<PAGE> 1
IMPORTANT NOTICE
REGARDING DELIVERY OF
SHAREHOLDER DOCUMENTS
SCHWAB
ANALYTICS FUND(R)
October 31, 2000
Annual Report enclosed
[CHARLESSCHWAB LOGO]
<PAGE> 2
IMPORTANT NOTICE REGARDING DELIVERY OF
SHAREHOLDER DOCUMENTS
The Securities and Exchange Commission (SEC) permits mutual funds to deliver
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reports, to fund investors with multiple accounts at the same residential or
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<PAGE> 3
SCHWAB
ANALYTICS FUND(R)
October 31, 2000
Annual Report
[PHOTO OF TWO MEN TALKING]
[CHARLESSCHWAB LOGO]
<PAGE> 4
[CHARLES SCHWAB PHOTO]
Dear Shareholder,
We're pleased to bring you the first report for this fund that uses our new
"plain English" format. This format is part of a major initiative to make
SchwabFunds(R) materials easier to use.
We've given the report a simpler organization and a new look. Our goal has been
to focus on presenting information clearly and explaining what it means to
shareholders.
The most significant change is the new section on how to read and understand the
report's financial data. We've even found ways to make the financial statements
and notes more accessible. We will continue to actively look for ways to improve
these reports even further.
We hope you find this report helpful and we welcome your feedback. Thank you for
choosing SchwabFunds.
Sincerely,
/s/ Charles Schwab
-------------------------------
Charles Schwab
SCHWAB
ANALYTICS FUND(R)
ANNUAL REPORT
November 1, 1999 - October 31, 2000
1 Market Overview
5 The Fund
Evidence of a slowing economy and wide market swings were among the
main factors affecting fund performance.
15 Financial Notes
20 Proxy Results
----------------------------------------------------------------------
22 HOW TO READ THIS REPORT
An illustrated guide to the financials, along with a glossary.
<PAGE> 5
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.
PRODUCTIVITY EMERGES AS A KEY FACTOR.
[PHOTO OF ASSEMBLY LINE]
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 times). The Fed has voiced
concern that increases in wages could outpace gains in productivity, forcing
companies to boost prices and potentially sparking inflation.
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 GRAPH]
<TABLE>
<CAPTION>
LEHMAN BROTHERS U.S.
AGGREGATE MSCI-EAFE(R) RUSSELL 2000(R) S&P 500(R)
BOND 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>
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. Remember that past
performance isn't an indication of future results. Data source: Charles Schwab &
Co., Inc. (Schwab).
1
<PAGE> 6
MARKET OVERVIEW Continued
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 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.
[PHOTO OF WELDER]
STOCKS STUMBLE, RECOVER; MOST BONDS POST HEALTHY RETURNS.
U.S. equities, as measured by the major indices (chart, page 1) had positive
returns for the report period. By historical standards, they also remained
highly valued (P/E chart, page 4).
FIVE FACTORS AND THEIR EFFECTS ON THIS FUND.
The following charts show recent figures for five common measures of the state
of the U.S. economy and the stock market.
While the relationship of each of these factors to the performance of the fund
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.
2
<PAGE> 7
________________________________________________________________________________
"Old economy" stocks and value stocks regained popularity as many newer company
stocks fell.
________________________________________________________________________________
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 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.
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
[PHOTO OF STOCK EXCHANGE]
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 GRAPH]
<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.
<TABLE>
<CAPTION>
Date CPI ECI
---- --- ---
<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.
3
<PAGE> 8
MARKET OVERVIEW Continued
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, 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.
[PHOTO OF PEOPLE OUTSIDE SHOPS]
Recent evidence indicates that economic growth has indeed slowed from its torrid
pace of the first half of 2000.
________________________________________________________________________________
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.
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.
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.
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 GRAPH]
<TABLE>
<CAPTION>
S&P 500 P/E Ratio
S&P 500 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 GRAPH]
<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.
4
<PAGE> 9
SCHWAB
ANALYTICS FUND(R)
[PHOTO OF GERI HOM]
"Although large- and mid-cap growth stocks suffered during the second half of
the report period, the fund still performed fairly well."
Portfolio Manager
Geri Hom
GERI HOM, a vice president of the investment adviser, has overall responsibility
for the management of the fund. Prior to joining the firm in 1995, she worked
for nearly 15 years in equity index management.
PRAVEEN GOTTIPALLI is responsible for the day-to-day management of the fund.
Since 1994, he has been Director of Investment for Symphony Asset Management,
Inc., the fund's subadviser. Prior to joining Symphony, he worked for nine years
developing quantitative strategies.
TICKER SYMBOL SWANX
________________________________________________________________________________
[INVESTMENT STYLE 1 AND MARKET CAP 1 GRAPHIC]
<TABLE>
<S> <C> <C>
VALUE BLEND GROWTH
X LARGE
MEDIUM
SMALL
</TABLE>
This fund could be appropriate for long-term investors seeking a quantitative
approach designed to outperform the S&P 500(R) Index.
________________________________________________________________________________
THE FUND SEEKS LONG-TERM CAPITAL GROWTH.
MANAGER'S PERSPECTIVE
GIVEN THE VOLATILITY THAT PREVAILED IN EQUITY MARKETS, THE FUND PERFORMED
COMPARATIVELY WELL DURING THE REPORT PERIOD. A combination of factors caused
investors to trim their overall exposure to stocks. Among these factors were
high stock prices, uncertainty over the outcome of the presidential election and
potential interest rate hikes, among others. Toward the end of the report
period, evidence of a slowing economy reduced fears of interest rate hikes.
Ordinarily this might have helped the market regain its footing, but concerns
about high oil prices kept stocks in flux.
THE FUND'S EXPOSURE TO TECHNOLOGY STOCKS AND OTHER GROWTH STOCKS HURT
PERFORMANCE IN THE SECOND HALF OF THE PERIOD. As noted in its prospectus, the
fund uses a quantitative investment approach that is designed to favor growth
stocks -- specifically, stocks that have shown earnings growth and positive
earnings surprises and whose prices appear attractive compared to similar
stocks.
These stocks stumbled during the second half of the report period as investors
turned toward more defensive stocks and away from technology, communications and
other sectors typically associated with growth stocks. Thus, the fund slightly
underperformed the S&P 500 over the report period, although its performance
since inception remains ahead of the index.
1 Source: Morningstar, Inc. This style assessment is the result of comparing the
fund with the S&P 500 Index, based on P/E, P/B and median market cap. The
assessment reflects the fund's portfolio as of 10/31/00, which may have
changed since then, and is not a precise indication of risk or performance --
past, present or future.
