<PAGE> 1
SCHWABFUNDS(R)
SCHWAB
ASSET DIRECTOR(R)
FUNDS
Annual Report
October 31, 1997
<PAGE> 2
October 31, 1997
Dear Shareholder,
With the support of investors like you, SchwabFunds(R) continues to be
among the largest and fastest-growing mutual fund families in the nation.
Charles Schwab Investment Management, Inc. (CSIM) now manages over $53 billion
in assets for nearly 3 million SchwabFunds shareholders and offers 31 funds
spanning a spectrum of financial markets and investing styles.
MAINTAINING A LONG-TERM PERSPECTIVE
The recent volatility in both domestic and international markets reminds us that
investments can move in both directions, down as well as up, especially in the
short term. For this reason, it is extremely important that you develop and
stick with a long-term investment plan that is appropriate for your personal
goals, time horizon and tolerance for risk. While it's a good idea to
periodically review your portfolio, I would encourage you to avoid making
changes merely in response to short-term market movements.
If you have any questions about your own investment plan, or need help getting
started, contact your local Schwab branch to set up a free consultation with one
of our representatives. Additionally, I encourage you to visit our Web site at
www.schwab.com/schwabfunds where you'll find online resources and tools to help
you evaluate or develop your investment plan.
NEW INVESTMENT OPPORTUNITIES
We recently introduced the Schwab OneSource Portfolios - Small Company Fund -- a
professionally managed portfolio of small company mutual funds in one convenient
investment. If you're looking for an easy, cost-effective way to tap into the
growth potential of small companies, this Fund may be an appropriate investment
for you. For a free prospectus, which contains more information, including fees
and expenses, please call our toll-free line, 1-800-435-4000. Please be sure to
read the prospectus before investing.
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
information on SchwabFunds.
/s/ Charles R. Schwab
Charles R. Schwab
<PAGE> 3
CONTENTS
A Word from SchwabFunds(R) 2
The Portfolio Management Team 3
Market Overview 4
Schwab Asset Director(R) Funds Performance 10
Schwab Asset Director Funds Holdings 11
Questions to the Portfolio Management Team 14
Financial Statements and Notes 18
<PAGE> 4
A WORD FROM SCHWABFUNDS(R)
We are pleased to provide you with the annual report for the Schwab Asset
Director(R) Funds for the fiscal year ended October 31, 1997. In this report,
you will find performance statistics and other useful information for the Schwab
Asset Director--High Growth Fund, Balanced Growth Fund, and Conservative Growth
Fund (the Funds).
Each of the Funds provides an easy, convenient way to diversify your portfolio
among major asset categories, namely stocks, bonds, and cash equivalents.
Through a single investment, you may benefit from asset allocation, an investing
strategy designed to achieve an optimal balance between risk and return. In
fact, research shows that the greatest impact on investment returns is due to
the asset allocation decision (the mix of stocks, bonds, and cash equivalents)
rather than market timing or individual stock and bond selections. 1
The primary difference between the three Schwab Asset Director Funds is the
proportion invested in stocks. Each Fund targets a different mix of investments,
as described more fully on the following pages, and employs an index-based
approach to capturing the returns inherent in the asset categories. This mix
among major asset classes will vary within defined ranges based on the
Investment Manager's determination of the relative attractiveness of securities
in the financial markets.
INFORMING INVESTORS
One of our top priorities continues to be keeping you informed about your
investments. In addition to this annual report, we offer a wealth of information
on our web site at www.schwab.com/schwabfunds. For a free prospectus, call our
toll-free line at 1-800-435-4000. The prospectus contains more information,
including fees and expenses. Please read the prospectus carefully before
investing.
SMART INVESTMENT STRATEGIES
Investing the same amount of money on a regular basis--every month or quarter,
for example, without regard to overall market condition--may help minimize the
effects of market volatility on your long-term investment plan. With this
investment strategy, better known as dollar-cost averaging, you automatically
buy more shares when prices dip and fewer shares when prices rise.
Consider a simple hypothetical example: Let's say you decide to invest $400 on a
regular basis in a single mutual fund, as shown in the table below. In this
example, your average cost basis would be lower than the average share price
during the period by $0.51 per share. 2
<TABLE>
<CAPTION>
Number of
Fixed Investment Share Price Shares Purchased
---------------- ----------- ----------------
<S> <C> <C> <C>
Purchase #1 $400.00 $10.00 40
Purchase #2 $400.00 $8.00 50
Purchase #3 $400.00 $5.00 80
Purchase #4 $400.00 $8.00 50
Purchase #5 $400.00 $10.00 40
--------- ------ ---
Total $2,000.00 $41.00 260
Average share price ($41/5 periods): $8.20
Your average cost basis ($2,000/260 shares): $7.69
-----
Per-share advantage: $0.51
</TABLE>
1 Source: Financial Analysts Journal; Brinson, Singer, Beebower; May-June
1991.
2 This example is for illustrative purposes only and is not intended to
predict or guarantee the performance of any particular fund available through
Schwab.
2
<PAGE> 5
THE PORTFOLIO MANAGEMENT TEAM
Of course, in this hypothetical example, you would have been better off buying
$2,000 worth at a share price of $5--but you'd have to be pretty lucky to know
that in advance. Dollar-cost averaging requires very little effort, especially
if you take advantage of free Schwab programs that make it easy and convenient
to invest regularly:
- - AUTOMATIC INVESTMENT PLAN (AIP) lets you make subsequent purchases of
mutual funds you already own, including SchwabFunds(R), on a regular basis,
for as little as $100 per fund. You can use the cash or sweep shares of
your Schwab Money Fund already available in your Schwab account,3 or you
can enroll in Schwab's free MoneyLink Transfer Service(R) to automatically
fund your Schwab account.
- - MONEYLINK TRANSFER SERVICE(R) allows you to make periodic cash transfers of
just $50 or more to your Schwab account automatically from your bank
account or payroll or government check and helps put your money to work
faster.4
Please remember that these programs do not ensure a profit or protect against
losses in a declining market, but if you invest for the long term, dollar-cost
averaging through regular investing can help smooth the effects of market
volatility. For more information on these services, call 1-800-435-4000.
Thank you for investing with us.
STEPHEN B. WARD, Senior Vice President and Chief Investment Officer, has overall
responsibility for the management of the Funds' portfolios. Steve joined CSIM as
Vice President and Portfolio Manager in April 1991, and was promoted to his
current position in August 1993. Prior to joining CSIM, Steve was Vice President
and Portfolio Manager at Federated Investors.
GERI HOM, Vice President and Senior Portfolio Manager, has primary
responsibility for the day-to-day management of the equity securities in each
Fund's portfolio. Geri joined CSIM in March 1995 as Portfolio Manager and was
promoted to her current position in December 1996. She currently manages
approximately $6.1 billion in assets. Prior to joining CSIM, Geri was a
principal for Wells Fargo Nikko Investment Advisors and Vice President and
Manager of the Domestic Equity Portfolio Management Group for Wells Fargo Nikko.
KIMON DAIFOTIS, Vice President and Senior Portfolio Manager, has primary
responsibility for the day-to-day management of the bonds and cash equivalent
securities in each Fund's portfolio. Kimon joined CSIM in his current capacity
in October 1997. In addition to the Schwab Asset Director(R) Funds, he manages
two bond index funds. For five years prior to joining Schwab, Kimon was employed
by Lehman Brothers, most recently as Vice President in fixed income
institutional sales and, prior to that, as Senior Portfolio Strategist.
The following Market Overview as well as the answers to questions for the Funds
are provided by the Portfolio Management Team.
3 Includes uninvested cash and margin cash available. If sufficient cash is
not available, your automatic purchases will not be made.
4 The terms of your specific Schwab account will dictate when your Schwab
MoneyLink transfers are swept into a money market fund and begin earning money
market dividend income.
3
<PAGE> 6
MARKET OVERVIEW
REAL GDP GROWTH RATE
Quarterly percentage change in annual rate
<TABLE>
<CAPTION>
Real GDP
<S> <C>
Q1 1990 0.041
Q2 1990 0.013
Q3 1990 -0.019
Q4 1990 -0.041
Q1 1991 -0.022
Q2 1991 0.017
Q3 1991 0.01
Q4 1991 0.01
Q1 1992 0.047
Q2 1992 0.025
Q3 1992 0.03
Q4 1992 0.043
Q1 1993 -0.001
Q2 1993 0.019
Q3 1993 0.023
Q4 1993 0.048
Q1 1994 0.025
Q2 1994 0.049
Q3 1994 0.035
Q4 1994 0.03
Q1 1995 0.004
Q2 1995 0.007
Q3 1995 0.038
Q4 1995 0.003
Q1 1996 0.02
Q2 1996 0.047
Q3 1996 0.021
Q4 1996 0.038
Q1 1997 0.049
Q2 1997 0.033
Q3 1997 0.033
</TABLE>
Source: Bloomberg L.P.
- - The economy, as measured by the growth of real GDP, continues to expand at
a healthy rate. The real GDP growth rate was 3.2% for the 1996 calendar
year and 3.9% (on an annualized basis) for the first nine months of 1997.
- - The strength of the economy and tight labor markets (refer to page 5)
continue to lead to speculation regarding potential acceleration in both
wage and price inflation and whether more restrictive Federal Reserve
policy is imminent. The Federal Reserve has indicated that it is "on alert"
for signs of accelerating inflation whether caused by tight labor markets
or by consumer spending fueled by a strong stock market.
- - At the time of this writing, the economy appears poised for continued
growth, extending the current economic expansion that began in 1991.
4
<PAGE> 7
U.S. UNEMPLOYMENT RATE
<TABLE>
<CAPTION>
<S> <C>
Jan-90 0.053
Feb-90 0.053
Mar-90 0.052
Apr-90 0.054
May-90 0.053
Jun-90 0.051
Jul-90 0.054
Aug-90 0.056
Sep-90 0.057
Oct-90 0.058
Nov-90 0.06
Dec-90 0.062
Jan-91 0.063
Feb-91 0.065
Mar-91 0.068
Apr-91 0.066
May-91 0.068
Jun-91 0.068
Jul-91 0.067
Aug-91 0.068
Sep-91 0.068
Oct-91 0.069
Nov-91 0.069
Dec-91 0.071
Jan-92 0.071
Feb-92 0.073
Mar-92 0.073
Apr-92 0.073
May-92 0.074
Jun-92 0.077
Jul-92 0.076
Aug-92 0.076
Sep-92 0.075
Oct-92 0.074
Nov-92 0.073
Dec-92 0.073
Jan-93 0.071
Feb-93 0.07
Mar-93 0.07
Apr-93 0.07
May-93 0.069
Jun-93 0.069
Jul-93 0.068
Aug-93 0.067
Sep-93 0.067
Oct-93 0.067
Nov-93 0.065
Dec-93 0.064
Jan-94 0.067
Feb-94 0.066
Mar-94 0.065
Apr-94 0.064
May-94 0.06
Jun-94 0.06
Jul-94 0.061
Aug-94 0.061
Sep-94 0.059
Oct-94 0.056
Nov-94 0.058
Dec-94 0.054
Jan-95 0.056
Feb-95 0.054
Mar-95 0.058
Apr-95 0.057
May-95 0.057
Jun-95 0.056
Jul-95 0.057
Aug-95 0.053
Sep-95 0.056
Oct-95 0.055
Nov-95 0.056
Dec-95 0.056
Jan-96 0.058
Feb-96 0.055
Mar-96 0.056
Apr-96 0.054
May-96 0.056
Jun-96 0.053
Jul-96 0.054
Aug-96 0.051
Sep-96 0.052
Oct-96 0.052
Nov-96 0.053
Dec-96 0.053
Jan-97 0.054
Feb-97 0.053
Mar-97 0.052
Apr-97 0.049
May-97 0.048
Jun-97 0.05
Jul-97 0.048
Aug-97 0.049
Sep-97 0.049
Oct-97 0.047
</TABLE>
Source: Bloomberg L.P.
- - Job growth has remained robust and the unemployment rate has reached a new
low for this decade. In fact, the October rate of 4.7% represents the
lowest rate in 24 years.
- - The combination of a tight labor market, as evidenced by low unemployment
rates and strong economic growth, typically leads to inflationary pressures
on wages and, ultimately, prices. In this environment, productivity growth
becomes particularly important. Strong productivity gains, as we
experienced in the second and third quarters, allow manufacturers to keep a
lid on prices in the face of rising wages without trimming profit margins.
5
<PAGE> 8
MARKET OVERVIEW (continued)
MEASURES OF INFLATION
- -----MONTHLY CONSUMER PRICE INDEX
<TABLE>
<S> <C>
Jan-90 0.052
Feb-90 0.053
Mar-90 0.052
Apr-90 0.047
May-90 0.044
Jun-90 0.047
Jul-90 0.048
Aug-90 0.056
Sep-90 0.062
Oct-90 0.063
Nov-90 0.063
Dec-90 0.061
Jan-91 0.057
Feb-91 0.053
Mar-91 0.049
Apr-91 0.049
May-91 0.05
Jun-91 0.047
Jul-91 0.044
Aug-91 0.038
Sep-91 0.034
Oct-91 0.029
Nov-91 0.03
Dec-91 0.031
Jan-92 0.026
Feb-92 0.028
Mar-92 0.032
Apr-92 0.032
May-92 0.03
Jun-92 0.031
Jul-92 0.032
Aug-92 0.031
Sep-92 0.03
Oct-92 0.032
Nov-92 0.03
Dec-92 0.029
Jan-93 0.033
Feb-93 0.032
Mar-93 0.031
Apr-93 0.032
May-93 0.032
Jun-93 0.03
Jul-93 0.028
Aug-93 0.028
Sep-93 0.027
Oct-93 0.028
Nov-93 0.027
Dec-93 0.027
Jan-94 0.025
Feb-94 0.025
Mar-94 0.025
Apr-94 0.024
May-94 0.023
Jun-94 0.025
Jul-94 0.028
Aug-94 0.029
Sep-94 0.03
Oct-94 0.026
Nov-94 0.027
Dec-94 0.027
Jan-95 0.028
Feb-95 0.029
Mar-95 0.029
Apr-95 0.031
May-95 0.032
Jun-95 0.03
Jul-95 0.028
Aug-95 0.026
Sep-95 0.025
Oct-95 0.028
Nov-95 0.026
Dec-95 0.025
Jan-96 0.027
Feb-96 0.027
Mar-96 0.028
Apr-96 0.029
May-96 0.029
Jun-96 0.028
Jul-96 0.03
Aug-96 0.029
Sep-96 0.03
Oct-96 0.03
Nov-96 0.033
Dec-96 0.033
Jan-97 0.03
Feb-97 0.03
Mar-97 0.028
Apr-97 0.025
May-97 0.022
Jun-97 0.023
Jul-97 0.022
Aug-97 0.022
Sep-97 0.022
Oct-97 0.021
</TABLE>
_____ QUARTERLY EMPLOYMENT COST INDEX
<TABLE>
<S> <C>
Jan-90 0.053
Feb-90 0.053
Mar-90 0.052
Apr-90 0.047
May-90 0.044
Jun-90 0.047
Jul-90 0.048
Aug-90 0.056
Sep-90 0.062
Oct-90 0.063
Nov-90 0.063
Dec-90 0.061
Jan-91 0.057
Feb-91 0.053
Mar-91 0.049
Apr-91 0.049
May-91 0.05
Jun-91 0.047
Jul-91 0.044
Aug-91 0.038
Sep-91 0.034
Oct-91 0.029
Nov-91 0.03
Dec-91 0.031
Jan-92 0.026
Feb-92 0.028
Mar-92 0.032
Apr-92 0.032
May-92 0.03
Jun-92 0.031
Jul-92 0.032
Aug-92 0.031
Sep-92 0.03
Oct-92 0.032
Nov-92 0.03
Dec-92 0.029
Jan-93 0.033
Feb-93 0.032
Mar-93 0.031
Apr-93 0.032
May-93 0.032
Jun-93 0.03
Jul-93 0.028
Aug-93 0.028
Sep-93 0.027
Oct-93 0.028
Nov-93 0.027
Dec-93 0.027
Jan-94 0.025
Feb-94 0.025
Mar-94 0.025
Apr-94 0.024
May-94 0.023
Jun-94 0.025
Jul-94 0.028
Aug-94 0.029
Sep-94 0.03
Oct-94 0.026
Nov-94 0.027
Dec-94 0.027
Jan-95 0.028
Feb-95 0.029
Mar-95 0.029
Apr-95 0.031
May-95 0.032
Jun-95 0.03
Jul-95 0.028
Aug-95 0.026
Sep-95 0.025
Oct-95 0.028
Nov-95 0.026
Dec-95 0.025
Jan-96 0.027
Feb-96 0.027
Mar-96 0.028
Apr-96 0.029
May-96 0.029
Jun-96 0.028
Jul-96 0.03
Aug-96 0.029
Sep-96 0.03
Oct-96 0.03
Nov-96 0.033
Dec-96 0.033
Jan-97 0.03
Feb-97 0.03
Mar-97 0.028
Apr-97 0.025
May-97 0.022
Jun-97 0.023
Jul-97 0.022
Aug-97 0.022
Sep-97 0.022
Oct-9 0.03
</TABLE>
Source: Bloomberg L.P.
- - Both the Employment Cost Index and Consumer Price Index (CPI) remained in
check throughout the first three quarters of 1997, reflecting continued low
levels of inflation.
- - For the one-year period ended October 1997, the CPI rose 2.1%, the lowest
rate since February 1987. Its core rate (which excludes the more volatile
food and energy components) rose 2.3%, the lowest rate since 1965.
- - Even though current levels of inflation are very low, the Federal Reserve
has indicated its belief that the economy remains in the zone where
inflation risks are on the upside and that it is poised to act preemptively
by raising interest rates if necessary. The Federal Reserve did take action
in March, increasing the Federal Funds Rate by 0.25% to 5.50%.
6
<PAGE> 9
TOTAL RETURN PERFORMANCE
VALUE OF A HYPOTHETICAL $1 INVESTMENT
<TABLE>
<CAPTION>
LEHMAN
SCHWAB SCHWAB BROTHERS
S&P 500(R) SMALL-CAP INERNATIONAL GENERAL U.S.
INDEX INDEX(R) INDEX(R) GOVT. INDEX
<S> <C> <C> <C> <C>
10/96 1. 1. 1. 1.
Nov-96 1.076 1.04 1.046 1.017
Dec-96 1.054 1.059 1.037 1.007
Jan-97 1.12 1.084 1.003 1.008
Feb-97 1.129 1.058 1.019 1.01
Mar-97 1.083 1.006 1.026 0.999
Apr-97 1.147 1.009 1.037 1.013
May-97 1.217 1.132 1.114 1.022
Jun-97 1.271 1.191 1.179 1.033
Jul-97 1.373 1.259 1.21 1.063
Aug-97 1.296 1.288 1.123 1.052
Sep-97 1.367 1.389 1.194 1.068
Oct-97 1.321 1.328 1.097 1.086
</TABLE>
Total return assumes reinvestment of all dividend and capital gain
distributions. Past performance is no guarantee of future results. The indices
are representative returns of specific market sectors during the one-year
reporting period and do not reflect the performance of any fund. Indices are
unmanaged and, unlike a fund, do not reflect the payment of advisory fees and
other expenses associated with an investment in a fund. Investors cannot invest
in an index directly.
- - Despite corrections in March, August and October, domestic equity
investments continued to be the best performing asset class and achieved
strong returns for the one-year reporting period. Large-cap domestic
stocks, as represented by the S&P 500 Index, achieved a total return of
32.1%, while small-cap stocks, as represented by the Schwab Small-Cap
Index, achieved a total return of 32.8%.
- - International stocks, as represented by the Schwab International Index,
achieved a return of 9.7% for the one-year reporting period, following an
Asian-led correction of 9.7% during the month of October.
- - U.S. government bonds, as represented by the Lehman Brothers General U.S.
Government Index, achieved a lower, albeit less-volatile, return of 8.6%
for the one-year reporting period.
7
<PAGE> 10
MARKET OVERVIEW (continued)
S&P 500(R) PRICE/EARNINGS RATIO
[LINE GRAPH]
Jan-90 14.37
Feb-90 14.21
Mar-90 14.77
Apr-90 14.82
May-90 15.84
Jun-90 16.66
Jul-90 16.65
Aug-90 15.57
Sep-90 14.9
Oct-90 14.36
Nov-90 14.59
Dec-90 15.19
Jan-91 14.95
Feb-91 16.82
Mar-91 17.48
Apr-91 17.85
May-91 17.92
Jun-91 17.96
Jul-91 18.07
Aug-91 19.72
Sep-91 19.88
Oct-91 19.92
Nov-91 21.02
Dec-91 21.85
Jan-92 23.35
Feb-92 23.83
Mar-92 25.45
Apr-92 25.51
May-92 25.71
Jun-92 25.08
Jul-92 25.61
Aug-92 25.5
Sep-92 24.37
Oct-92 23.94
Nov-92 24.08
Dec-92 24.01
Jan-93 24.2
Feb-93 24.25
Mar-93 24.22
Apr-93 23.2
May-93 23.21
Jun-93 22.58
Jul-93 22.52
Aug-93 23.02
Sep-93 23.74
Oct-93 23.97
Nov-93 22.55
Dec-93 23.55
Jan-94 22.98
Feb-94 21.17
Mar-94 20.34
Apr-94 20.1
May-94 20.16
Jun-94 19.76
Jul-94 18.64
Aug-94 18.9
Sep-94 18.26
Oct-94 17.55
Nov-94 16.58
Dec-94 16.98
Jan-95 16.23
Feb-95 16.2
Mar-95 16.5
Apr-95 16.02
May-95 16.43
Jun-95 16.82
Jul-95 16.55
Aug-95 16.18
Sep-95 16.68
Oct-95 16.18
Nov-95 17.14
Dec-95 17.41
Jan-96 18.11
Feb-96 18.56
Mar-96 18.94
Apr-96 19.16
May-96 19.48
Jun-96 19.3
Jul-96 18.31
Aug-96 18.62
Sep-96 19.75
Oct-96 19.6
Nov-96 21.05
Dec-96 20.7
Jan-97 20.55
Feb-97 20.98
Mar-97 19.87
Apr-97 20.24
May-97 21.43
Jun-97 22.45
Jul-97 23.92
Aug-97 22.64
Sep-97 24
Oct-97 22.84
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.
Source: Bloomberg L.P.
- - The price/earnings ratio for the S&P 500 was 22.8 at the close of the
reporting period, well above its 30-year average of 14.7.
- - Based on other traditional measures such as the price-to-book value ratio
or dividend yield, the U.S. stock market valuation, as measured by the S&P
500, reached historical highs during the reporting period.
- - Although low inflation and interest rates and strong flows into mutual
funds have helped the U.S. equity markets reach these levels, Federal
Reserve Chairman Greenspan has warned that current stock market values make
sense only if the outlook for corporate earnings growth remains positive,
an assumption which, as always, will be widely debated by market
participants.
8
<PAGE> 11
MSCI-EAFE(R) COUNTRY US$ RETURN
for the one-year period ended 10/31/97
<TABLE>
<CAPTION>
<S> <C>
Finland 0.4835
Spain 0.3907
Norway 0.3433
Denmark 0.3427
Netherlands 0.33
United Kingdom 0.3038
Switzerland 0.2938
Sweden 0.2666
Italy 0.2381
Germany 0.2023
Ireland 1.1764
France 0.1339
Belgium 0.1224
Austria 0.051
New Zealand -0.0309
Australia -0.0664
Hong Kong -0.1688
Japan -0.2418
Singapore -0.3048
Malaysia -0.5688
</TABLE>
- - Returns for the reporting period were generally strong for European
countries, with the highest returns in Finland, Spain, Norway, and Denmark.
