<PAGE> 1
SCHWABFUNDS(R)
[LOGO]
SCHWAB INTERNATIONAL
INDEX FUND(TM)
SEMI-ANNUAL REPORT
APRIL 30, 1995
[Photo of the Schwab Building, San Francisco, California]
<PAGE> 2
Dear Fellow Shareholder,
This year, the SchwabFunds Family(TM) celebrates its fifth
anniversary as a mutual fund complex. This celebration follows an
[Photo exciting 1994 when the organization experienced tremendous
of growth--the third largest asset growth of all mutual fund
Charles companies. By placing your trust in SchwabFunds,(R) you've helped
R. Schwab] total assets under management reach $25 billion, ranking
SchwabFunds in the top 6% of all mutual fund complexes in just a
few years.
We believe much of this success can be traced to the Schwab
commitment to serving the needs of Fund shareholders, a commitment demonstrated
by the entire SchwabFunds staff and, in particular, by our experienced team of
portfolio managers.
The 20 professionals that make up our growing portfolio management team are
devoted to monitoring the financial markets for you. Through careful and
disciplined selection of securities, they strive to construct optimal portfolios
that provide shareholders with competitive returns that meet their investment
goals. Shareholders continue to signal their trust in the 175 years of combined
experience behind our SchwabFunds portfolio management by keeping their money
invested in SchwabFunds. In fact, a large number of the 1.5 million shareholders
have been investing in the SchwabFunds Family since its first year of operation.
We believe an important part of serving your needs is keeping you informed about
your investments. For example, we've added the question and answer section of
this report, developed to address what our portfolio managers feel have been the
most pressing questions we've heard from shareholders over the period. It is one
way we hope to keep communication open between you and the people managing your
investments. In addition, now that Charles Schwab Investment Management, Inc.
will be managing the day-to-day portfolio management of the three Schwab equity
funds, we will be even better able to meet your service needs and respond to
your questions.
The SchwabFunds Family has grown to include a solid selection of funds that meet
the "core" needs of investors. The 16 funds available to retail investors offer
effective diversification of the U.S. and international equity markets, both
taxable and tax-free bonds, and a variety of money market investments. With this
level of diversification, you may use the SchwabFunds to create an efficient,
well-rounded portfolio. Or, they can serve as building blocks to an overall
investment program that includes more specialized investments.
To receive a brochure and prospectus for any of the SchwabFunds, you can call
Schwab's toll-free number, 1-800-2 NO-LOAD, or visit any one of the over 200
Schwab offices. The prospectus includes more complete information on the Funds,
including charges and expenses. Please read it carefully before investing.
I'd like to extend my personal gratitude for your trust in the SchwabFunds
Family. You should feel confident that the outstanding efforts of all those who
are part of the SchwabFunds organization will continue going forward. And, we
expect these efforts to help us meet even higher standards of excellence in the
years ahead.
/s/ Charles R. Schwab
Charles R. Schwab
Chairman
Cover: The Schwab Building, San Francisco, California
<PAGE> 3
YES! I'D LIKE TO TAKE
ADVANTAGE OF AN EASY WAY
TO EFFECTIVELY DIVERSIFY MY EQUITY PORTFOLIO.
Please send me more information, including prospectuses, for the three
SchwabFunds(R) equity index funds listed below.
SCHWAB 1000 FUND(R) is designed to match the total return of the Schwab 1000
Index,(R) Schwab's own benchmark of America's 1,000 largest companies, based on
market capitalization.
SCHWAB SMALL-CAP INDEX FUND(TM) seeks to track the total return of the Schwab
Small-Cap Index,TM comprised of the second 1,000 largest U.S. companies,
ranked by market capitalization.
SCHWAB INTERNATIONAL INDEX FUND(TM) seeks to track the total return of the
Schwab International Index,(TM) comprised of 350 of the largest publicly traded
companies (based on market capitalization) in countries with developed
securities markets outside of the U.S.
The prospectus provides more complete information, including charges and
expenses. Please read it carefully before investing.
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NAME
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ADDRESS
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CITY STATE ZIP
See the back page for more information.
[SCHWABFUNDS FAMILY LOGO]
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CHARLES SCHWAB & CO., INC.
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<PAGE> 5
Comments from the Investment Manager
We are pleased to report the performance of the Schwab International Index
Fund(TM) for the six-month period that began November 1, 1994 and ended April
30, 1995. During the period, the Fund achieved its primary objective of tracking
the price and dividend performance of the Schwab International Index(TM). It
also succeeded in maintaining the tax advantages and lower costs that its
investors seek for a better return in the long-term.
ASSETS AND NUMBER OF SHAREHOLDERS CONTINUED TO GROW
During the reporting period, investors signaled their desire to participate in
the potential long-term opportunities offered by international investing by
contributing to the growth of the Fund. The Schwab International Index Fund
showed an increase in assets from $142 million to more than $154 million as of
April 30, 1995, and the number of shareholders increased from 21,680 to 22,244.
FUND ACHIEVED TOP TEN RANKING
The Schwab International Index Fund's one-year total return of 5.93% as of March
31, 1995 captured an impressive ranking of 9TH OUT OF 174 INTERNATIONAL EQUITY
FUNDS, as measured by Lipper Analytical Services, Inc.(1) What's more, for the
six-month period ended April 30, 1995, both the Schwab International Index and
the Fund outperformed the MSCI EAFE Index* (EAFE Index). It should be noted that
indices usually enjoy a performance advantage over the funds that track them
because indices have no trading costs or operational expenses. The Schwab
International Index Fund's net asset value (NAV) began the period at $10.89 and
ended at $10.96. The Fund paid out $.12 per share in dividends during the
period.
The table below compares total return for various periods for the Schwab
International Index Fund, the Schwab International Index and the EAFE Index.
<TABLE>
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TOTAL RETURN
<CAPTION>
Cumulative Since Average Annual
Six-Months Ended One Year Ended Fund Inception Since Fund Inception
April 30, 1995 April 30, 1995 (9/9/93-4/30/95) (9/9/93-4/30/95)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Schwab
International
Index Fund(TM) 1.78% 6.57% 11.45% 6.84%
- -----------------------------------------------------------------------------------------------
Schwab
International
Index(TM) 2.90% 7.61% 13.46%
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MSCI EAFE
Index* 1.27% 5.64% 12.55%
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* Morgan Stanley Capital International-Europe, Australia, Far East Index
For the Schwab International Index Fund, one year total return for the year
ended 3/31/95 was 5.93% and average annual total return since inception through
3/31/95 was 4.81%.
- -----------------------------------------------------------------------------------------------
</TABLE>
Total return assumes reinvestment of all dividends and capital gain
distributions. Past performance is no guarantee of future results. Principal
value and returns will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
(1) Lipper Analytical Services, Inc. Total return assumes the reinvestment of
all dividends and capital gain distributions.
<PAGE> 6
FALLING DOLLAR BOLSTERS FUND'S PERFORMANCE
The movements of international equity prices and foreign currency exchange rates
provided an excellent example of the impact the currency factor can have on the
total return for U.S. dollar-based investments. During the six-month period
ended April 30, 1995, the value of the Fund's international stock positions
declined when expressed in terms of their local currencies. However, because the
U.S. dollar dropped to historic lows against the Japanese yen and German mark,
the Fund experienced a very strong positive return since the end of January and
actually realized a positive total return for the six-month period ended April
30, 1995.
In the "Questions to the Investment Manager" section of this report, we describe
in further detail the factors that affected the Fund's performance.
THE ADVANTAGES OF INDEXING
Trend Participation
Investors seeking the long-term growth potential of international stocks can
turn to indexing for the opportunity to participate in the long-term total
return of the international equity markets. The Schwab International Index
Fund(TM) attempts to track the price and dividend performance of the Schwab
International Index(TM) through its investment in stocks of international
companies that comprise the Index.
