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Previous: SCHWAB CAPITAL TRUST, N-30D, 1998-06-29 |
Next: NEUBERGER & BERMAN INCOME TRUST, N-30D, 1998-06-29 |
<PAGE>
SCHWABFUNDS-R-
SCHWAB MARKETTRACK
PORTFOLIOS-TM-
(formerly the
Schwab Asset Director-R- Funds)
/ / GROWTH
/ / BALANCED
/ / CONSERVATIVE
Semiannual Report
April 30, 1998
<PAGE>
SCHWAB MARKETTRACK PORTFOLIOS-TM-
We are pleased to bring you this semiannual report for the Schwab MarketTrack
Portfolios (the Portfolios) for the six-month period ended April 30, 1998. Note
that these funds were formerly known as the Schwab Asset Director-Registered
Trademark- Funds. In this report you will find performance statistics and other
useful information for the following three Portfolios:
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Each of the Portfolios provides an easy, convenient way to diversify your
investment among major asset categories--stocks, bonds and cash equivalents.
Through a single investment, you may benefit from asset allocation, an investing
strategy designed to achieve an optimal balance between risk and return. In
fact, a frequently cited research study has shown that one of the greatest
impacts on investment returns may be due to the asset allocation decision (the
mix of stocks, bonds and cash equivalents) rather than market timing or
individual stock selection.
The primary difference among the three Schwab MarketTrack Portfolios covered in
this report is the proportion of each that is invested in stocks. Each Portfolio
targets a different mix of investments, as described more fully on the following
pages, and employs an index-based approach to capturing the returns inherent in
the asset categories by investing primarily in Schwab index funds.
CONTENTS
<TABLE>
<S> <C>
- ------------------------------------------------
A Message from the Chairman 1
- ------------------------------------------------
What Every Investor Should Know 2
- ------------------------------------------------
Market Overview 4
- ------------------------------------------------
Portfolio Performance 8
- ------------------------------------------------
Portfolio Summary 9
- ------------------------------------------------
Portfolio Management 12
- ------------------------------------------------
Portfolio Discussion 13
- ------------------------------------------------
Statement of Net Assets 18
- ------------------------------------------------
Financial Statements 43
- ------------------------------------------------
Notes to Financial Statements 48
- ------------------------------------------------
</TABLE>
FUND LISTINGS
The Portfolios are listed in THE WALL STREET JOURNAL, USA TODAY, INVESTOR'S
BUSINESS DAILY and most local newspapers as follows under the heading
SCHWABFUNDS-Registered Trademark-:
<TABLE>
<CAPTION>
NEWSPAPER LISTING SYMBOL
<S> <C>
MT Gro SWHGX
MT Bal SWBGX
MT Cons SWCGX
</TABLE>
WHY THE NAME CHANGE?
If you've been invested in any of these funds for a while, you used to know
them as the Schwab Asset Director Funds. We recently changed their name to
better reflect their investing strategies. In fact, the change was a result of
feedback we received from you, our investors. We think the new name, SCHWAB
MARKETTRACK PORTFOLIOS, is clearer and better reflects the indexing strategy
of the Portfolios.
<PAGE>
A MESSAGE FROM THE CHAIRMAN
Dear Shareholder,
The U.S. stock market rallied strongly over most of the six-month period ended
April 30, 1998. So did many European markets. Despite investors' concerns about
Asia's financial crisis last autumn, economic conditions continued to provide a
solid underpinning for U.S. business activity. Once again, blue chips led the
rally, though many smaller-cap stocks posted very solid gains in absolute terms.
You'll find more insight about the overall market beginning on page 4.
[PHOTO]
As pleased as we are with the performance of our Funds during
this period, we want to be realistic. Over most of this
century, for example, the U.S. stock market has returned an
average of 11% to 12% PER YEAR, not per quarter. We encourage
investors to keep that in mind should the market revert to its historical
pattern of more-moderate performance.
Our philosophy has always been that REGULAR INVESTING, regardless of short-term
market trends, is the best strategy over the long term. By investing in one of
our SchwabFunds-Registered Trademark-, you've already taken an important step in
building a portfolio that can help you meet your future goals. On the following
pages, we outline several ways to help ensure that you reach those goals by
establishing--or maintaining--an ongoing investment program.
NEW INVESTMENT OPPORTUNITIES TO CONSIDER
We are proud to introduce a new addition to our family of Funds: THE SCHWAB
MARKETTRACK ALL EQUITY PORTFOLIO. (SCHWAB MARKETTRACK PORTFOLIOS-TM- is the new
name of Schwab's Asset Director-Registered Trademark- Funds.) This Portfolio,
which targets 100% equity investing, can provide you with diversified exposure
to three different areas of the stock market: U.S. large-company, U.S.
small-company and international stocks. We also offer three other MarketTrack
Portfolios: Growth, Balanced and Conservative. Each invests a different
proportion of its assets in bonds and cash in addition to stocks.
For additional information and a free prospectus on the Schwab MarketTrack
Portfolios or any of our SchwabFunds, please call us toll free at
1-800-435-4000. Each prospectus contains more-complete information on our Funds,
including their fees and expenses; please read the prospectus carefully before
you invest.
The support of investors like you has helped Charles Schwab Investment
Management, Inc. (CSIM) become one of the largest and fastest-growing mutual
fund families in the nation. CSIM now manages more than $63 billion in assets on
behalf of more than 3.3 million SchwabFunds shareholders. We offer a full
spectrum of 34 mutual funds for investors with varying financial situations and
goals.
Once again, thank you for your investment in SchwabFunds. We continue to do
everything we can to warrant the trust you have placed in us.
Sincerely,
/s/ Charles R. Schwab
Charles R. Schwab
April 30, 1998
1
<PAGE>
WHAT EVERY INVESTOR SHOULD KNOW
WHY ASSET ALLOCATION MATTERS
As most investors know, one of the most compelling reasons to invest in a mutual
fund is diversification. By allocating your assets across many different
securities, a fund helps reduce the risk that you might otherwise encounter by
owning just a few stocks or bonds.
Don't forget, however, that diversification across your portfolio can be just as
important as diversification within one of the mutual funds you own. As you
probably know, stocks have historically offered much higher returns over the
long term than bonds, cash or other asset classes, but those returns have come
at the price of higher volatility. To help mitigate some of that risk, many
investors often include at least some bonds and cash in their portfolios. They
also diversify their equity exposure across different market segments--such as
U.S. large-cap, U.S. small-cap and international, which have tended to move with
less than perfect correlation over time. In short, allocating assets across
market segments may help reduce your overall portfolio risk.
THE SCHWAB APPROACH
TO INVESTING
- START WITH THE BASICS FOR
LONG-TERM INVESTING.
- GET STARTED NOW!
- KNOW YOURSELF.
- INVEST IN THE STOCK MARKET
FOR GROWTH.
- TAKE A LONG-TERM VIEW.
- BUILD A DIVERSIFIED PORTFOLIO.
- CONSIDER BONDS AND CASH FOR
DIVERSIFICATION AND INCOME.
- MINIMIZE YOUR EXPENSES.
- STAY ON TRACK.
- BECOME A LIFELONG INVESTOR.
Asset allocation can sound simple in theory, but most individual investors find
it difficult to put into practice. Few of us have the time or resources to keep
track of the market and maintain balanced exposure across asset classes. For
example, if stocks perform especially well during a certain period, your equity
exposure may grow to take up a bigger share of your portfolio than you're
comfortable with.
That's why it makes a lot of sense to "automate" your asset allocation
decisions. Schwab has developed a broad spectrum of portfolio solutions that
make it convenient for you to apply this time-tested investment strategy. If
you'd like more information, please call us at 1-800-435-4000, access our Web
site at WWW.SCHWAB.COM/SCHWABFUNDS or visit the Schwab branch nearest you.
REGULAR-INVESTING STRATEGIES
Another way to help dampen the effects of short-term market volatility is to
invest the same amount of money on a regular basis. With this investment
strategy, known as DOLLAR-COST AVERAGING, you automatically buy more shares when
stock or bond prices are low and fewer when they're high.
A hypothetical example can help illustrate this concept. Let's say you invest
$400 on a monthly basis in a single mutual fund, as shown in the illustration
below. Because of fluctuating prices, your per-share purchase price varies
monthly. A simple average of your five purchase prices would yield $8.20 per
share; however, your AVERAGE COST BASIS (your total investment divided by the
number of shares actually purchased) would be significantly lower--by more than
$0.50 per share. The net result in this example is that your average cost per
share is reduced and you'd have purchased more shares than you would have had
you paid the average share price over the five-month period.
<TABLE>
<CAPTION>
No. of
Fixed Shares
Investment Share Price Purchased
<S> <C> <C> <C>
- -------------------------------------------------------------
Month 1 $400 $10 40
- -------------------------------------------------------------
Month 2 $400 $8 50
- -------------------------------------------------------------
Month 3 $400 $5 80
- -------------------------------------------------------------
Month 4 $400 $8 50
- -------------------------------------------------------------
Month 5 $400 $10 40
- -------------------------------------------------------------
Totals: $2,000 $41 260
AVERAGE SHARE PRICE ($41 DIVIDED BY 5 periods): $8.20
YOUR AVERAGE COST BASIS
($2,000 DIVIDED BY 260 shares): $7.69
PER-SHARE ADVANTAGE: $0.51
</TABLE>
This example is for illustrative purposes only and is not intended to predict or
guarantee the performance of any particular fund available through Schwab.
2
<PAGE>
(Of course, in this example, hindsight shows you that your best move would have
been to invest your entire $2,000 in Month 3 when the share price was at a low
of $5--but it's unlikely that you would have been able to predict that.)
In addition to reducing your per-share costs over time, dollar-cost averaging
provides you another benefit: the discipline of investing regularly. You're more
likely to maintain a regular investment plan if it's automatic: not only do you
not have to even think about it, but you minimize any propensity to skip an
investment in favor of some other expenditure. To encourage this discipline,
Schwab offers you two convenient, no-cost ways to begin or maintain a program of
regular investing:
Schwab's AUTOMATIC INVESTMENT PLAN (AIP) allows you to automatically
purchase--on a regular basis--additional shares in mutual funds that you already
own. For amounts as little as $100 per month, you can use the cash or sweep
shares of your existing Schwab Money Fund,(1) or you can enroll in Schwab's free
MONEYLINK TRANSFER SERVICE to automatically transfer money to your Schwab
account.
With MONEYLINK TRANSFER SERVICE-Registered Trademark-, you can arrange to
regularly and automatically transfer $50 or more from your bank account, payroll
or government check into your Schwab account. It's a great way to build your
investment over time.(2)
Please be aware that these programs--and dollar-cost averaging in general--do
not ensure a profit or protect against a loss, and investors should know that
markets fall as well as rise. Over the long term, however, dollar-cost averaging
may help to smooth out volatility caused by short-term market trends. For more
information about these programs, please call us at 1-800-435-4000.
WE MAKE IT EASY TO INVEST
We try to make it easy and convenient for you to invest in our
SchwabFunds-Registered Trademark-. In addition to our automated methods, you can
also invest in person at any of our nationwide branches, through our Web site at
WWW.SCHWAB.COM and through our automated touch-tone telephone service,
TELEBROKER,-Registered Trademark- by calling 1-800-272-4922.
(1)Includes uninvested cash and margin cash available. If sufficient cash is not
available, your automatic purchases will not be made.
(2)The terms of your specific Schwab account will dictate when your Schwab
MoneyLink transfers are swept into a money market fund and begin earning
money market dividend income.
KEEPING YOU INFORMED
One of our top priorities at Charles Schwab is to keep
you informed about your investments and potential
opportunities in the marketplace. A wealth of
information about our investment philosophy and
Funds, as well as the market and economic
environment, can be found at our Web site:
WWW.SCHWAB.COM/SCHWABFUNDS.
In addition, market commentaries and monthly
Portfolio updates are available by calling our
toll-free Shareholder Information Line at
1-888-9 NO-LOAD.
3
<PAGE>
MARKET OVERVIEW
U.S. GROWTH RATE
U.S. GROSS DOMESTIC PRODUCT (GDP) grew at a strong real rate of 3.8% in 1997 and
4.2% in the first quarter of 1998--well in excess of the Federal Reserve's
estimated noninflationary growth rate of 2.0% to 2.75%.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
REAL GDP GROWTH RATE
QUARTERLY PERCENTAGE CHANGE (ANNUALIZED
RATE)
<S> <C>
Q1 1990 3.90%
Q2 1990 1.20%
Q3 1990 -1.90%
Q4 1990 -4.00%
Q1 1991 -2.10%
Q2 1991 1.80%
Q3 1991 1.00%
Q4 1991 1.00%
Q1 1992 4.70%
Q2 1992 2.50%
Q3 1992 3.00%
Q4 1992 4.30%
Q1 1993 0.10%
Q2 1993 2.00%
Q3 1993 2.10%
Q4 1993 5.30%
Q1 1994 3.00%
Q2 1994 4.70%
Q3 1994 1.80%
Q4 1994 3.60%
Q1 1995 0.90%
Q2 1995 0.30%
Q3 1995 3.00%
Q4 1995 2.20%
Q1 1996 1.80%
Q2 1996 6.00%
Q3 1996 1.00%
Q4 1996 4.30%
Q1 1997 4.90%
Q2 1997 3.30%
Q3 1997 3.10%
Q4 1997 3.70%
Q1 1998 4.20%
SOURCE: BLOOMBERG L.P.
</TABLE>
At the time of this writing, THE U.S. ECONOMY APPEARS POISED FOR CONTINUED
GROWTH, further extending the current economic expansion that began in 1991.
Many economists expect Asia's economic problems to reduce 1998 U.S. GDP growth
by only a relatively minor 0.25 to 1.0 percentage point.
PRIOR TO THE FOURTH-QUARTER ONSET OF THE "ASIAN FLU," the U.S. economy's
strength and tight labor markets led investors to speculate about whether wage
and price inflation were accelerating. Some investors also believed that the
Federal Reserve was on the verge of raising interest rates to head off a
potential acceleration in both wage and price inflation. As Federal Reserve
Chairman Alan Greenspan said in his February congressional testimony, "The key
question going forward is whether the restraint building from the turmoil in
Asia will be sufficient to check inflationary tendencies that might otherwise
result from the strength of domestic spending and tightening labor markets." At
the moment, many economists believe that Federal Reserve policy-makers are now
more inclined to raise interest rates than they have been in the past, but are
refraining from doing so because inflation remains tame and Asia's continuing
problems may dampen both global and domestic growth.
UNEMPLOYMENT
JOB GROWTH IN THE UNITED STATES HAS REMAINED ROBUST. In fact, the U.S.
unemployment rate reached 4.3% in April--the lowest level in 28 years.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
U.S. UNEMPLOYMENT RATE
<S> <C>
Jan-90 5.40%
Feb-90 5.30%
Mar-90 5.20%
Apr-90 5.40%
May-90 5.40%
Jun-90 5.20%
Jul-90 5.50%
Aug-90 5.70%
Sep-90 5.90%
Oct-90 5.90%
Nov-90 6.20%
Dec-90 6.30%
Jan-91 6.40%
Feb-91 6.60%
Mar-91 6.80%
Apr-91 6.70%
May-91 6.90%
Jun-91 6.90%
Jul-91 6.80%
Aug-91 6.90%
Sep-91 6.90%
Oct-91 7.00%
Nov-91 7.00%
Dec-91 7.30%
Jan-92 7.30%
Feb-92 7.40%
Mar-92 7.40%
Apr-92 7.40%
May-92 7.60%
Jun-92 7.80%
Jul-92 7.70%
Aug-92 7.60%
Sep-92 7.60%
Oct-92 7.30%
Nov-92 7.40%
Dec-92 7.40%
Jan-93 7.30%
Feb-93 7.10%
Mar-93 7.00%
Apr-93 7.10%
May-93 7.10%
Jun-93 7.00%
Jul-93 6.90%
Aug-93 6.80%
Sep-93 6.70%
Oct-93 6.80%
Nov-93 6.60%
Dec-93 6.50%
Jan-94 6.60%
Feb-94 6.60%
Mar-94 6.50%
Apr-94 6.40%
May-94 6.00%
Jun-94 6.10%
Jul-94 6.10%
Aug-94 6.10%
Sep-94 5.90%
Oct-94 5.80%
Nov-94 5.60%
Dec-94 5.40%
Jan-95 5.60%
Feb-95 5.40%
Mar-95 5.40%
Apr-95 5.70%
May-95 5.60%
Jun-95 5.60%
Jul-95 5.70%
Aug-95 5.70%
Sep-95 5.70%
Oct-95 5.60%
Nov-95 5.60%
Dec-95 5.60%
Jan-96 5.70%
Feb-96 5.50%
Mar-96 5.50%
Apr-96 5.50%
May-96 5.50%
Jun-96 5.30%
Jul-96 5.50%
Aug-96 5.20%
Sep-96 5.20%
Oct-96 5.30%
Nov-96 5.40%
Dec-96 5.30%
Jan-97 5.30%
Feb-97 5.30%
Mar-97 5.20%
Apr-97 5.00%
May-97 4.80%
Jun-97 5.00%
Jul-97 4.90%
Aug-97 4.90%
Sep-97 4.90%
Oct-97 4.80%
Nov-97 4.60%
Dec-97 4.70%
Jan-98 4.70%
Feb-98 4.60%
Mar-98 4.70%
Apr-98 4.30%
SOURCE: BLOOMBERG L.P.
</TABLE>
ALTHOUGH INFLATION HAS BEEN WELL CONTAINED, the combination of a tight labor
market (as evidenced by low unemployment rates) and strong economic growth
typically leads to inflationary pressures on wages and, ultimately, prices. In
this environment, productivity growth becomes particularly important.
4
<PAGE>
Strong productivity gains, such as those achieved in
1997, allow manufacturers and other businesses to limit price increases in the
face of rising wages, without sacrificing profit margins.
INFLATION
BOTH THE EMPLOYMENT COST INDEX (ECI) AND CONSUMER PRICE INDEX (CPI) REMAINED IN
CHECK throughout 1997 and the first quarter of 1998, reflecting continued low
inflation.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURES OF INFLATION
MONTHLY CONSUMER QUARTERLY EMPLOYMENT
PRICE INDEX COST INDEX
<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% 2.8%
May-97 2.2% 2.8%
Jun-97 2.3% 2.8%
Jul-97 2.2% 3.0%
Aug-97 2.2% 3.0%
Sep-97 2.2% 3.0%
Oct-97 2.1% 3.2%
Nov-97 1.8% 3.2%
Dec-97 1.7% 3.2%
Jan-98 1.6% 3.3%
Feb-98 1.4% 3.3%
Mar-98 1.4% 3.3%
Apr-98 1.4%
SOURCE: BLOOMBERG L.P.
</TABLE>
THE CPI ROSE just 1.4% over the year ended April 1998--the lowest rate of
increase since 1986. Its core rate (which excludes the more volatile food and
energy components) rose 2.1%--the lowest rate of increase since 1965. Investors
were somewhat more concerned about the ECI, and its wages and salaries component
in particular. That segment of the ECI increased 3.7% during the year ended
April 1998.
EVEN THOUGH CURRENT LEVELS OF INFLATION ARE VERY LOW, Federal Reserve
policy-makers have indicated that they believe the risk of inflation is
increasing, and they are poised to act preemptively by raising interest rates if
they believe that is necessary. The Federal Reserve did raise interest rates in
March 1997, increasing the federal funds rate by 0.25 percentage point to 5.5%.
By the end of April, many economists believed that Federal Reserve policy-makers
were once again inclined to raise interest rates, but there was a lack of
consensus about when the Federal Reserve would raise interest rates, if in fact
it would, and by how much.
TOTAL-RETURN PERFORMANCE
MOST U.S. STOCKS posted strong total returns from November 1, 1997, through
April 30, 1998. Large-caps continued to outperform small-caps, as reflected in
the 22.5% return of the S&P 500-Registered Trademark- Index versus the 13.4%
return of the Schwab Small-Cap Index-Registered Trademark- over the period.
Amazingly, the S&P 500 Index posted its thirteenth consecutive quarterly gain
during the first quarter of 1998 and posted an incredible return of 41% for the
12-month period ended April 1998.
INTERNATIONAL STOCKS, as represented by the Schwab International
Index-Registered Trademark-, gained 15.2% over the six-month period, primarily
on the strength of European markets.
FIXED-INCOME RETURNS were more in line with long-term expectations during the
reporting period. Bond returns, as represented by the Lehman Brothers Aggregate
Bond Index, were 3.6% over the six-month reporting period.
5
<PAGE>
MARKET OVERVIEW (continued)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL-RETURN PERFORMANCE
VALUE OF A HYPOTHETICAL
$1 INVESTMENT
SCHWAB SCHWAB LEHMAN BROTHERS
S&P 500 SMALL CAP INTERNATIONAL AGGREGATE
INDEX-R- INDEX-R- INDEX-R- BOND INDEX
<S> <C> <C> <C> <C>
Oct-97 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Nov-97 $ 1.046 $ 0.991 $ 0.996 $ 1.005
Dec-97 $ 1.064 $ 1.012 $ 1.010 $ 1.015
Jan-98 $ 1.076 $ 0.996 $ 1.051 $ 1.028
Feb-98 $ 1.154 $ 1.078 $ 1.115 $ 1.027
Mar-98 $ 1.213 $ 1.127 $ 1.144 $ 1.030
Apr-98 $ 1.225 $ 1.134 $ 1.151 $ 1.036
</TABLE>
TOTAL RETURN ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. The indices
are intended to represent the returns of specific market sectors during the
funds' six-month reporting period and do not reflect the performance of any
fund. Indices are unmanaged and, unlike a fund, do not reflect the payment of
advisory fees and other expenses associated with an investment in a fund.
