<PAGE>
SCHWABFUNDS-R-
SCHWAB EQUITY
INDEX FUNDS
/ / SCHWAB S&P 500 FUND
/ / SCHWAB 1000 FUND-R-
/ / SCHWAB SMALL-CAP
INDEX FUND-R-
/ / SCHWAB INTERNATIONAL
INDEX FUND-R-
Semiannual Report
April 30, 1998
<PAGE>
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, 1998. This report
includes the following four Funds and all classes--Investor Shares, e.Shares-TM-
and Select Shares-TM-:
Schwab S&P 500 Fund
Schwab 1000 Fund-Registered Trademark-
Schwab Small-Cap Index Fund-Registered Trademark-
Schwab International Index Fund-Registered Trademark-
As covered in their respective sections of this report, the Funds all achieved
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 as follows under the heading
SCHWABFUNDS-REGISTERED TRADEMARK-:
<TABLE>
<CAPTION>
NEWSPAPER LISTING SYMBOL
<S> <C>
S&P e SWPEX
S&P Inv SWPIX
S&P Sel SWPPX
1000 Inv R SNXFX
1000 Sel SNXSX
SmCp Inv SWSMX
Sm Cp Sel SWSSX
Intl Sel r SWINX
Intl Inv SWISX
</TABLE>
CONTENTS
<TABLE>
<S> <C>
- ------------------------------------------------
A Message from the Chairman 1
- ------------------------------------------------
What Every Investor Should Know 2
- ------------------------------------------------
Market Overview 4
- ------------------------------------------------
Schwab S&P 500 Fund 8
- ------------------------------------------------
Schwab 1000 Fund 14
- ------------------------------------------------
Schwab Small-Cap Index Fund 21
- ------------------------------------------------
Schwab International Index Fund 28
- ------------------------------------------------
Statement of Net Assets 35
- ------------------------------------------------
Financial Statements 74
- ------------------------------------------------
Notes to Financial Statements 86
- ------------------------------------------------
</TABLE>
<PAGE>
A MESSAGE FROM THE CHAIRMAN
Dear Shareholder,
The U.S. stock market rallied strongly over most of the six-month period ended
April 30, 1998. So did many European markets. Despite investors' concerns about
Asia's financial crisis last autumn, economic conditions continued to provide a
solid underpinning for U.S. business activity. Once again, blue chips led the
rally, though many smaller-cap stocks posted very solid gains in absolute terms.
You'll find more insight about the overall market beginning on page 4.
[PHOTO]
As pleased as we are with the performance of our Funds during
this period, we want to be realistic. Over most of this
century, for example, the U.S. stock market has returned an
average of 11% to 12% PER YEAR, not per quarter. We encourage
investors to keep that in mind should the market revert to its historical
pattern of more-moderate performance.
Our philosophy has always been that REGULAR INVESTING, regardless of short-term
market trends, is the best strategy over the long term. By investing in one of
our SchwabFunds-Registered Trademark-, you've already taken an important step in
building a portfolio that can help you meet your future goals. On the following
pages, we outline several ways to help ensure that you reach those goals by
establishing--or maintaining--an ongoing investment program.
NEW INVESTMENT OPPORTUNITIES TO CONSIDER
We are proud to introduce a new addition to our family of Funds: THE SCHWAB
MARKETTRACK ALL EQUITY PORTFOLIO. (SCHWAB MARKETTRACK PORTFOLIOS-TM- is the new
name of Schwab's Asset Director-Registered Trademark- Funds.) This Portfolio,
which targets 100% equity investing, can provide you with diversified exposure
to three different areas of the stock market: U.S. large-company, U.S.
small-company and international stocks. We also offer three other MarketTrack
Portfolios: Growth, Balanced and Conservative. Each invests a different
proportion of its assets in bonds and cash in addition to stocks.
For additional information and a free prospectus on the Schwab MarketTrack
Portfolios or any of our SchwabFunds, please call us toll free at
1-800-435-4000. Each prospectus contains more-complete information on our Funds,
including their fees and expenses; please read the prospectus carefully before
you invest.
The support of investors like you has helped Charles Schwab Investment
Management, Inc. (CSIM) become one of the largest and fastest-growing mutual
fund families in the nation. CSIM now manages more than $63 billion in assets on
behalf of more than 3.3 million SchwabFunds shareholders. We offer a full
spectrum of 34 mutual funds for investors with varying financial situations and
goals.
Once again, thank you for your investment in SchwabFunds. We 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, 1998
1
<PAGE>
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 helps reduce the risk that you might otherwise encounter by
owning just a few stocks or bonds.
Don't forget, however, that diversification across your portfolio can be just as
important as diversification within one of the mutual funds you own. As you
probably know, stocks have historically 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 equity exposure across different market segments-- such as
U.S. large-cap, U.S. small-cap and international, which have tended to move with
less than perfect correlation over time. 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 in the illustration
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.
<TABLE>
<CAPTION>
No. of
Fixed Shares
Investment Share Price Purchased
<S> <C> <C> <C>
- -------------------------------------------------------------
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
</TABLE>
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.)
2
<PAGE>
THE SCHWAB APPROACH TO INVESTING
- START WITH THE BASICS FOR LONG-TERM INVESTING.
- GET STARTED NOW!
- KNOW YOURSELF.
- INVEST IN THE STOCK MARKET FOR GROWTH.
- TAKE A LONG-TERM VIEW.
- BUILD A DIVERSIFIED PORTFOLIO.
- CONSIDER BONDS AND CASH FOR DIVERSIFICATION AND INCOME.
- MINIMIZE YOUR EXPENSES.
- STAY ON TRACK.
- BECOME A LIFELONG INVESTOR.
In addition to reducing your per-share costs over time, dollar-cost averaging
provides you another benefit: the discipline of investing regularly. You're more
likely to maintain a regular investment plan if it's automatic; not only do you
not have to even think about it, but 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. For amounts as little as $100 per month, you can use the cash or
sweep shares of your existing Schwab Money Fund,(1) or you can enroll in
Schwab's free MoneyLink Transfer Service-Registered Trademark- to automatically
transfer money to your Schwab account.
With MONEYLINK TRANSFER SERVICE, you can arrange to regularly and automatically
transfer $50 or more from your bank account, payroll or government check into
your Schwab account. It's a great way to build your investment over time.(2)
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. Over the long term, however, dollar-cost averaging
may help to smooth out volatility caused by short-term market trends. For more
information about these programs, 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 our
SchwabFunds-Registered Trademark-. In addition to our automated methods, you can
also invest in person at any of our nationwide branches, through our Web site at
WWW.SCHWAB.COM and through our automated touch-tone telephone service,
TELEBROKER-REGISTERED TRADEMARK-, by calling 1-800-272-4922.
(1)Includes uninvested cash and margin cash available. If sufficient cash is not
available, your automatic purchases will not be made.
(2)The terms of your specific Schwab account will dictate when your Schwab
MoneyLink transfers are swept into a money market fund and begin earning
money market dividend income.
KEEPING YOU INFORMED
One of our top priorities at Charles Schwab is to keep you informed about your
investments and potential opportunities in the marketplace. A wealth of
information about our investment philosophy and Funds, as well as the market
and economic environment, can be found at our Web site:
WWW.SCHWAB.COM/SCHWABFUNDS
3
<PAGE>
MARKET OVERVIEW
U.S. GROWTH RATE
U.S. GROSS DOMESTIC PRODUCT (GDP) grew at a strong real rate of 3.8% in 1997 and
4.2% in the first quarter of 1998--well in excess of the Federal Reserve's
estimated noninflationary growth rate of 2.0% to 2.75%.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
REAL GDP GROWTH RATE
QUARTERLY PERCENTAGE CHANGE (ANNUALIZED
RATE)
<S> <C>
Q1 1990 3.90%
Q2 1990 1.20%
Q3 1990 -1.90%
Q4 1990 -4.00%
Q1 1991 -2.10%
Q2 1991 1.80%
Q3 1991 1.00%
Q4 1991 1.00%
Q1 1992 4.70%
Q2 1992 2.50%
Q3 1992 3.00%
Q4 1992 4.30%
Q1 1993 0.10%
Q2 1993 2.00%
Q3 1993 2.10%
Q4 1993 5.30%
Q1 1994 3.00%
Q2 1994 4.70%
Q3 1994 1.80%
Q4 1994 3.60%
Q1 1995 0.90%
Q2 1995 0.30%
Q3 1995 3.00%
Q4 1995 2.20%
Q1 1996 1.80%
Q2 1996 6.00%
Q3 1996 1.00%
Q4 1996 4.30%
Q1 1997 4.90%
Q2 1997 3.30%
Q3 1997 3.10%
Q4 1997 3.70%
Q1 1998 4.20%
SOURCE: BLOOMBERG L.P.
</TABLE>
At the time of this writing, THE U.S. ECONOMY APPEARS POISED FOR CONTINUED
GROWTH, further extending the current economic expansion that began in 1991.
Many economists expect Asia's economic problems to reduce 1998 U.S. GDP growth
by only a relatively minor 0.25 to 1.0 percentage point.
PRIOR TO THE FOURTH-QUARTER ONSET OF THE "ASIAN FLU," the U.S. economy's
strength and tight labor markets led investors to speculate about whether wage
and price inflation were accelerating. Some investors also believed that the
Federal Reserve was on the verge of raising interest rates to head off a
potential acceleration in both wage and price inflation. As Federal Reserve
Chairman Alan Greenspan said in his February congressional testimony, "The key
question going forward is whether the restraint building from the turmoil in
Asia will be sufficient to check inflationary tendencies that might otherwise
result from the strength of domestic spending and tightening labor markets." At
the moment, many economists believe that Federal Reserve policy-makers are now
more inclined to raise interest rates than they have been in the past, but are
refraining from doing so because inflation remains tame and Asia's continuing
problems may dampen both global and domestic growth.
UNEMPLOYMENT
JOB GROWTH IN THE UNITED STATES HAS REMAINED ROBUST. In fact, the U.S.
unemployment rate reached 4.3% in April--the lowest level in 28 years.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
U.S. UNEMPLOYMENT RATE
<S> <C>
Jan-90 5.40%
Feb-90 5.30%
Mar-90 5.20%
Apr-90 5.40%
May-90 5.40%
Jun-90 5.20%
Jul-90 5.50%
Aug-90 5.70%
Sep-90 5.90%
Oct-90 5.90%
Nov-90 6.20%
Dec-90 6.30%
Jan-91 6.40%
Feb-91 6.60%
Mar-91 6.80%
Apr-91 6.70%
May-91 6.90%
Jun-91 6.90%
Jul-91 6.80%
Aug-91 6.90%
Sep-91 6.90%
Oct-91 7.00%
Nov-91 7.00%
Dec-91 7.30%
Jan-92 7.30%
Feb-92 7.40%
Mar-92 7.40%
Apr-92 7.40%
May-92 7.60%
Jun-92 7.80%
Jul-92 7.70%
Aug-92 7.60%
Sep-92 7.60%
Oct-92 7.30%
Nov-92 7.40%
Dec-92 7.40%
Jan-93 7.30%
Feb-93 7.10%
Mar-93 7.00%
Apr-93 7.10%
May-93 7.10%
Jun-93 7.00%
Jul-93 6.90%
Aug-93 6.80%
Sep-93 6.70%
Oct-93 6.80%
Nov-93 6.60%
Dec-93 6.50%
Jan-94 6.60%
Feb-94 6.60%
Mar-94 6.50%
Apr-94 6.40%
May-94 6.00%
Jun-94 6.10%
Jul-94 6.10%
Aug-94 6.10%
Sep-94 5.90%
Oct-94 5.80%
Nov-94 5.60%
Dec-94 5.40%
Jan-95 5.60%
Feb-95 5.40%
Mar-95 5.40%
Apr-95 5.70%
May-95 5.60%
Jun-95 5.60%
Jul-95 5.70%
Aug-95 5.70%
Sep-95 5.70%
Oct-95 5.60%
Nov-95 5.60%
Dec-95 5.60%
Jan-96 5.70%
Feb-96 5.50%
Mar-96 5.50%
Apr-96 5.50%
May-96 5.50%
Jun-96 5.30%
Jul-96 5.50%
Aug-96 5.20%
Sep-96 5.20%
Oct-96 5.30%
Nov-96 5.40%
Dec-96 5.30%
Jan-97 5.30%
Feb-97 5.30%
Mar-97 5.20%
Apr-97 5.00%
May-97 4.80%
Jun-97 5.00%
Jul-97 4.90%
Aug-97 4.90%
Sep-97 4.90%
Oct-97 4.80%
Nov-97 4.60%
Dec-97 4.70%
Jan-98 4.70%
Feb-98 4.60%
Mar-98 4.70%
Apr-98 4.30%
SOURCE: BLOOMBERG L.P.
</TABLE>
ALTHOUGH INFLATION HAS BEEN WELL CONTAINED, the combination of a tight labor
market (as evidenced by low unemployment rates) and strong economic growth
typically leads to inflationary pressures on wages and, ultimately, prices. In
this environment, productivity growth becomes particularly important.
4
<PAGE>
Strong productivity gains, such as those achieved in
1997, allow manufacturers and other businesses to limit price increases in the
face of rising wages, without sacrificing profit margins.
INFLATION
BOTH THE EMPLOYMENT COST INDEX (ECI) AND CONSUMER PRICE INDEX (CPI) REMAINED IN
CHECK throughout 1997 and the first quarter of 1998, reflecting continued low
inflation.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURES OF INFLATION
MONTHLY CONSUMER QUARTERLY EMPLOYMENT
PRICE INDEX COST INDEX
<S> <C> <C>
Jan-90 5.2% 5.3%
Feb-90 5.3% 5.3%
Mar-90 5.2% 5.3%
Apr-90 4.7% 5.4%
May-90 4.4% 5.4%
Jun-90 4.7% 5.4%
Jul-90 4.8% 5.1%
Aug-90 5.6% 5.1%
Sep-90 6.2% 5.1%
Oct-90 6.3% 4.8%
Nov-90 6.3% 4.8%
Dec-90 6.1% 4.8%
Jan-91 5.7% 4.6%
Feb-91 5.3% 4.6%
Mar-91 4.9% 4.6%
Apr-91 4.9% 4.5%
May-91 5.0% 4.5%
Jun-91 4.7% 4.5%
Jul-91 4.4% 4.3%
Aug-91 3.8% 4.3%
Sep-91 3.4% 4.3%
Oct-91 2.9% 4.2%
Nov-91 3.0% 4.2%
Dec-91 3.1% 4.2%
Jan-92 2.6% 4.1%
Feb-92 2.8% 4.1%
Mar-92 3.2% 4.1%
Apr-92 3.2% 3.5%
May-92 3.0% 3.5%
Jun-92 3.1% 3.5%
Jul-92 3.2% 3.4%
Aug-92 3.1% 3.4%
Sep-92 3.0% 3.4%
Oct-92 3.2% 3.5%
Nov-92 3.0% 3.5%
Dec-92 2.9% 3.5%
Jan-93 3.3% 3.4%
Feb-93 3.2% 3.4%
Mar-93 3.1% 3.4%
Apr-93 3.2% 3.6%
May-93 3.2% 3.6%
Jun-93 3.0% 3.6%
Jul-93 2.8% 3.6%
Aug-93 2.8% 3.6%
Sep-93 2.7% 3.6%
Oct-93 2.8% 3.4%
Nov-93 2.7% 3.4%
Dec-93 2.7% 3.4%
Jan-94 2.5% 3.2%
Feb-94 2.5% 3.2%
Mar-94 2.5% 3.2%
Apr-94 2.4% 3.1%
May-94 2.3% 3.1%
Jun-94 2.5% 3.1%
Jul-94 2.8% 3.1%
Aug-94 2.9% 3.1%
Sep-94 3.0% 3.1%
Oct-94 2.6% 3.0%
Nov-94 2.7% 3.0%
Dec-94 2.7% 3.0%
Jan-95 2.8% 3.0%
Feb-95 2.9% 3.0%
Mar-95 2.9% 3.0%
Apr-95 3.1% 3.0%
May-95 3.2% 3.0%
Jun-95 3.0% 3.0%
Jul-95 2.8% 2.8%
Aug-95 2.6% 2.8%
Sep-95 2.5% 2.8%
Oct-95 2.8% 2.8%
Nov-95 2.6% 2.8%
Dec-95 2.5% 2.8%
Jan-96 2.7% 2.9%
Feb-96 2.7% 2.9%
Mar-96 2.8% 2.9%
Apr-96 2.9% 2.9%
May-96 2.9% 2.9%
Jun-96 2.8% 2.9%
Jul-96 3.0% 2.9%
Aug-96 2.9% 2.9%
Sep-96 3.0% 2.9%
Oct-96 3.0% 3.0%
Nov-96 3.3% 3.0%
Dec-96 3.3% 3.0%
Jan-97 3.0% 2.8%
Feb-97 3.0% 2.8%
Mar-97 2.8% 2.8%
Apr-97 2.5% 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% 3.2%
Nov-97 1.8% 3.2%
Dec-97 1.7% 3.2%
Jan-98 1.6% 3.3%
Feb-98 1.4% 3.3%
Mar-98 1.4% 3.3%
Apr-98 1.4%
SOURCE: BLOOMBERG L.P.
</TABLE>
THE CPI ROSE just 1.4% over the year ended April 1998--the lowest rate of
increase since 1986. Its core rate (which excludes the more volatile food and
energy components) rose 2.1%--the lowest rate of increase since 1965. Investors
were somewhat more concerned about the ECI, and its wages and salaries component
in particular. That segment of the ECI increased 3.7% during the year ended
April 1998.
EVEN THOUGH CURRENT LEVELS OF INFLATION ARE VERY LOW, Federal Reserve
policy-makers have indicated that they believe the risk of inflation is
increasing, and they are poised to act preemptively by raising interest rates if
they believe that is necessary. The Federal Reserve did raise interest rates in
March 1997, increasing the federal funds rate by 0.25 percentage point to 5.5%.
By the end of April, many economists believed that Federal Reserve policy-makers
were once again inclined to raise interest rates, but there was a lack of
consensus about when the Federal Reserve would raise interest rates, if in fact
it would, and by how much.
TOTAL-RETURN PERFORMANCE
MOST U.S. STOCKS posted strong total returns from November 1, 1997, through
April 30, 1998. Large-caps continued to outperform small-caps, as reflected in
the 22.5% return of the S&P 500-Registered Trademark- Index versus the 13.4%
return of the Schwab Small-Cap Index-Registered Trademark- over the period.
Amazingly, the S&P 500 Index posted its thirteenth consecutive quarterly gain
during the first quarter of 1998 and posted an incredible return of 41% for the
12-month period ended April 1998.
INTERNATIONAL STOCKS, as represented by the Schwab International
Index-Registered Trademark-, gained 15.2% over the six-month period, primarily
on the strength of European markets.
FIXED-INCOME RETURNS were more in line with long-term expectations during the
reporting period. Bond returns, as represented by the Lehman Brothers Aggregate
Bond Index, were 3.6% over the six-month reporting period.
5
<PAGE>
MARKET OVERVIEW (continued)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL-RETURN PERFORMANCE
VALUE OF A HYPOTHETICAL
$1 INVESTMENT
SCHWAB SCHWAB LEHMAN BROTHERS
S&P 500 SMALL CAP INTERNATIONAL AGGREGATE
INDEX-R- INDEX-R- INDEX-R- BOND INDEX
<S> <C> <C> <C> <C>
Oct-97 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Nov-97 $ 1.046 $ 0.991 $ 0.996 $ 1.005
Dec-97 $ 1.064 $ 1.012 $ 1.010 $ 1.015
Jan-98 $ 1.076 $ 0.996 $ 1.051 $ 1.028
Feb-98 $ 1.154 $ 1.078 $ 1.115 $ 1.027
Mar-98 $ 1.213 $ 1.127 $ 1.144 $ 1.030
Apr-98 $ 1.225 $ 1.134 $ 1.151 $ 1.036
</TABLE>
TOTAL RETURN ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. The indices
are intended to represent the returns of specific market sectors during the
funds' six-month reporting period and do not reflect the performance of any
fund. Indices are unmanaged and, unlike a fund, do not reflect the payment of
advisory fees and other expenses associated with an investment in a fund.
Investors cannot invest in an index directly.
S&P 500 PRICE/EARNINGS RATIO
THE PRICE/EARNINGS RATIO for the S&P 500 Index reached its highest value ever
during the reporting period: It stood at 26.5 at the close of the reporting
period, well above its 30-year average of 14.8. The price/earnings ratio, also
known as a multiple, is the price of a stock divided by its earnings per share
and generally indicates how much investors are willing to pay for a company's
earning potential.
Based on other traditional market valuation measures such as the price-to-book
value ratio or dividend yield, the U.S. stock market, as measured by the S&P 500
Index, also reached historic highs during the reporting period.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P 500 INDEX PRICE/EARNINGS
RATIO
<S> <C>
Jan-90 14.37
Feb-90 14.21
Mar-90 14.77
Apr-90 14.82
May-90 15.84
Jun-90 16.66
Jul-90 16.65
Aug-90 15.57
Sep-90 14.9
Oct-90 14.36
Nov-90 14.59
Dec-90 15.19
Jan-91 14.95
Feb-91 16.82
Mar-91 17.48
Apr-91 17.85
May-91 17.92
Jun-91 17.96
Jul-91 18.07
Aug-91 19.72
Sep-91 19.88
Oct-91 19.92
Nov-91 21.02
Dec-91 21.85
Jan-92 23.35
Feb-92 23.83
Mar-92 25.45
Apr-92 25.51
May-92 25.71
Jun-92 25.08
Jul-92 25.61
Aug-92 25.5
Sep-92 24.37
Oct-92 23.94
Nov-92 24.08
Dec-92 24.01
Jan-93 24.2
Feb-93 24.25
Mar-93 24.22
Apr-93 23.2
May-93 23.21
Jun-93 22.58
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 20.1
May-94 20.16
Jun-94 19.76
Jul-94 18.64
Aug-94 18.9
Sep-94 18.26
Oct-94 17.55
Nov-94 16.58
Dec-94 16.98
Jan-95 16.23
Feb-95 16.2
Mar-95 16.5
Apr-95 16.02
May-95 16.43
Jun-95 16.82
Jul-95 16.55
Aug-95 16.18
Sep-95 16.86
Oct-95 16.18
Nov-95 17.14
Dec-95 17.41
Jan-96 18.11
Feb-96 18.56
Mar-96 18.94
Apr-96 19.16
May-96 19.48
Jun-96 19.3
Jul-96 18.31
Aug-96 18.62
Sep-96 19.75
Oct-96 19.6
Nov-96 21.05
Dec-96 20.7
Jan-97 20.55
Feb-97 20.98
Mar-97 19.87
Apr-97 20.24
May-97 21.43
Jun-97 22.45
Jul-97 23.92
Aug-97 22.64
Sep-97 24
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
SOURCE: BLOOMBERG L.P.
</TABLE>
THE PRIMARY FACTORS DRIVING THESE HISTORIC EQUITY VALUATIONS have been low
inflation, low interest rates, healthy corporate earnings expectations, a
decline in the amount of equities outstanding (due to merger activity and share
buybacks) and high levels of consumer optimism. Changes in any of these factors
could have a negative impact on these lofty market valuations.
INTERNATIONAL PERFORMANCE
MOST EUROPEAN EQUITY MARKETS were strong during the six months ended April 30,
1998, with the highest returns in Spain, Italy, Finland and Ireland. In
contrast, many Asian markets declined sharply over the period; the weakest were
Malaysia, New Zealand, Hong Kong and Japan.
6
<PAGE>
PORTFOLIO MANAGEMENT
THE MSCI-EAFE-REGISTERED TRADEMARK- INDEX gained 15.4% in U.S. dollar terms
(excluding reinvested dividends) during the six-month reporting period. In
local-currency terms, it gained 20.3%, reflecting the relative strength of the
U.S. dollar versus most foreign currencies during the period.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI-EAFE COUNTRY $US RETURN
FOR THE SIX-MONTH PERIOD ENDED
4/30/98
<S> <C>
Spain 53.43%
Italy 45.80%
Finland 41.53%
Ireland 36.58%
France 35.45%
Germany 30.00%
Belgium 28.67%
Switzerland 25.35%
Austria 25.29%
Sweden 23.87%
United Kingdom 21.78%
Denmark 20.19%
Netherlands 19.67%
Australia 6.71%
Norway -1.53%
Singapore -4.02%
Japan -10.39%
Hong Kong -11.63%
New Zealand -11.93%
Malaysia -15.19%
SOURCE: DATASTREAM
</TABLE>
NOTE: This market overview has been provided by the Portfolio Management team.
THE PORTFOLIO MANAGEMENT TEAM
STEPHEN B. WARD, Senior Vice President and Chief Investment Officer, has
overall responsibility for the management of the Funds' portfolios. Steve
joined CSIM as Vice President and Portfolio Manager in April 1991 and was
promoted to his current position in August 1993. Prior to joining CSIM, Steve
was Vice President and Portfolio Manager at Federated Investors.
GERI HOM, Vice President and Senior Portfolio Manager, has primary
responsibility for the day-to-day 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 $8.6 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.
7
<PAGE>
SCHWAB S&P 500 FUND INVESTOR SHARES AND E.SHARES
FUND PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/98
<TABLE>
<CAPTION>
Since Inception
Six Months One Year (5/1/96)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
SCHWAB S&P 500 FUND(1)
- ----------------------------------------------------------------------------------
INVESTOR SHARES 22.17% 40.41% 32.10%
- ----------------------------------------------------------------------------------
e.SHARES 22.21% 40.53% 32.28%
- ----------------------------------------------------------------------------------
S&P 500-Registered Trademark- Index 22.47% 41.04% 32.84%
- ----------------------------------------------------------------------------------
Index Tracking Differential
- ----------------------------------------------------------------------------------
Investor Shares 0.30% 0.63% 0.74%
- ----------------------------------------------------------------------------------
e. Shares 0.26% 0.51% 0.56%
- ----------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 3/31/98
<TABLE>
<CAPTION>
Since Inception
Six Months One Year (5/1/96)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
SCHWAB S&P 500 FUND(1)
- ----------------------------------------------------------------------------------
INVESTOR SHARES 16.99% 47.22% 33.04%
- ----------------------------------------------------------------------------------
e.SHARES 17.11% 47.34% 33.23%
- ----------------------------------------------------------------------------------
</TABLE>
(1)The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.35% and 0.28%, respectively, for the
Investor Shares and the e.Shares. Without fee waivers and guarantees, as of
4/30/98, the six-month, one-year and average annual since-inception total
returns would have been 22.04%, 40.06% and 31.80%, respectively, for the
Investor Shares and 22.08%, 40.20% and 31.96%, respectively for the e.Shares.
As of 3/31/98, the six-month, one-year and average annual since-inception
total returns would have been 16.83%, 46.83% and 32.72%, respectively, for
the Investor Shares and 16.96%, 46.96% and 32.88%, respectively, for the
e.Shares.
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 one-year performance of the
Schwab S&P 500 Fund Investor Shares.
ONE-YEAR AVERAGE ANNUAL TOTAL RETURNS AS OF 4/30/98
<TABLE>
<CAPTION>
Before After % Lost
Tax Tax(2) to Taxes
<S> <C> <C> <C>
- -----------------------------------------------------------
Schwab S&P 500 Fund
Investor Shares(3) 40.41% 39.87% 0.54%
- -----------------------------------------------------------
Average Large-Cap Fund(4) 35.44% 31.53% 3.91%
- -----------------------------------------------------------
</TABLE>
(2)After-tax returns assume the maximum federal income tax rate of 39.6% on
dividends and 28% on capital gains distributions. Tax rates vary and may be
higher or lower than those shown.
(3)The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.35%. Without fee waivers and guarantees,
the Investor Shares' returns would have been lower.
(4)Source: Morningstar, Inc. Returns are load-adjusted. The Large-Cap Fund
category contains 761 funds with one-year track records as of 4/30/98. These
funds may or may not follow a tax-efficient strategy similar to that followed
by the Schwab S&P 500 Fund. Also, although many mutual funds have multiple
classes of shares, the category average includes only those funds that were
classified by Morningstar as a distinct portfolio. This typically means that
a fund's oldest class of shares was used.
8
<PAGE>
This graph compares the growth of a hypothetical $10,000 investment in the
Schwab S&P 500 Fund Investor Shares and e.Shares, made at their inception, with
a similar investment in the S&P 500-Registered Trademark- Index.
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, the Fund, unlike the index, incurs trading costs when it buys or sells
securities and also has operating expenses. The Fund also may hold nonindex
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.
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SCHWAB S&P 500 FUND INVESTOR
SHARES AND E.SHARES
GROWTH OF A HYPOTHETICAL $10,000
INVESTMENT
SCHWAB S&P SCHWAB S&P
500 FUND 500 FUND S&P 500
INVESTOR SHARES E.SHARES INDEX
<S> <C> <C> <C>
5/1/96 $10,000 $10,000 $10,000
5/31/96 $10,250 $10,250 $10,257
6/30/96 $10,290 $10,290 $10,296
7/31/96 $9,840 $9,840 $9,841
8/31/96 $10,040 $10,050 $10,049
9/30/96 $10,600 $10,600 $10,613
10/31/96 $10,880 $10,890 $10,906
11/30/96 $11,690 $11,710 $11,731
12/31/96 $11,462 $11,473 $11,498
1/31/97 $12,157 $12,179 $12,216
2/28/97 $12,248 $12,270 $12,312
3/31/97 $11,744 $11,766 $11,808
4/30/97 $12,430 $12,452 $12,511
5/31/97 $13,186 $12,452 $13,272
6/30/97 $13,760 $13,794 $13,867
7/31/97 $14,849 $14,873 $14,969
8/31/97 $14,012 $14,036 $14,131
9/30/97 $14,778 $14,803 $14,904
10/31/97 $14,284 $14,318 $14,406
11/30/97 $14,930 $14,964 $15,073
12/31/97 $15,184 $15,227 $15,332
1/31/98 $15,357 $15,390 $15,502
2/28/98 $16,455 $16,490 $16,620
3/31/98 $17,289 $17,336 $17,471
4/30/98 $17,452 $17,499 $17,647
</TABLE>
9
<PAGE>
SCHWAB S&P 500 FUND SELECT SHARES-TM-
FUND PERFORMANCE
CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 4/30/98
<TABLE>
<CAPTION>
Since Inception
Six Months (5/19/97)
<S> <C> <C>
- --------------------------------------------------------------------------------
SCHWAB S&P 500 FUND SELECT SHARES(1) 22.34% 35.10%
- --------------------------------------------------------------------------------
S&P 500-Registered Trademark- Index 22.47% 35.44%
- --------------------------------------------------------------------------------
Index Tracking Differential 0.13% 0.34%
- --------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 3/31/98
<TABLE>
<CAPTION>
Since Inception
Six Months (5/19/97)
<S> <C> <C>
- --------------------------------------------------------------------------------
SCHWAB S&P 500 FUND SELECT SHARES(1) 17.09% 33.76%
- --------------------------------------------------------------------------------
</TABLE>
(1)The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.19% for the Select Shares. Without fee
waivers and guarantees, as of 4/30/98, the six-month and cumulative
since-inception total returns would have been 22.14% and 34.76%,
respectively. As of 3/31/98, the six-month and cumulative since-inception
total returns would have been 16.93% and 33.51%, respectively.
This graph compares the growth of a hypothetical $50,000 investment(2) in the
Schwab S&P 500 Fund Select Shares, made at its inception, with a similar
investment in the S&P 500 Index.
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 9 for a more detailed discussion.)
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SCHWAB S&P 500 FUND SELECT SHARES(2)
GROWTH OF A HYPOTHETICAL $50,000
INVESTMENT
Schwab S&P 500 Fund Select Shares S&P 500 Index
<S> <C> <C>
5/19/97 $50,000 $50,000
5/31/97 $50,935 $50,930
6/30/97 $53,190 $53,212
7/31/97 $57,395 $57,442
8/31/97 $54,165 $54,225
9/30/97 $57,120 $57,191
10/31/97 $55,215 $55,281
11/30/97 $57,745 $57,841
12/31/97 $58,745 $58,836
1/31/98 $59,375 $59,489
2/28/98 $63,660 $63,778
3/31/98 $66,880 $67,043
4/30/98 $67,550 $67,720
</TABLE>
(2)The required minimum initial investment in the Select Shares is $50,000.
10
<PAGE>
SCHWAB S&P 500 FUND:
FUND HOLDINGS
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-company stocks selected by Standard & Poor's-Registered Trademark-. As of
April 30, 1998, the aggregate market capitalization of the S&P 500 Index
represented approximately 74% of the total value of the U.S. stock market.
Common stocks of the 50 largest companies of the S&P 500 Index accounted for
approximately 37% of the index.(1)
TOP 10 HOLDINGS
AS A PERCENTAGE OF FUND INVESTMENTS(2)
<TABLE>
<S> <C>
- -------------------------------------------------
General Electric Co. 3.11%
- -------------------------------------------------
Microsoft Corp. 2.46%
- -------------------------------------------------
Coca-Cola Co. 2.09%
- -------------------------------------------------
Exxon Corp. 2.01%
- -------------------------------------------------
Pfizer Inc. 1.66%
- -------------------------------------------------
Merck & Co., Inc. 1.63%
- -------------------------------------------------
Intel Corp. 1.50%
- -------------------------------------------------
Royal Dutch Petroleum Co. 1.35%
- -------------------------------------------------
Wal-Mart Stores, Inc. 1.28%
- -------------------------------------------------
International Business Machines Corp. 1.27%
- -------------------------------------------------
</TABLE>
PORTFOLIO BY ECONOMIC SECTOR(2)
<TABLE>
<S> <C>
- ------------------------------------------------
Consumer Nondurables 31.91%
- ------------------------------------------------
Finance 17.66%
- ------------------------------------------------
Technology 16.92%
- ------------------------------------------------
Utilities 9.54%
- ------------------------------------------------
Energy 8.32%
- ------------------------------------------------
Materials and Services 7.48%
- ------------------------------------------------
Capital Goods 4.92%
- ------------------------------------------------
Consumer Durables 2.10%
- ------------------------------------------------
Transportation 1.15%
- ------------------------------------------------
</TABLE>
(1)Source: Wilshire Associates. The U.S. stock market is represented by the
Wilshire 5000 Index.
(2)Both the top 10 holdings and the economic sector percentages may not be
indicative of current or future investments. A complete list of the Fund's
investments as of 4/30/98 can be found in the Schedule of Investments later
in this report.
11
<PAGE>
SCHWAB S&P 500 FUND:
FUND DISCUSSION
QUESTIONS TO THE
PORTFOLIO MANAGEMENT TEAM
Q. HOW DID THE FUND PERFORM DURING THE
REPORTING PERIOD?
A. The Fund achieved strong total returns for the six-month reporting period:
22.2%, 22.2% and 22.3% for the Investor Shares, e.Shares-TM- and Select
Shares-TM-, respectively. All classes of shares closely tracked the Fund's
benchmark, the S&P 500-Registered Trademark- Index. As the table below reveals,
the Fund also outperformed the average U.S. large-cap fund over the six-month
and one-year periods ended April 30, 1998.(1) The Fund's outperformance was even
greater on an after-tax basis, a direct result of its tax-efficient investment
strategy.
<TABLE>
<CAPTION>
AFTER
BEFORE TAX: TAX:
SIX MONTHS ONE YEAR ONE YEAR
<S> <C> <C> <C>
- -----------------------------------------------------------
Investor Shares 22.17% 40.41% 39.87%
- -----------------------------------------------------------
e.Shares 22.21% 40.53% 39.96%
- -----------------------------------------------------------
Select Shares 22.34% -- --
- -----------------------------------------------------------
Average
Large-Cap Fund(1) 16.99% 35.44% 31.53%
- -----------------------------------------------------------
</TABLE>
Q. WHY CAN INDEX FUNDS BE A SOUND WAY TO IMPLEMENT AN ASSET ALLOCATION PLAN?
A. One frequently cited study has shown that the manner in which an investor
allocates his or her portfolio among different asset classes can determine the
vast majority of the variance in the portfolio's returns.(2) Unless investors
build their portfolios with investments that are designed to consistently
deliver the performance of the asset classes they wish to track, their
portfolios may not behave as they expect.
Index funds can be an excellent choice to implement an asset allocation plan
because they seek to invest only in the intended asset class and therefore
should, because of their investment objectives, achieve returns that closely
track those of that benchmark asset class. Index funds should not be subject to
the "style drift" that investors may face with many actively managed funds.
Consistent with their mission to track their benchmarks, index funds also
usually maintain minimal cash holdings.
In addition to seeking to deliver consistent asset class performance, index
funds are typically efficient from both a cost and a tax standpoint. Most index
funds minimize their trading and operating costs by keeping both portfolio
turnover and operating expense ratios low. These savings are passed on to
investors in the form of higher returns.
Q. DO INDEX FUNDS REDUCE INVESTMENT RISK?
A. It depends on the type of risk. Most investment risks can be categorized as
either SYSTEMATIC (non-diversifiable) or NONSYSTEMATIC (diversifiable).
Systematic or nondiversifiable risks are those that may affect all stocks or
bonds, such as a bear market caused by adverse economic conditions. Index funds
do not safeguard against this type of risk. Their goal is to consistently track
their benchmark regardless of how it is performing. They also generally maintain
(1)Source: Morningstar, Inc. Returns are load-adjusted. The Large-Cap Fund
category contains 798 and 761 funds, respectively, with six-month and
one-year track records as of 4/30/98. These funds may or may not follow a
tax-efficient strategy similar to that followed by all classes of the Schwab
S&P 500 Fund. Also, although many mutual funds have multiple classes of
shares, the category average includes only those funds that were classified
by Morningstar as a distinct portfolio. This typically means that a fund's
oldest class of shares was used.
(2)Source: FINANCIAL ANALYSTS JOURNAL, Brinson, Singer, Beebower, May/June 1991.
12
<PAGE>
minimal cash balances, so they do not build up a defensive cash position in a
negative market environment.
Nonsystematic risks are those that affect a particular stock or bond, such as a
decline in demand for a company's product or a negative earnings surprise.
Nonsystematic risk is also referred to as "diversifiable risk," because an
investor can reduce it by diversifying his or her portfolio across a
sufficiently large number of companies. Since most broad-based index funds
purchase many--in some cases, hundreds of-- securities, they can be effective at
minimizing non-systematic or company-specific risk.
Q. BECAUSE THE STOCK MARKET HAS REACHED RECORD HIGHS, IS IT TIME TO RETHINK MY
ALLOCATION TO STOCKS?
