<PAGE> 1
SCHWABFUNDS(R)
SCHWAB EQUITY
INDEX FUNDS
- SCHWAB S&P 500 FUND
- SCHWAB 1000 FUND(R)
- SCHWAB SMALL-CAP
INDEX FUND(R)
- SCHWAB INTERNATIONAL
INDEX FUND(R)
Annual Report
October 31, 1997
<PAGE> 2
[PHOTO]
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.
INTRODUCING THE SCHWAB BOND INDEX FUNDS
As a strong proponent of indexing as an investment strategy, we've expanded our
indexing offering to include bond index funds. SchwabFunds is happy to introduce
the Short-Term Bond Market Index Fund and Total Bond Market Index Fund. 1 Each
fund is broad-based and diversified and seeks to track indices representing a
broad spectrum of the overall bond market. These funds are straightforward
choices for your bond holdings and can represent the core component of your bond
portfolio. For a free prospectus and brochure containing more information,
including fees, risks and expenses, please call us toll-free at 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
1 Formerly the Schwab Short/Intermediate and Long-Term Government Bond Funds,
respectively.
<PAGE> 3
CONTENTS
A Word from SchwabFunds(R) 2
The Portfolio Management Team 2
Market Overview 3
Schwab S&P 500 Fund 9
Schwab 1000 Fund(R) 15
Schwab Small-Cap Index Fund(R) 21
Schwab International Index Fund(R) 27
Financial Statements and Notes 34
1
<PAGE> 4
A WORD FROM SCHWABFUNDS(R)
We are pleased to bring you the annual report for the Schwab Equity Index Funds
(the Funds) for the fiscal year ended October 31, 1997. This report includes the
following four funds and all classes: Investor Shares, e.Shares(TM), and the
recently introduced Select Shares which became available in May 1997:
Schwab S&P 500 Fund
Schwab 1000 Fund(R)
Schwab Small-Cap Index Fund(R)
Schwab International Index Fund(R)
Due to a change in the Schwab 1000 Fund's fiscal year end from August 31 to
October 31, this annual report covers the two-month reporting period from
September 1, 1997 through October 31, 1997 for that Fund. The next report for
this Fund will be the semi-annual report for the six-month period ended April
30, 1998.
As explained in their respective sections of this report, the Funds all achieved
their primary objectives of tracking or matching the price and dividend
performances of their benchmark indices during the reporting period. In
addition, the Funds also succeeded in maintaining the tax efficiencies and low
costs designed to help maximize long-term performance results.
THE PORTFOLIO MANAGEMENT TEAM
STEPHEN B. WARD - Senior Vice President and Chief Investment Officer, has
overall responsibility for the management of the Funds' portfolios. Steve joined
CSIM as Vice President and Portfolio Manager in April 1991, and was promoted to
his current position in August 1993. Prior to joining CSIM, Steve was Vice
President and Portfolio Manager at Federated Investors.
GERI HOM - Vice President and Senior Portfolio Manager, has primary
responsibility for the day-to-day management of the Funds' portfolios. Geri
joined CSIM in March 1995 as Portfolio Manager and was promoted to her current
position in December 1996. She currently manages approximately $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.
The following Market Overview as well as the answers to questions for each fund
are provided by the Portfolio Management Team.
2
<PAGE> 5
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 0.035
</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 following
graph) 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.
3
<PAGE> 6
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 0.056
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.
4
<PAGE> 7
MEASURES OF INFLATION
Source: Bloomberg L.P.
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 0.052
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>
- - 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 31, 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%.
5
<PAGE> 8
TOTAL RETURN PERFORMANCE
Value of a Hypothetical $1 Investment
<TABLE>
<CAPTION>
LEHMAN
SCHWAB SCHWAB BROTHERS
S&P 500(R) SMALL-CAP INTERNATIONAL GENERAL U.S.
INDEX INDEX(R) INDEX(R) GOV'T. INDEX
<S> <C> <C> <C> <C>
Oct-96 1.00 1.00 1.00 1.00
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 DIVIDENDS 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 funds, 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.
6
<PAGE> 9
S&P 500(R) PRICE/EARNINGS RATIO
<TABLE>
<S> <C>
Jan-90 14.37
Feb-90 14.21
Mar-90 14.77
Apr-90 14.82
May-90 15.84
Jun-90 16.66
Jul-90 16.65
Aug-90 15.57
Sep-90 14.9
Oct-90 14.36
Nov-90 14.59
Dec-90 15.19
Jan-91 14.95
Feb-91 16.82
Mar-91 17.48
Apr-91 17.85
May-91 17.92
Jun-91 17.96
Jul-91 18.07
Aug-91 19.72
Sep-91 19.88
Oct-91 19.92
Nov-91 21.02
Dec-91 21.85
Jan-92 23.35
Feb-92 23.83
Mar-92 25.45
Apr-92 25.51
May-92 25.71
Jun-92 25.08
Jul-92 25.61
Aug-92 25.5
Sep-92 24.37
Oct-92 23.94
Nov-92 24.08
Dec-92 24.01
Jan-93 24.2
Feb-93 24.25
Mar-93 24.22
Apr-93 23.2
May-93 23.21
Jun-93 22.58
Jul-93 22.52
Aug-93 23.02
Sep-93 23.74
Oct-93 23.97
Nov-93 22.55
Dec-93 23.55
Jan-94 22.98
Feb-94 21.17
Mar-94 20.34
Apr-94 20.1
May-94 20.16
Jun-94 19.76
Jul-94 18.64
Aug-94 18.9
Sep-94 18.26
Oct-94 17.55
Nov-94 16.58
Dec-94 16.98
Jan-95 16.23
Feb-95 16.2
Mar-95 16.5
Apr-95 16.02
May-95 16.43
Jun-95 16.82
Jul-95 16.55
Aug-95 16.18
Sep-95 16.86
Oct-95 16.18
Nov-95 17.14
Dec-95 17.41
Jan-96 18.11
Feb-96 18.56
Mar-96 18.94
Apr-96 19.16
May-96 19.48
Jun-96 19.3
Jul-96 18.31
Aug-96 18.62
Sep-96 19.75
Oct-96 19.6
Nov-96 21.05
Dec-96 20.7
Jan-97 20.55
Feb-97 20.98
Mar-97 19.87
Apr-97 20.24
May-97 21.43
Jun-97 22.45
Jul-97 23.92
Aug-97 22.64
Sep-97 24
Oct-97 22.84
</TABLE>
Source: Bloomberg L.P.
The price/earnings ratio, also known as a multiple, is the price of a stock
divided by its earnings per share and generally indicates how much investors are
willing to pay for a company's earning potential.
- - The price/earnings ratio for the S&P 500 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
that, as always, will be widely debated by market participants.
7
<PAGE> 10
MSCI-EAFE(R) COUNTRY US$ RETURN
(for the one-year period ended 10/31/97)
<TABLE>
<S> <C>
Finland 0.4835
Singapore -0.3048
Japan -0.2418
Hong Kong -0.1688
Australia -0.0664
New Zealand -0.0309
Austria 0.051
Belgium 0.1224
France 0.1339
Ireland 1.1764
Germany 0.2023
Italy 0.2381
Sweden 0.2666
Switzerland 0.2938
United Kingdom 0.3038
Netherlands 0.33
Denmark 0.3427
Norway 0.3433
Spain 0.3907
Malaysia -0.5688
</TABLE>
Source: Datastream
- - 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.
8
<PAGE> 11
SCHWAB S&P 500 FUND
Schwab S&P 500 Fund (the Fund) invests primarily in common stocks of the S&P
500(R) Index (S&P 500 Index), a widely recognized, unmanaged index of 500
large-company common stocks selected by Standard & Poor's. As of October 31,
1997, the aggregate market capitalization of the S&P 500 Index represented
approximately 73% of the total value of the U.S. stock market. Common stocks of
the 50 largest companies of the S&P 500 Index accounted for approximately 50% of
the index. 1
TOP 10 HOLDINGS AS A PERCENTAGE
OF FUND INVESTMENTS 2
<TABLE>
<CAPTION>
INVESTMENT %
<S> <C>
General Electric Co. 2.9
Microsoft Corp. 2.1
Exxon Corp. 2.1
Coca-Cola Co. 1.9
Intel Corp. 1.7
Royal Dutch Petroleum Co. 1.5
Merck & Co., Inc. 1.5
Philip Morris Companies, Inc. 1.3
International Business Machines Corp. 1.3
Pfizer, Inc. 1.3
TOTAL 17.6%
</TABLE>
PORTFOLIO BY ECONOMIC SECTOR 2
[PIE CHART]
Source: Wilshire Associates
<TABLE>
<CAPTION>
<S> <C>
Capital Goods 5.0%
Consumer Durables 2.4%
Consumer Non-Durables 31.5%
Energy 9.7%
Finance 16.5%
Materials & Services 7.4%
Technology 16.8%
Transportation 1.4%
Utilities 9.3%
1 Source: Wilshire Associates. The U.S. stock market is represented by the
Wilshire 5000 Index.
2 Both the top 10 holdings and the economic sector percentages may not be
indicative of current or future investments. A complete listing of the Fund's
investments as of 10/31/97 can be found in the Schedule of Investments later
in this report.
</TABLE>
<PAGE> 12
TAX-SMART INVESTMENT STRATEGY
Schwab S&P 500 Fund seeks to maximize its after-tax performance by keeping
capital gain distributions to a minimum. This strategy is designed to help
investors keep more of what their money earns. The following chart illustrates
the effects of this strategy on the one-year performance of the Schwab S&P 500
Fund -- Investor Shares.
ONE-YEAR AVERAGE ANNUAL TOTAL RETURNS AS OF 10/31/97
Before After % Lost
Tax Tax 3 to Taxes
- --------------------------------------------------------
Schwab S&P 500 Fund --
Investor Shares 4 31.29% 30.88% 0.41%
Average Large-Cap Fund 5 26.22% 23.39% 2.83%
- --------------------------------------------------------
3 After-tax returns assume the maximum federal income tax rate of 39.6% on
dividends and 28% on capital gain distributions. Tax rates vary and may be
higher or lower than those shown.
4 The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed that maximum total operating expenses
will not exceed 0.35% for the Investor Shares through at least 2/29/2000.
Without fee waivers and guarantees, the Investor Shares' total returns would
have been lower.
5 Source: Morningstar, Inc. Large-Cap Fund Category contains 1,172 funds with
one-year track records as of 10/31/97. These funds may or may not follow a
tax-efficiency strategy similar to that followed by the Schwab S&P 500 Fund.
FUND PERFORMANCE
The graphs on the following pages compare the growth of hypothetical $10,000
investments in the Investor Shares and e.Shares and a $50,000 investment in the
Select Shares of the Fund, made at their respective inceptions, with similar
investments in the S&P 500(R) Index.
Also shown is the difference between the total returns of the S&P 500 Index and
the Schwab S&P 500 Fund, which is often referred to as the "tracking
differential." The tracking differential arises due to several factors. For
example, the Fund, unlike the Index, incurs trading costs when it buys or sells
securities and also has operating expenses. The Fund also may hold non-Index
securities that can produce either higher or lower returns than their Index
counterparts. Furthermore, unlike the Index, the Fund holds a portion of its
assets in cash.
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.
10
<PAGE> 13
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000
INVESTMENT IN SCHWAB S&P 500 FUND -- INVESTOR SHARES,
SCHWAB S&P 500 FUND -- E.SHARES[TM], AND THE S&P 500[R] INDEX
<TABLE>
<CAPTION>
Schwab S&P 500 Fund-- Schwab S&P 500 Fund--
Investor Shares e.Shares S&P 500 Index
Date $14,284 $14,318 $14,406
<S> <C> <C> <C>
May 1, 96 10000 10000 10000
May 31, 96 10250 10250 10257
Jun 30, 96 10290 10290 10296
Jul 31, 96 9840 9840 9841
Aug 31, 96 10040 10050 10049
Sep 30, 96 10600 10600 10613
Oct 31, 96 10880 10890 10906
Nov 30, 96 11690 11710 11731
Dec 31, 96 11462 11473 11498
Jan 31, 97 12157 12179 12216
Feb 28, 97 12248 12270 12312
Mar 31, 97 11744 11766 11808
Apr 30, 97 12430 12452 12511
May 31, 97 13186 13209 13272
Jun 30, 97 13760 13794 13867
Jul 31, 97 14849 14873 14969
Aug 31, 97 14012 14036 14131
Sep 30, 97 14778 14803 14904
Oct 31, 97 14284 14318 14406
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED 10/31/97
1 Yr. Since Inception (5/1/96)
SCHWAB S&P 500 FUND 6
Investor Shares 31.29% 26.75%
e.Shares 31.48% 26.95%
S&P 500 INDEX 32.10% 27.47%
INDEX TRACKING DIFFERENTIAL
Investor Shares 0.81% 0.72%
e.Shares 0.62% 0.52%
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED 9/30/97
1 Yr. Since Inception (5/1/96)
SCHWAB S&P 500 FUND 6
Investor Shares 39.42% 31.68%
e.Shares 39.65% 31.83%
6 The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.35% and 0.28% respectively, for the
Investor Shares and the e.Shares. Without fee waivers and guarantees, as of
10/31/97, the average annual one-year and since inception total returns would
have been 30.96% and 26.43% for the Investor Shares and 31.04% and 26.55% for
the e.Shares. As of 9/30/97, the average annual one-year and since inception
total returns would have been 39.03% and 31.33% for the Investor Shares and
39.22% and 31.47% for the e.Shares.
11
<PAGE> 14
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL
$50,000 INVESTMENT IN SCHWAB S&P 500 FUND -- SELECT SHARES*
AND THE S&P 500 INDEX[R]
<TABLE>
<CAPTION>
Schwab S&P 500 Fund--
Select Shares S&P 500 Index
$55,215 $55,281
<S> <C> <C>
May 20, 97 50000 50000
May 31, 97 50935 50930
Jun 30, 97 53190 53212
Jul 31, 97 57395 57442
Aug 31, 97 54165 54225
Sep 30, 97 57120 57191
Oct 31, 97 55215 55281
</TABLE>
CUMULATIVE TOTAL RETURN FOR THE
PERIOD ENDED 10/31/97
Since Inception (5/19/97)
SCHWAB S&P 500 FUND 7
Select Shares 10.43%
S&P 500 INDEX 10.56%
INDEX TRACKING DIFFERENTIAL 0.13%
CUMULATIVE TOTAL RETURN FOR THE
PERIOD ENDED 9/30/97
Since Inception (5/19/97)
SCHWAB S&P 500 FUND 7
Select Shares 14.24%
* Required minimum initial investment in the Select Shares is $50,000.
7 The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.19% for the Select Shares. Without fee
waivers and guarantees, as of 10/31/97 and as of 9/30/97, the since inception
total returns would have been 10.35% and 14.16%, respectively.
12
<PAGE> 15
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM
SCHWAB S&P 500 FUND
Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A. As shown in the Market Overview section, both large-cap and small-cap
domestic stock returns were impressive. The Schwab S&P 500 Fund -- Investor
Shares and e.Shares(TM) achieved respective total returns of 31.29% and 31.48%
for the one-year period ended October 31, 1997. For the period since inception
(5/19/97) through October 31, 1997, the Select Shares achieved a total return of
10.43%.
Q. WHAT STRATEGIES DOES THE FUND USE TO HELP INVESTORS ACHIEVE HIGHER AFTER-TAX
RETURNS?
A. Taxes can erode the returns investors earn from mutual funds. That's why it
is important to consider the effects of taxes on fund performance.
As shown in the Tax-Smart Investment Strategy section on page 10, the Schwab S&P
500 Fund has been more "tax efficient" than the average large-cap fund. Index
funds can be tax efficient because they are designed to have lower portfolio
turnover rates, and hence, lower realization of capital gains than most
actively-managed funds. Furthermore, when the Fund's Investment Manager does
trade stocks, an attempt is made to offset capital gains with capital losses to
minimize the potential for capital gain distributions to shareholders.
Q. HOW IS THE S&P 500(R) INDEX CONSTRUCTED? WERE THERE ANY CHANGES TO THE INDEX
DURING THE REPORTING PERIOD?
A. The stocks comprising the S&P 500 Index are selected by the Standard & Poor's
Index Committee. Stocks in the Index are chosen based on market size, liquidity,
and industry group representation, with the overall objective that the Index be
representative of the U.S. economy. Stocks in the Index must be traded on the
NYSE, AMEX, or NASDAQ. Too numerous to list here, there were 30 substitutions to
securities in the Index during the reporting period, including the addition of
The Charles Schwab Corporation in May.
Q. HOW HAS THE RECENT MARKET VOLATILITY AFFECTED THE PERFORMANCES OF THE S&P 500
INDEX AND THE SCHWAB S&P 500 FUND? WHAT IMPACT SHOULD THIS HAVE ON MY INVESTMENT
ALLOCATION TO THE FUND?
A. Although both domestic and international markets experienced significant
volatility during, and especially towards the end of the reporting period, it is
important to maintain a long-term perspective. Although the S&P 500 Index
experienced a correction in excess of 10% during the month of October, the Index
still realized a total return of 32.10% for the one-year period ended October
31, 1997. In fact, market declines of this magnitude are not particularly
unusual, and have
13
<PAGE> 16
occurred on average about once every three years. 8 These corrections, however,
may not be so apparent when viewed over a longer period, which tends to smooth
out the impacts of short-term volatility. As evidenced by the index tracking
differential noted in the Fund Performance section on pages 11 and 12, the
Fund's performance closely followed that of the S&P 500 Index. Bear in mind that
investors cannot invest in an index directly and that fees and expenses are not
deducted from an index.
We think 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 the risk of 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. Index funds offer a way to achieve long-term
exposure to the equity markets, but each individual investor has a different
tolerance for risk and should have a portfolio with a risk profile that reflects
that tolerance level.
8 Source: Mark W. Riepe and Derek A. Sasveld, "Equity Investments," in Scott L.
Lummer and Mark W. Riepe (ed.) Pension Investment Handbook 1998 Supplement, New
York: Panel Publishing, 1998.
14
<PAGE> 17
SCHWAB 1000 FUND(R)
Schwab 1000 Fund (the Fund) invests primarily in common stocks of the Schwab
1000 Index(R), an index created to represent the performance of publicly traded
common stocks of the 1,000 largest U.S. companies (excluding investment
companies). As of October 31, 1997, the aggregate market capitalization of the
Schwab 1000 Index represented approximately 88% of the total value of the U.S.
stock market. 9
TOP 10 HOLDINGS AS A PERCENTAGE OF FUND INVESTMENTS 10
INVESTMENT %
General Electric Co. 2.6
Microsoft Corp. 1.9
Exxon Corp. 1.9
Coca-Cola Co. 1.7
Intel Corp. 1.5
Merck & Co., Inc. 1.3
International Business Machines Corp. 1.2
Philip Morris Companies, Inc. 1.2
Procter & Gamble Co. 1.1
Pfizer, Inc. 1.1
TOTAL 15.5%
PORTFOLIO BY ECONOMIC SECTOR 10
[PIE CHART]
Source: Wilshire Associates
<TABLE>
<S> <C>
Technology 17.3%
Materials & Services 8.4%
Finance 18.7%
Energy 7.8%
Consumer Non-Durables 29.8%
Consumer Durables 2.4%
Capital Goods 4.6%
Utilities 9.8%
Transportation 1.4%
</TABLE>
9 Source: Wilshire Associates. The U.S. stock market is represented by the
Wilshire 5000 Index.
10 Both the top 10 holdings and the economic sector percentages may not be
representative of current or future investments. A complete listing of the
Fund's investments as of 10/31/97 is included in the Schedule of Investments
later in this report.
15
<PAGE> 18
TAX-SMART INVESTMENT STRATEGY
The Schwab 1000 Fund(R) seeks to maximize its after-tax performance by keeping
capital gain distributions to a minimum. This strategy is designed to help
investors keep more of what their money earns. The following chart illustrates
the effects of this strategy on the five-year performance of the Schwab 1000
Fund -- Investor Shares.
FIVE-YEAR AVERAGE ANNUAL TOTAL RETURNS AS OF 10/31/97
Before After % Lost
Tax Tax 11 to Taxes
Schwab 1000 Fund --
Investor Shares 12 18.97% 18.22% 0.75%
Average Large-Cap Fund 13 17.12% 14.73% 2.39%
FUND PERFORMANCE
The graphs on the following pages compare the growth of a hypothetical $10,000
investment in the Investor Shares and a $50,000 investment in the Select Shares
of the Fund, made at their respective inceptions, with similar investments in
the Schwab 1000 Index(R) and in the S&P 500(R) Index.
Also shown is the difference between the total returns of the Schwab 1000 Index
and the Schwab 1000 Fund, which is often referred to as the "tracking
differential." The tracking differential arises due to several factors. For
example, the Fund, unlike the Index, incurs trading costs when it buys or sells
securities and also has operating expenses. The Fund also may hold non-Index
securities that can produce either higher or lower returns than their Index
counterparts. Furthermore, unlike the Index, the Fund holds a portion of its
assets in cash.
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.
11 After-tax returns assume the maximum federal income tax rate of 39.6% on
dividends and 28% on capital gain distributions. Tax rates vary and may be
higher or lower than those shown.
12 The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed that maximum total operating expenses
will not exceed 0.46% for the Investor Shares through at least 2/29/2000.
Without fee waivers and guarantees, the Investor Shares' total returns would
have been lower.
13 Source: Morningstar, Inc. Large-Cap Fund Category contains 468 funds with
five-year track records as of 10/31/97. These funds may or may not follow a
tax-efficiency strategy similar to that followed by the Schwab 1000 Fund.
16
<PAGE> 19
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL
$10,000 INVESTMENT IN SCHWAB 1000 FUND(R) -- INVESTOR SHARES,
SCHWAB 1000 INDEX(R), AND THE S&P 500(R) INDEX
[GRAPH]
<TABLE>
<CAPTION>
DATE SCHWAB 1000 SCHWAB 1000 S&P 500
FUND - INVESTOR SHARES INDEX INDEX
$27,992 $28,756 $28,624
------------- ----------- -------
<S> <C> <C> <C>
Apr 2, 91 10,000 10,000 10,000
Apr 30, 91 9,910 9,898 9,908
May 31, 91 10,320 10,311 10,335
Jun 30, 91 9,850 9,840 9,861
Jul 31, 91 10,320 10,310 10,321
Aug 31, 91 10,600 10,591 10,566
Sep 30, 91 10,460 10,455 10,389
Oct 31, 91 10,630 10,625 10,528
Nov 30, 91 10,240 10,225 10,104
Dec 31, 91 11,425 11,412 11,260
Jan 31, 92 11,283 11,272 11,050
Feb 29, 92 11,425 11,415 11,193
Mar 31, 92 11,171 11,163 10,975
Apr 30, 92 11,404 11,392 11,298
May 31, 92 11,404 11,457 11,353
Jun 30, 92 11,465 11,257 11,184
Jul 31, 92 11,726 11,728 11,641
Aug 31, 92 11,480 11,486 11,403
Sep 30, 92 11,623 11,646 11,537
Oct 31, 92 11,746 11,763 11,577
Nov 30, 92 12,208 12,233 11,971
Dec 31, 92 12,398 12,428 12,119
Jan 31, 93 12,502 12,539 12,220
Feb 28, 93 12,595 12,632 12,387
Mar 31, 93 12,896 12,948 12,648
Apr 30, 93 12,533 12,583 12,342
May 31, 93 12,896 12,957 12,673
Jun 30, 93 12,958 13,024 12,710
Jul 31, 93 12,905 12,989 12,659
Aug 31, 93 13,397 13,492 13,139
Sep 30, 93 13,355 13,454 13,038
Oct 31, 93 13,544 13,654 13,308
Nov 30, 93 13,355 13,462 13,181
Dec 31, 93 13,592 13,700 13,341
Jan 31, 94 14,005 14,136 13,794
Feb 28, 94 13,645 13,781 13,420
Mar 31, 94 13,042 13,169 12,837
Apr 30, 94 13,190 13,326 13,001
May 31, 94 13,349 13,488 13,213
Jun 30, 94 12,988 13,127 12,889
Jul 31, 94 13,405 13,558 13,312
Aug 31, 94 13,971 14,147 13,856
Sep 30, 94 13,651 13,825 13,518
Oct 31, 94 13,918 14,095 13,821
Nov 30, 94 13,416 13,590 13,318
Dec 31, 94 13,577 13,767 13,514
Jan 31, 95 13,923 14,121 13,864
Feb 28, 95 14,474 14,700 14,404
Mar 31, 95 14,852 15,094 14,829
Apr 30, 95 15,219 15,476 15,264
May 31, 95 15,770 16,048 15,874
Jun 30, 95 16,191 16,490 16,242
Jul 31, 95 16,807 17,111 16,779
Aug 31, 95 16,936 17,245 16,821
Sep 30, 95 17,606 17,949 17,531
Oct 31, 95 17,520 17,859 17,468
Nov 30, 95 18,276 18,646 18,233
Dec 31, 95 18,547 18,924 18,585
Jan 31, 96 19,095 19,499 19,217
Feb 29, 96 19,379 19,789 19,396
Mar 31, 96 19,554 19,980 19,582
Apr 30, 96 19,883 20,321 19,870
May 31, 96 20,354 20,812 20,380
Jun 30, 96 20,299 20,779 20,458
Jul 31, 96 19,335 19,794 19,554
Aug 31, 96 19,861 20,327 19,966
Sep 30, 96 20,967 21,465 21,088
Oct 31, 96 21,394 21,899 21,670
Nov 30, 96 22,938 23,485 23,308
Dec 31, 96 22,549 23,103 22,847
Jan 31, 97 23,846 24,442 24,272
Feb 28, 97 23,935 24,528 24,464
Mar 31, 97 22,870 23,457 23,461
Apr 30, 97 24,101 24,696 24,859
May 31, 97 25,631 26,291 26,371
Jun 30, 97 26,695 27,402 27,552
Jul 31, 97 28,857 29,615 29,743
Aug 31, 97 27,471 28,216 28,077
Sep 30, 97 28,946 29,732 29,613
Oct 31, 97 27,992 28,756 28,624
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 10/31/97
1 Yr. 5 Yr. Since Inception (4/2/91)
SCHWAB 1000 FUND 14
Investor Shares 30.84% 18.97% 16.91%
SCHWAB 1000 INDEX 31.31% 19.58% 17.39%
INDEX TRACKING DIFFERENTIAL 0.47% 0.61% 0.48%
S&P 500 INDEX 32.10% 19.85% 17.31%
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 9/30/97
1 Yr. 5 Yr. Since Inception (4/2/91)
SCHWAB 1000 FUND 14
Investor Shares 38.05% 20.02% 17.75%
14 The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.46% for the Investor Shares. Without fee
waivers and guarantees, as of 10/31/97, the average annual one-year,
five-year, and since inception total returns would have been: 30.77%, 18.91%,
and 16.75%, respectively, for Investor Shares. As of 9/30/97, the average
annual one-year, five-year, and since inception total returns would have
been: 37.98%, 19.96%, and 17.59%, respectively.
17
<PAGE> 20
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL
$50,000 INVESTMENT IN SCHWAB 1000 FUND(R) -- SELECT SHARES*,
SCHWAB 1000 INDEX(R), AND THE S&P 500(R) INDEX
[GRAPH]
<TABLE>
<CAPTION>
Schwab 1000 Fund-- Schwab 1000 Index S&P 500 Index
Date Select Share $55,785 $55,851 $55,281
<S> <C> <C> <C>
May 19, 97 50000 50000 50000
May 30, 97 51040 51064 50930
Jun 30, 97 53180 53222 53212
Jul 31, 97 57490 57518 57442
Aug 31, 97 54750 54801 54225
Sep 30, 97 57685 57746 57191
Oct 31, 97 55785 55851 55281
</TABLE>
CUMULATIVE TOTAL RETURN FOR THE PERIOD ENDED 10/31/97
Since Inception (5/19/97)
SCHWAB 1000 FUND 15
Select Shares 11.57%
SCHWAB 1000 INDEX 11.70%
INDEX TRACKING DIFFERENTIAL 0.13%
S&P 500 INDEX 10.56%
CUMULATIVE TOTAL RETURN FOR THE PERIOD ENDED 9/30/97
Since Inception (5/19/97)
SCHWAB 1000 FUND 15
Select Shares 15.37%
* Required minimum initial investment in the Select Shares is $50,000.
15 The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.35% for Select Shares. Without fee
waivers and guarantees, as of 10/31/97 and as of 9/30/97, the cumulative
since inception total returns for the Select Shares would have been 11.53%
and 15.28%, respectively.
18
<PAGE> 21
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM
SCHWAB 1000 FUND(R)
Due to the change in the Fund's fiscal year end from August 31 to October 31,
the Financial Statements and Notes (found later in this report) cover the
two-month period since the last annual report (dated August 31, 1997). The
Questions to the Portfolio Management Team address the one-year period ended
October 31, 1997.
Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A. As shown in the Market Overview section, both large-cap and small-cap
domestic stock returns were impressive. The Schwab 1000 Fund -- Investor Shares
achieved a total return of 30.84% for the one-year period ended October 31,
1997. For the period since inception (5/19/97) through October 31, 1997, the
Select Shares achieved a total return of 11.57%.
Q. HOW DID THE PERFORMANCE OF THE SCHWAB 1000 INDEX(R) COMPARE TO THAT OF THE
S&P 500(R) INDEX DURING THE REPORTING PERIOD?
A. The total return for the one-year period was 31.31% for the Schwab 1000 Index
versus 32.10% for the S&P 500(R) Index. The reason for the minor difference was
that large-cap stocks outperformed mid-cap stocks, which comprise a portion of
the Schwab 1000 Index. On a fund inception-to-date basis, the average annual
total returns of the two indices remain very close -- 17.39% for the Schwab 1000
Index versus 17.31% for the S&P 500 Index.
Since the two indices are constructed differently, performance variance is a
normal and anticipated occurrence. The S&P 500 Index includes 500
large-capitalization stocks as determined by the Standard & Poor's Index
Committee and are chosen for market size, liquidity, and industry group
representation. The Schwab 1000 Index is a much broader representation of the
U.S. stock market, composed of the common stocks of the 1,000 largest operating
U.S. corporations (excluding investment companies), and is based on market
capitalization.
Q. WHAT STRATEGIES DOES THE SCHWAB 1000 FUND EMPLOY TO HELP INVESTORS ACHIEVE
HIGHER AFTER-TAX RETURNS?
A. Taxes can erode the returns investors earn from mutual funds. That's why it
is important to consider the effects of taxes on fund performance.
As shown in the Tax Smart Investment Strategy Section on page 16, the Schwab
1000 Fund has been more "tax efficient" than the average large-cap fund. In
fact, the Schwab 1000 Fund was one of the first, and is currently the largest,
fund designed to be tax efficient. 16 Since its inception in 1991, the Fund has
not paid a capital gain distribution. Although no assurance can be provided that
this record will be maintained in the future, it is indicative of the Fund's
tax-efficient management strategy.
16 Source: Strategic Insight Flow Watch, August 1997.
<PAGE> 22
Index funds can be tax efficient because they are designed to have lower
portfolio turnover rates, and hence, lower realization of capital gains than
most actively-managed funds. The Schwab 1000 Index(R) is reconstituted only once
a year, which also has the effect of keeping the Fund's portfolio turnover low.
Furthermore, when the Fund's Investment Manager does trade stocks, an attempt is
made to offset capital gains with capital losses to minimize the potential for
capital gain distributions to shareholders.
Unlike many index funds, the Schwab 1000 Fund(R) may, and often does, continue
to hold positions in certain appreciated stocks that are not currently in the
Schwab 1000 Index.
Q. HOW HAS THE RECENT MARKET VOLATILITY AFFECTED THE PERFORMANCES OF THE SCHWAB
1000 INDEX AND THE SCHWAB 1000 FUND? WHAT IMPACT MIGHT THIS HAVE ON MY
INVESTMENT ALLOCATION TO THE FUND?
A. Although both domestic and international markets experienced significant
volatility during, and especially towards the end of the reporting period, it is
important to maintain a long-term perspective. Even with corrections in excess
of 10% during the month of October 1997, the S&P 500 Index and the Schwab 1000
Index still produced total returns over 30% for the one-year period ended
October 31, 1997. In fact, market declines of at least 10% are not particularly
unusual and occur on average about once every three years. 17 These corrections,
however, may not be so apparent over a longer period, which tends to smooth out
the impacts of short-term volatility. As evidenced by the index tracking
differential noted in the Fund Performance section on pages 17 and 18, the
Fund's performance closely followed that of the Schwab 1000 Index. Bear in mind
that investors cannot invest in an index directly and that fees and expenses are
not deducted from an index.
We think the most meaningful way for investors to evaluate their exposure to
domestic as well as international 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 the risk of 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. Index funds
offer a way to achieve long-term exposure to the equity markets, but each
individual investor has a different tolerance for risk and should have a
portfolio with a risk profile that reflects that tolerance level.
17 Source: Mark W. Riepe and Derek A. Sasveld, "Equity Investments," in Scott L.
Lummer and Mark W. Riepe (ed.) Pension Investment Handbook 1998 Supplement, New
York: Panel Publishing, 1998.
