<PAGE> 1
SCHWABFUNDS(R)
SCHWAB
ONESOURCE
PORTFOLIOS
- GROWTH ALLOCATION
- BALANCED ALLOCATION
- INTERNATIONAL
Semi-Annual Report
April 30, 1997
<PAGE> 2
Dear Shareholder,
[Photo of With the support of investors like you, SchwabFunds(R) continues to
Charles be among the largest and fastest-growing mutual fund complexes in
R.Schwab] the nation. Charles Schwab Investment Management, Inc. (CSIM)
manages over $47 billion in assets for more than 2.5 million
SchwabFunds shareholders. Today, CSIM offers investors 30 funds
spanning a spectrum of financial markets and investing styles.
You'll find in-depth information on the performance of your
SchwabFunds investment in the following pages.
LONG-TERM INVESTMENT STRATEGIES
When it comes to investing, patience is a virtue. Given the recent market
volatility, it is important to maintain the discipline to adhere to your asset
allocation plan and to ensure you have a diversified investment portfolio. We
created the SchwabFunds Family to offer time-tested strategies for long-term
investing -- Indexing, Asset Allocation, Quantitative Models and Fund-of-Funds
- -- and to provide investors with easy, cost-efficient options to help achieve
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our index funds can help you retain more of what your investments earn.
COMMITMENT TO VALUE
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and the effects of those trends on fund performance.
Thank you for placing your trust in SchwabFunds. We will continue to explore new
strategies to help meet your investment needs and to provide you with timely
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/s/ Charles R. Schwab
---------------------
Charles R. Schwab
<PAGE> 3
KEEP YOUR
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----------------------------
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CHARLES SCHWAB
<PAGE> 4
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<PAGE> 5
CHARLES SCHWAB
JUST FOLLOW THESE EASY STEPS TO INVEST IN YOUR SCHWABFUNDS(R) ACCOUNT:
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<PAGE> 6
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<PAGE> 7
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
A Word from SchwabFunds(R) .............................................. 2
Fund Performance ........................................................ 3
International Fund Summary .............................................. 4
Growth Allocation Fund Summary .......................................... 6
Balanced Allocation Fund Summary ........................................ 8
Market Overview ......................................................... 10
The Portfolio Management Team ........................................... 16
Questions to the Portfolio Management Team .............................. 17
Financial Statements and Notes .......................................... 24
</TABLE>
1
<PAGE> 8
A WORD FROM SCHWABFUNDS(R)
We would like to take this opportunity to welcome you as a shareholder of the
Schwab OneSource Portfolios and are pleased to provide you with this semi-annual
report for the fiscal period ended April 30, 1997. In this report, you will find
performance statistics and other useful information for each of the three Schwab
OneSource Portfolios -- INTERNATIONAL, GROWTH ALLOCATION and BALANCED ALLOCATION
FUNDS.
The launch of the OneSource Portfolios at the end of 1996 was one of the most
popular fund introductions last year. The Portfolios' combined assets have grown
to $212 million, and the number of accounts is close to 25,000.
We're pleased that our investors realize that these Portfolios are a smart and
easy way to participate in a variety of actively managed mutual funds through a
single investment. These multi-family "funds of funds" span both the U.S. and
international markets, investing in a mix of funds from some of today's most
well-known fund families. Senior portfolio manager Cynthia Liu and her team are
continually performing in-depth quantitative analysis on thousands of mutual
funds, and discussing investment strategies and management styles with the
underlying funds' managers.
For the OneSource Allocation Portfolios, the portfolio management team seeks to
make the most of today's changing market conditions while providing broad
diversification not only across asset classes but among different funds and
investing styles. The OneSource International Portfolio invests in international
equity funds that invest in countries with developed securities markets, and
seeks to enhance its performance by strategically allocating a portion to
investments in specific regions, countries or emerging markets.
Keeping you up-to-date on your investments is one of our top priorities. In
addition to this semi-annual report, we also offer a wealth of information on
our web site at www.schwab.com/funds. You can also access our shareholder
information line at 1-888-9 NO LOAD (1-888-966-5623) to listen to monthly market
commentaries and fund updates for the three OneSource Portfolios. We hope you
enjoyed our newest publication, Market Views, which was designed to provide you
with an inside look at the funds within the OneSource Portfolios and the views
and opinions of their portfolio managers.
Thank you again for investing with us.
2
<PAGE> 9
FUND PERFORMANCE
The first table below compares total returns for the OneSource Portfolios --
International, the MSCI EAFE Index 1, and the average international equity
fund 2. The second table compares total returns for the OneSource Portfolios --
Growth and Balanced Allocation, the S&P 500(R) Index, the Lehman Brothers
General U.S. Government Index, and the average asset allocation fund 3.
<TABLE>
<CAPTION>
TOTAL RETURNS
Since inception (10/16/96)
through 3/31/97 through 4/30/97
- --------------------------------------------------------------------------------
<S> <C> <C>
ONESOURCE PORTFOLIOS -- INTERNATIONAL 5.58% 6.09%
- --------------------------------------------------------------------------------
<CAPTION>
INDICES/BENCHMARKS
- --------------------------------------------------------------------------------
<S> <C> <C>
MSCI EAFE Index 1 (0.62%) (0.09%)
- --------------------------------------------------------------------------------
Average international equity fund 2 4.74% 5.14%
- --------------------------------------------------------------------------------
<CAPTION>
TOTAL RETURNS
Since inception (11/18/96)
ONESOURCE PORTFOLIOS -- through 3/31/97 through 4/30/97
- --------------------------------------------------------------------------------
<S> <C> <C>
GROWTH ALLOCATION 0.16% 2.29%
- --------------------------------------------------------------------------------
BALANCED ALLOCATION 0.18% 2.00%
- --------------------------------------------------------------------------------
<CAPTION>
INDICES/BENCHMARKS
- --------------------------------------------------------------------------------
<S> <C> <C>
S&P 500(R) Index 3.38% 9.55%
- --------------------------------------------------------------------------------
Lehman Brothers General U.S. Gov't Index 0.09% 0.93%
- --------------------------------------------------------------------------------
Average asset allocation fund 3 1.91% 4.23%
- --------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN ASSUMES REINVESTMENT OF ALL DIVIDEND AND CAPITAL GAIN
DISTRIBUTIONS, IF ANY. PERFORMANCE IS FOR A LIMITED PERIOD OF TIME, AND DOES NOT
GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE
SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. The Investment Manager and Schwab waived a portion of their
fees during the reporting period and have guaranteed that each Fund's total
operating expenses will not exceed 0.50% through at least 2/28/99. Without fee
waivers and guarantees, the total returns since inception for the period ended
April 30, 1997, for the OneSource Portfolios -- International, Growth Allocation
and Balanced Allocation would have been 5.69%, 1.97% and 1.59%, respectively.
The total returns since inception for the OneSource Portfolios -- International,
Growth Allocation and Balanced Allocation for the period ended March 31, 1997,
would have been 5.25%, -0.10% and -0.16%, respectively. The cumulative total
returns since inception for the OneSource Portfolios -- Growth Allocation Fund
and the OneSource Portfolios -- Balanced Allocation Fund would have been 1.97%,
and 1.59%, respectively. Indices are unmanaged, and unlike funds, do not reflect
payment of advisory fees and other expenses associated with an investment in
funds. Investors cannot, however, directly invest in an index.
1 The Morgan Stanley Capital International Europe, Australasia, Far East
Index, MSCI EAFE(R) Index is an index of foreign stock prices of Europe,
Australasia and the Far East exchanges. The total return is calculated in
U.S. dollars.
2 Source: Morningstar, Inc. average for 428 international equity funds
(load-adjusted).
3 Source: Morningstar, Inc. average for 194 asset allocation funds
(load-adjusted).
3
<PAGE> 10
ONESOURCE PORTFOLIOS -- INTERNATIONAL
SUMMARY 1
The OneSource Portfolios -- International offers broad international
diversification with the convenience of a single investment. The Fund can be
used to fulfill all or part of the international equity component of your asset
allocation plans.
<TABLE>
<CAPTION>
REGIONAL DIVERSIFICATION
================================================================================
REGION % OF FUND INVESTMENTS
<S> <C>
- --------------------------------------------------------------------------------
Developed Europe 2 45.6%
- --------------------------------------------------------------------------------
Developed Pacific 3 26.8%
- --------------------------------------------------------------------------------
Emerging Markets 13.0%
- --------------------------------------------------------------------------------
Other investments 10.5%
- --------------------------------------------------------------------------------
Canada 1.6%
- --------------------------------------------------------------------------------
Cash 1.5%
- --------------------------------------------------------------------------------
United States 1.0%
- --------------------------------------------------------------------------------
TOTAL 100.0%
- --------------------------------------------------------------------------------
<CAPTION>
TOP FIVE COUNTRIES
================================================================================
COUNTRY % OF FUND INVESTMENTS
- --------------------------------------------------------------------------------
<S> <C>
Japan 15.0%
- --------------------------------------------------------------------------------
United Kingdom 12.6%
- --------------------------------------------------------------------------------
France 6.5%
- --------------------------------------------------------------------------------
Hong Kong 4.9%
- --------------------------------------------------------------------------------
Germany 4.9%
- --------------------------------------------------------------------------------
TOTAL 43.9%
- --------------------------------------------------------------------------------
</TABLE>
1 This information represents the Fund's asset mix, diversification and
holdings on April 30, 1997, and is not indicative of future holdings or
diversification. A complete listing of the Fund's holdings, also as of April
30, 1997, can be found in the Statement of Net Assets section of this
report. Unlike the Statement of Net Assets, information is shown here as a
percentage of the Fund's investments, not as a percentage of the Fund's net
assets.
