SCHWAB CAPITAL TRUST, 485APOS, 2000-03-01

SCHWAB CAPITAL TRUST
485APOS, 2000-03-01

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<PAGE> 1
File Nos. 33-62470 and 811-7704
As filed with the Securities and Exchange Commission on March 1, 2000
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 37 [X]
and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 39 [X]

SCHWAB CAPITAL TRUST
(Exact Name of Registrant as Specified in Charter)

101 Montgomery Street, San Francisco, California 94104
(Address of Principal Executive Offices) (zip code)

Registrant's Telephone Number, including Area Code:
(415) 627-7000

Jeremiah H. Chafkin
101 Montgomery Street, San Francisco, California 94104
(Name and Address of Agent for Service)

Copies of communications to:
John H. Grady, Jr. Esq. Martin E. Lybecker Frances Cole, Esq.
Morgan Lewis & Bockius LLP Ropes & Gray Charles Schwab Investment
1701 Market Street One Franklin Square Management, Inc.
Philadelphia, PA 19103 1301 K Street NW 101 Montgomery Street
Suite 800 East 120K-14-109
Washington, DC 20005 San Francisco, CA 94104

It is proposed that this filing will become effective (check appropriate box)

/ / Immediately upon filing pursuant to paragraph (b)
/ / On (date), pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / On (date) pursuant to paragraph (a)(1)
/X/ 75 days after filing pursuant to paragraph (a)(2)
/ / On (date) pursuant to paragraph (a)(2) of Rule 485
if appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Part C
<PAGE> 2
SCHWAB

FOCUS FUNDS

PROSPECTUS
May 15, 2000

Financial Services Focus Fund

Health Care Focus Fund

Technology Focus Fund

Communications Focus Fund

As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved these securities or passed on whether the information in this
prospectus is adequate and accurate. Anyone who indicates otherwise is
committing a federal crime.

[CHARLES SCHWAB LOGO]
<PAGE> 3
SCHWAB

FOCUS FUNDS

ABOUT THE FUNDS

4 Financial Services Focus Fund

7 Health Care Focus Fund

10 Technology Focus Fund

13 Communications Focus Fund

16 Fund Management

INVESTING IN THE FUNDS

18 Buying Shares

19 Selling/Exchanging Shares

20 Transaction Policies

21 Distributions and Taxes

<PAGE> 4
ABOUT THE FUNDS

The funds described in this prospectus share the same basic INVESTMENT APPROACH.
Each fund seeks long-term capital growth by investing in companies in a
particular economic sector.

The funds select from a base universe of stocks issued by the 2,000 LARGEST
COMPANIES (as measured by market capitalization) incorporated in the United
States, plus any smaller or foreign stocks that are not among these 2,000 but
are included in the S&P 500(R) Index.

The investment adviser has identified a series of SECTOR-SPECIFIC factors that
historically have signaled superior long-term PERFORMANCE, such as earnings,
cash flow, sales and market value. A sophisticated QUANTITATIVE MODEL sorts the
base universe by sector, screens each stock for fundamental and technical
factors and assigns weightings to help the adviser construct the portfolios.
However, in seeking to lock in gains, limit losses or otherwise maximize a
fund's RISK-ADJUSTED RETURN, the adviser may adjust the model's output. The
adviser periodically reviews the factors used by the model, and may enhance or
change them to incorporate the results of NEW RESEARCH.

The funds are designed for LONG-TERM INVESTORS. Their performance will fluctuate
over time and, as with all investments, future performance may differ from past
performance.

<PAGE> 5
FINANCIAL SERVICES
FOCUS FUND

TICKER SYMBOL

XXXXX

THE FUND'S GOAL IS TO SEEK LONG-TERM CAPITAL GROWTH.

STRATEGY

TO PURSUE ITS GOAL, THE FUND INVESTS IN COMMON STOCKS AND OTHER EQUITY
SECURITIES PRIMARILY ISSUED BY U.S. COMPANIES IN THE FINANCIAL SERVICES SECTOR.
It is the fund's policy that under normal circumstances it will invest at least
65% of total assets in these securities; typically, the actual percentage will
be considerably higher.

The fund expects to invest in all of the types of companies in the financial
services sector (see sidebar). However, in keeping with SEC regulations, it will
not invest more than 5% of total assets in any company that derives more than
15% of its revenues from brokerage, underwriting or investment management
activities. The investment adviser chooses the fund's stocks as described on
page 3.

The fund may invest in futures contracts to gain greater market exposure while
still keeping a small portion of assets in cash for business operations. By
using futures, the fund potentially can offset the impact on its performance of
keeping some assets in cash. The fund also may lend portfolio securities to earn
additional income. Any income realized through securities lending may help fund
performance.

During its initial period of operation, the fund may use futures,
exchange-traded funds and depositary receipts more extensively than it otherwise
might, if the investment adviser determines that doing so would be advantageous.

THE FINANCIAL SERVICES SECTOR

The U.S. economy can be divided into sectors, each consisting of a number of
related industries. The financial services sector includes these types of
companies:

- - asset management firms

- - brokerage companies

- - commercial banks

- - financial services firms

- - insurance companies

- - real estate investment trusts (REITs)

- - savings and loan associations

In determining whether a company falls within the sector, the fund considers the
amount of the company's assets devoted to, and sales and operating income
derived from the sector.

FINANCIAL SERVICES FOCUS FUND 4
<PAGE> 6
This fund may appeal to long-term investors who are interested in a fund that
seeks to capture the performance potential of the U.S. FINANCIAL SERVICES
sector.

MAIN RISKS

STOCK MARKETS RISE AND FALL DAILY. As with any investment whose performance is
tied to these markets, the value of your investment in the fund will fluctuate,
which means that you could lose money.

MANY FACTORS CAN AFFECT STOCK MARKET PERFORMANCE. Political and economic news
can influence market-wide trends, in both the short term and the long term.
Other factors may affect a single company or an industry, but not the broader
market.

BECAUSE THE FUND FOCUSES ON A SINGLE SECTOR OF THE ECONOMY, YOUR INVESTMENT IS
EXPOSED TO THAT SECTOR'S RISKS. Stocks of financial services companies may
underperform the stock market as a whole, and are likely to have above-average
volatility. The companies in which the fund invests are affected by many of the
same factors, such as legislative or regulatory changes, rising interest rates,
credit losses when borrowers default and pricing pressures from increasing
competition. Because the fund uses an active model, it could underperform its
sector as measured by a sector-specific index. The fund may take only limited
steps to reduce sector exposure or to lessen the effects of a declining market.

RISKS OF INDIVIDUAL COMPANIES MAY PLAY A GREATER ROLE WITH THIS FUND because the
fund may invest more than 5% of assets in a single issuer. In addition, to the
extent that the fund invests in companies of a given size, it takes on the risks
of that market segment. For example, small- and mid-cap company stocks may be
more volatile than large-cap stocks.

THE FUND'S MANAGEMENT MODEL IS BASED ON MARKET HISTORY. If the model fails to
capture shifts in market dynamics, or if adjustments to the model do not produce
the results expected, fund performance could suffer.

THE FUND MAY BUY AND SELL PORTFOLIO SECURITIES ACTIVELY. If it does, its
portfolio turnover rate and transaction costs will rise, which would lower fund
performance and increase the likelihood of capital gain distributions.

OTHER RISK FACTORS

Although the fund's main risks are those associated with its stock investments,
its other investment strategies also may involve risks. These risks could affect
how well the fund pursues its strategy.

For example, futures contracts, which the fund uses to gain additional market
exposure, could adversely affect the fund's performance if they don't perform as
expected.

Any loans of portfolio securities by the fund are fully collateralized. However,
if the borrowing institution defaults, the fund's performance could be reduced.

If the fund invests in any exchange-traded funds, there is the risk that those
funds' managers could make decisions that would hurt the fund's performance.

Depositary receipts (which represent ownership in a group of stocks) may trade
at a discount. If the fund invests in any depositary receipts, this could mean
that the fund would not be able to realize the full market value of its
underlying securities.

5 Financial Services Focus Fund
<PAGE> 7
PERFORMANCE

Because this is a new fund, no performance figures or financial highlights are
given. Information will appear in a future version of the fund's prospectus.

FUND FEES AND EXPENSES

The following table describes what you could expect to pay as a fund investor.
"Shareholder fees" are one-time expenses charged to you directly by the fund.
"Annual operating expenses" are paid out of fund assets, so their effect is
included in total return.

FEE TABLE (%)

<TABLE>
SHAREHOLDER FEES (% of transaction amount)
<S> <C>
- --------------------------------------------------------------------------------
Redemption fee, charged only on shares
you sell within 180 days of buying them,
and paid directly to the fund 0.00

ANNUAL OPERATING EXPENSES (% of average net assets)
- --------------------------------------------------------------------------------
Management fees 0.00
Distribution (12b-1) fees None
Other expenses 0.00
-----
TOTAL ANNUAL OPERATING EXPENSES 0.00

EXPENSE REDUCTION 0.00
-----
NET OPERATING EXPENSES* 0.00
=====
</TABLE>

* Guaranteed by Schwab and the investment adviser through XX/XX/XX.

EXPENSES ON A $10,000 INVESTMENT

Designed to help you compare expenses, this example uses the same assumptions as
all mutual fund prospectuses: a $10,000 investment and 5% return each year.
One-year figures are based on net operating expenses. The expenses would be the
same whether you stayed in the fund or sold your shares at the end of each
period. Your actual costs may be higher or lower.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------
<S> <C>
$000 $000
</TABLE>

FINANCIAL SERVICES FOCUS FUND 6
<PAGE> 8
HEALTH CARE
FOCUS FUND

TICKER SYMBOL

XXXXX

THE FUND'S GOAL IS TO SEEK LONG-TERM CAPITAL GROWTH.

Strategy

TO PURSUE ITS GOAL, THE FUND INVESTS IN COMMON STOCKS AND OTHER EQUITY
SECURITIES PRIMARILY ISSUED BY U.S. COMPANIES IN THE HEALTH CARE SECTOR. It is
the fund's policy that under normal circumstances it will invest at least 65% of
total assets in these securities; typically, the actual percentage will be
considerably higher.

The fund expects to invest in all of the types of companies in the health care
sector (see sidebar). The investment adviser chooses the fund's stocks as
described on page 3.

THE HEALTH CARE
SECTOR

- --------------------------------------------------------------------------------

The U.S. economy can be divided into sectors, each consisting of a number of
related industries. The health care sector includes these types of companies:

- - drug and biotechnology companies

- - health care facilities operators

- - medical product manufacturers and suppliers

- - medical providers

- - medical services firms

In determining whether a company falls within the sector, the fund considers the
amount of the company's assets devoted to, and sales and operating income
derived from the sector.

7 HEALTH CARE FOCUS FUND
<PAGE> 9
Investors who believe that U.S. HEALTH CARE COMPANIES may show potential
long-term growth may want to consider this fund.

MAIN RISKS

STOCK MARKETS RISE AND FALL DAILY. As with any investment whose performance is
tied to these markets, the value of your investment in the fund will fluctuate,
which means that you could lose money.

BECAUSE THE FUND FOCUSES ON A SINGLE SECTOR OF THE ECONOMY, YOUR INVESTMENT IS
EXPOSED TO THAT SECTOR'S RISKS. Stocks of health care companies may underperform
the stock market as a whole, and are likely to have above-average volatility.
The companies in which the fund invests are affected by many of the same
factors, such as legislative or regulatory changes, failure to win government
approval for new products, rapid product obsolescence and the high costs of
liability should a product or service prove harmful. Because the fund uses an
active model, it could underperform its sector as measured by a sector-specific
index. The fund may take only limited steps to reduce sector exposure or to
lessen the effects of a declining market.

OTHER RISK FACTORS

- --------------------------------------------------------------------------------

For example, futures contracts, which the fund uses to gain additional market
exposure, could adversely affect the fund's performance if they don't perform as
expected.

Any loans of portfolio securities by the fund are fully collateralized. However,
if the borrowing institution defaults, the fund's performance could be reduced.

If the fund invests in any exchange-traded funds, there is the risk that those
funds' managers could make decisions that would hurt the fund's performance.

HEALTH CARE FOCUS FUND 8
<PAGE> 10
PERFORMANCE

Because this is a new fund, no performance figures or financial highlights are
given. Information will appear in a future version of the fund's prospectus.

FUND FEES AND EXPENSES

FEE TABLE (%)

<TABLE>
SHAREHOLDER FEES (% of transaction amount)
- --------------------------------------------------------------------------------
<S> <C>
Redemption fee, charged only on shares
you sell within 180 days of buying them,
and paid directly to the fund 0.00

EXPENSE REDUCTION 0.00
-----
NET OPERATING EXPENSES* 0.00
=====
</TABLE>

* Guaranteed by Schwab and the investment adviser through XX/XX/XX.

EXPENSES ON A $10,000 INVESTMENT

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------
<S> <C>
$000 $000
</TABLE>

9 HEALTH CARE FOCUS FUND
<PAGE> 11
TECHNOLOGY
FOCUS FUND

TICKER SYMBOL

XXXXX

THE FUND'S GOAL IS TO SEEK LONG-TERM CAPITAL GROWTH.

STRATEGY

TO PURSUE ITS GOAL, THE FUND INVESTS IN COMMON STOCKS AND OTHER EQUITY
SECURITIES PRIMARILY ISSUED BY U.S. COMPANIES IN THE TECHNOLOGY SECTOR. It is
the fund's policy that under normal circumstances it will invest at least 65% of
total assets in these securities; typically, the actual percentage will be
considerably higher.

The fund expects to invest in all of the types of companies in the technology
sector (see sidebar). The investment adviser chooses the fund's stocks as
described on page 3.

THE TECHNOLOGY
SECTOR

- --------------------------------------------------------------------------------

The U.S. economy can be divided into sectors, each consisting of a number of
related industries. The technology sector includes these types of companies:

- - companies involved in technology research, distribution, sales or service

- - computer hardware and software makers

- - defense and aerospace contractors

- - electronic equipment makers

- - internet equipment and service providers

- - office equipment makers

- - semiconductor makers

In determining whether a company falls within the sector, the fund considers the
amount of the company's assets devoted to, and sales and operating income
derived from the sector.

TECHNOLOGY FOCUS FUND 10
<PAGE> 12
This fund is designed for long-term investors seeking a way to gain exposure to
the TECHNOLOGY SEGMENT of the U.S. economy.

MAIN RISKS

STOCK MARKETS RISE AND FALL DAILY. As with any investment whose performance is
tied to these markets, the value of your investment in the fund will fluctuate,
which means that you could lose money.

BECAUSE THE FUND FOCUSES ON A SINGLE SECTOR OF THE ECONOMY, YOUR INVESTMENT IS
EXPOSED TO THAT SECTOR'S RISKS. Stocks of technology companies may underperform
the stock market as a whole, and are likely to have above-average volatility.
The companies in which the fund invests are affected by many of the same
factors, such as intense price competition, difficulties bringing products to
market, product obsolescence caused by competitor innovations, stock prices that
are unsupported by revenues, high employee turnover and high labor costs.
Because the fund uses an active model, it could underperform its sector as
measured by a sector-specific index. The fund may take only limited steps to
reduce sector exposure or to lessen the effects of a declining market.

OTHER RISK FACTORS

- --------------------------------------------------------------------------------

For example, futures contracts, which the fund uses to gain additional market
exposure, could adversely affect the fund's performance if they don't perform as
expected.