Investors cannot invest in an index directly.
S&P 500 PRICE/EARNINGS RATIO
THE PRICE/EARNINGS RATIO for the S&P 500 Index reached its highest value ever
during the reporting period: It stood at 26.5 at the close of the reporting
period, well above its 30-year average of 14.8. The price/earnings ratio, also
known as a multiple, is the price of a stock divided by its earnings per share
and generally indicates how much investors are willing to pay for a company's
earning potential.
Based on other traditional market valuation measures such as the price-to-book
value ratio or dividend yield, the U.S. stock market, as measured by the S&P 500
Index, also reached historic highs during the reporting period.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P 500 INDEX PRICE/EARNINGS
RATIO
<S> <C>
Jan-90 14.37
Feb-90 14.21
Mar-90 14.77
Apr-90 14.82
May-90 15.84
Jun-90 16.66
Jul-90 16.65
Aug-90 15.57
Sep-90 14.9
Oct-90 14.36
Nov-90 14.59
Dec-90 15.19
Jan-91 14.95
Feb-91 16.82
Mar-91 17.48
Apr-91 17.85
May-91 17.92
Jun-91 17.96
Jul-91 18.07
Aug-91 19.72
Sep-91 19.88
Oct-91 19.92
Nov-91 21.02
Dec-91 21.85
Jan-92 23.35
Feb-92 23.83
Mar-92 25.45
Apr-92 25.51
May-92 25.71
Jun-92 25.08
Jul-92 25.61
Aug-92 25.5
Sep-92 24.37
Oct-92 23.94
Nov-92 24.08
Dec-92 24.01
Jan-93 24.2
Feb-93 24.25
Mar-93 24.22
Apr-93 23.2
May-93 23.21
Jun-93 22.58
Jul-93 22.52
Aug-93 23.02
Sep-93 23.74
Oct-93 23.97
Nov-93 22.55
Dec-93 23.55
Jan-94 22.98
Feb-94 21.17
Mar-94 20.34
Apr-94 20.1
May-94 20.16
Jun-94 19.76
Jul-94 18.64
Aug-94 18.9
Sep-94 18.26
Oct-94 17.55
Nov-94 16.58
Dec-94 16.98
Jan-95 16.23
Feb-95 16.2
Mar-95 16.5
Apr-95 16.02
May-95 16.43
Jun-95 16.82
Jul-95 16.55
Aug-95 16.18
Sep-95 16.86
Oct-95 16.18
Nov-95 17.14
Dec-95 17.41
Jan-96 18.11
Feb-96 18.56
Mar-96 18.94
Apr-96 19.16
May-96 19.48
Jun-96 19.3
Jul-96 18.31
Aug-96 18.62
Sep-96 19.75
Oct-96 19.6
Nov-96 21.05
Dec-96 20.7
Jan-97 20.55
Feb-97 20.98
Mar-97 19.87
Apr-97 20.24
May-97 21.43
Jun-97 22.45
Jul-97 23.92
Aug-97 22.64
Sep-97 24
Oct-97 22.84
Nov-97 24.02
Dec-97 24.51
Jan-98 24.99
Feb-98 26.44
Mar-98 27.76
Apr-98 26.51
SOURCE: BLOOMBERG L.P.
</TABLE>
THE PRIMARY FACTORS DRIVING THESE HISTORIC EQUITY VALUATIONS have been low
inflation, low interest rates, healthy corporate earnings expectations, a
decline in the amount of equities outstanding (due to merger activity and share
buybacks) and high levels of consumer optimism. Changes in any of these factors
could have a negative impact on these lofty market valuations.
INTERNATIONAL PERFORMANCE
MOST EUROPEAN EQUITY MARKETS were strong during the six months ended April 30,
1998, with the highest returns in Spain, Italy, Finland and Ireland. In
contrast, many Asian markets declined sharply over the period; the weakest were
Malaysia, New Zealand, Hong Kong and Japan.
6
<PAGE>
THE MSCI-EAFE-REGISTERED TRADEMARK- INDEX gained 15.4% in U.S. dollar terms
(excluding reinvested dividends) during the six-month reporting period. In
local-currency terms, it gained 20.3%, reflecting the relative strength of the
U.S. dollar versus most foreign currencies during the period.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI-EAFE COUNTRY $US RETURN
FOR THE SIX-MONTH PERIOD ENDED
4/30/98
<S> <C>
Spain 53.43%
Italy 45.80%
Finland 41.53%
Ireland 36.58%
France 35.45%
Germany 30.00%
Belgium 28.67%
Switzerland 25.35%
Austria 25.29%
Sweden 23.87%
United Kingdom 21.78%
Denmark 20.19%
Netherlands 19.67%
Australia 6.71%
Norway -1.53%
Singapore -4.02%
Japan -10.39%
Hong Kong -11.63%
New Zealand -11.93%
Malaysia -15.19%
SOURCE: DATASTREAM
</TABLE>
NOTE: This market overview has been provided by the Portfolio Management team.
7
<PAGE>
SCHWAB MARKETTRACK PORTFOLIOS
PORTFOLIO PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 4/30/98
<TABLE>
<CAPTION>
Since Inception
Six Months One Year (11/20/95)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
SCHWAB MARKETTRACK GROWTH PORTFOLIO(1) 14.39% 31.63% 20.68%
- ---------------------------------------------------------------------------------------------
SCHWAB MARKETTRACK BALANCED PORTFOLIO(1) 11.30% 25.71% 16.73%
- ---------------------------------------------------------------------------------------------
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(1) 8.27% 20.33% 12.98%
- ---------------------------------------------------------------------------------------------
S&P 500-Registered Trademark- Index 22.47% 41.04% 31.16%
- ---------------------------------------------------------------------------------------------
Lehman Aggregate Bond Index 3.58% 10.92% 7.19%
- ---------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 3/31/98
<TABLE>
<CAPTION>
Since Inception
Six Months One Year (11/20/95)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
SCHWAB MARKETTRACK GROWTH PORTFOLIO(1) 10.05% 34.61% 21.12%
- ---------------------------------------------------------------------------------------------
SCHWAB MARKETTRACK BALANCED PORTFOLIO(1) 8.45% 28.14% 17.07%
- ---------------------------------------------------------------------------------------------
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(1) 7.01% 22.37% 13.23%
- ---------------------------------------------------------------------------------------------
</TABLE>
(1)The Investment Manager and Schwab have voluntarily guaranteed that total
expenses of each Fund, including the expenses indirectly incurred through
investment in underlying SchwabFunds-Registered Trademark-, will not exceed
0.84% of each Fund's average daily net assets through at least 2/28/99.
Without fee waivers and guarantees, as of 4/30/98, the six-month, one-year
and average annual since-inception total returns would have been 14.13%,
30.46% and 19.84%, respectively, for the Growth Portfolio; 11.03%, 25.05% and
16.05%, respectively, for the Balanced Portfolio; and 7.94%, 18.48% and
11.53%, respectively, for the Conservative Portfolio. As of 3/31/98, the
six-month, one-year and average annual since-inception total returns would
have been 9.37%, 33.40% and 20.26%, respectively, for the Growth Portfolio;
8.18%, 27.45% and 16.38%, respectively, for the Balanced Portfolio; and
6.67%, 20.45% and 11.75%, respectively, for the Conservative Portfolio.
This graph compares the growth of a hypothetical $10,000 investment in the
Schwab MarketTrack Growth, Balanced and Conservative Portfolios, made at their
inception, with a similar investment in the S&P 500-Registered Trademark- Index
and the Lehman Brothers Aggregate Bond Index.
THIS INFORMATION IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS. TOTAL
RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Indices are
unmanaged and do not reflect advisory fees and other expenses associated with an
investment in the Portfolios. Investors cannot invest in an index directly.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SCHWAB
MARKETTRACK PORTFOLIOS
GROWTH OF A HYPOTHETICAL
$10,000 INVESTMENT
MARKETTRACK MARKETTRACK MARKETTRACK S&P 500 INDEX LEHMAN AGGREGATE
GROWTH BALANCED CONSERVATIVE BOND INDEX
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
11/20/95 $10,000 $10,000 $10,000 $10,000 $10,000
11/30/95 $10,080 $10,080 $10,080 $10,104 $10,076
12/31/95 $10,292 $10,270 $10,237 $10,299 $10,217
1/31/96 $10,442 $10,390 $10,337 $10,649 $10,285
2/29/96 $10,533 $10,410 $10,297 $10,748 $10,106
3/31/96 $10,623 $10,460 $10,287 $10,852 $10,035
4/30/96 $10,803 $10,581 $10,337 $11,011 $9,979
5/31/96 $10,954 $10,691 $10,378 $11,294 $9,959
6/30/96 $10,934 $10,711 $10,439 $11,337 $10,092
7/31/96 $10,523 $10,410 $10,256 $10,836 $10,120
8/31/96 $10,733 $10,551 $10,337 $11,064 $10,102
9/30/96 $11,184 $10,912 $10,643 $11,686 $10,278
10/31/96 $11,324 $11,082 $10,818 $12,009 $10,506
11/30/96 $11,896 $11,534 $11,179 $12,917 $10,686
12/31/96 $11,784 $11,415 $11,070 $12,661 $10,587
1/31/97 $12,008 $11,589 $11,174 $13,451 $10,620
2/28/97 $12,028 $11,589 $11,184 $13,557 $10,646
3/31/97 $11,692 $11,334 $10,965 $13,001 $10,528
4/30/97 $12,038 $11,620 $11,206 $13,776 $10,686
5/31/97 $12,793 $12,183 $11,604 $14,614 $10,787
6/30/97 $13,313 $12,593 $11,896 $15,268 $10,916
7/31/97 $14,087 $13,217 $12,413 $16,482 $11,210
8/31/97 $13,618 $12,849 $12,160 $15,559 $11,115
9/30/97 $14,301 $13,391 $12,540 $16,410 $11,280
10/31/97 $13,853 $13,125 $12,455 $15,862 $11,443
11/30/97 $14,098 $13,309 $12,603 $16,597 $11,496
12/31/97 $14,259 $13,443 $12,698 $16,882 $11,612
1/31/98 $14,410 $13,582 $12,829 $17,070 $11,761
2/28/98 $15,220 $14,149 $13,189 $18,300 $11,751
3/31/98 $15,738 $14,523 $13,418 $19,237 $11,791
4/30/98 $15,846 $14,608 $13,484 $19,432 $11,852
</TABLE>
8
<PAGE>
SCHWAB MARKETTRACK PORTFOLIOS
PORTFOLIO SUMMARY
Schwab MarketTrack Portfolios invest in a diversified mix of stocks, bonds and
cash equivalents, either directly or through investment in other
SchwabFunds-Registered Trademark-. Each Portfolio employs an indexing strategy
and seeks to capture the returns of the asset categories.
SCHWAB MARKETTRACK GROWTH PORTFOLIO:
ASSET MIX(1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
U.S. Large-Cap 39%
U.S. Small-Cap 20%
International 20%
Bonds 15%
Cash 6%
</TABLE>
<TABLE>
<CAPTION>
Target Mix in
Mix as of Mix as of Neutral
4/30/98 4/30/97 Markets
<S> <C> <C> <C>
- ---------------------------------------------------------------
U.S. Stocks:
- ---------------------------------------------------------------
Large-Cap 39.4% 42.8% 40.0%
- ---------------------------------------------------------------
Small-Cap 19.7% 19.3% 20.0%
- ---------------------------------------------------------------
International Stocks 19.6% 19.3% 20.0%
- ---------------------------------------------------------------
Total Stocks 78.7% 81.4% 80.0%
- ---------------------------------------------------------------
Bonds 14.9% 0.0% 15.0%
- ---------------------------------------------------------------
Cash Equivalents 6.4% 18.6% 5.0%
- ---------------------------------------------------------------
Total 100.0% 100.0% 100.0%
- ---------------------------------------------------------------
</TABLE>
Large-cap stocks in the MarketTrack Growth Portfolio are represented by the S&P
500-Registered Trademark- Index; small-cap stocks are represented by the Schwab
Small-Cap Index-Registered Trademark-; international stocks are represented by
the Schwab International Index-Registered Trademark-; bonds are represented by
the Lehman Aggregate Bond Index; and cash is represented by the three-month
Treasury bill.
SCHWAB MARKETTRACK GROWTH PORTFOLIO:
TOP 10 HOLDINGS
AS A PERCENTAGE OF PORTFOLIO INVESTMENTS(1)
<TABLE>
<S> <C>
- ------------------------------------------------
Schwab Small-Cap Index
Fund-Registered Trademark- 18.92%
- ------------------------------------------------
Schwab International Index
Fund-Registered Trademark- 18.08%
- ------------------------------------------------
Schwab Total Bond Market Index Fund 14.14%
- ------------------------------------------------
Federal Home Loan Mortgage Corp. 4.37%
- ------------------------------------------------
Schwab S&P 500-Registered Trademark-
Fund 4.16%
- ------------------------------------------------
Federal National Mortgage Association 4.10%
- ------------------------------------------------
General Electric Co. 1.09%
- ------------------------------------------------
Microsoft Corp. 0.87%
- ------------------------------------------------
Coca-Cola Co. 0.73%
- ------------------------------------------------
Exxon Corp. 0.70%
- ------------------------------------------------
Total 67.16%
- ------------------------------------------------
</TABLE>
(1)This information is as of 4/30/98 and may not be indicative of current or
future investments. A complete list of the Portfolio's investments as of
4/30/98 can be found in the Schedule of Investments later in this report.
9
<PAGE>
SCHWAB MARKETTRACK PORTFOLIOS
PORTFOLIO SUMMARY (continued)
SCHWAB MARKETTRACK BALANCED PORTFOLIO:
ASSET MIX(1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Bonds 36%
U.S. Large-Cap 29%
U.S. Small-Cap 14%
International 14%
Cash 7%
</TABLE>
<TABLE>
<CAPTION>
Target Mix in
Mix as of Mix as of Neutral
4/30/98 4/30/97 Markets
<S> <C> <C> <C>
- ---------------------------------------------------------------
U.S. Stocks:
- ---------------------------------------------------------------
Large-Cap 28.6% 32.9% 30.0%
- ---------------------------------------------------------------
Small-Cap 13.9% 14.5% 15.0%
- ---------------------------------------------------------------
International Stocks 14.0% 14.3% 15.0%
- ---------------------------------------------------------------
Total Stocks 56.5% 61.7% 60.0%
- ---------------------------------------------------------------
Bonds 35.9% 24.1% 35.0%
- ---------------------------------------------------------------
Cash Equivalents 7.6% 14.2% 5.0%
- ---------------------------------------------------------------
Total 100.0% 100.0% 100.0%
- ---------------------------------------------------------------
</TABLE>
Large-cap stocks in the MarketTrack Balanced Portfolio are represented by the
S&P 500-Registered Trademark- Index; small-cap stocks are represented by the
Schwab Small-Cap Index-Registered Trademark-; international stocks are
represented by the Schwab International Index-Registered Trademark-; bonds are
represented by the Lehman Aggregate Bond Index; and cash is represented by the
three-month Treasury bill.
SCHWAB MARKETTRACK BALANCED PORTFOLIO:
TOP 10 HOLDINGS
AS A PERCENTAGE OF PORTFOLIO INVESTMENTS(1)
<TABLE>
<S> <C>
- ------------------------------------------------
Schwab Total Bond Market Index Fund 33.93%
- ------------------------------------------------
Schwab Small-Cap Index
Fund-Registered Trademark- 14.08%
- ------------------------------------------------
Schwab International Index
Fund-Registered Trademark- 13.33%
- ------------------------------------------------
Schwab S&P 500-Registered Trademark-
Fund 3.83%
- ------------------------------------------------
Federal National Mortgage Association 2.95%
- ------------------------------------------------
Federal Home Loan Mortgage Corp. 2.93%
- ------------------------------------------------
General Electric Co. 0.80%
- ------------------------------------------------
Microsoft Corp. 0.62%
- ------------------------------------------------
Coca-Cola Co. 0.54%
- ------------------------------------------------
Exxon Corp. 0.50%
- ------------------------------------------------
Total 73.51%
- ------------------------------------------------
</TABLE>
(1)This information is as of 4/30/98 and may not be indicative of current or
future investments. A complete list of the Portfolio's investments as of
4/30/98 can be found in the Schedule of Investments later in this report.
10
<PAGE>
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO: ASSET MIX(1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Bonds 54%
U.S. Large-Cap 19%
U.S. Small-Cap 10%
International 9%
Cash 8%
</TABLE>
<TABLE>
<CAPTION>
Target Mix in
Mix as of Mix as of Neutral
4/30/98 4/30/97 Markets
<S> <C> <C> <C>
- ---------------------------------------------------------------
U.S. Stocks:
- ---------------------------------------------------------------
Large-Cap 18.9% 22.4% 20.0%
- ---------------------------------------------------------------
Small-Cap 9.8% 9.9% 10.0%
- ---------------------------------------------------------------
International Stocks 9.1% 9.7% 10.0%
- ---------------------------------------------------------------
Total Stocks 37.7% 42.0% 40.0%
- ---------------------------------------------------------------
Bonds 53.9% 42.5% 55.0%
- ---------------------------------------------------------------
Cash Equivalents 8.5% 15.5% 5.0%
- ---------------------------------------------------------------
Total 100.0% 100.0% 100.0%
- ---------------------------------------------------------------
</TABLE>
Large-cap stocks in the MarketTrack Conservative Portfolio are represented by
the S&P 500-Registered Trademark- Index; small-cap stocks are represented by the
Schwab Small-Cap Index-Registered Trademark-; international stocks are
represented by the Schwab International Index-Registered Trademark-; bonds are
represented by the Lehman Aggregate Bond Index; and cash is represented by the
three-month Treasury bill.
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO:
TOP 10 HOLDINGS
AS A PERCENTAGE OF PORTFOLIO INVESTMENTS(1)
<TABLE>
<S> <C>
- ------------------------------------------------
Schwab Total Bond Market Index Fund 53.29%
- ------------------------------------------------
Schwab Small-Cap Index
Fund-Registered Trademark- 9.88%
- ------------------------------------------------
Schwab International Index
Fund-Registered Trademark- 9.09%
- ------------------------------------------------
Federal Home Loan Mortgage Corp. 1.36%
- ------------------------------------------------
Schwab S&P 500-Registered Trademark-
Fund 0.96%
- ------------------------------------------------
Federal National Mortgage Association 0.82%
- ------------------------------------------------
General Electric Co. 0.58%
- ------------------------------------------------
Microsoft Corp. 0.47%
- ------------------------------------------------
Coca-Cola Co. 0.40%
- ------------------------------------------------
Exxon Corp. 0.38%
- ------------------------------------------------
Total 77.24%
- ------------------------------------------------
</TABLE>
(1)This information is as of 4/30/98 and may not be indicative of current or
future investments. A complete listing of the Portfolio's investments as of
4/30/98 can be found in the Schedule of Investments later in this report.
11
<PAGE>
PORTFOLIO MANAGEMENT
THE PORTFOLIO MANAGEMENT TEAM
STEPHEN B. WARD, Senior Vice President and Chief Investment Officer, has
overall responsibility for the management of the Portfolios. Steve joined CSIM
as Vice President and Portfolio Manager in April 1991 and was promoted to his
current position in August 1993. Prior to joining CSIM, Steve was Vice
President and Portfolio Manager at Federated Investors.
GERI HOM, Vice President and Senior Portfolio Manager, has primary
responsibility for the day-to-day management of the MarketTrack Portfolios.
Geri joined CSIM in March 1995 as Portfolio Manager and was promoted to her
current position in December 1996. She currently manages approximately $8.6
billion in indexed equity mutual fund assets. Prior to joining CSIM, Geri was
a principal for Wells Fargo Nikko Investment Advisors and Vice President and
Manager of the Domestic Equity Portfolio Management Group for Wells Fargo
Nikko.
KIMON DAIFOTIS, Vice President and Senior Portfolio Manager, has primary
responsibility for the day-to-day management of the bonds and cash equivalents
securities in each Portfolio. Kimon joined CSIM in his current capacity in
October 1997. In addition to the MarketTrack Portfolios, he manages two bond
index funds. He was previously with Lehman Brothers, most recently as Vice
President in fixed-income institutional sales and, prior to that, as Senior
Portfolio Strategist.
12
<PAGE>
PORTFOLIO DISCUSSION
QUESTIONS TO THE
PORTFOLIO MANAGEMENT TEAM
Q. HOW DID THE THREE SCHWAB MARKETTRACK PORTFOLIOS PERFORM DURING THE REPORTING
PERIOD? WHY WEREN'T THE RETURNS AS HIGH AS THE S&P 500-REGISTERED TRADEMARK-
INDEX?
A. As shown in the MARKET OVERVIEW section, equity securities--large-cap
equities in particular--significantly outperformed both bond and cash equivalent
returns for the six-month reporting period. Consequently, the Schwab MarketTrack
Portfolios, which had greater allocations to equities, had stronger performances
during the reporting period. Keep in mind that the target equity allocations for
the MarketTrack Portfolios are 80% for the Growth Portfolio, 60% for the
Balanced Portfolio and 40% for the Conservative Portfolio. Because the
MarketTrack Portfolios are designed to incorporate a mix of different asset
classes, their returns over any given period are expected to lag the return of
the strongest-performing asset class. Conversely, the returns of the MarketTrack
Portfolios are expected to exceed that of the worst-performing asset class for
any given period. By dampening the return volatility of any single asset class,
the MarketTrack Portfolios are designed to provide more-stable returns
throughout market cycles, which, on a risk-adjusted basis, are expected to be
very favorable over extended periods of time.