2 Developed Europe includes the following countries: Austria, Belgium,
Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway,
Portugal, Spain, Sweden, Switzerland and the United Kingdom.
3 Developed Pacific includes the following countries: Australia, Hong Kong,
Indonesia, Japan, Malaysia, New Zealand, Singapore and Thailand.
4
<PAGE> 11
<TABLE>
<CAPTION>
ASSET MIX
- --------------------------------------------------------------------------------
TYPE OF INVESTMENT % OF FUND INVESTMENTS
- --------------------------------------------------------------------------------
<S> <C>
International mutual funds 77.4%
- --------------------------------------------------------------------------------
Single-country mutual funds 8.1%
- --------------------------------------------------------------------------------
Emerging market mutual funds 6.1%
- --------------------------------------------------------------------------------
European region mutual funds 3.9%
- --------------------------------------------------------------------------------
Pacific region mutual funds 3.0%
- --------------------------------------------------------------------------------
Cash equivalents 1.5%
- --------------------------------------------------------------------------------
TOTAL 100.0%
- --------------------------------------------------------------------------------
<CAPTION>
TOP TEN HOLDINGS
- --------------------------------------------------------------------------------
MUTUAL FUND % OF FUND INVESTMENTS
- --------------------------------------------------------------------------------
<S> <C>
Oakmark International Fund 10.02%
- --------------------------------------------------------------------------------
Janus Overseas Fund 9.98%
- --------------------------------------------------------------------------------
SoGen Overseas Fund 9.12%
- --------------------------------------------------------------------------------
Ivy International Fund Class A 7.00%
- --------------------------------------------------------------------------------
Hotchkis & Wiley International Fund 6.95%
- --------------------------------------------------------------------------------
Scudder Japan Fund 6.75%
- --------------------------------------------------------------------------------
American Century-Twentieth Century International Growth Fund 6.49%
- --------------------------------------------------------------------------------
BT Investment International Equity Fund 6.43%
- --------------------------------------------------------------------------------
Founders Passport Fund 5.53%
- --------------------------------------------------------------------------------
Vontobel Eastern European Equity Fund 3.97%
- --------------------------------------------------------------------------------
TOTAL 72.24%
- --------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 12
ONESOURCE PORTFOLIOS--GROWTH ALLOCATION FUND
SUMMARY 1
The OneSource Portfolios--Growth Allocation Fund seeks long-term capital
growth with less volatility than a portfolio comprised entirely of stock funds.
Of the two OneSource Allocation Portfolios, this Fund offers the greatest
exposure to stocks and the greatest potential for return and risk.
The allocations of this Fund will vary as the portfolio manager adjusts the
asset mix based on changing market conditions.
ASSET MIX
As of April 30, 1997
[Pie Chart]
Equity FUNDS: 87%
BOND FUNDS: 10%
CASH EQUIVALENTS: 3%
[Pie Chart]
INTERNATIONAL: 24%
VALUE: 33%
AGGRESIVE GROWTH: 12%
GROWTH: 8%
SECTOR FUNDS: 3%
BALANCED: 7%
CASH: 9%
FIXED INCOME: 10%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MIX AS OF MIX AS OF
4/30/97 12/31/96 TARGET MIX 2
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity funds 87% 86% 80%
- --------------------------------------------------------------------------------
Bond funds 10% 7% 15%
- --------------------------------------------------------------------------------
Cash equivalents 3% 7% 5%
- --------------------------------------------------------------------------------
TOTAL 100% 100% 100%
- --------------------------------------------------------------------------------
</TABLE>
1 This information is not indicative of the Fund's asset mix or holdings after
April 30, 1997. A complete listing of the Fund's holdings as of April 30,
1997, can be found in the Statement of Net Assets section of this report.
Unlike the Statement of Net Assets, information is shown here as a percentage
of the Fund's investments, not as a percentage of the Fund's net assets.
2 In neutral markets.
6
<PAGE> 13
<TABLE>
<CAPTION>
TOP TEN HOLDINGS
- --------------------------------------------------------------------------------
MUTUAL FUND % OF FUND INVESTMENTS
- --------------------------------------------------------------------------------
<S> <C>
Janus Overseas Fund 8.06%
- --------------------------------------------------------------------------------
Sound Shore Fund 7.23%
- --------------------------------------------------------------------------------
Baron Asset Fund 7.13%
- --------------------------------------------------------------------------------
Kemper Dreman High Return Fund Class A 7.09%
- --------------------------------------------------------------------------------
Torray Fund 6.10%
- --------------------------------------------------------------------------------
Ivy International Fund Class A 5.18%
- --------------------------------------------------------------------------------
Lindner Dividend Fund 4.61%
- --------------------------------------------------------------------------------
Oakmark Fund 4.17%
- --------------------------------------------------------------------------------
Strong Schafer Value Fund 4.15%
- --------------------------------------------------------------------------------
American Century-Twentieth Century International Growth Fund 3.96%
- --------------------------------------------------------------------------------
TOTAL 57.68%
- --------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 14
ONESOURCE PORTFOLIOS -- BALANCED ALLOCATION FUND
SUMMARY 1
The OneSource Portfolios -- Balanced Allocation Fund seeks long-term capital
growth with less volatility than a fund comprised entirely of stock funds, but
is designed to have less volatility and represents a more balanced approach
between stock and bond funds than the OneSource Portfolios -- Growth Allocation
Fund.
The allocations of this Fund will vary as the portfolio manager adjusts the
asset mix based on changing market conditions.
<TABLE>
<CAPTION>
ASSET MIX
As of April 30, 1997
<S> <C>
EQUITY FUNDS: 66%
CASH EQUIVALENTS: 16%
BOND FUNDS: 18%
INTERNATIONAL: 19%
VALUE: 22%
FIXED INCOME: 18%
GROWTH: 7%
SECTOR FUNDS: 2%
BALANCED: 9%
AGGRESIVE GROWTH: 7%
CASH: 16%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MIX AS OF MIX AS OF
4/30/97 12/31/96 TARGET MIX 2
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity funds 66% 71% 60%
- --------------------------------------------------------------------------------
Bond funds 18% 18% 35%
- --------------------------------------------------------------------------------
Cash equivalents 16% 11% 5%
- --------------------------------------------------------------------------------
TOTAL 100% 100% 100%
- --------------------------------------------------------------------------------
</TABLE>
1 This information is not indicative of the Fund's asset mix or holdings after
April 30, 1997. A complete listing of the Fund's holdings as of April 30,
1997, can be found in the Statement of Net Assets section of this report.
Unlike the Statement of Net Assets, information is shown here as a percentage
of the Fund's investments, not as a percentage of the Fund's net assets.
2 In neutral markets.
8
<PAGE> 15
<TABLE>
<CAPTION>
TOP TEN HOLDINGS
- --------------------------------------------------------------------------------
MUTUAL FUND % OF FUND INVESTMENTS
- --------------------------------------------------------------------------------
<S> <C>
Strong Advantage Fund 13.21%
- --------------------------------------------------------------------------------
Kemper Diversified Income Fund 10.18%
- --------------------------------------------------------------------------------
Janus Overseas Fund 6.00%
- --------------------------------------------------------------------------------
Hotchkis & Wiley Low Duration Fund 5.12%
- --------------------------------------------------------------------------------
Kemper Dreman High Return Fund Class A 5.05%
- --------------------------------------------------------------------------------
Sound Shore Fund 4.97%
- --------------------------------------------------------------------------------
Lindner Dividend Fund 4.53%
- --------------------------------------------------------------------------------
Oakmark Fund 4.13%
- --------------------------------------------------------------------------------
Ivy International Fund Class A 4.08%
- --------------------------------------------------------------------------------
Torray Fund 4.04%
- --------------------------------------------------------------------------------
TOTAL 61.31%
- --------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 16
MARKET OVERVIEW
REAL GDP GROWTH RATE
Quarterly percentage change in annual rate
[BAR GRAPH]
<TABLE>
<CAPTION>
Real GDP
<S> <C>
Q1 1990 4.1%
Q2 1990 1.3%
Q3 1990 -1.9%
Q4 1990 -4.1%
Q1 1991 -2.2%
Q2 1991 1.7%
Q3 1991 1.0%
Q4 1991 1.0%
Q1 1992 4.7%
Q2 1992 2.5%
Q3 1992 3.0%
Q4 1992 4.3%
Q1 1993 -0.1%
Q2 1993 1.9%
Q3 1993 2.3%
Q4 1993 4.8%
Q1 1994 2.5%
Q2 1994 4.9%
Q3 1994 3.5%
Q4 1994 3.0%
Q1 1995 0.4%
Q2 1995 0.7%
Q3 1995 3.8%
Q4 1995 0.3%
Q1 1996 2.0%
Q2 1996 4.7%
Q3 1996 2.1%
Q4 1996 3.8%
Q1 1997 5.8%
</TABLE>
Source: Bloomberg L.P.
