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<PAGE> 1
SCHWABFUNDS(R)
SCHWAB MARKETTRACK
PORTFOLIOS(R)
ANNUAL REPORT
AND
AN IMPORTANT NOTICE REGARDING
DELIVERY OF SHAREHOLDER
DOCUMENTS
October 31, 2000
<PAGE> 2
IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS
The Securities and Exchange Commission (SEC) permits 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.
MAILING OF YOUR SCHWABFUNDS(R) SHAREHOLDER DOCUMENTS MAY BE HOUSEHOLDED
INDEFINITELY UNLESS YOU INSTRUCT US OTHERWISE.
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/schwabfunds.
If you would prefer that your SchwabFunds mailings not be householded, 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> 3
SCHWABFUNDS(R)
SCHWAB MARKETTRACK
PORTFOLIOS(R)
- ALL EQUITY
- GROWTH
- BALANCED
- CONSERVATIVE
Annual Report
October 31, 2000
<PAGE> 4
SCHWAB MARKETTRACK PORTFOLIOS(R)
We are pleased to bring you this annual report for the Schwab MarketTrack
Portfolios (the portfolios) for the period ended October 31, 2000. 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:(R)
Newspaper Listing** Symbol
MT AllEq SWEGX
MT Gro SWHGX
MT Bal SWBGX
MT Cons SWCGX
** Note that newspaper listings will indicate the previous day's quotation.
CONTENTS
--------------------------------------------------------------------------------
A Message from the Chairman 1
--------------------------------------------------------------------------------
Market Overview 2
--------------------------------------------------------------------------------
Schwab MarketTrack All Equity Portfolio
Portfolio Performance 7
Portfolio Snapshot 9
--------------------------------------------------------------------------------
Schwab MarketTrack Growth Portfolio
Portfolio Performance 11
Portfolio Snapshot 13
--------------------------------------------------------------------------------
Schwab MarketTrack Balanced Portfolio
Portfolio Performance 15
Portfolio Snapshot 17
--------------------------------------------------------------------------------
Schwab MarketTrack Conservative Portfolio
Portfolio Performance 19
Portfolio Snapshot 21
--------------------------------------------------------------------------------
Portfolio Management 23
--------------------------------------------------------------------------------
Portfolio Discussion 24
--------------------------------------------------------------------------------
Glossary 27
--------------------------------------------------------------------------------
Financial Statements and Notes 29
--------------------------------------------------------------------------------
<PAGE> 5
A MESSAGE FROM THE CHAIRMAN
[PHOTO OF CHARLES SCHWAB]
Dear Shareholder,
During the last few years, the benefits of investing have been readily apparent,
while the risks have been somewhat less obvious. In recent months, however,
investors have been subject to larger swings in the market, even within the span
of a single day.
Given this divergent environment, the message is clear: Expect volatility,
maintain a long-term view and ensure your investment strategy is appropriate for
your risk tolerance and time horizon. One way to lessen the impact of volatility
on your portfolio is to adequately diversify your investments, both within and
across asset sectors, namely stocks, bonds and cash equivalents. With its broad
range of funds, SchwabFunds(R) can help form the foundation of a diversified
investment plan. Our asset allocation funds can even provide diversification
within a single fund.
We recently added four new sector funds, the Schwab Focus Funds, to our
SchwabFunds offering. Each invests in a group of industries within a specific
sector -- Communications, Financial Services, Healthcare and Technology -- and
can be an effective complement to individual stock investing. Each Focus Fund
concentrates its investing in companies in a specific sector and may involve a
greater degree of risk than an investment in mutual funds with broader
diversification. For more information on the Schwab Focus Funds, please call
1-800-435-4000 and request a free prospectus. The prospectus contains more
information on fund fees and expenses as well as risks. Please read it carefully
before investing.
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
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.
Thank you for your investment in SchwabFunds. For its part, SchwabFunds will do
everything we can to warrant the trust you have placed in us.
Sincerely,
/s/ Charles Schwab
------------------
Charles Schwab
October 31, 2000
1
<PAGE> 6
MARKET OVERVIEW
GROWTH PERIOD IS THE LONGEST
IN U.S. HISTORY.
As of October 31, 2000, U.S. economic expansion was in the middle of its tenth
year, marking the longest period of continuous growth in U.S. history. The main
force behind the expansion has been high levels of consumer spending, fueled by
increases in personal income, personal wealth and consumer confidence.
The pace of economic growth remained robust through the second quarter of 2000,
then moderated somewhat in the third quarter, in part due to reduced government
spending. Actual Q3 growth was lower than many analysts had expected.
Although energy prices soared, inflation still appears to remain in check. The
GDP price deflator, a widely used inflation indicator, declined slightly from
2.4% in the second quarter to 2.0% in the third quarter.
Source: Bloomberg L P
[PHOTO]
PRODUCTIVITY EMERGES AS A KEY FACTOR.
In recent years, the Federal Reserve Bank (the Fed) demonstrated its resolve to
moderate the pace of the economy's growth by raising short-term interest rates
(since June 1999, it has raised these rates six
ASSET CLASS PERFORMANCE COMPARISON % RETURNS DURING THE REPORT PERIOD
--------------------------------------------------------------------------------
This graph compares the performance of four widely used measures of securities
market performance, including U.S. stocks and bonds and international stocks.
[LINE CHART]
<TABLE>
<CAPTION>
Lehman Brothers U.S.
Aggregate
Bond MSCI-EAFE(R) Russell 2000(R) S&P 500(R)
Index Index Index Index
<S> <C> <C> <C> <C>
11/05/99 0.0061 0.005 0.0323 0.0054
11/12/99 0.0073 0.02 0.0495 0.0244
11/19/99 0.0032 0.039 0.0762 0.0435
11/26/99 0.0011 0.052 0.0708 0.0395
12/03/99 0.0015 0.053 0.0843 0.0522
12/10/99 0.0078 0.067 0.0894 0.041
12/17/99 -0.003 0.068 0.0889 0.0439
12/24/99 -0.0061 0.107 0.1268 0.0713
12/31/99 -0.0051 0.126 0.1796 0.0804
01/07/00 -0.0057 0.074 0.1415 0.06
01/14/00 -0.0103 0.101 0.1867 0.0774
01/21/00 -0.0119 0.076 0.2483 0.0599
01/28/00 -0.0052 0.071 0.1801 0.0002
02/04/00 -0.0039 0.093 0.2292 0.0481
02/11/00 -0.0068 0.1 0.2568 0.0207
02/18/00 -0.0015 0.083 0.277 -0.0095
02/25/00 0.005 0.092 0.3029 -0.0189
03/03/00 0.0068 0.115 0.4004 0.0381
03/10/00 0.0048 0.114 0.4137 0.0277
03/17/00 0.0118 0.101 0.3458 0.0788
03/24/00 0.0105 0.123 0.3449 0.1251
03/31/00 0.0168 0.121 0.2632 0.1049
04/07/00 0.0249 0.11 0.2726 0.118
04/14/00 0.0242 0.071 0.064 0.0002
04/21/00 0.0233 0.062 0.1297 0.0577
04/28/00 0.0138 0.061 0.1872 0.0717
05/05/00 -0.0004 0.057 0.203 0.0571
05/12/00 -0.0017 0.046 0.1521 0.0485
05/19/00 0.0003 0.008 0.1258 0.0381
05/26/00 0.0112 0.014 0.0738 0.0168
06/02/00 0.023 0.081 0.2045 0.0916
06/09/00 0.0262 0.079 0.2287 0.0766
06/16/00 0.0349 0.075 0.2075 0.0822
06/23/00 0.0253 0.065 0.2002 0.0652
06/30/00 0.0344 0.073 0.2155 0.0757
07/07/00 0.0391 0.083 0.2406 0.0937
07/14/00 0.0376 0.079 0.2748 0.1166
07/21/00 0.0434 0.055 0.228 0.0946
07/28/00 0.0433 0.02 0.152 0.0501
08/04/00 0.0513 0.016 0.1839 0.0827
08/11/00 0.0531 0.031 0.2002 0.0893
08/18/00 0.0544 0.039 0.2129 0.104
08/25/00 0.0584 0.046 0.2359 0.115
09/01/00 0.0616 0.057 0.2758 0.127
09/08/00 0.0606 0.014 0.2598 0.1075
09/15/00 0.0588 -0.009 0.2506 0.0862
09/22/00 0.0613 -0.024 0.2224 0.0735
09/29/00 0.0657 -0.017 0.2293 0.0653
10/06/00 0.0654 -0.02 0.1579 0.0448
10/13/00 0.0692 -0.051 0.1332 0.019
10/20/00 0.0749 -0.052 0.15 0.0361
10/27/00 0.0736 -0.037 0.1321 0.0233
10/31/00 0.073 -0.029 0.1741 0.0609
</TABLE>
S&P 500(R) INDEX: measures U.S. large-cap stocks
RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in Europe,
Australasia and the Far East
LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond market
These figures assume dividends and distributions were reinvested. Index figures
don't include trading and management costs, which would lower performance.
Indices are unmanaged and you can't invest in them directly. Data source:
Charles Schwab & Co., Inc. (Schwab).
--------------------------------------------------------------------------------
2
<PAGE> 7
times). The Fed has voiced concern that increases in wages could outpace gains
in productivity, forcing companies to boost prices and potentially sparking
inflation.
Productivity gains are important because they enable companies to achieve
greater output for every dollar spent for labor costs. Spurred mainly by
technological advances, productivity grew at 4.0% during the first half of 2000
and 3.3% during the third quarter (these figures include all economic sectors
except farming). However, third quarter productivity gains were partially offset
by a 2.5% increase in unit labor costs -- costs that had declined in the
previous quarter.
Source: Bloomberg L.P.
UNEMPLOYMENT HITS NEW LOWS, YET INFLATION REMAINS AT BAY.
The unemployment rate has been trending downward for years. In April it fell
below 4% -- the lowest level in 30 years and one previously considered
improbable without high inflation.
Overall, labor markets continue to be extremely tight, and there has been
evidence in some regions of labor shortages driving up wages. In spite of these
regional trends, overall increases in prices and wages during the report period
were relatively
SIX FACTORS AND THEIR EFFECTS ON THESE FUNDS.
--------------------------------------------------------------------------------
The following charts show recent figures for five common measures of the state
of the U.S. economy and the stock market, as well as one measure of
international stock performance.
While the relationship of each of these factors to the performance of the funds
is complex, the captions over each chart and the discussion above include
analysis of how we believe these factors may have influenced market behavior
during the report period.
--------------------------------------------------------------------------------
REAL GDP GROWTH
Annualized growth rate for each quarter shown
The U.S. economy has grown steadily for more than nine years. Real GDP grew at a
2.4% annualized rate in Q3 2000 -- slower than the 5.2% for the first half of
the year.
[BAR CHART]
<TABLE>
<S> <C>
Dec-90 -3.2
Mar-91 -2
Jun-91 2.3
Sep-91 1
Dec-91 2.2
Mar-92 3.8
Jun-92 3.8
Sep-92 3.1
Dec-92 5.4
Mar-93 -0.1
Jun-93 2.5
Sep-93 1.8
Dec-93 6.2
Mar-94 3.4
Jun-94 5.7
Sep-94 2.2
Dec-94 5
Mar-95 1.5
Jun-95 0.8
Sep-95 3.1
Dec-95 3.2
Mar-96 2.9
Jun-96 6.8
Sep-96 2
Dec-96 4.6
Mar-97 4.4
Jun-97 5.9
Sep-97 4.2
Dec-97 2.8
Mar-98 6.5
Jun-98 2.9
Sep-98 3.4
Dec-98 5.6
Mar-99 3.5
Jun-99 2.5
Sep-99 5.7
Dec-99 8.3
Mar-00 4.8
Jun-00 5.6
Sep-00 2.4
</TABLE>
Gross domestic product (GDP), a broad measure of the goods and services produced
in the United States during a given time period, is a prime indicator of the
health of the country's economy. Typically, stock investors see increases in GDP
as a positive, since it indicates stronger demand, production and corporate
earnings. The figures shown here are adjusted for inflation.
Data source: Bloomberg L.P.
--------------------------------------------------------------------------------
3
<PAGE> 8
modest, due in part to strong productivity gains. However, an upturn in labor
costs may make the Fed more sensitive to other potential signs of inflation.
--------------------------------------------------------------------------------
"Old economy" stocks and value stocks regained popularity as many newer
company stocks fell.
--------------------------------------------------------------------------------
STOCKS STUMBLE, RECOVER; MOST BONDS POST HEALTHY RETURNS.
U.S. equities, as measured by the major indices (chart, page 2) had positive
returns for the report period. By historical standards, they also remained
highly valued (P/E chart, page 5).
However, the report period saw extreme volatility in the stock market,
particularly for U.S. stocks. In March and April, the P/E for the Nasdaq 100
Index lost one-third of its value in just a two-week period. (The Nasdaq 100
Index reflects 100 of the largest Nasdaq companies across major industry groups,
including computers, telecommunications, retail/wholesale and biotechnology, but
excluding financial companies.) Volatility continued through
--------------------------------------------------------------------------------
U.S. UNEMPLOYMENT RATE
Adjusted for seasonal variations
Unemployment hit a three-decade low of 3.9% in April. Although it trended up to
4.1% during the summer months, it closed the reporting period back at 3.9%.
[LINE CHART]
<TABLE>
<S> <C>
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
Nov-91 7
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
Apr-93 7.1
May-93 7.1
Jun-93 7
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
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 5.4
Apr-95 5.8
May-95 5.6
Jun-95 5.6
Jul-95 5.7
Aug-95 5.7
Sep-95 5.6
Oct-95 5.5
Nov-95 5.6
Dec-95 5.6
Jan-96 5.7
Feb-96 5.5
Mar-96 5.5
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 5.4
Dec-96 5.4
Jan-97 5.3
Feb-97 5.3
Mar-97 5.2
Apr-97 5
May-97 4.9
Jun-97 5
Jul-97 4.8
Aug-97 4.8
Sep-97 4.9
Oct-97 4.7
Nov-97 4.6
Dec-97 4.7
Jan-98 4.7
Feb-98 4.6
Mar-98 4.7
Apr-98 4.3
May-98 4.4
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 4.4
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
Nov-99 4.1
Dec-99 4.1
Jan-00 4
Feb-00 4.1
Mar-00 4.1
Apr-00 3.9
May-00 4.1
Jun-00 4
Jul-00 4
Aug-00 4.1
Sep-00 3.9
Oct-00 3.9
</TABLE>
This measures the portion of the U.S. labor force that is unemployed and is
either seeking a job or waiting to return to one. Low unemployment often
accompanies prosperity and is generally a positive factor for investors,
although very low unemployment may boost inflation as employers raise pay to
compete for workers. Rising unemployment may mean a softening economy.
Data source: Bloomberg L.P.
MEASURES OF INFLATION
Annualized figures for the Consumer Price Index (monthly) and Employment Cost
Index (quarterly)
CPI was up 3.4% for the 12 months ended October 31, 2000 (2.5% if food and
energy are excluded). ECI rose 4.3% for the 12 months ended September 30, 2000.
[LINE CHART]
<TABLE>
<CAPTION>
Consumer Employment
Date Price Index Cost Index
<S> <C> <C>
Sep-90 6.2 5.2
Oct-90 6.4 5.2
Nov-90 6.3 5.2
Dec-90 6.3 4.9
Jan-91 5.6 4.9
Feb-91 5.3 4.9
Mar-91 4.9 4.6
Apr-91 4.8 4.6
May-91 5 4.6
Jun-91 4.7 4.6
Jul-91 4.4 4.6
Aug-91 3.8 4.6
Sep-91 3.4 4.3
Oct-91 2.8 4.3
Nov-91 3.1 4.3
Dec-91 3 4.3
Jan-92 2.7 4.3
Feb-92 2.8 4.3
Mar-92 3.2 4
Apr-92 3.2 4
May-92 3 4
Jun-92 3 3.6
Jul-92 3.2 3.6
Aug-92 3.1 3.6
Sep-92 3 3.5
Oct-92 3.3 3.5
Nov-92 3.1 3.5
Dec-92 3 3.5
Jan-93 3.2 3.5
Feb-93 3.2 3.5
Mar-93 3 3.5
Apr-93 3.2 3.5
May-93 3.2 3.5
Jun-93 3 3.6
Jul-93 2.8 3.6
Aug-93 2.8 3.6
Sep-93 2.8 3.6
Oct-93 2.8 3.6
Nov-93 2.7 3.6
Dec-93 2.8 3.5
Jan-94 2.5 3.5
Feb-94 2.5 3.5
Mar-94 2.6 3.2
Apr-94 2.4 3.2
May-94 2.3 3.2
Jun-94 2.5 3.2
Jul-94 2.7 3.2
Aug-94 2.9 3.2
Sep-94 3 3.2
Oct-94 2.6 3.2
Nov-94 2.7 3.2
Dec-94 2.6 3
Jan-95 2.8 3
Feb-95 2.9 3
Mar-95 2.9 2.9
Apr-95 2.8 2.9
May-95 3.1 2.9
Jun-95 3 2.9
Jul-95 2.8 2.9
Aug-95 2.6 2.9
Sep-95 2.5 2.7
Oct-95 2.8 2.7
Nov-95 2.6 2.7
Dec-95 2.6 2.8
Jan-96 2.7 2.8
Feb-96 2.7 2.8
Mar-96 2.9 2.8
Apr-96 2.8 2.8
May-96 2.9 2.8
Jun-96 2.8 2.9
Jul-96 2.9 2.9
Aug-96 2.8 2.9
Sep-96 3 2.8
Oct-96 3 2.8
Nov-96 3.2 2.8
Dec-96 3.2 2.9
Jan-97 3 2.9
Feb-97 3 2.9
Mar-97 2.8 2.9
Apr-97 2.5 2.9
May-97 2.2 2.9
Jun-97 2.3 2.8
Jul-97 2.2 2.8
Aug-97 2.2 2.8
Sep-97 2.2 3
Oct-97 2.1 3
Nov-97 1.9 3
Dec-97 1.7 3.3
Jan-98 1.6 3.3
Feb-98 1.4 3.3
Mar-98 1.4 3.3
Apr-98 1.5 3.3
May-98 1.7 3.3
Jun-98 1.6 3.5
Jul-98 1.7 3.5
Aug-98 1.7 3.5
Sep-98 1.4 3.7
Oct-98 1.4 3.7
Nov-98 1.5 3.7
Dec-98 1.6 3.4
Jan-99 1.7 3.4
Feb-99 1.7 3.4
Mar-99 1.8 3
Apr-99 2.3 3
May-99 2.1 3
Jun-99 2 3.2
Jul-99 2.1 3.2
Aug-99 2.3 3.2
Sep-99 2.6 3.1
Oct-99 2.6 3.1
Nov-99 2.6 3.1
Dec-99 2.7 3.4
Jan-00 2.7 3.4
Feb-00 3.2 3.4
Mar-00 3.8 4.3
Apr-00 3.1 4.3
May-00 3.2 4.3
Jun-00 3.7 4.4
Jul-00 3.7 4.4
Aug-00 3.4 4.4
Sep-00 3.5 4.3
Oct-00 3.4
</TABLE>
The Consumer Price Index (CPI) tracks changes in the cost of goods and services
and is the most common measure of inflation. The Employment Cost Index (ECI)
measures the cost of employing workers, including benefits costs. Financial
markets are very sensitive to increases in inflation because of the potentially
negative impact on corporate earnings, investors and consumers.
Data source: Bloomberg L.P.
--------------------------------------------------------------------------------
4
<PAGE> 9
the end of the report period as investors shifted their focus from hard-hit
sectors such as technology to undervalued and established companies.
Outside the U.S., stocks were held back by uncertainty over oil prices and
corporate earnings. For U.S. investors, the continued rise of the dollar against
the euro and yen was a factor as well, because it eroded the dollar value of
foreign stocks.
[PHOTO]
A major factor for bonds during the report period was the U.S. Treasury's
decision to use some of the budget surplus to buy back its own bonds. This
created a major change in the picture for supply and demand of bonds, and
resulted in an inverted yield curve (a situation where short-term bonds actually
pay higher yields than long-term bonds). While short-term interest rates rose
during the report period, intermediate and long-term rates actually fell.
Although these events were comparatively unusual, their net effect on
performance was generally positive for bond investments.
LOOKING AHEAD: GROWTH MAY CONTINUE, BUT RATE MAY SLOW.
Through its aggressive tightening of short-term interest rates in late 1999 and
the first half of 2000,
--------------------------------------------------------------------------------
S&P 500(R) PRICE/EARNINGS RATIO (P/E)
Dollar-weighted average P/E for all stocks in the index
Despite the recent downturn in stocks, the P/E ratio of the S&P 500 ended the
report period at 25.6, a level still significantly above the 30-year average of
15.8.