Any loans of portfolio securities by the fund are fully collateralized. However,
if the borrowing institution defaults, the fund's performance could be reduced.

If the fund invests in any exchange-traded funds, there is the risk that those
funds' managers could make decisions that would hurt the fund's performance.

11 TECHNOLOGY FOCUS FUND
<PAGE> 13
PERFORMANCE

Because this is a new fund, no performance figures or financial highlights are
given. Information will appear in a future version of the fund's prospectus.

FUND FEES AND EXPENSES

FEE TABLE (%)

<TABLE>
<S> <C>
SHAREHOLDER FEES (% of transaction amount)
- --------------------------------------------------------------------------------
Redemption fee, charged only on shares
you sell within 180 days of buying them,
and paid directly to the fund 0.00

EXPENSE REDUCTION 0.00
------
NET OPERATING EXPENSES* 0.00
======
</TABLE>

* Guaranteed by Schwab and the investment adviser through XX/XX/XX.

EXPENSES ON A $10,000 INVESTMENT

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------
<S> <C>
$000 $000
</TABLE>

TECHNOLOGY FOCUS FUND 12
<PAGE> 14
COMMUNICATIONS
FOCUS FUND

TICKER SYMBOL

XXXXX

THE FUND'S GOAL IS TO SEEK LONG-TERM CAPITAL GROWTH.

STRATEGY

TO PURSUE ITS GOAL, THE FUND INVESTS IN COMMON STOCKS AND OTHER EQUITY
SECURITIES PRIMARILY ISSUED BY U.S. COMPANIES IN THE COMMUNICATIONS SECTOR. It
is the fund's policy that under normal circumstances it will invest at least 65%
of total assets in these securities; typically, the actual percentage will be
considerably higher.

The fund expects to invest in all of the types of companies in the
communications sector (see sidebar). The investment adviser chooses the fund's
stocks as described on page 3.

THE COMMUNI-
CATIONS SECTOR

- --------------------------------------------------------------------------------

The U.S. economy can be divided into sectors, each consisting of a number of
related industries. The communications sector includes these types of companies:

- - companies involved in telecommunications research, distribution, sales or
service

- - media companies including radio and television

- - telecommunications equipment makers

- - telephone service providers, including providers of local, long-distance,
cellular and paging services

In determining whether a company falls within the sector, the fund considers the
amount of the company's assets devoted to, and sales and operating income
derived from the sector.

13 COMMUNICATIONS FOCUS FUND
<PAGE> 15
Investors who believe that COMMUNICATIONS firms may be a good long-term
investment and are able to accept the risks may want to consider this fund.

MAIN RISKS

STOCK MARKETS RISE AND FALL DAILY. As with any investment whose performance is
tied to these markets, the value of your investment in the fund will fluctuate,
which means that you could lose money.

BECAUSE THE FUND FOCUSES ON A SINGLE SECTOR OF THE ECONOMY, YOUR INVESTMENT IS
EXPOSED TO THAT SECTOR'S RISKS. Stocks of communications companies may
underperform the stock market as a whole, and are likely to have above-average
volatility. The companies in which the fund invests are affected by many of the
same factors, such as legislative or regulatory changes, intense competition for
market share and competitive challenges posed by joint ventures and mergers
between U.S. and foreign firms. Because the fund uses an active model, it could
underperform its sector as measured by a sector-specific index. The fund may
take only limited steps to reduce sector exposure or to lessen the effects of a
declining market.

OTHER RISK FACTORS

- --------------------------------------------------------------------------------

For example, futures contracts, which the fund uses to gain additional market
exposure, could adversely affect the fund's performance if they don't perform as
expected.

Any loans of portfolio securities by the fund are fully collateralized. However,
if the borrowing institution defaults, the fund's performance could be reduced.

If the fund invests in any exchange-traded funds, there is the risk that those
funds' managers could make decisions that would hurt the fund's performance.

COMMUNICATIONS FOCUS FUND 14
<PAGE> 16
PERFORMANCE

Because this is a new fund, no performance figures or financial highlights are
given. Information will appear in a future version of the fund's prospectus.

FUND FEES AND EXPENSES

FEE TABLE (%)

EXPENSE REDUCTION 0.00
-----
NET OPERATING EXPENSES* 0.00
=====
</TABLE>

* Guaranteed by Schwab and the investment adviser through XX/XX/XX.

EXPENSES ON A $10,000 INVESTMENT

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------
<S> <C>
$000 $000
</TABLE>

15 COMMUNICATIONS FOCUS FUND
<PAGE> 17
FUND MANAGEMENT

THE FUNDS' INVESTMENT ADVISER, CHARLES SCHWAB INVESTMENT MANAGEMENT, INC., HAS
MORE THAN $X BILLION UNDER MANAGEMENT.

The investment adviser for the Schwab Focus Funds is Charles Schwab Investment
Management, Inc. (CSIM), 101 Montgomery Street, San Francisco, CA 94104. Founded
in 1989, the firm today serves as investment adviser for all of the
SchwabFunds.(R) The firm manages assets for more than X million shareholder
accounts. (All figures on this page are as of 3/31/00.)

As the investment adviser, the firm oversees the asset management and
administration of the Schwab Focus Funds. As compensation for these services,
the firm receives a management fee from each fund of 0.00% of average net
assets.

GERI HOM, a vice president of the investment adviser, is responsible for the
day-to-day management and has overall responsibility for management of the
funds. Prior to joining the firm in 1995, she worked for nearly 15 years in
equity index management.

LARRY MANO, a portfolio manager, is responsible for the day-to-day management of
the funds. Prior to joining the firm in 1998, he worked for 20 years in equity
index management, most recently at Wilshire Associates, Inc.

FUND MANAGEMENT 16
<PAGE> 18
INVESTING IN THE FUNDS

As a SchwabFunds(R) investor, you have a number of WAYS TO DO BUSINESS with us.

On the following pages, you will find information on BUYING, SELLING AND
EXCHANGING shares using the method that is most CONVENIENT FOR YOU. You also
will see how to choose a distribution option for your investment. Helpful
information on TAXES is included as well.

17 INVESTING IN THE FUNDS
<PAGE> 19
BUYING SHARES

Shares of the funds may be purchased through a Schwab brokerage account or
through certain third-party investment providers, such as other financial
institutions, investment professionals and workplace retirement plans.

The information on these pages outlines how Schwab brokerage account investors
can place "good orders" to buy, sell and exchange shares of the funds. If you
are investing through a third-party investment provider, some of the
instructions, minimums and policies may be different. Some investment providers
may charge transaction or other fees. Contact your investment provider for more
information.

Schwab is seeking investors for the funds during an initial offering period. As
of the date of this prospectus, Schwab anticipates that this period will begin
on XX/XX/XX and end on XX/XX/XX, although the period may be extended or
otherwise changed. Fund shares will not be purchased until the completion of
the initial offering period.

STEP 1

Choose a fund, then decide how much you want to invest.

MINIMUM INITIAL INVESTMENT MINIMUM ADDITIONAL INVESTMENT
- --------------------------------------------------------------------------------

$5,000 $500
($100 for Automatic
Investment Plan)

STEP 2

CHOOSE AN OPTION FOR FUND DISTRIBUTIONS. The three options are described below.
If you don't indicate a choice, you will receive the first option.

OPTION FEATURES
- --------------------------------------------------------------------------------

Reinvestment All dividends and capital gain distributions are invested
automatically in shares of your fund.
- --------------------------------------------------------------------------------

Cash/reinvestment You receive payment for dividends, while any capital gain
mix distributions are invested in shares of your fund.

Cash You receive payment for all dividends and capital gain
distributions.

STEP 3

PLACE YOUR ORDER. Use any of the methods described at right. Make checks payable
to Charles Schwab & Co., Inc.

SCHWAB ACCOUNTS

- --------------------------------------------------------------------------------

Different types of Schwab brokerage accounts are available, with varying account
opening and balance requirements. Some Schwab brokerage account features can
work in tandem with features offered by the funds.

For example, when you sell shares in a fund, the proceeds automatically are paid
to your Schwab brokerage account. From your account, you can use features such
as MoneyLink, which lets you move money between your brokerage accounts and bank
accounts, and Automatic Investment Plan (AIP), which lets you set up periodic
investments.

For more information on Schwab brokerage accounts, call 800-435-4000 or visit
the Schwab web site at www.schwab.com.

INVESTING IN THE FUNDS 18
<PAGE> 20
SELLING/EXCHANGING SHARES

USE ANY OF THE METHODS DESCRIBED BELOW TO SELL SHARES OF A FUND.

When selling or exchanging shares, please be aware of the following policies:

- - A fund may take up to seven days to pay sale proceeds.

- - If you are selling shares that were recently purchased by check, the
proceeds may be delayed until the check for purchase clears; this may take up
to 15 days from the date of purchase.

- - As indicated in the funds' fee tables, each fund charges a redemption fee,
payable to the fund, on the sale or exchange of any shares that have been
held for less than 180 days; in attempting to minimize this fee, a fund will
first sell any shares in your account that aren't subject to the fee
(including shares acquired through reinvestment or exchange).

- - Each fund reserves the right to honor redemptions in portfolio securities
instead of cash when your redemptions over a 90-day period exceed $250,000 or
1% of a fund's assets, whichever is less.

- - Exchange orders must meet the minimum investment and other requirements for
the fund and share class into which you are exchanging.

- - You must obtain and read the prospectus for the fund into which you are
exchanging prior to placing your order.

METHODS FOR PLACING DIRECT ORDERS

PHONE
Call 800-435-4000, day or night (for TDD service, call 800-345-2550).

INTERNET
www.schwab.com/schwabfunds

SCHWABINSTITUTIONAL.COM
Investment professionals should follow the transaction instructions in the
SchwabInstitutional.com manual; for technical assistance, call 800-367-5198.

MAIL
Write to SchwabFunds(R) at:
P.O. Box 7575
San Francisco, CA 94120-7575

When selling or exchanging shares, be sure to include the signature of at least
one of the persons whose name is on the account.

IN PERSON
Visit the nearest Charles Schwab branch office.

WHEN PLACING ORDERS

- --------------------------------------------------------------------------------

With every order to buy, sell or exchange shares, you will need to include the
following information:

- - Your name

- - Your account number (for SchwabInstitutional.com transactions, include the
master account and subaccount numbers)

- - The name of the fund whose shares you want to buy or sell

- - The dollar amount or number of shares you would like to buy, sell or exchange

- - For exchanges, the name and share class of the fund into which you want to
exchange and the distribution option you prefer

- - When selling shares, how you would like to receive the proceeds

Please note that orders to buy, sell or exchange become irrevocable at the time
you mail them.

19 INVESTING IN THE FUNDS
<PAGE> 21
TRANSACTION POLICIES

THE FUNDS ARE OPEN FOR BUSINESS EACH DAY THAT THE NEW YORK STOCK EXCHANGE (NYSE)
IS OPEN.

THE FUNDS CALCULATE THEIR SHARE PRICES EACH BUSINESS DAY, after the close of the
NYSE. A fund's share price is its net asset value per share, or NAV, which is
the fund's net assets divided by the number of its shares outstanding. Orders to
buy, sell or exchange shares that are received in good order prior to the close
of the funds (generally 4 p.m. Eastern time) will be executed at the next share
price calculated that day.

In valuing their securities, the funds use market quotes if they are readily
available. In cases where quotes are not readily available, a fund may value
securities based on fair values developed using methods approved by the fund's
Board of Trustees.

THE FUNDS AND SCHWAB RESERVE CERTAIN RIGHTS, including the following:

- - To automatically redeem your shares if the account they are held in is closed
for any reason or your balance falls below the minimum as a result of selling
or exchanging your shares

- - To modify or terminate the exchange privilege upon 60 days' written notice to
shareholders

- - To refuse any purchase or exchange order, including large purchase orders
that may negatively affect a fund's operations or orders that appear to be
associated with short-term trading activities

- - To change or waive a fund's investment minimums

- - To suspend the right to sell shares back to a fund, and delay sending
proceeds, during times when trading on the NYSE is restricted or halted, or
otherwise as permitted by the SEC

- - To withdraw or suspend any part of the offering made by this prospectus

- - To revise the criteria for redemption fees

INVESTING IN THE FUNDS 20
<PAGE> 22
DISTRIBUTIONS AND TAXES

ANY INVESTMENT IN THE FUNDS TYPICALLY INVOLVES SEVERAL TAX CONSIDERATIONS. The
information below is meant as a general summary for U.S. citizens and residents.
Because each person's tax situation is different, you should consult your tax
advisor about the tax implications of your investment in a fund. You also can
visit the Internal Revenue Service (IRS) web site at www.irs.gov.

AS A SHAREHOLDER, YOU ARE ENTITLED TO YOUR SHARE OF THE DIVIDENDS AND GAINS YOUR
FUND EARNS. Every year, each fund distributes to its shareholders substantially
all of its net investment income and net capital gains, if any. These
distributions typically are paid in December to all shareholders of record.

UNLESS YOU ARE INVESTING THROUGH A TAX-DEFERRED OR ROTH RETIREMENT ACCOUNT, YOUR
FUND DISTRIBUTIONS GENERALLY HAVE TAX CONSEQUENCES. Each fund's net investment
income and short-term capital gains are distributed as dividends and are taxable
as ordinary income. Other capital gain distributions are taxable as long-term
capital gains, regardless of how long you have held your shares in the fund.
Distributions generally are taxable in the tax year in which they are declared,
whether you reinvest them or take them in cash.

Generally, any sale of your shares is a taxable event. A sale may result in a
capital gain or loss for you. The gain or loss generally will be treated as
short term if you held the shares for 12 months or less, long term if you held
the shares longer. For tax purposes, an exchange between funds is considered a
sale.

AT THE BEGINNING OF EVERY YEAR, THE FUNDS PROVIDE SHAREHOLDERS WITH INFORMATION
DETAILING THE TAX STATUS OF ANY DISTRIBUTIONS their fund paid during the
previous calendar year. Schwab brokerage account customers also receive
information on distributions and transactions in their monthly account
statements.

SCHWAB BROKERAGE ACCOUNT CUSTOMERS WHO SELL FUND SHARES typically will receive a
report that calculates their gain or loss using the "average cost"
single-category method. This information is not reported to the IRS, and you
still have the option of calculating gains or losses using any other methods
permitted by the IRS.

MORE ON DISTRIBUTIONS

- --------------------------------------------------------------------------------

If you are investing through a taxable account and purchase shares of a fund
just before it declares a distribution, you may receive a portion of your
investment back as a taxable distribution. This is because when a fund makes a
distribution, the share price is reduced by the amount of the distribution.

You can avoid "buying a dividend," as it is often called, by finding out if a
distribution is imminent and waiting until afterwards to invest. Of course, you
may decide that the opportunity to gain a few days of investment performance
outweighs the tax consequences of buying a dividend.

21 INVESTING IN THE FUNDS
<PAGE> 23
TO LEARN MORE

This prospectus contains important information on the funds and should be read
and kept for reference. You also can obtain more information from the following
sources.

SHAREHOLDER REPORTS, which are mailed to current fund investors, discuss recent
performance and portfolio holdings.

The STATEMENT OF ADDITIONAL INFORMATION (SAI) includes a more detailed
discussion of investment policies and the risks associated with various
investments. The SAI is incorporated by reference into the prospectus, making it
legally part of the prospectus.