- - The economy continued to expand at a healthy rate during the reporting
period. The GDP growth rate was 3.2% for the 1996 calendar year and a very
strong 5.8% for the first quarter of 1997 -- the highest level since the
fourth quarter of 1987.
- - These strong growth rates resulted in sentiment focusing on the apparent
strength of the economy, its potential impact on future inflation, and the
potential for more restrictive Federal Reserve policy.
- - At the time of this writing, the economy appears to be on track for moderate
growth, continuing the six-year expansion that began in 1991.
10
<PAGE> 17
U.S. UNEMPLOYMENT RATE
[LINE CHART]
Unemployment
US Unemployment Rate
Source: Bloomberg
<TABLE>
Unemployment Rate
<S> <C>
Jan-90 5.3%
Feb-90 5.3%
Mar-90 5.2%
Apr-90 5.4%
May-90 5.3%
Jun-90 5.1%
Jul-90 5.4%
Aug-90 5.6%
Sep-90 5.7%
Oct-90 5.8%
Nov-90 6.0%
Dec-90 6.2%
Jan-91 6.3%
Feb-91 6.5%
Mar-91 6.8%
Apr-91 6.6%
May-91 6.8%
Jun-91 6.8%
Jul-91 6.7%
Aug-91 6.8%
Sep-91 6.8%
Oct-91 6.9%
Nov-91 6.9%
Dec-91 7.1%
Jan-92 7.1%
Feb-92 7.3%
Mar-92 7.3%
Apr-92 7.3%
May-92 7.4%
Jun-92 7.7%
Jul-92 7.6%
Aug-92 7.6%
Sep-92 7.5%
Oct-92 7.4%
Nov-92 7.3%
Dec-92 7.3%
Jan-93 7.1%
Feb-93 7.0%
Mar-93 7.0%
Apr-93 7.0%
May-93 6.9%
Jun-93 6.9%
Jul-93 6.8%
Aug-93 6.7%
Sep-93 6.7%
Oct-93 6.7%
Nov-93 6.5%
Dec-93 6.4%
Jan-94 6.7%
Feb-94 6.6%
Mar-94 6.5%
Apr-94 6.4%
May-94 6.0%
Jun-94 6.0%
Jul-94 6.1%
Aug-94 6.1%
Sep-94 5.9%
Oct-94 5.6%
Nov-94 5.6%
Dec-94 5.4%
Jan-95 5.6%
Feb-95 5.4%
Mar-95 5.8%
Apr-95 5.7%
May-95 5.7%
Jun-95 5.6%
Jul-95 5.7%
Aug-95 5.3%
Sep-95 5.6%
Oct-95 5.5%
Nov-95 5.6%
Dec-95 5.6%
Jan-96 5.8%
Feb-96 5.5%
Mar-96 5.6%
Apr-96 5.4%
May-96 5.6%
Jun-96 5.3%
Jul-96 5.4%
Aug-96 5.1%
Sep-96 5.2%
Oct-96 5.2%
Nov-96 5.3%
Dec-96 5.3%
Jan-97 5.4%
Feb-97 5.3%
Mar-97 5.2%
Apr-97 4.9%
</TABLE>
Source: Bloomberg L.P.
- - The unemployment rate during 1996 remained near its lows for the decade, and
declined further to 4.9% in April 1997, the lowest rate since December 1973.
Many economists have questioned how long such low levels of unemployment can
continue without generating inflationary pressures on wages and, ultimately,
prices.
11
<PAGE> 18
MARKET OVERVIEW (continued)
MEASURES OF INFLATION
[BAR CHART]
CPI & ECI
CONSUMER PRICE INDEX - ALL ITEMS YOY % CHANGE
EMPLOYMENT COST INDEX SA (INCLUDES BOTH WAGES AND SALARIES AND BENEFITS
COMPONENTS) - YOY % CHANGE
SOURCE: BLOOMBERG L.P.
RED = DATA INPUTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Monthly Quarterly
Consumer Price Employment Cost
Index - YOY % Index - YOY %
Change Change
- --------------------------------------------------------------------------------
<S> <C> <C>
Jan-90 5.2% 5.3%
Feb-90 5.3% 5.3%
Mar-90 5.2% 5.3%
Apr-90 4.7% 5.4%
May-90 4.4% 5.4%
Jun-90 4.7% 5.4%
Jul-90 4.8% 5.1%
Aug-90 5.6% 5.1%
Sep-90 6.2% 5.1%
Oct-90 6.3% 4.8%
Nov-90 6.3% 4.8%
Dec-90 6.1% 4.8%
Jan-91 5.7% 4.6%
Feb-91 5.3% 4.6%
Mar-91 4.9% 4.6%
Apr-91 4.9% 4.5%
May-91 5.0% 4.5%
Jun-91 4.7% 4.5%
Jul-91 4.4% 4.3%
Aug-91 3.8% 4.3%
Sep-91 3.4% 4.3%
Oct-91 2.9% 4.2%
Nov-91 3.0% 4.2%
Dec-91 3.1% 4.2%
Jan-92 2.6% 4.1%
Feb-92 2.8% 4.1%
Mar-92 3.2% 4.1%
Apr-92 3.2% 3.5%
May-92 3.0% 3.5%
Jun-92 3.1% 3.5%
Jul-92 3.2% 3.4%
Aug-92 3.1% 3.4%
Sep-92 3.0% 3.4%
Oct-92 3.2% 3.5%
Nov-92 3.0% 3.5%
Dec-92 2.9% 3.5%
Jan-93 3.3% 3.4%
Feb-93 3.2% 3.4%
Mar-93 3.1% 3.4%
Apr-93 3.2% 3.6%
May-93 3.2% 3.6%
Jun-93 3.0% 3.6%
Jul-93 2.8% 3.6%
Aug-93 2.8% 3.6%
Sep-93 2.7% 3.6%
Oct-93 2.8% 3.4%
Nov-93 2.7% 3.4%
Dec-93 2.7% 3.4%
Jan-94 2.5% 3.2%
Feb-94 2.5% 3.2%
Mar-94 2.5% 3.2%
Apr-94 2.4% 3.1%
May-94 2.3% 3.1%
Jun-94 2.5% 3.1%
Jul-94 2.8% 3.1%
Aug-94 2.9% 3.1%
Sep-94 3.0% 3.1%
Oct-94 2.6% 3.0%
Nov-94 2.7% 3.0%
Dec-94 2.7% 3.0%
Jan-95 2.8% 3.0%
Feb-95 2.9% 3.0%
Mar-95 2.9% 3.0%
Apr-95 3.1% 3.0%
May-95 3.2% 3.0%
Jun-95 3.0% 3.0%
Jul-95 2.8% 2.8%
Aug-95 2.6% 2.8%
Sep-95 2.5% 2.8%
Oct-95 2.8% 2.8%
Nov-95 2.6% 2.8%
Dec-95 2.5% 2.8%
Jan-96 2.7% 2.9%
Feb-96 2.7% 2.9%
Mar-96 2.8% 2.9%
Apr-96 2.9% 2.9%
May-96 2.9% 2.9%
Jun-96 2.8% 2.9%
Jul-96 3.0% 2.9%
Aug-96 2.9% 2.9%
Sep-96 3.0% 2.9%
Oct-96 3.0% 3.0%
Nov-96 3.3% 3.0%
Dec-96 3.3% 3.0%
Jan-97 3.0% 2.8%
Feb-97 3.0% 2.8%
Mar-97 2.8% 2.8%
Apr-97 2.5%
- --------------------------------------------------------------------------------
</TABLE>
Source: Bloomberg L.P.
- - Both the Employment Cost Index and Consumer Price Index (CPI) remained in
check throughout 1996 as well as the first quarter of 1997, reflecting
continued low levels of inflation.
- - CPI rose 3.3% in 1996, the highest annual rate since 1990. However, the core
rate (which excludes the more volatile food and energy components) rose just
2.6%, the lowest rate since 1965.
- - The Federal Reserve has indicated its belief that the economy remains at
risk to inflation and that it is poised to act preemptively by raising
interest rates if necessary. The Federal Reserve did take action in March,
increasing the Fed Funds Rate by 0.25% to 5.50%.
12
<PAGE> 19
TOTAL RETURN PERFORMANCE
VALUE OF A HYPOTHETICAL $1 INVESTMENT
[LINE CHART]
<TABLE>
<CAPTION>
Growth of a $ Investment
----------------------------------------------------
Lehman
MF
Schwab Schwab General
Small Cap International US Govt.
S&P 500 Index Index Index
------- --------- ------------- --------
<S> <C> <C> <C> <C>
$ 1.000 $ 1.000 $ 1.000 $ 1.000
Nov-96 $ 1.076 $ 1.040 $ 1.046 $ 1.017
Dec-96 $ 1.054 $ 1.059 $ 1.037 $ 1.007
Jan-97 $ 1.120 $ 1.084 $ 1.003 $ 1.008
Feb-97 $ 1.129 $ 1.058 $ 1.019 $ 1.010
Mar-97 $ 1.083 $ 1.006 $ 1.026 $ 0.999
Apr-97 $ 1.147 $ 1.009 $ 1.037 $ 1.013
</TABLE>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PRINCIPAL VALUE AND
INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Total return assumes
reinvestment of all dividend and capital gain distributions. Indices are
unmanaged and, unlike funds, do not reflect advisory and other fees associated
with an investment in funds. Investors cannot invest in an index directly.
