UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-7704
Schwab Capital Trust
-----------------------------------------------
(Exact name of registrant as specified in charter)
101 Montgomery Street, San Francisco, California 94104
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(Address of principal executive offices) (Zip code)
Evelyn Dilsaver
Schwab Capital Trust
101 Montgomery Street, San Francisco, California 94104
-----------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (415) 627-7000
Date of fiscal year end: October 31
Date of reporting period: October 31, 2004
ITEM 1: REPORT(S) TO SHAREHOLDERS.
SCHWAB EQUITY INDEX FUNDS
ANNUAL REPORT
October 31, 2004
Schwab S&P 500 Fund
Schwab 1000 Fund(R)
Schwab Small-Cap
Index Fund(R)
Schwab Total Stock Market
Index Fund(R)
Schwab International
Index Fund(R)
[CHARLES SCHWAB LOGO]
Five ways to put the power of the stock market in your portfolio--with some of
the lowest expenses in the industry.
IN THIS REPORT
Management's Discussion.................................................. 2
The president of SchwabFunds(R) and the funds' managers take a look
at the factors that shaped fund performance during the report period.
Performance at a Glance.......... 5
Schwab S&P 500 Fund
Investor Shares: SWPIX Select Shares(R): SWPPX e.Shares(R): SWPEX
The fund's goal is to track the total return of the S&P 500(R)
Index. 1
Performance and Fund Facts....... 7
Financial Statements............. 25
Schwab 1000 Fund(R)
Investor Shares: SNXFX Select Shares: SNXSX
The fund's goal is to match the total return of the Schwab 1000
Index(R).
Performance and Fund Facts....... 11
Financial Statements............. 35
Schwab Small-Cap Index Fund(R)
Investor Shares: SWSMX Select Shares: SWSSX
The fund's goal is to track the total return of small capitalization
U.S. stocks, as measured by the Schwab Small-Cap Index(R).
Performance and Fund Facts....... 14
Financial Statements............. 44
Schwab Total Stock Market Index Fund(R)
Investor Shares: SWTIX Select Shares: SWTSX
The fund's goal is to track the total return of the entire U.S. stock
market, as measured by the Dow Jones Wilshire 5000 Composite
Index(SM). 2
Performance and Fund Facts....... 17
Financial Statements............. 53
Schwab International Index Fund(R)
Investor Shares: SWINX Select Shares: SWISX
The fund's goal is to track the total return of large, publicly traded
non-U.S. companies from countries with developed equity markets
outside the United States, as measured by the Schwab International
Index(R).
Performance and Fund Facts....... 20
Financial Statements............. 63
Fund Expenses............................................................ 23
Financial Notes.......................................................... 71
Fund Trustees............................................................ 77
Glossary................................................................. 80
Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM)
Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab).
1 Standard & Poor's(R), S&P(R), S&P 500(R), Standard & Poor's 500(R) and 500(R)
are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for
use by the fund. The fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's, and Standard & Poor's makes no representation regarding the
advisability of investing in the fund.
2 "Dow Jones", "Wilshire", "The DJW 5000(SM)", "The Dow Jones Wilshire 5000(SM)"
and "The Dow Jones Wilshire 5000 Composite Index(SM)" are service marks of Dow
Jones & Company, Inc. and Wilshire Associates Incorporated. The Schwab Total
Stock Market Index Fund, based on The Dow Jones Wilshire 5000 Composite
Index(SM), is not sponsored, endorsed, sold or promoted by Dow Jones or
Wilshire; and, neither Dow Jones nor Wilshire makes any representation
regarding the advisability of investing in such a product.
[PHOTO OF CHARLES SCHWAB]
Charles Schwab
Chairman
FROM THE CHAIRMAN
Dear Shareholder:
As we get ready for 2005, I want to remind you that you might want to add one
more item to your list of New Year's resolutions--to review and, if necessary,
rebalance your investment portfolio. After all, staying on track is as important
in investing as it is in any other part of life. No matter whether it's a good
or bad investment climate, you need to make sure that you own a diversified mix
of investments and that your asset allocation matches your individual goals,
time frame and tolerance for risk.
One efficient way to be diversified is by owning a broad-based mutual fund.
Equity mutual funds also can help you to diversify the stock side of your
portfolio. While our experienced portfolio managers adhere to each fund's
objective, it still is important to review your portfolio to make sure the
holdings in your funds don't overlap and you're not overconcentrated in one
asset class.
On a final note, I'm very happy to announce that Evelyn Dilsaver has been named
CEO and President of SchwabFunds(R). Although new to the position, Evelyn is no
stranger to SchwabFunds, having been an officer in several other capacities at
Schwab. Her broad experience in product creation, coupled with a comprehensive
understanding of your financial needs and her commitment to you, make her the
ideal candidate for her new role.
Thank you for investing with us.
Sincerely,
/s/ Charles Schwab
MANAGEMENT'S DISCUSSION for the year ended October 31, 2004
[PHOTO OF EVELYN DILSAVER]
EVELYN DILSAVER is President and CEO of Charles Schwab Investment Management,
Inc. and is president of each of the funds covered in this report. She joined
the firm in 1992 and has held a variety of executive positions at Schwab.
Dear Shareholder:
I am very excited about my new role as President and CEO of SchwabFunds(R). I
believe that my experience at Schwab has prepared me well for this role, as each
position has been focused on meeting the needs of our clients. I promise that I
will continue on this path and that my goal is to offer you even better service
and more relevant choices.
When we discuss SchwabFunds with our clients, for example, we often hear that
you want to know that you're getting excellent value. Oftentimes, we find that
shareholders are unaware that some of the more popular SchwabFunds offer Select
Shares(R), a share class that carries lower expenses in exchange for higher
investment minimums.
My plan is to build on this legacy of value and continue to offer unique
investment solutions to help you meet your financial goals.
I also want to let you know that we plan to continue to provide and expand
information on SchwabFunds on schwab.com. Providing this information is one of
the many ways we help individual investors choose investments that are
appropriate for their financial goals and time horizons.
I look forward to serving you in my new role. I also want to remind you that
your trust is very important to us, and I will do all I can to earn and maintain
that trust. Thank you for investing in SchwabFunds.
Sincerely,
/s/ Evelyn Dilsaver
2 Schwab Equity Index Funds
[PHOTO OF JEFFREY MORTIMER]
JEFFREY MORTIMER, CFA, senior vice president and chief investment officer,
equities, of the investment adviser is responsible for the overall management of
each of the funds. Prior to joining the firm in October 1997, he worked for more
than nine years in asset management.
[PHOTO OF LARRY MANO]
LARRY MANO, a director and a portfolio manager, is responsible for the
day-to-day management of the funds. Prior to joining the firm in 1998, he worked
for 20 years in equity management.
THE INVESTMENT ENVIRONMENT AND THE FUNDS
THE ENCOURAGING ECONOMIC NEWS THAT WAS REPORTED TOWARD THE END OF 2003 CONTINUED
TO IMPROVE INTO 2004. Businesses added to their inventories, factory orders rose
and production gained some strength. Retail sales continued to rise and higher
commodity prices were holding. Mortgage refinancing activity, while still
significant, waned as mortgage rates inched slightly upward. And finally, the
last piece of the economic puzzle--job growth--began to pick up some steam.
In fact, aside from a "soft patch" in early summer, the economy was clicking on
all cylinders.
With the economic recovery more broad-based, investors, who only a year ago
feared deflation, started to worry about inflation. Their inflationary concerns
were based on surging oil prices, which had hit an all-time high amid fears of
supply interruptions. And while commodity prices moderated somewhat later in the
report period, previous increases started to show up in broad measures of
inflation. Labor costs also were beginning to rise. Nonetheless, the Federal
Reserve (the Fed) continued to hold the Fed funds rate near a 45-year low until
June 2004.
While third-quarter GDP moved in the right direction, up to an annualized 3.7%
from 3.3% in second quarter, higher commodity prices had effectively eroded many
consumers' purchasing power. Geopolitical events also had wreaked havoc on oil
markets and, after a brief decline in the price of oil following OPEC's decision
to boost production, a confluence of supply concerns and robust global demand
pushed crude to new highs. In addition to these issues, daily headlines about
terrorism and the fierce run for the White House all added up to an
uncomfortable sense of uncertainty, keeping many investors on the sidelines.
Despite all these concerns, which escalated toward the end of the report period,
the strength of the market early in the period, combined with strong second- and
third-quarter valuations and earnings resulted in a positive showing for
equities.
Schwab Equity Index Funds 3
MANAGEMENT'S DISCUSSION continued
The strength of the market early in the period, combined with strong
second- and third-quarter valuations and earnings resulted in a positive
showing for equities.
More specifically, the S&P 500(R) Index was up 9.42% for the 12-month report
period, while the Russell 2000(R) Index was up 11.73%. In terms of style, value
edged out growth early in the period and gained momentum, significantly
outperforming growth at the end of the period.
THE SCHWAB S&P 500 FUND ended the 12-month report period up 9.03%, closely
tracking its benchmark, the S&P 500(R) Index, which was up 9.42%. Interestingly,
most of this appreciation occurred during the beginning of the report period.
Since then--starting in February 2004--the market traded in a relatively narrow
trading range. During the report period, the price of crude oil increased
substantially, making energy-related stocks, which were up 44.49%, the top
performers in the fund. Exxon Mobil Corp. and ChevronTexaco Corp. were the
biggest contributors to returns. On the flip side, the Information Technology
sector continued to have problems and was down 0.88%, the only sector to have a
net negative return. Hurting returns the most was technology giant Intel Corp.,
which was down 32.30% for the report period.
ASSET CLASS PERFORMANCE COMPARISON % returns during the report period
This graph compares the performance of various asset classes during the report
period. Final performance figures for the period are in the key below.
9.42% S&P 500(R) INDEX: measures U.S. large-cap stocks
11.73% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
18.84% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in
Europe, Australasia and the Far East
5.53% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond market
[LINE GRAPH]
LEHMAN
S&P RUSSELL MSCI- BROTHERS
500(R) 2000(R) EAFE(R) U.S. AGGREGATE
INDEX INDEX INDEX BOND INDEX
31-Oct-03 0.00 0.00 0.00 0.00
07-Nov-03 0.29 2.82 0.78 -0.63
14-Nov-03 0.08 0.94 1.80 0.61
21-Nov-03 -1.33 -0.38 0.15 0.86
28-Nov-03 0.88 3.55 2.22 0.24
05-Dec-03 1.24 2.14 4.70 0.95
12-Dec-03 2.48 3.80 5.04 0.97
19-Dec-03 3.90 3.68 6.46 1.50
26-Dec-03 4.59 5.21 7.84 1.53
02-Jan-04 5.85 6.40 10.98 0.81
09-Jan-04 7.16 9.14 13.86 2.16
16-Jan-04 8.89 12.04 12.31 2.46
23-Jan-04 9.07 13.13 15.10 2.33
30-Jan-04 8.12 10.24 11.77 2.07
06-Feb-04 9.26 10.89 13.33 2.35
13-Feb-04 9.63 11.12 15.41 2.80
20-Feb-04 9.49 10.13 15.13 2.64
27-Feb-04 9.62 11.23 14.35 3.18
05-Mar-04 10.80 13.90 16.17 3.85
12-Mar-04 7.38 10.77 11.07 4.12
19-Mar-04 6.36 8.49 13.10 4.07
26-Mar-04 6.20 8.91 12.52 3.88
02-Apr-04 9.47 14.78 16.39 2.72
09-Apr-04 9.27 13.73 16.44 2.62
16-Apr-04 8.83 10.99 15.04 2.03
23-Apr-04 9.42 12.39 14.61 1.51
30-Apr-04 6.27 6.54 12.39 1.25
07-May-04 5.47 4.43 10.88 -0.19
14-May-04 5.27 3.54 6.99 0.03
21-May-04 5.09 3.93 9.59 0.21
28-May-04 7.73 8.24 12.63 0.84
04-Jun-04 7.95 8.15 12.87 0.36
11-Jun-04 9.32 8.43 13.42 0.32
18-Jun-04 9.21 8.73 14.66 0.78
25-Jun-04 9.18 12.01 15.45 1.18
02-Jul-04 8.35 11.13 15.27 2.16
09-Jul-04 7.18 7.52 15.10 2.22
16-Jul-04 6.10 5.96 14.50 2.69
23-Jul-04 4.64 2.87 10.84 2.41
30-Jul-04 6.19 5.20 11.50 2.42
06-Aug-04 2.58 -0.81 10.63 3.63
13-Aug-04 2.74 -1.21 9.57 3.72
20-Aug-04 6.01 4.63 11.08 3.79
27-Aug-04 6.95 5.36 12.29 3.89
03-Sep-04 7.56 6.26 12.42 3.70
10-Sep-04 8.58 8.88 14.40 4.31
17-Sep-04 9.07 9.54 14.32 4.59
24-Sep-04 7.31 8.18 13.88 4.93
01-Oct-04 9.41 11.89 16.43 4.38
08-Oct-04 8.56 10.13 17.91 4.79
15-Oct-04 7.23 8.95 16.46 5.20
22-Oct-04 6.03 8.64 17.65 5.54
29-Oct-04 9.42 11.73 18.84 5.53
31-Oct-04 9.42 11.73 18.84 5.53
These figures assume dividends and distributions were reinvested. Index figures
do not include trading and management costs, which would lower performance.
Indices are unmanaged and you cannot invest in them directly. Remember that past
performance is not an indication of future results. Data source: Charles Schwab
& Co., Inc.
4 Schwab Equity Index Funds
PERFORMANCE AT A GLANCE
Total return for the 12 months ended 10/31/04
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
SCHWAB S&P 500 FUND
Investor Shares............ 9.03%
Select(R) Shares........... 9.25%
e.Shares(R)................ 9.10%
Benchmark.................. 9.42%
Performance Details........ pages 7-9
SCHWAB 1000 FUND(R)
Investor Shares............ 8.78%
Select Shares.............. 8.90%
Benchmark.................. 9.23%
Performance Details........ pages 11-12
SCHWAB SMALL-CAP INDEX FUND(R)
Investor Shares............ 9.98%
Select Shares.............. 10.16%
Benchmark.................. 10.38%
Performance Details........ pages 14-15
SCHWAB TOTAL STOCK MARKET
INDEX FUND(R)
Investor Shares............ 9.93%
Select Shares.............. 10.16%
Benchmark.................. 10.00%
Performance Details........ pages 17-18
SCHWAB INTERNATIONAL INDEX FUND(R)
Investor Shares............ 18.40%
Select Shares.............. 18.56%
Benchmark.................. 19.32%
Performance Details........ pages 20-21
THE SCHWAB 1000 FUND was up 8.78% for the report period, tracking its benchmark,
the Schwab 1000 Index(R), which was up 9.23%. During the report period, the
price of crude oil increased substantially, making energy-related stocks, which
were up 44.49%, the top performers in the fund. Exxon Mobil Corp. and
ChevronTexaco Corp. were the biggest contributors to returns. On the flip side,
the Information Technology sector continued to have problems and was down 0.88%,
the only sector to have a net negative return. Hurting returns the most was
technology giant Intel Corp., which was down 32.30% for the report period.
THE SCHWAB SMALL-CAP INDEX FUND was up 9.98% for the period, closely tracking
its benchmark, the Schwab Small-Cap Index(R). The price of oil impacted
performance significantly, and just as its larger-cap cohorts rallied in the
Energy sector, so, too, did small-cap. Energy was up 66.00%, with Tesoro
Petroleum Corp. and Quicksilver Resources, Inc. having the biggest positive
impact. The Telecommunications sector fell approximately 36.22%, with Primus
Telecommunications and Dobson Communications Corp. having the most negative
impact.
THE SCHWAB TOTAL STOCK MARKET INDEX FUND was up 9.93% for the 12-month report
period, closely tracking its benchmark, the Dow Jones Wilshire 5000 Composite
Index(SM). The best performing sectors were Energy and Utilities, with Exxon
Mobil Corp. and TXU Corp. (Utilities) contributing most to returns. The fund
also benefited from its exposure to small-cap stocks, which led the market for
most of the report period. The worst performing sectors were Information
Technology and Health Care, with Intel Corp. and Merck & Co. negatively
impacting returns.
All fund and index figures on this page assume dividends and distributions were
reinvested. Index figures do not include trading and management costs, which
would lower performance. Indices are unmanaged, and you cannot invest in them
directly.
Expenses may be partially absorbed by CSIM and Schwab. Without these reductions,
the funds' total returns would have been lower. Performance does not reflect the
deduction of taxes that a shareholder would pay on fund distributions or on the
redemption of fund shares.
Small company stocks are subject to greater volatility than other asset
categories. Foreign securities can involve risks such as political and economic
instability and currency risk.
Schwab Equity Index Funds 5
MANAGEMENT'S DISCUSSION continued
All countries in the International Index Fund, as well as all sectors,
posted positive returns.
THE SCHWAB INTERNATIONAL INDEX FUND was up 18.40% for the period, slightly
trailing its benchmark, the Schwab International Index(R). All countries in the
fund, as well as all sectors, posted positive returns. The best performing
countries were Belgium, Sweden, Italy and Spain. The worst performing country
was Japan but it still posted an 8.00% gain. The best sectors were Energy and
Utilities. The worst performing sector was Information Technology, which also
still was positive for the 12-month period.
Nothing in this report represents a recommendation of a security by the
investment adviser. Manager views and portfolio holdings may have changed since
the report date.
6 Schwab Equity Index Funds
SCHWAB S&P 500 FUND
INVESTOR SHARES PERFORMANCE as of 10/31/04
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Investor Shares with
its benchmark and Morningstar category. The table below the chart shows two
types of after-tax returns.
[BAR CHART]
Fund: Benchmark: Fund Category:
INVESTOR S&P 500(R) MORNINGSTAR
SHARES INDEX LARGE-CAP BLEND
1 YEAR 9.03% 9.42% 7.89%
5 YEARS -2.50% -2.21% -1.72%
SINCE INCEPTION: 5/1/96 7.92% 8.33% 6.80%
1 YEAR 5 YEARS SINCE INCEPTION
Fund: Fund Category: Fund: Fund Category: Fund: Fund Category:
INVESTOR MORNINGSTAR INVESTOR MORNINGSTAR INVESTOR MORNINGSTAR
TOTAL RETURNS AFTER TAX SHARES LARGE-CAP BLEND SHARES LARGE-CAP BLEND SHARES LARGE-CAP BLEND
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 8.82% 5.88% -2.87% -2.76% 7.55% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 6.12% 4.04% -2.31% -1.93% 6.75% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the fund's Investor Shares, compared with a similar investment in
its benchmark.
[LINE GRAPH]
$19,123 INVESTOR SHARES
$19,753 S&P 500(R) INDEX
S&P
INVESTOR 500(R)
SHARES INDEX
01-May-96 $10,000 $10,000
31-May-96 $10,250 $10,257
30-Jun-96 $10,290 $10,296
31-Jul-96 $9,840 $9,841
31-Aug-96 $10,040 $10,049
30-Sep-96 $10,600 $10,613
31-Oct-96 $10,880 $10,906
30-Nov-96 $11,690 $11,731
31-Dec-96 $11,462 $11,498
31-Jan-97 $12,157 $12,216
28-Feb-97 $12,248 $12,312
31-Mar-97 $11,744 $11,808
30-Apr-97 $12,430 $12,511
31-May-97 $13,186 $13,272
30-Jun-97 $13,760 $13,867
31-Jul-97 $14,849 $14,969
31-Aug-97 $14,012 $14,131
30-Sep-97 $14,778 $14,904
31-Oct-97 $14,284 $14,406
30-Nov-97 $14,930 $15,073
31-Dec-97 $15,184 $15,332
31-Jan-98 $15,357 $15,502
28-Feb-98 $16,455 $16,620
31-Mar-98 $17,289 $17,471
30-Apr-98 $17,452 $17,647
31-May-98 $17,147 $17,344
30-Jun-98 $17,838 $18,048
31-Jul-98 $17,645 $17,857
31-Aug-98 $15,092 $15,278
30-Sep-98 $16,058 $16,257
31-Oct-98 $17,340 $17,579
30-Nov-98 $18,387 $18,645
31-Dec-98 $19,443 $19,718
31-Jan-99 $20,253 $20,543
28-Feb-99 $19,617 $19,904
31-Mar-99 $20,397 $20,700
30-Apr-99 $21,176 $21,501
31-May-99 $20,663 $20,994
30-Jun-99 $21,812 $22,159
31-Jul-99 $21,125 $21,467
31-Aug-99 $21,012 $21,360
30-Sep-99 $20,428 $20,775
31-Oct-99 $21,709 $22,090
30-Nov-99 $22,150 $22,539
31-Dec-99 $23,448 $23,866
31-Jan-00 $22,266 $22,668
29-Feb-00 $21,841 $22,239
31-Mar-00 $23,967 $24,414
30-Apr-00 $23,241 $23,679
31-May-00 $22,753 $23,194
30-Jun-00 $23,313 $23,767
31-Jul-00 $22,940 $23,396
31-Aug-00 $24,361 $24,849
30-Sep-00 $23,075 $23,537
31-Oct-00 $22,971 $23,438
30-Nov-00 $21,156 $21,591
31-Dec-00 $21,261 $21,697
31-Jan-01 $22,014 $22,467
28-Feb-01 $19,996 $20,418
31-Mar-01 $18,730 $19,124
30-Apr-01 $20,174 $20,610
31-May-01 $20,310 $20,748
30-Jun-01 $19,808 $20,244
31-Jul-01 $19,609 $20,045
31-Aug-01 $18,375 $18,790
30-Sep-01 $16,890 $17,272
31-Oct-01 $17,204 $17,602
30-Nov-01 $18,521 $18,952
31-Dec-01 $18,678 $19,119
31-Jan-02 $18,403 $18,840
28-Feb-02 $18,044 $18,476
31-Mar-02 $18,710 $19,171
30-Apr-02 $17,579 $18,009
31-May-02 $17,442 $17,876
30-Jun-02 $16,195 $16,603
31-Jul-02 $14,938 $15,310
31-Aug-02 $15,023 $15,409
30-Sep-02 $13,396 $13,734
31-Oct-02 $14,568 $14,943
30-Nov-02 $15,424 $15,823
31-Dec-02 $14,516 $14,894
31-Jan-03 $14,130 $14,504
28-Feb-03 $13,915 $14,286
31-Mar-03 $14,044 $14,425
30-Apr-03 $15,202 $15,614
31-May-03 $15,995 $16,436
30-Jun-03 $16,188 $16,647
31-Jul-03 $16,478 $16,940
31-Aug-03 $16,788 $17,270
30-Sep-03 $16,606 $17,087
31-Oct-03 $17,539 $18,054
30-Nov-03 $17,689 $18,213
31-Dec-03 $18,601 $19,167
31-Jan-04 $18,938 $19,520
29-Feb-04 $19,199 $19,791
31-Mar-04 $18,906 $19,493
30-Apr-04 $18,601 $19,187
31-May-04 $18,851 $19,449
30-Jun-04 $19,210 $19,827
31-Jul-04 $18,569 $19,170
31-Aug-04 $18,645 $19,247
30-Sep-04 $18,840 $19,455
31-Oct-04 $19,123 $19,753
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/04 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
Schwab Equity Index Funds 7
SCHWAB S&P 500 FUND
SELECT SHARES(R) PERFORMANCE as of 10/31/04
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Select Shares with its
benchmark and Morningstar category. The table below the chart shows two types of
after-tax returns.
[BAR CHART]
Fund: Benchmark: Fund Category:
SELECT S&P 500(R) MORNINGSTAR
SHARES INDEX LARGE-CAP BLEND
1 YEAR 9.25% 9.42% 7.89%
5 YEARS -2.34% -2.21% -1.72%
SINCE INCEPTION: 5/19/97 5.55% 5.74% 1.14%
1 YEAR 5 YEARS SINCE INCEPTION
Fund: Fund Category: Fund: Fund Category: Fund: Fund Category:
SELECT MORNINGSTAR SELECT MORNINGSTAR SELECT MORNINGSTAR
TOTAL RETURNS AFTER TAX SHARES LARGE-CAP BLEND SHARES LARGE-CAP BLEND SHARES LARGE-CAP BLEND
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 9.02% 5.88% -2.75% -2.76% 5.14% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 6.28% 4.04% -2.20% -1.93% 4.58% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $25,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $25,000
investment (the minimum investment for this share class) in the fund's Select
Shares, compared with a similar investment in its benchmark.
[LINE GRAPH]
$37,405 SELECT SHARES
$37,900 S&P 500(R) INDEX
S&P
SELECT 500(R)
SHARES INDEX
19-May-97 $25,000 $25,000
31-May-97 $25,468 $25,465
30-Jun-97 $26,595 $26,606
31-Jul-97 $28,698 $28,721
31-Aug-97 $27,083 $27,113
30-Sep-97 $28,560 $28,596
31-Oct-97 $27,608 $27,641
30-Nov-97 $28,873 $28,920
31-Dec-97 $29,373 $29,418
31-Jan-98 $29,688 $29,744
28-Feb-98 $31,830 $31,889
31-Mar-98 $33,440 $33,522
30-Apr-98 $33,775 $33,860
31-May-98 $33,185 $33,278
30-Jun-98 $34,520 $34,629
31-Jul-98 $34,148 $34,262
31-Aug-98 $29,218 $29,314
30-Sep-98 $31,083 $31,193
31-Oct-98 $33,578 $33,729
30-Nov-98 $35,623 $35,773
31-Dec-98 $37,670 $37,834
31-Jan-99 $39,238 $39,415
28-Feb-99 $38,008 $38,190
31-Mar-99 $39,515 $39,717
30-Apr-99 $41,043 $41,254
31-May-99 $40,070 $40,281
30-Jun-99 $42,273 $42,516
31-Jul-99 $40,943 $41,190
31-Aug-99 $40,745 $40,984
30-Sep-99 $39,615 $39,860
31-Oct-99 $42,115 $42,384
30-Nov-99 $42,968 $43,245
31-Dec-99 $45,500 $45,792
31-Jan-00 $43,210 $43,494
29-Feb-00 $42,385 $42,670
31-Mar-00 $46,525 $46,843
30-Apr-00 $45,118 $45,433
31-May-00 $44,175 $44,502
30-Jun-00 $45,258 $45,601
31-Jul-00 $44,555 $44,890
31-Aug-00 $47,328 $47,678
30-Sep-00 $44,818 $45,161
31-Oct-00 $44,615 $44,971
30-Nov-00 $41,100 $41,427
31-Dec-00 $41,328 $41,630
31-Jan-01 $42,770 $43,108
28-Feb-01 $38,873 $39,177
31-Mar-01 $36,418 $36,693
30-Apr-01 $39,240 $39,544
31-May-01 $39,483 $39,809
30-Jun-01 $38,528 $38,842
31-Jul-01 $38,143 $38,461
31-Aug-01 $35,750 $36,053
30-Sep-01 $32,868 $33,140
31-Oct-01 $33,478 $33,773
30-Nov-01 $36,033 $36,364
31-Dec-01 $36,350 $36,684
31-Jan-02 $35,818 $36,148
28-Feb-02 $35,120 $35,450
31-Mar-02 $36,433 $36,783
30-Apr-02 $34,215 $34,554
31-May-02 $33,970 $34,299
30-Jun-02 $31,548 $31,856
31-Jul-02 $29,085 $29,375
31-Aug-02 $29,290 $29,566
30-Sep-02 $26,088 $26,352
31-Oct-02 $28,388 $28,671
30-Nov-02 $30,070 $30,360
31-Dec-02 $28,293 $28,578
31-Jan-03 $27,543 $27,829
28-Feb-03 $27,125 $27,411
31-Mar-03 $27,395 $27,677
30-Apr-03 $29,650 $29,958
31-May-03 $31,215 $31,537
30-Jun-03 $31,590 $31,940
31-Jul-03 $32,153 $32,502
31-Aug-03 $32,780 $33,136
30-Sep-03 $32,425 $32,785
31-Oct-03 $34,240 $34,641
30-Nov-03 $34,533 $34,946
31-Dec-03 $36,348 $36,777
31-Jan-04 $37,005 $37,453
29-Feb-04 $37,513 $37,974
31-Mar-04 $36,940 $37,401
30-Apr-04 $36,348 $36,813
31-May-04 $36,855 $37,318
30-Jun-04 $37,555 $38,042
31-Jul-04 $36,305 $36,782
31-Aug-04 $36,455 $36,930
30-Sep-04 $36,855 $37,328
31-Oct-04 $37,405 $37,900
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/04 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
8 Schwab Equity Index Funds
SCHWAB S&P 500 FUND
E.SHARES(R) PERFORMANCE as of 10/31/04
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's e.Shares with its
benchmark and Morningstar category. The table below the chart shows two types of
after-tax returns.
Benchmark: Fund Category:
Fund: S&P 500(R) MORNINGSTAR
E.SHARES INDEX LARGE-CAP BLEND
1 YEAR 9.10% 9.42% 7.89%
5 YEARS -2.44% -2.21% -1.72%
SINCE INCEPTION: 5/1/96 8.01% 8.33% 6.80%
1 YEAR 5 YEARS SINCE INCEPTION
Fund Category: Fund Category: Fund Category:
Fund: MORNINGSTAR Fund: MORNINGSTAR Fund: MORNINGSTAR
TOTAL RETURNS AFTER TAX E.SHARES LARGE-CAP BLEND E.SHARES LARGE-CAP BLEND E.SHARES LARGE-CAP BLEND
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 8.88% 5.88% -2.83% -2.76% 7.61% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 6.18% 4.04% -2.27% -1.93% 6.81% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the fund's e.Shares, compared with a similar investment in its
benchmark.
[LINE GRAPH]
$19,263 E.SHARES
$19,753 S&P 500(R) INDEX
S&P 500(R)
E.SHARES INDEX
01-May-96 $10,000 $10,000
31-May-96 $10,250 $10,257
30-Jun-96 $10,290 $10,296
31-Jul-96 $9,840 $9,841
31-Aug-96 $10,050 $10,049
30-Sep-96 $10,600 $10,613
31-Oct-96 $10,890 $10,906
30-Nov-96 $11,710 $11,731
31-Dec-96 $11,473 $11,498
31-Jan-97 $12,179 $12,216
28-Feb-97 $12,270 $12,312
31-Mar-97 $11,766 $11,808
30-Apr-97 $12,452 $12,511
31-May-97 $13,209 $13,272
30-Jun-97 $13,794 $13,867
31-Jul-97 $14,873 $14,969
31-Aug-97 $14,036 $14,131
30-Sep-97 $14,803 $14,904
31-Oct-97 $14,318 $14,406
30-Nov-97 $14,964 $15,073
31-Dec-97 $15,227 $15,332
31-Jan-98 $15,390 $15,502
28-Feb-98 $16,490 $16,620
31-Mar-98 $17,336 $17,471
30-Apr-98 $17,499 $17,647
31-May-98 $17,193 $17,344
30-Jun-98 $17,886 $18,048
31-Jul-98 $17,692 $17,857
31-Aug-98 $15,136 $15,278
30-Sep-98 $16,103 $16,257
31-Oct-98 $17,397 $17,579
30-Nov-98 $18,446 $18,645
31-Dec-98 $19,504 $19,718
31-Jan-99 $20,316 $20,543
28-Feb-99 $19,679 $19,904
31-Mar-99 $20,459 $20,700
30-Apr-99 $21,240 $21,501
31-May-99 $20,737 $20,994
30-Jun-99 $21,878 $22,159
31-Jul-99 $21,199 $21,467
31-Aug-99 $21,086 $21,360
30-Sep-99 $20,501 $20,775
31-Oct-99 $21,795 $22,090
30-Nov-99 $22,227 $22,539
31-Dec-99 $23,536 $23,866
31-Jan-00 $22,350 $22,668
29-Feb-00 $21,924 $22,239
31-Mar-00 $24,057 $24,414
30-Apr-00 $23,328 $23,679
31-May-00 $22,850 $23,194
30-Jun-00 $23,401 $23,767
31-Jul-00 $23,037 $23,396
31-Aug-00 $24,462 $24,849
30-Sep-00 $23,172 $23,537
31-Oct-00 $23,068 $23,438
30-Nov-00 $21,247 $21,591
31-Dec-00 $21,364 $21,697
31-Jan-01 $22,110 $22,467
28-Feb-01 $20,092 $20,418
31-Mar-01 $18,821 $19,124
30-Apr-01 $20,271 $20,610
31-May-01 $20,407 $20,748
30-Jun-01 $19,903 $20,244
31-Jul-01 $19,703 $20,045
31-Aug-01 $18,463 $18,790
30-Sep-01 $16,971 $17,272
31-Oct-01 $17,297 $17,602
30-Nov-01 $18,610 $18,952
31-Dec-01 $18,768 $19,119
31-Jan-02 $18,492 $18,840
28-Feb-02 $18,141 $18,476
31-Mar-02 $18,810 $19,171
30-Apr-02 $17,674 $18,009
31-May-02 $17,536 $17,876
30-Jun-02 $16,282 $16,603
31-Jul-02 $15,019 $15,310
31-Aug-02 $15,114 $15,409
30-Sep-02 $13,468 $13,734
31-Oct-02 $14,647 $14,943
30-Nov-02 $15,507 $15,823
31-Dec-02 $14,593 $14,894
31-Jan-03 $14,216 $14,504
28-Feb-03 $14,000 $14,286
31-Mar-03 $14,129 $14,425
30-Apr-03 $15,294 $15,614
31-May-03 $16,092 $16,436
30-Jun-03 $16,297 $16,647
31-Jul-03 $16,578 $16,940
31-Aug-03 $16,890 $17,270
30-Sep-03 $16,707 $17,087
31-Oct-03 $17,656 $18,054
30-Nov-03 $17,807 $18,213
31-Dec-03 $18,727 $19,167
31-Jan-04 $19,066 $19,520
29-Feb-04 $19,328 $19,791
31-Mar-04 $19,033 $19,493
30-Apr-04 $18,738 $19,187
31-May-04 $18,989 $19,449
30-Jun-04 $19,350 $19,827
31-Jul-04 $18,705 $19,170
31-Aug-04 $18,782 $19,247
30-Sep-04 $18,978 $19,455
31-Oct-04 $19,263 $19,753
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/04 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
Schwab Equity Index Funds 9
SCHWAB S&P 500 FUND
FUND FACTS as of 10/31/04
STYLE ASSESSMENT 1
[GRAPHIC]
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 502
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $89,813
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 20.2
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 3.1
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 3%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2
Investor Shares ($1,000 for retirement and custodial accounts) $2,500
Select Shares $25,000
e.Shares ($500 for retirement and custodial accounts) $1,000
- --------------------------------------------------------------------------------
TOP HOLDINGS 3
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) GENERAL ELECTRIC CO. 3.4%
- --------------------------------------------------------------------------------
(2) EXXON MOBIL CORP. 3.0%
- --------------------------------------------------------------------------------
(3) MICROSOFT CORP. 2.9%
- --------------------------------------------------------------------------------
(4) CITIGROUP, INC. 2.2%
- --------------------------------------------------------------------------------
(5) WAL-MART STORES, INC. 2.2%
- --------------------------------------------------------------------------------
(6) PFIZER, INC. 2.1%
- --------------------------------------------------------------------------------
(7) BANK OF AMERICA CORP. 1.7%
- --------------------------------------------------------------------------------
(8) JOHNSON & JOHNSON 1.7%
- --------------------------------------------------------------------------------
(9) AMERICAN INTERNATIONAL GROUP, INC. 1.5%
- --------------------------------------------------------------------------------
(10) INTERNATIONAL BUSINESS MACHINES CORP. 1.4%
- --------------------------------------------------------------------------------
TOTAL 22.1%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
30.4% CONSUMER NON-DURABLES
21.0% FINANCE
19.2% TECHNOLOGY
7.3% ENERGY
7.3% MATERIALS
6.1% UTILITIES
5.2% CAPITAL GOODS
1.8% TRANSPORTATION
1.6% CONSUMER DURABLES
0.1% OTHER
Portfolio holdings may have changed since the report date.
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/04, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 Please see prospectus for further detail and eligibility requirements.
3 This list is not a recommendation of any security by the investment adviser.
10 Schwab Equity Index Funds
SCHWAB 1000 FUND(R)
INVESTOR SHARES PERFORMANCE as of 10/31/04
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1
This bar chart compares pre-tax performance of the fund's Investor Shares with
its benchmark and Morningstar category. The table below the chart shows two
types of after-tax returns.
[BAR CHART]
Fund: Benchmark: Fund Category:
INVESTOR SCHWAB 1000 MORNINGSTAR
SHARES INDEX(R) LARGE-CAP BLEND
1 YEAR 8.78% 9.23% 7.89%
5 YEARS 2 -1.70% -1.41% -1.72%
10 YEARS 2 10.69% 11.10% 9.38%
1 YEAR 5 YEARS 10 YEARS
Fund: Fund Category: Fund: Fund Category: Fund: Fund Category:
INVESTOR MORNINGSTAR INVESTOR MORNINGSTAR INVESTOR MORNINGSTAR
TOTAL RETURNS AFTER TAX SHARES LARGE-CAP BLEND SHARES LARGE-CAP BLEND SHARES LARGE-CAP BLEND
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 8.60% 5.88% -2.00% -2.76% 10.28% 7.61%
- ------------------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 5.93% 4.04% -1.61% -1.93% 9.29% 7.34%
- ------------------------------------------------------------------------------------------------------------------------------------
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance over ten years of a hypothetical $10,000 investment
in the fund's Investor Shares, compared with a similar investment in its
benchmark and an additional index.
[LINE GRAPH]
$27,627 INVESTOR SHARES
$28,681 SCHWAB 1000 INDEX(R)
$28,399 S&P 500(R) INDEX
INVESTOR SCHWAB 1000 S&P 500(R)
SHARES INDEX(R) INDEX
31-Oct-94 $10,000 $10,000 $10,000
30-Nov-94 $9,639 $9,642 $9,636
31-Dec-94 $9,755 $9,768 $9,779
31-Jan-95 $10,004 $10,019 $10,032
28-Feb-95 $10,399 $10,430 $10,422
31-Mar-95 $10,671 $10,709 $10,730
30-Apr-95 $10,935 $10,980 $11,045
31-May-95 $11,331 $11,386 $11,486
30-Jun-95 $11,633 $11,699 $11,752
31-Jul-95 $12,076 $12,140 $12,141
31-Aug-95 $12,168 $12,235 $12,172
30-Sep-95 $12,650 $12,735 $12,685
31-Oct-95 $12,588 $12,671 $12,640
30-Nov-95 $13,131 $13,229 $13,193
31-Dec-95 $13,326 $13,427 $13,448
31-Jan-96 $13,720 $13,835 $13,905
29-Feb-96 $13,924 $14,040 $14,034
31-Mar-96 $14,049 $14,176 $14,169
30-Apr-96 $14,286 $14,417 $14,377
31-May-96 $14,624 $14,766 $14,747
30-Jun-96 $14,585 $14,742 $14,803
31-Jul-96 $13,892 $14,043 $14,149
31-Aug-96 $14,270 $14,422 $14,447
30-Sep-96 $15,065 $15,230 $15,259
31-Oct-96 $15,371 $15,537 $15,680
30-Nov-96 $16,481 $16,663 $16,865
31-Dec-96 $16,201 $16,392 $16,531
31-Jan-97 $17,133 $17,341 $17,563
28-Feb-97 $17,197 $17,402 $17,702
31-Mar-97 $16,432 $16,643 $16,976
30-Apr-97 $17,316 $17,522 $17,988
31-May-97 $18,416 $18,654 $19,081
30-Jun-97 $19,180 $19,442 $19,936
31-Jul-97 $20,734 $21,011 $21,521
31-Aug-97 $19,738 $20,019 $20,316
30-Sep-97 $20,798 $21,095 $21,427
31-Oct-97 $20,112 $20,402 $20,712
30-Nov-97 $20,956 $21,273 $21,671
31-Dec-97 $21,373 $21,698 $22,043
31-Jan-98 $21,526 $21,865 $22,288
28-Feb-98 $23,111 $23,495 $23,895
31-Mar-98 $24,286 $24,712 $25,118
30-Apr-98 $24,536 $24,982 $25,372
31-May-98 $23,996 $24,436 $24,936
30-Jun-98 $24,962 $25,417 $25,948
31-Jul-98 $24,616 $25,062 $25,673
31-Aug-98 $20,938 $21,320 $21,966
30-Sep-98 $22,290 $22,714 $23,374
31-Oct-98 $24,060 $24,550 $25,274
30-Nov-98 $25,557 $26,082 $26,806
31-Dec-98 $27,178 $27,734 $28,350
31-Jan-99 $28,207 $28,788 $29,535
28-Feb-99 $27,259 $27,852 $28,616
31-Mar-99 $28,353 $28,962 $29,761
30-Apr-99 $29,505 $30,157 $30,913
31-May-99 $28,824 $29,469 $30,183
30-Jun-99 $30,259 $30,960 $31,858
31-Jul-99 $29,294 $29,974 $30,864
31-Aug-99 $29,011 $29,728 $30,710
30-Sep-99 $28,240 $28,844 $29,868
31-Oct-99 $30,106 $30,790 $31,759
30-Nov-99 $30,836 $31,509 $32,405
31-Dec-99 $32,885 $33,620 $34,313
31-Jan-00 $31,342 $32,054 $32,591
29-Feb-00 $31,351 $32,096 $31,974
31-Mar-00 $34,061 $34,888 $35,101
30-Apr-00 $32,779 $33,578 $34,044
31-May-00 $31,922 $32,704 $33,346
30-Jun-00 $32,779 $33,599 $34,170
31-Jul-00 $32,298 $33,084 $33,637
31-Aug-00 $34,486 $35,333 $35,726
30-Sep-00 $32,893 $33,701 $33,840
31-Oct-00 $32,616 $33,432 $33,698
30-Nov-00 $29,832 $30,582 $31,042
31-Dec-00 $30,185 $30,937 $31,195
31-Jan-01 $31,211 $31,968 $32,302
28-Feb-01 $28,319 $29,006 $29,356
31-Mar-01 $26,388 $27,033 $27,495
30-Apr-01 $28,541 $29,254 $29,631
31-May-01 $28,722 $29,446 $29,830
30-Jun-01 $28,089 $28,803 $29,105
31-Jul-01 $27,711 $28,426 $28,820
31-Aug-01 $25,944 $26,623 $27,015
30-Sep-01 $23,766 $24,391 $24,833
31-Oct-01 $24,300 $24,948 $25,307
30-Nov-01 $26,157 $26,859 $27,248
31-Dec-01 $26,485 $27,204 $27,488
31-Jan-02 $26,178 $26,894 $27,086
28-Feb-02 $25,673 $26,383 $26,564
31-Mar-02 $26,701 $27,449 $27,562
30-Apr-02 $25,250 $25,965 $25,892
31-May-02 $25,009 $25,722 $25,701
30-Jun-02 $23,202 $23,864 $23,871
31-Jul-02 $21,461 $22,077 $22,011
31-Aug-02 $21,594 $22,220 $22,154
30-Sep-02 $19,348 $19,911 $19,746
31-Oct-02 $20,931 $21,551 $21,484
30-Nov-02 $22,141 $22,800 $22,749
31-Dec-02 $20,872 $21,496 $21,414
31-Jan-03 $20,351 $20,972 $20,853
28-Feb-03 $20,016 $20,631 $20,540
31-Mar-03 $20,242 $20,864 $20,739
30-Apr-03 $21,854 $22,530 $22,448
31-May-03 $23,038 $23,767 $23,631
30-Jun-03 $23,332 $24,078 $23,934
31-Jul-03 $23,802 $24,571 $24,355
31-Aug-03 $24,289 $25,091 $24,830
30-Sep-03 $24,003 $24,807 $24,567
31-Oct-03 $25,397 $26,258 $25,957
30-Nov-03 $25,683 $26,557 $26,185
31-Dec-03 $26,871 $27,798 $27,558
31-Jan-04 $27,347 $28,301 $28,065
29-Feb-04 $27,737 $28,719 $28,455
31-Mar-04 $27,380 $28,356 $28,025
30-Apr-04 $26,880 $27,844 $27,585
31-May-04 $27,253 $28,240 $27,963
30-Jun-04 $27,729 $28,751 $28,505
31-Jul-04 $26,752 $27,744 $27,562
31-Aug-04 $26,862 $27,868 $27,672
30-Sep-04 $27,202 $28,232 $27,971
31-Oct-04 $27,627 $28,681 $28,399
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/04 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
Schwab Equity Index Funds 11
SCHWAB 1000 FUND
SELECT SHARES(R) PERFORMANCE as of 10/31/04
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1
This bar chart compares pre-tax performance of the fund's Select Shares with its
benchmark and Morningstar category. The table below the chart shows two types of
after-tax returns.
[BAR CHART]
Fund: Benchmark: Fund Category:
SELECT SCHWAB 1000 MORNINGSTAR
SHARES INDEX(R) LARGE-CAP BLEND
1 YEAR 8.90% 9.23% 7.89%
5 YEARS 2 -1.58% -1.41% -1.72%
SINCE INCEPTION: 5/19/97 2 6.02% 6.24% 1.14%
1 YEAR 5 YEARS SINCE INCEPTION
Fund: Fund Category: Fund: Fund Category: Fund: Fund Category:
SELECT MORNINGSTAR SELECT MORNINGSTAR SELECT MORNINGSTAR
TOTAL RETURNS AFTER TAX SHARES LARGE-CAP BLEND SHARES LARGE-CAP BLEND SHARES LARGE-CAP BLEND
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 8.70% 5.88% -1.92% -2.76% 5.66% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 6.03% 4.04% -1.53% -1.93% 5.02% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $50,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $50,000
investment (the minimum investment for this share class) in the fund's Select
Shares, compared with a similar investment in its benchmark and an additional
index.
[LINE GRAPH]
$77,310 SELECT SHARES
$78,514 SCHWAB 1000 INDEX(R)
$75,799 S&P 500(R) INDEX
SELECT SCHWAB 1000 S&P 500(R)
SHARES INDEX(R) INDEX
19-May-97 $50,000 $50,000 $50,000
31-May-97 $51,040 $51,064 $50,930
30-Jun-97 $53,180 $53,222 $53,212
31-Jul-97 $57,490 $57,518 $57,442
31-Aug-97 $54,750 $54,801 $54,225
30-Sep-97 $57,685 $57,746 $57,191
31-Oct-97 $55,785 $55,851 $55,281
30-Nov-97 $58,150 $58,233 $57,841
31-Dec-97 $59,325 $59,398 $58,836
31-Jan-98 $59,725 $59,855 $59,489
28-Feb-98 $64,145 $64,318 $63,778
31-Mar-98 $67,405 $67,648 $67,043
30-Apr-98 $68,100 $68,387 $67,720
31-May-98 $66,625 $66,893 $66,556
30-Jun-98 $69,305 $69,578 $69,258
31-Jul-98 $68,345 $68,606 $68,524
31-Aug-98 $58,140 $58,362 $58,629
30-Sep-98 $61,915 $62,179 $62,387
31-Oct-98 $66,825 $67,206 $67,459
30-Nov-98 $71,000 $71,400 $71,547
31-Dec-98 $75,505 $75,922 $75,668
31-Jan-99 $78,385 $78,805 $78,831
28-Feb-99 $75,750 $76,244 $76,379
31-Mar-99 $78,795 $79,282 $79,434
30-Apr-99 $82,015 $82,553 $82,509
31-May-99 $80,120 $80,671 $80,561
30-Jun-99 $84,110 $84,753 $85,033
31-Jul-99 $81,450 $82,052 $82,380
31-Aug-99 $80,665 $81,380 $81,968
30-Sep-99 $78,545 $78,960 $79,721
31-Oct-99 $83,725 $84,287 $84,767
30-Nov-99 $85,755 $86,255 $86,491
31-Dec-99 $91,470 $92,034 $91,585
31-Jan-00 $87,180 $87,747 $86,987
29-Feb-00 $87,225 $87,861 $85,341
31-Mar-00 $94,765 $95,504 $93,687
30-Apr-00 $91,200 $91,917 $90,867
31-May-00 $88,835 $89,525 $89,004
30-Jun-00 $91,220 $91,977 $91,203
31-Jul-00 $89,905 $90,566 $89,780
31-Aug-00 $95,990 $96,722 $95,356
30-Sep-00 $91,585 $92,255 $90,322
31-Oct-00 $90,810 $91,519 $89,942
30-Nov-00 $83,065 $83,717 $82,855
31-Dec-00 $84,050 $84,689 $83,261
31-Jan-01 $86,935 $87,511 $86,217
28-Feb-01 $78,875 $79,404 $78,354
31-Mar-01 $73,515 $74,002 $73,386
30-Apr-01 $79,515 $80,081 $79,088
31-May-01 $80,020 $80,608 $79,618
30-Jun-01 $78,280 $78,847 $77,683
31-Jul-01 $77,225 $77,815 $76,922
31-Aug-01 $72,325 $72,879 $72,107
30-Sep-01 $66,255 $66,771 $66,280
31-Oct-01 $67,745 $68,296 $67,546
30-Nov-01 $72,920 $73,526 $72,727
31-Dec-01 $73,845 $74,470 $73,367
31-Jan-02 $72,990 $73,622 $72,296
28-Feb-02 $71,600 $72,223 $70,901
31-Mar-02 $74,445 $75,140 $73,567
30-Apr-02 $70,445 $71,078 $69,108
31-May-02 $69,775 $70,413 $68,597
30-Jun-02 $64,710 $65,326 $63,713
31-Jul-02 $59,875 $60,436 $58,750
31-Aug-02 $60,245 $60,827 $59,132
30-Sep-02 $53,980 $54,506 $52,704
31-Oct-02 $58,420 $58,995 $57,342
30-Nov-02 $61,795 $62,414 $60,719
31-Dec-02 $58,255 $58,846 $57,155
31-Jan-03 $56,805 $57,410 $55,658
28-Feb-03 $55,865 $56,475 $54,823
31-Mar-03 $56,500 $57,115 $55,355
30-Apr-03 $61,025 $61,676 $59,916
31-May-03 $64,355 $65,062 $63,073
30-Jun-03 $65,175 $65,913 $63,881
31-Jul-03 $66,490 $67,261 $65,005
31-Aug-03 $67,875 $68,686 $66,273
30-Sep-03 $67,075 $67,908 $65,570
31-Oct-03 $70,990 $71,880 $69,281
30-Nov-03 $71,790 $72,699 $69,891
31-Dec-03 $75,105 $76,095 $73,553
31-Jan-04 $76,455 $77,473 $74,907
29-Feb-04 $77,550 $78,618 $75,948
31-Mar-04 $76,550 $77,622 $74,801
30-Apr-04 $75,175 $76,223 $73,627
31-May-04 $76,220 $77,305 $74,635
30-Jun-04 $77,575 $78,705 $76,083
31-Jul-04 $74,840 $75,948 $73,565
31-Aug-04 $75,175 $76,288 $73,859
30-Sep-04 $76,125 $77,284 $74,657
31-Oct-04 $77,310 $78,514 $75,799
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/04 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
12 Schwab Equity Index Funds
SCHWAB 1000 FUND
FUND FACTS as of 10/31/04
STYLE ASSESSMENT 1
[GRAPHIC]
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 986
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $79,733
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 20.6
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.9
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 5%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2
Investor Shares ($1,000 for retirement and custodial accounts) $2,500
Select Shares $50,000
- --------------------------------------------------------------------------------
TOP HOLDINGS 3
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) GENERAL ELECTRIC CO. 3.0%
- --------------------------------------------------------------------------------
(2) EXXON MOBIL CORP. 2.7%
- --------------------------------------------------------------------------------
(3) MICROSOFT CORP. 2.5%
- --------------------------------------------------------------------------------
(4) WAL-MART STORES, INC. 1.9%
- --------------------------------------------------------------------------------
(5) CITIGROUP, INC. 1.9%
- --------------------------------------------------------------------------------
(6) PFIZER, INC. 1.8%
- --------------------------------------------------------------------------------
(7) BANK OF AMERICA CORP. 1.5%
- --------------------------------------------------------------------------------
(8) JOHNSON & JOHNSON 1.4%
- --------------------------------------------------------------------------------
(9) AMERICAN INTERNATIONAL GROUP, INC. 1.3%
- --------------------------------------------------------------------------------
(10) INTERNATIONAL BUSINESS MACHINES CORP. 1.3%
- --------------------------------------------------------------------------------
TOTAL 19.3%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
29.7% CONSUMER NON-DURABLES
22.6% FINANCE
18.3% TECHNOLOGY
7.7% MATERIALS
6.8% ENERGY
6.2% UTILITIES
4.9% CAPITAL GOODS
1.8% TRANSPORTATION
1.8% CONSUMER DURABLES
0.2% OTHER
Portfolio holdings may have changed since the report date.
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/04, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 Please see prospectus for further detail and eligibility requirements.
3 This list is not a recommendation of any security by the investment adviser.
Schwab Equity Index Funds 13
SCHWAB SMALL-CAP INDEX FUND(R)
INVESTOR SHARES PERFORMANCE as of 10/31/04
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1
This bar chart compares pre-tax performance of the fund's Investor Shares with
its benchmark and Morningstar category. The table below the chart shows two
types of after-tax returns.
[BAR CHART]
Fund: Benchmark: Fund Category:
INVESTOR SCHWAB MORNINGSTAR
SHARES SMALL-CAP INDEX(R) SMALL-CAP BLEND
1 YEAR 9.98% 10.38% 13.51%
5 YEARS 2 6.63% 6.82% 12.25%
10 YEARS 2 9.94% 10.89% 11.83%
1 YEAR 5 YEARS 10 YEARS
Fund: Fund Category: Fund: Fund Category: Fund: Fund Category:
INVESTOR MORNINGSTAR INVESTOR MORNINGSTAR INVESTOR MORNINGSTAR
TOTAL RETURNS AFTER TAX SHARES SMALL-CAP BLEND SHARES SMALL-CAP BLEND SHARES SMALL-CAP BLEND
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 9.88% 11.50% 5.55% 10.91% 9.17% 9.79%
- ------------------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 6.61% 8.05% 5.14% 9.94% 8.43% 9.39%
- ------------------------------------------------------------------------------------------------------------------------------------
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance over ten years of a hypothetical $10,000 investment
in the fund's Investor Shares, compared with a similar investment in its
benchmark and an additional index.
[LINE GRAPH]
$25,809 INVESTOR SHARES
$28,150 SCHWAB SMALL-CAP INDEX(R)
$26,238 RUSSELL 2000(R) INDEX
SCHWAB
INVESTOR SMALL-CAP RUSSELL
SHARES INDEX(R) 2000(R) INDEX
31-Oct-94 $10,000 $10,000 $10,000
30-Nov-94 $9,602 $9,623 $9,596
31-Dec-94 $9,778 $9,853 $9,853
31-Jan-95 $9,668 $9,693 $9,729
28-Feb-95 $10,019 $10,080 $10,134
31-Mar-95 $10,269 $10,289 $10,307
30-Apr-95 $10,499 $10,515 $10,536
31-May-95 $10,649 $10,651 $10,717
30-Jun-95 $11,140 $11,189 $11,273
31-Jul-95 $11,791 $11,844 $11,923
31-Aug-95 $12,001 $12,090 $12,169
30-Sep-95 $12,231 $12,326 $12,387
31-Oct-95 $11,710 $11,735 $11,834
30-Nov-95 $12,251 $12,299 $12,331
31-Dec-95 $12,482 $12,595 $12,656
31-Jan-96 $12,412 $12,562 $12,642
29-Feb-96 $12,885 $13,067 $13,037
31-Mar-96 $13,087 $13,294 $13,303
30-Apr-96 $13,811 $13,997 $14,014
31-May-96 $14,293 $14,476 $14,566
30-Jun-96 $13,760 $14,014 $13,968
31-Jul-96 $12,563 $12,883 $12,748
31-Aug-96 $13,328 $13,700 $13,489
30-Sep-96 $13,921 $14,204 $14,016
31-Oct-96 $13,670 $13,961 $13,801
30-Nov-96 $14,253 $14,517 $14,369
31-Dec-96 $14,416 $14,787 $14,746
31-Jan-97 $14,801 $15,136 $15,041
28-Feb-97 $14,285 $14,767 $14,677
31-Mar-97 $13,568 $14,048 $13,984
30-Apr-97 $13,669 $14,089 $14,023
31-May-97 $15,286 $15,815 $15,582
30-Jun-97 $16,023 $16,632 $16,251
31-Jul-97 $17,104 $17,581 $17,006
31-Aug-97 $17,427 $17,976 $17,396
30-Sep-97 $18,731 $19,386 $18,669
31-Oct-97 $17,912 $18,540 $17,850
30-Nov-97 $17,730 $18,371 $17,734
31-Dec-97 $18,121 $18,756 $18,044
31-Jan-98 $17,674 $18,461 $17,759
28-Feb-98 $19,073 $19,988 $19,071
31-Mar-98 $19,915 $20,888 $19,857
30-Apr-98 $20,016 $21,031 $19,966
31-May-98 $18,810 $19,795 $18,890
30-Jun-98 $18,840 $19,851 $18,930
31-Jul-98 $17,360 $18,324 $17,396
31-Aug-98 $13,973 $14,791 $14,018
30-Sep-98 $14,896 $15,719 $15,116
31-Oct-98 $15,606 $16,464 $15,732
30-Nov-98 $16,427 $17,318 $16,557
31-Dec-98 $17,473 $18,445 $17,582
31-Jan-99 $17,505 $18,525 $17,815
28-Feb-99 $16,043 $16,976 $16,372
31-Mar-99 $16,268 $17,301 $16,628
30-Apr-99 $17,548 $18,884 $18,118
31-May-99 $17,860 $19,214 $18,382
30-Jun-99 $18,849 $20,473 $19,213
31-Jul-99 $18,753 $20,313 $18,687
31-Aug-99 $18,193 $19,740 $17,995
30-Sep-99 $18,376 $19,908 $17,999
31-Oct-99 $18,720 $20,236 $18,073
30-Nov-99 $19,881 $21,500 $19,152
31-Dec-99 $21,701 $23,548 $21,320
31-Jan-00 $20,882 $22,668 $20,976
29-Feb-00 $23,650 $25,634 $24,439
31-Mar-00 $22,929 $24,962 $22,829
30-Apr-00 $21,797 $23,755 $21,455
31-May-00 $20,772 $22,603 $20,204
30-Jun-00 $22,530 $24,492 $21,966
31-Jul-00 $21,636 $23,540 $21,258
31-Aug-00 $23,812 $25,906 $22,880
30-Sep-00 $23,091 $25,117 $22,208
31-Oct-00 $22,691 $24,656 $21,217
30-Nov-00 $20,515 $22,309 $19,038
31-Dec-00 $22,511 $24,471 $20,674
31-Jan-01 $22,878 $24,800 $21,751
28-Feb-01 $21,150 $22,929 $20,324
31-Mar-01 $20,193 $21,893 $19,330
30-Apr-01 $21,812 $23,667 $20,842
31-May-01 $22,400 $24,302 $21,354
30-Jun-01 $23,394 $25,390 $22,091
31-Jul-01 $22,339 $24,262 $20,896
31-Aug-01 $21,714 $23,574 $20,221
30-Sep-01 $18,648 $20,253 $17,499
31-Oct-01 $19,593 $21,267 $18,523
30-Nov-01 $21,027 $22,835 $19,957
31-Dec-01 $22,309 $24,211 $21,188
31-Jan-02 $21,506 $23,310 $20,968
28-Feb-02 $20,741 $22,481 $20,393
31-Mar-02 $22,538 $24,443 $22,033
30-Apr-02 $22,423 $24,312 $22,233
31-May-02 $21,391 $23,200 $21,246
30-Jun-02 $20,269 $21,980 $20,192
31-Jul-02 $17,502 $18,972 $17,143
31-Aug-02 $17,592 $19,082 $17,100
30-Sep-02 $16,457 $17,849 $15,872
31-Oct-02 $16,916 $18,346 $16,382
30-Nov-02 $18,217 $19,757 $17,843
31-Dec-02 $17,297 $18,781 $16,849
31-Jan-03 $16,486 $17,853 $16,383
28-Feb-03 $15,931 $17,270 $15,888
31-Mar-03 $16,125 $17,486 $16,093
30-Apr-03 $17,800 $19,317 $17,618
31-May-03 $19,718 $21,392 $19,509
30-Jun-03 $20,066 $21,778 $19,862
31-Jul-03 $21,110 $22,927 $21,105
31-Aug-03 $22,140 $24,049 $22,072
30-Sep-03 $21,676 $23,554 $21,664
31-Oct-03 $23,466 $25,502 $23,483
30-Nov-03 $24,290 $26,405 $24,317
31-Dec-03 $24,798 $26,978 $24,811
31-Jan-04 $25,498 $27,720 $25,888
29-Feb-04 $25,602 $27,833 $26,120
31-Mar-04 $25,705 $27,955 $26,363
30-Apr-04 $24,422 $26,563 $25,019
31-May-04 $24,811 $27,002 $25,417
30-Jun-04 $25,977 $28,280 $26,487
31-Jul-04 $24,242 $26,406 $24,704
31-Aug-04 $24,060 $26,210 $24,578
30-Sep-04 $25,304 $27,583 $25,731
31-Oct-04 $25,809 $28,150 $26,238
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/04 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
14 Schwab Equity Index Funds
SCHWAB SMALL-CAP INDEX FUND
SELECT SHARES(R) PERFORMANCE as of 10/31/04
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Select Shares with its
benchmark and Morningstar category. The table below the chart shows two types of
after-tax returns.
[BAR CHART]
Fund: Benchmark: Fund Category:
SELECT SCHWAB MORNINGSTAR
SHARES SMALL-CAP INDEX(R) SMALL-CAP BLEND
1 YEAR 10.16% 10.38% 13.51%
5 YEARS 6.77% 6.82% 12.25%
SINCE INCEPTION: 5/19/97 8.04% 8.68% 6.70%
1 YEAR 5 YEARS SINCE INCEPTION
Fund: Fund Category: Fund: Fund Category: Fund: Fund Category:
SELECT MORNINGSTAR SELECT MORNINGSTAR SELECT MORNINGSTAR
TOTAL RETURNS AFTER TAX SHARES SMALL-CAP BLEND SHARES SMALL-CAP BLEND SHARES SMALL-CAP BLEND
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 10.04% 11.50% 5.65% 10.91% 7.07% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 6.75% 8.05% 5.23% 9.94% 6.51% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $50,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $50,000
investment (the minimum investment for this share class) in the fund's Select
Shares, compared with a similar investment in its benchmark and an additional
index.
[LINE GRAPH]
$88,980 SELECT SHARES
$92,989 SCHWAB SMALL-CAP INDEX(R)
$87,491 RUSSELL 2000(R) INDEX
SCHWAB RUSSELL
SELECT SMALL-CAP 2000(R)
SHARES INDEX(R) INDEX
19-May-97 $50,000 $50,000 $50,000
31-May-97 $52,170 $52,242 $51,960
30-Jun-97 $54,690 $54,942 $54,189
31-Jul-97 $58,415 $58,075 $56,709
31-Aug-97 $59,485 $59,380 $58,008
30-Sep-97 $63,965 $64,039 $62,254
31-Oct-97 $61,205 $61,244 $59,521
30-Nov-97 $60,550 $60,687 $59,134
31-Dec-97 $61,920 $61,958 $60,169
31-Jan-98 $60,400 $60,983 $59,218
28-Feb-98 $65,175 $66,026 $63,594
31-Mar-98 $68,050 $69,002 $66,214
30-Apr-98 $68,430 $69,473 $66,578
31-May-98 $64,310 $65,391 $62,990
30-Jun-98 $64,415 $65,575 $63,122
31-Jul-98 $59,360 $60,531 $58,009
31-Aug-98 $47,790 $48,861 $46,744
30-Sep-98 $50,945 $51,924 $50,404
31-Oct-98 $53,365 $54,386 $52,460
30-Nov-98 $56,170 $57,207 $55,209
31-Dec-98 $59,775 $60,929 $58,627
31-Jan-99 $59,925 $61,193 $59,407
28-Feb-99 $54,925 $56,079 $54,595
31-Mar-99 $55,660 $57,152 $55,446
30-Apr-99 $60,070 $62,380 $60,414
31-May-99 $61,140 $63,470 $61,296
30-Jun-99 $64,555 $67,629 $64,067
31-Jul-99 $64,225 $67,099 $62,311
31-Aug-99 $62,315 $65,206 $60,006
30-Sep-99 $62,940 $65,762 $60,018
31-Oct-99 $64,115 $66,846 $60,264
30-Nov-99 $68,125 $71,021 $63,862
31-Dec-99 $74,390 $77,788 $71,091
31-Jan-00 $71,585 $74,879 $69,946
29-Feb-00 $81,065 $84,677 $81,495
31-Mar-00 $78,595 $82,458 $76,124
30-Apr-00 $74,755 $78,471 $71,541
31-May-00 $71,250 $74,666 $67,371
30-Jun-00 $77,265 $80,904 $73,245
31-Jul-00 $74,205 $77,761 $70,887
31-Aug-00 $81,655 $85,575 $76,295
30-Sep-00 $79,185 $82,968 $74,052
31-Oct-00 $77,820 $81,448 $70,749
30-Nov-00 $70,405 $73,694 $63,484
31-Dec-00 $77,230 $80,834 $68,937
31-Jan-01 $78,490 $81,923 $72,528
28-Feb-01 $72,565 $75,742 $67,770
31-Mar-01 $69,285 $72,319 $64,457
30-Apr-01 $74,875 $78,181 $69,497
31-May-01 $76,850 $80,277 $71,207
30-Jun-01 $80,300 $83,871 $73,663
31-Jul-01 $76,685 $80,145 $69,678
31-Aug-01 $74,540 $77,873 $67,427
30-Sep-01 $64,030 $66,902 $58,352
31-Oct-01 $67,265 $70,251 $61,765
30-Nov-01 $72,230 $75,432 $66,546
31-Dec-01 $76,610 $79,977 $70,652
31-Jan-02 $73,855 $77,001 $69,917
28-Feb-02 $71,230 $74,261 $68,001
31-Mar-02 $77,400 $80,744 $73,469
30-Apr-02 $77,005 $80,311 $74,137
31-May-02 $73,505 $76,636 $70,846
30-Jun-02 $69,655 $72,606 $67,332
31-Jul-02 $60,160 $62,669 $57,165
31-Aug-02 $60,465 $63,034 $57,022
30-Sep-02 $56,530 $58,961 $52,927
31-Oct-02 $58,105 $60,603 $54,626
30-Nov-02 $62,610 $65,263 $59,499
31-Dec-02 $59,485 $62,041 $56,185
31-Jan-03 $56,655 $58,974 $54,629
28-Feb-03 $54,795 $57,049 $52,979
31-Mar-03 $55,460 $57,761 $53,662
30-Apr-03 $61,255 $63,810 $58,749
31-May-03 $67,805 $70,666 $65,053
30-Jun-03 $69,000 $71,940 $66,231
31-Jul-03 $72,630 $75,736 $70,377
31-Aug-03 $76,170 $79,443 $73,600
30-Sep-03 $74,625 $77,805 $72,238
31-Oct-03 $80,775 $84,240 $78,307
30-Nov-03 $83,610 $87,223 $81,086
31-Dec-03 $85,415 $89,118 $82,732
31-Jan-04 $87,820 $91,568 $86,323
29-Feb-04 $88,180 $91,940 $87,100
31-Mar-04 $88,535 $92,345 $87,910
30-Apr-04 $84,120 $87,745 $83,427
31-May-04 $85,505 $89,198 $84,753
30-Jun-04 $89,515 $93,417 $88,321
31-Jul-04 $83,545 $87,229 $82,377
31-Aug-04 $82,920 $86,580 $81,957
30-Sep-04 $87,245 $91,115 $85,801
31-Oct-04 $88,980 $92,989 $87,491
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/04 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
Schwab Equity Index Funds 15
SCHWAB SMALL-CAP INDEX FUND
FUND FACTS as of 10/31/04
STYLE ASSESSMENT 1
[GRAPHIC]
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large / / / / / /
Medium / / / / / /
Small / / /X/ / /
STATISTICS
NUMBER OF HOLDINGS 974
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $973
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 35.5
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.1
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 39%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2
Investor Shares ($1,000 for retirement and custodial accounts) $2,500
Select Shares $50,000
- --------------------------------------------------------------------------------
TOP HOLDINGS 3
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) WYNN RESORTS LTD. 0.7%
- --------------------------------------------------------------------------------
(2) UNITEDGLOBALCOM, INC. Class A 0.4%
- --------------------------------------------------------------------------------
(3) UNITED DEFENSE INDUSTRIES, INC. 0.3%
- --------------------------------------------------------------------------------
(4) LANDSTAR SYSTEMS, INC. 0.3%
- --------------------------------------------------------------------------------
(5) TESORO PETROLEUM CORP. 0.3%
- --------------------------------------------------------------------------------
(6) CATHAY GENERAL BANCORP., INC. 0.3%
- --------------------------------------------------------------------------------
(7) EAST-WEST BANCORP, INC. 0.3%
- --------------------------------------------------------------------------------
(8) NEW CENTURY FINANCIAL CORP. 0.3%
- --------------------------------------------------------------------------------
(9) PLAINS EXPLORATION & PRODUCTION CO. 0.3%
- --------------------------------------------------------------------------------
(10) SCIENTIFIC GAMES CORP. Class A 0.3%
- --------------------------------------------------------------------------------
TOTAL 3.5%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
22.6% MATERIALS
21.8% FINANCE
17.6% CONSUMER NON-DURABLES
15.6% TECHNOLOGY
6.3% ENERGY
6.1% CAPITAL GOODS
3.8% CONSUMER DURABLES
3.2% TRANSPORTATION
2.9% UTILITIES
0.1% OTHER
Portfolio holdings may have changed since the report date.
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/04, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 Please see prospectus for further detail and eligibility requirements.
3 This list is not a recommendation of any security by the investment adviser.
16 Schwab Equity Index Funds
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
INVESTOR SHARES PERFORMANCE as of 10/31/04
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1
This bar chart compares pre-tax performance of the fund's Investor Shares with
its benchmark and Morningstar category. The table below the chart shows two
types of after-tax returns.
[BAR CHART]
Benchmark:
Fund: DOW JONES Fund Category:
INVESTOR WILSHIRE 5000 MORNINGSTAR
SHARES COMPOSITE INDEX(SM) LARGE-CAP BLEND
1 YEAR 9.93% 10.00% 7.89%
5 YEARS 2 -0.99% -0.93% -1.72%
SINCE INCEPTION: 6/1/99 2 -0.14% -0.06% -0.85%
1 YEAR 5 YEARS SINCE INCEPTION
Fund: Fund Category: Fund: Fund Category: Fund: Fund Category:
INVESTOR MORNINGSTAR INVESTOR MORNINGSTAR INVESTOR MORNINGSTAR
TOTAL RETURNS AFTER TAX SHARES LARGE-CAP BLEND SHARES LARGE-CAP BLEND SHARES LARGE-CAP BLEND
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 9.78% 5.88% -1.27% -2.76% -0.40% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 6.63% 4.04% -1.00% -1.93% -0.27% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the fund's Investor Shares, compared with a similar investment in
its benchmark.
[LINE GRAPH]
$9,926 INVESTOR SHARES
$9,970 DOW JONES WILSHIRE 5000 COMPOSITE INDEX(SM)
DOW JONES
WILSHIRE 5000
INVESTOR COMPOSITE
SHARES INDEX(SM)
01-Jun-99 $10,000 $10,000
30-Jun-99 $10,515 $10,518
31-Jul-99 $10,165 $10,180
31-Aug-99 $10,070 $10,086
30-Sep-99 $9,820 $9,822
31-Oct-99 $10,435 $10,447
30-Nov-99 $10,790 $10,797
31-Dec-99 $11,605 $11,617
31-Jan-00 $11,108 $11,135
29-Feb-00 $11,374 $11,384
31-Mar-00 $12,022 $12,060
30-Apr-00 $11,399 $11,432
31-May-00 $11,012 $11,033
30-Jun-00 $11,484 $11,519
31-Jul-00 $11,258 $11,284
31-Aug-00 $12,077 $12,104
30-Sep-00 $11,520 $11,538
31-Oct-00 $11,294 $11,294
30-Nov-00 $10,179 $10,170
31-Dec-00 $10,371 $10,351
31-Jan-01 $10,746 $10,748
28-Feb-01 $9,724 $9,729
31-Mar-01 $9,066 $9,074
30-Apr-01 $9,815 $9,821
31-May-01 $9,911 $9,919
30-Jun-01 $9,754 $9,752
31-Jul-01 $9,587 $9,591
31-Aug-01 $9,010 $9,011
30-Sep-01 $8,206 $8,202
31-Oct-01 $8,408 $8,410
30-Nov-01 $9,046 $9,054
31-Dec-01 $9,211 $9,217
31-Jan-02 $9,093 $9,102
28-Feb-02 $8,915 $8,915
31-Mar-02 $9,308 $9,305
30-Apr-02 $8,874 $8,851
31-May-02 $8,766 $8,747
30-Jun-02 $8,169 $8,132
31-Jul-02 $7,516 $7,476
31-Aug-02 $7,567 $7,520
30-Sep-02 $6,816 $6,765
31-Oct-02 $7,327 $7,283
30-Nov-02 $7,740 $7,722
31-Dec-02 $7,320 $7,294
31-Jan-03 $7,139 $7,111
28-Feb-03 $7,010 $6,990
31-Mar-03 $7,098 $7,069
30-Apr-03 $7,656 $7,649
31-May-03 $8,105 $8,116
30-Jun-03 $8,229 $8,237
31-Jul-03 $8,415 $8,435
31-Aug-03 $8,611 $8,637
30-Sep-03 $8,513 $8,542
31-Oct-03 $9,030 $9,064
30-Nov-03 $9,164 $9,190
31-Dec-03 $9,566 $9,603
31-Jan-04 $9,769 $9,817
29-Feb-04 $9,910 $9,961
31-Mar-04 $9,811 $9,854
30-Apr-04 $9,603 $9,644
31-May-04 $9,733 $9,777
30-Jun-04 $9,936 $9,981
31-Jul-04 $9,571 $9,599
31-Aug-04 $9,603 $9,631
30-Sep-04 $9,764 $9,802
31-Oct-04 $9,926 $9,970
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/04 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
Schwab Equity Index Funds 17
SCHWAB TOTAL STOCK MARKET INDEX FUND
SELECT SHARES(R) PERFORMANCE as of 10/31/04
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Select Shares with its
benchmark and Morningstar category. The table below the chart shows two types of
after-tax returns.
[BAR CHART]
Benchmark:
Fund: DOW JONES Fund Category:
SELECT WILSHIRE 5000 MORNINGSTAR
SHARES COMPOSITE INDEX(SM) LARGE-CAP BLEND
1 YEAR 10.16% 10.00% 7.89%
5 YEARS -0.85% -0.93% -1.72%
SINCE INCEPTION: 6/1/99 0.02% -0.06% -0.85%
YEAR 5 YEARS SINCE INCEPTION
Fund: Fund Category: Fund: Fund Category: Fund: Fund Category:
SELECT MORNINGSTAR SELECT MORNINGSTAR SELECT MORNINGSTAR
TOTAL RETURNS AFTER TAX SHARES LARGE-CAP BLEND SHARES LARGE-CAP BLEND SHARES LARGE-CAP BLEND
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 9.99% 5.88% -1.16% -2.76% -0.27% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 6.81% 4.04% -0.90% -1.93% -0.15% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $50,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $50,000
investment (the minimum investment for this share class) in the fund's Select
Shares, compared with a similar investment in its benchmark.
[LINE GRAPH]
$50,050 SELECT SHARES
$49,850 DOW JONES WILSHIRE 5000 COMPOSITE INDEX(SM)
DOW JONES
WILSHIRE 5000
SELECT COMPOSITE
SHARES INDEX(SM)
01-Jun-99 $50,000 $50,000
30-Jun-99 $52,600 $52,590
31-Jul-99 $50,850 $50,902
31-Aug-99 $50,350 $50,428
30-Sep-99 $49,125 $49,112
31-Oct-99 $52,225 $52,236
30-Nov-99 $53,975 $53,986
31-Dec-99 $58,065 $58,083
31-Jan-00 $55,605 $55,673
29-Feb-00 $56,935 $56,920
31-Mar-00 $60,150 $60,301
30-Apr-00 $57,060 $57,159
31-May-00 $55,130 $55,164
30-Jun-00 $57,515 $57,597
31-Jul-00 $56,385 $56,422
31-Aug-00 $60,480 $60,518
30-Sep-00 $57,715 $57,692
31-Oct-00 $56,560 $56,469
30-Nov-00 $51,010 $50,850
31-Dec-00 $51,975 $51,755
31-Jan-01 $53,850 $53,738
28-Feb-01 $48,730 $48,643
31-Mar-01 $45,435 $45,370
30-Apr-01 $49,185 $49,104
31-May-01 $49,695 $49,595
30-Jun-01 $48,910 $48,761
31-Jul-01 $48,070 $47,957
31-Aug-01 $45,185 $45,055
30-Sep-01 $41,155 $41,009
31-Oct-01 $42,190 $42,051
30-Nov-01 $45,385 $45,268
31-Dec-01 $46,210 $46,083
31-Jan-02 $45,645 $45,511
28-Feb-02 $44,725 $44,574
31-Mar-02 $46,720 $46,526
30-Apr-02 $44,520 $44,256
31-May-02 $44,010 $43,734
30-Jun-02 $41,015 $40,659
31-Jul-02 $37,735 $37,378
31-Aug-02 $37,990 $37,598
30-Sep-02 $34,230 $33,827
31-Oct-02 $36,790 $36,415
30-Nov-02 $38,860 $38,611
31-Dec-02 $36,775 $36,472
31-Jan-03 $35,865 $35,553
28-Feb-03 $35,245 $34,952
31-Mar-03 $35,660 $35,347
30-Apr-03 $38,485 $38,245
31-May-03 $40,740 $40,582
30-Jun-03 $41,365 $41,183
31-Jul-03 $42,325 $42,175
31-Aug-03 $43,310 $43,187
30-Sep-03 $42,815 $42,708
31-Oct-03 $45,435 $45,318
30-Nov-03 $46,110 $45,952
31-Dec-03 $48,165 $48,015
31-Jan-04 $49,160 $49,086
29-Feb-04 $49,895 $49,803
31-Mar-04 $49,395 $49,270
30-Apr-04 $48,345 $48,220
31-May-04 $49,030 $48,886
30-Jun-04 $50,050 $49,903
31-Jul-04 $48,215 $47,996
31-Aug-04 $48,375 $48,155
30-Sep-04 $49,185 $49,012
31-Oct-04 $50,050 $49,850
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/04 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
18 Schwab Equity Index Funds
SCHWAB TOTAL STOCK MARKET INDEX FUND
FUND FACTS as of 10/31/04
STYLE ASSESSMENT 1
[GRAPHIC]
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 2,965
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $70,406
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 21.0
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.8
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 2%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2
Investor Shares ($1,000 for retirement and custodial accounts) $2,500
Select Shares $50,000
- --------------------------------------------------------------------------------
TOP HOLDINGS 3
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) GENERAL ELECTRIC CO. 2.6%
- --------------------------------------------------------------------------------
(2) EXXON MOBIL CORP. 2.3%
- --------------------------------------------------------------------------------
(3) MICROSOFT CORP. 2.2%
- --------------------------------------------------------------------------------
(4) WAL-MART STORES, INC. 1.7%
- --------------------------------------------------------------------------------
(5) CITIGROUP, INC. 1.7%
- --------------------------------------------------------------------------------
(6) PFIZER, INC. 1.6%
- --------------------------------------------------------------------------------
(7) BANK OF AMERICA CORP. 1.3%
- --------------------------------------------------------------------------------
(8) JOHNSON & JOHNSON 1.3%
- --------------------------------------------------------------------------------
(9) AMERICAN INTERNATIONAL GROUP, INC. 1.2%
- --------------------------------------------------------------------------------
(10) INTERNATIONAL BUSINESS MACHINES CORP. 1.1%
- --------------------------------------------------------------------------------
TOTAL 17.0%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
28.4% CONSUMER NON-DURABLES
22.3% FINANCE
18.0% TECHNOLOGY
9.2% MATERIALS
7.0% ENERGY
5.8% UTILITIES
4.7% CAPITAL GOODS
2.0% TRANSPORTATION
1.9% CONSUMER DURABLES
0.7% OTHER
Portfolio holdings may have changed since the report date.
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/04, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 Please see prospectus for further detail and eligibility requirements.
3 This list is not a recommendation of any security by the investment adviser.
Schwab Equity Index Funds 19
SCHWAB INTERNATIONAL INDEX FUND(R)
INVESTOR SHARES PERFORMANCE as of 10/31/04
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Investor Shares with
its benchmark and Morningstar category. The table below the chart shows two
types of after-tax returns.
[BAR CHART]
Benchmark:
Fund: SCHWAB Fund Category:
INVESTOR INTERNATIONAL MORNINGSTAR FOREIGN
SHARES INDEX(R) LARGE-CAP BLEND
1 YEAR 18.40% 19.32% 16.12%
5 YEARS -2.32% -1.71% -1.56%
10 YEARS 4.47% 5.07% 4.69%
1 YEAR 5 YEARS 10 YEARS
Fund Category: Fund Category: Fund Category:
Fund: MORNINGSTAR Fund: MORNINGSTAR Fund: MORNINGSTAR
INVESTOR FOREIGN INVESTOR FOREIGN INVESTOR FOREIGN
TOTAL RETURNS AFTER TAX SHARES LARGE-CAP BLEND SHARES LARGE-CAP BLEND SHARES LARGE-CAP BLEND
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 18.30% 13.82% -2.67% -2.72% 4.12% 3.16%
- ------------------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 12.51% 9.24% -2.11% -1.89% 3.72% 3.26%
- ------------------------------------------------------------------------------------------------------------------------------------
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance over ten years of a hypothetical $10,000 investment
in the fund's Investor Shares, compared with a similar investment in its
benchmark and an additional index.
[LINE GRAPH]
$15,485 INVESTOR SHARES
$16,411 SCHWAB INTERNATIONAL INDEX(R)
$14,837 MSCI-EAFE(R) INDEX
SCHWAB
INVESTOR INTERNATIONAL MSCI-EAFE(R)
SHARES INDEX(R) INDEX
31-Oct-94 $10,000 $10,000 $10,000
30-Nov-94 $9,523 $9,503 $9,519
31-Dec-94 $9,575 $9,581 $9,579
31-Jan-95 $9,231 $9,300 $9,211
28-Feb-95 $9,305 $9,325 $9,184
31-Mar-95 $9,825 $9,944 $9,758
30-Apr-95 $10,178 $10,290 $10,124
31-May-95 $10,206 $10,251 $10,004
30-Jun-95 $10,104 $10,129 $9,829
31-Jul-95 $10,615 $10,725 $10,441
31-Aug-95 $10,262 $10,324 $10,043
30-Sep-95 $10,475 $10,576 $10,239
31-Oct-95 $10,336 $10,394 $9,964
30-Nov-95 $10,559 $10,685 $10,241
31-Dec-95 $10,936 $11,099 $10,654
31-Jan-96 $10,964 $11,134 $10,697
29-Feb-96 $10,982 $11,155 $10,734
31-Mar-96 $11,170 $11,363 $10,961
30-Apr-96 $11,443 $11,632 $11,280
31-May-96 $11,320 $11,495 $11,073
30-Jun-96 $11,405 $11,573 $11,135
31-Jul-96 $11,086 $11,273 $10,809
31-Aug-96 $11,190 $11,371 $10,833
30-Sep-96 $11,499 $11,706 $11,121
31-Oct-96 $11,480 $11,666 $11,008
30-Nov-96 $11,996 $12,208 $11,446
31-Dec-96 $11,933 $12,100 $11,298
31-Jan-97 $11,543 $11,698 $10,903
28-Feb-97 $11,714 $11,893 $11,082
31-Mar-97 $11,810 $11,973 $11,122
30-Apr-97 $11,895 $12,102 $11,181
31-May-97 $12,770 $12,990 $11,908
30-Jun-97 $13,485 $13,749 $12,565
31-Jul-97 $13,894 $14,121 $12,768
31-Aug-97 $12,885 $13,102 $11,814
30-Sep-97 $13,770 $13,925 $12,476
31-Oct-97 $12,665 $12,797 $11,517
30-Nov-97 $12,656 $12,747 $11,399
31-Dec-97 $12,805 $12,927 $11,498
31-Jan-98 $13,276 $13,450 $12,024
28-Feb-98 $14,047 $14,263 $12,796
31-Mar-98 $14,412 $14,637 $13,190
30-Apr-98 $14,509 $14,736 $13,294
31-May-98 $14,509 $14,700 $13,229
30-Jun-98 $14,634 $14,796 $13,329
31-Jul-98 $14,673 $14,891 $13,464
31-Aug-98 $12,863 $13,015 $11,796
30-Sep-98 $12,449 $12,588 $11,434
31-Oct-98 $13,681 $13,908 $12,625
30-Nov-98 $14,384 $14,690 $13,271
31-Dec-98 $14,834 $15,172 $13,796
31-Jan-99 $14,785 $15,091 $13,754
28-Feb-99 $14,455 $14,793 $13,427
31-Mar-99 $15,106 $15,472 $13,987
30-Apr-99 $15,718 $16,138 $14,553
31-May-99 $14,950 $15,324 $13,804
30-Jun-99 $15,524 $15,949 $14,342
31-Jul-99 $16,087 $16,542 $14,768
31-Aug-99 $16,232 $16,696 $14,823
30-Sep-99 $16,534 $16,982 $14,972
31-Oct-99 $17,418 $17,886 $15,534
30-Nov-99 $18,214 $18,664 $16,073
31-Dec-99 $19,820 $20,303 $17,516
31-Jan-00 $18,263 $18,829 $16,404
29-Feb-00 $18,518 $19,133 $16,845
31-Mar-00 $19,595 $20,219 $17,499
30-Apr-00 $18,537 $19,126 $16,578
31-May-00 $18,009 $18,565 $16,174
30-Jun-00 $18,684 $19,257 $16,806
31-Jul-00 $17,960 $18,511 $16,102
31-Aug-00 $18,284 $18,837 $16,242
30-Sep-00 $17,333 $17,863 $15,451
31-Oct-00 $16,775 $17,307 $15,086
30-Nov-00 $16,011 $16,528 $14,521
31-Dec-00 $16,334 $16,876 $15,036
31-Jan-01 $16,473 $17,056 $15,041
28-Feb-01 $15,061 $15,575 $13,916
31-Mar-01 $14,047 $14,498 $12,971
30-Apr-01 $15,011 $15,496 $13,862
31-May-01 $14,475 $14,917 $13,349
30-Jun-01 $13,858 $14,280 $12,800
31-Jul-01 $13,510 $13,935 $12,579
31-Aug-01 $13,122 $13,545 $12,287
30-Sep-01 $11,939 $12,318 $11,042
31-Oct-01 $12,149 $12,554 $11,325
30-Nov-01 $12,526 $12,947 $11,743
31-Dec-01 $12,619 $13,035 $11,812
31-Jan-02 $11,966 $12,356 $11,185
28-Feb-02 $12,056 $12,462 $11,263
31-Mar-02 $12,719 $13,119 $11,873
30-Apr-02 $12,759 $13,228 $11,951
31-May-02 $12,931 $13,414 $12,103
30-Jun-02 $12,408 $12,872 $11,621
31-Jul-02 $11,191 $11,616 $10,474
31-Aug-02 $11,161 $11,591 $10,450
30-Sep-02 $9,954 $10,339 $9,328
31-Oct-02 $10,528 $10,955 $9,828
30-Nov-02 $10,970 $11,438 $10,275
31-Dec-02 $10,646 $11,073 $9,929
31-Jan-03 $10,184 $10,608 $9,515
28-Feb-03 $9,979 $10,390 $9,298
31-Mar-03 $9,773 $10,186 $9,115
30-Apr-03 $10,697 $11,186 $10,009
31-May-03 $11,344 $11,857 $10,615
30-Jun-03 $11,612 $12,138 $10,872
31-Jul-03 $11,847 $12,415 $11,135
31-Aug-03 $12,033 $12,625 $11,403
30-Sep-03 $12,360 $12,977 $11,755
31-Oct-03 $13,079 $13,754 $12,487
30-Nov-03 $13,429 $14,119 $12,764
31-Dec-03 $14,493 $15,257 $13,761
31-Jan-04 $14,608 $15,393 $13,955
29-Feb-04 $14,932 $15,739 $14,277
31-Mar-04 $14,890 $15,702 $14,357
30-Apr-04 $14,598 $15,412 $14,033
31-May-04 $14,660 $15,514 $14,081
30-Jun-04 $14,932 $15,800 $14,389
31-Jul-04 $14,556 $15,392 $13,921
31-Aug-04 $14,566 $15,416 $13,983
30-Sep-04 $14,974 $15,845 $14,348
31-Oct-04 $15,485 $16,411 $14,837
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/04 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
20 Schwab Equity Index Funds
SCHWAB INTERNATIONAL INDEX FUND
SELECT SHARES(R) PERFORMANCE as of 10/31/04
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Select Shares with its
benchmark and Morningstar category. The table below the chart shows two types of
after-tax returns.
[BAR CHART]
Benchmark:
Fund: SCHWAB Fund Category:
SELECT INTERNATIONAL MORNINGSTAR FOREIGN
SHARES INDEX(R) LARGE-CAP BLEND
1 YEAR 18.56% 19.32% 16.12%
5 YEARS -2.21% -1.71% -1.56%
SINCE INCEPTION: 5/19/97 2.58% 2.99% -0.64%
1 YEAR 5 YEARS SINCE INCEPTION
Fund Category: Fund Category: Fund Category:
Fund: MORNINGSTAR Fund: MORNINGSTAR Fund: MORNINGSTAR
SELECT FOREIGN SELECT FOREIGN SELECT FOREIGN
TOTAL RETURNS AFTER TAX SHARES LARGE-CAP BLEND SHARES LARGE-CAP BLEND SHARES LARGE-CAP BLEND
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 18.43% 13.82% -2.60% -2.72% 2.21% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 12.63% 9.24% -2.04% -1.89% 2.03% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $50,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $50,000
investment (the minimum investment for this share class) in the fund's Select
Shares, compared with a similar investment in its benchmark and an additional
index.
[LINE GRAPH]
$60,440 SELECT SHARES
$62,259 SCHWAB INTERNATIONAL INDEX(R)
$61,358 MSCI-EAFE(R) INDEX
SCHWAB
SELECT INTERNATIONAL MSCI-EAFE(R)
SHARES INDEX(R) INDEX
19-May-97 $50,000 $50,000 $50,000
31-May-97 $49,375 $49,283 $49,248
30-Jun-97 $52,170 $52,161 $51,961
31-Jul-97 $53,755 $53,571 $52,803
31-Aug-97 $49,815 $49,706 $48,859
30-Sep-97 $53,240 $52,827 $51,595
31-Oct-97 $49,005 $48,550 $47,627
30-Nov-97 $48,970 $48,360 $47,141
31-Dec-97 $49,580 $49,042 $47,551
31-Jan-98 $51,405 $51,027 $49,725
28-Feb-98 $54,385 $54,111 $52,917
31-Mar-98 $55,800 $55,529 $54,547
30-Apr-98 $56,175 $55,905 $54,978
31-May-98 $56,175 $55,770 $54,708
30-Jun-98 $56,655 $56,133 $55,124
31-Jul-98 $56,845 $56,493 $55,681
31-Aug-98 $49,840 $49,376 $48,782
30-Sep-98 $48,240 $47,757 $47,284
31-Oct-98 $53,005 $52,763 $52,211
30-Nov-98 $55,725 $55,732 $54,885
31-Dec-98 $57,490 $57,561 $57,053
31-Jan-99 $57,305 $57,252 $56,881
28-Feb-99 $56,025 $56,122 $55,528
31-Mar-99 $58,585 $58,699 $57,843
30-Apr-99 $60,955 $61,225 $60,186
31-May-99 $57,980 $58,137 $57,086
30-Jun-99 $60,200 $60,507 $59,313
31-Jul-99 $62,385 $62,757 $61,074
31-Aug-99 $62,950 $63,342 $61,300
30-Sep-99 $64,115 $64,425 $61,919
31-Oct-99 $67,575 $67,857 $64,241
30-Nov-99 $70,660 $70,806 $66,470
31-Dec-99 $76,920 $77,025 $72,439
31-Jan-00 $70,880 $71,433 $67,839
29-Feb-00 $71,870 $72,588 $69,664
31-Mar-00 $76,050 $76,708 $72,367
30-Apr-00 $71,905 $72,561 $68,561
31-May-00 $69,895 $70,431 $66,888
30-Jun-00 $72,515 $73,058 $69,503
31-Jul-00 $69,740 $70,228 $66,591
31-Aug-00 $70,995 $71,462 $67,169
30-Sep-00 $67,310 $67,769 $63,898
31-Oct-00 $65,110 $65,658 $62,390
30-Nov-00 $62,185 $62,703 $60,050
31-Dec-00 $63,455 $64,024 $62,182
31-Jan-01 $63,955 $64,706 $62,201
28-Feb-01 $58,470 $59,090 $57,548
31-Mar-01 $54,570 $55,001 $53,641
30-Apr-01 $58,315 $58,788 $57,326
31-May-01 $56,230 $56,592 $55,205
30-Jun-01 $53,835 $54,175 $52,936
31-Jul-01 $52,485 $52,866 $52,020
31-Aug-01 $51,015 $51,386 $50,813
30-Sep-01 $46,385 $46,733 $45,666
31-Oct-01 $47,235 $47,628 $46,835
30-Nov-01 $48,700 $49,119 $48,563
31-Dec-01 $49,040 $49,452 $48,850
31-Jan-02 $46,540 $46,876 $46,256
28-Feb-02 $46,890 $47,279 $46,579
31-Mar-02 $49,430 $49,771 $49,099
30-Apr-02 $49,590 $50,183 $49,423
31-May-02 $50,255 $50,891 $50,051
30-Jun-02 $48,220 $48,833 $48,059
31-Jul-02 $43,525 $44,067 $43,316
31-Aug-02 $43,410 $43,973 $43,216
30-Sep-02 $38,715 $39,225 $38,575
31-Oct-02 $40,945 $41,560 $40,646
30-Nov-02 $42,665 $43,395 $42,491
31-Dec-02 $41,385 $42,009 $41,064
31-Jan-03 $39,625 $40,243 $39,351
28-Feb-03 $38,825 $39,419 $38,450
31-Mar-03 $38,025 $38,642 $37,697
30-Apr-03 $41,625 $42,438 $41,391
31-May-03 $44,140 $44,981 $43,899
30-Jun-03 $45,180 $46,051 $44,961
31-Jul-03 $46,140 $47,098 $46,050
31-Aug-03 $46,860 $47,898 $47,159
30-Sep-03 $48,140 $49,233 $48,612
31-Oct-03 $50,980 $52,179 $51,640
30-Nov-03 $52,300 $53,566 $52,787
31-Dec-03 $56,485 $57,881 $56,909
31-Jan-04 $56,935 $58,400 $57,712
29-Feb-04 $58,195 $59,711 $59,045
31-Mar-04 $58,035 $59,572 $59,376
30-Apr-04 $56,935 $58,470 $58,034
31-May-04 $57,180 $58,857 $58,231
30-Jun-04 $58,240 $59,940 $59,506
31-Jul-04 $56,770 $58,393 $57,572
31-Aug-04 $56,810 $58,483 $57,826
30-Sep-04 $58,400 $60,114 $59,335
31-Oct-04 $60,440 $62,259 $61,358
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/04 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
Schwab Equity Index Funds 21
SCHWAB INTERNATIONAL INDEX FUND
FUND FACTS as of 10/31/04
STYLE ASSESSMENT 1
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
TOP HOLDINGS 2
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) BP PLC 3.3%
- --------------------------------------------------------------------------------
(2) HSBC HOLDINGS PLC 2.7%
- --------------------------------------------------------------------------------
(3) VODAFONE GROUP PLC 2.7%
- --------------------------------------------------------------------------------
(4) GLAXOSMITHKLINE PLC 1.9%
- --------------------------------------------------------------------------------
(5) TOTAL SA 1.9%
- --------------------------------------------------------------------------------
(6) NOVARTIS AG, Registered 1.8%
- --------------------------------------------------------------------------------
(7) ROYAL DUTCH PETROLEUM CO. 1.7%
- --------------------------------------------------------------------------------
(8) TOYOTA MOTOR CORP. 1.7%
- --------------------------------------------------------------------------------
(9) NESTLE SA, Registered 1.5%
- --------------------------------------------------------------------------------
(10) ROYAL BANK OF SCOTLAND GROUP PLC 1.3%
- --------------------------------------------------------------------------------
TOTAL 20.5%
STATISTICS
NUMBER OF HOLDINGS 335
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $57,013
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 19.6
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.1
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 1%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 3
Investor Shares ($1,000 for retirement and custodial accounts) $2,500
Select Shares $50,000
- --------------------------------------------------------------------------------
SECTOR AND COUNTRY WEIGHTINGS % of Portfolio
These charts show the fund's sector and country composition as of the report
date. A sector is a portion of the overall stock market that is made up of
industries whose business components share similar characteristics.
SECTOR
- ---------------------------
[PIE CHART]
27.9% FINANCE
24.8% MATERIALS
15.6% CONSUMER NON-DURABLES
10.7% UTILITIES
7.7% TRANSPORTATION
4.4% ENERGY
3.9% CAPITAL GOODS
2.6% TECHNOLOGY
2.1% CONSUMER DURABLES
0.3% OTHER
COUNTRY
- ---------------------------
[PIE CHART]
27.8% UNITED KINGDOM
17.8% JAPAN
10.6% FRANCE
7.8% SWITZERLAND
7.2% GERMANY
6.2% CANADA
5.6% NETHERLANDS
4.1% AUSTRALIA
3.9% SPAIN
9.0% OTHER
Portfolio holdings may have changed since the report date.
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/04, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 This list is not a recommendation of any security by the investment adviser.
3 Please see prospectus for further detail and eligibility requirements.
22 Schwab Equity Index Funds
FUND EXPENSES
EXAMPLES FOR A $1,000 INVESTMENT
As a fund shareholder, you incur two types of costs: transaction costs, such as
redemption fees; and, ongoing costs, such as management fees, transfer agent and
shareholder services fees, and other fund expenses.
The expense examples below are intended to help you understand your ongoing cost
(in dollars) of investing in a fund and to compare this cost with the ongoing
cost of investing in other mutual funds. These examples are based on an
investment of $1,000 invested for six-months beginning May 1, 2004 and held
through October 31, 2004.
ACTUAL RETURN lines in the table below provide information about actual account
values and actual expenses. You may use this information, together with the
amount you invested, to estimate the expenses that you paid over the period. To
do so, simply divide your account value by $1,000 (for example, an $8,600
account value / $1,000 = 8.6), then multiply the result by the number given for
your fund or share class under the heading entitled "Expenses Paid During
Period."
HYPOTHETICAL RETURN lines in the table below provide information about
hypothetical account values and hypothetical expenses based on a fund's or share
class' actual expense ratio and an assumed return of 5% per year before
expenses. Because the return used is not an actual return, it may not be used to
estimate the actual ending account value or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only, and do not reflect any transactional costs, such as
redemption fees. If these transactional costs were included, your costs would
have been higher.
ENDING
BEGINNING ACCOUNT VALUE EXPENSES
EXPENSE RATIO 1 ACCOUNT VALUE (NET OF EXPENSES) PAID DURING PERIOD 2
(ANNUALIZED) AT 5/1/04 AT 10/31/04 5/1/04-10/31/04
- ------------------------------------------------------------------------------------------------------------------------------------
SCHWAB S&P 500 FUND
Investor Shares
Actual Return 0.37% $1,000 $1,028.00 $1.89
Hypothetical 5% Return 0.37% $1,000 $1,023.28 $1.88
Select Shares(R)
Actual Return 0.19% $1,000 $1,029.10 $0.97
Hypothetical 5% Return 0.19% $1,000 $1,024.18 $0.97
e.Shares(R)
Actual Return 0.28% $1,000 $1,028.00 $1.43
Hypothetical 5% Return 0.28% $1,000 $1,023.73 $1.42
- ------------------------------------------------------------------------------------------------------------------------------------
SCHWAB 1000 FUND(R)
Investor Shares
Actual Return 0.50% $1,000 $1,027.80 $2.55
Hypothetical 5% Return 0.50% $1,000 $1,022.62 $2.54
Select Shares
Actual Return 0.35% $1,000 $1,028.40 $1.78
Hypothetical 5% Return 0.35% $1,000 $1,023.38 $1.78
1 Based on the most recent six-month expense ratio; may differ from the expense
ratio provided in Financial Highlights.
2 Expenses for each share class are equal to that share class' annualized
expense ratio, multiplied by the average account value over the period,
multiplied by 184 days of the period, and divided by 366 days of the fiscal
year.
Schwab Equity Index Funds 23
FUND EXPENSES continued
ENDING
BEGINNING ACCOUNT VALUE EXPENSES
EXPENSE RATIO 1 ACCOUNT VALUE (NET OF EXPENSES) PAID DURING PERIOD 2
(ANNUALIZED) AT 5/1/04 AT 10/31/04 5/1/04-10/31/04
- ------------------------------------------------------------------------------------------------------------------------------------
SCHWAB SMALL-CAP INDEX FUND(R)
Investor Shares
Actual Return 0.59% $1,000 $1,056.80 $3.05
Hypothetical 5% Return 0.59% $1,000 $1,022.17 $3.00
Select Shares
Actual Return 0.42% $1,000 $1,057.80 $2.17
Hypothetical 5% Return 0.42% $1,000 $1,023.03 $2.14
- ------------------------------------------------------------------------------------------------------------------------------------
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
Investor Shares
Actual Return 0.56% $1,000 $1,033.70 $2.81
Hypothetical 5% Return 0.56% $1,000 $1,022.37 $2.80
Select Shares
Actual Return 0.39% $1,000 $1,035.20 $2.00
Hypothetical 5% Return 0.39% $1,000 $1,023.18 $1.98
- ------------------------------------------------------------------------------------------------------------------------------------
SCHWAB INTERNATIONAL INDEX FUND(R)
Investor Shares
Actual Return 0.69% $1,000 $1,060.80 $3.57
Hypothetical 5% Return 0.69% $1,000 $1,021.67 $3.51
Select Shares
Actual Return 0.50% $1,000 $1,061.60 $2.59
Hypothetical 5% Return 0.50% $1,000 $1,022.62 $2.54
1 Based on the most recent six-month expense ratio; may differ from the expense
ratio provided in Financial Highlights.
2 Expenses for each share class are equal to that share class' annualized
expense ratio, multiplied by the average account value over the period,
multiplied by 184 days of the period, and divided by 366 days of the fiscal
year.
24 Schwab Equity Index Funds
SCHWAB S&P 500 FUND
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
INVESTOR SHARES 10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 16.36 13.79 16.45 22.15 21.17
------------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.23 0.20 0.20 0.17 0.17
Net realized and unrealized gains or losses 1.23 2.57 (2.68) (5.70) 1.06
------------------------------------------------------------------------------
Total income or loss from investment operations 1.46 2.77 (2.48) (5.53) 1.23
Less distributions:
Dividends from net investment income (0.21) (0.20) (0.18) (0.17) (0.18)
Distributions from net realized gains -- -- -- -- (0.07)
------------------------------------------------------------------------------
Total distributions (0.21) (0.20) (0.18) (0.17) (0.25)
------------------------------------------------------------------------------
Net asset value at end of period 17.61 16.36 13.79 16.45 22.15
------------------------------------------------------------------------------
Total return (%) 9.03 20.39 (15.32) (25.11) 5.81
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.37 0.36 0.35 0.35 0.36 1
Gross operating expenses 0.45 0.46 0.46 0.46 0.52
Net investment income 1.35 1.45 1.21 0.95 0.81
Portfolio turnover rate 3 3 8 4 9
Net assets, end of period ($ x 1,000,000) 3,849 3,510 2,760 3,070 3,617
1 The ratio of net operating expenses would have been 0.35% if certain
non-routine expenses (proxy fees) had not been included.
See financial notes. 25
SCHWAB S&P 500 FUND
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
SELECT SHARES 10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 16.41 13.83 16.50 22.21 21.23
------------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.26 0.24 0.22 0.20 0.20
Net realized and unrealized gains or losses 1.24 2.57 (2.69) (5.71) 1.06
------------------------------------------------------------------------------
Total income or loss from investment operations 1.50 2.81 (2.47) (5.51) 1.26
Less distributions:
Dividends from net investment income (0.23) (0.23) (0.20) (0.20) (0.21)
Distributions from net realized gains -- -- -- -- (0.07)
------------------------------------------------------------------------------
Total distributions (0.23) (0.23) (0.20) (0.20) (0.28)
------------------------------------------------------------------------------
Net asset value at end of period 17.68 16.41 13.83 16.50 22.21
------------------------------------------------------------------------------
Total return (%) 9.25 20.62 (15.20) (24.97) 5.94
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.19 0.19 0.19 0.19 0.20 1
Gross operating expenses 0.30 0.31 0.31 0.31 0.36
Net investment income 1.53 1.63 1.37 1.11 0.98
Portfolio turnover rate 3 3 8 4 9
Net assets, end of period ($ x 1,000,000) 4,119 3,692 3,029 3,563 4,357
1 The ratio of net operating expenses would have been 0.19% if certain
non-routine expenses (proxy fees) had not been included.
26 See financial notes.
SCHWAB S&P 500 FUND
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
E.SHARES 10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 16.37 13.79 16.46 22.17 21.21
------------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.26 0.23 0.23 0.20 0.20
Net realized and unrealized gains or losses 1.21 2.56 (2.71) (5.71) 1.04
------------------------------------------------------------------------------
Total income or loss from investment operations 1.47 2.79 (2.48) (5.51) 1.24
Less distributions:
Dividends from net investment income (0.22) (0.21) (0.19) (0.20) (0.21)
Distributions from net realized gains -- -- -- -- (0.07)
------------------------------------------------------------------------------
Total distributions (0.22) (0.21) (0.19) (0.20) (0.28)
------------------------------------------------------------------------------
Net asset value at end of period 17.62 16.37 13.79 16.46 22.17
------------------------------------------------------------------------------
Total return (%) 9.10 20.55 (15.32) (25.02) 5.84
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.28 0.28 0.28 0.28 0.29 1
Gross operating expenses 0.30 0.31 0.31 0.31 0.36
Net investment income 1.44 1.54 1.28 1.02 0.88
Portfolio turnover rate 3 3 8 4 9
Net assets, end of period ($ x 1,000,000) 249 246 220 304 441
1 The ratio of net operating expenses would have been 0.28% if certain
non-routine expenses (proxy fees) had not been included.
See financial notes. 27
SCHWAB S&P 500 FUND
SUMMARY OF PORTFOLIO HOLDINGS as of October 31, 2004
This section shows the fund's 50 largest portfolio holdings in unaffiliated
issuers and any holding exceeding 1% of the fund's net assets. The remaining
securities held by the fund are grouped as "Other Securities" in each category.
You can request a complete schedule of portfolio holdings as of the end of the
report period, free of charge, by calling SchwabFunds(R) at 1-800-435-4000. This
complete schedule, filed on the fund's Form N-CSR, is also available on the
SEC's website at http://www.sec.gov. In addition, the fund files its complete
schedule of portfolio holdings with the SEC for the first and third quarters of
each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's
website and may be reviewed and copied at the SEC's Public Reference Room in
Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the
Public Reference Room. A copy of the fund's most recently filed quarterly
schedule of portfolio holdings, included on the fund's Form N-CSR (with respect
to the fund's second and fourth fiscal quarters) or Form N-Q (with respect to
the fund's first and third fiscal quarters), is available by visiting Schwab's
website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten. For the characteristics of the securities included under "Other
Securities", please refer to the complete schedule of portfolio holdings.
(1) Top Ten Holding
o Non-income producing security
= All or a portion of this security is held as collateral for open futures
contracts
/ Issuer is affiliated with the fund's adviser
@ This security or a portion of this security is on loan
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
99.9% COMMON STOCK 7,443,407 8,204,858
0.1% SHORT-TERM
INVESTMENT 9,415 9,415
0.0% U.S. TREASURY
OBLIGATIONS 973 973
- --------------------------------------------------------------------------------
100.0% TOTAL INVESTMENTS 7,453,795 8,215,246
7.8% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 641,932 641,932
(7.8)% OTHER ASSETS AND
LIABILITIES, NET (639,803)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 8,217,375
% OF NET VALUE
SECURITY AND NUMBER OF SHARES ASSETS ($ x 1,000)
COMMON STOCK 99.9% of net assets
AEROSPACE / DEFENSE 1.9%
--------------------------------------------------------------------------
Other Securities 1.9 154,257
AIR TRANSPORTATION 1.3%
--------------------------------------------------------------------------
United Parcel Service, Inc.,
Class B 875,969 0.9 69,359
Other Securities 0.4 33,712
------- -----------
1.3 103,071
ALCOHOLIC BEVERAGES 0.5%
--------------------------------------------------------------------------
Other Securities 0.5 37,410
APPAREL 0.5%
--------------------------------------------------------------------------
Other Securities 0.5 36,764
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.1%
--------------------------------------------------------------------------
Other Securities 1.1 87,613
BANKS 8.0%
--------------------------------------------------------------------------
(7) Bank of America
Corp. 3,185,172 1.7 142,664
JPMorgan Chase &
Co. 2,789,215 1.3 107,664
U.S. Bancorp 1,460,541 0.5 41,786
Wachovia Corp. 1,021,821 0.6 50,284
Wells Fargo & Co. 1,322,357 1.0 78,971
Other Securities 2.9 236,220
------- -----------
8.0 657,589
BUSINESS MACHINES & SOFTWARE 9.0%
--------------------------------------------------------------------------
o Cisco Systems, Inc. 5,294,483 1.2 101,707
o Dell, Inc. 1,955,032 0.8 68,543
Hewlett-Packard
Co. 2,349,878 0.5 43,849
(10) International Business
Machines Corp. 1,311,743 1.4 117,729
=(3) Microsoft Corp. 8,513,790 2.9 238,301
@o Oracle Corp. 4,033,549 0.6 51,065
Other Securities 1.6 122,082
------- -----------
9.0 743,276
28 See financial notes.
SCHWAB S&P 500 FUND
% OF NET VALUE
SECURITY AND NUMBER OF SHARES ASSETS ($ x 1,000)
BUSINESS SERVICES 4.5%
--------------------------------------------------------------------------
o eBay, Inc. 514,370 0.6 50,208
Tyco International
Ltd. 1,573,000 0.6 48,999
o Yahoo! Inc. 1,058,458 0.5 38,306
Other Securities 2.8 228,310
------- -----------
4.5 365,823
CHEMICALS 1.5%
--------------------------------------------------------------------------
Other Securities 1.5 125,594
CONSTRUCTION 0.5%
--------------------------------------------------------------------------
Other Securities 0.5 39,639
CONSUMER DURABLES 0.2%
--------------------------------------------------------------------------
Other Securities 0.2 18,034
CONTAINERS 0.1%
--------------------------------------------------------------------------
Other Securities 0.1 11,796
ELECTRONICS 5.0%
--------------------------------------------------------------------------
@ Intel Corp. 5,023,205 1.4 111,817
Qualcomm, Inc. 1,266,736 0.7 52,962
Other Securities 2.9 248,887
------- -----------
5.0 413,666
ENERGY: RAW MATERIALS 1.8%
--------------------------------------------------------------------------
Other Securities 1.8 150,220
FOOD & AGRICULTURE 3.4%
--------------------------------------------------------------------------
The Coca-Cola Co. 1,893,069 0.9 76,972
PepsiCo, Inc. 1,326,494 0.8 65,768
Other Securities 1.7 137,711
------- -----------
3.4 280,451
GOLD 0.2%
--------------------------------------------------------------------------
Other Securities 0.2 16,425
HEALTHCARE / DRUGS & MEDICINE 12.2%
--------------------------------------------------------------------------
Abbott Laboratories 1,222,533 0.6 52,117
@o Amgen, Inc. 985,789 0.7 55,993
Eli Lilly & Co. 878,527 0.6 48,240
@(8) Johnson & Johnson 2,324,156 1.7 135,684
Medtronic, Inc. 942,124 0.6 48,152
Merck & Co., Inc. 1,730,042 0.7 54,168
(6) Pfizer, Inc. 5,912,611 2.1 171,170
UnitedHealth Group,
Inc. 517,316 0.5 37,454
Wyeth 1,034,682 0.5 41,025
Other Securities 4.2 359,941
------- -----------
12.2 1,003,944
HOUSEHOLD PRODUCTS 2.2%
--------------------------------------------------------------------------
= Procter & Gamble
Co. 1,990,726 1.3 101,886
Other Securities 0.9 80,423
------- -----------
2.2 182,309
INSURANCE 4.6%
--------------------------------------------------------------------------
(9) American International
Group, Inc. 2,040,150 1.5 123,858
Other Securities 3.1 253,208
------- -----------
4.6 377,066
MEDIA 3.5%
--------------------------------------------------------------------------
@o Comcast Corp.,
Class A 1,742,810 0.6 51,413
o Time Warner, Inc. 3,558,276 0.7 59,210
@ Viacom, Inc.,
Class B 1,358,469 0.6 49,571
The Walt Disney
Co. 1,593,305 0.5 40,183
Other Securities 1.1 83,012
------- -----------
3.5 283,389
MISCELLANEOUS 0.6%
--------------------------------------------------------------------------
3M Co. 607,876 0.6 47,153
MISCELLANEOUS FINANCE 7.7%
--------------------------------------------------------------------------
American Express
Co. 990,581 0.6 52,570
/ The Charles Schwab
Corp. 1,063,150 0.1 9,728
(4) Citigroup, Inc. 4,056,339 2.2 179,980
Fannie Mae 753,227 0.6 52,839
Merrill Lynch & Co.,
Inc. 730,834 0.5 39,421
Morgan Stanley 855,539 0.5 43,709
Other Securities 3.2 254,466
------- -----------
7.7 632,713
See financial notes. 29
SCHWAB S&P 500 FUND
SUMMARY OF PORTFOLIO HOLDINGS continued
% OF NET VALUE
SECURITY AND NUMBER OF SHARES ASSETS ($ x 1,000)
NON-DURABLES & ENTERTAINMENT 1.2%
--------------------------------------------------------------------------
Other Securities 1.2 96,787
NON-FERROUS METALS 0.4%
--------------------------------------------------------------------------
Other Securities 0.4 35,915
OIL: DOMESTIC 1.2%
--------------------------------------------------------------------------
ConocoPhillips 535,948 0.5 45,186
Other Securities 0.7 53,440
----- -----------
1.2 98,626
OIL: INTERNATIONAL 4.1%
--------------------------------------------------------------------------
ChevronTexaco
Corp. 1,663,314 1.1 88,255
(2) Exxon Mobil Corp. 5,094,097 3.0 250,732
----- -----------
4.1 338,987
OPTICAL & PHOTO 0.2%
--------------------------------------------------------------------------
Other Securities 0.2 19,067
PAPER & FOREST PRODUCTS 0.8%
--------------------------------------------------------------------------
Other Securities 0.8 67,738
PRODUCER GOODS & MANUFACTURING 5.4%
--------------------------------------------------------------------------
@=(1) General Electric
Co. 8,267,470 3.4 282,086
Other Securities 2.0 159,500
----- -----------
5.4 441,586
RAILROAD & SHIPPING 0.5%
--------------------------------------------------------------------------
Other Securities 0.5 41,153
REAL PROPERTY 0.5%
--------------------------------------------------------------------------
Other Securities 0.5 39,573
RETAIL 6.7%
--------------------------------------------------------------------------
@ Home Depot, Inc. 1,719,111 0.9 70,621
=(5) Wal-Mart Stores,
Inc. 3,322,091 2.2 179,127
Other Securities 3.6 300,572
----- -----------
6.7 550,320
STEEL 0.1%
--------------------------------------------------------------------------
Other Securities 0.1 10,943
TELEPHONE 3.4%
--------------------------------------------------------------------------
BellSouth Corp. 1,425,708 0.5 38,024
SBC Communications,
Inc. 2,594,733 0.8 65,543
@ Verizon Communications,
Inc. 2,167,822 1.0 84,762
Other Securities 1.1 86,995
----- -----------
3.4 275,324
TOBACCO 1.1%
--------------------------------------------------------------------------
Altria Group, Inc. 1,606,665 0.9 77,859
Other Securities 0.2 13,173
----- -----------
1.1 91,032
TRAVEL & RECREATION 0.7%
--------------------------------------------------------------------------
Other Securities 0.7 56,548
TRUCKING & FREIGHT 0.1%
--------------------------------------------------------------------------
Other Securities 0.1 11,899
UTILITIES: ELECTRIC & GAS 3.2%
--------------------------------------------------------------------------
Other Securities 3.2 261,158
SHORT-TERM INVESTMENT
0.1% of net assets
Provident Institutional
TempFund 9,414,995 0.1 9,415
</Table>
<Table>
<Caption>
SECURITY
RATE, MATURITY DATE
FACE AMOUNT ($ x 1,000)
U.S. TREASURY OBLIGATIONS
0.0% of net assets
= U.S. Treasury Bills,
1.54%-1.66%, 12/16/04
975 0.0 973
END OF INVESTMENTS.