[LINE CHART]
<TABLE>
<CAPTION>
S&P 500
S&P 500 P/E Ratio
P/E Ratio 30-Year Average
<S> <C> <C>
Sep-90 14.34 15.8
Oct-90 14.67 15.8
Nov-90 14.65 15.8
Dec-90 15.28 15.8
Jan-91 15.55 15.8
Feb-91 16.87 15.8
Mar-91 17.56 15.8
Apr-91 17.77 15.8
May-91 18.23 15.8
Jun-91 17.7 15.8
Jul-91 18.37 15.8
Aug-91 20.35 15.8
Sep-91 19.98 15.8
Oct-91 20.37 15.8
Nov-91 20.99 15.8
Dec-91 22.89 15.8
Jan-92 23.03 15.8
Feb-92 25.78 15.8
Mar-92 25.51 15.8
Apr-92 26.03 15.8
May-92 25.22 15.8
Jun-92 25.23 15.8
Jul-92 26.08 15.8
Aug-92 24.22 15.8
Sep-92 24.7 15.8
Oct-92 24.64 15.8
Nov-92 23.8 15.8
Dec-92 24.31 15.8
Jan-93 24.29 15.8
Feb-93 24.44 15.8
Mar-93 23.48 15.8
Apr-93 22.92 15.8
May-93 22.96 15.8
Jun-93 22.9 15.8
Jul-93 22.91 15.8
Aug-93 24.21 15.8
Sep-93 23.77 15.8
Oct-93 24.04 15.8
Nov-93 22.52 15.8
Dec-93 22.95 15.8
Jan-94 22.98 15.8
Feb-94 21.17 15.8
Mar-94 20.34 15.8
Apr-94 20.1 15.8
May-94 20.16 15.8
Jun-94 19.77 15.8
Jul-94 18.63 15.8
Aug-94 18.91 15.8
Sep-94 18.32 15.8
Oct-94 17.51 15.8
Nov-94 16.56 15.8
Dec-94 16.98 15.8
Jan-95 16.05 15.8
Feb-95 16.22 15.8
Mar-95 16.47 15.8
Apr-95 16 15.8
May-95 16.45 15.8
Jun-95 16.77 15.8
Jul-95 16.61 15.8
Aug-95 16.18 15.8
Sep-95 16.85 15.8
Oct-95 16.18 15.8
Nov-95 17.86 15.8
Dec-95 17.41 15.8
Jan-96 18.29 15.8
Feb-96 18.57 15.8
Mar-96 18.94 15.8
Apr-96 19.16 15.8
May-96 19.48 15.8
Jun-96 19.3 15.8
Jul-96 18.31 15.8
Aug-96 18.62 15.8
Sep-96 19.73 15.8
Oct-96 19.59 15.8
Nov-96 21.06 15.8
Dec-96 20.77 15.8
Jan-97 20.52 15.8
Feb-97 20.95 15.8
Mar-97 19.87 15.8
Apr-97 20.23 15.8
May-97 21.45 15.8
Jun-97 22.44 15.8
Jul-97 23.99 15.8
Aug-97 22.74 15.8
Sep-97 24 15.8
Oct-97 22.84 15.8
Nov-97 24.12 15.8
Dec-97 24.53 15.8
Jan-98 25.03 15.8
Feb-98 26.49 15.8
Mar-98 27.98 15.8
Apr-98 26.69 15.8
May-98 26.15 15.8
Jun-98 27.27 15.8
Jul-98 26.94 15.8
Aug-98 22.9 15.8
Sep-98 24.35 15.8
Oct-98 28.07 15.8
Nov-98 30.31 15.8
Dec-98 32.15 15.8
Jan-99 33.9 15.8
Feb-99 32.64 15.8
Mar-99 33.92 15.8
Apr-99 33.9 15.8
May-99 32.74 15.8
Jun-99 34.7 15.8
Jul-99 31.31 15.8
Aug-99 31.21 15.8
Sep-99 30.39 15.8
Oct-99 30.41 15.8
Nov-99 30.65 15.8
Dec-99 32.53 15.8
Jan-00 29.78 15.8
Feb-00 28.59 15.8
Mar-00 31.5 15.8
Apr-00 29.41 15.8
May-00 28.82 15.8
Jun-00 29.31 15.8
Jul-00 28.94 15.8
Aug-00 30.35 15.8
Sep-00 28.64 15.8
Oct-00 25.6 15.8
</TABLE>
P/E is stock price divided by earnings per share (for one company or, as here,
an entire index). P/E indicates the value that investors have placed on a stock,
or group of them. When index P/E is well above its long-term average, it shows
high investor confidence about future earnings growth. It also can mean that if
confidence wanes, there could be a substantial drop in stock prices.
Data source: Bloomberg L.P.
YIELDS OF U.S. TREASURY BONDS
Effective yields of five-year and ten-year Treasuries
With its buyback program, the U.S. Treasury emerged as a major customer for its
own bonds, driving prices up (and yields down) on long-term Treasuries.
[LINE CHART]
<TABLE>
<CAPTION>
Five-Year Ten-Year
Treasury Treasury
Bond Yield Bond Yield
<S> <C> <C>
Sep-90 8.46 8.8
Oct-90 8.22 8.62
Nov-90 7.99 8.25
Dec-90 7.68 8.07
Jan-91 7.61 8.01
Feb-91 7.7 8.03
Mar-91 7.75 8.06
Apr-91 7.61 8.01
May-91 7.71 8.06
Jun-91 7.88 8.23
Jul-91 7.74 8.15
Aug-91 7.34 7.82
Sep-91 6.91 7.45
Oct-91 6.74 7.46
Nov-91 6.48 7.38
Dec-91 5.93 6.7
Jan-92 6.43 7.27
Feb-92 6.56 7.25
Mar-92 6.92 7.53
Apr-92 6.88 7.58
May-92 6.6 7.32
Jun-92 6.27 7.12
Jul-92 5.82 6.71
Aug-92 5.58 6.6
Sep-92 5.32 6.35
Oct-92 5.89 6.79
Nov-92 6.22 6.94
Dec-92 5.99 6.69
Jan-93 5.55 6.36
Feb-93 5.21 6.02
Mar-93 5.24 6.02
Apr-93 5.11 6.01
May-93 5.37 6.15
Jun-93 5.05 5.78
Jul-93 5.15 5.81
Aug-93 4.79 5.45
Sep-93 4.77 5.38
Oct-93 4.85 5.43
Nov-93 5.16 5.82
Dec-93 5.21 5.79
Jan-94 5.02 5.64
Feb-94 5.57 6.13
Mar-94 6.23 6.74
Apr-94 6.64 7.04
May-94 6.76 7.15
Jun-94 6.95 7.32
Jul-94 6.73 7.11
Aug-94 6.8 7.17
Sep-94 7.28 7.6
Oct-94 7.49 7.81
Nov-94 7.79 7.91
Dec-94 7.83 7.82
Jan-95 7.51 7.58
Feb-95 7.04 7.2
Mar-95 7.07 7.2
Apr-95 6.88 7.06
May-95 6.05 6.28
Jun-95 5.97 6.2
Jul-95 6.16 6.43
Aug-95 6.07 6.28
Sep-95 6.02 6.18
Oct-95 5.81 6.02
Nov-95 5.52 5.74
Dec-95 5.38 5.57
Jan-96 5.24 5.58
Feb-96 5.73 6.1
Mar-96 6.09 6.33
Apr-96 6.41 6.67
May-96 6.63 6.85
Jun-96 6.46 6.71
Jul-96 6.57 6.79
Aug-96 6.73 6.94
Sep-96 6.46 6.7
Oct-96 6.07 6.34
Nov-96 5.83 6.04
Dec-96 6.21 6.42
Jan-97 6.25 6.49
Feb-97 6.39 6.55
Mar-97 6.75 6.9
Apr-97 6.57 6.72
May-97 6.5 6.66
Jun-97 6.38 6.5
Jul-97 5.9 6.01
Aug-97 6.22 6.34
Sep-97 5.99 6.1
Oct-97 5.71 5.83
Nov-97 5.84 5.87
Dec-97 5.71 5.74
Jan-98 5.38 5.51
Feb-98 5.59 5.62
Mar-98 5.62 5.65
Apr-98 5.64 5.67
May-98 5.55 5.55
Jun-98 5.47 5.45
Jul-98 5.5 5.49
Aug-98 4.8 4.98
Sep-98 4.22 4.42
Oct-98 4.23 4.61
Nov-98 4.48 4.71
Dec-98 4.54 4.65
Jan-99 4.55 4.65
Feb-99 5.22 5.29
Mar-99 5.1 5.24
Apr-99 5.21 5.35
May-99 5.58 5.62
Jun-99 5.65 5.78
Jul-99 5.79 5.9
Aug-99 5.87 5.97
Sep-99 5.75 5.88
Oct-99 5.95 6.02
Nov-99 6.11 6.19
Dec-99 6.34 6.44
Jan-00 6.68 6.67
Feb-00 6.6 6.41
Mar-00 6.31 6
Apr-00 6.54 6.21
May-00 6.52 6.27
Jun-00 6.18 6.03
Jul-00 6.15 6.03
Aug-00 5.97 5.72
Sep-00 5.85 5.8
Oct-00 5.81 5.75
</TABLE>
Yields, or interest rates, represent the cost of borrowing money. Rapid economic
growth or the expectation of higher inflation can drive rates up, while the
opposite conditions can push rates down. Other factors being equal, low interest
rates are positive for stock investors because low borrowing costs can help
boost corporate earnings.
Data source: Bloomberg L.P.
--------------------------------------------------------------------------------
5
<PAGE> 10
the Fed has sought to slow the economy to a "soft landing" -- a growth rate that
is high enough to avoid recession but not so high as to tempt inflation.
Recent evidence indicates that economic growth has indeed slowed from its torrid
pace of the first half of 2000.
The question remains whether the slowdown is only a temporary condition prompted
by a build-up of manufacturing inventories or is the "soft landing" desired by
the Fed.
--------------------------------------------------------------------------------
The consensus among economists is that the U.S. economy appears poised for
continued growth, albeit at lower rates than those of the past few years.
--------------------------------------------------------------------------------
Source: Schwab.
Factors to watch may include consumer spending and employer competition for
workers. If the slowdown is in fact the desired "soft landing," we would expect
to see a slackening in one or both of these factors.
--------------------------------------------------------------------------------
STOCK MARKETS OF SELECTED COUNTRIES
Four best-performing and four worst-performing countries in the MSCI-EAFE(R)
Index during the report period.
While foreign stocks rose 11.8% when measured in their local currencies, a
rising U.S. dollar changed that into a - 2.9% return for American investors.
[BAR CHART]
<TABLE>
<S> <C>
Finland 25.54
Denmark 16.93
Norway 14.06
Italy 11.77
MSCI-EAFE Index -2.9
Ireland -13.08
Austria -13.92
Belgium -17.75
New Zealand -29.06
</TABLE>
The MSCI Europe, Australasia and Far East (EAFE) Index includes 19 non-U.S.
countries with major stock markets. In any report period, the gap between the
best and worst performers may be substantial. Similarly, a country's performance
may vary widely from period to period, although it's possible for a country to
perform above or below average for an extended time.
Data source: Bloomberg L.P.
--------------------------------------------------------------------------------
6
<PAGE> 11
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO
PORTFOLIO PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 10/31/00
<TABLE>
<CAPTION>
Since Inception
One Year (5/19/98)
<S> <C> <C>
--------------------------------------------------------------------------------
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO 1 6.37% 8.71%
--------------------------------------------------------------------------------
All Equity Composite Index 2 14.07% --
--------------------------------------------------------------------------------
S&P 500(R) Index 6.09% 11.90%
--------------------------------------------------------------------------------
</TABLE>
1 A portion of the fund's expenses was reduced during the reporting period.
Without such reductions, the fund's average annual returns would have been
lower.
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. As of 10/31/00, there
were 2,620 large-cap funds, 892 small-cap funds and 732 foreign funds
tracked by Morningstar. Performance includes changes in price and
reinvestment of dividends and capital gains.
Past performance doesn't indicate future results.
7
<PAGE> 12
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
<TABLE>
<CAPTION>
Schwab
MarketTrack All All Equity
Equity Portfolio S&P 500(R) Index Composite Index
<S> <C> <C> <C>
5/20/98 10000 10000
5/31/98 9850 9751 10000
6/30/98 10050 10147 10124
7/31/98 9810 10039 9907
8/31/98 8330 8590 8335
9/30/98 8610 9140 8580
10/31/98 9280 9883 9132
11/30/98 9800 10482 9656
12/31/98 10303 11086 10200
1/31/99 10483 11549 10393
2/28/99 10041 11190 9962
3/31/99 10383 11638 10290
4/30/99 10896 12088 10799
5/31/99 10664 11803 10631
6/30/99 11197 12458 11238
7/31/99 11137 12069 11176
8/31/99 11056 12009 11073
9/30/99 11006 11680 10988
10/31/99 11539 12419 11440
11/30/99 11971 12672 12105
12/31/99 12885 13418 13290
1/31/00 12162 12744 12795
2/29/00 12498 12503 13639
3/31/00 13159 13726 14064
4/30/00 12610 13313 13342
5/31/00 12223 13040 12876
6/30/00 12752 13362 13543
7/31/00 12386 13154 13220
8/31/00 13098 13971 14042
9/30/00 12477 13233 13444
10/31/00 12274 13177 13049
</TABLE>
The above graph compares the growth of a hypothetical $10,000 investment in the
Schwab MarketTrack All Equity Portfolio, made at its inception, to a similar
investment in the S&P 500(R) Index and the All Equity Composite Index. The
hypothetical $10,000 investment assumes investment on the first day of the month
following inception and includes changes in share price and reinvestment of
dividends and capital gains. A detailed analysis of the respective performances
of the portfolios and the indices is provided in the Portfolio Discussion
section later in this report.
THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS.
TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. Indices are unmanaged and do not reflect advisory fees and other expenses
associated with an investment in the portfolio. Investors cannot invest in an
index directly.
NET ASSETS
<TABLE>
<S> <C>
--------------------------------------------------------------------------------
Total net assets as of 10/31/99 ($M) $203
--------------------------------------------------------------------------------
Total net assets as of 10/31/00 ($M) $441
--------------------------------------------------------------------------------
Percentage growth from 10/31/99 to 10/31/00 117%
--------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 13
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO
PORTFOLIO SNAPSHOT
Schwab MarketTrack All Equity Portfolio uses an indexing strategy to invest in
three distinct segments of the stock market: large-cap, small-cap and
international stocks. The portfolio's target mix, as illustrated below, is
achieved either directly or through investment in other SchwabFunds.(R) The
portfolio employs an indexing strategy to capture the returns inherent in its
target asset categories. The information below and on the following page
provides a snapshot of the portfolio's characteristics as of October 31, 2000,
and is not indicative of its composition after that date. The terms used below
are defined in the Glossary. A complete list of the securities in the portfolio
as of October 31, 2000 is provided in the Schedule of Investments later in this
report.
PORTFOLIO FACTS
<TABLE>
<CAPTION>
Schwab MarketTrack Peer Group
All Equity Portfolio* Average++
--------------------------------------------------------------------------------
<S> <C> <C>
Number of Holdings 5 137
--------------------------------------------------------------------------------
Median Market Cap ($ M) $ 56,739 $ 56,749
--------------------------------------------------------------------------------
Price/Earnings (P/E) Ratio 33.9 34.3
--------------------------------------------------------------------------------
Price/Book (P/B) Ratio 7.3 8.7
--------------------------------------------------------------------------------
12-Month Yield 0.44%++ 0.45%
--------------------------------------------------------------------------------
Portfolio Turnover Rate 3% 98%
--------------------------------------------------------------------------------
Three-Year Beta -- --
--------------------------------------------------------------------------------
Expense Ratio 0.50%+ 1.34%
--------------------------------------------------------------------------------
</TABLE>
* Compiled by Charles Schwab & Co., Inc. (Schwab). 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 funds invest primarily in individual securities.
+ Effective 6/30/00, the investment adviser, Charles Schwab Investment
Management, Inc. (CSIM) and Schwab guaranteed, through at least 2/28/01,
that the operating expense ratio (excluding interest, taxes and certain
non-routine expenses) will not exceed 0.50%. Prior to 6/30/00, such ratio
was 0.60%. The actual expense ratio during the report period was 0.57%.
++ Source: Morningstar, Inc. The peer group average is based on 2,620 large-cap
funds as tracked by Morningstar as of 10/31/00.
9
<PAGE> 14
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO
ASSET MIX
<TABLE>
<CAPTION>
Mix As Of
10/31/00 Target Mix
--------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks:
--------------------------------------------------------------------------------
Large-Cap 44.7% 45.0%
--------------------------------------------------------------------------------
Small-Cap 25.1% 25.0%
--------------------------------------------------------------------------------
International Stocks 29.7% 30.0%
--------------------------------------------------------------------------------
Short-Term Investments 0.5% --
--------------------------------------------------------------------------------
Total Stocks 100.0% 100.0%
--------------------------------------------------------------------------------
</TABLE>
TOP HOLDINGS
AS A PERCENTAGE OF FUND INVESTMENTS 1
<TABLE>
--------------------------------------------------------------------------------
<S> <C>
Schwab S&P 500 Fund - Select Shares 44.7%
--------------------------------------------------------------------------------
Schwab International Index Fund(R) - Select Shares 29.7%
--------------------------------------------------------------------------------
Schwab Small-Cap Index Fund(R) - Select Shares 25.1%
--------------------------------------------------------------------------------
Total 99.5%
--------------------------------------------------------------------------------
</TABLE>
1 Nothing in this report represents a recommendation of a security by the
investment adviser. Portfolio holdings may have changed since the report
date.
10
<PAGE> 15
SCHWAB MARKETTRACK GROWTH PORTFOLIO
PORTFOLIO PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 10/31/00
<TABLE>
<CAPTION>
Since Inception
One Year (11/20/95)
-----------------------------------------------------------------------------------
<S> <C> <C>
SCHWAB MARKETTRACK GROWTH PORTFOLIO 1 7.08% 14.15%
-----------------------------------------------------------------------------------
Growth Composite Index II 2 12.89% --
-----------------------------------------------------------------------------------
S&P 500(R) Index 6.09% 21.11%
-----------------------------------------------------------------------------------
Lehman Brothers U.S. Aggregate Bond Index 7.30% 6.24%
-----------------------------------------------------------------------------------
</TABLE>
1 A portion of the fund's expenses was reduced during the reporting period.
Without such reductions, the fund's average annual returns would have been
lower.
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. As of 10/31/00,
there were 2,620 large-cap funds, 892 small-cap funds, 732 foreign funds and
559 intermediate-term bond funds tracked by Morningstar. Performance
includes changes in price and reinvestment of dividends and capital gains.
Past performance doesn't indicate future results.
11
<PAGE> 16
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[LINE CHART]
<TABLE>
<CAPTION>
Schwab Lehman
MarketTrack Brothers Growth
Growth S&P 500(R) Aggregate Bond Composite
Portfolio Index Index Index II
<S> <C> <C> <C> <C>
11/20/95 10000 10000 10000
11/30/95 10080 10104 10076 10000
12/31/95 10292 10299 10217 10167
01/31/96 10442 10649 10285 10330
02/29/96 10533 10748 10106 10470
03/31/96 10623 10852 10035 10595
04/30/96 10803 11011 9979 10897
05/31/96 10954 11294 9959 11088
06/30/96 10934 11337 10092 11023
07/31/96 10523 10836 10120 10561
08/31/96 10733 11064 10102 10832
09/30/96 11184 11686 10278 11239
10/31/96 11324 12009 10506 11305
11/30/96 11896 12917 10686 11793
12/31/96 11784 12661 10587 11756
01/31/97 12008 13451 10620 12064
02/28/97 12028 13557 10646 12012
03/31/97 11692 13001 10528 11687
04/30/97 12038 13776 10686 11893
05/31/97 12793 14614 10787 12629
06/30/97 13313 15268 10916 13105
07/31/97 14087 16482 11210 13813
08/31/97 13618 15559 11115 13452
09/30/97 14301 16410 11280 14130
10/31/97 13853 15862 11443 13637
11/30/97 14098 16597 11496 13722
12/31/97 14259 16882 11612 13860
01/31/98 14410 17070 11761 13948
02/28/98 15220 18300 11751 14744
03/31/98 15738 19237 11791 15317
04/30/98 15846 19432 11852 15461
05/31/98 15576 19097 11965 15194
06/30/98 15868 19873 12067 15390
07/31/98 15555 19662 12092 15113
08/31/98 13729 16823 12289 13217
09/30/98 14194 17901 12577 13624
10/31/98 15080 19357 12510 14312
11/30/98 15760 20530 12581 14987
12/31/98 16422 21712 12619 15697
01/31/99 16718 22620 12709 15967
02/28/99 16103 21916 12486 15390
03/31/99 16576 22793 12555 15819
04/30/99 17224 23675 12595 16448
05/31/99 16916 23116 12484 16232
06/30/99 17586 24399 12444 16966
07/31/99 17465 23638 12392 16847
08/31/99 17355 23520 12386 16707
09/30/99 17290 22875 12530 16612
10/31/99 17982 24323 12576 17178
11/30/99 18520 24817 12575 17945
12/31/99 19602 26279 12514 19307
01/31/00 18730 24960 12473 18729
02/29/00 19155 24487 12624 19701
03/31/00 20049 26882 12791 20292
04/30/00 19389 26073 12754 19474
05/31/00 18931 25539 12747 18934
06/30/00 19635 26169 13012 19769
07/31/00 19233 25761 13131 19436
08/31/00 20206 27361 13321 20487
09/30/00 19456 25917 13405 19825
10/31/00 19255 25808 13493 19391
</TABLE>
The above graph compares the growth of a hypothetical $10,000 investment in the
Schwab MarketTrack Growth Portfolio, made at its inception, to a similar
investment in the S&P 500(R) Index, the Lehman Brothers U.S. Aggregate Bond
Index and the Growth Composite Index II. The hypothetical $10,000 investment
assumes investment on the first day of the month following inception and
includes changes in share price and reinvestment of dividends and capital gains.
A detailed analysis of the respective performances of the portfolios and the
indices is provided in the Portfolio Discussion section later in this report.
THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS.
TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. Indices are unmanaged and do not reflect advisory fees and other expenses
associated with an investment in the portfolio. Investors cannot invest in an
index directly.
ASSETS
<TABLE>
<S> <C>
--------------------------------------------------------------------------------
Total net assets as of 10/31/99 ($M) $428
--------------------------------------------------------------------------------
Total net assets as of 10/31/00 ($M) $566
--------------------------------------------------------------------------------
Percentage growth from 10/31/99 to 10/31/00 32%
--------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 17
SCHWAB MARKETTRACK GROWTH PORTFOLIO
PORTFOLIO SNAPSHOT
Schwab MarketTrack Growth Portfolio uses an indexing strategy to invest in three
distinct asset classes -- stocks, bonds and cash -- and further allocates stock
investments between large-cap, small-cap and international. The portfolio's
target mix is achieved either directly or through investment in other
SchwabFunds(R). The portfolio employs an indexing strategy to capture the
returns inherent in its target asset categories. The information below and on
the following page provides a snapshot of the portfolio's characteristics as of
October 31, 2000, and is not indicative of its composition after that date. The
terms used below are defined in the Glossary. A complete list of the securities
in the portfolio as of October 31, 2000 is provided in the Schedule of
Investments later in this report.
PORTFOLIO FACTS
<TABLE>
<CAPTION>
Schwab MarketTrack Peer Group
Growth Portfolio* Average++
--------------------------------------------------------------------------------
<S> <C> <C>
Number of Holdings 509 137
--------------------------------------------------------------------------------
Median Market Cap ($M) $ 47,109 $ 56,749
--------------------------------------------------------------------------------
Price/Earnings (P/E) Ratio 33.3 34.3
--------------------------------------------------------------------------------
Price/Book (P/B) Ratio 7.3 8.7
--------------------------------------------------------------------------------
12-Month Yield 1.06%++ 0.45%
--------------------------------------------------------------------------------
Portfolio Turnover Rate 12% 98%
--------------------------------------------------------------------------------
Three-Year Beta 0.73++ 0.95
--------------------------------------------------------------------------------
Expense Ratio 0.50%+ 1.34%
--------------------------------------------------------------------------------
</TABLE>
* Compiled by Charles Schwab & Co., Inc. (Schwab). 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.
+ Effective 6/30/00, the investment adviser, Charles Schwab Investment
Management, Inc. (CSIM) and Schwab guaranteed, through at least 2/28/01,
that the operating expense ratio (excluding interest, taxes and certain
non-routine expenses) will not exceed 0.50%. Prior to 6/30/00, such ratio
was 0.60%. The actual expense ratio during the report period was 0.57%.
++ Source: Morningstar. The peer group average is based on 2,620 large-cap
funds as tracked by Morningstar as of 10/31/00.
