<PAGE>
SCHWABFUNDS -Registered Trademark-
SCHWAB MARKETTRACK
PORTFOLIOS -TM-
ANNUAL REPORT
AND
AN IMPORTANT NOTICE REGARDING
DELIVERY OF SHAREHOLDER
DOCUMENTS
October 31, 1999
<PAGE>
IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS
The Securities and Exchange Commission has adopted a rule permitting mutual
funds to deliver only one copy of shareholder documents, including prospectuses
and shareholder reports to fund investors with multiple accounts at the same
residential or post office box address. This practice is commonly called
"householding" and is intended to eliminate duplicate mailings of shareholder
documents.
Schwab may begin indefinitely householding prospectuses and shareholder reports
for SchwabFunds-Registered Trademark- effective February 29, 2000.
ADDITIONAL COPIES OF SHAREHOLDER DOCUMENTS
ALL SCHWABFUNDS PROSPECTUSES and shareholder reports ARE AVAILABLE FREE OF
CHARGE, AND MAY BE REQUESTED AT ANY TIME BY CALLING SCHWAB AS INDICATED BELOW.
SchwabFunds prospectuses are also available on our Web site at www.schwab.com.
If you would otherwise fall under our householding policy, but for any reason
prefer to receive multiple SchwabFunds prospectuses and shareholder reports,
please contact:
- - SCHWAB SIGNATURE SERVICES-TM- CLIENTS: Schwab Signature Services.
- - INVESTMENT MANAGER CLIENTS: Schwab at 1-800-515-2157, or your investment
manager.
- - ALL OTHER CLIENTS: Schwab at 1-800-435-4000.
Your instructions that householding not apply to your accounts holding
SchwabFunds will be effective within 30 days of receipt by Schwab.
<PAGE>
SCHWABFUNDS -Registered Trademark-
SCHWAB MARKETTRACK
PORTFOLIOS -TM-
- ALL EQUITY
- GROWTH
- BALANCED
- CONSERVATIVE
Annual Report
October 31, 1999
<PAGE>
SCHWAB MARKETTRACK PORTFOLIOS-TM-
We are pleased to bring you this annual report for the Schwab MarketTrack
Portfolios (the Portfolios) for the one-year period ended October 31, 1999. In
this report you will find performance statistics and other useful information
for the following Portfolios:
- Schwab MarketTrack All Equity Portfolio
- Schwab MarketTrack Growth Portfolio
- Schwab MarketTrack Balanced Portfolio
- Schwab MarketTrack Conservative Portfolio
Each of the Portfolios provides an easy, convenient way to diversify your
investment among major asset categories--stocks, bonds and cash equivalents.*
Through a single investment, you may benefit from asset allocation, an
investment strategy designed to achieve an optimal balance between risk and
return. In fact, research has shown that one of the greatest impacts on
investment returns may be the asset allocation decision (the mix of stocks,
bonds and cash equivalents) rather than market timing or individual stock
selection.
The primary difference among the four Schwab MarketTrack Portfolios is the
proportion of each that is invested in stocks. Each Portfolio targets a
different mix of investments, as described more fully in the following pages,
and employs an index-based approach to capturing the returns inherent in the
asset categories by investing primarily in Schwab Index Funds.
* The Schwab MarketTrack All Equity Portfolio does not target investing in bonds
or cash.
FUND LISTINGS
The MarketTrack Portfolios are listed in THE WALL STREET JOURNAL, USA TODAY,
INVESTOR'S BUSINESS DAILY and most local newspapers as follows under the heading
SCHWABFUNDS:-Registered Trademark-
<TABLE>
<CAPTION>
NEWSPAPER LISTING + SYMBOL
<S> <C>
MT AllEq SWEGX
MT Gro SWHGX
MT Bal SWBGX
MT Cons SWCGX
</TABLE>
+ Note that newspaper listings will indicate the previous day's quotation.
CONTENTS
<TABLE>
<S> <C>
- ---------------------------------------------
A Message from the Chairman 1
- ---------------------------------------------
What Every Investor Should Know 2
- ---------------------------------------------
Market Overview 4
- ---------------------------------------------
Schwab MarketTrack All Equity Portfolio
PORTFOLIO PERFORMANCE 8
PORTFOLIO SNAPSHOT 10
- ---------------------------------------------
Schwab MarketTrack Growth Portfolio
PORTFOLIO PERFORMANCE 12
PORTFOLIO SNAPSHOT 14
- ---------------------------------------------
Schwab MarketTrack Balanced Portfolio
PORTFOLIO PERFORMANCE 16
PORTFOLIO SNAPSHOT 18
- ---------------------------------------------
Schwab MarketTrack Conservative
Portfolio
PORTFOLIO PERFORMANCE 20
PORTFOLIO SNAPSHOT 22
- ---------------------------------------------
The Portfolio Management Team 24
- ---------------------------------------------
Portfolio Discussion 25
- ---------------------------------------------
Glossary 28
- ---------------------------------------------
Financial Statements and Notes 30
- ---------------------------------------------
</TABLE>
<PAGE>
A MESSAGE FROM THE CHAIRMAN
[PHOTO]
Dear Shareholder,
As 1999 draws to a close, I'd like to take this opportunity to reflect on the
year and the changes and milestones that have taken place at Charles Schwab
Investment Management, Inc. (CSIM), the investment adviser for the
SchwabFunds-Registered Trademark- Family.
First of all, we reached a significant milestone in September, when SchwabFunds
assets topped the $100 billion mark. With the support of investors like you,
SchwabFunds continue to be among the largest and fastest growing fund families
in the nation.
Secondly, we added two new products to our SchwabFunds offering:
- - SCHWAB TOTAL STOCK MARKET INDEX FUND-TM- seeks to track the total return of
the entire U.S. stock market, as measured by the Wilshire 5000 Total Market
Index, the broadest measure of U.S. stock market performance. In one single,
low-cost investment, fund investors can benefit from exposure to U.S.
companies of all types and sizes.
- - SCHWAB YIELDPLUS FUND-TM- The fund seeks high current income with minimal
changes in share price. It is designed to provide the potential for higher
yields than a money fund and lower risk than a longer-term bond fund through a
management strategy designed to minimize price fluctuation. Intended for your
long-term (over one-year) cash needs, the fund seeks to increase the overall
yield potential of the cash portion of your portfolio.
For more information on either of these funds, please call 1-800-435-4000 and
request a free prospectus. The prospectus contains more information on fund fees
and expenses. Please read it carefully before investing.
I encourage you to take a moment to read this annual report as it is designed to
provide timely information about your SchwabFunds investments. You will find
information on each fund's total returns and performance, as well as commentary
on market conditions provided by the portfolio management team. In the section
"What Every Investor Should Know", we've also provided guidelines that can help
you reach your goals by establishing--or maintaining--an ongoing investment
program.
As a leader in online brokerage, we recognize the value of the web as a means of
communicating timely, relevant information to investors. Regular updates on all
of the SchwabFunds, including performance data, are available on our Web site at
WWW.SCHWAB.COM/SCHWABFUNDS. We encourage you to take advantage of this valuable
resource which can help you keep track your funds' performance.
At Schwab our philosophy has always been that a combination of regular investing
and diversification is the best strategy over the long term. By investing in
SchwabFunds, you've already taken an important step in building a portfolio that
can help you meet your future goals. Thank you for your investment in
SchwabFunds.
Sincerely,
/s/ Charles R. Schwab
Charles R. Schwab
October 31, 1999
THE YEAR 2000
One issue with the potential to disrupt portfolio operations and affect
performance is the inability of some computers to recognize the year 2000.
The Investment Adviser will continue to take steps to enable its systems to
handle the year 2000 problem. The Investment Adviser is also seeking
assurances that its service providers and business partners are taking
similar steps as well. It is impossible to know in advance however, exactly
how this issue will affect portfolio administration, portfolio performance or
securities markets in general.
1
<PAGE>
WHAT EVERY INVESTOR SHOULD KNOW
WHY ASSET ALLOCATION MATTERS
As most investors know, one of the most compelling reasons to invest in a mutual
fund is diversification. By allocating your assets across many different
securities, a fund can help reduce the risk that you might otherwise encounter
by owning just a few stocks or bonds.
But remember that diversification ACROSS asset classes can be just as important
as diversification WITHIN one of the mutual funds you own. As you probably know,
stocks historically have offered much higher returns over the long term than
bonds, cash or other asset classes, but those returns have come at the price of
higher volatility. To help mitigate some of that risk, many investors often
include at least some bonds and cash in their portfolios. They also diversify
their exposure across different stock market segments--such as large-cap and
small-cap U.S. stocks and international stocks, which have tended to move with
less-than-perfect correlation over time. In short, allocating assets across
market segments may help reduce your overall portfolio risk.
REGULAR INVESTING STRATEGIES
Another way to help dampen the effects of short-term market volatility is to
invest the same amount of money on a regular basis. With this investment
strategy, known as DOLLAR-COST AVERAGING, you automatically buy more shares when
stock or bond prices are low and fewer when they're high.*
A hypothetical example can help illustrate this concept. Let's say you invest
$400 on a monthly basis in a single mutual fund, as shown below. Because of
fluctuating prices, your per-share purchase price varies monthly. A simple
average of your five purchase prices would yield $8.20 per share; however, your
AVERAGE COST BASIS (your total investment divided by the number of shares
actually purchased) would be significantly lower--by more than $0.50 per share.
The net result in this example is that your average cost per share is reduced
and you'd have purchased more shares than you would have had you paid the
average share price over the five-month period.
<TABLE>
<CAPTION>
No. of
Fixed Share Shares
Investment Price Purchased
<S> <C> <C> <C>
- --------------------------------------------------------
Month 1 $400 $10 40
- --------------------------------------------------------
Month 2 $400 $8 50
- --------------------------------------------------------
Month 3 $400 $5 80
- --------------------------------------------------------
Month 4 $400 $8 50
- --------------------------------------------------------
Month 5 $400 $10 40
- --------------------------------------------------------
Totals $2,000 -- 260
- --------------------------------------------------------
AVERAGE SHARE PRICE
($41 DIVIDED BY 5 periods): $8.20
YOUR AVERAGE COST BASIS
($2,000 DIVIDED BY 260 shares): $7.69
PER-SHARE ADVANTAGE: $0.51
</TABLE>
This example is for illustrative purposes only and is not intended to predict or
guarantee the performance of any particular fund available through Schwab.
(Of course, in this example, hindsight shows you that your best move would have
been to invest your entire $2,000 in Month 3, when the share price was at a low
of $5--but it's unlikely that you would have been able to predict that.)
* Regular investing strategies such as dollar-cost averaging do not assure a
profit or protect against a loss in declining markets. Since such a strategy
involves continuous investment, investors should consider their ability to
continue purchases through periods of low price levels.
2
<PAGE>
SCHWAB'S 10 INVESTING PRINCIPLES
1. START WITH THE BASICS FOR LONG-TERM INVESTING.
2. GET STARTED NOW!
3. KNOW YOURSELF.
4. INVEST IN THE STOCK MARKET FOR GROWTH.
5. TAKE A LONG-TERM VIEW.
6. BUILD A DIVERSIFIED PORTFOLIO.
7. CONSIDER BONDS AND CASH FOR DIVERSIFICATION AND INCOME.
8. MINIMIZE YOUR EXPENSES.
9. STAY ON TRACK.
10. BECOME A LIFELONG INVESTOR.
In addition to reducing your per-share costs over time, dollar-cost averaging
provides another benefit: the discipline of investing regularly. You're more
likely to maintain a regular investment plan if it's automatic: You don't have
to think about it, and you minimize any propensity to skip an investment in
favor of some other expenditure. To encourage this discipline, Schwab offers you
two convenient, no-cost ways to begin or maintain a program of regular
investing:
Schwab's AUTOMATIC INVESTMENT PLAN (AIP) allows you to automatically
purchase--on a regular basis--additional shares in mutual funds that you already
own. For amounts as little as $100 per month, you can use the cash or sweep
shares of your existing Schwab Money Fund,(1) or you can enroll in
MONEYLINK,-Registered Trademark- Schwab's electronic transfer service, to
automatically transfer money to your Schwab account.
With MoneyLink, you can arrange to regularly and automatically transfer money
between your bank account and your Schwab account. It's a convenient way to
build your investment over time.
Please be aware that these programs--and dollar-cost averaging in general--do
not ensure a profit or protect against a loss, and investors should know that
markets fall as well as rise. Because dollar-cost averaging involves continuous
investment in securities regardless of fluctuating prices, you should consider
your financial ability to purchase in both up and down markets. Over the long
term, however, dollar-cost averaging may help to smooth out volatility caused by
shortterm market trends. For more information, please call us
at 1-800-435-4000.
WE MAKE IT EASY TO INVEST
We try to make it easy and convenient for you to invest in our
SchwabFunds.-Registered Trademark- In addition to our automated methods that
allow you to invest or transfer money to your Schwab account on a regular basis,
you can also invest through our Web site at WWW.SCHWAB.COM/SCHWABFUNDS; through
our automated touch-tone telephone service, TeleBroker,-Registered Trademark- by
calling 1-800-272-4922; or in person at any of our nationwide branches.
KEEPING YOU INFORMED
You can find a wealth of information about our investment philosophy and
funds, as well as updated fund performance data at our Web site:
WWW.SCHWAB.COM/SCHWABFUNDS.
(1) Includes uninvested cash and margin cash available. If sufficient cash is
not available, your automatic purchases will not be made.
3
<PAGE>
MARKET OVERVIEW
U.S. ECONOMIC GROWTH
The U.S. economy, as measured by gross domestic product (GDP), continued its
lengthy expansion with a strong real growth rate of 4.3% for the year ended
September 1999--a rate considered to be in excess of the long-term maximum
sustainable non-inflationary growth rate. High levels of consumer confidence and
spending, low interest rates, rising real wages and strong gains in stock prices
have been the principal factors responsible for this lengthy expansion.
In a major revision of the GDP benchmark data going back four decades, the
Commerce Department reported that, during the 1990s, growth was stronger,
personal savings higher, and inflation lower than previously calculated.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
REAL GDP GROWTH RATE
QUARTERLY PERCENTAGE CHANGE
(ANNUALIZED RATE)
<S> <C>
Q1 1990 5.0%
Q2 1990 1.0%
Q3 1990 -0.6%
Q4 1990 -3.0%
Q1 1991 -1.7%
Q2 1991 2.6%
Q3 1991 1.3%
Q4 1991 2.5%
Q1 1992 4.3%
Q2 1992 4.0%
Q3 1992 3.1%
Q4 1992 5.2%
Q1 1993 -0.7%
Q2 1993 2.1%
Q3 1993 1.5%
Q4 1993 6.0%
Q1 1994 3.6%
Q2 1994 5.7%
Q3 1994 2.2%
Q4 1994 5.1%
Q1 1995 1.5%
Q2 1995 0.8%
Q3 1995 3.2%
Q4 1995 3.3%
Q1 1996 2.9%
Q2 1996 6.9%
Q3 1996 2.2%
Q4 1996 4.9%
Q1 1997 4.9%
Q2 1997 5.1%
Q3 1997 4.0%
Q4 1997 3.1%
Q1 1998 6.7%
Q2 1998 2.1%
Q3 1998 3.8%
Q4 1998 5.9%
Q1 1999 3.7%
Q2 1999 1.9%
Q3 1999 5.5%
Source: BLOOMBERG L.P.
</TABLE>
Despite some recent slowing in the housing sector and a moderate decline in
consumer confidence, personal consumption and business fixed investment remain
strong. The consensus of most economists is that the U.S. economy appears poised
for continued growth, but at a more moderate pace than experienced so far in
1999.
Last year's concerns over the impact of international economic problems have
been displaced by concerns over imbalances in the domestic economy, namely the
surging current account (trade) deficit, record high stock valuations, and the
low savings rate. Looking ahead, the behavior of domestic consumers in response
to continued stock market volatility may also be a key determinant of whether
the economy continues on its current course or softens throughout 2000.
UNEMPLOYMENT
October's unemployment rate of 4.1% was a 29-year low. Labor markets continue to
be extremely tight in many areas of the country. Growth in the labor force has
slowed, and there continues to be concern that wage and benefits increases may
begin to put more pressure on labor costs (refer to Employment Cost Index on the
next page).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
U.S. UNEMPLOYMENT RATE
<S> <C>
Jan-90 5.4%
Feb-90 5.3%
Mar-90 5.2%
Apr-90 5.4%
May-90 5.4%
Jun-90 5.2%
Jul-90 5.5%
Aug-90 5.7%
Sep-90 5.9%
Oct-90 5.9%
Nov-90 6.2%
Dec-90 6.3%
Jan-91 6.4%
Feb-91 6.6%
Mar-91 6.8%
Apr-91 6.7%
May-91 6.9%
Jun-91 6.9%
Jul-91 6.8%
Aug-91 6.9%
Sep-91 6.9%
Oct-91 7.0%
Nov-91 7.0%
Dec-91 7.3%
Jan-92 7.3%
Feb-92 7.4%
Mar-92 7.4%
Apr-92 7.4%
May-92 7.6%
Jun-92 7.8%
Jul-92 7.7%
Aug-92 7.6%
Sep-92 7.6%
Oct-92 7.3%
Nov-92 7.4%
Dec-92 7.4%
Jan-93 7.3%
Feb-93 7.1%
Mar-93 7.0%
Apr-93 7.1%
May-93 7.1%
Jun-93 7.0%
Jul-93 6.9%
Aug-93 6.8%
Sep-93 6.7%
Oct-93 6.8%
Nov-93 6.6%
Dec-93 6.5%
Jan-94 6.8%
Feb-94 6.6%
Mar-94 6.5%
Apr-94 6.4%
May-94 6.1%
Jun-94 6.1%
Jul-94 6.3%
Aug-94 6.0%
Sep-94 5.8%
Oct-94 5.8%
Nov-94 5.6%
Dec-94 5.5%
Jan-95 5.6%
Feb-95 5.4%
Mar-95 5.3%
Apr-95 5.8%
May-95 5.8%
Jun-95 5.6%
Jul-95 5.6%
Aug-95 5.7%
Sep-95 5.6%
Oct-95 5.5%
Nov-95 5.7%
Dec-95 5.6%
Jan-96 5.6%
Feb-96 5.5%
Mar-96 5.6%
Apr-96 5.5%
May-96 5.6%
Jun-96 5.3%
Jul-96 5.5%
Aug-96 5.1%
Sep-96 5.2%
Oct-96 5.2%
Nov-96 5.3%
Dec-96 5.4%
Jan-97 5.3%
Feb-97 5.3%
Mar-97 5.1%
Apr-97 5.0%
May-97 4.7%
Jun-97 5.0%
Jul-97 4.7%
Aug-97 4.9%
Sep-97 4.7%
Oct-97 4.7%
Nov-97 4.6%
Dec-97 4.7%
Jan-98 4.5%
Feb-98 4.6%
Mar-98 4.6%
Apr-98 4.3%
May-98 4.3%
Jun-98 4.5%
Jul-98 4.5%
Aug-98 4.5%
Sep-98 4.5%
Oct-98 4.5%
Nov-98 4.4%
Dec-98 4.3%
Jan-99 4.3%
Feb-99 4.4%
Mar-99 4.2%
Apr-99 4.3%
May-99 4.2%
Jun-99 4.3%
Jul-99 4.3%
Aug-99 4.2%
Sep-99 4.2%
Oct-99 4.1%
Source: BLOOMBERG L.P.
</TABLE>
INFLATION
Price inflation continued to remain well contained. The Consumer Price Index
(CPI) rose just 2.6% for the year ended October 1999. Its core rate (which
excludes the more volatile food and energy components) rose
4
<PAGE>
just 2.1%. The GDP price deflator, the broadest measure of inflation, indicated
prices rising at an annual rate of 1.3% for the year ended September 1999.
The Employment Cost Index, which measures inflation in wages, salaries and
benefits was also well contained, increasing 3.1% for the year ended September
1999.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASURES OF INFLATION
QUARTERLY EMPLOYMENT COST INDEX MONTHLY CONSUMER PRICE INDEX
<S> <C> <C>
Jan-90 5.5% 5.2%
Feb-90 5.5% 5.3%
Mar-90 5.5% 5.2%
Apr-90 5.4% 4.7%
May-90 5.4% 4.4%
Jun-90 5.4% 4.7%
Jul-90 5.2% 4.8%
Aug-90 5.2% 5.6%
Sep-90 5.2% 6.2%
Oct-90 4.9% 6.3%
Nov-90 4.9% 6.3%
Dec-90 4.9% 6.1%
Jan-91 4.6% 5.7%
Feb-91 4.6% 5.3%
Mar-91 4.6% 4.9%
Apr-91 4.6% 4.9%
May-91 4.6% 5.0%
Jun-91 4.6% 4.7%
Jul-91 4.3% 4.4%
Aug-91 4.3% 3.8%
Sep-91 4.3% 3.4%
Oct-91 4.3% 2.9%
Nov-91 4.3% 3.0%
Dec-91 4.3% 3.1%
Jan-92 4.0% 2.6%
Feb-92 4.0% 2.8%
Mar-92 4.0% 3.2%
Apr-92 3.6% 3.2%
May-92 3.6% 3.0%
Jun-92 3.6% 3.1%
Jul-92 3.5% 3.2%
Aug-92 3.5% 3.1%
Sep-92 3.5% 3.0%
Oct-92 3.5% 3.2%
Nov-92 3.5% 3.0%
Dec-92 3.5% 2.9%
Jan-93 3.5% 3.3%
Feb-93 3.5% 3.2%
Mar-93 3.5% 3.1%
Apr-93 3.6% 3.2%
May-93 3.6% 3.2%
Jun-93 3.6% 3.0%
Jul-93 3.6% 2.8%
Aug-93 3.6% 2.8%
Sep-93 3.6% 2.7%
Oct-93 3.5% 2.8%
Nov-93 3.5% 2.7%
Dec-93 3.5% 2.7%
Jan-94 3.2% 2.5%
Feb-94 3.2% 2.5%
Mar-94 3.2% 2.5%
Apr-94 3.2% 2.4%
May-94 3.2% 2.3%
Jun-94 3.2% 2.5%
Jul-94 3.2% 2.8%
Aug-94 3.2% 2.9%
Sep-94 3.2% 3.0%
Oct-94 3.0% 2.6%
Nov-94 3.0% 2.7%
Dec-94 3.0% 2.7%
Jan-95 2.9% 2.8%
Feb-95 2.9% 2.9%
Mar-95 2.9% 2.9%
Apr-95 2.9% 3.1%
May-95 2.9% 3.2%
Jun-95 2.9% 3.0%
Jul-95 2.7% 2.8%
Aug-95 2.7% 2.6%
Sep-95 2.7% 2.5%
Oct-95 2.7% 2.8%
Nov-95 2.7% 2.6%
Dec-95 2.7% 2.5%
Jan-96 2.8% 2.7%
Feb-96 2.8% 2.7%
Mar-96 2.8% 2.8%
Apr-96 2.9% 2.9%
May-96 2.9% 2.9%
Jun-96 2.9% 2.8%
Jul-96 2.8% 3.0%
Aug-96 2.8% 2.9%
Sep-96 2.8% 3.0%
Oct-96 2.9% 3.0%
Nov-96 2.9% 3.3%
Dec-96 2.9% 3.3%
Jan-97 2.9% 3.0%
Feb-97 2.9% 3.0%
Mar-97 2.9% 2.8%
Apr-97 2.8% 2.5%
May-97 2.8% 2.2%
Jun-97 2.8% 2.3%
Jul-97 3.0% 2.2%
Aug-97 3.0% 2.2%
Sep-97 3.0% 2.2%
Oct-97 3.3% 2.1%
Nov-97 3.3% 1.8%
Dec-97 3.3% 1.7%
Jan-98 3.3% 1.6%
Feb-98 3.3% 1.4%
Mar-98 3.3% 1.4%
Apr-98 3.5% 1.4%
May-98 3.5% 1.7%
Jun-98 3.5% 1.7%
Jul-98 3.7% 1.7%
Aug-98 3.7% 1.6%
Sep-98 3.7% 1.5%
Oct-98 3.4% 1.5%
Nov-98 3.4% 1.5%
Dec-98 3.4% 1.6%
Jan-99 3.0% 1.7%
Feb-99 3.0% 1.6%
Mar-99 3.0% 1.7%
Apr-99 3.2% 2.3%
May-99 3.2% 2.1%
Jun-99 3.2% 2.0%
Jul-99 3.1% 2.1%
Aug-99 3.1% 2.3%
Sep-99 3.1% 2.6%
Oct-99 2.6%
Source: BLOOMBERG L.P.
</TABLE>
Although there is little evidence of accelerating core inflation, the U.S.