By investing in a Fund whose stocks seek to match the performance of the
international markets, you can help keep pace with market trends. Whereas
actively managed funds regularly buy and sell securities based on predictions of
market movement, index funds generally follow market movement. Since it's nearly
impossible to consistently predict and beat the market, the alternative of
participating in the market trends offered by indexing is attractive for many
investors.
Lower Taxes
The Schwab International Index Fund seeks to maximize its after-tax performance
for investors by keeping capital gain distributions to a minimum. The Fund does
this in two significant ways. First, the Fund is designed to maintain a low
portfolio turnover through its indexing approach. For the year ended April 30,
1995, the Fund's portfolio turnover was 2%, compared with 67% for actively
managed international equity funds.(2) Second, the Fund seeks to offset gains
with losses when securities must be sold. Both methods can limit capital gain
distributions to shareholders, which when taxed, erode after-tax returns.
(2) Source: Morningstar, Inc., April 30, 1995. Average portfolio turnover
reported for 579 actively managed international equity funds, as of April
30, 1995.
<PAGE> 7
Keeping Expenses to a Minimum
Simply put, the less you pay in fees, the greater a portion of the Fund's return
you can receive. The Schwab International Index Fund(TM) has demonstrated
Schwab's strong commitment to keeping fees low for investors. The Fund does not
impose sales loads or 12b-1 fees, both of which would increase expenses, and
cause your total returns to diminish.(3) Additionally, the low portfolio
turnover rate mentioned previously results in lower transaction costs for the
Fund. In fact, the Fund's total operating expense ratio during the reporting
period of 0.95% of the Fund's average daily net assets underscores its lower
expenses when compared to the higher average ratio of 1.81% for actively
managed international equity funds.(4) What's more, beginning July 1, 1995,
the Fund's total operating expense ratio will be reduced to just .69% through
at least June 30, 1996.
THE POWER OF INTERNATIONAL DIVERSIFICATION
The Schwab International Index Fund's broad diversification among international
equities helps to reduce foreign investment risk by making sure your investment
is exposed to a variety of growth opportunities throughout the world, rather
than being tied to the fortunes of one region.
International stocks have provided a strong average annual price return of
14.17% for the past 10 years, as measured by the Schwab International
Index(TM).(5) By investing in the Schwab International Index Fund, shareholders
may make the most of the opportunity for international returns.
International equity returns have historically exhibited the potential for
greater returns than domestic equity investments. The Schwab International Index
represents approximately 45% of the worldwide equity marketplace while the U.S.
equity market represents only one-third. Since international and U.S. stock
price movements are not perfectly correlated, adding both to a portfolio may
result in less total portfolio price volatility than a portfolio comprised
strictly of U.S. or international stocks. As a result, allocating a portion of
your personal portfolio to an international index fund offers the potential to
increase your portfolio returns while simultaneously reducing portfolio
volatility.
The Schwab International Index Fund seeks to invest in substantially all of the
stocks in the Schwab International Index, which is comprised of 350 of the
world's largest publicly traded companies, ranked by market capitalization.(6)
In addition, the Fund has achieved broad diversification by currently
participating in the equity markets of fifteen countries.
(3) To help keep Fund expenses low for long-term shareholders, investors who
hold their shares for less than six months will be charged a redemption fee
of 0.75%. This fee is paid directly to the Fund to offset the costs
associated with short-term trading.
(4) Source: Morningstar, Inc., April 30, 1995. Average operating expenses
reported for 579 actively managed international equity funds, as of April
30, 1995.
(5) International stock performance as measured by the Schwab International
Index for the 10 year period ended April 30, 1995. Performance by the
Schwab International Index was reconstructed by Morgan Stanley & Co., Inc.
prior to the Fund's inception date of 9/9/93, and represents historical
performance of an unmanaged index. Past performance is no guarantee of
future results.
(6) The Schwab International Index includes only companies from 15 countries
with developed securities markets, and excludes non-operating companies and
companies from the United States.
<PAGE> 8
The map below illustrates your Fund's international diversification. You'll also
find a complete listing of its holdings following the "Questions to the
Investment Manager" section of this letter.
THE FUND PROVIDES INTERNATIONAL EQUITY OPPORTUNITIES
<TABLE>
<S> <C>
Canada 3.0%
Belgium 0.7%
Netherlands 5.3%
Germany 7.7%
Denmark 0.4%
Sweeden 1.7%
Japan 31.5%
United Kingdom 20.4%
Spain 1.8%
France 7.6%
Switzerland 6.2
Italy 2.7%
Singapore 2.2%
Australia 2.6%
Hong Kong 3.4%
</TABLE>
SCHWAB INTERNATIONAL INDEX FUND(TM) EQUITY HOLDINGS
AS OF APRIL 30, 1995
THE SCHWAB INTERNATIONAL INDEX FUND'S LONG-TERM ADVANTAGE
Overseas equity markets can be volatile, especially in the short-term.
International investing involves special risks, such as currency fluctuations,
differing tax laws and accounting standards, and economic or political
instability. The good news for investors with an eye toward the long-term is
that, over time, allocating a portion of your investment portfolio
internationally may smooth out your portfolio's overall ups and downs and help
you to realize the potential for greater growth.
LOOKING FORWARD
The Schwab International Index Fund remains poised to capture the potential for
attractive rewards offered by the international marketplace. With its broad
international equity diversification and opportunity for higher returns, we
believe the Fund has an important place in many long-term investment portfolios.
Going forward, the Fund will continue to strive to track the price and dividend
performance of the Schwab International Index(TM), as well as to maintain its
tax and cost advantages for shareholders.
Thank you again for your confidence in SchwabFunds(R). We look forward to
continuing to help you achieve your financial goals.
CHARLES SCHWAB INVESTMENT MANAGEMENT, INC.
<PAGE> 9
QUESTIONS TO THE INVESTMENT MANAGER
Q. HOW DID THE PERFORMANCE OF THE SCHWAB INTERNATIONAL INDEX(TM) COMPARE TO THE
MORGAN STANLEY EAFE INDEX DURING THE SIX-MONTH REPORTING PERIOD?
A. During the six-month period ended April 30, 1995, the total return of the
Schwab International Index was 2.90%, outperforming the 1.27% return of the
Morgan Stanley EAFE Index. Put another way, a $1,000 investment in the stocks
that comprise the Schwab International Index would have returned $29.00 compared
to the $12.70 return for the same investment in the stocks comprising the EAFE
Index. The Schwab International Index outperformed the EAFE Index for
dollar-based investors primarily because the Schwab International Index had less
exposure to Japanese markets and more exposure to the United Kingdom markets;
dur ing the six-month period, United Kingdom equities outperformed Japanese
equities.
The EAFE Index includes over 900 stocks and measures the performance of stocks
in Europe, Australia, and the Far East, with the objective of representing 60%
of the market capitalization of each included nation's market. The Schwab
International Index is made up of the stocks of the 350 largest publicly traded
companies (non-investment companies) by market capitalization, in the fifteen
countries with developed securities markets covered by the Index.
The chart below illustrates the cumulative total return of the Schwab
International Index and the Schwab International Index Fund(TM) compared to the
EAFE Index since the Fund's inception on September 9, 1993.