20
<PAGE> 23
SCHWAB SMALL-CAP INDEX FUND(R)
Schwab Small-Cap Index Fund (the Fund) invests primarily in common stocks of the
Schwab Small-Cap Index(R) (the Index), an index created to represent the
performance of common stocks of the second 1,000 largest U.S. corporations
ranked by market capitalization. As of October 31, 1997, the aggregate market
capitalization of stocks included in the Index represented approximately 7% of
the total market value of all publicly traded U.S. companies, as represented by
the Wilshire 5000 Index. 18
TOP 10 HOLDINGS AS A PERCENTAGE
OF FUND INVESTMENTS 19
<TABLE>
<S> <C>
INVESTMENT %
Dell Computer Corp. 0.4
USA Waste Services, Inc. 0.4
Compuware Corp. 0.4
Associated Banc Corp. 0.4
Immunex Corp. 0.3
Healthsouth Corp. 0.3
Quantum Corp. 0.3
Chancellor Media Corp. 0.3
CNF Transportation, Inc. 0.3
Caliber Systems, Inc. 0.3
TOTAL 3.4%
</TABLE>
PORTFOLIO BY ECONOMIC SECTOR 19
[PIE CHART]
<TABLE>
<S> <C>
Capital Goods 5.6%
Consumer Durables 4.1%
Consumer Non-Durables 20.5%
Energy 7.1%
Finance 18.8%
Materials & Services 20.8%
Technology 14.7%
Transportation 3.5%
Utilities 4.9%
</TABLE>
Source: Wilshire Associates
18 Source: Wilshire Associates. The U.S. stock market is represented by the
Wilshire 5000 Index.
19 Both the top 10 holdings and the economic sector percentages may not be
indicative of current or future investments. A complete list of the Fund's
investments as of 10/31/97 can be found in the Schedule of Investments later in
this report.
21
<PAGE> 24
TAX-SMART INVESTMENT STRATEGY
The Schwab Small-Cap Index Fund(R) seeks to maximize its after-tax performance
by keeping capital gain distributions to a minimum. This strategy is designed to
help investors keep more of what their money earns. The following chart
illustrates the effects of this strategy on the three-year performance of the
Schwab Small-Cap Index Fund -- Investor Shares.
THREE-YEAR AVERAGE ANNUAL TOTAL RETURNS AS OF 10/31/97
<TABLE>
<CAPTION>
Before After % Lost
Tax Tax 20 to Taxes
<S> <C> <C> <C>
- ------------------------------------------------------------------------------
Schwab Small-Cap Index Fund --
Investor Shares 21 21.45% 21.19% 0.26%
- ------------------------------------------------------------------------------
Average Small-Cap Fund 22 21.83% 19.34% 2.49%
- ------------------------------------------------------------------------------
</TABLE>
FUND PERFORMANCE
The graphs on the following pages compare the growth of a hypothetical $10,000
investment in the Investor Shares and a $50,000 investment in the Select Shares
of the Fund, made at their respective inceptions, with similar investments in
the Schwab Small-Cap Index(R), Russell 2000 Index (Russell 2000 Index), and the
S&P Small-Cap 600(R) Index (S&P 600 Index).
Also shown is the difference between the total returns of the Schwab Small-Cap
Index and the Schwab Small-Cap Index Fund, which is often referred to as the
"tracking differential." The tracking differential arises due to several
factors. For example, the Fund, unlike the Index, incurs trading costs when it
buys or sells securities and also has operating expenses. The Fund also may hold
non-Index securities that can produce either higher or lower returns than their
Index counterparts. Furthermore, unlike the Index, the Fund holds a portion of
its assets in cash.
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.
20 After-tax returns assume the maximum federal income tax rate of 39.6% on
dividends and 28% on capital gain distributions. Tax rates vary and may be
higher or lower than those shown.
21 The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed that maximum total operating expenses will
not exceed 0.49% for the Investor Shares through at least 2/29/2000. Without fee
waivers and guarantees, the Investor Shares' total returns would have been
lower.
22 Source: Morningstar, Inc. Small-Cap Fund Category contains 339 funds with
three-year track records as of 10/31/97. These funds may or may not follow a
tax-efficiency strategy similar to that followed by the Schwab Small-Cap Index
Fund.
22
<PAGE> 25
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000
INVESTMENT IN SCHWAB SMALL-CAP INDEX FUND(R) - INVESTOR SHARES,
SCHWAB SMALL-CAP INDEX(R), S&P 600(R) INDEX, AND RUSSELL 2000 INDEX
<TABLE>
<CAPTION>
Schwab
Small-Cap Schwab
Index Fund - Small-Cap Russell 2000 S&P 600
Date Investor Shares Index Index Index
$18,026 $18,816 $18,123 $19,051
<S> <C> <C> <C> <C>
Dec 3, 93 10000 10000 10000 10000
Dec 31, 93 10154 10234 10186 10232
Jan 31, 94 10394 10469 10505 10473
Feb 28, 94 10334 10430 10467 10443
Mar 31, 94 9783 9871 9915 9693
Apr 30, 94 9753 9847 9974 9839
May 31, 94 9613 9692 9861 9644
Jun 30, 94 9333 9419 9529 9286
Jul 31, 94 9493 9614 9685 9401
Aug 31, 94 10134 10249 10225 10042
Sep 30, 94 10094 10191 10190 9990
Oct 31, 94 10064 10149 10149 9890
Nov 30, 94 9663 9767 9739 9513
Dec 31, 94 9841 10000 10000 9744
Jan 31, 95 9730 9838 9874 9606
Feb 28, 95 10082 10229 10285 10002
Mar 31, 95 10334 10442 10461 10204
Apr 30, 95 10566 10671 10693 10432
May 31, 95 10717 10809 10877 10595
Jun 30, 95 11211 11356 11441 11176
Jul 31, 95 11866 12021 12100 12031
Aug 31, 95 12077 12270 12351 12292
Sep 30, 95 12309 12510 12572 12606
Oct 31, 95 11785 11910 12010 11984
Nov 30, 95 12329 12114 12514 12458
Dec 31, 95 12562 12782 12845 12663
Jan 31, 96 12491 12749 12831 12691
Feb 29, 96 12967 13261 13231 13106
Mar 31, 96 13170 13492 13505 13387
Apr 30, 96 13899 14206 14227 14156
May 31, 96 14384 14692 14788 14659
Jun 30, 96 13848 14222 14180 14084
Jul 31, 96 12643 13075 12942 13115
Aug 31, 96 13413 13904 13694 13925
Sep 30, 96 14010 14416 14230 14536
Oct 31, 96 13757 14169 14010 14435
Nov 30, 96 14344 14733 14588 15185
Dec 31, 96 14508 15007 14970 15363
Jan 31, 97 14895 15361 15269 15619
Feb 28, 97 14376 14986 14900 15295
Mar 31, 97 13654 14257 14196 14510
Apr 30, 97 13756 14299 14236 14689
May 31, 97 15383 16045 15821 16414
Jun 30, 97 16125 16880 16499 17139
Jul 31, 97 17213 17842 17267 18218
Aug 31, 97 17538 18243 17662 18677
Sep 30, 97 18850 19675 18955 19911
Oct 31, 97 18026 18816 18123 19051
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 10/31/97
<TABLE>
<CAPTION>
1 Yr. Since Inception (12/3/93)
<S> <C> <C>
- -----------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND 23
Investor Shares 31.03% 16.23%
- -----------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX 32.80% 17.51%
- -----------------------------------------------------------------------------------
INDEX TRACKING DIFFERENTIAL 1.77% 1.28%
- -----------------------------------------------------------------------------------
RUSSELL 2000 INDEX 29.34% 16.39%
- -----------------------------------------------------------------------------------
S&P 600 INDEX 31.97% 17.88%
- -----------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 9/30/97
<TABLE>
<CAPTION>
1 Yr. Since Inception (12/3/93)
<S> <C> <C>
- -----------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND 23
Investor Shares 34.54% 17.98%
- -----------------------------------------------------------------------------------
</TABLE>
23 The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.49% for Investor Shares. Without fee
waivers and guarantees, as of 10/31/97, the average annual one-year and since
inception total returns would have been 30.20% and 15.69%, respectively. As of
9/30/97, the average annual one-year and since inception total returns would
have been 34.06% and 17.52%, respectively.
23
<PAGE> 26
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $50,000
INVESTMENT IN SCHWAB SMALL-CAP INDEX FUND (R) - SELECT SHARES*,
SCHWAB SMALL-CAP INDEX(R), S&P 600(R) INDEX, AND RUSSELL 2000 INDEX
<TABLE>
<CAPTION>
Schwab
Small-Cap Schwab
Index Fund - Small-Cap Russell 2000 S&P 600
Select Shares Index Index Index
Date $61,205 $61,244 $59,521 $60,401
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
May 19, 97 50000 50000 50000 50000
- --------------------------------------------------------------------------------
May 31, 97 52170 52226 51960 52040
- --------------------------------------------------------------------------------
Jun 30, 97 54690 54942 54189 54340
- --------------------------------------------------------------------------------
Jul 31, 97 58415 58075 56709 57758
- --------------------------------------------------------------------------------
Aug 31, 97 59485 59380 58008 59214
- --------------------------------------------------------------------------------
Sep 30, 97 63965 64039 62254 63128
- --------------------------------------------------------------------------------
Oct 31, 97 61205 61244 59521 60401
- --------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURNS FOR THE PERIOD ENDED 10/31/97
<TABLE>
<CAPTION>
Since Inception (5/19/97)
- -----------------------------------------------------------------------
<S> <C>
SCHWAB SMALL-CAP INDEX FUND 24
Select Shares 22.41%
- -----------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX 22.49%
- -----------------------------------------------------------------------
INDEX TRACKING DIFFERENTIAL 0.08%
- -----------------------------------------------------------------------
RUSSELL 2000 INDEX 19.04%
- -----------------------------------------------------------------------
S&P 600 INDEX 20.80%
- -----------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN FOR THE PERIOD ENDED 9/30/97
<TABLE>
<CAPTION>
Since Inception (5/19/97)
- -----------------------------------------------------------------------
<S> <C>
SCHWAB SMALL-CAP INDEX FUND 24
Select Shares 27.93%
- -----------------------------------------------------------------------
</TABLE>
*Required minimum initial investment in the Select Shares is $50,000.
24 The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that total
operating expenses will not exceed 0.38% for Select Shares. Without fee waivers
and guarantees, as of 10/31/97 and as of 9/30/97, the since inception total
returns would have been 22.06% and 27.61%, respectively.
24
<PAGE> 27
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM
SCHWAB SMALL-CAP INDEX FUND(R)
Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A. As shown in the Market Overview section, both large-cap and small-cap
domestic stock returns were impressive. The Schwab Small-Cap Index Fund --
Investor Shares achieved a total return of 31.03% for the one-year period ended
October 31, 1997. For the period since inception (5/19/97) through October 31,
1997, the Select Shares achieved a total return of 22.41%.
Q. HOW DID THE PERFORMANCE OF THE SCHWAB SMALL-CAP INDEX(R) COMPARE TO THAT OF
THE S&P 600(R) SMALL-CAP INDEX (S&P 600 INDEX) DURING THE REPORTING PERIOD? HOW
DO THESE TWO INDICES COMPARE TO THE RUSSELL 2000 INDEX?
A. As shown on the graph in the Fund Performance section, although the S&P 600
Index slightly outperformed the Schwab Small-Cap Index on an inception to date
basis, their performances remain within a close range. For the one-year
reporting period, the total return of the Schwab Small-Cap Index was 32.80%,
slightly outperforming the 31.97% return of the S&P 600 Index. Because the
composition of the two indices is different, it is normal to observe periodic
discrepancies in their performance. The Schwab Small-Cap Index represents stocks
of the second-largest 1,000 U.S. corporations (excluding investment companies)
based on market capitalization while the S&P 600 contains 600 domestic stocks
selected by Standard & Poor's Corporation. There also are differences in index
characteristics, such as industry concentration.
You may have noticed the addition of the Russell 2000 Index to the historical
performance graph. This index will eventually replace the S&P 600 Index as a
basis for comparing the Fund's return to that of a well-recognized small-cap
index. Our primary reason for implementing this change is that the composition
and construction of the Russell 2000 Index are much more consistent with those
of the Schwab Small-Cap Index.
As of October 31, 1997, the total market capitalization of the Schwab Small-Cap
Index was $680 billion which is fairly similar to the level of the Russell
2000's $863 billion but is significantly greater than that of the S&P 600
Index -- $354 billion. Additionally, both the Schwab Small-Cap Index and the
Russell 2000 Index are capitalization weighted (stocks are chosen strictly based
on market capitalization), are rebalanced annually, do not add stocks during the
year, and do not contain any foreign stocks. This will be the last report that
includes the S&P 600 Index as a benchmark for the Schwab Small-Cap Index Fund.
Q. WHAT STRATEGIES DOES THE FUND USE TO HELP INVESTORS ACHIEVE HIGHER AFTER-TAX
RETURNS?
A. Taxes can erode the returns investors earn from mutual funds. That's why it
is important to consider the effects of taxes on fund performance.
As shown in the Tax-Smart Investment Strategy section on page 22, the Schwab
Small-Cap Index Fund has been more "tax efficient" than the average small-cap
fund. Since its inception in 1993, the Fund has not paid a capital gain
distribution to shareholders. Although no
25
<PAGE> 28
assurance can be provided that this record will be maintained in the future, it
is indicative of the Fund's tax-efficient management strategy.
Index funds can be tax efficient because they are designed to have lower
portfolio turnover rates, and hence, lower realization of capital gains than
most actively-managed funds. The Schwab Small-Cap Index(R) is reconstituted only
once a year, which also has the effect of keeping the Fund's portfolio turnover
low. Furthermore, when the Fund's Investment Manager does trade stocks, an
attempt is made to offset capital gains with capital losses to minimize the
potential for capital gain distributions to shareholders.
Q. HOW HAS THE RECENT MARKET VOLATILITY AFFECTED THE PERFORMANCES OF THE SCHWAB
SMALL-CAP INDEX AND THE SCHWAB SMALL CAP INDEX FUND(R)? WHAT IMPACT SHOULD THIS
HAVE ON MY INVESTMENT ALLOCATION TO THE FUND?
A. Although both domestic and international markets experienced significant
volatility during, and especially towards the end of the reporting period, it is
important to maintain a long-term perspective. Even with corrections in excess
of 10% during the month of October 1997, the S&P 500 Index and the Schwab
Small-Cap Index still produced respective total returns of 32.10% and 32.80% for
the one-year period ended October 31, 1997. In fact, market declines of at least
10% are not particularly unusual and have occurred on average about once every
three years. 25 These corrections, however, may not be so apparent over a
longer period, which tends to smooth out the impacts of short-term volatility.
As evidenced by the index tracking differential noted in the Fund Performance
section on pages 23 and 24, the Fund's performance closely followed that of the
Schwab Small-Cap Index. Bear in mind that investors cannot invest in an index
directly and that fees and expenses are not deducted from an index.
We think the most meaningful way for investors to evaluate their exposure to
domestic as well as international 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 the risk of 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 longterm. Index funds
offer a way to achieve long-term exposure to the equity markets, but each
individual investor has a different tolerance for risk and should have a
portfolio with a risk profile that reflects that tolerance level.
25 Source: Mark W. Riepe and Derek A. Sasveld, "Equity Investments," in Scott
L. Lummer and Mark W. Riepe (ed.), Pension Investment Handbook 1998 Supplement,
New York: Panel Publishing, 1998.
26
<PAGE> 29
SCHWAB INTERNATIONAL INDEX FUND(R)
Schwab International Index Fund (the Fund) invests primarily in common stocks of
the Schwab International Index(R) (the Index), an index created to represent the
performance of common stocks and other equity securities issued by large,
publicly traded companies from countries around the world with major developed
securities markets, excluding the United States. As of October 31, 1997, the
aggregate market capitalization of stocks included in the Index represented
approximately 48% of the total market value of all publicly traded non-U.S.
companies. 26
TOP 10 HOLDINGS AS A PERCENTAGE
OF FUND INVESTMENTS 27
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT %
Royal Dutch Petroleum Co. 2.1
Nippon Telegraph & Telephone Corp. 2.0
Toyota Motor Corp 1.9
Novartis AG 1.9
British Petroleum Co. 1.6
Glaxo Wellcome PLC 1.5
Lloyds TSB Group PLC 1.4
Shell Transport & Trading Co. 1.3
Roche Group Holdings AG 1.2
Bank of Tokyo-Mitsubishi, Ltd. 1.1
TOTAL 16.0%
</TABLE>
EQUITY HOLDINGS BY COUNTRY 27
<TABLE>
<CAPTION>
<S> <C>
Canada 3.9%
Belgium 0.9%
Netherlands 6.9%
Germany 8.9%
Denmark 0.7%
Sweden 2.7%
Japan 27.0%
United Kingdom 23.2%
Spain 2.3%
France 6.6%
Switzerland 8.1%
Italy 3.1%
Singapore 0.7%
Australia 1.9%
Hong Kong 3.1%
</TABLE>
26 Source: Wilshire Associates.
27 Both the top 10 holdings and the percentages invested by country may not be
indicative of current or future investments. A complete listing of the Fund's
investments as of 10/31/97 is included in the Schedule of Investments found
later in this report.
27
<PAGE> 30
TAX-SMART INVESTMENT STRATEGY
The Schwab International Index Fund(R) seeks to maximize its after-tax
performance by keeping capital gain distributions to a minimum. This strategy is
designed to help investors keep more of what their money earns. The following
chart illustrates the effects of this strategy on the three-year performance of
the Schwab International Index Fund -- Investor Shares.
THREE-YEAR AVERAGE ANNUAL TOTAL RETURNS AS OF 10/31/97
<TABLE>
<CAPTION>
Before After % Lost
Tax Tax 28 to Taxes
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Schwab International Index Fund --
Investor Shares 29 8.19% 7.68% 0.51%
- -----------------------------------------------------------------------------------
Average Foreign
Fund 30 5.92% 4.81% 1.11%
- -----------------------------------------------------------------------------------
</TABLE>
Fund Performance
The graphs on the following pages compare the growth of a hypothetical $10,000
investment in the Investor Shares and a $50,000 investment in the Select Shares
of the Fund, made at their respective inceptions, with similar investments in
the Schwab International Index(R) and in the Morgan Stanley Capital
International Europe, Australasia, Far East(R) Index (MSCI-EAFE).
Also shown is the difference between the total returns of the Schwab
International Index and the Schwab International Index Fund, which is often
referred to as the "tracking differential." The tracking differential arises due
to several factors. For example, the Fund, unlike the Index, incurs trading
costs when it buys or sells securities and also has operating expenses. The Fund
also may hold non-Index securities that can produce either higher or lower
returns than their Index counterparts. Furthermore, unlike the Index, the Fund
holds a portion of its assets in cash.
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.
28 After-tax returns assume the maximum federal income tax rate of 39.6% on
dividends and 28% on capital gain distributions. Tax rates vary and may be
higher or lower than those shown.
29 The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed that maximum total operating expenses will
not exceed 0.58% for the Investor Shares through at least 2/29/2000. Without fee
waivers and guarantees, the Investor Shares' total returns would have been
lower.
30 Source: Morningstar, Inc. Foreign Fund category contains 246 funds with
three-year track records as of 10/31/97. These funds may or may not follow a
tax-efficiency strategy similar to that followed by the Schwab International
Index Fund.
28
<PAGE> 31
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000
INVESTMENT IN SCHWAB INTERNATIONAL INDEX FUND(R) - INVESTOR SHARES,
SCHWAB INTERNATIONAL INDEX(R), AND MSCI-EAFE(R) INDEX
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Date Schwab International
Index Fund - Schwab International MSCI-EAFE
Investor Shares Index Index
$13,869 $14,110 $12,741
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Sep 9, 93 10000 10000 10000
- ------------------------------------------------------------------------------
Sep 30, 93 9770 9786 9749
- ------------------------------------------------------------------------------
Oct 31, 93 10150 10167 10049
- ------------------------------------------------------------------------------
Nov 30, 93 9420 9454 9171
- ------------------------------------------------------------------------------
Dec 31, 93 10096 10137 9833
- ------------------------------------------------------------------------------
Jan 31, 94 10769 10823 10664
- ------------------------------------------------------------------------------
Feb 28, 94 10558 10623 10634
- ------------------------------------------------------------------------------
Mar 31, 94 10156 10172 10176
- ------------------------------------------------------------------------------
Apr 30, 94 10458 10544 10607
- ------------------------------------------------------------------------------
May 31, 94 10407 10448 10547
- ------------------------------------------------------------------------------
Jun 30, 94 10488 10508 10695
- ------------------------------------------------------------------------------
Jul 31, 94 10649 10692 10798
- ------------------------------------------------------------------------------
Aug 31, 94 10941 10999 11054
- ------------------------------------------------------------------------------
Sep 30, 94 10559 10621 10706
- ------------------------------------------------------------------------------
Oct 31, 94 10950 11026 11062
- ------------------------------------------------------------------------------
Nov 30, 94 10428 10478 10530
- ------------------------------------------------------------------------------
Dec 31, 94 10484 10564 10597
- ------------------------------------------------------------------------------
Jan 31, 95 10108 10254 10190
- ------------------------------------------------------------------------------
Feb 28, 95 10189 10282 10160
- ------------------------------------------------------------------------------
Mar 31, 95 10759 10964 10794
- ------------------------------------------------------------------------------
Apr 30, 95 11145 11346 11200
- ------------------------------------------------------------------------------
May 31, 95 11176 11303 11067
- ------------------------------------------------------------------------------
Jun 29, 95 11064 11168 10873
- ------------------------------------------------------------------------------
Jul 31, 95 11623 11826 11551
- ------------------------------------------------------------------------------
Aug 31, 95 11237 11384 11111
- ------------------------------------------------------------------------------
Sep 30, 95 11470 11661 11327
- ------------------------------------------------------------------------------
Oct 30, 95 11318 11461 11023
- ------------------------------------------------------------------------------
Nov 30, 95 11562 11782 11329
- ------------------------------------------------------------------------------
Dec 31, 95 11975 12238 11786
- ------------------------------------------------------------------------------
Jan 31, 96 12006 12277 11834
- ------------------------------------------------------------------------------
Feb 29, 96 12026 12300 11874
- ------------------------------------------------------------------------------
Mar 31, 96 12232 12529 12126
- ------------------------------------------------------------------------------
Apr 30, 96 12530 12826 12479
- ------------------------------------------------------------------------------
May 31, 96 12396 12674 12249
- ------------------------------------------------------------------------------
Jun 30, 96 12489 12761 12318
- ------------------------------------------------------------------------------
Jul 31, 96 12139 12430 11958
- ------------------------------------------------------------------------------
Aug 31, 96 12253 12538 11985
- ------------------------------------------------------------------------------
Sep 30, 96 12592 12907 12303
- ------------------------------------------------------------------------------
Oct 31, 96 12571 12863 12178
- ------------------------------------------------------------------------------
Nov 30, 96 13136 13460 12663
- ------------------------------------------------------------------------------
Dec 31, 96 13067 13341 12499
- ------------------------------------------------------------------------------
Jan 31, 97 12640 12898 12062
- ------------------------------------------------------------------------------
Feb 28, 97 12827 13114 12260
- ------------------------------------------------------------------------------
Mar 31, 97 12932 13202 12304
- ------------------------------------------------------------------------------
Apr 30, 97 13025 13344 12369
- ------------------------------------------------------------------------------
May 31, 97 13984 14324 13174
- ------------------------------------------------------------------------------
Jun 30, 97 14766 15160 13900
- ------------------------------------------------------------------------------
Jul 31, 97 15214 15570 14125
- ------------------------------------------------------------------------------
Aug 31, 97 14109 14447 13070
- ------------------------------------------------------------------------------
Sep 30, 97 15078 15354 13802
- ------------------------------------------------------------------------------
Oct 31, 97 13869 14110 12741
- ------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 10/31/97
<TABLE>
<CAPTION>
1 Yr. Since Inception (9/9/93)
- ------------------------------------------------------------------------------
<S> <C> <C>
SCHWAB INTERNATIONAL INDEX FUND 31
Investor Shares 10.33% 8.20%
- ------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX 9.69% 8.65%
- ------------------------------------------------------------------------------
INDEX TRACKING DIFFERENTIAL -0.64% 0.45%
- ------------------------------------------------------------------------------
MSCI-EAFE INDEX 4.63% 6.01%
- ------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 9/30/97
<TABLE>
<CAPTION>
1 Yr. Since Inception (9/9/93)
- ------------------------------------------------------------------------------
<S> <C> <C>
SCHWAB INTERNATIONAL INDEX FUND 31
Investor Shares 19.75% 10.63%
- ------------------------------------------------------------------------------
</TABLE>
31 The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that the total
operating expenses will not exceed 0.58% for Investor Shares. Without fee
waivers and guarantees, as of 10/31/97, the average annual one-year and since
inception total returns would have been 9.76% and 7.68%, respectively. As of
9/30/97, the average annual one-year and since inception total returns would
have been 19.14% and 10.10%, respectively.
29
<PAGE> 32
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $50,000
INVESTMENT IN SCHWAB INTERNATIONAL INDEX FUND (R) - SELECT SHARES*,
SCHWAB INTERNATIONAL INDEX(R), AND MSCI-EAFE(R) INDEX
<TABLE>
<CAPTION>
SCHWAB INTERNATIONAL SCHWAB MSCI-EAFE
INDEX FUND-- INTERNATIONAL INDEX
SELECT SHARES $49,005 INDEX $48,550 $47,627
--------------------- ------------- ---------
<S> <C> <C> <C>
May 20, 97 50,000 50,000 50,000
May 30, 97 49,375 49,283 49,248
Jun 30, 97 52,170 52,161 51,961
Jul 31, 97 53,755 53,571 52,803
Aug 31, 97 49,815 49,706 48,859
Sep 30, 97 53,240 52,827 51,595
Oct 31, 97 49,005 48,550 47,627
</TABLE>
CUMULATIVE TOTAL RETURNS FOR THE PERIOD ENDED 10/31/97
<TABLE>
<CAPTION>
Since Inception (5/19/97)
- -------------------------------------------------------------------
<S> <C>
SCHWAB INTERNATIONAL INDEX FUND 32
Select Shares -1.99%
- -------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX -2.90%
- -------------------------------------------------------------------
INDEX TRACKING DIFFERENTIAL -0.91%
- -------------------------------------------------------------------
MSCI-EAFE INDEX -4.75%
- -------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN FOR THE PERIOD ENDED 9/30/97
<TABLE>
<CAPTION>
Since Inception (5/19/97)
- ------------------------------------------------------------------
<S> <C>
SCHWAB INTERNATIONAL INDEX FUND 32
Select Shares 6.48%
- ------------------------------------------------------------------
</TABLE>
*Required minimum initial investment in the Select Shares is $50,000.
32 The Investment Manager and Schwab waived a portion of their fees during the
reporting period and have guaranteed through at least 2/29/2000 that the total
operating expenses will not exceed 0.47% for the Select Shares. Without fee
waivers and guarantees, as of 10/31/97 and as of 9/30/97, the cumulative since
inception total returns would have been -2.67% and 5.80%, respectively.
30
<PAGE> 33
QUESTIONS TO THE
PORTFOLIO MANAGEMENT TEAM
SCHWAB SMALL-CAP INDEX FUND(R)
Q. HOW DID INTERNATIONAL EQUITIES PERFORM DURING THE REPORTING PERIOD? WHAT
IMPACT DID FLUCTUATIONS IN CURRENCY EXCHANGE RATES HAVE ON THE PERFORMANCE OF
INTERNATIONAL EQUITIES?
A. As shown in the Market Overview section, international stock returns,
although positive, were significantly less than those of both large-cap and
small-cap domestic stocks. As shown on the table in the Fund Performance
section, the Schwab International Index Fund(R) -- Investor Shares achieved a
total return of 10.33% for the one-year period ended October 31, 1997. For the
period since inception (5/19/97), the Select Shares achieved a total return of
- -1.99%.
You may have noted that the one-year total return for Investor shares of the
Fund actually exceeded that of the Index. Although certainly positive, this is
an unusual occurrence which we do not anticipate on a regular basis. As
explained in the Fund Performance section discussion on index tracking
differential, the Fund, unlike the Index, holds a small portion of its assets in
cash to pay expenses and meet Fund redemptions, and can either help or hurt the
Fund's performance relative to the Index. During the reporting period, the Fund
had larger cash holdings on certain days when international equities fell in
value, positively impacting Fund performance relative to that of the Index,
which has no such cash holdings. The Fund's average annual total return for the
Investor Shares on an inception-to-date basis lags the Index by 0.45% -- a much
more typical relationship and more in line with our long-term expectations for
the Fund's performance.
When expressed in local currency terms, international equity returns were quite
strong, especially for European countries, with Finland, Spain, Norway, and
Denmark producing the best returns for the reporting period. Returns from Asian
countries, however, were generally negative for the period, with the weakest
returns in Malaysia, Singapore, Japan, and Hong Kong. The following chart
illustrates the impact of fluctuations in exchange rates on the Schwab
International Index(R) during the reporting period. Despite strong gains
expressed in local currency terms, gains in the value of the U.S. dollar
relative to local currencies diminished returns of U.S. dollar-denominated
investments.
SCHWAB INTERNATIONAL INDEX
TOTAL RETURN EXPRESSED IN
U.S. DOLLARS AND LOCAL CURRENCY
<TABLE>
<CAPTION>
IN LOCAL CURRENCY IN U.S. DOLLARS
----------------- ---------------
<S> <C> <C>
Oct 31, 96 10,000 10,000
Nov 30, 96 10,463 10,464
Dec 31, 96 10,429 10,372
Jan 31, 97 10,602 10,027
Feb 28, 97 10,854 10,195
Mar 31, 97 10,935 10,263
Apr 30, 97 11,308 10,374
May 31, 97 11,741 11,135
Jun 30, 97 12,414 11,785
Jul 31, 97 13,167 12,104
Aug 31, 97 12,232 11,231
Sep 30, 97 12,929 11,936
Oct 31, 97 11,658 10,969
_____ IN LOCAL CURRENCY ----- IN U.S. DOLLARS
</TABLE>
31
<PAGE> 34
Q. HOW DID THE PERFORMANCE OF THE SCHWAB INTERNATIONAL INDEX(R) COMPARE TO THAT
OF THE MSCI-EAFE(R) INDEX DURING THE ONE-YEAR REPORTING PERIOD?
A. As shown in the Fund Performance section, the Schwab International Index
total return of 9.69% was significantly greater than the 4.63% total return of
the MSCI-EAFE Index for the period. For the period since the Fund's inception
(9/9/93), the average annual return of the Schwab International Index continues
to outperform the MSCI-EAFE Index -- 8.65% versus 6.01%, respectively. The two
indices, however, are constructed differently, which partly accounts for the
discrepancy in their respective returns.
The MSCI-EAFE Index includes more than 900 stocks and measures the performance
of stocks in Europe, Australia, and the Far East, with the objective of
representing 60% of the market capitalization of each included nation's market.
The Schwab International Index, on the other hand, is made up of the stocks of
the 350 largest publicly traded companies (excluding investment companies),
ranked by market capitalization, in the 15 countries with developed securities
markets covered by the Index. The primary reasons for the significant
performance differential were that the Schwab International Index has a larger
capitalization bias and excludes certain EAFE countries which had relatively
poor performances during the reporting period.
Q. WHAT STRATEGIES DOES THE FUND USE TO HELP INVESTORS ACHIEVE HIGHER AFTER-TAX
RETURNS?
A. Taxes can erode the returns investors earn from mutual funds. That's why it
is important to understand the effects of taxes on fund performance.
As shown in the Tax-Smart Investment Strategy section on page 28, the Schwab
International Index Fund has been more "tax efficient" than the average foreign
fund. In fact, since its inception in 1993, the Fund has made only one realized
capital gain distribution ($0.02 per share). Although no assurance can be
provided that this record will be maintained in the future, it is indicative of
the Fund's tax-efficient management strategy. Index funds can be tax efficient
because they are designed to have lower portfolio turnover, and hence, lower
realization of capital gains than most actively-managed funds. The Schwab
International Index is reconstituted only once a year, which also has the effect
of keeping the Fund's portfolio turnover low. Unlike many index funds, the
Schwab International Index Fund may, and often does, continue to hold positions
in certain appreciated stocks that are not currently in the Index. Furthermore,
when the Fund's manager does trade stocks, an attempt is made to offset capital
gains with capital losses to minimize the potential for capital gain
distributions to shareholders.
Q. HOW HAS THE RECENT MARKET VOLATILITY AND THE ACTIVITY IN ASIAN MARKETS
AFFECTED THE PERFORMANCES OF THE SCHWAB INTERNATIONAL INDEX AND THE SCHWAB
INTERNATIONAL INDEX FUND? WHAT IMPACT SHOULD THIS HAVE ON MY INVESTMENT
ALLOCATION TO THE FUND?
A. Although both domestic and international markets experienced significant
volatility during, and especially towards the end of the reporting period, it is
important to maintain a long-term perspective. Both the S&P 500 Index and the
Schwab International Index had corrections of 10.8% during the month of October
1997, yet still produced respective total returns of 32.10% and
32
<PAGE> 35
9.69% for the one-year period ended October 31, 1997. In fact, market declines
of at least 10% are not particularly unusual and may occur on average about once
every three years. 33 These corrections, however, may not be so apparent over a
longer period, which tends to smooth out the impacts of short-term volatility.
As evidenced by the index tracking differential noted in the Fund Performance
section on pages 29 and 30, the Fund's performance closely followed that of the
Schwab International Index. Bear in mind that investors cannot invest in an
index directly and that fees and expenses are not deducted from an index.
We think the most meaningful way for investors to evaluate their exposure to
domestic as well as international 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 the risk of 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. Index funds
offer a way to achieve long-term exposure to the equity markets, but each
individual investor has a different tolerance for risk and should have a
portfolio with a risk profile that reflects that tolerance level.