Federal Reserve Board has expressed concern that should labor markets continue
to tighten, increases in wages may outpace productivity growth. In that
environment, productivity growth becomes particularly critical, as it enables
companies to pay higher wages without raising prices. Non-farm productivity grew
2.8% in 1998 and at a 2.7% annualized rate in the first three quarters of 1999,
continuing a healthy trend that began in 1996.
ASSET CLASS PERFORMANCE
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL RETURN PERFORMANCE
GROWTH OF A HYPOTHETICAL $1 INVESTMENT
MSCI-EAFE- S&P 500 RUSSELL 2000 LEHMAN
REGISTERED TRADEMARK- INDEX SMALL-CAP AGGREGATE
INDEX INDEX BOND INDEX
<S> <C> <C> <C> <C>
Oct-98 $1.00 $1.00 $1.00 $1.00
Nov-98 $1.05 $1.06 $1.05 $1.01
Dec-98 $1.09 $1.12 $1.12 $1.01
Jan-99 $1.09 $1.17 $1.13 $1.02
Feb-99 $1.06 $1.13 $1.04 $1.00
Mar-99 $1.11 $1.18 $1.06 $1.00
Apr-99 $1.15 $1.22 $1.15 $1.01
May-99 $1.09 $1.19 $1.17 $1.00
Jun-99 $1.14 $1.26 $1.22 $0.99
Jul-99 $1.17 $1.22 $1.19 $0.99
Aug-99 $1.17 $1.22 $1.14 $0.99
Sep-99 $1.18 $1.18 $1.14 $1.00
Oct-99 $1.23 $1.26 $1.15 $1.01
</TABLE>
COMPILED BY CHARLES SCHWAB & CO., INC.
Large-cap domestic stocks, as represented by the S&P 500-Registered Trademark-
Index, continued to be the strongest performing asset class, achieving a total
return of 25.7% for the year ended October 1999. Within the S&P 500, growth
stocks continued to be the strongest performing style for the period. Small-cap
stocks as represented by the Russell 2000-Registered Trademark- Index also
experienced a positive return of 14.9%.
5
<PAGE>
MARKET OVERVIEW (continued)
Assisted by the rebound in Asian markets, international stock returns, as
represented by the MSCI-EAFE Index, experienced a positive total return of
23.0% for the one-year reporting period ended October 31, 1999.
Reflecting the rise in intermediate and long-term interest rates, fixed income
returns were generally weak for the period. Bond returns, as represented by the
Lehman Brothers Aggregate Bond Index,-Registered Trademark- were 0.5% for the
one-year reporting period.
U.S. EQUITY VALUATION
The price/earnings (P/E) ratio for the S&P 500-Registered Trademark- Index
reached record highs during the reporting period and ended the period at a lofty
29.9 times earnings, approximately twice its long-term average. The P/E ratio,
also known as a multiple, is the price of a stock divided by its earnings per
share, and generally indicates how much investors are willing to pay for a
company's earning potential. Based on other traditional market valuation
measures such as the price-to-book value ratio or dividend yield, the U.S. stock
market continues to remain at record high valuation levels.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P 500 PRICE/EARNINGS RATIO
<S> <C>
Jan-90 14.37
Feb-90 14.21
Mar-90 14.77
Apr-90 14.82
May-90 15.84
Jun-90 16.66
Jul-90 16.65
Aug-90 15.57
Sep-90 14.9
Oct-90 14.36
Nov-90 14.59
Dec-90 15.19
Jan-91 14.95
Feb-91 16.82
Mar-91 17.48
Apr-91 17.85
May-91 17.92
Jun-91 17.96
Jul-91 18.07
Aug-91 19.72
Sep-91 19.88
Oct-91 19.92
Nov-91 21.02
Dec-91 21.85
Jan-92 23.35
Feb-92 23.83
Mar-92 25.45
Apr-92 25.51
May-92 25.71
Jun-92 25.08
Jul-92 25.61
Aug-92 25.5
Sep-92 24.37
Oct-92 23.94
Nov-92 24.08
Dec-92 24.01
Jan-93 24.2
Feb-93 24.25
Mar-93 24.22
Apr-93 23.2
May-93 23.21
Jun-93 22.58
Jul-93 22.52
Aug-93 23.02
Sep-93 23.74
Oct-93 23.97
Nov-93 22.55
Dec-93 23.55
Jan-94 22.98
Feb-94 21.17
Mar-94 20.34
Apr-94 20.1
May-94 20.16
Jun-94 19.76
Jul-94 18.64
Aug-94 18.9
Sep-94 18.26
Oct-94 17.55
Nov-94 16.58
Dec-94 16.98
Jan-95 16.23
Feb-95 16.2
Mar-95 16.5
Apr-95 16.02
May-95 16.43
Jun-95 16.82
Jul-95 16.55
Aug-95 16.18
Sep-95 16.86
Oct-95 16.18
Nov-95 17.14
Dec-95 17.41
Jan-96 18.11
Feb-96 18.56
Mar-96 18.94
Apr-96 19.16
May-96 19.48
Jun-96 19.3
Jul-96 18.31
Aug-96 18.62
Sep-96 19.75
Oct-96 19.6
Nov-96 21.05
Dec-96 20.7
Jan-97 20.55
Feb-97 20.98
Mar-97 19.87
Apr-97 20.24
May-97 21.43
Jun-97 22.45
Jul-97 23.92
Aug-97 22.64
Sep-97 24
Oct-97 22.84
Nov-97 24.02
Dec-97 24.51
Jan-98 24.99
Feb-98 26.44
Mar-98 27.76
Apr-98 26.51
May-98 26.12
Jun-98 27.09
Jul-98 26.78
Aug-98 22.77
Sep-98 24.23
Oct-98 27.58
Nov-98 30.14
Dec-98 31.97
Jan-99 33.29
Feb-99 32.65
Mar-99 33.78
Apr-99 33.9
May-99 32.74
Jun-99 34.7
Jul-99 31.62
Aug-99 31.21
Sep-99 29.9
Oct-99 29.92
30-Year Average 15.5
Source: BLOOMBERG L.P.
</TABLE>
TREASURY BOND YIELDS
Continuing a trend which began in October 1998, both long-term and intermediate
term rates continued to climb upward during the reporting period. Scaled back
concerns about the impact of international economic problems and the continued
growth of the domestic economy were the primary drivers of this upward trend in
yields.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
30-YEAR AND FIVE-YEAR TREASURY BOND YIELDS
30-YEAR TREASURY FIVE-YEAR TREASURY
BOND YIELD NOTE YIELD
<S> <C> <C>
10/2/98 4.84% 4.08%
10/9/98 5.12% 4.46%
10/16/98 4.98% 4.04%
10/23/98 5.18% 4.30%
10/30/98 5.16% 4.23%
11/6/98 5.39% 4.59%
11/13/98 5.25% 4.50%
11/20/98 5.22% 4.60%
11/27/98 5.16% 4.59%
12/4/98 5.04% 4.39%
12/11/98 5.02% 4.39%
12/18/98 5.00% 4.36%
12/25/98 5.22% 4.71%
1/1/99 5.10% 4.54%
1/8/99 5.27% 4.73%
1/15/99 5.11% 4.55%
1/22/99 5.08% 4.52%
1/29/99 5.09% 4.55%
2/5/99 5.35% 4.86%
2/12/99 5.42% 4.96%
2/19/99 5.39% 4.99%
2/26/99 5.58% 5.22%
3/5/99 5.60% 5.22%
3/12/99 5.53% 5.06%
3/19/99 5.56% 5.08%
3/26/99 5.59% 5.08%
4/2/99 5.46% 4.96%
4/9/99 5.46% 4.96%
4/16/99 5.57% 5.11%
4/23/99 5.60% 5.14%
4/30/99 5.66% 5.21%
5/7/99 5.81% 5.37%
5/14/99 5.92% 5.50%
5/21/99 5.75% 5.43%
5/28/99 5.83% 5.58%
6/4/99 5.96% 5.73%
6/11/99 6.16% 5.91%
6/18/99 5.97% 5.73%
6/25/99 6.15% 5.89%
7/2/99 6.00% 5.69%
7/9/99 6.00% 5.69%
7/16/99 5.88% 5.55%
7/23/99 6.03% 5.69%
7/30/99 6.10% 5.79%
8/6/99 6.18% 5.91%
8/13/99 6.10% 5.86%
8/20/99 5.99% 5.77%
8/27/99 5.98% 5.77%
9/3/99 6.02% 5.77%
9/10/99 6.04% 5.78%
9/17/99 6.06% 5.75%
9/24/99 5.97% 5.66%
10/1/99 6.13% 5.86%
10/8/99 6.20% 5.95%
10/15/99 6.26% 5.97%
10/22/99 6.35% 6.10%
10/29/99 6.16% 5.95%
Source: BLOOMBERG L.P.
</TABLE>
INTERNATIONAL PERFORMANCE
The MSCI-EAFE-Registered Trademark- Index gained 23.0% in U.S. dollar terms
(excluding reinvested dividends) during the one-year reporting period. In local
currency terms, it gained 26.90%, reflecting the relative weakness of most
foreign currencies (compared to the dollar) during the period.
6
<PAGE>
With the exception of Austria, Belgium, Ireland, Switzerland and Spain, all of
the MSCI-EAFE component countries had positive returns for the period. In
particular, many of the Asian countries reversed their severe declines of the
prior period to post strong returns. The strongest-performing countries for the
period were Finland, Singapore and Japan.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI-EAFE COUNTRY RETURNS
ONE YEAR ENDED 10/31/99
<S> <C> <C>
Finland 100.43%
Singapore 87.76%
Japan 57.38%
Sweden 46.01%
Hong Kong 23.22%
France 23.03%
Netherlands 10.52%
United Kingdom 10.50%
Australia 9.14%
Germany 6.27%
Denmark 6.00%
New Zealand 4.46%
Norway 1.32%
Italy 0.34%
Spain -0.40%
Switzerland -1.44%
Ireland -2.74%
Belgium -6.67%
Austria -15.16%
Source: DATASTREAM
</TABLE>
This market overview has been provided by the portfolio management team.
7
<PAGE>
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO
PORTFOLIO PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 10/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
ONE YEAR (5/19/98)
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO(1) 24.34% 10.36%
- ------------------------------------------------------------------------------------------------------
All Equity Composite Index(2,3) 25.15% --
- ------------------------------------------------------------------------------------------------------
S&P 500-Registered Trademark- Index 25.67% 16.09%
- ------------------------------------------------------------------------------------------------------
</TABLE>
National Association of Securities Dealers (NASD) regulations require that we
report fund performance data as of the most recent calendar quarter--in this
case, the quarter ended 9/30/99. As of 9/30/99, the Portfolio's one year, and
since-inception average annual total returns were 27.83% and 7.26%,
respectively. Without fee waivers and guarantees, the Portfolio's one-year and
since-inception average annual total returns would have been 27.15% and 6.66% as
of 9/30/99.
(1) A portion of the fund's expenses was reduced during the reporting period.
Without such reductions, as of 10/31/99, the fund's one-year and
since-inception average annual returns would have been 23.76% and 9.75%.
(2) The All Equity Composite Index is composed of Morningstar category averages
and is calculated using the following portfolio allocations: 45% large-cap
stocks, 25% small-cap stocks and 30% foreign stocks.
(3) As of 10/31/99, there were 2,173 large-cap funds, 852 small-cap funds and
657 foreign funds tracked by Morningstar. Performance includes changes in
price and reinvestment of dividends and capital gains.
8
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
<TABLE>
<CAPTION>
SCHWAB MARKETTRACK ALL EQUITY S&P 500
ALL EQUITY PORTFOLIO COMPOSITE INDEX INDEX
<S> <C> <C> <C>
5/20/98 $10,000 $10,000
5/31/98 $9,850 $9,751
6/30/98 $10,050 $9,975 $10,147
7/31/98 $9,810 $9,759 $10,039
8/31/98 $8,330 $8,206 $8,590
9/30/98 $8,610 $8,446 $9,140
10/31/98 $9,280 $8,985 $9,883
11/30/98 $9,800 $9,501 $10,482
12/31/98 $10,303 $10,035 $11,086
1/31/99 $10,483 $10,227 $11,549
2/28/99 $10,041 $9,804 $11,190
3/31/99 $10,383 $10,127 $11,638
4/30/99 $10,896 $10,625 $12,088
5/31/99 $10,664 $10,453 $11,803
6/30/99 $11,197 $11,051 $12,458
7/31/99 $11,137 $10,984 $12,069
8/31/99 $11,056 $10,888 $12,009
9/30/99 $11,006 $10,801 $11,680
10/31/99 $11,539 $11,245 $12,419
</TABLE>
The above graph compares the growth of a hypothetical $10,000 investment in the
Schwab MarketTrack All Equity Portfolio, made at its inception, with a similar
investment in the S&P 500-Registered Trademark- Index and the All Equity
Composite Index. The hypothetical $10,000 investment assumes investment on the
first day of the month following inception and includes changes in share price
and reinvestment of dividends and capital gains.
THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS.
TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. Indices are unmanaged and do not reflect advisory fees and other expenses
associated with an investment in the Portfolios. Investors cannot invest in an
index directly.
ASSETS
<TABLE>
<S> <C>
- ----------------------------------------------------------------------
Total net assets as of 10/31/98 (000s) $117,409
- ----------------------------------------------------------------------
Total net assets as of 10/31/99 (000s) $202,884
- ----------------------------------------------------------------------
Percentage growth over reporting period 72.8%
- ----------------------------------------------------------------------
</TABLE>
9
<PAGE>
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO
PORTFOLIO SNAPSHOT
Schwab MarketTrack All Equity Portfolio uses an indexing strategy to invest in
three distinct equity asset classes: large-cap, small-cap and international
stocks. The Portfolio's target mix, as illustrated below, is achieved either
directly or through investment in other SchwabFunds.-Registered Trademark- The
Portfolio employs an indexing strategy to capture the returns inherent in its
target asset categories. The information below and on the following page
provides a snapshot of the Portfolio's characteristics as of 10/31/99, and is
not indicative of its composition after that date. The terms used below are
defined on page 28. A complete list of the securities in the Portfolio as of
10/31/99 is provided in the Schedule of Investments later in this report.
PORTFOLIO FACTS
<TABLE>
<CAPTION>
SCHWAB MARKETTRACK PEER GROUP
ALL EQUITY PORTFOLIO* AVERAGE++
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Number of Holdings 6** 131
- -------------------------------------------------------------------------------------------------------------------
Median Market Cap ($ Mil) $37,677++ $45,601
- -------------------------------------------------------------------------------------------------------------------
Price/Earnings (P/E) Ratio 31.4++ 33.6
- -------------------------------------------------------------------------------------------------------------------
Price/Book (P/B) Ratio 6.3++ 8.0
- -------------------------------------------------------------------------------------------------------------------
12-Month Yield 0.45%++ 0.47%
- -------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 6% 75%
- -------------------------------------------------------------------------------------------------------------------
Three-Year Beta N/A++ 0.95
- -------------------------------------------------------------------------------------------------------------------
Expense Ratio 0.60%+ 1.34%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* Compiled by Charles Schwab & Co., Inc. This information is for illustrative
purposes only and is not intended to show, predict or guarantee future
composition of the Portfolio.
** The Portfolio invests in other SchwabFunds, whereas most mid-cap funds invest
primarily in individual securities.
+ Reflects a reduction by the Investment Adviser and Schwab, which is
guaranteed through at least 2/29/00.
++ Source: Morningstar. The peer group average is based on 2,173 large-cap
funds as tracked by Morningstar.
10
<PAGE>
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO
ASSET MIX
<TABLE>
<CAPTION>
MIX AS OF
10/31/99 TARGET MIX
<S> <C> <C>
- -----------------------------------------------------
U.S. Stocks:
- -----------------------------------------------------
Large-Cap 44.13% 45.00%
- -----------------------------------------------------
Small-Cap 24.77% 25.00%
- -----------------------------------------------------
International Stocks 29.93% 30.00%
- -----------------------------------------------------
Short-Term Investments 1.17% --
- -----------------------------------------------------
Total Stocks 100% 100%
- -----------------------------------------------------
</TABLE>
Large-cap stocks in the MarketTrack All Equity Portfolio are represented by the
S&P 500-Registered Trademark- Index, small-cap stocks are represented by the
Schwab Small-Cap Index-Registered Trademark- and international stocks are
represented by the Schwab International Index.-Registered Trademark-
TOP HOLDINGS
AS A PERCENTAGE OF FUND INVESTMENTS
<TABLE>
<S> <C>
- ---------------------------------------------------------------------
Schwab S&P 500 Fund-Select Shares 44.13%
- ---------------------------------------------------------------------
Schwab International Index Fund-Select Shares 29.93%
- ---------------------------------------------------------------------
Schwab Small-Cap Index Fund-Select Shares 24.77%
- ---------------------------------------------------------------------
Total 98.83%
- ---------------------------------------------------------------------
</TABLE>
11
<PAGE>
SCHWAB MARKETTRACK GROWTH PORTFOLIO
PORTFOLIO PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 10/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
ONE YEAR (11/20/95)
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
SCHWAB MARKETTRACK GROWTH PORTFOLIO(1) 19.24% 16.01%
- -------------------------------------------------------------------------------------------------
Growth Composite Index II(2,3) 19.92% --
- -------------------------------------------------------------------------------------------------
S&P 500-Registered Trademark- Index 25.67% 25.23%
- -------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index 0.53% 5.97%
- -------------------------------------------------------------------------------------------------
</TABLE>
National Association of Securities Dealers (NASD) regulations require that we
report fund performance data as of the most recent calendar quarter--in this
case, the quarter ended 9/30/99. As of 9/30/99, the Portfolio's one-year and
since-inception average annual total returns were 21.81% and 15.22%,
respectively. Without fee waivers and guarantees, the one-year and
since-inception average annual total returns would have been 21.36% and 14.51%,
respectively, as of 9/30/99.
(1) A portion of the fund's expenses was reduced during the reporting period.
Without such reductions, as of 10/31/99, the fund's one-year and
since-inception average annual returns would have been 18.83% and 15.31%.
(2) The Growth Composite Index II is composed of Morningstar category averages
and cash equivalents as represented by the 90-day T-bill and is calculated
using the following portfolio allocations: 40% large-cap stocks, 20%
small-cap stocks, 20% foreign stocks, 15% bonds and 5% cash.
(3) As of 10/31/99, there were 2,173 large-cap funds, 852 small-cap funds, 657
foreign funds and 561 intermediate-term bond funds tracked by Morningstar.
Performance includes changes in price and reinvestment of dividends and
capital gains.
12
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
<TABLE>
<CAPTION>
SCHWAB MARKETTRACK LEHMAN BROS. S&P 500 GROWTH COMPOSITE
GROWTH PORTFOLIO AGGREGATE BOND INDEX INDEX INDEX II
<S> <C> <C> <C> <C>
11/20/95 $10,000 $10,000 $10,000
11/30/95 $10,080 $10,076 $10,104
12/31/95 $10,292 $10,217 $10,299 $10,245
1/31/96 $10,442 $10,285 $10,649 $10,409
2/29/96 $10,533 $10,106 $10,748 $10,550
3/31/96 $10,623 $10,035 $10,852 $10,677
4/30/96 $10,803 $9,979 $11,011 $10,985
5/31/96 $10,954 $9,959 $11,294 $11,176
6/30/96 $10,934 $10,092 $11,337 $11,107
7/31/96 $10,523 $10,120 $10,836 $10,633
8/31/96 $10,733 $10,102 $11,064 $10,905
9/30/96 $11,184 $10,278 $11,686 $11,318
10/31/96 $11,324 $10,506 $12,009 $11,379
11/30/96 $11,896 $10,686 $12,917 $11,868
12/31/96 $11,784 $10,587 $12,661 $11,828
1/31/97 $12,008 $10,620 $13,451 $12,141
2/28/97 $12,028 $10,646 $13,557 $12,086
3/31/97 $11,692 $10,528 $13,001 $11,754
4/30/97 $12,038 $10,686 $13,776 $11,962
5/31/97 $12,793 $10,787 $14,614 $12,706
6/30/97 $13,313 $10,916 $15,268 $13,187
7/31/97 $14,087 $11,210 $16,482 $13,902
8/31/97 $13,618 $11,115 $15,559 $13,533
9/30/97 $14,301 $11,280 $16,410 $14,215
10/31/97 $13,853 $11,443 $15,862 $13,715
11/30/97 $14,098 $11,496 $16,597 $13,801
12/31/97 $14,259 $11,612 $16,882 $13,939
1/31/98 $14,410 $11,761 $17,070 $14,029
2/28/98 $15,220 $11,751 $18,300 $14,829
3/31/98 $15,738 $11,791 $19,237 $15,405
4/30/98 $15,846 $11,852 $19,432 $15,550
5/31/98 $15,576 $11,965 $19,097 $15,279
6/30/98 $15,868 $12,067 $19,873 $15,480
7/31/98 $15,555 $12,092 $19,662 $15,200
8/31/98 $13,729 $12,289 $16,823 $13,287
9/30/98 $14,194 $12,577 $17,901 $13,695
10/31/98 $15,080 $12,510 $19,357 $14,380
11/30/98 $15,760 $12,581 $20,530 $15,059
12/31/98 $16,422 $12,619 $21,712 $15,769
1/31/99 $16,718 $12,709 $22,620 $16,043
2/28/99 $16,103 $12,486 $21,916 $15,465
3/31/99 $16,576 $12,555 $22,793 $15,895
4/30/99 $17,224 $12,595 $23,675 $16,525
5/31/99 $16,916 $12,484 $23,116 $16,299
6/30/99 $17,586 $12,444 $24,399 $17,037
7/31/99 $17,465 $12,392 $23,638 $16,910
8/31/99 $17,355 $12,386 $23,520 $16,774
9/30/99 $17,290 $12,530 $22,875 $16,676
10/31/99 $17,982 $12,576 $24,323 $17,244
</TABLE>
The above graph compares the growth of a hypothetical $10,000 investment in the
Schwab MarketTrack Growth Portfolio, made at its inception, with a similar
investment in the S&P 500-Registered Trademark- Index, the Lehman Brothers
Aggregate Bond Index and the Growth Composite Index II. The hypothetical $10,000
investment assumes investment on the first day of the month following inception
and includes changes in share price and reinvestment of dividends and capital
gains.
THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS.
TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. Indices are unmanaged and do not reflect advisory fees and other expenses
associated with an investment in the Portfolios. Investors cannot invest in an
index directly.
ASSETS
<TABLE>
<S> <C>
- ----------------------------------------------------------------------
Total net assets as of 10/31/98 (000s) $275,628
- ----------------------------------------------------------------------
Total net assets as of 10/31/99 (000s) $427,659
- ----------------------------------------------------------------------
Percentage growth over reporting period 55.2%
- ----------------------------------------------------------------------
</TABLE>
13
<PAGE>
SCHWAB MARKETTRACK GROWTH PORTFOLIO
PORTFOLIO SNAPSHOT
Schwab MarketTrack Growth Portfolio uses an indexing strategy to invest in three
distinct asset classes--stocks, bonds and cash--and further allocates stock
investments between large-cap, small-cap and international. The Portfolio's
target mix, as illustrated below, is achieved either directly or through
investment in other SchwabFunds.-Registered Trademark- The Portfolio employs an
indexing strategy to capture the returns inherent in its target asset
categories. The information below and on the following page provides a snapshot
of the Portfolio's characteristics as of 10/31/99, and is not indicative of its
composition after that date. The terms used below are defined on page 28. A
complete list of the securities in the Portfolio as of 10/31/99 is provided in
the Schedule of Investments later in this report.
PORTFOLIO FACTS
<TABLE>
<CAPTION>
SCHWAB MARKETTRACK PEER GROUP AV-
GROWTH PORTFOLIO* ERAGE++
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Number of Holdings 507** 131
- ----------------------------------------------------------------------------------------------------------
Median Market Cap ($ Mil) $24,319++ $45,601
- ----------------------------------------------------------------------------------------------------------
Price/Earnings (P/E) Ratio 29.1++ 33.6
- ----------------------------------------------------------------------------------------------------------
Price/Book (P/B) Ratio 6.3++ 8.0
- ----------------------------------------------------------------------------------------------------------
12-Month Yield 1.35%++ 0.47%
- ----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 7% 75%
- ----------------------------------------------------------------------------------------------------------
Three-Year Beta 0.72++ 0.95
- ----------------------------------------------------------------------------------------------------------
Expense Ratio 0.60%+ 1.34%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Compiled by Charles Schwab & Co., Inc. This information is for illustrative
purposes only and is not intended to show, predict or guarantee future
composition of the Portfolio.
** The Portfolio invests in a combination of other SchwabFunds and individual
securities.
+ Reflects a reduction by the Investment Adviser and Schwab, which is
guaranteed through at least 2/29/00.