13
<PAGE> 18
SCHWAB MARKETTRACK GROWTH PORTFOLIO
ASSET MIX
<TABLE>
<CAPTION>
Mix as of
10/31/00 Target Mix
--------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks:
--------------------------------------------------------------------------------
Large-Cap 40.5% 40.0%
--------------------------------------------------------------------------------
Small-Cap 20.3% 20.0%
--------------------------------------------------------------------------------
International Stocks 19.6% 20.0%
--------------------------------------------------------------------------------
Total Stocks 80.4% 80.0%
--------------------------------------------------------------------------------
Bonds 14.7% 15.0%
--------------------------------------------------------------------------------
Short-Term Investments 4.9% 5.0%
--------------------------------------------------------------------------------
Total 100.0% 100.0%
--------------------------------------------------------------------------------
</TABLE>
EQUITY INVESTMENT STYLE BOX 1
AS OF 10/31/00
[GRAPHIC]
<TABLE>
<CAPTION>
MARKET CAP
------------------------
LARGE MEDIUM SMALL
<S> <C> <C> <C>
STYLE
Value
Blend X
Growth
</TABLE>
TOP TEN HOLDINGS
AS A PERCENTAGE OF FUND INVESTMENTS 2
<TABLE>
<S> <C>
--------------------------------------------------------------------------------
Schwab Small-Cap
Index Fund(R) - Select Shares 20.3%
--------------------------------------------------------------------------------
Schwab International Index
Fund(R) - Select Shares 19.6%
--------------------------------------------------------------------------------
Schwab S&P 500 Fund - Select Shares 18.9%
--------------------------------------------------------------------------------
Schwab Total Bond Market Index Fund 14.6%
--------------------------------------------------------------------------------
Schwab Value Advantage Money Fund(R) 4.7%
--------------------------------------------------------------------------------
General Electric Co. 0.9%
--------------------------------------------------------------------------------
Cisco Systems, Inc. 0.7%
--------------------------------------------------------------------------------
Microsoft Corp. 0.6%
--------------------------------------------------------------------------------
Exxon Mobil Corp. 0.5%
--------------------------------------------------------------------------------
Intel Corp. 0.5%
================================================================================
Total 81.3%
--------------------------------------------------------------------------------
</TABLE>
1 Source: Morningstar, Inc. The style box illustrates the composition of the
fund's portfolio as of 10/31/00. 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(R) Index, as well as the
size of the companies in which it invests, or median market capitalization.
2 Nothing in this report represents a recommendation of a security by the
investment adviser. Portfolio holdings may have changed since the report
date.
14
<PAGE> 19
SCHWAB MARKETTRACK BALANCED PORTFOLIO
PORTFOLIO PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 10/31/00
<TABLE>
<CAPTION>
Since Inception
One Year (11/20/95)
-----------------------------------------------------------------------------------
<S> <C> <C>
SCHWAB MARKETTRACK BALANCED PORTFOLIO 1 7.11% 11.97%
-----------------------------------------------------------------------------------
Balanced Composite Index 2 11.23% --
-----------------------------------------------------------------------------------
S&P 500(R) Index 6.09% 21.11%
-----------------------------------------------------------------------------------
Lehman Brothers U.S. Aggregate Bond Index 7.30% 6.24%
-----------------------------------------------------------------------------------
</TABLE>
1 A portion of the fund's expenses was reduced during the reporting period.
Without such reductions, the fund's average annual returns would have been
lower.
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. As of 10/31/00,
there were 2,620 large-cap funds, 892 small-cap funds, 732 foreign funds and
559 intermediate-term bond funds tracked by Morningstar. Performance
includes changes in price and reinvestment of dividends and capital gains.
Past performance doesn't indicate future results.
15
<PAGE> 20
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[LINE CHART]
<TABLE>
<CAPTION>
Schwab Lehman
MarketTrack Brothers Balanced
Balanced S&P 500(R) Aggregate Composite
Portfolio Index Bond Index Index
<S> <C> <C> <C> <C>
11/20/95 10000 10000 10000
11/30/95 10080 10104 10076 10000
12/31/95 10270 10299 10217 10158
1/31/96 10390 10649 10285 10295
2/29/96 10410 10748 10106 10356
3/31/96 10460 10852 10035 10433
4/30/96 10581 11011 9979 10642
5/31/96 10691 11294 9959 10778
6/30/96 10711 11337 10092 10760
7/31/96 10410 10836 10120 10428
8/31/96 10551 11064 10102 10627
9/30/96 10912 11686 10278 10971
10/31/96 11082 12009 10506 11073
11/30/96 11534 12917 10686 11479
12/31/96 11415 12661 10587 11429
1/31/97 11589 13451 10620 11661
2/28/97 11589 13557 10646 11633
3/31/97 11334 13001 10528 11367
4/30/97 11620 13776 10686 11554
5/31/97 12183 14614 10787 12116
6/30/97 12593 15268 10916 12493
7/31/97 13217 16482 11210 13079
8/31/97 12849 15559 11115 12794
9/30/97 13391 16410 11280 13323
10/31/97 13125 15862 11443 13012
11/30/97 13309 16597 11496 13084
12/31/97 13443 16882 11612 13212
1/31/98 13582 17070 11761 13315
2/28/98 14149 18300 11751 13882
3/31/98 14523 19237 11791 14300
4/30/98 14608 19432 11852 14416
5/31/98 14448 19097 11965 14261
6/30/98 14672 19873 12067 14425
7/31/98 14469 19662 12092 14236
8/31/98 13262 16823 12289 12932
9/30/98 13668 17901 12577 13298
10/31/98 14309 19357 12510 13779
11/30/98 14800 20530 12581 14287
12/31/98 15281 21712 12619 14809
1/31/99 15523 22620 12709 15024
2/28/99 15028 21916 12486 14551
3/31/99 15369 22793 12555 14881
4/30/99 15820 23675 12595 15338
5/31/99 15567 23116 12484 15149
6/30/99 16018 24399 12444 15651
7/31/99 15930 23638 12392 15556
8/31/99 15842 23520 12386 15453
9/30/99 15853 22875 12530 15424
10/31/99 16337 24323 12576 15824
11/30/99 16711 24817 12575 16359
12/31/99 17420 26279 12514 17277
1/31/00 16823 24960 12473 16875
2/29/00 17150 24487 12624 17572
3/31/00 17815 26882 12791 18019
4/30/00 17353 26073 12754 17448
5/31/00 17037 25539 12747 17075
6/30/00 17601 26169 13012 17725
7/31/00 17364 25761 13131 17533
8/31/00 18085 27361 13321 18300
9/30/00 17612 25917 13405 17884
10/31/00 17499 25808 13493 17602
</TABLE>
The above graph compares the growth of a hypothetical $10,000 investment in the
Schwab MarketTrack Balanced Portfolio, made at its inception, to a similar
investment in the S&P 500(R) Index, the Lehman Brothers U.S. Aggregate Bond
Index and the Balanced Composite Index. The hypothetical $10,000 investment
assumes investment on the first day of the month following inception and
includes changes in share price and reinvestment of dividends and capital gains.
A detailed analysis of the respective performances of the portfolios and the
indices is provided in the Portfolio Discussion section later in this report.
THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS.
TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. Indices are unmanaged and do not reflect advisory fees and other expenses
associated with an investment in the portfolio. Investors cannot invest in an
index directly.
ASSETS
<TABLE>
<S> <C>
--------------------------------------------------------------------------------
Total net assets as of 10/31/99 ($M) $403
--------------------------------------------------------------------------------
Total net assets as of 10/31/00 ($M) $510
--------------------------------------------------------------------------------
Percentage growth from 10/31/99 to 10/31/00 27%
--------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 21
SCHWAB MARKETTRACK BALANCED PORTFOLIO
PORTFOLIO SNAPSHOT
Schwab MarketTrack Balanced Portfolio uses an indexing strategy to invest in
three distinct equity asset classes -- stocks, bonds and cash -- and further
allocates stock investments between large-cap, small-cap and international. The
portfolio's target mix is achieved either directly or through investment in
other SchwabFunds(R). The portfolio employs an indexing strategy to capture the
returns inherent in its target asset categories. The information below and on
the following page provides a snapshot of the portfolio's characteristics as of
October 31, 2000, and is not indicative of its composition after that date. The
terms used below are defined in the Glossary. A complete list of the securities
in the portfolio as of October 31, 2000 is provided in the Schedule of
Investments later in this report.
PORTFOLIO FACTS
<TABLE>
<CAPTION>
Schwab MarketTrack Peer Group
Balanced Portfolio* Average++
--------------------------------------------------------------------------------
<S> <C> <C>
Number of Holdings 506 232
--------------------------------------------------------------------------------
Median Market Cap ($M) $ 47,109 $ 43,750
--------------------------------------------------------------------------------
Price/Earnings (P/E) Ratio 33.3 30.6
--------------------------------------------------------------------------------
Price/Book (P/B) Ratio 7.3 7.2
--------------------------------------------------------------------------------
12-Month Yield 1.80%++ 2.65%
--------------------------------------------------------------------------------
Portfolio Turnover Rate 18% 95%
--------------------------------------------------------------------------------
Three-Year Beta 0.55++ 0.52
--------------------------------------------------------------------------------
Expense Ratio 0.50%+ 1.28%
--------------------------------------------------------------------------------
</TABLE>
* Compiled by Charles Schwab & Co., Inc. (Schwab). 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.
+ Effective 6/30/00, the investment adviser, Charles Schwab Investment
Management, Inc. (CSIM) and Schwab guaranteed, through at least 2/28/01,
that the operating expense ratio (excluding interest, taxes and certain
non-routine expenses) will not exceed 0.50%. Prior to 6/30/00, such ratio
was 0.60%. The actual expense ratio during the report period was 0.57%
++ Source: Morningstar. The peer group average is based on 736 domestic hybrid
funds as tracked by Morningstar as of 10/31/00.
17
<PAGE> 22
SCHWAB MARKETTRACK BALANCED PORTFOLIO
ASSET MIX
<TABLE>
<CAPTION>
Mix As Of
10/31/00 Target Mix
<S> <C> <C>
--------------------------------------------------------------------------------
U.S. Stocks:
--------------------------------------------------------------------------------
Large-Cap 30.5% 30.0%
--------------------------------------------------------------------------------
Small-Cap 15.3% 15.0%
--------------------------------------------------------------------------------
International Stocks 14.7% 15.0%
--------------------------------------------------------------------------------
Total Stocks 60.4% 60.0%
--------------------------------------------------------------------------------
Bonds 34.5% 35.0%
--------------------------------------------------------------------------------
Short-Term Investments 5.0% 5.0%
--------------------------------------------------------------------------------
Total 100.0% 100.0%
--------------------------------------------------------------------------------
</TABLE>
EQUITY INVESTMENT STYLE BOX 1
AS OF 10/31/00
[GRAPHIC]
<TABLE>
<CAPTION>
MARKET CAP
------------------------
LARGE MEDIUM SMALL
<S> <C> <C> <C>
STYLE
Value
Blend X
Growth
</TABLE>
TOP TEN HOLDINGS
AS A PERCENTAGE OF FUND INVESTMENTS 2
<TABLE>
<S> <C>
--------------------------------------------------------------------------------
Schwab Total Bond Market Index Fund 34.5%
--------------------------------------------------------------------------------
Schwab Small-Cap Index
Fund(R) - Select Shares 15.3%
--------------------------------------------------------------------------------
Schwab International Index
Fund(R) - Select Shares 14.7%
--------------------------------------------------------------------------------
Schwab S&P 500 Fund - Select Shares 14.5%
--------------------------------------------------------------------------------
Schwab Value Advantage Money Fund(R) 4.7%
--------------------------------------------------------------------------------
General Electric Co. 0.7%
--------------------------------------------------------------------------------
Cisco Systems, Inc. 0.5%
--------------------------------------------------------------------------------
Microsoft Corp. 0.5%
--------------------------------------------------------------------------------
Exxon Mobil Corp. 0.4%
--------------------------------------------------------------------------------
Intel Corp. 0.4%
--------------------------------------------------------------------------------
Total 86.2%
--------------------------------------------------------------------------------
</TABLE>
1 Source: Morningstar, Inc. The style box illustrates the composition of the
fund's portfolio as of 10/31/00. 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(R) Index, as well as the
size of the companies in which it invests, or median market capitalization.
2 Nothing in this report represents a recommendation of a security by the
investment adviser. Portfolio holdings may have changed since the report
date.
18
<PAGE> 23
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
PORTFOLIO PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 10/31/00
<TABLE>
<CAPTION>
Since Inception
One Year (11/20/95)
<S> <C> <C>
----------------------------------------------------------------------------------
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO 1 6.92% 9.66%
----------------------------------------------------------------------------------
Conservative Composite Index 2 9.48% --
----------------------------------------------------------------------------------
S&P 500(R) Index 6.09% 21.11%
----------------------------------------------------------------------------------
Lehman Brothers U.S. Aggregate Bond Index 7.30% 6.24%
----------------------------------------------------------------------------------
</TABLE>
1 A portion of the fund's expenses was reduced during the reporting period.
Without such reductions, the fund's average annual returns would have been
lower.
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. As of
10/31/00, there were 2,620 large-cap funds, 892 small-cap funds, 732 foreign
funds and 559 intermediate-term bond funds tracked by Morningstar.
Performance includes changes in price and reinvestment of dividends and
capital gains.
Past performance doesn't indicate future results.
19
<PAGE> 24
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[LINE CHART]
<TABLE>
<CAPTION>
Schwab Lehman
MarketTrack Brothers Conservative
Conservative Aggregate Bond Composite
Portfolio S&P 500(R) Index Index Index
<S> <C> <C> <C> <C>
11/20/95 10000 10000 10000
11/30/95 10080 10104 10076 10000
12/31/95 10237 10299 10217 10156
1/31/96 10337 10649 10285 10255
2/29/96 10297 10748 10106 10215
3/31/96 10287 10852 10035 10205
4/30/96 10337 11011 9979 10255
5/31/96 10378 11294 9959 10296
6/30/96 10439 11337 10092 10356
7/31/96 10256 10836 10120 10175
8/31/96 10337 11064 10102 10255
9/30/96 10643 11686 10278 10559
10/31/96 10818 12009 10506 10732
11/30/96 11179 12917 10686 11090
12/31/96 11070 12661 10587 10982
1/31/97 11174 13451 10620 11085
2/28/97 11184 13557 10646 11095
3/31/97 10965 13001 10528 10878
4/30/97 11206 13776 10686 11117
5/31/97 11604 14614 10787 11512
6/30/97 11896 15268 10916 11802
7/31/97 12413 16482 11210 12314
8/31/97 12160 15559 11115 12063
9/30/97 12540 16410 11280 12440
10/31/97 12455 15862 11443 12356
11/30/97 12603 16597 11496 12503
12/31/97 12698 16882 11612 12597
1/31/98 12829 17070 11761 12727
2/28/98 13189 18300 11751 13084
3/31/98 13418 19237 11791 13312
4/30/98 13484 19432 11852 13377
5/31/98 13431 19097 11965 13324
6/30/98 13595 19873 12067 13487
7/31/98 13484 19662 12092 13377
8/31/98 12774 16823 12289 12673
9/30/98 13139 17901 12577 13035
10/31/98 13530 19357 12510 13423
11/30/98 13843 20530 12581 13733
12/31/98 14166 21712 12619 14054
1/31/99 14348 22620 12709 14234
2/28/99 13950 21916 12486 13839
3/31/99 14200 22793 12555 14087
4/30/99 14475 23675 12595 14360
5/31/99 14269 23116 12484 14156
6/30/99 14521 24399 12444 14406
7/31/99 14452 23638 12392 14337
8/31/99 14395 23520 12386 14281
9/30/99 14464 22875 12530 14349
10/31/99 14766 24323 12576 14649
11/30/99 14986 24817 12575 14867
12/31/99 15398 26279 12514 15276
1/31/00 15022 24960 12473 14903
2/29/00 15269 24487 12624 15148
3/31/00 15738 26882 12791 15613
4/30/00 15442 26073 12754 15319
5/31/00 15229 25539 12747 15108
6/30/00 15667 26169 13012 15543
7/31/00 15584 25761 13131 15460
8/31/00 16085 27361 13321 15957
9/30/00 15835 25917 13405 15709
10/31/00 15787 25808 13493 15662
</TABLE>
The above graph compares the growth of a hypothetical $10,000 investment in the
Schwab MarketTrack Conservative Portfolio, made at its inception, to a similar
investment in the S&P 500(R) Index, the Lehman Brothers U.S. Aggregate Bond
Index and the Conservative Composite Index. The hypothetical $10,000 investment
assumes investment on the first day of the month following inception and
includes changes in share price and reinvestment of dividends and capital gains.
A detailed analysis of the respective performances of the portfolios and the
indices is provided in the Portfolio Discussion section later in this report.
THE INFORMATION PRESENTED IS HISTORICAL AND DOES NOT REPRESENT FUTURE RESULTS.
TOTAL RETURNS ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS. PRINCIPAL VALUE AND INVESTMENT RETURNS WILL FLUCTUATE, SO AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. Indices are unmanaged and do not reflect advisory fees and other expenses
associated with an investment in the portfolio. Investors cannot invest in an
index directly.
ASSETS
<TABLE>
<S> <C>
--------------------------------------------------------------------------------
Total net assets as of 10/31/99 ($M) $167
--------------------------------------------------------------------------------
Total net assets as of 10/31/00 ($M) $194
--------------------------------------------------------------------------------
Percentage growth from 10/31/99 to 10/31/00 16%
--------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 25
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
PORTFOLIO SNAPSHOT
Schwab MarketTrack Conservative Portfolio uses an indexing strategy to invest in
three distinct asset classes -- stocks, bonds and cash -- and further allocates
stock investments between large-cap, small-cap and international. The
portfolio's target mix is achieved either directly or through investment in
other SchwabFunds(R). The portfolio employs an indexing strategy to capture the
returns inherent in its target asset categories. The information below and on
the following page provides a snapshot of the portfolio's characteristics as of
October 31, 2000, and is not indicative of its composition after that date. The
terms used below are defined in the Glossary. A complete list of the securities
in the portfolio as of October 31, 2000 is provided in the Schedule of
Investments later in this report.
PORTFOLIO FACTS
<TABLE>
<CAPTION>
Schwab MarketTrack Peer Group
Conservative Portfolio* Average++
<S> <C> <C>
--------------------------------------------------------------------------------
Number of Issues 495 232
--------------------------------------------------------------------------------
Median Market Cap ($M) $ 47,182 $ 43,750
--------------------------------------------------------------------------------
Price/Earnings (P/E) Ratio 33.4 30.6
--------------------------------------------------------------------------------
Price/Book (P/B) Ratio 7.3 7.2
--------------------------------------------------------------------------------
12-Month Yield 3.47%++ 2.65%
--------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 95%
--------------------------------------------------------------------------------
Three-Year Beta 0.38++ 0.52
--------------------------------------------------------------------------------
Expense Ratio 0.50%+ 1.28%
--------------------------------------------------------------------------------
</TABLE>
* Compiled by Charles Schwab & Co., Inc. (Schwab). 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.
+ Effective 6/30/00, the investment adviser, Charles Schwab Investment
Management, Inc. (CSIM) and Schwab guaranteed, through at least 2/28/01,
that the operating expense ratio (excluding interest, taxes and certain
non-routine expenses) will not exceed 0.50%. Prior to 6/30/00, such ratio
was 0.60%. The actual expense ratio during the report period was 0.57%.
++ Source: Morningstar. The peer group average is based on 736 domestic hybrid
funds as tracked by Morningstar as of 10/31/00.
21
<PAGE> 26
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
ASSET MIX
<TABLE>
<CAPTION>
Mix as of
10/31/00 Target Mix
--------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks:
--------------------------------------------------------------------------------
Large-Cap 20.7% 20.0%
--------------------------------------------------------------------------------
Small-Cap 10.2% 10.0%
--------------------------------------------------------------------------------
International Stocks 9.7% 10.0%
--------------------------------------------------------------------------------
Total Stocks 40.6% 40.0%
--------------------------------------------------------------------------------
Bonds 54.6% 55.0%
--------------------------------------------------------------------------------
Short-Term Investments 4.8% 5.0%
--------------------------------------------------------------------------------
Total 100.0% 100.0%
--------------------------------------------------------------------------------
</TABLE>
TOP TEN HOLDINGS
AS A PERCENTAGE OF FUND INVESTMENTS 1
<TABLE>
<S> <C>
--------------------------------------------------------------------------------
Schwab Total Bond Market Index Fund 54.6%
--------------------------------------------------------------------------------
Schwab S&P 500 Fund - Select Shares 10.8%
--------------------------------------------------------------------------------
Schwab Small-Cap Index
Fund(R) - Select Shares 10.2%
--------------------------------------------------------------------------------
Schwab International Index
Fund(R) - Select Shares 9.7%
--------------------------------------------------------------------------------
Schwab Value Advantage Money Fund(R) 4.4%
--------------------------------------------------------------------------------
General Electric Co. 0.4%
--------------------------------------------------------------------------------
Cisco Systems, Inc. 0.3%
--------------------------------------------------------------------------------
Microsoft Corp. 0.3%
--------------------------------------------------------------------------------
Exxon Mobil Corp. 0.3%
--------------------------------------------------------------------------------
Intel Corp. 0.2%
--------------------------------------------------------------------------------
Total 91.2%
--------------------------------------------------------------------------------
</TABLE>
1 Nothing in this report represents a recommendation of a security by the
investment adviser. Portfolio holdings may have changed since the report
date.
22
<PAGE> 27
PORTFOLIO MANAGEMENT
THE PORTFOLIO MANAGEMENT TEAM
GERI HOM -- vice president and senior portfolio manager, is responsible for the
day-to-day management of the equity portions of the Schwab MarketTrack
Portfolios(R). In addition to the Schwab MarketTrack Portfolios, Geri manages
the Schwab Equity Index Funds, Schwab Analytics Fund(R) and the Schwab Focus
Funds. Prior to joining CSIM, Geri worked for nearly 15 years in equity index
management.
KIMON DAIFOTIS -- vice president and senior portfolio manager, has primary
responsibility for the day-to-day management of the bond and cash portions of
the Schwab MarketTrack Portfolios. In addition to the Schwab MarketTrack
Portfolios, he manages two bond index funds and the Schwab YieldPlus Fund. Prior
to joining CSIM in October 1997, he worked for more than 17 years in research
and asset management.
23
<PAGE> 28
PORTFOLIO DISCUSSION
QUESTIONS TO THE PORTFOLIO MANAGEMENT TEAM
Q. HOW DID THE FOUR SCHWAB MARKETTRACK PORTFOLIOS PERFORM DURING THE REPORTING
PERIOD?
A. As discussed in the Market Overview section and detailed in the table to the
right, asset class returns varied widely during the reporting period. In a year
of market uncertainty and volatility, with equities starting strong but then
slowing during the year, the funds' returns were within a very close range.