A. Whenever the returns of asset classes have diverged significantly from one
another, it can be prudent to review your portfolio's asset allocation. For
example, U.S. large-cap stocks dramatically outperformed U.S. bonds over the
three-year period ended April 30, 1998. This performance disparity is evident in
the average annual returns of the Schwab 1000 Fund-Registered Trademark- and the
Schwab Total Bond Market Index Fund over that period: The Schwab 1000 Fund,
which invests in U.S. large-cap stocks, gained 30.92%, whereas the Schwab Total
Bond Market Index Fund rose 8.84%.(1)
This disparity may have caused an investor's portfolio asset allocation to
shift, as the following example illustrates. Assume that an investor had a
hypothetical asset allocation of 60% stocks and 40% bonds (investing in just
these two Funds) at the beginning of the three-year period, and reinvested all
Fund distributions. By the end of the period, the portfolio's asset allocation
mix would have shifted to 72% stocks and 28% bonds--a significant divergence
from the investor's original strategy (see chart below).
We feel that investors should focus on their own risk profiles, time horizons
and income needs to determine the appropriate level of stocks and bonds in their
portfolios. Because bond returns historically have not been well correlated with
stock returns,(2) combining bonds in a portfolio with other asset classes can be
effective in reducing total portfolio volatility.
(1)Total return assumes reinvestment of all dividends and capital gains
distributions, if any. Past performance is no guarantee of future results.
Principal value and investment returns will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than their original cost. A
portion of both Funds' expenses was reduced during the period. Without these
reductions, the Funds' total returns would have been lower. As of 4/30/98,
the one-year and average annual five-year total returns for the Total Bond
Market Index Fund were 11.34% and 7.25%, respectively. As of 3/31/98, the
one-year, average annual five-year and average annual since-inception
(3/5/93) total returns for the Total Bond Market Index Fund were 13.05%,
7.47% and 6.80%, respectively.
(2)For the 20-year period ended 12/31/97, the correlation of large-cap stock
returns and government bond returns has been 0.38. Source: Symphony Asset
Management.
<TABLE>
<CAPTION>
4/30/95 PORTFOLIO THREE-YEAR 4/30/98 PORTFOLIO
VALUE ALLOCATION GROWTH VALUE ALLOCATION
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Schwab 1000 Fund $6,000 60% $7,464 $13,464 72%
- -----------------------------------------------------------------------------------------------------------------
Total Bond Market Index Fund $4,000 40% $1,157 $5,157 28%
- -----------------------------------------------------------------------------------------------------------------
Total Portfolio Value $10,000 100% $8,621 $18,621 100%
</TABLE>
13
<PAGE>
SCHWAB 1000 FUND-REGISTERED TRADEMARK- INVESTOR SHARES
FUND PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/98
<TABLE>
<CAPTION>
Since
Five Inception
Six Months One Year Years (4/2/91)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
SCHWAB 1000 FUND
INVESTOR SHARES(1) 21.99% 41.69% 22.20% 18.93%
- --------------------------------------------------------------------------------------
Schwab 1000 Index-Registered Trademark- 22.44% 42.58% 22.85% 19.45%
- --------------------------------------------------------------------------------------
Index Tracking Differential 0.45% 0.89% 0.65% 0.52%
- --------------------------------------------------------------------------------------
S&P 500-Registered Trademark- Index 22.47% 41.04% 23.23% 19.38%
- --------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 3/31/98
<TABLE>
<CAPTION>
Since
Five Inception
Six Months One Year Years (4/2/91)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
SCHWAB 1000 FUND
INVESTOR SHARES(1) 16.78% 47.79% 21.25% 19.00%
- --------------------------------------------------------------------------------------
</TABLE>
(1)The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.46% for the Investor Shares. Without fee
waivers and guarantees, as of 4/30/98, the six-month, one-year, average
annual five-year and average annual since-inception total returns would have
been 21.94%, 41.63%, 22.13% and 18.77%, respectively, for the Investor
Shares. As of 3/31/98, the six-month, one-year, average annual five-year and
average annual since-inception total returns would have been 16.72%, 47.73%,
21.19% and 18.84%, respectively.
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.
FIVE-YEAR AVERAGE ANNUAL TOTAL RETURNS AS OF 4/30/98
<TABLE>
<CAPTION>
Before After % Lost
Tax Tax(2) to Taxes
<S> <C> <C> <C>
- --------------------------------------------------------------
Schwab 1000 Fund
Investor Shares(3) 22.20% 21.42% 0.78%
- --------------------------------------------------------------
Average Large-Cap Fund(4) 19.69% 16.87% 2.82%
- --------------------------------------------------------------
</TABLE>
(2)After-tax returns assume the maximum federal income tax rate of 39.6% on
dividends and 28% on capital gains distributions. Tax rates vary and may be
higher or lower than those shown.
(3)The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that
total operating expenses will not exceed 0.46%. Without fee waivers and
guarantees, the Investor Shares' returns would have been lower.
(4)Source: Morningstar, Inc. Returns are load-adjusted. The Large-Cap Fund
category contains 477 funds with five-year track records as of 4/30/98. These
funds may or may not follow a tax-efficient strategy similar to that followed
by the Schwab 1000 Fund. Also, although many mutual funds have multiple
classes of shares, the category average includes only those funds that were
classified by Morningstar as a distinct portfolio. This typically means that
a fund's oldest class of shares was used.
14
<PAGE>
This 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.
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 9 for a more detailed discussion.)
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SCHWAB 1000 FUND INVESTOR SHARES
GROWTH OF A HYPOTHETICAL $10,000
INVESTMENT
SCHWAB 1000 FUND INVESTOR SHARES SCHWAB 1000 INDEX S&P 500 INDEX
<S> <C> <C> <C>
4/2/91 $10,000 $10,000 $10,000
4/30/91 $9,910 $9,898 $9,908
5/31/91 $10,320 $10,311 $10,335
6/30/91 $9,850 $9,840 $9,861
7/31/91 $10,320 $10,310 $10,321
8/31/91 $10,600 $10,591 $10,566
9/30/91 $10,460 $10,455 $10,389
10/31/91 $10,630 $10,625 $10,528
11/30/91 $10,240 $10,225 $10,104
12/31/91 $11,425 $11,412 $11,260
1/31/92 $11,283 $11,272 $11,050
2/29/92 $11,425 $11,415 $11,193
3/31/92 $11,171 $11,163 $10,975
4/30/92 $11,404 $11,392 $11,298
5/31/92 $11,404 $11,457 $11,353
6/30/92 $11,465 $11,257 $11,184
7/31/92 $11,726 $11,728 $11,641
8/31/92 $11,480 $11,486 $11,403
9/30/92 $11,623 $11,646 $11,537
10/31/92 $11,746 $11,763 $11,577
11/30/92 $12,208 $12,233 $11,971
12/31/92 $12,398 $12,428 $12,119
1/31/93 $12,502 $12,539 $12,220
2/28/93 $12,595 $12,632 $12,387
3/31/93 $12,896 $12,948 $12,648
4/30/93 $12,533 $12,583 $12,342
5/31/93 $12,896 $12,957 $12,673
6/30/93 $12,958 $13,024 $12,710
7/31/93 $12,905 $12,989 $12,659
8/31/93 $13,397 $13,492 $13,139
9/30/93 $13,355 $13,454 $13,038
10/31/93 $13,544 $13,654 $13,308
11/30/93 $13,355 $13,462 $13,181
12/31/93 $13,592 $13,700 $13,341
1/31/94 $14,005 $14,136 $13,794
2/28/94 $13,645 $13,781 $13,420
3/31/94 $13,042 $13,169 $12,837
4/30/94 $13,190 $13,326 $13,001
5/31/94 $13,349 $13,488 $13,213
6/30/94 $12,988 $13,127 $12,889
7/31/94 $13,405 $13,558 $13,312
8/31/94 $13,971 $14,147 $13,856
9/30/94 $13,651 $13,825 $13,518
10/31/94 $13,918 $14,095 $13,821
11/30/94 $13,416 $13,590 $13,318
12/31/94 $13,577 $13,767 $13,514
1/31/95 $13,923 $14,121 $13,864
2/28/95 $14,474 $14,700 $14,404
3/31/95 $14,852 $15,094 $14,829
4/30/95 $15,219 $15,476 $15,264
5/31/95 $15,770 $16,048 $15,874
6/30/95 $16,191 $16,490 $16,242
7/31/95 $16,807 $17,111 $16,779
8/31/95 $16,936 $17,245 $16,821
9/30/95 $17,606 $17,949 $17,531
10/31/95 $17,520 $17,859 $17,468
11/30/95 $18,276 $18,646 $18,233
12/31/95 $18,547 $18,924 $18,585
1/31/96 $19,095 $19,499 $19,217
2/29/96 $19,379 $19,789 $19,396
3/31/96 $19,554 $19,980 $19,582
4/30/96 $19,883 $20,321 $19,870
5/31/96 $20,354 $20,812 $20,380
6/30/96 $20,299 $20,779 $20,458
7/31/96 $19,335 $19,794 $19,554
8/31/96 $19,861 $20,327 $19,966
9/30/96 $20,967 $21,465 $21,088
10/31/96 $21,394 $21,899 $21,670
11/30/96 $22,938 $23,485 $23,308
12/31/96 $22,549 $23,103 $22,847
1/31/97 $23,846 $24,442 $24,272
2/28/97 $23,935 $24,528 $24,464
3/31/97 $22,870 $23,457 $23,461
4/30/97 $24,101 $24,696 $24,859
5/31/97 $25,631 $26,291 $26,371
6/30/97 $26,695 $27,402 $27,552
7/31/97 $28,857 $29,615 $29,743
8/31/97 $27,471 $28,216 $28,077
9/30/97 $28,946 $29,732 $29,613
10/31/97 $27,992 $28,756 $28,624
11/30/97 $29,167 $29,983 $29,949
12/31/97 $29,747 $30,582 $30,464
1/31/98 $29,960 $30,818 $30,802
2/28/98 $32,166 $33,116 $33,023
3/31/98 $33,801 $34,830 $34,714
4/30/98 $34,149 $35,211 $35,065
</TABLE>
15
<PAGE>
SCHWAB 1000 FUND-REGISTERED TRADEMARK- SELECT SHARES-TM-
FUND PERFORMANCE
CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 4/30/98
<TABLE>
<CAPTION>
Since Inception
Six Months (5/19/97)
<S> <C> <C>
--------------------------------------------------------------------------------
SCHWAB 1000 FUND SELECT SHARES(1) 22.07% 36.20%
--------------------------------------------------------------------------------
Schwab 1000 Index-Registered Trademark- 22.44% 36.77%
--------------------------------------------------------------------------------
Index Tracking Differential 0.37% 0.57%
--------------------------------------------------------------------------------
S&P 500-Registered Trademark- Index 22.47% 35.44%
--------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 3/31/98
<TABLE>
<CAPTION>
Since Inception
Six Months (5/19/97)
<S> <C> <C>
- --------------------------------------------------------------------------------
SCHWAB 1000 FUND SELECT SHARES(1) 16.85% 34.81%
- --------------------------------------------------------------------------------
</TABLE>
(1)The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.35% for the Select Shares. Without fee
waivers and guarantees, as of 4/30/98, the six-month and average annual
since-inception total returns would have been 22.06% and 36.12%,
respectively, for the Select Shares. As of 3/31/98, the six-month and average
annual since-inception total returns would have been 16.84% and 34.74%,
respectively.
This graph compares the growth of a hypothetical $50,000 investment(2) in the
Schwab 1000 Fund Select Shares, made at its inception, with a similar investment
in the Schwab 1000 Index and the S&P 500 Index.
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 9 for a more detailed discussion.)
THIS INFORMATION IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL
RETURNS ASSUME REINVESTMENT OF ALL DIVIDEND AND CAPITAL GAIN 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SCHWAB 1000 FUND SELECT SHARES
GROWTH OF A HYPOTHETICAL $50,000
INVESTMENT
SCHWAB 1000 FUND SELECT SHARES SCHWAB 1000 INDEX S&P 500 INDEX
<S> <C> <C> <C>
5/19/97 $50,000 $50,000 $50,000
5/31/97 $51,040 $51,064 $50,930
6/30/97 $53,180 $53,222 $53,212
7/31/97 $57,490 $57,518 $57,442
8/31/97 $54,750 $54,801 $54,225
9/30/97 $57,685 $57,746 $57,191
10/31/97 $55,785 $55,851 $55,281
11/30/97 $58,150 $58,233 $57,841
12/31/97 $59,325 $59,398 $58,836
1/31/98 $59,725 $59,855 $59,489
2/28/98 $64,145 $64,318 $63,778
3/31/98 $67,405 $67,648 $67,043
4/30/98 $68,100 $68,387 $67,720
</TABLE>
(2)The required minimum initial investment in the Select Shares is $50,000.
16
<PAGE>
SCHWAB 1000 FUND-REGISTERED TRADEMARK-:
FUND HOLDINGS
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, 1998, the aggregate market capitalization
of the Schwab 1000 Index represented approximately 85% of the total value of the
U.S. stock market.(1)
TOP 10 HOLDINGS AS A PERCENTAGE OF FUND INVESTMENTS(2)
<TABLE>
<S> <C>
- -------------------------------------------------
General Electric Co. 2.74%
- -------------------------------------------------
Microsoft Corp. 2.16%
- -------------------------------------------------
Coca-Cola Co. 1.86%
- -------------------------------------------------
Exxon Corp. 1.77%
- -------------------------------------------------
Pfizer Inc. 1.45%
- -------------------------------------------------
Merck & Co., Inc. 1.42%
- -------------------------------------------------
Intel Corp. 1.30%
- -------------------------------------------------
International Business Machines Corp. 1.12%
- -------------------------------------------------
Wal-Mart Stores, Inc. 1.12%
- -------------------------------------------------
Procter & Gamble Co. 1.09%
- -------------------------------------------------
</TABLE>
PORTFOLIO BY ECONOMIC SECTOR(2)
<TABLE>
<S> <C>
- ------------------------------------------------
Consumer Nondurables 30.48%
- ------------------------------------------------
Finance 19.81%
- ------------------------------------------------
Technology 17.31%
- ------------------------------------------------
Utilities 9.87%
- ------------------------------------------------
Materials and Services 7.88%
- ------------------------------------------------
Energy 6.56%
- ------------------------------------------------
Capital Goods 4.55%
- ------------------------------------------------
Consumer Durables 2.24%
- ------------------------------------------------
Transportation 1.30%
- ------------------------------------------------
</TABLE>
(1)Source: Wilshire Associates. The U.S. stock market is represented by the
Wilshire 5000 Index.
(2)Both the top 10 holdings and the economic sector percentages may not be
indicative of current or future investments. A complete list of the Fund's
investments as of 4/30/98 can be found in the Schedule of Investments later
in this report.
17
<PAGE>
SCHWAB 1000 FUND-REGISTERED TRADEMARK-:
FUND DISCUSSION
QUESTIONS TO THE
PORTFOLIO MANAGEMENT TEAM
Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A. The Fund achieved strong total returns for the six-month reporting period:
21.99% and 22.07% for the Investor Shares and Select Shares-TM-, respectively.
Both classes of shares closely tracked the Fund's benchmark, the Schwab 1000
Index-Registered Trademark-. As the table below shows, the Fund also
outperformed the average U.S. large-cap fund over the six-month and five-year
periods ended April 30.(1) The Fund's outperformance was even greater on an
after-tax basis, a direct result of its tax-efficient investment strategy.
<TABLE>
<CAPTION>
BEFORE TAX: AFTER TAX:
SIX MONTHS FIVE YEARS* FIVE YEARS*
<S> <C> <C> <C>
- ---------------------------------------------------------------
Investor Shares 21.99% 22.20% 21.42%
- ---------------------------------------------------------------
Select Shares 22.07% -- --
- ---------------------------------------------------------------
Average
Large-Cap Fund 16.99% 19.69% 16.87%
- ---------------------------------------------------------------
</TABLE>
*Five-year returns represent average annual total returns over the five-year
period.
Q. HOW DID THE PERFORMANCE OF THE SCHWAB 1000 INDEX COMPARE WITH THAT OF THE S&P
500-REGISTERED TRADEMARK- INDEX?
A. As the following table reveals, the performance of the Schwab 1000 Index and
that of the S&P 500 Index were virtually identical over the six-month reporting
period and from the Fund's inception through April 30, 1998. As we have
discussed in previous reports, this will not always be the case, because the
indices are not constructed in the same manner; in particular, the Schwab 1000
Index has more mid-cap stock exposure than does the S&P 500 Index, in addition
to holding approximately twice as many stocks.
<TABLE>
<CAPTION>
INCEPTION
(4/2/91)
TO DATE AVERAGE
SIX MONTHS ANNUAL RETURNS
<S> <C> <C>
- ----------------------------------------------------------------
Schwab 1000 Index 22.44% 19.45%
- ----------------------------------------------------------------
S&P 500 Index 22.47% 19.38%
- ----------------------------------------------------------------
</TABLE>
Q. WHY CAN INDEX FUNDS BE A SOUND WAY TO IMPLEMENT AN ASSET ALLOCATION PLAN?
A. One frequently cited study has shown that the manner in which an investor
allocates his or her portfolio among different asset classes can determine the
vast majority of the variance in the portfolio's returns.(2) Unless investors
build their portfolios with investments that are designed to consistently
deliver the performance of the asset classes they wish to track, their
portfolios may not behave as they expect.
Index funds can be an excellent choice to implement an asset allocation plan
because they seek to invest only in the intended asset class and therefore
should, because of their investment objectives, achieve returns that closely
track those of that benchmark asset class. Index funds should not be subject to
the "style drift" that investors may face with many actively managed funds.
Consistent with their mission to track their benchmarks, index funds also
usually maintain minimal cash holdings.
(1)Source: Morningstar, Inc. Returns are load-adjusted. The Large-Cap Fund
category contains 798 and 477 funds, respectively, with six-month and
five-year track records as of 4/30/98. These funds may or may not follow a
tax-efficient strategy similar to that followed by the Schwab 1000 Fund.
Also, although many mutual funds have multiple classes of shares, the
category average includes only those funds that were classified by
Morningstar as a distinct portfolio. This typically means that a fund's
oldest class of shares was used.
(2)Source: FINANCIAL ANALYSTS JOURNAL, Brinson, Singer, Beebower, May/June 1991.
18
<PAGE>
In addition to seeking to deliver consistent asset class performance, index
funds are typically efficient from both a cost and a tax standpoint. Most index
funds minimize their trading and operating costs by keeping both portfolio
turnover and operating expense ratios low. These savings are passed on to
investors in the form of higher returns.
Q. DO INDEX FUNDS REDUCE INVESTMENT RISK?
A. It depends on the type of risk. Most investment risks can be categorized as
either SYSTEMATIC (non-diversifiable) or NONSYSTEMATIC (diversifiable).
Systematic or nondiversifiable risks are those that may affect all stocks or
bonds, such as a bear market caused by adverse economic conditions. Index funds
do not safeguard against this type of risk. Their goal is to consistently track
their benchmark, regardless of how it is performing. They also generally
maintain minimal cash balances, so they do not build up a defensive cash
position in a negative market environment.
Nonsystematic risks are those that affect a particular stock or bond, such as a
decline in demand for a company's product or a negative earnings surprise.
Nonsystematic risk is also referred to as "diversifiable risk," because an
investor can reduce it by diversifying his or her portfolio across a
sufficiently large number of companies. Since most broad-based index funds
purchase many--in some cases, hundreds of-- securities, they can be extremely
effective at minimizing nonsystematic or company-specific risk.
Q. BECAUSE THE STOCK MARKET HAS REACHED RECORD HIGHS, IS IT TIME TO RETHINK MY
ALLOCATION TO STOCKS?
A. Whenever the returns of asset classes have diverged significantly from one
another, it can be prudent to review your portfolio's asset allocation. For
example, U.S. large-cap stocks dramatically outperformed U.S. bonds over the
three-year period ended April 30, 1998. This performance disparity is
illustrated by the average annual returns of the Schwab 1000 Fund-Registered
Trademark- and the Schwab Total Bond Market Index Fund over that period: The
Schwab 1000 Fund, which invests in large-cap domestic equities, gained 30.92%,
whereas the Schwab Total Bond Market Index Fund rose 8.84%.(1)
This disparity may have caused an investor's portfolio asset allocation to
shift, as the following example illustrates. Assume that an investor had a
hypothetical asset allocation of 60% stocks and 40% bonds (investing in just
these two Funds) at the beginning of the three-year period, and reinvested all
Fund distributions. By the end of the period, the portfolio's asset allocation
mix would have shifted to 72% stocks and 28% bonds--a significant divergence
from the investor's original strategy (see chart on the following page).
We feel that investors should focus on their own risk profiles, time horizons
and income needs to determine the appropriate level of stocks and bonds in their
portfolios. Because bond returns historically have not been well correlated with
stock returns,(2) combining bonds in a portfolio with other asset classes can be
effective in reducing total portfolio volatility.
(1)Total return assumes reinvestment of all dividends and capital gains
distributions, if any. Past performance is no guarantee of future results.
Principal value and investment returns will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than their original cost. A
portion of both Funds' expenses was reduced during the period. Without these
reductions, the Funds' total returns would have been lower. As of 4/30/98,
the one-year and average annual five-year total returns for the Total Bond
Market Index Fund were 11.34% and 7.25%, respectively. As of 3/31/98, the
one-year, average annual five-year and average annual since-inception
(3/5/93) total returns for the Total Bond Market Index Fund were 13.05%,
7.47% and 6.80%, respectively.
(2)For the 20-year period ended 12/31/97, the correlation of large-cap stock
returns and government bond returns has been 0.38. Source: Symphony Asset
Management.
19
<PAGE>
SCHWAB 1000 FUND-REGISTERED TRADEMARK-:
FUND DISCUSSION (continued)
<TABLE>
<CAPTION>
4/30/95 PORTFOLIO THREE-YEAR 4/30/98 PORTFOLIO
VALUE ALLOCATION GROWTH VALUE ALLOCATION
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Schwab 1000 Fund $6,000 60% $7,464 $13,464 72%
- -----------------------------------------------------------------------------------------------------------------
Total Bond Market Index Fund $4,000 40% $1,157 $5,157 28%
- -----------------------------------------------------------------------------------------------------------------
Total Portfolio Value $10,000 100% $8,621 $18,621 100%
</TABLE>
Q. YOU OFTEN REFER TO THE SCHWAB 1000 FUND
AS "TAX-EFFICIENT." WHAT DOES THIS MEAN?
ARE TAX-EFFICIENT FUNDS APPROPRIATE FOR RETIREMENT ACCOUNTS?
A. Taxes can erode the returns investors earn from mutual funds held outside a
retirement account. That's why it is important to consider their effects on fund
performance. As the Tax-Smart Investment Strategy section on page 14 shows, the
Schwab 1000 Fund is considerably more "tax-efficient" than the average U.S.
large-cap fund. In fact, the Schwab 1000 Fund was one of the first, and is
currently the largest, fund designed to be tax-efficient.(1) Since its inception
in 1991, the Fund has not paid a single capital gain distribution. Although
there's no guarantee that the Fund will be able to maintain this record,
especially in a down market, it does illustrate the Fund's tax-efficient
management strategy.
Generally, index funds are tax-efficient because they are designed to have less
portfolio turnover and therefore realize capital gains much less frequently than
most actively managed funds; the Fund's tax-efficient strategy has been very
effective in eliminating capital gains distributions. However, it's important to
note that like most mutual funds, the Schwab 1000 Fund is required to distribute
income dividends, which are taxed at standard income-tax rates. The Schwab 1000
Index-Registered Trademark- is rebalanced only once a year, which helps minimize
the portfolio turnover of the Schwab 1000 Fund. Furthermore, when stocks are
traded, the Portfolio Manager attempts to sells shares with the highest tax
basis first and attempts to offset capital gains with capital losses in order to
minimize taxable distributions to shareholders. Unlike many index funds, the
Schwab 1000 Fund occasionally holds stocks that are no longer included in the
index, once again to avoid realizing capital gains.
Tax-efficient fund management techniques like those used by the Schwab 1000 Fund
are designed to increase the after-tax returns of investors that hold the fund
in a taxable, or non-retirement, account. So it is fair to ask whether it can
make sense to hold a tax-efficient fund within a retirement account, on which
taxes are deferred. The answer is a resounding yes. Some of these techniques,
such as selling shares with the highest tax basis first, have no impact on
pre-tax returns whatsoever. Others, such as low portfolio turnover and
relatively infrequent index rebalancing, have proven to be effective tactics in
enhancing long-term investment returns regardless of whether the fund is held
inside or outside a retirement account.
(1)Source: "Strategic Insight," FLOW WATCH, August 1997.
20
<PAGE>
SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK- INVESTOR SHARES
FUND PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/98
<TABLE>
<CAPTION>
Since
Inception
Six Months One Year Three Years (12/3/93)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND
INVESTOR SHARES(1) 11.75% 46.44% 24.00% 17.20%
- --------------------------------------------------------------------------------------
Schwab Small-Cap Index-Registered
Trademark- 13.44% 49.27% 26.00% 18.75%
- --------------------------------------------------------------------------------------
Index Tracking Differential 1.69% 2.83% 2.00% 1.55%
- --------------------------------------------------------------------------------------
Russell 2000-Registered Trademark-
Index 11.85% 42.38% 23.75% 17.37%
- --------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 3/31/98
<TABLE>
<CAPTION>
Since
Inception
Six Months One Year Three Years (12/3/93)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND
INVESTOR SHARES(1) 6.33% 46.78% 24.70% 17.41%
- --------------------------------------------------------------------------------------
</TABLE>
(1)The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.49% for the Investor Shares. Without fee
waivers and guarantees, as of 4/30/98, the six-month, one-year, average
annual three-year and average annual since-inception total returns would have
been 11.45%, 45.78%, 23.52% and 16.71%, respectively, for the Investor
Shares. As of 3/31/98, the six-month, one-year, average annual three-year and
average annual since-inception total returns would have been 6.06%, 46.14%,
24.24% and 16.93%, respectively.
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 three-year performance of the
Schwab Small-Cap Fund Investor Shares.
THREE-YEAR AVERAGE ANNUAL TOTAL RETURNS AS OF 4/30/98
<TABLE>
<CAPTION>
Before After % Lost
Tax Tax(2) to Taxes
<S> <C> <C> <C>
- -----------------------------------------------------------
Schwab Small-Cap Fund
Investor Shares(3) 24.00% 23.76% 0.24%
- -----------------------------------------------------------
Average Small-Cap Fund(4) 23.97% 20.78% 3.19%
- -----------------------------------------------------------
</TABLE>
(2)After-tax returns assume the maximum federal income tax rate of 39.6% on
dividends and 28% on capital gains distributions. Tax rates vary and may be
higher or lower than those shown.
(3)The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.49%. Without fee waivers and guarantees,
the Investor Shares' returns would have been lower.
(4)Source: Morningstar, Inc. Returns are load-adjusted. The Small-Cap Fund
category contains 249 funds with three-year track records as of 4/30/98.
These funds may or may not follow a tax-efficient strategy similar to that
followed by the Schwab Small-Cap Index Fund. Also, although many mutual funds
have multiple classes of shares, the category average includes only those
funds that were classified by Morningstar as a distinct portfolio. This
typically means that a fund's oldest class of shares was used.
21
<PAGE>
SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK- INVESTOR SHARES
FUND PERFORMANCE (continued)
This 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.
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 9 for a more detailed discussion.)
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SCHWAB SMALL-CAP INDEX FUND INVESTOR
SHARES
GROWTH OF A HYPOTHETICAL $10,000
INVESTMENT
SCHWAB SMALL-CAP INDEX FUND INVESTOR
SHARES SCHWAB SMALL-CAP INDEX RUSSELL 2000 INDEX
<S> <C> <C> <C>
12/3/93 $10,000 $10,000 $10,000
12/31/93 $10,154 $10,234 $10,186
1/31/94 $10,394 $10,469 $10,505
2/28/94 $10,334 $10,430 $10,467
3/31/94 $9,783 $9,871 $9,915
4/30/94 $9,753 $9,847 $9,974
5/31/94 $9,613 $9,692 $9,861
6/30/94 $9,333 $9,419 $9,529
7/31/94 $9,493 $9,614 $9,685
8/31/94 $10,134 $10,249 $10,225
9/30/94 $10,094 $10,191 $10,190
10/31/94 $10,064 $10,149 $10,149
11/30/94 $9,663 $9,767 $9,739
12/31/94 $9,841 $10,000 $10,000
1/31/95 $9,730 $9,838 $9,874
2/28/95 $10,082 $10,229 $10,285
3/31/95 $10,334 $10,442 $10,461
4/30/95 $10,566 $10,671 $10,693
5/31/95 $10,717 $10,809 $10,877
6/30/95 $11,211 $11,356 $11,441
7/31/95 $11,866 $12,021 $12,100
8/31/95 $12,077 $12,270 $12,351
9/30/95 $12,309 $12,510 $12,572
10/31/95 $11,785 $11,910 $12,010
11/30/95 $12,329 $12,114 $12,514
12/31/95 $12,562 $12,782 $12,845
1/31/96 $12,491 $12,749 $12,831
2/29/96 $12,967 $13,261 $13,231
3/31/96 $13,170 $13,492 $13,505
4/30/96 $13,899 $14,206 $14,227
5/31/96 $14,384 $14,692 $14,788
6/30/96 $13,848 $14,222 $14,180
7/31/96 $12,643 $13,075 $12,942
8/31/96 $13,413 $13,904 $13,694
9/30/96 $14,010 $14,416 $14,230
10/31/96 $13,757 $14,169 $14,010
11/30/96 $14,344 $14,733 $14,588
12/31/96 $14,508 $15,007 $14,970
1/31/97 $14,895 $15,361 $15,269
2/28/97 $14,376 $14,986 $14,900
3/31/97 $13,654 $14,257 $14,196
4/30/97 $13,756 $14,299 $14,236
5/31/97 $15,383 $16,045 $15,821
6/30/97 $16,125 $16,880 $16,499
7/31/97 $17,213 $17,842 $17,267
8/31/97 $17,538 $18,243 $17,662
9/30/97 $18,850 $19,675 $18,955
10/31/97 $18,026 $18,816 $18,123
11/30/97 $17,843 $18,645 $18,005
12/31/97 $18,236 $19,035 $18,320
1/31/98 $17,787 $18,736 $18,031
2/28/98 $19,195 $20,285 $19,361
3/31/98 $20,042 $21,199 $20,159
4/30/98 $20,144 $21,344 $20,270
</TABLE>
22
<PAGE>
SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK- SELECT SHARES-TM-
FUND PERFORMANCE
CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 4/30/98
<TABLE>
<CAPTION>
Since Inception
Six Months (5/19/97)
<S> <C> <C>
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND
SELECT SHARES(1) 11.80% 36.86%
- --------------------------------------------------------------------------------
Schwab Small-Cap Index-Registered Trademark- 13.44% 38.95%
- --------------------------------------------------------------------------------
Index Tracking Differential 1.64% 2.09%
- --------------------------------------------------------------------------------
Russell 2000-Registered Trademark- Index 11.85% 33.14%
- --------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 3/31/98
<TABLE>
<CAPTION>
Since Inception
Six Months (5/19/97)
<S> <C> <C>
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND
SELECT SHARES(1) 6.39% 36.10%
- --------------------------------------------------------------------------------
</TABLE>
(1)The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.38% for the Select Shares. Without fee
waivers and guarantees, as of 4/30/98, the six-month and since-inception
total returns would have been 11.49% and 36.09%, respectively, for the Select
Shares. As of 3/31/98, the six-month and since-inception total returns would
have been 6.10% and 35.40%, respectively.
This graph compares the growth of a hypothetical $50,000 investment(2) in the
Schwab Small-Cap Index Fund Select Shares, made at its inception, with similar
investments in the Schwab Small-Cap Index and the Russell 2000 Index.
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 9 for a more detailed discussion.)
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SCHWAB SMALL-CAP INDEX FUND SELECT SHARES
GROWTH OF A HYPOTHETICAL $50,000
INVESTMENT
SCHWAB SMALL CAP INDEX FUND SELECT
SHARES SCHWAB SMALL-CAP INDEX RUSSELL 2000 INDEX
<S> <C> <C> <C>
5/19/97 $50,000 $50,000 $50,000
5/31/97 $52,170 $52,226 $51,960
6/30/97 $54,690 $54,942 $54,189
7/31/97 $58,415 $58,075 $56,709
8/31/97 $59,485 $59,380 $58,008
9/30/97 $63,965 $64,039 $62,254
10/31/97 $61,205 $61,244 $59,521
11/30/97 $60,550 $60,687 $59,134
12/31/97 $61,920 $61,958 $60,169
1/31/98 $60,400 $60,983 $59,218
2/28/98 $65,175 $66,026 $63,588
3/31/98 $68,050 $69,002 $66,208
4/30/98 $68,430 $69,473 $66,572
</TABLE>
(2)The required minimum initial investment in the Select Shares is $50,000.
23
<PAGE>
SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK-:
FUND HOLDINGS
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, 1998, the aggregate market
capitalization of stocks included in the index represented approximately 6.57%
of the total market value of all publicly traded U.S. companies, as represented
by the Wilshire 5000 Index.(1)
TOP 10 HOLDINGS
AS A PERCENTAGE OF FUND INVESTMENTS(2)
<TABLE>
<S> <C>
- -------------------------------------------------
Ocean Energy Inc. 0.31%
- -------------------------------------------------
Interstate Energy Corp. 0.28%
- -------------------------------------------------
Comverse Technology Inc. 0.26%
- -------------------------------------------------
Pixar 0.24%
- -------------------------------------------------
Ingram Mirco Inc. 0.23%
- -------------------------------------------------
Bethlehem Steel Corp. 0.22%
- -------------------------------------------------
CNB Bancshares Inc. 0.22%
- -------------------------------------------------
Delta & Pine Land Co. 0.22%
- -------------------------------------------------
Beckman Coulter Inc. 0.21%
- -------------------------------------------------
Waters Corp. 0.21%
- -------------------------------------------------
</TABLE>
PORTFOLIO BY ECONOMIC SECTOR(2)
<TABLE>
<S> <C>
- ------------------------------------------------
Materials and Services 23.89%
- ------------------------------------------------
Consumer Nondurables 20.65%
- ------------------------------------------------
Technology 16.41%
- ------------------------------------------------
Finance 14.85%
- ------------------------------------------------
Capital Goods 6.80%
- ------------------------------------------------
Utilities 5.62%
- ------------------------------------------------
Energy 4.88%
- ------------------------------------------------
Consumer Durables 4.06%
- ------------------------------------------------
Transportation 2.85%
- ------------------------------------------------
</TABLE>
(1)Source: Wilshire Associates. The U.S. stock market is represented by the
Wilshire 5000 Index.
(2)Both the top 10 holdings and the economic sector percentages may not be
indicative of current or future investments. A complete list of the Fund's
investments as of 4/30/98 can be found in the Schedule of Investments later
in this report.
24
<PAGE>
SCHWAB SMALL-CAP INDEX FUND:
FUND DISCUSSION
QUESTIONS TO THE
PORTFOLIO MANAGEMENT TEAM
Q. HOW DID THE FUND PERFORM DURING THE
REPORTING PERIOD?
A. The Fund achieved strong total returns for the six-month reporting period:
11.75% and 11.80% for the Investor Shares and Select Shares-TM-, respectively.
Both classes of shares closely tracked the Fund's benchmark, the Schwab
Small-Cap Index-Registered Trademark-. Although the Fund's six-month returns are
impressive in absolute terms, they lagged those of the U.S. large-cap equity
sector. As the table below shows, however, the Fund did manage to outperform the
average U.S. small-cap fund over the six-month AND three-year periods ended
April 30, 1998.(1) The Fund's outperformance was even greater on an after-tax
basis, a direct result of its tax-efficient investment strategy.
<TABLE>
<CAPTION>
BEFORE TAX: AFTER TAX:
THREE THREE
SIX MONTHS YEARS* YEARS*
<S> <C> <C> <C>
- ---------------------------------------------------------------
Investor Shares 11.75% 24.00% 23.76%
- ---------------------------------------------------------------
Select Shares 11.80% -- --
- ---------------------------------------------------------------
Average
Small-Cap Fund 8.94% 23.97% 20.78%
- ---------------------------------------------------------------
</TABLE>
*Three-year returns represent average annual total returns over the three-year
period.
Q. HOW DID THE PERFORMANCE OF THE SCHWAB SMALL-CAP INDEX COMPARE WITH THAT OF
THE RUSSELL 2000-REGISTERED TRADEMARK-INDEX?
A. As shown in the performance figures on page 21, the Schwab Small-Cap Index
outperformed the Russell 2000 Index of small-cap stocks by nearly 1.5 percent-
age points for the six-month reporting period as well as on an inception-to-date
basis.
Q. WHY CAN INDEX FUNDS BE A SOUND WAY TO IMPLEMENT AN ASSET ALLOCATION PLAN?
A. One frequently cited study has shown that the manner in which an investor
allocates his or her portfolio among different asset classes can determine the
vast majority of the variance in the portfolio's returns.(2) Unless investors
build their portfolios with investments that are designed to consistently
deliver the performance of the asset classes they wish to track, their
portfolios may not behave as they expect.
Index funds can be an excellent choice to implement an asset allocation plan
because they seek to invest only in the intended asset class and therefore
should, because of their investment objectives, achieve returns that closely
track those of that benchmark asset class. Index funds should not be subject to
the "style drift" that investors may face with many actively managed funds.
Consistent with their mission to track their benchmarks, index funds also
usually maintain minimal cash holdings.
In addition to seeking to deliver consistent asset class performance, index
funds are typically efficient from both a cost and a tax standpoint. Most index
funds minimize their trading and operating costs by keeping
(1)Source: Morningstar, Inc. Returns are load-adjusted. The Small-Cap Fund
category contains 393 and 249 funds, respectively, with six-month and three-
year track records as of 4/30/98. These funds may or may not follow a tax-
efficient strategy similar to that followed by the Schwab Small-Cap Index
Fund. Also, although many mutual funds have multiple classes of shares, the
category average includes only those funds that were classified by
Morningstar as a distinct portfolio. This typically means that a fund's
oldest class of shares was used.
(2)Source: FINANCIAL ANALYSTS JOURNAL, Brinson, Singer, Beebower, May/June 1991.
25
<PAGE>
SCHWAB SMALL-CAP INDEX FUND:
FUND DISCUSSION (continued)
both portfolio turnover and operating expense ratios low. These savings are
passed on to investors in the form of higher returns.
Q. DO INDEX FUNDS REDUCE INVESTMENT RISK?
A. It depends on the type of risk. Most investment risks can be categorized as
either SYSTEMATIC (non-diversifiable) or NONSYSTEMATIC (diversifiable).
Systematic or nondiversifiable risks are those that may affect all stocks or
bonds, such as a bear market caused by adverse economic conditions. Index funds
do not safeguard against this type of risk. Their goal is to consistently track
their benchmark, regardless of how it is performing. They also generally
maintain minimal cash balances, so they do not build up a defensive cash
position in a negative market environment.