Asian country returns were generally negative for the period, with the
weakest returns in Malaysia, Singapore, Japan, and Hong Kong.
- - The total return expressed in U.S. dollars for the MSCI-EAFE Index for the
one-year reporting period was 4.6%. For the same period, the total return
expressed in local currencies was 12.0%, reflecting the relative strength
of the U.S. dollar versus most foreign currencies.
9
<PAGE> 12
FUND PERFORMANCE
The graph to the right compares the growth of a hypothetical $10,000 investment
in each of the Schwab Asset Director(R) Funds, made at their inception, with a
similar investment in the S&P 500 (R) Index and the Lehman Brothers General U.S.
Government Index (Lehman Government Bond Index).
THIS INFORMATION IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL
RETURNS ASSUME REINVESTMENT OF ALL DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS.
PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
Indices are unmanaged and do not reflect advisory fees and other expenses
associated with an investment in the Fund. Investors cannot invest in an index
directly.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 10/31/97
<TABLE>
<CAPTION>
One Year Since inception
(11/20/95)
-------- ---------------
<S> <C> <C>
SCHWAB ASSET DIRECTOR-HIGH GROWTH FUND(1) 22.33% 18.16%
SCHWAB ASSET DIRECTOR-BALANCED GROWTH FUND(1) 18.43% 14.94%
SCHWAB ASSET DIRECTOR-CONSERVATIVE GROWTH FUND(1) 15.12% 11.89%
S&P 500 Index 32.10% 26.64%
Lehman Government Bond Index 8.65% 6.62%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 9/30/97
<TABLE>
<CAPTION>
One Year Since inception
(11/20/95)
-------- ---------------
<S> <C> <C>
SCHWAB ASSET DIRECTOR-HIGH GROWTH FUND(1) 27.99% 21.10%
SCHWAB ASSET DIRECTOR-BALANCED GROWTH FUND(1) 22.72% 16.92%
SCHWAB ASSET DIRECTOR-CONSERVATIVE GROWTH FUND(1) 17.82% 12.88%
</TABLE>
(1) The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/28/98 that total
operating expenses will not exceed 0.89%. Without fee waivers and guarantees, as
of 10/31/97, the one-year and average annual since-inception total returns would
have been 21.24% and 17.26%; 17.81% and 14.23%; and 13.16% and 10.27%,
respectively, for the High Growth, Balanced Growth and Conservative Growth
Funds. As of 9/30/97, the one-year and average annual since-inception total
returns would have been 27.34% and 20.42%; 22.08% and 16.19%; and 15.76% and
11.20%, respectively, for the High Growth, Balanced Growth and Conservative
Growth Funds.
[GRAPH OF HYPOTHETICAL INVESTMENT]
HIGH GROWTH FUND
BALANCED GROWTH FUND
CONSERVATIVE GROWTH FUND
S&P 500(R) INDEX
LEHMAN GOVERNMENT BOND INDEX
<TABLE>
<CAPTION>
Date High Bal. Cons. S&P 500 Lehman Gov't Bond Index
- -------- ------- ------- ------- ------- -----------------------
<S> <C> <C> <C> <C> <C>
11/20/95 $10,000 $10,000 $10,000 $10,000 $10,000
11/30/95 $10,080 $10,080 $10,080 $10,104 $10,078
12/31/95 $10,292 $10,270 $10,237 $10,299 $10,221
01/31/96 $10,442 $10,390 $10,337 $10,649 $10,283
02/29/96 $10,533 $10,410 $10,297 $10,748 $10,074
03/31/96 $10,623 $10,460 $10,287 $10,852 $9,990
04/30/96 $10,803 $10,581 $10,337 $11,011 $9,926
05/31/96 $10,954 $10,691 $10,378 $11,294 $9,909
06/30/96 $10,934 $10,711 $10,439 $11,337 $10,037
07/31/96 $10,523 $10,410 $10,256 $10,836 $10,062
08/31/96 $10,733 $10,551 $10,337 $11,064 $10,040
09/30/96 $11,184 $10,912 $10,643 $11,686 $10,207
10/31/96 $11,324 $11,082 $10,818 $12,009 $10,431
11/30/96 $11,896 $11,534 $11,179 $12,917 $10,613
12/31/96 $11,784 $11,415 $11,070 $12,661 $10,505
01/31/97 $12,008 $11,589 $11,174 $13,451 $10,516
02/28/97 $12,028 $11,589 $11,184 $13,557 $10,531
03/31/97 $11,692 $11,334 $10,965 $13,001 $10,419
04/30/97 $12,038 $11,620 $11,206 $13,776 $10,569
05/31/97 $12,793 $12,183 $11,604 $14,614 $10,660
06/30/97 $13,313 $12,593 $11,896 $15,268 $10,779
07/31/97 $14,087 $13,217 $12,413 $16,482 $11,086
08/31/97 $13,618 $12,849 $12,160 $15,559 $10,976
09/30/97 $14,301 $13,391 $12,540 $16,410 $11,141
10/31/97 $13,853 $13,125 $12,455 $15,862 $11,333
</TABLE>
10
<PAGE> 13
FUND HOLDINGS
Schwab Asset Director(R) Funds invest in a diversified mix of stocks, bonds, and
cash equivalents, either directly or through investments in other
SchwabFunds.(R) Each Fund employs an index-based approach and seeks to capture
the returns inherent in the asset categories. This mix among asset classes will
vary within the defined ranges and is based on the Investment Manager's
determination of the relative attractiveness of securities in the financial
markets. The charts on the following pages present the asset mixes and target
ranges for each of the three Funds as well as their 10 largest holdings as of
the end of the reporting period.
SCHWAB ASSET DIRECTOR-HIGH GROWTH FUND(1)
[PIE GRAPH OF ASSET MIX]
<TABLE>
<CAPTION>
ASSET MIX
<S> <C>
INTERNATIONAL STOCKS 19%
U.S. LARGE-COMPANY STOCKS 43%
CASH EQUIVALENTS 19%
U.S. SMALL-COMPANY STOCKS 19%
</TABLE>
<TABLE>
<CAPTION>
MIX AS OF MIX AS OF TARGET MIX IN
10/31/97 10/31/96 NEUTRAL MARKETS
--------- --------- ---------------
<S> <C> <C> <C>
U.S. Stocks:
Large-company 42.8% 35.9%
Small-company 19.3% 18.3%
International stocks 19.3% 19.1%
Total Stocks 81.4% 73.3% 80.0%
Bonds 0.0% 16.9% 15.0%
Cash equivalents 18.6% 9.8% 5.0%
TOTAL 100.0% 100.0% 100.0%
</TABLE>
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
INVESTMENT % OF FUND INVESTMENTS
- ---------- ---------------------
<S> <C>
Schwab International Index Fund(R) 19.3
Schwab Small-Cap Index Fund(R) 19.3
General Electric Co. 1.3
Microsoft Corp. 1.0
Exxon Corp. 0.9
Coca-Cola Co. 0.8
Intel Corp. 0.8
Royal Dutch Petroleum Co. 0.7
Merck & Co., Inc. 0.7
International Business Machines Corp. 0.6
TOTAL 45.4%
</TABLE>
(1) This information is as of 10/31/97 and may not be indicative of current or
future investments. A complete listing of the Fund's holdings as of 10/31/97 can
be found in the Schedule of Investments later in this report.
11
<PAGE> 14
SCHWAB ASSET DIRECTOR--BALANCED GROWTH FUND 1
[PIE GRAPH OF ASSET MIX]
<TABLE>
<CAPTION>
ASSET MIX
<S> <C>
U.S. SMALL-COMPANY STOCKS 15%
INTERNATIONAL STOCKS 14%
U.S. LARGE-COMPANY STOCKS 33%
BONDS 24%
CASH EQUIVALENTS 14%
</TABLE>
<TABLE>
<CAPTION>
MIX AS OF MIX AS OF TARGET MIX IN
10/31/97 10/31/96 NEUTRAL MARKETS
--------- --------- ---------------
<S> <C> <C> <C>
U.S. Stocks:
Large-company 32.9% 26.5%
Small-company 14.5% 14.2%
International stocks 14.3% 14.2%
Total Stocks 61.7% 54.9% 60.0%
Bonds 24.1% 34.7% 35.0%
Cash equivalents 14.2% 10.4% 5.0%
TOTAL 100.0% 100.0% 100.0%
</TABLE>
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
INVESTMENT % OF FUND INVESTMENTS
- ---------- ---------------------
<S> <C>
Schwab Small-Cap Index Fund(R) 14.5
Schwab International Index Fund(R) 14.3
U.S. Treasury Note (7.25%, maturity 05/15/04) 3.0
U.S. Treasury Note (7.00%, maturity 04/15/99) 2.1
U.S. Treasury Bond (7.125%, maturity 02/15/23) 1.4
U.S. Treasury Note (6.125%, maturity 12/31/01) 1.3
U.S. Treasury Bond (8.125%, maturity 08/15/19) 1.3
General Electric Co. 1.0
U.S. Treasury Note (6.25%, maturity 04/30/01) 0.9
U.S. Treasury Note (6.00%, maturity 08/15/00) 0.8
TOTAL 40.6%
</TABLE>
1 This information is as of 10/31/97 and may not be indicative of current or
future investments. A complete listing of the Fund's holdings as of 10/31/97 can
be found in the Schedule of Investments later in this report.
12
<PAGE> 15
SCHWAB ASSET DIRECTOR--CONSERVATIVE GROWTH FUND 2
[PIE GRAPH OF ASSET MIX]
<TABLE>
<CAPTION>
ASSET MIX
<S> <C>
U.S. SMALL-COMPANY STOCKS 10%
INTERNATIONAL STOCKS 10%
CASH EQUIVALENTS 16%
U.S. LARGE-COMPANY STOCKS 22%
BONDS 42%
</TABLE>
<TABLE>
<CAPTION>
MIX AS OF MIX AS OF TARGET MIX IN
10/31/97 10/31/96 NEUTRAL MARKETS
--------- --------- ---------------
<S> <C> <C> <C>
U.S. Stocks:
Large-company 22.4% 17.1%
Small-company 9.9% 10.5%
International stocks 9.7% 9.8%
Total Stocks 42.0% 37.4% 40.0%
Bonds 42.5% 55.4% 55.0%
Cash equivalents 15.5% 7.2% 5.0%
TOTAL 100.0% 100.0% 100.0%
</TABLE>
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
INVESTMENT % OF FUND INVESTMENTS
- ---------- ---------------------
<S> <C>
Schwab Small-Cap Index Fund(R) 9.9
Schwab International Index Fund(R) 9.7
U.S. Treasury Note (7.25%, maturity 05/15/04) 5.1
U.S. Treasury Bond (8.125%, maturity 08/15/19) 2.9
U.S. Treasury Note (7.875%, maturity 08/15/01) 2.6
U.S. Treasury Bond (7.125%, maturity 02/15/23) 2.6
U.S. Treasury Note (6.00%, maturity 08/15/00) 1.9
U.S. Treasury Note (8.00%, maturity 08/15/99) 1.8
U.S. Treasury Note (5.75%, maturity 08/15/03) 1.7
U.S. Treasury Bond (10.375%, maturity 11/15/12) 1.6
TOTAL 39.1%
</TABLE>
2 This information is as of 10/31/97 and may not be indicative of current or
future investments. A complete listing of the Fund's holdings as of 10/31/97 can
be found in the Schedule of Investments later in this report.
13
<PAGE> 16
Schwab Asset Director(R) Funds
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM
Q: HOW DID THE PERFORMANCES OF THE THREE SCHWAB ASSET DIRECTOR FUNDS COMPARE TO
THOSE OF THE S&P 500(R) INDEX AND THE LEHMAN BROTHERS GENERAL U.S. GOVERNMENT
INDEX?
A: As shown in the MARKET OVERVIEW section, large-cap and small-cap domestic
equities represented the strongest performing asset classes during the reporting
period. Consequently, the Asset Director Funds with greater allocations to
equities had stronger performances during the reporting period. Remember that
the target equity allocations for the Asset Director Funds are 80% for the High
Growth Fund, 60% for the Balanced Growth Fund, and 40% for the Conservative
Growth Fund. Given these target allocations, the relative performances of the
three Asset Director Funds remain consistent with our long-term expectations.
However, we also anticipate that there may be future periods in which bonds may
outperform equities.
<TABLE>
<CAPTION>
ONE-YEAR TOTAL RETURNS AS OF 10/31/97
-------------------------------------
<S> <C>
S&P 500 Index 32.10%
High Growth Fund 22.33%
Balanced Growth Fund 18.43%
Conservative Growth Fund 15.12%
Lehman Government Bond Index 8.65%
</TABLE>
Q: WHAT ASSET MIX CHANGES WERE MADE DURING THE ONE-YEAR REPORTING PERIOD AND
WHY?
A: The charts on the following page show the target and actual asset mixes
for each of the three Funds for each month during the reporting period.
Throughout most of the year, the Funds maintained equity exposures that were
somewhat lower than their respective target allocations due to our expectation
of lower returns for stocks relative to those of the cash equivalent and bond
asset categories.
Throughout the year, as equity valuations continued to rise, our expectations
for corporate earnings remained somewhat constant--indicating a relative
decrease in the expected return for stocks. In fact, the Funds were slightly
underweighted in stocks prior to the October stock market correction; however,
being underweighted in stocks for most of the reporting period had a slightly
negative impact on the Funds' performances.
The Investment Manager also made several moderate shifts between the cash
equivalent and bond allocations, particularly during the second half of the
reporting period. The yield curve generally flattened throughout the year,
narrowing the spread between bond and cash equivalent yields. This narrowing
spread, making cash more attractive relative to bonds on a risk/reward basis,
contributed to the moderate overweighting in cash equivalents toward the end of
the reporting period. Finally, at the close of the reporting period, following
the late October correction in the stock market, the Funds adopted a slightly
overweighted position in stocks and cash equivalents and an underweighted
position in bonds.
Q: HOW DO THE SCHWAB ASSET DIRECTOR FUNDS ATTEMPT TO MINIMIZE VOLATILITY? WHAT
IMPACT SHOULD THE RECENT MARKET VOLATILITY HAVE ON MY ASSET ALLOCATION?
A: One of the primary objectives of the Schwab Asset Director Funds is to
combine asset classes to enhance the total portfolio return and risk profile,
based on the prevailing market outlook. It is our expectation over the long term
that the total return performance of the
14
<PAGE> 17
ASSET DIRECTOR - HIGH GROWTH FUND
TARGET MIX ACTUAL ASSET MIX
<TABLE>
<CAPTION>
30% 15% 15%
70% 25% 20% 20% 0% 5%
- ----------------------------------------------------------------------------------------
High Growth
- ----------------------------------------------------------------------------------------
DATE Large Cap Small Cap International Bonds Cash Total
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
11/1/96 37% 20% 20% 18% 5% 100%
11/4/96 37% 20% 20% 18% 5% 100%
11/5/96 37% 20% 20% 18% 5% 100%
11/6/96 37% 20% 20% 18% 5% 100%
11/7/96 37% 20% 20% 18% 5% 100%
11/8/96 37% 20% 20% 18% 5% 100%
11/11/96 40% 20% 20% 12% 8% 100%
11/12/96 40% 20% 20% 12% 8% 100%
11/13/96 40% 20% 20% 12% 8% 100%
11/14/96 40% 20% 20% 12% 8% 100%
11/15/96 40% 20% 20% 12% 8% 100%
11/18/96 40% 20% 20% 12% 8% 100%
11/19/96 40% 20% 20% 12% 8% 100%
11/20/96 40% 20% 20% 12% 8% 100%
11/21/96 40% 20% 20% 12% 8% 100%
11/22/96 40% 20% 20% 12% 8% 100%
11/25/96 40% 20% 20% 12% 8% 100%
11/26/96 40% 20% 20% 12% 8% 100%
11/27/96 40% 20% 20% 12% 8% 100%
11/29/96 40% 20% 20% 12% 8% 100%
12/2/96 40% 20% 20% 12% 8% 100%
12/3/96 40% 20% 20% 12% 8% 100%
12/4/96 40% 20% 20% 12% 8% 100%
12/5/96 40% 20% 20% 12% 8% 100%
12/6/96 40% 20% 20% 12% 8% 100%
12/9/96 40% 20% 20% 12% 8% 100%
12/10/96 40% 20% 20% 12% 8% 100%
12/11/96 40% 20% 20% 12% 8% 100%
12/12/96 40% 20% 20% 12% 8% 100%
12/13/96 40% 20% 20% 12% 8% 100%
12/16/96 40% 20% 20% 12% 8% 100%
12/17/96 40% 20% 20% 12% 8% 100%
12/18/96 40% 20% 20% 12% 8% 100%
12/19/96 40% 20% 20% 12% 8% 100%
12/20/96 40% 20% 20% 12% 8% 100%
12/23/96 40% 20% 20% 12% 8% 100%
12/24/96 40% 20% 20% 12% 8% 100%
12/26/96 40% 20% 20% 12% 8% 100%
12/27/96 40% 20% 20% 12% 8% 100%
12/30/96 40% 20% 20% 12% 8% 100%
12/31/96 40% 20% 20% 12% 8% 100%
1/2/97 40% 20% 20% 12% 8% 100%
1/3/97 37% 20% 20% 18% 5% 100%
1/6/97 37% 20% 20% 18% 5% 100%
1/7/97 37% 20% 20% 18% 5% 100%
1/8/97 37% 20% 20% 18% 5% 100%
1/9/97 37% 20% 20% 18% 5% 100%
1/10/97 37% 20% 20% 18% 5% 100%
1/13/97 37% 20% 20% 18% 5% 100%
1/14/97 37% 20% 20% 18% 5% 100%
1/15/97 37% 20% 20% 18% 5% 100%
1/16/97 37% 20% 20% 18% 5% 100%
1/17/97 37% 20% 20% 18% 5% 100%
1/20/97 37% 20% 20% 18% 5% 100%
1/21/97 37% 20% 20% 18% 5% 100%
1/22/97 37% 20% 20% 18% 5% 100%
1/23/97 37% 20% 20% 18% 5% 100%
1/24/97 37% 20% 20% 18% 5% 100%
1/27/97 37% 20% 20% 18% 5% 100%
1/28/97 37% 20% 20% 18% 5% 100%
1/29/97 37% 20% 20% 18% 5% 100%
1/30/97 37% 20% 20% 18% 5% 100%
1/31/97 37% 20% 20% 18% 5% 100%
2/3/97 37% 20% 20% 18% 5% 100%
2/4/97 37% 20% 20% 18% 5% 100%
2/5/97 37% 20% 20% 18% 5% 100%
2/6/97 37% 20% 20% 18% 5% 100%
2/7/97 37% 20% 20% 18% 5% 100%
2/10/97 37% 20% 20% 18% 5% 100%
2/11/97 37% 20% 20% 18% 5% 100%
2/12/97 37% 20% 20% 18% 5% 100%
2/13/97 37% 20% 20% 18% 5% 100%
2/14/97 37% 20% 20% 18% 5% 100%
2/18/97 37% 20% 20% 18% 5% 100%
2/19/97 37% 20% 20% 18% 5% 100%
2/20/97 37% 20% 20% 18% 5% 100%
2/21/97 37% 20% 20% 18% 5% 100%
2/24/97 37% 20% 20% 18% 5% 100%
2/25/97 37% 20% 20% 18% 5% 100%
2/26/97 37% 20% 20% 18% 5% 100%
2/27/97 37% 20% 20% 18% 5% 100%
2/28/97 37% 20% 20% 18% 5% 100%
3/3/97 37% 20% 20% 18% 5% 100%
3/4/97 37% 20% 20% 18% 5% 100%
3/5/97 37% 20% 20% 18% 5% 100%
3/6/97 37% 20% 20% 18% 5% 100%
3/7/97 37% 20% 20% 18% 5% 100%
3/10/97 37% 20% 20% 18% 5% 100%
3/11/97 37% 20% 20% 18% 5% 100%
3/12/97 37% 20% 20% 18% 5% 100%
3/13/97 37% 20% 20% 18% 5% 100%
3/14/97 37% 20% 20% 18% 5% 100%
3/17/97 37% 20% 20% 18% 5% 100%
3/18/97 37% 20% 20% 18% 5% 100%
3/19/97 37% 20% 20% 18% 5% 100%
3/20/97 37% 20% 20% 18% 5% 100%