Small-cap domestic equities emerged to be the best performing major asset class;
however, within each of the portfolios, those gains were neutralized for the
most part by the negative return generated by international stocks. The bond
market, also experiencing fluctuation during the year, was the second best
performing asset class.
The MarketTrack Portfolios incorporate a mix of different asset classes.
Accordingly, their returns over a given period will reflect a blend of the
returns of those asset classes, and will depend on their relative weightings
within the portfolios. By spreading their exposure over various asset classes,
the MarketTrack Portfolios are designed to provide more stable returns while
reducing risk over various market cycles.
<TABLE>
<CAPTION>
One-Year
Return as of
Asset Class Index 10/31/00
--------------------------------------------------------------------------------
<S> <C> <C>
Large-Cap Stocks S&P 500(R) Index 6.09%
--------------------------------------------------------------------------------
Small-Cap Stocks Russell 2000(R) Index 17.41%
--------------------------------------------------------------------------------
International Stocks MSCI-EAFE(R) Index (2.90%)
--------------------------------------------------------------------------------
Bonds Lehman Aggregate 7.30%
Bond Index
--------------------------------------------------------------------------------
Cash Three-Month 6.13%
Treasury Bill
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Equity/Fixed One-Year
Income Return as of
MarketTrack Portfolio Target Mix (%) 10/31/00
--------------------------------------------------------------------------------
<S> <C> <C>
All Equity 100/0 6.37%
--------------------------------------------------------------------------------
Growth 80/20 7.08%
--------------------------------------------------------------------------------
Balanced 60/40 7.11%
--------------------------------------------------------------------------------
Conservative 40/60 6.92%
--------------------------------------------------------------------------------
</TABLE>
Q. DO THE MARKETTRACK PORTFOLIOS USE TAX-SMART STRATEGIES?
A. Yes. The MarketTrack Portfolios employ management techniques that are
designed to minimize potential capital gain distributions. First, they follow an
indexing strategy by investing directly in index securities or index funds,
which helps to keep portfolio turnover low. Second, when securities need to be
sold -- either to raise cash for redemptions or when an index is rebalanced --
the funds generally will attempt to sell the shares with the highest tax basis
to minimize capital gains.
24
<PAGE> 29
PORTFOLIO DISCUSSION Continued
Finally, the investment managers strive to use efficient trading practices,
which helps 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 an all 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 1.5% less than the 13.48% return of
the all-stock portfolio -- but with significantly less volatility on a yearly
basis. 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.
ADDING BONDS TO AN ALL-STOCK PORTFOLIO
Hypothetical Portfolios: 1970-1998
High, Low and Average Annual Returns
for Portfolio Compositions
[BARCHART]
<TABLE>
<CAPTION>
Lowest Annual Return Average Annual Return Highest Annual Return
<S> <C> <C> <C>
100% Stocks -26.47 13.48 37.43
90% Stocks/10% Bonds -23.25 13.14 35.37
80% Stocks/20% Bonds -20.04 12.77 33.3
70% Stocks/30% Bonds -16.82 12.38 31.24
60% Stocks/40% Bonds -13.6 11.97 29.18
</TABLE>
1 The returns do not reflect actual investments in any security. The
hypothetical returns are all weighted averages and assume reinvestment of
dividends. The indices represented are the S&P 500(R) Index and the Ibbotson
Intermediate Government Bond Index. Indices are unmanaged, do not incur costs
and expenses, and cannot be invested in directly.
25
<PAGE> 30
Q. WHY DOES INVESTING IN ALL THE MAJOR SEGMENTS OF THE STOCK MARKET 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 1975
through 1999. The chart shows that the performances of the three segments of the
stock market varied considerably, both on a relative basis and over time.
These shifting results are driven by the fact that different segments have
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,
predicting them can be very difficult. By investing in several types of stock,
you can participate in the long-term return performance of the segments, reduce
portfolio volatility (as compared to investing in just one type) and avoid the
entire issue of trying to predict which group will be the next winner.
WHY DIVERSIFY?
Non-Overlapping, Three-Year Intervals
[BARCHART]
<TABLE>
<CAPTION>
Large-Cap Stocks Small-Cap Stocks International Stocks
<S> <C> <C> <C>
Dec-74 -9.28 -22.01 -2.76
Dec-77 16.4 43.46 19.31
Dec-80 18.67 31.5 21.06
Dec-83 12.25 20.23 6.93
Dec-86 18.5 10.08 42.15
Dec-89 17.36 9.37 21.19
Dec-92 10.82 12.51 -8.68
Dec-95 15.26 15.01 17.02
Dec-98 28.27 13.29 9.31
</TABLE>
1 Large-cap stocks are represented by the S&P 500 Index, small-cap stocks by
CRSP 6-10 Index and international stocks by the MSCI-EAFE Index. Indices are
unmanaged, do not incur fees or expenses and cannot be invested in directly.
The charts shows annualized returns for three-year periods indicated. Returns
for each period would vary depending on the exact start and end dates used.
All returns assume reinvestment of dividends, capital gains and interest. This
chart is for illustrative purposes only and is not intended to predict or
guarantee performance. Past performance is no guarantee of future results. The
CRSP 6-10 Index consists of the smallest half of NYSE stocks by name and all
equivalents from other exchanges.
26
<PAGE> 31
GLOSSARY
ASSET ALLOCATION -- The division of holdings among different types of assets,
such as domestic stocks, international stocks, bonds and cash-equivalent
securities.
BETA -- A measure of a stock's volatility relative to the overall stock market.
The beta of the S&P 500(R) 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 net assets, 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.
27
<PAGE> 32
TOTAL RETURN -- The overall performance of an investment over a given period,
including any expenses, any income or distributions paid out and any capital
gain or loss (increases or decreases in portfolio value).
TURNOVER RATE -- A measure 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
market value.
28
<PAGE> 33
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
INVESTMENT FUNDS -- 99.5%
Schwab International Index Fund(R),
Select Shares 7,641,646 $ 130,978
Schwab S&P 500 Fund,
Select Shares (b) 8,880,807 197,243
Schwab Small-Cap Index Fund(R),
Select Shares 5,260,695 110,948
---------
TOTAL INVESTMENT FUNDS
(Cost $410,285) 439,169
---------
Par
(000s)
-----------
U.S. TREASURY OBLIGATIONS -- 0.0%
U.S. Treasury Bills (a)(b)
6.02%-6.04%, 12/14/00 $200 199
---------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $199) 199
---------
Par Value
(000s) (000s)
----------- ----------
SHORT-TERM INVESTMENT -- 0.5%
Wachovia Bank NA Time Deposit
6.03%*, 11/1/00 $2,199 $ 2,199
---------
TOTAL SHORT-TERM INVESTMENT
(Cost $2,199) 2,199
---------
TOTAL INVESTMENTS -- 100.0%
(Cost $412,683) 441,567
---------
OTHER ASSETS AND LIABILITIES, NET -- 0.0%
Other assets 724
Liabilities (799)
---------
(75)
---------
TOTAL NET ASSETS -- 100.0% $ 441,492
=========
</TABLE>
See accompanying Notes to Schedules of Investments and Notes to Financial
Statements.
29
<PAGE> 34
SCHWAB MARKETTRACK GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
COMMON STOCK -- 21.6%
AEROSPACE / DEFENSE -- 0.3%
B.F. Goodrich Co. 1,100 $ 45
Boeing Co. 8,578 582
Crane Co. 300 8
General Dynamics Corp. 2,000 143
Lockheed Martin Corp. 3,900 140
Northrop Grumman Corp. 700 59
Raytheon Co., Class B 3,400 116
Rockwell International Corp. 1,900 75
Textron, Inc. 1,500 76
TRW, Inc. 1,300 55
United Technologies Corp. 4,600 321
---------
1,620
---------
AIR TRANSPORTATION -- 0.1%
AMR Corp.+ 1,500 49
Delta Air Lines, Inc. 1,300 61
FedEx Corp.+ 2,920 137
Southwest Airlines Co. 4,987 142
U.S. Airways Group, Inc.+ 500 19
---------
408
---------
ALCOHOLIC BEVERAGES -- 0.1%
Adolph Coors Co., Class B 400 25
Anheuser-Busch Cos., Inc. 9,000 412
Brown-Forman Corp., Class B 700 43
---------
480
---------
APPAREL -- 0.0%
Liz Claiborne, Inc. 600 25
Nike, Inc., Class B 2,800 112
Reebok International Ltd.+ 500 11
Russell Corp. 400 6
Springs Industries, Inc., Class A 100 2
VF Corp. 1,200 33
---------
189
---------
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES -- 0.2%
Cooper Tire & Rubber Co. 700 8
Cummins Engine Co., Inc. 200 7
Dana Corp. 1,578 35
Danaher Corp. 1,400 88
Delphi Automotive Systems Corp. 5,743 90
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Eaton Corp. 700 $ 48
Ford Motor Co.+ 18,103 473
General Motors Corp. 5,125 318
Genuine Parts Co. 1,800 38
Goodyear Tire & Rubber Co. 1,600 30
Harley-Davidson, Inc. 3,000 145
Navistar International Corp.+ 700 23
Visteon Corp. 1,558 28
---------
1,331
---------
BANKS -- 1.2%
AmSouth Bancorp. 3,900 54
Bank of America Corp. 16,048 771
Bank of New York Co., Inc. 7,300 420
Bank One Corp. 11,375 415
BB&T Corp. 3,300 105
Chase Manhattan Corp. 11,970 545
Comerica, Inc. 1,500 90
Fifth Third Bancorp. 4,537 233
First Union Corp. 9,684 294
Firstar Corp. 9,618 189
FleetBoston Financial Corp. 8,974 341
Golden West Financial Corp. 1,600 90
Huntington Bancshares, Inc. 2,262 33
J.P. Morgan & Co., Inc. 1,700 281
KeyCorp, Inc. 4,400 109
Mellon Financial Corp. 4,600 222
National City Corp. 6,100 130
Northern Trust Corp. 2,200 188
Old Kent Financial Corp. 1,260 35
PNC Financial Services Group 2,800 187
Providian Financial Corp. 1,450 151
Regions Financial Corp. 2,100 49
SouthTrust Corp. 1,700 55
State Street Corp. 1,500 187
Summit Bancorp. 1,800 67
SunTrust Banks, Inc. 3,100 151
Synovus Financial Corp. 2,750 59
U.S. Bancorp. 7,150 173
Union Planters Corp. 1,300 44
Wachovia Corp. 1,900 103
Wells Fargo & Co. 15,550 720
---------
6,491
---------
</TABLE>
30
<PAGE> 35
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
BUSINESS MACHINES & SOFTWARE -- 3.2%
Adaptec, Inc.+ 1,000 $ 16
Adobe Systems, Inc. 2,400 183
Apple Computer, Inc.+ 3,200 63
Autodesk, Inc. 600 13
BMC Software, Inc.+ 2,400 49
Cabletron Systems, Inc.+ 1,800 49
Ceridian Corp.+ 1,456 36
Cisco Systems, Inc.+ 68,600 3,696
Compaq Computer Corp. 16,764 510
Compuware Corp.+ 3,600 28
Comverse Technology, Inc.+ 1,400 156
Dell Computer Corp.+ 25,100 740
EMC Corp.+ 20,986 1,869
Gateway, Inc.+ 3,100 160
Hewlett-Packard Co. 19,600 910
International Business
Machines Corp. 17,100 1,684
Lexmark International
Group, Inc., Class A+ 1,300 53
Microsoft Corp.+ 51,100 3,520
NCR Corp.+ 1,000 43
Network Appliance, Inc.+ 2,800 333
Novell, Inc.+ 3,200 29
Novellus Systems, Inc.+ 825 34
Oracle Corp.+ 55,048 1,817
Pitney Bowes, Inc. 2,700 80
Seagate Technology, Inc.+ 2,168 151
Silicon Graphics, Inc.+ 1,000 4
Sun Microsystems, Inc.+ 15,400 1,707
Unisys Corp.+ 3,100 40
Xerox Corp. 6,600 56
---------
18,029
---------
BUSINESS SERVICES -- 1.3%
Allied Waste Industries, Inc.+ 1,900 18
America Online, Inc.+ 22,300 1,125
Automatic Data Processing, Inc. 6,200 405
Cendant Corp.+ 7,232 87
Citrix Systems, Inc.+ 1,800 40
Computer Associates
International, Inc. 5,625 179
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Computer Sciences Corp.+ 1,680 $ 106
Convergys Corp.+ 1,354 59
Deluxe Corp. 700 16
Ecolab, Inc. 1,400 55
Electronic Data Systems Corp. 4,600 216
Equifax, Inc. 1,200 41
Exelon Corp. 2,812 169
First Data Corp. 4,200 211
H&R Block, Inc. 1,000 36
IMS Health, Inc. 3,000 71
Interpublic Group of Cos., Inc. 2,700 116
Mercury Interactive Corp.+ 800 89
MIPS Technologies, Inc., Class B+ 139 5
National Service Industries, Inc. 300 6
Nortel Networks Corp. 28,720 1,307
Omnicom Group, Inc. 1,800 166
Parametric Technology Corp.+ 2,700 33
Paychex, Inc. 3,600 204
PeopleSoft, Inc.+ 2,300 100
Sapient Corp.+ 1,200 43
Siebel Systems, Inc.+ 3,800 399
Stilwell Financial, Inc. 2,200 99
Tyco International Ltd. 17,308 981
VERITAS Software Corp.+ 3,800 536
Waste Management, Inc. 6,117 122
Yahoo!, Inc.+ 5,300 311
---------
7,351
---------
CHEMICAL -- 0.2%
Air Products & Chemicals, Inc. 2,300 86
Dow Chemical Co. 6,600 202
E.I. du Pont de Nemours & Co. 10,292 467
Eastman Chemical Co. 800 34
Great Lakes Chemical Corp. 600 20
Hercules, Inc. 900 16
PPG Industries, Inc. 1,500 67
Praxair, Inc. 1,600 60
Rohm & Haas Co. 2,205 66
Sigma-Aldrich Corp. 900 32
Union Carbide Corp. 1,300 56
W.R. Grace & Co.+ 600 2
---------
1,108
---------
</TABLE>
31
<PAGE> 36
SCHWAB MARKETTRACK GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 2000
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
CONSTRUCTION -- 0.0%
Armstrong Holdings, Inc. 500 $ 1
Centex Corp. 300 11
Fluor Corp. 500 17
Kaufman & Broad Home Corp. 400 12
Masco Corp. 4,000 75
Pulte Corp. 400 13
Sherwin-Williams Co. 1,200 26
The Stanley Works 600 16
Vulcan Materials Co. 800 34
---------
205
---------
CONSUMER - DURABLE -- 0.0%
Black & Decker Corp. 900 34
Leggett & Platt, Inc. 2,000 33
Maytag Corp. 900 26
Whirlpool Corp. 800 35
---------
128
---------
CONSUMER - NONDURABLE -- 0.1%
American Greetings Corp., Class A 300 5
Darden Restaurants, Inc. 1,200 27
Fortune Brands, Inc. 1,600 47
Harcourt General, Inc. 800 45
Hasbro, Inc. 1,650 18
Mattel, Inc. 4,150 54
McDonald's Corp. 13,400 415
Newell Rubbermaid, Inc. 2,745 53
Starbucks Corp.+ 1,780 80
Tricon Global Restaurants, Inc.+ 1,560 47
Tupperware Corp. 400 7
Wendy's International, Inc. 1,000 22
---------
820
---------
CONTAINERS -- 0.0%
Ball Corp. 200 7
Bemis Co., Inc. 300 8
Crown Cork & Seal Co., Inc. 800 7
Owens-Illinois, Inc.+ 800 5
Pactiv Corp.+ 800 8
Sealed Air Corp.+ 582 28
---------
63
---------
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
ELECTRONICS -- 1.8%
ADC Telecommunications, Inc.+ 6,000 $ 128
Advanced Micro Devices, Inc.+ 2,840 64
Altera Corp.+ 3,680 151
American Power Conversion Corp.+ 1,725 22
Analog Devices, Inc.+ 3,400 221
Andrew Corp.+ 850 22
Applied Materials, Inc.+ 7,800 414
Broadcom Corp., Class A+ 2,300 511
Conexant Systems, Inc.+ 1,900 50
Intel Corp. 65,200 2,934
ITT Industries, Inc. 900 29
JDS Uniphase Corp.+ 9,000 733
KLA-Tencor Corp.+ 1,800 61
Linear Technology Corp. 3,000 194
LSI Logic Corp.+ 3,000 99
Lucent Technologies, Inc. 31,592 736
Maxim Integrated Products, Inc.+ 2,700 179
Micron Technology, Inc.+ 5,400 188
Molex, Inc. 1,875 101
Moody's Corp. 1,500 39
Motorola, Inc. 20,931 522
National Semiconductor Corp.+ 1,700 44
Nextel Communications, Inc.,
Class A+ 7,200 277
PE Corp.-PE Biosystems Group 2,000 234
PerkinElmer, Inc. 500 60
Power-One, Inc.+ 400 28
QUALCOMM, Inc.+ 7,200 469
Sanmina Corp.+ 1,200 137
Scientific-Atlanta, Inc. 1,600 109
Solectron Corp.+ 5,800 255
Tektronix, Inc. 450 32
Tellabs, Inc.+ 4,000 200
Teradyne, Inc.+ 1,700 53
Texas Instruments, Inc. 16,800 824
Thermo Electron Corp.+ 1,300 38
Thomas & Betts Corp. 481 7
Xilinx, Inc.+ 3,200 232
---------
10,397
---------
</TABLE>
32
<PAGE> 37
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
ENERGY - RAW MATERIALS -- 0.2%
Anadarko Petroleum Corp. 2,018 $ 129
Apache Corp. 900 50
Baker Hughes, Inc. 2,960 102
Burlington Resources, Inc. 1,905 69
Devon Energy Corp. 1,200 60
Eastern Enterprises 100 6
Halliburton Co. 4,158 154
McDermott International, Inc. 800 8
Nabors Industries, Inc.+ 900 46
Occidental Petroleum Corp. 3,200 64
Rowan Cos., Inc.+ 600 15
Schlumberger Ltd. 5,400 411
---------
1,114
---------
FOOD & AGRICULTURE -- 0.7%
Archer-Daniels-Midland Co. 6,221 68
Campbell Soup Co. 4,200 123
Coca-Cola Co. 24,100 1,455
Coca-Cola Enterprises, Inc. 4,000 73
ConAgra, Inc. 4,900 105
General Mills, Inc. 3,026 126
H.J. Heinz Co. 3,400 143
Hershey Foods Corp. 1,500 81
Kellogg Co. 3,900 99
Nabisco Group Holdings Corp. 3,200 92
PepsiCo, Inc. 13,900 673
Quaker Oats Co. 1,200 98
Ralston Purina Group 3,100 75
Sara Lee Corp. 8,100 175
Supervalu, Inc. 1,400 22
Sysco Corp. 3,300 172
Unilever NV - Sponsored ADR 5,714 290
Wm. Wrigley Jr. Co. 1,100 87
---------
3,957
---------
GOLD -- 0.0%
Barrick Gold Corp. 3,900 52
Homestake Mining Co. 2,600 11
Newmont Mining Corp. 1,701 23
Placer Dome, Inc. 3,200 26
---------
112
---------
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
HEALTHCARE / DRUGS & MEDICINE -- 2.6%
Abbott Laboratories 15,000 $ 792
Aetna, Inc. 1,424 82
Allergan, Inc. 1,300 109
ALZA Corp.+ 800 65
American Home Products Corp. 12,700 806
Amgen, Inc.+ 10,100 585
Bausch & Lomb, Inc. 600 23
Baxter International, Inc. 2,800 230
Becton, Dickinson & Co. 2,600 87
Biogen, Inc.+ 1,500 90
Biomet, Inc. 1,650 60
Boston Scientific Corp.+ 4,074 65
Bristol-Myers Squibb Co. 19,400 1,182
C.R. Bard, Inc. 400 17
Cardinal Health, Inc. 2,800 265
Eli Lilly & Co. 10,900 974
Guidant Corp.+ 3,000 159
HCA-The Healthcare Co. 5,600 224
HealthSouth Corp.+ 3,452 41
Humana, Inc.+ 1,400 17
Johnson & Johnson 13,400 1,234
King Pharmaceuticals, Inc.+ 1,600 72
Manor Care, Inc.+ 1,100 18
McKesson HBOC, Inc. 2,654 74
Medimmune, Inc.+ 2,000 131
Medtronic, Inc. 11,800 641
Merck & Co., Inc. 22,300 2,006
Pfizer, Inc. 61,100 2,639
Pharmacia Corp. 12,269 675
Quintiles Transnational Corp.+ 1,200 17
Schering-Plough Corp. 14,100 729
St. Jude Medical, Inc.+ 725 40
Tenet Healthcare Corp.+ 3,100 122
UnitedHealth Group, Inc. 1,700 186
Watson Pharmaceuticals, Inc.+ 1,000 63
Wellpoint Health Networks, Inc.+ 700 82
---------
14,602
---------
HOUSEHOLD PRODUCTS -- 0.3%
Alberto-Culver Co., Class B 600 20
Avon Products, Inc. 2,400 116
Clorox Co. 2,200 98
</TABLE>
33
<PAGE> 38
SCHWAB MARKETTRACK GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 2000
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Colgate-Palmolive Co. 5,800 $ 341
Gillette Co. 10,600 370
International Flavors
& Fragrances, Inc. 1,100 18
Procter & Gamble Co. 12,600 900
---------
1,863
---------
INSURANCE -- 0.8%
AFLAC, Inc. 2,600 190
Allstate Corp. 7,000 282
American General Corp. 2,510 202
American International
Group, Inc. 22,345 2,190
Aon Corp. 2,625 109
Chubb Corp. 1,700 144
CIGNA Corp. 1,600 195
Cincinnati Financial Corp. 1,800 66