Nonsystematic risks are those that affect a particular stock or bond, such as a
decline in demand for a company's product or a negative earnings surprise.
Nonsystematic risk is also referred to as "diversifiable risk," because an
investor can reduce it by diversifying his or her portfolio across a
sufficiently large number of companies. Since most broad-based index funds
purchase many--in some cases, hundreds of-- securities, they can be extremely
effective at minimizing nonsystematic or company-specific risk.
Q. BECAUSE THE STOCK MARKET HAS REACHED RECORD HIGHS, IS IT TIME TO RETHINK MY
ALLOCATION TO STOCKS?
A. Whenever the returns of asset classes have diverged significantly from one
another, it can be prudent to review your portfolio's asset allocation. For
example, U.S. large-cap stocks dramatically outperformed U.S. bonds over the
three-year period ended April 30, 1998. This performance disparity is
illustrated by the average annual returns of the Schwab 1000 Fund and the Schwab
Total Bond Market Index Fund over that period: The Schwab 1000 Fund, which
invests in large-cap domestic equities, gained 30.92%, whereas the Schwab Total
Bond Market Index Fund rose 8.84%.(1)
This disparity may have caused an investor's portfolio asset allocation to
shift, as the following example illustrates. Assume that an investor had a
hypothetical asset allocation of 60% stocks and 40% bonds (investing in just
these two Funds) at the beginning of the three-year period, and reinvested all
Fund distributions. By the end of the period, the portfolio's asset allocation
mix would have shifted to 72% stocks and 28% bonds--a significant divergence
from the investor's original strategy (see chart on the following page).
We feel that investors should focus on their own risk profiles, time horizons
and income needs to determine the appropriate level of stocks and bonds in their
portfolios. Because bond returns historically have not been well correlated with
stock returns,(2) combining bonds in a portfolio with other asset classes can be
effective in reducing total portfolio volatility.
(1)Total return assumes reinvestment of all dividends and capital gains
distributions, if any. Past performance is no guarantee of future results.
Principal value and investment returns will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than their original cost. A
portion of both Funds' expenses was reduced during the period. Without these
reductions, the Funds' total returns would have been lower. As of 4/30/98,
the one-year and average annual five-year total returns for the Total Bond
Market Index Fund were 11.34% and 7.25%, respectively. As of 3/31/98, the
one-year, average annual five-year and average annual since-inception
(3/5/93) total returns for the Total Bond Market Index Fund were 13.05%,
7.47% and 6.80%, respectively.
(2)For the 20-year period ended 12/31/97, the correlation of large-cap stock
returns and government bond returns has been 0.38. Source: Symphony Asset
Management.
26
<PAGE>
<TABLE>
<CAPTION>
4/30/95 PORTFOLIO THREE-YEAR 4/30/98 PORTFOLIO
VALUE ALLOCATION GROWTH VALUE ALLOCATION
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Schwab 1000 Fund-Registered Trademark- $6,000 60% $7,464 $13,464 72%
- ------------------------------------------------------------------------------------------------------------------------------
Total Bond Market Index Fund $4,000 40% $1,157 $5,157 28%
- ------------------------------------------------------------------------------------------------------------------------------
Total Portfolio Value $10,000 100% $8,621 $18,621 100%
</TABLE>
Q. GIVEN THE RECENT UNDERPERFORMANCE OF SMALL-CAP STOCKS, IS THERE STILL A
REASON TO INVEST IN THEM?
A. If history is any guide, yes. As the first of the graphs at the right
illustrates, the total returns of U.S. large-cap and small-cap stocks have been
fairly comparable over extended periods of time--such as from 1970 to 1997. Over
the past 28 years, small-caps have outperformed large-caps 14 times, over
varying lengths of time, as the second graph illustrates. In the remaining 14
years, large-caps outperformed small-caps. There appears to be little, if any,
predictability to this seesaw effect. That's why it can be wise for an investor
to consider diversifying his or her portfolio by holding both small- and
large-cap stocks. For example, small-cap stocks generally outperformed large-cap
stocks from 1991 to 1993. Large-cap stocks were the winners from 1994 through
1997. Although not readily apparent from viewing these graphs, small-cap stocks
have also exhibited a higher level of volatility over the period shown. In
addition, there is generally less publicly available information on small-cap
stocks.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LARGE-CAP AND SMALL-CAP CUMULATIVE RETURNS:
1970-1997
GROWTH OF A HYPOTHETICAL $1 INVESTMENT
LARGE-CAP SMALL-CAP
CUMULATIVE CUMULATIVE
RETURN RETURN
<S> <C> <C>
1970 1.04 0.88
1971 1.19 1.05
1972 1.41 1.09
1973 1.21 0.69
1974 0.89 0.50
1975 1.22 0.82
1976 1.51 1.24
1977 1.40 1.47
1978 1.49 1.73
1979 1.77 2.50
1980 2.34 3.34
1981 2.22 3.47
1982 2.70 4.45
1983 3.31 5.79
1984 3.52 5.49
1985 4.65 7.22
1986 5.51 7.73
1987 5.79 7.03
1988 6.77 8.71
1989 8.90 10.12
1990 8.62 8.08
1991 11.25 12.06
1992 12.11 14.41
1993 13.32 17.08
1994 13.50 16.76
1995 18.55 21.93
1996 22.83 25.93
1997 30.44 32.81
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LARGE-CAP AND SMALL-CAP
RELATIVE PERFORMANCE:
1970-1997
<S> <C>
1970 16.3%
1971 -5.8%
1972 15.4%
1973 22.0%
1974 1.5%
1975 -27.1%
1976 -27.3%
1977 -26.0%
1978 -11.5%
1979 -25.8%
1980 -1.0%
1981 -8.9%
1982 -6.9%
1983 -7.5%
1984 11.5%
1985 0.6%
1986 11.3%
1987 14.3%
1988 -7.1%
1989 15.3%
1990 17.0%
1991 -18.7%
1992 -11.8%
1993 -8.5%
1994 3.2%
1995 6.6%
1996 4.8%
1997 6.8%
Large-Caps Outperformed
Small-Caps Outperformed
</TABLE>
Source: Schwab's Center for Investment Research. Large-cap stocks are
represented by the S&P 500-Registered Trademark- Index; small-cap stocks are
represented by the Russell 2000-Registered Trademark- Index.
27
<PAGE>
SCHWAB INTERNATIONAL INDEX FUND-REGISTERED TRADEMARK- INVESTOR SHARES
FUND PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/98
<TABLE>
<CAPTION>
Since
Inception
Six Months One Year Three Years (9/9/93)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX
FUND INVESTOR SHARES(1) 14.55% 21.98% 12.55% 10.48%
- --------------------------------------------------------------------------------------
Schwab International Index-Registered
Trademark- 15.15% 21.76% 12.72% 11.01%
- --------------------------------------------------------------------------------------
Index Tracking Differential 0.60% 0.22% 0.17% 0.53%
- --------------------------------------------------------------------------------------
MSCI-EAFE-Registered Trademark- Index 15.44% 18.91% 9.50% 8.66%
- --------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 3/31/98
<TABLE>
<CAPTION>
Since
Inception
Six Months One Year Three Years (9/9/93)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX
FUND INVESTOR SHARES(1) 4.67% 22.04% 13.62% 10.51%
- --------------------------------------------------------------------------------------
</TABLE>
(1)The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.58% for the Investor Shares. Without fee
waivers and guarantees, as of 4/30/98, the six-month, one-year, average
annual three-year and average annual since-inception total returns would have
been 14.13%, 21.20%, 11.96% and 9.92%, respectively, for the Investor Shares.
As of 3/31/98, the six-month, one-year, average annual three-year and average
annual since-inception total returns would have been 4.30%, 21.29%, 13.05%
and 9.96%, respectively.
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 three-year performance of
the Schwab International Index Fund Investor Shares.
THREE-YEAR AVERAGE ANNUAL TOTAL RETURNS AS OF 4/30/98
<TABLE>
<CAPTION>
Before After % Lost
Tax Tax(2) to Taxes
<S> <C> <C> <C>
- -----------------------------------------------------------
Schwab International
Index Fund
Investor Shares(3) 12.55% 11.99% 0.56%
- -----------------------------------------------------------
Average Foreign Fund(4) 13.14% 11.42% 1.72%
- -----------------------------------------------------------
</TABLE>
(2)After-tax returns assume the maximum federal income tax rate of 39.6% on
dividends and 28% on capital gains distributions. Tax rates vary and may be
higher or lower than those shown.
(3)The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.58%. Without fee waivers and guarantees,
the Investor Shares' returns would have been lower.
(4)Source: Morningstar, Inc. Returns are load-adjusted. The Foreign Fund
category contains 185 funds with three-year track records as of 4/30/98.
These funds may or may not follow a tax-efficient strategy similar to that
followed by the Schwab International Index Fund. Also, although many mutual
funds have multiple classes of shares, the category average includes only
those funds that were classified by Morningstar as a distinct portfolio. This
typically means that a fund's oldest class of shares was used.
28
<PAGE>
This 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 Morgan Stanley Capital International Europe, Australasia, Far
East-Registered Trademark- (MSCI-EAFE) Index.
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 9 for a more detailed
discussion.)
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SCHWAB INTERNATIONAL
INDEX FUND INVESTOR SHARES
GROWTH OF A HYPOTHETICAL
$10,000 INVESTMENT
SCHWAB INTERNATIONAL
INDEX FUND INVESTOR SCHWAB INTERNATIONAL MSCI-EAFE
SHARES INDEX INDEX
<S> <C> <C> <C>
9/9/93 $10,000 $10,000 $10,000
9/30/93 $9,770 $9,786 $9,749
10/31/93 $10,150 $10,167 $10,049
11/30/93 $9,420 $9,454 $9,171
12/31/93 $10,096 $10,137 $9,833
1/31/94 $10,769 $10,823 $10,664
2/28/94 $10,558 $10,623 $10,634
3/31/94 $10,156 $10,172 $10,176
4/30/94 $10,458 $10,544 $10,607
5/31/94 $10,407 $10,448 $10,547
6/30/94 $10,488 $10,508 $10,695
7/31/94 $10,649 $10,692 $10,798
8/31/94 $10,941 $10,999 $11,054
9/30/94 $10,559 $10,621 $10,706
10/31/94 $10,950 $11,026 $11,062
11/30/94 $10,428 $10,478 $10,530
12/31/94 $10,484 $10,564 $10,597
1/31/95 $10,108 $10,254 $10,190
2/28/95 $10,189 $10,282 $10,160
3/31/95 $10,759 $10,964 $10,794
4/30/95 $11,145 $11,346 $11,200
5/31/95 $11,176 $11,303 $11,067
6/30/95 $11,064 $11,168 $10,873
7/31/95 $11,623 $11,826 $11,551
8/31/95 $11,237 $11,384 $11,111
9/30/95 $11,470 $11,661 $11,327
10/31/95 $11,318 $11,461 $11,023
11/30/95 $11,562 $11,782 $11,329
12/31/95 $11,975 $12,238 $11,786
1/31/96 $12,006 $12,277 $11,834
2/29/96 $12,026 $12,300 $11,874
3/31/96 $12,232 $12,529 $12,126
4/30/96 $12,530 $12,826 $12,479
5/31/96 $12,396 $12,674 $12,249
6/30/96 $12,489 $12,761 $12,318
7/31/96 $12,139 $12,430 $11,958
8/31/96 $12,253 $12,538 $11,985
9/30/96 $12,592 $12,907 $12,303
10/31/96 $12,571 $12,863 $12,178
11/30/96 $13,136 $13,460 $12,663
12/31/96 $13,067 $13,341 $12,499
1/31/97 $12,640 $12,898 $12,062
2/28/97 $12,827 $13,114 $12,260
3/31/97 $12,932 $13,202 $12,304
4/30/97 $13,025 $13,344 $12,369
5/31/97 $13,984 $14,324 $13,174
6/30/97 $14,766 $15,160 $13,900
7/31/97 $15,214 $15,570 $14,125
8/31/97 $14,109 $14,447 $13,070
9/30/97 $15,078 $15,354 $13,802
10/31/97 $13,869 $14,110 $12,741
11/30/97 $13,859 $14,055 $12,611
12/31/97 $14,022 $14,254 $12,720
1/31/98 $14,538 $14,830 $13,302
2/28/98 $15,382 $15,727 $14,156
3/31/98 $15,782 $16,139 $14,592
4/30/98 $15,888 $16,248 $14,707
</TABLE>
29
<PAGE>
SCHWAB INTERNATIONAL INDEX FUND-REGISTERED TRADEMARK- SELECT SHARES-TM-
FUND PERFORMANCE
CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 4/30/98
<TABLE>
<CAPTION>
Six Months Since Inception (5/19/97)
<S> <C> <C>
- ------------------------------------------------------------
SCHWAB INTERNATIONAL
INDEX FUND
SELECT SHARES(1) 14.62% 12.35%
- ------------------------------------------------------------
Schwab International
Index-Registered
Trademark- 15.15% 11.81%
- ------------------------------------------------------------
Index Tracking
Differential 0.53% -0.54%
- ------------------------------------------------------------
MSCI-EAFE-Registered
Trademark- Index 15.44% 9.96%
- ------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 3/31/98
<TABLE>
<CAPTION>
Six Months Since Inception (5/19/97)
<S> <C> <C>
- ------------------------------------------------------------
SCHWAB INTERNATIONAL
INDEX FUND
SELECT SHARES(1) 4.81% 11.60%
- ------------------------------------------------------------
</TABLE>
(1)The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.47% for the Select Shares. Without fee
waivers and guarantees, as of 4/30/98, the six-month and since-inception
total returns would have been 14.16% and 11.11%, respectively, for the Select
Shares. As of 3/31/98, the six-month and since-inception total returns would
have been 4.39% and 10.44%, respectively.
This graph compares the growth of a hypothetical $50,000 investment(2) in the
Schwab International Index Fund Select Shares, made at its inception, with a
similar investment in the Schwab International Index and the MSCI-EAFE Index.
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 9 for a more detailed discussion.)
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 THAT 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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SCHWAB INTERNATIONAL
INDEX FUND SELECT SHARES
GROWTH OF A HYPOTHETICAL
$50,000 INVESTMENT
SCHWAB INTERNATIONAL
INDEX FUND SELECT SCHWAB INTERNATIONAL MSCI-EAFE
SHARES INDEX INDEX
<S> <C> <C> <C>
5/19/97 $50,000 $50,000 $50,000
5/31/97 $49,375 $49,283 $49,248
6/30/97 $52,170 $52,161 $51,961
7/31/97 $53,755 $53,571 $52,803
8/31/97 $49,815 $49,706 $48,859
9/30/97 $53,240 $52,827 $51,595
10/31/97 $49,005 $48,550 $47,627
11/30/97 $48,970 $48,360 $47,141
12/31/97 $49,580 $49,042 $47,551
1/31/98 $51,405 $51,027 $49,725
2/28/98 $54,385 $54,111 $52,917
3/31/98 $55,800 $55,529 $54,547
4/30/98 $56,175 $55,905 $54,978
</TABLE>
(2)The required minimum initial investment in the Select Shares is $50,000.
30
<PAGE>
SCHWAB INTERNATIONAL INDEX FUND:
FUND HOLDINGS
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, 1998,
the aggregate market capitalization of stocks included in the index represented
approximately 54% of the total market value of all publicly traded non-U.S.
companies.(1)
TOP 10 HOLDINGS
AS A PERCENTAGE OF FUND INVESTMENTS(2)
<TABLE>
<S> <C>
- -------------------------------------------------
Royal Dutch Petroleum Co. 1.95%
- -------------------------------------------------
Nippon Telegraph & Telephone Corp. 1.84%
- -------------------------------------------------
Novartis AG 1.70%
- -------------------------------------------------
Glaxo Wellcome PLC 1.65%
- -------------------------------------------------
Toyota Motor Corp. 1.62%
- -------------------------------------------------
British Petroleum Co. 1.38%
- -------------------------------------------------
Lloyds TSB Group PLC 1.26%
- -------------------------------------------------
Nestle SA 1.26%
- -------------------------------------------------
Roche Group Holdings AG 1.17%
- -------------------------------------------------
Shell Transport & Trading Co. 1.13%
- -------------------------------------------------
</TABLE>
EQUITY HOLDINGS BY COUNTRY(2)
<TABLE>
<S> <C>
- ------------------------------------------------
United Kingdom 23.68%
- ------------------------------------------------
Japan 22.92%
- ------------------------------------------------
Germany 10.26%
- ------------------------------------------------
Switzerland 8.53%
- ------------------------------------------------
France 7.72%
- ------------------------------------------------
Netherlands 7.23%
- ------------------------------------------------
Canada 4.16%
- ------------------------------------------------
Italy 3.49%
- ------------------------------------------------
Spain 3.23%
- ------------------------------------------------
Sweden 2.78%
- ------------------------------------------------
Hong Kong 2.10%
- ------------------------------------------------
Australia 1.52%
- ------------------------------------------------
Belgium 1.15%
- ------------------------------------------------
Denmark 0.73%
- ------------------------------------------------
Singapore 0.53%
- ------------------------------------------------
</TABLE>
(1)Source: Wilshire Associates.
(2)Both the top 10 holdings and the percentages invested by country may not be
indicative of current or future investments. A complete list of the Fund's
investments as of 4/30/98 can be found in the Schedule of Investments later
in this report.
31
<PAGE>
SCHWAB INTERNATIONAL INDEX FUND-REGISTERED TRADEMARK-:
FUND DISCUSSION
QUESTIONS TO THE
PORTFOLIO MANAGEMENT TEAM
Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A. The Fund achieved strong total returns for the six-month reporting period:
14.55% and 14.62% for the Investor Shares and Select Shares-TM-, respectively.
Both classes of shares closely tracked the Fund's benchmark, the Schwab
International Index-Registered Trademark-. Although the Fund's six-month returns
are impressive in absolute terms, they lagged those of the domestic large-cap
equity sector. The Fund outperformed the average foreign fund for the six-month
period but underperformed for the three-year period ended April 30, 1998, both
by relatively small amounts. Because of the Fund's tax-efficient investment
strategy, however, its three-year after-tax performance exceeded the average
foreign fund by approximately 0.5% annually.(1)
<TABLE>
<CAPTION>
BEFORE TAX: AFTER TAX:
THREE THREE
SIX MONTHS YEARS* YEARS*
<S> <C> <C> <C>
- -------------------------------------------------------------------
Investor Shares 14.55% 12.55% 11.99%
- -------------------------------------------------------------------
Select Shares 14.62% -- --
- -------------------------------------------------------------------
Average Foreign Fund 14.12% 13.14% 11.42%
- -------------------------------------------------------------------
</TABLE>
*Three-year returns represent average annual total returns over the three-year
period.
Q. HOW DID THE PERFORMANCE OF THE SCHWAB INTERNATIONAL INDEX COMPARE WITH THAT
OF THE MSCI-EAFE-REGISTERED TRADEMARK- INDEX?
A. As indicated in the performance figures on page 28,
the Schwab International Index lagged the MSCI-EAFE
Index by approximately 0.29 percentage point over the
six-month reporting period. On an inception-to-datebasis, however, the Schwab
International Index has outperformed the MSCI-EAFE Index by approxi-
mately two percentage points annually. As we have discussed in previous reports,
these two indices are constructed differently, particularly in that they have
somewhat different country weightings, so we anticipate that their performances
will occasionally diverge in the future.
Q. WHY CAN INDEX FUNDS BE A SOUND WAY TO IMPLEMENT AN ASSET ALLOCATION PLAN?
A. One frequently cited study has shown that the manner in which an investor
allocates his or her portfolio among different asset classes can determine the
vast majority of the variance in the portfolio's returns.(2) Unless investors
build their portfolios with investments that are designed to consistently
deliver the performance of the asset classes they wish to track, their
portfolios may not behave as they expect.
Index funds can be an excellent choice to implement an asset allocation plan
because they seek to invest only in the intended asset class and therefore
should, because of their investment objectives, achieve returns that closely
track those of that benchmark asset class. Index funds should not be subject to
the "style drift" that investors may face with many actively managed funds.
Consistent with their mission to track their benchmarks, index funds also
usually maintain minimal cash holdings.
(1)Source: Morningstar, Inc. Returns are load-adjusted. The Foreign Fund
category contains 271 and 185 funds, respectively, with six-month and
three-year track records as of 4/30/98. These funds may or may not follow a
tax-efficient strategy similar to that followed by the Schwab International
Index Fund. Also, although many mutual funds have multiple classes of shares,
the category average includes only those funds that were classified by
Morningstar as a distinct portfolio. This typically means that a fund's
oldest class of shares was used.
(2)Source: FINANCIAL ANALYSTS JOURNAL, Brinson, Singer, Beebower, May/June 1991.
32
<PAGE>
In addition to seeking to deliver consistent asset class performance, index
funds are typically efficient from both a cost and a tax standpoint. Most index
funds minimize their trading and operating costs by keeping both portfolio
turnover and operating expense ratios low. These savings are passed on to
investors in the form of higher returns.
Q. DO INDEX FUNDS REDUCE INVESTMENT RISK?
A. It depends on the type of risk. Most investment risks can be categorized as
either SYSTEMATIC (non-diversifiable) or NONSYSTEMATIC (diversifiable).
Systematic or nondiversifiable risks are those that may affect all stocks or
bonds, such as a bear market caused by adverse economic conditions. Index funds
do not safeguard against this type of risk. Their goal is to consistently track
their benchmark, regardless of how it is performing. They also generally
maintain minimal cash balances, so they do not build up a defensive cash
position in a negative market environment.
Nonsystematic risks are those that affect a particular stock or bond, such as a
decline in demand for a company's product or a negative earnings surprise.
Nonsystematic risk is also referred to as "diversifiable risk," because an
investor can reduce it by diversifying his or her portfolio across a
sufficiently large number of companies. Since most broad-based index funds
purchase many--in some cases, hundreds of--securities, they can be extremely
effective at minimizing nonsystematic or company-specific risk.
Q. BECAUSE THE STOCK MARKET HAS REACHED RECORD HIGHS, IS IT TIME TO RETHINK MY
ALLOCATION TO STOCKS?
A. Whenever the returns of asset classes have diverged significantly from one
another, it can be prudent to review your portfolio's asset allocation. For
example, U.S. large-cap stocks dramatically outperformed U.S. bonds over the
three-year period ended April 30, 1998. This performance disparity is
illustrated by the average annual returns of the Schwab 1000 Fund-Registered
Trademark- and the Schwab Total Bond Market Index Fund over that period: The
Schwab 1000 Fund, which invests in large-cap domestic equities, gained 30.92%,
whereas the Schwab Total Bond Market Index Fund rose 8.84%.(1)
This disparity may have caused an investor's portfolio asset allocation to
shift, as the following example illustrates. Assume that an investor had a
hypothetical asset allocation of 60% stocks and 40% bonds (investing in just
these two Funds) at the beginning of the three-year period, and reinvested all
Fund distributions. By the end of the period, the portfolio's asset allocation
mix would have shifted to 72% stocks and 28% bonds--a significant divergence
from the investor's original strategy (see chart on the following page).
We feel that investors should focus on their own risk profiles, time horizons
and income needs to determine the appropriate level of stocks and bonds in their
portfolios. Because bond returns historically have not been well correlated with
stock returns,(2) combining bonds in a portfolio with other asset classes can be
effective in reducing total portfolio volatility.
(1)Total return assumes reinvestment of all dividends and capital gains
distributions, if any. Past performance is no guarantee of future results.
Principal value and investment returns will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than their original cost. A
portion of both Funds' expenses was reduced during the period. Without these
reductions, the Funds' total returns would have been lower. As of 4/30/98,
the one-year and average annual five-year total returns for the Total Bond
Market Index Fund were 11.34% and 7.25%, respectively. As of 3/31/98, the
one-year, average annual five-year and average annual since-inception
(3/5/93) total returns for the Total Bond Market Index Fund were 13.05%,
7.47% and 6.80%, respectively.
(2)For the 20-year period ended 12/31/97, the correlation of large-cap stock
returns and government bond returns has been 0.38. Source: Symphony Asset
Management.
33
<PAGE>
SCHWAB INTERNATIONAL INDEX FUND-REGISTERED TRADEMARK-:
FUND DISCUSSION (continued)
<TABLE>
<CAPTION>
4/30/95 PORTFOLIO THREE-YEAR 4/30/98 PORTFOLIO
VALUE ALLOCATION GROWTH VALUE ALLOCATION
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Schwab 1000 Fund-Registered Trademark- $6,000 60% $7,464 $13,464 72%
- ---------------------------------------------------------------------------------------------------------------------------------
Total Bond Market Index Fund $4,000 40% $1,157 $5,157 28%
- ---------------------------------------------------------------------------------------------------------------------------------
Total Portfolio Value $10,000 100% $8,621 $18,621 100%
</TABLE>
Q. WHAT IMPACT HAS THE FINANCIAL TURMOIL IN MANY ASIAN COUNTRIES HAD ON THE
FUND?
A. As discussed in the MARKET OVERVIEW section, most Asian markets suffered
large losses during the reporting period. Although well-diversified across many
developed securities markets, the Schwab International Index-Registered
Trademark- does have exposure to several Asian countries, and that had a
negative impact on the Fund's returns for the period. The table at the right
shows the Fund's weightings in various Asian markets as of April 30, 1998, as
well as each market's return during the reporting period (according to MSCI).
The strong returns of several European countries, however, helped offset the
negative returns of the Asian markets represented in the Fund.
<TABLE>
<CAPTION>
COUNTRY
RETURNS
% OF FUND FOR SIX
ASSETS MONTHS
(4/30/98) ENDED 4/30/98
<S> <C> <C> <C>
- ------------------------------------------------------------
Japan 22.92% (10.39%)
- ------------------------------------------------------------
Singapore 0.53% (4.02%)
- ------------------------------------------------------------
Hong Kong 2.10% (11.63%)
- ------------------------------------------------------------
</TABLE>
The Schwab International Index is a capitalization-weighted index, which means
that each country's percentage representation in the index is based on the total
size, or market capitalization, of the index stocks in the market. To ensure
that the Schwab International Index remains sufficiently diversified, the
Manager limits the maximum representation of any one country to 35% of the
index.
34
<PAGE>
SCHWAB S&P 500 FUND:
STATEMENT OF NET ASSETS
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
COMMON STOCK--98.6%
AEROSPACE / DEFENSE--1.6%
Boeing Co. 325,854 $ 16,312
General Dynamics Corp. 48,862 2,064
Lockheed Martin Corp. 61,805 6,884
Northrop Grumman Corp. 22,439 2,372
Raytheon Co. Class B 109,894 6,230
Textron, Inc. 58,145 4,550
United Technologies Corp. 74,792 7,362
----------
45,774
----------
AIR TRANSPORTATION--0.5%
AMR Corp.+ 29,592 4,510
Delta Airlines, Inc. 24,353 2,831
FDX Corp.+ 52,144 3,546
Southwest Airlines Co. 64,408 1,767
US Airways Group, Inc.+ 30,390 2,161
----------
14,815
----------
ALCOHOLIC BEVERAGES--0.5%
Adolph Coors Co. Class B 13,077 468
Anheuser-Busch Companies, Inc. 156,527 7,170
Brown-Forman Corp. Class B 26,844 1,520
Seagram Co., Ltd. 113,775 4,857
----------
14,015
----------
APPAREL--0.3%
Fruit of the Loom, Inc. Class A+ 20,553 768
Liz Claiborne, Inc. 18,646 917
Nike, Inc. Class B 99,503 4,752
Reebok International Ltd.+ 14,018 412
Russell Corp. 12,276 331
Springs Industries, Inc. 5,942 327
V.F. Corp. 41,262 2,146
----------
9,653
----------
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES--2.1%
BF Goodrich Co. 26,613 1,432
Chrysler Corp. 216,109 8,685
Cooper Tire & Rubber Co. 29,764 711
Cummins Engine Co., Inc. 10,280 559
Dana Corp. 31,218 1,846
Eaton Corp. 26,161 2,417
Echlin, Inc. 17,632 834
Fleetwood Enterprises, Inc. 11,175 516
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Ford Motor Co. 390,495 $ 17,889
General Motors Corp. 227,123 15,302
Genuine Parts Co. 50,876 1,832
Goodyear Tire & Rubber Co. 48,326 3,382
Navistar International Corp.+ 21,753 650
Paccar, Inc. 21,163 1,257
TRW, Inc. 38,857 2,052
----------
59,364
----------
BANKS--8.9%
Banc One Corp. 209,239 12,306
Bank of New York Co., Inc. 117,693 6,951
BankAmerica Corp. 224,059 19,045
BankBoston Corp. 48,904 5,279
Bankers Trust New York Corp. 30,608 3,952
BB & T Corp. 51,086 3,436
Chase Manhattan Corp. 134,485 18,635
Citicorp 150,857 22,704
Comerica, Inc. 53,130 3,556
Fifth Third Bancorp 71,283 3,921
First Chicago NBD Corp. 99,818 9,271
First Union Corp. 317,421 19,164
Fleet Financial Group, Inc. 87,122 7,525
Huntington Bancshares, Inc. 58,299 2,073
J.P. Morgan & Co., Inc. 56,374 7,399
