<PAGE>
-------------
SCHWAB ANNUITY PORTFOLIOS
JUNE 30, 1997 SEMI-ANNUAL REPORT
ECONOMIC HIGHLIGHTS
- --------------------------------------------------------------------------------
. The economy, as measured by the
growth of real GDP, continues
to expand at a healthy rate.
The real GDP growth rate was
3.6% for the first six months
of 1997.
[GRAPH OF REAL GDP GROWTH . The apparent strength of the
RATE APPEARS HERE] economy continues to lead to
speculation regarding the
Real Gross Domestic Product potential impact on future
Chain Weighted inflation and whether a more
Percent change from preceeding quarter, restrictive Federal Reserve
seasonally adjusted at annual rates policy is imminent.
Source: Bloomberg . At the time of this writing,
the economy appears poised for
Real GDP growth, continuing the current
Q1 1990 4.1% economic expansion which began
Q2 1990 1.3% in 1991.
Q3 1990 -1.9%
Q4 1990 -4.1%
Q1 1991 -2.2%
Q2 1991 1.7%
Q3 1991 1.0%
Q4 1991 1.0%
Q1 1992 4.7%
Q2 1992 2.5%
Q3 1992 3.0%
Q4 1992 4.3%
Q1 1993 -0.1%
Q2 1993 1.9%
Q3 1993 2.3%
Q4 1993 4.8%
Q1 1994 2.5%
Q2 1994 4.9%
Q3 1994 3.5%
Q4 1994 3.0%
Q1 1995 0.4%
Q2 1995 0.7%
Q3 1995 3.8%
Q4 1995 0.3%
Q1 1996 2.0%
Q2 1996 4.7%
Q3 1996 2.1%
Q4 1996 3.8%
Q1 1997 4.9%
Q2 1997 2.2%
. The unemployment rate during
1996 remained near its lowest
point in the decade. This
declining trend continued into
[GRAPH OF U.S. UNEMPLOYMENT 1997, with the May 1997 rate of
RATE APPEARS HERE] 4.8% representing the lowest
rate since December 1973. Low
US Unemployment Rate unemployment rates typically
Source: Bloomberg lead economists to question
whether continued low levels of
Unemployment Rate unemployment can persist
Jan-90 5.3% without generating inflationary
Feb-90 5.3% pressures on wages and,
Mar-90 5.2% ultimately, prices.
Apr-90 5.4%
May-90 5.3%
Jun-90 5.1%
Jul-90 5.4%
Aug-90 5.6%
Sep-90 5.7%
Oct-90 5.8%
Nov-90 6.0%
Dec-90 6.2%
Jan-91 6.3%
Feb-91 6.5%
Mar-91 6.8%
Apr-91 6.6%
May-91 6.8%
Jun-91 6.8%
Jul-91 6.7%
Aug-91 6.8%
Sep-91 6.8%
Oct-91 6.9%
Nov-91 6.9%
Dec-91 7.1%
Jan-92 7.1%
Feb-92 7.3%
Mar-92 7.3%
Apr-92 7.3%
May-92 7.4%
Jun-92 7.7%
Jul-92 7.6%
Aug-92 7.6%
Sep-92 7.5%
Oct-92 7.4%
Nov-92 7.3%
Dec-92 7.3%
Jan-93 7.1%
Feb-93 7.0%
Mar-93 7.0%
Apr-93 7.0%
May-93 6.9%
Jun-93 6.9%
Jul-93 6.8%
Aug-93 6.7%
Sep-93 6.7%
Oct-93 6.7%
Nov-93 6.5%
Dec-93 6.4%
Jan-94 6.7%
Feb-94 6.6%
Mar-94 6.5%
Apr-94 6.4%
May-94 6.0%
Jun-94 6.0%
Jul-94 6.1%
Aug-94 6.1%
Sep-94 5.9%
Oct-94 5.6%
Nov-94 5.6%
Dec-94 5.4%
Jan-95 5.6%
Feb-95 5.4%
Mar-95 5.8%
Apr-95 5.7%
May-95 5.7%
Jun-95 5.6%
Jul-95 5.7%
Aug-95 5.3%
Sep-95 5.6%
Oct-95 5.5%
Nov-95 5.6%
Dec-95 5.6%
Jan-96 5.8%
Feb-96 5.5%
Mar-96 5.6%
Apr-96 5.4%
May-96 5.6%
Jun-96 5.3%
Jul-96 5.4%
Aug-96 5.1%
Sep-96 5.2%
Oct-96 5.2%
Nov-96 5.3%
Dec-96 5.3%
Jan-97 5.4%
Feb-97 5.3%
Mar-97 5.2%
Apr-97 4.9%
May-97 4.8%
Jun-97 5.0%
. Both the Employment Cost Index
and Consumer Price Index (CPI)
continued to remain in check
throughout the first half of
1997, reflecting continued low
levels of inflation.
[GRAPH OF MEASURES OF INFLATION . For the 12 months ended June
APPEARS HERE] 1997, the CPI rose 2.3%, the
lowest rate since February
Consumer Price Index - All Items YOY % 1987. Its core rate (which
Change Employment Cost Index SA excludes the more volatile food
(includes both wages and salaries and and energy components) rose
benefits components) - YOY % Change 2.4%, the lowest rate since
Source: Bloomberg L.P. 1965.
RED = DATA INPUTS . The Federal Reserve has
indicated that the economy
continues to remain in the zone
Data for Graph where inflation risks are on
Monthly C Quarterly Employment Cost Index the upside and that it is
- - YOY % Change poised to act preemptively by
raising interest rates if
Jan-90 5.2% 5.3% necessary.
Feb-90 5.3% 5.3%
Mar-90 5.2% 5.3%
Apr-90 4.7% 5.4%
May-90 4.4% 5.4%
Jun-90 4.7% 5.4%
Jul-90 4.8% 5.1%
Aug-90 5.6% 5.1%
Sep-90 6.2% 5.1%
Oct-90 6.3% 4.8%
Nov-90 6.3% 4.8%
Dec-90 6.1% 4.8%
Jan-91 5.7% 4.6%
Feb-91 5.3% 4.6%
Mar-91 4.9% 4.6%
Apr-91 4.9% 4.5%
May-91 5.0% 4.5%
Jun-91 4.7% 4.5%
Jul-91 4.4% 4.3%
Aug-91 3.8% 4.3%
Sep-91 3.4% 4.3%
Oct-91 2.9% 4.2%
Nov-91 3.0% 4.2%
Dec-91 3.1% 4.2%
Jan-92 2.6% 4.1%
Feb-92 2.8% 4.1%
Mar-92 3.2% 4.1%
Apr-92 3.2% 3.5%
May-92 3.0% 3.5%
Jun-92 3.1% 3.5%
Jul-92 3.2% 3.4%
Aug-92 3.1% 3.4%
Sep-92 3.0% 3.4%
Oct-92 3.2% 3.5%
Nov-92 3.0% 3.5%
Dec-92 2.9% 3.5%
Jan-93 3.3% 3.4%
Feb-93 3.2% 3.4%
Mar-93 3.1% 3.4%
Apr-93 3.2% 3.6%
May-93 3.2% 3.6%
Jun-93 3.0% 3.6%
Jul-93 2.8% 3.6%
Aug-93 2.8% 3.6%
Sep-93 2.7% 3.6%
Oct-93 2.8% 3.4%
Nov-93 2.7% 3.4%
Dec-93 2.7% 3.4%
Jan-94 2.5% 3.2%
Feb-94 2.5% 3.2%
Mar-94 2.5% 3.2%
Apr-94 2.4% 3.1%
May-94 2.3% 3.1%
Jun-94 2.5% 3.1%
Jul-94 2.8% 3.1%
Aug-94 2.9% 3.1%
Sep-94 3.0% 3.1%
Oct-94 2.6% 3.0%
Nov-94 2.7% 3.0%
Dec-94 2.7% 3.0%
Jan-95 2.8% 3.0%
Feb-95 2.9% 3.0%
Mar-95 2.9% 3.0%
Apr-95 3.1% 3.0%
May-95 3.2% 3.0%
Jun-95 3.0% 3.0%
Jul-95 2.8% 2.8%
Aug-95 2.6% 2.8%
Sep-95 2.5% 2.8%
Oct-95 2.8% 2.8%
Nov-95 2.6% 2.8%
Dec-95 2.5% 2.8%
Jan-96 2.7% 2.9%
Feb-96 2.7% 2.9%
Mar-96 2.8% 2.9%
Apr-96 2.9% 2.9%
May-96 2.9% 2.9%
Jun-96 2.8% 2.9%
Jul-96 3.0% 2.9%
Aug-96 2.9% 2.9%
Sep-96 3.0% 2.9%
Oct-96 3.0% 3.0%
Nov-96 3.3% 3.0%
Dec-96 3.3% 3.0%
Jan-97 3.0% 2.8%
Feb-97 3.0% 2.8%
Mar-97 2.8% 2.8%
Apr-97 2.5% 2.8%
May-97 2.2% 2.8%
Jun-97 2.3% 2.8%
Source: Bloomberg L.P.
-------------
O-1
<PAGE>
-------------
SCHWAB ANNUITY PORTFOLIOS
JUNE 30, 1997 SEMI-ANNUAL REPORT (CONTINUED)
ECONOMIC HIGHLIGHTS
- --------------------------------------------------------------------------------
. Large cap domestic stocks, as
represented by the S&P 500,
were clearly the strongest
performing asset class,
achieving a 20.6% return during
the six month reporting period.
[GRAPH OF TOTAL RETURN PERFORMANCE: . Although positive, domestic
GROWTH OF A DOLLAR INVESTED small cap stock and
APPEARS HERE] international stock total
returns both lagged the S&P 500
Index with six month returns of
12.5% and 13.6%, respectively.
. Bond total returns, as
represented by the Lehman
General U.S. Government Index,
were 2.6% for the period.
<TABLE>
<CAPTION>
Plot Points
Growth of a $ Investment
S&P 500 Schwab Small Cap In Schwab International I Lehman MF General
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.000 $ 1.000 $ 1.000 $ 1.000
Jan-97 $ 1.062 $ 1.024 $ 0.967 $ 1.001
Feb-97 $ 1.071 $ 0.999 $ 0.983 $ 1.003
Mar-97 $ 1.027 $ 0.950 $ 0.990 $ 0.992
Apr-97 $ 1.088 $ 0.953 $ 1.000 $ 1.006
May-97 $ 1.154 $ 1.069 $ 1.074 $ 1.015
Jun-97 $ 1.2060 $ 1.1248 $ 1.1363 $ 1.0262
</TABLE>
. The price earnings ratio for
the S&P 500 was 23.9 at the
close of the reporting period,
well above its 30-year mean of
14.7, but below its 1992 high
of 26.
[GRAPH OF S&P 500 PRICE EARNINGS . Based on other traditional
RATIO APPEARS HERE] measures such as the price-to-
book value ratio or dividend
S&P 500 P/E Ratio yield, the U.S. stock market
Source Bloomberg valuation, as measured by the
S&P 500, reached historical
S&P 500 Price Earnings Ratio highs during the reporting
Jan-90 14.37 period.
Feb-90 14.21
Mar-90 14.77
Apr-90 14.82
May-90 15.84
Jun-90 16.66
Jul-90 16.65
Aug-90 15.57
Sep-90 14.90
Oct-90 14.36
Nov-90 14.59
Dec-90 15.19
Jan-91 14.95
Feb-91 16.82
Mar-91 17.48
Apr-91 17.85
May-91 17.92
Jun-91 17.96
Jul-91 18.07
Aug-91 19.72
Sep-91 19.88
Oct-91 19.92
Nov-91 21.02
Dec-91 21.85
Jan-92 23.35
Feb-92 23.83
Mar-92 25.45
Apr-92 25.51
May-92 25.71
Jun-92 25.08
Jul-92 25.61
Aug-92 25.50
Sep-92 24.37
Oct-92 23.94
Nov-92 24.08
Dec-92 24.01
Jan-93 24.20
Feb-93 24.25
Mar-93 24.22
Apr-93 23.20
May-93 23.21
Jun-93 22.58
Jul-93 22.52
Aug-93 23.02
Sep-93 23.74
Oct-93 23.97
Nov-93 22.55
Dec-93 23.55
Jan-94 22.98
Feb-94 21.17
Mar-94 20.34
Apr-94 20.10
May-94 20.16
Jun-94 19.76
Jul-94 18.64
Aug-94 18.90
Sep-94 18.26
Oct-94 17.55
Nov-94 16.58
Dec-94 16.98
Jan-95 16.23
Feb-95 16.20
Mar-95 16.50
Apr-95 16.02
May-95 16.43
Jun-95 16.82
Jul-95 16.55
Aug-95 16.18
Sep-95 16.86
Oct-95 16.18
Nov-95 17.14
Dec-95 17.41
Jan-96 18.11
Feb-96 18.56
Mar-96 18.94
Apr-96 19.16
May-96 19.48
Jun-96 19.30
Jul-96 18.31
Aug-96 18.62
Sep-96 19.75
Oct-96 19.60
Nov-96 21.05
Dec-96 20.70
Jan-97 20.55
Feb-97 20.98
Mar-97 19.87
Apr-97 20.24
May-97 21.43
Jun-97 22.45
. Although short-term rates were
relatively stable during the
first quarter of 1991, the
spread between commercial paper
[GRAPH OF 1997 YIELDS ON 90-DAY and U.S. Treasury bill yields
COMMERCIAL PAPER AND 3-MONTH widened significantly during
TREASURY BILLS APPEARS HERE] the second quarter. This
widening, making Treasury bill
Interest Rate Graph Data yields relatively less
Source: Bloomberg L.P. attractive than commercial
paper yields, was a result of
90 Day the reduced U.S. Treasury bill
90 Day Commercial supply, caused by unexpectedly
T-Bill Paper large April federal tax
---------------------- receipts, which led to lower
1/2/97 5.18% 5.47% government financing needs.
1/3/97 5.16% 5.46%
1/6/97 5.17% 5.45%
1/7/97 5.15% 5.45%
1/8/97 5.15% 5.45%
1/9/97 5.12% 5.44%
1/10/97 5.16% 5.48%
1/13/97 5.17% 5.50%
1/14/97 5.16% 5.48%
1/15/97 5.14% 5.46%
1/16/97 5.16% 5.45%
1/17/97 5.15% 5.44%
1/20/97 5.15% 5.44%
1/21/97 5.15% 5.45%
1/22/97 5.16% 5.44%
1/23/97 5.16% 5.44%
1/24/97 5.16% 5.44%
1/27/97 5.19% 5.45%
1/28/97 5.19% 5.45%
1/29/97 5.17% 5.45%
1/30/97 5.17% 5.45%
1/31/97 5.15% 5.45%
2/3/97 5.11% 5.44%
2/4/97 5.13% 5.44%
2/5/97 5.12% 5.43%
2/6/97 5.13% 5.42%
2/7/97 5.12% 5.40%
2/10/97 5.13% 5.40%
2/11/97 5.14% 5.40%
2/12/97 5.14% 5.40%
2/13/97 5.12% 5.39%
2/14/97 5.08% 5.38%
2/17/97 5.09% 5.38%
2/18/97 5.09% 5.38%
2/19/97 5.10% 5.38%
2/20/97 5.08% 5.37%
2/21/97 5.09% 5.37%
2/24/97 5.11% 5.37%
2/25/97 5.15% 5.37%
2/26/97 5.18% 5.39%
2/27/97 5.20% 5.44%
2/28/97 5.22% 5.45%
3/3/97 5.23% 5.43%
3/4/97 5.23% 5.46%
3/5/97 5.19% 5.46%
3/6/97 5.21% 5.46%
3/7/97 5.21% 5.48%
3/10/97 5.19% 5.41%
3/11/97 5.17% 5.45%
3/12/97 5.19% 5.46%
3/13/97 5.23% 5.47%
3/14/97 5.23% 5.48%
3/17/97 5.25% 5.50%
3/18/97 5.29% 5.52%
3/19/97 5.29% 5.53%
3/20/97 5.34% 5.57%
3/21/97 5.40% 5.65%
3/24/97 5.38% 5.66%
3/25/97 5.39% 5.68%
3/26/97 5.34% 5.70%
3/27/97 5.37% 5.71%
3/28/97 5.37% 5.75%
3/31/97 5.32% 5.77%
4/1/97 5.30% 5.72%
4/2/97 5.29% 5.71%
4/3/97 5.25% 5.70%
4/4/97 5.27% 5.70%
4/7/97 5.27% 5.70%
4/8/97 5.23% 5.69%
4/9/97 5.22% 5.69%
4/10/97 5.29% 5.68%
4/11/97 5.28% 5.70%
4/14/97 5.29% 5.73%
4/15/97 5.29% 5.71%
4/16/97 5.29% 5.71%
4/17/97 5.29% 5.70%
4/18/97 5.28% 5.70%
4/21/97 5.26% 5.70%
4/22/97 5.32% 5.70%
4/23/97 5.34% 5.70%
4/24/97 5.30% 5.70%
4/25/97 5.31% 5.72%
4/28/97 5.30% 5.74%
4/29/97 5.26% 5.72%
4/30/97 5.23% 5.72%
5/1/97 5.21% 5.71%
5/2/97 5.22% 5.70%
5/5/97 5.11% 5.70%
5/6/97 5.17% 5.69%
5/7/97 5.22% 5.70%
5/8/97 5.21% 5.71%
5/9/97 5.16% 5.69%
5/12/97 5.15% 5.69%
5/13/97 5.20% 5.69%
5/14/97 5.16% 5.69%
5/15/97 5.11% 5.70%
5/16/97 5.18% 5.70%
5/19/97 5.30% 5.72%
5/20/97 5.20% 5.77%
5/21/97 5.12% 5.69%
5/22/97 5.17% 5.67%
5/23/97 5.16% 5.66%
5/26/97 5.16% 5.66%
5/27/97 5.11% 5.66%
5/28/97 5.13% 5.67%
5/29/97 5.01% 5.67%
5/30/97 4.94% 5.68%
6/2/97 4.84% 5.68%
6/3/97 5.07% 5.67%
6/4/97 5.07% 5.67%
6/5/97 5.11% 5.67%
6/6/97 5.04% 5.69%
6/9/97 5.03% 5.68%
6/10/97 5.03% 5.67%
6/11/97 4.96% 5.67%
6/12/97 4.95% 5.66%
6/13/97 4.96% 5.64%
6/16/97 4.97% 5.64%
6/17/97 5.04% 5.64%
6/18/97 5.07% 5.64%
6/19/97 5.07% 5.64%
6/20/97 5.06% 5.64%
6/23/97 5.15% 5.63%
6/24/97 5.18% 5.63%
6/25/97 5.10% 5.63%
6/26/97 5.12% 5.63%
6/27/97 5.14% 5.63%
6/30/97 5.17% 5.63%
-------------
O-2
<PAGE>
-------------
SCHWAB ANNUITY PORTFOLIOS
JUNE 30, 1997 SEMI-ANNUAL REPORT (CONTINUED)
ECONOMIC HIGHLIGHTS
- -------------------------------------------------------------------------------
SCHWAB MONEY MARKET PORTFOLIO
STEPHEN B. WARD--Senior Vice President and Chief Investment Officer, has
overall responsibility for the management of the portfolios. Steve joined
Charles Schwab Investment Management, Inc. (CSIM) as Vice President and Port-
folio Manager in April 1991 and was promoted to his current position in August
1993. Prior to joining CSIM, Steve was a Vice President and Portfolio Manager
at Federated Investors.