++ Source: Morningstar. The peer group average is based on 2,173 large-cap
funds as tracked by Morningstar.
14
<PAGE>
SCHWAB MARKETTRACK GROWTH PORTFOLIO
ASSET MIX
<TABLE>
<CAPTION>
MIX AS OF
10/31/99 TARGET MIX
<S> <C> <C>
- ------------------------------------------------------------------------------------
U.S. Stocks:
- ------------------------------------------------------------------------------------
Large-Cap 40.66% 40.00%
- ------------------------------------------------------------------------------------
Small-Cap 19.99% 20.00%
- ------------------------------------------------------------------------------------
International Stocks 19.94% 20.00%
- ------------------------------------------------------------------------------------
Total Stocks 80.59% 80.00%
- ------------------------------------------------------------------------------------
Bonds 14.57% 15.00%
- ------------------------------------------------------------------------------------
Short-Term Investments 4.84% 5.00%
- ------------------------------------------------------------------------------------
Total 100% 100%
- ------------------------------------------------------------------------------------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
EQUITY INVESTMENT STYLE BOX(1)
AS OF 10/31/99
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -Style-
Value Blend Growth -Market Cap-
X Large
Medium
Small
</TABLE>
Large-cap stocks in the MarketTrack Growth Portfolio are represented by the S&P
500-Registered Trademark- Index, small-cap stocks are represented by the Schwab
Small-Cap Index,-Registered Trademark- international stocks are represented by
the Schwab International Index,-Registered Trademark- bonds are represented by
the Lehman Brothers Aggregate Bond Index and cash is represented by the three-
month Treasury bill.
TOP 10 HOLDINGS
AS A PERCENTAGE OF FUND INVESTMENTS
<TABLE>
<S> <C>
- --------------------------------------------------------------------
Schwab Small-Cap Index
Fund-Registered Trademark--Select Shares 19.99%
- --------------------------------------------------------------------
Schwab International Index
Fund-Registered Trademark--Select Shares 19.94%
- --------------------------------------------------------------------
Schwab Total Bond Market Index Fund 14.57%
- --------------------------------------------------------------------
Schwab S&P 500 Fund-Registered Trademark--Select Shares 14.37%
- --------------------------------------------------------------------
Schwab Value Advantage Money Fund-Registered Trademark- 3.58%
- --------------------------------------------------------------------
Microsoft Corp. 1.10%
- --------------------------------------------------------------------
General Electric Co. 1.05%
- --------------------------------------------------------------------
Intel Corp. 0.61%
- --------------------------------------------------------------------
Wal-Mart Stores, Inc. 0.60%
- --------------------------------------------------------------------
Cisco Systems, Inc. 0.56%
- --------------------------------------------------------------------
Total 76.37%
- --------------------------------------------------------------------
</TABLE>
1 Source: Morningstar, Inc. The style box illustrates the composition of the
fund's portfolio as of 10/31/99. It is not indicative of its holdings after
that date, nor does it represent an exact assessment of risk or future
assessment or any type of future performance. Placement is based on the fund's
P/E and P/B ratios relative to the S&P 500-Registered Trademark- Index, as
well as the size of the companies in which it invests, or median market
capitalization.
15
<PAGE>
SCHWAB MARKETTRACK BALANCED PORTFOLIO
PORTFOLIO PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 10/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
ONE YEAR (11/20/95)
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
SCHWAB MARKETTRACK BALANCED PORTFOLIO(1) 14.18% 13.23%
- -------------------------------------------------------------------------------------------------------
Balanced Composite Index(2,3) 14.73% --
- -------------------------------------------------------------------------------------------------------
S&P 500-Registered Trademark- Index 25.67% 25.23%
- -------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index 0.53% 5.97%
- -------------------------------------------------------------------------------------------------------
</TABLE>
National Association of Securities Dealers (NASD) regulations require that we
report performance data as of the most recent calendar quarter--in this case,
the quarter ended 9/30/99. As of 9/30/99, the Portfolio's one-year and
since-inception average annual total returns were 15.99% and 12.66%,
respectively. Without fee waivers and guarantees, the one-year and
since-inception average annual total returns would have been 15.54% and 12.05%,
respectively, as of 9/30/99.
(1) A portion of the fund's expenses was reduced during the reporting period.
Without such reductions, as of 10/31/99, the fund's one-year and
since-inception average annual returns would have been 13.75% and 12.63%.
(2) The Balanced Composite Index is composed of Morningstar category averages
and cash equivalents as represented by the 90-day T-bill and is calculated
using the following portfolio allocations: 30% large-cap stocks, 15%
small-cap stocks, 15% foreign stocks, 35% bonds and 5% cash.
(3) As of 10/31/99, there were 2,173 large-cap funds, 852 small-cap funds,
657 foreign funds and 561 intermediate-term bond funds tracked by
Morningstar. Performance includes changes in price and reinvestment of
dividends and capital gains.
16
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
<TABLE>
<CAPTION>
SCHWAB MARKETTRACK LEHMAN BROTHERS S&P 500 INDEX BALANCED
BALANCED PORTFOLIO AGGREGATE BOND INDEX COMPOSITE INDEX
<S> <C> <C> <C> <C>
11/20/95 $10,000 $10,000 $10,000
11/30/95 $10,080 $10,076 $10,104
12/31/95 $10,270 $10,217 $10,299 $10,237
1/31/96 $10,390 $10,285 $10,649 $10,374
2/29/96 $10,410 $10,106 $10,748 $10,437
3/31/96 $10,460 $10,035 $10,852 $10,514
4/30/96 $10,581 $9,979 $11,011 $10,727
5/31/96 $10,691 $9,959 $11,294 $10,864
6/30/96 $10,711 $10,092 $11,337 $10,843
7/31/96 $10,410 $10,120 $10,836 $10,502
8/31/96 $10,551 $10,102 $11,064 $10,702
9/30/96 $10,912 $10,278 $11,686 $11,050
10/31/96 $11,082 $10,506 $12,009 $11,149
11/30/96 $11,534 $10,686 $12,917 $11,555
12/31/96 $11,415 $10,587 $12,661 $11,503
1/31/97 $11,589 $10,620 $13,451 $11,739
2/28/97 $11,589 $10,646 $13,557 $11,707
3/31/97 $11,334 $10,528 $13,001 $11,436
4/30/97 $11,620 $10,686 $13,776 $11,624
5/31/97 $12,183 $10,787 $14,614 $12,193
6/30/97 $12,593 $10,916 $15,268 $12,573
7/31/97 $13,217 $11,210 $16,482 $13,165
8/31/97 $12,849 $11,115 $15,559 $12,874
9/30/97 $13,391 $11,280 $16,410 $13,406
10/31/97 $13,125 $11,443 $15,862 $13,090
11/30/97 $13,309 $11,496 $16,597 $13,163
12/31/97 $13,443 $11,612 $16,882 $13,291
1/31/98 $13,582 $11,761 $17,070 $13,395
2/28/98 $14,149 $11,751 $18,300 $13,966
3/31/98 $14,523 $11,791 $19,237 $14,385
4/30/98 $14,608 $11,852 $19,432 $14,503
5/31/98 $14,448 $11,965 $19,097 $14,344
6/30/98 $14,672 $12,067 $19,873 $14,512
7/31/98 $14,469 $12,092 $19,662 $14,321
8/31/98 $13,262 $12,289 $16,823 $13,006
9/30/98 $13,668 $12,577 $17,901 $13,374
10/31/98 $14,309 $12,510 $19,357 $13,850
11/30/98 $14,800 $12,581 $20,530 $14,360
12/31/98 $15,281 $12,619 $21,712 $14,883
1/31/99 $15,523 $12,709 $22,620 $15,099
2/28/99 $15,028 $12,486 $21,916 $14,626
3/31/99 $15,369 $12,555 $22,793 $14,956
4/30/99 $15,820 $12,595 $23,675 $15,413
5/31/99 $15,567 $12,484 $23,116 $15,216
6/30/99 $16,018 $12,444 $24,399 $15,720
7/31/99 $15,930 $12,392 $23,638 $15,620
8/31/99 $15,842 $12,386 $23,520 $15,520
9/30/99 $15,853 $12,530 $22,875 $15,488
10/31/99 $16,337 $12,576 $24,323 $15,890
</TABLE>
The above graph compares the growth of a hypothetical $10,000 investment in the
Schwab MarketTrack Balanced Portfolio, made at its inception, with a similar
investment in the S&P 500-Registered Trademark- Index, the Lehman Brothers
Aggregate Bond Index and the Balanced Composite Index. The hypothetical $10,000
investment assumes investment on the first day of the month following inception
and includes changes in share price and reinvestment of dividends and capital
gains.
THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS.
TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. Indices are unmanaged and do not reflect advisory fees and other expenses
associated with an investment in the Portfolio. Investors cannot invest in an
index directly.
ASSETS
<TABLE>
<S> <C>
- ----------------------------------------------------------------------
Total net assets as of 10/31/98 (000s) $263,904
- ----------------------------------------------------------------------
Total net assets as of 10/31/99 (000s) $403,271
- ----------------------------------------------------------------------
Percentage growth over reporting period 52.8%
- ----------------------------------------------------------------------
</TABLE>
17
<PAGE>
SCHWAB MARKETTRACK BALANCED PORTFOLIO
PORTFOLIO SNAPSHOT
Schwab MarketTrack Balanced Portfolio uses an indexing strategy to invest in
three distinct asset classes-- stocks, bonds and cash--and further allocates
stock investments between large-cap, small-cap and international.
The Portfolio's target mix, as illustrated below, is achieved either directly or
through investment in other SchwabFunds.-Registered Trademark- The Portfolio
employs an indexing strategy to capture the returns inherent in its target asset
categories. The information below and on the following page provides a snapshot
of the Portfolio's characteristics as of 10/31/99, and is not indicative of its
composition after that date. The terms used below are defined on page 28.
A complete list of the securities in the Portfolio as of 10/31/99 is provided in
the Schedule of Investments later in this report.
PORTFOLIO FACTS
<TABLE>
<CAPTION>
SCHWAB MARKETTRACK PEER GROUP
BALANCED PORTFOLIO* AVERAGE++
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Number of Holdings 507** 230
- ---------------------------------------------------------------------------------------------------------------------
Median Market Cap ($ Mil) $24,319++ $31,733
- ---------------------------------------------------------------------------------------------------------------------
Price/Earnings (P/E) Ratio 29.0++ 29.8
- ---------------------------------------------------------------------------------------------------------------------
Price/Book (P/B) Ratio 6.3++ 6.5
- ---------------------------------------------------------------------------------------------------------------------
12-Month Yield 2.24%++ 2.36%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 7% 95%
- ---------------------------------------------------------------------------------------------------------------------
Three-Year Beta .055++ 0.55
- ---------------------------------------------------------------------------------------------------------------------
Expense Ratio 0.60%+ 1.31%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* Compiled by Charles Schwab & Co., Inc. This information is for illustrative
purposes only and is not intended to show, predict or guarantee future
composition of the Portfolio.
** The Portfolio invests in a combination of other SchwabFunds and individual
securities.
+ Reflects a reduction by the Investment Adviser and Schwab, which is
guaranteed through at least 2/29/00.
++ Source: Morningstar. The peer group average is based on 745 domestic hybrid
funds as tracked by Morningstar.
18
<PAGE>
SCHWAB MARKETTRACK BALANCED PORTFOLIO
ASSET MIX
<TABLE>
<CAPTION>
MIX AS OF
10/31/99 TARGET MIX
<S> <C> <C>
- ------------------------------------------------------------------------------------
U.S. Stocks:
- ------------------------------------------------------------------------------------
Large-Cap 30.61% 30.00%
- ------------------------------------------------------------------------------------
Small-Cap 15.11% 15.00%
- ------------------------------------------------------------------------------------
International Stocks 15.04% 15.00%
- ------------------------------------------------------------------------------------
Total Stocks 60.76% 60.00%
- ------------------------------------------------------------------------------------
Bonds 34.34% 35.00%
- ------------------------------------------------------------------------------------
Short-Term Investments 4.89% 5.00%
- ------------------------------------------------------------------------------------
Total 100% 100%
- ------------------------------------------------------------------------------------
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
EQUITY INVESTMENT STYLE BOX(1)
AS OF 10/31/99
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -Style-
Value Blend Growth -Market Cap-
X Large
Medium
Small
</TABLE>
Large-cap stocks in the MarketTrack Balanced Portfolio are represented by the
S&P 500-Registered Trademark- Index, small-cap stocks are represented by the
Schwab Small-Cap Index,-Registered Trademark- international stocks are
represented by the Schwab International Index,-Registered Trademark- bonds are
represented by the Lehman Brothers Aggregate Bond Index and cash is represented
by the three-month Treasury bill.
TOP 10 HOLDINGS
AS A PERCENTAGE OF FUND INVESTMENTS
<TABLE>
<S> <C>
- --------------------------------------------------------------------
Schwab Total Bond Market Index Fund 34.34%
- --------------------------------------------------------------------
Schwab Small-Cap Index
Fund-Registered Trademark--Select Shares 15.11%
- --------------------------------------------------------------------
Schwab International Index
Fund-Registered Trademark--Select Shares 15.04%
- --------------------------------------------------------------------
Schwab S&P 500 Fund-Select Shares 11.87%
- --------------------------------------------------------------------
Schwab Value Advantage Money Fund 3.69%
- --------------------------------------------------------------------
Microsoft Corp. 0.78%
- --------------------------------------------------------------------
General Electric Co. 0.75%
- --------------------------------------------------------------------
Wal-Mart Stores, Inc. 0.43%
- --------------------------------------------------------------------
Intel Corp. 0.43%
- --------------------------------------------------------------------
Cisco Systems, Inc. 0.39%
- --------------------------------------------------------------------
Total 82.83%
- --------------------------------------------------------------------
</TABLE>
1 Source: Morningstar, Inc. The style box illustrates the composition of the
fund's portfolio as of 10/31/99. It is not indicative of its holdings after
that date, nor does it represent an exact assessment of risk or future
assessment or any type of future performance. Placement is based on the fund's
P/E and P/B ratios relative to the S&P 500-Registered Trademark- Index, as
well as the size of the companies in which it invests, or median market
capitalization.
19
<PAGE>
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
PORTFOLIO PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 10/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
ONE YEAR (11/20/95)
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(1) 9.13% 10.37%
- -------------------------------------------------------------------------------------------------
Conservative Composite Index(2,3) 9.71% --
- -------------------------------------------------------------------------------------------------
S&P 500-Registered Trademark- Index 25.67% 25.23%
- -------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index 0.53% 5.97%
- -------------------------------------------------------------------------------------------------
</TABLE>
National Association of Securities Dealers (NASD) regulations require that we
report performance data as of the most recent calendar quarter--in this case,
the quarter ended 9/30/99. As of 9/30/99, the Portfolio's one-year and
since-inception average annual total returns were 10.08% and 10.02%,
respectively. Without fee waivers and guarantees, the six-month, one-year and
since-inception average annual total returns would have been 9.62% and 9.18%,
respectively, as of 9/30/99.
(1) A portion of the fund's expenses was reduced during the reporting period.
Without such reductions, as of 10/31/99, the fund's one-year and
since-inception average annual returns would have been 8.73% and 9.94%.
(2) The Conservative Composite Index is composed of Morningstar category
averages and cash equivalents as represented by the 90-day T-bill and is
calculated using the following portfolio allocations: 20% large-cap stocks,
10% small-cap stocks, 10% foreign stocks, 55% bonds and 5% cash.
(3) As of 10/31/99, there were 2,173 large-cap funds, 852 small-cap funds,
657 foreign funds and 561 intermediate-term bond funds tracked by
Morningstar. Performance includes changes in price and reinvestment of
dividends and capital gains.
20
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
<TABLE>
<CAPTION>
SCHWAB MARKETTRACK LEHMAN BROTHERS S&P 500 INDEX CONSERVATIVE
CONSERVATIVE PORTFOLIO AGGREGATE BOND INDEX COMPOSITE INDEX
<S> <C> <C> <C> <C>
11/20/95 $10,000 $10,000 $10,000
11/30/95 $10,080 $10,076 $10,104
12/31/95 $10,237 $10,217 $10,299 $10,229
1/31/96 $10,337 $10,285 $10,649 $10,340
2/29/96 $10,297 $10,106 $10,748 $10,324
3/31/96 $10,287 $10,035 $10,852 $10,353
4/30/96 $10,337 $9,979 $11,011 $10,474
5/31/96 $10,378 $9,959 $11,294 $10,558
6/30/96 $10,439 $10,092 $11,337 $10,583
7/31/96 $10,256 $10,120 $10,836 $10,369
8/31/96 $10,337 $10,102 $11,064 $10,499
9/30/96 $10,643 $10,278 $11,686 $10,783
10/31/96 $10,818 $10,506 $12,009 $10,920
11/30/96 $11,179 $10,686 $12,917 $11,245
12/31/96 $11,070 $10,587 $12,661 $11,181
1/31/97 $11,174 $10,620 $13,451 $11,345
2/28/97 $11,184 $10,646 $13,557 $11,335
3/31/97 $10,965 $10,528 $13,001 $11,122
4/30/97 $11,206 $10,686 $13,776 $11,291
5/31/97 $11,604 $10,787 $14,614 $11,692
6/30/97 $11,896 $10,916 $15,268 $11,979
7/31/97 $12,413 $11,210 $16,482 $12,458
8/31/97 $12,160 $11,115 $15,559 $12,238
9/30/97 $12,540 $11,280 $16,410 $12,632
10/31/97 $12,455 $11,443 $15,862 $12,481
11/30/97 $12,603 $11,496 $16,597 $12,542
12/31/97 $12,698 $11,612 $16,882 $12,661
1/31/98 $12,829 $11,761 $17,070 $12,778
2/28/98 $13,189 $11,751 $18,300 $13,137
3/31/98 $13,418 $11,791 $19,237 $13,416
4/30/98 $13,484 $11,852 $19,432 $13,508
5/31/98 $13,431 $11,965 $19,097 $13,449
6/30/98 $13,595 $12,067 $19,873 $13,587
7/31/98 $13,484 $12,092 $19,662 $13,475
8/31/98 $12,774 $12,289 $16,823 $12,696
9/30/98 $13,139 $12,577 $17,901 $13,024
10/31/98 $13,530 $12,510 $19,357 $13,301
11/30/98 $13,843 $12,581 $20,530 $13,653
12/31/98 $14,166 $12,619 $21,712 $14,002
1/31/99 $14,348 $12,709 $22,620 $14,167
2/28/99 $13,950 $12,486 $21,916 $13,788
3/31/99 $14,200 $12,555 $22,793 $14,028
4/30/99 $14,475 $12,595 $23,675 $14,330
5/31/99 $14,269 $12,484 $23,116 $14,159
6/30/99 $14,521 $12,444 $24,399 $14,456
7/31/99 $14,452 $12,392 $23,638 $14,379
8/31/99 $14,395 $12,386 $23,520 $14,310
9/30/99 $14,464 $12,530 $22,875 $14,336
10/31/99 $14,766 $12,576 $24,323 $14,591
</TABLE>
The above graph compares the growth of a hypothetical $10,000 investment in the
Schwab MarketTrack Conservative Portfolio, made at its inception, with a similar
investment in the S&P 500-Registered Trademark- Index, the Lehman Brothers
Aggregate Bond Index and the Conservative Composite Index. The hypothetical
$10,000 investment assumes investment on the first day of the month following
inception and includes changes in share price and reinvestment of dividends and
capital gains.
THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS.
TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. Indices are unmanaged and do not reflect advisory fees and other expenses
associated with an investment in the Portfolio. Investors cannot invest in an
index directly.
ASSETS
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
Total net assets as of 10/31/98 (000s) $114,898
- --------------------------------------------------------------------------
Total net assets as of 10/31/99 (000s) $167,402
- --------------------------------------------------------------------------
Percentage growth over reporting period 45.7%
- --------------------------------------------------------------------------
</TABLE>
21
<PAGE>
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
PORTFOLIO SNAPSHOT
Schwab MarketTrack Conservative Portfolio uses an indexing strategy to invest in
three distinct asset classes--stocks, bonds and cash--and further allocates
stock investments between large-cap, small-cap and international. The
Portfolio's target mix, as illustrated below, is achieved either directly or
through investment in other SchwabFunds.-Registered Trademark- The Portfolio
employs an indexing strategy to capture the returns inherent in its target asset
categories. The information below and on the following page provides a snapshot
of the Portfolio's characteristics as of 10/31/99, and is not indicative of its
composition after that date. The terms used below are defined on page 28. A
complete list of the securities in the Portfolio as of 10/31/99 is provided in
the Schedule of Investments later in this report.
PORTFOLIO FACTS
<TABLE>
<CAPTION>
SCHWAB MARKETTRACK PEER GROUP
CONSERVATIVE PORTFOLIO* AVERAGE++
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Number of Issues 507** 230
- --------------------------------------------------------------------------------------------------------------------
Median Market Cap ($ Mil) $24,319++ $31,733
- --------------------------------------------------------------------------------------------------------------------
Price/Earnings (P/E) Ratio 28.7++ 29.8
- --------------------------------------------------------------------------------------------------------------------
Price/Book (P/B) Ratio 6.2++ 6.5
- --------------------------------------------------------------------------------------------------------------------
12-Month Yield 3.12%++ 2.36%
- --------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 8% 95%
- --------------------------------------------------------------------------------------------------------------------
Three-Year Beta 0.39++ 0.55
- --------------------------------------------------------------------------------------------------------------------
Expense Ratio 0.60%+ 1.31%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Compiled by Charles Schwab & Co., Inc. This information is for illustrative
purposes only and is not intended to show, predict or guarantee future
composition of the Portfolio.
** The Portfolio invests in a combination of other SchwabFunds and individual
securities.
+ Reflects a reduction by the Investment Adviser and Schwab, which is
guaranteed through at least 2/29/00.
++ Source: Morningstar. The peer group average is based on 745 domestic hybrid
funds as tracked by Morningstar.
22
<PAGE>
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
ASSET MIX
<TABLE>
<CAPTION>
MIX AS OF
10/31/99 TARGET MIX
<S> <C> <C>
- -------------------------------------------------
U.S. Stocks:
- -------------------------------------------------
Large-Cap 20.77% 20.00%
- -------------------------------------------------
Small-Cap 10.12% 10.00%
- -------------------------------------------------
International Stocks 10.30% 10.00%
- -------------------------------------------------
Total Stocks 41.19% 40.00%
- -------------------------------------------------
Bonds 54.33% 55.00%
- -------------------------------------------------
Short-Term Investments 4.48% 5.00%
- -------------------------------------------------
Total 100% 100%
- -------------------------------------------------
</TABLE>
Large-cap stocks in the MarketTrack Conservative Portfolio are represented by
the S&P 500-Registered Trademark- Index, small-cap stocks are represented by the
Schwab Small-Cap Index,-Registered Trademark- international stocks are
represented by the Schwab International Index,-Registered Trademark- bonds are
represented by the Lehman Brothers Aggregate Bond Index and cash is represented
by the three-month Treasury bill.
TOP 10 HOLDINGS
AS A PERCENTAGE OF FUND INVESTMENTS
<TABLE>
<S> <C>
- --------------------------------------------------------------------
Schwab Total Bond Market Index Fund 54.33%
- --------------------------------------------------------------------
Schwab International Index
Fund-Registered Trademark--Select Shares 10.30%
- --------------------------------------------------------------------
Schwab Small-Cap Index
Fund-Registered Trademark--Select Shares 10.12%
- --------------------------------------------------------------------
Schwab S&P 500 Fund-Select Shares 10.05%
- --------------------------------------------------------------------
Schwab Value Advantage Money Fund-Registered Trademark- 3.70%
- --------------------------------------------------------------------
Microsoft Corp. 0.45%
- --------------------------------------------------------------------
General Electric Co. 0.42%
- --------------------------------------------------------------------
Intel Corp. 0.25%
- --------------------------------------------------------------------
Wal-Mart Stores, Inc. 0.24%
- --------------------------------------------------------------------
Cisco Systems, Inc. 0.22%
- --------------------------------------------------------------------
Total 90.08%
- --------------------------------------------------------------------
</TABLE>
23
<PAGE>
PORTFOLIO MANAGEMENT
THE PORTFOLIO MANAGEMENT TEAM
GERI HOM--vice president and senior portfolio manager, has primary
responsibility for the day-to-day management of the equity securities in the
MarketTrack Portfolios. Geri joined CSIM in March 1995 as portfolio manager and
was promoted to her current position in December 1996. She currently manages
approximately $17 billion in indexed equity mutual fund assets. Prior to joining
CSIM, Geri was a principal for Wells Fargo Nikko Investment Advisors and vice
president and manager of the Domestic Equity Portfolio Management Group for
Wells Fargo Nikko.