5
<PAGE> 10
SCHWAB ANALYTICS FUND(R)
PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS as of 10/31/00
This chart compares performance of the fund with the S&P 500(R) Index and the
Morningstar Large-Cap Fund category.
[BAR CHART]
<TABLE>
<CAPTION>
TOTAL RETURN 2
--------------------------------------
SINCE INCEPTION:
1 YEAR 7/1/96
------ ------
<S> <C> <C>
FUND 5.75% 21.93%
S&P 500 INDEX 6.09% 20.88%
PEER GROUP AVERAGE 1 8.7% n/a
</TABLE>
PERFORMANCE OF A $10,000 INVESTMENT
Shows performance since inception of a hypothetical $10,000 investment in the
fund, compared to a similar investment in the S&P 500 Index.
[LINE GRAPH]
<TABLE>
<CAPTION>
FUND S&P 500 Index
----- -------------
<S> <C> <C>
06/30/96 10000 10000
07/31/96 9690 9558
08/31/96 9880 9760
09/30/96 10620 10308
10/31/96 11010 10593
11/30/96 11640 11393
12/31/96 11368 11168
01/31/97 11959 11865
02/28/97 11908 11958
03/31/97 11287 11468
04/30/97 12081 12152
05/31/97 12722 12890
06/30/97 13272 13468
07/31/97 14462 14539
08/31/97 13821 13724
09/30/97 14646 14475
10/31/97 13964 13992
11/30/97 14676 14640
12/31/97 14963 14891
01/31/98 15054 15057
02/28/98 16155 16142
03/31/98 16801 16969
04/30/98 16949 17140
05/31/98 16620 16845
06/30/98 17448 17529
07/31/98 17198 17343
08/31/98 14555 14839
09/30/98 15565 15790
10/31/98 16529 17074
11/30/98 17561 18109
12/31/98 19158 19152
01/31/99 20138 19952
02/28/99 19134 19332
03/31/99 19961 20105
04/30/99 20882 20883
05/31/99 20493 20390
06/30/99 21910 21522
07/31/99 21189 20850
08/31/99 21154 20746
09/30/99 20658 20177
10/31/99 22347 21455
11/30/99 22808 21891
12/31/99 24474 23180
01/31/00 23416 22017
02/29/00 24296 21600
03/31/00 26222 23712
04/30/00 25087 22998
05/31/00 24232 22527
06/30/00 24844 23083
07/31/00 24309 22723
08/31/00 25839 24135
09/30/00 24117 22860
10/31/00 23633 22764
</TABLE>
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. The indices are unmanaged, and you cannot invest in them directly.
When you sell your shares, they may be worth more or less than what you paid for
them. Past performance doesn't indicate future results.
1 Source: Morningstar, Inc. As of 10/31/00, there were 2,620 funds in the
Large-Cap Fund category that had track records of at least one year.
2 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower.
6
<PAGE> 11
FUND FACTS
<TABLE>
<CAPTION>
TOP TEN HOLDINGS 1 as of 10/31/00
----------------------------------------------------------
<S> <C>
1 CITIGROUP, INC. 4.4%
2 GENERAL ELECTRIC CO. 3.9%
3 AXA FINANCIAL, INC. 3.8%
4 CISCO SYSTEMS, INC. 3.7%
5 MERCK & CO., INC. 3.6%
6 SUN MICROSYSTEMS, INC. 3.2%
7 AMERICAN INTERNATIONAL GROUP, INC. 3.0%
8 JOHNSON & JOHNSON 2.8%
9 EXXON MOBIL CORP. 2.5%
10 NORTEL NETWORKS CORP. 2.4%
----------------------------------------------------------
TOTAL PERCENTAGE OF INVESTMENTS 33.3%
</TABLE>
<TABLE>
<CAPTION>
PEER GROUP
STATISTICS as of 10/31/00 FUND AVERAGE 2
----------------------------------------------------------------------
<S> <C> <C>
Number of Holdings 82 137
----------------------------------------------------------------------
Median Market Cap ($ Mil) $ 66,658 $ 56,749
----------------------------------------------------------------------
Price/Earnings (P/E) Ratio 29.7 34.3
----------------------------------------------------------------------
Price/Book (P/B) Ratio 8.0 8.7
----------------------------------------------------------------------
12-Month Yield 0.22% 0.45%
----------------------------------------------------------------------
Portfolio Turnover Rate 96% 98%
----------------------------------------------------------------------
Three-Year Beta 1.05 0.95
----------------------------------------------------------------------
</TABLE>
EXPENSE RATIO as of 10/31/00
[BAR GRAPH]
<TABLE>
<S> <C>
FUND 0.75% 3
PEER GROUP AVERAGE 1.34% 2
</TABLE>
INDUSTRY WEIGHTINGS as of 10/31/00
This shows the composition by industry of the fund's portfolio as of the report
date.
INDUSTRIES IN SCHWAB ANALYTICS FUND
[PIE CHART]
<TABLE>
<S> <C>
1 13.0% Healthcare/Drugs & Medicine
2 12.7% Business Machines & Software
3 10.1% Miscellaneous Finance
4 8.9% Electronics
5 7.4% Oil - International
6 5.8% Producer Goods & Manufacturing
7 5.8% Aerospace/Defense
8 5.5% Insurance
9 4.6% Banks
10 26.2% Other
</TABLE>
1 This list is not a recommendation of any security by the investment
adviser. Portfolio holdings may have changed since the report date.
2 Source: Morningstar, Inc. As of 10/31/00, there were 2,620 funds in the
Large-Cap Fund category.
3 Guaranteed by Schwab and the investment adviser through 2/28/01. The
actual expense ratio during the report period was 0.01% higher due to
certain non-routine expenses.
7
<PAGE> 12
SCHWAB ANALYTICS FUND(R)--FINANCIALS
FINANCIAL TABLES
These pages provide additional data on the fund's performance, portfolio
holdings, expenses and business operations. These figures have been audited by
PricewaterhouseCoopers LLP.