33 Source: Mark W. Riepe and Derek A. Sasveld, "Equity Investments," in Scott L.
Lummer and Mark W. Riepe (ed.), Pension Investment Handbook 1998 Supplement, New
York: Panel Publishing, 1998.
33
<PAGE> 36
SCHWAB S&P 500 FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
COMMON STOCK--97.1%
AEROSPACE/DEFENSE--1.6%
BF Goodrich Co. 16,100 $ 717
Boeing Co. 214,962 10,291
General Dynamics Corp. 13,400 1,088
Lockheed Martin Corp. 40,100 3,812
Northrop Grumman Corp. 14,900 1,628
Raytheon Co. 50,300 2,729
Textron, Inc. 34,900 2,018
United Technologies Corp. 47,800 3,346
----------
25,629
----------
AIR TRANSPORTATION--0.4 %
AMR Corp.+ 19,100 2,224
Delta Airlines, Inc. 15,800 1,592
Southwest Airlines Co. 33,900 1,106
US Airways Group, Inc.+ 18,200 853
----------
5,775
----------
ALCOHOLIC BEVERAGES--0.5%
Adolph Coors Co. Class B 12,800 452
Anheuser-Busch Companies,
Inc. 107,600 4,297
Brown-Forman Corp. Class
B 12,700 625
Seagram Co., Ltd. 75,200 2,533
----------
7,907
----------
APPAREL--0.4%
Fruit of the Loom, Inc.
Class A+ 20,000 521
Liz Claiborne, Inc. 18,200 923
NIKE, Inc. Class B 64,500 3,030
Reebok International
Ltd.+ 13,600 502
Russell Corp. 12,000 353
Springs Industries, Inc. 2,900 134
Stride Rite Corp. 4,100 48
V.F. Corp. 15,200 1,359
----------
6,870
----------
AUTOMOTIVE PRODUCTS--0.2 %
Autoliv, Inc. 4,296 169
Cooper Tire & Rubber Co. 14,200 301
Goodyear Tire & Rubber
Co. 32,200 2,017
Meritor Automotive, Inc.+ 12,966 289
----------
2,776
----------
BANKS--8.1%
Banc One Corp. 124,400 6,484
Bank of New York Co.,
Inc. 79,300 3,732
BankAmerica Corp. 147,800 10,568
BankBoston Corp. 30,500 2,472
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Bankers Trust New York
Corp. 20,500 $ 2,419
Barnett Banks, Inc. 44,500 3,071
Chase Manhattan Corp. 89,200 10,291
Citicorp 97,700 12,217
Comerica, Inc. 22,900 1,811
CoreStates Financial
Corp. 42,100 3,063
Fifth Third Bancorp 39,400 2,527
First Chicago NBD Corp. 60,400 4,394
First Union Corp. 127,000 6,231
Fleet Financial Group,
Inc. 54,800 3,524
Huntington Bancshares,
Inc. 45,000 1,454
J.P. Morgan & Co., Inc. 39,300 4,313
KeyCorp, Inc. 42,800 2,619
MBNA Corp. 109,400 2,879
Mellon Bank Corp. 51,600 2,661
National City Corp. 48,200 2,880
NationsBank Corp. 151,144 9,050
Norwest Corp. 161,800 5,188
PNC Bank Corp. 61,700 2,931
Republic New York Corp. 13,800 1,460
State Street Corp. 35,700 1,990
SunTrust Banks, Inc. 45,800 2,968
U.S. Bancorp. 49,916 5,076
Wachovia Corp. 41,900 3,156
Wells Fargo & Co. 21,400 6,235
----------
127,664
----------
BUSINESS MACHINES & SOFTWARE--8.8%
3COM Corp.+ 69,000 2,859
Adobe Systems, Inc. 17,200 821
Apple Computer, Inc.+ 13,300 227
Autodesk, Inc. 10,700 396
Bay Networks, Inc.+ 40,600 1,284
Cabletron Systems, Inc.+ 38,200 1,108
Ceridian Corp.+ 13,000 508
Cisco Systems, Inc.+ 141,000 11,566
Compaq Computer Corp.+ 159,690 10,180
Computer Associates
International, Inc. 74,500 5,555
Computer Sciences Corp.+ 16,400 1,163
Data General Corp.+ 16,300 314
Dell Computer Corp.+ 71,400 5,721
Digital Equipment Corp.+ 37,500 1,877
EMC Corp.+ 51,400 2,878
Hewlett-Packard Co. 227,900 14,059
Honeywell, Inc. 29,100 1,981
</TABLE>
34
<PAGE> 37
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
International Business
Machines Corp. 208,400 $ 20,436
Microsoft Corp.+ 255,200 33,176
Novell, Inc.+ 78,400 662
Oracle Systems Corp.+ 217,050 7,766
Parametric Technology
Corp.+ 28,500 1,258
Pitney Bowes, Inc. 30,100 2,387
Seagate Technology, Inc.+ 46,700 1,267
Siebel Systems Inc.+ 57 2
Silicon Graphics, Inc.+ 28,300 416
Sun Microsystems, Inc.+ 76,900 2,634
Unisys Corp.+ 48,800 650
Xerox Corp. 70,533 5,594
----------
138,745
----------
BUSINESS SERVICES--1.6%
Automatic Data
Processing, Inc. 59,700 3,051
Browning-Ferris
Industries, Inc. 46,900 1,524
Choicepoint, Inc.+ 3,100 115
Cognizant Corp. 33,600 1,317
Deluxe Corp. 14,800 485
Dun & Bradstreet Corp. 35,500 1,014
Ecolab, Inc. 17,300 823
Equifax, Inc. 31,000 963
First Data Corp. 89,500 2,601
H & R Block, Inc. 23,100 855
HBO & Co. 41,100 1,788
IKON Office Solutions 27,000 764
Interpublic Group of
Companies, Inc. 25,800 1,226
John H. Harland Co. 10,000 224
Laidlaw, Inc. 74,900 1,058
Moore Corp. Ltd. 5,200 84
National Service
Industries, Inc. 17,800 788
R.R. Donnelley & Sons Co. 38,700 1,263
Safety-Kleen Corp. 19,300 427
Service Corp.
International 54,000 1,644
Shared Medical Systems
Corp. 9,700 531
SUPERVALU, Inc. 16,600 608
Waste Management, Inc. 94,100 2,200
----------
25,353
----------
CHEMICAL--2.9 %
Air Products & Chemicals,
Inc. 20,900 1,588
Dow Chemical Co. 48,700 4,420
E.I. du Pont de Nemours &
Co. 236,900 13,472
Eastman Chemical Co. 20,000 1,193
Great Lakes Chemical
Corp. 11,800 555
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Hercules, Inc. 18,500 $ 849
Minnesota Mining &
Manufacturing Co. 88,500 8,098
Monsanto Co. 125,333 5,358
Morton International,
Inc. 31,100 1,026
Nalco Chemical Co. 13,200 528
PPG Industries, Inc. 41,500 2,350
Praxair, Inc. 29,800 1,298
Rohm & Haas Co. 14,900 1,241
Sigma-Aldrich Corp. 17,500 615
Solutia, Inc.+ 21,266 471
Union Carbide Corp. 25,400 1,160
W.R. Grace & Co. 13,600 925
----------
45,147
----------
CONSTRUCTION--0.3%
Armstrong World
Industries, Inc. 3,700 246
Centex Corp. 10,300 603
Crane Co. 7,750 322
Fluor Corp. 20,500 843
Kaufman & Broad Home
Corp. 3,200 68
Owens Corning 18,800 644
Pulte Corp. 600 22
Sherwin-Williams Co. 20,000 555
The Stanley Works 19,800 837
----------
4,140
----------
CONSUMER-DURABLE--0.4%
Black & Decker Corp. 20,600 784
Masco Corp. 36,600 1,606
Maytag Corp. 23,600 788
Newell Co. 33,200 1,274
Snap-on, Inc. 16,450 707
Whirlpool Corp. 17,200 1,043
----------
6,202
----------
CONSUMER-NONDURABLE--1.2 %
American Greetings Corp.
Class A 11,600 402
Corning, Inc. 52,100 2,351
Darden Restaurants, Inc. 47,500 540
Fort James Corp.+ 38,000 1,508
Fortune Brands, Inc. 38,600 1,276
Hasbro, Inc. 30,800 893
Jostens, Inc. 2,800 65
Mattel, Inc. 57,300 2,228
McDonald's Corp. 145,600 6,525
Premark International,
Inc. 2,100 57
Rubbermaid, Inc. 33,400 804
</TABLE>
35
<PAGE> 38
SCHWAB S&P 500 FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Tricon Global
Restaurants, Inc.+ 29,930 $ 907
Wendy's International,
Inc. 27,600 580
----------
18,136
----------
CONTAINERS--0.2%
Ball Corp. 3,100 109
Bemis Co., Inc. 12,900 492
Crown Cork & Seal Co.,
Inc. 20,300 915
Owens-Illinois, Inc.+ 34,000 1,172
Stone Container Corp. 24,600 297
----------
2,985
----------
ELECTRONICS--4.2 %
Advanced Micro Devices,
Inc.+ 22,300 513
AMP, Inc. 42,500 1,913
Applied Materials, Inc.+ 77,800 2,597
EG&G, Inc. 3,000 62
General Signal Corp. 15,500 622
Harris Corp. 18,600 811
Intel Corp. 347,900 26,789
KLA-Tencor Corp.+ 15,700 690
LSI Logic Corp.+ 23,300 508
Lucent Technologies,
Inc.+ 148,719 12,260
Micron Technology, Inc.+ 36,700 984
Motorola, Inc. 122,500 7,564
National Semiconductor
Corp.+ 27,700 997
Perkin Elmer Corp. 10,800 675
Rockwell International
Corp. 46,900 2,298
Scientific-Atlanta, Inc. 13,700 254
Tektronix, Inc. 6,600 390
Texas Instruments, Inc. 39,500 4,214
Thermo Electron Corp.+ 30,500 1,138
Thomas & Betts Corp. 9,900 493
----------
65,772
----------
ENERGY-DEVELOPMENT--1.6%
Anadarko Petroleum Corp. 15,000 1,099
Apache Corp. 20,800 874
Baker Hughes, Inc. 39,500 1,815
Burlington Resources,
Inc. 37,787 1,849
Dresser Industries, Inc. 38,700 1,630
Enserch Explorations,
Inc.+ 9,896 89
Halliburton Co. 52,933 3,156
Helmerich & Payne, Inc. 6,600 533
Occidental Petroleum
Corp. 68,700 1,915
Rowan Companies, Inc.+ 16,900 657
Schlumberger Ltd. 107,700 9,424
Union Pacific Resources
Group 52,932 1,303
Western Atlas, Inc.+ 12,000 1,034
----------
25,378
----------
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
FOOD-AGRICULTURE--5.6%
Archer-Daniels Midland
Co. 111,436 $ 2,479
Campbell Soup Co. 93,766 4,835
Coca-Cola Co. 532,400 30,081
ConAgra, Inc. 98,400 2,964
CPC International, Inc. 28,700 2,841
Fleming Companies, Inc. 3,300 56
General Mills, Inc. 36,800 2,429
H.J. Heinz Co. 77,166 3,583
Hershey Foods Corp. 27,200 1,503
Kellogg Co. 82,000 3,531
PepsiCo, Inc. 322,300 11,865
Pioneer Hi-Bred
International, Inc. 16,600 1,521
Quaker Oats Co. 27,500 1,317
Ralston Purina Co. 24,200 2,172
Sara Lee Corp. 102,966 5,264
SYSCO Corp. 32,700 1,308
Unilever NV 135,400 7,227
Whitman Corp. 26,300 690
Wm. Wrigley Jr. Co. 26,300 1,903
----------
87,569
----------
GOLD--0.3 %
Barrick Gold Corp. 76,800 1,579
Battle Mountain Gold Co. 50,000 306
Echo Bay Mines Ltd.+ 30,000 122
Homestake Mining Co. 22,800 282
Newmont Mining Corp. 40,842 1,429
Placer Dome, Inc. 47,000 729
----------
4,447
----------
HEALTHCARE--10.4%
Abbott Laboratories 160,600 9,847
Allegiance Corp. 2,600 72
Allergan, Inc. 12,500 412
ALZA Corp.+ 19,500 508
American Home Products
Corp. 135,600 10,051
Amgen, Inc. 57,000 2,807
Bausch & Lomb, Inc. 11,400 447
Baxter International,
Inc. 58,800 2,720
Becton, Dickinson & Co. 25,400 1,170
Beverly Enterprises,
Inc.+ 22,200 332
Biomet, Inc. 28,300 706
Boston Scientific Corp.+ 34,100 1,552
Bristol-Myers Squibb Co. 211,200 18,533
</TABLE>
36
<PAGE> 39
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
C.R. Bard, Inc. 4,700 $ 130
Cardinal Health, Inc. 22,100 1,641
Columbia/HCA Healthcare
Corp. 131,350 3,711
Crescendo Pharmaceuticals
Corp. Class A+ 975 11
Eli Lilly & Co. 236,400 15,809
Fresenius Medical Care
AG -- Sponsored ADR**+ 4,825 114
Guidant Corp.+ 32,800 1,886
HealthSouth Corp.+ 87,200 2,229
Humana, Inc.+ 31,600 664
Johnson & Johnson 284,000 16,295
Mallinckrodt, Inc. 25,000 938
Manor Care, Inc. 12,600 432
Medtronic, Inc. 94,600 4,115
Merck & Co., Inc. 259,000 23,114
Pfizer, Inc. 279,500 19,775
Pharmacia & Upjohn, Inc. 101,900 3,235
Schering-Plough Corp. 154,400 8,656
St. Jude Medical, Inc.+ 14,500 440
Tenet Healthcare Corp.+ 62,500 1,910
U.S. Surgical Corp. 20,000 539
United Healthcare Co. 39,100 1,811
Warner Lambert Co. 57,800 8,276
----------
164,888
----------
HOUSEHOLD PRODUCTS--2.5%
Alberto-Culver Co. Class
B 9,600 290
Avon Products, Inc. 30,800 2,017
Clorox Co. 22,900 1,603
Colgate-Palmolive Co. 64,600 4,183
Gillette Co. 118,500 10,554
International Flavors &
Fragrances, Inc. 21,100 1,021
Procter & Gamble Co. 287,200 19,529
Tupperware Corp. 16,000 401
----------
39,598
----------
IMAGING & PHOTO--0.3%
Eastman Kodak Co. 66,000 3,952
Polaroid Corp. 8,800 395
----------
4,347
----------
INSURANCE--4.0%
Aegon NV ARS*** 4,213 335
Aetna, Inc. 30,445 2,163
Allstate Corp. 98,200 8,144
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
American General Corp. 55,803 $ 2,846
American International
Group, Inc. 148,900 15,199
Aon Corp. 38,650 2,085
Chubb Corp. 35,900 2,378
CIGNA Corp. 19,900 3,089
Conseco, Inc. 44,200 1,928
General Re Corp. 18,400 3,628
Hartford Financial
Services Group 26,900 2,179
Jefferson-Pilot Corp. 13,500 1,044
Lincoln National Corp. 20,800 1,430
Marsh & McLennan
Companies, Inc. 37,600 2,670
MBIA Corp. 20,600 1,231
MGIC Investment Corp. 23,200 1,399
Progressive Corp. 17,000 1,772
Providian Financial Corp. 18,200 673
SAFECO Corp. 27,800 1,324
St. Paul Companies, Inc. 20,800 1,663
SunAmerica, Inc. 45,500 1,635
Torchmark Corp. 32,800 1,308
Transamerica Corp. 14,000 1,413
UNUM Corp. 31,000 1,511
USF & G Corp. 16,000 324
----------
63,371
----------
MEDIA--2.6%
Clear Channel
Communications, Inc.+ 23,100 1,525
Comcast Corp. Class A 69,400 1,909
Dow Jones & Co., Inc. 18,400 856
Gannett Co., Inc. 64,200 3,375
King World Productions,
Inc. 11,900 562
Knight-Ridder, Inc. 21,000 1,097
McGraw Hill Companies,
Inc. 23,900 1,562
Meredith Corp. 13,200 450
New York Times Co. Class
A 23,100 1,265
SBC Communications, Inc. 200,182 12,735
Telecommunications, Inc.
Series A (TCI Group)+ 150,400 3,450
Time Warner, Inc. 114,500 6,605
Times Mirror Co. Series A 21,700 1,175
Tribune Co. 28,500 1,571
Viacom, Inc. Class B+ 67,600 2,045
----------
40,182
----------
</TABLE>
37
<PAGE> 40
SCHWAB S&P 500 FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
MISCELLANEOUS FINANCE--3.9 %
American Express Co. 100,500 $ 7,839
Beneficial Corp. 14,200 1,089
Charles Schwab Corp. 60,200 2,054
Countrywide Credit Industries,
Inc. 27,000 926
Freddie Mac 147,000 5,568
Fannie Mae 224,700 10,882
Golden West Financial
Corp. 13,000 1,128
Green Tree Financial
Corp. 31,400 1,323
H.F. Ahmanson & Co. 17,900 1,056
Household International,
Inc. 32,200 3,647
Merrill Lynch & Co.,
Inc.+ 67,000 4,531
Morgan Stanley, Dean
Witter, Discover & Co. 120,910 5,925
Salomon, Inc. 21,400 1,663
Travelers Group, Inc. 135,933 9,515
Washington Mutual, Inc. 51,590 3,531
----------
60,677
----------
MOTOR VEHICLE--2.1%
Chrysler Corp. 138,400 4,879
Cummins Engine Co., Inc. 7,400 451
Dana Corp. 24,500 1,147
Eaton Corp. 16,200 1,565
Echlin, Inc. 17,200 563
Fleetwood Enterprises,
Inc. 2,900 88
Ford Motor Co. 265,400 11,595
General Motors Corp. 153,600 9,859
Genuine Parts Co. 37,600 1,177
Navistar International
Corp.+ 21,200 492
Paccar, Inc. 20,600 928
TRW, Inc. 17,800 1,019
----------
33,763
----------
NON-FERROUS--0.6%
Alcan Aluminum, Ltd. 51,700 1,477
Aluminum Company of
America 35,200 2,569
Asarco, Inc. 8,900 244
Cyprus Amax Minerals Co. 13,100 274
Engelhard Corp. 26,400 459
Freeport-McMoRan Copper &
Gold, Inc. Class B 35,800 855
Inco Ltd. 36,800 759
Phelps Dodge Corp. 15,800 1,175
Reynolds Metals Co. 14,000 853
----------
8,665
----------
OIL-DOMESTIC--1.2%
Amerada Hess Corp. 21,600 1,327
Ashland, Inc. 21,300 1,016
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Atlantic Richfield Co. 70,000 $ 5,763
Kerr-McGee Corp. 10,000 676
Monterey Resources, Inc. 10,806 215
Oryx Energy Co.+ 25,700 708
Pennzoil Co. 10,600 784
Phillips Petroleum Co. 63,100 3,052
Santa Fe Energy
Resources, Inc.+ 24,500 320
Sun, Inc. 11,600 465
Unocal Corp. 52,200 2,153
USX-Marathon Group 55,700 1,991
----------
18,470
----------
OIL-INTERNATIONAL--6.2 %
Amoco Corp. 104,200 9,554
Chevron Corp. 138,600 11,495
Exxon Corp. 534,200 32,821
Mobil Corp. 166,900 12,152
Royal Dutch Petroleum
Co.- Sponsored ADR** 458,000 24,102
Texaco, Inc. 116,200 6,616
----------
96,740
----------
PAPER--1.2%
Boise Cascade Corp. 16,900 585
Champion International
Corp. 22,900 1,264
Georgia-Pacific Corp.+ 18,500 1,569
International Paper Co. 60,500 2,723
Kimberly-Clark Corp. 121,500 6,310
Louisiana-Pacific Corp. 26,600 559
Mead Corp. 11,500 696
Potlatch Corp. 15,200 758
Temple Inland, Inc. 12,200 700
Union Camp Corp. 12,900 699
Westvaco Corp. 23,100 758
Weyerhaeuser Co. 45,600 2,177
Willamette Industries,
Inc. 19,000 628
----------
19,426
----------
PRODUCER GOODS & MANUFACTURING--5.6%
Aeroquip-Vickers, Inc. 10,300 536
Allied Signal, Inc. 115,600 4,162
Avery Dennison Corp. 20,800 828
Briggs & Stratton Corp. 8,000 398
Case Corp. 17,100 1,023
Caterpillar, Inc. 79,400 4,069
</TABLE>
38
<PAGE> 41
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Cincinnati Milacron, Inc. 10,900 $ 302
Commscope Inc.+ 4 0
Cooper Industries, Inc. 29,200 1,522
Deere & Co. 52,600 2,768
Dover Corp. 21,300 1,438
Emerson Electric Co. 89,700 4,704
FMC Corp.+ 10,800 873
Foster Wheeler Corp. 9,200 302
General Electric Co. 703,300 45,404
Harnischfeger Industries,
Inc. 12,000 473
Illinois Tool Works, Inc. 56,800 2,794
Ingersoll-Rand Co. 32,250 1,256
ITT Industries, Inc. 20,800 657
Johnson Controls, Inc. 19,600 880
McDermott International,
Inc. 12,800 465
Millipore Corp. 9,700 380
NACCO Industries, Inc.
Class A 3,000 309
Pall Corp. 34,500 714
Parker-Hannifin Corp. 15,100 631
Raychem Corp. 11,300 1,023
Tenneco, Inc. 32,200 1,447
Timken Co. 12,600 422
Tyco International Ltd.+ 110,600 4,175
W.W. Grainger, Inc. 10,900 953
Westinghouse Electric
Corp. 144,400 3,818
----------
88,726
----------
RAILROAD--0.8%
Burlington Northern Santa Fe
Corp. 35,700 3,391
CSX Corp. 47,600 2,603
Norfolk Southern Corp. 86,600 2,782
Union Pacific Corp. 51,800 3,173
----------
11,949
----------
REAL PROPERTY--0.2%
HFS, Inc.+ 34,600 2,439
----------
RETAIL--4.9 %
Albertson's, Inc. 57,100 2,106
American Stores Co. 50,600 1,300
AutoZone, Inc.+ 32,600 964
Charming Shoppes, Inc.+ 5,800 30
Circuit City Stores, Inc. 21,200 845
Costco Companies, Inc.+ 46,600 1,794
CUC International, Inc.+ 80,800 2,384
CVS Corp. 37,100 2,275
Dayton Hudson Corp. 44,100 2,770
Dillards Inc. Class A 26,900 1,032
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Federated Department
Stores, Inc.+ 42,200 $ 1,857
Gap, Inc. 55,300 2,941
Giant Food, Inc. Class A 18,700 573
Great Atlantic & Pacific
Tea Co., Inc. 10,000 307
Harcourt General, Inc. 15,700 786
Home Depot, Inc. 175,900 9,784
J.C. Penney Co., Inc. 56,900 3,339
K Mart Corp.+ 101,600 1,340
Kroger Co.+ 59,100 1,928
Limited, Inc. 53,800 1,268
Longs Drug Stores, Inc. 3,400 85
Lowe's Companies, Inc. 33,000 1,374
May Department Stores Co. 53,800 2,898
Mercantile Stores Co.,
Inc. 5,200 306
Nordstrom, Inc. 17,000 1,041
Pep Boys-Manny Moe & Jack 18,800 474
Rite Aid Corp. 25,700 1,526
Sears Roebuck & Co. 86,900 3,639
Tandy Corp. 26,800 921
TJX Companies, Inc. 40,800 1,209
Toys 'R' Us, Inc.+ 60,500 2,061
Wal Mart Stores, Inc. 489,400 17,189
Walgreen Co. 101,900 2,866
Winn Dixie Stores, Inc. 29,700 1,103
Woolworth Corp.+ 34,800 661
----------
76,976
----------
STEEL--0.2 %
Allegheny Teledyne, Inc. 34,235 901
Armco, Inc.+ 6,400 37
Bethlehem Steel Corp.+ 35,500 355
Inland Steel Industries,
Inc. 4,600 90
Nucor Corp. 22,700 1,186
USX-U.S. Steel Group 19,200 653
Worthington Industries,
Inc. 13,300 275
----------
3,497
----------
TELEPHONE--6.0%
AirTouch Communications,
Inc.+ 112,500 4,345
Alltel Corp. 34,300 1,213
Ameritech Corp. 116,000 7,540
Andrew Corp. 19,000 441
AT&T Corp.+ 341,200 16,698
Bell Atlantic Corp. 168,676 13,473
BellSouth Corp. 210,200 9,945
DSC Communications Corp.+ 29,100 709
</TABLE>
39
<PAGE> 42
SCHWAB S&P 500 FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Frontier Corp. 42,800 $ 926
GTE Corp. 203,700 8,645
MCI Communications Corp. 160,600 5,701
Nextlevel Systems, Inc.+ 23,500 317
Northern Telecom Ltd. 53,500 4,798
Sprint Corp. 88,700 4,612
Tellabs, Inc.+ 37,700 2,036
U.S. West, Inc.
(Communications Group) 98,100 3,906
U.S. West, Inc. (Media
Group)+ 126,700 3,199
WorldCom, Inc.+ 188,100 6,325
----------
94,829
----------
TOBACCO--1.6%
Loew's Corp. 24,600 2,748
Philip Morris Companies.,
Inc. 516,700 20,474
UST, Inc. 41,000 1,227
----------
24,449
----------
TRANSPORTATION-MISCELLANEOUS--0.2 %
Caliber Systems, Inc. 5,300 276
CNF Transportation, Inc. 4,700 210
Federal Express Corp.+ 28,900 1,929
Ryder Systems, Inc. 20,500 718
----------
3,133
----------
TRAVEL & RECREATION--1.2%
Brunswick Corp. 20,700 699
Harrah's Entertainment,
Inc.+ 14,000 276
Hilton Hotels Corp. 54,800 1,689
ITT Corp.+ 22,500 1,680
Marriott International,
Inc. 25,200 1,758
Mirage Resorts, Inc.+ 45,300 1,133
Walt Disney Co. 141,900 11,670
----------
18,905
----------
UTILITIES--3.1%
American Electric Power
Co., Inc. 42,000 1,985
Baltimore Gas & Electric
Co. 28,600 785
Carolina Power & Light
Co. 36,900 1,319
Central & South West
Services Corp. 39,300 847
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Cinergy Corp. 36,000 $ 1,188
Coastal Corp. 24,400 1,467
Columbia Gas System, Inc. 13,700 990
Consolidated Edison Co.
of New York, Inc. 46,900 1,606
Consolidated Natural Gas
Co. 22,200 1,200
Dominion Resources, Inc. 42,200 1,569
DTE Energy Co. 34,800 1,070
Duke Power Co. 74,863 3,613
Eastern Enterprises 1,700 67
Edison International 78,200 2,004
Enron Corp. 69,500 2,641
Entergy Corp. 52,900 1,293
FPL Group, Inc. 40,800 2,109
GPU, Inc. 22,500 814
Houston Industries, Inc. 77,190 1,679
Niagara Mohawk Power
Corp.+ 32,200 312
NICOR, Inc. 17,900 690
Northern States Power Co. 19,500 982
Ohio Edison Co. 38,000 941
ONEOK, Inc. 2,100 72
Pacific Enterprises, Inc. 15,000 490
Pacific Gas & Electric
Corp. 90,900 2,324
PacifiCorp. 66,300 1,438
PECO Energy Co. 51,200 1,162
Peoples Energy Corp. 11,900 425
PP&L Resources, Inc. 37,000 800
Public Service Enterprise
Group, Inc. 49,000 1,271
Sonat, Inc. 20,100 923
Southern Co. 140,000 3,211
Texas Utilities Co. 47,285 1,696
Unicom Corp. 40,900 1,145
Union Electric Co. 26,100 984
Williams Companies, Inc. 38,700 1,971
----------
49,083
----------
TOTAL COMMON STOCK
(Cost $1,357,609) 1,524,608
----------
</TABLE>
40
<PAGE> 43
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
PREFERRED STOCK--0.0%
HEALTHCARE--0.0 %
Fresenius National
Medical, Inc.+ 4,600 $ 0
----------
INSURANCE--0.0%
Aetna, Inc. 6.25%
Class C (Voting) 381 28
----------
TOTAL PREFERRED STOCK
(Cost $25) 28
----------
Par
-----------
CASH EQUIVALENTS--2.9%
Temporary Investment
Fund,
Inc.-TempCash Portfolio
5.16%*, 11/07/97 $45,269,274 45,269
----------
TOTAL CASH EQUIVALENTS
(Cost $45,269) 45,269
----------
<CAPTION>
Value
Par (000s)
----------- ----------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS--0.0 %
U.S. Treasury Bills(b)
4.98%, 11/20/97 $ 75,000 $ 75
4.82%, 11/20/97 5,000 5
4.99%, 11/20/97 315,000 314
5.03%, 11/20/97 115,000 115
4.80%, 11/20/97 40,000 40
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $549) 549
----------
TOTAL INVESTMENTS--100.0%
(Cost $1,403,452) $1,570,454
==========
</TABLE>
See accompanying Notes to Schedule of Investments and Notes to Financial
Statements.
41
<PAGE> 44
SCHWAB 1000 FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
COMMON STOCK--99.4%
AEROSPACE/DEFENSE--1.6%
BF Goodrich Co. 23,400 $ 1,043
Boeing Co. 364,052 17,429
Coltec Industries, Inc.+ 18,200 364
General Dynamics Corp. 21,400 1,737
Litton Industries, Inc.+ 20,500 1,040
Lockheed Martin Corp. 74,092 7,043
Northrop Grumman Corp. 29,900 3,267
Raytheon Co. 85,400 4,633
Sundstrand Corp. 24,600 1,338
Textron, Inc. 65,400 3,781
United Technologies Corp. 91,400 6,398
----------
48,073
----------
AIR TRANSPORTATION--0.5%
AMR Corp.+ 36,100 4,203
Atlas Air, Inc.+ 7,000 194
Comair Holdings, Inc. 12,000 441
Continental Airlines, Inc.
Class B+ 14,400 623
Delta Airlines, Inc. 29,200 2,942
Northwest Airlines Corp.
Class A+ 46,500 2,093
Southwest Airlines Co. 56,400 1,840
UAL Corp.+ 21,600 1,893
US Airways Group, Inc.+ 36,500 1,711
----------
15,940
----------
ALCOHOLIC BEVERAGES--0.3 %
Anheuser-Busch Companies,
Inc. 180,800 7,221
Brown-Forman Corp. Class B 25,500 1,254
----------
8,475
----------
APPAREL--0.4%
Fruit of the Loom, Inc.