You can obtain copies of these documents by contacting SchwabFunds(R) or the
SEC. All materials from SchwabFunds are free; the SEC charges a duplicating fee.
You can also review these materials in person at the SEC's Public Reference Room
or by computer using the SEC's EDGAR database at www.sec.gov.

SEC FILE NUMBER
Schwab Focus Funds 811-XXXX

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-0102
800-SEC-0330 (Public Reference Section)
202-942-8090
www.sec.gov
[email protected]

SCHWABFUNDS
P.O. Box 7575
San Francisco, CA 94120-7575
800-435-4000
WWW.SCHWAB.COM/SCHWABFUNDS

SCHWAB

FOCUS FUNDS

PROSPECTUS
May 15, 2000

[CHARLES SCHWAB LOGO]
MKTXXXXFLT

<PAGE> 24

STATEMENT OF ADDITIONAL INFORMATION

SCHWAB FOCUS FUNDS

FINANCIAL SERVICES FOCUS FUND
HEALTH CARE FOCUS FUND
TECHNOLOGY FOCUS FUND
COMMUNICATIONS FOCUS FUND

MAY 15, 2000

The Statement of Additional Information (SAI) is not a prospectus. It should be
read in conjunction with the funds' prospectus dated May 15, 2000 (as amended
from time to time).

To obtain a copy of the prospectus, please contact SchwabFunds(R) at
800-435-4000, 24 hours a day, or write to the funds at P.O. Box 7575, San
Francisco, California 94120-7575. For TDD service call 800-345-2550, 24 hours a
day. The prospectus also may be available on the Internet at:
http://www.schwab.com/schwabfunds.

The funds are series of Schwab Capital Trust (the trust).

TABLE OF CONTENTS

Page
INVESTMENT STRATEGIES, SECURITIES, RISKS AND LIMITATIONS................ 2
MANAGEMENT OF THE FUNDS................................................. 15
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..................... 19
INVESTMENT ADVISORY AND OTHER SERVICES.................................. 19
BROKERAGE ALLOCATION AND OTHER PRACTICES................................ 21
DESCRIPTION OF THE TRUSTS............................................... 22
PURCHASE, REDEMPTION, DELIVERY OF SHAREHOLDER
REPORTS AND PRICING OF SHARES......................................... 23
TAXATION................................................................ 25
CALCULATION OF PERFORMANCE DATA......................................... 26

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<PAGE> 25
INVESTMENT STRATEGIES, SECURITIES, RISKS AND LIMITATIONS

INVESTMENT OBJECTIVE

Each fund's investment objective is to seek long-term capital growth. There is
no guarantee a fund will achieve its investment objective. Each fund's
investment objective may be changed by vote of a majority of its shareholders.

The following descriptions of investment securities, risks and limitations
supplement those set forth in the prospectus and may be changed without
shareholder approval unless otherwise noted. Also, policies and limitations that
state a maximum percentage of assets that may be invested in a security or other
asset, or that set forth a quality standard, shall be measured immediately after
and as a result of a fund's acquisition of such security or asset unless
otherwise noted. Any subsequent change in values, net assets or other
circumstances will not be considered when determining whether the investment
complies with a fund's investment policies and limitations. Not all investment
securities or techniques discussed below are eligible investments for each fund.
Each fund will invest in securities or engage in techniques that are intended to
help achieve its investment objective.

INVESTMENT STRATEGIES

Each fund will normally invest at least 65% of its total assets in common stocks
and other equity securities from a base universe of the 2000 largest (measured
by market capitalization) U.S. incorporated companies plus any companies
(including foreign and smaller companies) included in the S&P 500(R) Index. In
the future, the investment adviser may expand the model's base universe to
include stocks and other equity securities of foreign companies not included in
the S&P 500 Index. However, the investment adviser has no present plan to do so.

THE FINANCIAL SERVICES FOCUS FUND invests in common stocks and other equity
securities issued by companies in the financial services sector, including
commercial banks, savings and loan associations, insurance companies, brokerage
companies, asset management firms, real estate investment trusts and financial
services firms.

The financial services sector is currently undergoing relatively rapid change as
existing distinctions between financial service segments become less clear. For
instance, recent business combinations have included insurance, finance, and
securities brokerage under single ownership. Some primarily retail corporations
have expanded into securities and insurance industries. Moreover, the federal
laws generally separating commercial and investment banking were recently
revised to permit a greater level of affiliation between financial services
companies.

Securities and Exchange Commission (SEC) regulations limit the extent to which a
fund may invest in the securities of any one company that derives more than 15%
of its revenues from brokerage, underwriting or investment management
activities. A fund may purchase securities of an issuer that derived more than
15% of its gross revenues in its most recent fiscal year from securities-related
activities, subject to the following conditions: 1) the purchase cannot cause
more than 5% of the fund's total assets to be invested in securities of that
issuer; 2) for any equity security, the purchase cannot result in the fund
owning more than 5% of the issuer's outstanding securities in that class; and 3)
for a debt security, the purchase cannot result in the fund owning more than 10%
of the outstanding principal amount of the issuer's debt securities.

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THE HEALTH CARE FOCUS FUND invests in common stocks and other equity securities
issued by companies in the health care sector, including companies engaged in
the design, manufacture, or sale of products or services used for or in
connection with health care or medicine. Companies in the health care sector may
include medical providers and medical services firms, medical product
manufacturers and suppliers, health care facilities operators, drug and
biotechnology companies.

THE TECHNOLOGY FOCUS FUND invests in common stocks and other equity securities
issued by companies in the technology sector, including companies which Charles
Schwab Investment Management, Inc. (CSIM or the investment adviser) believes
have, or will develop, products, processes or services that will provide or will
benefit significantly from technological advances and improvements. These may
include, companies that develop, produce, or distribute products or services in
the electronic equipment, semiconductor, computer hardware and software, office
equipment, internet and defense and aerospace industries.

THE COMMUNICATIONS FOCUS FUND invests in common stocks and other equity
securities issued by companies in the communications sector, including telephone
service providers, such as local and long-distance telephone companies, cellular
and paging services companies, telecommunications equipment makers, companies
involved in telecommunications research, distribution, sales or service, and
media companies (including radio and television). Certain types of companies in
which the fund may invest are engaged in fierce competition for a share of the
market for goods or services such as private and local area networks, or are
engaged in the sale of telephone set equipment.

The investment adviser may change the inclusion criteria of each sector if it
determines that doing so would cause a fund to be more representative of its
sector.

INVESTMENT SECURITIES AND RISKS

BORROWING may subject a fund to interest costs, which may exceed the interest
received on any securities purchased with the borrowed funds. A fund normally
may borrow to meet redemption requests rather than sell portfolio securities to
raise the necessary cash. Borrowing can involve leveraging when securities are
purchased with the borrowed money. Each fund may borrow money from banks and
make other investments or engage in other transactions permissible under the
Investment Company Act of 1940 (1940 Act) which may be considered a borrowing.
However, each fund may not purchase securities when bank borrowings exceed 5% of
a fund's total assets. Each fund will monitor its level of borrowing on an
on-going basis.

Each fund may establish lines-of-credit (lines) with certain banks by which it
may borrow funds for temporary or emergency purposes. A borrowing is presumed to
be for temporary or emergency purposes if it is repaid by a fund within 60 days
and is not extended or renewed. Each fund intends to use the lines to meet large
or unexpected redemptions that would otherwise force a fund to liquidate
securities under circumstances which are unfavorable to the fund's remaining
shareholders. Each fund will pay a fee to the bank for using the lines.

CONCENTRATION means that substantial amounts of assets are invested in a
particular industry or group of industries. Concentration increases investment
exposure. For example, the technology

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<PAGE> 27
sector may have greater exposure to a single fact such as a shortage of skilled
workers, which may increase costs and adversely affect the value of the sector's
securities. Each fund will, under normal conditions, invest 25% or more of its
total assets in the industry or group of industries representing its sector.

DELAYED-DELIVERY TRANSACTIONS include purchasing and selling securities on a
delayed-delivery or when-issued basis. These transactions involve a commitment
to buy or sell specific securities at a predetermined price or yield, with
payment and delivery taking place after the customary settlement period for that
type of security. When purchasing securities on a delayed-delivery basis, a fund
assumes the rights and risks of ownership, including the risk of price and yield
fluctuations. Typically, no interest will accrue to the fund until the security
is delivered. The fund will segregate appropriate liquid assets to cover its
delayed-delivery purchase obligations. When a fund sells a security on a
delayed-delivery basis, the fund does not participate in further gains or losses
with respect to that security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, the fund could suffer
losses.

DEPOSITARY RECEIPTS include American or European Depositary Receipts (ADRs or
EDRs), Global Depositary Receipts or Shares (GDRs or GSSs) or other similar
global instruments that are receipts representing ownership of shares of a
foreign-based issuer held in trust by a bank or similar financial institution.
These securities are designed for U.S. and European securities markets as
alternatives to purchasing underlying securities in their corresponding national
markets and currencies. Depositary receipts can be sponsored or unsponsored.
Sponsored depositary receipts are certificates in which a bank or financial
institution participates with a custodian. Issuers of unsponsored depositary
receipts are not contractually obligated to disclose material information in the
United States. Therefore, there may not be a correlation between such
information and the market value of an unsponsored depositary receipt.

Depositary Receipts also include securities issued by a trust representing an
undivided beneficial ownership interest in the assets of the trust, usually
common stocks of a group of companies. The trust generally holds the deposited
common stocks for the benefit of the holders of the depositary receipts. Issuers
generally are not registered as investment companies under the 1940 Act. The
trustee of a trust is typically limited to performing only administrative and
ministerial duties, for which it is paid out of trust assets. The risks of
investing in depositary receipts generally reflect the risks of the securities
held in the trust. The acquisition and disposal of some depositary receipts is
limited to round-lots or round-lot multiples. Depositary receipts may trade in
the secondary market at prices lower than the aggregate value of the
corresponding underlying securities. In such cases, some depositary receipts
enable the holders to realize the underlying value of the securities by
canceling the receipt and receiving a corresponding amount of underlying
securities, which requires the payment of fees and expenses.

DIVERSIFICATION involves investing in a wide range of securities and thereby
spreading and reducing the risks of investment. Each fund is a series of an
open-end investment management company. Each fund is a non-diversified mutual
fund.

EQUITY SECURITIES represent ownership interests in a corporation, and are
commonly called "stocks." Equity securities historically have outperformed most
other securities, although their prices can fluctuate based on changes in a
company's financial condition, market conditions and political, economic or even
company-specific news. When a stock's price declines, its market value is
lowered even though the intrinsic value of the company may not have changed.

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<PAGE> 28
Sometimes factors, such as economic conditions or political events, affect the
value of stocks of companies of the same or similar industry or group of
industries, and may affect the entire stock market.

Types of equity securities include common stocks, preferred stocks, convertible
securities and warrants. Common stocks, which are probably the most recognized
type of equity security, usually entitle the owner to voting rights in the
election of the corporation's directors and any other matters submitted to the
corporation's shareholders for voting. Preferred stocks do not ordinarily carry
voting rights or may carry limited voting rights, but normally have preference
over the corporation's assets and earnings. For example, preferred stocks have
preference over common stock in the payment of dividends. Preferred stocks also
may pay specified dividends.

Convertible securities are typically preferred stock or bonds that are
exchangeable for a specific number of another form of security (usually the
issuer's common stock) at a specified price or ratio. A corporation may issue a
convertible security that is subject to redemption after a specified date, and
usually under certain circumstances. A holder of a convertible security that is
called for redemption would be required to tender it for redemption to the
issuer, convert it to the underlying common stock or sell it to a third party.
Convertible bonds typically pay a lower interest rate than nonconvertible bonds
of the same quality and maturity, because of the convertible feature. This
structure allows the holder of the convertible bond to participate in share
price movements in the company's common stock. The actual return on a
convertible bond may exceed its stated yield if the company's common stock
appreciates in value and the option to convert to common shares becomes more
valuable.

Convertible preferred stocks are nonvoting equity securities that pay a fixed
dividend. These securities have a convertible feature similar to convertible
bonds, but do not have a maturity date.

Due to their fixed income features, convertible securities provide higher income
potential than the issuer's common stock, but typically are more sensitive to
interest rate changes than the underlying common stock. In the event of a
company's liquidation, bondholders have claims on company assets senior to those
of stockholders; preferred stockholders have claims senior to those of common
stockholders. Convertible securities typically trade at prices above their
conversion value, which is the current market value of the common stock received
upon conversion, because of their higher yield potential than the underlying
common stock. The difference between the conversion value and the price of a
convertible security will vary depending on the value of the underlying common
stock and interest rates. When the underlying value of the common stocks
decline, the price of the issuer's convertible securities will tend not to fall
as much because the convertible security's income potential will act as a price
support. While the value of a convertible security also tends to rise when the
underlying common stock value rises, it will not rise as much because their
conversion value is more narrow. The value of convertible securities also is
affected by changes in interest rates. For example, when interest rates fall,
the value of convertible securities may rise because of their fixed income
component.

Warrants are a type of security usually issued with bonds and preferred stock
that entitles the holder to a proportionate amount of common stock at a
specified price for a specific period of time. The prices of warrants do not
necessarily move parallel to the prices of the underlying common stock. Warrants
have no voting rights, receive no dividends and have no rights with respect to
the assets of the issuer. If a warrant is not exercised within the specified
time period, it

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will become worthless and a fund will lose the purchase price it paid for the
warrant and the right to purchase the underlying security.

FOREIGN SECURITIES involve additional risks, including foreign currency exchange
rate risks, because they are issued by foreign entities, including foreign
governments, banks, and corporations, or because they are traded principally
overseas. Foreign entities are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to U.S. corporations. In addition, there may be less publicly
available information about foreign entities. Foreign economic, political and
legal developments, as well as fluctuating foreign currency exchange rates and
withholding taxes, could have more dramatic effects on the value of foreign
securities. For example, conditions within and around foreign countries, such as
the possibility of expropriation or confiscatory taxation, political or social
instability, diplomatic developments, change of government or war could affect
the value of foreign investments. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.

Foreign securities typically have less volume and are generally less liquid and
more volatile than securities of U.S. companies. Fixed commissions on foreign
securities exchanges are generally higher than negotiated commissions on U.S.
exchanges, although the fund endeavor to achieve the most favorable overall
results on the fund's transactions. There is generally less government
supervision and regulation of foreign securities exchanges, brokers, dealers and
listed companies than in the United States, thus increasing the risk of delayed
settlements of the fund's transactions or loss of certificates for the fund's
securities. There may be difficulties in obtaining or enforcing judgments
against foreign issuers as well. These factors and others may increase the risks
with respect to the liquidity of the fund's securities containing foreign
investments, and its ability to meet a large number of shareholder redemption
requests.

Foreign markets also have different clearance and settlement procedures and, in
certain markets, there have been times when settlements have been unable to keep
pace with the volume of securities transactions, making it difficult to conduct
such transactions. Such delays in settlement could result in temporary periods
when a portion of the assets of the fund is uninvested and no return is earned
thereon. The inability to make intended security purchases due to settlement
problems could cause the fund to miss attractive investment opportunities.
Losses to the fund arising out of the inability to fulfill a contract to sell
such securities also could result in potential liability for the fund.