3/21/97 37% 20% 20% 18% 5% 100%
3/24/97 37% 20% 20% 18% 5% 100%
3/25/97 37% 20% 20% 18% 5% 100%
3/26/97 37% 20% 20% 18% 5% 100%
3/27/97 37% 20% 20% 18% 5% 100%
3/31/97 37% 20% 20% 18% 5% 100%
4/1/97 37% 20% 20% 18% 5% 100%
4/2/97 37% 20% 20% 18% 5% 100%
4/3/97 37% 20% 20% 18% 5% 100%
4/4/97 37% 20% 20% 18% 5% 100%
4/7/97 37% 20% 20% 18% 5% 100%
4/8/97 37% 20% 20% 18% 5% 100%
4/9/97 37% 20% 20% 18% 5% 100%
4/10/97 37% 20% 20% 18% 5% 100%
4/11/97 37% 20% 20% 18% 5% 100%
4/14/97 37% 20% 20% 18% 5% 100%
4/15/97 37% 20% 20% 18% 5% 100%
4/16/97 37% 20% 20% 18% 5% 100%
4/17/97 37% 20% 20% 18% 5% 100%
4/18/97 37% 20% 20% 18% 5% 100%
4/21/97 37% 20% 20% 18% 5% 100%
4/22/97 37% 20% 20% 18% 5% 100%
4/23/97 37% 20% 20% 18% 5% 100%
4/24/97 37% 20% 20% 18% 5% 100%
4/25/97 37% 20% 20% 18% 5% 100%
4/28/97 37% 20% 20% 18% 5% 100%
4/29/97 37% 20% 20% 18% 5% 100%
4/30/97 37% 20% 20% 18% 5% 100%
5/1/97 37% 20% 20% 18% 5% 100%
5/2/97 37% 20% 20% 18% 5% 100%
5/5/97 37% 20% 20% 18% 5% 100%
5/6/97 37% 20% 20% 18% 5% 100%
5/7/97 37% 20% 20% 18% 5% 100%
5/8/97 37% 20% 20% 18% 5% 100%
5/9/97 37% 20% 20% 18% 5% 100%
5/12/97 37% 20% 20% 18% 5% 100%
5/13/97 37% 20% 20% 18% 5% 100%
5/14/97 37% 20% 20% 18% 5% 100%
5/15/97 37% 20% 20% 18% 5% 100%
5/16/97 37% 20% 20% 18% 5% 100%
5/19/97 37% 20% 20% 18% 5% 100%
5/20/97 37% 20% 20% 18% 5% 100%
5/21/97 37% 20% 20% 18% 5% 100%
5/22/97 37% 20% 20% 18% 5% 100%
5/23/97 37% 20% 20% 18% 5% 100%
5/27/97 37% 20% 20% 18% 5% 100%
5/28/97 37% 20% 20% 18% 5% 100%
5/29/97 34% 20% 20% 21% 5% 100%
5/30/97 34% 20% 20% 21% 5% 100%
6/2/97 34% 20% 20% 21% 5% 100%
6/3/97 34% 20% 20% 21% 5% 100%
6/4/97 34% 20% 20% 21% 5% 100%
6/5/97 34% 20% 20% 21% 5% 100%
6/6/97 34% 20% 20% 21% 5% 100%
6/9/97 34% 20% 20% 21% 5% 100%
6/10/97 34% 20% 20% 21% 5% 100%
6/11/97 34% 20% 20% 21% 5% 100%
6/12/97 34% 20% 20% 21% 5% 100%
6/13/97 34% 20% 20% 21% 5% 100%
6/16/97 34% 20% 20% 21% 5% 100%
6/17/97 34% 20% 20% 21% 5% 100%
6/18/97 34% 20% 20% 21% 5% 100%
6/19/97 34% 20% 20% 21% 5% 100%
6/20/97 34% 20% 20% 21% 5% 100%
6/23/97 34% 20% 20% 21% 5% 100%
6/24/97 34% 20% 20% 21% 5% 100%
6/25/97 34% 20% 20% 21% 5% 100%
6/26/97 34% 20% 20% 21% 5% 100%
6/27/97 34% 20% 20% 21% 5% 100%
6/30/97 34% 20% 20% 21% 5% 100%
7/1/97 34% 20% 20% 21% 5% 100%
7/2/97 34% 20% 20% 21% 5% 100%
7/3/97 34% 20% 20% 21% 5% 100%
7/7/97 34% 20% 20% 21% 5% 100%
7/8/97 34% 20% 20% 21% 5% 100%
7/9/97 34% 20% 20% 21% 5% 100%
7/10/97 34% 20% 20% 21% 5% 100%
7/11/97 34% 20% 20% 21% 5% 100%
7/14/97 34% 20% 20% 21% 5% 100%
7/15/97 34% 20% 20% 21% 5% 100%
7/16/97 34% 20% 20% 21% 5% 100%
7/17/97 34% 20% 20% 18% 8% 100%
7/18/97 34% 20% 20% 18% 8% 100%
7/21/97 34% 20% 20% 12% 8% 100%
7/22/97 34% 20% 20% 12% 8% 100%
7/23/97 34% 20% 20% 12% 8% 100%
7/24/97 34% 20% 20% 12% 8% 100%
7/25/97 34% 20% 20% 12% 8% 100%
7/28/97 34% 20% 20% 12% 8% 100%
7/29/97 34% 20% 20% 12% 8% 100%
7/30/97 34% 20% 20% 18% 8% 100%
7/31/97 34% 20% 20% 12% 14% 100%
8/1/97 34% 20% 20% 12% 14% 100%
8/4/97 34% 20% 20% 12% 14% 100%
8/5/97 34% 20% 20% 12% 14% 100%
8/6/97 34% 20% 20% 12% 14% 100%
8/7/97 34% 20% 20% 12% 14% 100%
8/8/97 34% 20% 20% 12% 14% 100%
8/11/97 34% 20% 20% 18% 8% 100%
8/12/97 34% 20% 20% 18% 8% 100%
8/13/97 34% 20% 20% 18% 8% 100%
8/14/97 34% 20% 20% 18% 8% 100%
8/15/97 34% 20% 20% 18% 8% 100%
8/18/97 34% 20% 20% 18% 8% 100%
8/19/97 34% 20% 20% 18% 8% 100%
8/20/97 34% 20% 20% 18% 8% 100%
8/21/97 34% 20% 20% 18% 8% 100%
8/22/97 34% 20% 20% 18% 8% 100%
8/25/97 34% 20% 20% 18% 8% 100%
8/26/97 34% 20% 20% 18% 8% 100%
8/27/97 34% 20% 20% 18% 8% 100%
8/28/97 34% 20% 20% 18% 8% 100%
8/29/97 34% 20% 20% 18% 8% 100%
9/2/97 34% 20% 20% 18% 8% 100%
9/3/97 34% 20% 20% 18% 8% 100%
9/4/97 34% 20% 20% 18% 8% 100%
9/5/97 34% 20% 20% 18% 8% 100%
9/8/97 34% 20% 20% 18% 8% 100%
9/9/97 34% 20% 20% 18% 8% 100%
9/10/97 34% 20% 20% 18% 8% 100%
9/11/97 34% 20% 20% 18% 8% 100%
9/12/97 34% 20% 20% 18% 8% 100%
9/15/97 34% 20% 20% 18% 8% 100%
9/16/97 34% 20% 20% 18% 8% 100%
9/17/97 34% 20% 20% 18% 8% 100%
9/18/97 37% 20% 20% 12% 11% 100%
9/19/97 37% 20% 20% 12% 11% 100%
9/22/97 37% 20% 20% 12% 11% 100%
9/23/97 37% 20% 20% 12% 11% 100%
9/24/97 37% 20% 20% 12% 11% 100%
9/25/97 37% 20% 20% 12% 11% 100%
9/26/97 37% 20% 20% 12% 11% 100%
9/29/97 37% 20% 20% 12% 11% 100%
9/30/97 37% 20% 20% 12% 11% 100%
10/1/97 37% 20% 20% 12% 11% 100%
10/2/97 37% 20% 20% 12% 11% 100%
10/3/97 37% 20% 20% 12% 11% 100%
10/6/97 37% 20% 20% 12% 11% 100%
10/7/97 37% 20% 20% 12% 11% 100%
10/8/97 37% 20% 20% 12% 11% 100%
10/9/97 37% 20% 20% 12% 11% 100%
10/10/97 37% 20% 20% 12% 11% 100%
10/13/97 37% 20% 20% 12% 11% 100%
10/14/97 37% 20% 20% 12% 11% 100%
10/15/97 37% 20% 20% 12% 11% 100%
10/16/97 37% 20% 20% 12% 11% 100%
10/17/97 37% 20% 20% 12% 11% 100%
10/20/97 37% 20% 20% 12% 11% 100%
10/21/97 37% 20% 20% 12% 11% 100%
10/22/97 37% 20% 20% 12% 11% 100%
10/23/97 37% 20% 20% 12% 11% 100%
10/24/97 37% 20% 20% 12% 11% 100%
10/27/97 37% 20% 20% 8% 17% 100%
10/28/97 43% 20% 20% 0% 17% 100%
10/29/97 43% 20% 20% 0% 17% 100%
10/30/97 43% 20% 20% 0% 17% 100%
10/31/97 43% 20% 20% 0% 17% 100%
</TABLE>
15
<PAGE> 18
ASSET DIRECTOR - BALANCED GROWTH FUND
TARGET MIX ACTUAL ASSET MIX
<TABLE>
<CAPTION>
20% 10% 10%
50% 20% 15% 15% 25% 5%
BALANCED GROWTH
- ---------------------------------------------------------------------------
Date Large Cap Small Cap International Bonds Cash Total
<S> <C> <C> <C> <C> <C> <C>
11/1/96 28% 15% 15% 37% 5% 100%
11/4/96 28% 15% 15% 37% 5% 100%
11/5/96 28% 15% 15% 37% 5% 100%
11/6/96 28% 15% 15% 37% 5% 100%
11/7/96 28% 15% 15% 37% 5% 100%
11/8/96 28% 15% 15% 37% 5% 100%
11/11/96 30% 15% 15% 33% 7% 100%
11/12/96 30% 15% 15% 33% 7% 100%
11/13/96 30% 15% 15% 33% 7% 100%
11/14/96 30% 15% 15% 33% 7% 100%
11/15/96 30% 15% 15% 33% 7% 100%
11/18/96 30% 15% 15% 33% 7% 100%
11/19/96 30% 15% 15% 33% 7% 100%
11/20/96 30% 15% 15% 33% 7% 100%
11/21/96 30% 15% 15% 33% 7% 100%
11/22/96 30% 15% 15% 33% 7% 100%
11/25/96 30% 15% 15% 33% 7% 100%
11/26/96 30% 15% 15% 33% 7% 100%
11/27/96 30% 15% 15% 33% 7% 100%
11/29/96 30% 15% 15% 33% 7% 100%
12/2/96 30% 15% 15% 33% 7% 100%
12/3/96 30% 15% 15% 33% 7% 100%
12/4/96 30% 15% 15% 33% 7% 100%
12/5/96 30% 15% 15% 33% 7% 100%
12/6/96 30% 15% 15% 33% 7% 100%
12/9/96 30% 15% 15% 33% 7% 100%
12/10/96 30% 15% 15% 33% 7% 100%
12/11/96 30% 15% 15% 33% 7% 100%
12/12/96 30% 15% 15% 33% 7% 100%
12/13/96 30% 15% 15% 33% 7% 100%
12/16/96 30% 15% 15% 33% 7% 100%
12/17/96 30% 15% 15% 33% 7% 100%
12/18/96 30% 15% 15% 33% 7% 100%
12/19/96 30% 15% 15% 33% 7% 100%
12/20/96 30% 15% 15% 33% 7% 100%
12/23/96 30% 15% 15% 33% 7% 100%
12/24/96 30% 15% 15% 33% 7% 100%
12/26/96 30% 15% 15% 33% 7% 100%
12/27/96 30% 15% 15% 33% 7% 100%
12/30/96 30% 15% 15% 33% 7% 100%
12/31/96 30% 15% 15% 33% 7% 100%
1/2/97 30% 15% 15% 33% 7% 100%
1/3/97 28% 15% 15% 37% 5% 100%
1/6/97 28% 15% 15% 37% 5% 100%
1/7/97 28% 15% 15% 37% 5% 100%
1/8/97 28% 15% 15% 37% 5% 100%
1/9/97 28% 15% 15% 37% 5% 100%
1/10/97 28% 15% 15% 37% 5% 100%
1/13/97 28% 15% 15% 37% 5% 100%
1/14/97 28% 15% 15% 37% 5% 100%
1/15/97 28% 15% 15% 37% 5% 100%
1/16/97 28% 15% 15% 37% 5% 100%
1/17/97 28% 15% 15% 37% 5% 100%
1/20/97 28% 15% 15% 37% 5% 100%
1/21/97 28% 15% 15% 37% 5% 100%
1/22/97 28% 15% 15% 37% 5% 100%
1/23/97 28% 15% 15% 37% 5% 100%
1/24/97 28% 15% 15% 37% 5% 100%
1/27/97 28% 15% 15% 37% 5% 100%
1/28/97 28% 15% 15% 37% 5% 100%
1/29/97 28% 15% 15% 37% 5% 100%
1/30/97 28% 15% 15% 37% 5% 100%
1/31/97 28% 15% 15% 37% 5% 100%
2/3/97 28% 15% 15% 37% 5% 100%
2/4/97 28% 15% 15% 37% 5% 100%
2/5/97 28% 15% 15% 37% 5% 100%
2/6/97 28% 15% 15% 37% 5% 100%
2/7/97 28% 15% 15% 37% 5% 100%
2/10/97 28% 15% 15% 37% 5% 100%
2/11/97 28% 15% 15% 37% 5% 100%
2/12/97 28% 15% 15% 37% 5% 100%
2/13/97 28% 15% 15% 37% 5% 100%
2/14/97 28% 15% 15% 37% 5% 100%
2/18/97 28% 15% 15% 37% 5% 100%
2/19/97 28% 15% 15% 37% 5% 100%
2/20/97 28% 15% 15% 37% 5% 100%
2/21/97 28% 15% 15% 37% 5% 100%
2/24/97 28% 15% 15% 37% 5% 100%
2/25/97 28% 15% 15% 37% 5% 100%
2/26/97 28% 15% 15% 37% 5% 100%
2/27/97 28% 15% 15% 37% 5% 100%
2/28/97 28% 15% 15% 37% 5% 100%
3/3/97 28% 15% 15% 37% 5% 100%
3/4/97 28% 15% 15% 37% 5% 100%
3/5/97 28% 15% 15% 37% 5% 100%
3/6/97 28% 15% 15% 37% 5% 100%
3/7/97 28% 15% 15% 37% 5% 100%
3/10/97 28% 15% 15% 37% 5% 100%
3/11/97 28% 15% 15% 37% 5% 100%
3/12/97 28% 15% 15% 37% 5% 100%
3/13/97 28% 15% 15% 37% 5% 100%
3/14/97 28% 15% 15% 37% 5% 100%
3/17/97 28% 15% 15% 37% 5% 100%
3/18/97 28% 15% 15% 37% 5% 100%
3/19/97 28% 15% 15% 37% 5% 100%
3/20/97 28% 15% 15% 37% 5% 100%
3/21/97 28% 15% 15% 37% 5% 100%
3/24/97 28% 15% 15% 37% 5% 100%
3/25/97 28% 15% 15% 37% 5% 100%
3/26/97 28% 15% 15% 37% 5% 100%
3/27/97 28% 15% 15% 37% 5% 100%
3/31/97 28% 15% 15% 37% 5% 100%
4/1/97 28% 15% 15% 37% 5% 100%
4/2/97 28% 15% 15% 37% 5% 100%
4/3/97 28% 15% 15% 37% 5% 100%
4/4/97 28% 15% 15% 37% 5% 100%
4/7/97 28% 15% 15% 37% 5% 100%
4/8/97 28% 15% 15% 37% 5% 100%
4/9/97 28% 15% 15% 37% 5% 100%
4/10/97 28% 15% 15% 37% 5% 100%
4/11/97 28% 15% 15% 37% 5% 100%
4/14/97 28% 15% 15% 37% 5% 100%
4/15/97 28% 15% 15% 37% 5% 100%
4/16/97 28% 15% 15% 37% 5% 100%
4/17/97 28% 15% 15% 37% 5% 100%
4/18/97 28% 15% 15% 37% 5% 100%
4/21/97 28% 15% 15% 37% 5% 100%
4/22/97 28% 15% 15% 37% 5% 100%
4/23/97 28% 15% 15% 37% 5% 100%
4/24/97 28% 15% 15% 37% 5% 100%
4/25/97 28% 15% 15% 37% 5% 100%
4/26/97 28% 15% 15% 37% 5% 100%
4/29/97 28% 15% 15% 37% 5% 100%
4/30/97 28% 15% 15% 37% 5% 100%
5/1/97 28% 15% 15% 37% 5% 100%
5/2/97 28% 15% 15% 37% 5% 100%
5/5/97 28% 15% 15% 37% 5% 100%
5/6/97 28% 15% 15% 37% 5% 100%
5/7/97 28% 15% 15% 37% 5% 100%
5/8/97 28% 15% 15% 37% 5% 100%
5/9/97 28% 15% 15% 37% 5% 100%
5/12/97 28% 15% 15% 37% 5% 100%
5/13/97 28% 15% 15% 37% 5% 100%
5/14/97 28% 15% 15% 37% 5% 100%
5/15/97 28% 15% 15% 37% 5% 100%
5/16/97 28% 15% 15% 37% 5% 100%
5/19/97 28% 15% 15% 37% 5% 100%
5/20/97 28% 15% 15% 37% 5% 100%
5/21/97 28% 15% 15% 37% 5% 100%
5/22/97 28% 15% 15% 37% 5% 100%
5/23/97 28% 15% 15% 37% 5% 100%
5/27/97 28% 15% 15% 37% 5% 100%
5/28/97 28% 15% 15% 37% 5% 100%
5/29/97 28% 15% 15% 37% 5% 100%
5/30/97 26% 15% 15% 39% 5% 100%
6/2/97 26% 15% 15% 39% 5% 100%
6/3/97 26% 15% 15% 39% 5% 100%
6/4/97 26% 15% 15% 39% 5% 100%
6/5/97 26% 15% 15% 39% 5% 100%
6/6/97 26% 15% 15% 39% 5% 100%
6/9/97 26% 15% 15% 39% 5% 100%
6/10/97 26% 15% 15% 39% 5% 100%
6/11/97 26% 15% 15% 39% 5% 100%
6/12/97 26% 15% 15% 39% 5% 100%
6/13/97 26% 15% 15% 39% 5% 100%
6/16/97 26% 15% 15% 39% 5% 100%
6/17/97 26% 15% 15% 39% 5% 100%
6/18/97 26% 15% 15% 39% 5% 100%
6/19/97 26% 15% 15% 39% 5% 100%
6/20/97 26% 15% 15% 39% 5% 100%
6/23/97 26% 15% 15% 39% 5% 100%
6/24/97 26% 15% 15% 39% 5% 100%
6/25/97 26% 15% 15% 39% 5% 100%
6/26/97 26% 15% 15% 39% 5% 100%
6/27/97 26% 15% 15% 39% 5% 100%
6/30/97 26% 15% 15% 39% 5% 100%
7/1/97 26% 15% 15% 39% 5% 100%
7/2/97 26% 15% 15% 39% 5% 100%
7/3/97 26% 15% 15% 39% 5% 100%
7/7/97 26% 15% 15% 39% 5% 100%
7/8/97 26% 15% 15% 39% 5% 100%
7/9/97 26% 15% 15% 39% 5% 100%
7/10/97 26% 15% 15% 39% 5% 100%
7/11/97 26% 15% 15% 39% 5% 100%
7/14/97 26% 15% 15% 39% 5% 100%
7/15/97 26% 15% 15% 39% 5% 100%
7/16/97 26% 15% 15% 39% 5% 100%
7/17/97 26% 15% 15% 37% 7% 100%
7/18/97 26% 15% 15% 37% 7% 100%
7/21/97 26% 15% 15% 37% 7% 100%
7/22/97 26% 15% 15% 37% 7% 100%
7/23/97 26% 15% 15% 37% 7% 100%
7/24/97 26% 15% 15% 37% 7% 100%
7/25/97 26% 15% 15% 37% 7% 100%
7/28/97 26% 15% 15% 37% 7% 100%
7/29/97 26% 15% 15% 37% 7% 100%
7/30/97 26% 15% 15% 37% 7% 100%
7/31/97 26% 15% 15% 33% 11% 100%
8/1/97 26% 15% 15% 33% 11% 100%
8/4/97 26% 15% 15% 33% 11% 100%
8/5/97 26% 15% 15% 33% 11% 100%
8/6/97 26% 15% 15% 33% 11% 100%
8/7/97 26% 15% 15% 33% 11% 100%
8/8/97 26% 15% 15% 33% 11% 100%
8/11/97 26% 15% 15% 37% 7% 100%
8/12/97 26% 15% 15% 37% 7% 100%
8/13/97 26% 15% 15% 37% 7% 100%
8/14/97 26% 15% 15% 37% 7% 100%
8/15/97 26% 15% 15% 37% 7% 100%
8/18/97 26% 15% 15% 37% 7% 100%
8/19/97 26% 15% 15% 37% 7% 100%
8/20/97 26% 15% 15% 37% 7% 100%
8/21/97 26% 15% 15% 37% 7% 100%
8/22/97 26% 15% 15% 37% 7% 100%
8/25/97 26% 15% 15% 37% 7% 100%
8/26/97 26% 15% 15% 37% 7% 100%
8/27/97 26% 15% 15% 37% 7% 100%
8/28/97 26% 15% 15% 37% 7% 100%
8/29/97 26% 15% 15% 37% 7% 100%
9/2/97 26% 15% 15% 37% 7% 100%
9/3/97 26% 15% 15% 37% 7% 100%
9/4/97 26% 15% 15% 37% 7% 100%
9/5/97 26% 15% 15% 37% 7% 100%
9/8/97 26% 15% 15% 37% 7% 100%
9/9/97 26% 15% 15% 37% 7% 100%
9/10/97 26% 15% 15% 37% 7% 100%
9/11/97 26% 15% 15% 37% 7% 100%
9/12/97 26% 15% 15% 37% 7% 100%
9/15/97 26% 15% 15% 37% 7% 100%
9/16/97 26% 15% 15% 37% 7% 100%
9/17/97 28% 15% 15% 37% 7% 100%
9/18/97 28% 15% 15% 33% 9% 100%
9/19/97 28% 15% 15% 33% 9% 100%
9/22/97 28% 15% 15% 33% 9% 100%
9/23/97 28% 15% 15% 33% 9% 100%
9/24/97 28% 15% 15% 33% 9% 100%
9/25/97 28% 15% 15% 33% 9% 100%
9/26/97 28% 15% 15% 33% 9% 100%
9/28/97 28% 15% 15% 33% 9% 100%
9/30/97 28% 15% 15% 33% 9% 100%
10/1/97 28% 15% 15% 33% 9% 100%
10/2/97 28% 15% 15% 33% 9% 100%
10/3/97 28% 15% 15% 33% 9% 100%
10/6/97 28% 15% 15% 33% 9% 100%
10/7/97 28% 15% 15% 33% 9% 100%
10/8/97 28% 15% 15% 33% 9% 100%
10/9/97 28% 15% 15% 33% 9% 100%
10/10/97 28% 15% 15% 33% 9% 100%
10/13/97 28% 15% 15% 33% 9% 100%
10/14/97 28% 15% 15% 33% 9% 100%
10/15/97 28% 15% 15% 33% 9% 100%
10/16/97 28% 15% 15% 33% 9% 100%
10/17/97 28% 15% 15% 33% 9% 100%
10/20/97 28% 15% 15% 33% 9% 100%
10/21/97 28% 15% 15% 33% 9% 100%
10/22/97 28% 15% 15% 33% 9% 100%
10/23/97 28% 15% 15% 33% 9% 100%
10/24/97 28% 15% 15% 33% 9% 100%
10/27/97 28% 15% 15% 29% 13% 100%
10/28/97 32% 15% 15% 25% 13% 100%
10/29/97 32% 15% 15% 25% 13% 100%
10/30/97 32% 15% 15% 25% 13% 100%
10/31/97 32% 15% 15% 25% 13% 100%
</TABLE>
<PAGE> 19
ASSET DIRECTOR - CONSERVATIVE GROWTH FUND
TARGET MIX ACTUAL ASSET MIX
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
20% 10% 10%
- -----------------------------------------------------------------------------
80% 10% 10% 10% 45% 5%
- -----------------------------------------------------------------------------
CONSERVATIVE GROWTH
- -----------------------------------------------------------------------------
DATE LARGE CAP SMALL CAP INTERNATIONAL BONDS CASH TOTAL
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
11/1/96 18% 10% 10% 57% 5% 100%
11/4/96 18% 10% 10% 57% 5% 100%
11/5/96 18% 10% 10% 57% 5% 100%
11/6/96 18% 10% 10% 57% 5% 100%
11/7/96 18% 10% 10% 57% 5% 100%
11/8/96 18% 10% 10% 57% 5% 100%
11/11/96 20% 10% 10% 53% 7% 100%
11/12/96 20% 10% 10% 53% 7% 100%
11/13/96 20% 10% 10% 53% 7% 100%
11/14/96 20% 10% 10% 53% 7% 100%
11/15/96 20% 10% 10% 53% 7% 100%
11/18/96 20% 10% 10% 53% 7% 100%
11/19/96 20% 10% 10% 53% 7% 100%
11/20/96 20% 10% 10% 53% 7% 100%
11/21/96 20% 10% 10% 53% 7% 100%
11/22/96 20% 10% 10% 53% 7% 100%
11/25/96 20% 10% 10% 53% 7% 100%
11/26/96 20% 10% 10% 53% 7% 100%
11/27/96 20% 10% 10% 53% 7% 100%
11/29/96 20% 10% 10% 53% 7% 100%
12/2/96 20% 10% 10% 53% 7% 100%
12/3/96 20% 10% 10% 53% 7% 100%
12/4/96 20% 10% 10% 53% 7% 100%
12/5/96 20% 10% 10% 53% 7% 100%
12/6/96 20% 10% 10% 53% 7% 100%
12/9/96 20% 10% 10% 53% 7% 100%
12/10/96 20% 10% 10% 53% 7% 100%
12/11/96 20% 10% 10% 53% 7% 100%
12/12/96 20% 10% 10% 53% 7% 100%
12/13/96 20% 10% 10% 53% 7% 100%
12/16/96 20% 10% 10% 53% 7% 100%
12/17/96 20% 10% 10% 53% 7% 100%
12/18/96 20% 10% 10% 53% 7% 100%
12/19/96 20% 10% 10% 53% 7% 100%
12/20/96 20% 10% 10% 53% 7% 100%
12/23/96 20% 10% 10% 53% 7% 100%
12/24/96 20% 10% 10% 53% 7% 100%
12/26/96 20% 10% 10% 53% 7% 100%
12/27/96 20% 10% 10% 53% 7% 100%
12/30/96 20% 10% 10% 53% 7% 100%
12/31/96 20% 10% 10% 53% 7% 100%
1/2/97 20% 10% 10% 53% 7% 100%
1/3/97 18% 10% 10% 57% 5% 100%
1/6/97 18% 10% 10% 57% 5% 100%
1/7/97 18% 10% 10% 57% 5% 100%
1/8/97 18% 10% 10% 57% 5% 100%
1/9/97 18% 10% 10% 57% 5% 100%
1/10/97 18% 10% 10% 57% 5% 100%
1/13/97 18% 10% 10% 57% 5% 100%