KeyCorp, Inc. 138,308 5,489
MBNA Corp. 162,947 5,520
Mellon Bank Corp. 78,426 5,647
Mercantile Bancorp. Inc. 45,900 2,542
National City Corp. 110,850 7,676
NationsBank Corp. 303,161 22,963
Northern Trust Corp. 36,900 2,694
Norwest Corp. 250,066 9,924
PNC Bank Corp. 100,541 6,076
Republic New York Corp. 19,315 2,583
State Street Corp. 55,435 3,964
Summit Bancorp. 54,500 2,732
SunTrust Banks, Inc. 68,947 5,615
Synovus Financial Corp. 52,165 1,836
U. S. Bancorp. 79,927 10,151
Wachovia Corp. 65,226 5,540
Wells Fargo & Co. 27,584 10,165
----------
256,334
----------
BUSINESS MACHINES & SOFTWARE--9.2%
3COM Corp.+ 123,420 4,227
Adobe Systems, Inc. 17,752 889
</TABLE>
35
<PAGE>
SCHWAB S&P 500 FUND:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Apple Computer, Inc.+ 34,166 $ 935
Autodesk, Inc. 11,000 517
Bay Networks, Inc.+ 64,040 1,501
Cabletron Systems, Inc. 39,329 521
Ceridian Corp.+ 22,560 1,276
Cisco Systems, Inc.+ 333,497 24,429
Compaq Computer Corp. 494,238 13,870
Computer Associates International, Inc. 173,990 10,189
Computer Sciences Corp. 50,522 2,665
Data General Corp.+ 16,600 253
Dell Computer Corp.+ 214,382 17,311
Digital Equipment Corp.+ 48,519 2,699
EMC Corp. 154,331 7,119
Gateway 2000, Inc.+ 49,300 2,893
Hewlett-Packard Co. 338,773 25,514
Honeywell, Inc. 39,166 3,647
International Business Machines Corp. 315,652 36,576
Microsoft Corp.+ 785,306 70,776
Novell, Inc.+ 110,829 1,108
Oracle Systems Corp.+ 324,997 8,409
Parametric Technology Corp.+ 78,732 2,517
Pitney Bowes, Inc. 95,602 4,589
Seagate Technology, Inc.+ 84,411 2,253
Silicon Graphics, Inc.+ 49,570 648
Sun Microsystems, Inc.+ 119,571 4,925
Unisys Corp.+ 75,065 1,684
Xerox Corp. 106,162 12,049
----------
265,989
----------
BUSINESS SERVICES--1.4%
Automatic Data Processing, Inc. 98,112 6,567
Browning-Ferris Industries, Inc. 60,313 2,058
Cognizant Corp. 53,743 2,764
Deluxe Corp. 27,372 917
Dun & Bradstreet Corp. 50,656 1,798
Ecolab, Inc. 35,470 1,124
Equifax, Inc. 47,015 1,819
First Data Corp. 146,527 4,964
H & R Block, Inc. 33,817 1,522
IKON Office Solutions 41,977 1,015
Interpublic Group of Companies, Inc. 40,760 2,604
Laidlaw, Inc. 97,187 1,355
Moore Corp. Ltd. 30,785 483
National Service Industries, Inc. 18,094 979
Omnicom Group, Inc.+ 46,400 2,198
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
R.R. Donnelley & Sons Co. 51,706 $ 2,278
Waste Management, Inc. 143,347 4,802
----------
39,247
----------
CHEMICAL--2.4%
Air Products & Chemicals, Inc. 41,629 3,619
Dow Chemical Co. 70,176 6,785
E.I. du Pont de Nemours & Co. 370,962 27,011
Eastman Chemical Co. 28,764 1,978
Great Lakes Chemical Corp. 22,225 1,117
Hercules, Inc. 33,607 1,607
Minnesota Mining & Manufacturing Co. 128,768 12,152
Morton International, Inc. 47,078 1,506
Nalco Chemical Co. 23,640 940
PPG Industries, Inc. 63,375 4,480
Praxair, Inc. 48,930 2,462
Rohm & Haas Co. 22,029 2,375
Sigma-Aldrich Corp. 32,209 1,284
Union Carbide Corp. 36,260 1,759
W.R. Grace & Co.+ 19,452 395
----------
69,470
----------
CONSTRUCTION--0.3%
Armstrong World Industries, Inc. 11,985 1,028
Centex Corp. 20,922 727
Crane Co. 18,046 971
Fluor Corp. 21,275 1,005
Kaufman & Broad Home Corp. 17,481 508
Owens Corning 19,211 798
Pulte Corp. 12,744 652
Sherwin-Williams Co. 61,261 2,183
The Stanley Works 30,586 1,566
----------
9,438
----------
CONSUMER--DURABLE--0.4%
Black & Decker Corp. 39,297 2,029
Masco Corp. 48,745 2,827
Maytag Corp. 34,306 1,767
Newell Co. 54,332 2,625
Snap-on, Inc. 16,878 714
Whirlpool Corp. 20,556 1,480
----------
11,442
----------
CONSUMER--NONDURABLE--1.0%
American Greetings Corp. Class A 21,157 979
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Corning, Inc. 75,682 $ 3,027
Darden Restaurants, Inc. 48,620 778
Hasbro, Inc. 46,665 1,718
Jostens, Inc. 18,082 428
Mattel, Inc. 94,307 3,613
McDonald's Corp. 228,937 14,166
Rubbermaid, Inc. 49,413 1,414
Tricon Global Restaurants, Inc.+ 47,050 1,494
Wendy's International, Inc. 48,575 1,169
----------
28,786
----------
CONTAINERS--0.2%
Ball Corp. 3,363 130
Bemis Co., Inc. 13,311 592
Crown Cork & Seal Co., Inc. 44,268 2,305
Owens-Illinois, Inc.+ 44,993 1,780
Sealed Air Corp.+ 24,426 1,531
Stone Container Corp.+ 25,308 414
----------
6,752
----------
ELECTRONICS--4.4%
Advanced Micro Devices, Inc.+ 38,294 1,063
AMP, Inc. 64,059 2,518
Applied Materials, Inc.+ 117,362 4,240
DSC Communications Corp.+ 29,945 539
EG&G, Inc. 13,296 401
General Instrument Corp.+ 40,508 909
General Signal Corp. 15,805 695
Harris Corp. 29,166 1,411
Intel Corp. 534,212 43,171
KLA -Tencor Corp.+ 23,275 938
LSI Logic Corp.+ 39,297 1,066
Lucent Technologies, Inc. 425,120 32,362
Micron Technology, Inc.+ 62,140 1,930
Motorola, Inc. 189,844 10,560
National Semiconductor Corp.+ 58,837 1,294
Perkin Elmer Corp. 17,091 1,169
Rockwell International Corp. 61,236 3,425
Scientific-Atlanta, Inc. 34,262 818
Tektronix, Inc. 10,305 443
Tellabs, Inc.+ 62,578 4,435
Texas Instruments, Inc. 130,701 8,373
Thermo Electron Corp.+ 53,614 2,135
Thomas & Betts Corp. 20,315 1,186
----------
125,081
----------
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
ENERGY--RAW MATERIALS--1.3%
Anadarko Petroleum Corp. 21,425 $ 1,569
Apache Corp. 36,489 1,291
Baker Hughes, Inc. 50,653 2,051
Burlington Resources, Inc. 61,255 2,879
Dresser Industries, Inc. 59,966 3,171
Halliburton Co. 83,763 4,607
Helmerich & Payne, Inc. 13,504 412
Occidental Petroleum Corp. 109,092 3,211
ONEOK, Inc. 12,365 501
Rowan Companies, Inc.+ 32,481 956
Schlumberger Ltd. 159,134 13,189
Union Pacific Resources Group 89,762 2,143
Western Atlas, Inc.+ 14,613 1,154
----------
37,134
----------
FOOD & AGRICULTURE--5.9%
Archer-Daniels Midland Co. 177,406 3,814
Bestfoods, Inc. 93,000 5,103
Campbell Soup Co. 141,627 7,267
Coca-Cola Co. 794,282 60,268
ConAgra, Inc. 158,688 4,632
General Mills, Inc. 54,334 3,671
H.J. Heinz Co. 114,738 6,253
Hershey Foods Corp. 43,198 3,164
Kellogg Co. 135,162 5,575
Monsanto Co. 193,465 10,229
PepsiCo, Inc. 494,997 19,645
Pioneer Hi-Bred International, Inc. 75,414 2,847
Quaker Oats Co. 47,487 2,469
Ralston Purina Co. 32,823 3,479
Sara Lee Corp. 154,069 9,177
SYSCO Corp. 107,728 2,565
Unilever NV 210,337 15,696
Wm. Wrigley Jr. Co. 37,343 3,324
----------
169,178
----------
GOLD--0.2%
Barrick Gold Corp. 115,379 2,588
Battle Mountain Gold Co. 51,580 371
Homestake Mining Co. 73,807 858
Newmont Mining Corp. 51,969 1,673
Placer Dome, Inc. 73,700 1,087
----------
6,577
----------
</TABLE>
37
<PAGE>
SCHWAB S&P 500 FUND:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
HEALTHCARE / DRUG & MEDICINE--11.6%
Abbott Laboratories 245,507 $ 17,953
Allergan, Inc. 24,935 1,036
ALZA Corp.+ 32,078 1,538
American Home Products Corp. 209,655 19,524
Amgen, Inc.+ 84,254 5,024
Bausch & Lomb, Inc. 23,816 1,177
Baxter International, Inc. 88,884 4,928
Becton, Dickinson & Co. 37,855 2,636
Biomet, Inc. 29,132 874
Boston Scientific Corp.+ 59,506 4,303
Bristol-Myers Squibb Co. 323,282 34,227
C.R. Bard, Inc. 21,120 756
Cardinal Health, Inc. 36,827 3,545
Columbia/HCA Healthcare Corp. 219,916 7,243
Eli Lilly & Co. 354,324 24,648
Guidant Corp. 52,310 3,498
HBO & Co. 64,514 3,859
HealthSouth Corp.+ 128,909 3,891
Humana, Inc.+ 50,742 1,370
Johnson & Johnson 435,780 31,104
Mallinckrodt, Inc. 25,553 824
Manor Care, Inc. 28,033 983
Medtronic, Inc. 147,877 7,782
Merck & Co., Inc. 390,423 47,046
Pfizer, Inc. 420,200 47,825
Pharmacia & Upjohn, Inc. 171,461 7,212
Schering-Plough Corp. 237,931 19,064
Service Corp. International 75,726 3,124
Shared Medical Systems Corp. 9,852 719
St. Jude Medical, Inc.+ 26,392 935
Tenet Healthcare Corp.+ 101,633 3,805
United Healthcare Co. 58,392 4,102
US Surgical Corp. 20,553 647
Warner Lambert Co. 89,967 17,021
----------
334,223
----------
HOUSEHOLD PRODUCTS--2.6%
Alberto-Culver Co. Class B 10,017 294
Avon Products, Inc. 40,277 3,310
Clorox Co. 37,016 3,105
Colgate-Palmolive Co. 98,218 8,809
Gillette Co. 182,669 21,087
International Flavors & Fragrances, Inc. 36,628 1,792
Procter & Gamble Co. 435,622 35,803
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Tupperware Corp. 16,428 $ 445
----------
74,645
----------
INSURANCE--4.0%
Aetna, Inc. 53,758 4,344
Allstate Corp. 138,809 13,360
American General Corp. 80,322 5,351
American International Group, Inc. 227,465 29,927
Aon Corp. 50,499 3,257
Chubb Corp. 53,060 4,188
CIGNA Corp. 24,455 5,061
Cincinnati Financial Corp. 19,415 2,473
Conseco, Inc. 55,493 2,754
General Re Corp. 25,466 5,693
Hartford Financial Services Group, Inc. 35,846 3,970
Jefferson-Pilot Corp. 32,322 1,897
Lincoln National Corp. 36,713 3,261
Marsh & McLennan Companies, Inc. 58,252 5,308
MBIA, Inc. 30,586 2,282
MGIC Investment Corp. 34,838 2,195
Progressive Corp. 23,951 3,244
SAFECO Corp. 47,791 2,387
St. Paul Companies, Inc. 35,008 2,967
SunAmerica, Inc. 66,908 3,341
Torchmark Corp. 43,789 1,951
Transamerica Corp. 21,432 2,475
UNUM Corp. 44,792 2,408
----------
114,094
----------
MEDIA--2.2%
CBS Corp. 231,375 8,243
Clear Channel Communications, Inc.+ 40,705 3,836
Comcast Corp. Class A 106,829 3,826
Dow Jones & Co., Inc. 33,600 1,636
Gannett Co., Inc. 98,192 6,671
Harcourt General, Inc. 19,048 994
King World Productions, Inc. 24,354 650
Knight-Ridder, Inc. 21,583 1,259
McGraw Hill Companies, Inc. 37,907 2,935
Meredith Corp. 13,612 585
New York Times Co. Class A 35,100 2,490
Telecommunications, Inc. Series A (TCI
Group)+ 173,958 5,610
Time Warner, Inc. 186,970 14,677
Times Mirror Co. Series A 24,800 1,517
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Tribune Co. 40,856 $ 2,696
Viacom, Inc. Class B+ 111,037 6,440
----------
64,065
----------
MISCELLANEOUS FINANCE--4.7%
American Express Co. 149,279 15,226
Associates First Capital Corp. 107,801 8,058
Beneficial Corp. 19,611 2,557
Charles Schwab Corp. 87,053 3,047
Countrywide Credit Industries, Inc. 37,724 1,825
Fannie Mae 339,217 20,311
Franklin Resources, Inc. 81,400 4,355
Freddie Mac 231,852 10,738
Golden West Financial Corp. 22,019 2,319
Green Tree Financial Corp. 52,384 2,135
H.F. Ahmanson & Co. 34,603 2,638
Household International, Inc. 32,923 4,327
Lehman Brothers Holdings, Inc. 33,200 2,359
Merrill Lynch & Co., Inc. 106,792 9,371
Morgan Stanley, Dean Witter, Discover & Co. 187,436 14,784
Providian Financial Corp. 30,896 1,860
Travelers Group, Inc. 373,062 22,827
Washington Mutual, Inc. 81,813 5,732
----------
134,469
----------
NON-FERROUS METALS--0.5%
Alcan Aluminum, Ltd. 67,274 2,186
Aluminum Company of America 59,063 4,578
Asarco, Inc. 9,188 229
Cyprus Amax Minerals Co. 33,795 583
Engelhard Corp. 47,401 1,001
Freeport-McMoRan Copper & Gold, Inc. Class B 62,215 1,170
Inco Ltd. 57,949 1,018
Phelps Dodge Corp. 16,226 1,089
Reynolds Metals Co. 28,054 1,852
----------
13,706
----------
OIL--DOMESTIC--0.9%
Amerada Hess Corp. 25,092 1,443
Ashland, Inc. 21,856 1,156
Atlantic Richfield Co. 109,170 8,515
Kerr-McGee Corp. 12,700 838
Oryx Energy Co.+ 26,420 690
Pennzoil Co. 13,199 846
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Phillips Petroleum Co. 84,950 $ 4,210
Sun, Inc. 21,352 863
Unocal Corp. 76,916 3,149
USX-Marathon Group 85,702 3,069
----------
24,779
----------
OIL--INTERNATIONAL--5.6%
Amoco Corp. 310,050 13,720
Chevron Corp. 215,468 17,817
Exxon Corp. 794,269 57,931
Mobil Corp. 258,542 20,425
Royal Dutch Petroleum Co.-- Sponsored ADR** 687,880 38,908
Texaco, Inc. 178,654 10,987
----------
159,788
----------
OPTICAL & PHOTO--0.3%
Eastman Kodak Co. 105,281 7,600
Polaroid Corp. 9,095 400
----------
8,000
----------
PAPER & FOREST PRODUCTS--1.2%
Boise Cascade Corp. 17,316 650
Champion International Corp. 31,600 1,700
Fort James Corp. 71,395 3,543
Georgia-Pacific Corp. 30,691 2,369
International Paper Co. 103,632 5,408
Kimberly-Clark Corp. 181,313 9,202
Louisiana-Pacific Corp. 27,328 598
Mead Corp. 35,719 1,237
Potlatch Corp. 15,560 737
Temple Inland, Inc. 15,519 1,002
Union Camp Corp. 29,245 1,766
Westvaco Corp. 33,813 1,025
Weyerhaeuser Co. 67,017 3,862
Willamette Industries, Inc. 34,832 1,352
----------
34,451
----------
PRODUCER GOODS & MANUFACTURING--5.6%
Aeroquip-Vickers, Inc. 10,459 665
Allied Signal, Inc. 181,582 7,956
Avery Dennison Corp. 29,515 1,546
Briggs & Stratton Corp. 8,153 369
Case Corp. 20,156 1,281
Caterpillar, Inc. 119,986 6,832
Cincinnati Milacron, Inc. 11,183 347
</TABLE>
39
<PAGE>
SCHWAB S&P 500 FUND:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Cooper Industries, Inc. 38,055 $ 2,545
Deere & Co. 84,027 4,910
Dover Corp. 66,365 2,621
Emerson Electric Co. 143,126 9,106
FMC Corp.+ 11,078 859
Foster Wheeler Corp. 9,485 263
General Electric Co. 1,053,240 89,654
Harnischfeger Industries, Inc. 12,303 348
Illinois Tool Works, Inc. 81,121 5,719
Ingersoll-Rand Co. 56,397 2,598
ITT Industries, Inc. 32,647 1,190
Johnson Controls, Inc. 30,175 1,792
McDermott International, Inc. 13,216 547
Millipore Corp. 9,991 345
NACCO Industries, Inc. Class A 3,117 524
Pall Corp. 35,366 694
Parker-Hannifin Corp. 37,933 1,693
Raychem Corp. 23,182 932
Tenneco, Inc. 52,356 2,255
Timken Co. 28,032 1,120
Tyco International Ltd. 185,313 10,100
W.W. Grainger, Inc. 18,904 2,059
----------
160,870
----------
RAILROAD & SHIPPING--0.6%
Burlington Northern Santa Fe Corp. 50,825 5,032
CSX Corp. 73,255 3,846
Norfolk Southern Corp. 117,288 3,922
Union Pacific Corp. 80,516 4,408
----------
17,208
----------
RETAIL--5.2%
Albertson's, Inc. 76,813 3,841
American Stores Co. 82,569 1,982
AutoZone, Inc.+ 45,715 1,380
Cendant Corp.+ 256,500 6,413
Circuit City Stores, Inc. 31,906 1,296
Consolidated Stores Corp.+ 37,000 1,480
Costco Companies, Inc.+ 68,144 3,808
CVS Corp. 64,459 4,754
Dayton Hudson Corp. 73,255 6,396
Dillards Inc. Class A 41,633 1,525
Federated Department Stores, Inc.+ 72,637 3,573
Gap, Inc. 130,290 6,702
Giant Food, Inc. Class A 19,125 712
Great Atlantic & Pacific Tea Co., Inc. 10,280 320
Home Depot, Inc. 240,025 16,712
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
J.C. Penney Co., Inc. 81,120 $ 5,765
Kmart Corp.+ 160,017 2,790
Kroger Co.+ 82,931 3,473
Limited, Inc. 84,667 2,842
Longs Drug Stores, Inc. 15,682 454
Lowe's Companies, Inc. 55,263 3,865
May Department Stores Co. 78,386 4,835
Mercantile Stores Co., Inc. 9,077 663
Nordstrom, Inc. 30,161 1,974
Pep Boys-Manny Moe & Jack 19,232 418
Rite Aid Corp. 77,914 2,503
Sears Roebuck & Co. 129,618 7,688
SUPERVALU, Inc. 17,027 744
Tandy Corp. 37,521 1,867
TJX Companies, Inc. 51,941 2,298
Toys 'R' Us, Inc.+ 98,496 2,715
Wal-Mart Stores, Inc. 727,531 36,783
Walgreen Co. 153,328 5,290
Winn Dixie Stores, Inc. 49,711 1,870
Woolworth Corp.+ 35,782 823
----------
150,554
----------
STEEL--0.2%
Allegheny Teledyne, Inc. 70,503 1,789
Armco, Inc.+ 7,124 49
Bethlehem Steel Corp.+ 36,335 565
Inland Steel Industries, Inc. 20,902 613
Nucor Corp. 33,484 2,008
USX--U.S. Steel Group, Inc. 31,779 1,243
Worthington Industries, Inc. 29,002 521
----------
6,788
----------
TELEPHONE--7.3%
AirTouch Communications, Inc.+ 180,052 9,565
Alltel Corp. 53,590 2,291
Ameritech Corp. 351,798 14,973
Andrew Corp.+ 19,788 453
AT&T Corp. 528,994 31,772
Bell Atlantic Corp. 255,398 23,896
BellSouth Corp. 320,771 20,589
Frontier Corp. 43,943 1,316
GTE Corp. 311,498 18,203
MCI Communications Corp. 231,445 11,645
Nextel Communications, Inc.+ 79,500 2,281
Northern Telecom Ltd. 169,896 10,342
SBC Communications, Inc. 587,382 24,341
Sprint Corp. 143,799 9,823
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
U.S. West, Inc. (Communications Group) 155,501 $ 8,203
U.S. West, Inc. (Media Group)+ 195,967 7,398
WorldCom, Inc.+ 330,184 14,126
----------
211,217
----------
TOBACCO--1.3%
Fortune Brands, Inc. 51,858 1,912
Loew's Corp. 41,040 4,107
Philip Morris Companies., Inc. 785,762 29,319
UST, Inc. 52,284 1,441
----------
36,779
----------
TRUCKING & FREIGHT--0.0%
Ryder Systems, Inc. 21,062 733
----------
TRAVEL & RECREATION--1.2%
Brunswick Corp. 36,407 1,183
Harrah's Entertainment, Inc.+ 31,711 826
Hilton Hotels Corp. 91,522 2,923
Marriott International, Inc. Class A 39,266 1,257
Marriott International, Inc. 39,266 1,296
Mirage Resorts, Inc.+ 46,574 1,028
Walt Disney Co. 219,610 27,300
----------
35,813
----------
UTILITIES--ELECTRIC & GAS--3.0%
Ameren Corp. 46,013 1,823
American Electric Power Co., Inc. 56,295 2,688
Baltimore Gas & Electric Co. 58,608 1,846
Carolina Power & Light Co. 47,916 2,063
Central & South West Services Corp. 66,843 1,742
Cinergy Corp. 47,129 1,644
Coastal Corp. 37,821 2,702
Columbia Gas System, Inc. 14,516 1,179
Consolidated Edison, Inc. 78,591 3,556
Consolidated Natural Gas Co. 35,499 2,041
Dominion Resources, Inc. 55,488 2,195
DTE Energy Co. 45,803 1,795
Duke Power Co. 113,815 6,587
Eastern Enterprises 1,843 78
Edison International 128,929 3,844
Enron Corp. 98,739 4,857
Entergy Corp. 69,604 1,731
First Energy Corp. 65,581 1,984
FPL Group, Inc. 62,680 3,890
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
GPU, Inc. 35,352 $ 1,401
Houston Industries, Inc. 99,186 2,883
Niagara Mohawk Power Corp.+ 33,202 407
NICOR, Inc. 18,201 745
Northern States Power Co. 20,054 1,131
Pacific Enterprises, Inc. 21,574 840
Pacific Gas & Electric Corp. 149,016 4,824
PacifiCorp. 88,419 2,056
PECO Energy Co. 72,765 1,733
Peoples Energy Corp. 12,173 441
PP&L Resources, Inc. 54,145 1,249
Public Service Enterprise Group, Inc. 77,585 2,604
Sonat, Inc. 34,779 1,543
Southern Co. 215,831 5,720
Texas Utilities Co. 75,987 3,039
Unicom Corp. 66,452 2,309
Williams Companies, Inc. 136,664 4,322
----------
85,492
----------
TOTAL COMMON STOCK
(Cost $2,270,934) 2,836,723
----------
<CAPTION>
Par
-----------
<S> <C> <C>
CASH EQUIVALENTS--1.5%
Temporary Investment Fund, Inc.-- TempCash
Portfolio
5.09%*, 05/07/98 $43,070,934 43,071
----------
TOTAL CASH EQUIVALENTS
(Cost $43,071) 43,071
----------
U.S. TREASURY OBLIGATIONS--0.1%
U.S. Treasury Bills (a)(b)
4.90%, 07/30/98 130,000 128
4.91%, 06/18/98 45,000 45
4.93%, 06/18/98 90,000 89
4.94%, 06/18/98 75,000 75
4.96%, 06/25/98 180,000 180
4.98%, 06/25/98 75,000 74
4.99%, 06/18/98 90,000 89
5.00%, 06/18/98 140,000 139
5.01%, 06/18/98 140,000 139
5.01%, 06/25/98 55,000 55
5.02%, 06/18/98 60,000 60
5.04%, 06/18/98 170,000 169
5.07%, 06/25/98 140,000 139
5.08%, 06/25/98 40,000 40
5.11%, 06/18/98 100,000 99
</TABLE>
41
<PAGE>
SCHWAB S&P 500 FUND:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Value
Par (000s)
----------- ----------
<S> <C> <C>
5.11%, 06/25/98 $ 75,000 $ 74
5.14%, 06/25/98 80,000 79
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,673) 1,673
----------
TOTAL INVESTMENTS--100.2%
(Cost $2,315,678) 2,881,467
----------
<CAPTION>
Value
(000s)
----------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES--(0.2)%
Other Assets $ 35,624
Liabilities (40,219)
----------
(4,595)
----------
NET ASSETS--100.0% $2,876,872
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENTS OF NET ASSETS AND NOTES TO FINANCIAL
STATEMENTS.
42
<PAGE>
SCHWAB 1000 FUND-REGISTERED TRADEMARK-:
STATEMENT OF NET ASSETS
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
COMMON STOCK--99.5%
AEROSPACE/DEFENSE--1.5%
Boeing Co. 426,052 $ 21,328
Coltec Industries, Inc.+ 18,200 455
General Dynamics Corp. 48,600 2,053
General Motors Corp. Class H 38,000 2,100
Gulfstream Aerospace Corp.+ 35,000 1,468
Litton Industries, Inc.+ 20,500 1,230
Lockheed Martin Corp. 80,992 9,020
Northrop Grumman Corp. 29,900 3,160
Raytheon Co. Class B 138,400 7,846
Sundstrand Corp. 24,600 1,699
Textron, Inc. 65,400 5,118
Thiokol Corp. 14,200 765
United Technologies Corp. 101,400 9,982
----------
66,224
----------
AIR TRANSPORTATION--0.6%
AMR Corp.+ 41,100 6,263
Comair Holdings, Inc. 18,000 492
Continental Airlines, Inc. Class B+ 33,400 1,966
Delta Airlines, Inc. 29,200 3,395
FDX Corp.+ 58,680 3,990
Northwest Airlines Corp. Class A+ 46,500 2,441
Southwest Airlines Co. 84,600 2,321
UAL Corp.+ 22,700 1,979
US Airways Group, Inc.+ 36,500 2,596
----------
25,443
----------
ALCOHOLIC BEVERAGES--0.3%
Adolph Coors Co. Class B 8,000 286
Anheuser-Busch Companies, Inc. 206,800 9,474
Brown-Forman Corp. Class B 26,700 1,512
----------
11,272
----------
APPAREL--0.3%
Fruit of the Loom, Inc. Class A+ 26,300 983
Jones Apparel Group, Ltd.+ 28,600 1,711
Liz Claiborne, Inc. 32,000 1,574
Nike, Inc. Class B 119,600 5,711
Reebok International Ltd.+ 16,700 491
Unifi, Inc. 16,925 648
V.F. Corp. 48,100 2,501
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
Warnaco Group, Inc. 28,600 $ 1,208
----------
14,827
----------
AUTOMOTIVE PRODUCTS/MOTOR VEHICLES--2.0%
Bandag, Inc. 8,800 490
BF Goodrich Co. 38,400 2,066
Borg Warner Automotive, Inc. 9,200 572
Carlisle Companies, Inc. 6,000 305
Chrysler Corp. 266,600 10,714
Cooper Tire & Rubber Co. 19,500 466
Cummins Engine Co., Inc. 14,800 805
Dana Corp. 40,500 2,395
Danaher Corp. 25,400 1,826
Eaton Corp. 32,100 2,965
Echlin, Inc. 22,800 1,079
Federal-Mogul Corp. 23,000 1,488
Fleetwood Enterprises, Inc. 22,000 1,016
Ford Motor Co. 509,500 23,342
General Motors Corp. 293,400 19,768
Genuine Parts Co. 70,575 2,541
Goodyear Tire & Rubber Co. 72,300 5,059
Harley-Davidson, Inc. 71,400 2,570
Lear Corp.+ 26,000 1,393
Meritor Automotive, Inc. 40,000 1,033
Navistar International Corp.+ 21,000 627
Paccar, Inc. 30,120 1,788
TRW, Inc. 47,700 2,519
----------
86,827
----------
BANKS--9.7%
Amsouth Bancorp. 31,800 1,984
Associated Bancorp. 19,700 1,034
Banc One Corp. 266,393 15,667
Bank of New York Co., Inc. 161,000 9,509
Bank UTD Corp. 7,000 362
BankAmerica Corp. 299,390 25,448
BankBoston Corp. 63,020 6,802
Bankers Trust New York Corp. 47,940 6,190
BB & T Corp. 59,250 3,985
CCB Financial Corp. 10,500 1,142
Centura Banks, Inc. 10,000 720
Chase Manhattan Corp. 177,230 24,557
Citicorp 194,700 29,302
City National Corp. 15,000 558
Colonial BancGroup, Inc. 20,000 718
Comerica, Inc. 61,296 4,103
Commerce Bancshares, Inc. 28,992 1,421
</TABLE>
43
<PAGE>
SCHWAB 1000 FUND-REGISTERED TRADEMARK-:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
Compass Bancshares, Inc. 36,275 $ 1,759
Crestar Financial Corp. 42,600 2,548
Cullen/Frost Bankers, Inc. 8,600 503
Deposit Guaranty Corp. 15,800 900
Dime Bancorp, Inc. 49,926 1,532
Fifth Third Bancorp 91,443 5,029
First Chicago NBD Corp. 123,321 11,453
First Citizens BancShares, Inc. Class A 4,400 498
First Commerce Corp. 16,562 1,348
First Commercial Corp. 19,450 1,432
First Empire State Corp. 2,600 1,326
First Hawaiian, Inc. 10,000 393
First of America Bank Corp. 31,600 1,558
First Security Corp. 72,627 1,779
First Tennessee National Corp. 52,600 1,811
First Union Corp. 406,195 24,524
First Virginia Banks, Inc. 24,625 1,376
Firstar Corp. 54,000 2,015
Firstmerit Corp. 32,800 931
Fleet Financial Group, Inc. 116,480 10,061
Fulton Financial Corp. 8,000 291
Golden State Bancorp, Inc.+ 14,000 546
Hibernia Corp. Class A 60,000 1,226
Huntington Bancshares, Inc. 84,363 3,000
Imperial Bancorp.+ 9,000 264
J.P. Morgan & Co., Inc. 77,000 10,106
KeyCorp, Inc. 176,846 7,019
Keystone Financial, Inc. 30,000 1,170
Long Island Bancorp, Inc. 5,000 330
Magna Group, Inc. 10,000 591
Marshall & Ilsley Corp. 42,185 2,468
MBNA Corp. 208,325 7,057
Mellon Bank Corp. 108,244 7,794
Mercantile Bancorp. Inc. 68,925 3,817
Mercantile Bankshares Corp. 30,675 1,177
National City Corp. 178,300 12,347
National Commerce Bancorp. 30,000 1,343
NationsBank Corp. 390,585 29,585
North Fork Bancorporation, Inc. 30,000 1,114
Northern Trust Corp. 44,900 3,278
Norwest Corp. 321,576 12,763
Ocwen Financial Corp.+ 30,000 776
Old Kent Financial Corp. 35,952 1,398
Old National Bancorp 7,875 376
Pacific Century Financial Corp. 20,350 502
People's Bank-Bridgeport 25,400 981
Peoples Heritage Financial Group, Inc. 6,000 290
PNC Bank Corp. 129,630 7,835
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
Regions Financial Corp. 65,700 $ 2,866
Republic New York Corp. 23,900 3,197
Southtrust Corp. 57,787 2,467
Sovereign Bancorp, Inc. 48,000 906
Star Bank Corp. 43,000 2,717
State Street Corp. 77,000 5,506
Summit Bancorp. 71,850 3,601
SunTrust Banks, Inc. 91,300 7,435
Synovus Financial Corp. 81,975 2,884
TCF Financial Corp. 33,600 1,094
Trustmark Corp. 44,000 1,015
U S Trust Corp. 7,500 533
U. S. Bancorp. 105,266 13,369
Union Planters Corp. 32,900 2,023
UnionBanCal Corp. 21,200 2,184
Valley National Bancorp 28,000 1,124
Wachovia Corp. 88,749 7,538
Washington Federal, Inc. 15,400 433
Washington Mutual, Inc. 110,245 7,724
Wells Fargo & Co. 37,500 13,819
Westamerica Bancorp 16,800 554
Whitney Holding Corp. 8,000 487
Wilmington Trust Co. 14,200 918
Zions Bancorp 26,600 1,360
----------
411,476
----------
BUSINESS MACHINES & SOFTWARE--9.1%
3COM Corp.+ 147,450 5,050
Adobe Systems, Inc. 31,800 1,592
Apple Computer, Inc.+ 45,700 1,251
Autodesk, Inc. 27,200 1,278
Bay Networks, Inc.+ 86,480 2,027
BMC Software, Inc.+ 43,200 4,042
Cabletron Systems, Inc.+ 52,000 689
Ceridian Corp.+ 30,700 1,736
Cisco Systems, Inc.+ 429,150 31,435
Citrix Systems, Inc.+ 16,050 997
Compaq Computer Corp. 643,690 18,064
Computer Associates International, Inc. 228,662 13,391
Computer Horizons Corp.+ 10,000 379
Computer Sciences Corp. 61,196 3,228
Compuware Corp.+ 77,800 3,802
Dell Computer Corp. 273,800 22,109
Diebold, Inc. 25,818 1,059
Digital Equipment Corp.+ 60,400 3,360
Electronic Arts, Inc.+ 30,400 1,406
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
EMC Corp. 212,800 $ 9,815
Gateway 2000, Inc.+ 71,000 4,167
Hewlett-Packard Co. 444,500 33,476
Honeywell, Inc. 59,100 5,504
I2 Technologies, Inc.+ 12,400 828
International Business Machines Corp. 411,900 47,729
Intuit, Inc.+ 23,800 1,266
Iomega Corp.+ 118,000 929
Lexmark International Group, Inc. Class A+ 35,000 2,026
Microchip Technology, Inc.+ 30,000 851
Microsoft Corp.+ 1,025,000 92,379
Netscape Communications Corp.+ 25,898 707
Network Associates, Inc.+ 26,700 1,829
Novell, Inc.+ 120,800 1,208
Oracle Systems Corp.+ 417,962 10,815
Parametric Technology Corp.+ 102,400 3,274
PeopleSoft, Inc.+ 99,600 4,631
Pitney Bowes, Inc. 124,600 5,981
Platinum Technology, Inc.+ 37,000 944
Policy Management Systems Corp.+ 7,100 572
Quantum Corp.+ 55,400 1,302
Seagate Technology, Inc.+ 112,060 2,991
Security Dynamics Technologies, Inc.+ 28,000 676
Siebel Systems Inc.+ 26,800 693
Silicon Graphics, Inc.+ 73,700 963
Sterling Commerce+ 37,000 1,575
Sterling Software, Inc.+ 27,600 730
Storage Technology Corp.+ 30,400 2,567
Sun Microsystems, Inc.+ 150,000 6,178
Synopsys, Inc.+ 23,800 1,023
Technology Data Corp.+ 23,000 1,147
Unisys Corp.+ 104,800 2,351
Veritas Software Co.+ 19,000 1,040
Western Digital Corp.+ 33,400 660
Xerox Corp. 138,700 15,742
YAHOO! Inc.+ 26,700 3,176
----------
388,640
----------
BUSINESS SERVICES--3.0%
Accustaff, Inc.+ 50,000 1,794
ACNielson Corp.+ 35,000 980
Allied Waste Industries, Inc.+ 45,000 1,238
America Online, Inc.+ 91,400 7,312
Apollo Group, Inc. Class A+ 22,500 771
Automatic Data Processing, Inc. 131,400 8,792
Browning-Ferris Industries, Inc. 71,200 2,430
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
Cadence Design Systems, Inc.+ 89,750 $ 3,259
Cambridge Technology Partners+ 24,000 1,254
Camco International, Inc. 18,000 1,222
Cendant Corp.+ 342,259 8,556
Ciber, Inc.+ 16,400 533
Cintas Corp. 47,200 2,248
Cognizant Corp. 71,600 3,683
Comdisco, Inc. 33,033 1,462
Concord EFS, Inc.+ 34,850 1,098
Corrections Corp. of America+ 31,000 860
Culligan Water Technologies, Inc.+ 8,000 465
Deluxe Corp. 26,000 871
DST Systems, Inc.+ 15,000 827
Dun & Bradstreet Corp. 69,600 2,471
Ecolab, Inc. 52,800 1,673
Equifax, Inc. 59,000 2,283
First Data Corp. 184,302 6,243
Fiserv, Inc.+ 26,975 1,763
Gartner Group, Inc. Class A+ 38,400 1,272
Gtech Holdings Corp.+ 15,700 563
H & R Block, Inc. 48,700 2,192
IKON Office Solutions 61,400 1,485
Integrated Health Services, Inc. 28,000 1,080
Interpublic Group of Companies, Inc. 54,850 3,504
Keane, Inc.+ 30,000 1,508
Manpower, Inc. 31,500 1,388
Medpartners, Inc. 81,144 832
National Service Industries, Inc. 16,700 904
NCR Corp.+ 44,451 1,631
Ogden Corp. 10,000 308
Olsten Corp. 22,275 305
Omnicom Group, Inc. 68,200 3,231
Paychex, Inc. 42,087 2,286
PhyCor, Inc.+ 22,650 515
Quorum Health Group, Inc.+ 39,650 1,274
R.R. Donnelley & Sons Co. 66,500 2,930
Republic Industries, Inc.+ 181,700 5,054
Reynolds & Reynolds Co. Class A 20,400 469
Robert Half International, Inc.+ 34,650 1,875
Steris Corp.+ 13,200 776
Stewart Enterprises, Inc. Class A 56,100 1,445
Sungard Data Systems, Inc.+ 41,600 1,482
Sylvan Learning Systems, Inc.+ 6,000 296
Symantec Corp.+ 30,000 870
Total Renal Care Holdings, Inc.+ 35,000 1,159
Total System Services, Inc. 51,800 1,628
U.S. Office Products Co.+ 54,500 964
USA Waste Services, Inc.+ 87,050 4,271
</TABLE>
45
<PAGE>
SCHWAB 1000 FUND-REGISTERED TRADEMARK-:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
Valassis Communications, Inc.+ 10,000 $ 393
Vencor, Inc.+ 27,775 753
Viad Corp. 38,100 983
Wallace Computer Service, Inc. 23,800 858
Waste Management, Inc. 186,000 6,231
Wellpoint Health Networks, Inc. Class A+ 26,925 1,942
----------
122,745
----------
CHEMICAL--2.5%
Air Products & Chemicals, Inc. 46,100 4,008
Albemarle Corp. 15,400 383
Arco Chemical Co. 42,600 2,263
Arterial Vascular Engineering+ 24,200 856
Betz Laboratories, Inc. 12,500 670
Cabot Corp. 37,800 1,358
Crompton & Knowles Corp. 22,000 659
Cytec Industries, Inc.+ 13,755 753