Two other sections of this report provide context for the data in these
financials. THE FINANCIAL NOTES section contains information about the fund's
business structure, accounting practices and other matters, completing the data
given in these tables. The final section, HOW TO READ THIS REPORT, includes
guides designed to make the financials easy to read and understand.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
11/1/99- 11/1/98- 11/1/97- 11/1/96- 7/1/96 1-
10/31/00 10/31/99 10/31/98 10/31/97 10/31/96
-----------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period 18.91 14.57 13.72 11.01 10.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.05 0.06 0.10 0.13 0.05
Net realized and unrealized gains 1.08 4.94 2.20 2.79 0.96
--------------------------------------------------------------------------------
Total income from investment operations 1.13 5.00 2.30 2.92 1.01
Less distributions:
Dividends from net investment income (0.04) (0.09) (0.12) (0.08) --
Distributions from net realized gains (1.47) (0.57) (1.33) (0.13) --
--------------------------------------------------------------------------------
Total distributions (1.51) (0.66) (1.45) (0.21) --
--------------------------------------------------------------------------------
Net asset value at end of period 18.53 18.91 14.57 13.72 11.01
================================================================================
Total return (%) 5.75 35.20 18.37 26.83 10.10 2
RATIOS/SUPPLEMENTAL DATA (%)
-----------------------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.75 4 0.75 0.75 0.74 0.75 3
Expense reductions reflected in above ratio 0.11 0.18 0.37 0.41 0.76 3
Ratio of net investment income to
average net assets 0.29 0.34 0.70 1.04 1.41 3
Portfolio turnover rate 96 99 115 120 33
Net assets, end of period ($ x 1,000,000) 342 289 192 150 98
</TABLE>
1 Commencement of operations.
2 Not annualized.
3 Annualized.
4 Would have been 0.76% if certain non-routine expenses (proxy fees) had been
included.
8 See the Financial Notes, which
are integral to this information.
<PAGE> 13
PORTFOLIO HOLDINGS
As of October 31, 2000
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top
ten holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
+ New holding (since 10/31/99)
- Non-income producing security
* American Depositary Receipt
The pie chart below shows the fund's major asset categories and the market value
and cost of the securities in each category.
ALL DOLLAR VALUES ARE IN THOUSANDS.
[PIE CHART]
<TABLE>
<S> <C>
98.1% COMMON STOCK
Market Value: $333,952
Cost: $264,984
1.9% OTHER INVESTMENT COMPANIES
Market Value: $6,610
Cost: $6,610
----------------------------------------------
100.0% TOTAL INVESTMENTS
Market Value: $340,562
Cost: $271,594
</TABLE>
COMMON STOCK 98.1% OF INVESTMENTS
<TABLE>
<CAPTION>
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
<S> <C> <C>
AEROSPACE / DEFENSE 5.8%
+ Boeing Co. 96,600 6,551
General Dynamics Corp. 79,700 5,703
United Technologies Corp. 105,900 7,393
------
19,647
BANKS 4.6%
+ BancWest Corp. 253,100 5,173
City National Corp. 103,200 3,547
+ J.P. Morgan & Co., Inc. 34,100 5,644
+ PNC Financial Services Group 19,900 1,331
------
15,695
BUSINESS MACHINES & SOFTWARE 12.7%
-(4) Cisco Systems, Inc. 234,500 12,634
+ Hewlett-Packard Co. 26,000 1,207
International Business Machines Corp. 53,600 5,280
-+ Microchip Technology, Inc. 35,250 1,115
- Microsoft Corp. 83,700 5,765
-+ Oracle Corp. 185,800 6,131
-(6) Sun Microsystems, Inc. 99,700 11,054
------
43,186
BUSINESS SERVICES 4.1%
-+ Flextronics International Ltd. 95,200 3,618
+(10) Nortel Networks Corp. 181,300 8,249
-+ SDL, Inc. 8,000 2,074
------
13,941
CHEMICAL 0.6%
+ Eastman Chemical Co. 49,300 2,114
CONSUMER: NONDURABLE 1.3%
Darden Restaurants, Inc. 160,500 3,611
+ Tupperware Corp. 37,100 635
------
4,246
ELECTRONICS 8.9%
-+ ADC Telecommunications, Inc. 140,400 3,001
+ Adelphia Communications Corp., Class A 58,000 1,925
-+ Advanced Fibre Communications, Inc. 73,200 2,384
-+ Altera Corp. 44,700 1,830
- Analog Devices, Inc. 37,800 2,457
-+ Applied Materials, Inc. 23,300 1,238
Intel Corp. 45,700 2,056
-+ Lam Research Corp. 72,500 1,405
+ Scientific-Atlanta, Inc. 11,900 814
+ Tektronix, Inc. 77,400 5,515
Texas Instruments, Inc. 80,200 3,935
-+ Three-Five Systems, Inc. 22,900 790
-+ Vishay Intertechnology, Inc. 50,050 1,501
-+ Xilinx, Inc. 21,600 1,565
------
30,416
</TABLE>
See the Financial Notes, which 9
are integral to this information.
<PAGE> 14
SCHWAB ANALYTICS FUND(R) -- FINANCIALS
PORTFOLIO HOLDINGS Continued
As of October 31, 2000
<TABLE>
<CAPTION>
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
<S> <C> <C>
ENERGY: RAW MATERIALS 2.8%
+ Apache Corp. 30,900 1,709
ENSCO International, Inc. 111,500 3,707
Occidental Petroleum Corp. 211,600 4,206
------
9,622
FOOD & AGRICULTURE 1.5%
General Mills, Inc. 45,000 1,879
Quaker Oats Co. 39,500 3,222
------
5,101
HEALTHCARE / DRUGS & MEDICINE 13.0%
Allergan, Inc. 53,700 4,514
- Amgen, Inc. 51,500 2,984
Baxter International, Inc. 67,500 5,548
Bristol-Myers Squibb Co. 60,300 3,674
-+ Edwards Lifesciences Corp. 7,940 107
(8) Johnson & Johnson 104,700 9,645
(5) Merck & Co., Inc. 136,600 12,285
Schering-Plough Corp. 104,200 5,386
------
44,143
HOUSEHOLD PRODUCTS 0.6%
+ Colgate-Palmolive Co. 34,200 2,010
INSURANCE 5.5%
(7) American International Group, Inc. 105,500 10,339
Marsh & McLennan Cos., Inc. 51,800 6,773
-+ Metlife, Inc. 63,000 1,740
------
18,852
MEDIA 2.5%
+ Knight-Ridder, Inc. 33,900 1,703
McGraw-Hill Cos., Inc. 67,800 4,352
+ The Walt Disney Co. 44,800 1,604
Washington Post Co., Class B 1,700 908
------
8,567
MISCELLANEOUS 0.9%
-+ Fairchild Semiconductor
International, Inc., Class A 79,600 1,677
-+ Intersil Holding Corp. 31,100 1,491
------
3,168
MISCELLANEOUS FINANCE 10.1%
+(3) AXA Financial, Inc. 237,700 12,851
(1) Citigroup, Inc. 284,333 14,963
Fannie Mae 54,500 4,196
Freddie Mac 37,500 2,250
------
34,260
NON-FERROUS METALS 0.7%
+ Alcoa, Inc. 89,000 2,553
OIL: DOMESTIC 1.3%
+ Kerr-McGee Corp. 25,400 1,659
+ Unocal Corp. 77,100 2,631
------
4,290
OIL: INTERNATIONAL 7.4%
Chevron Corp. 53,500 4,394
(9) Exxon Mobil Corp. 95,400 8,508
* Royal Dutch Petroleum Co. 116,100 6,893
Texaco, Inc. 89,200 5,268
------
25,063
PRODUCER GOODS & MANUFACTURING 5.8%
+ Cooper Industries, Inc. 54,100 2,069
+ Corning, Inc. 35,700 2,731
(2) General Electric Co. 241,000 13,210
-+ Lattice Semiconductor Corp. 58,200 1,699
------
19,709
REAL PROPERTY 0.2%
+ Starwood Hotels & Resorts Worldwide, Inc. 27,200 806
RETAIL 3.2%
-+ Costco Wholesale Corp. 54,600 2,000
-+ Safeway, Inc. 54,800 2,997
Wal-Mart Stores, Inc. 132,500 6,012
------
11,009
TELEPHONE 3.2%
AT&T Corp. 58,200 1,349
BellSouth Corp. 156,700 7,571
- Broadwing, Inc. 65,400 1,848
------
10,768
</TABLE>
10 See the Financial Notes, which
are integral to this information.