ANDREA REGAN--Vice President and Senior Portfolio Manager, has managed the
Schwab Money Market Portfolio since its inception in May 1994. Andrea joined
CSIM in 1991 as Portfolio Manager and was promoted to her current position in
December 1996. Prior to joining CSIM, Andrea was Vice President and Manager of
Trading for Merus Capital Management, the investment management division of
Bank of California.
AMY TREANOR--Portfolio Manager, has day-to-day portfolio management responsi-
bilities for the Schwab Money Market Portfolio. Amy joined CSIM in 1992 as As-
sociate Portfolio Trader and was promoted to her current position in May 1997.
Prior to joining CSIM, Amy was Portfolio Manager and Assistant Vice President
with Capitalcorp Asset Management.
During the reporting period, the portfolio managers adjusted the dollar-
weighted average maturity (DWAM) of the Portfolio as needed in order to capi-
talize on opportunities to buy higher-yielding money market instruments re-
sulting from market fluctuations. For example, while most economists had accu-
rately predicted the 0.25% increase in the Federal Funds rate prior to the
Federal Open Market Committee meeting held on March 25, 1997, the short-term
market, on the other hand, had "priced in" or anticipated an even larger in-
crease. We believed the likelihood of an increase greater than 0.25% was
fairly remote, and seized the opportunity to add securities with longer matu-
rities (and higher yields) to the Portfolio throughout the month of March. We
maintained a slightly longer DWAM throughout the end of the reporting period
in the Portfolio. Additionally, the Portfolio continued to take advantage of
anomalies in the pricing of money market instruments that arose from supply
and demand imbalances affecting the market.
SCHWAB S&P 500 PORTFOLIO
STEPHEN B. WARD--Senior Vice President and Chief Investment Officer, has
overall responsibility for the management of the portfolios. Steve joined CSIM
as Vice President and Portfolio Manager in April 1991 and was promoted to his
current position in August 1993. Prior to joining CSIM, Steve was a Vice Pres-
ident and Portfolio Manager at Federated Investors.
GERI HOM--Senior Portfolio Manager and Vice President has managed the S&P 500
Portfolio since its inception in November 1996. Geri joined CSIM in March 1995
as Portfolio Manager and currently manages over $5 billion in assets. Prior to
joining CSIM, Geri was a Principal for Wells Fargo Nikko Investment Advisors
and Vice President and Manager of the Domestic Equity Portfolio Management
Group for Wells Fargo Nikko.
During the reporting period, most major domestic equity market indices, in-
cluding the S&P 500 Index, reached new highs. Using most traditional measures,
such as price-to-book value and dividend yield, many major market indices re-
main valued near their historic highs. Although there are many contributing
factors, most market observers attribute the market's strong performance to
four key developments: the third straight year of impressive corporate earn-
ings growth; a continuation of relatively moderate short- and long-term inter-
est rates; low levels of inflation, and continued high levels of cash flowing
into equity mutual funds.
As discussed in the Market Overview section, large cap domestic stocks (such
as those in the S&P 500 Index) were clearly a strong performing asset class
for the reporting period. The S&P 500 Portfolio achieved a very strong total
return of 19.94% for the six month reporting period ended June 30, 1997/1/.
The Portfolio continued to closely track the performance of its benchmark, the
S&P 500 Index.
Unlike the Portfolio, the Index does not incur management and other Portfolio
costs which reduce returns to the shareholders. Additionally, the Portfolio,
unlike the Index, holds a small portion in cash to meet shareholder redemp-
tions and to pay Fund expenses. The cash portion earns interest at money mar-
ket rates, which may be more or less than the returns of the Index during a
given period. Also, the weighting of any particular security
- -------
(1) A portion of the Portfolio's expenses were waived or reimbursed by CSIM.
Without the waivers or reimbursements, the Portfolio's total return for
the period ended would have been 19.66%.
-------------
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<PAGE>
-------------
SCHWAB ANNUITY PORTFOLIOS
JUNE 30, 1997 SEMI-ANNUAL REPORT (CONTINUED)
ECONOMIC HIGHLIGHTS
- -------------------------------------------------------------------------------
in the Portfolio can be greater or less than in the Index. Lastly, unlike the
Index, the Portfolio incurs trading costs when it buys or sells stocks.
Taken together, these factors cause the difference in the returns of the
Portfolio compared to the Index, a difference referred to as the Portfolio's
"tracking error." The tracking error for the Portfolio during the reporting
period was 0.66%, and its average annual tracking error since November 1,
1996, the Portfolio's inception, has been 0.84%. Given the Portfolio's current
ratio of expenses to average net assets (0.28%),/1/ and the components of
tracking error (as discussed above), we are satisfied with this level of
tracking error.
SCHWAB ASSET DIRECTOR--HIGH GROWTH PORTFOLIO
STEPHEN B. WARD--Senior Vice President and Chief Investment Officer, has
overall responsibility for the management of the Portfolios. Steve joined CSIM
as Vice President and Portfolio Manager in April 1991 and was promoted to his
current position in August 1993. Prior to joining CSIM, Steve was a Vice Pres-
ident and Portfolio Manager at Federated Investors.
GERI HOM--Senior Portfolio Manager and Vice President has managed the equity
components of the Schwab Asset Director--High Growth Portfolio since its in-
ception in November 1996. Geri joined CSIM in March 1995 as Portfolio Manager
and currently manages over $5 billion in assets. Prior to joining CSIM, Geri
was a Principal for Wells Fargo Nikko Investment Advisors and Vice President
and Manager of the Domestic Equity Portfolio Management Group for Wells Fargo
Nikko.
ANDREA REGAN--Vice President and Senior Portfolio Manager, has managed the
bond and cash components of the Schwab Asset Director--High Growth Portfolio
since its inception in November 1996. Andrea joined CSIM in 1991 as Portfolio
Manager and was promoted to her current position in December 1996. Prior to
joining CSIM, Andrea was Vice President and Manager of Trading for Merus Capi-
tal Management, the investment management division of Bank of California.
The Asset Director--High Growth Portfolio participated in the strong perfor-
mance of the domestic and foreign equities markets as evidenced by its total
return of 14.59%/2/ for the six month period.
The Portfolio's asset class weightings changed very little throughout the six
month period and were as follows at the close of the reporting period:
<TABLE>
<CAPTION>
NEUTRAL FUND POSITION
TARGET AT 6/30/97
------- -------------
<S> <C> <C>
Large Cap Stocks.......................................... 40% 33.5%
Small Cap Stocks.......................................... 20% 19.6%
International Stocks...................................... 20% 20.5%
Bonds..................................................... 15% 20.5%
Cash...................................................... 5% 5.9%
---- -----
100% 100%
</TABLE>
This positioning represents a moderate under-weighting in stocks, and a mod-
erate over-weighting in bonds, which reflects the period-end bias of our tac-
tical asset allocation model that stocks were somewhat overvalued relative to
bonds. Rather than emphasizing any particular stocks, industries, or styles,
the portfolio managers use an index oriented approach in each of the Portfo-
lio's five asset categories.
- -------
(1) The Portfolio's total operating expenses are voluntarily guaranteed not to
exceed 0.28% of average daily net assets, through April 30, 1998.
(2) A portion of the Portfolio's expenses were waived or reimbursed during the
period. Without these waivers or reimbursements, the Portfolio's total re-
turn for the period ended would have been 13.62%.
-------------
O-4
<PAGE>
-------------
SCHWAB MONEY MARKET PORTFOLIO
PORTFOLIO SUMMARY
ASSET GROWTH
<TABLE>
<CAPTION>
PERCENTAGE
TOTAL TOTAL GROWTH OVER
NET ASSETS NET ASSETS REPORTING
AS OF 6/30/97 AS OF 12/31/96 PERIOD
----------------------------------------------------------------------------------------
<S> <C> <C>
$36,176,668 $27,430,633 32%
----------------------------------------------------------------------------------------
</TABLE>
AVERAGE YIELDS FOR THE PERIODS ENDED
JUNE 30, 1997*
<TABLE>
<CAPTION>
LAST LAST LAST
SEVEN DAYS THREE MONTHS TWELVE MONTHS
----------------------------------------------------------------------------------------
<S> <C> <C>
5.08% 5.05% 4.92%
----------------------------------------------------------------------------------------
</TABLE>
MATURITY SCHEDULE
PERCENT OF TOTAL INVESTMENTS
<TABLE>
<CAPTION>
MATURITY RANGE 9/30/96 12/31/96 3/31/97 6/30/97
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
0-- 15 Days 10.3% 20.4% 27.1% 28.2%
16-- 30 Days 38.1 46.1 26.0 29.3
31-- 60 Days 18.7 25.7 31.7 13.7
61-- 90 Days 16.7 0.1 6.3 11.3
91--120 Days 16.2 7.7 3.9 5.6
Over 120 Days 0.0 0.0 5.0 11.9
Weighted Average 47 Days 35 Days 39 Days 52 Days
--------------------------------------------------------------------------------------
</TABLE>
PORTFOLIO QUALITY
<TABLE>
<CAPTION>
PERCENT OF
SEC TIER NET ASSETS
RATING 6/30/97
-----------------------------------
<S> <C>
Tier 1 100.0%
Tier 2 0.0%
-----------------------------------
</TABLE>
- -------
* A portion of the Portfolio's expenses were reduced during the periods. Had
these expenses not been reduced, yields would have been lower.
-------------
O-5
<PAGE>
-------------
SCHWAB MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
AGENCY OBLIGATIONS--80.1% PAR VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------
DISCOUNT NOTES--80.1%
Federal Farm Credit Bank
5.41%, 07/15/97......................................... $1,145,000 $ 1,142,596
5.62%, 07/21/97......................................... 1,415,000 1,410,661
5.59%, 07/22/97......................................... 1,000,000 996,780
5.55%, 07/23/97......................................... 1,025,000 1,021,574
5.48%, 07/31/97......................................... 1,495,000 1,488,223
5.42%, 09/02/97......................................... 630,000 624,179
Federal Home Loan Bank
5.59%, 07/03/97......................................... 525,000 524,839
5.43%, 07/17/97......................................... 2,250,000 2,244,619
5.44%, 07/18/97......................................... 1,500,000 1,496,161
5.47%, 07/25/97......................................... 1,555,000 1,549,350
5.45%, 08/13/97......................................... 675,000 670,638
5.50%, 08/25/97......................................... 1,175,000 1,165,234
Federal Home Loan Mortgage Corp.
5.60%, 07/03/97......................................... 1,000,000 999,693
5.45%, 07/07/97......................................... 855,000 854,226
5.56%, 07/15/97......................................... 1,770,000 1,766,228
5.46%, 07/18/97......................................... 365,000 364,064
5.53%, 08/27/97......................................... 1,315,000 1,303,642
5.82%, 10/02/97......................................... 485,000 477,908
5.73%, 10/02/97......................................... 1,000,000 985,611
Federal National Mortgage Assoc.
5.59%, 07/07/97......................................... 1,955,000 1,953,192
5.46%, 07/07/97......................................... 500,000 499,547
5.61%, 07/10/97......................................... 1,845,000 1,842,449
5.53%, 07/10/97......................................... 345,000 344,527
5.59%, 07/18/97......................................... 1,255,000 1,251,729
5.51%, 09/19/97......................................... 755,000 745,890
5.75%, 10/02/97......................................... 500,000 492,780
-----------
TOTAL AGENCY OBLIGATIONS (Cost $28,216,340).............. 28,216,340
-----------
</TABLE>
-------------
O-6
<PAGE>
-------------
SCHWAB MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
U.S. TREASURY OBLIGATIONS--19.9% PAR VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------
U.S. Treasury Bills
5.19%, 08/21/97......................................... 195,000 $ 193,586
5.15%, 09/25/97......................................... 120,000 118,548
U.S. Treasury Notes
6.00%, 08/31/97......................................... 2,500,000 2,500,619
6.00%, 11/30/97......................................... 2,000,000 2,003,648
5.13%, 02/28/98......................................... 2,200,000 2,192,307
-----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $7,008,708)........ 7,008,708
-----------
TOTAL INVESTMENTS--100% (Cost $35,225,048)............... $35,225,048
===========
</TABLE>
- -------
Notes to Schedule of Investments
Yields shown are effective yields at the time of purchase and are stated ac-
cording to the market convention for the security type. For each security,
cost (for financial reporting and federal income tax purposes) and carrying
value are the same.
See accompanying Notes to Financial Statements.
-------------
O-7
<PAGE>
-------------
SCHWAB MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (Cost: $35,225,048)........................ $35,225,048
Cash............................................................. 3,471
Interest receivable.............................................. 97,985
Receivable for Fund shares sold.................................. 1,023,378
Deferred organization costs...................................... 14,245
Prepaid expenses................................................. 18,642
-----------
Total assets.................................................... 36,382,769
-----------
LIABILITIES
Payable for:
Dividends........................................................ 24,884
Fund shares redeemed............................................. 140,891
Investment advisory fee.......................................... 1,671
Other............................................................ 38,655
-----------
Total liabilities............................................... 206,101
-----------
Net assets applicable to outstanding shares...................... $36,176,668
===========
NET ASSETS consist of:
Paid-in-capital.................................................. $36,178,074
Accumulated net realized loss on investments sold................ (1,406)
-----------
$36,176,668
===========
PRICING OF SHARES
Outstanding shares, $0.00001 par value (unlimited shares
authorized)..................................................... 36,178,074
NET ASSET VALUE, offering and redemption price per share......... $ 1.00
</TABLE>
- -------
See accompanying Notes to Financial Statements.
-------------
O-8
<PAGE>
-------------
SCHWAB MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
INTEREST INCOME....................................................... $894,314
--------
EXPENSES
Investment advisory and administration fee........................... 75,374
Custodian fees....................................................... 13,406
Registration fees.................................................... 0
Professional fees.................................................... 24,168
Shareholder reports.................................................. 5,778
Trustees' fees....................................................... 5,335
Amortization of deferred organization costs.......................... 3,801
Insurance and other expenses......................................... 2,693
--------
130,555
Less: expenses reduced and absorbed (see Note 4)...................... (48,626)
--------
Total expenses incurred by Fund..................................... 81,929
--------
Net investment income................................................. 812,385
Net realized loss on investments sold................................. (689)
--------
Increase in net assets resulting from operations...................... $811,696
========
</TABLE>
- -------
See accompanying Notes to Financial Statements.
-------------
O-9
<PAGE>
-------------
SCHWAB MONEY MARKET PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED
1997 DECEMBER 31,
(UNAUDITED) 1996
---------------- ------------
<S> <C> <C>
OPERATIONS
Net investment income.......................... $ 812,385 $ 1,094,918
Net realized loss on investments sold.......... (689) (655)
------------ ------------
Increase in net assets resulting from
operations.................................... 811,696 1,094,263
------------ ------------
Dividends to shareholders from net investment
income........................................ (812,385) (1,094,918)
------------ ------------
CAPITAL SHARE TRANSACTIONS (at $1.00 per share):
Proceeds from shares sold...................... 55,800,450 71,617,183
Net asset value of shares issued in
reinvestment of dividends..................... 909,534 1,053,350
Less payments for shares redeemed.............. (47,963,260) (62,151,677)
------------ ------------
Increase in net assets from capital share
transactions.................................. 8,746,724 10,518,856
------------ ------------
Total increase in net assets.................. 8,746,035 10,518,201
NET ASSETS
Beginning of period............................ 27,430,633 16,912,432
------------ ------------
End of period.................................. $ 36,176,668 $ 27,430,633
============ ============
</TABLE>
- -------
See accompanying Notes to Financial Statements.
-------------
O-10
<PAGE>
-------------
SCHWAB MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
1. DESCRIPTION OF THE FUND
The Schwab Money Market Portfolio (the "Fund") is a series of Schwab Annuity
Portfolios (the "Trust"), a diversified, no-load, open-end investment manage-
ment company organized as a Massachusetts business trust on January 21, 1994
and registered under the Investment Company Act of 1940, as amended.
The Fund is intended as an investment vehicle for variable annuity contracts
and variable life insurance policies to be offered by separate accounts of
participating life insurance companies and for pension and retirement plans
qualified under the Internal Revenue Code of 1986, as amended.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with gener-
ally accepted accounting principles for investment companies. The preparation
of financial statements in accordance with generally accepted accounting prin-
ciples 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 are stated at amortized cost which approxi-
mates market value.