1/14/97 18% 10% 10% 57% 5% 100%
1/15/97 18% 10% 10% 57% 5% 100%
1/16/97 18% 10% 10% 57% 5% 100%
1/17/97 18% 10% 10% 57% 5% 100%
1/20/97 18% 10% 10% 57% 5% 100%
1/21/97 18% 10% 10% 57% 5% 100%
1/22/97 18% 10% 10% 57% 5% 100%
1/23/97 18% 10% 10% 57% 5% 100%
1/24/97 18% 10% 10% 57% 5% 100%
1/27/97 18% 10% 10% 57% 5% 100%
1/28/97 18% 10% 10% 57% 5% 100%
1/29/97 18% 10% 10% 57% 5% 100%
1/30/97 18% 10% 10% 57% 5% 100%
1/31/97 18% 10% 10% 57% 5% 100%
2/3/97 18% 10% 10% 57% 5% 100%
2/4/97 18% 10% 10% 57% 5% 100%
2/5/97 18% 10% 10% 57% 5% 100%
2/6/97 18% 10% 10% 57% 5% 100%
2/7/97 18% 10% 10% 57% 5% 100%
2/10/97 18% 10% 10% 57% 5% 100%
2/11/97 18% 10% 10% 57% 5% 100%
2/12/97 18% 10% 10% 57% 5% 100%
2/13/97 18% 10% 10% 57% 5% 100%
2/14/97 18% 10% 10% 57% 5% 100%
2/15/97 18% 10% 10% 57% 5% 100%
2/19/97 18% 10% 10% 57% 5% 100%
2/20/97 18% 10% 10% 57% 5% 100%
2/21/97 18% 10% 10% 57% 5% 100%
2/24/97 18% 10% 10% 57% 5% 100%
2/25/97 18% 10% 10% 57% 5% 100%
2/26/97 18% 10% 10% 57% 5% 100%
2/27/97 18% 10% 10% 57% 5% 100%
2/28/97 18% 10% 10% 57% 5% 100%
3/3/97 18% 10% 10% 57% 5% 100%
3/4/97 18% 10% 10% 57% 5% 100%
3/5/97 18% 10% 10% 57% 5% 100%
3/6/97 18% 10% 10% 57% 5% 100%
3/7/97 18% 10% 10% 57% 5% 100%
3/10/97 18% 10% 10% 57% 5% 100%
3/11/97 18% 10% 10% 57% 5% 100%
3/12/97 18% 10% 10% 57% 5% 100%
3/13/97 18% 10% 10% 57% 5% 100%
3/14/97 18% 10% 10% 57% 5% 100%
3/17/97 18% 10% 10% 57% 5% 100%
3/18/97 18% 10% 10% 57% 5% 100%
3/19/97 18% 10% 10% 57% 5% 100%
3/20/97 18% 10% 10% 57% 5% 100%
3/21/97 18% 10% 10% 57% 5% 100%
3/24/97 18% 10% 10% 57% 5% 100%
3/25/97 18% 10% 10% 57% 5% 100%
3/26/97 18% 10% 10% 57% 5% 100%
3/27/97 18% 10% 10% 57% 5% 100%
3/31/97 18% 10% 10% 57% 5% 100%
4/1/97 18% 10% 10% 57% 5% 100%
4/2/97 18% 10% 10% 57% 5% 100%
4/3/97 18% 10% 10% 57% 5% 100%
4/4/97 18% 10% 10% 57% 5% 100%
4/7/97 18% 10% 10% 57% 5% 100%
4/8/97 18% 10% 10% 57% 5% 100%
4/9/97 18% 10% 10% 57% 5% 100%
4/10/97 18% 10% 10% 57% 5% 100%
4/11/97 18% 10% 10% 57% 5% 100%
4/14/97 18% 10% 10% 57% 5% 100%
4/15/97 18% 10% 10% 57% 5% 100%
4/16/97 18% 10% 10% 57% 5% 100%
4/17/97 18% 10% 10% 57% 5% 100%
4/18/97 18% 10% 10% 57% 5% 100%
4/21/97 18% 10% 10% 57% 5% 100%
4/22/97 18% 10% 10% 57% 5% 100%
4/23/97 18% 10% 10% 57% 5% 100%
4/24/97 18% 10% 10% 57% 5% 100%
4/25/97 18% 10% 10% 57% 5% 100%
4/28/97 18% 10% 10% 57% 5% 100%
4/29/97 18% 10% 10% 57% 5% 100%
4/30/97 18% 10% 10% 57% 5% 100%
5/1/97 18% 10% 10% 57% 5% 100%
5/2/97 18% 10% 10% 57% 5% 100%
5/5/97 18% 10% 10% 57% 5% 100%
5/6/97 18% 10% 10% 57% 5% 100%
5/7/97 18% 10% 10% 57% 5% 100%
5/8/97 18% 10% 10% 57% 5% 100%
5/9/97 18% 10% 10% 57% 5% 100%
5/12/97 18% 10% 10% 57% 5% 100%
5/13/97 18% 10% 10% 57% 5% 100%
5/14/97 18% 10% 10% 57% 5% 100%
5/15/97 18% 10% 10% 57% 5% 100%
5/16/97 18% 10% 10% 57% 5% 100%
5/19/97 18% 10% 10% 57% 5% 100%
5/20/97 18% 10% 10% 57% 5% 100%
5/21/97 18% 10% 10% 57% 5% 100%
5/22/97 18% 10% 10% 57% 5% 100%
5/23/97 18% 10% 10% 57% 5% 100%
5/27/97 18% 10% 10% 57% 5% 100%
5/28/97 18% 10% 10% 57% 5% 100%
5/29/97 16% 10% 10% 59% 5% 100%
5/30/97 16% 10% 10% 59% 5% 100%
6/2/97 16% 10% 10% 59% 5% 100%
6/3/97 16% 10% 10% 59% 5% 100%
6/4/97 16% 10% 10% 59% 5% 100%
6/5/97 16% 10% 10% 59% 5% 100%
6/6/97 16% 10% 10% 59% 5% 100%
6/9/97 16% 10% 10% 59% 5% 100%
6/10/97 16% 10% 10% 59% 5% 100%
6/11/97 16% 10% 10% 59% 5% 100%
6/12/97 16% 10% 10% 59% 5% 100%
6/13/97 16% 10% 10% 59% 5% 100%
6/16/97 16% 10% 10% 59% 5% 100%
6/17/97 16% 10% 10% 59% 5% 100%
6/18/97 16% 10% 10% 59% 5% 100%
6/19/97 16% 10% 10% 59% 5% 100%
6/20/97 16% 10% 10% 59% 5% 100%
6/23/97 16% 10% 10% 59% 5% 100%
6/24/97 16% 10% 10% 59% 5% 100%
6/25/97 16% 10% 10% 59% 5% 100%
6/26/97 16% 10% 10% 59% 5% 100%
6/27/97 16% 10% 10% 59% 5% 100%
6/30/97 16% 10% 10% 59% 5% 100%
7/1/97 16% 10% 10% 59% 5% 100%
7/2/97 16% 10% 10% 59% 5% 100%
7/3/97 16% 10% 10% 59% 5% 100%
7/7/97 16% 10% 10% 59% 5% 100%
7/8/97 16% 10% 10% 59% 5% 100%
7/9/97 16% 10% 10% 59% 5% 100%
7/10/97 16% 10% 10% 59% 5% 100%
7/11/97 16% 10% 10% 59% 5% 100%
7/14/97 16% 10% 10% 59% 5% 100%
7/15/97 16% 10% 10% 59% 5% 100%
7/16/97 16% 10% 10% 59% 5% 100%
7/17/97 16% 10% 10% 57% 7% 100%
7/18/97 16% 10% 10% 57% 7% 100%
7/21/97 16% 10% 10% 57% 7% 100%
7/22/97 16% 10% 10% 57% 7% 100%
7/23/97 16% 10% 10% 57% 7% 100%
7/24/97 16% 10% 10% 57% 7% 100%
7/25/97 16% 10% 10% 57% 7% 100%
7/26/97 16% 10% 10% 57% 7% 100%
7/29/97 16% 10% 10% 57% 7% 100%
7/30/97 16% 10% 10% 57% 7% 100%
7/31/97 16% 10% 10% 53% 11% 100%
8/1/97 16% 10% 10% 53% 11% 100%
8/4/97 16% 10% 10% 53% 11% 100%
8/5/97 16% 10% 10% 53% 11% 100%
8/6/97 16% 10% 10% 53% 11% 100%
8/7/97 16% 10% 10% 53% 11% 100%
8/8/97 16% 10% 10% 53% 11% 100%
8/11/97 16% 10% 10% 57% 7% 100%
8/12/97 16% 10% 10% 57% 7% 100%
8/13/97 16% 10% 10% 57% 7% 100%
8/14/97 16% 10% 10% 57% 7% 100%
8/15/97 16% 10% 10% 57% 7% 100%
8/18/97 16% 10% 10% 57% 7% 100%
8/19/97 16% 10% 10% 57% 7% 100%
8/20/97 16% 10% 10% 57% 7% 100%
8/21/97 16% 10% 10% 57% 7% 100%
8/22/97 16% 10% 10% 57% 7% 100%
8/25/97 16% 10% 10% 57% 7% 100%
8/26/97 16% 10% 10% 57% 7% 100%
8/27/97 16% 10% 10% 57% 7% 100%
8/28/97 16% 10% 10% 57% 7% 100%
8/29/97 16% 10% 10% 57% 7% 100%
9/2/97 16% 10% 10% 57% 7% 100%
9/3/97 16% 10% 10% 57% 7% 100%
9/4/97 16% 10% 10% 57% 7% 100%
9/5/97 16% 10% 10% 57% 7% 100%
9/8/97 16% 10% 10% 57% 7% 100%
9/9/97 16% 10% 10% 57% 7% 100%
9/10/97 16% 10% 10% 57% 7% 100%
9/11/97 16% 10% 10% 57% 7% 100%
9/12/97 16% 10% 10% 57% 7% 100%
9/15/97 16% 10% 10% 57% 7% 100%
9/16/97 16% 10% 10% 57% 7% 100%
9/17/97 16% 10% 10% 57% 7% 100%
9/18/97 18% 10% 10% 53% 9% 100%
9/19/97 18% 10% 10% 53% 9% 100%
9/22/97 18% 10% 10% 53% 9% 100%
9/23/97 18% 10% 10% 53% 9% 100%
9/24/97 18% 10% 10% 53% 9% 100%
9/25/97 18% 10% 10% 53% 9% 100%
9/26/97 18% 10% 10% 53% 9% 100%
9/29/97 18% 10% 10% 53% 9% 100%
9/30/97 18% 10% 10% 53% 9% 100%
10/1/97 18% 10% 10% 53% 9% 100%
10/2/97 18% 10% 10% 53% 9% 100%
10/3/97 18% 10% 10% 53% 9% 100%
10/6/97 18% 10% 10% 53% 9% 100%
10/7/97 18% 10% 10% 53% 9% 100%
10/8/97 18% 10% 10% 53% 9% 100%
10/9/97 18% 10% 10% 53% 9% 100%
10/10/97 18% 10% 10% 53% 9% 100%
10/13/97 18% 10% 10% 53% 9% 100%
10/14/97 18% 10% 10% 53% 9% 100%
10/15/97 18% 10% 10% 53% 9% 100%
10/16/97 18% 10% 10% 53% 9% 100%
10/17/97 18% 10% 10% 53% 9% 100%
10/20/97 18% 10% 10% 53% 9% 100%
10/21/97 18% 10% 10% 53% 9% 100%
10/22/97 18% 10% 10% 53% 9% 100%
10/23/97 18% 10% 10% 53% 9% 100%
10/24/97 18% 10% 10% 53% 9% 100%
10/27/97 18% 10% 10% 49% 13% 100%
10/28/97 22% 10% 10% 45% 13% 100%
10/29/97 22% 10% 10% 45% 13% 100%
10/30/97 22% 10% 10% 45% 13% 100%
10/31/97 22% 10% 10% 45% 13% 100%
</TABLE>
- -----------------------------------------
Cash Equivalents
Bonds
Stocks
International
U.S. Small-Company
U.S. Large-Company
<PAGE> 20
Schwab Asset Director(R) Funds
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM (continued)
Conservative Growth Fund will exhibit less volatility than that of the Balanced
Growth Fund, which will in turn exhibit less volatility than that of the High
Growth Fund.
This expectation is based on the fact that bonds have traditionally exhibited
less volatility than stocks. Therefore, as the proportion of the portfolio
allocated to bonds increases, volatility should decrease. As a result of this
strategy, all three Asset Director Funds should exhibit less volatility than an
all stock fund such as an S&P 500 Index fund. For example, on October 27, 1997,
the S&P 500 Index experienced its largest single-day decline during the
reporting period, losing 6.87%. By comparison, on that same day, the Asset
Director High Growth, Balanced Growth, and Conservative Growth Funds lost just
3.97%, 2.77%, and 1.44%, respectively.
We think that the most meaningful way for investors to evaluate their exposure
to market risk is not on an individual fund basis, but in regard to the risk of
their overall investment portfolio. One of the greatest risks of a bear market
is selling at the bottom of a market downturn. It is for this reason that your
asset allocation strategy and total portfolio exposure should be set at an
appropriate level for you--one that allows you to "ride out" market downturns
over the long term. The different risk and potential return profiles of the
three Asset Director funds offer one way to achieve long-term exposure to the
equity markets, taking into consideration that each individual investor has a
different tolerance for risk and should have a portfolio with a risk profile
that reflects that tolerance level.
Q: CERTAIN SECTORS OF THE SCHWAB ASSET DIRECTOR FUNDS' PORTFOLIOS ARE INVESTED
IN INDEX FUNDS WHILE OTHERS ARE INVESTED IN INDIVIDUAL SECURITIES. WHY ARE
INDEX FUNDS USED ONLY FOR SOME SECTORS, AND HOW DO YOU DETERMINE WHEN TO
USE THEM?
A: One effective means to ensure that a particular portfolio has performance and
risk characteristics consistent with those of its component asset classes is to
use an indexing strategy specifically designed to track the performance and risk
characteristics of a particular asset class. The Funds use several indexing
techniques that are both representative of the asset classes they seek to
replicate and cost efficient for the Funds to execute.
The large-company domestic stock component of the Funds is managed very much
like our Schwab S&P 500 Fund. Most, if not all, of the S&P 500 Index stocks are
held by the Funds in weights consistent with those in that Index. We have
determined that it would not be advisable for the Funds to convert their
large-company stock holdings to an investment in the Schwab S&P 500 Fund at this
time because of realized capital gain implications, and the potential for
negative tax consequences for Fund shareholders.
For the small-company stock and international stock components, in which
economies of scale have a significant impact on trading costs, the Asset
Director Funds achieve their target asset class weightings by investing in both
the Schwab Small-Cap Index Fund(R) and the Schwab International Index Fund.(R)
For the bond asset class, where the indices we seek to replicate include
thousands of issues, we utilize a sampling strategy designed to replicate the
return and risk characteristics of the indices we seek to track.
16
<PAGE> 21
During the next year, we anticipate investing a portion of the assets of the
Balanced Growth Fund and Conservative Growth Fund in the Schwab Total Bond
Market Index Fund.
Combined, these techniques can provide the Funds with an effective and
cost-efficient indexing strategy. The asset classes included in each of the
Asset Director Funds and the indices they seek to track are as follows:
Large-Company Stock S&P 500(R) Index
Small-Company Stock Schwab Small-Cap Index(R)
International Stock Schwab International Index(R)
Bonds Lehman Brothers Aggregate Bond
Index and Lehman Brothers 20+ Year
Treasury Index
17
<PAGE> 22
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
COMMON STOCK--42.8%
AEROSPACE/DEFENSE--0.8%
BF Goodrich Co. 300 $ 13
Boeing Co. 10,278 493
General Dynamics Corp. 800 65
Lockheed Martin Corp. 2,300 219
Northrop Grumman Corp. 900 98
Raytheon Co. 2,400 130
Textron, Inc. 2,200 127
United Technologies Corp. 2,500 175
-------
1,320
-------
AIR TRANSPORTATION--0.2%
AMR Corp.+ 1,200 139
Delta Airlines, Inc. 1,100 111
Southwest Airlines Co. 1,300 42
US Airways Group, Inc.+ 800 38
-------
330
-------
ALCOHOLIC BEVERAGES--0.2%
Adolph Coors Co. Class B 200 7
Anheuser-Busch Companies,
Inc. 5,000 199
Brown-Forman Corp. Class B 500 25
Seagram Co., Ltd. 3,800 128
-------
359
-------
APPAREL--0.2%
Fruit of the Loom, Inc. Class
A+ 400 10
Liz Claiborne, Inc. 400 20
NIKE, Inc. Class B 2,900 136
Reebok International Ltd.+ 400 15
Russell Corp. 200 6
Springs Industries, Inc. 100 5
Stride Rite Corp. 300 4
V.F. Corp. 900 80
-------
276
-------
AUTOMOTIVE PRODUCTS--0.1%
Autoliv, Inc. 341 13
Cooper Tire & Rubber Co. 800 17
Goodyear Tire & Rubber Co. 1,900 120
Meritor Automotive, Inc.+ 633 14
-------
164
-------
BANKS--3.7%
Banc One Corp. 5,950 310
Bank of New York Co., Inc. 3,800 179
BankAmerica Corp. 7,200 515
BankBoston Corp. 1,700 138
Bankers Trust New York Corp. 1,400 165
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Barnett Banks, Inc. 2,100 $ 145
Chase Manhattan Corp. 4,440 512
Citicorp 4,800 598
Comerica, Inc. 1,400 111
CoreStates Financial Corp. 2,200 160
Fifth Third Bancorp 1,950 125
First Chicago NBD Corp. 3,105 226
First Union Corp. 5,720 281
Fleet Financial Group, Inc. 2,624 169
Huntington Bancshares, Inc. 1,700 55
J.P. Morgan & Co., Inc. 2,000 220
KeyCorp, Inc. 2,300 141
MBNA Corp. 5,100 134
Mellon Bank Corp. 2,300 119
National City Corp. 1,900 114
NationsBank Corp. 7,326 439
Norwest Corp. 7,620 244
PNC Bank Corp. 3,100 147
Republic New York Corp. 800 85
State Street Corp. 1,600 89
SunTrust Banks, Inc. 2,300 149
U.S. Bancorp. 2,550 259
Wachovia Corp. 1,800 136
Wells Fargo & Co. 1,133 330
-------
6,295
-------
BUSINESS MACHINES & SOFTWARE--4.0%
3COM Corp.+ 3,900 162
Adobe Systems, Inc. 500 24
Apple Computer, Inc.+ 1,300 22
Autodesk, Inc. 500 19
Bay Networks, Inc.+ 2,100 66
Cabletron Systems, Inc.+ 1,600 46
Ceridian Corp.+ 828 32
Cisco Systems, Inc.+ 6,900 566
Compaq Computer Corp.+ 7,815 498
Computer Associates
International, Inc. 3,750 280
Computer Sciences Corp.+ 1,190 84
Data General Corp.+ 300 6
Dell Computer Corp.+ 3,400 272
Digital Equipment Corp.+ 1,500 75
EMC Corp.+ 2,500 140
Hewlett-Packard Co. 10,700 660
Honeywell, Inc. 1,400 95
Intergraph Corp.+ 500 5
</TABLE>
18
<PAGE> 23
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
International Business
Machines Corp. 10,100 $ 990
Microsoft Corp.+ 12,400 1,611
Novell, Inc.+ 3,500 30
Oracle Systems Corp.+ 9,975 357
Parametric Technology Corp.+ 1,100 49
Pitney Bowes, Inc. 1,700 135
Seagate Technology, Inc.+ 2,468 67
Silicon Graphics, Inc.+ 1,476 22
Sun Microsystems, Inc.+ 3,700 127
Unisys Corp.+ 1,700 23
Xerox Corp. 3,400 270
-------
6,733
-------
BUSINESS SERVICES--0.6%
Automatic Data Processing,
Inc. 3,000 150
Browning-Ferris Industries,
Inc. 1,800 59
Choicepoint, Inc.+ 100 4
Cognizant Corp. 1,400 55
Deluxe Corp. 700 23
Dun & Bradstreet Corp. 1,500 43
Ecolab, Inc. 600 29
Equifax, Inc. 1,500 47
First Data Corp. 4,500 131
H & R Block, Inc. 1,000 37
HBO & Co. 1,700 74
IKON Office Solutions 1,300 37
Interpublic Group of
Companies, Inc. 1,150 55
John H. Harland Co. 200 4
Laidlaw, Inc. 3,300 47
Moore Corp. Ltd. 900 15
National Service Industries,
Inc. 200 9
R.R. Donnelley & Sons Co. 1,500 49
Safety-Kleen Corp. 300 7
Service Corp. International 2,200 67
Shared Medical Systems Corp. 100 5
SUPERVALU, Inc. 300 11
Waste Management, Inc. 4,600 108
-------
1,066
-------
CHEMICAL--1.3%
Air Products & Chemicals,
Inc. 1,400 106
Dow Chemical Co. 2,700 245
E.I. du Pont de Nemours & Co. 11,600 659
Eastman Chemical Co. 900 54
Great Lakes Chemical Corp. 400 19
Number Value
of Shares (000s)
--------- --------
Hercules, Inc. 1,200 $ 55
Minnesota Mining &
Manufacturing Co. 4,300 393
Monsanto Co. 6,000 257
Morton International, Inc. 1,100 36
Nalco Chemical Co. 600 24
PPG Industries, Inc. 1,600 91
Praxair, Inc. 1,400 61
Rohm & Haas Co. 900 75
Sigma-Aldrich Corp. 900 32
Solutia, Inc.+ 860 19
Union Carbide Corp. 1,400 64
W.R. Grace & Co. 900 61
-------
2,251
-------
CONSTRUCTION--0.1%
Armstrong World Industries,
Inc. 700 47
Centex Corp. 100 6
Crane Co. 150 6
Fluor Corp. 700 29
Kaufman & Broad Home Corp. 200 4
Owens Corning 400 14
Pulte Corp. 100 4
Sherwin-Williams Co. 1,700 47
The Stanley Works 1,100 46
-------
203
-------
CONSUMER-DURABLE--0.1%
Black & Decker Corp. 600 23
Masco Corp. 1,400 61
Maytag Corp. 900 30
Newell Co. 1,600 62
Snap-on, Inc. 300 13
Whirlpool Corp. 600 36
-------
225
-------
CONSUMER-NONDURABLE--0.5%
American Greetings Corp.