KIMON DAIFOTIS--vice president and senior portfolio manager, has primary
responsibility for the day-to-day management of the bonds and cash equivalents
securities in the MarketTrack Portfolios. Kimon joined CSIM in his current
capacity in October 1997. In addition to the MarketTrack Portfolios, he manages
two bond index funds and the YieldPlus Fund. He was previously with Lehman
Brothers, most recently as vice president in fixed income institutional sales
and, prior to that, senior portfolio strategist.
24
<PAGE>
PORTFOLIO DISCUSSION
QUESTIONS TO THE
PORTFOLIO MANAGEMENT TEAM
Q. HOW DID THE THREE SCHWAB MARKETTRACK PORTFOLIOS-TM- PERFORM DURING THE
REPORTING PERIOD?
A. As discussed in the MARKET OVERVIEW section and detailed in the table at
right, there was a wide range of returns for the various asset classes during
the reporting period. Equities in general, and large-cap domestic equities in
particular, continued to be the best performing major asset class. As a result,
the primary factor determining the relative performance of the four MarketTrack
portfolios was the portion of the portfolio allocated to equity investments. As
shown in the table to the right, the portfolios with the greatest exposure to
equity investments had the highest returns. The portfolios with the greatest
exposure to fixed income investments had lower returns on a relative basis.
Because the MarketTrack Portfolios are designed to incorporate a mix of
different asset classes, their returns over any given period are expected to lag
the return of the strongest performing asset class. Conversely, the returns of
the MarketTrack Portfolios are expected to exceed that of the worst performing
asset class for any given period. By dampening the return volatility of any
single asset class, the MarketTrack Portfolios are designed to provide more
stable returns throughout market cycles which, on a risk-adjusted basis, are
expected to be very favorable over extended periods of time.
<TABLE>
<CAPTION>
ONE-YEAR
RETURN AS OF
ASSET CLASS INDEX(1) 10/31/99
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Large-Cap Stocks S&P 500-Registered Trademark- Index 25.67%
- -------------------------------------------------------------------------------------------------
Small-Cap Stocks Russell 2000-Registered Trademark- Index 14.87%
- -------------------------------------------------------------------------------------------------
International Stocks MSCI-EAFE-Registered Trademark- Index 23.03%
- -------------------------------------------------------------------------------------------------
Bonds Lehman Brothers Aggregate Bond Index 0.53%
- -------------------------------------------------------------------------------------------------
Cash Three-Month Treasury Bill 4.73%
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EQUITY/FIXED ONE-YEAR
INCOME RETURN AS OF
MARKETTRACK FUND TARGET MIX 10/31/99
<S> <C> <C>
- ----------------------------------------------------
All Equity Portfolio 100/0 24.34%
- ----------------------------------------------------
Growth Portfolio 80/20 19.24%
- ----------------------------------------------------
Balanced Portfolio 60/40 14.18%
- ----------------------------------------------------
Conservative Portfolio 40/60 9.13%
- ----------------------------------------------------
</TABLE>
(1) The S&P Index is composed of 500 large-company common stocks representing
key industries, including many from the most recognizable companies in the
United States. The Russell 2000 consisted of the smallest 2000 companies in
the Russell 3000 Index (largest 3000 companies), representing approximately
7% of the total market capitalization. MSCI EAFE (refers to Europe,
Australasia, and Far East) is widely accepted as a benchmark for
international stock performance, the EAFE Index is an aggregate of 21
individual country indexes that collectively represent many of the major
markets of the world. The Lehman Brother Aggregate Bond Index includes
fixed-rate debt issues rated investment grade or higher.
Q. ARE THE MARKETTRACK PORTFOLIOS MANAGED FOR TAX-EFFICIENCY?
A. Yes. The MarketTrack Portfolios employ several management techniques that are
designed to minimize capital gains distributions. First, they follow an indexing
strategy by investing directly in index securities or index funds, which helps
them keep their portfolio turnover low and thereby minimizes realized
25
<PAGE>
PORTFOLIO DISCUSSION (continued)
capital gains. Second, when securities need to be sold--either to raise cash for
portfolio redemptions or when an index is rebalanced--the MarketTrack Portfolios
or the underlying index funds generally will attempt to sell the shares with the
highest tax basis to minimize capital gains. Third, the Portfolios' 1998 change
to a more static asset allocation mix should further reduce turnover rates.
Finally, the investment managers strive to use efficient trading practices,
which help to keep portfolio turnover down.
Q. CAN YOU PROVIDE AN EXAMPLE OF HOW ASSET ALLOCATION REDUCES PORTFOLIO
VOLATILITY?
A. Adding bonds and cash equivalents to a stock portfolio can help reduce its
overall risk. Three of the four MarketTrack portfolios (all except the All
Equity Portfolio) use this approach. The following chart displays the high, low,
and average annual returns from 1970 - 1998 for five hypothetical portfolios
representing the returns of stocks and bonds.(1) As the chart demonstrates,
adding bonds to a stock-heavy portfolio would have reduced risk while still
producing competitive returns.
A portfolio comprising 40% bonds and 60% stocks, for example, achieved an
average annual return of 11.97%--roughly 1.50% less than the 13.48% return of
the all-stock portfolio--and with significantly less volatility. The lowest
annual return of the portfolio invested 40% in bonds and 60% in stocks, which
was actually a loss of 13.60%, was about half of the
26.47% loss in the all-stock portfolio. This hypothetical example is for
illustrative purposes only, and, of course, past performance does not guarantee
future results.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE EFFECTS OF ADDING BONDS TO AN ALL-STOCK PORTFOLIO
HYPOTHETICAL PORTFOLIOS: 1970-1998
HIGH, LOW AND AVERAGE ANNUAL RETURNS FOR PORTFOLIO COMPOSITIONS
HIGHEST ANNUAL RETURN AVERAGE ANNUAL RETURN LOWEST ANNUAL RETURN
<S> <C> <C> <C>
100% Stocks 37.43% 13.48% -26.47%
90% Stocks/10% Bonds 35.37% 13.14% -23.25%
80% Stocks/20% Bonds 33.30% 12.77% -20.04%
70% Stocks/30% Bonds 31.24% 12.38% -16.82%
60% Stocks/40% Bonds 29.18% 11.97% -13.60%
</TABLE>
(1) Source: Schwab Center for Investment Research. The returns do not reflect
actual investment in any security. The hypothetical returns are all weighted
averages and assume reinvestment of dividends. The indices represented are
the S&P 500-Registered Trademark- Index and the Ibbotson Intermediate
Government Bond Index. Indices are unmanaged, do not incur costs and
expenses, and cannot be invested in directly.
26
<PAGE>
Q. WHY DOES INVESTING IN ALL THE MAJOR ASSET CLASSES MAKE SENSE?
A. The following chart shows the performance of large-cap, small-cap, and
international stocks over nine non-overlapping three-year periods spanning 1974
through 1998. The chart shows that the perfor-mance of the various asset classes
varied considerably. Sometimes large-caps performed better than small-caps and
sometimes the opposite occurred. Some international stocks performed better than
domestic stocks and sometimes vice versa. These shifting results are driven by
the fact that different asset classes tended to take turns leading the market
and these "performance cycles" have varied in length and magnitude. While these
cycles may not be entirely random, pre-dicting them can prove to be very
difficult. By investing in several asset classes, you can participate in the
long-term return performance of the various classes, reduce portfolio volatility
(compared to investing in just one asset class) and avoid the entire issue of
trying to predict which asset class will be the next winner.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
WHY DIVERSIFY?
NON-OVERLAPPING, THREE-YEAR INTERVALS
THREE-YEARS ENDED LARGE-CAP STOCKS SMALL-CAP STOCKS INTERNATIONAL STOCKS
<S> <C> <C> <C>
12/31/74 -9.28% -22.01% -2.76%
12/31/77 16.40% 43.46% 19.31%
12/31/80 18.67% 31.50% 21.06%
12/31/83 12.25% 20.23% 6.93%
12/31/86 18.50% 10.08% 42.15%
12/31/89 17.36% 9.37% 21.19%
12/31/92 10.82% 12.51% -8.68%
12/31/95 15.26% 15.01% 17.02%
12/31/98 28.27% 13.29% 9.31%
</TABLE>
27
<PAGE>
GLOSSARY
ASSET ALLOCATION--The division of holdings among different types of assets, such
as domestic stocks, international stocks, bonds and cashequivalent securities.
BETA--A measure of a stock's volatility relative to the overall stock market.
The beta of the S&P 500-Registered Trademark- Index is 1. Any investment that is
more volatile than the market as a whole has a beta value higher than 1. If the
beta is less than 1, the investment is considered to be less volatile than the
market.
CAPITAL GAIN (LOSS)--When a stock is sold for a profit, the difference between
the net sales price and its net purchase price, or cost basis, is a capital
gain. If a stock is sold below cost, the difference is a capital loss.
EARNINGS GROWTH RATE--The average annual rate of growth in earnings over the
past five years for the stocks in a fund's portfolio.
EARNINGS PER SHARE (EPS)--The net income (or earnings) of a company for the past
12 months divided by the current number of shares outstanding.
EXPENSE RATIO--Amount, expressed as a percentage of total investment, that
shareholders pay annually for mutual fund operating expenses and management
fees.
MARKET CAPITALIZATION--The dollar value of a company or the amount someone would
pay to buy the company today. It is calculated by multiplying the total number
of outstanding shares by the current price per share. Median market cap is the
midpoint of a fund's total market capitalization, weighted by the portion of
assets invested in each holding. As a result, half of the fund's holdings will
have market caps above the median, and the rest below it.
NET ASSET VALUE (NAV)--The market value of a fund share.
PRICE/BOOK (P/B) RATIO--Compares a stock's market value with the value of total
assets minus intangible assets and total liabilities (the book value). It is
determined by dividing the current price of the stock by common stockholder
equity per share. In evaluating stocks, comparing P/B ratios often works well in
situations where price/earnings ratios do not, because the P/B ratio is stable
over time and is always a positive number. P/B ratios are best used for
comparisons within an industry rather than between industries, as certain
industries will usually contain stocks that have all high or all low P/B ratios.
For mutual funds the P/B ratio is the weighted average of all the stocks' P/B
ratios in the portfolio.
PRICE/EARNINGS (P/E) RATIO--The ratio of a company's stock price to its earnings
per share over the past year. For mutual funds the P/E ratio is the weighted
average of all the stocks' P/E ratios in the mutual fund's portfolio. The P/E is
an indicator of market expectations about a company's prospects. Typically, the
higher the P/E, the greater the expectations for a company's future growth.
Because earnings are volatile and sometimes "negative," however, the P/E has its
limitations and may fail as a measure for a significant number of stocks at any
given time.
RETURN ON EQUITY--The average annual rate of return generated by the companies a
fund holds during the past five years for each dollar of shareholders' equity
(net income divided by shareholders' equity).
STOCK--A share of ownership, or equity, in a corporation.
28
<PAGE>
GLOSSARY (continued)
TOTAL RETURN--The sum of dividends, plus capital gains (or losses).
TURNOVER RATE--An indication of a fund's trading activity. Funds with higher
turnover rates typically incur higher transaction costs and are more likely to
distribute capital gains, which are taxable to investors.
YIELD--The income generated by an investment, expressed as a percentage of its
price.
29
<PAGE>
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1999
Number Value
of Shares (000s)
----------- -----------
- --------------------------------------------------------------------------------
INVESTMENT FUNDS -- 98.6%
- --------------------------------------------------------------------------------
Schwab International Index Fund,
Select Shares 3,374,290 $ 60,602
Schwab S&P 500 Fund,
Select Shares 4,208,335 89,343
Schwab Small-Cap Index Fund,
Select Shares 2,875,411 50,147
--------
Total Investment Funds
(Cost $178,408) 200,092
--------
Par
(000s)
-----------
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 0.1%
- --------------------------------------------------------------------------------
U.S. Treasury Bill (a)(b)
4.570%, 12/16/99 $ 220 219
--------
Total U.S. Treasury Obligations
(Cost $219) 219
--------
Number Value
of Shares (000s)
--------- ----------
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.1%
- --------------------------------------------------------------------------------
Cayman Time Deposit,
4.750%*, 11/01/99 59,130 $ 59
First National Bank of Chicago
Time Deposit,
4.750%*, 11/01/99 2,081,884 2,082
--------
Total Short-Term Investments
(Cost $2,141) 2,141
--------
Total Investments -- 99.8%
(Cost $180,768) 202,452
--------
OTHER ASSETS AND LIABILITIES, NET -- 0.2%
Other assets 1,007
Liabilities (575)
--------
432
--------
TOTAL NET ASSETS -- 100.0% $202,884
========
SEE ACCOMPANYING NOTES TO SCHEDULES OF INVESTMENTS AND NOTES TO
FINANCIAL STATEMENTS.
30
<PAGE>
SCHWAB MARKETTRACK GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1999
Number Value
of Shares (000s)
--------- -----------
- --------------------------------------------------------------------------------
COMMON STOCK -- 26.3%
- --------------------------------------------------------------------------------
AEROSPACE / DEFENSE -- 0.3%
- --------------------------------------------------------------------------------
Boeing Co. 9,678 $ 446
General Dynamics Corp. 1,600 89
Lockheed Martin Corp. 4,600 92
Northrop Grumman Corp. 900 49
Raytheon Co., Class B 3,400 99
Rockwell International Corp. 2,100 102
Textron, Inc. 1,700 131
United Technologies Corp. 4,800 290
------
1,298
------
- --------------------------------------------------------------------------------
AIR TRANSPORTATION -- 0.1%
- --------------------------------------------------------------------------------
AMR Corp.+ 2,400 152
Delta Air Lines, Inc. 2,200 120
FDX Corp.+ 2,720 117
Southwest Airlines Co. 4,387 74
U.S. Airways Group, Inc.+ 1,000 28
------
491
------
- --------------------------------------------------------------------------------
ALCOHOLIC BEVERAGES -- 0.1%
- --------------------------------------------------------------------------------
Adolph Coors Co., Class B 200 11
Anheuser-Busch Companies, Inc. 4,700 338
Brown-Forman Corp., Class B 700 47
Seagram Co. Ltd. 3,500 173
------
569
------
- --------------------------------------------------------------------------------
APPAREL -- 0.1%
- --------------------------------------------------------------------------------
Liz Claiborne, Inc. 400 16
Nike, Inc., Class B 2,600 147
Reebok International Ltd.+ 400 4
Russell Corp. 200 3
VF Corp. 1,200 36
------
206
------
- --------------------------------------------------------------------------------
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES -- 0.4%
- --------------------------------------------------------------------------------
B.F. Goodrich Co. 800 19
Cooper Tire & Rubber Co. 500 8
Cummins Engine Co., Inc. 400 20
Dana Corp. 1,378 41
Danaher Corp. 1,400 68
Delphi Automotive Systems Corp. 5,743 94
Eaton Corp. 1,100 83
Fleetwood Enterprises, Inc. 200 4
Number Value
of Shares (000s)
--------- -----------
Ford Motor Co. 12,500 $ 686
General Motors Corp. 6,500 457
Genuine Parts Co. 1,500 39
Goodyear Tire & Rubber Co. 1,600 66
Navistar International Corp.+ 700 29
TRW, Inc. 1,300 56
------
1,670
------
- --------------------------------------------------------------------------------
BANKS -- 1.8%
- --------------------------------------------------------------------------------
AmSouth Bancorp. 3,900 100
Bank of America Corp. 17,648 1,136
Bank of New York Co., Inc. 7,600 318
Bank One Corp. 12,075 454
BB&T Corp. 2,800 102
Chase Manhattan Corp. 8,880 776
Comerica, Inc. 2,100 125
Fifth Third Bancorp. 2,925 216
First Union Corp. 9,884 422
Firstar Corp. 9,618 283
Fleet Boston Corp. 9,274 405
Golden West Financial Corp. 900 101
Huntington Bancshares, Inc. 2,057 61
J.P. Morgan & Co., Inc. 2,000 262
KeyCorp, Inc. 4,400 123
Mellon Financial Corp. 5,200 192
National City Corp. 6,600 195
Northern Trust Corp. 1,200 116
PNC Bank Corp. 3,100 185
Regions Financial Corp. 2,100 63
Republic New York Corp. 1,600 101
SouthTrust Corp. 1,700 68
State Street Corp. 1,700 129
Summit Bancorp. 1,800 62
SunTrust Banks, Inc. 3,100 227
Synovus Financial Corp. 2,250 48
U.S. Bancorp. 7,650 284
Union Planters Corp. 1,300 58
Wachovia Corp. 2,100 181
Washington Mutual, Inc. 5,655 203
Wells Fargo & Co. 16,550 792
------
7,788
------
- --------------------------------------------------------------------------------
BUSINESS MACHINES & SOFTWARE -- 3.4%
3Com Corp.+ 3,300 96
Adaptec, Inc.+ 1,000 45
31
<PAGE>
SCHWAB MARKETTRACK GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 1999
Number Value
of Shares (000s)
--------- -------
Adobe Systems, Inc. 1,000 $ 70
Apple Computer, Inc.+ 1,000 80
Autodesk, Inc. 200 4
BMC Software, Inc.+ 2,100 135
Cabletron Systems, Inc.+ 1,300 22
Ceridian Corp.+ 1,056 23
Cisco Systems, Inc.+ 32,250 2,387
Compaq Computer Corp. 17,364 330
Computer Associates
International, Inc. 5,525 312
Compuware Corp.+ 3,600 100
Comverse Technology, Inc.+ 700 79
Dell Computer Corp.+ 26,200 1,051
Gateway, Inc.+ 3,000 198
Hewlett-Packard Co. 10,400 770
Honeywell, Inc. 1,300 137
International Business
Machines Corp. 18,200 1,790
Lexmark International
Group, Inc., Class A+ 1,300 101
Microsoft Corp.+ 51,000 4,721
Network Appliance, Inc.+ 700 52
Novell, Inc.+ 3,200 64
Oracle Systems Corp.+ 14,212 676
Parametric Technology Corp.+ 2,200 42
PeopleSoft, Inc.+ 2,300 35
Pitney Bowes, Inc. 2,700 123
Seagate Technology, Inc.+ 2,168 64
Silicon Graphics, Inc.+ 1,476 11
Sun Microsystems, Inc.+ 8,000 847
Unisys Corp.+ 2,600 63
Xerox Corp. 6,600 185
-------
14,613
-------
- --------------------------------------------------------------------------------
BUSINESS SERVICES -- 0.8%
- --------------------------------------------------------------------------------
Allied Waste Industries, Inc.+ 1,900 20
America Online, Inc.+ 10,800 1,401
Automatic Data Processing, Inc. 6,000 289
Cendant Corp.+ 7,232 119
Computer Sciences Corp.+ 2,080 143
Deluxe Corp. 700 20
Ecolab, Inc. 1,400 47
Equifax, Inc. 1,200 32
First Data Corp. 4,200 192
Number Value
of Shares (000s)
-------- ---------
H&R Block, Inc. 1,000 $ 43
Interpublic Group of
Companies, Inc. 2,700 110
Laidlaw, Inc. 3,000 18
National Service Industries, Inc. 500 16
Omnicom Group, Inc. 1,600 141