In addition to the risks discussed above, it is unforeseeable what risk, if any,
may exist to investments as a result of the conversion of the 11 of the 15
Economic Union Member States from their respective local currency to the
official currency of the Economic and Monetary Union ("EMU"). As of January 3,
1999, the euro became the official currency of the EMU, the rate of exchange was
set between the euro and the currency of each converting country and the
European Central Bank, all national central banks and all stock exchanges and
depositories began pricing, trading and settling in euro even if the securities
traded are not denominated in euro. Each securities transaction that requires
converting to euro may involve rounding that could affect the value of the
security converted. In addition, issuers of securities that require converting
may experience increased costs as a result of the conversion, which may affect
the value of their securities. It is possible that uncertainties related to the
conversion will affect investor expectations and cause investments to shift from
or to European countries, thereby making the European market less liquid and
more expensive. All of these factors could affect the value of

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<PAGE> 30
the fund's investments and/or increase its expenses. While the investment
adviser has taken steps to minimize the impact of the conversion on the fund, it
is not possible to know precisely what impact the conversion will have on the
fund, if any, nor is it possible to eliminate the risks completely.

FUTURES CONTRACTS are securities that represent an agreement between two parties
that obligates one party to buy, and the other party to sell, specific
securities at an agreed-upon price on a stipulated future date. In the case of
futures contracts relating to an index or otherwise not calling for physical
delivery at the close of the transaction, the parties usually agree to deliver
the final cash settlement price of the contract. The funds may purchase and sell
futures contracts based on securities, securities indices and foreign currencies
or any other futures contracts traded on U.S. exchanges or boards of trade that
the Commodities Futures Trading Commission (CFTC) licenses and regulates on
foreign exchanges.

A fund must maintain a small portion of its assets in cash to process
shareholder transactions in and out of the fund and to pay its expenses. In
order to reduce the effect this otherwise uninvested cash would have on its
performance, a fund may purchase futures contracts. Such transactions allow a
fund's cash balance to produce a return similar to that of the underlying
security or index on which the futures contract is based. A fund may enter into
a futures contract for other reasons.

When buying or selling futures contracts, a fund must place a deposit with its
broker equal to a fraction of the contract amount. This amount is known as
"initial margin" and must be in the form of liquid debt instruments, including
cash, cash-equivalents and U.S. government securities. Subsequent payments to
and from the broker, known as "variation margin" are made at least daily as the
value of the futures contracts fluctuate. This process is known as
"marking-to-market." The margin amount will be returned to the fund upon
termination of the futures contracts assuming all contractual obligations are
satisfied. A fund's aggregate initial and variation margin payments required to
establish its futures positions may not exceed 5% of its net assets. Because
margin requirements are normally only a fraction of the amount of the futures
contracts in a given transaction, futures trading can involve a great deal of
leverage. In order to avoid this, the fund will segregate assets in an amount
equal to the margin requirement that is deposited with the broker for its
outstanding futures contracts.

While a fund may purchase and sell futures contracts in order to increase its
market exposure, there are risks associated with these transactions. Adverse
market movements could cause a fund to experience substantial losses when buying
and selling futures contracts. Of course, barring significant market
distortions, similar results would have been expected if a fund had instead
transacted in the underlying securities directly. There also is the risk of
losing any margin payments held by a broker in the event of its bankruptcy.
Additionally, a fund incurs transaction costs (i.e., brokerage fees) when
engaging in futures trading.

Futures contracts normally require actual delivery or acquisition of an
underlying security or cash value of an index on the expiration date of the
contract. In most cases, however, the contractual obligation is fulfilled before
the date of the contract by buying or selling, as the case may be, identical
futures contracts. Such offsetting transactions terminate the original contracts
and cancel the obligation to take or make delivery of the underlying securities
or cash. There may not always be a liquid secondary market at the time a fund
seeks to close out a futures position. If a fund is unable to close out its
position and prices move adversely, a fund would have to continue

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to make daily cash payments to maintain its margin requirements. If a fund had
insufficient cash to meet these requirements it may have to sell portfolio
securities at a disadvantageous time or incur extra costs by borrowing the cash.
Also, a fund may be required to make or take delivery and incur extra
transaction costs buying or selling the underlying securities. The funds seek to
reduce the risks associated with futures transactions by buying and selling
futures contracts that are traded on national exchanges or for which there
appears to be a liquid secondary market.

ILLIQUID SECURITIES generally are any securities that cannot be disposed of
promptly and in the ordinary course of business at approximately the amount at
which the fund has valued the instruments. The liquidity of a fund's investments
is monitored under the supervision and direction of the board of trustees.
Investments currently not considered liquid include repurchase agreements not
maturing within seven days and certain restricted securities.

LENDING of portfolio securities is a common practice in the securities industry.
A fund will engage in security lending arrangements with the primary objective
of increasing its income. For example, a fund may receive cash collateral and it
may invest it in short-term, interest-bearing obligations, but will do so only
to the extent that it will not lose the tax treatment available to mutual funds.
Lending portfolio securities involve risks that the borrower may fail to return
the securities or provide additional collateral.

A fund may loan portfolio securities to qualified broker-dealers or other
institutional investors provided: (1) the loan is secured continuously by
collateral consisting of U.S. government securities, letters of credit, cash or
cash equivalents or other appropriate instruments maintained on a daily
marked-to-market basis in an amount at least equal to the current market value
of the securities loaned; (2) the fund may at any time call the loan and obtain
the return of the securities loaned; (3) the fund will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value of
securities loaned will not at any time exceed one-third of the total assets of
the fund including collateral received from the loan (at market value computed
at the time of the loan).

Although voting rights with respect to loaned securities pass to the borrower,
the lender retains the right to recall a security (or terminate a loan) for the
purpose of exercising the security's voting rights. Efforts to recall such
securities promptly may be unsuccessful, especially for foreign securities or
thinly traded securities such as small-cap stocks. In addition, because
recalling a security may involve expenses to the funds, it is expected that the
funds will do so only where the items being voted upon are, in the judgment of
the investment adviser, either material to the economic value of the security or
threaten to materially impact the issuer's corporate governance policies or
structure.

OPTIONS CONTRACTS generally provide the right to buy or sell a security,
commodity, futures contract or foreign currency in exchange for an agreed upon
price. If the right is not exercised after a specified period, the option
expires and the option buyer forfeits the money paid to the option seller.

A call option gives the buyer the right to buy a specified number of shares of a
security at a fixed price on or before a specified date in the future. For this
right, the call option buyer pays the call option seller, commonly called the
call option writer, a fee called a premium. Call option buyers are usually
anticipating that the price of the underlying security will rise above the price
fixed with the call writer, thereby allowing them to profit. If the price of the
underlying security does not rise, the call option buyer's losses are limited to
the premium paid to the call option writer. For call option

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writers, a rise in the price of the underlying security will be offset by the
premium received from the call option buyer. If the call option writer does not
own the underlying security, however, the losses that may ensue if the price
rises could be potentially unlimited. If the call option writer owns the
underlying security or commodity, this is called writing a covered call. All
call options written by the portfolios will be covered, which means that the
portfolios will own the securities subject to the option so long as the option
is outstanding.

A put option is the opposite of a call option. It gives the buyer the right to
sell a specified number of shares of a security at a fixed price on or before a
specified date in the future. Put option buyers are usually anticipating a
decline in the price of the underlying security, and wish to offset those losses
when selling the security at a later date. All put options the portfolios write
will be covered, which means that the portfolio will deposit with its custodian
cash, U.S. government securities or other high-grade debt securities (i.e.,
securities rated in one of the top three categories by Moody's Investor Service
("Moody's") or Standard & Poor's ("S&P") or, if unrated, determined by the
investment adviser to be of comparable credit quality) with a value at least
equal to the exercise price of the put option. The purpose of writing such
options is to generate additional income for the fund. However, in return for
the option premium, the fund accepts the risk that it may be required to
purchase the underlying securities at a price in excess of the securities market
value at the time of purchase.

A fund may purchase and write put and call options on any securities in which it
may invest or any securities index based on securities in which it may invest. A
fund may purchase and write such options on securities that are listed on
domestic or foreign securities exchanges or traded in the over-the-counter
market. Like futures contracts, option contracts are rarely exercised. Option
buyers usually sell the option before it expires. Option writers may terminate
their obligations under a written call or put option by purchasing an option
identical to the one it has written. Such purchases are referred to as "closing
purchase transactions." The fund may enter into closing sale transactions in
order to realize gains or minimize losses on options it has purchased or
written.

Although a fund generally will purchase or write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market will exist for any particular option or at any
particular time. If a fund is unable to effect a closing purchase transaction
with respect to options it has written, it will not be able to sell the
underlying securities or dispose of assets held in a segregated account until
the options expire or are exercised. Similarly, if a fund is unable to effect a
closing sale transaction with respect to options it has purchased, it would have
to exercise the options in order to realize any profit and will incur
transaction costs upon the purchase or sale of underlying securities.

Reasons for the absence of a liquid secondary market on an exchange include the
following: (1) there may be insufficient trading interest in certain options;
(2) an exchange may impose restrictions on opening transactions or closing
transactions or both; (3) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options; (4) unusual
or unforeseen circumstances may interrupt normal operations on an exchange; (5)
the facilities of an exchange or the Options Clearing Corporation (the OCC) may
not at all times be adequate to handle current trading volume; or (6) one or
more exchanges could, for economic or other reasons, decide or be compelled at
some future date to discontinue the trading of options (or a particular class or
series of options), although outstanding options on that exchange that had been
issued by the OCC as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.

9
<PAGE> 33
The ability to terminate over-the-counter options is more limited than with
exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. Until
such time as the staff of the SEC changes its position, a fund will treat
purchased over-the-counter options and all assets used to cover written
over-the-counter options as illiquid securities, except that with respect to
options written with primary dealers in U.S. government securities pursuant to
an agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to a formula the
staff of the SEC approves.

Additional risks are involved with options trading because of the low margin
deposits required and the extremely high degree of leverage that may be involved
in options trading. There may be imperfect correlation between the change in
market value of the securities held by a fund and the prices of the options,
possible lack of a liquid secondary markets, and the resulting inability to
close such positions prior to their maturity dates.

A fund may write or purchase an option only when the market value of that
option, when aggregated with the market value of all other options transactions
made on behalf of the fund, does not exceed 5% of its net assets.

REAL ESTATE INVESTMENT TRUSTS (REITs). A REIT is a pooled investment vehicle,
which invests primarily in income producing real estate or real estate related
loans or interests. REITs are sometimes referred to as equity REITs or mortgage
REITs. An equity REIT invests primarily in properties and generates income from
rental and lease properties. Equity REITs also offer the potential for growth as
a result of property appreciation and, in addition, from the sale of appreciated
property. Mortgage REITs invest primarily in real estate mortgages, which may
secure construction, development or long-term loans, and derive income for the
collection of interest payments. REITs are generally organized as corporations
and business trusts but are not taxed as a corporation if they meet certain
requirements of the Internal Revenue Code of 1986, as amended (Code). To
qualify, a REIT must, among other things, invest substantially all of its assets
in interests in real estate (including other REITs), cash and government
securities, distribute at least 95% of its taxable income to its shareholders
and receive at least 75% of that income from rents, mortgages and sales of
property.

Like any investment in real estate, a REIT's performance depends on many
factors, such as its ability to find tenants for its properties, to renew
leases, and to finance property purchases and renovations. In general, REITs may
be affected by changes in underlying real estate values, which may have an
exaggerated effect to the extent a REIT concentrates its investment in certain
regions or property types. For example, rental income could decline because of
extended vacancies, increased competition from nearby properties, tenants'
failure to pay rent, or incompetent management. Property values could decrease
because of overbuilding, environmental liabilities, uninsured damages caused by
natural disasters, a general decline in the neighborhood, losses due to casualty
or condemnation, increases in property taxes, or changes in zoning laws.
Ultimately, a REIT's performance depends on the types of properties it owns and
how well the REIT manages its properties.

In general, during periods of rising interest rates, REITs may lose some of
their appeal for investors who may be able to obtain higher yields from other
income-producing investments, such as long-term bonds. Higher interest rates
also mean that financing for property purchases

10
<PAGE> 34
and improvements is more costly and difficult to obtain. During periods of
declining interest rates, certain mortgage REITs may hold mortgages that
mortgagors elect to prepay, which can reduce the yield on securities issued by
mortgage REITs. Mortgage REITs may be affected by the ability of borrowers to
repay debts to the REIT when due and equity REITs may be affected by the ability
of tenants to pay rent.

Like small-cap stocks in general, certain REITs have relatively small market
capitalization and their securities can be more volatile than -- and at times
will perform differently from -- large-cap stocks. In addition, because
small-cap stocks are typically less liquid than large-cap stocks, REIT stocks
may sometimes experience greater share-price fluctuations than the stocks of
larger companies. Further, REITs are dependent upon specialized management
skills, have limited diversification, and are therefore subject to risks
inherent in operating and financing a limited number of projects. By investing
in REITs indirectly through a fund, a shareholder will bear indirectly a
proportionate share of the REIT's expenses. Finally, REITs could possibly fail
to qualify for tax-free pass-through of income under the Code or to maintain
their exemptions from registration under the 1940 Act.

RESTRICTED SECURITIES are securities that are subject to legal restrictions on
their sale. Restricted securities may be considered to be liquid if an
institutional or other market exists for these securities. In making this
determination, a fund, under the direction and supervision of the board of
trustees, will take into account the following factors: (1) the frequency of
trades and quotes for the security; (2) the number of dealers willing to
purchase or sell the security and the number of potential purchasers; (3) dealer
undertakings to make a market in the security; and (4) the nature of the
security and marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers and the mechanics of transfer). To the
extent a fund invests in restricted securities that are deemed liquid, the
general level of illiquidity in the fund's portfolios may be increased if
qualified institutional buyers become uninterested in purchasing these
securities.

SECURITIES OF OTHER INVESTMENT COMPANIES. Investment companies generally offer
investors the advantages of diversification and professional investment
management, by combining shareholders' money and investing it in securities such
as stocks, bonds and money market instruments. Investment companies include: (1)
open-end funds (commonly called mutual funds) that issue and redeem their shares
on a continuous basis, (2) closed-end funds that offer a fixed number of shares,
and are usually listed on an exchange, and (3) unit investment trusts that
generally offer a fixed number of redeemable shares. Certain open-end funds and
unit investment trusts are traded on exchanges.

Investment companies may make investments and use techniques designed to enhance
their performance. These may include delayed-delivery and when-issued securities
transactions; swap agreements; buying and selling futures contracts, illiquid,
and/or restricted securities and repurchase agreements; and borrowing or lending
money and/or portfolio securities. The risks of investing in a particular
investment company will generally reflect the risks of the securities in which
it invests and the investment techniques it employs. Also, investment companies
charge fees and incur operating expenses.

Each fund may buy securities of other investment companies, including those of
foreign issuers, in compliance with the requirements of federal law or any SEC
exemptive order. Each fund intends to vote any investment company proxies in
accordance with instructions received, or in the same proportion as the vote of
all other shareholders. A fund may invest in investment companies that are not
registered with the SEC or privately placed securities of investment

11
<PAGE> 35
companies (which may or may not be registered), such as hedge funds and offshore
funds. Unregistered funds are largely exempt from the regulatory requirements
that apply to registered investment companies. As a result, unregistered funds
may have a greater ability to make investments, or use investment techniques,
that offer a higher potential investment return (for example, leveraging), but
which may carry high risk. Unregistered funds, while not regulated by the SEC
like registered funds, may be indirectly supervised by the financial
institutions (e.g., commercial and investment banks) that may provide them with
loans or other sources of capital. Investments in unregistered funds may be
difficult to sell, which could cause a fund selling an interest in an
unregistered fund to lose money. For example, many hedge funds require their
investors to hold their investments for at least one year.