- - Large-cap domestic stocks, as represented by the S&P 500 Index, were clearly
the strongest performing asset class -- achieving a 14.71% return during the
six-month reporting period.
- - Although positive, domestic small-cap stocks (as represented by the Schwab
Small-Cap Index) and international stocks (as represented by the Schwab
International Index) both lagged the S&P 500 Index significantly, with
six-month returns of 0.92% and 3.74%, respectively.
- - The six-month total return for U.S. Government bonds (as represented by the
Lehman Brothers General U.S. Government Index) was 1.32%.
13
<PAGE> 20
MARKET OVERVIEW (continued)
S&P 500(R) PRICE/EARNINGS RATIO
[LINE CHART]
S&P 500 P/E Ratio
Source Bloomberg
<TABLE>
<CAPTION>
S&P 500 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 21.27
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
</TABLE>
Source: Bloomberg L.P.
The price/earnings ratio, also known as a multiple, is the price of a stock
divided by its earnings per share and generally indicates how much investors are
willing to pay for a company's earning potential.
- - The price/earnings ratio for the S&P 500 Index was 20 at the close of the
reporting period, well above its 30-year mean of 15, but below its 1991 and
1987 highs of 26 and 22, respectively.
- - Based on other traditional measures such as the price-to-book value ratio or
dividend yield, the U.S. stock market valuation reached historical highs
during the reporting period.
14
<PAGE> 21
EAFE COUNTRY US$ RETURNS
for the six months ended 4/30/97
[BAR CHART]
<TABLE>
<CAPTION>
EAFE Country Returns for 6 mos ended 4/30/97 6 Month US$ Return Ended 4/30/97
- -------------------------------------------- --------------------------------
<S> <C> <C> <C>
Australia 3.53% Spain 23.39%
Austria -3.65% Finland 18.15%
Belgium 8.75% Netherlands 12.64%
Denmark 10.42% Norway 11.35%
Finland 18.15% Germany 11.23%
France 7.35% Switzerland 11.19%
Germany 11.23% Denmark 10.42%
Hong Kong -1.75% United Kingdom 10.39%
Ireland 0.07% Italy 10.25%
Italy 10.25% Belgium 8.75%
Japan -13.58% France 7.35%
Malaysia -6.91% Australia 3.53%
Netherlands 12.64% Ireland 0.07%
New Zealand -6.47% Hong Kong -1.75%
Norway 11.35% Austria -3.65%
Singapore -7.26% New Zealand -6.47%
Spain 23.39% Malaysia -6.91%
Switzerland 11.19% Singapore -7.26%
United Kingdom 10.39% Japan -13.58%
</TABLE>
Source: Datastream
- - Returns for the reporting period were generally strong for European
countries, with the highest returns in Spain, Finland and the Netherlands.
Asian country returns were generally negative for the period, with the
weakest returns in Japan, Singapore and Malaysia.
15
<PAGE> 22
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 Charles
Schwab Investment Management (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.
CYNTHIA LIU, Vice President and Senior Portfolio Manager, has primary
responsibility for the day-to-day management of the Funds. Cynthia joined CSIM
in July 1996 and currently manages the three Schwab OneSource Portfolios. Prior
to joining CSIM, Cynthia was Director of Investment Strategy at Jardine Fleming
Unit Trust in Hong Kong. She was honored with the Alfred Dunhill Award of
Excellence in the 1995 Fund Manager of the Year Awards, sponsored by the South
China Morning Post.
16
<PAGE> 23
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM
OneSource Portfolios -- International
Q: HOW DID THE FUND PERFORM DURING THE SIX-MONTH REPORTING PERIOD COMPARED TO
ITS BENCHMARK, THE MSCI EAFE INDEX?
A: As shown in the graph below, the Fund significantly outperformed the MSCI
EAFE index during the reporting period. The fund achieved a total return of
7.05% vs. 1.57% for the MSCI EAFE Index for the six-month reporting period ended
April 30, 1997. The excess return can be attributed to a combination of good
underlying funds performance as well as our strategic allocation to two of the
best performing emerging regions -- Latin America and Eastern Europe -- and our
under-exposure to Japan during most of the reporting period.
--------------
ONESOURCE PORTFOLIOS
INTERNATIONAL
6.09%
Cumulative total return
since inception (10/16/96)
through 4/30/97
--------------
ONESOURCE PORTFOLIOS -- INTERNATIONAL
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[LINE CHART]
SCHWAB ONESOURCE PORTFOLIOS - INTERNATIONAL
HYPOTHETICAL GROWTH CHART
<TABLE>
<CAPTION>
DATE ONESOURCE PORTFOLIOS - INTERNATIONAL MSCI-EAFE
- ---- ------------------------------------ ---------
<S> <C> <C>
10/16/96 $10,000 $10,000
10/31/96 $ 9,910 $ 9,836
11/30/96 $10,220 $10,228
12/31/96 $10,313 $10,096
1/31/97 $10,426 $ 9,742
2/28/97 $10,599 $ 9,902
3/31/97 $10,558 $ 9,938
4/30/97 $10,609 $ 9,991
</TABLE>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PRINCIPAL VALUE AND
INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. The performance graph
compares a hypothetical $10,000 investment in the Schwab OneSource Portfolios --
International, since inception, with a hypothetical investment in the MSCI EAFE
Index. Total return assumes reinvestment of all dividend and capital gain
distributions, if any. Indices are unmanaged, and unlike the Fund, do not
reflect advisory and other fees associated with an investment in the Fund.
Investors cannot invest in an index directly. The Investment Manager and Schwab
waived a portion of their fees during the period, and have guaranteed that
maximum total operating expenses will not exceed 0.50% through at least 2/28/99.
Without fee waivers and guarantees, the Fund's total return for each period
would have been lower.
17
<PAGE> 24
QUESTIONS TO THE MANAGEMENT TEAM (continued)
OneSource Portfolios -- International
Q: WHICH SECTORS OR REGIONS PERFORMED WELL FOR THE FUND?
A: The developed (non-emerging) European markets, as well as Latin America and
Eastern Europe, were the best-performing regions for the Fund. The Japanese
market represented the worst-performing component for the Fund. Throughout the
period, the Fund's holdings in Japan ranged from 12% to 18%.
Q: WHAT IMPACT DID FLUCTUATIONS IN CURRENCY EXCHANGE RATES HAVE ON THE
PERFORMANCE OF INTERNATIONAL EQUITIES AND THE FUND?
A: Although the U.S. dollar exhibited significant strength relative to most
foreign currencies during the reporting period, fluctuations in currency
exchange rates had only a negligible effect on the Fund's performance. The
reason for this minimal effect is that most of the underlying funds employ
currency hedging strategies to varying degrees. Although some underlying funds
were more successful in their hedging strategies than others, the net impact of
the strengthening U.S. dollar on the Fund was not substantial. As a basis of
comparison, the Schwab International Index, which is unhedged, lost
approximately 9% of its net asset value to currency exchange rate movements
during the six-month reporting period.
Q: HOW DID THE FUND'S STRATEGY CHANGE DURING THE REPORTING PERIOD, AND HOW WAS
THE FUND POSITIONED VERSUS ITS BENCHMARK AT THE CLOSE OF THE PERIOD?
ONESOURCE PORTFOLIOS -- INTERNATIONAL
ACTUAL ASSET MIX
[BAR CHART]
INTL
<TABLE>
<CAPTION>
10/31/96 11/30/96 12/31/96 1/31/97 2/28/97 3/31/97 4/30/97
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
North America 6.46% 7.40% 2.89% 2.945% 2.12% 1.88% 2.60%
Developed Europe 37.23% 43.32% 44.58% 43.17% 43.25% 44.43% 45.60%
Developed Pacific 26.13% 29.81% 32.33% 30.00% 31.63% 29.95% 26.80%
Emerging Markets 10.54% 7.43% 9.74% 11.16% 11.53% 11.26% 13.00%
Other Investments 8.33% 7.32% 8.08% 8.16% 7.48% 9.86% 10.50%
Cash 11.30% 4.71% 2.37% 4.58% 3.99% 2.63% 1.50%
----------------------------------------------------------------------------
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
</TABLE>
18
<PAGE> 25
A: Since the beginning of the reporting period, we have reduced the cash
equivalent position from 13.8% to 1.5%, bringing the Fund close to a fully
invested position. We have reduced our exposure to North America by replacing
our positions in global funds (which include investments in North America) with
international and region specific funds. We have also made a style shift
favoring large-cap stock exposure at the expense of small-cap stocks. Finally,
near the close of the reporting period, following declines in Japanese equity
values, we increased our exposure to Japan.
Q: WHY SHOULD INVESTORS CONSIDER INTERNATIONAL INVESTING?