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT
(IN THE SCHWAB INTERNATIONAL INDEX FUND(TM)
THE SCHWAB INTERNATIONAL INDEX(TM) AND THE MSCI EAFE INDEX)
[Line graph comparing value of $10,000 investment for the period 9/3/93 to
4/30/95 between the Schwab International Index $11,346, Schwab International
Index Fund $11,145, and MSCI EAFE Index $11,255]
<TABLE>
<CAPTION>
- ------------------------------------------------------
Date Fund Index EAFE
- ------------------------------------------------------
<S> <C> <C> <C>
9/9/93 $10,000 $10,000 $10,000
9/30/93 $9,770 $9,786 $9,776
10/31/93 $10,150 $10,167 $10,079
11/30/93 $9,420 $9,454 $9,200
12/31/93 $10,096 $10,137 $9,867
1/31/94 $10,769 $10,823 $10,703
2/28/94 $10,558 $10,623 $10,676
3/31/94 $10,156 $10,172 $10,218
4/30/94 $10,458 $10,544 $10,654
5/31/94 $10,407 $10,448 $10,593
6/30/94 $10,488 $10,508 $10,743
7/31/94 $10,649 $10,692 $10,846
8/31/94 $10,940 $10,999 $11,103
9/30/94 $10,558 $10,621 $10,753
10/31/94 $10,950 $11,026 $11,113
11/30/94 $10,427 $10,478 $10,579
12/31/94 $10,484 $10,564 $10,645
1/31/95 $10,108 $10,254 $10,237
2/28/95 $10,189 $10,282 $10,207
3/31/95 $10,759 $10,964 $10,847
4/30/95 $11,145 $11,346 $11,255
</TABLE>
Past performance is no guarantee of future results. Principal value and returns
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
The performance graph compares a hypothetical $10,000 investment in the Schwab
International Index Fund since inception with hypothetical investments in the
Schwab International Index and the MSCI EAFE Index. Indices are unmanaged and
assume reinvestment of all dividends. Investors cannot invest directly in an
index, therfore indices, unlike the Fund, do not reflect the payment of advisory
fees and other expenses associated with an investment in the Fund. Fund total
returns assume the reinvestment of all dividends and capital gain distributions.
<PAGE> 10
Q. WHAT ACCOUNTS FOR THE DIFFERENCE BETWEEN THE PERFORMANCE OF THE SCHWAB
INTERNATIONAL INDEX FUND(TM) AND THE SCHWAB INTERNATIONAL INDEX(TM)?
A. The Schwab International Index is a theoretical return of a group of stocks
of the companies covered by the Index. Unlike the Fund, the Index does not incur
management and other Fund costs, such as trading, customer service and Fund
accounting costs, which affect Fund performance. Also, the Fund holds a small
portion of its balances in cash to meet redemptions and pay expenses. The cash
portion earns interest at money market rates, which may be more or less than the
returns of the Index during a given period. The Index contains no such cash
balances. In addition, the weighting of any particular security in the Fund can
be greater or less than the actual weighting in the Index. These factors can
cause a difference in the returns of the Index compared to the Fund, a
difference referred to as the Fund's "tracking error".
Another primary goal of the Fund is to minimize capital gain distributions. In
order to avoid the excessive realization of capital gains, the Fund may continue
to hold certain stocks which have fallen out of the Index, but do not
significantly impact tracking error. Depending on the performance of these
non-Index stocks, this can contribute positive or negative tracking error to the
Fund.
Q. WHAT HAS BEEN THE EFFECT ON THE FUND OF THE DECLINING U.S. DOLLAR DURING THE
REPORTING PERIOD?
A. Since your investment in the Fund is denominated in U.S. dollars, the return
you receive as a U.S. investor from international equities is made up of two
primary components - the market movement of the securities, and the value of the
dollar in relation to the securities' local currencies. As a result,
fluctuations in the exchange rate between the U.S. dollar and the local
currencies will affect the U.S. dollar-denominated returns the Fund earns on
international equities. If the U.S. dollar rises against local currency, it will
decrease the return on your investment in the Fund. However, if the U.S. dollar
falls against the local currency, it will increase the return on your
investment, which is, on average, what happened during the six-month period.
The three countries with the largest weights as a percentage of the Fund's
investments were Japan (31.5%), the United Kingdom (20.4%), and Germany (7.7%).
During the six-month period, the U.S. dollar fell dramatically against the
Japanese yen and, to a lesser extent, against the German mark. As a result, the
return in U.S. dollars of these sectors of the Fund's portfolio improved. The
U.S. dollar was flat against the British pound over the period; therefore, this
sector of the Fund's portfolio was largely unaffected by currency movements.
Negative returns expressed in local currencies can translate to positive returns
in U.S. dollars, which is what occurred during the reporting period. For
example, the return of the Schwab International Index for the six-month period
was -3.69% in local currency; once translated into U.S. dollars, the total
return of the Index was 2.90%. If an investor's diversified portfolio includes
both U.S. and international securities, these exchange rate fluctuations may
actually have a beneficial impact on total portfolio risk.
<PAGE> 11
Q. NOW THAT YOU, CHARLES SCHWAB INVESTMENT MANAGEMENT, INC., WILL HAVE DIRECT,
DAY-TO-DAY, PORTFOLIO MANAGEMENT RESPONSIBILITY FOR THE SCHWAB INTERNATIONAL
INDEX FUND(TM), WHAT CHANGES CAN SHAREHOLDERS EXPECT AND HOW MAY THE CHANGES
BENEFIT THEM?
A. Although we will continue to manage the Fund in a manner very consistent with
that of the former sub-adviser, we feel there are advantages to Fund
shareholders as a result of the change. By directly overseeing the portfolio
management activities of the Fund, we will be better able to meet your service
needs, respond to your questions, and prepare meaningful communications
regarding the Fund's activities. Although we already manage over $24 billion in
money market and bond mutual funds, we have recently made additional investments
in state of the art equity portfolio management software and systems. As part of
this venture, we have also added a very talented and experienced equity
portfolio management team whose sole responsibility will be management of the
SchwabFunds(R) equity portfolios.
We will continue to strive to minimize tracking error relative to the Schwab
International Index(TM), and to pursue a tax efficient strategy by minimizing
portfolio turnover and managing capital gain distributions by offsetting
portfolio gains with losses.
Q. WHAT IS INDEX INVESTING, AND WHAT MAKES IT SUCH AN ATTRACTIVE INVESTMENT
STRATEGY?
A. Although index investing has broad appeal among many sophisticated investors
and academics, it is actually a fairly simple concept. The investment manager's
objective generally is to replicate the performance of an index either by
investing in all the securities in the index or by investing in a representative
sample of securities in the index. Index investing is frequently referred to as
a "passive" strategy. As contrasted with "active" strategies, a passive strategy
does not attempt to "make bets" on particular industry sectors or individual
securities which the manager believes will out-perform the market.
The primary advantages of investing in an index fund are usually reduced costs
to shareholders, the opportunity to achieve a particular market return, and the
ability to purchase a diversified portfolio of securities. Compared to actively
managed funds, passively managed funds generally have lower portfolio turnover,
lower transaction costs, and they attempt to remain as fully invested as
possible.
Index funds typically realize these lower costs in two ways. First, index funds
can offer lower management fees and, therefore, lower total operating expenses.
Second, index funds may achieve lower costs through low portfolio turnover. Low
portfolio turnover can minimize excessive capital gain distributions and trading
costs, helping to increase returns to shareholders. These strategies may help to
enhance the after-tax returns to Fund investors.
Since index funds attempt to replicate the performance of a particular index,
they tend to keep minimal cash positions and maintain a relatively fully
invested equity position. In contrast, many actively managed funds maintain
varying levels of cash positions in an effort to enhance returns by "timing"
market movements and to maintain some liquidity for future redemptions. For
example, as of March 31, 1995, the Investment Company
<PAGE> 12
Institute reported that the average cash equivalent position for all
international equity funds was 10.4%. This is a significantly greater percentage
than that of the Schwab International Index Fund(TM), which had a cash
equivalent position of 3.7% as of April 30, 1995. In addition, index funds
provide individual investors a convenient and low cost way to diversify into
different market sectors.
Q. WHAT STRATEGIES DOES THE FUND EMPLOY TO INCREASE ITS AFTER-TAX RETURN TO
SHAREHOLDERS?