Security transactions and interest income--Security transactions are ac-
counted for on a trade date basis (date the order to buy or sell is executed).
Realized gains and losses from security transactions are determined on an
identified cost basis. Interest income is accrued daily and includes amortiza-
tion of premium and accretion of discount on investments.
Repurchase agreements--Repurchase agreements are fully collateralized by U.S.
Treasury or U.S. government obligations. 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.
Dividends to shareholders--The Fund declares a daily dividend, equal to its
net investment income for that day, payable monthly.
Deferred organization costs--Costs incurred in connection with the organiza-
tion of the Fund are amortized on a straight-line basis over a five-year pe-
riod from the Fund's commencement of operations.
Expenses--Expenses arising in connection with the Fund are charged directly
to the Fund. Expenses common to all series of the Trust are generally allo-
cated to each series in proportion to their relative net assets.
Federal income taxes--It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to dis-
tribute all net investment income and realized net capital gains, if any, to
shareholders. Therefore, no federal income tax provision is required. The Fund
is considered a separate entity for tax purposes.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreement--The Trust has an investment
advisory and administration agreement with Charles Schwab Investment Manage-
ment, Inc. (the "Investment Manager"). For advisory services and facilities
furnished, the Fund pays an annual fee, payable monthly, of 0.46% of the first
$1 billion of average daily net assets, 0.45% of the next $2 billion, 0.40% of
the next $7 billion, 0.37% of the next $10 billion and 0.34% of such net as-
sets over $20 billion. The Investment Manager has reduced a portion of its
fees for the six months ended June 30, 1997 (see Note 4).
Officers and trustees--Certain officers and trustees of the Trust are also
officers or directors of the Investment Manager. During the six months ended
June 30, 1997, the Trust made no direct payments to its officers or trustees
who are "interested persons" within the meaning of the Investment Company Act
of 1940, as amended. The Fund incurred fees of $5,335 related to the Trust's
unaffiliated trustees.
4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT MANAGER
The Investment Manager reduced a portion of its fee and absorbed certain ex-
penses in order to limit the Fund's ratio of operating expenses to average net
assets. For the six months ended June 30, 1997, the total of such fees and ex-
penses reduced and absorbed by the Investment Manager was $48,626 (see Note
6).
5. INVESTMENT TRANSACTIONS
Purchases, sales and maturities of investment securities aggregated
$119,915,880 and $111,691,993, respectively, during the six months ended June
30, 1997.
-------------
O-11
<PAGE>
-------------
SCHWAB MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, PERIOD ENDED
JUNE 30, 1997 ------------------------ DECEMBER 31,
(UNAUDITED) 1996 1995 1994++
------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net asset value at
beginning of period.... $1.00 $1.00 $1.00 $1.00
----------- ----------- ----------- ----------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income.. 0.03 0.05 0.05 0.03
Net realized and
unrealized gain on
investments........... -- -- -- --
----------- ----------- ----------- ----------
Total from investment
operations............ 0.03 0.05 0.05 0.03
----------- ----------- ----------- ----------
LESS DISTRIBUTIONS
Dividends from net
investment income..... (0.03) (0.05) (0.05) (0.03)
Distributions from
realized gain on
investments........... -- -- -- --
----------- ----------- ----------- ----------
Total distributions.... (0.03) (0.05) (0.05) (0.03)
----------- ----------- ----------- ----------
Net asset value at end
of period.............. $1.00 $1.00 $1.00 $1.00
=========== =========== =========== ==========
TOTAL RETURN (not
annualized)............ 2.48% 4.98% 5.26% 2.55%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period................ $36,176,668 $27,430,633 $16,912,432 $7,409,454
Ratio of expenses to
average net assets+... 0.50%* 0.50% 0.50% 0.50%*
Ratio of net investment
income to average net
assets+............... 4.96%* 4.87% 5.17% 4.16%*
</TABLE>
- -------
+ The information contained in the above table is based on actual expenses for
the periods, after giving effect to the portion of expenses reduced and ab-
sorbed by the Investment Manager. Had these expenses not been reduced and
absorbed, the Fund's expense and net investment income ratios would have
been:
Ratio of expenses to
average net assets.... 0.80%* 0.95% 1.02% 2.10%*
Ratio of net investment
income to average net
assets................ 4.66%* 4.42% 4.65% 2.56%*
++For the period May 3, 1994 (commencement of operations) to December 31,
1994.
* Annualized
-------------
O-12
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
STATEMENT OF NET ASSETS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK--98.64% SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
AEROSPACE/DEFENSE--1.91%
BFGoodrich Co. .......................................... 200 $ 8,663
Boeing Co. .............................................. 2,016 106,974
General Dynamics Corp. .................................. 200 15,000
Lockheed Martin Corp. ................................... 500 51,781
McDonnell Douglas Corp. ................................. 600 41,100
Northrop Grumman Corp. .................................. 300 26,344
Raytheon Co. ............................................ 600 30,600
Textron, Inc. ........................................... 400 26,550
United Technologies Corp. ............................... 800 66,400
-----------
373,412
-----------
AIR TRANSPORTATION--0.34%
AMR Corp.+............................................... 400 37,000
Delta Airlines, Inc. .................................... 200 16,400
Southwest Airlines Co. .................................. 400 10,350
USAir Group, Inc.+....................................... 100 3,500
-----------
67,250
-----------
ALCOHOLIC BEVERAGES--0.61%
Adolph Coors Co. Class B................................. 100 2,663
Anheuser-Busch Companies, Inc. .......................... 1,400 58,712
Brown-Forman Corp. Class B............................... 300 14,644
Seagram Co., Ltd. ....................................... 1,100 44,275
-----------
120,294
-----------
APPAREL--0.51%
Fruit of the Loom, Inc. Class A+......................... 100 3,100
Liz Claiborne, Inc. ..................................... 300 13,988
NIKE, Inc. Class B....................................... 900 52,537
Reebok International Ltd.+............................... 100 4,675
Russell Corp. ........................................... 100 2,963
Springs Industries, Inc. ................................ 100 5,275
Stride Rite Corp. ....................................... 100 1,288
V.F. Corp. .............................................. 200 16,949
-----------
100,775
-----------
AUTOMOTIVE PRODUCTS--0.19%
Autoliv, Inc.+........................................... 102 3,991
Cooper Tire & Rubber Co. ................................ 100 2,200
Goodyear Tire & Rubber Co. .............................. 500 31,656
-----------
37,847
-----------
BANKS--7.91%
Banc One Corp. .......................................... 1,700 82,344
Bank of New York Co., Inc. .............................. 1,100 47,850
BankAmerica Corp. ....................................... 2,000 129,124
</TABLE>
-------------
O-13
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
BANKS (CONTINUED)
BankBoston Corp. ........................................ 500 $ 36,031
Bankers Trust New York Corp. ............................ 200 17,400
Barnett Banks, Inc. ..................................... 600 31,500
Chase Manhattan Corp. (New).............................. 1,300 126,181
Citicorp................................................. 1,300 156,730
Comerica, Inc. .......................................... 400 27,200
CoreStates Financial Corp. .............................. 600 32,250
Fifth Third Bancorp...................................... 400 32,813
First Bank System, Inc. ................................. 500 42,688
First Chicago NBD Corp. ................................. 900 54,450
First Union Corp. ....................................... 900 83,250
Fleet Financial Group, Inc. ............................. 700 44,275
J.P. Morgan & Co., Inc. ................................. 500 52,188
KeyCorp, Inc. ........................................... 600 33,525
MBNA Corp. .............................................. 850 31,131
Mellon Bank Corp. ....................................... 800 36,100
National City Corp. ..................................... 600 31,500
NationsBank Corp. ....................................... 1,960 126,420
Norwest Corp. ........................................... 1,100 61,875
PNC Bank Corp. .......................................... 800 33,300
Republic New York Corp. ................................. 200 21,500
SunTrust Banks, Inc. .................................... 600 33,038
U.S. Bancorp............................................. 500 32,063
Wachovia Corp. .......................................... 500 29,156
Wells Fargo & Co. ....................................... 300 80,850
-----------
1,546,732
-----------
BUSINESS MACHINES & SOFTWARE--8.38%
3COM Corp.+.............................................. 1,100 49,500
Adobe Systems, Inc.+..................................... 200 7,013
Amdahl Corp.+............................................ 100 875
Apple Computer, Inc.+.................................... 300 4,275
Autodesk, Inc. .......................................... 100 3,831
Bay Networks, Inc.+...................................... 600 15,938
Cabletron Systems, Inc.+................................. 700 19,819
Ceridian Corp.+.......................................... 300 12,675
Cisco Systems, Inc.+..................................... 1,800 120,824
Compaq Computer Corp.+................................... 900 89,325
Computer Associates International, Inc. ................. 1,000 55,688
Computer Sciences Corp.+................................. 200 14,425
Data General Corp.+...................................... 100 2,600
Dell Computer Corp.+..................................... 500 58,719
Digital Equipment Corp.+................................. 500 17,719
EMC Corp.+............................................... 600 23,400
Hewlett-Packard Co. ..................................... 2,900 162,399
</TABLE>
-------------
O-14
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCKS (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
BUSINESS MACHINES & SOFTWARE (CONTINUED)
Honeywell, Inc. ......................................... 400 $ 30,350
Intergraph Corp.+........................................ 100 850
International Business Machines Corp. ................... 2,700 243,505
Microsoft Corp.+......................................... 3,300 417,037
Novell, Inc.+............................................ 800 5,550
Oracle Systems Corp.+.................................... 1,900 95,712
Parametric Technology Corp.+............................. 400 17,025
Pitney Bowes, Inc. ...................................... 400 27,800
Seagate Technology, Inc.+................................ 600 21,113
Silicon Graphics, Inc.+.................................. 400 6,000
Sun Microsystems, Inc.+.................................. 900 33,497
Tandem Computers, Inc.+.................................. 100 2,025
Unisys Corp.+............................................ 100 763
Xerox Corp. ............................................. 1,000 78,875
-----------
1,639,127
-----------
BUSINESS SERVICES--1.58%
Automatic Data Processing, Inc. ........................ 800 37,599
Browning-Ferris Industries, Inc. ........................ 700 23,275
Cognizant Corp. ......................................... 500 20,250
Deluxe Corp. ............................................ 100 3,413
Dun & Bradstreet Corp. .................................. 400 10,500
Ecolab, Inc. ............................................ 100 4,775
Equifax, Inc.+........................................... 400 14,875
First Data Corp. ........................................ 1,300 57,118
H & R Block, Inc. ....................................... 300 9,675
IKON Office Solutions.................................... 400 9,975
Interpublic Group of Companies, Inc. .................... 200 12,263
John H. Harland Co. ..................................... 100 2,281
Laidlaw, Inc. Class B.................................... 800 11,050
Moore Corp. Ltd. ........................................ 200 3,938
National Service Industries, Inc. ....................... 100 4,869
R.R. Donnelley & Sons Co. ............................... 300 10,988
Safety-Kleen Corp. ...................................... 100 1,688
Service Corp. International.............................. 600 19,725
Shared Medical Systems Corp. ............................ 100 5,400
SUPERVALU, Inc. ......................................... 100 3,450
Waste Management Inc. (New).............................. 1,300 41,762
-----------
308,869
-----------
CHEMICAL--3.36%
Air Products & Chemicals, Inc. .......................... 400 32,500
Dow Chemical Co. ........................................ 700 60,988
E.I. du Pont de Nemours & Co. ........................... 3,200 201,199
Eastman Chemical Co. .................................... 200 12,700
Great Lakes Chemical Corp. .............................. 100 5,238
</TABLE>
-------------
O-15
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
CHEMICAL (CONTINUED)
Hercules, Inc. .......................................... 200 $ 9,575
Minnesota Mining & Manufacturing Co. .................... 1,200 122,399
Monsanto Co. ............................................ 1,600 68,899
Morton International Inc. New............................ 300 9,056
Nalco Chemical Co. ...................................... 100 3,863
PPG Industries, Inc. .................................... 500 29,063
Praxair, Inc. ........................................... 500 28,000
Rohm & Haas Co. ......................................... 200 18,013
Sigma-Aldrich Corp. ..................................... 300 10,519
Union Carbide Corp. ..................................... 400 18,825
W.R. Grace & Co. ........................................ 500 27,563
-----------
658,400
-----------
CONSTRUCTION--0.32%
Armstrong World Industries, Inc. ........................ 100 7,338
Centex Corp. ............................................ 100 4,063
Crane Co. ............................................... 100 4,181
Fluor Corp. ............................................. 200 11,038
Kaufman & Broad Home Corp. .............................. 100 1,756
Owens Corning............................................ 100 4,313
Pulte Corp. ............................................. 100 3,456
Sherwin-Williams Co. .................................... 600 18,524
Stanley Works............................................ 200 8,000
-----------
62,669
-----------
CONSUMER--DURABLE--0.33%
Black & Decker Corp. .................................... 200 7,438
Masco Corp. ............................................. 500 20,874
Maytag Corp. ............................................ 200 5,225
Newell Co. .............................................. 400 15,850
Snap-on, Inc. ........................................... 100 3,938
Whirlpool Corp. ......................................... 200 10,913
-----------
64,238
-----------
CONSUMER--NONDURABLE--1.10%
American Greetings Corp. Class A......................... 100 3,713
Corning, Inc. ........................................... 600 33,375
Darden Restaurants, Inc. ................................ 100 906
Fortune Brands, Inc. .................................... 500 18,656
Hasbro, Inc. ............................................ 250 7,094
Jostens, Inc. ........................................... 100 2,675
Mattel, Inc. ............................................ 900 30,488
McDonald's Corp. ........................................ 1,900 91,793
Rubbermaid, Inc. ........................................ 400 11,900
Wendy's International, Inc. ............................. 600 15,563
-----------
216,163
-----------
</TABLE>
-------------
O-16
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCKS (continued) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
CONTAINERS--0.15%
Ball Corp. .............................................. 100 $ 3,006
Bemis Co., Inc. ......................................... 100 4,325
Crown Cork & Seal Co., Inc. ............................. 400 21,376
Stone Container Corp.+................................... 100 1,431
-----------
30,138
-----------
ELECTRONICS--4.34%
Advanced Micro Devices, Inc.+............................ 300 10,800
AMP, Inc. ............................................... 700 29,225
Applied Materials, Inc.+................................. 500 35,406
EG&G, Inc. .............................................. 100 2,250
General Instrument Corp.+................................ 400 10,000
General Signal Corp. .................................... 100 4,363
Harris Corp. ............................................ 100 8,400
Intel Corp. ............................................. 2,400 340,349
LSI Logic Corp.+......................................... 400 12,800
Lucent Technologies, Inc. ............................... 1,800 129,713
Micron Technology, Inc.+................................. 600 23,963
Motorola, Inc. .......................................... 1,600 121,600
National Semiconductor Corp.+............................ 400 12,250
Perkin Elmer Corp. ...................................... 100 7,956
Rockwell International Corp. (New)....................... 600 35,400
Scientific-Atlanta, Inc. ................................ 100 2,188
Tektronix, Inc. ......................................... 100 6,000
Texas Instruments, Inc. ................................. 500 42,031
Thermo Electron Corp.+................................... 300 10,313
Thomas & Betts Corp. .................................... 100 5,256
-----------
850,263
-----------
ENERGY--DEVELOPMENT--1.17%
Baker Hughes, Inc. ...................................... 300 11,606
Burlington Resources, Inc. .............................. 400 17,650
Dresser Industries, Inc. ................................ 500 18,625
Halliburton Co. ......................................... 400 31,700
Helmerich & Payne, Inc. ................................. 100 5,763
Louisiana Land & Exploration Co. ........................ 100 5,713
Occidental Petroleum Corp. .............................. 800 20,050
Rowan Companies, Inc.+................................... 100 2,819
Schlumberger Ltd. ....................................... 700 87,499
Union Pacific Resources Group............................ 800 19,900
Western Atlas, Inc. ..................................... 100 7,325
-----------
228,650
-----------
FOOD--AGRICULTURE--6.45%
Archer-Daniels Midland Co. .............................. 1,400 32,900
Campbell Soup Co. ....................................... 1,400 70,000
</TABLE>
-------------
O-17
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
FOOD--AGRICULTURE (CONTINUED)
Coca-Cola Co. ............................................ 7,000 $ 472,499
ConAgra, Inc. ............................................ 600 38,475
CPC International, Inc. .................................. 500 46,156
Fleming Companies, Inc. .................................. 100 1,800
General Mills, Inc. ...................................... 500 32,563
H.J. Heinz Co. ........................................... 1,100 50,738
Hershey Foods Corp. ...................................... 500 27,656
Kellogg Co. .............................................. 600 51,375
PepsiCo, Inc. ............................................ 4,300 161,519
Pioneer Hi-Bred International, Inc. ...................... 200 16,000
Quaker Oats Co. .......................................... 400 17,950
Ralston Purina Co. ....................................... 300 24,656
Sara Lee Corp. ........................................... 1,400 58,275
SYSCO Corp. .............................................. 500 18,250
Unilever NV............................................... 500 109,000
Whitman Corp. ............................................ 200 4,800
Wm. Wrigley Jr. Co. ...................................... 400 26,800
----------
1,261,412
----------
GOLD--0.31%
Barrick Gold Corp. ....................................... 1,000 21,999
Battle Mountain Gold Co.+................................. 200 1,138
Echo Bay Mines Ltd.+...................................... 100 575
Homestake Mining Co. ..................................... 200 2,613
Newmont Mining Corp. ..................................... 486 18,954
Placer Dome, Inc. ........................................ 1,000 16,375
----------
61,654
----------
HEALTHCARE--11.18%
Abbott Laboratories....................................... 2,100 140,175
Allergan, Inc. ........................................... 100 3,181
ALZA Corp.+............................................... 100 2,900
American Home Products Corp. ............................. 1,900 145,350
Amgen, Inc. .............................................. 800 46,500
Bausch & Lomb, Inc. ...................................... 100 4,713
Baxter International, Inc. ............................... 700 36,575
Becton, Dickinson & Co. .................................. 400 20,250
Beverly Enterprises, Inc.+................................ 200 3,250
Biomet, Inc.+............................................. 200 3,725
Boston Scientific Corp.+.................................. 500 30,719
Bristol-Myers Squibb Co. ................................. 2,800 226,800
C.R. Bard, Inc. .......................................... 100 3,631
Cardinal Health, Inc.+.................................... 400 22,900
Columbia/HCA Healthcare Corp. ............................ 1,900 74,694