30 See financial notes.
SCHWAB S&P 500 FUND
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
COLLATERAL INVESTED FOR SECURITIES ON LOAN
7.8% of net assets
COMMERCIAL PAPER & OTHER CORPORATE
OBLIGATIONS 3.3%
--------------------------------------------------------------------------
Canadian Imperial Bank of
Commerce/New York
1.92%, 11/29/04 23,101 23,097
1.72%, 05/25/05 21,894 21,890
Crown Point Capital
1.80%, 11/05/04 8,536 8,523
Foreningssparbanken AB
1.83%, 11/15/04 63,439 63,430
Fortis Bank NY
1.78%, 06/06/05 9,163 9,162
2.06%, 06/08/05 6,590 6,589
Societe Generale NY
1.95%, 11/01/04 60,728 60,715
1.83%, 11/15/04 21,790 21,782
Westdeutsche Landesbank AG
1.50%, 01/10/05 54,770 54,756
-----------
269,944
SHORT-TERM INVESTMENTS 4.5%
--------------------------------------------------------------------------
Citibank, Time Deposit
1.76%, 11/01/04 15,069 15,069
</Table>
<Table>
<Caption>
SECURITY AND NUMBER OF SHARES
Institutional Money Market
Trust 356,919,456 356,919
-----------
371,988
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN.
In addition to the above, the fund held the following at 10/31/04. All numbers x
1,000 except number of contracts.
FUTURES CONTRACTS
NUMBER OF CONTRACT UNREALIZED
CONTRACTS VALUE GAINS
S&P 500 Index, Long
expires 12/17/04 10 2,826 68
See financial notes. 31
SCHWAB S&P 500 FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value
(including $620,138 of securities on loan) $8,215,246 a
Collateral invested for securities on loan 641,932
Receivables:
Fund shares sold 8,988
Interest 10
Dividends 10,572
Due from brokers for futures 16
Income from securities on loan 50
Prepaid expenses + 89
--------------
TOTAL ASSETS 8,876,903
LIABILITIES
- --------------------------------------------------------------------------------
Collateral invested for securities on loan 641,932
Payables:
Fund shares redeemed 13,877
Interest expense 1
Investments bought 3,181
Investment adviser and administrator fees 85
Transfer agent and shareholder service fees 68
Trustees' fees 4
Accrued expenses + 380
--------------
TOTAL LIABILITIES 659,528
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 8,876,903
TOTAL LIABILITIES - 659,528
--------------
NET ASSETS $8,217,375
NET ASSETS BY SOURCE
Capital received from investors 8,026,861
Net investment income not yet distributed 94,491
Net realized capital losses (665,496) b
Net unrealized capital gains 761,519 b
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $3,849,213 218,576 $17.61
Select Shares $4,118,961 232,983 $17.68
e.Shares $249,201 14,142 $17.62
Unless stated, all numbers x 1,000.
a The fund paid $7,453,795 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $486,090
Sales/maturities $277,754
The fund's total security transactions with other SchwabFunds(R) during the
period were $5,033.
b These derive from investments and futures.
FEDERAL TAX DATA
--------------------------------------------------
PORTFOLIO COST $7,540,237
NET UNREALIZED GAINS AND LOSSES:
Gains $1,985,732
Losses + (1,310,723)
--------------
$675,009
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $94,491
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2008 $26,504
2009 50,224
2010 400,268
2011 72,381
2012 + 29,609
--------------
$578,986
32 See financial notes.
SCHWAB S&P 500 FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $136,896
Interest 78
Securities on loan + 1,155
------------
TOTAL INVESTMENT INCOME 138,129
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments (34,701)
Net realized gains on futures contracts + 817
------------
NET REALIZED LOSSES (33,884)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 600,786
Net unrealized losses on futures contracts + (316)
------------
NET UNREALIZED GAINS 600,470
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 13,834 a
Transfer agent and shareholder service fees:
Investor Shares 9,494 b
Select Shares 3,998 b
e.Shares 254 b
Trustees' fees 60 c
Custodian fees 226
Portfolio accounting fees 1,116
Professional fees 69
Registration fees 168
Shareholder reports 456
Interest expense 9
Other expenses + 148
------------
Total expenses 29,832
Expense reduction - 7,465 d
------------
NET EXPENSES 22,367
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 138,129
NET EXPENSES - 22,367
------------
NET INVESTMENT INCOME 115,762
NET REALIZED LOSSES (33,884) e
NET UNREALIZED GAINS + 600,470 e
------------
INCREASE IN NET ASSETS FROM OPERATIONS $682,348
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.20% of the first
$500 million and 0.17% of the assets beyond that. These fees are paid to
Charles Schwab Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20%, 0.05%,
and 0.05% of the assets of each respective share class. These fees are paid to
Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d Includes $1,591 from the investment adviser (CSIM) and $5,874 from the
transfer agent and shareholder service agent (Schwab). These reductions
reflect a guarantee by CSIM and Schwab to limit the operating expenses of this
fund through February 28, 2005, as follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
--------------------------------------
Investor Shares 0.37
Select Shares 0.19
e.Shares 0.28
This limit excludes interest, taxes and certain non-routine expenses.
e These add up to a net gain on investments of $566,586.
See financial notes. 33
SCHWAB S&P 500 FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income $115,762 $99,392
Net realized losses (33,884) (59,341)
Net unrealized gains + 600,470 1,201,943
------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS 682,348 1,241,994
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME
Investor Shares 46,375 40,628
Select Shares 52,459 49,532
e.Shares + 3,356 3,378
------------------------------------
TOTAL DIVIDENDS FROM NET INVESTMENT INCOME $102,190 $93,538 a,b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
SHARES SOLD
Investor Shares 43,461 $748,116 50,095 $730,445
Select Shares 48,984 845,969 51,800 753,457
e.Shares + 3,507 60,506 4,668 67,061
-----------------------------------------------------
TOTAL SHARES SOLD 95,952 $1,654,591 106,563 $1,550,963
SHARES REINVESTED
Investor Shares 2,680 $44,333 2,857 $39,062
Select Shares 2,844 47,146 3,300 45,211
e.Shares + 182 3,018 224 3,062
-----------------------------------------------------
TOTAL SHARES REINVESTED 5,706 $94,497 6,381 $87,335
SHARES REDEEMED
Investor Shares (42,120) ($725,021) (38,573) ($558,964)
Select Shares (43,789) (755,806) (49,150) (705,422)
e.Shares + (4,554) (78,428) (5,869) (84,347)
-----------------------------------------------------
TOTAL SHARES REDEEMED (90,463) ($1,559,255) (93,592) ($1,348,733) c
NET TRANSACTIONS IN
FUND SHARES 11,195 $189,833 19,352 $289,565
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 454,506 $7,447,384 435,154 $6,009,363
Total increase + 11,195 769,991 19,352 1,438,021
-----------------------------------------------------
END OF PERIOD 465,701 $8,217,375 454,506 $7,447,384 d
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
The fund designates $102,190 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h)(ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for use in preparing
their 2004 income tax return.
b The tax-basis components of distributions paid are:
CURRENT PRIOR
PERIOD PERIOD
Ordinary income $102,190 $93,538
Long-term capital gains $-- $--
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase.
CURRENT PRIOR
PERIOD PERIOD
Investor Shares $238 $236
Select Shares 238 302
e.Shares + 10 + 22
------- ------
TOTAL $486 $560
Dollar amounts are net of the redemption proceeds.
d Includes distributable net investment income in the amount of $94,491 and
$80,919 at the end of the current period and prior period, respectively.
Percent of fund shares owned by other SchwabFunds(R) as of the end of the
current period:
SCHWAB MARKETTRACK PORTFOLIOS
All Equity Portfolio 2.4%
Growth Portfolio 1.7%
Balanced Portfolio 1.1%
Conservative Portfolio 0.5%
34 See financial notes.
SCHWAB 1000 FUND(R)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
INVESTOR SHARES 10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 30.25 25.25 29.57 39.95 37.12
---------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.37 0.33 0.31 0.26 0.26
Net realized and unrealized gains or losses 2.26 4.99 (4.36) (10.40) 2.83
---------------------------------------------------------------------------
Total income or loss from investment operations 2.63 5.32 (4.05) (10.14) 3.09
Less distributions:
Dividends from net investment income (0.34) (0.32) (0.27) (0.24) (0.26)
---------------------------------------------------------------------------
Net asset value at end of period 32.54 30.25 25.25 29.57 39.95
---------------------------------------------------------------------------
Total return (%) 8.78 21.34 (13.87) (25.50) 8.34
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.50 0.49 0.46 0.46 0.47 1
Gross operating expenses 0.50 0.51 0.52 0.51 0.51
Net investment income 1.15 1.27 1.04 0.78 0.63
Portfolio turnover rate 5 5 9 8 9
Net assets, end of period ($ x 1,000,000) 4,258 3,974 3,223 3,852 5,083
1 The ratio of net operating expenses would have been 0.46% if certain
non-routine expenses (proxy fees) had not been included.
See financial notes. 35
SCHWAB 1000 FUND
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
SELECT SHARES 10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 30.27 25.26 29.58 39.98 37.16
---------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.42 0.37 0.35 0.31 0.29
Net realized and unrealized gains or losses 2.25 4.99 (4.36) (10.41) 2.84
---------------------------------------------------------------------------
Total income or loss from investment operations 2.67 5.36 (4.01) (10.10) 3.13
Less distributions:
Dividends from net investment income (0.38) (0.35) (0.31) (0.30) (0.31)
---------------------------------------------------------------------------
Net asset value at end of period 32.56 30.27 25.26 29.58 39.98
---------------------------------------------------------------------------
Total return (%) 8.90 21.52 (13.77) (25.40) 8.46
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.35 0.35 0.35 0.35 0.36 1
Gross operating expenses 0.35 0.36 0.37 0.36 0.36
Net investment income 1.30 1.41 1.15 0.89 0.74
Portfolio turnover rate 5 5 9 8 9
Net assets, end of period ($ x 1,000,000) 2,138 1,996 1,588 1,911 2,159
1 The ratio of net operating expenses would have been 0.35% if certain
non-routine expenses (proxy fees) had not been included.
36 See financial notes.
SCHWAB 1000 FUND
SUMMARY OF PORTFOLIO HOLDINGS as of October 31, 2004
This section shows the fund's 50 largest portfolio holdings in unaffiliated
issuers and any holding exceeding 1% of the fund's net assets. The remaining
securities held by the fund are grouped as "Other Securities" in each category.
You can request a complete schedule of portfolio holdings as of the end of the
report period, free of charge, by calling SchwabFunds(R) at 1-800-435-4000. This
complete schedule, filed on the fund's Form N-CSR, is also available on the
SEC's website at http://www.sec.gov. In addition, the fund files its complete
schedule of portfolio holdings with the SEC for the first and third quarters of
each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's
website and may be reviewed and copied at the SEC's Public Reference Room in
Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the
Public Reference Room. A copy of the fund's most recently filed quarterly
schedule of portfolio holdings, included on the fund's Form N-CSR (with respect
to the fund's second and fourth fiscal quarters) or Form N-Q (with respect to
the fund's first and third fiscal quarters), is available by visiting Schwab's
website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten. For the characteristics of the securities included under "Other
Securities" and for securities valued at fair value, please refer to the
complete schedule of portfolio holdings.
(1) Top Ten Holding
o Non-income producing security
= All or a portion of this security is held as collateral for open futures
contracts
/ Issuer is affiliated with the fund's adviser
@ This security or a portion of this security is on loan
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
99.7% COMMON STOCK 3,915,127 6,375,544
0.2% SHORT-TERM
INVESTMENT 13,754 13,754
0.0% PREFERRED STOCK 376 382
0.0% U.S. TREASURY
OBLIGATION 299 299
0.0% WARRANTS -- 9
- --------------------------------------------------------------------------------
99.9% TOTAL INVESTMENTS 3,929,556 6,389,988
10.3% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 659,658 659,658
(10.2)% OTHER ASSETS AND
LIABILITIES, NET (654,395)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 6,395,251
% OF NET VALUE
SECURITY AND NUMBER OF SHARES ASSETS ($ x 1,000)
COMMON STOCK 99.7% of net assets
AEROSPACE / DEFENSE 1.7%
------------------------------------------------------------------------
Other Securities 1.7 107,928
AIR TRANSPORTATION 1.1%
------------------------------------------------------------------------
United Parcel Service, Inc.,
Class B 598,100 0.8 47,358
Other Securities 0.3 24,752
------ -----------
1.1 72,110
ALCOHOLIC BEVERAGES 0.4%
------------------------------------------------------------------------
Other Securities 0.4 27,707
APPAREL 0.4%
------------------------------------------------------------------------
Other Securities 0.4 26,306
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.1%
------------------------------------------------------------------------
Other Securities 1.1 69,892
BANKS 7.9%
------------------------------------------------------------------------
(7) Bank of America
Corp. 2,158,336 1.5 96,672
JPMorgan Chase &
Co. 1,886,776 1.2 72,830
U.S. Bancorp 993,453 0.5 28,423
@ Wachovia Corp. 692,320 0.5 34,069
Wells Fargo & Co. 895,032 0.8 53,451
Other Securities 3.4 221,051
------ -----------
7.9 506,496
BUSINESS MACHINES & SOFTWARE 8.4%
------------------------------------------------------------------------
o Cisco Systems, Inc. 3,607,000 1.1 69,290
o Dell, Inc. 1,336,000 0.7 46,840
Hewlett-Packard
Co. 1,629,340 0.5 30,403
(10) International Business
Machines Corp. 912,900 1.3 81,933
=(3) Microsoft Corp. 5,769,100 2.5 161,477
o Oracle Corp. 2,770,014 0.6 35,068
Other Securities 1.7 112,116
------ -----------
8.4 537,127
See financial notes. 37
SCHWAB 1000 FUND
SUMMARY OF PORTFOLIO HOLDINGS continued
% OF NET VALUE
SECURITY AND NUMBER OF SHARES ASSETS ($ x 1,000)
BUSINESS SERVICES 4.6%
------------------------------------------------------------------------
o eBay, Inc. 349,500 0.5 34,115
o Yahoo! Inc. 721,912 0.4 26,126
Other Securities 3.7 232,239
------ -----------
4.6 292,480
CHEMICALS 1.5%
------------------------------------------------------------------------
Other Securities 1.5 96,447
CONSTRUCTION 0.8%
------------------------------------------------------------------------
Other Securities 0.8 48,773
CONSUMER DURABLES 0.3%
------------------------------------------------------------------------
Other Securities 0.3 19,079
CONTAINERS 0.2%
------------------------------------------------------------------------
Other Securities 0.2 12,027
ELECTRONICS 5.0%
------------------------------------------------------------------------
@ Intel Corp. 3,413,800 1.2 75,991
Qualcomm, Inc. 862,200 0.6 36,049
Other Securities 3.2 211,199
------ -----------
5.0 323,239
ENERGY: RAW MATERIALS 1.7%
------------------------------------------------------------------------
Other Securities 1.7 106,631
FOOD & AGRICULTURE 3.4%
------------------------------------------------------------------------
The Coca-Cola Co. 1,299,300 0.8 52,830
PepsiCo, Inc. 898,860 0.7 44,565
Other Securities 1.9 119,281
------ -----------
3.4 216,676
GOLD 0.2%
------------------------------------------------------------------------
Other Securities 0.2 10,228
HEALTHCARE / DRUGS & MEDICINE 11.8%
------------------------------------------------------------------------
Abbott Laboratories 827,500 0.6 35,276
@o Amgen, Inc. 670,140 0.6 38,064
Eli Lilly & Co. 601,568 0.5 33,032
(8) Johnson & Johnson 1,574,920 1.4 91,944
Medtronic, Inc. 641,000 0.5 32,762
Merck & Co., Inc. 1,176,008 0.6 36,821
(6) Pfizer, Inc. 4,009,712 1.8 116,081
UnitedHealth Group,
Inc. 355,181 0.4 25,715
Wyeth 712,200 0.5 28,239
Other Securities 4.9 314,623
------ -----------
11.8 752,557
HOUSEHOLD PRODUCTS 2.0%
------------------------------------------------------------------------
= Procter & Gamble
Co. 1,364,000 1.1 69,810
Other Securities 0.9 58,843
------ -----------
2.0 128,653
INSURANCE 4.5%
-------------------------------------------------------------------------
(9) American International
Group, Inc. 1,382,471 1.3 83,930
Other Securities 3.2 201,136
------ -----------
4.5 285,066
MEDIA 4.0%
------------------------------------------------------------------------
o Comcast Corp.,
Class A 1,192,880 0.6 35,190
o Time Warner, Inc. 2,338,630 0.6 38,915
@ Viacom, Inc., Class B 927,579 0.5 33,847
@ The Walt Disney Co. 1,097,021 0.4 27,667
Other Securities 1.9 121,163
------ -----------
4.0 256,782
MISCELLANEOUS 0.5%
------------------------------------------------------------------------
@ 3M Co. 416,900 0.5 32,339
MISCELLANEOUS FINANCE 8.3%
------------------------------------------------------------------------
@ American Express Co. 672,700 0.6 35,700
o Berkshire Hathaway, Inc.,
Class A 617 0.8 51,982
/ The Charles Schwab
Corp. 730,497 0.1 6,684
(5) Citigroup, Inc. 2,744,001 1.9 121,751
@ Fannie Mae 517,800 0.6 36,324
Merrill Lynch & Co.,
Inc. 497,400 0.4 26,830
Morgan Stanley 586,010 0.5 29,939
Other Securities 3.4 220,208
------- -----------
8.3 529,418
38 See financial notes.
SCHWAB 1000 FUND
% OF NET VALUE
SECURITY AND NUMBER OF SHARES ASSETS ($ x 1,000)
NON-DURABLES & ENTERTAINMENT 1.3%
------------------------------------------------------------------------
Other Securities 1.3 80,258
NON-FERROUS METALS 0.4%
------------------------------------------------------------------------
Other Securities 0.4 24,519
OIL: DOMESTIC 1.4%
------------------------------------------------------------------------
ConocoPhillips 364,678 0.5 30,746
Other Securities 0.9 59,788
------ -----------
1.4 90,534
OIL: INTERNATIONAL 3.6%
------------------------------------------------------------------------
ChevronTexaco
Corp. 1,135,092 0.9 60,228
(2) Exxon Mobil Corp. 3,473,230 2.7 170,952
------ -----------
3.6 231,180
OPTICAL & PHOTO 0.2%
------------------------------------------------------------------------
Other Securities 0.2 14,253
PAPER & FOREST PRODUCTS 0.8%
------------------------------------------------------------------------
Other Securities 0.8 51,877
PRODUCER GOODS & MANUFACTURING 5.0%
------------------------------------------------------------------------
@=(1) General Electric
Co. 5,602,200 3.0 191,147
Other Securities 2.0 130,694
------ -----------
5.0 321,841
RAILROAD & SHIPPING 0.4%
------------------------------------------------------------------------
Other Securities 0.4 28,373
REAL PROPERTY 1.7%
------------------------------------------------------------------------
Other Securities 1.7 108,603
RETAIL 6.6%
------------------------------------------------------------------------
Home Depot, Inc. 1,179,397 0.8 48,450
=(4) Wal-Mart Stores, Inc. 2,267,900 1.9 122,285
Other Securities 3.9 251,037
------ -----------
6.6 421,772
STEEL 0.1%
------------------------------------------------------------------------
Other Securities 0.1 6,524
TELEPHONE 3.3%
------------------------------------------------------------------------
BellSouth Corp. 979,400 0.4 26,121
SBC Communications,
Inc. 1,750,128 0.7 44,208
Verizon Communications,
Inc. 1,464,693 0.9 57,270
Other Securities 1.3 85,115
------ -----------
3.3 212,714
TOBACCO 1.0%
------------------------------------------------------------------------
@ Altria Group, Inc. 1,093,500 0.8 52,991
Other Securities 0.2 9,078
------ -----------
1.0 62,069
TRAVEL & RECREATION 0.5%
------------------------------------------------------------------------
Other Securities 0.5 32,593
TRUCKING & FREIGHT 0.3%
------------------------------------------------------------------------
Other Securities 0.3 19,789
UTILITIES: ELECTRIC & GAS 3.3%
------------------------------------------------------------------------
Other Securities 3.3 210,684
PREFERRED STOCK 0.0% of net assets
REAL PROPERTY 0.0%
------------------------------------------------------------------------
Other Securities 0.0 382
WARRANTS 0.0% of net assets
Other Securities 0.0 9
SHORT-TERM INVESTMENT
0.2% of net assets
Provident Institutional
TempFund 13,754,005 0.2 13,754
SECURITY
RATE, MATURITY DATE
FACE AMOUNT ($ x 1,000)
U.S. TREASURY OBLIGATION
0.0% of net assets
= U.S. Treasury Bill,
1.63%, 12/16/04
300 0.0 299
END OF INVESTMENTS.
See financial notes. 39
SCHWAB 1000 FUND
SUMMARY OF PORTFOLIO HOLDINGS continued
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
COLLATERAL INVESTED FOR SECURITIES ON LOAN
10.3% of net assets
COMMERCIAL PAPER & OTHER CORPORATE
OBLIGATIONS 4.0%
------------------------------------------------------------------------
Canadian Imperial Bank of
Commerce/New York
1.92%, 11/29/04 36,821 36,815
1.72%, 05/25/05 35,997 35,989
Crown Point Capital
1.80%, 11/05/04 19,819 19,788
Foreningssparbanken AB
1.83%, 11/15/04 58,583 58,574
Fortis Bank NY
1.78%, 06/06/05 21,855 21,853
2.06%, 06/08/05 8,015 8,014
Societe Generale NY
1.95%, 11/01/04 35,907 35,900
1.83%, 11/15/04 9,413 9,409
Westdeutsche Landesbank AG
1.50%, 01/10/05 27,833 27,826
-----------
254,168
SHORT-TERM INVESTMENTS 6.3%
------------------------------------------------------------------------
Citibank, Time Deposit
1.76%, 11/01/04 16,254 16,254
</Table>
SECURITY AND NUMBER OF SHARES
Institutional Money Market
Trust 389,235,872 389,236
-----------
405,490
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN.
In addition to the above, the fund held the following at 10/31/04. All numbers x
1,000 except number of contracts.
FUTURES CONTRACTS
NUMBER OF CONTRACT UNREALIZED
CONTRACTS VALUE GAINS
S&P 500 Index, Long
expires 12/17/04 30 8,477 87
40 See financial notes.
SCHWAB 1000 FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value
(including $637,824 of securities on loan) $6,389,988 a
Collateral invested for securities on loan 659,658
Receivables:
Fund shares sold 2,095
Interest 3
Dividends 7,575
Investments sold 110
Due from brokers for futures 15
Income from securities on loan 46
Prepaid expenses + 71
--------------
TOTAL ASSETS 7,059,561
LIABILITIES
- --------------------------------------------------------------------------------
Collateral invested for securities on loan 659,658
Payables:
Fund shares redeemed 4,151
Interest expense 3
Investment adviser and administrator fees 119
Transfer agent and shareholder service fees 105
Trustees' fees 3
Accrued expenses + 271
--------------
TOTAL LIABILITIES 664,310
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 7,059,561
TOTAL LIABILITIES - 664,310
--------------
NET ASSETS $6,395,251
NET ASSETS BY SOURCE
Capital received from investors 4,432,434
Net investment income not yet distributed 61,505
Net realized capital losses (559,207) b
Net unrealized capital gains 2,460,519 b
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $4,257,718 130,855 $32.54
Select Shares $2,137,533 65,647 $32.56
Unless stated, all numbers x 1,000.
a The fund paid $3,929,556 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $303,687
Sales/maturities $335,286
The fund's total security transactions with other SchwabFunds(R) during the
period were $88,439.
b These derive from investments and futures.
FEDERAL TAX DATA
-----------------------------------------------
PORTFOLIO COST $3,949,178
NET UNREALIZED GAINS AND LOSSES:
Gains $2,869,565
Losses + (428,755)
--------------
$2,440,810
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $61,505
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2005 $2,606
2006 650
2007 11,853
2009 97,811
2010 250,410
2011 164,037
2012 + 12,131
--------------
$539,498
RECLASSIFICATIONS:
Net investment income
not yet distributed $212
Net realized capital losses $632
Reclassified as:
Capital received from
investors ($844)
See financial notes. 41
SCHWAB 1000 FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $103,511
Interest 41
Securities on loan + 1,292
------------
TOTAL INVESTMENT INCOME 104,844
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments (10,857)
Net realized gains on futures contracts + 56
------------
NET REALIZED LOSSES (10,801)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 458,496
Net unrealized losses on futures contracts + (19)
------------
NET UNREALIZED GAINS 458,477
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 14,342 a
Transfer agent and shareholder service fees:
Investor Shares 10,556 b
Select Shares 2,115 b
Trustees' fees 43 c
Custodian fees 178
Portfolio accounting fees 870
Professional fees 66
Registration fees 132
Shareholder reports 452
Interest expense 6
Other expenses + 59
------------
Total expenses 28,819
Expense reduction - 7 d
------------
NET EXPENSES 28,812
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 104,844
NET EXPENSES - 28,812
------------
NET INVESTMENT INCOME 76,032
NET REALIZED LOSSES (10,801) e
NET UNREALIZED GAINS + 458,477 e
------------
INCREASE IN NET ASSETS FROM OPERATIONS $523,708
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.30% of the first
$500 million and 0.22% of the assets beyond that. These fees are paid to
Charles Schwab Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20%, and
0.05% of the assets of each respective share class. These fees are paid to
Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 28,
2005, as follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
---------------------------------------------------------
Investor Shares 0.51
Select Shares 0.36
This limit excludes interest, taxes and certain non-routine expenses.
e These add up to a net gain on investments of $447,676.
42 See financial notes.
SCHWAB 1000 FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income $76,032 $68,476
Net realized losses (10,801) (168,829)
Net unrealized gains + 458,477 1,141,148
-------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS 523,708 1,040,795
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME
Investor Shares 45,314 40,944
Select Shares + 25,058 22,368
-------------------------------------
TOTAL DIVIDENDS FROM NET INVESTMENT INCOME $70,372 $63,312 a,b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
SHARES SOLD
Investor Shares 19,479 $619,405 23,357 $623,574
Select Shares + 9,808 311,874 14,563 384,508
------------------------------------------------
TOTAL SHARES SOLD 29,287 $931,279 37,920 $1,008,082
SHARES REINVESTED
Investor Shares 1,365 $41,809 1,516 $38,050
Select Shares + 698 21,363 766 19,200
------------------------------------------------
TOTAL SHARES REINVESTED 2,063 $63,172 2,282 $57,250
SHARES REDEEMED
Investor Shares (21,346) ($679,008) (21,127) ($560,404)
Select Shares + (10,792) (343,161) (12,277) (323,765)
------------------------------------------------
TOTAL SHARES REDEEMED (32,138) ($1,022,169) (33,404) ($884,169) c
NET TRANSACTIONS
IN FUND SHARES (788) ($27,718) 6,798 $181,163
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 197,290 $5,969,633 190,492 $4,810,987
Total increase
or decrease + (788) 425,618 6,798 1,158,646
------------------------------------------------
END OF PERIOD 196,502 $6,395,251 197,290 $5,969,633 d
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
The fund designates $70,372 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h)(ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for use in preparing
their 2004 income tax return.
b The tax-basis components of distributions paid are:
CURRENT PRIOR
PERIOD PERIOD
Ordinary income $70,372 $63,312
Long-term capital gains $-- $--
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase.
CURRENT PERIOD:
Investor Shares $218
Select Shares + 83
-------
TOTAL $301
PRIOR PERIOD:
Investor Shares $222
Select Shares + 163
-------
TOTAL $385
Dollar amounts are net of the redemption proceeds.
d Includes distributable net investment income in the amount of $61,505 and
$55,633 at the end of the current period and prior period, respectively.
See financial notes. 43
SCHWAB SMALL-CAP INDEX FUND(R)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
INVESTOR SHARES 10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 18.22 13.27 15.98 21.06 17.41
--------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.13 0.11 0.13 0.07 0.07
Net realized and unrealized gains or losses 1.68 4.98 (2.17) (2.76) 3.62
--------------------------------------------------------------------
Total income or loss from investment operations 1.81 5.09 (2.04) (2.69) 3.69
Less distributions:
Dividends from net investment income (0.11) (0.14) (0.09) (0.08) (0.04)
Distributions from net realized gains -- -- (0.58) (2.31) --
--------------------------------------------------------------------
Total distributions (0.11) (0.14) (0.67) (2.39) (0.04)
--------------------------------------------------------------------
Net asset value at end of period 19.92 18.22 13.27 15.98 21.06
--------------------------------------------------------------------
Total return (%) 9.98 38.72 (13.66) (13.66) 21.22
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.59 0.56 0.49 0.49 0.50 1
Gross operating expenses 0.59 0.60 0.60 0.61 0.66
Net investment income 0.66 0.74 0.77 0.49 0.44
Portfolio turnover rate 39 34 44 49 54
Net assets, end of period ($ x 1,000,000) 869 886 722 804 803
1 The ratio of net operating expenses would have been 0.49% if certain
non-routine expenses (proxy fees) had not been included.
44 See financial notes.
SCHWAB SMALL-CAP INDEX FUND
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
SELECT SHARES 10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 18.25 13.28 16.00 21.09 17.44
--------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.17 0.14 0.14 0.11 0.11
Net realized and unrealized gains or losses 1.68 4.99 (2.18) (2.78) 3.61
--------------------------------------------------------------------
Total income or loss from investment operations 1.85 5.13 (2.04) (2.67) 3.72
Less distributions:
Dividends from net investment income (0.14) (0.16) (0.10) (0.11) (0.07)
Distributions from net realized gains -- -- (0.58) (2.31) --
--------------------------------------------------------------------
Total distributions (0.14) (0.16) (0.68) (2.42) (0.07)
--------------------------------------------------------------------
Net asset value at end of period 19.96 18.25 13.28 16.00 21.09
--------------------------------------------------------------------
Total return (%) 10.16 39.02 (13.62) (13.56) 21.37
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.42 0.41 0.38 0.38 0.39 1
Gross operating expenses 0.44 0.45 0.45 0.46 0.51
Net investment income 0.82 0.89 0.88 0.60 0.55
Portfolio turnover rate 39 34 44 49 54
Net assets, end of period ($ x 1,000,000) 761 759 638 727 757
1 The ratio of net operating expenses would have been 0.38% if certain
non-routine expenses (proxy fees) had not been included.
See financial notes. 45
SCHWAB SMALL-CAP INDEX FUND
SUMMARY OF PORTFOLIO HOLDINGS as of October 31, 2004
This section shows the fund's 50 largest portfolio holdings in unaffiliated
issuers and any holding exceeding 1% of the fund's net assets. The remaining
securities held by the fund are grouped as "Other Securities" in each category.
You can request a complete schedule of portfolio holdings as of the end of the
report period, free of charge, by calling SchwabFunds(R) at 1-800-435-4000. This
complete schedule, filed on the fund's Form N-CSR, is also available on the
SEC's website at http://www.sec.gov. In addition, the fund files its complete
schedule of portfolio holdings with the SEC for the first and third quarters of
each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's
website and may be reviewed and copied at the SEC's Public Reference Room in
Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the
Public Reference Room. A copy of the fund's most recently filed quarterly
schedule of portfolio holdings, included on the fund's Form N-CSR (with respect
to the fund's second and fourth fiscal quarters) or Form N-Q (with respect to
the fund's first and third fiscal quarters), is available by visiting Schwab's
website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten. For the characteristics of the securities included under "Other
Securities", please refer to the complete schedule of portfolio holdings.
(1) Top Ten Holding
o Non-income producing security
= All or a portion of this security is held as collateral
for open futures contracts
@ This security or a portion of this security is on loan
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
100.0% COMMON STOCK 1,387,803 1,628,595
0.0% SHORT-TERM
INVESTMENT 787 787
0.0% U.S. TREASURY
OBLIGATIONS 120 120
- --------------------------------------------------------------------------------
100.0% TOTAL INVESTMENTS 1,388,710 1,629,502
8.6% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 140,272 140,272
(8.6)% OTHER ASSETS AND
LIABILITIES, NET (140,048)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 1,629,726
% OF NET VALUE
SECURITY AND NUMBER OF SHARES ASSETS ($ x 1,000)
COMMON STOCK 100.0% of net assets
AEROSPACE / DEFENSE 1.0%
------------------------------------------------------------------------
Other Securities 1.0 16,871
AIR TRANSPORTATION 1.1%
------------------------------------------------------------------------
Other Securities 1.1 17,661
ALCOHOLIC BEVERAGES 0.1%
------------------------------------------------------------------------
Other Securities 0.1 1,994
APPAREL 1.6%
------------------------------------------------------------------------
o Aeropostale, Inc. 120,950 0.2 3,816
o Quiksilver, Inc. 130,000 0.2 3,543
Other Securities 1.2 18,357
------ -----------
1.6 25,716
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.6%
------------------------------------------------------------------------
=o(3) United Defense Industries,
Inc. 118,600 0.3 4,761
Other Securities 1.3 20,616
------ -----------
1.6 25,377
BANKS 7.0%
------------------------------------------------------------------------
= Southwest Bancorp of Texas,
Inc. 156,200 0.2 3,661
Texas Regional Bancshares,
Inc., Class A 106,628 0.2 3,405
Other Securities 6.6 106,334
------ -----------
7.0 113,400
BUSINESS MACHINES & SOFTWARE 2.2%
------------------------------------------------------------------------
Other Securities 2.2 35,871
BUSINESS SERVICES 14.5%
------------------------------------------------------------------------
o Ask Jeeves, Inc. 127,500 0.2 3,287
=o CACI International, Inc.,
Class A 65,700 0.2 4,006
@=o Cerner Corp. 77,700 0.2 3,508
o Hewitt Associates, Inc.,
Class A 118,380 0.2 3,318
o Infospace, Inc. 71,390 0.2 3,748
=o R.H. Donnelley Corp. 67,700 0.2 3,673
o Waste Connections,
Inc. 106,950 0.2 3,371
46 See financial notes.
SCHWAB SMALL-CAP INDEX FUND
% OF NET VALUE
SECURITY AND NUMBER OF SHARES ASSETS ($ x 1,000)
@o(1) Wynn Resorts Ltd. 183,440 0.7 10,667
Other Securities 12.4 199,888
------ -----------
14.5 235,466
CHEMICALS 2.2%
------------------------------------------------------------------------
Georgia Gulf Corp. 71,100 0.2 3,219
Other Securities 2.0 32,243
------ -----------
2.2 35,462
CONSTRUCTION 2.0%
------------------------------------------------------------------------
@= Beazer Homes USA,
Inc. 30,369 0.2 3,334
= Simpson Manufacturing Co.,
Inc. 52,700 0.2 3,388
Other Securities 1.6 26,459
------ -----------
2.0 33,181
CONSUMER DURABLES 1.1%
------------------------------------------------------------------------
@ Toro Co. 54,500 0.2 3,720
Other Securities 0.9 14,699
------ -----------
1.1 18,419
CONTAINERS 0.3%
------------------------------------------------------------------------
Other Securities 0.3 4,066
ELECTRONICS 7.8%
------------------------------------------------------------------------
@o Macromedia, Inc. 150,600 0.2 4,087
Other Securities 7.6 122,210
------ -----------
7.8 126,297
ENERGY: RAW MATERIALS 3.4%
------------------------------------------------------------------------
o Cimarex Energy Co. 93,900 0.2 3,369
o Southwestern Energy
Co. 81,820 0.2 3,759
Unit Corp. 99,500 0.2 3,690
Other Securities 2.8 44,840
------ -----------
3.4 55,658
FOOD & AGRICULTURE 1.2%
------------------------------------------------------------------------
Other Securities 1.2 19,796
GOLD 0.0%
------------------------------------------------------------------------
Other Securities 0.0 767
HEALTHCARE / DRUGS & MEDICINE 11.0%
------------------------------------------------------------------------
o AMERIGROUP Corp. 55,600 0.2 3,336
Mentor Corp. 95,600 0.2 3,327
@=o MGI Pharma, Inc. 153,200 0.3 4,086
Mine Safety Appliances
Co. 88,000 0.2 3,319
=o Resmed, Inc. 76,200 0.2 3,581
Other Securities 9.9 161,548
------ -----------
11.0 179,197
HOUSEHOLD PRODUCTS 0.1%
------------------------------------------------------------------------
Other Securities 0.1 2,376
INSURANCE 3.1%
------------------------------------------------------------------------
Commerce Group, Inc. 74,100 0.2 3,750
Other Securities 2.9 47,458
------ -----------
3.1 51,208
MEDIA 2.1%
------------------------------------------------------------------------
Other Securities 2.1 34,959
MISCELLANEOUS 0.3%
------------------------------------------------------------------------
Other Securities 0.3 4,935
MISCELLANEOUS FINANCE 5.3%
------------------------------------------------------------------------
=(6) Cathay General Bancorp.,
Inc. 112,400 0.3 4,429
= Downey Financial
Corp. 60,440 0.2 3,340
(7) East-West Bancorp,
Inc. 109,700 0.3 4,392
=o La Quinta Corp. 396,700 0.2 3,193
@o(2) UnitedGlobalCom, Inc.,
Class A 858,200 0.4 6,419
Other Securities 3.9 64,240
------ -----------
5.3 86,013
NON-DURABLES & ENTERTAINMENT 2.7%
------------------------------------------------------------------------
o Penn National Gaming,
Inc. 90,240 0.2 3,748
Other Securities 2.5 40,296
------ -----------
2.7 44,044
See financial notes. 47
SCHWAB SMALL-CAP INDEX FUND
SUMMARY OF PORTFOLIO HOLDINGS continued
% OF NET VALUE
SECURITY AND NUMBER OF SHARES ASSETS ($ x 1,000)
NON-FERROUS METALS 0.9%
------------------------------------------------------------------------
Other Securities 0.9 13,821
OIL: DOMESTIC 2.8%
------------------------------------------------------------------------
o(9) Plains Exploration &
Production Co. 167,478 0.3 4,187
@ Quicksilver Resources,
Inc. 107,600 0.2 3,403
o(5) Tesoro Petroleum
Corp. 148,100 0.3 4,485
Other Securities 2.0 33,720
------ -----------
2.8 45,795
OPTICAL & PHOTO 0.1%
------------------------------------------------------------------------
Other Securities 0.1 1,616
PAPER & FOREST PRODUCTS 0.8%
------------------------------------------------------------------------
Other Securities 0.8 13,355
PRODUCER GOODS & MANUFACTURING 6.0%
------------------------------------------------------------------------
= Aptargroup, Inc. 79,100 0.2 3,711
= Hughes Supply, Inc. 133,800 0.2 3,801
= IDEX Corp. 108,300 0.2 3,996
= Kennametal, Inc. 79,300 0.2 3,690
MSC Industrial Direct Co.,
Class A 94,000 0.2 3,209
Other Securities 5.0 79,234
------ -----------
6.0 97,641
RAILROAD & SHIPPING 0.4%
------------------------------------------------------------------------
Other Securities 0.4 6,587
REAL PROPERTY 6.3%
------------------------------------------------------------------------
= Brandywine Realty
Trust 119,300 0.2 3,510
(8) New Century Financial
Corp. 77,200 0.3 4,258
Other Securities 5.8 94,749
------ -----------
6.3 102,517
RETAIL 3.4%
------------------------------------------------------------------------
=o United Stationers, Inc. 73,100 0.2 3,253
=o Zale Corp. 112,500 0.2 3,209
Other Securities 3.0 49,285
------ -----------
3.4 55,747
STEEL 1.1%
------------------------------------------------------------------------
Allegheny Technologies,
Inc. 208,000 0.2 3,497
Steel Dynamics, Inc. 111,900 0.2 3,715
Other Securities 0.7 10,181
------ -----------
1.1 17,393
TELEPHONE 1.2%
------------------------------------------------------------------------
Other Securities 1.2 19,350
TOBACCO 0.3%
------------------------------------------------------------------------
Other Securities 0.3 4,963
TRAVEL & RECREATION 1.6%
------------------------------------------------------------------------
o(10) Scientific Games Corp.,
Class A 194,200 0.3 4,113
Other Securities 1.3 21,611
------ -----------
1.6 25,724
TRUCKING & FREIGHT 1.1%
------------------------------------------------------------------------
o(4) Landstar Systems, Inc. 67,300 0.3 4,573
Other Securities 0.8 13,866
------ -----------
1.1 18,439
UTILITIES: ELECTRIC & GAS 2.3%
------------------------------------------------------------------------
PNM Resources,
Inc. 136,250 0.2 3,172
Other Securities 2.1 33,741
------ -----------
2.3 36,913
SECURITY
RATE, MATURITY DATE
FACE AMOUNT ($ x 1,000)
SHORT-TERM INVESTMENT
0.0% of net assets
HSBC Bank, USA Grand
Cayman Time Deposit
1.29%, 11/01/04
787 0.0 787
48 See financial notes.
SCHWAB SMALL-CAP INDEX FUND
SECURITY
RATE, MATURITY DATE % OF NET VALUE
FACE AMOUNT ($ x 1,000) ASSETS ($ x 1,000)
U.S. TREASURY OBLIGATIONS
0.0% of net assets
= U.S. Treasury Bills,
1.59%-1.65%, 12/16/04
120 0.0 120
END OF INVESTMENTS.
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COLLATERAL INVESTED FOR SECURITIES ON LOAN
8.6% of net assets
SHORT-TERM INVESTMENT 8.6%
------------------------------------------------------------------------
Securities Lending Investment
Fund 140,271,911 140,272
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN.
In addition to the above, the fund held the following at 10/31/04. All numbers x
1,000 except number of contracts.
FUTURES CONTRACTS
NUMBER OF CONTRACT UNREALIZED
CONTRACTS VALUE GAINS
Russell 2000 Index,
Long expires 12/17/04 4 1,169 35
See financial notes. 49
SCHWAB SMALL-CAP INDEX FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value
(including $133,167 of securities on loan) $1,629,502 a
Collateral invested for securities on loan 140,272
Receivables:
Fund shares sold 441
Dividends 914
Investments sold 253
Income from securities on loan 52
Prepaid expenses + 26
--------------
TOTAL ASSETS 1,771,460
LIABILITIES
- --------------------------------------------------------------------------------
Collateral invested for securities on loan 140,272
Payables:
Fund shares redeemed 1,244
Interest expense 3
Due to brokers for futures 1
Investment adviser and administrator fees 40
Transfer agent and shareholder service fees 22
Trustees' fees 1
Accrued expenses + 151
--------------
TOTAL LIABILITIES 141,734
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 1,771,460
TOTAL LIABILITIES - 141,734
--------------
NET ASSETS $1,629,726
NET ASSETS BY SOURCE
Capital received from investors 1,451,903
Net investment income not yet distributed 9,047
Net realized capital losses (72,051) b
Net unrealized capital gains 240,827 b
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $868,933 43,629 $19.92
Select Shares $760,793 38,121 $19.96
Unless stated, all numbers x 1,000.
a The fund paid $1,388,710 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $656,852
Sales/maturities $818,350
The fund's total security transactions with other SchwabFunds(R) during the
period were $86,623.
b These derive from investments and futures.
FEDERAL TAX DATA
---------------------------------------------------------
PORTFOLIO COST $1,391,370
NET UNREALIZED GAINS AND LOSSES:
Gains $443,325
Losses + (205,193)
--------------
$238,132
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $9,047
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $214,814
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2011 $69,356
RECLASSIFICATIONS:
Net investment income
not yet distributed $30
Reclassified as:
Net realized capital losses ($30)
50 See financial notes.
SCHWAB SMALL-CAP INDEX FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $20,182 a
Interest 18
Securities on loan + 693
------------
TOTAL INVESTMENT INCOME 20,893
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized gains on investments 215,204
Net realized gains on futures contracts + 406
------------
NET REALIZED GAINS 215,610
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized losses on investments (67,232)
Net unrealized losses on futures contracts + (18)
------------
NET UNREALIZED LOSSES (67,250)
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 4,956 b
Transfer agent and shareholder service fees:
Investor Shares 2,247 c
Select Shares 782 c
Trustees' fees 16 d
Custodian fees 167
Portfolio accounting fees 242
Professional fees 45
Registration fees 61
Shareholder reports 166
Interest expense 12
Other expenses + 22
------------
Total expenses 8,716
Expense reduction - 139 e
------------
NET EXPENSES 8,577
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 20,893
NET EXPENSES - 8,577
------------
NET INVESTMENT INCOME 12,316
NET REALIZED GAINS 215,610 f
NET UNREALIZED LOSSES + (67,250) f
------------
INCREASE IN NET ASSETS FROM OPERATIONS $160,676
Unless stated, all numbers x 1,000.
a Net of $3 foreign withholding tax.
b Calculated as a percentage of average daily net assets: 0.33% of the first
$500 million and 0.28% of the assets beyond that. These fees are paid to
Charles Schwab Investment Management, Inc. (CSIM).
c Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20%, and
0.05% of the assets of each respective share class. These fees are paid to
Charles Schwab & Co., Inc. (Schwab).
d For the fund's independent trustees only.
e This reduction was made by the transfer agent and shareholder service agent
(Schwab). It reflects a guarantee by the investment adviser (CSIM) and Schwab
to limit the operating expenses of this fund through February 28, 2005, as
follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
----------------------------------------
Investor Shares 0.60
Select Shares 0.42
This limit excludes interest, taxes and certain non-routine expenses.
f These add up to a net gain on investments of $148,360.
See financial notes. 51
SCHWAB SMALL-CAP INDEX FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income $12,316 $11,374
Net realized gains or losses 215,610 (193,979)
Net unrealized gains or losses + (67,250) 656,467
------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS 160,676 473,862
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME
Investor Shares 5,423 7,507
Select Shares + 5,623 7,345
------------------------------------
TOTAL DIVIDENDS FROM NET INVESTMENT INCOME $11,046 $14,852 a,b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
SHARES SOLD
Investor Shares 5,935 $114,857 6,678 $101,578
Select Shares + 6,358 121,773 6,760 99,820
----------------------------------------------------
TOTAL SHARES SOLD 12,293 $236,630 13,438 $201,398
SHARES REINVESTED
Investor Shares 270 $5,073 522 $7,085
Select Shares + 278 5,234 503 6,844
----------------------------------------------------
TOTAL SHARES REINVESTED 548 $10,307 1,025 $13,929
SHARES REDEEMED
Investor Shares (11,208) ($215,266) (12,997) ($188,682)
Select Shares + (10,118) (196,867) (13,679) (200,308)
----------------------------------------------------
TOTAL SHARES REDEEMED (21,326) ($412,133) (26,676) ($388,990) c
NET TRANSACTIONS
IN FUND SHARES (8,485) ($165,196) (12,213) ($173,663)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 90,235 $1,645,292 102,448 $1,359,945
Total increase or
decrease + (8,485) (15,566) (12,213) 285,347
----------------------------------------------------
END OF PERIOD 81,750 $1,629,726 90,235 $1,645,292 d
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
The fund designates $11,046 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h)(ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for use in preparing
their 2004 income tax return.
b The tax-basis components of distributions paid are:
CURRENT PRIOR
PERIOD PERIOD
Ordinary income $11,046 $14,852
Long-term capital gains $-- $--
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase.
CURRENT PRIOR
PERIOD PERIOD
Investor Shares $68 $70
Select Shares + 33 + 39
--------------------
TOTAL $101 $109
Dollar amounts are net of the redemption proceeds.
d Includes distributable net investment income in the amount of $9,047 and
$7,747 at the end of the current period and prior period, respectively.
Percent of fund shares owned by other SchwabFunds(R) as of the end of the
current period:
SCHWAB MARKETTRACK PORTFOLIOS
All Equity Portfolio 6.9%
Growth Portfolio 7.6%
Balanced Portfolio 5.0%
Conservative Portfolio 1.8%
SCHWAB ANNUITY PORTFOLIOS
Growth Portfolio II 0.4%
52 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
INVESTOR SHARES 10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 17.48 14.35 16.62 22.49 20.87
------------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.19 0.16 0.16 0.15 0.16
Net realized and unrealized gains or losses 1.53 3.14 (2.27) (5.87) 1.56
------------------------------------------------------------------------------
Total income or loss from investment operations 1.72 3.30 (2.11) (5.72) 1.72
Less distributions:
Dividends from net investment income (0.16) (0.17) (0.16) (0.15) (0.10)
------------------------------------------------------------------------------
Net asset value at end of period 19.04 17.48 14.35 16.62 22.49
------------------------------------------------------------------------------
Total return (%) 9.93 23.24 (12.86) (25.55) 8.23
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.56 0.53 0.40 0.40 0.41 1
Gross operating expenses 0.56 0.59 0.62 0.65 0.67
Net investment income 1.07 1.18 1.11 0.94 0.76
Portfolio turnover rate 2 3 2 2 2
Net assets, end of period ($ x 1,000,000) 592 469 263 224 218
1 The ratio of net operating expenses would have been 0.40% if certain
non-routine expenses (proxy fees) had not been included.
See financial notes. 53
SCHWAB TOTAL STOCK MARKET INDEX FUND
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
SELECT SHARES 10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 17.52 14.37 16.65 22.52 20.89
------------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.22 0.20 0.19 0.18 0.17
Net realized and unrealized gains or losses 1.54 3.14 (2.29) (5.87) 1.56
------------------------------------------------------------------------------
Total income or loss from investment operations 1.76 3.34 (2.10) (5.69) 1.73
Less distributions:
Dividends from net investment income (0.19) (0.19) (0.18) (0.18) (0.10)
------------------------------------------------------------------------------
Net asset value at end of period 19.09 17.52 14.37 16.65 22.52
------------------------------------------------------------------------------
Total return (%) 10.10 23.50 (12.81) (25.40) 8.30
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.39 0.36 0.27 0.27 0.28 1
Gross operating expenses 0.41 0.44 0.47 0.50 0.52
Net investment income 1.23 1.35 1.24 1.07 0.89
Portfolio turnover rate 2 3 2 2 2
Net assets, end of period ($ x 1,000,000) 548 429 264 257 262
1 The ratio of net operating expenses would have been 0.27% if certain
non-routine expenses (proxy fees) had not been included.
54 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND
SUMMARY OF PORTFOLIO HOLDINGS as of October 31, 2004
This section shows the fund's 50 largest portfolio holdings in unaffiliated
issuers and any holding exceeding 1% of the fund's net assets. The remaining
securities held by the fund are grouped as "Other Securities" in each category.
You can request a complete schedule of portfolio holdings as of the end of the
report period, free of charge, by calling SchwabFunds(R) at 1-800-435-4000. This
complete schedule, filed on the fund's Form N-CSR, is also available on the
SEC's website at http://www.sec.gov. In addition, the fund files its complete
schedule of portfolio holdings with the SEC for the first and third quarters of
each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's
website and may be reviewed and copied at the SEC's Public Reference Room in
Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the
Public Reference Room. A copy of the fund's most recently filed quarterly
schedule of portfolio holdings, included on the fund's Form N-CSR (with respect
to the fund's second and fourth fiscal quarters) or Form N-Q (with respect to
the fund's first and third fiscal quarters), is available by visiting Schwab's
website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten. For the characteristics of the securities included under "Other
Securities" and for securities valued at fair value, please refer to the
complete schedule of portfolio holdings.
(1) Top Ten Holding
o Non-income producing security
= All or a portion of this security is held as collateral for open futures
contracts
/ Issuer is affiliated with the fund's adviser
@ This security or a portion of this security is on loan
For fixed-rate obligations, the rate shown is the interest rate (the rate
established when the obligation was issued) and the maturity date shown is the
stated legal maturity.
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- ---------------------------------------------------------------------------------
98.9% COMMON STOCK 1,070,799 1,127,570
0.7% SHORT-TERM
INVESTMENT 8,015 8,015
0.0% U.S. TREASURY
OBLIGATION 399 399
0.0% PREFERRED STOCK 68 69
0.0% CORPORATE BONDS 15 16
0.0% RIGHTS 130 8
0.0% WARRANTS 286 2
- ---------------------------------------------------------------------------------
99.6% TOTAL INVESTMENTS 1,079,712 1,136,079
6.3% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 71,496 71,496
(5.9)% OTHER ASSETS AND
LIABILITIES, NET (66,895)
- ---------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 1,140,680
% OF NET VALUE
SECURITY AND NUMBER OF SHARES ASSETS ($ x 1,000)
COMMON STOCK 98.9% of net assets
AEROSPACE / DEFENSE 1.6%
--------------------------------------------------------------------------
Other Securities 1.6 17,869
AIR TRANSPORTATION 1.0%
--------------------------------------------------------------------------
United Parcel Service, Inc.,
Class B 91,480 0.7 7,243
Other Securities 0.3 4,734
----- -----------
1.0 11,977
ALCOHOLIC BEVERAGES 0.4%
--------------------------------------------------------------------------
Other Securities 0.4 4,500
APPAREL 0.6%
--------------------------------------------------------------------------
Other Securities 0.6 6,415
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.1%
--------------------------------------------------------------------------
Other Securities 1.1 12,658
BANKS 7.7%
--------------------------------------------------------------------------
(7) Bank of America
Corp. 338,518 1.3 15,162
JPMorgan Chase &
Co. 295,944 1.0 11,423
U.S. Bancorp 158,531 0.4 4,536
See financial notes. 55
SCHWAB TOTAL STOCK MARKET INDEX FUND
SUMMARY OF PORTFOLIO HOLDINGS continued
% OF NET VALUE
SECURITY AND NUMBER OF SHARES ASSETS ($ x 1,000)
Wachovia Corp. 108,236 0.5 5,326
Wells Fargo & Co. 140,077 0.8 8,365
Other Securities 3.7 42,863
------ -----------
7.7 87,675
BUSINESS MACHINES & SOFTWARE 7.5%
--------------------------------------------------------------------------
o Cisco Systems, Inc. 563,969 1.0 10,834
o Dell, Inc. 209,300 0.7 7,338
Hewlett-Packard Co. 252,916 0.4 4,719
(10) International Business Machines
Corp. 139,850 1.1 12,552
=(3) Microsoft Corp. 892,760 2.2 24,988
o Oracle Corp. 429,500 0.5 5,437
Other Securities 1.6 19,495
------ -----------
7.5 85,363
BUSINESS SERVICES 5.8%
--------------------------------------------------------------------------
o eBay, Inc. 52,924 0.5 5,166
@o Google, Inc., Class A 22,500 0.4 4,291
o Yahoo! Inc. 111,144 0.4 4,022
Other Securities 4.5 52,191
------ -----------
5.8 65,670
CHEMICALS 1.5%
--------------------------------------------------------------------------
Other Securities 1.5 17,539
CONSTRUCTION 0.9%
--------------------------------------------------------------------------
Other Securities 0.9 9,898
CONSUMER DURABLES 0.4%
--------------------------------------------------------------------------
Other Securities 0.4 4,237
CONTAINERS 0.2%
--------------------------------------------------------------------------
Other Securities 0.2 2,183
ELECTRONICS 5.3%
--------------------------------------------------------------------------
Intel Corp. 533,832 1.1 11,883
Qualcomm, Inc. 135,100 0.5 5,649
Other Securities 3.7 43,042
------ -----------
5.3 60,574
ENERGY: RAW MATERIALS 2.0%
--------------------------------------------------------------------------
Other Securities 2.0 23,419
FOOD & AGRICULTURE 3.1%
--------------------------------------------------------------------------
The Coca-Cola Co. 202,200 0.7 8,221
PepsiCo, Inc. 140,800 0.6 6,981
Other Securities 1.8 20,755
------ -----------
3.1 35,957
GOLD 0.2%
--------------------------------------------------------------------------
Other Securities 0.2 2,009
HEALTHCARE / DRUGS & MEDICINE 11.5%
--------------------------------------------------------------------------
Abbott Laboratories 128,205 0.5 5,465
o Amgen, Inc. 107,168 0.6 6,087
Eli Lilly & Co. 92,400 0.5 5,074
(8) Johnson & Johnson 246,370 1.3 14,383
Medtronic, Inc. 100,974 0.5 5,161
Merck & Co., Inc. 183,552 0.5 5,747
(6) Pfizer, Inc. 631,552 1.6 18,283
UnitedHealth Group,
Inc. 66,300 0.4 4,800
Wyeth 109,400 0.4 4,338
Other Securities 5.2 62,410
------ -----------
11.5 131,748
HOUSEHOLD PRODUCTS 1.8%
--------------------------------------------------------------------------
= Procter & Gamble Co. 213,400 1.0 10,922
Other Securities 0.8 9,485
------ -----------
1.8 20,407
INSURANCE 4.3%
--------------------------------------------------------------------------
(9) American International Group,
Inc. 216,222 1.2 13,127
Other Securities 3.1 36,098
------ -----------
4.3 49,225
MEDIA 3.8%
--------------------------------------------------------------------------
o Comcast Corp.,
Class A 148,336 0.4 4,376
o Time Warner, Inc. 367,052 0.6 6,108
Viacom, Inc., Class B 144,012 0.5 5,255
The Walt Disney Co. 167,150 0.4 4,216
Other Securities 1.9 23,289
------ -----------
3.8 43,244
MISCELLANEOUS 0.5%
--------------------------------------------------------------------------
3M Co. 65,000 0.5 5,042
Other Securities 0.0 687
------ -----------
0.5 5,729
56 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND
% OF NET VALUE
SECURITY AND NUMBER OF SHARES ASSETS ($ x 1,000)
MISCELLANEOUS FINANCE 7.9%
--------------------------------------------------------------------------
American Express Co. 105,150 0.5 5,580
o Berkshire Hathaway, Inc.,
Class A 96 0.7 8,088
/ The Charles Schwab
Corp. 111,120 0.1 1,017
=(5) Citigroup, Inc. 424,936 1.7 18,854
Fannie Mae 81,400 0.5 5,710
Merrill Lynch & Co., Inc. 79,800 0.4 4,304
Morgan Stanley 90,300 0.4 4,613
Other Securities 3.6 41,680
------ -----------
7.9 89,846
NON-DURABLES & ENTERTAINMENT 1.4%
--------------------------------------------------------------------------
Other Securities 1.4 16,109
NON-FERROUS METALS 0.4%
--------------------------------------------------------------------------
Other Securities 0.4 4,931
OIL: DOMESTIC 1.6%
--------------------------------------------------------------------------
ConocoPhillips 56,098 0.4 4,730
Other Securities 1.2 13,653
------ -----------
1.6 18,383
OIL: INTERNATIONAL 3.2%
--------------------------------------------------------------------------
ChevronTexaco Corp. 179,634 0.8 9,532
=(2) Exxon Mobil Corp. 537,816 2.3 26,471
Other Securities 0.1 586
------ -----------
3.2 36,589
OPTICAL & PHOTO 0.2%
--------------------------------------------------------------------------
Other Securities 0.2 2,465
PAPER & FOREST PRODUCTS 0.8%
--------------------------------------------------------------------------
Other Securities 0.8 8,757
PRODUCER GOODS & MANUFACTURING 4.9%
--------------------------------------------------------------------------
=(1) General Electric Co. 863,066 2.6 29,448
Other Securities 2.3 26,142
------ -----------
4.9 55,590
RAILROAD & SHIPPING 0.5%
--------------------------------------------------------------------------
Other Securities 0.5 5,533
REAL PROPERTY 2.1%
--------------------------------------------------------------------------
Other Securities 2.1 23,704
RETAIL 6.1%
--------------------------------------------------------------------------
Home Depot, Inc. 187,000 0.7 7,682
=(4) Wal-Mart Stores, Inc. 354,600 1.7 19,120
Other Securities 3.7 43,354
------ -----------
6.1 70,156
STEEL 0.2%
--------------------------------------------------------------------------
Other Securities 0.2 2,003
TELEPHONE 3.1%
--------------------------------------------------------------------------
SBC Communications,
Inc. 273,212 0.6 6,901
Verizon Communications,
Inc. 228,786 0.8 8,946
Other Securities 1.7 19,561
------ -----------
3.1 35,408
TOBACCO 0.9%
--------------------------------------------------------------------------
Altria Group, Inc. 168,800 0.7 8,180
Other Securities 0.2 1,637
------ -----------
0.9 9,817
TRAVEL & RECREATION 0.9%
--------------------------------------------------------------------------
Other Securities 0.9 9,761
TRUCKING & FREIGHT 0.4%
--------------------------------------------------------------------------
Other Securities 0.4 4,328
UTILITIES: ELECTRIC & GAS 3.1%
--------------------------------------------------------------------------
Other Securities 3.1 35,894
PREFERRED STOCK 0.0% of net assets
REAL PROPERTY 0.0%
--------------------------------------------------------------------------
Other Securities 0.0 69
</Table>
<Table>
<Caption>
SECURITY
RATE, MATURITY DATE
FACE AMOUNT ($ x 1,000)
CORPORATE BONDS 0.0% of net assets
FIXED-RATE OBLIGATIONS 0.0%
--------------------------------------------------------------------------
Brookfield Homes Corp.
12.00%, 06/30/20
15 0.0 16
See financial notes. 57
SCHWAB TOTAL STOCK MARKET INDEX FUND
SUMMARY OF PORTFOLIO HOLDINGS continued
% OF NET VALUE
SECURITY AND NUMBER OF SHARES ASSETS ($ x 1,000)
WARRANTS 0.0% of net assets
Other Securities 0.0 2
RIGHTS 0.0% of net assets
Other Securities 0.0 8
SHORT-TERM INVESTMENT
0.7% of net assets
Provident Institutional
TempFund 8,014,950 0.7 8,015
SECURITY
RATE, MATURITY DATE
FACE AMOUNT ($ x 1,000)
U.S. TREASURY OBLIGATION
0.0% of net assets
= U.S. Treasury Bill,
1.63%, 12/16/04
400 0.0 399
END OF INVESTMENTS.
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
COLLATERAL INVESTED FOR SECURITIES ON LOAN
6.3% of net assets
COMMERCIAL PAPER & OTHER CORPORATE
OBLIGATIONS 2.5%
--------------------------------------------------------------------------
Canadian Imperial Bank of
Commerce/New York
1.92%, 11/29/04 3,848 3,847
1.72%, 05/25/05 1,516 1,516
Crown Point Capital
1.80%, 11/05/04 1,851 1,851
Foreningssparbanken AB
1.83%, 11/15/04 10,855 10,853
Fortis Bank
1.78%, 06/06/05 1,381 1,381
Societe Generale NY
1.95%, 11/01/04 5,456 5,455
1.83%, 11/15/04 1,571 1,570
Westdeutsche Landesbank AG
1.50%, 01/10/05 2,340 2,339
-----------
28,812
SHORT-TERM INVESTMENTS 3.8%
--------------------------------------------------------------------------
Citibank, Time Deposit
1.76%, 11/01/04 1,709 1,709
SECURITY AND NUMBER OF SHARES
Institutional Money Market
Trust 40,974,861 40,975
-----------
42,684
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN.
58 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND
In addition to the above, the fund held the following at 10/31/04. All numbers x
1,000 except number of contracts.
FUTURES CONTRACTS
NUMBER OF CONTRACT UNREALIZED
CONTRACTS VALUE GAINS
Russell 2000 Index,
Long expires 12/17/04 4 1,169 29
S&P 500 Index, Long
expires 12/17/04 23 6,499 50
----
79
See financial notes. 59
SCHWAB TOTAL STOCK MARKET INDEX FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value
(including $68,742 of securities on loan) $1,136,079 a
Collateral invested for securities on loan 71,496
Receivables:
Fund shares sold 3,993
Interest 6
Dividends 1,263
Investments sold 14
Due from brokers for futures 10
Income from securities on loan 10
Prepaid expenses + 22
--------------
TOTAL ASSETS 1,212,893
LIABILITIES
- --------------------------------------------------------------------------------
Collateral invested for securities on loan 71,496
Payables:
Fund shares redeemed 580
Investment adviser and administrator fees 24
Transfer agent and shareholder service fees 19
Trustee fees 1
Accrued expenses + 93
--------------
TOTAL LIABILITIES 72,213
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 1,212,893
TOTAL LIABILITIES - 72,213
--------------
NET ASSETS $1,140,680
NET ASSETS BY SOURCE
Capital received from investors 1,096,490
Net investment income not yet distributed 10,037
Net realized capital losses (22,293) b
Net unrealized capital gains 56,446 b
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $592,410 31,108 $19.04
Select Shares $548,270 28,713 $19.09
Unless stated, all numbers x 1,000.
a The fund paid $1,079,712 for these securities.
Includes securities valued at fair value worth $13 or 0.0% of the fund's total
net assets.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $169,426
Sales/maturities $16,950
The fund's total security transactions with other SchwabFunds(R) during the
period were $3,569.
b These derive from investments and futures.
FEDERAL TAX DATA
--------------------------------------------------
PORTFOLIO COST $1,080,161
NET UNREALIZED GAINS AND LOSSES:
Gains $226,948
Losses + (171,030)
--------------
$55,918
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $10,037
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2007 $18
2008 3,413
2009 2,000
2010 11,485
2011 3,975
2012 + 874
--------------
$21,765
RECLASSIFICATIONS:
Net investment income
not yet distributed $1
Reclassified as:
Realized capital losses ($1)
60 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $17,028
Interest 59
Securities on loan + 180
-----------
TOTAL INVESTMENT INCOME 17,267
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments (92)
Net realized gains on futures contracts + 378
-----------
NET REALIZED GAINS 286
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 83,808
Net unrealized losses on futures contracts + (107)
-----------
NET UNREALIZED GAINS 83,701
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 2,743 a
Transfer agent and shareholder service fees:
Investor Shares 1,384 b
Select Shares 511 b
Trustees' fees 12 c
Custodian fees 81
Portfolio accounting fees 159
Professional fees 42
Registration fees 99
Shareholder reports 79
Interest expense 1
Other expenses + 33
-----------
Total expenses 5,144
Expense reduction - 85 d
-----------
NET EXPENSES 5,059
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 17,267
NET EXPENSES - 5,059
-----------
NET INVESTMENT INCOME 12,208
NET REALIZED GAINS 286 e
NET UNREALIZED GAINS + 83,701 e
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $96,195
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.30% of the first
$500 million and 0.22% of the assets beyond that. These fees are paid to
Charles Schwab Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20%, and
0.05% of the assets of each respective share class. These fees are paid to
Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d Includes $4 from the investment adviser (CSIM) and $81 from the transfer agent
and shareholder service agent (Schwab). These reductions reflect a guarantee
by CSIM and Schwab to limit the operating expenses of this fund through
February 28, 2005, as follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
--------------------------------------
Investor Shares 0.58
Select Shares 0.39
This limit excludes interest, taxes and certain non-routine expenses.
d These add up to a net gain on investments of $83,987
See financial notes. 61
SCHWAB TOTAL STOCK MARKET INDEX FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income $12,208 $8,702
Net realized gains or losses 286 (5,294)
Net unrealized gains + 83,701 155,552
------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS 96,195 158,960
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME
Investor Shares 4,522 3,195
Select Shares + 4,835 3,512
------------------------------------
TOTAL DIVIDENDS FROM NET INVESTMENT INCOME $9,357 $6,707 a,b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
SHARES SOLD
Investor Shares 9,767 $180,735 12,774 $194,287
Select Shares + 8,998 165,692 11,399 172,567
-----------------------------------------------------
TOTAL SHARES SOLD 18,765 $346,427 24,173 $366,854
SHARES REINVESTED
Investor Shares 237 $4,213 209 $2,984
Select Shares + 222 3,957 203 2,911
-----------------------------------------------------
TOTAL SHARES REINVESTED 459 $8,170 412 $5,895
SHARES REDEEMED
Investor Shares (5,759) ($106,552) (4,461) ($68,649)
Select Shares + (5,002) (92,791) (5,507) (85,326)
-----------------------------------------------------
TOTAL SHARES REDEEMED (10,761) ($199,343) (9,968) ($153,975) c
NET TRANSACTIONS
IN FUND SHARES 8,463 $155,254 14,617 $218,774
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 51,358 $898,588 36,741 $527,561
Total increase + 8,463 242,092 14,617 371,027
-----------------------------------------------------
END OF PERIOD 59,821 $1,140,680 51,358 $898,588 d
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
The fund designates $9,357 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h)(ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for use in preparing
their 2004 income tax return.
b The tax-basis components of distributions paid are:
CURRENT PRIOR
PERIOD PERIOD
Ordinary income $9,357 $6,707
Long-term capital gains $-- $--
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase.
CURRENT PERIOD:
Investor Shares $70
Select Shares + 59
-------
TOTAL $129
PRIOR PERIOD:
Investor Shares $76
Select Shares + 173
-------
TOTAL $249
Dollar amounts are net of the redemption proceeds.
d Includes distributable net investment income in the amount of $10,037 and
$7,185 at the end of the current period and prior period, respectively.
62 See financial notes.
SCHWAB INTERNATIONAL INDEX FUND(R)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
INVESTOR SHARES 10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 12.74 10.47 12.22 17.13 17.93
--------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.26 0.23 0.21 0.15 0.20
Net realized and unrealized gains or losses 2.05 2.25 (1.82) (4.81) (0.85)
--------------------------------------------------------------------------
Total income or loss from investment operations 2.31 2.48 (1.61) (4.66) (0.65)
Less distributions:
Dividends from net investment income (0.23) (0.21) (0.14) (0.25) (0.15)
--------------------------------------------------------------------------
Net asset value at end of period 14.82 12.74 10.47 12.22 17.13
--------------------------------------------------------------------------
Total return (%) 18.40 24.24 (13.34) (27.58) (3.69)
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.69 0.65 0.58 0.58 0.59 1
Gross operating expenses 0.73 0.74 0.76 0.75 0.82
Net investment income 1.78 2.01 1.70 1.14 1.60
Portfolio turnover rate 1 7 13 18 16
Net assets, end of period ($ x 1,000,000) 550 494 443 519 637
1 The ratio of net operating expenses would have been 0.58% if certain
non-routine expenses (proxy fees) had not been included.
See financial notes. 63
SCHWAB INTERNATIONAL INDEX FUND
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
SELECT SHARES 10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 12.75 10.47 12.23 17.14 17.96
Income or loss from investment operations:
Net investment income 0.28 0.25 0.21 0.16 0.27
Net realized and unrealized gains or losses 2.05 2.26 (1.82) (4.80) (0.91)
-----------------------------------------------------------------------------
Total income or loss from investment operations 2.33 2.51 (1.61) (4.64) (0.64)
Less distributions:
Dividends from net investment income (0.25) (0.23) (0.15) (0.27) (0.18)
-----------------------------------------------------------------------------
Net asset value at end of period 14.83 12.75 10.47 12.23 17.14
-----------------------------------------------------------------------------
Total return (%) 18.56 24.50 (13.31) (27.45) (3.65)
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.50 0.49 0.47 0.47 0.48 1
Gross operating expenses 0.58 0.59 0.61 0.60 0.67
Net investment income 1.97 2.19 1.81 1.25 1.71
Portfolio turnover rate 1 7 13 18 16
Net assets, end of period ($ x 1,000,000) 687 629 536 616 700
1 The ratio of net operating expenses would have been 0.47% if certain
non-routine expenses (proxy fees) had not been included.
64 See financial notes.
SCHWAB INTERNATIONAL INDEX FUND
SUMMARY OF PORTFOLIO HOLDINGS as of October 31, 2004
This section shows the fund's 50 largest portfolio holdings in unaffiliated
issuers and any holding exceeding 1% of the fund's net assets. The remaining
securities held by the fund are grouped as "Other Securities" in each category.
You can request a complete schedule of portfolio holdings as of the end of the
report period, free of charge, by calling SchwabFunds(R) at 1-800-435-4000. This
complete schedule, filed on the fund's Form N-CSR, is also available on the
SEC's website at http://www.sec.gov. In addition, the fund files its complete
schedule of portfolio holdings with the SEC for the first and third quarters of
each fiscal year on Form N-Q. The fund's Form N-Q is available on the SEC's
website and may be reviewed and copied at the SEC's Public Reference Room in
Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the
Public Reference Room. A copy of the fund's most recently filed quarterly
schedule of portfolio holdings, included on the fund's Form N-CSR (with respect
to the fund's second and fourth fiscal quarters) or Form N-Q (with respect to
the fund's first and third fiscal quarters), is available by visiting Schwab's
website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten. For the characteristics of the securities included under "Other
Securities" and for securities valued at fair value, please refer to the
complete schedule of portfolio holdings.
(1) Top Ten Holding
o Non-income producing security
@ The security or a portion of this security is on loan.
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
99.3% FOREIGN COMMON
STOCK 995,647 1,228,866
0.4% FOREIGN PREFERRED
STOCK 3,801 5,016
0.2% SHORT-TERM
INVESTMENT 1,954 1,954
0.0% RIGHTS -- 107
0.0% WARRANTS 200 --
- --------------------------------------------------------------------------------
99.9% TOTAL INVESTMENTS 1,001,602 1,235,943
8.4% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 103,711 103,711
(8.3)% OTHER ASSETS AND
LIABILITIES, NET (102,147)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 1,237,507
% OF NET VALUE
SECURITY AND NUMBER OF SHARES ASSETS ($ x 1,000)
FOREIGN COMMON STOCK 99.3% of net assets
AUSTRALIA 4.1%
--------------------------------------------------------------------------
BHP Billiton Ltd. 727,139 0.6 7,521
Commonwealth Bank of
Australia 245,112 0.5 5,877
@ National Australia Bank
Ltd. 296,328 0.5 6,257
Other Securities 2.5 31,088
----- -----------
4.1 50,743
BELGIUM 0.9%
--------------------------------------------------------------------------
Other Securities 0.9 10,810
CANADA 6.2%
--------------------------------------------------------------------------
@ Bank of Nova Scotia 198,704 0.5 6,451
Manulife Financial
Corp. 156,550 0.6 7,300
@ Royal Bank of Canada 127,717 0.5 6,638
Other Securities 4.6 56,071
----- -----------
6.2 76,460
DENMARK 0.6%
--------------------------------------------------------------------------
Other Securities 0.6 7,414
FRANCE 10.6%
--------------------------------------------------------------------------
BNP Paribas 157,814 0.9 10,710
France Telecom SA 209,724 0.5 5,986
Sanofi-Aventis 173,827 1.0 12,670
@(5) Total SA 110,932 1.9 23,001
Other Securities 6.3 78,375
----- -----------
10.6 130,742
GERMANY 7.2%
--------------------------------------------------------------------------
BASF AG 103,335 0.5 6,428
DaimlerChrysler AG 168,370 0.6 6,935
Deutsche Bank AG 99,862 0.6 7,570
o Deutsche Telekom AG 487,262 0.8 9,310
E.ON AG 118,150 0.8 9,586
SAP AG 39,024 0.5 6,628
Siemens AG 153,790 0.9 11,415
Other Securities 2.5 31,371
----- -----------
7.2 89,243
HONG KONG / CHINA 1.3%
--------------------------------------------------------------------------
Other Securities 1.3 16,095
See financial notes. 65
SCHWAB INTERNATIONAL INDEX FUND
SUMMARY OF PORTFOLIO HOLDINGS continued
% OF NET VALUE
SECURITY AND NUMBER OF SHARES ASSETS ($ x 1,000)
ITALY 3.5%
--------------------------------------------------------------------------
ENI-Ente Nazionale Idrocarburi
SPA 490,576 0.9 11,108
Other Securities 2.6 32,589
----- -----------
3.5 43,697
JAPAN 17.8%
--------------------------------------------------------------------------
Canon, Inc. 162,000 0.6 7,979
Honda Motor Co. Ltd. 152,700 0.6 7,362
Mitsubishi Tokyo Financial
Group, Inc. 787 0.5 6,670
NTT DoCoMo, Inc. 3,541 0.5 6,236
Takeda Pharmaceutical Co.
Ltd. 160,200 0.6 7,724
(8) Toyota Motor Corp. 538,500 1.7 20,944
Other Securities 13.3 162,981
----- -----------
17.8 219,896
NETHERLANDS 5.6%
--------------------------------------------------------------------------
ABN Amro Holdings
NV 298,017 0.6 7,108
ING Groep NV 340,404 0.7 8,985
Koninklijke Philips Electronics
NV 255,925 0.5 6,039
(7) Royal Dutch Petroleum
Co. 398,487 1.7 21,589
Unilever NV 110,002 0.5 6,381
Other Securities 1.6 18,982
----- -----------
5.6 69,084
SINGAPORE 0.1%
--------------------------------------------------------------------------
Other Securities 0.1 1,593
SPAIN 3.9%
--------------------------------------------------------------------------
Banco Bilbao Vizcaya
Argentaria SA 587,573 0.7 9,193
@ Banco Santander Central
Hispano SA 834,597 0.8 9,290
Telefonica SA 900,159 1.2 14,817
Other Securities 1.2 15,297
----- -----------
3.9 48,597
SWEDEN 1.9%
--------------------------------------------------------------------------
o Telefonaktiebolaget LM Ericsson,
Class B 2,846,579 0.7 8,244
Other Securities 1.2 15,679
----- -----------
1.9 23,923
SWITZERLAND 7.8%
--------------------------------------------------------------------------
o Credit Suisse Group 218,120 0.6 7,434
(9) Nestle SA, Registered 77,668 1.5 18,311
(6) Novartis AG,
Registered 460,530 1.8 21,887
Roche Holdings-
Genus 135,932 1.1 13,848
UBS AG, Registered 216,176 1.3 15,528
Other Securities 1.5 19,536
----- -----------
7.8 96,544
UNITED KINGDOM 27.8%
--------------------------------------------------------------------------
AstraZeneca PLC 328,216 1.1 13,423
Barclays PLC 1,265,372 1.0 12,335
(1) BP PLC 4,216,549 3.3 40,755
Diageo PLC 596,684 0.6 7,965
(4) GlaxoSmithKline
PLC 1,142,422 1.9 24,010
HBOS PLC 747,598 0.8 9,993
(2) HSBC Holdings
PLC 2,103,680 2.7 33,901
Lloyds TSB Group
PLC 1,065,026 0.7 8,411
(10) Royal Bank of Scotland
Group PLC 547,776 1.3 16,109
o Shell Transport & Trading Co.
PLC 1,852,117 1.2 14,550
Tesco PLC 1,445,671 0.6 7,602
(3) Vodafone Group
PLC 12,980,507 2.7 33,179
Other Securities 9.9 121,792
----- -----------
27.8 344,025
FOREIGN PREFERRED STOCK 0.4% of net assets
AUSTRALIA 0.3%
--------------------------------------------------------------------------
Other Securities 0.3 4,113
GERMANY 0.1%
--------------------------------------------------------------------------
Other Securities 0.1 903
66 See financial notes.
SCHWAB INTERNATIONAL INDEX FUND
% OF NET VALUE
SECURITY AND NUMBER OF SHARES ASSETS ($ x 1,000)
WARRANTS 0.0% of net assets
Other Securities 0.0 -- *
RIGHTS 0.0% of net assets
Other Securities 0.0 107
SECURITY
RATE, MATURITY DATE
FACE AMOUNT ($ x 1,000)
SHORT-TERM INVESTMENT
0.2% of net assets
HSBC Bank, USA Grand
Cayman Time Deposit
1.29%, 11/01/04
1,954 0.2 1,954
END OF INVESTMENTS.
* Amounts stated as "--" are less than $1.
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COLLATERAL INVESTED FOR SECURITIES ON LOAN
8.4% of net assets
SHORT-TERM INVESTMENT 8.4%
--------------------------------------------------------------------------
Securities Lending Investment
Fund 103,710,647 103,711
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN.
See financial notes. 67
SCHWAB INTERNATIONAL INDEX FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value
(including $98,966 of securities on loan) $1,235,943 a
Collateral invested for securities on loan 103,711
Foreign currency 30 b
Receivables:
Fund shares sold 290
Dividends 1,941
Income from securities on loan 39
Dividend tax reclaim 136
Prepaid expenses + 21
--------------
TOTAL ASSETS 1,342,111
LIABILITIES
- --------------------------------------------------------------------------------
Collateral invested for securities on loan 103,711
Payables:
Fund shares redeemed 619
Interest expense 1
Withholding taxes 48
Investment adviser and administrator fees 36
Transfer agent and shareholder service fees 15
Trustees' fees 1
Accrued expenses + 173
--------------
TOTAL LIABILITIES 104,604
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 1,342,111
TOTAL LIABILITIES - 104,604
--------------
NET ASSETS $1,237,507
NET ASSETS BY SOURCE
Capital received from investors 1,294,974
Net investment income not yet distributed 21,478
Net realized capital losses (313,335)
Net unrealized capital gains 234,390
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $550,263 37,126 $14.82
Select Shares $687,244 46,340 $14.83
Unless stated, all numbers x 1,000.
a The fund paid $1,001,602 for these securities. Not counting short-term
obligations and government securities, the fund's security transactions during
the period were:
Purchases $16,070
Sales/maturities $82,592
b The fund paid $27 for these currencies.
FEDERAL TAX DATA
-------------------------------------------------------------------
PORTFOLIO COST $1,006,740
NET UNREALIZED GAINS AND LOSSES:
Gains $316,555
Losses + (87,352)
------------
$229,203
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $21,655
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2005 $1,837
2006 11,905
2007 7
2008 3,669
2009 130,942
2010 112,722
2011 39,016
2012 + 8,278
------------
$308,376
RECLASSIFICATIONS:
Net investment income
not yet distributed $6
Net realized capital losses $1,737
Reclassified as:
Capital received from
investors ($1,743)
68 See financial notes.
SCHWAB INTERNATIONAL INDEX FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $29,068 a
Interest 22
Securities on loan + 976
------------
TOTAL INVESTMENT INCOME 30,066
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments (7,823)
Net realized gains on foreign currency transactions + 6
------------
NET REALIZED LOSSES (7,817)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 187,878
Net unrealized gains on foreign currency transactions + 14
------------
NET UNREALIZED GAINS 187,892
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 4,870 b
Transfer agent and shareholder service fees:
Investor Shares 1,346 c
Select Shares 677 c
Trustees' fees 13 d
Custodian fees 514
Portfolio accounting fees 179
Professional fees 46
Registration fees 48
Shareholder reports 120
Interest expense 3
Other expenses + 29
------------
Total expenses 7,845
Expense reduction - 741 e
------------
NET EXPENSES 7,104
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 30,066
NET EXPENSES - 7,104
------------
NET INVESTMENT INCOME 22,962
NET REALIZED LOSSES (7,817) f
NET UNREALIZED GAINS + 187,892 f
------------
INCREASE IN NET ASSETS FROM OPERATIONS $203,037
Unless stated, all numbers x 1,000.
a Net of $3,668 foreign withholding tax.
b Calculated as a percentage of average daily net assets: 0.43% of the first
$500 million and 0.38% of the assets beyond that. These fees are paid to
Charles Schwab Investment Management, Inc. (CSIM).
c Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20%, and
0.05% of the assets of each respective share class. These fees are paid to
Charles Schwab & Co., Inc. (Schwab).
d For the fund's independent trustees only.
e Includes $470 from the investment adviser (CSIM) and $271 from the transfer
agent and shareholder service agent (Schwab). These reductions reflect a
guarantee by CSIM and Schwab to limit the operating expenses of this fund
through at least February 28, 2005, as follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
------------------------------------------------
Investor Shares 0.69
Select Shares 0.50
This limit excludes interest, taxes and certain non-routine expenses.
f These add up to a net gain on investments of $180,075.
See financial notes. 69
SCHWAB INTERNATIONAL INDEX FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net Investment income $22,962 $21,074
Net realized losses (7,817) (37,839)
Net unrealized gains + 187,892 241,954
-----------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS 203,037 225,189
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME
Investor Shares 9,069 9,001
Select Shares + 12,465 11,662
-----------------------------------
TOTAL DIVIDENDS FROM NET INVESTMENT INCOME $21,534 $20,663 a,b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
SHARES SOLD
Investor Shares 5,725 $80,057 5,440 $59,471
Select Shares + 5,772 80,804 8,086 86,648
--------------------------------------------------
TOTAL SHARES SOLD 11,497 $160,861 13,526 $146,119
SHARES REINVESTED
Investor Shares 629 $8,293 815 $8,329
Select Shares + 882 11,628 1,072 10,936
--------------------------------------------------
TOTAL SHARES REINVESTED 1,511 $19,921 1,887 $19,265
SHARES REDEEMED
Investor Shares (7,955) ($111,302) (9,803) ($105,853)
Select Shares + (9,688) (136,414) (10,942) (119,750)
--------------------------------------------------
TOTAL SHARES REDEEMED (17,643) ($247,716) (20,745) ($225,603) c
NET TRANSACTIONS
IN FUND SHARES (4,635) ($66,934) (5,332) ($60,219)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 88,101 $1,122,938 93,433 $978,631
Total increase or
decrease + (4,635) 114,569 (5,332) 144,307
--------------------------------------------------
END OF PERIOD 83,466 $1,237,507 88,101 $1,122,938 d
Unless stated, all numbers x 1,000.
a UNAUDITED
The fund designates $20,935 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h)(ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for use in preparing
their 2004 income tax return.
b The tax-basis components of distributions paid were:
CURRENT PRIOR
PERIOD PERIOD
Ordinary income $21,534 $20,663
Long-term capital gains $-- $--
c The fund charges 1.50% of early withdrawal fees on shares redeemed 180 days or
less after the purchase.
CURRENT PERIOD:
Investor Shares $50
Select Shares + 22
--------
TOTAL $72
PRIOR PERIOD:
Investor Shares $62
Select Shares + 46
--------
TOTAL $108
Dollar amounts are net of the redemption proceeds.
d Includes distributable net investment income in the amount of $21,478 and
$20,044 at the end of the current period and prior period, respectively.
Percent of fund shares owned by other SchwabFunds(R) as of the end of the
current period:
SCHWAB MARKETTRACK PORTFOLIOS
All Equity Portfolio 10.9%
Growth Portfolio 10.0%
Balanced Portfolio 6.7%
Conservative Portfolio 2.4%
SCHWAB ANNUITY PORTFOLIOS
Growth Portfolio II 0.5%
70 See financial notes.
SCHWAB EQUITY INDEX FUNDS
FINANCIAL NOTES
BUSINESS STRUCTURE OF THE FUNDS
EACH OF THE FUNDS DISCUSSED IN THIS REPORT IS A SERIES OF A NO-LOAD, OPEN-END
MANAGEMENT INVESTMENT COMPANY. Each of these companies is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended. The sidebar shows the funds in this report by trust.
THE FUNDS OFFER MULTIPLE SHARE CLASSES. For any given fund, shares of each class
represent interests in the same portfolio, but each class has different expenses
and investment minimums. In addition, one share class, e.Shares, is available
only to clients of Schwab Institutional(R), Charles Schwab Trust Company and
certain tax-advantaged retirement plans, and can only be traded electronically.
INVESTOR SELECT
FUND SHARES SHARES E.SHARES
- --------------------------------------------------------------------------------
S&P 500 - - -
- --------------------------------------------------------------------------------
SCHWAB 1000 - -
- --------------------------------------------------------------------------------
SMALL-CAP INDEX - -
- --------------------------------------------------------------------------------
TOTAL STOCK MARKET INDEX - -
- --------------------------------------------------------------------------------
INTERNATIONAL INDEX - -
- --------------------------------------------------------------------------------
For these funds, shares are bought and sold at net asset value (NAV), which is
the price for all outstanding shares. Each share has a par value of 1/1,000 of a
cent, and the trusts may issue as many shares as necessary.
THE TRUSTS AND THEIR FUNDS
This list shows the trust containing each fund in this report, along with all
other funds included in these trusts. The funds discussed in this report are
highlighted.
SCHWAB INVESTMENTS organized October 26, 1990
SCHWAB 1000 FUND
Schwab Short-Term Bond Market Fund
Schwab Total Bond Market Fund
Schwab YieldPlus Fund
Schwab Short/Intermediate Tax-Free Bond Fund
Schwab Long-Term Tax-Free Bond Fund
Schwab California Short/Intermediate Tax-Free Bond Fund
Schwab California Long-Term Tax-Free Bond Fund
Schwab GNMA Fund
SCHWAB CAPITAL TRUST organized May 7, 1993
SCHWAB S&P 500 FUND
SCHWAB SMALL-CAP INDEX FUND
SCHWAB TOTAL STOCK MARKET INDEX FUND
SCHWAB INTERNATIONAL INDEX FUND
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Laudus U.S. MarketMasters Fund
Laudus Balanced MarketMasters Fund
Laudus Small-Cap MarketMasters Fund
Laudus International MarketMasters Fund
Schwab Core Equity Fund
Schwab Dividend Equity Fund
Schwab Small-Cap Equity Fund
Schwab Hedged Equity Fund
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab Institutional Select S&P 500 Fund
Schwab Institutional Select Large-Cap Value Index Fund
Schwab Institutional Select Small-Cap Value Index Fund
71
SCHWAB EQUITY INDEX FUNDS
FUND OPERATIONS
Most of the funds' investments are described in the fund-by-fund sections
earlier in this report. However, there are certain other fund operations and
policies that may affect a fund's financials, as described below. Other policies
concerning the funds' business operations also are described here.
THE FUNDS PAY DIVIDENDS from net investment income and make distributions from
net capital gains once a year.
THE FUNDS MAY INVEST IN FUTURES CONTRACTS. Futures contracts involve certain
risks because they can be very sensitive to market movements.
One risk is that the price of a futures contract may not move in perfect
correlation with the price of the underlying securities. Another risk is that,
at certain times, it may be impossible for a fund to close out a position in a
futures contract, due to a difference in trading hours or to market conditions
that may reduce the liquidity for a futures contract or its underlying
securities. The potential for losses associated with futures contracts may
exceed amounts recorded in the Statement of Assets and Liabilities.
Because futures carry inherent risks, a fund must give the broker a deposit of
cash and/or securities (the "initial margin") whenever it enters into a futures
contract. The amount of the deposit may vary from one contract to another, but
it is generally a percentage of the contract amount.
Futures are traded publicly on exchanges, and their market value changes daily.
A fund records the change in market value of futures, and also the change in the
amount of margin deposit required ("variation margin").
THE SCHWAB INTERNATIONAL INDEX FUND MAY INVEST IN FORWARD CURRENCY CONTRACTS IN
CONNECTION WITH THE PURCHASE AND SALE OF PORTFOLIO SECURITIES TO MINIMIZE THE
UNCERTAINTY OF CHANGES IN FUTURE EXCHANGE RATES. "Forwards," as they are known,
are contracts to buy and sell a currency at a set price on a future date.
Forwards are similar to futures except that they are not publicly traded, but
are agreements directly between two parties.
As with futures, forwards involve certain risks that are not fully reflected in
the fund's financials. If counter-parties to the contracts are unable to meet
the terms of the contracts or if the value of the foreign currency changes
unfavorably, the fund could sustain a loss.
THE FUNDS MAY ENTER INTO REPURCHASE AGREEMENTS. In a repurchase agreement, a
fund buys a security from another party (usually a financial institution) with
the agreement that it be sold back in the future. The date, price and other
conditions are all specified when the agreement is created.
The funds' repurchase agreements will be fully collateralized by U.S. government
securities. All collateral is held by the funds' custodian (or, with tri-party
agreements, the agent's bank) and is monitored daily to ensure that its market
value is at least equal to the repurchase price under the agreement.
THE FUNDS MAY LOAN SECURITIES TO CERTAIN BROKERS, DEALERS AND OTHER FINANCIAL
INSTITUTIONS WHO PAY THE FUNDS NEGOTIATED FEES. The funds receive cash, letters
of credit or U.S. government securities as collateral on these loans. All of the
cash collateral received is reinvested in high quality, short-term investments.
The value of the collateral must be at least 102% of the market value of the
loaned securities as of the first day of the loan, and at least 100% each day
thereafter.
THE FUNDS PAY FEES TO AFFILIATES OF THE INVESTMENT ADVISER FOR VARIOUS SERVICES.
Through their trusts, the funds have agreements with Charles Schwab Investment
Management, Inc. (CSIM) to provide investment advisory and administrative
services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent
and shareholder services.
72
SCHWAB EQUITY INDEX FUNDS
Although these agreements specify certain fees for these services, CSIM and
Schwab have made additional agreements with the funds that may limit the total
expenses charged. The rates and limitations for these fees vary from fund to
fund, and are described in each fund's Statement of Operations.
THE FUNDS MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING RELATED PARTIES. For
instance, a fund may own shares of The Charles Schwab Corporation if that
company is included in its index. The funds also may let other SchwabFunds(R)
buy and sell fund shares, particularly Schwab MarketTrack Portfolios(R), which
seek to provide investors with allocated portfolios of Schwab index funds.
The funds may make direct transactions with certain other SchwabFunds when
practical. When one fund is seeking to sell a security that another is seeking
to buy, an interfund transaction can allow both funds to benefit by reducing
transaction costs. This practice is limited to funds that share the same
investment adviser, trustees and officers.
Pursuant to an exemptive order issued by the SEC, the funds may enter into
interfund borrowing and lending transactions within the SchwabFunds. All loans
are for temporary or emergency purposes only. The interest rate charged on the
loan is the average of the overnight repurchase agreement rate and the
short-term bank loan rate. The interfund lending facility is subject to the
oversight and periodic review of the Board of Trustees of the SchwabFunds.
TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/ OR DIRECTORS OF THE INVESTMENT
ADVISER OR SCHWAB. Federal securities law limits the percentage of such
"interested persons" who may serve on a trust's board, and the trusts were in
compliance with these limitations throughout the report period. The trusts did
not pay any of these persons for their service as trustees, but they did pay the
non-interested persons (independent trustees), as noted in each fund's Statement
of Operations.
THE FUNDS MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The funds may obtain
temporary bank loans through the trusts to which they belong, to use for meeting
shareholder redemptions or for extraordinary or emergency purposes. The
SchwabFunds have custodian overdraft facilities and line of credit arrangements
of $150 million and $100 million with PNC Bank, N.A. and Bank of America, N.A.,
respectively. The funds pay interest on the amounts they borrow at rates that
are negotiated periodically.
WEIGHTED
AMOUNT AVERAGE
OUTSTANDING AVERAGE INTEREST
AT 10/31/04 BORROWING* RATE*
FUND ($ x 1,000) ($ x 1,000) (%)
- --------------------------------------------------------------------------------
SCHWAB
S&P 500 FUND -- 4,982 1.46
- --------------------------------------------------------------------------------
SCHWAB 1000 -- 1,749 1.93
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP
INDEX FUND -- 2,007 1.78
- --------------------------------------------------------------------------------
SCHWAB TOTAL STOCK
MARKET INDEX FUND -- 5,425 1.40
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL
INDEX FUND -- 1,147 2.00
- --------------------------------------------------------------------------------
* Based on the number of days for which the borrowing is outstanding.
THE FUNDS INTEND TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR
REGULATED INVESTMENT COMPANIES. Accordingly, the funds distribute substantially
all of their net investment income and net realized capital gains (if any) to
their respective shareholders each year. As long as a fund meets the tax
requirements, it is not required to pay federal income tax. The net investment
income and net realized capital gains and losses may differ for financial
statement and tax purposes primarily due to differing treatments of wash sale
losses and foreign currency transactions.
UNDER THE FUNDS' ORGANIZATIONAL DOCUMENTS, ITS OFFICERS AND TRUSTEES ARE
INDEMNIFIED AGAINST CERTAIN LIABILITY ARISING OUT OF THE PERFORMANCE OF THEIR
DUTIES TO THE FUNDS. In addition, in the normal course of business the funds
enter into contracts with their vendors and others that provide general
indemnifications. The funds' maximum
73
SCHWAB EQUITY INDEX FUNDS
exposure under these arrangements is unknown as this would involve future claims
that may be made against the funds. However, based on experience, the funds
expect the risk of loss to be remote.
ACCOUNTING POLICIES
The following are the main policies the funds use in preparing their financial
statements.
THE FUNDS VALUE THE SECURITIES IN THEIR PORTFOLIOS EVERY BUSINESS
DAY. The funds use the following policies to value various types of securities:
- - SECURITIES TRADED ON AN EXCHANGE OR OVER-THE-COUNTER: valued at the closing
value for the day, or, on days when no closing value has been reported,
halfway between the most recent bid and asked quotes. Securities that are
primarily traded on foreign exchanges are valued at the closing values of such
securities on their respective exchanges with these values then translated
into U.S. dollars at the current exchange rate.
- - SECURITIES FOR WHICH NO MARKET QUOTATIONS ARE READILY AVAILABLE or when a
significant event has occurred between the time of the security's last close
and the time that a fund calculates net asset value: valued at fair value, as
determined in good faith by the fund's investment adviser using guidelines
adopted by the fund's Board of Trustees and the Pricing Committee. Some of the
more common reasons that may necessitate that a security be valued at fair
value include: the security's trading has been halted or suspended; the
security has been de-listed from a national exchange; the security's primary
trading market is temporarily closed at a time when under normal conditions it
would be open; or the security's primary pricing source is not able or willing
to provide a price.
Also, the foreign securities held by International Index Fund are fair valued
if a movement in the U.S. market exceeds a specific threshold that has been
established using the guideline adopted by the fund's Board of Trustees. The
fund uses a third party vendor to provide the fair valuation based on certain
factors and methodologies including tracking valuation correlations between
the U.S. market and each non-U.S. security.
- - FUTURES AND FORWARDS: open contracts are valued at their settlement prices as
of the close of their exchanges (for futures) or at a market value based on
that day's exchange rates (for forwards). When a fund closes out a futures or
forwards position, it calculates the difference between the value of the
position at the beginning and at the end, and records a realized gain or loss
accordingly.
- - SHORT-TERM SECURITIES (60 DAYS OR LESS TO MATURITY): valued at amortized cost.
SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the
security is executed.
DIVIDENDS AND DISTRIBUTIONS FROM PORTFOLIO SECURITIES are recorded on the date
they are effective (the ex-dividend date), although the funds record certain
foreign security dividends on the day they learn of the ex-dividend date.
INCOME FROM INTEREST AND THE ACCRETION OF DISCOUNT is recorded as it accrues.
REALIZED GAINS AND LOSSES from security transactions are based on the identified
costs of the securities involved.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES are reported in U.S.
dollars. For assets and liabilities held on a given date, the dollar value is
74
SCHWAB EQUITY INDEX FUNDS
based on market exchange rates in effect on that date. Transactions involving
foreign currencies, including purchases, sales, income receipts and expense
payments, are calculated using exchange rates in effect on the transaction date.
EXPENSES that are specific to a fund are charged directly to that fund. Expenses
that are common to all funds within a trust generally are allocated among the
funds in proportion to their average daily net assets.
FOR FUNDS OFFERING MULTIPLE SHARE CLASSES, all of the realized and unrealized
gains or losses and net investment income, other than class specific expenses,
are allocated daily to each class in proportion to its average daily net assets.
EACH FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND
ACCOUNTING, and is considered a separate entity for tax purposes. Within its
account, each fund also keeps certain assets in segregated accounts, as may be
required by securities law.
THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH ACCOUNTING PRINCIPLES
GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. Notwithstanding this,
shareholders should understand that in order to follow these principles, fund
management has to make estimates and assumptions that affect the information
reported in the financial statements. It's possible that once the results are
known, they may turn out to be different from these estimates.
75
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF:
Schwab S&P 500
Fund Schwab 1000 Fund(R)
Schwab Small-Cap Index Fund(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
In our opinion, the accompanying statements of assets and liabilities, including
the summary of portfolio holdings, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Schwab 1000 Fund (one of the
portfolios constituting Schwab Investments), Schwab S&P 500 Fund, Schwab
Small-Cap Index Fund, Schwab Total Stock Market Index Fund and Schwab
International Index Fund (four of the portfolios constituting Schwab Capital
Trust) (hereafter collectively referred to as the "Funds") at October 31, 2004,
the results of each of their operations for the year then ended, and the changes
in each of their net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at October 31, 2004 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
San Francisco, CA
December 16, 2004
76
FUND TRUSTEES
A fund's Board of Trustees is responsible for protecting the interests of
that fund's shareholders. The tables below give information about the
people who serve as trustees and officers for the SchwabFunds(R),
including the funds covered in this report. Trustees remain in office
until they resign, retire or are removed by shareholder vote. 1
Under the Investment Company Act of 1940, any officer, director, or
employee of Schwab or CSIM is considered an "interested person," meaning
that he or she is considered to have a business interest in Schwab or
CSIM. These individuals are listed as "interested trustees." The
"independent trustees" are individuals who, under the 1940 Act, are not
considered to have a business interest in Schwab or CSIM.
Each of the SchwabFunds (of which there were 51 as of 10/31/04) belongs to
one of these trusts: The Charles Schwab Family of Funds, Schwab
Investments, Schwab Capital Trust or Schwab Annuity Portfolios. Currently
all these trusts have the same trustees and officers. The address for all
trustees and officers is 101 Montgomery Street, San Francisco, CA 94104.
You can find more information about the trustees and officers in the
Statement of Additional Information, which is available free by calling
1-800-435-4000.
INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S);
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
CHARLES R. SCHWAB 2 Chair, Trustee: Chair, CEO, Director, The Charles Schwab Corp., Charles Schwab &
7/29/37 Family of Funds, 1989; Co., Inc.; Chair, Director, Charles Schwab Investment Management,
Investments, 1991; Inc.; Chair, Charles Schwab Holdings (UK); CEO, Director, Charles
Capital Trust, 1993; Schwab Holdings, Inc.; Chair, CEO Schwab (SIS) Holdings, Inc. I,
Annuity Portfolios, 1994. Schwab International Holdings, Inc.; Director, Charles Schwab Bank,
N.A., U.S. Trust Corp., United States Trust Co. of New York, Siebel
Systems (software), Xsign, Inc. (electronic payment systems),
TrustMark, Inc., All Kinds of Minds (education); Trustee, Stanford
University. Until 5/04: Director, The Gap, Inc. (clothing retailer). Until
5/03: Co-CEO, The Charles Schwab Corp. Until 3/02: Director,
Audiobase, Inc. (Internet audio solutions). Until 5/02: Director,
Vodaphone AirTouch PLC (telecommunications). Until 7/01: Director,
The Charles Schwab Trust Co.
1 The SchwabFunds retirement policy requires that independent trustees elected
after January 1, 2000 retire at age 72 or after twenty years of service as a
trustee, whichever comes first. Independent trustees elected prior to January
1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will
retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on
December 31, 2010.
2 In addition to his position with the investment adviser and the distributor,
Mr. Schwab also owns stock of The Charles Schwab Corporation.
77
INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUST OFFICERS HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
EVELYN DILSAVER President, CEO EVP, President, Charles Schwab Investment Management, Inc;
5/4/55 (all trusts). Until 7/04: SVP for Development and Distribution, Asset Management
Products and Services Enterprise; Until 6/03: EVP, CFO, Administrative
Officer, U.S. Trust Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Director, Charles Schwab Investment
4/5/55 Officer (all trusts). Management, Inc.; Chief Investment Officer, The Charles Schwab
Trust Co.
- ------------------------------------------------------------------------------------------------------------------------------------
KIMON DAIFOTIS SVP, Chief Investment Since 9/04: Chief Investment Officer, Fixed Income, Charles Schwab
7/10/59 Officer (all trusts). Investment Management, Inc.; Since 6/04: SVP, Charles Schwab
Investment Management, Inc.; Until 6/04: VP, Charles Schwab
Investment Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
JEFF MORTIMER SVP, Chief Investment Since 5/04: SVP, Chief Investment Officer, Equities, Charles Schwab
9/29/63 Officer (all trusts). Investment Management, Inc.; Since 6/04: VP, Chief Investment
Officer, Laudus Trust; Until 5/04: VP, Charles Schwab
Investment Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
RANDALL FILLMORE Chief Compliance Since 9/04: SVP, Institutional Compliance and Chief Compliance
11/11/60 Officer (all trusts). Officer, Charles Schwab Investment Management, Inc.; Until 9/04:
VP, Charles Schwab & Co., Charles Schwab Investment Management,
Inc.; Until 2002: VP of Internal Audit, Charles Schwab & Co.;
Prior to 2000: PricewaterhouseCoopers.
- ------------------------------------------------------------------------------------------------------------------------------------
KOJI E. FELTON Secretary (all trusts). SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab
3/13/61 Investment Management, Inc. Until 6/98: Branch Chief in Enforcement,
U.S. Securities and Exchange Commission, San Francisco.
- ------------------------------------------------------------------------------------------------------------------------------------
GEORGE PEREIRA 1 Treasurer, Principal Since 11/04: SVP, CFO, Charles Schwab Investment Management,
6/9/64 Financial Officer Inc.; Until 11/04: SVP, Financial Reporting, Charles Schwab & Co., Inc.;
(all trusts). Until 12/99: Chief Financial Officer, Commerzbank Capital Markets;
Until 9/99: Managing Director at the New York Stock Exchange.
1 Elected to his position on the SchwabFunds Board on November 16, 2004.
78
INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
MARIANN BYERWALTER 2000 (all trusts). Chair, JDN Corp. Advisory LLC; Trustee, Stanford University, America
8/13/60 First Cos., (venture capital/fund management), Redwood Trust, Inc.
(mortgage finance), Stanford Hospitals and Clinics, SRI International
(research), PMI Group, Inc. (mortgage insurance), Lucile Packard
Children's Hospital, Laudus Trust, Laudus Variable Insurance Trust.
2001: Special Advisor to the President, Stanford University. Until 2002:
Director, LookSmart, Ltd. (Internet infrastructure). Until 2001: VP,
Business Affairs, CFO, Stanford University.
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD F. DORWARD Family of Funds, 1989; CEO, Dorward & Associates (corporate management, marketing and
9/23/31 Investments, 1991; communications consulting). Until 1999: EVP, Managing Director,
Capital Trust, 1993; Grey Advertising.
Annuity Portfolios,1994.
- ------------------------------------------------------------------------------------------------------------------------------------
WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp. (bio-pharmaceuticals). Trustee, Solectron Corp.
11/22/41 (manufacturing), Airlease Ltd. (aircraft leasing), Mission West
Properties (commercial real estate), Stratex Corp. (network equipment);
Public Governor, Laudus Trust, Laudus Variable Insurance Trust;
Member, executive committee, Pacific Stock & Options Exchange.
Until 2003: Trustee, Tenera, Inc. (services and software). Until 1998:
Dean, Haas School of Business, University of California, Berkeley.
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT G. HOLMES Family of Funds, 1989; Chair, CEO, Director, Semloh Financial, Inc. (international financial
5/15/31 Investments, 1991; services and investment advice).
Capital Trust, 1993;
Annuity Portfolios,1994.
- ------------------------------------------------------------------------------------------------------------------------------------
GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors);
9/28/50 Trustee, Rorento N.V. (investments -- Netherlands), Cooper Industries
(electrical products, tools and hardware); Member, audit committee,
Northern Border Partners, L.P. (energy). Until 2002: Director, Pennzoil-
Quaker State Co. (oil and gas).
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD R. STEPHENS Family of Funds, 1989; Managing Partner, D.R. Stephens & Co. (investments). Until 1996:
6/28/38 Investments, 1991; Chair, CEO, North American Trust (real estate investment trust).
Capital Trust, 1993;
Annuity Portfolios, 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL W. WILSEY Family of Funds, 1989; Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate
8/18/43 Investments, 1991; and investments).
Capital Trust, 1993;
Annuity Portfolios, 1994.
79
GLOSSARY
ASSET ALLOCATION The practice of dividing a portfolio among different asset
classes, with each asset class assigned a particular percentage.
ASSET CLASS A group of securities with similar structure and basic
characteristics. Stocks, bonds and cash are the three main examples of asset
classes.
BETA A historical measure of an investment's volatility relative to a market
index (usually the S&P 500(R)). The index is defined as having a beta of 1.00.
Investments with a beta higher than 1.00 have been more volatile than the index;
those with a beta of less than 1.00 have been less volatile.
BOND A security representing a loan from the investor to the issuer. A bond
typically pays interest at a fixed rate (the "coupon rate") until a specified
date (the "maturity date"), at which time the issuer returns the money borrowed
("principal" or "face value") to the bondholder. Because of their structure,
bonds are sometimes called "fixed income securities" or "debt securities."
An individual bond is subject to the credit risk of the issuer. Changes in
interest rates can affect a bond's market value prior to call or maturity. There
is no guarantee that a bond's yield to call or maturity will provide a positive
return over the rate of inflation.
BOND FUND A bond fund is subject to the same credit, interest rate, and
inflation risks as bonds. In addition, a bond fund incurs ongoing fees and
expenses. A bond fund's net asset value will fluctuate with the price of the
underlying bonds and the portfolio turnover activity; return of principal is not
guaranteed.
CAP, CAPITALIZATION See "market cap."
CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an
investment and its value at a later time. If the investment has been sold, the
capital gain or loss is considered a realized gain or loss. If the investment is
still held, the gain or loss is still "on paper" and is considered unrealized.
EARNINGS GROWTH RATE For a mutual fund, the average yearly rate at which the
earnings of the companies in the fund's portfolio have grown, measured over the
past five years.
EARNINGS PER SHARE (EPS) A company's earnings, or net income, for the past 12
months, divided by the number of shares outstanding.
EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to
cover the fund's operating expenses. An expense ratio of 0.50% means that a
fund's expenses amount to half of one percent of its average net assets a year.
MARKET CAP, MARKET CAPITALIZATION The value of a company as determined by the
total value of all shares of its stock outstanding.
MEDIAN MARKET CAP The midpoint of the range of market caps of the stocks held by
a fund. There are different ways of calculating median market cap. With a simple
median, half of the stocks in the fund's portfolio would be larger than the
median, and half would be smaller. With a weighted median (the type that is
calculated for these funds), half of the fund's assets are invested in stocks
that are larger than the median market cap, and half in stocks that are smaller.
NET ASSET VALUE (NAV) The value of one share of a mutual fund. NAV is calculated
by taking the fund's total assets, subtracting liabilities, and dividing by the
number of shares outstanding.
OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual
fund, indicates all shares currently held by investors.
PRICE-TO-BOOK RATIO (P/B) The market price of a company's stock compared with
its "book value." A mutual fund's P/B is the weighted average of the P/B of all
stocks in the fund's portfolio.
PRICE-TO-EARNINGS RATIO (P/E) The market price of a company's stock compared
with earnings over the past year. A mutual fund's P/E is the weighted average of
the P/E of all stocks in the fund's portfolio.
RETURN ON EQUITY (ROE) The average yearly rate of return for each dollar of
investors' money, measured over the past five years.
STOCK A share of ownership, or equity, in the issuing company.
TOTAL RETURN The percentage that an investor would have earned or lost on an
investment in the fund assuming dividends and distributions were reinvested.
WEIGHTED AVERAGE For mutual funds, an average that gives the same weight to each
security as the security represents in the fund's portfolio.
YIELD The income paid out by an investment, expressed as a percentage of the
investment's market value.
80
SchwabFunds(R) offers you a complete family of mutual funds, each one based on a
clearly defined investment approach and using disciplined management strategies.
The list at right shows all currently available SchwabFunds.
Whether you're an experienced investor or just starting out, SchwabFunds can
help you achieve your financial goals. An investor should consider a fund's
investment objectives, risks, and charges and expenses carefully before
investing or sending money. This and other important information can be found in
the fund's prospectus. Please call 1-800-435-4000 for a prospectus and brochure
for any SchwabFund. Please read the prospectus carefully before you invest. This
report must be preceded or accompanied by a current prospectus.
METHODS FOR PLACING ORDERS
The following information outlines how Schwab investors can place orders. If you
are investing through a third-party investment provider, methods for placing
orders may be different.
INTERNET 1
www.schwab.com
SCHWAB BY PHONE(TM) 2
Use our automated voice service or speak to a representative. Call
1-800-435-4000, day or night (for TDD service, call 1-800-345-2550).
TELEBROKER(R)
Use our automated touch-tone phone service at 1-800-272-4922.
MAIL
Write to SchwabFunds at:
P.O. Box 3812
Englewood, CO
80155-3812
When selling or exchanging shares, be sure to include the signatures of at least
one of the persons whose name is on the account.
PROXY VOTING POLICIES, PROCEDURES AND RESULTS
A description of the proxy voting policies and procedures used to determine how
to vote proxies on behalf of the funds is available without charge, upon
request, by visiting Schwab's web site at www.schwab.com/schwabfunds, the SEC's
web site at http://www.sec.gov, or by contacting SchwabFunds at 1-800-435-4000.
