<PAGE> 1
SCHWABFUNDS(R)
[LOGO]
SCHWAB
SMALL-CAP
INDEX FUND(R)
Semi-Annual Report
April 30, 1997
<PAGE> 2
Dear Shareholder,
[Photo of With the support of investors like you, SchwabFunds(R)
Charles continues to be among the largest and fastest-growing mutual
R. Schwab] fund complexes in the nation. Charles Schwab Investment
Management, Inc. (CSIM) manages over $47 billion in assets
for more than 2.5 million SchwabFunds shareholders. Today,
CSIM offers investors 30 funds spanning a spectrum of
financial markets and investing styles.
You'll find in-depth information on the performance of your SchwabFunds
investment in the following pages.
LONG-TERM INVESTMENT STRATEGIES
When it comes to investing, patience is a virtue. Given the recent market
volatility, it is important to maintain the discipline to adhere to your asset
allocation plan and to ensure you have a diversified investment portfolio. We
created the SchwabFunds Family to offer time-tested strategies for long-term
investing -- Indexing, Asset Allocation, Quantitative Models and Fund-of-Funds
- -- and to provide investors with easy, cost-efficient options to help achieve
portfolio diversification. Furthermore, the tax-efficient strategy employed by
our index funds can help you retain more of what your investments earn.
COMMITMENT TO VALUE
In our ongoing commitment to provide cost-efficient ways for you to invest, we
recently reduced the operating expense ratios and introduced a new class of
shares -- Select Shares -- for each of our four index funds. Select Shares have
among the lowest fund expenses in the industry and offer investors even greater
savings through significantly lower expense ratios.
EXPANDING CHANNELS OF COMMUNICATION
If you're among the millions of people exploring the Internet, I encourage you
to visit our Web site at www.schwab.com/funds. There you'll find a wealth of
online information on SchwabFunds as well as other resources available at
Schwab. You can also access mutual fund performance data, chart daily net asset
values, request a free fund prospectus, trade funds and more -- all from the
comfort of your home or office, 24 hours a day. Continuing our efforts to
provide you with up-to-date, useful information, we have recently added monthly
portfolio manager commentaries on selected SchwabFunds to our Web site. In these
commentaries, our expert portfolio managers offer insights into market trends
and the effects of those trends on fund performance.
Thank you for placing your trust in SchwabFunds. We will continue to explore new
strategies to help meet your investment needs and to provide you with timely
information on SchwabFunds.
/s/ Charles R. Schwab
---------------------
Charles R. Schwab
<PAGE> 3
KEEP YOUR
MONEY WORKING
HARDER!
----------------------------
USE THIS ENVELOPE TO EASILY
ADD TO YOUR SCHWAB FUNDS.
CHARLES SCHWAB
<PAGE> 4
WE'VE MADE IT EASIER FOR YOU! TAKE ADVANTAGE OF THIS OPPORTUNITY TO ADD TO YOUR
SCHWABFUNDS(R) INVESTMENT.
Now, you can add to your account by using this convenient Schwab investment
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- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
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________________________________________________________________________________
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$_______________________________________________________________________________
AMOUNT OF INVESTMENT
________________________________________________________________________________
SIGNATURE
[ ] Check here if you would like more investment coupons for future use.
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Please indicate to which SchwabFund your investment should go:
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IF NO FUND IS INDICATED, YOUR INVESTMENT WILL GO INTO THE SWEEP ACCOUNT YOU'VE
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Printed on recycled paper. TF4794C(5/97) CRS 20061
(LIFT HERE FOR MORE INFORMATION)
<PAGE> 5
CHARLES SCHWAB
JUST FOLLOW THESE EASY STEPS TO INVEST IN YOUR SCHWABFUNDS(R) ACCOUNT:
1. Fill out the Schwab investment coupon completely, including your name,
account number, amount of your check and signature. Please use one coupon
for each account.
2. Make your check payable to CHARLES SCHWAB & CO., INC., and enclose your
check with the completed coupon in this postage-paid envelope.
3. Then just drop your SchwabFunds investment envelope in the mail today -
and start putting your money to work. If you have any questions, don't
hesitate to call 1-800-2 NO-LOAD.
This envelope is intended for shareholders who have already received a current
SchwabFunds prospectus.
<PAGE> 6
ATTN: Dept. AIP333-4 NO POSTAGE
NECESSARY IF
MAILED IN THE
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FIRST-CLASS MAIL PERMIT NO. 18125 SAN FRANCISCO, CA
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PO BOX 7778
SAN FRANCISCO CA 94120-9419
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
A WORD FROM SCHWABFUNDS(R) .............................................. 2
FUND PERFORMANCE ........................................................ 3
TAX-SMART INVESTMENT STRATEGY ........................................... 4
FUND HOLDINGS ........................................................... 5
THE PORTFOLIO MANAGEMENT TEAM ........................................... 7
MARKET OVERVIEW ......................................................... 8
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM .............................. 13
FINANCIAL STATEMENTS AND NOTES .......................................... 17
</TABLE>
1
<PAGE> 8
A WORD FROM SCHWABFUNDS(R)
We are pleased to report on the performance of the Schwab Small-Cap Index
Fund(R) (the Fund) for the six-month period ended April 30, 1997. During the
period, the Fund achieved its primary objective of tracking the price and
dividend performance of the Schwab Small-Cap Index(R) (the Index). It also
succeeded in maintaining the tax efficiencies and low costs designed to maximize
long-term performance results, as explained on the following pages.
NEW LOWER EXPENSE RATIOS
In their tradition of providing low-cost investing, Schwab and Charles Schwab
Investment Management, Inc. (CSIM) lowered the operating expense ratio (OER) for
the Fund, from 0.59% to 0.49% (effective February 28, 1997). In addition to
lowering the Fund's OER, Schwab and CSIM have created a new class of shares for
the Fund, Select Shares, with an even lower OER.
SCHWAB SMALL-CAP INDEX FUND
GROWTH IN NET ASSETS AND NUMBER OF ACCOUNTS
[LINE GRAPH]
<TABLE>
<CAPTION>
DATE TOTAL ASSETS TOTAL # OF ACCOUNTS
---- ------------ -------------------
<S> <C> <C>
Dec-93 $ 44,656,627 9,839
Jan-94 $ 49,672,858 13,121
Feb-94 $ 54,131,066 11,271
Mar-94 $ 54,623,517 11,861
Apr-94 $ 57,000,966 12,273
May-97 $ 57,674,788 12,521
Jun-94 $ 57,455,901 12,694
Jul-94 $ 61,221,482 13,085
Aug-94 $ 66,248,931 15,740
Sep-94 $ 66,740,791 13,316
Oct-94 $ 68,128,086 13,385
Nov-94 $ 67,524,682 13,546
Dec-94 $ 70,719,651 13,711
Jan-95 $ 71,233,434 13,937
Feb-95 $ 74,928,456 13,984
Mar-95 $ 79,552,370 14,078
Apr-95 $ 83,951,001 14,348
May-95 $ 87,423,469 14,616
Jun-95 $ 95,452,534 15,100
Jul-95 $107,765,285 15,792
Aug-95 $114,839,076 16,609
Sep-95 $123,741,929 17,520
Oct-95 $122,072,444 18,007
Nov-95 $131,786,085 18,525
Dec-95 $138,479,661 19,126
Jan-96 $144,469,083 19,973
Feb-96 $158,389,989 20,745
Mar-96 $165,801,285 21,515
Apr-96 $184,314,000 22,685
May-96 $202,700,000 24,135
Jun-96 $200,367,000 24,839
Jul-96 $186,278,000 25,177
Aug-96 $198,807,000 25,282
Sep-96 $212,498,000 25,810
Oct-96 $209,125,000 25,986
Nov-96 $220,803,793 26,066
Dec-96 $232,840,606 26,600
Jan-97 $244,898,130 27,392
Feb-97 $237,219,541 27,586
Mar-97 $262,821,855 27,657
Apr-97 $271,147,650 27,918
</TABLE>
Net Assets $271,147,650
Accounts 27,918
*Commencement of Fund Operations
2
<PAGE> 9
Select Shares, which became available on May 19, 1997, was created to give
investors a more cost-effective way to invest. This new class of shares offers a
significantly lower expense ratio and requires a minimum initial deposit of
$50,000. With an OER of only 0.38%, the expense ratio for the Small-Cap Index
Fund--Select Shares is among the lowest for small-cap funds. 1 All the OERs for
the Fund are guaranteed through at least February 29, 2000.
FUND PERFORMANCE
The table below compares the total returns for various periods ended April 30,
1997 for the Schwab Small-Cap Index Fund(R), the Schwab Small-Cap Index(R),
Russell 2000 Index (Russell 2000), the S&P Small-Cap 600(R) Index (S&P 600), and
the S&P 500(R) Index (S&P 500).
<TABLE>
<CAPTION>
TOTAL RETURNS
=======================================================================================================
Cumulative Since Average Annual
Fund Inception Since Fund Inception
Six-Month One-Year (12/3/93) (12/3/93)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Schwab Small-Cap
Index Fund -0.01% -1.03% 37.56% 9.79%
- -------------------------------------------------------------------------------------------------------
Schwab Small-Cap
Index 0.92% 0.66% 42.99% 11.04%
- -------------------------------------------------------------------------------------------------------
Russell 2000 1.60% 0.06% 42.36% 10.90%
- -------------------------------------------------------------------------------------------------------
S&P 600 1.75% 3.76% 46.89% 11.92%
- -------------------------------------------------------------------------------------------------------
S&P 500 14.71% 25.12% 87.30% 20.18%
- -------------------------------------------------------------------------------------------------------
</TABLE>
As of March 31, 1997, the six-month, one-year, cumulative since fund inception,
and average annual since fund inception total returns for the Schwab Small-Cap
Index Fund were -2.54%, 3.68%, 36.54%, and 9.81%, respectively.
TOTAL RETURN ASSUMES REINVESTMENT OF ALL DIVIDEND AND CAPITAL GAIN
DISTRIBUTIONS, IF ANY. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. The
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% through at least 2/29/2000. Without fee waivers and guarantees,
for the period ended 4/30/97, the Fund's six-month, one-year, cumulative since
fund inception, and average annual since fund inception total returns would have
been -0.18%, -1.37%, 35.69%, and 9.35%, respectively. For the period ended
3/31/97, the Fund's six-month, one-year, cumulative since fund inception, and
average annual since fund inception total returns would have been -2.72%, 3.32%,
34.99%, and 9.43%, respectively. Indices are unmanaged, and unlike the Fund, do
not reflect advisory and other fees associated with an investment in the Fund.
Investors cannot invest in an index directly.
1 Source: Morningstar, Inc. Based on the average OER of 1.52% for 459
small-cap funds as of 4/30/97.
3
<PAGE> 10
TAX-SMART INVESTMENT STRATEGY
The Schwab Small-Cap Index Fund(R) seeks to maximize its after-tax performance
for investors by minimizing capital gain distributions. This strategy is
designed to help you keep more of what your money earns. The following chart
illustrates the effects of this strategy.
<TABLE>
<CAPTION>
ONE-YEAR TOTAL RETURN AS OF APRIL 30, 1997
===================================================================================
Before-Tax After-Tax %Lost to Taxes
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Schwab Small-Cap
Index Fund -1.03% -1.20% 0.17%
- -----------------------------------------------------------------------------------
Average Small
Company Fund -3.49% -5.78% -2.29%
- -----------------------------------------------------------------------------------
</TABLE>
Source for average small company fund is Morningstar, Inc. for 459 small-cap
funds as of 4/30/97. After-tax returns assume the maximum Federal 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. TOTAL RETURN ASSUMES REINVESTMENT OF ALL
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS, IF ANY. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL
FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
LESS THAN THEIR ORIGINAL COST. The 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% through at least
2/29/2000. Without this waiver and guarantee, the Fund's total return would have
been lower.
4
<PAGE> 11
FUND HOLDINGS
The Fund's portfolio is diversified across the second largest 1,000 publicly
traded U.S. companies and a broad range of sectors and industries. Following is
a list of the Fund's ten largest holdings as well as a diversification chart
showing the economic sectors in which the Fund was invested. Both are as of
April 30, 1997 and are not necessarily indicative of the Fund's future holdings.
A complete listing of the Fund's portfolio holdings, also as of April 30, 1997,
can be found in the Statement of Net Assets section of this report. Unlike the
Statement of Net Assets, information is shown here as a percentage of the Fund's
investments, not as a percentage of the Fund's net assets.