Class A+ 26,300 685
Jones Apparel Group, Ltd.+ 28,600 1,455
Liz Claiborne, Inc. 32,000 1,622
Nautica Enterprises+ 10,000 266
NIKE, Inc. Class B 105,600 4,964
Nine West Group, Inc.+ 7,700 272
Reebok International Ltd.+ 16,700 616
Russell Corp. 12,200 358
Unifi, Inc. 16,925 651
V.F. Corp. 24,050 2,149
Warnaco Group, Inc. 13,600 384
----------
13,422
----------
AUTOMOTIVE PRODUCTS--0.3 %
Autoliv, Inc. 15,992 631
Bandag, Inc. 4,000 202
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Cooper Tire & Rubber Co. 19,500 $ 413
Danaher Corp. 17,400 954
Goodyear Tire & Rubber Co. 57,900 3,626
Lear Corp.+ 26,000 1,250
Meritor Automotive, Inc.+ 26,100 582
----------
7,658
----------
BANKS--9.0 %
Amsouth Bancorporation 31,800 1,528
B B & T Corp. 59,250 3,225
Banc One Corp. 221,085 11,524
Bank of New York Co., Inc. 139,000 6,542
BankAmerica Corp. 257,390 18,403
BankBoston Corp. 52,420 4,249
Bankers Trust New York
Corp. 47,940 5,657
Barnett Banks, Inc. 71,676 4,946
CCB Financial Corp. 10,500 956
Central Fidelity Banks,
Inc. 27,825 1,294
Centura Banks, Inc. 8,000 463
Chase Manhattan Corp. 157,230 18,140
Citicorp 170,700 21,345
Comerica, Inc. 40,864 3,231
Commerce Bancshares, Inc. 18,408 1,077
Compass Bancshares, Inc. 36,275 1,367
CoreStates Financial Corp. 76,592 5,572
Crestar Financial Corp. 38,800 1,836
Deposit Guaranty Corp. 12,000 443
Dime Bancorp, Inc. 49,926 1,198
Fifth Third Bancorp 60,962 3,909
First American Corp. 32,850 1,831
First Chicago NBD Corp. 113,321 8,244
First Commerce Corp. 10,562 679
First Commercial Corp. 9,000 446
First Empire State Corp. 2,500 1,023
First Hawaiian, Inc. 10,000 390
First of America Bank Corp. 17,600 836
First Security Corp. 48,418 1,404
First Tennessee National
Corp. 26,300 1,516
First Union Corp. 206,986 10,155
First Virginia Banks, Inc. 14,625 679
Firstar Corp. 54,000 1,951
Firstmerit Corp. 32,800 836
Fleet Financial Group, Inc. 94,580 6,083
Hibernia Corp. Class A 35,000 623
Huntington Bancshares, Inc. 84,363 2,726
</TABLE>
42
<PAGE> 45
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
J.P. Morgan & Co., Inc. 70,000 $ 7,683
KeyCorp, Inc. 78,423 4,799
Marshall & Ilsley Corp. 42,185 2,188
MBNA Corp. 188,325 4,955
Mellon Bank Corp. 96,944 4,999
Mercantile Bancorporation,
Inc. 68,925 3,347
Mercantile Bankshares Corp. 30,675 1,093
National City Corp. 74,240 4,436
NationsBank Corp. 263,470 15,775
Northern Trust Corp. 44,900 2,627
Norwest Corp. 273,576 8,772
Old Kent Financial Corp. 17,976 1,135
Old National Bancorp 7,500 344
Pacific Century Financial
Corp. 10,175 513
People's Bank-Bridgeport 18,000 590
PNC Bank Corp. 116,730 5,545
Regions Financial Corp. 45,700 1,679
Republic New York Corp. 23,900 2,529
Signet Banking Corp. 26,300 1,415
Southtrust Corp. 37,125 1,782
Star Bank Corp. 31,300 1,536
State Street Corp. 60,200 3,356
Summit Bancorp 71,850 3,067
SunTrust Banks, Inc. 78,200 5,068
Synovus Financial Corp. 60,975 1,326
U.S. Bancorp. 87,266 8,874
Union Planters Corp. 23,900 1,418
UnionBanCal Corp. 19,400 1,775
Wachovia Corp. 59,820 4,505
Wells Fargo & Co. 32,800 9,557
Wilmington Trust Co. 14,200 792
Zions Bancorporation 26,600 1,034
----------
274,841
----------
BUSINESS MACHINES & SOFTWARE--8.8%
3COM Corp.+ 127,450 5,281
Adobe Systems, Inc. 31,800 1,518
Apple Computer, Inc.+ 45,700 778
Autodesk, Inc. 12,200 451
Bay Networks, Inc.+ 86,480 2,735
BMC Software, Inc.+ 34,200 2,065
Cabletron Systems, Inc.+ 52,000 1,508
Ceridian Corp.+ 30,700 1,199
Cirrus Logic, Inc.+ 12,200 185
Cisco Systems, Inc.+ 248,100 20,352
Citrix Systems, Inc.+ 8,000 588
Compaq Computer Corp.+ 275,845 17,585
Computer Associates
International, Inc. 130,775 9,751
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Computer Sciences Corp.+ 30,598 $ 2,171
Compuware Corp.+ 38,900 2,572
Dell Computer Corp.+ 125,200 10,032
Diebold, Inc. 25,818 1,138
Digital Equipment Corp.+ 50,400 2,523
Electronic Arts, Inc.+ 30,400 1,030
Electronics For Imaging,
Inc.+ 15,000 701
EMC Corp.+ 92,900 5,202
Gateway 2000, Inc.+ 48,000 1,377
Hewlett-Packard Co. 379,500 23,410
Honeywell, Inc. 46,800 3,185
Informix Corp.+ 40,700 277
International Business
Machines Corp. 363,400 35,636
Intuit, Inc.+ 11,800 385
Iomega Corp.+ 39,000 1,046
Komag, Inc.+ 17,900 310
Lexmark International
Group, Inc. Class A+ 20,000 611
McAfee Associates, Inc.+ 14,400 716
Microchip Technology, Inc. 30,000 1,196
Micron Electronics+ 41,000 569
Microsoft Corp.+ 443,500 57,657
Netscape Communications
Corp.+ 25,898 851
Novell, Inc.+ 120,800 1,019
Oracle Systems Corp.+ 367,962 13,166
Parametric Technology
Corp.+ 51,200 2,259
PeopleSoft, Inc.+ 42,800 2,691
Pitney Bowes, Inc. 62,300 4,941
Quantum Corp.+ 55,400 1,752
Rational Software Corp.+ 10,000 91
Read-Rite Corp.+ 14,000 278
Remedy Corp.+ 8,000 376
Seagate Technology, Inc.+ 87,060 2,362
Security Dynamics
Technologies, Inc.+ 8,000 271
Shiva Corp.+ 2,000 21
Siebel Systems Inc.+ 106 4
Silicon Graphics, Inc.+ 73,700 1,082
Sterling Software, Inc.+ 13,800 471
Storage Technology Corp.+ 30,400 1,784
Sun Microsystems, Inc.+ 128,000 4,384
Sybase, Inc.+ 54,800 894
Synopsys, Inc.+ 23,800 925
Technology Data Corp.+ 13,000 579
Unisys Corp.+ 64,800 863
</TABLE>
43
<PAGE> 46
SCHWAB 1000 FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Western Digital Corp.+ 33,400 $ 1,000
Xerox Corp. 123,500 9,795
----------
267,599
----------
BUSINESS SERVICES--2.9 %
Accustaff, Inc.+ 30,000 857
Affiliated Computer
Services, Inc.+ 11,000 276
America Online, Inc.+ 36,700 2,826
American Management
Systems, Inc.+ 11,000 238
APAC Teleservices, Inc.+ 14,000 191
Apollo Group, Inc. Class A+ 15,000 634
Automatic Data Processing,
Inc. 106,400 5,433
Browning-Ferris Industries,
Inc. 71,200 2,314
Cadence Design Systems,
Inc.+ 34,875 1,857
Cambridge Technology
Partners+ 12,000 438
Camco International, Inc. 18,000 1,301
Catalina Marketing Corp.+ 6,000 274
Choice Hotels
International+ 14,550 256
Choicepoint, Inc.+ 5,900 220
Cintas Corp. 16,100 1,163
Cognizant Corp. 59,600 2,336
Comdisco, Inc. 33,033 1,043
Concord EFS, Inc.+ 14,850 441
Corrections Corp. of
America+ 31,000 946
Credit Acceptance Corp.+ 7,000 39
Deluxe Corp. 26,000 852
DST Systems, Inc.+ 15,000 530
Dun & Bradstreet Corp. 69,600 1,988
Ecolab, Inc. 26,400 1,256
Equifax, Inc. 59,000 1,833
First Data Corp. 164,302 4,775
Fiserv, Inc.+ 26,975 1,207
Foundation Health Systems,
Inc. Class A+ 45,760 1,316
Gartner Group, Inc. Class
A+ 38,400 1,085
Gtech Holdings Corp.+ 15,700 506
H & R Block, Inc. 34,700 1,284
HBO & Co. 82,200 3,576
Health Care & Retirement
Corp.+ 10,050 380
Health Management
Associates, Inc. Class A+ 58,752 1,432
Healthcare Compare Corp.+ 20,000 1,075
IKON Office Solutions 41,400 1,172
Interpublic Group of
Companies, Inc. 44,850 2,130
John H. Harland Co. 10,000 224
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Keane, Inc.+ 20,000 $ 593
Kelly Services, Inc. Class
A 23,525 835
Manpower, Inc. 31,500 1,209
Medpartners, Inc.+ 81,144 2,064
National Data Corp. 10,000 369
National Service
Industries, Inc. 12,200 540
NCR Corp.+ 29,451 893
Olsten Corp. 22,275 340
Omnicom Group, Inc. 29,100 2,055
Pacificare Health Systems,
Inc. Class B+ 21,164 1,370
Paychex, Inc. 34,087 1,300
PhyCor, Inc.+ 22,650 522
Quorum Health Group, Inc.+ 19,650 477
R.R. Donnelley & Sons Co. 52,500 1,713
Republic Industries, Inc.+ 146,700 4,328
Reynolds & Reynolds Co.
Class A 20,400 349
Robert Half International,
Inc.+ 34,650 1,418
Service Corp. International 101,400 3,086
Shared Medical Systems
Corp. 7,600 416
Steris Corp.+ 9,000 358
Stewart Enterprises, Inc.
Class A 13,050 542
Sungard Data Systems, Inc.+ 41,600 983
SUPERVALU, Inc. 15,800 579
Total System Services, Inc. 51,800 1,023
U.S. Office Products Co.+ 23,000 719
U.S.A. Waste Services,
Inc.+ 77,050 2,851
Unisource Worldwide, Inc. 20,700 338
Vencor, Inc.+ 27,775 750
Viad Corp. 20,100 367
Wallace Computer Service,
Inc. 23,800 915
Waste Management, Inc. 166,000 3,880
Wellpoint Health Networks,
Inc. Class A+ 26,425 1,209
Wheelabrator Technologies,
Inc. 81,900 1,244
----------
89,339
----------
CHEMICAL--3.0 %
Air Products & Chemicals,
Inc. 46,100 3,504
Albemarle Corp. 15,400 373
Arco Chemical Co. 32,600 1,593
Betz Laboratories, Inc. 12,500 802
Cabot Corp. 17,800 437
Crompton & Knowles Corp. 22,000 556
Cytec Industries, Inc.+ 13,755 671
Dow Chemical Co. 82,000 7,442
E.I. du Pont de Nemours &
Co. 422,400 24,023
Eastman Chemical Co. 33,725 2,011
</TABLE>
44
<PAGE> 47
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Ethyl Corp. 31,300 $ 270
Great Lakes Chemical Corp. 21,700 1,020
Hercules, Inc. 34,400 1,578
International Specialty
Products, Inc.+ 45,400 678
Lubrizol Corp. 15,600 601
Lyondell Petrochemical Co.+ 36,300 930
M.A. Hanna Co. 10,725 276
Millennium Chemicals, Inc. 24,000 564
Minnesota Mining &
Manufacturing Co. 153,900 14,082
Monsanto Co. 225,500 9,640
Morton International, Inc. 46,900 1,548
Nalco Chemical Co. 26,800 1,072
Olin Corp. 20,000 909
PPG Industries, Inc. 68,000 3,851
Praxair, Inc. 57,100 2,487
Rohm & Haas Co. 30,300 2,524
RPM, Inc. 35,875 673
Sigma-Aldrich Corp. 35,000 1,229
Solutia, Inc.+ 41,100 909
Union Carbide Corp. 47,000 2,147
Valspar Corp. 21,600 637
W.R. Grace & Co. 24,900 1,693
Witco Corp. 25,900 1,127
----------
91,857
----------
CONSTRUCTION--0.4%
Armstrong World Industries,
Inc. 13,600 905
Centex Corp. 9,000 527
Clayton Homes, Inc. 51,346 844
Crane Co. 21,900 910
Fluor Corp. 27,000 1,110
Lafarge Corp. 16,100 489
Martin Marietta Materials,
Inc. 21,400 746
Oakwood Homes Corp. 14,000 368
Owens Corning 18,300 627
Sherwin-Williams Co. 55,000 1,526
The Stanley Works 36,800 1,556
USG Corp.+ 11,700 552
Vulcan Materials Co. 14,800 1,314
----------
11,474
----------
CONSUMER-DURABLE--0.5 %
Black & Decker Corp. 29,500 1,123
Harman International
Industries, Inc. 5,600 302
Leggett & Platt, Inc. 33,300 1,390
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Masco Corp. 66,400 $ 2,915
Maytag Corp. 42,800 1,428
Newell Co. 51,674 1,983
Shaw Industries, Inc. 30,100 365
Snap-on, Inc. 22,150 952
Sunbeam Corp. 33,100 1,500
Whirlpool Corp. 31,100 1,885
----------
13,843
----------
CONSUMER-NONDURABLE--1.2 %
American Greetings Corp.
Class A 29,200 1,013
Boston Chicken, Inc.+ 15,600 139
Brinker International,
Inc.+ 20,225 283
Corning, Inc. 85,800 3,872
Cracker Barrel Old Country
Store, Inc. 20,900 617
Darden Restaurants, Inc. 38,600 439
First Brands Corp. 6,400 163
Fort James Corp.+ 78,100 3,100
Fortune Brands, Inc. 51,300 1,696
Hasbro, Inc. 44,725 1,297
Lancaster Colony Corp. 16,300 807
Lone Star Steakhouse &
Saloon, Inc.+ 7,400 171
Mattel, Inc. 114,220 4,440
McDonald's Corp. 259,200 11,615
Outback Steakhouse, Inc.+ 11,250 304
Premark International, Inc. 17,300 468
Rubbermaid, Inc. 54,000 1,299
Starbucks Corp.+ 20,500 677
Tricon Global Restaurants,
Inc.+ 54,760 1,660
U.S. Industries, Inc. 22,500 605
Wendy's International, Inc. 63,500 1,334
----------
35,999
----------
CONTAINERS--0.3%
Bemis Co., Inc. 13,400 511
Crown Cork & Seal Co., Inc. 43,600 1,963
Jefferson Smurfit Corp.+ 51,900 779
Owens-Illinois, Inc.+ 55,900 1,929
Sealed Air Corp.+ 25,600 1,320
Sonoco Products, Inc. 38,310 1,233
Stone Container Corp. 22,112 267
----------
8,002
----------
ELECTRONICS--5.0 %
Adaptec, Inc.+ 45,400 2,199
ADC Telecommunications,
Inc.+ 50,400 1,670
Advanced Micro Devices,
Inc.+ 49,300 1,134
</TABLE>
45
<PAGE> 48
SCHWAB 1000 FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Altera Corp.+ 32,200 $ 1,429
American Power Conversion
Corp.+ 33,500 913
AMP, Inc. 83,300 3,749
Analog Devices, Inc.+ 58,400 1,785
Applied Materials, Inc.+ 139,400 4,652
Arrow Electronics, Inc.+ 38,800 1,101
Ascend Communications,
Inc.+ 80,010 2,160
Atmel Corp.+ 30,200 781
Avnet, Inc. 17,100 1,076
AVX Corp. 26,000 735
Cypress Semiconductor
Corp.+ 40,600 457
Electronic Data Systems
Corp. 173,800 6,724
ESS Technology+ 12,000 146
Fore Systems, Inc.+ 23,400 380
General Semiconductor,
Inc.+ 9,250 105
General Signal Corp. 21,600 867
Glenayre Technologies,
Inc.+ 14,600 190
Harris Corp. 36,600 1,597
Imation Corp.+ 10,760 230
Integrated Device
Technology, Inc.+ 24,000 278
Intel Corp. 604,500 46,545
KLA-Tencor Corp.+ 37,400 1,643
Lattice Semiconductor
Corp.+ 7,000 350
Linear Technology Corp. 30,700 1,930
LSI Logic Corp.+ 45,100 984
Lucent Technologies, Inc.+ 238,727 19,680
Maxim Integrated Products,
Inc.+ 24,600 1,630
Micron Technology, Inc.+ 69,500 1,863
Molex, Inc. 41,806 1,568
Molex, Inc. Class A 30,457 1,068
Motorola, Inc. 224,400 13,857
National Semiconductor
Corp.+ 49,300 1,775
Perkin Elmer Corp. 12,800 800
Pittway Corp. 6,750 421
Qualcomm, Inc.+ 24,700 1,392
Rockwell International
Corp. 78,300 3,837
SCI Systems, Inc.+ 18,000 792
Scientific-Atlanta, Inc. 24,700 458
Sensormatic Electronics
Corp. 10,250 153
Solectron Corp.+ 43,600 1,711
Symbol Technologies, Inc. 11,550 459
Tektronix, Inc. 17,600 1,041
Tele-Communications
International, Inc. Class
A+ 35,000 564
Teradyne, Inc.+ 32,900 1,232
Texas Instruments, Inc. 69,800 7,447
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Thermo Electron Corp.+ 66,737 $ 2,490
Thomas & Betts Corp. 19,400 965
Varian Associates, Inc. 9,300 544
Vishay Intertechnology,
Inc.+ 13,450 322
Vitesse Semiconductor
Corp.+ 10,500 455
VLSI Technology, Inc.+ 14,000 415
Xilinx, Inc.+ 27,400 935
----------
153,684
----------
ENERGY-DEVELOPMENT--2.0 %
Anadarko Petroleum Corp. 19,700 1,443
Apache Corp. 30,100 1,264
Baker Hughes, Inc. 68,200 3,133
Barrett Resources Corp.+ 10,000 352
BJ Services Co.+ 18,000 1,526
Burlington Resources, Inc. 68,467 3,351
Chesapeake Energy Corp. 15,000 147
Cooper Cameron Corp.+ 32,000 2,312
Devon Energy Corp. 10,000 448
Diamond Offshore Drilling,
Inc. 56,600 3,523
Dresser Industries, Inc. 61,060 2,572
Enron Oil & Gas Co. 57,800 1,217
Ensco International, Inc. 52,800 2,221
Enserch Explorations, Inc.+ 74,737 673
EVI, Inc.+ 27,600 1,772
Falcon Drilling, Inc.+ 24,000 873
Global Marine, Inc.+ 69,500 2,163
Halliburton Co. 97,400 5,805
Helmerich & Payne, Inc. 10,000 807
Mapco Petroleum Co. 31,400 1,036
Mitchell Energy &
Development Corp. Class A 28,000 704
Nabors Industries, Inc.+ 41,100 1,690
NGC Corp. 56,000 1,064
Noble Affiliates, Inc. 27,400 1,125
Noble Drilling Corp.+ 55,000 1,956
Occidental Petroleum Corp. 123,900 3,454
Ocean Energy, Inc.+ 6,000 371
Reading & Bates Corp.+ 33,500 1,420
Rowan Companies, Inc.+ 44,500 1,730
Tidewater, Inc. 27,000 1,774
Transocean Offshore, Inc. 36,000 1,944
Union Pacific Resources
Group 107,588 2,649
Union Texas Petroleum
Holding, Inc. 21,100 480
United Meridian Corp.+ 7,500 255
Valero Energy 19,600 590
Vastar Resources 29,800 1,203
</TABLE>
46
<PAGE> 49
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Weatherford International,
Inc.+ 21,400 $ 1,093
Western Atlas, Inc.+ 26,600 2,293
----------
62,433
----------
FOOD-AGRICULTURE--5.1%
Archer-Daniels Midland Co. 197,865 4,402
Campbell Soup Co. 168,200 8,673
Coca-Cola Co. 922,600 52,127
Coca-Cola Enterprises, Inc. 134,600 3,786
ConAgra, Inc. 167,048 5,032
CPC International, Inc. 56,700 5,613
Dean Foods Co. 21,150 1,001
Dole Food Co., Inc. 23,100 1,024
Flowers Industries, Inc. 22,500 428
General Mills, Inc. 60,500 3,993
H.J. Heinz Co. 140,100 6,506
Hershey Foods Corp. 52,600 2,906
Hormel Foods Corp. 19,100 574
IBP, Inc. 31,400 728
IMC Global, Inc. 32,360 1,090
Interstate Bakeries Corp. 18,600 1,188
Kellogg Co. 158,800 6,838
McCormick & Co., Inc. 33,400 835
Nabisco Holdings Corp. 14,000 576
PepsiCo, Inc. 562,600 20,711
Pioneer Hi-Bred
International, Inc. 34,500 3,161
Quaker Oats Co. 56,600 2,710
Ralston Purina Co. 39,300 3,527
Richfood Holdings, Inc. 12,750 308
Sara Lee Corp. 171,400 8,763
SYSCO Corp. 60,700 2,428
Terra Industries, Inc. 11,100 135
Tyson Foods, Inc. Class A 69,300 1,308
Universal Corp. 9,500 365
Whitman Corp. 41,900 1,100
Wm. Wrigley Jr. Co. 46,000 3,329
----------
155,165
----------
GOLD--0.2 %
Battle Mountain Gold Co. 66,000 404
Homestake Mining Co. 37,800 468
Newmont Gold Co. 66,600 2,406
Newmont Mining Corp. 59,231 2,073
----------
5,351
----------
HEALTHCARE--9.9 %
Abbott Laboratories 287,700 17,640
Allegiance Corp. 14,920 414
Allergan, Inc. 15,700 517
ALZA Corp.+ 27,600 719
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
American Home Products
Corp. 236,800 $ 17,553
Amgen, Inc. 95,200 4,689
Bausch & Lomb, Inc. 20,800 816
Baxter International, Inc. 106,600 4,930
Beckman Instruments, Inc. 16,300 642
Becton, Dickinson & Co. 42,100 1,939
Bergen Brunswig Corp. 39,353 1,577
Beverly Enterprises, Inc.+ 48,400 723
Biogen, Inc.+ 26,000 871
Biomet, Inc. 48,900 1,219
Boston Scientific Corp.+ 68,471 3,115
Bristol-Myers Squibb Co. 370,700 32,529
C.R. Bard, Inc. 13,600 377
Cardinal Health, Inc. 39,493 2,932
Centocor, Inc.+ 20,600 906
Chiron Corp.+ 64,612 1,244
Columbia/HCA Healthcare
Corp. 236,258 6,674
Crescendo Pharmaceuticals
Corp. Class A+ 1,380 16
Dentsply International,
Inc. 18,000 511
Dura Pharmaceuticals, Inc.+ 19,000 919
Eli Lilly & Co. 407,168 27,229
Forest Laboratories, Inc.+ 9,300 430
Genentech, Inc.+ 42,500 2,468
Genzyme Corp. (General
Division)+ 28,800 788
Genzyme Corp. (Tissue
Repair)+ 864 7
Guidant Corp.+ 54,336 3,124
HealthSouth Corp.+ 154,200 3,942
Humana, Inc.+ 68,500 1,439
Idexx Laboratories, Inc.+ 9,800 156
Interneuron
Pharmaceuticals, Inc.+ 10,500 122
Ivax Corp.+ 29,700 225
Johnson & Johnson 490,300 28,131
Jones Medical Industries,
Inc. 10,800 325
Lincare Holdings, Inc.+ 7,500 402
Mallinckrodt, Inc. 25,600 960
Manor Care, Inc. 23,550 808
McKesson Corp.+ 19,500 2,093
Medtronic, Inc. 171,200 7,447
Merck & Co., Inc. 446,054 39,811
Mylan Laboratories, Inc.+ 49,550 1,087
Omnicare, Inc. 26,600 740
Pfizer, Inc. 479,800 33,946
Quintiles Transnational
Corp.+ 11,000 798
R.P. Scherer Corp.+ 13,600 801
</TABLE>
47
<PAGE> 50
SCHWAB 1000 FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Schering-Plough Corp. 272,200 $ 15,260
St. Jude Medical, Inc.+ 26,450 802
Stryker Corp. 36,600 1,361
Sybron International Corp.+ 29,800 1,196
Tenet Healthcare Corp.+ 112,373 3,434
Thermo Cardiosystems, Inc.+ 7,500 162
U.S. Surgical Corp. 20,700 558
United Healthcare Co. 75,400 3,492
Warner Lambert Co. 100,400 14,376
Watson Pharmaceuticals+ 35,000 1,111
----------
302,503
----------
HOUSEHOLD PRODUCTS--2.3%
Alberto-Culver Co. Class B 18,700 565
Avon Products, Inc. 45,200 2,961
Clorox Co. 38,600 2,702
Colgate-Palmolive Co. 112,000 7,252
Dial Corp. 20,100 339
Estee Lauder Companies
Class A 18,000 800
Gillette Co. 209,205 18,632
International Flavors &
Fragrances, Inc. 43,500 2,104
Procter & Gamble Co. 504,200 34,286
Tupperware Corp. 28,700 719
----------
70,360
----------
IMAGING & PHOTO--0.3%
C-Cube Microsystems, Inc.+ 8,000 190
Eastman Kodak Co. 121,900 7,299
Polaroid Corp. 18,200 818
----------
8,307
----------
INSURANCE--4.7%
Aegon NV ARS*** 12,989 1,033
Aetna, Inc. 54,665 3,885
AFLAC, Inc. 49,825 2,535
Alleghany Corp.+ 2,953 791
Allmerica Financial Corp. 40,216 1,885
Allstate Corp. 158,724 13,164
AMBAC Financial Group, Inc. 20,800 879
American Bankers Insurance
Group, Inc. 12,200 456
American General Corp. 96,546 4,924
American International
Group, Inc. 260,037 26,540
American National Insurance
Co. 7,900 758
Aon Corp. 61,775 3,332
Chubb Corp. 65,100 4,313
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
CIGNA Corp. 29,400 $ 4,564
Cincinnati Financial Corp. 24,538 2,224
CNA Financial Corp.+ 25,400 3,151
Conseco, Inc. 74,640 3,256
Equitable Companies, Inc. 81,100 3,340
Equitable of Iowa
Companies**** 14,700 984
Erie Indemnity Co. Class A 40,000 1,220
Everest Reinsurance
Holdings, Inc. 15,000 564
General Re Corp. 31,700 6,251
Hartford Financial Services
Group 43,900 3,556
Jefferson-Pilot Corp. 29,150 2,254
Liberty Financial Corp. 7,000 364
Lincoln National Corp. 33,900 2,331
Marsh & McLennan Companies,
Inc. 61,800 4,388
MBIA Corp. 37,000 2,211
Mercury General Corp. 39,400 1,672
MGIC Investment Corp. 45,400 2,738
Ohio Casualty Corp. 17,300 766
Old Republic International
Corp. 30,850 1,103
Oxford Health Plans, Inc.+ 29,900 772
Penncorp Financial Group,
Inc. 9,000 293
PMI Group, Inc. 10,400 629
Progressive Corp. 33,900 3,534
Protective Life Corp. 13,800 730
Provident Companies, Inc. 91,992 3,070
Providian Financial Corp. 29,900 1,106
Reliance Group Holdings,
Inc. 34,000 429
Reliastar Financial Corp. 35,000 1,308
SAFECO Corp. 54,600 2,600
St. Paul Companies, Inc. 34,100 2,726
SunAmerica, Inc. 67,650 2,431
TIG Holdings, Inc. 16,300 552
Torchmark Corp. 49,700 1,982
Transamerica Corp. 26,500 2,675
Transatlantic Holdings,
Inc. 11,000 761
United Insurance Companies,
Inc.+ 12,000 402
Unitrin, Inc. 14,200 909
UNUM Corp. 52,416 2,555
USF & G Corp. 32,700 662
Western National Corp. 27,500 792
----------
142,350
----------
</TABLE>
48
<PAGE> 51
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
MEDIA--2.7%
A.H. Belo Corp. Class A 18,000 $ 851
Ascent Entertainment Group,
Inc.+ 8,309 82
BHC Communications, Inc. 11,700 1,445
Central Newspapers, Inc.
Class A 7,000 460
Chris-Craft Industries,
Inc.+ 10,691 553
Clear Channel
Communications, Inc.+ 38,600 2,548
Comcast Corp. Class A 130,688 3,594
Cox Communications, Inc.
Class A+ 87,306 2,685
Dow Jones & Co., Inc. 46,000 2,139
E.W. Scripps Co. Class A 31,675 1,328
Gannett Co., Inc. 100,600 5,288
Gaylord Entertainment Co.
Class A+ 11,003 318
Harte Hanks Communications,
Inc. 9,100 316
K-III Communications Corp.+ 38,000 475
King World Productions,
Inc. 9,000 425
Knight-Ridder, Inc. 28,800 1,505
Lee Enterprises, Inc. 7,000 186
Lin Television Corp.+ 10,550 555
McClatchy Newspapers, Inc.
Class A 12,000 394
McGraw Hill Companies, Inc. 32,100 2,099
Meredith Corp. 16,000 545
New York Times Co. Class A 34,013 1,862
Pulitzer Publishing Co. 3,066 165
Readers Digest Association,
Inc. 42,800 974
Regal Cinemas, Inc.+ 7,500 173
SBC Communications, Inc. 335,082 21,316
Scholastic Corp.+ 700 28
Telecommunications, Inc.
Series A (Liberty Media
Group)+ 78,129 2,720
Telecommunications, Inc.
Series A (TCI Group)+ 245,346 5,628
Time Warner, Inc. 201,955 11,650
Times Mirror Co. Series A 36,400 1,970
Tribune Co. 44,200 2,437
Viacom, Inc. Class A+ 42,172 1,260
Viacom, Inc. Class B+ 122,026 3,691
Washington Post Co. 4,300 1,866
----------
83,531
----------
MISCELLANEOUS FINANCE--4.9 %
A.G. Edwards & Sons, Inc. 42,843 1,406
Advanta Corp. Class A 14,600 475
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
American Express Co. 169,400 $ 13,213
Bear, Stearns & Co., Inc. 39,138 1,553
Beneficial Corp. 16,000 1,227
Berkshire Hathaway, Inc.+ 469 20,491
Capital One Financial Corp. 27,000 1,232
Charles Schwab Corp. 92,250 3,148
Charter One Financial, Inc. 33,731 1,961
Countrywide Credit
Industries, Inc. 35,985 1,235
Donaldson Lufkin & Jenrette 17,300 1,215
Freddie Mac 255,400 9,673
Fannie Mae 397,000 19,230
Finova Group, Inc. 21,600 949
Franklin Resources, Inc. 46,300 4,161
Golden State Bancorp, Inc.+ 14,000 466
Golden West Financial Corp. 19,200 1,666
GP Financial Corp. 14,100 908
Green Tree Financial Corp. 44,000 1,854
H.F. Ahmanson & Co. 40,300 2,378
Household International,
Inc. 41,000 4,643
Lehman Brothers Holdings,
Inc. 34,880 1,642
Leucadia National Corp. 30,000 1,039
Mercury Finance Co. 64,563 73
Merrill Lynch & Co., Inc.+ 118,600 8,020
Money Store, Inc. 15,000 426
Morgan Stanley, Dean
Witter, Discover & Co. 216,605 10,614
PaineWebber Group, Inc. 39,125 1,729
Provident Financial Group,
Inc. 10,200 469
Salomon, Inc. 37,100 2,882
SLM Holding Corp. 20,100 2,822
T. Rowe Price Associates,
Inc. 24,200 1,603
TCF Financial Corp. 12,800 728
Travelers Group, Inc. 236,433 16,550
United Asset Management
Corp. 18,400 488
Washington Federal, Inc. 14,000 413
Washington Mutual, Inc. 98,245 6,724
Wesco Financial Corp. 2,100 672
----------
149,978
----------
MOTOR VEHICLE--2.0 %
Chrysler Corp. 246,600 8,693
Cummins Engine Co., Inc. 10,400 634
Dana Corp. 36,300 1,699
Eaton Corp. 32,100 3,102
</TABLE>
49
<PAGE> 52
SCHWAB 1000 FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Echlin, Inc. 22,800 $ 747
Ford Motor Co. 436,500 19,069
General Motors Corp. 273,400 17,549
General Motors Corp. Class
H 38,000 2,404
Genuine Parts Co. 58,575 1,834
Harley-Davidson, Inc. 71,400 1,981
Paccar, Inc. 30,120 1,357
TRW, Inc. 47,700 2,731
----------
61,800
----------
NON-FERROUS--0.4%
Alumax, Inc.+ 25,500 829
Aluminum Company of America 63,000 4,600
Asarco, Inc. 10,800 296
Cyprus Amax Minerals Co. 31,200 653
Engelhard Corp. 44,687 776
Freeport-McMoRan Copper &
Gold, Inc. Class A 29,531 681
Freeport-McMoRan Copper &
Gold, Inc. Class B 63,894 1,525
Phelps Dodge Corp. 22,200 1,651
Reynolds Metals Co. 28,800 1,755
----------
12,766
----------
OIL-DOMESTIC--1.1%
Amerada Hess Corp. 30,100 1,849
Ashland, Inc. 23,600 1,125
Atlantic Richfield Co. 117,200 9,648
Fina, Inc. 8,000 508
Kerr-McGee Corp. 17,000 1,149
Monterey Resources, Inc. 17,025 339
Murphy Oil Corp. 22,370 1,296
Oryx Energy Co.+ 28,200 777
Pennzoil Co. 13,800 1,021
Phillips Petroleum Co. 95,700 4,629
Pogo Producing Co. 10,000 362
Santa Fe Energy Resources,
Inc.+ 38,600 504
Sun, Inc. 31,900 1,278
Tosco Corp. 48,600 1,604
TransTexas Gas Corp.+ 22,000 418
Ultramar Diamond Shamrock
Corp. 30,800 951
Unocal Corp. 95,534 3,941
USX-Marathon Group 101,000 3,611
----------
35,010
----------
OIL-INTERNATIONAL--4.1%
Amoco Corp. 181,000 16,595
Chevron Corp. 238,400 19,772
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Exxon Corp. 919,400 $ 56,487
Mobil Corp. 287,000 20,897
Texaco, Inc. 195,600 11,137
----------
124,888
----------
PAPER--1.2 %
Boise Cascade Corp. 23,000 796
Bowater, Inc. 13,600 569
Champion International
Corp. 38,500 2,125
Consolidated Papers, Inc. 17,100 888
Georgia-Pacific Corp.+ 32,300 2,739
International Paper Co. 110,100 4,955
Kimberly-Clark Corp. 209,660 10,888
Louisiana-Pacific Corp. 36,500 767
Mead Corp. 18,400 1,113
Potlatch Corp. 9,300 464
Rayonier, Inc. 13,875 606
St. Joe Corp. 9,100 867
Temple Inland, Inc. 19,400 1,113
Union Camp Corp. 26,300 1,425
Westvaco Corp. 43,300 1,421
Weyerhaeuser Co. 74,400 3,553
Willamette Industries, Inc. 34,000 1,124
----------
35,413
----------
PRODUCER GOODS & MANUFACTURING--5.6 %
Aeroquip-Vickers, Inc. 7,000 364
AGCO, Inc. 19,600 568
Airgas, Inc.+ 20,600 321
Allied Signal, Inc. 209,800 7,553
American Financial Group,
Inc. 24,100 917
American Standard Corp.+ 25,500 912
Avery Dennison Corp. 36,800 1,465
Blyth Industries, Inc.+ 15,000 373
Boise Cascade Office
Products Corp.+ 16,400 312
Briggs & Stratton Corp. 16,300 811
Case Corp. 23,900 1,430
Caterpillar, Inc. 133,600 6,847
Commscope Inc.+ 12,333 136
Cooper Industries, Inc. 45,300 2,361
Corporate Express, Inc.+ 34,350 505
Deere & Co. 94,500 4,973
Dover Corp. 44,600 3,011
</TABLE>
50
<PAGE> 53
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Emerson Electric Co. 161,400 $ 8,463
Federal Signal Corp. 10,066 243
FMC Corp.+ 13,600 1,099
Foster Wheeler Corp. 9,800 322
General Electric Co. 1,217,700 78,615
Halter Marine Group, Inc.+ 4,158 218
Harnischfeger Industries,
Inc. 22,500 886
Harsco Corp. 14,800 614
Herman Miller, Inc. 14,200 694
Hillenbrand Industries,
Inc. 27,000 1,154
Hubbell, Inc. Class B 26,938 1,187
Illinois Tool Works, Inc. 94,600 4,653
Ingersoll-Rand Co. 65,550 2,552
ITT Industries, Inc. 50,600 1,597
Johns Manville Corp. 49,300 595
Johnson Controls, Inc. 28,600 1,283
Kennametal, Inc. 9,700 470
Mark IV Industries, Inc. 15,405 374
Millipore Corp. 12,400 485
Nordson Corp. 5,300 263
Pall Corp. 40,233 832
Parker-Hannifin Corp. 36,375 1,521
Pentair, Inc. 21,200 819
Precision Castparts Corp. 7,100 418
Prestek, Inc.+ 8,000 248
Raychem Corp. 15,400 1,395
Smith International, Inc.+ 17,000 1,296
Tecumseh Products Co. Class
A 6,500 337
Tenneco, Inc. 70,500 3,168
Thermo Instruments Systems,
Inc.+ 41,737 1,505
Timken Co. 18,600 623
Trinity Industries, Inc. 11,950 535
Tyco International Ltd.+ 208,228 7,861
U.S. Filter Corp.+ 25,000 1,003
Ucar International, Inc.+ 14,000 525
W.W. Grainger, Inc. 15,800 1,382
Westinghouse Electric Corp. 264,807 7,001
York International Corp. 23,400 1,068
----------
170,163
----------
RAILROAD--0.7 %
Alexander & Baldwin, Inc. 21,700 597
Burlington Northern Santa
Fe Corp. 57,451 5,458
CSX Corp. 77,700 4,249
Illinois Central Corp.