Information regarding how a fund voted proxies relating to portfolio securities
during the most recent twelve-month period ended June 30 is available, without
charge, by visiting Schwab's web site at www.schwab.com/schwabfunds or the SEC's
website at http://www.sec.gov.
1 Shares of Sweep Investments(TM) may not be purchased directly over the
Internet.
2 Orders placed in person or through a telephone representative may be subject
to a service fee payable to Schwab.
THE SCHWABFUNDS FAMILY(R)
STOCK FUNDS
Schwab S&P 500 Fund
Schwab 1000 Fund(R)
Schwab Small-Cap Index Fund(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab(R) Institutional Select(R) Funds
Schwab(R) Institutional Select(R) S&P 500 Fund
Schwab(R) Institutional Select(R) Large-Cap Value Index Fund
Schwab(R) Institutional Select(R) Small-Cap Value Index Fund
ASSET ALLOCATION FUNDS
Schwab MarketTrack Portfolios(R)
Schwab MarketTrack All Equity Portfolio(TM)
Schwab MarketTrack Growth Portfolio(TM)
Schwab MarketTrack Balanced Portfolio(TM)
Schwab MarketTrack Conservative Portfolio(TM)
BOND FUNDS
Schwab YieldPlus Fund(R)
Schwab Short-Term Bond Market Fund(TM)
Schwab Total Bond Market Fund(TM)
Schwab GNMA Fund(TM)
Schwab Short/Intermediate Tax-Free Bond Fund(TM)
Schwab Long-Term Tax-Free Bond Fund(TM)
Schwab California Short/Intermediate Tax-Free Bond Fund(TM)
Schwab California Long-Term Tax-Free Bond Fund(TM)
SCHWAB MONEY FUNDS
Schwab offers an array of money market funds that seek high current income
consistent with safety and liquidity. 3 Choose from taxable or tax-advantaged
alternatives. Many can be linked to your Schwab account to "sweep" cash balances
automatically, subject to availability, when you're between investments. Or, for
your larger cash reserves, choose one of our Value Advantage Investments(R).
3 Investments in money market funds are neither insured nor guaranteed by the
Federal Deposit Insurance Corporation (FDIC) or any other government agency
and, although they seek to preserve the value of your investment at $1 per
share, it is possible to lose money.
[CHARLES SCHWAB LOGO]
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc. (Schwab)
FUNDS
SchwabFunds(R)
P.O. Box 3812, Englewood, CO 80155-3812
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
(C) 2004 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC
Printed on recycled paper.
REG13810-07
ANNUAL REPORT
October 31, 2004
[LAUDUS FUNDS LOGO]
COMMAND PERFORMANCE(TM)
LAUDUS MARKETMASTERS FUNDS(TM)
(effective November 1, 2004 the Funds changed their name from the
Schwab MarketMasters Funds(R) to the Laudus MarketMasters Funds(TM))
Laudus U.S. MarketMasters Fund(TM)
Laudus Balanced MarketMasters Fund(TM)
Laudus Small-Cap MarketMasters Fund(TM)
Laudus International MarketMasters Fund(TM)
Four distinct Funds, each combining the expertise of leading
investment managers with Schwab's overall supervision.
IN THIS REPORT
Management's Discussion ............................................... 1
The president of Laudus Funds and the Funds' managers take a
look at the factors that shaped Fund performance during the
report period.
Performance at a Glance .............. 4
Laudus U.S. MarketMasters Fund(TM)
Investor Shares: SWOGX Select Shares(R): SWMGX
The Fund seeks capital growth.
Performance and Fund Facts ........... 6
Financial Statements ................. 20
Laudus Balanced MarketMasters Fund(TM)
Investor Shares: SWOBX Select Shares: SWMBX
The Fund seeks capital growth and income.
Performance and Fund Facts ........... 9
Financial Statements ................. 29
Laudus Small-Cap MarketMasters Fund(TM)
Investor Shares: SWOSX Select Shares: SWMSX
The Fund seeks long-term capital appreciation.
Performance and Fund Facts ........... 12
Financial Statements ................. 47
Laudus International MarketMasters Fund(TM)
Investor Shares: SWOIX Select Shares: SWMIX
The Fund seeks long-term capital appreciation.
Performance and Fund Facts ........... 15
Financial Statements ................. 56
Fund Expenses ........................................................ 18
Financial Notes ...................................................... 70
Fund Trustees ........................................................ 77
Glossary ............................................................. 80
- --------------------------------------------------------------------------------
INTRODUCING SELECT SHARES FOR THE LAUDUS MARKETMASTERS FUNDS(TM)
On April 1, 2004 SchwabFunds announced the availability of a new lower operating
expense share class of the Laudus International MarketMasters Fund. The
availability of this new share class came as good news to investors seeking
exposure to international equities as well as those who already own the Fund who
were now eligible to lower their net operating expenses.
We are pleased to announce that effective June 1, 2004, Select Shares became
available for the U.S., Balanced and Small-Cap MarketMasters Funds. (See the
table at right for specifics.)
The new Select Shares, have lower net operating expense and higher investment
minimums compared with Investor Shares. (See the prospectus for additional
information).
Select Shares are also available to current shareholders who have positions of
$25,000 or greater in Investor Shares of one of the Laudus MarketMasters Funds.
We encourage shareholders of Investor Shares to review their portfolio along
with the Fund's prospectus to see if they are eligible to exchange into Select
Shares. If an investor is eligible, they should contact Schwab to do an
interclass exchange.
INVESTMENT
SELECT SHARES OER MINIMUM
- --------------------------------------------------------------------------------
U.S. MarketMasters Fund 1.07% $25,000
Balanced
MarketMasters Fund 0.95% $25,000
Small-Cap
MarketMasters Fund 1.37% $25,000
International
MarketMasters Fund 1.47% $25,000
To learn more, please see the Funds' prospectus at WWW.LAUDUSFUNDS.COM. Or, call
1.800.435.4000 to order a prospectus or to speak with a representative.
Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM)
Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab).
MANAGEMENT'S DISCUSSION for the year ended October 31, 2004
[PHOTO OF EVELYN DILSAVER]
EVELYN DILSAVER is President and CEO of Charles Schwab Investment Management,
Inc. (CSIM). She joined the firm in 1992 and has held a variety of executive
positions at Schwab.
[PHOTO OF JANA THOMPSON]
JANA THOMPSON is President of Laudus Funds. Prior to joining Charles Schwab &
Co., Inc. in 2000, she enjoyed a 16-year career in asset management and client
services.
Dear Shareholder:
We are pleased to announce that, effective November 1, 2004 the Schwab
MarketMasters Funds(R) were renamed the Laudus MarketMasters Funds(TM).
SchwabFunds and Laudus Funds are two of Schwab's unique fund families that
benefit from the management oversight of CSIM. While SchwabFunds(R) focuses on
the needs of individual investors, Laudus Funds focuses on the
institutional-investing markets.
This change will have little, if any, effect on current shareholders, as neither
the portfolio management team, nor the objectives of each of the four Funds has
changed. Jeff Mortimer and Kim Formon will continue to manage the Funds in
conjunction with some of the most talented money managers in the industry. The
only change you should expect to see is in the name Laudus MarketMastersFunds.
We made this change because we believe it will help our shareholders. The
MarketMasters Funds have experienced impressive asset growth over the past few
years. Making the Funds available with the Laudus name presents an opportunity
to open up the Funds to a greater pool of investors, including institutional
investment managers. As the MarketMasters Funds grow, the costs of operating the
Funds are reduced. While this won't result in an immediate reduction in the net
operating expenses, the fees you pay are likely to be reduced over time, as the
Funds reach certain asset milestones.
We are very excited about this change, and we hope you share our enthusiasm.
Once again, we thank you for investing with us, as we continue to build both
SchwabFunds and Laudus Funds' mutual fund families.
Sincerely,
/s/ Evelyn Dilsaver
/s/ Jana Thompson
Laudus MarketMasters Funds 1
[PHOTO OF JEFFREY MORTIMER & KIMBERLY FORMON]
JEFFREY MORTIMER, CFA, senior vice president and chief investment officer,
equities, of the investment adviser, has overall responsibility for the
management of the Funds. Prior to joining the firm in 1997, he worked for nine
years in asset allocation and manager selection.
KIMBERLY FORMON, CFA, a director and portfolio manager of the investment
adviser, co-manages the Schwab MarketMasters Funds. Prior to joining the firm in
1999, she worked for 10 years in equity and fixed-income analysis.
THE INVESTMENT ENVIRONMENT AND THE FUNDS
THE ENCOURAGING ECONOMIC NEWS THAT WAS REPORTED TOWARD THE END OF 2003 CONTINUED
TO IMPROVE INTO 2004. Businesses added to their inventories, factory orders rose
and production gained some strength. Retail sales continued to rise and higher
commodity prices were holding. Mortgage refinancing activity, while still
significant, waned as mortgage rates inched slightly upward. And finally, the
last piece of the economic puzzle--job growth--began to pick up some steam.
In fact, aside from a "soft patch" in early summer, the economy was clicking on
all cylinders.
With the economic recovery more broad-based, investors, who only a year ago
feared deflation, started to worry about inflation. Their inflationary concerns
were based on surging oil prices, which had hit an all-time high amid fears of
supply interruptions. And while commodity prices moderated somewhat later in the
report period, previous increases started to show up in broad measures of
inflation. Labor costs also were beginning to rise. Nonetheless, the Federal
Reserve (the Fed) continued to hold the Fed funds rate near a 45-year low until
June 2004.
While third-quarter GDP moved in the right direction, up to an annualized 3.7%
from 3.3% in second quarter, higher commodity prices had effectively eroded many
consumers' purchasing power. Geopolitical
ASSET CLASS PERFORMANCE COMPARISON % returns during the report period
This graph compares the performance of various asset classes during the report
period. Final performance figures for the period are in the key below.
9.42% S&P 500(R) INDEX: measures U.S. large-cap stocks
11.73% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
18.84% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in
Europe, Australasia and the Far East
5.53% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond market
LEHMAN BROTHERS
S&P 500(R) RUSSELL 2000(R) MSCI-EAFE(R) U.S. AGGREGATE
INDEX INDEX INDEX BOND INDEX
31-Oct-03 0.00% 0.00% 0.00% 0.00%
07-Nov-03 0.29% 2.82% 0.78% -0.63%
14-Nov-03 0.08% 0.94% 1.80% 0.61%
21-Nov-03 -1.33% -0.38% 0.15% 0.86%
28-Nov-03 0.88% 3.55% 2.22% 0.24%
05-Dec-03 1.24% 2.14% 4.70% 0.95%
12-Dec-03 2.48% 3.80% 5.04% 0.97%
19-Dec-03 3.90% 3.68% 6.46% 1.50%
26-Dec-03 4.59% 5.21% 7.84% 1.53%
02-Jan-04 5.85% 6.40% 10.98% 0.81%
09-Jan-04 7.16% 9.14% 13.86% 2.16%
16-Jan-04 8.89% 12.04% 12.31% 2.46%
23-Jan-04 9.07% 13.13% 15.10% 2.33%
30-Jan-04 8.12% 10.24% 11.77% 2.07%
06-Feb-04 9.26% 10.89% 13.33% 2.35%
13-Feb-04 9.63% 11.12% 15.41% 2.80%
20-Feb-04 9.49% 10.13% 15.13% 2.64%
27-Feb-04 9.62% 11.23% 14.35% 3.18%
05-Mar-04 10.80% 13.90% 16.17% 3.85%
12-Mar-04 7.38% 10.77% 11.07% 4.12%
19-Mar-04 6.36% 8.49% 13.10% 4.07%
26-Mar-04 6.20% 8.91% 12.52% 3.88%
02-Apr-04 9.47% 14.78% 16.39% 2.72%
09-Apr-04 9.27% 13.73% 16.44% 2.62%
16-Apr-04 8.83% 10.99% 15.04% 2.03%
23-Apr-04 9.42% 12.39% 14.61% 1.51%
30-Apr-04 6.27% 6.54% 12.39% 1.25%
07-May-04 5.47% 4.43% 10.88% -0.19%
14-May-04 5.27% 3.54% 6.99% 0.03%
21-May-04 5.09% 3.93% 9.59% 0.21%
28-May-04 7.73% 8.24% 12.63% 0.84%
04-Jun-04 7.95% 8.15% 12.87% 0.36%
11-Jun-04 9.32% 8.43% 13.42% 0.32%
18-Jun-04 9.21% 8.73% 14.66% 0.78%
25-Jun-04 9.18% 12.01% 15.45% 1.18%
02-Jul-04 8.35% 11.13% 15.27% 2.16%
09-Jul-04 7.18% 7.52% 15.10% 2.22%
16-Jul-04 6.10% 5.96% 14.50% 2.69%
23-Jul-04 4.64% 2.87% 10.84% 2.41%
30-Jul-04 6.19% 5.20% 11.50% 2.42%
06-Aug-04 2.58% -0.81% 10.63% 3.63%
13-Aug-04 2.74% -1.21% 9.57% 3.72%
20-Aug-04 6.01% 4.63% 11.08% 3.79%
27-Aug-04 6.95% 5.36% 12.29% 3.89%
03-Sep-04 7.56% 6.26% 12.42% 3.70%
10-Sep-04 8.58% 8.88% 14.40% 4.31%
17-Sep-04 9.07% 9.54% 14.32% 4.59%
24-Sep-04 7.31% 8.18% 13.88% 4.93%
01-Oct-04 9.41% 11.89% 16.43% 4.38%
08-Oct-04 8.56% 10.13% 17.91% 4.79%
15-Oct-04 7.23% 8.95% 16.46% 5.20%
22-Oct-04 6.03% 8.64% 17.65% 5.54%
29-Oct-04 9.42% 11.73% 18.84% 5.53%
31-Oct-04 9.42% 11.73% 18.84% 5.53%
These figures assume dividends and distributions were reinvested. Index figures
do not include trading and management costs, which would lower performance.
Indices are unmanaged and you cannot invest in them directly. Remember that past
performance is not an indication of future results.
Data source: Charles Schwab & Co., Inc.
2 Laudus MarketMasters Funds
MANAGEMENT'S DISCUSSION continued
The strength of the market early in the period, combined with strong
second- and third-quarter valuations and earnings resulted in a positive
showing for equities.
events also had wreaked havoc on oil markets and, after a brief decline in the
price of oil following OPEC's decision to boost production, a confluence of
supply concerns and robust global demand pushed crude to new highs. In addition
to these issues, daily headlines about terrorism and the fierce run for the
White House all added up to an uncomfortable sense of uncertainty, keeping many
investors on the sidelines.
Despite all these concerns, which escalated toward the end of the report period,
the strength of the market early in the period, combined with strong second- and
third-quarter valuations and earnings resulted in a positive showing for
equities. More specifically, the S&P 500(R) Index was up 9.42% for the 12-month
report period, while the Russell 2000(R) Index was up 11.73%. In terms of style,
value edged out growth early in the period and gained momentum, significantly
outperforming growth at the end of the period.
All four Funds posted positive returns over the 12-month report period, although
three of the Funds trailed their respective benchmarks. Longer-term results are
stronger, with three of the Funds outperforming their benchmarks. During the
period, we were in close contact with the Funds' sub-advisors and made
adjustments to their allocations based on a combination of market conditions and
daily cash flows. We maintained our small-cap bias and since this asset class
was the strongest performer through the end of the report period, this strategy
helped the Funds. More recently, we shifted assets from a value tilt toward a
growth bias.
THE LAUDUS U.S. MARKETMASTERS FUND returned 3.62% versus 9.42% for the S&P
500(R) Index. With value the style in favor for much of the reporting period,
Eagle Asset Management, Inc.'s growth bias hurt performance. Eagle's stock
selection was also a contributing factor. More specifically, the Fund's exposure
to technology and semiconductor stocks contributed to its underperformance.
Sub-advisor, Harris Associates L.P., which focuses on large-cap value stocks,
helped performance, as did sub-advisor
Laudus MarketMasters Funds 3
PERFORMANCE AT A GLANCE
Total return for the 12 months ended 10/31/04, except where noted.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN MORE CURRENT PERFORMANCE INFORMATION, PLEASE VISIT
WWW.SCHWAB.COM/MARKETMASTERS.
LAUDUS U.S.
MARKETMASTERS FUND(TM)
Investor Shares ........... 3.62%
Select Shares(R) 1 ........ -0.96%
Benchmark ................. 9.42%
Fund Category 2 ........... 7.89%
Performance Details ....... pages 6-7
LAUDUS BALANCED
MARKETMASTERS FUND(TM)
Investor Shares ........... 8.59%
Select Shares 3 ........... 2.77%
Benchmark ................. 7.91%
Fund Category 2 ........... 7.40%
Performance Details ....... pages 9-10
LAUDUS SMALL-CAP
MARKETMASTERS FUND(TM)
Investor Shares ........... 9.93%
Select Shares 4 ........... 0.66%
Benchmark ................. 11.73%
Fund Category 2 ........... 13.51%
Performance Details ....... pages 12-13
LAUDUS INTERNATIONAL
MARKETMASTERS FUND(TM)
Investor Shares ........... 14.06%
Select Shares 5 ........... -0.22%
Benchmark ................. 18.84%
Fund Category 2 ........... 12.54%
Performance Details ....... pages 15-16
TCW Investment Management Company, which focuses on small- to mid-cap value
stocks. These two sub-advisors' performance helped to offset Eagle's growth
orientation. Thornburg Investment Management, Inc. slightly underperformed the
S&P 500(R) Index during the period.
THE LAUDUS BALANCED MARKETMASTERS FUND outperformed the Balanced Blended Index
(60% S&P 500(R) Index /40% Lehman Brothers U.S. Aggregate Bond Index) by 0.68%.
The Fund was overweight in stocks for most of the reporting period, as we
believed stocks would have the potential for higher returns. This overweight
helped performance, as did sub-advisors Janus Capital Management LLC/Perkins,
Wolf, McDonnell and Company, LLC and Aronson+Johnson+Ortiz, LP. Perkins
performed particularly well, helped not only by strong stock selection but also
by being overweight in top performing sectors such as Energy and Health Care. On
the fixed-income side, sub-advisor Pacific Investment Management Company LLC
also performed well, beating its benchmark (Lehman Brothers U.S. Aggregate Bond
Index) by 1.54%. Eagle Asset Management, our growth manager, lagged for the
period as growth stocks underperformed value stocks. Eagle's stock selection and
sector allocation also hurt performance.
THE LAUDUS SMALL-CAP MARKETMASTERS FUND underperformed its benchmark, the
Russell 2000(R) Index, by 1.80%. This was largely due to sub-advisor TAMRO
Capital Partners LLC, which only recently became a sub-advisor of the Fund and
struggled with stock selection and sector allocations. (During the report
period, on April 1, 2004, TAMRO replaced sub-advisor Royce & Associates, LLC.)
Veredus Asset Management LLC, whose focus is on growth stocks, trailed the
broader Russell 2000(R) Index, which modestly hampered returns. TCW Investment
Management
All Fund and index figures on this page assume dividends and distributions
were reinvested. Index figures do not include trading and management costs,
which would lower performance. Indices are unmanaged, and you cannot invest in
them directly.
Expenses may be partially absorbed by CSIM and Schwab. Without these
reductions, the Funds' total returns would have been lower. Performance does
not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or on the redemption of Fund shares.
Small company stocks are subject to greater volatility than other asset
categories. Foreign securities can involve risks such as political and
economic instability and currency risk. These risks may be greater in emerging
markets.
1 Select Shares total return is for 6/4/04 -- 10/31/04. (Not annualized.)
2 Source for category information: Morningstar, Inc.
3 Select Shares total return is for 6/3/04 -- 10/31/04. (Not annualized.)
4 Select Shares total return is for 6/9/04 -- 10/31/04. (Not annualized.)
5 Select Shares total return is for 4/2/04 -- 10/31/04. (Not annualized.)
4 Laudus MarketMasters Funds
MANAGEMENT'S DISCUSSION continued
With many economic indicators continuing to be positive and the economy
seemingly on track, larger-cap stocks became the more dominant asset
class.
Company also trailed the Russell 2000 benchmark slightly, as its focus on
mid/small names slightly hurt performance in a market that was led by small-cap
stocks. Offsetting that performance was sub-advisor Tocqueville Asset Management
LP, which outperformed the Russell 2000(R) Index with strong stock selection and
an overweight in the Energy sector.
THE LAUDUS INTERNATIONAL MARKETMASTERS FUND trailed its benchmark, the
MSCI-EAFE(R) Index, by 4.78%. The growth focus of sub-advisors' William Blair &
Company, LLC and Artisan Partners Limited Partnership hurt performance, as the
market favored value during the report period. American Century Investment
Management, Inc. also trailed the broader MSCI-EAFE(R) because of its relative
high weighting in Japanese stocks, which underperformed their European
counterparts over the reporting period. Harris Associates benefited from its
value emphasis and its overweighting of European stocks, which were among the
strongest performers of all international regions during the period. All the
managers' exposure to emerging markets was nearly neutral to returns, as
performance was only modestly different than the developed markets over the
period.
Small company stocks are subject to greater volatility than other asset
categories. Foreign securities can involve risks such as political and economic
instability and currency risk. These risks may be greater in emerging markets.
Nothing in this report represents a recommendation of a security by the
investment adviser. Manager views and portfolio holdings may have changed since
the report date.
Laudus MarketMasters Funds 5
LAUDUS U.S. MARKETMASTERS FUND(TM)
INVESTOR SHARES PERFORMANCE as of 10/31/04
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the Fund with a benchmark and the Fund's
Morningstar category.
[BAR CHART]
Fund: Benchmark: Fund Category:
INVESTOR S&P 500(R) MORNINGSTAR
SHARES INDEX LARGE-CAP BLEND
1 YEAR 3.62% 9.42% 7.89%
5 YEARS -0.29% -2.21% -1.72%
SINCE INCEPTION: 11/18/96 5.52% 7.12% 2.31%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/MARKETMASTERS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the Fund, compared with a similar investment in a benchmark.
$15,337 INVESTOR SHARES
$17,295 S&P 500(R) INDEX
[LINE GRAPH]
INVESTOR S&P 500(R)
DATE SHARES INDEX
18-Nov-96 $10,000 $10,000
30-Nov-96 $10,120 $10,271
31-Dec-96 $10,077 $10,068
31-Jan-97 $10,371 $10,696
28-Feb-97 $10,310 $10,780
31-Mar-97 $10,016 $10,338
30-Apr-97 $10,229 $10,955
31-May-97 $10,848 $11,621
30-Jun-97 $11,274 $12,141
31-Jul-97 $11,841 $13,106
31-Aug-97 $11,547 $12,372
30-Sep-97 $12,145 $13,049
31-Oct-97 $11,760 $12,613
30-Nov-97 $11,750 $13,197
31-Dec-97 $11,927 $13,424
31-Jan-98 $11,959 $13,573
28-Feb-98 $12,622 $14,552
31-Mar-98 $13,146 $15,297
30-Apr-98 $13,242 $15,452
31-May-98 $13,135 $15,186
30-Jun-98 $13,306 $15,802
31-Jul-98 $13,135 $15,635
31-Aug-98 $11,639 $13,377
30-Sep-98 $11,745 $14,235
31-Oct-98 $12,216 $15,392
30-Nov-98 $12,814 $16,325
31-Dec-98 $13,734 $17,265
31-Jan-99 $14,255 $17,987
28-Feb-99 $13,712 $17,427
31-Mar-99 $14,266 $18,124
30-Apr-99 $14,830 $18,826
31-May-99 $14,487 $18,381
30-Jun-99 $15,118 $19,402
31-Jul-99 $14,919 $18,796
31-Aug-99 $14,896 $18,702
30-Sep-99 $14,819 $18,190
31-Oct-99 $15,560 $19,341
30-Nov-99 $16,557 $19,734
31-Dec-99 $18,630 $20,897
31-Jan-00 $17,808 $19,848
29-Feb-00 $19,681 $19,472
31-Mar-00 $19,516 $21,376
30-Apr-00 $18,086 $20,733
31-May-00 $17,289 $20,308
30-Jun-00 $18,263 $20,809
31-Jul-00 $17,922 $20,485
31-Aug-00 $18,997 $21,757
30-Sep-00 $18,213 $20,608
31-Oct-00 $17,580 $20,522
30-Nov-00 $16,099 $18,905
31-Dec-00 $16,401 $18,997
31-Jan-01 $16,873 $19,672
28-Feb-01 $15,516 $17,878
31-Mar-01 $14,690 $16,744
30-Apr-01 $15,855 $18,045
31-May-01 $15,782 $18,166
30-Jun-01 $15,634 $17,725
31-Jul-01 $15,206 $17,551
31-Aug-01 $14,557 $16,452
30-Sep-01 $13,186 $15,123
31-Oct-01 $13,569 $15,412
30-Nov-01 $14,602 $16,594
31-Dec-01 $14,979 $16,740
31-Jan-02 $14,696 $16,496
28-Feb-02 $14,324 $16,177
31-Mar-02 $14,801 $16,785
30-Apr-02 $14,146 $15,768
31-May-02 $13,848 $15,652
30-Jun-02 $12,716 $14,537
31-Jul-02 $11,495 $13,405
31-Aug-02 $11,570 $13,492
30-Sep-02 $10,453 $12,025
31-Oct-02 $11,138 $13,084
30-Nov-02 $12,135 $13,854
31-Dec-02 $11,316 $13,041
31-Jan-03 $11,123 $12,699
28-Feb-03 $10,959 $12,509
31-Mar-03 $11,093 $12,630
30-Apr-03 $12,254 $13,671
31-May-03 $13,252 $14,391
30-Jun-03 $13,475 $14,575
31-Jul-03 $13,773 $14,832
31-Aug-03 $14,250 $15,121
30-Sep-03 $13,878 $14,961
31-Oct-03 $14,801 $15,808
30-Nov-03 $15,128 $15,947
31-Dec-03 $15,679 $16,782
31-Jan-04 $16,007 $17,091
29-Feb-04 $16,185 $17,329
31-Mar-04 $15,992 $17,067
30-Apr-04 $15,471 $16,799
31-May-04 $15,694 $17,029
30-Jun-04 $15,858 $17,360
31-Jul-04 $14,920 $16,785
31-Aug-04 $14,696 $16,852
30-Sep-04 $14,920 $17,034
31-Oct-04 $15,337 $17,295
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
Because the Fund was originally an asset allocation Fund with a multi-fund
strategy, its performance prior to June 3, 2002 does not reflect the current
strategy and may have been different if it did.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the Fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
2 Source for category information: Morningstar, Inc.
6 Laudus MarketMasters Funds
LAUDUS U.S. MARKETMASTERS FUND
SELECT SHARES(R) PERFORMANCE as of 10/31/04
TOTAL RETURNS 1, 2
This chart compares performance of the Fund's Select Shares with its benchmark
and Morningstar category.
[BAR CHART]
Fund: Benchmark: Fund Category:
SELECT S&P 500(R) MORNINGSTAR
SHARES INDEX LARGE-CAP BLEND
SINCE INCEPTION: 6/4/04 -0.96% 1.90% 1.52%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/MARKETMASTERS.
PERFORMANCE OF A HYPOTHETICAL $25,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $25,000
investment (the minimum investment for this share class) in the Fund's Select
Shares, compared with a similar investment in its benchmark.
$24,760 SELECT SHARES
$25,474 S&P 500(R) INDEX
[LINE GRAPH]
SELECT S&P 500(R)
DATE SHARES INDEX
04-Jun-04 $25,000 $25,000
30-Jun-04 $25,575 $25,570
31-Jul-04 $24,065 $24,723
31-Aug-04 $23,728 $24,822
30-Sep-04 $24,088 $25,090
31-Oct-04 $24,760 $25,474
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the Fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
2 Source for category information: Morningstar, Inc.
Laudus MarketMasters Funds 7
LAUDUS U.S. MARKETMASTERS FUND
FUND FACTS as of 10/31/04
STYLE ASSESSMENT 1
[GRAPHIC]
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 163
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $52,045
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 24.4
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.6
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 72%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2
Investor Shares ($1,000 for retirement and custodial accounts) $2,500
Select Shares $25,000
- --------------------------------------------------------------------------------
INVESTMENT MANAGERS AND ALLOCATIONS
% OF
INVESTMENT MANAGER INVESTMENT STYLE NET ASSETS
- --------------------------------------------------------------------------------
EAGLE ASSET Large-Cap Growth 24.4%
MANAGEMENT, INC.
- --------------------------------------------------------------------------------
HARRIS ASSOCIATES L.P. Mid/Large-Cap 22.5%
Value
- --------------------------------------------------------------------------------
TCW INVESTMENT Small/Mid-Cap 23.6%
MANAGEMENT COMPANY Blend
- --------------------------------------------------------------------------------
THORNBURG INVESTMENT Large-Cap Blend 29.8%
MANAGEMENT, INC.
- --------------------------------------------------------------------------------
TOP HOLDINGS 3
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) TIME WARNER, INC. 2.3%
- --------------------------------------------------------------------------------
(2) GUIDANT CORP. 2.1%
- --------------------------------------------------------------------------------
(3) GENERAL ELECTRIC CO. 2.0%
- --------------------------------------------------------------------------------
(4) MICROSOFT CORP. 1.7%
- --------------------------------------------------------------------------------
(5) PFIZER, INC. 1.7%
- --------------------------------------------------------------------------------
(6) CITIGROUP, INC. 1.4%
- --------------------------------------------------------------------------------
(7) CARNIVAL CORP. 1.4%
- --------------------------------------------------------------------------------
(8) JPMORGAN CHASE & CO. 1.4%
- --------------------------------------------------------------------------------
(9) YUM! BRANDS, INC. 1.3%
- --------------------------------------------------------------------------------
(10) COSTCO COS., INC. 1.3%
- --------------------------------------------------------------------------------
TOTAL 16.6%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the Fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
30.5% CONSUMER NON-DURABLES
23.6% TECHNOLOGY
16.6% FINANCE
11.9% MATERIALS & SERVICES
4.1% ENERGY
3.6% CAPITAL GOODS
2.6% UTILITIES
2.3% TRANSPORTATION
1.2% CONSUMER DURABLES
3.6% CASH & CASH EQUIVALENTS
Portfolio holdings may have changed since the report date.
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the Fund based on a ten-factor model for value and growth characteristics. The
Fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the Fund's
portfolio as of 10/31/04, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 Please see prospectus for further detail and eligibility requirements.
3 This list is not a recommendation of any security by the investment adviser.
8 Laudus MarketMasters Funds
LAUDUS BALANCED MARKETMASTERS FUND(TM)
INVESTOR SHARES PERFORMANCE as of 10/31/04
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the Fund with a benchmark and the Fund's
Morningstar category.
[BAR CHART]
Benchmark: Fund Category:
Fund: BALANCED MORNINGSTAR
INVESTOR BLENDED MODERATE
SHARES INDEX ALLOCATION
1 YEAR 8.59% 7.91% 7.40%
5 YEARS 3.51% 1.99% 2.24%
SINCE INCEPTION: 11/18/96 7.23% 7.46% 2.61%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/MARKETMASTERS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the Fund, compared with a similar investment in a benchmark and
two additional indices.
$17,430 INVESTOR SHARES
$17,729 BALANCED BLENDED INDEX
$17,295 S&P 500(R) INDEX
$17,079 LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX
[LINE GRAPH]
LEHMAN BROS.
INVESTOR BALANCED S&P 500(R) U.S. AGGREGATE
DATE SHARES BLENDED INDEX INDEX BOND INDEX
18-Nov-96 $10,000 $10,000 $10,000 $10,000
30-Nov-96 $10,100 $10,191 $10,271 $10,071
31-Dec-96 $10,059 $10,032 $10,068 $ 9,977
31-Jan-97 $10,322 $10,420 $10,696 $10,008
28-Feb-97 $10,271 $10,480 $10,780 $10,033
31-Mar-97 $10,018 $10,175 $10,338 $ 9,922
30-Apr-97 $10,200 $10,600 $10,955 $10,071
31-May-97 $10,676 $11,027 $11,621 $10,166
30-Jun-97 $11,041 $11,376 $12,141 $10,287
31-Jul-97 $11,517 $12,042 $13,106 $10,565
31-Aug-97 $11,284 $11,596 $12,372 $10,475
30-Sep-97 $11,770 $12,046 $13,049 $10,630
31-Oct-97 $11,527 $11,874 $12,613 $10,784
30-Nov-97 $11,558 $12,226 $13,197 $10,834
31-Dec-97 $11,719 $12,401 $13,424 $10,943
31-Jan-98 $11,762 $12,547 $13,573 $11,084
28-Feb-98 $12,251 $13,086 $14,552 $11,075
31-Mar-98 $12,634 $13,506 $15,297 $11,112
30-Apr-98 $12,688 $13,616 $15,452 $11,170
31-May-98 $12,613 $13,527 $15,186 $11,276
30-Jun-98 $12,783 $13,903 $15,802 $11,372
31-Jul-98 $12,677 $13,826 $15,635 $11,396
31-Aug-98 $11,581 $12,718 $13,377 $11,582
30-Sep-98 $11,740 $13,326 $14,235 $11,853
31-Oct-98 $12,092 $13,948 $15,392 $11,790
30-Nov-98 $12,560 $14,487 $16,325 $11,857
31-Dec-98 $13,311 $15,005 $17,265 $11,893
31-Jan-99 $13,693 $15,424 $17,987 $11,977
28-Feb-99 $13,224 $15,028 $17,427 $11,768
31-Mar-99 $13,650 $15,422 $18,124 $11,832
30-Apr-99 $14,130 $15,800 $18,826 $11,870
31-May-99 $13,868 $15,521 $18,381 $11,766
30-Jun-99 $14,326 $16,018 $19,402 $11,728
31-Jul-99 $14,141 $15,691 $18,796 $11,679
31-Aug-99 $14,119 $15,641 $18,702 $11,673
30-Sep-99 $14,119 $15,456 $18,190 $11,808
31-Oct-99 $14,664 $16,066 $19,341 $11,852
30-Nov-99 $15,341 $16,261 $19,734 $11,851
31-Dec-99 $16,742 $16,805 $20,897 $11,794
31-Jan-00 $16,155 $16,276 $19,848 $11,755
29-Feb-00 $17,353 $16,170 $19,472 $11,897
31-Mar-00 $17,390 $17,204 $21,376 $12,054
30-Apr-00 $16,534 $16,874 $20,733 $12,019
31-May-00 $16,033 $16,663 $20,308 $12,013
30-Jun-00 $16,705 $17,048 $20,809 $12,263
31-Jul-00 $16,498 $16,951 $20,485 $12,375
31-Aug-00 $17,341 $17,681 $21,757 $12,554
30-Sep-00 $16,815 $17,165 $20,608 $12,633
31-Oct-00 $16,424 $17,167 $20,522 $12,717
30-Nov-00 $15,508 $16,468 $18,905 $12,925
31-Dec-00 $15,879 $16,639 $18,997 $13,166
31-Jan-01 $16,326 $17,102 $19,672 $13,380
28-Feb-01 $15,502 $16,226 $17,878 $13,497
31-Mar-01 $14,887 $15,641 $16,744 $13,564
30-Apr-01 $15,669 $16,344 $18,045 $13,507
31-May-01 $15,683 $16,449 $18,166 $13,588
30-Jun-01 $15,530 $16,234 $17,725 $13,640
31-Jul-01 $16,748 $16,284 $17,551 $13,945
31-Aug-01 $14,873 $15,747 $16,452 $14,106
30-Sep-01 $13,826 $15,057 $15,123 $14,269
31-Oct-01 $14,133 $15,355 $15,412 $14,568
30-Nov-01 $14,859 $15,977 $16,594 $14,367
31-Dec-01 $15,090 $16,021 $16,740 $14,275
31-Jan-02 $14,933 $15,932 $16,496 $14,390
28-Feb-02 $14,733 $15,810 $16,177 $14,530
31-Mar-02 $15,133 $16,061 $16,785 $14,289
30-Apr-02 $14,919 $15,602 $15,768 $14,566
31-May-02 $14,776 $15,586 $15,652 $14,690
30-Jun-02 $14,219 $14,974 $14,537 $14,817
31-Jul-02 $13,534 $14,347 $13,405 $14,997
31-Aug-02 $13,734 $14,500 $13,492 $15,250
30-Sep-02 $12,963 $13,648 $12,025 $15,497
31-Oct-02 $13,348 $14,343 $13,084 $15,426
30-Nov-02 $13,891 $14,849 $13,854 $15,421
31-Dec-02 $13,659 $14,449 $13,041 $15,741
31-Jan-03 $13,572 $14,227 $12,699 $15,755
28-Feb-03 $13,528 $14,177 $12,509 $15,972
31-Mar-03 $13,557 $14,255 $12,630 $15,959
30-Apr-03 $14,210 $15,007 $13,671 $16,092
31-May-03 $14,906 $15,593 $14,391 $16,391
30-Jun-03 $15,051 $15,701 $14,575 $16,358
31-Jul-03 $15,065 $15,656 $14,832 $15,809
31-Aug-03 $15,428 $15,880 $15,121 $15,913
30-Sep-03 $15,486 $15,947 $14,961 $16,335
31-Oct-03 $16,051 $16,430 $15,808 $16,183
30-Nov-03 $16,327 $16,532 $15,947 $16,222
31-Dec-03 $16,829 $17,119 $16,782 $16,387
31-Jan-04 $17,107 $17,363 $17,091 $16,518
29-Feb-04 $17,386 $17,583 $17,329 $16,697
31-Mar-04 $17,371 $17,476 $17,067 $16,822
30-Apr-04 $16,814 $17,130 $16,799 $16,384
31-May-04 $16,961 $17,243 $17,029 $16,319
30-Jun-04 $17,239 $17,483 $17,360 $16,412
31-Jul-04 $16,755 $17,205 $16,785 $16,574
31-Aug-04 $16,814 $17,378 $16,852 $16,891
30-Sep-04 $17,166 $17,510 $17,034 $16,937
31-Oct-04 $17,430 $17,729 $17,295 $17,079
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
Because the Fund originally used a different asset allocation strategy and a
multi-fund strategy, its performance prior to June 3, 2002 does not reflect
the current strategy and may have been different if it did.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the Fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares. The Balanced Blended Index is
composed of 60% S&P 500(R) Index and 40% Lehman Brothers U.S. Aggregate Bond
Index.
2 Source for category information: Morningstar, Inc.
Laudus MarketMasters Funds 9
LAUDUS BALANCED MARKETMASTERS FUND
SELECT SHARES(R) PERFORMANCE as of 10/31/04
TOTAL RETURNS 1, 2
This chart compares performance of the Fund's Select Shares with its benchmark
and Morningstar category.
[BAR CHART]
Fund: Benchmark: Fund Category:
SELECT BALANCED MORNINGSTAR
SHARES BLENDED INDEX MODERATE ALLOCATION
SINCE INCEPTION: 6/3/04 2.77% 2.71% 2.28%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/MARKETMASTERS.
PERFORMANCE OF A HYPOTHETICAL $25,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $25,000
investment (the minimum investment for this share class) in the Fund's Select
Shares, compared with a similar investment in its benchmark.
$25,693 SELECT SHARES
$25,677 BALANCED BLENDED INDEX
$25,286 S&P 500(R) INDEX
$26,257 LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX
[LINE GRAPH]
DATE SELECT BALANCED S&P 500(R) LEHMAN BROS. U.S.
SHARES BLENDED INDEX INDEX AGG BOND INDEX
03-Jun-04 $25,000 $25,000 $25,000 $25,000
30-Jun-04 $25,390 $25,321 $25,380 $25,231
31-Jul-04 $24,698 $24,918 $24,540 $25,481
31-Aug-04 $24,785 $25,168 $24,638 $25,968
30-Sep-04 $25,303 $25,359 $24,905 $26,038
31-Oct-04 $25,693 $25,677 $25,286 $26,257
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the Fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares. The Balanced Blended Index is
composed of 60% S&P 500(R) Index and 40% Lehman Brothers U.S. Aggregate Bond
Index.
2 Source for category information: Morningstar, Inc.
10 Laudus MarketMasters Funds
LAUDUS BALANCED MARKETMASTERS FUND
FUND FACTS as of 10/31/04
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) U.S. TREASURY INFLATION-PROTECTED SECURITY
3.63%, 01/15/2008 2.8%
- --------------------------------------------------------------------------------
(2) FANNIE MAE 5.50%, 11/15/2034 1.9%
- --------------------------------------------------------------------------------
(3) BUNDES REPUBLIC OF DEUTSCHLAND
Series 99, 3.75%, 01/04/2009 1.9%
- --------------------------------------------------------------------------------
(4) CITIGROUP, INC. 1.7%
- --------------------------------------------------------------------------------
(5) U.S. TREASURY NOTE 1.63%, 04/30/2005 1.5%
- --------------------------------------------------------------------------------
(6) FANNIE MAE 5.00%, 11/15/2034 1.5%
- --------------------------------------------------------------------------------
(7) FANNIE MAE 4.50%, 11/15/2034 1.5%
- --------------------------------------------------------------------------------
(8) U.S. TREASURY NOTE 4.88%, 02/15/2012 1.5%
- --------------------------------------------------------------------------------
(9) U.S. TREASURY NOTE 2.00%, 11/30/2004 1.1%
- --------------------------------------------------------------------------------
(10) BANK OF AMERICA CORP. 1.0%
- --------------------------------------------------------------------------------
TOTAL 16.4%
STATISTICS
NUMBER OF LONG HOLDINGS 407
- --------------------------------------------------------------------------------
NUMBER OF SHORT POSITIONS 6
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $43,622
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 17.3
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.3
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 242%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2
Investor Shares ($1,000 for retirement and custodial accounts) $2,500
Select Shares $25,000
- --------------------------------------------------------------------------------
INVESTMENT MANAGERS AND ALLOCATIONS
% OF
INVESTMENT MANAGER INVESTMENT STYLE NET ASSETS
- --------------------------------------------------------------------------------
ARONSON + JOHNSON + Large-Cap Value 31.8%
ORTIZ, LP
- --------------------------------------------------------------------------------
EAGLE ASSET Large-Cap Growth 14.9%
MANAGEMENT, INC.
- --------------------------------------------------------------------------------
JANUS CAPITAL Mid-Cap Value 17.1%
MANAGEMENT LLC/
PERKINS, WOLF,
MCDONNELL AND
COMPANY, LLC
- --------------------------------------------------------------------------------
PACIFIC INVESTMENT Total Return 31.1%
MANAGEMENT Fixed-Income
COMPANY LLC
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS % of Equity Securities
This chart shows the Fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
25.6% FINANCE
21.5% CONSUMER NON-DURABLES
14.1% TECHNOLOGY
12.4% MATERIALS & SERVICES
9.9% ENERGY
7.3% UTILITIES
4.2% CAPITAL GOODS
3.3% CONSUMER DURABLES
1.7% TRANSPORTATION
Portfolio holdings may have changed since the report date.
1 This list is not a recommendation of any security by the investment adviser.
2 Please see prospectus for further detail and eligibility requirements.
Laudus MarketMasters Funds 11
LAUDUS SMALL-CAP MARKETMASTERS FUND(TM)
INVESTOR SHARES PERFORMANCE as of 10/31/04
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the Fund with a benchmark and the Fund's
Morningstar category.
[BAR CHART]
Fund: Benchmark: Fund Category:
INVESTOR RUSSELL 2000(R) MORNINGSTAR
SHARES INDEX SMALL-CAP BLEND
1 YEAR 9.93% 11.73% 13.51%
5 YEARS 5.25% 7.73% 12.25%
SINCE INCEPTION: 9/16/97 5.60% 5.35% 4.03%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/MARKETMASTERS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT
This graph shows performance since inception of a hypothetical $10,000
investment in the Fund, compared with a similar investment in a benchmark.
$14,748 INVESTOR SHARES
$14,502 RUSSELL 2000(R) INDEX
[LINE GRAPH]
DATE INVESTOR RUSSELL 2000(R)
SHARES INDEX
16-Sep-97 $10,000 $10,000
30-Sep-97 $10,260 $10,319
31-Oct-97 $ 9,930 $ 9,866
30-Nov-97 $ 9,770 $ 9,802
31-Dec-97 $ 9,886 $ 9,973
31-Jan-98 $ 9,701 $ 9,816
28-Feb-98 $10,277 $10,541
31-Mar-98 $10,781 $10,976
30-Apr-98 $10,832 $11,036
31-May-98 $10,359 $10,441
30-Jun-98 $10,411 $10,463
31-Jul-98 $ 9,896 $ 9,615
31-Aug-98 $ 8,271 $ 7,748
30-Sep-98 $ 8,435 $ 8,355
31-Oct-98 $ 8,754 $ 8,696
30-Nov-98 $ 9,238 $ 9,151
31-Dec-98 $ 9,946 $ 9,718
31-Jan-99 $10,101 $ 9,847
28-Feb-99 $ 9,563 $ 9,049
31-Mar-99 $10,029 $ 9,191
30-Apr-99 $10,773 $10,014
31-May-99 $10,752 $10,160
30-Jun-99 $11,311 $10,620
31-Jul-99 $11,228 $10,329
31-Aug-99 $10,938 $ 9,946
30-Sep-99 $10,990 $ 9,948
31-Oct-99 $11,414 $ 9,989
30-Nov-99 $12,272 $10,586
31-Dec-99 $13,714 $11,784
31-Jan-00 $13,339 $11,594
29-Feb-00 $15,171 $13,508
31-Mar-00 $14,496 $12,618
30-Apr-00 $13,178 $11,859
31-May-00 $12,482 $11,167
30-Jun-00 $14,003 $12,141
31-Jul-00 $13,478 $11,750
31-Aug-00 $14,924 $12,647
30-Sep-00 $14,164 $12,275
31-Oct-00 $13,146 $11,727
30-Nov-00 $11,325 $10,523
31-Dec-00 $12,156 $11,427
31-Jan-01 $12,795 $12,022
28-Feb-01 $11,698 $11,233
31-Mar-01 $10,879 $10,684
30-Apr-01 $11,927 $11,520
31-May-01 $12,325 $11,803
30-Jun-01 $12,674 $12,210
31-Jul-01 $12,168 $11,550
31-Aug-01 $11,590 $11,177
30-Sep-01 $10,012 $ 9,672
31-Oct-01 $10,518 $10,238
30-Nov-01 $11,421 $11,030
31-Dec-01 $12,144 $11,711
31-Jan-02 $11,951 $11,589
28-Feb-02 $11,612 $11,272
31-Mar-02 $12,520 $12,178
30-Apr-02 $12,471 $12,289
31-May-02 $12,060 $11,743
30-Jun-02 $11,164 $11,161
31-Jul-02 $ 9,469 $ 9,475
31-Aug-02 $ 9,323 $ 9,452
30-Sep-02 $ 8,476 $ 8,773
31-Oct-02 $ 8,694 $ 9,055
30-Nov-02 $ 9,481 $ 9,862
31-Dec-02 $ 8,997 $ 9,313
31-Jan-03 $ 8,864 $ 9,055
28-Feb-03 $ 8,585 $ 8,782
31-Mar-03 $ 8,573 $ 8,895
30-Apr-03 $ 9,384 $ 9,738
31-May-03 $10,668 $10,783
30-Jun-03 $10,946 $10,978
31-Jul-03 $11,600 $11,665
31-Aug-03 $12,314 $12,200
30-Sep-03 $12,193 $11,974
31-Oct-03 $13,416 $12,980
30-Nov-03 $13,913 $13,441
31-Dec-03 $14,276 $13,714
31-Jan-04 $14,942 $14,309
29-Feb-04 $15,075 $14,437
31-Mar-04 $15,075 $14,572
30-Apr-04 $14,143 $13,829
31-May-04 $14,458 $14,048
30-Jun-04 $15,075 $14,640
31-Jul-04 $14,046 $13,655
31-Aug-04 $13,719 $13,585
30-Sep-04 $14,470 $14,222
31-Oct-04 $14,748 $14,502
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
Because the Fund originally used a multi-fund strategy, its performance prior
to June 3, 2002 does not reflect the current strategy and may have been
different if it did.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the Fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
2 Source for category information: Morningstar, Inc.
12 Laudus MarketMasters Funds
LAUDUS SMALL-CAP MARKETMASTERS FUND
SELECT SHARES(R) PERFORMANCE as of 10/31/04
TOTAL RETURNS 1, 2
This chart compares performance of the Fund's Select Shares with its benchmark
and Morningstar category.
[BAR CHART]
Fund: Benchmark: Fund Category:
SELECT RUSSELL 2000(R) MORNINGSTAR
SHARES INDEX SMALL-CAP BLEND
SINCE INCEPTION: 6/9/04 0.66% 1.50% 1.97%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/MARKETMASTERS.
PERFORMANCE OF A HYPOTHETICAL $25,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $25,000
investment (the minimum investment for this share class) in the Fund's Select
Shares, compared with a similar investment in its benchmark.
$25,165 SELECT SHARES
$25,374 RUSSELL 2000(R) INDEX
[LINE GRAPH]
DATE SELECT RUSSELL 2000(R)
SHARES INDEX
09-Jun-04 $25,000 $25,000
30-Jun-04 $25,723 $25,615
31-Jul-04 $23,948 $23,891
31-Aug-04 $23,390 $23,769
30-Sep-04 $24,690 $24,884
31-Oct-04 $25,165 $25,374
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the Fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
2 Source for category information: Morningstar, Inc.
Laudus MarketMasters Funds 13
LAUDUS SMALL-CAP MARKETMASTERS FUND
FUND FACTS as of 10/31/04
STYLE ASSESSMENT 1
[GRAPHIC]
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large / / / / / /
Medium / / / / / /
Small / / / / /X/
STATISTICS
NUMBER OF HOLDINGS 209
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $1,742
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 38.7
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.2
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 140%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2
Investor Shares ($1,000 for retirement and custodial accounts) $2,500
Select Shares $25,000
- --------------------------------------------------------------------------------
INVESTMENT MANAGERS AND ALLOCATIONS
% OF
INVESTMENT MANAGER INVESTMENT STYLE NET ASSETS
- --------------------------------------------------------------------------------
TAMRO CAPITAL Small-Cap Value 25.1%
PARTNERS LLC 3
- --------------------------------------------------------------------------------
TCW INVESTMENT Small/Mid-Cap 15.3%
MANAGEMENT COMPANY Blend
- --------------------------------------------------------------------------------
TOCQUEVILLE ASSET Small-Cap Blend 21.2%
MANAGEMENT LP
- --------------------------------------------------------------------------------
VEREDUS ASSET Small-Cap Growth 38.1%
MANAGEMENT LLC
- --------------------------------------------------------------------------------
TOP HOLDINGS 4
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) CYTYC CORP. 1.7%
- --------------------------------------------------------------------------------
(2) TOLL BROTHERS, INC. 1.4%
- --------------------------------------------------------------------------------
(3) GENESCO, INC. 1.4%
- --------------------------------------------------------------------------------
(4) THE CHICAGO MERCANTILE EXCHANGE 1.4%
- --------------------------------------------------------------------------------
(5) PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. 1.3%
- --------------------------------------------------------------------------------
(6) CLEVELAND CLIFFS, INC. 1.2%
- --------------------------------------------------------------------------------
(7) TIDEWATER, INC. 1.1%
- --------------------------------------------------------------------------------
(8) PORTFOLIO RECOVERY ASSOCIATES, INC. 1.1%
- --------------------------------------------------------------------------------
(9) HOOPER HOLMES, INC. 1.1%
- --------------------------------------------------------------------------------
(10) AKAMAI TECHNOLOGIES, INC. 1.1%
- --------------------------------------------------------------------------------
TOTAL 12.8%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the Fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
29.3% MATERIALS & SERVICES
23.0% TECHNOLOGY
20.2% CONSUMER NON-DURABLES
8.4% FINANCE
8.1% ENERGY
5.7% CAPITAL GOODS
2.1% CONSUMER DURABLES
1.1% TRANSPORTATION
2.1% CASH & CASH EQUIVALENTS
Portfolio holdings may have changed since the report date.
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the Fund based on a ten-factor model for value and growth characteristics. The
Fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the Fund's
portfolio as of 10/31/04, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 Please see prospectus for further detail and eligibility requirements.
3 TAMRO Capital Partners replaced Royce & Associates as of 4/1/04.
4 This list is not a recommendation of any security by the investment adviser.
14 Laudus MarketMasters Funds
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM)
INVESTOR SHARES PERFORMANCE as of 10/31/04
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the Fund's Investor Shares with a benchmark
and the Fund's Morningstar category.
[BAR CHART]
Fund: Benchmark: Fund Category:
INVESTOR MSCI-EAFE(R) MORNINGSTAR FOREIGN
SHARES INDEX LARGE-CAP GROWTH
1 YEAR 14.06% 18.84% 12.54%
5 YEARS 4.38% -0.91% -2.84%
SINCE INCEPTION: 10/16/96 9.07% 3.56% 0.89%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/MARKETMASTERS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the Fund's Investor Shares, compared with a similar investment in
a benchmark.
$20,118 INVESTOR SHARES
$13,258 MSCI-EAFE(R) INDEX
[LINE GRAPH]
INVESTOR MSCI-EAFE(R)
SHARES INDEX
16-Oct-96 $10,000 $10,000
31-Oct-96 $ 9,910 $ 9,836
30-Nov-96 $10,220 $10,228
31-Dec-96 $10,313 $10,096
31-Jan-97 $10,426 $ 9,742
28-Feb-97 $10,599 $ 9,902
31-Mar-97 $10,558 $ 9,938
30-Apr-97 $10,609 $ 9,991
31-May-97 $11,209 $10,641
30-Jun-97 $11,697 $11,227
31-Jul-97 $11,962 $11,409
31-Aug-97 $11,199 $10,557
30-Sep-97 $11,830 $11,148
31-Oct-97 $11,046 $10,291
30-Nov-97 $10,894 $10,186
31-Dec-97 $11,016 $10,274
31-Jan-98 $11,146 $10,744
28-Feb-98 $11,925 $11,434
31-Mar-98 $12,670 $11,786
30-Apr-98 $12,952 $11,879
31-May-98 $13,265 $11,821
30-Jun-98 $13,157 $11,911
31-Jul-98 $13,525 $12,031
31-Aug-98 $11,654 $10,540
30-Sep-98 $11,006 $10,217
31-Oct-98 $11,438 $11,281
30-Nov-98 $12,011 $11,859
31-Dec-98 $12,481 $12,327
31-Jan-99 $12,820 $12,290
28-Feb-99 $12,415 $11,998
31-Mar-99 $12,853 $12,498
30-Apr-99 $13,815 $13,004
31-May-99 $13,170 $12,335
30-Jun-99 $14,428 $12,816
31-Jul-99 $14,985 $13,196
31-Aug-99 $15,248 $13,245
30-Sep-99 $15,401 $13,379
31-Oct-99 $16,232 $13,881
30-Nov-99 $18,683 $14,362
31-Dec-99 $21,819 $15,652
31-Jan-00 $21,236 $14,658
29-Feb-00 $24,410 $15,052
31-Mar-00 $23,356 $15,636
30-Apr-00 $21,149 $14,814
31-May-00 $20,120 $14,452
30-Jun-00 $21,100 $15,018
31-Jul-00 $20,554 $14,388
31-Aug-00 $21,249 $14,513
30-Sep-00 $20,120 $13,806
31-Oct-00 $19,253 $13,481
30-Nov-00 $18,050 $12,975
31-Dec-00 $18,672 $13,436
31-Jan-01 $18,893 $13,440
28-Feb-01 $17,883 $12,434
31-Mar-01 $16,680 $11,590
30-Apr-01 $17,538 $12,386
31-May-01 $17,496 $11,928
30-Jun-01 $17,178 $11,438
31-Jul-01 $16,639 $11,240
31-Aug-01 $16,182 $10,979
30-Sep-01 $14,495 $ 9,867
31-Oct-01 $14,937 $10,120
30-Nov-01 $15,588 $10,493
31-Dec-01 $16,028 $10,555
31-Jan-02 $15,659 $ 9,994
28-Feb-02 $15,762 $10,064
31-Mar-02 $16,515 $10,609
30-Apr-02 $16,397 $10,679
31-May-02 $16,338 $10,815
30-Jun-02 $15,674 $10,384
31-Jul-02 $14,006 $ 9,359
31-Aug-02 $13,947 $ 9,338
30-Sep-02 $12,368 $ 8,335
31-Oct-02 $12,899 $ 8,782
30-Nov-02 $13,548 $ 9,181
31-Dec-02 $13,092 $ 8,873
31-Jan-03 $12,560 $ 8,503
28-Feb-03 $12,103 $ 8,308
31-Mar-03 $11,911 $ 8,145
30-Apr-03 $13,224 $ 8,943
31-May-03 $14,184 $ 9,485
30-Jun-03 $14,700 $ 9,715
31-Jul-03 $15,291 $ 9,950
31-Aug-03 $15,925 $10,190
30-Sep-03 $16,368 $10,504
31-Oct-03 $17,638 $11,158
30-Nov-03 $17,756 $11,406
31-Dec-03 $18,845 $12,296
31-Jan-04 $19,423 $12,470
29-Feb-04 $19,837 $12,758
31-Mar-04 $19,896 $12,829
30-Apr-04 $19,497 $12,539
31-May-04 $19,393 $12,582
30-Jun-04 $19,955 $12,858
31-Jul-04 $19,038 $12,440
31-Aug-04 $18,978 $12,494
30-Sep-04 $19,511 $12,821
31-Oct-04 $20,118 $13,258
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
Because the Fund originally used a multi-fund strategy, its performance prior
to June 3, 2002 does not reflect the current strategy and may have been
different if it did.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the Fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
2 Source for category information: Morningstar, Inc.
Laudus MarketMasters Funds 15
LAUDUS INTERNATIONAL MARKETMASTERS FUND
SELECT SHARES(R) PERFORMANCE as of 10/31/04
TOTAL RETURNS 1, 2
This chart compares performance of the Fund's Select Shares with its benchmark
and Morningstar category.
[BAR CHART]
Fund: Benchmark: Fund Category:
SELECT MSCI-EAFE(R) MORNINGSTAR FOREIGN
SHARES INDEX LARGE-CAP GROWTH
SINCE INCEPTION: 4/2/04 -0.22% 2.01% 0.90%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/MARKETMASTERS.
PERFORMANCE OF A HYPOTHETICAL $25,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $25,000
investment (the minimum investment for this share class) in the Fund's Select
Shares, compared with a similar investment in its benchmark.
$24,945 SELECT SHARES
$25,504 MSCI-EAFE(R) INDEX
[LINE GRAPH]
SELECT MSCI-EAFE(R)
SHARES INDEX
02-Apr-04 25,000 25,000
30-Apr-04 24,158 24,122
31-May-04 24,028 24,204
30-Jun-04 24,725 24,734
31-Jul-04 23,608 23,930
31-Aug-04 23,533 24,035
30-Sep-04 24,193 24,663
31-Oct-04 24,945 25,504
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the Fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares.
2 Source for category information: Morningstar, Inc.
16 Laudus MarketMasters Funds
LAUDUS INTERNATIONAL MARKETMASTERS FUND
FUND FACTS as of 10/31/04
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) NESTLE SA 1.4%
- --------------------------------------------------------------------------------
(2) GLAXOSMITHKLINE PLC 1.3%
- --------------------------------------------------------------------------------
(3) BAYERISCHE MOTOREN-WERKE AG 1.2%
- --------------------------------------------------------------------------------
(4) DIAGEO PLC 1.2%
- --------------------------------------------------------------------------------
(5) CREDIT SUISSE GROUP 1.2%
- --------------------------------------------------------------------------------
(6) ERICSSON TELEFONAB LM SP 1.2%
- --------------------------------------------------------------------------------
(7) BANK OF IRELAND 1.1%
- --------------------------------------------------------------------------------
(8) GRUPO TELEVISA SA DE CV 1.1%
- --------------------------------------------------------------------------------
(9) EURONEXT N.V. 1.1%
- --------------------------------------------------------------------------------
(10) TESCO PLC 1.0%
- --------------------------------------------------------------------------------
TOTAL 11.8%
INVESTMENT MANAGERS AND ALLOCATIONS
% OF
INVESTMENT MANAGER INVESTMENT STYLE NET ASSETS
- --------------------------------------------------------------------------------
AMERICAN CENTURY International 20.6%
INVESTMENT Small Company
MANAGEMENT, INC.
- --------------------------------------------------------------------------------
ARTISAN PARTNERS International 20.2%
LIMITED PARTNERSHIP Growth
- --------------------------------------------------------------------------------
HARRIS ASSOCIATES L.P. International 34.9%
Value
- --------------------------------------------------------------------------------
WILLIAM BLAIR & International 22.8%
COMPANY, LLC Growth
- --------------------------------------------------------------------------------
STATISTICS
NUMBER OF HOLDINGS 405
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $22,116
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 21.0
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.5
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 69%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2
Investor Shares ($1,000 for retirement and custodial accounts) $2,500
Select Shares $25,000
- --------------------------------------------------------------------------------
SECTOR AND COUNTRY WEIGHTINGS % of portfolio
These charts show the Fund's sector and country composition as of the report
date. A sector is a portion of the overall stock market that is made up of
industries whose business components share similar characteristics.
SECTOR
[PIE CHART]
30.0% MATERIALS & SERVICES
21.8% FINANCE
16.3% CONSUMER NON-DURABLES
6.4% TRANSPORTATION
5.6% TECHNOLOGY
5.5% CAPITAL GOODS
3.8% CONSUMER DURABLES
3.4% ENERGY
3.4% UTILITIES
3.8% CASH & CASH EQUIVALENTS
COUNTRY
[PIE CHART]
18.0% UNITED KINGDOM
15.9% JAPAN
8.7% SWITZERLAND
8.0% FRANCE
7.8% GERMANY
3.8% NETHERLANDS
3.3% ITALY
3.2% CANADA
2.6% AUSTRALIA
24.9% OTHER COUNTRIES
3.8% CASH & CASH EQUIVALENTS
Portfolio holdings may have changed since the report date.
1 This list is not a recommendation of any security by the investment adviser.
2 Please see prospectus for further detail and eligibility requirements.
Laudus MarketMasters Funds 17
FUND EXPENSES
EXAMPLES FOR A $1,000 INVESTMENT
As a Fund shareholder, you incur two types of costs: transaction costs, such as
redemption fees; and, ongoing costs, such as management fees, transfer agent and
shareholder services fees, and other fund expenses.
The expense examples below are intended to help you understand your ongoing cost
(in dollars) of investing in a fund and to compare this cost with the ongoing
cost of investing in other mutual funds. These examples are based on an
investment of $1,000 invested for six-months beginning May 1, 2004 and held
through October 31, 2004.
ACTUAL RETURN lines in the table below provide information about actual account
values and actual expenses. You may use this information, together with the
amount you invested, to estimate the expenses that you paid over the period. To
do so, simply divide your account value by $1,000 (for example, an $8,600
account value / $1,000 = 8.6), then multiply the result by the number given for
your fund or share class under the heading entitled "Expenses Paid During
Period."
HYPOTHETICAL RETURN lines in the table below provide information about
hypothetical account values and hypothetical expenses based on a fund's or share
class' actual expense ratio and an assumed return of 5% per year before
expenses. Because the return used is not an actual return, it may not be used to
estimate the actual ending account value or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only, and do not reflect any transactional costs, such as
redemption fees. If these transactional costs were included, your costs would
have been higher.
ENDING
BEGINNING ACCOUNT VALUE EXPENSES
EXPENSE RATIO 1 ACCOUNT VALUE (Net of Expenses) PAID DURING PERIOD
(Annualized) at 5/1/04 at 10/31/04 5/1/04-10/31/04
- ---------------------------------------------------------------------------------------------------------------
LAUDUS U.S. MARKETMASTERS FUND(TM)
Investor Shares
Actual Return 1.25% $1,000 $991.30 $6.26 2
Hypothetical 5% Return 1.25% $1,000 $1,018.85 $6.34 2
Select Shares(R)
Actual Return 1.07% $1,000 $990.40 $4.36 3
Hypothetical 5% Return 1.07% $1,000 $1,019.76 $4.43 3
- ---------------------------------------------------------------------------------------------------------------
LAUDUS BALANCED
MARKETMASTERS FUND(TM)
Investor Shares
Actual Return 1.10% $1,000 $1,036.70 $5.63 2
Hypothetical 5% Return 1.10% $1,000 $1,019.61 $5.58 2
Select Shares
Actual Return 0.95% $1,000 $1,027.70 $3.97 4
Hypothetical 5% Return 0.95% $1,000 $1,020.36 $3.96 4
1 Based on the most recent six-month expense ratio; may differ from the expense
ratio provided in Financial Highlights.
2 Expenses for the share class are equal to that share class' annualized expense
ratio, multiplied by the average account value over the period, multiplied by
184 days of the period, and divided by 366 days of the fiscal year.
3 Expenses for the share class are equal to the share class' annualized expense
ratio, multiplied by the average account value over the period, multiplied by
150 days of the period (from 6/4/04, commencement of operations through
10/31/04), and divided by 366 days of the fiscal year.
4 Expenses for the share class are equal to the share class' annualized expense
ratio, multiplied by the average account value over the period, multiplied by
151 days of the period (from 6/3/04, commencement of operations through
10/31/04), and divided by 366 days of the fiscal year.
18 Laudus MarketMasters Funds
FUND EXPENSES continued
ENDING
BEGINNING ACCOUNT VALUE EXPENSES
EXPENSE RATIO 1 ACCOUNT VALUE (Net of Expenses) PAID DURING PERIOD
(Annualized) at 5/1/04 at 10/31/04 5/1/04-10/31/04
- ------------------------------------------------------------------------------------------------
LAUDUS SMALL-CAP
MARKETMASTERS FUND(TM)
Investor Shares
Actual Return 1.55% $1,000 $1,042.80 $7.96 2
Hypothetical 5% Return 1.55% $1,000 $1,017.34 $7.86 2
Select Shares
Actual Return 1.37% $1,000 $1,006.60 $5.45 3
Hypothetical 5% Return 1.37% $1,000 $1,018.25 $5.48 3
- ------------------------------------------------------------------------------------------------
LAUDUS INTERNATIONAL
MARKETMASTERS FUND(TM)
Investor Shares
Actual Return 1.65% $1,000 $1,031.90 $8.43 2
Hypothetical 5% Return 1.65% $1,000 $1,016.84 $8.36 2
Select Shares
Actual Return 1.47% $1,000 $1,032.60 $7.51 2
Hypothetical 5% Return 1.47% $1,000 $1,017.75 $7.46 2
1 Based on the most recent six-month expense ratio; may differ from the expense
ratio provided in Financial Highlights.
2 Expenses for the share class are equal to that share class' annualized expense
ratio, multiplied by the average account value over the period, multiplied by
184 days of the period, and divided by 366 days of the fiscal year.
3 Expenses for the share class are equal to the share class' annualized expense
ratio, multiplied by the average account value over the period, multiplied by
145 days of the period (from 6/9/04, commencement of operations through
10/31/04), and divided by 366 days of the fiscal year.
Laudus MarketMasters Funds 19
LAUDUS U.S. MARKETMASTERS FUND(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
INVESTOR SHARES 10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- -----------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- -----------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 9.94 7.48 9.20 13.89 14.06
-------------------------------------------------------------
Income or loss from investment operations:
Net investment income or loss (0.03) (0.01) 0.06 0.38 0.38
Net realized and unrealized gains or losses 0.39 2.47 (1.68) (3.21) 1.55
-------------------------------------------------------------
Total income or loss from investment operations 0.36 2.46 (1.62) (2.83) 1.93
Less distributions:
Dividends from net investment income -- -- (0.10) (0.46) (0.33)
Distributions from net realized gains -- -- -- (1.40) (1.77)
-------------------------------------------------------------
Total distributions -- -- (0.10) (1.86) (2.10)
-------------------------------------------------------------
Net asset value at end of period 10.30 9.94 7.48 9.20 13.89
-------------------------------------------------------------
Total return (%) 3.62 32.89 (17.92) (22.81) 12.98
RATIOS/SUPPLEMENTAL DATA (%)
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.25 1.25 0.83 1,2 0.50 2 0.51 2,3
Gross operating expenses 1.39 1.42 1.16 2 0.89 2 0.89 2
Net investment income or loss (0.25) (0.12) 0.50 3.27 2.34
Portfolio turnover rate 72 97 390 145 179
Net assets, end of period ($ x 1,000,000) 180 169 129 176 248
1 The ratio of net operating expenses would have been 0.74% if certain
non-routine expenses (proxy fees) had not been included.
2 Prior to the fund's change in structure on June 3, 2002, the expenses incurred
by underlying funds in which the fund invested were not included in this
ratio.
3 The ratio of net operating expenses would have been 0.50% if certain
non-routine expenses (proxy fees) had not been included.
20 See financial notes.
LAUDUS U.S. MARKETMASTERS FUND
6/4/04 1-
SELECT SHARES 10/31/04
- --------------------------------------------------------------------------------
PER-SHARE DATA ($)
- --------------------------------------------------------------------------------
Net asset value at beginning of period 10.42
-----------------------------
Income or loss from investment operations:
Net investment loss (0.00) 2
Net realized and unrealized losses (0.10)
-----------------------------
Total loss from investment operations (0.10)
-----------------------------
Net asset value at end of period 10.32
-----------------------------
Total return (%) (0.96) 3
RATIOS/SUPPLEMENTAL DATA (%)
- --------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.07 4
Gross operating expenses 1.37 4
Net investment loss (0.08) 4
Portfolio turnover rate 72 3
Net assets, end of period ($ x 1,000,000) 1
1 Commencement of operations.
2 Per share amount was less than $0.01.
3 Not annualized.
4 Annualized.
See financial notes. 21
LAUDUS U.S. MARKETMASTERS FUND
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q
will be available on the SEC'S website at http://www.sec.gov and may be reviewed
and copied at the SEC'S Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q will
be available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbol below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top ten holding
o Non-income producing security
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
95.5% COMMON STOCK 152,925 172,855
1.0% FOREIGN COMMON
STOCK 1,558 1,850
0.0% SHORT-TERM
INVESTMENTS 100 100
3.6% OTHER INVESTMENTS 6,444 6,444
- --------------------------------------------------------------------------------
100.1% TOTAL INVESTMENTS 161,027 181,249
(0.1)% OTHER ASSETS AND
LIABILITIES, NET (240)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 181,009
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 95.5% of net assets
AIR TRANSPORTATION 1.3%
--------------------------------------------------------------------------
Southwest Airlines, Inc. 143,832 2,268
APPAREL 0.5%
--------------------------------------------------------------------------
Jones Apparel Group, Inc. 26,465 934
BANKS 5.3%
--------------------------------------------------------------------------
Bank of America Corp. 29,900 1,339
Bank of New York Co., Inc. 57,700 1,873
BankNorth Group, Inc. 24,100 850
(8) JP Morgan Chase & Co. 63,700 2,459
Mellon Financial Corp. 23,900 691
North Fork Bancorp, Inc. 24,100 1,063
Wells Fargo & Co. 13,900 830
Zions Bancorp. 7,400 489
-----------
9,594
BUSINESS MACHINES & SOFTWARE 4.4%
--------------------------------------------------------------------------
o Cisco Systems, Inc. 67,850 1,303
o Dell Computer Corp. 46,700 1,637
o EMC Corp. 51,980 669
o Maxtor Corp. 10,100 30
(4) Microsoft Corp. 112,250 3,142
o Siebel Systems, Inc. 57,100 543
o Unisys Corp. 64,600 686
-----------
8,010
BUSINESS SERVICES 9.6%
--------------------------------------------------------------------------
o Accenture Ltd. 15,650 379
o Affiliated Computer Services, Inc. 17,500 955
Cendant Corp. 70,000 1,441
o CheckFree Corp. 18,850 584
o eBay, Inc. 16,800 1,640
o Eclipsys Corp. 50,700 860
First Data Corp. 56,300 2,324
o FTI Consulting, Inc. 31,900 599
o IAC InterActiveCorp. 29,400 636
o Interpublic Group of Cos., Inc. 71,400 875
o McAfee, Inc. 51,100 1,237
o Nortel Networks Corp. 194,200 658
Reynolds & Reynolds Co., Class A
26,000 640
o Sungard Data Systems, Inc. 25,600 678
o Veritas Software Corp. 50,500 1,105
Waste Management, Inc. 70,000 1,994
o Yahoo! Inc. 23,800 861
-----------
17,466
22 See financial notes.
LAUDUS U.S. MARKETMASTERS FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
CHEMICAL 0.4%
--------------------------------------------------------------------------
o Entegris, Inc. 73,800 683
CONSUMER DURABLES 1.3%
--------------------------------------------------------------------------
Hillenbrand Industries, Inc. 19,300 960
Leggett & Platt, Inc. 23,100 650
o Tempur-Pedic International, Inc. 47,650 774
-----------
2,384
ELECTRONICS 13.1%
--------------------------------------------------------------------------
o Agere Systems, Inc., Class B 737,600 848
o Alliant Techsystems, Inc. 13,900 799
o Altera Corp. 30,800 700
o Andrew Corp. 62,500 874
Anixter International, Inc. 23,000 889
o Applied Materials, Inc. 59,150 952
o Arrow Electronics, Inc. 37,600 901
o Broadcom Corp., Class A 34,600 936
o Celestica, Inc. 52,335 758
o Cox Radio, Inc. 14,800 235
o Cypress Semiconductor Corp. 77,100 812
o Fairchild Semiconductor Corp. 69,900 1,005
Intel Corp. 65,450 1,457
o Jabil Circuit, Inc. 17,500 425
Maxim Integrated Products, Inc. 16,550 728
National Semiconductor Corp. 62,025 1,036
o Nextel Communications, Inc., Class A
45,900 1,216
o Novellus Systems, Inc. 41,600 1,078
PerkinElmer, Inc. 41,450 851
Qualcomm, Inc. 12,650 529
o Teradyne, Inc. 67,700 1,121
Texas Instruments, Inc. 88,950 2,175
o Thermo Electron Corp. 30,100 873
o Ultra Clean Holdings, Inc. 74,500 390
o Uniphase Corp. 156,850 497
o Varian, Inc. 17,200 628
o Vishay Intertechnology, Inc. 80,300 1,038
-----------
23,751
ENERGY: RAW MATERIALS 1.3%
--------------------------------------------------------------------------
o Cooper Cameron Corp. 18,100 875
Devon Energy Corp. 13,500 999
ENSCO International, Inc. 14,300 437
-----------
2,311
FOOD & AGRICULTURE 1.7%
--------------------------------------------------------------------------
Coca-Cola Co. 25,400 1,033
The Pepsi Bottling Group, Inc. 74,000 2,075
-----------
3,108
HEALTHCARE / DRUGS & MEDICINE 13.1%
--------------------------------------------------------------------------
Abbott Laboratories 18,050 770
Allergan, Inc. 7,150 512
o Amgen, Inc. 27,600 1,568
o Anthem, Inc. 11,900 957
Baxter International, Inc. 60,000 1,846
Beckman Coulter, Inc. 12,300 732
Cardinal Health, Inc. 20,500 958
o Caremark Rx, Inc. 25,500 764
o Charles River Laboratories, Inc. 17,900 838
o Edwards Lifesciences Corp. 24,500 837
o Genzyme Corp. 13,100 687
(2) Guidant Corp. 58,150 3,874
Health Management Associates, Inc.
79,500 1,642
o Health Net, Inc. 46,350 1,124
Johnson & Johnson, Inc. 15,100 882
(5) Pfizer, Inc. 107,950 3,125
o St. Jude Medical, Inc. 1,950 149
United Healthcare Corp. 16,400 1,187
Wyeth 14,100 559
o Zimmer Holdings, Inc. 8,650 671
-----------
23,682
HOUSEHOLD PRODUCTS 0.5%
--------------------------------------------------------------------------
Colgate-Palmolive Co. 18,300 816
INSURANCE 3.9%
--------------------------------------------------------------------------
Aetna, Inc. 6,000 570
American International Group, Inc.
32,250 1,958
Arthur J. Gallagher & Co. 11,900 334
Assurant, Inc. 40,500 1,093
Lincoln National Corp. 1,600 70
See financial notes. 23
LAUDUS U.S. MARKETMASTERS FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Marsh & McLennan Cos., Inc. 37,400 1,035
Old Republic International Corp. 28,800 672
St. Paul Cos., Inc. 39,000 1,324
-----------
7,056
MEDIA 8.5%
--------------------------------------------------------------------------
o Cablevision Systems New York Group,
Class A 100,000 2,058
o Comcast Corp., Class A 55,450 1,610
o Directv Group, Inc. 79,111 1,327
o Dreamworks Animation 2,500 98
o EchoStar Communications Corp. 24,700 781
o Entercom Communications Corp. 8,200 272
o Fox Entertainment Group, Inc., Class A
40,200 1,192
Gannett, Inc. 7,550 626
o Liberty Media International, Inc., Class A
11,400 411
Nokia Corp., Class A 45,800 706
Readers Digest Association, Inc. 36,470 514
The Walt Disney Co. 29,800 752
o(1) Time Warner, Inc. 248,500 4,135
Viacom, Inc., Class B 13,950 509
o Westwood One, Inc. 14,600 337
-----------
15,328
MISCELLANEOUS FINANCE 6.9%
--------------------------------------------------------------------------
(6) Citigroup, Inc. 57,050 2,531
o E*TRADE Group, Inc. 46,500 600
Fannie Mae 27,900 1,957
o Jackson Hewitt Tax Service, Inc. 4,550 96
Merrill Lynch & Co., Inc. 12,250 661
o Piper Jaffray Cos., Inc. 11,300 494
Sovereign Bancorp, Inc. 100,000 2,165
T.Rowe Price Group, Inc. 21,100 1,177
The Goldman Sachs Group, Inc. 7,650 753
Washington Mutual, Inc. 50,200 1,943
-----------
12,377
NON-DURABLES & ENTERTAINMENT 4.1%
--------------------------------------------------------------------------
o American Greetings Corp., Class A
37,800 1,000
Darden Restaurants, Inc. 38,800 951
o EMCOR Group, Inc. 16,355 647
McDonalds Corp. 80,000 2,332
(9) Yum! Brands, Inc. 56,000 2,436
-----------
7,366
OIL: DOMESTIC 1.6%
--------------------------------------------------------------------------
o Transocean, Inc. 29,650 1,045
Unocal Corp. 46,700 1,950
-----------
2,995
OIL: INTERNATIONAL 1.2%
--------------------------------------------------------------------------
Exxon Mobil Corp. 43,100 2,121
PAPER & FOREST PRODUCTS 0.3%
--------------------------------------------------------------------------
o Smurfit-Stone Container Corp. 27,700 481
PRODUCER GOODS & MANUFACTURING 3.9%
--------------------------------------------------------------------------
Dover Corp. 13,600 534
Emerson Electric Co. 11,400 730
(3) General Electric Co. 105,750 3,608
Grainger, Inc. 18,400 1,078
Pall Corp. 22,600 585
York International Corp. 18,600 592
-----------
7,127
RAILROADS 0.7%
--------------------------------------------------------------------------
Union Pacific Corp. 20,600 1,297
RETAIL 7.2%
--------------------------------------------------------------------------
o Autozone, Inc. 5,100 417
(10) Costco Cos., Inc. 50,000 2,397
Home Depot, Inc. 14,650 602
o Linens 'n Things, Inc. 38,391 925
Lowe's Cos., Inc. 25,400 1,430
Talbots, Inc. 32,700 863
Target Corp. 18,800 940
The Gap, Inc. 90,000 1,798
The TJX Max Cos., Inc. 24,700 592
Tiffany & Co. 72,200 2,118
Wal-Mart Stores, Inc. 18,850 1,016
-----------
13,098
24 See financial notes.
LAUDUS U.S. MARKETMASTERS FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TELEPHONE 2.9%
--------------------------------------------------------------------------
Alltel Corp. 24,300 1,335
o Crown Castle International Corp. 25,900 396
o Ditech Communications Corp. 21,800 500
o Liberty Media Corp., Class A 190,000 1,695
o NII Holdings, Inc. 30,600 1,355
-----------
5,281
TRAVEL & RECREATION 1.8%
--------------------------------------------------------------------------
(7) Carnival Corp. 50,000 2,528
Harrah's Entertainment, Inc. 13,550 793
-----------
3,321
FOREIGN COMMON STOCK 1.0% of net assets
SOUTH KOREA 0.4%
--------------------------------------------------------------------------
Samsung Electronics Co. Ltd. Preferred
1,800 707
UNITED KINGDOM 0.6%
--------------------------------------------------------------------------
o Lloyds TSB Group PLC 144,800 1,143
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENTS 0.0% of net assets
U.S. GOVERNMENT SECURITIES 0.0%
--------------------------------------------------------------------------
U.S. Treasury Bills
1.63%, 12/15/04 100 100
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OTHER INVESTMENTS 3.6% of net assets
OTHER INVESTMENT COMPANIES 3.6%
--------------------------------------------------------------------------
Provident Institutional Funds-
TempCash 2,023,212 2,023
Provident Institutional Funds-
TempFund 4,420,945 4,421
-----------
6,444
END OF INVESTMENTS.
See financial notes. 25
LAUDUS U.S. MARKETMASTERS FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- ------------------------------------------------------------------------------
Investments, at value $181,249 a
Receivables:
Fund shares sold 39
Dividends 160
Investments sold 1,198
Prepaid expenses + 37
-----------
TOTAL ASSETS 182,683
LIABILITIES
- ------------------------------------------------------------------------------
Bank overdraft 632
Payables:
Fund shares redeemed 154
Investments bought 824
Investment adviser and administrator fees 13
Transfer agency and shareholder service fees 4
Accrued expenses + 47
-----------
TOTAL LIABILITIES 1,674
NET ASSETS
- ------------------------------------------------------------------------------
TOTAL ASSETS 182,683
TOTAL LIABILITIES - 1,674
-----------
NET ASSETS $181,009
NET ASSETS BY SOURCE
Capital received from investors 214,420
Net realized capital losses (53,633) b
Net unrealized capital gains 20,222 b
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $179,799 17,461 $10.30
Select Shares $1,210 117 $10.32
Unless stated, all numbers x 1,000.
a The fund paid $161,027 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $136,745
Sales/maturities $125,930
b These derive from investments, foreign currency transactions and futures.
FEDERAL TAX DATA
- -----------------------------------------------------
PORTFOLIO COST $163,640
NET UNREALIZED GAINS AND LOSSES:
Gains $23,579
Losses + (5,970)
-------------
$17,609
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $--
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $11,740
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount:
2009 $16,032
2010 34,385
2011 + 604
-------------
$51,021
RECLASSIFICATIONS:
Net investment income not
yet distributed $469
RECLASSIFIED AS:
Net realized capital gains $20
Capital received from
investors ($489)
26 See financial notes.
LAUDUS U.S. MARKETMASTERS FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- ------------------------------------------------------------------------------
Dividends $1,874 a
Interest + 6
----------
TOTAL INVESTMENT INCOME 1,880
NET REALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net realized gains on investments 9,937
Net realized gains of futures contracts 608
Net realized losses on foreign currency transactions + (13)
----------
NET REALIZED GAINS 10,532
NET UNREALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net unrealized losses on investments (4,861)
Net unrealized losses on futures contracts + (169)
----------
NET UNREALIZED LOSSES (5,030)
EXPENSES
- ------------------------------------------------------------------------------
Investment adviser and administrator fees 1,880 b
Transfer agent and shareholder service fees:
Investor shares 469 c
Select shares 1 c
Trustees' fees 6 d
Custodian and portfolio accounting fees 131
Professional fees 44
Registration fees 22
Shareholder reports 57
Other expenses + 6
----------
Total expenses 2,616
Expense reduction - 267 e
----------
NET EXPENSES 2,349
INCREASE IN NET ASSETS FROM OPERATIONS
- ------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,880
NET EXPENSES - 2,349
----------
NET INVESTMENT LOSS (469)
NET REALIZED GAINS 10,532 f
NET UNREALIZED LOSSES + (5,030) f
----------
INCREASE IN NET ASSETS FROM OPERATIONS $5,033
Unless stated, all numbers x 1,000.
a Net of $13 foreign withholding tax.
b Calculated as 1.00% of average daily net assets. These fees are paid to
Charles Schwab Investment Management, Inc. (CSIM)
c Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% and
0.15% of the assets of each respective share class. These fees are paid to
Charles Schwab & Co., Inc. (Schwab).
d For the fund's independent trustees only.
e This reduction was made by the investment advisor (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 28,
2005 for Investor shares and February 28, 2006 for Select shares, as follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
-----------------------------------------
Investor Shares 1.25
Select Shares 1.07
This limit excludes interest, taxes and certain non-routine expenses.
f These add up to a net gain on investments of $5,502.
See financial notes. 27
LAUDUS U.S. MARKETMASTERS FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment loss (469) ($170)
Net realized gains 10,532 30
Net unrealized gains or losses + (5,030) 40,130
------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS $5,033 $39,990
TRANSACTIONS IN FUND SHARES a
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
SHARES SOLD
Investor Shares 4,950 $52,179 3,184 $28,358
Select Shares + 118 1,210 -- --
---------------------------------------------------
TOTAL SHARES SOLD 5,068 $53,389 3,184 $28,358
SHARES REDEEMED
Investor Shares (4,454) ($46,021) (3,420) ($28,461)
Select Shares + (1) (11) -- --
---------------------------------------------------
TOTAL SHARES REDEEMED (4,455) ($46,032) (3,420) ($26,461)
NET TRANSACTIONS IN
FUND SHARES 613 $7,357 (236) ($103)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 16,965 $168,619 17,201 $128,732
Total increase or decrease + 613 12,390 (236) 39,887 b
---------------------------------------------------
END OF PERIOD 17,578 $181,009 16,965 $168,619 c
Unless stated, all numbers x 1,000.
a The fund started offering Select shares on June 4, 2004.
b Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
c There was no distributable net investment income at the end of the current and
prior period.
28 See financial notes.
LAUDUS BALANCED MARKETMASTERS FUND(TM)
Financial Statements
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
INVESTOR SHARES 10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 11.07 9.35 10.12 13.44 13.44
--------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.08 0.12 0.20 0.43 0.45
Net realized and unrealized gains or losses 0.86 1.75 (0.73) (2.12) 1.18
--------------------------------------------------------------------
Total income or loss from investment operations 0.94 1.87 (0.53) (1.69) 1.63
Less distributions:
Dividends from net investment income (0.13) (0.15) (0.24) (0.52) (0.35)
Distributions from net realized gains -- -- -- (1.11) (1.28)
--------------------------------------------------------------------
Total distributions (0.13) (0.15) (0.24) (1.63) (1.63)
--------------------------------------------------------------------
Net asset value at end of period 11.88 11.07 9.35 10.12 13.44
--------------------------------------------------------------------
Total return (%) 8.59 20.25 (5.55) (13.95) 12.00
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.10 1.10 0.76 1,2 0.50 2 0.51 2,3
Gross operating expenses 1.32 1.33 1.10 2 0.89 2 0.90 2
Net investment income 0.68 1.13 1.89 3.67 3.18
Portfolio turnover rate 242 256 380 95 114
Net assets, end of period ($ x 1,000,000) 130 109 97 118 153
1 The ratio of net operating expenses would have been 0.72% if certain
non-routine expenses (proxy fees) had not been included.
2 Prior to the fund's change in structure on June 3, 2002, the expenses incurred
by underlying funds in which the fund invested were not included in this
ratio.
3 The ratio of net operating expenses would have been 0.50% if certain
non-routine expenses (proxy fees) had not been included.
See financial notes. 29
LAUDUS BALANCED MARKETMASTERS FUND
6/3/04 1-
SELECT SHARES 10/31/04
- --------------------------------------------------------------------------------
PER-SHARE DATA ($)
- --------------------------------------------------------------------------------
Net asset value at beginning of period 11.57
------------------
Income or loss from investment operations:
Net investment income 0.02
Net realized and unrealized gains 0.30
------------------
Total income from investment operations 0.32
------------------
Net asset value at end of period 11.89
------------------
Total return (%) 2.77 2
RATIOS/SUPPLEMENTAL DATA (%)
- --------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.95 3
Gross operating expenses 1.29 3
Net investment income 0.73 3
Portfolio turnover rate 242 2
Net assets, end of period ($ x 1,000,000) 2
1 Commencement of operations.
2 Not annualized.
3 Annualized.
30 See financial notes.
LAUDUS BALANCED MARKETMASTERS FUND
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q
will be available on the SEC'S website at http://www.sec.gov and may be reviewed
and copied at the SEC'S Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q will
be available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbol below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top ten holding
o Non-income producing security
= All or a portion of this security is held as collateral for futures
contracts, short sales, swap agreements and delayed-delivery security
* American Depository Receipt
+ Credit-enhanced security
~ Delayed-delivery security
For fixed-rate obligations, the rate shown is the interest rate (the rate
established when the obligation was issued) and the maturity date shown is the
stated legal maturity.
For variable-rate obligations, the rate shown is the rate as of the report date,
and the maturity shown is the later of the next interest rate change or demand
date.
COST/PROCEEDS VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
62.1% COMMON STOCK 72,379 81,999
9.1% U.S. GOVERNMENT
SECURITIES 11,915 12,020
4.1% FOREIGN GOVERNMENT
SECURITIES 5,291 5,443
3.2% CORPORATE BONDS 3,947 4,189
1.3% MUNICIPAL BONDS 1,708 1,712
5.7% AGENCY MORTGAGE-
BACKED SECURITIES 7,491 7,562
1.3% NON-AGENCY MORTGAGE-
BACKED SECURITIES 1,726 1,719
13.2% SHORT-TERM
INVESTMENTS 17,496 17,494
6.8% OTHER INVESTMENTS 8,995 8,995
0.0% OPTIONS 1 1
- --------------------------------------------------------------------------------
106.8% TOTAL INVESTMENTS 130,949 141,134
(6.5)% SHORT SALES (8,460) (8,544)
(0.1)% OPTIONS WRITTEN (219) (211)
(0.2)% OTHER ASSETS AND
LIABILITIES (248)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 132,131
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 62.1% of net assets
AEROSPACE / DEFENSE 0.4%
--------------------------------------------------------------------------
= Northrop Grumman Corp. 9,700 503
ALCOHOLIC BEVERAGES 0.1%
--------------------------------------------------------------------------
= Coors (Adolph) Co., Class B 1,600 107
APPAREL 0.7%
--------------------------------------------------------------------------
o= Aeropostale, Inc. 9,800 309
= Jones Apparel Group, Inc. 2,300 81
= Liz Claiborne, Inc. 5,800 237
o= Timberland Co., Class A 5,000 307
-----------
934
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
AUTOMOBILE PRODUCTS / MOTOR VEHICLES 1.7%
--------------------------------------------------------------------------
= Autoliv, Inc. 9,000 385
= Cooper Tire & Rubber Co. 5,900 115
= Cummins Engine, Inc. 2,300 161
= Eaton Corp. 2,600 166
= Ford Motor Co. 24,600 321
= Genuine Parts Co. 6,000 239
=* Magna International, Inc. 3,200 233
= Polars Industries Partners LP 6,200 368
o= United Defense Industries, Inc. 4,800 193
-----------
2,181
See financial notes. 31
LAUDUS BALANCED MARKETMASTERS FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
BANKS 5.1%
--------------------------------------------------------------------------
=(10) Bank of America Corp. 30,200 1,353
= Brookline Bancorp, Inc. 9,900 153
= Comerica, Inc. 7,400 455
= Compass Bancshares, Inc. 4,400 210
=* Doral Financial Corp. 8,300 348
= Hibernia Corp., Class A 5,100 148
= JP Morgan Chase & Co. 12,450 481
= Keycorp 15,400 517
= National City Corp. 14,600 569
= Peoples Bank 5,100 191
= PNC Financial Services Group 11,500 601
= State Street Corp. 4,700 212
= Suntrust Banks, Inc. 2,278 160
= U.S. Bancorp 14,600 418
= UnionBanCal Corp. 6,400 389
= Wachovia Corp. 11,800 581
-----------
6,786
BUSINESS MACHINES & SOFTWARE 2.7%
--------------------------------------------------------------------------
o= 3Com Corp. 22,700 94
o= Advanced Digital Information Corp. 5,500 49
o= Cisco Systems, Inc. 36,500 701
o= Dell Computer Corp. 20,250 710
o= EMC Corp. 22,850 294
o= Foundry Networks, Inc. 12,900 157
o= Integrated Device Technology, Inc. 15,200 180
= International Business Machines Corp. 4,500 404
= Microsoft Corp. 21,450 600
o= Siebel Systems, Inc. 24,900 237
o= Xerox Corp. 7,200 106
-----------
3,532
BUSINESS SERVICES 3.6%
--------------------------------------------------------------------------
o= Accenture Ltd. 6,650 161
= Cendant Corp. 10,300 212
o= Check Point Software Technologies Ltd. 8,300 188
o= CheckFree Corp. 8,150 253
= Deluxe Corp. 7,400 282
o= Earthlink, Inc. 9,200 95
o= eBay, Inc. 7,450 727
= First Data Corp. 4,550 188
= H&R Block, Inc. 3,700 176
o= IAC InterActiveCorp. 20,600 445
o= IDT Corp. 8,700 114
o= Jacobs Engineering Group, Inc. 5,700 232
= Manpower, Inc. 1,500 68
o= Netiq Corp. 10,000 127
o= Nortel Networks Corp. 90,450 307
= Omnicom Group, Inc. 2,000 158
o= Priority Healthcare Corp., Class B 3,700 67
= Republic Services, Inc., Class A 5,200 160
= The ServiceMaster Co. 12,300 158
o= Veritas Software Corp. 5,400 118
o= Verity, Inc. 6,300 81
o= Wireless Facilities, Inc. 13,600 100
o= Yahoo! Inc. 10,050 364
-----------
4,781
CHEMICAL 0.7%
--------------------------------------------------------------------------
= Air Products & Chemicals, Inc. 2,400 128
o= Entegris, Inc. 35,200 326
= Lubrizol Corp. 8,300 288
= The Mosaic Co. 10,800 162
-----------
904
CONSTRUCTION 2.0%
--------------------------------------------------------------------------
= Centex Corp. 3,400 177
= D.R. Horton, Inc. 8,300 249
= KB Home 4,100 337
= Lafarge North America, Inc. 3,700 181
= Masco Corp. 5,000 171
o= NVR, Inc. 600 376
= Pulte Corp. 3,800 209
= Standard Pacific Corp. 5,300 298
= The Ryland Group, Inc. 3,900 372
= The Stanley Works 5,300 236
-----------
2,606
CONSUMER DURABLES 0.5%
--------------------------------------------------------------------------
= Hillenbrand Industries, Inc. 5,400 269
o= Tempur-Pedic International, Inc. 22,300 362
-----------
631
32 See financial notes.
LAUDUS BALANCED MARKETMASTERS FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
ELECTRONICS 4.2%
--------------------------------------------------------------------------
o= Altera Corp. 13,150 299
= American Power Conversion Corp. 9,000 174
o= Applied Materials, Inc. 25,850 416
o= Arrow Electronics, Inc. 6,600 158
o= Avnet, Inc. 10,200 173
o= Broadcom Corp., Class A 15,600 422
o= Cree, Inc. 2,100 73
o= Fairchild Semiconductor International, Inc. 35,400 509
= Intel Corp. 28,850 642
= Intersil Holding Corp., Class A 10,200 166
o= Jabil Circuit, Inc. 7,750 188
= Maxim Integrated Products, Inc. 7,350 323
= National Semiconductor Corp. 8,700 145
o= Pinnacle Systems, Inc. 5,600 26
= Plantronics, Inc. 1,600 70
o= QLogic Corp. 5,300 172
= Qualcomm, Inc. 9,900 414
o= Synopsys, Inc. 7,500 122
= Texas Instruments, Inc. 16,750 410
o= Ultra Clean Holdings, Inc. 32,150 168
o= Uniphase Corp. 70,950 225
o= Vishay Intertechnology, Inc. 11,600 150
o= Zoran Corp 7,000 71
-----------
5,516
ENERGY: RAW MATERIALS 1.4%
--------------------------------------------------------------------------
= Arch Coal, Inc. 3,700 120
= Canadian Natural Resources Ltd. 5,800 243
o= Cooper Cameron Corp. 3,800 184
= Devon Energy Corp. 2,000 148
o= FMC Technologies, Inc. 2,900 88
o= Forest Oil Corp. 7,600 232
= Hewlett Packard Co. 7,600 142
= Joy Global, Inc. 3,600 121
o= Key Energy Group, Inc. 5,800 67
o= Noble Corp. 1,700 78
= Noble Energy, Inc. 3,200 185
= Valero Energy Corp. 5,400 232
o= Weatherford International Ltd. 1,400 73
-----------
1,913
FOOD & AGRICULTURE 1.9%
--------------------------------------------------------------------------
o= 7-Eleven, Inc. 2,500 53
= Agrium, Inc. 30,500 506
= Coca-Cola Co. 11,250 457
= H.J. Heinz Co. 5,100 185
= Potash Corporation of Saskatchewan, Inc. 6,200 414
= Supervalu, Inc. 20,400 602
= The Pepsi Bottling Group, Inc. 8,900 250
= Tyson Foods, Inc. 2,400 35
-----------
2,502
HEALTHCARE / DRUGS & MEDICINE 4.8%
--------------------------------------------------------------------------
= Abbott Laboratories 7,150 305
o= Accredo Heath, Inc. 5,900 136
= Allergan, Inc. 3,150 225
o= Amgen, Inc. 5,200 295
= Bausch & Lomb, Inc. 2,800 171
= Cardinal Health, Inc. 8,600 402
o= Caremark Rx, Inc. 11,000 330
o= Genzyme Corp. 5,600 294
= Guidant Corp. 5,250 350
= HCA, Inc. 5,300 195
o= Humana, Inc. 3,900 75
= Invacare Corp. 1,800 83
= Johnson & Johnson, Inc. 9,900 578
o= Laboratory Corporation of America
Holdings 5,200 238
o= Lifepoint Hospitals, Inc. 3,800 123
= Manor Care, Inc. 5,200 170
= McKesson Corp. 7,550 201
= Merck & Co., Inc. 6,700 210
= Omnicare, Inc. 8,500 235
= Pfizer, Inc. 24,600 712
o= Province Healthcare Co. 6,600 141
o= St. Jude Medical, Inc. 850 65
o= Steris Corp. 11,200 232
= Wyeth 6,600 262
o= Zimmer Holdings, Inc. 4,050 314
-----------
6,342
See financial notes. 33
LAUDUS BALANCED MARKETMASTERS FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
HOUSEHOLD PRODUCTS 0.2%
--------------------------------------------------------------------------
= Clorox Co. 4,700 257
INSURANCE 3.1%
--------------------------------------------------------------------------
= Aetna, Inc. 7,700 731
= Allstate Corp. 14,000 673
= American International Group, Inc. 4,950 300
= Everest Reinsurance Group Ltd. 1,900 151
= Fidelity National Financial, Inc. 10,037 379
= Fremont General Corp. 11,300 243
= Loews Corp. 3,600 216
= Mercury General Corp. 4,600 237
= Old Republic International Corp. 14,450 337
= PMI Group, Inc. 8,400 326
= Principal Financial Group, Inc. 4,600 174
= Radian Group, Inc. 7,600 364
-----------
4,131
MEDIA 2.2%
--------------------------------------------------------------------------
= Belo Corp., Class A 5,100 119
o= Comcast Corp., Class A 8,300 241
o= Dreamworks Animation 1,100 43
o= EchoStar Communications Corp. 11,050 349
= Gannett, Inc. 3,600 299
= McGraw Hill Cos., Inc. 5,300 457
= Nokia Corp., Class A 20,050 309
= The Walt Disney Co. 13,200 333
o= Time Warner, Inc. 21,200 353
= Tribune Co. 4,000 173
= Viacom, Inc., Class B 7,250 264
-----------
2,940
MISCELLANEOUS FINANCE 7.4%
--------------------------------------------------------------------------
= Archstone Communities Trust 4,900 164
= Astoria Financial Corp. 4,800 188
o= Berkshire Hathaway, Inc., Class B 126 353
= CIT Group, Inc. 18,800 759
=(4) Citigroup, Inc. 51,050 2,265
= Countrywide Credit Industries, Inc. 15,600 498
= Fannie Mae 2,000 140
= Federated Investors, Inc. 6,300 183
= Franklin Resources, Inc. 2,400 145
= Home Properties of New York, Inc. 5,500 226
= Independence Community Bank Corp. 11,000 414
= IndyMac Bankcorp., Inc. 8,500 274
= IPC Holdings Ltd. 14,500 587
o= Jackson Hewitt Tax Service, Inc. 1,900 40
= Legg Mason, Inc. 2,850 182
= LNR Property Corp. 3,000 188
= MBNA Corp. 8,400 215
= MDC Holdings, Inc. 4,400 338
= Merrill Lynch & Co., Inc. 5,450 294
= Provident Financial Services, Inc. 10,700 193
o= Providian Financial Corp. 12,200 190
= R & G Financial Corp., Class B 6,900 260
= The Bear Stearns Cos., Inc. 2,400 227
= The Goldman Sachs Group, Inc. 7,750 762
= Waddell & Reed Financial, Inc. 8,600 181
= Washington Federal, Inc. 12,700 324
= Webster Financial Corp. 3,600 172
-----------
9,762
NON-DURABLES & ENTERTAINMENT 1.3%
--------------------------------------------------------------------------
o= Activision, Inc. 17,850 259
o= American Greetings Corp., Class A 6,000 159
= Bob Evans Farms, Inc. 3,200 76
o= Brinker International, Inc. 4,900 158
= Darden Restaurants, Inc. 7,400 181
o= Energizer Holdings, Inc. 4,200 195
= Mattel, Inc. 8,600 151
= McDonald's Corp. 5,700 166
= Wendy's International, Inc. 4,500 150
= Yum! Brands, Inc. 4,100 178
-----------
1,673
NON-FERROUS METALS 0.2%
--------------------------------------------------------------------------
= Alcan Aluminum Ltd. 2,200 102
= Southern Peru Copper Corp. 3,300 142
-----------
244
34 See financial notes.
LAUDUS BALANCED MARKETMASTERS FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OIL: DOMESTIC 4.2%
--------------------------------------------------------------------------
= Amerada Hess Corp. 5,200 420
= ChevronTexaco Corp. 21,200 1,125
= Conoco Phillips 10,600 894
= Marathon Oil Corp. 2,700 103
o= National Oilwell, Inc. 2,900 98
o= Newfield Exploration Co. 3,900 227
= Patterson Energy, Inc. 16,100 309
= Petrokazakhstan, Inc., Class A 10,600 391
= Pioneer Natural Resouces Co. 5,000 162
o= Plains Exploration & Production Co. 2,900 72
o= Precision Drilling Corp. 4,200 259
o= Stone Energy Corp. 3,000 123
= Sunoco, Inc. 6,400 476
= Teekay Shipping Corp. 9,800 453
o= Tesoro Petroleum Corp. 10,100 306
= Unocal Corp. 2,100 88
o= Varco International, Inc. 2,500 69
-----------
5,575
OIL: INTERNATIONAL 0.6%
--------------------------------------------------------------------------
= Exxon Mobil Corp. 16,200 797
OPTICAL & PHOTO 0.3%
--------------------------------------------------------------------------
= Eastman Kodak Co. 2,500 76
o= Ingram Micro, Inc., Class A 18,900 326
-----------
402
PAPER & FOREST PRODUCTS 0.4%
--------------------------------------------------------------------------
= Louisiana-Pacific Corp. 6,700 164
= Rayonier, Inc. 5,575 264
= Temple-Inland, Inc. 1,600 95
-----------
523
PRODUCER GOODS & MANUFACTURING 1.6%
--------------------------------------------------------------------------
= Albany International Corp. Class A 2,900 87
= Briggs & Stratton Corp. 2,300 165
= Dover Corp. 2,400 94
= Emerson Electric Co. 4,950 317
= Federal Signal Corp. 4,700 78
= General Electric Co. 21,650 739
= Grainger, Inc. 4,400 258
= HNI Corp. 2,900 117
= Honeywell International, Inc. 4,600 155
= Snap-On Tools Corp. 2,400 71
o= Terex Corp. 2,400 91
-----------
2,172
RAILROAD & SHIPPING 0.2%
--------------------------------------------------------------------------
= Burlington Nothern Santa Fe Corp. 3,000 126
o= Kansas City Southern Industries, Inc. 8,400 142
-----------
268
REAL PROPERTY 0.8%
--------------------------------------------------------------------------
= Brascan Corp. 9,900 353
= Plum Creek Timber Co., Inc. 3,300 120
= Prentiss Properties Trust 4,900 176
= The Macerich Co. 4,100 245
= Weingarten Realty Investors 3,800 138
-----------
1,032
RETAIL 2.5%
--------------------------------------------------------------------------
o= Advance Auto Parts, Inc. 3,100 121
o= American Eagle Outfitters, Inc. 5,700 233
o= Ann Taylor Stores Corp. 3,600 81
o= Big Lots, Inc. 13,200 164
o= BJ's Wholesale Club, Inc. 8,200 238
= Circuit City Stores, Inc. 10,800 175
= Claire's Stores, Inc. 7,800 203
= CVS Corp. 4,400 191
= Home Depot, Inc. 7,000 288
o= Kroger Co. 21,300 322
= Limited Brands, Inc. 12,600 312
= Radio Shack Corp. 4,300 129
= Talbots, Inc. 6,400 169
o= Toys `R' Us, Inc. 6,300 113
= Wal-Mart Stores, Inc. 9,350 504
-----------
3,243
STEEL 0.7%
--------------------------------------------------------------------------
o= International Steel Group, Inc. 3,200 118
= Nucor Corp. 9,400 397
= Steel Dynamics, Inc. 7,800 259
= Worthington Industries, Inc. 8,000 159
-----------
933
See financial notes. 35
LAUDUS BALANCED MARKETMASTERS FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TELEPHONE 2.2%
--------------------------------------------------------------------------
= Alltel Corp. 4,300 236
= BellSouth Corp. 26,100 696
= Century Telephone Enterprises, Inc. 5,100 164
o= Liberty Media Corp., Class A 17,300 154
= SBC Communications, Inc. 15,600 394
= Telephone & Data Systems, Inc. 4,500 337
= Verizon Communications, Inc. 22,400 876
-----------
2,857
TOBACCO 0.4%
--------------------------------------------------------------------------
= Altria Group, Inc. 3,100 150
= Reynolds American, Inc. 6,400 441
-----------
591
TRAVEL & RECREATION 0.7%
--------------------------------------------------------------------------
=* Fairmont Hotels & Resorts, Inc. 5,700 162
= Harrah's Entertainment, Inc. 6,300 369
o= MGM Mirage 7,800 419
-----------
950
TRUCKING & FREIGHT 1.2%
--------------------------------------------------------------------------
o= Laidlaw International, Inc. 11,600 193
= Paccar, Inc. 6,800 471
= Ryder Systems, Inc. 8,800 441
o= Swift Transportation Co., Inc. 8,500 161
= U.S. Freightways Corp. 5,200 186
= Werner Enterprises, Inc. 7,300 155
-----------
1,607
UTILITIES: ELECTRIC & GAS 2.1%
--------------------------------------------------------------------------
= Alliant Energy Corp. 6,000 158
= Constellation Energy Group, Inc. 9,700 394
= Edison International 17,300 528
= Oneok, Inc. 11,100 298
= Potomac Electric Power Co. 17,800 367
= Texas Genco Holdings, Inc. 5,300 248
= TXU Corp. 10,800 661
= Xcel Energy, Inc. 8,800 150
-----------
2,804
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
U.S. GOVERNMENT SECURITIES 9.1% of net assets
U.S. Treasury Bond
= 11.25%, 02/15/15 150 240
= 9.13%, 05/15/18 50 74
U.S. Treasury Inflation-Protected
Security
=(1) 3.63%, 01/15/08 2,900 3,753
= 0.88%, 04/15/10 600 599
= 2.38%, 01/15/25 100 105
U.S. Treasury Note
=(9) 2.00%, 11/30/04 1,500 1,500
= 1.75%, 12/31/04 500 500
=(5) 1.63%, 04/30/05 2,000 1,996
2.50%, 09/30/06 600 600
=~(8) 4.88%, 02/15/12 1,800 1,930
= 4.00%, 02/15/14 550 550
= U.S. Treasury Stripped Bond
0.00%, 11/15/16 300 173
-----------
12,020
FOREIGN GOVERNMENT SECURITIES 4.1% of net assets
Bundes Republic of Deutschland
=~ Series 03
4.50%, 01/04/13 1,000 1,342
=~ Series 97
6.50%, 07/04/27 300 488
=~(3) Series 99
3.75%, 01/04/09 1,900 2,490
=~ UK Treasury Gilt
5.00%, 09/07/14 600 1,123
-----------
5,443
CORPORATE BONDS 3.2% of net assets
FIXED-RATE OBLIGATIONS 2.0%
--------------------------------------------------------------------------
= AT&T Corp.
8.50%, 11/15/31 90 104
= Centerpoint Energy
Series B
8.13%, 07/15/05 100 104
= DaimlerChrysler NA Holding
7.40%, 01/20/05 400 404
El Paso Corp.
= 7.80%, 08/01/31 100 92
= 7.75%, 01/15/32 150 139
36 See financial notes.
LAUDUS BALANCED MARKETMASTERS FUND
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
= Federal Republic of Brazil
Series C
8.00%, 04/15/14 334 333
= Ford Motor Co.
8.90%, 01/15/32 500 561
= PP&L Capital Funding
Series C
7.75%, 04/15/05 100 102
= Republic of Panama
9.38%, 01/16/23 250 272
= SBC Communications, Inc., 144A
4.21%, 06/01/21 400 404
= United Mexican States
5.88%, 01/15/14 75 77
-----------
2,592
VARIABLE-RATE OBLIGATIONS 1.2%
--------------------------------------------------------------------------
= Alcan, Inc., 144A
1.43%, 12/08/04 200 200
= Entergy Gulf States, 144A
2.01%, 12/18/04 200 201
Federal Republic of Brazil
= 2.13%, 04/15/05 265 258
= Series EI
2.06%, 04/15/05 48 48
= General Motors Acceptance Corp.
3.16%, 11/19/04 400 403
= HSBC Bank USA
1.95%, 12/21/04 250 250
= PG&E Corp.
2.30%, 01/03/05 137 137
= TXU Energy Co, L.L.C. 144A
2.37%, 01/14/05 100 100
-----------
1,597
MUNICIPAL BONDS 1.3% of net assets
FIXED-RATE OBLIGATIONS 1.3%
--------------------------------------------------------------------------
= Golden State, California
Securitization Corp.
Revenue Bond, Series 2003-A-1
6.25%, 06/01/33 250 239
=+ Massachusetts State Water
Resource Authority
General Revenue Bond,
Series 2002J
5.00%, 08/01/32 250 256
= Tobacco Settlement Financing
Corp. of Rhode Island
Revenue Bond, Series 2002A
6.25%, 06/01/42 500 449
=+ Triborough, New York Bridge &
Tunnel Authority
Revenue Bond, Series 2002B
5.00%, 11/15/32 750 768
-----------
1,712
AGENCY MORTGAGE-BACKED SECURITIES 5.7% of net assets
COLLATERALIZED MORTGAGE OBLIGATIONS 0.2%
--------------------------------------------------------------------------
= Fannie Mae
Series 2003-3 Class PA
4.50%, 08/25/09 116 117
= Freddie Mac
Series 2535 Class DT
5.00%, 09/15/16 161 165
-----------
282
U.S. GOVERNMENT AGENCY MORTGAGES 5.5%
--------------------------------------------------------------------------
Fannie Mae
=~(7) 4.50%, 11/15/34 2,000 1,942
=~(6) 5.00%, 11/15/34 2,000 1,993
=~(2) 5.50%, 11/15/34 2,500 2,546
= ARM Pool# 606116
4.75%, 09/01/31 36 37
= Pool# 535846
6.00%, 04/01/16 48 50
= Pool# 555454
6.00%, 03/01/18 34 36
= Pool# 732153
4.50%, 07/01/33 166 162
= Pool# 733910
4.50%, 08/01/33 214 208
= Freddie Mac
Pool# C90580
6.00%, 09/01/22 294 306
-----------
7,280
NON-AGENCY MORTGAGE-BACKED SECURITIES 1.3% of net assets
FIXED-RATE OBLIGATIONS 0.2%
--------------------------------------------------------------------------
= Bank of America Mortgage Securities
Series 2004-2 Class 5A1
6.50%, 10/25/19 215 218
See financial notes. 37
LAUDUS BALANCED MARKETMASTERS FUND
PORTFOLIO HOLDINGS continued
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
= Residential Funding Mortgage
Security I
Series-S9 Class A1
6.50%, 03/25/32 101 103
-----------
321
VARIABLE-RATE OBLIGATIONS 1.1%
--------------------------------------------------------------------------
= Argent Securities, Inc.
Series 2003-W3 Class AF1
1.26%, 11/25/04 19 19
Bear Stearns Adjustable Rate
Mortgage Trust
= Series 2002-11 Class 1A1
5.68%, 11/01/04 109 109
= Series 2002-5 Class 6A
6.05%, 11/01/04 45 45
= Series 2002-9 Class 2A
5.30%, 11/01/04 86 86
= Quest Trust, 144A
Series 2004-X2 Class A1
2.01%, 11/26/04 161 161
= Structured Asset Securities Corp.
Series 2002-13 Class 2A1
1.60%, 11/26/04 211 212
= Washington Mutual
Series 2003-R1 Class A1
2.11%, 11/25/04 767 766
-----------
1,398
SHORT-TERM INVESTMENTS 13.2% of net assets
U.S. GOVERNMENT SECURITIES 1.2%
--------------------------------------------------------------------------
= Fannie Mae
1.70%, 11/01/04 400 400
U.S. Treasury Bills
= 1.58%, 12/02/04 40 40
= 1.61%, 12/02/04 80 80
= 1.63%, 12/16/04 360 359
= 1.63%, 12/16/04 750 749
= 1.67%, 12/16/04 10 10
-----------
1,638
COMMERCIAL PAPER & OTHER CORPORATE OBLIGATIONS 12.0%
--------------------------------------------------------------------------
= AMRO N.A. Finance, Inc.
1.93%, 01/24/05 400 398
ANZ (Delaware), Inc.
= 1.64%, 11/18/04 1,100 1,099
= 1.85%, 12/17/04 100 100
Barclays U.S. Funding Corp.
= 1.80%, 12/08/04 200 200
= 2.06%, 02/22/05 200 199
CBA (Delaware) Finance, Inc.
= 1.65%, 11/19/04 800 799
= 1.85%, 12/20/04 100 100
= CDC Commercial Paper Corp.,
Section 4(2) / 144A
2.04%, 02/22/05 600 596
Danske Corp.
= 1.65%, 11/19/04 300 300
= 1.85%, 12/21/04 300 299
= 2.04%, 02/14/05 600 596
Dexia Delaware, L.L.C.