<PAGE> 15
<TABLE>
<CAPTION>
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
<S> <C> <C>
UTILITIES: ELECTRIC & GAS 1.4%
Public Service Enterprise
Group, Inc. 77,900 3,233
+ Reliant Energy, Inc. 37,600 1,553
------
4,786
OTHER INVESTMENT COMPANIES
1.9% of investments
+ Provident Institutional
TempFund 6,609,604 6,610
</TABLE>
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of
holdings for this fund.
See the Financial Notes, which 11
are integral to this information.
<PAGE> 16
SCHWAB ANALYTICS FUND(R) -- FINANCIALS
Statement of
ASSETS AND LIABILITIES
As of October 31, 2000. All numbers x 1,000 except NAV.
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments, at market value $340,562*
Receivables:
Fund shares sold 214
Interest 33
Dividends 152
Investments sold 1,249
Prepaid expenses + 13
--------
TOTAL ASSETS 342,223
LIABILITIES
Payables:
Fund shares redeemed 145
Interest expense 2
Investment adviser and administrator fees 18
Transfer agent and shareholder service fees 11
Accrued expenses + 78
--------
TOTAL LIABILITIES 254
NET ASSETS
TOTAL ASSETS 342,223
TOTAL LIABILITIES - 254
--------
NET ASSETS $341,969
NET ASSETS BY SOURCE
Capital received from investors 246,992
Net investment income not yet distributed 914
Net realized capital gains 25,095
Net unrealized capital gains 68,968
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
<S> <C> <C>
$341,969 18,459 $18.53
</TABLE>
* The fund paid $271,594 for these securities. Not counting short-term
obligations and government securities, the fund paid $384,969 for securities
during the report period and received $338,740 from securities it sold or that
matured.
<TABLE>
<CAPTION>
FEDERAL TAX DATA
<S> <C>
COST BASIS OF PORTFOLIO $272,701
NET UNREALIZED GAINS AND LOSSES:
Gains $ 86,013
Losses + (18,152)
----------
$ 67,861
</TABLE>
12 See the Financial Notes, which
are integral to this information.
<PAGE> 17
Statement of
OPERATIONS
For November 1, 1999 through October 31, 2000. All numbers x 1,000.
<TABLE>
<CAPTION>
INVESTMENT INCOME
-----------------
<S> <C>
Dividends $ 3,365*
Interest + 436
--------
TOTAL INVESTMENT INCOME 3,801
NET REALIZED GAINS AND LOSSES
-----------------------------
Net realized gains on investments sold 25,211
Net realized gains on futures contracts + 190
--------
NET REALIZED GAINS 25,401
NET UNREALIZED GAINS AND LOSSES
-------------------------------
Net unrealized losses on investments (9,837)
Net unrealized losses on futures contracts + (145)
--------
NET UNREALIZED LOSSES (9,982)
EXPENSES
--------
Investment adviser and administrator fees 1,957**
Transfer agent and shareholder service fees 906***
Trustees' fees 6#
Custodian fees 55
Portfolio accounting fees 55
Professional fees 22
Registration fees 75
Shareholder reports 42
Interest expense 2
Proxy fees 34
Other expenses + 7
--------
Total expenses 3,161
Expense reduction - 407##
--------
NET EXPENSES 2,754
INCREASE IN NET ASSETS FROM OPERATIONS
--------------------------------------
TOTAL INVESTMENT INCOME 3,801
NET EXPENSES - 2,754
--------
NET INVESTMENT INCOME 1,047
NET REALIZED GAINS 25,401###
NET UNREALIZED LOSSES + (9,982)###
--------
INCREASE IN NET ASSETS FROM OPERATIONS $ 16,466
</TABLE>
* An additional $26 was withheld for foreign taxes.
** Calculated as a percentage of average daily net assets: 0.54% of the first
$500 million and 0.49% of assets beyond that. Prior to February 28, 1999,
the percentages were 0.74% of the first $1 billion, 0.69% of the next $1
billion and 0.64% of assets beyond that.
*** Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% of the
fund's assets.
# For the fund's independent trustees only.
## This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through at least
February 28, 2001, to 0.75% of average daily net assets. This limit does not
include interest, taxes and certain non-routine expenses.
### These add up to a net gain on investments of $15,419.
See the Financial Notes, which 13
are integral to this information.