A. The Fund is managed to increase the after-tax return for shareholders by
employing strategies designed to minimize portfolio turnover and capital gain
distributions. In addition, unlike the management policies of many other index
funds, the Fund may selectively maintain positions in stocks which, because of
market conditions, have "fallen out" of the Schwab International Index(TM). In
other words, stocks of companies fall in value relative to other companies in
the Index. The Investment Manager evaluates the impact such stocks have on
portfolio tracking error, trading costs, and capital gain distributions. This
strategy may further decrease portfolio turnover relative even to other index
funds. The Fund's annual turnover rate for its only full year of operation was
6% compared to an average of 20% for international equity index funds.(7)
These policies enable the Schwab International Index Fund to add significant
value for its shareholders by helping to minimize trading costs and capital gain
distributions, which maximize the after-tax returns to shareholders of the Fund.
(7) Source: Morningstar, April 30, 1995. Average portfolio turnover reported
for the 19 index funds in the International category.
<PAGE> 13
SchwabFunds(R) 1
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SCHWAB INTERNATIONAL INDEX FUND(TM)
STATEMENT OF NET ASSETS
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
COMMON STOCK--96.6%
AUSTRALIA--2.5%
Australia & New Zealand Banking Group 51,565 $ 191
BTR Nylex, Ltd. 116,332 227
Broken Hill Proprietary Co., Ltd. 75,045 1,092
CRA 24,700 355
Coles Myer, Ltd. 50,456 168
Commonwealth Bank Group 39,529 271
National Australia Bank 61,005 528
News Corp., Ltd. 85,790 417
Western Mining Corp. 47,000 266
Westpac Banking Corp. 79,966 296
------
3,811
------
BELGIUM--0.7%
Electrabel 2,000 430
Electrabel, AFV1 500 108
Petrofina SA 1,000 312
Societe Generale de Belgique 2,640 200
------
1,050
------
CANADA--3.0%
Alcan Aluminum Ltd. 9,967 282
BCE Inc. 13,906 442
Bank of Montreal 11,493 232
Bank of Nova Scotia 8,356 170
Barrick Gold Corp. 14,800 359
Canadian Imperial Bank of Commerce 9,517 237
Canadian Pacific Ltd. 14,600 224
Imperial Oil Ltd. 8,710 310
Newbridge Networks Corp.* 3,300 103
Northern Telecom Ltd. 10,700 390
Nova Corp. 19,200 168
PanCanadian Petroleum Ltd. 5,000 169
Placer Dome Inc. 10,700 255
Royal Bank of Canada 13,200 290
Seagram Co. Ltd. 16,300 441
Thomson Corp. 23,700 322
Toronto-Dominion Bank 14,000 206
------
4,600
------
DENMARK--0.4%
D/S 1912 Series B 10 195
D/S Svendborg Series B 5 138
Tele Denmark AS Series B 5,910 308
------
641
------
FRANCE--7.6%
AXA Groupe SA 13,100 691
Alcatel Alsthom Cie Generale d'Electricite SA 6,200 575
Alcatel Cable 1,723 133
Assurances Generales de France 15,800 523
Banque Nationale de Paris 10,018 487
Canal Plus 819 112
Carrefour 1,100 552
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
Cie Financiere de Paribas (Bearer) 5,231 319
Cie Generale des Eaux 4,803 506
Compagnie de Saint-Gobain SA 3,523 456
Credit Lyonnais 1,800 89
Danone Groupe 3,000 496
Elf Aquitaine 11,256 900
GAN Group 1,900 66
L'Air Liquide 3,022 486
L'Oreal SA 2,650 698
LVMH Moat Hennessy Louis Vuitton 7,100 1,351
Lafarge Coppee SA 3,500 273
Lyonnaise des Eaux-Dumez 2,430 242
Michelin Class B (Reg.) 4,450 200
PSA Peugeot Citroen 2,200 317
Rhone-Poulenc SA A Shares 13,500 329
Schneider Group 2,650 204
Societe Generale 3,473 382
Suez Group 6,400 333
TOTAL Class B 9,800 613
Union des Assurances de Paris 12,650 344
------
11,677
------
GERMANY--7.3%
BASF Group 2,500 555
Bankgesellschaft Berlin 1,029 237
Bayer AG 2,866 705
Bayerische Hypotheken & Wechsel Bank AG 1,047 279
Bayerische Hypotheken & Wechsel Bank AG (New)* 91 24
Bayerische Motoren Werke AG 820 420
Bayerische Vereinsbank AG 1,031 292
Bayerische Vereinsbank AG
(Subordinate rights - exp. 05/12/95)* 1,031 2
Commerzbank AG 1,345 324
Daimler-Benz AG 2,721 1,246
Deutsche Bank AG 2,016 989
Dresdner Bank AG 1,897 526
Hoechst AG 2,550 544
Mannesmann AG 1,561 423
Muenchener Rueckversicherung 11 18
Muenchener Rueckversicherung (Reg.) 311 620
Preussag AG 615 178
RWE AG 1,469 493
SAP AG 242 250
Siemens AG 2,449 1,189
Thyssen AG 1,411 262
VEBA AG 2,148 800
VIAG AG 873 323
Vereinigte Elektrizitatswerke Westfalen Series B 903 292
Volkswagen AG 1,129 315
------
11,306
------
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 14
SchwabFunds(R) 2
- -------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
STATEMENT OF NET ASSETS
April 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
HONG KONG-3.4%
CITIC Pacific 85,000 $208
Cathay Pacific Airways 118,000 165
China Light & Power 88,900 419
Hang Seng Bank Ltd. 81,100 534
Henderson Land Development Co. 68,000 350
Hongkong Electric Holdings Ltd. 84,000 258
Hongkong Land Holdings 111,000 209
Hongkong Telecom International 488,000 955
Hutchinson Whampoa Ltd. 154,000 668
New World Development Co. 69,709 181
Sun Hung Kai Properties 97,500 622
Swire Pacific Ltd. Class A 68,000 455
Wharf Holdings 89,000 267
-----
5,291
-----
ITALY-2.6%
Alleanza Assicurazioni 22,500 235
Alleanza Assicurazioni (Non-Convertible) 3,750 34
Assicurazioni Generali 35,200 848
Banco di Roma SpA 141,900 136
Fiat Finance SpA 102,000 416
Fiat Finance SpA (Non-Convertible) 42,000 105
First Bank San Paolo di Torino 27,700 154
IMI 24,800 152
INA* 161,000 217
Montedison SpA 213,000 156
RAS Assicurazioni 6,310 67
RAS Assicurazioni (Non-Convertible) 2,790 18
STET 160,000 456
STET (Non-Convertible) 66,000 152
Telecom Italia 260,000 694
Telecom Italia (Non-Convertible) 65,000 136
-----
3,976
-----
JAPAN-31.5%
Ajinomoto Co., Inc. 14,000 168
All Nippon Airways Co., Ltd. 28,000 332
Asahi Bank 45,000 578
Asahi Breweries 8,000 99
Asahi Chemical Industry Co. 28,000 217