= 1.81%, 12/13/04 400 399
= 1.83%, 12/20/04 100 100
= 2.01%, 01/21/05 400 398
= 2.06%, 01/26/05 300 299
DnB NOR Bank ASA
= 1.65%, 11/19/04 400 400
= 1.81%, 12/20/04 200 199
= 1.84%, 12/23/04 600 598
Du Pont (E.I.) de Nemours & Co.
= 1.88%, 12/20/04 200 199
= 1.89%, 12/21/04 300 299
= Euro Investment Bank
1.79%, 12/13/04 300 299
= Foreningssparbanken AB
(Swedbank)
1.79%, 12/07/04 1,000 998
General Electric Capital Corp.
= 1.59%, 11/05/04 900 900
= 1.60%, 11/09/04 200 200
= General Motors Acceptance Corp.
2.50%, 04/05/05 200 198
HBOs Treasury Services PLC
= 1.66%, 11/18/04 100 100
= 1.73%, 12/02/04 400 399
= 2.07%, 02/22/05 300 298
ING (U.S.) Funding, L.L.C.
= 1.59%, 11/08/04 100 100
= 1.81%, 11/12/04 200 200
= 1.79%, 12/10/04 800 798
= 1.84%, 12/21/04 100 100
Nordea North America, Inc.
= 1.87%, 12/21/04 600 598
= 1.91%, 01/18/05 600 597
Svenska Handelsbanken, Inc.
= 1.61%, 11/10/04 100 100
= 1.74%, 12/03/04 200 200
38 See financial notes.
LAUDUS BALANCED MARKETMASTERS FUND
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
UBS Finance (Delaware), L.L.C.
= 1.63%, 11/16/04 100 100
= 1.74%, 12/03/04 1,000 998
= 1.77%, 12/07/04 100 100
Unicredit Delaware, Inc.
= 1.62%, 11/10/04 200 200
= 1.99%, 01/31/05 800 796
-----------
15,856
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OTHER INVESTMENTS 6.8% of net assets
OTHER INVESTMENT COMPANIES 6.8%
--------------------------------------------------------------------------
= Provident Institutional Funds--
TempCash 2,399,339 2,399
= Provident Institutional Funds--
TempFund 6,595,545 6,596
-----------
8,995
NUMBER OF VALUE
SECURITY DESCRIPTION CONTRACTS ($ x 1,000)
OPTIONS 0.0% of net assets
PUT OPTIONS 0.0%
-------------------------------------------------------------------------
3 Month Euro Euribor Futures,
Strike Price 95.875,
Expires 12/13/04 5 --*
3 Month Euro Euribor Futures,
Strike Price 96,
Expires 12/13/04 11 --*
90 Day LIBOR Futures,
Strike Price 91,
Expires 03/16/05 3 --*
90 Day LIBOR Futures,
Strike Price 91.75,
Expires 12/15/04 5 --*
90 Day Euro Dollar Futures,
Strike Price 93.75,
Expires 09/19/05 37 --*
Euro-Bobl, Strike Price
105.5, Expires 11/22/04 24 --*
U.S. Treasury Note Futures,
Strike Price 108,
Expires 11/26/04 44 1
-----------
1
END OF INVESTMENTS.
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT SALES 6.5% of net assets
U.S. GOVERNMENT SECURITIES 6.5%
--------------------------------------------------------------------------
U.S. Treasury Note
~ 3.63%, 3,200 3,144
~ 3.88%, 2,800 2,802
~ 4.00%, 1,100 1,113
~ 4.38%, 500 520
~ 4.88%, 900 965
-----------
8,544
NUMBER OF VALUE
SECURITY DESCRIPTION CONTRACTS ($ x 1,000)
OPTIONS WRITTEN 0.1% of net assets
CALL OPTIONS 0.1%
--------------------------------------------------------------------------
3 Month LIBOR, Strike Price
4.00, Expires 10/31/05 70 9
3 Month LIBOR, Strike Price
4.00, Expires 11/02/04 20 --*
3 Month LIBOR, Strike Price
5.00, Expires 01/07/05 370 190
U.S. Treasury Note Futures,
Strike Price 115,
Expires 11/26/04 45 10
-----------
209
PUT OPTIONS 0.0%
--------------------------------------------------------------------------
3 Month LIBOR, Strike Price
5.25%, Expires 11/02/04 10 --*
3 Month LIBOR, Strike Price
7.00, Expires 01/07/05 370 --*
3 Month LIBOR, Strike Price
7.00, Expires 10/31/05 70 1
U.S. Treasury Note Futures, Strike
Price 109, Expires 11/26/04 27 1
-----------
2
END OF SHORT SALES AND OPTIONS WRITTEN.
See financial notes. 39
LAUDUS BALANCED MARKETMASTERS FUND
In addition to the above, the fund held the following at 10/31/04. All numbers x
1,000 except number of futures contracts.
SWAP AGREEMENTS
NOTIONAL UNREALIZED
INTEREST RATE SWAPS AMOUNT GAINS/(LOSSES)
BRITISH POUNDS
Receive variable rate payments of
6 month LIBOR, Pay fixed rate
payments of 5.00%, expires 06/15/08,
Barclays Bank 2,800 54
Receive variable rate payments of
6 month LIBOR, Pay fixed rate
payments of 5.00%, expires 06/18/34,
Barclays Bank 200 (3)
Receive variable rate payments of
6 month LIBOR, Pay fixed rate
payments of 5.00%, expires 03/15/32,
Barclays Bank 400 (2)
EUROPEAN EURO
Receive variable rate payments of
6 month LIBOR, Pay fixed rate
payments of 5.00%, expires 12/15/14,
UBS AG 2,300 (167)
Receive variable rate payments of
6 month LIBOR, Pay fixed rate
payments of 4.00%, expires 03/15/07,
Barclays Bank 100 2
Receive variable rate payments of
6 month LIBOR, Pay fixed rate
payments of 4.00%, expires 12/21/07,
Goldman Sachs 600 5
Receive variable rate payments of
6 month LIBOR, Pay fixed rate
payments of 4.00%, expires 12/21/07,
Barclays Bank 500 5
Receive variable rate payments of
6 month LIBOR, Pay fixed rate
payments of 6.00%, expires 06/18/34,
JP Morgan Chase 300 10
Receive variable rate payments of
6 month LIBOR, Pay fixed rate
payments of 4.00%, expires 03/15/07,
JP Morgan Chase 400 4
Receive variable rate payments of
6 month Euro LIBOR, Pay fixed rate
payments of 6.00%, expires 03/15/32,
JP Morgan Chase 500 6
Receive variable rate payments of
6 month LIBOR, Pay fixed rate
payments of 4.00%, expires 06/17/10,
JP Morgan Chase 300 6
40 See financial notes.
LAUDUS BALANCED MARKETMASTERS FUND
All numbers x 1,000 except number of futures contracts.
SWAP AGREEMENTS (CONTINUED)
NOTIONAL UNREALIZED
AMOUNT GAINS/(LOSSES)
Receive variable rate payments of
6 month LIBOR, Pay fixed rate
payments of 4.00%, expires 06/17/10,
UBS AG 400 7
U.S. DOLLARS
Receive variable rate payments of
3 month LIBOR, Pay fixed rate
payments of 5.00%, expires 12/15/14,
Goldman Sachs 300 24
Receive variable rate payments of
3 month LIBOR, Pay fixed rate
payments of 4.00%, expires 12/15/06,
Barclays Bank 2,500 12
Receive variable rate payments of
3 month LIBOR, Pay fixed rate
payments of 4.00%, expires 12/15/09,
UBS AG 5,300 155
Receive variable rate payments of
3 month LIBOR, Pay fixed rate
payments of 4.00%, expires 12/15/09,
JP Morgan Chase 400 11
Receive variable rate payments of
3 month LIBOR, Pay fixed rate
payments of 6.00 expires 12/15/24,
UBS AG 200 (2)
CREDIT DEFAULT SWAPS
U.S. DOLLARS
Eli Lilly & Co. Rate 0.16%,
expires 12/20/08, Barclays Bank PLC 100 --*
Johnson & Johnson, Inc. Rate 0.11%,
expires 12/20/08, Lehman Brothers, Inc. 100 --*
Eaton Corp. Rate 0.28%,
expires 12/20/08, Citibank N.A. 100 --*
Whirlpool Corp. Rate 0.29%,
expires 12/20/08, Lehman Brothers, Inc. 100 1
Home Depot, Inc. Rate 0.12%,
expires 12/20/08, Lehman Brothers, Inc. 100 --*
Fedex Corp. Rate 0.29%,
expires 12/20/08, Citibank N.A. 100 --*
Allstate Corp. Rate 0.26%,
expires 12/20/08, Morgan Stanley 100 --*
Wal-mart Stores, Inc. Rate 0.14%,
expires 12/20/08, Citibank N.A. 200 --*
Ingersoll-Rand Co. Ltd. Rate 0.32%,
expires 12/20/08, Merrill Lynch 100 --*
See financial notes. 41
LAUDUS BALANCED MARKETMASTERS FUND
All numbers x 1,000 except number of futures contracts.
SWAP AGREEMENTS (CONTINUED)
NOTIONAL UNREALIZED
AMOUNT GAINS/(LOSSES)
Emerson Electric Co. Rate 0.21%,
expires 12/20/08, Morgan Stanley 100 --*
Autozone, Inc. Rate 0.35%,
expires 12/20/08, UBS, AG 200 4
Radioshack Corp. Rate 0.35%,
expires 12/20/08, Lehman Brothers, Inc. 100 --*
Masco Corp. Rate 0.30%,
expires 12/20/08, Lehman Brothers, Inc. 100 --*
People's Republic of China Rate 0.40%,
expires 06/20/09, Lehman Brothers, Inc. 200 (1)
-------------
131
FUTURES CONTRACTS
NUMBER OF CONTRACT UNREALIZED
CONTRACTS VALUE GAINS/(LOSSES)
S&P 500 Index, Long
expires 12/16/04 22 6,217 20
90 Day Eurodollar, Long
expires 03/14/05 20 4,874 (7)
90 Day Eurodollar, Long
expires 06/13/05 10 2,432 3
90 Day Eurodollar, Long
expires 09/19/05 2 486 1
90 Day Eurodollar, Long
expires 12/19/05 5 1,211 2
10 Year, Long
U.S. Treasury Note,
expires 12/20/04 127 14,422 192
10 Year, Long
U.S. Treasury Note,
expires 03/21/05 30 3,389 3
5 Year, Short
U.S. Treasury Note,
expires 12/20/04 66 7,351 (35)
5 Year, Long
Euro-Bobl,
expires 12/08/04 24 3,429 32
90 Day LIBOR, Long
expires 12/29/04 5 1,089 7
UK Gilt, Long
expires 03/16/05 1 199 3
-------------
221
42 See financial notes.
LAUDUS BALANCED MARKETMASTERS FUND
All numbers x 1,000 except number of futures contracts.
FORWARD FOREIGN CURRENCY CONTRACTS
AMOUNT OF AMOUNT OF
CURRENCY TO CURRENCY TO CURRENCY TO CURRENCY TO UNREALIZED
EXPIRATION DATE BE RECEIVED BE RECEIVED BE DELIVERED BE DELIVERED GAINS/(LOSSES)
11/23/04 Brazilian Real 27 U.S. Dollars 9 1
12/17/04 Brazilian Real 27 U.S. Dollars 9 --*
01/24/05 Brazilian Real 27 U.S. Dollars 9 --*
11/04/04 Chilean Pesos 1,870 U.S. Dollars 3 --*
11/18/04 Chilean Pesos 10,964 U.S. Dollars 17 1
12/17/04 Chilean Pesos 5,454 U.S. Dollars 9 --*
02/16/05 Chinese Renminbi 6,077 U.S. Dollars 740 1
12/09/04 European Euro 74 U.S. Dollars 93 1
11/24/04 Hong Kong Dollars 70 U.S. Dollars 9 --*
12/20/04 Hong Kong Dollars 70 U.S. Dollars 9 --*
01/26/05 Hong Kong Dollars 125 U.S. Dollars 16 --*
12/21/04 Indian Rupee 1,357 U.S. Dollars 30 --*
01/27/05 Japanese Yen 87,892 U.S. Dollars 822 11
11/24/04 South Korean Won 10,481 U.S. Dollars 9 1
12/20/04 South Korean Won 10,620 U.S. Dollars 9 --*
01/28/05 South Korean Won 18,576 U.S. Dollars 16 --*
11/29/04 Mexican Pesos 177 U.S. Dollars 15 --*
12/21/04 Mexican Pesos 101 U.S. Dollars 9 --*
11/23/04 Peruvian New Sol 35 U.S. Dollars 10 --*
12/17/04 Peruvian New Sol 63 U.S. Dollars 19 --*
11/22/04 Polish Zloty 32 U.S. Dollars 9 1
12/21/04 Polish Zloty 32 U.S. Dollars 9 1
11/19/04 Russian Ruble 257 U.S. Dollars 9 --*
12/22/04 Russian Ruble 274 U.S. Dollars 9 --*
11/24/04 Singapore Dollars 15 U.S. Dollars 9 --*
12/20/04 Singapore Dollars 15 U.S. Dollars 9 --*
01/26/05 Singapore Dollars 27 U.S. Dollars 16 --*
11/26/04 Slovakian Koruna 329 U.S. Dollars 10 1
12/22/04 Slovakian Koruna 602 U.S. Dollars 18 1
11/24/04 Taiwanese Dollars 298 U.S. Dollars 9 --*
12/20/04 Taiwanese Dollars 299 U.S. Dollars 9 --*
-------------
20
* Amounts stated as "--" are less than $1.
See financial notes. 43
LAUDUS BALANCED MARKETMASTERS FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value $141,134 a
Foreign currency 139 b
Receivables:
Fund shares sold 141
Dividends 100
Interest 347
Due from brokers for futures 62
Unrealized gains on forward foreign currency contracts 20
Investments sold 3,878
Investments sold short 11,001
Prepaid expenses + 30
------------
TOTAL ASSETS 156,852
LIABILITIES
- --------------------------------------------------------------------------------
Securities sold short, at value 8,544 c
Options written, at value 211 d
Swap agreements, at fair value 62 e
Payables:
Fund shares redeemed 102
Investments bought 13,202
Covered short sales 2,454
Interest on short sales 88
Investment adviser and administrator fees 7
Transfer agency and shareholder service fees 3
Withholding taxes on foreign dividends 1
Accrued expenses + 47
------------
TOTAL LIABILITIES 24,721
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 156,852
TOTAL LIABILITIES - 24,721
------------
NET ASSETS $132,131
NET ASSETS BY SOURCE
Capital received from investors 131,865
Net investment income not yet distributed 512
Net realized capital losses (10,614) f
Net unrealized capital gains 10,368 f
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $130,491 10,985 $11.88
Select Shares $1,640 138 $11.89
All numbers x 1,000 except number of written option contracts.
a The fund paid $130,949 for these securities.
Includes certain restricted but deemed liquid 144A and section 4(2) securities
worth $1,662 or 1.3% of the fund's total net assets.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $91,085
Sales/maturities $85,178
The fund's long-term government security transactions were:
Purchases $82,975
Sales/maturities $83,236
b The fund paid $123 for this currency.
c The proceeds for securities sold short is $8,460
d OPTIONS NUMBER PREMIUMS
WRITTEN OF CONTRACTS RECEIVED
---------------- ------------ --------
Beginning of
period 940 $182
Options written 397 100
Options closed (21) (10)
Options expired (334) (53)
Options
exercised + -- --
-------------------------
End of period 982 $219
e The fund received $193 to enter into these swap agreements.
f These derive from investments, short sales, options, foreign currency
transactions, futures and swap agreements.
FEDERAL TAX DATA
- -------------------------------------------------
PORTFOLIO COST $131,807
NET UNREALIZED GAINS AND LOSSES:
Gains $11,769
Losses + (2,442)
------------
$9,327
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $516
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $8,576
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount:
2009 $405
2010 + 9,116
------------
$9,521
RECLASSIFICATIONS:
Net investment not yet
distributed ($46)
RECLASSIFIED AS:
Net realized capital gains $46
44 See financial notes.
LAUDUS BALANCED MARKETMASTERS FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $1,298 a
Interest + 940
----------
TOTAL INVESTMENT INCOME 2,238
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized gains on investments 6,766
Net realized losses on short sales (571)
Net realized gains on foreign currency transactions 52
Net realized gains on option contracts 56
Net realized gains on futures contracts 1,464
Net realized gains on swap agreements + 275
----------
NET REALIZED GAINS 8,042
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 747
Net unrealized losses on short sales (11)
Net unrealized losses on foreign currency transactions (119)
Net unrealized losses on option contracts (16)
Net unrealized gains on futures contracts 60
Net unrealized gains on swap agreements + 121
----------
NET UNREALIZED GAINS 782
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 1,072 b
Transfer agent and shareholder service fees:
Investor shares 314 c
Select shares 1 c
Trustees' fees 5 d
Custodian and portfolio accounting fees 174
Professional fees 44
Registration fees 20
Shareholder reports 24
Other expenses + 5
----------
Total expenses 1,659
Expense reduction - 273 e
----------
NET EXPENSES 1,386
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 2,238
NET EXPENSES - 1,386
----------
NET INVESTMENT INCOME 852
NET REALIZED GAINS 8,042 f
NET UNREALIZED GAINS + 782 f
----------
INCREASE IN NET ASSETS FROM OPERATIONS $9,676
Unless stated, all numbers x 1,000.
a Net of $3 foreign withholding tax.
b Calculated as 0.85% of average daily net assets. These fees are paid to
Charles Schwab Investment Management, Inc. (CSIM)
c Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% and
0.15% of the assets of each respective share class. These fees are paid to
Charles Schwab & Co., Inc. (Schwab).
d For the fund's independent trustees only.
e This reduction was made by the investment advisor (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 28,
2005 for Investor shares and February 28, 2006 for Select shares, as follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
------------------------------------------
Investor Shares 1.10
Select Shares 0.95
This limit excludes interest, taxes and certain non-routine expenses.
f These add up to a net gain on investments of $8,824.
See financial notes. 45
LAUDUS BALANCED MARKETMASTERS FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income $852 $1,126
Net realized gains 8,042 917
Net unrealized gains + 782 16,449
-----------------------------------
INCREASE IN NET ASSETS
FROM OPERATIONS 9,676 18,492
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME
Investor Shares $1,360 $1,516
Select Shares + -- --
-----------------------------------
TOTAL DIVIDENDS FROM NET INVESTMENT INCOME $1,360 $1,516 a, b
TRANSACTIONS IN FUND SHARES c
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
SHARES SOLD
Investor Shares 3,519 $40,718 1,150 $11,825
Select Shares + 169 1,957 -- --
-----------------------------------------------
TOTAL SHARES SOLD 3,688 $42,675 1,150 $11,825
SHARES REINVESTED
Investor Shares 112 $1,274 151 $1,431
Select Shares + -- -- -- --
-----------------------------------------------
TOTAL SHARES REINVESTED 112 $1,274 151 $1,431
SHARES REDEEMED
Investor Shares (2,489) ($28,746) (1,851) ($18,430)
Select Shares + (31) (361) -- --
-----------------------------------------------
TOTAL SHARES REDEEMED (2,520) ($29,107) (1,851) ($18,430)
NET TRANSACTIONS IN
FUND SHARES 1,280 $14,842 (550) ($5,174)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 9,843 $108,973 10,393 $97,171
Total increase or decrease + 1,280 23,158 (550) 11,802 d
-----------------------------------------------
END OF PERIOD 11,123 $132,131 9,843 $108,973 e
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 85% of the fund's dividends for this report period qualify
for the dividends-received deductions.
The fund designates $1,148 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h)(ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for use in preparing
their 2004 income tax return.
b The tax-basis components of distributions are:
CURRENT YEAR
Ordinary income $1,360
Long-term capital gains $--
PRIOR YEAR
Ordinary income $1,516
Long-term capital gains $--
c The fund started offering Select Shares on June 3, 2004.
d Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
e Includes distributable net investment income in the amount of $512 and $1,066
at the end of the current period and prior period, respectively.
46 See financial notes.
LAUDUS SMALL-CAP MARKETMASTERS FUND(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
INVESTOR SHARES 10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 11.08 7.18 8.73 12.27 11.04
---------------------------------------------------------------------
Income or loss from investment operations:
Net investment income or loss (0.14) (0.09) 0.04 0.41 0.39
Net realized and unrealized gains or losses 1.24 3.99 (1.54) (2.68) 1.30
---------------------------------------------------------------------
Total income or loss from investment operations 1.10 3.90 (1.50) (2.27) 1.69
Less distributions:
Dividends from net investment income -- (0.00) 1 (0.03) (0.55) (0.46)
Distributions from net realized gains -- -- (0.02) (0.72) --
---------------------------------------------------------------------
Total distributions -- -- (0.05) (1.27) (0.46)
---------------------------------------------------------------------
Net asset value at end of period 12.18 11.08 7.18 8.73 12.27
---------------------------------------------------------------------
Total return (%) 9.93 54.32 (17.34) (19.99) 15.17
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.55 1.55 0.93 2,3 0.50 3 0.51 3,4
Gross operating expenses 1.77 1.80 1.31 3 0.91 3 0.92 3
Net investment income or loss (1.08) (0.98) 0.06 4.17 2.86
Portfolio turnover rate 140 94 324 172 128
Net assets, end of period ($ x 1,000,000) 129 115 81 111 162
1 Per-share amount was less than $0.01.
2 The ratio of net operating expenses would have been 0.84% if certain
non-routine expenses (proxy fees) had not been included.
3 Prior to the fund's change in structure on June 3, 2002, the expenses incurred
by underlying funds in which the fund invested were not included in this
ratio.
4 The ratio of net operating expenses would have been 0.50% if certain
non-routine expenses (proxy fees) had not been included.
See financial notes. 47
LAUDUS SMALL-CAP MARKETMASTERS FUND
6/9/04 1-
SELECT SHARES 10/31/04
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 12.11
---------------------------------------------------------------
Income or loss from investment operations:
Net investment loss (0.03)
Net realized and unrealized gains 0.11
---------------------------------------------------------------
Total income from investment operations 0.08
---------------------------------------------------------------
Net asset value at end of period 12.19
---------------------------------------------------------------
Total return (%) 0.66 2
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Net operating expenses 1.37 3
Gross operating expenses 1.79 3
Net investment loss (0.91) 3
Portfolio turnover rate 140 2
Net assets, end of period ($ x 1,000,000) 0.32
1 Commencement of operations.
2 Not annualized.
3 Annualized.
48 See financial notes.
LAUDUS SMALL-CAP MARKETMASTERS FUND
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for
the first and third quarters of each fiscal year on Form N-Q. The fund's Form
N-Q will be available on the SEC'S website at http://www.sec.gov and may be
reviewed and copied at the SEC'S Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q will
be available by visiting Schwab's web-site at www.schwab.com/schwabfunds.
We use the symbol below to designate certain characteristics of the
securities. With the top ten holdings, the number in the circle is the
security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
98.1% COMMON STOCK 115,415 127,111
2.1% OTHER INVESTMENTS 2,744 2,744
- --------------------------------------------------------------------------------
100.2% TOTAL INVESTMENTS 118,159 129,855
(0.2%) OTHER ASSETS AND
LIABILITIES, NET (316)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 129,539
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 98.1% of net assets
AIR TRANSPORTATION 0.3%
--------------------------------------------------------------------------
Southwest Airlines, Inc. 23,500 371
APPAREL 2.1%
--------------------------------------------------------------------------
o Aeropostale, Inc. 17,450 551
o Deckers Outdoor Corp. 11,000 416
Jones Apparel Group, Inc. 12,385 437
o Jos. A. Bank Clothiers, Inc. 35,275 1,120
OshKosh B'Gosh, Inc. 13,400 243
-----------
2,767
BANKS 1.1%
--------------------------------------------------------------------------
BankNorth Group, Inc. 11,300 398
Mellon Financial Corp. 10,200 295
North Fork Bancorp, Inc. 11,300 498
Zions Bancorp. 3,500 232
-----------
1,423
BUSINESS MACHINES & SOFTWARE 2.9%
--------------------------------------------------------------------------
o 3Com Corp. 133,360 552
o Ascential Software Corp. 57,700 813
o Computer Horizons Corp. 111,600 418
o F5 Networks, Inc. 14,700 587
o Maxtor Corp. 4,650 14
o Seachange International, Inc. 29,600 504
o Unisys Corp. 29,900 318
o Viisage Technology, Inc. 75,690 547
-----------
3,753
BUSINESS SERVICES 17.7%
--------------------------------------------------------------------------
o Agile Software Corp. 88,100 752
o(10) Akamai Technologies, Inc. 98,450 1,364
Analogic Corp. 16,620 707
o Aspen Technology, Inc. 128,800 774
o Ciber, Inc. 122,810 1,110
o Connetics Corp. 17,000 457
o Doubleclick, Inc. 112,620 716
o Eclipsys Corp. 39,640 673
o Indus International, Inc. 70,100 119
o InFocus Corp. 57,500 370
o Informatica Corp. 129,330 1,010
o InFoSpace, Inc. 12,500 656
o Internet Security Systems, Inc. 37,430 815
o Interpublic Group of Cos., Inc. 33,090 406
o Ivillage, Inc. 73,300 376
o Keane, Inc. 71,200 1,126
o Lionbridge Technologies, Inc. 25,000 117
o ManTech International Corp. Class A 49,060 1,061
o Maximus, Inc. 15,120 411
o McAfee, Inc. 25,900 627
o Navigant Consulting, Inc. 33,200 826
o Performance Food Group Co. 28,390 660
See financial notes. 49
LAUDUS SMALL-CAP MARKETMASTERS FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Polycom, Inc. 39,800 822
o Priority Healthcare Corp., Class B 37,000 668
o Resources Connection, Inc. 24,250 1,018
Reynolds & Reynolds Co., Class A
12,100 298
o RSA Security, Inc. 47,000 962
o Tetra Technologies, Inc. 24,650 738
o Tibco Software, Inc. 67,940 660
o Tier Technologies, Inc. 67,100 579
o Vastera, Inc. 132,600 225
o Veritas Software Corp. 23,400 512
o Watson Wyatt & Co. Holdings 22,990 610
o Websense Inc 18,300 742
-----------
22,967
CHEMICAL 0.3%
--------------------------------------------------------------------------
o OM Group, Inc. 11,200 369
CONSTRUCTION 5.3%
--------------------------------------------------------------------------
Beazer Homes USA, Inc. 8,650 950
o EMCOR Group, Inc. 7,550 299
Martin Marietta Materials, Inc. 14,350 653
Standard Pacific Corp. 13,500 758
Texas Industries, Inc. 5,150 262
The Ryland Group, Inc. 14,000 1,336
o(2) Toll Brothers, Inc. 40,200 1,863
o WCI Communities, Inc. 32,200 760
-----------
6,881
CONSUMER DURABLES 1.0%
--------------------------------------------------------------------------
Hillenbrand Industries, Inc. 9,000 448
La-Z-Boy Chair Co. 15,390 203
Leggett & Platt, Inc. 10,700 301
Natuzzi S.P.A. 38,520 396
-----------
1,348
CONTAINERS 0.5%
--------------------------------------------------------------------------
o Mobile Mini, Inc. 21,000 596
ELECTRONICS 10.8%
--------------------------------------------------------------------------
o Agere Systems, Inc., Class B 341,800 393
o Alliant Techsystems, Inc. 6,400 368
o Andrew Corp. 77,620 1,085
Anixter International, Inc. 10,600 409
o Arrow Electronics, Inc. 17,400 417
o Brooks Automation, Inc. 10,400 155
C & D Technologies, Inc. 59,700 1,069
o Captaris, Inc. 48,300 222
o Celestica, Inc. 24,220 351
o Cox Radio, Inc. 6,900 110
o Cypress Semiconductor Corp. 35,700 376
o General Cable Corp. 58,850 724
National Semiconductor Corp. 19,460 325
o Novellus Systems, Inc. 19,300 500
OmniVision Technologies, Inc. 20,770 330
PerkinElmer, Inc. 19,400 398
o Powerwave Technologies, Inc. 109,400 817
o Rofin-Sinar Technologies, Inc. 22,900 686
o Sierra Wireless, Inc. 57,400 979
o Silicon Image, Inc. 12,600 173
o Skyworks Solutions, Inc. 30,500 271
o Sungard Data Systems, Inc. 11,900 315
o Tekelec 44,700 998
o Teradyne, Inc. 31,400 520
o Thermo Electron Corp. 14,100 409
o TRC Cos., Inc. 44,080 768
o Varian, Inc. 8,000 292
o Vishay Intertechnology, Inc. 37,200 481
-----------
13,941
ENERGY: RAW MATERIALS 5.0%
--------------------------------------------------------------------------
Arch Coal, Inc. 30,600 995
o Cooper Cameron Corp. 8,400 406
Devon Energy Corp. 6,100 451
ENSCO International, Inc. 6,700 205
Helmerich & Payne, Inc. 23,000 657
Joy Global, Inc. 34,300 1,159
o Offshore Logistics, Inc. 29,450 1,065
(7) Tidewater, Inc. 46,900 1,450
-----------
6,388
FOOD & AGRICULTURE 2.4%
--------------------------------------------------------------------------
American Italian Pasta Co. Class A 26,930 547
Delta & Pineland Co. 32,250 849
o Hain Celestial Group, Inc. 44,770 724
50 See financial notes.
LAUDUS SMALL-CAP MARKETMASTERS FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
MGP Ingredients, Inc. 15,600 129
Sensient Technologies Corp. 32,060 696
o Texas Roadhouse, Inc. Class A 7,900 182
-----------
3,127
GOLD 0.8%
--------------------------------------------------------------------------
o Kinross Gold Corp. 70,591 525
o Meridian Gold, Inc. 33,200 561
-----------
1,086
HEALTHCARE / DRUGS & MEDICINE 11.3%
--------------------------------------------------------------------------
o Accredo Heath, Inc. 23,370 538
o Andrx Corp. 29,360 635
o Arthrocare Corp. 39,600 1,220
Beckman Coulter, Inc. 5,700 339
o Cardiodynamics International Corp.
99,500 360
o Centene Corp. 25,400 1,205
o Charles River Laboratories, Inc. 8,300 388
o Cholestech Corp. 71,425 573
o Collagenex Pharmaceuticals 29,000 174
o(1) Cytyc Corp. 85,600 2,233
o Edwards Lifesciences Corp. 11,300 386
o Enzon, Inc. 50,300 813
o Eon Labs, Inc. 6,600 163
Health Management Associates, Inc.
10,400 215
o Health Net, Inc. 21,400 519
o Human Genome Sciences, Inc. 40,870 421
o Incyte Corp. 57,520 598
o Ivax Corp. 23,437 424
o Martek Biosciences Corp. 13,250 624
Perrigo Co. 37,810 687
o(5) Pharmaceutical Product Developement, Inc.
38,680 1,634
o Synovis Life Technologies Inc. 29,400 311
o Theragenics Corp. 66,100 243
-----------
14,703
INSURANCE 2.1%
--------------------------------------------------------------------------
Arthur J. Gallagher & Co. 5,450 153
Assurant, Inc. 18,800 507
Hilb, Rogal & Hobbs Co. 9,730 309
(9) Hooper Holmes, Inc. 266,830 1,401
Old Republic International Corp. 13,400 313
-----------
2,683
MEDIA 1.6%
--------------------------------------------------------------------------
o Emmis Communications Corp. 29,390 550
o Entercom Communications Corp. 3,800 126
o Raindance Communications, Inc.
184,600 306
Readers Digest Association, Inc. 16,960 239
o Valassis Communications, Inc. 20,450 703
o Westwood One, Inc. 6,800 157
-----------
2,081
MISCELLANEOUS FINANCE 5.0%
--------------------------------------------------------------------------
o Accredited Home Lenders Holding Co.
16,500 595
o Knight Trading Group, Inc. 58,980 613
MDC Holdings, Inc. 11,653 894
o Piper Jaffray Cos., Inc. 5,200 227
o(8) Portfolio Recovery Associates, Inc.
41,900 1,413
Raymond James Financial, Inc. 25,620 669
(4) The Chicago Mercantile Exchange 9,950 1,749
o Wheeling-Pittsburgh Corporation 11,300 358
-----------
6,518
NON-DURABLES & ENTERTAINMENT 2.1%
--------------------------------------------------------------------------
o California Pizza Kitchen, Inc. 30,650 678
Darden Restaurants, Inc. 18,000 441
Leapfrog Enterprises, Inc. 45,800 559
o O' Charleys, Inc. 47,240 733
Tupperware Corp. 16,200 270
-----------
2,681
NON-FERROUS METALS 1.6%
--------------------------------------------------------------------------
o Century Aluminum Co. 10,100 234
Commercial Metals Co. 29,600 1,070
Gibraltar Industries Inc. 4,800 168
o RTI International Metals, Inc. 28,700 575
-----------
2,047
See financial notes. 51
LAUDUS SMALL-CAP MARKETMASTERS FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OIL: DOMESTIC 3.2%
--------------------------------------------------------------------------
Chesapeake Energy Corp. 24,300 391
o Comstock Resources, Inc. 45,400 999
o Global Industry Ltd. 154,800 1,039
Patterson Energy, Inc. 32,050 616
o Transocean, Inc. 13,750 485
o Whiting Petroleum Corp. 20,700 614
-----------
4,144
PRODUCER GOODS & MANUFACTURING 8.1%
--------------------------------------------------------------------------
Baldor Electric Co. 38,500 902
o BE Aerospace, Inc. 49,700 426
o Bucyrus International, Inc. 27,100 813
Cognex Corp. 12,780 327
o Coherent, Inc. 25,300 611
Dover Corp. 5,800 228
o Flowserve Corp. 35,600 768
o GrafTech International Ltd. 96,200 891
Grainger, Inc. 8,500 498
o GSI Lumonics, Inc. 32,750 293
o Ionics, Inc. 16,800 479
o Oceaneering International, Inc. 29,500 1,049
Pall Corp. 34,650 896
Steelcase, Inc., Class A 42,500 557
Teleflex, Inc. 16,610 727
The Manitowoc Co., Inc. 20,430 721
York International Corp. 8,700 277
-----------
10,463
REAL PROPERTY 2.0%
--------------------------------------------------------------------------
o FelCor Lodging Trust, Inc. 55,120 641
Innkeepers USA Trust 41,620 576
Post Properties, Inc. 21,790 699
Washington Real Estate Investment Trust
21,720 683
-----------
2,599
RETAIL 5.7%
--------------------------------------------------------------------------
o 99 Cents Only Stores 47,410 731
o Coldwater Creek, Inc. 30,700 707
o Gander Mountain Co. 27,750 540
o(3) Genesco, Inc. 71,030 1,818
o Guess, Inc. 26,850 448
o Guitar Center, Inc. 16,850 752
Longs Drug Stores Co. 28,120 695
Silgan Holdings, Inc. 15,250 724
Talbots, Inc. 15,200 401
The TJX Max Cos., Inc. 11,400 273
Tiffany & Co. 10,300 302
-----------
7,391
STEEL 3.2%
--------------------------------------------------------------------------
o AK Steel Holding Corp. 81,200 774
o(6) Cleveland Cliffs, Inc. 21,500 1,567
Schnitzer Steel Industries, Inc., Class A
33,000 932
Steel Dynamics, Inc. 26,200 870
-----------
4,143
TRAVEL & RECREATION 1.2%
--------------------------------------------------------------------------
Central Parking Corp. 40,990 555
Choice Hotels International, Inc. 5,700 285
o Vail Resorts, Inc. 38,380 770
-----------
1,610
TRUCKING & FREIGHT 0.8%
--------------------------------------------------------------------------
Arkansas Best Corp. 13,950 545
Overnite Corp. 15,000 486
-----------
1,031
OTHER INVESTMENTS 2.1% of net assets
OTHER INVESTMENT COMPANIES 2.1%
--------------------------------------------------------------------------
Provident Institutional Funds--
TempFund 2,743,879 2,744
END OF INVESTMENTS.
52 See financial notes.
LAUDUS SMALL-CAP MARKETMASTERS FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value $129,855 a
Receivables:
Fund shares sold 28
Dividends 22
Investments sold 2,056
Prepaid expenses + 25
------------
TOTAL ASSETS 131,986
LIABILITIES
- --------------------------------------------------------------------------------
Bank overdraft 379
Payables:
Fund shares redeemed 442
Investments bought 1,573
Investment adviser and administrator fees 5
Transfer agency and shareholder service fees 3
Accrued expenses + 45
------------
TOTAL LIABILITIES 2,447
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 131,986
TOTAL LIABILITIES - 2,447
------------
NET ASSETS $129,539
NET ASSETS BY SOURCE
Capital received from investors 118,988
Net investment income not yet distributed 25
Net realized capital loss (1,170) b
Net unrealized capital gains 11,696 b
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $129,218 10,610 $12.18
Select Shares $321 26 $12.19
Unless stated, all numbers x 1,000.
a The fund paid $118,159 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $178,195
Sales/maturities $172,730
b These derive from investments and futures.
FEDERAL TAX DATA
- ------------------------------------------------------------
PORTFOLIO COST $118,497
NET UNREALIZED GAINS AND LOSSES:
Gains $18,592
Losses + (7,234)
------------
$11,358
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $--
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $21,374
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount:
2010 $808
RECLASSIFICATIONS:
Net investment income
not yet distributed $1,461
RECLASSIFIED AS:
Net realized capital losses ($49)
Capital received from
investors ($1,412)
See financial notes. 53
LAUDUS SMALL-CAP MARKETMASTERS FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $628 a
Interest + 3
-----------
TOTAL INVESTMENT INCOME 631
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized gains on investments 21,529
Net realized gains on futures contracts + 313
-----------
NET REALIZED GAINS 21,842
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized losses on investments (9,660)
Net unrealized losses on futures contracts + (35)
-----------
NET UNREALIZED LOSSES (9,695)
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 1,734 b
Transfer agent and shareholder service fees:
Investor shares 333 c
Select shares -- c
Trustees' fees 6 d
Custodian and portfolio accounting fees 153
Professional fees 43
Registration fees 20
Shareholder reports 71
Other expenses + 6
-----------
Total expenses 2,366
Expense reduction - 299 e
-----------
NET EXPENSES 2,067
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 631
NET EXPENSES - 2,067
-----------
NET INVESTMENT LOSS (1,436)
NET REALIZED GAINS 21,842 f
NET UNREALIZED LOSSES + (9,695) f
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $10,711
Unless stated, all numbers x 1,000.
a Net of $3 foreign withholding tax.
b Calculated as 1.30% of average daily net assets. These fees are paid to
Charles Schwab Investment Management, Inc. (CSIM)
c Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% and
0.15% of the assets of each respective share class. These fees are paid to
Charles Schwab & Co., Inc. (Schwab).
d For the fund's independent trustees only.
e This reduction was made by the investment advisor (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 28,
2005 for Investor shares and February 28, 2006 for Select shares, as follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
--------------------------------------
Investor Shares 1.55
Select Shares 1.37
This limit excludes interest, taxes and certain non-routine expenses.
f These add up to a net gain on investments of $12,147
54 See financial notes.
LAUDUS SMALL-CAP MARKETMASTERS FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000 except footnote.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment loss ($1,436) ($886)
Net realized gains 21,842 2,970
Net unrealized gains or losses + (9,695) 38,944
------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS 10,711 41,028
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME
Investor Shares $-- $3
Select Shares + -- --
------------------------------------
TOTAL DIVIDENDS FROM NET INVESTMENT INCOME $-- $3 a
TRANSACTIONS IN FUND SHARES b
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
SHARES SOLD
Investor Shares 3,329 $40,268 1,528 $14,258
Select Shares + 28 329 -- --
----------------------------------------------------
TOTAL SHARES SOLD 3,357 $40,597 1,528 $14,258
SHARES REINVESTED
Investor Shares -- $-- 0* $3
Select Shares + -- -- -- --
----------------------------------------------------
TOTAL SHARES REINVESTED -- $-- -- $3
SHARES REDEEMED
Investor Shares (3,099) ($36,800) (2,500) ($21,725)
Select Shares + (2) (16) -- --
----------------------------------------------------
TOTAL SHARES REDEEMED (3,101) ($36,816) (2,500) ($21,725)
NET TRANSACTIONS IN
FUND SHARES 256 $3,781 (972) ($7,464)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 10,380 $115,047 11,352 $81,486
Total increase or decrease + 256 14,492 (972) 33,561 c
----------------------------------------------------
END OF PERIOD 10,636 $129,539 10,380 $115,047 d
* Amount was less than 500 shares.
Unless stated, all numbers x 1,000.
a The tax-basis components of distributions are:
CURRENT YEAR
Ordinary income $--
Long-term capital gains $--
PRIOR YEAR
Ordinary income $3
Long-term capital gains $--
b The fund started offering Select shares on June 9, 2004.
c Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
d Includes distributable net investment income in the amount of $25 and $0 at
the end of the current and prior period, respectively.
See financial notes. 55
LAUDUS INTERNATIONAL MARKETMASTERS FUND(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
INVESTOR SHARES 10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 11.95 8.74 10.80 15.53 14.84
------------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.02 0.03 0.10 0.73 0.53
Net realized and unrealized gains or losses 1.65 3.18 (1.43) (3.90) 2.49
------------------------------------------------------------------------------
Total income or loss from investment operations 1.67 3.21 (1.33) (3.17) 3.02
Less distributions:
Dividends from net investment income (0.04) (0.00) 2 (0.07) (0.77) (0.49)
Distributions from net realized gains -- -- (0.66) (0.79) (1.84)
------------------------------------------------------------------------------
Total distributions (0.04) -- (0.73) (1.56) (2.33)
------------------------------------------------------------------------------
Net asset value at end of period 13.58 11.95 8.74 10.80 15.53
------------------------------------------------------------------------------
Total return (%) 13.98 36.74 (13.65) (22.41) 18.61
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Net operating expenses 1.65 1.65 0.99 1,3 0.50 3 0.51 3,4
Gross operating expenses 1.89 1.92 1.32 3 0.88 3 0.90 3
Net investment income 0.15 0.33 0.60 5.13 1.94
Portfolio turnover rate 69 99 158 51 80
Net assets, end of period ($ x 1,000,000) 552 302 206 215 278
1 The ratio of net operating expenses would have been 0.93% if certain
non-routine expenses (proxy fees) had not been included.
2 The per share amount was less than $0.01.
3 Prior to the fund's change in structure on June 3, 2002, the expenses incurred
by underlying funds in which the fund invested were not included in this
ratio.
4 The ratio of net operating expenses would have been 0.50% if certain
non-routine expenses (proxy fees) had not been included.
56 See financial notes.
LAUDUS INTERNATIONAL MARKETMASTERS FUND
4/2/04 1-
SELECT SHARES 10/31/04
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 13.64
------------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.02
Net realized and unrealized losses (0.05)
------------------------------------------------------------------------------
Total loss from investment operations (0.03)
------------------------------------------------------------------------------
Net asset value at end of period 13.61
------------------------------------------------------------------------------
Total return (%) (0.22) 2
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Net operating expenses 1.47 3
Gross operating expenses 1.86 3
Net investment income 0.37 3
Portfolio turnover rate 69 2
Net assets, end of period ($ x 1,000,000) 81
1 Commencement of operations.
2 Not annualized.
3 Annualized.
See financial notes. 57
LAUDUS INTERNATIONAL MARKETMASTERS FUND
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q
will be available on the SEC'S website at http://www.sec.gov and may be reviewed
and copied at the SEC'S Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q will
be available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbol below to designate certain characteristics of the securities.
With the top ten holdings, the number in the parenthesis is the security's rank
among the top ten.
(1) Top ten holding
o Non-income producing security
* American Depositary Receipt
= All or a portion of this security is held as collateral for futures
contracts
~ Security is valued at fair value (see Accounting Policies)
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
96.0% FOREIGN COMMON
STOCK 521,809 608,094
0.2% SHORT-TERM
INVESTMENTS 1,497 1,497
3.6% OTHER INVESTMENTS 22,685 22,685
- --------------------------------------------------------------------------------
99.8% TOTAL INVESTMENTS 545,991 632,276
0.2% OTHER ASSETS AND
LIABILITIES, NET 1,011
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 633,287
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
FOREIGN COMMON STOCK 96.0% of net assets
AUSTRALIA 2.6%
--------------------------------------------------------------------------
Australia and New Zeland Banking
Group Ltd. 326,000 4,967
Billabong International Ltd. 70,500 553
o Bradken Ltd. 278,422 641
Commonwealth Bank of Australia 28,850 692
Excel Coal 322,851 1,061
John Fairfax Holdings Ltd. 958,000 3,070
Just Group 463,103 1,020
Macarthur Coal Ltd. 169,930 484
Macquarie Bank Ltd. 32,000 946
Perpetual Trustees Australia Ltd. 16,500 686
Sigma Co. Ltd. 91,700 568
Toll Holdings Ltd. 124,000 1,095
West Australian Newspapers Holdings
Ltd. 84,581 540
-----------
16,323
AUSTRIA 0.5%
--------------------------------------------------------------------------
Andritz AG 17,077 1,047
Erste Bank der Oesterreichischen
Sparkassen AG 52,600 2,334
-----------
3,381
BAHAMAS 0.2%
--------------------------------------------------------------------------
o Steiner Leisure Ltd. 53,045 1,294
BELGIUM 0.4%
--------------------------------------------------------------------------
Interbrew SA 57,500 2,037
o Option N.V. 29,581 803
-----------
2,840
BRAZIL 0.8%
--------------------------------------------------------------------------
* Banco Bradesco SA 1,000 61
Banco Bradesco SA Preffered 4,319 261
Banco Itau SA Preffered 12,843 1,554
* Companhia de Bebidas Spon 12,700 315
* Eregli Demir Ve Celik Fabrik 191,423,519 759
* Gol Linhas Aereas Intel 14,000 289
o Natura Cosmeticos SA 28,000 569
* Petroleo Brasileiro SA 23,900 849
o* Telesp Celular Participacoes SA
ADR 123,400 739
-----------
5,396
CANADA 3.2%
--------------------------------------------------------------------------
o Algoma Steel Inc. 76,418 1,284
o Alimentation Couche-Tard, Inc. 33,900 781
CHC Helicopter Corp. 30,212 1,132
58 See financial notes.
LAUDUS INTERNATIONAL MARKETMASTERS FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Corus Entertainment, Inc. 38,500 741
Encana Corp. 53,800 2,664
o Extendicare, Inc., Class A 104,378 1,434
Home Capital Group, Inc., Class B
35,560 780
Manulife Financial Corp. 65,300 3,045
o* Nortel Networks Corp. 104,800 355
Peyto Energy Trust 54,750 1,840
o Precision Drilling Corp. 13,800 853
o Research in Motion Ltd. 13,300 1,171
o Shoppers Drug Mart Corp. 23,700 720
Suncor Energy, Inc. 46,400 1,584
o Transat A.T. Inc. 116,311 2,146
-----------
20,530
CHILE 0.3%
--------------------------------------------------------------------------
o* Cencosud SA 144A 25,000 555
* LanChile SA 24,900 611
S.A.C.I. Falabella SA 268,700 600
-----------
1,766
CZECH REPUBLIC 0.2%
--------------------------------------------------------------------------
Cesky Telecom A/S 84,649 1,109
DENMARK 1.0%
--------------------------------------------------------------------------
Bang Olufsen A/S Class B 24,032 1,424
o Bavarian Nordic A/S 14,544 1,320
H. Lundbeck A/S 3,900 70
Kobenhavns Lufthavne 4,014 671
Novo Nordisk A/S 20,300 1,006
o TopDanmark Development A/S 22,157 1,557
-----------
6,048
EGYPT 0.1%
--------------------------------------------------------------------------
Orascom Construction Inds 77,000 892
ESTONIA 0.1%
--------------------------------------------------------------------------
Hansabank Ltd. 38,800 390
FINLAND 1.0%
--------------------------------------------------------------------------
Alma Media Corporation-II 12,965 142
Metso Oyj 171,100 2,403
Nokian Renkaat Oyj 23,196 2,506
Perlos Oyj 78,786 1,186
-----------
6,237
FRANCE 8.0%
--------------------------------------------------------------------------
o Alten 35,356 765
April Group 19,208 414
o AXAlto Holding N.V. 81,855 1,926
Banque National de Paris 39,800 2,701
o Christian Dior SA 23,200 1,401
Essilor International SA 21,700 1,469
Generale de Sante 50,049 855
Hermes International 5,700 1,096
Ingenico 34,856 576
Ipsos 10,463 976
o JC Decaux SA 163,900 4,063
Klepierre 9,500 723
Lvmh Moet Hennessy Louis Vutton
SA 4,800 328
M6 Metropole Television 18,400 478
o Michelin (C.G.D.E.), Class B 39,500 2,143
Mr. Bricolage SA 6,300 150
Neopost SA 78,100 5,405
o Orpea 23,100 680
o PagesJaunes SA 54,991 1,112
Pernod-Ricard 18,375 2,536
Publicis Groupe SA 187,000 5,561
Sanofi-Synthelabo SA 88,660 6,462
Spir Communication 2,973 531
SR Teleperformance 61,312 1,350
Suez SA 37,700 879
Total SA, Class B 10,700 2,219
Trader Classified Media N.V. 35,558 451
o Vivendi Universal SA 117,000 3,186
-----------
50,436
GERMANY 7.8%
--------------------------------------------------------------------------
Allianz AG 17,845 1,893
AWD Holding AG 13,472 470
Balda AG 34,850 357
(3) Bayerische Motoren-Werke AG 187,400 7,902
Bayerische Vereinsbank AG 22,900 447
Bijou Brigitte Modische Accessoires
AG 3,012 349
Celesio AG 10,500 759
o Commerzbank AG 10,100 184
o Continental AG 32,300 1,759
Deutsche Boerse AG 115,400 5,747
See financial notes. 59
LAUDUS INTERNATIONAL MARKETMASTERS FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
DIS Deutscher Industrie Service
AG 21,746 704
o* Efes Breweries Intl GDR Ebidq.L 17,051 473
Funkwerk AG 14,875 640
GFK AG 34,848 1,141
Grenskeleasing AG 8,947 337
Hannover Rueckversicherung AG 96,000 3,119
Henkel KGaA 81,000 5,754
Krones AG 8,288 833
Linde AG 30,400 1,831
Merck KGAA 6,100 339
MPC Muenchmeyer Petersen Capital
AG 31,446 2,200
Muenchener Rueckversicherungs-
Gesellschaft AG 15,454 1,507
o Norddeutsche Affinerie AG 32,328 521
ProSiebenSat.1 Media AG
Preffered 80,875 1,444
Puma AG 2,780 694
Rational AG 1,744 137
SAP AG 20,900 3,550
o SBS Broadcasting SA 51,747 1,782
Schering AG 3,200 205
o Software AG 46,015 1,340
o Techem AG 26,062 832
-----------
49,250
GREECE 0.7%
--------------------------------------------------------------------------
Coca-Cola Hellenic Bottling Co.
SA 47,600 1,056
EFG Eurobanck Ergasias 32,000 873
Folli-Follie SA 20,800 635
o Fourlis SA 49,210 304
Germanos SA 13,493 358
National Bank of Greece SA 31,780 885
o OPAP SA 9,400 191
-----------
4,302
HONG KONG 2.3%
--------------------------------------------------------------------------
China Insurance International Holdings Co.
Ltd. 946,900 435
China Mobile Ltd. 466,300 1,354
China Travel Intl Inv Hk 2,880,000 758
Citic Pacific Ltd. 225,800 577
o CNOOC Ltd. 4,856,900 2,496
Esprit Holdings Ltd. 171,500 917
Giordano International Ltd. 1,436,000 802
Hang Lung Group Ltd. 7,800 13
Hong Kong & China Gas Co.
Ltd. 310,600 599
o Pacific Basin Shipping Ltd. 2,992,000 1,384
Sinopec Beijing Yanhua Petrochemical Co.
Ltd. 5,948,000 2,159
Sung Hung Kai Properties 70,900 656
Techtronic Industries Co., Ltd. 1,248,000 2,485
-----------
14,635
HUNGARY 0.3%
--------------------------------------------------------------------------
Borsodchem Rt. 56,391 560
Otp Bank Rt. 46,600 1,175
-----------
1,735
INDIA 0.8%
--------------------------------------------------------------------------
Bharat Forge 513 --
Bharat Forge Ltd. 21,525 414
o Bharti Televentures Ltd. 247,100 857
Biocon Ltd. 55,300 627
HDFC Bank Ltd. 64,800 592
Housing Development Finance Corp.,
Ltd. 57,700 813
o Infosys Technologies Ltd. 35,600 1,496
o Mphasis BFL Ltd. 27,269 162
-----------
4,961
INDONESIA 0.1%
--------------------------------------------------------------------------
o PT Bank Rakyat Indonesia 3,035,000 650
IRELAND 1.7%
--------------------------------------------------------------------------
Anglo Irish Bank Corp. PLC 56,300 1,067
(7) Bank of Ireland 532,000 7,275
o Grafton Group PLC - UTS 67,900 609
o Paddy Power PLC 61,503 813
o United Drug PLC 184,509 732
-----------
10,496
60 See financial notes.
LAUDUS INTERNATIONAL MARKETMASTERS FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
ISRAEL 0.1%
--------------------------------------------------------------------------
o* ECI Telecom Ltd. 59,149 408
o* Orbotech Ltd. 25,000 423
-----------
831
ITALY 3.3%
--------------------------------------------------------------------------
Amplifon SPA 7,836 346
Assicurazioni Generali 21,400 633
Banca Intesabci SPA 345,500 1,411
Banco Popolare di Verona e Novara
Scrl 240,900 4,259
Credito Emiliano SPA 68,800 593
o Enel SPA 259,400 2,340
Eni SPA 64,500 1,460
Hera SPA 215,600 594
Interpump Group SPA 62,570 322
Marzotto SPA 47,938 739
Mediobanca SPA 3,900 54
Merloni Elettrodomestici SPA 29,700 451
Pirelli & C. Real Estate SPA 14,700 641
Saipem SPA 130,761 1,504
San Paolo IMI SPA 135,000 1,707
Unicredito Italiano SPA 724,000 3,877
-----------
20,931
JAPAN 15.8%
--------------------------------------------------------------------------
o AEON Co. Ltd. 5,000 80
Aeon Credit Service Co. Ltd. 13,500 884
Aeon Mall Co. Ltd 11,300 721
Aica Kogyo Company Limited 98,000 1,168
All Nippon Airways Co. Ltd. 55,000 171
o Aoc Holdings Inc. 116,300 1,343
Arbeit-Times Co., Ltd. 24,209 604
Arealink Co. Ltd. 471 1,096
o Arnest One Corp. 12,100 328
Askul Corp. 8,400 520
Canon, Inc. 54,500 2,684
o Chiyoda Corp. 90,000 680
Credit Saison Co. Ltd. 63,400 2,024
o Cyber Agent Ltd-W I 86 235
Cybernet Systems Co. Ltd. 389 1,154
Daiwa Securities Group, Inc. 176,000 1,077
Diamond City Co. Ltd. 34,600 960
East Japan Railway Co. 229 1,201
en-Japan, Inc. 353 662
o EPS Co. Ltd 45 127
Exedy Corp 63,500 1,070
Fast Retailing Co. Ltd. 19,700 1,250
First Juken Co. Ltd. 3,200 61
o First Juken Co. Ltd. W/I 16,567 371
o Fuji Television Network, Inc. 232 522
Global One Real Estate Investment Co.,
Ltd. 41 326
Goldcrest Co. Ltd. 14,200 884
Hino Motors Ltd. 178,300 1,185
Hitachi Koki Company Ltd. 117,000 864
o Hodogaya Chemical CO Ltd. 260,000 1,285
Honda Motor Co. Ltd. 58,700 2,830
Hoya Corp. 20,900 2,141
o J-Oil Mills, Inc. 293,000 1,101
o Japan Airlines System Corp. 224,000 612
o Kennedy-Wilson Japan 348 1,357
Keyence Corp. 10,900 2,451
Komatsu Ltd. 41,600 278
Meitec Corp. 102,000 3,833
Misumi Corp. 18,600 508
Mitsubishi Tokyo Financial Group, Inc. 129 1,093
Mizuho Financial Group Inc. 312 1,202
Musashino Bank Ltd. 3,500 131
Nakanishi, Inc. 6,000 397
o Neomax Co., Ltd. 21,000 329
o Nihon Dempa Kogyo Co. Ltd. 14,000 296
Nikko Cordial Corp. 425,600 1,900
Nippon Broadcasting System, Inc. 3,750 168
Nishimatsuya Chain Co. Ltd. 48,700 1,678
Nitori Co. Ltd. 10,580 573
Nitto Denko Corp. 29,600 1,402
NIWS Co. Ltd. 855 2,166
Nomura Holdings, Inc. 79,300 971
Okinawa Cellular Telephone Co. 493 2,321
Olympus Optical Co. Ltd. 246,700 4,774
Orix Corp. 33,900 3,968
Pacific Metals CO Ltd 246,000 1,001
o Park24 Co. Ltd W/I 15,100 257
Park24 Co. Ltd. 15,100 256
See financial notes. 61
LAUDUS INTERNATIONAL MARKETMASTERS FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Pasona, Inc. 190 474
Phoenix Electric Co. Ltd 47,200 738
Point, Inc. 82,640 2,226
Promise Co. Ltd. 26,300 1,669
o Roland DG Corp. 16,800 831
o Ryohin Keikaku Co. Ltd. 11,700 522
Sankyo Co., Ltd. Gunma 900 36
Sawai Pharmaceutical Co. Ltd. 10,500 312
o Sega Sammy Holdings Inc. 19,524 905
o Seven-Eleven Japan Co. Ltd. 8,000 231
Sharp Corp. 140,000 1,930
Shinsei Bank Ltd. 182,000 1,183
SMC Corp. 23,100 2,469
Sumitomo Trust and Banking Co.
Ltd. 445,200 2,591
Sundrug Co., Ltd. 2,000 54
Sysmex Corp. 53,000 2,066
o Take and Give Needs Co-W I 1,152 1,193
Takeda Chemical Industries Ltd. 121,000 5,834
The Bank of Yokohama Ltd. 247,300 1,476
The Fuji Fire & Marine Insurance Co.
Ltd. 10,500 33
Toagosei Chemical Ltd. 177,000 485
Tokyo Broadcasting System, Inc. 35,400 566
Tokyu Corp. 195,100 882
Toto Ltd. 100,000 895
Toyo Tire & Rubber Co., Ltd. 570,000 1,702
Trend Micro Inc. 23,500 1,124
Urban Corporation 11,500 496
USS Co. Ltd. 6,730 543
o Watabe Wedding Corp. 13,700 339
Yamato Transport Co. Ltd. 21,400 288
Yodogawa Steel Works Ltd. 162,000 731
-----------
100,355
MALAYSIA 0.0%
--------------------------------------------------------------------------
~o Airasia BHD 388,000 128
MEXICO 2.4%
--------------------------------------------------------------------------
America Mobil SA de CV 799,100 1,760
o Consorcio ARA SA de CV 68,200 183
o Corporacion Geo SA , Series B 1,563,281 2,440
* Grupo Aeroportuario del Sureste SA de
CV 29,035 665
*(8) Grupo Televisa SA de CV 124,300 6,837
o Urbi Desarrollos Urbanos SA de
CV 192,300 717
Walmart de Mexico-Ser V 786,000 2,572
-----------
15,174
NETHERLANDS 3.8%
--------------------------------------------------------------------------
Aalberts Industries NV 26,583 987
AKZO Nobel N.V. 158,000 5,927
o ASM Lithography Holding N.V. 119,600 1,699
o ASML Holding N.V. 17,000 242
(9) Euronext N.V. 236,000 6,815
Fortis N.V. 156,520 3,972
Heineken Holding N.V. 154,000 4,312
-----------
23,954
NORWAY 1.9%
--------------------------------------------------------------------------
Aktiv Kapital ASA 70,897 1,187
Ekornes ASA 49,329 1,121
o Fred Olsen Energy ASA 101,546 1,048
Statoil ASA 146,200 2,110
Stolt Offshores S.A 339,030 1,676
o Tandberg Television ASA 328,544 2,375
Telenor ASA 158,800 1,261
o TGS Nopec Geophysical Co. ASA 58,256 1,103
-----------
11,881
PORTUGAL 0.2%
--------------------------------------------------------------------------
o Impresa Sociedade Gestora de
Participacoes SA 107,978 626
o SonaeCom SGPS SA 214,564 906
-----------
1,532
RUSSIA 0.4%
--------------------------------------------------------------------------
* Lukoil Holding Co. 11,500 1,431
* OAO Gazprom SP 8,105 303
o* Sibneft - Sponsored 22,300 825
-----------
2,559
SINGAPORE 2.0%
--------------------------------------------------------------------------
o Accord Customer Care Solutions
Ltd. 3,695,000 1,708
62 See financial notes.
LAUDUS INTERNATIONAL MARKETMASTERS FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Cosco Investments 3,871,520 2,441
DBS Group Holdings Ltd. 138,200 1,295
Jaya Holdings Ltd. 2,051,000 1,269
Osim International Ltd. 455,600 257
o Singapore Airlines Ltd. 74,800 481
Singapore Telecommunications
Ltd. 695,407 1,011
Sunningdale Precision Industries
Ltd. 1,254,000 629
United Overseas Bank Ltd. 482,000 3,907
-----------
12,998
SOUTH AFRICA 0.6%
--------------------------------------------------------------------------
Edgars Consolidated Stores Ltd. 23,900 841
Ellerine Holdings Ltd. 64,905 481
Foschini Ltd. 241,681 1,213
MTN Group Ltd. 155,100 850
Network Healthcare Holdings
Ltd. 682,500 601
-----------
3,986
SOUTH KOREA 2.0%
--------------------------------------------------------------------------
Hyundai Motor Co. Ltd. 41,700 2,023
o Kookmin Bank 117,700 3,932
Samsung Electronics Co. Ltd.
Preferred 5,600 2,198
SK Telecom Co. Ltd. 26,900 4,217
-----------
12,370
SPAIN 2.0%
--------------------------------------------------------------------------
Aldeasa SA 34,230 1,132
Altadis SA 38,960 1,426
Amadeus Global Travel Distribution SA
Class A 49,500 405
Banco Bilbao Vizcaya Argentaria
SA 97,155 1,520
Banco Santander Central Hispano
SA 74,400 828
Cortefiel SA 126,270 1,646
Grupo Ferrovial SA 20,200 892
Inditex SA 33,200 841
Miquel y Costas & Miquel SA 2,223 141
Prisa-Promotora de Informaciones
SA 102,900 1,939
Telefonica SA 107,753 1,774
-----------
12,544
SWEDEN 1.7%
--------------------------------------------------------------------------
Elekta Ab-B 60,269 1,601
o(6) Ericsson Telefonab LM AB,
Class B 2,031,400 5,883
o*(6) Ericsson Telefonab LM SP 48,600 1,405
Hennes & Mauritz AB, Class B 4,950 144
Q-Med AB 32,146 827
Telelogic AB 307,080 652
-----------
10,512
SWITZERLAND 8.7%
--------------------------------------------------------------------------
o Actelion Ltd. 5,800 661
Clariant AG 160,405 2,163
o(5) Credit Suisse Croup 216,700 7,386
Galenica Holding AG 1,595 264
Geberit AG 730 474
Givaudan AG 7,150 4,454
Julius Baer Holding AG, Class B 3,315 924
o Leica Geosystems AG 4,704 1,129
Lonza Group AG 117,000 5,697
(1) Nestle SA 38,332 9,037
Novartis AG 133,000 6,321
o Roche Holding AG Genusschein 15,200 1,549
Saia-Burgess Electronics AG 504 281
Serono SA, Class B 4,199 2,602
Swatch Group AG 23,200 3,099
o Syngenta AG 37,700 3,584
o Temenos Group AG 56,142 397
United Bank of Switzerland AG 72,050 5,175
-----------
55,197
TAIWAN 0.6%
--------------------------------------------------------------------------
* Chunghwa Telecom Co. Ltd. 65,900 1,242
o Eva Airways Corp. 1,237,669 491
Hon Hai Precision Industry Co.
Ltd. 549,550 2,024
-----------
3,757
THAILAND 0.0%
--------------------------------------------------------------------------
Advanced Info Service Public Co.
Ltd. 69,000 157
See financial notes. 63
LAUDUS INTERNATIONAL MARKETMASTERS FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TURKEY 0.5%
--------------------------------------------------------------------------
o Boyner Buyuk Magazacilik 407,063,360 508
o* Dogan Yayin Holding A/S 191,530,047 682
Eregli Demir Ve Celik
Fabrikalari 20,076,534 80
Migros Turkey TAS 141,847,389 871
o Otokar Otobus Karoseri Sanayi
A/S 173,219,008 763
-----------
2,904
UNITED KINGDOM 17.9%
--------------------------------------------------------------------------
Abbot Group PLC 130,640 510
o Acambis PLC 68,020 328
Aegis Group PLC 1,900,000 3,551
Allied Domecq PLC 72,316 642
o Ashtead Group PLC 1,706,580 2,119
Associated British Ports Holdings
PLC 596,000 5,045
o AstraZeneca PLC 3,900 160
BG Group PLC 430,800 2,802
BP PLC 347,600 3,360
British Sky Broadcasting Group
PLC 602,801 5,616
Cadbury Schweppes PLC 692,000 5,738
o Cairn Energy PLC 35,000 944
Capital Group PLC 230,400 1,485
Carnival PLC 62,709 3,311
Cattles PLC 94,900 619
o Cobham PLC 27,600 699
Compass Group PLC 383,200 1,580
o CSR PLC 221,151 1,358
(4) Diageo PLC 588,000 7,849
Domino Printing Sciences PLC 30,217 136
o Enodis PLC 1,515,000 2,408
(2) GlaxoSmithKline PLC 388,000 8,154
HSBC Holdings PLC -- (UK) 176,500 2,844
Imperial Chemical Industries
PLC 203,640 782
Intertek Group 45,000 567
ITV PLC 1,587,202 3,112
Johnston Press PLC F P 69,800 704
Kesa Electricals PLC 147,360 734
Kingfisher PLC 611,963 3,389
o Lloyds TSB Group PLC 523,000 4,130
Man Group PLC 34,900 836
McCarthy & Stone PLC 40,300 428
Michael Page Group PLC 1,188,800 3,747
Morrison Wm. Supermarkets 185,416 770
Next PLC 39,300 1,203
o Orascom Telecommunications 42,700 730
Pearson PLC 81,600 894
Reckitt Benkiser PLC 82,297 2,253
Reed Elsevier PLC 575,000 5,126
RTL Group SA 9,660 640
S I G PLC 35,527 324
Savills PLC 22,457 168
Signet Group PLC 2,700,000 5,256
Smith & Nephew PLC 158,700 1,345
Standard Chartered PLC 158,900 2,834
* Stolt Comex Seaway ADR 184,547 939
(10) Tesco PLC 1,261,100 6,632
o Ultra Electronics Holdings PLC 73,431 833
o Vodafone Group PLC 1,357,000 3,469
Whatman PLC 150,160 550
-----------
113,653
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENTS 0.2% of net assets
U.S. GOVERNMENT SECURITIES 0.2%
--------------------------------------------------------------------------
= U.S. Treasury Bills
1.63%, 12/16/04 1,500 1,497
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OTHER INVESTMENTS 3.6% of net assets
OTHER INVESTMENT COMPANIES 3.6%
--------------------------------------------------------------------------
= Provident Institutional Funds --
TempFund 22,684,772 22,685
END OF INVESTMENTS.
64 See financial notes.
LAUDUS INTERNATIONAL MARKETMASTERS FUND
In addition to the above, the fund held the following at 10/31/04. All numbers x
1,000 except number of futures contracts.
FUTURES CONTRACTS
NUMBER OF CONTRACT UNREALIZED
CONTRACTS VALUE GAIN/(LOSSES)
S&P 500 Index
expires 12/16/04 24 6,782 119
FOREIGN CURRENCY CONTRACTS
AMOUNT OF AMOUNT OF
CURRENCY TO CURRENCY TO CURRENCY TO CURRENCY TO UNREALIZED
EXPIRATION DATE BE RECEIVED BE RECEIVED BE DELIVERED BE DELIVERED GAINS/(LOSSES)
11/01/04 Australian Dollars 72 U.S. Dollars 54 -- *
11/01/04 Canadian Dollars 105 U.S. Dollars 86 -- *
11/01/04 Danish Krones 3,210 U.S. Dollars 551 (1)
11/01/04 European Euro 135 U.S. Dollars 172 (1)
11/01/04 Hong Kong Dollars 1,074 U.S. Dollars 138 -- *
11/01/04 Japanese Yen 9,455 U.S. Dollars 89 -- *
11/01/04 Norwegian Krona 5,958 U.S. Dollars 927 5
11/01/04 Swedish Krona 756 U.S. Dollars 107 -- *
11/01/04 Swiss Francs 39 U.S. Dollars 33 -- *
11/01/04 U.S. Dollars 180 British Pounds 98 -- *
11/01/04 U.S. Dollars 24 Danish Krone 140 -- *
11/01/04 U.S. Dollars 379 European Euro 298 -- *
11/01/04 U.S. Dollars 88 Swiss Francs 106 (1)
11/02/04 Canadian Dollars 49 U.S. Dollars 40 -- *
11/02/04 European Euro 121 U.S. Dollars 154 (1)
~ 11/02/04 South African Rand 739 U.S. Dollars 120 2
11/02/04 Swedish Krona 717 U.S. Dollars 101 -- *
11/02/04 Swiss Francs 36 U.S. Dollars 30 -- *
11/02/04 U.S. Dollars 16 Danish Krone 95 -- *
11/02/04 U.S. Dollars 58 European Euro 46 -- *
11/02/04 U.S. Dollars 387 Japanese Yen 41,007 -- *
11/02/04 U.S. Dollars 12 Swiss Francs 14 -- *
11/03/04 European Euro 18 U.S. Dollars 23 -- *
~ 11/03/04 South African Rand 1,213 U.S. Dollars 197 3
11/03/04 Swiss Francs 48 U.S. Dollars 40 -- *
11/03/04 U.S. Dollars 48 Danish Krone 278 -- *
11/03/04 U.S. Dollars 23 European Euro 18 -- *
11/03/04 U.S. Dollars 11 Swiss Francs 13 -- *
11/04/04 Japanese Yen 27,668 U.S. Dollars 261 (1)
See financial notes. 65
LAUDUS INTERNATIONAL MARKETMASTERS FUND
All numbers x 1,000 except number of futures contracts.
FOREIGN CURRENCY CONTRACTS (CONTINUED)
AMOUNT OF AMOUNT OF
CURRENCY TO CURRENCY TO CURRENCY TO CURRENCY TO UNREALIZED
EXPIRATION DATE BE RECEIVED BE RECEIVED BE DELIVERED BE DELIVERED GAINS/(LOSSES)
~ 11/04/04 South African Rand 1,140 U.S. Dollars 186 1
11/04/04 U.S. Dollars 16 Japanese Yen 1,654 -- *
~ 11/05/04 South African Rand 311 U.S. Dollars 51 1
------------
7
FORWARD FOREIGN CURRENCY CONTRACTS
AMOUNT OF AMOUNT OF
CURRENCY TO CURRENCY TO CURRENCY TO CURRENCY TO UNREALIZED
EXPIRATION DATE BE RECEIVED BE RECEIVED BE DELIVERED BE DELIVERED GAINS/(LOSSES)
07/13/05 U.S. Dollars 10,424 British Pounds 5,800 (32)
07/14/05 U.S. Dollars 10,483 British Pounds 5,800 27
------------
(5)
* Amounts stated as "--" are less than $1.
66 See financial notes.
LAUDUS INTERNATIONAL MARKETMASTERS FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value $632,276 a
Foreign currency 1,872 b
Receivables:
Fund shares sold 1,016
Dividends 728
Due from brokers for futures 16
Foreign tax reclaims 306
Investments sold 4,093
Unrealized appreciation on foreign currency contracts 12
Unrealized appreciation on forward foreign currency contracts 27
Prepaid expenses + 105
------------
TOTAL ASSETS 640,451
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 540
Investments bought 6,363
Investment adviser and administrator fees 28
Transfer agency and shareholder service fees 11
Withholding taxes 11
Unrealized depreciation on foreign currency contracts 5
Unrealized depreciation on forward foreign contracts 32
Accrued expenses + 174
------------
TOTAL LIABILITIES 7,164
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 640,451
TOTAL LIABILITIES - 7,164
------------
NET ASSETS $633,287
NET ASSETS BY SOURCE
Capital received from investors 633,397
Distributions in excess of net investment income (221)
Net realized capital losses (86,354) c
Net unrealized capital gains 86,465 c
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $551,940 40,635 $13.58
Select Shares $81,347 5,979 $13.61
Unless stated, all numbers x 1,000.
a The fund paid $545,991 for these securities.
Includes certain restricted but deemed liquid 144A securities worth $555 or
0.1% of the fund's total net assets.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $577,938
Sales/maturities $303,634
b The fund paid $1,847 for these currencies.
c These derive from investments, foreign currency transactions and futures.
FEDERAL TAX DATA
- --------------------------------------------------------
PORTFOLIO COST $551,348
NET UNREALIZED GAINS AND LOSSES:
Gains $89,549
Losses + (8,621)
------------
$80,928
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $1,221
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $15,097
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount:
2009 $25,229
2010 53,351
2011 + 3,747
------------
$82,327
RECLASSIFICATIONS:
Net investment income
not yet distributed ($496)
RECLASSIFIED AS:
Net realized capital gains $506
Capital received from
investors ($10)
See financial notes. 67
LAUDUS INTERNATIONAL MARKETMASTERS FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $8,586 a
Interest + 10
-----------
TOTAL INVESTMENT INCOME 8,596
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized gains on investments 13,734
Net realized losses on foreign currency transactions (1,163)
Net realized gains on futures contracts + 382
-----------
NET REALIZED GAINS 12,953
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 39,633
Net unrealized gains on foreign currency transactions 16
Net unrealized losses on futures contracts + (24)
-----------
NET UNREALIZED GAINS 39,625
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 6,665 b
Transfer agent and shareholder service fees:
Investor Shares 1,123 c
Select Shares 54 c
Trustees' fees 7 d
Custodian and portfolio accounting fees 896
Professional fees 51
Registration fees 77
Shareholder reports 110
Other expenses + 15
-----------
Total expenses 8,998
Expense reduction - 1,191 e
-----------
NET EXPENSES 7,807
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 8,596
NET EXPENSES - 7,807
-----------
NET INVESTMENT INCOME 789
NET REALIZED GAINS 12,953 f
NET UNREALIZED GAINS + 39,625 f
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $53,367
Unless stated, all numbers x 1,000.
a Net of $1,049 foreign withholding tax.
b Calculated as 1.40% of average daily net assets. These fees are paid to
Charles Schwab Investment Management, Inc. (CSIM)
c Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% and
0.15% of the assets of each respective share class. These fees are paid to
Charles Schwab & Co., Inc. (Schwab).
d For the fund's independent trustees only.
e Includes $1,155 from the investment adviser (CSIM) and $36 from the transfer
agent and shareholder service agent (Schwab). These reductions reflect a
guarantee by CSIM and Schwab to limit the operating expenses of this fund
through February 28, 2005 for Investor Shares and February 28, 2006 for Select
Shares, as follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
--------------------------------------------
Investor Shares 1.65
Select Shares 1.47
This limit excludes interest, taxes and certain non-routine expenses.
f These add up to a net gain on investments of $52,578
68 See financial notes.
LAUDUS INTERNATIONAL MARKETMASTERS FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income $789 $740
Net realized gains or losses 12,953 (6,081)
Net unrealized gains + 39,625 80,329
-------------------------------------
INCREASE IN NET ASSETS
FROM OPERATIONS 53,367 74,988
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME
Investor Shares 1,007 14
Select Shares + -- --
--------------------------------------
TOTAL DIVIDENDS FROM NET INVESTMENT INCOME $1,007 $14 a, b
TRANSACTIONS IN FUND SHARES c
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
SHARES SOLD
Investor Shares 22,257 $290,173 6,539 $66,048
Select Shares + 6,216 82,103 -- --
---------------------------------------------------
TOTAL SHARES SOLD 28,473 $372,276 6,539 $66,048
SHARES REINVESTED
Investor Shares 77 $938 2 $13
Select Shares + -- -- -- --
---------------------------------------------------
TOTAL SHARES REINVESTED 77 $938 2 $13
SHARES REDEEMED
Investor Shares (6,975) ($91,166) (4,801) ($44,770)
Select Shares + (237) (3,110) -- --
---------------------------------------------------
TOTAL SHARES REDEEMED (7,212) ($94,276) (4,801) ($44,770) d
NET TRANSACTIONS IN
FUND SHARES 21,338 $278,938 1,740 $21,291
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 25,276 $301,989 23,536 $205,724
Total increase + 21,338 331,298 1,740 96,265 e
---------------------------------------------------
END OF PERIOD 46,614 $633,287 25,276 $301,989 f
Unless stated, all numbers x 1,000.
a UNAUDITED
The fund designates $1,007 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h)(ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for use in preparing
their 2004 income tax return.
b The tax-basis components of distributions are:
CURRENT YEAR
Ordinary income $1,007
Long-term capital gains $--
PRIOR YEAR
Ordinary income $14
Long-term capital gains $--
c The fund started offering Select Shares on April 2, 2004.
d The fund charges 1.50% of early withdrawal fees on shares redeemed 180 days or
less after the purchases:
CURRENT PERIOD
Investor Shares $129
Select Shares + 24
--------
TOTAL $153
PRIOR PERIOD
Investor Shares $52
Select Shares + --
--------
TOTAL $52
Dollar amounts are net of the redemption fees.
e Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
f Includes distributions in excess of net investment income in the amount of
$221 and distributable net investment income of $493 at the end of the current
period and prior period, respectively.
See financial notes. 69
LAUDUS MARKETMASTERS FUNDS
FINANCIAL NOTES
BUSINESS STRUCTURE OF THE FUNDS
EACH OF THE FUNDS DISCUSSED IN THIS REPORT IS A SERIES OF SCHWAB CAPITAL TRUST,
A NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended. The sidebar shows the funds in this report and their trust.
Prior to June 3, 2002, each fund invested in a mix of actively managed mutual
funds. The transition to their multi-manager strategy began on June 3, 2002.
Also, effective November 1, 2004 the Schwab MarketMasters Funds were renamed the
Laudus MarketMasters Funds.
THE TRUST AND ITS FUNDS
This list shows all of the funds included in Schwab Capital Trust. The funds
discussed in this report are highlighted.
SCHWAB CAPITAL TRUST organized May 7, 1993
Schwab S&P 500 Fund
Schwab Small-Cap Index Fund
Schwab Total Stock Market Index Fund
Schwab International Index Fund
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Laudus U.S. MarketMasters Fund
Laudus Balanced MarketMasters Fund
Laudus Small-Cap MarketMasters Fund
Laudus International MarketMasters Fund
Schwab Core Equity Fund
Schwab Dividend Equity Fund
Schwab Small-Cap Equity Fund
Schwab Hedged Equity Fund
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab Institutional Select S&P 500 Fund
Schwab Institutional Select Large-Cap Value Index Fund
Schwab Institutional Select Small-Cap Value Index Fund
LAUDUS MARKETMASTERS FUNDS OFFER TWO SHARE CLASSES: Investor Shares and Select
Shares. Shares of each class represent interest in the same portfolio, but each
class has different expenses and investment minimums.
Shares are bought and sold at net asset value (NAV), which is the price for all
outstanding shares. Each share has a par value of 1/1,000 of a cent, and the
trust may issue as many shares as necessary.
FUND OPERATIONS
Most of the funds' investments are described in the fund-by-fund sections
earlier in this report. However, there are certain other fund operations and
policies that may affect a fund's financials, as described below. Other policies
concerning the funds' business operations also are described here.
THE FUNDS PAY DIVIDENDS from net investment income and make distributions from
net capital gains once a year.
THE FUNDS MAY BUY SECURITIES ON A DELAYED-DELIVERY BASIS. In these transactions,
the funds agree to buy a security for a stated price, with settlement generally
occurring within two weeks. If the security's value falls before settlement
occurs, the funds could end up paying more for the security than its market
value at the time of settlement. The funds have set aside sufficient securities
as collateral for those securities bought on a delayed-delivery basis.
THE FUNDS MAY INVEST IN FUTURES CONTRACTS. Futures contracts involve certain
risks because they can be very sensitive to market movements.
One risk is that the price of a futures contract may not move in perfect
correlation with the price of the underlying securities. Another risk is that,
at certain times, it may be impossible for the fund to close out a position in a
futures contract, due to a difference in trading hours or to market conditions
that may reduce the liquidity for a futures contract or its underlying
securities.
70
LAUDUS MARKETMASTERS FUNDS
Because futures carry inherent risks, the funds must give the broker a deposit
of cash and/or securities (the "initial margin") whenever they enter into the
futures contract. The amount of the deposit may vary from one contract to
another, but it is generally a percentage of the contract amount. The potential
for losses associated with futures contracts may exceed amounts recorded in the
Statement of Assets and Liabilities.
Futures are traded publicly on exchanges, and their market value changes daily.
The funds record the change in market value of futures, and also the change in
the amount of margin deposit required ("variation margin").
THE FUNDS MAY ALSO SELL SECURITIES SHORT (SELLING SECURITIES THEY DO NOT OWN).
When they do so, the funds also place assets worth at least 100% of the value of
the short securities into segregated accounts, as collateral. If the market
value of the short securities subsequently falls, the funds can realize a gain
by closing the position. However, if the value rises, the funds typically would
have to add to their collateral or close out their short position at a loss. The
potential for losses associated with short positions is much greater than the
original value of the securities sold short and may exceed amounts recorded in
the Statements of Assets and Liabilities.
THE LAUDUS BALANCED MARKETMASTERS FUND AND LAUDUS INTERNATIONAL MARKETMASTERS
FUND INVEST IN FORWARD CURRENCY CONTRACTS IN CONNECTION WITH THE PURCHASE AND
SALE OF PORTFOLIO SECURITIES TO MINIMIZE THE UNCERTAINTY OF CHANGES IN FUTURE
EXCHANGE RATES. "Forwards," as they are known, are contracts to buy and sell a
currency at a set price on a future date. Similar to futures, forwards are
agreements directly between two parties, however forwards are not publicly
traded.
As with futures, forwards involve certain risks that are not fully reflected in
the fund's financials. If counterparties to the contracts are unable to meet
the terms of the contracts or if the value of the foreign currency changes
unfavorably, the fund could sustain a loss.
THE FUNDS MAY ENTER INTO REPURCHASE AGREEMENTS. In a repurchase agreement, a
fund buys a security from another party (usually a financial institution) with
the agreement that it be sold back in the future. The date, price and other
conditions are all specified when the agreement is created.
The funds' repurchase agreements will be fully collateralized by U.S. government
securities. All collateral is held by the funds' custodian (or, with tri-party
agreements, the agent's bank) and is monitored daily to ensure that its market
value is at least equal to the repurchase price under the agreement.
THE FUNDS MAY ENTER INTO SWAP AGREEMENTS. In these transactions, a fund and a
counterparty agree to swap payments that are based on two different rates. The
counterparty is typically a large financial institution, and the terms of the
swap are specified in advance. For example, a fund may agree that for six months
it will pay the counterparty the equivalent of the interest on a given amount
invested at LIBOR (the London Interbank Offered Rate). In exchange, the
counterparty might agree to pay a fund the equivalent of the same amount
invested in a certain bond index during this same six month period.
Swap agreements carry certain risks. Because the net gains or losses stemming
from a swap agreement depend on the movements of one rate relative to another, a
fund could experience unanticipated losses if one or both rates failed to behave
as expected. A fund also could lose money if a counterparty failed to honor the
terms of a swap agreement.
The Credit Swap or "Credit Default Swap" is a bilateral financial contract in
which one counterparty (the Protection Buyer) pays a periodic fee, typically
expressed in basis points on the notional amount, in return for a Contingent
Payment by the Protection Seller following a Credit Event of a Reference Entity.
71
LAUDUS MARKETMASTERS FUNDS
The definitions of a Credit Event and the settlement mechanism used to determine
the Contingent Payment are flexible and determined by negotiation between the
counterparties at the inception of the transaction.
THE FUNDS ARE AUTHORIZED TO WRITE AND PURCHASE PUT AND CALL OPTIONS. The risk in
writing a call option is that a fund gives up the opportunity for profit if the
market price of the security increases. The risk in writing a put option is that
the funds may incur a loss if the market price of the security decreases and the
option is exercised. The risk in purchasing an option is that a fund pays a
premium whether or not the option is exercised. The funds also have the
additional risk of being unable to enter into a closing transaction at an
acceptable price if a liquid secondary market does not exist.
THE FUNDS MAY ENTER INTO "TBA" (TO BE ANNOUNCED) PURCHASE COMMITMENTS TO
PURCHASE SECURITIES FOR A FIXED PRICE AT A FUTURE DATE, TYPICALLY NOT EXCEEDING
45 DAYS. TBAs may be considered securities in themselves, and involve a risk of
loss if the value of the security to be purchased declines prior to settlement
date. This risk is in addition to the risk of decline in a fund's other assets.
THE FUNDS PAY FEES TO AFFILIATES OF THE INVESTMENT ADVISER FOR VARIOUS SERVICES.
Through their trust, the funds have agreements with Charles Schwab Investment
Management, Inc. (CSIM) to provide investment advisory and administrative
services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent
and shareholder services.
Although these agreements specify certain fees for these services, CSIM and
Schwab have made additional agreements with the funds that may limit the total
expenses charged. The rates and limitations for these fees vary from fund to
fund, and are described in each fund's Statement of Operations. The adviser is
responsible for compensating each fund's investment managers.
THE FUNDS MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING AFFILIATES. Pursuant to
an exemptive order issued by the SEC, the funds may enter into interfund
borrowing and lending transactions within the SchwabFunds. All loans are for
temporary or emergency purposes only. The interest rate charged on the loan is
the average of the overnight repurchase agreement rate and the short-term bank
loan rate. The interfund lending facility is subject to the oversight and
periodic review of the Board of Trustees of the SchwabFunds.
TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/OR DIRECTORS OF THE INVESTMENT
ADVISER OR SCHWAB. Federal securities law limits the percentage of such
"interested persons" who may serve on a trust's board, and the trust was in
compliance with these limitations throughout the report period. The trust did
not pay any of these persons for their service as trustees, but it did pay
non-interested persons (independent trustees), as noted in each fund's Statement
of Operations.
THE FUNDS MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The funds may obtain
temporary bank loans through the trust to which they belong, to use for meeting
shareholder redemptions or for extraordinary or emergency purposes. The
SchwabFunds have custodian overdraft facilities and line of credit arrangements
of $150 million and $100 million with PNC Bank, N.A. and Bank of America, N.A.,
respectively. The funds pay interest on the amounts they borrow at rates that
are negotiated periodically.
AMOUNT WEIGHTED
OUTSTANDING AVERAGE AVERAGE
AT 10/31/04 BORROWING* INTEREST
FUND ($ x 1,000) ($ x 1,000) RATE* (%)
- --------------------------------------------------------------------------------
Laudus U.S.
MarketMasters Fund 632 345 1.77
- --------------------------------------------------------------------------------
Laudus Small-Cap
MarketMasters Fund -- 249 1.92
- --------------------------------------------------------------------------------
* Based on the number of days for which the borrowing is outstanding.
72
LAUDUS MARKETMASTERS FUNDS
THE FUNDS INTEND TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR
REGULATED INVESTMENT COMPANIES. Accordingly, the funds distribute substantially
all of their net investment income and net realized capital gains (if any) to
their respective shareholders each year. As long as a fund meets the tax
requirements, it is not required to pay federal income tax. The net investment
income and net realized capital gains and losses may differ for financial
statement and tax purposes primarily due to differing treatments of losses on
wash sales, foreign currency transactions and paydown gains and losses.
UNDER THE FUNDS' ORGANIZATIONAL DOCUMENTS, THE OFFICERS AND TRUSTEES ARE
INDEMNIFIED AGAINST CERTAIN LIABILITY ARISING OUT OF THE PERFORMANCE OF THEIR
DUTIES TO THE FUNDS. In addition, in the normal course of business the funds
enter into contracts with their vendors and others that provide general
indemnifications. The funds' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the funds.
However, based on experience, the funds expect the risk of loss to be remote.
ACCOUNTING POLICIES
The following are the main policies the funds use in preparing their financial
statements.
THE FUNDS VALUE THE SECURITIES IN THEIR PORTFOLIOS EVERY BUSINESS DAY. The funds
use the following policies to value various types of securities:
- - SECURITIES TRADED ON AN EXCHANGE OR OVER-THE-COUNTER: valued at closing value
for the day, or, on days when no closing value has been reported, halfway
between the most recent bid and asked quotes. Securities that are primarily
traded on foreign exchanges are valued at the closing values of such
securities on their respective exchanges with these values then translated
into U.S. dollars at the current exchange rate.
- - SECURITIES FOR WHICH NO MARKET QUOTATIONS ARE READILY AVAILABLE or when a
significant event has occurred between the time of the security's last close
and the time that a fund calculates net asset value: valued at fair value, as
determined in good faith by the fund's investment adviser using guidelines
adopted by the funds' Board of Trustees and the Pricing Committee. Some of the
more common reasons that may necessitate that a security be valued at fair
value include: the security's trading has been halted or suspended; the
security has been de-listed from a national exchange; the security's primary
trading market is temporarily closed at a time when under normal conditions it
would be open; or the security's primary pricing source is not able or willing
to provide a price.
- - Also, the foreign securities held by International MarketMasters Fund are fair
valued if a movement in the U.S. market exceeds a specific threshold that has
been established using the guideline adopted by the fund's Board of Trustees.
The fund uses a third party vendor to provide the fair valuation based on
certain factors and methodologies including tracking valuation correlations
between the U.S. market and each non-U.S. security.
- - BONDS AND NOTES: valued at halfway between the most recent bid and asked
quotes or, if such quotes are unavailable, at prices for securities of
comparable maturity, credit quality and type. Valuations for bonds and notes
are provided by an independent bond-pricing service.
- - FUTURES AND FORWARDS: open contracts are valued at their settlement prices as
of the close of their exchanges (for futures) or at a market value based on
that day's exchange rates (for forwards). When a fund closes out a futures or
forwards position, it calculates the difference between the value of the
position at the beginning and at the end, and records a realized gain or loss
accordingly.
73
LAUDUS MARKETMASTERS FUNDS
- - SWAP AGREEMENTS: each open contract is valued at fair value using guidelines
adopted by the funds' Board of Trustees, using a formula that varies with the
specific terms of the agreement.
- - OPTIONS: open contracts are valued at their last quoted sale price or in the
case of swaptions (options on swaps) at fair value, that varies with the
specific terms of the underlying swap agreement.
- - SHORT-TERM SECURITIES (60 DAYS OR LESS TO MATURITY): valued at amortized cost.
SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the
security is executed.
IF A FUND SELLS SECURITIES SHORT, it records the proceeds received as an asset
and the obligation to buy back the securities as a liability. At the time a
short sale is initiated, the asset and the liability are of equal value and
effectively cancel each other out. Subsequently, the fund values the liability
side of the transaction according to the market price of the securities sold
short, and values the asset side according to the value of the proceeds. When
the fund closes out a short position (buys the security), it records the outcome
as a realized gain or loss. Interest accrued or dividends paid on securities
sold short are recorded as an expense on the fund's records.
OPTIONS purchased are recorded as assets and written options are recorded as
liabilities to the extent of premiums paid or received. Each fund will realize a
gain or loss when the option transaction expires or closes. When an option is
exercised, the proceeds on sales for a written call option, the purchase cost
for a written put option or the cost of a security for a purchased put or call
option is adjusted by the amount of the premium received or paid.
SWAP premiums paid are recorded as assets and premiums received are recorded as
liabilities. Each fund begins recording income on swaps based on the effective
date and terms of the swap agreement. Interest is paid to or received from the
counterparty periodically. Realized gains and losses are recognized on interest
rate swaps at the termination or closing of the agreement. Credit Default swaps
record gains or losses when a credit event occurs involving the underlying
entity.
DIVIDENDS AND DISTRIBUTIONS FROM PORTFOLIO SECURITIES are recorded on the date
they are effective (the ex-dividend date), although the funds record certain
foreign security dividends on the day they learn of the ex-dividend date.
INTEREST INCOME is recorded as it accrues. If a fund buys a debt security at a
discount (that is, for less than its face value) or a premium (more than face
value), it amortizes the discount or premium from the current date up to
maturity. The fund then increases (in the case of discounts) or reduces (in the
case of premiums) the income it records from the security. If the security is
callable (meaning that the issuer has the option to pay it off before its
maturity date), then the fund amortizes the premium to the security's call date
and price, rather than the maturity date and price.
REALIZED GAINS AND LOSSES from security transactions are based on the identified
costs of the securities involved. Gains and losses from paydowns on mortgage and
asset backed securities are recorded as adjustments to interest income.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES are reported in U.S.
dollars. For assets and liabilities held on a given date, the dollar value is
based on market exchange rates in effect on that date. Transactions involving
foreign currencies, including purchases, sales, income receipts and expense
payments, are calculated using exchange rates in effect on the transaction date.
EXPENSES that are specific to a fund are charged directly to that fund. Expenses
that are common to all funds within a trust generally are allocated among the
funds in proportion to their average daily net assets.
74
LAUDUS MARKETMASTERS FUNDS
FOR FUNDS OFFERING MULTIPLE SHARE CLASSES, all of the realized and unrealized
gains or losses and net investment income, other than class specific expenses,
are allocated daily to each class in proportion to its net assets.
EACH FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND
ACCOUNTING, and is considered a separate entity for tax purposes. Within its
account, each fund also keeps certain assets in segregated accounts, as may be
required by securities law.
THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH ACCOUNTING PRINCIPLES
GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. Notwithstanding this,
shareholders should understand that in order to follow these principles, fund
management has to make estimates and assumptions that affect the information
reported in the financial statements. It's possible that once the results are
known, they may turn out to be different from these estimates.
75
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF:
Laudus U.S. MarketMasters Fund
Laudus Balanced MarketMasters Fund
Laudus Small-Cap MarketMasters Fund
Laudus International MarketMasters Fund
In our opinion, the accompanying statements of assets and liabilities, including
the portfolio holdings, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of Laudus U.S. MarketMasters Fund, Laudus
Balanced MarketMasters Fund, Laudus Small-Cap MarketMasters Fund and Laudus
International MarketMasters Fund (four of the portfolios constituting Schwab
Capital Trust) (hereafter collectively referred to as the "Funds") at October
31, 2004, the results of each of their operations for the year then ended, and
the changes in each of their net assets for each of the two years in the period
then ended and the financial highlights for each of the periods presented, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Funds' management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
San Francisco, CA
December 16, 2004
76
FUND TRUSTEES
A fund's Board of Trustees is responsible for protecting the interests of
that fund's shareholders. The tables below give information about the
people who serve as trustees and officers for the SchwabFunds(R),
including the Funds covered in this report. Trustees remain in office
until they resign, retire or are removed by shareholder vote. 1
Under the Investment Company Act of 1940, any officer, director, or
employee of Schwab or CSIM is considered an "interested person," meaning
that he or she is considered to have a business interest in Schwab or
CSIM. These individuals are listed as "interested trustees." The
"independent trustees" are individuals who, under the 1940 Act, are not
considered to have a business interest in Schwab or CSIM.
Each of the SchwabFunds (of which there were 51 as of 10/31/04) belongs to
one of these trusts: The Charles Schwab Family of Funds, Schwab
Investments, Schwab Capital Trust or Schwab Annuity Portfolios. Currently
all these trusts have the same trustees and officers. The address for all
trustees and officers is 101 Montgomery Street, San Francisco, CA 94104.
You can find more information about the trustees and officers in the
Statement of Additional Information, which is available free by calling
1.800.435.4000.
INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S);
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
CHARLES R. SCHWAB 2 Chair, Trustee: Chair, CEO, Director, The Charles Schwab Corp., Charles Schwab &
7/29/37 Family of Funds, 1989; Co., Inc.; Chair, Director, Charles Schwab Investment Management,
Investments, 1991; Inc.; Chair, Charles Schwab Holdings (UK); CEO, Director, Charles
Capital Trust, 1993; Schwab Holdings, Inc.; Chair, CEO Schwab (SIS) Holdings, Inc. I,
Annuity Portfolios, 1994. Schwab International Holdings, Inc.; Director, Charles Schwab Bank,
N.A., U.S. Trust Corp., United States Trust Co. of New York, Siebel
Systems (software), Xsign, Inc. (electronic payment systems),
TrustMark, Inc., All Kinds of Minds (education); Trustee, Stanford
University. Until 5/04: Director, The Gap, Inc. (clothing retailer). Until
5/03: Co-CEO, The Charles Schwab Corp. Until 3/02: Director,
Audiobase, Inc. (Internet audio solutions). Until 5/02: Director,
Vodaphone AirTouch PLC (telecommunications). Until 7/01: Director,
The Charles Schwab Trust Co.
1 The SchwabFunds retirement policy requires that independent trustees elected
after January 1, 2000 retire at age 72 or after twenty years of service as a
trustee, whichever comes first. Independent trustees elected prior to January
1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will
retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on
December 31, 2010.
2 In addition to his position with the investment adviser and the distributor,
Mr. Schwab also owns stock of The Charles Schwab Corporation.
77
INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUST OFFICE(S) HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
EVELYN DILSAVER President, CEO EVP, President, Charles Schwab Investment Management, Inc;
5/4/55 (all trusts). Until 7/04: SVP for Development and Distribution, Asset Management
Products and Services Enterprise; Until 6/03: EVP, CFO, Administrative
Officer, U.S. Trust Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Director, Charles Schwab Investment
4/5/55 Officer (all trusts). Management, Inc.; Chief Investment Officer, The Charles Schwab
Trust Co.
- ------------------------------------------------------------------------------------------------------------------------------------
KIMON DAIFOTIS SVP, Chief Investment Since 9/04: Chief Investment Officer, Fixed Income, Charles
7/10/59 Officer (all trusts). Schwab Investment Management, Inc.; Since 6/04: SVP, Charles Schwab
Investment Management, Inc.; Until 6/04: VP, Charles Schwab
Investment Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
JEFF MORTIMER SVP, Chief Investment Since 5/04: SVP, Chief Investment Officer, Equities, Charles Schwab
9/29/63 Officer (all trusts). Investment Management, Inc.; Since 6/04: VP, Chief Investment
Officer, Laudus Trust; Until 5/04: VP, Charles Schwab Investment
Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
RANDALL FILLMORE Chief Compliance Since 9/04: SVP, Institutional Compliance and Chief Compliance
11/11/60 Officer (all trusts). Officer, Charles Schwab Investment Management, Inc.; Until 9/04:
VP, Charles Schwab & Co., Charles Schwab Investment Management,
Inc.; Until 2002: VP of Internal Audit, Charles Schwab & Co.;
Prior to 2000: PricewaterhouseCoopers.
- ------------------------------------------------------------------------------------------------------------------------------------
KOJI E. FELTON Secretary (all trusts). SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab
3/13/61 Investment Management, Inc. Until 6/98: Branch Chief in Enforcement,
U.S. Securities and Exchange Commission, San Francisco.
- ------------------------------------------------------------------------------------------------------------------------------------
GEORGE PEREIRA 1 Treasurer, Principal Since 11/04: SVP, CFO, Charles Schwab Investment Management,
6/9/64 Financial Officer Inc.; Until 11/04: SVP, Financial Reporting, Charles Schwab & Co., Inc.;
(all trusts). Until 12/99: Chief Financial Officer, Commerzbank Capital Markets;
Until 9/99: Managing Director at the New York Stock Exchange.
1 Elected to his position on the SchwabFunds Board on November 16, 2004.
78
INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
MARIANN BYERWALTER 2000 (all trusts). Chair, JDN Corp. Advisory LLC; Trustee, Stanford University, America
8/13/60 First Cos., (venture capital/fund management), Redwood Trust, Inc.
(mortgage finance), Stanford Hospitals and Clinics, SRI International
(research), PMI Group, Inc. (mortgage insurance), Lucile Packard
Children's Hospital, Laudus Trust, Laudus Variable Insurance Trust.
2001: Special Advisor to the President, Stanford University. Until 2002:
Director, LookSmart, Ltd. (Internet infrastructure). Until 2001: VP,
Business Affairs, CFO, Stanford University.
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD F. DORWARD Family of Funds, 1989; CEO, Dorward & Associates (corporate management, marketing and
9/23/31 Investments, 1991; communications consulting). Until 1999: EVP, Managing Director,
Capital Trust, 1993; Grey Advertising.
Annuity Portfolios,1994.
- ------------------------------------------------------------------------------------------------------------------------------------
WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp. (bio-pharmaceuticals). Trustee, Solectron Corp.
11/22/41 (manufacturing), Airlease Ltd. (aircraft leasing), Mission West
Properties (commercial real estate), Stratex Corp. (network equipment);
Public Governor, Laudus Trust, Laudus Variable Insurance Trust;
Member, executive committee, Pacific Stock & Options Exchange.
Until 2003: Trustee, Tenera, Inc. (services and software). Until 1998:
Dean, Haas School of Business, University of California, Berkeley.
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT G. HOLMES Family of Funds, 1989; Chair, CEO, Director, Semloh Financial, Inc. (international financial
5/15/31 Investments, 1991; services and investment advice).
Capital Trust, 1993;
Annuity Portfolios,1994.
- ------------------------------------------------------------------------------------------------------------------------------------
GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors);
9/28/50 Trustee, Rorento N.V. (investments--Netherlands), Cooper Industries
(electrical products, tools and hardware); Member, audit committee,
Northern Border Partners, L.P. (energy). Until 2002: Director, Pennzoil-
Quaker State Co. (oil and gas).
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD R. STEPHENS Family of Funds, 1989; Managing Partner, D.R. Stephens & Co. (investments). Until 1996:
6/28/38 Investments, 1991; Chair, CEO, North American Trust (real estate investment trust).
Capital Trust, 1993;
Annuity Portfolios, 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL W. WILSEY Family of Funds, 1989; Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate
8/18/43 Investments, 1991; and investments).
Capital Trust, 1993;
Annuity Portfolios, 1994.
79
GLOSSARY
ASSET ALLOCATION The practice of dividing a portfolio among different asset
classes, with each asset class assigned a particular percentage.
ASSET CLASS A group of securities with similar structure and basic
characteristics. Stocks, bonds and cash are the three main examples of asset
classes.
BETA A historical measure of an investment's volatility relative to a market
index (usually the S&P 500(R)). The index is defined as having a beta of 1.00.
Investments with a beta higher than 1.00 have been more volatile than the index;
those with a beta of less than 1.00 have been less volatile.
BOND A security representing a loan from the investor to the issuer. A bond
typically pays interest at a fixed rate (the "coupon rate") until a specified
date (the "maturity date"), at which time the issuer returns the money borrowed
("principal" or "face value") to the bondholder. Because of their structure,
bonds are sometimes called "fixed income securities" or "debt securities."
An individual bond is subject to the credit risk of the issuer. Changes in
interest rates can affect a bond's market value prior to call or maturity. There
is no guarantee that a bond's yield to call or maturity will provide a positive
return over the rate of inflation.
BOND FUND A bond fund is subject to the same credit, interest rate, and
inflation risks as bonds. In addition, a bond fund incurs ongoing fees and
expenses. A bond fund's net asset value will fluctuate with the price of the
underlying bonds and the portfolio turnover activity; return of principal is not
guaranteed.
CAP, CAPITALIZATION See "market cap."
CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an
investment and its value at a later time. If the investment has been sold, the
capital gain or loss is considered a realized gain or loss. If the investment is
still held, the gain or loss is still "on paper" and is considered unrealized.
EARNINGS GROWTH RATE For a mutual fund, the average yearly rate at which the
earnings of the companies in the fund's portfolio have grown, measured over the
past five years.
EARNINGS PER SHARE (EPS) A company's earnings, or net income, for the past 12
months, divided by the number of shares outstanding.
EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to
cover the fund's operating expenses. An expense ratio of 0.50% means that a
fund's expenses amount to half of one percent of its average net assets a year.
MARKET CAP, MARKET CAPITALIZATION The value of a company as determined by the
total value of all shares of its stock outstanding.
MEDIAN MARKET CAP The midpoint of the range of market caps of the stocks held by
a fund. There are different ways of calculating median market cap. With a simple
median, half of the stocks in the fund's portfolio would be larger than the
median, and half would be smaller. With a weighted median (the type that is
calculated for these funds), half of the fund's assets are invested in stocks
that are larger than the median market cap, and half in stocks that are smaller.
NET ASSET VALUE (NAV) The value of one share of a mutual fund. NAV is calculated
by taking the fund's total assets, subtracting liabilities, and dividing by the
number of shares outstanding.
OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual
fund, indicates all shares currently held by investors.
PRICE-TO-BOOK RATIO (P/B) The market price of a company's stock compared with
its "book value." A mutual fund's P/B is the weighted average of the P/B of all
stocks in the fund's portfolio.
PRICE-TO-EARNINGS RATIO (P/E) The market price of a company's stock compared
with earnings over the past year. A mutual fund's P/E is the weighted average of
the P/E of all stocks in the fund's portfolio.
RETURN ON EQUITY (ROE) The average yearly rate of return for each dollar of
investors' money, measured over the past five years.
STOCK A share of ownership, or equity, in the issuing company.
TOTAL RETURN The percentage that an investor would have earned or lost on an
investment in the fund assuming dividends and distributions were reinvested.
WEIGHTED AVERAGE For mutual funds, an average that gives the same weight to each
security as the security represents in the fund's portfolio.
YIELD The income paid out by an investment, expressed as a percentage of the
investment's market value.
80
An investor should consider a fund's investment objectives, risks, and charges
and expenses carefully before investing or sending money. This and other
important information can be found in the fund's prospectus. Please call
1.800.435.4000 for a prospectus and brochure for any SchwabFund. Please read the
prospectus carefully before you invest. This report must be preceded or
accompanied by a current prospectus.
METHODS FOR PLACING ORDERS
The following information outlines how Schwab investors can place orders. If you
are investing through a third-party investment provider, methods for placing
orders may be different.
INTERNET 1
www.schwab.com/
marketmasters
SCHWAB BY PHONE(TM) 2
Use our automated voice service or speak to a representative. Call
1.800.435.4000, day or night (for TDD service, call 1.800.345.2550).
TELEBROKER(R)
Use our automated touch-tone phone service at 1.800.272.4922.
MAIL
Write to Laudus
MarketMasters Funds at:
P.O. Box 3812
Englewood, CO
80155-3812
When selling or exchanging shares, be sure to include the signatures of at least
one of the persons whose name is on the account.
PROXY VOTING POLICIES, PROCEDURES AND RESULTS
A description of the proxy voting policies and procedures used to determine how
to vote proxies on behalf of the funds is available without charge, upon
request, by visiting Schwab's web site at www.schwab.com/marketmasters, the
SEC's web site at http://www.sec.gov, or by contacting SchwabFunds at
1.800.435.4000.
Information regarding how a fund voted proxies relating to portfolio securities
during the most recent twelve-month period ended June 30 is available, without
charge, by visiting Schwab's web site at www.schwab.com/schwabfunds or the SEC's
website at http://www.sec.gov.
1 Shares of Sweep Investments(TM) may not be purchased directly over the
Internet.
2 Orders placed in person or through a telephone representative may be subject
to a service fee payable to Schwab.
THE LAUDUS FUNDS(TM)
LAUDUS MARKETMASTERS FUNDS(TM)
Laudus U.S. MarketMasters Fund(TM)
Laudus Balanced MarketMasters Fund(TM)
Laudus Small-Cap MarketMasters Fund(TM)
Laudus International MarketMasters Fund(TM)
LAUDUS ROSENBERG U.S. EQUITY FUNDS
Laudus Rosenberg U.S. Large Capitalization Fund
Laudus Rosenberg U.S. Large Capitalization Growth Fund
Laudus Rosenberg U.S. Discovery Fund
Laudus Rosenberg U.S. Small Capitalization Growth Fund
LAUDUS ROSENBERG EQUITY FUNDS
Laudus Rosenberg International Equity Fund
Laudus Rosenberg International Small Capitalization Fund
Laudus Rosenberg European Fund
LAUDUS ROSENBERG LONG/SHORT FUNDS
Laudus Rosenberg U.S. Large/Mid Capitalization
Long/Short Equity Fund
Laudus Rosenberg Global Long/Short Equity Fund
Laudus Rosenberg Value Long/Short Equity Fund
The Laudus Funds includes the Laudus Rosenberg Funds, which are part of the
Laudus Trust and distributed by Laudus Distributor, Inc.; and the Laudus
MarketMasters Funds, which are part of the Schwab Capital Trust, and distributed
by Charles Schwab & Co., Inc.
[LAUDUS FUNDS LOGO]
COMMAND PERFORMANCE(TM)
FOR MORE INFORMATION ABOUT THE FUNDS:
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc. (Schwab)
FUNDS
Laudus MarketMasters Funds(TM)
P.O. Box 3812, Englewood, CO 80155-3812
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
(C)2004 Charles Schwab & Co., Inc. All rights reserved. Member SIPC. Printed on
recycled paper. REG13812-07
SCHWAB MARKETTRACK PORTFOLIOS(R)
ANNUAL REPORT
October 31, 2004
Schwab MarketTrack
All Equity Portfolio(TM)
Schwab MarketTrack
Growth Portfolio(TM)
Schwab MarketTrack
Balanced Portfolio(TM)
Schwab MarketTrack
Conservative Portfolio(TM)
[CHARLES SCHWAB LOGO]
Four portfolios that combine the power of indexing with the benefits of asset
allocation.
IN THIS REPORT
Management's Discussion ............................................... 2
The president of SchwabFunds(R) and the funds' managers take
a look at the factors that shaped fund performance during the
report period.
Performance at a Glance ..................... 5
Schwab MarketTrack All Equity Portfolio(TM)
Ticker Symbol: SWEGX
The portfolio seeks high capital growth through an all-stock
portfolio.
Performance and Fund Facts .................. 6
Financial Statements ....................... 15
Schwab MarketTrack Growth Portfolio(TM)
Ticker Symbol: SWHGX
The portfolio seeks high capital growth with
less volatility than an all-stock portfolio.
Performance and Fund Facts .................. 8
Financial Statements ....................... 20
Schwab MarketTrack Balanced Portfolio(TM)
Ticker Symbol: SWBGX
The portfolio seeks both capital growth and income.
Performance and Fund Facts ................. 10
Financial Statements ....................... 32
Schwab MarketTrack Conservative Portfolio(TM)
Ticker Symbol: SWCGX
The portfolio seeks income and more growth potential than an
all-bond portfolio.
Performance and Fund Facts ................. 12
Financial Statements ....................... 44
Fund Expenses ........................................................ 14
Financial Notes ...................................................... 56
Fund Trustees ........................................................ 61
Glossary ............................................................. 64
Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM)
Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab).
[PHOTO OF CHARLES SCHWAB]
Charles Schwab
Chairman
FROM THE CHAIRMAN
Dear Shareholder:
As we get ready for 2005, I want to remind you that you might want to add one
more item to your list of New Year's resolutions--to review and, if necessary,
rebalance your investment portfolio. After all, staying on track is as important
in investing as it is in any other part of life. No matter whether it's a good
or bad investment climate, you need to make sure that you own a diversified mix
of investments and that your asset allocation matches your individual goals,
time frame and tolerance for risk.
One efficient way to be diversified is by owning a broad-based mutual fund.
Equity mutual funds also can help you to diversify the stock side of your
portfolio. While our experienced portfolio managers adhere to each fund's
objective, it still is important to review your portfolio to make sure the
holdings in your funds don't overlap and you're not overconcentrated in one
asset class.
On a final note, I'm very happy to announce that Evelyn Dilsaver has been named
CEO and President of SchwabFunds(R). Although new to the position, Evelyn is no
stranger to SchwabFunds, having been an officer in several other capacities at
Schwab. Her broad experience in product creation, coupled with a comprehensive
understanding of your financial needs and her commitment to you, make her the
ideal candidate for her new role.
Thank you for investing with us.
Sincerely,
/s/ Charles Schwab
MANAGEMENT'S DISCUSSION for the year ended October 31, 2004
[PHOTO OF EVELYN DILSAVER]
EVELYN DILSAVER is President and CEO of Charles Schwab Investment Management,
Inc. and is president of each of the funds covered in this report. She joined
the firm in 1992 and has held a variety of executive positions at Schwab.
Dear Shareholder:
I am very excited about my new role as President and CEO of SchwabFunds(R). I
believe that my experience at Schwab has prepared me well for this role, as each
position has been focused on meeting the needs of our clients. I promise that I
will continue on this path and that my goal is to offer you even better service
and more relevant choices.
One of the relevant choices is SchwabFunds' MarketTrack Portfolios. Each of the
four portfolios' exposure to a broad spectrum of U.S. and international
securities may make it an appropriate choice for long-term investors seeking
diversification across a variety of asset classes in a single fund. Each
portfolio has been designed to help shareholders implement an asset-allocation
plan. So whether you want an all-equity fund or one that includes exposure to
the fixed-income sector, you can gain diversification that might otherwise be
impossible because of the costs associated with investing in so many individual
securities.
I also want to let you know that we plan to continue to provide and expand
information on SchwabFunds on schwab.com. Providing this information is one of
the many ways we help individual investors choose investments that are
appropriate for their financial goals and time horizons.
I look forward to serving you in my new role. I also want to remind you that
your trust is very important to us, and I will do all I can to earn and maintain
that trust. Thank you for investing in SchwabFunds.
Sincerely,
/s/ Evelyn Dilsaver
2 Schwab MarketTrack Portfolios
[PHOTO OF JEFFREY MORTIMER]
JEFFREY MORTIMER, CFA, senior vice president and chief investment officer,
equities, of the investment adviser is responsible for the overall management of
each of the portfolios. Prior to joining the firm in October 1997, he worked for
more than nine years in asset management.
[PHOTO OF TOM BROWN]
TOM BROWN, an associate portfolio manager of the investment adviser, is a
day-to-day manager of the equity portions of the portfolios. He joined Schwab in
1995, became a trader in 1999, and was named to his current position in 2004.
THE INVESTMENT ENVIRONMENT AND THE FUNDS
THE ENCOURAGING ECONOMIC NEWS THAT WAS REPORTED TOWARD THE END OF 2003 CONTINUED
TO IMPROVE INTO 2004. Businesses added to their inventories, factory orders rose
and production gained some strength. Retail sales continued to rise and higher
commodity prices were holding. Mortgage refinancing activity, while still
significant, waned as mortgage rates inched slightly upward. And finally, the
last piece of the economic puzzle--job growth--began to pick up some steam.
In fact, aside from a "soft patch" in early summer, the economy was clicking on
all cylinders.