A: International stocks exhibit certain characteristics that make them an
attractive element of a well-diversified investment portfolio. Historically,
international stocks have demonstrated high return potential and correlations of
return that differ significantly from domestic stock returns. For example, for
the 20-year period ended 1996, international stocks, as measured by the MSCI
EAFE Index, provided an average return of 14.62%. During the same period,
international stocks had total-return correlations of 0.42, 0.34, and 0.23 with
domestic large-cap stocks, domestic small-cap stocks, and intermediate-term U.S.
Government bonds, respectively 1. A correlation of 1.0 means that the returns
of the different asset classes move together perfectly in relation to each
other. A correlation of 0 means that the returns of the asset classes have no
relationship whatsoever. A negative correlation means that the returns of the
asset classes move in opposite directions in relation to each other. Combining
asset classes with low or even negative return correlations will result in lower
total portfolio return volatility.
Typically, investors with higher risk tolerances and longer-term investment
horizons may be able to consider a larger allocation to international stocks.
Bear in mind that investing internationally involves additional risk, which
includes currency fluctuations, political instability and foreign regulations.
Investors with lower risk tolerances and shorter-term investment horizons may
want to consider a smaller allocation to international stocks. An investment
portfolio that uses only international stocks will not realize the benefits of
asset-class diversification described above. To take maximum advantage of these
investment principles, international stocks should be combined with other major
equity asset classes (such as large-company stocks and small-company stocks) to
form the equity component of a well-diversified investment portfolio.
1 Source: As reported by BARRA, Inc. Total return assumes reinvestment of all
dividends and capital gain distributions. Past performance does not guarantee
future results. Indices are unmanaged and do not reflect advisory fees and other
expenses associated with an investment in a fund and cannot be invested in
directly.
19
<PAGE> 26
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM (continued)
OneSource Portfolios -- Growth Allocation and Balanced Allocation
Q: HOW DID THE FUNDS PERFORM DURING THE SIX-MONTH REPORTING PERIOD?
A: The charts below and on the opposite page show the total returns for the
Funds as well as the S&P 500(R) Index and the Lehman Brothers General U.S.
Government Index for period from the Funds' inception (11/18/96) through the end
of the reporting period, 4/30/97. The relative performances of the two funds and
these indices remain consistent with our long-term expectations -- the Funds'
returns are likely to fall between those of the two indices. However, there may
be future periods in which the short-term results are reversed because bonds may
outperform equities.
ONESOURCE PORTFOLIOS -- GROWTH ALLOCATION
2.29%
ONESOURCE PORTFOLIOS -- BALANCED ALLOCATION
2.00%
Cumulative total return
since inception (11/18/96)
through 4/30/97
ONESOURCE PORTFOLIOS -- GROWTH ALLOCATION
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[LINE CHART]
Gro Hypo
<TABLE>
<CAPTION>
SCHWAB ONESOURCE PORTFOLIOS - GROWTH ALLOCATION
HYPOTHETICAL GROWTH CHART
OneSource Portfolios - Lehman Government
Date Growth Allocation S&P 500 Index Bond Index
<S> <C> <C> <C>
11/18/96 $10,000 $10,000 $10,000
11/30/96 $10,120 $10,271 $10,075
12/31/96 $10,077 $10,068 $10,032
1/31/97 $10,371 $10,696 $10,052
2/28/97 $10,310 $10,780 $10,144
3/31/97 $10,016 $10,338 $10,009
4/30/97 $10,229 $10,955 $10,093
</TABLE>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PRINCIPAL VALUE AND
INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. The performance graph
compares a hypothetical $10,000 investment in the Schwab OneSource Portfolios --
Growth Allocation Fund, since inception, with a hypothetical investment in the
S&P 500 Index and the Lehman Brothers General U.S. Government Index. Total
return assumes reinvestment of all dividends and capital gain distributions, if
any. Indices are unmanaged, and unlike the Fund, do not reflect advisory and
other fees associated with an investment in the Fund. Investors cannot invest in
an index directly. The Investment Manager and Schwab waived a portion of their
fees during the period, and have guaranteed that maximum total operating
expenses will not exceed 0.50% through at least 2/28/99. Without fee waivers and
guarantees, the Fund's total returns for each period would have been lower.
20
<PAGE> 27
ONESOURCE PORTFOLIOS -- BALANCED ALLOCATION
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[LINE CHART]
Bal Hypo
SCHWAB ONESOURCE PORTFOLIOS - BALANCED ALLOCATION
HYPOTHETICAL GROWTH CHART
<TABLE>
<CAPTION>
Date Onesource Port: Balanced Fund S&P 500 Index Lehman Government Bond Index
<S> <C> <C> <C>
11/18/96 $10,000 $10,000 $10,000
11/30/96 $10,100 $10,271 $10,075
12/31/96 $10,059 $10,068 $10,032
1/31/97 $10,322 $10,696 $10,052
2/28/97 $10,271 $10,780 $10,144
3/31/97 $10,018 $10,338 $10,009
4/30/97 $10,200 $10,955 $10,093
</TABLE>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PRINCIPAL VALUE AND
INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. The performance graph
compares a hypothetical $10,000 investment in the Schwab OneSource Portfolios --
Balanced Allocation Fund, since inception, with a hypothetical investment in the
S&P 500 Index and the Lehman Mutual Fund General U.S. Government Bond Index.
Total return assumes reinvestment of all dividends and capital gain
distributions, if any. Indices are unmanaged, and unlike the Fund, do not
reflect advisory and other fees associated with an investment in the Fund.
Investors cannot invest in an index directly. The Investment Manager and Schwab
waived a portion of their fees during the period, and have guaranteed that
maximum total operating expenses will not exceed 0.50% through at least 2/28/99.
Without fee waivers and guarantees, the Fund's total returns for each period
would have been lower.
Q: WHICH ASSET CLASSES OR FUNDS PERFORMED WELL FOR THE FUNDS?
A: As shown in the Market Overview section, large-cap domestic equities were
clearly the strongest performing asset class during the reporting period. The
strong performance of this sector has been the primary factor determining the
relative performance of the two OneSource Allocation Portfolios and their
performance relative to other indices. Relatively speaking, large-cap value
funds and international funds performed well. However, within the U.S. domestic
equity market, actively managed stock funds of all sorts, whether small-cap or
large-cap, growth, value or blend, had a difficult time outperforming the
various
21
<PAGE> 28
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM (continued)
OneSource Portfolios -- Growth Allocation and Balanced Allocation
benchmark indices, such as the S&P 500(R), as the market concentrated on a
narrow group of large-cap stocks. The funds with the highest allocations to
stocks (particularly large-cap domestic equities) experienced the best
performance. Keep in mind that the target stock allocations for the OneSource
Allocation Portfolios are 80% for the Growth Fund and 60% for the Balanced Fund.
Q: DID THE FUNDS' STRATEGIES CHANGE SINCE THEIR INCEPTION IN NOVEMBER? RELATIVE
TO THEIR NEUTRAL TARGETS, HOW WERE THE FUNDS POSITIONED AT THE CLOSE OF THE
REPORTING PERIOD?
ONESOURCE PORTFOLIO -- GROWTH ALLOCATION
ACTUAL ASSET MIX
[BAR CHART]
<TABLE>
<CAPTION>
ONESOURCE-GROWTH 11/29/96 12/31/96 1/31/97 2/28/97 3/31/97 4/30/97
<S> <C> <C> <C> <C> <C> <C>
CASH 20.41% 11.63% 9.28% 8.40% 14.71% 9.67%
BONDS 5.93% 2.99% 2.84% 6.01% 6.10% 6.14%
INTERNATIONAL EQUITY 17.65% 18.89% 17.90% 17.49% 20.03% 23.67%
SMALL CAP EQUITY 10.20% 11.00% 11.92% 9.59% 4.96% 6.96%
LARGE CAP EQUITY 45.81% 55.49% 58.06% 58.51% 54.20% 53.56%
3539900.00% 3543100.00% 3546200.00% 3549000.00% 3552100.00% 100.00%
</TABLE>
ONESOURCE PORTFOLIOS -- BALANCED ALLOCATION
ACTUAL ASSET MIX
[BAR CHART]
<TABLE>
<CAPTION>
ONESOURCE-BALANCED 11/29/96 12/31/96 1/31/97 2/28/97 3/31/97 4/30/97
<S> <C> <C> <C> <C> <C> <C>
CASH 27.26% 22.74% 19.37% 21.65% 22.62% 22.25%
BONDS 13.76% 6.90% 9.58% 12.21% 13.14% 13.12%
INTERNATIONAL EQUITY 13.19% 13.86% 13.52% 12.48% 16.36% 18.91%
SMALL CAP EQUITY 7.60% 8.53% 11.20% 6.28% 4.02% 5.36%
LARGE CAP EQUITY 38.19% 47.97% 46.33% 45.38% 43.86% 40.42%
3539900.00% 3543100.00% 3546200.00% 3549000.00% 3552100.00% 100.00%
</TABLE>
22
<PAGE> 29
A: The graphs on the opposite page show the two Funds' actual asset mixes as
of the end of each month during the reporting period. As explained in the Market
Overview section, gains in large-cap stocks during the reporting period were
significant. This factor influenced us to slightly reduce our exposure to
large-cap stocks in favor of other asset classes. As of the end of the period,
both portfolios remain overweighted in cash equivalents, reflecting our
continued cautionary stance.