Federal law restricts the ability of one registered investment company to invest
in another. As a result, the extent to which a fund may invest in another
investment company may be limited. With respect to investments in other mutual
funds, the SEC has granted the funds an exemption from the limitations of the
1940 Act that restrict the amount of securities of underlying mutual funds a
fund may hold, provided that certain conditions are met. The conditions
requested by the SEC were designed to address certain abuses perceived to be
associated with funds of funds, including unnecessary costs (such as sales
loads, advisory fees and administrative costs), and undue influence by a fund of
funds over the underlying fund. The conditions apply only when a fund and its
affiliates in the aggregate own more than 3% of the outstanding shares of any
one underlying fund.

Under the terms of the exemptive order, each fund and its affiliates may not
control a non-affiliated underlying fund. Under the 1940 Act, any person who
owns beneficially, either directly or through one or more controlled companies,
more than 25% of the voting securities of a company is assumed to control that
company. This limitation is measured at the time the investment is made.

SMALL-CAP STOCKS in which a fund may invest include stocks issued by U.S.
operating companies with market capitalizations that place them below the
largest 1,000 such companies. Historically, small-cap stocks have been riskier
than stocks issued by large- or mid-cap companies for a variety of reasons.
Small-cap companies may have less certain growth prospects and are typically
less diversified and less able to withstand changing economic conditions than
larger capitalized companies. Small-cap companies also may have more limited
product lines, markets or financial resources than companies with larger
capitalizations, and may be more dependent on a relatively small management
group. In addition, small-cap companies may not be well known to the investing
public, may not have institutional ownership and may have only cyclical, static
or moderate growth prospects. Most small-cap company stocks pay low or no
dividends.

These factors and others may cause sharp changes in the value of a small-cap
company's stock, and even cause some small-cap companies to fail. Additionally,
small-cap stocks may not be as broadly traded as large- or mid-cap stocks, and a
fund's positions in securities of such companies may be substantial in relation
to the market for such securities. Accordingly, it may be difficult for a fund
to dispose of securities of these small-cap companies at prevailing market
prices in order to meet redemptions. This lower degree of liquidity can
adversely affect the value of these securities. For these reasons and others,
the value of a fund's investments in small-cap stocks is expected to be more
volatile than other types of investments, including other types of stock
investments. While small-cap stocks are generally considered to offer greater
growth opportunities for investors, they involve greater risks and the share
price of a fund that invests in

12
<PAGE> 36
small-cap stocks may change sharply during the short term and long term.

U.S. GOVERNMENT SECURITIES are issued by the U.S. Treasury or issued or
guaranteed by the U.S. government or its agencies or instrumentalities. U.S.
Treasury securities include bills, notes and bonds and are backed by the full
faith and credit of the United States. Not all U.S. government securities are
backed by the full faith and credit of the United States. Securities issued by
government agencies or instrumentalities include obligations of the following:
The Farm Credit System, Small Business Administration, and the Government
National Mortgage Association (GNMA or Ginnie Mae), including GNMA certificates
and mortgage-backed securities, whose securities are supported by the full faith
and credit of the United States; the Federal Home Loan Banks and the Tennessee
Valley Authority, whose securities are supported by the right to borrow from the
U.S. Treasury; Freddie Mac (formerly known as the Federal Home Loan Mortgage
Association or FHLMC) and Fannie Mae (formerly known as the Federal National
Mortgage Association or FNMA), or the Student Loan Marketing Association (Sallie
Mae or SLMA), whose securities are supported by the discretionary authority of
the U.S. government to purchase certain obligations of the agency or
instrumentality.

There can be no assurance that the U.S. government will provide full financial
support to U.S. government-sponsored agencies or instrumentalities if the U.S.
government is not obligated to do so under law. While U.S. government
securities, including U.S. Treasury securities, are among the safest securities,
like other fixed-income securities, they are sensitive to interest rate changes,
which will cause their yield and value of such securities to fluctuate.

INVESTMENT LIMITATIONS

The following investment limitations may be changed only by vote of a majority
of each fund's shareholders.

1) Each fund may concentrate investments in a particular industry or group
of industries, as concentration is defined under the 1940 Act, the
rules or regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from time
to time.

2) Each fund may not purchase or sell commodities or real estate, except
to the extent permitted under the 1940 Act, the rules or regulations
thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.

3) Each fund may not make loans to other persons, except to the extent
permitted under the 1940 Act, the rules or regulations thereunder or
any exemption therefrom, as such statute, rules or regulations may be
amended or interpreted from time to time.

4) Each fund may not borrow money, except to the extent permitted under
the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.

5) Each fund may not issue senior securities, except to the extent
permitted under the 1940 Act, the rules or regulations thereunder or
any exemption therefrom, as such statute, rules or regulations may be
amended or interpreted from time to time.

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<PAGE> 37
6) Each fund may not underwrite securities issued by other persons, except
to the extent permitted under the 1940 Act, the rules or regulations
thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.

THE FOLLOWING DESCRIPTIONS OF THE 1940 ACT MAY ASSIST INVESTORS IN UNDERSTANDING
THE ABOVE OR BELOW POLICIES AND RESTRICTIONS.

Borrowing. The 1940 Act restricts the fund from borrowing (including pledging,
mortgaging or hypothecating assets) in excess of 33 1/3% of its total assets
(not including temporary borrowings not in excess of 5% of its total assets).

Lending. Under the 1940 Act, the fund may only make loans if expressly permitted
by its investment policies.

Concentration. The SEC has defined concentration as investing 25% or more of an
investment company's total assets in an industry or group of industries, with
certain exceptions.

Underwriting. Under the 1940 Act, underwriting securities involves a fund
purchasing securities directly from an issuer for the purpose of selling
(distributing) them or participating in any such activity either directly or
indirectly. Under the 1940 Act, a diversified fund may not make any commitment
as underwriter, if immediately thereafter the amount of its outstanding
underwriting commitments, plus the value of its investments in securities of
issuers (other than investment companies) of which it owns more than 10% of the
outstanding voting securities, exceeds 25% of the value of its total assets.
Each fund is a non-diversified mutual fund.

Senior Securities. Senior securities may include any obligation or instrument
issued by a fund evidencing indebtedness. The 1940 Act generally prohibits funds
from issuing senior securities, although it provides allowances for certain
borrowings and certain other investments, such as short sales, reverse
repurchase agreements, firm commitment agreements and standby commitments, with
appropriate segregation of assets.

NON-FUNDAMENTAL INVESTMENT POLICIES.

The following investment policies and restrictions are non-fundamental and may
be changed by the trust's Board of Trustees.

Each fund may not:

1) Purchase securities of any issuer, if as a result, more than 15% of its
net assets would be invested in illiquid securities, including
repurchase agreements with maturities in excess of 7 days.

2) Purchase the securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities)
if, as a result, the fund would fail to qualify for taxation as a
"regulated investment company" under the requirements of Subchapter M
of the Code.

14
<PAGE> 38
3) Purchase securities of other investment companies, except as permitted
by the 1940 Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time, including any exemptive relief granted
by the SEC.

4) Concentrate its investments in any industry or group of industries as
defined by the SEC, except that each fund may concentrate 25% or more
of its assets in the industry or group of industries representing its
sector.

5) Sell securities short unless it owns the security or the right to
obtain the security or equivalent securities (transactions in futures
contracts and options are not considered selling securities short).

6) Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of purchases and sales of securities and
provided that margin payments in connection with futures contracts and
options on futures shall not constitute purchasing securities on
margin.

7) Purchase or sell commodities, commodity contracts or real estate,
including interests in real estate limited partnerships, provided that
the fund may (1) purchase securities of companies that deal in real
estate or interests therein (including REITs), (2) purchase or sell
futures contracts, options contracts, equity index participations and
index participation contracts, and (3) purchase securities of companies
that deal in precious metals or interests therein.

8) Borrow money except that a fund may (i) borrow money from banks and
(ii) engage in reverse repurchase agreements with any party; provided
that (i) and (ii) in combination do not exceed 33 1/3% of its total
assets (any borrowings that come to exceed this amount will be reduced
to the extent necessary to comply with the limitation within three
business days) and a fund will not purchase securities while borrowings
represent more than 5% of its total assets.

9) Lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties (this
restriction does not apply to purchases of debt securities or
repurchase agreements).

MANAGEMENT OF THE FUNDS

The officers and trustees, their principal occupations during the past five
years and their affiliations, if any, with The Charles Schwab Corporation,
Charles Schwab & Co., Inc. (Schwab) and CSIM are as follows:

<TABLE>
<CAPTION>
POSITION(S) WITH
NAME/DATE OF BIRTH THE TRUSTS PRINCIPAL OCCUPATIONS & AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CHARLES R. SCHWAB* Chairman and Trustee Chairman and Co-Chief Executive Officer,
July 29, 1937 Director, The Charles Schwab Corporation; Chief
Executive Officer, Director, Charles Schwab
</TABLE>

- ------------------------------
* This trustee is an "interested person" of the trusts.

15
<PAGE> 39
<TABLE>
<S> <C> <C>
Holdings, Inc.; Chairman, Director, Charles
Schwab & Co., Inc., Charles Schwab Investment
Management, Inc.; Director, The Charles Schwab
Trust Company; Chairman, Schwab Retirement Plan
Services, Inc.; Chairman and Director until
January 1999, Mayer & Schweitzer, Inc. (a
securities brokerage subsidiary of The Charles
Schwab Corporation); Director, The Gap, Inc. (a
clothing retailer), Transamerica Corporation (a
financial services organization), AirTouch
Communications (a telecommunications company)
and Siebel Systems (a software company).

STEVEN L. SCHEID* President and Trustee Vice Chairman and Executive Vice President, The
June 28, 1953 Charles Schwab Corporation; Vice Chairman and
Enterprise President - Financial Products and
Services, Director, Charles Schwab & Co., Inc.;
Chief Executive Officer and Chief Financial
Officer, Director, Charles Schwab Investment
Management, Inc. From 1994 to 1996, Mr. Scheid was
Executive Vice President of Finance for First
Interstate Bancorp and Principal Financial
Officer from 1995 to 1996. Prior to 1994, Mr. Scheid
was Chief Financial Officer, First Interstate
Bank of Texas.

DONALD F. DORWARD Trustee Chief Executive Officer, Dorward Associates
September 23, 1931 (corporate management, marketing and communications
consulting firm); From 1996 to 1999, Executive Vice
President and Managing Director, Grey Advertising.
From 1990 to 1996, Mr. Dorward was President and
Chief Executive Officer, Dorward & Associates
(advertising and marketing/consulting firm).

ROBERT G. HOLMES Trustee Chairman, Chief Executive Officer and Director,
May 15, 1931 Semloh Financial, Inc. (international financial
services and investment advisory firm).

WILLIAM J. KLIPP Trustee From 1991 to 1999, Mr. Klipp was Executive Vice
December 9, 1955 President, SchwabFunds(R), Charles Schwab & Co.,
Inc.; President and Chief Operating Officer,
Charles Schwab Investment Management, Inc.

DONALD R. STEPHENS Trustee Managing Partner, D.R. Stephens & Company
June 28, 1938 (Investments) and Chairman and Chief Executive
</TABLE>

- ------------------------
* This trustee is an "interested person" of the trusts.

16
<PAGE> 40
<TABLE>
<S> <C> <C>
Officer of North American Trust (real estate
investment trust).

MICHAEL W. WILSEY Trustee Chairman, Chief Executive Officer and Director,
August 18, 1943 Wilsey Bennett, Inc. (truck and air transportation,
real estate investment, management, and investments).

JEREMIAH H. CHAFKIN* Executive Vice Executive Vice President, SchwabFunds(R),
May 5, 1959 President and Chief Charles Schwab & Co., Inc.; President and Chief
Operating Officer and Operating Officer, Charles Schwab Investment
Trustee Management, Inc.

TAI-CHIN TUNG Treasurer and Principal Vice President, Treasurer and Controller,
March 7, 1951 Financial Officer Charles Schwab Investment Management, Inc. From
1994 to 1996, Ms. Tung was Controller for Robertson
Stephens Investment Management, Inc. From 1993 to
1994, she was Vice President of Fund Accounting,
Capital Research and Management Co.

STEPHEN B. WARD Senior Vice President Senior Vice President and Chief Investment
April 5, 1955 and Chief Investment Officer, Charles Schwab Investment Management,
Officer Inc.

FRANCES COLE Secretary Senior Vice President, Chief Counsel and
September 9, 1955 Assistant Corporate Secretary, Charles Schwab
Investment Management, Inc.
</TABLE>

Each of the above-referenced officers and/or trustees also serves in the same
capacity as described for the trust, for The Charles Schwab Family of Funds,
Schwab Investments and Schwab Annuity Portfolios. The address of each individual
listed above is 101 Montgomery Street, San Francisco, California 94104.

Each fund is overseen by a board of trustees. The board of trustees meets
regularly to review each fund's activities, contractual arrangements and
performance. The board of trustees is responsible for protecting the interests
of a fund's shareholders. The following table provides information as of October
31, 1999, concerning compensation of the trustees. Unless otherwise stated,
information is for the fund complex, which included 40 funds as of December 31,
1999.

- -------------------------------
* This trustee is an "interested person" of the trusts.

17
<PAGE> 41
<TABLE>
<CAPTION>
Pension or ($)
($) Retirement Total
Name of Trustee Aggregate Compensation Benefits Accrued Compensation from
from the as Part of Fund Fund Complex
Expenses
-------------------------------------------------

-------------------------------------------------
Financial Health
Technology Services Care Communication
Focus Fund Focus Fund Focus Fund Focus Fund
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Schwab 0 0 0 0 N/A 0
Steven L. Scheid 0 0 0 0 N/A 0
Jeremiah Chafkin 0 0 0 0 N/A 0
William J. Klipp N/A
Donald F. Dorward N/A
Robert G. Holmes N/A
Donald R. Stephens N/A
Michael W. Wilsey N/A
</TABLE>

DEFERRED COMPENSATION PLAN

Trustees who are not "interested persons" of a trust ("independent trustees")
may enter into a fee deferral plan. Under this plan, deferred fees will be
credited to an account established by the trust as of the date that such fees
would have been paid to the trustee. The value of this account will equal the
value that the account would be if the fees credited to the account had been
invested in the shares of SchwabFunds selected by the trustee. Currently, none
of the independent trustees have elected to participate in this plan.

CODE OF ETHICS

The funds, their investment adviser and Schwab have adopted a Code of Ethics
(Code) as required under the 1940 Act. Subject to certain conditions or
restrictions, the Code permits the trustees, directors, officers or advisory
representatives of the funds or the investment adviser or the directors or
officers of Schwab to buy or sell securities for their own accounts. This
includes securities that may be purchased or held by the funds. Securities
transactions by some of these individuals may be subject to prior approval of
the investment adviser's Chief Compliance Officer or alternate. Most securities
transactions are subject to quarterly reporting and review

18
<PAGE> 42
requirements.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of __________, 2000, the officers and trustees of the trusts, as a group
owned, of record or beneficially, less than 1% of the outstanding voting
securities of the classes and series of each trust.