With the economic recovery more broad-based, investors, who only a year ago
feared deflation, started to worry about inflation. Their inflationary concerns
were based on surging oil prices, which had hit an all-time high amid fears of
supply interruptions. And while commodity prices moderated somewhat later in the
report period, previous increases started to show up in broad measures of
inflation. Labor costs also were beginning to rise. Nonetheless, the Federal
Reserve (the Fed) continued to hold the Fed funds rate near a 45-year low until
June 2004.
While third-quarter GDP moved in the right direction, up to an annualized 3.7%
from 3.3% in second quarter, higher commodity prices had effectively eroded many
consumers' purchasing power. Geopolitical events also had wreaked havoc on oil
markets and, after a brief decline in the price of oil following OPEC's decision
to boost production, a confluence of supply concerns and robust global demand
pushed crude to new highs. In addition to these issues, daily headlines about
terrorism and the fierce run for the White House all added up to an
uncomfortable sense of uncertainty, keeping many investors on the sidelines.
Despite all these concerns, which escalated toward the end of the report period,
the strength of the market early in the period, combined with strong second- and
third-quarter valuations and earnings resulted in a positive showing for
equities.
Schwab MarketTrack Portfolios 3
MANAGEMENT'S DISCUSSION continued
[PHOTO OF KIMON DAIFOTIS]
KIMON DAIFOTIS, CFA, a senior vice president and chief investment officer, fixed
income, of the investment adviser, is responsible for the overall management of
the bond and cash portions of the Schwab MarketTrack Portfolios. Prior to
joining the firm in 1997, he worked for more than 18 years in research and asset
management.
More specifically, the S&P 500(R) Index was up 9.42% for the 12-month report
period, while the Russell 2000(R) Index was up 11.73%. In terms of style, value
edged out growth early in the period and gained momentum, significantly
outperforming growth at the end of the period.
The MarketTrack Portfolios incorporate a mix of different asset classes.
Accordingly, their returns over a given period will reflect a blend of the
returns of those asset classes, and will depend on their relative weightings
within the portfolios. By spreading their exposure over various asset classes,
the MarketTrack Portfolios are designed to provide more stable returns while
seeking to reduce risk over various market cycles.
During this period, bonds did well, up 5.53%, as measured by the Lehman Brothers
U.S. Aggregate Bond Index. But it was more the strength in the equity markets
that helped to boost returns in the MarketTrack portfolios.
ASSET CLASS PERFORMANCE COMPARISON % returns during the report period
This graph compares the performance of various asset classes during the report
period. Final performance figures for the period are in the key below.
9.42% S&P 500(R) INDEX: measures U.S. large-cap stocks
11.73% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
18.84% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in
Europe, Australasia and the Far East
5.53% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond market
1.03% THREE-MONTH U.S. TREASURY BILLS (T-BILLS): measures short-term U.S.
Treasury obligations
[LINE CHART]
LEHMAN
RUSSELL BROTHERS THREE-MONTH
S&P 500(R) 2000(R) MSCI-EAFE(R) U.S. AGGREGATE U.S. TREASURY
INDEX INDEX INDEX BOND INDEX BILLS
31-Oct-03 0.00 0.00 0.00 0.00 0.00
07-Nov-03 0.29 2.82 0.78 -0.63 0.02
14-Nov-03 0.08 0.94 1.80 0.61 0.04
21-Nov-03 -1.33 -0.38 0.15 0.86 0.06
28-Nov-03 0.88 3.55 2.22 0.24 0.08
05-Dec-03 1.24 2.14 4.70 0.95 0.09
12-Dec-03 2.48 3.80 5.04 0.97 0.11
19-Dec-03 3.90 3.68 6.46 1.50 0.13
26-Dec-03 4.59 5.21 7.84 1.53 0.15
02-Jan-04 5.85 6.40 10.98 0.81 0.13
09-Jan-04 7.16 9.14 13.86 2.16 0.15
16-Jan-04 8.89 12.04 12.31 2.46 0.17
23-Jan-04 9.07 13.13 15.10 2.33 0.19
30-Jan-04 8.12 10.24 11.77 2.07 0.20
06-Feb-04 9.26 10.89 13.33 2.35 0.22
13-Feb-04 9.63 11.12 15.41 2.80 0.24
20-Feb-04 9.49 10.13 15.13 2.64 0.25
27-Feb-04 9.62 11.23 14.35 3.18 0.27
05-Mar-04 10.80 13.90 16.17 3.85 0.28
12-Mar-04 7.38 10.77 11.07 4.12 0.30
19-Mar-04 6.36 8.49 13.10 4.07 0.32
26-Mar-04 6.20 8.91 12.52 3.88 0.34
02-Apr-04 9.47 14.78 16.39 2.72 0.36
09-Apr-04 9.27 13.73 16.44 2.62 0.37
16-Apr-04 8.83 10.99 15.04 2.03 0.39
23-Apr-04 9.42 12.39 14.61 1.51 0.41
30-Apr-04 6.27 6.54 12.39 1.25 0.43
07-May-04 5.47 4.43 10.88 -0.19 0.45
14-May-04 5.27 3.54 6.99 0.03 0.47
21-May-04 5.09 3.93 9.59 0.21 0.49
28-May-04 7.73 8.24 12.63 0.84 0.51
04-Jun-04 7.95 8.15 12.87 0.36 0.51
11-Jun-04 9.32 8.43 13.42 0.32 0.52
18-Jun-04 9.21 8.73 14.66 0.78 0.55
25-Jun-04 9.18 12.01 15.45 1.18 0.56
02-Jul-04 8.35 11.13 15.27 2.16 0.59
09-Jul-04 7.18 7.52 15.10 2.22 0.62
16-Jul-04 6.10 5.96 14.50 2.69 0.64
23-Jul-04 4.64 2.87 10.84 2.41 0.66
30-Jul-04 6.19 5.20 11.50 2.42 0.68
06-Aug-04 2.58 -0.81 10.63 3.63 0.70
13-Aug-04 2.74 -1.21 9.57 3.72 0.73
20-Aug-04 6.01 4.63 11.08 3.79 0.75
27-Aug-04 6.95 5.36 12.29 3.89 0.78
03-Sep-04 7.56 6.26 12.42 3.70 0.80
10-Sep-04 8.58 8.88 14.40 4.31 0.81
17-Sep-04 9.07 9.54 14.32 4.59 0.84
24-Sep-04 7.31 8.18 13.88 4.93 0.88
01-Oct-04 9.41 11.89 16.43 4.38 0.91
08-Oct-04 8.56 10.13 17.91 4.79 0.95
15-Oct-04 7.23 8.95 16.46 5.20 0.97
22-Oct-04 6.03 8.64 17.65 5.54 1.00
29-Oct-04 9.42 11.73 18.84 5.53 1.03
31-Oct-04 9.42 11.73 18.84 5.53 1.03
These figures assume dividends and distributions were reinvested. Index figures
do not include trading and management costs, which would lower performance.
Indices are unmanaged and you cannot invest in them directly. Remember that past
performance is not an indication of future results.
Data source: Charles Schwab & Co., Inc.
4 Schwab MarketTrack Portfolios
PERFORMANCE AT A GLANCE
Total return for the 12 months ended 10/31/04
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
SCHWAB MARKETTRACK
ALL EQUITY PORTFOLIO(TM) ....... 11.75%
Benchmark ...................... 11.18%
Performance Details ............ page 6
SCHWAB MARKETTRACK
GROWTH PORTFOLIO(TM) ........... 9.94%
Benchmark ...................... 9.84%
Performance Details ............ page 8
SCHWAB MARKETTRACK
BALANCED PORTFOLIO(TM) ......... 8.61%
Benchmark ...................... 8.27%
Performance Details ............ page 10
SCHWAB MARKETTRACK
CONSERVATIVE PORTFOLIO(TM) ..... 7.38%
Benchmark ...................... 7.09%
Performance Details ............ page 12
THE SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO did well over the report period due
to its 100% allocation to equities, which performed better than fixed-income
securities. Performance for the period was up 11.75%, slightly outperforming its
benchmark. The fund's 30% allocation to international stocks, along with its 25%
allocation to small-cap stocks, which led the market for much of the report
period, were key to the portfolio's strong performance.
THE SCHWAB MARKETTRACK GROWTH PORTFOLIO also did well. It was up 9.94%, slightly
outperforming its benchmark for the report period. The portfolio's performance
was helped by its exposure to international and small-cap stocks. Its allocation
to fixed income--an asset class that tends to be less volatile--also added
positive returns, although not as strong as equities during the period.
THE SCHWAB MARKETTRACK BALANCED PORTFOLIO returned 8.61% during the period,
outperforming its benchmark. The portfolio is weighted toward equities but also
includes fixed-income investments to add income and reduce volatility. While
equities were the stronger performers during the period, the 40% fixed-income
allocation (35% bonds/5% cash) also contributed positive returns, while seeking
to reduce overall risk.
THE SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO did well during the period as it
was up 7.38%, outperforming its benchmark. Equities performed well and
contributed positively to the portfolio's return. While equities were the
stronger performers, the 60% fixed-income allocation (55% bonds/5% cash) also
contributed positive returns, while seeking to reduce overall risk.
All portfolio and index figures on this page assume dividends and distributions
were reinvested. Index figures do not include trading and management costs,
which would lower performance. Indices are unmanaged, and you cannot invest in
them directly.
Expenses may be partially absorbed by CSIM and Schwab. Without these reductions,
the portfolios' total returns would have been lower. Performance does not
reflect the deduction of taxes that a shareholder would pay on portfolio
distributions or on the redemption of portfolio shares.
Small company stocks are subject to greater volatility than other asset
categories. Foreign securities can involve risks such as political and economic
instability and currency risk.
Nothing in this report represents a recommendation of a security by the
investment adviser. Manager views and portfolio holdings may have changed since
the report date.
Schwab MarketTrack Portfolios 5
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO(TM)
PERFORMANCE as of 10/31/04
AVERAGE ANNUAL TOTAL RETURNS 1,2
This chart compares performance of the portfolio with a benchmark and the
portfolio's Morningstar category.
[BAR CHART]
Benchmark: Fund Category:
ALL EQUITY MORNINGSTAR
COMPOSITE LARGE-CAP
PORTFOLIO INDEX BLEND
1 YEAR 11.75% 11.18% 7.89%
5 YEARS -0.36% 1.72% -1.72%
SINCE INCEPTION 1.95% 3 3.25% 4 -2.62% 3
3 SINCE INCEPTION: 5/19/98
4 SINCE: 6/1/98
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the portfolio, compared with a similar investment in a benchmark
and an additional index.
$11,331 PORTFOLIO
$12,278 ALL EQUITY COMPOSITE INDEX
$11,105 S&P 500(R) INDEX
[LINE GRAPH]
ALL EQUITY
COMPOSITE S&P 500(R)
PORTFOLIO INDEX INDEX
19-May-98 $10,000 $10,000
31-May-98 $ 9,850 $10,000 $ 9,751
30-Jun-98 $10,050 $10,110 $10,147
31-Jul-98 $ 9,810 $ 9,892 $10,039
31-Aug-98 $ 8,330 $ 8,339 $ 8,590
30-Sep-98 $ 8,610 $ 8,575 $ 9,140
31-Oct-98 $ 9,280 $ 9,138 $ 9,883
30-Nov-98 $ 9,800 $ 9,649 $10,482
31-Dec-98 $10,303 $10,161 $11,086
31-Jan-99 $10,483 $10,330 $11,549
28-Feb-99 $10,041 $ 9,909 $11,190
31-Mar-99 $10,383 $10,220 $11,638
30-Apr-99 $10,896 $10,759 $12,088
31-May-99 $10,664 $10,607 $11,803
30-Jun-99 $11,197 $11,178 $12,458
31-Jul-99 $11,137 $11,109 $12,069
31-Aug-99 $11,056 $10,989 $12,009
30-Sep-99 $11,006 $10,870 $11,680
31-Oct-99 $11,539 $11,275 $12,419
30-Nov-99 $11,971 $11,824 $12,672
31-Dec-99 $12,885 $12,882 $13,418
31-Jan-00 $12,162 $12,357 $12,744
29-Feb-00 $12,498 $12,945 $12,503
31-Mar-00 $13,159 $13,488 $13,726
30-Apr-00 $12,610 $12,912 $13,313
31-May-00 $12,223 $12,562 $13,040
30-Jun-00 $12,752 $13,086 $13,362
31-Jul-00 $12,386 $12,824 $13,154
31-Aug-00 $13,098 $13,560 $13,971
30-Sep-00 $12,477 $13,043 $13,233
31-Oct-00 $12,274 $12,769 $13,177
30-Nov-00 $11,378 $11,877 $12,139
31-Dec-00 $11,736 $12,409 $12,198
31-Jan-01 $11,996 $12,687 $12,632
28-Feb-01 $10,967 $11,749 $11,480
31-Mar-01 $10,302 $11,007 $10,752
30-Apr-01 $11,081 $11,837 $11,587
31-May-01 $11,061 $11,865 $11,665
30-Jun-01 $10,925 $11,676 $11,381
31-Jul-01 $10,655 $11,415 $11,270
31-Aug-01 $10,187 $10,940 $10,564
30-Sep-01 $ 9,179 $ 9,813 $ 9,711
31-Oct-01 $ 9,418 $10,123 $ 9,896
30-Nov-01 $10,000 $10,752 $10,655
31-Dec-01 $10,205 $11,021 $10,749
31-Jan-02 $ 9,887 $10,770 $10,592
28-Feb-02 $ 9,728 $10,626 $10,388
31-Mar-02 $10,258 $11,190 $10,778
30-Apr-02 $ 9,972 $10,963 $10,125
31-May-02 $ 9,855 $10,845 $10,050
30-Jun-02 $ 9,293 $10,214 $ 9,335
31-Jul-02 $ 8,380 $ 9,206 $ 8,607
31-Aug-02 $ 8,402 $ 9,220 $ 8,663
30-Sep-02 $ 7,585 $ 8,342 $ 7,722
31-Oct-02 $ 8,062 $ 8,799 $ 8,401
30-Nov-02 $ 8,529 $ 9,290 $ 8,896
31-Dec-02 $ 8,118 $ 8,853 $ 8,374
31-Jan-03 $ 7,817 $ 8,585 $ 8,154
28-Feb-03 $ 7,645 $ 8,384 $ 8,032
31-Mar-03 $ 7,656 $ 8,381 $ 8,110
30-Apr-03 $ 8,355 $ 9,084 $ 8,778
31-May-03 $ 8,925 $ 9,689 $ 9,241
30-Jun-03 $ 9,075 $ 9,856 $ 9,359
31-Jul-03 $ 9,323 $10,134 $ 9,524
31-Aug-03 $ 9,559 $10,427 $ 9,710
30-Sep-03 $ 9,538 $10,384 $ 9,607
31-Oct-03 $10,140 $11,042 $10,150
30-Nov-03 $10,333 $11,261 $10,240
31-Dec-03 $10,875 $11,796 $10,776
31-Jan-04 $11,071 $12,047 $10,975
29-Feb-04 $11,223 $12,236 $11,127
31-Mar-04 $11,136 $12,202 $10,959
30-Apr-04 $10,854 $11,855 $10,787
31-May-04 $10,973 $11,952 $10,935
30-Jun-04 $11,255 $12,247 $11,147
31-Jul-04 $10,810 $11,728 $10,778
31-Aug-04 $10,799 $11,710 $10,821
30-Sep-04 $11,081 $12,032 $10,938
31-Oct-04 $11,331 $12,278 $11,105
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Portfolio expenses have been partially absorbed by CSIM and Schwab. Without
these reductions, the portfolio's returns would have been lower. These returns
do not reflect the deduction of taxes that a shareholder would pay on
portfolio distributions or the redemption of portfolio shares.
2 The All Equity Composite Index is composed of Morningstar category averages
and is calculated using the following portion allocations: 45% large-cap
stocks, 25% small-cap stocks and 30% foreign stocks. Source: Morningstar, Inc.
6 Schwab MarketTrack Portfolios
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO
FUND FACTS as of 10/31/04
STYLE ASSESSMENT 1
[GRAPHIC]
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 5
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $57,763
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 23.8
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.5
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 7%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2 $ 1,000
($500 for retirement and custodial accounts)
- --------------------------------------------------------------------------------
TOP HOLDINGS 3
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) SCHWAB S&P 500 FUND Select Shares(R) 44.7%
- --------------------------------------------------------------------------------
(2) SCHWAB INTERNATIONAL INDEX FUND(R) Select Shares 30.0%
- --------------------------------------------------------------------------------
(3) SCHWAB SMALL-CAP INDEX FUND(R) Select Shares 25.1%
- --------------------------------------------------------------------------------
TOTAL 99.8%
ASSET CLASS WEIGHTINGS % of Portfolio
This chart shows the portfolio's asset class composition as of the report date.
[PIE CHART]
44.7% LARGE-CAP STOCKS
30.0% INTERNATIONAL STOCKS
25.0% SMALL-CAP STOCKS
0.3% SHORT-TERM INVESTMENTS
Portfolio holdings may have changed since the report date.
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the portfolio based on a ten-factor model for value and growth
characteristics. The portfolio's market capitalization placement is determined
by the geometric mean of its holdings' market capitalizations. The assessment
reflects the portfolio's holdings as of 10/31/04, which may have changed since
then, and is not a precise indication of risk or performance--past, present,
or future.
2 Please see prospectus for further detail and eligibility requirements.
3 This list is not a recommendation of any security by the investment adviser.
Schwab MarketTrack Portfolios 7
SCHWAB MARKETTRACK GROWTH PORTFOLIO(TM)
PERFORMANCE as of 10/31/04
AVERAGE ANNUAL TOTAL RETURNS 1,2
This chart compares performance of the portfolio with a benchmark and the
portfolio's Morningstar category.
[BAR CHART]
Benchmark: Fund Category:
GROWTH MORNINGSTAR
COMPOSITE LARGE-CAP
PORTFOLIO INDEX BLEND
1 YEAR 9.94% 9.84% 7.89%
5 YEARS 1.17% 2.75% -1.72%
SINCE INCEPTION 7.46% 3 7.69% 4 4.29% 3
3 SINCE INCEPTION: 11/20/95
4 SINCE: 12/1/95
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the portfolio, compared with a similar investment in a benchmark
and two additional indices.
$19,062 PORTFOLIO
$19,357 GROWTH COMPOSITE INDEX
$21,750 S&P 500(R) INDEX
$18,122 LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX
[LINE GRAPH]
LEHMAN
BROTHERS
GROWTH U.S.
COMPOSITE S&P 500(R) AGGREGATE
PORTFOLIO INDEX INDEX BOND INDEX
20-Nov-95 $10,000 $10,000 $10,000
30-Nov-95 $10,080 $10,000 $10,104 $10,076
31-Dec-95 $10,292 $10,177 $10,299 $10,217
31-Jan-96 $10,442 $10,339 $10,649 $10,285
29-Feb-96 $10,533 $10,464 $10,748 $10,106
31-Mar-96 $10,623 $10,593 $10,852 $10,035
30-Apr-96 $10,803 $10,872 $11,011 $ 9,979
31-May-96 $10,954 $11,042 $11,294 $ 9,959
30-Jun-96 $10,934 $10,996 $11,337 $10,092
31-Jul-96 $10,523 $10,565 $10,836 $10,120
31-Aug-96 $10,733 $10,821 $11,064 $10,102
30-Sep-96 $11,184 $11,208 $11,686 $10,278
31-Oct-96 $11,324 $11,277 $12,009 $10,506
30-Nov-96 $11,896 $11,775 $12,917 $10,686
31-Dec-96 $11,784 $11,756 $12,661 $10,587
31-Jan-97 $12,008 $12,030 $13,451 $10,620
28-Feb-97 $12,028 $12,022 $13,557 $10,646
31-Mar-97 $11,692 $11,739 $13,001 $10,528
30-Apr-97 $12,038 $11,943 $13,776 $10,686
31-May-97 $12,793 $12,666 $14,614 $10,787
30-Jun-97 $13,313 $13,153 $15,268 $10,916
31-Jul-97 $14,087 $13,834 $16,482 $11,210
31-Aug-97 $13,618 $13,444 $15,559 $11,115
30-Sep-97 $14,301 $14,120 $16,410 $11,280
31-Oct-97 $13,853 $13,605 $15,862 $11,443
30-Nov-97 $14,098 $13,686 $16,597 $11,496
31-Dec-97 $14,259 $13,832 $16,882 $11,612
31-Jan-98 $14,410 $13,939 $17,070 $11,761
28-Feb-98 $15,220 $14,716 $18,300 $11,751
31-Mar-98 $15,738 $15,277 $19,237 $11,791
30-Apr-98 $15,846 $15,422 $19,432 $11,852
31-May-98 $15,576 $15,181 $19,097 $11,965
30-Jun-98 $15,868 $15,329 $19,873 $12,067
31-Jul-98 $15,555 $15,075 $19,662 $12,092
31-Aug-98 $13,729 $13,210 $16,823 $12,289
30-Sep-98 $14,194 $13,542 $17,901 $12,577
31-Oct-98 $15,080 $14,240 $19,357 $12,510
30-Nov-98 $15,760 $14,893 $20,530 $12,581
31-Dec-98 $16,422 $15,532 $21,712 $12,619
31-Jan-99 $16,718 $15,754 $22,620 $12,709
28-Feb-99 $16,103 $15,198 $21,916 $12,486
31-Mar-99 $16,576 $15,599 $22,793 $12,555
30-Apr-99 $17,224 $16,268 $23,675 $12,595
31-May-99 $16,916 $16,057 $23,116 $12,484
30-Jun-99 $17,586 $16,743 $24,399 $12,444
31-Jul-99 $17,465 $16,663 $23,638 $12,392
31-Aug-99 $17,355 $16,522 $23,520 $12,386
30-Sep-99 $17,290 $16,411 $22,875 $12,530
31-Oct-99 $17,982 $16,904 $24,323 $12,576
30-Nov-99 $18,520 $17,577 $24,817 $12,575
31-Dec-99 $19,602 $18,838 $26,279 $12,514
31-Jan-00 $18,730 $18,215 $24,960 $12,473
29-Feb-00 $19,155 $18,950 $24,487 $12,624
31-Mar-00 $20,049 $19,612 $26,882 $12,791
30-Apr-00 $19,389 $18,921 $26,073 $12,754
31-May-00 $18,931 $18,506 $25,539 $12,747
30-Jun-00 $19,635 $19,191 $26,169 $13,012
31-Jul-00 $19,233 $18,905 $25,761 $13,131
31-Aug-00 $20,206 $19,804 $27,361 $13,321
30-Sep-00 $19,456 $19,221 $25,917 $13,405
31-Oct-00 $19,255 $18,904 $25,808 $13,493
30-Nov-00 $18,148 $17,901 $23,774 $13,715
31-Dec-00 $18,660 $18,600 $23,891 $13,970
31-Jan-01 $19,052 $18,982 $24,739 $14,198
28-Feb-01 $17,758 $17,892 $22,483 $14,321
31-Mar-01 $16,938 $17,001 $21,057 $14,393
30-Apr-01 $17,955 $18,014 $22,693 $14,332
31-May-01 $18,001 $18,061 $22,845 $14,418
30-Jun-01 $17,851 $17,840 $22,290 $14,473
31-Jul-01 $17,574 $17,582 $22,072 $14,797
31-Aug-01 $16,973 $17,032 $20,690 $14,967
30-Sep-01 $15,667 $15,647 $19,018 $15,141
31-Oct-01 $16,037 $16,087 $19,382 $15,457
30-Nov-01 $16,823 $16,853 $20,868 $15,244
31-Dec-01 $17,086 $17,174 $21,052 $15,147
31-Jan-02 $16,706 $16,873 $20,744 $15,269
28-Feb-02 $16,492 $16,718 $20,344 $15,417
31-Mar-02 $17,157 $17,393 $21,109 $15,161
30-Apr-02 $16,753 $17,163 $19,830 $15,456
31-May-02 $16,623 $17,041 $19,683 $15,587
30-Jun-02 $15,863 $16,260 $18,282 $15,723
31-Jul-02 $14,652 $14,989 $16,858 $15,913
31-Aug-02 $14,747 $15,046 $16,967 $16,182
30-Sep-02 $13,619 $13,929 $15,123 $16,444
31-Oct-02 $14,307 $14,525 $16,454 $16,368
30-Nov-02 $14,984 $15,179 $17,423 $16,363
31-Dec-02 $14,440 $14,659 $16,400 $16,702
31-Jan-03 $14,030 $14,305 $15,970 $16,717
28-Feb-03 $13,825 $14,067 $15,731 $16,948
31-Mar-03 $13,849 $14,059 $15,883 $16,934
30-Apr-03 $14,863 $15,029 $17,192 $17,075
31-May-03 $15,720 $15,874 $18,098 $17,392
30-Jun-03 $15,913 $16,092 $18,330 $17,358
31-Jul-03 $16,167 $16,376 $18,652 $16,774
31-Aug-03 $16,517 $16,771 $19,016 $16,885
30-Sep-03 $16,529 $16,789 $18,815 $17,332
31-Oct-03 $17,338 $17,622 $19,879 $17,171
30-Nov-03 $17,616 $17,911 $20,054 $17,212
31-Dec-03 $18,352 $18,624 $21,105 $17,388
31-Jan-04 $18,645 $18,963 $21,494 $17,527
29-Feb-04 $18,866 $19,229 $21,792 $17,716
31-Mar-04 $18,780 $19,210 $21,463 $17,849
30-Apr-04 $18,327 $18,703 $21,126 $17,385
31-May-04 $18,486 $18,809 $21,416 $17,316
30-Jun-04 $18,878 $19,194 $21,831 $17,414
31-Jul-04 $18,303 $18,571 $21,109 $17,587
31-Aug-04 $18,352 $18,598 $21,193 $17,923
30-Sep-04 $18,731 $19,019 $21,422 $17,971
31-Oct-04 $19,062 $19,357 $21,750 $18,122
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Portfolio expenses have been partially absorbed by CSIM and Schwab. Without
these reductions, the portfolio's returns would have been lower. These returns
do not reflect the deduction of taxes that a shareholder would pay on
portfolio distributions or the redemption of portfolio shares.
2 The Growth Composite Index is composed of Morningstar category averages and
cash equivalents as represented by the 90-day T-bill and is calculated using
the following portfolio allocations: 40% large-cap stocks, 20% small-cap
stocks, 20% foreign stocks, 15% bonds and 5% cash. Source: Morningstar, Inc.
8 Schwab MarketTrack Portfolios
SCHWAB MARKETTRACK GROWTH PORTFOLIO
FUND FACTS as of 10/31/04
STYLE ASSESSMENT 1
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 507
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $59,403
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 23.9
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.6
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 9%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2 $ 1,000
($500 for retirement and custodial accounts)
- --------------------------------------------------------------------------------
TOP HOLDINGS 3
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) SCHWAB S&P 500 FUND Select Shares(R) 23.5%
- --------------------------------------------------------------------------------
(2) SCHWAB SMALL-CAP INDEX FUND(R) Select Shares 20.2%
- --------------------------------------------------------------------------------
(3) SCHWAB INTERNATIONAL INDEX FUND(R) Select Shares 20.1%
- --------------------------------------------------------------------------------
(4) SCHWAB TOTAL BOND MARKET FUND(TM) 14.8%
- --------------------------------------------------------------------------------
(5) SCHWAB VALUE ADVANTAGE 4.5%
MONEY FUND(R) Investor Shares
- --------------------------------------------------------------------------------
(6) GENERAL ELECTRIC CO. 0.6%
- --------------------------------------------------------------------------------
(7) EXXON MOBIL CORP. 0.5%
- --------------------------------------------------------------------------------
(8) MICROSOFT CORP. 0.5%
- --------------------------------------------------------------------------------
(9) CITIGROUP, INC. 0.4%
- --------------------------------------------------------------------------------
(10) WAL-MART STORES, INC. 0.4%
- --------------------------------------------------------------------------------
TOTAL 85.5%
ASSET CLASS WEIGHTINGS % of Portfolio
This chart shows the portfolio's asset class composition as of the report date.
[PIE CHART]
40.0% LARGE-CAP STOCKS
20.2% SMALL-CAP STOCKS
20.1% INTERNATIONAL STOCKS
14.8% BONDS
4.9% SHORT-TERM INVESTMENTS
Portfolio holdings may have changed since the report date.
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the portfolio based on a ten-factor model for value and growth
characteristics. The portfolio's market capitalization placement is determined
by the geometric mean of its holdings' market capitalizations. The assessment
reflects the portfolio's holdings as of 10/31/04, which may have changed since
then, and is not a precise indication of risk or performance--past, present,
or future.
2 Please see prospectus for further detail and eligibility requirements.
3 This list is not a recommendation of any security by the investment adviser.
Schwab MarketTrack Portfolios 9
SCHWAB MARKETTRACK BALANCED PORTFOLIO(TM)
PERFORMANCE as of 10/31/04
AVERAGE ANNUAL TOTAL RETURNS 1,2
This chart compares performance of the portfolio with a benchmark and the
portfolio's Morningstar category.
[BAR CHART]
Benchmark: Fund Category:
BALANCED MORNINGSTAR
COMPOSITE MODERATE
PORTFOLIO INDEX ALLOCATION
1 YEAR 8.61% 8.27% 7.40%
5 YEARS 2.71% 3.85% 2.24%
SINCE INCEPTION 7.22% 3 7.50% 4 4.29% 3
3 SINCE INCEPTION: 11/20/95
4 SINCE: 12/1/95
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the portfolio, compared with a similar investment in a benchmark
and two additional indices.
$18,674 PORTFOLIO
$19,056 BALANCED COMPOSITE INDEX
$21,750 S&P 500(R) INDEX
$18,122 LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX
[LINE GRAPH]
LEHMAN
BROTHERS
BALANCED U.S.
COMPOSITE S&P 500(R) AGGREGATE
PORTFOLIO INDEX INDEX BOND INDEX
20-Nov-95 $10,000 $10,000 $10,000
30-Nov-95 $10,080 $10,000 $10,104 $10,076
31-Dec-95 $10,270 $10,160 $10,299 $10,217
31-Jan-96 $10,390 $10,298 $10,649 $10,285
29-Feb-96 $10,410 $10,352 $10,748 $10,106
31-Mar-96 $10,460 $10,427 $10,852 $10,035
30-Apr-96 $10,581 $10,615 $11,011 $ 9,979
31-May-96 $10,691 $10,745 $11,294 $ 9,959
30-Jun-96 $10,711 $10,737 $11,337 $10,092
31-Jul-96 $10,410 $10,422 $10,836 $10,120
31-Aug-96 $10,551 $10,617 $11,064 $10,102
30-Sep-96 $10,912 $10,957 $11,686 $10,278
31-Oct-96 $11,082 $11,072 $12,009 $10,506
30-Nov-96 $11,534 $11,493 $12,917 $10,686
31-Dec-96 $11,415 $11,449 $12,661 $10,587
31-Jan-97 $11,589 $11,679 $13,451 $10,620
28-Feb-97 $11,589 $11,675 $13,557 $10,646
31-Mar-97 $11,334 $11,419 $13,001 $10,528
30-Apr-97 $11,620 $11,621 $13,776 $10,686
31-May-97 $12,183 $12,176 $14,614 $10,787
30-Jun-97 $12,593 $12,560 $15,268 $10,916
31-Jul-97 $13,217 $13,154 $16,482 $11,210
31-Aug-97 $12,849 $12,862 $15,559 $11,115
30-Sep-97 $13,391 $13,389 $16,410 $11,280
31-Oct-97 $13,125 $13,081 $15,862 $11,443
30-Nov-97 $13,309 $13,168 $16,597 $11,496
31-Dec-97 $13,443 $13,306 $16,882 $11,612
31-Jan-98 $13,582 $13,414 $17,070 $11,761
28-Feb-98 $14,149 $13,975 $18,300 $11,751
31-Mar-98 $14,523 $14,386 $19,237 $11,791
30-Apr-98 $14,608 $14,501 $19,432 $11,852
31-May-98 $14,448 $14,351 $19,097 $11,965
30-Jun-98 $14,672 $14,502 $19,873 $12,067
31-Jul-98 $14,469 $14,310 $19,662 $12,092
31-Aug-98 $13,262 $13,014 $16,823 $12,289
30-Sep-98 $13,668 $13,373 $17,901 $12,577
31-Oct-98 $14,309 $13,863 $19,357 $12,510
30-Nov-98 $14,800 $14,365 $20,530 $12,581
31-Dec-98 $15,281 $14,859 $21,712 $12,619
31-Jan-99 $15,523 $15,054 $22,620 $12,709
28-Feb-99 $15,028 $14,584 $21,916 $12,486
31-Mar-99 $15,369 $14,900 $22,793 $12,555
30-Apr-99 $15,820 $15,391 $23,675 $12,595
31-May-99 $15,567 $15,215 $23,116 $12,484
30-Jun-99 $16,018 $15,689 $24,399 $12,444
31-Jul-99 $15,930 $15,590 $23,638 $12,392
31-Aug-99 $15,842 $15,472 $23,520 $12,386
30-Sep-99 $15,853 $15,415 $22,875 $12,530
31-Oct-99 $16,337 $15,777 $24,323 $12,576
30-Nov-99 $16,711 $16,226 $24,817 $12,575
31-Dec-99 $17,420 $17,055 $26,279 $12,514
31-Jan-00 $16,823 $16,628 $24,960 $12,473
29-Feb-00 $17,150 $17,140 $24,487 $12,624
31-Mar-00 $17,815 $17,684 $26,882 $12,791
30-Apr-00 $17,353 $17,214 $26,073 $12,754
31-May-00 $17,037 $16,926 $25,539 $12,747
30-Jun-00 $17,601 $17,466 $26,169 $13,012
31-Jul-00 $17,364 $17,322 $25,761 $13,131
31-Aug-00 $18,085 $18,031 $27,361 $13,321
30-Sep-00 $17,612 $17,674 $25,917 $13,405
31-Oct-00 $17,499 $17,486 $25,808 $13,493
30-Nov-00 $16,812 $16,827 $23,774 $13,715
31-Dec-00 $17,241 $17,394 $23,891 $13,970
31-Jan-01 $17,569 $17,747 $24,739 $14,198
28-Feb-01 $16,713 $17,017 $22,483 $14,321
31-Mar-01 $16,162 $16,405 $21,057 $14,393
30-Apr-01 $16,877 $17,125 $22,693 $14,332
31-May-01 $16,936 $17,205 $22,845 $14,418
30-Jun-01 $16,842 $17,066 $22,290 $14,473
31-Jul-01 $16,748 $16,979 $22,072 $14,797
31-Aug-01 $16,350 $16,604 $20,690 $14,967
30-Sep-01 $15,447 $15,631 $19,018 $15,141
31-Oct-01 $15,798 $16,029 $19,382 $15,457
30-Nov-01 $16,314 $16,577 $20,868 $15,244
31-Dec-01 $16,483 $16,788 $21,052 $15,147
31-Jan-02 $16,239 $16,608 $20,744 $15,269
28-Feb-02 $16,105 $16,508 $20,344 $15,417
31-Mar-02 $16,519 $16,940 $21,109 $15,161
30-Apr-02 $16,288 $16,804 $19,830 $15,456
31-May-02 $16,227 $16,735 $19,683 $15,587
30-Jun-02 $15,691 $16,149 $18,282 $15,723
31-Jul-02 $14,838 $15,234 $16,858 $15,913
31-Aug-02 $14,972 $15,344 $16,967 $16,182
30-Sep-02 $14,156 $14,541 $15,123 $16,444
31-Oct-02 $14,680 $14,999 $16,454 $16,368
30-Nov-02 $15,204 $15,525 $17,423 $16,363
31-Dec-02 $14,860 $15,189 $16,400 $16,702
31-Jan-03 $14,548 $14,931 $15,970 $16,717
28-Feb-03 $14,436 $14,799 $15,731 $16,948
31-Mar-03 $14,473 $14,808 $15,883 $16,934
30-Apr-03 $15,284 $15,604 $17,192 $17,075
31-May-03 $16,008 $16,335 $18,098 $17,392
30-Jun-03 $16,145 $16,494 $18,330 $17,358
31-Jul-03 $16,207 $16,582 $18,652 $16,774
31-Aug-03 $16,494 $16,904 $19,016 $16,885
30-Sep-03 $16,619 $17,001 $18,815 $17,332
31-Oct-03 $17,193 $17,601 $19,879 $17,171
30-Nov-03 $17,393 $17,824 $20,054 $17,212
31-Dec-03 $17,986 $18,380 $21,105 $17,388
31-Jan-04 $18,215 $18,665 $21,494 $17,527
29-Feb-04 $18,419 $18,897 $21,792 $17,716
31-Mar-04 $18,393 $18,905 $21,463 $17,849
30-Apr-04 $17,960 $18,426 $21,126 $17,385
31-May-04 $18,062 $18,490 $21,416 $17,316
30-Jun-04 $18,381 $18,793 $21,831 $17,414
31-Jul-04 $17,986 $18,371 $21,109 $17,587
31-Aug-04 $18,113 $18,463 $21,193 $17,923
30-Sep-04 $18,393 $18,782 $21,422 $17,971
31-Oct-04 $18,674 $19,056 $21,750 $18,122
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Portfolio expenses have been partially absorbed by CSIM and Schwab. Without
these reductions, the portfolio's returns would have been lower. These returns
do not reflect the deduction of taxes that a shareholder would pay on
portfolio distributions or the redemption of portfolio shares.
2 The Balanced Composite Index is composed of Morningstar category averages and
cash equivalents as represented by the 90-day T-bill and is calculated using
the following portfolio allocations: 30% large-cap stocks, 15% small-caps
stocks, 15% foreign stocks, 35% bonds and 5% cash. Source: Morningstar, Inc.
10 Schwab MarketTrack Portfolios
SCHWAB MARKETTRACK BALANCED PORTFOLIO
FUND FACTS as of 10/31/04
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) SCHWAB TOTAL BOND MARKET FUND(TM) 34.7%
- --------------------------------------------------------------------------------
(2) SCHWAB S&P 500 FUND Select Shares(R) 17.3%
- --------------------------------------------------------------------------------
(3) SCHWAB INTERNATIONAL INDEX FUND(R) Select Shares 15.3%
- --------------------------------------------------------------------------------
(4) SCHWAB SMALL-CAP INDEX FUND(R) Select Shares 15.1%
- --------------------------------------------------------------------------------
(5) SCHWAB VALUE ADVANTAGE 4.5%
MONEY FUND(R) Investor Shares
- --------------------------------------------------------------------------------
(6) GENERAL ELECTRIC CO. 0.4%
- --------------------------------------------------------------------------------
(7) EXXON MOBIL CORP. 0.4%
- --------------------------------------------------------------------------------
(8) MICROSOFT CORP. 0.4%
- --------------------------------------------------------------------------------
(9) CITIGROUP, INC. 0.3%
- --------------------------------------------------------------------------------
(10) WAL-MART STORES, INC. 0.3%
- --------------------------------------------------------------------------------
TOTAL 88.7%
STATISTICS
NUMBER OF HOLDINGS 507
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 11%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2 $1,000
($500 for retirement and custodial accounts)
ASSET CLASS WEIGHTINGS % of Portfolio
This chart shows the portfolio's asset class composition as of the report date.
[PIE CHART]
34.7% BONDS
29.9% LARGE-CAP STOCKS
15.3% INTERNATIONAL STOCKS
15.1% SMALL-CAP STOCKS
5.0% SHORT-TERM INVESTMENTS
Portfolio holdings may have changed since the report date.
1 This list is not a recommendation of any security by the investment adviser.
2 Please see prospectus for further detail and eligibility requirements.
Schwab MarketTrack Portfolios 11
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(TM)
PERFORMANCE as of 10/31/04
AVERAGE ANNUAL TOTAL RETURNS 1,2
This chart compares performance of the portfolio with a benchmark and the
portfolio's Morningstar category.
[BAR CHART]
Benchmark: Fund Category:
CONSERVATIVE MORNINGSTAR
COMPOSITE CONSERVATIVE
PORTFOLIO INDEX ALLOCATION
1 YEAR 7.38% 7.09% 6.03%
5 YEARS 4.13% 4.85% 3.74%
SINCE INCEPTION 6.83% 3 7.05% 4 5.08% 3
3 SINCE INCEPTION: 11/20/95
4 SINCE: 12/1/95
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the portfolio, compared with a similar investment in a benchmark
and two additional indices.
$18,079 PORTFOLIO
$18,363 CONSERVATIVE COMPOSITE INDEX
$21,750 S&P 500(R) INDEX
$18,122 LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX
[LINE GRAPH]
LEHMAN
BROTHERS
CONSERVATIVE U.S.
COMPOSITE S&P 500(R) AGGREGATE
PORTFOLIO INDEX INDEX BOND INDEX
20-Nov-95 $10,000 $10,000 $10,000
30-Nov-95 $10,080 $10,000 $10,104 $10,076
31-Dec-95 $10,237 $10,151 $10,299 $10,217
31-Jan-96 $10,337 $10,263 $10,649 $10,285
29-Feb-96 $10,297 $10,240 $10,748 $10,106
31-Mar-96 $10,287 $10,267 $10,852 $10,035
30-Apr-96 $10,337 $10,371 $11,011 $ 9,979
31-May-96 $10,378 $10,450 $11,294 $ 9,959
30-Jun-96 $10,439 $10,484 $11,337 $10,092
31-Jul-96 $10,256 $10,287 $10,836 $10,120
31-Aug-96 $10,337 $10,413 $11,064 $10,102
30-Sep-96 $10,643 $10,693 $11,686 $10,278
31-Oct-96 $10,818 $10,840 $12,009 $10,506
30-Nov-96 $11,179 $11,177 $12,917 $10,686
31-Dec-96 $11,070 $11,118 $12,661 $10,587
31-Jan-97 $11,174 $11,278 $13,451 $10,620
28-Feb-97 $11,184 $11,287 $13,557 $10,646
31-Mar-97 $10,965 $11,082 $13,001 $10,528
30-Apr-97 $11,206 $11,260 $13,776 $10,686
31-May-97 $11,604 $11,653 $14,614 $10,787
30-Jun-97 $11,896 $11,942 $15,268 $10,916
31-Jul-97 $12,413 $12,424 $16,482 $11,210
31-Aug-97 $12,160 $12,203 $15,559 $11,115
30-Sep-97 $12,540 $12,594 $16,410 $11,280
31-Oct-97 $12,455 $12,449 $15,862 $11,443
30-Nov-97 $12,603 $12,519 $16,597 $11,496
31-Dec-97 $12,698 $12,644 $16,882 $11,612
31-Jan-98 $12,829 $12,764 $17,070 $11,761
28-Feb-98 $13,189 $13,116 $18,300 $11,751
31-Mar-98 $13,418 $13,389 $19,237 $11,791
30-Apr-98 $13,484 $13,480 $19,432 $11,852
31-May-98 $13,431 $13,427 $19,097 $11,965
30-Jun-98 $13,595 $13,554 $19,873 $12,067
31-Jul-98 $13,484 $13,442 $19,662 $12,092
31-Aug-98 $12,774 $12,674 $16,823 $12,289
30-Sep-98 $13,139 $12,997 $17,901 $12,577
31-Oct-98 $13,530 $13,281 $19,357 $12,510
30-Nov-98 $13,843 $13,630 $20,530 $12,581
31-Dec-98 $14,166 $13,961 $21,712 $12,619
31-Jan-99 $14,348 $14,113 $22,620 $12,709
28-Feb-99 $13,950 $13,733 $21,916 $12,486
31-Mar-99 $14,200 $13,964 $22,793 $12,555
30-Apr-99 $14,475 $14,287 $23,675 $12,595
31-May-99 $14,269 $14,130 $23,116 $12,484
30-Jun-99 $14,521 $14,407 $24,399 $12,444
31-Jul-99 $14,452 $14,332 $23,638 $12,392
31-Aug-99 $14,395 $14,252 $23,520 $12,386
30-Sep-99 $14,464 $14,262 $22,875 $12,530
31-Oct-99 $14,766 $14,492 $24,323 $12,576
30-Nov-99 $14,986 $14,774 $24,817 $12,575
31-Dec-99 $15,398 $15,261 $26,279 $12,514
31-Jan-00 $15,022 $14,988 $24,960 $12,473
29-Feb-00 $15,269 $15,346 $24,487 $12,624
31-Mar-00 $15,738 $15,731 $26,882 $12,791
30-Apr-00 $15,442 $15,423 $26,073 $12,754
31-May-00 $15,229 $15,238 $25,539 $12,747
30-Jun-00 $15,667 $15,663 $26,169 $13,012
31-Jul-00 $15,584 $15,616 $25,761 $13,131
31-Aug-00 $16,085 $16,109 $27,361 $13,321
30-Sep-00 $15,835 $15,930 $25,917 $13,405
31-Oct-00 $15,787 $15,831 $25,808 $13,493
30-Nov-00 $15,462 $15,507 $23,774 $13,715
31-Dec-00 $15,815 $15,952 $23,891 $13,970
31-Jan-01 $16,087 $16,256 $24,739 $14,198
28-Feb-01 $15,594 $15,859 $22,483 $14,321
31-Mar-01 $15,297 $15,501 $21,057 $14,393
30-Apr-01 $15,732 $15,929 $22,693 $14,332
31-May-01 $15,807 $16,011 $22,845 $14,418
30-Jun-01 $15,770 $15,940 $22,290 $14,473
31-Jul-01 $15,820 $16,000 $22,072 $14,797
31-Aug-01 $15,632 $15,818 $20,690 $14,967
30-Sep-01 $15,107 $15,237 $19,018 $15,141
31-Oct-01 $15,410 $15,587 $19,382 $15,457
30-Nov-01 $15,675 $15,881 $20,868 $15,244
31-Dec-01 $15,759 $15,982 $21,052 $15,147
31-Jan-02 $15,643 $15,899 $20,744 $15,269
28-Feb-02 $15,592 $15,875 $20,344 $15,417
31-Mar-02 $15,759 $16,072 $21,109 $15,161
30-Apr-02 $15,682 $16,071 $19,830 $15,456
31-May-02 $15,695 $16,067 $19,683 $15,587
30-Jun-02 $15,384 $15,706 $18,282 $15,723
31-Jul-02 $14,875 $15,141 $16,858 $15,913
31-Aug-02 $15,045 $15,295 $16,967 $16,182
30-Sep-02 $14,575 $14,825 $15,123 $16,444
31-Oct-02 $14,903 $15,108 $16,454 $16,368
30-Nov-02 $15,243 $15,478 $17,423 $16,363
31-Dec-02 $15,125 $15,355 $16,400 $16,702
31-Jan-03 $14,926 $15,190 $15,970 $16,717
28-Feb-03 $14,913 $15,168 $15,731 $16,948
31-Mar-03 $14,939 $15,174 $15,883 $16,934
30-Apr-03 $15,539 $15,770 $17,192 $17,075
31-May-03 $16,113 $16,360 $18,098 $17,392
30-Jun-03 $16,193 $16,461 $18,330 $17,358
31-Jul-03 $16,059 $16,348 $18,652 $16,774
31-Aug-03 $16,286 $16,591 $19,016 $16,885
30-Sep-03 $16,501 $16,794 $18,815 $17,332
31-Oct-03 $16,837 $17,147 $19,879 $17,171
30-Nov-03 $16,971 $17,308 $20,054 $17,212
31-Dec-03 $17,402 $17,723 $21,105 $17,388
31-Jan-04 $17,593 $17,949 $21,494 $17,527
29-Feb-04 $17,785 $18,150 $21,792 $17,716
31-Mar-04 $17,802 $18,196 $21,463 $17,849
30-Apr-04 $17,390 $17,749 $21,126 $17,385
31-May-04 $17,431 $17,760 $21,416 $17,316
30-Jun-04 $17,674 $17,980 $21,831 $17,414
31-Jul-04 $17,467 $17,761 $21,109 $17,587
31-Aug-04 $17,660 $17,918 $21,193 $17,923
30-Sep-04 $17,858 $18,142 $21,422 $17,971
31-Oct-04 $18,079 $18,363 $21,750 $18,122
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Portfolio expenses have been partially absorbed by CSIM and Schwab. Without
these reductions, the portfolio's returns would have been lower. These returns
do not reflect the deduction of taxes that a shareholder would pay on
portfolio distributions or the redemption of portfolio shares.
2 The Conservative Composite Index is composed of Morningstar category averages
and cash equivalents as represented by the 90-day T-bill and is calculated
using the following portfolio allocations: 20% large-cap stocks, 10% small-cap
stocks, 10% foreign stocks, 55% bonds and 5% cash. Source: Morningstar, Inc.
12 Schwab MarketTrack Portfolios
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
FUND FACTS as of 10/31/04
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) SCHWAB TOTAL BOND MARKET FUND(TM) 54.9%
- --------------------------------------------------------------------------------
(2) SCHWAB S&P 500 FUND Select Shares(R) 14.6%
- --------------------------------------------------------------------------------
(3) SCHWAB INTERNATIONAL INDEX FUND(R) Select Shares 10.2%
- --------------------------------------------------------------------------------
(4) SCHWAB SMALL-CAP INDEX FUND(R) Select Shares 10.1%
- --------------------------------------------------------------------------------
(5) SCHWAB VALUE ADVANTAGE 4.1%
MONEY FUND(R) Investor Shares
- --------------------------------------------------------------------------------
(6) GENERAL ELECTRIC CO. 0.2%
- --------------------------------------------------------------------------------
(7) EXXON MOBIL CORP. 0.2%
- --------------------------------------------------------------------------------
(8) MICROSOFT CORP. 0.2%
- --------------------------------------------------------------------------------
(9) WAL-MART STORES, INC. 0.1%
- --------------------------------------------------------------------------------
(10) CITIGROUP, INC. 0.1%
- --------------------------------------------------------------------------------
TOTAL 94.7%
STATISTICS
NUMBER OF HOLDINGS 507
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 10%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2 $1,000
($500 for retirement and custodial accounts)
ASSET CLASS WEIGHTINGS % of Portfolio
This chart shows the portfolio's asset class composition as of the report date.
[PIE CHART]
54.9% BONDS
20.1% LARGE-CAP STOCKS
10.2% INTERNATIONAL STOCKS
10.1% SMALL-CAP STOCKS
4.7% SHORT-TERM INVESTMENTS
Portfolio holdings may have changed since the report date.
1 This list is not a recommendation of any security by the investment adviser.
2 Please see prospectus for further detail and eligibility requirements.
Schwab MarketTrack Portfolios 13
FUND EXPENSES
EXAMPLES FOR A $1,000 INVESTMENT
As a fund shareholder, you incur two types of costs: transaction costs, such as
redemption fees; and, ongoing costs, such as management fees, transfer agent and
shareholder services fees, and other fund expenses.
The expense examples below are intended to help you understand your ongoing cost
(in dollars) of investing in a fund and to compare this cost with the ongoing
cost of investing in other mutual funds. These examples are based on an
investment of $1,000 invested for six-months beginning May 1, 2004 and held
through October 31, 2004.
ACTUAL RETURN lines in the table below provide information about actual account
values and actual expenses. You may use this information, together with the
amount you invested, to estimate the expenses that you paid over the period. To
do so, simply divide your account value by $1,000 (for example, an $8,600
account value / $1,000 = 8.6), then multiply the result by the number given for
your fund under the heading entitled "Expenses Paid During Period."
HYPOTHETICAL RETURN lines in the table below provide information about
hypothetical account values and hypothetical expenses based on a fund's actual
expense ratio and an assumed return of 5% per year before expenses. Because the
return used is not an actual return, it may not be used to estimate the actual
ending account value or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only, and do not reflect any transactional costs, such as
redemption fees. If these transactional costs were included, your costs would
have been higher.
ENDING
BEGINNING ACCOUNT VALUE EXPENSES
EXPENSE RATIO 1 ACCOUNT VALUE (Net of Expenses) PAID DURING PERIOD 2
(Annualized) at 5/1/04 at 10/31/04 5/1/04-10/31/04
- ----------------------------------------------------------------------------------------------------------------------------------
SCHWAB MARKETTRACK
ALL EQUITY PORTFOLIO(TM)
Actual Return 0.50% $1,000 $1,044.00 $2.57
Hypothetical 5% Return 0.50% $1,000 $1,022.62 $2.54
- ----------------------------------------------------------------------------------------------------------------------------------
SCHWAB MARKETTRACK
GROWTH PORTFOLIO(TM)
Actual Return 0.50% $1,000 $1,040.10 $2.56
Hypothetical 5% Return 0.50% $1,000 $1,022.62 $2.54
- ----------------------------------------------------------------------------------------------------------------------------------
SCHWAB MARKETTRACK
BALANCED PORTFOLIO(TM)
Actual Return 0.50% $1,000 $1,039.70 $2.56
Hypothetical 5% Return 0.50% $1,000 $1,022.62 $2.54
- ----------------------------------------------------------------------------------------------------------------------------------
SCHWAB MARKETTRACK
CONSERVATIVE PORTFOLIO(TM)
Actual Return 0.50% $1,000 $1,039.60 $2.56
Hypothetical 5% Return 0.50% $1,000 $1,022.62 $2.54
1 Based on the most recent six-month expense ratio; may differ from the expense
ratio provided in Financial Highlights.
2 Expenses for each fund are equal to that fund's annualized expense ratio,
multiplied by the average account value over the period, multiplied by 184
days of the period, and divided by 366 days of the fiscal year.
14 Schwab MarketTrack Portfolios
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 9.43 7.60 9.06 12.06 11.48
---------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.08 0.09 0.05 0.22 0.04
Net realized and unrealized gains or losses 1.02 1.85 (1.32) (2.99) 0.69
---------------------------------------------------------------------------
Total income or loss from investment operations 1.10 1.94 (1.27) (2.77) 0.73
Less distributions:
Dividends from net investment income (0.09) (0.09) (0.05) (0.22) (0.05)
Distributions from net realized gains -- (0.02) (0.14) (0.01) (0.10)
---------------------------------------------------------------------------
Total distributions (0.09) (0.11) (0.19) (0.23) (0.15)
---------------------------------------------------------------------------
Net asset value at end of period 10.44 9.43 7.60 9.06 12.06
---------------------------------------------------------------------------
Total return (%) 11.75 25.77 (14.40) (23.27) 6.37
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1 0.50 0.50 0.50 0.50 0.57 2
Gross operating expenses 1 0.76 0.76 0.77 0.77 0.84
Net investment income 0.83 1.10 0.58 1.93 0.05
Portfolio turnover rate 7 10 15 5 3
Net assets, end of period ($ x 1,000,000) 450 427 353 405 441
1 The expenses incurred by underlying funds in which the portfolio invests are
not included in this ratio. The income received by the portfolio from
underlying funds is reduced by those expenses.
2 The ratio of net operating expenses would have been 0.56% if certain
non-routine expenses (proxy fees) had not been included.
See financial notes. 15
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio and their value,
as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q is
available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top Holding
= All or a portion of this security is held as collateral for open futures
contracts
/ Issuer is affiliated with the fund's adviser
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
99.8% OTHER INVESTMENT
COMPANIES 449,555 449,229
0.3% SHORT-TERM
INVESTMENT 1,305 1,305
0.0% U.S. TREASURY
OBLIGATION 110 110
- --------------------------------------------------------------------------------
100.1% TOTAL INVESTMENTS 450,970 450,644
(0.1)% OTHER ASSETS AND
LIABILITIES, NET (446)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 450,198
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OTHER INVESTMENT COMPANIES
99.8% of net assets
/(2) Schwab International Index Fund,
Select Shares 9,114,006 135,160
/=(1) Schwab S&P 500 Fund,
Select Shares 11,381,715 201,229
/(3) Schwab Small-Cap Index Fund,
Select Shares 5,653,311 112,840
-----------
449,229
SECURITY FACE AMOUNT
RATE, MATURITY DATE ($ x 1,000)
SHORT-TERM INVESTMENT
0.3% of net assets
HSBC Bank, USA Grand Cayman
Time Deposit
1.29%, 11/01/04 1,305 1,305
U.S. TREASURY OBLIGATION
0.0% of net assets
= U.S. Treasury Bill
1.65%, 12/16/04 110 110
END OF INVESTMENTS.
In addition to the above, the fund held the following at 10/31/04. All numbers x
1,000 except number of contracts.
FUTURES CONTRACTS
NUMBER OF CONTRACT UNREALIZED
CONTRACTS VALUE GAINS
S&P 500 Index, Long
expires 12/17/04 6 1,695 6
16 See financial notes.
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value $450,644 a
Receivables:
Fund shares sold 92
Due from brokers for futures 4
Prepaid expenses + 13
------------
TOTAL ASSETS 450,753
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 454
Investment adviser and administrator fees 7
Transfer agent and shareholder service fees 9
Trustees' fees 1
Accrued expenses + 84
------------
TOTAL LIABILITIES 555
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 450,753
TOTAL LIABILITIES - 555
------------
NET ASSETS $450,198
NET ASSETS BY SOURCE
Capital received from investors 490,458
Distributions in excess of net investment income (1,897)
Net realized capital losses (38,043) b
Net unrealized capital losses (320) b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$450,198 43,139 $10.44
Unless stated, all numbers x 1,000.
a The fund paid $450,970 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $33,282
Sales/maturities $55,212
Percent of fund shares of other Schwab funds owned at the end of the report
period:
SCHWAB EQUITY INDEX FUNDS
S&P 500 Fund 2.4%
Small-Cap Index Fund 6.9%
International Index Fund 10.9%
b These derive from investments and futures.
FEDERAL TAX DATA
- -------------------------------------------------------
PORTFOLIO COST $457,101
NET UNREALIZED GAINS AND LOSSES:
Gains $23,316
Losses + (29,773)
-------------
($6,457)
AS OF DECEMBER 31, 2003:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $--
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 12/31 of: Loss amount:
2010 $11,058
2011 + 13,010
-------------
$24,068
RECLASSIFICATIONS:
Net investment income not
yet distributed $1
Reclassified as:
Capital received from investors ($1)
See financial notes. 17
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $6,042
Interest + 10
-----------
TOTAL INVESTMENT INCOME 6,052
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments (5,487)
Net realized gains on futures contracts + 171
-----------
NET REALIZED LOSSES (5,316)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 50,813
Net unrealized losses on futures contracts + (47)
-----------
NET UNREALIZED GAINS 50,766
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 1,999 a
Transfer agent and shareholder service fees 1,136 b
Trustees' fees 8 c
Custodian fees 41
Portfolio accounting fees 61
Professional fees 34
Registration fees 27
Shareholder reports 124
Other expenses + 7
-----------
Total expenses 3,437
Expense reduction - 1,165 d
-----------
NET EXPENSES 2,272
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 6,052
NET EXPENSES - 2,272
-----------
NET INVESTMENT INCOME 3,780
NET REALIZED LOSSES (5,316) e
NET UNREALIZED GAINS + 50,766 e
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $49,230
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.44% of the first
$500 million and 0.39% of assets beyond that. These fees are paid to Charles
Schwab Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% of the
fund's assets. These fees are paid to Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 28,
2005, to 0.50% of average daily net assets. This limit excludes interest,
taxes and certain non-routine expenses.
e These add up to a net gain on investments of $45,450.
18 See financial notes.
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income $3,780 $4,133
Net realized losses (5,316) (10,097)
Net unrealized gains + 50,766 94,425
----------------------------------------
INCREASE IN NET ASSETS
FROM OPERATIONS 49,230 88,461
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income 4,156 3,978
Distributions from net realized gains + -- 837
----------------------------------------
TOTAL DISTRIBUTIONS PAID $4,156 $4,815 a,b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
Shares sold 6,823 $68,910 7,189 $58,084
Shares reinvested 409 4,002 618 4,696
Shares redeemed + (9,423) (95,049) (8,992) (72,607)
---------------------------------------------------
NET TRANSACTIONS IN
FUND SHARES (2,191) ($22,137) (1,185) ($9,827)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 45,330 $427,261 46,515 $353,442
Total increase or
decrease + (2,191) 22,937 (1,185) 73,819 c
---------------------------------------------------
END OF PERIOD 43,139 $450,198 45,330 $427,261 d
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
The fund designates $4,117 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h)(ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for use in preparing
their 2004 income tax return.
b The tax-basis components of distributions paid are:
CURRENT PERIOD
Ordinary income $4,156
Long-term capital gains $--
PRIOR PERIOD
Ordinary income $3,978
Long-term capital gains $837
c Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
d Includes distributions in excess of net investment income in the amount of
$1,897 and $1,522 at the end of the current period and the prior period,
respectively.
See financial notes. 19
SCHWAB MARKETTRACK GROWTH PORTFOLIO(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 14.36 12.05 13.88 17.22 16.37
---------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.21 0.18 0.19 0.41 0.22
Net realized and unrealized gains or losses 1.21 2.33 (1.62) (3.22) 0.94
---------------------------------------------------------------------------
Total income or loss from investment operations 1.42 2.51 (1.43) (2.81) 1.16
Less distributions:
Dividends from net investment income (0.21) (0.20) (0.24) (0.44) (0.18)
Distributions from net realized gains -- -- (0.16) (0.09) (0.13)
---------------------------------------------------------------------------
Total distributions (0.21) (0.20) (0.40) (0.53) (0.31)
---------------------------------------------------------------------------
Net asset value at end of period 15.57 14.36 12.05 13.88 17.22
---------------------------------------------------------------------------
Total return (%) 9.94 21.18 (10.78) (16.71) 7.08
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1 0.50 0.50 0.50 0.50 0.57 2
Gross operating expenses 1 0.73 0.74 0.75 0.74 0.82
Net investment income 1.35 1.48 1.35 2.58 1.32
Portfolio turnover rate 9 9 21 10 12
Net assets, end of period ($ x 1,000,000) 614 578 510 511 566
1 The expenses incurred by underlying funds in which the portfolio invests are
not included in this ratio. The income received by the portfolio from
underlying funds is reduced by those expenses.
2 The ratio of net operating expenses would have been 0.56% if certain
non-routine expenses (proxy fees) had not been included.
20 See financial notes.
SCHWAB MARKETTRACK GROWTH PORTFOLIO
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q is
available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top Ten Holding
o Non-income producing security
/ Issuer is affiliated with the fund's adviser
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
83.1% OTHER INVESTMENT
COMPANIES 460,675 509,619
16.5% COMMON STOCK 69,232 101,454
0.4% SHORT-TERM
INVESTMENT 2,653 2,653
- --------------------------------------------------------------------------------
100.0% TOTAL INVESTMENTS 532,560 613,726
0.0% OTHER ASSETS AND
LIABILITIES, NET 102
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 613,828
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 16.5% of net assets
AEROSPACE / DEFENSE 0.3%
--------------------------------------------------------------------------
The Boeing Co. 8,078 402
Crane Co. 300 9
General Dynamics Corp. 2,000 204
Goodrich Corp. 1,100 34
Lockheed Martin Corp. 4,300 237
Northrop Grumman Corp. 3,592 186
Raytheon Co. 3,900 142
Rockwell Automation, Inc. 1,900 79
Rockwell Collins, Inc. 1,900 68
Textron, Inc. 1,500 102
United Technologies Corp. 5,000 464
-----------
1,927
AIR TRANSPORTATION 0.2%
--------------------------------------------------------------------------
o Delta Air Lines, Inc. 1,300 7
FedEx Corp. 2,920 266
Sabre Holdings Corp., Class A 1,283 28
Southwest Airlines Co. 7,480 118
United Parcel Service, Inc.,
Class B 10,818 856
-----------
1,275
ALCOHOLIC BEVERAGES 0.1%
--------------------------------------------------------------------------
Adolph Coors Co., Class B 400 27
Anheuser-Busch Cos., Inc. 7,800 389
Brown-Forman Corp., Class B 1,204 54
-----------
470
APPAREL 0.1%
--------------------------------------------------------------------------
o Coach, Inc. 1,800 84
Jones Apparel Group, Inc. 1,200 42
Liz Claiborne, Inc. 1,200 49
Nike, Inc., Class B 2,500 203
Reebok International Ltd. 500 19
VF Corp. 1,200 65
-----------
462
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 0.2%
--------------------------------------------------------------------------
Cooper Tire & Rubber Co. 700 14
Cummins, Inc. 400 28
Dana Corp. 1,578 23
Danaher Corp. 2,800 154
Delphi Corp. 5,743 48
Eaton Corp. 1,400 90
Ford Motor Co. 18,103 236
General Motors Corp. 5,425 209
Genuine Parts Co. 1,800 72
o Goodyear Tire & Rubber Co. 1,600 16
Harley-Davidson, Inc. 3,000 173
o Navistar International Corp. 700 24
Visteon Corp. 1,558 11
-----------
1,098
See financial notes. 21
SCHWAB MARKETTRACK GROWTH PORTFOLIO
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
BANKS 1.3%
--------------------------------------------------------------------------
AmSouth Bancorp. 3,300 87
Bank of America Corp. 39,124 1,752
The Bank of New York Co., Inc. 7,300 237
BB&T Corp. 5,300 218
Comerica, Inc. 1,700 105
Fifth Third Bancorp 5,369 264
First Horizon National Corp. 1,200 52
Huntington Bancshares, Inc. 2,262 54
JPMorgan Chase & Co. 34,315 1,325
KeyCorp, Inc. 4,400 148
M&T Bank Corp. 1,198 123
Marshall & Ilsley Corp. 2,056 86
Mellon Financial Corp. 4,100 119
National City Corp. 6,100 238
North Fork Bancorp., Inc. 3,000 132
Northern Trust Corp. 2,200 94
PNC Financial Services Group, Inc. 2,800 146
Regions Financial Corp. 4,542 159
SouthTrust Corp. 3,400 148
State Street Corp. 3,300 149
SunTrust Banks, Inc. 3,500 246
Synovus Financial Corp. 2,750 75
U.S. Bancorp 18,662 534
Wachovia Corp. 12,884 634
Wells Fargo & Co. 16,415 980
Zions Bancorp. 900 60
-----------
8,165
BUSINESS MACHINES & SOFTWARE 1.5%
--------------------------------------------------------------------------
Adobe Systems, Inc. 2,400 134
o Apple Computer, Inc. 3,200 168
Autodesk, Inc. 1,200 63
o BMC Software, Inc. 2,400 45
o Cisco Systems, Inc. 66,300 1,274
o Compuware Corp. 3,600 21
o Comverse Technology, Inc. 1,400 29
o Dell, Inc. 24,600 863
o EMC Corp. 23,186 298
o Gateway, Inc. 3,100 18
Hewlett-Packard Co. 29,903 55
International Business Machines
Corp. 16,200 1,454
o Lexmark International, Inc., Class A 1,300 108
(8) Microsoft Corp. 104,200 2,917
o NCR Corp. 1,000 56
o Network Appliance, Inc. 3,400 83
o Novell, Inc. 3,200 23
o Oracle Corp. 50,648 641
Pitney Bowes, Inc. 2,300 101
o Siebel Systems, Inc. 4,300 41
o Sun Microsystems, Inc. 30,800 140
o Unisys Corp. 3,100 33
o Xerox Corp. 7,800 115
-----------
9,183
BUSINESS SERVICES 0.7%
--------------------------------------------------------------------------
o Affiliated Computer Services, Inc.,
Class A 671 37
o Allied Waste Industries, Inc. 3,100 25
o Apollo Group, Inc., Class A 1,700 112
Automatic Data Processing, Inc. 5,700 247
Cendant Corp. 9,532 196
Cintas Corp. 1,638 71
o Citrix Systems, Inc. 1,800 43
Computer Associates International,
Inc. 5,625 156
o Computer Sciences Corp. 1,680 83
o Convergys Corp. 1,354 18
Deluxe Corp. 700 27
o eBay, Inc. 6,268 612
Electronic Data Systems Corp. 4,600 98
Equifax, Inc. 1,200 31
First Data Corp. 8,688 359
o Fiserv, Inc. 1,800 64
H&R Block, Inc. 1,700 81
IMS Health, Inc. 2,300 49
o Interpublic Group of Cos., Inc. 3,700 45
o Intuit, Inc. 1,972 90
o Mercury Interactive Corp. 800 35
o Monster Worldwide, Inc. 954 27
Omnicom Group, Inc. 1,800 142
o Parametric Technology Corp. 2,700 14
Paychex, Inc. 3,600 118
o PeopleSoft, Inc. 3,600 75
Robert Half International, Inc. 1,700 45
o SunGard Data Systems, Inc. 2,725 72
22 See financial notes.
SCHWAB MARKETTRACK GROWTH PORTFOLIO
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Symantec Corp. 2,800 159
Tyco International Ltd. 19,303 601
o Veritas Software Corp. 4,200 92
Waste Management, Inc. 5,517 157
o Yahoo! Inc. 12,600 456
-----------
4,437
CHEMICALS 0.3%
--------------------------------------------------------------------------
Air Products & Chemicals, Inc. 2,300 122
Dow Chemical Co. 8,994 404
E.I. du Pont de Nemours & Co. 9,592 411
Eastman Chemical Co. 800 38
Ecolab, Inc. 2,800 95
Great Lakes Chemical Corp. 600 15
o Hercules, Inc. 900 13
Monsanto Co. 2,493 107
PPG Industries, Inc. 1,500 96
Praxair, Inc. 3,200 135
Rohm & Haas Co. 2,205 94
Sigma-Aldrich Corp. 600 33
-----------
1,563
CONSTRUCTION 0.1%
--------------------------------------------------------------------------
Centex Corp. 1,200 62
Fluor Corp. 800 37
KB Home 400 33
Masco Corp. 4,500 154
Pulte Homes, Inc. 1,400 77
The Sherwin-Williams Co. 1,200 51
The Stanley Works 600 27
Vulcan Materials Co. 800 40
-----------
481
CONSUMER DURABLES 0.0%
--------------------------------------------------------------------------
Black & Decker Corp. 900 72
Leggett & Platt, Inc. 2,000 56
Maytag Corp. 900 16
Newell Rubbermaid, Inc. 2,745 59
Whirlpool Corp. 800 47
-----------
250
CONTAINERS 0.0%
--------------------------------------------------------------------------
Ball Corp. 800 32
Bemis Co. 1,000 26
o Pactiv Corp. 1,500 36
o Sealed Air Corp. 882 44
-----------
138
ELECTRONICS 0.8%
--------------------------------------------------------------------------
o ADC Telecommunications, Inc. 6,000 13
o Advanced Micro Devices, Inc. 2,840 48
o Agilent Technologies, Inc. 4,437 111
o Altera Corp. 3,680 84
American Power Conversion Corp. 1,725 33
Analog Devices, Inc. 3,400 137
o Andrew Corp. 1,550 22
o Applied Materials, Inc. 16,200 261
o Applied Micro Circuits Corp. 2,862 10
o Broadcom Corp., Class A 2,900 78
o CIENA Corp. 3,200 8
Intel Corp. 62,800 1,398
ITT Industries, Inc. 900 73
o Jabil Circuit, Inc. 1,998 49
o JDS Uniphase Corp. 12,589 40
o KLA-Tencor Corp. 1,800 82
Linear Technology Corp. 3,000 114
o LSI Logic Corp. 3,000 14
o Lucent Technologies, Inc. 40,092 142
Maxim Integrated Products, Inc. 3,100 136
o Micron Technology, Inc. 5,400 66
Molex, Inc. 1,875 55
Motorola, Inc. 22,631 391
o National Semiconductor Corp. 3,400 57
o Novellus Systems, Inc. 1,325 34
o Nvidia Corp. 1,400 20
PerkinElmer, Inc. 1,000 21
o PMC--Sierra, Inc. 1,600 16
o Power-One, Inc. 400 3
o QLogic Corp. 869 28
Qualcomm, Inc. 15,200 635
o Sanmina--SCI Corp. 5,000 40
Scientific-Atlanta, Inc. 1,600 44
o Solectron Corp. 7,900 41
Symbol Technologies, Inc. 1,908 28
Tektronix, Inc. 900 27
o Tellabs, Inc. 4,000 32
o Teradyne, Inc. 1,700 28
See financial notes. 23
SCHWAB MARKETTRACK GROWTH PORTFOLIO
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Texas Instruments, Inc. 16,800 411
o Thermo Electron Corp. 1,300 38
o Thomas & Betts Corp. 281 8
o Waters Corp. 1,300 54
Xilinx, Inc. 3,200 98
-----------
5,028
ENERGY: RAW MATERIALS 0.3%
--------------------------------------------------------------------------
Anadarko Petroleum Corp. 2,418 163
Apache Corp. 3,308 168
Baker Hughes, Inc. 2,960 127
o BJ Services Co. 1,500 77
Burlington Resources, Inc. 3,810 158
Devon Energy Corp. 2,300 170
EOG Resources, Inc. 1,128 75
Halliburton Co. 4,158 154
o Noble Corp. 1,300 59
Occidental Petroleum Corp. 3,600 201
o Rowan Cos., Inc. 600 15
Schlumberger Ltd. 5,700 359
Valero Energy Corp. 2,400 103
-----------
1,829
FOOD & AGRICULTURE 0.6%
--------------------------------------------------------------------------
Archer-Daniels-Midland Co. 6,532 126
Campbell Soup Co. 4,200 113
The Coca-Cola Co. 23,500 955
Coca-Cola Enterprises, Inc. 4,000 84
ConAgra Foods, Inc. 4,900 129
General Mills, Inc. 3,576 158
H.J. Heinz Co. 3,400 124
Hershey Foods Corp. 2,400 122
Kellogg Co. 3,900 168
McCormick & Co., Inc. 1,400 50
The Pepsi Bottling Group, Inc. 2,832 79
PepsiCo, Inc. 16,460 816
Sara Lee Corp. 7,600 177
Supervalu, Inc. 1,400 41
Sysco Corp. 6,200 200
Wm. Wrigley Jr. Co. 2,200 144
-----------
3,486
GOLD 0.0%
--------------------------------------------------------------------------
Newmont Mining Corp. 4,201 200
HEALTHCARE / DRUGS & MEDICINE 2.0%
--------------------------------------------------------------------------
Abbott Laboratories 15,300 652
Allergan, Inc. 1,300 93
AmerisourceBergen Corp. 1,000 55
o Amgen, Inc. 12,488 709
o Anthem, Inc. 1,351 109
Applied Biosystems Group --
Applera Corp. 2,000 38
Bausch & Lomb, Inc. 600 37
Baxter International, Inc. 5,600 172
Becton Dickinson & Co. 2,600 136
o Biogen Idec, Inc. 3,125 182
Biomet, Inc. 2,475 116
o Boston Scientific Corp. 8,148 288
Bristol-Myers Squibb Co. 19,000 445
C.R. Bard, Inc. 800 45
Cardinal Health, Inc. 4,100 192
o Caremark Rx, Inc. 3,570 107
o Chiron Corp. 1,800 58
Eli Lilly & Co. 10,900 599
o Express Scripts, Inc. 800 51
o Forest Laboratories, Inc. 3,400 152
o Genzyme Corp. 2,100 110
o Gilead Sciences, Inc. 3,800 132
Guidant Corp. 3,000 200
HCA, Inc. 5,000 184
Health Management Associates, Inc.,
Class A 2,400 50
o Hospira, Inc. 1,530 49
o Humana, Inc. 1,400 27
Johnson & Johnson 28,554 1,667
o King Pharmaceuticals, Inc. 2,133 23
Manor Care, Inc. 1,100 36
McKesson Corp. 2,654 71
o Medco Health Solutions, Inc. 2,641 90
o Medimmune, Inc. 2,400 68
Medtronic, Inc. 11,800 603
Merck & Co., Inc. 21,600 676
Mylan Laboratories, Inc. 2,600 45
Pfizer, Inc. 73,476 2,127
Quest Diagnostics 1,101 96
Schering-Plough Corp. 14,100 255
o St. Jude Medical, Inc. 1,750 134
24 See financial notes.
SCHWAB MARKETTRACK GROWTH PORTFOLIO
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Stryker Corp. 3,784 163
o Tenet Healthcare Corp. 4,650 50
UnitedHealth Group, Inc. 6,300 456
o Watson Pharmaceuticals, Inc. 1,000 28
o WellPoint Health Networks, Inc. 1,400 137
Wyeth 13,100 519
o Zimmer Holdings, Inc. 2,300 178
-----------
12,410
HOUSEHOLD PRODUCTS 0.4%
--------------------------------------------------------------------------
Alberto-Culver Co., Class B 900 40
Avon Products, Inc. 4,800 190
Clorox Co. 2,200 120
Colgate-Palmolive Co. 5,300 237
The Gillette Co. 9,700 402
International Flavors & Fragrances,
Inc. 1,100 43
Procter & Gamble Co. 25,000 1,280
-----------
2,312
INSURANCE 0.8%
--------------------------------------------------------------------------
ACE Ltd. 2,500 95
Aetna, Inc. 1,424 135
AFLAC, Inc. 5,200 187
The Allstate Corp. 7,000 337
AMBAC Financial Group, Inc. 1,015 79
American International Group,
Inc. 25,251 1,533
AON Corp. 2,625 54
Chubb Corp. 1,700 123
CIGNA Corp. 1,400 89
Cincinnati Financial Corp. 1,890 79
Hartford Financial Services Group,
Inc. 2,700 158
Jefferson-Pilot Corp. 1,412 68
Lincoln National Corp. 1,900 83
Loews Corp. 1,900 114
Marsh & McLennan Cos., Inc. 5,200 144
MBIA, Inc. 1,350 78
Metlife, Inc. 7,310 280
MGIC Investment Corp. 900 58
Principal Financial Group, Inc. 3,065 116
The Progressive Corp. 2,100 196
Prudential Financial, Inc. 5,200 242
Safeco Corp. 1,100 51
The St. Paul Travelors Cos., Inc. 6,453 219
Torchmark Corp. 1,100 59
UnumProvident Corp. 2,349 32
XL Capital Ltd., Class A 1,300 94
-----------
4,703
MEDIA 0.6%
--------------------------------------------------------------------------
Clear Channel Communications,
Inc. 6,017 201
o Comcast Corp., Class A 21,843 644
Dow Jones & Co., Inc. 800 35
Gannett Co., Inc. 2,700 224
Knight-Ridder, Inc. 900 62
The McGraw-Hill Cos., Inc. 1,900 164
Meredith Corp. 500 24
New York Times Co., Class A 1,400 56
R.R. Donnelley & Sons Co. 2,100 66
o Time Warner, Inc. 44,150 735
Tribune Co. 3,100 134
o Univision Communications, Inc.,
Class A 3,104 96
Viacom, Inc., Class B 16,981 620
The Walt Disney Co. 19,619 495
-----------
3,556
MISCELLANEOUS 0.1%
--------------------------------------------------------------------------
3M Co. 7,600 589
MISCELLANEOUS FINANCE 1.3%
--------------------------------------------------------------------------
American Express Co. 12,400 658
The Bear Stearns Cos., Inc. 882 84
Capital One Financial Corp. 2,100 155
/ The Charles Schwab Corp. 13,042 119
CIT Group, Inc. 2,000 81
(9) Citigroup, Inc. 49,792 2,209
Countrywide Financial Corp. 5,298 169
o E*TRADE Financial Corp. 3,500 45
Fannie Mae 9,400 659
Federated Investors, Inc., Class B 1,100 32
Franklin Resources, Inc. 2,500 151
Freddie Mac 6,600 440
Golden West Financial Corp. 1,400 164
Goldman Sachs Group, Inc. 4,579 450
See financial notes. 25
SCHWAB MARKETTRACK GROWTH PORTFOLIO
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Janus Capital Group, Inc. 2,200 33
Lehman Brothers Holdings, Inc. 2,600 214
MBNA Corp. 12,550 322
Merrill Lynch & Co., Inc. 9,400 507
Moody's Corp. 1,500 117
Morgan Stanley 10,600 542
o Providian Financial Corp. 2,900 45
SLM Corp. 4,500 204
Sovereign Bancorp, Inc. 2,700 58
T. Rowe Price Group, Inc. 1,200 67
Washington Mutual, Inc. 8,682 336
-----------
7,861
NON-DURABLES & ENTERTAINMENT 0.2%
--------------------------------------------------------------------------
Darden Restaurants, Inc. 1,800 44
o Electronic Arts, Inc. 2,866 129
Fortune Brands, Inc. 1,400 102
Hasbro, Inc. 1,650 29
International Game Technology 3,400 112
Mattel, Inc. 4,150 73
McDonald's Corp. 12,400 362
o Starbucks Corp. 3,560 188
Wendy's International, Inc. 1,000 33
Yum! Brands, Inc. 3,120 136
-----------
1,208
NON-FERROUS METALS 0.1%
--------------------------------------------------------------------------
Alcoa, Inc. 8,472 275
Engelhard Corp. 1,300 37
Freeport-McMoran Copper & Gold,
Inc., Class B 1,700 62
Phelps Dodge Corp. 810 71
-----------
445
OIL: DOMESTIC 0.2%
--------------------------------------------------------------------------
Amerada Hess Corp. 1,000 81
Ashland, Inc. 800 46
ConocoPhillips 6,546 552
Kerr-McGee Corp. 1,269 75
Marathon Oil Corp. 3,100 118
o Nabors Industries Ltd. 1,400 69
Sunoco, Inc. 900 67
o Transocean, Inc. 2,945 104
Unocal Corp. 2,400 100
-----------
1,212
OIL: INTERNATIONAL 0.7%
--------------------------------------------------------------------------
ChevronTexaco Corp. 20,654 1,096
(7) Exxon Mobil Corp. 63,158 3,108
-----------
4,204
OPTICAL & PHOTO 0.0%
--------------------------------------------------------------------------
o Corning, Inc. 12,300 141
Eastman Kodak Co. 3,100 94
-----------
235
PAPER & FOREST PRODUCTS 0.1%
--------------------------------------------------------------------------
o Boise Cascade Corp. 700 21
Georgia-Pacific Corp. 2,228 77
International Paper Co. 4,846 187
Kimberly-Clark Corp. 4,960 296
Louisiana-Pacific Corp. 600 15
MeadWestvaco Corp. 1,970 62
Temple-Inland, Inc. 600 35
Weyerhaeuser Co. 2,300 144
-----------
837
PRODUCER GOODS & MANUFACTURING 0.9%
--------------------------------------------------------------------------
o American Standard Cos., Inc. 2,100 77
Avery Dennison Corp. 1,200 73
Caterpillar, Inc. 3,300 266
Cooper Industries Ltd., Class A 900 57
Deere & Co. 2,300 137
Dover Corp. 2,000 79
Emerson Electric Co. 4,000 256
o Fisher Scientific International, Inc. 1,115 64
(6) General Electric Co. 101,500 3,463
Honeywell International, Inc. 8,437 284
Illinois Tool Works, Inc. 3,000 277
Ingersoll-Rand Co., Class A 1,650 113
Johnson Controls, Inc. 1,800 103
o Millipore Corp. 400 18
Pall Corp. 1,000 26
Parker Hannifin Corp. 1,150 81
Snap-On, Inc. 600 18
W.W. Grainger, Inc. 900 53
-----------
5,445
RAILROAD & SHIPPING 0.1%
--------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 3,800 159
CSX Corp. 2,200 80
26 See financial notes.
SCHWAB MARKETTRACK GROWTH PORTFOLIO
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Norfolk Southern Corp. 3,600 122
Union Pacific Corp. 2,500 158
-----------
519
REAL PROPERTY 0.1%
--------------------------------------------------------------------------
Apartment Investment & Management
Co., Class A 900 33
Equity Office Properties Trust 3,900 109
Equity Residential 2,600 87
Plum Creek Timber Co., Inc. 1,700 62
ProLogis 1,700 66
Simon Property Group, Inc. 1,700 99
-----------
456
RETAIL 1.1%
--------------------------------------------------------------------------
Albertson's, Inc. 3,538 81
o Autonation, Inc. 3,000 52
o AutoZone, Inc. 800 65
o Bed, Bath & Beyond, Inc. 2,800 114
Best Buy Co., Inc. 3,150 187
o Big Lots, Inc. 1,100 14
Circuit City Stores, Inc. 2,000 33
Costco Wholesale Corp. 4,400 211
CVS Corp. 3,900 169
Dillards, Inc., Class A 500 10
Dollar General Corp. 3,303 64
Family Dollar Stores, Inc. 1,700 50
Federated Department Stores, Inc. 1,700 86
The Gap, Inc. 8,300 166
Home Depot, Inc. 21,700 891
J.C. Penney Co., Inc. Holding Co. 2,500 86
o Kohl's Corp. 3,200 162
o Kroger Co. 7,200 109
Limitedbrands 4,994 124
Lowe's Cos., Inc. 7,600 428
The May Department Stores Co. 2,800 73
Nordstrom, Inc. 1,300 56
o Office Depot, Inc. 3,300 53
RadioShack Corp. 1,900 57
o Safeway, Inc. 4,200 77
Sears, Roebuck & Co. 2,100 74
Staples, Inc. 4,750 141
Target Corp. 8,800 440
Tiffany & Co. 1,400 41
TJX Cos., Inc. 5,200 125
o Toys `R' Us, Inc. 2,600 47
(10) Wal-Mart Stores, Inc. 40,900 2,205
Walgreen Co. 9,900 355
Winn-Dixie Stores, Inc. 1,500 5
-----------
6,851
STEEL 0.0%
--------------------------------------------------------------------------
Allegheny Technologies, Inc. 735 12
Nucor Corp. 1,800 76
United States Steel Corp. 900 33
Worthington Industries, Inc. 900 18
-----------
139
TELEPHONE 0.5%
--------------------------------------------------------------------------
Alltel Corp. 3,100 170
AT&T Corp. 7,358 126
o Avaya, Inc. 4,132 59
BellSouth Corp. 17,800 475
CenturyTel, Inc. 1,350 43
o Citizens Communications Co. 2,576 35
o Nextel Communications, Inc.,
Class A 10,600 281
o Qwest Communications International,
Inc. 15,773 54
SBC Communications, Inc. 32,336 817
Sprint Corp. (FON Group) 13,000 272
Verizon Communications, Inc. 26,758 1,046
-----------
3,378
TOBACCO 0.2%
--------------------------------------------------------------------------
Altria Group, Inc. 19,800 960
Reynolds American, Inc. 1,442 99
UST, Inc. 1,600 66
-----------
1,125
TRAVEL & RECREATION 0.1%
--------------------------------------------------------------------------
Brunswick Corp. 900 42
Carnival Corp. 6,100 308
Harrah's Entertainment, Inc. 1,200 70
Hilton Hotels Corp. 3,600 72
Marriott International, Inc., Class A 2,200 120
Starwood Hotels & Resorts Worldwide,
Inc. 1,900 91
-----------
703
See financial notes. 27
SCHWAB MARKETTRACK GROWTH PORTFOLIO
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TRUCKING & FREIGHT 0.0%
--------------------------------------------------------------------------
Paccar, Inc. 1,575 109
Ryder Systems, Inc. 400 20
-----------
129
UTILITIES: ELECTRIC & GAS 0.5%
--------------------------------------------------------------------------
o The AES Corp. 6,000 65
o Allegheny Energy, Inc. 1,070 20
Ameren Corp. 1,800 86
American Electric Power Co., Inc. 3,860 127
o Calpine Corp. 2,700 7
Centerpoint Energy, Inc. 2,949 31
Cinergy Corp. 1,600 63
o CMS Energy Corp. 1,000 9
Consolidated Edison, Inc. 2,100 91
Constellation Energy Group, Inc. 1,700 69
Dominion Resources, Inc. 3,078 198
DTE Energy Co. 1,400 60
Duke Energy Corp. 8,852 217
o Dynegy, Inc., Class A 3,100 15
Edison International 3,200 98
El Paso Corp. 5,006 45
Entergy Corp. 2,400 157
Exelon Corp. 6,224 247
FirstEnergy Corp. 3,195 132
FPL Group, Inc. 1,900 131
KeySpan Corp. 1,300 52
Kinder Morgan, Inc. 1,107 71
Nicor, Inc. 500 19
NiSource, Inc. 2,646 57
Peoples Energy Corp. 200 9
o PG&E Corp. 4,000 128
Pinnacle West Capital Corp. 800 34
PPL Corp. 1,800 94
Progress Energy, Inc. 2,475 102
Public Service Enterprise Group, Inc. 2,300 98
Sempra Energy 2,103 70
The Southern Co. 7,200 227
TECO Energy, Inc. 1,300 18
TXU Corp. 2,767 169
Williams Cos., Inc. 5,000 63
Xcel Energy, Inc. 3,850 66
-----------
3,145
OTHER INVESTMENT COMPANIES
83.1% of net assets
/(3) Schwab International Index
Fund, Select Shares 8,331,435 123,555
/(1) Schwab S&P 500 Fund,
Select Shares 8,151,944 144,127
/(2) Schwab Small-Cap Index
Fund, Select Shares 6,200,618 123,764
/(4) Schwab Total Bond
Market Fund 8,901,276 90,793
/(5) Schwab Value Advantage
Money Fund, Investor Shares
27,380,154 27,380
-----------
509,619
SECURITY FACE AMOUNT
RATE, MATURITY DATE ($ x 1,000)
SHORT-TERM INVESTMENT
0.4% of net assets
HSBC Bank, USA Grand Cayman
Time Deposit
1.29%, 11/01/04 2,653 2,653
END OF INVESTMENTS.
28 See financial notes.
SCHWAB MARKETTRACK GROWTH PORTFOLIO
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value $613,726 a
Receivables:
Fund shares sold 463
Interest 1
Dividends 399
Prepaid expenses + 14
------------
TOTAL ASSETS 614,603
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 347
Investments bought 323
Investment adviser and administrator fees 10
Transfer agent and shareholder service fees 13
Trustees' fees 1
Accrued expenses + 81
------------
TOTAL LIABILITIES 775
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 614,603
TOTAL LIABILITIES - 775
------------
NET ASSETS $613,828
NET ASSETS BY SOURCE
Capital received from investors 555,835
Net investment income not yet distributed 1,494
Net realized capital losses (24,667)
Net unrealized capital gains 81,166
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$613,828 39,421 $15.57
Unless stated, all numbers x 1,000.
a The fund paid $532,560 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $50,952
Sales/maturities $64,598
The fund's total security transactions with other SchwabFunds(R) during the
period were $93.
Percent of fund shares of other Schwab funds owned at the end of the report
period:
SCHWAB EQUITY INDEX FUNDS
S&P 500 Fund 1.7%
Small-Cap Index Fund 7.6%
International Index Fund 10.0%
SCHWAB BOND FUNDS
Total Bond Market Fund 8.6%
SCHWAB MONEY FUNDS
Value Advantage
Money Fund 0.1%
FEDERAL TAX DATA
- -------------------------------------------------------
PORTFOLIO COST $537,346
NET UNREALIZED GAINS AND LOSSES:
Gains $96,660
Losses + (20,280)
------------
$76,380
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $1,494
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $1,799
2011 16,068
2012 + 2,014
------------
$19,881
See financial notes. 29
SCHWAB MARKETTRACK GROWTH PORTFOLIO
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $11,305
Interest + 6
-----------
TOTAL INVESTMENT INCOME 11,311
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments (2,288)
Net realized gains received from underlying funds + 1,577
-----------
NET REALIZED LOSSES (711)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 48,907
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 2,642 a
Transfer agent and shareholder service fees 1,533 b
Trustees' fees 9 c
Custodian fees 46
Portfolio accounting fees 83
Professional fees 34
Registration fees 22
Shareholder reports 97
Other expenses + 11
-----------
Total expenses 4,477
Expense reduction - 1,411 d
-----------
NET EXPENSES 3,066
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 11,311
NET EXPENSES - 3,066
-----------
NET INVESTMENT INCOME 8,245
NET REALIZED LOSSES (711) e
NET UNREALIZED GAINS + 48,907 e
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $56,441
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.44% of the first
$500 million and 0.39% of assets beyond that. These fees are paid to Charles
Schwab Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% of the
fund's assets. These fees are paid to Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 28,
2005, to 0.50% of average daily net assets. This limit excludes interest,
taxes and certain non-routine expenses.
e These add up to a net gain on investments of $48,196.
30 See financial notes.
SCHWAB MARKETTRACK GROWTH PORTFOLIO
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income $8,245 $7,781
Net realized losses (711) (13,734)
Net unrealized gains + 48,907 107,668
----------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS 56,441 101,715
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income $8,251 $8,524 a,b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
Shares sold 6,342 $95,944 5,664 $72,375
Shares reinvested 547 8,044 694 8,339
Shares redeemed + (7,686) (116,063) (8,438) (105,988)
---------------------------------------------------
NET TRANSACTIONS IN
FUND SHARES (797) ($12,075) (2,080) ($25,274)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 40,218 $577,713 42,298 $509,796
Total increase or
decrease + (797) 36,115 (2,080) 67,917 c
---------------------------------------------------
END OF PERIOD 39,421 $613,828 40,218 $577,713 d
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 54% of the fund's dividends for the report period qualify
for the dividends-received deduction.
The fund designates $6,411 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h)(ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for use in preparing
their 2004 income tax return.
b The tax-basis components of distributions are:
CURRENT PERIOD
Ordinary income $8,251
Long-term capital gains $--
PRIOR PERIOD
Ordinary income $8,524
Long-term capital gains $--
c Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
d Includes distributable net investment income in the amount of $1,494 and
$1,500 at the end of the current period and prior period, respectively.
See financial notes. 31
SCHWAB MARKETTRACK BALANCED PORTFOLIO(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- -----------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 13.78 12.05 13.47 15.53 14.85
-------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.29 0.25 0.32 0.45 0.36
Net realized and unrealized gains or losses 0.88 1.77 (1.22) (1.92) 0.69
-------------------------------------------------------------------------
Total income or loss from investment operations 1.17 2.02 (0.90) (1.47) 1.05
Less distributions:
Dividends from net investment income (0.29) (0.29) (0.40) (0.49) (0.28)
Distributions from net realized gains -- -- (0.12) (0.10) (0.09)
-------------------------------------------------------------------------
Total distributions (0.29) (0.29) (0.52) (0.59) (0.37)
-------------------------------------------------------------------------
Net asset value at end of period 14.66 13.78 12.05 13.47 15.53
-------------------------------------------------------------------------
Total return (%) 8.61 17.12 (7.08) (9.72) 7.11
RATIOS/SUPPLEMENTAL DATA (%)
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1 0.50 0.50 0.50 0.50 0.57 2
Gross operating expenses 1 0.74 0.74 0.74 0.74 0.82
Net investment income 2.03 1.98 2.35 3.31 2.46
Portfolio turnover rate 11 17 31 21 18
Net assets, end of period ($ x 1,000,000) 541 516 462 497 510
1 The expenses incurred by underlying funds in which the portfolio invests are
not included in this ratio.
The income received by the portfolio from underlying funds is reduced by those
expenses.
2 The ratio of net operating expenses would have been 0.56% if certain
non-routine expenses (proxy fees) had not been included.
32 See financial notes.
SCHWAB MARKETTRACK BALANCED PORTFOLIO
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q is
available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top Ten Holding
o Non-income producing security
/ Issuer is affiliated with the fund's adviser
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
86.9% OTHER INVESTMENT
COMPANIES 427,200 470,527
12.6% COMMON STOCK 46,967 68,085
0.5% SHORT-TERM
INVESTMENT 2,590 2,590
- --------------------------------------------------------------------------------
100.0% TOTAL INVESTMENTS 476,757 541,202
0.0% OTHER ASSETS AND
LIABILITIES, NET (12)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 541,190
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 12.6% of net assets
AEROSPACE / DEFENSE 0.2%
--------------------------------------------------------------------------
The Boeing Co. 5,484 273
Crane Co. 200 5
General Dynamics Corp. 1,300 133
Goodrich Corp. 700 22
Lockheed Martin Corp. 2,900 160
Northrop Grumman Corp. 2,256 117
Raytheon Co. 2,600 95
Rockwell Automation, Inc. 1,200 50
Rockwell Collins, Inc. 1,200 42
Textron, Inc. 1,000 68
United Technologies Corp. 3,300 306
-----------
1,271
AIR TRANSPORTATION 0.2%
--------------------------------------------------------------------------
o Delta Air Lines, Inc. 900 5
FedEx Corp. 1,960 178
Sabre Holdings Corp., Class A 922 20
Southwest Airlines Co. 5,137 81
United Parcel Service, Inc., Class B 7,385 585
-----------
869
ALCOHOLIC BEVERAGES 0.1%
--------------------------------------------------------------------------
Adolph Coors Co., Class B 200 13
Anheuser-Busch Cos., Inc. 5,200 260
Brown-Forman Corp., Class B 804 36
-----------
309
APPAREL 0.1%
--------------------------------------------------------------------------
o Coach, Inc. 1,200 56
Jones Apparel Group, Inc. 800 28
Liz Claiborne, Inc. 800 33
Nike, Inc., Class B 1,700 138
Reebok International Ltd. 300 11
VF Corp. 800 43
-----------
309
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 0.1%
--------------------------------------------------------------------------
Cooper Tire & Rubber Co. 400 8
Cummins, Inc. 300 21
Dana Corp. 1,085 16
Danaher Corp. 2,000 110
Delphi Corp. 3,884 33
Eaton Corp. 1,000 64
Ford Motor Co. 12,185 159
General Motors Corp. 3,650 141
Genuine Parts Co. 1,150 46
o Goodyear Tire & Rubber Co. 1,000 10
Harley-Davidson, Inc. 2,000 115
o Navistar International Corp. 400 14
Visteon Corp. 1,047 7
-----------
744
See financial notes. 33
SCHWAB MARKETTRACK BALANCED PORTFOLIO
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
BANKS 1.0%
--------------------------------------------------------------------------
AmSouth Bancorp. 2,600 69
Bank of America Corp. 26,286 1,177
The Bank of New York Co., Inc. 4,900 159
BB&T Corp. 3,600 148
Comerica, Inc. 1,100 68
Fifth Third Bancorp 3,658 180
First Horizon National Corp. 800 35
Huntington Bancshares, Inc. 1,597 38
JPMorgan Chase & Co. 22,713 877
KeyCorp, Inc. 2,600 87
M&T Bank Corp. 800 82
Marshall & Ilsley Corp. 1,344 56
Mellon Financial Corp. 2,800 81
National City Corp. 4,100 160
North Fork Bancorp., Inc. 2,000 88
Northern Trust Corp. 1,400 60
PNC Financial Services Group, Inc. 1,900 99
Regions Financial Corp. 3,078 108
SouthTrust Corp. 2,200 96
State Street Corp. 2,200 99
SunTrust Banks, Inc. 2,300 162
Synovus Financial Corp. 1,900 52
U.S. Bancorp 12,554 359
Wachovia Corp. 8,536 420
Wells Fargo & Co. 10,835 647
Zions Bancorp. 600 40
-----------
5,447
BUSINESS MACHINES & SOFTWARE 1.1%
--------------------------------------------------------------------------
Adobe Systems, Inc. 1,600 90
o Apple Computer, Inc. 2,200 116
Autodesk, Inc. 800 42
o BMC Software, Inc. 1,600 30
o Cisco Systems, Inc. 44,500 855
o Compuware Corp. 2,400 14
o Comverse Technology, Inc. 1,000 21
o Dell, Inc. 16,500 579
o EMC Corp. 15,562 200
o Gateway, Inc. 2,100 12
Hewlett-Packard Co. 19,724 368
International Business Machines
Corp. 10,800 969
o Lexmark International, Inc., Class A 800 66
(8) Microsoft Corp. 69,800 1,954
o NCR Corp. 600 34
o Network Appliance, Inc. 2,000 49
o Novell, Inc. 2,200 16
o Oracle Corp. 34,000 430
Pitney Bowes, Inc. 1,600 70
o Siebel Systems, Inc. 3,000 29
o Sun Microsystems, Inc. 20,800 94
o Unisys Corp. 2,100 22
o Xerox Corp. 5,200 77
-----------
6,137
BUSINESS SERVICES 0.6%
--------------------------------------------------------------------------
o Affiliated Computer Services, Inc.,
Class A 465 25
o Allied Waste Industries, Inc. 2,100 17
o Apollo Group, Inc., Class A 1,100 73
Automatic Data Processing, Inc. 3,900 169
Cendant Corp. 6,415 132
Cintas Corp. 1,102 48
o Citrix Systems, Inc. 1,200 29
Computer Associates International,
Inc. 3,825 106
o Computer Sciences Corp. 1,090 54
o Convergys Corp. 869 11
Deluxe Corp. 500 19
o eBay, Inc. 4,208 411
Electronic Data Systems Corp. 3,100 66
Equifax, Inc. 900 23
First Data Corp. 5,704 235
o Fiserv, Inc. 1,200 43
H&R Block, Inc. 1,200 57
IMS Health, Inc. 1,500 32
o Interpublic Group of Cos., Inc. 2,500 31
o Intuit, Inc. 1,327 60
o Mercury Interactive Corp. 500 22
o Monster Worldwide, Inc. 666 19
Omnicom Group, Inc. 1,200 95
o Parametric Technology Corp. 1,800 9
Paychex, Inc. 2,475 81
o PeopleSoft, Inc. 2,400 50
Robert Half International, Inc. 1,200 32
o SunGard Data Systems, Inc. 1,832 48
34 See financial notes.
SCHWAB MARKETTRACK BALANCED PORTFOLIO
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Symantec Corp. 1,998 114
Tyco International Ltd. 12,949 403
o Veritas Software Corp. 2,600 57
Waste Management, Inc. 3,712 106
o Yahoo! Inc. 8,400 304
-----------
2,981
CHEMICALS 0.2%
--------------------------------------------------------------------------
Air Products & Chemicals, Inc. 1,500 80
Dow Chemical Co. 6,049 272
E.I. du Pont de Nemours & Co. 6,484 278
Eastman Chemical Co. 600 28
Ecolab, Inc. 2,000 68
Great Lakes Chemical Corp. 400 10
o Hercules, Inc. 700 10
Monsanto Co. 1,727 74
PPG Industries, Inc. 1,200 77
Praxair, Inc. 2,000 84
Rohm & Haas Co. 1,421 60
Sigma-Aldrich Corp. 500 28
-----------
1,069
CONSTRUCTION 0.1%
--------------------------------------------------------------------------
Centex Corp. 800 41
Fluor Corp. 500 23
KB Home 300 25
Masco Corp. 3,000 103
Pulte Homes, Inc. 800 44
The Sherwin-Williams Co. 1,100 47
The Stanley Works 600 27
Vulcan Materials Co. 700 35
-----------
345
CONSUMER DURABLES 0.0%
--------------------------------------------------------------------------
Black & Decker Corp. 600 48
Leggett & Platt, Inc. 1,300 37
Maytag Corp. 600 11
Newell Rubbermaid, Inc. 1,872 40
Whirlpool Corp. 500 29
-----------
165
CONTAINERS 0.0%
--------------------------------------------------------------------------
Ball Corp. 800 32
Bemis Co. 600 16
o Pactiv Corp. 1,000 23
o Sealed Air Corp. 621 31
-----------
102
ELECTRONICS 0.6%
--------------------------------------------------------------------------
o ADC Telecommunications, Inc. 5,000 11
o Advanced Micro Devices, Inc. 2,040 34
o Agilent Technologies, Inc. 2,917 73
o Altera Corp. 2,546 58
American Power Conversion Corp. 1,175 23
Analog Devices, Inc. 2,300 93
o Andrew Corp. 1,025 14
o Applied Materials, Inc. 10,900 175
o Applied Micro Circuits Corp. 1,928 7
o Broadcom Corp., Class A 2,000 54
o CIENA Corp. 2,100 5
Intel Corp. 42,100 937
ITT Industries, Inc. 600 49
o Jabil Circuit, Inc. 1,341 33
o JDS Uniphase Corp. 8,464 27
o KLA-Tencor Corp. 1,200 55
Linear Technology Corp. 2,000 76
o LSI Logic Corp. 2,000 9
o Lucent Technologies, Inc. 26,905 96
Maxim Integrated Products, Inc. 2,100 92
o Micron Technology, Inc. 3,600 44
Molex, Inc. 1,250 37
Motorola, Inc. 14,770 255
o National Semiconductor Corp. 2,200 37
o Novellus Systems, Inc. 900 23
o Nvidia Corp. 900 13
PerkinElmer, Inc. 600 12
o PMC--Sierra, Inc. 1,100 11
o Power-One, Inc. 240 2
o QLogic Corp. 585 19
Qualcomm, Inc. 10,200 426
o Sanmina--SCI Corp. 3,400 27
Scientific-Atlanta, Inc. 1,000 27
o Solectron Corp. 5,300 28
Symbol Technologies, Inc. 1,284 19
Tektronix, Inc. 500 15
o Tellabs, Inc. 2,700 22
o Teradyne, Inc. 1,100 18
Texas Instruments, Inc. 11,300 276
o Thermo Electron Corp. 900 26
o Thomas & Betts Corp. 231 7
o Waters Corp. 900 37
Xilinx, Inc. 2,100 64
-----------
3,366
See financial notes. 35
SCHWAB MARKETTRACK BALANCED PORTFOLIO
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
ENERGY: RAW MATERIALS 0.2%
--------------------------------------------------------------------------
Anadarko Petroleum Corp. 1,510 102
Apache Corp. 2,048 104
Baker Hughes, Inc. 2,250 96
o BJ Services Co. 1,000 51
Burlington Resources, Inc. 2,820 117
Devon Energy Corp. 1,500 111
EOG Resources, Inc. 759 51
Halliburton Co. 2,974 110
o Noble Corp. 900 41
Occidental Petroleum Corp. 2,400 134
o Rowan Cos., Inc. 600 15
Schlumberger Ltd. 3,900 245
Valero Energy Corp. 1,600 69
-----------
1,246
FOOD & AGRICULTURE 0.4%
--------------------------------------------------------------------------
Archer-Daniels-Midland Co. 4,446 86
Campbell Soup Co. 2,800 75
The Coca-Cola Co. 15,800 642
Coca-Cola Enterprises, Inc. 2,700 56
ConAgra Foods, Inc. 3,300 87
General Mills, Inc. 2,392 106
H.J. Heinz Co. 2,300 84
Hershey Foods Corp. 1,600 81
Kellogg Co. 2,700 116
McCormick & Co., Inc. 900 32
The Pepsi Bottling Group, Inc. 1,826 51
PepsiCo, Inc. 11,070 549
Sara Lee Corp. 5,100 119
Supervalu, Inc. 900 27
Sysco Corp. 4,400 142
Wm. Wrigley Jr. Co. 1,600 105
-----------
2,358
GOLD 0.0%
--------------------------------------------------------------------------
Newmont Mining Corp. 2,754 131
HEALTHCARE / DRUGS & MEDICINE 1.5%
--------------------------------------------------------------------------
Abbott Laboratories 10,200 435
Allergan, Inc. 900 64
AmerisourceBergen Corp. 700 39
o Amgen, Inc. 8,340 474
o Anthem, Inc. 926 74
Applied Biosystems Group --
Applera Corp. 1,400 27
Bausch & Lomb, Inc. 400 24
Baxter International, Inc. 3,800 117
Becton Dickinson & Co. 1,800 95
o Biogen Idec, Inc. 2,150 125
Biomet, Inc. 1,575 74
o Boston Scientific Corp. 5,248 185
Bristol-Myers Squibb Co. 12,800 300
C.R. Bard, Inc. 600 34
Cardinal Health, Inc. 2,775 130
o Caremark Rx, Inc. 2,408 72
o Chiron Corp. 1,200 39
Eli Lilly & Co. 7,400 406
o Express Scripts, Inc. 500 32
o Forest Laboratories, Inc. 2,400 107
o Genzyme Corp. 1,400 73
o Gilead Sciences, Inc. 2,400 83
Guidant Corp. 2,000 133
HCA, Inc. 3,400 125
Health Management Associates, Inc.,
Class A 1,600 33
o Hospira, Inc. 1,020 33
o Humana, Inc. 800 15
Johnson & Johnson 19,272 1,125
o King Pharmaceuticals, Inc. 1,388 15
Manor Care, Inc. 500 16
McKesson Corp. 1,773 47
o Medco Health Solutions, Inc. 1,784 61
o Medimmune, Inc. 1,400 40
Medtronic, Inc. 7,800 399
Merck & Co., Inc. 14,500 454
Mylan Laboratories, Inc. 1,700 29
Pfizer, Inc. 49,386 1,430
Quest Diagnostics 735 64
Schering-Plough Corp. 9,500 172
o St. Jude Medical, Inc. 1,060 81
Stryker Corp. 2,546 110
o Tenet Healthcare Corp. 3,150 34
UnitedHealth Group, Inc. 4,200 304
o Watson Pharmaceuticals, Inc. 600 17
36 See financial notes.
SCHWAB MARKETTRACK BALANCED PORTFOLIO
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o WellPoint Health Networks, Inc. 1,000 98
Wyeth 8,800 349
o Zimmer Holdings, Inc. 1,500 116
-----------
8,309
HOUSEHOLD PRODUCTS 0.3%
--------------------------------------------------------------------------
Alberto-Culver Co., Class B 600 27
Avon Products, Inc. 3,000 119
Clorox Co. 1,300 71
Colgate-Palmolive Co. 3,600 160
The Gillette Co. 6,700 278
International Flavors & Fragrances,
Inc. 800 31
Procter & Gamble Co. 16,800 860
-----------
1,546
INSURANCE 0.6%
--------------------------------------------------------------------------
ACE Ltd. 1,700 65
Aetna, Inc. 1,034 98
AFLAC, Inc. 3,300 118
The Allstate Corp. 4,700 226
AMBAC Financial Group, Inc. 684 53
American International Group, Inc. 16,942 1,028
AON Corp. 2,025 41
Chubb Corp. 1,200 87
CIGNA Corp. 1,000 63
Cincinnati Financial Corp. 1,260 53
Hartford Financial Services Group, Inc. 1,800 105
Jefferson-Pilot Corp. 1,050 51
Lincoln National Corp. 1,300 57
Loews Corp. 1,200 72
Marsh & McLennan Cos., Inc. 3,600 100
MBIA, Inc. 1,050 61
Metlife, Inc. 4,986 191
MGIC Investment Corp. 700 45
Principal Financial Group, Inc. 2,329 88
The Progressive Corp. 1,500 140
Prudential Financial, Inc. 3,500 163
Safeco Corp. 800 37
The St. Paul Travelors Cos., Inc. 4,241 144
Torchmark Corp. 800 43
UnumProvident Corp. 1,657 23
XL Capital Ltd., Class A 800 58
-----------
3,210
MEDIA 0.4%
--------------------------------------------------------------------------
Clear Channel Communications,
Inc. 4,080 136
o Comcast Corp., Class A 14,661 432
Dow Jones & Co., Inc. 600 27
Gannett Co., Inc. 1,700 141
Knight-Ridder, Inc. 600 41
The McGraw-Hill Cos., Inc. 1,200 104
Meredith Corp. 300 15
New York Times Co., Class A 1,100 44
R.R. Donnelley & Sons Co. 1,400 44
o Time Warner, Inc. 29,650 493
Tribune Co. 2,100 91
o Univision Communications, Inc.,
Class A 2,048 63
Viacom, Inc., Class B 11,418 417
The Walt Disney Co. 13,217 333
-----------
2,381
MISCELLANEOUS 0.1%
--------------------------------------------------------------------------
3M Co. 5,000 388
MISCELLANEOUS FINANCE 1.0%
--------------------------------------------------------------------------
American Express Co. 8,300 440
The Bear Stearns Cos., Inc. 602 57
Capital One Financial Corp. 1,500 111
/ The Charles Schwab Corp. 8,783 80
CIT Group, Inc. 1,300 52
(9) Citigroup, Inc. 33,476 1,485
Countrywide Financial Corp. 3,498 112
o E*TRADE Financial Corp. 2,400 31
Fannie Mae 6,300 442
Federated Investors, Inc., Class B 700 20
Franklin Resources, Inc. 1,700 103
Freddie Mac 4,500 300
Golden West Financial Corp. 1,000 117
Goldman Sachs Group, Inc. 3,079 303
Janus Capital Group, Inc. 1,400 21
Lehman Brothers Holdings, Inc. 1,800 148
MBNA Corp. 8,268 212
Merrill Lynch & Co., Inc. 6,300 340
Moody's Corp. 1,000 78
Morgan Stanley 7,010 358
See financial notes. 37
SCHWAB MARKETTRACK BALANCED PORTFOLIO
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Providian Financial Corp. 1,900 30
SLM Corp. 3,000 136
Sovereign Bancorp, Inc. 1,800 39
T. Rowe Price Group, Inc. 800 45
Washington Mutual, Inc. 5,874 227
-----------
5,287
NON-DURABLES & ENTERTAINMENT 0.2%
--------------------------------------------------------------------------
Darden Restaurants, Inc. 1,350 33
o Electronic Arts, Inc. 1,792 80
Fortune Brands, Inc. 1,000 73
Hasbro, Inc. 1,275 23
International Game Technology 2,100 69
Mattel, Inc. 2,825 49
McDonald's Corp. 8,100 236
o Starbucks Corp. 2,440 129
Wendy's International, Inc. 800 27
Yum! Brands, Inc. 2,060 90
-----------
809
NON-FERROUS METALS 0.1%
--------------------------------------------------------------------------
Alcoa, Inc. 5,648 183
Engelhard Corp. 800 23
Freeport-McMoran Copper & Gold, Inc.,
Class B 1,100 40
Phelps Dodge Corp. 540 47
-----------
293
OIL: DOMESTIC 0.1%
--------------------------------------------------------------------------
Amerada Hess Corp. 600 48
Ashland, Inc. 500 29
ConocoPhillips 4,324 364
Kerr-McGee Corp. 771 46
Marathon Oil Corp. 2,100 80
o Nabors Industries Ltd. 1,000 49
Sunoco, Inc. 600 45
o Transocean, Inc. 2,016 71
Unocal Corp. 1,600 67
-----------
799
OIL: INTERNATIONAL 0.5%
--------------------------------------------------------------------------
ChevronTexaco Corp. 13,790 732
(7) Exxon Mobil Corp. 42,420 2,088
-----------
2,820
OPTICAL & PHOTO 0.0%
--------------------------------------------------------------------------
o Corning, Inc. 8,300 95
Eastman Kodak Co. 2,000 61
-----------
156
PAPER & FOREST PRODUCTS 0.1%
--------------------------------------------------------------------------
o Boise Cascade Corp. 600 18
Georgia-Pacific Corp. 1,496 52
International Paper Co. 3,166 122
Kimberly-Clark Corp. 3,380 202
Louisiana-Pacific Corp. 700 17
MeadWestvaco Corp. 1,279 40
Temple-Inland, Inc. 400 23
Weyerhaeuser Co. 1,400 88
-----------
562
PRODUCER GOODS & MANUFACTURING 0.7%
--------------------------------------------------------------------------
o American Standard Cos., Inc. 1,500 55
Avery Dennison Corp. 700 43
Caterpillar, Inc. 2,300 185
Cooper Industries Ltd., Class A 600 38
Deere & Co. 1,500 90
Dover Corp. 1,400 55
Emerson Electric Co. 2,800 179
o Fisher Scientific International, Inc. 720 41
(6) General Electric Co. 68,100 2,324
Honeywell International, Inc. 5,700 192
Illinois Tool Works, Inc. 2,000 185
Ingersoll-Rand Co., Class A 1,100 75
Johnson Controls, Inc. 1,200 69
o Millipore Corp. 200 9
Pall Corp. 800 21
Parker Hannifin Corp. 700 49
Snap-On, Inc. 350 10
W.W. Grainger, Inc. 600 35
-----------
3,655
RAILROAD & SHIPPING 0.1%
--------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 2,500 104
CSX Corp. 1,500 55
Norfolk Southern Corp. 2,500 85
Union Pacific Corp. 1,700 107
-----------
351
38 See financial notes.
SCHWAB MARKETTRACK BALANCED PORTFOLIO
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
REAL PROPERTY 0.1%
--------------------------------------------------------------------------
Apartment Investment & Management Co.,
Class A 600 22
Equity Office Properties Trust 2,600 73
Equity Residential 1,700 57
Plum Creek Timber Co., Inc. 1,200 43
ProLogis 1,200 47
Simon Property Group, Inc. 1,100 64
-----------
306
RETAIL 0.9%
--------------------------------------------------------------------------
Albertson's, Inc. 2,671 61
o Autonation, Inc. 2,000 34
o AutoZone, Inc. 500 41
o Bed, Bath & Beyond, Inc. 1,800 73
Best Buy Co., Inc. 2,100 124
o Big Lots, Inc. 700 9
Circuit City Stores, Inc. 1,400 23
Costco Wholesale Corp. 3,000 144
CVS Corp. 2,600 113
Dillards, Inc., Class A 700 14
Dollar General Corp. 2,202 42
Family Dollar Stores, Inc. 1,100 33
Federated Department Stores, Inc. 1,100 56
The Gap, Inc. 5,662 113
Home Depot, Inc. 14,600 600
J.C. Penney Co., Inc. Holding Co. 1,700 59
o Kohl's Corp. 2,200 112
o Kroger Co. 5,300 80
Limitedbrands 3,388 84
Lowe's Cos., Inc. 5,000 281
The May Department Stores Co. 2,100 55
Nordstrom, Inc. 900 39
o Office Depot, Inc. 2,500 40
RadioShack Corp. 1,300 39
o Safeway, Inc. 2,800 51
Sears, Roebuck & Co. 1,600 56
Staples, Inc. 3,050 91
Target Corp. 5,800 290
Tiffany & Co. 950 28
TJX Cos., Inc. 3,600 86
o Toys `R' Us, Inc. 1,200 22
(10) Wal-Mart Stores, Inc. 27,400 1,477
Walgreen Co. 6,600 237
Winn-Dixie Stores, Inc. 1,200 4
-----------
4,611
STEEL 0.0%
--------------------------------------------------------------------------
Allegheny Technologies, Inc. 492 8
Nucor Corp. 1,200 51
United States Steel Corp. 700 26
Worthington Industries, Inc. 300 6
-----------
91
TELEPHONE 0.4%
--------------------------------------------------------------------------
Alltel Corp. 2,100 115
AT&T Corp. 4,941 85
o Avaya, Inc. 2,775 40
BellSouth Corp. 11,900 317
CenturyTel, Inc. 900 29
o Citizens Communications Co. 1,732 23
o Nextel Communications, Inc.,
Class A 7,200 191
o Qwest Communications International,
Inc. 10,622 36
SBC Communications, Inc. 21,788 550
Sprint Corp. (FON Group) 8,750 183
Verizon Communications, Inc. 17,836 698
-----------
2,267
TOBACCO 0.1%
--------------------------------------------------------------------------
Altria Group, Inc. 13,200 640
Reynolds American, Inc. 914 63
UST, Inc. 1,100 45
-----------
748
TRAVEL & RECREATION 0.1%
--------------------------------------------------------------------------
Brunswick Corp. 600 28
Carnival Corp. 4,100 207
Harrah's Entertainment, Inc. 700 41
Hilton Hotels Corp. 2,500 50
Marriott International, Inc., Class A 1,500 82
Starwood Hotels & Resorts Worldwide,
Inc. 1,200 57
-----------
465
See financial notes. 39
SCHWAB MARKETTRACK BALANCED PORTFOLIO
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TRUCKING & FREIGHT 0.0%
--------------------------------------------------------------------------
Paccar, Inc. 1,050 73
Ryder Systems, Inc. 400 20
-----------
93
UTILITIES: ELECTRIC & GAS 0.4%
--------------------------------------------------------------------------
o The AES Corp. 3,200 35
o Allegheny Energy, Inc. 720 13
Ameren Corp. 1,200 58
American Electric Power Co., Inc. 2,580 85
o Calpine Corp. 1,800 4
Centerpoint Energy, Inc. 1,924 20
Cinergy Corp. 1,000 39
o CMS Energy Corp. 700 7
Consolidated Edison, Inc. 1,500 65
Constellation Energy Group, Inc. 1,000 41
Dominion Resources, Inc. 2,167 139
DTE Energy Co. 1,000 43
Duke Energy Corp. 5,952 146
o Dynegy, Inc., Class A 2,100 10
Edison International 2,200 67
El Paso Corp. 3,222 29
Entergy Corp. 1,500 98
Exelon Corp. 4,324 171
FirstEnergy Corp. 2,030 84
FPL Group, Inc. 1,300 90
KeySpan Corp. 900 36
Kinder Morgan, Inc. 745 48
Nicor, Inc. 300 11
NiSource, Inc. 1,651 35
Peoples Energy Corp. 200 9
o PG&E Corp. 2,700 86
Pinnacle West Capital Corp. 600 26
PPL Corp. 1,000 52
Progress Energy, Inc. 1,593 66
Public Service Enterprise Group, Inc. 1,500 64
Sempra Energy 1,360 46
The Southern Co. 4,500 142
TECO Energy, Inc. 900 13
TXU Corp. 2,122 130
Williams Cos., Inc. 3,000 37
Xcel Energy, Inc. 2,585 44
-----------
2,089
OTHER INVESTMENT COMPANIES
86.9% of net assets
/(3) Schwab International Index
Fund, Select Shares 5,576,815 82,704
/(2) Schwab S&P 500 Fund,
Select Shares 5,309,473 93,872
/(4) Schwab Small-Cap Index Fund,
Select Shares 4,091,089 81,658
/(1) Schwab Total Bond
Market Fund 18,437,321 188,061
/(5) Schwab Value Advantage
Money Fund, Investor Shares
24,231,862 24,232
-----------
470,527
SECURITY FACE AMOUNT
RATE, MATURITY DATE ($ x 1,000)
SHORT-TERM INVESTMENT
0.5% of net assets
HSBC Bank, USA Grand Cayman
Time Deposit
1.29%, 11/01/04 2,590 2,590
END OF INVESTMENTS.