Conseco, Inc. 3,220 22
Hartford Financial
Services Group, Inc. 2,200 164
Jefferson-Pilot Corp. 1,075 74
Lincoln National Corp. 1,900 92
Loew's Corp. 1,000 91
Marsh & McLennan Cos., Inc. 2,600 340
MBIA, Inc. 900 65
MGIC Investment Corp. 1,200 82
Progressive Corp. 700 69
SAFECO Corp. 1,100 27
St. Paul Cos., Inc. 1,850 95
Torchmark Corp. 1,100 37
UnumProvident Corp. 2,349 66
---------
4,602
---------
MEDIA -- 0.7%
Clear Channel
Communications, Inc.+ 5,717 343
Comcast Corp., Special Class A+ 8,500 346
Dow Jones & Co., Inc. 800 47
Gannett Co., Inc. 2,700 157
Knight-Ridder, Inc. 900 45
McGraw-Hill Cos., Inc. 2,000 128
Meredith Corp. 500 16
New York Times Co., Class A 1,700 62
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
R.R. Donnelley & Sons Co. 1,200 $ 26
Seagram Co. Ltd. 4,300 246
Time Warner, Inc. 12,700 964
Tribune Co. 2,800 104
Viacom, Inc., Class B+ 14,981 852
The Walt Disney Co. 20,319 728
---------
4,064
---------
MISCELLANEOUS -- 0.1%
Agilent Technologies, Inc.+ 4,437 205
Palm, Inc.+ 4,894 262
Sabre Holdings Corp.+ 1,283 43
XCEL Energy, Inc. 3,150 81
---------
591
---------
MISCELLANEOUS FINANCE -- 1.4%
American Express Co. 12,900 774
Associates First Capital Corp., Class A 7,242 269
Bear Stearns Cos., Inc. 1,182 72
Capital One Financial Corp. 1,800 114
Charles Schwab Corp. 13,042 458
Charter One Financial, Inc. 2,100 48
CIT Group, Inc., Class A 2,600 45
Citigroup, Inc. 43,881 2,309
Countrywide Credit Industries, Inc. 1,100 41
Fannie Mae 9,700 747
Franklin Resources, Inc. 2,500 107
Freddie Mac 6,900 414
Household International, Inc. 4,759 239
Lehman Brothers Holdings, Inc. 2,400 155
MBNA Corp. 7,900 297
Merrill Lynch & Co., Inc. 7,400 518
Morgan Stanley Dean Witter & Co. 11,000 883
Paine Webber Group, Inc. 1,400 100
T. Rowe Price Associates, Inc. 1,200 56
USA Education, Inc. 1,700 95
Washington Mutual, Inc. 5,655 249
---------
7,990
---------
</TABLE>
34
<PAGE> 39
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
NON-FERROUS METALS -- 0.1%
Alcan Aluminum Ltd. 3,214 $ 101
Alcoa, Inc. 8,472 243
Engelhard Corp. 1,300 27
Freeport-McMoRan Copper
& Gold, Inc., Class B+ 800 6
Inco Ltd.+ 1,900 29
Phelps Dodge Corp. 810 38
---------
444
---------
OIL - DOMESTIC -- 0.1%
Amerada Hess Corp. 1,000 62
Ashland, Inc. 800 26
Conoco, Inc., Class B 6,300 171
Kerr-McGee Corp. 869 57
Phillips Petroleum Co. 2,400 148
Sunoco, Inc. 900 27
Tosco Corp. 1,500 43
Transocean Sedco Forex, Inc. 2,045 108
Unocal Corp. 2,400 82
USX-Marathon Group, Inc. 3,100 84
---------
808
---------
OIL - INTERNATIONAL -- 0.9%
Chevron Corp. 6,500 534
Exxon Mobil Corp. 33,729 3,008
Royal Dutch Petroleum Co. -
Sponsored ADR 20,900 1,241
Texaco, Inc. 5,361 317
---------
5,100
---------
OPTICAL & PHOTO -- 0.0%
Eastman Kodak Co. 3,100 139
Polaroid Corp. 400 4
---------
143
---------
PAPER & FOREST PRODUCTS -- 0.2%
Boise Cascade Corp. 600 17
Fort James Corp. 2,000 66
Georgia-Pacific Group 1,700 46
International Paper Co. 4,846 177
Kimberly-Clark Corp. 5,360 354
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Louisiana-Pacific Corp. 600 $ 5
Mead Corp. 1,000 29
Potlatch Corp. 300 10
Temple-Inland, Inc. 600 27
Westvaco Corp. 1,000 28
Weyerhaeuser Co. 2,300 108
Willamette Industries, Inc. 1,100 40
---------
907
---------
PRODUCER GOODS & MANUFACTURING -- 1.4%
Avery Dennison Corp. 1,200 61
Briggs & Stratton Corp. 100 4
Caterpillar, Inc. 3,500 123
Cooper Industries, Inc. 900 34
Corning, Inc. 8,700 666
Deere & Co. 2,300 85
Dover Corp. 2,000 85
Emerson Electric Co. 4,000 294
FMC Corp.+ 400 30
General Electric Co. 96,200 5,273
Honeywell International, Inc. 7,837 422
Illinois Tool Works, Inc. 3,000 167
Ingersoll-Rand Co. 1,650 62
Johnson Controls, Inc. 800 48
Millipore Corp. 400 21
Minnesota Mining
& Manufacturing Co. 3,900 377
Pall Corp. 1,000 22
Parker-Hannifin Corp. 1,150 48
Snap-On, Inc. 600 15
The Timken Co. 400 6
W.W. Grainger, Inc. 900 29
---------
7,872
---------
RAILROAD & SHIPPING -- 0.1%
Burlington Northern
Santa Fe Corp. 4,500 120
CSX Corp. 2,200 56
Norfolk Southern Corp. 3,600 51
Union Pacific Corp. 2,500 117
---------
344
---------
</TABLE>
35
<PAGE> 40
SCHWAB MARKETTRACK GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 2000
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
RETAIL -- 1.1%
Albertson's, Inc. 4,138 $ 98
AutoZone, Inc.+ 1,300 35
Bed, Bath & Beyond, Inc.+ 2,800 72
Best Buy Co., Inc.+ 1,900 95
Circuit City Stores-
Circuit City Group 2,000 26
Consolidated Stores Corp.+ 500 6
Costco Wholesale Corp.+ 4,400 161
CVS Corp. 3,900 206
Dillards, Inc., Class A 500 5
Dollar General Corp. 3,303 51
Federated Department Stores, Inc.+ 2,100 68
Gap, Inc. 8,300 214
Home Depot, Inc. 22,500 967
J.C. Penney Co., Inc. 2,500 29
Kmart Corp.+ 4,700 28
Kohl's Corp.+ 3,200 173
Kroger Co.+ 8,200 185
Limited, Inc. 4,194 106
Longs Drug Stores, Inc. 400 9
Lowe's Cos., Inc. 3,800 174
May Department Stores Co. 3,200 84
The Neiman Marcus Group, Inc.,
Class B+ 1 --
Nordstrom, Inc. 1,300 21
Office Depot, Inc.+ 3,700 31
RadioShack Corp. 1,900 113
Safeway, Inc.+ 4,900 268
Sears, Roebuck & Co. 3,200 95
Staples, Inc.+ 4,350 62
Target Corp. 8,800 243
Tiffany & Co., Inc 1,400 60
TJX Cos., Inc. 3,000 82
Toys 'R' Us, Inc.+ 2,600 45
Wal-Mart Stores, Inc. 43,500 1,974
Walgreen Co. 9,900 452
Winn-Dixie Stores, Inc. 1,500 29
---------
6,267
---------
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
STEEL -- 0.0%
Allegheny Technologies, Inc. 735 $ 15
Bethlehem Steel Corp.+ 1,868 5
Nucor Corp. 900 31
USX-U.S. Steel Group, Inc. 900 14
Worthington Industries, Inc. 900 9
---------
74
---------
TELEPHONE -- 1.4%
Alltel Corp. 3,100 200
AT&T Corp. 35,821 831
Avaya, Inc.+ 2,632 35
BellSouth Corp. 18,400 889
CenturyTel, Inc. 1,350 52
Global Crossing Ltd.+ 7,770 184
Qwest Communications
International, Inc.+ 15,773 767
SBC Communications, Inc. 33,336 1,923
Sprint Corp. (FON Group) 8,600 219
Sprint Corp. (PCS Group)+ 8,800 335
Verizon Communications 26,858 1,553
Worldcom, Inc.+ 27,720 658
---------
7,646
---------
TOBACCO -- 0.2%
Philip Morris Cos., Inc. 22,800 835
UST, Inc. 1,600 40
---------
875
---------
TRAVEL & RECREATION -- 0.1%
Brunswick Corp. 900 17
Carnival Corp. 6,100 151
Harrah's Entertainment, Inc.+ 1,300 37
Hilton Hotels Corp. 3,600 34
Marriott International, Inc., Class A 2,600 105
---------
344
---------
TRUCKING & FREIGHT -- 0.0%
PACCAR, Inc. 500 21
Ryder Systems, Inc. 400 8
---------
29
---------
</TABLE>
36
<PAGE> 41
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
UTILITIES - ELECTRIC & GAS -- 0.7%
AES Corp.+ 4,000 $ 226
Ameren Corp. 1,500 60
American Electric Power Co., Inc. 3,160 131
CP&L Energy, Inc. 1,600 65
Cinergy Corp. 1,600 49
CMS Energy Corp. 1,000 27
Coastal Corp. 2,200 166
Columbia Energy Group 800 58
Consolidated Edison, Inc. 2,100 74
Constellation Energy Group, Inc. 1,300 54
Dominion Resources, Inc. 2,378 142
DTE Energy Co. 1,400 51
Duke Energy Corp. 3,626 313
Dynegy, Inc., Class A 3,100 144
Edison International 3,200 76
El Paso Energy Corp. 2,300 144
Enron Corp. 7,100 583
Entergy Corp. 2,400 92
FirstEnergy Corp. 2,100 54
Florida Progress Corp. 1,000 53
FPL Group, Inc. 1,900 125
GPU, Inc. 1,200 40
KeySpan Corp. 1,300 46
Niagara Mohawk Holdings, Inc.+ 1,800 29
NICOR, Inc. 500 18
ONEOK, Inc. 300 12
Peoples Energy Corp. 200 7
PG&E Corp. 3,600 97
Pinnacle West Capital Corp. 800 35
PPL Corp. 1,400 58
Public Service Enterprise Group, Inc. 2,000 83
Reliant Energy, Inc. 2,949 122
Sempra Energy 2,103 44
Southern Co. 6,600 194
TXU Corp. 2,767 103
Williams Cos., Inc. 4,200 176
---------
3,751
---------
TOTAL COMMON STOCK
(Cost $66,230) 122,119
---------
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
INVESTMENT FUNDS -- 73.5%
Schwab International Index Fund(R),
Select Shares 6,476,764 $111,012
Schwab S&P 500 Fund,
Select Shares 4,822,487 107,107
Schwab Small-Cap Index Fund(R),
Select Shares 5,457,779 115,105
Schwab Total Bond Market
Index Fund 8,579,670 82,880
---------
TOTAL INVESTMENT FUNDS
(Cost $363,552) 416,104
---------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares/Par (000s)
-----------------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 4.9%
Schwab Value Advantage
Money Fund(R), Investor
Shares, 6.30%* 26,594,862 26,595
Wachovia Bank NA Time Deposit
6.03%*, 11/1/00 $1,220 1,220
---------
TOTAL SHORT-TERM INVESTMENTS
(Cost $27,815) 27,815
---------
TOTAL INVESTMENTS -- 100.0%
(Cost $457,597) 566,038
---------
OTHER ASSETS AND LIABILITIES, NET -- 0.0%
Other assets 777
Liabilities (510)
---------
267
---------
TOTAL NET ASSETS -- 100.0% $ 566,305
=========
</TABLE>
See accompanying Notes to Schedules of Investments and Notes to Financial
Statements.
37
<PAGE> 42
SCHWAB MARKETTRACK BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
COMMON STOCK -- 16.1%
AEROSPACE / DEFENSE -- 0.2%
B.F. Goodrich Co. 700 $ 29
Boeing Co. 5,784 392
Crane Co. 200 5
General Dynamics Corp. 1,300 93
Lockheed Martin Corp. 2,600 93
Northrop Grumman Corp. 500 42
Raytheon Co., Class B 2,300 79
Rockwell International Corp. 1,200 47
Textron, Inc. 1,000 50
TRW, Inc. 800 34
United Technologies Corp. 3,200 223
----------
1,087
----------
AIR TRANSPORTATION -- 0.1%
AMR Corp.+ 1,000 33
Delta Air Lines, Inc. 900 43
FedEx Corp.+ 1,960 92
Southwest Airlines Co. 3,025 86
U.S. Airways Group, Inc.+ 400 15
----------
269
----------
ALCOHOLIC BEVERAGES -- 0.1%
Adolph Coors Co., Class B 200 13
Anheuser-Busch Cos., Inc. 5,800 265
Brown-Forman Corp., Class B 500 30
----------
308
----------
APPAREL -- 0.0%
Liz Claiborne, Inc. 400 17
Nike, Inc., Class B 1,700 68
Reebok International Ltd.+ 300 6
Russell Corp. 200 3
Springs Industries, Inc., Class A 200 5
VF Corp. 800 22
----------
121
----------
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES -- 0.2%
Cooper Tire & Rubber Co. 400 4
Cummins Engine Co., Inc. 300 10
Dana Corp. 1,085 24
Danaher Corp. 900 57
Delphi Automotive Systems Corp. 3,884 61
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Eaton Corp. 500 $ 34
Ford Motor Co.+ 12,185 318
General Motors Corp. 3,450 214
Genuine Parts Co. 1,150 25
Goodyear Tire & Rubber Co. 1,000 18
Harley-Davidson, Inc. 2,000 96
Navistar International Corp.+ 400 13
Visteon Corp. 1,047 19
----------
893
----------
BANKS -- 0.9%
AmSouth Bancorp. 2,600 36
Bank of America Corp. 10,780 518
Bank of New York Co., Inc. 4,900 282
Bank One Corp. 7,557 276
BB&T Corp. 2,200 70
Chase Manhattan Corp. 8,196 373
Comerica, Inc. 1,000 60
Fifth Third Bancorp. 3,037 156
First Union Corp. 6,536 198
Firstar Corp. 6,381 126
FleetBoston Financial Corp. 6,054 230
Golden West Financial Corp. 1,100 62
Huntington Bancshares, Inc. 1,597 23
J.P. Morgan & Co., Inc. 1,100 182
KeyCorp, Inc. 2,600 64
Mellon Financial Corp. 3,100 150
National City Corp. 4,100 88
Northern Trust Corp. 1,400 120
Old Kent Financial Corp. 840 23
PNC Financial Services Group 1,900 127
Providian Financial Corp. 950 99
Regions Financial Corp. 1,400 33
SouthTrust Corp. 1,100 36
State Street Corp. 1,100 137
Summit Bancorp. 1,200 45
SunTrust Banks, Inc. 1,900 93
Synovus Financial Corp. 1,900 41
U.S. Bancorp. 4,880 118
Union Planters Corp. 900 30
Wachovia Corp. 1,400 76
Wells Fargo & Co. 10,420 483
----------
4,355
----------
</TABLE>
38
<PAGE> 43
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
BUSINESS MACHINES & SOFTWARE -- 2.4%
Adaptec, Inc.+ 700 $ 11
Adobe Systems, Inc. 1,600 122
Apple Computer, Inc.+ 2,200 43
Autodesk, Inc. 400 9
BMC Software, Inc.+ 1,600 32
Cabletron Systems, Inc.+ 1,200 33
Ceridian Corp.+ 928 23
Cisco Systems, Inc.+ 46,300 2,494
Compaq Computer Corp. 11,264 343
Compuware Corp.+ 2,400 19
Comverse Technology, Inc.+ 1,000 112
Dell Computer Corp.+ 16,900 499
EMC Corp.+ 14,162 1,261
Gateway, Inc.+ 2,100 108
Hewlett-Packard Co. 13,200 613
International Business
Machines Corp. 11,500 1,133
Lexmark International
Group, Inc., Class A+ 800 33
Microsoft Corp.+ 34,500 2,376
NCR Corp.+ 600 26
Network Appliance, Inc.+ 2,000 238
Novell, Inc.+ 2,200 20
Novellus Systems, Inc.+ 600 25
Oracle Corp.+ 37,000 1,221
Pitney Bowes, Inc. 1,800 53
Seagate Technology, Inc.+ 1,384 97
Sun Microsystems, Inc.+ 10,400 1,153
Unisys Corp.+ 2,100 27
Xerox Corp. 4,200 35
----------
12,159
----------
BUSINESS SERVICES -- 1.0%
Allied Waste Industries, Inc.+ 1,300 12
America Online, Inc.+ 14,900 751
Automatic Data Processing, Inc. 4,200 274
Cendant Corp.+ 4,915 59
Citrix Systems, Inc.+ 1,200 27
Computer Associates
International, Inc. 3,825 122
Computer Sciences Corp.+ 1,090 69
Convergys Corp.+ 869 38
Deluxe Corp. 500 11
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Ecolab, Inc. 1,000 $ 39
Electronic Data Systems Corp. 3,100 146
Equifax, Inc. 900 31
Exelon Corp. 2,162 130
First Data Corp. 2,800 140
H&R Block, Inc. 600 21
IMS Health, Inc. 2,000 47
Interpublic Group of Cos., Inc. 1,900 82
Mercury Interactive Corp.+ 500 55
National Service Industries, Inc. 100 2
Nortel Networks Corp. 19,340 880
Omnicom Group, Inc. 1,200 111
Parametric Technology Corp.+ 1,800 22
Paychex, Inc. 2,475 140
PeopleSoft, Inc.+ 1,500 65
Sapient Corp.+ 800 28
Siebel Systems, Inc.+ 2,600 273
Stilwell Financial, Inc. 1,400 63
Tyco International Ltd. 11,375 645
VERITAS Software Corp.+ 2,600 367
Waste Management, Inc. 4,112 82
Yahoo!, Inc.+ 3,600 211
----------
4,943
----------
CHEMICAL -- 0.1%
Air Products & Chemicals, Inc. 1,500 56
Dow Chemical Co. 4,200 129
E.I. du Pont de Nemours & Co. 6,884 312
Eastman Chemical Co. 600 26
Great Lakes Chemical Corp. 400 13
Hercules, Inc. 700 13
PPG Industries, Inc. 1,200 54
Praxair, Inc. 1,000 37
Rohm & Haas Co. 1,421 43
Sigma-Aldrich Corp. 700 25
Union Carbide Corp. 900 39
W.R. Grace & Co.+ 300 1
----------
748
----------
CONSTRUCTION -- 0.0%
Armstrong Holdings, Inc. 400 1
Centex Corp. 400 15
Fluor Corp. 500 17
Kaufman & Broad Home Corp. 300 9
</TABLE>
39
<PAGE> 44
SCHWAB MARKETTRACK BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 2000
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Masco Corp. 3,000 $ 56
Pulte Corp. 200 7
Sherwin-Williams Co. 1,100 24
The Stanley Works 600 16
Vulcan Materials Co. 700 29
----------
174
----------
CONSUMER - DURABLE -- 0.0%
Black & Decker Corp. 600 23
Leggett & Platt, Inc. 1,300 21
Maytag Corp. 600 17
Whirlpool Corp. 500 22
----------
83
----------
CONSUMER - NONDURABLE -- 0.1%
American Greetings Corp., Class A 400 7
Darden Restaurants, Inc. 900 20
Fortune Brands, Inc. 1,000 29
Harcourt General, Inc. 500 28
Hasbro, Inc. 1,275 14
Mattel, Inc. 2,825 37
McDonald's Corp. 8,600 267
Newell Rubbermaid, Inc. 1,872 36
Starbucks Corp.+ 1,220 55
Tricon Global Restaurants, Inc.+ 1,030 31
Tupperware Corp. 200 3
Wendy's International, Inc. 800 17
----------
544
----------
CONTAINERS -- 0.0%
Ball Corp. 100 4
Bemis Co., Inc. 300 8
Crown Cork & Seal Co., Inc. 900 8
Owens-Illinois, Inc.+ 1,000 6
Pactiv Corp.+ 1,000 10
Sealed Air Corp.+ 621 30
----------
66
----------
ELECTRONICS -- 1.4%
ADC Telecommunications, Inc.+ 4,000 85
Advanced Micro Devices, Inc.+ 2,040 46
Altera Corp.+ 2,546 104
American Power Conversion Corp.+ 1,175 15
Analog Devices, Inc.+ 2,300 149
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Andrew Corp.+ 325 $ 9
Applied Materials, Inc.+ 5,200 276
Broadcom Corp., Class A+ 1,500 334
Conexant Systems, Inc.+ 1,300 34
Intel Corp. 43,800 1,971
ITT Industries, Inc. 600 20
JDS Uniphase Corp.+ 6,000 489
KLA-Tencor Corp.+ 1,200 41
Linear Technology Corp. 2,000 129
LSI Logic Corp.+ 2,000 66
Lucent Technologies, Inc. 21,305 497
Maxim Integrated Products, Inc.+ 1,800 119
Micron Technology, Inc.+ 3,600 125
Molex, Inc. 1,250 67
Moody's Corp. 1,000 26
Motorola, Inc. 14,070 351
National Semiconductor Corp.+ 1,100 29
Nextel Communications, Inc.,
Class A+ 4,800 185
PE Corp.-PE Biosystems Group 1,400 164
PerkinElmer, Inc. 300 36
Power-One, Inc.+ 240 17
QUALCOMM, Inc.+ 4,800 313
Sanmina Corp.+ 1,000 114
Scientific-Atlanta, Inc. 1,000 68
Solectron Corp.+ 3,800 167
Tektronix, Inc. 250 18
Tellabs, Inc.+ 2,700 135
Teradyne, Inc.+ 1,100 34
Texas Instruments, Inc. 11,300 554
Thermo Electron Corp.+ 900 26
Thomas & Betts Corp. 381 6
Xilinx, Inc.+ 2,100 152
----------
6,971
----------
ENERGY - RAW MATERIALS -- 0.2%
Anadarko Petroleum Corp. 1,510 97
Apache Corp. 800 44
Baker Hughes, Inc. 2,250 77
Burlington Resources, Inc. 1,410 51
Devon Energy Corp. 800 40
Eastern Enterprises 100 6
Halliburton Co. 2,974 110
McDermott International, Inc. 400 4
Nabors Industries, Inc.+ 700 36
</TABLE>
40
<PAGE> 45
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Occidental Petroleum Corp. 2,400 $ 48
Rowan Cos., Inc.+ 600 15
Schlumberger Ltd. 3,600 274
----------
802
----------
FOOD & AGRICULTURE -- 0.5%
Archer-Daniels-Midland Co. 4,235 47
Campbell Soup Co. 2,800 82
Coca-Cola Co. 16,200 978
Coca-Cola Enterprises, Inc. 2,700 50
ConAgra, Inc. 3,300 71
General Mills, Inc. 1,992 83
H.J. Heinz Co. 2,300 96
Hershey Foods Corp. 1,000 54
Kellogg Co. 2,700 69
Nabisco Group Holdings Corp. 2,200 64
PepsiCo, Inc. 9,300 450
Quaker Oats Co. 900 73
Ralston Purina Group 2,100 51
Sara Lee Corp. 5,500 119
Supervalu, Inc. 900 14
Sysco Corp. 2,200 115
Unilever NV - Sponsored ADR 3,839 195
Wm. Wrigley Jr. Co. 800 63
----------
2,674
----------
GOLD -- 0.0%
Barrick Gold Corp. 2,600 35
Homestake Mining Co. 1,700 7
Newmont Mining Corp. 1,129 15
Placer Dome, Inc. 2,200 18
----------
75
----------
HEALTHCARE / DRUGS & MEDICINE -- 1.9%
Abbott Laboratories 10,200 539
Aetna, Inc. 834 48
Allergan, Inc. 900 76
ALZA Corp.+ 700 57
American Home Products Corp. 8,500 540
Amgen, Inc.+ 6,800 394
Bausch & Lomb, Inc. 400 15
Baxter International, Inc. 1,900 156
Becton, Dickinson & Co. 1,800 60
Biogen, Inc.+ 1,000 60
Biomet, Inc. 1,050 38
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Boston Scientific Corp.+ 2,774 $ 44
Bristol-Myers Squibb Co. 13,000 792
C.R. Bard, Inc. 300 13
Cardinal Health, Inc. 1,850 175
Eli Lilly & Co. 7,400 661
Guidant Corp.+ 2,000 106
HCA-The Healthcare Co. 3,700 148
HealthSouth Corp.+ 2,776 33
Humana, Inc.+ 800 10
Johnson & Johnson 9,100 838
King Pharmaceuticals, Inc.+ 1,041 47
Manor Care, Inc.+ 500 8
McKesson HBOC, Inc. 1,773 50
Medimmune, Inc.+ 1,400 92
Medtronic, Inc. 7,800 424
Merck & Co., Inc. 15,000 1,349
Pfizer, Inc. 41,075 1,774
Pharmacia Corp. 8,365 460