Q: WHAT IS THE PRIMARY DIFFERENCE BETWEEN THE GROWTH AND BALANCED ALLOCATION
PORTFOLIOS?
A: The primary difference between the Growth and Balanced Allocation Portfolios
is their neutral target exposures to stock funds and bond funds. The neutral
mixes for the two Funds are as follows:
<TABLE>
<CAPTION>
NEUTRAL TARGET ALLOCATIONS
- --------------------------------------------------------------------------------
GROWTH ALLOCATION BALANCED ALLOCATION
- --------------------------------------------------------------------------------
<S> <C> <C>
Equity funds 80% 60%
- --------------------------------------------------------------------------------
Bond funds 15% 35%
- --------------------------------------------------------------------------------
Money market funds 5% 5%
- --------------------------------------------------------------------------------
</TABLE>
Although relationships may change over the short term, over the long term the
Growth Allocation Fund is designed to experience both higher returns and greater
volatility than the Balanced Allocation Fund. This is due to its greater
exposure to equities, which have historically demonstrated greater returns and
volatility than bonds. Conversely, as the proportion of the portfolio allocated
to bonds increases, such as with the Balanced Allocation Fund, volatility may
decrease. As a result, both Funds should exhibit less volatility than an
all-stock fund such as an S&P 500(R) Index fund.
23
<PAGE> 30
SCHWAB ONESOURCE PORTFOLIOS--INTERNATIONAL
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- -------
<S> <C> <C>
MUTUAL FUNDS--98.7%
Acorn International Fund 31,332 $ 618
Berger/Biam International Core Fund+ 188,460 2,024
BT Investment International Equity Fund 255,247 4,742
EV Traditional Greater China Growth Fund 136,795 2,224
Founders Passport Fund 289,728 4,076
GAM Japan Capital Fund Class A 100,698 986
Hotchkis & Wiley International Fund 230,480 5,121
Invesco European Small Company Fund 177,731 2,876
Ivy International Fund Class A 139,173 5,163
Janus Overseas Fund 450,961 7,355
Managers International Equity Fund 43,491 1,942
Oakmark International Fund 433,069 7,385
Oppenheimer International Growth Fund Class A+ 188,477 2,445
Scudder Japan Fund 617,451 4,977
Scudder Latin American Fund 61,754 1,584
SoGen Overseas Fund 484,662 6,722
Strong International Stock Fund 106,730 1,464
American Century-Twentieth Century International Growth
Fund 557,419 4,783
Vontobel Eastern European Equity Fund+ 169,898 2,926
Vontobel EuroPacific Fund 91,847 1,714
Warburg Pincus International Equity Fund 69,150 1,474
------
TOTAL MUTUAL FUNDS (Cost $69,825) 72,601
------
</TABLE>
24
<PAGE> 31
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- -------
<S> <C> <C>
CASH EQUIVALENTS--1.5%
MSTC Cash Reserve Liquid Asset Fund* 5.33%, 05/07/97 1,113,596 $ 1,114
------
TOTAL CASH EQUIVALENTS (Cost $1,114) 1,114
------
TOTAL INVESTMENTS--100.2% (Cost $70,939) 73,715
------
OTHER ASSETS AND LIABILITIES--(0.2)%
Other Assets 652
Liabilities (809)
------
(157)
------
NET ASSETS--100.0% (see Note 6)
Applicable to 7,050,894 outstanding $0.00001 par value
shares (unlimited shares authorized) $73,558
======
NET ASSET VALUE PER SHARE $10.43
=====
</TABLE>
See accompanying Notes to Statements of Net Assets and Notes to Financial
Statements.
25
<PAGE> 32
SCHWAB ONESOURCE PORTFOLIOS--GROWTH ALLOCATION
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- -------
<S> <C> <C>
MUTUAL FUNDS--96.9%
Baron Asset Fund 184,684 $ 6,503
Barr Rosenberg Series Trust U.S. Small Capitalizaton
Insurance Shares 274,157 1,960
Brinson US Equity Fund Class A 168,400 2,649
BT Investment International Equity Fund 149,409 2,776
Franklin California Growth Fund 139,904 2,707
Hotchkis & Wiley Low Duration Fund 294,946 2,994
Ivy International Fund Class A 127,413 4,727
Janus Investment Balanced Fund 92,465 1,352
Janus Overseas Fund 450,929 7,355
Kemper Diversified Income Fund 482,508 2,847
Kemper Dreman High Return Fund Class A 230,200 6,471
Lindner Dividend Fund 157,895 4,200
Longleaf Partners Funds Trust Realty Fund 190,225 2,793
Montgomery Growth Fund 91,964 1,910
Oakmark Fund 108,481 3,799
Oppenheimer Bond Fund for Growth Class A 195,557 2,820
Oppenheimer Quest For Value Class A 59,364 1,869
Papp American Abroad Fund 56,613 1,304
Scudder Japan Fund 248,478 2,003
SoGen Overseas Fund 102,490 1,422
Sound Shore Fund 285,884 6,598
Strong Advantage Fund 84,491 850
Strong Schafer Value Fund 70,317 3,789
Torray Fund 217,533 5,562
American Century-Twentieth Century International Growth
Fund 421,133 3,613
Westwood Balanced Fund 103,595 1,038
Westwood Equity Retail Fund 165,857 1,302
White Oak Growth Stock Fund 100,961 2,435
------
TOTAL MUTUAL FUNDS (Cost $89,119) 89,648
------
</TABLE>
26
<PAGE> 33
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- -------
<S> <C> <C>
CASH EQUIVALENTS--1.7%
MSTC Cash Reserve Liquid Asset Fund* 5.33%, 05/07/97 1,556,821 $ 1,557
------
TOTAL CASH EQUIVALENTS (Cost $1,557) 1,557
------
TOTAL INVESTMENTS--98.6% (Cost $90,676) 91,205
------
OTHER ASSETS AND LIABILITIES--1.4%
Other Assets 6,253
Liabilities (4,919)
------
1,334
------
NET ASSETS--100.0% (see Note 6)
Applicable to 9,172,376 outstanding $0.00001 par value
shares (unlimited shares authorized) $92,539
======
NET ASSET VALUE PER SHARE $10.09
=====
</TABLE>
See accompanying Notes to Statements of Net Assets and Notes to Financial
Statements.
27
<PAGE> 34
SCHWAB ONESOURCE PORTFOLIOS--BALANCED ALLOCATION
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- -------
<S> <C> <C>
MUTUAL FUNDS--96.4%
Baron Asset Fund 50,906 $ 1,792
Barr Rosenberg Series Trust U.S. Small Capitalizaton
Insurance Shares 90,871 650
BT Investment International Equity Fund 74,136 1,377
Franklin California Growth Fund 45,674 884
Hotchkis & Wiley Low Duration Fund 227,628 2,310
Ivy International Fund Class A 49,915 1,852
Janus Investment Balanced Fund 77,729 1,136
Janus Overseas Fund 166,834 2,721
Kemper Diversified Income Fund 782,792 4,618
Kemper Dreman High Return Fund Class A 81,490 2,291
Lindner Dividend Fund 77,206 2,054
Longleaf Partners Funds Trust Realty Fund 48,490 712
Montgomery Growth Fund 34,038 707
Oakmark Fund 53,540 1,875
Oppenheimer Bond Fund for Growth Class A 95,847 1,382
Oppenheimer Quest For Value Class A 16,763 528
Papp American Abroad Fund 21,059 485
Scudder Japan Fund 92,098 742
SoGen Overseas Fund 23,246 322
Sound Shore Fund 97,733 2,256
Strong Advantage Fund 594,864 5,984
Strong Schafer Value Fund 26,028 1,403
Torray Fund 71,721 1,834
American Century-Twentieth Century International Growth
Fund 195,051 1,674
Westwood Balanced Fund 69,034 692
Westwood Equity Retail Fund 102,573 805
White Oak Growth Stock Fund 47,202 1,139
------
TOTAL MUTUAL FUNDS (Cost $44,136) 44,225
------
</TABLE>
28
<PAGE> 35
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- -------
<S> <C> <C>
CASH EQUIVALENTS--2.4%
MSTC Cash Reserve Liquid Asset Fund* 5.33%, 05/07/97 1,090,875 $ 1,091
------
TOTAL CASH EQUIVALENTS (Cost $1,091) 1,091
------
TOTAL INVESTMENTS--98.8% (Cost $45,227) 45,316
------
OTHER ASSETS AND LIABILITIES--1.2%
Other Assets 1,952
Liabilities (1,385)
------
567
------
NET ASSETS--100.0% (see Note 6)
Applicable to 4,558,429 outstanding $0.00001 par value
shares (unlimited shares authorized) $45,883
======
NET ASSET VALUE PER SHARE $10.07
=====
</TABLE>
- ---------------
NOTES TO STATEMENTS OF NET ASSETS
+ Non-Income Producing Security.
* Interest rate represents the yield on report date.
See accompanying Notes to Financial Statements.