FUND'S TOP TEN HOLDINGS AS A
PERCENTAGE OF FUND INVESTMENTS
================================================================================
<TABLE>
<CAPTION>
INVESTMENT %
- --------------------------------------------------------------------------------
<S> <C>
U.S.A. Waste Services, Inc. 0.48
- --------------------------------------------------------------------------------
Dell Computer Corp. 0.39
- --------------------------------------------------------------------------------
Compuware Corp. 0.38
- --------------------------------------------------------------------------------
Quantum Corp. 0.34
- --------------------------------------------------------------------------------
McAfee Associates, Inc. 0.33
- --------------------------------------------------------------------------------
Republic Industries, Inc. 0.31
- --------------------------------------------------------------------------------
Conseco, Inc. 0.29
- --------------------------------------------------------------------------------
U.S. Robotics Corp. 0.25
- --------------------------------------------------------------------------------
Interstate Bakeries Corp. 0.25
- --------------------------------------------------------------------------------
Tencor Instruments 0.25
================================================================================
TOTAL 3.27%
</TABLE>
5
<PAGE> 12
SCHWAB SMALL-CAP INDEX FUND (R)
ECONOMIC SECTOR DIVERSIFICATION
<TABLE>
<S> <C>
Materials & Service 21.27% [PIE GRAPH]
Finance 18.91%
Energy 6.46%
Consumer Non-Durables 20.10%
Consumer Durables 4.15%
Capital Goods 6.01%
Utilities 5.36%
Transportation 3.10%
Technology 14.64%
</TABLE>
6
<PAGE> 13
THE PORTFOLIO MANAGEMENT TEAM
STEPHEN B. WARD -- Senior Vice President and Chief Investment Officer, has
overall responsibility for the management of the Fund's portfolio. 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 the 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 Fund's portfolio. Geri
joined CSIM in March 1995 as Portfolio Manager and was promoted to her current
position in December 1996. She currently manages approximately $4 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 and answers to questions are provided by the
Portfolio Management Team.
7
<PAGE> 14
MARKET OVERVIEW
REAL GDP GROWTH RATE
[BAR GRAPH]
<TABLE>
<CAPTION>
Real GDP
<S> <C>
Q1 1990 4.1%
Q2 1990 1.3%
Q3 1990 -1.9%
Q4 1990 -4.1%
Q1 1991 -2.2%
Q2 1991 1.7%
Q3 1991 1.0%
Q4 1991 1.0%
Q1 1992 4.7%
Q2 1992 2.5%
Q3 1992 3.0%
Q4 1992 4.3%
Q1 1993 -0.1%
Q2 1993 1.9%
13 1993 2.3%
Q4 1993 4.8%
Q1 1994 2.5%
Q2 1994 4.9%
Q3 1994 3.5%
Q4 1994 3.0%
Q1 1995 0.4%
Q2 1995 0.7%
Q3 1995 3.8%
Q4 1995 0.3%
Q1 1996 2.0%
Q2 1996 4.7%
Q3 1996 2.1%
Q4 1996 3.8%
Q1 1997 5.8%
</TABLE>
- - The economy continued to expand at a healthy rate during the reporting
period. The GDP growth rate was 3.2% for the 1996 calendar year and a very
strong 5.8% for the first quarter of 1997 -- the highest level since the
fourth quarter of 1987.
- - These strong growth rates resulted in a focus on the apparent strength of
the economy, its potential impact on future inflation, and the potential
for more restrictive Federal Reserve policy.
- - At the time of this writing, the economy appears to be on track for
moderate growth, continuing the six-year expansion which began in 1991.
8
<PAGE> 15
U.S. UNEMPLOYMENT RATE
[LINE GRAPH]
<TABLE>
<S> <C>
Jan-90 5.3%
Feb-90 5.3%
Mar-90 5.2%
Apr-90 5.4%
May-90 5.3%
Jun-90 5.1%
Jul-90 5.4%
Aug-90 5.6%
Sep-90 5.7%
Oct-90 5.8%
Nov-90 6.0%
Dec-90 6.2%
Jan-91 6.3%
Feb-91 6.5%
Mar-91 6.8%
Apr-91 6.6%
May-91 6.8%
Jun-91 6.8%
Jul-91 6.7%
Aug-91 6.8%
Sep-91 6.8%
Oct-91 6.9%
Nov-91 6.9%
Dec-91 7.1%
Jan-92 7.1%
Feb-92 7.3%
Mar-92 7.3%
Apr-92 7.3%
May-92 7.4%
Jun-92 7.7%
Jul-92 7.6%
Aug-92 7.6%
Sep-92 7.5%
Oct-92 7.4%
Nov-92 7.3%
Dec-92 7.3%
Jan-93 7.1%
Feb-93 7.0%
Mar-93 7.0%
Apr-93 7.0%
May-93 6.9%
Jun-93 6.9%
Jul-93 6.8%
Aug-93 6.7%
Sep-93 6.7%
Oct-93 6.7%
Nov-93 6.5%
Dec-93 6.4%
Jan-94 6.7%
Feb-94 6.6%
Mar-94 6.5%
Apr-94 6.4%
May-94 6.0%
Jun-94 6.0%
Jul-94 6.1%
Aug-94 6.1%
Sep-94 5.9%
Oct-94 5.6%
Nov-94 5.6%
Dec-94 5.4%
Jan-95 5.6%
Feb-95 5.4%
Mar-95 5.8%
Apr-95 5.7%
May-95 5.7%
Jun-95 5.6%
Jul-95 5.7%
Aug-95 5.3%
Sep-95 5.6%
Oct-95 5.5%
Nov-95 5.6%
Dec-95 5.6%
Jan-96 5.8%
Feb-96 5.5%
Mar-96 5.6%
Apr-96 5.4%
May-96 5.6%
Jun-96 5.3%
Jul-96 5.4%
Aug-96 5.1%
Sep-96 5.2%
Oct-96 5.2%
Nov-96 5.3%
Dec-96 5.3%
Jan-97 5.4%
Feb-97 5.3%
Mar-97 5.2%
Apr-97 4.9%
</TABLE>
- - The unemployment rate during 1996 remained near its lows for the decade,
and declined further to 4.9% in April 1997, the lowest rate since December
1973. Many economists have questioned how long such low levels of
unemployment can continue without generating inflationary pressures on
wages and, ultimately, prices.
9
<PAGE> 16
MEASURES OF INFLATION
[BAR GRAPH]
CPI & ECI
CONSUMER PRICE INDEX - ALL ITEMS YOY % CHANGE
EMPLOYMENT COST INDEX SA (INCLUDES BOTH WAGES AND SALARIES AND BENEFITS
COMPONENTS) - YOY % CHANGE
SOURCE: BLOOMBERG L.P.
RED = DATA INPUTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Data for Graph
--------------
Monthly Quarterly
Consumer Price Employment Cost
Index - YOY % Index - YOY %
Change Change
- --------------------------------------------------------------------------------
<S> <C> <C>
Jan-90 5.2% 5.3%
Feb-90 5.3% 5.3%
Mar-90 5.2% 5.3%
Apr-90 4.7% 5.4%
May-90 4.4% 5.4%
Jun-90 4.7% 5.4%
Jul-90 4.8% 5.1%
Aug-90 5.6% 5.1%
Sep-90 6.2% 5.1%
Oct-90 6.3% 4.8%
Nov-90 6.3% 4.8%
Dec-90 6.1% 4.8%
Jan-91 5.7% 4.6%
Feb-91 5.3% 4.6%
Mar-91 4.9% 4.6%
Apr-91 4.9% 4.5%
May-91 5.0% 4.5%
Jun-91 4.7% 4.5%
Jul-91 4.4% 4.3%
Aug-91 3.8% 4.3%
Sep-91 3.4% 4.3%
Oct-91 2.9% 4.2%
Nov-91 3.0% 4.2%
Dec-91 3.1% 4.2%
Jan-92 2.6% 4.1%
Feb-92 2.8% 4.1%
Mar-92 3.2% 4.1%
Apr-92 3.2% 3.5%
May-92 3.0% 3.5%
Jun-92 3.1% 3.5%
Jul-92 3.2% 3.4%
Aug-92 3.1% 3.4%
Sep-92 3.0% 3.4%
Oct-92 3.2% 3.5%
Nov-92 3.0% 3.5%
Dec-92 2.9% 3.5%
Jan-93 3.3% 3.4%
Feb-93 3.2% 3.4%
Mar-93 3.1% 3.4%
Apr-93 3.2% 3.6%
May-93 3.2% 3.6%
Jun-93 3.0% 3.6%
Jul-93 2.8% 3.6%
Aug-93 2.8% 3.6%
Sep-93 2.7% 3.6%
Oct-93 2.8% 3.4%
Nov-93 2.7% 3.4%
Dec-93 2.7% 3.4%
Jan-94 2.5% 3.2%
Feb-94 2.5% 3.2%
Mar-94 2.5% 3.2%
Apr-94 2.4% 3.1%
May-94 2.3% 3.1%
Jun-94 2.5% 3.1%
Jul-94 2.8% 3.1%
Aug-94 2.9% 3.1%
Sep-94 3.0% 3.1%
Oct-94 2.6% 3.0%
Nov-94 2.7% 3.0%
Dec-94 2.7% 3.0%
Jan-95 2.8% 3.0%
Feb-95 2.9% 3.0%
Mar-95 2.9% 3.0%
Apr-95 3.1% 3.0%
May-95 3.2% 3.0%
Jun-95 3.0% 3.0%
Jul-95 2.8% 2.8%
Aug-95 2.6% 2.8%
Sep-95 2.5% 2.8%
Oct-95 2.8% 2.8%
Nov-95 2.6% 2.8%
Dec-95 2.5% 2.8%
Jan-96 2.7% 2.9%
Feb-96 2.7% 2.9%
Mar-96 2.8% 2.9%
Apr-96 2.9% 2.9%
May-96 2.9% 2.9%
Jun-96 2.8% 2.9%
Jul-96 3.0% 2.9%
Aug-96 2.9% 2.9%
Sep-96 3.0% 2.9%
Oct-96 3.0% 3.0%
Nov-96 3.3% 3.0%
Dec-96 3.3% 3.0%
Jan-97 3.0% 2.8%
Feb-97 3.0% 2.8%
Mar-97 2.8% 2.8%
Apr-97 2.5%
- --------------------------------------------------------------------------------
</TABLE>
- - Both the Employment Cost Index and Consumer Price Index (CPI) remained in
check throughout 1996 as well as the first quarter of 1997, reflecting
continued low levels of inflation.
- - CPI rose 3.3% in 1996, the highest annual rate since 1990. However, the
core rate (which excludes the more volatile food and energy components)
rose just 2.6%, the lowest rate since 1965.
- - The Federal Reserve has indicated its belief that the economy remains at
risk to inflation and that it is poised to act preemptively by raising
interest rates if necessary. The Federal Reserve did take action in March,
increasing the Fed Funds Rate by 0.25% to 5.50%.
10
<PAGE> 17
TOTAL RETURN OF A HYPOTHETICAL DOLLAR INVESTED
IN FOUR BROAD MARKET INDICIES
[LINE CHART]
<TABLE>
<CAPTION>
Growth of a $ Investment
--------------------------
Lehman
MF
Schwab Schwab General
Small Cap International US Govt.
S&P 500 Index Index Index
------- --------- ------------- --------
<S> <C> <C> <C> <C>
$1.000 $1.000 $1.000 $1.000
Nov-96 $1.076 $1.040 $1.046 $1.017
Dec-96 $1.054 $1.059 $1.037 $1.007
Jan-97 $1.120 $1.084 $1.003 $1.008
Feb-97 $1.129 $1.058 $1.019 $1.010
Mar-97 $1.083 $1.006 $1.026 $0.999
Apr-97 $1.147 $1.009 $1.037 $1.013
</TABLE>
Past performance is no guarantee of future results. PRINCIPAL VALUE AND
INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Total return assumes
reinvestment of all dividend and capital gain distributions. Indices are
unmanaged, and unlike funds, do not reflect advisory and other fees associated
with an investment in funds. Investors cannot invest in an index directly.
- - Large-cap domestic stocks, as represented by the S&P 500 Index, were
clearly the strongest performing asset class -- achieving a 14.71% return
during the six-month reporting period.
- - Although positive, domestic small-cap stocks (as represented by the Schwab
Small-Cap Index) and international stocks (as represented by the Schwab
International Index) both lagged the S&P 500 Index significantly, with
six-month returns of 0.92% and 3.74%, respectively.
- - The six-month total return for U.S. Government bonds (as represented by the
Lehman Brothers General U.S. Government Index) was 1.32%.
11
<PAGE> 18
S&P 500* PRICE/EARNINGS RATIO
[LINE CHART]
<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
</TABLE>
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 earnings potential.
- - The price/earnings ratio for the S&P 500 Index was 20 at the close of the
reporting period, well above its 30-year mean of 15, but below its 1991 and
1987 highs of 26 and 22, respectively.
- - Based on other traditional measures such as the price-to-book value ratio
or dividend yield, the U.S. stock market valuation reached historical highs
during the reporting period.