Asahi Glass Co., Ltd. 24,000 314
Ashikaga Bank 15,000 114
Bank of Fukuoka 11,000 101
Bank of Tokyo 39,000 705
Bank of Yokohama 24,000 223
Bridgestone Corp. 15,000 243
Canon Inc. 16,000 265
Chiba Bank 16,000 162
Chubu Electric Power Co. 14,300 398
Chugoku Electric Power Co., Inc. 7,700 210
Cosmo Oil Co. 11,000 80
Dai Nippon Printing Co. 15,000 252
Dai-Ichi Kangyo Bank, Ltd. 61,000 1,249
Daiei Inc. 14,000 173
Daiichi Pharmaceutical Co. 5,000 81
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
Daiwa Bank 29,000 $289
Daiwa House Industry Co. 9,000 150
Daiwa Securities Co. 26,000 328
East Japan Railway Co. 100 520
Ebara Corp. 5,000 79
Eisai Co. 5,000 89
FamilyMart Co. 1,200 57
Fanuc 5,000 226
Fuji Bank, Ltd. 58,000 1,394
Fuji Photo Film Co. 11,000 270
Fujitsu Ltd. 35,000 358
Furukawa Electric Co., Ltd. 13,000 80
Gunma Bank 10,000 120
Hachijuni Bank 10,000 127
Hankyu Corp. 17,000 103
Hanwa Co. 5,000 16
Hiroshima Bank 13,000 91
Hitachi Ltd. 66,000 672
Hitachi Zosen 19,000 91
Hokkaido Electric Power Co. 4,000 109
Hokkaido Takushoku Bank 12,000 43
Hokuriku Bank 13,000 99
Hokuriku Electric Power Co. 4,000 107
Honda Motor Co., Ltd. 20,000 324
Industrial Bank of Japan, Ltd. 46,000 1,407
Ishikawajima-Harima Heavy Industries 25,000 115
Isuzu Motors Ltd. 20,000 93
Ito-Yokado Co., Ltd. 8,000 431
Itochu Corp. 28,000 190
Japan Airlines Co., Ltd. 35,000 250
Japan Energy Co. 21,000 83
Joyo Bank 14,000 124
Jusco Co. 6,000 123
Kajima Corp. 20,000 200
Kandenko Co., Ltd. 5,500 90
Kansai Electric Power Co. 18,800 515
Kao Corp. 12,000 146
Kawasaki Heavy Industries 25,000 102
Kawasaki Steel Co. 62,000 251
Keio Teito Railway Co. 8,000 51
Kinden Co. 3,300 66
Kinki Nippon Railway Co. 31,000 286
Kirin Brewery Co., Ltd. 22,000 261
Kobe Steel 59,000 177
Kokusai Denki 1,100 99
Komatsu Ltd. 18,000 143
Kubota Corp. 27,000 195
Kyocera Corp. 4,000 309
Kyowa Hakko Kogyo 6,000 64
Kyushu Electric Power Co. 9,700 268
Kyushu Matsushita Electric Co. 3,000 62
Long-Term Credit Bank of Japan 48,000 491
Marubeni Corp. 27,000 149
Marui Co. 7,000 107
Matsushita Communication Industrial 4,000 89
Matsushita Electric Industrial Co., Ltd. 41,000 688
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 15
SchwabFunds(R) 3
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
Matsushita Electric Works 15,000 $ 180
Matsushita-Kotokuki Electronics 3,000 64
Mazda Motor Corp. 21,000 93
Mitsubishi Bank 57,000 1,397
Mitsubishi Chemical Corp. 28,000 164
Mitsubishi Corp. 30,000 378
Mitsubishi Electric Corp. 43,000 305
Mitsubishi Estate Co. 25,000 300
Mitsubishi Heavy Industries 64,000 465
Mitsubishi Materials Co. 21,000 105
Mitsubishi Motors 17,000 158
Mitsubishi Oil Co. 8,000 86
Mitsubishi Trust & Banking Corp. 25,000 431
Mitsui & Co. 30,000 257
Mitsui Fudosan Co. 16,000 186
Mitsui Marine & Fire Insurance 14,000 106
Mitsui O.S.K. Lines 14,000 51
Mitsui Trust & Banking Co. 25,000 280
Mitsukoshi Ltd. 9,000 83
Murata Manufacturing Co. 5,000 201
NEC Corp. 31,000 343
NGK Insulators 5,000 50
NKK Corp. 67,000 187
Nagoya Railroad Co. 10,000 57
New Oil Paper Co. 16,000 179
Nichii Co. 4,000 46
Nikko Securities Co. 29,000 284
Nintendo Co., Ltd. 3,000 192
Nippon Credit Bank 34,000 196
Nippon Express Co. 21,000 208
Nippon Fire & Marine Insurance Co. 7,000 46
Nippon Oil Co. 26,000 176
Nippon Paper Industries Co. 39,000 303
Nippon Steel Corp. 131,000 521
Nippon Telegraph & Telephone Corp. 303 2,679
Nippon Yusen Kabushiki Kaisha 21,000 135
Nippondenso 17,000 342
Nissan Motor Co., Ltd. 49,000 358
Nisshin Steel Co. 20,000 100
Nomura Securities Co., Ltd. 38,000 769
Obayashi Corp. 17,000 142
Odakyu Electric Railway Co. 14,000 117
Oki Electric Industry Co., Ltd. 12,000 85
Ono Pharmaceutical Co. 3,000 149
Osaka Gas Co. 53,000 218
Pioneer Electronic Corp. 4,000 84
Ricoh Co., Ltd. 13,000 121
SEGA Enterprises, Ltd. 2,000 92
Sakura Bank 67,000 893
Sankyo Co. 7,700 185
Sanwa Bank 57,000 1,234
Sanyo Electric Co., Ltd. 40,000 226
Secom Co. 2,000 130
Seibu Railway Co. 11,000 445
Sekisui Chemical Co. 11,000 137
Sekisui House 14,000 185
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
Seven-Eleven Japan Co. 7,700 $ 554
Sharp Corp. 22,000 361
Shikoku Electric Power Co. 4,800 130
Shimizu Corp. 17,000 182
Shin-Etsu Chemical Co. 6,000 116
Shiseido Co., Ltd. 8,000 97
Shizuoka Bank 16,000 221
Showa Shell Sekiyu 7,000 89
Sony Corp. 8,000 404
Sony Music Entertainment (Japan) 2,100 107
Sumitomo Bank 63,000 1,364
Sumitomo Chemical Co. 29,000 164
Sumitomo Corp. 21,000 209
Sumitomo Electric Industries 15,000 203
Sumitomo Marine & Fire Insurance Co. 13,000 109
Sumitomo Metal Industries 60,000 197
Sumitomo Metal Mining Co. 11,000 98
Sumitomo Trust & Banking Co. 25,000 378
Suzuki Motor Corp. 10,000 107
TDK 3,000 137
Taisei Corp. 19,000 131
Taisho Pharmaceutical Co. 6,000 112
Takeda Chemical Industries 17,000 227
Teijin Ltd. 19,000 107
Tobu Railway Co. 16,000 105
Tohoku Electric Power Co. 10,000 287
Tokai Bank 39,000 501
Tokio Marine & Fire insurance Co. 30,000 357
Tokyo Electric Power Co., Inc. 26,000 832
Tokyo Electron 3,000 94
Tokyo Gas & Electric Industrial 57,000 260
Tokyo Steel Manufacturing 2,000 42
Tokyu Corp. 23,000 162
Tonen 13,000 240
Toppan Printing Co. 12,000 174
Toray Industries 29,000 203
Toshiba Corp. 61,000 406
Tostem Corp. 4,000 145
Toto 6,000 100
Toyo Seikan 4,000 138
Toyo Trust & Banking Co. 17,000 174
Toyoda Automatic Loom 6,000 110
Toyota Motor Corp. 74,000 1,506
Yamaichi Securities Co. 25,000 173
Yamanouchi Pharmaceutical Co. 6,000 135
Yamazaki Baking Co. 5,000 95
Yasuda Fire & Marine Insurance Co. 15,000 107
Yasuda Trust & Banking Co. 23,000 186
-------
48,571
-------
NETHERLANDS--5.3%
ABN-Amro Holding NV 12,240 471
AEGON NV 4,400 342
Akzo Nobel NV 3,000 348
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 16
SchwabFunds(R) 4