29
<PAGE> 36
SCHWAB ONESOURCE PORTFOLIOS
- ------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (in thousands)
<TABLE>
<CAPTION>
Schwab OneSource Portfolios
---------------------------------------------
International Growth Balanced
------------- Allocation Allocation
Six Months ------------ ------------
ended April Period ended Period ended
30, April 30, April 30,
1997 1997+ 1997+
(Unaudited) (Unaudited) (Unaudited)
------------- ------------ ------------
<S> <C> <C> <C>
Investment income:
Dividends $ 1,311 $ 1,562 $ 895
Interest 49 104 55
------ ------- -----
Total investment income 1,360 1,666 950
------ ------- -----
Expenses:
Investment advisory and
administration fee 256 294 142
Transfer agency and shareholder
service fees 87 99 48
Custodian fees 19 28 24
Portfolio accounting fees 2 3 2
Registration fees 33 29 34
Professional fees 9 9 6
Shareholder reports 21 17 13
Trustees' fees 3 2 2
Amortization of deferred
organization costs 7 2 2
Insurance and other expenses 2 1 1
------ ------- -----
439 484 274
Less expenses reduced and absorbed
(see Note 4) (266) (286) (178)
------ ------- -----
Total expenses incurred by Fund 173 198 96
------ ------- -----
Net investment income 1,187 1,468 854
------ ------- -----
Net realized loss on investments
sold (957) (1,293) (659)
Net realized gains received from
underlying funds 964 1,079 450
Net unrealized gain on investments 3,300 529 89
------ ------- -----
Net gain (loss) on investments 3,307 315 (120)
------ ------- -----
Increase in net assets resulting
from operations $ 4,494 $ 1,783 $ 734
====== ======= =====
</TABLE>
+ Period from November 18, 1996 (commencement of operations) through April 30,
1997.
See accompanying Notes to Financial Statements.
30
<PAGE> 37
SCHWAB ONESOURCE PORTFOLIOS
- ------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Schwab OneSource Portfolios
--------------------------------------------------------
Growth Balanced
International Allocation Allocation
-------------------------- ----------- -----------
Periods Ended
April 30, April 30, April 30,
1997+ October 31, 1997+++ 1997+++
(Unaudited) 1996++ (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 1,187 $ 12 $ 1,468 $ 854
Net realized loss on investments sold (957) -- (1,293) (659)
Net realized gains received from
underlying funds 964 -- 1,079 450
Net unrealized gain (loss) on investments 3,300 (524) 529 89
-------- ------- -------- -------
Increase (decrease) in net assets
resulting
from operations 4,494 (512) 1,783 734
-------- ------- -------- -------
Dividends to shareholders from net
investment income (1,133) -- (1,148) (520)
-------- ------- -------- -------
Capital share transactions:
Proceeds from shares sold 22,814 59,980 105,361 51,499
Net asset value of shares issued in
reinvestment of dividends 1,062 -- 1,114 488
Less payments for shares redeemed (12,859) (288) (14,571) (6,318)
-------- ------- -------- -------
Increase in net assets from capital share
transactions 11,017 59,692 91,904 45,669
-------- ------- -------- -------
Total increase in net assets 14,378 59,180 92,539 45,883
Net assets:
Beginning of period 59,180 -- -- --
-------- ------- -------- -------
End of period (including undistributed
net investment income of $66, $12,
$320, and $334 respectively) $ 73,558 $59,180 $ 92,539 $45,883
======== ======= ======== =======
Number of Fund shares:
Sold 2,226 5,999 10,509 5,138
Reinvested 105 -- 112 49
Redeemed (1,250) (29) (1,449) (629)
-------- ------- -------- -------
Net increase in shares outstanding 1,081 5,970 9,172 4,558
Shares outstanding:
Beginning of period 5,970 -- -- --
-------- ------- -------- -------
End of period 7,051 5,970 9,172 4,558
======== ======= ======== =======
</TABLE>
- ---------------
+ Period from November 1, 1996 through April 30, 1997.
++ Period from October 16, 1996 (commencement of operations) through October
31, 1996.
+++ Period from November 18, 1996 (commencement of operations) through April 30,
1997.
See accompanying Notes to Financial Statements.
31
<PAGE> 38
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Periods ended April 30, 1997 (Unaudited)
1. DESCRIPTION OF THE FUND
The Schwab OneSource Portfolios -- International, Growth Allocation and Balanced
Allocation, (the "Funds") are a series of Schwab Capital Trust (the "Trust"), a
no-load, open-end, investment management company organized as a Massachusetts
business trust on May 7, 1993 and registered under the Investment Company Act of
1940, as amended (the "1940 Act").
In addition to the Funds, the Trust also offers the Schwab International Index
Fund(R), Schwab Small-Cap Index Fund(R), Schwab Asset Director(R) -- High Growth
Fund, Schwab Asset Director -- Balanced Growth Fund, Schwab Asset
Director -- Conservative Growth Fund, Schwab S&P 500 Fund and Schwab Analytics
Fund(TM). The assets of each series are segregated and accounted for separately.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments in underlying funds are valued at their
respective net asset values as determined by those funds, in accordance with the
1940 Act, for a given day. Investments in securities traded on an exchange and
unlisted securities are valued at the last quoted sale price on the exchange on
which such securities are primarily traded, or if a sale is not reported for
that day, at the mean between the most recent bid and ask prices. Other
investments for which no quotations are readily available are valued at fair
value as determined by the Funds' investment manager pursuant to guidelines
adopted in good faith by the Board of Trustees.
Security transactions and investment income -- Security transactions are
accounted for on a trade date basis (date the order to buy or sell is executed).
Realized gains and losses from security transactions are determined on an
identified cost basis. Dividend income and distributions to shareholders are
recorded on the ex-dividend date; interest income is accrued on a daily basis.
32
<PAGE> 39
- ------------------------------------------------------------------------------
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 a Fund are charged directly to
that Fund. Expenses common to all series of the Trust are generally allocated to
each series in proportion to their relative net assets.
Federal income taxes -- It is each Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all net investment income and realized net capital gains, if any, to
shareholders. Therefore, no federal income tax provision is required. Each Fund
is considered a separate entity for tax purposes.
At April 30, 1997 (for financial reporting and federal income tax purposes), net
unrealized gain for the International, Growth Allocation and Balanced Allocation
aggregated $2,776,000, $529,000 and $89,000, respectively, of which $2,802,000,
$1,305,000 and $472,000, respectively, related to appreciated securities and
$26,000, $776,000 and $383,000, respectively, 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") whereby the Investment Manager manages the
Funds' business affairs and provides underlying fund analysis, selection,
ongoing monitoring, and investment management services. For these services, each
Fund pays an annual fee, payable monthly, of 0.74% of the first $1 billion of
average daily net assets, 0.69% of the next $1 billion and 0.64% of such assets
over $2 billion. The Investment Manager has reduced a portion of its fees for
the periods ended April 30, 1997 (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of 0.05% of each Fund's average daily net assets
for transfer agency services and 0.20% of such assets for shareholder
33
<PAGE> 40
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
services. Schwab has reduced a portion of its fees for the periods ended April
30, 1997 (see Note 4).
Officers and trustees -- Certain officers and trustees of the Trust are also
officers and/or directors of the Investment Manager and/or Schwab. During the
periods ended April 30, 1997, the Trust made no direct payments to its officers
or trustees who are "interested persons" within the meaning of the 1940 Act, as
amended. The Funds incurred fees related to the Trust's unaffiliated trustees of
$3,000, $2,000 and $2,000 for the International, Growth Allocation and Balanced
Allocation, respectively.
4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees and absorbed
certain expenses in order to limit the Funds' ratio of operating expenses to
average net assets. For the periods ended April 30, 1997, the total of such fees
and expenses reduced and absorbed by the Investment Manager was $179,000,
$187,000 and $130,000 for the International, Growth Allocation and Balanced
Allocation, respectively, and the total of such fees reduced by Schwab was
$87,000, $99,000 and $48,000, for the International, Growth Allocation and
Balanced Allocation, respectively (see Note 7).
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities, other than short-term
obligations, for the periods ended April 30, 1997, were as follows:
<TABLE>
<CAPTION>
Growth Balanced
International Allocation Allocation
--------------- ---------------- ----------------
April 30, 1997+ April 30, 1997++ April 30, 1997++
--------------- ---------------- ----------------
<S> <C> <C> <C>
Purchases $85,025,000 $189,219,000 $ 82,743,000
Proceeds of sales
and maturities $67,301,000 $ 98,863,000 $ 37,767,000
</TABLE>
- ---------------
+ Period from November 1, 1996 through April 30, 1997.
++ Period from November 18, 1996 (commencement of operations) through April 30,
1997.
34
<PAGE> 41
- ------------------------------------------------------------------------------
6. COMPOSITION OF NET ASSETS
At April 30, 1997, net assets for each Fund consisted of:
<TABLE>
<CAPTION>
Growth Balanced
International Allocation Allocation
------------- ----------- -----------
<S> <C> <C> <C>
Paid in capital $ 70,709,000 $91,904,000 $45,669,000
Accumulated undistributed
net investment income 66,000 320,000 334,000
Accumulated net realized
gain (loss) on
investments sold and
underlying funds 7,000 (214,000) (209,000)
Net unrealized gain on
investments 2,776,000 529,000 89,000
------------- ----------- -----------
Net Assets $ 73,558,000 $92,539,000 $45,883,000
========== ========== ==========
</TABLE>
At April 30, 1997, the International Fund's Statement of Net Assets included:
$570,000 payable for investments purchased, $157,000 payable for Fund shares
redeemed, $4,000 payable for investment advisory fee, $572,000 receivable for
investments sold, and $12,000 receivable for Fund shares sold. The Growth
Allocation Fund's Statement of Net Assets included: $4,780,000, payable for
investments purchased, $72,000 payable for Fund shares redeemed, $6,000 payable
for investment advisory fee, $6,162,000 receivable for investments sold, and
$7,000 receivable for Fund shares sold. The Balanced Allocation Fund's Statement
of Net Assets included: $1,307,000 payable for investment purchased, $19,000
payable for Fund shares redeemed, $1,813,000 receivable for investments sold,
$62,000 receivable for fund shares sold, and $1,000 receivable from advisor.