INVESTMENT ADVISORY AND OTHER SERVICES

INVESTMENT ADVISER

Charles Schwab Investment Management, Inc., a wholly owned subsidiary of The
Charles Schwab Corporation, 101 Montgomery Street, San Francisco CA 94104,
serves as the funds' investment adviser and administrator pursuant to Investment
Advisory and Administration Agreements (Advisory Agreements) between it and each
trust. Charles Schwab & Co., Inc. (Schwab) is an affiliate of the investment
adviser and is the trusts' distributor, shareholder services agent and transfer
agent. Charles R. Schwab is the founder, Chairman, Co-Chief Executive Officer
and Director of The Charles Schwab Corporation. As a result of his ownership of
and interests in The Charles Schwab Corporation, Mr. Schwab may be deemed to be
a controlling person of the investment adviser and Schwab.

For its advisory and administrative services to the Financial Services Focus
Fund, the investment adviser is entitled to receive an annual fee, accrued daily
and paid monthly, of _____% of the fund's average daily net assets.

The investment adviser and Schwab have voluntarily guaranteed that, through at
least __________, the total operating expenses (excluding interest, taxes and
extraordinary expenses) of the Financial Services Focus Fund will not exceed [ ]
of its average daily net assets.

For its advisory and administrative services to the Health Care Focus Fund, the
investment adviser is entitled to receive an annual fee, accrued daily and paid
monthly, of _____% of the fund's average daily net assets.

The investment adviser and Schwab have voluntarily guaranteed that, through at
least __________, the total operating expenses (excluding interest, taxes and
extraordinary expenses) of the Health Care Focus Fund will not exceed [ ] of its
average daily net assets.

For its advisory and administrative services to the Technology Focus Fund the
investment adviser is entitled to receive an annual fee, accrued daily and paid
monthly, of _____% of the fund's average daily net assets.

The investment adviser and Schwab have voluntarily guaranteed that, through at
least __________, the total operating expenses (excluding interest, taxes and
extraordinary expenses) of the Technology Focus Fund will not exceed [ ] of its
average daily net assets.

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<PAGE> 43
For its advisory and administrative services to the Communications Focus Fund,
the investment adviser is entitled to receive an annual fee, accrued daily and
paid monthly, of _____% of the fund's average daily net assets.

The investment adviser and Schwab have voluntarily guaranteed that, through at
least __________, the total operating expenses (excluding interest, taxes and
extraordinary expenses) of the Communications Focus Fund will not exceed [ ] of
its average daily net assets.

DISTRIBUTOR

Pursuant to a Distribution Agreement, Schwab is the principal underwriter for
shares of the funds and is the trust's agent for the purpose of the continuous
offering of the funds' shares. Each fund pays the cost of the prospectuses and
shareholder reports to be prepared and delivered to existing shareholders.
Schwab pays such costs when the described materials are used in connection with
the offering of shares to prospective investors and for supplementary sales
literature and advertising. Schwab receives no fee under the Distribution
Agreement. Terms of continuation, termination and assignment under the
Distribution Agreement are identical to those described above with respect to
the Advisory Agreement.

SHAREHOLDER SERVICES AND TRANSFER AGENT

Schwab provides fund information to shareholders, including share price,
shareholder ownership and account activities and distributes the funds'
prospectuses, financial reports and other informational literature about the
funds. Schwab maintains the office space, equipment and personnel necessary to
provide these services. Schwab also distributes and markets SchwabFunds and
provides other services. At its own expense, Schwab may engage third party
entities, as appropriate, to perform some or all of these services.

For the services performed as transfer agent under its contract with each fund,
Schwab is entitled to receive an annual fee, payable monthly from each fund, in
the amount of [ _ ] of each fund's average daily net assets. For the services
performed as shareholder services agent under its contract with each fund,
Schwab is entitled to receive an annual fee, payable monthly from each fund, in
the amount of [_] of each fund's average daily net assets.

CUSTODIAN AND FUND ACCOUNTANT

[ ______________________________________ ] serves as custodian for the funds.
[ ___________________ ] serves as fund accountant for the funds.

The custodian is responsible for the daily safekeeping of securities and cash
held or sold by the funds. The fund accountant maintains all books and records
related to each fund's transactions.

INDEPENDENT ACCOUNTANTS

The funds' independent accountants, [_________________________], audit and
reports on the annual financial statements of each series of the trust and
reviews certain regulatory reports and each fund's federal income tax return.
They also perform other professional accounting, auditing, tax and advisory
services when the trust engages them to do so. Their address is
[_____________________]. Each fund's audited financial statements for the fiscal
year ended

20
<PAGE> 44
[_____________________], are included in the fund's annual report, which is a
separate report supplied with the SAI.

OTHER SERVICES

__________ provides the investment adviser with statistical and factual
information and advice about economic factors and trends relating to each fund's
sector. Pursuant to an agreement between the investment adviser and ________,
________ provides these services to the investment adviser, and in return is
compensated by the investment adviser based on a percentage of each fund's
assets, subject to a maximum fee per fund.

BROKERAGE ALLOCATION AND OTHER PRACTICES

PORTFOLIO TURNOVER

For reporting purposes, each fund's turnover rate is calculated by dividing the
value of purchases or sales of portfolio securities for the fiscal year,
whichever is less, by the monthly average value of portfolio securities the fund
owned during the fiscal year. When making the calculation, all securities whose
maturities at the time of acquisition were one year or less ("short-term
securities") are excluded.

A 100% portfolio turnover rate would occur, for example, if all portfolio
securities (aside from short-term securities) were sold and either repurchased
or replaced once during the fiscal year.

Typically, funds with high turnover (such as 100% or more) tend to generate
higher capital gains and transaction costs, such as brokerage commissions.

The turnover rate for each fund is largely driven by the output of the portfolio
model the investment adviser uses to construct each fund's investment portfolio.

PORTFOLIO TRANSACTIONS

In effecting securities transactions for the funds, the investment adviser seeks
to obtain best execution. Subject to the supervision of the board of trustees,
the investment adviser will select brokers and dealers for the funds on the
basis of a number of factors, including, for example, price paid for securities,
commission paid for transactions, clearance, settlement, reputation, financial
strength and stability, efficiency of execution and error resolution, block
trading and block positioning capabilities, willingness to execute related or
unrelated difficult transactions in the future and order of call.

In assessing these criteria, the investment adviser will, among other things,
monitor the performance of brokers effecting transactions for the funds to
determine the effect, if any, that the funds' transactions through those brokers
have on the market prices of the stocks involved. This may be of particular
importance for the funds' investments in relatively smaller companies whose
stocks are not as actively traded as those of their larger counterparts. The
funds will seek to buy and sell securities in a manner that causes the least
possible fluctuation in the prices of those stocks in view of the size of the
transactions.

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<PAGE> 45
When the execution capability and price offered by two or more broker-dealers
are comparable, the investment adviser may, in its discretion, in agency
transactions (and not principal transactions) utilize the services of
broker-dealers that provide it with investment information and other research
resources. Such resources also may be used by the investment adviser when
providing advisory services to its clients.

In determining when and to what extent to use Schwab or any other affiliated
broker-dealer as its broker for executing orders for the funds on securities
exchanges, the investment adviser follows procedures, adopted by the board of
trustees, that are designed to ensure that affiliated brokerage commissions (if
relevant) are reasonable and fair in comparison to unaffiliated brokerage
commissions for comparable transactions. The Board reviews the procedures
annually and approves and reviews transactions involving affiliated brokers
quarterly.

In an attempt to obtain best execution for the funds, the investment adviser may
place orders directly with market makers or with third market brokers, Instinet
or brokers on an agency basis. Placing orders with third market brokers or
through Instinet may enable the funds to trade directly with other institutional
holders on a net basis. At times, this may allow the funds to trade larger
blocks than would be possible trading through a single market maker.

DESCRIPTION OF THE TRUST

Each fund is a series of Schwab Capital Trust, an open-end management investment
company organized as a Massachusetts business trust on May 7, 1993.

The Declaration of Trust provides that shares may be automatically redeemed if
held by a shareholder in an amount less than the minimum required by each fund
or share class. Each fund's initial and subsequent minimum investment and
balance requirements are set forth in the prospectus. These minimums may be
waived for certain investors, including trustees, officers and employees of
Schwab, or changed without prior notice.

The funds may hold special meetings. These meetings may be called for purposes
such as electing trustees, changing fundamental policies and amending management
contracts. Shareholders are entitled to one vote for each share owned and may
vote by proxy or in person. Proxy materials will be mailed to shareholders prior
to any meetings, and will include a voting card and information explaining the
matters to be voted upon.

The bylaws of the trust provide that a majority of shares entitled to vote shall
be a quorum for the transaction of business at a shareholders' meeting, except
that where any provision of law, or of the Declaration of Trust or of the bylaws
permits or requires that (1) holders of any series shall vote as a series, then
a majority of the aggregate number of shares of that series entitled to vote
shall be necessary to constitute a quorum for the transaction of business by
that series, or (2) holders of any class shall vote as a class, then a majority
of the aggregate number of shares of that class entitled to vote shall be
necessary to constitute a quorum for the transaction of business by that class.
A majority of the outstanding shares of a fund means the affirmative vote, at an
annual or special meeting of shareholders (a) where 67% or more of the voting
securities are present at the meeting or represented by proxy, of shareholders
owning more than 50% of the outstanding securities of a fund or (b) of more than
50% of the outstanding voting securities of a fund, whichever is less. Any
lesser number shall be sufficient for adjournments. Any adjourned session or
sessions may be held, within a reasonable time after the date set for the
original meeting, without the necessity of further notice.

22
<PAGE> 46
The Declaration of Trust specifically authorizes the board of trustees to
terminate the trust (or any of its investment portfolios) by notice to the
shareholders without shareholder approval.

Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for the trust's
obligations. The Declaration of Trust, however, disclaims shareholder liability
for the trust's acts or obligations and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the trust or the trustees. In addition, the Declaration of Trust provides for
indemnification out of the property of an investment portfolio in which a
shareholder owns or owned shares for all losses and expenses of such shareholder
or former shareholder if he or she is held personally liable for the obligations
of the trust solely by reason of being or having been a shareholder. Moreover,
the trust will be covered by insurance which the trustees consider adequate to
cover foreseeable tort claims. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered remote, because
it is limited to circumstances in which a disclaimer is inoperative and the
trust itself is unable to meet its obligations. There is a remote possibility
that a fund could become liable for a misstatement in the prospectus or SAI
about another fund.

As more fully described in the Declaration of Trust, the trustees may each year,
or more frequently, distribute to the shareholders of each series accrued income
less accrued expenses and any net realized capital gains less accrued expenses.
Distributions of each year's income of each series shall be distributed pro rata
to shareholders in proportion to the number of shares of each series held by
each of them. Distributions will be paid in cash or shares or a combination
thereof as determined by the trustees. Distributions paid in shares will be paid
at the net asset value as determined in accordance with the bylaws.

PURCHASE, REDEMPTION AND PRICING OF SHARES

PURCHASING AND REDEEMING SHARES OF THE FUNDS

As long as the funds or Schwab follow reasonable procedures to confirm that an
investor's telephone order is genuine, they will not be liable for any losses
the investor may experience due to unauthorized or fraudulent instructions.
These procedures may include requiring a form of personal identification before
acting upon any telephone order, providing written confirmation of telephone
orders and tape recording all telephone orders.

Share certificates will not be issued in order to avoid additional
administrative costs, however, share ownership records are maintained by Schwab.
Twice a year, financial reports will be mailed to shareholders describing each
fund's performance and investment holdings. In order to reduce these mailing
costs, each household will receive one consolidated mailing. If you do not want
to receive consolidated mailings, you may write to your fund and request that
your mailings not be consolidated.

Each fund reserves the right to waive its early redemption fee for certain
tax-advantaged retirement plans.

Each fund has made an election with the SEC to pay in cash all redemptions
requested by any shareholder of record limited in amount during any 90-day
period to the lesser of $250,000 or 1% of its net assets at the beginning of
such period. This election is irrevocable without the SEC's

23
<PAGE> 47
prior approval. Redemption requests in excess of these limits may be paid, in
whole or in part, in investment securities or in cash, as the board of trustees
may deem advisable. Payment will be made wholly in cash unless the board of
trustees believes that economic or market conditions exist that would make such
payment a detriment to the best interests of a fund. If redemption proceeds are
paid in investment securities, such securities will be valued as set forth in
"Pricing of Shares." A redeeming shareholder would normally incur brokerage
expenses if he or she were to convert the securities to cash.

Each fund is designed for long-term investing. Because short-term trading
activities can disrupt the smooth management of a fund and increase its
expenses, each fund reserves the right to refuse any purchase or exchange order,
including any purchase or exchange order which appears to be associated with
short-term trading activities or "market timing." Because market timing
decisions to buy and sell securities typically are based on an individual
investor's market outlook, including such factors as the perceived strength of
the economy or the anticipated direction of interest rates, it is difficult for
a fund to determine in advance what purchase or exchange orders may be deemed to
be associated with market timing or short-term trading activities.

DELIVERY OF SHAREHOLDER DOCUMENTS

Typically once a year, an updated prospectus will be mailed to shareholders
describing each fund's investment strategies, risks and shareholder policies.
Twice a year, financial reports will be mailed to shareholders describing each
fund's performance and investment holdings. In order to eliminate duplicate
mailings of shareholder documents, each household may receive one copy of these
documents, under certain conditions. This practice is commonly called
"householding." If you want to receive multiple copies, you may write or call
your fund at the address or telephone number on the front of this SAI. Your
instructions will be effective within 30 days of receipt by Schwab.

PRICING OF SHARES

Securities traded on stock exchanges are valued at the last-quoted sales price
on the exchange on which such securities are primarily traded, or, lacking any
sales, at the mean between the bid and ask prices. Securities traded in the
over-the-counter market are valued at the last sales price that day, or if no
sales that day, at the mean between the bid and ask prices. In addition,
securities that are primarily traded on foreign exchanges are generally valued
at the preceding closing values of such securities on their respective exchanges
with these values then translated into U.S. dollars at the current exchange
rate. Securities for which market quotations or closing values are not readily
available (including restricted securities that are subject to limitations on
their sale and illiquid securities) are valued at fair value as determined in
good faith pursuant to guidelines and procedures adopted by the board of
trustees. These procedures require that securities be valued on the basis of
prices provided by approved pricing services, except when a price appears
manifestly incorrect or events occurring between the time a price is furnished
by a service and the time a fund calculates its share price materially affect
the furnished price. The board of trustees regularly reviews fair values
assigned to portfolio securities under these circumstances and also when no
prices from approved pricing services are available.

24
<PAGE> 48
TAXATION

FEDERAL TAX INFORMATION FOR THE FUNDS

It is each fund's policy to qualify for taxation as a "regulated investment
company"(RIC) by meeting the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended (the Code). By qualifying as a RIC, each fund
expects to eliminate or reduce to a nominal amount the federal income tax to
which it is subject. If a fund does not qualify as a RIC under the Code, it will
be subject to federal income tax on its net investment income and any net
realized capital gains.