12
<PAGE> 19
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM
Q. HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A. The total return for Schwab Small-Cap Index Fund(R) for the six-month period
ended April 30, 1997 was -0.01%. As shown in the Market Overview section,
small-cap stock returns continued to be dwarfed by the returns of large-cap
domestic stocks during the reporting period. Following relatively strong returns
from November through January, small-cap stocks experienced a decline of over 7%
during February and March -- erasing the gains achieved earlier in the reporting
period. Unlike large-cap stocks which rebounded in April, small-cap stocks
finished out the period essentially unchanged. As shown on the graph at right,
the Fund continued to closely track the performance of its benchmark, the Schwab
Small-Cap Index(R).
Q. HOW DID THE PERFORMANCE OF THE SCHWAB SMALL-CAP INDEX COMPARE TO THE S&P
600(R) SMALL-CAP INDEX (S&P 600 INDEX) DURING THE REPORTING PERIOD? HOW DO THESE
INDEXES COMPARE TO THE RUSSELL 2000 INDEX?
A. As shown on the next page, the Schwab Small-Cap Index and the S&P 600 Index
continue to track very closely, with the Schwab Small-Cap Index slightly
underperforming the S&P 600 Index on an inception-to-date basis. For the
six-month reporting period, the total return of the Schwab Small-Cap Index was
0.92%, below the 1.75% return of the S&P 600 Index. Because the composition of
the two indices is different, we expect that there will be periodic
discrepancies in their performance. The Schwab Small-Cap Index represents stocks
of the second 1,000 largest U.S. corporations (excluding investment companies)
while the S&P 600 Index contains 600 stocks selected by Standard & Poor's. There
are also differences in index characteristics, such as industry concentration.
It is important to note that investors cannot invest directly in either index.
You may have noticed the addition of a new comparative index to the historical
performance graph -- the Russell 2000 Index. This index will eventually replace
the S&P 600 Index as a basis for comparing the Fund's return to 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 the Schwab Small-Cap Index. For example, as of April 30, 1997,
13
<PAGE> 20
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL
$10,000 INVESTMENT IN SCHWAB SMALL-CAP INDEX FUND(R),
SCHWAB SMALL-CAP INDEX(R), S&P 500(R) INDEX,
S&P 600(R) SMALL-CAP INDEX, AND RUSSELL 2000 INDEX
[LINE GRAPH]
GRAPH AREA (PLOT POINTS) FOR SMALL CAP INDEX FUND
Schwab Small-Cap Index Fund
Average Annual Total Returns
Through April 30, 1997
----------------------------
One Year Since Inception
-1.03% 9.79%
<TABLE>
<CAPTION>
SMALL CAP SMALL-CAP
DATE INDEX FUND INDEX S&P 500 S&P 600 RUSSELL 2000
- ---- ---------- --------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
12/3/93 $10,000 $10,000 $10,000 $10,000 $10,000
12/31/93 $10,154 $10,234 $10,051 $10,232 $10,186
1/31/94 $10,394 $10,469 $10,392 $10,473 $10,505
2/28/94 $10,334 $10,430 $10,111 $10,443 $10,467
3/31/94 $ 9,783 $ 9,871 $ 9,671 $ 9,693 $ 9,915
4/30/94 $ 9,753 $ 9,847 $ 9,795 $ 9,839 $ 9,974
5/31/94 $ 9,613 $ 9,692 $ 9,954 $ 9,644 $ 9,861
6/30/94 $ 9,333 $ 9,419 $ 9,710 $ 9,286 $ 9,529
7/31/94 $ 9,493 $ 9,614 $10,029 $ 9,401 $ 9,685
8/31/94 $10,134 $10,249 $10,439 $10,042 $10,225
9/30/94 $10,094 $10,191 $10,184 $ 9,990 $10,190
10/31/94 $10,064 $10,149 $10,413 $ 9,890 $10,149
11/30/94 $ 9,663 $ 9,767 $10,034 $ 9,513 $ 9,739
12/31/94 $ 9,841 $10,000 $10,182 $ 9,744 $10,000
1/31/95 $ 9,730 $ 9,838 $10,446 $ 9,606 $ 9,874
2/28/95 $10,082 $10,229 $10,852 $10,002 $10,285
3/31/95 $10,334 $10,442 $11,172 $10,204 $10,461
4/30/95 $10,566 $10,671 $11,501 $10,432 $10,693
5/31/95 $10,717 $10,809 $11,960 $10,595 $10,877
6/30/95 $11,211 $11,356 $12,237 $11,176 $11,441
7/31/95 $11,866 $12,021 $12,642 $12,031 $12,100
8/31/95 $12,077 $12,270 $12,674 $12,292 $12,351
9/30/95 $12,309 $12,510 $13,208 $12,606 $12,572
10/31/95 $11,785 $11,910 $13,161 $11,984 $12,010
11/30/95 $12,329 $12,114 $13,737 $12,458 $12,514
12/31/95 $12,562 $12,782 $14,003 $12,663 $12,845
1/31/96 $12,491 $12,749 $14,479 $12,691 $12,831
2/29/96 $12,967 $13,261 $14,613 $13,106 $13,231
3/31/96 $13,170 $13,492 $14,754 $13,387 $13,505
4/30/96 $13,899 $14,206 $14,970 $14,156 $14,227
5/31/96 $14,384 $14,692 $15,355 $14,659 $14,788
6/30/96 $13,848 $14,222 $15,414 $14,084 $14,180
7/31/96 $12,643 $13,075 $14,732 $13,115 $12,942
8/31/96 $14,413 $13,904 $15,043 $13,925 $13,964
9/30/96 $14,010 $14,416 $15,889 $14,536 $14,230
10/31/96 $13,757 $14,169 $16,327 $14,435 $14,010
11/30/96 $14,344 $14,733 $17,561 $15,185 $14,588
12/31/96 $14,508 $15,007 $17,213 $15,363 $14,970
1/31/97 $14,895 $15,361 $18,288 $15,619 $15,269
2/28/97 $14,376 $14,986 $18,432 $15,295 $14,900
3/31/97 $13,654 $14,257 $17,676 $14,510 $14,196
4/30/97 $13,756 $14,299 $18,730 $14,689 $14,236
</TABLE>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. PRINCIPAL VALUE AND
INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. The performance graph
compares a hypothetical $10,000 investment in the Schwab Small-Cap Index Fund,
since inception, with a hypothetical investment in the Schwab Small-Cap Index,
the S&P 500 Index, the S&P 600 Small-Cap Index, and the Russell 2000 Index.
Total return assumes reinvestment of all dividend and capital gain
distributions, if any. Indices are unmanaged, and unlike the Fund, do not
reflect advisory and other fees associated with an investment in the Fund.
Investors cannot invest in an index directly. The Investment Manager and Schwab
waived a portion of their fees during the period, and have guaranteed that
maximum total operating expenses will not exceed 0.49% through at least
2/29/2000. Without fee waivers and guarantees, the Fund's total return would
have been lower.
14
<PAGE> 21
The total index market capitalization of the Schwab Small-Cap Index(R) was $534
billion, which is fairly similar to the level of the Russell 2000 ($652 billion)
but significantly greater than the S&P 600(R) Index ($275 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. We will continue to include the S&P 600 Index
in the performance graph for the October 1997 report but will be discontinuing
its usage next year.
Q. WHAT ACCOUNTS FOR THE DIFFERENCE BETWEEN THE PERFORMANCE OF THE SCHWAB
SMALL-CAP INDEX FUND(R) (THE FUND) AND THE SCHWAB SMALL-CAP INDEX (THE INDEX)?
A. Unlike the Fund, the Index does not incur management and other Fund operating
expenses that reduce returns to the shareholders. Additionally, the Fund, unlike
the Index, holds a small portion in cash to meet shareholder redemptions and to
pay Fund expenses. This cash portion earns interest at money market rates, which
may be more or less than the returns of the Index during a given period. Also,
the precise weighting of any particular security in the Fund can be greater or
less than in the Index.
Another factor accounting for the difference in performance is the Fund's goal
of minimizing capital gain distributions. In order to minimize capital gain
distributions, the Fund may avoid selling certain stocks that are no longer in
the Index. Depending on the performance of these non-Index stocks, this practice
may have a positive or negative impact on Fund performance. Lastly, unlike the
Index, the Fund incurs trading costs when it buys or sells stocks. Recently, the
frequency of the rebalancing of the Index was changed from semi-annually to
annually. As a result of this procedural change, it is anticipated that the
Fund's trading costs may decrease and shareholder returns may be enhanced.
Taken together, these factors cause the difference in the returns of the Fund
compared to the Index, a difference referred to as the Fund's "tracking error."
The tracking error for the Fund during the reporting period was 0.93%, and the
15
<PAGE> 22
average annual tracking error since 12/3/93, the Fund's inception, was 1.25%,
both of which are within our expectations given the components of the tracking
error as discussed above.
Q. ARE INDEX FUNDS LESS RISKY THAN ACTIVELY MANAGED FUNDS? HOW DO INDEX FUNDS
BEHAVE IN A BEAR MARKET?
A. While broad-based index funds like the Schwab Small-Cap Index Fund(R) help
reduce the risk associated with investing in individual stocks or a specific
industry sector, they do not provide protection against market risk. It's
important to realize that the stock market can fluctuate significantly. Because
equity index funds are designed to track stock market performance in both
directions, down as well as up, their values will fall and rise with the markets
they seek to track.
We feel the most meaningful way for investors to think about their exposure to
market risk is not on a fund by fund basis, but on the basis 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 you
should set your asset allocation strategy and total portfolio market exposure at
an appropriate level for you -- one that can help you to "ride out" bear markets
over the long-term. When used as part of a long-term strategy, index funds offer
an excellent way to achieve exposure to the equity markets; however, each
individual investor has a different tolerance for risk and should have a
portfolio with a risk profile that reflects that tolerance level.