Quintiles Transnational Corp.+ 800 11
Schering-Plough Corp. 9,500 491
St. Jude Medical, Inc.+ 430 24
Tenet Healthcare Corp.+ 2,100 83
UnitedHealth Group, Inc. 1,100 120
Watson Pharmaceuticals, Inc.+ 600 38
Wellpoint Health Networks, Inc.+ 500 58
----------
9,832
----------
HOUSEHOLD PRODUCTS -- 0.2%
Alberto-Culver Co., Class B 400 13
Avon Products, Inc. 1,500 73
Clorox Co. 1,600 71
Colgate-Palmolive Co. 3,900 229
Gillette Co. 6,700 234
International Flavors
& Fragrances, Inc. 800 13
Procter & Gamble Co. 8,500 607
----------
1,240
----------
INSURANCE -- 0.6%
AFLAC, Inc. 1,800 132
Allstate Corp. 4,700 189
American General Corp. 1,710 138
American International Group, Inc. 14,962 1,466
Aon Corp. 1,725 71
Chubb Corp. 1,100 93
</TABLE>
41
<PAGE> 46
SCHWAB MARKETTRACK BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 2000
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
CIGNA Corp. 1,100 $ 134
Cincinnati Financial Corp. 1,200 44
Conseco, Inc. 2,171 15
Hartford Financial
Services Group, Inc. 1,400 104
Jefferson-Pilot Corp. 700 48
Lincoln National Corp. 1,300 63
Loew's Corp. 700 64
Marsh & McLennan Cos., Inc. 1,800 235
MBIA, Inc. 700 51
MGIC Investment Corp. 700 48
Progressive Corp. 500 49
SAFECO Corp. 800 19
St. Paul Cos., Inc. 1,424 73
Torchmark Corp. 800 27
UnumProvident Corp. 1,657 47
----------
3,110
----------
MEDIA -- 0.5%
Clear Channel
Communications, Inc.+ 3,780 227
Comcast Corp., Special Class A+ 6,100 249
Dow Jones & Co., Inc. 600 35
Gannett Co., Inc. 1,700 99
Knight-Ridder, Inc. 600 30
McGraw-Hill Cos., Inc. 1,400 90
Meredith Corp. 300 10
New York Times Co., Class A 1,100 40
R.R. Donnelley & Sons Co. 800 17
Seagram Co. Ltd. 2,800 160
Time Warner, Inc. 8,500 645
Tribune Co. 1,900 70
Viacom, Inc., Class B+ 10,118 575
The Walt Disney Co. 13,717 491
----------
2,738
----------
MISCELLANEOUS -- 0.1%
Agilent Technologies, Inc.+ 2,917 135
Palm, Inc.+ 3,411 183
Sabre Holdings Corp.+ 922 31
XCEL Energy, Inc. 2,085 53
----------
402
----------
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
MISCELLANEOUS FINANCE -- 1.1%
American Express Co. 8,700 $ 522
Associates First Capital Corp.,
Class A 4,798 178
Bear Stearns Cos., Inc. 802 49
Capital One Financial Corp. 1,300 82
Charles Schwab Corp. 8,783 309
Charter One Financial, Inc. 1,470 34
CIT Group, Inc., Class A 1,700 30
Citigroup, Inc. 29,458 1,550
Countrywide Credit Industries, Inc. 800 30
Fannie Mae 6,500 501
Franklin Resources, Inc. 1,700 73
Freddie Mac 4,700 282
Household International, Inc. 3,033 153
Lehman Brothers Holdings, Inc. 1,600 103
MBNA Corp. 5,212 196
Merrill Lynch & Co., Inc. 5,200 364
Morgan Stanley Dean Witter & Co. 7,310 587
Paine Webber Group, Inc. 1,000 71
T. Rowe Price Associates, Inc. 800 37
USA Education, Inc. 1,000 56
Washington Mutual, Inc. 3,816 168
----------
5,375
----------
NON-FERROUS METALS -- 0.1%
Alcan Aluminum Ltd. 2,209 70
Alcoa, Inc. 5,648 162
Engelhard Corp. 800 17
Freeport-McMoRan Copper
& Gold, Inc., Class B+ 1,100 9
Inco Ltd.+ 1,300 20
Phelps Dodge Corp. 540 25
----------
303
----------
OIL - DOMESTIC -- 0.1%
Amerada Hess Corp. 600 37
Ashland, Inc. 500 16
Conoco, Inc., Class B 3,900 106
Kerr-McGee Corp. 621 41
Phillips Petroleum Co. 1,700 105
Sunoco, Inc. 600 18
</TABLE>
42
<PAGE> 47
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Tosco Corp. 1,000 $ 29
Transocean Sedco Forex, Inc. 1,416 75
Unocal Corp. 1,600 55
USX-Marathon Group, Inc. 2,100 57
----------
539
----------
OIL - INTERNATIONAL -- 0.7%
Chevron Corp. 4,300 353
Exxon Mobil Corp. 22,660 2,021
Royal Dutch Petroleum Co. -
Sponsored ADR 14,200 843
Texaco, Inc. 3,630 214
----------
3,431
----------
OPTICAL & PHOTO -- 0.0%
Eastman Kodak Co. 2,000 90
Polaroid Corp. 200 2
----------
92
----------
PAPER & FOREST PRODUCTS -- 0.1%
Boise Cascade Corp. 400 11
Fort James Corp. 1,500 49
Georgia-Pacific Group 1,100 30
International Paper Co. 3,166 116
Kimberly-Clark Corp. 3,580 236
Louisiana-Pacific Corp. 700 6
Mead Corp. 600 17
Potlatch Corp. 100 3
Temple-Inland, Inc. 400 18
Westvaco Corp. 700 20
Weyerhaeuser Co. 1,600 75
Willamette Industries, Inc. 700 25
----------
606
----------
PRODUCER GOODS & MANUFACTURING -- 1.0%
Avery Dennison Corp. 700 35
Briggs & Stratton Corp. 100 4
Caterpillar, Inc. 2,300 81
Cooper Industries, Inc. 600 23
Corning, Inc. 5,700 436
Deere & Co. 1,500 55
Dover Corp. 1,400 59
Emerson Electric Co. 2,800 206
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
FMC Corp.+ 200 $ 15
General Electric Co. 64,700 3,546
Honeywell International, Inc. 5,300 285
Illinois Tool Works, Inc. 2,000 111
Ingersoll-Rand Co. 1,100 42
Johnson Controls, Inc. 500 30
Millipore Corp. 200 11
Minnesota Mining
& Manufacturing Co. 2,600 251
Pall Corp. 800 17
Parker-Hannifin Corp. 700 29
Snap-On, Inc. 350 9
The Timken Co. 200 3
W.W. Grainger, Inc. 600 19
----------
5,267
----------
RAILROAD & SHIPPING -- 0.1%
Burlington Northern Santa Fe Corp. 2,900 77
CSX Corp. 1,500 38
Norfolk Southern Corp. 2,500 35
Union Pacific Corp. 1,700 80
----------
230
----------
RETAIL -- 0.8%
Albertson's, Inc. 2,671 63
AutoZone, Inc.+ 1,000 27
Bed, Bath & Beyond, Inc.+ 1,800 46
Best Buy Co., Inc.+ 1,400 70
Circuit City Stores-
Circuit City Group 1,400 19
Consolidated Stores Corp.+ 700 8
Costco Wholesale Corp.+ 3,000 110
CVS Corp. 2,600 138
Dillards, Inc., Class A 700 7
Dollar General Corp. 2,202 34
Federated Department
Stores, Inc.+ 1,400 46
Gap, Inc. 5,662 146
Home Depot, Inc. 15,100 649
J.C. Penney Co., Inc. 1,700 20
Kmart Corp.+ 3,300 20
Kohl's Corp.+ 2,200 119
Kroger Co.+ 5,300 120
</TABLE>
43
<PAGE> 48
SCHWAB MARKETTRACK BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 2000
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Limited, Inc. 2,688 $ 68
Longs Drug Stores, Inc. 200 4
Lowe's Cos., Inc. 2,500 114
May Department Stores Co. 2,100 55
Nordstrom, Inc. 900 15
Office Depot, Inc.+ 2,500 21
RadioShack Corp. 1,300 78
Safeway, Inc.+ 3,300 180
Sears, Roebuck & Co. 2,400 71
Staples, Inc.+ 3,050 43
Target Corp. 5,800 160
Tiffany & Co., Inc 950 41
TJX Cos., Inc. 2,100 57
Toys 'R' Us, Inc.+ 1,200 21
Wal-Mart Stores, Inc. 29,100 1,320
Walgreen Co. 6,600 301
Winn-Dixie Stores, Inc. 1,200 23
----------
4,214
----------
STEEL -- 0.0%
Allegheny Technologies, Inc. 492 10
Bethlehem Steel Corp.+ 1,088 3
Nucor Corp. 600 21
USX-U.S. Steel Group, Inc. 500 8
Worthington Industries, Inc. 300 3
----------
45
----------
TELEPHONE -- 1.0%
Alltel Corp. 2,100 135
AT&T Corp. 24,142 560
Avaya, Inc.+ 1,775 24
BellSouth Corp. 12,500 604
CenturyTel, Inc. 900 35
Global Crossing Ltd.+ 5,150 122
Qwest Communications
International, Inc.+ 10,622 516
SBC Communications, Inc. 22,388 1,292
Sprint Corp. (FON Group) 5,800 148
Sprint Corp. (PCS Group)+ 5,900 225
Verizon Communications 17,836 1,031
Worldcom, Inc.+ 18,819 447
----------
5,139
----------
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
TOBACCO -- 0.1%
Philip Morris Cos., Inc. 15,000 $ 549
UST, Inc. 1,100 28
----------
577
----------
TRAVEL & RECREATION -- 0.0%
Brunswick Corp. 600 12
Carnival Corp. 4,100 102
Harrah's Entertainment, Inc.+ 900 26
Hilton Hotels Corp. 2,500 24
Marriott International, Inc.,
Class A 1,500 61
----------
225
----------
TRUCKING & FREIGHT -- 0.0%
PACCAR, Inc. 600 25
Ryder Systems, Inc. 400 8
----------
33
----------
UTILITIES - ELECTRIC & GAS -- 0.5%
AES Corp.+ 2,800 158
Ameren Corp. 900 36
American Electric Power Co., Inc. 2,080 86
CP&L Energy, Inc. 1,100 44
Cinergy Corp. 1,000 31
CMS Energy Corp. 700 19
Coastal Corp. 1,400 106
Columbia Energy Group 550 40
Consolidated Edison, Inc. 1,500 53
Constellation Energy Group, Inc. 1,000 42
Dominion Resources, Inc. 1,467 87
DTE Energy Co. 1,000 36
Duke Energy Corp. 2,426 210
Dynegy, Inc., Class A 2,100 97
Edison International 2,200 53
El Paso Energy Corp. 1,500 94
Enron Corp. 4,700 386
Entergy Corp. 1,500 57
FirstEnergy Corp. 1,500 39
Florida Progress Corp. 700 37
FPL Group, Inc. 1,300 86
GPU, Inc. 800 26
KeySpan Corp. 900 32
</TABLE>
44
<PAGE> 49
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Niagara Mohawk Holdings, Inc.+ 1,200 $ 19
NICOR, Inc. 300 11
ONEOK, Inc. 200 8
Peoples Energy Corp. 200 7
PG&E Corp. 2,400 65
Pinnacle West Capital Corp. 600 26
PPL Corp. 1,000 41
Public Service Enterprise Group, Inc. 1,500 62
Reliant Energy, Inc. 1,924 79
Sempra Energy 1,360 28
Southern Co. 4,500 132
TXU Corp. 1,622 60
Williams Cos., Inc. 2,800 117
----------
2,510
----------
TOTAL COMMON STOCK
(Cost $45,266) 82,180
----------
INVESTMENT FUNDS -- 78.9%
Schwab International Index Fund(R),
Select Shares 4,363,729 74,794
Schwab S&P 500 Fund,
Select Shares 3,319,102 73,717
Schwab Small-Cap Index Fund(R),
Select Shares 3,704,732 78,133
Schwab Total Bond Market
Index Fund 18,196,007 175,773
----------
TOTAL INVESTMENT FUNDS
(Cost $365,536) 402,417
----------
</TABLE>
<TABLE>
<CAPTION>
Number of Value
Shares/Par (000s) (000s)
----------------- ----------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 4.9%
Schwab Value Advantage Money
Fund(R), Investor Shares, 6.30%* 24,006,195 $ 24,006
Wachovia Bank NA Time Deposit,
6.03%*, 11/1/00 $1,179 1,179
----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $25,185) 25,185
----------
TOTAL INVESTMENTS -- 99.9%
(Cost $435,987) 509,782
----------
OTHER ASSETS AND LIABILITIES -- 0.1%
Other assets 997
Liabilities (559)
----------
438
----------
TOTAL NET ASSETS -- 100.0% $ 510,220
==========
</TABLE>
See accompanying Notes to Schedules of Investments and Notes to Financial
Statements.
45
<PAGE> 50
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
COMMON STOCK -- 10.0%
AEROSPACE / DEFENSE -- 0.1%
B.F. Goodrich Co. 200 $ 8
Boeing Co. 1,446 98
Crane Co. 150 4
General Dynamics Corp. 300 21
Lockheed Martin Corp. 600 22
Northrop Grumman Corp. 100 8
Raytheon Co., Class B 500 17
Rockwell International Corp. 300 12
Textron, Inc. 200 10
TRW, Inc. 200 8
United Technologies Corp. 700 49
----------
257
----------
AIR TRANSPORTATION -- 0.0%
AMR Corp.+ 200 7
Delta Air Lines, Inc. 200 9
FedEx Corp.+ 460 22
Southwest Airlines Co. 812 23
U.S. Airways Group, Inc.+ 100 4
----------
65
----------
ALCOHOLIC BEVERAGES -- 0.0%
Adolph Coors Co., Class B 100 6
Anheuser-Busch Cos., Inc. 1,400 64
Brown-Forman Corp., Class B 100 6
----------
76
----------
APPAREL -- 0.0%
Liz Claiborne, Inc. 100 4
Nike, Inc., Class B 400 16
Reebok International Ltd.+ 100 2
VF Corp. 200 5
----------
27
----------
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES -- 0.1%
Cooper Tire & Rubber Co. 100 1
Cummins Engine Co., Inc. 100 3
Dana Corp. 292 6
Danaher Corp. 200 13
Delphi Automotive Systems Corp. 868 14
Eaton Corp. 100 7
Ford Motor Co. 2,921 76
General Motors Corp. 825 51
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Genuine Parts Co. 250 $ 5
Goodyear Tire & Rubber Co. 300 6
Harley-Davidson, Inc. 400 19
Navistar International Corp.+ 100 3
Visteon Corp. 248 4
----------
208
----------
BANKS -- 0.5%
AmSouth Bancorp. 600 8
Bank of America Corp. 2,511 121
Bank of New York Co., Inc. 1,100 63
Bank One Corp. 1,846 67
BB&T Corp. 500 16
Chase Manhattan Corp. 1,974 90
Comerica, Inc. 200 12
Fifth Third Bancorp. 712 37
First Union Corp. 1,600 49
Firstar Corp. 1,518 30
Fleet Boston Financial Corp. 1,451 55
Golden West Financial Corp. 200 11
Huntington Bancshares, Inc. 423 6
J.P. Morgan & Co., Inc. 200 33
KeyCorp, Inc. 700 17
Mellon Financial Corp. 800 39
National City Corp. 1,000 21
Northern Trust Corp. 400 34
Old Kent Financial Corp. 210 6
PNC Financial Services Group 400 27
Providian Financial Corp. 200 21
Regions Financial Corp. 300 7
SouthTrust Corp. 200 6
State Street Corp. 300 37
Summit Bancorp. 300 11
SunTrust Banks, Inc. 500 24
Synovus Financial Corp. 400 9
U.S. Bancorp. 1,189 29
Union Planters Corp. 200 7
Wachovia Corp. 300 16
Wells Fargo & Co. 2,560 119
----------
1,028
----------
BUSINESS MACHINES & SOFTWARE -- 1.5%
Adaptec, Inc.+ 200 3
Adobe Systems, Inc. 400 30
Apple Computer, Inc.+ 400 8
Autodesk, Inc. 100 2
</TABLE>
46
<PAGE> 51
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
BMC Software, Inc.+ 400 $ 8
Cabletron Systems, Inc.+ 300 8
Ceridian Corp.+ 214 5
Cisco Systems, Inc.+ 10,800 582
Compaq Computer Corp. 2,693 82
Compuware Corp.+ 600 5
Comverse Technology, Inc.+ 200 22
Dell Computer Corp.+ 4,000 118
EMC Corp.+ 3,350 298
Gateway, Inc.+ 500 26
Hewlett-Packard Co. 3,200 149
International Business
Machines Corp. 2,700 266
Lexmark International Group,
Inc., Class A+ 200 8
Microsoft Corp.+ 8,100 558
NCR Corp.+ 200 9
Network Appliance, Inc.+ 500 60
Novell, Inc.+ 500 5
Novellus Systems, Inc.+ 150 6
Oracle Corp.+ 8,800 290
Pitney Bowes, Inc. 400 12
Seagate Technology, Inc.+ 376 26
Sun Microsystems, Inc.+ 2,500 277
Unisys Corp.+ 500 6
Xerox Corp. 1,000 8
----------
2,877
----------
BUSINESS SERVICES -- 0.6%
Allied Waste Industries, Inc.+ 300 3
America Online, Inc.+ 3,500 177
Automatic Data Processing, Inc. 1,000 65
Cendant Corp.+ 1,159 14
Citrix Systems, Inc.+ 300 7
Computer Associates
International, Inc. 850 27
Computer Sciences Corp.+ 258 16
Convergys Corp.+ 174 8
Deluxe Corp. 100 2
Ecolab, Inc. 200 8
Electronic Data Systems Corp. 700 33
Equifax, Inc. 200 7
Exelon Corp. 562 34
First Data Corp. 700 35
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
H&R Block, Inc. 200 $ 7
IMS Health, Inc. 500 12
Interpublic Group of Cos., Inc. 400 17
Mercury Interactive Corp.+ 100 11
National Service Industries, Inc. 100 2
Nortel Networks Corp. 4,620 210
Omnicom Group, Inc. 300 28
Parametric Technology Corp.+ 500 6
Paychex, Inc. 525 30
PeopleSoft, Inc.+ 400 17
Sapient Corp.+ 200 7
Siebel Systems, Inc.+ 600 63
Stilwell Financial, Inc. 400 18
Tyco International Ltd. 2,737 155
VERITAS Software Corp.+ 600 85
Waste Management, Inc. 1,007 20
Yahoo!, Inc.+ 800 47
----------
1,171
----------
CHEMICAL -- 0.1%
Air Products & Chemicals, Inc. 400 15
Dow Chemical Co. 900 28
E.I. du Pont de Nemours & Co. 1,625 74
Eastman Chemical Co. 100 4
Great Lakes Chemical Corp. 100 3
Hercules, Inc. 200 4
PPG Industries, Inc. 300 13
Praxair, Inc. 200 7
Rohm & Haas Co. 373 11
Sigma-Aldrich Corp. 200 7
Union Carbide Corp. 200 9
----------
175
----------
CONSTRUCTION -- 0.0%
Centex Corp. 100 4
Fluor Corp. 100 4
Kaufman & Broad Home Corp. 100 3
Masco Corp. 700 13
Sherwin-Williams Co. 300 7
The Stanley Works 100 3
Vulcan Materials Co. 200 8
----------
42
----------
</TABLE>
47
<PAGE> 52
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 2000
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
CONSUMER - DURABLE -- 0.0%
Black & Decker Corp. 200 $ 8
Leggett & Platt, Inc. 300 5
Maytag Corp. 100 3
Whirlpool Corp. 100 4
----------
20
----------
CONSUMER - NONDURABLE -- 0.1%
American Greetings Corp., Class A 100 2
Darden Restaurants, Inc. 200 5
Fortune Brands, Inc. 200 6
Harcourt General, Inc. 100 6
Hasbro, Inc. 325 4
Mattel, Inc. 650 8
McDonald's Corp. 2,100 65
Newell Rubbermaid, Inc. 436 8
Starbucks Corp.+ 280 13
Tricon Global Restaurants, Inc.+ 240 7
Tupperware Corp. 100 2
Wendy's International, Inc. 200 4
----------
130
----------
CONTAINERS -- 0.0%
Bemis Co., Inc. 100 3
Crown Cork & Seal Co., Inc. 200 2
Owens-Illinois, Inc.+ 300 2
Pactiv Corp.+ 300 3
Sealed Air Corp.+ 153 7
----------
17
----------
ELECTRONICS -- 0.9%
ADC Telecommunications, Inc.+ 1,000 21
Advanced Micro Devices, Inc.+ 560 13
Altera Corp.+ 510 21
American Power
Conversion Corp.+ 225 3
Analog Devices, Inc.+ 600 39
Andrew Corp.+ 100 3
Applied Materials, Inc.+ 1,200 64
Broadcom Corp., Class A+ 342 76
Conexant Systems, Inc.+ 300 8
Intel Corp. 10,400 468
ITT Industries, Inc. 100 3
JDS Uniphase Corp.+ 1,400 114
KLA-Tencor Corp.+ 300 10
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Linear Technology Corp. 500 $ 32
LSI Logic Corp.+ 500 16
Lucent Technologies, Inc. 5,019 117
Maxim Integrated Products, Inc.+ 400 27
Micron Technology, Inc.+ 900 31
Molex, Inc. 250 14
Moody's Corp. 300 8
Motorola, Inc. 3,316 83
National Semiconductor Corp.+ 300 8
Nextel Communications,
Inc., Class A+ 1,200 46
PE Corp.-PE Biosystems Group 300 35
PerkinElmer, Inc. 100 12
Power-One, Inc.+ 57 4
QUALCOMM, Inc.+ 1,100 72
Sanmina Corp.+ 200 23
Scientific-Atlanta, Inc. 200 14
Solectron Corp.+ 1,000 44
Tektronix, Inc. 100 7
Tellabs, Inc.+ 600 30
Teradyne, Inc.+ 300 9
Texas Instruments, Inc. 2,700 132
Thermo Electron Corp.+ 200 6
Thomas & Betts Corp. 100 2
Xilinx, Inc.+ 500 36
----------
1,651
----------
ENERGY - RAW MATERIALS -- 0.1%
Anadarko Petroleum Corp. 367 24
Apache Corp. 200 11
Baker Hughes, Inc. 470 16
Burlington Resources, Inc. 300 11
Devon Energy Corp. 200 10
Halliburton Co. 714 26
McDermott International, Inc. 100 1
Nabors Industries, Inc.+ 100 5
Occidental Petroleum Corp. 600 12
Rowan Cos., Inc.+ 100 3
Schlumberger Ltd. 900 69
----------
188
----------
FOOD & AGRICULTURE -- 0.3%
Archer-Daniels-Midland Co. 966 11
Campbell Soup Co. 700 20
Coca-Cola Co. 3,800 229
</TABLE>
48
<PAGE> 53
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Coca-Cola Enterprises, Inc. 700 $ 13
ConAgra, Inc. 800 17
General Mills, Inc. 432 18
H.J. Heinz Co. 600 25
Hershey Foods Corp. 200 11
Kellogg Co. 600 15
Nabisco Group Holdings Corp. 500 14
PepsiCo, Inc. 2,200 107
Quaker Oats Co. 200 16
Ralston Purina Group 500 12
Sara Lee Corp. 1,400 30
Supervalu, Inc. 200 3
Sysco Corp. 500 26
Unilever NV - Sponsored ADR 892 45
Wm. Wrigley Jr. Co. 200 16
----------
628
----------
GOLD -- 0.0%
Barrick Gold Corp. 600 8
Homestake Mining Co. 400 2
Newmont Mining Corp. 243 3
Placer Dome, Inc. 600 5
----------
18
----------
HEALTHCARE / DRUGS & MEDICINE -- 1.2%
Abbott Laboratories 2,400 127
Aetna, Inc. 222 13
Allergan, Inc. 200 17
ALZA Corp.+ 200 16
American Home Products Corp. 2,000 127
Amgen, Inc.+ 1,600 93
Bausch & Lomb, Inc. 100 4
Baxter International, Inc. 500 41
Becton, Dickinson & Co. 400 13
Biogen, Inc.+ 200 12
Biomet, Inc. 300 11
Boston Scientific Corp.+ 634 10
Bristol-Myers Squibb Co. 3,100 189
C.R. Bard, Inc. 100 4
Cardinal Health, Inc. 400 38
Eli Lilly & Co. 1,700 152
Guidant Corp.+ 500 26
HCA-The Healthcare Co. 900 36
HealthSouth Corp.+ 700 8
Humana, Inc.+ 200 2
Johnson & Johnson 2,100 193
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
King Pharmaceuticals, Inc.+ 200 $ 9
Manor Care, Inc.+ 100 2
McKesson HBOC, Inc. 422 12
Medimmune, Inc.+ 300 20