<PAGE> 18
SCHWAB ANALYTICS FUND(R) -- FINANCIALS
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
<TABLE>
<CAPTION>
OPERATIONS
----------
11/1/99-10/31/2000 11/1/98-10/31/99
<S> <C> <C>
Net investment income $ 1,047 $ 787
Net realized gains 25,401 25,589
Net unrealized gains or losses + (9,982) 40,876
------------ ----------
INCREASE IN NET ASSETS FROM OPERATIONS 16,466 67,252
DISTRIBUTIONS PAID
------------------
Dividends from net investment income 763 1,124*
Distributions from net realized gains + 25,635 7,390
------------ ----------
TOTAL DISTRIBUTIONS PAID $26,398 $ 8,514
</TABLE>
<TABLE>
<CAPTION>
TRANSACTIONS IN FUND SHARES
---------------------------
11/1/99-10/31/2000 11/1/98-10/31/99
QUANTITY VALUE QUANTITY VALUE
<S> <C> <C> <C> <C>
Shares sold 8,703 $168,592 5,132 $90,154
Shares reinvested 1,300 24,672 499 7,968
Shares redeemed + (6,807) (130,018) (3,510) (59,718)
---------- -------- ------ -------
NET INCREASE 3,196 $63,246 2,121 $38,404
</TABLE>
SHARES OUTSTANDING AND NET ASSETS
---------------------------------
<TABLE>
<CAPTION>
11/1/99-10/31/00 11/1/98-10/31/99
SHARES NET ASSETS SHARES NET ASSETS
<S> <C> <C> <C> <C>
Beginning of period 15,263 $288,655 13,142 $191,513
Total increase + 3,196 53,314 2,121 97,142**
-------- -------- ------ --------
END OF PERIOD 18,459 $341,969 15,263 $288,655#
</TABLE>
* UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
** Figures for shares represent the net changes in shares from the transactions
described above. Figures for net assets represent the changes in net assets
from operations plus the value of transactions in fund shares, minus
distributions paid.
# Includes net investment income not yet distributed in the amount of $914 for
the current period and $630 for the prior period.
14 See the Financial Notes, which
are integral to this information.
<PAGE> 19
FINANCIAL NOTES
Financial Notes
Business Structure of the Fund
THE FUND DISCUSSED IN THIS REPORT IS A SERIES OF SCHWAB CAPITAL TRUST, A
NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended. The sidebar shows the fund in this report and its trust.
THE FUND OFFERS ONE SHARE CLASS. Shares are bought and sold at net asset value,
or NAV, which is the price for all outstanding shares. Each share has a par
value of 1/1,000 of a cent, and the trustees may issue as many shares as
necessary.
THE TRUST AND ITS FUNDS
-----------------------
This list shows all of the funds included in Schwab Capital Trust. The fund
discussed in this report is highlighted.
SCHWAB CAPITAL TRUST
Organized May 7, 1993
Schwab S&P 500 Fund
Schwab Small-Cap Index Fund(R)
Schwab Total Stock Market Index Fund(TM)
Schwab International Index Fund(R)
Schwab Analytics Fund(R)
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Schwab MarketManager Growth Portfolio
Schwab MarketManager Balanced Portfolio
Schwab MarketManager Small Cap Portfolio
Schwab MarketManager International Portfolio
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Institutional Select(TM)S&P 500 Fund
Institutional Select(TM)Large-Cap Value Index Fund
Institutional Select(TM)Small-Cap Value Index Fund
15
<PAGE> 20
FINANCIAL NOTES
Fund Operations
Most of the fund's investments are described earlier in this report. However,
there are certain other investments and policies that may affect the fund's
financials. The most significant of these are described below. Other policies
concerning the fund's business operations also are described here.
THE FUND PAYS DIVIDENDS from net investment income and makes distributions from
net capital gains once a year.
THE FUND MAY INVEST IN FUTURES CONTRACTS TO PARTICIPATE IN THE RETURN OF AN
INDEX. Futures contracts involve certain risks because they can be sensitive to
market movements.
One risk is that the price of a futures contract may not move in perfect
correlation with the price of the underlying securities. Another risk is that,
at certain times, it may be impossible for the fund to close out a position in a
futures contract due to a difference in trading hours or to market conditions
that may reduce the liquidity for a futures contract or its underlying
securities.
Because futures carry inherent risks, the fund must give the broker a deposit of
cash and/or securities (the "initial margin") whenever it enters into a futures
contract. The amount of the deposit may vary from one contract to another, but
it is generally a percentage of the contract amount.
Futures are traded publicly on exchanges, and their market value changes daily.
The fund records the change in market value of futures, and also the change in
the amount of margin deposit required ("variation margin").
THE FUND MAY ENTER INTO REPURCHASE AGREEMENTS. In a repurchase agreement, the
fund buys a security from another party (usually a financial institution) with
the agreement that it be sold back in the future. The date, price and other
conditions are all specified when the agreement is created.
Among the terms of the fund's repurchase agreements is that they be fully
collateralized by U.S. Treasury or government agency securities. All collateral
is held by the fund's custodian and is monitored daily to ensure that its market
value at least equals the repurchase price under the agreement.
THE FUND MAY LOAN SECURITIES TO CERTAIN BROKERS, DEALERS AND OTHER FINANCIAL
INSTITUTIONS WHO PAY THE FUND NEGOTIATED FEES. The fund receives cash, letters
of credit or U.S. government securities as collateral on these loans, and the
value of the collateral must be at least 102% of the market value of the loaned
securities as of the first day of the loan, and at least 100% each day
thereafter.
THE FUND MAY BORROW MONEY FROM BANKS. The fund may obtain temporary bank loans
through its trust, to use for meeting shareholder redemptions or for
extraordinary or emergency purposes. The trust has line of credit arrangements
with PNC Bank, N.A., Bank of America, N.A. and The Bank of New York. The fund
pays interest on the amounts it borrows at rates that are negotiated
periodically. As of the end of the report period, there were no borrowings
outstanding.
16
<PAGE> 21
THE FUND PAYS FEES FOR VARIOUS SERVICES. Through its trust, the fund has
agreements with Charles Schwab Investment Management, Inc. (CSIM) to provide
investment advisory and administrative services and with Charles Schwab & Co.,
Inc. (Schwab) to provide transfer agent and shareholder services. Although these
agreements specify certain fees for these services, CSIM and Schwab have made
additional agreements with the fund limiting certain expenses. The rates and
limitations for these fees are described in the fund's Statement of Operations.
The adviser pays Symphony Asset Management, Inc. an annual fee for serving as
the fund's subadviser. This fee is calculated as a percentage of average daily
net assets: 0.20% of the first $300 million, 0.15% of the next $500 million and
0.10% of assets beyond that.
TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/OR DIRECTORS OF THE INVESTMENT
ADVISER AND/OR SCHWAB. Federal securities law limits the percentage of such
"interested persons" who may serve on a trust's board, and the trust was in
compliance with these limitations throughout the report period. The trust did
not pay any of these persons for their service as trustees, but it did pay the
independent trustees, as noted in the fund's Statement of Operations.