16
<PAGE> 23
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
COMMON STOCK--99.1%
AEROSPACE/DEFENSE--0.9%
AAR Corp. 6,200 $ 184
Alliant Techsystems, Inc.+ 7,500 314
Coltec Industries, Inc.+ 24,400 494
GenCorp., Inc. 14,100 264
OEA, Inc. 8,500 305
Orbital Sciences Corp.+ 12,600 186
Rohr, Inc.+ 13,600 213
Thiokol Corp. 7,700 503
-----
2,463
-----
AIR TRANSPORTATION--0.7%
America West Holding Corp. Class B+ 19,500 300
ASA Holdings, Inc. 12,600 268
Continental Airlines, Inc. 15,000 476
Offshore Logistics, Inc.+ 7,900 142
USAir Group, Inc.+ 17,200 557
Valujet, Inc. 20,300 129
-----
1,872
-----
ALCOHOLIC BEVERAGES--0.3%
Adolph Coors Co. Class B 19,100 437
Canandaigua Wine Co., Inc. Class A+ 10,300 264
-----
701
-----
APPAREL--1.2%
Brown Group, Inc. 6,600 110
Burlington Industries, Inc.+ 27,500 282
Guilford Mills, Inc. 5,600 158
Kellwood Co. 11,000 261
Men's Wearhouse, Inc. 9,200 229
Phillips-Van Heusen Corp. 12,200 160
Springs Industries, Inc. 9,000 421
St. John Knits, Inc. 7,400 284
Stride Rite Corp. 22,300 307
Talbots, Inc. 14,700 397
Timberland Co. Class A+ 4,300 209
Wolverine World Wide, Inc. 11,800 474
-----
3,292
-----
AUTOMOTIVE PRODUCTS--0.2%
Carlisle Companies, Inc. 13,400 376
Discount Auto Parts, Inc.+ 5,900 96
O'Reilly Automotive, Inc.+ 4,900 172
-----
644
-----
</TABLE>
17
<PAGE> 24
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
BANKS--7.2%
ALBANK Financial Corp. 5,420 $ 198
Associated Banc-Corp 10,320 384
Banc One Corp. 6,386 271
Bancorp South, Inc. 9,200 251
BankNorth Group, Inc. Delaware 3,000 128
Centura Banks, Inc. 7,900 309
Chemical Financial Corp. 4,384 148
Citizens Banking Corp. 6,500 202
City National Corp. 17,900 409
CNB Bancshares, Inc. 8,131 357
Colonial BancGroup, Inc. 16,400 369
Commerce Bancorp, Inc. New Jersey 5,800 181
Community First Bankshares, Inc. 8,100 260
Corus Bankshares, Inc. 6,800 191
Crestar Financial Corp. 5,260 195
Cullen/Frost Bankers, Inc. 10,400 364
Deposit Guaranty Corp. 14,800 453
F & M National Corp. 10,355 221
Financial Trust Corp. 4,200 176
First Citizens BancShares, Inc. Class A 5,500 435
First Colorado Bancorp, Inc. 8,000 128
First Commerce Bancshares, Inc. 5,000 133
First Commonwealth Financial Corp. 10,700 201
First Financial Bancorp 6,710 242
First Michigan Bank Corp. 13,609 388
First Midwest Bancorp, Inc. 7,000 215
Firstbank of Illinois Co. 4,300 159
Fort Wayne National Corp. 4,700 196
Fulton Financial Corp. 13,246 341
Hancock Holding Co. 4,930 202
HUBCO, Inc. 13,356 329
Imperial Bancorp 10,798 254
Jefferson Bankshares, Inc. 6,100 171
Keystone Financial, Inc. 16,350 417
Liberty Bancorp, Inc. 4,800 238
Long Islands Bancorp, Inc. 10,500 357
MAF Bancorp, Inc. 4,100 162
Magna Group, Inc. 14,700 454
Mercantile Bancorp, Inc. 8,378 486
Mid-Am, Inc. 7,392 128
National Bancorp of Alaska, Inc. 4,000 298
National Commerce Bancorp 10,200 436
New York Bancorp, Inc. 8,850 258
North Fork Bancorporation, Inc. 13,400 531
ONBANCorp., Inc. 6,200 303
One Valley Bancorp of West Virginia, Inc. 11,125 427
Park National Corp. 3,900 216
</TABLE>
18
<PAGE> 25
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
People's Bank Bridgeport, Conneticut 13,200 $ 396
Provident Bancorp, Inc. 13,500 527
Provident Bankshares Corp. 4,305 152
Queens County Bancorp, Inc. 5,198 192
Riggs National Corp. 12,800 237
S & T Bancorp, Inc. 5,300 175
Security Capital Corp. 3,800 338
Sumitomo Bank of California 7,300 181
Susquehanna Bancshares, Inc. 6,300 211
T R Financial Corp. 4,400 163
TrustCo Bank Corp. New York 7,749 161
Trustmark Corp. 14,300 361
U S Trust Corp. (New) 10,200 449
UMB Financial Corp. 8,874 344
Union Planters Corp. 5,337 238
United Bankshares, Inc. 6,700 235
United Carolina Bancshares Corp. 10,950 479
UST Corp. 10,700 201
Valley National Bancorp 15,477 431
Westamerica Bancorp 3,700 241
Whitney Holding Corp. 7,400 268
Zions Bancorporation 4,500 565
------
19,717
------
BUSINESS MACHINES & SOFTWARE--6.1%
Analogic Corp. 5,300 155
Applied Magnetics Corp.+ 13,000 327
Avant Corp.+ 8,400 119
BancTec, Inc.+ 7,400 169
BBN Corp.+ 8,200 191
Black Box Corp.+ 7,200 170
Boole & Babbage, Inc. 6,200 132
Broderbund Software, Inc.+ 10,500 197
Cisco Systems, Inc. 2,800 145
Clarify, Inc. 6,900 59
Computer Horizons Corp. 7,000 305
Computer Products, Inc.+ 9,700 166
Computer Sciences Corp.+ 6,320 395
Compuware Corp.+ 27,400 1,034
Comverse Technology, Inc.+ 9,000 353
Cooper & Chyan Technology, Inc.+ 4,500 109
Data General Corp.+ 17,500 328
Dell Computer Corp.+ 12,600 1,052
Dialogic Corp.+ 7,400 146
FileNet Corp.+ 6,900 77
Geoworks+ 5,400 39
GT Interactive Software Corp.+ 24,300 156
HCIA, Inc.+ 5,300 109
</TABLE>
19
<PAGE> 26
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
HNC Software, Inc. 7,900 $ 209
Hyperion Software Corp. 5,900 96
Inacom Corp.+ 3,600 80
INSO Corp.+ 6,700 141
Intergraph Corp.+ 19,000 121
Learning Company, Inc.+ 17,300 112
Legato Systems, Inc. 6,800 91
Manugistics Group, Inc.+ 4,700 253
McAfee Associates, Inc. 16,012 893
Medic Computer Systems, Inc. 10,000 156
Microchip Technology, Inc. 17,550 548
National Computer Systems, Inc. 6,400 161
National Instruments Corp.+ 9,800 296
Network Appliance, Inc.+ 7,400 216
Network General Corp. 7,000 96
Novellus Systems, Inc.+ 7,200 416
Oak Technology, Inc. 15,700 127
Objective Systems Integrators, Inc.+ 5,000 23
PeopleSoft, Inc. 2,400 100
Pixar, Inc.+ 13,600 207
Platinum Technology, Inc.+ 21,700 260
Policy Management Systems Corp.+ 7,300 318
Project Software & Development, Inc.+ 4,900 66
Pure Atria Corp.+ 18,029 176
Quantum Corp.+ 21,800 909
Read-Rite Corp.+ 16,800 435
Safeguard Scientifics, Inc. 13,400 298
Scopus Technology, Inc. 6,900 185
Security Dynamics Technologies, Inc. 8,200 207
Sequent Computer Systems, Inc.+ 13,900 221
Stratus Computer, Inc.+ 9,900 385
System Software Associates, Inc. 17,400 94
Transaction Systems Architects, Inc. 10,000 300
U.S. Robotics, Inc. 13,600 689
Vantive Corp. 8,300 165
Veritas DGC, Inc.+ 6,500 125
Veritas Software Co. 5,750 193
Videoserver, Inc.+ 5,300 89
Visio Corp.+ 6,200 315
Wang Laboratories, Inc.+ 14,700 255
Wind River Systems, Inc. 14,175 326
Xircom, Inc.+ 7,800 72
Zitel Corp. 7,100 99
------
16,457
------
</TABLE>
20
<PAGE> 27
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
BUSINESS SERVICES--12.0%
ABM Industries, Inc. 10,000 $ 188
ABR Information Services, Inc. 12,000 242
Access Health, Inc. 7,400 105
Ackerley, Inc. 11,800 121
Act Networks, Inc.+ 3,200 43
Advo, Inc. 6,500 79
Allied Waste Industries, Inc.+ 26,100 290
American Business Information, Inc.+ 8,550 162
American Business Products, Inc. 6,300 151
American Homepatient, Inc. 6,450 124
Amresco, Inc. 12,500 182
Analysts International Corp. 6,200 177
Apollo Group, Inc. Class A 14,337 385
Apria Healthcare Group, Inc.+ 20,600 348
Aspen Technology, Inc. 11,000 334
BDM International, Inc. 11,600 270
Bell & Howell Co. (New)+ 7,900 187
BISYS Group, Inc.+ 11,000 352
Bowne & Co., Inc. 8,500 225
BRC Holdings, Inc.+ 3,700 110
Brightpoint, Inc. 7,125 156
Cambridge Technology Partners 14,400 383
Camco International, Inc. 9,700 430
CDI Corp.+ 9,000 341
Cellstar Corp.+ 8,600 206
Cellular Technical Services, Inc. 8,500 123
Cerner Corp.+ 13,300 214
Checkfree Corp.+ 24,300 337
Ciber, Inc. 8,800 315
CKS Group, Inc.+ 4,500 95
Clintrials Research, Inc. 7,200 56
Compucom System, Inc.+ 16,400 96
Computer Task Group, Inc. 5,300 229
Computervision Corp.+ 28,400 99
Concord EFS, Inc. 23,175 458
Consolidated Graphics, Inc. 5,900 144
Corestaff, Inc. 14,300 248
Corrections Corp. of America 15,200 496
CRA Managed Care, Inc.+ 3,400 120
Creative Biomolecules, Inc.+ 13,500 102
Culligan Water Technologies, Inc.+ 9,500 388
Curative Technologies, Inc.+ 5,400 128
Dames & Moore, Inc. 7,400 94
DeVRY, Inc. 21,000 462
Dionex Corp. 5,200 254
Dynatech Corp.+ 7,100 247
Employee Solutions, Inc. 16,600 83
</TABLE>
21
<PAGE> 28
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Envoy Corp. (New)+ 7,800 $ 163
Equity Corp. International 8,200 176
Express Scripts, Inc. Class A+ 8,000 294
Fair, Issac & Co., Inc. 6,000 190
FPA Medical Management, Inc.+ 7,100 115
Franklin Quest Co.+ 8,300 175
G&K Services, Inc. Class A 10,350 300
Gartner Group, Inc. Class A 11,600 305
HA-LO Industries, Inc. 6,425 108
HBO & Co. 5,200 278
Healthplan Services Corp.+ 5,200 86
Healthsource, Inc. 30,400 638
Henry Jack & Associates, Inc. 7,350 140
Heritage Media Corp. Class A 13,200 241
Horizon/CMS Healthcare Corp.+ 23,900 379
IDX Systems Corp.+ 10,000 298
Information Resources, Inc.+ 10,400 138
Integrated Health Services, Inc. 11,200 360
Integrated Systems, Inc. Class A 9,800 94
Interim Services, Inc.+ 9,300 360
ITT Educational Services, Inc. 11,000 250
Jacobs Engineering Group, Inc.+ 11,300 288
Keane, Inc. 14,200 659
Kirby Corp.+ 9,100 166
Laboratory Corp. of America Holdings+ 53,100 166
Learning Tree International, Inc. 9,600 302
Maxicare Health Plans, Inc.+ 9,700 226
Medaphis Corp.+ 25,300 131
Mentor Graphics Corp.+ 28,200 199
Metromedia International Group, Inc.+ 26,200 244
Micro Warehouse, Inc.+ 14,100 243
National Data Corp. 8,800 330
National Education Corp.+ 12,800 259
National Surgery Centers, Inc. 5,700 171
Network Equipment Technologies+ 7,400 105
Neuromedical Systems, Inc.+ 12,800 85
Norrell Corp. Georgia 9,400 248
Occusystems, Inc.+ 11,600 239
Oceaneering International, Inc.+ 8,700 126
Ogden Corp. 25,300 531
Orthodontic Centers of America, Inc. 16,800 202
PAXAR Corp. 14,108 272
Payment Services, Inc. 13,000 154
Pediatrix Medical Group+ 6,700 221
PhyCor, Inc. 10,350 276
Physician Reliance Network, Inc. 21,100 153
Physicians Computer Network, Inc.+ 19,900 106
Physicians Corp. of America+ 14,700 72
</TABLE>
22
<PAGE> 29
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Pre-Paid Legal Services, Inc.+ 8,200 $ 117
PSInet, Inc.+ 14,800 85
Radisys Corp.+ 3,100 91
Renaissance Solutions, Inc.+ 3,700 80
Renters Choice, Inc.+ 10,800 151
Republic Industries, Inc. 33,700 836
Robert Half International, Inc. 15,800 620
Rollins, Inc. 13,800 266
Rural/Metro Corp.+ 5,500 158
S.E. Rykoff & Co. 12,150 220
Safety-Kleen Corp. 22,600 336
Scientific Games Holdings Corp.+ 5,500 121
Seacor Holdings, Inc.+ 6,500 280
SEI Corp. 6,800 143
Sitel Corp. 24,300 240
SPS Transaction Services, Inc.+ 9,900 178