Class A 15,525 553
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Kansas City Southern
Industries, Inc.+ 44,100 $ 1,345
Norfolk Southern Corp. 146,100 4,693
Union Pacific Corp. 89,761 5,498
Wisconsin Central
Transportation Corp.+ 12,900 402
----------
22,795
----------
REAL PROPERTY--0.2 %
Doubletree Corp.+ 11,000 458
HFS, Inc.+ 65,425 4,613
Host Marriott Corp.+ 67,500 1,409
Rouse Co. 22,500 624
Sunburst Hospitality Corp.+ 4,850 49
----------
7,153
----------
RETAIL--5.2 %
Albertson's, Inc. 89,200 3,289
American Stores Co. 93,400 2,399
AutoZone, Inc.+ 52,000 1,537
Bed Bath & Beyond, Inc.+ 24,800 787
Borders Group+ 22,000 571
CDW Computer Centers, Inc.+ 6,400 397
Circuit City Stores, Inc. 33,800 1,348
CompUSA, Inc.+ 26,000 852
Consolidated Stores Corp.+ 30,312 1,209
Costco Companies, Inc.+ 80,704 3,107
CUC International, Inc.+ 165,037 4,869
CVS Corp. 63,057 3,866
Dayton Hudson Corp. 80,500 5,056
Dillards Inc. Class A 42,200 1,619
Dollar General Corp. 34,937 1,155
Family Dollar Stores, Inc. 69,750 1,639
Fastenal Co. 9,700 475
Federated Department
Stores, Inc.+ 80,200 3,529
Food Lion, Inc. Class A 150,450 1,166
Food Lion, Inc. Class B 64,800 488
Fred Meyer, Inc.+ 56,000 1,600
Gap, Inc. 102,000 5,425
General Nutrition
Companies, Inc.+ 23,600 743
Giant Food, Inc. Class A 13,700 420
Global Directmail Corp.+ 10,000 184
Great Atlantic & Pacific
Tea Co., Inc. 5,700 175
Hannaford Bros. Co., Inc. 13,300 503
Harcourt General, Inc. 20,200 1,011
</TABLE>
51
<PAGE> 54
SCHWAB 1000 FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Home Depot, Inc. 264,449 $ 14,710
International Game
Technology 33,600 859
Intimate Brands 100,000 2,138
J.C. Penney Co., Inc. 102,800 6,033
K Mart Corp.+ 165,700 2,185
Kohl's Corp.+ 29,200 1,960
Kroger Co.+ 86,400 2,819
Limited, Inc. 94,819 2,234
Lowe's Companies, Inc. 66,100 2,751
May Department Stores Co. 90,900 4,897
Mercantile Stores Co., Inc. 18,300 1,079
Nordstrom, Inc. 36,900 2,260
Office Depot, Inc.+ 48,300 996
Officemax, Inc.+ 56,100 750
Payless Shoesource, Inc.+ 19,600 1,093
Pep Boys-Manny Moe & Jack 13,700 345
PETsMART, Inc.+ 14,800 113
Rite Aid Corp. 46,450 2,758
Ross Stores, Inc. 16,000 598
Safeway, Inc.+ 84,540 4,914
Sears Roebuck & Co. 147,100 6,160
Sotheby's Holdings, Inc.
Class A+ 18,700 351
Southland Corp.+ 100,000 241
Staples, Inc.+ 58,605 1,538
Tandy Corp. 36,116 1,241
Tiffany & Co. 10,000 395
TJX Companies, Inc. 52,200 1,546
Toys 'R' Us, Inc.+ 105,480 3,593
Viking Office Products,
Inc.+ 56,200 1,345
Wal Mart Stores, Inc. 840,500 29,523
Walgreen Co. 177,400 4,989
Weis Markets, Inc. 7,900 274
Winn Dixie Stores, Inc. 50,300 1,867
Woolworth Corp.+ 49,000 931
----------
158,905
----------
STEEL--0.2 %
AK Steel Holding Corp. 7,500 316
Allegheny Teledyne, Inc. 58,280 1,533
LTV Corp. 19,200 234
Nucor Corp. 35,100 1,835
USX-U.S. Steel Group 27,160 923
Worthington Industries,
Inc. 21,700 449
----------
5,290
----------
TELEPHONE--5.6%
360 Communications Co.+ 47,578 1,005
Adtran, Inc.+ 9,600 346
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
AirTouch Communications,
Inc.+ 189,200 $ 7,308
Alltel Corp. 68,500 2,423
Ameritech Corp. 204,000 13,260
Andrew Corp. 25,612 594
Aspect Telecommunications
Corp.+ 10,000 240
AT&T Corp.+ 608,617 29,785
Bell Atlantic Corp. 290,643 23,215
BellSouth Corp. 373,500 17,671
Century Telephone
Enterprises, Inc. 28,750 1,220
Cincinnati Bell, Inc. 46,800 1,264
COMSAT Corp. 17,000 389
DSC Communications Corp.+ 49,800 1,214
Frontier Corp. 62,450 1,350
GTE Corp. 356,400 15,125
LCI International, Inc.+ 39,000 1,009
MCI Communications Corp. 254,600 9,038
Nextel Communications,
Inc.+ 96,100 2,523
Nextlevel Systems, Inc.+ 37,000 500
Paging Network, Inc.+ 30,300 375
Pairgain Technologies,
Inc.+ 29,000 819
Pioneer Natural Resources
Company 29,400 1,178
Southern New England
Telecommunications Corp. 23,800 1,020
Sprint Corp. 157,334 8,181
Telephone & Data Systems,
Inc. 20,100 854
Tellabs, Inc.+ 69,600 3,758
U.S. Cellular Corp.+ 28,800 936
U.S. West, Inc.
(Communications Group) 174,110 6,932
U.S. West, Inc. (Media
Group)+ 234,700 5,926
WorldCom, Inc.+ 327,979 11,028
----------
170,486
----------
TOBACCO--1.5%
Gallaher Group
PLC-Sponsored ADR**+ 51,300 984
Loew's Corp. 45,000 5,026
Philip Morris Companies.,
Inc. 890,100 35,270
RJR Nabisco Holdings Corp. 126,736 4,016
UST, Inc. 65,200 1,952
----------
47,248
----------
</TABLE>
52
<PAGE> 55
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
TRANSPORTATION-MISCELLANEOUS--0.1%
Federal Express Corp.+ 38,600 $ 2,576
Pittston Service Group 9,900 358
Ryder Systems, Inc. 33,800 1,183
----------
4,117
----------
TRAVEL & RECREATION--1.3%
Acxiom Corp.+ 16,000 263
Brunswick Corp. 28,900 975
Callaway Golf Co. 19,000 613
Circus Circus Enterprises,
Inc.+ 25,400 565
Extended Stay America,
Inc.+ 20,400 268
Harrah's Entertainment,
Inc.+ 47,100 927
Hilton Hotels Corp. 96,200 2,964
ITT Corp.+ 52,900 3,951
La Quinta Inns, Inc. 19,200 343
Marriott International,
Inc. 46,100 3,215
MGM Grand, Inc.+ 27,500 1,207
Mirage Resorts, Inc.+ 69,100 1,728
Promus Hotel Corp.+ 15,200 597
Walt Disney Co. 250,907 20,637
----------
38,253
----------
UTILITIES--3.9%
AES Corp.+ 70,318 2,786
AGL Resources, Inc. 14,600 265
Allegheny Energy, Inc. 42,100 1,189
American Electric Power
Co., Inc. 68,900 3,256
American Water Works Co.,
Inc. 19,600 443
Baltimore Gas & Electric
Co. 47,150 1,294
Boston Edison Co. 12,900 407
CalEnergy Co., Inc.+ 21,900 750
Carolina Power & Light Co. 50,500 1,805
Centerior Energy Corp. 48,600 632
Central & South West
Services Corp. 75,800 1,634
Cinergy Corp. 67,565 2,230
Cipsco, Inc. 11,000 422
Citizens Utilities Company
Class B+ 77,952 775
CMS Energy Corp. 37,900 1,383
Coastal Corp. 43,300 2,603
Columbia Gas System, Inc. 19,100 1,380
Consolidated Edison Co. of
New York, Inc. 88,700 3,038
Consolidated Natural Gas
Co. 30,400 1,644
Delmarva Power & Light Co. 15,700 311
Dominion Resources, Inc. 68,650 2,553
DPL, Inc. 38,850 964
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
DQE, Inc. 29,050 $ 899
DTE Energy Co. 52,100 1,602
Duke Power Co. 131,931 6,364
Edison International 145,600 3,731
El Paso Natural Gas Co. 19,684 1,180
Enova Corp. 42,700 1,038
Enron Corp. 114,569 4,354
Entergy Corp. 92,421 2,259
Equitable Resources, Inc. 5,100 162
Florida Progress Corp. 30,400 990
FPL Group, Inc. 67,200 3,473
GPU, Inc. 42,600 1,542
Hawaiian Electric
Industries, Inc. 7,900 299
Houston Industries, Inc. 131,917 2,869
Idaho Power Co. 21,400 682
Illinova Corp. 16,300 363
Ipalco Enterprises, Inc. 11,000 385
K N Energy, Inc. 7,000 305
Kansas City Power & Light
Co. 15,900 466
Keyspan Energy Corp. 22,350 694
Ku Energy Corp. 26,500 911
LG & E Energy Corp. 25,900 550
Long Island Lighting Co. 36,800 927
MCN Corp. 35,600 1,233
Midamerican Energy Holdings
Co. 34,461 616
Montana Power Co. 17,900 453
National Fuel Gas Co. 16,600 732
New Century Energies Inc.+ 37,700 1,574
New England Electric Co. 28,800 1,129
New York State Electric &
Gas Corp. 16,400 438
Niagara Mohawk Power Corp.+ 25,200 244
NICOR, Inc. 10,300 397
Nipsco Industries, Inc. 30,900 1,358
Northeast Utilities 41,000 472
Northern States Power Co. 24,200 1,219
Ohio Edison Co. 54,000 1,337
Oklahoma Gas & Electric Co. 10,200 494
Pacific Enterprises, Inc. 32,800 1,072
Pacific Gas & Electric
Corp. 151,458 3,872
PacifiCorp. 119,500 2,592
PECO Energy Co. 78,500 1,781
Peoples Energy Corp. 9,500 340
Pinnacle West Capital Co. 32,300 1,124
Potomac Electric Power Co. 49,400 1,108
PP&L Resources, Inc. 54,720 1,183
</TABLE>
53
<PAGE> 56
SCHWAB 1000 FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
Public Service Enterprise
Group, Inc. 92,300 $ 2,394
Puget Sound Power & Light
Co. 28,200 751
Questar Corp. 17,900 691
Scana Corp. 45,800 1,156
Seagull Energy Corp.+ 19,000 464
Sonat, Inc. 25,600 1,176
Southern Co. 263,700 6,049
Teco Energy, Inc. 47,200 1,127
Texas Utilities Co. 85,812 3,079
Unicom Corp. 83,500 2,338
Union Electric Co. 33,800 1,274
Utilicorp United, Inc. 13,900 439
Washington Water Power Co. 7,700 154
Western Resources, Inc. 27,231 1,014
Williams Companies, Inc. 56,090 2,857
Wisconsin Energy Corp. 39,600 1,002
----------
118,542
----------
TOTAL COMMON STOCK
(Cost $1,994,858) 3,033,013
----------
PREFERRED STOCK--0.0%
HEALTHCARE--0.0 %
Fresenius National Medical,
Inc.+ 24,900 1
----------
<CAPTION>
Number Value
of Shares (000s)
--------- ----------
<S> <C> <C>
INSURANCE--0.0 %
Aetna, Inc. 6.25% Class C
(Voting) 2,922 $ 210
----------
TOTAL PREFERRED STOCK
(Cost $191) 211
----------
</TABLE>
<TABLE>
<CAPTION>
Value
Par (000s)
----------- ----------
<S> <C> <C>
REPURCHASE AGREEMENTS--0.6%
PNC BANK, N.A. 4.75%,
Dated 10/31/97; Due
11/3/97, Collateralized
by: Federal National
Mortgage Assoc. CMO:
$17,775,000 Par; 6.50%
Due 9/25/20 $17,276,000 17,276
----------
TOTAL REPURCHASE
AGREEMENTS
(Cost $17,276) 17,276
----------
TOTAL INVESTMENTS--100.0%
(Cost $2,012,325) $3,050,500
==========
</TABLE>
See accompanying Notes to Schedule of Investments and Notes to Financial
Statements.
54
<PAGE> 57
SCHWAB SMALL-CAP INDEX FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
COMMON STOCK--99.0%
AEROSPACE/DEFENSE--1.0%
AAR Corp. 11,400 $ 408
Alliant Techsystems, Inc.+ 7,500 446
Coltec Industries, Inc.+ 24,400 488
GenCorp., Inc. 25,200 616
Northrop Grumman Corp. 4,682 512
OEA, Inc. 14,400 580
Orbital Sciences Corp.+ 17,600 429
Rohr, Inc.+ 18,900 573
Thiokol Corp. 11,700 1,071
--------
5,123
--------
AIR TRANSPORTATION--0.6%
America West Holding Corp.
Class B+ 27,500 407
ASA Holdings, Inc. 21,100 588
Continental Airlines, Inc.
Class B+ 15,000 649
Offshore Logistics, Inc.+ 11,900 250
US Airways Group, Inc.+ 17,200 806
Valujet, Inc.+ 50,300 296
--------
2,996
--------
ALCOHOLIC BEVERAGES--0.3%
Adolph Coors Co. Class B 22,600 798
Canandaigua Wine Co., Inc.
Class A+ 13,300 660
--------
1,458
--------
APPAREL--1.0%
Brown Group, Inc. 9,400 142
Burlington Industries, Inc.+ 36,500 545
Guilford Mills, Inc. 12,400 296
Kellwood Co. 15,000 518
Men's Wearhouse, Inc.+ 12,200 473
Phillips-Van Heusen Corp. 22,200 316
Springs Industries, Inc. 12,200 566
St. John Knits, Inc. 9,900 398
Stride Rite Corp. 31,300 368
Talbots, Inc. 14,200 341
Timberland Co. Class A+ 7,800 563
Wolverine World Wide, Inc. 25,200 554
--------
5,080
--------
AUTOMOTIVE PRODUCTS--0.3%
Carlisle Companies, Inc. 20,400 882
Discount Auto Parts, Inc.+ 9,400 197
O'Reilly Automotive, Inc. 16,300 397
--------
1,476
--------
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
BANKS--7.7%
ALBANK Financial Corp. 7,920 $ 366
Associated Banc-Corp 35,158 1,760
B B & T Corp. 12,428 677
Bancorp South, Inc. 16,200 616
Bankers Trust New York Corp. 7,470 881
Banknorth Group, Inc.
Delaware 5,500 333
Centura Banks, Inc. 5,900 341
Chemical Financial Corp. 7,884 323
Citizens Banking Corp. 11,500 490
City National Corp. 30,300 911
CNB Bancshares, Inc. 12,192 486
Colonial BancGroup, Inc. 25,300 751
Commerce Bancorp, Inc.-New
Jersey 11,800 465
Community First Bankshares,
Inc. 11,100 530
Corus Bankshares, Inc. 10,300 361
Crestar Financial Corp. 5,260 249
Cullen/Frost Bankers, Inc. 14,400 727
Deposit Guaranty Corp. 14,800 546
F & M National Corp. 15,855 493
First Citizens BancShares,
Inc. Class A 6,700 657
First Colorado Bancorp, Inc. 8,000 163
First Commerce Bancshares,
Inc. 10,500 247
First Commonwealth Financial
Corp. 17,200 404
First Financial Bancorp 10,131 484
First Midwest Bancorp, Inc. 9,000 326
Firstbank of Illinois Co. 9,900 314
Fort Wayne National Corp. 13,050 473
Fulton Financial Corp. 24,821 720
Hancock Holding Co. 7,430 407
HUBCO, Inc. 13,356 465
Huntington Bancshares, Inc. 18,952 612
Imperial Bancorp 16,998 742
Jefferson Bankshares, Inc. 8,600 409
Keystone Financial, Inc. 33,280 1,144
Long Island Bancorp, Inc. 16,300 725
MAF Bancorp, Inc. 13,500 434
Magna Group, Inc. 21,700 857
Mercantile Bancorporation,
Inc. 21,292 1,034
</TABLE>
55
<PAGE> 58
SCHWAB SMALL-CAP INDEX FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Mid-Am, Inc. 17,881 $ 360
National Bancorp of Alaska,
Inc. 5,200 525
National Commerce Bancorp 33,000 978
New York Bancorp, Inc. 11,799 404
North Fork Bancorporation,
Inc. 39,800 1,172
ONBANCorp., Inc. 8,400 545
One Valley Bancorp of West
Virginia, Inc. 17,656 706
Park National Corp. 6,100 524
People's Bank-Bridgeport 19,800 648
Provident Bankshares Corp. 8,905 481
Queens County Bancorp, Inc. 11,996 435
Riggs National Corp. 17,300 398
S & T Bancorp, Inc. 11,300 458
Sumitomo Bank of California 9,800 461
Summit Bancorp 13,962 596
Susquehanna Bancshares, Inc. 16,250 494
T R Financial Corp. 13,300 436
TrustCo Bank Corp.-New York 13,511 324
Trustmark Corp. 20,900 645
U S Trust Corp. 12,700 743
UMB Financial Corp. 13,574 699
Union Planters Corp. 5,337 317
United Bankshares, Inc. 9,200 413
UST Corp. 20,700 536
Valley National Bancorp 26,977 850
Westamerica Bancorp 9,200 810
Whitney Holding Corp. 13,600 673
Zions Bancorporation 18,000 700
--------
38,254
--------
BUSINESS MACHINES & SOFTWARE--6.5%
3COM Corp.+ 23,800 986
Analogic Corp. 7,800 289
Applied Magnetics Corp.+ 13,000 299
Avant Corp.+ 15,900 417
BancTec, Inc.+ 15,900 364
Black Box Corp.+ 11,200 459
Boole & Babbage, Inc. 13,900 403
Broderbund Software, Inc.+ 14,100 409
Cisco Systems, Inc.+ 2,800 230
Clarify, Inc. 6,500 85
Computer Horizons Corp. 17,500 532
Computer Products, Inc.+ 13,700 373
Computer Sciences Corp.+ 6,320 448
Compuware Corp.+ 27,400 1,812
Comverse Technology, Inc.+ 15,100 623
Data General Corp.+ 30,500 587
Dell Computer Corp.+ 25,200 2,019
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<C> <C> <C>
Dialogic Corp.+ 10,400 $ 429
FileNet Corp.+ 13,000 293
Geoworks+ 13,900 177
GT Interactive Software
Corp.+ 46,000 454
HCIA, Inc.+ 5,300 66
Hewlett-Packard Co. 10,800 666
HNC Software, Inc.+ 13,700 507
Hyperion Software Corp.+ 13,600 519
Inacom Corp.+ 6,400 197
INSO Corp.+ 14,100 171
Intergraph Corp.+ 29,000 312
Learning Company, Inc.+ 31,100 587
Legato Systems, Inc. 10,800 462
Manugistics Group, Inc. 14,400 513
McAfee Associates, Inc.+ 16,012 797
Medic Computer Systems, Inc. 14,600 509
Microchip Technology, Inc. 17,550 700
National Computer Systems,
Inc. 9,400 357
National Instruments Corp. 13,300 605
Network Appliance, Inc.+ 9,700 487
Network General Corp. 7,000 142
Novellus Systems, Inc. 21,200 943
Oak Technology, Inc.+ 34,200 329
Objective Systems
Integrators, Inc.+ 23,300 290
PeopleSoft, Inc.+ 2,400 151
Pixar, Inc.+ 24,600 590
Platinum Technology, Inc.+ 40,000 970
Policy Management Systems
Corp.+ 11,300 692
Project Software &
Development, Inc.+ 9,100 210
Quantum Corp.+ 43,600 1,379
Read-Rite Corp.+ 16,800 334
Safeguard Scientifics, Inc. 21,100 654
Scopus Technology, Inc. 500 7
Security Dynamics
Technologies, Inc.+ 8,200 278
Sequent Computer Systems,
Inc.+ 27,600 578
Stratus Computer, Inc.+ 14,400 509
System Software Associates,
Inc.+ 25,900 304
Transaction Systems
Architects, Inc. 16,300 638
Vantive Corp. 13,100 331
Veritas DGC, Inc.+ 13,300 544
Veritas Software Co. 19,425 809
</TABLE>
56
<PAGE> 59
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Videoserver, Inc.+ 15,200 $ 192
Visio Corp. 19,400 721
Wang Laboratories, Inc.+ 25,300 585
Wind River Systems, Inc. 17,175 659
Xircom, Inc.+ 12,800 128
Zitel Corp. 14,100 200
--------
32,310
--------
BUSINESS SERVICES--11.4%
ABM Industries, Inc. 15,200 412
ABR Information Services,
Inc. 16,000 376
Access Health, Inc.+ 11,000 382
Ackerley, Inc. 11,800 208
Act Networks, Inc.+ 3,200 30
Advo, Inc.+ 19,000 426
Allied Waste Industries,
Inc.+ 48,100 980
American Business
Information, Inc. 13,450 175
American Business
Information, Inc. Class A+ 13,450 141
American Business Products,
Inc. 9,300 187
American Homepatient, Inc. 12,250 315
Amresco, Inc. 22,500 706
Analysts International Corp. 8,700 393
Apollo Group, Inc. Class A+ 14,337 606
Apria Healthcare Group,
Inc.+ 32,400 492
Aspen Technology, Inc. 11,000 414
BDM International, Inc. 15,800 350
Bell & Howell Co.+ 16,900 466
BISYS Group, Inc.+ 18,500 576
Bowne & Co., Inc. 12,000 419
BRC Holdings, Inc.+ 3,700 139
Brightpoint, Inc. 15,325 506
Camco International, Inc. 16,720 1,208
CDI Corp.+ 11,800 463
Cellstar Corp. 19,400 658
Cellular Technical Services,
Inc. 10,300 51
Cerner Corp.+ 23,000 558
Checkfree Corp.+ 37,000 999
Ciber, Inc. 13,800 611
CKS Group, Inc.+ 9,600 348
Clintrials Research, Inc. 9,800 88
Compucom System, Inc.+ 27,400 259
Computer Task Group, Inc. 13,600 384
Computervision Corp.+ 35,400 100
Concentra Managed Care,
Inc.+ 24,530 800
Concord EFS, Inc.+ 23,175 688
Consolidated Graphics, Inc. 8,900 462
Corestaff, Inc. 20,800 515
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<C> <C> <C>
Corrections Corp. of
America+ 15,200 $ 464
Creative Biomolecules, Inc.+ 27,500 254
Culligan Water Technologies,
Inc.+ 14,632 624
Curative Technologies, Inc.+ 10,200 307
Dames & Moore, Inc. 7,400 92
DeVRY, Inc. 21,000 554
Dionex Corp.+ 8,700 434
Dynatech Corp.+ 12,100 413
Employee Solutions, Inc. 55,500 354
Envoy Corp.+ 13,800 386
Equity Corp. International 13,100 267
Express Scripts, Inc. Class
A+ 10,500 592
Fair, Issac & Co., Inc. 9,500 413
FPA Medical Management,
Inc.+ 22,100 533
Franklin Covey Co.+ 14,800 332
G&K Services, Inc. Class A 14,850 535
Gartner Group, Inc. Class A+ 11,600 328
GranCare, Inc.+ 18,300 206
HA-LO Industries, Inc. 13,425 376
HBO & Co. 10,400 452
Healthplan Services Corp. 10,200 215
Henry Jack & Associates,
Inc. 10,850 279
IDX Systems Corp.+ 16,100 543
Information Resources, Inc.+ 15,900 262
Integrated Health Services,
Inc. 28,628 909
Integrated Systems, Inc.
Class A+ 16,800 296
Interim Services, Inc. 22,600 592
ITT Educational Services,
Inc. 20,700 499
Jacobs Engineering Group,
Inc.+ 14,900 402
Keane, Inc.+ 28,400 841
Kirby Corp.+ 13,300 263
Laboratory Corp. of America
Holdings 53,100 126
Learning Tree International,
Inc. 16,600 577
Maxicare Health Plans, Inc.+ 9,700 136
Medaphis Corp.+ 37,300 226
Mentor Graphics Corp.+ 47,200 516
Metromedia International
Group, Inc.+ 42,400 488
Micro Warehouse, Inc.+ 20,100 302
National Data Corp. 5,300 196
National Surgery Centers,
Inc. 15,550 389
Network Equipment
Technologies+ 21,100 359
Neuromedical Systems, Inc.+ 12,800 59
Norrell Corp. Georgia 17,700 516
</TABLE>
57
<PAGE> 60
SCHWAB SMALL-CAP INDEX FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
OAO Technology Solutions,
Inc.+ 4,220 $ 17
Oceaneering International,
Inc.+ 14,700 365
Ogden Corp. 30,100 760
Orthodontic Centers of
America, Inc. 27,300 473
PAXAR Corp. 35,635 606
Payment Services, Inc. 28,300 456
Pediatrix Medical Group+ 9,200 389
PhyCor, Inc.+ 10,350 239
Physician Reliance Network,
Inc. 31,100 358
Physicians Computer Network,
Inc.+ 15,000 82
Physicians Resource Group,
Inc.+ 14,000 126
Pre-Paid Legal Services,
Inc.+ 12,300 372
PSInet, Inc.+ 20,800 174
Radisys Corp.+ 6,300 293
Registry, Inc.+ 1,060 44
Renters Choice, Inc.+ 15,300 340
Republic Industries, Inc.+ 31,200 920
Robert Half International,
Inc.+ 23,700 970
Rollins, Inc. 18,300 391
Rural/Metro Corp.+ 11,100 386
S.E. Rykoff & Co. 16,350 352
Safety-Kleen Corp. 34,600 766
Scientific Games Holdings
Corp.+ 5,500 119
Seacor Holdings, Inc.+ 8,500 554
SEI Corp. 13,400 570
Sitel Corp. 19,300 171
SPS Transaction Services,
Inc.+ 17,800 377
Standard Register Co. 19,700 638
Stewart Enterprises, Inc.
Class A 7,950 330
Structural Dynamics Research
Corp.+ 20,500 392
Sun Healthcare Group, Inc.+ 30,208 600
Sylvan Learning Systems,
Inc. 16,400 691
Symantec Corp.+ 37,700 825
Synetic, Inc.+ 10,400 403
Systemsoft Corp. 12,200 97
Technology Solutions Co. 17,050 537
Tetra Technologies, Inc.+ 7,200 166
Total Renal Care Holdings,
Inc. 27,666 852
True North Communications,
Inc. 16,800 382
U.S.A. Waste Services, Inc.+ 51,662 1,905
Universal Health Services,
Inc. Class B 22,400 987
Valassis Communications,
Inc.+ 24,100 711
Viasoft, Inc. 12,600 517
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<C> <C> <C>
Volt Information Sciences,
Inc. 8,550 $ 590
Wackenhut Corrections Corp. 13,500 388
Wallace Computer Service,
Inc. 9,200 354
Zebra Technologies Corp.
Class A+ 13,400 419
--------
56,252
--------
CHEMICAL--1.8%
Calgon Carbon Corp. 23,100 273
Cambrex Corp. 8,750 419
Chemed Corp. 7,500 304
Dexter Corp. 16,400 644
Ferro Corp. 16,400 614
Foamex International, Inc. 11,000 127
Geon Co. 16,300 354
Georgia Gulf Corp. 21,600 649
H.B. Fuller Co. 9,500 449
Lawter International, Inc. 27,200 304
Lilly Industries, Inc. Class
A 18,350 348
NCH Corp. 3,900 261
NL Industries, Inc. 30,700 512
OM Group, Inc. 13,450 508
Schulman (A.), Inc. 21,700 488
Scotts Co. Class A+ 12,200 326
Sequa Corp. Class A+ 6,300 361
Tredegar Industries, Inc. 8,600 601
WD-40 Co. 11,000 316
Wellman, Inc. 16,900 343
Zoltek Companies, Inc. 10,100 480
--------
8,681
--------
CONSTRUCTION--2.1%
Apogee Enterprises, Inc. 16,300 389
Blount International, Inc.
Class A 10,800 568
Blount International, Inc.
Class B 1,500 77
CalMat Co. 13,400 338
Centex Construction
Products, Inc. 12,700 394
D.R.Horton, Inc. 24,600 369
Global Industries, Inc. 55,000 1,103
Granite Construction, Inc. 12,200 258
Kaufman & Broad Home Corp. 24,800 529
Lone Star Industries, Inc. 6,800 374
Mastec, Inc. 15,400 500
McDermott International+ 24,800 1,026
Medusa Corp. 9,800 414
Morrison Knudsen Corp.+ 29,700 349
Palm Harbor Homes, Inc. 14,550 389
Pulte Corp. 13,300 497
</TABLE>
58
<PAGE> 61
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Regal Beloit Corp. 14,000 $ 376
Southdown, Inc.+ 14,700 814
Stone & Webster, Inc. 8,600 399
TJ International, Inc. 15,200 350
Toll Brothers, Inc.+ 20,000 443
Triangle Pacific Corp.+ 10,800 354
--------
10,310
--------
CONSUMER-DURABLE--1.1%
Bassett Furniture
Industries, Inc. 9,400 263
Champion Enterprises, Inc. 30,292 532
Chicago Miniature Lamp, Inc. 13,200 422
Coachmen Industries, Inc. 10,100 201
Ethan Allen Interiors, Inc. 20,200 715
Furniture Brands
International, Inc.+ 28,700 481
Griffon Corp.+ 22,700 359
Interface, Inc. 17,300 500
Kimball International, Inc.
Class B 15,400 631
La-Z-Boy Chair Co. 11,500 430
Sturm, Ruger & Co., Inc. 13,800 260
Toro Co. 6,600 282
Zenith Electronics Corp.+ 36,200 285
--------
5,361
--------
CONSUMER-NONDURABLE--2.3%
Apple South, Inc. 29,000 540
Applebee's International,
Inc. 20,700 459
Buffets, Inc.+ 10,700 112
CKE Restaurants, Inc. 28,150 1,127
Department 56, Inc.+ 13,000 392
Foodmaker, Inc.+ 23,600 388
Gibson Greetings, Inc.+ 12,500 308
International Dairy Queen,
Inc. Class A+ 16,800 445
Jostens, Inc. 27,000 629
Landrys Seafood Restaurants,
Inc.+ 17,800 498
Luby's Cafeterias, Inc. 11,400 227
Mohawk Industries, Inc. 24,200 744
Oakley, Inc. 39,500 390
Papa John's International,
Inc. 18,825 557
Paragon Trade Brands, Inc.+ 4,000 76
Rainforest Cafe, Inc. 9,500 324
Rexall Sundown, Inc. 39,600 866
Ruby Tuesday, Inc.+ 10,537 286
Russ Berrie & Co., Inc. 17,400 474
Ryan's Family Steak Houses,
Inc.+ 30,000 259
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<C> <C> <C>
Samsonite Corp.+ 14,200 $ 659
Sbarro, Inc. 12,700 336
Shoney's, Inc.+ 28,700 135
Showbiz Pizza Time, Inc. 10,200 217
Sonic Corp.+ 6,300 162
Toy Biz, Inc. Class A+ 25,100 221
USA Detergents, Inc.+ 4,700 49
Williams-Sonoma, Inc.+ 15,500 622
--------
11,502
--------
CONTAINERS--0.4%
ACX Technologies, Inc.+ 16,500 434
Ball Corp. 19,000 666
Gaylord Container Corp.