You can compare the returns of the three MarketTrack Portfolios as shown on page
8 with the returns over the same period of the indices representing the various
asset classes in which they invest, as shown below. Again, remember that the
MarketTrack Portfolios are not designed to track any ONE of these indices but a
combination of them all, which is why it is generally not appropriate to compare
the Portfolios' performance with any single index.
The S&P 500 Index is composed of 500 large-company common stocks representing
key industries, including many from the most recognizable companies in the
United States. The Schwab Small-Cap Index includes the second-largest 1,000
publicly traded companies in the United States. The Schwab International Index
includes the stocks of 350 of the largest publicly traded non-U.S. companies
from countries with developed securities markets. The Lehman Aggregate Bond
Index includes fixed-rate debt issues rated investment grade or higher.
<TABLE>
<CAPTION>
SIX-MONTH
RETURNS AS OF
ASSET CLASS INDEX 4/30/98
<S> <C> <C>
- ---------------------------------------------------------------------
S&P 500-Registered Trademark-
Large-Cap Stocks Index 22.47%
- ---------------------------------------------------------------------
Schwab Small-Cap
Small-Cap Stocks Index-Registered Trademark- 13.44%
- ---------------------------------------------------------------------
Schwab International
International Stocks Index-Registered Trademark- 15.15%
- ---------------------------------------------------------------------
Bonds Lehman Aggregate Bond Index 3.58%
- ---------------------------------------------------------------------
Cash Three-month Treasury Bill 2.63%
- ---------------------------------------------------------------------
</TABLE>
13
<PAGE>
PORTFOLIO DISCUSSION (continued)
Q. DID THE MANAGERS CHANGE THE PORTFOLIOS' ASSET MIX SIGNIFICANTLY DURING THE
SIX-MONTH REPORTING PERIOD?
A. The following charts show the target and actual asset mixes for each of the
three Portfolios during the reporting period. From November 1, 1997, through
approximately mid-December, the Portfolios were moderately overweighted in
stocks and cash equivalents and underweighted in bonds. Then, through the end of
February, the Portfolios maintained a neutral stock weighting, an underweighting
in bonds and an overweighting in cash. We underweighted bonds because the yield
advantage they offered over cash equivalents had declined to the point where
bonds were relatively unattractive on a risk-adjusted return basis. In early
March yields rebounded, leading us to increase the Portfolios' positions closer
to each Portfolio's neutral target. By the close of the period, all the
Portfolios were positioned near their neutral targets (as depicted on pages 9,
10 and 11).
Going forward, we have made a decision to maintain each Portfolio's stock, bond
and cash equivalent allocations on a static basis, with only minor deviations
from their neutral targets. In large part this decision was made in response to
comments we heard from shareholders that expressed a preference for Portfolios
that do not significantly deviate from their neutral targets. Additionally,
recent market conditions have presented a difficult environment for the
strategies previously utilized by the Portfolios to add significant value. Given
these conditions, we felt that a shift in strategy to more static asset class
allocations was in the best interest of our shareholders. Concurrently, since
the revised strategy involves a reduction in advisory and trading activities
and, consequently, expenditures required to manage the Portfolios, we decided to
pass along the savings to shareholders by reducing the operating expense ratio
(OER) of each Portfolio by approximately 0.05%. Because this change was made
late in the reporting period, you will not notice the impact on the OER until
the next reporting period.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MARKETTRACK GROWTH PORTFOLIO
ACTUAL TARGET ASSET MIX
LARGE- SMALL-
CAP CAP INTERNATIONAL
STOCKS STOCKS STOCKS BONDS CASH
<S> <C> <C> <C> <C> <C>
11/3/97 43% 20% 20% 0% 17%
11/4/97 43% 20% 20% 0% 17%
11/5/97 43% 20% 20% 0% 17%
11/6/97 43% 20% 20% 0% 17%
11/7/97 43% 20% 20% 0% 17%
11/10/97 43% 20% 20% 0% 17%
11/11/97 43% 20% 20% 0% 17%
11/12/97 43% 20% 20% 0% 17%
11/13/97 43% 20% 20% 0% 17%
11/14/97 43% 20% 20% 0% 17%
11/17/97 43% 20% 20% 0% 17%
11/18/97 43% 20% 20% 0% 17%
11/19/97 43% 20% 20% 0% 17%
11/20/97 43% 20% 20% 0% 17%
11/21/97 43% 20% 20% 0% 17%
11/24/97 43% 20% 20% 0% 17%
11/25/97 43% 20% 20% 0% 17%
11/26/97 43% 20% 20% 0% 17%
11/28/97 43% 20% 20% 0% 17%
12/1/97 43% 20% 20% 0% 17%
12/2/97 43% 20% 20% 0% 17%
12/3/97 43% 20% 20% 0% 17%
12/4/97 43% 20% 20% 0% 17%
12/5/97 43% 20% 20% 0% 17%
12/8/97 43% 20% 20% 0% 17%
12/9/97 43% 20% 20% 0% 17%
12/10/97 43% 20% 20% 0% 17%
12/11/97 43% 20% 20% 0% 17%
12/12/97 43% 20% 20% 0% 17%
12/15/97 40% 20% 20% 0% 20%
12/16/97 40% 20% 20% 0% 20%
12/17/97 40% 20% 20% 0% 20%
12/18/97 40% 20% 20% 0% 20%
12/19/97 40% 20% 20% 0% 20%
12/22/97 40% 20% 20% 0% 20%
12/23/97 40% 20% 20% 0% 20%
12/24/97 40% 20% 20% 0% 20%
12/26/97 40% 20% 20% 0% 20%
12/29/97 40% 20% 20% 0% 20%
12/30/97 40% 20% 20% 0% 20%
12/31/97 40% 20% 20% 0% 20%
1/2/98 40% 20% 20% 0% 20%
1/5/98 40% 20% 20% 0% 20%
1/6/98 40% 20% 20% 0% 20%
1/7/98 40% 20% 20% 0% 20%
1/8/98 40% 20% 20% 0% 20%
1/9/98 40% 20% 20% 0% 20%
1/12/98 40% 20% 20% 0% 20%
1/13/98 40% 20% 20% 0% 20%
1/14/98 40% 20% 20% 0% 20%
1/15/98 40% 20% 20% 0% 20%
1/16/98 40% 20% 20% 0% 20%
1/20/98 40% 20% 20% 0% 20%
1/21/98 40% 20% 20% 0% 20%
1/22/98 40% 20% 20% 0% 20%
1/23/98 40% 20% 20% 0% 20%
1/26/98 40% 20% 20% 0% 20%
1/27/98 40% 20% 20% 0% 20%
1/28/98 40% 20% 20% 0% 20%
1/29/98 40% 20% 20% 0% 20%
1/30/98 40% 20% 20% 0% 20%
2/2/98 40% 20% 20% 0% 20%
2/3/98 40% 20% 20% 0% 20%
2/4/98 40% 20% 20% 0% 20%
2/5/98 40% 20% 20% 0% 20%
2/6/98 40% 20% 20% 0% 20%
2/9/98 40% 20% 20% 0% 20%
2/10/98 40% 20% 20% 0% 20%
2/11/98 40% 20% 20% 0% 20%
2/12/98 40% 20% 20% 0% 20%
2/13/98 40% 20% 20% 0% 20%
2/17/98 40% 20% 20% 0% 20%
2/18/98 40% 20% 20% 0% 20%
2/19/98 40% 20% 20% 0% 20%
2/20/98 40% 20% 20% 0% 20%
2/23/98 40% 20% 20% 0% 20%
2/24/98 40% 20% 20% 0% 20%
2/25/98 40% 20% 20% 0% 20%
2/26/98 40% 20% 20% 0% 20%
2/27/98 37% 20% 20% 6% 17%
3/2/98 37% 20% 20% 6% 17%
3/3/98 37% 20% 20% 6% 17%
3/4/98 37% 20% 20% 6% 17%
3/5/98 37% 20% 20% 6% 17%
3/6/98 37% 20% 20% 6% 17%
3/9/98 37% 20% 20% 6% 17%
3/10/98 37% 20% 20% 6% 17%
3/11/98 37% 20% 20% 6% 17%
3/12/98 37% 20% 20% 6% 17%
3/13/98 37% 20% 20% 6% 17%
3/16/98 37% 20% 20% 6% 17%
3/17/98 37% 20% 20% 6% 17%
3/18/98 37% 20% 20% 6% 17%
3/19/98 40% 20% 20% 6% 14%
3/20/98 40% 20% 20% 6% 14%
3/23/98 40% 20% 20% 6% 14%
3/24/98 40% 20% 20% 6% 14%
3/25/98 40% 20% 20% 6% 14%
3/26/98 40% 20% 20% 6% 14%
3/27/98 40% 20% 20% 6% 14%
3/30/98 40% 20% 20% 6% 14%
3/31/98 40% 20% 20% 6% 14%
4/1/98 40% 20% 20% 6% 14%
4/2/98 40% 20% 20% 15% 5%
4/3/98 40% 20% 20% 15% 5%
4/6/98 40% 20% 20% 15% 5%
4/7/98 40% 20% 20% 15% 5%
4/8/98 40% 20% 20% 15% 5%
4/9/98 40% 20% 20% 15% 5%
4/13/98 40% 20% 20% 15% 5%
4/14/98 40% 20% 20% 15% 5%
4/15/98 40% 20% 20% 15% 5%
4/16/98 40% 20% 20% 15% 5%
4/17/98 40% 20% 20% 15% 5%
4/20/98 40% 20% 20% 15% 5%
4/21/98 40% 20% 20% 15% 5%
4/22/98 40% 20% 20% 15% 5%
4/23/98 40% 20% 20% 15% 5%
4/24/98 40% 20% 20% 15% 5%
4/27/98 40% 20% 20% 15% 5%
4/28/98 40% 20% 20% 15% 5%
4/29/98 40% 20% 20% 15% 5%
Neutral Target Mix 40% 20% 20% 15% 5%
</TABLE>
14
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MARKETTRACK BALANCED PORTFOLIO
ACTUAL TARGET ASSET MIX
LARGE- SMALL-
CAP CAP INTERNATIONAL
STOCKS STOCKS STOCKS BONDS CASH
<S> <C> <C> <C> <C> <C>
11/3/97 32% 15% 15% 25% 13%
11/4/97 32% 15% 15% 25% 13%
11/5/97 32% 15% 15% 25% 13%
11/6/97 32% 15% 15% 25% 13%
11/7/97 32% 15% 15% 25% 13%
11/10/97 32% 15% 15% 25% 13%
11/11/97 32% 15% 15% 25% 13%
11/12/97 32% 15% 15% 25% 13%
11/13/97 32% 15% 15% 25% 13%
11/14/97 32% 15% 15% 25% 13%
11/17/97 32% 15% 15% 25% 13%
11/18/97 32% 15% 15% 25% 13%
11/19/97 32% 15% 15% 25% 13%
11/20/97 32% 15% 15% 25% 13%
11/21/97 32% 15% 15% 25% 13%
11/24/97 32% 15% 15% 25% 13%
11/25/97 32% 15% 15% 25% 13%
11/26/97 32% 15% 15% 25% 13%
11/28/97 32% 15% 15% 25% 13%
12/1/97 32% 15% 15% 25% 13%
12/2/97 32% 15% 15% 25% 13%
12/3/97 32% 15% 15% 25% 13%
12/4/97 32% 15% 15% 25% 13%
12/5/97 32% 15% 15% 25% 13%
12/8/97 32% 15% 15% 25% 13%
12/9/97 32% 15% 15% 25% 13%
12/10/97 32% 15% 15% 25% 13%
12/11/97 32% 15% 15% 25% 13%
12/12/97 32% 15% 15% 25% 13%
12/15/97 30% 15% 15% 25% 15%
12/16/97 30% 15% 15% 25% 15%
12/17/97 30% 15% 15% 25% 15%
12/18/97 30% 15% 15% 25% 15%
12/19/97 30% 15% 15% 25% 15%
12/22/97 30% 15% 15% 25% 15%
12/23/97 30% 15% 15% 25% 15%
12/24/97 30% 15% 15% 25% 15%
12/26/97 30% 15% 15% 25% 15%
12/29/97 30% 15% 15% 25% 15%
12/30/97 30% 15% 15% 25% 15%
12/31/97 30% 15% 15% 25% 15%
1/2/98 30% 15% 15% 25% 15%
1/5/98 30% 15% 15% 25% 15%
1/6/98 30% 15% 15% 25% 15%
1/7/98 30% 15% 15% 25% 15%
1/8/98 30% 15% 15% 25% 15%
1/9/98 30% 15% 15% 25% 15%
1/12/98 30% 15% 15% 25% 15%
1/13/98 30% 15% 15% 25% 15%
1/14/98 30% 15% 15% 25% 15%
1/15/98 30% 15% 15% 25% 15%
1/16/98 30% 15% 15% 25% 15%
1/20/98 30% 15% 15% 25% 15%
1/21/98 30% 15% 15% 25% 15%
1/22/98 30% 15% 15% 25% 15%
1/23/98 30% 15% 15% 25% 15%
1/26/98 30% 15% 15% 25% 15%
1/27/98 30% 15% 15% 25% 15%
1/28/98 30% 15% 15% 25% 15%
1/29/98 30% 15% 15% 25% 15%
1/30/98 30% 15% 15% 25% 15%
2/2/98 30% 15% 15% 25% 15%
2/3/98 30% 15% 15% 25% 15%
2/4/98 30% 15% 15% 25% 15%
2/5/98 30% 15% 15% 25% 15%
2/6/98 30% 15% 15% 25% 15%
2/9/98 30% 15% 15% 25% 15%
2/10/98 30% 15% 15% 25% 15%
2/11/98 30% 15% 15% 25% 15%
2/12/98 30% 15% 15% 25% 15%
2/13/98 30% 15% 15% 25% 15%
2/17/98 30% 15% 15% 25% 15%
2/18/98 30% 15% 15% 25% 15%
2/19/98 30% 15% 15% 25% 15%
2/20/98 30% 15% 15% 25% 15%
2/23/98 30% 15% 15% 25% 15%
2/24/98 30% 15% 15% 25% 15%
2/25/98 30% 15% 15% 25% 15%
2/26/98 30% 15% 15% 25% 15%
2/27/98 28% 15% 15% 29% 13%
3/2/98 28% 15% 15% 29% 13%
3/3/98 28% 15% 15% 29% 13%
3/4/98 28% 15% 15% 29% 13%
3/5/98 28% 15% 15% 29% 13%
3/6/98 28% 15% 15% 29% 13%
3/9/98 28% 15% 15% 29% 13%
3/10/98 28% 15% 15% 29% 13%
3/11/98 28% 15% 15% 29% 13%
3/12/98 28% 15% 15% 29% 13%
3/13/98 28% 15% 15% 29% 13%
3/16/98 28% 15% 15% 29% 13%
3/17/98 28% 15% 15% 29% 13%
3/18/98 28% 15% 15% 29% 13%
3/19/98 30% 15% 15% 29% 11%
3/20/98 30% 15% 15% 29% 11%
3/23/98 30% 15% 15% 29% 11%
3/24/98 30% 15% 15% 29% 11%
3/25/98 30% 15% 15% 29% 11%
3/26/98 30% 15% 15% 29% 11%
3/27/98 30% 15% 15% 29% 11%
3/30/98 30% 15% 15% 29% 11%
3/31/98 30% 15% 15% 29% 11%
4/1/98 30% 15% 15% 29% 11%
4/2/98 30% 15% 15% 35% 5%
4/3/98 30% 15% 15% 35% 5%
4/6/98 30% 15% 15% 35% 5%
4/7/98 30% 15% 15% 35% 5%
4/8/98 30% 15% 15% 35% 5%
4/9/98 30% 15% 15% 35% 5%
4/13/98 30% 15% 15% 35% 5%
4/14/98 30% 15% 15% 35% 5%
4/15/98 30% 15% 15% 35% 5%
4/16/98 30% 15% 15% 35% 5%
4/17/98 30% 15% 15% 35% 5%
4/20/98 30% 15% 15% 35% 5%
4/21/98 30% 15% 15% 35% 5%
4/22/98 30% 15% 15% 35% 5%
4/23/98 30% 15% 15% 35% 5%
4/24/98 30% 15% 15% 35% 5%
4/27/98 30% 15% 15% 35% 5%
4/28/98 30% 15% 15% 35% 5%
4/29/98 30% 15% 15% 35% 5%
Neutral Target Mix 30% 15% 15% 35% 5%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MARKETTRACK CONSERVATIVE
PORTFOLIO
ACTUAL TARGET ASSET MIX
LARGE- SMALL-
CAP CAP INTERNATIONAL
STOCKS STOCKS STOCKS BONDS CASH
<S> <C> <C> <C> <C> <C>
11/3/97 22% 10% 10% 45% 13%
11/4/97 22% 10% 10% 45% 13%
11/5/97 22% 10% 10% 45% 13%
11/6/97 22% 10% 10% 45% 13%
11/7/97 22% 10% 10% 45% 13%
11/10/97 22% 10% 10% 45% 13%
11/11/97 22% 10% 10% 45% 13%
11/12/97 22% 10% 10% 45% 13%
11/13/97 22% 10% 10% 45% 13%
11/14/97 22% 10% 10% 45% 13%
11/17/97 22% 10% 10% 45% 13%
11/18/97 22% 10% 10% 45% 13%
11/19/97 22% 10% 10% 45% 13%
11/20/97 22% 10% 10% 45% 13%
11/21/97 22% 10% 10% 45% 13%
11/24/97 22% 10% 10% 45% 13%
11/25/97 22% 10% 10% 45% 13%
11/26/97 22% 10% 10% 45% 13%
11/28/97 22% 10% 10% 45% 13%
12/1/97 22% 10% 10% 45% 13%
12/2/97 22% 10% 10% 45% 13%
12/3/97 22% 10% 10% 45% 13%
12/4/97 22% 10% 10% 45% 13%
12/5/97 22% 10% 10% 45% 13%
12/8/97 22% 10% 10% 45% 13%
12/9/97 22% 10% 10% 45% 13%
12/10/97 22% 10% 10% 45% 13%
12/11/97 22% 10% 10% 45% 13%
12/12/97 22% 10% 10% 45% 13%
12/15/97 20% 10% 10% 45% 15%
12/16/97 20% 10% 10% 45% 15%
12/17/97 20% 10% 10% 45% 15%
12/18/97 20% 10% 10% 45% 15%
12/19/97 20% 10% 10% 45% 15%
12/22/97 20% 10% 10% 45% 15%
12/23/97 20% 10% 10% 45% 15%
12/24/97 20% 10% 10% 45% 15%
12/26/97 20% 10% 10% 45% 15%
12/29/97 20% 10% 10% 45% 15%
12/30/97 20% 10% 10% 45% 15%
12/31/97 20% 10% 10% 45% 15%
1/2/98 20% 10% 10% 45% 15%
1/5/98 20% 10% 10% 45% 15%
1/6/98 20% 10% 10% 45% 15%
1/7/98 20% 10% 10% 45% 15%
1/8/98 20% 10% 10% 45% 15%
1/9/98 20% 10% 10% 45% 15%
1/12/98 20% 10% 10% 45% 15%
1/13/98 20% 10% 10% 45% 15%
1/14/98 20% 10% 10% 45% 15%
1/15/98 20% 10% 10% 45% 15%
1/16/98 20% 10% 10% 45% 15%
1/20/98 20% 10% 10% 45% 15%
1/21/98 20% 10% 10% 45% 15%
1/22/98 20% 10% 10% 45% 15%
1/23/98 20% 10% 10% 45% 15%
1/26/98 20% 10% 10% 45% 15%
1/27/98 20% 10% 10% 45% 15%
1/28/98 20% 10% 10% 45% 15%
1/29/98 20% 10% 10% 45% 15%
1/30/98 20% 10% 10% 45% 15%
2/2/98 20% 10% 10% 45% 15%
2/3/98 20% 10% 10% 45% 15%
2/4/98 20% 10% 10% 45% 15%
2/5/98 20% 10% 10% 45% 15%
2/6/98 20% 10% 10% 45% 15%
2/9/98 20% 10% 10% 45% 15%
2/10/98 20% 10% 10% 45% 15%
2/11/98 20% 10% 10% 45% 15%
2/12/98 20% 10% 10% 45% 15%
2/13/98 20% 10% 10% 45% 15%
2/17/98 20% 10% 10% 45% 15%
2/18/98 20% 10% 10% 45% 15%
2/19/98 20% 10% 10% 45% 15%
2/20/98 20% 10% 10% 45% 15%
2/23/98 20% 10% 10% 45% 15%
2/24/98 20% 10% 10% 45% 15%
2/25/98 20% 10% 10% 45% 15%
2/26/98 20% 10% 10% 45% 15%
2/27/98 18% 10% 10% 49% 13%
3/2/98 18% 10% 10% 49% 13%
3/3/98 18% 10% 10% 49% 13%
3/4/98 18% 10% 10% 49% 13%
3/5/98 18% 10% 10% 49% 13%
3/6/98 18% 10% 10% 49% 13%
3/9/98 18% 10% 10% 49% 13%
3/10/98 18% 10% 10% 49% 13%
3/11/98 18% 10% 10% 49% 13%
3/12/98 18% 10% 10% 49% 13%
3/13/98 18% 10% 10% 49% 13%
3/16/98 18% 10% 10% 49% 13%
3/17/98 18% 10% 10% 49% 13%
3/18/98 18% 10% 10% 49% 13%
3/19/98 20% 10% 10% 49% 11%
3/20/98 20% 10% 10% 49% 11%
3/23/98 20% 10% 10% 49% 11%
3/24/98 20% 10% 10% 49% 11%
3/25/98 20% 10% 10% 49% 11%
3/26/98 20% 10% 10% 49% 11%
3/27/98 20% 10% 10% 49% 11%
3/30/98 20% 10% 10% 49% 11%
3/31/98 20% 10% 10% 49% 11%
4/1/98 20% 10% 10% 49% 11%
4/2/98 20% 10% 10% 55% 5%
4/3/98 20% 10% 10% 55% 5%
4/6/98 20% 10% 10% 55% 5%
4/7/98 20% 10% 10% 55% 5%
4/8/98 20% 10% 10% 55% 5%
4/9/98 20% 10% 10% 55% 5%
4/13/98 20% 10% 10% 55% 5%
4/14/98 20% 10% 10% 55% 5%
4/15/98 20% 10% 10% 55% 5%
4/16/98 20% 10% 10% 55% 5%
4/17/98 20% 10% 10% 55% 5%
4/20/98 20% 10% 10% 55% 5%
4/21/98 20% 10% 10% 55% 5%
4/22/98 20% 10% 10% 55% 5%
4/23/98 20% 10% 10% 55% 5%
4/24/98 20% 10% 10% 55% 5%
4/27/98 20% 10% 10% 55% 5%
4/28/98 20% 10% 10% 55% 5%
4/29/98 20% 10% 10% 55% 5%
Neutral Target Mix 20% 10% 10% 55% 5%
</TABLE>
15
<PAGE>
PORTFOLIO DISCUSSION (continued)
Q. WHY DO THE SCHWAB MARKETTRACK PORTFOLIOS USE AN INDEXING STRATEGY TO INVEST
IN EACH ASSET CLASS?