THE FUND MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING AFFILIATES. For instance,
the fund may own shares of The Charles Schwab Corp. if that company is selected
by its investment process.
The fund may make direct transactions with certain other SchwabFunds(R) when
practical. When one fund is seeking to sell a security that another is seeking
to buy, an interfund transaction can allow both funds to benefit by reducing
transaction costs. This practice is limited to funds that share the same
investment adviser, trustees and officers.
THE FUND INTENDS TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR
REGULATED INVESTMENT COMPANIES. Accordingly, the fund distributes substantially
all of its net investment income and realized net capital gains (if any) to its
shareholders each year. As long as the fund meets the tax requirements, it is
not required to pay federal income tax.
17
<PAGE> 22
FINANCIAL NOTES
ACCOUNTING POLICIES
The following are the main policies the fund uses in preparing its financial
statements.
THE FUND VALUES THE SECURITIES IN ITS PORTFOLIO EVERY BUSINESS DAY. The fund
uses the following policies to value various types of securities:
EXCHANGE-TRADED SECURITIES: valued at the last-quoted sale price for the
day, or, on days when no sale has been reported, halfway between the most
recent bid and asked quotes.
SECURITIES TRADED OVER-THE-COUNTER: same as exchange-traded securities.
SECURITIES FOR WHICH NO QUOTED VALUE IS AVAILABLE, INCLUDING RESTRICTED
SECURITIES: valued at fair value, as determined in good faith by the fund's
investment adviser using guidelines adopted by the fund's Board of Trustees.
FUTURES: open contracts are valued at their settlement prices as of the
close of their exchanges. When the fund closes out a futures position, it
calculates the difference between the value of the position at the beginning
and at the end, and records a realized gain or loss accordingly.
SHORT-TERM SECURITIES (60 DAYS OR LESS TO MATURITY): valued at amortized
cost.
SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the
security is executed.
DIVIDENDS AND DISTRIBUTIONS FROM PORTFOLIO SECURITIES are recorded on the date
they are effective (the ex-dividend date), although the fund records certain
foreign security dividends on the day it learns of the ex-dividend date.
INCOME FROM INTEREST AND THE ACCRETION OF DISCOUNTS is recorded as it accrues.
REALIZED GAINS AND LOSSES from security transactions are based on the identified
costs of the securities involved.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES are reported in U.S.
dollars. For assets and liabilities held on a given date, the dollar value
is based on market exchange rates in effect on that date. Transactions involving
foreign currencies, including purchases, sales, income receipts and expense
payments, are figured using exchange rates in effect on the transaction date.
EXPENSES that are specific to the fund are charged directly to the fund.
Expenses that are common to all funds within a trust generally are allocated
among the funds in proportion to their net assets.
THE FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND
ACCOUNTING, and is considered a separate entity for tax purposes. Within its
account, the fund also keeps certain assets in segregated accounts, as may be
required by securities law.
THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES. Notwithstanding this, shareholders should understand that
in order to follow these principles, fund management has to make estimates and
assumptions that affect the information reported in the financial statements.
It's possible that once the results are known, they may turn out to be different
from these estimates.
18
<PAGE> 23
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF:
Schwab Analytics Fund(R)
In our opinion, the accompanying statements of assets and liabilities, including
the portfolio holdings, 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 Analytics Fund (one of the portfolios
constituting Schwab Capital Trust) (hereafter referred to as the "fund") at
October 31, 2000, and the results of its operations for the year then ended, the
changes in its 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 fund's 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
19
<PAGE> 24
PROXY VOTING RESULTS (UNAUDITED)
SHAREHOLDERS OF THE FUND 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 Analytics Fund(R) 8,359,431 301,930 1,114,026
PROPOSAL 2c2
TO APPROVE CHANGES TO RESTRICTIONS REGARDING LENDING.
Schwab Analytics Fund 8,358,360 304,434 1,112,593
PROPOSAL 2c3
TO APPROVE CHANGES TO RESTRICTIONS REGARDING SENIOR SECURITIES.
Schwab Analytics Fund 8,438,908 221,962 1,114,517
</TABLE>
1 Includes broker non-votes.
20
<PAGE> 25
<TABLE>
<CAPTION>
FOR AGAINST ABSTAINED 1
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PROPOSAL 2d
TO APPROVE CHANGES TO RESTRICTIONS REGARDING DIVERSIFICATION.
Schwab Analytics Fund(R) 8,411,631 238,808 1,124,948
PROPOSAL 2i
TO APPROVE CHANGES TO RESTRICTIONS REGARDING INDUSTRY CONCENTRATION.
Schwab Analytics Fund 8,454,610 207,774 1,113,003
PROPOSAL 2j
TO APPROVE CHANGES TO RESTRICTIONS REGARDING COMMODITIES, FUTURES, AND REAL ESTATE.
Schwab Analytics Fund 8,299,223 365,079 1,111,085
PROPOSAL 2k
TO APPROVE CHANGES TO RESTRICTIONS UNDERWRITING OF SECURITIES.
Schwab Analytics Fund 8,374,464 288,402 1,112,521
</TABLE>
1 Includes broker non-votes.
21
<PAGE> 26
HOW TO READ THIS REPORT
This report, including the financial tables, has been designed to be EASY
TO READ. The next few pages provide additional information that can help
you more fully understand the financial tables and why they are important
to ALL FUND INVESTORS.
In this section, we take a closer look at the types of information
presented in the financial tables.
Brief CALLOUTS add context to some of the most important elements in the
tables, and help explain certain fund operations and accounting principles.
At the end, a GLOSSARY defines many of the technical financial terms that
are used in this report.
[FINANCIAL HIGHLIGHTS TABLE GRAPHIC -- SAMPLE PAGE]
FINANCIAL HIGHLIGHTS*
PER SHARE DATA ($)**
Income from investment operations***
Total return (%)+
* The financial highlights summarize a fund's activities over the past five
years (or since inception, if the fund doesn't yet have five years of
operating history).
** The figures in the first part of the table are for a single share of a fund
that was "outstanding," or in existence, during the periods indicated.
*** These lines show how much the fund earned per share, and where these
earnings came from: how much was from interest and dividends, and how much
from capital appreciation (that is, price increases of investments the fund
owned). A fund may show losses in this section if its expenses exceeded its
income or its capital losses exceeded its capital gains.
Some funds, such as money funds, typically receive all their earnings as
interest, while some equity funds may have only appreciation, or may
receive interest and dividends only occasionally.