35
<PAGE> 42
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
7. FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Growth Balanced
International Allocation Allocation
-------------------------- ----------- -----------
Periods ended
April 30, April 30, April 30,
1997++ October 31, 1997++++++ 1997++++++
(Unaudited) 1996++++ (Unaudited) (Unaudited)
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 9.91 $ 10.00 $ 10.00 $ 10.00
Income from investment operations
Net investment income 0.18 -- 0.17 0.20
Net realized and unrealized gain (loss)
on investments 0.51 (0.09) 0.06 --
----------- ------ ----------- -----------
Total from investment operations 0.69 (0.09) 0.23 0.20
Less distributions
Dividends from net investment income (0.17) -- (0.14) (0.13)
----------- ------ ----------- -----------
Total distributions (0.17) -- (0.14) (0.13)
----------- ------ ----------- -----------
Net asset value at end of period $ 10.43 $ 9.91 $ 10.09 $ 10.07
============ ============ ============ ============
Total return (not annualized) 7.05% (0.90%) 2.29% 2.00%
Ratios/Supplemental data
Net assets, end of period (in thousands) $73,558 $59,180 $92,539 $45,883
Ratio of expenses to average net assets+ 0.50%* 0.50%* 0.50%* 0.50%*
Ratio of net investment income to average
net assets 3.41%* 0.52%* 3.68%* 4.43%*
Portfolio turnover rate 98% 0% 109% 93%
Average commission rate $ 0.00 $ 0.00 $ 0.00 $ 0.00
</TABLE>
- ---------------
+ The information contained in the above table is based on actual expenses for
each period, after giving effect to the portion of expenses reduced and
absorbed by the Investment Manager and Schwab. Had these expenses not been
reduced and absorbed, the Funds' expense and net investment income ratios
would have been:
<TABLE>
<S> <C> <C> <C> <C>
Ratio of expenses to average net assets 1.26%* 3.41%* 1.22%* 1.42%*
Ratio of net investment income to average
net assets 2.65%* (2.39%)* 2.96%* 3.51%*
</TABLE>
* Annualized
++ Period from November 1, 1996 through April 30, 1997.
++++ Period from October 16, 1996 (commencement of operations) through October
31, 1996.
++++++ Period from November 18, 1996 (commencement of operations) through April
30, 1997.
36
<PAGE> 43
KEEP YOUR
MONEY WORKING
HARDER!
----------------------------
USE THIS ENVELOPE TO EASILY
ADD TO YOUR SCHWAB FUNDS.
CHARLES SCHWAB
<PAGE> 44
WE'VE MADE IT EASIER FOR YOU! TAKE ADVANTAGE OF THIS OPPORTUNITY TO ADD TO YOUR
SCHWABFUNDS(R) INVESTMENT.
Now, you can add to your account by using this convenient Schwab investment
envelope. It's a simple, easy way to increase your investment. You can also
have money transferred to your fund directly from your bank account or payroll
check using Schwab's free Automatic Investment Plan (AIP). If you'd like more
information on AIP, just check the appropriate box on the coupon. We'll send
you everything you need to get started.
DON'T DELAY. USE THIS CONVENIENT INVESTMENT ENVELOPE AND SEND YOUR CHECK TODAY!
THE AUTOMATIC INVESTMENT PLAN DOES NOT INSURE PROFIT OR PROTECT AGAINST LOSS IN
DECLINING MARKETS.
- --------------------------------------------------------------------------------
PLEASE DETACH HERE
SCHWABFUNDS(R)
INVESTMENT COUPON
- --------------------------------------------------------------------------------
Please enclose your check and this completed investment coupon in the attached
postage-paid envelope.
________________________________________________________________________________
NAME
$_______________________________________________________________________________
AMOUNT OF INVESTMENT
________________________________________________________________________________
SIGNATURE
[ ] Check here if you would like more investment coupons for future use.
[ ] Check here if you would like more information on Schwab's Automatic
Investment Plan (AIP).
__________-__________
SCHWAB ACCOUNT NUMBER
Please indicate to which SchwabFund your investment should go:
[ ] Schwab S&P 500 Fund
[ ] Schwab Small-Cap Index Fund(R)
[ ] Schwab International Index Fund(R)
[ ] Schwab Analytics Fund(TM)
[ ] Schwab OneSource Portfolios - International
[ ] Schwab OneSource Portfolios - Growth Allocation
[ ] Schwab OneSource Portfolios - Balanced Allocation
[ ] Schwab Asset Director(R) - High Growth Fund
[ ] Schwab Asset Director(R) - Balanced Growth Fund
[ ] Schwab Asset Director(R) - Conservative Growth Fund
IF NO FUND IS INDICATED, YOUR INVESTMENT WILL GO INTO THE SWEEP ACCOUNT YOU'VE
DESIGNATED.
*This envelope may not be used for initial investments. Subsequent investment
minimum is $100.
(C) 1997 Charles Schwab & Co., Inc. All rights reserved. Member SIPC/NYSE
Printed on recycled paper. TF4794C(5/97) CRS 20061
(LIFT HERE FOR MORE INFORMATION)
<PAGE> 45
CHARLES SCHWAB
JUST FOLLOW THESE EASY STEPS TO INVEST IN YOUR SCHWABFUNDS(R) ACCOUNT:
1. Fill out the Schwab investment coupon completely, including your name,
account number, amount of your check and signature. Please use one coupon
for each account.
2. Make your check payable to CHARLES SCHWAB & CO., INC., and enclose your
check with the completed coupon in this postage-paid envelope.
3. Then just drop your SchwabFunds investment envelope in the mail today -
and start putting your money to work. If you have any questions, don't
hesitate to call 1-800-2 NO-LOAD.
This envelope is intended for shareholders who have already received a current
SchwabFunds prospectus.
<PAGE> 46
ATTN: Dept. AIP333-4 NO POSTAGE
NECESSARY IF
MAILED IN THE
BUSINESS REPLY MAIL UNITED STATES
FIRST-CLASS MAIL PERMIT NO. 18125 SAN FRANCISCO, CA
POSTAGE WILL BE PAID BY ADDRESSEE
CHARLES SCHWAB & CO INC
PO BOX 7778
SAN FRANCISCO CA 94120-9419
<PAGE> 47
SCHWABFUNDS FAMILY(R)
The SchwabFunds Family includes a variety of funds to help meet your investment
needs. You can diversify your portfolio in a single step with our asset
allocation funds. Or you can customize your portfolio with a combination of our
stock funds as well as our taxable and tax-advantaged bond and money funds.
SCHWAB ASSET ALLOCATION FUNDS
Schwab Asset Director(R) -- High Growth Fund
Schwab Asset Director -- Balanced Growth Fund
Schwab Asset Director -- Conservative Growth Fund
Schwab OneSource Portfolios -- Growth Allocation
Schwab OneSource Portfolios -- Balanced Allocation
SCHWAB STOCK FUNDS
Schwab 1000 Fund(R)
Schwab S&P 500 Fund
Schwab Analytics Fund(TM)
Schwab Small-Cap Index Fund(R)
Schwab International Index Fund(R)
Schwab OneSource Portfolios -- International
SCHWAB BOND FUNDS
Schwab Government Bond Funds -- Long-Term and Short/Intermediate
Schwab Tax-Free Bond Funds -- Long-Term and Short/Intermediate
Schwab California Tax-Free Bond Funds -- Long-Term and Short/Intermediate
SCHWAB MONEY MARKET FUNDS
Schwab offers an array of money market funds* that seek high current income with
safety and liquidity. Choose from taxable or tax-advantaged alternatives. Many
can be linked to your Schwab account to "sweep" cash balances automatically when
you're between investments. Or, for your larger cash reserves, choose one of our
Value Advantage Investments(R).
Please call 1-800-2 NO-LOAD for a free prospectus and brochure for any of the
SchwabFunds(R).
Each prospectus provides more complete information, including charges and
expenses. Please read it carefully before investing.
This report must be preceded or accompanied by a current prospectus.
*Investments in money market funds are neither insured nor guaranteed by the
U.S. government, and there is no assurance that the funds will be able to
maintain a stable share price of $1.
<PAGE> 48
SCHWABFUNDS ==============
FAMILY(R) BULK RATE
101 Montgomery Street U.S. POSTAGE
San Francisco, California 94104 PAID
CHARLES SCHWAB
==============
INVESTMENT ADVISOR
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc.
101 Montgomery Street, San Francisco, CA 94104
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
(C)1997 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
TF4733R(5/97) CRS 20064 Printed on recycled paper.