The Code imposes a non-deductible excise tax on RICs that do not distribute in a
calendar year (regardless of whether they otherwise have a non-calendar taxable
year) an amount equal to 98% of their "ordinary income" (as defined in the Code)
for the calendar year plus 98% of their net capital gain for the one-year period
ending on October 31 of such calendar year, plus any undistributed amounts from
prior years. The non-deductible excise tax is equal to 4% of the deficiency. For
the foregoing purposes, a fund is treated as having distributed any amount on
which it is subject to income tax for any taxable year ending in such calendar
year.

A fund's transactions in futures contracts, forward contracts, foreign currency
transactions, options and certain other investment and hedging activities may be
restricted by the Code and are subject to special tax rules. In a given case,
these rules may accelerate income to a fund, defer its losses, cause adjustments
in the holding periods of the fund's assets, convert short-term capital losses
into long-term capital losses or otherwise affect the character of the fund's
income. These rules could therefore affect the amount, timing and character of
distributions to shareholders. The funds will endeavor to make any available
elections pertaining to these transactions in a manner believed to be in the
best interest of the funds and their shareholders.

FEDERAL INCOME TAX INFORMATION FOR SHAREHOLDERS

The discussion of federal income taxation presented below supplements the
discussion in the funds' prospectus and only summarizes some of the important
federal tax considerations generally affecting shareholders of the funds.
Accordingly, prospective investors (particularly those not residing or domiciled
in the United States) should consult their own tax advisers regarding the
consequences of investing in a fund.

Any dividends declared by a fund in October, November or December and paid the
following January are treated, for tax purposes, as if they were received by
shareholders on December 31 of the year in which they were declared. Long-term
capital gains distributions are taxable as long-term capital gains, regardless
of how long you have held your shares. However, if you receive a long-term
capital gains distribution with respect to fund shares held for six months or
less, any loss on the sale or exchange of those shares shall, to the extent of
the long-term capital gains distribution, be treated as a long-term capital
loss. For corporate investors in the funds, dividend distributions the funds
designate to be from dividends received from qualifying domestic corporations
will be eligible for the 70% corporate dividends-received deduction to the
extent they would qualify if the funds were regular corporations. Distributions
by a fund also may be

25
<PAGE> 49
subject to state, local and foreign taxes, and its treatment under applicable
tax laws may differ from the federal income tax treatment.

A fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of taxable dividends paid to any shareholder who (1) fails to
provide a correct taxpayer identification number certified under penalty of
perjury; (2) is subject to withholding by the Internal Revenue Service for
failure to properly report all payments of interest or dividends; or (3) fails
to provide a certified statement that he or she is not subject to "backup
withholding." Backup withholding is not an additional tax and any amounts
withheld may be credited against the shareholder's ultimate U.S. tax liability.

Foreign shareholders (i.e., nonresident alien individuals and foreign
corporations, partnerships, trusts and estates) are generally subject to U.S.
withholding tax at the rate of 30% (or a lower tax treaty rate) on distributions
derived from net investment income and short-term capital gains. Distributions
to foreign shareholders of long-term capital gains and any gains from the sale
or other disposition of shares of the funds generally are not subject to U.S.
taxation, unless the recipient is an individual who either (1) meets the Code's
definition of "resident alien" or (2) who is physically present in the U.S. for
183 days or more. Different tax consequences may result if the foreign
shareholder is engaged in a trade or business within the United States. In
addition, the tax consequences to a foreign shareholder entitled to claim the
benefits of a tax treaty may be different than those described above.

CALCULATION OF PERFORMANCE DATA

Average annual total return is a standardized measure of performance calculated
using methods prescribed by SEC rules. It is calculated by determining the
ending value of a hypothetical initial investment of $1,000 made at the
beginning a specified period. The ending value is then divided by the initial
investment, which is annualized and expressed as a percentage. It is reported
for periods of one, five and 10 years or since commencement of operations for
periods not falling on those intervals. In computing average annual total
return, a fund assumes reinvestment of all distributions at net asset value on
applicable reinvestment dates.

An after-tax total return for each fund may be calculated by taking that fund's
total return and subtracting applicable federal taxes from the portions of each
fund's total return attributable to capital gain and ordinary income
distributions. This after-tax total return may be compared to that of other
mutual funds with similar investment objectives as reported by independent
sources.

Each fund also may report the percentage of its total return that would be paid
to taxes annually (at the applicable federal personal income and capital gains
tax rates) before redemption of fund shares. This proportion may be compared to
that of other mutual funds with similar investment objectives as reported by
independent sources.

A fund also may advertise its cumulative total return. This number is calculated
using the same formula that is used for average annual total return except that,
rather than calculating the total return based on a one-year period, cumulative
total return is calculated from commencement of operations to the fiscal year
end.

The performance of the funds may be compared with the performance of other
mutual funds by comparing the ratings of mutual fund rating services, various
indices, U.S. government

26
<PAGE> 50
obligations, bank certificates of deposit, the consumer price index and other
investments for which reliable data is available. An index's performance data
assumes the reinvestment of dividends but does not reflect deductions for
administrative, management and trading expenses. The funds will be subject to
these costs and expenses, while an index does not have these expenses. In
addition, various factors, such as holding a cash balance, may cause the funds'
performance to be higher or lower than that of an index.

27
<PAGE> 51
PART C
OTHER INFORMATION
SCHWAB CAPITAL TRUST

Item 23. Exhibits.

(a) Articles of Agreement and Declaration of Trust,
Incorporation dated May 6, 1993 is incorporated by
reference to Exhibit 1 of
Post-Effective Amendment No. 21 to
Registrant's Registration on Form
N-1A, electronically filed on December
17, 1997.

(b) By-Laws Amended and Restated Bylaws are
incorporated by reference to Exhibit 2
of Post-Effective Amendment No. 7 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
February 27, 1996.

(c) Instruments (i) Article III, Section 5, Article V,
Defining rights of Article VI, Article VIII, Section 4
Security Holders and Article IX, Sections 1, 5 and 7 of
the Agreement and Declaration of
Trust, dated May 6, 1993, referenced
in Exhibit (a) above, are incorporated
herein by reference to Exhibit 1 to
Post-Effective Amendment No. 21 of
Registrant's registration Statement on
Form N-1A electronically filed on
December 17, 1997.

(ii) Articles 9 and 11 of the Amended and
Restated Bylaws are incorporated
herein by reference to Exhibit 2 of
Post-Effective Amendment No. 7 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
February 27, 1996.

(d) Investment Advisory (i) Investment Advisory and Administration
Contracts Agreement between Registrant and
Charles Schwab Investment Management,
Inc. (the "Investment Adviser"), dated
June 15, 1994, is incorporated herein
by reference to Exhibit 5(a) of
Post-Effective Amendment No. 21 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
December 17, 1997.

(ii) Amended Schedules A and B to
Investment Advisory and Administration
Agreement referenced in Exhibit (d)(i)
above is incorporated herein by
reference to Exhibit (d)(ii) of
Post-Effective Amendment No. 32 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
February 26, 1999.

(iii) Amended Schedules A and B to the
Investment Advisory and Administration
Agreement between Registrant and the
Investment Adviser, referenced in
Exhibit (d)(i) above are incorporated
herein by reference to Exhibit
(d)(iii) of Post Effective Amendment
No. 33 to Registrant's Registration
Statement on Form N-1A electronically
filed on April 15, 1999.

Part C
<PAGE> 52
(vi) Investment Sub-Advisory Agreement
between Investment Adviser, on behalf
of the Schwab Analytics Fund(R), and
Symphony Asset Management is
incorporated herein by reference to
Exhibit 5(d) of Post-Effective
Amendment No. 10 to Registrant's
Registration Statement on Form N-1A,
electronically filed on May 17, 1996.

(e) Underwriting (i) Distribution Agreement between
Contracts Registrant and Charles Schwab & Co.,
Inc. ("Schwab"), dated July 21, 1993,
is incorporated herein by reference to
Exhibit 6(a) of Post-Effective
Amendment No. 21 to Registrant's
Registration Statement on Form N-1A,
electronically filed on December 17,
1997.

(ii) Amended Schedule A to the Distribution
Agreement, referenced at Exhibit
(e)(i) above, is incorporated herein
by reference to Exhibit (e)(ii) of
Post-Effective Amendment No. 32 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
February 26, 1999.

(iii) Amended Schedule A to the Distribution
Agreement between Registrant and
Schwab, referenced at Exhibit (e)(i)
above, is incorporated herein by
reference to Exhibit (e)(iii) of Post
Effective Amendment No. 33 to
Registrant's Registration Statement on
Form N-1A electronically filed on
April 15, 1999.

(f) Bonus or Profit Inapplicable
Sharing Contracts

(g) Custodian Agreements (i) Custodian Agreement between Registrant
and Morgan Stanley Trust Company,
dated April 4, 1997, is incorporated
herein by reference to Exhibit 8(a) of
Post-Effective Amendment No. 18 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
April 14, 1997.

(ii) Amended Appendix 2 to Custodian
Agreement between the Registrant and
Morgan Stanley Trust Company referred
to at Exhibit (g)(i) above, is
incorporated herein by reference to
Exhibit (g)(ii) of Post-Effective
Amendment No. 30 to Registrant's
Registration Statement on Form N-1A,
electronically filed on December 29,
1998.

(iii) Amended Custodian Agreement referenced
at Exhibit (g)(i) above, between
Registrant and Morgan Stanley Trust
Company, is incorporated herein by
reference to Exhibit 8(c) of
Post-Effective Amendment No. 21 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
December 17, 1997.

Part C
<PAGE> 53
(iv) Accounting Services Agreement between
Registrant and SEI Investments, dated
April 1, 1998, is incorporated herein
by reference to Exhibit 8(d) of
Post-Effective Amendment No. 26 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
August 14, 1998.

(v) Amended Schedule A to the Accounting
Services Agreement referenced at
Exhibit (g)(iv) above, is incorporated
herein by reference to Exhibit (g)(v)
of Post-Effective Amendment No. 32 to
Registrant's Registration Statement on
Form N1-A, electronically filed on
February 26, 1999.

(vi) Amended Schedule A to the Accounting
Services Agreement referenced at
Exhibit (g)(iv) above, is incorporated
herein by reference to Exhibit (g)(vi)
of Post Effective Amendment No. 34 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
September 14, 1999.

(vii) Custodian Services Agreement between
Registrant, on behalf of the Schwab
S&P 500 Fund, and PNC Bank, National
Association ("PNC Bank"), dated
February 21, 1996, is incorporated
herein by reference to Exhibit 8(c) of
Post-Effective Amendment No. 7 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
February 27, 1996.

(viii) Schedule A to the Custodian Services
Agreement referenced at Exhibit
(g)(vii) above between Registrant, on
behalf of the Institutional Select
Index Funds is incorporated herein by
reference to Exhibit (g)(viii) of
Post-Effective Amendment No. 32 to
Registrant's Registration Statement on
Form N1-A, electronically filed on
February 26, 1999.

(ix) Schedule I to the Custodian Services
Agreement referenced at Exhibit
(g)(vii) above, is incorporated herein
by reference to Exhibit (a)(ix) of
Post-Effective Amendment No. 36 to the
Registrant's Registration Statement on
Form N-1A, electronically filed on or
about February 25, 2000.

(x) Accounting Services Agreement between
Registrant, on behalf of the Schwab
S&P 500 Fund, and PFPC Inc., dated
February 21, 1996, is incorporated
herein by reference to Exhibit 8(d) of
Post-Effective Amendment No. 7 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
February 27, 1996.

Part C
<PAGE> 54
(xi) Amended Schedule to the Accounting
Services Agreement referenced at
Exhibit (g)(viii) above between
Registrant, on behalf of the Schwab
S&P 500 Fund and the Schwab Analytics
Fund, and PFPC Inc. is incorporated
herein by reference to Exhibit 8(f) of
Post-Effective Amendment No. 10 to
Registrant's Registration Statement on
Form N-1A, electronically filed on May
17, 1996.

(xii) Transfer Agency Agreement between
Registrant and Schwab, dated July 21,
1993, is incorporated herein by
reference to Exhibit 8(j) of
Post-Effective Amendment No. 21 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
December 17, 1997.

(xiii) Amended Schedules A and C to the
Transfer Agency Agreement referenced
at Exhibit (g)(xii) above is
incorporated herein by reference to
Exhibit (xiii) of Post-Effective
Amendment No. 32 to Registrant's
Registration Statement on Form N1-A,
electronically filed on February 26,
1999.

(xiv) Amended Schedules A and C to the
Transfer Agency Agreement between
Registrant and Schwab referenced at
Exhibit (g)(xii) above, are
incorporated herein by reference to
Exhibit (g)(xiv) of Post Effective
Amendment No. 33 to Registrant's
Registration Statement on Form N-1A
electronically filed on April 15,
1999.

(xv) Shareholder Service Agreement between
Registrant and Schwab, dated July 21,
1993 is incorporated herein by
reference to Exhibit 8(l) of
Post-Effective Amendment No. 21 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
December 17, 1997.

(xvi) Amended Schedules A and C to the
Shareholder Service Agreement between
Registrant and Schwab referenced at
Exhibit (g)(xv) above, is incorporated
herein by reference to Exhibit
(g)(xvi) of Post-Effective Amendment
No. 32 to Registrant's Registration
Statement on Form N1-A, electronically
filed on February 26, 1999.

(xvii) Amended Schedules A and C to the
Shareholder Service Agreement between
Registrant and Schwab referenced at
Exhibit (g)(xv) above, are
incorporated herein by reference to
Exhibit (g)(xvii) of Post Effective
Amendment No. 33 to Registrant's
Registration Statement on Form N-1A
electronically filed on April 15,
1999.

(xviii) Amended Custodian Services Agreement
by and between Registrant and PNC
Bank, National Association, dated
November 1, 1998, referenced as
Exhibit (g)(vii) above, is
incorporated herein by reference to
Exhibit (g)(xv) of Post-Effective
Amendment No. 30 to Registrant's
Registration Statement on Form N-1A,
electronically filed on December 29,
1998.

Part C
<PAGE> 55
(h) Other Material License Agreement between Schwab
Contracts Capital Trust and Standard & Poor's is
incorporated herein by reference to
Exhibit (h) of Post-Effective
Amendment No. 32 to Registrant's
Registration Statement on Form N1-A,
electronically filed on February 26,
1999.

(i) Legal Opinion To be filed in a subsequent amendment.

(j) Other Opinions To be filed in a subsequent amendment.

(k) Omitted Financial Inapplicable.
Statements

(l) Initial Capital (i) Purchase Agreement for the Schwab
Agreement International Index Fund(R), dated
June 17, 1993, is incorporated herein
by reference to Exhibit 13(a) of
Post-Effective Amendment No. 21 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
December 17, 1997.

(ii) Purchase Agreement for the Schwab
Small-Cap Index Fund(R), dated October
13, 1993, is incorporated herein by
reference to Exhibit 13(b) of
Post-Effective Amendment No. 21 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
December 17, 1997.

(iii) Purchase Agreement for the Schwab
MarketTrack Portfolios - Growth
Portfolio, Balanced Portfolio and
Conservative Portfolio (formerly
Schwab Asset Director(R)- High Growth,
Schwab Asset Director - Balanced
Growth, and Schwab Asset Director -
Conservative Growth Funds) is
incorporated herein by reference to
Exhibit 13(c) of Post-Effective
Amendment No. 6 to registrant's
Registration Statement on Form N-1A,
electronically filed on December 15,
1996.

(iv) Purchase Agreement for the Schwab S&P
500 Fund-Investor Shares and
e.Shares(R) is incorporated herein by
reference to Exhibit 13(d) of
Post-Effective Amendment No. 7 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
February 27, 1996.