Eli Lilly & Co. .......................................... 1,600 174,900
Guidant Corp. ............................................ 200 17,000
</TABLE>
-------------
O-18
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
HEALTHCARE (CONTINUED)
HealthSouth Corp.+....................................... 900 $ 22,444
Humana, Inc.+............................................ 300 6,938
Johnson & Johnson........................................ 3,800 244,624
Mallinckrodt, Inc. ...................................... 100 3,800
Manor Care, Inc. ........................................ 100 3,263
Medtronic, Inc. ......................................... 700 56,700
Merck & Co., Inc. ....................................... 3,400 351,899
Pfizer, Inc. ............................................ 1,800 215,100
Pharmacia & Upjohn, Inc. ................................ 1,400 48,650
Schering Plough Corp. ................................... 2,000 95,750
St. Jude Medical, Inc.+.................................. 300 11,700
Tenet Healthcare Corp.+.................................. 900 26,606
U.S. Surgical Corp. ..................................... 100 3,725
United Healthcare Co. ................................... 500 26,000
Warner Lambert Co. ...................................... 900 111,825
-----------
2,186,287
-----------
HOUSEHOLD PRODUCTS--2.93%
Alberto-Culver Co. Class B............................... 200 5,600
Avon Products, Inc. ..................................... 400 28,225
Clorox Co. .............................................. 200 26,400
Colgate-Palmolive Co. ................................... 800 52,200
Gillette Co. ............................................ 1,600 151,600
International Flavors & Fragrances, Inc. ................ 400 20,200
Procter & Gamble Co. .................................... 2,000 282,500
Tupperware Corp. ........................................ 200 7,300
-----------
574,025
-----------
IMAGING & PHOTO--0.38%
Eastman Kodak Co. ....................................... 900 69,075
Polaroid Corp. .......................................... 100 5,550
-----------
74,625
-----------
INSURANCE--4.06%
Aegon NV+................................................ 86 6,025
Aetna, Inc. ............................................. 400 40,950
Allstate Financial Corp. ................................ 1,200 87,599
American General Corp. .................................. 610 29,128
American International Group, Inc. ...................... 1,300 194,187
Aon Corp. ............................................... 500 25,875
Chubb Corp. ............................................. 500 33,438
CIGNA Corp. ............................................. 200 35,500
Conseco, Inc. ........................................... 500 18,500
General Re Corp. ........................................ 300 54,599
Hartford Financial Services Group........................ 400 33,100
Jefferson-Pilot Corp. ................................... 300 20,963
Lincoln National Corp. .................................. 400 25,750
</TABLE>
-------------
O-19
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCKS (continued) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
INSURANCE (continued)
Marsh & McLennan Companies, Inc. ........................ 500 $ 35,688
MBIA Corp. .............................................. 100 11,281
MGIC Investment Corp. ................................... 600 28,763
Providian Financial Corp.+............................... 200 6,425
SAFECO Corp. ............................................ 400 18,675
St. Paul Companies, Inc. ................................ 200 15,250
Torchmark Corp. ......................................... 300 21,375
Transamerica Corp. ...................................... 300 28,069
UNUM Corp. .............................................. 400 16,800
USF & G Corp. ........................................... 300 7,200
-----------
795,140
-----------
MEDIA--2.21%
Comcast Corp. Class A.................................... 1,000 21,375
Dow Jones & Co., Inc. ................................... 200 8,038
Gannett Co., Inc. ....................................... 500 49,375
King World Productions, Inc. ............................ 100 3,500
Knight-Ridder, Inc. ..................................... 300 14,719
McGraw Hill Companies, Inc. ............................. 200 11,763
Meredith Corp. .......................................... 200 5,800
New York Times Co. Class A............................... 200 9,900
SBC Communications, Inc. ................................ 2,438 150,850
Telecommunications, Inc. Series A (TCI Group)+........... 2,100 31,238
Time Warner, Inc. ....................................... 1,500 72,375
Times Mirror Co. Series A................................ 200 11,050
Tribune Co. (New)........................................ 400 19,225
Viacom, Inc. Class B+.................................... 800 24,000
-----------
433,208
-----------
MISCELLANEOUS FINANCE--3.54%
American Express Co. .................................... 1,400 104,300
Beneficial Corp. ........................................ 100 7,106
Charles Schwab Corp. (See Note 6)+....................... 400 16,275
Countrywide Credit Industries, Inc.+..................... 300 9,356
Federal Home Loan Mortgage Corp. ........................ 2,000 68,750
Federal National Mortgage Assoc. ........................ 3,000 130,876
Golden West Financial Corp. ............................. 100 7,000
Great Western Financial Corp. ........................... 400 21,500
Green Tree Financial Corp. .............................. 400 14,250
H.F. Ahmanson & Co. ..................................... 200 8,600
Household International, Inc. ........................... 400 46,975
Merrill Lynch & Co., Inc. ............................... 1,000 59,625
Morgan Stanley, Dean Witter, Discover & Co. ............. 1,525 65,670
Salomon, Inc. ........................................... 400 22,250
Travelers Group, Inc. ................................... 1,766 111,368
-----------
693,901
-----------
</TABLE>
-------------
O-20
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
MOTOR VEHICLE--2.01%
Chrysler Corp. .......................................... 2,000 $ 65,625
Cummins Engine Co., Inc. ................................ 100 7,056
Dana Corp. .............................................. 200 7,600
Eaton Corp. ............................................. 200 17,463
Echlin, Inc. ............................................ 100 3,600
Fleetwood Enterprises, Inc. ............................. 100 2,981
Ford Motor Co. .......................................... 3,200 120,799
General Motors Corp. .................................... 2,100 116,944
Genuine Parts Co. ....................................... 500 16,938
Navistar International Corp.+............................ 100 1,725
Paccar, Inc. ............................................ 200 9,288
TRW, Inc. ............................................... 400 22,725
-----------
392,744
-----------
NON--FERROUS--0.73%
Alcan Aluminum, Ltd. .................................... 600 20,813
Aluminum Company of America.............................. 500 37,687
Asarco, Inc. ............................................ 100 3,063
Cyprus Minerals Co. ..................................... 200 4,900
Engelhard Corp. ......................................... 300 6,281
Freeport-McMoran Copper & Gold, Inc. Class B............. 500 15,563
Inco Ltd. ............................................... 500 15,031
Phelps Dodge Corp. ...................................... 300 25,556
Reynolds Metals Co. ..................................... 200 14,250
-----------
143,144
-----------
OIL--DOMESTIC--1.03%
Amerada Hess Corp. ...................................... 200 11,113
Ashland, Inc. ........................................... 300 13,913
Atlantic Richfield Co. .................................. 1,000 70,499
Kerr-McGee Corp. ........................................ 100 6,338
Oryx Energy Co.+......................................... 200 4,225
Pennzoil Co. ............................................ 100 7,675
Phillips Petroleum Co. .................................. 800 34,999
Santa Fe Energy Resources, Inc.+......................... 100 1,469
Sun, Inc. ............................................... 100 3,100
Unocal Corp. ............................................ 600 23,288
USX-Marathon Group....................................... 900 25,987
-----------
202,606
-----------
OIL--INTERNATIONAL--6.45%
Amoco Corp. ............................................. 1,400 121,713
Chevron Corp. ........................................... 1,900 140,481
Exxon Corp. ............................................. 6,800 418,199
Mobil Corp. ............................................. 2,400 167,700
</TABLE>
-------------
O-21
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCKS (continued) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
OIL--INTERNATIONAL (continued)
Royal Dutch Petroleum Co.--Sponsored ADR+................ 6,000 $ 326,250
Texaco, Inc. ............................................ 800 87,000
-----------
1,261,343
-----------
PAPER--1.31%
Boise Cascade Corp. ..................................... 100 3,531
Champion International Corp. ............................ 200 11,050
Georgia-Pacific Corp. ................................... 400 34,150
International Paper Co. ................................. 900 43,706
James River Corp. ....................................... 300 11,100
Kimberly-Clark Corp. .................................... 1,600 79,601
Louisiana-Pacific Corp. ................................. 200 4,225
Mead Corp. .............................................. 100 6,225
Potlatch Corp. .......................................... 100 4,525
Temple Inland, Inc. ..................................... 100 5,400
Union Camp Corp. ........................................ 200 10,000
Westvaco Corp. .......................................... 300 9,431
Weyerhaeuser Co. ........................................ 500 26,000
Willamette Industries, Inc. ............................. 100 7,000
-----------
255,944
-----------
PRODUCER GOODS & MANUFACTURING--6.03%
Aeroquip-Vickers, Inc. .................................. 100 4,725
Allied Signal, Inc. ..................................... 900 75,599
Avery Dennison Corp. .................................... 200 8,025
Briggs & Stratton Corp. ................................. 100 5,000
Case Corp. .............................................. 300 20,663
Caterpillar, Inc. ....................................... 500 53,687
Cincinnati Milacron, Inc. ............................... 100 2,594
Cooper Industries, Inc. ................................. 400 19,900
Deere & Co. ............................................. 800 43,899
Dover Corp. ............................................. 400 24,600
Emerson Electric Co. .................................... 1,200 66,074
FMC Corp.+............................................... 100 7,944
Foster Wheeler Corp. .................................... 100 4,050
General Electric Co. .................................... 9,200 601,449
Giddings & Lewis, Inc. .................................. 100 2,088
Harnischfeger Industries, Inc. .......................... 100 4,150
Illinois Tool Works, Inc. ............................... 800 39,950
Ingersoll-Rand Co. ...................................... 400 24,700
ITT Industries, Inc. .................................... 300 7,725
Johnson Controls, Inc. .................................. 200 8,213
McDermott International, Inc. ........................... 100 2,919
Millipore Corp. ......................................... 100 4,400
NACCO Industries, Inc. Class A........................... 100 5,644
Pall Corp. .............................................. 200 4,650
</TABLE>
-------------
O-22
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (continued) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
PRODUCER GOODS & MANUFACTURING (continued)
Parker-Hannifin Corp. ................................... 300 $ 18,206
Raychem Corp. ........................................... 100 7,438
Tenneco, Inc. (New)...................................... 500 22,594
Timken Co. .............................................. 200 7,113
Tyco International, Ltd.+................................ 500 34,781
W.W. Grainger, Inc. ..................................... 100 7,819
Westinghouse Electric Corp. ............................. 1,700 39,313
-----------
1,179,912
-----------
RAILROAD--0.89%
Burlington Northern Santa Fe Corp. ...................... 500 44,938
CSX Corp. ............................................... 600 33,300
Norfolk Southern Corp. .................................. 400 40,300
Union Pacific Corp. ..................................... 800 56,400
-----------
174,938
-----------
REAL PROPERTY--0.12%
HFS, Inc.+............................................... 400 23,200
-----------
RETAIL--4.69%
Albertson's, Inc. ....................................... 700 25,550
American Stores Co. ..................................... 400 19,750
AutoZone, Inc.+.......................................... 500 11,781
Charming Shoppes, Inc.+.................................. 100 522
Circuit City Stores, Inc. ............................... 300 10,669
Costco Companies, Inc.+.................................. 600 19,725
CUC International, Inc.+................................. 1,200 30,975
CVS Corp. ............................................... 600 30,750
Dayton Hudson Corp. ..................................... 700 37,230
Dillards Inc. Class A.................................... 200 6,925
Federated Department Stores, Inc.+....................... 600 20,850
Gap, Inc. ............................................... 700 27,213
Giant Food, Inc. Class A................................. 100 3,263
Great Atlantic & Pacific Tea Co., Inc. .................. 100 2,719
Harcourt General, Inc. .................................. 200 9,525
Home Depot, Inc. ........................................ 1,400 96,512
J.C. Penney Co., Inc. ................................... 600 31,313
K Mart Corp.+............................................ 1,600 19,600
Kroger Co.+.............................................. 700 20,300
Limited, Inc. ........................................... 700 14,175
Longs Drug Stores, Inc. ................................. 100 2,619
Lowe's Companies, Inc. .................................. 500 18,563
May Department Stores Co. ............................... 600 28,350
Mercantile Stores Co., Inc. ............................. 100 6,294
Nordstrom, Inc. ......................................... 300 14,719
Pep Boys-Manny Moe & Jack................................ 200 6,813
</TABLE>
-------------
O-23
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
RETAIL (CONTINUED)
Rite Aid Corp. .......................................... 300 $ 14,963
Sears Roebuck & Co. ..................................... 1,100 59,124
Tandy Corp. ............................................. 100 5,600
TJX Companies, Inc. ..................................... 600 15,825
Toys 'R' Us, Inc.+....................................... 900 31,500
Wal Mart Stores, Inc. ................................... 6,500 219,780
Walgreen Co. ............................................ 600 32,174
Winn Dixie Stores, Inc. ................................. 500 18,625
Woolworth Corp.+ ........................................ 200 4,800
-----------
919,096
-----------
STEEL--0.22%
Allegheny Teledyne, Inc. ................................ 600 16,199
Armco, Inc.+............................................. 100 388
Bethlehem Steel Corp.+................................... 100 1,044
Inland Steel Industries, Inc. ........................... 100 2,613
Nucor Corp. ............................................. 200 11,300
USX--U.S. Steel Group.................................... 300 10,519
Worthington Industries, Inc. ............................ 100 1,831
-----------
43,894
-----------
TELEPHONE--5.86%
Air Touch Communications+................................ 1,400 38,325
Alltel Corp. ............................................ 500 16,719
Ameritech Corp. ......................................... 1,500 101,905
Andrew Corp.+............................................ 150 4,219
AT&T Corp. .............................................. 4,600 161,287
Bell Atlantic Corp. ..................................... 1,300 98,638
Bellsouth Corp. ......................................... 2,800 129,849
DSC Communications Corp.+................................ 200 4,450
Frontier Corp. .......................................... 500 9,969
GTE Corp. ............................................... 2,700 118,462
MCI Communications Corp. ................................ 1,900 72,734
Northern Telecom Ltd. ................................... 700 63,700
Nynex Corp. ............................................. 1,300 74,913
Sprint Corp. ............................................ 1,300 68,413
Tellabs, Inc.+........................................... 500 27,938
U.S. West, Inc. (Communications Group)................... 1,200 45,225
U.S. West, Inc. (Media Group)+........................... 1,700 34,425
WorldCom, Inc. .......................................... 2,400 76,800
-----------
1,147,971
-----------
TOBACCO--1.79%
Loew's Corp. ............................................ 400 40,050
Philip Morris Companies., Inc. .......................... 6,700 297,313
UST, Inc. ............................................... 500 13,875
-----------
351,238
-----------
</TABLE>
-------------
O-24
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
TRANSPORTATION--MISCELLANEOUS--0.15%
Caliber Systems, Inc. ................................... 100 $ 3,725
Federal Express Corp.+................................... 400 23,100
Ryder Systems, Inc. ..................................... 100 3,300
-----------
30,125
-----------
TRAVEL & RECREATION--1.15%
Brunswick Corp. ......................................... 200 6,250
Harrah's Entertainment, Inc.+ ........................... 100 1,800
Hilton Hotels Corp. ..................................... 600 15,938
ITT Corp. (New)+......................................... 400 24,425
Marriott International, Inc. ............................ 400 24,550
Walt Disney Co. ......................................... 1,900 152,475
-----------
225,438
-----------
UTILITIES--2.95%
American Electric Power Co., Inc. ....................... 500 21,000
Baltimore Gas & Electric Co. ............................ 400 10,675
Carolina Power & Light Co. .............................. 500 17,938
Central & South West Services Corp. ..................... 500 10,625
Cinergy Corp. ........................................... 400 13,925
Coastal Corp. ........................................... 400 21,275
Columbia Gas System, Inc. ............................... 100 6,525
Consolidated Edison Co. of New York, Inc. ............... 600 17,663
Consolidated Natural Gas Co. ............................ 200 10,763
Dominion Resources, Inc. ................................ 500 18,313
DTE Energy Co. .......................................... 400 11,050
Duke Power Co. .......................................... 1,017 48,751
Eastern Enterprises...................................... 100 3,469
Edison International..................................... 1,100 27,362
Enron Corp. ............................................. 600 24,487
ENSERCH Corp. ........................................... 100 2,225
Entergy Corp. ........................................... 600 16,425
FPL Group, Inc. ......................................... 500 23,030
GPU, Inc. ............................................... 400 14,350
Houston Industries, Inc. ................................ 500 10,719
Niagara Mohawk Power Corp.+ ............................. 200 1,713
NICOR, Inc. ............................................. 100 3,588
Noram Energy Corp. ...................................... 200 3,050
Northern States Power Co. ............................... 100 5,175
Ohio Edison Co. ......................................... 500 10,906
ONEOK, Inc. ............................................. 100 3,219
Pacific Enterprises, Inc. ............................... 300 10,088
Pacific Gas & Electric Corp. ............................ 1,300 31,524
PacifiCorp. ............................................. 800 17,600
PECO Energy Co. ......................................... 600 12,600
Peoples Energy Corp. .................................... 100 3,744
</TABLE>
-------------
O-25
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
UTILITIES (continued)
PP&L Resources, Inc. ................................... 300 $ 5,981
Public Service Enterprises.............................. 700 17,500
Sonat, Inc. ............................................ 200 10,250
Southern Co. ........................................... 1,900 41,562
Texas Utilities Co. .................................... 600 20,663
Unicom Corp. ........................................... 800 17,800
Union Electric Co. ..................................... 200 7,538
Williams Companies, Inc. ............................... 500 21,875
-----------
576,946
-----------
TOTAL COMMON STOCK
(Cost $16,969,921)..................................... 19,313,618
-----------
CASH EQUIVALENTS--3.84%
Temporary Investment Fund, Inc.--TempCash Portfolio*
5.30%, 07/07/97........................................ 751,201 751,201
-----------
TOTAL CASH EQUIVALENTS (Cost $751,201).................. 751,201
-----------
TOTAL INVESTMENTS--102.48%
(Cost $17,721,122)..................................... 20,064,819
OTHER ASSETS AND LIABILITIES--(2.48)%
Other Assets........................................... 96,647
Liabilities............................................ (581,524)
-----------
(484,877)
-----------
NET ASSETS--100.00%
Applicable to 1,550,830 outstanding $0.00001 par value
shares (unlimited shares authorized).......................... $19,579,942
===========
NET ASSET VALUE PER SHARE............................... $ 12.63
===========
</TABLE>
- -------
+ Non-Income Producing Security.