Paychex, Inc. 2,400 95
R.R. Donnelley & Sons Co. 1,200 29
Tyco International Ltd. 15,852 633
Waste Management, Inc. 5,617 103
------
3,451
------
- --------------------------------------------------------------------------------
CHEMICAL -- 0.5%
- --------------------------------------------------------------------------------
Air Products & Chemicals, Inc. 2,800 77
Dow Chemical Co. 2,200 260
E. I. du Pont de Nemours & Co. 11,492 741
Eastman Chemical Co. 800 31
Great Lakes Chemical Corp. 400 14
Hercules, Inc. 900 22
Minnesota Mining &
Manufacturing Co. 4,300 409
PPG Industries, Inc. 1,800 109
Praxair, Inc. 1,400 65
Rohm & Haas Co. 3,105 119
Sigma-Aldrich Corp. 900 26
Union Carbide Corp. 1,100 67
W.R. Grace & Co.+ 900 13
-------
1,953
-------
- --------------------------------------------------------------------------------
CONSTRUCTION -- 0.1%
- --------------------------------------------------------------------------------
Armstrong World Industries, Inc. 500 19
Centex Corp. 600 16
Crane Co. 225 5
Fluor Corp. 700 28
Kaufman & Broad Home Corp. 200 4
Masco Corp. 3,400 104
Owens Corning 400 8
Pulte Corp. 200 4
Sherwin-Williams Co. 1,400 31
The Stanley Works 800 22
Vulcan Materials Co. 1,000 41
-------
282
-------
32
<PAGE>
Number Value
of Shares (000s)
--------- ---------
- --------------------------------------------------------------------------------
CONSUMER - DURABLE -- 0.1%
- --------------------------------------------------------------------------------
Black & Decker Corp. 600 $ 26
Fortune Brands, Inc. 1,400 50
Leggett & Platt, Inc. 2,000 44
Maytag Corp. 900 36
Newell Rubbermaid, Inc. 2,245 78
Whirlpool Corp. 800 56
-----
290
-----
- --------------------------------------------------------------------------------
CONSUMER - NONDURABLE -- 0.2%
- --------------------------------------------------------------------------------
American Greetings Corp., Class A 500 13
Darden Restaurants, Inc. 1,200 23
Hasbro, Inc. 1,650 34
Jostens, Inc. 200 4
Mattel, Inc. 2,650 35
McDonald's Corp. 13,200 545
Tricon Global Restaurants,
Inc.+ 1,260 51
Wendy's International, Inc. 1,000 24
-----
729
-----
- --------------------------------------------------------------------------------
CONTAINERS -- 0.0%
- --------------------------------------------------------------------------------
Ball Corp. 200 8
Bemis Co., Inc. 500 17
Crown Cork & Seal Co., Inc. 1,000 24
Owens-Illinois, Inc.+ 1,100 26
Sealed Air Corp.+ 782 43
-----
118
-----
- --------------------------------------------------------------------------------
ELECTRONICS -- 2.1%
- --------------------------------------------------------------------------------
ADC Telecommunications, Inc.+ 1,300 62
Advanced Micro Devices, Inc.+ 1,220 24
Analog Devices, Inc.+ 1,700 90
Andrew Corp.+ 850 11
Applied Materials, Inc.+ 3,300 296
Electronic Data Systems Corp. 4,900 287
EMC Corp.+ 10,693 781
Emerson Electric Co. 4,500 270
General Instrument Corp.+ 1,200 65
Harris Corp. 500 11
Intel Corp. 33,400 2,586
KLA-Tencor Corp.+ 600 48
LSI Logic Corp.+ 1,100 59
Lucent Technologies, Inc. 29,892 1,921
Micron Technology, Inc.+ 1,800 128
Number Value
of Shares (000s)
--------- ---------
Motorola, Inc. 6,000 $ 585
National Semiconductor Corp.+ 1,400 42
Niagara Mohawk Holdings, Inc.+ 1,400 22
PE Corp-PE Biosystems Group 1,000 65
PerkinElmer, Inc. 300 12
QUALCOMM, Inc.+ 1,600 356
Scientific-Atlanta, Inc. 400 23
Solectron Corp.+ 2,400 181
Tektronix, Inc. 450 15
Tellabs, Inc.+ 3,800 240
Texas Instruments, Inc. 7,400 664
Thermo Electron Corp.+ 1,300 18
Thomas & Betts Corp. 481 22
------
8,884
------
- --------------------------------------------------------------------------------
ENERGY - RAW MATERIALS -- 0.2%
- --------------------------------------------------------------------------------
Anadarko Petroleum Corp. 1,200 37
Apache Corp. 600 23
Baker Hughes, Inc. 3,560 99
Burlington Resources, Inc. 1,505 52
Constellation Energy Group 1,300 40
Halliburton Co. 3,958 149
Helmerich & Payne, Inc. 400 10
McDermott International, Inc. 300 5
Occidental Petroleum Corp. 3,100 71
ONEOK, Inc. 200 6
Rowan Companies, Inc.+ 500 8
Schlumberger Ltd. 5,100 309
Sempra Energy 2,403 49
Sunoco, Inc. 400 10
Union Pacific Resources Group,
Inc. 2,239 32
-----
900
-----
- --------------------------------------------------------------------------------
FOOD & AGRICULTURE -- 1.1%
- --------------------------------------------------------------------------------
Archer-Daniels Midland Co. 5,925 73
Bestfoods, Inc. 3,000 176
Campbell Soup Co. 4,600 207
Coca-Cola Co. 24,800 1,463
Coca-Cola Enterprises, Inc. 4,000 102
ConAgra, Inc. 4,500 117
General Mills, Inc. 1,963 171
H.J. Heinz Co. 3,700 177
Hershey Foods Corp. 1,500 76
Kellogg Co. 3,900 155
Monsanto Co. 6,500 250
33
<PAGE>
SCHWAB MARKETTRACK GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 1999
Number Value
of Shares (000s)
--------- ---------
PepsiCo, Inc. 14,800 $ 513
Quaker Oats Co. 1,400 98
Ralston-Ralston Purina Group 3,600 113
Sara Lee Corp. 9,600 260
SYSCO Corp. 3,000 115
Unilever NV 5,714 381
Wm. Wrigley Jr. Co. 1,400 112
------
4,559
------
- --------------------------------------------------------------------------------
GOLD -- 0.0%
- --------------------------------------------------------------------------------
Barrick Gold Corp. 3,500 64
Homestake Mining Co. 1,300 11
Newmont Mining Corp. 1,401 31
Placer Dome, Inc. 2,100 25
------
131
------
- --------------------------------------------------------------------------------
HEALTHCARE / DRUGS & MEDICINE -- 2.9%
- --------------------------------------------------------------------------------
Abbott Laboratories 15,400 622
Allergan, Inc. 300 32
ALZA Corp.+ 800 34
American Home Products Corp. 13,000 679
Amgen, Inc.+ 5,400 431
Bausch & Lomb, Inc. 300 16
Baxter International, Inc. 2,800 182
Becton, Dickinson & Co. 2,600 66
Biomet, Inc. 800 24
Boston Scientific Corp.+ 3,474 70
Bristol-Myers Squibb Co. 19,800 1,521
C.R. Bard, Inc. 400 22
Cardinal Health, Inc. 2,500 108
Columbia / HCA Healthcare Corp. 6,300 152
Eli Lilly & Co. 11,100 765
Guidant Corp. 3,000 148
HealthSouth Corp.+ 3,452 20
Humana, Inc.+ 1,400 10
IMS Health, Inc. 2,800 81
Johnson & Johnson 13,500 1,414
Mallinckrodt, Inc. 400 14
Manor Care, Inc.+ 1,100 17
McKesson HBOC, Inc. 2,654 53
Medtronic, Inc. 11,600 402
Merck & Co., Inc. 24,200 1,925
Pfizer, Inc. 39,000 1,541
Pharmacia & Upjohn, Inc. 4,900 264
Schering-Plough Corp. 14,800 733
Service Corp. International 2,200 21
Number Value
of Shares (000s)
--------- ---------
Shared Medical Systems Corp. 300 $ 11
St. Jude Medical, Inc.+ 725 20
Tenet Healthcare Corp.+ 2,800 54
United Healthcare Corp. 1,700 88
Warner-Lambert Co. 8,700 694
Watson Pharmaceuticals, Inc.+ 1,000 32
Wellpoint Health Networks, Inc.+ 700 41
-------
12,307
-------
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.6%
- --------------------------------------------------------------------------------
Alberto-Culver Co., Class B 200 5
Avon Products, Inc. 2,800 90
Clorox Co. 2,400 98
Colgate-Palmolive Co. 6,000 363
Gillette Co. 11,600 420
International Flavors &
Fragrances, Inc. 1,100 42
Procter & Gamble Co. 13,300 1,395
Tupperware Corp. 400 8
-------
2,421
-------
- --------------------------------------------------------------------------------
INSURANCE -- 0.9%
- --------------------------------------------------------------------------------
Aetna, Inc. 1,424 72
AFLAC, Inc. 2,600 133
Allstate Corp. 9,000 259
American General Corp. 2,510 186
American International Group,
Inc. 15,997 1,647
Aon Corp. 2,625 93
Chubb Corp. 2,100 115
CIGNA Corp. 2,400 179
Cincinnati Financial Corp. 1,800 64
Conseco, Inc. 2,520 61
Hartford Financial Services
Group, Inc. 3,000 155
Jefferson-Pilot Corp. 1,575 118
Lincoln National Corp. 2,200 101
Marsh & McLennan
Companies, Inc. 3,000 237
MBIA, Inc. 900 51
MGIC Investment Corp. 1,200 72
Progressive Corp. 900 83
SAFECO Corp. 1,100 30
St. Paul Companies, Inc. 2,450 78
Torchmark Corp. 1,100 34
UnumProvident Corp. 2,349 77
-------
3,845
-------
34
<PAGE>
Number Value
of Shares (000s)
--------- --------
- --------------------------------------------------------------------------------
MEDIA -- 0.8%
- --------------------------------------------------------------------------------
CBS Corp.+ 6,800 $ 332
Clear Channel
Communications, Inc.+ 3,000 241
Comcast Corp., Class A 7,400 312
Dow Jones & Co., Inc. 1,000 62
Gannett Co., Inc. 2,900 224
Harcourt General, Inc. 800 31
King World Productions, Inc.+ 800 31
Knight-Ridder, Inc. 900 57
McGraw-Hill Companies, Inc. 2,000 119
Mediaone Group+ 5,800 412
Meredith Corp. 200 7
New York Times Co., Class A 2,000 81
Time Warner, Inc. 12,000 836
Times Mirror Co., Series A 1,000 72
Tribune Co. 2,600 156
Viacom, Inc., Class B+ 6,600 295
-------
3,268
-------
- --------------------------------------------------------------------------------
MISCELLANEOUS FINANCE -- 1.5%
- --------------------------------------------------------------------------------
American Express Co. 4,900 755
Associates First Capital Corp. 6,942 253
Bear Stearns Companies, Inc. 840 36
Capital One Financial Corp. 2,100 111
Charles Schwab Corp. 7,450 290
Citigroup, Inc. 34,111 1,846
Countrywide Credit Industries,
Inc. 800 27
Dun & Bradstreet Corp. 1,500 44
Fannie Mae 10,700 757
Freddie Mac 6,700 362
Franklin Resources, Inc. 2,500 88
Household International, Inc. 5,759 257
Lehman Brothers Holdings, Inc. 1,100 81
MBNA Corp. 7,200 199
Merrill Lynch & Co., Inc. 3,800 298
Morgan Stanley Dean Witter
Discover & Co. 5,950 656
Paine Webber Group, Inc. 1,400 57
Providian Financial Corp. 1,550 169
SLM Holding Corp. 1,700 83
T. Rowe Price Associates, Inc. 1,200 43
-------
6,412
-------
Number Value
of Shares (000s)
--------- ---------
- --------------------------------------------------------------------------------
NON-FERROUS METALS -- 0.1%
- --------------------------------------------------------------------------------
Alcan Aluminum, Ltd. 2,000 $ 66
Alcoa, Inc. 3,600 219
Asarco, Inc. 200 6
Engelhard Corp. 1,300 23
Freeport-McMoRan Copper &
Gold, Inc., Class B 1,700 28
Inco Ltd. 1,400 28
Phelps Dodge Corp. 810 46
Reynolds Metals Co. 800 48
-------
464
-------
- --------------------------------------------------------------------------------
OIL - DOMESTIC -- 0.2%
- --------------------------------------------------------------------------------
Amerada Hess Corp. 1,000 57
Ashland, Inc. 800 26
Atlantic Richfield Co. 3,300 308
Conoco Inc., Class B 6,300 171
Kerr-McGee Corp. 869 47
Phillips Petroleum Co. 2,400 112
Tosco Corp. 1,500 38
Unocal Corp. 2,200 76
USX-Marathon Group 2,600 76
-------
911
-------
- --------------------------------------------------------------------------------
OIL - INTERNATIONAL -- 1.1%
- --------------------------------------------------------------------------------
Chevron Corp. 6,800 621
Exxon Corp. 24,700 1,829
Mobil Corp. 7,900 762
Royal Dutch Petroleum Co. -
Sponsored ADR 21,500 1,289
Texaco, Inc. 5,561 341
-------
4,842
-------
- --------------------------------------------------------------------------------
OPTICAL & PHOTO -- 0.1%
- --------------------------------------------------------------------------------
Eastman Kodak Co. 3,300 227
Polaroid Corp. 500 11
-------
238
-------
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.2%
- --------------------------------------------------------------------------------
Boise Cascade Corp. 300 11
Champion International Corp. 700 40
Fort James Corp. 2,000 53
Georgia-Pacific Group 2,400 95
International Paper Co. 3,839 202
35
<PAGE>
SCHWAB MARKETTRACK GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 1999
Number Value
of Shares (000s)
--------- ---------
Kimberly-Clark Corp. 5,360 $ 338
Louisiana-Pacific Corp. 800 10
Mead Corp. 1,000 36
Potlatch Corp. 100 4
Temple Inland, Inc. 600 35
Westvaco Corp. 700 21
Weyerhaeuser Co. 1,700 101
Willamette Industries, Inc. 900 37
------
983
------
- --------------------------------------------------------------------------------
PRODUCER GOODS & MANUFACTURING -- 1.4%
- --------------------------------------------------------------------------------
AlliedSignal, Inc. 5,400 307
Avery Dennison Corp. 1,200 75
Briggs & Stratton Corp. 100 6
Case Corp. 800 42
Caterpillar, Inc. 3,500 193
Cooper Industries, Inc. 1,300 56
Corning, Inc. 2,100 165
Deere & Co. 2,600 94
Dover Corp. 1,800 77
FMC Corp.+ 400 16
Foster Wheeler Corp. 300 3
General Electric Co. 33,100 4,487
W.W. Grainger, Inc. 1,600 68
Illinois Tool Works, Inc. 2,500 183
Ingersoll-Rand Co. 1,450 76
ITT Industries, Inc. 900 31
Johnson Controls, Inc. 600 36
Milacron, Inc. 100 2
Millipore Corp. 200 6
NACCO Industries, Inc., Class A 100 5
Pall Corp. 1,000 22
Parker-Hannifin Corp. 750 34
Snap-On, Inc. 300 9
Springs Industries, Inc. 300 12
Tenneco, Inc.+ 1,400 22
The Timken Co. 600 11
-------
6,038
-------
- --------------------------------------------------------------------------------
RAILROAD & SHIPPING -- 0.1%
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe
Corp. 5,100 163
CSX Corp. 2,200 90
Number Value
of Shares (000s)
--------- ---------
Kansas City Southern
Industries, Inc. 1,100 $ 52
Norfolk Southern Corp. 3,600 88
Union Pacific Corp. 2,500 139
-----
532
-----
- --------------------------------------------------------------------------------
RETAIL -- 1.6%
- --------------------------------------------------------------------------------
Albertson's, Inc. 3,838 139
AutoZone, Inc.+ 1,300 35
Bed, Bath & Beyond, Inc.+ 1,400 47
Best Buy Co., Inc.+ 2,100 117
Circuit City Stores, Inc. 1,600 68
Consolidated Stores Corp.+ 1,100 20
Costco Wholesale Corp.+ 2,300 185
CVS Corp. 3,600 156
Dayton Hudson Corp. 4,400 284
Dillards, Inc., Class A 800 15
Dollar General Corp. 2,343 62
Federated Department
Stores, Inc.+ 1,800 77
Gap, Inc. 8,100 301
Great Atlantic & Pacific
Tea Co., Inc. 200 6
Home Depot, Inc. 14,900 1,125
IKON Office Solutions 1,000 7
J.C. Penney Co., Inc. 2,500 63
Kmart Corp.+ 4,700 47
Kohl's Corp.+ 1,600 120
Kroger Co.+ 7,800 162
Limited, Inc. 2,397 99
Longs Drug Stores, Inc. 200 5
Lowe's Companies, Inc. 3,600 198
May Department Stores Co. 3,600 125
Nordstrom, Inc. 1,600 40
Office Depot, Inc.+ 3,700 46
Pep Boys-Manny, Moe, & Jack 300 4
Rite Aid Corp. 2,600 23
Safeway, Inc.+ 4,900 173
Sears, Roebuck & Co. 3,700 104
Staples, Inc.+ 4,350 97
SUPERVALU, Inc. 600 13
Tandy Corp. 1,600 101
TJX Cos., Inc. 3,000 81
36
<PAGE>
Number Value
of Shares (000s)
--------- --------
Toys 'R' Us, Inc.+ 2,600 $ 37
Wal-Mart Stores, Inc. 45,400 2,574
Walgreen Co. 9,400 237
Winn-Dixie Stores, Inc. 1,200 32
------
7,025
------
- --------------------------------------------------------------------------------
STEEL -- 0.0%
- --------------------------------------------------------------------------------
Allegheny Teledyne, Inc. 1,470 22
Bethlehem Steel Corp.+ 800 6
Nucor Corp. 600 31
USX-U.S. Steel Group, Inc. 500 13
Worthington Industries, Inc. 900 15
------
87
------
- --------------------------------------------------------------------------------
TELEPHONE -- 2.4%
- --------------------------------------------------------------------------------
Alltel Corp. 2,800 233
AT&T Corp. 32,049 1,498
Bell Atlantic Corp. 16,146 1,048
BellSouth Corp. 20,000 900
CenturyTel, Inc. 1,350 55
Global Crossing Ltd.+ 7,570 262
GTE Corp. 9,600 720
MCI WorldCom, Inc.+ 18,180 1,560
Nextel Communications, Inc.,
Class A+ 2,600 224
Nortel Networks Corp. 13,360 828
SBC Communications, Inc. 34,936 1,780
Sprint Corp. (FON Group) 8,600 639
Sprint Corp. (PCS Group)+ 4,250 352
US WEST, Inc. 4,758 291
-------
10,390
-------
- --------------------------------------------------------------------------------
TOBACCO -- 0.2%
- --------------------------------------------------------------------------------
Loew's Corp. 1,300 92
Nabisco Group Holdings Corp. 3,200 41
Philip Morris Companies, Inc. 24,300 612
UST, Inc. 1,600 44
-------
789
-------
- --------------------------------------------------------------------------------
TRAVEL & RECREATION -- 0.2%
- --------------------------------------------------------------------------------
Brunswick Corp. 900 20
Carnival Corp. 6,100 271
Harrah's Entertainment, Inc.+ 900 26
Hilton Hotels Corp. 2,200 20
Number Value
of Shares (000s)
--------- -------
Marriott International, Inc.,
Class A 2,600 $ 88
Mirage Resorts, Inc.+ 1,500 22
Walt Disney Co.+ 20,919 552
-------
999
-------
- --------------------------------------------------------------------------------
TRUCKING & FREIGHT -- 0.0%
- --------------------------------------------------------------------------------
PACCAR, Inc. 800 38
Ryder Systems, Inc. 400 9
-------
47
-------
- --------------------------------------------------------------------------------
UTILITIES - ELECTRIC & GAS -- 0.7%
- --------------------------------------------------------------------------------
AES Corp.+ 1,800 102
Ameren Corp. 1,500 57
American Electric Power Co., Inc.1,900 66
Carolina Power & Light Co. 1,200 41
Central & South West Corp. 1,800 40
Cinergy Corp. 1,300 37
CMS Energy Corp. 1,000 37
Coastal Corp. 2,200 93
Columbia Energy Group 1,200 78
Consolidated Edison, Inc. 2,100 80
Consolidated Natural Gas Co. 1,000 64
Dominion Resources, Inc. 1,600 77
DTE Energy Co. 1,400 46
Duke Energy Corp. 3,826 216
Eastern Enterprises 100 5
Edison International 3,700 110
El Paso Energy Corp. 2,300 94
Enron Corp. 6,800 272
Entergy Corp. 2,100 63
First Energy Corp. 2,100 55
Florida Progress Corp. 1,000 46
FPL Group, Inc. 1,900 96
GPU, Inc. 900 31
New Century Energies, Inc. 1,000 33
NICOR, Inc. 200 8
Northern States Power Co. 1,600 34
PacifiCorp. 2,700 56
PECO Energy Co. 1,900 73
Peoples Energy Corp. 100 4
PG&E Corp. 4,200 96
Pinnacle West Capital Corp. 800 30
PP&L Resources, Inc. 1,400 38
37
<PAGE>
SCHWAB MARKETTRACK GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (concluded)
October 31, 1999
Number Value
of Shares (000s)
--------- -----------
Public Service Enterprise
Group, Inc. 2,000 $ 79
Reliant Energy, Inc. 2,549 69
Southern Co. 6,600 175
Texas Utilities Co. 2,767 107
Unicom Corp. 1,900 73
Williams Cos., Inc. 4,200 158
---------
2,839
---------
Total Common Stock
(Cost $61,128) 112,369
---------
- -------------------------------------------------------------------------------
Investment Funds -- 68.8%
Schwab International
Index Fund,
Select Shares 4,745,564 85,230
Schwab S&P 500 Fund,
Select Shares 2,893,868 61,437
Schwab Small-Cap Index
Fund,
Select Shares 4,898,022 85,422
Schwab Total Bond Market
Index Fund 6,461,129 62,285
---------
Total Investment Funds
(Cost $259,385) 294,374
---------
Number Value
of Shares (000s)
--------- -----------
- ------------------------------------------------------------------------------
Short-Term Investments -- 4.8%
Morgan Guaranty London
Time Deposit,
4.750%*, 11/01/99 5,379,801 $ 5,380
Schwab Value Advantage Money
Fund, Investor Shares
5.256%* 15,287,642 15,288
---------
Total Short-Term Investments
(Cost $20,668) 20,668
---------
Total Investments -- 99.9%
(Cost $341,181) 427,411
---------
OTHER ASSETS AND LIABILITIES, NET -- 0.1%
Other assets 811
Liabilities (563)
---------
248
---------
TOTAL Net Assets -- 100.0% $427,659
=========
See accompanying Notes to Schedules of Investments and Notes to
Financial Statements.