Medtronic, Inc. 1,900 103
Merck & Co., Inc. 3,600 324
Pfizer, Inc. 9,775 422
Pharmacia Corp. 1,952 107
Quintiles Transnational Corp.+ 200 3
Schering-Plough Corp. 2,300 119
St. Jude Medical, Inc.+ 100 6
Tenet Healthcare Corp.+ 500 20
UnitedHealth Group, Inc. 200 22
Watson Pharmaceuticals, Inc.+ 100 6
Wellpoint Health Networks, Inc.+ 100 12
----------
2,319
----------
HOUSEHOLD PRODUCTS -- 0.2%
Alberto-Culver Co., Class B 100 3
Avon Products, Inc. 400 19
Clorox Co. 300 13
Colgate-Palmolive Co. 900 53
Gillette Co. 1,700 59
International Flavors
& Fragrances, Inc. 200 3
Procter & Gamble Co. 2,000 143
----------
293
----------
INSURANCE -- 0.4%
AFLAC, Inc. 400 29
Allstate Corp. 1,100 44
American General Corp. 400 32
American International Group, Inc. 3,616 354
Aon Corp. 375 16
Chubb Corp. 300 25
CIGNA Corp. 200 24
Cincinnati Financial Corp. 300 11
Conseco, Inc. 515 4
Hartford Financial Services Group, Inc. 300 22
Jefferson-Pilot Corp. 150 10
Lincoln National Corp. 300 15
Loew's Corp. 100 9
Marsh & McLennan Cos., Inc. 450 59
MBIA, Inc. 200 15
MGIC Investment Corp. 200 14
</TABLE>
49
<PAGE> 54
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 2000
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Progressive Corp. 100 $ 10
SAFECO Corp. 200 5
St. Paul Cos., Inc. 356 18
Torchmark Corp. 200 7
UnumProvident Corp. 346 10
----------
733
----------
MEDIA -- 0.3%
Clear Channel
Communications, Inc.+ 867 52
Comcast Corp., Special Class A+ 1,400 57
Dow Jones & Co., Inc. 100 6
Gannett Co., Inc. 400 23
Knight-Ridder, Inc. 100 5
McGraw-Hill Cos., Inc. 300 19
Meredith Corp. 100 3
New York Times Co., Class A 300 11
R.R. Donnelley & Sons Co. 200 4
Seagram Co. Ltd. 700 40
Time Warner, Inc. 2,100 159
Tribune Co. 500 19
Viacom, Inc., Class B+ 2,360 134
The Walt Disney Co. 3,227 116
----------
648
----------
MISCELLANEOUS -- 0.1%
Agilent Technologies, Inc.+ 710 33
Palm, Inc.+ 741 40
Sabre Holdings Corp.+ 244 8
XCEL Energy, Inc. 510 13
----------
94
----------
MISCELLANEOUS FINANCE -- 0.7%
American Express Co. 2,100 126
Associates First Capital Corp.,
Class A 1,190 44
Bear Stearns Cos., Inc. 220 13
Capital One Financial Corp. 300 19
Charles Schwab Corp. 2,125 75
Charter One Financial, Inc. 315 7
CIT Group, Inc., Class A 400 7
Citigroup, Inc. 6,910 364
Countrywide Credit Industries, Inc. 200 8
Fannie Mae 1,500 116
Franklin Resources, Inc. 400 17
Freddie Mac 1,100 66
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
Household International, Inc. 706 $ 36
Lehman Brothers Holdings, Inc. 400 26
MBNA Corp. 1,305 49
Merrill Lynch & Co., Inc. 1,200 84
Morgan Stanley Dean Witter & Co. 1,730 139
Paine Webber Group, Inc. 200 14
T. Rowe Price Associates, Inc. 200 9
USA Education, Inc. 300 17
Washington Mutual, Inc. 921 41
----------
1,277
----------
NON-FERROUS METALS -- 0.0%
Alcan Aluminum Ltd. 502 16
Alcoa, Inc. 1,312 38
Engelhard Corp. 200 4
Freeport-McMoRan Copper
& Gold, Inc., Class B+ 300 2
Inco Ltd.+ 300 5
Phelps Dodge Corp. 135 6
----------
71
----------
OIL - DOMESTIC -- 0.1%
Amerada Hess Corp. 100 6
Ashland, Inc. 100 3
Conoco, Inc., Class B 1,000 27
Kerr-McGee Corp. 136 9
Phillips Petroleum Co. 400 25
Sunoco, Inc. 100 3
Tosco Corp. 200 6
Transocean Sedco Forex, Inc. 374 20
Unocal Corp. 400 14
USX-Marathon Group, Inc. 500 14
----------
127
----------
OIL - INTERNATIONAL -- 0.4%
Chevron Corp. 1,000 82
Exxon Mobil Corp. 5,384 480
Royal Dutch Petroleum Co. -
Sponsored ADR 3,300 196
Texaco, Inc. 900 53
----------
811
----------
OPTICAL & PHOTO -- 0.0%
Eastman Kodak Co. 500 22
Polaroid Corp. 200 2
----------
24
----------
</TABLE>
50
<PAGE> 55
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
PAPER & FOREST PRODUCTS -- 0.1%
Boise Cascade Corp. 100 $ 3
Fort James Corp. 300 10
Georgia-Pacific Group 300 8
International Paper Co. 789 29
Kimberly-Clark Corp. 856 57
Louisiana-Pacific Corp. 100 1
Mead Corp. 200 6
Temple-Inland, Inc. 100 4
Westvaco Corp. 200 6
Weyerhaeuser Co. 300 14
Willamette Industries, Inc. 100 4
----------
142
----------
PRODUCER GOODS & MANUFACTURING -- 0.7%
Avery Dennison Corp. 200 10
Caterpillar, Inc. 600 21
Cooper Industries, Inc. 100 4
Corning, Inc. 1,500 115
Deere & Co. 400 15
Dover Corp. 300 13
Emerson Electric Co. 700 51
General Electric Co. 15,300 839
Honeywell International, Inc. 1,275 69
Illinois Tool Works, Inc. 500 28
Ingersoll-Rand Co. 250 9
Johnson Controls, Inc. 100 6
Millipore Corp. 100 5
Minnesota Mining &
Manufacturing Co. 600 58
Pall Corp. 200 4
Parker-Hannifin Corp. 150 6
Snap-On, Inc. 100 3
W.W. Grainger, Inc. 100 3
----------
1,259
----------
RAILROAD & SHIPPING -- 0.0%
Burlington Northern
Santa Fe Corp. 600 16
CSX Corp. 300 8
Norfolk Southern Corp. 600 8
Union Pacific Corp. 400 19
----------
51
----------
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
RETAIL -- 0.5%
Albertson's, Inc. 652 $ 15
AutoZone, Inc.+ 200 5
Bed, Bath & Beyond, Inc.+ 400 10
Best Buy Co., Inc.+ 300 15
Circuit City Stores-
Circuit City Group 300 4
Consolidated Stores Corp.+ 200 2
Costco Wholesale Corp.+ 700 26
CVS Corp. 600 32
Dillards, Inc., Class A 200 2
Dollar General Corp. 515 8
Federated Department Stores, Inc.+ 300 10
Gap, Inc. 1,362 35
Home Depot, Inc. 3,600 155
J.C. Penney Co., Inc. 400 5
Kmart Corp.+ 700 4
Kohl's Corp.+ 500 27
Kroger Co.+ 1,200 27
Limited, Inc. 618 16
Longs Drug Stores, Inc. 100 2
Lowe's Cos., Inc. 600 27
May Department Stores Co. 500 13
Nordstrom, Inc. 200 3
Office Depot, Inc.+ 600 5
RadioShack Corp. 300 18
Safeway, Inc.+ 800 44
Sears, Roebuck & Co. 500 15
Staples, Inc.+ 750 11
Target Corp. 1,400 39
Tiffany & Co., Inc 150 6
TJX Cos., Inc. 500 14
Toys 'R' Us, Inc.+ 300 5
Wal-Mart Stores, Inc. 6,900 313
Walgreen Co. 1,600 73
Winn-Dixie Stores, Inc. 300 6
----------
992
----------
STEEL -- 0.0%
Allegheny Technologies, Inc. 146 3
Bethlehem Steel Corp.+ 288 1
Nucor Corp. 100 3
USX-U.S. Steel Group, Inc. 100 2
Worthington Industries, Inc. 100 1
----------
10
----------
</TABLE>
51
<PAGE> 56
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
SCHEDULE OF INVESTMENTS (continued)
October 31, 2000
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
TELEPHONE -- 0.6%
Alltel Corp. 500 $ 32
AT&T Corp. 5,725 133
Avaya, Inc.+ 418 6
BellSouth Corp. 2,900 140
CenturyTel, Inc. 250 10
Global Crossing Ltd.+ 1,210 29
Qwest Communications
International, Inc.+ 2,524 123
SBC Communications, Inc. 5,275 304
Sprint Corp. (FON Group) 1,300 33
Sprint Corp. (PCS Group)+ 1,400 53
Verizon Communications 4,188 242
Worldcom, Inc.+ 4,525 107
----------
1,212
----------
TOBACCO -- 0.1%
Philip Morris Cos., Inc. 3,500 128
UST, Inc. 300 8
----------
136
----------
TRAVEL & RECREATION -- 0.0%
Brunswick Corp. 100 2
Carnival Corp. 900 22
Harrah's Entertainment, Inc.+ 200 6
Hilton Hotels Corp. 600 6
Marriott International, Inc.,
Class A 400 16
----------
52
----------
TRUCKING & FREIGHT -- 0.0%
PACCAR, Inc. 100 4
Ryder Systems, Inc. 100 2
----------
6
----------
UTILITIES - ELECTRIC & GAS -- 0.3%
AES Corp.+ 600 34
Ameren Corp. 200 8
American Electric Power Co., Inc. 480 20
</TABLE>
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
CP&L Energy, Inc. 300 $ 12
Cinergy Corp. 300 9
CMS Energy Corp. 200 5
Coastal Corp. 300 23
Columbia Energy Group 150 11
Consolidated Edison, Inc. 300 11
Constellation Energy Group, Inc. 200 8
Dominion Resources, Inc. 315 19
DTE Energy Co. 200 7
Duke Energy Corp. 604 52
Dynegy, Inc., Class A 500 23
Edison International 500 12
El Paso Energy Corp. 400 25
Enron Corp. 1,100 90
Entergy Corp. 400 15
FirstEnergy Corp. 400 10
Florida Progress Corp. 200 11
FPL Group, Inc. 300 20
GPU, Inc. 200 7
KeySpan Corp. 200 7
Niagara Mohawk Holdings, Inc.+ 300 5
NICOR, Inc. 100 4
PG&E Corp. 600 16
Pinnacle West Capital Corp. 100 4
PPL Corp. 200 8
Public Service Enterprise
Group, Inc. 300 12
Reliant Energy, Inc. 474 20
Sempra Energy 297 6
Southern Co. 1,000 29
TXU Corp. 400 15
Williams Cos., Inc. 700 29
----------
587
----------
TOTAL COMMON STOCK
(Cost $11,988) 19,422
----------
</TABLE>
52
<PAGE> 57
<TABLE>
<CAPTION>
Number Value
of Shares (000s)
----------- ----------
<S> <C> <C>
INVESTMENT FUNDS -- 85.2%
Schwab International Index Fund(R),
Select Shares 1,101,880 $ 18,886
Schwab S&P 500 Fund,
Select Shares 941,886 20,919
Schwab Small-Cap Index Fund(R),
Select Shares 935,190 19,723
Schwab Total Bond Market
Index Fund 10,979,952 106,066
--------
TOTAL INVESTMENT FUNDS
(Cost $156,627) 165,594
--------
</TABLE>
<TABLE>
<CAPTION>
Number of Value
Shares/Par (000s) (000s)
----------------- ----------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 4.8%
Schwab Value Advantage Money
Fund(R), Investor Shares, 6.30%* 8,631,077 8,631
Wachovia Bank NA Time Deposit,
6.03%*, 11/1/00 $751 $ 751
--------
TOTAL SHORT-TERM INVESTMENTS
(Cost $9,382) 9,382
--------
TOTAL INVESTMENTS -- 100.0%
(Cost $177,997) 194,398
--------
OTHER ASSETS AND LIABILITIES, NET -- 0.0%
Other assets 268
Liabilities (174)
--------
94
--------
TOTAL NET ASSETS -- 100.0% $194,492
========
</TABLE>
NOTES TO SCHEDULES OF INVESTMENTS
October 31, 2000
+ Non-income producing security.
* Interest rates represent the yield on report date.
ADR -- American Depositary Receipt.
(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.
See accompanying Notes to Financial Statements.
53
<PAGE> 58
STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except for net asset value per share)
October 31, 2000
<TABLE>
<CAPTION>
Schwab MarketTrack Portfolios(R)
---------------------------------------------------
All Equity Growth Balanced Conservative
---------- -------- -------- ------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (Cost: $412,683, $457,597,
$435,987, and $177,997, respectively) $441,567 $566,038 $509,782 $194,398
Receivables:
Fund shares sold 653 498 658 101
Variation margin 44 -- -- --
Dividends -- 245 309 150
Dividend tax reclaim -- 10 4 1
Prepaid expenses 27 24 26 16
-------- -------- -------- --------
Total assets 442,291 566,815 510,779 194,666
-------- -------- -------- --------
LIABILITIES
Payables:
Investments purchased 500 34 -- --
Fund shares redeemed 168 339 449 119
Investment advisory and administration fees 8 14 13 4
Transfer agency and shareholder service fees 15 19 17 6
Accrued expenses 108 104 80 45
-------- -------- -------- --------
Total liabilities 799 510 559 174
-------- -------- -------- --------
Net assets applicable to outstanding shares $441,492 $566,305 $510,220 $194,492
======== ======== ======== ========
NET ASSETS CONSIST OF:
Paid-in capital $414,580 $452,647 $427,154 $177,125
Undistributed/(distributions in excess of) net investment income (1,517) 4,354 8,782 685
Accumulated net realized gain (loss) on investments sold
and futures contracts (344) 863 489 281
Net unrealized appreciation on investments
and futures contracts 28,773 108,441 73,795 16,401
-------- -------- -------- --------
$441,492 $566,305 $510,220 $194,492
======== ======== ======== ========
PRICING OF SHARES:
Outstanding shares, $0.00001 par value (unlimited shares
authorized) 36,607 32,885 32,854 14,819
Net asset value, offering and redemption price per share $ 12.06 $ 17.22 $ 15.53 $ 13.12
</TABLE>
See accompanying Notes to Financial Statements.
54
<PAGE> 59
STATEMENTS OF OPERATIONS (in thousands)
For the year ended October 31, 2000
<TABLE>
<CAPTION>
Schwab MarketTrack Portfolios(R)
-----------------------------------------------------
All Equity Growth Balanced Conservative
---------- -------- -------- ------------
<S> <C> <C> <C> <C>
Investment income:
Dividends (net of foreign tax withheld of $0, $7, $4
and $1, respectively) $ 1,902 $ 9,725 $ 13,817 $ 7,554
Interest 146 203 185 96
------- -------- -------- --------
Total investment income 2,048 9,928 14,002 7,650
------- -------- -------- --------
Expenses:
Investment advisory and administration fees 1,648 2,625 2,328 930
Transfer agency and shareholder service fees 828 1,311 1,156 461
Custodian fees 34 52 41 21
Portfolio accounting fees 45 72 66 29
Registration fees 100 84 69 34
Professional fees 41 52 48 41
Shareholder reports 48 55 19 13
Trustees' fees 5 7 7 6
Proxy fees 30 46 37 14
Other expenses 4 13 7 4
------- -------- -------- --------
2,783 4,317 3,778 1,553
Less: expenses reduced (See Note 4) (907) (1,315) (1,135) (498)
------- -------- -------- --------
Net expenses incurred by fund 1,876 3,002 2,643 1,055
------- -------- -------- --------
Net investment income 172 6,926 11,359 6,595
------- -------- -------- --------
Net realized gain (loss) on investments and futures contracts:
Net realized gain (loss) on investments sold (97) 1,536 1,327 584
Net realized gain received from underlying funds 268 185 123 42
Net realized gain (loss) on futures contracts (44) 7 -- --
------- -------- -------- --------
Net realized gain on investments and futures contracts 127 1,728 1,450 626
------- -------- -------- --------
Change in net unrealized appreciation (depreciation) on
investments and futures contracts:
Net unrealized appreciation on investments 7,200 22,211 15,852 4,958
Net unrealized depreciation on futures contracts (142) -- -- --
------- -------- -------- --------
Net unrealized appreciation on investments
and futures contracts 7,058 22,211 15,852 4,958
------- -------- -------- --------
Net gain on investments 7,185 23,939 17,302 5,584
------- -------- -------- --------
Increase in net assets resulting from operations $ 7,357 $ 30,865 $ 28,661 $ 12,179
======= ======== ======== ========
</TABLE>
See accompanying Notes to Financial Statements.
55
<PAGE> 60
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
For the years ended October 31,
<TABLE>
<CAPTION>
Schwab MarketTrack Portfolios(R)
------------------------------------------------------------------------
All Equity Growth Balanced
--------------------- --------------------- ---------------------
2000 1999 2000 1999 2000 1999
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 172 $ 194 $ 6,926 $ 4,272 $ 11,359 $ 7,538
Net realized gain (loss) on investments
and futures contracts (141) 192 1,543 (196) 1,327 (252)
Net realized gain received from
underlying funds 268 1,703 185 3,267 123 2,503
Net unrealized appreciation
on investments and futures contracts 7,058 29,520 22,211 51,554 15,852 32,821
--------- --------- --------- --------- --------- ---------
Increase in net assets resulting
from operations 7,357 31,609 30,865 58,897 28,661 42,610
--------- --------- --------- --------- --------- ---------
Dividends and distributions:
Dividends to shareholders from net
investment income (172) (22) (5,062) (4,540) (7,749) (6,924)
Dividends in excess of net investment
income (875) (642) -- -- -- --
Distributions to shareholders from net
capital gains (1,962) -- (3,458) (557) (2,431) (1,483)
--------- --------- --------- --------- --------- ---------
Total dividends and distributions
to shareholders (3,009) (664) (8,520) (5,097) (10,180) (8,407)
--------- --------- --------- --------- --------- ---------
Capital share transactions:
Proceeds from shares sold 326,322 114,034 260,601 195,487 223,028 191,766
Net asset value of shares issued in
reinvestment of dividends 2,943 642 8,333 4,951 9,811 8,091
Payments for shares redeemed (95,005) (60,146) (152,633) (102,207) (144,371) (94,693)
--------- --------- --------- --------- --------- ---------
Increase in net assets from
capital share transactions 234,260 54,530 116,301 98,231 88,468 105,164
--------- --------- --------- --------- --------- ---------
Total increase in net assets 238,608 85,475 138,646 152,031 106,949 139,367
Net assets:
Beginning of period 202,884 117,409 427,659 275,628 403,271 263,904
--------- --------- --------- --------- --------- ---------
End of period (including undistributed
net investment income (loss) of $(1,517),
$(642), $4,354, $2,490, $8,782, $5,172,
$685, and $497, respectively) $ 441,492 $ 202,884 $ 566,305 $ 427,659 $ 510,220 $ 403,271
========= ========= ========= ========= ========= =========
Number of fund shares:
Sold 26,396 10,710 15,116 12,686 14,416 13,521
Reinvested 238 64 483 335 643 589
Redeemed (7,700) (5,750) (8,831) (6,651) (9,356) (6,672)
--------- --------- --------- --------- --------- ---------
Net increase in shares outstanding 18,934 5,024 6,768 6,370 5,703 7,438
Shares outstanding:
Beginning of period 17,673 12,649 26,117 19,747 27,151 19,713
--------- --------- --------- --------- --------- ---------
End of period 36,607 17,673 32,885 26,117 32,854 27,151
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
---------------------
Conservative
---------------------
2000 1999
--------- ---------
<S> <C> <C>
Operations:
Net investment income $ 6,595 $ 4,714
Net realized gain (loss) on investments
and futures contracts 584 (521)
Net realized gain received from
underlying funds 42 800
Net unrealized appreciation
on investments and futures contracts 4,958 7,022
--------- ---------
Increase in net assets resulting
from operations 12,179 12,015
--------- ---------
Dividends and distributions:
Dividends to shareholders from net
investment income (6,407) (4,511)
Dividends in excess of net investment
income -- --
Distributions to shareholders from net
capital gains (367) (661)
--------- ---------
Total dividends and distributions
to shareholders (6,774) (5,172)
--------- ---------
Capital share transactions:
Proceeds from shares sold 79,146 89,099
Net asset value of shares issued in
reinvestment of dividends 6,324 4,821
Payments for shares redeemed (63,785) (48,259)
--------- ---------
Increase in net assets from
capital share transactions 21,685 45,661
--------- ---------
Total increase in net assets 27,090 52,504
Net assets:
Beginning of period 167,402 114,898
--------- ---------
End of period (including undistributed
net investment income (loss) of $(1,517),
$(642), $4,354, $2,490, $8,782, $5,172,
$685, and $497, respectively) $ 194,492 $ 167,402
========= =========
Number of fund shares:
Sold 6,071 7,124
Reinvested 482 389
Redeemed (4,882) (3,854)
--------- ---------
Net increase in shares outstanding 1,671 3,659
Shares outstanding:
Beginning of period 13,148 9,489
--------- ---------
End of period 14,819 13,148
========= =========
</TABLE>
See accompanying Notes to Financial Statements.