40 See financial notes.
SCHWAB MARKETTRACK BALANCED PORTFOLIO
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value $541,202 a
Receivables:
Fund shares sold 162
Interest 1
Dividends 118
Prepaid expenses + 14
------------
TOTAL ASSETS 541,497
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 170
Investments bought 52
Investment adviser and administrator fees 9
Transfer agent and shareholder service fees 11
Trustee fees 1
Accrued expenses + 64
------------
TOTAL LIABILITIES 307
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 541,497
TOTAL LIABILITIES - 307
------------
NET ASSETS $541,190
NET ASSETS BY SOURCE
Capital received from investors 491,296
Net investment income not yet distributed 3,853
Net realized capital losses (18,404)
Net unrealized capital gains 64,445
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$541,190 36,910 $14.66
Unless stated, all numbers x 1,000.
a The fund paid $476,757 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $55,917
Sales/maturities $63,899
The fund's total security transactions with other SchwabFunds(R) during the
period were $100.
Percent of fund shares of other Schwab funds owned at the end of the report
period:
SCHWAB EQUITY INDEX FUNDS
S&P 500 Fund 1.1%
Small-Cap Index Fund 5.0%
International Index Fund 6.7%
SCHWAB BOND FUNDS
Total Bond Market Fund 17.8%
SCHWAB MONEY FUNDS
Value Advantage
Money Fund 0.1%
FEDERAL TAX DATA
- -------------------------------------------------------
PORTFOLIO COST $483,848
NET UNREALIZED GAINS AND LOSSES:
Gains $69,043
Losses + (11,689)
------------
$57,354
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $3,853
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $680
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2011 $11,313
See financial notes. 41
SCHWAB MARKETTRACK BALANCED PORTFOLIO
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- -------------------------------------------------------------------------------
Dividends $13,437
Interest + 8
----------
TOTAL INVESTMENT INCOME 13,445
NET REALIZED GAINS AND LOSSES
- -------------------------------------------------------------------------------
Net realized gains on investments 203
Net realized gains received from underlying funds + 3,264
----------
NET REALIZED GAINS 3,467
NET UNREALIZED GAINS AND LOSSES
- -------------------------------------------------------------------------------
Net unrealized gains on investments 29,584
EXPENSES
- -------------------------------------------------------------------------------
Investment adviser and administrator fees 2,325 a
Transfer agent and shareholder service fees 1,330 b
Trustees' fees 8 c
Custodian fees 42
Portfolio accounting fees 72
Professional fees 35
Registration fees 33
Shareholder reports 58
Other expenses + 11
----------
Total expenses 3,914
Expense reduction - 1,254 d
----------
NET EXPENSES 2,660
INCREASE IN NET ASSETS FROM OPERATIONS
- -------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 13,445
NET EXPENSES - 2,660
----------
NET INVESTMENT INCOME 10,785
NET REALIZED GAINS 3,467 e
NET UNREALIZED GAINS + 29,584 e
----------
INCREASE IN NET ASSETS FROM OPERATIONS $43,836
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.44% of the first
$500 million and 0.39% of assets beyond that. These fees are paid to Charles
Schwab Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% of the
fund's assets. These fees are paid to Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 28,
2005, to 0.50% of average daily net assets. This limit excludes interest,
taxes and certain non-routine expenses.
e These add up to a net gain on investments of $33,051.
42 See financial notes.
SCHWAB MARKETTRACK BALANCED PORTFOLIO
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income $10,785 $9,483
Net realized gains or losses 3,467 (9,182)
Net unrealized gains + 29,584 75,317
----------------------------------------
INCREASE IN NET ASSETS
FROM OPERATIONS 43,836 75,618
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income $10,771 $11,180 a,b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
Shares sold 7,160 $101,953 6,802 $85,681
Shares reinvested 746 10,391 904 10,796
Shares redeemed + (8,474) (120,586) (8,594) (107,008)
--------------------------------------------------
NET TRANSACTIONS IN
FUND SHARES (568) ($8,242) (888) ($10,531)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 37,478 $516,367 38,366 $462,460
Total increase or
decrease + (568) 24,823 (888) 53,907 c
---------------------------------------------------
END OF PERIOD 36,910 $541,190 37,478 $516,367 d
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 28% of the fund's dividends for the report period qualify
for the dividends-received deduction.
The fund designates $3,502 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h)(ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for use in preparing
their 2004 income tax return.
b The tax-basis components of distributions paid are:
CURRENT PERIOD
Ordinary income $10,771
Long-term capital gains $--
PRIOR PERIOD
Ordinary income $11,180
Long-term capital gains $--
c Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
d Includes distributable net investment income in the amount of $3,853 and
$3,839 at the end of the current period and prior period, respectively.
See financial notes. 43
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- -----------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 12.53 11.37 12.22 13.12 12.73
-------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.34 0.29 0.40 0.49 0.47
Net realized and unrealized gains or losses 0.57 1.16 (0.78) (0.80) 0.41
-------------------------------------------------------------------------
Total income or loss from investment operations 0.91 1.45 (0.38) (0.31) 0.88
Less distributions:
Dividends from net investment income (0.35) (0.29) (0.41) (0.50) (0.46)
Distributions from net realized gains -- -- (0.06) (0.09) (0.03)
-------------------------------------------------------------------------
Total distributions (0.35) (0.29) (0.47) (0.59) (0.49)
-------------------------------------------------------------------------
Net asset value at end of period 13.09 12.53 11.37 12.22 13.12
-------------------------------------------------------------------------
Total return (%) 7.38 12.98 (3.29) (2.39) 6.92
RATIOS/SUPPLEMENTAL DATA (%)
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1 0.50 0.50 0.50 0.50 0.57 2
Gross operating expenses 1 0.75 0.75 0.76 0.77 0.84
Net investment income 2.70 2.44 3.17 3.85 3.58
Portfolio turnover rate 10 17 32 15 16
Net assets, end of period ($ x 1,000,000) 290 289 263 211 194
1 The expenses incurred by underlying funds in which the portfolio invests are
not included in this ratio. The income received by the portfolio from
underlying funds is reduced by those expenses.
2 The ratio of net operating expenses would have been 0.56% if certain
non-routine expenses (proxy fees) had not been included.
44 See financial notes.
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q is
available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top Ten Holding
o Non-income producing security
/ Issuer is affiliated with the fund's adviser
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
93.8% OTHER INVESTMENT
COMPANIES 249,080 272,247
5.5% COMMON STOCK 12,219 15,990
0.7% SHORT-TERM
INVESTMENT 1,973 1,973
- --------------------------------------------------------------------------------
100.0% TOTAL INVESTMENTS 263,272 290,210
0.0% OTHER ASSETS AND
LIABILITIES, NET (52)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 290,158
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 5.5% of net assets
AEROSPACE / DEFENSE 0.1%
--------------------------------------------------------------------------
The Boeing Co. 1,246 61
Crane Co. 150 4
General Dynamics Corp. 300 31
Goodrich Corp. 200 6
Lockheed Martin Corp. 700 38
Northrop Grumman Corp. 514 27
Raytheon Co. 600 22
Rockwell Automation, Inc. 300 12
Rockwell Collins, Inc. 300 11
Textron, Inc. 200 14
United Technologies Corp. 800 74
-----------
300
AIR TRANSPORTATION 0.1%
--------------------------------------------------------------------------
o Delta Air Lines, Inc. 200 1
FedEx Corp. 460 42
Sabre Holdings Corp., Class A 244 5
Southwest Airlines Co. 1,218 19
United Parcel Service, Inc., Class B 1,712 136
-----------
203
ALCOHOLIC BEVERAGES 0.0%
--------------------------------------------------------------------------
Adolph Coors Co., Class B 50 3
Anheuser-Busch Cos., Inc. 1,200 60
Brown-Forman Corp., Class B 150 7
-----------
70
APPAREL 0.0%
--------------------------------------------------------------------------
o Coach, Inc. 300 14
Jones Apparel Group, Inc. 200 7
Liz Claiborne, Inc. 200 8
Nike, Inc., Class B 400 32
Reebok International Ltd. 100 4
VF Corp. 200 11
-----------
76
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 0.1%
--------------------------------------------------------------------------
Cooper Tire & Rubber Co. 100 2
Cummins, Inc. 100 7
Dana Corp. 292 4
Danaher Corp. 500 28
Delphi Corp. 868 7
Eaton Corp. 200 13
Ford Motor Co. 2,921 38
General Motors Corp. 825 32
Genuine Parts Co. 250 10
o Goodyear Tire & Rubber Co. 300 3
Harley-Davidson, Inc. 500 29
o Navistar International Corp. 100 3
Visteon Corp. 248 2
-----------
178
See financial notes. 45
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
BANKS 0.4%
--------------------------------------------------------------------------
AmSouth Bancorp. 600 16
Bank of America Corp. 6,162 276
The Bank of New York Co., Inc. 1,200 39
BB&T Corp. 850 35
Comerica, Inc. 300 18
Fifth Third Bancorp 867 43
First Horizon National Corp. 200 9
Huntington Bancshares, Inc. 423 10
JPMorgan Chase & Co. 5,352 207
KeyCorp, Inc. 700 23
M&T Bank Corp. 199 20
Marshall & Ilsley Corp. 322 13
Mellon Financial Corp. 700 20
National City Corp. 950 37
North Fork Bancorp., Inc. 500 22
Northern Trust Corp. 300 13
PNC Financial Services Group, Inc. 400 21
Regions Financial Corp. 670 23
SouthTrust Corp. 500 22
State Street Corp. 500 23
SunTrust Banks, Inc. 500 35
Synovus Financial Corp. 400 11
U.S. Bancorp 2,922 84
Wachovia Corp. 2,000 98
Wells Fargo & Co. 2,560 153
Zions Bancorp. 100 7
-----------
1,278
BUSINESS MACHINES & SOFTWARE 0.5%
--------------------------------------------------------------------------
Adobe Systems, Inc. 400 22
o Apple Computer, Inc. 600 31
Autodesk, Inc. 200 11
o BMC Software, Inc. 400 8
o Cisco Systems, Inc. 10,450 201
o Compuware Corp. 600 3
o Comverse Technology, Inc. 300 6
o Dell, Inc. 3,850 135
o EMC Corp. 3,650 47
o Gateway, Inc. 500 3
Hewlett-Packard Co. 4,703 88
International Business Machines
Corp. 2,500 224
o Lexmark International, Inc., Class A 200 17
(8) Microsoft Corp. 16,400 459
o NCR Corp. 200 11
o Network Appliance, Inc. 500 12
o Novell, Inc. 500 4
o Oracle Corp. 7,900 100
Pitney Bowes, Inc. 400 17
o Siebel Systems, Inc. 600 6
o Sun Microsystems, Inc. 5,000 23
o Unisys Corp. 500 5
o Xerox Corp. 1,200 18
-----------
1,451
BUSINESS SERVICES 0.3%
--------------------------------------------------------------------------
o Affiliated Computer Services, Inc.,
Class A 203 11
o Allied Waste Industries, Inc. 500 4
o Apollo Group, Inc., Class A 250 17
Automatic Data Processing, Inc. 900 39
Cendant Corp. 1,459 30
Cintas Corp. 260 11
o Citrix Systems, Inc. 300 7
Computer Associates International,
Inc. 850 24
o Computer Sciences Corp. 258 13
o Convergys Corp. 174 2
Deluxe Corp. 100 4
o eBay, Inc. 1,004 98
Electronic Data Systems Corp. 700 15
Equifax, Inc. 200 5
First Data Corp. 1,392 57
o Fiserv, Inc. 300 11
H&R Block, Inc. 300 14
IMS Health, Inc. 350 7
o Interpublic Group of Cos., Inc. 600 7
o Intuit, Inc. 313 14
o Mercury Interactive Corp. 100 4
o Monster Worldwide, Inc. 191 5
Omnicom Group, Inc. 300 24
o Parametric Technology Corp. 500 3
Paychex, Inc. 525 17
o PeopleSoft, Inc. 600 13
Robert Half International, Inc. 300 8
o SunGard Data Systems, Inc. 433 12
o Symantec Corp. 502 29
46 See financial notes.
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Tyco International Ltd. 3,013 94
o Veritas Software Corp. 600 13
Waste Management, Inc. 907 26
o Yahoo! Inc. 2,000 72
-----------
710
CHEMICALS 0.1%
--------------------------------------------------------------------------
Air Products & Chemicals, Inc. 300 16
Dow Chemical Co. 1,372 62
E.I. du Pont de Nemours & Co. 1,525 65
Eastman Chemical Co. 100 5
Ecolab, Inc. 400 13
Great Lakes Chemical Corp. 100 2
o Hercules, Inc. 200 3
Monsanto Co. 332 14
PPG Industries, Inc. 250 16
Praxair, Inc. 500 21
Rohm & Haas Co. 373 16
Sigma-Aldrich Corp. 100 6
-----------
239
CONSTRUCTION 0.0%
--------------------------------------------------------------------------
Centex Corp. 200 10
Fluor Corp. 100 5
KB Home 100 8
Masco Corp. 700 24
Pulte Homes, Inc. 200 11
The Sherwin-Williams Co. 200 9
The Stanley Works 100 4
Vulcan Materials Co. 200 10
-----------
81
CONSUMER DURABLES 0.0%
--------------------------------------------------------------------------
Black & Decker Corp. 100 8
Leggett & Platt, Inc. 300 8
Maytag Corp. 100 2
Newell Rubbermaid, Inc. 436 9
Whirlpool Corp. 100 6
-----------
33
CONTAINERS 0.0%
--------------------------------------------------------------------------
Ball Corp. 200 8
Bemis Co. 200 5
o Pactiv Corp. 300 7
o Sealed Air Corp. 153 8
-----------
28
ELECTRONICS 0.3%
--------------------------------------------------------------------------
o ADC Telecommunications, Inc. 1,000 2
o Advanced Micro Devices, Inc. 560 10
o Agilent Technologies, Inc. 710 18
o Altera Corp. 510 12
American Power Conversion Corp. 225 4
Analog Devices, Inc. 600 24
o Andrew Corp. 100 1
o Applied Materials, Inc. 2,600 42
o Applied Micro Circuits Corp. 455 2
o Broadcom Corp., Class A 492 13
o CIENA Corp. 500 1
Intel Corp. 9,800 218
ITT Industries, Inc. 150 12
o Jabil Circuit, Inc. 322 8
o JDS Uniphase Corp. 2,010 6
o KLA-Tencor Corp. 300 14
Linear Technology Corp. 500 19
o LSI Logic Corp. 500 2
o Lucent Technologies, Inc. 7,019 25
Maxim Integrated Products, Inc. 500 22
o Micron Technology, Inc. 900 11
Molex, Inc. 250 7
Motorola, Inc. 3,666 63
o National Semiconductor Corp. 600 10
o Novellus Systems, Inc. 250 7
o Nvidia Corp. 200 3
PerkinElmer, Inc. 200 4
o PMC--Sierra, Inc. 300 3
o Power-One, Inc. 57 --
o QLogic Corp. 138 5
Qualcomm, Inc. 2,400 100
o Sanmina--SCI Corp. 800 6
Scientific-Atlanta, Inc. 200 6
o Solectron Corp. 1,000 5
Symbol Technologies, Inc. 303 5
Tektronix, Inc. 200 6
o Tellabs, Inc. 600 5
o Teradyne, Inc. 300 5
Texas Instruments, Inc. 2,700 66
o Thermo Electron Corp. 200 6
o Thomas & Betts Corp. 100 3
See financial notes. 47
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Waters Corp. 200 8
Xilinx, Inc. 500 15
-----------
804
ENERGY: RAW MATERIALS 0.1%
--------------------------------------------------------------------------
Anadarko Petroleum Corp. 367 25
Apache Corp. 462 23
Baker Hughes, Inc. 470 20
o BJ Services Co. 200 10
Burlington Resources, Inc. 600 25
Devon Energy Corp. 350 26
EOG Resources, Inc. 180 12
Halliburton Co. 714 26
o Noble Corp. 200 9
Occidental Petroleum Corp. 600 34
o Rowan Cos., Inc. 100 3
Schlumberger Ltd. 900 57
Valero Energy Corp. 400 17
-----------
287
FOOD & AGRICULTURE 0.2%
--------------------------------------------------------------------------
Archer-Daniels-Midland Co. 1,014 20
Campbell Soup Co. 700 19
The Coca-Cola Co. 3,700 150
Coca-Cola Enterprises, Inc. 700 15
ConAgra Foods, Inc. 800 21
General Mills, Inc. 582 26
H.J. Heinz Co. 600 22
Hershey Foods Corp. 400 20
Kellogg Co. 600 26
McCormick & Co., Inc. 200 7
The Pepsi Bottling Group, Inc. 350 10
PepsiCo, Inc. 2,560 127
Sara Lee Corp. 1,200 28
Supervalu, Inc. 200 6
Sysco Corp. 1,000 32
Wm. Wrigley Jr. Co. 300 19
-----------
548
GOLD 0.0%
--------------------------------------------------------------------------
Newmont Mining Corp. 643 31
HEALTHCARE / DRUGS & MEDICINE 0.7%
--------------------------------------------------------------------------
Abbott Laboratories 2,400 102
Allergan, Inc. 200 14
AmerisourceBergen Corp. 200 11
o Amgen, Inc. 1,952 111
o Anthem, Inc. 200 16
Applied Biosystems Group --
Applera Corp. 300 6
Bausch & Lomb, Inc. 100 6
Baxter International, Inc. 900 28
Becton Dickinson & Co. 400 21
o Biogen Idec, Inc. 480 28
Biomet, Inc. 450 21
o Boston Scientific Corp. 1,268 45
Bristol-Myers Squibb Co. 3,000 70
C.R. Bard, Inc. 200 11
Cardinal Health, Inc. 650 30
o Caremark Rx, Inc. 581 18
o Chiron Corp. 300 10
Eli Lilly & Co. 1,725 95
o Express Scripts, Inc. 100 6
o Forest Laboratories, Inc. 550 25
o Genzyme Corp. 325 17
o Gilead Sciences, Inc. 650 23
Guidant Corp. 500 33
HCA, Inc. 800 29
Health Management Associates, Inc.,
Class A 400 8
o Hospira, Inc. 240 8
o Humana, Inc. 200 4
Johnson & Johnson 4,492 262
o King Pharmaceuticals, Inc. 366 4
Manor Care, Inc. 100 3
McKesson Corp. 422 11
o Medco Health Solutions, Inc. 422 14
o Medimmune, Inc. 400 11
Medtronic, Inc. 1,800 92
Merck & Co., Inc. 3,400 107
Mylan Laboratories, Inc. 400 7
Pfizer, Inc. 11,557 335
Quest Diagnostics 139 12
Schering-Plough Corp. 2,300 42
o St. Jude Medical, Inc. 250 19
Stryker Corp. 602 26
o Tenet Healthcare Corp. 750 8
UnitedHealth Group, Inc. 1,000 72
48 See financial notes.
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Watson Pharmaceuticals, Inc. 200 6
o WellPoint Health Networks, Inc. 250 25
Wyeth 2,000 79
o Zimmer Holdings, Inc. 350 27
-----------
1,958
HOUSEHOLD PRODUCTS 0.1%
--------------------------------------------------------------------------
Alberto-Culver Co., Class B 150 7
Avon Products, Inc. 700 28
Clorox Co. 300 16
Colgate-Palmolive Co. 800 36
The Gillette Co. 1,500 62
International Flavors & Fragrances,
Inc. 200 8
Procter & Gamble Co. 3,900 199
-----------
356
INSURANCE 0.3%
--------------------------------------------------------------------------
ACE Ltd. 400 15
Aetna, Inc. 222 21
AFLAC, Inc. 800 29
The Allstate Corp. 1,100 53
AMBAC Financial Group, Inc. 162 13
American International Group, Inc. 3,979 241
AON Corp. 475 10
Chubb Corp. 300 22
CIGNA Corp. 200 13
Cincinnati Financial Corp. 315 13
Hartford Financial Services Group, Inc. 425 25
Jefferson-Pilot Corp. 225 11
Lincoln National Corp. 300 13
Loews Corp. 300 18
Marsh & McLennan Cos., Inc. 800 22
MBIA, Inc. 200 11
Metlife, Inc. 1,178 45
MGIC Investment Corp. 150 10
Principal Financial Group, Inc. 550 21
The Progressive Corp. 350 33
Prudential Financial, Inc. 800 37
Safeco Corp. 200 9
The St. Paul Travelors Cos., Inc. 1,006 34
Torchmark Corp. 200 11
UnumProvident Corp. 346 5
XL Capital Ltd., Class A 200 14
-----------
749
MEDIA 0.2%
--------------------------------------------------------------------------
Clear Channel Communications, Inc. 967 32
o Comcast Corp., Class A 3,463 102
Dow Jones & Co., Inc. 100 4
Gannett Co., Inc. 400 33
Knight-Ridder, Inc. 100 7
The McGraw-Hill Cos., Inc. 300 26
Meredith Corp. 100 5
New York Times Co., Class A 200 8
R.R. Donnelley & Sons Co. 300 9
o Time Warner, Inc. 6,850 114
Tribune Co. 500 22
o Univision Communications, Inc.,
Class A 519 16
Viacom, Inc., Class B 2,660 97
The Walt Disney Co. 3,077 78
-----------
553
MISCELLANEOUS 0.0%
--------------------------------------------------------------------------
3M Co. 1,200 93
MISCELLANEOUS FINANCE 0.4%
--------------------------------------------------------------------------
American Express Co. 2,000 106
The Bear Stearns Cos., Inc. 145 14
Capital One Financial Corp. 350 26
/ The Charles Schwab Corp. 2,125 19
CIT Group, Inc. 300 12
(10) Citigroup, Inc. 7,782 345
Countrywide Financial Corp. 798 26
o E*TRADE Financial Corp. 600 8
Fannie Mae 1,475 103
Federated Investors, Inc., Class B 200 6
Franklin Resources, Inc. 400 24
Freddie Mac 1,000 67
Golden West Financial Corp. 250 29
Goldman Sachs Group, Inc. 728 72
Janus Capital Group, Inc. 400 6
Lehman Brothers Holdings, Inc. 400 33
MBNA Corp. 1,957 50
Merrill Lynch & Co., Inc. 1,500 81
Moody's Corp. 200 16
Morgan Stanley 1,630 83
o Providian Financial Corp. 400 6
See financial notes. 49
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
SLM Corp. 650 29
Sovereign Bancorp, Inc. 400 9
T. Rowe Price Group, Inc. 200 11
Washington Mutual, Inc. 1,331 52
-----------
1,233
NON-DURABLES & ENTERTAINMENT 0.1%
--------------------------------------------------------------------------
Darden Restaurants, Inc. 300 7
o Electronic Arts, Inc. 424 19
Fortune Brands, Inc. 200 15
Hasbro, Inc. 325 6
International Game Technology 556 18
Mattel, Inc. 650 11
McDonald's Corp. 2,000 58
o Starbucks Corp. 560 30
Wendy's International, Inc. 200 7
Yum! Brands, Inc. 480 21
-----------
192
NON-FERROUS METALS 0.0%
--------------------------------------------------------------------------
Alcoa, Inc. 1,312 42
Engelhard Corp. 200 6
Freeport-McMoran Copper & Gold, Inc.,
Class B 300 11
Phelps Dodge Corp. 135 12
-----------
71
OIL: DOMESTIC 0.1%
--------------------------------------------------------------------------
Amerada Hess Corp. 100 8
Ashland, Inc. 100 6
ConocoPhillips 1,027 86
Kerr-McGee Corp. 186 11
Marathon Oil Corp. 500 19
o Nabors Industries Ltd. 200 10
Sunoco, Inc. 100 7
o Transocean, Inc. 474 17
Unocal Corp. 400 17
-----------
181
OIL: INTERNATIONAL 0.2%
--------------------------------------------------------------------------
ChevronTexaco Corp. 3,286 174
(7) Exxon Mobil Corp. 9,918 488
-----------
662
OPTICAL & PHOTO 0.0%
--------------------------------------------------------------------------
o Corning, Inc. 1,900 22
Eastman Kodak Co. 500 15
-----------
37
PAPER & FOREST PRODUCTS 0.0%
--------------------------------------------------------------------------
o Boise Cascade Corp. 100 3
Georgia-Pacific Corp. 379 13
International Paper Co. 739 29
Kimberly-Clark Corp. 756 45
Louisiana-Pacific Corp. 100 2
MeadWestvaco Corp. 294 9
Temple-Inland, Inc. 100 6
Weyerhaeuser Co. 350 22
-----------
129
PRODUCER GOODS & MANUFACTURING 0.3%
--------------------------------------------------------------------------
o American Standard Cos., Inc. 300 11
Avery Dennison Corp. 200 12
Caterpillar, Inc. 550 44
Cooper Industries Ltd., Class A 150 10
Deere & Co. 400 24
Dover Corp. 300 12
Emerson Electric Co. 650 42
o Fisher Scientific International, Inc. 163 9
(6) General Electric Co. 15,950 544
Honeywell International, Inc. 1,275 43
Illinois Tool Works, Inc. 450 41
Ingersoll-Rand Co., Class A 250 17
Johnson Controls, Inc. 300 17
o Millipore Corp. 100 5
Pall Corp. 200 5
Parker Hannifin Corp. 150 11
Snap-On, Inc. 100 3
W.W. Grainger, Inc. 100 6
-----------
856
RAILROAD & SHIPPING 0.0%
--------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 600 25
CSX Corp. 300 11
Norfolk Southern Corp. 600 21
Union Pacific Corp. 400 25
-----------
82
50 See financial notes.
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
REAL PROPERTY 0.0%
--------------------------------------------------------------------------
Apartment Investment & Management
Co., Class A 100 4
Equity Office Properties Trust 600 17
Equity Residential 400 13
Plum Creek Timber Co., Inc. 300 11
ProLogis 300 12
Simon Property Group, Inc. 300 17
-----------
74
RETAIL 0.4%
--------------------------------------------------------------------------
Albertson's, Inc. 652 15
o Autonation, Inc. 500 9
o AutoZone, Inc. 150 12
o Bed, Bath & Beyond, Inc. 400 16
Best Buy Co., Inc. 450 27
o Big Lots, Inc. 200 2
Circuit City Stores, Inc. 300 5
Costco Wholesale Corp. 700 34
CVS Corp. 600 26
Dillards, Inc., Class A 200 4
Dollar General Corp. 515 10
Family Dollar Stores, Inc. 300 9
Federated Department Stores, Inc. 300 15
The Gap, Inc. 1,362 27
Home Depot, Inc. 3,450 142
J.C. Penney Co., Inc. Holding Co. 400 14
o Kohl's Corp. 500 25
o Kroger Co. 1,200 18
Limitedbrands 818 20
Lowe's Cos., Inc. 1,200 68
The May Department Stores Co. 500 13
Nordstrom, Inc. 200 9
o Office Depot, Inc. 600 10
RadioShack Corp. 300 9
o Safeway, Inc. 650 12
Sears, Roebuck & Co. 300 11
Staples, Inc. 750 22
Target Corp. 1,400 70
Tiffany & Co. 250 7
TJX Cos., Inc. 800 19
o Toys `R' Us, Inc. 300 5
(9) Wal-Mart Stores, Inc. 6,450 348
Walgreen Co. 1,600 57
Winn-Dixie Stores, Inc. 300 1
-----------
1,091
STEEL 0.0%
--------------------------------------------------------------------------
Allegheny Technologies, Inc. 146 3
Nucor Corp. 200 8
United States Steel Corp. 100 4
Worthington Industries, Inc. 100 2
-----------
17
TELEPHONE 0.2%
--------------------------------------------------------------------------
Alltel Corp. 500 27
AT&T Corp. 1,181 20
o Avaya, Inc. 618 9
BellSouth Corp. 2,750 73
CenturyTel, Inc. 250 8
o Citizens Communications Co. 410 6
o Nextel Communications, Inc.,
Class A 1,700 45
o Qwest Communications International,
Inc. 2,524 9
SBC Communications, Inc. 5,025 127
Sprint Corp. (FON Group) 2,000 42
Verizon Communications, Inc. 4,188 164
-----------
530
TOBACCO 0.1%
--------------------------------------------------------------------------
Altria Group, Inc. 3,100 150
Reynolds American, Inc. 237 16
UST, Inc. 300 13
-----------
179
TRAVEL & RECREATION 0.0%
--------------------------------------------------------------------------
Brunswick Corp. 100 5
Carnival Corp. 1,000 50
Harrah's Entertainment, Inc. 200 12
Hilton Hotels Corp. 600 12
Marriott International, Inc., Class A 400 22
Starwood Hotels & Resorts Worldwide,
Inc. 300 14
-----------
115
See financial notes. 51
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TRUCKING & FREIGHT 0.0%
--------------------------------------------------------------------------
Paccar, Inc. 300 21
Ryder Systems, Inc. 100 5
-----------
26
UTILITIES: ELECTRIC & GAS 0.2%
--------------------------------------------------------------------------
o The AES Corp. 800 9
o Allegheny Energy, Inc. 170 3
Ameren Corp. 300 14
American Electric Power Co., Inc. 580 19
o Calpine Corp. 400 1
Centerpoint Energy, Inc. 474 5
Cinergy Corp. 300 12
o CMS Energy Corp. 200 2
Consolidated Edison, Inc. 300 13
Constellation Energy Group, Inc. 200 8
Dominion Resources, Inc. 515 33
DTE Energy Co. 200 9
Duke Energy Corp. 1,408 34
o Dynegy, Inc., Class A 500 2
Edison International 500 15
El Paso Corp. 769 7
Entergy Corp. 350 23
Exelon Corp. 1,024 41
FirstEnergy Corp. 533 22
FPL Group, Inc. 300 21
KeySpan Corp. 200 8
Kinder Morgan, Inc. 176 11
Nicor, Inc. 100 4
NiSource, Inc. 376 8
Peoples Energy Corp. 100 4
o PG&E Corp. 600 19
Pinnacle West Capital Corp. 100 4
PPL Corp. 300 16
Progress Energy, Inc. 354 15
Public Service Enterprise Group, Inc. 400 17
Sempra Energy 297 10
The Southern Co. 1,100 35
TECO Energy, Inc. 200 3
TXU Corp. 400 24
Williams Cos., Inc. 700 9
Xcel Energy, Inc. 510 9
-----------
489
OTHER INVESTMENT COMPANIES
93.8% of net assets
/(3) Schwab International Index Fund,
Select Shares 1,990,703 29,522
/(2) Schwab S&P 500 Fund,
Select Shares 2,403,370 42,492
/(4) Schwab Small-Cap Index Fund,
Select Shares 1,461,305 29,168
/(1) Schwab Total Bond
Market Fund 15,615,522 159,278
/(5) Schwab Value Advantage
Money Fund, Investor Shares
11,787,465 11,787
-----------
272,247
SECURITY FACE AMOUNT
RATE, MATURITY DATE ($ x 1,000)
SHORT-TERM INVESTMENT
0.7% of net assets
HSBC Bank, USA Grand Cayman
Time Deposit
1.29%, 11/01/04 1,973 1,973
END OF INVESTMENTS.
52 See financial notes.
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value $290,210 a
Receivables:
Fund shares sold 103
Dividends 41
Prepaid expenses + 12
------------
TOTAL ASSETS 290,366
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 143
Investments bought 12
Investment adviser and administrator fees 5
Transfer agent and shareholder service fees 6
Trustees' fees 1
Accrued expenses + 41
------------
TOTAL LIABILITIES 208
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 290,366
TOTAL LIABILITIES - 208
------------
NET ASSETS $290,158
NET ASSETS BY SOURCE
Capital received from investors 266,074
Net investment income not yet distributed 372
Net realized capital losses (3,226)
Net unrealized capital gains 26,938
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$290,158 22,169 $13.09
Unless stated, all numbers x 1,000.
a The fund paid $263,272 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $28,152
Sales/maturities $37,100
The fund's total security transactions with other SchwabFunds(R) during the
period were $30.
Percent of fund shares of other Schwab funds owned at the end of the report
period:
SCHWAB EQUITY INDEX FUNDS
S&P 500 Fund 0.5%
Small-Cap Index Fund 1.8%
International Index Fund 2.4%
SCHWAB BOND FUNDS
Total Bond Market Fund 15.1%
SCHWAB MONEY FUNDS
Value Advantage
Money Fund Less than 0.1%
FEDERAL TAX DATA
- ------------------------------------------------------
PORTFOLIO COST $264,443
NET UNREALIZED GAINS AND LOSSES:
Gains $27,952
Losses + (2,185)
----------
$25,767
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $372
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $2,752
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2011 $2,055
See financial notes. 53
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- -------------------------------------------------------------------------------
Dividends $9,377
Interest + 8
----------
TOTAL INVESTMENT INCOME 9,385
NET REALIZED GAINS AND LOSSES
- -------------------------------------------------------------------------------
Net realized gains on investments 404
Net realized gains received from underlying funds + 2,869
----------
NET REALIZED GAINS 3,273
NET UNREALIZED GAINS AND LOSSES
- -------------------------------------------------------------------------------
Net unrealized gains on investments 9,568
EXPENSES
- -------------------------------------------------------------------------------
Investment adviser and administrator fees 1,293 a
Transfer agent and shareholder service fees 734 b
Trustees' fees 6 c
Custodian fees 30
Portfolio accounting fees 40
Professional fees 34
Registration fees 21
Shareholder reports 23
Other expenses + 8
----------
Total expenses 2,189
Expense reduction - 720 d
----------
NET EXPENSES 1,469
INCREASE IN NET ASSETS FROM OPERATIONS
- -------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 9,385
NET EXPENSES - 1,469
NET INVESTMENT INCOME 7,916
NET REALIZED GAINS 3,273 e
NET UNREALIZED GAINS + 9,568 e
----------
INCREASE IN NET ASSETS FROM OPERATIONS $20,757
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.44% of the first
$500 million and 0.39% of assets beyond that. These fees are paid to Charles
Schwab Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% of the
fund's assets. These fees are paid to Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 28,
2005, to 0.50% of average daily net assets. This limit excludes interest,
taxes and certain non-routine expenses.
e These add up to a net gain on investments of $12,841.
54 See financial notes.
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income $7,916 $6,662
Net realized gains or losses 3,273 (2,662)
Net unrealized gains + 9,568 29,372
-------------------------------------------
INCREASE IN NET ASSETS
FROM OPERATIONS 20,757 33,372
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income $8,047 $6,687 a,b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
Shares sold 3,721 $47,654 4,632 $54,499
Shares reinvested 602 7,647 548 6,370
Shares redeemed + (5,185) (66,455) (5,315) (62,339)
---------------------------------------------------
NET TRANSACTIONS IN
FUND SHARES (862) ($11,154) (135) ($1,470)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 23,031 $288,602 23,166 $263,387
Total increase or
decrease + (862) 1,556 (135) 25,215 c
---------------------------------------------------
END OF PERIOD 22,169 $290,158 23,031 $288,602 d
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 13% of the fund's dividends for the report period qualify
for the dividends-received deduction.
The fund designates $1,510 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h)(ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for use in preparing
their 2004 income tax return.
b The tax-basis components of distributions are:
CURRENT PERIOD
Ordinary income $8,047
Long-term capital gains $ --
PRIOR PERIOD
Ordinary income $6,687
Long-term capital gains $ --
c Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
d Includes distributable net investment income in the amount of $372 and $503 at
the end of the current period and prior period, respectively.
See financial notes. 55
SCHWAB MARKETTRACK PORTFOLIOS
FINANCIAL NOTES
BUSINESS STRUCTURE OF THE FUNDS
EACH OF THE FUNDS DISCUSSED IN THIS REPORT IS A SERIES OF SCHWAB CAPITAL TRUST,
A NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended. The sidebar shows the funds in this report and their trust.
THE FUNDS OFFER ONE SHARE CLASS. Shares are bought and sold at net asset value
(NAV), which is the price for all outstanding shares. Each share has a par value
of 1/1,000 of a cent, and the trust may issue as many shares as necessary.
FUND OPERATIONS
Most of the funds' investments are described in the fund-by-fund sections
earlier in this report. However, there are certain other fund operations and
policies that may affect a fund's financials, as described below. Other policies
concerning the funds' business operations also are described here.
THE FUNDS PAY DIVIDENDS from net investment income and make distributions from
net capital gains once a year, except for the Conservative Portfolio, which
makes income distributions quarterly.
THE FUNDS MAY INVEST IN FUTURES CONTRACTS. Futures contracts involve certain
risks because they can be very sensitive to market movements.
One risk is that the price of a futures contract may not move in perfect
correlation with the price of the underlying securities. Another risk is that,
at certain times, it may be impossible for a fund to close out a position in a
futures contract, due to a difference in trading hours or to market conditions
that may reduce the liquidity for a futures contract or its underlying
securities. The potential for losses associated with futures contracts may
exceed amounts recorded in the Statement of Assets and Liabilities.
Because futures carry inherent risks, a fund must give the broker a deposit of
cash and/or securities (the "initial margin") whenever it enters into a futures
contract. The amount of the deposit may vary from one contract to another, but
it is generally a percentage of the contract amount.
Futures are traded publicly on exchanges, and their market value changes daily.
A fund records the change in market value of futures, and also the change in the
amount of margin deposit required ("variation margin").
THE FUNDS MAY ENTER INTO REPURCHASE AGREEMENTS. In a repurchase agreement, a
fund buys a security from another party (usually a financial institution) with
the agreement that it be sold back in the future. The date,
THE TRUST AND ITS FUNDS
This list shows all of the funds included in Schwab Capital Trust. The funds
discussed in this report are highlighted.
SCHWAB CAPITAL TRUST organized May 7, 1993
Schwab S&P 500 Fund
Schwab Small-Cap Index Fund
Schwab Total Stock Market Index Fund
Schwab International Index Fund
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Laudus U.S. MarketMasters Fund
Laudus Balanced MarketMasters Fund
Laudus Small-Cap MarketMasters Fund
Laudus International MarketMasters Fund
Schwab Core Equity Fund
Schwab Dividend Equity Fund
Schwab Small-Cap Equity Fund
Schwab Hedged Equity Fund
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab Institutional Select S&P 500 Fund
Schwab Institutional Select Large-Cap Value
Index Fund
Schwab Institutional Select Small-Cap Value
Index Fund
56
SCHWAB MARKETTRACK PORTFOLIOS
price and other conditions are all specified when the agreement is created.
The funds' repurchase agreements will be fully collateralized by U.S. government
securities. All collateral is held by the funds' custodian (or, with tri-party
agreements, the agent's bank) and is monitored daily to ensure that its market
value is at least equal to the repurchase price under the agreement.
THE FUNDS PAY FEES TO AFFILIATES OF THE INVESTMENT ADVISER FOR VARIOUS SERVICES.
Through their trust, the funds have agreements with Charles Schwab Investment
Management, Inc. (CSIM) to provide investment advisory and administrative
services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent
and shareholder services.
Although these agreements specify certain fees for these services, CSIM and
Schwab have made additional agreements with the funds that may limit the total
expenses charged. The rates and limitations for these fees vary from fund to
fund, and are described in each fund's Statement of Operations.
THE FUNDS MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING RELATED PARTIES. For
instance, a fund may own shares of The Charles Schwab Corporation if that
company is included in its index.
Pursuant to an exemptive order issued by the SEC, the funds may invest in other
related funds. The percentages of fund shares of other related funds owned are
shown in each fund's Statement of Assets and Liabilities.
The funds may make direct transactions with certain other SchwabFunds(R) when
practical. When one fund is seeking to sell a security that another is seeking
to buy, an interfund transaction can allow both funds to benefit by reducing
transaction costs. This practice is limited to funds that share the same
investment adviser, trustees and officers.
Pursuant to an exemptive order issued by the SEC, the funds may enter into
interfund borrowing and lending transactions within the SchwabFunds(R). All
loans are for temporary or emergency purposes only. The interest rate charged on
the loan is the average of the overnight repurchase agreement rate and the
short-term bank loan rate. The interfund lending facility is subject to the
oversight and periodic review of the Board of Trustees of the SchwabFunds(R).
TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/OR DIRECTORS OF THE INVESTMENT
ADVISER OR SCHWAB. Federal securities law limits the percentage of such
"interested persons" who may serve on a trust's board, and the trust was in
compliance with these limitations throughout the report period. The trust did
not pay any of these persons for their service as trustees, but it did pay
non-interested persons (independent trustees), as noted in each fund's Statement
of Operations.
THE FUNDS MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The funds may obtain
temporary bank loans through the trusts to which they belong, to use for meeting
shareholder redemptions or for extraordinary or emergency purposes. The
SchwabFunds have custodian overdraft facilities and line of credit arrangements
of $150 million and $100 million with PNC Bank, N.A. and Bank of America, N.A.,
respectively. The funds pay interest on the amounts they borrow at rates that
are negotiated periodically.
AMOUNT WEIGHTED
OUTSTANDING AVERAGE AVERAGE
AT 10/31/04 BORROWING* INTEREST
FUND ($ x 1,000) ($ x 1,000) RATE* (%)
- --------------------------------------------------------------------------------
MARKETTRACK
GROWTH PORTFOLIO -- 142 2.18
- --------------------------------------------------------------------------------
MARKETTRACK
BALANCED PORTFOLIO -- 465 2.11
- --------------------------------------------------------------------------------
MARKETTRACK
CONSERVATIVE PORTFOLIO -- 98 1.55
- --------------------------------------------------------------------------------
* Based on the number of days for which the borrowing is outstanding.
THE FUNDS INTEND TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR
REGULATED INVESTMENT COMPANIES.
57
SCHWAB MARKETTRACK PORTFOLIOS
Accordingly, the funds distribute substantially all of their net investment
income and net realized capital gains (if any) to their respective shareholders
each year. As long as a fund meets the tax requirements, it is not required to
pay federal income tax. The net investment income and net realized capital gains
and losses may differ for financial statement and tax purposes primarily due to
differing treatments of losses on wash sales.
UNDER THE FUNDS' ORGANIZATIONAL DOCUMENTS, ITS OFFICERS AND TRUSTEES ARE
INDEMNIFIED AGAINST CERTAIN LIABILITY ARISING OUT OF THE PERFORMANCE OF THEIR
DUTIES TO THE FUNDS. In addition, in the normal course of business the funds
enter into contracts with their vendors and others that provide general
indemnifications. The funds' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the funds.
However, based on experience, the funds expect the risk of loss to be remote.
ACCOUNTING POLICIES
The following are the main policies the funds use in preparing their financial
statements.
THE FUNDS VALUE THE SECURITIES IN THEIR PORTFOLIOS EVERY BUSINESS DAY. The funds
use the following policies to value various types of securities:
- - SECURITIES TRADED ON AN EXCHANGE OR OVER-THE-COUNTER: valued at the closing
value for the day, or, on days when no closing value has been reported,
halfway between the most recent bid and asked quotes. Securities that are
primarily traded on foreign exchanges are valued at the closing values of such
securities on their respective exchanges with these values then translated
into U.S. dollars at the current exchange rate.
- - SECURITIES FOR WHICH NO MARKET QUOTATIONS ARE READILY AVAILABLE or when a
significant event has occurred between the time of the security's last close
and the time that a fund calculates net asset value: valued at fair value, as
determined in good faith by the fund's investment adviser using guidelines
adopted by the fund's Board of Trustees and the Pricing Committee. Some of the
more common reasons that may necessitate that a security be valued at fair
value include: the security's trading has been halted or suspended; the
security has been de-listed from a national exchange; the security's primary
trading market is temporarily closed at a time when under normal conditions it
would be open; or the security's primary pricing source is not able or willing
to provide a price.
- - FUTURES AND FORWARDS: open contracts are valued at their settlement prices as
of the close of their exchanges (for futures) or at a market value based on
that day's exchange rates (for forwards). When a fund closes out a futures or
forwards position, it calculates the difference between the value of the
position at the beginning and at the end, and records a realized gain or loss
accordingly.
- - UNDERLYING FUNDS: Valued at their respective net asset values as determined by
those funds, in accordance with the 1940 Act for a given day.
- - SHORT-TERM SECURITIES (60 DAYS OR LESS TO MATURITY): valued at amortized cost.
SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the
security is executed.
DIVIDENDS AND DISTRIBUTIONS FROM PORTFOLIO SECURITIES are recorded on the date
they are effective (the ex-dividend date), although the funds record certain
foreign security dividends on the day they learn of the ex-dividend date.
INCOME FROM INTEREST AND THE ACCRETION OF DISCOUNT is recorded as it accrues.
REALIZED GAINS AND LOSSES from security transactions are based on the identified
costs of the securities involved.
58
SCHWAB MARKETTRACK PORTFOLIOS
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES are reported in U.S.
dollars. For assets and liabilities held on a given date, the dollar value is
based on market exchange rates in effect on that date. Transactions involving
foreign currencies, including purchases, sales, income receipts and expense
payments, are calculated using exchange rates in effect on the transaction date.
EXPENSES that are specific to a fund are charged directly to that fund. Expenses
that are common to all funds within a trust generally are allocated among the
funds in proportion to their average daily net assets.
EACH FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND
ACCOUNTING, and is considered a separate entity for tax purposes. Within its
account, each fund also keeps certain assets in segregated accounts, as may be
required by securities law.
THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH ACCOUNTING PRINCIPLES
GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. Notwithstanding this,
shareholders should understand that in order to follow these principles, fund
management has to make estimates and assumptions that affect the information
reported in the financial statements. It's possible that once the results are
known, they may turn out to be different from these estimates.
59
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF:
Schwab MarketTrack All Equity Portfolio(TM)
Schwab MarketTrack Growth Portfolio(TM)
Schwab MarketTrack Balanced Portfolio(TM)
Schwab MarketTrack Conservative Portfolio(TM)
In our opinion, the accompanying statements of assets and liabilities, including
the portfolio holdings, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of Schwab MarketTrack All Equity Portfolio,
Schwab MarketTrack Growth Portfolio, Schwab MarketTrack Balanced Portfolio and
Schwab MarketTrack Conservative Portfolio (four of the portfolios constituting
Schwab Capital Trust) (hereafter collectively referred to as the "Funds") at
October 31, 2004, the results of each of their operations for the year then
ended, and the changes in their net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 2004 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
San Francisco, CA
December 16, 2004
60
FUND TRUSTEES
A fund's Board of Trustees is responsible for protecting the interests of
that fund's shareholders. The tables below give information about the
people who serve as trustees and officers for the SchwabFunds(R),
including the funds covered in this report. Trustees remain in office
until they resign, retire or are removed by shareholder vote. 1
Under the Investment Company Act of 1940, any officer, director, or
employee of Schwab or CSIM is considered an "interested person," meaning
that he or she is considered to have a business interest in Schwab or
CSIM. These individuals are listed as "interested trustees." The
"independent trustees" are individuals who, under the 1940 Act, are not
considered to have a business interest in Schwab or CSIM.
Each of the SchwabFunds (of which there were 51 as of 10/31/04) belongs to
one of these trusts: The Charles Schwab Family of Funds, Schwab
Investments, Schwab Capital Trust or Schwab Annuity Portfolios. Currently
all these trusts have the same trustees and officers. The address for all
trustees and officers is 101 Montgomery Street, San Francisco, CA 94104.
You can find more information about the trustees and officers in the
Statement of Additional Information, which is available free by calling
1-800-435-4000.
INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S);
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
CHARLES R. SCHWAB 2 Chair, Trustee: Chair, CEO, Director, The Charles Schwab Corp., Charles Schwab &
7/29/37 Family of Funds, 1989; Co., Inc.; Chair, Director, Charles Schwab Investment Management,
Investments, 1991; Inc.; Chair, Charles Schwab Holdings (UK); CEO, Director, Charles
Capital Trust, 1993; Schwab Holdings, Inc.; Chair, CEO Schwab (SIS) Holdings, Inc. I,
Annuity Portfolios, 1994. Schwab International Holdings, Inc.; Director, Charles Schwab Bank,
N.A., U.S. Trust Corp., United States Trust Co. of New York, Siebel
Systems (software), Xsign, Inc. (electronic payment systems),
TrustMark, Inc., All Kinds of Minds (education); Trustee, Stanford
University. Until 5/04: Director, The Gap, Inc. (clothing retailer). Until
5/03: Co-CEO, The Charles Schwab Corp. Until 3/02: Director,
Audiobase, Inc. (Internet audio solutions). Until 5/02: Director,
Vodaphone AirTouch PLC (telecommunications). Until 7/01: Director,
The Charles Schwab Trust Co.
1 The SchwabFunds retirement policy requires that independent trustees elected
after January 1, 2000 retire at age 72 or after twenty years of service as a
trustee, whichever comes first. Independent trustees elected prior to January
1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will
retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on
December 31, 2010.
2 In addition to his position with the investment adviser and the distributor,
Mr. Schwab also owns stock of The Charles Schwab Corporation.
61
INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUST OFFICE(S) HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
EVELYN DILSAVER President, CEO EVP, President, Charles Schwab Investment Management, Inc;
5/4/55 (all trusts). Until 7/04: SVP for Development and Distribution, Asset Management
Products and Services Enterprise; Until 6/03: EVP, CFO, Administrative
Officer, U.S. Trust Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Director, Charles Schwab Investment
4/5/55 Officer (all trusts). Management, Inc.; Chief Investment Officer, The Charles Schwab
Trust Co.
- ------------------------------------------------------------------------------------------------------------------------------------
KIMON DAIFOTIS SVP, Chief Investment Since 9/04: Chief Investment Officer, Fixed Income, Charles
7/10/59 Officer (all trusts). Schwab Investment Management, Inc.; Since 6/04: SVP, Charles Schwab
Investment Management, Inc.; Until 6/04: VP, Charles Schwab
Investment Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
JEFF MORTIMER SVP, Chief Investment Since 5/04: SVP, Chief Investment Officer, Equities, Charles Schwab
9/29/63 Officer (all trusts). Investment Management, Inc.; Since 6/04: VP, Chief Investment
Officer, Laudus Trust; Until 5/04: VP, Charles Schwab Investment
Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
RANDALL FILLMORE Chief Compliance Since 9/04: SVP, Institutional Compliance and Chief Compliance
11/11/60 Officer (all trusts). Officer, Charles Schwab Investment Management, Inc.; Until 9/04:
VP, Charles Schwab & Co., Charles Schwab Investment Management,
Inc.; Until 2002: VP of Internal Audit, Charles Schwab & Co.;
Prior to 2000: PricewaterhouseCoopers.
- ------------------------------------------------------------------------------------------------------------------------------------
KOJI E. FELTON Secretary (all trusts). SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab
3/13/61 Investment Management, Inc. Until 6/98: Branch Chief in Enforcement,
U.S. Securities and Exchange Commission, San Francisco.
- ------------------------------------------------------------------------------------------------------------------------------------
GEORGE PEREIRA 1 Treasurer, Principal Since 11/04: SVP, CFO, Charles Schwab Investment Management,
6/9/64 Financial Officer Inc.; Until 11/04: SVP, Financial Reporting, Charles Schwab & Co., Inc.;
(all trusts). Until 12/99: Chief Financial Officer, Commerzbank Capital Markets;
Until 9/99: Managing Director at the New York Stock Exchange.
1 Elected to his position on the SchwabFunds Board on November 16, 2004.
62
INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
MARIANN BYERWALTER 2000 (all trusts). Chair, JDN Corp. Advisory LLC; Trustee, Stanford University, America
8/13/60 First Cos., (venture capital/fund management), Redwood Trust, Inc.
(mortgage finance), Stanford Hospitals and Clinics, SRI International
(research), PMI Group, Inc. (mortgage insurance), Lucile Packard
Children's Hospital, Laudus Trust, Laudus Variable Insurance Trust.
2001: Special Advisor to the President, Stanford University. Until 2002:
Director, LookSmart, Ltd. (Internet infrastructure). Until 2001: VP,
Business Affairs, CFO, Stanford University.
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD F. DORWARD Family of Funds, 1989; CEO, Dorward & Associates (corporate management, marketing and
9/23/31 Investments, 1991; communications consulting). Until 1999: EVP, Managing Director,
Capital Trust, 1993; Grey Advertising.
Annuity Portfolios,1994.
- ------------------------------------------------------------------------------------------------------------------------------------
WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp. (bio-pharmaceuticals). Trustee, Solectron Corp.
11/22/41 (manufacturing), Airlease Ltd. (aircraft leasing), Mission West
Properties (commercial real estate), Stratex Corp. (network equipment);
Public Governor, Laudus Trust, Laudus Variable Insurance Trust;
Member, executive committee, Pacific Stock & Options Exchange.
Until 2003: Trustee, Tenera, Inc. (services and software). Until 1998:
Dean, Haas School of Business, University of California, Berkeley.
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT G. HOLMES Family of Funds, 1989; Chair, CEO, Director, Semloh Financial, Inc. (international financial
5/15/31 Investments, 1991; services and investment advice).
Capital Trust, 1993;
Annuity Portfolios,1994.
- ------------------------------------------------------------------------------------------------------------------------------------
GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors);
9/28/50 Trustee, Rorento N.V. (investments--Netherlands), Cooper Industries
(electrical products, tools and hardware); Member, audit committee,
Northern Border Partners, L.P. (energy). Until 2002: Director, Pennzoil-
Quaker State Co. (oil and gas).
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD R. STEPHENS Family of Funds, 1989; Managing Partner, D.R. Stephens & Co. (investments). Until 1996:
6/28/38 Investments, 1991; Chair, CEO, North American Trust (real estate investment trust).
Capital Trust, 1993;
Annuity Portfolios, 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL W. WILSEY Family of Funds, 1989; Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate
8/18/43 Investments, 1991; and investments).
Capital Trust, 1993;
Annuity Portfolios, 1994.
63
GLOSSARY
ASSET ALLOCATION The practice of dividing a portfolio among different asset
classes, with each asset class assigned a particular percentage.
ASSET CLASS A group of securities with similar structure and basic
characteristics. Stocks, bonds and cash are the three main examples of asset
classes.
BETA A historical measure of an investment's volatility relative to a market
index (usually the S&P 500(R)). The index is defined as having a beta of 1.00.
Investments with a beta higher than 1.00 have been more volatile than the index;
those with a beta of less than 1.00 have been less volatile.
BOND A security representing a loan from the investor to the issuer. A bond
typically pays interest at a fixed rate (the "coupon rate") until a specified
date (the "maturity date"), at which time the issuer returns the money borrowed
("principal" or "face value") to the bondholder. Because of their structure,
bonds are sometimes called "fixed income securities" or "debt securities."
An individual bond is subject to the credit risk of the issuer. Changes in
interest rates can affect a bond's market value prior to call or maturity. There
is no guarantee that a bond's yield to call or maturity will provide a
positive return over the rate of inflation.
BOND FUND A bond fund is subject to the same credit, interest rate, and
inflation risks as bonds. In addition, a bond fund incurs ongoing fees and
expenses. A bond fund's net asset value will fluctuate with the price of the
underlying bonds and the portfolio turnover activity; return of principal is not
guaranteed.
CAP, CAPITALIZATION See "market cap."
CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an
investment and its value at a later time. If the investment has been sold, the
capital gain or loss is considered a realized gain or loss. If the investment
is still held, the gain or loss is still "on paper" and is considered
unrealized.
EARNINGS GROWTH RATE For a mutual fund, the average yearly rate at which the
earnings of the companies in the fund's portfolio have grown, measured over the
past five years.
EARNINGS PER SHARE (EPS) A company's earnings, or net income, for the past 12
months, divided by the number of shares outstanding.
EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to
cover the fund's operating expenses. An expense ratio of 0.50% means that a
fund's expenses amount to half of one percent of its average net assets a year.
MARKET CAP, MARKET CAPITALIZATION The value of a company as determined by the
total value of all shares of its stock outstanding.
MEDIAN MARKET CAP The midpoint of the range of market caps of the stocks held by
a fund. There are different ways of calculating median market cap. With a simple
median, half of the stocks in the fund's portfolio would be larger than the
median, and half would be smaller. With a weighted median (the type that is
calculated for these funds), half of the fund's assets are invested in stocks
that are larger than the median market cap, and half in stocks that are smaller.
NET ASSET VALUE (NAV) The value of one share of a mutual fund. NAV is calculated
by taking the fund's total assets, subtracting liabilities, and dividing by the
number of shares outstanding.
OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual
fund, indicates all shares currently held by investors.
PRICE-TO-BOOK RATIO (P/B) The market price of a company's stock compared with
its "book value." A mutual fund's P/B is the weighted average of the P/B of all
stocks in the fund's portfolio.
PRICE-TO-EARNINGS RATIO (P/E) The market price of a company's stock compared
with earnings over the past year. A mutual fund's P/E is the weighted average of
the P/E of all stocks in the fund's portfolio.
RETURN ON EQUITY (ROE) The average yearly rate of return for each dollar of
investors' money, measured over the past five years.
STOCK A share of ownership, or equity, in the issuing company.
TOTAL RETURN The percentage that an investor would have earned or lost on an
investment in the fund assuming dividends and distributions were reinvested.
WEIGHTED AVERAGE For mutual funds, an average that gives the same weight to each
security as the security represents in the fund's portfolio.
YIELD The income paid out by an investment, expressed as a percentage of the
investment's market value.
64
SchwabFunds(R) offers you a complete family of mutual funds, each one based on a
clearly defined investment approach and using disciplined management strategies.
The list at right shows all currently available SchwabFunds.
Whether you're an experienced investor or just starting out, SchwabFunds can
help you achieve your financial goals. An investor should consider a fund's
investment objectives, risks, and charges and expenses carefully before
investing or sending money. This and other important information can be found in
the fund's prospectus. Please call 1-800-435-4000 for a prospectus and brochure
for any SchwabFund. Please read the prospectus carefully before you invest. This
report must be preceded or accompanied by a current prospectus.
METHODS FOR PLACING ORDERS
The following information outlines how Schwab investors can place orders. If you
are investing through a third-party investment provider, methods for placing
orders may be different.
INTERNET 1
www.schwab.com
SCHWAB BY PHONE(TM) 2
Use our automated voice service or speak to a representative. Call
1-800-435-4000, day or night (for TDD service, call 1-800-345-2550).
TELEBROKER(R)
Use our automated touch-tone phone service at 1-800-272-4922.
MAIL
Write to SchwabFunds at:
P.O. Box 3812
Englewood, CO
80155-3812
When selling or exchanging shares, be sure to include the signatures of at least
one of the persons whose name is on the account.
PROXY VOTING POLICIES, PROCEDURES AND RESULTS
A description of the proxy voting policies and procedures used to determine how
to vote proxies on behalf of the funds is available without charge, upon
request, by visiting Schwab's web site at www.schwab.com/schwabfunds, the SEC's
web site at http://www.sec.gov, or by contacting SchwabFunds at 1-800-435-4000.
Information regarding how a fund voted proxies relating to portfolio securities
during the most recent twelve-month period ended June 30 is available, without
charge, by visiting Schwab's web site at www.schwab.com/schwabfunds or the SEC's
website at http://www.sec.gov.
1 Shares of Sweep Investments(TM) may not be purchased directly over the
Internet.
2 Orders placed in person or through a telephone representative may be subject
to a service fee payable to Schwab.
THE SCHWABFUNDS FAMILY(R)
STOCK FUNDS
Schwab S&P 500 Fund
Schwab 1000 Fund(R)
Schwab Small-Cap Index Fund(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab(R) Institutional Select(R) Funds
Schwab(R) Institutional Select(R) S&P 500 Fund
Schwab(R) Institutional Select(R) Large-Cap Value Index Fund
Schwab(R) Institutional Select(R) Small-Cap Value Index Fund
ASSET ALLOCATION FUNDS
Schwab MarketTrack Portfolios(R)
Schwab MarketTrack All Equity Portfolio(TM)
Schwab MarketTrack Growth Portfolio(TM)
Schwab MarketTrack Balanced Portfolio(TM)
Schwab MarketTrack Conservative Portfolio(TM)
BOND FUNDS
Schwab YieldPlus Fund(R)
Schwab Short-Term Bond Market Fund(TM)
Schwab Total Bond Market Fund(TM)
Schwab GNMA Fund(TM)
Schwab Short/Intermediate Tax-Free Bond Fund(TM)
Schwab Long-Term Tax-Free Bond Fund(TM)
Schwab California Short/Intermediate
Tax-Free Bond Fund(TM)
Schwab California Long-Term Tax-Free Bond Fund(TM)
SCHWAB MONEY FUNDS
Schwab offers an array of money market funds that seek high current income
consistent with safety and liquidity. 3 Choose from taxable or tax-advantaged
alternatives. Many can be linked to your Schwab account to "sweep" cash balances
automatically, subject to availability, when you're between investments. Or, for
your larger cash reserves, choose one of our Value Advantage Investments(R).
3 Investments in money market funds are neither insured nor guaranteed by the
Federal Deposit Insurance Corporation (FDIC) or any other government agency
and, although they seek to preserve the value of your investment at $1 per
share, it is possible to lose money.
[CHARLES SCHWAB LOGO]
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc. (Schwab)
FUNDS
SchwabFunds(R)
P.O. Box 3812, Englewood, CO 80155-3812
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
(C)2004 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC
Printed on recycled paper.
REG13813-07
SCHWAB(R) INSTITUTIONAL SELECT(R) FUNDS
ANNUAL REPORT
October 31, 2004
Schwab(R) Institutional Select(R)
S&P 500 Fund
Schwab(R) Institutional Select(R)
Large-Cap Value Index Fund
Schwab(R) Institutional Select(R)
Small-Cap Value Index Fund
[CHARLES SCHWAB LOGO]
Three funds designed to capture the performance
of specific segments of the U.S. stock market.
IN THIS REPORT
Management's Discussion .............................................. 2
The president of SchwabFunds(R) and the funds' managers take
a look at the factors that shaped fund performance during the
report period.
Performance at a Glance ............. 5
Schwab(R) Institutional Select(R) S&P 500 Fund
Ticker Symbol: ISLCX
The fund seeks high total return by tracking the performance
of the S&P 500(R) Index. 1
Performance and Fund Facts .......... 6
Financial Statements ................ 13
Schwab(R) Institutional Select(R) Large-Cap Value Index Fund
Ticker Symbol: ISLVX
The fund seeks high total return by tracking the performance
of the S&P 500/Barra Value Index. 1
Performance and Fund Facts .......... 8
Financial Statements ................ 26
Schwab(R) Institutional Select(R) Small-Cap Value Index Fund
Ticker Symbol: ISSVX
The fund seeks high total return by tracking the performance
of the S&P SmallCap 600/Barra Value Index. 1
Performance and Fund Facts .......... 10
Financial Statements ................ 37
Fund Expenses ........................................................ 12
Financial Notes ...................................................... 48
Fund Trustees ........................................................ 53
Glossary ............................................................. 56
Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM)
Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab).
1 Standard & Poor's(R), S&P(R), S&P 500(R), Standard & Poor's 500(R),
500(R), S&P 500/Barra Value Index and S&P SmallCap 600/Barra Value Index
are trademarks of The McGraw-Hill Companies, Inc. and have been licensed
for use by the fund. The fund is not sponsored, endorsed, sold or promoted
by Standard & Poor's, and Standard & Poor's makes no representation
regarding the advisability of investing in the fund.
[PHOTO OF CHARLES SCHWAB]
Charles Schwab
Chairman
FROM THE CHAIRMAN
Dear Shareholder:
As we get ready for 2005, I want to remind you that you might want to add one
more item to your list of New Year's resolutions--to review and, if necessary,
rebalance your investment portfolio. After all, staying on track is as important
in investing as it is in any other part of life. No matter whether it's a good
or bad investment climate, you need to make sure that you own a diversified mix
of investments and that your asset allocation matches your individual goals,
time frame and tolerance for risk.
One efficient way to be diversified is by owning a broad-based mutual fund.
Equity mutual funds also can help you to diversify the stock side of your
portfolio. While our experienced portfolio managers adhere to each fund's
objective, it still is important to review your portfolio to make sure the
holdings in your funds don't overlap and you're not overconcentrated in one
asset class.
On a final note, I'm very happy to announce that Evelyn Dilsaver has been named
CEO and President of SchwabFunds(R). Although new to the position, Evelyn is no
stranger to SchwabFunds, having been an officer in several other capacities at
Schwab. Her broad experience in product creation, coupled with a comprehensive
understanding of your financial needs and her commitment to you, make her the
ideal candidate for her new role.
Thank you for investing with us.
Sincerely,
/s/ Charles Schwab
MANAGEMENT'S DISCUSSION for the year ended October 31, 2004
[PHOTO OF EVELYN DILSAVER]
EVELYN DILSAVER is President and CEO of Charles Schwab Investment Management,
Inc. and is president of each of the funds covered in this report. She joined
the firm in 1992 and has held a variety of executive positions at Schwab.
Dear Shareholder:
I am very excited about my new role as President and CEO of SchwabFunds(R). I
believe that my experience at Schwab has prepared me well for this role, as each
position has been focused on meeting the needs of our clients. I promise that I
will continue on this path and that my goal is to offer you even better service
and more relevant choices.
When we discuss SchwabFunds with our clients, for example, we often hear that
you want to know that you're getting excellent value. In fact, on October 1,
2004, we significantly reduced the minimum investment needed in our Schwab(R)
Institutional Select(R) S&P 500 Fund and we lowered its operating expense ratio
(OER) from 0.15% down to 0.10% 1.
I also want to let you know that we plan to continue to provide and expand
information on SchwabFunds on schwab.com. Providing this information is one of
the many ways we help individual investors choose investments that are
appropriate for their financial goals and time horizons.
I look forward to serving you in my new role. I also want to remind you that
your trust is very important to us, and I will do all I can to earn and maintain
that trust. Thank you for investing in SchwabFunds.
Sincerely,
/s/ Evelyn Dilsaver
1 Schwab and the investment adviser have agreed to limit the fund's OER to 0.10%
(excluding interest, taxes and certain non-routine expenses) through 12/31/05.
2 Schwab Institutional Select Funds
The strength of the market early in the period, combined with strong
second- and third-quarter valuations and earnings resulted in a positive
showing for equities, as measured by the S&P 500(R) Index.
THE INVESTMENT ENVIRONMENT AND THE FUNDS
THE ENCOURAGING ECONOMIC NEWS THAT WAS REPORTED TOWARD THE END OF 2003 CONTINUED
TO IMPROVE INTO 2004. Businesses added to their inventories, factory orders rose
and production gained some strength. Retail sales continued to rise and higher
commodity prices were holding. Mortgage refinancing activity, while still
significant, waned as mortgage rates inched slightly upward. And finally, the
last piece of the economic puzzle--job growth--began to pick up some steam.
In fact, aside from a "soft patch" in early summer, the economy was clicking on
all cylinders.
With the economic recovery more broad-based, investors, who only a year ago
feared deflation, started to worry about inflation. Their inflationary concerns
were based on surging oil prices, which had hit an all-time high amid fears of
supply interruptions. And while commodity prices moderated somewhat later in the
report period, previous increases started to show up in broad measures of
inflation. Labor costs also were beginning to rise. Nonetheless, the Federal
Reserve (the Fed) continued to hold the Fed funds rate near a 45-year low until
June 2004.
While third-quarter GDP moved in the right direction, up to an annualized 3.7%
from 3.3% in second quarter, higher commodity prices had effectively eroded many
consumers' purchasing power. Geopolitical
ASSET CLASS PERFORMANCE COMPARISON % returns during the report period
This graph compares the performance of various asset classes during the report
period. Final performance figures for the period are in the key below.
9.42% S&P 500(R) INDEX: measures U.S. large-cap stocks
11.73% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
18.84% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in
Europe, Australasia and the Far East
5.53% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond market
[LINE GRAPH]
RUSSELL LEHMAN BROTHERS
S&P 500(R) 2000(R) MSCI-EAFE(R) U.S. AGGREGATE
DATE INDEX INDEX INDEX BOND INDEX
31-Oct-03 0.00 0.00 0.00 0.00
7-Nov-03 0.29 2.82 0.78 -0.63
14-Nov-03 0.08 0.94 1.80 0.61
21-Nov-03 -1.33 -0.38 0.15 0.86
28-Nov-03 0.88 3.55 2.22 0.24
5-Dec-03 1.24 2.14 4.70 0.95
12-Dec-03 2.48 3.80 5.04 0.97
19-Dec-03 3.90 3.68 6.46 1.50
26-Dec-03 4.59 5.21 7.84 1.53
2-Jan-04 5.85 6.40 10.98 0.81
9-Jan-04 7.16 9.14 13.86 2.16
16-Jan-04 8.89 12.04 12.31 2.46
23-Jan-04 9.07 13.13 15.10 2.33
30-Jan-04 8.12 10.24 11.77 2.07
6-Feb-04 9.26 10.89 13.33 2.35
13-Feb-04 9.63 11.12 15.41 2.80
20-Feb-04 9.49 10.13 15.13 2.64
27-Feb-04 9.62 11.23 14.35 3.18
5-Mar-04 10.80 13.90 16.17 3.85
12-Mar-04 7.38 10.77 11.07 4.12
19-Mar-04 6.36 8.49 13.10 4.07
26-Mar-04 6.20 8.91 12.52 3.88
2-Apr-04 9.47 14.78 16.39 2.72
9-Apr-04 9.27 13.73 16.44 2.62
16-Apr-04 8.83 10.99 15.04 2.03
23-Apr-04 9.42 12.39 14.61 1.51
30-Apr-04 6.27 6.54 12.39 1.25
7-May-04 5.47 4.43 10.88 -0.19
14-May-04 5.27 3.54 6.99 0.03
21-May-04 5.09 3.93 9.59 0.21
28-May-04 7.73 8.24 12.63 0.84
4-Jun-04 7.95 8.15 12.87 0.36
11-Jun-04 9.32 8.43 13.42 0.32
18-Jun-04 9.21 8.73 14.66 0.78
25-Jun-04 9.18 12.01 15.45 1.18
2-Jul-04 8.35 11.13 15.27 2.16
9-Jul-04 7.18 7.52 15.10 2.22
16-Jul-04 6.10 5.96 14.50 2.69
23-Jul-04 4.64 2.87 10.84 2.41
30-Jul-04 6.19 5.20 11.50 2.42
6-Aug-04 2.58 -0.81 10.63 3.63
13-Aug-04 2.74 -1.21 9.57 3.72
20-Aug-04 6.01 4.63 11.08 3.79
27-Aug-04 6.95 5.36 12.29 3.89
3-Sep-04 7.56 6.26 12.42 3.70
10-Sep-04 8.58 8.88 14.40 4.31
17-Sep-04 9.07 9.54 14.32 4.59
24-Sep-04 7.31 8.18 13.88 4.93
1-Oct-04 9.41 11.89 16.43 4.38
8-Oct-04 8.56 10.13 17.91 4.79
15-Oct-04 7.23 8.95 16.46 5.20
22-Oct-04 6.03 8.64 17.65 5.54
29-Oct-04 9.42 11.73 18.84 5.53
31-Oct-04 9.42 11.73 18.84 5.53
These figures assume dividends and distributions were reinvested. Index figures
do not include trading and management costs, which would lower performance.
Indices are unmanaged and you cannot invest in them directly. Remember that past
performance is not an indication of future results.
Data source: Charles Schwab & Co., Inc.
Schwab Institutional Select Funds 3
MANAGEMENT'S DISCUSSION continued
[PHOTO OF JEFFREY MORTIMER]
JEFFREY MORTIMER, CFA, senior vice president and chief investment officer,
equities, of the investment adviser is responsible for the overall management of
each of the funds. Prior to joining the firm in October 1997, he worked for more
than nine years in asset management.
[PHOTO OF LARRY MANO]
LARRY MANO, a director and a portfolio manager, is responsible for the
day-to-day management of the funds. Prior to joining the firm in 1998, he worked
for 20 years in equity management.
events also had wreaked havoc on oil markets and, after a brief decline in the
price of oil following OPEC's decision to boost production, a confluence of
supply concerns and robust global demand pushed crude to new highs. In addition
to these issues, daily headlines about terrorism and the fierce run for the
White House all added up to an uncomfortable sense of uncertainty, keeping many
investors on the sidelines.
Despite all these concerns, which escalated toward the end of the report period,
the strength of the market early in the period, combined with strong second- and
third-quarter valuations and earnings resulted in a positive showing for
equities. More specifically, the S&P 500(R) Index was up 9.42% for the 12-month
report period, while the Russell 2000(R) Index was up 11.73%. In terms of style,
value edged out growth early in the period and gained momentum, significantly
outperforming growth at the end of the period.
In terms of performance, the top sector, as measured by the S&P 500(R) Index was
Energy, up 44.50%, due to the rising price of a barrel of oil. Coming in second
was the Utilities sector, which was up 24.10%. The worst performer was
Information Technology, which was down 0.88%.
THE SCHWAB INSTITUTIONAL SELECT S&P 500 FUND ended the 12-month report period up
9.36%, closely tracking its benchmark, the S&P 500(R) Index, which was up 9.42%.
Interestingly, most of this appreciation occurred during the beginning of the
report period. Since then--starting in February 2004--the market traded in a
relatively narrow trading range. During the report period, the price of crude
oil increased substantially, making energy-related stocks, which were up 44.49%,
the top performers in the fund. Exxon Mobil Corp. and ChevronTexaco Corp. were
the biggest contributors to returns. On the flip side, the Information
Technology sector continued to have problems and was down 0.88%, the only sector
to have a net negative return. Hurting returns the most was technology giant
Intel Corp., which was down 32.30% over the 12-month report period.
4 Schwab Institutional Select Funds
PERFORMANCE AT A GLANCE
Total return for the 12 months ended 10/31/04
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
SCHWAB INSTITUTIONAL SELECT(R)
S&P 500 FUND .................... 9.36%
Benchmark ....................... 9.42%
Performance Details ............. page 6
SCHWAB INSTITUTIONAL SELECT(R)
LARGE-CAP VALUE INDEX FUND ...... 14.12%
Benchmark ....................... 14.46%
Performance Details ............. page 8
SCHWAB INSTITUTIONAL SELECT(R)
SMALL-CAP VALUE INDEX FUND ...... 18.76%
Benchmark ....................... 18.76%
Performance Details ............. page 10
THE SCHWAB INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND was up 14.12% for the
period, closely tracking its benchmark, the S&P 500/Barra Value Index, which
was up 14.46%. The fund benefited from the market favoring large-cap value over
large-cap growth stocks. All sectors posted positive returns for the period, led
by Energy, Utilities and Industrials. Within these sectors, the best performers
were Exxon Mobil Corp., TXU Corp. (Utilities) and Tyco International
(Industrials).
THE SCHWAB INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND was up 18.76% for the
report period, the best performer of the three Institutional Select funds. The
fund benefited from the market having favored both small-cap and value stocks.
The strongest sectors were Energy, Materials and Industrials. Stocks that led
the way were Tom Brown, Inc. (Energy), Massey Energy Corp. (Materials) and
Timken Co. (Industrials). The weakest sector was Telecommunication Services,
with General Communications, which was down 7.10%, being the worst performer.
All fund and index figures on this page assume dividends and distributions were
reinvested. Index figures do not include trading and management costs, which
would lower performance. Indices are unmanaged, and you cannot invest in them
directly.
Expenses may be partially absorbed by CSIM and Schwab. Without these reductions,
the funds' total returns would have been lower. Performance does not reflect the
deduction of taxes that a shareholder would pay on fund distributions or on the
redemption of fund shares.
Small company stocks are subject to greater volatility than other asset
categories.
Nothing in this report represents a recommendation of a security by the
investment adviser.
Manager views and portfolio holdings may have changed since the report date.
Schwab Institutional Select Funds 5
SCHWAB INSTITUTIONAL SELECT(R) S&P 500 FUND
PERFORMANCE as of 10/31/04
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund with its benchmark and
Morningstar category. The table below the chart shows two types of after-tax
returns.
[BAR CHART]
Fund Category:
Benchmark: MORNINGSTAR
S&P 500(R) LARGE-CAP
FUND INDEX BLEND
---- ----- -----
1 YEAR 9.36% 9.42% 7.89%
5 YEARS -2.32% -2.21% -1.72%
SINCE INCEPTION: 2/1/99 -0.80% -0.68% -0.38%
1 YEAR 5 YEARS SINCE INCEPTION
Fund Category: Fund Category: Fund Category:
MORNINGSTAR MORNINGSTAR MORNINGSTAR
LARGE-CAP LARGE-CAP LARGE-CAP
TOTAL RETURNS AFTER TAX FUND BLEND FUND BLEND FUND BLEND
- ----------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 9.13% 5.88% -2.74% -2.76% -1.17% n/a
- ----------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 6.36% 4.04% -2.20% -1.93% -0.89% n/a
- ----------------------------------------------------------------------------------------------------------------
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the fund compared with a similar investment in its benchmark.
[LINE GRAPH]
$9,549 FUND
$9,615 S&P 500(R) INDEX
S&P 500(R)
DATE FUND INDEX
---- ---- -----
01-Feb-99 $10,000 $10,000
28-Feb-99 $9,680 $9,689
31-Mar-99 $10,070 $10,077
30-Apr-99 $10,460 $10,467
31-May-99 $10,200 $10,220
30-Jun-99 $10,770 $10,787
31-Jul-99 $10,440 $10,450
31-Aug-99 $10,380 $10,398
30-Sep-99 $10,100 $10,113
31-Oct-99 $10,740 $10,753
30-Nov-99 $10,950 $10,972
31-Dec-99 $11,602 $11,618
31-Jan-00 $11,016 $11,035
29-Feb-00 $10,804 $10,826
31-Mar-00 $11,864 $11,885
30-Apr-00 $11,501 $11,527
31-May-00 $11,259 $11,291
30-Jun-00 $11,541 $11,569
31-Jul-00 $11,360 $11,389
31-Aug-00 $12,066 $12,096
30-Sep-00 $11,420 $11,458
31-Oct-00 $11,370 $11,410
30-Nov-00 $10,481 $10,510
31-Dec-00 $10,534 $10,562
31-Jan-01 $10,901 $10,937
28-Feb-01 $9,911 $9,939
31-Mar-01 $9,278 $9,309
30-Apr-01 $10,003 $10,033
31-May-01 $10,064 $10,100
30-Jun-01 $9,819 $9,854
31-Jul-01 $9,717 $9,758
31-Aug-01 $9,115 $9,147
30-Sep-01 $8,380 $8,408
31-Oct-01 $8,533 $8,569
30-Nov-01 $9,187 $9,226
31-Dec-01 $9,264 $9,307
31-Jan-02 $9,130 $9,171
28-Feb-02 $8,954 $8,994
31-Mar-02 $9,295 $9,332
30-Apr-02 $8,726 $8,767
31-May-02 $8,664 $8,702
30-Jun-02 $8,044 $8,082
31-Jul-02 $7,424 $7,453
31-Aug-02 $7,465 $7,501
30-Sep-02 $6,659 $6,686
31-Oct-02 $7,238 $7,274
30-Nov-02 $7,672 $7,702
31-Dec-02 $7,217 $7,250
31-Jan-03 $7,028 $7,060
28-Feb-03 $6,922 $6,954
31-Mar-03 $6,986 $7,022
30-Apr-03 $7,564 $7,601
31-May-03 $7,953 $8,001
30-Jun-03 $8,059 $8,104
31-Jul-03 $8,195 $8,246
31-Aug-03 $8,353 $8,407
30-Sep-03 $8,269 $8,318
31-Oct-03 $8,732 $8,789
30-Nov-03 $8,806 $8,866
31-Dec-03 $9,272 $9,331
31-Jan-04 $9,432 $9,502
29-Feb-04 $9,570 $9,634
31-Mar-04 $9,421 $9,489
30-Apr-04 $9,272 $9,340
31-May-04 $9,400 $9,468
30-Jun-04 $9,581 $9,651
31-Jul-04 $9,261 $9,332
31-Aug-04 $9,304 $9,369
30-Sep-04 $9,400 $9,471
31-Oct-04 $9,549 $9,615
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/04 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
6 Schwab Institutional Select Funds
SCHWAB INSTITUTIONAL SELECT S&P 500 FUND
FUND FACTS as of 10/31/04
STYLE ASSESSMENT 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 503
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $89,712
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 20.1
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 3.1
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 3%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2
Investment Manager
Per Client Account, and $2,500
Aggregate Client Accounts $50,000
Other Investors $50,000
- --------------------------------------------------------------------------------
TOP HOLDINGS 3
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) GENERAL ELECTRIC CO. 3.4%
- --------------------------------------------------------------------------------
(2) EXXON MOBIL CORP. 3.0%
- --------------------------------------------------------------------------------
(3) MICROSOFT CORP. 2.8%
- --------------------------------------------------------------------------------
(4) CITIGROUP, INC. 2.1%
- --------------------------------------------------------------------------------
(5) WAL-MART STORES, INC. 2.1%
- --------------------------------------------------------------------------------
(6) PFIZER, INC. 2.0%
- --------------------------------------------------------------------------------
(7) BANK OF AMERICA CORP. 1.7%
- --------------------------------------------------------------------------------
(8) JOHNSON & JOHNSON 1.6%
- --------------------------------------------------------------------------------
(9) AMERICAN INTERNATIONAL GROUP, INC. 1.5%
- --------------------------------------------------------------------------------
(10) INTERNATIONAL BUSINESS MACHINES CORP. 1.4%
- --------------------------------------------------------------------------------
TOTAL 21.6%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
28.9% CONSUMER NON-DURABLES
20.1% FINANCE
18.3% TECHNOLOGY
7.1% ENERGY
6.9% MATERIALS
5.8% UTILITIES
4.9% CAPITAL GOODS
1.7% TRANSPORTATION
1.5% CONSUMER DURABLES
4.8% OTHER
Portfolio holdings may have changed since the report date.
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/04, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 Please see prospectus for further detail and eligibility requirements.
3 This list is not a recommendation of any security by the investment adviser.
Schwab Institutional Select Funds 7
SCHWAB INSTITUTIONAL SELECT(R) LARGE-CAP VALUE INDEX FUND
PERFORMANCE as of 10/31/04
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund with its benchmark and
Morningstar category. The table below the chart shows two types of after-tax
returns.
[BAR CHART]
Benchmark: Fund Category:
S&P 500/BARRA MORNINGSTAR
FUND VALUE INDEX LARGE-CAP VALUE
1 YEAR 14.12% 14.46% 12.14%
5 YEARS 1.32% 1.49% 2.64%
SINCE INCEPTION: 2/1/99 2.31% 2.51% 2.96%
1 YEAR 5 YEARS SINCE INCEPTION
Fund Category: Fund Category: Fund Category:
MORNINGSTAR MORNINGSTAR MORNINGSTAR
LARGE-CAP LARGE-CAP LARGE-CAP
TOTAL RETURNS AFTER TAX FUND VALUE FUND VALUE FUND VALUE
- -----------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 13.83% 9.76% 0.26% 1.26% 1.38% n/a
- -----------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 9.50% 6.68% 0.50% 1.51% 1.43% n/a
- -----------------------------------------------------------------------------------------------------------
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with a similar investment in its benchmark.
[LINE GRAPH]
$11,407 FUND
$11,533 S&P 500/BARRA VALUE INDEX
S&P 500/BARRA
DATE FUND VALUE INDEX
---- ---- -----------
1-Feb-99 $10,000 $10,000
28-Feb-99 $9,780 $9,785
31-Mar-99 $10,080 $10,081
30-Apr-99 $10,930 $10,950
31-May-99 $10,730 $10,756
30-Jun-99 $11,140 $11,169
31-Jul-99 $10,790 $10,826
31-Aug-99 $10,520 $10,553
30-Sep-99 $10,110 $10,140
31-Oct-99 $10,680 $10,712
30-Nov-99 $10,620 $10,649
31-Dec-99 $11,008 $11,049
31-Jan-00 $10,650 $10,698
29-Feb-00 $9,996 $10,030
31-Mar-00 $11,039 $11,076
30-Apr-00 $10,957 $11,001
31-May-00 $10,988 $11,036
30-Jun-00 $10,548 $10,600
31-Jul-00 $10,763 $10,812
31-Aug-00 $11,489 $11,537
30-Sep-00 $11,478 $11,535
31-Oct-00 $11,693 $11,751
30-Nov-00 $11,090 $11,149
31-Dec-00 $11,662 $11,723
31-Jan-01 $12,154 $12,218
28-Feb-01 $11,342 $11,408
31-Mar-01 $10,894 $10,957
30-Apr-01 $11,630 $11,700
31-May-01 $11,748 $11,823
30-Jun-01 $11,363 $11,440
31-Jul-01 $11,171 $11,242
31-Aug-01 $10,520 $10,592
30-Sep-01 $9,526 $9,586
31-Oct-01 $9,526 $9,586
30-Nov-01 $10,114 $10,195
31-Dec-01 $10,275 $10,350
31-Jan-02 $9,994 $10,066
28-Feb-02 $9,904 $9,976
31-Mar-02 $10,410 $10,487
30-Apr-02 $9,893 $9,962
31-May-02 $9,938 $10,002
30-Jun-02 $9,319 $9,370
31-Jul-02 $8,328 $8,358
31-Aug-02 $8,373 $8,414
30-Sep-02 $7,428 $7,453
31-Oct-02 $8,036 $8,072
30-Nov-02 $8,598 $8,639
31-Dec-02 $8,149 $8,190
31-Jan-03 $7,930 $7,966
28-Feb-03 $7,711 $7,749
31-Mar-03 $7,711 $7,739
30-Apr-03 $8,461 $8,504
31-May-03 $9,073 $9,130
30-Jun-03 $9,131 $9,197
31-Jul-03 $9,338 $9,401
31-Aug-03 $9,535 $9,604
30-Sep-03 $9,361 $9,430
31-Oct-03 $9,996 $10,075
30-Nov-03 $10,077 $10,166
31-Dec-03 $10,703 $10,794
31-Jan-04 $10,891 $10,985
29-Feb-04 $11,126 $11,234
31-Mar-04 $11,055 $11,156
30-Apr-04 $10,785 $10,881
31-May-04 $10,903 $11,006
30-Jun-04 $11,137 $11,245
31-Jul-04 $10,914 $11,032
31-Aug-04 $11,032 $11,151
30-Sep-04 $11,243 $11,362
31-Oct-04 $11,407 $11,533
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/04 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
8 Schwab Institutional Select Funds
SCHWAB INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND
FUND FACTS as of 10/31/04
STYLE ASSESSMENT 1
[GRAPHIC]
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large /X/ / / / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 334
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $68,431
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 17.6
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.2
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 11%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2
Investment Manager
Per Client Account, and $2,500
Aggregate Client Accounts $100,000 3
Other Investors $3,000,000
- --------------------------------------------------------------------------------
TOP HOLDINGS 4
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) EXXON MOBIL CORP. 5.8%
- --------------------------------------------------------------------------------
(2) CITIGROUP, INC. 4.1%
- --------------------------------------------------------------------------------
(3) BANK OF AMERICA CORP. 3.3%
- --------------------------------------------------------------------------------
(4) AMERICAN INTERNATIONAL GROUP, INC. 2.9%
- --------------------------------------------------------------------------------
(5) JPMORGAN CHASE & CO. 2.5%
- --------------------------------------------------------------------------------
(6) CHEVRONTEXACO CORP. 2.0%
- --------------------------------------------------------------------------------
(7) VERIZON COMMUNICATIONS, INC. 2.0%
- --------------------------------------------------------------------------------
(8) WELLS FARGO & CO. 1.8%
- --------------------------------------------------------------------------------
(9) SBC COMMUNICATIONS, INC. 1.5%
- --------------------------------------------------------------------------------
(10) TIME WARNER, INC. 1.4%
- --------------------------------------------------------------------------------
TOTAL 27.3%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
35.5% FINANCE
15.4% CONSUMER NON-DURABLES
12.9% ENERGY
11.3% UTILITIES
8.9% TECHNOLOGY
7.8% MATERIALS
2.2% CAPITAL GOODS
1.8% TRANSPORTATION
1.5% CONSUMER DURABLES
2.7% OTHER
Portfolio holdings may have changed since the report date.
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/04, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 Please see prospectus for further detail and eligibility requirements.
3 Waived until further notice.
4 This list is not a recommendation of any security by the investment adviser.
Schwab Institutional Select Funds 9
SCHWAB INSTITUTIONAL SELECT(R) SMALL-CAP VALUE INDEX FUND
PERFORMANCE as of 10/31/04
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund with its benchmark and
Morningstar category. The table below the chart shows two types of after-tax
returns.
[BAR CHART]
Fund
Benchmark: Category:
S&P SMALLCAP MORNINGSTAR
600/BARRA VALUE SMALL-CAP
FUND INDEX VALUE
1 YEAR 18.76% 18.76% 16.59%
5 YEARS 13.76% 13.78% 14.93%
SINCE INCEPTION: 2/1/99 11.65% 11.74% 12.58%
1 YEAR 5 YEARS SINCE INCEPTION
Fund Fund Fund
Category: Category: Category:
MORNINGSTAR MORNINGSTAR MORNINGSTAR
SMALL-CAP SMALL-CAP SMALL-CAP
TOTAL RETURNS AFTER TAX FUND VALUE FUND VALUE FUND VALUE
- -------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 18.61% 14.16% 11.91% 13.60% 10.07% n/a
- -------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 12.36% 9.99% 10.79% 12.28% 9.14% n/a
- -------------------------------------------------------------------------------------------------------
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the fund compared with a similar investment in its benchmark.
[LINE GRAPH]
$18,855 FUND
$18,940 S&P SMALLCAP 600/BARRA VALUE INDEX
S&P SMALL CAP
600/BARRA
DATE FUND VALUE INDEX
1-Feb-99 $10,000 $10,000
28-Feb-99 $9,170 $9,186
31-Mar-99 $9,130 $9,150
30-Apr-99 $9,920 $9,947
31-May-99 $10,310 $10,345
30-Jun-99 $10,930 $10,973
31-Jul-99 $10,760 $10,802
31-Aug-99 $10,310 $10,349
30-Sep-99 $10,120 $10,159
31-Oct-99 $9,890 $9,924
30-Nov-99 $10,120 $10,147
31-Dec-99 $10,411 $10,425
31-Jan-00 $9,886 $9,891
29-Feb-00 $10,338 $10,338
31-Mar-00 $10,716 $10,720
30-Apr-00 $10,801 $10,795
31-May-00 $10,611 $10,619
30-Jun-00 $10,916 $10,923
31-Jul-00 $11,127 $11,139
31-Aug-00 $11,789 $11,789
30-Sep-00 $11,747 $11,765
31-Oct-00 $11,810 $11,823
30-Nov-00 $11,021 $11,042
31-Dec-00 $12,583 $12,601
31-Jan-01 $13,572 $13,599
28-Feb-01 $12,993 $13,025
31-Mar-01 $12,458 $12,484
30-Apr-01 $13,208 $13,236
31-May-01 $13,549 $13,573
30-Jun-01 $14,084 $14,092
31-Jul-01 $13,936 $13,959
31-Aug-01 $13,709 $13,735
30-Sep-01 $11,754 $11,769
31-Oct-01 $12,299 $12,307
30-Nov-01 $13,265 $13,292
31-Dec-01 $14,218 $14,251
31-Jan-02 $14,469 $14,518
28-Feb-02 $14,406 $14,455
31-Mar-02 $15,658 $15,712
30-Apr-02 $16,296 $16,354
31-May-02 $15,683 $15,734
30-Jun-02 $15,019 $15,031
31-Jul-02 $12,604 $12,587
31-Aug-02 $12,579 $12,571
30-Sep-02 $11,665 $11,645
31-Oct-02 $11,890 $11,879
30-Nov-02 $12,504 $12,521
31-Dec-02 $12,182 $12,189
31-Jan-03 $11,676 $11,686
28-Feb-03 $11,259 $11,253
31-Mar-03 $11,221 $11,218
30-Apr-03 $12,220 $12,234
31-May-03 $13,333 $13,374
30-Jun-03 $13,726 $13,771
31-Jul-03 $14,383 $14,445
31-Aug-03 $15,079 $15,139
30-Sep-03 $14,573 $14,643
31-Oct-03 $15,876 $15,947
30-Nov-03 $16,521 $16,606
31-Dec-03 $16,992 $17,071
31-Jan-04 $17,401 $17,479
29-Feb-04 $17,809 $17,893
31-Mar-04 $18,115 $18,206
30-Apr-04 $17,439 $17,536
31-May-04 $17,668 $17,756
30-Jun-04 $18,625 $18,729
31-Jul-04 $17,745 $17,839
31-Aug-04 $17,809 $17,896
30-Sep-04 $18,689 $18,778
31-Oct-04 $18,855 $18,940
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/04 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
10 Schwab Institutional Select Funds
SCHWAB INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND
FUND FACTS as of 10/31/04
STYLE ASSESSMENT 1
[GRAPHIC]
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large / / / / / /
Medium / / / / / /
Small /X/ / / / /
STATISTICS
NUMBER OF HOLDINGS 354
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $966
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 21.9
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 1.7
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 40%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2
Investment Manager
Per Client Account, and $2,500
Aggregate Client Accounts $100,000 3
Other Investors $3,000,000
- --------------------------------------------------------------------------------
TOP HOLDINGS 4
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) MDC HOLDINGS, INC. 1.0%
- --------------------------------------------------------------------------------
(2) YELLOW ROADWAY CORP. 0.9%
- --------------------------------------------------------------------------------
(3) TIMKEN CO. 0.9%
- --------------------------------------------------------------------------------
(4) SOUTH FINANCIAL GROUP, INC. 0.9%
- --------------------------------------------------------------------------------
(5) UGI CORP. 0.8%
- --------------------------------------------------------------------------------
(6) ENERGEN CORP. 0.8%
- --------------------------------------------------------------------------------
(7) STANDARD-PACIFIC CORP. 0.7%
- --------------------------------------------------------------------------------
(8) SHURGARD STORAGE CENTERS, INC. Class A 0.7%
- --------------------------------------------------------------------------------
(9) HUGHES SUPPLY, INC. 0.7%
- --------------------------------------------------------------------------------
(10) CORN PRODUCTS INTERNATIONAL, INC. 0.7%
- --------------------------------------------------------------------------------
TOTAL 8.1%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
21.1% FINANCE
20.1% MATERIALS
16.3% CONSUMER NON-DURABLES
10.7% TECHNOLOGY
8.9% CAPITAL GOODS
8.2% UTILITIES
4.1% ENERGY
4.0% TRANSPORTATION
3.5% CONSUMER DURABLES
3.1% OTHER
Portfolio holdings may have changed since the report date.
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/04, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 Please see prospectus for further detail and eligibility requirements.
3 Waived until further notice.
4 This list is not a recommendation of any security by the investment adviser.
Schwab Institutional Select Funds 11
FUND EXPENSES
EXAMPLES FOR A $1,000 INVESTMENT
As a fund shareholder, you incur two types of costs: transaction costs, such as
redemption fees; and, ongoing costs, such as management fees, transfer agent and
shareholder services fees, and other fund expenses.
The expense examples below are intended to help you understand your ongoing cost
(in dollars) of investing in a fund and to compare this cost with the ongoing
cost of investing in other mutual funds. These examples are based on an
investment of $1,000 invested for six-months beginning May 1, 2004 and held
through October 31, 2004.
ACTUAL RETURN lines in the table below provide information about actual account
values and actual expenses. You may use this information, together with the
amount you invested, to estimate the expenses that you paid over the period. To
do so, simply divide your account value by $1,000 (for example, an $8,600
account value / $1,000 = 8.6), then multiply the result by the number given for
your fund under the heading entitled "Expenses Paid During Period."
HYPOTHETICAL RETURN lines in the table below provide information about
hypothetical account values and hypothetical expenses based on a fund's actual
expense ratio and an assumed return of 5% per year before expenses. Because the
return used is not an actual return, it may not be used to estimate the actual
ending account value or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only, and do not reflect any transactional costs, such as
redemption fees. If these transactional costs were included, your costs would
have been higher.
ENDING
BEGINNING ACCOUNT VALUE EXPENSES
EXPENSE RATIO 1 ACCOUNT VALUE (NET OF EXPENSES) PAID DURING PERIOD 2
(ANNUALIZED) AT 5/1/04 AT 10/31/04 5/1/04-10/31/04
- ---------------------------------------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL SELECT(R)
S&P 500 FUND
Actual Return 0.14% $1,000 $1,029.90 $0.71
Hypothetical 5% Return 0.14% $1,000 $1,024.43 $0.71
- ---------------------------------------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL SELECT(R)
LARGE-CAP VALUE INDEX FUND
Actual Return 0.25% $1,000 $1,057.70 $1.29
Hypothetical 5% Return 0.25% $1,000 $1,023.88 $1.27
- ---------------------------------------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL SELECT(R)
SMALL-CAP VALUE INDEX FUND
Actual Return 0.32% $1,000 $1,081.20 $1.67
Hypothetical 5% Return 0.32% $1,000 $1,023.53 $1.63
1 Based on the most recent six-month expense ratio; may differ from the expense
ratio provided in Financial Highlights.
2 Expenses for each fund are equal to that fund's annualized expense ratio,
multiplied by the average account value over the period, multiplied by 184
days of the period, and divided by 366 days of the fiscal year.
12 Schwab Institutional Select Funds
SCHWAB INSTITUTIONAL SELECT(R)
S&P 500 FUND
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ----------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 8.30 7.00 8.36 11.26 10.74
----------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.13 0.12 0.12 0.12 0.11
Net realized and unrealized gains or losses 0.64 1.30 (1.37) (2.91) 0.52
----------------------------------------------------------------------
Total income or loss from investment operations 0.77 1.42 (1.25) (2.79) 0.63
Less distributions:
Dividends from net investment income (0.12) (0.12) (0.11) (0.11) (0.09)
Distributions from net realized gains -- -- -- -- (0.02)
----------------------------------------------------------------------
Total distributions (0.12) (0.12) (0.11) (0.11) (0.11)
----------------------------------------------------------------------
Net asset value at end of period 8.95 8.30 7.00 8.36 11.26
----------------------------------------------------------------------
Total return (%) 9.36 20.65 (15.18) (24.95) 5.86
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.15 0.15 0.15 0.15 0.16 1
Gross operating expenses 0.35 0.36 0.37 0.37 0.38
Net investment income 1.56 1.65 1.38 1.14 1.06
Portfolio turnover rate 3 4 12 13 6
Net assets, end of period ($ x 1,000,000) 348 272 203 261 382
1 The ratio of net operating expenses would have been 0.15% if certain
non-routine expenses (proxy fees) had not been included.