Class A 500 17
Corning, Inc. 2,100 95
Darden Restaurants, Inc. 1,500 17
Fort James Corp.+ 1,600 64
Fortune Brands, Inc. 1,700 56
Hasbro, Inc. 1,100 32
Jostens, Inc. 200 5
Mattel, Inc. 2,950 115
McDonald's Corp. 7,000 313
Rubbermaid, Inc. 1,500 36
</TABLE>
19
<PAGE> 24
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Tricon Global Restaurants,
Inc.+ 1,260 $ 38
Wendy's International, Inc. 1,300 27
-------
815
-------
CONTAINERS--0.1%
Ball Corp. 200 7
Bemis Co., Inc. 500 19
Crown Cork & Seal Co., Inc. 1,000 45
Owens-Illinois, Inc.+ 1,400 48
Stone Container Corp. 1,000 12
-------
131
-------
ELECTRONICS--1.8%
Advanced Micro Devices, Inc.+ 1,220 28
AMP, Inc. 1,900 86
Applied Materials, Inc.+ 3,600 120
EG&G, Inc. 300 6
General Semiconductor, Inc.+ 200 2
General Signal Corp. 200 8
Harris Corp. 800 35
Intel Corp. 16,800 1,294
KLA-Tencor Corp.+ 600 26
LSI Logic Corp.+ 1,400 31
Lucent Technologies, Inc.+ 6,648 548
Micron Technology, Inc.+ 1,800 48
Motorola, Inc. 6,200 383
National Semiconductor Corp.+ 1,400 50
Perkin Elmer Corp. 500 31
Rockwell International Corp. 1,900 93
Scientific-Atlanta, Inc. 400 7
Tektronix, Inc. 700 41
Texas Instruments, Inc. 2,200 235
Thermo Electron Corp.+ 1,300 49
Thomas & Betts Corp. 481 24
-------
3,145
-------
ENERGY-DEVELOPMENT--0.7%
Anadarko Petroleum Corp. 800 59
Apache Corp. 600 25
Baker Hughes, Inc. 1,700 78
Burlington Resources, Inc. 1,805 88
Dresser Industries, Inc. 1,700 72
Enserch Explorations, Inc.+ 449 4
Halliburton Co. 2,558 153
Helmerich & Payne, Inc. 500 40
Occidental Petroleum Corp. 3,400 95
Rowan Companies, Inc.+ 500 19
Schlumberger Ltd. 5,100 446
Union Pacific Resources Group 2,539 63
Western Atlas, Inc.+ 800 69
-------
1,211
-------
Number Value
of Shares (000s)
--------- --------
FOOD-AGRICULTURE--2.5%
Archer-Daniels Midland Co. 5,675 $ 126
Campbell Soup Co. 4,700 242
Coca-Cola Co. 25,400 1,433
ConAgra, Inc. 4,800 145
CPC International, Inc. 1,500 149
Fleming Companies, Inc. 400 7
General Mills, Inc. 1,963 130
H.J. Heinz Co. 3,700 172
Hershey Foods Corp. 1,400 77
Kellogg Co. 4,200 181
PepsiCo, Inc. 15,700 578
Pioneer Hi-Bred
International, Inc. 1,000 92
Quaker Oats Co. 1,200 57
Ralston Purina Co. 1,200 108
Sara Lee Corp. 4,900 251
SYSCO Corp. 1,500 60
Unilever NV 6,500 347
Whitman Corp. 900 24
Wm. Wrigley Jr. Co. 1,400 101
-------
4,280
-------
GOLD--0.1%
Barrick Gold Corp. 3,800 78
Battle Mountain Gold Co. 2,000 12
Echo Bay Mines Ltd.+ 1,400 6
Homestake Mining Co. 1,300 16
Newmont Mining Corp. 1,401 49
Placer Dome, Inc. 2,100 33
-------
194
-------
HEALTHCARE--4.5%
Abbott Laboratories 8,000 491
Allergan, Inc. 300 10
ALZA Corp.+ 800 21
American Home Products Corp. 6,700 497
Amgen, Inc. 2,700 133
Bausch & Lomb, Inc. 300 12
Baxter International, Inc. 2,800 130
Becton, Dickinson & Co. 1,000 46
Beverly Enterprises, Inc.+ 1,100 16
Biomet, Inc. 1,100 27
Boston Scientific Corp.+ 1,737 79
Bristol-Myers Squibb Co. 10,300 904
C.R. Bard, Inc. 400 11
</TABLE>
20
<PAGE> 25
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Cardinal Health, Inc. 1,200 $ 89
Columbia/HCA Healthcare Corp. 6,700 189
Crescendo Pharmaceuticals
Corp. Class A+ 20 0
Eli Lilly & Co. 11,500 769
Guidant Corp.+ 1,200 69
HealthSouth Corp.+ 3,452 88
Humana, Inc.+ 1,400 29
Johnson & Johnson 13,600 780
Mallinckrodt, Inc. 400 15
Manor Care, Inc. 300 10
Medtronic, Inc. 4,800 209
Merck & Co., Inc. 12,500 1,116
Pfizer, Inc. 13,300 941
Pharmacia & Upjohn, Inc. 5,200 165
Schering-Plough Corp. 7,500 420
St. Jude Medical, Inc.+ 725 22
Tenet Healthcare Corp.+ 3,100 95
U.S. Surgical Corp. 700 19
United Healthcare Co. 1,700 79
Warner Lambert Co. 2,900 415
-------
7,896
-------
HOUSEHOLD PRODUCTS--1.1%
Alberto-Culver Co. Class B 200 6
Avon Products, Inc. 1,600 105
Clorox Co. 1,200 84
Colgate-Palmolive Co. 3,100 201
Gillette Co. 5,800 517
International Flavors &
Fragrances, Inc. 1,100 53
Procter & Gamble Co. 13,900 945
Tupperware Corp. 400 10
-------
1,921
-------
IMAGING & PHOTO--0.1%
Eastman Kodak Co. 3,400 204
Polaroid Corp. 200 9
-------
213
-------
INSURANCE--1.9%
Aegon NV ARS*** 304 24
Aetna, Inc. 1,924 137
Allstate Corp. 4,500 373
American General Corp. 2,510 128
American International Group,
Inc. 7,250 739
Aon Corp. 1,650 89
Chubb Corp. 2,100 139
CIGNA Corp. 800 124
Number Value
of Shares (000s)
--------- --------
Conseco, Inc. 1,604 $ 70
General Re Corp. 935 184
Hartford Financial Services
Group 1,500 122
Jefferson-Pilot Corp. 1,050 81
Lincoln National Corp. 1,100 76
Marsh & McLennan Companies,
Inc. 2,000 142
MBIA Corp. 1,400 84
MGIC Investment Corp. 1,800 109
Progressive Corp. 900 94
Providian Financial Corp. 700 26
SAFECO Corp. 1,100 52
St. Paul Companies, Inc. 1,000 80
SunAmerica, Inc. 1,950 70
Torchmark Corp. 1,400 56
Transamerica Corp. 1,000 101
UNUM Corp. 2,000 98
USF & G Corp. 1,100 22
-------
3,220
-------
MEDIA--1.1%
Clear Channel Communications,
Inc.+ 1,100 73
Comcast Corp. Class A 3,500 96
Dow Jones & Co., Inc. 700 33
Gannett Co., Inc. 3,000 158
King World Productions, Inc. 300 14
Knight-Ridder, Inc. 600 31
McGraw Hill Companies, Inc. 1,300 85
Meredith Corp. 200 7
New York Times Co. Class A 1,000 55
SBC Communications, Inc. 9,467 601
Telecommunications, Inc.
Series A (TCI Group)+ 5,200 119
Time Warner, Inc. 5,700 329
Times Mirror Co. Series A 700 38
Tribune Co. 1,100 61
Viacom, Inc. Class B+ 3,600 109
-------
1,809
-------
MISCELLANEOUS FINANCE--1.8%
American Express Co. 4,900 382
Beneficial Corp. 900 69
Charles Schwab Corp. 2,650 90
Countrywide Credit
Industries, Inc. 1,100 38
Federal Home Loan Mortgage
Corp. 7,100 269
Federal National Mortgage
Assoc. 10,800 523
</TABLE>
21
<PAGE> 26
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Golden West Financial Corp. 900 $ 78
Green Tree Financial Corp. 1,000 42
H.F. Ahmanson & Co. 900 53
Household International, Inc. 1,200 136
Merrill Lynch & Co., Inc.+ 3,800 257
Morgan Stanley, Dean Witter,
Discover & Co. 5,950 292
Salomon, Inc 1,500 117
Travelers Group, Inc. 6,666 467
Washington Mutual, Inc. 2,650 181
-------
2,994
-------
MOTOR VEHICLE--1.0%
Chrysler Corp. 6,900 243
Cummins Engine Co., Inc. 600 37
Dana Corp. 800 37
Eaton Corp. 1,100 106
Echlin, Inc. 300 10
Fleetwood Enterprises, Inc. 200 6
Ford Motor Co. 12,200 534
General Motors Corp. 7,500 481
Genuine Parts Co. 1,800 56
Navistar International Corp.+ 700 16
Paccar, Inc. 700 32
TRW, Inc. 1,400 80
-------
1,638
-------
NON-FERROUS--0.3%
Alcan Aluminum, Ltd. 2,300 66
Aluminum Company of America 2,000 144
Asarco, Inc. 200 5
Cyprus Amax Minerals Co. 600 13
Engelhard Corp. 1,300 23
Freeport-McMoRan Copper &
Gold, Inc. Class B 1,700 41
Inco Ltd. 1,400 29
Phelps Dodge Corp. 800 60
Reynolds Metals Co. 1,100 67
-------
448
-------
OIL-DOMESTIC--0.5%
Amerada Hess Corp. 1,000 61
Ashland, Inc. 700 33
Atlantic Richfield Co. 3,300 271
Kerr-McGee Corp. 800 54
Monterey Resources, Inc. 176 4
Oryx Energy Co.+ 1,000 28
Pennzoil Co. 500 37
Phillips Petroleum Co. 2,700 131
Number Value
of Shares (000s)
--------- --------
Santa Fe Energy Resources,
Inc.+ 400 $ 5
Sun, Inc. 400 16
Unocal Corp. 2,500 103
USX-Marathon Group 2,900 104
-------
847
-------
OIL-INTERNATIONAL--2.7%
Amoco Corp. 5,100 468
Chevron Corp. 6,800 564
Exxon Corp. 25,500 1,566
Mobil Corp. 8,100 590
Royal Dutch Petroleum
Co.-Sponsored ADR** 22,000 1,158
Texaco, Inc. 5,400 307
-------
4,653
-------
PAPER--0.5%
Boise Cascade Corp. 300 10
Champion International Corp. 1,000 55
Georgia-Pacific Corp.+ 1,200 102
International Paper Co. 3,100 140
Kimberly-Clark Corp. 5,660 294
Louisiana-Pacific Corp. 1,100 23
Mead Corp. 700 42
Potlatch Corp. 100 5
Temple Inland, Inc. 800 46
Union Camp Corp. 500 27
Westvaco Corp. 700 23
Weyerhaeuser Co. 1,700 81
Willamette Industries, Inc. 1,200 40
-------
888
-------
PRODUCER GOODS & MANUFACTURING--2.5%
Aeroquip-Vickers, Inc. 300 16
Allied Signal, Inc. 5,800 209
Avery Dennison Corp. 700 28
Briggs & Stratton Corp. 100 5
Case Corp. 900 54
Caterpillar, Inc. 3,800 195
Cincinnati Milacron, Inc. 100 3
Commscope Inc.+ 266 3
Cooper Industries, Inc. 900 47
Deere & Co. 2,200 116
Dover Corp. 1,200 81
Emerson Electric Co. 4,500 236
FMC Corp.+ 600 48
Foster Wheeler Corp. 300 10
General Electric Co. 33,700 2,176
</TABLE>
22
<PAGE> 27
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Harnischfeger Industries,
Inc. 200 $ 8
Illinois Tool Works, Inc. 2,600 128
Ingersoll-Rand Co. 1,450 56
ITT Industries, Inc. 900 28
Johnson Controls, Inc. 600 27
McDermott International, Inc. 300 11
Millipore Corp. 200 8
NACCO Industries, Inc. Class
A 100 10
Pall Corp. 1,300 27
Parker-Hannifin Corp. 750 31
Raychem Corp. 800 72
Tenneco, Inc. 1,700 76
Timken Co. 600 20
Tyco International Ltd.+ 5,400 204
W.W. Grainger, Inc. 800 70
Westinghouse Electric Corp. 7,200 190
-------
4,193
-------
RAILROAD--0.3%
Burlington Northern Santa Fe
Corp. 1,700 162
CSX Corp. 1,900 104
Norfolk Southern Corp. 4,200 135
Union Pacific Corp. 2,600 159
-------
560
-------
REAL PROPERTY--0.1%
HFS, Inc.+ 1,800 127
-------
RETAIL--2.0%
Albertson's, Inc. 2,500 92
American Stores Co. 3,000 77
AutoZone, Inc.+ 1,300 38
Charming Shoppes, Inc.+ 700 4
Circuit City Stores, Inc. 800 32
Costco Companies, Inc.+ 1,800 69
CUC International, Inc.+ 4,197 124
CVS Corp. 1,500 92
Dayton Hudson Corp. 1,900 119
Dillards Inc. Class A 800 31
Federated Department Stores,
Inc.+ 2,100 92
Gap, Inc. 2,700 144
Giant Food, Inc. Class A 300 9
Great Atlantic & Pacific Tea
Co., Inc. 200 6
Harcourt General, Inc. 500 25
Home Depot, Inc. 7,450 414
J.C. Penney Co., Inc. 2,500 147
K Mart Corp.+ 5,000 66
Number Value
of Shares (000s)
--------- --------
Kroger Co.+ 2,600 $ 85
Limited, Inc. 2,697 64
Longs Drug Stores, Inc. 200 5
Lowe's Companies, Inc. 1,500 62
May Department Stores Co. 2,300 124
Mercantile Stores Co., Inc. 300 18
Nordstrom, Inc. 500 31
Pep Boys-Manny Moe & Jack 300 8
Rite Aid Corp. 1,100 65
Sears Roebuck & Co. 4,000 168
Tandy Corp. 800 28
TJX Companies, Inc. 2,000 59
Toys 'R' Us, Inc.+ 2,900 99
Wal Mart Stores, Inc. 23,200 813
Walgreen Co. 5,000 141
Winn Dixie Stores, Inc. 1,500 56
Woolworth Corp.+ 1,300 25
-------
3,432
-------
STEEL--0.1%
Allegheny Teledyne, Inc. 1,470 38
Armco, Inc.+ 1,000 6
Bethlehem Steel Corp.+ 1,100 11
Inland Steel Industries, Inc. 300 6
Nucor Corp. 600 31
USX-U.S. Steel Group 500 17
Worthington Industries, Inc. 900 19
-------
128
-------
TELEPHONE--2.7%
AirTouch Communications,
Inc.+ 5,100 197
Alltel Corp. 1,600 57
Ameritech Corp. 5,700 371
Andrew Corp. 850 20
AT&T Corp.+ 16,600 812
Bell Atlantic Corp. 8,073 645
BellSouth Corp. 10,100 478
DSC Communications Corp.+ 1,200 29
Frontier Corp. 1,400 30
GTE Corp. 9,800 416
MCI Communications Corp. 7,100 252
Nextlevel Systems, Inc.+ 1,500 20
Northern Telecom Ltd. 2,800 251
Sprint Corp. 4,400 229
Tellabs, Inc.+ 1,600 86
U.S. West, Inc.
(Communications Group) 4,900 195
</TABLE>
23
<PAGE> 28
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
U.S. West, Inc. (Media
Group)+ 6,200 $ 157
WorldCom, Inc.+ 9,200 309
-------
4,554
-------
TOBACCO--0.7%
Loew's Corp. 1,300 145
Philip Morris Companies.,
Inc. 24,800 983
UST, Inc. 1,600 48
-------
1,176
-------
TRANSPORTATION-MISCELLANEOUS--0.1%
Caliber Systems, Inc. 200 10
Federal Express Corp.+ 1,300 87
Ryder Systems, Inc. 400 14
-------
111
-------
TRAVEL & RECREATION--0.6%
Brunswick Corp. 900 30
Harrah's Entertainment, Inc.+ 900 18
Hilton Hotels Corp. 2,500 77
ITT Corp.+ 1,500 112
Marriott International, Inc. 1,500 105
Mirage Resorts, Inc.+ 1,800 45
Walt Disney Co. 6,973 573
-------
960
-------
UTILITIES--1.2%
American Electric Power Co.,
Inc. 1,600 76
Baltimore Gas & Electric Co. 1,300 36
Carolina Power & Light Co. 1,500 54
Central & South West Services
Corp. 1,800 39
Cinergy Corp. 1,600 53
Coastal Corp. 1,400 84
Columbia Gas System, Inc. 800 58
Consolidated Edison Co. of
New York, Inc. 2,400 82
Consolidated Natural Gas Co. 900 49
Dominion Resources, Inc. 1,900 71
DTE Energy Co. 1,400 43
Duke Power Co. 3,526 165
Eastern Enterprises 100 4
Edison International 4,000 103
Enron Corp. 2,900 110
Entergy Corp. 2,400 59
FPL Group, Inc. 1,500 78
GPU, Inc. 1,200 43
Houston Industries, Inc. 2,849 62
Number Value
of Shares (000s)
--------- --------
Niagara Mohawk Power Corp.+ 1,400 $ 14
NICOR, Inc. 200 8
Northern States Power Co. 500 25
Ohio Edison Co. 1,300 32
ONEOK, Inc. 200 7
Pacific Enterprises, Inc. 800 26
Pacific Gas & Electric Corp. 4,500 115
PacifiCorp. 3,000 65
PECO Energy Co. 1,900 43
Peoples Energy Corp. 100 4
PP&L Resources, Inc. 1,400 30
Public Service Enterprise
Group, Inc. 2,000 52
Sonat, Inc. 600 28
Southern Co. 7,000 161
Texas Utilities Co. 2,467 89
Unicom Corp. 2,200 62
Union Electric Co. 700 26
Williams Companies, Inc. 1,350 69
-------
2,125
-------
INTERNATIONAL--0.0%
GERMANY--0.0 %
VIAG AG 20 9
-------
UNITED KINGDOM--0.0 %
Centrica+ 21,063 31
Energy Group 2,663 27
Granada Group 29 0
Siebe PLC 10 0
-------
58
-------
67
-------
TOTAL COMMON STOCK
(Cost $56,626) 72,958
-------
WARRANTS--0.0%
BELGIUM--0.0 %
Generale de Banque (expire
11/15/99)+ 88 1
-------
FRANCE--0.0 %
AXA UAP CVG (expire
01/07/99)+ 636 2
-------
</TABLE>
24
<PAGE> 29
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
SWITZERLAND--0.0 %
Schweizerische Bankverein
(expire 6/30/00)+ 30 $ 0
-------
TOTAL WARRANTS
(Cost $0) 3
-------
MUTUAL FUNDS--38.6%
Schwab International Index
Fund 2,471,942 32,902
Schwab Small-Cap Index Fund 1,854,205 32,875
-------
TOTAL MUTUAL FUNDS
(Cost $57,909) 65,777
-------
</TABLE>
<TABLE>
<CAPTION>
Value
Par (000s)
----------- --------
<S> <C> <C>
AGENCY NOTES--16.5%(a)
Federal National Mortgage
Association Discount
Notes(b)
5.450%, 12/05/97 $ 5,500,000 $ 5,473
5.530%, 01/15/98 12,500,000 12,363
5.560%, 01/30/98 10,500,000 10,360
--------
TOTAL AGENCY NOTES
(Cost $28,186) 28,196
--------
CASH EQUIVALENTS--2.1%
MSTC Cash Reserve Liquid
Asset Fund
5.380%*, 11/07/97 3,520,401 3,520
--------
TOTAL CASH EQUIVALENTS
(Cost $3,520) 3,520
--------
TOTAL INVESTMENTS--100.0%
(Cost $146,241) $170,454
========
</TABLE>
See accompanying Notes to Schedule of Investments and Notes to Financial
Statements.
25
<PAGE> 30
SCHWAB ASSET DIRECTOR(R)--BALANCED GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
COMMON STOCK--32.9%
AEROSPACE/DEFENSE--0.6%
BF Goodrich Co. 200 $ 9
Boeing Co. 5,584 266
General Dynamics Corp. 500 41
Lockheed Martin Corp. 1,600 152
Northrop Grumman Corp. 500 55
Raytheon Co. 1,800 98
Textron, Inc. 1,400 81
United Technologies Corp. 2,000 140
-------
842
-------
AIR TRANSPORTATION--0.2%
AMR Corp.+ 900 104
Delta Airlines, Inc. 800 81
Southwest Airlines Co. 600 20
US Airways Group, Inc.+ 700 33
-------
238
-------
ALCOHOLIC BEVERAGES--0.1%
Adolph Coors Co. Class B 100 4
Anheuser-Busch Companies,
Inc. 2,700 108
Brown-Forman Corp. Class B 700 34
Seagram Co., Ltd. 2,000 67
-------
213
-------
APPAREL--0.1%
Fruit of the Loom, Inc. Class
A+ 200 5
Liz Claiborne, Inc. 600 30
NIKE, Inc. Class B 2,100 100
Reebok International Ltd.+ 200 7
Russell Corp. 100 3
Springs Industries, Inc. 500 23
Stride Rite Corp. 200 2
V.F. Corp. 500 45
-------
215
-------
AUTOMOTIVE PRODUCTS--0.1%
Autoliv, Inc. 204 8
Cooper Tire & Rubber Co. 200 4
Goodyear Tire & Rubber Co. 1,300 82
Meritor Automotive, Inc.+ 333 7
-------
101
-------
BANKS--2.9%
Banc One Corp. 4,088 213
Bank of New York Co., Inc. 2,700 127
BankAmerica Corp. 4,900 350
BankBoston Corp. 1,200 97
Bankers Trust New York Corp. 1,000 118
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Barnett Banks, Inc. 1,400 $ 97
Chase Manhattan Corp. 3,032 350
Citicorp 3,200 399
Comerica, Inc. 1,000 79
CoreStates Financial Corp. 1,600 116
Fifth Third Bancorp 1,150 74
First Chicago NBD Corp. 2,143 156
First Union Corp. 3,944 194
Fleet Financial Group, Inc. 1,956 126
Huntington Bancshares, Inc. 1,200 39
J.P. Morgan & Co., Inc. 1,600 176
KeyCorp, Inc. 1,600 98
MBNA Corp. 2,475 65
Mellon Bank Corp. 2,000 103
National City Corp. 1,500 90
NationsBank Corp. 4,974 298
Norwest Corp. 4,220 135
PNC Bank Corp. 1,800 86
Republic New York Corp. 500 53
State Street Corp. 1,200 67
SunTrust Banks, Inc. 1,500 97
U.S. Bancorp. 1,760 179
Wachovia Corp. 1,300 98
Wells Fargo & Co. 900 262
-------
4,342
-------
BUSINESS MACHINES & SOFTWARE--3.0%
3COM Corp.+ 2,400 99
Adobe Systems, Inc. 800 38
Apple Computer, Inc.+ 900 15
Autodesk, Inc. 500 19
Bay Networks, Inc.+ 1,100 35
Cabletron Systems, Inc.+ 700 20
Ceridian Corp.+ 614 24
Cisco Systems, Inc.+ 4,700 386
Compaq Computer Corp.+ 5,357 342
Computer Associates
International, Inc. 2,550 190
Computer Sciences Corp.+ 595 42
Data General Corp.+ 100 2
Dell Computer Corp.+ 2,400 192
Digital Equipment Corp.+ 1,400 70
EMC Corp.+ 1,800 101
Hewlett-Packard Co. 7,300 450
Honeywell, Inc. 1,200 82
Intergraph Corp.+ 200 2
</TABLE>
26
<PAGE> 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
International Business
Machines Corp. 6,900 $ 677
Microsoft Corp.+ 8,400 1,092
Netscape Communications
Corp.+ 1 0
Novell, Inc.+ 1,200 10
Oracle Systems Corp.+ 5,300 190
Parametric Technology Corp.+ 1,100 49
Pitney Bowes, Inc. 1,400 111
Seagate Technology, Inc.+ 1,284 35
Silicon Graphics, Inc.+ 1,154 17
Sun Microsystems, Inc.+ 2,200 75
Unisys Corp.+ 1,000 13
Xerox Corp. 2,300 182
-------
4,560
-------
BUSINESS SERVICES--0.5%
Automatic Data Processing,
Inc. 2,100 108
Browning-Ferris Industries,
Inc. 1,200 39
Choicepoint, Inc.+ 70 3
Cognizant Corp. 900 35
Deluxe Corp. 500 16
Dun & Bradstreet Corp. 1,000 29
Ecolab, Inc. 700 33
Equifax, Inc. 700 22
First Data Corp. 2,600 76
H & R Block, Inc. 600 22
HBO & Co. 1,100 48
IKON Office Solutions 900 25
Interpublic Group of
Companies, Inc. 1,150 55
Laidlaw, Inc. 2,000 28
Moore Corp. Ltd. 200 3
National Service Industries,
Inc. 400 18
R.R. Donnelley & Sons Co. 800 26
Safety-Kleen Corp. 200 4
Service Corp. International 1,400 43
Shared Medical Systems Corp. 500 27
SUPERVALU, Inc. 300 11
Waste Management, Inc. 2,500 58
-------
729
-------
CHEMICAL--1.0%
Air Products & Chemicals,
Inc. 1,100 84
Dow Chemical Co. 1,800 163
E.I. du Pont de Nemours & Co. 7,900 447
Eastman Chemical Co. 600 36
Great Lakes Chemical Corp. 500 24
Number Value
of Shares (000s)
--------- --------
Hercules, Inc. 600 $ 28
Minnesota Mining &
Manufacturing Co. 2,900 265
Monsanto Co. 3,400 145
Morton International, Inc. 600 20
Nalco Chemical Co. 300 12
PPG Industries, Inc. 1,300 74
Praxair, Inc. 1,000 44
Rohm & Haas Co. 500 42
Sigma-Aldrich Corp. 400 14
Solutia, Inc.+ 600 13
Union Carbide Corp. 1,200 55
W.R. Grace & Co. 600 41
-------
1,507
-------
CONSTRUCTION--0.1%
Armstrong World Industries,
Inc. 400 27
Centex Corp. 400 23
Crane Co. 150 6
Fluor Corp. 600 25
Kaufman & Broad Home Corp. 100 2
Owens Corning 300 10
Pulte Corp. 100 4
Sherwin-Williams Co. 1,100 31
The Stanley Works 400 17
-------
145
-------
CONSUMER-DURABLE--0.1%
Black & Decker Corp. 700 27
Masco Corp. 1,100 48
Maytag Corp. 700 23
Newell Co. 900 35
Snap-on, Inc. 550 24
Whirlpool Corp. 600 36
-------
193
-------
CONSUMER-NONDURABLE--0.3%
American Greetings Corp.