Dow Chemical Co. 99,000 9,572
E.I. du Pont de Nemours & Co. 474,400 34,542
Eastman Chemical Co. 33,725 2,319
Great Lakes Chemical Corp. 21,700 1,090
Hercules, Inc. 34,400 1,645
International Specialty Products, Inc.+ 45,400 905
Lubrizol Corp. 15,600 575
Lyondell Petrochemical Co. 36,300 1,193
M.A. Hanna Co. 10,725 246
Millennium Chemicals, Inc. 24,000 861
Minnesota Mining &
Manufacturing Co. 171,400 16,176
Morton International, Inc. 46,900 1,501
Nalco Chemical Co. 26,800 1,065
Olin Corp. 20,000 936
PPG Industries, Inc. 78,700 5,563
Praxair, Inc. 72,100 3,628
Rohm & Haas Co. 30,300 3,267
RPM, Inc. 44,843 774
Sigma-Aldrich Corp. 35,000 1,396
Solutia, Inc. 55,000 1,561
Union Carbide Corp. 47,000 2,280
Valspar Corp. 21,600 861
Witco Corp. 25,900 1,026
W.R. Grace & Co.+ 34,700 705
----------
104,637
----------
CONSTRUCTION--0.6%
Armstrong World Industries, Inc. 15,700 1,346
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
Centex Corp. 23,000 $ 799
Clayton Homes, Inc. 51,346 1,030
Crane Co. 21,900 1,178
Fluor Corp. 39,000 1,843
Georgia Pacific Timber Group 35,000 897
Global Industries, Inc.+ 43,000 976
Johns Manville Corp. 49,300 804
Lafarge Corp. 31,100 1,244
Martin Marietta Materials, Inc. 21,400 1,004
McDermott International 10,000 444
Oakwood Homes Corp. 14,000 395
Owens Corning 18,300 761
Sherwin-Williams Co. 67,000 2,386
Southdown, Inc. 9,200 651
The Stanley Works 36,800 1,884
USG Corp. 18,700 961
Vulcan Materials Co. 14,800 1,703
----------
20,306
----------
CONSUMER--DURABLE--0.4%
Black & Decker Corp. 43,500 2,246
Leggett & Platt, Inc. 35,800 1,859
Masco Corp. 66,400 3,851
Maytag Corp. 42,800 2,204
Newell Co. 61,674 2,980
Shaw Industries, Inc. 60,100 973
Snap-on, Inc. 22,150 937
Sunbeam Corp. 33,100 832
Whirlpool Corp. 31,100 2,239
----------
18,121
----------
CONSUMER--NONDURABLE--1.0%
American Greetings Corp. Class A 29,200 1,351
CKE Restaurants, Inc. 27,000 935
Corning, Inc. 106,800 4,272
Cracker Barrel Old Country Store, Inc. 20,900 768
Darden Restaurants, Inc. 63,600 1,018
Hasbro, Inc. 64,725 2,383
Lancaster Colony Corp. 24,450 944
Mattel, Inc. 114,220 4,376
McDonald's Corp. 288,200 17,833
Outback Steakhouse, Inc.+ 31,250 1,191
Premark International, Inc. 17,300 577
Rexall Sundown, Inc.+ 26,000 830
Rubbermaid, Inc. 54,000 1,546
Starbucks Corp.+ 35,500 1,708
Tricon Global Restaurants, Inc.+ 54,760 1,739
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
U.S. Industries, Inc. 22,500 $ 610
Wendy's International, Inc. 63,500 1,528
----------
43,609
----------
CONTAINERS--0.2%
Bemis Co., Inc. 21,400 952
Crown Cork & Seal Co., Inc. 55,600 2,895
Jefferson Smurfit Corp.+ 51,900 1,070
Owens-Illinois, Inc.+ 55,900 2,212
Sealed Air Corp.+ 44,199 2,770
Sonoco Products, Inc. 38,310 1,540
----------
11,439
----------
ELECTRONICS--5.1%
Adaptec, Inc.+ 45,400 1,075
ADC Telecommunications, Inc.+ 50,400 1,509
Advanced Micro Devices, Inc.+ 49,300 1,368
Altera Corp.+ 32,200 1,304
American Power Conversion Corp.+ 33,500 1,078
AMP, Inc. 103,300 4,061
Analog Devices, Inc.+ 68,400 2,663
Applied Materials, Inc.+ 159,400 5,758
Arrow Electronics, Inc.+ 38,800 1,060
Ascend Communications, Inc.+ 80,010 3,485
Atmel Corp.+ 30,200 610
Avnet, Inc. 17,100 1,055
AVX Corp. 26,000 535
DSC Communications Corp.+ 49,800 896
Electronic Data Systems Corp. 203,800 8,763
Emerson Electric Co. 188,400 11,987
Fore Systems, Inc.+ 48,400 1,107
General Instrument Corp.+ 60,000 1,346
General Signal Corp. 21,600 950
Harris Corp. 36,600 1,771
Input/Output, Inc.+ 20,000 498
Intel Corp. 685,500 55,397
Jabil Circuit, Inc.+ 18,000 632
KLA -Tencor Corp.+ 37,400 1,508
Linear Technology Corp. 30,700 2,471
LSI Logic Corp.+ 65,100 1,766
Lucent Technologies, Inc. 551,454 41,979
Maxim Integrated Products, Inc.+ 49,200 1,986
Micron Technology, Inc.+ 84,500 2,625
Molex, Inc. 70,257 2,011
Motorola, Inc. 251,400 13,984
National Semiconductor Corp.+ 69,300 1,525
Perkin Elmer Corp. 29,000 1,983
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
Pittway Corp. 8,150 $ 609
Qualcomm, Inc.+ 26,500 1,491
Rockwell International Corp. 80,600 4,509
Sanmina Corp.+ 7,900 711
SCI Systems, Inc.+ 18,000 741
Scientific-Atlanta, Inc. 24,700 590
Sensormatic Electronics Corp. 35,250 551
Solectron Corp.+ 43,600 1,932
Symbol Technologies, Inc. 17,325 667
Tektronix, Inc. 26,400 1,135
Tellabs, Inc.+ 80,000 5,670
Teradyne, Inc.+ 32,900 1,201
Texas Instruments, Inc. 163,600 10,481
Thermo Electron Corp.+ 66,737 2,657
Thomas & Betts Corp. 19,400 1,132
Uniphase Corp.+ 20,000 1,085
Varian Associates, Inc. 9,300 455
Vishay Intertechnology, Inc.+ 13,450 246
Vitesse Semiconductor Corp.+ 10,500 606
Xilinx, Inc.+ 27,400 1,254
----------
218,469
----------
ENERGY--RAW MATERIALS--1.4%
Anadarko Petroleum Corp. 23,100 1,692
Apache Corp. 50,100 1,772
Baker Hughes, Inc. 68,200 2,762
BJ Services Co.+ 36,000 1,350
Burlington Resources, Inc. 68,467 3,218
Cooper Cameron Corp.+ 32,000 2,126
Devon Energy Corp. 10,000 399
Diamond Offshore Drilling, Inc. 56,600 2,865
Dresser Industries, Inc. 76,060 4,022
Enron Oil & Gas Co. 57,800 1,351
Ensco International, Inc. 52,800 1,492
EVI, Inc.+ 27,600 1,470
Global Marine, Inc.+ 69,500 1,638
Halliburton Co. 112,400 6,180
Helmerich & Payne, Inc. 20,000 610
Mitchell Energy & Development Corp. Class A 28,000 700
Nabors Industries, Inc.+ 41,100 1,035
National-Oilwell, Inc.+ 25,000 948
NGC Corp. 56,000 826
Noble Affiliates, Inc. 27,400 1,182
Noble Drilling Corp.+ 55,000 1,777
Occidental Petroleum Corp. 149,900 4,413
ONEOK, Inc. 10,000 405
</TABLE>
47
<PAGE>
SCHWAB 1000 FUND-REGISTERED TRADEMARK-:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
Pioneer Natural Resources Co. 29,400 $ 704
Rowan Companies, Inc.+ 44,500 1,310
Tidewater, Inc. 27,000 1,070
Transocean Offshore, Inc. 51,000 2,850
Union Pacific Resources Group 107,588 2,569
Union Texas Petroleum Holding, Inc. 21,100 426
Varco International, Inc.+ 26,000 800
Vastar Resources, Inc. 49,800 2,369
Weatherford International, Inc.+ 21,400 1,071
Western Atlas, Inc.+ 26,600 2,101
----------
59,503
----------
FOOD & AGRICULTURE--5.2%
Archer-Daniels Midland Co. 237,865 5,114
Bestfoods, Inc. 141,400 7,759
Campbell Soup Co. 188,400 9,667
Coca-Cola Co. 1,044,100 79,221
Coca-Cola Enterprises, Inc. 154,600 5,836
ConAgra, Inc. 202,048 5,897
Dean Foods Co. 21,150 991
Dekalb Genetics Corp. Class B 18,000 1,227
Dole Food Co., Inc. 23,100 1,038
Flowers Industries, Inc. 47,500 1,015
General Mills, Inc. 71,100 4,804
H.J. Heinz Co. 149,600 8,153
Hershey Foods Corp. 55,100 4,036
Hormel Foods Corp. 34,100 1,159
IBP, Inc. 31,400 648
IMC Global, Inc. 47,360 1,705
Interstate Bakeries Corp. 37,200 1,179
Kellogg Co. 178,800 7,376
McCormick & Co., Inc. 33,400 1,144
Monsanto Co. 252,500 13,351
Nabisco Holdings Corp. 26,000 1,243
PepsiCo, Inc. 630,600 25,027
Pioneer Hi-Bred International, Inc. 103,500 3,907
Quaker Oats Co. 56,600 2,943
Ralston Purina Co. 51,100 5,417
Richfood Holdings, Inc. 12,750 350
Sara Lee Corp. 196,100 11,680
Smithfield Foods, Inc.+ 8,000 243
Suiza Foods Corp.+ 11,300 670
SYSCO Corp. 149,400 3,558
Tyson Foods, Inc. Class A 94,300 1,821
U.S. Foodservice, Inc.+ 10,000 353
Universal Corp. 9,500 356
Whitman Corp. 41,900 820
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
Wm. Wrigley Jr. Co. 46,000 $ 4,094
----------
223,802
----------
GOLD--0.1%
Battle Mountain Gold Co. 66,000 474
Homestake Mining Co. 37,800 439
Newmont Gold Co. 66,600 2,157
Newmont Mining Corp. 59,231 1,906
----------
4,976
----------
HEALTHCARE/DRUG & MEDICINE--10.9%
Abbott Laboratories 319,700 23,378
Allegiance Corp. 29,920 1,365
Allergan, Inc. 25,700 1,068
ALZA Corp.+ 42,600 2,042
American Home Products Corp. 270,800 25,218
Amgen, Inc.+ 105,200 6,273
Bausch & Lomb, Inc. 20,800 1,028
Baxter International, Inc. 122,000 6,763
Becton, Dickinson & Co. 50,100 3,488
Bergen Brunswig Corp. 39,353 1,786
Beverly Enterprises, Inc.+ 48,400 762
Biogen, Inc.+ 26,000 1,154
Biomet, Inc. 48,900 1,467
Boston Scientific Corp.+ 83,471 6,036
Bristol-Myers Squibb Co. 414,700 43,906
C.R. Bard, Inc. 33,600 1,203
Cardinal Health, Inc. 50,193 4,831
Centocor, Inc.+ 30,600 1,291
Chiron Corp.+ 64,612 1,252
Columbia/HCA Healthcare Corp. 274,258 9,033
Concentra Managed Care, Inc.+ 33,000 1,027
Dentsply International, Inc. 18,000 592
Depuy, Inc.+ 40,000 1,240
Dura Pharmaceuticals, Inc.+ 19,000 504
Eli Lilly & Co. 471,168 32,776
First Health Group Corp.+ 20,000 1,180
Forest Laboratories, Inc.+ 31,200 1,129
Genentech, Inc.+ 52,500 3,636
Genzyme Corp. (General Division)+ 28,800 891
Guidant Corp. 67,136 4,490
HBO & Co. 94,200 5,634
Health Care & Retirement Corp.+ 25,050 1,021
Health Management Associates, Inc. Class A+ 58,752 1,851
HealthSouth Corp.+ 154,200 4,655
Humana, Inc.+ 68,500 1,850
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
ICN Pharmaceuticals, Inc. 25,650 $ 1,263
Immunex Corp.+ 15,400 1,057
Johnson & Johnson 571,300 40,777
Lincare Holdings, Inc.+ 11,000 892
Mallinckrodt, Inc. 25,600 826
Manor Care, Inc. 23,550 826
McKesson Corp. 39,000 2,757
Medtronic, Inc. 191,200 10,062
Merck & Co., Inc. 502,054 60,498
Mylan Laboratories, Inc. 49,550 1,344
Omnicare, Inc. 26,600 911
Pacificare Health Systems, Inc. Class B+ 21,164 1,516
Pfizer, Inc. 544,800 62,003
Quintiles Transnational Corp.+ 32,000 1,584
R.P. Scherer Corp.+ 13,600 993
Schering-Plough Corp. 313,300 25,103
Service Corp. International 101,400 4,183
Shared Medical Systems Corp. 9,700 707
Sofamor/Danek Group, Inc.+ 9,700 851
St. Jude Medical, Inc.+ 46,450 1,646
Stryker Corp. 36,600 1,647
Sybron International Corp.+ 59,600 1,579
Tenet Healthcare Corp.+ 132,373 4,956
United Healthcare Co. 75,400 5,297
US Surgical Corp. 42,700 1,345
Warner Lambert Co. 116,400 22,021
Watson Pharmaceuticals+ 35,000 1,505
----------
463,969
----------
HOUSEHOLD PRODUCTS--2.3%
Alberto-Culver Co. Class B 18,700 549
Avon Products, Inc. 53,200 4,372
Clorox Co. 39,900 3,347
Colgate-Palmolive Co. 127,100 11,399
Dial Corp. 45,100 1,099
Estee Lauder Companies Class A 26,000 1,727
Gillette Co. 237,205 27,382
International Flavors & Fragrances, Inc. 43,500 2,129
Procter & Gamble Co. 567,200 46,618
Tupperware Corp. 28,700 777
----------
99,399
----------
INSURANCE--4.7%
20th Century Industries 10,000 285
Aetna, Inc. 75,365 6,090
AFLAC, Inc. 52,425 3,408
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
Alleghany Corp.+ 2,953 $ 1,019
Allmerica Financial Corp. 40,216 2,519
Allstate Corp. 176,724 17,010
AMBAC Financial Group, Inc. 32,800 1,859
American Bankers Insurance Group, Inc. 12,200 750
American General Corp. 105,493 7,028
American International Group, Inc. 294,037 38,683
American National Insurance Co. 10,300 1,112
Aon Corp. 74,675 4,817
Berkley (W.R.) Corp. 7,000 326
Chubb Corp. 83,700 6,607
CIGNA Corp. 37,400 7,739
Cincinnati Financial Corp. 24,538 3,126
CMAC Investment Corp. 8,700 562
CNA Financial Corp.+ 25,400 3,758
Conseco, Inc. 74,640 3,704
Equitable Companies, Inc. 93,100 5,714
Erie Indemnity Co. Class A 40,000 1,270
Everest Reinsurance Holdings, Inc. 15,000 619
Financial Security Assured Holdings, Ltd. 18,000 1,078
Foundation Health Systems, Inc. Class A+ 45,760 1,324
Fremont General Corp. 12,800 714
General Re Corp. 31,700 7,087
Hartford Financial Services Group, Inc. 52,600 5,825
Horace Mann Educators Corp. 10,000 344
Jefferson-Pilot Corp. 43,725 2,566
Leucadia National Corp. 30,000 1,123
Liberty Financial Corp. 10,500 421
Lincoln National Corp. 43,900 3,899
Marsh & McLennan Companies, Inc. 71,800 6,543
MBIA, Inc. 37,000 2,761
Mercury General Corp. 39,400 2,551
MGIC Investment Corp. 45,400 2,860
Ohio Casualty Corp. 17,300 837
Old Republic International Corp. 40,850 1,848
Orion Capital Corp. 8,000 446
Oxford Health Plans, Inc.+ 29,900 512
PMI Group, Inc. 12,600 1,024
Progressive Corp. 33,900 4,591
Protective Life Corp. 27,600 1,025
Provident Companies, Inc. 91,992 3,593
Provident Financial Group, Inc. 19,200 1,016
Reliance Group Holdings, Inc. 34,000 589
Reliastar Financial Corp. 35,000 1,597
</TABLE>
49
<PAGE>
SCHWAB 1000 FUND-REGISTERED TRADEMARK-:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
SAFECO Corp. 54,600 $ 2,727
St. Paul Companies, Inc. 50,377 4,269
SunAmerica, Inc. 94,650 4,727
TIG Holdings, Inc. 16,300 392
Torchmark Corp. 64,700 2,883
Transamerica Corp. 26,500 3,061
Transatlantic Holdings, Inc. 26,000 1,997
Travelers Property Casualty Corp. 35,000 1,470
United Insurance Companies, Inc.+ 12,000 348
Unitrin, Inc. 14,500 1,008
UNUM Corp. 53,516 2,876
Wesco Financial Corp. 2,800 1,030
----------
200,967
----------
MEDIA--2.6%
A.H. Belo Corp. Class A 26,000 1,376
American Radio Systems Corp.+ 9,600 637
BHC Communications, Inc. 11,700 1,673
Cablevision Systems Corp. Class A+ 10,800 664
CBS Corp. 289,807 10,324
Central Newspapers, Inc. Class A 8,500 623
Chris-Craft Industries, Inc.+ 12,556 720
Clear Channel Communications, Inc.+ 55,501 5,231
Comcast Corp. Class A 150,688 5,397
Cox Communications, Inc. Class A+ 109,306 4,878
Dow Jones & Co., Inc. 46,000 2,240
E.W. Scripps Co. Class A 31,675 1,796
Gannett Co., Inc. 119,600 8,125
Harcourt General, Inc. 30,200 1,576
Harte Hanks Communications, Inc. 18,200 413
Heftel Broadcasting Corp.+ 8,000 351
Hollinger International, Inc. 35,000 543
King World Productions, Inc. 38,000 1,014
Knight-Ridder, Inc. 32,600 1,901
Lee Enterprises, Inc. 22,000 689
McGraw Hill Companies, Inc. 38,200 2,958
Meredith Corp. 16,000 688
New York Times Co. Class A 37,013 2,626
Outdoor Systems, Inc.+ 47,000 1,492
Primedia, Inc.+ 38,000 542
Pulitzer Publishing Co. 13,066 1,116
Readers Digest Association, Inc. 42,800 1,150
Snyder Communication+ 30,000 1,275
Telecommunications, Inc. Series A (Liberty
Media Group)+ 142,193 4,719
Telecommunications, Inc. Series A (TCI
Group)+ 245,559 7,919
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
Time Warner, Inc. 240,955 $ 18,915
Times Mirror Co. Series A 37,000 2,264
Tribune Co. 47,400 3,128
USA Networks, Inc.+ 33,200 815
Viacom, Inc. Class B+ 152,026 8,818
Washington Post Co. 4,300 2,254
----------
110,850
----------
MISCELLANEOUS FINANCE--5.6%
A.G. Edwards & Sons, Inc. 42,843 1,928
American Express Co. 200,400 20,441
American Financial Group, Inc. 24,100 1,050
Associates First Capital Corp. 164,601 12,304
Astoria Financial Corp. 10,200 598
Bear, Stearns & Co., Inc. 54,138 3,089
Beneficial Corp. 21,000 2,738
Berkshire Hathaway, Inc.+ 524 35,945
Capital One Financial Corp. 27,000 2,594
Charles Schwab Corp. 101,250 3,544
Charter One Financial, Inc. 33,731 2,283
Checkfree Holdings Corp.+ 31,000 798
CNF Transportation, Inc. 35,000 1,352
Coast Federal Litigation Contingent+ 7,200 122
Contifinancial Corp.+ 30,000 968
Countrywide Credit Industries, Inc. 50,985 2,466
Donaldson, Lufkin & Jenrette, Inc. 23,300 2,209
Fannie Mae 444,000 26,585
Finova Group, Inc. 21,700 1,271
Franklin Resources, Inc. 112,600 6,024
Freddie Mac 296,400 13,727
GATX Corp. 9,500 787
Golden West Financial Corp. 21,900 2,306
GP Financial Corp. 32,800 1,302
Green Tree Financial Corp. 64,000 2,608
H.F. Ahmanson & Co. 46,119 3,517
Household International, Inc. 47,300 6,217
Legg Mason, Inc. 16,000 944
Lehman Brothers Holdings, Inc. 45,880 3,260
Merrill Lynch & Co., Inc. 138,600 12,162
Money Store, Inc. 15,000 493
Morgan Stanley, Dean Witter, Discover & Co. 248,405 19,593
PaineWebber Group, Inc. 58,687 2,630
Pride International, Inc.+ 10,000 243
Providian Financial Corp. 41,900 2,522
RAC Financial Group, Inc.+ 23,000 1,116
Raymond James Financial, Inc. 12,000 391
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
Student Loan Marketing Assoc. 70,350 $ 3,003
T. Rowe Price Associates, Inc. 24,200 1,827
Travelers Group, Inc. 480,533 29,403
United Asset Management Corp. 18,400 488
----------
236,848
----------
NON-FERROUS METALS--0.3%
Alumax, Inc. 25,500 1,259
Aluminum Company of America 76,500 5,929
Cyprus Amax Minerals Co. 31,200 538
Engelhard Corp. 44,687 944
Freeport-McMoRan Copper & Gold, Inc. Class B 88,894 1,672
Phelps Dodge Corp. 22,700 1,524
Reynolds Metals Co. 28,800 1,901
----------
13,767
----------
OIL--DOMESTIC--0.9%
Amerada Hess Corp. 40,100 2,306
Ashland, Inc. 29,000 1,533
Atlantic Richfield Co. 135,200 10,546
Kerr-McGee Corp. 18,400 1,214
Murphy Oil Corp. 22,370 1,151
Oryx Energy Co.+ 41,200 1,076
Pennzoil Co. 23,800 1,525
Phillips Petroleum Co. 107,700 5,338
Sun, Inc. 31,900 1,290
Tosco Corp. 60,600 2,159
Ultramar Diamond Shamrock Corp. 30,800 995
Unocal Corp. 95,534 3,911
USX-Marathon Group 126,000 4,512
Valero Energy 19,600 635
----------
38,191
----------
OIL--INTERNATIONAL--3.7%
Amoco Corp. 416,000 18,408
Chevron Corp. 273,400 22,607
Exxon Corp. 1,035,400 75,519
Fina, Inc. 11,300 712
Mobil Corp. 330,500 26,110
Texaco, Inc. 226,509 13,930
----------
157,286
----------
OPTICAL & PHOTO--0.2%
Eastman Kodak Co. 135,300 9,767
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
Polaroid Corp. 18,200 $ 801
----------
10,568
----------
PAPER & FOREST PRODUCTS--1.1%
Boise Cascade Corp. 23,000 864
Bowater, Inc. 15,700 878
Champion International Corp. 38,500 2,072
Consolidated Papers, Inc. 17,400 1,152
Fort James Corp. 93,100 4,620
Georgia-Pacific Corp. 35,800 2,763
International Paper Co. 128,100 6,685
Kimberly-Clark Corp. 235,660 11,961
Louisiana-Pacific Corp. 36,500 798
Mead Corp. 36,800 1,274
Potlatch Corp. 9,300 441
Rayonier, Inc. 13,875 695
St. Joe Corp. 43,300 1,369
Temple Inland, Inc. 21,900 1,414
Union Camp Corp. 26,900 1,624
Westvaco Corp. 43,300 1,313
Weyerhaeuser Co. 87,000 5,013
Willamette Industries, Inc. 52,000 2,018
----------
46,954
----------
PRODUCER GOODS & MANUFACTURING--4.8%
Aeroquip-Vickers, Inc. 10,900 693
AGCO, Inc. 19,600 524
Allied Signal, Inc. 241,800 10,594
American Standard Corp.+ 25,500 1,242
AMF Bowling, Inc.+ 30,000 868
Avery Dennison Corp. 36,800 1,927
Blyth Industries, Inc.+ 15,000 550
Briggs & Stratton Corp. 16,300 738
Case Corp. 33,900 2,155
Caterpillar, Inc. 153,600 8,746
Cooper Industries, Inc. 46,700 3,123
Corporate Express, Inc.+ 34,350 346
Deere & Co. 107,200 6,265
Dover Corp. 89,200 3,523
FMC Corp.+ 14,200 1,101
General Electric Co. 1,375,700 117,104
Harnischfeger Industries, Inc. 22,500 636
Harsco Corp. 14,800 681
Henry Schein, Inc.+ 8,000 312
Herman Miller, Inc. 35,600 1,075
Hillenbrand Industries, Inc. 27,000 1,684
Hon Industries, Inc. 23,800 762
</TABLE>
51
<PAGE>
SCHWAB 1000 FUND-REGISTERED TRADEMARK-:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
Hubbell, Inc. Class B 26,938 $ 1,328
Illinois Tool Works, Inc. 106,200 7,487
Ingersoll-Rand Co. 65,550 3,019
ITT Industries, Inc. 50,600 1,844
Johnson Controls, Inc. 40,600 2,411
Kennametal, Inc. 10,200 544
Mark IV Industries, Inc. 15,405 324
McDermott International, Inc. 31,000 1,283
Millipore Corp. 12,400 428
Pall Corp. 40,233 790
Parker-Hannifin Corp. 49,375 2,203
Pentair, Inc. 21,200 917
Precision Castparts Corp. 9,400 584
Raychem Corp. 30,800 1,238
Safeskin Corp.+ 20,400 727
Smith International, Inc.+ 17,000 999
Teleflex, Inc. 10,000 425
Tenneco, Inc. 70,500 3,036
Thermo Instruments Systems, Inc.+ 52,171 1,539
Timken Co. 18,600 743
Trinity Industries, Inc. 11,950 609
U.S. Filter Corp.+ 40,000 1,305
Ucar International, Inc.+ 14,000 455
W.W. Grainger, Inc. 21,800 2,375
Westpoint Stevens, Inc. Class A+ 34,000 1,139
York International Corp. 23,400 1,154
----------
203,555
----------
RAILROAD & SHIPPING--0.6%
Alexander & Baldwin, Inc. 21,700 621
Burlington Northern Santa Fe Corp. 68,251 6,757
CSX Corp. 89,700 4,709
Illinois Central Corp. Class A 550 22
Kansas City Southern Industries, Inc. 44,100 1,993
Norfolk Southern Corp. 166,100 5,554
Union Pacific Corp. 99,761 5,462
Wisconsin Central Transportation Corp.+ 12,900 316
----------
25,434
----------
REAL PROPERTY--0.0%
Catellus Development Corp.+ 45,000 801
Rouse Co. 22,500 695
Universal Health Services, Inc. Class B+ 10,000 576
----------
2,072
----------
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
RETAIL--5.6%
Albertson's, Inc. 101,200 $ 5,060
American Stores Co. 118,400 2,842
AutoZone, Inc.+ 72,000 2,174
Barnes & Noble, Inc.+ 30,000 1,016
Bed Bath & Beyond, Inc.+ 24,800 1,221
Best Buy Co., Inc.+ 16,900 1,187
Borders Group, Inc.+ 22,000 707
Chancellor Media Corp.+ 61,000 2,894
Circuit City Stores, Inc. 33,800 1,373
CompUSA, Inc.+ 36,000 668
Consolidated Stores Corp.+ 45,312 1,812
Costco Companies, Inc.+ 93,704 5,236
CVS Corp. 81,457 6,007
Dayton Hudson Corp. 90,500 7,902
Dillards Inc. Class A 42,200 1,546
Dollar General Corp. 56,171 2,127
Dollar Tree Stores, Inc.+ 18,000 977
Family Dollar Stores, Inc. 69,750 2,372
Fastenal Co. 9,700 543
Federated Department Stores, Inc.+ 90,200 4,437
Food Lion, Inc. Class A 185,450 1,878
Fred Meyer, Inc.+ 71,390 3,204
Gap, Inc. 169,000 8,693
General Nutrition Companies, Inc.+ 39,600 1,421
Giant Food, Inc. Class A 25,700 957
Hannaford Bros. Co., Inc. 13,300 591
Home Depot, Inc. 311,449 21,685
International Game Technology 58,600 1,630
Intimate Brands 100,000 2,900
J.C. Penney Co., Inc. 102,800 7,305
Kmart Corp.+ 195,700 3,413
Kohl's Corp.+ 60,800 2,512
Kroger Co.+ 116,400 4,874
Limited, Inc. 114,819 3,854
Longs Drug Stores, Inc. 8,000 232
Lowe's Companies, Inc. 79,300 5,546
May Department Stores Co. 100,900 6,224
Mercantile Stores Co., Inc. 18,300 1,337
Neiman Marcus Group, Inc.+ 30,000 1,101
Nordstrom, Inc. 36,900 2,415
Office Depot, Inc.+ 68,300 2,262
Officemax, Inc.+ 56,100 1,055
Payless Shoesource, Inc.+ 19,600 1,401
Pep Boys-Manny Moe & Jack 13,700 298
Pier 1 Imports, Inc.+ 35,000 923
Planet Hollywood International, Inc.+ 25,000 228
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
Proffitt's, Inc.+ 33,000 $ 1,312
Rite Aid Corp. 111,300 3,576
Ross Stores, Inc. 16,000 741
Safeway, Inc.+ 215,080 8,227
Saks Holdings, Inc.+ 37,000 826
Sears Roebuck & Co. 162,100 9,615
Staples, Inc.+ 117,907 2,911
SUPERVALU, Inc. 35,800 1,564
Tandy Corp. 51,116 2,543
Tiffany & Co. 10,000 455
TJX Companies, Inc. 67,200 2,974
Toys 'R' Us, Inc.+ 125,480 3,459
Viking Office Products, Inc.+ 56,200 1,359
Wal-Mart Stores, Inc. 941,500 47,600
Walgreen Co. 207,400 7,155
Weis Markets, Inc. 23,900 859
Whole Foods Market, Inc.+ 14,000 866
Winn Dixie Stores, Inc. 62,300 2,344
Woolworth Corp.+ 49,000 1,127
----------
239,553
----------
STEEL--0.2%
Allegheny Teledyne, Inc. 83,280 2,113
Nucor Corp. 35,100 2,104
USX--U.S. Steel Group, Inc. 42,160 1,650
Worthington Industries, Inc. 46,700 839
----------
6,706
----------
TELEPHONE--6.7%
360 Communications Co.+ 47,578 1,454
Advanced Fibre Communications, Inc.+ 40,000 1,695
AirTouch Communications, Inc.+ 231,200 12,283
Alltel Corp. 88,500 3,783
Ameritech Corp. 468,000 19,919
Andrew Corp.+ 25,612 586
AT&T Corp. 678,617 40,759
Bell Atlantic Corp. 331,443 31,011
BellSouth Corp. 418,500 26,862
Century Telephone Enterprises, Inc. 43,125 1,836
Cincinnati Bell, Inc. 66,800 2,555
COMSAT Corp. 17,000 686
Excel Communications+ 60,000 1,410
Frontier Corp. 62,450 1,870
GTE Corp. 403,400 23,574
Jacor Communications, Inc. Class A+ 16,300 927
LCI International, Inc.+ 39,000 1,550
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
Loral Space & Communications+ 90,000 $ 2,818
MCI Communications Corp. 289,600 14,571
MCleod, Inc.+ 30,000 1,380
Mobile Telecommunications Technologies Corp.+ 10,000 255
Nextel Communications, Inc.+ 116,100 3,331
Omnipoint Corp.+ 10,000 245
Pairgain Technologies, Inc.+ 29,000 535
SBC Communications, Inc. 764,164 31,663
Southern New England Telecommunications Corp. 25,700 1,799
Sprint Corp. 177,334 12,114
Tel Save Holdings, Inc.+ 26,000 593
Telephone & Data Systems, Inc. 20,100 955
Teleport Communications Group, Inc.+ 23,700 1,277
U.S. Cellular Corp.+ 28,800 943
U.S. West, Inc. (Communications Group) 200,310 10,566
U.S. West, Inc. (Media Group)+ 254,700 9,615
WorldCom, Inc.+ 422,979 18,096
----------
283,516
----------
TOBACCO--1.2%
Fortune Brands, Inc. 71,300 2,629
Loew's Corp. 45,000 4,503
Philip Morris Companies., Inc. 1,015,100 37,875
RJR Nabisco Holdings Corp. 126,736 3,525
UST, Inc. 80,200 2,211
----------
50,743
----------
TRUCKING & FREIGHT--0.1%
Airborne Freight Corp. 19,200 761
Pittston Brink's Group 9,900 387
Ryder Systems, Inc. 33,800 1,177
----------
2,325
----------
TRAVEL & RECREATION--1.2%
Bristol Hotel Co.+ 10,000 270
Brunswick Corp. 38,900 1,264
Callaway Golf Co. 31,000 845
Central Parking Corp. 10,000 469
Circus Circus Enterprises, Inc.+ 40,400 730
Extended Stay America, Inc.+ 20,400 266
Harrah's Entertainment, Inc.+ 47,100 1,228
Hilton Hotels Corp. 96,200 3,072
</TABLE>
53
<PAGE>
SCHWAB 1000 FUND-REGISTERED TRADEMARK-:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
La Quinta Inns, Inc. 19,200 $ 422
Marriott International, Inc. Class A 49,300 1,578
Marriott International, Inc. 49,300 1,627
Mirage Resorts, Inc.+ 69,100 1,525
Promus Hotel Corp.+ 50,060 2,262
Walt Disney Co. 287,907 35,790
----------
51,348
----------
UTILITIES--ELECTRIC & GAS --3.8%
AES Corp.+ 70,318 3,881
Allegheny Energy, Inc. 42,100 1,289
Ameren Corp. 67,130 2,660
American Electric Power Co., Inc. 73,200 3,495
American Water Works Co., Inc. 34,600 1,036
Baltimore Gas & Electric Co. 58,150 1,832
Boston Edison Co. 12,900 526
CalEnergy Co., Inc.+ 45,000 1,468
Carolina Power & Light Co. 60,500 2,605
Central & South West Services Corp. 101,800 2,653
Cinergy Corp. 67,565 2,356
Citizens Utilities Company Class B 78,536 795
CMS Energy Corp. 37,900 1,656
Coastal Corp. 43,300 3,093
Columbia Gas System, Inc. 21,400 1,739
Conectiv, Inc. 45,700 957
Consolidated Edison, Inc. 103,700 4,692
Consolidated Natural Gas Co. 40,400 2,323
Dominion Resources, Inc. 88,650 3,507
DPL, Inc. 58,275 1,060
DQE, Inc. 29,050 999
DTE Energy Co. 52,100 2,042
Duke Power Co. 154,931 8,967
Edison International 165,600 4,937
El Paso Natural Gas Co. 46,168 1,705
Enova Corp. 42,700 1,142
Enron Corp. 130,569 6,422
Entergy Corp. 92,421 2,299
Equitable Resources, Inc. 25,100 816
First Energy Corp. 99,515 3,010
Florida Progress Corp. 40,400 1,641
FPL Group, Inc. 84,200 5,226
GPU, Inc. 58,600 2,322
Hawaiian Electric Industries, Inc. 7,900 320
Houston Industries, Inc. 131,917 3,834
Idaho Power Co. 21,400 762
Illinova Corp. 31,300 957
Ipalco Enterprises, Inc. 31,000 1,350
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
K N Energy, Inc. 12,200 $ 716
Kansas City Power & Light Co. 15,900 473
Keyspan Energy Corp. 22,350 763
Ku Energy Corp. 26,500 1,173
LG & E Energy Corp. 25,900 686
Long Island Lighting Co. 51,800 1,551
MCN Corp. 35,600 1,344
Midamerican Energy Holdings Co. 34,461 728
Minnesota Power & Light Co. 7,000 285
Montana Power Co. 17,900 666
National Fuel Gas Co. 16,600 764
Nevada Power Co. 10,000 246
New Century Energies Inc. 45,700 2,171
New England Electric Co. 28,800 1,253
New York State Electric & Gas Corp. 33,400 1,394
Niagara Mohawk Power Corp.+ 75,200 921
NICOR, Inc. 25,300 1,036
Nipsco Industries, Inc. 61,800 1,657
Northeast Utilities+ 41,000 579
Northern States Power Co. 28,800 1,624
Oklahoma Gas & Electric Co. 15,600 857
Pacific Enterprises, Inc. 32,800 1,277
Pacific Gas & Electric Corp. 185,458 6,004
PacifiCorp. 119,500 2,778
PECO Energy Co. 78,500 1,869
Peoples Energy Corp. 19,500 707
Pinnacle West Capital Co. 32,300 1,429
Potomac Electric Power Co. 49,400 1,210
PP&L Resources, Inc. 54,720 1,262
Public Service Enterprise Group, Inc. 92,300 3,098
Puget Sound Power & Light Co. 28,200 742
Questar Corp. 17,900 776
Rochester Gas & Electric Corp. 10,000 311
Scana Corp. 45,800 1,368
Seagull Energy Corp.+ 19,000 324
Sonat, Inc. 43,600 1,935
Southern Co. 283,700 7,518
Teco Energy, Inc. 47,200 1,257
Texas Utilities Co. 95,812 3,832
Unicom Corp. 83,500 2,902
Utilicorp United, Inc. 13,900 523
Washington Gas Light Co. 10,000 272
Washington Water Power Co. 27,700 637
Western Resources, Inc. 27,231 1,064
Williams Companies, Inc. 184,461 5,834
Wisconsin Energy Corp. 39,600 1,208
----------
163,398
----------
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- ----------
<S> <C> <C>
TOTAL COMMON STOCK
(Cost $2,513,664) $4,239,765
----------
PREFERRED STOCK--0.0%
CONTAINERS--0.0%
Sealed Air Corp. Series A+ 174 11
----------
HEALTHCARE--0.0%
Fresenius National Medical, Inc.+ 24,900 1
----------
TOTAL PREFERRED STOCK (Cost $3) 12
----------
<CAPTION>
Par
----------
<S> <C> <C>
REPURCHASE AGREEMENTS--0.7%
PNC BANK, N.A. 4.75%, Dated 4/30/98; Due
5/1/98, Collateralized by: Federal National
Mortgage Assoc. CMO: $29,466,826 Par; 6.50%;
Due 10/15/08 $ 28,537 28,537
----------
TOTAL REPURCHASE AGREEMENTS
(Cost $28,537) 28,537
----------
<CAPTION>
Value
Par (000s)
---------- ----------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS--0.0%
U.S. Treasury Bills(a)(b)
4.91%, 06/18/98 $ 35,000 $ 35
4.93%, 06/18/98 40,000 40
4.94%, 06/18/98 90,000 89
4.99%, 06/18/98 30,000 30
5.01%, 06/18/98 50,000 50
5.01%, 06/25/98 20,000 20
5.04%, 06/18/98 60,000 60
5.07%, 06/25/98 65,000 65
5.14%, 06/25/98 165,000 164
5.18%, 06/25/98 265,000 261
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $814) 814
----------
TOTAL INVESTMENTS--100.2%
(Cost $2,543,018) 4,269,128
----------
OTHER ASSETS AND LIABILITIES--(0.2)%
Other Assets 14,977
Liabilities (23,721)
----------
(8,744)
----------
NET ASSETS--100.0% $4,260,384
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENTS OF NET ASSETS AND NOTES TO FINANCIAL
STATEMENTS.