A. One frequently cited research study has shown that the manner in which an
investor allocates his or her portfolio among different asset classes can
determine the vast majority of the variance in the portfolio's returns.(1)
Unless investors build their portfolios with investments that are designed to
consistently deliver the performance of the asset classes they wish to track,
their portfolios may not perform as they expect.
Mutual funds that employ an indexing strategy can be an excellent way to
implement an asset allocation plan because they generally invest only in the
intended asset class and therefore should achieve returns that closely track
those of that benchmark asset class. These funds should not be subject to the
"style drift" that investors may face with many actively managed funds.
In addition to seeking to deliver consistent asset class performance, indexing
is typically efficient from both a cost and a tax standpoint. Most funds
utilizing an index strategy minimize their trading and operating costs by
keeping both portfolio turnover and operating expense ratios low. These savings
are passed on to investors in the form of higher returns. By virtue of the large
number of holdings, most indexing strategies also offer broad diversification,
which can reduce both the company- and industry-specific risk elements of equity
investing.
Q. WHAT ARE THE BENEFITS OF INCLUDING BONDS AND CASH IN AN INVESTMENT PORTFOLIO?
A. Adding bonds and cash equivalents to a stock-oriented portfolio can help
reduce its overall risk. The following chart displays the high, low and average
annual returns from 1970 to 1997 for five hypothetical portfolios representing
the returns of stocks and bonds measured by indices.(2) As the chart
demonstrates, adding bonds to a stock-heavy portfolio would have reduced its
risk while still producing competitive returns.
A hypothetical portfolio with 60% of its assets in stocks and the remaining 40%
in bonds, for example, would have achieved an average annual return of
11.65%--roughly 1.3 percentage points less than the 12.97% return of the
all-stock portfolio--and with significantly less volatility. The lowest annual
return-- a loss of 13.61%--of the portfolio that had 40% in bonds and 60% in
stocks was about half the 26.47% loss in the all-stock portfolio. This
hypothetical example is for illustrative purposes only, and, of course,
past performance does not guarantee future results.
(1)Source: FINANCIAL ANALYSTS JOURNAL; Brinson, Singer, Beebower;
May/June 1991.
(2)The hypothetical returns are all weighted averages and assume reinvestment of
dividends. Stocks are represented by the S&P 500-Registered Trademark- Index
and bonds are represented by the Ibbotson Intermediate U.S. Government Bond
Index. Indices are unmanaged, do not incur costs and expenses, and cannot be
invested in directly. Portfolios were rebalanced annually. Returns represent
historical performance of these indices and not performance of any specific
investments.
16
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE EFFECTS OF ADDING BONDS TO AN ALL-STOCK
PORTFOLIO
HYPOTHETICAL PORTFOLIOS: 1970-1997
AVERAGE ANNUAL RETURN HIGHEST ANNUAL RETURN LOWEST ANNUAL RETURN
<S> <C> <C> <C>
100% Stocks 12.97% 37.43% -26.47%
90% Stocks / 10% Bonds 12.68% 35.37% -23.25%
80% Stocks / 20% Bonds 12.36% 33.30% -20.04%
70% Stocks / 30% Bonds 12.02% 31.24% -16.82%
60% Stocks / 40% Bonds 11.65% 29.18% -13.61%
</TABLE>
Q. ARE THE MARKETTRACK PORTFOLIOS MANAGED FOR TAX-EFFICIENCY?
A. Yes. The MarketTrack Portfolios use several management techniques designed to
minimize their capital gains distributions. First, they follow an indexing
strategy by investing either directly in index securities or index funds, which
helps them keep their portfolio turnover low and minimize capital gains
distributions. Second, when securities need to be sold--either to raise cash for
portfolio redemptions or when an index is rebalanced--the MarketTrack Portfolios
or the underlying index funds will always attempt to sell the shares with the
highest tax basis to minimize capital gains. Third, the Portfolios' recent shift
to a more static asset allocation mix should further reduce their turnover
rates. Recently, because of the Portfolios' conversion to the use of equity
index funds (March 1997) and a bond index fund (April 1998), the turnover ratios
have been higher than normal. We anticipate that these strategies will result in
lower turnover ratios going forward. Finally, the Portfolio Managers strive to
use efficient trading practices, which help to keep portfolio turnover down.
17
<PAGE>
SCHWAB MARKETTRACK GROWTH PORTFOLIO-TM-
STATEMENT OF NET ASSETS
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
COMMON STOCK--35.9%
AEROSPACE / DEFENSE--0.6%
Boeing Co. 9,678 $ 485
General Dynamics Corp. 1,600 68
Lockheed Martin Corp. 2,300 256
Northrop Grumman Corp. 900 95
Raytheon Co. Class B 3,400 193
Textron, Inc. 1,700 133
United Technologies Corp. 2,400 236
----------
1,466
----------
AIR TRANSPORTATION--0.2%
AMR Corp.+ 1,200 183
Delta Airlines, Inc. 1,100 128
FDX Corp.+ 1,360 92
Southwest Airlines Co. 1,950 54
US Airways Group, Inc.+ 1,000 71
----------
528
----------
ALCOHOLIC BEVERAGES--0.2%
Adolph Coors Co. Class B 200 7
Anheuser-Busch Companies, Inc. 4,700 216
Brown-Forman Corp. Class B 700 40
Seagram Co., Ltd. 3,500 149
----------
412
----------
APPAREL--0.1%
Fruit of the Loom, Inc. Class A+ 400 15
Liz Claiborne, Inc. 400 20
Nike, Inc. Class B 2,600 124
Reebok International Ltd. 400 12
Russell Corp. 200 5
Springs Industries, Inc. 300 17
Stride Rite Corp. 300 4
V.F. Corp. 1,200 62
----------
259
----------
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES--0.8%
BF Goodrich Co. 300 16
Chrysler Corp. 6,500 261
Cooper Tire & Rubber Co. 500 12
Cummins Engine Co., Inc. 400 22
Dana Corp. 1,100 65
Eaton Corp. 1,100 102
Echlin, Inc. 300 14
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Fleetwood Enterprises, Inc. 200 $ 9
Ford Motor Co. 12,100 554
General Motors Corp. 7,100 478
Genuine Parts Co. 1,500 54
Goodyear Tire & Rubber Co. 1,600 112
Navistar International Corp.+ 700 21
Paccar, Inc. 800 48
TRW, Inc. 1,300 69
----------
1,837
----------
BANKS--3.4%
Banc One Corp. 6,545 385
Bank of New York Co., Inc. 3,800 224
BankAmerica Corp. 7,200 612
BankBoston Corp. 1,700 183
Bankers Trust New York Corp. 1,400 181
BB & T Corp. 1,400 94
Chase Manhattan Corp. 4,440 615
Citicorp 4,800 721
Comerica, Inc. 2,100 141
Fifth Third Bancorp 2,925 161
First Chicago NBD Corp. 3,105 288
First Union Corp. 9,884 597
Fleet Financial Group, Inc. 2,624 227
Huntington Bancshares, Inc. 1,700 60
J.P. Morgan & Co., Inc. 2,000 263
KeyCorp, Inc. 4,400 175
MBNA Corp. 4,800 163
Mellon Bank Corp. 2,600 187
Mercantile Bancorp. Inc. 1,300 72
National City Corp. 3,300 229
NationsBank Corp. 9,501 720
Northern Trust Corp. 1,200 88
Norwest Corp. 7,220 287
PNC Bank Corp. 3,100 187
Republic New York Corp. 800 107
State Street Corp. 1,700 122
Summit Bancorp. 1,800 90
SunTrust Banks, Inc. 2,200 179
Synovus Financial Corp. 1,500 53
U. S. Bancorp. 2,550 324
Wachovia Corp. 2,100 178
Washington Mutual, Inc. 2,650 186
Wells Fargo & Co. 933 344
----------
8,443
----------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
BUSINESS MACHINES & SOFTWARE--3.4%
3COM Corp.+ 3,300 $ 113
Adobe Systems, Inc. 500 25
Apple Computer, Inc.+ 1,000 27
Autodesk, Inc. 200 9
Bay Networks, Inc.+ 1,800 42
Cabletron Systems, Inc.+ 1,300 17
Ceridian Corp.+ 528 30
Cisco Systems, Inc.+ 10,350 758
Compaq Computer Corp. 15,230 427
Computer Associates International, Inc. 5,525 324
Computer Sciences Corp.+ 2,380 126
Data General Corp.+ 300 5
Dell Computer Corp.+ 6,800 549
Digital Equipment Corp.+ 1,200 67
EMC Corp. 4,700 217
Gateway 2000, Inc.+ 1,500 88
Hewlett-Packard Co. 10,400 783
Honeywell, Inc. 1,300 121
Intergraph Corp.+ 500 4
International Business Machines Corp. 10,100 1,170
Microsoft Corp.+ 24,800 2,237
Novell, Inc.+ 3,200 32
Oracle Systems Corp.+ 9,475 245
Parametric Technology Corp.+ 2,200 70
Pitney Bowes, Inc. 3,400 163
Seagate Technology, Inc.+ 2,168 58
Silicon Graphics, Inc.+ 1,476 19
Sun Microsystems, Inc.+ 3,400 140
Unisys Corp.+ 1,400 31
Xerox Corp. 3,300 375
----------
8,272
----------
BUSINESS SERVICES--0.5%
Automatic Data Processing, Inc. 3,000 203
Browning-Ferris Industries, Inc. 1,800 61
Cognizant Corp. 1,400 72
Deluxe Corp. 700 23
Dun & Bradstreet Corp. 1,500 53
Ecolab, Inc. 1,400 44
Equifax, Inc. 1,200 46
First Data Corp. 4,200 142
H & R Block, Inc. 1,000 45
IKON Office Solutions 1,000 24
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Interpublic Group of Companies, Inc. 1,350 $ 86
Laidlaw, Inc. 3,000 42
Moore Corp. Ltd. 600 9
National Service Industries, Inc. 500 27
Omnicom Group, Inc. 1,600 76
R.R. Donnelley & Sons Co. 1,200 53
Waste Management, Inc. 4,300 144
----------
1,150
----------
CHEMICAL--0.9%
Air Products & Chemicals, Inc. 1,400 122
Dow Chemical Co. 2,700 261
E.I. du Pont de Nemours & Co. 11,400 831
Eastman Chemical Co. 800 55
Great Lakes Chemical Corp. 400 20
Hercules, Inc. 900 43
Minnesota Mining & Manufacturing Co. 4,300 406
Morton International, Inc. 1,100 35
Nalco Chemical Co. 600 24
PPG Industries, Inc. 1,800 127
Praxair, Inc. 1,400 70
Rohm & Haas Co. 900 97
Sigma-Aldrich Corp. 900 36
Union Carbide Corp. 1,100 53
W.R. Grace & Co.+ 900 18
----------
2,198
----------
CONSTRUCTION--0.1%
Armstrong World Industries, Inc. 500 43
Centex Corp. 600 21
Crane Co. 150 8
Fluor Corp. 700 33
Kaufman & Broad Home Corp. 200 6
Owens Corning 400 17
Pulte Corp. 100 5
Sherwin-Williams Co. 1,400 49
The Stanley Works 800 41
----------
223
----------
CONSUMER--DURABLE--0.1%
Black & Decker Corp. 600 31
Masco Corp. 1,700 98
Maytag Corp. 900 46
Newell Co. 1,300 63
</TABLE>
19
<PAGE>
SCHWAB MARKETTRACK GROWTH PORTFOLIO-TM-
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Snap-on, Inc. 300 $ 13
Whirlpool Corp. 800 58
----------
309
----------
CONSUMER--NONDURABLE--0.3%
American Greetings Corp. Class A 500 23
Corning, Inc. 2,100 84
Darden Restaurants, Inc. 1,200 19
Hasbro, Inc. 1,100 40
Jostens, Inc. 200 5
Mattel, Inc. 2,650 102
McDonald's Corp. 6,600 409
Rubbermaid, Inc. 1,200 34
Tricon Global Restaurants, Inc.+ 1,260 40
Wendy's International, Inc. 1,000 24
----------
780
----------
CONTAINERS--0.1%
Ball Corp. 200 8
Bemis Co., Inc. 500 22
Crown Cork & Seal Co., Inc. 1,000 52
Owens-Illinois, Inc.+ 1,100 44
Sealed Air Corp.+ 782 49
Stone Container Corp. 700 11
----------
186
----------
ELECTRONICS--1.5%
Advanced Micro Devices, Inc.+ 1,220 34
AMP, Inc. 1,900 75
Applied Materials, Inc. 3,300 119
DSC Communications Corp.+ 900 16
EG&G, Inc. 300 9
General Instrument Corp.+ 1,200 27
General Signal Corp. 200 9
Harris Corp. 500 24
Intel Corp. 16,400 1,325
KLA -Tencor Corp.+ 600 24
LSI Logic Corp.+ 1,100 30
Lucent Technologies, Inc. 13,296 1,012
Micron Technology, Inc. 1,800 56
Motorola, Inc. 6,000 334
National Semiconductor Corp.+ 1,400 31
Perkin Elmer Corp. 500 34
Rockwell International Corp. 2,100 117
Scientific-Atlanta, Inc. 400 10
Tektronix, Inc. 450 19
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Tellabs, Inc.+ 1,900 $ 135
Texas Instruments, Inc. 3,700 237
Thermo Electron Corp.+ 1,300 52
Thomas & Betts Corp. 481 28
----------
3,757
----------
ENERGY--RAW MATERIALS--0.4%
Anadarko Petroleum Corp. 600 44
Apache Corp. 600 21
Baker Hughes, Inc. 1,400 57
Burlington Resources, Inc. 1,505 71
Dresser Industries, Inc. 1,700 90
Halliburton Co. 2,258 124
Helmerich & Payne, Inc. 400 12
Occidental Petroleum Corp. 3,100 91
ONEOK, Inc. 200 8
Rowan Companies, Inc.+ 500 15
Schlumberger Ltd. 5,100 423
Union Pacific Resources Group 2,239 53
Western Atlas, Inc.+ 800 63
----------
1,072
----------
FOOD & AGRICULTURE--2.2%
Archer-Daniels Midland Co. 5,375 116
Bestfoods, Inc. 3,000 165
Campbell Soup Co. 4,600 236
Coca-Cola Co. 24,800 1,880
ConAgra, Inc. 4,500 131
General Mills, Inc. 1,963 133
H.J. Heinz Co. 3,700 202
Hershey Foods Corp. 1,500 110
Kellogg Co. 3,900 161
Monsanto Co. 5,700 301
PepsiCo, Inc. 14,800 587
Pioneer Hi-Bred International, Inc. 3,000 113
Quaker Oats Co. 1,400 73
Ralston Purina Co. 1,200 127
Sara Lee Corp. 4,800 286
SYSCO Corp. 3,000 71
Unilever NV 6,400 478
Wm. Wrigley Jr. Co. 1,400 125
----------
5,295
----------
GOLD--0.1%
Barrick Gold Corp. 3,500 79
Battle Mountain Gold Co. 2,000 14
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Homestake Mining Co. 1,300 $ 15
Newmont Mining Corp. 1,401 45
Placer Dome, Inc. 2,100 31
----------
184
----------
HEALTHCARE / DRUG & MEDICINE--4.2%
Abbott Laboratories 7,700 563
Allergan, Inc. 300 12
ALZA Corp.+ 800 38
American Home Products Corp. 6,500 605
Amgen, Inc.+ 2,700 161
Bausch & Lomb, Inc. 300 15
Baxter International, Inc. 2,800 155
Becton, Dickinson & Co. 1,300 91
Biomet, Inc.+ 800 24
Boston Scientific Corp.+ 1,737 126
Bristol-Myers Squibb Co. 10,300 1,091
C.R. Bard, Inc. 400 14
Cardinal Health, Inc. 1,200 116
Columbia/HCA Healthcare Corp. 6,300 208
Eli Lilly & Co. 11,100 772
Guidant Corp. 1,500 100
HBO & Co. 2,100 126
HealthSouth Corp.+ 3,452 104
Humana, Inc.+ 1,400 38
Johnson & Johnson 13,500 964
Mallinckrodt, Inc. 400 13
Manor Care, Inc. 300 11
Medtronic, Inc. 4,700 247
Merck & Co., Inc. 12,400 1,494
Pfizer, Inc. 13,300 1,512
Pharmacia & Upjohn, Inc. 4,900 206
Schering-Plough Corp. 7,400 593
Service Corp. International 2,200 91
Shared Medical Systems Corp. 300 22
St. Jude Medical, Inc. 725 26
Tenet Healthcare Corp.+ 2,800 105
United Healthcare Co. 1,700 119
US Surgical Corp. 700 22
Warner Lambert Co. 2,900 549
----------
10,333
----------
HOUSEHOLD PRODUCTS--1.0%
Alberto-Culver Co. Class B 200 6
Avon Products, Inc. 1,400 115
Clorox Co. 1,200 101
Colgate-Palmolive Co. 3,000 269
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Gillette Co. 5,800 $ 670
International Flavors & Fragrances, Inc. 1,100 54
Procter & Gamble Co. 13,900 1,141
Tupperware Corp. 400 11
----------
2,367
----------
INSURANCE--1.6%
Aetna, Inc. 1,924 155
Allstate Corp. 4,500 433
American General Corp. 2,510 167
American International Group, Inc. 7,250 954
Aon Corp. 1,750 113
Chubb Corp. 2,100 166
CIGNA Corp. 800 166
Cincinnati Financial Corp. 600 76
Conseco, Inc. 1,604 80
General Re Corp. 935 209