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
STATEMENT OF NET ASSETS
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
Elsevier NV 29,000 $ 318
Heineken NV 2,250 321
Internationale Nederlanden Groep 11,582 610
Koninkiljke PTT Nederland 19,700 687
Philips Electronics NV 14,500 553
PolyGram NV 7,900 446
Royal Dutch/Shell Group (Bearer) 23,200 2,862
Unilever NV 7,000 937
Wolters Kluwer CVA 2,700 220
------
8,115
------
SINGAPORE--2.2%
Development Bank Singapore (Alien Market) 45,000 481
Jardine Matheson Holdings Ltd. 29,811 237
OCBC Bank 38,833 424
Singapore Airlines Ltd. 62,000 596
Singapore Telecom 669,000 1,335
United Overseas Bank 33,000 343
------
3,416
------
SPAIN--1.8%
Argentaria 5,700 184
Banco Central SA (Reg.) 5,500 126
Banco Espanol de Credito 26,000 184
Banco de Bilbao Vizcaya SA (Reg.) 11,200 302
Banco de Santander 1,200 44
Banco de Santander SA (Reg.) 5,600 204
Empresa Nacional de Electricidad 11,700 553
Iberdrola SA 39,600 261
Repsol, SA 12,800 408
Telefonica Internacional de Espana, SA 42,300 517
------
2,783
------
SWEDEN--1.7%
ASEA AB Series A Free shares 3,300 278
ASEA AB Series B Free shares 800 67
Astra AB Series A Free shares 22,400 654
Astra AB Series B Free shares 3,400 97
BCP Branded Consumer Products Series A Free shares 5,300 69
BCP Branded Consumer Products Series B Free shares 2,800 36
L.M. Ericsson Telephone Co. Series B Free shares 9,300 616
Pharmacia AB Series A Free shares 5,300 100
Pharmacia AB Series B Free shares 2,800 53
Sandvik AB Series A Free shares 8,600 160
Volvo AB Series A Free shares 5,000 95
Volvo AB Series B Free shares 20,700 389
------
2,614
------
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
SWITZERLAND--6.2%
BBC Brown Bovari 331 $ 327
BBC Brown Bovari (Reg.) 189 36
CS Holding (Bearer) 1,014 424
CS Holding (Reg.) 2,260 189
Ciba-Geigy Ltd. (Bearer) 170 116
Ciba-Geigy Ltd. (Reg.) 1,080 739
Cie Financiere Richemont Series A (Bearer) 259 294
Nestle Ltd. (Reg.) 1,669 1,629
Roche Group 295 1,772
Roche Group (Bearer) 70 739
SMH AG (Bearer) 156 80
SMH AG (Reg.) 682 80
Sandoz Ltd. (Bearer) 91 60
Sandoz Ltd. (Reg.) 1,673 1,093
Schweizeriche Bankgesellschaft (Bearer) 886 815
Schweizerische Bankgesellschaft (Reg.) 950 204
Schweizerische Bankverein (Bearer) 1,028 338
Schweizerische Bankverein (Reg.) 1,251 208
Zurich Versicherung (Bearer) 150 159
Zurich Versicherung (Reg.) 238 254
------
9,556
------
UNITED KINGDON--20.4%
Abbey National 56,600 424
Allied-Lyons 43,900 387
Argyll Group 45,306 209
BAA PLC 42,518 324
BAT Industries PLC 130,356 984
BOC Group 21,850 265
BTR PLC 148,712 785
Barclays PLC 70,097 721
Bass PLC 37,200 329
Boots Co. PLC 46,648 383
British Airways PLC 40,000 258
British Gas PLC 189,700 919
British Petroleum Co. PLC 236,575 1,704
British Steel 80,800 220
British Telecommunications PLC 269,400 1,682
Cable & Wireless PLC 146,900 948
Cadbury Schweppes PLC 35,110 253
Commercial Union Assurance Co. 31,400 281
General Accident 17,300 161
General Electric Co. PLC 115,800 568
Glaxo PLC 149,529 1,767
Grand Metropolitan PLC 92,103 591
Great Universal Stores 43,000 409
Guinness PLC 88,200 667
HSBC Holdings PLC 36,191 427
HSBC Holdings PLC (Hong Kong) 77,046 887
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 17
SchwabFunds(R) 5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
Hanson PLC 219,053 $ 834
Imperial Chemical Industries PLC 32,100 390
Inchcape 21,587 111
J. Sainsbury PLC 75,303 530
Kingfisher 28,721 207
Lloyds Abbey Life 26,700 160
Lloyds Bank 56,554 582
Marks & Spencer PLC 117,900 798
National Power Development 52,800 385
National Westminster Bank PLC 73,299 637
New Rothmans (units) 62,400 614
Pearson PLC 25,137 232
Peninsular & Oriental Steam Navigation Co. 25,546 237
Powergen PLC 33,400 260
Prudential Corp. 83,367 420
RTZ Corp. PLC (Reg.) 44,900 572
Rank Organisation PLC 35,800 244
Redland 21,671 143
Reed International PLC 23,400 301
Reuters Holdings PLC 86,500 658
Royal Bank of Scotland 36,000 241
Scot & Newcastle 20,100 174
Scottish Power 31,400 171
Shell Transport & Trading Co. (Reg.) 143,700 1,702
SmithKline Beecham PLC Series A 60,463 478
SmithKline Beecham units 58,100 443
Standard Chartered PLC 9,989 48
Sun Alliance Group 31,988 173
TSB Group PLC 68,100 273
Tesco 84,875 382
Thorn EMI PLC 17,666 323
Tomkins 46,606 176
Unilever PLC 34,600 683
Vendome (units) 29,850 231
Vodafone Group PLC 136,192 425
Waste Management International* 16,000 65
Zeneca Group 42,100 612
-------
31,468
-------
TOTAL COMMON STOCK (Cost $137,128) 148,875
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ------
<S> <C> <C>
PREFERRED STOCK--0.6%
AUSTRALIA--0.1%
News Corp. Ltd. (Limited Voting Shares) 39,195 $ 173
--------
GERMANY--0.4%
Henkel KGaA 629 242
RWE AG (Non Voting) 832 224
SAP AG (Non Voting) 161 151
Volkswagen AG (Non Voting) 201 43
--------
660
--------
ITALY--0.1%
Fiat Finance SpA 38,800 100
--------
TOTAL PREFERRED STOCK (Cost $812) 933
--------
WARRANTS--0.0%
UNITED KINGDOM--0.0%
BTR Nylex Ltd. (expire 11/26/98)* 4,019 2
--------
TOTAL WARRANTS (Cost $3) 2
--------
</TABLE>
<TABLE>
<CAPTION>
Maturity
(000s)
---------
<S> <C> <C>
REPURCHASE AGREEMENT--3.5%
UNITED STATES--3.5%
State Street Bank & Trust 2.80%
Dated 4/28/95 Due 5/1/95
Collateralized By:
U.S. Treasury Note $5,395,000 Par;
6.75% Due 5/31/99 $5,424 5,423
--------
TOTAL REPURCHASE AGREEMENT
(Cost $5,423) 5,423
--------
TOTAL INVESTMENTS--100.8%
(Cost $143,366) 155,233
--------
OTHER ASSETS AND LIABILITIES--(0.8%)
Other Assets 3,580
Liabilities (4,751)
--------
(1,171)
--------
NET ASSETS--100.0%
Applicable to 14,053,362 outstanding $0.00001
par value shares (unlimited shares authorized) $154,062
========
NET ASSET VALUE PER SHARE $10.96
======
</TABLE>
- ---------------
*Non-Income Producing Security
See accompanying Notes to Financial Statements.