55
<PAGE>
SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK-:
STATEMENT OF NET ASSETS
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
COMMON STOCK--99.7%
AEROSPACE / DEFENSE--0.8%
AAR Corp. 27,150 $ 711
Alliant Techsystems, Inc. 11,800 754
BE Aerospace, Inc.+ 21,900 683
GenCorp., Inc. 36,400 1,108
OEA, Inc. 16,100 307
Orbital Sciences Corp.+ 27,900 1,242
Trimble Navigation Ltd.+ 17,700 327
--------
5,132
--------
AIR TRANSPORTATION--0.7%
Alaska Air Group, Inc.+ 16,600 932
America West Holding Corp. Class B+ 40,500 1,224
ASA Holdings, Inc. 25,600 973
Atlas Air, Inc.+ 22,600 881
Offshore Logistics, Inc.+ 17,000 402
Trans World Airlines, Inc.+ 39,900 387
--------
4,799
--------
ALCOHOLIC BEVERAGES--0.2%
Canandaigua Wine Co., Inc. Class A+ 16,200 848
Mondavi (Robert) Corp. Class A+ 6,200 245
--------
1,093
--------
APPAREL--2.1%
Burlington Industries, Inc.+ 55,000 963
Fabric Centers of America, Inc.+ 14,500 427
Footstar, Inc.+ 24,700 983
Goody's Family Clothing, Inc.+ 15,000 743
Guilford Mills, Inc. 22,400 633
Kellwood Co. 20,800 664
Men's Wearhouse, Inc.+ 19,800 834
Nautica Enterprises, Inc.+ 33,600 836
Nine West Group, Inc.+ 31,600 879
Pacific Sunwear of California+ 10,800 477
Phillips-Van Heusen Corp. 22,200 262
Russell Corp. 31,900 861
Springs Industries, Inc. 17,300 953
St. John Knits, Inc. 15,000 669
Stride Rite Corp. 37,400 470
Talbots, Inc. 25,300 481
The Buckle, Inc. 13,000 658
Timberland Co. Class A+ 10,500 899
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Wolverine World Wide, Inc. 36,400 $ 1,050
--------
13,742
--------
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES--1.6%
A.O. Smith Corp. Class B 15,500 699
Arvin Industries, Inc. 21,700 888
Breed Technologies, Inc. 24,900 503
Coach USA, Inc.+ 17,800 844
Detroit Diesel Corp.+ 19,900 458
Gentex Corp.+ 30,200 1,019
Hayes Lemmerz International, Inc.+ 29,700 1,142
Mascotech, Inc. 42,300 986
Modine Manufacturing Co. 26,100 971
O'Reilly Automotive, Inc. 16,600 457
Standard Products Co. 13,200 422
Superior Industries International, Inc. 24,700 793
Titan International, Inc. 17,000 332
Tower Automotive, Inc.+ 20,200 1,077
Wynns International, Inc. 15,100 340
--------
10,931
--------
BANKS--5.6%
ALBANK Financial Corp. 10,920 573
AMCORE Financial, Inc. 25,150 651
Bancorp South, Inc. 19,500 869
Banknorth Group, Inc. 15,800 573
Bay View Cap Corp. 17,800 581
BOK Financial Corp. 18,707 952
Chemical Financial Corp. 8,478 350
Chittenden Corp. 11,900 446
CitFed Bancorp, Inc. 11,900 631
Citizens Bancshares, Inc. 4,700 340
Citizens Banking Corp. 22,750 808
CNB Bancshares, Inc. 30,615 1,497
Commerce Bancorp, Inc.--New Jersey 14,990 860
Community First Bankshares, Inc. 18,500 932
Corus Bankshares, Inc. 14,300 642
Downey Financial Corp. 23,497 815
Everen Capital Corp. 16,500 878
F & M National Corp. 15,955 515
F.N.B. Corp. 13,755 512
First Colorado Bancorp, Inc. 14,400 421
First Commonwealth Financial Corp. 17,300 482
First Financial Bancorp 14,631 827
First Midwest Bancorp, Inc. 18,300 949
Firstbank of Illinois Co. 12,400 567
Firstfed Financial Corp.+ 8,300 380
First Source Corp. 17,493 688
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
First Source Bancorp, Inc. 32,871 $ 349
GBC Bancorp California 6,900 440
Hancock Holding Co. 9,930 619
Harris Financial, Inc. 30,000 771
HUBCO, Inc. 25,256 928
Irwin Financial Corp. 10,500 579
MAF Bancorp, Inc. 21,000 847
Merchants Bancorp, Inc. New York 7,600 302
Mid-Am, Inc. 19,081 518
National Bancorp of Alaska, Inc. 29,600 1,088
National City Bancshares, Inc. 11,000 448
One Valley Bancorp of West Virginia, Inc. 23,956 931
Park National Corp. 7,900 759
Peoples Bancorp, Inc. 35,183 378
Peoples First Corp. 7,900 300
Provident Bankshares Corp. 22,270 724
Queens County Bancorp, Inc. 11,995 549
Republic Bancorp, Inc. 14,600 285
Riggs National Corp. 27,500 792
S & T Bancorp, Inc. 13,000 676
St. Paul Bancorp, Inc. 30,237 756
Susquehanna Bancshares, Inc. 20,750 742
T R Financial Corp. 13,800 496
Texas Regional Bancshares, Inc. 12,300 406
The Trust Company of New Jersey 15,500 422
Trans Financial, Inc. 11,100 616
Triangle Bancorp, Inc. 10,200 298
TrustCo Bank Corp.--New York 20,011 575
UMB Financial Corp. 17,252 1,018
United Bankshares, Inc. 27,200 711
UST Corp. 27,300 770
Wesbancorp, Inc. 12,600 337
Westcorp, Inc. 20,575 312
--------
37,481
--------
BUSINESS MACHINES & SOFTWARE--5.7%
Analogic Corp. 9,900 462
Avant Corp.+ 25,400 737
BancTec, Inc.+ 17,100 373
Black Box Corp.+ 13,100 436
Boole & Babbage, Inc. 22,050 529
Broderbund Software, Inc.+ 16,300 291
Cirrus Logic, Inc.+ 62,900 657
Computer Products, Inc.+ 35,100 772
Comverse Technology, Inc.+ 36,485 1,728
Data General Corp.+ 31,300 477
Davox Corp. 9,300 208
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Dialogic Corp.+ 12,700 $ 475
Electronics For Imaging, Inc. 45,600 935
FileNet Corp.+ 13,000 709
GT Interactive Software Corp.+ 57,000 602
HMT Technology Corp.+ 33,500 436
HNC Software, Inc.+ 23,800 928
Hyperion Software Corp.+ 17,000 737
Inacom Corp.+ 12,400 444
Informix Corp.+ 131,000 1,296
Intergraph Corp.+ 37,700 320
Komag, Inc.+ 49,200 763
Learning Company, Inc.+ 43,200 1,237
Legato Systems, Inc. 32,000 1,012
Manugistics Group, Inc. 21,200 1,272
Micron Electronics, Inc.+ 84,900 1,183
National Computer Systems, Inc. 28,400 710
National Instruments Corp. 26,950 957
Network Appliance, Inc. 29,600 1,067
Novellus Systems, Inc. 28,900 1,384
Pixar, Inc.+ 38,000 1,577
Premiere Technologies, Inc.+ 38,400 1,224
Rational Software Corp.+ 73,700 1,239
Read-Rite Corp.+ 45,500 628
Remedy Corp. 22,100 488
Safeguard Scientifics, Inc. 27,000 1,141
Sequent Computer Systems, Inc.+ 39,000 765
Stratus Computer, Inc.+ 20,600 897
Sybase, Inc.+ 76,100 649
Systems & Computer Technology+ 16,100 910
Transaction Systems Architects, Inc.+ 23,600 991
Vantive Corp.+ 24,700 790
Veritas DGC, Inc.+ 20,100 1,089
Visio Corp. 26,000 1,287
Wang Laboratories, Inc.+ 32,900 888
Wind River Systems, Inc. 21,175 733
--------
38,433
--------
BUSINESS SERVICES--13.1%
Abacus Direct Corp.+ 9,400 535
ABM Industries, Inc. 15,900 460
ABR Information Services, Inc. 23,500 680
Access Health, Inc.+ 16,700 564
Advo, Inc.+ 19,100 547
Affiliated Computer Services, Inc. 37,700 1,321
Affymetrix, Inc.+ 21,800 687
American Disposal Services, Inc.+ 21,000 842
American Management Systems, Inc. 35,500 1,027
Amresco, Inc. 34,200 1,240
</TABLE>
57
<PAGE>
SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK-:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Analysts International Corp. 19,050 $ 552
APAC Teleservices, Inc.+ 38,300 364
Apria Healthcare Group, Inc.+ 40,400 386
Arbor Sorftware Corp.+ 10,900 513
Aspect Development, Inc.+ 12,200 772
Aspen Technology, Inc.+ 17,400 850
Atria Communities, Inc.+ 18,400 354
Bell & Howell Co.+ 18,400 508
Billing Concepts Corp. 29,000 812
BISYS Group, Inc.+ 23,000 909
Borg Warner Securities Corp.+ 18,300 373
Bowne & Co., Inc. 14,500 599
Brightpoint, Inc. 41,650 812
Caribiner International, Inc. 21,400 428
Catalina Marketing Corp.+ 16,600 863
Catalytica, Inc.+ 49,400 716
CDI Corp.+ 18,000 696
Cellstar Corp. 26,000 848
Century Business Services, Inc.+ 44,400 855
Cerner Corp.+ 31,100 927
Choicepoint, Inc.+ 13,200 723
Computer Learning Centers, Inc. 12,600 151
Computer Task Group, Inc. 18,800 731
Consolidated Graphics, Inc. 12,200 704
Cort Business Services Corp.+ 12,100 483
CSG Systems International, Inc.+ 22,500 1,024
Curative Technologies, Inc.+ 10,000 310
DBT Online, Inc. 14,400 382
DeVRY, Inc.+ 30,100 1,140
Dionex Corp. 10,800 576
Documentum, Inc.+ 13,800 743
Dynatech Corp.+ 15,200 741
Eastern Environmental Services, Inc.+ 18,300 478
Education Management Corp.+ 11,400 396
Electro Rent Corp. 11,600 554
Envoy Corp.+ 18,800 792
Equity Corp. International+ 16,300 404
Excite, Inc.+ 14,500 970
Express Scripts, Inc. Class A+ 14,200 1,136
Fair, Issac & Co., Inc. 10,600 421
FPA Medical Management, Inc.+ 21,600 270
Franklin Covey Co.+ 19,500 488
G&K Services, Inc. Class A 18,050 727
HA-LO Industries, Inc.+ 19,225 645
Harbinger Corp.+ 24,600 895
Henry Jack & Associates, Inc. 20,250 704
IDX Systems Corp.+ 23,800 1,037
Information Resources, Inc.+ 22,800 426
Interim Services, Inc. 34,500 1,126
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Intersolv, Inc.+ 16,700 $ 257
Iron Mountain, Inc.+ 10,600 445
ITT Educational Services, Inc. 25,200 745
Jacobs Engineering Group, Inc.+ 22,100 738
JDA Software Group, Inc.+ 12,200 617
John H. Harland Co. 24,300 433
Kirby Corp.+ 19,100 468
LaidLaw Environmental Services, Inc.+ 162,000 638
Lamar Advertising Company Class A 23,550 812
Learning Tree International, Inc.+ 10,200 244
Lycos, Inc.+ 12,700 785
Mariner Health Group, Inc.+ 23,100 419
Mastech Corp. 39,800 1,055
Medaphis Corp.+ 65,200 599
Mentor Graphics Corp.+ 62,100 652
Mercury Interactive Corp.+ 16,000 648
Metamor Worldwide, Inc.+ 27,900 1,067
Metris Companies, Inc. 17,600 998
Metromedia International Group, Inc.+ 59,600 991
Metzler Group, Inc. 18,750 649
Micro Warehouse, Inc.+ 27,200 425
Miravant Medical Technologies+ 11,200 270
National Data Corp. 28,100 1,147
National Processing, Inc.+ 39,700 499
National Surgery Centers, Inc. 15,550 441
New England Business Service, Inc. 10,800 358
NFO Worldwide, Inc.+ 16,100 337
Norrell Corp. 26,000 548
NOVA Corp.+ 23,700 806
Oceaneering International, Inc.+ 18,400 422
Orthodontic Centers of America, Inc.+ 44,300 947
PAXAR Corp.+ 45,835 679
Payment Services, Inc.+ 42,100 821
Pediatrix Medical Group, Inc.+ 12,800 540
Pegasystems, Inc.+ 22,400 420
Personal Group of America, Inc. 23,200 461
Physician Reliance Network, Inc.+ 38,300 464
Pre-Paid Legal Services, Inc.+ 17,800 673
Renaissance Worldwide, Inc. 41,920 752
Renters Choice, Inc.+ 19,600 537
Rollins, Inc. 26,500 528
Romac International, Inc.+ 27,300 723
Rural/Metro Corp.+ 11,100 361
Sandisk Corp.+ 20,100 420
Sapient Corp. 21,700 1,071
Seacor Holdings, Inc.+ 12,600 739
SEI Corp. 15,700 1,160
Sitel Corp.+ 57,400 674
Spartech Corp. 20,700 439
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
SPS Transaction Services, Inc.+ 27,400 $ 844
Staffmark, Inc.+ 17,900 761
Standard Register Co. 25,100 1,002
Strayer Education, Inc. 12,200 448
Structural Dynamics Research Corp.+ 27,500 777
Sun Healthcare Group, Inc.+ 43,408 727
Superior Services, Inc.+ 22,200 722
Sykes Enterprises, Inc. 35,900 752
Synetic, Inc.+ 15,200 936
Technology Solutions Co.+ 21,750 699
Teletech Holdings, Inc.+ 51,300 770
Tetra Technology Inc.+ 17,800 432
Transition Systems, Inc.+ 13,600 306
True North Communications, Inc. 38,200 1,165
Unisource Worldwide, Inc. 59,300 752
USCS International, Inc.+ 18,200 366
Vanstar Corp.+ 33,900 451
Viasoft, Inc.+ 15,200 265
Volt Information Sciences, Inc.+ 13,350 444
Wackenhut Corrections Corp.+ 17,400 455
Walter Industries, Inc.+ 47,800 986
Whittman Hart, Inc.+ 19,400 851
Xylan Corp.+ 37,500 1,068
Zebra Technologies Corp. Class A+ 21,500 833
--------
87,951
--------
CHEMICAL--2.7%
Calgon Carbon Corp. 31,200 378
Cambrex Corp. 11,250 624
Chemed Corp. 7,900 316
Chemfirst, Inc. 15,900 423
Dexter Corp. 20,700 855
Ethyl Corp. 67,700 516
Ferro Corp. 33,600 971
Furon Co. 14,300 299
General Chem Group, Inc. 16,500 460
Geon Co. 18,200 435
Georgia Gulf Corp. 28,900 742
H.B. Fuller Co. 12,500 784
Lawter International, Inc. 35,700 375
Lilly Industries, Inc. Class A 18,350 345
Macdermid, Inc. 24,800 742
NCH Corp. 6,400 406
NL Industries, Inc. 42,700 963
OM Group, Inc. 18,450 818
Schulman (A.), Inc. 32,400 725
Scotts Co. Class A+ 14,700 537
Sequa Corp. Class A+ 8,700 644
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Tredegar Industries, Inc. 11,000 $ 861
Twinlab Corp.+ 23,600 926
WD-40 Co. 12,200 353
Wellman, Inc. 29,400 665
Zoltek Companies, Inc.+ 12,800 443
--------
15,606
--------
CONSTRUCTION--2.7%
Blount International, Inc. Class A 33,600 1,044
CalMat Co. 19,400 508
Carbo Ceramics, Inc. 11,500 404
Centex Construction Products, Inc. 18,200 669
D.R.Horton, Inc. 48,200 895
DAL-Tile International, Inc.+ 50,900 716
Florida Rock Industries, Inc. 14,900 410
Granite Construction, Inc. 14,400 426
Kaufman & Broad Home Corp. 37,600 1,093
Lone Star Industries, Inc. 10,100 835
Mastec, Inc. 22,400 599
Medusa Corp. 15,300 941
Morrison Knudsen Corp.+ 45,700 546
Palm Harbor Homes, Inc.+ 18,850 836
Pulte Corp. 19,100 978
Regal Beloit Corp. 16,400 504
Sawtek, Inc.+ 20,300 617
Simpson Manufacturing, Inc.+ 9,100 379
Standard Pacific Corp. 23,200 400
Stone & Webster, Inc. 11,900 531
TJ International, Inc. 15,200 473
Toll Brothers, Inc.+ 32,300 900
Triangle Pacific Corp.+ 11,600 505
U.S. Home Corp.+ 11,500 477
United Dominion Industries, Ltd. 38,200 1,304
Webb Del Corp. 13,900 364
West Teleservices Corp.+ 55,700 912
--------
18,266
--------
CONSUMER--DURABLE--1.7%
Bassett Furniture Industries, Inc. 10,200 319
Champion Enterprises, Inc.+ 40,692 1,012
Chicago Miniature Lamp, Inc.+ 25,000 959
Ethan Allen Interiors, Inc. 24,300 1,238
Furniture Brands International, Inc.+ 43,800 1,288
Griffon Corp.+ 23,800 318
Harman International Industries, Inc. 17,100 735
Helen of Troy Ltd.+ 21,200 435
Interface, Inc. 21,400 908
Kimball International, Inc. Class B 36,600 862
</TABLE>
59
<PAGE>
SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK-:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
La-Z-Boy Chair Co. 15,100 $ 790
Linens-N-Things, Inc.+ 17,300 1,042
Samsonite Corp.+ 16,000 460
Sturm, Ruger & Co., Inc. 21,300 419
Toro Co. 10,200 386
Windmere Durable Holdings, Inc. 14,000 343
--------
11,514
--------
CONSUMER--NONDURABLE--2.9%
Action Performance, Inc.+ 12,600 436
Apple South, Inc. 30,400 479
Applebee's International, Inc. 29,700 739
Boston Chicken, Inc.+ 60,000 257
Brinker International, Inc.+ 54,800 1,315
Buffets, Inc.+ 39,500 585
Cheesecake Factory 15,300 386
Cytyc Corp.+ 13,700 199
Department 56, Inc.+ 19,200 690
First Brands Corp. 35,000 938
Foodmaker, Inc.+ 35,700 678
Hanover Direct, Inc.+ 160,000 570
Jostens, Inc. 35,300 836
Landrys Seafood Restaurants, Inc.+ 25,300 721
Lone Star Steakhouse & Saloon, Inc.+ 36,200 769
Luby's Cafeterias, Inc. 18,900 363
Midway Games, Inc.+ 62,466 1,156
Mohawk Industries, Inc. 44,800 1,383
Oakley, Inc.+ 62,400 823
Oneida Ltd. 13,200 395
Papa John's International, Inc.+ 25,625 1,070
Rainforest Cafe, Inc. 20,850 316
Ruby Tuesday, Inc. 13,537 453
Russ Berrie & Co., Inc. 17,400 498
Ryan's Family Steak Houses, Inc.+ 37,000 370
Sbarro, Inc. 16,100 475
Showbiz Pizza Time, Inc.+ 18,200 703
Trans World Entertainment Corp. 15,500 419
Trex Medical Corp.+ 28,200 536
Williams-Sonoma, Inc. 21,800 1,198
--------
19,756
--------
CONTAINERS--0.6%
ACX Technologies, Inc.+ 24,000 573
Ball Corp. 27,500 1,062
Greif Brothers Corp. Class A 18,800 724
Stone Container Corp. 83,900 1,374
--------
3,733
--------
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
ELECTRONICS--5.7%
Allen Telecom, Inc.+ 23,800 $ 382
Amphenol Corp.+ 15,300 943
Anadigics, Inc.+ 11,500 192
Anixter International, Inc.+ 41,800 833
Atmi, Inc.+ 14,200 396
Belden, Inc. 22,500 932
Berg Electronics Corp.+ 34,600 824
Burr Brown Corp. 32,500 989
Cable Design Technologies Corp.+ 26,250 699
CCC Information Services Group, Inc.+ 18,800 451
Centennial Technologies, Inc.+ 5,600 12
Checkpoint Systems, Inc. 28,200 527
Commscope Inc.+ 46,000 748
CTS Corp. 12,400 458
Cypress Semiconductor Corp.+ 82,300 823
Dallas Semiconductor Corp. 23,600 910
Digital Microwave Corp. 44,900 511
DSP Communications, Inc.+ 31,900 532
Dupont Photomasks, Inc.+ 14,400 781
EG&G, Inc. 38,000 1,149
Electro Scientific Industries, Inc.+ 8,900 338
E Spire Communications, Inc.+ 35,000 665
Exide Corp. 17,100 330
Fluke Corp. 14,400 457
General Semiconductor, Inc.+ 28,900 396
Genrad, Inc.+ 25,400 510
Gerber Scientific, Inc. 17,700 451
Glenayre Technologies, Inc.+ 57,400 900
Hadco Corp.+ 11,400 436
Hutchinson Technology, Inc.+ 15,400 476
Imation Corp.+ 37,800 713
Information Management Resources, Inc.+ 22,500 610
Integrated Device Technology, Inc.+ 69,200 835
International Network Services+ 28,300 952
International Rectifier Corp.+ 41,000 482
Kemet Corp.+ 32,400 583
Kent Electronics Corp.+ 25,900 570
Kulicke & Soffa Industries, Inc.+ 10,800 232
Lam Research Corp.+ 25,800 800
Lattice Semiconductor Corp.+ 19,800 903
Level One Communications, Inc.+ 25,650 798
Littlefuse, Inc.+ 15,700 396
Marshall Industries+ 13,100 425
MEMC Electronic Materials, Inc.+ 22,200 312
Methode Electronics, Inc. Class A 27,850 446
MRV Communications, Inc.+ 21,300 572
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Pioneer Standard Electronic, Inc. 20,700 $ 260
Premisys Communications, Inc.+ 20,600 601
Remec, Inc. 18,600 463
Sevice Experts, Inc.+ 14,100 469
Silicon Valley Group, Inc.+ 28,600 543
Sipex Corp. 13,800 274
Smart Modular Technologies, Inc. 38,100 941
SpeedFam International, Inc.+ 12,200 354
Superior Telecommunications, Inc. 12,750 538
Technitrol, Inc. 12,700 519
Tekelec, Inc. 22,200 1,116
Tracor, Inc.+ 22,700 892
United States Satellite Broadcasting Co.+ 79,400 734
Unitrode Corp. 18,500 296
Univision Communications, Inc.+ 21,300 816
Vicor Corp.+ 36,500 732
VLSI Technology, Inc.+ 40,300 831
--------
38,059
--------
ENERGY--RAW MATERIALS--2.6%
Amcol International Corp. 22,300 305
Arch Coal, Inc. 34,600 887
Atwood Oceanics, Inc. 13,100 716
Barrett Resources Corp.+ 27,600 1,025
Benton Oil & Gas Co.+ 23,100 282
Cabot Oil & Gas Corp. Class A 19,400 455
Chesapeake Energy Corp. 95,700 490
Cliffs Drilling Co. 13,500 666
EEX Corp.+ 110,000 1,066
Forcenergy, Inc.+ 19,900 459
Forest Oil Corp.+ 28,500 445
Harken Energy Corp.+ 110,000 708
Grey Wolf, Inc.+ 91,200 393
Key Energy Group, Inc.+ 14,200 265
Leviathan Gas Pipeline Partners, L.P. 14,200 461
Louis Dreyfus Natural Gas Corp.+ 37,300 748
Marine Drilling Company, Inc.+ 45,200 1,099
Newfield Exploration Co. 31,700 769
Newpark Resources, Inc. 53,700 1,291
Nuevo Energy Co.+ 19,000 677
Parker Drilling Co.+ 62,600 642
Stone Energy Corp.+ 16,800 644
Tom Brown, Inc.+ 24,100 497
Trico Marine Services, Inc. 15,500 351
Tuboscope Vetco International Corp.+ 39,700 940
UTI Energy Corp. 12,900 224
Vintage Petroleum, Inc. 44,400 866
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Zeigler Coal Holding Co. 22,100 $ 399
--------
17,770
--------
FOOD & AGRICULTURE--2.3%
Agribiotech, Inc.+ 23,500 358
Bob Evans Farms, Inc. 37,900 772
Chiquita Brands International, Inc. 56,900 772
Coca-Cola Bottling Co. 7,000 428
Delta & Pine Land Co. 32,445 1,497
Dimon, Inc. 25,600 374
Dominicks Supermarkets, Inc.+ 18,000 721
Dreyer's Grand Ice Cream, Inc. 25,600 646
Earthgrains Co. 18,348 858
Fleming Companies, Inc. 35,700 669
International Multifoods Corp. 14,500 421
J.M. Smucker Co. Class A 27,400 673
Lance, Inc. 23,500 505
Lindsay Manufacturing Co. 7,400 347
Michael Foods, Inc. 17,100 500
Mississippi Chemical Corp. 21,540 390
Mycogen Corp.+ 30,400 623
Pilgrims Pride Corp. 21,700 369
Ralcorp Holdings, Inc.+ 28,466 566
Seabord Corp. 1,400 476
Terra Industries, Inc. 66,300 713
Tootsie Roll Industries, Inc. 14,141 1,025
United National Foods, Inc.+ 13,600 384
Universal Foods Corp. 22,100 1,117
--------
15,204
--------
GOLD--0.1%
Getchell Gold Corp.+ 28,571 704
--------
HEALTHCARE / DRUG & MEDICINE--7.3%
Acuson Corp.+ 22,600 424
Advanced Tissue Sciences, Inc.+ 29,500 250
Agouron Pharmaceuticals, Inc.+ 26,600 904
Algos Pharmaceutical Corp.+ 12,500 411
Alkermes, Inc.+ 16,400 392
Alpharma, Inc. Class A 20,067 457
Alternative Living Servies, Inc.+ 24,600 861
American Oncology Resources, Inc.+ 22,900 344
Amerisource Health Corp.+ 17,900 976
Andrx Corp.+ 11,700 439
Arrow International, Inc. 22,200 733
ATL Ultrasound, Inc.+ 13,100 634
Aviron+ 12,600 313
Ballard Medical Products 26,100 656
</TABLE>
61
<PAGE>
SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK-:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Barr Laboratories, Inc.+ 19,950 $ 809
Bindley Western Industies, Inc. 12,200 474
Bio-Technology General Corp.+ 36,900 329
Carematrix Corp.+ 13,500 366
Carter-Wallace, Inc. 42,800 773
Cognex Corp.+ 34,700 839
Columbia Laboratories, Inc.+ 22,400 202
Conmed Corp.+ 12,500 286
Cooper Companies, Inc.+ 11,600 446
COR Therapeutics, Inc.+ 18,600 351
Covance, Inc.+ 49,000 1,050
Coventry Health Care, Inc.+ 50,400 854
Cygnus, Inc.+ 15,100 166
Datascope Corp.+ 12,600 354
Gensia, Inc.+ 60,000 274
Genesis Health Ventures, Inc.+ 30,550 808
Gilead Sciences, Inc.+ 25,800 980
Guilford Pharmaceuticals, Inc.+ 15,200 302
Heartport, Inc.+ 19,400 206
Human Genome Sciences, Inc.+ 20,200 735
Icos Corp.+ 31,300 462
IDEC Pharmaceuticals Corp.+ 17,000 612
Idexx Labortories, Inc.+ 35,900 794
Incyte Pharmacuticals, Inc. 20,900 941
Inhale Therapeutic Systems+ 12,000 336
Interneuron Pharmaceuticals, Inc.+ 32,200 213
Invacare Corp. 28,300 789
Ivax Corp. 105,200 1,026
Jones Medical Industries, Inc. 25,300 746
Life Technologies, Inc. 21,250 744
Magellan Health Services, Inc.+ 24,700 685
Marquette Medical Systems, Inc.+ 19,400 524
Medicis Pharmaceutical Corp.+ 16,050 686
Medimmune, Inc.+ 22,100 1,163
Mentor Corp. 19,600 533
Mid Atlantic Medical Services, Inc.+ 51,900 665
Millennium Pharmaceuticals+ 22,800 433
Minimed, Inc.+ 14,100 705
Natures Sunshine Products, Inc. 14,650 359
NBTY, Inc. 50,100 1,002
North American Vaccine, Inc.+ 24,900 405
NovaCare, Inc.+ 55,980 780
Organogenesis, Inc.+ 26,359 820
Owens & Minor, Inc. Holding Co. 25,200 449
Paragon Health Network, Inc.+ 37,179 695
Parexel International Corp.+ 19,900 667
Pathogensis Corp.+ 12,700 503
Patterson Dental Co.+ 28,275 832
Perrigo Co.+ 66,800 864
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Phymatrix Corp.+ 29,000 $ 292
Protein Design Labs, Inc.+ 14,300 458
PSS World Medical, Inc.+ 58,000 1,301
Quest Diagnostic, Inc.+ 23,500 452
Renal Care Group, Inc.+ 19,900 761
Respironics, Inc.+ 27,200 454
Sangstat Medical Corp.+ 12,800 433
Sepracor, Inc.+ 24,300 1,124
Serologicals Corp.+ 12,300 369
Sola International, Inc.+ 21,200 901
Sunrise Assisted Living, Inc.+ 17,000 762
Theragenics Corp. 25,800 735
Thermedics, Inc.+ 28,800 463
Thermo Cardiosystems, Inc.+ 34,600 945
ThermoLase Corp.+ 3,182 51
Thermotrex Corp.+ 15,100 301
Transkaryotic Therapies, Inc.+ 14,500 451
Vertex Pharmaceuticals, Inc.+ 23,100 719
West Company, Inc. 15,100 466
--------
49,269
--------
HOUSEHOLD PRODUCTS--0.5%
Bush Boake Allen, Inc.+ 15,100 427
Church & Dwight Co., Inc. 16,700 515
Libbey, Inc. 13,500 510
Playtex Products, Inc.+ 42,600 658
Revlon, Inc.+ 17,700 927
ThermoLase Corp.+ 31,018 178
--------
3,215
--------
INSURANCE--4.6%
Alfa Farmers Federation Corp. 38,000 679
Allied Group, Inc. 26,950 805
American Annuity Group, Inc. 38,350 904
American Heritage Life Investment Corp. 22,000 505
Amerin Corp.+ 22,500 716
Argonaut Group, Inc. 21,100 723
Arthur J. Gallagher & Co. 15,000 658
Blanche Withholdings, Inc. 9,900 347
Capital Re Corp. 14,000 1,033
Citizens Corp. 30,100 963
Commerce Group, Inc. 30,100 1,134
Delphi Financial Group, Inc. Class A 17,713 1,010
Enhance Financial Services Group, Inc. 16,200 1,112
Executive Risk, Inc. 9,900 660
FBL Financial Group, Inc. 30,200 868
Foremost Corp. of America 22,800 553
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Frontier Insurance Group, Inc. 30,150 $ 799
Harleysville Group, Inc. 26,600 718
Hartford Life, Inc. Class A 22,400 1,107
HCC Insurance Holdings, Inc. 40,450 880
HSB Group, Inc. 16,200 1,069
John Alden Financial Corp. 20,100 440
Kansas City Life Insurance Co. 4,900 417
Liberty Corp. 18,600 953
Life Re Corp. 14,700 1,058
Markel Corp.+ 5,000 793
Medical Assurance, Inc. 16,879 500
NAC Re Corp. 17,200 860
Penncorp Financial Group, Inc. 25,000 650
Presidential Life Corp. 25,600 522
PXRE Corp. 10,800 325
Reinsurance Group of America, Inc. 22,450 1,113
RLI Corp. 9,000 488
Selective Insurance Group, Inc. 27,200 748
Sierra Health Services, Inc. 18,200 700
State Auto Financial Corp. 17,350 631
Trenwick Group, Inc. 9,400 362
Triad Guarantee, Inc 10,500 373
United Companies Financial Corp. 27,000 552
United Fire & Casualty Co. 8,900 367
United Wisconsin Services, Inc. 13,000 404
Vesta Insurance Group, Inc. 16,200 917
Zenith National Insurance Corp. 14,000 394
--------
30,810
--------
MEDIA--3.5%
AMC Entertainment, Inc.+ 14,500 279
Applied Graphics Techologies+ 15,500 775
Banta Corp. 30,000 960
Big Flower Holdings, Inc.+ 15,300 464
Century Communications Corp. Class A+ 65,237 1,011
CNET, Inc.+ 11,000 366
Cymer, Inc. 26,900 600
Gaylord Entertainment Co. 28,000 952
Houghton Mifflin Co. 26,700 869
IXC Communications, Inc.+ 27,600 1,375
John Wiley & Sons, Inc. Class A 13,500 748
Jones Intercable, Inc. Class A+ 37,900 763
McClatchy Newspapers, Inc. Class A 33,200 994
Media General, Inc. Class A 23,000 1,093
Metro Networks, Inc.+ 13,000 517
Oak Industries, Inc.+ 14,800 537
On Command Corp.+ 24,500 340
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
PanAmSat Corp.+ 17,400 $ 1,017
Paxson Communications Corp.+ 49,000 658
Regal Cinemas, Inc.+ 29,500 902
Scholastic Corp.+ 12,700 473
Sinclair Broadcast Group, Inc. 12,300 638
Spelling Entertainment Group, Inc.+ 76,700 729
TCA Cable TV, Inc. 21,500 1,328
TCI Satellite Entertainment, Inc. Class A+ 47,000 370
United Television, Inc. 8,600 950
United Video Satellite Group+ 21,600 944
Waverly, Inc. 7,100 275
Westwood One, Inc.+ 28,000 840
World Color Press, Inc.+ 33,100 1,059
Young Broadcasting, Inc.+ 11,800 590
--------
23,416
--------
MISCELLANEOUS FINANCE--3.3%
Advanta Corp. Class A 24,209 570
Americredit Corp.+ 26,500 879
Commercial Federal Corp. 33,900 1,229
Dain Rauscher Corp. 11,200 674
E*Trade Group, Inc.+ 33,900 845
Eaton Vance Corp. 16,600 813
Fidelity National Financial, Inc. 20,100 741
First American Financial Corp. 15,600 1,109
First Financial Corp. 5,500 286
Florida Panthers Holdings, Inc.+ 32,300 707
Fund American Enterprises Holdings, Inc. 5,709 797
Hambrecht & Quist Group, Inc.+ 21,700 726
Imperial Credit Industries, Inc.+ 34,900 881
Interpool, Inc. 23,900 378
Investment Technology Group, Inc.+ 14,300 415
Jefferies Group, Inc. 17,000 840
John Nuveen Co. Class A 27,800 1,008
JSB Financial, Inc. 9,500 525
LNR Property Corp. 32,700 875
Mail Well Holdings, Inc. 18,800 909
McDonald & Company Investments, Inc. 14,300 411
Morgan Keegan, Inc. 30,550 701
Northwest Bancorp, Inc. 42,700 747
PaymentTech, Inc.+ 32,700 627
Pioneer Group, Inc. 23,100 728
Price Enterprises, Inc. 18,600 342
Sabre Group Holdings, Inc.+ 20,800 757
Student Loan Corp. 18,500 923
Value Line, Inc. 8,900 401
</TABLE>
63
<PAGE>
SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK-:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Webster Financial Corp. 23,800 $ 806
White River Corp.+ 3,900 341
--------
21,991
--------
NON-FERROUS METALS--1.0%
Asarco, Inc. 35,700 890
Brush Wellman, Inc. 12,900 352
Commercial Metals Co. 11,633 388
Kaiser Aluminum Corp.+ 71,900 750
Minerals Technologies, Inc. 20,600 1,121
Mueller Industries, Inc.+ 15,600 1,056
Reliance Steel & Aluminum Co. 17,200 694
RMI Titanium Co.+ 18,000 402
Titanium Metals Corp.+ 27,700 738
Wolverine Tube, Inc.+ 11,100 437
--------
6,828
--------
OIL--DOMESTIC--1.7%
Belco Oil & Gas Corp.+ 24,800 436
Cross Timbers Oil Co. 41,725 798
Houston Exploring Co.+ 18,300 428
KCS Energy, Inc. 32,100 498
Ocean Energy, Inc.+ 84,682 2,077
Patterson Energy, Inc. 24,700 346
Pogo Producing Co. 34,800 1,114
Pool Energy Services Co.+ 20,200 533
Quaker State Corp. 32,600 589
Rutherford Moran Oil Corp.+ 20,100 503
Santa Fe Energy Resources, Inc.+ 89,200 920
Snyder Oil Corp. 28,500 607
St. Mary Land & Exploring Co. 8,600 275
Tesoro Petroleum Corp.+ 21,000 417
Trans Montaigne Oil Co.+ 20,300 297
TransTexas Gas Corp.+ 50,600 598
UNOVA, Inc.+ 47,300 1,100
--------
11,536
--------
OPTICAL & PHOTO--0.8%
Avid Technology, Inc.+ 21,400 928
BMC Industries, Inc. 21,800 398
C-Cube Microsystems, Inc.+ 34,800 842
Ingram Micro, Inc.+ 33,700 1,538
Panavision, Inc.+ 18,800 491
Photronic, Inc. 22,800 841
Ultratech Stepper, Inc.+ 16,300 400
--------
5,438
--------
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
PAPER & FOREST PRODUCTS--0.9%
Buckeye Technologies, Inc. 34,200 $ 795
Caraustar Industries, Inc. 23,200 795
Chesapeake Corp. 21,100 768
Longview Fibre Co. 47,100 798
P. H. Glatfelter Co. 40,100 724
Rock Tennessee Co. Class A 18,330 292
Shorewood Packaging Corp. 14,300 371
Thermo Fibertek, Inc.+ 61,900 712
Wausau Mosinee Paper Corp. 50,825 1,076
--------
6,331
--------
PRODUCER GOODS & MANUFACTURING--7.0%
Airgas, Inc.+ 60,100 932
Albany International Corp. Class A 26,400 752
AMETEK, Inc. 28,900 880
Applied Industrial Technologies, Inc. 19,025 483
Applied Power, Inc. Class A 24,000 897
AptarGroup, Inc. 15,500 969
Baldor Electric Co. 32,720 859
Barnes Group, Inc. 16,000 501
Beckman Coulter, Inc. 25,400 1,414
Boise Cascade Office Products Corp.+ 59,400 1,140
Cincinnati Milacron, Inc. 35,900 1,115
CLARCOR, Inc. 19,050 427
Collins & Aikman Corp.+ 51,800 424
Consolidated Cigar Holdings, Inc.+ 24,100 333
Credence Systems Corp.+ 17,150 473
DII Group, Inc. 9,900 230
Donaldson Co., Inc. 45,200 1,147
DT Industries, Inc. 8,900 298
Federal Signal Corp. 39,400 845
Flowserve Corp. 36,934 1,103
Foster Wheeler Corp. 36,000 997
Franklin Electronic, Inc. 5,000 345
Gardner Denver Machinery, Inc. 15,900 448
General Binding Corp. 10,500 347
Graco, Inc. 23,287 802
Helix Technology Corp. 15,500 310
Hexcel Corp.+ 30,400 849
Hughes Supply, Inc. 16,800 651
IDEX Corp. 25,275 924
Ionics, Inc.+ 12,600 561
JLG Industries, Inc. 42,500 693
Kaydon Corp. 28,700 1,257
Kuhlman Corp. 14,900 730
Lincoln Electric Co. Class A 21,400 1,003
MagneTek, Inc.+ 24,500 482
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Manitowoc Co., Inc. 16,525 $ 770
Maverick Tube Corp. 12,100 211
Micrel, Inc. 18,000 707
Miller Industries, Inc. 15,000 118
MSC Industrial Direct, Inc.+ 14,900 758
NACCO Industries, Inc. Class A 7,450 1,253
Nordson Corp. 15,800 745
PMC Sierra, Inc.+ 26,300 1,197
Prestek, Inc. 24,900 367
PRI Automation, Inc. 16,800 449
Quanex Corp. 11,000 322
Robbins & Myers, Inc. 8,600 285
Roper Industries, Inc. 29,200 905
Sonosight, Inc.+ 4,366 36
SPS Technologies, Inc. 11,700 723
SPX Corp. 11,000 796
Standex International Corp. 10,300 314
Stewart & Stevenson Services, Inc. 30,000 668
Tecumseh Products Co. Class A 19,000 957
Terex Corp.+ 16,100 493
Texas Industries, Inc. 18,600 1,199
Thermo Ecotek Corp.+ 21,250 388
Thermo Optek Corp.+ 42,000 756
Thermoquest Corp.+ 44,500 795
Valhi, Inc. 99,900 987
Valmont Industries, Inc. 21,700 483
VWR Scientific Products Corp. 26,300 865
W.H. Brady Co. Class A 20,600 628
Waters Corp.+ 26,200 1,401
Watts Industries, Inc. Class A 25,200 646
WMS Industries, Inc. 23,600 121
Wyman Gordon Co.+ 36,500 739
X-Rite, Inc. 16,600 215
--------
46,918
--------
RAILROAD & SHIPPING--0.6%
Avondale Industries, Inc.+ 11,400 306
Florida East Coast Industry, Inc. 8,100 925
Halter Marine Group, Inc. 22,400 406
MotivePower Industries, Inc.+ 13,900 358
Newport News Shipbuilding, Inc. 30,700 835
Overseas Shipholding Group, Inc. 33,500 712
Westinghouse Air Brake Co. 23,600 662
--------
4,204
--------
REAL PROPERTY--1.0%
Alexanders, Inc.+ 4,600 416
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
CB Commercial Real Estate Services Group,
Inc.+ 17,700 $ 649
Fairfield Communities, Inc. 41,600 972
Forest City Enterprises, Inc. Class A 13,000 751
Insignia Financial Group Class A+ 24,800 660
Koll Real Estate Group. Inc.+ 38,400 442
Lennar Corp. 48,100 1,321
Newhall Land & Farming Co. 30,100 858
Premier Parks, Inc.+ 15,900 884
--------
6,953
--------
RETAIL--4.2%
99 Cents Only Stores 17,600 671
Ames Dept Stores, Inc.+ 17,500 429
Authentic Fitness Corp. 17,400 315
BJS Wholesale Club, Inc.+ 31,400 1,256
Burlington Coat Factory Warehouse Corp. 42,840 830
Casey's General Stores, Inc. 47,800 783
CDW Computer Centers, Inc.+ 19,700 955
Central Garden & Pet Co.+ 23,300 798
Charming Shoppes, Inc.+ 85,500 398
CHS Electronics, Inc. 44,100 921
Claire's Stores, Inc. 42,875 935
Cole National Corp.+ 11,600 431
Dress Barn, Inc.+ 22,000 641
Eagle Hardware & Garden, Inc.+ 23,900 436
Etec Systems, Inc.+ 19,400 1,101
Fingerhut Companies, Inc. 39,800 1,179
Global Directmail Corp.+ 30,000 533
Great Atlantic & Pacific Tea Co., Inc. 32,500 1,012
Gymboree Corp.+ 19,300 355
Heilig-Meyers Co. 50,200 706
Just For Feet, Inc.+ 23,575 519
Lands' End, Inc. 26,100 962
Michael's Stores, Inc.+ 25,300 765
Petco Animal Supplies, Inc.+ 16,500 326
PETsMART, Inc.+ 101,000 1,187
Regis Corp. 21,900 621
Ruddick Corp. 40,500 726
ShopKo Stores, Inc. 22,200 769
Smart & Final, Inc. 17,600 308
Sotheby's Holdings, Inc. Class A 48,500 1,119
Southland Corp.+ 340,000 999
Stage Stores, Inc.+ 22,900 1,178
Stanhome, Inc. 13,700 459
Stein Mart, Inc.+ 21,200 747
United Stationers, Inc. 13,600 859
</TABLE>
65
<PAGE>
SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK-:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Vitalink Pharmacy Services, Inc.+ 20,166 $ 434
Wet Seal, Inc.+ 10,700 296
Zale Corp.+ 32,000 964
--------
27,923
--------
STEEL--1.7%
AK Steel Holding Corp. 50,000 1,050
Armco, Inc.+ 94,800 652
Bethlehem Steel Corp.+ 96,400 1,499
Birmingham Steel Corp. 23,300 373
Carpenter Technology Corp. 19,500 1,132
Cleveland-Cliffs, Inc. 10,700 599
Inland Steel Industries, Inc. 42,600 1,249
Intermet Corp. 19,800 416
J & L Specialty Steel, Inc. 34,000 276
Lone Star Technologies, Inc.+ 23,000 505
LTV Corp. 87,000 1,131
National Steel Corp. Class B 38,000 710
NS Group, Inc.+ 18,900 254
Oregon Steel Mills, Inc. 27,200 646
Steel Dynamics, Inc.+ 43,000 984
--------
11,476
--------
TELEPHONE--2.8%
Adtran, Inc.+ 33,300 885
Aliant Communications, Inc. 32,800 931
ANTEC Corp.+ 36,800 727
Aspect Telecommunications Corp. 45,500 1,307
Associated Group, Inc. Class A 33,900 1,229
Cellular Communications International, Inc. 13,950 614
Coherent Communications Systems Corp.+ 14,100 694
Coherent, Inc. 18,000 428
Commonwealth Telephone Enterprises, Inc.+ 14,366 431
ICG Communications, Inc.+ 36,300 1,271
Inter Tel, Inc. 20,800 491
Intermedia Communications, Inc.+ 14,800 1,080
Natural Microsystems Corp. 10,700 345
NTL, Inc.+ 27,933 1,089
P-Com, Inc. 37,700 742
Pacific Gateway Exchange, Inc.+ 17,300 986
Paging Network, Inc.+ 86,400 1,215
Plantronics, Inc. 13,500 574
Powertel, Inc.+ 24,200 554
Teleport Communications Group, Inc.+ 13,682 737
Vanguard Cellular Systems, Inc. Class A+ 37,550 713
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Winstar Communications, Inc.+ 29,100 $ 1,131
World Access, Inc.+ 18,300 707
--------
18,881
--------
TOBACCO--0.1%
Schweitzer Mauduit International, Inc. 12,660 421
--------
TRUCKING & FREIGHT--1.7%
Air Express International Corp. 33,050 868
AMERCO+ 21,800 698
Arnold Industries, Inc. 20,300 325
Eagle USA Airfreight, Inc.+ 16,000 526
Expeditores International of Washington, Inc. 21,300 905
Fritz Companies, Inc.+ 28,000 410
Heartland Express, Inc.+ 27,047 673
J. B. Hunt Transport Services, Inc. 32,050 1,025
OMI Corp.+ 33,800 325
Pittston Burlington Group 16,050 301
Roadway Express, Inc. 16,100 399
Rollins Truck Leasing Corp. 56,450 748
Swift Transportation Co., Inc. 37,300 853
U.S. Freightways Corp. 23,000 822
Wabash National Corp. 20,200 624
Werner Enterprises, Inc. 32,050 773
XTRA Corp. 13,500 818
Yellow Corp.+ 22,400 402
--------
11,495
--------
TRAVEL & RECREATION--2.0%
Acxiom Corp. 44,900 1,090
Anchor Gaming+ 11,600 977
Bally Total Fitness Holding Corp.+ 16,200 498
Boyd Gaming Corp.+ 55,200 386
Budget Group, Inc.+ 24,000 804
Capstar Hotel, Co.+ 22,500 723
Coleman Co., Inc.+ 46,400 951
Family Golf Centers, Inc.+ 10,100 425
Grand Casinos, Inc.+ 33,500 588
Homestead Village Properties, Inc. 29,800 417
K2, Inc. 13,615 309
Marcus Corp. 32,225 570
Polaris Industries, Inc. 26,000 926
Primadonna Resorts, Inc.+ 26,000 465
Prime Hospitality Corp.+ 42,000 869
Red Roof Inns, Inc.+ 22,000 389
Rental Services, Corp.+ 19,600 570
Rio Hotel & Casino, Inc.+ 16,900 382
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Signature Resorts, Inc. 28,100 $ 502
Speedway Motorsports, Inc.+ 36,500 997
Sports Authority, Inc.+ 24,800 436
--------
13,274
--------
UTILITIES--ELECTRIC & GAS --3.9%
AGL Resources, Inc. 48,800 1,013
Atmos Energy Corp. 26,100 768
Bay State Gas Co. 11,400 432
Black Hills Corp. 17,100 358
Central Hudson Gas & Electric Corp. 13,700 552
Central Maine Power Co. 25,500 464
CILCORP, Inc. 13,000 622
Cleco Corp. 18,000 578
Commonwealth Energy System 19,400 742
Eastern Enterprises 18,000 763
Eastern Utilities Association 21,600 567
El Paso Electric, Co.+ 50,000 475
Energen Corp. 26,600 594
Global Industrial Technologies, Inc.+ 17,700 317
Indiana Energy, Inc. 21,700 684
Interstate Energy Corp. 59,480 1,877
Laclede Gas Co. 13,800 342
MDU Resources Group, Inc. 25,100 871
New Jersey Resources Corp. 15,000 566
Northwest Natural Gas Co. 19,300 521
Northwestern Public Services Co. 14,000 312
Orange & Rockland Utilities, Inc. 12,000 496
Otter Tail Power Co. 9,600 352
Philadelpia Suburban Corp. 21,800 461
Piedmont Natural Gas Co., Inc. 26,600 906
Primark Corp.+ 22,400 833
Public Service Co. of New Mexico 37,800 872
Public Service Co. of North Carolina, Inc. 16,400 336
Sierra Pacific Resources 26,700 935
SIGCORP, Inc. 18,599 550
Southern Union Co. 18,285 480
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Southwest Gas Corp. 22,000 $ 507
TNP Enterprises, Inc. 11,700 377
Triarc Companies, Inc. Class A+ 27,800 718
UGI Corp. 27,800 771
Unisource Energy Corp.+ 27,680 490
United Illuminating Co. 13,400 658
United Water Resources, Inc. 28,300 490
Western Gas Resources, Inc. 25,200 473
WICOR, Inc. 16,600 796
WPS Resources Corp. 21,800 719
Zurn Industries, Inc. 9,800 423
--------
26,061
--------
TOTAL COMMON STOCK (Cost $544,372) 666,614
--------
WARRANTS--0.0%
FOOD & AGRICULTURE--0.0%
IMC Global, Inc. (expire 12/22/00)+ 4,900 23
--------
TOTAL WARRANTS (Cost $16) 23
--------
<CAPTION>
Par
----------
<S> <C> <C>
CASH EQUIVALENTS--0.2%
MSTC Cash Reserve Liquid Asset Fund
5.31%*, 05/07/98 $1,520,062 1,520
--------
TOTAL CASH EQUIVALENTS (Cost $1,520) 1,520
--------
TOTAL INVESTMENTS--99.9%
(Cost $545,908) 668,157
--------
OTHER ASSETS AND LIABILITIES--0.1%
Other Assets 4,282
Liabilities (3,467)
--------
815
--------
NET ASSETS--100.0% $668,972
--------
--------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENTS OF NET ASSETS AND NOTES TO FINANCIAL
STATEMENTS.