38
<PAGE>
SCHWAB MARKETTRACK BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1999
Number Value
of Shares (000s)
--------- -----------
- -------------------------------------------------------------------------------
Common Stock -- 18.7%
- -------------------------------------------------------------------------------
AEROSPACE / DEFENSE -- 0.2%
Boeing Co. 6,684 $ 308
General Dynamics Corp. 1,000 55
Lockheed Martin Corp. 2,600 52
Northrop Grumman Corp. 500 27
Raytheon Co., Class B 2,300 67
Rockwell International Corp. 1,400 68
Textron, Inc. 1,100 85
United Technologies Corp. 3,000 181
---------
843
---------
- -----------------------------------------------------------------------------
AIR TRANSPORTATION -- 0.1%
AMR Corp.+ 1,600 102
Delta Air Lines, Inc. 1,400 76
FDX Corp.+ 2,560 110
Southwest Airlines Co. 3,525 59
U.S. Airways Group, Inc.+ 700 20
---------
367
---------
- -----------------------------------------------------------------------------
ALCOHOLIC BEVERAGES -- 0.1%
Adolph Coors Co., Class B 100 6
Anheuser-Busch Companies, Inc. 3,400 244
Brown-Forman Corp., Class B 500 34
Seagram Co. Ltd. 2,800 138
---------
422
---------
- -----------------------------------------------------------------------------
APPAREL -- 0.0%
Liz Claiborne, Inc. 200 8
Nike, Inc., Class B 1,700 96
Reebok International Ltd.+ 200 2
Russell Corp. 100 2
VF Corp. 600 18
---------
126
---------
- ------------------------------------------------------------------------------
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES -- 0.3%
B.F. Goodrich Co. 200 5
Cooper Tire & Rubber Co. 200 3
Cummins Engine Co., Inc. 300 15
Dana Corp. 885 26
Danaher Corp. 900 43
Delphi Automotive Systems Corp. 3,884 64
Eaton Corp. 600 45
Fleetwood Enterprises, Inc. 100 2
Ford Motor Co. 8,200 450
General Motors Corp. 4,700 330
Number Value
of Shares (000s)
--------- -----------
Genuine Parts Co. 1,150 $ 30
Goodyear Tire & Rubber Co. 1,300 54
Navistar International Corp.+ 200 8
TRW, Inc. 900 39
---------
1,114
---------
- ------------------------------------------------------------------------------
BANKS -- 1.3%
AmSouth Bancorp. 2,600 67
Bank of America Corp. 11,980 771
Bank of New York Co., Inc. 5,200 218
Bank One Corp. 7,857 295
BB&T Corp. 2,000 73
Chase Manhattan Corp. 6,064 530
Comerica, Inc. 1,000 59
Fifth Third Bancorp. 1,725 127
First Union Corp. 6,836 292
Firstar Corp. 6,381 187
Fleet Boston Corp. 6,754 295
Golden West Financial Corp. 500 56
Huntington Bancshares, Inc. 1,452 43
J.P. Morgan & Co., Inc. 1,400 183
KeyCorp, Inc. 3,200 89
Mellon Financial Corp. 3,400 126
National City Corp. 4,400 130
Northern Trust Corp. 800 77
PNC Bank Corp. 2,100 125
Regions Financial Corp. 1,400 42
Republic New York Corp. 1,000 63
SouthTrust Corp. 1,100 44
State Street Corp. 1,100 84
Summit Bancorp. 1,200 42
SunTrust Banks, Inc. 2,200 161
Synovus Financial Corp. 1,200 26
U.S. Bancorp. 5,280 196
Union Planters Corp. 900 40
Wachovia Corp. 1,400 121
Washington Mutual, Inc. 3,816 137
Wells Fargo & Co. 11,120 532
---------
5,231
---------
- ------------------------------------------------------------------------------
BUSINESS MACHINES & SOFTWARE -- 2.4%
3Com Corp.+ 2,600 75
Adaptec, Inc.+ 700 31
Adobe Systems, Inc. 800 56
Apple Computer, Inc.+ 500 40
Autodesk, Inc. 100 2
BMC Software, Inc.+ 1,400 90
39
<PAGE>
SCHWAB MARKETTRACK BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 1999
Number Value
of Shares (000s)
--------- -----------
Cabletron Systems, Inc.+ 700 $ 12
Ceridian Corp.+ 1,428 31
Cisco Systems, Inc.+ 21,150 1,565
Compaq Computer Corp. 11,664 222
Computer Associates
International, Inc. 3,725 210
Compuware Corp.+ 2,400 67
Comverse Technology, Inc.+ 500 57
Dell Computer Corp.+ 17,800 714
Gateway, Inc.+ 2,000 132
Hewlett-Packard Co. 7,000 518
Honeywell, Inc. 800 84
International Business
Machines Corp. 12,300 1,210
Lexmark International Group, Inc.,
Class A+ 900 70
Microsoft Corp.+ 34,000 3,147
Network Appliance, Inc.+ 500 37
Novell, Inc.+ 2,600 52
Oracle Systems Corp.+ 9,750 464
Parametric Technology Corp.+ 1,400 27
PeopleSoft, Inc.+ 1,500 22
Pitney Bowes, Inc. 1,800 82
Seagate Technology, Inc.+ 1,284 38
Silicon Graphics, Inc.+ 1,054 8
Sun Microsystems, Inc.+ 5,600 593
Unisys Corp.+ 1,900 46
Xerox Corp. 4,600 129
---------
9,831
---------
- -------------------------------------------------------------------------------
BUSINESS SERVICES -- 0.6%
Allied Waste Industries, Inc.+ 1,300 14
America Online, Inc.+ 7,300 947
Automatic Data Processing, Inc. 4,000 193
Cendant Corp.+ 4,915 81
Computer Sciences Corp.+ 1,190 82
Deluxe Corp. 500 14
Ecolab, Inc. 1,000 34
Equifax, Inc. 700 19
First Data Corp. 2,600 119
H&R Block, Inc. 600 26
Interpublic Group of
Companies, Inc. 1,700 69
Laidlaw, Inc. 2,000 12
National Service Industries,
Inc. 300 10
Omnicom Group, Inc. 1,000 88
Number Value
of Shares (000s)
--------- -----------
Paychex, Inc. 1,650 $ 65
R.R. Donnelley & Sons Co. 800 19
Tyco International Ltd. 10,700 427
Waste Management, Inc. 3,812 70
---------
2,289
---------
- -------------------------------------------------------------------------------
CHEMICAL -- 0.3%
Air Products & Chemicals, Inc. 2,200 60
Dow Chemical Co. 1,500 177
E. I. du Pont de Nemours & Co. 7,784 502
Eastman Chemical Co. 600 23
Great Lakes Chemical Corp. 100 4
Hercules, Inc. 700 17
Minnesota Mining &
Manufacturing Co. 2,900 276
PPG Industries, Inc. 1,200 73
Praxair, Inc. 1,000 47
Rohm & Haas Co. 1,721 66
Sigma-Aldrich Corp. 400 11
Union Carbide Corp. 800 49
W.R. Grace & Co.+ 600 9
---------
1,314
---------
- -------------------------------------------------------------------------------
CONSTRUCTION -- 0.0%
Armstrong World Industries, Inc. 400 15
Centex Corp. 400 11
Crane Co. 225 5
Fluor Corp. 200 8
Kaufman & Broad Home Corp. 100 2
Masco Corp. 2,200 67
Owens Corning 300 6
Pulte Corp. 200 4
Sherwin-Williams Co. 1,100 25
The Stanley Works 400 11
Vulcan Materials Co. 700 29
---------
183
---------
- -------------------------------------------------------------------------------
CONSUMER - DURABLE -- 0.0%
Black & Decker Corp. 300 13
Fortune Brands, Inc. 1,000 35
Leggett & Platt, Inc. 1,300 29
Maytag Corp. 800 32
Newell Rubbermaid, Inc. 1,372 48
Whirlpool Corp. 500 35
---------
192
---------
40
<PAGE>
Number Value
of Shares (000s)
--------- --------
- -------------------------------------------------------------------------------
CONSUMER - NONDURABLE -- 0.1%
American Greetings Corp., Class A 200 $ 5
Darden Restaurants, Inc. 400 8
Hasbro, Inc. 675 14
Jostens, Inc. 100 2
Mattel, Inc. 1,625 22
McDonald's Corp. 9,400 388
Tricon Global Restaurants,
Inc.+ 830 33
Wendy's International, Inc. 500 12
---------
484
---------
- -------------------------------------------------------------------------------
CONTAINERS -- 0.0%
Ball Corp. 100 4
Bemis Co., Inc. 100 3
Crown Cork & Seal Co., Inc. 900 22
Owens-Illinois, Inc.+ 600 14
Sealed Air Corp.+ 621 34
---------
77
---------
- -------------------------------------------------------------------------------
ELECTRONICS -- 1.5%
ADC Telecommunications, Inc.+ 900 43
Advanced Micro Devices, Inc.+ 820 16
Analog Devices, Inc.+ 1,200 64
Andrew Corp.+ 325 4
Applied Materials, Inc.+ 2,200 198
Electronic Data Systems Corp. 3,300 193
EMC Corp.+ 7,231 528
Emerson Electric Co. 3,000 180
General Instrument Corp.+ 1,300 70
Harris Corp. 400 9
Intel Corp. 22,400 1,735
KLA-Tencor Corp.+ 400 32
LSI Logic Corp.+ 600 32
Lucent Technologies, Inc. 19,805 1,272
Micron Technology, Inc.+ 1,500 107
Motorola, Inc. 4,000 390
National Semiconductor Corp.+ 1,000 30
Niagara Mohawk Holdings, Inc.+ 400 6
PE Corp-PE Biosystems Group 800 52
PerkinElmer, Inc. 200 8
QUALCOMM, Inc.+ 1,100 245
Scientific-Atlanta, Inc. 200 11
Solectron Corp.+ 1,600 120
Tektronix, Inc. 250 8
Number Value
of Shares (000s)
--------- -----------
Tellabs, Inc.+ 2,600 $ 164
Texas Instruments, Inc. 5,600 503
Thermo Electron Corp.+ 900 12
Thomas & Betts Corp. 81 4
---------
6,036
---------
- -------------------------------------------------------------------------------
ENERGY - RAW MATERIALS -- 0.1%
Anadarko Petroleum Corp. 800 25
Apache Corp. 400 16
Baker Hughes, Inc. 2,250 63
Burlington Resources, Inc. 910 32
Constellation Energy Group 800 25
Halliburton Co. 2,574 97
Helmerich & Payne, Inc. 1,000 24
McDermott International, Inc. 200 4
Occidental Petroleum Corp. 2,000 46
ONEOK, Inc. 100 3
Rowan Companies, Inc.+ 300 5
Schlumberger Ltd. 3,500 212
Sempra Energy 1,600 33
Sunoco, Inc. 200 5
Union Pacific Resources Group,
Inc 1,562 23
---------
613
---------
- -------------------------------------------------------------------------------
FOOD & AGRICULTURE -- 0.8%
Archer-Daniels Midland Co. 3,334 41
Bestfoods, Inc. 1,900 112
Campbell Soup Co. 3,100 139
Coca-Cola Co. 16,800 991
Coca-Cola Enterprises, Inc. 2,700 69
ConAgra, Inc. 3,300 86
General Mills, Inc. 1,346 117
H.J. Heinz Co. 2,500 119
Hershey Foods Corp. 1,000 50
Kellogg Co. 2,300 92
Monsanto Co. 4,000 154
PepsiCo, Inc. 10,300 357
Quaker Oats Co. 1,000 70
Ralston-Ralston Purina Group 2,100 66
Sara Lee Corp. 6,400 173
SYSCO Corp. 2,200 85
Unilever NV 3,839 256
Wm. Wrigley Jr. Co. 1,000 80
---------
3,057
---------
41
<PAGE>
SCHWAB MARKETTRACK BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 1999
Number Value
of Shares (000s)
--------- -----------
- -------------------------------------------------------------------------------
GOLD -- 0.0%
Barrick Gold Corp. 2,000 $ 37
Homestake Mining Co. 600 5
Newmont Mining Corp. 629 14
Placer Dome, Inc. 1,000 12
---------
68
---------
- -------------------------------------------------------------------------------
HEALTHCARE / DRUGS & MEDICINE -- 2.1%
Abbott Laboratories 10,200 412
Allergan, Inc. 300 32
ALZA Corp.+ 300 13
American Home Products Corp. 9,200 481
Amgen, Inc.+ 3,600 287
Bausch & Lomb, Inc. 200 11
Baxter International, Inc. 1,900 123
Becton, Dickinson & Co. 1,800 46
Biomet, Inc. 400 12
Boston Scientific Corp.+ 2,074 42
Bristol-Myers Squibb Co. 13,400 1,029
C.R. Bard, Inc. 200 11
Cardinal Health, Inc. 1,650 71
Columbia / HCA Healthcare Corp. 4,400 106
Eli Lilly & Co. 7,400 510
Guidant Corp. 2,000 99
HealthSouth Corp.+ 2,776 16
Humana, Inc.+ 700 5
IMS Health, Inc. 1,800 52
Johnson & Johnson 9,300 974
Mallinckrodt, Inc. 400 14
Manor Care, Inc.+ 700 11
McKesson HBOC, Inc. 1,773 36
Medtronic, Inc. 8,000 277
Merck & Co., Inc. 16,000 1,273
Pfizer, Inc. 26,100 1,031
Pharmacia & Upjohn, Inc. 3,500 189
Schering-Plough Corp. 9,800 485
Service Corp. International 1,400 13
Shared Medical Systems Corp. 200 8
St. Jude Medical, Inc.+ 430 12
Tenet Healthcare Corp.+ 1,700 33
United Healthcare Corp. 1,300 67
Warner Lambert Co. 5,700 455
Watson Pharmaceuticals, Inc.+ 600 19
Wellpoint Health Networks, Inc.+ 500 29
---------
8,284
---------
Number Value
of Shares (000s)
--------- -----------
- ------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.4%
Alberto-Culver Co., Class B 200 $ 5
Avon Products, Inc. 1,800 58
Clorox Co. 1,400 57
Colgate-Palmolive Co. 4,200 254
Gillette Co. 7,800 282
International Flavors &
Fragrances, Inc. 800 31
Procter & Gamble Co. 9,200 965
Tupperware Corp. 200 4
---------
1,656
---------
- ------------------------------------------------------------------------------
INSURANCE -- 0.6%
Aetna, Inc. 1,134 57
AFLAC, Inc. 1,800 92
Allstate Corp. 5,500 158
American General Corp. 1,710 127
American International Group,
Inc. 10,575 1,089
Aon Corp. 1,725 61
Chubb Corp. 1,100 60
CIGNA Corp. 1,400 105
Cincinnati Financial Corp. 1,200 43
Conseco, Inc. 1,671 41
Hartford Financial Services
Group, Inc. 1,600 83
Jefferson-Pilot Corp. 900 68
Lincoln National Corp. 1,800 83
Marsh & McLennan
Companies, Inc. 1,800 142
MBIA, Inc. 900 51
MGIC Investment Corp. 800 48
Progressive Corp. 600 56
SAFECO Corp. 800 22
St. Paul Companies, Inc. 1,424 46
Torchmark Corp. 800 25
UnumProvident Corp. 1,657 55
---------
2,512
---------
- -------------------------------------------------------------------------------
MEDIA -- 0.6%
CBS Corp.+ 4,900 239
Clear Channel
Communications, Inc.+ 1,800 145
Comcast Corp., Class A 4,800 202
Dow Jones & Co., Inc. 700 43
Gannett Co., Inc. 1,900 147
Harcourt General, Inc. 500 19
42
<PAGE>
Number Value
of Shares (000s)
--------- -----------
King World Productions, Inc.+ 600 $ 23
Knight-Ridder, Inc. 600 38
McGraw-Hill Companies, Inc. 1,400 83
Mediaone Group+ 4,000 284
Meredith Corp. 200 7
New York Times Co., Class A 1,400 56
Time Warner, Inc. 8,000 557
Times Mirror Co., Series A 700 50
Tribune Co. 1,800 108
Viacom, Inc., Class B+ 5,000 224
---------
2,225
---------
- -------------------------------------------------------------------------------
MISCELLANEOUS FINANCE -- 1.1%
American Express Co. 3,300 508
Associates First Capital Corp. 4,698 171
Bear Stearns Companies, Inc. 1,050 45
Capital One Financial Corp. 1,200 64
Charles Schwab Corp. 5,850 228
Citigroup, Inc. 23,494 1,272
Countrywide Credit Industries,
Inc. 500 17
Dun & Bradstreet Corp. 1,000 29
Fannie Mae 7,100 502
Franklin Resources, Inc. 1,700 59
Freddie Mac 4,700 254
Household International, Inc. 3,233 144
Lehman Brothers Holdings, Inc. 700 52
MBNA Corp. 5,212 144
Merrill Lynch & Co., Inc. 2,400 188
Morgan Stanley Dean Witter
Discover & Co. 3,955 436
Paine Webber Group, Inc. 1,000 41
Providian Financial Corp. 750 82
SLM Holding Corp. 1,200 59
T. Rowe Price Associates, Inc. 800 28
---------
4,323
---------
- ------------------------------------------------------------------------------
NON-FERROUS METALS -- 0.1%
Alcan Aluminum Ltd. 1,300 43
Alcoa, Inc. 3,000 182
Asarco, Inc. 100 3
Engelhard Corp. 600 11
Freeport-McMoRan Copper &
Gold, Inc., Class B 1,100 18
Number Value
of Shares (000s)
--------- -----------
Inco Ltd. 900 $ 18
Phelps Dodge Corp. 540 30
Reynolds Metals Co. 500 30
---------
335
---------
- ------------------------------------------------------------------------------
OIL - DOMESTIC -- 0.2%
Amerada Hess Corp. 700 40
Ashland, Inc. 500 16
Atlantic Richfield Co. 2,300 214
Conoco Inc., Class B 4,200 114
Kerr-McGee Corp. 621 33
Phillips Petroleum Co. 1,500 70
Tosco Corp. 1,000 25
Unocal Corp. 1,400 48
USX-Marathon Group 1,600 47
---------
607
---------
- ------------------------------------------------------------------------------
OIL - INTERNATIONAL -- 0.8%
Chevron Corp. 4,600 420
Exxon Corp. 16,400 1,215
Mobil Corp. 5,500 531
Royal Dutch Petroleum Co. -
Sponsored ADR 14,300 857
Texaco, Inc. 3,730 229
---------
3,252
---------
- -------------------------------------------------------------------------------
OPTICAL & PHOTO -- 0.0%
Eastman Kodak Co. 2,200 152
Polaroid Corp. 300 7
---------
159
---------
- -------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.2%
Boise Cascade Corp. 100 4
Champion International Corp. 500 29
Fort James Corp. 1,500 39
Georgia-Pacific Group 1,800 71
International Paper Co. 2,542 134
Kimberly-Clark Corp. 3,480 220
Louisiana-Pacific Corp. 400 5
Mead Corp. 600 22
Potlatch Corp. 100 4
Temple Inland, Inc. 400 23
Westvaco Corp. 400 12
43
<PAGE>
SCHWAB MARKETTRACK BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 1999
Number Value
of Shares (000s)
--------- -----------
Weyerhaeuser Co. 1,000 $ 60
Willamette Industries, Inc. 400 17
---------
640
---------
- -------------------------------------------------------------------------------
PRODUCER GOODS & MANUFACTURING -- 1.0%
AlliedSignal, Inc. 3,900 222
Avery Dennison Corp. 600 37
Briggs & Stratton Corp. 100 6
Case Corp. 500 26
Caterpillar, Inc. 2,500 138
Cooper Industries, Inc. 900 39
Corning, Inc. 1,200 94
Deere & Co. 1,700 62
Dover Corp. 1,600 68
FMC Corp.+ 400 16
Foster Wheeler Corp. 100 1
General Electric Co. 22,200 3,009
Illinois Tool Works, Inc. 1,700 125
Ingersoll-Rand Co. 900 47
ITT Industries, Inc. 400 14
Johnson Controls, Inc. 500 30
Milacron, Inc. 100 2
Millipore Corp. 200 6
NACCO Industries, Inc., Class A 100 5
Pall Corp. 500 11
Parker-Hannifin Corp. 600 27
Snap-On, Inc. 150 5
Springs Industries, Inc. 200 8
Tenneco, Inc.+ 1,000 16
The Timken Co. 200 4
W.W. Grainger, Inc. 1,000 42
---------
4,060
---------
- --------------------------------------------------------------------------------
RAILROAD & SHIPPING -- 0.1%
Burlington Northern
Santa Fe Corp. 3,200 102
CSX Corp. 1,500 61
Kansas City Southern
Industries, Inc. 800 38
Norfolk Southern Corp. 2,300 56
Union Pacific Corp. 1,700 95
---------
352
---------
Number Value
of Shares (000s)
--------- -----------
- -------------------------------------------------------------------------------
RETAIL -- 1.2%
Albertson's, Inc. 2,971 $ 108
AutoZone, Inc.+ 600 16
Bed, Bath & Beyond, Inc.+ 900 30
Best Buy Co., Inc.+ 1,400 78
Circuit City Stores, Inc. 800 34
Consolidated Stores Corp.+ 700 13
Costco Wholesale Corp.+ 1,700 137
CVS Corp. 2,400 104
Dayton Hudson Corp. 3,200 207
Dillards, Inc., Class A 400 8
Dollar General Corp. 1,562 41
Federated Department
Stores, Inc.+ 1,100 47
Gap, Inc. 5,962 221
Great Atlantic & Pacific
Tea Co., Inc. 100 3
Home Depot, Inc. 10,200 770
IKON Office Solutions 500 3
J.C. Penney Co., Inc. 1,700 43
Kmart Corp.+ 2,600 26
Kohl's Corp.+ 1,100 82
Kroger Co.+ 5,800 121
Limited, Inc. 1,544 63
Longs Drug Stores, Inc. 200 5
Lowe's Companies, Inc. 2,200 121
May Department Stores Co. 2,400 83
Nordstrom, Inc. 1,200 30
Office Depot, Inc.+ 2,500 31
Pep Boys-Manny, Moe, & Jack 200 3
Rite Aid Corp. 1,800 16
Safeway, Inc.+ 3,300 117
Sears, Roebuck & Co. 2,700 76
Staples, Inc.+ 2,850 63
SUPERVALU, Inc. 600 13
Tandy Corp. 1,200 76
TJX Companies, Inc. 1,600 43
Toys 'R' Us, Inc.+ 1,800 25
Wal-Mart Stores, Inc. 30,400 1,723
Walgreen Co. 6,600 166
Winn-Dixie Stores, Inc. 1,200 32
---------
4,778
---------
44
<PAGE>
Number Value
of Shares (000s)
--------- -----------
- -------------------------------------------------------------------------------
STEEL -- 0.0%
Allegheny Teledyne, Inc. 985 $ 15
Bethlehem Steel Corp.+ 300 2
Nucor Corp. 500 26
USX-U.S. Steel Group, Inc. 500 13
Worthington Industries, Inc. 300 5
---------
61
---------
- -------------------------------------------------------------------------------
TELEPHONE -- 1.7%
Alltel Corp. 1,800 150
AT&T Corp. 21,471 1,004
Bell Atlantic Corp. 10,872 706
BellSouth Corp. 13,200 594
CenturyTel, Inc. 900 36
Global Crossing, Ltd.+ 5,150 178
GTE Corp. 6,400 480
MCI WorldCom, Inc.+ 12,546 1,077
Nextel Communications, Inc.,
Class A+ 1,800 155
Nortel Networks Corp. 8,920 552
SBC Communications, Inc. 23,188 1,181
Sprint Corp. (FON Group) 5,800 431
Sprint Corp. (PCS Group)+ 2,850 236
US WEST, Inc. 3,309 202
---------
6,982
---------
- -------------------------------------------------------------------------------
TOBACCO -- 0.1%
Loew's Corp. 1,000 71
Philip Morris Companies, Inc. 16,100 406
Nabisco Group Holdings Corp. 2,200 28
UST, Inc. 1,100 30
---------
535
---------
- -------------------------------------------------------------------------------
TRAVEL & RECREATION -- 0.2%
Brunswick Corp. 600 14
Carnival Corp. 4,100 182
Harrah's Entertainment, Inc.+ 400 12
Hilton Hotels Corp. 1,500 14
Marriott International, Inc.,
Class A 2,000 67
Mirage Resorts, Inc.+ 800 12
Walt Disney Co.+ 14,217 375
---------
676
---------
Number Value
of Shares (000s)
----------- ---------
- -------------------------------------------------------------------------------
TRUCKING & FREIGHT -- 0.0%
PACCAR, Inc. 600 $ 28
Ryder Systems, Inc. 200 4
---------
32
---------
- -------------------------------------------------------------------------------
UTILITIES - ELECTRIC & GAS -- 0.5%
AES Corp.+ 1,200 68
Ameren Corp. 600 23
American Electric Power Co.,
Inc. 1,300 45
Carolina Power & Light Co. 900 31
Central & South West Corp. 1,300 29
Cinergy Corp. 1,000 28
CMS Energy Corp. 700 26
Coastal Corp. 1,600 67
Columbia Energy Group 550 36
Consolidated Edison, Inc. 1,300 50
Consolidated Natural Gas Co. 700 45
Dominion Resources, Inc. 1,000 48
DTE Energy Co. 600 20
Duke Energy Corp. 2,426 137
Eastern Enterprises 100 5
Edison International 2,200 65
El Paso Energy Corp. 1,500 62
Enron Corp. 4,800 192
Entergy Corp. 1,500 45
First Energy Corp. 1,200 31
Florida Progress Corp. 700 32
FPL Group, Inc. 1,300 65
GPU, Inc. 500 17
New Century Energies, Inc. 700 23
NICOR, Inc. 100 4
Northern States Power Co. 1,000 22
PacifiCorp. 1,800 37
PECO Energy Co. 1,400 53
Peoples Energy Corp. 100 4
PG&E Corp. 2,400 55
Pinnacle West Capital Corp. 600 22
PP&L Resources, Inc. 700 19
Public Service Enterprise
Group, Inc. 1,300 51
45
<PAGE>
SCHWAB MARKETTRACK BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS (concluded)
October 31, 1999
Number Value
of Shares (000s)
--------- -----------
Reliant Energy, Inc. 1,724 $ 47
Southern Co. 4,700 125
Texas Utilities Co. 1,922 74
Unicom Corp. 1,300 50
Williams Cos., Inc. 2,800 105
---------
1,858
---------
Total Common Stock
(Cost $41,668) 75,574
---------
- ------------------------------------------------------------------------------
Investment Funds -- 76.4%
Schwab International Index
Fund,
Select Shares 3,376,419 60,641
Schwab S&P 500 Fund,
Select Shares 2,254,453 47,862
Schwab Small-Cap Index
Fund,
Select Shares 3,493,808 60,932
Schwab Total Bond Market
Index Fund 14,363,634 138,465
---------
Total Investment Funds
(Cost $283,863) 307,900
---------
Number Value
of Shares (000s)
--------- -----------
- ------------------------------------------------------------------------------
Short-Term Investments -- 4.9%
Republic National Bank
Time Deposit,
4.750%*, 11/01/99 4,863,348 $ 4,863
Schwab Value Advantage
Money
Fund, Investor Shares
5.256%* 14,862,403 14,862
---------
Total Short-Term Investments
(Cost $19,725) 19,725
---------
Total Investments -- 100.0%
(Cost $345,256) 403,199
---------
OTHER ASSETS AND LIABILITIES, NET -- 0.0%
Other assets 760
Liabilities (688)
---------
72
---------
TOTAL Net Assets -- 100.0% $403,271
=========
See accompanying Notes to Schedules of Investments and Notes to Financial
Statements.