* Interest rate represents the yield as of the report date.
See accompanying Notes to Financial Statements.
-------------
O-26
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends.......................................................... $ 108,950
EXPENSES
Investment advisory and administration fee......................... 18,942
Custodian fees..................................................... 12,711
Registration fees.................................................. 0
Professional fees.................................................. 23,623
Shareholder reports................................................ 9,813
Trustees' fees..................................................... 1,516
Amortization of deferred organization costs........................ 484
Insurance and other expenses....................................... 7,566
----------
74,655
Less: expenses reduced and absorbed (see Note 4).................... (57,967)
----------
Total expenses incurred by Fund.................................... 16,688
----------
Net investment income............................................... 92,262
----------
Net realized loss on investments sold............................... (13,223)
Net unrealized appreciation on investments.......................... 2,105,613
----------
Net gain on investments............................................ 2,092,390
----------
Increase in net assets resulting from operations.................... $2,184,652
==========
</TABLE>
- -------
See accompanying Notes to Financial Statements.
-------------
O-27
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
1997 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1996*
- -------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income......................... $ 92,262 $ 19,042
Net realized gain(loss) on investments sold... (13,223) 12
Net unrealized appreciation on investments.... 2,105,613 238,084
----------- ----------
Increase in net assets resulting from
operations................................... 2,184,652 257,138
----------- ----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold..................... 11,951,040 5,666,286
Net asset value of shares issued in
reinvestment of dividends.................... 0 --
Less payments for shares redeemed............. (479,174) --
----------- ----------
Increase in net assets from capital share
transactions................................. 11,471,866 5,666,286
----------- ----------
Total increase in net assets.................. 13,656,518 5,923,424
NET ASSETS
Beginning of period........................... 5,923,424 --
----------- ----------
End of period (including undistributed net
investment income of $111,305 and $19,042,
respectively)................................ $19,579,942 $5,923,424
=========== ==========
NUMBER OF FUND SHARES
Sold.......................................... 1,031,154 562,647
Reinvested.................................... -- --
Redeemed...................................... (42,971) --
----------- ----------
Net increase in shares outstanding............ 988,183 562,647
SHARES OUTSTANDING
Beginning of period........................... 562,647 --
----------- ----------
End of period................................. 1,550,830 562,647
=========== ==========
</TABLE>
- -------
* For the period from November 1, 1996 (commencement of operations) to December
31, 1996.
See accompanying Notes to Financial Statements.
-------------
O-28
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
1. DESCRIPTION OF THE FUND
The Schwab S&P 500 Portfolio (the "Fund") is a series of Schwab Annuity Port-
folios (the "Trust"), a diversified, no load, open-end investment management
company organized as a Massachusetts business trust on January 21, 1994 and
registered under the Investment Company Act of 1940, as amended.
The Fund is intended as an investment vehicle for variable annuity contracts
and variable life insurance policies to be offered by separate accounts of
participating life insurance companies and for pension and retirement plans
qualified under the Internal Revenue Code of 1986, as amended.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with gener-
ally accepted accounting principles for investment companies. The preparation
of financial statements in accordance with generally accepted accounting prin-
ciples requires management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
Security valuation--Investments in securities traded on an exchange and in-
vestments in money market funds are valued at the last 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. Unlisted securities for which market quo-
tations are readily available are valued at the mean between the most recent
bid and asked prices. Securities for which no quotations are readily available
are valued at fair value as determined by the Fund's investment manager pursu-
ant to guidelines adopted in good faith by the Board of Trustees. Short-term
securities with 60 days or less to maturity are stated at amortized cost,
which approximates market value.
Securities transactions and investment income--Security transactions are ac-
counted for on a trade date basis (date the order to buy or sell is executed).
Realized gains and losses from security transactions are determined on an
identified cost basis. Dividend income and distributions to shareholders are
recorded on the ex-dividend date; interest income is accrued on a daily basis.
Deferred organization costs--Costs incurred in connection with the organiza-
tion of the Fund and its initial registration with the Securities and Exchange
Commission are amortized on a straight-line basis over a five-year period from
the Fund's commencement of operations.
Expenses--Expenses arising in connection with the Fund are charged directly
to the Fund. Expenses common to all series of the Trust are generally allo-
cated to each series in proportion to their relative net assets.
Federal income taxes--It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to dis-
tribute all net investment income and realized net capital gains, if any, to
shareholders. Therefore, no federal income tax provision is required. The Fund
is considered a separate entity for tax purposes.
At June 30, 1997, (for financial reporting and federal income tax purposes),
net unrealized gain aggregated $2,343,697, of which $2,432,623 related to ap-
preciated securities and $88,926 related to depreciated securities.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreement--The Trust has investment
advisory and administration agreements with Charles Schwab Investment Manage-
ment, Inc. (the "Investment Manager"). For advisory services and facilities
furnished, the Fund pays an annual fee, payable monthly, of 0.36% of the first
$1 billion of average daily net assets, 0.33% of the next $1 billion and 0.31%
of such assets over $2 billion. The Investment Manager has reduced a portion
of its fee for the six months ended June 30, 1997 (see Note 4).
4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT MANAGER
The Investment Manager reduced a portion of its fee and absorbed certain ex-
penses in order to limit the Fund's ratio of operating expenses to average net
assets. For the six months ended June 30, 1997, the total of such fees and ex-
penses reduced and absorbed by the Investment Manager was $57,967 (see Note
8).
-------------
O-29
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
5. BORROWING AGREEMENT
The Trust has an arrangement with PNC Bank, N.A., the Fund's custodian,
whereby the Fund may borrow up to $10,000,000, on a temporary basis, to fund
redemptions. Amounts borrowed under this arrangement bear interest at periodi-
cally negotiated rates and may be collateralized by the assets of the Fund.
During the six months ended June 30, 1997, no borrowings were made under this
arrangement.
6. INVESTMENT TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
Purchases and sales of investment securities, other than short-term obliga-
tions, aggregated $11,804,359 and $336,413, respectively, for the six months
ended June 30, 1997. Included in the aforementioned are purchases of common
stock of Charles Schwab Corp., an affiliated issuer, of $16,275.
7. COMPOSITION OF NET ASSETS
At June 30, 1997, net assets consisted of:
<TABLE>
<CAPTION>
<S> <C>
Paid in capital.............................................. $17,138,151
Undistributed net investment income.......................... 111,305
Net realized loss on investments sold........................ (13,211)
Net unrealized gain on investments........................... 2,343,697
-----------
Total...................................................... $19,579,942
===========
</TABLE>
At June 30, 1997, the Fund's Statement of Net Assets included: $535,458 pay-
able for securities purchased, $59,676 receivable for fund shares sold and
$4,545 receivable from advisor.
-------------
O-30
<PAGE>
-------------
SCHWAB S&P 500 PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1996**
---------------- -------------------
<S> <C> <C>
Net asset value at beginning of period... $10.53 $10.00
----------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income................... 0.04 0.03
Net realized and unrealized gain on
investments........................... 2.06 0.50
----------- ----------
Total from investment operations........ 2.10 0.53
LESS DISTRIBUTIONS
Dividends from net investment income.... -- --
Distributions from realized gain on
investments........................... -- --
----------- ----------
Total distributions..................... -- --
----------- ----------
Net asset value at end of period......... $12.63 $10.53
=========== ==========
TOTAL RETURN (not annualized)............ 19.94% 5.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period............... $19,579,942 $5,923,424
Ratio of expenses to average net
assets+............................... 0.31%* 0.33%*
Ratio of net investment income to
average net assets+................... 1.72%* 2.16%*
Portfolio turnover rate................. 3.07% 0%
Average commission rate................. $ 0.03 $ 0.03
</TABLE>
- -------
+ The information contained in the above table is based on actual expenses
for the periods, after giving effect to the portion of expenses reduced and
absorbed by the Investment Manager. Had these expenses not been reduced and
absorbed, the Fund's expense and net investment income ratios would have
been:
Ratio of expenses to average net
assets.................................. 0.66%* 3.11%*
Ratio of net investment income to
average net assets...................... 1.37%* (0.62%)*
* Annualized
** For the period from November 1, 1996 (commencement of operations) to Decem-
ber 31, 1996.
-------------
O-31
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK--72.81% SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
AEROSPACE/DEFENSE--0.77%
Alliant Techsystems, Inc.+................................ 100 $ 5,500
Boeing Co. ............................................... 208 11,037
Lockheed Martin Corp. .................................... 100 10,356
McDonnell Douglas Corp. .................................. 100 6,850
OEA, Inc. ................................................ 100 3,950
Raytheon Co. ............................................. 100 5,100
Thiokol Corp. ............................................ 100 7,000
United Technologies Corp. ................................ 100 8,300
----------
58,093
----------
AIR TRANSPORTATION--0.04%
America West Holding Corp. Class B+....................... 200 2,900
----------
ALCOHOLIC BEVERAGES--0.22%
Anheuser-Busch Companies, Inc. ........................... 200 8,388
Seagram Co., Ltd. ........................................ 200 8,050
----------
16,438
----------
APPAREL--0.37%
Burlington Industries, Inc.+.............................. 200 2,400
NIKE, Inc. Class B........................................ 100 5,838
Springs Industries, Inc. ................................. 100 5,275
St. John Knits, Inc. ..................................... 100 5,400
Timberland Co. Class A+................................... 100 6,449
Wolverine World Wide, Inc. ............................... 100 3,038
----------
28,400
----------
AUTOMOTIVE PRODUCTS--0.13%
Goodyear Tire & Rubber Co. ............................... 100 6,331
O'Reilly Automotive, Inc.+................................ 100 3,850
----------
10,181
----------
BANKS--5.78%
ALBANK Financial Corp. ................................... 100 3,950
Associated Banc-Corp...................................... 120 4,740
Banc One Corp. ........................................... 318 15,378
Bank of New York Co., Inc. ............................... 200 8,700
BankAmerica Corp. ........................................ 200 12,912
BankBoston Corp. ......................................... 100 7,206
Banknorth Group, Inc...................................... 100 4,625
Barnett Banks, Inc. ...................................... 100 5,250
Chase Manhattan Corp. (New)............................... 200 19,412
Chemical Financial Corp. ................................. 105 3,623
Citicorp.................................................. 200 24,112
City National Corp. ...................................... 200 4,813
CNB Bancshares, Inc. ..................................... 100 4,050
</TABLE>
-------------
O-32
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
BANKS (CONTINUED)
Colonial BancGroup, Inc. ................................. 200 $ 4,850
Community First Bankshares, Inc. ......................... 100 3,838
CoreStates Financial Corp. ............................... 100 5,375
Corus Bankshares, Inc. ................................... 100 2,825
Cullen/Frost Bankers, Inc. ............................... 100 4,238
First Bank System, Inc. .................................. 100 8,538
First Chicago NBD Corp. .................................. 200 12,099
First Citizens BancShares, Inc. Class A................... 100 8,700
First Financial Bancorp................................... 100 4,025
First Union Corp. ........................................ 100 9,250
Firstbank of Illinois Co. ................................ 100 3,913
Fleet Financial Group, Inc. .............................. 100 6,325
Fort Wayne National Corp. ................................ 100 4,700
Hancock Holding Co. ...................................... 115 5,635
J.P. Morgan & Co., Inc. .................................. 100 10,438
KeyCorp, Inc. ............................................ 100 5,588
Keystone Financial, Inc. ................................. 165 5,156
Long Islands Bancorp, Inc. ............................... 100 3,631
MAF Bancorp, Inc. ........................................ 100 4,188
Magna Group, Inc. ........................................ 100 3,475
MBNA Corp. ............................................... 100 3,663
Mercantile Bancorp, Inc. ................................. 95 5,783
National Bancorp of Alaska, Inc. ......................... 100 8,450
National City Corp. ...................................... 100 5,250
National Commerce Bancorp................................. 200 4,400
NationsBank Corp. ........................................ 330 21,284
New York Bancorp, Inc. ................................... 150 5,213
North Fork Bancorporation, Inc. .......................... 200 4,275
Norwest Corp. ............................................ 200 11,249
ONBANCorp., Inc. ......................................... 100 5,100
One Valley Bancorp of West Virginia, Inc. ................ 100 4,200
Park National Corp. ...................................... 100 7,925
PNC Bank Corp. ........................................... 200 8,325
Provident Bankshares Corp. ............................... 105 4,371
Queens County Bancorp, Inc. .............................. 150 6,825
S & T Bancorp, Inc. ...................................... 100 3,350
Security Capital Corp. ................................... 100 9,450
SunTrust Banks, Inc. ..................................... 100 5,506
T R Financial Corp. ...................................... 200 5,038
U S Trust Corp. (New)..................................... 200 9,425
U.S. Bancorp.............................................. 100 6,413
UMB Financial Corp. ...................................... 105 4,528
United Carolina Bancshares Corp. ......................... 100 5,200
Valley National Bancorp................................... 100 2,713
Wachovia Corp. ........................................... 100 5,831
</TABLE>
-------------
O-33
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
BANKS (CONTINUED)
Wells Fargo & Co. ........................................ 100 $ 27,247
Westamerica Bancorp....................................... 100 7,600
Whitney Holding Corp. .................................... 100 4,225
----------
438,397
----------
BUSINESS MACHINES & SOFTWARE--3.77%
3COM Corp. ............................................... 100 4,500
Adobe Systems, Inc. ...................................... 100 3,506
Analogic Corp. ........................................... 100 3,400
Applied Magnetics Corp.+.................................. 100 2,263
Cisco Systems, Inc. ...................................... 300 20,138
Compaq Computer Corp. .................................... 100 9,925
Computer Associates International, Inc. .................. 200 11,138
Computer Horizons Corp. .................................. 150 5,138
Comverse Technology, Inc.+................................ 100 5,200
Dell Computer Corp. ...................................... 100 11,744
EMC Corp. ................................................ 100 3,900
Hewlett-Packard Co. ...................................... 400 22,399
INSO Corp.+............................................... 100 2,056
International Business Machines Corp. .................... 400 36,074
Legato Systems, Inc. ..................................... 100 1,850
Microsoft Corp. .......................................... 400 50,549
Novell, Inc. ............................................. 100 694
Novellus Systems, Inc.+................................... 100 8,650
Oracle Systems Corp. ..................................... 300 15,113
Parametric Technology Corp. .............................. 100 4,256
Pitney Bowes, Inc. ....................................... 100 6,950
Platinum Technology, Inc.+................................ 200 2,650
Policy Management Systems Corp.+.......................... 100 4,700
Seagate Technology, Inc. ................................. 100 3,519
Sun Microsystems, Inc. ................................... 200 7,444
Transaction Systems Architects, Inc. ..................... 100 3,450
Veritas Software Co. ..................................... 100 5,025
Videoserver, Inc.+........................................ 100 1,325
Visio Corp.+.............................................. 100 7,050
Wind River Systems, Inc. ................................. 150 5,738
Xerox Corp. .............................................. 200 15,775
----------
286,119
----------
BUSINESS SERVICES--2.67%
Allied Waste Industries, Inc.+............................ 200 3,475
Apria Healthcare Group, Inc.+............................. 200 3,550
Aspen Technology, Inc. ................................... 200 7,524
Automatic Data Processing, Inc. .......................... 100 4,700
BDM International, Inc. .................................. 200 4,600
</TABLE>
-------------
O-34
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
BUSINESS SERVICES (CONTINUED)
BISYS Group, Inc.+........................................ 100 $ 4,175
BRC Holdings, Inc.+....................................... 100 3,800
Camco International, Inc. ................................ 130 7,118
CDI Corp.+................................................ 100 4,169
Checkfree Corp.+.......................................... 200 3,525
Clintrials Research, Inc. ................................ 150 1,800
Cognizant Corp. .......................................... 100 4,050
Computer Task Group, Inc. ................................ 200 7,449
CRA Managed Care, Inc.+................................... 100 5,219
Culligan Water Technologies, Inc.+........................ 100 4,475
Dionex Corp. ............................................. 100 5,125
Dun & Bradstreet Corp. ................................... 100 2,625
Dynatech Corp.+........................................... 100 3,575
Envoy Corp. (New)+........................................ 100 3,325
Equifax, Inc. ............................................ 100 3,719
Express Scripts, Inc. Class A+............................ 100 4,175
Fair, Issac & Co., Inc. .................................. 100 4,456
First Data Corp. ......................................... 200 8,787
HA-LO Industries, Inc. ................................... 125 2,953
Henry Jack & Associates, Inc. ............................ 150 3,638
Horizon/CMS Healthcare Corp.+............................. 200 4,013
Interim Services, Inc.+................................... 100 4,450
ITT Educational Services, Inc. ........................... 150 3,722
John H. Harland Co. ...................................... 100 2,281
Laidlaw, Inc. Class B..................................... 100 1,381
Medaphis Corp.+........................................... 200 2,013
Metromedia International Group, Inc.+..................... 200 2,538
Ogden Corp. .............................................. 200 4,350
Orthodontic Centers of America, Inc. ..................... 200 3,638
Safety-Kleen Corp. ....................................... 100 1,688
Seacor Holdings, Inc.+.................................... 100 5,231
Service Corp. International............................... 100 3,288
Sitel Corp. .............................................. 200 4,125
Sun Healthcare Group, Inc.+............................... 200 4,163
Symantec Corp. ........................................... 200 3,900
Synetic, Inc.+............................................ 100 3,700
Technology Solutions Co. ................................. 100 3,950
Universal Health Services, Inc. Class B................... 200 7,699
Valassis Communications, Inc.+............................ 100 2,400
Viasoft, Inc. ............................................ 100 5,075
Volt Information Sciences, Inc. .......................... 150 7,574
Waste Management Inc. (New)............................... 200 6,425
Zebra Technologies Corp. Class A.......................... 100 2,788
----------
202,399
----------
</TABLE>
-------------
O-35
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
CHEMICAL--1.59%
Cambrex Corp. ............................................ 100 $ 3,975
Chemed Corp. ............................................. 100 3,744
Dow Chemical Co. ......................................... 100 8,713
E.I. du Pont de Nemours & Co. ............................ 400 25,149
H.B. Fuller Co. .......................................... 100 5,500
Minnesota Mining & Manufacturing Co. ..................... 200 20,399
Monsanto Co. ............................................. 300 12,918
NCH Corp. ................................................ 100 6,250
OM Group, Inc. ........................................... 150 4,969
Petrolite Corp. .......................................... 100 6,188
PPG Industries, Inc. ..................................... 100 5,813
Sequa Corp. Class A+...................................... 100 5,638
Tredegar Industries, Inc. ................................ 100 5,550
WD-40 Co. ................................................ 100 6,000
----------
120,806
----------
CONSTRUCTION--0.58%
Apogee Enterprises, Inc. ................................. 200 4,300
Blount International, Inc. Class A........................ 100 4,256