(v) Purchase Agreement for the Schwab
Analytics Fund(R) is incorporated
herein by reference to Exhibit 13(e)
to Post-Effective Amendment No. 13 of
Registrant's Registration Statement on
Form N-1A, electronically filed on
October 10, 1996.

(vi) Purchase Agreement for Schwab
MarketManager International Portfolio
(formerly Schwab OneSource(R)
Portfolios-International) is
incorporated herein by reference to
Exhibit 13(f) of Post-Effective
Amendment No. 13 to Registrant's
Registration Statement on Form N-1A,
electronically filed on October 10,
1996.

Part C
<PAGE> 56
(vii) Purchase Agreement for Schwab
MarketManager Growth Portfolio and
Balanced Portfolio (formerly Schwab
OneSource Portfolios-Growth Allocation
and Schwab OneSource Portfolios-
Balanced Allocation) is incorporated
herein by reference of Exhibit 13(g)
to Post-Effective Amendment No. 14 to
Registration Statement on Form N-1A,
electronically filed on December 18,
1996.

(viii) Purchase Agreement for Schwab
MarketManager(TM) Small Cap Portfolio
(formerly Schwab OneSource(R)
Portfolios-Small Company) is
incorporated herein by reference to
Exhibit 13(h) of Post-Effective
Amendment No. 21 to Registrant's
Registration Statement on Form N-1A,
electronically filed on December 17,
1997.

(ix) Purchase Agreement for MarketTrack(TM)
All Equity Portfolio is incorporated
herein by reference to Exhibit 13(i)
of Post-Effective Amendment No. 26 to
Registrant's Registration Statement on
Form N-1A, electronically filed on
August 14, 1998.

(x) Purchase Agreement for Institutional
Select S&P 500 Fund, Institutional
Select Large-Cap Value Index Fund and
Institutional Select Small-Cap Value
Index Fund is incorporated herein by
reference to Exhibit (l)(x) of
Post-Effective Amendment No. 32 to
Registrant's Registration Statement on
Form N1-A, electronically filed on
February 26, 1999.

(xi) Purchase Agreement for Schwab Total
Stock Market Index Fund is
incorporated herein by reference to
Exhibit (l)(xi) of Post Effective
Amendment No. 33 to Registrant's
Registration Statement on Form N-1A
electronically filed on April 15,
1999.

(m) Rule 12b-1 Plan Inapplicable.

(n) Financial Data (i) Inapplicable.
Schedule

(o) Rule 18f-3 Plan (i) Amended and Restated Multiple Class
Plan, dated April 10, 1997, for Schwab
International Index Fund, Schwab
Small-Cap Index Fund and Schwab S&P
500 Fund is incorporated herein by
reference to Post Effective Amendment
18 to Registrant's Registration
Statement on Form N1-A, electronically
filed on April 14, 1997.

(ii) Amended Schedule A to the Amended and
Restated Multiple Class Plan and the
Amended and Restated Multiple Class
Plan, referenced at Exhibit (o)(i)
above, for Schwab Total Stock Market
Index are incorporated herein by
reference to Exhibit (o)(ii) of Post
Effective Amendment No. 33 to
Registrant's Registration Statement on
Form N-1A electronically filed on
April 15, 1999.

Part C
<PAGE> 57
(p) Power of Attorney Power of Attorney executed by Jeremiah
H. Chafkin, December 6, 1999, is
incorporated herein by reference to
Exhibit (p) of Post-Effective
Amendment No. 36 to Registrant's
Registration Statement on Form N-1A
electronically filed on February 25,
2000.

(q) Code of Ethics Code of Ethics adopted by Registrant,
Charles Schwab Investment Management
Inc. and Charles Schwab & Co., Inc. is
incorporated herein by reference to
Exhibit (q) of Post-Effective
Amendment No. 36 to Registrant's
Registration Statement on Form N-1A
electronically filed on February 25,
2000.

Item 24. Persons Controlled by or under Common Control with the Fund.

The Charles Schwab Family of Funds, Schwab Investments and Schwab Annuity
Portfolios each are Massachusetts business trusts registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), are advised by the
Investment Adviser, and employ Schwab as their principal underwriter, transfer
agent and shareholder services agent. As a result, The Charles Schwab Family of
Funds, Schwab Investments and Schwab Annuity Portfolios may be deemed to be
under common control with Registrant.

Item 25. Indemnification.

Article VIII of Registrant's Agreement and Declaration of Trust (Exhibit
(1) hereto, which is incorporated by reference) provides in effect that
Registrant will indemnify its officers and trustees against all liabilities and
expenses, including but not limited to amounts paid in satisfaction of
judgments, in compromise, or as fines and penalties, and counsel fees reasonably
incurred by any such officer or trustee in connection with the defense or
disposition of any action, suit, or other proceeding. However, in accordance
with Section 17(h) and 17(i) of the 1940 Act and its own terms, said Agreement
and Declaration of Trust does not protect any person against any liability to
Registrant or its shareholders to which he or she would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office. In any event,
Registrant will comply with 1940 Act Releases No. 7221 and 11330 respecting the
permissible boundaries of indemnification by an investment company of its
officers and trustees.

Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, Registrant has been advised that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.

Part C
<PAGE> 58
Item 26. Business and Other Connections of Investment Manager

Registrant's investment adviser, Charles Schwab Investment Management, Inc., a
Delaware corporation, organized in October 1989 to serve as investment manager
to Registrant, also serves as the investment manager to The Charles Schwab
Family of Funds, Schwab Investments, and Schwab Annuity Portfolios, each an
open-end, management investment company. The principal place of business of the
investment adviser is 101 Montgomery Street, San Francisco, California 94104.
The only business in which the investment adviser engages is that of investment
adviser and administrator to Registrant, The Charles Schwab Family of Funds,
Schwab Investments, and Schwab Annuity Portfolios and any other investment
companies that Schwab may sponsor in the future as well as provider of advisory
services to the Schwab Fund for Charitable Giving and to Charles Schwab Asset
Management (Ireland) Limited.

The business, profession, vocation or employment of a substantial nature in
which each director and/or senior or executive officer of the investment adviser
(CSIM) is or has been engaged during the past two fiscal years is listed below.
The name of any company for which any director and/or senior or executive
officer of the investment adviser serves as director, officer, employee, partner
or trustee is also listed below. In addition, the name and position of each
director and/or senior or executive officer of the Registrant's principal
underwriter Schwab & Co. Inc. is listed below.

<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Charles R. Schwab, Charles Schwab & Co., Inc. Chairman, Director
Chairman, Chief Executive
Officer and Trustee

The Charles Schwab Corporation Chairman and Co-Chief Executive Officer, Director

Charles Schwab Investment Management, Inc. Chairman, Director

The Charles Schwab Trust Company Director

Mayer & Schweitzer, Inc. Chairman and Director until January 1999

Schwab Retirement Plan Services, Inc. Chairman, Director until January 1999

Charles Schwab Limited (U.K.) Chairman and Chief Executive Officer

Schwab Holdings, Inc. Chief Executive Officer

Schwab International Holdings, Inc. Chairman and Chief Executive Officer
</TABLE>

Part C
<PAGE> 59
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Schwab (SIS) Holdings, Inc. I Chairman and Chief Executive Officer

Performance Technologies, Inc. Chairman, Director until January 1999

TrustMark, Inc. Chairman and Director until January 1999

The Gap, Inc. Director

Audiobase, Inc. Director

Vodaphone AirTouch PLC Director

Siebel Systems Director

David S. Pottruck Charles Schwab & Co., Inc. Chief Executive Officer, Director

The Charles Schwab Corporation President and Co-Chief Executive Officer,
Director

Schwab Retirement Plan Services, Inc. Director until January 1999

Charles Schwab Limited (U.K.) Director until January 1999

Charles Schwab Investment Management, Inc. Director

Mayer & Schweitzer, Inc. Director until January 1999

Performance Technologies, Inc. Director until January 1999

TrustMark, Inc. Director until January 1999

Steven L. Scheid Charles Schwab & Co., Inc. Vice Chairman and Enterprise
President and Trustee President - Financial Products
and Services, Director

The Charles Schwab Corporation Vice Chairman and Executive Vice President

Charles Schwab Investment Management, Inc. Chief Executive Officer and
Chief Financial Officer, Director
</TABLE>

Part C
<PAGE> 60
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The Charles Schwab Trust Company Director until July 1998

Charles Schwab Limited (U.K.) Finance Officer

Schwab Retirement Plan Services, Inc. Director until January 1999

Performance Technologies, Inc. Director until January 1999

Mayer & Schweitzer, Inc. Director until January 1999

Willie C. Bogan The Charles Schwab Corporation Assistant Corporate Secretary

Charles Schwab & Co., Inc. Vice President and Assistant
Corporate Secretary

Charles Schwab Investment Management, Inc. Assistant Corporate Secretary

The Charles Schwab Trust Company Assistant Corporate Secretary

Jeremiah H. Chafkin, Charles Schwab & Co., Inc. Executive Vice President - SchwabFunds.
Executive Vice President Prior to November 1999, Mr. Chafkin was Senior
and Chief Operating Officer Managing Director, Bankers Trust Company.

Charles Schwab Investment Management, Inc. President and Chief Operating Officer

Karen W. Chang Charles Schwab & Co., Inc. Enterprise President - General Investor Services

John P. Coghlan Charles Schwab & Co., Inc. Vice Chairman and Enterprise
President - Retirement Plan Services and
Services for Investment Managers

Frances Cole, Charles Schwab Investment Management, Inc. Senior Vice President, Chief Counsel
Secretary and Assistant Corporate Secretary

Linnet F. Deily Charles Schwab & Co., Inc. Vice Chairman and President -
Schwab Retail Group

Christopher V. Dodds Charles Schwab & Co., Inc. Executive Vice President and Chief
Financial Officer
</TABLE>

Part C
<PAGE> 61
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Carrie Dwyer Charles Schwab & Co., Inc. Executive Vice President - Corporate
Oversight and Corporate Secretary

Wayne W. Fieldsa Charles Schwab & Co., Inc. Enterprise President - Brokerage
Operations

Lon Gorman Charles Schwab & Co., Inc. Vice Chairman and Enterprise
President - Capital Markets and Trading

James M. Hackley Charles Schwab & Co., Inc. Executive Vice President - Retail
Client Services

Colleen M. Hummer Charles Schwab & Co., Inc. Senior Vice President - Mutual
Funds Operations

Daniel O. Leemon The Charles Schwab Corporation Executive Vice President and Chief
Strategy Officer

Dawn G. Lepore Charles Schwab & Co., Inc. Vice Chairman, Executive Vice President
and Chief Information Officer

Susanne D. Lyons Charles Schwab & Co., Inc. Enterprise President - Retail
Client Services

Frederick E. Matteson Charles Schwab & Co., Inc. Executive Vice President - Schwab
Technology Services

John P. McGonigle Charles Schwab & Co., Inc. Executive Vice President - Mutual
Funds

Geoffrey Penney Charles Schwab & Co., Inc. Executive Vice President - Financial Products
and International Technology

George A. Rich Charles Schwab & Co., Inc. Executive Vice President - Human
Resources

Gideon Sasson Charles Schwab & Co., Inc. Enterprise President - Electronic
Brokerage

Elizabeth G. Sawi Charles Schwab & Co., Inc. Executive Vice President and Chief
Administrative Officer
</TABLE>

Part C
<PAGE> 62
<TABLE>
<CAPTION>
Name and Position
with Registrant Name of Company Capacity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Leonard Short Charles Schwab & Co., Inc. Executive Vice President - CRS
Advertising and Branch Management

Stephen B. Ward, Charles Schwab Investment Management, Inc. Senior Vice President and Chief
Senior Vice President and Investment Officer
Chief Investment Officer
</TABLE>

Part C
<PAGE> 63
(a) Schwab acts as principal underwriter and distributor of Registrant's
shares. Schwab currently also acts as principal underwriter for The Charles
Schwab Family of Funds, Schwab Investments and Schwab Annuity Portfolios, and
intends to act as such for any other investment company which Schwab may sponsor
in the future.

(b) See Item 26(b) for information on the officers and directors of
Schwab. The principal business address of Schwab is 101 Montgomery Street, San
Francisco, California 94104.

Item 28. Location of Accounts and Records.

All accounts, books and other documents required to be maintained
pursuant to Section 31(a) of the 1940 Act and the Rules thereunder are
maintained at the offices of Registrant; Registrant's investment adviser
and administrator, Charles Schwab Investment Management, Inc., 101
Montgomery Street, San Francisco, California 94104; Registrant's former
sub-investment adviser, Dimensional Fund Advisors Inc., 1299 Ocean
Avenue, Suite 1100, Santa Monica, California 90401; Registrant's
sub-investment adviser for the Schwab Analytics Fund(R) is Symphony Asset
Management, Inc., 555 California Street, Suite 2975, San Francisco,
California 94104; Registrant's principal underwriter, Charles Schwab &
Co., Inc., 101 Montgomery Street, San Francisco, California 94104;
Registrant's custodian and fund accountants, PNC Bank, National
Association/PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809,
Chase Manhattan Bank, 1 Pierrepont Plaza, Brooklyn, New York 11201, and
SEI Fund Resources, Oaks Pennsylvania 19456; Registrant's former
custodians and fund accountants, Federated Services Company, 1001 Liberty
Avenue, Pittsburgh, Pennsylvania 15222, State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts 02180; or Ropes &
Gray, 1301 K Street, N.W., Suite 800 East, Washington, District of
Columbia 20005.

Item 29. Management Services.

Not applicable.

Item 30. Undertakings.

Not applicable.

Part C
<PAGE> 64
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended
(the "1933 Act"), and the Investment Company Act of 1940, as amended, has duly
caused this Post Effective Amendment No. 37 to be signed on its behalf by the
undersigned, duly authorized, in the City of Philadelphia, Commonwealth of
Pennsylvania, on this 1st day of March, 2000.

SCHWAB CAPITAL TRUST
Registrant

Charles R. Schwab*
--------------------------------------
Charles R. Schwab, Chairman,
Chief Executive Officer and Trustee

Pursuant to the requirements of the 1933 Act, this
Post-Effective Amendment No. 37 to Registrant's Registration Statement on Form
N-1A has been signed below by the following persons in the capacities indicated
this 1st day of March, 2000.

Signature Title
- --------- -----

Charles R. Schwab* Chairman, Chief Executive Officer, and Trustee
- --------------------------
Charles R. Schwab

Steve Scheid* President and Trustee
- --------------------------
Steve Scheid

Jeremiah H. Chafkin* Executive Vice President, Chief Operating Officer
- --------------------------
Jeremiah H. Chafkin

William J. Klipp* Trustee
- --------------------------
William J. Klipp

Donald F. Dorward* Trustee
- --------------------------
Donald F. Dorward

Robert G. Holmes* Trustee
- --------------------------
Robert G. Holmes

Donald R. Stephens* Trustee
- --------------------------
Donald R. Stephens

Michael W. Wilsey* Trustee
- --------------------------
Michael W. Wilsey

Tai-Chin Tung* Treasurer and Principal Financial Officer
- --------------------------
Tai-Chin Tung

*By /s/ John H. Grady, Jr.
-----------------------------------------
John H. Grady, Jr., Attorney-in-Fact
pursuant to Powers of Attorney