Hartford Financial Services Group, Inc. 1,500 166
Jefferson-Pilot Corp. 1,575 92
Lincoln National Corp. 1,100 98
Marsh & McLennan Companies, Inc. 2,000 182
MBIA, Inc. 900 67
MGIC Investment Corp. 1,200 76
Progressive Corp. 900 122
SAFECO Corp. 1,100 55
St. Paul Companies, Inc. 1,226 104
SunAmerica, Inc. 1,650 82
Torchmark Corp. 1,100 49
Transamerica Corp. 1,000 116
UNUM Corp. 1,400 75
----------
3,803
----------
MEDIA--0.8%
CBS Corp. 6,800 242
Clear Channel Communications, Inc.+ 1,000 94
Comcast Corp. Class A 3,200 115
Dow Jones & Co., Inc. 1,000 49
Gannett Co., Inc. 2,900 197
Harcourt General, Inc. 800 42
King World Productions, Inc.+ 800 21
Knight-Ridder, Inc. 900 52
McGraw Hill Companies, Inc. 1,000 77
Meredith Corp. 200 9
New York Times Co. Class A 1,000 71
</TABLE>
21
<PAGE>
SCHWAB MARKETTRACK GROWTH PORTFOLIO-TM-
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Telecommunications, Inc. Series A (TCI Group)+ 4,900 $ 158
Time Warner, Inc. 5,600 440
Times Mirror Co. Series A 1,000 61
Tribune Co. 1,300 86
Viacom, Inc. Class B+ 3,300 191
----------
1,905
----------
MISCELLANEOUS FINANCE--1.6%
Associates First Capital Corp. 3,471 259
American Express Co. 4,900 500
Beneficial Corp. 900 117
Charles Schwab Corp. 2,350 82
Countrywide Credit Industries, Inc. 800 39
Fannie Mae 10,700 641
Franklin Resources, Inc. 2,500 134
Freddie Mac 6,700 310
Golden West Financial Corp. 900 95
Green Tree Financial Corp. 1,000 41
H.F. Ahmanson & Co. 1,000 76
Household International, Inc. 1,200 158
Lehman Brothers Holdings, Inc. 1,100 78
Merrill Lynch & Co., Inc. 3,800 333
Morgan Stanley, Dean Witter, Discover & Co. 5,950 469
Providian Financial Corp. 700 42
Travelers Group, Inc. 11,541 706
----------
4,080
----------
NON-FERROUS METALS--0.2%
Alcan Aluminum, Ltd. 2,000 65
Aluminum Company of America 1,800 140
Asarco, Inc. 200 5
Cyprus Amax Minerals Co. 600 10
Engelhard Corp. 1,300 27
Freeport-McMoRan Copper & Gold, Inc. Class B 1,700 32
Inco Ltd. 1,400 25
Phelps Dodge Corp. 600 40
Reynolds Metals Co. 800 53
----------
397
----------
OIL--DOMESTIC--0.3%
Amerada Hess Corp. 1,000 58
Ashland, Inc. 800 42
Atlantic Richfield Co. 3,300 258
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Kerr-McGee Corp. 500 $ 33
Oryx Energy Co.+ 1,000 26
Pennzoil Co. 500 32
Phillips Petroleum Co. 2,400 119
Sun, Inc. 400 16
Unocal Corp. 2,200 90
USX-Marathon Group 2,600 93
----------
767
----------
OIL--INTERNATIONAL--2.1%
Amoco Corp. 10,200 451
Chevron Corp. 6,800 562
Exxon Corp. 24,700 1,802
Mobil Corp. 7,900 624
Royal Dutch Petroleum Co.-- Sponsored ADR** 21,500 1,216
Texaco, Inc. 5,561 342
----------
4,997
----------
OPTICAL & PHOTO--0.1%
Eastman Kodak Co. 3,300 238
Polaroid Corp. 500 22
----------
260
----------
PAPER & FOREST PRODUCTS--0.4%
Boise Cascade Corp. 300 11
Champion International Corp. 700 38
Fort James Corp. 2,000 99
Georgia-Pacific Corp. 1,200 93
International Paper Co. 2,800 146
Kimberly-Clark Corp. 5,360 271
Louisiana-Pacific Corp. 800 18
Mead Corp. 1,000 35
Potlatch Corp. 100 5
Temple Inland, Inc. 600 39
Union Camp Corp. 700 42
Westvaco Corp. 700 21
Weyerhaeuser Co. 1,700 98
Willamette Industries, Inc. 900 35
----------
951
----------
PRODUCER GOODS & MANUFACTURING--2.0%
Aeroquip-Vickers, Inc. 300 19
Allied Signal, Inc. 5,400 237
Avery Dennison Corp. 700 37
Briggs & Stratton Corp. 100 5
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Case Corp. 800 $ 51
Caterpillar, Inc. 3,500 199
Cincinnati Milacron, Inc. 100 3
Cooper Industries, Inc. 1,300 87
Deere & Co. 2,600 152
Dover Corp. 1,800 71
Emerson Electric Co. 4,500 286
FMC Corp.+ 400 31
Foster Wheeler Corp. 300 8
General Electric Co. 32,700 2,783
Harnischfeger Industries, Inc. 200 6
Illinois Tool Works, Inc. 2,500 176
Ingersoll-Rand Co. 1,450 67
ITT Industries, Inc. 900 33
Johnson Controls, Inc. 600 36
McDermott International, Inc. 300 12
Millipore Corp. 200 7
NACCO Industries, Inc. Class A 100 17
Pall Corp. 1,000 20
Parker-Hannifin Corp. 750 33
Raychem Corp. 800 32
Tenneco, Inc. 1,400 60
Timken Co. 600 24
Tyco International Ltd. 5,700 311
W.W. Grainger, Inc. 800 87
----------
4,890
----------
RAILROAD & SHIPPING--0.2%
Burlington Northern Santa Fe Corp. 1,700 168
CSX Corp. 2,200 116
Norfolk Southern Corp. 3,600 120
Union Pacific Corp. 2,500 137
----------
541
----------
RETAIL--1.8%
Albertson's, Inc. 2,200 110
American Stores Co. 2,600 62
AutoZone, Inc.+ 1,300 39
Cendant Corp.+ 8,222 206
Circuit City Stores, Inc. 800 33
Consolidated Stores Corp.+ 1,100 44
Costco Companies, Inc.+ 1,800 101
CVS Corp. 1,800 133
Dayton Hudson Corp. 2,200 192
Dillards Inc. Class A 800 29
Federated Department Stores, Inc.+ 1,800 89
Gap, Inc. 3,600 185
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Giant Food, Inc. Class A 300 $ 11
Great Atlantic & Pacific Tea Co., Inc. 200 6
Home Depot, Inc. 7,350 512
J.C. Penney Co., Inc. 2,500 178
Kmart Corp.+ 4,700 82
Kroger Co.+ 2,300 96
Limited, Inc. 2,397 80
Longs Drug Stores, Inc. 200 6
Lowe's Companies, Inc. 1,500 105
May Department Stores Co. 2,400 148
Mercantile Stores Co., Inc. 400 29
Nordstrom, Inc. 800 52
Pep Boys-Manny Moe & Jack 300 7
Rite Aid Corp. 2,600 84
Sears Roebuck & Co. 3,700 219
SUPERVALU, Inc. 300 13
Tandy Corp. 800 40
TJX Companies, Inc. 1,500 66
Toys 'R' Us, Inc.+ 2,600 72
Wal-Mart Stores, Inc. 22,000 1,112
Walgreen Co. 4,700 162
Winn Dixie Stores, Inc. 1,200 45
Woolworth Corp.+ 1,300 30
----------
4,378
----------
STEEL--0.1%
Allegheny Teledyne, Inc. 1,470 37
Armco, Inc.+ 1,000 7
Bethlehem Steel Corp.+ 800 12
Inland Steel Industries, Inc. 300 9
Nucor Corp. 600 36
USX - U.S. Steel Group, Inc. 500 20
Worthington Industries, Inc. 900 16
----------
137
----------
TELEPHONE--2.7%
AirTouch Communications, Inc.+ 4,800 255
Alltel Corp. 1,600 68
Ameritech Corp. 11,400 485
Andrew Corp.+ 850 19
AT&T Corp. 16,300 979
Bell Atlantic Corp. 8,073 755
BellSouth Corp. 10,000 642
Frontier Corp. 1,400 42
GTE Corp. 9,600 561
MCI Communications Corp. 6,700 337
Nextel Communications, Inc.+ 2,600 75
</TABLE>
23
<PAGE>
SCHWAB MARKETTRACK GROWTH PORTFOLIO-TM-
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Northern Telecom Ltd. 5,600 $ 341
SBC Communications, Inc. 18,334 760
Sprint Corp. 4,300 294
U.S. West, Inc. (Communications Group) 4,600 243
U.S. West, Inc. (Media Group)+ 5,800 219
WorldCom, Inc.+ 10,100 432
----------
6507
----------
TOBACCO--0.5%
Fortune Brands, Inc. 1,400 52
Loew's Corp. 1,300 130
Philip Morris Companies., Inc. 24,300 907
UST, Inc. 1,600 44
----------
1,133
----------
TRAVEL & RECREATION--0.4%
Brunswick Corp. 900 29
Harrah's Entertainment, Inc.+ 900 23
Hilton Hotels Corp. 2,200 70
Marriott International, Inc. Class A+ 1,300 42
Marriott International, Inc. 1,300 43
Mirage Resorts, Inc.+ 1,500 33
Walt Disney Co. 6,973 868
----------
1,108
----------
TRUCKING & FREIGHT--0.0%
Ryder Systems, Inc. 400 14
----------
UTILITIES--ELECTRIC & GAS--1.0%
Ameren Corp. 1,500 59
American Electric Power Co., Inc. 1,900 91
Baltimore Gas & Electric Co. 1,300 41
Carolina Power & Light Co. 1,200 52
Central & South West Services Corp. 1,800 47
Cinergy Corp. 1,300 45
Coastal Corp. 1,100 79
Columbia Gas System, Inc. 800 65
Consolidated Edison, Inc. 2,100 95
Consolidated Natural Gas Co. 1,000 58
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Dominion Resources, Inc. 1,600 $ 63
DTE Energy Co. 1,400 55
Duke Power Co. 3,626 209
Eastern Enterprises 100 4
Edison International 3,700 110
Enron Corp. 2,900 143
Entergy Corp. 2,100 52
First Energy Corp. 2,100 64
FPL Group, Inc. 1,900 118
GPU, Inc. 900 36
Houston Industries, Inc. 2,549 74
Niagara Mohawk Power Corp.+ 1,400 17
NICOR, Inc. 200 8
Northern States Power Co. 800 45
Pacific Enterprises, Inc. 800 31
Pacific Gas & Electric Corp. 4,200 136
PacifiCorp. 2,700 63
PECO Energy Co. 1,900 45
Peoples Energy Corp. 100 4
PP&L Resources, Inc. 1,400 32
Public Service Enterprise Group, Inc. 2,000 67
Sonat, Inc. 600 27
Southern Co. 6,600 175
Texas Utilities Co. 2,167 87
Unicom Corp. 1,900 66
Williams Companies, Inc. 2,700 85
----------
2,448
----------
INTERNATIONAL--0.0%
Germany--0.0%
VIAG AG+ 20 10
----------
United Kingdom--0.0%
Centrica+ 21,063 36
Granada Group+ 29 1
Siebe PLC+ 10 0
----------
47
----------
TOTAL COMMON STOCK
(Cost $55,663) 87,434
----------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
WARRANTS--0.0%
BELGIUM--0.0%
Generale de Banque (expire 11/15/99)+ 88 $ 0
----------
FRANCE--0.0%
AXA UAP CVG (expire 01/07/99)+ 636 0
----------
SWITZERLAND--0.0%
Schweizerische Bankverein (expire 6/30/00)+ 30 1
----------
TOTAL WARRANTS (Cost $0) 1
----------
MUTUAL FUNDS--57.5%
Schwab S&P 500 Fund 527,506 9,052
Schwab International Index Fund 3,071,335 46,285
Schwab Small-Cap Index Fund 2,454,003 48,442
Schwab Total Bond Market Index Fund 3,620,811 36,208
----------
TOTAL MUTUAL FUNDS
(Cost $122,169) 139,987
----------
<CAPTION>
Value
Par (000s)
---------- ----------
<S> <C> <C>
AGENCY NOTES--8.9%(a)
DISCOUNT NOTES--8.9%
Federal Home Loan Mortgage Corp.
5.44%, 07/01/98 $11,300,000 $ 11,197
Federal National Mortgage Association
5.44%, 05/01/98 10,500,000 10,500
----------
21,697
----------
TOTAL AGENCY NOTES (Cost $21,697) 21,697
----------
CASH EQUIVALENTS--2.2%
MSTC Cash Reserve Liquid Asset Fund
5.31%*, 05/07/98 5,295,104 5,295
----------
TOTAL CASH EQUIVALENTS (Cost $5,295) 5,295
----------
TOTAL INVESTMENTS--104.5%
(Cost $204,824) 254,414
----------
OTHER ASSETS AND LIABILITIES--(4.5)%
Other Assets 814
Liabilities (11,699)
----------
(10,885)
----------
NET ASSETS--100.0% $ 243,529
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENTS OF NET ASSETS AND NOTES TO THE FINANCIAL
STATEMENTS.
25
<PAGE>
SCHWAB MARKETTRACK BALANCED PORTFOLIO-TM-
STATEMENT OF NET ASSETS
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
COMMON STOCK--26.0%
AEROSPACE / DEFENSE--0.5%
Boeing Co. 6,684 $ 335
General Dynamics Corp. 1,000 42
Lockheed Martin Corp. 1,600 178
Northrop Grumman Corp. 500 53
Raytheon Co. Class B 2,300 130
Textron, Inc. 1,100 86
United Technologies Corp. 2,000 197
----------
1,021
----------
AIR TRANSPORTATION--0.2%
AMR Corp.+ 800 122
Delta Airlines, Inc. 700 81
FDX Corp.+ 1,280 87
Southwest Airlines Co. 900 25
US Airways Group, Inc.+ 700 50
----------
365
----------
ALCOHOLIC BEVERAGES--0.1%
Adolph Coors Co. Class B 100 4
Anheuser-Busch Companies, Inc. 3,400 156
Brown-Forman Corp. Class B 500 28
Seagram Co., Ltd. 2,000 85
----------
273
----------
APPAREL--0.1%
Fruit of the Loom, Inc. Class A+ 200 7
Liz Claiborne, Inc. 200 10
Nike, Inc. Class B 1,700 81
Reebok International Ltd. 200 6
Russell Corp. 100 3
Springs Industries, Inc. 200 11
Stride Rite Corp. 200 3
V.F. Corp. 600 31
----------
152
----------
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES--0.5%
BF Goodrich Co. 200 11
Chrysler Corp. 4,300 173
Cooper Tire & Rubber Co. 200 5
Cummins Engine Co., Inc. 300 16
Dana Corp. 700 41
Eaton Corp. 600 55
Echlin, Inc. 200 9
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Fleetwood Enterprises, Inc. 100 $ 5
Ford Motor Co. 8,200 376
General Motors Corp. 4,700 317
Genuine Parts Co. 1,150 41
Goodyear Tire & Rubber Co. 1,300 91
Navistar International Corp.+ 200 6
Paccar, Inc. 600 36
TRW, Inc. 900 48
----------
1,230
----------
BANKS--2.6%
Banc One Corp. 4,386 258
Bank of New York Co., Inc. 2,600 154
BankAmerica Corp. 4,900 417
BankBoston Corp. 1,200 130
Bankers Trust New York Corp. 900 116
BB & T Corp. 1,000 67
Chase Manhattan Corp. 3,032 420
Citicorp 3,200 481
Comerica, Inc. 1,500 100
Fifth Third Bancorp 1,725 95
First Chicago NBD Corp. 2,143 199
First Union Corp. 6,836 413
Fleet Financial Group, Inc. 1,956 169
Huntington Bancshares, Inc. 1,200 43
J.P. Morgan & Co., Inc. 1,400 184
KeyCorp, Inc. 3,200 127
MBNA Corp. 3,475 118
Mellon Bank Corp. 1,700 122
Mercantile Bancorp. Inc. 900 50
National City Corp. 2,200 152
NationsBank Corp. 6,436 487
Northern Trust Corp. 800 58
Norwest Corp. 5,120 203
PNC Bank Corp. 2,100 127
Republic New York Corp. 500 67
State Street Corp. 1,100 79
Summit Bancorp. 1,200 60
SunTrust Banks, Inc. 1,500 122
Synovus Financial Corp. 800 28
U. S. Bancorp. 1,760 224
Wachovia Corp. 1,400 119
Washington Mutual, Inc. 1,760 123
Wells Fargo & Co. 700 258
----------
5,770
----------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
BUSINESS MACHINES & SOFTWARE--2.5%
3COM Corp.+ 2,000 $ 69
Adobe Systems, Inc. 400 20
Apple Computer, Inc.+ 500 14
Autodesk, Inc. 100 5
Bay Networks, Inc.+ 1,100 26
Cabletron Systems, Inc.+ 700 9
Ceridian Corp.+ 214 12
Cisco Systems, Inc.+ 7,050 516
Compaq Computer Corp. 10,114 284
Computer Associates International, Inc. 3,725 218
Computer Sciences Corp.+ 1,190 63
Data General Corp.+ 100 2
Dell Computer Corp.+ 4,800 388
Digital Equipment Corp.+ 900 50
EMC Corp. 3,100 143
Gateway 2000, Inc. 1,000 59
Hewlett-Packard Co. 7,000 527
Honeywell, Inc. 1,200 112
Intergraph Corp.+ 200 2
International Business Machines Corp. 6,700 776
Microsoft Corp.+ 16,400 1,476
Novell, Inc.+ 1,200 12
Oracle Systems Corp.+ 6,500 168
Parametric Technology Corp.+ 1,400 45
Pitney Bowes, Inc. 2,400 115
Seagate Technology, Inc.+ 1,284 34
Silicon Graphics, Inc.+ 1,054 14
Sun Microsystems, Inc.+ 2,200 91
Unisys Corp.+ 1,000 22
Xerox Corp. 2,300 261
----------
5,533
----------
BUSINESS SERVICES--0.3%
Automatic Data Processing, Inc. 2,000 133
Browning-Ferris Industries, Inc. 1,200 41
Cognizant Corp. 900 46
Deluxe Corp. 500 17
Dun & Bradstreet Corp. 1,000 36
Ecolab, Inc. 1,000 32
Equifax, Inc. 700 27
First Data Corp. 2,600 88
H & R Block, Inc. 600 27
IKON Office Solutions 500 12
Interpublic Group of Companies, Inc. 850 54
Laidlaw, Inc. 2,000 28
Moore Corp. Ltd. 200 3
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
National Service Industries, Inc. 300 $ 16
Omnicom Group, Inc. 1,000 47
R.R. Donnelley & Sons Co. 800 35
Waste Management, Inc. 2,500 84
----------
726
----------
CHEMICAL--0.7%
Air Products & Chemicals, Inc. 1,100 96
Dow Chemical Co. 1,800 174
E.I. du Pont de Nemours & Co. 7,600 553
Eastman Chemical Co. 600 41
Great Lakes Chemical Corp. 100 5
Hercules, Inc. 700 33
Minnesota Mining & Manufacturing Co. 2,900 274
Morton International, Inc. 600 19
Nalco Chemical Co. 300 12
PPG Industries, Inc. 1,200 85
Praxair, Inc. 1,000 50
Rohm & Haas Co. 500 54
Sigma-Aldrich Corp. 400 16
Union Carbide Corp. 800 39
W.R. Grace & Co.+ 600 12