Class A 600 21
Corning, Inc. 1,200 54
Darden Restaurants, Inc. 400 5
Fort James Corp.+ 900 36
Fortune Brands, Inc. 1,000 33
Hasbro, Inc. 850 25
Jostens, Inc. 100 2
Mattel, Inc. 1,625 63
McDonald's Corp. 3,700 166
Rubbermaid, Inc. 600 14
</TABLE>
27
<PAGE> 32
SCHWAB ASSET DIRECTOR(R)--BALANCED GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Tricon Global Restaurants,
Inc.+ 830 $ 25
Wendy's International, Inc. 900 19
-------
463
-------
CONTAINERS--0.1%
Ball Corp. 200 7
Bemis Co., Inc. 500 19
Crown Cork & Seal Co., Inc. 1,100 50
Owens-Illinois, Inc.+ 600 21
Stone Container Corp. 200 2
-------
99
-------
ELECTRONICS--1.5%
Advanced Micro Devices, Inc.+ 920 21
AMP, Inc. 1,100 50
Applied Materials, Inc.+ 2,200 73
EG&G, Inc. 200 4
General Semiconductor, Inc.+ 125 1
General Signal Corp. 500 20
Harris Corp. 800 35
Intel Corp. 11,400 878
KLA-Tencor Corp.+ 800 35
LSI Logic Corp.+ 1,000 22
Lucent Technologies, Inc.+ 4,565 376
Micron Technology, Inc.+ 1,100 29
Motorola, Inc. 4,200 259
National Semiconductor Corp.+ 1,000 36
Perkin Elmer Corp. 400 25
Rockwell International Corp. 1,700 83
Scientific-Atlanta, Inc. 200 4
Tektronix, Inc. 500 30
Texas Instruments, Inc. 1,600 171
Thermo Electron Corp.+ 900 34
Thomas & Betts Corp. 481 24
-------
2,210
-------
ENERGY-DEVELOPMENT--0.6%
Anadarko Petroleum Corp. 700 51
Apache Corp. 400 17
Baker Hughes, Inc. 900 41
Burlington Resources, Inc. 1,310 64
Dresser Industries, Inc. 1,000 42
Enserch Explorations, Inc.+ 149 1
Halliburton Co. 1,974 118
Helmerich & Payne, Inc. 500 40
Occidental Petroleum Corp. 2,000 56
Rowan Companies, Inc.+ 700 27
Schlumberger Ltd. 3,500 308
Union Pacific Resources Group 1,562 38
Western Atlas, Inc.+ 500 43
-------
846
-------
Number Value
of Shares (000s)
--------- --------
FOOD-AGRICULTURE--1.9%
Archer-Daniels Midland Co. 3,025 $ 67
Campbell Soup Co. 3,300 170
Coca-Cola Co. 17,300 977
ConAgra, Inc. 2,400 72
CPC International, Inc. 1,400 139
Fleming Companies, Inc. 200 3
General Mills, Inc. 1,346 89
H.J. Heinz Co. 2,600 121
Hershey Foods Corp. 1,100 61
Kellogg Co. 2,300 99
PepsiCo, Inc. 8,300 306
Pioneer Hi-Bred
International, Inc. 800 73
Quaker Oats Co. 700 34
Ralston Purina Co. 1,100 99
Sara Lee Corp. 3,400 174
SYSCO Corp. 1,100 44
Unilever NV 4,800 256
Whitman Corp. 700 18
Wm. Wrigley Jr. Co. 1,000 72
-------
2,874
-------
GOLD--0.1%
Barrick Gold Corp. 2,000 41
Battle Mountain Gold Co. 1,600 10
Echo Bay Mines Ltd.+ 300 1
Homestake Mining Co. 600 7
Newmont Mining Corp. 1,029 36
Placer Dome, Inc. 1,000 16
-------
111
-------
HEALTHCARE--3.4%
Abbott Laboratories 5,400 331
Allergan, Inc. 300 10
ALZA Corp.+ 700 18
American Home Products Corp. 4,600 341
Amgen, Inc. 1,900 94
Bausch & Lomb, Inc. 200 8
Baxter International, Inc. 1,600 74
Becton, Dickinson & Co. 700 32
Beverly Enterprises, Inc.+ 800 12
Biomet, Inc. 800 20
Boston Scientific Corp.+ 1,437 65
Bristol-Myers Squibb Co. 7,000 614
C.R. Bard, Inc. 200 6
</TABLE>
28
<PAGE> 33
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Cardinal Health, Inc. 1,100 $ 82
Columbia/HCA Healthcare Corp. 3,600 102
Crescendo Pharmaceuticals
Corp. Class A+ 10 0
Eli Lilly & Co. 7,800 522
Guidant Corp.+ 1,200 69
HealthSouth Corp.+ 1,876 48
Humana, Inc.+ 1,100 23
Johnson & Johnson 9,300 534
Mallinckrodt, Inc. 400 15
Manor Care, Inc. 200 7
Medtronic, Inc. 2,600 113
Merck & Co., Inc. 8,500 756
Pfizer, Inc. 9,100 644
Pharmacia & Upjohn, Inc. 2,800 89
Schering-Plough Corp. 5,200 292
St. Jude Medical, Inc.+ 430 13
Tenet Healthcare Corp.+ 1,700 52
U.S. Surgical Corp. 400 11
United Healthcare Co. 1,000 46
Warner Lambert Co. 1,900 272
-------
5,315
-------
HOUSEHOLD PRODUCTS--0.9%
Alberto-Culver Co. Class B 200 6
Avon Products, Inc. 1,300 85
Clorox Co. 1,100 77
Colgate-Palmolive Co. 2,100 136
Gillette Co. 3,900 347
International Flavors &
Fragrances, Inc. 900 44
Procter & Gamble Co. 9,500 646
Tupperware Corp. 200 5
-------
1,346
-------
IMAGING & PHOTO--0.1%
Eastman Kodak Co. 2,300 138
Polaroid Corp. 400 18
-------
156
-------
INSURANCE--1.5%
Aegon NV ARS*** 217 17
Aetna, Inc. 1,134 81
Allstate Corp. 3,100 257
American General Corp. 1,810 92
American International Group,
Inc. 4,900 500
Aon Corp. 1,450 78
Chubb Corp. 1,500 99
CIGNA Corp. 800 124
Number Value
of Shares (000s)
--------- --------
Conseco, Inc. 1,030 $ 45
General Re Corp. 686 135
Hartford Financial Services
Group 1,100 89
Jefferson-Pilot Corp. 600 46
Lincoln National Corp. 1,100 76
Marsh & McLennan Companies,
Inc. 1,200 85
MBIA Corp. 1,200 72
MGIC Investment Corp. 1,000 60
Progressive Corp. 600 63
Providian Financial Corp. 500 19
SAFECO Corp. 1,300 62
St. Paul Companies, Inc. 600 48
SunAmerica, Inc. 1,050 38
Torchmark Corp. 800 32
Transamerica Corp. 700 71
UNUM Corp. 1,200 59
USF & G Corp. 800 16
-------
2,264
-------
MEDIA--0.8%
Clear Channel Communications,
Inc.+ 700 46
Comcast Corp. Class A 1,700 47
Dow Jones & Co., Inc. 800 37
Gannett Co., Inc. 2,000 105
King World Productions, Inc. 500 24
Knight-Ridder, Inc. 800 42
McGraw Hill Companies, Inc. 700 46
Meredith Corp. 200 7
New York Times Co. Class A 800 44
SBC Communications, Inc. 6,462 410
Telecommunications, Inc.
Series A (TCI Group)+ 2,800 64
Time Warner, Inc. 3,900 225
Times Mirror Co. Series A 700 38
Tribune Co. 900 50
Viacom, Inc. Class B+ 1,900 57
-------
1,242
-------
MISCELLANEOUS FINANCE--1.3%
American Express Co. 3,300 257
Beneficial Corp. 500 38
Charles Schwab Corp. 1,350 46
Countrywide Credit
Industries, Inc. 500 17
Federal Home Loan Mortgage
Corp. 3,800 144
Federal National Mortgage
Assoc. 7,400 361
</TABLE>
29
<PAGE> 34
SCHWAB ASSET DIRECTOR(R)--BALANCED GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Golden West Financial Corp. 500 $ 43
Green Tree Financial Corp. 700 29
H.F. Ahmanson & Co. 1,000 59
Household International, Inc. 1,100 125
Merrill Lynch & Co., Inc.+ 2,400 162
Morgan Stanley, Dean Witter,
Discover & Co. 4,155 204
Salomon, Inc. 1,100 85
Travelers Group, Inc. 4,533 317
Washington Mutual, Inc. 1,760 120
-------
2,007
-------
MOTOR VEHICLE--0.7%
Chrysler Corp. 3,700 130
Cummins Engine Co., Inc. 400 24
Dana Corp. 800 37
Eaton Corp. 600 58
Echlin, Inc. 200 7
Fleetwood Enterprises, Inc. 100 3
Ford Motor Co. 6,400 280
General Motors Corp. 5,100 327
Genuine Parts Co. 1,150 36
Navistar International Corp. 600 14
Paccar, Inc. 500 23
TRW, Inc. 1,000 57
-------
996
-------
NON-FERROUS--0.2%
Alcan Aluminum, Ltd. 1,300 37
Aluminum Company of America 1,500 110
Asarco, Inc. 100 3
Cyprus Amax Minerals Co. 400 8
Engelhard Corp. 1,000 17
Freeport-McMoRan Copper &
Gold, Inc. Class B 1,100 26
Inco Ltd. 900 19
Phelps Dodge Corp. 700 52
Reynolds Metals Co. 800 49
-------
321
-------
OIL-DOMESTIC--0.4%
Amerada Hess Corp. 1,000 61
Ashland, Inc. 900 43
Atlantic Richfield Co. 2,300 188
Kerr-McGee Corp. 600 41
Monterey Resources, Inc. 88 2
Oryx Energy Co.+ 600 17
Pennzoil Co. 700 52
Phillips Petroleum Co. 1,900 92
Number Value
of Shares (000s)
--------- --------
Santa Fe Energy Resources,
Inc.+ 200 $ 3
Sun, Inc. 600 24
Unocal Corp. 1,400 58
USX-Marathon Group 1,600 57
-------
638
-------
OIL-INTERNATIONAL--2.1%
Amoco Corp. 3,500 321
Chevron Corp. 4,600 382
Exxon Corp. 17,300 1,063
Mobil Corp. 5,500 400
Royal Dutch Petroleum
Co.-Sponsored ADR** 15,000 789
Texaco, Inc. 3,700 211
-------
3,166
-------
PAPER--0.5%
Boise Cascade Corp. 500 17
Champion International Corp. 900 50
Georgia-Pacific Corp.+ 900 76
International Paper Co. 2,200 99
Kimberly-Clark Corp. 3,880 202
Louisiana-Pacific Corp. 800 17
Mead Corp. 600 36
Potlatch Corp. 500 25
Temple Inland, Inc. 500 29
Union Camp Corp. 500 27
Westvaco Corp. 400 13
Weyerhaeuser Co. 1,400 67
Willamette Industries, Inc. 800 26
-------
684
-------
PRODUCER GOODS & MANUFACTURING--2.0%
Aeroquip-Vickers, Inc. 500 26
Allied Signal, Inc. 3,200 115
Avery Dennison Corp. 600 24
Briggs & Stratton Corp. 500 25
Case Corp. 600 36
Caterpillar, Inc. 2,800 144
Cincinnati Milacron, Inc. 100 3
Commscope Inc.+ 166 2
Cooper Industries, Inc. 1,100 57
Deere & Co. 1,800 95
Dover Corp. 800 54
Emerson Electric Co. 3,100 163
FMC Corp.+ 400 32
Foster Wheeler Corp. 100 3
General Electric Co. 22,900 1,478
</TABLE>
30
<PAGE> 35
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Harnischfeger Industries,
Inc. 500 $ 20
Illinois Tool Works, Inc. 1,900 93
Ingersoll-Rand Co. 900 35
ITT Industries, Inc. 800 25
Johnson Controls, Inc. 900 40
McDermott International, Inc. 200 7
Millipore Corp. 400 16
NACCO Industries, Inc. Class
A 100 10
Pall Corp. 900 19
Parker-Hannifin Corp. 600 25
Raychem Corp. 600 54
Tenneco, Inc. 1,400 63
Timken Co. 200 7
Tyco International Ltd.+ 3,200 121
W.W. Grainger, Inc. 500 44
Westinghouse Electric Corp. 4,000 106
-------
2,942
-------
RAILROAD--0.3%
Burlington Northern Santa Fe
Corp. 1,400 133
CSX Corp. 1,600 88
Norfolk Southern Corp. 2,700 87
Union Pacific Corp. 1,900 116
-------
424
-------
REAL PROPERTY--0.1%
HFS, Inc.+ 1,200 85
-------
RETAIL--1.5%
Albertson's, Inc. 1,300 48
American Stores Co. 1,700 44
AutoZone, Inc.+ 1,000 30
Charming Shoppes, Inc.+ 200 1
Circuit City Stores, Inc.+ 400 16
Costco Companies, Inc.+ 1,100 42
CUC International, Inc.+ 2,032 60
CVS Corp. 1,200 74
Dayton Hudson Corp. 1,600 101
Dillards Inc. Class A 800 31
Federated Department Stores,
Inc.+ 1,100 48
Gap, Inc. 1,900 101
Giant Food, Inc. Class A 300 9
Great Atlantic & Pacific Tea
Co., Inc. 100 3
Harcourt General, Inc. 700 35
Home Depot, Inc. 5,150 286
J.C. Penney Co., Inc. 1,800 106
K Mart Corp.+ 2,600 34
Number Value
of Shares (000s)
--------- --------
Kroger Co.+ 1,400 $ 46
Limited, Inc. 1,544 36
Longs Drug Stores, Inc. 200 5
Lowe's Companies, Inc. 1,100 46
May Department Stores Co. 1,700 92
Mercantile Stores Co., Inc. 400 24
Nordstrom, Inc. 900 55
Pep Boys-Manny Moe & Jack 200 5
Rite Aid Corp. 1,100 65
Sears Roebuck & Co. 2,200 92
Tandy Corp. 600 21
TJX Companies, Inc. 800 24
Toys 'R' Us, Inc.+ 1,800 61
Wal Mart Stores, Inc. 12,200 427
Walgreen Co. 2,800 79
Winn Dixie Stores, Inc. 1,000 37
Woolworth Corp.+ 900 17
-------
2,201
-------
STEEL--0.1%
Allegheny Teledyne, Inc. 985 26
Armco, Inc.+ 400 2
Bethlehem Steel Corp.+ 300 3
Inland Steel Industries, Inc. 100 2
Nucor Corp. 900 48
USX-U.S. Steel Group 500 17
Worthington Industries, Inc. 700 14
-------
112
-------
TELEPHONE--1.9%
AirTouch Communications,
Inc.+ 2,900 112
Alltel Corp. 1,200 42
Ameritech Corp. 3,900 254
Andrew Corp. 725 17
AT&T Corp.+ 11,400 558
Bell Atlantic Corp. 5,436 434
BellSouth Corp. 7,000 331
DSC Communications Corp.+ 800 20
Frontier Corp. 1,100 24
GTE Corp. 5,200 221
MCI Communications Corp. 3,700 131
Nextlevel Systems, Inc.+ 500 7
Northern Telecom Ltd. 1,900 170
Sprint Corp. 3,000 156
Tellabs, Inc.+ 1,600 86
U.S. West, Inc.
(Communications Group) 2,600 104
</TABLE>
31
<PAGE> 36
SCHWAB ASSET DIRECTOR(R)--BALANCED GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
U.S. West, Inc. (Media
Group)+ 3,300 $ 83
WorldCom, Inc.+ 4,800 161
-------
2,911
-------
TOBACCO--0.4%
Gallaher Group PLC- Sponsored
ADR**+ 300 6
Loew's Corp. 1,000 112
Philip Morris Companies.,
Inc. 13,100 518
UST, Inc. 1,200 36
-------
672
-------
TRANSPORTATION-MISCELLANEOUS--0.1%
Caliber Systems, Inc. 500 26
Federal Express Corp.+ 1,200 80
Ryder Systems, Inc. 600 21
-------
127
-------
TRAVEL & RECREATION--0.4%
Brunswick Corp. 600 20
Harrah's Entertainment, Inc.+ 400 8
Hilton Hotels Corp. 1,500 46
ITT Corp.+ 1,000 75
Marriott International, Inc. 1,000 70
Mirage Resorts, Inc.+ 800 20
Walt Disney Co. 4,739 390
-------
629
-------
UTILITIES--1.0%
American Electric Power Co.,
Inc. 1,500 71
Baltimore Gas & Electric Co. 800 22
Carolina Power & Light Co. 900 32
Central & South West Services
Corp. 1,300 28
Cinergy Corp. 1,000 33
Coastal Corp. 800 48
Columbia Gas System, Inc. 700 51
Consolidated Edison Co. of
New York, Inc. 1,300 45
Consolidated Natural Gas Co. 1,000 54
Dominion Resources, Inc. 1,000 37
DTE Energy Co. 600 18
Duke Power Co. 2,526 121
Eastern Enterprises 100 4
Edison International 2,200 56
Enron Corp. 1,900 72
Entergy Corp. 1,500 37
FPL Group, Inc. 1,600 83
Number Value
of Shares (000s)
--------- --------
GPU, Inc. 500 $ 18
Houston Industries, Inc. 1,724 37
Niagara Mohawk Power Corp.+ 400 4
NICOR, Inc. 500 19
Northern States Power Co. 600 30
Ohio Edison Co. 1,000 25
ONEOK, Inc. 100 3
Pacific Enterprises, Inc. 600 20
Pacific Gas & Electric Corp. 2,400 61
PacifiCorp. 1,800 39
PECO Energy Co. 1,400 32
Peoples Energy Corp. 100 4
PP&L Resources, Inc. 1,100 24
Public Service Enterprise
Group, Inc. 1,300 34
Sonat, Inc. 800 37
Southern Co. 3,700 85
Texas Utilities Co. 1,222 44
Unicom Corp. 1,300 36
Union Electric Co. 600 23
Williams Companies, Inc. 1,300 66
-------
1,453
-------
INTERNATIONAL--0.0%
GERMANY--0.0 %
VIAG AG 12 6
-------
UNITED KINGDOM--0.0 %
Centrica+ 11,258 16
Energy Group 2,304 23
Siebe PLC 6 0
-------
39
-------
45
-------
TOTAL COMMON STOCK
(Cost $38,908) 49,424
-------
WARRANTS--0.0%
BELGIUM--0.0 %
Generale de Banque (expire
11/15/99)+ 44 0
-------
FRANCE--0.0 %
AXA UAP CVG (expire
01/07/99)+ 328 1
-------
</TABLE>
32
<PAGE> 37
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
SWITZERLAND--0.0 %
Schweizerische Bankverein
(expire 6/30/00)+ 20 $ 0
-------
TOTAL WARRANTS
(Cost $0) 1
-------
MUTUAL FUNDS--28.8%
Schwab International Index
Fund 1,617,380 21,527
Schwab Small-Cap Index Fund 1,233,758 21,875
-------
TOTAL MUTUAL FUNDS
(Cost $38,267) 43,402
-------
</TABLE>
<TABLE>
<CAPTION>
Par
----------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS--21.6%(a)
U.S. Treasury Bonds
11.625%, 11/15/04 $ 400,000 531
10.000%, 05/15/10 475,000 589
10.375%, 11/15/12 500,000 660
12.000%, 08/15/13 500,000 732
11.250%, 02/15/15 350,000 539
9.250%, 02/15/16 600,000 799
9.125%, 05/15/18 500,000 667
8.125%, 08/15/19 1,650,000 2,017
7.125%, 02/15/23 1,950,000 2,168
6.250%, 08/15/23 1,025,000 1,027
U.S. Treasury Notes
7.250%, 02/15/98 200,000 201
5.250%, 07/31/98 400,000 399
7.125%, 10/15/98 400,000 406
5.000%, 02/15/99 500,000 496
7.000%, 04/15/99 3,100,000 3,159
6.000%, 06/30/99 1,000,000 1,006
5.875%, 07/31/99 1,000,000 1,004
6.375%, 01/15/00 1,000,000 1,015
6.375%, 05/15/00 1,000,000 1,016
6.000%, 08/15/00 1,200,000 1,210
5.750%, 10/31/00 1,000,000 1,000
6.250%, 04/30/01 1,400,000 1,422
6.125%, 12/31/01 2,000,000 2,025
<CAPTION>
Value
Par (000s)
---------- --------
<S> <C> <C>
7.500%, 05/15/02 $1,000,000 $ 1,069
6.375%, 08/15/02 300,000 307
6.250%, 02/15/03 800,000 816
5.750%, 08/15/03 500,000 498
5.875%, 02/15/04 700,000 702
7.250%, 05/15/04 4,200,000 4,516
6.500%, 10/15/06 500,000 520
--------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $31,625) 32,516
--------
AGENCY NOTES--16.5%(a)
Federal Home Loan
Mortgage Corp.