Global Industries, Inc. .................................. 200 4,672
Lone Star Industries, Inc. ............................... 100 4,531
Mafco Consolidated Group, Inc. ........................... 100 3,350
Mastec, Inc. ............................................. 150 7,096
Medusa Corp. ............................................. 100 3,838
Pulte Corp. .............................................. 100 3,456
Southdown, Inc. .......................................... 100 4,363
Stone & Webster, Inc. .................................... 100 4,269
----------
44,131
----------
CONSUMER--DURABLE--0.30%
Champion Enterprises, Inc. ............................... 200 3,000
Ethan Allen Interiors, Inc. .............................. 100 5,700
Furniture Brands International, Inc.+..................... 200 3,875
Kimball International, Inc. Class B....................... 100 4,025
La-Z-Boy Chair Co. ....................................... 100 3,600
Zenith Electronics Corp.+................................. 200 2,363
----------
22,563
----------
CONSUMER--NONDURABLE--0.45%
Corning, Inc. ............................................ 100 5,562
Fortune Brands, Inc. ..................................... 100 3,731
Mattel, Inc. ............................................. 100 3,388
McDonald's Corp. ......................................... 300 14,493
Oakley, Inc. ............................................. 200 2,813
Samsonite Corp. (New)+.................................... 100 4,413
----------
34,400
----------
</TABLE>
-------------
O-36
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
ELECTRONICS--2.90%
AMP, Inc. ................................................ 100 $ 4,175
Anixter International, Inc.+.............................. 200 3,438
Applied Materials, Inc. .................................. 100 7,081
EG&G, Inc. ............................................... 400 9,000
Fluke Corp. .............................................. 100 5,925
Hadco Corp.+.............................................. 100 6,550
Innovex, Inc. ............................................ 100 2,913
Input/Output, Inc. ....................................... 200 3,625
Intel Corp. .............................................. 300 42,543
International Rectifier Corp.+............................ 200 3,725
Jabil Circuit, Inc. ...................................... 100 8,388
KLA Instruments Corp. .................................... 100 4,875
Lam Research Corp.+....................................... 100 3,706
Littlefuse, Inc. ......................................... 200 5,650
Logicon, Inc. ............................................ 100 5,300
Lucent Technologies, Inc. ................................ 300 21,619
MEMC Electronic Materials, Inc.+.......................... 200 6,550
Micron Technology, Inc. .................................. 100 3,994
Motorola, Inc. ........................................... 300 22,799
Rockwell International Corp. (New)........................ 100 5,900
S3, Inc.+................................................. 200 2,200
Sanmina Corp. ............................................ 100 6,350
Technitrol, Inc. ......................................... 200 5,475
Texas Instruments, Inc. .................................. 100 8,406
Thermo Electron Corp. .................................... 100 3,400
Uniphase Corp. ........................................... 100 5,825
Unitrode Corp.+........................................... 100 5,038
Vitesse Semiconductor Corp. .............................. 50 1,634
Wyle Electronics.......................................... 100 3,950
----------
220,034
----------
ENERGY--DEVELOPMENT--0.95%
Ashland Coal, Inc. ....................................... 100 2,850
Atwood Oceanics, Inc.+.................................... 100 6,700
Cliffs Drilling Co. ...................................... 200 7,300
Helmerich & Payne, Inc. .................................. 100 5,763
Marine Drilling Company, Inc.+............................ 200 3,925
MAXXAM, Inc.+............................................. 100 4,681
Newfield Exploration Co. ................................. 200 4,000
Newpark Resources, Inc. .................................. 200 6,750
Nuevo Energy Co.+......................................... 100 4,100
Occidental Petroleum Corp. ............................... 100 2,506
Parker Drilling Co.+...................................... 200 2,225
Pride Petroleum Services, Inc.+........................... 200 4,800
Schlumberger Ltd. ........................................ 100 12,500
Tuboscope Vetco International Corp.+...................... 200 3,975
----------
72,075
----------
</TABLE>
-------------
O-37
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
FOOD--AGRICULTURE--2.78%
Archer-Daniels Midland Co. ............................... 200 $ 4,700
Campbell Soup Co. ........................................ 200 10,000
Chiquita Brands International, Inc. ...................... 200 2,750
Coca-Cola Bottling Co. Consolidated....................... 100 4,850
Coca-Cola Co. ............................................ 900 60,749
ConAgra, Inc. ............................................ 100 6,413
CPC International, Inc. .................................. 100 9,231
Dekalb Genetics Corp. Class B............................. 100 7,975
Delta & Pine Land Co. .................................... 133 4,738
Earthgrains Co. .......................................... 100 6,556
General Mills, Inc. ...................................... 100 6,513
H.J. Heinz Co. ........................................... 200 9,225
Hershey Foods Corp. ...................................... 100 5,531
Kellogg Co. .............................................. 100 8,563
PepsiCo, Inc. ............................................ 600 22,537
Sara Lee Corp. ........................................... 200 8,325
Smithfield Foods, Inc.+................................... 100 6,150
Tootsie Roll Industries, Inc. ............................ 103 4,584
Unilever NV............................................... 100 21,800
----------
211,190
----------
GOLD--0.08%
Barrick Gold Corp. ....................................... 100 2,200
Battle Mountain Gold Co. ................................. 100 569
Getchell Gold Corp.+...................................... 100 3,525
----------
6,294
----------
HEALTHCARE--4.87%
Abbott Laboratories....................................... 300 20,025
Advanced Technology Laboratories, Inc.+................... 100 4,300
Agouron Pharmaceuticals, Inc.+............................ 100 8,088
American Home Products Corp. ............................. 300 22,950
Amgen, Inc. .............................................. 100 5,813
Barr Laboratories, Inc. .................................. 150 6,600
Baxter International, Inc. ............................... 100 5,225
Bio-Technology General Corp.+............................. 200 2,700
Block Drug Co., Inc. Class A.............................. 103 4,506
Boston Scientific Corp. .................................. 7 430
Bristol-Myers Squibb Co. ................................. 400 32,399
Cardinal Health, Inc. .................................... 100 5,725
Carter-Wallace, Inc. ..................................... 200 3,575
Columbia/HCA Healthcare Corp. ............................ 300 11,794
Eli Lilly & Co. .......................................... 200 21,863
Guidant Corp. ............................................ 100 8,500
HealthSouth Corp. ........................................ 100 2,494
</TABLE>
-------------
O-38
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
HEALTHCARE (CONTINUED)
Human Genome Sciences, Inc.+.............................. 100 $ 3,325
Immunex Corp. (New)+...................................... 200 7,250
Incyte Pharmaceuticals, Inc.+............................. 100 6,700
Johnson & Johnson......................................... 500 32,187
Kinetic Concepts, Inc. ................................... 200 3,600
Living Centers of America, Inc.+.......................... 100 3,950
Medical Assurance, Inc.+.................................. 106 4,306
Medicis Pharmaceutical Corp. ............................. 150 7,481
Medtronic, Inc. .......................................... 100 8,100
Merck & Co., Inc. ........................................ 400 41,399
Mid Atlantic Medical Services, Inc.+...................... 200 3,113
NovaCare, Inc.+........................................... 200 2,775
Perrigo Co.+.............................................. 200 2,500
Pfizer, Inc. ............................................. 200 23,900
Pharmacia & Upjohn, Inc. ................................. 200 6,950
Protein Design Labs, Inc.+................................ 100 2,850
Renal Treatment Centers, Inc. ............................ 100 2,688
Schering Plough Corp. .................................... 200 9,575
Sofamor/Danek Group, Inc.+................................ 100 4,575
Sola International, Inc.+................................. 100 3,350
United Healthcare Co. .................................... 100 5,200
Vertex Pharmaceuticals, Inc.+............................. 100 3,825
Warner Lambert Co. ....................................... 100 12,425
----------
369,011
----------
HOUSEHOLD PRODUCTS--0.79%
Colgate-Palmolive Co. .................................... 200 13,050
Gillette Co. ............................................. 200 18,950
Procter & Gamble Co. ..................................... 200 28,250
----------
60,250
----------
IMAGING & PHOTO--0.21%
BMC Industries, Inc. ..................................... 100 3,425
Eastman Kodak Co. ........................................ 100 7,675
Photronic, Inc.+.......................................... 100 4,775
----------
15,875
----------
INTERNATIONAL--20.28%
AUSTRALIA--0.40%
Australia & New Zealand Banking Group..................... 426 3,187
Broken Hill Proprietary Co., Ltd. ........................ 563 8,290
Coca Cola Amatil.......................................... 154 2,002
Commonwealth Bank......................................... 260 3,144
National Australia Bank................................... 415 5,950
</TABLE>
-------------
O-39
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
AUSTRALIA (CONTINUED)
News Corporation, Ltd. ................................... 566 $ 2,716
Western Mining Corp. ..................................... 316 1,994
Westpac Banking Corp. .................................... 510 3,072
----------
30,355
----------
BELGIUM--0.18%
Electrabel................................................ 15 3,213
Fortis AG................................................. 11 2,272
Generale de Banque........................................ 5 1,925
Petrofina SA.............................................. 7 2,651
Societe Generale de Belgique.............................. 20 1,868
Tractebel Investor International Capital.................. 4 1,668
----------
13,597
----------
CANADA--0.60%
Alcan Aluminum, Ltd. ..................................... 64 2,183
Bank of Montreal, Quebec.................................. 73 2,849
Bank of Nova Scotia, Halifax.............................. 67 2,935
Barrick Gold Corp. ....................................... 105 2,285
BCE, Inc. ................................................ 178 4,950
Canadian Imperial Bank of Commerce........................ 116 2,923
Canadian Pacific, Ltd. ................................... 98 2,789
Imperial Oil, Ltd. ....................................... 45 2,305
INCO, Ltd. ............................................... 47 1,406
Northern Telecom, Ltd. ................................... 73 6,454
Royal Bank of Canada, Montreal, Quebec.................... 89 4,031
Seagram Co., Ltd. ........................................ 105 4,220
Thomson Corp. ............................................ 168 3,869
Toronto-Dominion Bank..................................... 82 2,429
----------
45,628
----------
DENMARK--0.06%
Novo Nordisk A/S Series B................................. 22 2,399
Tele Danmark A/S Series B................................. 37 1,922
----------
4,321
----------
FRANCE--1.28%
Alcatel Alsthom SA........................................ 46 5,761
AXA Groupe SA............................................. 92 5,722
Banque Nationale de Paris................................. 59 2,432
Carrefour................................................. 11 7,989
Christian Dior............................................ 12 1,981
CIE de Suez............................................... 920 2,262
Cie Financiere de Paribas (Bearer)........................ 35 2,418
Cie Generale de Eaux...................................... 35 4,485
</TABLE>
-------------
O-40
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
FRANCE (CONTINUED)
Compagnie de Saint-Gobain SA.............................. 24 $ 3,500
Compagnie Francaise des Petroles Class B.................. 68 6,873
Danone Groupe............................................. 20 3,305
L'Air Liquide............................................. 21 3,334
L'Oreal SA................................................ 19 8,005
Lafarge Coppee SA......................................... 27 1,679
LVMH Moet-Hennessy Louis Vuitton.......................... 25 6,721
Lyonnaise des Eaux-Dumez.................................. 16 1,612
Michelin (CDGE) Class B (Reg.)............................ 33 1,982
Pinault Printemps Redoute SA.............................. 6 2,883
Promodes.................................................. 6 2,337
Rhone-Poulenc SA Class A.................................. 93 3,798
Sanofi.................................................... 30 2,940
Schneider SA.............................................. 38 2,023
Societe Generale.......................................... 26 2,902
Societe Nationale Elf Aquitaine........................... 77 8,307
Synthelabo................................................ 14 1,822
----------
97,073
----------
GERMANY--1.57%
BASF AG................................................... 172 6,356
Bayer AG.................................................. 199 7,647
Bayerische Hypotheken & Wechsel Bank AG................... 73 2,183
Bayerische Motoren Werke AG............................... 6 4,964
Bayerische Vereinsbank AG................................. 75 3,066
Commerzbank AG............................................ 109 3,087
Daimler Benz AG........................................... 145 11,765
Deutsche Bank AG.......................................... 141 8,238
Dresdner Bank AG.......................................... 126 4,356
Hoechst AG................................................ 164 6,956
Linde AG.................................................. 2 1,531
Lufthansa AG.............................................. 308 5,907
Mannesmann AG............................................. 10 4,455
Metro AG.................................................. 26 2,849
Muenchener Rueckversicherung (Reg.)....................... 2 5,607
RWE AG.................................................... 95 4,085
Sap AG.................................................... 17 3,412
Schering AG Dem5.......................................... 20 2,137
Siemens AG................................................ 158 9,381
Thyssen AG................................................ 9 2,131
Veba AG................................................... 138 7,754
Vereinigte Elektrizitat Westfalen Series B................ 6 1,933
VIAG AG................................................... 7 3,183
Volkswagen AG............................................. 8 6,133
----------
119,116
----------
</TABLE>
-------------
O-41
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
HONG KONG--0.56%
Hang Seng Bank, Ltd. ..................................... 1,000 $ 14,264
Hong Kong Telecommunications, Ltd. ....................... 3,200 7,641
Hutchison Whampoa, Ltd. .................................. 1,000 8,648
Sun Hung Kai Properties................................... 1,000 12,036
----------
42,589
----------
ITALY--0.56%
Assicurazioni Generali.................................... 249 4,527
ENI SPA (Reg.)............................................ 2,273 12,872
Fiat Finance SPA.......................................... 927 3,338
INA....................................................... 1,129 1,721
STET...................................................... 1,082 6,303
STETdi Risp (Non-Convertible)............................. 500 1,736
Telecom Italia............................................ 1,874 5,612
Telecom Italia Mob........................................ 1,874 6,064
----------
42,173
----------
JAPAN--5.15%
Bank of Tokyo--Mitsubishi, Ltd. .......................... 1,000 20,066
Dai-Ichi Kangyo Bank, Ltd. ............................... 1,000 13,610
Fuji Bank, Ltd. .......................................... 1,000 15,006
Hitachi, Ltd. ............................................ 1,000 11,167
Industrial Bank of Japan, Ltd. ........................... 1,000 15,530
Kawasaki Steel Co. ....................................... 1,000 3,254
Kobe Steel................................................ 1,000 1,911
Kyocera Corp. ............................................ 1,000 79,393
Mitsubishi Heavy Industries............................... 1,000 7,669
Nippon Steel Corp. ....................................... 1,000 3,193
Nippon Telegraph & Telephone Corp. ....................... 4 38,388
Nissan Motor Co., Ltd. ................................... 1,000 7,756
NKK Corp. ................................................ 1,000 2,146
Osaka Gas Co. ............................................ 1,000 2,870
Sakura Bank............................................... 1,000 7,660
Sanwa Bank................................................ 1,000 14,832
Sony Corp. ............................................... 1,000 87,157
Sumitomo Bank............................................. 1,000 16,402
Sumitomo Metal Industries................................. 1,000 2,844
Tokyo Gas Co. ............................................ 1,000 2,774
Toshiba Corp. ............................................ 1,000 6,430
Toyota Motor Corp. ....................................... 1,000 29,489
----------
389,547
----------
NETHERLANDS--1.31%
ABN AMRO Holdings NV...................................... 360 6,713
Aegon NV.................................................. 74 5,165
Akzo Nobel NV............................................. 20 2,741
</TABLE>
-------------
O-42
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
NETHERLANDS (CONTINUED)
Dordtsche Petroleum....................................... 40 $ 2,140
Elsevier NV............................................... 187 3,125
Fortis Amev NV, CVA....................................... 51 2,271
Heineken NV............................................... 14 2,389
ING Groep NV, CVA......................................... 216 9,959
Koninklijke Ahold NV...................................... 47 3,965
Koninklijke PTT Nederland................................. 131 5,139
Philips Electronics NV.................................... 98 7,020
PolyGram NV............................................... 51 2,676
Royal Dutch Petroleum Co. ................................ 604 31,416
SGS-Thomson Microelectronics NV+.......................... 39 3,079
Unilever NV, CVA.......................................... 45 9,473
Wolters Kluwer NV, CVA.................................... 19 2,313
----------
99,584
----------
SINGAPORE--0.08%
Hong Kong Land Holdings................................... 1,000 2,660
Singapore Telecommunications.............................. 2,000 3,693
----------
6,353
----------
SPAIN--0.48%
Argentaria Corp........................................... 35 1,960
Banco de Bilbao--Vizcaya SA (Reg.)........................ 63 5,118
BCO Popular (Reg.)........................................ 9 2,205
BCO Santander (Reg.)...................................... 135 4,159
Empresa Nacional de Electricidad.......................... 73 6,128
Gas Natural SDG SA........................................ 11 2,403
Iberdrola SA.............................................. 259 3,269
Repsol SA................................................. 85 3,594
Telefonica Internacional de Espana SA..................... 265 7,662
----------
36,498
----------
SWEDEN--0.34%
ABB AB Series A........................................... 190 2,665
Astra AB Series A......................................... 379 7,049
Astra AB Series B......................................... 85 1,506
L.M. Ericsson Telephone Series B.......................... 270 10,628
Sandvik AB Series A....................................... 59 1,674
Volvo AB Series B......................................... 91 2,435
----------
25,957
----------
SWITZERLAND--3.48%
ABB AG.................................................... 2 3,027
ABB AG (Reg.)............................................. 2 589
Adecco SA................................................. 5 1,918
Alusuisse Lonza HD (Reg.)................................. 2 2,071
</TABLE>
-------------
O-43
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
SWITZERLAND (CONTINUED)
Ciba Specialty (Reg.)+.................................... 21 $ 1,942
Cie Financiere Richemont Series A (Bearer)................ 2 2,890
CS Holding (Reg.)......................................... 53 6,807
Holderbank Financiere Glaris (Bearer)..................... 2 1,889
Holderbank Financiere Glaris (Reg.)....................... 3 565
Nestle SA (Reg.).......................................... 11 14,511
Novartis AG (Bearer)...................................... 101 161,323
Novartis AG (Reg.)........................................ 17 27,177
Roche Group Holding AG.................................... 2 18,089
Schweizerische Bankgesellschaft (Bearer).................. 6 6,863
Schweizerische Bankgesellschaft (Reg.).................... 7 1,601
Schweizerische Bankverein (Reg.).......................... 21 5,617
Winterthur (Reg.)......................................... 2 1,762
Zurich Versicherung (Reg.)................................ 13 5,173
----------
263,814
----------
UNITED KINGDOM--4.23%
Abbey National............................................ 396 5,408
Allied-Lyons PLC.......................................... 301 2,165
Asda Group................................................ 820 1,693
Associated British Foods.................................. 254 2,187
BAA PLC................................................... 295 2,719
Barclays PLC.............................................. 432 8,575
Bass PLC.................................................. 248 3,027
BAT Industries PLC........................................ 873 7,814
BG PLC.................................................... 1,238 4,536
BOC Group................................................. 138 2,398
Boots Co.................................................. 255 2,992
British Aerospace......................................... 121 2,693
British Airways........................................... 272 3,101
British Petroleum Co. .................................... 1,601 19,916
British Sky Broadcast..................................... 484 3,577
British Telecommunications................................ 1,775 13,183
BTR PLC................................................... 1,129 3,864
Cable & Wireless.......................................... 631 5,779
Cadbury Schweppes......................................... 280 2,499
Commercial Union Assurance Co. ........................... 190 1,998
EMI Group................................................. 122 2,194
GKN....................................................... 99 1,698