46
<PAGE>
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1999
Number Value
of Shares (000s)
--------- -----------
- -------------------------------------------------------------------------------
COMMON STOCK -- 10.7%
- -------------------------------------------------------------------------------
AEROSPACE / DEFENSE -- 0.1%
Boeing Co. 1,546 $ 71
General Dynamics Corp. 200 11
Lockheed Martin Corp. 600 12
Northrop Grumman Corp. 100 5
Raytheon Co., Class B 500 15
Rockwell International Corp. 300 15
Textron, Inc. 300 23
United Technologies Corp. 800 48
---------
200
---------
- -------------------------------------------------------------------------------
AIR TRANSPORTATION -- 0.0%
AMR Corp.+ 300 19
Delta Air Lines, Inc. 200 11
FDX Corp.+ 560 24
Southwest Airlines Co. 1,012 17
U.S. Airways Group, Inc.+ 200 6
---------
77
---------
- -------------------------------------------------------------------------------
ALCOHOLIC BEVERAGES -- 0.0%
Adolph Coors Co., Class B 100 6
Anheuser-Busch Companies, Inc. 700 50
Brown-Forman Corp., Class B 100 7
Seagram Co. Ltd. 500 25
---------
88
---------
- -------------------------------------------------------------------------------
APPAREL -- 0.0%
Liz Claiborne, Inc. 100 4
Nike, Inc., Class B 400 23
Reebok International Ltd.+ 100 1
Russell Corp. 100 2
VF Corp. 200 6
---------
36
---------
- -------------------------------------------------------------------------------
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES -- 0.2%
B.F. Goodrich Co. 100 2
Cooper Tire & Rubber Co. 100 2
Cummins Engine Co., Inc. 100 5
Dana Corp. 292 9
Danaher Corp. 200 10
Delphi Automotive Systems Corp. 868 14
Eaton Corp. 200 15
Fleetwood Enterprises, Inc. 100 2
Number Value
of Shares (000s)
--------- -----------
Ford Motor Co. 1,900 $ 104
General Motors Corp. 1,100 77
Genuine Parts Co. 250 7
Goodyear Tire & Rubber Co. 300 12
Navistar International Corp.+ 100 4
TRW, Inc. 200 9
---------
272
---------
- -------------------------------------------------------------------------------
BANKS -- 0.7%
AmSouth Bancorp. 600 15
Bank of America Corp. 2,711 175
Bank of New York Co., Inc. 1,200 50
Bank One Corp. 1,946 73
BB&T Corp. 400 15
Chase Manhattan Corp. 1,416 124
Comerica, Inc. 300 18
Fifth Third Bancorp. 375 28
First Union Corp. 1,500 64
Firstar Corp. 1,618 48
Fleet Boston Corp. 1,451 63
Golden West Financial Corp. 100 11
Huntington Bancshares, Inc. 385 11
J.P. Morgan & Co., Inc. 300 39
KeyCorp, Inc. 700 20
Mellon Financial Corp. 800 30
National City Corp. 1,000 29
Northern Trust Corp. 200 19
PNC Bank Corp. 500 30
Regions Financial Corp. 300 9
Republic New York Corp. 200 13
SouthTrust Corp. 300 12
State Street Corp. 300 23
Summit Bancorp. 300 10
SunTrust Banks, Inc. 400 29
Synovus Financial Corp. 300 6
U.S. Bancorp. 1,089 40
Union Planters Corp. 200 9
Wachovia Corp. 300 26
Washington Mutual, Inc. 921 33
Wells Fargo & Co. 2,560 123
---------
1,195
---------
- --------------------------------------------------------------------------------
BUSINESS MACHINES & SOFTWARE -- 1.4%
3Com Corp.+ 600 17
Adaptec, Inc.+ 200 9
47
<PAGE>
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 1999
Number Value
of Shares (000s)
--------- -----------
Adobe Systems, Inc. 200 $ 14
Apple Computer, Inc.+ 200 16
Autodesk, Inc. 100 2
BMC Software, Inc.+ 300 19
Cabletron Systems, Inc.+ 400 7
Ceridian Corp.+ 314 7
Cisco Systems, Inc.+ 4,950 366
Compaq Computer Corp. 2,693 51
Computer Associates
International, Inc. 850 48
Compuware Corp.+ 600 17
Comverse Technology, Inc.+ 100 11
Dell Computer Corp.+ 4,000 160
Gateway, Inc.+ 400 26
Hewlett-Packard Co. 1,600 118
Honeywell, Inc. 200 21
International Business Machines
Corp. 3,000 295
Lexmark International Group,
Inc.,
Class A+ 200 16
Microsoft Corp.+ 8,100 750
Network Appliance, Inc.+ 100 7
Novell, Inc.+ 600 12
Oracle Systems Corp.+ 2,250 107
Parametric Technology Corp.+ 400 8
PeopleSoft, Inc.+ 400 6
Pitney Bowes, Inc. 400 18
Seagate Technology, Inc.+ 276 8
Silicon Graphics, Inc.+ 122 1
Sun Microsystems, Inc.+ 1,200 127
Unisys Corp.+ 400 10
Xerox Corp. 1,000 28
---------
2,302
---------
- -------------------------------------------------------------------------------
BUSINESS SERVICES -- 0.3%
Allied Waste Industries, Inc.+ 300 3
America Online, Inc.+ 1,700 220
Automatic Data Processing, Inc. 1,000 48
Cendant Corp.+ 1,159 19
Computer Sciences Corp.+ 258 18
Deluxe Corp. 100 3
Ecolab, Inc. 200 7
Equifax, Inc. 200 5
First Data Corp. 600 27
H&R Block, Inc. 200 9
Number Value
of Shares (000s)
--------- -----------
Interpublic Group of
Companies, Inc. 500 $ 20
Laidlaw, Inc. 500 3
National Service Industries, Inc. 100 3
Omnicom Group, Inc. 200 18
Paychex, Inc. 450 18
R.R. Donnelley & Sons Co. 200 5
Tyco International Ltd. 2,544 102
Waste Management, Inc. 907 17
---------
545
---------
- ------------------------------------------------------------------------------
CHEMICAL -- 0.2%
Air Products & Chemicals, Inc. 400 11
Dow Chemical Co. 400 47
E. I. du Pont de Nemours & Co. 1,825 118
Eastman Chemical Co. 200 8
Great Lakes Chemical Corp. 100 4
Hercules, Inc. 100 2
Minnesota Mining &
Manufacturing Co. 700 67
PPG Industries, Inc. 300 18
Praxair, Inc. 200 9
Rohm & Haas Co. 373 14
Sigma-Aldrich Corp. 100 3
Union Carbide Corp. 300 18
W.R. Grace & Co.+ 100 1
---------
320
---------
- ------------------------------------------------------------------------------
CONSTRUCTION -- 0.0%
Armstrong World Industries, Inc. 100 4
Centex Corp. 200 5
Crane Co. 150 3
Fluor Corp. 100 4
Kaufman & Broad Home Corp. 100 2
Masco Corp. 600 18
Owens Corning 100 2
Pulte Corp. 200 4
Sherwin-Williams Co. 200 4
The Stanley Works 100 3
Vulcan Materials Co. 200 8
---------
57
---------
- -------------------------------------------------------------------------------
CONSUMER - DURABLE -- 0.0%
Black & Decker Corp. 100 4
Fortune Brands, Inc. 200 7
48
<PAGE>
Number Value
of Shares (000s)
--------- -----------
Leggett & Platt, Inc. 300 $ 7
Maytag Corp. 100 4
Newell Rubbermaid, Inc. 536 19
Whirlpool Corp. 100 7
---------
48
---------
- -------------------------------------------------------------------------------
CONSUMER - NONDURABLE -- 0.1%
American Greetings Corp., Class A 100 3
Darden Restaurants, Inc. 400 8
Hasbro, Inc. 225 5
Jostens, Inc. 100 2
Mattel, Inc. 450 6
McDonald's Corp. 2,200 91
Tricon Global Restaurants, Inc.+ 240 10
Wendy's International, Inc. 300 7
---------
132
---------
- ------------------------------------------------------------------------------
CONTAINERS -- 0.0%
Ball Corp. 100 4
Bemis Co., Inc. 100 3
Crown Cork & Seal Co., Inc. 200 5
Owens-Illinois, Inc.+ 300 7
Sealed Air Corp.+ 153 8
---------
27
---------
- ------------------------------------------------------------------------------
ELECTRONICS -- 0.9%
ADC Telecommunications, Inc.+ 200 10
Advanced Micro Devices, Inc.+ 180 4
Analog Devices, Inc.+ 300 16
Andrew Corp.+ 100 1
Applied Materials, Inc.+ 500 45
Electronic Data Systems Corp. 800 47
EMC Corp.+ 1,725 126
Emerson Electric Co. 700 42
General Instrument Corp.+ 200 11
Harris Corp. 100 2
Intel Corp. 5,400 418
KLA-Tencor Corp.+ 100 8
LSI Logic Corp.+ 100 5
Lucent Technologies, Inc. 4,719 303
Micron Technology, Inc.+ 400 29
Motorola, Inc. 900 88
National Semiconductor Corp.+ 200 6
Niagara Mohawk Holdings, Inc.+ 100 2
PE Corp-PE Biosystems Group 200 13
Number Value
of Shares (000s)
--------- -----------
PerkinElmer, Inc. 100 $ 4
QUALCOMM, Inc.+ 300 67
Scientific-Atlanta, Inc. 100 6
Solectron Corp.+ 400 30
Tektronix, Inc. 50 2
Tellabs, Inc.+ 600 38
Texas Instruments, Inc. 1,200 108
Thermo Electron Corp.+ 300 4
Thomas & Betts Corp. 63 3
---------
1,438
---------
- -------------------------------------------------------------------------------
ENERGY - RAW MATERIALS -- 0.1%
Anadarko Petroleum Corp. 200 6
Apache Corp. 100 4
Baker Hughes, Inc. 670 19
Burlington Resources, Inc. 300 10
Constellation Energy Group 200 6
Halliburton Co. 714 27
Helmerich & Payne, Inc. 200 5
McDermott International, Inc. 100 2
Occidental Petroleum Corp. 500 11
ONEOK, Inc. 100 3
Rowan Companies, Inc.+ 100 2
Schlumberger Ltd. 800 48
Sempra Energy 350 7
Sunoco, Inc. 100 2
Union Pacific Resources Group,
Inc. 369 5
---------
157
---------
- -------------------------------------------------------------------------------
FOOD & AGRICULTURE -- 0.4%
Archer-Daniels Midland Co. 920 11
Bestfoods, Inc. 400 23
Campbell Soup Co. 700 31
Coca-Cola Co. 3,900 230
Coca-Cola Enterprises, Inc. 600 15
ConAgra, Inc. 700 18
General Mills, Inc. 216 19
H.J. Heinz Co. 600 29
Hershey Foods Corp. 200 10
Kellogg Co. 700 28
Monsanto Co. 900 35
PepsiCo, Inc. 2,300 80
Quaker Oats Co. 200 14
Ralston-Ralston Purina Group 600 19
Sara Lee Corp. 1,400 38
49
<PAGE>
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 1999
Number Value
of Shares (000s)
--------- -----------
SYSCO Corp. 500 $ 19
Unilever NV 892 59
Wm. Wrigley Jr. Co. 200 16
---------
694
---------
- -------------------------------------------------------------------------------
GOLD -- 0.0%
Barrick Gold Corp. 600 11
Homestake Mining Co. 100 1
Newmont Mining Corp. 443 10
Placer Dome, Inc. 600 7
---------
29
---------
- -------------------------------------------------------------------------------
HEALTHCARE / DRUGS & MEDICINE -- 1.2%
Abbott Laboratories 2,400 97
Allergan, Inc. 100 11
ALZA Corp.+ 100 4
American Home Products Corp. 2,100 110
Amgen, Inc.+ 800 64
Bausch & Lomb, Inc. 100 5
Baxter International, Inc. 400 26
Becton, Dickinson & Co. 500 13
Biomet, Inc. 300 9
Boston Scientific Corp.+ 534 11
Bristol-Myers Squibb Co. 3,200 246
C.R. Bard, Inc. 100 5
Cardinal Health, Inc. 400 17
Columbia / HCA Healthcare Corp. 1,000 24
Eli Lilly & Co. 1,700 117
Guidant Corp. 400 20
HealthSouth Corp.+ 700 4
Humana, Inc.+ 300 2
IMS Health, Inc. 400 12
Johnson & Johnson 2,100 220
Mallinckrodt, Inc. 100 3
Manor Care, Inc.+ 200 3
McKesson HBOC, Inc. 422 8
Medtronic, Inc. 1,800 62
Merck & Co., Inc. 3,800 302
Pfizer, Inc. 6,300 249
Pharmacia & Upjohn, Inc. 800 43
Schering-Plough Corp. 2,400 119
Service Corp. International 400 4
Shared Medical Systems Corp. 100 4
St. Jude Medical, Inc.+ 100 3
Tenet Healthcare Corp.+ 500 10
United Healthcare Corp. 300 16
Number Value
of Shares (000s)
--------- -----------
Warner Lambert Co. 1,300 $ 104
Watson Pharmaceuticals, Inc.+ 200 6
Wellpoint Health Networks, Inc.+ 100 6
---------
1,959
---------
- -------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.2%
Alberto-Culver Co., Class B 100 2
Avon Products, Inc. 400 13
Clorox Co. 400 16
Colgate-Palmolive Co. 1,000 60
Gillette Co. 1,800 65
International Flavors &
Fragrances, Inc. 200 8
Procter & Gamble Co. 2,100 220
Tupperware Corp. 100 2
---------
386
---------
- -------------------------------------------------------------------------------
INSURANCE -- 0.4%
Aetna, Inc. 222 11
AFLAC, Inc. 400 20
Allstate Corp. 1,400 40
American General Corp. 400 30
American International Group,
Inc. 2,511 258
Aon Corp. 375 13
Chubb Corp. 300 16
CIGNA Corp. 300 22
Cincinnati Financial Corp. 300 11
Conseco, Inc. 515 13
Hartford Financial Services
Group, Inc. 400 21
Jefferson-Pilot Corp. 150 11
Lincoln National Corp. 400 18
Marsh & McLennan
Companies, Inc. 450 36
MBIA, Inc. 200 11
MGIC Investment Corp. 200 12
Progressive Corp. 100 9
SAFECO Corp. 200 5
St. Paul Companies, Inc. 456 15
Torchmark Corp. 200 6
UnumProvident Corp. 346 11
---------
589
---------
- --------------------------------------------------------------------------------
MEDIA -- 0.3%
CBS Corp.+ 1,100 54
Clear Channel
Communications, Inc.+ 500 40
50
<PAGE>
Number Value
of Shares (000s)
--------- -----------
Comcast Corp., Class A 1,000 $ 42
Dow Jones & Co., Inc. 100 6
Gannett Co., Inc. 400 31
Harcourt General, Inc. 100 4
King World Productions, Inc.+ 200 8
Knight-Ridder, Inc. 200 13
McGraw-Hill Companies, Inc. 400 24
Mediaone Group+ 900 64
Meredith Corp. 100 4
New York Times Co., Class A 400 16
Time Warner, Inc. 2,000 139
Times Mirror Co., Series A 200 14
Tribune Co. 400 24
Viacom, Inc., Class B+ 1,200 54
---------
537
---------
- ------------------------------------------------------------------------------
MISCELLANEOUS FINANCE -- 0.6%
American Express Co. 700 108
Associates First Capital Corp. 1,090 40
Bear Stearns Companies, Inc. 210 9
Capital One Financial Corp. 300 16
Charles Schwab Corp. 1,200 47
Citigroup, Inc. 5,383 291
Countrywide Credit Industries,
Inc. 200 7
Dun & Bradstreet Corp. 300 9
Fannie Mae 1,700 120
Franklin Resources, Inc. 400 14
Freddie Mac 1,100 59
Household International, Inc. 906 40
Lehman Brothers Holdings, Inc. 200 15
MBNA Corp. 1,105 31
Merrill Lynch & Co., Inc. 500 39
Morgan Stanley Dean Witter
Discover & Co. 965 106
Paine Webber Group, Inc. 200 8
Providian Financial Corp. 300 33
SLM Holding Corp. 300 15
T. Rowe Price Associates, Inc. 200 7
---------
1,014
---------
- -------------------------------------------------------------------------------
NON-FERROUS METALS -- 0.0%
Alcan Aluminum Ltd. 300 10
Alcoa, Inc. 600 36
Asarco, Inc. 100 3
Number Value
of Shares (000s)
--------- -----------
Engelhard Corp. 100 $ 2
Freeport-McMoRan Copper &
Gold, Inc., Class B 600 10
Inco Ltd. 300 6
Phelps Dodge Corp. 135 8
Reynolds Metals Co. 100 6
---------
81
---------
- -------------------------------------------------------------------------------
OIL - DOMESTIC -- 0.1%
Amerada Hess Corp. 100 6
Ashland, Inc. 100 3
Atlantic Richfield Co. 500 47
Conoco Inc., Class B 1,000 27
Kerr-McGee Corp. 136 7
Phillips Petroleum Co. 400 19
Tosco Corp. 200 5
Unocal Corp. 400 14
USX-Marathon Group 400 12
---------
140
---------
- -------------------------------------------------------------------------------
OIL - INTERNATIONAL -- 0.5%
Chevron Corp. 1,000 91
Exxon Corp. 3,900 289
Mobil Corp. 1,200 116
Royal Dutch Petroleum Co. -
Sponsored ADR 3,400 204
Texaco, Inc. 900 55
---------
755
---------
- -------------------------------------------------------------------------------
OPTICAL & PHOTO -- 0.0%
Eastman Kodak Co. 500 34
Polaroid Corp. 100 2
---------
36
---------
- -------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.1%
Boise Cascade Corp. 100 4
Champion International Corp. 100 6
Fort James Corp. 300 8
Georgia-Pacific Group 400 16
International Paper Co. 648 34
Kimberly-Clark Corp. 856 54
Louisiana-Pacific Corp. 100 1
Mead Corp. 100 4
Potlatch Corp. 100 4
51
<PAGE>
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 1999
Number Value
of Shares (000s)
--------- -----------
Temple Inland, Inc. 100 $ 6
Westvaco Corp. 100 3
Weyerhaeuser Co. 300 18
Willamette Industries, Inc. 200 8
---------
166
---------
- -------------------------------------------------------------------------------
PRODUCER GOODS & MANUFACTURING -- 0.6%
AlliedSignal, Inc. 900 51
Avery Dennison Corp. 200 13
Briggs & Stratton Corp. 100 6
Case Corp. 100 5
Caterpillar, Inc. 600 33
Cooper Industries, Inc. 200 9
Corning, Inc. 300 24
Deere & Co. 400 15
Dover Corp. 300 13
FMC Corp.+ 100 4
Foster Wheeler Corp. 100 1
General Electric Co. 5,200 705
Illinois Tool Works, Inc. 400 29
Ingersoll-Rand Co. 350 18
ITT Industries, Inc. 200 7
Johnson Controls, Inc. 100 6
Milacron, Inc. 300 5
Millipore Corp. 100 3
NACCO Industries, Inc., Class A 100 5
Pall Corp. 100 2
Parker-Hannifin Corp. 150 7
Snap-On, Inc. 100 3
Springs Industries, Inc. 100 4
Tenneco, Inc.+ 300 5
The Timken Co. 100 2
W.W. Grainger, Inc. 200 8
---------
983
---------
- -----------------------------------------------------------------------------
RAILROAD & SHIPPING -- 0.1%
Burlington Northern
Santa Fe Corp. 900 29
CSX Corp. 300 12
Kansas City Southern
Industries, Inc. 200 9
Norfolk Southern Corp. 600 15
Union Pacific Corp. 400 22
---------
87
---------
Number Value
of Shares (000s)
--------- -----------
- --------------------------------------------------------------------------------
RETAIL -- 0.7%
Albertson's, Inc. 652 $ 24
AutoZone, Inc.+ 200 5
Bed, Bath & Beyond, Inc.+ 200 7
Best Buy Co., Inc.+ 300 17
Circuit City Stores, Inc. 200 9
Consolidated Stores Corp.+ 200 4
Costco Wholesale Corp.+ 300 24
CVS Corp. 600 26
Dayton Hudson Corp. 800 52
Dillards, Inc., Class A 300 6
Dollar General Corp. 312 8
Federated Department
Stores, Inc.+ 400 17
Gap, Inc. 1,462 54
Great Atlantic & Pacific
Tea Co., Inc. 100 3
Home Depot, Inc. 2,500 189
IKON Office Solutions 200 1
J.C. Penney Co., Inc. 400 10
Kmart Corp.+ 700 7
Kohl's Corp.+ 300 22
Kroger Co.+ 1,400 29
Limited, Inc. 409 17
Longs Drug Stores, Inc. 100 3
Lowe's Companies, Inc. 600 33
May Department Stores Co. 600 21
Nordstrom, Inc. 400 10
Office Depot, Inc.+ 600 7
Pep Boys-Manny, Moe, & Jack 100 1
Rite Aid Corp. 400 4
Safeway, Inc.+ 800 28
Sears, Roebuck & Co. 600 17
Staples, Inc.+ 750 17
SUPERVALU, Inc. 200 4
Tandy Corp. 400 25
TJX Companies, Inc. 400 11
Toys 'R' Us, Inc.+ 500 7
Wal-Mart Stores, Inc. 7,200 408
Walgreen Co. 1,400 35
Winn-Dixie Stores, Inc. 300 8
---------
1,170
---------
52
<PAGE>
Number Value
of Shares (000s)
--------- -----------
- -------------------------------------------------------------------------------
STEEL -- 0.0%
Allegheny Teledyne, Inc. 292 $ 4
Bethlehem Steel Corp.+ 100 1
Nucor Corp. 100 5
USX-U.S. Steel Group, Inc. 100 3
Worthington Industries, Inc. 100 2
---------
15
---------
- -------------------------------------------------------------------------------
TELEPHONE -- 1.0%
Alltel Corp. 400 33
AT&T Corp. 5,130 240
Bell Atlantic Corp. 2,458 160
BellSouth Corp. 3,200 144
CenturyTel, Inc. 150 6
Global Crossing Ltd.+ 1,210 42
GTE Corp. 1,500 113
MCI WorldCom, Inc.+ 3,017 259
Nextel Communications, Inc.,
Class A+ 400 34
Nortel Networks Corp. 1,960 121
SBC Communications, Inc. 5,475 279
Sprint Corp. (FON Group) 1,400 104
Sprint Corp. (PCS Group)+ 750 62
US WEST, Inc. 724 44
---------
1,641
---------
- -------------------------------------------------------------------------------
TOBACCO -- 0.1%
Loew's Corp. 200 14
Nabisco Group Holdings Corp. 500 6
Philip Morris Companies, Inc. 3,800 96
UST, Inc. 200 6
---------
122
---------
- -------------------------------------------------------------------------------
TRAVEL & RECREATION -- 0.1%
Brunswick Corp. 100 2
Carnival Corp. 900 40
Harrah's Entertainment, Inc.+ 100 3
Hilton Hotels Corp. 400 4
Marriott International, Inc.,
Class A 500 17
Mirage Resorts, Inc.+ 200 3
Walt Disney Co.+ 3,327 88
---------
157
---------
- -------------------------------------------------------------------------------
TRUCKING & FREIGHT -- 0.0%
PACCAR, Inc. 100 5
Ryder Systems, Inc. 100 2
---------
7
---------
Number Value
of Shares (000s)
--------- -----------
- -------------------------------------------------------------------------------
UTILITIES - ELECTRIC & GAS -- 0.3%
AES Corp.+ 300 $ 17
Ameren Corp. 200 8
American Electric Power Co., Inc. 300 10
Carolina Power & Light Co. 200 7
Central & South West Corp. 300 7
Cinergy Corp. 200 6
CMS Energy Corp. 200 7
Coastal Corp. 400 17
Columbia Energy Group 150 10
Consolidated Edison, Inc. 400 15
Consolidated Natural Gas Co. 200 13
Dominion Resources, Inc. 400 19
DTE Energy Co. 300 10
Duke Energy Corp. 604 34
Eastern Enterprises 100 5
Edison International 500 15
El Paso Energy Corp. 400 16
Enron Corp. 1,000 40
Entergy Corp. 300 9
First Energy Corp. 300 8
Florida Progress Corp. 200 9
FPL Group, Inc. 300 15
GPU, Inc. 200 7
New Century Energies, Inc. 200 7
NICOR, Inc. 100 4
Northern States Power Co. 200 4
PacifiCorp. 700 14
PECO Energy Co. 300 11
Peoples Energy Corp. 100 4
PG&E Corp. 700 16
Pinnacle West Capital Corp. 100 4
PP&L Resources, Inc. 300 8
Public Service Enterprise
Group, Inc. 500 20
Reliant Energy, Inc. 374 10
Southern Co. 1,100 29
Texas Utilities Co. 500 19
Unicom Corp. 300 11
Williams Cos., Inc. 600 23
---------
488
---------
Total Common Stock
(Cost $11,258) 17,950
---------
53
<PAGE>
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
SCHEDULE OF INVESTMENTS (concluded)
October 31, 1999
Number Value
of Shares (000s)
------------- -----------
- ------------------------------------------------------------------------------
Investment Funds -- 84.8%
Schwab International Index
Fund,
Select Shares 960,083 $ 17,243
Schwab S&P 500 Fund,
Select Shares 792,867 16,833
Schwab Small-Cap Index Fund,
Select Shares 971,353 16,940
Schwab Total Bond Market
Index Fund 9,437,264 90,975
---------
Total Investment Funds
(Cost $137,240) 141,991
---------
Number Value
of Shares (000s)
------------- -----------
- ------------------------------------------------------------------------------
Short-Term Investments -- 4.5%
Cayman Time Deposit,
4.750%*, 11/01/99 1,305,061 $ 1,305
Schwab Value Advantage
Money Fund, Investor Shares
5.256%* 6,200,667 6,201
---------
Total Short-Term Investments
(Cost $7,506) 7,506
---------
Total Investments -- 100.0%
(Cost $156,004) 167,447
---------
OTHER ASSETS AND LIABILITIES, NET -- 0.0%
Other assets 371
Liabilities (416)
---------
(45)
---------
TOTAL Net Assets -- 100.0% $167,402
=========
NOTES TO SCHEDULES OF INVESTMENTS
October 31, 1999
+ Non-income producing security.
* Interest rates represent the yield on report date.
(a) Yields shown are effective yields at the time of purchases.
(b) These securities, or a portion thereof, are being used to collateralize open
futures contracts.
ADR--American Depository Receipt.
See accompanying Notes to Financial Statements.
54
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES (in thousands)
October 31, 1999
<TABLE>
Schwab MarketTrack Portfolios(TM)
----------------------------------------------------------------------------------
All Equity Growth Balanced Conservative
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (Cost: $180,768, $341,181,
$345,256, and $156,004, respectively) $202,452 $427,411 $403,199 $167,447
Cash -- -- 3 1
Amounts on deposit with broker 374 -- -- --
Receivables:
Fund shares sold 569 558 453 207
Variation margin 52 -- -- --
Dividends -- 210 273 145
Dividend tax reclaim -- 11 4 --
Interest 3 6 5 2
Prepaid expenses 9 26 22 16
--------- --------- --------- ---------
Total assets 203,459 428,222 403,959 167,818
--------- --------- --------- ---------
LIABILITIES
Payables:
Investments purchased 350 -- -- --
Fund shares redeemed 128 394 537 344
Investment advisory and administration fees 9 31 27 17
Transfer agency and shareholder service fees 13 28 27 11
Accrued expenses 75 110 97 44
--------- --------- --------- --------
Total liabilities 575 563 688 416
--------- --------- --------- --------
Net assets applicable to outstanding shares $202,884 $427,659 $403,271 $167,402
========= ======== ======== ========
NET ASSETS CONSIST OF:
Paid-in capital $180,320 $336,346 $338,686 $155,440
Undistributed/(overdistributed) net investment
income (642) 2,490 5,172 497
Accumulated net realized gain on investments sold
and futures contracts 1,491 2,593 1,470 22
Net unrealized appreciation on investments
and futures contracts 21,715 86,230 57,943 11,443
--------- --------- --------- ---------
$202,884 $427,659 $403,271 $167,402
========= ========= ========= =========
PRICING OF SHARES
Outstanding shares, $0.00001 par value
(unlimited shares authorized) 17,673 26,117 27,151 13,148
Net asset value, offering and redemption
price per share $ 11.48 $ 16.37 $ 14.85 $ 12.73
</TABLE>
See accompanying Notes to Financial Statements.