67
<PAGE>
SCHWAB INTERNATIONAL INDEX FUND-REGISTERED TRADEMARK-:
STATEMENT OF NET ASSETS
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- --------
<S> <C> <C>
COMMON STOCK--97.5%
AUSTRALIA--1.4%
Australia & New Zealand Banking Group 93,545 $ 653
Broken Hill Proprietary Co., Ltd. 138,586 1,356
Coca-Cola Amatil, Ltd. 33,680 257
Commonwealth Bank 66,233 795
National Australia Bank 100,311 1,427
News Corporation, Ltd. 127,551 855
Western Mining Corp. 76,938 274
Westpac Banking Corp. 115,210 774
Woodside Petroleum 41,200 270
--------
6,661
--------
BELGIUM--1.1%
Electrabel 4,301 1,142
Fortis AG 3,335 942
Generale de Banque 1,416 818
Petrofina SA 1,983 783
Societe Generale de Belgique 6,070 937
Tractebel Investor International Capital 6,207 742
--------
5,364
--------
CANADA--4.0%
Alcan Aluminum, Ltd. 18,402 597
Bank of Montreal, Quebec 21,004 1,146
Bank of Nova Scotia, Halifax 43,560 1,196
Barrick Gold Corp.+ 23,986 538
BCE, Inc. 49,354 2,102
Bombardier Inc. Class B 20,600 556
Canadian Imperial Bank of Commerce 35,029 1,246
Canadian Pacific, Ltd.+ 26,726 785
Imasco, Ltd. 23,100 870
Imperial Oil, Ltd. 13,629 752
INCO, Ltd. 9,640 169
Newbridge Networks Corp.+ 20,900 612
Northern Telecom, Ltd. 36,100 2,196
Pancanadian Petroleum, Ltd. 16,500 263
Royal Bank of Canada, Montreal, Quebec 24,397 1,457
Seagram Co., Ltd. 29,085 1,241
Thomson Corp. 53,764 1,619
Toronto Dominion Bank Ontario 33,578 1,533
--------
18,878
--------
<CAPTION>
Number of Value
Shares (000s)
---------- --------
<S> <C> <C>
DENMARK--0.7%
D/S 1912 Series B 17 $ 763
D/S Svendborg Series B 13 826
Novo Nordisk A/S Series B 5,885 955
Tele Danmark A/S Series B 10,177 855
--------
3,399
--------
FRANCE--7.8%
Air Liquide (Prime Fidelite) (Reg.) 3,324 614
Alcatel Alsthom SA 12,700 2,356
AXA Groupe SA 24,992 2,936
Banque Nationale de Paris 16,055 1,354
Carrefour 3,385 1,940
Christian Dior 3,321 450
Cie Financiere de Paribas (Bearer) 9,674 1,030
Cie Generale de Eaux 9,664 1,797
Compagnie de Saint-Gobain SA 6,876 1,146
Danone Groupe 5,627 1,329
L'Air Liquide 5,703 1,053
L'Oreal SA 5,295 2,528
Lafarge Coppee SA 9,658 913
Lafarge SA 804 74
LVMH (Moet Hennessy Louis Vuitton) 8,050 1,658
Lyonnaise des Eaux-Dumez 7,811 1,325
Michelin (CDGE) Class B (Reg.) 11,054 697
Pinault Printemps Redoute SA 1,835 1,367
Promodes 1,608 775
Rhone-Poulenc SA, Class A 25,447 1,245
Sanofi 8,283 1,005
Schneider SA 11,422 855
SGS-Thomson Microelectronics N.V.+ 11,250 962
Societe Generale 7,166 1,493
Societe Nationale Elf Aquitaine 21,160 2,777
Synthelabo 4,342 654
Total SA Class B 18,860 2,243
--------
36,576
--------
GERMANY--9.5%
BASF AG 47,907 2,133
Bayer AG 55,964 2,489
Bayerische Hypotheken &
Wechsel Bank AG 20,459 1,167
Bayerische Motoren Werke AG 1,552 1,712
Bayerische Vereinsbank AG 21,362 1,625
Commerzbank AG 31,780 1,225
Daimler Benz AG 40,144 3,919
Deutsche Bank AG 39,288 3,023
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- --------
<S> <C> <C>
Dresdner Bank AG 36,822 $ 1,992
Hoechst AG 45,647 1,841
Linde AG 663 458
Lufthansa AG (Reg.) 29,260 696
Mannesmann AG 2,912 2,311
Metro AG 18,402 909
Munchener Ruckvers 510 173
Munchener Ruckvers (Reg.) 10,740 4,910
RWE AG 22,847 1,162
SAP AG 4,880 2,311
Schering AG 6,062 650
Siemens AG 43,437 2,542
Thyssen AG 2,808 642
Veba AG 38,163 2,522
Vereinigte Elektrizitat Westfalen Series B 1,906 637
VIAG AG 2,050 1,038
Volkswagen AG 3,144 2,504
--------
44,591
--------
HONG KONG--2.9%
Cheung Kong Holdings 141,000 936
Cheung Kong Infras 137,000 348
CITIC Pacific 146,000 449
CLP Holdings, Ltd. 138,900 667
Hang Seng Bank, Ltd. 122,700 1,034
Henderson Land Development Co. 103,000 460
Hong Kong and China Gas 240,900 328
Hong Kong Electric Holdings, Ltd. 139,500 429
Hong Kong Telecommunications, Ltd. 742,698 1,390
HSBC Holdings 138,303 4,071
Hutchison Whampoa, Ltd. 286,000 1,769
New World Development Co. 113,351 323
Sun Hung Kai Properties 150,500 894
Swire Pacific, Ltd. Class A 101,500 507
Wharf Holdings 124,000 199
--------
13,804
--------
ITALY--3.4%
Assicurazioni Generali 73,003 2,197
ENI SPA (Reg.) 588,802 3,953
Fiat Finance SPA (Convertible) 212,225 842
Fiat Finance SPA (Non-Convertible) 60,267 150
INA 325,075 972
Telecom Italia 446,823 2,548
Telecom Italia Mob di Risp 223,802 812
Telecom Italia SPA di Risp 179,292 945
Telecom Italia SPA 484,651 3,625
--------
16,044
--------
<CAPTION>
Number of Value
Shares (000s)
---------- --------
<S> <C> <C>
JAPAN--22.7%
Advantest Corp. 7,700 $ 518
Ajinomoto Co., Inc. 46,000 369
All Nippon Airways Co., Ltd+ 103,000 438
Asahi Bank 166,000 640
Asahi Breweries 32,000 419
Asahi Chemical Industry Co. 103,000 361
Asahi Glass Co., Ltd 84,000 454
Bank of Tokyo--Mitsubishi, Ltd. 333,500 4,130
Bank of Yokohama 81,000 207
Bridgestone Corp. 58,000 1,324
Canon, Inc. 62,000 1,466
Chubu Electric Power Co. 53,100 796
Chugoku Electric Power Co., Inc. 26,300 388
Dai Nippon Printing Co. 54,000 918
Dai-Ichi Kangyo Bank, Ltd. 223,000 1,515
Daiwa Bank 114,000 231
Daiwa House Industries Co. 37,000 299
Daiwa Securities Co. 96,000 363
DDI Corp. 168 425
East Japan Railway Co. 373 1,860
Eisai Co. 20,000 287
Fanuc 21,100 778
Fuji Bank, Ltd. 207,000 1,165
Fuji Photo Film Co. 40,000 1,424
Fujitsu, Ltd. 132,000 1,541
Hitachi, Ltd. 239,000 1,714
Honda Motor Co., Ltd. 75,000 2,720
Industrial Bank of Japan, Ltd. 181,000 1,231
Ito-Yokado Co., Ltd. 33,000 1,708
Itochu Corp. 102,000 238
Japan Airlines Co., Ltd 127,000 386
Japan Telecom Co. 32 326
Japan Tobacco, Inc. 155 1,109
Joyo Bank 100 0
Jusco Co. 23,000 371
Kansai Electric Power Co. 70,300 1,206
Kao Corp. 43,000 632
Kawasaki Heavy Industries 99,000 206
Kawasaki Steel Co. 233,000 317
Kinki Nippon Railway Co. 115,830 594
Kirin Brewery Co., Ltd 75,000 655
Kobe Steel 203,000 160
Komatsu, Ltd. 72,000 326
Kubota Corp. 101,000 286
Kyocera Corp. 15,000 787
Kyushu Electric Power Co. 33,700 502
Long-Term Credit Bank of Japan 171,000 280
Marubeni Corp. 40,000 91
</TABLE>
69
<PAGE>
SCHWAB INTERNATIONAL INDEX FUND-REGISTERED TRADEMARK-:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- --------
<S> <C> <C>
Marui Co. 26,000 $ 411
Matsushita Commerce 17,000 502
Matsushita Electric Industrial Co., Ltd. 151,000 2,419
Matsushita Electric Works 55,000 495
Matsushita Kotobuk 11,000 305
Mitsubishi Chemical Corp. 157,000 285
Mitsubishi Corp. 112,000 846
Mitsubishi Electric Corp.+ 154,000 396
Mitsubishi Estate Co. 93,000 900
Mitsubishi Heavy Industries, Ltd. 241,000 892
Mitsubishi Motors Corp.+ 66,000 165
Mitsubishi Trust & Banking Corp. 93,000 885
Mitsui & Co. 113,000 700
Mitsui Trust & Banking Co. 86,000 187
Murata Manufacturing Co. 19,000 557
NEC Corp. 113,000 1,272
New Oji Paper Co. 74,000 347
Nikko Securities Co. 105,000 320
Nikon Corp. 26,000 230
Nintendo Co., Ltd. 12,600 1,156
Nippon Express Co. 77,000 439
Nippon Oil Co. 88,000 297
Nippon Steel Corp. 493,000 793
Nippon Telegraph & Telephone Corp. 983 8,621
Nippondenso Co. 63,000 1,083
Nissan Motor Co., Ltd. 180,000 581
NKK Corp. 252,000 219
Nomura Securities Co., Ltd. 140,000 1,708
NTT Data Corp. 20 864
Odakyu Electric Railway Co. 510 2
Osaka Gas Co. 181,000 406
Ricoh Co., Ltd. 47,000 487
Rohm Co. 9,000 1,016
Sakura Bank 245,000 842
Sankyo Co. 33,000 818
Sanwa Bank 208,000 1,839
Sanyo Electric Co., Ltd. 140,000 398
Secom Co. 10,000 589
Seibu Railway Co. 34,000 1,210
Sekisui Chemical Co. 40,000 220
Sekisui House 51,000 398
Seven-Eleven Japan Co. 33,000 2,207
Sharp Co. 81,000 637
Shin-Etsu Chemical Co. 25,700 501
Shiseido Co. 30,000 396
Shizuoka Bank 58,000 644
Sony Corp. 29,700 2,471
Sumitomo Bank 225,000 2,125
Sumitomo Chemical Co. 116,000 307
Sumitomo Corp. 76,000 436
<CAPTION>
Number of Value
Shares (000s)
---------- --------
<S> <C> <C>
Sumitomo Electric Industries 52,000 $ 620
Sumitomo Metal Industries 225,000 372
Sumitomo Trust & Banking Co. 89,000 465
Suzuki Motor Corp. 13,000 112
Taisho Pharmaceutical Co. 25,000 529
Takeda Chemical Industries 68,000 1,942
TDK Corp. 12,000 948
Tohoku Electric Power Co. 35,600 524
Tokai Bank 145,000 850
Tokio Marine & Fire Insurance Co. 111,000 1,208
Tokyo Electric Power Co., Inc. 96,700 1,852
Tokyo Electron 13,000 511
Tokyo Gas Co. 201,000 454
Tokyu Corp. 79,000 315
Tonen Corp. 44,000 246
Toppan Printing Co. 50,000 594
Toray Industries, Inc. 100,000 538
Toshiba Corp. 230,000 1,067
Tostem Corp. 16,000 202
Toyo Trust & Banking Co. 56,000 325
Toyoda Automatic Loom 20,000 354
Toyota Motor Corp. 291,000 7,586
Yamanouchi Pharmaceutical Co. 24,000 568
Yasuda Fire & Marine Insurance Co. 28,000 127
--------
106,294
--------
NETHERLANDS--7.1%
ABN AMRO Holdings NV 106,043 2,583
Aegon NV 22,283 2,890
Ahold (Kon) NV 39,400 1,229
Akzo Nobel NV 5,590 1,137
Dordtsche Petroleum 18,420 969
Elsevier NV 44,195 667
Fortis Amev NV 14,784 865
Heineken NV 4,081 947
ING Groep NV 60,720 3,947
Koninklijke PTT Nederland 36,452 1,884
Philips Electronics NV 27,387 2,413
PolyGram NV 14,507 599
Royal Dutch Petroleum Co. 165,534 9,136
Unilever NV 49,418 3,518
Wolters Kluwer NV 6,026 788
--------
33,572
--------
SINGAPORE--0.5%
City Developments 52,000 225
Hong Kong Land Holdings 274,070 386
Jardine Matheson Holdings, Ltd. 281 1
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- --------
<S> <C> <C>
Oversea-Chinese Banking Corp., Ltd.,
Foreign*** 13,606 $ 72
Singapore Telecommunications 1,022,000 1,757
United Overseas Bank, Foreign*** 600 3
--------
2,444
--------
SPAIN--3.2%
Argentaria Corp. 10,451 871
BCO Bilbao Vizcaya 52,103 2,682
BCO Popular 9,247 759
BCO Santander (Reg.) 48,862 2,583
Endesa SA 80,332 1,952
Gas Natural SDG 12,959 830
Iberdrola SA 57,259 921
Repsol SA 23,395 1,283
Telefonica Internacional de Espana SA 74,611 3,116
Telefonica S.A. 71,211 56
--------
15,053
--------
SWEDEN--2.7%
ABB AB Series A 40,230 652
ABB AB Series B 10,040 156
Astra AB Series A 90,856 1,866
Astra AB Series B 20,421 406
Hennes and Mauritz Series B 16,723 870
L.M. Ericsson Telephone Series B 77,301 4,075
Mandamus AB+ 1,351 0
Nordbanken Holdings 79,100 582
Sandvik AB Series B 5,349 154
Sandvik AB Series A 14,701 424
Scania AB Series A 6,600 156
Scania AB Series B 6,600 157
Skand Enskilda Banken Series A 32,600 543
Sparbanken Sverige Series A 27,012 844
Svenska Handelsbanken Series A 17,223 781
Svenska Handelsbanken Series B 3,956 169
Volvo AB Series A 10,975 315
Volvo AB Series B 24,990 729
--------
12,879
--------
SWITZERLAND--8.4%
ABB AG (Bearer) 625 1,025
ABB AG (Reg.) 566 185
Adecco SA 1,293 564
Alusuisse Lonza HD (Reg.)+ 514 658
Ciba Specialty (Reg.) 6,004 726
Cie Financiere Richemont Series A (Bearer) 452 648
<CAPTION>
Number of Value
Shares (000s)
---------- --------
<S> <C> <C>
CS Holding (Reg.) 21,135 $ 4,648
Holderbank Financiere Glaris (Bearer) 403 427
Holderbank Financiere Glaris (Reg.) 985 211
Nestle SA (Reg.) 3,048 5,911
Novartis AG (Bearer) 913 1,514
Novartis AG (Reg.) 4,823 7,973
Roche Group Holding AG 543 5,502
Roche Group Holding AG (Bearer) 125 2,093
Schweizerische Bankgesellschaft (Bearer) 1,639 2,639
Schweizerische Bankgesellschaft (Reg.) 1,963 630
Schweizerische Bankverein (Reg.) 6,000 2,083
Zurich Versicherung (Reg.) 3,550 2,162
--------
39,599
--------
UNITED KINGDOM--22.1%
Abbey National 98,782 1,856
Allied-Lyons PLC 74,694 768
Asda Group 178,462 598
Associated British Foods 64,007 601
BAA PLC 71,420 727
Bank of Scotland PLC 72,515 892
Barclays PLC 116,768 3,369
BASS PLC 52,112 989
BAT Industries PLC 221,854 2,093
BG 317,760 1,698
BOC Group 34,233 585
Boots Co. 64,382 998
British Aerospace 33,639 1,124
British Airways 68,662 716
British Petroleum Co. 409,909 6,479
British Sky Broadcast 115,063 837
British Telecommunications 456,665 4,961
BTR PLC 255,071 848
Cable & Wireless 169,486 1,942
Cadbury Schweppes 68,513 999
Commercial Union Assurance Co. 39,457 739
Diageo PLC 229,925 2,738
Emi Group PLC 77,355 786
Enterprise Oil PLC 30,600 282
General Accident PLC 29,244 688
General Electric Company PLC 173,285 1,435
GKN PLC 23,403 676
Glaxo Wellcome PLC 273,737 7,735
Granada Group 61,342 1,057
Great Universal Stores 64,838 988
HSBC Holdings PLC 67,799 2,140
Imperial Chemical Industries 46,630 847
J. Sainsbury PLC 122,221 958
Kingfisher 47,394 861
</TABLE>
71
<PAGE>
SCHWAB INTERNATIONAL INDEX FUND-REGISTERED TRADEMARK-:
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number of Value
Shares (000s)
---------- --------
<S> <C> <C>
Legal & General Group 78,007 $ 936
Lloyds TSB Group PLC 396,102 5,933
Marks & Spencer PLC 201,861 1,920
National Grid Group PLC 88,400 571
National Power Development 68,681 669
National Westminster Bancorp 123,100 2,465
Pearson, Inc. 39,203 614
Peninsular & Oriental Steam Navigation 37,123 548
Powergen 44,584 603
Prudential Corp. 137,676 1,951
Rank Group 105,935 686
Reckitt & Colman PLC 24,700 498
Reed International 73,392 649
Rentokil Initial 205,888 1,327
Reuters Holdings PLC 121,872 1,321
Rolls Royce PLC 92,075 430
Royal Bank of Scotland 58,960 910
Royal Sun Alliance PLC 114,003 1,274
RTZ Corp. PLC (Reg.) 69,818 1,003
Safeway PLC 66,762 398
Schroders 16,307 800
Scot & Newcastle 42,611 645
Scottish Power 70,424 648
Shell Transport & Trading Co. (Reg.) 711,604 5,297
Siebe PLC 28,239 631
Smithkline Beecham 394,445 4,704
Standard Chartered PLC 64,712 975
Tesco PLC 142,936 1,339
Unilever PLC 233,329 2,486
United News & Media PLC 31,703 430
United Utilities PLC 33,990 473
Vodafone Group PLC 218,872 2,398
Whitbread 30,836 533
Zeneca Group 73,175 3,153
--------
104,228
--------
TOTAL COMMON STOCK
(Cost $350,712) 459,386
--------
PREFERRED STOCK--0.8%
AUSTRALIA--0.1%
News Corporation, Ltd. (Limited Voting
Shares) 71,278 402
--------
GERMANY--0.7%
Metro AG (Non-Voting) 3,260 121
RWE AG (Non-Voting) 20,391 853
<CAPTION>
Number of Value
Shares (000s)
---------- --------
<S> <C> <C>
Sap AG (Non-Voting) 3,326 $ 1,659
Volkswagen AG (Non-Voting) 784 465
--------
3,098
--------
ITALY--0.0%
Fiat Finance SPA 62,447 154
--------
TOTAL PREFERRED STOCK
(Cost $1,871) 3,654
--------
WARRANTS--0.0%
BELGIUM--0.0%
Generale de Banque (expire 11/15/99)+ 600 1
--------
FRANCE--0.0%
AXA UAP CVG (expire 01/07/99)+ 5,916 2
Cie Generale de Eaux (expire 05/02/01)+ 8,094 11
--------
13
--------
HONG KONG--0.0%
Hong Kong & China Gas (expire 9/30/99)+ 10,950 0
--------
SWITZERLAND--0.0%
Schweizerische Bankverein (expire 6/30/00)+ 425 8
--------
UNITED KINGDOM--0.0%
BTR (expire 11/26/98)+ 4,019 0
--------
TOTAL WARRANTS
(Cost $9) 22
--------
<CAPTION>
Par
----------
<S> <C> <C>
CASH EQUIVALENTS--1.3%
MSTC Cash Reserve Liquid Asset Fund
5.31%*, 05/07/98 $6,223,285 6,223
--------
TOTAL CASH EQUIVALENTS
(Cost $6,223) 6,223
--------
TOTAL INVESTMENTS--99.6%
(Cost $358,815) 469,285
--------
OTHER ASSETS AND LIABILITIES--0.4%
Other Assets 2,369
Liabilities (661)
--------
1,708
--------
NET ASSETS--100.0% $470,993
--------
--------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENTS OF NET ASSETS AND NOTES TO FINANCIAL
STATEMENTS.
72
<PAGE>
NOTES TO SCHEDULES OF INVESTMENTS
+ Non-income producing security.
* Interest rate represents the yield on report date.
** ADR--American Depository Receipt.
*** Shares registered for foreign investors.
(a) Yields shown are effective yields at the time of purchase.
(b) These securities, or portion thereof, are being used to collaterize open
futures contracts.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
73
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Schwab Schwab
S&P 500 1000
Fund Fund-Registered Trademark-
---------- -----------
<S> <C> <C>
ASSETS
Investments, at value (Cost: $2,315,678 and $2,543,018,
respectively) $2,881,467 $4,269,128
Cash -- 1
Receivables:
Interest -- 4
Dividends receivable 3,166 4,266
Fund shares sold 15,938 5,675
Securities lending 26 60
Amounts in deposit with broker 16,333 4,887
Prepaid expenses 161 84
---------- -----------
Total assets 2,917,091 4,284,105
---------- -----------
LIABILITIES
Payables:
Investments purchased 23,199 17,380
Fund shares redeemed 4,126 2,474
Investment advisory and administration fees 57 165
Transfer agency and shareholder service fees 77 172
Variation margin/due to broker (see Note 2) 12,605 3,246
Accrued expenses 155 284
---------- -----------
Total liabilities 40,219 23,721
---------- -----------
Net assets applicable to outstanding shares $2,876,872 $4,260,384
---------- -----------
---------- -----------
NET ASSETS CONSIST OF:
Paid-in-capital $2,300,869 $2,525,175
Undistributed net investment income 9,225 11,856
Accumulated net realized gain (loss) on investments and
futures sold 989 (2,757 )
Net unrealized appreciation on investments 565,789 1,726,110
---------- -----------
$2,876,872 $4,260,384
---------- -----------
---------- -----------
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 ($1,557,272/90,737, $3,499,642/114,779,
respectively) $17.16 $30.49
Select Shares ($1,104,519/64,263, $760,742/24,939,
respectively) $17.19 $30.50
e. Shares ($215,081/12,519) $17.18 --
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
74
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Schwab Schwab
Small-Cap International
Index Fund-Registered Index Fund-Registered
Trademark- Trademark-
------------ ------------
<S> <C> <C>
ASSETS
Investments, at value (Cost: $545,908 and $358,815,
respectively) $668,157 $469,285
Foreign currencies, at value (cost $34) -- 19
Receivables:
Interest 11 31
Dividends 245 1,580
Fund shares sold 2,930 365
Investments sold 1,094 --
Deferred organization costs 2 6
Dividend tax reclaim receivable -- 368
Miscellaneous assets -- --
---------- ----------
Total assets 672,439 471,654
---------- ----------
LIABILITIES
Payables:
Investments purchased 2,922 --
Fund shares redeemed 341 203
Investment advisory and administration fees 19 26
Custodian fees 21 64
Deferred organization costs -- 1
Withholding taxes -- 173
Accrued expenses 164 194
---------- ----------
Total liabilities 3,467 661
---------- ----------
Net assets applicable to outstanding shares $668,972 $470,993
---------- ----------
---------- ----------
NET ASSETS CONSIST OF:
Paid-in-capital $485,401 $362,755
Undistributed net investment income 612 2,032
Accumulated net realized gain (loss) on investments sold
and foreign currency transactions 60,710 (4,249)
Accumulated net unrealized appreciation on investments and
translating assets and liabilities into reporting
currency 122,249 110,455
---------- ----------
$668,972 $470,993
---------- ----------
---------- ----------
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 ($516,443/26,160, $388,784/25,795,
respectively) $19.74 $15.07
Select Shares ($152,529/7,721, $82,209/5,450,
respectively) $19.76 $15.08
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
75
<PAGE>
STATEMENT OF OPERATIONS (in thousands)
For the six months ended April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Schwab S&P Schwab
500 Fund 1000 Fund-Registered Trademark-
---------- ------------
<S> <C> <C>
Investment income:
Dividends (net of foreign taxes withheld of
$4 and $1, respectively) $ 16,483 $ 26,032
Interest 169 709
---------- ----------
Total investment income 16,652 26,741
---------- ----------
Expenses:
Investment advisory and administration fee 3,555 4,087
Transfer agency and shareholder service
fees
Investor Shares 1,456 3,727
Select Shares 368 277
e. Shares 89 --
Custodian fees 115 203
Professional fees 54 41
Registration fees 175 157
Shareholder reports 101 --
Trustees' fees 7 4
Amortization of deferred organization costs 3 --
Insurance and other expenses 50 31
---------- ----------
5,973 8,527
Less expenses reduced (see Note 4) (2,987) (701)
---------- ----------
Total expenses incurred by Fund 2,986 7,826
---------- ----------
Net investment income 13,666 18,915
---------- ----------
Net realized gain on investments sold 1,610 1,729
Net realized gain on futures contracts 2,112 967
Net unrealized appreciation on investments 397,812 687,487
Net unrealized appreciation on futures
contracts 974 450
---------- ----------
Net gain on investments 402,508 690,633
---------- ----------
Increase in net assets resulting from
operations $416,174 $709,548
---------- ----------
---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
76
<PAGE>
STATEMENT OF OPERATIONS (in thousands)
For the six months ended April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Schwab Small-Cap Index Schwab International Index
Fund-Registered Trademark- Fund-Registered Trademark-
------------- -------------
<S> <C> <C>
Investment income:
Dividends (net of foreign taxes withheld of
$1 and $419, respectively) $ 2,199 $ 3,483
Interest 102 210
-------- --------
Total investment income 2,301 3,693
-------- --------
Expenses:
Investment advisory and administration fee 1,331 1,367
Transfer agency and shareholder service
fees
Investor Shares 556 460
Select Shares 57 --
Custodian fees 41 117
Portfolio accounting fees 93 71
Professional fees 25 30
Registration fees 68 44
Shareholder reports 43 48
Trustees' fees 4 3
Amortization of deferred organization costs 5 5
Insurance and other expenses 32 40
-------- --------
2,255 2,185
Less expenses reduced (see Note 4) (949) (1,042)
-------- --------
Total expenses incurred by Fund 1,306 1,143
-------- --------
Net investment income 995 2,550
-------- --------
Net realized gain (loss) on investments and
foreign currency transactions:
Net realized gain on investments sold 62,070 188
Net realized loss on foreign currency
transactions -- (514)
-------- --------
Net realized gain (loss) on investments
sold and foreign currency transactions 62,070 (326)
-------- --------
Change in net unrealized appreciation
(depreciation) on investments and foreign
currency:
Net unrealized appreciation on investments 2,853 53,811
Net unrealized depreciation on foreign
currency -- (32)
-------- --------
Net unrealized appreciation on investments
and foreign currency 2,853 53,779
-------- --------
Net gain on investments 64,923 53,453
-------- --------
Increase in net assets resulting from
operations $ 65,918 $ 56,003
-------- --------
-------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
77
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Schwab S&P 500 Fund Schwab 1000 Fund-Registered Trademark-
------------------------- ---------------------------------------
Six months Six months
ended ended
April 30, Year ended April 30, Period ended Year ended
1998 October 31, 1998 October 31, August 31,
(Unaudited) 1997 (Unaudited) 1997* 1997**
------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 13,666 $ 12,073 $ 18,915 $ 5,159 $ 29,087
Net realized gain (loss) on investments sold and
futures contracts 3,722 (2,679) 2,696 1,097 (4,992)
Net unrealized appreciation on investments and
futures contracts 398,786 149,986 687,937 43,118 651,010
------------ ----------- ------------ ------------ -----------
Increase in net assets resulting from operations 416,174 159,380 709,548 49,374 675,105
------------ ----------- ------------ ------------ -----------
Dividends to shareholders from net investment income
Investor Shares (8,697) (2,361) (27,684) -- (23,949)
Select Shares (5,313) -- (5,011) -- --
e. Shares (1,504) (498) -- -- --
------------ ----------- ------------ ------------ -----------
(15,514) (2,859) (32,695) -- (23,949)
------------ ----------- ------------ ------------ -----------
Capital Share Transactions:
Proceeds from shares sold 1,399,402 1,636,074 911,624 270,742 1,328,283
Net asset value of shares issued in reinvestment
of dividends 14,660 2,679 29,584 -- 21,833
Early withdrawal fees (see Note 8) -- -- 281 104 429
Less payments for shares redeemed (478,293) (534,934) (394,957) (129,356) (715,625)
------------ ----------- ------------ ------------ -----------
Increase in net assets from capital share
transactions 935,769 1,103,819 546,532 141,490 634,920
------------ ----------- ------------ ------------ -----------
Total increase in net assets 1,336,429 1,260,340 1,223,385 190,864 1,286,076
Net Assets:
Beginning of period 1,540,443 280,103 3,036,999 2,846,135 1,560,059
------------ ----------- ------------ ------------ -----------
End of period (including undistributed net
investment income of $9,225, $11,074, $11,856,
and $25,431, respectively) $2,876,872 $1,540,443 $4,260,384 $3,036,999 $2,846,135
------------ ----------- ------------ ------------ -----------
------------ ----------- ------------ ------------ -----------
Number of Fund shares:
Sold 88,256 122,252 32,360 10,444 59,126
Reinvested 1,017 231 1,155 -- 1,058
Redeemed (30,398) (39,579) (14,083) (4,990) (31,365)
------------ ----------- ------------ ------------ -----------
Net increase in shares outstanding 58,875 82,904 19,432 5,454 28,819
------------ ----------- ------------ ------------ -----------
------------ ----------- ------------ ------------ -----------
Shares outstanding:
Beginning of period 108,644 25,740 120,286 114,832 86,013
------------ ----------- ------------ ------------ -----------
End of period 167,519 108,644 139,718 120,286 114,832
------------ ----------- ------------ ------------ -----------
------------ ----------- ------------ ------------ -----------
</TABLE>
* For the period from September 1, 1997 to October 31, 1997
** For the period from September 1, 1996 to August 31, 1997
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
78
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Small-Cap Index International Index
Fund-Registered Fund-Registered
Trademark- Trademark-
------------------------- -------------------------
Six months Six months
ended ended
April 30, Year ended April 30, Year ended
1998 October 31, 1998 October 31,
(Unaudited) 1997 (Unaudited) 1997
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 995 $ 1,671 $ 2,550 $ 4,224
Net realized gain (loss) on investments sold and foreign currency
transactions 62,070 (478) (326) (1,963)
Change in net unrealized appreciation on investments and foreign
currency translation 2,853 83,214 53,779 24,079
------------ ----------- ------------ -----------
Increase in net assets resulting from operations 65,918 84,407 56,003 26,340
------------ ----------- ------------ -----------
Dividends to shareholders from net investment income
Investor Shares (1,517) (998) (3,700) (3,464)
Select Shares (379) -- (654) --
------------ ----------- ------------ -----------
(1,896) (998) (4,354) (3,464)
------------ ----------- ------------ -----------
Capital Share Transactions:
Proceeds from shares sold 187,877 314,331 91,862 199,296
Net asset value of shares issued in reinvestment of dividends 1,744 901 3,935 3,084
Early withdrawal fees (see Note 8) 124 155 47 76
Less payments for shares redeemed (76,439) (116,277) (43,862) (104,748)
------------ ----------- ------------ -----------
Increase in net assets from capital share transactions 113,306 199,110 51,982 97,708
------------ ----------- ------------ -----------
Total increase in net assets 177,328 282,519 103,631 120,584
Net Assets:
Beginning of period 491,644 209,125 367,362 246,778
------------ ----------- ------------ -----------
End of period (including undistributed net investment income of
$612, $1,452, $2,032 and $4,052, respectively) $ 668,972 $ 491,644 $ 470,993 $ 367,362
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
Number of Fund shares:
Sold 10,231 19,646 6,490 15,015
Reinvested 102 64 302 250
Redeemed (4,174) (7,380) (3,150) (7,843)
------------ ----------- ------------ -----------
Net increase in shares outstanding 6,159 12,330 3,642 7,422
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
Shares outstanding:
Beginning of period 27,722 15,392 27,603 20,181
------------ ----------- ------------ -----------
End of period 33,881 27,722 31,245 27,603
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
79
<PAGE>
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Income from
Investment Operations Less Distributions
--------------------------------------- ---------------------------------------------
Net Distributions
Fiscal Net Asset Realized & Total Dividends from Net Asset
Period Value Net Unrealized from from Net Realized Value
Ended Beginning Investment Gains on Investment Investment Gain on Total End of
Oct. 31 of Period Income Investment Operation Income Investment Distributions Period
- --------- ---------- ----------- ----------- ----------- ----------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SCHWAB S & P 500 FUND--INVESTOR SHARES
1998(2) $14.17 $0.08 $3.04 $3.12 $(0.13) $0.00 $(0.13) $17.16
1997 $10.88 $0.14 $3.24 $3.38 $(0.09) $0.00 $(0.09) $14.17
1996(3) $10.00 $0.08 $0.80 $0.88 $(0.00) $0.00 $(0.00) $10.88
SCHWAB S & P 500 FUND--e. SHARES
1998(2) $14.19 $0.07 $3.05 $3.12 $(0.13) $0.00 $(0.13) $17.18
1997 $10.89 $0.21 $3.19 $3.40 $(0.10) $0.00 $(0.10) $14.19
1996(3) $10.00 $0.04 $0.85 $0.89 $(0.00) $0.00 $(0.00) $10.89
SCHWAB S & P 500 FUND--SELECT SHARES
1998(2) $14.19 $0.17 $2.97 $3.14 $(0.14) $0.00 $(0.14) $17.19
1997(4) $12.64 $0.05 $1.50 $1.55 $(0.00) $0.00 $(0.00) $14.19
</TABLE>
(1) The information contained in the above table is based on actual expenses
for the periods, after giving effect to the portion of expenses reduced by
the Investment Manager and Schwab. Had these expenses not been reduced, the
Fund's expense and net investment income ratios would have been:
<TABLE>
<CAPTION>
Schwab S & P 500 Fund--Investor Shares Schwab S & P 500 Fund--e. Shares Schwab S & P 500 Fund--Select Shares
- --------------------------------------- ------------------------------------ ------------------------------------
(without reductions) Fiscal (without reductions) Fiscal (without reductions)
Fiscal ----------------------- Period ----------------------- Period -----------------------
Period Ratio of Ratio of Ended Oct. Ratio of Ratio of Ended Oct. Ratio of Ratio of
Ended Oct. 31 Expenses Income 31 Expenses Income 31 Expenses Income
- ------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998(2) 0.64%* 0.97%* 1998(2) 0.54%* 1.07%* 1998(2) 0.48%* 1.11%*
1997 0.70% 1.17% 1997 0.59% 1.29% 1997(4) 0.53%* 1.15%*
1996(3) 0.89%* 1.49%* 1996(3) 1.19%* 0.91%*
</TABLE>
(2) For the six months ended April 30, 1998 (Unaudited).