<PAGE> 18
SchwabFunds(R) 6
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
STATEMENT OF OPERATIONS (in thousands)
For the six months ended April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income:
Dividends (net of foreign tax withheld of $170) $ 1,205
Interest 54
-------
Total investment income 1,259
-------
Expenses:
Investment advisory and administration fee 481
Transfer agency and shareholder service fees 172
Custodian fees 100
Registration fees 14
Professional fees 22
Shareholder reports 30
Trustees' fees 25
Amortization of deferred organization costs 12
Insurance and other expenses 6
-------
862
Less expenses reduced (209)
-------
Total expenses incurred by Fund 653
-------
Net investment income 606
-------
Net realized gain (loss) on investments and
foreign currency transactions:
Proceeds from sales of investments 2,356
Cost of investments sold (2,232)
-------
Net realized gain on investments from changes in market value 124
Net realized gain on investments from changes in foreign
exchange rates 39
-------
Net realized gain on investments sold 163
Net realized gain on foreign currency transactions 35
-------
Net realized gain on investments sold and foreign
currency transactions 198
-------
Change in net unrealized gain (loss ) on investments and foreign
currency translation:
Changes in market value:
Beginning of period unrealized gain 413
End of period unrealized gain (7,334)
-------
Decrease in net unrealized gain in market value (7,747)
-------
Changes in foreign exchange rates:
Beginning of period unrealized gain 9,494
End of period unrealized gain 19,201
-------
Increase in net unrealized gain in foreign exchange rates 9,707
-------
Increase in net unrealized gain on investments from changes
in market value and foreign exchange rates 1,960
Decrease in net unrealized gain on translating assets and
liabilities into the reporting currency (12)
-------
Increase in net unrealized gain on investments and
foreign currency translation 1,948
-------
Net gain on investments 2,146
-------
Increase in net assets resulting from operations $ 2,752
=======
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 19
SchwabFunds(R) 7
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
STATEMENT OF CHANGE IN NET ASSETS (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
six months ended years ended
April 30, 1995 October 31,
(Unaudited) 1994
---------------- ------------
<S> <C> <C>
Operations:
Net investment income $ 606 $ 1,412
Net realized gain (loss) on investments sold
and foreign currency transactions 198 (580)
Increase in net unrealized gain on investments
and foreign currency translation 1,948 8,889
-------- --------
Increase in net assets resulting from
operations 2,752 9,721
-------- --------
Distributions to Shareholders From:
Net investment income (1,532) (433)
Capital gains -- (188)
-------- --------
Total distributions to shareholders (1,532) (621)
-------- --------
Capital Share Transactions:
Proceeds from shares sold 29,936 61,237
Net asset value of shares issued in
reinvestment of distributions 1,372 560
Early withdrawal fees 13 129
Less payments for shares redeemed (20,834) (34,756)
-------- --------
Increase in net assets from capital share
transactions 10,487 27,170
-------- --------
Total increase in net assets 11,707 36,270
Net Assets:
Beginning of period 142,355 106,085
-------- --------
End of period (including undistributed net
investment income of $407 and $1,280,
respectively) $154,062 $142,355
======== ========
Number of Fund Shares:
Sold 2,882 5,947
Reinvested 134 56
Redeemed (2,029) (3,392)
-------- --------
Net increase in shares outstanding 987 2,611
Shares Outstanding:
Beginning of period 13,066 10,455
-------- --------
End of period 14,053 13,066
======== ========
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 20
SchwabFunds(R) 8
- -------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the six months ended April 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
The Schwab International Index Fund (the "Fund") is a series of Schwab Capital
Trust (the "Trust"), an open-end, management investment company organized as a
Massachusetts business trust on May 7, 1993 and registered under the Investment
Company Act of 1940, as amended.
In addition to the Fund, the Trust also offers the Schwab Small-Cap Index
Fund(TM), the assets of each series are segregated and accounted for separately.
The investment objective of the Fund is to attempt to track the price and
divided performance (total return) of the Schwab International Index(TM), an
index created to represent the performance of common stocks and other equity
securities issued by large, publicly traded companies from countries around the
world with major developed securities markets, excluding the United States.
2. SIGNIFICANT ACCOUNTING POLICIES
Security valuation-Investments in securities traded on an exchange are valued
at the last quoted sale price for a given day, or if a sale is not reported for
that day, at the mean between the most recent quoted bid and asked prices.
Unlisted securities for which market quotations are readily available are
valued at the mean between the most recent bid and asked prices. Securities for
which no quotations are readily available are valued at fair value as
determined in good faith by the investment manager and the Fund's sub-advisor
pursuant to Board of Trustees guidelines. Short-term securities with 60 days or
less to maturity are stated at amortized cost, which approximates market value.
Security transactions and investment income-Security transactions, in the
accompanying financial statements, are accounted for on a trade date basis
(date the order to buy or sell is executed). Divided income and distributions
to shareholders are recorded on the ex-divided date; Interest income is
recorded on the accrual basis. Realized gains and losses from security
transactions are determined on an identified cost basis.
Repurchase agreements-Repurchase agreements are fully collateralized by U.S.
Treasury or Government agency securities. All collateral is held by the Fund's
custodian and is monitored daily to ensure that its market value at least
equals the repurchase price under the agreement.
Foreign currency translation-The accounting records of the Fund are maintained
in U.S. dollars. Investment securities and all other assets and liabilities of
the Fund denominated in a foreign currency are translated into U.S. dollars at
the exchange rates on April 30. Purchases and sales of securities, income
receipts and expense payments are translated into U.S. dollars at the exchange
rate in effect on the dates of the respective transactions.
The Fund separates within its statement of operations the portion of realized
and unrealized gains and losses resulting from changes in foreign exchange
rates from that arising from changes in securities' market values.
<PAGE> 21
SchwabFunds(R) 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Forward currency contracts -- A forward currency contract ("Forward") is an
agreement between two parties to buy and sell a currency at a set price on a
future date. The value of the Forward fluctuates with changes in currency
exchange rates. The Forward is marked-to-market daily and the change in value
is recorded by the Fund as an unrealized gain or loss. When the Forward is
closed, the Fund records a realized gain or loss equal to the difference
between the value at the time the contract was opened and the value at the time
the contract was closed. The Fund engages in Forwards in connection with the
purchase and sale of portfolio securities to minimize the uncertainty of
changes in future exchange rates (see Note 9).
Deferred organization costs -- Costs incurred in connection with the
organization of the Fund, its initial registration with the Securities and
Exchange Commission and with various states are amortized on a straight-line
basis over a five year period from the Fund's commencement of operations.
Expenses -- Expenses arising in connection with the Fund are charged directly
to the Fund. Expenses common to all series of the Trust are allocated to each
series in proportion to their relative net assets.
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all net investment income and realized net capital
gains, if any, to shareholders. Therefore, no federal income tax provision is
required. The Fund is considered a separate entity for tax purposes.
At April 30, 1995, (for financial reporting and federal income tax purposes),
net unrealized gain aggregated $11,867,000, of which $15,924,000 related to
appreciated securities and $4,057,000 related to depreciated securities.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreement -- The Trust has an investment
advisory and administration agreement with Charles Schwab Investment
Management, Inc. (the "Investment Manager"). For advisory services and
facilities furnished, the Fund pays an annual fee, payable monthly, of .70% of
the first $300 million of average daily net assets and .60% of such assets over
$300 million. Under this agreement, the Fund incurred investment advisory and
administration fees of $481,000 during the six months ended April 30, 1995,
before the Investment Manager reduced its fee (see Note 5).
Sub-advisory agreement -- The Investment Manager currently has a sub-advisory
agreement with Dimensional Fund Advisors Inc. ("Dimensional") to perform
day-to-day portfolio management for the Fund. Dimensional does not receive
compensation directly from the Fund. However, the Investment Manager pays
Dimensional an annual fee, payable monthly, of .15% of the first $300 million
of average daily net assets and .05% of such assets over $300 million.
Effective June 30, 1995, the Investment Manager will terminate the sub-advisory
agreement with Dimensional and will assume day-to-day portfolio management
responsibility for the Fund.
<PAGE> 22
SchwabFunds(R) 10
- -------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the six months ended April 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of .05% of average daily net assets for transfer
agency services and .20% of such assets for shareholder services. For the six
months ended April 30, 1995, the Fund incurred transfer agency and shareholder
service fees of $172,000, before Schwab reduced its fees (see Note 5).
Officers and trustees -- During the period, certain officers and trustees of
the Trust were also officers or directors of the Investment Manager and/or
Schwab. During the six months ended April 30, 1995, the Trust made no direct
payments to its officers or trustees who were "interested persons" within the
meaning of the Investment Company Act of 1940, as amended. The Fund incurred
fees of $25,000 related to the Trust's unaffiliated trustees.