----------
1,463
----------
CONSTRUCTION--0.1%
Armstrong World Industries, Inc. 400 34
Centex Corp. 400 14
Crane Co. 150 8
Fluor Corp. 200 9
Kaufman & Broad Home Corp. 100 3
Owens Corning 300 12
Pulte Corp. 100 5
Sherwin-Williams Co. 1,100 41
The Stanley Works 400 20
----------
146
----------
CONSUMER--DURABLE--0.1%
Black & Decker Corp. 300 15
Masco Corp. 1,100 66
Maytag Corp. 300 15
Newell Co. 900 43
Snap-on, Inc. 150 6
Whirlpool Corp. 500 36
----------
181
----------
</TABLE>
27
<PAGE>
SCHWAB MARKETTRACK BALANCED PORTFOLIO-TM-
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
CONSUMER--NONDURABLE--0.2%
American Greetings Corp. Class A 200 $ 9
Corning, Inc. 1,200 48
Darden Restaurants, Inc. 400 6
Hasbro, Inc. 450 17
Jostens, Inc. 100 2
Mattel, Inc. 1,625 62
McDonald's Corp. 4,700 292
Rubbermaid, Inc. 600 17
Tricon Global Restaurants, Inc.+ 830 26
Wendy's International, Inc. 500 12
----------
491
----------
CONTAINERS--0.0%
Ball Corp. 100 4
Bemis Co., Inc. 100 4
Crown Cork & Seal Co., Inc. 900 47
Owens-Illinois, Inc.+ 600 24
Sealed Air Corp.+ 621 39
Stone Container Corp. 200 3
----------
121
----------
ELECTRONICS--1.1%
Advanced Micro Devices, Inc.+ 820 23
AMP, Inc. 1,100 43
Applied Materials, Inc.+ 2,200 79
DSC Communications Corp.+ 400 7
EG&G, Inc. 200 6
General Instrument Corp.+ 500 11
General Signal Corp. 100 4
Harris Corp. 400 19
Intel Corp. 11,200 906
KLA -Tencor Corp.+ 400 16
LSI Logic Corp.+ 600 16
Lucent Technologies, Inc. 9,130 695
Micron Technology, Inc. 1,100 34
Motorola, Inc. 4,000 223
National Semiconductor Corp.+ 1,000 22
Perkin Elmer Corp. 400 27
Rockwell International Corp. 1,400 78
Scientific-Atlanta, Inc. 200 5
Tektronix, Inc. 250 11
Tellabs, Inc.+ 1,300 92
Texas Instruments, Inc. 2,400 154
Thermo Electron Corp.+ 900 36
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Thomas & Betts Corp. 81 $ 5
----------
2,512
----------
ENERGY--RAW MATERIALS--0.3%
Anadarko Petroleum Corp. 400 29
Apache Corp. 400 14
Baker Hughes, Inc. 900 36
Burlington Resources, Inc. 910 43
Dresser Industries, Inc. 1,000 53
Halliburton Co. 1,574 87
Helmerich & Payne, Inc. 1,000 31
Occidental Petroleum Corp. 2,000 59
ONEOK, Inc. 100 4
Rowan Companies, Inc.+ 300 9
Schlumberger Ltd. 3,500 289
Union Pacific Resources Group 1,562 37
Western Atlas, Inc.+ 500 40
----------
731
----------
FOOD & AGRICULTURE--1.6%
Archer-Daniels Midland Co. 3,025 65
Bestfoods, Inc. 2,400 132
Campbell Soup Co. 3,100 159
Coca-Cola Co. 16,800 1,274
ConAgra, Inc. 2,400 70
General Mills, Inc. 1,346 91
H.J. Heinz Co. 2,500 136
Hershey Foods Corp. 1,000 73
Kellogg Co. 2,300 95
Monsanto Co. 4,000 212
PepsiCo, Inc. 10,300 409
Pioneer Hi-Bred International, Inc. 2,100 79
Quaker Oats Co. 1,000 52
Ralston Purina Co. 1,100 117
Sara Lee Corp. 3,200 191
SYSCO Corp. 2,200 52
Unilever NV 4,300 321
Wm. Wrigley Jr. Co. 1,000 89
----------
3,617
----------
GOLD--0.0%
Barrick Gold Corp. 2,000 44
Battle Mountain Gold Co. 1,200 9
Homestake Mining Co. 600 7
Newmont Mining Corp. 629 20
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Placer Dome, Inc. 1,000 $ 15
----------
95
----------
HEALTHCARE/DRUGS & MEDICINE--3.1%
Abbott Laboratories 5,400 395
Allergan, Inc. 300 12
ALZA Corp.+ 300 14
American Home Products Corp. 4,600 428
Amgen, Inc.+ 1,800 107
Bausch & Lomb, Inc. 200 10
Baxter International, Inc. 1,900 105
Becton, Dickinson & Co. 900 63
Biomet, Inc.+ 400 12
Boston Scientific Corp.+ 1,037 75
Bristol-Myers Squibb Co. 6,900 731
C.R. Bard, Inc. 200 7
Cardinal Health, Inc. 1,100 106
Columbia/HCA Healthcare Corp. 3,600 119
Eli Lilly & Co. 7,400 515
Guidant Corp. 1,000 67
HBO & Co. 1,100 66
HealthSouth Corp.+ 1,876 57
Humana, Inc.+ 700 19
Johnson & Johnson 9,300 664
Mallinckrodt, Inc. 400 13
Manor Care, Inc. 200 7
Medtronic, Inc. 3,200 168
Merck & Co., Inc. 8,300 1,000
Pfizer, Inc. 9,000 1,025
Pharmacia & Upjohn, Inc. 2,800 118
Schering-Plough Corp. 4,900 393
Service Corp. International 1,400 58
Shared Medical Systems Corp. 200 15
St. Jude Medical, Inc. 430 15
Tenet Healthcare Corp.+ 1,700 64
United Healthcare Co. 1,300 91
US Surgical Corp. 400 13
Warner Lambert Co. 1,900 359
----------
6,911
----------
HOUSEHOLD PRODUCTS--0.7%
Alberto-Culver Co. Class B 200 6
Avon Products, Inc. 900 74
Clorox Co. 1,100 92
Colgate-Palmolive Co. 2,100 188
Gillette Co. 3,900 450
International Flavors & Fragrances, Inc. 800 39
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Procter & Gamble Co. 9,200 $ 757
Tupperware Corp. 200 5
----------
1,611
----------
INSURANCE--1.2%
Aetna, Inc. 1,134 92
Allstate Corp. 3,100 298
American General Corp. 1,710 114
American International Group, Inc. 4,900 646
Aon Corp. 1,150 74
Chubb Corp. 1,500 118
CIGNA Corp. 600 124
Cincinnati Financial Corp. 400 51
Conseco, Inc. 1,030 51
General Re Corp. 686 153
Hartford Financial Services Group, Inc. 1,100 122
Jefferson-Pilot Corp. 900 53
Lincoln National Corp. 1,100 98
Marsh & McLennan Companies, Inc. 1,200 109
MBIA, Inc. 900 67
MGIC Investment Corp. 800 50
Progressive Corp. 600 81
SAFECO Corp. 800 40
St. Paul Companies, Inc. 713 60
SunAmerica, Inc. 1,050 52
Torchmark Corp. 800 36
Transamerica Corp. 700 81
UNUM Corp. 1,000 54
----------
2,624
----------
MEDIA--0.5%
CBS Corp. 4,000 143
Clear Channel Communications, Inc. 700 66
Comcast Corp. Class A 1,700 61
Dow Jones & Co., Inc. 700 34
Gannett Co., Inc. 1,900 129
Harcourt General, Inc. 500 26
King World Productions, Inc.+ 600 16
Knight-Ridder, Inc. 600 35
McGraw Hill Companies, Inc. 700 54
Meredith Corp. 200 9
New York Times Co. Class A 700 50
Telecommunications, Inc. Series A (TCI Group)+ 2,800 90
Time Warner, Inc. 3,800 298
Times Mirror Co. Series A 700 43
Tribune Co. 900 59
</TABLE>
29
<PAGE>
SCHWAB MARKETTRACK BALANCED PORTFOLIO-TM-
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Viacom, Inc. Class B+ 1,900 $ 110
----------
1,223
----------
MISCELLANEOUS FINANCE--1.2%
American Express Co. 3,300 337
Associates First Capital Corp. 2,349 176
Beneficial Corp. 500 65
Charles Schwab Corp. 1,350 47
Countrywide Credit Industries, Inc. 500 24
Fannie Mae 7,100 425
Franklin Resources, Inc. 1,700 91
Freddie Mac 4,700 218
Golden West Financial Corp. 500 53
Green Tree Financial Corp. 700 29
H.F. Ahmanson & Co. 700 53
Household International, Inc. 900 118
Lehman Brothers Holdings, Inc. 700 50
Merrill Lynch & Co., Inc. 2,400 211
Morgan Stanley, Dean Witter, Discover & Co. 3,955 312
Providian Financial Corp. 500 30
Travelers Group, Inc. 7,663 468
----------
2,707
----------
NON-FERROUS METALS 0.1%
Alcan Aluminum, Ltd. 1,300 42
Aluminum Company of America 1,500 116
Asarco, Inc. 100 2
Cyprus Amax Minerals Co. 400 7
Engelhard Corp. 600 13
Freeport-McMoRan Copper & Gold, Inc. Class B 1,100 21
Inco Ltd. 900 16
Phelps Dodge Corp. 400 27
Reynolds Metals Co. 500 33
----------
277
----------
OIL--DOMESTIC--0.2%
Amerada Hess Corp. 700 40
Ashland, Inc. 500 26
Atlantic Richfield Co. 2,300 181
Kerr-McGee Corp. 400 26
Oryx Energy Co.+ 600 16
Pennzoil Co. 700 45
Phillips Petroleum Co. 1,500 74
Sun, Inc. 200 8
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Unocal Corp. 1,400 $ 57
USX-Marathon Group 1,600 57
----------
530
----------
OIL--INTERNATIONAL--1.5%
Amoco Corp. 7,000 310
Chevron Corp. 4,600 380
Exxon Corp. 16,400 1,196
Mobil Corp. 5,500 435
Royal Dutch Petroleum Co.-- Sponsored ADR** 14,300 809
Texaco, Inc. 3,730 229
----------
3,359
----------
OPTICAL & PHOTO--0.1%
Eastman Kodak Co. 2,200 159
Polaroid Corp. 300 13
----------
172
----------
PAPER & FOREST PRODUCTS--0.3%
Boise Cascade Corp. 100 4
Champion International Corp. 500 27
Fort James Corp. 900 45
Georgia-Pacific Corp. 900 69
International Paper Co. 1,800 94
Kimberly-Clark Corp. 3,480 175
Louisiana-Pacific Corp. 400 9
Mead Corp. 600 21
Potlatch Corp. 100 5
Temple Inland, Inc. 400 26
Union Camp Corp. 500 30
Westvaco Corp. 400 12
Weyerhaeuser Co. 1,000 58
Willamette Industries, Inc. 400 16
----------
591
----------
PRODUCER GOODS & MANUFACTURING--1.5%
Aeroquip-Vickers, Inc. 100 6
Allied Signal, Inc. 3,200 140
Avery Dennison Corp. 600 31
Briggs & Stratton Corp. 100 5
Case Corp. 500 32
Caterpillar, Inc. 2,500 142
Cincinnati Milacron, Inc. 100 3
Cooper Industries, Inc. 900 60
Deere & Co. 1,700 99
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Dover Corp. 1,600 $ 63
Emerson Electric Co. 3,000 191
FMC Corp.+ 400 31
Foster Wheeler Corp. 100 3
General Electric Co. 22,200 1,890
Harnischfeger Industries, Inc. 100 3
Illinois Tool Works, Inc. 1,700 120
Ingersoll-Rand Co. 900 41
ITT Industries, Inc. 400 15
Johnson Controls, Inc. 500 30
McDermott International, Inc. 200 8
Millipore Corp. 200 7
NACCO Industries, Inc. Class A 100 17
Pall Corp. 500 10
Parker-Hannifin Corp. 600 27
Raychem Corp. 500 20
Tenneco, Inc. 1,000 43
Timken Co. 200 8
Tyco International Ltd. 3,800 207
W.W. Grainger, Inc. 500 54
----------
3,306
----------
RAILROAD & SHIPPING--0.2%
Burlington Northern Santa Fe Corp. 1,400 138
CSX Corp. 1,500 79
Norfolk Southern Corp. 2,300 77
Union Pacific Corp. 1,700 93
----------
387
----------
RETAIL--1.3%
Albertson's, Inc. 1,300 65
American Stores Co. 1,700 41
AutoZone, Inc.+ 600 18
Cendant Corp.+ 4,915 123
Circuit City Stores, Inc. 400 16
Consolidated Stores Corp.+ 700 28
Costco Companies, Inc.+ 1,100 61
CVS Corp. 1,200 89
Dayton Hudson Corp. 1,600 140
Dillards Inc. Class A 400 15
Federated Department Stores, Inc.+ 1,100 54
Gap, Inc. 2,250 116
Giant Food, Inc. Class A 300 11
Great Atlantic & Pacific Tea Co., Inc. 100 3
Home Depot, Inc. 4,950 345
J.C. Penney Co., Inc. 1,700 121
Kmart Corp.+ 2,600 45
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Kroger Co.+ 1,400 $ 59
Limited, Inc. 1,544 52
Longs Drug Stores, Inc. 200 6
Lowe's Companies, Inc. 1,100 77
May Department Stores Co. 1,600 99
Mercantile Stores Co., Inc. 300 22
Nordstrom, Inc. 600 39
Pep Boys-Manny Moe & Jack 200 4
Rite Aid Corp. 1,800 58
Sears Roebuck & Co. 2,200 130
SUPERVALU, Inc. 300 13
Tandy Corp. 600 30
TJX Companies, Inc. 800 35
Toys 'R' Us, Inc.+ 1,800 50
Wal-Mart Stores, Inc. 15,200 766
Walgreen Co. 2,800 97
Winn Dixie Stores, Inc. 600 23
Woolworth Corp.+ 500 12
----------
2,863
----------
STEEL--0.0%
Allegheny Teledyne, Inc. 985 25
Armco, Inc.+ 400 3
Bethlehem Steel Corp.+ 300 5
Inland Steel Industries, Inc. 100 3
Nucor Corp. 500 29
USX--U.S. Steel Group, Inc. 500 20
Worthington Industries, Inc. 300 5
----------
90
----------
TELEPHONE--1.9%
AirTouch Communications, Inc.+ 2,900 154
Alltel Corp. 1,200 51
Ameritech Corp. 7,800 332
Andrew Corp.+ 325 7
AT&T Corp. 10,800 649
Bell Atlantic Corp. 5,436 509
BellSouth Corp. 6,600 424
Frontier Corp. 700 21
GTE Corp. 6,400 374
MCI Communications Corp. 4,700 236
Nextel Communications, Inc.+ 1,800 52
Northern Telecom Ltd. 3,800 231
SBC Communications, Inc. 12,924 536
Sprint Corp. 2,900 198
U.S. West, Inc. (Communications Group) 3,200 169
</TABLE>
31
<PAGE>
SCHWAB MARKETTRACK BALANCED PORTFOLIO-TM-
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
U.S. West, Inc. (Media Group)+ 4,000 $ 151
WorldCom, Inc.+ 6,700 287
----------
4,381
----------
TOBACCO--0.3%
Fortune Brands, Inc. 1,000 37
Loew's Corp. 1,000 100
Philip Morris Companies., Inc. 16,100 601
UST, Inc. 1,100 30
----------
768
----------
TRAVEL & RECREATION--0.3%
Brunswick Corp. 600 20
Harrah's Entertainment, Inc.+ 400 10
Hilton Hotels Corp. 1,500 48
Marriot International, Inc. Class A+ 1,000 32
Marriot International, Inc. 1,000 33
Mirage Resorts, Inc.+ 800 18
Walt Disney Co. 4,739 589
----------
750
----------
TRUCKING & FREIGHT--0.0%
Ryder Systems, Inc. 200 7
----------
UTILITIES--ELECTRIC & GAS--0.7%
Ameren Corp. 600 24
American Electric Power Co., Inc. 1,300 62
Baltimore Gas & Electric Co. 800 25
Carolina Power & Light Co. 900 39
Central & South West Services Corp. 1,300 34
Cinergy Corp. 1,000 35
Coastal Corp. 800 57
Columbia Gas System, Inc. 700 57
Consolidated Edison, Inc. 1,300 59
Consolidated Natural Gas Co. 700 40
Dominion Resources, Inc. 1,000 40
DTE Energy Co. 600 24
Duke Power Co. 2,426 139
Eastern Enterprises 100 4
Edison International 2,200 66
Enron Corp. 1,900 93
Entergy Corp. 1,500 37
First Energy Corp. 1,200 36
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
FPL Group, Inc. 1,300 $ 81
GPU, Inc. 500 20
Houston Industries, Inc. 1,724 50
Niagara Mohawk Power Corp.+ 400 5
NICOR, Inc. 100 4
Northern States Power Co. 500 28
Pacific Enterprises, Inc. 200 8
Pacific Gas & Electric Corp. 2,400 78
PacifiCorp. 1,800 42
PECO Energy Co. 1,400 33
Peoples Energy Corp. 100 4
PP&L Resources, Inc. 700 16
Public Service Enterprise Group, Inc. 1,300 44
Sonat, Inc. 400 18
Southern Co. 3,700 98
Texas Utilities Co. 1,222 49
Unicom Corp. 1,300 45
Williams Companies, Inc. 1,800 57
----------
1,551
----------
INTERNATIONAL--0.0%
Germany 0.0%
VIAG AG+ 12 6
United Kingdom 0.0%
Centrica+ 11,258 20
Siebe PLC+ 6 0
----------
26
----------
TOTAL COMMON STOCK
(Cost $37,727) 58,561
----------
WARRANTS--0.0%
BELGIUM 0.0%
Generale de Banque (expire 11/15/99)+ 44 0
----------
FRANCE 0.0%
AXA UAP CVG (expire 01/07/99)+ 328 0
----------
SWITZERLAND 0.0%
Schweizerische Bankverein (expire 6/30/00)+ 20 1
----------
TOTAL WARRANTS (Cost $0) 1
----------
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
MUTUAL FUNDS--66.3%
Schwab S&P 500 Fund 336,814 $ 5,780
Schwab International Index Fund 2,094,866 31,570
Schwab Small-Cap Index Fund 1,588,806 31,363
Schwab Total Bond Market Index Fund 8,038,216 80,381
----------
TOTAL MUTUAL FUNDS
(Cost $137,194) 149,094
----------
<CAPTION>
Par
----------
<S> <C> <C>
AGENCY NOTES--6.2%(a)
DISCOUNT NOTES--6.2%
Federal Home Loan Mortgage Corp.
5.44%, 07/01/98 $7,000,000 6,936
Federal National Mortgage Association
5.44%, 05/01/98 7,000,000 7,000
----------
13,936
----------
TOTAL AGENCY NOTES (Cost $13,936) 13,936
----------
<CAPTION>
Value
Par (000s)
---------- ----------
<S> <C> <C>
CASH EQUIVALENTS--4.4%
MSTC Cash Reserve Liquid Asset Fund
5.31%*, 05/07/98 $10,004,705 $ 10,005
----------
TOTAL CASH EQUIVALENTS
(Cost $10,005) 10,005
----------
TOTAL INVESTMENTS--103.0%
(Cost $198,862) 231,597
----------
OTHER ASSETS AND LIABILITIES--(3.0)%
Other Assets 875
Liabilities (7,543)
----------
(6,668)
----------
NET ASSETS--100.0% $ 224,929
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENTS OF NET ASSETS AND NOTES TO FINANCIAL
STATEMENTS.