Standard Register Co. 12,200 401
Stewart Enterprises, Inc. Class A 7,950 262
Structural Dynamics Research Corp.+ 13,500 287
Sun Healthcare Group, Inc.+ 18,708 264
Sylvan Learning Systems, Inc. 10,400 313
Symantec Corp.+ 23,000 331
Synetic, Inc.+ 8,100 316
Systemsoft Corp. 3,200 24
Technology Solutions Co. 6,700 177
Tetra Technologies, Inc.+ 4,400 102
Total Renal Care Holdings, Inc.+ 11,600 373
Transitional Hospitals Corp.+ 20,300 203
True North Communications, Inc. 11,800 226
U.S.A. Waste Services, Inc.+ 39,837 1,306
United Waste System, Inc. 11,000 371
Universal Health Services, Inc. Class B 13,700 519
Valassis Communications, Inc.+ 17,300 424
Viasoft, Inc. 8,000 340
Volt Information Sciences, Inc. 4,300 224
Wackenhut Corrections Corp. 9,500 150
Wallace Computer Service, Inc. 9,200 246
Zebra Technologies Corp. Class A 13,400 308
------
32,730
------
CHEMICAL--2.1%
Calgon Carbon Corp. 16,100 197
Cambrex Corp. 5,950 202
Chemed Corp. 4,300 145
Cytec Industries, Inc. 12,600 476
Dexter Corp. 9,900 296
Ferro Corp. 10,900 339
Foamex International+ 11,000 158
</TABLE>
23
<PAGE> 30
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Geon Co. 10,300 $ 225
Georgia Gulf Corp. 13,700 332
H.B. Fuller Co. 5,700 306
Lawter International, Inc. 19,200 204
Lilly Industries, Inc. Class A 7,850 136
NCH Corp. 3,900 246
NL Industries, Inc. 23,200 220
OM Group, Inc. 9,950 277
Petrolite Corp. 5,500 333
Schulman (A.), Inc. 17,100 325
Scotts Co. Class A+ 8,200 210
Sequa Corp. Class A+ 4,300 204
Tredegar Industries, Inc. 5,000 231
WD-40 Co. 3,500 202
Wellman, Inc. 12,400 195
Zoltek Companies, Inc. 7,400 214
-----
5,673
-----
CONSTRUCTION--2.0%
Apogee Enterprises, Inc. 11,600 174
Blount International, Inc. Class A 10,800 439
Blount International, Inc. Class B 1,500 60
CalMat Co. 8,900 159
Centex Construction Products, Inc. 9,100 168
D.R. Horton, Inc. 13,100 128
Global Industries, Inc. 17,400 365
Granite Construction, Inc. 7,000 139
Kaufman & Broad Home Corp. 13,900 193
Lone Star Industries, Inc. 6,800 269
Mafco Consolidated Group, Inc. 9,500 311
Mastec, Inc. 10,800 313
McDermott International+ 16,200 277
Medusa Corp. 7,300 276
Morrison Knudsen Corp. (New)+ 21,100 264
Palm Harbor Homes, Inc. 5,200 127
Pulte Corp. 10,700 305
Regal Beloit Corp. 10,000 238
Southdown, Inc. 11,200 405
Stone & Webster, Inc. 6,100 233
TJ International, Inc. 6,800 151
Toll Brothers, Inc.+ 15,500 283
Triangle Pacific Corp. Delaware+ 5,600 152
-----
5,429
-----
CONSUMER-DURABLE--1.2%
Bassett Furniture Industries, Inc. 5,400 122
Champion Enterprises, Inc. 19,792 302
Chicago Miniature Lamp, Inc. 9,200 215
</TABLE>
24
<PAGE> 31
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Coachmen Industries, Inc. 5,500 $ 94
Ethan Allen Interiors, Inc. 6,300 279
Furniture Brands International, Inc.+ 28,700 423
Griffon Corp.+ 10,200 124
Interface, Inc. 8,700 195
Kimball International, Inc. Class B 9,200 324
La-Z-Boy Chair Co. 8,100 264
Outboard Marine Corp. 6,400 83
Sturm, Ruger & Co., Inc. 13,800 212
Toro Co. 6,600 231
Zenith Electronics Corp.+ 28,700 309
-----
3,177
-----
CONSUMER-NONDURABLE--2.0%
Apple South, Inc. 13,500 176
Applebee's International, Inc. 12,500 292
Buffets, Inc.+ 20,600 157
CKE Restaurants, Inc. 12,650 248
Department 56, Inc.+ 8,500 159
Foodmaker, Inc.+ 14,100 153
Gibson Greetings, Inc.+ 7,000 144
International Dairy Queen, Inc. Class A+ 9,200 196
Jostens, Inc. 17,500 418
Landrys Seafood Restaurants, Inc.+ 13,300 187
Luby's Cafeterias, Inc. 7,500 137
Mohawk Industries, Inc.+ 15,000 336
Oakley, Inc. 31,500 323
Papa John's International, Inc. 10,525 271
Paragon Trade Brands, Inc.+ 4,000 64
Rainforest Cafe, Inc. 5,500 131
Rexall Sundown, Inc. 13,300 264
Ruby Tuesday, Inc. 6,537 129
Russ Berrie & Co., Inc. 9,400 181
Ryan's Family Steak Houses, Inc.+ 19,500 173
Samsonite Corp. (New)+ 8,700 361
Sbarro, Inc. 8,900 251
Shoney's, Inc.+ 16,700 77
Showbiz Pizza Time, Inc. 6,800 131
Sonic Corp.+ 6,300 83
Toy Biz, Inc. Class A+ 9,000 88
USA Detergents, Inc. 4,700 53
Williams-Sonoma, Inc.+ 10,500 326
-----
5,509
-----
</TABLE>
25
<PAGE> 32
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
CONTAINERS--0.3%
ACX Technologies, Inc.+ 10,400 $ 199
Ball Corp. 12,800 344
Gaylord Container Corp. Class A+ 19,800 110
Greif Brothers Corp. Class A 10,300 263
----
916
----
ELECTRONICS--4.9%
Actel Corp.+ 6,800 122
ADAC Laboratories 7,000 162
Altron, Inc. 5,850 97
AMETEK, Inc. 12,900 289
Ampex Corp. (Delaware) Class A+ 16,900 95
Anadigics, Inc. 5,500 155
Anixter International, Inc. 19,600 279
Belden, Inc. 14,400 443
Burr Brown Corp. 11,100 327
Cable Design Technologies Corp. 7,100 134
Centennial Technologies, Inc. 5,600 17
Checkpoint Systems, Inc. 13,200 182
Chips & Technologies, Inc.+ 6,700 55
Cyrix Corp.+ 7,600 158
Dallas Semiconductor Corp. 10,700 391
Diamond Multimedia Systems, Inc.+ 5,700 39
Digital Microwave Corp.+ 5,500 142
DSP Communications, Inc. 17,400 138
EG&G, Inc. 19,700 372
Exide Corp. 7,800 126
Fluke Corp. 4,400 199
FSI International, Inc.+ 8,800 106
Genrad, Inc.+ 8,100 134
Gerber Scientific, Inc. 8,200 135
Hadco Corp.+ 4,400 188
Hutchinson Technology, Inc. 7,900 214
Innovex, Inc. 4,900 157
Input/Output, Inc. 17,900 251
International Rectifier Corp. 24,000 276
Jabil Circuit, Inc.+ 7,200 348
Kemet Corp.+ 15,700 306
Kent Electronics Corp. 11,300 283
Kulicke & Soffa Industries, Inc.+ 7,600 212
Lam Research Corp.+ 12,900 374
Lattice Semiconductor Corp.+ 7,400 413
Level One Communications, Inc.+ 6,200 198
Littlefuse, Inc.+ 5,000 231
Logicon, Inc. 6,100 242
Macromedia, Inc.+ 14,000 107
Marshall Industries+ 7,100 232
</TABLE>
26
<PAGE> 33
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
MEMC Electronic Materials, Inc.+ 16,600 $ 454
Methode Electronics, Inc. Class A 15,150 214
MRV Communications, Inc. 7,100 146
Osmonics, Inc.+ 7,800 123
Premisys Communications, Inc. 8,400 75
Rexel, Inc.+ 11,600 204
S3, Inc.+ 19,400 186
Sanmina Corp. 7,100 355
SDL, Inc. 2,200 29
Sierra Semiconductor Corp.+ 11,700 197
Silicon Valley Group, Inc.+ 11,800 243
Smart Modular Technologies, Inc.+ 6,400 214
Symmetricom, Inc.+ 2,500 34
Technitrol, Inc. 6,200 125
Tracor, Inc. New+ 8,400 183
Ultrak, Inc.+ 4,700 51
Uniphase Corp. 6,400 254
Unitrode Corp.+ 5,500 217
VeriFone, Inc.+ 10,800 546
Vicor Corp.+ 14,400 229
Vitesse Semiconductor Corp. 12,900 406
Wyle Electronics 5,300 180
Zilog, Inc.+ 10,000 185
------
13,179
------
ENERGY-DEVELOPMENT--4.1%
Ashland Coal, Inc. 5,200 138
Atwood Oceanics, Inc.+ 2,800 172
Barrett Resources Corp.+ 12,900 422
Benton Oil & Gas Co.+ 11,500 168
BJ Services Co.+ 10,000 471
Cabot Oil & Gas Corp. Class A 12,300 206
Chesapeake Energy Corp. 19,200 290
Cliffs Drilling Co. 2,600 159
DI Industries, Inc.+ 25,200 63
Energy Ventures, Inc. 8,000 535
Falcon Drilling, Inc.+ 11,600 444
Forcenergy, Inc.+ 9,000 279
Forest Oil Corp.+ 10,400 138
Freeport-McMoRan, Inc. 9,200 269
Halliburton Co. 5,616 397
Helmerich & Payne, Inc. 10,000 478
Leviathan Gas Pipeline Partners, L.P. 6,200 143
Louis Dreyfus Natural Gas Corp.+ 13,100 206
Marine Drilling Company, Inc.+ 18,300 288
MAXXAM, Inc.+ 6,000 258
Mesa, Inc. 27,100 139
Newfield Exploration Co. 15,000 287
</TABLE>
27
<PAGE> 34
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Newpark Resources, Inc. 7,000 $ 314
Nuevo Energy Co.+ 8,400 289
Parker & Parsley Petroleum Co. 11,200 370
Parker Drilling Co.+ 25,600 198
Pride Petroleum Services, Inc.+ 17,100 295
Production Operators Corp. 3,900 224
Reading & Bates Corp.+ 20,600 461
Rowan Companies, Inc.+ 27,700 499
Seitel, Inc.+ 4,900 164
Solv-Ex Corp.+ 8,700 92
Stone Energy Corp.+ 5,000 134
Swift Energy Co.+ 5,200 110
Tom Brown, Inc.+ 8,400 153
Transocean Offshore, Inc. 6,700 406
Tuboscope Vetco International Corp.+ 16,600 232
United Meridian Corp.+ 8,100 230
Varco International, Inc.+ 16,300 375
Vintage Petroleum, Inc. 11,400 322
Zeigler Coal Holding Co. 13,200 332
------
11,150
------
FOOD-AGRICULTURE--2.6%
Bob Evans Farms, Inc. 17,200 228
Calgene, Inc.+ 29,100 232
Chiquita Brands International, Inc. 21,400 308
Coca-Cola Bottling Co. Consolidated 4,700 182
Dekalb Genetics Corp. Class B 8,400 529
Delta & Pine Land Co. 12,260 306
Dimon, Inc. 20,100 397
Dreyer's Grand Ice Cream, Inc. 6,100 191
Earthgrains Co. 4,224 242
Fleming Companies, Inc. 16,800 273
Hudson Foods, Inc. Class A 15,250 236
International Multifoods Corp. 5,900 147
Interstate Bakeries Corp. 13,100 679
J.M. Smucker Co. Class A 11,700 205
JP Foodservice, Inc.+ 10,500 293
Lance, Inc. 11,800 214
Mississippi Chemical Corp. 17,140 377
Mycogen Corp.+ 15,500 281
Ralcorp Holdings, Inc.+ 12,966 133
Savannah Foods & Industries, Inc. 11,900 170
Seabord Corp. 800 198
Smithfield Foods, Inc.+ 7,700 355
Tootsie Roll Industries, Inc. 11,330 537
Universal Foods Corp. 11,200 395
------
7,108
------
</TABLE>
28
<PAGE> 35
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
GOLD--0.3%
Amax Gold, Inc.+ 42,200 $ 237
Getchell Gold Corp.+ 11,671 448
Pegasus Gold, Inc.+ 8,800 61
Royal Oak Mines, Inc.+ 57,000 143
------
889
------
HEALTHCARE--7.2%
Acuson Corp.+ 15,100 366
Advanced Technology Laboratories, Inc.+ 6,500 215
Advanced Tissue Sciences, Inc.+ 15,200 162
Agouron Pharmaceuticals, Inc.+ 5,900 378
Alkermes, Inc.+ 8,900 98
Alliance Pharmaceutical Corp.+ 10,500 80
Alpharma, Inc. Class A 8,500 123
Amerisource Health Corp.+ 6,700 299
Amylin Pharmaceuticals, Inc.+ 17,300 177
Arrow International, Inc. 11,000 333
Ballard Medical Products 11,400 217
Barr Laboratories, Inc. 5,900 267
Bio Rad Laboratories, Inc. Class A 5,000 119
Bio-Technology General Corp.+ 21,200 305
Block Drug Co., Inc. Class A 13,643 575
Capstone Pharmacy Services, Inc.+ 13,600 115
Cardinal Health, Inc. 7,818 416
Carter-Wallace, Inc. 17,900 237
Cephalon, Inc.+ 11,900 199
Cognex Corp. 17,200 424
Columbia Laboratories, Inc. 13,700 188
Conmed Corp. 5,500 82
Datascope Corp.+ 6,200 112
Diagnostic Products Corp. 6,400 183
Enzo Biochem, Inc. 8,793 123
Geltex Pharmaceuticals, Inc.+ 4,600 76
Genesis Health Ventures, Inc. 13,050 390
Gilead Sciences, Inc.+ 12,000 266
GranCare, Inc.+ 8,300 64
Guilford Pharmaceuticals, Inc. 4,800 111
Gulf South Medical Supply, Inc.+ 6,200 88
Haemonetics Corp.+ 10,900 181
HealthSouth Corp.+ 24,976 493
Herbalife International, Inc. 14,000 226
Hologic, Inc. 5,500 114