General Electric Co. ..................................... 779 4,657
Glaxo Wellcome PLC........................................ 989 20,465
Granada Group............................................. 241 3,170
Grand Metropolitan, Inc................................... 604 5,814
Great Universal Stores.................................... 284 2,883
Guinness.................................................. 544 5,327
</TABLE>
-------------
O-44
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
UNITED KINGDOM (CONTINUED)
HSBC Holdings............................................. 243 $ 7,480
HSBC Holdings (Hong Kong)................................. 503 14,908
Imperial Chemical Industries.............................. 205 2,847
J. Sainsbury PLC.......................................... 522 3,164
Kingfisher................................................ 189 2,147
Legal & General Group..................................... 748 5,070
Lloyds TSB Group PLC...................................... 1,626 16,707
Marks & Spencer PLC....................................... 796 6,601
National Power Development................................ 321 2,790
National Westminster Bancorp.............................. 492 6,616
Pearson, Inc. ............................................ 157 1,820
Peninsular & Oriental Steam Navigation.................... 174 1,733
Powergen.................................................. 196 2,330
Prudential Corp. ......................................... 540 5,278
Rank Group................................................ 535 3,390
Reed International........................................ 320 3,091
Rentokil Initial.......................................... 704 2,469
Reuters Holdings PLC...................................... 473 4,986
Royal Bank of Scotland.................................... 232 2,171
RTZ Corp. PLC (Reg.)...................................... 304 5,298
Safeway PLC............................................... 309 1,788
Schroders................................................. 56 1,538
Scot & Newcastle.......................................... 173 1,861
Scottish Power............................................ 326 2,117
Shell Transport & Trading Co. (Reg.)...................... 2,805 19,152
Siebe PLC................................................. 130 2,204
Smithkline Beecham PLC (New).............................. 778 14,323
Standard Chartered PLC.................................... 275 4,195
Tesco PLC................................................. 621 3,837
Unilever.................................................. 230 6,584
United News & Media PLC................................... 133 1,543
Vodafone Group PLC........................................ 871 4,250
Whitbread................................................. 137 1,733
Zeneca Group.............................................. 267 8,830
----------
321,183
----------
1,537,788
----------
INSURANCE--3.18%
20th Century Industries................................... 200 4,200
Aetna, Inc. .............................................. 100 10,237
Allied Group, Inc. ....................................... 150 5,700
Allstate Financial Corp. ................................. 200 14,599
American Annuity Group, Inc. ............................. 200 3,600
American General Corp. ................................... 100 4,775
American International Group, Inc. ....................... 200 29,874
</TABLE>
-------------
O-45
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
INSURANCE (CONTINUED)
Arthur J. Gallagher & Co. ................................ 100 $ 3,775
Berkley (W.R.) Corp. ..................................... 100 5,888
Capital Re Corp. ......................................... 100 5,350
Chubb Corp. .............................................. 100 6,688
CIGNA Corp. .............................................. 100 17,749
Conseco, Inc.............................................. 32 1,184
Crawford & Co. Class B.................................... 200 3,250
Delphi Financial Group, Inc. Class A...................... 102 3,927
Enhance Financial Services Group, Inc. ................... 100 4,388
Executive Risk, Inc. ..................................... 100 5,200
Financial Security Assured Holdings, Ltd. ................ 100 3,894
Foremost Corp. of America................................. 100 5,988
Fremont General Corp. .................................... 100 4,025
Frontier Insurance Group, Inc. ........................... 100 6,475
Horace Mann Educators Corp. .............................. 100 4,900
HSB Group, Inc. .......................................... 100 5,338
Kansas City Life Insurance Co. ........................... 100 7,900
Liberty Corp. ............................................ 100 4,075
Life Re Corp. ............................................ 100 4,663
MBIA Corp. ............................................... 100 11,280
MGIC Investment Corp. .................................... 200 9,588
MMI Companies, Inc. ...................................... 100 2,613
NAC Re Corp. ............................................. 100 4,838
Orion Capital Corp. ...................................... 100 7,375
Reinsurance Group of America, Inc. ....................... 100 5,750
Selective Insurance Group, Inc. .......................... 100 4,844
Sierra Health Services, Inc.+............................. 100 3,125
Trenwick Group, Inc. ..................................... 150 5,625
Vesta Insurance Group, Inc. .............................. 100 4,325
Zurich Reinsurance Centre Holdings, Inc. ................. 100 3,950
----------
240,955
----------
MEDIA--1.08%
Cablevision Systems Corp. Class A+........................ 100 5,400
Evergreen Media Corp. Class A............................. 200 8,925
Heftel Broadcasting Corp.+................................ 100 5,525
Hollinger International, Inc. ............................ 200 2,238
Houghton Mifflin Co. ..................................... 100 6,675
International Family Entertainment, Inc. Class B.......... 200 6,875
SBC Communications, Inc. ................................. 446 27,596
Telecommunications, Inc. Series A (TCI Group)............. 200 2,975
Time Warner, Inc. ........................................ 200 9,650
Viacom, Inc. Class B...................................... 200 6,000
----------
81,859
----------
</TABLE>
-------------
O-46
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
MISCELLANEOUS FINANCE--2.32%
Aames Financial Corp. .................................... 150 $ 2,775
American Express Co. ..................................... 200 14,899
Astoria Financial Corp. .................................. 100 4,750
BOK Financial Corp. ...................................... 100 3,525
Charles Schwab Corp. ..................................... 100 4,069
Coast Savings Financial, Inc.+............................ 100 4,544
Collective Bancorp, Inc. ................................. 100 4,488
Commercial Federal Corp. ................................. 150 5,569
Countrywide Credit Industries, Inc. ...................... 100 3,119
Eaton Vance Corp. (Non Voting)............................ 200 5,563
Federal Home Loan Mortgage Corp. ......................... 200 6,875
Federal National Mortgage Assoc. ......................... 400 17,449
First American Financial Corp. ........................... 100 3,900
GATX Corp. ............................................... 100 5,775
Interra Financial, Inc.................................... 100 4,194
Jefferies Group, Inc. .................................... 100 5,700
JSB Financial, Inc. ...................................... 100 4,325
Legg Mason, Inc. ......................................... 100 5,381
McDonald & Company Investments, Inc. ..................... 100 4,588
Merrill Lynch & Co., Inc. ................................ 200 11,925
Morgan Stanley, Dean Witter, Discover & Co. .............. 365 15,717
Quick & Reilly Group, Inc. ............................... 150 3,488
RCSB Financial, Inc. ..................................... 100 4,788
Roosevelt Financial Group, Inc. .......................... 200 4,400
Sovereign Bancorp, Inc. .................................. 200 3,050
Travelers Group, Inc. .................................... 266 16,774
Value Line, Inc. ......................................... 100 4,325
----------
175,955
----------
MOTOR VEHICLE--0.84%
Borg Warner Automotive, Inc. ............................. 100 5,406
Chrysler Corp. ........................................... 300 9,844
Ford Motor Co. ........................................... 500 18,875
General Motors Corp. ..................................... 300 16,706
Mascotech, Inc. .......................................... 200 4,175
Navistar International Corp. ............................. 500 8,625
----------
63,631
----------
NON-FERROUS--0.37%
Aluminum Company of America............................... 100 7,537
Commercial Metals Co. .................................... 100 3,225
Kaiser Aluminum Corp.+.................................... 200 2,450
Minerals Technologies, Inc. .............................. 100 3,750
Mueller Industries, Inc.+................................. 100 4,375
Reliance Steel & Aluminum Co. ............................ 150 3,900
Wolverine Tube, Inc.+..................................... 100 2,788
----------
28,025
----------
</TABLE>
-------------
O-47
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
OIL--DOMESTIC--0.39%
Atlantic Richfield Co. ................................... 200 $ 14,100
KCS Energy, Inc. ......................................... 200 4,075
Phillips Petroleum Co. ................................... 100 4,375
Unocal Corp. ............................................. 100 3,881
USX-Marathon Group........................................ 100 2,888
----------
29,319
----------
OIL--INTERNATIONAL--2.23%
Amoco Corp. .............................................. 200 17,388
Chevron Corp. ............................................ 300 22,181
Exxon Corp. .............................................. 1,000 61,500
Mobil Corp. .............................................. 200 13,975
Royal Dutch Petroleum Co.--Sponsored ADR+................. 800 43,200
Texaco, Inc. ............................................. 100 10,875
----------
169,119
----------
PAPER--0.40%
International Paper Co. .................................. 200 9,713
Kimberly-Clark Corp. ..................................... 200 9,950
Longview Fibre Co. ....................................... 200 3,325
Thermo Fibertek, Inc. .................................... 200 2,100
Weyerhaeuser Co. ......................................... 100 5,200
----------
30,288
----------
PRODUCER GOODS & MANUFACTURING--3.99%
Allied Signal, Inc. ...................................... 100 8,400
Applied Power, Inc. Class A............................... 100 5,163
AptarGroup, Inc. ......................................... 100 4,525
Barnes Group, Inc. ....................................... 300 8,887
Butler Manufacturing Co. ................................. 100 3,313
Caterpillar, Inc. ........................................ 100 10,737
Deere & Co. .............................................. 100 5,488
Donaldson Co., Inc. ...................................... 100 3,800
Emerson Electric Co. ..................................... 200 11,012
Fisher Scientific International, Inc. .................... 100 4,750
General Electric Co. ..................................... 1,200 78,449
Hon Industries, Inc. ..................................... 100 4,425
Hughes Supply, Inc. ...................................... 100 4,000
IDEX Corp. ............................................... 150 4,950
Illinois Tool Works, Inc. ................................ 200 9,987
Insilco Corp.+............................................ 100 3,750
Ionics, Inc.+............................................. 100 4,550
JLG Industries, Inc. ..................................... 200 2,725
Kaydon Corp. ............................................. 100 4,963
Keystone International, Inc. ............................. 100 3,469
</TABLE>
-------------
O-48
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
PRODUCER GOODS & MANUFACTURING (CONTINUED)
Lincoln Electric Co. ..................................... 100 $ 3,500
Manitowoc Co., Inc. ...................................... 100 4,675
McDermott International, Inc. ............................ 1,000 29,187
NACCO Industries, Inc. Class A............................ 200 11,287
PRI Automation, Inc. ..................................... 200 7,588
Roper Industries, Inc. ................................... 100 5,188
SPS Technologies, Inc.+................................... 100 7,075
SPX Corp. ................................................ 100 6,481
Standex International Corp. .............................. 100 3,000
Teleflex, Inc. ........................................... 200 6,250
Texas Industries, Inc. ................................... 200 5,313
Tyco International, Ltd. ................................. 100 6,956
Valhi, Inc. .............................................. 300 2,438
Valmont Industries, Inc. ................................. 200 3,800
Westinghouse Electric Corp. .............................. 200 4,625
Westpoint Stevens, Inc. Class A+.......................... 200 7,825
----------
302,531
----------
RAILROAD--0.56%
Burlington Northern Santa Fe Corp. ....................... 100 8,988
CSX Corp. ................................................ 100 5,550
Florida East Coast Industry, Inc. ........................ 100 11,100
Norfolk Southern Corp. ................................... 100 10,075
Union Pacific Corp. ...................................... 100 7,050
----------
42,763
----------
REAL PROPERTY--0.18%
Catellus Development Corp.+............................... 200 3,625
Forest City Enterprises, Inc. Class A..................... 150 7,162
Lennar Corp. ............................................. 100 3,194
----------
13,981
----------
RETAIL--2.09%
Albertson's, Inc. ........................................ 100 3,650
AutoZone, Inc. ........................................... 100 2,356
Barnes & Noble, Inc.+..................................... 200 8,599
Best Buy Co., Inc.+....................................... 200 2,975
Claire's Stores, Inc. .................................... 200 3,500
CUC International, Inc. .................................. 200 5,163
Dayton Hudson Corp. ...................................... 100 5,319
Dollar Tree Stores, Inc. ................................. 100 5,038
Fingerhut Companies, Inc. ................................ 200 3,488
Gap, Inc. ................................................ 100 3,888
Heilig-Meyers Co. ........................................ 200 3,925
Home Depot, Inc. ......................................... 200 13,787
</TABLE>
-------------
O-49
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
RETAIL (CONTINUED)
J.C. Penney Co., Inc. .................................... 100 $ 5,219
K Mart Corp. ............................................. 100 1,225
Longs Drug Stores, Inc. .................................. 200 5,238
May Department Stores Co. ................................ 100 4,725
Neiman Marcus Group, Inc.+................................ 200 5,250
Pier 1 Imports, Inc. ..................................... 200 5,300
Proffitt's, Inc.+......................................... 100 4,388
Quality Food Centers, Inc.+............................... 100 3,800
Ruddick Corp. ............................................ 200 3,300
Sears Roebuck & Co. ...................................... 200 10,749
Smith's Food & Drug Centers, Inc. Class B................. 100 5,362
Toys "R' Us, Inc. ........................................ 100 3,500
Waban, Inc.+.............................................. 100 3,219
Wal Mart Stores, Inc. .................................... 900 30,430
Walgreen Co. ............................................. 100 5,363
----------
158,756
----------
STEEL--0.42%
Bethlehem Steel Corp. .................................... 200 2,088
Carpenter Technology Corp. ............................... 100 4,575
Cleveland-Cliffs, Inc. ................................... 100 4,075
Inland Steel Industries, Inc. ............................ 800 20,900
----------
31,638
----------
TELEPHONE--2.64%
ACC Corp. ................................................ 100 3,088
Air Touch Communications.................................. 200 5,475
Ameritech Corp. .......................................... 200 13,588
AT&T Corp. ............................................... 600 21,037
Bell Atlantic Corp. ...................................... 200 15,174
Bellsouth Corp. .......................................... 400 18,549
Cellular Communications International, Inc.+.............. 100 3,350
Coherent, Inc.+........................................... 100 4,450
Frontier Corp. ........................................... 100 1,994
GTE Corp. ................................................ 400 17,549
Intermedia Communications, Inc.+.......................... 100 3,238
Jacor Communications, Inc. Class A+....................... 200 7,650
MCI Communications Corp. ................................. 300 11,484
Mobile Telecommunications Technologies Corp.+............. 200 2,863
Northern Telecom Ltd. .................................... 100 9,100
Nynex Corp. .............................................. 200 11,525
Octel Communications Corp. ............................... 200 4,688
Plantronics, Inc. (New)+.................................. 100 5,013
Sprint Corp. ............................................. 200 10,525
Tel Save Holdings, Inc. .................................. 200 3,050
</TABLE>
-------------
O-50
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
TELEPHONE (CONTINUED)
Tellabs, Inc. ............................................ 100 $ 5,588
U.S. West, Inc. (Communications Group).................... 200 7,538
U.S. West, Inc. (Media Group)............................. 200 4,050
WorldCom, Inc. ........................................... 300 9,600
----------
200,166
----------
TOBACCO--0.53%
Philip Morris Companies., Inc. ........................... 900 39,938
----------
TRANSPORTATION--MISCELLANEOUS--0.37%
Caliber Systems, Inc. .................................... 300 11,175
CNF Transportation, Inc. ................................. 200 6,450
Expeditores International of Washington, Inc. ............ 200 5,675
XTRA Corp. ............................................... 100 4,394
----------
27,694
----------
TRAVEL & RECREATION--0.52%
Anchor Gaming+............................................ 100 4,775
Bristol Hotel Co. ........................................ 100 3,850
Central Parking Corp. .................................... 100 3,481
Coleman Co., Inc. ........................................ 200 3,450
Walt Disney Co. .......................................... 300 24,075
----------
39,631
----------
UTILITIES--1.17%
American Electric Power Co., Inc. ........................ 100 4,200
Atlantic Energy, Inc. .................................... 200 3,363
CILCORP, Inc. ............................................ 100 4,119
Columbia Gas System, Inc. ................................ 100 6,524
Destec Energy, Inc.+...................................... 200 4,330
Duke Power Co. ........................................... 100 4,794
Eastern Enterprises ...................................... 200 6,937
Edison International ..................................... 100 2,488
Enron Corp. .............................................. 100 4,081
FPL Group, Inc. .......................................... 100 4,606
IES Industries, Inc. ..................................... 100 2,950
Nevada Power Co. ......................................... 200 4,250
Orange & Rockland Utilities, Inc. ........................ 100 3,363
Otter Tail Power Co. ..................................... 100 3,300
Pacific Gas & Electric Corp. ............................. 100 2,425
PacifiCorp. .............................................. 100 2,200
SIGCORP, Inc. ............................................ 150 3,806
Southern Co. ............................................. 200 4,375
Tejas Gas Corp. .......................................... 100 3,925
Texas Utilities Co. ...................................... 100 3,444
</TABLE>
-------------
O-51
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
COMMON STOCK (CONTINUED) SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
UTILITIES (CONTINUED)
Washington Gas Light Co. ................................. 200 $ 5,025
WICOR, Inc. .............................................. 100 3,894
----------
88,399
----------
TOTAL COMMON STOCK
(Cost $4,594,572)........................................ 5,521,992
----------
PREFERRED STOCK--0.09%
- -------------------------------------------------------------------------------
AUSTRALIA--0.02%
News Corporation, Ltd. (Limited Voting Shares)............ 324 1,278
----------
GERMANY--0.07%
RWE AG (Non-Voting)....................................... 56 1,949
Sap AG (Non-Voting)....................................... 11 2,283
Volkswagen AG (Non-Voting)................................ 3 1,686
----------
5,918
----------
TOTAL PREFERRED STOCK
(Cost $6,382)............................................ 7,196
----------
WARRANTS--0.00%
- -------------------------------------------------------------------------------
BELGIUM--0.00%
Generale de Banque (expire 11/15/99)+..................... 4 43
----------
FRANCE--0.00%
AXA UAP CVG (expire 01/07/99)+............................ 38 147
Cie Generale de Eaux (expire 05/02/01)+................... 35 21
----------
168
----------
TOTAL WARRANTS
(Cost $95)............................................... 211
----------
U.S. TREASURY OBLIGATIONS--20.33%(a) PAR
- -------------------------------------------------------------------------------
U.S. Treasury Bonds
8.125%, 08/15/19......................................... $ 500,000 $ 570,770
9.125%, 05/15/18......................................... 50,000 62,460
7.250%, 08/15/22......................................... 325,000 339,245
7.125%, 02/15/23......................................... 200,000 206,086
7.500%, 11/15/24......................................... 250,000 269,935
6.000%, 02/15/26......................................... 75,000 67,127
7.250%, 05/15/16......................................... 25,000 26,074
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,528,705)........................................ 1,541,697
----------
</TABLE>
-------------
O-52
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
CASH EQUIVALENTS--5.80% PAR VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------
Federal National Mortgage Association Discount Note(b)
5.480%, 07/18/97........................................ 300,000 $ 299,229
NUMBER OF
SHARES
---------
MSTC Cash Reserve Liquid Asset Fund(c)
5.390%, 07/07/97........................................ 140,401 140,401
----------
TOTAL CASH EQUIVALENTS
(Cost $439,630)......................................... 439,630
----------
TOTAL INVESTMENTS--99.03%
(Cost $6,569,384)....................................... 7,510,726
OTHER ASSETS AND LIABILITIES--0.97%
Other Assets............................................ 163,741
Liabilities............................................. (90,144)
----------
73,597
----------
NET ASSETS--100.00%
Applicable to 635,466 outstanding $0.00001 par value
shares (unlimited shares authorized)................... $7,584,323
==========
NET ASSET VALUE PER SHARE................................ $ 11.94
==========
</TABLE>
- -------
+--Non-Income Producing Security.