+ Total return shows what an investor in a fund would have earned or lost
during each period indicated, assuming that all dividends and distributions
were rein vested. Because the numbers in the financial highlights are for a
fund's fiscal year, they will be different from calendar year numbers,
except for funds whose fiscal year is the same as the calendar year.
22
<PAGE> 27
[SAMPLE TABLE GRAPHIC]
1/1/97-10/31/97 *
(0.19) **
0.49 ***
0.40 ***
1.89 #
1 ##
Table is for illustration only.
* In some cases, such as with funds that started partway through their
planned fiscal year or have changed their fiscal year, the financial
highlights may contain a "stub period" that is less than 12 months.
** In financial tables, parentheses around numbers are used to indicate a
negative number, such as a loss, or a number that is being subtracted, such
as a distribution paid by a fund to its shareholders.
*** The figures in this part of the table disclose a fund's annual operating
expenses. The expenses are shown as a percentage of a fund's average net
assets because they are paid from these assets.
*** For some funds, the annual expenses are capped at a certain level. With
these funds, there are two sets of expense figures: net expenses and the
amounts of any expense reductions. The net figures reflect what the
expenses actually were, after the reductions.
# This shows you how much a fund netted in dividend and interest income
(i.e., total dividends and interest minus expenses), expressed as a
percentage of the fund's average net assets.
## The turnover rate tells you how actively a fund has traded securities. A
rate of 100% would be the equivalent of replacing every security in the
portfolio over the period of a year.
## Consistently high turnover can result in taxable distributions, which can
lower after-tax performance -- although this is not a concern if your
investment is held in an IRA, 401(k) or other tax-deferred account.
23
<PAGE> 28
HOW TO READ THIS REPORT Continued
[HYPOTHETICAL FUND -- FINANCIALS SAMPLE GRAPHIC]
*** PORTFOLIO HOLDINGS
(1) Top ten holding
+ New holding
- Non-income producing security
** Global Depositary Receipt
# Collateral for open futures contracts
## Issuer is affiliated with the fund's adviser
Table is for illustration only.
*** The Portfolio Holdings (sometimes also called the Schedule of Investments)
is a snapshot of all securities a fund held on the last day of the report
period.
Symbols that may appear in the Portfolio Holdings:
(1) Top ten holding -- shows a fund's ten largest positions, as measured by
market value.
+ New holding -- a security the fund added during the report period.
- Non-income producing security -- this includes several categories of
securities: those that never pay dividends (such as many growth stocks);
those that sometimes pay dividends, but have not done so in the past 12
months; and those that typically do pay dividends, but have missed a recent
dividend payment.
** Global Depositary Receipt (GDR) -- a security issued in one country that
represents a stock issued in another country.
* American Depositary Receipt (ADR) -- a type of GDR that is traded in the
United States and priced in U.S. dollars.
# Collateral for open futures contracts -- indicates a security the fund has
set aside in a separate account to cover possible losses that may result
from a futures contract. The fund is not permitted to sell a security while
it is pledged as collateral.
## Issuer is affiliated with the fund's adviser -- indicates a security issued
by the company that manages the fund, or an affiliate of that company.
Substantial ownership of such securities could represent conflict of
interest, which is why this disclosure is required.
### [PIE CHART FROM SAMPLE GRAPHIC]
99.9% COMMON STOCK
Market Value: $7,368,959
Cost: $5,767,040
0.1% U.S. TREASURY OBLIGATIONS
Market Value: $3,778
Cost: $3,778
SHORT-TERM INVESTMENTS
Market Value: $1,864
Cost: $1,864
-------------------------
00.0% TOTAL INVESTMENTS
Market Value: $7,374,601
Cost: $5,772,682
### This shows a breakdown of holdings by asset type. To the right of the pie
chart are figures showing the total market value of securities of each asset
type, and also what a fund paid for those securities.
24
<PAGE> 29
[SAMPLE PORTFOLIO HOLDINGS TABLE GRAPHIC]
Table is for illustration only.
* In some cases, securities are organized into sub-groups (in this example,
stock holdings are organized by industry). For each sub-group, there are
figures showing the percentage of investments represented and the total
market value of the securities in the sub-group. Note that for all dollar
values, you need to add three zeroes after each number to get the approximate
value.
** For all bonds, the report shows the security name, the rate the security pays
and the maturity date. The maturity date is the date when the bond is retired
and the issuer returns the money borrowed ("principal" or "face value") to
the bondholder.
** During its lifetime, a bond may trade at a premium or a discount to its par
value, depending on interest rate trends and other factors. When a bond
begins to approach maturity, its market value typically moves closer to its
face value.
# Most equity funds keep a small percentage of assets in high quality, liquid
investments, in order to manage their cash flow needs.
## In this example, the investment shown is one that seeks to maintain a stable
$1.00 share price, so the number of shares is typically the same as the
market value (allowing for rounding in the value column).
* UTILITIES: ELECTRIC & GAS 2.6%
<TABLE>
<S> <C>
Reliant Energy, Inc. 191,286 5,213
Southern Co. 442,331 11,749
Texas Utilities Co. 185,887 7,203
Unicom Corp. 138,452 5,304
Williams Cos., Inc. 281,464 10,555
--------
194,247
</TABLE>
**
<TABLE>
<S> <C> <C>
Security Face Value Mkt. Value
Rate, Maturity Date ($ x 1.000) ($ x 1,000)
U.S Treasury Bills
4.36%-4.65%, 12/19/00 3,800 3,778
</TABLE>
# OTHER INVESTMENT COMPANIES
## Provident Institutional TempCash 1,864,212
25
<PAGE> 30
HOW TO READ THIS REPORT Continued
[HYPOTHETICAL FUND -- FINANCIALS SAMPLE GRAPHIC]
* As of October 31, 2000. All numbers X 1,000 except NAV.
** Statement of Assets and Liabilities
***Receivables:
Payables:
# TOTAL ASSETS:
TOTAL LIABILITIES
NET ASSETS
## NET ASSETS BY SOURCE
Table is for illustration only.
* As with the Portfolio Holdings, the figures in these statements need to be
multiplied by 1,000. This includes the figures in the notes.
** The Statement of Assets and Liabilities is a snapshot of a fund's balance
sheet on the last day of the report period.
The collateral is simultaneously counted as an asset (because the fund held
it as of the report date) and as a liability (because it is owned by the
institutions that provided it as collateral).
*** At any given time, a fund is likely to be owed money from various sources
that it has not yet received, and to owe money it hasn't yet paid.