Human Genome Sciences, Inc.+ 8,200 257
ICN Pharmaceuticals, Inc. 13,315 281
IDEC Pharmaceuticals Corp.+ 8,600 153
Immunex Corp. (New)+ 16,900 471
Incyte Pharmaceuticals, Inc.+ 5,200 221
</TABLE>
29
<PAGE> 36
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Invacare Corp. 12,200 $ 242
Isis Pharmaceuticals, Inc.+ 9,100 134
Kinetic Concepts, Inc. 17,400 259
Life Technologies, Inc. 10,150 258
Ligand Pharmaceuticals, Inc. Class B+ 9,500 97
Liposome, Inc.+ 14,500 322
Living Centers of America, Inc.+ 8,300 297
Magellan Health Services, Inc.+ 13,700 360
Marquette Medical Systems, Inc.+ 19,400 390
Medicis Pharmaceutical Corp. 6,750 165
Medimmune, Inc.+ 8,800 114
Mentor Corp. 10,300 238
Mid Atlantic Medical Services, Inc.+ 27,700 329
Minimed, Inc.+ 4,000 99
Multicare Companies, Inc. 14,500 270
Natures Sunshine Products, Inc. 8,250 112
NBTY, Inc.+ 6,400 122
Neoprobe Corp.+ 7,100 90
Neurex Corp.+ 7,900 87
Nexstar Pharmaceuticals, Inc.+ 10,400 98
North American Vaccine, Inc.+ 14,200 296
NovaCare, Inc.+ 27,080 308
Organogenesis, Inc. 7,000 152
Owens & Minor, Inc. Holding Co. 14,400 187
Parexel International Corp. 6,200 174
Patterson Dental Co.+ 9,050 303
PDT, Inc.+ 5,700 145
Perrigo Co.+ 33,000 388
Physician Sales & Service, Inc.+ 14,500 210
Physicians Resource Group, Inc.+ 14,000 152
Physio Control International Corp.+ 2,500 31
PLC Systems, Inc.+ 6,600 102
Protein Design Labs, Inc.+ 8,600 216
Quintiles Transnational Corp. 6,100 310
Regeneron Pharmaceuticals, Inc.+ 10,500 68
Renal Treatment Centers, Inc. 11,900 257
Respironics, Inc.+ 6,900 129
RoTech Medical Corp. 9,400 148
Sangstat Medical Corp.+ 6,300 108
Sepracor, Inc.+ 10,700 209
Sequus Pharmaceuticals, Inc.+ 12,000 71
Sofamor/Danek Group, Inc.+ 10,100 394
Sola International, Inc.+ 11,600 290
Tenet Healthcare Corp.+ 13,176 343
Thermedics, Inc. 14,700 246
Thermotrex Corp. 8,500 158
Ventritex, Inc.+ 7,900 127
Vertex Pharmaceuticals, Inc.+ 9,300 295
</TABLE>
30
<PAGE> 37
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
VISX, Inc.+ 6,200 $ 140
Vivus, Inc. 7,500 277
West Company, Inc. 6,300 176
------
19,678
------
HOUSEHOLD PRODUCTS--0.4%
Bush Boake Allen, Inc.+ 7,500 206
Church & Dwight Co., Inc. 7,700 196
Libbey, Inc. 8,400 261
Playtex Products, Inc.+ 20,800 192
ThermoLase Corp.+ 19,000 181
-----
1,036
-----
IMAGING & PHOTO--0.3%
BMC Industries, Inc. 12,200 354
Photronic, Inc.+ 5,050 175
Ultratech Stepper, Inc.+ 8,500 152
-----
681
-----
INSURANCE--6.1%
20th Century Industries 23,300 414
Acordia, Inc. 6,400 202
Alfa Farmers Federation Corp. 15,700 188
Allied Group, Inc. 10,500 389
American Annuity Group, Inc. 18,050 302
American Bankers Insurance Group, Inc. 7,500 397
American Heritage Life Investment Corp. 5,700 144
Amerin Corp.+ 12,500 244
Argonaut Group, Inc. 10,600 305
Arthur J. Gallagher & Co. 7,100 222
Berkley (W.R.) Corp. 8,800 433
Capital Re Corp. 6,900 273
Capmac Holdings, Inc. 8,800 229
Citizens Corp. 15,900 421
CMAC Investment Corp. 10,500 399
Commerce Group, Inc. 14,300 315
Compdent Corp.+ 4,400 71
Conseco, Inc. 18,804 777
Crawford & Co. Class A 10,200 147
Crawford & Co. Class B 20,700 300
Delphi Financial Group, Inc. Class A 8,300 295
Enhance Financial Services Group, Inc. 8,600 331
Executive Risk, Inc. 5,100 231
Financial Security Assured Holdings Ltd. 12,500 405
Foremost Corp. of America 5,300 282
Fremont General Corp. 13,870 390
Frontier Insurance Group, Inc. 6,525 336
General Re Corp. 2,049 343
Harleysville Group, Inc. 6,500 208
</TABLE>
31
<PAGE> 38
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Hartford Steam Boiler Inspection & Insurance
Co. 8,100 $ 390
HCC Insurance Holdings, Inc. 14,150 356
Horace Mann Educators Corp. 11,700 548
John Alden Financial Corp. 10,000 174
Kansas City Life Insurance Co. 3,000 207
Liberty Corp. 10,100 391
Life Re Corp. 5,600 216
MAIC Holdings, Inc. 5,062 171
Markel Corp.+ 2,600 286
MMI Companies, Inc. 4,500 98
NAC Re Corp. 9,600 372
Orion Capital Corp. 7,700 482
Oxford Health Plans, Inc. 4,400 290
Presidential Life Corp. 13,100 188
Reinsurance Group of America, Inc. 8,100 403
Selective Insurance Group, Inc. 6,600 266
Sierra Health Services, Inc.+ 7,200 185
State Auto Financial Corp. 7,650 134
Trenwick Group, Inc. 5,100 166
United Companies Financial Corp. 11,500 226
United Fire & Casualty Co. 5,400 201
United Insurance Companies, Inc.+ 14,800 392
United Wisconsin Services, Inc. 7,300 200
Vesta Insurance Group, Inc. 8,400 351
Washington National Corp. 5,500 157
Zenith National Insurance Corp. 8,000 204
Zurich Reinsurance Centre Holdings, Inc. 11,000 422
------
16,469
------
MEDIA--2.2%
American Radio Systems Corp.+ 7,200 211
Ascent Entertainment Group, Inc.+ 13,000 127
Banta Corp. 13,500 341
Big Flower Press Holdings, Inc.+ 8,000 152
Cablevision Systems Corp. Class A+ 5,700 180
Century Communications Corp. Class A+ 28,137 114
Evergreen Media Corp. Class A 16,200 523
Heftel Broadcasting Corp.+ 7,300 365
Hollinger International, Inc. 33,200 332
Houghton Mifflin Co. 8,100 455
International Family Entertainment, Inc. Class
B 17,750 359
John Wiley & Sons, Inc. Class A 7,300 220
Jones Intercable, Inc. Class A+ 11,700 101
Media General, Inc. Class A 11,400 336
News Corporation Ltd.- Sponsored ADR 16,240 246
Oak Industries, Inc.+ 7,300 137
Spelling Entertainment Group, Inc.+ 38,900 214
TCA Cable TV, Inc. 12,800 410
</TABLE>
32
<PAGE> 39
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
United International Holdings, Inc. Class A+ 10,100 $ 97
United Television, Inc. 4,500 401
United Video Satellite Group 10,500 163
Westwood One, Inc.+ 11,500 275
Young Broadcasting, Inc.+ 5,900 156
-----
5,915
-----
MISCELLANEOUS FINANCE--4.7%
Aames Financial Corp. 14,025 216
Alex Brown, Inc. 9,000 579
AMCORE Financial, Inc. 5,600 150
Americredit Corp.+ 10,500 151
Astoria Financial Corp. 9,500 372
BOK Financial Corp. 9,291 285
California Federal Bank+ 960 15
Cityscape Financial Corp. 10,900 146
Coast Savings Financial, Inc.+ 9,700 390
Collective Bancorp, Inc. 9,100 372
Commercial Federal Corp. 8,900 298
Downey Financial Corp. 9,617 186
Eaton Vance Corp. (Non Voting) 4,200 186
First American Financial Corp. 4,800 153
First Financial Corp. 24,625 650
First Source Corp. 6,267 146
Fund American Enterprises Holdings, Inc. 3,409 340
GATX Corp. 7,900 433
Glendale Federal Bank (FSB)+ 17,300 430
Great Financial Corp. 6,500 211
HFNC Financial Corp. 7,500 135
Imperial Credit Industries, Inc. 17,200 250
Interpool, Inc. 9,900 126
Interra Financial, Inc. 5,000 178
Investment Technology Group, Inc.+ 8,000 152
Jefferies Group, Inc. 4,600 213
John Nuveen Co. Class A 14,100 414
JSB Financial, Inc. 4,600 196
Legg Mason, Inc. 7,900 375
McDonald & Company Investments, Inc. 3,900 140
Money Store, Inc. 17,675 382
Morgan Keegan, Inc. 9,900 179
Northwest Savings Bank 11,300 167
Olympic Financial Ltd.+ 14,400 139
Peoples Heritage Financial Group, Inc. 11,400 358
Phoenix Duff & Phelp Corp. 19,400 143
Pioneer Group, Inc. 10,300 270
Quick & Reilly Group, Inc. 15,570 344
Raymond James Financial, Inc. 13,350 312
RCSB Financial, Inc. 6,900 205
</TABLE>
33
<PAGE> 40
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Reliance Acceptance Group, Inc. 5,400 $ 47
Roosevelt Financial Group, Inc. 17,400 405
Sirrom Capital Corp. 6,900 215
Sovereign Bancorp, Inc. 25,862 317
St. Paul Bancorp, Inc. 9,825 269
Standard Financial, Inc. 6,500 149
Student Loan Corp. 10,400 376
Value Line, Inc. 4,900 163
Westcorp, Inc. 10,475 157
WFS Financial, Inc. 10,560 124
------
12,609
------
MOTOR VEHICLE--1.7%
A.O. Smith Corp. Class B 10,800 375
Arvin Industries, Inc. 9,400 244
Borg Warner Automotive, Inc. 12,700 537
Breed Technologies, Inc. 14,500 263
Detroit Diesel Corp.+ 10,200 175
Federal-Mogul Corp. 14,200 392
Fleetwood Enterprises, Inc. 16,200 427
Gentex Corp. 14,300 257
Hays Wheels International, Inc. 9,800 225
Mascotech, Inc. 22,300 426
Modine Manufacturing Co. 13,500 361
Navistar International Corp.+ 34,050 383
Standard Products Co. 6,600 144
Superior Industries International, Inc. 12,100 287
Tower Automotive, Inc.+ 5,900 218
------
4,714
------
NON-FERROUS--0.8%
Coeur d'Alene Mines Corp. 8,600 118
Commercial Metals Co. 6,933 192
Kaiser Aluminum Corp.+ 31,700 342
Minerals Technologies, Inc. 9,400 330
Mueller Industries, Inc.+ 7,500 281
Oregon Metallurgical Corp. 7,200 166
Reliance Steel & Aluminum Co. 5,200 166
RMI Titanium Co.+ 8,000 171
Stillwater Mining Co.+ 8,600 173
Wolverine Tube, Inc.+ 5,900 153
------
2,092
------
</TABLE>
34
<PAGE> 41
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
OIL-DOMESTIC--0.8%
Cross Timbers Oil Co. 10,650 $ 165
KCS Energy, Inc. 6,300 205
Pogo Producing Co. 9,000 330
Quaker State Corp. 18,000 270
Snyder Oil Corp. 12,400 197
Tesoro Petroleum Corp.+ 9,400 101
Tosco Corp. 14,418 426
Total Petroleum (North America) Ltd. 14,400 144
TransTexas Gas Corp.+ 24,900 349
-----
2,187
-----
PAPER--0.9%
Buckeye Cellulose Corp.+ 8,100 244
Caraustar Industries, Inc. 10,400 263
Chesapeake Corp. 9,800 334
Longview Fibre Co. 22,200 358
Mosinee Paper Corp. 4,800 194
P. H. Glatfelter Co. 18,600 291
Rock Tennessee Co. Class A 12,930 184
Shorewood Packaging Corp.+ 7,000 133
Thermo Fibertek, Inc. 18,200 171
Wausau Paper Mills Co. 14,845 260
-----
2,432
-----
PRODUCER GOODS & MANUFACTURING--7.2%
Advanced Lighting Technologies, Inc.+ 4,600 87
AGCO, Inc. 12,300 318
Albany International Corp. Class A 14,400 290
American Financial Enterprises, Inc. 5,300 191
Applied Industrial Technologies, Inc. 5,750 182
Applied Power, Inc. Class A 6,300 267
AptarGroup, Inc. 7,800 312
Baldor Electric Co. 10,640 273
Barnes Group, Inc. 10,500 244
BE Aerospace, Inc.+ 9,400 231
Boise Cascade Office Products Corp. 15,200 268
Butler Manufacturing Co. 4,100 136
BW/IP, Inc. Class A 9,100 148
Cincinnati Milacron, Inc. 13,900 281
CLARCOR, Inc. 5,700 126
Collins & Aikman Corp.+ 31,700 301
Credence Systems Corp.+ 7,750 123
Donaldson Co., Inc. 10,600 363
DT Industries, Inc. 4,200 109
Duriron Co., Inc. 9,800 244
Encad, Inc. 5,400 198
Fisher Scientific International, Inc. 8,400 356
</TABLE>
35
<PAGE> 42
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
General Binding Corp. 7,100 $ 197
Giddings & Lewis, Inc. 12,800 259
Goulds Pumps, Inc. 8,800 321
Graco, Inc. 7,625 180