(3) For the period from July 1, 1996 (commencement of operations) to October
31, 1996.
(4) For the period from May 19, 1997 (commencement of operations) to October
31, 1997.
* Annualized.
80
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------------
Ratio of Net
Ratio of Investment
Expenses Income
Fiscal Total to Average to Average Portfolio
Period Return Net Assets Net Net Turnover
Ended (not annualized) End of Period Assets(1) Assets(1) Rate
Oct. 31 (%) (000's) (%) (%) (%)
- ------------ ---------------- -------------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
SCHWAB S & P 500 FUND--INVESTOR SHARES
1998(2) 22.17 $1,557,272 0.35* 1.26* 0
1997 31.29 $ 923,148 0.38 1.49 3
1996(3) 8.80 $ 243,772 0.49* 1.89* 1
SCHWAB S & P 500 FUND--e. SHARES
1998(2) 22.21 $ 215,081 0.28* 1.33* 0
1997 31.48 $ 131,691 0.27 1.61 3
1996(3) 8.90 $ 36,331 0.28* 1.82* 1
SCHWAB S & P 500 FUND--SELECT SHARES
1998(2) 22.34 $1,104,519 0.19* 1.40* 0
1997(4) 10.43 $ 485,604 0.19* 1.49* 3
</TABLE>
(1) The information contained in the above table is based on actual expenses
for the periods, after giving effect to the portion of expenses reduced by
the Investment Manager and Schwab. Had these expenses not been reduced, the
Fund's expense and net investment income ratios would have been:
<TABLE>
<CAPTION>
Schwab S & P 500 Fund--Investor Shares
Schwab S & P 500 Fund--e. Shares Schwab S & P 500 Fund--Select Shares
- --------------------------------------- ------------------------------------ ------------------------------------
(without reductions) Fiscal (without reductions) Fiscal (without reductions)
Fiscal ----------------------- Period ----------------------- Period -----------------------
Period Ratio of Ratio of Ended Oct. Ratio of Ratio of Ended Oct. Ratio of Ratio of
Ended Oct. 31 Expenses Income 31 Expenses Income 31 Expenses Income
- ------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998(2) 0.64%* 0.97%* 1998(2) 0.54%* 1.07%* 1998(2) 0.48%* 1.11%*
1997 0.70% 1.17% 1997 0.59% 1.29% 1997(4) 0.53%* 1.15%*
1996(3) 0.89%* 1.49%* 1996(3) 1.19%* 0.91%*
</TABLE>
(2) For the six months ended April 30, 1998 (Unaudited).
(3) For the period from July 1, 1996 (commencement of operations) to October
31, 1996.
(4) For the period from May 19, 1997 (commencement of operations) to October
31, 1997.
* Annualized.
81
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Income from
Investment Operations Less Distributions
--------------------------------------- ---------------------------------------------
Net Distributions
Fiscal Net Asset Realized & Total Dividends from Net Asset
Period Value Net Unrealized from from Net Realized Value
Ended Beginning Investment Gains on Investment Investment Gain on Total End of
Oct. 31 of Period Income Investment Operation Income Investment Distributions Period
- --------- ---------- ----------- ----------- ----------- ----------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SCHWAB 1000 FUND-REGISTERED TRADEMARK---INVESTOR SHARES
1998(2) $25.25 $0.14 $5.36 $5.50 $(0.26) $0.00 $(0.26) $30.49
1997(3) $24.78 $0.04 $0.43 $0.47 $(0.00) $0.00 $(0.00) $25.25
1997(4) $18.14 $0.28 $6.62 $6.90 $(0.26) $0.00 $(0.26) $24.78
1996(4) $15.68 $0.24 $2.45 $2.69 $(0.23) $0.00 $(0.23) $18.14
1995(4) $13.08 $0.26 $2.48 $2.74 $(0.14) $0.00 $(0.14) $15.68
1994(4) $12.80 $0.26 $0.28 $0.54 $(0.26) $0.00 $(0.26) $13.08
1993(5) $11.96 $0.17 $0.79 $0.96 $(0.12) $0.00 $(0.12) $12.80
1992(6) $11.26 $0.24 $0.71 $0.95 $(0.25) $0.00 $(0.25) $11.96
SCHWAB 1000 FUND-REGISTERED TRADEMARK---SELECT SHARES
1998(2) $25.26 $0.27 $5.25 $5.52 $(0.28) $0.00 $(0.28) $30.50
1997(3) $24.79 $0.04 $0.43 $0.47 $(0.00) $0.00 $(0.00) $25.26
1997(7) $22.64 $0.05 $2.10 $2.15 $(0.00) $0.00 $(0.00) $24.79
</TABLE>
(1) The information contained in the above table is based on actual expenses
for the periods, after giving effect to the portion of expenses reduced by
the Investment Manager and Schwab. Had these expenses not been reduced, the
Fund's expense and net investment income ratios would have been:
<TABLE>
<CAPTION>
Schwab 1000 Fund--Investor Shares Schwab 1000 Fund--Select Shares
- --------------------------------------- ------------------------------------
(without reductions) Fiscal (without reductions)
Fiscal ----------------------- Period -----------------------
Period Ratio of Ratio of Ended Oct. Ratio of Ratio of
Ended Oct. 31 Expenses Income 31 Expenses Income
- ------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1998(2) 0.50%* 1.02%* 1998(2) 0.39%* 1.11%*
1997(3) 0.50%* 0.96%* 1997(3) 0.41%* 1.05%*
1997(4) 0.53% 1.27% 1997(7) 0.68%* 0.93%*
1996(4) 0.57% 1.58%
1995(4) 0.63% 1.94%
1994(4) 0.56% 2.01%
1993(5) 0.49%* 2.17%*
1992(6) 0.52% 2.28%
</TABLE>
(2) For the six months ended April 30, 1998 (Unaudited).
(3) For the period from September 1, 1997 to October 31, 1997.
(4) Years ended August 31.
(5) For the period from January 1, 1993 to August 31, 1993.
(6) Year ended December 31, 1992.
(7) For the period from May 19, 1997 (commencement of operations) to August 31,
1997.
* Annualized.
82
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------------
Ratio of Net
Ratio of Investment
Expenses Income
Fiscal Total to Average to Average Portfolio
Period Return Net Assets Net Net Turnover
Ended (not annualized) End of Period Assets(1) Assets(1) Rate
Oct. 31 (%) (000's) (%) (%) (%)
- ------------ ---------------- -------------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
SCHWAB 1000 FUND-REGISTERED TRADEMARK---INVESTOR SHARES
1998(2) 21.99 $3,499,642 0.46* 1.06* 2
1997(3) 1.90 $2,610,607 0.46* 1.00* 0
1997(4) 38.32 $2,498,891 0.47 1.33 2
1996(4) 17.27 $1,560,059 0.49 1.66 2
1995(4) 21.23 $ 826,714 0.54 2.03 2
1994(4) 4.28 $ 554,061 0.51 2.06 3
1993(5) 8.06 $ 515,272 0.45* 2.21* 1
1992(6) 8.52 $ 370,980 0.35 2.45 1
SCHWAB 1000 FUND-REGISTERED TRADEMARK---SELECT SHARES
1998(2) 22.07 $ 760,742 0.35* 1.15* 2
1997(3) 1.90 $ 426,392 0.35* 1.10* 0
1997(7) 9.50 $ 347,244 0.35* 1.26* 2
</TABLE>
(1) The information contained in the above table is based on actual expenses
for the periods, after giving effect to the portion of expenses reduced by
the Investment Manager and Schwab. Had these expenses not been reduced, the
Fund's expense and net investment income ratios would have been:
<TABLE>
<CAPTION>
Schwab 1000 Fund--Investor Shares Schwab 1000 Fund--Select Shares
- --------------------------------------- ------------------------------------
(without reductions) Fiscal (without reductions)
Fiscal ----------------------- Period -----------------------
Period Ratio of Ratio of Ended Oct. Ratio of Ratio of
Ended Oct. 31 Expenses Income 31 Expenses Income
- ------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1998(2) 0.50%* 1.02%* 1998(2) 0.39%* 1.11%*
1997(3) 0.50%* 0.96%* 1997(3) 0.41%* 1.05%*
1997(4) 0.53% 1.27% 1997(7) 0.68%* 0.93%*
1996(4) 0.57% 1.58%
1995(4) 0.63% 1.94%
1994(4) 0.56% 2.01%
1993(5) 0.49%* 2.17%*
1992(6) 0.52% 2.28%
</TABLE>
(2) For the six months ended April 30, 1998 (Unaudited).
(3) For the period from September 1, 1997 to October 31, 1997.
(4) Years ended August 31.
(5) For the period from January 1, 1993 to August 31, 1993.
(6) Year ended December 31, 1992.
(7) For the period from May 19, 1997 (commencement of operations) to August 31,
1997.
* Annualized.
83
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Income from
Investment Operations Less Distributions
--------------------------------------------- ---------------------------------------------
Net Distributions
Fiscal Net Asset Realized & Total Dividends from Net Asset
Period Value Net Unrealized from from Net Realized Value
Ended Beginning Investment Gains(Losses) on Investment Investment Gain on Total End of
Oct. 31 of Period Income Investment Operation Income Investment Distributions Period
- --------- ---------- ----------- ----------------- ----------- ----------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK---INVESTOR SHARES
1998(2) $17.73 $0.06 $ 2.01 $ 2.07 $(0.06) -- $(0.06) $19.74
1997 $13.59 $0.06 $ 4.14 $ 4.20 $(0.06) -- $(0.06) $17.73
1996 $11.70 $0.07 $ 1.88 $ 1.95 $(0.06) -- $(0.06) $13.59
1995 $10.05 $0.10 $ 1.61 $ 1.71 $(0.06) -- $(0.06) $11.70
1994(3) $10.00 $0.06 $ -- $ 0.06 $(0.01) -- $(0.01) $10.05
SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK---SELECT SHARES
1998(2) $17.75 $0.07 $ 2.01 $ 2.08 $(0.07) -- $(0.07) $19.76
1997(4) $14.50 $0.02 $ 3.23 $ 3.25 $(0.00) -- $(0.00) $17.75
SCHWAB INTERNATIONAL INDEX FUND-REGISTERED TRADEMARK---INVESTOR SHARES
1998(2) $13.31 $0.15 $ 1.76 $ 1.91 $(0.15) -- $(0.15) $15.07
1997 $12.23 $0.17 $ 1.08 $ 1.25 $(0.17) -- $(0.17) $13.31
1996 $11.13 $0.16 $ 1.07 $ 1.23 $(0.13) -- $(0.13) $12.23
1995 $10.89 $0.14 $ 0.22 $ 0.36 $(0.12) -- $(0.12) $11.13
1994 $10.15 $0.11 $ 0.69 $ 0.80 $(0.04) $(0.02) $(0.06) $10.89
1993(5) $10.00 $0.03 $ 0.12 $ 0.15 -- -- -- $10.15
SCHWAB INTERNATIONAL INDEX FUND-REGISTERED TRADEMARK---SELECT SHARES
1998(2) $13.32 $0.16 $ 1.76 $ 1.92 $(0.16) -- $(0.16) $15.08
1997(4) $13.59 $0.04 $(0.31) $(0.27) -- -- -- $13.32
</TABLE>
(1) The information contained in the above table is based on actual expenses
for the periods, after giving effect to the portion of expenses reduced by
the Investment Manager and Schwab. Had these expenses not been reduced, the
Fund's expense and net investment income ratios would have been:
<TABLE>
<CAPTION>
Schwab Small-Cap Index Schwab International Index
Fund-Registered Trademark- Fund-Registered Trademark-
- --------------------------------------- ------------------------------------
Fiscal
Fiscal Period
Period Ratio of Ratio of Ended Oct. Ratio of Ratio of
Ended Oct. 31 Expenses Income 31 Expenses Income
- ------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INVESTOR SHARES INVESTOR SHARES
1998(2) 0.83%* 0.00%* 1998(2) 1.08%* 0.63%*
1997 0.89% 0.16% 1997 1.13% 0.84%
1996 0.94% 0.21% 1996 1.17% 1.02%
1995 1.02% 0.34% 1995 1.22% 1.08%
1994(3) 1.19%* 0.16%* 1994 1.30% 0.74%
SELECT SHARES 1993(5) 2.10%* 0.65%*
1998(2) 0.74%* 0.08%* SELECT SHARES
1997(4) 0.90%* 0.04%* 1998(2) 1.03%* 0.75%*
1997(4) 1.27%* 0.37%*
</TABLE>
(2) For the six months ended April 30, 1998 (Unaudited).
(3) For the period from December 3, 1993 (commencement of operations) to
October 31, 1994.
(4) For the period from May 19, 1997 (commencement of operations) to October
31, 1997.
(5) For the period from September 9, 1993 (commencement of operations) to
October 31, 1993.
* Annualized.
84
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------------
Ratio of Net
Ratio of Investment
Expenses Income
Fiscal Total to Average to Average Portfolio
Period Return Net Assets Net Net Turnover
Ended (not annualized) End of Period Assets(1) Assets(1) Rate
Oct. 31 (%) (000's) (%) (%) (%)
- ------------ ---------------- -------------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK---INVESTOR SHARES
1998(2) 11.75 $516,443 0.49* 0.33* 42
1997 31.03 $410,470 0.52 0.53 23
1996 16.73 $209,125 0.59 0.56 23
1995 17.11 $122,074 0.68 0.68 24
1994(3) 0.63 $ 68,128 0.67* 0.68* 16
SCHWAB SMALL-CAP INDEX FUND-REGISTERED TRADEMARK---SELECT SHARES
1998(2) 11.80 $152,529 0.38* 0.44* 42
1997(4) 22.41 $ 81,174 0.38* 0.56* 23
SCHWAB INTERNATIONAL INDEX FUND-REGISTERED TRADEMARK---INVESTOR SHARES
1998(2) 14.55 $388,784 0.58* 1.14* 0
1997 10.33 $317,833 0.61 1.36 13
1996 11.07 $246,778 0.69 1.50 6
1995 3.35 $179,612 0.85 1.45 0
1994 7.89 $142,355 0.90 1.14 6
1993(5) 1.50 $106,085 0.60* 2.15* 2
SCHWAB INTERNATIONAL INDEX FUND-REGISTERED TRADEMARK---SELECT SHARES
1998(2) 14.62 $ 82,209 0.47* 1.31* 0
1997(4) (1.99) $ 49,529 0.47* 1.17* 13
</TABLE>
(1) The information contained in the above table is based on actual expenses
for the periods, after giving effect to the portion of expenses reduced by
the Investment Manager and Schwab. Had these expenses not been reduced, the
Fund's expense and net investment income ratios would have been:
<TABLE>
<CAPTION>
Schwab Small-Cap Index Schwab International Index
Fund-Registered Trademark- Fund-Registered Trademark-
- --------------------------------------- ------------------------------------
Fiscal
Fiscal Period
Period Ratio of Ratio of Ended Oct. Ratio of Ratio of
Ended Oct. 31 Expenses Income 31 Expenses Income
- ------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INVESTOR SHARES INVESTOR SHARES
1998(2) 0.83%* 0.00%* 1998(2) 1.08%* 0.63%*
1997 0.89% 0.16% 1997 1.13% 0.84%
1996 0.94% 0.21% 1996 1.17% 1.02%
1995 1.02% 0.34% 1995 1.22% 1.08%
1994(3) 1.19%* 0.16%* 1994 1.30% 0.74%
SELECT SHARES 1993(5) 2.10%* 0.65%*
1998(2) 0.74%* 0.08%* SELECT SHARES
1997(4) 0.90%* 0.04%* 1998(2) 1.03%* 0.75%*
1997(4) 1.27%* 0.37%*
</TABLE>
(2) For the six months ended April 30, 1998 (Unaudited).
(3) For the period from December 3, 1993 (commencement of operations) to
October 31, 1994.
(4) For the period from May 19, 1997 (commencement of operations) to October
31, 1997.
(5) For the period from September 9, 1993 (commencement of operations) to
October 31, 1993.
* Annualized.
85
<PAGE>
NOTES TO FINANCIAL STATEMENTS
For the six months ended April 30, 1998 (Unaudited)
1. DESCRIPTION OF THE FUNDS
The Schwab S&P 500 Fund, Schwab Small-Cap Index Fund-Registered Trademark- and
Schwab International Index Fund-Registered Trademark- are series of Schwab
Capital Trust (the "Capital Trust") and the Schwab 1000 Fund-Registered
Trademark- is a series of the Schwab Investments (the "Investment Trust"), each
a no-load, open-end management investment company organized as a Massachusetts
business trust on May 7, 1993 and October 26, 1990, respectively, and registered
under the Investment Company Act of 1940, as amended. Each of the funds in this
report are herein referred to as a "Fund".
The Schwab S&P 500 Fund, Schwab 1000 Fund-Registered Trademark-, Schwab
Small-Cap Index Fund-Registered Trademark- and Schwab International Index
Fund-Registered Trademark- offer two classes of shares--Investor Shares and
Select Shares. 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 transfer agency and shareholder
service fees (see Note 3), investment minimums and certain other expenses.
However, the Schwab S&P 500 Fund offers a third class of shares--the
e.Shares-TM-. This class offers the same concept as the Investor Shares and the
Select Shares, but the e. Shares are available only to clients of Schwab
Institutional and The 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, Small-Cap Index Fund-Registered
Trademark- and International Index Fund-Registered Trademark-, the Capital Trust
also offers the Schwab MarketTrack All Equity Portfolio-TM- (effective on April
16, 1998, and commenced operations on May 19, 1998), Schwab MarketTrack Growth
Portfolio-TM- (formerly Schwab Asset Director-Registered Trademark---High Growth
Fund), Schwab MarketTrack Balanced Portfolio-TM- (formerly Schwab Asset
Director-Registered Trademark---Balanced Growth Fund), Schwab MarketTrack
Conservative Portfolio-TM- (formerly Schwab Asset Director-Registered
Trademark---Conservative Growth Fund), Schwab Analytics Fund-Registered
Trademark-, Schwab MarketManager International Portfolio-TM- (formerly Schwab
OneSource Portfolios--International), Schwab MarketManager Growth Portfolio-TM-
(formerly Schwab OneSource Portfolios--Growth Allocation), Schwab MarketManager
Balanced Portfolio-TM- (formerly Schwab OneSource Portfolios--Balanced
Allocation), and Schwab MarketManager Small Cap Portfolio-TM- (formerly Schwab
OneSource Portfolios--Small Company). The assets of each series are segregated
and accounted for separately.
In addition to the Schwab 1000 Fund-Registered Trademark-, 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 and Schwab Long-Term Tax-Free Bond 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 for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
86
<PAGE>
SECURITY VALUATION--Investments in securities traded on an exchange are valued
at the last quoted sale price for a given day, or if a sale is not reported for
that day, at the mean between the most recent quoted bid and asked prices.
Securities for which no market quotations are readily available are valued at
the mean between the most recent bid and asked prices. Securities for which no
quotations are readily available are valued at fair value as determined by the
Fund's investment manager pursuant to guidelines adopted in good faith by the
Board of Trustees. Short-term securities with 60 days or less to maturity are
stated at amortized cost, which approximates market value.
SECURITY TRANSACTIONS AND INVESTMENT INCOME--Security transactions are accounted
for on a trade date basis (date the order to buy or sell is executed). Realized
gains and losses from security transactions are determined on an identified cost
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date; interest income is recorded on the accrual basis.
FUTURES CONTRACTS--The Schwab S&P 500 Fund and the Schwab 1000 Fund-Registered
Trademark- may invest in financial 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."
Subsequent payments ("variation margin") are made or received by the Fund each
day, depending on the daily fluctuation of the value of the contract.
The Funds will invest in these instruments to hedge against the effects of
changes in value of portfolio securities due to anticipated changes in interest
rates and/or market conditions, for duration management, or risk inherent in the
management of the Funds and not for trading purposes. The use of futures
contracts involves certain risks, which include (1) imperfect correlation
between the price movement of the contracts and the underlying securities, (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, or (3) an inaccurate prediction by the Adviser of the future
direction of interest rates. Any of these risks may involve amounts exceeding
the amount recognized in the Fund's Statement of Operations at any given time.
As of April 30, 1998, the Schwab S&P 500 Fund and the Schwab 1000
Fund-Registered Trademark- had the following open futures contracts:
<TABLE>
<CAPTION>
Number of Contract Unrealized
Contracts Value Expiration Appreciation
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
S&P 500 Index Futures 127 $34,209,625 June '98 $ 975,000
Schwab 1000 Index-Registered Trademark- Futures 58 $16,228,400 June '98 $ 450,000
</TABLE>
The aggregate value of cash or eligible securities pledged to cover margin
requirements for open futures positions at April 30, 1998 was $2,584,000 and
$1,033,000, respectively.
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.
87
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
FOREIGN CURRENCY TRANSLATION--The accounting records of the Schwab International
Index Fund-Registered Trademark- are maintained in U.S. dollars. Investment
securities and all other asset and liabilities of the Fund denominated in a
foreign currency are translated into U.S. dollars at the exchange rates on April
30, 1998. 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-Registered Trademark- separates within its
statement of operations the portion of realized and unrealized gains and losses
resulting from changes in foreign exchange rates from that arising from changes
in securities' market values.
FOWARD 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-Registered Trademark- 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 opened 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.
DEFERRED ORGANIZATION COSTS--Costs incurred in connection with the organization
of the Funds are amortized on a straight-line basis over a five-year period from
the Funds commencement of operations.
EXPENSES--Expenses arising in connection with the Funds are charged directly to
the Funds. Expenses common to all series of the Trusts 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 all net investment income and realized net capital gains, if any, to
shareholders. Therefore, no federal income tax provision is required. The Funds
are considered a separate entity for tax purposes.
88
<PAGE>
At April 30, 1998 (for financial reporting and federal income tax purposes):
<TABLE>
<CAPTION>
Net Unrealized Appreciated Depreciated
Appreciation Securities Securities
-------------- -------------- -----------
<S> <C> <C> <C>
Schwab S&P 500 Fund $ 565,789,000 $ 583,846,000 $18,057,000
Schwab 1000 Fund-Registered Trademark- $1,726,110,000 $1,741,507,000 $15,397,000
Schwab Small-Cap Index Fund-Registered
Trademark- $ 122,249,000 $ 136,326,000 $14,077,000
Schwab International Index Fund-Registered
Trademark- $ 110,455,000 $ 152,240,000 $41,785,000
</TABLE>
At October 31, 1997, the unused capital loss carryforwards, for federal income
tax purposes with expiration dates, were as follows:
<TABLE>
<CAPTION>
Schwab Schwab
Small-Cap International
Index Index
Schwab S&P 500 Fund-Registered Fund-Registered
Expiring in: Fund Trademark- Trademark-
-------------- -------------- -----------
<S> <C> <C> <C>
10/31/02 -- $ 202,000 $ 140,000
10/31/04 $ 5,000 $ 661,000 $ 1,743,000
10/31/05 $ 2,152,000 $ 451,000 $ 1,837,000
-------------- -------------- -----------
Total capital loss carryforward: $ 2,157,000 $ 1,314,000 $ 3,720,000
-------------- -------------- -----------
-------------- -------------- -----------
</TABLE>
At August 31, 1997, the Schwab 1000 Fund-Registered Trademark- had unused
capital loss carryforwards, for federal income tax purposes with expiration
dates, as follows:
<TABLE>
<CAPTION>
Schwab 1000
Fund-Registered
Expiring in: Trademark-
--------------
<S> <C>
8/31/01 $ 354,000
8/31/03 $ 935,000
8/31/05 $ 844,000
--------------
Total capital loss carryforward: $ 2,133,000
--------------
--------------
</TABLE>
The Schwab 1000 Fund-Registered Trademark- has elected to defer $3,740,000 in
post-October losses from the sale of securities until the tax year ending August
31, 1998.
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 Manager"). For
advisory services and facilities furnished, the Schwab S&P 500 Fund pays an
annual fee, payable monthly, of 0.36% of the first $1 billion of average daily
net assets, 0.33% of such net assets over $1 billion, and 0.31% of such assets
in excess of $2 billion. The Schwab 1000 Fund-Registered Trademark- pays an
annual fee, payable monthly, of 0.30% of the first $500 million of average daily
net assets and 0.22% of such assets over $500 million. The Schwab Small-Cap
Index Fund-Registered Trademark- pays 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-Registered
Trademark- pays 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. The Investment Manager has reduced a portion of its fee for the six
months ended April 30, 1998 (see Note 4).
89
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
TRANSFER AGENCY AND SHAREHOLDER SERVICE AGREEMENTS--The Capital Trust and the
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
and e.Shares-TM- 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 fee for the six months ended April 30, 1998 (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
Manager and/or Schwab. For the six months ended April 30, 1998, 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 Investment
Company Act of 1940, as amended. The Schwab S&P 500 Fund, Schwab 1000
Fund-Registered Trademark-, Schwab Small-Cap Index Fund-Registered Trademark-
and Schwab International Index Fund-Registered Trademark- incurred fees of
$7,000, $4,000, $4,000 and $3,000, respectively, related to the Trust's
unaffiliated trustees.
OTHER AFFILIATED PARTIES AND TRANSACTIONS--As of April 30, 1998, Schwab S&P 500
Fund, Schwab Small-Cap Index Fund-Registered Trademark- and Schwab International
Index Fund-Registered Trademark- had outstanding shares of 1%, 1%, 0% and 9%,
6%, 1% and 12%, 8%, 2%, respectively, owned by Schwab MarketTrack-TM---Growth
Portfolio, Schwab MarketTrack--Balanced Portfolio and Schwab
MarketTrack--Conservative Portfolio, respectively. The Schwab 1000
Fund-Registered Trademark- and the Schwab S&P 500 Fund placed a portion of its
portfolio transactions with Charles Schwab & Co., an affiliated broker. For the
six-month period ended April 30, 1998, the commissions paid were $7,000 and
$3,500, respectively.
INTERFUND TRANSACTIONS--For the six months ended April 30, 1998, Schwab S&P 500
Fund, Schwab Small-Cap Index Fund-Registered Trademark- and Schwab International
Index Fund-Registered Trademark- engaged in purchase transactions with funds
that have a common investment adviser, common trustees, and common officers.
These purchase and sale transactions, made at current market value pursuant to
Rule 17a-7 under the Act, were $557,000, $255,825,000 and $256,241,000,
respectively.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab guarantee that, through at least February 29,
2000, 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 purpose of this guarantee,
operating expenses do not include interest expenses, extraordinary expenses,
taxes, foreign taxes and capital items.
<TABLE>
<CAPTION>
Investor Shares Select Shares e.Shares
----------------- ------------- -----------
<S> <C> <C> <C>
Schwab S&P 500 Fund 0.35% 0.19% 0.28%
Schwab 1000 Fund-Registered Trademark- 0.46% 0.35% --
Schwab Small-Cap Index Fund-Registered Trademark- 0.49% 0.38% --
Schwab International Index Fund-Registered Trademark- 0.58% 0.47% --
</TABLE>
For the six months ended April 30, 1998, the totals of such fees and expenses
reduced by the Investment Manager were $2,659,000, $636,000, $936,000 and
$1,024,000 for the Schwab S&P 500 Fund, Schwab 1000 Fund-Registered Trademark-,
Schwab Small-Cap Index Fund-Registered Trademark- and Schwab International Index
Fund-Registered Trademark-, respectively. The total of such fees reduced by
90
<PAGE>
Schwab were $328,000, $65,000, $13,000 and $18,000, for the Schwab S&P 500 Fund,
Schwab 1000 Fund, Schwab Small-Cap Index Fund and Schwab International Index
Fund, respectively.
5. BORROWING AGREEMENT
The Trusts have arrangements with PNC Bank, N.A., whereby the Schwab S&P 500
Fund and Schwab 1000 Fund-Registered Trademark-may borrow up to $10,000,000 and
$50,000,000, respectively, on a temporary basis, to fund redemptions. Amounts
borrowed under this arrangement bear interest at periodically negotiated rates
and may be collateralized by the assets of the Funds. For the six months ended
April 30, 1998, no borrowings were made under this arrangement. The Capital
Trust has an arrangement with Bank of New York Trust Company, whereby the Schwab
Small-Cap Index Fund-Registered Trademark- and Schwab International Index
Fund-Registered Trademark- may borrow in aggregate up to $100,000,000, on a
temporary basis, to fund redemptions. Amounts borrowed under this arrangement
bear interest at periodically negotiated rates and may be collateralized by the
assets of the Funds'. There were no outstanding borrowings as of April 30, 1998.
6. SECURITIES LENDING
The Schwab S&P 500 Fund and Schwab 1000 Fund-Registered Trademark- loaned
securities to certain brokers, dealers and other financial institutions who paid
the Funds negotiated lenders' fees. The Fund 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 will be collateralized at all times in an
amount equal to at least 100% of the market value of the securities loaned. At
April 30, 1998, the market value of securities loaned by the Schwab S&P 500 Fund
was $397,634,000 for which the Fund received collateral of $402,524,000 and the
market value of securities loaned by the Schwab 1000 Fund-Registered Trademark-
was $700,196,000 for which the Schwab 1000 Fund-Registered Trademark- received
collateral of $711,886,000.
7. INVESTMENT TRANSACTIONS
Aggregate purchases and sales of investment securities, other than short-term
obligations (in thousands), for the period ended April 30, 1998, were as
follows:
<TABLE>
<CAPTION>
Schwab Schwab
Small-Cap International
Schwab 1000 Index Index
Schwab S&P 500 Fund-Registered Fund-Registered Fund-Registered
Fund Trademark- Trademark- Trademark-
-------------- ----------- --------------- -----------------
<S> <C> <C> <C> <C>
Purchases $ 922,862 $ 578,174 $ 430,550 $ 119,843
Sales $ 8,185 $ 55,493 $ 322,885 $ 62,738
</TABLE>
For the Schwab S&P 500 Fund and Schwab 1000 Fund-Registered Trademark-, included
in the aforementioned purchases of common stock are purchases of Charles Schwab
Corp., an affiliated issuer, with a current value as of April 30, 1998, of
$3,047,000 and $3,544,000, respectively.
91
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
8. EARLY WITHDRAWAL FEES
The early withdrawal fees are retained by the Funds and are treated as a
contribution to capital.
<TABLE>
<CAPTION>
Early withdrawal fees Early withdrawal
on fees
redemption proceeds as of 4/30/98
----------------------- -----------------
<S> <C> <C>
Schwab S&P 500 Fund N/A N/A
Schwab 1000 Fund-Registered Trademark- 0.50%* $ 281,000
Schwab Small-Cap Index Fund-Registered Trademark- 0.50%* $ 124,000
Schwab International Index Fund-Registered Trademark- 0.75%* $ 47,000
</TABLE>
* Attributable to shares purchased and held less than six months.
9. CAPITAL SHARE TRANSACTIONS
The Fund offers two classes of shares: Investor Shares and Select Shares with an
exception to Schwab S&P 500 Fund which offers a third class of shares:
e.Shares-TM-. Shares of each class represent interests in the same portfolio of
investments of the Funds. Transactions in capital shares for the period ended
April 30, 1998 were as follows (in thousands):
<TABLE>
<CAPTION>
Schwab S&P 500 Fund
-------------------------------------------
Six months ended
April 30, 1998 Year ended October
(Unaudited) 31, 1997
-------------------- ---------------------
Shares Dollars Shares Dollars
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Investor Shares:
Sold 39,378 $ 626,807 68,380 $ 894,864
Reinvested 583 8,407 193 2,235
Redeemed (14,373) (225,994) (25,827) (345,122)
--------- --------- --------- ----------
Net increase 25,588 $ 409,220 42,746 $ 551,977
e. Shares:
Sold 7,855 $ 121,701 14,545 $ 184,271
Reinvested 96 1,381 38 444
Redeemed (4,714) (72,833) (8,636) (116,137)
--------- --------- --------- ----------
Net increase 3,237 $ 50,249 5,947 $ 68,578
Select Shares:
Sold 41,023 $ 650,894 39,327 $ 556,939
Reinvested 338 4,872 -- --
Redeemed (11,311) (179,466) (5,116) (76,675)
--------- --------- --------- ----------
Net increase 30,050 $ 476,300 34,211 $ 480,264
Total increase from capital share transactions 58,875 $ 935,769 82,904 $1,100,819
--------- --------- --------- ----------
--------- --------- --------- ----------
</TABLE>
92
<PAGE>
<TABLE>
<CAPTION>
Schwab 1000 Fund-Registered Trademark-
----------------------------------------------------------
Six months ended
April 30, 1998 Period ended Year ended August
(Unaudited) October 31, 1997* 31, 1997
------------------ ------------------- -----------------
Shares Dollars Shares Dollars Shares Dollars
------- --------- ------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investor Shares:
Sold 22,837 $ 642,206 7,163 $ 185,593 44,512 $972,064
Reinvested 985 25,237 -- -- 1,058 21,833
Redeemed (12,448) (349,430) (4,583) (118,834) (30,757) (700,480)
------- --------- ------- ---------- ------- --------
Net increase 11,374 $ 318,013 2,580 $ 66,759 14,813 $293,417
Select Shares:
Sold 9,523 $ 269,699 3,281 $ 85,253 14,614 $356,648
Reinvested 170 4,347 -- -- -- --
Redeemed (1,635) (45,527) (407) (10,522) (608) (15,145)
------- --------- ------- ---------- ------- --------
Net increase 8,058 $ 228,519 2,874 $ 74,731 14,006 $341,503
Total increase from capital share transactions 19,432 $ 546,532 5,454 $ 141,490 28,819 $634,920
------- --------- ------- ---------- ------- --------
------- --------- ------- ---------- ------- --------
</TABLE>
* For the period from September 1, 1997 to October 31, 1997
** For the period from September 1, 1996 to August 31, 1997
<TABLE>
<CAPTION>
Schwab Small-Cap Index
Fund-Registered Trademark-
-------------------------------------------
Six months ended
April 30, 1998 Year ended
(Unaudited) October 31, 1997
-------------------- ---------------------
Shares Dollars Shares Dollars
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Investor Shares:
Sold 6,096 $ 112,261 14,644 $ 230,161
Reinvested 82 1,410 64 901
Redeemed (3,166) (57,912) (6,952) (108,657)
--------- --------- --------- ----------
Net increase 3,012 $ 55,759 7,756 $ 122,405
Select Shares:
Sold 4,135 $ 75,740 5,002 $ 84,325
Reinvested 20 334 -- --
Redeemed (1,008) (18,527) (428) (7,620)
--------- --------- --------- ----------
Net increase 3,147 $ 57,547 4,574 $ 76,705
Total increase from capital share transactions 6,159 $ 113,306 12,330 $ 199,110
--------- --------- --------- ----------
--------- --------- --------- ----------
</TABLE>
93
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
Schwab International Index
Fund-Registered Trademark-
-------------------------------------------
Six months ended
April 30, 1998 Year ended
(Unaudited) October 31, 1997
-------------------- ---------------------
Shares Dollars Shares Dollars
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Investor Shares:
Sold 4,274 $ 60,470 11,009 $ 142,547
Reinvested 261 3,395 250 3,084
Redeemed (2,624) (36,514) (7,556) (100,709)
--------- --------- --------- ----------
Net increase 1,911 $ 27,351 3,703 $ 44,922
Select Shares:
Sold 2,216 $ 31,439 4,006 $ 56,825
Reinvested 41 540 -- --
Redeemed (526) (7,348) (287) (4,039)
--------- --------- --------- ----------
Net increase 1,731 $ 24,631 3,719 $ 52,786
Total increase from capital share transactions 3,642 $ 51,982 7,422 $ 97,708
--------- --------- --------- ----------
--------- --------- --------- ----------
</TABLE>
94
<PAGE>
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE>
THE SCHWABFUNDS FAMILY-REGISTERED TRADEMARK-
The SchwabFunds Family includes a variety of funds to help you meet your
investment goals. 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 1-800-435-4000 for a free prospectus and brochure for any of these
SchwabFunds.
This report must be preceded or accompanied by a current prospectus.
SCHWAB ASSET ALLOCATION FUNDS
Schwab MarketTrack All Equity Portfolio(1)
Schwab MarketTrack Growth Portfolio(1)
Schwab MarketTrack Balanced Portfolio(1)
Schwab MarketTrack Conservative Portfolio(1)
Schwab MarketManager Growth Portfolio(2)
Schwab MarketManager Balanced Portfolio(2)
SCHWAB STOCK FUNDS
Schwab 1000 Fund-Registered Trademark-
Schwab S&P 500 Fund
Schwab Analytics Fund-Registered Trademark-
Schwab Small-Cap Index Fund-Registered Trademark-
Schwab MarketManager Small Cap Portfolio(2)
Schwab International Index Fund-Registered Trademark-
Schwab MarketManager International Portfolio(2)
SCHWAB BOND FUNDS
Schwab Total Bond Market Index Fund(3)
Schwab Short-Term Bond Market Index Fund(3)
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 Fund
SCHWAB MONEY MARKET FUNDS
Schwab offers an array of money market funds(4) that seek high current income
with safety and liquidity. Choose from taxable or tax-advantaged alternatives.
Many can be linked to your Schwab account to "sweep" cash balances automatically
when you're between investments. Or, for your larger cash reserves, choose one
of our Value Advantage Investments-Registered Trademark-.
(1)Formerly the Schwab Asset Director Funds.
(2)Formerly the Schwab OneSource-TM- Portfolios.
(3)Formerly the Schwab Government Bond Funds.
(4)Investments in money market funds are neither insured nor guaranteed by the
U.S. government, and there is no assurance that the funds will be able to
maintain a stable share price of $1.
<PAGE>
SCHWABFUNDS
FAMILY-R-
101 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
INVESTMENT ADVISOR
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc.
101 Montgomery Street, San Francisco, CA 94104
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
- -C-1998 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
Printed on recycled paper. CRS 20293 (0598-2346) MKT3562(6/98)