Class A+ 29,800 197
Greif Brothers Corp. Class A 13,800 481
--------
1,778
--------
ELECTRONICS--5.2%
Actel Corp.+ 12,300 184
ADAC Laboratories 10,500 205
Altron, Inc. 12,050 191
AMETEK, Inc. 22,500 530
Ampex Corp. Class A+ 16,900 54
Anadigics, Inc. 8,400 311
Anixter International, Inc.+ 31,500 595
Belden, Inc. 18,400 630
Burr Brown Corp. 13,900 420
Cable Design Technologies
Corp.+ 10,200 400
Centennial Technologies,
Inc. 5,600 17
Checkpoint Systems, Inc. 18,200 291
Chips & Technologies, Inc.+ 13,700 217
Cyrix Corp.+ 12,100 357
Dallas Semiconductor Corp. 16,300 797
Diamond Multimedia Systems,
Inc.+ 26,700 287
Digital Microwave Corp. 13,400 482
DSP Communications, Inc. 24,400 451
EG&G, Inc. 30,900 639
Exide Corp. 11,100 259
Fluke Corp. 14,000 337
FSI International, Inc.+ 13,300 229
Genrad, Inc.+ 19,300 569
Gerber Scientific, Inc. 12,200 253
Hadco Corp.+ 7,900 437
Hutchinson Technology, Inc. 11,400 301
Innovex, Inc. 10,400 268
</TABLE>
59
<PAGE> 62
SCHWAB SMALL-CAP INDEX FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Input/Output, Inc.+ 26,500 $ 711
International Rectifier
Corp.+ 29,000 397
Jabil Circuit, Inc. 23,600 1,073
Kemet Corp.+ 23,400 509
Kent Electronics Corp.+ 17,500 611
KLA-Tencor Corp.+ 15,100 663
Kulicke & Soffa Industries,
Inc.+ 13,600 350
Lam Research Corp.+ 25,800 932
Lattice Semiconductor Corp.+ 7,400 370
Level One Communications,
Inc. 12,100 545
Littlefuse, Inc. 14,400 441
Macromedia, Inc.+ 11,600 120
Marshall Industries+ 9,600 337
MEMC Electronic Materials,
Inc.+ 24,600 494
Methode Electronics, Inc.
Class A 24,750 489
MRV Communications, Inc. 14,700 430
Osmonics, Inc.+ 7,800 123
PMC Sierra, Inc.+ 20,900 551
Premisys Communications,
Inc.+ 14,600 398
Rexel, Inc.+ 17,600 394
S3, Inc.+ 36,500 324
Sanmina Corp.+ 10,100 755
SDL, Inc. 7,200 130
Silicon Valley Group, Inc.+ 19,800 569
Smart Modular Technologies,
Inc.+ 11,900 592
Symmetricom, Inc.+ 8,500 130
Technitrol, Inc. 9,200 284
Tracor, Inc.+ 13,900 372
Ultrak, Inc.+ 4,700 54
Uniphase Corp. 9,800 658
Unitrode Corp. 13,600 365
Vicor Corp.+ 27,500 887
Vitesse Semiconductor Corp.+ 9,400 408
Zilog, Inc.+ 16,600 316
--------
25,493
--------
ENERGY-DEVELOPMENT--4.6%
Arch Coal, Inc. 9,000 241
Atwood Oceanics, Inc. 4,000 443
Baker Hughes, Inc. 8,874 408
Barrett Resources Corp.+ 6,900 243
Benton Oil & Gas Co.+ 18,500 372
BJ Services Co.+ 10,000 848
Cabot Oil & Gas Corp. Class
A 19,300 463
Chesapeake Energy Corp. 10,600 104
Cliffs Drilling Co. 10,300 749
EVI, Inc.+ 16,000 1,027
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Falcon Drilling, Inc.+ 23,200 $ 844
Forcenergy, Inc.+ 15,600 509
Forest Oil Corp.+ 20,900 394
Freeport-McMoRan, Inc. 14,700 502
Grey Wolf, Inc.+ 100,200 827
Halliburton Co. 11,232 670
Helmerich & Payne, Inc. 6,700 541
Leviathan Gas Pipeline
Partners, L.P. 12,900 390
Louis Dreyfus Natural Gas
Corp.+ 19,100 423
Marine Drilling Company,
Inc.+ 33,300 987
MAXXAM, Inc.+ 8,000 421
Newfield Exploration Co. 24,000 651
Newpark Resources, Inc. 22,200 921
Nuevo Energy Co.+ 13,500 559
Parker Drilling Co.+ 47,600 705
Pride International, Inc.+ 30,500 1,007
Reading & Bates Corp.+ 20,600 873
Rowan Companies, Inc.+ 27,700 1,077
Seitel, Inc. 8,400 396
Stone Energy Corp.+ 8,500 284
Swift Energy Co. 9,240 240
Tom Brown, Inc.+ 12,900 319
Transocean Offshore, Inc. 13,400 724
Tuboscope Vetco
International Corp.+ 27,100 860
United Meridian Corp.+ 8,100 275
Varco International, Inc.+ 19,800 1,204
Vintage Petroleum, Inc. 34,200 782
Zeigler Coal Holding Co. 17,800 318
--------
22,601
--------
FOOD-AGRICULTURE--2.3%
Bob Evans Farms, Inc. 28,700 544
Chiquita Brands
International, Inc. 32,900 553
Coca-Cola Bottling Co. 4,700 280
Dekalb Genetics Corp. Class
B 22,600 811
Delta & Pine Land Co. 16,759 624
Dimon, Inc. 29,600 768
Dreyer's Grand Ice Cream,
Inc. 8,600 356
Earthgrains Co. 15,048 619
Fleming Companies, Inc. 22,100 373
Hudson Foods, Inc. Class A 22,750 427
International Multifoods
Corp. 9,300 274
Interstate Bakeries Corp. 13,100 835
J.M. Smucker Co. Class A 20,700 563
JP Foodservice, Inc.+ 14,500 463
Lance, Inc. 16,200 346
</TABLE>
60
<PAGE> 63
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Mississippi Chemical Corp. 17,140 $ 315
Mycogen Corp.+ 21,000 446
Ralcorp Holdings, Inc.+ 18,466 343
Savannah Foods & Industries,
Inc. 7,195 124
Seabord Corp. 800 258
Smithfield Foods, Inc. 26,600 795
Tootsie Roll Industries,
Inc. 11,330 643
Universal Foods Corp. 17,100 674
--------
11,434
--------
GOLD--0.3%
Amax Gold, Inc.+ 79,700 394
Getchell Gold Corp.+ 18,371 661
Pegasus Gold, Inc.+ 18,300 85
Royal Oak Mines, Inc.+ 125,500 298
--------
1,438
--------
HEALTHCARE--7.9%
Acuson Corp.+ 20,600 386
Advanced Tissue Sciences,
Inc.+ 23,200 323
Agouron Pharmaceuticals,
Inc. 19,200 876
Alkermes, Inc.+ 14,900 339
Alliance Pharmaceutical
Corp.+ 18,000 180
Alpharma, Inc. Class A 16,000 353
Alpharma, Inc.+ 1,667 9
Amerisource Health Corp.+ 10,400 618
Amylin Pharmaceuticals,
Inc.+ 17,300 146
Arrow International, Inc. 14,800 533
Ballard Medical Products 15,400 347
Barr Laboratories, Inc. 14,850 563
Bio Rad Laboratories, Inc.
Class A 9,000 223
Bio-Technology General
Corp.+ 29,200 358
Block Drug Co., Inc. Class A 13,643 634
Capstone Pharmacy Services,
Inc.+ 22,600 240
Cardinal Health, Inc. 7,818 580
Carter-Wallace, Inc. 33,400 524
Cephalon, Inc.+ 11,900 138
Cognex Corp.+ 28,400 760
Columbia Laboratories, Inc. 19,800 317
Conmed Corp.+ 12,500 256
Datascope Corp.+ 11,200 270
Diagnostic Products Corp. 6,400 187
Enzo Biochem, Inc. 15,393 262
Geltex Pharmaceuticals,
Inc.+ 8,600 254
Genesis Health Ventures,
Inc.+ 20,450 501
Gilead Sciences, Inc.+ 18,000 614
Guilford Pharmaceuticals,
Inc. 14,300 349
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Gulf South Medical Supply,
Inc.+ 10,200 $ 337
Haemonetics Corp.+ 17,000 257
HealthSouth Corp.+ 55,422 1,417
Herbalife International,
Inc. 16,600 415
Hologic, Inc.+ 10,800 277
Human Genome Sciences, Inc.+ 13,700 562
ICN Pharmaceuticals, Inc. 23,315 1,122
IDEC Pharmaceuticals Corp.+ 12,200 465
Immunex Corp.+ 24,400 1,558
Incyte Pharmacuticals, Inc. 7,500 604
Invacare Corp. 22,700 522
Isis Pharmaceuticals, Inc.+ 14,400 237
Kinetic Concepts, Inc. 30,500 580
Life Technologies, Inc. 13,150 404
Ligand Pharmaceuticals, Inc.
Class B+ 20,500 300
Liposome, Inc.+ 62,000 341
Living Centers of America,
Inc.+ 12,400 500
Magellan Health Services,
Inc.+ 17,200 496
Marquette Medical Systems,
Inc.+ 19,400 500
Medical Assurance, Inc. 15,124 423
Medicis Pharmaceutical Corp. 9,750 469
Medimmune, Inc.+ 17,000 678
Mentor Corp. 17,400 634
Mid Atlantic Medical
Services, Inc.+ 36,700 534
Minimed, Inc.+ 7,400 289
Miravant Medical
Technologies+ 8,700 418
Natures Sunshine Products,
Inc. 13,250 306
NBTY, Inc.+ 10,100 222
Neoprobe Corp.+ 11,600 116
Neurex Corp.+ 12,900 219
Nexstar Pharmaceuticals,
Inc.+ 17,400 254
North American Vaccine,
Inc.+ 19,200 482
NovaCare, Inc.+ 42,580 556
Organogenesis, Inc. 13,750 419
Owens & Minor, Inc. Holding
Co. 23,400 328
Parexel International Corp. 10,700 387
Patterson Dental Co.+ 15,350 614
Perrigo Co.+ 45,200 695
Physician Sales & Service,
Inc.+ 26,500 649
Physio Control International
Corp.+ 10,700 171
PLC Systems, Inc.+ 20,100 260
Protein Design Labs, Inc.+ 11,600 579
Quintiles Transnational
Corp.+ 6,100 442
Regeneron Pharmaceuticals,
Inc.+ 24,700 258
</TABLE>
61
<PAGE> 64
SCHWAB SMALL-CAP INDEX FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Renal Treatment Centers,
Inc.+ 15,200 $ 504
Respironics, Inc.+ 10,100 284
Sangstat Medical Corp.+ 10,300 321
Sepracor, Inc.+ 18,500 664
Sequus Pharmaceuticals,
Inc.+ 25,200 227
Sofamor/Danek Group, Inc.+ 16,100 1,109
Sola International, Inc.+ 15,600 532
Tenet Healthcare Corp.+ 13,176 403
Thermedics, Inc. 19,700 335
ThermoLase Corp.+ 3,182 59
Thermotrex Corp. 13,000 299
Vertex Pharmaceuticals,
Inc.+ 16,300 481
VISX, Inc.+ 12,700 291
Vivus, Inc. 21,500 567
West Company, Inc. 9,100 306
--------
38,818
--------
HOUSEHOLD PRODUCTS--0.3%
Bush Boake Allen, Inc.+ 12,200 377
Church & Dwight Co., Inc. 10,700 308
Libbey, Inc. 8,400 314
Playtex Products, Inc.+ 26,600 266
ThermoLase Corp.+ 21,818 340
--------
1,605
--------
IMAGING & PHOTO--0.4%
ATL Ultrasound+ 9,000 387
BMC Industries, Inc. 20,200 650
Photronic, Inc. 8,250 354
Ultratech Stepper, Inc.+ 14,400 392
--------
1,783
--------
INSURANCE--5.5%
20th Century Industries 33,900 848
Alfa Farmers Federation
Corp. 27,800 452
Allied Group, Inc. 13,500 638
American Annuity Group, Inc. 25,250 508
American Bankers Insurance
Group, Inc. 15,000 561
American General Corp. 6,769 345
American Heritage Life
Investment Corp. 8,700 308
Amerin Corp.+ 17,100 391
Argonaut Group, Inc. 15,100 487
Arthur J. Gallagher & Co. 10,100 354
Berkley (W.R.) Corp. 19,700 810
Capital Re Corp. 8,900 525
Capmac Holdings, Inc. 13,800 414
Citizens Corp. 24,000 704
CMAC Investment Corp. 15,800 864
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Commerce Group, Inc. 22,600 $ 723
Compdent Corp.+ 4,400 91
Conseco, Inc. 18,804 820
Crawford & Co. Class A 15,200 303
Crawford & Co. Class B 31,200 640
Delphi Financial Group, Inc.
Class A 14,666 605
Enhance Financial Services
Group, Inc. 11,100 586
Executive Risk, Inc. 7,600 501
Financial Security Assured
Holdings, Ltd. 19,500 848
Foremost Corp. of America 5,300 305
Fremont General Corp. 22,070 1,027
Frontier Insurance Group,
Inc. 19,450 655
General Re Corp. 1,000 197
Harleysville Group, Inc. 18,000 459
HCC Insurance Holdings, Inc. 31,750 742
Horace Mann Educators Corp. 13,700 771
HSB Group, Inc. 12,000 626
John Alden Financial Corp. 14,000 384
Kansas City Life Insurance
Co. 4,800 422
Liberty Corp. 12,800 548
Life Re Corp. 7,500 413
Markel Corp.+ 3,400 522
MMI Companies, Inc. 9,500 237
NAC Re Corp. 12,200 543
Orion Capital Corp. 18,900 851
Oxford Health Plans, Inc.+ 4,400 114
Presidential Life Corp. 21,600 429
Reinsurance Group of
America, Inc. 14,850 582
Selective Insurance Group,
Inc. 8,600 465
Sierra Health Services,
Inc.+ 9,700 358
State Auto Financial Corp. 12,650 354
Trenwick Group, Inc. 8,600 300
United Companies Financial
Corp. 18,500 468
United Fire & Casualty Co. 5,400 219
United Wisconsin Services,
Inc. 10,700 298
Vesta Insurance Group, Inc. 13,400 779
Washington National Corp. 10,500 342
Zenith National Insurance
Corp. 12,000 336
--------
27,072
--------
MEDIA--2.1%
American Radio Systems
Corp.+ 15,200 741
Ascent Entertainment Group,
Inc.+ 13,000 128
</TABLE>
62
<PAGE> 65
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Banta Corp. 16,500 $ 431
Big Flower Press Holdings,
Inc.+ 13,000 286
Cable Michigan, Inc.+ 3,925 82
Cablevision Systems Corp.
Class A+ 9,600 671
Century Communications Corp.
Class A+ 55,037 423
Heftel Broadcasting Corp.+ 9,100 605
Hollinger International,
Inc. 56,100 733
Houghton Mifflin Co. 20,200 717
John Wiley & Sons, Inc.
Class A 10,500 461
Jones Intercable, Inc. Class
A+ 18,200 232
Media General, Inc. Class A 16,400 668
News Corporation, Ltd.-
Sponsored ADR** 25,161 447
Oak Industries, Inc.+ 14,800 425
Spelling Entertainment
Group, Inc.+ 51,500 444
TCA Cable TV, Inc. 16,000 660
United International
Holdings, Inc. Class A+ 22,100 273
United Television, Inc. 5,700 614
United Video Satellite
Group+ 15,400 418
Westwood One, Inc.+ 18,400 565
Young Broadcasting, Inc.+ 5,900 214
--------
10,238
--------
MISCELLANEOUS FINANCE--4.4%
Aames Financial Corp. 14,025 205
AMCORE Financial, Inc. 19,350 455
Americredit Corp.+ 20,300 590
Arcadia Financial, Ltd.+ 27,900 253
Astoria Financial Corp. 19,000 993
BOK Financial Corp. 13,891 611
Charter One Financial, Inc. 8,886 517
Cityscape Financial Corp. 16,900 26
Coast Savings Financial,
Inc.+ 12,700 745
Commercial Federal Corp. 15,000 728
Downey Financial Corp. 20,598 541
Eaton Vance Corp. 12,400 448
First American Financial
Corp. 7,300 440
First Source Corp. 10,267 287
Fund American Enterprises
Holdings, Inc. 4,909 587
GATX Corp. 16,000 1,033
Golden State Bancorp, Inc.+ 17,300 575
Great Financial Corp. 9,100 400
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
HFNC Financial Corp. 7,500 $ 111
Imperial Credit Industries,
Inc. 29,900 751
Interpool, Inc. 13,900 222
Interra Financial, Inc. 8,000 441
Investment Technology Group,
Inc.+ 11,200 328
Jefferies Group, Inc. 6,600 437
John Nuveen Co. Class A 23,300 827
JSB Financial, Inc. 7,400 357
Legg Mason, Inc. 15,333 752
McDonald & Company
Investments, Inc. 12,400 303
Money Store, Inc. 8,625 245
Morgan Keegan, Inc. 21,050 374
Northwest Savings Bank 16,300 489
Peoples Heritage Financial
Group, Inc. 17,600 693
Phoenix Duff & Phelps Corp. 19,400 137
Pioneer Group, Inc. 14,300 429
Provident Financial Group,
Inc. 13,500 621
Quick & Reilly Group, Inc. 22,870 832
Raymond James Financial,
Inc. 20,350 611
Sirrom Capital Corp. 10,200 514
Sovereign Bancorp, Inc. 59,262 1,050
St. Paul Bancorp, Inc. 18,937 454
Student Loan Corp. 13,400 659
TCF Financial Corp. 3,150 179
Value Line, Inc. 4,900 186
Westcorp, Inc. 15,975 297
WFS Financial, Inc. 15,560 202
--------
21,935
--------
MOTOR VEHICLE--1.8%
A.O. Smith Corp. Class B 10,800 448
Arvin Industries, Inc. 16,100 603
Borg Warner Automotive, Inc. 15,200 828
Breed Technologies, Inc. 19,300 426
Detroit Diesel Corp.+ 13,400 276
Federal-Mogul Corp. 23,700 1,003
Fleetwood Enterprises, Inc. 23,700 718
Gentex Corp. 24,700 605
Hays Wheels International,
Inc. 16,800 567
Mascotech, Inc. 27,500 523
Modine Manufacturing Co. 20,300 691
Navistar International
Corp.+ 44,050 1,021
Standard Products Co. 9,600 258
</TABLE>
63
<PAGE> 66
SCHWAB SMALL-CAP INDEX FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Superior Industries
International, Inc. 15,700 $ 419
Tower Automotive, Inc.+ 13,700 574
--------
8,960
--------
NON-FERROUS--0.7%
Coeur d'Alene Mines Corp.+ 17,200 178
Commercial Metals Co. 10,933 353
Kaiser Aluminum Corp.+ 49,500 622
Minerals Technologies, Inc. 15,300 633
Mueller Industries, Inc.+ 13,100 579
Oregon Metallurgical Corp. 12,700 298
Reliance Steel & Aluminum
Co. 7,800 214
RMI Titanium Co.+ 11,000 261
Stillwater Mining Co.+ 13,600 282
Wolverine Tube, Inc.+ 9,000 279
--------
3,699
--------
OIL-DOMESTIC--0.5%
Cross Timbers Oil Co. 14,650 391
KCS Energy, Inc. 17,100 450
Pogo Producing Co. 9,000 326
Quaker State Corp. 18,000 279
Snyder Oil Corp. 16,900 374
Tesoro Petroleum Corp.+ 20,900 340
Tosco Corp. 14,418 475
--------
2,635
--------
PAPER--0.9%
Buckeye Cellulose Corp.+ 11,100 461
Caraustar Industries, Inc. 16,600 570
Chesapeake Corp. 16,500 523
Longview Fibre Co. 35,200 559
Mosinee Paper Corp. 7,200 203
P. H. Glatfelter Co. 24,200 478
Rock Tennessee Co. Class A 12,930 259
Shorewood Packaging Corp.+ 10,000 248
Thermo Fibertek, Inc. 37,700 405
Wausau Paper Mills Co. 26,745 540
--------
4,246
--------
PRODUCER GOODS & MANUFACTURING--6.6%
Advanced Lighting
Technologies, Inc.+ 10,300 207
AGCO, Inc. 12,300 357
Albany International Corp.
Class A 18,400 449
Allen Telecom, Inc. 14,800 280
American Financial
Enterprises, Inc. 5,300 211
Applied Industrial
Technologies, Inc. 12,525 364
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Applied Power, Inc. Class A 8,300 $ 514
AptarGroup, Inc. 12,500 687
Baldor Electric Co. 17,640 516
Barnes Group, Inc. 10,500 274
BE Aerospace, Inc.+ 12,400 349
Butler Manufacturing Co. 4,100 139
Cincinnati Milacron, Inc. 24,900 691
CLARCOR, Inc. 9,200 264
Collins & Aikman Corp.+ 41,700 404
Credence Systems Corp.+ 13,850 409
Donaldson Co., Inc. 16,600 840
DT Industries, Inc. 6,700 201
Encad, Inc. 5,400 176
Fisher Scientific
International, Inc. 14,000 644
Flowserve Corp. 24,034 715
General Binding Corp. 7,100 215
Graco, Inc. 11,125 430
Greenfield Industries, Inc. 9,600 364
Henry Schein, Inc.+ 16,400 539
Herman Miller, Inc. 16,600 811
Hexcel Corp.+ 22,400 601
Hon Industries, Inc. 18,100 934
Hughes Supply, Inc. 11,200 391
IDEX Corp. 18,675 628
Insilco Corp.+ 4,000 153
Ionics, Inc.+ 12,400 475
JLG Industries, Inc. 32,700 415
Kaydon Corp. 22,800 693
Lincoln Electric Co. 5,100 193
Lincoln Electric Co. Class A 18,500 710
Lydall, Inc.+ 10,100 207
MagneTek, Inc.+ 18,400 374
Manitowoc Co., Inc. 10,025 304
McDermott International,
Inc. 34,700 1,257
Miller Industries, Inc. 21,500 218
MSC Industrial Direct, Inc.+ 9,200 383
NACCO Industries, Inc. Class
A 4,950 510
PRI Automation, Inc. 9,900 379
Quanex Corp. 9,700 268
Roper Industries, Inc. 19,600 523
Safeskin Corp. 15,500 703
Smith International, Inc.+ 10,100 770
SPS Technologies, Inc. 7,600 352
SPX Corp. 7,100 463
</TABLE>
64
<PAGE> 67
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Standex International Corp. 9,300 $ 326
Stewart & Stevenson
Services, Inc. 21,400 465
Teleflex, Inc. 22,200 827
Texas Industries, Inc. 13,400 636
Thermo Ecotek Corp. 11,250 160
TriMas Corp. 25,600 749
Tyco International Ltd.+ 18,028 681
UNR Industries, Inc. 29,700 152
Valhi, Inc. 77,200 709
Valmont Industries, Inc. 16,600 380
Vital Signs, Inc. 12,300 238
VWR Scientific Products
Corp.+ 15,500 341
W.H. Brady Co. Class A 14,400 461
Waters Corp.+ 17,800 783
Watsco, Inc. 11,900 280
Watts Industries, Inc. Class
A 14,600 370
Westpoint Stevens, Inc.
Class A+ 21,400 877
WMS Industries, Inc. 15,100 367
Wyman Gordon Co.+ 22,000 531
X-Rite, Inc. 10,700 207
--------
32,494
--------
RAILROAD--0.3%
Florida East Coast Industry,
Inc. 6,600 715
Overseas Shipholding Group,
Inc. 25,900 641
Westinghouse Air Brake Co. 14,700 365
--------
1,721
--------
REAL PROPERTY--1.0%
Alexanders, Inc.+ 2,800 245
Castle & Cooke, Inc.+ 14,100 251
Catellus Development Corp.+ 72,200 1,241
Forest City Enterprises,
Inc. Class A 10,200 589
Insignia Financial Group
Class A+ 21,900 474
Lennar Corp. 23,300 948
Newhall Land & Farming Co. 20,200 477
Premier Parks, Inc.+ 12,000 480
Price Enterprises, Inc. 13,400 245
--------
4,950
--------
RETAIL--5.5%
AnnTaylor Stores Corp.+ 11,900 170
Arbor Drugs, Inc. 22,650 606
Barnes & Noble, Inc. 42,800 1,094
Best Buy Co., Inc.+ 25,800 721
BJS Wholesale Club, Inc.+ 19,700 569
Burlington Coat Factory
Warehouse Corp. 28,440 471
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Carson, Pirie, Scott & Co.+ 10,200 $ 492
Casey's General Stores, Inc. 17,700 427
CDW Computer Centers, Inc.+ 5,700 353
Chancellor Media Corp.+ 25,100 1,375
Charming Shoppes, Inc.+ 55,500 288
Claire's Stores, Inc. 33,575 743
Cole National Corp.+ 8,200 347
CompUSA, Inc.+ 26,400 865
Consolidated Stores Corp.+ 9,531 380
Dollar Tree Stores, Inc. 27,225 1,103
Dress Barn, Inc.+ 15,100 383
Eagle Hardware & Garden,
Inc.+ 15,400 262
Etec Systems, Inc.+ 13,500 602
Family Dollar Stores, Inc. 29,700 698
Fingerhut Companies, Inc. 29,600 655
Finish Line, Inc. 8,000 135
Fred Meyer, Inc.+ 16,600 474
Gymboree Corp.+ 13,700 332
Heilig-Meyers Co. 36,500 488
Hollywood Entertainment
Corp.+ 18,300 224
Homebase, Inc. 19,700 181
Host Marriott Services
Corp.+ 25,800 368
Just For Feet, Inc. 17,275 256
Lands' End, Inc.+ 22,700 716
Longs Drug Stores, Inc. 23,200 581
Mac Frugals Bargains Close-
Outs, Inc.+ 16,900 575
Neiman Marcus Group, Inc.+ 34,400 1,142
Petco Animal Supplies, Inc.+ 9,800 301
Pier 1 Imports, Inc. 45,217 825
PriceSmart, Inc.+ 3,350 55
Proffitt's, Inc. 36,600 1,050
Quality Food Centers, Inc.+ 14,000 667
Regis Corp. 14,000 336
Ross Stores, Inc. 18,000 673
Ruddick Corp. 29,900 467
Service Merchandise Co.,
Inc.+ 54,362 221
ShopKo Stores, Inc. 22,200 556
Smart & Final, Inc. 13,600 275
Stanhome, Inc. 12,000 335
Stein Mart, Inc.+ 13,900 407
Sunglass Hut International,
Inc.+ 31,700 254
Tiffany & Co. 12,200 482
UniFirst Corp. 7,800 196
Value City Department
Stores, Inc.+ 31,700 250
</TABLE>
65
<PAGE> 68
SCHWAB SMALL-CAP INDEX FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Vitalink Pharmacy Services,
Inc.+ 16,266 $ 351
West Marine, Inc. 13,600 286
Whole Foods Market, Inc.+ 14,800 581
Zale Corp.+ 22,400 566
--------
27,210
--------
STEEL--1.0%
Armco, Inc.+ 74,800 430
Bethlehem Steel Corp.+ 67,000 668
Birmingham Steel Corp. 19,300 321
Carpenter Technology Corp. 13,400 648
Chaparral Steel Co. 13,700 207
Cleveland-Cliffs, Inc. 9,000 391
Gibraltor Steel Corp.+ 8,200 194
Inland Steel Industries,
Inc. 27,800 546
Intermet Corp. 16,300 314
J & L Specialty Steel, Inc. 13,000 164
Lone Star Technologies,
Inc.+ 14,000 535
National Steel Corp. Class
B+ 26,700 441
Oregon Steel Mills, Inc. 14,800 312
--------
5,171
--------
TELEPHONE--2.6%
ACC Corp. 12,850 509
Aliant Communications, Inc. 21,300 546
American Mobile Satellite
Corp.+ 10,900 98
Associated Group, Inc. Class
A 25,200 926
Boston Technology, Inc.+ 18,900 513
Cellular Communications
International, Inc.+ 6,000 240
Coherent, Inc.+ 8,400 328
Commonwealth Telephone
Enterprises, Inc.+ 10,467 233
Comnet Cellular, Inc.+ 10,800 374
Geotek Communications, Inc.+ 35,300 128
HighwayMaster
Communications, Inc.+ 10,700 98
Intermedia Communications,
Inc.+ 9,400 427
Jacor Communications, Inc.
Class A+ 27,100 1,133
LCI International, Inc.+ 16,200 419
Mobile Telecommunications
Technologies Corp.+ 37,500 623
Natural Microsystems Corp. 7,400 353
NTL, Inc.+ 19,133 519
P-Com, Inc. 28,600 576
Pairgain Technologies, Inc.+ 16,400 463
PanAmSat Corp.+ 17,400 729
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Periphonics Corp. 16,300 $ 157
PictureTel Corp.+ 24,600 228
Pioneer Natural Resources
Company 11,200 449
Plantronics, Inc. 10,200 376
Powertel, Inc.+ 14,700 267
RCN Corp.+ 15,700 497
Tel Save Holdings, Inc. 38,600 830
Vanguard Cellular Systems,
Inc. Class A+ 26,150 361
Westell Technologies, Inc. 8,300 146
Winstar Communications,
Inc.+ 23,300 533
--------
13,079
--------
TOBACCO--0.1%
Schweitzer Mauduit
International, Inc. 8,760 369
--------
TRANSPORTATION-MISCELLANEOUS--2.6%
Air Express International
Corp. 22,050 675
Airborne Freight Corp. 13,400 849
AMERCO+ 16,300 513
American Freightways Corp.+ 19,100 296
APL, Ltd. 15,400 506
Arnold Industries, Inc. 15,700 334
Caliber Systems, Inc. 24,700 1,287
Circle International Group,
Inc. 12,400 312
CNF Transportation, Inc. 29,000 1,294
Eagle USA Airfreight, Inc. 10,000 303
Expeditores International of
Washington, Inc. 16,700 614
Fritz Companies, Inc.+ 24,400 337
Heartland Express, Inc. 18,447 507
J. B. Hunt Transport
Services, Inc. 27,250 419
OMI Corp.+ 24,900 297
Pittston Burlington Group 12,950 352
Roadway Express, Inc. 13,900 386
Rollins Truck Leasing Corp. 23,100 384
Swift Transportation Co.,
Inc.+ 17,900 573
U.S. Freightways Corp. 14,600 473
Wabash National Corp. 11,100 332
Werner Enterprises, Inc. 25,950 629
XTRA Corp. 9,000 454
Yellow Corp.+ 19,000 521
--------
12,647
--------
</TABLE>
66
<PAGE> 69
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
TRAVEL & RECREATION--1.6%
Anchor Gaming+ 8,200 $ 644
Aztar Corp.+ 19,900 142
Boyd Gaming Corp.+ 40,200 332
Bristol Hotel Co. 27,750 715
Central Parking Corp. 11,300 617
Coleman Co., Inc. 37,200 556
Family Golf Centers, Inc.+ 7,000 187
Grand Casinos, Inc.+ 22,500 302
Hilton Hotels Corp. 14,800 456
K2, Inc. 8,115 205
Marcus Corp. 11,150 312
National Auto Credit, Inc.+ 15,850 118
Polaris Industries, Inc. 16,100 490
Primadonna Resorts, Inc.+ 15,700 275
Prime Hospitality Corp.+ 27,200 554
Rio Hotel & Casino, Inc.+ 12,400 272
Sodak Gaming, Inc. 16,100 173
Speedway Motorsports, Inc.+ 29,900 715
Sports Authority, Inc. 19,900 377
Station Casinos, Inc.+ 30,100 245
--------
7,687
--------
UTILITIES--4.3%
Aquila Gas Pipeline Corp. 21,500 280
Atlantic Energy, Inc. 31,400 579
Atmos Energy Corp. 17,400 439
Bay State Gas Co. 6,900 198
Black Hills Corp. 11,100 334
Central Hudson Gas &
Electric Corp. 11,200 397
Central Louisiana Electric
Co., Inc. 12,500 329
Central Maine Power Co. 15,600 207
CILCORP, Inc. 7,900 323
Commonwealth Energy System 16,600 475
Eastern Enterprises 12,100 474
Eastern Utilities
Association 11,900 251
Energen Corp. 9,300 337
Enron Global Power &
Pipelines L. L. C. 18,000 620
Global Industrial
Technologies, Inc.+ 15,900 271
IES Industries, Inc. 18,600 600
Indiana Energy, Inc. 16,000 457
Laclede Gas Co. 10,900 272
Madison Gas and Electric Co. 10,650 214
MDU Resources Group, Inc. 17,200 488
<CAPTION>
Number Value
of Shares (000s)
---------- --------
<S> <C> <C>
Minnesota Power & Light Co. 22,800 $ 829
Nevada Power Co. 31,300 673
New Jersey Resources Corp. 12,500 405
Northwest Natural Gas Co. 13,300 328
ONEOK, Inc. 18,800 645
Orange & Rockland Utilities,
Inc. 8,700 312
Otter Tail Power Co. 5,600 183
Philadelpia Suburban Corp. 9,350 211
Piedmont Natural Gas Co.,
Inc. 20,000 560
Primark Corp.+ 15,200 456
Public Service Co. of New
Mexico 23,500 457
Public Service Co. of North
Carolina, Inc. 16,400 331
Rochester Gas & Electric
Corp. 24,500 617
Sierra Pacific Resources 17,700 539
SIGCORP, Inc. 14,299 374
Southern Union Co. 11,129 259
Southwest Gas Corp. 14,000 263
Southwestern Energy Co. 11,400 138
Tejas Gas Corp. 14,395 863
TNP Enterprises, Inc. 6,200 157
Triarc Companies, Inc. Class
A+ 18,200 412
Trigen Energy Corp. 7,100 169
Tuscon Electric Power Co.+ 18,180 301
UGI Corp. 19,400 521
United Illuminating Co. 7,500 293
United Water Resources, Inc. 18,800 311
Washington Gas Light Co. 26,100 670
Western Gas Resources, Inc. 19,300 476
WICOR, Inc. 13,700 591
WPL Holdings, Inc. 19,900 581
WPS Resources Corp. 15,300 443
Zurn Industries, Inc. 8,300 279
--------
21,192
--------
TOTAL COMMON STOCK
(Cost $369,661) 489,058
--------
</TABLE>
<TABLE>
<CAPTION>
Par
----------
<S> <C> <C>
CASH EQUIVALENTS--1.0%
MSTC Cash Reserve Liquid
Asset Fund
5.38%*, 11/07/97 $5,132,269 5,132
--------
TOTAL CASH EQUIVALENTS
(Cost $5,132) 5,132
--------
TOTAL INVESTMENTS--100.0%
(Cost $374,793) $494,190
========
</TABLE>
See accompanying Notes to Schedule of Investments and Notes to Financial
Statements.