Greenfield Industries, Inc. 6,600 134
Henry Schein, Inc.+ 8,900 247
Herman Miller, Inc. 16,600 537
Hexcel Corp. (New)+ 18,400 329
Hon Industries, Inc. 12,500 528
Hughes Supply, Inc. 4,800 159
IDEX Corp. 12,475 327
Insilco Corp.+ 4,000 149
Ionics, Inc.+ 8,400 386
JLG Industries, Inc. 16,500 206
Kaydon Corp. 7,400 327
Keystone International, Inc. 13,800 273
Lincoln Electric Co. 5,100 196
Lincoln Electric Co. Class A (Non Voting) 10,200 326
Lydall, Inc.+ 6,600 134
MagneTek, Inc.+ 10,100 169
Manitowoc Co., Inc. 4,750 192
McDermott International, Inc. 23,700 438
Miller Industries, Inc. 16,000 190
MSC Industrial Direct, Inc.+ 6,700 206
NACCO Industries, Inc. Class A 3,550 164
PRI Automation, Inc. 3,700 190
Quanex Corp. 6,200 157
Roper Industries, Inc. 6,800 278
Safeskin Corp. 12,300 275
Smith International, Inc.+ 10,100 478
SPS Technologies, Inc.+ 2,500 169
SPX Corp. 7,100 388
Standex International Corp. 5,300 133
Stewart & Stevenson Services, Inc. 16,400 394
Teleflex, Inc. 7,850 453
Tencor Instruments+ 15,100 672
Texas Industries, Inc. 10,400 239
Thermo Ecotek Corp. 11,250 158
TriMas Corp. 15,700 387
U.S. Filter Corp. (New) 12,450 378
UNR Industries, Inc. 18,700 115
Valhi, Inc. 48,200 404
Valmont Industries, Inc. 5,700 227
Vital Signs, Inc. 6,300 120
VWR Scientific Products Corp.+ 9,500 143
W.H. Brady Co. Class A 8,200 206
Waters Corp.+ 11,700 347
Watsco, Inc. 4,800 119
</TABLE>
36
<PAGE> 43
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Watts Industries, Inc. Class A 11,400 $ 291
Westpoint Stevens, Inc. Class A+ 12,700 497
WMS Industries, Inc. 10,900 195
Wyman Gordon Co.+ 14,700 309
X-Rite, Inc. 7,500 124
------
19,468
------
RAILROAD--0.3%
Florida East Coast Industry, Inc. 3,500 305
Overseas Shipholding Group, Inc. 15,800 280
Westinghouse Air Brake Co. (New) 14,700 211
-----
796
-----
REAL PROPERTY--0.9%
Alexanders, Inc.+ 1,800 120
Castle & Cooke, Inc.+ 8,100 111
Catellus Development Corp.+ 32,700 482
Forest City Enterprises, Inc. Class A 7,200 311
Insignia Financial Group Class A (New) 13,900 243
Lennar Corp. 16,800 452
Newhall Land & Farming Co. 13,100 249
Premier Parks, Inc.+ 8,300 246
Price Enterprises, Inc. 8,900 159
-----
2,373
-----
RETAIL--5.5%
AnnTaylor Stores Corp.+ 11,900 289
Arbor Drugs, Inc. 18,150 334
Barnes & Noble, Inc.+ 14,500 544
Best Buy Co., Inc.+ 18,300 247
Burlington Coat Factory Warehouse Corp.+ 15,400 293
Carson Pirie Scott & Co.+ 7,200 214
Casey's General Stores, Inc. 9,500 179
CDW Computer Centers, Inc. 6,950 334
Charming Shoppes, Inc.+ 39,100 231
Claire's Stores, Inc. 20,475 392
Cole National Corp.+ 5,700 188
CompUSA, Inc. 32,000 614
Consolidated Stores Corp. 7,625 305
Dollar Tree Stores, Inc. 12,150 480
Dress Barn, Inc.+ 10,100 140
Duty Free International, Inc. 10,300 145
Eagle Hardware & Garden, Inc.+ 11,900 223
Etec Systems, Inc.+ 9,000 262
Family Dollar Stores, Inc. 19,800 517
Fingerhut Companies, Inc. 17,600 262
Finish Line, Inc. 5,800 60
Gymboree Corp.+ 10,500 291
Heilig-Meyers Co. 18,500 278
</TABLE>
37
<PAGE> 44
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Hollywood Entertainment Corp.+ 14,300 $ 306
Host Marriott Services Corp.+ 10,800 96
Just For Feet, Inc. 11,375 181
Lands' End, Inc.+ 14,300 383
Longs Drug Stores, Inc. 16,100 407
Mac Frugal's Bargains--Close-outs, Inc.+ 12,400 363
Neiman Marcus Group, Inc.+ 22,000 578
Petco Animal Supplies, Inc. 7,000 150
Pier 1 Imports, Inc. 18,145 358
Proffitt's, Inc.+ 11,400 426
Quality Food Centers, Inc.+ 5,800 233
Regis Corp. 10,000 205
Ross Stores, Inc. 18,000 506
Ruddick Corp. 20,300 305
Service Merchandise Co., Inc.+ 39,362 103
ShopKo Stores, Inc. 14,700 294
Smart & Final, Inc. 7,900 153
Smith's Food & Drug Centers, Inc. Class B 7,205 241
Stanhome, Inc. 7,000 212
Stein Mart, Inc.+ 9,900 287
Sunglass Hut International, Inc.+ 19,200 139
Tiffany & Co. (New) 12,200 483
UniFirst Corp. 7,800 148
Value City Department Stores, Inc.+ 11,700 99
Vitalink Pharmacy Services, Inc.+ 9,267 170
Waban, Inc.+ 14,300 383
West Marine, Inc. 7,900 205
Whole Foods Market, Inc.+ 9,800 225
Zale Corp. (New)+ 17,900 331
------
14,792
------
STEEL--1.1%
Armco, Inc.+ 38,500 135
Bethlehem Steel Corp.+ 48,000 396
Birmingham Steel Corp. 13,300 195
Carpenter Technology Corp. 8,200 333
Chaparral Steel Co. 13,700 161
Cleveland-Cliffs, Inc. 5,500 233
Gibraltor Steel Corp.+ 4,200 103
Inland Steel Industries, Inc. 23,300 529
Intermet Corp. 10,300 127
J & L Specialty Steel, Inc. 17,000 213
Lone Star Technologies, Inc.+ 6,900 129
National Steel Corp. Class B+ 15,200 150
Oregon Steel Mills, Inc. 11,300 186
------
2,890
------
</TABLE>
38
<PAGE> 45
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
TELEPHONE--2.2%
ACC Corp. 9,450 $ 150
Aliant Communications, Inc. 16,800 263
Allen Telecom, Inc. 10,700 185
American Mobile Satellite Corp.+ 10,900 106
Associated Group, Inc. Class A+ 8,000 296
Boston Technology, Inc.+ 9,800 196
C-TEC Corp.+ 13,200 360
Cellular Communications International, Inc.+ 6,000 150
Coherent, Inc.+ 5,900 245
Comnet Cellular, Inc.+ 6,400 165
Geotek Communications, Inc.+ 21,300 80
HighwayMaster Communications, Inc.+ 10,700 118
Intercel, Inc.+ 5,700 56
Intermedia Communications, Inc.+ 6,900 136
Jacor Communications, Inc. Class A+ 14,200 399
LCI International, Inc.+ 16,200 269
Mobile Telecommunications Technologies Corp.+ 20,500 200
Natural Microsystems Corp. 3,400 71
NTL, Inc.+ 13,033 254
Octel Communications Corp. 22,800 371
P-Com, Inc. 8,500 243
Pairgain Technologies, Inc. 20,800 540
PanAmSat Corp.+ 6,500 190
Periphonics Corp. 4,700 65
PictureTel Corp. 14,600 130
Plantronics, Inc. (New)+ 3,600 151
Tel Save Holdings, Inc. 26,600 372
Vanguard Cellular Systems, Inc. Class A+ 15,950 158
Westell Technologies, Inc. 2,300 40
Winstar Communications, Inc.+ 11,300 117
-----
6,076
-----
TOBACCO--0.1%
Schweitzer Mauduit International, Inc. 6,760 221
-----
TRANSPORTATION-MISCELLANEOUS--2.2%
Air Express International Corp. 9,600 329
Airborne Freight Corp. 8,600 302
AMERCO+ 9,300 230
American Freightways Corp.+ 11,800 167
APL Ltd. 9,600 282
Arnold Industries, Inc. 10,500 155
Caliber Systems, Inc. 14,900 443
Consolidated Freightways, Inc. 19,700 584
Eagle USA Airfreight, Inc. 6,000 120
Expeditores International of Washington, Inc. 9,300 233
Fritz Companies, Inc. 15,400 132
</TABLE>
39
<PAGE> 46
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Harper Group, Inc. 7,400 $ 174
Heartland Express, Inc. 13,947 302
J. B. Hunt Transport Services, Inc. 14,350 199
OMI Corp.+ 11,400 114
Pittston Burlington Group 7,850 179
Roadway Express, Inc. 8,900 156
Rollins Truck Leasing Corp. 16,300 214
Swift Transportation Co., Inc.+ 11,300 322
U.S. Freightways Corp. 11,100 300
Wabash National Corp. 7,100 127
Werner Enterprises, Inc. 15,450 295
XTRA Corp. 6,500 287
Yellow Corp.+ 14,500 279
-----
5,925
-----
TRAVEL & RECREATION--1.6%
Anchor Gaming+ 6,600 165
Aztar Corp.+ 19,900 129
Boyd Gaming Corp.+ 23,200 133
Bristol Hotel Co.+ 7,500 283
Central Parking Corp. 8,500 234
Coleman Co., Inc. 24,300 377
Family Golf Centers, Inc.+ 4,100 84
Grand Casinos, Inc. 22,500 248
Hilton Hotels Corp. 14,800 398
K2, Inc. 8,115 212
Marcus Corp. 7,650 170
National Auto Credit, Inc. 10,650 84
Polaris Industries, Inc. 12,100 333
Primadonna Resorts, Inc.+ 11,700 219
Prime Hospitality Corp.+ 17,900 298
Rio Hotel & Casino, Inc.+ 6,900 96
Sodak Gaming, Inc. 8,600 101
Speedway Motorsports, Inc. 18,400 384
Sports Authority, Inc. 14,400 256
Station Casinos, Inc.+ 13,300 118
-----
4,322
-----
UTILITIES--4.8%
Aquila Gas Pipeline Corp. 10,000 141
Atlantic Energy, Inc. 20,900 337
Atmos Energy Corp. 6,200 140
Bay State Gas Co. 5,100 130
Black Hills Corp. 6,600 186
Central Hudson Gas & Electric Corp. 8,200 252
Central Louisiana Electric Co., Inc. 9,500 243
Central Maine Power Co. 15,600 174
CILCORP, Inc. 7,900 305
</TABLE>
40
<PAGE> 47
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
Commonwealth Energy System 8,600 $ 188
Destec Energy, Inc.+ 21,400 450
Eastern Enterprises 9,100 308
Eastern Utilities Association 7,400 127
Energen Corp. 5,800 183
Enron Global Power & Pipelines L. L. C. 8,900 263
Global Industrial Technologies, Inc.+ 7,900 144
IES Industries, Inc. 14,600 423
Indiana Energy, Inc. 11,000 267
Laclede Gas Co. 6,700 149
Madison Gas and Electric Co. 6,150 123
MDU Resources Group, Inc. 12,700 295
Minnesota Power & Light Co. 15,200 424
Nevada Power Co. 18,200 364
New Jersey Resources Corp. 8,500 245
Northwest Natural Gas Co. 9,300 226
ONEOK, Inc. 11,800 351
Orange & Rockland Utilities, Inc. 5,700 178
Otter Tail Power Co. 5,600 178
Philadelpia Suburban Corp. 9,350 187
Piedmont Natural Gas Co., Inc. 15,000 353
Primark Corp.+ 12,400 226
Public Service Co. of New Mexico 15,800 263
Public Service Co. of North Carolina, Inc. 6,700 116
Puget Sound Power & Light Co. 9,546 234
Rochester Gas & Electric Corp. 19,700 367
Sierra Pacific Resources 14,700 417
SIGCORP, Inc. 10,299 248
Southern Union Co. (New) 6,629 158
Southwest Gas Corp. 10,000 166
Southwestern Energy Co. 11,400 144
Tejas Gas Corp. 9,395 390
TNP Enterprises, Inc. 6,200 130
Triarc Companies, Inc. Class A+ 10,100 188
Trigen Energy Corp. 4,100 100
Tuscon Electric Power Co.+ 12,580 179
UGI Corp. 13,500 307
United Illuminating Co. 5,500 136
United Water Resources, Inc. 14,300 234
Washington Gas Light Co. 16,000 368
Western Gas Resources, Inc. 14,300 220
WICOR, Inc. 10,000 351
WPL Holdings, Inc. 12,400 336
</TABLE>
41
<PAGE> 48
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
April 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
--------- --------
<S> <C> <C>
WPS Resources Corp. 10,000 $ 246
Zurn Industries, Inc. 4,300 106
-------
12,964
-------
TOTAL COMMON STOCK
(Cost $235,652) 268,546
-------
CASH EQUIVALENTS--1.0%
MSTC Cash Reserve Liquid Asset Fund*
5.33%, 05/07/97 2,604 2,604
-------
TOTAL CASH EQUIVALENTS
(Cost $2,604) 2,604
-------
TOTAL INVESTMENTS--100.1% (Cost $238,256) 271,150
-------
OTHER ASSETS AND LIABILITIES--(0.1)% Other
Assets 1,228
Liabilities (1,491)
-------
(263)
-------
NET ASSETS--100.0% (see Note 7)
Applicable to 20,016,385 outstanding $0.00001
par value shares (unlimited shares
authorized) $270,887
=======
NET ASSET VALUE PER SHARE $13.53
=====
</TABLE>
- ---------------
+ Non-Income Producing Security.