7.140%, 09/13/06 1,000,000 1,072
6.875%, 11/22/06 850,000 868
Federal National Mortgage
Association
8.500%, 02/01/05 1,050,000 1,104
7.250%, 06/01/05 650,000 663
Federal National Mortgage
Association Discount
Notes(b)
5.450%, 12/05/97 6,000,000 5,971
5.530%, 01/15/98 7,400,000 7,318
5.560%, 01/30/98 8,000,000 7,895
--------
TOTAL AGENCY NOTES
(Cost $24,772) 24,891
--------
CASH EQUIVALENTS--0.2%
MSTC Cash Reserve Liquid
Asset Fund
5.380%*, 11/07/97 337,799 338
--------
TOTAL CASH EQUIVALENTS
(Cost $338) 338
--------
TOTAL INVESTMENTS--100.0%
(Cost $133,910) $150,572
========
</TABLE>
See accompanying Notes to Schedule of Investments and Notes to Financial
Statements.
33
<PAGE> 38
SCHWAB ASSET DIRECTOR(R)--CONSERVATIVE GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
COMMON STOCK--22.4%
AEROSPACE/DEFENSE--0.4%
BF Goodrich Co. 100 $ 4
Boeing Co. 1,246 60
General Dynamics Corp. 100 8
Lockheed Martin Corp. 300 29
Northrop Grumman Corp. 100 11
Raytheon Co. 300 16
Textron, Inc. 200 12
United Technologies Corp. 400 28
------
168
------
AIR TRANSPORTATION--0.1%
AMR Corp.+ 200 23
Delta Airlines, Inc. 100 10
Southwest Airlines Co. 100 3
US Airways Group, Inc.+ 100 5
------
41
------
ALCOHOLIC BEVERAGES--0.1%
Adolph Coors Co. Class B 100 4
Anheuser-Busch Companies, Inc. 600 24
Brown-Forman Corp. Class B 100 5
Seagram Co., Ltd. 400 13
------
46
------
APPAREL--0.1%
Fruit of the Loom, Inc. Class
A+ 100 3
Liz Claiborne, Inc. 100 5
NIKE, Inc. Class B 300 13
Reebok International Ltd.+ 100 4
Russell Corp. 100 3
Springs Industries, Inc. 100 5
Stride Rite Corp. 100 1
V.F. Corp. 100 9
------
43
------
AUTOMOTIVE PRODUCTS--0.0%
Autoliv, Inc. 34 1
Cooper Tire & Rubber Co. 100 2
Goodyear Tire & Rubber Co. 100 7
Meritor Automotive, Inc.+ 66 1
------
11
------
BANKS--1.9%
Banc One Corp. 707 37
Bank of New York Co., Inc. 400 19
BankAmerica Corp. 900 64
BankBoston Corp. 200 16
Bankers Trust New York Corp. 200 24
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
Barnett Banks, Inc. 200 $ 14
Chase Manhattan Corp. 608 70
Citicorp 600 74
Comerica, Inc. 200 16
CoreStates Financial Corp. 300 22
Fifth Third Bancorp 150 10
First Chicago NBD Corp. 381 28
First Union Corp. 714 35
Fleet Financial Group, Inc. 289 19
Huntington Bancshares, Inc. 200 6
J.P. Morgan & Co., Inc. 300 33
KeyCorp, Inc. 200 12
MBNA Corp. 637 17
Mellon Bank Corp. 300 15
National City Corp. 200 12
NationsBank Corp. 830 50
Norwest Corp. 900 29
PNC Bank Corp. 300 14
Republic New York Corp. 100 11
State Street Corp. 200 11
SunTrust Banks, Inc. 200 13
U.S. Bancorp. 363 37
Wachovia Corp. 300 23
Wells Fargo & Co. 166 48
------
779
------
BUSINESS MACHINES & SOFTWARE--2.1%
3COM Corp.+ 400 17
Adobe Systems, Inc. 100 5
Apple Computer, Inc.+ 100 2
Autodesk, Inc. 100 4
Bay Networks, Inc.+ 200 6
Cabletron Systems, Inc.+ 200 6
Ceridian Corp.+ 57 2
Cisco Systems, Inc.+ 900 74
Compaq Computer Corp.+ 952 61
Computer Associates
International, Inc. 500 37
Computer Sciences Corp.+ 179 13
Data General Corp.+ 100 2
Dell Computer Corp.+ 500 40
Digital Equipment Corp.+ 100 5
EMC Corp.+ 300 17
Hewlett-Packard Co. 1,300 80
Honeywell, Inc. 200 14
Intergraph Corp.+ 100 1
</TABLE>
34
<PAGE> 39
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
International Business
Machines Corp. 1,300 $ 127
Microsoft Corp.+ 1,600 207
Novell, Inc.+ 400 3
Oracle Systems Corp.+ 1,200 43
Parametric Technology Corp.+ 100 4
Pitney Bowes, Inc. 200 16
Seagate Technology, Inc. 276 7
Silicon Graphics, Inc.+ 222 3
Sun Microsystems, Inc.+ 400 14
Unisys Corp.+ 200 3
Xerox Corp. 500 40
------
853
------
BUSINESS SERVICES--0.3%
Automatic Data Processing,
Inc. 300 15
Browning-Ferris Industries,
Inc. 200 7
Choicepoint, Inc.+ 10 0
Cognizant Corp. 200 8
Deluxe Corp. 100 3
Dun & Bradstreet Corp. 200 6
Ecolab, Inc. 100 5
Equifax, Inc. 100 3
First Data Corp. 500 14
H & R Block, Inc. 100 4
HBO & Co. 200 9
IKON Office Solutions 100 3
Interpublic Group of
Companies, Inc. 150 7
John H. Harland Co. 100 2
Laidlaw, Inc. 400 6
Moore Corp. Ltd. 100 2
National Service Industries,
Inc. 100 4
R.R. Donnelley & Sons Co. 100 3
Safety-Kleen Corp. 100 2
Service Corp. International 300 9
Shared Medical Systems Corp. 100 5
SUPERVALU, Inc. 100 4
Waste Management, Inc. 500 12
------
133
------
CHEMICAL--0.7%
Air Products & Chemicals, Inc. 200 15
Dow Chemical Co. 300 27
E.I. du Pont de Nemours & Co. 1,400 78
Eastman Chemical Co. 100 6
Great Lakes Chemical Corp. 100 5
Number Value
of Shares (000s)
--------- -------
Hercules, Inc. 100 $ 5
Minnesota Mining &
Manufacturing Co. 600 55
Monsanto Co. 700 30
Morton International, Inc. 100 3
Nalco Chemical Co. 100 4
PPG Industries, Inc. 200 11
Praxair, Inc. 200 9
Rohm & Haas Co. 100 8
Sigma-Aldrich Corp. 100 4
Solutia, Inc.+ 80 2
Union Carbide Corp. 100 5
W.R. Grace & Co. 100 7
------
274
------
CONSTRUCTION--0.1%
Armstrong World Industries,
Inc. 100 7
Centex Corp. 100 6
Crane Co. 100 4
Fluor Corp. 100 4
Kaufman & Broad Home Corp. 100 2
Owens Corning 100 3
Pulte Corp. 100 4
Sherwin-Williams Co. 200 6
The Stanley Works 100 4
------
40
------
CONSUMER-DURABLE--0.1%
Black & Decker Corp. 100 4
Masco Corp. 200 9
Maytag Corp. 100 3
Newell Co. 200 8
Snap-on, Inc. 100 4
Whirlpool Corp. 100 6
------
34
------
CONSUMER-NONDURABLE--0.2%
American Greetings Corp. Class
A 100 3
Corning, Inc. 200 9
Darden Restaurants, Inc. 100 1
Fort James Corp.+ 200 8
Fortune Brands, Inc. 200 7
Hasbro, Inc. 150 4
Jostens, Inc. 100 2
Mattel, Inc. 350 14
McDonald's Corp. 800 37
Rubbermaid, Inc. 100 2
</TABLE>
35
<PAGE> 40
SCHWAB ASSET DIRECTOR(R)--CONSERVATIVE GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
Tricon Global Restaurants,
Inc.+ 140 $ 4
Wendy's International, Inc. 100 2
------
93
------
CONTAINERS--0.0%
Ball Corp. 100 4
Bemis Co., Inc. 100 4
Crown Cork & Seal Co., Inc. 100 4
Owens-Illinois, Inc.+ 100 3
Stone Container Corp. 100 1
------
16
------
ELECTRONICS--1.0%
Advanced Micro Devices, Inc.+ 180 4
AMP, Inc. 200 9
Applied Materials, Inc.+ 400 13
EG&G, Inc. 100 2
General Semiconductor, Inc.+ 25 0
General Signal Corp. 100 4
Harris Corp. 200 9
Intel Corp. 2,100 162
KLA-Tencor Corp.+ 100 4
LSI Logic Corp.+ 100 2
Lucent Technologies, Inc.+ 856 71
Micron Technology, Inc.+ 200 5
Motorola, Inc. 700 43
National Semiconductor Corp.+ 100 4
Perkin Elmer Corp. 100 6
Rockwell International Corp. 200 10
Scientific-Atlanta, Inc. 100 2
Tektronix, Inc. 100 6
Texas Instruments, Inc. 300 32
Thermo Electron Corp.+ 100 4
Thomas & Betts Corp. 63 3
------
395
------
ENERGY-DEVELOPMENT--0.4%
Anadarko Petroleum Corp. 100 7
Apache Corp. 100 4
Baker Hughes, Inc. 200 9
Burlington Resources, Inc. 200 10
Dresser Industries, Inc. 200 8
Halliburton Co. 314 19
Helmerich & Payne, Inc. 200 16
Occidental Petroleum Corp. 400 11
Rowan Companies, Inc.+ 100 4
Schlumberger Ltd. 700 61
Union Pacific Resources Group 269 7
Western Atlas, Inc.+ 100 9
------
165
------
Number Value
of Shares (000s)
--------- -------
FOOD-AGRICULTURE--1.2%
Archer-Daniels Midland Co. 636 $ 14
Campbell Soup Co. 500 26
Coca-Cola Co. 3,100 172
ConAgra, Inc. 600 18
CPC International, Inc. 200 20
Fleming Companies, Inc. 100 2
General Mills, Inc. 116 8
H.J. Heinz Co. 400 19
Hershey Foods Corp. 100 6
Kellogg Co. 500 22
PepsiCo, Inc. 1,900 70
Pioneer Hi-Bred International,
Inc. 100 9
Quaker Oats Co. 100 5
Ralston Purina Co. 200 18
Sara Lee Corp. 600 31
SYSCO Corp. 200 8
Unilever NV 800 43
Whitman Corp. 100 3
Wm. Wrigley Jr. Co. 100 7
------
501
------
GOLD--0.1%
Barrick Gold Corp. 400 9
Battle Mountain Gold Co. 200 1
Echo Bay Mines Ltd.+ 100 0
Homestake Mining Co. 100 1
Newmont Mining Corp. 143 5
Placer Dome, Inc. 300 5
------
21
------
HEALTHCARE--2.6%
Abbott Laboratories 900 55
Allergan, Inc. 100 3
ALZA Corp.+ 100 3
American Home Products Corp. 900 67
Amgen, Inc. 300 15
Bausch & Lomb, Inc. 100 4
Baxter International, Inc. 300 14
Becton, Dickinson & Co. 100 5
Beverly Enterprises, Inc.+ 100 1
Biomet, Inc. 100 2
Boston Scientific Corp.+ 167 8
Bristol-Myers Squibb Co. 1,300 114
C.R. Bard, Inc. 100 3
</TABLE>
36
<PAGE> 41
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
Cardinal Health, Inc. 200 $ 15
Columbia/HCA Healthcare Corp. 800 23
Crescendo Pharmaceuticals
Corp. Class A+ 5 0
Eli Lilly & Co. 1,400 94
Guidant Corp.+ 200 12
HealthSouth Corp.+ 400 10
Humana, Inc.+ 200 4
Johnson & Johnson 1,700 98
Mallinckrodt, Inc. 100 4
Manor Care, Inc. 100 3
Medtronic, Inc. 500 22
Merck & Co., Inc. 1,600 143
Pfizer, Inc. 1,700 120
Pharmacia & Upjohn, Inc. 600 19
Schering-Plough Corp. 900 50
St. Jude Medical, Inc.+ 100 3
Tenet Healthcare Corp.+ 300 9
U.S. Surgical Corp. 100 3
United Healthcare Co. 200 9
Warner Lambert Co. 400 57
------
992
------
HOUSEHOLD PRODUCTS--0.6%
Alberto-Culver Co. Class B 100 3
Avon Products, Inc. 200 13
Clorox Co. 200 14
Colgate-Palmolive Co. 400 26
Gillette Co. 800 71
International Flavors &
Fragrances, Inc. 100 5
Procter & Gamble Co. 1,700 115
Tupperware Corp. 100 3
------
250
------
IMAGING & PHOTO--0.1%
Eastman Kodak Co. 400 24
Polaroid Corp. 100 4
------
28
------
INSURANCE--1.0%
Aegon NV ARS*** 43 3
Aetna, Inc. 222 16
Allstate Corp. 600 50
American General Corp. 300 15
American International Group,
Inc. 950 97
Aon Corp. 150 8
Chubb Corp. 200 13
CIGNA Corp. 100 16
Conseco, Inc. 232 10
Number Value
of Shares (000s)
--------- -------
General Re Corp. 137 $ 27
Hartford Financial Services
Group 200 16
Jefferson-Pilot Corp. 100 8
Lincoln National Corp. 200 14
Marsh & McLennan Companies,
Inc. 300 21
MBIA Corp. 200 12
MGIC Investment Corp. 200 12
Progressive Corp. 100 10
Providian Financial Corp. 100 4
SAFECO Corp. 100 5
St. Paul Companies, Inc. 200 16
SunAmerica, Inc. 150 5
Torchmark Corp. 200 8
Transamerica Corp. 100 10
UNUM Corp. 200 10
USF & G Corp. 100 2
------
408
------
MEDIA--0.5%
Clear Channel Communications,
Inc.+ 100 7
Comcast Corp. Class A 400 11
Dow Jones & Co., Inc. 100 5
Gannett Co., Inc. 300 16
King World Productions, Inc. 100 5
Knight-Ridder, Inc. 100 5
McGraw Hill Companies, Inc. 100 7
Meredith Corp. 100 3
New York Times Co. Class A 100 5
SBC Communications, Inc. 1,119 71
Telecommunications, Inc.
Series A (TCI Group)+ 600 14
Time Warner, Inc. 700 40
Times Mirror Co. Series A 100 5
Tribune Co. 100 6
Viacom, Inc. Class B+ 400 12
------
212
------
MISCELLANEOUS FINANCE--0.9%
American Express Co. 600 47
Beneficial Corp. 100 8
Charles Schwab Corp. 300 10
Countrywide Credit Industries,
Inc. 100 3
Federal Home Loan Mortgage
Corp. 800 30
Federal National Mortgage
Assoc. 1,300 62
Golden West Financial Corp. 100 9
Green Tree Financial Corp. 100 4
H.F. Ahmanson & Co. 100 6
</TABLE>
37
<PAGE> 42
SCHWAB ASSET DIRECTOR(R)--CONSERVATIVE GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
Household International, Inc. 200 $ 23
Merrill Lynch & Co., Inc.+ 400 27
Morgan Stanley, Dean Witter,
Discover & Co. 665 33
Salomon, Inc 200 16
Travelers Group, Inc. 800 56
Washington Mutual, Inc. 290 20
------
354
------
MOTOR VEHICLE--0.5%
Chrysler Corp. 800 28
Cummins Engine Co., Inc. 100 6
Dana Corp. 100 5
Eaton Corp. 100 10
Echlin, Inc. 100 3
Fleetwood Enterprises, Inc. 100 3
Ford Motor Co. 1,500 65
General Motors Corp. 900 58
Genuine Parts Co. 150 5
Navistar International Corp.+ 100 2
Paccar, Inc. 100 5
TRW, Inc. 200 11
------
201
------
NON-FERROUS--0.1%
Alcan Aluminum, Ltd. 200 6
Aluminum Company of America 300 22
Asarco, Inc. 100 3
Cyprus Amax Minerals Co. 100 2
Engelhard Corp. 100 2
Freeport-McMoRan Copper &
Gold, Inc. Class B 200 5
Inco Ltd. 200 4
Phelps Dodge Corp. 100 7
Reynolds Metals Co. 100 6
------
57
------
OIL-DOMESTIC--0.3%
Amerada Hess Corp. 100 6
Ashland, Inc. 100 5
Atlantic Richfield Co. 500 41
Kerr-McGee Corp. 100 7
Oryx Energy Co.+ 100 3
Pennzoil Co. 100 7
Phillips Petroleum Co. 300 15
Sun, Inc. 100 4
Unocal Corp. 300 12
USX-Marathon Group 300 11
------
111
------
Number Value
of Shares (000s)
--------- -------
OIL-INTERNATIONAL--1.4%
Amoco Corp. 700 $ 64
Chevron Corp. 900 75
Exxon Corp. 3,100 191
Mobil Corp. 1,100 80
Royal Dutch Petroleum
Co.-Sponsored ADR** 2,700 142
Texaco, Inc. 600 34
------
586
------
PAPER--0.3%
Boise Cascade Corp. 100 3
Champion International Corp. 100 6
Georgia-Pacific Corp.+ 200 17
International Paper Co. 300 14
Kimberly-Clark Corp. 656 33
Louisiana-Pacific Corp. 100 2
Mead Corp. 100 6
Potlatch Corp. 100 5
Temple Inland, Inc. 100 6
Union Camp Corp. 100 5
Westvaco Corp. 100 3
Weyerhaeuser Co. 200 10
Willamette Industries, Inc. 200 7
------
117
------
PRODUCER GOODS & MANUFACTURING--1.3%
Aeroquip-Vickers, Inc. 100 5
Allied Signal, Inc. 700 25
Avery Dennison Corp. 100 4
Briggs & Stratton Corp. 100 5
Case Corp. 100 6
Caterpillar, Inc. 400 21
Cincinnati Milacron, Inc. 100 3
Commscope Inc.+ 33 0
Cooper Industries, Inc. 100 5
Deere & Co. 300 16
Dover Corp. 200 14
Emerson Electric Co. 500 26
FMC Corp.+ 100 8
Foster Wheeler Corp. 100 3
General Electric Co. 4,100 265
Harnischfeger Industries, Inc. 100 4
Illinois Tool Works, Inc. 300 15
Ingersoll-Rand Co. 150 6
ITT Industries, Inc. 100 3
Johnson Controls, Inc. 100 4
</TABLE>
38
<PAGE> 43
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
McDermott International, Inc. 100 $ 4
Millipore Corp. 100 4
NACCO Industries, Inc. Class A 100 10
Pall Corp. 100 2
Parker-Hannifin Corp. 150 6
Raychem Corp. 100 9
Tenneco, Inc. 200 9
Timken Co. 100 3
Tyco International Ltd.+ 600 23
W.W. Grainger, Inc. 100 9
Westinghouse Electric Corp. 900 24
------
541
------
RAILROAD--0.2%
Burlington Northern Santa Fe
Corp. 200 19
CSX Corp. 200 11
Norfolk Southern Corp. 400 13
Union Pacific Corp. 300 18
------
61
------
REAL PROPERTY--0.0%
HFS, Inc.+ 200 14
------
RETAIL--1.0%
Albertson's, Inc. 300 11
American Stores Co. 300 8
AutoZone, Inc.+ 100 3
Charming Shoppes, Inc.+ 100 1
Circuit City Stores, Inc. 100 4
Costco Companies, Inc.+ 200 8
CUC International, Inc.+ 519 15
CVS Corp. 200 12
Dayton Hudson Corp. 200 13
Dillards Inc. Class A 100 4
Federated Department Stores,
Inc.+ 200 9
Gap, Inc. 300 16
Giant Food, Inc. Class A 100 3
Great Atlantic & Pacific Tea
Co., Inc. 100 3
Harcourt General, Inc. 100 5
Home Depot, Inc. 850 47
J.C. Penney Co., Inc. 300 18
K Mart Corp.+ 600 8
Kroger Co.+ 300 10
Limited, Inc. 309 7
Longs Drug Stores, Inc. 100 3
Lowe's Companies, Inc. 200 8
May Department Stores Co. 200 11
Number Value
of Shares (000s)
--------- -------
Mercantile Stores Co., Inc. 100 $ 6
Nordstrom, Inc. 100 6
Pep Boys-Manny Moe & Jack 100 3
Rite Aid Corp. 100 6
Sears Roebuck & Co. 500 21
Tandy Corp. 200 7
TJX Companies, Inc. 200 6
Toys 'R' Us, Inc.+ 300 10
Wal Mart Stores, Inc. 2,800 96
Walgreen Co. 600 17
Winn Dixie Stores, Inc. 100 4
Woolworth Corp.+ 100 2
------
411
------
STEEL--0.0%
Allegheny Teledyne, Inc. 192 5
Armco, Inc.+ 100 1
Bethlehem Steel Corp.+ 100 1
Inland Steel Industries, Inc. 100 2
Nucor Corp. 100 5
USX-U.S. Steel Group 100 3
Worthington Industries, Inc. 100 2
------
19
------
TELEPHONE--1.4%
AirTouch Communications, Inc.+ 600 23
Alltel Corp. 200 7
Ameritech Corp. 700 46
Andrew Corp. 100 2
AT&T Corp.+ 2,000 99
Bell Atlantic Corp. 1,030 82
BellSouth Corp. 1,200 57
DSC Communications Corp.+ 100 2
Frontier Corp. 200 4
GTE Corp. 1,200 51
MCI Communications Corp. 800 28
Nextlevel Systems, Inc.+ 100 1
Northern Telecom Ltd. 400 36
Sprint Corp. 500 26
Tellabs, Inc.+ 200 11
U.S. West, Inc.