67
<PAGE> 70
SCHWAB INTERNATIONAL INDEX FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
COMMON STOCK--98.3%
AUSTRALIA--1.8 %
Australia & New Zealand
Banking Group 91,156 $ 636
Broken Hill Proprietary Co.,
Ltd. 136,197 1,352
Coca Cola Amatil 33,680 253
Commonwealth Bank 74,039 851
National Australia Bank 97,832 1,338
News Corporation, Ltd. 127,344 610
Western Mining Corp. 76,158 270
Westpac Banking Corp. 115,210 671
Woodside Petroleum 41,200 348
--------
6,329
--------
BELGIUM--0.9 %
Electrabel 3,679 826
Fortis AG 2,789 529
Generale de Banque 1,104 452
Petrofina SA 1,553 572
Societe Generale de Belgique 4,713 427
Tractebel Investor
International Capital 4,660 397
--------
3,203
--------
CANADA--3.8 %
Alcan Aluminum, Ltd. 17,402 494
Bank of Montreal, Quebec 19,104 825
Bank of Nova Scotia, Halifax 21,780 960
Barrick Gold Corp. 23,986 491
BCE, Inc. 48,354 1,347
Bombardier Inc. Class B 20,600 395
Canadian Imperial Bank of
Commerce 31,029 907
Canadian Pacific, Ltd. 23,326 693
Imasco, Ltd. 13,900 442
Imperial Oil, Ltd. 13,629 847
INCO, Ltd. 9,640 198
Newbridge Networks Corp. 20,900 1,114
Northern Telecom, Ltd. 16,250 1,455
Pancanadian Petroleum, Ltd. 16,500 265
Royal Bank of Canada,
Montreal, Quebec 17,897 957
Seagram Co., Ltd. 23,985 810
Thomson Corp. 38,664 927
Toronto Dominion Bank Ontario 16,378 600
--------
13,727
--------
DENMARK--0.7 %
D/S 1912 Series B 15 652
D/S Svendborg Series B 10 610
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Novo Nordisk A/S Series B 5,009 $ 543
Tele Danmark A/S Series B 9,010 529
--------
2,334
--------
FRANCE--6.6 %
Air Liquide (Prime Fidelite)
(Reg.) 3,324 516
Alcatel Alsthom SA 10,811 1,304
AXA Groupe SA 24,192 1,657
Banque Nationale de Paris 13,847 612
Carrefour 3,385 1,766
Christian Dior 2,811 312
Cie Financiere de Paribas
(Bearer) 8,288 602
Cie Generale de Eaux 8,094 944
Compagnie de Saint-Gobain SA 5,914 849
Compagnie Francaise des
Petroles Class B 16,271 1,805
Danone Groupe 4,855 742
L'Air Liquide 4,881 757
L'Oreal SA 4,538 1,608
Lafarge Coppee SA 9,658 603
LVMH Moet-Hennessy Louis
Vuitton 8,050 1,368
Lyonnaise des Eaux-Dumez 7,811 811
Michelin (CDGE) Class B
(Reg.) 8,470 434
Pinault Printemps Redoute SA 1,635 748
Promodes 1,278 416
Rhone-Poulenc SA Class A 21,991 959
Sanofi 7,098 674
Schneider SA 10,122 540
Societe Generale 6,118 838
Societe Nationale Elf
Aquitaine 18,217 2,257
Synthelabo 3,224 380
--------
23,502
--------
GERMANY--8.3 %
BASF AG 42,207 1,432
Bayer AG 47,664 1,673
Bayerische Hypotheken &
Wechsel Bank AG 17,159 712
Bayerische Motoren Werke AG 1,452 1,050
Bayerische Vereinsbank AG 17,662 1,025
Commerzbank AG 24,380 827
Daimler Benz AG 35,544 2,382
Deutsche Bank AG 33,388 2,185
Dresdner Bank AG 31,522 1,289
</TABLE>
68
<PAGE> 71
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Hoechst AG 39,247 $ 1,494
Linde AG 663 400
Lufthansa AG (Reg.)+ 29,260 511
Mannesmann AG 2,512 1,061
Metro AG 15,002 660
Munchener Ruckvers 210 44
Munchener Ruckvers (Reg.) 10,740 3,128
RWE AG 22,847 991
SAP AG 4,280 1,228
Schering AG 4,562 442
Siemens AG 37,537 2,310
Thyssen AG 2,308 509
Veba AG 32,963 1,838
Vereinigte Elektrizitat
Westfalen Series B 1,506 507
VIAG AG 277 128
VIAG AG 1,773 823
Volkswagen AG 1,944 1,149
--------
29,798
--------
HONG KONG--3.0 %
Cheung Kong Holdings 141,000 980
Cheung Kong Infras 137,000 354
China Light & Power 138,900 731
CITIC Pacific 146,000 699
Hang Seng Bank, Ltd. 122,700 1,067
Henderson Land Development
Co. 103,000 570
Hong Kong and China Gas 219,000 414
Hong Kong Electric Holdings,
Ltd. 139,500 473
Hong Kong Telecommunications,
Ltd. 742,698 1,422
Hutchison Whampoa, Ltd. 239,000 1,654
New World Development Co. 113,351 399
Sun Hung Kai Properties 150,500 1,110
Swire Pacific, Ltd. Class A 101,500 542
Wharf Holdings 124,000 253
--------
10,668
--------
ITALY--3.1 %
Assicurazioni Generali 54,762 1,224
ENI SPA (Reg.) 488,802 2,749
Fiat Finance SPA 212,225 675
Fiat Finance SPA (Non-
Convertible) 60,267 109
INA 227,375 366
Telecom Italia Mob 446,823 1,657
Telecom Italia Mob di Risp 223,802 459
Telecom Italia SPA di Risp+ 179,292 724
Telecom Italia SPA+ 484,651 3,038
--------
11,001
--------
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
JAPAN--26.5 %
Advantest 7,000 $ 579
Ajinomoto Co., Inc. 29,000 263
All Nippon Airways Co., Ltd 57,000 284
Asahi Bank 144,000 747
Asahi Breweries 27,000 399
Asahi Chemical Industry Co. 94,000 428
Asahi Glass Co., Ltd 48,000 323
Bank of Tokyo-Mitsubishi,
Ltd. 301,500 3,933
Bank of Yokohama 49,000 203
Bridgestone Corp. 50,000 1,080
Canon, Inc. 53,000 1,286
Chubu Electric Power Co. 49,100 832
Chugoku Electric Power Co.,
Inc. 16,300 265
Dai Nippon Printing Co. 47,000 937
Dai-Ichi Kangyo Bank, Ltd. 191,000 1,619
Daiwa Bank 103,000 383
Daiwa House Industries Co. 34,000 328
Daiwa Securities Co. 55,000 333
DDI Corp. 146 488
East Japan Railway Co. 373 1,813
Eisai Co. 17,250 271
Fanuc 12,100 489
Fuji Bank, Ltd. 178,000 1,538
Fuji Photo Film Co. 34,000 1,232
Fujitsu, Ltd. 112,000 1,228
Hitachi, Ltd. 203,000 1,560
Honda Motor Co., Ltd. 60,000 2,019
Industrial Bank of Japan,
Ltd. 154,680 1,529
Ito-Yokado Co., Ltd. 28,000 1,391
Itochu Corp. 49,000 168
Japan Airlines Co., Ltd 72,000 261
Japan Telecom Co. 28 391
Japan Tobacco, Inc. 134 1,099
Joyo Bank 100 0
Jusco Co. 15,000 335
Kansai Electric Power Co. 60,300 1,067
Kao Corp. 28,000 391
Kawasaki Heavy Industries 62,000 144
Kawasaki Steel Co. 126,000 221
Kinki Nippon Railway Co. 104,830 595
Kirin Brewery Co., Ltd 46,000 386
Kobe Steel 121,000 146
Komatsu, Ltd. 43,000 230
</TABLE>
69
<PAGE> 72
SCHWAB INTERNATIONAL INDEX FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Kubota Corp. 48,000 $ 187
Kyocera Corp. 13,000 744
Kyushu Electric Power Co. 22,700 377
Long-Term Credit Bank of
Japan 155,000 524
Marubeni Corp. 40,000 125
Marui Co. 17,000 287
Matsushita Commerce 12,000 424
Matsushita Electric
Industrial Co., Ltd. 130,000 2,182
Matsushita Electric Works 33,000 299
Matsushita Kotobuk 10,000 311
Mitsubishi Chemical Corp. 72,000 162
Mitsubishi Corp. 90,000 770
Mitsubishi Electric Corp. 112,000 373
Mitsubishi Estate Co. 80,000 1,010
Mitsubishi Heavy Industries 208,000 1,021
Mitsubishi Motors 40,000 175
Mitsubishi Trust & Banking
Corp. 79,000 972
Mitsui & Co. 102,000 774
Mitsui Trust & Banking Co. 50,000 174
Murata Manufacturing Co. 16,000 649
NEC Corp. 97,000 1,064
New Oji Paper Co. 67,000 340
Nikko Securities Co. 59,000 213
Nikon Corp. 23,000 256
Nintendo Co., Ltd. 9,600 830
Nippon Express Co. 70,000 377
Nippon Oil Co. 53,000 217
Nippon Steel Corp. 420,000 865
Nippon Telegraph & Telephone
Corp. 850 7,204
Nippondenso Co. 57,000 1,231
Nissan Motor Co., Ltd. 163,000 868
NKK Corp. 112,000 155
Nomura Securities Co., Ltd. 120,000 1,396
NTT Data Corp. 17 812
Odakyu Electric Railway Co. 510 2
Osaka Gas Co. 105,000 232
Ricoh Co., Ltd. 30,000 386
Rohm Co. 8,000 791
Sakura Bank 209,000 853
Sankyo Co. 30,000 990
Sanwa Bank 178,000 1,790
Sanyo Electric Co., Ltd. 68,000 226
Secom Co. 8,000 517
Seibu Railway Co. 28,000 1,142
Sekisui Chemical Co. 24,000 189
Sekisui House 30,000 257
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Seven-Eleven Japan Co. 28,000 $ 2,094
Sharp Co. 73,000 567
Shin-Etsu Chemical Co. 15,700 384
Shiseido Co. 26,000 354
Shizuoka Bank 52,000 527
Sony Corp. 26,200 2,175
Sumitomo Bank 192,000 2,042
Sumitomo Chemical Co. 71,000 253
Sumitomo Corp. 45,000 322
Sumitomo Electric Industries 47,000 621
Sumitomo Metal Industries 204,000 409
Sumitomo Trust & Banking Co. 81,000 617
Suzuki Motor Corp. 13,000 138
Taisho Pharmaceutical Co. 17,000 435
Takeda Chemical Industries 54,000 1,472
TDK Corp. 9,000 746
Tohoku Electric Power Co. 32,600 531
Tokai Bank 124,000 723
Tokio Marine & Fire Insurance
Co. 95,000 947
Tokyo Electric Power Co.,
Inc. 82,700 1,580
Tokyo Electron 11,000 548
Tokyo Gas Co. 95,000 218
Tokyu Corp. 48,000 199
Tonen Corp. 27,000 201
Toppan Printing Co. 31,000 389
Toray Industries, Inc. 60,000 334
Toshiba Corp. 196,000 888
Tostem Corp. 11,000 153
Toyo Trust & Banking Co. 34,000 254
Toyoda Automatic Loom 8,000 157
Toyota Motor Corp. 245,000 6,820
Yamanouchi Pharmaceutical Co. 15,000 369
Yasuda Fire & Marine
Insurance Co. 24,000 133
--------
95,557
--------
NETHERLANDS--6.9 %
ABN AMRO Holdings NV 85,013 1,712
Aegon NV 19,205 1,513
Ahold (Kon) NV 32,184 824
Akzo Nobel NV 4,896 863
Dordtsche Petroleum 18,420 989
Elsevier NV 44,195 694
Fortis Amev NV 12,205 480
Heineken NV 3,581 582
ING Groep NV 52,450 2,202
Koninklijke PTT Nederland 30,120 1,151
Philips Electronics NV 23,604 1,848
</TABLE>
70
<PAGE> 73
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
PolyGram NV 12,016 $ 683
Royal Dutch Petroleum Co. 143,136 7,571
SGS-Thomson Microelectronics
NV+ 9,283 661
Unilever NV 42,736 2,272
Wolters Kluwer NV 4,643 570
--------
24,615
--------
SINGAPORE--0.7 %
City Developments 52,000 218
Hong Kong Land Holdings 270,176 616
Jardine Matheson Holdings,
Ltd. 278 2
OCBC Bank (alien market) 13,606 76
Singapore Telecommunications 1,022,000 1,622
United Overseas Bank (alien
market) 600 3
--------
2,537
--------
SPAIN--2.3 %
Argentaria Corp. 9,106 506
BCO Bilbao Vizcaya 47,091 1,259
BCO Esp de Credito 37,900 350
BCO Popular 7,558 446
BCO Santander (Reg.) 29,838 836
Endesa SA 70,232 1,323
Gas Natural SDG 9,964 462
Iberdrola SA 57,259 685
Repsol SA 20,026 840
Telefonica Internacional de
Espana SA 62,733 1,712
--------
8,419
--------
SWEDEN--2.6 %
ABB AB Series A 40,230 470
ABB AB Series B 10,040 116
Astra AB Series A 90,856 1,468
Astra AB Series B 20,421 316
Hennes and Mauritz Series B 13,810 565
L.M. Ericsson Telephone
Series B 77,301 3,406
Nordbanken AB 11,300 355
Sandvik AB Series B 4,349 132
Sandvik AB Series A 10,501 318
Scania AB Series A 6,600 159
Scania AB Series B 6,600 163
Skand Enskilda Banken Series
A 32,600 353
Sparbanken Sverige Series A 21,193 481
Svenska Handelsbanken Series
A 13,127 415
Svenska Handelsbanken Series
B 1,500 45
Volvo AB Series A 6,119 159
Volvo AB Series B 21,821 571
--------
9,492
--------
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
SWITZERLAND--8.0 %
ABB AG (Bearer)+ 545 $ 710
ABB AG (Reg.)+ 361 93
Adecco SA 1,098 349
Alusuisse Lonza (Bearer) 136 122
Alusuisse Lonza HD (Reg.) 274 246
Ciba Specialty (Reg.)+ 4,815 473
Cie Financiere Richemont
Series A (Bearer) 392 476
CS Holding (Reg.) 15,477 2,180
Holderbank Financiere Glaris
(Bearer) 341 274
Holderbank Financiere Glaris
(Reg.) 675 120
Nestle SA (Reg.) 2,773 3,907
Novartis AG (Bearer) 913 1,440
Novartis AG (Reg.) 4,319 6,765
Roche Group Holding AG 495 4,350
Roche Group Holding AG
(Bearer) 107 1,589
Schweizerische
Bankgesellschaft (Bearer) 1,418 1,632
Schweizerische
Bankgesellschaft (Reg.) 1,474 340
Schweizerische Bankverein
(Reg.) 5,192 1,396
Winterthur (Reg.) 775 790
Zurich Versicherung (Reg.) 3,109 1,283
--------
28,535
--------
UNITED KINGDOM--23.1 %
Abbey National 84,072 1,337
Allied-Lyons PLC 74,694 610
Asda Group 178,462 464
Associated British Foods 64,007 515
BAA PLC 70,714 653
Bank of Scotland PLC 72,515 599
Barclays PLC 106,143 2,659
Bass PLC 58,366 811
BAT Industries PLC 206,852 1,810
BG PLC 276,262 1,214
BOC Group 34,233 576
Boots Co. 64,382 922
British Aerospace 27,694 735
British Airways 68,083 665
British Petroleum Co. 395,622 5,817
</TABLE>
71
<PAGE> 74
SCHWAB INTERNATIONAL INDEX FUND(R)
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
British Sky Broadcast 115,063 $ 817
British Telecommunications 408,446 3,104
BTR PLC 255,071 861
Cable & Wireless 169,486 1,354
Cadbury Schweppes 68,513 690
Commercial Union Assurance
Co. 39,457 556
Emi Group PLC 77,355 626
Enterprise Oil PLC 30,600 342
General Accident PLC 29,244 498
General Electric Co. 173,285 1,107
GKN 23,403 525
Glaxo Wellcome PLC 242,851 5,207
Granada Group 42,142 582
Grand Metropolitan, Inc. 141,859 1,280
Great Universal Stores 64,838 769
Guinness 124,259 1,111
HSBC Holdings 56,280 1,402
HSBC Holdings (Hong Kong) 120,541 2,831
Imperial Chemical Industries 46,630 688
J. Sainsbury PLC 122,221 1,020
Kingfisher 47,394 682
Legal & General Group 78,007 648
Lloyds TSB Group PLC 396,102 4,951
Marks & Spencer PLC 176,607 1,793
National Grid Group PLC 104,000 490
National Power Development 68,681 573
National Westminster Bancorp 123,100 1,770
Pearson, Inc. 39,203 513
Peninsular & Oriental Steam
Navigation 37,123 430
Powergen 44,045 490
Prudential Corp. 127,462 1,360
Rank Group 102,265 571
Reckitt & Colman PLC 24,700 379
Reed International 73,392 726
Rentokil Initial 128,688 518
Reuters Holdings PLC 109,468 1,188
Rolls Royce PLC 91,200 327
Royal Bank of Scotland 57,824 613
Royal Sun Alliance PLC 93,507 897
RTZ Corp. PLC (Reg.) 69,818 900
Safeway PLC 66,762 435
Schroders 12,100 347
Scot & Newcastle 42,611 482
Scottish Power 70,424 527
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Shell Transport & Trading Co.
(Reg.) 678,429 $ 4,812
Siebe PLC 28,239 542
Smithkline Beecham 345,380 3,274
Standard Chartered PLC 64,712 702
Tesco PLC 142,936 1,144
Unilever PLC 213,116 1,588
United News & Media PLC 31,703 399
United Utilities PLC 33,990 415
Vodafone Group PLC 203,835 1,111
Whitbread 30,836 412
Zeneca Group 60,471 1,908
--------
82,674
--------
TOTAL COMMON STOCK
(Cost $296,559) 352,391
--------
PREFERRED STOCK--0.6%
AUSTRALIA--0.1 %
News Corporation, Ltd.
(Limited Voting Shares) 70,942 315
--------
GERMANY--0.5 %
Metro AG (Non-Voting) 460 16
RWE AG (Non-Voting) 20,391 736
Sap AG (Non-Voting) 2,826 841
Volkswagen AG (Non-Voting) 584 265
--------
1,858
--------
ITALY--0.0 %
Fiat Finance SPA 62,447 103
--------
TOTAL PREFERRED STOCK
(Cost $1,513) 2,276
--------
WARRANTS--0.0%
BELGIUM--0.0 %
Generale de Banque (expire
11/15/99)+ 600 4
--------
FRANCE--0.0 %
AXA UAP CVG (expire
01/07/99)+ 5,916 16
Cie Generale de Eaux (expire
05/02/01)+ 8,094 4
--------
20
--------
</TABLE>
72
<PAGE> 75
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
SWITZERLAND--0.0 %
Schweizerische Bankverein
(expire 6/30/00)+ 425 $ 4
--------
UNITED KINGDOM--0.0 %
BTR (expire 11/26/98)+ 4,019 0
--------
TOTAL WARRANTS
(Cost $8) 28
--------
</TABLE>
<TABLE>
<CAPTION>
Value
Par (000s)
---------- --------
<S> <C> <C>
CASH EQUIVALENTS--1.1%
MSTC Cash Reserve Liquid
Asset Fund
5.38%*, 11/07/97 $3,887,854 $ 3,888
--------
TOTAL CASH EQUIVALENTS
(Cost $3,888) 3,888
--------
TOTAL INVESTMENTS--100.0%
(Cost $301,968) $358,583
========
</TABLE>
- ---------------
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.
**** Fair-value security. See Note 2 "Security valuation."
(a) Yields shown are effective yields at the time of purchase.
(b) These securities, or portion thereof, are being used to collaterize open
futures contracts.
See accompanying Notes to Financial Statements.
73
<PAGE> 76
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
October 31, 1997
<TABLE>
<CAPTION>
Schwab Schwab
S&P 500 1000
Fund Fund(R)
---------- ----------
<S> <C> <C>
ASSETS
Investments, at value (Cost: $1,403,452 and $1,995,049, respectively) $1,570,454 $3,033,224
Repurchase agreement -- 17,276
Interest receivable -- 2
Amounts on deposit with broker 1,100 --
Dividends receivable 1,951 3,552
Receivable for fund shares sold 6,517 4,386
Receivable from securities lending 10 48
Prepaid expenses 103 108
Deferred organization costs 19 --
---------- ----------
Total Assets 1,580,154 3,058,596
---------- ----------
LIABILITIES
Payable for investments purchased 36,209 18,203
Payable for fund shares redeemed 2,838 2,610
Variation margin 278 --
Investment advisory fee payable 13 110
Transfer agency and shareholder service fees payable 51 133
Accrued expenses 322 541
---------- ----------
Total Liabilities 39,711 21,597
---------- ----------
Net assets applicable to outstanding shares $1,540,443 $3,036,999
========== ==========
NET ASSETS CONSIST OF:
Paid-in-capital $1,365,100 $1,978,847
Undistributed net investment income 11,074 25,431
Accumulated net realized loss on investments and futures (2,733) (5,454)
Net unrealized appreciation on investments 167,002 1,038,175
---------- ----------
$1,540,443 $3,036,999
========== ==========
PRICING OF SHARES
Net asset value, offering and redemption price per share, applicable to outstanding
shares, $0.00001 par value (unlimited shares authorized)
Investor Shares ($923,148/65,149, $2,610,607/103,406, respectively) $14.17 $25.25
Select Shares ($485,604/34,212, $426,392/16,880, respectively) $14.19 $25.26
e. Shares ($131,691/9,283) $14.19 --
</TABLE>
See accompanying Notes to Financial Statements.
74
<PAGE> 77
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
October 31, 1997
<TABLE>
<CAPTION>
Schwab
Small-Cap Schwab
Index International
Fund(R) Index Fund(R)
---------- -------------
<S> <C> <C>
ASSETS
Investments, at value (Cost: $374,793 and $301,968, respectively) $494,190 $ 358,583
Foreign currencies, at value (cost $4,595) -- 4,656
Interest receivable 23 27
Dividends receivable 266 766
Receivable for fund shares sold 2,973 3,599
Receivable for investments sold 220 1,137
Dividend tax reclaim receivable -- 321
Miscellaneous assets 11 14
---------- ---------
Total Assets 497,683 369,103
---------- ---------
LIABILITIES
Payable for investments purchased 5,207 1,137
Payable for fund shares redeemed 637 281
Investment advisory fee payable 11 10
Payable for custodian fees 23 50
Transfer agency and shareholder service fees payable 70 56
Accrued expenses 91 106
Withholding taxes payable -- 101
---------- ---------
Total Liabilities 6,039 1,741
---------- ---------
Net assets applicable to outstanding shares $491,644 $ 367,362
========== =========
NET ASSETS CONSIST OF:
Paid-in-capital $372,157 $ 310,814
Undistributed net investment income 1,452 4,052
Accumulated net realized loss on investments sold and foreign currency transactions (1,362) (4,180)
Net unrealized appreciation on investments and translating assets and liabilities
into reporting currency 119,397 56,676
---------- ---------
$491,644 $ 367,362
========== =========
PRICING OF SHARES
Net asset value, offering and redemption price per share, applicable to outstanding
shares, $0.00001 par value (unlimited shares authorized) Investor Shares
($410,470/23,148 and $317,833/23,884, respectively) $17.73 $13.31
Select Shares ($81,174/4,574 and $49,529/3,719, respectively) $17.75 $13.32
</TABLE>
See accompanying Notes to Financial Statements.
75
<PAGE> 78
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (in thousands)
<TABLE>
<CAPTION>
Schwab S&P
500 Fund Schwab
Year ended 1000 Fund(R)
October Period ended
31, October 31,
1997 1997*
---------- ------------
<S> <C> <C>
Investment income:
Dividends $ 14,709 $ 7,263
Interest 34 164
-------- --------
Total investment income 14,743 7,427
-------- --------
Expenses:
Investment advisory and administration fee 2,839 1,187
Transfer agency and shareholder service fees
Investor Shares 1,423 1,106
Select Shares 126 67
e. Shares 107 --
Custodian fees 185 54
Professional fees 69 12
Registration fees 282 53
Shareholder reports 125 --
Trustees' fees 16 1
Amortization of deferred organization costs 5 --
Insurance and other expenses 99 17
-------- --------
5,276 2,497
Less expenses reduced (see Note 4) (2,606) (229)
-------- --------
Net expenses incurred by Fund 2,670 2,268
-------- --------
Net investment income 12,073 5,159
-------- --------
Net realized gain (loss) on investments sold (2,400) 1,097
Net realized loss on futures contracts (279) --
Net unrealized appreciation on investments 149,985 43,118
Net unrealized appreciation on futures contracts 1 --
-------- --------
Net gain on investments 147,307 44,215
-------- --------
Increase in net assets resulting from operations $159,380 $ 49,374
======== ========
</TABLE>
- ---------------
* Period from September 1, 1997 through October 31, 1997
See accompanying Notes to Financial Statements.
76
<PAGE> 79
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (in thousands)
Year ended October 31, 1997
<TABLE>
<CAPTION>
Schwab
Small-Cap Schwab
Index International
Fund(R) Index Fund(R)
----------- -------------
<S> <C> <C>
Investment income:
Dividends (net of foreign taxes withheld of $1 and $888, respectively) $ 3,078 $ 5,882
Interest 183 224
------- -------
Total investment income 3,261 6,106
------- -------
Expenses:
Investment advisory and administration fee 1,540 2,146
Transfer agency and shareholder service fees
Investor Shares 734 744
Select Shares 20 14
Custodian fees 121 285
Portfolio accounting fees 73 73
Professional fees 55 66
Registration fees 108 95
Shareholder reports 84 79
Trustees' fees 11 13
Amortization of deferred organization costs 4 4
Insurance and other expenses 30 37
------- -------
2,780 3,556
Less expenses reduced (see Note 4) (1,190) (1,674)
------- -------
Net expenses incurred by Fund 1,590 1,882
------- -------
Net investment income 1,671 4,224
------- -------
Net realized gain (loss) on investments and foreign currency transactions:
Net realized loss on investments sold (481) (1,791)
Net realized gain (loss) on foreign currency transactions 3 (172)
------- -------
Net realized loss on investments sold and foreign currency transactions (478) (1,963)
Change in net unrealized appreciation on investments and foreign currency:
Net unrealized appreciation on investments 83,214 24,032
Net unrealized appreciation on foreign currency -- 47
------- -------
Net unrealized appreciation on investments and foreign currency 83,214 24,079
------- -------
Net gain on investments 82,736 22,116
------- -------
Increase in net assets resulting from operations $84,407 $26,340
======= =======
</TABLE>
See accompanying Notes to Financial Statements.
77
<PAGE> 80
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
S&P 500 Fund Schwab 1000 Fund(R)
-------------------------- -------------------------
Year ended Period ended Period ended Year ended
October 31, October 31, October 31, August 31,
1997 1996* 1997** 1997***
----------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 12,073 $ 1,860 $ 5,159 $ 29,087
Net realized gain (loss) on investments sold and futures
contracts (2,679) (54) 1,097 (4,992)
Net unrealized appreciation on investments and futures
contracts 149,986 17,016 43,118 651,010
-------- -------- -------- --------
Increase in net assets resulting from operations 159,380 18,822 49,374 675,105
-------- -------- -------- --------
Dividends to shareholders from net investment income
Investor Shares (2,361) -- -- (23,949)
Select Shares -- -- -- --
e. Shares (498) -- -- --
-------- -------- -------- --------
(2,859) -- -- (23,949)
Capital Share Transactions:
Proceeds from shares sold 1,636,074 304,596 270,742 1,328,283
Net asset value of shares issued in reinvestment of
dividends 2,679 -- -- 21,833
Early withdrawal fees (see Note 8) -- -- 104 429
Less payments for shares redeemed (534,934) (43,315) (129,356) (715,625)
-------- -------- -------- --------
Increase in net assets from capital share transactions 1,103,819 261,281 141,490 634,920
-------- -------- -------- --------
Total increase in net assets 1,260,340 280,103 190,864 1,286,076
Net Assets:
Beginning of period 280,103 -- 2,846,135 1,560,059
-------- -------- -------- --------
End of period (including undistributed net investment
income of $11,074, $1,860, $25,431 and $20,272,
respectively) $1,540,443 $280,103 $3,036,999 $2,846,135
======== ======== ======== ========
Number of Fund shares:
Sold 122,252 29,931 10,444 59,126
Reinvested 231 -- -- 1,058
Redeemed (39,579) (4,191) (4,990) (31,365)
-------- -------- -------- --------
Net increase in shares outstanding 82,904 25,740 5,454 28,819
======== ======== ======== ========
</TABLE>
- ---------------
* For the period from May 1, 1996 (commencement of operations) to October 31,
1996
** For the period from September 1, 1997 to October 31, 1997
*** For the period from September 1, 1996 to August 31, 1997
See accompanying Notes to Financial Statements.
78
<PAGE> 81
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
International Index
Small-Cap Index Fund(R) Fund(R)
Year ended October 31, Year ended October 31,
-------------------------- --------------------------
1997 1996 1997 1996
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 1,671 $ 968 $ 4,224 $ 3,349
Net realized loss on investments sold and foreign
currency transactions (478) (647) (1,963) (1,781)
Change in net unrealized appreciation on investments and
foreign currency translation 83,214 22,556 24,079 20,098
-------- -------- -------- --------
Increase in net assets resulting from operations 84,407 22,877 26,340 21,666
-------- -------- -------- --------
Dividends to shareholders from net investment income
Investor Shares (998) (673) (3,464) (2,089)
Select Shares -- -- -- --
-------- -------- -------- --------
(998) (673) (3,464) (2,089)
Capital Share Transactions:
Proceeds from shares sold 314,331 106,790 199,296 100,434
Net asset value of shares issued in reinvestment of
dividends 901 604 3,084 1,809
Early withdrawal fees (see Note 8) 155 61 76 54
Less payments for shares redeemed (116,277) (42,608) (104,748) (54,708)
-------- -------- -------- --------
Increase in net assets from capital share transactions 199,110 64,847 97,708 47,589
-------- -------- -------- --------
Total increase in net assets 282,519 87,051 120,584 67,166
Net Assets:
Beginning of period 209,125 122,074 246,778 179,612
-------- -------- -------- --------
End of period (including undistributed net investment
income of $1,452, $779, $4,052 and $3,292,
respectively) $ 491,644 $209,125 $ 367,362 $ 246,778
======== ======== ======== ========
Number of Fund shares:
Sold 19,646 8,182 15,015 8,493
Reinvested 64 49 250 155
Redeemed (7,380) (3,271) (7,843) (4,605)
-------- -------- -------- --------
Net increase in shares outstanding 12,330 4,960 7,422 4,043
======== ======== ======== ========
</TABLE>
See accompanying Notes to Financial Statements.
79
<PAGE> 82
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Schwab S&P 500 Fund
-----------------------------------------------------------------------
Investor Shares e. Shares Select Shares
-------------------------- -------------------------- -------------
Year ended Period ended Year ended Period ended Period ended
October 31, October 31, October 31, October 31, October 31,
1997 1996** 1997 1996** 1997***
----------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.88 $ 10.00 $ 10.89 $ 10.00 $ 12.85
Income from investment operations
Net investment income 0.14 0.08 0.21 0.04 0.05
Net realized and unrealized gain on
investments 3.24 0.80 3.19 0.85 1.29
-------- -------- -------- ------- --------
Total from investment operations 3.38 0.88 3.40 0.89 1.34
Less distributions
Dividends from net investment income (0.09) -- (0.10) -- --
-------- -------- -------- ------- --------
Total distributions (0.09) -- (0.10) -- --
-------- -------- -------- ------- --------
Net asset value at end of period $ 14.17 $ 10.88 $ 14.19 $ 10.89 $ 14.19
======== ======== ======== ======= ========
Total return (not annualized) 31.29% 8.80% 31.48% 8.90% 10.43%
Ratios/Supplemental data
Net assets, end of period (000s) $ 923,148 $243,772 $ 131,691 $ 36,331 $ 485,604
Ratio of expenses to average net assets+ 0.38% 0.49%* 0.28% 0.28%* 0.19%*
Ratio of net investment income to average net
assets+ 1.49% 1.89%* 1.61% 1.82%* 1.46%*
Portfolio turnover rate 3% 1% 3% 1% 3%
Average commission rate $ 0.0277 $ 0.0224 $ 0.0277 $ 0.0224 $ 0.0277
</TABLE>
- ---------------
+ The information contained in the above table is based on actual expenses for
the period, after giving effect to the portion of expenses reduced and
absorbed by the Investment Manager and Schwab. Had these expenses not been
reduced and absorbed, the Fund's expense and net investment income ratios
would have been:
<TABLE>
<S> <C> <C> <C> <C> <C>
Ratio of expenses to average net assets 0.70% 0.89%* 0.61% 1.19%* 0.53%*
Ratio of net investment income to average
net assets 1.17% 1.49%* 1.28% 0.91%* 1.12%*
</TABLE>
* Annualized
** For the period from May 1, 1996 (commencement of operations) to October 31,
1996.