33
<PAGE>
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO-TM-
STATEMENT OF NET ASSETS
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
COMMON STOCK--19.6%
AEROSPACE/DEFENSE--0.3%
Boeing Co. 1,546 $ 79
General Dynamics Corp. 200 8
Lockheed Martin Corp. 300 33
Northrop Grumman Corp. 100 11
Raytheon Co. Class B 500 28
Textron, Inc. 300 23
United Technologies Corp. 400 39
----------
221
----------
AIR TRANSPORTATION--0.1%
AMR Corp. 200 31
Delta Airlines, Inc. 100 12
FDX Corp.+ 280 19
Southwest Airlines Co. 450 12
US Airways Group, Inc.+ 200 14
----------
88
----------
ALCOHOLIC BEVERAGES--0.1%
Adolph Coors Co. Class B 100 4
Anheuser-Busch Companies, Inc. 700 32
Brown-Forman Corp. Class B 100 6
Seagram Co., Ltd. 500 21
----------
63
----------
APPAREL--0.1%
Fruit of the Loom, Inc. Class A+ 100 4
Liz Claiborne, Inc. 100 5
Nike, Inc. Class B 400 19
Reebok International Ltd. 100 3
Russell Corp. 100 3
Springs Industries, Inc. 100 6
Stride Rite Corp. 100 1
V.F. Corp. 200 10
----------
51
----------
AUTOMOTIVE PRODUCTS/MOTOR VEHICLES--0.4%
BF Goodrich Co. 100 5
Chrysler Corp. 1,000 40
Cooper Tire & Rubber Co. 100 2
Cummins Engine Co., Inc. 100 5
Dana Corp. 200 12
Eaton Corp. 200 18
Echlin, Inc. 100 5
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Fleetwood Enterprises, Inc. 100 $ 5
Ford Motor Co. 1,800 82
General Motors Corp. 1,100 74
Genuine Parts Co. 250 9
Goodyear Tire & Rubber Co. 300 21
Navistar International Corp.+ 100 3
Paccar, Inc. 100 6
TRW, Inc. 200 11
----------
298
----------
BANKS--1.8%
Banc One Corp. 967 57
Bank of New York Co., Inc. 600 35
BankAmerica Corp. 1,100 94
BankBoston Corp. 200 22
Bankers Trust New York Corp. 200 26
BB & T Corp. 200 14
Chase Manhattan Corp. 708 98
Citicorp 700 105
Comerica, Inc. 300 20
Fifth Third Bancorp 375 21
First Chicago NBD Corp. 481 45
First Union Corp. 1,500 91
Fleet Financial Group, Inc. 489 42
Huntington Bancshares, Inc. 500 18
J.P. Morgan & Co., Inc. 300 39
KeyCorp, Inc. 700 28
MBNA Corp. 737 25
Mellon Bank Corp. 400 29
Mercantile Bancorp. Inc. 200 11
National City Corp. 500 35
NationsBank Corp. 1,467 111
Northern Trust Corp. 200 15
Norwest Corp. 1,100 44
PNC Bank Corp. 500 30
Republic New York Corp. 100 13
State Street Corp. 300 21
Summit Bancorp. 300 15
SunTrust Banks, Inc. 300 24
Synovus Financial Corp. 200 7
U. S. Bancorp. 363 46
Wachovia Corp. 300 25
Washington Mutual, Inc. 390 27
Wells Fargo & Co. 166 61
----------
1,294
----------
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
BUSINESS MACHINES & SOFTWARE--1.8%
3COM Corp.+ 600 $ 21
Adobe Systems, Inc. 100 5
Apple Computer, Inc.+ 200 5
Autodesk, Inc. 100 5
Bay Networks, Inc.+ 300 7
Cabletron Systems, Inc.+ 400 5
Ceridian Corp.+ 157 9
Cisco Systems, Inc.+ 1,550 114
Compaq Computer Corp. 2,304 65
Computer Associates International, Inc. 850 50
Computer Sciences Corp.+ 358 19
Data General Corp.+ 400 6
Dell Computer Corp.+ 1,000 81
Digital Equipment Corp.+ 200 11
EMC Corp. 800 37
Gateway 2000, Inc.+ 200 12
Hewlett-Packard Co. 1,600 121
Honeywell, Inc. 200 19
Intergraph Corp.+ 100 1
International Business Machines Corp. 1,500 174
Microsoft Corp.+ 3,800 339
Novell, Inc.+ 1,100 11
Oracle Systems Corp.+ 1,500 39
Parametric Technology Corp.+ 400 13
Pitney Bowes, Inc. 400 19
Seagate Technology, Inc.+ 276 7
Silicon Graphics, Inc.+ 122 2
Sun Microsystems, Inc.+ 600 25
Unisys Corp.+ 400 9
Xerox Corp. 500 57
----------
1,288
----------
BUSINESS SERVICES--0.3%
Automatic Data Processing, Inc. 500 35
Browning-Ferris Industries, Inc. 300 10
Cognizant Corp. 200 10
Deluxe Corp. 100 3
Dun & Bradstreet Corp. 500 18
Ecolab, Inc. 200 6
Equifax, Inc. 200 8
First Data Corp. 600 20
H & R Block, Inc. 200 9
IKON Office Solutions 200 5
Interpublic Group of Companies, Inc. 250 16
Laidlaw, Inc. 500 7
Moore Corp. Ltd. 100 2
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
National Service Industries, Inc. 100 $ 5
Omnicom Group, Inc. 200 9
R.R. Donnelley & Sons Co. 200 9
Waste Management, Inc. 700 23
----------
195
----------
CHEMICAL--0.5%
Air Products & Chemicals, Inc. 200 17
Dow Chemical Co. 400 39
E.I. du Pont de Nemours & Co. 1,800 130
Eastman Chemical Co. 200 14
Great Lakes Chemical Corp. 100 5
Hercules, Inc. 100 5
Minnesota Mining & Manufacturing Co. 700 66
Morton International, Inc. 200 6
Nalco Chemical Co. 100 4
PPG Industries, Inc. 300 21
Praxair, Inc. 200 10
Rohm & Haas Co. 100 11
Sigma-Aldrich Corp. 100 4
Union Carbide Corp. 300 15
W.R. Grace & Co.+ 100 2
----------
349
----------
CONSTRUCTION--0.1%
Armstrong World Industries, Inc. 100 9
Centex Corp. 200 7
Crane Co. 100 5
Fluor Corp. 100 5
Kaufman & Broad Home Corp. 100 3
Owens Corning 100 4
Pulte Corp. 100 5
Sherwin-Williams Co. 200 7
The Stanley Works 100 5
----------
50
----------
CONSUMER--DURABLES--0.1%
Black & Decker Corp. 100 5
Masco Corp. 300 19
Maytag Corp. 100 5
Newell Co. 300 14
Snap-on, Inc. 100 4
Whirlpool Corp. 100 7
----------
54
----------
</TABLE>
35
<PAGE>
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO-TM-
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
CONSUMER--NONBURABLES--0.2%
American Greetings Corp. Class A 100 $ 5
Corning, Inc. 300 12
Darden Restaurants, Inc. 400 6
Hasbro, Inc. 150 6
Jostens, Inc. 100 2
Mattel, Inc. 450 17
McDonald's Corp. 1,100 68
Rubbermaid, Inc. 300 9
Tricon Global Restaurants, Inc.+ 240 8
Wendy's International, Inc. 300 7
----------
140
----------
CONTAINERS--0.1%
Ball Corp. 100 4
Bemis Co., Inc. 100 4
Crown Cork & Seal Co., Inc. 200 10
Owens-Illinois, Inc.+ 300 12
Sealed Air Corp.+ 153 10
Stone Container Corp. 100 2
----------
42
----------
ELECTRONICS--0.8%
Advanced Micro Devices, Inc.+ 180 5
AMP, Inc. 300 12
Applied Materials, Inc. 500 18
DSC Communications Corp.+ 100 2
EG&G, Inc. 100 3
General Instrument Corp.+ 200 4
General Signal Corp. 100 4
Harris Corp. 100 5
Intel Corp. 2,500 203
KLA-Tencor Corp.+ 100 4
LSI Logic Corp.+ 100 3
Lucent Technologies, Inc. 2,012 153
Micron Technology, Inc. 400 12
Motorola, Inc. 900 50
National Semiconductor Corp.+ 200 4
Perkin Elmer Corp. 100 7
Rockwell International Corp. 300 17
Scientific-Atlanta, Inc. 100 2
Tektronix, Inc. 50 2
Tellabs, Inc.+ 300 21
Texas Instruments, Inc. 600 38
Thermo Electron Corp.+ 300 12
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Thomas & Betts Corp. 63 $ 4
----------
585
----------
ENERGY--RAW MATERIALS--0.3%
Anadarko Petroleum Corp. 100 7
Apache Corp. 100 4
Baker Hughes, Inc. 400 16
Burlington Resources, Inc. 300 14
Dresser Industries, Inc. 300 16
Halliburton Co. 414 23
Helmerich & Payne, Inc. 200 6
Occidental Petroleum Corp. 500 15
ONEOK, Inc. 100 4
Rowan Companies, Inc.+ 100 3
Schlumberger Ltd. 800 66
Union Pacific Resources Group 369 9
Western Atlas, Inc.+ 100 8
----------
191
----------
FOOD & AGRICULTURE--1.1%
Archer-Daniels Midland Co. 836 18
Bestfoods, Inc. 400 22
Campbell Soup Co. 700 36
Coca-Cola Co. 3,800 287
ConAgra, Inc. 700 20
General Mills, Inc. 216 15
H.J. Heinz Co. 600 33
Hershey Foods Corp. 200 15
Kellogg Co. 700 29
Monsanto Co. 900 48
PepsiCo, Inc. 2,300 91
Pioneer Hi-Bred International, Inc. 400 15
Quaker Oats Co. 200 10
Ralston Purina Co. 200 21
Sara Lee Corp. 700 42
SYSCO Corp. 500 12
Unilever NV 1,000 75
Wm. Wrigley Jr. Co. 200 18
----------
807
----------
GOLD--0.1%
Barrick Gold Corp. 600 13
Battle Mountain Gold Co. 200 1
Homestake Mining Co. 100 1
Newmont Mining Corp. 443 15
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Placer Dome, Inc. 600 $ 9
----------
39
----------
HEALTHCARE/DRUG & MEDICINE--2.3%
Abbott Laboratories 1,200 88
Allergan, Inc. 100 4
ALZA Corp.+ 300 14
American Home Products Corp. 1,000 93
Amgen, Inc.+ 400 24
Bausch & Lomb, Inc. 100 5
Baxter International, Inc. 400 22
Becton, Dickinson & Co. 400 28
Biomet, Inc.+ 300 9
Boston Scientific Corp.+ 267 19
Bristol-Myers Squibb Co. 1,600 169
C.R. Bard, Inc. 100 4
Cardinal Health, Inc. 200 19
Columbia/HCA Healthcare Corp. 1,000 33
Eli Lilly & Co. 1,700 118
Guidant Corp. 200 13
HBO & Co. 300 18
HealthSouth Corp.+ 700 21
Humana, Inc.+ 300 8
Johnson & Johnson 2,100 150
Mallinckrodt, Inc. 100 3
Manor Care, Inc. 100 4
Medtronic, Inc. 700 37
Merck & Co., Inc. 1,900 230
Pfizer, Inc. 2,000 228
Pharmacia & Upjohn, Inc. 800 34
Schering-Plough Corp. 1,100 88
Service Corp. International 400 17
Shared Medical Systems Corp. 100 7
St. Jude Medical, Inc. 100 4
Tenet Healthcare Corp.+ 500 19
United Healthcare Co. 300 21
US Surgical Corp. 100 3
Warner Lambert Co. 400 76
----------
1,630
----------
HOUSEHOLD PRODUCTS--0.5%
Alberto-Culver Co. Class B 100 3
Avon Products, Inc. 200 16
Clorox Co. 200 17
Colgate-Palmolive Co. 500 45
Gillette Co. 900 104
International Flavors & Fragrances, Inc. 200 10
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Procter & Gamble Co. 2,100 $ 172
Tupperware Corp. 100 3
----------
370
----------
INSURANCE--0.8%
Aetna, Inc. 222 18
Allstate Corp. 700 67
American General Corp. 400 27
American International Group, Inc. 1,050 137
Aon Corp. 250 16
Chubb Corp. 300 24
CIGNA Corp. 100 21
Cincinnati Financial Corp. 100 13
Conseco, Inc. 332 16
General Re Corp. 137 31
Hartford Financial Services Group, Inc. 200 22
Jefferson-Pilot Corp. 150 9
Lincoln National Corp. 200 18
Marsh & McLennan Companies, Inc. 300 27
MBIA, Inc. 200 15
MGIC Investment Corp. 200 13
Progressive Corp. 100 14
SAFECO Corp. 200 10
St. Paul Companies, Inc. 228 19
SunAmerica, Inc. 250 12
Torchmark Corp. 200 9
Transamerica Corp. 100 12
UNUM Corp. 200 11
----------
561
----------
MEDIA--0.6%
CBS Corp. 1,100 39
Clear Channel Communications, Inc.+ 200 19
Comcast Corp. Class A 500 18
Dow Jones & Co., Inc. 100 5
Gannett Co., Inc. 400 27
Harcourt General, Inc. 100 5
King World Productions, Inc.+ 200 5
Knight-Ridder, Inc. 200 12
McGraw Hill Companies, Inc. 200 15
Meredith Corp. 100 4
New York Times Co. Class A 200 14
SBC Communications, Inc. 2,838 118
Telecommunications, Inc. Series A (TCI Group)+ 800 26
Time Warner, Inc. 900 71
Times Mirror Co. Series A 200 12
</TABLE>
37
<PAGE>
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO-TM-
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Tribune Co. 200 $ 13
Viacom, Inc. Class B+ 600 35
----------
438
----------
MISCELLANEOUS FINANCE--0.9%
American Express Co. 700 71
Associates First Capital Corp. 545 41
Beneficial Corp. 100 13
Charles Schwab Corp. 400 14
Countrywide Credit Industries, Inc. 200 10
Fannie Mae 1,600 96
Franklin Resources, Inc. 400 21
Freddie Mac 1,100 51
Golden West Financial Corp. 100 11
Green Tree Financial Corp. 200 8
H.F. Ahmanson & Co. 200 15
Household International, Inc. 200 26
Lehman Brothers Holdings, Inc. 200 14
Merrill Lynch & Co., Inc. 500 44
Morgan Stanley, Dean Witter, Discover & Co. 965 76
Providian Financial Corp. 200 12
Travelers Group, Inc. 1,739 107
----------
630
----------
NON-FERROUS METALS--0.1%
Alcan Aluminum, Ltd. 300 10
Aluminum Company of America 300 23
Asarco, Inc. 100 2
Cyprus Amax Minerals Co. 100 2
Engelhard Corp. 100 2
Freeport-McMoRan Copper & Gold, Inc. Class B 600 11
Inco Ltd. 300 5
Phelps Dodge Corp. 100 7
Reynolds Metals Co. 100 7
----------
69
----------
OIL--DOMESTIC--0.2%
Amerada Hess Corp. 100 6
Ashland, Inc. 100 5
Atlantic Richfield Co. 500 39
Kerr-McGee Corp. 100 7
Oryx Energy Co.+ 100 3
Pennzoil Co. 100 6
Phillips Petroleum Co. 400 20
Sun, Inc. 100 4
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Unocal Corp. 500 $ 20
USX-Marathon Group 400 14
----------
124
----------
OIL--INTERNATIONAL--1.1%
Amoco Corp. 1,500 66
Chevron Corp. 1,000 83
Exxon Corp. 3,800 277
Mobil Corp. 1,200 95
Royal Dutch Petroleum Co.--Sponsored ADR** 3,300 187
Texaco, Inc. 900 55
----------
763
----------
OPTICAL & PHOTO--0.1%
Eastman Kodak Co. 500 36
Polaroid Corp. 100 4
----------
40
----------
PAPER & FOREST PRODUCTS--0.2%
Boise Cascade Corp. 100 4
Champion International Corp. 100 5
Fort James Corp. 300 15
Georgia-Pacific Corp. 200 15
International Paper Co. 500 26
Kimberly-Clark Corp. 856 45
Louisiana-Pacific Corp. 100 2
Mead Corp. 100 3
Potlatch Corp. 100 5
Temple Inland, Inc. 100 6
Union Camp Corp. 100 6
Westvaco Corp. 100 3
Weyerhaeuser Co. 300 17
Willamette Industries, Inc. 200 8
----------
160
----------
PRODUCER GOODS & MANUFACTURING--1.2%
Aeroquip-Vickers, Inc. 100 6
Allied Signal, Inc. 900 39
Avery Dennison Corp. 200 10
Briggs & Stratton Corp. 100 5
Case Corp. 100 6
Caterpillar, Inc. 600 34
Cincinnati Milacron, Inc. 300 9
Cooper Industries, Inc. 300 20
Deere & Co. 400 23
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Dover Corp. 300 $ 12
Emerson Electric Co. 700 45
FMC Corp.+ 100 8
Foster Wheeler Corp. 100 3
General Electric Co. 5,000 427
Harnischfeger Industries, Inc. 100 3
Illinois Tool Works, Inc. 400 28
Ingersoll-Rand Co. 350 16
ITT Industries, Inc. 200 7
Johnson Controls, Inc. 100 6
McDermott International, Inc. 100 4
Millipore Corp. 100 3
NACCO Industries, Inc. Class A 100 17
Pall Corp. 100 2
Parker-Hannifin Corp. 150 7
Raychem Corp. 100 4
Tenneco, Inc. 300 13
Timken Co. 100 4
Tyco International Ltd. 900 49
W.W. Grainger, Inc. 100 11
----------
821
----------
RAILROAD & SHIPPING--0.1%
Burlington Northern Santa Fe Corp. 300 29
CSX Corp. 300 16
Norfolk Southern Corp. 600 20
Union Pacific Corp. 400 22
----------
87
----------
RETAIL--1.0%
Albertson's, Inc. 400 20
American Stores Co. 400 10
AutoZone, Inc.+ 200 6
Cendant Corp.+ 1,159 29
Circuit City Stores, Inc. 100 4
Consolidated Stores Corp.+ 200 8
Costco Companies, Inc.+ 300 17
CVS Corp. 300 22
Dayton Hudson Corp. 400 35
Dillards Inc. Class A 300 11
Federated Department Stores, Inc.+ 400 20
Gap, Inc. 650 33
Giant Food, Inc. Class A 100 4
Great Atlantic & Pacific Tea Co., Inc. 100 3
Home Depot, Inc. 1,150 80
J.C. Penney Co., Inc. 400 28
Kmart Corp.+ 700 12
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
Kroger Co.+ 400 $ 17
Limited, Inc. 409 14
Longs Drug Stores, Inc. 100 3
Lowe's Companies, Inc. 300 21
May Department Stores Co. 400 25
Mercantile Stores Co., Inc. 100 7
Nordstrom, Inc. 200 13
Pep Boys-Manny Moe & Jack 100 2
Rite Aid Corp. 400 13
Sears Roebuck & Co. 600 36
SUPERVALU, Inc. 100 4
Tandy Corp. 200 10
TJX Companies, Inc. 200 9
Toys 'R' Us, Inc.+ 500 14
Wal-Mart Stores, Inc. 3,500 177
Walgreen Co. 700 24
Winn Dixie Stores, Inc. 300 11
Woolworth Corp.+ 100 2
----------
744
----------
STEEL--0.0%
Allegheny Teledyne, Inc. 292 6
Armco, Inc.+ 100 1
Bethlehem Steel Corp.+ 100 2
Inland Steel Industries, Inc. 100 3
Nucor Corp. 100 6
USX-U.S. Steel Group, Inc. 100 4
Worthington Industries, Inc. 100 2
----------
24
----------
TELEPHONE--1.3%
AirTouch Communications, Inc.+ 900 48
Alltel Corp. 300 13
Ameritech Corp. 1,700 72
Andrew Corp.+ 100 2
AT&T Corp. 2,500 152
Bell Atlantic Corp. 1,229 115
BellSouth Corp. 1,500 96
Frontier Corp. 200 6
GTE Corp. 1,500 88
MCI Communications Corp. 1,100 55
Nextel Communications, Inc.+ 400 11
Northern Telecom Ltd. 800 49
Sprint Corp. 700 48
U.S. West, Inc. (Communications Group) 700 37
U.S. West, Inc. (Media Group)+ 900 34
</TABLE>
39
<PAGE>
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO-TM-
STATEMENT OF NET ASSETS (continued)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
WorldCom, Inc.+ 1,600 $ 68
----------
894
----------
TOBACCO--0.2%
Fortune Brands, Inc. 200 7
Loew's Corp. 200 20
Philip Morris Companies., Inc. 3,700 138
UST, Inc. 200 6
----------
171
----------
TRAVEL & RECREATION--0.2%
Brunswick Corp. 100 3
Harrah's Entertainment, Inc.+ 100 3
Hilton Hotels Corp. 400 13
Marriott International, Inc. Class A+ 200 6
Marriott International, Inc. 300 10
Mirage Resorts, Inc.+ 200 4
Walt Disney Co. 1,109 138
----------
177
----------
TRUCKING & FREIGHT--0.0%
Ryder Systems, Inc. 100 3
----------
UTILITIES--ELECTRIC & GAS--0.6%
Ameren Corp. 200 8
American Electric Power Co., Inc. 300 14
Baltimore Gas & Electric Co. 200 6
Carolina Power & Light Co. 200 9
Central & South West Services Corp. 300 8
Cinergy Corp. 200 7
Coastal Corp. 200 14
Columbia Gas System, Inc. 100 8
Consolidated Edison, Inc. 400 18
Consolidated Natural Gas Co. 200 12
Dominion Resources, Inc. 400 16
DTE Energy Co. 300 12
Duke Power Co. 604 34
Eastern Enterprises 100 4
Edison International 500 15
Enron Corp. 500 25
Entergy Corp. 300 7
First Energy Corp. 300 9
FPL Group, Inc. 300 19
GPU, Inc. 200 8
Houston Industries, Inc. 374 11
Niagara Mohawk Power Corp.+ 100 1
<CAPTION>
Number Value
of Shares (000s)
---------- ----------
<S> <C> <C>
NICOR, Inc. 100 $ 4
Northern States Power Co. 100 6
Pacific Enterprises, Inc. 100 4
Pacific Gas & Electric Corp. 700 23
PacifiCorp. 900 21
PECO Energy Co. 300 7
Peoples Energy Corp. 100 4
PP&L Resources, Inc. 300 7
Public Service Enterprise Group, Inc. 500 17
Sonat, Inc. 100 4
Southern Co. 1,100 29
Texas Utilities Co. 500 20
Unicom Corp. 300 10
Williams Companies, Inc. 600 19
----------
440
----------
INTERNATIONAL--0.0%
Germany 0.0%
VIAG AG+ 3 2
----------
United Kingdom 0.0%
Centrica+ 2,541 4
Granada Group+ 3 0
----------
6
----------
TOTAL COMMON STOCK
(Cost $10,304) 13,907
----------
WARRANTS--0.0%
Belgium 0.0%
Generale de Banque (expire 11/15/99)+ 8 0
----------
France 0.0%
AXA UAP CVG (expire 01/07/99)+ 72 0
----------
Switzerland 0.0%
Schweizerische Bankverein (expire 6/30/00)+ 5 0
----------
TOTAL WARRANTS
(Cost $0) 0
----------
MUTUAL FUNDS--73.8%
Schwab International Index Fund 439,509 6,623
Schwab Small-Cap Index Fund 354,511 6,998
Schwab Total Bond Market Index Fund 3,880,582 38,806
----------
TOTAL MUTUAL FUNDS
(Cost $50,395) 52,427
----------
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Value
Par (000s)
---------- ----------
<S> <C> <C>
AGENCY NOTES--2.2%(a)
DISCOUNT NOTES--2.2%
Federal Home Loan Mortgage Corp.
5.44%, 07/01/98 $1,000,000 $ 991
Federal National Mortgage Association
5.44%, 05/01/98 600,000 600
----------
1,591
----------
TOTAL AGENCY NOTES
(Cost $1,591) 1,591
----------
<CAPTION>
Value
Par (000s)
---------- ----------
<S> <C> <C>
CASH EQUIVALENTS--5.6%
MSTC Cash Reserve Liquid Asset Fund
5.31%*, 05/07/98 $4,000,670 $ 4,001
----------
TOTAL CASH EQUIVALENTS
(Cost $4,001) 4,001
----------
TOTAL INVESTMENTS--101.2%
(Cost $66,291) 71,926
OTHER ASSETS AND LIABILITIES--(1.2)%
Other Assets 649
Liabilities (1,490)
----------
(841)
----------
NET ASSETS--100.0% $71,085
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES TO STATEMENT OF NET ASSETS AND NOTES TO FINANCIAL
STATEMENTS.
41
<PAGE>
NOTES TO STATEMENTS OF NET ASSETS
+ Non-Income Producing Security.
* Interest rates represent the yield on report date.