See financial notes. 13
SCHWAB INSTITUTIONAL SELECT S&P 500 FUND
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q is
available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top ten holding
o Non-income producing security
= All or a portion of this security is held as collateral for open futures
contracts
/ Issuer is related to the fund's adviser
@ This security or a portion of this security is on loan
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
97.8% COMMON STOCK 346,761 340,369
4.7% SHORT-TERM
INVESTMENTS 16,210 16,210
0.2% U.S. TREASURY
OBLIGATIONS 863 863
- --------------------------------------------------------------------------------
102.7% TOTAL INVESTMENTS 363,834 357,442
5.3% COLLATERAL INVESTED
FOR SECURITIES ON LOAN 18,387 18,387
(8.0)% OTHER ASSETS AND
LIABILITIES, NET (27,964)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 347,865
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 97.8% of net assets
AEROSPACE / DEFENSE 1.8%
--------------------------------------------------------------------------
The Boeing Co. 27,200 1,357
Crane Co. 1,700 47
General Dynamics Corp. 6,400 653
Goodrich Corp. 3,800 117
Lockheed Martin Corp. 14,400 793
Northrop Grumman Corp. 11,628 602
Raytheon Co. 14,600 533
Rockwell Automation, Inc. 5,800 242
Rockwell Collins, Inc. 5,600 199
Textron, Inc. 4,500 307
United Technologies Corp. 16,600 1,541
-----------
6,391
AIR TRANSPORTATION 1.2%
--------------------------------------------------------------------------
@o Delta Air Lines, Inc. 3,200 17
FedEx Corp. 9,800 893
Sabre Holdings Corp., Class A 4,118 89
Southwest Airlines Co. 25,650 405
United Parcel Service, Inc.,
Class B 36,424 2,884
-----------
4,288
ALCOHOLIC BEVERAGES 0.4%
--------------------------------------------------------------------------
Adolph Coors Co., Class B 1,200 80
Anheuser-Busch Cos., Inc. 26,000 1,299
Brown-Forman Corp., Class B 3,908 175
-----------
1,554
APPAREL 0.4%
--------------------------------------------------------------------------
o Coach, Inc. 6,100 284
Jones Apparel Group, Inc. 4,100 145
Liz Claiborne, Inc. 3,500 143
Nike, Inc., Class B 8,600 699
Reebok International Ltd. 2,000 74
VF Corp. 3,600 194
-----------
1,539
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.0%
--------------------------------------------------------------------------
Cooper Tire & Rubber Co. 2,100 41
Cummins, Inc. 1,400 98
Dana Corp. 4,900 73
@ Danaher Corp. 10,000 551
@ Delphi Corp. 17,649 148
Eaton Corp. 4,800 307
14 See financial notes.
SCHWAB INSTITUTIONAL SELECT S&P 500 FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Ford Motor Co. 59,211 772
General Motors Corp. 18,275 705
Genuine Parts Co. 5,500 219
@o Goodyear Tire & Rubber Co. 5,300 53
Harley-Davidson, Inc. 9,600 553
@o Navistar International Corp. 2,100 73
Visteon Corp. 3,669 26
-----------
3,619
BANKS 7.8%
--------------------------------------------------------------------------
AmSouth Bancorp. 11,200 296
@(7) Bank of America Corp. 131,664 5,897
The Bank of New York Co., Inc. 25,250 820
BB&T Corp. 18,000 740
Comerica, Inc. 5,600 344
Fifth Third Bancorp 18,469 909
First Horizon National Corp. 4,000 173
Huntington Bancshares, Inc. 7,283 174
JPMorgan Chase & Co. 115,228 4,448
KeyCorp, Inc. 13,200 443
M&T Bank Corp. 3,799 391
Marshall & Ilsley Corp. 7,228 303
Mellon Financial Corp. 13,800 399
National City Corp. 21,500 838
North Fork Bancorp., Inc. 10,100 445
Northern Trust Corp. 7,000 298
PNC Financial Services
Group, Inc. 9,200 481
Regions Financial Corp. 14,998 526
SouthTrust Corp. 10,800 471
State Street Corp. 10,900 491
SunTrust Banks, Inc. 11,600 816
Synovus Financial Corp. 10,100 275
U.S. Bancorp 60,807 1,740
Wachovia Corp. 42,400 2,087
Wells Fargo & Co. 54,713 3,267
Zions Bancorp. 2,900 192
-----------
27,264
BUSINESS MACHINES & SOFTWARE 8.8%
--------------------------------------------------------------------------
@ Adobe Systems, Inc. 7,800 437
o Apple Computer, Inc. 12,600 662
Autodesk, Inc. 3,600 190
o BMC Software, Inc. 7,100 134
o Cisco Systems, Inc. 218,750 4,202
o Compuware Corp. 11,300 65
o Comverse Technology, Inc. 6,400 132
o Dell, Inc. 80,800 2,833
o EMC Corp. 77,824 1,002
o Gateway, Inc. 12,100 71
Hewlett-Packard Co. 97,701 1,823
(10) International Business Machines
Corp. 54,200 4,864
o Lexmark International, Inc.,
Class A 4,200 349
=(3) Microsoft Corp. 351,750 9,846
o NCR Corp. 3,000 169
o Network Appliance, Inc. 11,600 284
o Novell, Inc. 12,200 88
o Oracle Corp. 167,300 2,118
Pitney Bowes, Inc. 7,500 328
o Siebel Systems, Inc. 15,900 151
o Sun Microsystems, Inc. 107,600 487
o Unisys Corp. 10,600 113
@o Xerox Corp. 27,200 402
-----------
30,750
BUSINESS SERVICES 4.4%
--------------------------------------------------------------------------
o Affiliated Computer Services, Inc.,
Class A 4,014 219
@o Allied Waste Industries, Inc. 10,000 82
o Apollo Group, Inc., Class A 6,300 416
Automatic Data Processing, Inc. 18,900 820
Cendant Corp. 34,170 704
@ Cintas Corp. 5,620 242
o Citrix Systems, Inc. 5,500 133
Computer Associates
International, Inc. 19,000 527
@o Computer Sciences Corp. 6,000 298
o Convergys Corp. 4,625 60
Deluxe Corp. 1,600 61
o eBay, Inc. 21,382 2,087
Electronic Data Systems Corp. 16,600 353
Equifax, Inc. 4,500 118
First Data Corp. 27,781 1,147
o Fiserv, Inc. 6,150 219
See financial notes. 15
SCHWAB INSTITUTIONAL SELECT S&P 500 FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
H&R Block, Inc. 5,200 247
IMS Health, Inc. 7,400 157
o Interpublic Group of Cos., Inc. 13,300 163
o Intuit, Inc. 6,283 285
@o Mercury Interactive Corp. 3,000 130
o Monster Worldwide, Inc. 3,861 108
Omnicom Group, Inc. 6,100 481
o Parametric Technology Corp. 8,100 42
Paychex, Inc. 12,325 404
o PeopleSoft, Inc. 11,600 241
Robert Half International, Inc. 5,650 150
o SunGard Data Systems, Inc. 9,113 241
o Symantec Corp. 10,200 581
@ Tyco International Ltd. 65,076 2,027
o Veritas Software Corp. 14,050 307
Waste Management, Inc. 18,800 535
o Yahoo! Inc. 44,100 1,596
-----------
15,181
CHEMICALS 1.5%
--------------------------------------------------------------------------
Air Products & Chemicals, Inc. 7,400 393
Dow Chemical Co. 30,460 1,369
E.I. du Pont de Nemours & Co. 32,282 1,384
Eastman Chemical Co. 2,400 114
Ecolab, Inc. 8,400 284
Great Lakes Chemical Corp. 1,400 36
o Hercules, Inc. 3,300 47
Monsanto Co. 8,717 373
PPG Industries, Inc. 5,600 357
Praxair, Inc. 10,600 447
Rohm & Haas Co. 7,263 308
Sigma-Aldrich Corp. 2,300 128
-----------
5,240
CONSTRUCTION 0.5%
--------------------------------------------------------------------------
Centex Corp. 4,000 208
Fluor Corp. 2,700 125
KB Home 1,500 123
Masco Corp. 14,100 483
Pulte Homes, Inc. 4,000 220
The Sherwin-Williams Co. 4,700 201
The Stanley Works 2,600 116
Vulcan Materials Co. 3,300 164
-----------
1,640
CONSUMER DURABLES 0.2%
--------------------------------------------------------------------------
Black & Decker Corp. 2,600 209
Leggett & Platt, Inc. 6,100 171
@ Maytag Corp. 2,350 41
Newell Rubbermaid, Inc. 8,667 187
Whirlpool Corp. 2,200 129
-----------
737
CONTAINERS 0.1%
--------------------------------------------------------------------------
Ball Corp. 3,600 143
Bemis Co. 3,200 85
o Pactiv Corp. 4,900 116
o Sealed Air Corp. 2,600 129
-----------
473
ELECTRONICS 4.9%
--------------------------------------------------------------------------
o ADC Telecommunications, Inc. 26,200 58
@o Advanced Micro Devices, Inc. 11,200 188
@o Agilent Technologies, Inc. 15,784 396
o Altera Corp. 11,720 266
American Power Conversion Corp. 6,550 126
Analog Devices, Inc. 12,300 495
@o Andrew Corp. 5,300 74
o Applied Materials, Inc. 54,950 885
o Applied Micro Circuits Corp. 9,121 33
@o Broadcom Corp., Class A 10,500 284
o CIENA Corp. 17,000 42
Intel Corp. 207,600 4,621
ITT Industries, Inc. 3,000 244
o Jabil Circuit, Inc. 6,364 155
o JDS Uniphase Corp. 45,228 143
@o KLA-Tencor Corp. 6,400 291
Linear Technology Corp. 10,000 379
o LSI Logic Corp. 12,500 57
o Lucent Technologies, Inc. 139,445 495
Maxim Integrated Products, Inc. 10,600 466
@o Micron Technology, Inc. 19,200 234
Molex, Inc. 6,000 177
Motorola, Inc. 76,426 1,319
o National Semiconductor Corp. 11,300 189
o Novellus Systems, Inc. 4,450 115
o Nvidia Corp. 5,300 77
16 See financial notes.
SCHWAB INSTITUTIONAL SELECT S&P 500 FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
PerkinElmer, Inc. 4,100 84
o PMC--Sierra, Inc. 5,800 60
o Power-One, Inc. 2,300 16
o QLogic Corp. 2,813 92
Qualcomm, Inc. 52,700 2,203
o Sanmina--SCI Corp. 16,400 131
Scientific-Atlanta, Inc. 4,900 134
o Solectron Corp. 30,200 158
Symbol Technologies, Inc. 7,536 111
Tektronix, Inc. 2,900 88
o Tellabs, Inc. 13,500 108
o Teradyne, Inc. 6,100 101
Texas Instruments, Inc. 56,000 1,369
o Thermo Electron Corp. 5,300 154
o Waters Corp. 3,900 161
Xilinx, Inc. 11,300 346
-----------
17,125
ENERGY: RAW MATERIALS 1.8%
--------------------------------------------------------------------------
Anadarko Petroleum Corp. 8,121 548
@ Apache Corp. 10,564 536
Baker Hughes, Inc. 10,800 462
o BJ Services Co. 5,100 260
Burlington Resources, Inc. 12,800 531
Devon Energy Corp. 7,900 584
EOG Resources, Inc. 3,722 248
Halliburton Co. 14,300 530
o Noble Corp. 4,300 196
Occidental Petroleum Corp. 12,700 709
o Rowan Cos., Inc. 3,200 82
Schlumberger Ltd. 19,200 1,208
Valero Energy Corp. 8,300 357
-----------
6,251
FOOD & AGRICULTURE 3.4%
--------------------------------------------------------------------------
Archer-Daniels-Midland Co. 21,148 410
Campbell Soup Co. 13,300 357
The Coca-Cola Co. 78,500 3,192
Coca-Cola Enterprises, Inc. 15,200 318
ConAgra Foods, Inc. 17,100 451
General Mills, Inc. 12,300 544
H.J. Heinz Co. 11,400 414
Hershey Foods Corp. 8,000 406
Kellogg Co. 13,400 576
McCormick & Co., Inc. 4,399 156
The Pepsi Bottling Group, Inc. 8,080 227
PepsiCo, Inc. 54,880 2,721
Sara Lee Corp. 25,700 598
Supervalu, Inc. 4,300 127
Sysco Corp. 20,700 668
Wm. Wrigley Jr. Co. 7,300 477
-----------
11,642
GOLD 0.2%
--------------------------------------------------------------------------
Newmont Mining Corp. 14,400 684
HEALTHCARE / DRUGS & MEDICINE 12.0%
--------------------------------------------------------------------------
Abbott Laboratories 50,500 2,153
@ Allergan, Inc. 4,200 301
AmerisourceBergen Corp. 3,600 198
o Amgen, Inc. 41,000 2,329
@o Anthem, Inc. 4,428 356
Applied Biosystems Group--
Applera Corp. 6,600 126
Bausch & Lomb, Inc. 1,600 98
Baxter International, Inc. 19,900 612
Becton Dickinson & Co. 8,200 430
o Biogen Idec, Inc. 11,030 641
Biomet, Inc. 8,300 387
@o Boston Scientific Corp. 27,300 964
Bristol-Myers Squibb Co. 63,000 1,476
C.R. Bard, Inc. 3,400 193
Cardinal Health, Inc. 14,000 654
o Caremark Rx, Inc. 15,126 453
o Chiron Corp. 5,900 191
Eli Lilly & Co. 36,600 2,010
@o Express Scripts, Inc. 2,400 154
o Forest Laboratories, Inc. 12,000 535
o Genzyme Corp. 7,400 388
o Gilead Sciences, Inc. 14,000 485
Guidant Corp. 10,200 680
HCA, Inc. 15,700 577
Health Management Associates, Inc.,
Class A 7,700 159
o Hospira, Inc. 4,900 156
See financial notes. 17
SCHWAB INSTITUTIONAL SELECT S&P 500 FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Humana, Inc. 4,900 94
(8) Johnson & Johnson 96,068 5,608
@o King Pharmaceuticals, Inc. 7,633 83
Manor Care, Inc. 2,900 95
McKesson Corp. 9,300 248
@o Medco Health Solutions, Inc. 8,889 301
o Medimmune, Inc. 7,900 225
Medtronic, Inc. 39,200 2,004
Merck & Co., Inc. 71,800 2,248
@ Mylan Laboratories, Inc. 8,500 146
=(6) Pfizer, Inc. 244,247 7,071
Quest Diagnostics 3,337 292
Schering-Plough Corp. 47,700 864
o St. Jude Medical, Inc. 5,800 444
Stryker Corp. 13,040 562
o Tenet Healthcare Corp. 14,700 158
UnitedHealth Group, Inc. 21,600 1,564
o Watson Pharmaceuticals, Inc. 3,300 92
o WellPoint Health Networks, Inc. 5,100 498
Wyeth 43,200 1,713
o Zimmer Holdings, Inc. 8,000 621
-----------
41,637
HOUSEHOLD PRODUCTS 2.2%
--------------------------------------------------------------------------
Alberto-Culver Co., Class B 2,950 132
Avon Products, Inc. 15,300 605
Clorox Co. 6,900 377
Colgate-Palmolive Co. 17,200 768
The Gillette Co. 32,500 1,348
International Flavors & Fragrances,
Inc. 2,900 113
Procter & Gamble Co. 82,300 4,212
-----------
7,555
INSURANCE 4.5%
--------------------------------------------------------------------------
ACE Ltd. 9,200 350
Aetna, Inc. 5,000 475
AFLAC, Inc. 16,500 592
The Allstate Corp. 22,500 1,082
AMBAC Financial Group, Inc. 3,533 276
(9) American International Group,
Inc. 84,300 5,118
AON Corp. 10,000 204
Chubb Corp. 6,200 447
CIGNA Corp. 4,400 279
Cincinnati Financial Corp. 5,535 231
Hartford Financial Services Group,
Inc. 9,500 556
Jefferson-Pilot Corp. 4,300 208
Lincoln National Corp. 5,600 245
Loews Corp. 5,900 353
Marsh & McLennan Cos., Inc. 16,900 468
MBIA, Inc. 4,700 272
Metlife, Inc. 24,357 934
MGIC Investment Corp. 3,100 199
Principal Financial Group, Inc. 10,184 385
The Progressive Corp. 6,500 608
Prudential Financial, Inc. 16,800 781
Safeco Corp. 4,200 194
The St. Paul Travelers Cos.,
Inc. 21,711 737
Torchmark Corp. 3,500 189
UnumProvident Corp. 9,660 132
XL Capital Ltd., Class A 4,500 326
-----------
15,641
MEDIA 3.4%
--------------------------------------------------------------------------
Clear Channel Communications,
Inc. 19,095 638
o Comcast Corp., Class A 72,338 2,134
Dow Jones & Co., Inc. 2,600 115
Gannett Co., Inc. 8,700 722
Knight-Ridder, Inc. 2,400 164
@ The McGraw-Hill Cos., Inc. 6,200 535
Meredith Corp. 1,600 78
New York Times Co., Class A 4,700 188
R.R. Donnelley & Sons Co. 6,950 218
o Time Warner, Inc. 148,000 2,463
Tribune Co. 10,300 445
@o Univision Communications, Inc.,
Class A 10,494 325
Viacom, Inc., Class B 56,145 2,049
The Walt Disney Co. 66,500 1,677
-----------
11,751
MISCELLANEOUS 0.6%
--------------------------------------------------------------------------
3M Co. 25,400 1,970
18 See financial notes.
SCHWAB INSTITUTIONAL SELECT S&P 500 FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
MISCELLANEOUS FINANCE 7.6%
--------------------------------------------------------------------------
American Express Co. 41,100 2,181
The Bear Stearns Cos., Inc. 3,446 326
@ Capital One Financial Corp. 7,900 583
/ The Charles Schwab Corp. 44,238 405
CIT Group, Inc. 6,900 279
=(4) Citigroup, Inc. 167,650 7,439
Countrywide Financial Corp. 18,298 584
o E*TRADE Financial Corp. 11,800 152
Fannie Mae 31,400 2,203
Federated Investors, Inc., Class B 3,600 104
Franklin Resources, Inc. 8,100 491
Freddie Mac 22,300 1,485
Golden West Financial Corp. 4,900 573
Goldman Sachs Group, Inc. 15,754 1,550
Janus Capital Group, Inc. 7,750 118
Lehman Brothers Holdings, Inc. 8,800 723
MBNA Corp. 41,350 1,060
Merrill Lynch & Co., Inc. 30,400 1,640
Moody's Corp. 4,700 366
Morgan Stanley 35,600 1,819
o Providian Financial Corp. 9,500 148
SLM Corp. 14,200 643
Sovereign Bancorp, Inc. 11,200 242
T. Rowe Price Group, Inc. 4,000 223
Washington Mutual, Inc. 28,300 1,095
------------
26,432
NON-DURABLES & ENTERTAINMENT 1.2%
--------------------------------------------------------------------------
Darden Restaurants, Inc. 5,200 127
o Electronic Arts, Inc. 9,850 443
Fortune Brands, Inc. 4,600 335
Hasbro, Inc. 5,800 103
International Game Technology 11,150 368
Mattel, Inc. 13,400 235
McDonald's Corp. 40,700 1,186
o Starbucks Corp. 12,940 684
Wendy's International, Inc. 3,700 124
Yum! Brands, Inc. 9,400 409
-----------
4,014
NON-FERROUS METALS 0.4%
--------------------------------------------------------------------------
Alcoa, Inc. 28,204 917
Engelhard Corp. 4,000 113
Freeport-McMoran Copper & Gold, Inc.,
Class B 5,800 210
Phelps Dodge Corp. 2,960 259
-----------
1,499
OIL: DOMESTIC 1.2%
--------------------------------------------------------------------------
Amerada Hess Corp. 3,000 242
Ashland, Inc. 2,300 133
ConocoPhillips 22,349 1,884
Kerr-McGee Corp. 4,973 295
Marathon Oil Corp. 11,200 427
o Nabors Industries Ltd. 4,700 231
Sunoco, Inc. 2,400 178
o Transocean, Inc. 10,420 367
Unocal Corp. 8,600 359
-----------
4,116
OIL: INTERNATIONAL 4.0%
--------------------------------------------------------------------------
ChevronTexaco Corp. 68,992 3,661
=(2) Exxon Mobil Corp. 210,520 10,362
-----------
14,023
OPTICAL & PHOTO 0.2%
--------------------------------------------------------------------------
o Corning, Inc. 45,100 516
Eastman Kodak Co. 9,300 282
-----------
798
PAPER & FOREST PRODUCTS 0.8%
--------------------------------------------------------------------------
o Boise Cascade Corp. 2,800 83
Georgia-Pacific Corp. 8,386 290
International Paper Co. 15,739 606
Kimberly-Clark Corp. 16,000 955
Louisiana-Pacific Corp. 3,300 81
MeadWestvaco Corp. 6,422 202
Temple-Inland, Inc. 1,800 106
Weyerhaeuser Co. 7,800 489
-----------
2,812
See financial notes. 19
SCHWAB INSTITUTIONAL SELECT S&P 500 FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
PRODUCER GOODS & MANUFACTURING 5.3%
--------------------------------------------------------------------------
o American Standard Cos., Inc. 7,000 256
Avery Dennison Corp. 3,500 213
Caterpillar, Inc. 11,100 894
Cooper Industries Ltd., Class A 3,000 192
Deere & Co. 8,100 484
Dover Corp. 6,600 259
Emerson Electric Co. 13,600 871
o Fisher Scientific International, Inc. 3,775 217
=(1) General Electric Co. 341,600 11,655
Honeywell International, Inc. 27,812 937
Illinois Tool Works, Inc. 9,800 904
Ingersoll-Rand Co., Class A 5,700 390
Johnson Controls, Inc. 6,200 356
o Millipore Corp. 1,600 74
Pall Corp. 4,000 103
Parker Hannifin Corp. 3,800 268
Snap-On, Inc. 1,700 50
W.W. Grainger, Inc. 2,900 170
-----------
18,293
RAILROAD & SHIPPING 0.5%
--------------------------------------------------------------------------
Burlington Northern Santa Fe
Corp. 12,100 506
CSX Corp. 6,800 248
Norfolk Southern Corp. 12,800 435
Union Pacific Corp. 8,400 529
-----------
1,718
REAL PROPERTY 0.5%
--------------------------------------------------------------------------
Apartment Investment & Management Co.,
Class A 2,900 106
Equity Office Properties Trust 13,050 367
Equity Residential 9,100 304
Plum Creek Timber Co., Inc. 5,800 210
ProLogis 5,800 226
Simon Property Group, Inc. 7,200 420
-----------
1,633
RETAIL 6.6%
--------------------------------------------------------------------------
Albertson's, Inc. 11,983 273
@o Autonation, Inc. 8,700 150
@o AutoZone, Inc. 2,800 229
o Bed, Bath & Beyond, Inc. 9,800 400
@ Best Buy Co., Inc. 10,600 628
o Big Lots, Inc. 3,400 42
Circuit City Stores, Inc. 6,000 97
Costco Wholesale Corp. 15,000 719
CVS Corp. 13,000 565
Dillards, Inc., Class A 2,500 51
Dollar General Corp. 10,650 205
Family Dollar Stores, Inc. 5,300 157
Federated Department Stores,
Inc. 5,700 288
The Gap, Inc. 29,300 585
Home Depot, Inc. 71,100 2,921
J.C. Penney Co., Inc. Holding
Co. 9,400 325
o Kohl's Corp. 11,100 563
o Kroger Co. 24,000 363
@ Limitedbrands 15,300 379
Lowe's Cos., Inc. 25,300 1,424
@ The May Department Stores Co. 9,200 240
Nordstrom, Inc. 4,400 190
o Office Depot, Inc. 9,900 160
RadioShack Corp. 5,200 156
o Safeway, Inc. 14,100 257
Sears, Roebuck & Co. 6,900 241
Staples, Inc. 16,100 479
Target Corp. 29,300 1,466
Tiffany & Co. 4,650 136
TJX Cos., Inc. 15,900 381
o Toys `R' Us, Inc. 6,800 122
=(5) Wal-Mart Stores, Inc. 137,250 7,401
Walgreen Co. 33,200 1,192
@ Winn-Dixie Stores, Inc. 3,800 13
-----------
22,798
STEEL 0.1%
--------------------------------------------------------------------------
Allegheny Technologies, Inc. 2,850 48
Nucor Corp. 5,200 219
United States Steel Corp. 3,700 136
Worthington Industries, Inc. 2,500 50
-----------
453
20 See financial notes.
SCHWAB INSTITUTIONAL SELECT S&P 500 FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TELEPHONE 3.3%
--------------------------------------------------------------------------
Alltel Corp. 10,000 549
AT&T Corp. 25,797 441
o Avaya, Inc. 14,295 206
BellSouth Corp. 59,250 1,580
CenturyTel, Inc. 4,300 138
o Citizens Communications Co. 10,486 141
o Nextel Communications, Inc.,
Class A 36,100 956
o Qwest Communications
International, Inc. 57,021 195
SBC Communications, Inc. 107,230 2,709
Sprint Corp. (FON Group) 47,050 986
Verizon Communications, Inc. 89,628 3,504
-----------
11,405
TOBACCO 1.1%
--------------------------------------------------------------------------
Altria Group, Inc. 66,400 3,218
@ Reynolds American, Inc. 4,870 335
UST, Inc. 5,200 214
-----------
3,767
TRAVEL & RECREATION 0.7%
--------------------------------------------------------------------------
Brunswick Corp. 3,100 145
Carnival Corp. 20,500 1,036
Harrah's Entertainment, Inc. 3,700 217
Hilton Hotels Corp. 12,500 249
Marriott International, Inc., Class A 7,500 409
Starwood Hotels & Resorts
Worldwide, Inc. 6,600 315
-----------
2,371
TRUCKING & FREIGHT 0.1%
--------------------------------------------------------------------------
Paccar, Inc. 5,675 394
Ryder Systems, Inc. 2,100 105
-----------
499
UTILITIES: ELECTRIC & GAS 3.1%
--------------------------------------------------------------------------
o The AES Corp. 20,300 221
o Allegheny Energy, Inc. 4,401 81
Ameren Corp. 6,300 302
American Electric Power Co., Inc. 12,880 424
@o Calpine Corp. 16,800 42
Centerpoint Energy, Inc. 9,700 102
Cinergy Corp. 5,900 233
o CMS Energy Corp. 6,000 56
Consolidated Edison, Inc. 7,900 343
Constellation Energy Group, Inc. 5,700 232
Dominion Resources, Inc. 10,691 688
DTE Energy Co. 5,500 235
Duke Energy Corp. 30,400 746
@o Dynegy, Inc., Class A 12,300 61
Edison International 10,600 323
El Paso Corp. 20,126 180
Entergy Corp. 7,400 484
Exelon Corp. 21,400 848
FirstEnergy Corp. 10,688 442
FPL Group, Inc. 5,900 406
@ KeySpan Corp. 5,000 200
Kinder Morgan, Inc. 3,905 251
@ Nicor, Inc. 1,400 53
NiSource, Inc. 8,327 179
Peoples Energy Corp. 1,200 51
o PG&E Corp. 13,000 416
Pinnacle West Capital Corp. 2,800 119
PPL Corp. 6,000 312
Progress Energy, Inc. 8,026 331
@ Public Service Enterprise Group,
Inc. 7,700 328
@ Sempra Energy 7,585 254
The Southern Co. 23,900 755
TECO Energy, Inc. 6,000 84
TXU Corp. 9,650 591
@ Williams Cos., Inc. 17,400 218
Xcel Energy, Inc. 12,560 215
-----------
10,806
SHORT-TERM INVESTMENTS
4.7% of net assets
BlackRock Liquidity Fund,
Temp Cash Institutional
Shares #21 2,390,802 2,391
Provident Institutional
TempFund 13,818,502 13,819
-----------
16,210
See financial notes. 21
SCHWAB INSTITUTIONAL SELECT S&P 500 FUND
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
U.S. TREASURY OBLIGATIONS
0.2% of net assets
= U.S. Treasury Bills
1.54%-1.69%, 12/16/04 865 863
END OF INVESTMENTS.
COLLATERAL INVESTED FOR SECURITIES ON LOAN
5.3% of net assets
COMMERCIAL PAPER & OTHER CORPORATE
OBLIGATIONS 1.7%
--------------------------------------------------------------------------
Canadian Imperial Bank of
Commerce/New York
1.72%, 05/25/05 716 716
Foreningssparbanken AB
1.83%, 11/15/04 458 458
Fortis Bank NY
1.78%, 06/06/05 1,121 1,121
Societe Generale NY
1.95%, 11/01/04 1,042 1,042
1.83%, 11/15/04 1,922 1,922
Westdeutsche Landesbank AG
1.50%, 01/10/05 654 654
-----------
5,913
SHORT-TERM INVESTMENTS 3.6%
--------------------------------------------------------------------------
Citibank, Time Deposit
1.76%, 11/01/04 393 393
SECURITY AND NUMBER OF SHARES
Institutional Money Market
Trust 12,081,358 12,081
-----------
12,474
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN.
In addition to the above, the fund held the following at 10/31/04. All numbers x
1,000 except number of contracts.
FUTURES CONTRACTS
NUMBER OF CONTRACT UNREALIZED
CONTRACTS VALUE GAINS
S&P 500 Index, Long
expires 12/17/04 35 9,890 213
22 See financial notes.
SCHWAB INSTITUTIONAL SELECT S&P 500 FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value (including $17,816
of securities on loan) $357,442 a
Collateral invested for securities on loan 18,387
Receivables:
Fund shares sold 786
Interest 14
Dividends 418
Due from brokers for futures 33
Income from securities lending 2
Prepaid expenses + 23
------------
TOTAL ASSETS 377,105
LIABILITIES
- --------------------------------------------------------------------------------
Collateral invested for securities on loan 18,387
Payables:
Fund shares redeemed 437
Investments bought 10,352
Trustees' fees 1
Accrued expenses + 63
------------
TOTAL LIABILITIES 29,240
NET ASSETS
- --------------------------------------------------------------------------------
Total assets 377,105
Total liabilities - 29,240
------------
NET ASSETS $347,865
NET ASSETS BY SOURCE
Capital received from investors 401,593
Net investment income not yet distributed 3,943
Net realized capital losses (51,492) b
Net unrealized capital losses (6,179) b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$347,865 38,886 $8.95
Unless stated, all numbers x 1,000.
a The fund paid $363,834 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $56,287
Sales/maturities $7,940
The fund's total security transactions with other SchwabFunds(R) during the
period were $845.
b These derive from investments and futures.
FEDERAL TAX DATA
- ---------------------------------------------------
PORTFOLIO COST $367,819
NET UNREALIZED GAINS AND LOSSES:
Gains $56,177
Losses + (66,554)
------------
($10,377)
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $3,943
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $313
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2008 $152
2009 17,888
2010 27,645
2011 + 1,609
------------
$47,294
See financial notes. 23
SCHWAB INSTITUTIONAL SELECT S&P 500 FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $5,147
Interest 42
Securities on loan + 27
-----------
TOTAL INVESTMENT INCOME 5,216
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments (287)
Net realized gains on futures contracts + 241
-----------
NET REALIZED LOSSES (46)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 21,182
Net unrealized gains on futures contracts + 204
-----------
NET UNREALIZED GAINS 21,386
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 551 a
Transfer agent and shareholder service fees 306 b
Trustees' fees 7 c
Custodian fees 47
Portfolio accounting fees 41
Professional fees 30
Registration fees 31
Shareholder reports 48
Other expenses + 19
-----------
Total expenses 1,080
Expense reduction - 635 d
-----------
NET EXPENSES 445
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 5,216
NET EXPENSES - 445
-----------
NET INVESTMENT INCOME 4,771
NET REALIZED LOSSES (46) e
NET UNREALIZED GAINS + 21,386 e
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $26,111
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.18% of the first $1
billion and 0.15% of assets beyond that. These fees are paid to Charles Schwab
Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.05% of the
fund's assets. These fees are paid to Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d Includes $554 from the investment adviser (CSIM) and $81 from the transfer
agent and shareholder service agent (Schwab). These reductions reflect a
guarantee by CSIM and Schwab to limit the operating expenses of this fund
through December 31, 2005, to 0.10% of average daily net assets. Prior to
October 1, 2004, this limit was 0.15%. This limit excludes interest, taxes and
certain non-routine expenses.
e These add up to a net gain on investments of $21,340.
24 See financial notes.
SCHWAB INSTITUTIONAL SELECT S&P 500 FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income $4,771 $3,778
Net realized losses (46) (1,536)
Net unrealized gains + 21,386 42,910
--------------------------------------
INCREASE IN NET ASSETS
FROM OPERATIONS 26,111 45,152
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income $3,944 $3,544 a, b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
Shares sold 13,048 $114,347 13,049 $95,187
Shares reinvested 371 3,113 407 2,823
Shares redeemed + (7,241) (63,271) (9,685) (70,755) c
----------------------------------------------
NET TRANSACTIONS
IN FUND SHARES 6,178 $54,189 3,771 $27,255
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 32,708 $271,509 28,937 $202,646
Total increase + 6,178 76,356 3,771 68,863 c
- --------------------------------------------------------------------------------
END OF PERIOD 38,886 $347,865 32,708 $271,509 d
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
The fund designates $3,915 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h) (ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for use in preparing
their 2004 income tax return.
b The tax-basis components of distributions paid are:
CURRENT PERIOD
Ordinary income $3,944
Long-term capital gains $--
PRIOR PERIOD
Ordinary income $3,544
Long-term capital gains $--
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase.
CURRENT PERIOD $15
PRIOR PERIOD $21
Dollar amounts are net of the redemption proceeds.
d Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
e Includes distributable net investment income in the amount of $3,943 and
$3,116 at the end of the current period and prior period, respectively.
See financial notes. 25
SCHWAB INSTITUTIONAL SELECT(R)
LARGE-CAP VALUE INDEX FUND
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 8.66 7.14 8.92 11.44 10.68
------------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.16 0.15 0.18 0.14 0.15
Net realized and unrealized gains or losses 1.05 1.55 (1.49) (2.19) 0.84
------------------------------------------------------------------------------
Total income or loss from investment operations 1.21 1.70 (1.31) (2.05) 0.99
Less distributions:
Dividends from net investment income (0.15) (0.18) (0.15) (0.15) (0.11)
Distributions from net realized gains -- -- (0.32) (0.32) (0.12)
------------------------------------------------------------------------------
Total distributions (0.15) (0.18) (0.47) (0.47) (0.23)
------------------------------------------------------------------------------
Net asset value at end of period 9.72 8.66 7.14 8.92 11.44
------------------------------------------------------------------------------
Total return (%) 14.12 24.40 (15.65) (18.53) 9.48
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.25 0.25 0.26 1 0.25 0.26 2
Gross operating expenses 0.44 0.45 0.48 0.45 0.51
Net investment income 1.80 1.94 1.72 1.47 1.64
Portfolio turnover rate 11 24 26 47 27
Net assets, end of period ($ x 1,000,000) 108 79 70 128 129
1 The ratio of net operating expenses would have been 0.25% if interest expense
had not been included.
2 The ratio of net operating expenses would have been 0.25% if certain
non-routine expenses (proxy fees) had not been included.
26 See financial notes.
SCHWAB INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q is
available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top ten holding
o Non-income producing security
= All or a portion of this security is held as collateral for open futures
contracts
/ Issuer is related to the fund's adviser
@ This security or a portion of this security is on loan
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
97.1% COMMON STOCK 94,603 104,596
2.5% SHORT-TERM
INVESTMENT 2,696 2,696
0.2% U.S. TREASURY
OBLIGATION 200 200
- --------------------------------------------------------------------------------
99.8% TOTAL INVESTMENTS 97,499 107,492
6.6% COLLATERAL INVESTED
FOR SECURITIES ON LOAN 7,145 7,145
(6.4)% OTHER ASSETS AND
LIABILITIES, NET (6,912)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 107,725
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 97.1% of net assets
AEROSPACE / DEFENSE 1.8%
--------------------------------------------------------------------------
@ Crane Co. 1,200 34
General Dynamics Corp. 3,900 397
Goodrich Corp. 2,500 77
Lockheed Martin Corp. 8,800 485
Northrop Grumman Corp. 6,848 354
Raytheon Co. 8,400 306
Rockwell Automation, Inc. 3,600 150
Textron, Inc. 2,700 184
-----------
1,987
AIR TRANSPORTATION 0.8%
--------------------------------------------------------------------------
FedEx Corp. 5,700 519
Sabre Holdings Corp., Class A 2,700 58
Southwest Airlines Co. 15,400 243
-----------
820
ALCOHOLIC BEVERAGES 0.0%
--------------------------------------------------------------------------
Adolph Coors Co., Class B 700 47
APPAREL 0.3%
--------------------------------------------------------------------------
Jones Apparel Group, Inc. 2,300 81
Liz Claiborne, Inc. 2,000 82
Reebok International Ltd. 1,100 41
VF Corp. 2,200 118
-----------
322
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.3%
--------------------------------------------------------------------------
Cooper Tire & Rubber Co. 1,300 25
Cummins, Inc. 800 56
Dana Corp. 2,700 40
Eaton Corp. 3,000 192
@ Ford Motor Co. 35,109 458
@ General Motors Corp. 10,975 423
Genuine Parts Co. 3,400 136
@o Goodyear Tire & Rubber Co. 3,600 36
@ Visteon Corp. 2,585 18
-----------
1,384
BANKS 14.9%
--------------------------------------------------------------------------
@ AmSouth Bancorp. 6,900 182
(3) Bank of America Corp. 79,080 3,542
The Bank of New York Co., Inc. 15,100 490
@ BB&T Corp. 10,800 444
Comerica, Inc. 3,300 203
Fifth Third Bancorp 11,100 546
First Horizon National Corp. 2,500 108
See financial notes. 27
SCHWAB INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Huntington Bancshares, Inc. 4,241 102
(5) JPMorgan Chase & Co. 69,174 2,670
KeyCorp, Inc. 7,900 265
M&T Bank Corp. 2,200 227
Marshall & Ilsley Corp. 4,366 183
Mellon Financial Corp. 8,100 234
National City Corp. 12,900 503
Northern Trust Corp. 4,300 183
PNC Financial Services Group,
Inc. 5,600 293
Regions Financial Corp. 8,994 315
SouthTrust Corp. 6,400 279
State Street Corp. 6,500 293
SunTrust Banks, Inc. 7,000 493
Synovus Financial Corp. 6,000 163
U.S. Bancorp 36,378 1,041
Wachovia Corp. 25,500 1,255
(8) Wells Fargo & Co. 32,800 1,959
Zions Bancorp. 1,700 112
-----------
16,085
BUSINESS MACHINES & SOFTWARE 3.0%
--------------------------------------------------------------------------
o Apple Computer, Inc. 7,600 399
o BMC Software, Inc. 4,000 76
o Compuware Corp. 7,100 41
o Comverse Technology, Inc. 3,600 74
o EMC Corp. 46,800 602
o Gateway, Inc. 6,900 40
Hewlett-Packard Co. 58,698 1,095
o NCR Corp. 1,800 102
o Novell, Inc. 7,500 54
o Siebel Systems, Inc. 10,600 101
o Sun Microsystems, Inc. 64,100 290
o Unisys Corp. 6,100 65
@o Xerox Corp. 16,300 241
-----------
3,180
BUSINESS SERVICES 3.3%
--------------------------------------------------------------------------
@o Affiliated Computer Services, Inc.,
Class A 2,788 152
@o Allied Waste Industries, Inc. 5,600 46
Cendant Corp. 20,500 422
Computer Associates International,
Inc. 11,400 316
@o Computer Sciences Corp. 3,500 174
o Convergys Corp. 3,000 39
Electronic Data Systems Corp. 10,000 213
o Fiserv, Inc. 3,700 131
o Interpublic Group of Cos., Inc. 8,200 100
o PeopleSoft, Inc. 6,500 135
o SunGard Data Systems, Inc. 5,700 151
Tyco International Ltd. 39,001 1,215
o Veritas Software Corp. 8,400 184
Waste Management, Inc. 11,300 322
-----------
3,600
CHEMICALS 0.9%
--------------------------------------------------------------------------
Air Products & Chemicals, Inc. 4,600 245
Eastman Chemical Co. 1,600 76
Great Lakes Chemical Corp. 900 23
Monsanto Co. 5,000 214
PPG Industries, Inc. 3,200 204
Rohm & Haas Co. 4,305 182
-----------
944
CONSTRUCTION 0.8%
--------------------------------------------------------------------------
Centex Corp. 2,600 135
Fluor Corp. 1,300 60
KB Home 1,000 82
Masco Corp. 8,400 288
Pulte Homes, Inc. 2,500 137
The Stanley Works 1,500 67
Vulcan Materials Co. 2,200 110
-----------
879
CONSUMER DURABLES 0.3%
--------------------------------------------------------------------------
Leggett & Platt, Inc. 3,800 107
Newell Rubbermaid, Inc. 5,100 110
Whirlpool Corp. 1,500 88
-----------
305
CONTAINERS 0.1%
--------------------------------------------------------------------------
Bemis Co. 2,000 53
ELECTRONICS 2.2%
--------------------------------------------------------------------------
o ADC Telecommunications, Inc. 19,600 43
@o Advanced Micro Devices, Inc. 6,500 109
American Power Conversion Corp. 3,900 75
28 See financial notes.
SCHWAB INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
@o Andrew Corp. 3,000 42
o Applied Micro Circuits Corp. 5,200 19
o CIENA Corp. 11,100 28
ITT Industries, Inc. 1,800 146
o Jabil Circuit, Inc. 4,009 98
o JDS Uniphase Corp. 27,500 87
o LSI Logic Corp. 7,700 35
@o Micron Technology, Inc. 11,900 145
Molex, Inc. 3,800 112
Motorola, Inc. 45,785 790
o Novellus Systems, Inc. 3,000 78
o Nvidia Corp. 3,200 46
PerkinElmer, Inc. 2,600 54
o Power-One, Inc. 1,300 9
o QLogic Corp. 1,600 52
o Sanmina--SCI Corp. 10,300 82
Scientific-Atlanta, Inc. 2,800 77
Tektronix, Inc. 2,000 61
o Tellabs, Inc. 7,900 63
o Thermo Electron Corp. 3,100 90
-----------
2,341
ENERGY: RAW MATERIALS 2.4%
--------------------------------------------------------------------------
Anadarko Petroleum Corp. 4,838 326
Apache Corp. 6,470 328
Baker Hughes, Inc. 6,500 278
Burlington Resources, Inc. 7,700 320
Devon Energy Corp. 4,600 340
EOG Resources, Inc. 2,100 140
o Noble Corp. 2,900 132
Occidental Petroleum Corp. 7,800 436
@o Rowan Cos., Inc. 2,100 54
Valero Energy Corp. 4,800 206
-----------
2,560
FOOD & AGRICULTURE 1.0%
--------------------------------------------------------------------------
Archer-Daniels-Midland Co. 12,705 246
Coca-Cola Enterprises, Inc. 9,100 190
ConAgra Foods, Inc. 10,400 274
General Mills, Inc. 7,200 319
Supervalu, Inc. 2,600 77
-----------
1,106
GOLD 0.4%
--------------------------------------------------------------------------
@ Newmont Mining Corp. 8,600 409
HEALTHCARE / DRUGS & MEDICINE 3.5%
--------------------------------------------------------------------------
AmerisourceBergen Corp. 2,200 121
@o Anthem, Inc. 2,629 211
Applied Biosystems Group--
Applera Corp. 4,100 78
Bausch & Lomb, Inc. 1,100 67
o Biogen Idec, Inc. 6,600 384
@o Caremark Rx, Inc. 9,043 271
o Chiron Corp. 3,600 117
o Genzyme Corp. 4,400 231
@ HCA, Inc. 9,400 345
Health Management Associates, Inc.,
Class A 4,700 97
o Hospira, Inc. 3,200 102
o Humana, Inc. 3,400 65
@o King Pharmaceuticals, Inc. 4,300 47
Manor Care, Inc. 1,800 59
McKesson Corp. 5,700 152
@o Medco Health Solutions, Inc. 5,400 183
o Medimmune, Inc. 5,100 145
@ Quest Diagnostics 1,914 168
Schering-Plough Corp. 28,600 518
o Tenet Healthcare Corp. 8,600 92
o Watson Pharmaceuticals, Inc. 2,000 56
o WellPoint Health Networks, Inc. 3,000 293
-----------
3,802
HOUSEHOLD PRODUCTS 0.1%
--------------------------------------------------------------------------
Alberto-Culver Co., Class B 1,800 81
INSURANCE 8.5%
--------------------------------------------------------------------------
ACE Ltd. 5,700 217
Aetna, Inc. 2,900 275
AFLAC, Inc. 9,900 355
The Allstate Corp. 13,500 649
AMBAC Financial Group, Inc. 2,000 156
=(4) American International Group,
Inc. 50,648 3,075
@ AON Corp. 6,250 128
Chubb Corp. 3,900 281
See financial notes. 29
SCHWAB INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
@ CIGNA Corp. 2,500 159
Cincinnati Financial Corp. 3,140 131
Hartford Financial Services
Group, Inc. 5,600 327
Jefferson-Pilot Corp. 2,600 125
Lincoln National Corp. 3,600 158
Loews Corp. 3,500 210
MBIA, Inc. 2,950 171
Metlife, Inc. 14,578 559
MGIC Investment Corp. 1,800 116
Principal Financial Group, Inc. 6,000 227
The Progressive Corp. 4,050 379
Prudential Financial, Inc. 10,100 469
Safeco Corp. 2,500 116
The St. Paul Travelers Cos.,
Inc. 12,840 436
Torchmark Corp. 2,100 113
UnumProvident Corp. 5,849 80
XL Capital Ltd., Class A 2,700 196
-----------
9,108
MEDIA 5.9%
--------------------------------------------------------------------------
Clear Channel Communications,
Inc. 11,639 389
o Comcast Corp., Class A 43,283 1,277
Gannett Co., Inc. 5,100 423
R.R. Donnelley & Sons Co. 4,300 135
o(10) Time Warner, Inc. 88,900 1,479
Tribune Co. 6,080 263
@o Univision Communications, Inc.,
Class A 6,300 195
Viacom, Inc., Class B 33,701 1,230
The Walt Disney Co. 39,900 1,006
-----------
6,397
MISCELLANEOUS FINANCE 11.4%
--------------------------------------------------------------------------
The Bear Stearns Cos., Inc. 2,101 199
@ Capital One Financial Corp. 4,800 354
/ The Charles Schwab Corp. 26,400 242
=(2) Citigroup, Inc. 100,673 4,467
Countrywide Financial Corp. 10,998 351
o E*TRADE Financial Corp. 7,700 99
Franklin Resources, Inc. 4,700 285
Freddie Mac 13,400 892
Golden West Financial Corp. 2,800 327
Goldman Sachs Group, Inc. 9,500 935
Janus Capital Group, Inc. 4,400 67
Lehman Brothers Holdings, Inc. 5,400 444
MBNA Corp. 24,800 636
Merrill Lynch & Co., Inc. 18,300 987
Morgan Stanley 21,400 1,093
o Providian Financial Corp. 5,400 84
Sovereign Bancorp, Inc. 6,800 147
Washington Mutual, Inc. 16,950 656
-----------
12,265
NON-DURABLES & ENTERTAINMENT 1.0%
--------------------------------------------------------------------------
Darden Restaurants, Inc. 2,900 71
Hasbro, Inc. 3,950 70
Mattel, Inc. 8,100 142
McDonald's Corp. 24,400 711
Wendy's International, Inc. 2,100 70
-----------
1,064
NON-FERROUS METALS 0.7%
--------------------------------------------------------------------------
Alcoa, Inc. 16,532 537
Engelhard Corp. 2,300 65
Phelps Dodge Corp. 1,920 168
-----------
770
OIL: DOMESTIC 2.3%
--------------------------------------------------------------------------
Amerada Hess Corp. 1,700 137
Ashland, Inc. 1,400 81
ConocoPhillips 13,352 1,126
Kerr-McGee Corp. 2,800 166
Marathon Oil Corp. 6,800 259
o Nabors Industries Ltd. 2,850 140
Sunoco, Inc. 1,500 112
o Transocean, Inc. 6,248 220
Unocal Corp. 5,300 221
-----------
2,462
OIL: INTERNATIONAL 7.8%
--------------------------------------------------------------------------
(6) ChevronTexaco Corp. 41,424 2,198
=(1) Exxon Mobil Corp. 126,350 6,219
-----------
8,417
30 See financial notes.
SCHWAB INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OPTICAL & PHOTO 0.4%
--------------------------------------------------------------------------
o Corning, Inc. 27,100 310
@ Eastman Kodak Co. 5,500 167
-----------
477
PAPER & FOREST PRODUCTS 1.0%
--------------------------------------------------------------------------
o Boise Cascade Corp. 1,600 47
@ Georgia-Pacific Corp. 5,210 180
International Paper Co. 9,515 367
Louisiana-Pacific Corp. 2,300 56
MeadWestvaco Corp. 3,746 118
Temple-Inland, Inc. 1,100 65
Weyerhaeuser Co. 4,500 282
-----------
1,115
PRODUCER GOODS & MANUFACTURING 2.4%
--------------------------------------------------------------------------
Cooper Industries Ltd., Class A 1,900 122
Deere & Co. 5,000 299
Dover Corp. 4,200 165
o Fisher Scientific International, Inc. 2,200 126
Honeywell International, Inc. 16,687 562
Illinois Tool Works, Inc. 5,800 535
Ingersoll-Rand Co., Class A 3,400 233
Johnson Controls, Inc. 3,800 218
Pall Corp. 2,200 57
Parker Hannifin Corp. 2,200 155
Snap-On, Inc. 1,000 29
W.W. Grainger, Inc. 1,700 100
-----------
2,601
RAILROAD & SHIPPING 1.0%
--------------------------------------------------------------------------
Burlington Northern Santa Fe
Corp. 7,000 293
CSX Corp. 4,400 161
Norfolk Southern Corp. 7,700 261
Union Pacific Corp. 5,100 321
-----------
1,036
REAL PROPERTY 0.7%
--------------------------------------------------------------------------
@ Apartment Investment & Management Co.,
Class A 2,000 73
Equity Office Properties Trust 7,900 222
Equity Residential 5,300 177
Plum Creek Timber Co., Inc. 3,600 131
ProLogis 3,400 132
-----------
735
RETAIL 3.4%
--------------------------------------------------------------------------
Albertson's, Inc. 7,138 163
@o Autonation, Inc. 4,900 84
o Big Lots, Inc. 1,800 22
Circuit City Stores, Inc. 4,100 67
Costco Wholesale Corp. 9,000 431
CVS Corp. 7,800 339
Dillards, Inc., Class A 1,600 33
Federated Department Stores,
Inc. 3,500 177
J.C. Penney Co., Inc.
Holding Co. 5,800 201
o Kroger Co. 14,500 219
@ Limitedbrands 9,000 223
@ The May Department Stores
Co. 5,700 149
Nordstrom, Inc. 2,600 112
o Office Depot, Inc. 5,800 94
o Safeway, Inc. 8,700 159
@ Sears, Roebuck & Co. 4,300 151
Target Corp. 17,600 880
Tiffany & Co. 2,700 79
o Toys `R' Us, Inc. 4,400 79
@ Winn-Dixie Stores, Inc. 2,100 7
-----------
3,669
STEEL 0.2%
--------------------------------------------------------------------------
@ Nucor Corp. 3,200 135
@ United States Steel Corp. 2,200 81
Worthington Industries, Inc. 1,800 36
-----------
252
TELEPHONE 5.6%
--------------------------------------------------------------------------
Alltel Corp. 5,800 319
AT&T Corp. 15,352 263
BellSouth Corp. 35,400 944
CenturyTel, Inc. 2,900 93
o Citizens Communications Co. 6,948 93
(9) SBC Communications, Inc. 64,300 1,624
See financial notes. 31
SCHWAB INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Sprint Corp. (FON Group) 28,200 591
(7) Verizon Communications, Inc. 53,800 2,103
-----------
6,030
TOBACCO 0.2%
--------------------------------------------------------------------------
@ Reynolds American, Inc. 2,800 193
TRAVEL & RECREATION 1.3%
--------------------------------------------------------------------------
Brunswick Corp. 2,200 103
@ Carnival Corp. 12,300 622
@ Harrah's Entertainment, Inc. 2,300 135
Hilton Hotels Corp. 7,400 147
Marriott International, Inc., Class A 4,300 234
Starwood Hotels & Resorts
Worldwide, Inc. 3,900 186
-----------
1,427
TRUCKING & FREIGHT 0.3%
--------------------------------------------------------------------------
Paccar, Inc. 3,425 238
Ryder Systems, Inc. 1,300 65
-----------
303
UTILITIES: ELECTRIC & GAS 5.9%
--------------------------------------------------------------------------
o Allegheny Energy, Inc. 2,900 53
Ameren Corp. 3,900 187
American Electric Power Co., Inc. 7,640 252
@o Calpine Corp. 8,400 21
Centerpoint Energy, Inc. 6,600 69
@ Cinergy Corp. 3,700 146
@o CMS Energy Corp. 3,100 29
Consolidated Edison, Inc. 4,700 204
Constellation Energy Group, Inc. 3,300 134
Dominion Resources, Inc. 6,448 415
DTE Energy Co. 3,500 150
@ Duke Energy Corp. 18,200 446
@o Dynegy, Inc., Class A 7,500 37
Edison International 6,100 186
@ El Paso Corp. 11,873 106
Entergy Corp. 4,300 281
Exelon Corp. 12,800 507
FirstEnergy Corp. 6,422 265
FPL Group, Inc. 3,600 248
@ KeySpan Corp. 3,000 120
Kinder Morgan, Inc. 2,545 164
@ Nicor, Inc. 800 30
NiSource, Inc. 5,115 110
Peoples Energy Corp. 700 30
o PG&E Corp. 7,700 247
Pinnacle West Capital Corp. 1,700 73
PPL Corp. 3,500 182
Progress Energy, Inc. 4,606 190
@ Public Service Enterprise Group,
Inc. 4,700 200
Sempra Energy 4,400 148
@ The Southern Co. 14,400 455
TECO Energy, Inc. 3,600 50
TXU Corp. 6,100 373
@ Williams Cos., Inc. 10,200 128
@ Xcel Energy, Inc. 7,810 134
-----------
6,370
SHORT-TERM INVESTMENT
2.5% of net assets
Provident Institutional
TempFund 2,696,245 2,696
SECURITY FACE AMOUNT
RATE, MATURITY DATE ($ x 1,000)
U.S. TREASURY OBLIGATION
0.2% of net assets
= U.S. Treasury Bill
1.63%, 12/16/04 200 200
END OF INVESTMENTS.
32 See financial notes.
SCHWAB INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
COLLATERAL INVESTED FOR SECURITIES ON LOAN
6.6% of net assets
COMMERCIAL PAPER & OTHER CORPORATE
OBLIGATIONS 2.5%
--------------------------------------------------------------------------
Canadian Imperial Bank of
Commerce/New York
1.92%, 11/29/04 190 190
1.72%, 05/25/05 296 296
Foreningssparbanken AB
1.83%, 11/15/04 841 841
Fortis Bank NY
1.78%, 06/06/05 211 211
Societe Generale NY
1.95%, 11/01/04 864 863
1.83%, 11/15/04 355 355
-----------
2,756
SHORT-TERM INVESTMENTS 4.1%
--------------------------------------------------------------------------
Citibank, Time Deposit
1.76%, 11/01/04 167 167
SECURITY AND NUMBER OF SHARES
Institutional Money Market
Trust 4,221,520 4,222
-----------
4,389
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN.
In addition to the above, the fund held the following at 10/31/04. All numbers x
1,000 except number of contracts.
FUTURES CONTRACTS
NUMBER OF CONTRACT UNREALIZED
CONTRACTS VALUE GAINS
S&P 500 Index, Long
expires 12/17/04 13 3,673 13
See financial notes. 33
SCHWAB INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value (including
$6,903 of securities on loan) $107,492 a
Collateral invested for securities on loan 7,145
Receivables:
Fund shares sold 105
Interest 3
Dividends 194
Due from broker for futures 8
Income from securities on loan 1
Prepaid expenses + 15
------------
TOTAL ASSETS 114,963
LIABILITIES
- --------------------------------------------------------------------------------
Collateral invested for securities on loan 7,145
Payables:
Fund shares redeemed 53
Transfer agent and shareholder service fees 1
Accrued expenses + 39
------------
TOTAL LIABILITIES 7,238
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 114,963
TOTAL LIABILITIES - 7,238
------------
NET ASSETS $107,725
NET ASSETS BY SOURCE
Capital received from investors 129,050
Net investment income not yet distributed 1,427
Net realized capital losses (32,758) b
Net unrealized capital gains 10,006 b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$107,725 11,089 $9.72
Unless stated, all numbers x 1,000.
a The fund paid $97,499 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $27,180
Sales/maturities $10,493
The fund's total security transactions with other SchwabFunds(R) during the
period were $4,131.
b These derive from investments and futures.
FEDERAL TAX DATA
--------------------------------------------------
PORTFOLIO COST $99,165
NET UNREALIZED GAINS AND LOSSES:
Gains $20,246
Losses + (11,919)
------------
$8,327
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $1,427
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $1,252
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $24,705
2011 + 6,374
------------
$31,079
34 See financial notes.
SCHWAB INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $1,883
Interest 21
Securities on loan + 18
-----------
TOTAL INVESTMENT INCOME 1,922
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized gains on investments 1,362
Net realized gains on futures contracts + 123
-----------
NET REALIZED GAINS 1,485
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 8,597
Net unrealized losses on futures contracts + (22)
-----------
NET UNREALIZED GAINS 8,575
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 188 a
Transfer agent and shareholder service fees 94 b
Trustees' fees 5 c
Custodian fees 20
Portfolio accounting fees 13
Professional fees 29
Registration fees 20
Shareholder reports 30
Other expenses + 16
-----------
Total expenses 415
Expense reduction - 180 d
-----------
NET EXPENSES 235
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,922
NET EXPENSES - 235
-----------
NET INVESTMENT INCOME 1,687
NET REALIZED GAINS 1,485 e
NET UNREALIZED GAINS + 8,575 e
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $11,747
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.20% of the first $1
billion and 0.18% of assets beyond that. These fees are paid to Charles Schwab
Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.05% of the
fund's assets. These fees are paid to Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d Includes $171 from the investment adviser (CSIM) and $9 from the transfer
agent and shareholder service agent (Schwab). These reductions reflect a
guarantee by CSIM and Schwab to limit the operating expenses of this fund
through December 31, 2005, to 0.25% of average daily net assets. This limit
excludes interest, taxes and certain non-routine expenses.
e These add up to a net gain on investments of $10,060.
See financial notes. 35
SCHWAB INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income $1,687 $1,358
Net realized gains or losses 1,485 (6,127)
Net unrealized gains + 8,575 20,469
------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS 11,747 15,700
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income $1,357 $1,700 a, b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
Shares sold 4,232 $39,448 3,034 $23,065
Shares reinvested 132 1,154 200 1,408
Shares redeemed + (2,432) (22,547) (3,938) (29,626) c
----------------------------------------------------
NET TRANSACTIONS
IN FUND SHARES 1,932 $18,055 (704) ($5,153)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 9,157 $79,280 9,861 $70,433
Total increase
or decrease + 1,932 28,445 (704) 8,847 d
----------------------------------------------------
END OF PERIOD 11,089 $107,725 9,157 $79,280 e
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
The fund designates $1,337 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h) (ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for use in preparing
their 2004 income tax return.
b The tax-basis components of distributions paid are:
CURRENT PERIOD
Ordinary income $1,357
Long-term capital gains $--
PRIOR PERIOD
Ordinary income $1,700
Long-term capital gains $--
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase.
CURRENT PERIOD $11
PRIOR PERIOD $12
Dollar amounts are net of the redemption proceeds.
d Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
e Includes distributable net investment income in the amount of $1,427 and
$1,097 at the end of the current period and prior period, respectively.
36 See financial notes.
SCHWAB INSTITUTIONAL SELECT(R) SMALL-CAP VALUE INDEX FUND
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 12.55 9.50 10.82 11.23 9.89
------------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.16 0.11 0.10 0.09 0.09
Net realized and unrealized gains or losses 2.18 3.04 (0.32) 0.32 1.74
------------------------------------------------------------------------------
Total income or loss from investment operations 2.34 3.15 (0.22) 0.41 1.83
Less distributions:
Dividends from net investment income (0.11) (0.10) (0.10) (0.08) (0.09)
Distributions from net realized gains -- -- (1.00) (0.74) (0.40)
------------------------------------------------------------------------------
Total distributions (0.11) (0.10) (1.10) (0.82) (0.49)
------------------------------------------------------------------------------
Net asset value at end of period 14.78 12.55 9.50 10.82 11.23
------------------------------------------------------------------------------
Total return (%) 18.76 33.52 (3.32) 4.14 19.42
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.32 0.32 0.33 1 0.32 0.28 2
Gross operating expenses 0.58 0.63 0.61 0.61 0.66
Net investment income 1.15 0.95 0.81 0.87 0.94
Portfolio turnover rate 40 36 56 69 71
Net assets, end of period ($ x 1,000,000) 42 36 37 47 39
1 The ratio of net operating expenses would have been 0.32% if interest expense
had not been included.
2 The ratio of net operating expenses would have been 0.27% if certain
non-routine expenses (proxy fees) had not been included.
See financial notes. 37
SCHWAB INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q is
available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top ten holding
o Non-income producing security
= All or a portion of this security is held as collateral for open futures
contracts
@ This security or a portion of this security is on loan
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
96.7% COMMON STOCK 31,872 40,691
2.8% SHORT-TERM
INVESTMENT 1,173 1,173
0.3% U.S. TREASURY
OBLIGATIONS 110 110
- --------------------------------------------------------------------------------
99.8% TOTAL INVESTMENTS 33,155 41,974
5.4% COLLATERAL INVESTED
FOR SECURITIES ON LOAN 2,263 2,263
(5.2)% OTHER ASSETS AND
LIABILITIES, NET (2,193)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 42,044
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 96.7% of net assets
AEROSPACE / DEFENSE 1.2%
--------------------------------------------------------------------------
o DRS Technologies, Inc. 4,600 167
EDO Corp. 3,600 101
o Esterline Technologies Corp. 3,700 117
GenCorp, Inc. 7,200 100
Kaman Corp., Class A 3,800 42
-----------
527
AIR TRANSPORTATION 0.7%
--------------------------------------------------------------------------
=o AAR Corp. 6,000 70
o FLYi, Inc. 6,200 9
o Frontier Airlines, Inc. 5,000 42
o Mesa Air Group, Inc. 5,500 32
SkyWest, Inc. 9,500 162
-----------
315
APPAREL 1.3%
--------------------------------------------------------------------------
=o Ashworth, Inc. 2,400 20
Brown Shoe Co., Inc. 3,200 87
Haggar Corp. 700 12
Kellwood Co. 4,600 145
Phillips-Van Heusen Corp. 5,500 125
Russell Corp. 5,800 100
Stride Rite Corp. 6,100 63
-----------
552
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.1%
--------------------------------------------------------------------------
A.O. Smith Corp., Class B 5,000 133
Coachmen Industries, Inc. 2,300 33
o Group 1 Automotive, Inc. 3,800 108
Myers Industries, Inc. 6,050 64
Standard Motor Products, Inc. 3,400 52
o TBC Corp. 3,800 84
-----------
474
BANKS 8.6%
--------------------------------------------------------------------------
Anchor Bancorp Wisconsin, Inc. 3,600 93
BankAtlantic Bancorp, Inc.,
Class A 10,200 178
Boston Private Financial Holdings,
Inc. 4,500 110
= Brookline Bancorp, Inc. 9,600 149
Chittenden Corp. 7,750 219
Community Bank System, Inc. 5,000 138
First Republic Bank 2,900 140
o FirstFed Financial Corp. 3,000 154
Irwin Financial Corp. 4,900 122
38 See financial notes.
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
MAF Bancorp., Inc. 5,500 236
Provident Bankshares Corp. 5,505 191
Republic Bancorp, Inc. 11,000 184
Riggs National Corp. 5,200 110
(4) The South Financial Group,
Inc. 12,200 366
Sterling Bancshares, Inc.
Texas 7,800 111
o Sterling Financial Corp.
Washington 4,000 150
Susquehanna Bancshares,
Inc. 8,200 204
Umpqua Holdings Corp. 7,300 182
United Bankshares, Inc. 7,500 275
= Whitney Holding Corp. 6,850 299
-----------
3,611
BUSINESS MACHINES & SOFTWARE 1.5%
--------------------------------------------------------------------------
=o Adaptec, Inc. 18,700 146
Analogic Corp. 2,500 106
Black Box Corp. 3,000 118
o Brooktrout, Inc. 2,500 23
o Digi International, Inc. 4,100 56
@ Landamerica Financial Group,
Inc. 3,300 162
o Roxio, Inc. 3,900 24
-----------
635
BUSINESS SERVICES 8.4%
--------------------------------------------------------------------------
o 4Kids Entertainment, Inc. 2,500 46
ABM Industries, Inc. 8,200 170
Angelica Corp. 1,600 38
Bowne & Co., Inc. 5,800 72
o CACI International, Inc., Class A 5,000 305
CDI Corp. 3,100 51
Chemed Corp. 2,000 121
o Ciber, Inc. 10,700 97
o Cross Country Healthcare, Inc. 5,700 85
o Digital Insight Corp. 6,100 95
o eFunds Corp. 8,300 163
o EPIQ Systems, Inc. 3,000 45
G&K Services, Inc., Class A 3,600 141
o Gentiva Health Services, Inc. 4,100 70
o Insurance Auto Auctions, Inc. 1,900 36
o Internet Security Systems 8,000 174
o JDA Software Group, Inc. 4,900 55
o Mantech International Corp.,
Class A 5,500 119
o MAXIMUS, Inc. 4,000 109
Nautilus Group, Inc. 5,500 108
o NCO Group, Inc. 5,500 147
o NYFIX, Inc. 4,800 23
o On Assignment, Inc. 4,200 21
o Paxar Corp. 6,900 152
o PC-Tel, Inc. 3,500 27
o Pegasus Solutions, Inc. 3,900 41
o Phoenix Technologies Ltd. 3,800 23
o PRG-Schultz International,
Inc. 10,300 53
o QRS Corp. 3,000 21
o Radiant Systems, Inc. 4,500 23
o SourceCorp 2,600 44
o Spherion Corp. 10,100 73
o SPSS, Inc. 3,000 41
The Standard Register Co. 4,800 51
o URS Corp. 7,300 201
o Verity, Inc. 6,500 84
Viad Corp. 3,700 80
o Volt Information Sciences, Inc. 2,800 81
o Waste Connections, Inc. 8,050 254
-----------
3,540
CHEMICALS 2.0%
--------------------------------------------------------------------------
@ A. Schulman, Inc. 5,200 103
= Arch Chemicals, Inc. 4,200 119
H.B. Fuller Co. 4,800 129
=o OM Group, Inc. 5,200 172
Penford Corp. 1,600 25
o PolyOne Corp. 15,500 117
Quaker Chemical Corp. 1,300 30
Tredegar Corp. 6,500 109
Wellman, Inc. 4,500 33
-----------
837
CONSTRUCTION 2.9%
--------------------------------------------------------------------------
Apogee Enterprises, Inc. 4,400 56
Building Material Holding Corp. 2,300 67
o EMCOR Group, Inc. 2,500 99
See financial notes. 39
SCHWAB INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Insituform Technologies, Inc.,
Class A 4,500 89
@(1) MDC Holdings, Inc. 5,692 437
(7) Standard-Pacific Corp. 5,600 314
Texas Industries, Inc. 3,500 178
-----------
1,240
CONSUMER DURABLES 1.2%
--------------------------------------------------------------------------
o Applica, Inc. 3,800 15
Bassett Furniture Industries, Inc. 2,200 41
Haverty Furniture Cos., Inc. 3,900 66
o Interface, Inc., Class A 7,800 68
La-Z-Boy, Inc. 8,500 112
National Presto Industries, Inc. 1,400 56
Skyline Corp. 1,500 60
Thomas Industries, Inc. 3,100 105
-----------
523
CONTAINERS 0.2%
--------------------------------------------------------------------------
o Mobile Mini, Inc. 2,500 71
ELECTRONICS 7.4%
--------------------------------------------------------------------------
o Actel Corp. 4,500 68
Agilysys, Inc. 5,700 98
o Alliance Semiconductor Corp. 5,300 18
Anixter International, Inc. 6,200 240
o Audiovox Corp., Class A 3,400 49
Belden CDT, Inc. 8,225 183
=o Bell Microproducts, Inc. 3,700 33
=o Benchmark Electronics, Inc. 7,250 246
C&D Technologies, Inc. 4,700 84
o C-COR.net Corp. 8,000 60
o Captaris, Inc. 5,000 23
o Checkpoint Systems, Inc. 6,500 111
o Coherent, Inc. 5,400 130
Cohu, Inc. 3,200 50
CTS Corp. 6,200 82
Cubic Corp. 4,500 99
o Dupont Photomasks, Inc. 3,400 89
o Electro Scientific Industries, Inc. 4,600 78
o ESS Technology, Inc. 6,500 43
o Exar Corp. 7,000 105
o Gerber Scientific, Inc. 4,000 31
@o Hutchinson Technology, Inc. 4,400 148
Methode Electronics, Class A 5,900 79
Park Electrochemical Corp. 3,600 76
o Pericom Semiconductor Corp. 4,300 39
o Pinnacle Systems, Inc. 11,200 52
o Planar Systems, Inc. 1,800 18
o Radisys Corp. 3,200 43
o Rudolph Technologies, Inc. 3,000 45
o SCM Microsystems, Inc. 2,700 10
=o Skyworks Solutions, Inc. 26,900 239
o Standard Microsystems Corp. 3,100 68
o Supertex, Inc. 2,300 49
o Symmetricom, Inc. 7,600 65
o Technitrol, Inc. 7,000 114
o THQ, Inc. 6,900 130
=o Three-Five Systems, Inc. 2,200 5
o Tollgrade Communications, Inc. 2,200 21
-----------
3,121
ENERGY: RAW MATERIALS 2.7%
--------------------------------------------------------------------------
o Atwood Oceanics, Inc. 2,700 129
o Cimarex Energy Co. 7,000 251
o Dril-Quip, Inc. 3,200 72
o Kirby Corp. 4,300 180
o Offshore Logistics, Inc. 4,000 145
o Seacor Holdings, Inc. 2,900 138
o Swift Energy Co. 4,700 114
o W-H Energy Services, Inc. 4,700 96
-----------
1,125
FOOD & AGRICULTURE 2.8%
--------------------------------------------------------------------------
@ American Italian Pasta Co.,
Class A 3,000 61
=(10) Corn Products International,
Inc. 6,200 305
Flowers Foods, Inc. 7,900 200
o Hain Celestial Group, Inc. 5,900 96
o J & J Snack Foods Corp. 1,400 62
= Nash Finch Co. 2,400 74
o Performance Food Group Co. 8,100 189
o Ralcorp Holdings, Inc. 4,800 176
-----------
1,163
40 See financial notes.
SCHWAB INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
HEALTHCARE / DRUGS & MEDICINE 4.9%
--------------------------------------------------------------------------
Alpharma, Inc., Class A 8,900 151
@o AMERIGROUP Corp. 4,400 264
=o Arqule, Inc. 3,700 17
= Cambrex Corp. 4,400 98
o Conmed Corp. 5,300 149
@o CryoLife, Inc. 3,900 27
=o Curative Health Services, Inc. 1,400 8
Datascope Corp. 2,600 84
Invacare Corp. 5,300 245
@o OCA, Inc. 8,100 33
o Osteotech, Inc. 3,000 14
= Owens & Minor, Inc. 6,800 178
o Parexel International Corp. 4,500 87
o Province Healthcare Co. 8,500 182
o RehabCare Group, Inc. 2,600 60
o Savient Pharmaceuticals, Inc. 8,400 17
o Sola International, Inc. 5,700 109
o Sunrise Senior Living, Inc. 3,600 137
o Theragenics Corp. 3,600 13
o Viasys Healthcare, Inc. 5,400 92
Vital Signs, Inc. 2,200 76
-----------
2,041
INSURANCE 3.8%
--------------------------------------------------------------------------
Delphi Financial Group, Inc.,
Class A 5,167 211
Hooper Holmes, Inc. 11,500 60
o Philadelphia Consolidated Holding
Co. 3,800 220
Presidential Life Corp. 5,400 86
o ProAssurance Corp. 5,000 178
RLI Corp. 4,100 156
= SCPIE Holdings, Inc. 900 8
Selective Insurance Group,
Inc. 4,700 184
Stewart Information Services
Corp. 3,100 132
o UICI 8,000 237
@ Zenith National Insurance
Corp. 3,500 144
-----------
1,616
MEDIA 0.9%
--------------------------------------------------------------------------
=o Advanced Marketing Services,
Inc. 3,600 38
o Consolidated Graphics, Inc. 2,200 94
o Information Holdings, Inc. 3,900 107
@ Movie Gallery, Inc. 5,500 89
o Network Equipment Technologies,
Inc. 3,900 33
-----------
361
MISCELLANEOUS FINANCE 4.3%
--------------------------------------------------------------------------
@o Bankunited Financial Corp.,
Class A 5,100 152
Cash America International,
Inc. 4,700 119
= Commercial Federal Corp. 6,800 189
= Downey Financial Corp. 4,800 265
o Financial Federal Corp. 2,900 108
= Flagstar Bancorp., Inc. 10,500 219
o Investment Technology Group,
Inc. 7,000 108
o Meritage Corp. 2,300 204
o Piper Jaffray Cos. 3,500 153
SWS Group, Inc. 2,997 58
Waypoint Financial Corp. 5,740 158
o World Acceptance Corp. 3,100 72
-----------
1,805
NON-DURABLES & ENTERTAINMENT 2.2%
--------------------------------------------------------------------------
Action Performance Cos.,
Inc. 2,900 27
o Department 56, Inc. 2,600 39
o Enesco Group, Inc. 1,900 12
IHOP Corp. 3,600 138
o Jack in the Box, Inc. 6,500 217
=o Jakks Pacific, Inc. 4,200 66
Landry's Restaurants, Inc. 4,600 125
Lone Star Steakhouse & Saloon,
Inc. 4,059 98
o O'Charleys, Inc. 3,000 46
Russ Berrie & Co., Inc. 3,100 65
o Ryan's Restaurant Group, Inc. 6,800 95
-----------
928
See financial notes. 41
SCHWAB INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
NON-FERROUS METALS 1.8%
--------------------------------------------------------------------------
=o A.M. Castle & Co. 2,700 31
o Brush Engineered Materials, Inc. 3,100 48
Commercial Metals Co. 4,900 177
o Commonwealth Industries, Inc. 2,600 24
o Imco Recycling, Inc. 2,500 29
Mueller Industries, Inc. 6,100 163
Reliance Steel & Aluminum Co. 5,500 189
o RTI International Metals, Inc. 3,900 78
o Wolverine Tube, Inc. 2,100 21
-----------
760
OIL: DOMESTIC 1.2%
--------------------------------------------------------------------------
o Remington Oil & Gas Corp. 4,900 125
o Spinnaker Exploration Co. 5,900 188
o Stone Energy Corp. 4,300 177
-----------
490
OPTICAL & PHOTO 0.2%
--------------------------------------------------------------------------
o Meade Instruments Corp. 1,700 6
o Photronics, Inc. 5,700 100
-----------
106
PAPER & FOREST PRODUCTS 1.5%
--------------------------------------------------------------------------
o Buckeye Technologies, Inc. 6,300 66
o Caraustar Industries, Inc. 5,100 76
Chesapeake Corp. 3,300 76
o Lydall, Inc. 2,000 19
Pope & Talbot, Inc. 2,700 41
Rock-Tennessee Co., Class A 6,300 98
Universal Forest Products, Inc. 2,900 106
Wausau-Mosinee Paper Corp. 9,000 141
-----------
623
PRODUCER GOODS & MANUFACTURING 9.4%
--------------------------------------------------------------------------
o Aeroflex, Inc. 12,500 139
= Albany International Corp.
Class A 5,500 165
Applied Industrial Technologies,
Inc. 3,500 130
= Aptargroup, Inc. 6,300 296
o Astec Industries, Inc. 3,500 51
Barnes Group, Inc. 3,700 96
Curtiss-Wright Corp. 3,800 212
Fedders Corp. 4,000 14
o Gardner Denver, Inc. 3,600 108
(9) Hughes Supply, Inc. 10,800 307
o Ionics, Inc. 4,100 117
JLG Industries, Inc. 7,000 117
Lawson Products, Inc. 1,700 74
Lennox International, Inc. 10,112 146
Libbey, Inc. 2,300 42
o Lone Star Technologies, Inc. 4,800 127
=o Magnetek, Inc. 4,100 25
=o Material Sciences Corp. 2,500 32
o Moog, Inc., Class A 4,500 169
o Oceaneering International, Inc. 4,000 142
Regal Beloit Corp. 4,200 98
Robbins & Myers, Inc. 2,700 56
o The Shaw Group, Inc. 10,300 126
Standex International Corp. 2,200 58
Stewart & Stevenson
Services, Inc. 5,200 88
(3) The Timken Co. 15,600 374
o Triumph Group, Inc. 2,600 89
o Ultratech Stepper, Inc. 4,000 68
Valmont Industries, Inc. 4,300 94
Watsco, Inc. 4,400 125
Watts Water Technologies, Inc.,
Class A 5,600 145
Woodward Governor Co. 1,800 109
-----------
3,939
RAILROAD & SHIPPING 0.4%
--------------------------------------------------------------------------
o Kansas City Southern Railway 10,600 180
REAL PROPERTY 4.3%
--------------------------------------------------------------------------
Capital Automotive Real Estate
Investment Trust 6,500 210
= Colonial Properties Trust 4,700 183
Commercial Net Lease Realty 8,900 171
Entertainment Properties Trust 4,000 159
Gables Residential Trust 5,000 182
Glenborough Realty Trust, Inc. 5,800 122
= Kilroy Realty Corp. 4,800 191
@ Lexington Corp. Properties Trust 8,300 186
42 See financial notes.
SCHWAB INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
=(8) Shurgard Storage Centers, Inc.,
Class A 7,900 314
Sovran Self Storage, Inc. 2,500 98
-----------
1,816
RETAIL 5.9%
--------------------------------------------------------------------------
Burlington Coat Factory Warehouse
Corp. 7,300 161
Casey's General Stores, Inc. 8,700 155
The Cato Corp., Class A 3,500 80
o The Dress Barn, Inc. 5,000 80
Goody's Family Clothing, Inc. 5,300 47
o Great Atlantic & Pacific Tea Co. 6,300 41
o The Gymboree Corp. 5,100 62
Hancock Fabrics, Inc. 2,300 24
o Insight Enterprises, Inc. 8,300 154
=o Jo-Ann Stores, Inc. 3,610 89
o Linens `N Things, Inc. 7,500 181
Longs Drug Stores Corp. 6,500 160
o The Men's Wearhouse, Inc. 6,300 196
Pep Boys-Manny, Moe & Jack 10,000 142
@o School Specialty, Inc. 3,800 155
o ShopKo Stores, Inc. 5,300 91
o Too, Inc. 6,000 132
o United Stationers, Inc. 5,800 258
o Zale Corp. 9,000 257
-----------
2,465
STEEL 2.1%
--------------------------------------------------------------------------
Carpenter Technology Corp. 4,000 190
@o Cleveland-Cliffs, Inc. 2,100 153
Quanex Corp. 2,700 137
Ryerson Tull, Inc. 3,900 64
Steel Dynamics, Inc. 8,500 282
Steel Technologies, Inc. 1,900 45
-----------
871
TELEPHONE 0.3%
--------------------------------------------------------------------------
o Boston Communications Group 3,300 30
o General Communication, Inc.,
Class A 9,100 83
-----------
113
TOBACCO 0.3%
--------------------------------------------------------------------------
DIMON, Inc. 7,400 43
Schweitzer-Mauduit International,
Inc. 2,300 73
-----------
116
TRAVEL & RECREATION 1.3%
--------------------------------------------------------------------------
o Aztar Corp. 5,800 179
Central Parking Corp. 6,100 83
o K2, Inc. 5,800 94
The Marcus Corp. 5,400 115
o Pinnacle Entertainment, Inc. 6,000 88
-----------
559
TRUCKING & FREIGHT 1.7%
--------------------------------------------------------------------------
= Arkansas Best Corp. 4,100 160
USF Corp. 4,600 165
o(2) Yellow Roadway Corp. 8,287 398
-----------
723
UTILITIES: ELECTRIC & GAS 8.2%
--------------------------------------------------------------------------
Allete, Inc. 5,300 180
American States Water Co. 2,800 69
Atmos Energy Corp. 10,600 274
= Avista Corp. 8,100 144
Cascade Natural Gas Corp. 1,600 32
Central Vermont Public Service
Corp. 2,200 48
CH Energy Group, Inc. 2,500 112
Cleco Corp. 8,200 149
o El Paso Electric Co. 8,200 137
=(6) Energen Corp. 6,300 339
= Green Mountain Power Corp. 900 23
The Laclede Group, Inc. 3,500 106
New Jersey Resources Corp. 4,900 201
Northwest Natural Gas Co. 4,400 140
NUI Corp. 2,300 31
Piedmont Natural Gas Co. 6,200 282
o Southern Union Co. 13,575 298
Southwest Gas Corp. 5,600 137
(5) UGI Corp. 8,800 340
UIL Holdings Corp. 2,700 137
@ Unisource Energy Corp. 6,100 150
o Veritas DGC, Inc. 5,500 116
-----------
3,445
See financial notes. 43
SCHWAB INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
SHORT-TERM INVESTMENT
2.8% of net assets
Provident Institutional
TempFund 1,173,087 1,173
SECURITY FACE AMOUNT
RATE, MATURITY DATE ($ x 1,000)
U.S. TREASURY OBLIGATIONS
0.3% of net assets
= U.S. Treasury Bills
1.54%-1.63%, 12/16/04 110 110
END OF INVESTMENTS.
<Caption>
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
COLLATERAL INVESTED FOR SECURITIES ON LOAN
5.4% of net assets
COMMERCIAL PAPER & OTHER CORPORATE
OBLIGATIONS 0.6%
-----------------------------------------------------------------------------
Foreningssparbanken AB
1.83%, 11/15/04 259 259
SHORT-TERM INVESTMENTS 4.8%
-----------------------------------------------------------------------------
Citibank, Time Deposit
1.76%, 11/01/04 39 39
SECURITY AND NUMBER OF SHARES
Institutional Money Market
Trust 1,964,875 1,965
--------
2,004
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN.
In addition to the above, the fund held the following at 10/31/04. All numbers x
1,000 except number of contracts.
FUTURES CONTRACTS
NUMBER OF CONTRACT UNREALIZED
CONTRACTS VALUE GAINS
Russell 2000 Index,
Long expires 12/17/04 4 1,169 19
44 See financial notes.
SCHWAB INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- -------------------------------------------------------------------------------
Investments, at value (Including $2,160
of securities on loan) $41,974 a
Collateral invested for securities on loan 2,263
Receivables:
Fund shares sold 24
Interest 1
Dividends 34
Investments sold 50
Prepaid expenses + 11
----------
TOTAL ASSETS 44,357
LIABILITIES
- -------------------------------------------------------------------------------
Collateral invested for securities on loan 2,263
Payables:
Fund shares redeemed 23
Due to brokers for futures 1
Accrued expenses + 26
----------
TOTAL LIABILITIES 2,313
NET ASSETS
- -------------------------------------------------------------------------------
TOTAL ASSETS 44,357
TOTAL LIABILITIES - 2,313
----------
NET ASSETS $42,044
NET ASSETS BY SOURCE
Capital received from investors 29,516
Net investment income not yet distributed 398
Net realized capital gains 3,292 b
Net unrealized capital gains 8,838 b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$42,044 2,844 $14.78
Unless stated, all numbers x 1,000.
a The fund paid $33,155 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $15,483
Sales/maturities $16,484
The fund's total security transactions with other Schwab Funds during the
period were $3,714.
b These derive from investments and futures.
FEDERAL TAX DATA
-----------------------------------
PORTFOLIO COST $33,513
NET UNREALIZED GAINS AND LOSSES:
Gains $10,645
Losses + (2,184)
---------
$8,461
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $1,034
Long-term capital gains $3,033
CAPITAL LOSSES UTILIZED $826
See financial notes. 45
SCHWAB INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- -------------------------------------------------------------------------------
Dividends $555
Interest 5
Lending of securities + 7
---------
TOTAL INVESTMENT INCOME 567
NET REALIZED GAINS AND LOSSES
- -------------------------------------------------------------------------------
Net realized gains on investments 4,657
Net realized gains on futures contracts + 16
---------
NET REALIZED GAINS 4,673
NET UNREALIZED GAINS AND LOSSES
- -------------------------------------------------------------------------------
Net unrealized gains on investments 1,446
Net unrealized gains on futures contracts + 9
---------
NET UNREALIZED GAINS 1,455
EXPENSES
- -------------------------------------------------------------------------------
Investment adviser and administrator fees 97 a
Transfer agent and shareholder service fees 39 b
Trustees' fees 5 c
Custodian fees 13
Portfolio accounting fees 5
Professional fees 28
Registration fees 15
Shareholder reports 9
Other expenses + 15
---------
Total expenses 226
Expense reduction - 102 d
---------
NET EXPENSES 124
INCREASE IN NET ASSETS FROM OPERATIONS
- -------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 567
NET EXPENSES - 124
---------
NET INVESTMENT INCOME 443
NET REALIZED GAINS 4,673 e
NET UNREALIZED GAINS + 1,455 e
---------
INCREASE IN NET ASSETS FROM OPERATIONS $6,571
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.25% of the first $1
billion and 0.23% of assets beyond that. These fees are paid to Charles Schwab
Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.05% of the
fund's assets. These fees are paid to Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d Includes $92 from the investment adviser (CSIM) and $10 from the transfer
agent and shareholder service agent (Schwab). These reductions reflect a
guarantee by CSIM and Schwab to limit the operating expenses of this fund
through December 31, 2005, to 0.32% of average daily net assets. This limit
excludes interest, taxes and certain non-routine expenses.
e These add up to a net gain on investments of $6,128.
46 See financial notes.
SCHWAB INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income $443 $341
Net realized gains 4,673 833
Net unrealized gains + 1,455 9,158
-------------------------------------
INCREASE IN NET ASSETS
FROM OPERATIONS 6,571 10,332
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income $313 $401 a, b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
Shares sold 637 $8,882 727 $7,355
Shares reinvested 18 238 34 331
Shares redeemed + (667) (9,167) (1,794) (18,743) c
---------------------------------------------
NET TRANSACTIONS
IN FUND SHARES (12) ($47) (1,033) ($11,057)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 2,856 $35,833 3,889 $36,959
Total increase
or decrease + (12) 6,211 (1,033) (1,126) d
----------------------------------------------
END OF PERIOD 2,844 $42,044 2,856 $35,833 e
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 99% of the fund's dividends for the report period qualify
for the dividends-received deduction.
The fund designates $283 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h) (ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for use in preparing
their 2004 income tax return.
b The tax-basis components of distributions paid are:
CURRENT PERIOD
Ordinary income $313
Long-term capital gains $--
PRIOR PERIOD
Ordinary income $401
Long-term capital gains $--
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase.
CURRENT PERIOD $2
PRIOR PERIOD $3
Dollar amounts are net of the redemption proceeds.
d Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
e Includes distributable net investment income in the amount of $398 and $268 at
the end of the current period and prior period, respectively.
See financial notes. 47
SCHWAB INSTITUTIONAL SELECT FUNDS
FINANCIAL NOTES
BUSINESS STRUCTURE OF THE FUNDS
EACH OF THE FUNDS DISCUSSED IN THIS REPORT IS A SERIES OF SCHWAB CAPITAL TRUST,
A NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended. The sidebar shows the funds in this report and their trust.
THE FUNDS OFFER ONE SHARE CLASS. Shares are bought and sold at net asset value
(NAV), which is the price for all outstanding shares. Each share has a par value
of 1/1,000 of a cent, and the trust may issue as many shares as necessary.
FUND OPERATIONS
Most of the funds' investments are described in the fund-by-fund sections
earlier in this report. However, there are certain other fund operations and
policies that may affect a fund's financials, as described below. Other policies
concerning the funds' business operations also are described here.
THE FUNDS PAY DIVIDENDS from net investment income and make distributions from
net capital gains once a year.
THE FUNDS MAY INVEST IN FUTURES CONTRACTS. Futures contracts involve certain
risks because they can be very sensitive to market movements.
One risk is that the price of a futures contract may not move in perfect
correlation with the price of the underlying securities. Another risk is that,
at certain times, it may be impossible for a fund to close out a position in a
futures contract, due to a difference in trading hours or to market conditions
that may reduce the liquidity for a futures contract or its underlying
securities. The potential for losses associated with futures contracts may
exceed amounts recorded in the Statement of Assets and Liabilities.
Because futures carry inherent risks, a fund must give the broker a deposit of
cash and/or securities (the "initial margin") whenever it enters into a futures
contract. The amount of the deposit may vary from one contract to another, but
it is generally a percentage of the contract amount.
Futures are traded publicly on exchanges, and their market value changes daily.
A fund records the change in market value of futures, and also the change in the
amount of margin deposit required ("variation margin").
THE FUNDS MAY ENTER INTO REPURCHASE AGREEMENTS. In a repurchase agreement, a
fund buys a security from another party (usually a financial institution) with
the agreement that it be sold back in the future. The
THE TRUST AND ITS FUNDS
This list shows all of the funds included in Schwab Capital Trust. The funds
discussed in this report are highlighted.
SCHWAB CAPITAL TRUST organized May 7, 1993
Schwab S&P 500 Fund
Schwab Small-Cap Index Fund
Schwab Total Stock Market Index Fund
Schwab International Index Fund
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Laudus U.S. MarketMasters Fund
Laudus Balanced MarketMasters Fund
Laudus Small-Cap MarketMasters Fund
Laudus International MarketMasters Fund
Schwab Core Equity Fund
Schwab Dividend Equity Fund
Schwab Small-Cap Equity Fund
Schwab Hedged Equity Fund
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
SCHWAB INSTITUTIONAL SELECT S&P 500 FUND
SCHWAB INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND
SCHWAB INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND
48
SCHWAB INSTITUTIONAL SELECT FUNDS
date, price and other conditions are all specified when the agreement is
created.
The funds' repurchase agreements will be fully collateralized by U.S. government
securities. All collateral is held by the funds' custodian (or, with tri-party
agreements, the agent's bank) and is monitored daily to ensure that its market
value is at least equal to the repurchase price under the agreement.
THE FUNDS MAY LOAN SECURITIES TO CERTAIN BROKERS, DEALERS AND OTHER FINANCIAL
INSTITUTIONS WHO PAY THE FUNDS NEGOTIATED FEES. The funds receive cash, letters
of credit or U.S. government securities as collateral on these loans. All of the
cash collateral received is reinvested in high quality, short-term investments.
The value of the collateral must be at least 102% of the market value of the
loaned securities as of the first day of the loan, and at least 100% each day
thereafter.
THE FUNDS PAY FEES TO AFFILIATES OF THE INVESTMENT ADVISER FOR VARIOUS SERVICES.
Through their trust, the funds have agreements with Charles Schwab Investment
Management, Inc. (CSIM) to provide investment advisory and administrative
services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent
and shareholder services.
Although these agreements specify certain fees for these services, CSIM and
Schwab have made additional agreements with the funds that may limit the total
expenses charged. The rates and limitations for these fees vary from fund to
fund, and are described in each fund's Statement of Operations.
THE FUNDS MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING RELATED PARTIES. For
instance, a fund may own shares of The Charles Schwab Corporation if that
company is included in its index.
The funds may make direct transactions with certain other SchwabFunds(R) when
practical. When one fund is seeking to sell a security that another is seeking
to buy, an interfund transaction can allow both funds to benefit by reducing
transaction costs. This practice is limited to funds that share the same
investment adviser, trustees and officers.
Pursuant to an exemptive order issued by the SEC, the funds may enter into
interfund borrowing and lending transactions within the SchwabFunds(R). All
loans are for temporary or emergency purposes only. The interest rate charged on
the loan is the average of the overnight repurchase agreement rate and the
short-term bank loan rate. The interfund lending facility is subject to the
oversight and periodic review of the Board of Trustees of the SchwabFunds(R).
TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/OR DIRECTORS OF THE INVESTMENT
ADVISER OR SCHWAB. Federal securities law limits the percentage of such
"interested persons" who may serve on a trust's board, and the trusts were in
compliance with these limitations throughout the report period. The trust did
not pay any of these persons for their service as trustees, but they did pay the
non-interested persons (independent trustees), as noted in each fund's Statement
of Operations.
THE FUNDS MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The funds may obtain
temporary bank loans through the trust to which they belong, to use for meeting
shareholder redemptions or for extraordinary or emergency purposes. The
SchwabFunds have custodian overdraft facilities and line of credit arrangements
of $150 million and $100 million with PNC Bank, N.A. and Bank of America, N.A.,
respectively. The funds pay interest on the amounts they borrow at rates that
are negotiated periodically.
AMOUNT WEIGHTED
OUTSTANDING AVERAGE AVERAGE
AT 10/31/04 BORROWING* INTEREST
FUND ($ x 1,000) ($ x 1,000) RATE* (%)
- ----------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL SELECT
S&P 500 FUND -- 95 1.38
- ----------------------------------------------------------------------------------
SCHWAB INSTITUTIONAL SELECT
SMALL-CAP VALUE
INDEX FUND -- 56 1.38
- ----------------------------------------------------------------------------------
* Based on the number of days for which the borrowing is outstanding.
49
SCHWAB INSTITUTIONAL SELECT FUNDS
THE FUNDS INTEND TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR
REGULATED INVESTMENT COMPANIES. Accordingly, the funds distribute substantially
all of their net investment income and net realized capital gains (if any) to
their respective shareholders each year. As long as a fund meets the tax
requirements, it is not required to pay federal income tax. The net investment
income and net realized capital gains and losses may differ for financial
statement and tax purposes primarily due to differing treatments of losses on
wash sales.
UNDER THE FUNDS' ORGANIZATIONAL DOCUMENTS, ITS OFFICERS AND TRUSTEES ARE
INDEMNIFIED AGAINST CERTAIN LIABILITY ARISING OUT OF THE PERFORMANCE OF THEIR
DUTIES TO THE FUNDS. In addition, in the normal course of business the funds
enter into contracts with their vendors and others that provide general
indemnifications. The funds' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the funds.
However, based on experience, the funds expect the risk of loss to be remote.
ACCOUNTING POLICIES
The following are the main policies the funds use in preparing their financial
statements.
THE FUNDS VALUE THE SECURITIES IN THEIR PORTFOLIOS EVERY BUSINESS DAY. The funds
use the following policies to value various types of securities:
- - SECURITIES TRADED ON AN EXCHANGE OR OVER-THE-COUNTER: valued at the closing
value for the day, or, on days when no closing value has been reported,
halfway between the most recent bid and asked quotes. Securities that are
primarily traded on foreign exchanges are valued at the closing values of such
securities on their respective exchanges with these values then translated
into U.S. dollars at the current exchange rate.
- - SECURITIES FOR WHICH NO MARKET QUOTATIONS ARE READILY AVAILABLE or when a
significant event has occurred between the time of the security's last close
and the time that a fund calculates net asset value: valued at fair value, as
determined in good faith by the fund's investment adviser using guidelines
adopted by the fund's Board of Trustees and the Pricing Committee. Some of the
more common reasons that may necessitate that a security be valued at fair
value include: the security's trading has been halted or suspended; the
security has been de-listed from a national exchange; the security's primary
trading market is temporarily closed at a time when under normal conditions it
would be open; or the security's primary pricing source is not able or willing
to provide a price.
- - FUTURES AND FORWARDS: open contracts are valued at their settlement prices as
of the close of their exchanges (for futures) or at a market value based on
that day's exchange rates (for forwards). When a fund closes out a futures or
forwards position, it calculates the difference between the value of the
position at the beginning and at the end, and records a realized gain or loss
accordingly.
- - SHORT-TERM SECURITIES (60 DAYS OR LESS TO MATURITY): valued at amortized cost.
SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the
security is executed.
DIVIDENDS AND DISTRIBUTIONS FROM PORTFOLIO SECURITIES are recorded on the date
they are effective (the ex-dividend date), although the funds record certain
foreign security dividends on the day they learn of the ex-dividend date.
INCOME FROM INTEREST AND THE ACCRETION OF DISCOUNT is recorded as it accrues.
REALIZED GAINS AND LOSSES from security transactions are based on the identified
costs of the securities involved.
50
SCHWAB INSTITUTIONAL SELECT FUNDS
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES are reported in U.S.
dollars. For assets and liabilities held on a given date, the dollar value is
based on market exchange rates in effect on that date. Transactions involving
foreign currencies, including purchases, sales, income receipts and expense
payments, are calculated using exchange rates in effect on the transaction date.
EXPENSES that are specific to a fund are charged directly to that fund. Expenses
that are common to all funds within a trust generally are allocated among the
funds in proportion to their average daily net assets.
EACH FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND
ACCOUNTING, and is considered a separate entity for tax purposes. Within its
account, each fund also keeps certain assets in segregated accounts, as may be
required by securities law.
THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH ACCOUNTING PRINCIPLES
GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. Notwithstanding this,
shareholders should understand that in order to follow these principles, fund
management has to make estimates and assumptions that affect the information
reported in the financial statements. It's possible that once the results are
known, they may turn out to be different from these estimates.
51
REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF:
Schwab Institutional Select S&P 500 Fund
Schwab Institutional Select Large-Cap Value Index Fund
Schwab Institutional Select Small-Cap Value Index Fund
In our opinion, the accompanying statements of assets and liabilities, including
the portfolio holdings, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of Schwab Institutional Select S&P 500 Fund,
Schwab Institutional Select Large-Cap Value Index Fund and Schwab Institutional
Select Small-Cap Value Index Fund (three of the portfolios constituting Schwab
Capital Trust) (hereafter collectively referred to as the "Funds") at October
31, 2004, the results of each of their operations for the year then ended, and
the changes in their net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at October 31, 2004 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
San Francisco, CA
December 16, 2004
52
FUND TRUSTEES
A fund's Board of Trustees is responsible for protecting the interests of
that fund's shareholders. The tables below give information about the
people who serve as trustees and officers for the SchwabFunds(R),
including the funds covered in this report. Trustees remain in office
until they resign, retire or are removed by shareholder vote. 1
Under the Investment Company Act of 1940, any officer, director, or
employee of Schwab or CSIM is considered an "interested person," meaning
that he or she is considered to have a business interest in Schwab or
CSIM. These individuals are listed as "interested trustees." The
"independent trustees" are individuals who, under the 1940 Act, are not
considered to have a business interest in Schwab or CSIM.
Each of the SchwabFunds (of which there were 51 as of 10/31/04) belongs to
one of these trusts: The Charles Schwab Family of Funds, Schwab
Investments, Schwab Capital Trust or Schwab Annuity Portfolios. Currently
all these trusts have the same trustees and officers. The address for all
trustees and officers is 101 Montgomery Street, San Francisco, CA 94104.
You can find more information about the trustees and officers in the
Statement of Additional Information, which is available free by calling
1-800-435-4000.
INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S);
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
CHARLES R. SCHWAB 2 Chair, Trustee: Chair, CEO, Director, The Charles Schwab Corp., Charles Schwab &
7/29/37 Family of Funds, 1989; Co., Inc.; Chair, Director, Charles Schwab Investment Management,
Investments, 1991; Inc.; Chair, Charles Schwab Holdings (UK); CEO, Director, Charles
Capital Trust, 1993; Schwab Holdings, Inc.; Chair, CEO Schwab (SIS) Holdings, Inc. I,
Annuity Portfolios, 1994. Schwab International Holdings, Inc.; Director, Charles Schwab Bank,
N.A., U.S. Trust Corp., United States Trust Co. of New York, Siebel
Systems (software), Xsign, Inc. (electronic payment systems),
TrustMark, Inc., All Kinds of Minds (education); Trustee, Stanford
University. Until 5/04: Director, The Gap, Inc. (clothing retailer). Until
5/03: Co-CEO, The Charles Schwab Corp. Until 3/02: Director,
Audiobase, Inc. (Internet audio solutions). Until 5/02: Director,
Vodaphone AirTouch PLC (telecommunications). Until 7/01: Director,
The Charles Schwab Trust Co.
1 The SchwabFunds retirement policy requires that independent trustees elected
after January 1, 2000 retire at age 72 or after twenty years of service as a
trustee, whichever comes first. Independent trustees elected prior to January
1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will
retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on
December 31, 2010.
2 In addition to his position with the investment adviser and the distributor,
Mr. Schwab also owns stock of The Charles Schwab Corporation.
53
INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUST OFFICE(S) HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
EVELYN DILSAVER President, CEO EVP, President, Charles Schwab Investment Management, Inc;
5/4/55 (all trusts). Until 7/04: SVP for Development and Distribution, Asset Management
Products and Services Enterprise; Until 6/03: EVP, CFO, Administrative
Officer, U.S. Trust Corp.
- -----------------------------------------------------------------------------------------------------------------------------------
STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Director, Charles Schwab Investment
4/5/55 Officer (all trusts). Management, Inc.; Chief Investment Officer, The Charles Schwab
Trust Co.
- -----------------------------------------------------------------------------------------------------------------------------------
KIMON DAIFOTIS SVP, Chief Investment Since 9/04: Chief Investment Officer, Fixed Income, Charles
7/10/59 Officer (all trusts). Schwab Investment Management, Inc.; Since 6/04: SVP, Charles Schwab
Investment Management, Inc.; Until 6/04: VP, Charles Schwab
Investment Management, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
JEFF MORTIMER SVP, Chief Investment Since 5/04: SVP, Chief Investment Officer, Equities, Charles Schwab
9/29/63 Officer (all trusts). Investment Management, Inc.; Since 6/04: VP, Chief Investment
Officer, Laudus Trust; Until 5/04: VP, Charles Schwab Investment
Management, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
RANDALL FILLMORE Chief Compliance Since 9/04: SVP, Institutional Compliance and Chief Compliance
11/11/60 Officer (all trusts). Officer, Charles Schwab Investment Management, Inc.; Until 9/04:
VP, Charles Schwab & Co., Charles Schwab Investment Management,
Inc.; Until 2002: VP of Internal Audit, Charles Schwab & Co.;
Prior to 2000: PricewaterhouseCoopers.
- -----------------------------------------------------------------------------------------------------------------------------------
KOJI E. FELTON Secretary (all trusts). SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab
3/13/61 Investment Management, Inc. Until 6/98: Branch Chief in Enforcement,
U.S. Securities and Exchange Commission, San Francisco.
- -----------------------------------------------------------------------------------------------------------------------------------
GEORGE PEREIRA 1 Treasurer, Principal Since 11/04: SVP, CFO, Charles Schwab Investment Management,
6/9/64 Financial Officer Inc.; Until 11/04: SVP, Financial Reporting, Charles Schwab & Co., Inc.;
(all trusts). Until 12/99: Chief Financial Officer, Commerzbank Capital Markets;
Until 9/99: Managing Director at the New York Stock Exchange.
1 Elected to his position on the SchwabFunds Board on November 16, 2004.
54
INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
MARIANN BYERWALTER 2000 (all trusts). Chair, JDN Corp. Advisory LLC; Trustee, Stanford University, America
8/13/60 First Cos., (venture capital/fund management), Redwood Trust, Inc.
(mortgage finance), Stanford Hospitals and Clinics, SRI International
(research), PMI Group, Inc. (mortgage insurance), Lucile Packard
Children's Hospital, Laudus Trust, Laudus Variable Insurance Trust.
2001: Special Advisor to the President, Stanford University. Until 2002:
Director, LookSmart, Ltd. (Internet infrastructure). Until 2001: VP,
Business Affairs, CFO, Stanford University.
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD F. DORWARD Family of Funds, 1989; CEO, Dorward & Associates (corporate management, marketing and
9/23/31 Investments, 1991; communications consulting). Until 1999: EVP, Managing Director,
Capital Trust, 1993; Grey Advertising.
Annuity Portfolios,1994.
- ------------------------------------------------------------------------------------------------------------------------------------
WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp. (bio-pharmaceuticals). Trustee, Solectron Corp.
11/22/41 (manufacturing), Airlease Ltd. (aircraft leasing), Mission West
Properties (commercial real estate), Stratex Corp. (network equipment);
Public Governor, Laudus Trust, Laudus Variable Insurance Trust;
Member, executive committee, Pacific Stock & Options Exchange.
Until 2003: Trustee, Tenera, Inc. (services and software). Until 1998:
Dean, Haas School of Business, University of California, Berkeley.
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT G. HOLMES Family of Funds, 1989; Chair, CEO, Director, Semloh Financial, Inc. (international financial
5/15/31 Investments, 1991; services and investment advice).
Capital Trust, 1993;
Annuity Portfolios,1994.
- ------------------------------------------------------------------------------------------------------------------------------------
GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors);
9/28/50 Trustee, Rorento N.V. (investments--Netherlands), Cooper Industries
(electrical products, tools and hardware); Member, audit committee,
Northern Border Partners, L.P. (energy). Until 2002: Director, Pennzoil-
Quaker State Co. (oil and gas).
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD R. STEPHENS Family of Funds, 1989; Managing Partner, D.R. Stephens & Co. (investments). Until 1996:
6/28/38 Investments, 1991; Chair, CEO, North American Trust (real estate investment trust).
Capital Trust, 1993;
Annuity Portfolios, 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL W. WILSEY Family of Funds, 1989; Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate
8/18/43 Investments, 1991; and investments).
Capital Trust, 1993;
Annuity Portfolios, 1994.
55
GLOSSARY
ASSET ALLOCATION The practice of dividing a portfolio among different asset
classes, with each asset class assigned a particular percentage.
ASSET CLASS A group of securities with similar structure and basic
characteristics. Stocks, bonds and cash are the three main examples of asset
classes.
BETA A historical measure of an investment's volatility relative to a market
index (usually the S&P 500(R)). The index is defined as having a beta of 1.00.
Investments with a beta higher than 1.00 have been more volatile than the index;
those with a beta of less than 1.00 have been less volatile.
BOND A security representing a loan from the investor to the issuer. A bond
typically pays interest at a fixed rate (the "coupon rate") until a specified
date (the "maturity date"), at which time the issuer returns the money borrowed
("principal" or "face value") to the bondholder. Because of their structure,
bonds are sometimes called "fixed income securities" or "debt securities."
An individual bond is subject to the credit risk of the issuer. Changes in
interest rates can affect a bond's market value prior to call or maturity. There
is no guarantee that a bond's yield to call or maturity will provide a positive
return over the rate of inflation.
BOND FUND A bond fund is subject to the same credit, interest rate, and
inflation risks as bonds. In addition, a bond fund incurs ongoing fees and
expenses. A bond fund's net asset value will fluctuate with the price of the
underlying bonds and the portfolio turnover activity; return of principal is not
guaranteed.
CAP, CAPITALIZATION See "market cap."
CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an
investment and its value at a later time. If the investment has been sold, the
capital gain or loss is considered a realized gain or loss. If the investment is
still held, the gain or loss is still "on paper" and is considered unrealized.
EARNINGS GROWTH RATE For a mutual fund, the average yearly rate at which the
earnings of the companies in the fund's portfolio have grown, measured over the
past five years.
EARNINGS PER SHARE (EPS) A company's earnings, or net income, for the past 12
months, divided by the number of shares outstanding.
EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to
cover the fund's operating expenses. An expense ratio of 0.50% means that a
fund's expenses amount to half of one percent of its average net assets a year.
MARKET CAP, MARKET CAPITALIZATION The value of a company as determined by the
total value of all shares of its stock outstanding.
MEDIAN MARKET CAP The midpoint of the range of market caps of the stocks held by
a fund. There are different ways of calculating median market cap. With a simple
median, half of the stocks in the fund's portfolio would be larger than the
median, and half would be smaller. With a weighted median (the type that is
calculated for these funds), half of the fund's assets are invested in stocks
that are larger than the median market cap, and half in stocks that are smaller.
NET ASSET VALUE (NAV) The value of one share of a mutual fund. NAV is calculated
by taking the fund's total assets, subtracting liabilities, and dividing by the
number of shares outstanding.
OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual
fund, indicates all shares currently held by investors.
PRICE-TO-BOOK RATIO (P/B) The market price of a company's stock compared with
its "book value." A mutual fund's P/B is the weighted average of the P/B of all
stocks in the fund's portfolio.
PRICE-TO-EARNINGS RATIO (P/E) The market price of a company's stock compared
with earnings over the past year. A mutual fund's P/E is the weighted average of
the P/E of all stocks in the fund's portfolio.
RETURN ON EQUITY (ROE) The average yearly rate of return for each dollar of
investors' money, measured over the past five years.
STOCK A share of ownership, or equity, in the issuing company.
TOTAL RETURN The percentage that an investor would have earned or lost on an
investment in the fund assuming dividends and distributions were reinvested.
WEIGHTED AVERAGE For mutual funds, an average that gives the same weight to each
security as the security represents in the fund's portfolio.
YIELD The income paid out by an investment, expressed as a percentage of the
investment's market value.
56
SchwabFunds(R) offers you a complete family of mutual funds, each one based on a
clearly defined investment approach and using disciplined management strategies.
The list at right shows all currently available SchwabFunds.
Whether you're an experienced investor or just starting out, SchwabFunds can
help you achieve your financial goals. An investor should consider a fund's
investment objectives, risks, and charges and expenses carefully before
investing or sending money. This and other important information can be found in
the fund's prospectus. Please call 1-800-435-4000 for a prospectus and brochure
for any SchwabFund. Please read the prospectus carefully before you invest. This
report must be preceded or accompanied by a current prospectus.
METHODS FOR PLACING ORDERS
The following information outlines how Schwab investors can place orders. If you
are investing through a third-party investment provider, methods for placing
orders may be different.
INTERNET 1
www.schwab.com
SCHWAB BY PHONE(TM) 2
Use our automated voice service or speak to a representative. Call
1-800-435-4000, day or night (for TDD service, call 1-800-345-2550).
TELEBROKER(R)
Use our automated touch-tone phone service at 1-800-272-4922.
MAIL
Write to SchwabFunds at:
P.O. Box 3812
Englewood, CO
80155-3812
When selling or exchanging shares, be sure to include the signatures of at least
one of the persons whose name is on the account.
PROXY VOTING POLICIES, PROCEDURES AND RESULTS
A description of the proxy voting policies and procedures used to determine how
to vote proxies on behalf of the funds is available without charge, upon
request, by visiting Schwab's web site at www.schwab.com/schwabfunds, the SEC's
web site at http://www.sec.gov, or by contacting SchwabFunds at 1-800-435-4000.
Information regarding how a fund voted proxies relating to portfolio securities
during the most recent twelve-month period ended June 30 is available, without
charge, by visiting Schwab's web site at www.schwab.com/schwabfunds or the SEC's
website at http://www.sec.gov.
1 Shares of Sweep Investments(TM) may not be purchased directly over the
Internet.
2 Orders placed in person or through a telephone representative may be subject
to a service fee payable to Schwab.
THE SCHWABFUNDS FAMILY(R)
STOCK FUNDS
Schwab S&P 500 Fund
Schwab 1000 Fund(R)
Schwab Small-Cap Index Fund(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab(R) Institutional Select(R) Funds
Schwab(R) Institutional Select(R) S&P 500 Fund
Schwab(R) Institutional Select(R) Large-Cap Value Index Fund
Schwab(R) Institutional Select(R) Small-Cap Value Index Fund
ASSET ALLOCATION FUNDS
Schwab MarketTrack Portfolios(R)
Schwab MarketTrack All Equity Portfolio(TM)
Schwab MarketTrack Growth Portfolio(TM)
Schwab MarketTrack Balanced Portfolio(TM)
Schwab MarketTrack Conservative Portfolio(TM)
BOND FUNDS
Schwab YieldPlus Fund(R)
Schwab Short-Term Bond Market Fund(TM)
Schwab Total Bond Market Fund(TM)
Schwab GNMA Fund(TM)
Schwab Short/Intermediate Tax-Free Bond Fund(TM)
Schwab Long-Term Tax-Free Bond Fund(TM)
Schwab California Short/Intermediate
Tax-Free Bond Fund(TM)
Schwab California Long-Term Tax-Free Bond Fund(TM)
SCHWAB MONEY FUNDS
Schwab offers an array of money market funds that seek high current income
consistent with safety and liquidity. 3 Choose from taxable or tax-advantaged
alternatives. Many can be linked to your Schwab account to "sweep" cash balances
automatically, subject to availability, when you're between investments. Or, for
your larger cash reserves, choose one of our Value Advantage Investments(R).
3 Investments in money market funds are neither insured nor guaranteed by the
Federal Deposit Insurance Corporation (FDIC) or any other government agency
and, although they seek to preserve the value of your investment at $1 per
share, it is possible to lose money.
[CHARLES SCHWAB LOGO]
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc. (Schwab)
FUNDS
SchwabFunds(R)
P.O. Box 3812, Englewood, CO 80155-3812
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
(C)2004 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC
Printed on recycled paper.
REG14310-05
FUNDS USING SCHWAB EQUITY RATINGS(R)
ANNUAL REPORT
October 31, 2004
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
[CHARLES SCHWAB LOGO]
The power of Schwab Equity Ratings(R).
The convenience and diversification of mutual funds.
IN THIS REPORT
Management's Discussion ............................................... 2
The president of SchwabFunds(R) and the funds' managers take
a look at the factors that shaped fund performance during the
report period.
Performance at a Glance ................... 6
Schwab Core Equity Fund(TM)
Ticker Symbol: SWANX
The fund seeks long-term capital growth.
Performance and Fund Facts ................ 8
Financial Statements ...................... 28
Schwab Dividend Equity Fund(TM)
Investor Shares: SWDIX
Select Shares(R): SWDSX
The fund seeks current income and capital appreciation.
Performance and Fund Facts ................ 10
Financial Statements ...................... 36
Schwab Small-Cap Equity Fund(TM)
Investor Shares: SWSIX
Select Shares: SWSCX
The fund seeks long-term capital growth.
Performance and Fund Facts ................ 13
Financial Statements ...................... 44
Schwab Hedged Equity Fund(TM)
Ticker Symbol: SWHEX
The fund's principal investment objective is long-term
capital appreciation over market cycles with lower volatility
than the broad equity market.
Performance and Fund Facts ................ 16
Financial Statements ...................... 53
Communications Focus Fund
Ticker Symbol: SWCFX
The fund's goal is to seek long-term capital growth.
Performance and Fund Facts ................ 18
Financial Statements ...................... 65
Financial Services Focus Fund
Ticker Symbol: SWFFX
The fund's goal is to seek long-term capital growth.
Performance and Fund Facts ................ 20
Financial Statements ...................... 71
Health Care Focus Fund
Ticker Symbol: SWHFX
The fund's goal is to seek long-term capital growth.
Performance and Fund Facts ................ 22
Financial Statements ...................... 77
Technology Focus Fund
Ticker Symbol: SWTFX
The fund's goal is to seek long-term capital growth.
Performance and Fund Facts ................ 24
Financial Statements ...................... 83
Fund Expenses ......................................................... 26
Financial Notes ....................................................... 89
Fund Trustees ......................................................... 95
Glossary .............................................................. 98
Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM)
Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab).
[PHOTO OF CHARLES SCHWAB]
Charles Schwab
Chairman
FROM THE CHAIRMAN
Dear Shareholder:
As we get ready for 2005, I want to remind you that you might want to add one
more item to your list of New Year's resolutions--to review and, if necessary,
rebalance your investment portfolio. After all, staying on track is as important
in investing as it is in any other part of life. No matter whether it's a good
or bad investment climate, you need to make sure that you own a diversified mix
of investments and that your asset allocation matches your individual goals,
time frame and tolerance for risk.
One efficient way to be diversified is by owning a broad-based mutual fund.
Equity mutual funds also can help you to diversify the stock side of your
portfolio. While our experienced portfolio managers adhere to each fund's
objective, it still is important to review your portfolio to make sure the
holdings in your funds don't overlap and you're not overconcentrated in one
asset class.
On a final note, I'm very happy to announce that Evelyn Dilsaver has been named
CEO and President of SchwabFunds(R). Although new to the position, Evelyn is no
stranger to SchwabFunds, having been an officer in several other capacities at
Schwab. Her broad experience in product creation, coupled with a comprehensive
understanding of your financial needs and her commitment to you, make her the
ideal candidate for her new role.
Thank you for investing with us.
Sincerely,
/s/ Charles Schwab
MANAGEMENT'S DISCUSSION for the year ended October 31, 2004
[PHOTO OF EVELYN DILSAVER]
EVELYN DILSAVER is President and CEO of Charles Schwab Investment Management,
Inc. and is president of each of the funds covered in this report. She joined
the firm in 1992 and has held a variety of executive positions at Schwab.
Dear Shareholder:
I am very excited about my new role as President and CEO of SchwabFunds(R). I
believe that my experience at Schwab has prepared me well for this role, as each
position has been focused on meeting the needs of our clients.
While SchwabFunds equity funds turned in solid results during the report period,
I am particularly pleased with the performance of the funds that use Schwab
Equity Ratings(R) as part of their investment strategies. We are excited about
these products and the value they offer to our shareholders.
Sharing this excitement and our commitment to our shareholders is portfolio
manager Vivienne Hsu, who joined SchwabFunds on August 30, 2004. Vivienne is
responsible for the day-to-day co-management of the equity funds using Schwab
Equity Ratings(R). She holds both an MBA and a Chartered Financial Analyst(R)
designation, and has more than 11 years experience in investment management. Her
understanding of each fund's objective mirrors the rest of the SchwabFunds
portfolio group, meaning this change should be seamless to you.
I look forward to serving you in my new role. I also want to remind you that
your trust is very important to us, and I will do all I can to earn and maintain
that trust. Thank you for investing in SchwabFunds.
Sincerely,
/s/ Evelyn Dilsaver
2 Funds Using Schwab Equity Ratings
The strength of the market early in the period, combined with strong
second- and third-quarter valuations and earnings resulted in a positive
showing for equities, as measured by the S&P 500(R) Index.
THE INVESTMENT ENVIRONMENT AND THE FUNDS
THE ENCOURAGING ECONOMIC NEWS THAT WAS REPORTED TOWARD THE END OF 2003 CONTINUED
TO IMPROVE INTO 2004. Businesses added to their inventories, factory orders rose
and production gained some strength. Retail sales continued to rise and higher
commodity prices were holding. Mortgage refinancing activity, while still
significant, waned as mortgage rates inched slightly upward. And finally, the
last piece of the economic puzzle--job growth--began to pick up some steam.
In fact, aside from a "soft patch" in early summer, the economy was clicking on
all cylinders.
With the economic recovery more broad-based, investors, who only a year ago
feared deflation, started to worry about inflation. Their inflationary concerns
were based on surging oil prices, which had hit an all-time high amid fears of
supply interruptions. And while commodity prices moderated somewhat later in the
report period, previous increases started to show up in broad measures of
inflation. Labor costs also were beginning to rise. Nonetheless, the Federal
Reserve (the Fed) continued to hold the Fed funds rate near a 45-year low until
June 2004.
While third-quarter GDP moved in the right direction, up to an annualized 3.7%
from 3.3% in second quarter, higher commodity prices had effectively eroded many
consumers' purchasing power. Geopolitical
ASSET CLASS PERFORMANCE COMPARISON % returns during the report period
This graph compares the performance of various asset classes during the report
period. Final performance figures for the period are in the key below.
9.42% S&P 500(R) INDEX: measures U.S. large-cap stocks
11.73% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
18.84% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in
Europe, Australasia and the Far East
5.53% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond market
[LINE GRAPH]
LEHMAN
RUSSELL BROTHERS
S&P 500(R) 2000(R) MSCI-EAFE(R) U.S. AGGREGATE
INDEX INDEX INDEX BOND INDEX
31-Oct-03 0.00 0.00 0.00 0.00
07-Nov-03 0.29 2.82 0.78 -0.63
14-Nov-03 0.08 0.94 1.80 0.61
21-Nov-03 -1.33 -0.38 0.15 0.86
28-Nov-03 0.88 3.55 2.22 0.24
05-Dec-03 1.24 2.14 4.70 0.95
12-Dec-03 2.48 3.80 5.04 0.97
19-Dec-03 3.90 3.68 6.46 1.50
26-Dec-03 4.59 5.21 7.84 1.53
02-Jan-04 5.85 6.40 10.98 0.81
09-Jan-04 7.16 9.14 13.86 2.16
16-Jan-04 8.89 12.04 12.31 2.46
23-Jan-04 9.07 13.13 15.10 2.33
30-Jan-04 8.12 10.24 11.77 2.07
06-Feb-04 9.26 10.89 13.33 2.35
13-Feb-04 9.63 11.12 15.41 2.80
20-Feb-04 9.49 10.13 15.13 2.64
27-Feb-04 9.62 11.23 14.35 3.18
05-Mar-04 10.80 13.90 16.17 3.85
12-Mar-04 7.38 10.77 11.07 4.12
19-Mar-04 6.36 8.49 13.10 4.07
26-Mar-04 6.20 8.91 12.52 3.88
02-Apr-04 9.47 14.78 16.39 2.72
09-Apr-04 9.27 13.73 16.44 2.62
16-Apr-04 8.83 10.99 15.04 2.03
23-Apr-04 9.42 12.39 14.61 1.51
30-Apr-04 6.27 6.54 12.39 1.25
07-May-04 5.47 4.43 10.88 -0.19
14-May-04 5.27 3.54 6.99 0.03
21-May-04 5.09 3.93 9.59 0.21
28-May-04 7.73 8.24 12.63 0.84
04-Jun-04 7.95 8.15 12.87 0.36
11-Jun-04 9.32 8.43 13.42 0.32
18-Jun-04 9.21 8.73 14.66 0.78
25-Jun-04 9.18 12.01 15.45 1.18
02-Jul-04 8.35 11.13 15.27 2.16
09-Jul-04 7.18 7.52 15.10 2.22
16-Jul-04 6.10 5.96 14.50 2.69
23-Jul-04 4.64 2.87 10.84 2.41
30-Jul-04 6.19 5.20 11.50 2.42
06-Aug-04 2.58 -0.81 10.63 3.63
13-Aug-04 2.74 -1.21 9.57 3.72
20-Aug-04 6.01 4.63 11.08 3.79
27-Aug-04 6.95 5.36 12.29 3.89
03-Sep-04 7.56 6.26 12.42 3.70
10-Sep-04 8.58 8.88 14.40 4.31
17-Sep-04 9.07 9.54 14.32 4.59
24-Sep-04 7.31 8.18 13.88 4.93
01-Oct-04 9.41 11.89 16.43 4.38
08-Oct-04 8.56 10.13 17.91 4.79
15-Oct-04 7.23 8.95 16.46 5.20
22-Oct-04 6.03 8.64 17.65 5.54
29-Oct-04 9.42 11.73 18.84 5.53
31-Oct-04 9.42 11.73 18.84 5.53
These figures assume dividends and distributions were reinvested. Index figures
do not include trading and management costs, which would lower performance.
Indices are unmanaged and you cannot invest in them directly. Remember that past
performance is not an indication of future results. Data source: Charles Schwab
& Co., Inc.
Funds Using Schwab Equity Ratings 3
MANAGEMENT'S DISCUSSION continued
[PHOTO OF JEFFREY MORTIMER, VIVIENNE HSU AND LARRY MANO]
JEFFREY MORTIMER, CFA, at right, senior vice president and chief investment
officer, equities, of the investment adviser is responsible for the overall
management of each of the funds. Prior to joining the firm in October 1997, he
worked for more than nine years in asset management.
VIVIENNE HSU, CFA, at left, vice president and senior equities portfolio manager
of the investment adviser, is responsible for the day-to-day co-management of
each of the funds. Prior to joining the firm in August 2004, she worked for more
than 11 years in asset management and quantitative analysis.
LARRY MANO, in center, a director and a portfolio manager, is responsible for
the day-to-day co-management of each of the funds. Prior to joining the firm in
1998, he worked for 20 years in equity management.
events also had wreaked havoc on oil markets and, after a brief decline in the
price of oil following OPEC's decision to boost production, a confluence of
supply concerns and robust global demand pushed crude to new highs. In addition
to these issues, daily headlines about terrorism and the fierce run for the
White House all added up to an uncomfortable sense of uncertainty, keeping many
investors on the sidelines.