*** For the period from May 19, 1997 (commencement of operations) to October 31,
1997.
See accompanying Notes to Financial Statements.
80
<PAGE> 83
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab 1000 Fund(R)
-----------------------------------------------------------------------------------------
Investor Shares
-----------------------------------------------------------------------------------------
Two months
ended Eight months
October August 31, ended Year ended
31, --------------------------------------------- August 31, December 31,
1997 1997 1996 1995 1994 1993 1992
---------- ---------- ---------- -------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning
of period $ 24.78 $ 18.14 $ 15.68 $ 13.08 $ 12.80 $ 11.96 $ 11.26
Income from investment
operations
Net investment income 0.04 0.28 0.24 0.26 0.26 0.17 0.24
Net realized and unrealized
gain on investments 0.43 6.62 2.45 2.48 0.28 0.79 0.71
---------- ---------- ---------- -------- -------- -------- --------
Total from investment
operations 0.47 6.90 2.69 2.74 0.54 0.96 0.95
Less distributions
Dividends from net
investment income -- (0.26) (0.23) (0.14) (0.26) (0.12) (0.25)
---------- ---------- ---------- -------- -------- -------- --------
Total distributions -- (0.26) (0.23) (0.14) (0.26) (0.12) (0.25)
---------- ---------- ---------- -------- -------- -------- --------
Net asset value at end of
period $ 25.25 $ 24.78 $ 18.14 $ 15.68 $ 13.08 $ 12.80 $ 11.96
========== ========== ========== ======== ======== ======== ========
Total return (not annualized) 1.90% 38.32% 17.27% 21.23% 4.28% 8.06% 8.52%
Ratios/Supplemental data
Net assets, end of period
(000s) $2,610,607 $2,498,891 $1,560,059 $826,714 $554,061 $ 515,272 $370,980
Ratio of expenses to
average net assets+ 0.46% * 0.47% 0.49% 0.54% 0.51% 0.45%* 0.35%
Ratio of net investment
income to average net
assets+ 1.00% * 1.33% 1.66% 2.03% 2.06% 2.21%* 2.45%
Portfolio turnover rate 0 % 2% 2% 2% 3% 1% 1%
Average commission rate** $ 0.0279 $ 0.0280 $ 0.0282 -- -- -- --
</TABLE>
- ---------------
+ The information contained in the above table is based on actual expenses for
the period, after giving effect to the portion of expenses reduced and
absorbed by the Investment Manager and Schwab. Had these expenses not been
reduced and absorbed, the Fund's expense and net investment income ratios
would have been:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of expenses to average
net assets 0.50% * 0.53% 0.57% 0.63% 0.56% 0.49%* 0.52%
Ratio of net investment
income to average net
assets 0.96% * 1.27% 1.58% 1.94% 2.01% 2.17%* 2.28%
</TABLE>
* Annualized
** A fund is required to disclose its average commission rate per share for
security trades on which a commission is charged.
See accompanying Notes to Financial Statements.
81
<PAGE> 84
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Schwab 1000 Fund(R)
-------------------------
Select Shares
-------------------------
Two months
ended
October Period ended
31, August 31,
1997 1997**
---------- ------------
<S> <C> <C>
Net asset value at beginning of period $ 24.79 $ 22.64
Income from investment operations
Net investment income 0.04 0.05
Net realized and unrealized gain on investments 0.43 2.10
-------- --------
Total from investment operations 0.47 2.15
Less distributions
Dividends from net investment income -- --
-------- --------
Total distributions -- --
-------- --------
Net asset value at end of period $ 25.26 $ 24.79
======== ========
Total return (not annualized) 1.90% 9.50%
Ratios/Supplemental data
Net assets, end of period (000s) $426,392 $347,244
Ratio of expenses to average net assets+ 0.35%* 0.35%*
Ratio of net investment income to average net assets+ 1.11%* 1.26%*
Portfolio turnover rate 0% 2%
Average commission rate $ 0.0279 $ 0.0280
</TABLE>
- ---------------
+ The information contained in the above table is based on actual expenses for
the period, after giving effect to the portion of expenses reduced and
absorbed by the Investment Manager and Schwab. Had these expenses not been
reduced and absorbed, the Fund's expense and net investment income ratios
would have been:
<TABLE>
<S> <C> <C>
Ratio of expenses to average net assets 0.41%* 0.68%*
Ratio of net investment income to average net assets 1.05%* 0.93%*
</TABLE>
* Annualized
** For the period from May 19, 1997 (commencement of operations) to August 31,
1997.
See accompanying Notes to Financial Statements.
82
<PAGE> 85
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab Small-Cap Index Fund(R)
---------------------------------------------------
Investor Shares
---------------------------------------------------
Year ended October 31, Period ended
---------------------------------- October 31,
1997 1996 1995 1994++
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 13.59 $ 11.70 $ 10.05 $ 10.00
Income from investment operations
Net investment income 0.06 0.07 0.10 0.06
Net realized and unrealized gain on investments 4.14 1.88 1.61 --
-------- -------- -------- -------
Total from investment operations 4.20 1.95 1.71 0.06
Less distributions
Dividends from net investment income (0.06) (0.06) (0.06) (0.01)
-------- -------- -------- -------
Total distributions (0.06) (0.06) (0.06) (0.01)
-------- -------- -------- -------
Net asset value at end of period $ 17.73 $ 13.59 $ 11.70 $ 10.05
======== ======== ======== =======
Total return (not annualized) 31.03% 16.73% 17.11% 0.63%
Ratios/Supplemental data
Net assets, end of period (000s) $410,470 $209,125 $122,074 $ 68,128
Ratio of expenses to average net assets+ 0.52% 0.59% 0.68% 0.67%*
Ratio of net investment income to average net assets+ 0.53% 0.56% 0.68% 0.68%*
Portfolio turnover rate 23% 23% 24% 16%
Average commission rate** $ 0.0012 $ 0.0318 -- --
</TABLE>
- ---------------
+ The information contained in the above table is based on actual expenses for
the periods, after giving effect to the portion of fees reduced and expenses
absorbed by the Investment Manager and Schwab. Had these fees and expenses not
been reduced and absorbed, the Fund's expense and net investment income ratios
would have been:
<TABLE>
<S> <C> <C> <C> <C>
Ratio of expenses to average net assets 0.89% 0.94% 1.02% 1.19%*
Ratio of net investment income to average net assets 0.16% 0.21% 0.34% 0.16%*
</TABLE>
++ For the period December 3, 1993 (commencement of operations) to October 31,
1994.
* Annualized
** A fund is required to disclose its average commission rate per share for
security trades on which a commission is charged.
See accompanying Notes to Financial Statements.
83
<PAGE> 86
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Schwab Small-Cap Index
Fund(R)
Select Shares
----------------------------
Period Ended
October 31, 1997++
----------------------------
<S> <C>
Net asset value at beginning of period $ 14.50
Income from investment operations
Net investment income 0.02
Net realized and unrealized gain on investments 3.23
-------
Total from investment operations 3.25
Less distributions
Dividends from net investment income --
-------
Total distributions --
-------
Net asset value at end of period $ 17.75
=======
Total return (not annualized) 22.41%
Ratios/Supplemental data
Net assets, end of period (000s) $ 81,174
Ratio of expenses to average net assets+++ 0.38%*
Ratio of net investment income to average net assets+++ 0.56%*
Portfolio turnover rate 23%
Average commission rate $ 0.0012
</TABLE>
- ---------------
+ The information contained in the above table is based on actual expenses for
the periods, after giving effect to the portion of fees reduced and expenses
absorbed by the Investment Manager and Schwab. Had these fees and expenses not
been reduced and absorbed, the Fund's expense and net investment income ratios
would have been:
<TABLE>
<S> <C>
Ratio of expenses to average net assets 0.90%*
Ratio of net investment income to average net assets 0.04%*
</TABLE>
++ For the period May 19, 1997 (commencement of operations) to October 31, 1997.
* Annualized
See accompanying Notes to Financial Statements.
84
<PAGE> 87
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab International Index Fund(R)
Investor Shares
---------------------------------------------------------------
Period
Year Ended October 31, Ended
----------------------------------------------- October 31,
1997 1996 1995 1994 1993++
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 12.23 $ 11.13 $ 10.89 $ 10.15 $ 10.00
Income from investment operations
Net investment income 0.17 0.16 0.14 0.11 0.03
Net realized and unrealized gain on investments
and foreign currency transactions 1.08 1.07 0.22 0.69 0.12
-------- -------- -------- -------- --------
Total from investment operations 1.25 1.23 0.36 0.80 0.15
Less distributions
Dividends from net investment income (0.17) (0.13) (0.12) (0.04) --
Distributions from realized gain on investments -- -- -- (0.02) --
-------- -------- -------- -------- --------
Total distributions (0.17) (0.13) (0.12) (0.06) --
-------- -------- -------- -------- --------
Net asset value at end of period $ 13.31 $ 12.23 $ 11.13 $ 10.89 $ 10.15
======== ======== ======== ======== ========
Total return (not annualized) 10.33% 11.07% 3.35% 7.89% 1.50%
Ratios/Supplemental data
Net assets, end of period (000s) $317,833 $246,778 $179,612 $142,355 $ 106,085
Ratio of expenses to average net assets+ 0.61% 0.69% 0.85% 0.90% 0.60%*
Ratio of net investment income to average net
assets+ 1.36% 1.50% 1.45% 1.14% 2.15%*
Portfolio turnover rate 13% 6% 0% 6% 2%
Average commission rate** $ 0.0175 $ 0.0162 -- -- --
</TABLE>
- ---------------
+ The information contained in the above table is based on actual expenses for
the periods, after giving effect to the portion of fees reduced and expenses
absorbed by the Investment Manager and Schwab. Had these fees and expenses
not been reduced and absorbed, the Fund's expense and net investment income
ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C>
Ratio of expenses to average net assets 1.13% 1.17% 1.22% 1.30% 2.10%*
Ratio of net investment income to average net
assets 0.84% 1.02% 1.08% 0.74% 0.65%*
</TABLE>
* Annualized
** A fund is required to disclose its average commission rate per share for
security trades on which a commission is charged.
++ For the period September 9, 1993 (commencement of operations) to October 31,
1993.
See accompanying Notes to Financial Statements.
85
<PAGE> 88
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Schwab
International
Index Fund(R)
Select Shares
-----------------
Period Ended
October 31,
1997++
-----------------
<S> <C>
Net asset value at beginning of period $ 13.59
Income from investment operations
Net investment income 0.04
Net realized and unrealized gain on investments and foreign currency transactions (0.31)
-------
Total from investment operations (0.27)
Less distributions
Dividends from net investment income --
-------
Total distributions --
-------
Net asset value at end of period $ 13.32
=======
Total return (not annualized) (1.99)%
Ratios/Supplemental data
Net assets, end of period (000s) $49,529
Ratio of expenses to average net assets+ 0.47%*
Ratio of net investment income to average net assets+ 1.17%*
Portfolio turnover rate 13%
Average commission rate $0.0175
</TABLE>
- ---------------
+ The information contained in the above table is based on actual expenses for
the periods, after giving effect to the portion of fees reduced and expenses
absorbed by the Investment Manager and Schwab. Had these fees and expenses not
been reduced and absorbed, the Fund's expense and net investment income ratios
would have been:
<TABLE>
<S> <C>
Ratio of expenses to average net assets 1.27%*
Ratio of net investment income to average net assets 0.37%*
</TABLE>
* Annualized
++ For the period May 19, 1997 (commencement of operations) to October 31, 1997.
See accompanying Notes to Financial Statements.
86
<PAGE> 89
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
1. DESCRIPTION OF THE FUNDS
The Schwab S&P 500 Fund, Schwab Small-Cap Index Fund(R) and Schwab International
Index Fund(R) are a series of Schwab Capital Trust (the "Capital Trust") and the
Schwab 1000 Fund(R) is a series of the Schwab Investments (the "Investment
Trust"), each a no-load, open-end, management investment company organized as
Massachusetts business trusts on May 7, 1993 and October 26, 1990, respectively,
and registered under the Investment Company Act of 1940, as amended. Each of the
funds in this report are herein referred to as the "Funds".
The Schwab S&P 500 Fund, Schwab 1000 Fund(R), Schwab Small-Cap Index Fund(R),
and Schwab International Index Fund(R) offer two classes of shares -- Investor
Shares and Select Shares. Both classes represent interests in the same portfolio
of investments of each Fund and are substantially the same in all respects
except that the classes are subject to different transfer agency and shareholder
service fees (see Note 3), investment minimums and certain other expenses.
However, the Schwab S&P 500 Fund offers a third class of shares -- the e.
Shares(TM). These Shares offer the same concept as the Investor Shares and the
Select Shares, but the e.Shares are available only to clients of Schwab
Institutional and The Charles Schwab Trust Company and to certain tax-advantaged
retirement plans who can execute their trading and information requests through
SchwabLink(TM).
The investment objective for the Schwab S&P 500 Fund is to seek to track the
price and dividend performance (total return) of common stocks of U.S.
companies, as represented by the S&P 500 Index. The investment objective for the
Schwab 1000 Fund(R) is to attempt to match the price and dividend performance
(total return) of the Schwab 1000 Index(R), an index created to represent the
performance of publicly traded common stocks of the 1,000 largest U.S.
companies. The investment objective for the Schwab Small-Cap Index Fund(R) is to
attempt to track the price and dividend performance (total return) of the Schwab
Small Cap Index(R), an index created to represent the performance of common
stocks of the second 1,000 largest U.S. companies, ranked by market
capitalization. The investment objective for the Schwab International Index
Fund(R) is to attempt to track the price and dividend performance (total return)
of the Schwab International Index(R), an index created to represent the
performance of common stocks and other equity securities, including preferred
stocks, rights, and warrants, issued by large, publicly traded companies from
countries around the world with major developed securities markets, excluding
the United States.
In addition to the Schwab S&P 500 Fund, Small-Cap Index Fund(R) and
International Index Fund(R), the Capital Trust also offers the Schwab Asset
Director(R) -- High Growth Fund, Schwab Asset Director -- Balanced Growth Fund,
Schwab Asset Director -- Conservative Growth Fund, Schwab Analytics Fund(R),
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.
87
<PAGE> 90
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1997
In addition to the Schwab 1000 Fund(R), the Investment Trust also offers the
Schwab Short-Term Bond Index Fund (formerly Schwab Short/Intermediate Government
Bond Fund), Schwab Total Bond Market Index Fund (formerly Schwab Long-Term
Government Bond Fund), Schwab California Short/Intermediate Tax-Free Bond Fund,
Schwab California Long-Term Tax-Free Bond Fund, Schwab Short/Intermediate
Tax-Free Bond Fund and Schwab Long-Term Tax-Free Bond Fund. The assets of each
series are segregated and accounted for separately.
Effective September 1, 1997, the Schwab 1000 Fund(R) changed its fiscal year
end. Accordingly, the Statement of Assets and Liabilities, the Statement of
Operations, the Statement of Changes in Net Assets and the Financial Highlights
each report activity as of October 31, 1997 and for the two month period then
ended.
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 are valued
at the last quoted sale price for a given day, or if a sale is not reported for
that day, at the mean between the most recent quoted bid and asked prices.
Securities for which no market quotations are readily available are valued at
the mean between the most recent bid and asked prices. Securities for which no
quotations are readily available are valued at fair value as determined by the
Fund's investment manager pursuant to guidelines adopted in good faith by the
Board of Trustees. Short-term securities with 60 days or less to maturity are
stated at amortized cost, which approximates market value.
Security transactions and investment income -- Security transactions are
accounted for on a trade date basis (date the order to buy or sell is executed).
Realized gains and losses from security transactions are determined on an
identified cost basis. Dividend income and distributions to shareholders are
recorded on the ex-dividend date; interest income is recorded on the accrual
basis.
Futures Contracts -- The Schwab S&P 500 Fund may invest in financial futures
contracts. The Fund will invest in these instruments to hedge against the
effects of changes in value of portfolio securities due to anticipated changes
in interest rates and/or market conditions, for duration management, or risk
inherent in the management of the Fund and not for trading purposes. The use of
futures contracts involves certain risks, which include (1) imperfect
correlation between the price movement of the contracts and the underlying
securities, (2) inability to close out positions due to different trading hours,
or the temporary absence of a liquid market, for either the contract or
underlying securities, or (3) an inaccurate prediction by the Adviser of the
future direction of interest rates. Any of these risks may involve amounts
exceeding the amount recognized in the Fund's Statement of Operations at any
given time.
88
<PAGE> 91
- --------------------------------------------------------------------------------
As of October 31, 1997. The Schwab S&P 500 Fund had the following open futures
contracts:
<TABLE>
<CAPTION>
Number of Unrealized
Contracts Contract Value Expiration Appreciation
--------- -------------- ------------- ------------
<S> <C> <C> <C> <C>
S&P 500 Index Futures 25 $ 11,549,325 December '97 $675
</TABLE>
The aggregate value of cash or eligible securities pledged to cover margin
requirements for open futures positions at October 31, 1997 was $1,649,000.
Repurchase agreements -- Repurchase agreements are fully collateralized by U.S.
Treasury or government agency securities. All collateral is held by the Funds'
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Foreign currency translation -- The accounting records of the Schwab
International Index Fund(R) are maintained in U.S. dollars. Investment
securities and all other assets and liabilities of the Fund denominated in a
foreign currency are translated into U.S. dollars at the exchange rates on
October 31, 1997. Purchases and sales of securities, income receipts and expense
payments are translated into U.S. dollars at the exchange rate in effect on the
dates of the respective transactions.
The Schwab International Index Fund separates within its statement of operations
the portion of realized and unrealized gains and losses resulting from changes
in foreign 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 Schwab International Index Fund(R) as an unrealized gain or
loss. When the Forward is closed, the Schwab International Index Fund records a
realized gain or loss equal to the difference between the value at the time the
contract was opened and the value at the time the contract was closed. The
Schwab International Index Fund engages in Forwards in connection with the
purchase and sale of portfolio securities to minimize the uncertainty of changes
in future exchange rates. The Schwab International Index Fund could be exposed
to risk if counterparties to the contracts are unable to meet the terms of the
contracts or if the value of the foreign currency changes unfavorably.
Deferred organization costs -- Costs incurred in connection with the
organization of the Funds are amortized on a straight-line basis over a
five-year period from the Funds commencement of operations.
Expenses -- Expenses arising in connection with the Funds are charged directly
to the Funds. Expenses common to all series of the Trusts are generally
allocated to each series in proportion to their relative net assets.
89
<PAGE> 92
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1997
Federal income taxes -- It is each Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all net investment income and realized net capital gains, if any, to
shareholders. Therefore, no federal income tax provision is required. The Funds
are considered a separate entity for tax purposes.
At October 31, 1997, (for financial reporting and federal income tax purposes):
<TABLE>
<CAPTION>
Net Unrealized Appreciated Depreciated
Appreciation Securities Securities
--------------------- -------------- -----------
<S> <C> <C> <C>
Schwab S&P 500 Fund $ 166,455,000 $ 187,020,000 $20,565,000
Schwab 1000 Fund(R) $ 1,038,174,000 $1,059,531,000 $21,357,000
Schwab Small-Cap Index Fund(R) $ 119,351,000 $ 128,852,000 $ 9,501,000
Schwab International Index Fund(R) $ 56,615,000 $ 88,845,000 $32,230,000
</TABLE>
At October 31, 1997, the unused capital loss carryforwards, for federal income
tax purposes with expiration dates were as follows:
<TABLE>
<CAPTION>
Expiring Expiring Expiring
10/31/02 10/31/04 10/31/05
--------------------- ----------- -----------
<S> <C> <C> <C>
Schwab S&P 500 Fund -- $ 5,000 $2,152,000
Schwab Small-Cap Index Fund(R) $ 202,000 $ 661,000 $ 451,000
Schwab International Index Fund(R) $ 140,000 $1,743,000 $1,837,000
</TABLE>
At August 31, 1997, the Schwab 1000 Fund had unused capital loss carryforwards,
for federal income tax purposes with expiration dates as follows:
<TABLE>
<CAPTION>
Expiring Expiring Expiring
8/31/01 8/31/03 8/31/05
--------------------- ----------- -----------
<S> <C> <C> <C>
Schwab 1000 Fund(R) $ 370,000 $ 919,000 $ 806,000
</TABLE>
The Schwab 1000 Fund has elected to defer $3,740,000 in post-October losses from
the sale of securities until the tax year ending August 31, 1998.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreement -- The Capital Trust and the
Investment Trust have investment advisory and administration agreements with
Charles Schwab Investment Management, Inc. (the "Investment Manager"). For
advisory services and facilities furnished, the Schwab S&P 500 Fund pays an
annual fee, payable monthly, of 0.36% of the first $1 billion of average daily
net assets, 0.33% of such net assets over $1 billion, and 0.31% of such assets
in excess of $2 billion. The Schwab 1000 Fund(R) pays an annual fee, payable
monthly, of 0.30% of the first $500 million of average daily net assets and
0.22% of such
90
<PAGE> 93
- --------------------------------------------------------------------------------
assets over $500 million. The Schwab Small-Cap Index Fund(R) pays an annual fee,
payable monthly, of 0.50% of the first $300 million of average daily net assets
and 0.45% of such assets over $300 million. The Schwab International Index
Fund(R) pays an annual fee, payable monthly, of 0.70% of the first $300 million
of average daily net assets and 0.60% of such assets over $300 million. 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 Capital Trust and the
Investment Trust have transfer agency and shareholder service agreements with
Charles Schwab & Co., Inc. ("Schwab"). For services provided under these
agreements, Schwab receives an annual fee, payable monthly, of 0.05% of average
daily net assets for transfer agency services. For shareholder services
provided, Schwab will receive from the Investor Shares, Select Shares and e.
shares(]) an annual fee of 0.20%, 0.05% and 0.05%, respectively, of average net
assets of that class of shares. Schwab has reduced a portion of its fee for the
period ended October 31, 1997 (see Note 4).
Officers and trustees -- Certain officers and trustees of the Capital Trust and
the Investment Trust are also officers and/or directors of the Investment
Manager and/or Schwab. During the year ended October 31, 1997, the Capital Trust
and the Investment Trust made no direct payments to its officers or trustees who
are "interested persons" within the meaning of the Investment Company Act of
1940, as amended. The Schwab S&P 500 Fund, Schwab 1000 Fund(R), Schwab Small-Cap
Index Fund(R) and Schwab International Index Fund(R) incurred fees of $16,000,
$1,000, $11,000 and $13,000, respectively, related to the Trusts' unaffiliated
trustees.
Other affiliated parties and transactions -- As of October 31, 1997, Schwab
Small-Cap Index Fund(R) and Schwab International Index Fund(R) had outstanding
shares of 7%, 4% and 1%, and 9%, 6% and 1%, respectively, owned by Schwab Asset
Director(R) -- High Growth Fund, Schwab Asset Director(R) -- Balanced Growth
Fund and Schwab Asset Director(R) -- Conservative Growth Fund, respectively.
Interfund transactions -- During the year ended October 31, 1997, Schwab
Small-Cap Index Fund(R) and Schwab International Index Fund(R) engaged in
purchase transactions with funds that have a common investment adviser, common
trustees, and common officers. These purchase and sale transactions, made at
current market value pursuant to Rule 17a-7 under the Act, were $32,564,000 and
$42,665,000, respectively.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab guarantee that, through at least February 29,
2000, total operating expenses of each class of shares will not exceed the
percentages of the average daily net assets of that class
91
<PAGE> 94
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1997
of shares, after waivers and reimbursements, as shown below. For purpose of this
guarantee, operating expenses do not include interest expenses, extraordinary
expenses, taxes, foreign taxes and capital items.
<TABLE>
<CAPTION>
Investor Shares Select Shares e.shares
--------------- ------------- --------
<S> <C> <C> <C>
Schwab S&P 500 Fund 0.35% 0.19% 0.28%
Schwab 1000 Fund(R) 0.46% 0.35% --
Schwab Small-Cap Index Fund(R) 0.49% 0.38% --
Schwab International Index Fund(R) 0.58% 0.47% --
</TABLE>
For the year ended October 31, 1997 the totals of such fees and expenses reduced
and absorbed by the Investment Manager were $2,410,000, $220,000, $1,000,000 and
$1,503,000 for the Schwab S&P 500 Fund, Schwab 1000 Fund, Schwab Small-Cap Index
Fund and Schwab International Index Fund, respectively. The total of such fees
reduced by Schwab were $196,000, $9,000, $190,000, and $171,000 for the Schwab
S&P 500 Fund, Schwab 1000 Fund, Schwab Small-Cap Index Fund and Schwab
International Index Fund, respectively.
5. BORROWING AGREEMENT
The Trusts have arrangements with PNC Bank, N.A., whereby the Schwab S&P 500
Fund and Schwab 1000 Fund(R) may borrow up to $10,000,000 and $50,000,000,
respectively, on a temporary basis, to fund redemptions. Amounts borrowed under
this arrangement bear interest at periodically negotiated rates and may be
collateralized by the assets of the Funds. During the year ended October 31,
1997, no borrowings were made under this arrangement. The Capital Trust has an
arrangement with Bank of New York Trust Company, whereby the Schwab Small-Cap
Fund(R) and Schwab International Index Fund(R), 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'. The average daily loan balance for
the year ended October 31, 1997 in the Schwab Small-Cap Index Fund(R), was
$10,137 at a weighted average interest rate of 5.80%. The maximum loan
outstanding during the period was $2,600,000 and as of October 31, 1997, there
were no outstanding borrowings.
6. SECURITIES LENDING
The Schwab S&P 500 Fund and the Schwab 1000 Fund(R) loaned securities to certain
brokers, dealers and other financial institutions who paid the Funds negotiated
lenders' fees. The Funds received cash collateral, letters of credit, or U.S.
Government securities against the loaned securities in an amount equal to 102%
of the market value of the loaned securities at the inception of each loan. The
loans will be collateralized at all times in an amount equal to at least 100% of
the market value of the securities loaned. At October 31, 1997, the market value
of securities loaned by the Schwab S&P 500 Fund was $125,796,000 for which the
Fund received collateral of $128,566,000 and the market value of securities
loaned by the Schwab 1000 Fund was $488,369,000 for which the Schwab 1000 Fund
received collateral of $497,786,000.
92
<PAGE> 95
- --------------------------------------------------------------------------------
7. INVESTMENT TRANSACTIONS
Aggregate purchases and sales of investment securities, other than short-term
obligations, (in thousands) for the year ended October 31, 1997 were as follows:
<TABLE>
<CAPTION>
Schwab
Schwab S&P 1000 Schwab Small-Cap Schwab International
500 Fund Fund(R)* Index Fund(R) Index Fund(R)
---------- ----------- ---------------- --------------------
<S> <C> <C> <C> <C>
Purchases $1,123,077 $ 162,443 $269,706 $129,292
Sales $ 23,009 $ 11,728 $ 70,162 $299,918
</TABLE>
For the Schwab S&P 500 Fund and Schwab 1000 Fund(R), included in the
aforementioned purchases of common stock are purchases of Charles Schwab Corp.,
an affiliated issuer, with a current value as of October 31, 1997, of $2,054,000
and $3,148,000, respectively.*
- ---------------
* For the two months ended October 31, 1997.
8. EARLY WITHDRAWAL FEES
The early withdrawal fee are retained by the Funds and are treated as a
contribution to capital.
<TABLE>
<CAPTION>
Early withdrawal fees on Early withdrawal fees
redemption proceeds as of 10/31/97
------------------------ ---------------------
<S> <C> <C>
Schwab S&P 500 Fund N/A N/A
Schwab 1000 Fund(R) 0.50%** $ 104,000
Schwab Small-Cap Index Fund(R) 0.50%** $ 155,000
Schwab International Index Fund(R) 0.75%** $ 76,000
</TABLE>
- ---------------
** Attributable to shares purchased and held less than six months.
93
<PAGE> 96
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1997
9. CAPITAL SHARE TRANSACTIONS
The Funds offers two classes of shares: Investor Shares and Select Shares with
an exception to Schwab S&P 500 Fund which offers a third class of shares:
e.shares(TM). Shares of each class represent interests in the same portfolio of
investments of the Funds. Transactions in capital shares for the year ended
October 31, 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
Schwab S&P 500 Fund
---------------------------------------------------
Investor Select
Shares e.Shares Shares Total
--------- --------- -------- ----------
<S> <C> <C> <C> <C>
Capital share transactions:
Proceeds from shares sold $ 894,864 $ 184,271 $556,939 $1,636,074
Net asset value of shares issued in
Reinvestment of dividends 2,235 444 0 2,679
Less payments for shares redeemed (345,122) (116,137) (73,675) (534,934)
--------- --------- -------- ----------
Increase in net assets from
capital share transactions $ 551,977 $ 68,578 $483,264 $1,103,819
========= ========= ======== ==========
Number of Fund shares:
Sold 68,380 14,545 39,327 122,252
Reinvested 193 38 0 231
Redeemed (25,827) (8,636) (5,116) (39,579)
--------- --------- -------- ----------
Net increase in shares outstanding 42,746 5,947 34,211 82,904
========= ========= ======== ==========
</TABLE>
94
<PAGE> 97
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schwab 1000 Fund(R)*
------------------------------------
Investor Select
Shares Shares Total
--------- -------- ---------
<S> <C> <C> <C>
Capital share transactions:
Proceeds from shares sold $ 185,514 $ 85,228 $ 270,742
Net asset value of shares issued in reinvestment
of dividends 0 0 0
Early redemption fees 79 25 104
Less payments for shares redeemed (118,834) (10,522) (129,356)
--------- -------- ---------
Increase in net assets from capital share
transactions $ 66,759 $ 74,731 $ 141,490
========= ======== =========
Number of Fund shares:
Sold 7,163 3,281 10,444
Reinvested 0 0 0
Redeemed (4,583) (407) (4,990)
--------- -------- ---------
Net increase in shares outstanding 2,580 2,874 5,454
========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
Schwab Small-Cap Index Fund
-----------------------------------
Investor Select
Shares Shares Total
--------- ------- ---------
<S> <C> <C> <C>
Capital share transactions:
Proceeds from shares sold $ 230,031 $84,300 $ 314,331
Net asset value of shares issued in reinvestment of
dividends 901 -- 901
Early redemption fees 130 25 155
Less payments for shares redeemed (108,657) (7,620) (116,277)
--------- -------- ---------
Increase in net assets from capital share
transactions $ 122,405 $76,705 $ 199,110
========= ======== =========
Number of Fund shares:
Sold 14,644 5,002 19,646
Reinvested 64 -- 64
Redeemed (6,952) (428) (7,380)
--------- -------- ---------
Net increase in shares outstanding 7,756 4,574 12,330
========= ======== =========
</TABLE>
- ---------------
* For the two months ended October 31, 1997.
95
<PAGE> 98
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1997
<TABLE>
<CAPTION>
Schwab International Index Fund(R)
-----------------------------------
Investor Select
Shares Shares Total
--------- ------- ---------
<S> <C> <C> <C>
Capital share transactions:
Proceeds from shares sold $ 142,487 $56,809 $ 199,296
Net asset value of shares issued in reinvestment of
dividends 3,084 -- 3,084
Early redemption fees 60 16 76
Less payments for shares redeemed (100,709) (4,039) (104,748)
--------- -------- ---------
Increase in net assets from capital share
transactions $ 44,922 $52,786 $ 97,708
========= ======== =========
Number of Fund shares:
Sold 11,009 4,006 15,015
Reinvested 250 -- 250
Redeemed (7,556) (287) (7,843)
--------- -------- ---------
Net increase in shares outstanding 3,703 3,719 7,422
========= ======== =========
</TABLE>
96
<PAGE> 99
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
Schwab S&P 500 Fund, Schwab 1000 Fund(R),
Schwab Small Cap Index Fund(R), and
Schwab International Index Fund(R)
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 S&P 500 Fund, Schwab
Small-Cap Index Fund, and Schwab International Index Fund, (three series
constituting part of Schwab Capital Trust) and Schwab 1000 Fund (one series
constituting part of Schwab Investments, hereafter collectively referred to as
the "Trusts"), at October 31, 1997, the results of each of their operations for
the year then ended, and 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 Trusts' 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
<PAGE> 100
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 101
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 102
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 103
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).
Pleased 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> 104
SCHWABFUNDS FAMILY(R) ------------------
101 Montgomery Street BULK RATE
San Francisco, California 94104 U.S. POSTAGE
PAID
CHARLES SCHWAB
------------------
INVESTMENT ADVISOR
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc.
101 Montgomery Street, San Francisco, CA 94104
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
(C)1997 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
Printed on recycled paper. CRS 20204 TF5268R(12/97)