# This section gathers the totals from the first two sections in order to
compute net assets.
## This section shows where the assets described above came from. "Capital
received from investors" is money a fund received from investors buying its
shares during the report period, and is a net figure (meaning that money the
fund remitted to investors who redeemed their shares has already been subtracted
from it).
Although a mutual fund doesn't expect to pay federal income tax, it does have to
file a return with the IRS and disclose certain tax information to shareholders.
In some cases, the requirements of tax accounting differ from the requirements
of the accounting practices used in keeping a fund's books, so the figures in
this box may differ from those shown elsewhere in the financials. These
differences may require that some values be reclassified in the financials, but
this does not affect a fund's NAV.
[FEDERAL TAX DATA SAMPLE TABLE GRAPHIC]
Table is for illustration only.
26
<PAGE> 31
[HYPOTHETICAL FUND -- FINANCIALS SAMPLE GRAPHIC]
* STATEMENT OF OPERATIONS
** NET REALIZED GAINS AND LOSSES
*** NET UNREALIZED GAINS AND LOSSES
# INVESTMENT ADVISER AND ADMINISTRATOR FEES
## TRANSFER AGENT AND SHAREHOLDER SERVICE FEES:
### CUSTODIAN FEES
#### INCREASE IN NET ASSETS FROM OPERATIONS
Table is for illustration only.
* The Statement of Operations tells you how much money a fund earned and
spent over the course of the report period, and how much it gained and lost
on its investments.
** These are the capital gains or losses resulting from securities a fund sold
during the report period.
*** These represent the change in unrealized gains or losses over the report
period.
# Covers most activities related to managing a fund's portfolio.
## Covers most activities associated with shareholders, including processing
transactions in fund shares and providing services such as account
statements and information. In funds with more than one share class, these
figures are reported by class.
### To safeguard the interests of shareholders, mutual funds must keep their
portfolio securities in accounts at a financial institution, whose tasks
include maintaining records of a fund's holdings.
#### This section gathers the totals from the first four sections in order to
compute the net earnings or losses that resulted from a fund's operations
during the report period. These figures also appear, in summary form, on
the Statements of Changes in Net Assets.
27
<PAGE> 32
HOW TO READ THIS REPORT Continued
[HYPOTHETICAL FUND -- FINANCIALS SAMPLE GRAPHIC]
* STATEMENTS OF CHANGES IN NET ASSETS
** OPERATIONS 11-1-99-10/31/00
*** OPERATIONS 11-1-98-10/31/99
# TRANSACTIONS IN FUND SHARES
## SHARES OUTSTANDING AND NET ASSETS
Table is for illustration only.
* The Statements of Changes in Net Assets compare a fund's performance during
the current report period with its performance from the previous report
period.
* Keep in mind that if the current report is a semiannual report, its figures
are only for six months, whereas the figures for the previous period are
generally for a full year.
** These are the figures for the current report period.
*** These are the figures for the previous report period.
# From this section, you can see how the size of a fund was affected by
investors buying and selling shares (as opposed to changes due to fund
performance, shown above in "Operations").
# The information shows how many shares the fund sold to investors, how many
shares the fund issued in connection with investors who reinvested their
dividends or distributions, and how many shares the fund redeemed (bought
back from investors).
# In funds with more than one share class, these figures are reported by
class.
## For mutual funds, the number of "shares outstanding" is the number of shares
in existence.
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GLOSSARY
ASSET ALLOCATION The practice of dividing a portfolio among different asset
classes, with each asset class assigned a particular percentage.
ASSET CLASS A group of securities with similar structure and basic
characteristics. Stocks, bonds and cash are the three main examples of asset
classes.
BETA A historical measure of an investment's volatility relative to a market
index (usually the S&P 500). The index is defined as having a beta of 1.00.
Investments with a beta higher than 1.00 have been more volatile than the index;
those with a beta of less than 1.00 have been less volatile.
BOND A security representing a loan from the investor to the issuer. A bond
typically pays interest at a fixed rate (the "coupon rate") until a specified
date (the "maturity date"), at which time the issuer returns the money borrowed
("principal" or "face value") to the bondholder. Because of their structure,
bonds are sometimes called "fixed income securities" or "debt securities."
CAP, CAPITALIZATION See "market cap."
CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an
investment and its value at a later time. If the investment has been sold, the
capital gain or loss is considered a realized gain or loss. If the investment is
still held, the gain or loss is still "on paper" and is considered unrealized.
EARNINGS GROWTH RATE For a mutual fund, the average yearly rate at which the
earnings of the companies in the fund's portfolio have grown, measured over the
past five years.
EARNINGS PER SHARE (EPS) A company's earnings, or net income, for the past 12
months, divided by the number of shares outstanding.
EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to
cover the fund's operating expenses. An expense ratio of 0.50% means that a
fund's expenses amount to half of one percent of its average net assets a year.
MARKET CAP, MARKET CAPITALIZATION The value of a company as determined by the
total value of all shares of its stock outstanding.
MEDIAN MARKET CAP The midpoint of the range of market caps of the stocks held
by a fund. There are different ways of calculating median market cap. With a
simple median, half of the stocks in the fund's portfolio would be larger than
the median, and half would be smaller. With a weighted median (the type that is
calculated for these funds), half of the fund's assets are invested in stocks
that are larger than the median market cap, and half in stocks that are smaller.
NET ASSET VALUE (NAV) The value of one share of a mutual fund. NAV is
calculated by taking the fund's total assets, subtracting liabilities, and
dividing by the number of shares outstanding.
OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual
fund, indicates all shares currently held by investors.
PRICE-TO-BOOK RATIO (P/B) The market price of a company's stock compared with
its "book value." A mutual fund's P/B is the weighted average of the P/B of all
stocks in the fund's portfolio.
PRICE-TO-EARNINGS RATIO (P/E) The market price of a company's stock compared
with earnings over the past year. A mutual fund's P/E is the weighted average of
the P/E of all stocks in the fund's portfolio.
RETURN ON EQUITY (ROE) The average yearly rate of return for each dollar of
investors' money, measured over the past five years.
STOCK A share of ownership, or equity, in the issuing company.
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).
WEIGHTED AVERAGE For mutual funds, an average that gives the same weight to
each security as the security represents in the fund's portfolio.
YIELD The income paid out by an investment, expressed as a percentage of the
investment's market value.
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NOTES
<PAGE> 35
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> 36
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INVESTMENT ADVISER
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101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
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PO Box 7575, San Francisco, CA 94120-7575
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
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