4. BORROWING AGREEMENT
The Trust has an arrangement with State Street Bank and Trust Company, the
Fund's custodian, whereby the Fund may borrow up to $10,000,000, on a temporary
basis, to fund redemptions. Amounts borrowed under this arrangement bear
interest at periodically negotiated rates and may be collateralized by the
assets of the Fund. During the six months ended April 30, 1995, no borrowings
were made under this arrangement.
5. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the six
months ended April 30, 1995, the total of such fees reduced by the Investment
Manager was $172,000 and the total of such fees reduced by Schwab was $37,000.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, other than short-term
obligations, aggregated $11,045,000 and $2,356,000, respectively, for the six
months ended April 30, 1995.
7. EARLY WITHDRAWAL FEES PAID TO THE FUND
The Fund assesses a .75% early withdrawal fee on redemption proceeds
attributable to shares purchased and held less than six months. The early
withdrawal fee is retained by the Fund and is treated as a contribution to
capital. For the six months ended April 30, 1995, total early withdrawal fees
retained by the Fund amounted to $13,000.
<PAGE> 23
SchwabFunds(R) 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. COMPOSITION OF NET ASSETS
At April 30, 1995, net assets consisted of:
<TABLE>
<S> <C>
Capital paid in $142,163,000
Accumulated undistributed net investment income 407,000
Accumulated net realized loss on investments sold
and foreign currency transactions (398,000)
Net unrealized gain on investments 11,867,000
Net unrealized gain on translating assets and liabilities
into the reporting currency 23,000
------------
Total $154,062,000
============
</TABLE>
The Fund adopted Statement of Position 93-2, Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies, which will generally present
undistributed income and realized gains on a tax basis. As a result of
adoption, certain reclassifications to increase undistributed net investment
income and net realized loss on investments sold and foreign currency
transactions by $27,000 and $15,000, respectively, and to decrease capital paid
in by $12,000 have occurred. These classifications have no impact on the net
asset value of the Fund.
At April 30, 1995, the Fund's Statement of Net Assets included liabilities of
$2,330,000 for securities purchased, $56,000 for Fund shares redeemed, $55,000
for investment advisory and administration fee payable and $29,000 for transfer
agency and shareholder service fees payable.
9. COMMITMENTS
At April 30, 1995, the Fund had various open Forward contracts which obligated
the Fund to deliver U.S. dollars in exchange for foreign currencies at
specified future dates as follows:
<TABLE>
<CAPTION>
Contract In Exchange Settlement Unrealized
Currency Amount For Date Value Gain (Loss)
- ---------------------- ----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Australian dollar 82,000 $ 59,819 5/04/95 $ 59,641 ($ 178)
British pound sterling 272,000 440,341 5/12/95 437,721 (2,620)
Canadian dollar 96,000 70,459 5/04/95 70,609 150
Swiss franc 77,000 67,853 5/04/95 67,167 (686)
Duetche mark 225,000 163,577 5/02/95 162,302 (1,275)
Danish krone 174,000 32,139 5/02/95 31,969 (170)
French franc 323,000 66,186 5/31/95 65,731 (455)
Hong Kong dollar 54,000 6,978 5/01/95 6,976 (2)
Italian lira 298,000,000 171,857 5/31/95 177,717 5,860
Japanese yen 64,430,000 771,709 5/02/95 766,704 (5,005)
Netherlands guilder 62,000 40,239 5/04/95 39,946 (293)
Singapore dollar 250,000 179,559 5/04/95 179,404 (155)
---------- ---------- --------
$2,070,716 $2,065,887 ($ 4,829)
========== ========== ========
</TABLE>
<PAGE> 24
SchwabFunds(R) 12
- -------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(TM)
NOTES TO FINANCIAL STATEMENTS
For the six months ended April 30, 1995 (Unaudited)
- -------------------------------------------------------------------------------
10. FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the
period:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the period
For the September 9, 1993
six months ended For the (commencement of
April 30, 1995 year ended operations) to
(Unaudited) October 31, 1994 October 31, 1993
---------------- ---------------- -----------------
Net asset value at beginning
of period $10.89 $10.15 $10.00
Income from Investment Operations
- ---------------------------------
Net investment income .04 .11 .03
Net realized and unrealized gain
on investment and foreign
currency transactions .15 .69 .12
------ ------ ------
.19 .80 .15
Less Distributions
- ------------------
Dividends from net investment
income (.12) (.04) -
Distributions from realized gain
on investments - (.02) -
------ ------ ------
Total distributions (.12) (.06) -
------ ------ ------
Net asset value at end of period $10.96 $10.89 $10.15
====== ====== ======
Total return (%) 1.78 7.89 1.50
- ----------------
Ratios/Supplemental Data
- ------------------------
Net assets, end of period (000s) $154,062 $142,355 $106,085
Ratio of expenses to average net
assets (%) .95* .90 .60*
Ratio of net investment income to
average net assets (%) .88* 1.14 2.15*
Portfolio turnover rate (%) 0 6 2
</TABLE>
The Investment Manager and Schwab have reduced a portion of their fees and
absorbed certain expenses in order to limit the Fund's ratio of operating
expenses to average net assets. Had these fees and expenses not been reduced
and absorbed, the ratio of expenses to average net assets for the periods ended
April 30, 1995, October 31, 1994 and 1993, would have been 1.25%*, 1.30% and
2.10%*, respectively, and the ratio of net investment income to average net
assets would have been .58%*, .74% and .65%*, respectively.
* Annulized
<PAGE> 25
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[FIGURE 1] SCHWAB 1000 FUND(R) is designed to match the total return of the
Schwab 1000 Index,(R) which is comprised of the largest 1,000
publicly traded U.S. companies--the stocks of which represent
about 91% of the total market capitalization of the U.S. stock
market.(1)
[FIGURE 2] SCHWAB SMALL-CAP INDEX FUND(TM) is designed to track the total
return of the Schwab Small-Cap Index,(TM) which tracks the
performance of smaller-capitalization companies. The Schwab
Small-Cap Index is comprised of the second 1,000 largest publicly
traded companies in the U.S.(1)
[FIGURE 3] SCHWAB INTERNATIONAL INDEX FUND(TM) is designed to track the total
return of the Schwab International Index,(TM) which is comprised
of 350 of the largest companies, based on market capitalization,
in foreign countries with developed securities markets.(2)
You can begin building your diversified equity investment portfolio with the
three SchwabFunds equity index funds by calling Schwab at the toll-free number
below, or by sending back the enclosed postcard. We'll be happy to provide you
with a free prospectus and brochure for the Funds.
Each prospectus provides more complete information, including charges and
expenses. Please read it carefully before investing.
- -------------------------------------------------------------------------------
SCHWAB'S FUNDMAP(TM) SOFTWARE MAKES FUND
SELECTION EASIER.
FundMap Mutual Fund Selection Software for Windows(R) allows you to calculate
your long-term investment needs and can help you to decide how much you may
need to invest in each of the three SchwabFunds equity index funds.3 You can
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- ------------------------------------------------------------------------------
1-800-2 NO-LOAD
1-800-266-5623
(1) Each Index consists of publicly traded companies ranked by market
capitalization. Each Index does not include privately held companies,
investment companies and companies incorporated outside of the United
States.
(2) The Index is comprised of publicly traded companies ranked by market
capitalization in countries with developed securities markets around the
world. It does not include privately held companies, investment companies,
or companies from the United States.
(3) FundMap is available for Schwab customers only. Please allow 2-4 weeks for
delivery.
Windows is a registered trademark of Microsoft Corporation.
<PAGE> 26
--------------
BULK RATE
U.S. POSTAGE
PAID
CHARLES SCHWAB
--------------
[SCHWABFUNDS FAMILY(TM) LOGO]
101 Montgomery Street
San Francisco, California 94104
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc.
101 Montgomery Street, San Francisco, CA 94104
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a current prospectus.
CRS 10713 TF3534 (6/95) Printed on recycled paper.