* Interest rate represents the yield on report date.
See accompanying Notes to Financial Statements.
42
<PAGE> 49
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (in thousands)
Six months ended April 30, 1997 (Unaudited)
<TABLE>
<S> <C>
Investment income:
Dividends $ 1,335
Interest 66
-------
Total investment income 1,401
-------
Expenses:
Investment advisory and administration fee 591
Transfer agency and shareholder service fees 299
Custodian fees 66
Portfolio accounting fees 7
Registration fees 33
Professional fees 27
Shareholder reports 39
Trustees' fees 7
Amortization of deferred organization costs 7
Insurance and other expenses 2
-------
1,078
Less expenses reduced (see Note 4) (420)
-------
Total expenses incurred by Fund 658
-------
Net investment income 743
-------
Net realized loss on investments sold (438)
Net unrealized loss on investments (3,288)
-------
Net loss on investments (3,726)
-------
Decrease in net assets resulting from operations $(2,983)
=======
</TABLE>
See accompanying Notes to Financial Statements.
43
<PAGE> 50
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Six months
ended
April 30, Year ended
1997 October 31,
(Unaudited) 1996
-------------- ----------------
<S> <C> <C>
Operations:
Net investment income $ 743 $ 968
Net realized loss on investments sold (438) (647)
Net unrealized gain (loss) on investments (3,288) 22,556
-------- --------
Increase (Decrease) in net assets resulting from
operations (2,983) 22,877
-------- --------
Dividends to shareholders from net investment income (998) (673)
-------- --------
Capital share transactions:
Proceeds from shares sold 99,998 106,790
Net asset value of shares issued in reinvestment of
dividends 901 604
Early withdrawal fees 34 61
Less payments for shares redeemed (35,190) (42,608)
-------- --------
Increase in net assets from capital share
transactions 65,743 64,847
-------- --------
Total increase in net assets 61,762 87,051
Net assets:
Beginning of period 209,125 122,074
-------- --------
End of period (including undistributed net
investment income of $524 and $779, respectively) $270,887 $209,125
======== ========
Number of Fund shares:
Sold 7,052 8,182
Reinvested 64 49
Redeemed (2,492) (3,271)
-------- --------
Net increase in shares outstanding 4,624 4,960
Shares outstanding:
Beginning of period 15,392 10,432
-------- --------
End of period 20,016 15,392
======== ========
</TABLE>
See accompanying Notes to Financial Statements.
44
<PAGE> 51
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Six months ended April 30, 1997 (Unaudited)
1. DESCRIPTION OF THE FUND
The Schwab Small-Cap Index Fund(R) (the "Fund") is a series of Schwab Capital
Trust (the "Trust"), a no-load, open-end, investment management company
organized as a Massachusetts business trust on May 7, 1993 and registered under
the Investment Company Act of 1940, as amended.
In addition to the Fund, the Trust also offers the Schwab International Index
Fund(R), Schwab Asset Director(R) -- High Growth Fund, Schwab Asset
Director -- Balanced Growth Fund, Schwab Asset Director -- Conservative Growth
Fund, Schwab S&P 500 Fund, Schwab Analytics Fund(TM), Schwab OneSource
Portfolios -- International, Schwab OneSource Portfolios -- Growth Allocation
and Schwab OneSource Portfolios -- Balanced Allocation. The assets of each
series are segregated and accounted for separately.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security valuation -- Investments in securities traded on an exchange and
unlisted securities are valued at the last quoted sale price for a given day, or
if a sale is not reported for that day, at the mean between the most recent
quoted bid and asked prices. Securities for which no quotations are readily
available are valued at fair value as determined by the 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 accrued on a daily basis.
45
<PAGE> 52
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
Repurchase agreements -- Repurchase agreements are fully collateralized by U.S.
Treasury or government agency securities. All collateral is held by the Fund's
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
Deferred organization costs -- Costs incurred in connection with the
organization of the Fund are amortized on a straight-line basis over a five-year
period from the Fund's commencement of operations.
Expenses -- Expenses arising in connection with the Fund are charged directly to
the Fund. Expenses common to all series of the Trust are generally allocated to
each series in proportion to their relative net assets.
Federal income taxes -- It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all net investment income and realized net capital gains, if any, to
shareholders. Therefore, no federal income tax provision is required. The Fund
is considered a separate entity for tax purposes.
At April 30, 1997 (for financial reporting and federal income tax purposes), net
unrealized gain aggregated $32,894,000, of which $52,583,000 related to
appreciated securities and $19,689,000 related to depreciated securities.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreement -- The Trust has an investment
advisory and administration agreement with Charles Schwab Investment Management,
Inc. (the "Investment Manager"). For advisory services and facilities furnished,
the Fund pays an annual fee, payable monthly, of 0.50% of the first $300 million
of average daily net assets and 0.45% of such assets over $300 million. The
Investment Manager has reduced a portion of its fee for the six months ended
April 30, 1997 (see Note 4).
Transfer agency and shareholder service agreements -- The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of 0.05% of the average daily net assets for
transfer agency services and 0.20% of such assets for shareholder services.
Schwab has reduced a portion of its fee for the six months ended April 30, 1997
(see Note 4).
46
<PAGE> 53
- ------------------------------------------------------------------------------
Officers and trustees -- Certain officers and trustees of the Trust are also
officers and/or directors of the Investment Manager and/or Schwab. During the
six months ended April 30, 1997, the 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 Fund incurred fees of $7,000
related to the Trust's unaffiliated trustees.
Other affiliate parties and transactions -- As of April 30, 1997, 9%, 6% and 1%
of the outstanding shares of the Fund were owned by Schwab Asset Director(R)-
High Growth Fund, Schwab Asset Director(R)-Balanced Growth Fund, Schwab Asset
Director(R)-Conservative Growth Fund, respectively.
Interfund transactions -- During the period ended April 30, 1997, the Fund
engaged in purchase transactions with funds that have a common investment
advisor, common trustees, and common officers. These purchase transactions, made
at current market value pursuant to Rule 17a-7 under the Act, were $32,564,000.
4. EXPENSES REDUCED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab reduced a portion of their fees in order to
limit the Fund's ratio of operating expenses to average net assets. For the six
months ended April 30, 1997, the total of such fees reduced by the Investment
Manager and Schwab was $314,000 and $106,000, respectively (see Note 8).
5. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, other than short-term obligations,
aggregated (in thousands) $103,850 and $39,509, respectively, for the six months
ended April 30, 1997.
6. EARLY WITHDRAWAL FEES PAID TO THE FUND
The Fund assesses a 0.50% early withdrawal fee on redemption proceeds
attributable to shares purchased and held less than six months. The early
withdrawal fee is retained by the Fund and is treated as a contribution to
capital. For the six months ended April 30, 1997, total early withdrawal fees
retained by the Fund amounted to $34,000.
47
<PAGE> 54
SCHWAB SMALL-CAP INDEX FUND(R)
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
7. COMPOSITION OF NET ASSETS
At April 30, 1997, net assets consisted of (in thousands):
<TABLE>
<S> <C>
Paid-in-capital $238,791
Undistributed net investment income 524
Accumulated net realized loss on investments sold and
foreign currency transactions (1,322)
Net unrealized gain on investments 32,894
--------
Total $270,887
========
</TABLE>
At April 30, 1997, the Fund's Statement of Net Assets included: $1,009,000
payable for investments purchased, $348,000 payable for Fund shares redeemed,
$10,000 payable for investment advisory and administration fee, $912,000
receivable for investments sold and $92,000 receivable for Fund shares sold.
48
<PAGE> 55
- ------------------------------------------------------------------------------
8. FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Six months
ended
April 30, Year ended Period ended
1997 October 31, October 31,
(Unaudited) 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 0.04 0.07 0.10 0.06
Net realized and unrealized gain (loss)
on investments (0.04) 1.88 1.61 --
-------- -------- -------- --------
Total from investment operations -- 1.95 1.71 0.06
Less distributions
- ------------
Dividends from net investment income (0.06) (0.06) (0.06) (0.01)
Distributions from realized gain on
investments -- -- -- --
-------- -------- -------- --------
Total distributions (0.06) (0.06) (0.06) (0.01)
-------- -------- -------- --------
Net asset value at end of period $ 13.53 $ 13.59 $ 11.70 $ 10.05
======== ======== ======== ========
Total return (not annualized) (0.01)% 16.73% 17.11% 0.63%
- --------
Ratios/Supplemental data
- ------------------
Net assets, end of period (000s) $270,887 $209,125 $122,074 $ 68,128
Ratio of expenses to average net assets+ 0.55%* 0.59% 0.68% 0.67%*
Ratio of net investment income to
average net assets+ 0.62%* 0.56% 0.68% 0.68%*
Portfolio turnover rate 16% 23% 24% 16%
Average commission rate $ 0.03 $ 0.03 -- --
</TABLE>
- ---------------
+ The information contained in the above table is based on actual expenses for
the periods, 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>
Ratio of expenses to average net assets 0.90%* 0.94% 1.02% 1.19%*
Ratio of net investment income to
average
net assets 0.27%* 0.21% 0.34% 0.16%*
</TABLE>
* Annualized
** For the period from December 3, 1993 (commencement of operations) to October
31, 1994.
49
<PAGE> 56
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 57
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 58
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE> 59
SCHWABFUNDS FAMILY(R)
The SchwabFunds Family includes a variety of funds to help meet your investment
needs. You can diversify your portfolio in a single step with our asset
allocation funds. Or you can customize your portfolio with a combination of our
stock funds as well as our taxable and tax-advantaged bond and money funds.
SCHWAB ASSET ALLOCATION FUNDS
Schwab Asset Director(R) -- High Growth Fund
Schwab Asset Director -- Balanced Growth Fund
Schwab Asset Director -- Conservative Growth Fund
Schwab OneSource Portfolios -- Growth Allocation
Schwab OneSource Portfolios -- Balanced Allocation
SCHWAB STOCK FUNDS
Schwab 1000 Fund(R)
Schwab S&P 500 Fund
Schwab Analytics Fund(TM)
Schwab Small-Cap Index Fund(R)
Schwab International Index Fund(R)
Schwab OneSource Portfolios -- International
SCHWAB BOND FUNDS
Schwab Government Bond Funds -- Long-Term and Short/Intermediate
Schwab Tax-Free Bond Funds -- Long-Term and Short/Intermediate
Schwab California Tax-Free Bond Funds -- Long-Term and Short/Intermediate
SCHWAB MONEY MARKET FUNDS
Schwab offers an array of money market funds* that seek high current income with
safety and liquidity. Choose from taxable or tax-advantaged alternatives. Many
can be linked to your Schwab account to "sweep" cash balances automatically when
you're between investments. Or, for your larger cash reserves, choose one of our
Value Advantage Investments(R).
Please call 1-800-2 NO-LOAD for a free prospectus and brochure for any of the
SchwabFunds(R).
Each prospectus provides more complete information, including charges and
expenses. Please read it carefully before investing.
This report must be preceded or accompanied by a current prospectus.
*Investments in money market funds are neither insured nor guaranteed by the
U.S. government, and there is no assurance that the funds will be able to
maintain a stable share price of $1.
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BULK RATE
U.S. POSTAGE
PAID
CHARLES SCHWAB
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SCHWABFUNDS
FAMILY(R)
101 Montgomery Street
San Francisco, California 94104
INVESTMENT ADVISOR
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc.
101 Montgomery Street, San Francisco, CA 94104
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
(C)1997 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
TF4729R(5/97) CRS 20064 Printed on recycled paper.