(a) Yields shown are effective yields at the time of purchases.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
42
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES (in thousands)
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Schwab MarketTrack Portfolios-TM-
-------------------------------------
Growth Balanced Conservative
--------- ----------- -------------
<S> <C> <C> <C>
ASSETS
Investments at value (Cost: $204,824, $198,862, and $66,291, respectively) $ 254,414 $ 231,597 $ 71,926
Cash -- -- 605
Receivables:
Dividends 93 72 19
Interest 18 24 13
Investments sold 37 32 3
Fund shares sold 654 736 --
Prepaid expenses 9 9 9
Foreign dividend tax reclaim receivable 3 2 --
--------- ----------- -------------
Total assets 255,228 232,472 72,575
--------- ----------- -------------
LIABILITIES
Payables:
Investments purchased 11,329 7,026 1,411
Fund shares redeemed 182 302 --
Investment advisory and administration fees 12 10 3
Transfer agency and shareholder service fees 11 11 3
Custodian fees 39 68 16
Other liabilities 126 125 57
--------- ----------- -------------
Total liabilities 11,699 7,543 1,490
--------- ----------- -------------
Net assets applicable to outstanding shares $ 243,529 $ 224,929 $ 71,085
--------- ----------- -------------
--------- ----------- -------------
NET ASSETS CONSIST OF:
Paid-in-capital $ 192,559 $ 189,269 $ 64,668
Undistributed net investment income 1,242 1,805 194
Accumulated net realized gain on investments sold and foreign currency transactions 138 1,118 588
Net unrealized appreciation on investments and translating assets and liabilities into
reporting currency 49,590 32,737 5,635
--------- ----------- -------------
$ 243,529 $ 224,929 $ 71,085
--------- ----------- -------------
--------- ----------- -------------
PRICING OF SHARES:
Outstanding shares, $0.00001 par value (unlimited shares authorized) 16,595 16,459 5,801
Net asset value, offering and redemption price per share $14.67 $13.67 $12.25
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
43
<PAGE>
STATEMENT OF OPERATIONS (in thousands)
For the six months ended April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Schwab MarketTrack Portfolios-TM-
----------------------------------
Growth Balanced Conservative
------- --------- -------------
<S> <C> <C> <C>
Investment income:
Dividends (net of foreign tax withheld: $1, $0, and $0,
respectively) $ 1,271 $ 1,871 $ 711
Interest 957 959 335
------- --------- ------
Total investment income 2,228 2,830 1,046
Expenses:
Investment advisory and administration fees 735 663 193
Transfer agency and shareholder service fees 248 224 65
Custodian fees 42 54 27
Portfolio accounting fees 36 33 12
Registration fees 5 6 5
Professional fees 15 12 9
Shareholder reports 15 20 5
Trustees' fees 1 3 4
Amortization of deferred organization costs 2 2 2
Insurance and other expenses 10 10 9
------- --------- ------
1,109 1,027 331
Less expenses reduced (Note 4) (452) (437) (158)
------- --------- ------
Total expenses incurred by Fund 657 590 173
------- --------- ------
Net investment income 1,571 2,240 873
------- --------- ------
Net realized gain on investments sold 229 1,183 603
Net realized loss on foreign currency transactions (21) (10) --
------- --------- ------
Net realized gain on investments sold and foreign currency
transaction 208 1,173 603
------- --------- ------
Net unrealized appreciation on investments 25,383 16,074 2,701
Net unrealized appreciation on foreign currency 1 1 --
------- --------- ------
Net unrealized appreciation on investments and foreign
currency 25,384 16,075 2,701
Net gain on investments 25,592 17,248 3,304
------- --------- ------
Increase in net assets resulting from operations $27,163 $19,488 $4,177
------- --------- ------
------- --------- ------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
44
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (in thousands)
<TABLE>
<CAPTION>
Schwab MarketTrack Portfolios-TM-
----------------------------------------------------------------------------------
Growth Fund Balanced Fund Conservative Fund
-------------------------- -------------------------- --------------------------
Six months Six months Six months
ended ended ended
April 30, Year ended April 30, Year ended April 30, Year ended
1998 October 31, 1998 October 31, 1998 October 31,
(Unaudited) 1997 (Unaudited) 1997 (Unaudited) 1997
------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 1,571 $ 2,087 $ 2,240 $ 2,858 $ 873 $ 973
Net realized gain on investments sold and
foreign currency transactions 208 8,655 1,173 4,372 603 1,046
Net unrealized appreciation on investments
and foreign currency translation 25,384 14,439 16,075 11,175 2,701 1,878
------------- ----------- ------------- ----------- ------------- -----------
Increase in net assets resulting from
operations 27,163 25,181 19,488 18,405 4,177 3,897
Dividends to shareholders from net investment
income (2,098) (1,915) (2,881) (2,005) (784) (945)
Distributions to shareholders from net
capital gains (8,127) -- (3,851) -- (911) --
------------- ----------- ------------- ----------- ------------- -----------
Total dividends and distributions to
shareholders (10,225) (1,915) (6,732) (2,005) (1,695) (945)
------------- ----------- ------------- ----------- ------------- -----------
Capital Share Transactions:
Proceeds from shares sold 71,434 67,570 77,069 86,068 36,191 24,063
Net asset value of shares issued in
reinvestment of dividends 9,908 1,850 6,425 1,893 1,576 683
Less payments for shares redeemed (22,451) (30,940) (22,739) (33,923) (9,723) (9,598)
------------- ----------- ------------- ----------- ------------- -----------
Increase in net assets from capital share
transactions 58,891 38,480 60,755 54,038 28,044 15,148
------------- ----------- ------------- ----------- ------------- -----------
Total increase in net assets 75,829 61,746 73,511 70,438 30,526 18,100
Net Assets:
Beginning of period 167,700 105,954 151,418 80,980 40,559 22,459
------------- ----------- ------------- ----------- ------------- -----------
End of period (including undistributed net
investment income of $1,242, $1,765,
$1,805, $2,453, $194, and $101,
respectively) $ 243,529 $ 167,700 $ 224,929 $ 151,418 $ 71,085 $ 40,559
------------- ----------- ------------- ----------- ------------- -----------
------------- ----------- ------------- ----------- ------------- -----------
Number of Fund shares:
Sold 5,098 5,302 5,859 7,197 3,017 2,130
Reinvested 760 159 516 169 134 60
Redeemed (1,603) (2,496) (1,730) (2,883) (812) (865)
------------- ----------- ------------- ----------- ------------- -----------
Net increase in shares outstanding 4,255 2,965 4,645 4,483 2,339 1,325
Shares outstanding:
Beginning of period 12,340 9,375 11,814 7,331 3,462 2,137
------------- ----------- ------------- ----------- ------------- -----------
End of period 16,595 12,340 16,459 11,814 5,801 3,462
------------- ----------- ------------- ----------- ------------- -----------
------------- ----------- ------------- ----------- ------------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
45
<PAGE>
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Income from
Investment Operations Less Distributions
--------------------------------------- ---------------------------------------------
Net Distributions
Fiscal Net Asset Realized & Total Dividends from Net Asset
Period Value Net Unrealized from from Net Realized Value
Ended Beginning Investment Gains on Investment Investment Gain on Total End of
Oct. 31 of Period Income Investment Operation Income Investment Distributions Period
- --------- ---------- ----------- ----------- ----------- ----------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SCHWAB MARKETTRACK GROWTH PORTFOLIO-TM-
1998(2) $13.59 $0.23 $1.63 $1.86 $(0.16) $(0.62) $(0.78) $14.67
1997 $11.30 $0.17 $2.32 $2.49 $(0.20) -- $(0.20) $13.59
1996(3) $10.00 $0.19 $1.13 $1.32 $(0.02) -- $(0.02) $11.30
SCHWAB MARKETTRACK BALANCED PORTFOLIO-TM-
1998(2) $12.82 $0.34 $1.05 $1.39 $(0.23) $(0.31) $(0.54) $13.67
1997 $11.05 $0.22 $1.78 $2.00 $(0.23) -- $(0.23) $12.82
1996(3) $10.00 $0.25 $0.83 $1.08 $(0.03) -- $(0.03) $11.05
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO-TM-
1998(2) $11.71 $0.20 $0.75 $0.95 $(0.17) $(0.24) $(0.41) $12.25
1997 $10.51 $0.35 $1.21 $1.56 $(0.36) -- $(0.36) $11.71
1996(3) $10.00 $0.33 $0.48 $0.81 $(0.30) -- $(0.30) $10.51
</TABLE>
(1) The information contained in the above table is based on actual expenses
for the periods, after giving effect to the portion of expenses reduced by
the Investment Manager and Schwab. Had these expenses not been reduced, the
Fund's expense and net investment income ratios would have been:
<TABLE>
<CAPTION>
Growth Portfolio Balanced Portfolio Conservative Portfolio
------------------------- ------------------------- -------------------------
Ratio of Net Ratio of Net Ratio of Net
Fiscal Ratio of Investment Ratio of Investment Ratio of Investment
Period Expenses Income Expenses Income Expenses Income
Ended to Ave. to Average to Ave. to Average to Ave. to Average
Oct. 31 Net Assets Net Assets Net Assets Net Assets Net Assets Net Assets
- --------- ---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
1998(2) 1.12%* 1.13%* 1.14%* 2.02%* 1.24%* 2.74%*
1997 1.24% 1.10% 1.30% 1.96% 1.65% 2.56%
1996(3) 1.50%* 1.42%* 1.56%* 2.12%* 2.05%* 2.33%*
</TABLE>
(2) For the six months ended April 30, 1998 (Unaudited).
(3) Period from November 20, 1995 (commencement of operations) to October 31,
1996.
* Annualized.
46
<PAGE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------------
Ratio of Net
Ratio of Investment
Expenses Income
Fiscal Total to Average to Average Portfolio
Period Return Net Assets Net Net Turnover
Ended (not annualized) End of Period Assets(1) Assets(1) Rate
Oct. 31 (%) (000's) (%) (%) (%)
- --------- ---------------- -------------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
SCHWAB MARKETTRACK GROWTH PORTFOLIO-TM-
1998(2) 14.39 $243,529 0.66* 1.58* 44
1997 22.33 $167,700 0.75 1.58 113
1996(3) 13.24 $105,954 0.89* 2.03* 46
SCHWAB MARKETTRACK BALANCED PORTFOLIO-TM-
1998(2) 11.30 $224,929 0.65* 2.51* 0
1997 18.43 $151,418 0.78 2.48 104
1996(3) 10.82 $80,980 0.89* 2.79* 44
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO-TM-
1998(2) 8.27 $71,085 0.63* 3.35* 107
1997 15.12 $40,559 0.81 3.40 104
1996(3) 8.18 $22,459 0.89* 3.49* 64
</TABLE>
(1) The information contained in the above table is based on actual expenses
for the periods, after giving effect to the portion of expenses reduced by
the Investment Manager and Schwab. Had these expenses not been reduced, the
Fund's expense and net investment income ratios would have been:
<TABLE>
<CAPTION>
Growth Portfolio Balanced Portfolio Conservative Portfolio
------------------------- ------------------------- -------------------------
Ratio of Net Ratio of Net Ratio of Net
Fiscal Ratio of Investment Ratio of Investment Ratio of Investment
Period Expenses Income Expenses Income Expenses Income
Ended to Ave. to Average to Ave. to Average to Ave. to Average
Oct. 31 Net Assets Net Assets Net Assets Net Assets Net Assets Net Assets
- --------- ---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
1998(2) 1.12%* 1.13%* 1.14%* 2.02%* 1.24%* 2.74%*
1997 1.24% 1.10% 1.30% 1.96% 1.65% 2.56%
1996(3) 1.50%* 1.42%* 1.56%* 2.12%* 2.05%* 2.33%*
</TABLE>
(2) For the six months ended April 30, 1998 (Unaudited).
(3) Period from November 20, 1995 (commencement of operations) to October 31,
1996.
* Annualized.
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS
For the six months ended April 30, 1998 (Unaudited)
1. DESCRIPTION OF THE FUNDS
The Schwab MarketTrack All Equity Portfolio-TM-, Schwab MarketTrack Growth
Portfolio-TM- (formerly Schwab Asset Director-Registered Trademark---High Growth
Fund), Schwab MarketTrack Balanced Portfolio-TM- (formerly Schwab Asset
Director-Registered Trademark--- Balanced Growth Fund) and Schwab MarketTrack
Conservative Portfolio-TM- (formerly Schwab Asset
Director-Registered Trademark--- Conservative Growth Fund) (the "Funds") are
series of Schwab Capital Trust (the "Trust"), a no-load, open-end investment
management company organized as a Massachusetts business trust on May 7, 1993
and registered under the Investment Company Act of 1940, as amended (Schwab
MarketTrack All Equity Portfolio-TM- was effective on April 16, 1998 and
commenced operations on May 19, 1998).
In addition to the four Funds described above, the Trust also offers--the Schwab
International Index Fund-Registered Trademark-, Schwab Small-Cap Index
Fund-Registered Trademark-, Schwab S&P 500 Fund, Schwab Analytics
Fund-Registered Trademark-, Schwab MarketManager International Portfolio-TM-
(formerly Schwab One Source Portfolios--International Fund), Schwab
MarketManager Growth Portfolio-TM- (formerly Schwab One Source
Portfolios--Growth Allocation Fund), Schwab MarketManager Balanced Portfolio-TM-
(formerly Schwab One Source Portfolios--Balanced Allocation Fund) and Schwab
MarketManager Small Cap Portfolio-TM- (formerly Schwab One Source
Portfolios--Small Company Fund). The assets of each series are segregated and
accounted for separately.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles for investment companies. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
SECURITY VALUATION--Investments in securities traded on an exchange and unlisted
securities are valued at the last quoted sale price for a given day, or if a
sale is not reported for that day, at the mean between the most recent quoted
bid and asked prices. Securities for which no quotations are readily available
are valued at fair value as determined by the Funds' investment manager pursuant
to guidelines adopted in good faith by the Board of Trustees. Bonds and notes
are generally valued at prices obtained from an independent bond-pricing
service. These securities are valued at the mean between the representative
quoted bid and asked prices or, if such prices are not available, at prices for
securities of comparable maturity, quality and type. Investments in underlying
funds are valued at their respective net asset values as determined by those
funds, in accordance with the 1940 Act, for a given day. Short-term securities
with 60 days or less to maturity are stated at amortized cost, which
approximates market value.
SECURITY TRANSACTIONS AND INVESTMENT INCOME--Security transactions are accounted
for on a trade date basis (date the order to buy or sell is executed). Realized
gains and losses from security transactions are determined on an identified cost
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
48
<PAGE>
Interest income is recorded on the accrual basis and includes amortization of
premium and accretion of discount on investments. For callable bonds purchased
at a premium, the excess of the purchase price over the call value is amortized
against interest income through the call date. If the call provision is not
exercised, any remaining premium is amortized through the final maturity date.
REPURCHASE AGREEMENTS--Repurchase agreements are fully collateralized by U.S.
Treasury or government agency securities. All collateral is held by the Funds'
custodian and is monitored daily to ensure that its market value at least equals
the repurchase price under the agreement.
FOREIGN CURRENCY TRANSLATION--The accounting records of the Funds are maintained
in U.S. dollars. Investment securities and all other assets and liabilities of
the Funds denominated in a foreign currency are translated into U.S. dollars at
the exchange rates on April 30, 1998. Purchases and sales of foreign securities,
foreign income receipts and foreign expense payments are translated into U.S.
dollars at the exchange rate in effect on the dates of the respective
transactions.
The Funds separate within their statement of operations the portion of realized
and unrealized gains and losses resulting from changes in foreign exchange rates
from that arising from changes in securities' market values.
FORWARD CURRENCY CONTRACTS--A forward currency contract ("Forward") is an
agreement between two parties to buy and sell a currency at a set price on a
future date. The value of the Forward fluctuates with changes in currency
exchange rates. The Forward is marked-to-market daily and the change in value is
recorded by the Funds as an unrealized gain or loss. When the Forward is closed,
the Funds record a realized gain or loss equal to the difference between the
value at the time the contract was opened and the value at the time the contract
was closed. The Funds engage in Forwards in connection with the purchase and
sale of portfolio securities to minimize the uncertainty of changes in future
exchange rates. The Funds could be exposed to risk if counterparties to the
contracts are unable to meet the terms of the contracts or if the value of the
foreign currency changes unfavorably.
DEFERRED ORGANIZATION COSTS--Costs incurred in connection with the organization
of the Funds are amortized on a straight-line basis over a five-year period from
each Fund's commencement of operations.
EXPENSES--Expenses arising in connection with a Fund are charged directly to
that Fund. Expenses common to all series of the Trust are generally allocated to
each series in proportion to their relative net assets.
FEDERAL INCOME TAXES--It is each Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all net investment income and realized net capital gains, if any, to
shareholders. Therefore, no federal income tax provision is required. Each Fund
is considered a separate entity for tax purposes.
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
At April 30, 1998 (for financial reporting and federal income tax purposes:)
<TABLE>
<CAPTION>
Net
Unrealized Appreciated Depreciated
Appreciation Securities Securities
------------- ------------ ------------
<S> <C> <C> <C>
Schwab MarketTrack Growth Portfolio-TM- $ 49,590,000 $ 50,140,000 $ 550,000
Schwab MarketTrack Balanced Portfolio-TM- $ 32,737,000 $ 33,070,000 $ 333,000
Schwab MarketTrack Conservative Portfolio-TM- $ 5,635,000 $ 5,734,000 $ 99,000
</TABLE>
3. TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENT--The Trust has an investment
advisory and administration agreement with Charles Schwab Investment Management,
Inc. (the "Investment Manager"). For advisory services and facilities furnished,
each Fund pays an annual fee, payable monthly, of 0.74% of each Fund's average
daily net assets not in excess of $1 billion, 0.69% of such assets over $1
billion and 0.64% of such assets over $2 billion. The Investment Manager has
reduced a portion of its fee for the six months ended April 30, 1998 (see Note
4).
TRANSFER AGENCY AND SHAREHOLDER SERVICE AGREEMENTS--The Trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of 0.05% of each Fund's average daily net assets
for transfer agency services and 0.20% of such assets for shareholder services.
Schwab has reduced a portion of its fees for the six months ended April 30, 1998
(see Note 4).
OFFICERS AND TRUSTEES--Certain officers and trustees of the Trust are also
officers and/or directors of the Investment Manager and/or Schwab. For the six
months ended April 30, 1998, the Trust made no direct payments to its officers
or trustees who were "interested persons" within the meaning of the Investment
Company Act of 1940, as amended.
OTHER AFFILIATED PARTIES AND TRANSACTIONS--Pursuant to an Exemptive Order issued
by the SEC, the Funds may invest other SchwabFunds-Registered Trademark-. As of
April 30, 1998 the Growth Fund, Balanced Fund and Conservative Fund owned 12%,
8%, 2%, respectively of the outstanding shares of the Schwab International Index
Fund; 1%, 1%, 0%, respectively of the outstanding shares of the Schwab S&P 500
Index Fund; 17%, 38%, 18%, respectively of the outstanding shares of the Schwab
Total Bond Market Index Fund, and 9%, 6%, 1%, respectively of the outstanding
shares of the Schwab Small-Cap Index Fund.
INTERFUND TRANSACTIONS--For the six months ended April 30, 1998, the Funds
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Trustees, and Officers. These sale transactions, made
at current market value pursuant to Rule 17a-7 under the Act, were $0,
$28,051,000 and $28,704,000, respectively.
50
<PAGE>
4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager and Schwab guarantee that, through at least February 28,
1999, each Fund's total operating expenses, including the expenses indirectly
incurred through investment in underlying Schwab Funds-Registered Trademark-,
will not exceed 0.84% of the Fund's average daily net assets, after waivers and
reimbursements. For purpose of this guarantee, operating expenses do not include
interest expenses, taxes and extraordinary expenses.
For the six months ended April 30, 1998, the total of such fees and expenses
reduced by the Investment Manager were $452,000, $437,000 and $158,000 for the
Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively.
5. BORROWING AGREEMENT
The Trust has a line of credit arrangement with Bank of New York Company whereby
the Funds may borrow, in aggregate, up to $100,000,000, on a temporary basis, to
fund redemptions. Amounts borrowed under this arrangement bear interest at
periodically negotiated rates and may be collateralized by the assets of the
Funds. For the six months ended April 30, 1998, no borrowings were made under
this arrangement.
6. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities, other than short-term
obligations, for the six months ended April 30, 1998, were as follows (in
thousands):
<TABLE>
<CAPTION>
Conservative
Growth Fund Balanced Fund Fund
------------ ------------- ------------
<S> <C> <C> <C>
Purchases $ 187,635 $ 245,885 $ 101,344
Proceeds of sales and maturities $ 129,822 $ 182,482 $ 73,675
</TABLE>
Included in the aforementioned are purchases of common stock of Charles Schwab
Corp., an affiliated issuer, with a current value as of April 30, 1998, of
$82,250, $47,250 and $14,000 for the Growth Portfolio, Balanced Portfolio and
Conservative Portfolio, respectively.
51
<PAGE>
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE>
THE SCHWABFUNDS FAMILY-REGISTERED TRADEMARK-
The SchwabFunds Family includes a variety of funds to help you meet your
investment goals. 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
market funds.
Please call 1-800-435-4000 for a free prospectus and brochure for any of these
SchwabFunds.
This report must be preceded or accompanied by a current prospectus.
SCHWAB ASSET ALLOCATION FUNDS
Schwab MarketTrack All Equity Portfolio(1)
Schwab MarketTrack Growth Portfolio(1)
Schwab MarketTrack Balanced Portfolio(1)
Schwab MarketTrack Conservative Portfolio(1)
Schwab MarketManager Growth Portfolio(2)
Schwab MarketManager Balanced Portfolio(2)
SCHWAB STOCK FUNDS
Schwab 1000 Fund-Registered Trademark-
Schwab S&P 500 Fund
Schwab Analytics Fund-Registered Trademark-
Schwab Small-Cap Index Fund-Registered Trademark-
Schwab MarketManager Small Cap Portfolio(2)
Schwab International Index Fund-Registered Trademark-
Schwab MarketManager International Portfolio(2)
SCHWAB BOND FUNDS
Schwab Total Bond Market Index Fund(3)
Schwab Short-Term Bond Market Index Fund(3)
Schwab Long-Term Tax-Free Bond Fund
Schwab Short/Intermediate Tax-Free Bond Fund
Schwab California Long-Term Tax-Free Bond Fund
Schwab California Short/Intermediate
Tax-Free Fund
SCHWAB MONEY MARKET FUNDS
Schwab offers an array of money market funds(4) 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-Registered Trademark-.
(1)Formerly the Schwab Asset Director Funds.
(2)Formerly the Schwab OneSource-TM- Portfolios.
(3)Formerly the Schwab Government Bond Funds.
(4)Investments in money market funds are neither insured nor guaranteed by the
U.S. government, and there is no assurance that the funds will be able to
maintain a stable share price of $1.
<PAGE>
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-1998 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
Printed on recycled paper. CRS 20293 (0598-2346) MKT3559(6/98)
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