56
<PAGE> 61
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
11/1/99- 11/1/98- 5/19/98*-
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO 10/31/00 10/31/99 10/31/98
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER-SHARE DATA ($)
-------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 11.48 9.28 10.00
-----------------------------------------
Income from investment operations:
Net investment income (loss) 0.04 0.03 (0.01)
Net realized and unrealized gain (loss) on investments 0.69 2.22 (0.71)
-----------------------------------------
Total income (loss) from investment operations 0.73 2.25 (0.72)
-----------------------------------------
Less distributions:
Dividends from net investment income (0.01) (0.01) --
Dividends in excess of net investment income (0.04) (0.04) --
Distributions from capital gains (0.10) -- --
-----------------------------------------
Total distributions (0.15) (0.05) --
-----------------------------------------
Net asset value at end of period 12.06 11.48 9.28
=========================================
Total return (%) 6.37 24.34 (7.20) 1
RATIOS/SUPPLEMENTAL DATA (%)
-------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to average net assets 0.56 3 0.54 0.39 2
Expense reductions reflected in above ratio 0.27 0.43 0.74 2
Ratio of net investment income to average net assets 0.05 0.13 (0.36) 2
Portfolio turnover rate 3 6 2
Net assets, end of period ($ x 1,000,000) 441 203 117
</TABLE>
* Commencement of operations.
1 Not annualized.
2 Annualized.
3 Would have been 0.57% if certain non-routine expenses (proxy fees) had been
included.
See accompanying Notes to Financial Statements.
57
<PAGE> 62
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
11/1/99- 11/1/98- 11/1/97- 11/1/96- 11/20/95*-
SCHWAB MARKETTRACK GROWTH PORTFOLIO 10/31/00 10/31/99 10/31/98 10/31/97 10/31/96
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
--------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 16.37 13.96 13.59 11.30 10.00
----------------------------------------------------------
Income from investment operations:
Net investment income 0.22 0.18 0.16 0.17 0.19
Net realized and unrealized gain
on investments 0.94 2.48 0.99 2.32 1.13
----------------------------------------------------------
Total income from investment operations 1.16 2.66 1.15 2.49 1.32
----------------------------------------------------------
Less distributions:
Dividends from net investment income (0.18) (0.22) (0.16) (0.20) (0.02)
Distributions from capital gains (0.13) (0.03) (0.62) -- --
----------------------------------------------------------
Total distributions (0.31) (0.25) (0.78) (0.20) (0.02)
----------------------------------------------------------
Net asset value at end of period 17.22 16.37 13.96 13.59 11.30
==========================================================
Total return (%) 7.08 19.24 8.85 22.33 13.24 1
RATIOS/SUPPLEMENTAL DATA (%)
--------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to average net assets 0.56 3 0.58 0.60 0.75 0.89 2
Expense reductions reflected in above ratio 0.25 0.33 0.50 0.49 0.61 2
Ratio of net investment income to average net assets 1.32 1.21 1.34 1.58 2.03 2
Portfolio turnover rate 12 7 14 113 46
Net assets, end of period ($ x 1,000,000) 566 428 276 168 106
</TABLE>
* Commencement of operations.
1 Not annualized.
2 Annualized.
3 Would have been 0.57% if certain non-routine expenses (proxy fees) had been
included.
See accompanying Notes to Financial Statements.
58
<PAGE> 63
<TABLE>
<CAPTION>
11/1/99- 11/1/98- 11/1/97- 11/1/96- 11/20/95*-
SCHWAB MARKETTRACK BALANCED PORTFOLIO 10/31/00 10/31/99 10/31/98 10/31/97 10/31/96
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
-------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 14.85 13.39 12.82 11.05 10.00
----------------------------------------------------------
Income from investment operations:
Net investment income 0.36 0.29 0.25 0.22 0.25
Net realized and unrealized gain
on investments 0.69 1.57 0.86 1.78 0.83
----------------------------------------------------------
Total income from investment operations 1.05 1.86 1.11 2.00 1.08
----------------------------------------------------------
Less distributions:
Dividends from net investment income (0.28) (0.33) (0.23) (0.23) (0.03)
Distributions from capital gains (0.09) (0.07) (0.31) -- --
----------------------------------------------------------
Total distributions (0.37) (0.40) (0.54) (0.23) (0.03)
----------------------------------------------------------
Net asset value at end of period 15.53 14.85 13.39 12.82 11.05
==========================================================
Total return (%) 7.11 14.18 9.02 18.43 10.82 1
RATIOS/SUPPLEMENTAL DATA (%)
-------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to average net assets 0.56 3 0.58 0.59 0.78 0.89 2
Expense reductions reflected in above ratio 0.25 0.33 0.51 0.52 0.67 2
Ratio of net investment income to average net assets 2.46 2.25 2.33 2.48 2.79 2
Portfolio turnover rate 18 7 32 104 44
Net assets, end of period ($ x 1,000,000) 510 403 264 151 81
</TABLE>
* Commencement of operations.
1 Not annualized.
2 Annualized.
3 Would have been 0.57% if certain non-routine expenses (proxy fees) had been
included.
See accompanying Notes to Financial Statements.
59
<PAGE> 64
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
11/1/99- 11/1/98- 11/1/97- 11/1/96- 11/20/95*-
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO 10/31/00 10/31/99 10/31/98 10/31/97 10/31/96
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
----------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 12.73 12.11 11.71 10.51 10.00
-------------------------------------------------------
Income from investment operations:
Net investment income 0.47 0.41 0.35 0.35 0.33
Net realized and unrealized gain on investments 0.41 0.68 0.64 1.21 0.48
-------------------------------------------------------
Total income from investment operations 0.88 1.09 0.99 1.56 0.81
-------------------------------------------------------
Less distributions:
Dividends from net investment income (0.46) (0.40) (0.35) (0.36) (0.30)
Distributions from capital gains (0.03) (0.07) (0.24) -- --
-------------------------------------------------------
Total distributions (0.49) (0.47) (0.59) (0.36) (0.30)
-------------------------------------------------------
Net asset value at end of period 13.12 12.73 12.11 11.71 10.51
=======================================================
Total return (%) 6.92 9.13 8.64 15.12 8.18 1
RATIOS/SUPPLEMENTAL DATA (%)
----------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to average net assets 0.56 3 0.57 0.58 0.81 0.89 2
Expense reductions reflected in above ratio 0.27 0.35 0.64 0.84 1.16 2
Ratio of net investment income to average net assets 3.58 3.28 3.26 3.40 3.49 2
Portfolio turnover rate 16 8 58 104 64
Net assets, end of period ($ x 1,000,000) 194 167 115 41 22
</TABLE>
* Commencement of operations.
1 Not annualized.
2 Annualized.
3 Would have been 0.57% if certain non-routine expenses (proxy fees) had been
included.
See accompanying Notes to Financial Statements.
60
<PAGE> 65
NOTES TO FINANCIAL STATEMENTS
For year ended October 31, 2000
(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 management investment company organized as a
Massachusetts business trust on May 7, 1993 and registered under the Investment
Company Act of 1940, as amended (the "1940 Act").
In addition to the funds, 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(TM) S&P 500 Fund, Institutional Select(TM) Large-Cap Value
Index Fund, Institutional Select(TM) Small-Cap Value Index Fund, Communications
Focus Fund, Financial Services Focus Fund, Health Care Focus Fund and Technology
Focus 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 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. The funds' 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. Futures contracts, which are traded on exchanges, are valued
at their settlement prices 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.
61
<PAGE> 66
NOTES TO FINANCIAL STATEMENTS (continued)
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, or (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.
As of October 31, 2000, the Schwab MarketTrack All Equity Portfolio had the
following open S&P 500 Index futures contracts:
<TABLE>
<CAPTION>
Number of Contract Unrealized
Contracts Value Expiration Depreciation
--------- -------- ---------- ------------
<S> <C> <C> <C>
6 $2,160 12/15/00 $(111)
</TABLE>
Eligible securities on deposit with broker available to cover margin
requirements for open futures positions at October 31, 2000 were $199. 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, 2000. Purchases and sales of
securities, income receipts and expense payments are translated into U.S.
dollars at the exchange rate in effect on the dates of the respective
transactions.
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.
62
<PAGE> 67
For Federal income tax purposes, the cost of securities owned at October 31,
2000 and the net realized gains or losses on securities sold for the period then
ended was different from the amounts reported for financial reporting purposes
as shown below. The aggregate gross unrealized appreciation and depreciation at
October 31, 2000 for the Funds is as follows:
<TABLE>
<CAPTION>
Federal Net Unrealized Appreciated Depreciated
Portfolio Tax Cost Appreciation Securities Securities
--------- -------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
Schwab MarketTrack All Equity Portfolio $413,495 $ 27,961 $ 36,643 $ (8,682)
Schwab MarketTrack Growth Portfolio 459,739 106,299 116,367 (10,068)
Schwab MarketTrack Balanced Portfolio 439,072 70,710 80,029 (9,319)
Schwab MarketTrack Conservative Portfolio 179,025 15,373 19,360 (3,987)
</TABLE>
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. As of October 31, 2000, there were no reclassifications.
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 0.44% of the first $500
million of average daily net assets and 0.39% of such net assets over $500
million. The investment adviser has reduced a portion of its fee for the year
ended October 31, 2000 (see Note 4).
Prior to June 30, 2000, each fund paid 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 February 28, 1999, each fund paid an annual
fee, payable monthly, of 0.74% of the first $1 billion of average daily net
assets, 0.69% of the next $1 billion and 0.64% of such net assets over $2
billion.
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.
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, 2000, the trust made no direct payments to its officers or
trustees who were "interested persons" within the meaning of the 1940 Act. The
funds incurred fees aggregating $25 related to the trust's unaffiliated
trustees.
63
<PAGE> 68
NOTES TO FINANCIAL STATEMENTS (continued)
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, 2000 the Schwab MarketTrack All Equity Portfolio, Schwab MarketTrack Growth
Portfolio, Schwab MarketTrack Balanced Portfolio and Schwab MarketTrack
Conservative Portfolio owned 9.8%, 8.3%, 5.6%, 1.4%, respectively of the
outstanding shares of the Schwab International Index Fund(R); 2.3%, 1.3%, 0.9%,
0.3%, respectively of the outstanding shares of the Schwab S&P 500 Fund; 0.0%,
12.5%, 26.5%, 16.0%, respectively of the outstanding shares of the Schwab Total
Bond Market Index Fund; 7.1%, 7.4%, 5.0%, 1.3%, respectively of the outstanding
shares of the Schwab Small-Cap Index Fund(R) and 0.0%, 0.1%, 0.1%, 0.0%,
respectively of the outstanding shares of the Schwab Value Advantage Money
Fund(R).
As of October 31, 2000, the 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 $458, $309 and $75, respectively.
Interfund transactions -- For the year ended October 31, 2000 the Schwab
MarketTrack Growth Portfolio, Schwab MarketTrack Balanced Portfolio and Schwab
MarketTrack Conservative Portfolio engaged in purchase and sale transactions
with funds that have a common adviser, common trustees and common officers.
These purchases and sales transactions, made at current market value pursuant to
Rule 17a-7 under the 1940 Act, were $32, $20 and $6, respectively.
4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT ADVISER AND SCHWAB
The investment adviser and Schwab guarantee that, through at least February 28,
2001, each fund's total operating expenses, including the expenses indirectly
incurred through investment in underlying SchwabFunds(R), will not exceed 0.50%
of the fund's average daily net assets, after waivers and reimbursements. Prior
to June 30, 2000, each fund's total operating expenses guaranteed by the
investment adviser and Schwab was 0.60%. For purposes of this guarantee,
operating expenses do not include interest, taxes and certain non-routine
expenses. The actual operating expense ratio for the year ended October 31, 2000
did include non-routine expenses.
For the year ended October 31, 2000, the total of such fees and expenses reduced
by the investment adviser were $907, $1,315, $1,135 and $498, respectively for
the Schwab MarketTrack All Equity Portfolio, Schwab MarketTrack Growth
Portfolio, Schwab MarketTrack Balanced Portfolio and Schwab MarketTrack
Conservative Portfolio.
5. BORROWING AGREEMENTS
The funds may obtain temporary bank loans through the trust to use for meeting
shareholder redemptions or for extraordinary or emergency purposes. The trust
has line of credit arrangements with PNC, N.A., Bank of America, N.A. and The
Bank of New York. The funds pay interest on the amounts they borrow at rates
that are negotiated periodically. As of the end of the report period there were
no borrowings outstanding.
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<PAGE> 69
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, 2000,
were as follows:
<TABLE>
<CAPTION>
Proceeds of Sales
Portfolio Purchases and Maturities
--------- --------- -----------------
<S> <C> <C>
Schwab MarketTrack All Equity Portfolio $241,758 $ 9,786
Schwab MarketTrack Growth Portfolio 166,824 59,088
Schwab MarketTrack Balanced Portfolio 162,394 78,448
Schwab MarketTrack Conservative Portfolio 46,887 27,354
</TABLE>
65
<PAGE> 70
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 collectively referred to as the
"funds") at October 31, 2000, and the results of each of their operations for
the year then ended, the changes in each of their net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods presented, in conformity with accounting principles generally accepted
in the United States of America. 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 auditing standards
generally accepted in the United States of America, 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, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
San Francisco, CA
December 12, 2000
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<PAGE> 71
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, 2000.
<TABLE>
<S> <C>
Schwab MarketTrack Growth Portfolio 77%
Schwab MarketTrack Balanced Portfolio 46%
Schwab MarketTrack Conservative Portfolio 30%
</TABLE>
67
<PAGE> 72
PROXY VOTING RESULTS (UNAUDITED)
SHAREHOLDERS OF THE FUNDS COVERED IN THIS REPORT APPROVED ALL PROPOSALS
DESCRIBED IN THE MOST RECENT SCHWABFUNDS(R) PROXY SOLICITATION. A special
meeting of the shareholders of Schwab Capital Trust was held on June 1, 2000.
The number of votes necessary to conduct the meeting and approve each proposal
was obtained. The results of the votes of shareholders are listed below by
proposal.
<TABLE>
<CAPTION>
FOR WITHHELD
---------------------------------------------------------------------------------------
<S> <C> <C>
PROPOSAL 1
ELECTION OF TRUSTEES
Charles R. Schwab 289,830,691 68,146,593
Mariann Byerwalter 289,803,100 68,174,184
Jeremiah H. Chafkin 290,116,655 67,860,629
Donald F. Dorward 289,894,704 68,082,580
William A. Hasler 289,963,656 68,013,628
Robert G. Holmes 290,075,539 67,901,745
Steven L. Scheid 290,226,860 67,750,424
Gerald B. Smith 290,102,267 67,875,017
Donald R. Stephens 290,162,159 67,815,125
Michael W. Wilsey 290,227,986 67,749,298
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAINED 1
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PROPOSAL 2c1
TO APPROVE CHANGES TO RESTRICTIONS REGARDING BORROWING.
Schwab MarketTrack Growth Portfolio 11,419,780 235,549 3,398,841
Schwab MarketTrack Balanced Portfolio 11,848,386 220,651 3,240,013
Schwab MarketTrack Conservative Portfolio 5,509,848 136,373 1,399,232
PROPOSAL 2c2
TO APPROVE CHANGES TO RESTRICTIONS REGARDING LENDING.
Schwab MarketTrack Growth Portfolio 11,414,917 235,991 3,403,262
Schwab MarketTrack Balanced Portfolio 11,541,595 531,297 3,236,158
Schwab MarketTrack Conservative Portfolio 5,517,076 129,165 1,399,232
PROPOSAL 2c3
TO APPROVE CHANGES TO RESTRICTIONS REGARDING SENIOR SECURITIES.
Schwab MarketTrack Growth Portfolio 11,422,234 230,522 3,401,414
Schwab MarketTrack Balanced Portfolio 11,543,654 523,140 3,242,256
Schwab MarketTrack Conservative Portfolio 5,519,462 128,036 1,397,975
</TABLE>
1 Includes broker non-votes.
68
<PAGE> 73
<TABLE>
<CAPTION>
FOR AGAINST ABSTAINED 1
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PROPOSAL 2d
TO APPROVE CHANGES TO RESTRICTIONS REGARDING DIVERSIFICATION.
Schwab MarketTrack Growth Portfolio 11,428,098 226,331 3,399,741
Schwab MarketTrack Balanced Portfolio 11,566,467 530,169 3,212,414
Schwab MarketTrack Conservative Portfolio 5,536,683 111,768 1,397,022
PROPOSAL 2f
TO APPROVE CHANGES TO RESTRICTIONS REGARDING RESTRICTED OR ILLIQUID SECURITIES.
Schwab MarketTrack Growth Portfolio 11,400,329 242,953 3,410,888
Schwab MarketTrack Balanced Portfolio 11,476,534 572,081 3,260,435
Schwab MarketTrack Conservative Portfolio 5,482,477 162,680 1,400,316
PROPOSAL 2h
TO APPROVE CHANGES TO RESTRICTIONS REGARDING OWNERSHIP OF SECURITIES.
Schwab MarketTrack Growth Portfolio 11,411,310 238,200 3,404,660
Schwab MarketTrack Balanced Portfolio 11,542,822 526,208 3,240,020
Schwab MarketTrack Conservative Portfolio 5,515,629 131,455 1,398,389
PROPOSAL 2i
TO APPROVE CHANGES TO RESTRICTIONS REGARDING INDUSTRY CONCENTRATION.
Schwab MarketTrack Growth Portfolio 11,398,440 256,123 3,399,607
Schwab MarketTrack Balanced Portfolio 11,527,192 553,043 3,228,815
Schwab MarketTrack Conservative Portfolio 5,527,591 119,835 1,398,047
PROPOSAL 2j
TO APPROVE CHANGES TO RESTRICTIONS REGARDING COMMODITIES, FUTURES, AND REAL ESTATE.
Schwab MarketTrack Growth Portfolio 11,376,082 291,468 3,386,620
Schwab MarketTrack Balanced Portfolio 11,490,817 577,561 3,240,672
Schwab MarketTrack Conservative Portfolio 5,479,196 167,132 1,399,145
PROPOSAL 2k
TO APPROVE CHANGES TO RESTRICTIONS REGARDING UNDERWRITING OF SECURITIES.
Schwab MarketTrack Growth Portfolio 11,428,471 235,523 3,390,176
Schwab MarketTrack Balanced Portfolio 11,544,632 520,892 3,243,526
Schwab MarketTrack Conservative Portfolio 5,529,333 118,952 1,397,188
</TABLE>
1 Includes broker non-votes.
69
<PAGE> 74
<TABLE>
<CAPTION>
FOR AGAINST ABSTAINED 1
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PROPOSAL 2l
TO APPROVE CHANGES TO RESTRICTIONS REGARDING CONTROL OF AN ISSUER.
Schwab MarketTrack Growth Portfolio 11,437,341 217,095 3,399,734
Schwab MarketTrack Balanced Portfolio 11,575,097 508,921 3,225,032
Schwab MarketTrack Conservative Portfolio 5,533,935 111,148 1,400,390
</TABLE>
1 Includes broker non-votes.
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<PAGE> 75
CONTACT SCHWAB
The SchwabFunds(R) 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 1-800-435-4000 for a free prospectus and brochure for any of these
SchwabFunds.
This report must be preceded or accompanied by a current prospectus.
METHODS FOR PLACING ORDERS
The following information 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.
INTERNET
WWW.SCHWAB.COM
SCHWAB BY PHONE(TM)
Use our automated voice service or speak to a representative. Call
1-800-435-4000, day or night (for TDD service, call 1-800-345-2550).
TELEBROKER(R)
Automated touch-tone phone service at 1-800-272-4922
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.
THE SCHWABFUNDS FAMILY
EQUITY INDEX FUNDS
Schwab S&P 500 Fund
Schwab 1000 Fund(R)
Schwab Small-Cap Index Fund(R)
Schwab Total Stock Market Index Fund(TM)
Schwab International Index Fund(R)
QUANTITATIVE/SECTOR FUNDS
Schwab Analytics Fund(R)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
ASSET ALLOCATION FUNDS
Schwab MarketTrack Portfolios(R)
All Equity Portfolio
Growth Portfolio
Balanced Portfolio
Conservative Portfolio
Schwab MarketManager Portfolios(R)
Growth Portfolio
Balanced Portfolio
Small Cap Portfolio
International Portfolio
BOND FUNDS
Schwab Short-Term Bond Market Index Fund
Schwab Total Bond Market Index Fund
Schwab YieldPlus Fund(TM)
Schwab Short/Intermediate Tax-Free Bond Fund
Schwab Long-Term Tax-Free Bond Fund
Schwab California Short/Intermediate Tax-Free Bond Fund
Schwab California Long-Term Tax-Free Bond Fund
SCHWAB MONEY 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(R).
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.
<PAGE> 76
SCHWABFUNDS(R)
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc.
P.O. Box 7575, San Francisco, CA 94104-7575
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
(C)2000 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
Printed on recycled paper. MKT3813-3 (12/00)
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