NOTES TO STATEMENT OF NET ASSETS
(a) Interest rate represents stated coupon rate of security.
(b) Interest rate represents effective yield at time of purchase.
(c) Interest rate represents the yield on report date.
See accompanying Notes to Financial Statements.
-------------
O-53
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign tax withheld of $2,721)................... $ 44,645
Interest............................................................ 49,049
--------
Total investment income............................................ 93,694
--------
EXPENSES
Investment advisory and administration fee.......................... 22,361
Custodian fees...................................................... 22,994
Portfolio accounting fees........................................... 3,179
Professional fees (legal)........................................... 2,449
Professional fees (audit)........................................... 11,103
Shareholder reports................................................. 7,768
Trustees' fees...................................................... 1,858
Amortization of organization costs.................................. 362
Insurance and other expenses........................................ 1,493
--------
73,567
LESS EXPENSES REDUCED AND ABSORBED (see Note 4)...................... 50,794
--------
Total expenses incurred by Fund.................................... 22,773
--------
NET INVESTMENT INCOME................................................ 70,921
--------
NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Net realized gain from changes in market value...................... 78,187
Net realized loss from changes in foreign exchange rates............ (901)
--------
Net realized gain on investments sold............................... 77,286
Net realized loss on foreign currency transactions.................. (1,546)
--------
Net realized gain on investments sold and foreign currency
transactions....................................................... 75,740
--------
CHANGE IN NET UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY
TRANSLATION
Net unrealized appreciation from changes in market value............ 799,776
Net unrealized depreciation from changes in foreign exchange rates.. (50,543)
--------
Net unrealized appreciation on investments.......................... 749,233
Net unrealized depreciation on translating assets and liabilities
into the reporting currency........................................ (833)
--------
Net unrealized appreciation on investments and foreign currency
translation........................................................ 748,400
--------
Net gain on investments............................................. 824,140
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $895,061
========
</TABLE>
- -------
See accompanying Notes to Financial Statements.
-------------
O-54
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1996*
- -------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income..................... $ 70,921 $ 20,060
Net realized gain on investments sold and
foreign currency transactions............ 75,740 647
Net unrealized appreciation on investments
and foreign currency translation......... 748,400 192,046
---------- ----------
Increase in net assets resulting from
operations............................... 895,061 212,753
---------- ----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold................. 1,724,148 5,171,338
Net asset value of shares issued in
reinvestment of dividends................ -- --
Less payments for shares redeemed......... (418,977) --
---------- ----------
Increase in net assets from capital share
transactions............................. 1,305,171 5,171,338
---------- ----------
Total increase in net assets............. 2,200,232 5,384,091
NET ASSETS
Beginning of period....................... 5,384,091 --
---------- ----------
End of period (including undistributed net
investment income of $91,004 and $20,060,
respectively.)........................... $7,584,323 $5,384,091
========== ==========
NUMBER OF FUND SHARES
Sold...................................... 158,514 516,513
Reinvested................................ -- --
Redeemed.................................. (39,561) --
---------- ----------
Net increase in shares outstanding....... 118,953 516,513
SHARES OUTSTANDING
Beginning of period....................... 516,513 --
---------- ----------
End of period............................. 635,466 516,513
========== ==========
</TABLE>
- -------
* For the period from November 1, 1996 (commencement of operations) to December
31, 1996.
See accompanying Notes to Financial Statements.
-------------
O-55
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
1. DESCRIPTION OF THE FUND
The Schwab Asset Director(R)--High Growth Portfolio (the "Fund") is a series
of Schwab Annuity Portfolios (the "Trust"), a diversified, no-load, open-end
investment management company organized as a Massachusetts business trust on
January 21, 1994 and registered under the Investment Company Act of 1940, as
amended.
The Fund is intended as an investment vehicle for variable annuity contracts
and variable life insurance policies to be offered by separate accounts of
participating life insurance companies and for pension and retirement plans
qualified under the Internal Revenue Code of 1986, as amended. The assets of
each series are segregated and accounted for separately.
2. SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are in conformity with gener-
ally accepted accounting principles for investment companies. The preparation
of financial statements in accordance with generally accepted accounting prin-
ciples requires management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
Security valuation--Investments in securities traded on an exchange and in-
vestments in money market funds 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. Unlisted securities for which market
quotations are readily available are valued at the mean between the most re-
cent bid and asked prices. Securities for which no quotations are readily
available are valued at fair value as determined by the Fund's investment man-
ager pursuant to guidelines adopted in good faith by the Board of Trustees.
Bonds and notes are generally valued at prices obtained from an independent
bond-pricing service. These securities are valued at the mean between the rep-
resentative quoted bid and asked prices, or if such prices are not available,
at prices for securities of comparable maturity, quality and type. Short-term
securities with 60 days or less to maturity are stated at amortized cost,
which approximates market value.
Security transactions and investment income--Security transactions are ac-
counted for on a trade date basis (date the order to buy or sell is executed).
Realized gains and losses from security tranactions are determined on an iden-
tified cost basis. Dividend income and distributions to shareholders are re-
corded on the ex-dividend date. Interest income is accrued daily and includes
amortization of premium and accretion of discount on investments. For callable
bonds purchased at a premium, the excess of the purchase price over the call
value is amortized against interest income through the call date. If the call
provision is not exercised, any remaining premium is amortized through the fi-
nal maturity date.
Foreign currency translation--The accounting records of the Fund are main-
tained in U.S. dollars. Investment securities and all other assets and liabil-
ities of the Fund denominated in a foreign currency are translated into U.S.
dollars at the exchange rates on June 30, 1997. Purchases and sales of foreign
securities, foreign income receipts and foreign expense payments are trans-
lated into U.S. dollars at the exchange rate in effect on the dates of the re-
spective transactions.
The Fund separates within its statement of operations the portion of realized
and unrealized gains and losses resulting from changes in foreign exchange
rates from that arising from changes in securities' market values.
Forward currency contracts--A forward currency contract ("Forward") is an
agreement between two parties to buy and sell a currency at a set price on a
future date. The value of the Forward fluctuates with changes in currency ex-
change rates. The Forward is marked-to-market daily and the change in value is
recorded by the Fund as an unrealized gain or loss. When the Forward is
closed, the Fund records a realized gain or loss equal to the difference be-
tween the value at the time the contract was opened and the value at the time
the contract was closed. The Fund engages in Forwards in connection with the
purchase and sale of portfolio securities to minimize the uncertainty of
changes in future exchange rates. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of the contracts
or if the value of the foreign currency changes unfavorably. At June 30, 1997,
the Fund had outstanding Forwards as set forth below:
-------------
O-56
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION
DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
---------- --------------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C>
CONTRACTS PURCHASED:
French Franc........... 07/31/97 36,145 $ 6,223 $ 6,150 $ (73)
Pound Sterling......... 07/01/97 1,981 3,296 3,299 3
Italian Lira........... 07/01/97 21,825,221 12,979 12,842 (137)
CONTRACTS SOLD:
French Franc........... 07/31/97 25,500 4,390 4,339 51
Pound Sterling......... 07/01/97 5,050 8,403 8,410 (7)
Italian Lira........... 07/01/97 3,347,855 1,991 1,970 21
-----
Net unrealized depreciation on Forwards................................ $(142)
=====
</TABLE>
Deferred organization costs--Costs incurred in connection with the organiza-
tion of the Fund and its initial registration with the Securities and Exchange
Commission are amortized on a straight-line basis over a five-year period from
each Fund's commencement of operations.
Expenses--Expenses arising in connection with a Fund are charged directly to
that Fund. Expenses common to all series of the Trust are generally allocated
to each series in proportion to their relative net assets.
Federal income taxes--It is the Fund's policy to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to dis-
tribute all net investment income and realized net capital gains, if any, to
shareholders. Therefore, no federal income tax provision is required. The Fund
is considered a separate entity for tax purposes.
At June 30, 1997, (for financial reporting and federal income tax purposes),
net unrealized appreciation aggregated $941,342 of which $1,027,027 related to
appreciation securities and $85,685 related to depreciation securities.
3. TRANSACTIONS WITH AFFILIATES
Investment advisory and administration agreement--The Trust has investment
advisory and administration agreements with Charles Schwab Investment Manage-
ment, Inc. (the "Investment Manager"). For advisory services and facilities
furnished, each Fund pays 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 assets over $2 billion. The investment Manager has reduced a
portion of its fee for the period ended June 30, 1997 year (see Note 4).
Sub-advisory agreement--The Investment Manager had a sub-advisory agreement
with Symphony Asset Management, Inc. ("Symphony") to serve as sub-adviser to
the Fund. Symphony did not receive compensation directly from the Fund. Howev-
er, the Investment Manager paid Symphony a graduated annual fee, payable
monthly, based on the aggregate daily net assets of the Fund and certain other
funds advised by the Investment Manager. Effective February 28, 1997, the In-
vestment Manager terminated the sub-advisory agreement with Symphony and as-
sumed day-to-day advisory responsibility for the Fund.
Officers and trustees--Certain officers and trustees of the Trust are also
officers and/or directors of the Investment Manager. During the period year
ended June 30, 1997, the Trust made no direct payments to its officers or
trustees who were "interested persons" within the meaning of the Investment
Company Act of 1940, as amended. The Fund incurred fees aggregating $1,858 re-
lated to the Trust's unaffiliated trustees.
4. EXPENSES REDUCED AND ABSORBED BY THE INVESTMENT MANAGER AND SCHWAB
The Investment Manager reduced a portion of their fees and absorbed certain
expenses in order to limit the Fund's ratio of operating expenses to average
net assets. For the period ended June 30, 1997, the total of such fees and ex-
penses reduced and absorbed by the Investment Manager were $50,794. (see Note
8).
-------------
O-57
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
5. BORROWING AGREEMENT
The Trust has an agreement with State Street Bank and Trust Company, the
Fund's custodian, whereby each Fund may borrow up to $10,000,000 on a tempo-
rary basis, to fund redemptions. Amounts borrowed under this arrangement bear
interest at periodically negotiated rates and may be collateralized by the as-
sets of the Fund. During the period ended June 30, 1997, no borrowings were
made under this arrangement.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, other than short-term obliga-
tions, aggregated $2,550,605 and $1,079,435, respectively, for the period
ended June 30, 1997.
7. COMPOSITION OF NET ASSETS
At June 30, 1997, net assets for the Fund consisted of:
<TABLE>
<CAPTION>
<S> <C>
Paid in capital................................................... $6,476,449
Accumulated undistributed net investment income................... 91,004
Accumulated net realized gain on investments sold and foreign
currency transactions............................................ 76,423
Net unrealized appreciation on investments........................ 941,342
Net unrealized depreciation on translating assets and liabilities
into the reporting currency...................................... (895)
----------
$7,584,323
==========
</TABLE>
At June 30, 1997, the Fund's Statement of Net Assets included: $53,349 pay-
able for securities purchased, $24,295 receivable for Fund shares sold, and
$2,371 receivable from advisor.
-------------
O-58
<PAGE>
-------------
SCHWAB ASSET DIRECTOR(R)--HIGH GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1997 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1996**
------------- -------------------
<S> <C> <C>
Net asset value at beginning of period....... $10.42 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income....................... 0.10 0.04
Net realized and unrealized gain on
investments and foreign currency
transactions............................... 1.42 0.38
--------- ---------
Total from investment operations............ 1.52 0.42
LESS DISTRIBUTIONS
Dividends from net investment income........ -- --
Distributions from realized gain on
investments................................ -- --
--------- ---------
Total distributions......................... -- --
--------- ---------
Net asset value at end of period............. $11.94 $10.42
========= =========
TOTAL RETURN (not annualized)................ 14.59% 4.20%
RATIOS/ SUPPLEMENTAL DATA
Net assets, end of period................... 7,584,323 5,384,091
Ratio of expenses to average net assets+.... 0.75%* 0.67%*
Ratio of net investment income to average
net assets................................. 2.32%* 2.35%*
Portfolio turnover rate..................... 20% 7%
Average commission rate..................... $ 0.02 $ 0.02
</TABLE>
- -------
+ The information contained in the above table is based on actual expenses
for the period, after giving effect to the portion of fees and expenses re-
duced and expenses absorbed by the Investment Manager and Schwab. Had these
fees and expenses not been reduced and absorbed, the Fund's expense and net
investment income ratios would have been:
Ratio of expenses to average net assets...... 2.41%* 4.71%*
Ratio of net investment income to average net
assets...................................... 0.66%* (1.69%)*
* Annualized
** For the period from November 1, 1996 (commencement of operations) to Decem-
ber 31, 1996.
-------------
O-59