55
<PAGE>
STATEMENTS OF OPERATIONS (in thousands)
For the year ended October 31, 1999
<TABLE>
Schwab MarketTrack Portfolios(TM)
---------------------------------------------------------------------------------
All Equity Growth Balanced Conservative
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment income:
Dividends (net of foreign tax withheld
of $0, $12, $8 and $2, respectively) $ 913 $ 6,194 $ 9,360 $ 5,481
Interest 100 114 97 54
------- ------- ------- -------
Total investment income 1,013 6,308 9,457 5,535
------- ------- ------- -------
Expenses:
Investment advisory and administration fees 902 2,096 1,995 859
Transfer agency and shareholder service fees 378 878 834 360
Custodian fees 10 18 18 6
Portfolio accounting fees 23 52 50 21
Registration fees 80 46 34 12
Professional fees 20 37 40 16
Shareholder reports 41 53 42 25
Trustees' fees 6 6 6 5
Other expenses 6 19 19 18
------- ------- ------- -------
1,466 3,205 3,038 1,322
Less: expenses reduced (See Note 4) (647) (1,169) (1,119) (501)
------- ------- ------- -------
Net expenses incurred by fund 819 2,036 1,919 821
------- ------- ------- -------
Net investment income 194 4,272 7,538 4,714
------- ------- ------- -------
Net realized gain (loss) on investments and
futures contracts:
Net realized loss on investments sold (237) (196) (252) (521)
Net realized gain received from underlying funds 1,703 3,267 2,503 800
Net realized gain on futures contracts 429 -- -- --
------- ------- ------- -------
Net realized gain on investments and futures
contracts 1,895 3,071 2,251 279
------- ------- ------- -------
Change in net unrealized appreciation on
investments and futures contracts:
Net unrealized appreciation on investments 29,484 51,554 32,821 7,022
Net unrealized appreciation on futures contracts 36 -- -- --
------- ------- ------- -------
Net unrealized appreciation on investments
and futures contracts 29,520 51,554 32,821 7,022
------- ------- ------- -------
Net gain on investments 31,415 54,625 35,072 7,301
------- ------- ------- -------
Increase in net assets resulting from operations $31,609 $58,897 $42,610 $12,015
======= ======= ======= =======
</TABLE>
See accompanying Notes to Financial Statements.
56
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
For the periods ended October 31,
<TABLE>
Schwab MarketTrack Portfolios(TM)
----------------------------------------------------------------------------------------------
All Equity Growth Balanced Conservative
----------------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 1998+ 1999 1998 1999 1998 1999 1998
------- ------- ------ -------- -------- ------- -------- -------
Operations:
Net investment income (loss) $ 194 $ (172) $ 4,272 $ 3,096 $ 7,538 $ 5,001 $ 4,714 $ 2,561
Net realized gain (loss) on
investments and futures contracts 192 (404) (196) 137 (252) 743 (521) 417
Net realized gain received from
underlying funds 1,703 -- 3,267 -- 2,503 -- 800 --
Change in net unrealized
appreciation (depreciation)
on investments and futures
contracts 29,520 (7,805) 51,554 10,470 32,821 8,460 7,022 1,487
-------- -------- -------- -------- -------- -------- -------- --------
Increase (decrease) in net
assets resulting from
operations 31,609 (8,381) 58,897 13,703 42,610 14,204 12,015 4,465
-------- -------- -------- -------- -------- -------- -------- --------
Dividends and distributions:
Dividends to shareholders
from net investment income (22) -- (4,540) (2,098) (6,924) (2,881) (4,511) (2,373)
Dividends in excess of net
investment income (642) -- -- -- -- -- -- --
Distributions to shareholders
from net capital gains -- -- (557) (8,127) (1,483) (3,851) (661) (911)
--------- -------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions to shareholders (664) -- (5,097) (10,225) (8,407) (6,732) (5,172) (3,284)
-------- -------- -------- -------- -------- -------- -------- --------
Capital share transactions:
Proceeds from shares sold 114,034 142,131 195,487 151,971 191,766 157,398 89,099 119,172
Net asset value of shares issued
in reinvestment of dividends 642 -- 4,951 9,908 8,091 6,425 4,821 3,060
Payments for shares redeemed (60,146) (16,341) (102,207) (57,429) (94,693) (58,809) (48,259) (49,074)
-------- -------- -------- -------- -------- -------- -------- --------
Increase in net assets from
capital share transactions 54,530 125,790 98,231 104,450 105,164 105,014 45,661 73,158
-------- -------- -------- -------- -------- -------- -------- --------
Total increase in net assets 85,475 117,409 152,031 107,928 139,367 112,486 52,504 74,339
Net assets:
Beginning of period 117,409 -- 275,628 167,700 263,904 151,418 114,898 40,559
-------- -------- -------- -------- -------- -------- -------- --------
End of period (including
undistributed net investment
income (loss) of $(642),
$(172), $2,490, $2,767,
$5,172, $4,566, $497 and
$293 respectively) $202,884 $117,409 $427,659 $275,628 $403,271 $263,904 $167,402 $114,898
======== ======== ======== ======== ======== ======== ======== ========
Number of fund shares:
Sold 10,710 14,421 12,686 10,768 13,521 11,852 7,124 9,833
Reinvested 64 -- 335 760 589 516 389 257
Redeemed (5,750) (1,772) (6,651) (4,121) (6,672) (4,469) (3,854) (4,063)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase in shares outstanding 5,024 12,649 6,370 7,407 7,438 7,899 3,659 6,027
Shares outstanding:
Beginning of period 12,649 -- 19,747 12,340 19,713 11,814 9,489 3,462
-------- -------- -------- -------- -------- -------- -------- --------
End of period 17,673 12,649 26,117 19,747 27,151 19,713 13,148 9,489
======== ======== ======== ======== ======== ======== ======== ========
+ For the period from May 19, 1998 (commencement of operations) to October 31,
1998.
</TABLE>
See accompanying Notes to Financial Statements.
57
<PAGE>
FINANCIAL HIGHLIGHTS
11/1/98- 5/19/98-
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO 10/31/99 10/31/98
PER-SHARE DATA ($)
- -------------------------------------------------------------------------------
Net asset value at beginning of period 9.28 10.00
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.03 (0.01)
Net realized and unrealized gain (loss)
on investments 2.22 (0.71)
- -------------------------------------------------------------------------------
Total income (loss) from investment operations 2.25 (0.72)
Less distributions:
Dividends from net investment income (0.01) --
Dividends in excess of net investment income (0.04) --
- -------------------------------------------------------------------------------
Total distributions (0.05) --
- -------------------------------------------------------------------------------
Net asset value at end of period 11.48 9.28
- -------------------------------------------------------------------------------
Total return (%) 24.34 (7.20)1
RATIOS/SUPPLEMENTAL DATA (%)
- -------------------------------------------------------------------------------
Ratio of net operating expenses to average net assets 0.54 0.39 (2)
Expense reductions reflected in above ratio 0.43 0.74 (2)
Ratio of net investment income to average net assets 0.13 (0.36)(2)
Portfolio turnover rate 6 2
Net assets, end of period ($ x 1,000) 202,884 117,409
1 Not annualized.
2 Annualized.
See accompanying Notes to Financial Statements.
58
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
11/1/98- 11/1/97- 11/1/96- 11/20/95-
Schwab MarketTrack Growth Portfolio 10/31/99 10/31/98 10/31/97 10/31/96
PER-SHARE DATA ($)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset valueat beginning of period 13.96 13.59 11.30 10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18 0.16 0.17 0.19
Net realized and unrealized gain
on investments 2.48 0.99 2.32 1.13
- ---------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 2.66 1.15 2.49 1.32
Less distributions:
Dividends from net investment income (0.22) (0.16) (0.20) (0.02)
Distributions from capital gains (0.03) (0.62) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (0.25) (0.78) (0.20) (0.02)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period 16.37 13.96 13.59 11.30
- ---------------------------------------------------------------------------------------------------------------------------
Total return (%) 19.24 8.85 22.33 13.24(1)
RATIOS/SUPPLEMENTAL DATA (%)
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to average
net assets 0.58 0.60 0.75 0.89(2)
Expense reductions reflected in above ratio 0.33 0.50 0.49 0.61(2)
Ratio of net investment income to average
net assets 1.21 1.34 1.58 2.03(2)
Portfolio turnover rate 7 14 113 46
Net assets, end of period ($ x 1,000) 427,659 275,628 167,700 105,954
1 Not annualized.
2 Annualized.
</TABLE>
See accompanying Notes to Financial Statements.
59
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<S> <C> <C> <C> <C>
11/1/98- 11/1/97- 11/1/96- 11/20/95-
SCHWAB MARKETTRACK BALANCED PORTFOLIO 10/31/99 10/31/98 10/31/97 10/31/96
PER-SHARE DATA ($)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 13.39 12.82 11.05 10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.29 0.25 0.22 0.25
Net realized and unrealized gain
on investments 1.57 0.86 1.78 0.83
- ---------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 1.86 1.11 2.00 1.08
Less distributions:
Dividends from net investment income (0.33) (0.23) (0.23) (0.03)
Distributions from capital gains (0.07) (0.31) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (0.40) (0.54) (0.23) (0.03)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period 14.85 13.39 12.82 11.05
- ---------------------------------------------------------------------------------------------------------------------------
Total return (%) 14.18 9.02 18.43 10.82(1)
RATIOS/SUPPLEMENTAL DATA (%)
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to average
net assets 0.58 0.59 0.78 0.8(2)
Expense reductions reflected in above ratio 0.33 0.51 0.52 0.67(2)
Ratio of net investment income to average
net assets 2.25 2.33 2.48 2.79(2)
Portfolio turnover rate 7 32 104 44
Net assets, end of period ($ x 1,000) 403,271 263,904 151,418 80,980
1 Not annualized.
2 Annualized.
</TABLE>
See accompanying Notes to Financial Statements.
60
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
11/1/98- 11/1/97- 11/1/96- 11/20/95-
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO 10/31/99 10/31/98 10/31/97 10/31/96
PER-SHARE DATA ($)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset valueat beginning of period 12.11 11.71 10.51 10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.41 0.35 0.35 0.33
Net realized and unrealized gain on
investments 0.68 0.64 1.21 0.48
- ---------------------------------------------------------------------------------------------------------------------------
Total income from investment operations 1.09 0.99 1.56 0.81
Less distributions:
Dividends from net investment income (0.40) (0.35) (0.36) (0.30)
Distributions from capital gains (0.07) (0.24) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (0.47) (0.59) (0.36) (0.30)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period 12.73 12.11 11.71 10.51
- ---------------------------------------------------------------------------------------------------------------------------
Total return (%) 9.13 8.64 15.12 8.18(1)
RATIOS/SUPPLEMENTAL DATA (%)
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to average
net assets 0.57 0.58 0.81 0.89(2)
Expense reductions reflected in above ratio 0.35 0.64 0.84 1.16(2)
Ratio of net investment income to average
net assets 3.28 3.26 3.40 3.49(2)
Portfolio turnover rate 8 58 104 64
Net assets, end of period ($ x 1,000) 167,402 114,898 40,559 22,459
</TABLE>
1 Not annualized.
2 Annualized.
See accompanying Notes to Financial Statements.
61
<PAGE>
NOTES TO FINANCIAL STATEMENTS
For the year ended October 31, 1999
(All currency amounts are in thousands unless otherwise noted.)
1. DESCRIPTION OF THE FUNDS
The Schwab MarketTrack All Equity Portfolio, Schwab MarketTrack Growth
Portfolio, Schwab MarketTrack Balanced Portfolio and Schwab MarketTrack
Conservative Portfolio (the "funds") are series of Schwab Capital Trust (the
"trust"), a no-load, open-end investment management company organized as a
Massachusetts business trust on May 7, 1993 and registered under the Investment
Company Act of 1940 (the "1940 Act").
In addition to the four funds described above, the trust also offers the Schwab
Total Stock Market Index Fund(TM), Schwab S&P 500 Fund, Schwab Small-Cap Index
Fund(R), Schwab International Index Fund(R), Schwab Analytics Fund(R), Schwab
MarketManager International Portfolio, Schwab MarketManager Growth Portfolio,
Schwab MarketManager Balanced Portfolio, Schwab MarketManager Small Cap
Portfolio, Institutional Select S&P 500 Fund, Institutional Select Large-Cap
Value Index Fund, and Institutional Select Small-Cap Value Index Fund. The
assets of each series are segregated and accounted for separately.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with generally
accepted accounting principles. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
SECURITY VALUATION -- Investments in securities traded on an exchange or in the
over-the-counter market are valued at the last-quoted sale price for a given
day, or if a sale is not reported for that day, at the mean between the most
recent quoted bid and asked prices. Securities for which no quotations are
readily available are valued at fair value as determined by the funds'
investment adviser pursuant to guidelines adopted in good faith by the Board of
Trustees. Investments in underlying funds are valued at their respective net
asset values as determined by those funds, in accordance with the 1940 Act, for
a given day. Futures contracts, which are traded on exchanges, are valued at
their settlement as of the close of such exchanges. Short-term securities with
60 days or less to maturity are stated at amortized cost, which approximates
market value.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND REALIZED GAINS (LOSSES) -- Security
transactions are accounted for on a trade-date basis (date the order to buy or
sell is executed). Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income (including accretion of
discount) is recorded on accrual basis. Realized gains and losses from security
transactions are determined on an identified cost basis.
62
<PAGE>
FUTURES CONTRACTS -- The funds may invest in futures contracts. The funds are
required to deposit with the broker an amount of cash equivalents equal to a
certain percentage of the contract amount. This is known as the "initial
margin." The "variation margin" represents the daily fluctuation in the value of
the contract. When the contract is closed, the funds record a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the time it was closed.
The funds will invest in these instruments to participate in the return of an
index. The use of futures contracts involves certain risks, which include (1)
imperfect correlation between the price movement of the contracts and the
underlying securities, (2) inability to close out positions due to different
trading hours, or the temporary absence of a liquid market, for either the
contract or underlying securities. These risks may involve amounts exceeding the
amount recognized in the funds' Statement of Operations at any given time.
During the year, only the Schwab MarketTrack All Equity Portfolio engaged in
futures transactions, and as of October 31, 1999, it had the following open S&P
500 Index futures contracts:
Number of Contract Unrealized
Contracts Value Expiration Appreciation
------------ ---------- ------------ ------------
8 $2,752 12/17/99 $31
Cash and eligible securities on deposit with broker available to cover margin
requirements for open futures positions at October 31, 1999 were $374 and $219,
respectively. the fund has segregated short-term investments with the custodian
for the remaining portion of the contract value.
FOREIGN CURRENCY TRANSLATION -- The accounting records of the funds are
maintained in U.S. dollars. Investment securities and all other assets and
liabilities of the funds denominated in a foreign currency are translated into
U.S. dollars at the exchange rates on October 31, 1999. Purchases and sales of
foreign securities, foreign income receipts and foreign expense payments are
translated into U.S. dollars at the exchange rate in effect on the dates of the
respective transactions.
EXPENSES -- Expenses arising in connection with a fund are charged directly to
that fund. Expenses common to all series of the trust are generally allocated to
each series in proportion to their relative net assets.
FEDERAL INCOME TAXES -- It is each fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all net investment income and realized net capital
gains, if any, to shareholders. Therefore, no federal income tax provision is
required. Each fund is considered a separate entity for tax purposes.
63
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
The aggregate gross unrealized appreciation and depreciation for securities held
by the funds at October 31, 1999 (for financial reporting and federal income tax
purposes) is as follows:
<TABLE>
<S> <C> <C> <C>
Net Unrealized Appreciated Depreciated
Portfolio Appreciation Securities Securities
--------- ------------ ---------- ------------
<S> <C> <C> <C>
Schwab MarketTrack All Equity Portfolio $21,715 $24,005 $(2,290)
Schwab MarketTrack Growth Portfolio 86,230 92,448 (6,218)
Schwab MarketTrack Balanced Portfolio 57,943 65,379 (7,436)
Schwab MarketTrack Conservative Portfolio 11,443 15,609 (4,166)
RECLASSIFICATIONS -- Generally accepted accounting principles require that
certain components of net assets be reclassified between financial and tax
reporting. These reclassifications have no effect on net assets or net asset
values per share.
On the statements of assets and liabilities the following reclassifications were
made:
Accumulated Undistributed
Net Realized Net Investment
Portfolio Gain Income (Loss) Paid-In Capital
------ ------------ -------------- ------------
Schwab MarketTrack Growth Portfolio $12 $ (9) $(3)
Schwab MarketTrack Balanced Portfolio 14 (8) (6)
Schwab MarketTrack Conservative Portfolio 2 1 (3)
</TABLE>
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreement -- The trust has an investment
advisory and administration agreement with Charles Schwab Investment Management,
Inc. (the "investment adviser"). For advisory services and facilities furnished,
each fund pays an annual fee, payable monthly, of 0.54% of the first $500
million of average daily net assets and 0.49% of such net assets over $500
million. Prior to March 1, 1999, each fund paid an annual fee, payable monthly,
of 0.74% of the first $1 billion of average daily net assets, and 0.69% of the
next $1 billion, and 0.64% of such net assets over $2 billion. The investment
adviser has reduced a portion of its fee for the year ended October 31, 1999
(see Note 4).
TRANSFER AGENCY AND SHAREHOLDER SERVICE AGREEMENTS -- The trust has transfer
agency and shareholder service agreements with Charles Schwab & Co., Inc.
("Schwab"). For services provided under these agreements, Schwab receives an
annual fee, payable monthly, of 0.05% of each fund's average daily net assets
for transfer agency services and 0.20% of such net assets for shareholder
services.
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OFFICERS AND TRUSTEES -- Certain officers and trustees of the trust are also
officers and/or directors of the investment adviser and/or Schwab. For the year
ended October 31, 1999, the trust made no direct payments to its officers or
trustees who were "interested persons" within the meaning of the Investment
Company Act of 1940, as amended. The funds incurred fees aggregating $23 related
to the trust's unaffiliated trustees.
OTHER AFFILIATED PARTIES AND TRANSACTIONS -- Pursuant to an Exemptive Order
issued by the SEC, the funds may invest in other SchwabFunds(R). As of October
31, 1999 the Schwab MarketTrack All Equity Portfolio, Schwab MarketTrack Growth
Portfolio, Schwab MarketTrack Balanced Portfolio and Schwab MarketTrack
Conservative Portfolio owned 7%, 10%, 7%, 2% respectively of the outstanding
shares of the Schwab International Index Fund(R); 1%, .8%, .7%, .2%,
respectively of the outstanding shares of the Schwab S&P 500 Fund(R); 0%, 12%,
27%, 18%, respectively of the outstanding shares of the Schwab Total Bond Market
Index Fund(TM); 6%, 9%, 7%, 2%, respectively of the outstanding shares of the
Schwab Small-Cap Index Fund(R), and 0%, .1%, .1%, 0%, respectively of the
outstanding shares of the Schwab Value Advantage Money Fund.
As of October 31, 1999, the Schwab MarketTrack All Equity Portfolio, Schwab
MarketTrack Growth Portfolio, Schwab MarketTrack Balanced Portfolio and Schwab
MarketTrack Conservative Portfolio held common stock of The Charles Schwab
Corp., an affiliated issuer, with a current value of $0, $290, $228 and $47,
respectively.
4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT ADVISER AND SCHWAB
The investment adviser and Schwab guarantee that, through at least February 29,
2000, each fund's total operating expenses, including the expenses indirectly
incurred through investment in underlying SchwabFunds(R), will not exceed 0.60%
of the fund's average daily net assets, after waivers and reimbursements. For
purposes of this guarantee, operating expenses do not include interest expenses,
extraordinary expenses, taxes, foreign taxes and capital items.
For the year ended October 31, 1999, the total of such fees and expenses reduced
by the investment adviser were $647, $1,169, $1,119, and $501, respectively for
the Schwab MarketTrack All Equity Portfolio, Schwab MarketTrack Growth
Portfolio, Schwab MarketTrack Balanced Portfolio and Schwab MarketTrack
Conservative Portfolio.
5. BORROWING AGREEMENT
The trust has lines of credit arrangements with The Bank of New York whereby the
trust may borrow on behalf of the funds, an aggregate amount of up to $250
million on a temporary basis to fund shareholder redemptions. Amounts borrowed
under this arrangement bear interest at periodically negotiated rates and may be
collateralized by the assets of the funds. The funds borrowed against the lines
of credit during the year, but as of October 31, 1999, there were no outstanding
borrowings under this arrangement on behalf of the funds.
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NOTES TO FINANCIAL STATEMENTS (continued)
6. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities, other than short-term
obligations and U.S. Government securities, for the year ended October 31, 1999,
were as follows:
Proceeds of Sales
Portfolio Purchases and Maturities
- -------- ------------ --------------
Schwab MarketTrack All Equity Portfolio $ 63,820 $ 9,524
Schwab MarketTrack Growth Portfolio 117,892 24,483
Schwab MarketTrack Balanced Portfolio 122,936 22,924
Schwab MarketTrack Conservative Portfolio 54,603 10,978
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of:
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio,
Schwab MarketTrack Balanced Portfolio, and
Schwab MarketTrack Conservative Portfolio
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Schwab MarketTrack All Equity
Portfolio, Schwab MarketTrack Growth Portfolio, Schwab MarketTrack Balanced
Portfolio, and Schwab MarketTrack Conservative Portfolio (four of the portfolios
constituting Schwab Capital Trust, hereafter referred to as the "Funds") at
October 31, 1999, and the results of each of their operations for the year then
ended, the changes in each of their net assets and the financial highlights for
each of the periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
San Francisco, CA
December 9, 1999
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TAX DESIGNATIONS (unaudited)
Pursuant to Section 854 (b) (2) of the Internal Revenue Code, the funds hereby
make the following designations as to the percentage of the ordinary income
dividends qualifying for the dividends received deduction for the fiscal year
ended October 31, 1999.
Schwab MarketTrack Growth Portfolio 48%
Schwab MarketTrack Balanced Portfolio 24%
Schwab MarketTrack Conservative Portfolio 21%
<PAGE>
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE>
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE>
THIS SPACE RESERVED FOR YOUR COMMENTS AND QUESTIONS.
A SCHWAB REPRESENTATIVE WILL BE HAPPY TO ASSIST YOU.
<PAGE>
THE SCHWABFUNDS FAMILY-REGISTERED TRADEMARK-
The SchwabFunds Family includes a variety of funds to help meet your investment
needs. You can diversify your portfolio in a single step with our asset
allocation funds. Or you can customize your portfolio with a combination of our
stock funds as well as our taxable and tax-advantaged bond and money market
funds.
Please call 800-435-4000 for a free prospectus and brochure for any of these
SchwabFunds.-Registered Trademark-
This report must be preceded or accompanied by a current prospectus.
METHODS FOR PLACING ORDERS
The information below outlines how Schwab brokerage account investors can place
orders. If you are investing through a third-party investment provider, methods
for placing orders may be different.
PHONE
Call 800-435-4000, day or night (for TDD service, call 800-345-2550).
INTERNET
www.schwab.com/schwabfunds
MAIL
Write to SchwabFunds at:
P. O. Box 7575, San Francisco, CA 94120-7575
When selling or exchanging shares, be sure to include the signatures of at least
one of the persons whose name is on the account.
IN PERSON
Visit the nearest Charles Schwab office.
SCHWAB ASSET ALLOCATION FUNDS
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Schwab MarketManager Growth Portfolio
Schwab MarketManager Balanced Portfolio
SCHWAB STOCK FUNDS
Schwab S&P 500-Registered Trademark- Fund
Schwab 1000 Fund-Registered Trademark-
Schwab Total Stock Market Index Fund-TM-
Schwab Analytics Fund-Registered Trademark-
Schwab Small-Cap Index Fund-Registered Trademark-
Schwab MarketManager Small Cap Portfolio
Schwab International Index Fund-Registered Trademark-
Schwab MarketManager International Portfolio
SCHWAB BOND FUNDS
Schwab YieldPlus Fund-TM-
Schwab Total Bond Market Index Fund
Schwab Short-Term Bond Market Index Fund
Schwab Long-Term Tax-Free Bond Fund
Schwab Short/Intermediate Tax-Free Bond Fund
Schwab California Long-Term Tax-Free Bond Fund
Schwab California Short/Intermediate
Tax-Free Bond Fund
SCHWAB MONEY MARKET FUNDS
Schwab offers an array of money market funds that seek high current income
consistent with safety and liquidity.(1) Choose from taxable or tax-advantaged
alternatives. Many can be linked to your Schwab account to "sweep" cash balances
automatically when you're between investments. Or, for your larger cash
reserves, choose one of our Value Advantage Investments.-Registered Trademark-
(1) Investments in money market funds are neither insured nor guaranteed by the
Federal Deposit Insurance Corporation (FDIC) or any other government agency
and, although they seek to preserve the value of your investment at $1 per
share, it is possible to lose money.
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[LOGO]
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc.
101 Montgomery Street, San Francisco, CA 94104
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
-C- 1999 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
Printed on recycled paper. MKT3813-2 (12/99)
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