(Communications Group) 600 24
U.S. West, Inc. (Media Group)+ 700 18
WorldCom, Inc.+ 1,100 37
------
554
------
</TABLE>
39
<PAGE> 44
SCHWAB ASSET DIRECTOR(R)--CONSERVATIVE GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
TOBACCO--0.4%
Loew's Corp. 200 $ 22
Philip Morris Companies., Inc. 3,000 119
UST, Inc. 200 6
------
147
------
TRANSPORTATION-MISCELLANEOUS--0.1%
Caliber Systems, Inc. 100 5
Federal Express Corp.+ 200 13
Ryder Systems, Inc. 100 4
------
22
------
TRAVEL & RECREATION--0.3%
Brunswick Corp. 100 3
Harrah's Entertainment, Inc.+ 100 2
Hilton Hotels Corp. 300 9
ITT Corp.+ 200 15
Marriott International, Inc. 200 14
Mirage Resorts, Inc.+ 200 5
Walt Disney Co. 909 75
------
123
------
UTILITIES--0.6 %
American Electric Power Co.,
Inc. 200 9
Baltimore Gas & Electric Co. 100 3
Carolina Power & Light Co. 100 4
Central & South West Services
Corp. 200 4
Cinergy Corp. 200 7
Coastal Corp. 100 6
Columbia Gas System, Inc. 100 7
Consolidated Edison Co. of New
York, Inc. 300 10
Consolidated Natural Gas Co. 100 5
Dominion Resources, Inc. 200 7
DTE Energy Co. 100 3
Duke Power Co. 404 20
Eastern Enterprises 100 4
Edison International 500 13
Enron Corp. 300 11
Entergy Corp. 300 7
FPL Group, Inc. 200 10
GPU, Inc. 100 4
Houston Industries, Inc. 274 6
Niagara Mohawk Power Corp.+ 100 1
NICOR, Inc. 100 4
Northern States Power Co. 100 5
Ohio Edison Co. 100 2
ONEOK, Inc. 100 3
Number Value
of Shares (000s)
--------- -------
Pacific Enterprises, Inc. 100 $ 3
Pacific Gas & Electric Corp. 500 13
PacifiCorp. 300 7
PECO Energy Co. 200 5
Peoples Energy Corp. 100 4
PP&L Resources, Inc. 200 4
Public Service Enterprise
Group, Inc. 200 5
Sonat, Inc. 100 5
Southern Co. 800 18
Texas Utilities Co. 300 11
Unicom Corp. 200 6
Union Electric Co. 100 4
Williams Companies, Inc. 150 8
------
248
------
INTERNATIONAL--0.0 %
GERMANY--0.0 %
VIAG AG 3 1
------
UNITED KINGDOM--0.0 %
Centrica+ 2,541 4
Energy Group 217 2
Granada Group 3 0
------
6
------
7
------
TOTAL COMMON STOCK
(Cost $7,500) 9,076
------
WARRANTS--0.0%
BELGIUM--0.0 %
Generale de Banque (expire
11/15/99)+ 8 0
------
FRANCE--0.0 %
AXA UAP CVG
(expire 01/07/99)+ 72 0
------
SWITZERLAND--0.0 %
Schweizerische Bankverein
(expire 6/30/00)+ 5 0
------
TOTAL WARRANTS
(Cost $0) 0
------
</TABLE>
40
<PAGE> 45
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- -------
<S> <C> <C>
MUTUAL FUNDS--19.6%
Schwab International Index
Fund 295,013 $ 3,927
Schwab Small-Cap Index Fund 226,269 4,011
------
TOTAL MUTUAL FUNDS
(Cost $7,096) 7,938
------
</TABLE>
<TABLE>
<CAPTION>
Par
----------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS--39.7%(a)
U.S. Treasury Bonds
11.625%, 11/15/04 $ 200,000 265
10.000%, 05/15/10 100,000 124
10.375%, 11/15/12 500,000 660
11.250%, 02/15/15 150,000 231
9.250%, 02/15/16 100,000 133
7.250%, 05/15/16 200,000 223
8.750%, 05/15/17 200,000 257
8.125%, 08/15/19 950,000 1,162
8.000%, 11/15/21 250,000 304
7.125%, 02/15/23 950,000 1,056
U.S. Treasury Notes
7.250%, 02/15/98 50,000 50
6.125%, 08/31/98 325,000 327
6.000%, 09/30/98 250,000 251
7.125%, 10/15/98 300,000 304
5.875%, 02/28/99 400,000 401
7.000%, 04/15/99 300,000 306
9.125%, 05/15/99 400,000 420
8.000%, 08/15/99 700,000 728
7.500%, 10/31/99 600,000 621
7.125%, 02/29/00 200,000 206
6.375%, 05/15/00 600,000 610
6.125%, 07/31/00 200,000 202
6.000%, 08/15/00 750,000 756
5.750%, 10/31/00 200,000 200
5.250%, 01/31/01 600,000 592
6.375%, 03/31/01 400,000 408
6.625%, 07/31/01 100,000 103
7.875%, 08/15/01 1,000,000 1,071
6.000%, 07/31/02 200,000 202
6.375%, 08/15/02 200,000 205
5.750%, 08/15/03 675,000 672
5.875%, 02/15/04 500,000 501
<CAPTION>
Value
Par (000s)
---------- -------
<S> <C> <C>
7.250%, 05/15/04 1,900,000 2,044
6.500%, 10/15/06 $ 250,000 $ 260
6.250%, 02/15/07 150,000 154
-------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $15,548) 16,009
-------
AGENCY NOTES--17.3%
Federal Home Loan
Mortgage Corp.(a)
7.140%, 09/13/06 575,000 617
6.875%, 11/22/06 150,000 153
Federal National
Mortgage Association(a)
7.250%, 06/01/05 400,000 408
Federal National Mortgage
Association Discount
Notes(b)
5.450%, 12/05/97 900,000 896
5.530%, 01/15/98 1,500,000 1,483
5.560%, 01/30/98 3,500,000 3,453
-------
TOTAL AGENCY NOTES
(Cost $6,956) 7,010
-------
CASH EQUIVALENTS--1.0%
MSTC Cash Reserve Liquid
Asset Fund
5.380%*, 11/07/97 409,415 409
-------
TOTAL CASH EQUIVALENTS
(Cost $409) 409
-------
TOTAL INVESTMENTS--100.0%
(Cost $37,509) $40,442
=======
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
NOTES TO SCHEDULES OF INVESTMENTS
+ Non-Income Producing Security.
* Interest rate represents the yield on report date.
** ADR--American Depository Receipt.
*** ARS--American Regulatory Share.
(a) Interest rates represent stated coupon rate of
security.
(b) Interest rate represents the effective yield at
time of purchase.
</TABLE>
See accompanying Notes to Financial Statements.
41
<PAGE> 46
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
October 31, 1997
<TABLE>
<CAPTION>
Schwab Asset Director(R)
---------------------------------------
High Balanced Conservative
Growth Fund Growth Fund Growth Fund
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments, at value (Cost $146,241, $133,910 and $37,509,
respectively) $ 170,454 $ 150,572 $40,442
Foreign currencies, at value (Cost $109, $274 and $52, respectively) 102 274 53
Receivable for investments sold -- 1,518 607
Receivable for fund shares sold 247 135 38
Dividends receivable 74 50 9
Interest receivable 14 654 315
Deferred organization costs 11 11 10
Foreign dividend tax reclaim receivable 8 4 1
-------- -------- -------
Total Assets 170,910 153,218 41,475
-------- -------- -------
LIABILITIES
Payable for investments purchased 3,000 1,500 828
Payable for fund shares redeemed 56 136 34
Custodian fees 13 29 1
Investment advisory fee 8 6 1
Transfer agency and shareholder service fees 8 7 2
Accrued expenses 125 122 50
-------- -------- -------
Total Liabilities 3,210 1,800 916
-------- -------- -------
Net assets applicable to outstanding shares $ 167,700 $ 151,418 $40,559
======== ======== =======
NET ASSETS CONSIST OF:
Paid-in-capital $ 133,633 $ 128,491 $36,626
Undistributed net investment income 1,765 2,453 101
Accumulated net realized gain on investments sold and
foreign currency transactions 8,096 3,812 898
Net unrealized appreciation on investments and translating assets and
liabilities into reporting currency 24,206 16,662 2,934
-------- -------- -------
$ 167,700 $ 151,418 $40,559
======== ======== =======
PRICING OF SHARES:
Outstanding shares, $0.00001 par value (unlimited shares authorized) 12,340 11,814 3,462
Net asset value, offering and redemption price per share $13.59 $12.82 $11.71
</TABLE>
See accompanying Notes to Financial Statements.
42
<PAGE> 47
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (in thousands)
Year ended October 31, 1997
<TABLE>
<CAPTION>
Schwab Asset Director(R)
-------------------------------------------
High Balanced Conservative
Growth Fund Growth Fund Growth Fund
----------- ----------- -----------
<S> <C> <C> <C>
Investment income:
Dividends (net of foreign tax withheld of $23, $12 and $2,
respectively) $ 1,070 $ 685 $ 110
Interest 2,001 3,072 1,094
------- ------- -----
Total investment income 3,071 3,757 1,204
------- ------- -----
Expenses:
Investment advisory and administration fee 972 848 208
Transfer agency and shareholder service fees 330 289 71
Custodian fees 99 126 57
Portfolio accounting fees 32 28 11
Registration fees 107 113 66
Professional fees 40 39 29
Shareholder reports 37 30 8
Trustees' fees 9 7 6
Amortization of deferred organization costs 4 4 4
Insurance and other expenses 10 10 11
------- ------- -----
1,640 1,494 471
Less expenses reduced and absorbed (Note 4) (656) (595) (240)
------- ------- -----
Net expenses incurred by Fund 984 899 231
------- ------- -----
Net investment income 2,087 2,858 973
------- ------- -----
Net realized gain (loss) on investments and foreign currency
transactions:
Net realized gain on investments sold 8,660 4,387 1,048
Net realized loss on foreign currency transactions (5) (15) (2)
------- ------- -----
Net realized gain on investments sold and foreign currency
transaction 8,655 4,372 1,046
------- ------- -----
Change in net unrealized appreciation (depreciation) on
investments and foreign currency translation:
Net unrealized appreciation on investments 14,448 11,174 1,878
Net unrealized appreciation (depreciation) on foreign currency (9) 1 --
------- ------- -----
Net unrealized appreciation on investments and foreign
currency 14,439 11,175 1,878
------- ------- -----
Net gain on investments 23,094 15,547 2,924
------- ------- -----
Increase in net assets resulting from operations $25,181 $18,405 $ 3,897
======= ======= =====
</TABLE>
See accompanying Notes to Financial Statements.
43
<PAGE> 48
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Schwab Asset Director(R)
---------------------------------------------------------------------------------
High Growth Fund Balanced Growth Fund Conservative Growth Fund
------------------------- ------------------------- -------------------------
Year ended October 31, Year ended October 31, Year ended October 31,
1997 1996* 1997 1996* 1997 1996*
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 2,087 $ 1,751 $ 2,858 $ 1,751 $ 973 $ 689
Net realized gain (loss) on
investments sold and foreign
currency transactions 8,655 (559) 4,372 (560) 1,046 (148)
Net unrealized appreciation on
investments and foreign currency
translation 14,439 9,768 11,175 5,487 1,878 1,055
-------- -------- -------- -------- ------- -------
Increase in net assets resulting from
operations 25,181 10,960 18,405 6,678 3,897 1,596
-------- -------- -------- -------- ------- -------
Dividends to shareholders from net
investment income (1,915) (158) (2,005) (151) (945) (616)
-------- -------- -------- -------- ------- -------
Capital Share Transactions:
Proceeds from shares sold 67,570 117,537 86,068 89,829 23,889 29,367
Net asset value of shares issued in
reinvestment of dividends 1,850 152 1,893 138 857 552
Less payments for shares redeemed (30,940) (22,538) (33,923) (15,515) (9,598) (8,441)
-------- -------- -------- -------- ------- -------
Increase in net assets from capital
share transactions 38,480 95,151 54,038 74,452 15,148 21,478
-------- -------- -------- -------- ------- -------
Total increase in net assets 61,746 105,953 70,438 80,979 18,100 22,458
Net Assets:
Beginning of period 105,954 1 80,980 1 22,459 1
-------- -------- -------- -------- ------- -------
End of period (including
undistributed net investment income
of $1,765, $1,593, $2,453, $1,600,
$101, and $73, respectively) $ 167,700 $ 105,954 $ 151,418 $ 80,980 $40,559 $22,459
======== ======== ======== ======== ======= =======
Number of Fund shares:
Sold 5,302 11,467 7,197 8,788 2,113 2,909
Reinvested 159 15 169 14 77 54
Redeemed (2,496) (2,107) (2,883) (1,470) (865) (826)
-------- -------- -------- -------- ------- -------
Net increase in shares outstanding 2,965 9,375 4,483 7,332 1,325 2,137
======== ======== ======== ======== ======= =======
</TABLE>
- ---------------
* For the period from November 20, 1995 (commencement of operations) to October
31, 1996.
See accompanying Notes to Financial Statements.
44
<PAGE> 49
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Schwab Asset Director(R)
---------------------------------------------------------------------------------
Conservative
High Growth Fund Balanced Growth Fund Growth Fund
------------------------- ------------------------- -------------------------
Year Period Year Period Year Period
ended ended ended ended ended ended
October 31, October 31, October 31, October 31, October 31, October 31,
1997 1996(a) 1997 1996(a) 1997 1996(a)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 11.30 $ 10.00 $ 11.05 $ 10.00 $ 10.51 $ 10.00
Income from investment operations
Net investment income 0.17 0.19 0.22 0.25 0.35 0.33
Net realized and unrealized gain on
investments and foreign currency
transactions 2.32 1.13 1.78 0.83 1.21 0.48
-------- -------- -------- ------- ------- -------
Total from investment operations 2.49 1.32 2.00 1.08 1.56 0.81
Less distributions
Dividends from net investment income (0.20) (0.02) (0.23) (0.03) (0.36) (0.30)
-------- -------- -------- ------- ------- -------
Total distributions (0.20) (0.02) (0.23) (0.03) (0.36) (0.30)
-------- -------- -------- ------- ------- -------
Net asset value at end of period $ 13.59 $ 11.30 $ 12.82 $ 11.05 $ 11.71 $ 10.51
======== ======== ======== ======= ======= =======
Total return (not annualized) 22.33% 13.24% 18.43% 10.82% 15.12% 8.18%
Ratios/Supplemental data
Net assets, end of period (000's) $ 167,700 $ 105,954 $ 151,418 $80,980 $40,559 $22,459
Ratio of expenses to average net
assets++ 0.75% 0.89%* 0.78% 0.89%* 0.81% 0.89%*
Ratio of net investment income to
average net assets 1.58% 2.03%* 2.48% 2.79%* 3.40% 3.49%*
Portfolio turnover rate 113% 46% 104% 44% 104% 64%
Average commission rate $ 0.0355 $ 0.0245 $ 0.0324 $0.0225 $0.0277 $0.0283
</TABLE>
- ---------------
++ The information contained in the above table is based on actual expenses
for the period, after giving effect to the portion of fees and expenses
reduced and expenses absorbed by the Investment Manager and Schwab. Had
these fees and expenses not been reduced and absorbed, the Funds' expense
and net investment income ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Ratio of expenses to average net
assets 1.24% 1.50%* 1.30% 1.56%* 1.65% 2.05%*
Ratio of net investment income to
average net assets 1.10% 1.42%* 1.96% 2.12%* 2.56% 2.33%*
</TABLE>
* Annualized
(a) For the period from November 20, 1995 (commencement of operations) to
October 31, 1996.
See accompanying Notes to Financial Statements.
45
<PAGE> 50
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
1. DESCRIPTION OF THE FUNDS
The Schwab Asset Director(R) -- High Growth Fund, Schwab Asset Director(R) --
Balanced Growth Fund and Schwab Asset Director(R) -- Conservative Growth Fund
(the "Funds") are series of Schwab Capital Trust (the "Trust"), a no-load,
open-end investment management company organized as a Massachusetts business
trust on May 7, 1993 and registered under the Investment Company Act of 1940, as
amended.
The investment objective of the Schwab Asset Director(R) -- High Growth Fund is
to provide high capital growth with less volatility than an all-stock portfolio.
The investment objective of the Schwab Asset Director(R) -- Balanced Growth Fund
is to provide maximum total return, including both capital growth and income.
The investment objective of the Schwab Asset Director(R) -- Conservative Growth
Fund is to provide income and more growth potential than an all bond fund.
In addition to the three Funds described above, the Trust also offers -- the
Schwab International Index Fund(R), Schwab Small-Cap Index Fund(R), Schwab S&P
500 Fund, Schwab Analytics Fund(TM), Schwab OneSource Portfolios --
International, Schwab OneSource Portfolios -- Growth Allocation, Schwab
OneSource Portfolios -- Balanced Allocation and Schwab OneSource Portfolios --
Small Company. 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 securities traded on an exchange and
unlisted securities are valued at the last quoted sale price for a given day, or
if a sale is not reported for that day, at the mean between the most recent
quoted bid and asked prices. Securities for which no quotations are readily
available are valued at fair value as determined by the Funds' investment
manager pursuant to guidelines adopted in good faith by the Board of Trustees.
Bonds and notes are generally valued at prices obtained from an independent
bond-pricing service. These securities are valued at the mean between the
representative quoted bid and asked prices or, if such prices are not available,
at prices for securities of comparable maturity, quality and type. 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.
Short-term securities with 60 days or less to maturity are stated at amortized
cost, which approximates market value.
Security transactions and investment income -- Security transactions are
accounted for on a trade date basis (date the order to buy or sell is executed).
Realized gains and losses from security transactions are determined on an
identified cost basis. Dividend income and distributions to shareholders are
recorded on the
46
<PAGE> 51
- --------------------------------------------------------------------------------
ex-dividend date. Interest income is recorded on the accrual basis and includes
amortization of premium and accretion of discount on investments. For callable
bonds purchased at a premium, the excess of the purchase price over the call
value is amortized against interest income through the call date. If the call
provision is not exercised, any remaining premium is amortized through the final
maturity date.
Repurchase agreements -- Repurchase agreements are fully collateralized by U.S.
Treasury or government agency securities. All collateral is held by the Funds'
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Foreign currency translation -- The accounting records of the Funds are
maintained in U.S. dollars. Investment securities and all other assets and
liabilities of the Funds denominated in a foreign currency are translated into
U.S. dollars at the exchange rates on October 31, 1997. Purchases and sales of
foreign securities, foreign income receipts and foreign expense payments are
translated into U.S. dollars at the exchange rate in effect on the dates of the
respective transactions.
The Funds separate within their 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.
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 Funds as an unrealized gain or loss. When the Forward is closed,
the Funds record 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 Funds engage in Forwards in connection with the purchase and
sale of portfolio securities to minimize the uncertainty of changes in future
exchange rates. The Funds could be exposed to risk if counterparties to the
contracts are unable to meet the terms of the contracts or if the value of the
foreign currency changes unfavorably.
Deferred organization costs -- Costs incurred in connection with the
organization of the Funds are amortized on a straight-line basis over a
five-year period from each Fund's 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 October 31, 1997, (for financial reporting and federal income tax purposes),
net unrealized gain for the High Growth Fund, Balanced Growth Fund and
Conservative Growth Fund aggregated $24,214,000,
47
<PAGE> 52
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
$16,660,000 and $2,934,000, respectively, of which $24,879,000, $17,107,000 and
$3,012,000, respectively, related to appreciated securities and $665,000,
$447,000 and $78,000, 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"). For advisory services and facilities furnished,
each Fund pays an annual fee, payable monthly, of 0.74% of each Fund's average
daily net assets not in excess of $1 billion, 0.69% of such assets over $1
billion and 0.64% of such assets over $2 billion. The Investment Manager has
reduced a portion of its fee for the year ended October 31, 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 services.
Schwab has reduced a portion of its fees for the year ended October 31, 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
year ended October 31, 1997, 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 Funds incurred fees aggregating $22,000
related to the Trust's unaffiliated trustees.
Other affiliated parties and transactions -- Pursuant to an Exemptive Order
issued by the SEC, the Funds may invest in other SchwabFunds and common stock of
Charles Schwab Corporation. As of October 31, 1997 the High Growth Fund,
Balanced Growth Fund and Conservative Growth Fund owned 9%, 6%, 1%, respectively
of the outstanding shares of the Schwab International Index Fund(R), 7%, 4%, 1%,
respectively, of the outstanding shares of the Schwab Small-Cap Index Fund(R),
and 1%, 1%, 1%, respectively, of the outstanding shares of Charles Schwab
Corporation.
Interfund transactions -- During the period ended October 31, 1997, the Funds
engaged in purchase and sale transactions with funds that have a common
investment adviser, common trustees, and officers. These sale transactions, made
at current market value pursuant to Rule 17a-7 under the Act, were $42,609,000,
$28,242,000 and $4,378,000, for the High Growth Fund, Balanced Growth Fund and
Conservative Growth Fund, respectively.
48
<PAGE> 53
- --------------------------------------------------------------------------------
4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab guarantee that, through at least February 28,
1999, each Fund's total operating expenses, including the impact of the
operating expenses of underlying SchwabFunds(R) in which a Fund invests, will
not exceed 0.89% of the Fund's average daily net assets, after waivers and
reimbursements. For purpose of this guarantee, operating expenses do not include
interest expenses, extraordinary expenses, taxes, foreign taxes and capital
items.
For the year ended October 31, 1997, the totals of such fees and expenses
reduced and absorbed by the Investment Manager were $546,000, $496,000 and
$203,000 for the High Growth Fund, Balanced Growth Fund and Conservative Growth
Fund, respectively. The totals of such fees reduced by Schwab were $110,000,
$99,000 and $36,000 for the High Growth Fund, Balanced Growth Fund and
Conservative Growth Fund, respectively (see Financial Highlights).
5. BORROWING AGREEMENT
The Trust has an arrangement with Bank of New York Trust Company whereby the
Funds may borrow, in aggregate, up to $100,000,000, on a temporary basis, to
fund redemptions. Amounts borrowed under this arrangement bear interest at
periodically negotiated rates and may be collateralized by the assets of the
Funds. During the year ended October 31, 1997, no borrowings were made under
this arrangement.
6. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities, other than short-term
obligations, for the year ended October 31, 1997, were as follows (in
thousands):
<TABLE>
<CAPTION>
High Balanced Conservative
Growth Fund Growth Fund Growth Fund
----------- ----------- -----------
<S> <C> <C> <C>
Purchases $ 186,438 $ 172,672 $44,184
Proceeds of sales and maturities $ 142,330 $ 113,813 $28,294
</TABLE>
Included in the aforementioned are purchases of common stock of Charles Schwab
Corp., an affiliated issuer, with a current value as of October 31, 1997, of
$90,431,000, $46,069,000 and $10,238,000, respectively, for the High Growth
Fund, Balanced Growth Fund and Conservative Growth Fund.
49
<PAGE> 54
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
Schwab Asset Director(R)--High Growth Fund,
Schwab Asset Director(R)--Balanced Growth Fund and
Schwab Asset Director(R)--Conservative Growth Fund
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Schwab Asset Director--High Growth
Fund, Schwab Asset Director--Balanced Growth Fund and Schwab Asset
Director--Conservative Growth Fund (three series constituting part of Schwab
Capital Trust, hereafter referred to as the "Trust") at October 31, 1997, the
results of each of their operations, the changes in each of their net assets and
the financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1997 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
San Francisco, California
December 5, 1997
50
<PAGE> 55
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 56
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 57
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(R)
Schwab Small-Cap Index Fund(R)
Schwab OneSource Portfolios - Small Company
Schwab International Index Fund(R)
Schwab OneSource Portfolios - International
SCHWAB BOND FUNDS
Schwab Bond Index Funds - Total and Short-Term Bond Market Index Funds*
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 1-800-435-4000 for a free prospectus and brochure for any of the
SchwabFunds(R).
Each prospectus provides more complete information, including fees and expenses.
Please read it carefully before investing.
This report must be preceded or accompanied by a current prospectus.
*Formerly known as the Schwab Government Bond Funds - Long-Term and
Short/Intermediate.
+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> 58
SCHWABFUNDS BULK RATE
FAMILY(R) U.S. POSTAGE
PAID
101 Montgomery Street CHARLES SCHWAB
San Francisco, California 94104
INVESTMENT ADVISOR
CHARLES SCHWAB INVESTMENT MANAGEMENT, INC.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc.
101 Montgomery Street, San Francisco, CA 94104
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
(C)1997 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
Printed on recycled paper. CRS 20204 TF5267R(12/97)