Despite all these concerns, which escalated toward the end of the report period,
the strength of the market early in the period, combined with strong second- and
third-quarter valuations and earnings resulted in a positive showing for
equities. More specifically, the S&P 500(R) Index was up 9.42% for the 12-month
report period, while the Russell 2000(R) Index was up 11.73%. In terms of style,
value edged out growth early in the period and gained momentum, significantly
outperforming growth at the end of the period.
For most of the 12-month report period, Schwab Equity Ratings(R), which are
designed to identify companies expected to outperform or underperform the
equities market, performed as expected, with the A- and B-rated stocks
outperforming the D- and F-rated ones. There was a period of time, however, at
the very beginning of the period and then, again, toward the middle, when
extremely high-risk stocks with poor fundamentals led the market. Many of these
lower-rated companies had received D or F ratings. Despite these small setbacks,
all eight funds powered by Schwab Equity Ratings(R) had positive returns, with
half of them enjoying double-digit returns over the 12 months.
THE SCHWAB CORE EQUITY FUND outperformed its benchmark, up 9.57% vs. the S&P
500(R) Index, which was up 9.42%. The fund's value tilt in a market that favored
value helped performance. The sectors that had the largest positive impact
relative to the benchmark were Health Care and
Schwab Equity Ratings(R) are produced by the Schwab Center for Investment
Research(R).
4 Funds Using Schwab Equity Ratings
[PHOTO OF KIM DAIFOTIS]
KIM DAIFOTIS, CFA, a senior vice president and chief investment officer, fixed
income, of the investment adviser, is responsible for overall management of
preferred stocks and convertible securities for the Dividend Equity Fund. He
joined the firm in 1997, and has worked in fixed-income asset management and
research since 1982.
Consumer Staples. Stocks that performed well in these sectors included
UnitedHealth Group, Inc. and Kellogg Co. Conversely, sectors that
underperformed relative to the benchmark were Industrials and Information
Technology, with General Electric Co. and Intel Corp. negatively affecting the
fund's performance over the report period.
THE SCHWAB DIVIDEND EQUITY FUND was up 17.00%, well above its benchmark, the S&P
500(R) Index, which returned 9.42% over the report period. The fund's natural
value tilt was helped, in part, by the market favoring value across all
market-cap segments. While all sectors had positive returns, good stock
selection in Consumer Staples, Consumer Discretionary, Financials and Utilities
boosted the fund's returns. Underweighting Information Technology also proved
positive for the fund.
THE SCHWAB SMALL-CAP EQUITY FUND had an excellent year and outperformed its
benchmark, the S&P SmallCap 600 Index, by 4.96% for the 12-month report period.
The fund benefited from small-cap equities outperforming large-cap. The best
performing sectors were Consumer Discretionary and Health Care. Strong stocks
within these sectors included: Deckers Outdoor Corp., a designer of specialty
footwear; and Mine Safety Appliances Co., a health-care equipment manufacturer.
The weaker sectors, relative to the benchmark, were Materials and
Telecommunications, with Time Warner Telecom Inc.'s performance hurting returns.
THE SCHWAB HEDGED EQUITY FUND outperformed its benchmark, the S&P 500(R) Index,
by 3.42% for the 12-month period. The fund, which uses Schwab Equity Ratings(R),
generally selects its long positions from stocks that are rated A or B and
selects its short positions from stocks that are rated D or F. The fund, which
had a value tilt, benefited from the market favoring value during the report
period. Small-cap stocks led the way for much of the fiscal year, helping on the
long side, but hurting on the short side. Nonetheless, good stock selection in
both the long and short side of the fund more than offset the negative impact.
Importantly, in addition to outperforming its benchmark, the fund did it with
less volatility during the report period than its benchmark.
Schwab Equity Ratings(R) are produced by the Schwab Center for Investment
Research(R).
Small company stocks are subject to greater volatility than other asset
categories.
The Hedged Equity Fund's long positions can decline in value at the same time
the value of its shorted stocks increases, thereby increasing the potential for
loss. The potential loss associated with short positions is much greater than
the original value of the securities sold. The use of borrowing and short sales
may cause the fund to have higher expenses than those of equity funds that do
not use such techniques.
Funds Using Schwab Equity Ratings 5
MANAGEMENT'S DISCUSSION continued
PERFORMANCE AT A GLANCE
Total return for the 12 months ended 10/31/04
THE PERFORMANCE DATA QUOTED REPRESENTS PAST
PERFORMANCE. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL
VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN
PERFORMANCE DATA QUOTED. TO OBTAIN PERFORMANCE
INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
SCHWAB CORE EQUITY FUND(TM) ........... 9.57%
Benchmark ............................. 9.42%
Fund Category 1 ....................... 7.89%
Performance Details ................... page 8
SCHWAB DIVIDEND EQUITY FUND(TM)
Investor Shares ....................... 17.00%
Select Shares(R) ...................... 17.07%
Benchmark ............................. 9.42%
Fund Category 1 ....................... 12.14%
Performance Details ................... pages 10-11
SCHWAB SMALL-CAP EQUITY FUND(TM)
Investor Shares ....................... 21.74%
Select Shares ......................... 22.00%
Benchmark ............................. 16.78%
Fund Category 1 ....................... 13.51%
Performance Details ................... pages 13-14
SCHWAB HEDGED EQUITY FUND(TM) ......... 12.84%
Benchmark ............................. 9.42%
Fund Category 1 ....................... 7.40%
Performance Details ................... page 16
More specifically, underweights in the Pharmaceutical and Semiconductor sectors
helped the fund, although being underweight in the torrid Energy sector
detracted somewhat from performance. Some stocks that did well on the long side
included: Peabody Energy Corp. (Materials), Landstar Systems Inc
(Transportation) Cytyc Corp. (Health Care) and Verisign, Inc. (Software and
Services).
THE COMMUNICATIONS FOCUS FUND returned 9.14% for the year, yet underperformed
its benchmark, the S&P 1500 SuperComposite Telecommunication Services Sector
Index, which was up 20.68% for the 12-month period ending October 31, 2004. The
benchmark was highly concentrated in several large stocks, which performed well.
The fund, powered by Schwab Equity Ratings(R) methodology was much more
diversified and included media industry stocks, which ultimately benefited the
fund, although not enough to match the benchmark's strong showing. Within the
Telecommunications sector, another industry that did well was wireless
telecommunications. The best performers within this industry were Arch Wireless
and Sprint PCS. Conversely, the worst performing industry was Diversified
Telecommunications Services, with Primus Telecommunications and Time Warner
Telecom Inc. negatively impacting returns.
THE FINANCIAL SERVICES FOCUS FUND was up 12.39% for the year, outperforming the
S&P 1500 SuperComposite Financial Services Index by 3.35%. For the 12-month
period ending October 31, 2004, banks led the Financial Services sector, while
diversified financials and insurance trailed. The market values of many
insurance companies declined in September when the Marsh & McLennan debacle hit
the news and New York Attorney General Eliot Spitzer initiated reviews of the
industry's business practices. The fund's outperformance was primarily due to
Schwab Equity Ratings'(R) rigorous stock evaluation in the insurance and
diversified financials industry groups. The fund benefited from positions in
First Bancorp, Inc., Countrywide Financial Corp., Fidelity National Financial,
Inc. and Franklin Resources, Inc. Also, low Schwab Equity Ratings(R) led
management to either hold a small position or completely avoid the
underperforming Fifth Third Bancorp, Inc., Citigroup and Marsh & McLennan.
All fund and index figures on this page assume dividends and distributions
were reinvested. Index figures do not include trading and management costs,
which would lower performance. Indices are unmanaged, and you cannot invest in
them directly.
Expenses may be partially absorbed by CSIM and Schwab. Without these
reductions, the funds' total returns would have been lower. Performance does
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares.
Schwab Equity Ratings(R) are produced by the Schwab Center for Investment
Research(R).
1 Source for category information: Morningstar, Inc.
6 Funds Using Schwab Equity Ratings
PERFORMANCE AT A GLANCE
Total return for the 12 months ended 10/31/04
THE PERFORMANCE DATA QUOTED REPRESENTS PAST
PERFORMANCE. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL
VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN
PERFORMANCE DATA QUOTED. TO OBTAIN PERFORMANCE
INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
COMMUNICATIONS
FOCUS FUND ................................ 9.14%
Benchmark ................................. 20.68%
Fund Category 1 ........................... 18.37%
Performance Details ....................... page 18
FINANCIAL SERVICES
FOCUS FUND ................................ 12.39%
Benchmark ................................. 9.04%
Fund Category 1 ........................... 10.48%
Performance Details ....................... page 20
HEALTH CARE FOCUS FUND .................... 27.88%
Benchmark ................................. 2.65%
Fund Category 1 ........................... 6.16%
Performance Details ....................... page 22
TECHNOLOGY FOCUS FUND ..................... 2.31%
Benchmark ................................. -1.63%
Fund Category 1 ........................... -3.41%
Performance Details ....................... page 24
THE HEALTH CARE FOCUS FUND was the best performing of the four Focus funds,
topping its benchmark, the S&P 1500 SuperComposite Health Care Sector Index, by
an impressive 25.23%, returning 27.88% for the 12-month period. The index is
comprised of two industry groups: Health Care Equipment, and Pharmaceuticals and
Biotechnology. Overweighting Health Care Equipment and underweighting
Pharmaceuticals and Biotechnology accounted for about one-third of the fund's
outperformance. The other two-thirds can be attributed to strong stock selection
within each group. We looked beyond the benchmark to find winners such as Ventiv
Health, Inc., Nutraceutical International, Stewart Enterprises, Inc. and Third
Wave Technologies. Avoiding names such as Cardinal Health, Pfizer Inc., Amgen,
Wyeth and Bristol Myers Squibb Co. helped the fund avoid the downdraft in drug
makers which was set off by Merck & Co.'s withdrawal of the arthritis drug Vioxx
on September 30th.
THE TECHNOLOGY FOCUS FUND returned 2.31% and topped the S&P 1500 SuperComposite
Technology Sector Index by 3.94%. The primary reason for this outperformance was
the underweighting of the Semiconductor sector and the overweighting of Software
and Services. We took a below-market weight position in Intel Corp., which
turned out to benefit the fund. SS&C Technologies Inc., Epicor Software and
Akamai Technologies were all stocks management selected outside the benchmark
that proved beneficial. Top-performing hardware stocks included Plantronics,
Inc. and Digi International, Inc. The year's top winner, Autodesk, Inc., helped
offset losses in Synopsys, Inc. and Sybase, Inc. On the negative side, the fund
missed stellar returns posted by Yahoo and Apple Computer, Inc., and a positive
showing posted by Microsoft Corp.
All fund and index figures on this page assume dividends and distributions
were reinvested. Index figures do not include trading and management costs,
which would lower performance. Indices are unmanaged, and you cannot invest in
them directly.
Expenses may be partially absorbed by CSIM and Schwab. Without these
reductions, the funds' total returns would have been lower. Performance does
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares.
Since each of the Focus Funds focuses its investments on companies involved in
a specific sector, these funds may involve a greater degree of risk than an
investment in other mutual funds with greater diversification.
Schwab Equity Ratings(R) are produced by the Schwab Center for Investment
Research(R). Nothing in this report represents a recommendation of a security
by the investment adviser. Manager views and portfolio holdings may have
changed since the report date.
1 Source for category information: Morningstar, Inc.
Funds Using Schwab Equity Ratings 7
SCHWAB CORE EQUITY FUND(TM)
PERFORMANCE as of 10/31/04
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund with its benchmark and Morningstar
category.
[BAR CHART]
Fund Category:
Benchmark: MORNINGSTAR
S&P 500(R) LARGE-CAP
FUND INDEX BLEND
1 YEAR 9.57% 9.42% 7.89%
5 YEARS -2.48% -2.21% -1.72%
SINCE INCEPTION: 7/1/96 8.47% 8.12% 6.72%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with a similar investment in its benchmark.
$19,705 FUND
$19,185 S&P 500(R) INDEX
[LINE GRAPH]
S&P 500(R)
FUND INDEX
01-Jul-96 $10,000 $10,000
31-Jul-96 $ 9,690 $ 9,558
31-Aug-96 $ 9,880 $ 9,760
30-Sep-96 $10,620 $10,308
31-Oct-96 $11,010 $10,593
30-Nov-96 $11,640 $11,393
31-Dec-96 $11,368 $11,168
31-Jan-97 $11,959 $11,865
28-Feb-97 $11,908 $11,958
31-Mar-97 $11,287 $11,468
30-Apr-97 $12,081 $12,152
31-May-97 $12,722 $12,890
30-Jun-97 $13,272 $13,468
31-Jul-97 $14,462 $14,539
31-Aug-97 $13,821 $13,724
30-Sep-97 $14,646 $14,475
31-Oct-97 $13,964 $13,992
30-Nov-97 $14,676 $14,640
31-Dec-97 $14,963 $14,891
31-Jan-98 $15,054 $15,057
28-Feb-98 $16,155 $16,142
31-Mar-98 $16,801 $16,969
30-Apr-98 $16,949 $17,140
31-May-98 $16,620 $16,845
30-Jun-98 $17,448 $17,529
31-Jul-98 $17,198 $17,343
31-Aug-98 $14,555 $14,839
30-Sep-98 $15,565 $15,790
31-Oct-98 $16,529 $17,074
30-Nov-98 $17,561 $18,109
31-Dec-98 $19,158 $19,152
31-Jan-99 $20,138 $19,952
28-Feb-99 $19,134 $19,332
31-Mar-99 $19,961 $20,105
30-Apr-99 $20,882 $20,883
31-May-99 $20,493 $20,390
30-Jun-99 $21,910 $21,522
31-Jul-99 $21,189 $20,850
31-Aug-99 $21,154 $20,746
30-Sep-99 $20,658 $20,177
31-Oct-99 $22,347 $21,455
30-Nov-99 $22,808 $21,891
31-Dec-99 $24,474 $23,180
31-Jan-00 $23,416 $22,017
29-Feb-00 $24,296 $21,600
31-Mar-00 $26,222 $23,712
30-Apr-00 $25,087 $22,998
31-May-00 $24,232 $22,527
30-Jun-00 $24,844 $23,083
31-Jul-00 $24,309 $22,723
31-Aug-00 $25,839 $24,135
30-Sep-00 $24,117 $22,860
31-Oct-00 $23,633 $22,764
30-Nov-00 $22,000 $20,971
31-Dec-00 $22,589 $21,073
31-Jan-01 $22,575 $21,821
28-Feb-01 $20,549 $19,831
31-Mar-01 $19,250 $18,574
30-Apr-01 $20,507 $20,017
31-May-01 $20,577 $20,151
30-Jun-01 $20,228 $19,662
31-Jul-01 $19,711 $19,469
31-Aug-01 $18,342 $18,250
30-Sep-01 $17,071 $16,776
31-Oct-01 $17,504 $17,096
30-Nov-01 $18,495 $18,407
31-Dec-01 $18,547 $18,569
31-Jan-02 $18,280 $18,298
28-Feb-02 $17,887 $17,945
31-Mar-02 $18,660 $18,620
30-Apr-02 $17,816 $17,491
31-May-02 $17,788 $17,362
30-Jun-02 $16,692 $16,126
31-Jul-02 $15,611 $14,870
31-Aug-02 $15,737 $14,966
30-Sep-02 $14,290 $13,339
31-Oct-02 $15,301 $14,513
30-Nov-02 $15,667 $15,368
31-Dec-02 $14,971 $14,466
31-Jan-03 $14,546 $14,087
28-Feb-03 $14,221 $13,876
31-Mar-03 $14,504 $14,010
30-Apr-03 $15,509 $15,165
31-May-03 $16,343 $15,964
30-Jun-03 $16,556 $16,168
31-Jul-03 $16,881 $16,453
31-Aug-03 $17,164 $16,774
30-Sep-03 $17,051 $16,596
31-Oct-03 $17,985 $17,535
30-Nov-03 $18,296 $17,689
31-Dec-03 $19,192 $18,616
31-Jan-04 $19,391 $18,959
29-Feb-04 $19,605 $19,222
31-Mar-04 $19,548 $18,932
30-Apr-04 $19,220 $18,635
31-May-04 $19,420 $18,890
30-Jun-04 $19,876 $19,257
31-Jul-04 $19,149 $18,619
31-Aug-04 $19,192 $18,694
30-Sep-04 $19,505 $18,896
31-Oct-04 $19,705 $19,185
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
8 Funds Using Schwab Equity Ratings
SCHWAB CORE EQUITY FUND
FUND FACTS as of 10/31/04
STYLE ASSESSMENT 1
[GRAPHIC]
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 106
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $53,077
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 21.0
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 3.1
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 86%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2 $2,500
($1,000 for retirement and custodial accounts)
- --------------------------------------------------------------------------------
TOP HOLDINGS 3
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) UST, INC. 5.1%
- --------------------------------------------------------------------------------
(2) THE BOEING CO. 4.9%
- --------------------------------------------------------------------------------
(3) EXXON MOBIL CORP. 4.2%
- --------------------------------------------------------------------------------
(4) TIME WARNER, INC. 3.4%
- --------------------------------------------------------------------------------
(5) WEYERHAEUSER CO. 3.3%
- --------------------------------------------------------------------------------
(6) UNITEDHEALTH GROUP, INC. 3.0%
- --------------------------------------------------------------------------------
(7) METLIFE, INC. 2.7%
- --------------------------------------------------------------------------------
(8) VERIZON COMMUNICATIONS, INC. 2.6%
- --------------------------------------------------------------------------------
(9) THE PROGRESSIVE CORP. 2.6%
- --------------------------------------------------------------------------------
(10) EMERSON ELECTRIC CO. 2.4%
- --------------------------------------------------------------------------------
TOTAL 34.2%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
26.2% CONSUMER NON-DURABLES
18.5% TECHNOLOGY
14.9% FINANCE
11.5% UTILITIES
7.8% MATERIALS & SERVICES
7.5% ENERGY
4.9% CAPITAL GOODS
4.2% TRANSPORTATION
3.5% CONSUMER DURABLES
1.0% OTHER
Portfolio holdings may have changed since the report date.
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/04, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 Please see prospectus for further detail and eligibility requirements.
3 This list is not a recommendation of any security by the investment adviser.
Funds Using Schwab Equity Ratings 9
SCHWAB DIVIDEND EQUITY FUND(TM)
INVESTOR SHARES PERFORMANCE as of 10/31/04
TOTAL RETURNS 1, 2
This chart compares performance of the fund's Investor Shares with a benchmark
and the fund's Morningstar category.
[BAR CHART]
Fund Category:
Fund: Benchmark: MORNINGSTAR
INVESTOR S&P 500(R) LARGE-CAP
SHARES INDEX VALUE
1 YEAR 17.00% 9.42% 12.14%
SINCE INCEPTION: 9/2/03 20.20% 12.16% 13.74%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund's Investor Shares, compared with a similar investment in
a benchmark.
$12,402 INVESTOR SHARES
$11,437 S&P 500(R) INDEX
[LINE GRAPH]
INVESTOR S&P 500(R)
SHARES INDEX
02-Sep-03 $10,000 $10,000
30-Sep-03 $ 9,900 $ 9,894
31-Oct-03 $10,600 $10,454
30-Nov-03 $10,850 $10,546
31-Dec-03 $11,417 $11,099
31-Jan-04 $11,559 $11,303
29-Feb-04 $11,851 $11,460
31-Mar-04 $11,860 $11,287
30-Apr-04 $11,667 $11,110
31-May-04 $11,820 $11,262
30-Jun-04 $12,025 $11,480
31-Jul-04 $11,902 $11,100
31-Aug-04 $12,220 $11,145
30-Sep-04 $12,299 $11,265
31-Oct-04 $12,402 $11,437
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
10 Funds Using Schwab Equity Ratings
SCHWAB DIVIDEND EQUITY FUND
SELECT SHARES(R) PERFORMANCE as of 10/31/04
TOTAL RETURNS 1, 2
This chart compares performance of the fund's Select Shares with a benchmark and
the fund's Morningstar category.
[BAR CHART]
Fund Category:
Fund: Benchmark: MORNINGSTAR
SELECT S&P 500(R) LARGE-CAP
SHARES INDEX VALUE
1 YEAR 17.07% 9.42% 12.14%
SINCE INCEPTION: 9/2/03 20.26% 12.16% 13.74%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $50,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $50,000
investment (the minimum investment for this share class) in the fund's Select
Shares, compared with a similar investment in a benchmark.
$62,045 SELECT SHARES
$57,187 S&P 500(R) INDEX
[LINE GRAPH]
SELECT S&P 500(R)
SHARES INDEX
02-Sep-03 $50,000 $50,000
30-Sep-03 $49,500 $49,470
31-Oct-03 $53,000 $52,270
30-Nov-03 $54,250 $52,730
31-Dec-03 $57,085 $55,493
31-Jan-04 $57,795 $56,514
29-Feb-04 $59,255 $57,300
31-Mar-04 $59,300 $56,434
30-Apr-04 $58,335 $55,548
31-May-04 $59,100 $56,309
30-Jun-04 $60,140 $57,402
31-Jul-04 $59,525 $55,502
31-Aug-04 $61,165 $55,724
30-Sep-04 $61,530 $56,326
31-Oct-04 $62,045 $57,187
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
Funds Using Schwab Equity Ratings 11
SCHWAB DIVIDEND EQUITY FUND
FUND FACTS as of 10/31/04
STYLE ASSESSMENT 1
[GRAPHIC]
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large /X/ / / / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 105
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $33,217
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 20.1
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.5
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 39%
- --------------------------------------------------------------------------------
SEC YIELD 2
Investor Shares 2.21%
Select Shares 2.36%
- --------------------------------------------------------------------------------
SEC YIELD-NO WAIVER 3
Investor Shares 2.09%
Select Shares 2.24%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 4
Investor Shares ($1,000 for retirement and custodial accounts) $2,500
Select Shares $50,000
- --------------------------------------------------------------------------------
TOP HOLDINGS 5
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) JPMORGAN CHASE & CO. 1.7%
- --------------------------------------------------------------------------------
(2) EDISON INTERNATIONAL 1.3%
- --------------------------------------------------------------------------------
(3) REYNOLDS AMERICAN, INC. 1.3%
- --------------------------------------------------------------------------------
(4) EXELON CORP. 1.2%
- --------------------------------------------------------------------------------
(5) DUKE ENERGY CORP. 1.2%
- --------------------------------------------------------------------------------
(6) PPG INDUSTRIES, INC. 1.2%
- --------------------------------------------------------------------------------
(7) EMERSON ELECTRIC CO. 1.2%
- --------------------------------------------------------------------------------
(8) KERR-MCGEE CORP. 1.2%
- --------------------------------------------------------------------------------
(9) CHEVRONTEXACO CORP. 1.2%
- --------------------------------------------------------------------------------
(10) KEYCORP, INC. 1.2%
- --------------------------------------------------------------------------------
TOTAL 12.7%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
25.5% FINANCE
24.5% UTILITIES
20.3% CONSUMER NON-DURABLES
13.3% MATERIALS
4.8% ENERGY
4.6% TECHNOLOGY
3.7% CAPITAL GOODS
1.8% CONSUMER DURABLES
0.6% TRANSPORTATION
0.9% OTHER
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
Fund holdings may have changed since the report date.
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/04, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 Fund expenses have been partially absorbed by CSIM and Schwab. The yield does
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares.
3 Yield if fund expenses had not been partially absorbed by CSIM and Schwab.
4 Please see prospectus for further detail and eligibility requirements.
5 This list is not a recommendation of any security by the investment adviser.
12 Funds Using Schwab Equity Ratings
SCHWAB SMALL-CAP EQUITY FUND(TM)
INVESTOR SHARES PERFORMANCE as of 10/31/04
TOTAL RETURNS 1, 2
This chart compares performance of the fund's Investor Shares with its benchmark
and Morningstar category.
[BAR CHART]
Benchmark: Fund Category:
Fund: S&P MORNINGSTAR
INVESTOR SMALLCAP SMALL-CAP
SHARES 600 INDEX BLEND
1 YEAR 21.74% 16.78% 13.51%
SINCE INCEPTION: 7/1/03 31.13% 25.71% 23.44%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund's Investor Shares, compared with a similar investment in
its benchmark.
$14,377 INVESTOR SHARES
$13,587 S&P SMALLCAP 600 INDEX
[LINE GRAPH]
S&P
INVESTOR SMALL-CAP
SHARES 600 INDEX
01-Jul-03 $10,000 $10,000
31-Jul-03 $10,590 $10,520
31-Aug-03 $10,920 $11,032
30-Sep-03 $10,800 $10,708
31-Oct-03 $11,810 $11,636
30-Nov-03 $12,370 $12,076
31-Dec-03 $12,749 $12,290
31-Jan-04 $13,238 $12,644
29-Feb-04 $13,523 $12,887
31-Mar-04 $13,706 $13,054
30-Apr-04 $13,238 $12,621
31-May-04 $13,289 $12,814
30-Jun-04 $14,194 $13,524
31-Jul-04 $13,472 $12,783
31-Aug-04 $13,279 $12,670
30-Sep-04 $13,981 $13,338
31-Oct-04 $14,377 $13,587
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
Funds Using Schwab Equity Ratings 13
SCHWAB SMALL-CAP EQUITY FUND
SELECT SHARES(R) PERFORMANCE as of 10/31/04
TOTAL RETURNS 1, 2
This chart compares performance of the fund's Select Shares with its benchmark
and Morningstar category.
[BAR CHART]
Benchmark: Fund Category:
Fund: S&P MORNINGSTAR
SELECT SMALLCAP SMALL-CAP
SHARES 600 INDEX BLEND
1 YEAR 22.00% 16.78% 13.51%
SINCE INCEPTION: 7/1/03 31.34% 25.71% 23.44%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $50,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $50,000
investment (the minimum investment for this share class) in the fund's Select
Shares, compared with a similar investment in its benchmark.
$72,040 SELECT SHARES
$67,937 S&P SMALLCAP 600 INDEX
[LINE GRAPH]
S&P
SELECT SMALL-CAP
SHARES 600 INDEX
01-Jul-03 $50,000 $50,000
31-Jul-03 $52,950 $52,600
31-Aug-03 $54,600 $55,162
30-Sep-03 $54,000 $53,540
31-Oct-03 $59,050 $58,182
30-Nov-03 $61,900 $60,381
31-Dec-03 $63,800 $61,450
31-Jan-04 $66,240 $63,220
29-Feb-04 $67,665 $64,433
31-Mar-04 $68,580 $65,271
30-Apr-04 $66,240 $63,104
31-May-04 $66,545 $64,069
30-Jun-04 $71,075 $67,619
31-Jul-04 $67,460 $63,913
31-Aug-04 $66,495 $63,351
30-Sep-04 $70,055 $66,690
31-Oct-04 $72,040 $67,937
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
14 Funds Using Schwab Equity Ratings
SCHWAB SMALL-CAP EQUITY FUND
FUND FACTS as of 10/31/04
STYLE ASSESSMENT 1
[GRAPHIC]
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large / / / / / /
Medium / / / / / /
Small / / /X/ / /
STATISTICS
NUMBER OF HOLDINGS 165
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $1,147
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 25.2
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.1
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 118%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2
Investor Shares ($1,000 for retirement and custodial accounts) $2,500
Select Shares $50,000
TOP HOLDINGS 3
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) ESCO TECHNOLOGIES, INC. 2.9%
- --------------------------------------------------------------------------------
(2) POTLATCH CORP. 2.3%
- --------------------------------------------------------------------------------
(3) MEDICIS PHARMACEUTICAL CORP. Class A 2.2%
- --------------------------------------------------------------------------------
(4) AMERIGROUP CORP. 2.0%
- --------------------------------------------------------------------------------
(5) POLARIS INDUSTRIES, INC. 1.9%
- --------------------------------------------------------------------------------
(6) MATTHEWS INTERNATIONAL CORP. Class A 1.7%
- --------------------------------------------------------------------------------
(7) COMMONWEALTH TELEPHONE ENTERPRISES, INC. 1.7%
- --------------------------------------------------------------------------------
(8) ODYSSEY RE HOLDINGS CORP. 1.6%
- --------------------------------------------------------------------------------
(9) CLECO CORP. 1.6%
- --------------------------------------------------------------------------------
(10) HARMAN INTERNATIONAL INDUSTRIES, INC. 1.6%
- --------------------------------------------------------------------------------
TOTAL 19.5%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
20.9% MATERIALS & SERVICES
16.7% CONSUMER NON-DURABLES
16.5% TECHNOLOGY
15.4% FINANCE
7.6% CAPITAL GOODS
5.9% CONSUMER DURABLES
4.9% TRANSPORTATION
4.7% UTILITIES
4.5% ENERGY
2.9% OTHER
Portfolio holdings may have changed since the report date.
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/04, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 Please see prospectus for further detail and eligibility requirements.
3 This list is not a recommendation of any security by the investment adviser.
Funds Using Schwab Equity Ratings 15
SCHWAB HEDGED EQUITY FUND(TM)
PERFORMANCE as of 10/31/04
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund with a benchmark and the fund's
Morningstar category.
[BAR CHART]
Fund Category:
Benchmark: MORNINGSTAR
S&P 500(R) MODERATE
FUND INDEX ALLOCATION
1 YEAR 12.84% 9.42% 7.40%
SINCE INCEPTION: 9/3/02 12.88% 12.11% 0.51%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $25,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $25,000
investment in the fund (the minimum investment for this fund), compared with a
similar investment in a benchmark.
$32,525 FUND
$32,047 S&P 500(R) INDEX
[LINE GRAPH]
S&P 500(R)
FUND INDEX
03-Sep-02 $25,000 $25,000
30-Sep-02 $23,850 $22,283
31-Oct-02 $24,600 $24,243
30-Nov-02 $24,700 $25,671
31-Dec-02 $24,375 $24,164
31-Jan-03 $24,050 $23,531
28-Feb-03 $23,850 $23,178
31-Mar-03 $24,275 $23,403
30-Apr-03 $25,225 $25,332
31-May-03 $26,125 $26,667
30-Jun-03 $26,425 $27,008
31-Jul-03 $26,750 $27,483
31-Aug-03 $27,100 $28,019
30-Sep-03 $26,975 $27,722
31-Oct-03 $28,825 $29,291
30-Nov-03 $29,400 $29,549
31-Dec-03 $29,950 $31,097
31-Jan-04 $30,550 $31,670
29-Feb-04 $31,075 $32,110
31-Mar-04 $31,325 $31,625
30-Apr-04 $30,550 $31,128
31-May-04 $31,000 $31,555
30-Jun-04 $32,025 $32,167
31-Jul-04 $31,125 $31,102
31-Aug-04 $30,850 $31,227
30-Sep-04 $31,875 $31,564
31-Oct-04 $32,525 $32,047
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
16 Funds Using Schwab Equity Ratings
SCHWAB HEDGED EQUITY FUND
FUND FACTS as of 10/31/04
TOP LONG HOLDINGS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) APPLE COMPUTER, INC. 0.7%
- --------------------------------------------------------------------------------
(2) EDISON INTERNATIONAL 0.7%
- --------------------------------------------------------------------------------
(3) MACROVISION CORP. 0.7%
- --------------------------------------------------------------------------------
(4) HARMAN INTERNATIONAL IND., INC. 0.7%
- --------------------------------------------------------------------------------
(5) AUTODESK, INC. 0.7%
- --------------------------------------------------------------------------------
TOTAL 3.5%
TOP SHORT POSITIONS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) ENGINEERED SUPPORT SYSTEMS, INC. 0.6%
- --------------------------------------------------------------------------------
(2) POTOMAC ELECTRIC POWER CO. 0.6%
- --------------------------------------------------------------------------------
(3) DST SYSTEMS, INC. 0.6%
- --------------------------------------------------------------------------------
(4) FOOT LOCKER, INC. 0.6%
- --------------------------------------------------------------------------------
(5) OMNICARE, INC. 0.6%
- --------------------------------------------------------------------------------
TOTAL 3.0%
STATISTICS
NUMBER OF HOLDINGS
Long Holdings 265
Short Positions 167
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000)
Long Holdings $13,101
Short Positions $10,768
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E)
Long Holdings 22.1
Short Positions 20.9
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B)
Long Holdings 2.7
Short Positions 2.1
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 2
Long Holdings 99%
Short Positions n/a
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 3 $25,000
Portfolio holdings may have changed since the report date.
1 This list is not a recommendation of any security by the investment adviser.
2 Short positions have been excluded from the calculation of portfolio turnover
because at the time of entering into the short positions, the fund did not
intend to hold the positions for more than one year.
3 Please see prospectus for further detail and eligibility requirements.
Funds Using Schwab Equity Ratings 17
COMMUNICATIONS FOCUS FUND
Performance as of 10/31/04
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund with a benchmark and the fund's
Morningstar category.
[BAR CHART]
Benchmark:
S&P 1500
SUPERCOMPOSITE Fund Category:
TELECOMMUNICATIONS MORNINGSTAR
FUND SECTOR INDEX COMMUNICATIONS
1 YEAR 9.14 20.68 18.37
3 YEARS -1.86 -6.43 -0.13
SINCE INCEPTION: 7/3/00 -19.35 -14.71 -20.53
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with a similar investment in a benchmark and an
additional index.
$3,933 FUND
$5,013 S&P 1500 SUPERCOMPOSITE TELECOMMUNICATIONS SECTOR INDEX
$8,311 S&P 500(R) INDEX
[LINE GRAPH]
S&P 1500
SUPERCOMPOSITE
TELECOMMUNICATIONS S&P 500(R)
FUND SECTOR INDEX INDEX
03-Jul-00 $10,000 $10,000 $10,000
31-Jul-00 $9,490 $9,223 $9,844
31-Aug-00 $9,720 $9,026 $10,455
30-Sep-00 $8,510 $8,933 $9,903
31-Oct-00 $8,130 $9,157 $9,862
30-Nov-00 $6,740 $7,842 $9,085
31-Dec-00 $6,402 $7,236 $9,129
31-Jan-01 $7,382 $8,303 $9,453
28-Feb-01 $5,972 $7,549 $8,591
31-Mar-01 $5,462 $7,170 $8,046
30-Apr-01 $5,972 $7,492 $8,672
31-May-01 $5,682 $7,377 $8,730
30-Jun-01 $5,232 $7,073 $8,518
31-Jul-01 $5,142 $7,384 $8,434
31-Aug-01 $4,581 $6,693 $7,906
30-Sep-01 $4,281 $7,055 $7,267
31-Oct-01 $4,161 $6,120 $7,406
30-Nov-01 $4,471 $6,231 $7,974
31-Dec-01 $4,511 $6,336 $8,044
31-Jan-02 $4,181 $5,844 $7,927
28-Feb-02 $3,931 $5,470 $7,774
31-Mar-02 $3,961 $5,359 $8,066
30-Apr-02 $3,461 $4,539 $7,577
31-May-02 $3,481 $4,686 $7,521
30-Jun-02 $2,941 $4,096 $6,986
31-Jul-02 $2,651 $3,588 $6,442
31-Aug-02 $2,681 $3,528 $6,484
30-Sep-02 $2,361 $3,031 $5,779
31-Oct-02 $2,841 $4,016 $6,287
30-Nov-02 $3,211 $4,500 $6,658
31-Dec-02 $2,877 $4,160 $6,267
31-Jan-03 $2,857 $3,894 $6,103
28-Feb-03 $2,746 $3,572 $6,011
31-Mar-03 $2,726 $3,564 $6,069
30-Apr-03 $3,029 $3,917 $6,570
31-May-03 $3,261 $4,180 $6,916
30-Jun-03 $3,331 $4,339 $7,004
31-Jul-03 $3,362 $4,106 $7,128
31-Aug-03 $3,362 $4,110 $7,267
30-Sep-03 $3,352 $3,941 $7,190
31-Oct-03 $3,604 $4,154 $7,596
30-Nov-03 $3,554 $4,103 $7,663
31-Dec-03 $3,690 $4,462 $8,065
31-Jan-04 $3,883 $4,660 $8,213
29-Feb-04 $3,883 $4,757 $8,327
31-Mar-04 $3,873 $4,687 $8,202
30-Apr-04 $3,710 $4,688 $8,073
31-May-04 $3,680 $4,503 $8,183
30-Jun-04 $3,731 $4,644 $8,342
31-Jul-04 $3,741 $4,823 $8,066
31-Aug-04 $3,690 $4,877 $8,098
30-Sep-04 $3,781 $4,944 $8,186
31-Oct-04 $3,933 $5,013 $8,311
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
18 Funds Using Schwab Equity Ratings
COMMUNICATIONS FOCUS FUND
FUND FACTS as of 10/31/04
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) AT&T CORP. 5.6%
- --------------------------------------------------------------------------------
(2) COMMONWEALTH TELEPHONE ENTERPRISES, INC. 5.5%
- --------------------------------------------------------------------------------
(3) ALLTEL CORP. 5.5%
- --------------------------------------------------------------------------------
(4) VERIZON COMMUNICATIONS, INC. 5.4%
- --------------------------------------------------------------------------------
(5) CITIZENS COMMUNICATIONS CO. 5.4%
- --------------------------------------------------------------------------------
(6) NEXTEL COMMUNICATIONS, INC. Class A 5.2%
- --------------------------------------------------------------------------------
(7) BELLSOUTH CORP. 5.1%
- --------------------------------------------------------------------------------
(8) SBC COMMUNICATIONS, INC. 5.1%
- --------------------------------------------------------------------------------
(9) CENTURYTEL, INC. 4.8%
- --------------------------------------------------------------------------------
(10) WESTERN WIRELESS CORP. Class A 4.8%
- --------------------------------------------------------------------------------
TOTAL 52.4%
STATISTICS
NUMBER OF HOLDINGS 28
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $18,163
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) n/a
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.1
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 80%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2 $5,000
INDUSTRY WEIGHTINGS % of Portfolio
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
77.0% TELEPHONE
10.0% MEDIA
4.8% ELECTRONICS
4.0% BUSINESS MACHINES & SOFTWARE
2.5% CONSUMER DURABLES
1.7% OTHER
Portfolio holdings may have changed since the report date.
1 This list is not a recommendation of any security by the investment adviser.
2 Please see prospectus for further detail and eligibility requirements.
Funds Using Schwab Equity Ratings 19
FINANCIAL SERVICES FOCUS FUND
PERFORMANCE as of 10/31/04
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund with a benchmark and the fund's
Morningstar category.
[BAR CHART]
Benchmark:
S&P 1500 Fund Category:
SUPERCOMPOSITE MORNINGSTAR
FINANCIALS FINANCIAL
FUND SECTOR INDEX SERVICES
1 YEAR 12.39 9.04 10.48
3 YEARS 11.82 9.04 10.95
SINCE INCEPTION: 7/3/00 8.38 7.80 7.15
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with a similar investment in a benchmark and an
additional index.
$14,179 FUND
$13,854 S&P 1500 SUPERCOMPOSITE FINANCIALS SECTOR INDEX
$8,311 S&P 500(R) INDEX
[LINE GRAPH]
S&P 1500
SUPERCOMPOSITE
FINANCIALS S&P 500(R)
FUND SECTOR INDEX INDEX
03-Jul-00 $10,000 $10,000 $10,000
31-Jul-00 $10,770 $11,015 $9,844
31-Aug-00 $11,830 $12,059 $10,455
30-Sep-00 $12,050 $12,376 $9,903
31-Oct-00 $11,860 $12,328 $9,862
30-Nov-00 $11,200 $11,627 $9,085
31-Dec-00 $12,136 $12,761 $9,129
31-Jan-01 $11,928 $12,692 $9,453
28-Feb-01 $11,501 $11,898 $8,591
31-Mar-01 $11,023 $11,528 $8,046
30-Apr-01 $11,637 $11,970 $8,672
31-May-01 $12,032 $12,447 $8,730
30-Jun-01 $12,094 $12,479 $8,518
31-Jul-01 $11,761 $12,325 $8,434
31-Aug-01 $11,096 $11,582 $7,906
30-Sep-01 $10,368 $10,916 $7,267
31-Oct-01 $10,139 $10,685 $7,406
30-Nov-01 $10,805 $11,442 $7,974
31-Dec-01 $11,172 $11,736 $8,044
31-Jan-02 $10,919 $11,577 $7,927
28-Feb-02 $10,982 $11,457 $7,774
31-Mar-02 $11,499 $12,195 $8,066
30-Apr-02 $11,351 $11,936 $7,577
31-May-02 $11,362 $11,913 $7,521
30-Jun-02 $10,866 $11,347 $6,986
31-Jul-02 $10,433 $10,471 $6,442
31-Aug-02 $10,549 $10,689 $6,484
30-Sep-02 $9,378 $9,455 $5,779
31-Oct-02 $9,959 $10,256 $6,287
30-Nov-02 $10,212 $10,664 $6,658
31-Dec-02 $9,786 $10,125 $6,267
31-Jan-03 $9,593 $9,951 $6,103
28-Feb-03 $9,379 $9,649 $6,011
31-Mar-03 $9,464 $9,613 $6,069
30-Apr-03 $10,558 $10,747 $6,570
31-May-03 $11,051 $11,332 $6,916
30-Jun-03 $11,136 $11,367 $7,004
31-Jul-03 $11,458 $11,893 $7,128
31-Aug-03 $11,447 $11,800 $7,267
30-Sep-03 $11,597 $11,878 $7,190
31-Oct-03 $12,615 $12,706 $7,596
30-Nov-03 $13,001 $12,720 $7,663
31-Dec-03 $13,260 $13,311 $8,065
31-Jan-04 $13,844 $13,729 $8,213
29-Feb-04 $14,146 $14,111 $8,327
31-Mar-04 $14,071 $13,990 $8,202
30-Apr-04 $13,206 $13,308 $8,073
31-May-04 $13,379 $13,579 $8,183
30-Jun-04 $13,573 $13,657 $8,342
31-Jul-04 $13,379 $13,379 $8,066
31-Aug-04 $13,822 $13,844 $8,098
30-Sep-04 $14,049 $13,755 $8,186
31-Oct-04 $14,179 $13,854 $8,311
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
20 Funds Using Schwab Equity Ratings
FINANCIAL SERVICES FOCUS FUND
FUND FACTS as of 10/31/04
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) MELLON FINANCIAL CORP. 5.0%
- --------------------------------------------------------------------------------
(2) NORTHERN TRUST CORP. 4.9%
- --------------------------------------------------------------------------------
(3) UNIONBANCAL CORP. 4.9%
- --------------------------------------------------------------------------------
(4) KEYCORP, INC. 4.3%
- --------------------------------------------------------------------------------
(5) COMERICA, INC. 4.1%
- --------------------------------------------------------------------------------
(6) BANK OF HAWAII CORP. 3.7%
- --------------------------------------------------------------------------------
(7) COUNTRYWIDE FINANCIAL CORP. 2.8%
- --------------------------------------------------------------------------------
(8) CAPITAL ONE FINANCIAL CORP. 2.6%
- --------------------------------------------------------------------------------
(9) METLIFE, INC. 2.5%
- --------------------------------------------------------------------------------
(10) CITY NATIONAL CORP. 2.5%
- --------------------------------------------------------------------------------
TOTAL 37.3%
STATISTICS
NUMBER OF HOLDINGS 62
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $14,490
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 15.4
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 1.7
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 85%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2 $5,000
INDUSTRY WEIGHTINGS % of Portfolio
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
47.0% BANKS
26.7% MISCELLANEOUS FINANCE
23.3% INSURANCE
1.9% REAL PROPERTY
1.1% ELECTRONICS
Portfolio holdings may have changed since the report date.
1 This list is not a recommendation of any security by the investment adviser.
2 Please see prospectus for further detail and eligibility requirements.
Funds Using Schwab Equity Ratings 21
HEALTH CARE FOCUS FUND
Performance as of 10/31/04
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund with a benchmark and the fund's
Morningstar category.
[BAR CHART]
Benchmark:
S&P 1500
SUPERCOMPOSITE Fund Category:
HEALTH CARE MORNINGSTAR
FUND SECTOR INDEX HEALTH CARE
1 YEAR 27.88% 2.65% 6.16%
3 YEARS 6.38% -2.33% -0.97%
SINCE INCEPTION: 7/3/00 2.25% -2.29% -5.93%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with a similar investment in a benchmark and an
additional index.
$11,014 FUND
$9,043 S&P 1500 SUPERCOMPOSITE HEALTH CARE SECTOR INDEX
$8,311 S&P 500(R) INDEX
[LINE GRAPH]
S&P 1500
SUPERCOMPOSITE
HEALTH CARE S&P 500(R)
FUND SECTOR INDEX INDEX
03-Jul-00 $10,000 $10,000 $10,000
31-Jul-00 $9,450 $9,489 $9,844
31-Aug-00 $9,820 $9,669 $10,455
30-Sep-00 $10,160 $10,146 $9,903
31-Oct-00 $10,270 $10,451 $9,862
30-Nov-00 $10,460 $10,793 $9,085
31-Dec-00 $10,905 $11,158 $9,129
31-Jan-01 $9,848 $10,230 $9,453
28-Feb-01 $9,797 $10,234 $8,591
31-Mar-01 $8,892 $9,447 $8,046
30-Apr-01 $9,268 $9,792 $8,672
31-May-01 $9,492 $9,949 $8,730
30-Jun-01 $9,278 $9,605 $8,518
31-Jul-01 $9,594 $10,019 $8,434
31-Aug-01 $9,258 $9,700 $7,906
30-Sep-01 $9,228 $9,729 $7,267
31-Oct-01 $9,146 $9,706 $7,406
30-Nov-01 $9,624 $10,180 $7,974
31-Dec-01 $9,335 $9,918 $8,044
31-Jan-02 $9,111 $9,786 $7,927
28-Feb-02 $8,989 $9,799 $7,774
31-Mar-02 $9,101 $9,868 $8,066
30-Apr-02 $8,582 $9,318 $7,577
31-May-02 $8,389 $9,122 $7,521
30-Jun-02 $7,657 $8,292 $6,986
31-Jul-02 $7,291 $8,088 $6,442
31-Aug-02 $7,433 $8,181 $6,484
30-Sep-02 $6,986 $7,701 $5,779
31-Oct-02 $7,240 $8,127 $6,287
30-Nov-02 $7,342 $8,313 $6,658
31-Dec-02 $7,060 $8,037 $6,267
31-Jan-03 $7,009 $8,013 $6,103
28-Feb-03 $6,825 $7,855 $6,011
31-Mar-03 $7,080 $8,138 $6,069
30-Apr-03 $7,377 $8,423 $6,570
31-May-03 $7,560 $8,651 $6,916
30-Jun-03 $8,030 $9,018 $7,004
31-Jul-03 $8,245 $8,966 $7,128
31-Aug-03 $8,173 $8,675 $7,267
30-Sep-03 $8,276 $8,705 $7,190
31-Oct-03 $8,613 $8,810 $7,596
30-Nov-03 $9,287 $8,978 $7,663
31-Dec-03 $9,655 $9,455 $8,065
31-Jan-04 $10,288 $9,736 $8,213
29-Feb-04 $10,513 $9,822 $8,327
31-Mar-04 $10,871 $9,483 $8,202
30-Apr-04 $10,820 $9,744 $8,073
31-May-04 $10,861 $9,740 $8,183
30-Jun-04 $11,085 $9,748 $8,342
31-Jul-04 $10,452 $9,200 $8,066
31-Aug-04 $10,585 $9,353 $8,098
30-Sep-04 $10,983 $9,226 $8,186
31-Oct-04 $11,014 $9,043 $8,311
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
22 Funds Using Schwab Equity Ratings
HEALTH CARE FOCUS FUND
FUND FACTS as of 10/31/04
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) WYETH 3.6%
- --------------------------------------------------------------------------------
(2) HUMANA, INC. 3.4%
- --------------------------------------------------------------------------------
(3) PERKINELMER, INC. 3.3%
- --------------------------------------------------------------------------------
(4) AMERIGROUP CORP. 3.3%
- --------------------------------------------------------------------------------
(5) UNITEDHEALTH GROUP, INC. 3.3%
- --------------------------------------------------------------------------------
(6) PACIFICARE HEALTH SYSTEMS, INC. 3.2%
- --------------------------------------------------------------------------------
(7) LABORATORY CORP. OF AMERICA HOLDINGS 3.1%
- --------------------------------------------------------------------------------
(8) WELLCHOICE, INC. 3.1%
- --------------------------------------------------------------------------------
(9) BECTON DICKINSON & CO. 3.0%
- --------------------------------------------------------------------------------
(10) JOHNSON & JOHNSON 3.0%
- --------------------------------------------------------------------------------
TOTAL 32.3%
STATISTICS
NUMBER OF HOLDINGS 47
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $23,641
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 18.8
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.8
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 105%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2 $5,000
INDUSTRY WEIGHTINGS % of Portfolio
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
76.3% HEALTHCARE / DRUGS & MEDICINE
9.0% BUSINESS SERVICES
8.9% INSURANCE
3.3% ELECTRONICS
2.5% PRODUCER GOODS & MANUFACTURING
Portfolio holdings may have changed since the report date.
1 This list is not a recommendation of any security by the investment adviser.
2 Please see prospectus for further detail and eligibility requirements.
Funds Using Schwab Equity Ratings 23
TECHNOLOGY FOCUS FUND
PERFORMANCE as of 10/31/04
AVERAGE ANNUAL TOTAL RETURNS 1,2
This chart compares performance of the fund with a benchmark and the fund's
Morningstar category.
[BAR CHART]
Benchmark:
S&P 1500
SUPERCOMPOSITE Fund Category:
TECHNOLOGY MORNINGSTAR
FUND SECTOR INDEX TECHNOLOGY
1 YEAR 2.31% -1.63% -3.41%
3 YEARS 4.61% 0.13% -1.10%
SINCE INCEPTION: 7/3/00 -17.15% -19.66% -24.81%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATA
QUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,
PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with a similar investment in a benchmark and an
additional index.
$4,420 FUND
$3,868 S&P 1500 SUPERCOMPOSITE TECHNOLOGY SECTOR INDEX
$8,311 S&P 500(R) INDEX
[LINE GRAPH]
S&P 1500
SUPERCOMPOSITE
TECHNOLOGY S&P 500(R)
FUND SECTOR INDEX INDEX
03-Jul-00 $10,000 $10,000 $10,000
31-Jul-00 $9,480 $9,481 $9,844
31-Aug-00 $10,910 $10,594 $10,455
30-Sep-00 $9,220 $8,695 $9,903
31-Oct-00 $8,520 $8,189 $9,862
30-Nov-00 $6,500 $6,477 $9,085
31-Dec-00 $5,940 $5,835 $9,129
31-Jan-01 $6,950 $6,872 $9,453
28-Feb-01 $5,110 $4,993 $8,591
31-Mar-01 $4,420 $4,361 $8,046
30-Apr-01 $5,320 $5,110 $8,672
31-May-01 $5,240 $4,867 $8,730
30-Jun-01 $5,290 $4,925 $8,518
31-Jul-01 $4,850 $4,649 $8,434
31-Aug-01 $4,210 $4,094 $7,906
30-Sep-01 $3,270 $3,279 $7,267
31-Oct-01 $3,860 $3,852 $7,406
30-Nov-01 $4,480 $4,490 $7,974
31-Dec-01 $4,500 $4,425 $8,044
31-Jan-02 $4,560 $4,485 $7,927
28-Feb-02 $4,040 $3,870 $7,774
31-Mar-02 $4,320 $4,140 $8,066
30-Apr-02 $3,840 $3,650 $7,577
31-May-02 $3,670 $3,505 $7,521
30-Jun-02 $3,290 $3,075 $6,986
31-Jul-02 $2,950 $2,781 $6,442
31-Aug-02 $2,880 $2,741 $6,484
30-Sep-02 $2,450 $2,266 $5,779
31-Oct-02 $2,900 $2,754 $6,287
30-Nov-02 $3,310 $3,228 $6,658
31-Dec-02 $2,890 $2,765 $6,267
31-Jan-03 $2,840 $2,719 $6,103
28-Feb-03 $2,860 $2,778 $6,011
31-Mar-03 $2,810 $2,738 $6,069
30-Apr-03 $3,110 $2,989 $6,570
31-May-03 $3,400 $3,255 $6,916
30-Jun-03 $3,430 $3,257 $7,004
31-Jul-03 $3,720 $3,442 $7,128
31-Aug-03 $3,980 $3,657 $7,267
30-Sep-03 $3,890 $3,618 $7,190
31-Oct-03 $4,320 $3,931 $7,596
30-Nov-03 $4,610 $4,001 $7,663
31-Dec-03 $4,590 $4,089 $8,065
31-Jan-04 $5,140 $4,238 $8,213
29-Feb-04 $5,060 $4,100 $8,327
31-Mar-04 $4,860 $3,998 $8,202
30-Apr-04 $4,440 $3,794 $8,073
31-May-04 $4,630 $3,991 $8,183
30-Jun-04 $4,750 $4,095 $8,342
31-Jul-04 $4,300 $3,766 $8,066
31-Aug-04 $4,100 $3,569 $8,098
30-Sep-04 $4,290 $3,679 $8,186
31-Oct-04 $4,420 $3,868 $8,311
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
24 Funds Using Schwab Equity Ratings
TECHNOLOGY FOCUS FUND
FUND FACTS as of 10/31/04
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) INTERNATIONAL BUSINESS MACHINES CORP. 5.0%
- --------------------------------------------------------------------------------
(2) ORACLE CORP. 4.6%
- --------------------------------------------------------------------------------
(3) CERTEGY, INC. 4.6%
- --------------------------------------------------------------------------------
(4) MOTOROLA, INC. 4.5%
- --------------------------------------------------------------------------------
(5) QUALCOMM, INC. 3.1%
- --------------------------------------------------------------------------------
(6) AUTOMATIC DATA PROCESSING, INC. 3.0%
- --------------------------------------------------------------------------------
(7) CISCO SYSTEMS, INC. 2.9%
- --------------------------------------------------------------------------------
(8) DIGI INTERNATIONAL, INC. 2.7%
- --------------------------------------------------------------------------------
(9) XEROX CORP. 2.7%
- --------------------------------------------------------------------------------
(10) NCR CORP. 2.7%
- --------------------------------------------------------------------------------
TOTAL 35.8%
STATISTICS
NUMBER OF HOLDINGS 52
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $30,408
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 30.1
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 3.3
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 109%
- --------------------------------------------------------------------------------
MINIMUM INITIAL INVESTMENT 2 $5,000
INDUSTRY WEIGHTINGS % of Portfolio
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
31.3% BUSINESS MACHINES & SOFTWARE
29.9% BUSINESS SERVICES
29.5% ELECTRONICS
4.7% OPTICAL & PHOTO
2.2% TELEPHONE
1.9% AIR TRANSPORTATION
0.5% PRODUCER GOODS & MANUFACTURING
Portfolio holdings may have changed since the report date.
1 This list is not a recommendation of any security by the investment adviser.
2 Please see prospectus for further detail and eligibility requirements.
Funds Using Schwab Equity Ratings 25
FUND EXPENSES
EXAMPLES FOR A $1,000 INVESTMENT
As a fund shareholder, you incur two types of costs: transaction costs, such as
redemption fees; and, ongoing costs, such as management fees, transfer agent and
shareholder services fees, and other fund expenses.
The expense examples below are intended to help you understand your ongoing cost
(in dollars) of investing in a fund and to compare this cost with the ongoing
cost of investing in other mutual funds. These examples are based on an
investment of $1,000 invested for six-months beginning May 1, 2004 and held
through October 31, 2004.
ACTUAL RETURN lines in the table below provide information about actual account
values and actual expenses. You may use this information, together with the
amount you invested, to estimate the expenses that you paid over the period. To
do so, simply divide your account value by $1,000 (for example, an $8,600
account value / $1,000 = 8.6), then multiply the result by the number given for
your fund or share class under the heading entitled "Expenses Paid During
Period."
HYPOTHETICAL RETURN lines in the table below provide information about
hypothetical account values and hypothetical expenses based on a fund's or share
class' actual expense ratio and an assumed return of 5% per year before
expenses. Because the return used is not an actual return, it may not be used to
estimate the actual ending account value or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only, and do not reflect any transactional costs, such as
redemption fees. If these transactional costs were included, your costs would
have been higher.
ENDING
BEGINNING ACCOUNT VALUE EXPENSES
EXPENSE RATIO 1 ACCOUNT VALUE (Net of Expenses) PAID DURING PERIOD 2
(Annualized) at 5/1/04 at 10/31/04 5/1/04-10/31/04
- ---------------------------------------------------------------------------------------------------------------------------------
SCHWAB CORE EQUITY FUND(TM)
Actual Return 0.75% $1,000 $1,025.20 $3.82
Hypothetical 5% Return 0.75% $1,000 $1,021.37 $3.81
- ---------------------------------------------------------------------------------------------------------------------------------
SCHWAB DIVIDEND EQUITY FUND(TM)
Investor Shares
Actual Return 1.08% $1,000 $1,063.00 $5.60
Hypothetical 5% Return 1.08% $1,000 $1,019.71 $5.48
Select Shares(R)
Actual Return 0.94% $1,000 $1,063.60 $4.88
Hypothetical 5% Return 0.94% $1,000 $1,020.41 $4.77
- ---------------------------------------------------------------------------------------------------------------------------------
SCHWAB SMALL-CAP EQUITY FUND(TM)
Investor Shares
Actual Return 1.30% $1,000 $1,086.10 $6.82
Hypothetical 5% Return 1.30% $1,000 $1,018.60 $6.60
Select Shares
Actual Return 1.12% $1,000 $1,087.60 $5.88
Hypothetical 5% Return 1.12% $1,000 $1,019.51 $5.69
1 Based on the most recent six-month expense ratio; may differ from the expense
ratio provided in Financial Highlights.
2 Expenses for each fund or share class are equal to that fund's or share class'
annualized expense ratio, multiplied by the average account value over the
period, multiplied by 184 days of the period, and divided by 366 days of the
fiscal year.
26 Funds Using Schwab Equity Ratings
FUND EXPENSES continued
ENDING
BEGINNING ACCOUNT VALUE EXPENSES
EXPENSE RATIO 1 ACCOUNT VALUE (Net of Expenses) PAID DURING PERIOD 2
(Annualized) at 5/1/04 at 10/31/04 5/1/04-10/31/04
- ------------------------------------------------------------------------------------------------------------------------------------
SCHWAB HEDGED EQUITY FUND(TM)
Actual Return 2.46% $1,000 $1,064.70 $12.77
Hypothetical 5% Return 2.46% $1,000 $1,012.77 $12.45
- ------------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS FOCUS FUND
Actual Return 1.10% $1,000 $1,060.10 $5.70
Hypothetical 5% Return 1.10% $1,000 $1,019.61 $5.58
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES FOCUS FUND
Actual Return 1.01% $1,000 $1,073.60 $5.26
Hypothetical 5% Return 1.01% $1,000 $1,020.06 $5.13
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE FOCUS FUND
Actual Return 1.02% $1,000 $1,017.90 $5.17
Hypothetical 5% Return 1.02% $1,000 $1,020.01 $5.18
- ------------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY FOCUS FUND
Actual Return 0.99% $1,000 $995.50 $4.97
Hypothetical 5% Return 0.99% $1,000 $1,020.16 $5.03
1 Based on the most recent six-month expense ratio; may differ from the expense
ratio provided in Financial Highlights.
2 Expenses for each fund or share class are equal to that fund's or share class'
annualized expense ratio, multiplied by the average account value over the
period, multiplied by 184 days of the period, and divided by 366 days of the
fiscal year.
Funds Using Schwab Equity Ratings 27
SCHWAB CORE EQUITY FUND(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 11/1/99-
10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($) 1
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 12.71 10.89 12.53 18.53 18.91
---------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.12 0.10 0.08 0.08 0.05
Net realized and unrealized gains or losses 1.09 1.79 (1.64) (4.57) 1.08
---------------------------------------------------------------------------
Total income or loss from investment operations 1.21 1.89 (1.56) (4.49) 1.13
Less distributions:
Dividends from net investment income (0.11) (0.07) (0.08) (0.07) (0.04)
Distributions from net realized gains -- -- -- (1.44) (1.47)
---------------------------------------------------------------------------
Total distributions (0.11) (0.07) (0.08) (1.51) (1.51)
---------------------------------------------------------------------------
Net asset value at end of period 13.81 12.71 10.89 12.53 18.53
---------------------------------------------------------------------------
Total return (%) 9.57 17.54 (12.58) (25.93) 5.75
RATIOS/SUPPLEMENTAL DATA (%) 1
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.75 0.75 0.75 0.75 0.76 2
Gross operating expenses 0.88 0.88 0.91 0.88 0.87
Net investment income 0.89 0.94 0.63 0.55 0.29
Portfolio turnover rate 86 73 114 106 96
Net assets, end of period ($ x 1,000,000) 263 237 179 210 342
1 Prior to June 1, 2002, the fund's day-to-day investment management was handled
by a subadviser, Symphony Asset Management LLC.
2 The ratio of net operating expenses would have been 0.75% if certain
non-routine expenses (proxy fees) had not been included.
28 See financial notes.
SCHWAB CORE EQUITY FUND
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q is
available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top ten holding
o Non-income producing security
= All or a portion of this security is held as collateral for open futures
contracts
@ This security or a portion of this security is on loan
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
99.0% COMMON STOCK
230,455 260,170
0.9% SHORT-TERM
INVESTMENT 2,419 2,419
0.0% U.S. TREASURY
OBLIGATIONS 115 115
- --------------------------------------------------------------------------------
99.9% TOTAL INVESTMENTS 232,989 262,704
5.9% COLLATERAL INVESTED
FOR SECURITIES ON LOAN 15,380 15,380
(5.8)% OTHER ASSETS AND
LIABILITIES, NET (15,301)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 262,783
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 99.0% of net assets
AEROSPACE / DEFENSE 9.0%
--------------------------------------------------------------------------
(2) The Boeing Co. 260,000 12,975
Goodrich Corp. 25,500 786
Lockheed Martin Corp. 20,000 1,102
Raytheon Co. 80,000 2,918
Rockwell Automation, Inc. 34,000 1,418
United Technologies Corp. 47,200 4,381
-----------
23,580
AIR TRANSPORTATION 2.0%
--------------------------------------------------------------------------
o AMR Corp. 4,500 35
= FedEx Corp. 26,000 2,369
= Sabre Holdings Corp., Class A 28,000 602
United Parcel Service, Inc.,
Class B 28,200 2,233
-----------
5,239
APPAREL 0.5%
--------------------------------------------------------------------------
Nike, Inc., Class B 16,000 1,301
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.2%
--------------------------------------------------------------------------
= Eaton Corp. 24,400 1,560
@ Ford Motor Co. 120,300 1,568
-----------
3,128
BANKS 3.2%
--------------------------------------------------------------------------
JPMorgan Chase & Co. 78,960 3,048
Northern Trust Corp. 17,500 744
UnionBanCal Corp. 77,600 4,714
-----------
8,506
BUSINESS MACHINES & SOFTWARE 5.1%
--------------------------------------------------------------------------
Autodesk, Inc. 2,000 106
International Business Machines
Corp. 38,600 3,464
= Microsoft Corp. 209,800 5,872
o Oracle Corp. 213,500 2,703
=o Xerox Corp. 89,900 1,328
-----------
13,473
BUSINESS SERVICES 3.0%
--------------------------------------------------------------------------
Automatic Data Processing, Inc. 14,000 607
o Checkfree Corp. 16,000 496
o Citrix Systems, Inc. 26,500 639
@ Computer Associates International,
Inc. 56,100 1,555
o Dun & Bradstreet Corp. 2,900 164
IMS Health, Inc. 81,200 1,720
o Intuit, Inc. 35,000 1,588
See financial notes. 29
SCHWAB CORE EQUITY FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
=o Polycom, Inc. 10,000 207
=o Synopsys, Inc. 41,500 674
o VeriSign, Inc. 10,000 268
-----------
7,918
CHEMICALS 2.2%
--------------------------------------------------------------------------
= Dow Chemical Co. 110,500 4,966
PPG Industries, Inc. 12,000 765
-----------
5,731
CONSUMER DURABLES 2.9%
--------------------------------------------------------------------------
@ Black & Decker Corp. 24,900 1,999
o Gemstar-- TV Guide
International, Inc. 990,000 5,692
-----------
7,691
ELECTRONICS 2.7%
--------------------------------------------------------------------------
@o Applied Materials, Inc. 60,500 974
Linear Technology Corp. 12,500 474
Motorola, Inc. 266,900 4,607
Qualcomm, Inc. 8,000 334
Scientific-Atlanta, Inc. 25,300 693
-----------
7,082
ENERGY: RAW MATERIALS 1.4%
--------------------------------------------------------------------------
Burlington Resources, Inc. 88,000 3,652
FOOD & AGRICULTURE 1.7%
--------------------------------------------------------------------------
H.J. Heinz Co. 45,200 1,643
Kellogg Co. 67,800 2,915
-----------
4,558
HEALTHCARE / DRUGS & MEDICINE 11.7%
--------------------------------------------------------------------------
Applied Biosystems Group -
Applera Corp. 5,500 105
= Bausch & Lomb, Inc. 41,000 2,499
Becton Dickinson & Co. 107,300 5,633
Bristol-Myers Squibb Co. 146,800 3,440
o Coventry Health Care, Inc. 70,950 2,902
= Johnson & Johnson 30,900 1,804
o Laboratory Corp. of America
Holdings 15,000 687
Merck & Co., Inc. 55,500 1,738
@o Pacificare Health Systems,
Inc. 57,000 2,030
Pfizer, Inc. 51,000 1,476
@(6) UnitedHealth Group, Inc. 108,414 7,849
Valeant Pharmaceuticals
International 2,000 48
Wyeth 12,500 496
-----------
30,707
HOUSEHOLD PRODUCTS 1.1%
--------------------------------------------------------------------------
The Gillette Co. 70,000 2,903
INSURANCE 11.0%
--------------------------------------------------------------------------
= Aetna, Inc. 25,000 2,375
= AFLAC, Inc. 91,900 3,297
The Allstate Corp. 84,000 4,040
Arthur J. Gallagher & Co. 85,000 2,389
Chubb Corp. 9,000 649
o CNA Financial Corp. 15,500 371
Fidelity National Financial,
Inc. 17,722 669
=(7) Metlife, Inc. 183,000 7,018
@(9) The Progressive Corp. 72,200 6,754
Prudential Financial, Inc. 28,500 1,324
-----------
28,886
MEDIA 4.0%
--------------------------------------------------------------------------
The McGraw-Hill Cos., Inc. 19,100 1,647
=o(4) Time Warner, Inc. 538,250 8,957
-----------
10,604
MISCELLANEOUS 1.1%
--------------------------------------------------------------------------
= 3M Co. 36,400 2,823
MISCELLANEOUS FINANCE 1.2%
--------------------------------------------------------------------------
@= American Express Co. 39,600 2,101
o AmeriCredit Corp. 50,000 970
-----------
3,071
NON-DURABLES & ENTERTAINMENT 1.3%
--------------------------------------------------------------------------
McDonald's Corp. 94,500 2,755
Yum! Brands, Inc. 14,000 609
-----------
3,364
30 See financial notes.
SCHWAB CORE EQUITY FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OIL: INTERNATIONAL 6.0%
-------------------------------------------------------------------------
ChevronTexaco Corp. 92,000 4,881
(3) Exxon Mobil Corp. 222,200 10,937
-----------
15,818
OPTICAL & PHOTO 0.4%
-------------------------------------------------------------------------
o Ingram Micro, Inc., Class A 57,200 987
PAPER & FOREST PRODUCTS 3.3%
-------------------------------------------------------------------------
(5) Weyerhaeuser Co. 140,000 8,770
PRODUCER GOODS & MANUFACTURING 3.7%
-------------------------------------------------------------------------
Cooper Industries Ltd., Class A 9,000 575
@=(10) Emerson Electric Co. 97,000 6,213
o FMC Corp. 14,000 614
Parker Hannifin Corp. 18,000 1,271
W.W. Grainger, Inc. 16,000 938
-----------
9,611
RETAIL 0.4%
-------------------------------------------------------------------------
@ Claire's Stores, Inc. 7,400 193
o Petco Animal Supplies, Inc. 2,000 72
=o Rite Aid Corp. 103,000 383
Staples, Inc. 6,400 190
o Toys `R' Us, Inc. 8,000 144
-----------
982
TELEPHONE 8.4%
-------------------------------------------------------------------------
Alltel Corp. 3,500 192
AT&T Corp. 3,020 52
o Avaya, Inc. 395,100 5,689
BellSouth Corp. 126,500 3,374
= CenturyTel, Inc. 94,000 3,017
SBC Communications, Inc. 112,200 2,834
(8) Verizon Communications,
Inc. 177,400 6,936
-----------
22,094
TOBACCO 5.1%
-------------------------------------------------------------------------
(1) UST, Inc. 325,000 13,377
TRAVEL & RECREATION 0.2%
-------------------------------------------------------------------------
o Caesars Entertainment, Inc. 37,000 662
TRUCKING & FREIGHT 2.2%
-------------------------------------------------------------------------
CNF, Inc. 113,500 4,969
o Landstar Systems, Inc. 2,600 176
Paccar, Inc. 9,000 624
-----------
5,769
UTILITIES: ELECTRIC & GAS 3.0%
-------------------------------------------------------------------------
o The AES Corp. 556,900 6,070
@ Duke Energy Corp. 9,000 221
= TXU Corp. 26,000 1,592
-----------
7,883
SHORT-TERM INVESTMENT
0.9% of net assets
Provident Institutional
TempFund 2,419,401 2,419
SECURITY FACE AMOUNT
RATE, MATURITY DATE ($ x 1,000)
U.S. TREASURY OBLIGATIONS
0.0% of net assets
= U.S. Treasury Bills
1.60%-1.65%, 12/16/04 115 115
END OF INVESTMENTS.
See financial notes. 31
SCHWAB CORE EQUITY FUND
PORTFOLIO HOLDINGS continued
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
COLLATERAL INVESTED FOR SECURITIES ON LOAN
5.9% of net assets
COMMERCIAL PAPER & OTHER CORPORATE
OBLIGATIONS 2.5%
--------------------------------------------------------------------------
Canadian Imperial Bank of
Commerce/New York
1.72%, 05/25/05 396 396
Foreningssparbanken AB
1.83%, 11/15/04 5,772 5,771
Societe Generale NY
1.95%, 11/01/04 369 369
-----------
6,536
SHORT-TERM INVESTMENTS 3.4%
--------------------------------------------------------------------------
Citibank, Time Deposit
1.76%, 11/01/04 378 378
</Table>
<Table>
SECURITY AND NUMBER OF SHARES
<Caption>
Institutional Money
Market Trust 8,465,972 8,466
-----------
8,844
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN.
In addition to the above, the fund held the following at 10/31/04. All numbers
x 1,000 except number of contracts.
FUTURES CONTRACTS
NUMBER OF CONTRACT UNREALIZED
CONTRACTS VALUE GAINS
S&P 500 Index, Long
expires 12/17/04 7 1,978 26
32 See financial notes.
SCHWAB CORE EQUITY FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value
(including $14,806 of securities on loan) $262,704 a
Collateral invested for securities on loan 15,380
Receivables:
Fund shares sold 101
Interest 2
Dividends 291
Investments sold 12,670
Due from brokers for futures 5
Income from securities on loan 1
Prepaid expenses + 11
-----------
TOTAL ASSETS 291,165
LIABILITIES
- --------------------------------------------------------------------------------
Collateral invested for securities on loan 15,380
Payables:
Fund shares redeemed 291
Investments bought 12,636
Investment adviser and administrator fees 9
Transfer agent and shareholder service fees 5
Trustees' fees 1
Accrued expenses + 60
-----------
TOTAL LIABILITIES 28,382
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 291,165
TOTAL LIABILITIES - 28,382
-----------
NET ASSETS $262,783
NET ASSETS BY SOURCE
Capital received from investors 249,757
Net investment income not yet distributed 1,867
Net realized capital losses (18,582) b
Net unrealized capital gains 29,741 b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$262,783 19,023 $13.81
Unless stated, all numbers x 1,000.
a The fund paid $232,989 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $222,788
Sales/maturities $220,144
The fund's total security transactions with other SchwabFunds(R) during the
period were $221.
b These derive from investments and futures.
FEDERAL TAX DATA
- -------------------------------------------------------
PORTFOLIO COST $233,119
NET UNREALIZED GAINS AND LOSSES:
Gains $34,873
Losses + (5,288)
------------
$29,585
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $1,867
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $28,106
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $7,255
2011 + 11,171
-----------
$18,426
See financial notes. 33
SCHWAB CORE EQUITY FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $4,192
Interest 12
Securities on loan + 28
-----------
TOTAL INVESTMENT INCOME 4,232
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized gains on investments 27,853
Net realized gains on futures contracts + 137
-----------
NET REALIZED GAINS 27,990
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized losses on investments (7,412)
Net unrealized losses on futures contracts + (2)
-----------
NET UNREALIZED LOSSES (7,414)
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 1,393 a
Transfer agent and shareholder service fees 645 b
Trustees' fees 6 c
Custodian fees 29
Portfolio accounting fees 35
Professional fees 30
Registration fees 29
Shareholder reports 86
Other expenses + 5
-----------
Total expenses 2,258
Expense reduction - 324 d
-----------
NET EXPENSES 1,934
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 4,232
NET EXPENSES - 1,934
-----------
NET INVESTMENT INCOME 2,298
NET REALIZED GAINS 27,990 e
NET UNREALIZED LOSSES + (7,414) e
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $22,874
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.54% of the first
$500 million and 0.49% of assets beyond that. These fees are paid to Charles
Schwab Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% of the
fund's assets. These fees are paid to Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 28,
2005, to 0.75% of average daily net assets. This limit excludes interest,
taxes and certain non-routine expenses.
e These add up to a net gain on investments of $20,576.
34 See financial notes.
SCHWAB CORE EQUITY FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income $2,298 $1,895
Net realized gains or losses 27,990 (10,956)
Net unrealized gains or losses + (7,414) 43,747
----------------------------------------
INCREASE IN NET ASSETS
FROM OPERATIONS 22,874 34,686
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income $2,074 $1,261 a,b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
Shares sold 4,444 $59,997 5,806 $65,590
Shares reinvested 144 1,891 109 1,152
Shares redeemed + (4,213) (56,963) (3,746) (42,567)
---------------------------------------------------
NET TRANSACTIONS
IN FUND SHARES 375 $4,925 2,169 $24,175
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 18,648 $237,058 16,479 $179,458
Total increase + 375 25,725 2,169 57,600 c
---------------------------------------------------
END OF PERIOD 19,023 $262,783 18,648 $237,058 d
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
The fund designates $2,074 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h)(ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for the use in
preparing their 2004 income tax return.
b The tax-basis components of distributions paid are:
CURRENT PERIOD
Ordinary income $2,074
Long-term capital gains $--
PRIOR PERIOD
Ordinary income $1,261
Long-term capital gains $--
c Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value from transactions in fund shares, minus
distributions paid.
d Includes distributable net investment income in the amount of $1,867 and
$1,643 at the end of the current period and prior period, respectively.
See financial notes. 35
SCHWAB DIVIDEND EQUITY FUND(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 9/2/03 1-
INVESTOR SHARES 10/31/04 10/31/03
- -----------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- -----------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 10.60 10.00
-------------------------------------------------------------
Income from investment operations:
Net investment income 0.29 0.05
Net realized and unrealized gains 1.49 0.55
-------------------------------------------------------------
Total income from investment operations 1.78 0.60
Less distributions:
Dividends from net investment income (0.32) --
-------------------------------------------------------------
Net asset value at end of period 12.06 10.60
-------------------------------------------------------------
Total return (%) 17.00 6.00 2
RATIOS/SUPPLEMENTAL DATA (%)
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.65 --
Gross operating expenses 1.19 1.34 3
Net investment income 2.71 3.41 3
Portfolio turnover rate 39 2 2
Net assets, end of period ($ x 1,000,000) 267 94
1 Commencement of operations.
2 Not annualized.
3 Annualized.
36 See financial notes.
SCHWAB DIVIDEND EQUITY FUND
11/1/03- 9/2/03 1-
SELECT SHARES 10/31/04 10/31/03
- --------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- --------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 10.60 10.00
----------------------------------------------------
Income from investment operations:
Net investment income 0.31 0.05
Net realized and unrealized gains 1.48 0.55
----------------------------------------------------
Total income from investment operations 1.79 0.60
Less distributions:
Dividends from net investment income (0.33) --
----------------------------------------------------
Net asset value at end of period 12.06 10.60
----------------------------------------------------
Total return (%) 17.07 6.00 2
RATIOS/SUPPLEMENTAL DATA (%)
- --------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.54 --
Gross operating expenses 1.04 1.19 3
Net investment income 2.83 3.41 3
Portfolio turnover rate 39 2 2
Net assets, end of period ($ x 1,000,000) 252 111
1 Commencement of operations.
2 Not annualized.
3 Annualized.
See financial notes. 37
SCHWAB DIVIDEND EQUITY FUND
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q is
available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top ten holding
o Non-income producing security
COST VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- --------------------------------------------------------------------------------
98.5% COMMON STOCK 470,131 511,658
0.9% SHORT-TERM
INVESTMENT 4,493 4,493
- --------------------------------------------------------------------------------
99.4% TOTAL INVESTMENTS 474,624 516,151
0.6% OTHER ASSETS AND
LIABILITIES, NET 3,095
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 519,246
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 98.5% of net assets
AEROSPACE / DEFENSE 2.4%
--------------------------------------------------------------------------
Goodrich Corp. 80,000 2,466
Raytheon Co. 115,000 4,195
Rockwell Automation, Inc. 138,600 5,778
-----------
12,439
APPAREL 1.0%
--------------------------------------------------------------------------
VF Corp. 99,900 5,378
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.8%
--------------------------------------------------------------------------
Ford Motor Co. 370,200 4,823
Genuine Parts Co. 111,000 4,428
-----------
9,251
BANKS 18.0%
--------------------------------------------------------------------------
AmSouth Bancorp. 197,900 5,223
Bank of America Corp. 135,400 6,065
Comerica, Inc. 99,500 6,120
First Horizon National Corp. 116,000 5,021
Hudson United Bancorp 52,000 2,070
Huntington Bancshares, Inc. 153,000 3,664
(1) JPMorgan Chase & Co. 228,584 8,823
(10) KeyCorp, Inc. 187,500 6,298
National City Corp. 156,400 6,095
North Fork Bancorp., Inc. 99,567 4,391
Peoples Bank-Bridgeport 135,000 5,061
PNC Financial Services Group,
Inc. 114,400 5,983
Regions Financial Corp. 141,855 4,976
SunTrust Banks, Inc. 9,487 668
U.S. Bancorp 209,300 5,988
UnionBanCal Corp. 79,000 4,799
Wachovia Corp. 125,700 6,186
Wells Fargo & Co. 99,200 5,924
-----------
93,355
BUSINESS MACHINES & SOFTWARE 1.1%
--------------------------------------------------------------------------
Pitney Bowes, Inc. 130,700 5,718
BUSINESS SERVICES 2.6%
--------------------------------------------------------------------------
Automatic Data Processing, Inc. 100,000 4,339
Deluxe Corp. 76,000 2,895
Electronic Data Systems Corp. 240,000 5,105
The ServiceMaster Co. 103,000 1,322
-----------
13,661
CHEMICALS 6.6%
--------------------------------------------------------------------------
Dow Chemical Co. 137,300 6,170
E.I. du Pont de Nemours & Co. 142,400 6,105
Eastman Chemical Co. 117,000 5,554
Lubrizol Corp. 111,900 3,886
38 See financial notes.
SCHWAB DIVIDEND EQUITY FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
(6) PPG Industries, Inc. 100,500 6,407
Rohm & Haas Co. 139,000 5,892
-----------
34,014
CONSTRUCTION 0.2%
--------------------------------------------------------------------------
The Stanley Works 28,000 1,247
CONTAINERS 0.2%
--------------------------------------------------------------------------
Sonoco Products Co. 45,000 1,199
ELECTRONICS 1.6%
--------------------------------------------------------------------------
AVX Corp. 65,000 780
Motorola, Inc. 190,000 3,280
PerkinElmer, Inc. 200,500 4,118
-----------
8,178
FOOD & AGRICULTURE 4.3%
--------------------------------------------------------------------------
General Mills, Inc. 131,000 5,797
H.J. Heinz Co. 151,500 5,507
Kellogg Co. 144,900 6,231
Sara Lee Corp. 205,000 4,772
-----------
22,307
HEALTHCARE / DRUGS & MEDICINE 3.5%
--------------------------------------------------------------------------
Abbott Laboratories 85,000 3,624
Bristol-Myers Squibb Co. 251,200 5,886
Merck & Co., Inc. 131,700 4,123
Wyeth 117,000 4,639
-----------
18,272
HOUSEHOLD PRODUCTS 3.4%
--------------------------------------------------------------------------
Clorox Co. 111,500 6,088
The Gillette Co. 143,000 5,932
Procter & Gamble Co. 113,200 5,793
-----------
17,813
INSURANCE 6.4%
--------------------------------------------------------------------------
The Allstate Corp. 127,200 6,117
Arthur J. Gallagher & Co. 73,000 2,051
Cincinnati Financial Corp. 104,745 4,373
Jefferson-Pilot Corp. 90,000 4,346
Lincoln National Corp. 131,200 5,747
Marsh & McLennan
Cos., Inc. 130,200 3,601
Mercury General Corp. 82,100 4,223
Unitrin, Inc. 60,500 2,612
-----------
33,070
MISCELLANEOUS 1.1%
--------------------------------------------------------------------------
3M Co. 70,200 5,445
MISCELLANEOUS FINANCE 1.0%
--------------------------------------------------------------------------
Fannie Mae 77,000 5,402
NON-DURABLES & ENTERTAINMENT 1.0%
--------------------------------------------------------------------------
Fortune Brands, Inc. 73,500 5,352
OIL: DOMESTIC 2.4%
--------------------------------------------------------------------------
(8) Kerr-McGee Corp. 108,100 6,402
Marathon Oil Corp. 153,900 5,865
-----------
12,267
OIL: INTERNATIONAL 2.4%
--------------------------------------------------------------------------
(9) ChevronTexaco Corp. 120,600 6,399
Exxon Mobil Corp. 124,800 6,143
-----------
12,542
PAPER & FOREST PRODUCTS 3.7%
--------------------------------------------------------------------------
International Paper Co. 115,000 4,429
Kimberly-Clark Corp. 65,000 3,878
MeadWestvaco Corp. 156,000 4,919
Weyerhaeuser Co. 96,000 6,013
-----------
19,239
PRODUCER GOODS & MANUFACTURING 4.0%
--------------------------------------------------------------------------
Briggs & Stratton Corp. 60,300 4,330
(7) Emerson Electric Co. 100,000 6,405
Harsco Corp. 87,200 4,225
Hubbell, Inc., Class B 78,800 3,603
Lennox International, Inc. 149,000 2,154
-----------
20,717
RAILROAD & SHIPPING 0.6%
--------------------------------------------------------------------------
GATX Corp. 120,000 3,274
RETAIL 1.2%
--------------------------------------------------------------------------
Limitedbrands 253,300 6,277
See financial notes. 39
SCHWAB DIVIDEND EQUITY FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TELEPHONE 8.1%
--------------------------------------------------------------------------
Alltel Corp. 108,800 5,976
AT&T Corp. 367,100 6,281
BellSouth Corp. 219,600 5,857
o Citizens Communications Co. 455,000 6,097
SBC Communications, Inc. 226,500 5,721
Sprint Corp. (FON Group) 295,800 6,197
Verizon Communications, Inc. 150,300 5,877
-----------
42,006
TOBACCO 3.6%
--------------------------------------------------------------------------
Altria Group, Inc. 120,300 5,830
(3) Reynolds American, Inc. 95,000 6,542
UST, Inc. 150,500 6,194
-----------
18,566
UTILITIES: ELECTRIC & GAS 16.3%
--------------------------------------------------------------------------
American Electric Power Co., Inc. 182,000 5,993
Centerpoint Energy, Inc. 397,500 4,178
Cinergy Corp. 132,500 5,236
Constellation Energy Group, Inc. 134,700 5,471
DPL, Inc. 243,000 5,249
(5) Duke Energy Corp. 262,814 6,447
Duquesne Light Holdings, Inc. 85,000 1,459
(2) Edison International 228,000 6,954
Energy East Corp. 168,800 4,254
(4) Exelon Corp. 163,400 6,474
FirstEnergy Corp. 147,100 6,080
National Fuel Gas Co. 139,300 3,903
OGE Energy Corp. 149,200 3,785
Pinnacle West Capital Corp. 108,000 4,603
The Southern Co. 185,000 5,844
UGI Corp. 109,800 4,242
Xcel Energy, Inc. 263,000 4,497
-----------
84,669
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENT
0.9% of net assets
HSBC Bank, USA Grand
Cayman Time Deposit
1.29%, 11/01/04 4,493 4,493
END OF INVESTMENTS.
40 See financial notes.
SCHWAB DIVIDEND EQUITY FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value $516,151 a
Receivables:
Fund shares sold 2,202
Dividends 1,226
Prepaid expenses + 23
-----------
TOTAL ASSETS 519,602
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 205
Investment adviser and administrator fees 32
Transfer agent and shareholder service fees 8
Trustees' fees 1
Accrued expenses + 110
-----------
TOTAL LIABILITIES 356
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 519,602
TOTAL LIABILITIES - 356
-----------
NET ASSETS $519,246
NET ASSETS BY SOURCE
Capital received from investors 467,427
Net investment income not yet distributed 1,068
Net realized capital gains 9,224
Net unrealized capital gains 41,527
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $267,462 22,186 $12.06
Select Shares $251,784 20,882 $12.06
Unless stated, all numbers x 1,000.
a The fund paid $474,624 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $414,821
Sales/maturities $148,671
The fund's total security transactions with other SchwabFunds(R) during the
period were $526.
FEDERAL TAX DATA
- ---------------------------------------------------------
PORTFOLIO COST $474,624
NET UNREALIZED GAINS AND LOSSES:
Gains $50,639
Losses + (9,112)
------------
$41,527
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $9,585
Long-term capital gains $707
CAPITAL LOSSES UTILIZED $268
RECLASSIFICATIONS:
Capital received from investors $31
Net investment income not
yet distributed $3
Reclassified as:
Net realized capital gains ($34)
See financial notes. 41
SCHWAB DIVIDEND EQUITY FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $12,866
Interest + 37
----------
TOTAL INVESTMENT INCOME 12,903
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized gains on investments 9,619
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 31,897
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 3,264 a
Transfer agent and shareholder service fees:
Investor Shares 473 b
Select Shares 195 b
Trustees' fees 8 c
Custodian fees 74
Portfolio accounting fees 67
Professional fees 34
Registration fees 96
Shareholder reports 76
Other expenses + 6
----------
Total expenses 4,293
Expense reduction - 2,020 d
----------
NET EXPENSES 2,273
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 12,903
NET EXPENSES - 2,273
----------
NET INVESTMENT INCOME 10,630
NET REALIZED GAINS 9,619 e
NET UNREALIZED GAINS + 31,897 e
----------
INCREASE IN NET ASSETS FROM OPERATIONS $52,146
Unless stated, all numbers x 1,000.
a Calculated as 0.85% of average daily net assets. These fees are paid to
Charles Schwab Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% and
0.05% of the assets of each respective share class. These fees are paid to
Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d Includes $1,526 from the investment adviser (CSIM) and $359 from the transfer
agent and shareholder service agent (Schwab). In addition, the total expenses
reimbursed by the investment adviser was $135. These reductions reflect a
guarantee by CSIM and Schwab to limit the annual operating expenses of this
fund through February 28, 2005 as follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
--------------------------------------
Investor Shares 1.10
Select Shares 0.95
Prior to May 4, 2004, these limits were 0.00% for both Investor Shares and
Select Shares. This limit excludes interest, taxes and certain non-routine
expenses.
e These add up to a net gain on investments of $41,516.
42 See financial notes.
SCHWAB DIVIDEND EQUITY FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 9/2/03*-10/31/03
Net investment income $10,630 $931
Net realized gains or losses 9,619 (361)
Net unrealized gains + 31,897 9,630
-------------------------------------
INCREASE IN NET ASSETS
FROM OPERATIONS 52,146 10,200
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME
Investor Shares 5,107 --
Select Shares + 5,389 --
-------------------------------------
TOTAL DIVIDENDS FROM NET
INVESTMENT INCOME $10,496 $-- a,b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 9/2/03-10/31/03
SHARES VALUE SHARES VALUE
SHARES SOLD
Investor Shares 16,485 $189,992 9,018 $90,936
Select Shares + 13,314 153,084 10,753 108,229
-------------------------------------------------
TOTAL SHARES SOLD 29,799 $343,076 19,771 $199,165
SHARES REINVESTED
Investor Shares 331 $3,809 -- $--
Select Shares + 307 3,531 -- --
-------------------------------------------------
TOTAL SHARES REINVESTED 638 $7,340 -- $--
SHARES REDEEMED
Investor Shares (3,492) ($40,556) (156) ($1,596)
Select Shares + (3,202) (37,066) (290) (2,967)
-------------------------------------------------
TOTAL SHARES REDEEMED (6,694) ($77,622) (446) ($4,563)
NET TRANSACTIONS IN FUND
SHARES 23,743 $272,794 19,325 $194,602
SHARES OUTSTANDING AND NET ASSETS
- -------------------------------------------------------------------------------
11/1/03-10/31/04 9/2/03-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 19,325 $204,802 -- $--
Total increase + 23,743 314,444 19,325 204,802 c
-------------------------------------------------
END OF PERIOD 43,068 $519,246 19,325 $204,802 d
* Commencement of operations.
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 61% of the fund's dividends for the report period qualify
for the dividends-received deduction.
The fund designates $7,294 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h)(ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for the use in
preparing their 2004 income tax return.
b The tax-basis components of distributions paid are:
CURRENT PERIOD
Ordinary income $10,496
Long-term capital gains $--
PRIOR PERIOD
Ordinary income $--
Long-term capital gains $--
c Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
d Includes distributable net investment income in the amount of $1,068 and $931
at the end of the current period and prior period, respectively.
See financial notes. 43
SCHWAB SMALL-CAP EQUITY FUND(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 7/1/03 1-
INVESTOR SHARES 10/31/04 10/31/03
- -----------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- -----------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 11.81 10.00
--------------------------------------------------------
Income or loss from investment operations:
Net investment loss (0.04) (0.02)
Net realized and unrealized gains 2.58 1.83
--------------------------------------------------------
Total income from investment operations 2.54 1.81
Less distributions:
Distributions from net realized gains (0.22) --
--------------------------------------------------------
Net asset value at end of period 14.13 11.81
--------------------------------------------------------
Total return (%) 21.74 18.10 2
RATIOS/SUPPLEMENTAL DATA (%)
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.30 1.30 3
Gross operating expenses 1.61 1.73 3
Net investment loss (0.35) (0.54) 3
Portfolio turnover rate 118 39 2
Net assets, end of period ($ x 1,000,000) 37 26
1 Commencement of operations.
2 Not annualized.
3 Annualized.
44 See financial notes.
SCHWAB SMALL-CAP EQUITY FUND
11/1/03- 7/1/03 1-
SELECT SHARES 10/31/04 10/31/03
- -----------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- -----------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 11.81 10.00
--------------------------------------------------------
Income or loss from investment operations:
Net investment loss (0.02) (0.01)
Net realized and unrealized gains 2.59 1.82
--------------------------------------------------------
Total income from investment operations 2.57 1.81
Less distributions:
Distributions from net realized gains (0.22) --
--------------------------------------------------------
Net asset value at end of period 14.16 11.81
--------------------------------------------------------
Total return (%) 22.00 18.10 2
RATIOS/SUPPLEMENTAL DATA (%)
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.12 1.12 3
Gross operating expenses 1.46 1.58 3
Net investment loss (0.16) (0.36) 3
Portfolio turnover rate 118 39 2
Net assets, end of period ($ x 1,000,000) 18 14
1 Commencement of operations.
2 Not annualized.
3 Annualized.
See financial notes. 45
SCHWAB SMALL-CAP EQUITY FUND
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q is
available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top ten holding
o Non-income producing security
= All or a portion of this security is held as collateral for open futures
contracts
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
96.9% COMMON STOCK 46,768 53,406
2.7% SHORT-TERM
INVESTMENTS 1,505 1,505
0.2% U.S. TREASURY
OBLIGATION 90 90
- --------------------------------------------------------------------------------
99.8% TOTAL INVESTMENTS 48,363 55,001
0.2% OTHER ASSETS AND
LIABILITIES, NET 118
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 55,119
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 96.9% of net assets
AEROSPACE / DEFENSE 2.9%
--------------------------------------------------------------------------
=o(1) ESCO Technologies, Inc. 22,700 1,584
AIR TRANSPORTATION 1.9%
--------------------------------------------------------------------------
o Alaska Air Group, Inc. 28,600 754
o EGL, Inc. 6,200 198
o ExpressJet Holdings, Inc. 6,400 71
-----------
1,023
ALCOHOLIC BEVERAGES 1.3%
--------------------------------------------------------------------------
o Boston Beer Co., Inc., Class A 27,500 695
APPAREL 1.8%
--------------------------------------------------------------------------
Cutter & Buck, Inc. 23,800 289
o Guess?, Inc. 8,100 135
o Hartmarx Corp. 22,000 184
o Wilsons The Leather Expert 70,700 410
-----------
1,018
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 3.1%
--------------------------------------------------------------------------
Monaco Coach Corp. 10,300 183
(5) Polaris Industries, Inc. 17,300 1,027
Titan International, Inc. 10,000 99
o United Defense Industries, Inc. 6,900 277
Winnebago Industries, Inc. 4,000 126
-----------
1,712
BANKS 4.6%
--------------------------------------------------------------------------
BancFirst Corp. 6,800 442
o Central Coast Bancorp 5,700 127
Columbia Banking Systems, Inc. 8,400 206
FFLC Bancorp, Inc. 1,900 57
First Bancorp Puerto Rico 600 33
First Charter Corp. 7,600 194
First Merchants Corp. 14,500 361
Great Southern Bancorp, Inc. 6,500 217
Hancock Holding Co. 11,500 364
Mid-State Bancshares 8,500 228
WesBanco, Inc. 6,200 188
WSFS Financial Corp. 2,600 141
-----------
2,558
BUSINESS MACHINES & SOFTWARE 0.8%
--------------------------------------------------------------------------
o Digi International, Inc. 18,200 249
Landamerica Financial Group, Inc. 3,000 147
o PTEK Holdings, Inc. 4,600 46
-----------
442
46 See financial notes.
SCHWAB SMALL-CAP EQUITY FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
BUSINESS SERVICES 10.1%
--------------------------------------------------------------------------
o Administaff, Inc. 14,500 166
o Ansoft Corp. 4,500 72
o Ansys, Inc. 14,400 398
o Earthlink, Inc. 22,500 232
o FileNet Corp. 17,100 476
G&K Services, Inc., Class A 5,000 197
o Heidrick & Struggles International,
Inc. 7,600 218
o Hewitt Associates, Inc., Class A 4,000 112
o Hyperion Solutions Corp. 6,000 241
o Identix, Inc. 16,500 120
= John H. Harland Co. 12,800 413
o Korn/Ferry International 13,500 235
o Kronos, Inc. 3,900 191
o Michael Baker Corp. 6,700 115
o NCO Group, Inc. 20,800 556
o Parametric Technology Corp. 43,900 228
o PDI, Inc. 7,700 220
o Phoenix Technologies Ltd. 11,300 69
o Progress Software Corp. 27,700 550
SS&C Technologies, Inc. 6,500 154
=o Transaction Systems Architects, Inc.,
Class A 19,100 313
o United Online, Inc. 31,000 291
o Universal Electronics, Inc. 800 14
-----------
5,581
CHEMICALS 1.8%
--------------------------------------------------------------------------
Georgia Gulf Corp. 10,500 476
=o NewMarket Corp 24,200 542
-----------
1,018
CONSTRUCTION 1.1%
--------------------------------------------------------------------------
o Cavco Industries, Inc. 5,100 203
o NVR, Inc. 400 251
o WESCO International, Inc. 7,000 175
-----------
629
CONSUMER DURABLES 0.2%
--------------------------------------------------------------------------
Kimball International, Inc., Class B 7,100 96
CONTAINERS 0.5%
--------------------------------------------------------------------------
o Crown Holdings, Inc. 25,000 284
ELECTRONICS 12.7%
--------------------------------------------------------------------------
Acxiom Corp. 16,700 417
o Agere Systems, Inc., Class B 254,400 293
Agilysys, Inc. 38,200 653
o American Physicians Capital, Inc. 25,600 816
=o Aspect Communications Corp. 33,900 322
=o Avid Technology, Inc. 11,600 615
o Coherent, Inc. 6,000 145
=(10) Harman International Industries,
Inc. 7,200 865
o Hollywood Entertainment Corp. 85,400 830
o LeCroy Corp. 15,200 256
o Neoware Systems, Inc. 32,500 261
o Siliconix, Inc. 11,900 493
o Supertex, Inc. 11,700 251
o Technitrol, Inc. 11,400 186
o Thomas & Betts Corp. 9,100 258
o Western Wireless Corp., Class A 11,000 320
-----------
6,981
ENERGY: RAW MATERIALS 1.4%
--------------------------------------------------------------------------
=o Hydril Co. 18,000 792
FOOD & AGRICULTURE 2.2%
--------------------------------------------------------------------------
o 7-Eleven, Inc. 20,300 428
Coca-Cola Bottling Co. Consolidated 1,300 69
Corn Products International, Inc. 7,000 344
o Darling International, Inc. 74,100 290
o Lesco, Inc. 8,000 101
-----------
1,232
HEALTHCARE / DRUGS & MEDICINE 9.1%
--------------------------------------------------------------------------
o Amedisys, Inc. 8,300 251
o America Service Group, Inc. 9,300 333
o(4) AMERIGROUP Corp. 18,400 1,104
=o Haemonetics Corp. 25,900 851
o Kensey Nash Corp. 3,700 106
(3) Medicis Pharmaceutical Corp.,
Class A 30,200 1,228
o Res-Care, Inc. 21,500 261
o Sierra Health Services, Inc. 12,200 582
See financial notes. 47
SCHWAB SMALL-CAP EQUITY FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Techne Corp. 6,200 223
o Visx, Inc. 5,200 87
-----------
5,026
HOUSEHOLD PRODUCTS 0.7%
--------------------------------------------------------------------------
Balchem Corp. 6,900 216
= Church & Dwight Co., Inc. 5,550 151
-----------
367
INSURANCE 6.2%
--------------------------------------------------------------------------
21st Century Insurance Group 7,700 102
= Delphi Financial Group, Inc.,
Class A 9,150 374
FBL Financial Group, Inc.,
Class A 3,000 78
Horace Mann Educators Corp. 24,000 408
(8) Odyssey Re Holdings Corp. 40,700 890
o Ohio Casualty Corp. 38,600 806
o Philadelphia Consolidated Holding
Co. 5,300 307
Safety Insurance Group, Inc. 3,000 67
o WellChoice, Inc. 2,800 117
Zenith National Insurance Corp. 6,700 275
-----------
3,424
MEDIA 0.4%
--------------------------------------------------------------------------
o Consolidated Graphics, Inc. 5,300 226
MISCELLANEOUS FINANCE 3.7%
--------------------------------------------------------------------------
Advanta Corp., Class B 8,500 207
C&F Financial Corp. 600 23
o CompuCredit Corp. 20,000 381
Fidelity Bankshares, Inc. 4,000 156
First Financial Holdings, Inc. 9,300 283
o Instinet Group, Inc. 80,000 384
Northrim BanCorp, Inc. 4,000 91
o Portfolio Recovery Associates, Inc. 7,600 256
Santander BanCorp 8,500 237
-----------
2,018
NON-DURABLES & ENTERTAINMENT 1.7%
--------------------------------------------------------------------------
o American Greetings Corp.,
Class A 11,000 291
Dover Motorsports, Inc. 3,500 17
o Luby's, Inc. 13,000 85
o Stewart Enterprises, Inc.,
Class A 33,500 239
o Trans World Entertainment
Corp. 27,000 280
-----------
912
NON-FERROUS METALS 0.4%
--------------------------------------------------------------------------
o RTI International Metals, Inc. 12,000 240
OIL: DOMESTIC 2.5%
--------------------------------------------------------------------------
o CAL Dive International, Inc. 5,800 205
o Meridian Resource Corp. 41,000 330
=o Tesoro Petroleum Corp. 28,500 863
-----------
1,398
OPTICAL & PHOTO 0.7%
--------------------------------------------------------------------------
o Photronics, Inc. 21,000 369
PAPER & FOREST PRODUCTS 2.5%
--------------------------------------------------------------------------
o Buckeye Technologies, Inc. 8,300 88
(2) Potlatch Corp. 27,000 1,271
-----------
1,359
PRODUCER GOODS & MANUFACTURING 7.6%
--------------------------------------------------------------------------
Fedders Corp. 34,300 123
= Graco, Inc. 23,400 805
o Hexcel Corp. 19,900 308
=(6) Matthews International Corp.,
Class A 28,700 962
Middleby Corp. 4,500 221
Sauer-Danfoss, Inc. 8,000 145
Steelcase, Inc., Class A 9,400 123
o Strattec Security Corp. 3,400 214
Tennant Co. 8,600 351
o Tenneco Automotive, Inc. 29,200 372
= The Timken Co. 24,000 576
-----------
4,200
RAILROAD & SHIPPING 0.8%
--------------------------------------------------------------------------
Overseas Shipholding Group 7,500 427
REAL PROPERTY 0.8%
--------------------------------------------------------------------------
o American Retirement Corp. 40,000 324
o Jones Lang LaSalle, Inc. 3,900 125
-----------
449
48 See financial notes.
SCHWAB SMALL-CAP EQUITY FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
RETAIL 2.8%
--------------------------------------------------------------------------
Aaron Rents, Inc. 6,300 137
o Books-A-Million, Inc. 33,500 275
The Cato Corp., Class A 15,200 349
o Charming Shoppes, Inc. 22,500 172
DEB Shops, Inc. 1,400 34
=o The Men's Wearhouse, Inc. 7,200 224
Ruddick Corp. 18,200 366
-----------
1,557
STEEL 0.6%
--------------------------------------------------------------------------
Carpenter Technology Corp. 6,500 308
TELEPHONE 2.8%
--------------------------------------------------------------------------
o Alaska Communications Systems Group, Inc. 34,500 243
o(7) Commonwealth Telephone Enterprises,
Inc. 20,900 954
CT Communications, Inc. 2,300 29
North Pittsburgh Systems, Inc. 9,700 200
o Ulticom, Inc. 5,900 101
-----------
1,527
TOBACCO 0.4%
--------------------------------------------------------------------------
o M&F Worldwide Corp. 9,700 130
Vector Group Ltd. 4,200 65
-----------
195
TRAVEL & RECREATION 1.9%
--------------------------------------------------------------------------
Ameristar Casinos, Inc. 15,000 521
o Argosy Gaming Co. 8,800 348
o Shuffle Master, Inc. 4,500 190
-----------
1,059
TRUCKING & FREIGHT 2.3%
--------------------------------------------------------------------------
o Forward Air Corp. 9,900 407
= Heartland Express, Inc. 39,250 803
USF Corp. 1,500 54
-----------
1,264
UTILITIES: ELECTRIC & GAS 2.6%
--------------------------------------------------------------------------
(9) Cleco Corp. 48,500 883
UIL Holdings Corp. 5,700 289
o Veritas DGC, Inc. 12,500 264
-----------
1,436
SECURITY FACE AMOUNT
RATE, MATURITY DATE ($ x 1,000)
SHORT-TERM INVESTMENTS
2.7% of net assets
Brown Brothers Harriman,
Grand Cayman Time Deposit
1.29%, 11/01/04 5 5
HSBC Bank, USA Grand
Cayman Time Deposit
1.29%, 11/01/04 1,500 1,500
-----------
1,505
U.S. TREASURY OBLIGATION
0.2% of net assets
= U.S. Treasury Bill
1.63%, 12/16/04 90 90
END OF INVESTMENTS.
In addition to the above, the fund held the following at 10/31/04. All numbers x
1,000 except number of contracts.
FUTURES CONTRACTS
NUMBER OF CONTRACT UNREALIZED
CONTRACTS VALUE GAINS
Russell 2000 Index,
Long expires 12/17/04 6 1,754 44
See financial notes. 49
SCHWAB SMALL-CAP EQUITY FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value $55,001 a
Receivables:
Fund shares sold 113
Dividends 22
Investments sold 156
Prepaid expenses + 11
-----------
TOTAL ASSETS 55,303
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 39
Investments bought 88
Due to brokers for futures 2
Investment adviser and administrator fees 4
Transfer agent and shareholder service fees 1
Accrued expenses + 50
----------
TOTAL LIABILITIES 184
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 55,303
TOTAL LIABILITIES - 184
----------
NET ASSETS $55,119
NET ASSETS BY SOURCE
Capital received from investors 41,426
Net realized capital gains 7,011 b
Net unrealized capital gains 6,682 b
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $36,653 2,594 $14.13
Select Shares $18,466 1,304 $14.16
Unless stated, all numbers x 1,000.
a The fund paid $48,363 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $62,623
Sales/maturities $57,389
The fund's total security transactions with other SchwabFunds(R) during
the period were $221.
b These derive from investments and futures.
FEDERAL TAX DATA
- -------------------------------------------------------
PORTFOLIO COST $48,363
NET UNREALIZED GAINS AND LOSSES:
Gains $7,615
Losses + (977)
-----------
$6,638
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $4,863
Long-term capital gains $2,192
RECLASSIFICATIONS:
Net investment income not
yet distributed $143
Reclassified as:
Net realized capital gains ($143)
50 See financial notes.
SCHWAB SMALL-CAP EQUITY FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $467
Interest + 9
-----------
TOTAL INVESTMENT INCOME 476
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized gains on investments 7,051
Net realized gains on futures contracts + 132
-----------
NET REALIZED GAINS 7,183
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 2,239
Net unrealized gains on futures contracts + 14
-----------
NET UNREALIZED GAINS 2,253
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 524 a
Transfer agent and shareholder service fees:
Investor Shares 83 b
Select Shares 17 b
Trustees' fees 5 c
Custodian fees 35
Portfolio accounting fees 22
Professional fees 33
Registration fees 25
Shareholder reports 29
Other expenses + 4
-----------
Total expenses 777
Expense reduction - 158 d
-----------
NET EXPENSES 619
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 476
NET EXPENSES - 619
-----------
NET INVESTMENT LOSS (143)
NET REALIZED GAINS 7,183 e
NET UNREALIZED GAINS + 2,253 e
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $9,293
Unless stated, all numbers x 1,000.
a Calculated as 1.05% of average daily net assets. These fees are paid to
Charles Schwab Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% and
0.05% of the assets of each respective share class. These fees are paid to
Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d Includes $153 from the investment adviser (CSIM) and $5 from the transfer
agent and shareholder service agent (Schwab). These reductions reflect a
guarantee by CSIM and Schwab to limit the operating expenses of this fund
through February 28, 2005, as follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
-------------------------------------------------------
Investor Shares 1.30
Select Shares 1.12
This limit excludes interest, taxes and certain non-routine expenses.
e These add up to a net gain on investments of $9,436.
See financial notes. 51
SCHWAB SMALL-CAP EQUITY FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 7/1/03*-10/31/03
Net investment loss ($143) ($50)
Net realized gains 7,183 786
Net unrealized gains + 2,253 4,429
-------------------------------------
INCREASE IN NET ASSETS
FROM OPERATIONS 9,293 5,165
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
DISTRIBUTIONS FROM NET REALIZED GAINS
Investor Shares 499 --
Select Shares + 266 --
-------------------------------------
TOTAL DISTRIBUTIONS FROM NET
REALIZED GAINS $765 $-- a,b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 7/1/03-10/31/03
SHARES VALUE SHARES VALUE
SHARES SOLD
Investor Shares 1,153 $15,053 2,272 $23,526
Select Shares + 301 3,944 1,245 12,704
--------------------------------------------------
TOTAL SHARES SOLD 1,454 $18,997 3,517 $36,230
SHARES REINVESTED
Investor Shares 37 $453 -- $--
Select Shares + 17 204 -- --
--------------------------------------------------
TOTAL SHARES REINVESTED 54 $657 -- $--
SHARES REDEEMED
Investor Shares (763) ($10,029) (105) ($1,137)
Select Shares + (221) (2,885) (38) (407)
--------------------------------------------------
TOTAL SHARES REDEEMED (984) ($12,914) (143) ($1,544)
NET TRANSACTIONS IN FUND
SHARES 524 $6,740 3,374 $34,686
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 7/1/03-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 3,374 $39,851 -- $--
Total increase + 524 15,268 3,374 39,851 c
--------------------------------------------------
END OF PERIOD 3,898 $55,119 3,374 $39,851 d
* Commencement of operations.
Unless stated, all numbers x 1,000.
a UNAUDITED
The fund designates $73 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h)(ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for the use in
preparing their 2004 income tax return.
b The tax-basis components of distributions paid are:
CURRENT PERIOD
Ordinary income $642
Long-term capital gains $123
PRIOR PERIOD
Ordinary income $--
Long-term capital gains $--
c Figures for shares represent shares sold plus shares reinvested, minus
shares redeemed. Figures for net assets represent the changes in net
assets from operations plus the changes in value of transactions in fund
shares, minus distributions paid.
d There was no distributable net investment income at the end of the current
and prior period.
52 See financial notes.
SCHWAB HEDGED EQUITY FUND(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 9/3/02 1-
10/31/04 10/31/03 10/31/02
- -----------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- -----------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 11.53 9.84 10.00
---------------------------------------------------------
Income or loss from investment operations:
Net investment loss (0.09) (0.09) (0.01)
Net realized and unrealized gains or losses 1.57 1.78 (0.15)
---------------------------------------------------------
Total income or losses from investment operations 1.48 1.69 (0.16)
---------------------------------------------------------
Net asset value at end of period 13.01 11.53 9.84
---------------------------------------------------------
Total return (%) 12.84 17.17 (1.60) 2
RATIOS/SUPPLEMENTAL DATA (%)
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses (including dividend
expense on short sales) 2.43 2.37 2.39 3
Net operating expenses (excluding dividend
expense on short sales) 2.10 4 2.00 2.00 3
Gross operating expenses 2.71 2.77 3.33 3
Net investment loss (0.86) (0.90) (0.79) 3
Portfolio turnover rate 99 114 68 2
Net assets, end of period ($ x 1,000,000) 68 44 32
1 Commencement of operations.
2 Not annualized.
3 Annualized.
4 The ratio of net operating expenses would have been 2.00% if interest expense
had not been included.
See financial notes. 53
SCHWAB HEDGED EQUITY FUND
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q is
available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the security.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top five long holdings/top five short positions
o Non-income producing security
@ All or a portion of this security is held as collateral for short sales
COST/PROCEEDS VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- ---------------------------------------------------------------------------------
98.1% COMMON STOCK 57,745 66,965
7.7% SHORT-TERM
INVESTMENTS 5,247 5,247
- ---------------------------------------------------------------------------------
105.8% TOTAL INVESTMENTS 62,992 72,212
(27.8)% SHORT SALES (18,860) (18,951)
22.0% OTHER ASSETS AND
LIABILITIES, NET 15,030
- ---------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 68,291
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 98.1% of net assets
AEROSPACE / DEFENSE 4.2%
--------------------------------------------------------------------------
General Dynamics Corp. 2,900 296
Goodrich Corp. 12,800 395
@ Lockheed Martin Corp. 7,800 430
Raytheon Co. 5,200 190
@ Rockwell Collins, Inc. 9,500 337
@ Rockwell International Corp. 9,600 400
Textron, Inc. 900 61
@ The Boeing Co. 8,000 399
@ United Technologies Corp. 3,500 325
-----------
2,833
AIR TRANSPORTATION 1.0%
--------------------------------------------------------------------------
o AMR Corp. 22,000 170
@ Fedex Corp. 1,900 173
Sabre Group Holdings, Inc. 16,000 344
-----------
687
APPAREL 0.8%
--------------------------------------------------------------------------
Nike, Inc., Class B 2,500 203
@ VF Corp. 6,900 372
-----------
575
AUTOMOBILE PRODUCTS / MOTOR VEHICLES 3.0%
--------------------------------------------------------------------------
o Advance Auto Parts, Inc. 7,100 278
Cummins Engine, Inc. 5,400 378
@ Eaton Corp. 5,600 358
Ford Motor Co. 22,000 287
o Goodyear Tire & Rubber Co. 22,000 222
@ Polars Industries Partners LP 7,200 427
Winnebago Industries, Inc. 3,300 104
-----------
2,054
BANKS 4.4%
--------------------------------------------------------------------------
Associated Bancorp. 10,300 357
Bank of Hawaii Corp. 4,800 229
Colonial Bancgroup, Inc. 200 4
Comerica, Inc. 6,600 406
@ Doral Financial Corp. 9,750 409
Huntington Bancshares, Inc. 100 2
Marshall & Ilsley Corp. 8,100 340
National City Corp. 8,300 324
PNC Financial Services Group 4,700 246
@ UnionBanCal Corp. 6,600 401
Zions Bancorp. 4,649 308
-----------
3,026
BUSINESS MACHINES & SOFTWARE 6.2%
--------------------------------------------------------------------------
@ 3M Co. 3,500 272
@ Adobe Systems, Inc. 2,200 123
54 See financial notes.
SCHWAB HEDGED EQUITY FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o@(1) Apple Computer, Inc. 9,600 504
@(1) Autodesk, Inc. 8,789 464
o@ BMC Software, Inc. 22,000 416
o@ Cisco Systems, Inc. 11,300 217
o Comverse Technology, Inc. 14,300 295
Icon Office Solutions, Inc. 2,800 29
o Juniper Networks, Inc. 4,100 109
o Lexmark International, Inc., Class A 3,700 308
o@ NCR Corp. 7,900 445
o PalmOne, Inc. 5,200 151
o@ Storage Technology Corp. 14,500 392
o Sybase, Inc. 12,600 199
o Xerox Corp. 22,000 325
-----------
4,249
BUSINESS SERVICES 11.6%
--------------------------------------------------------------------------
o@ Apollo Group Inc., Class A 5,465 361
Automatic Data Processing, Inc. 4,600 199
Catalina Marketing Corp. 4,000 102
@ Cendant Corp. 16,400 338
Certegy, Inc. 6,900 244
o@ CheckFree Corp. 13,800 428
o@ Citrix Systems, Inc. 14,816 357
o CSG Systems International, Inc. 17,100 287
o Digital River, Inc. 12,000 400
o Earthlink, Inc. 22,000 227
o Education Management Corp. 6,660 179
o Filenet Corp. 7,787 217
o@ Hyperion Solutions Corp. 10,217 410
@ IMS Health, Inc. 15,900 337
o@ InFoSpace, Inc. 8,755 460
o Intuit, Inc. 2,200 100
o Kronos, Inc. 6,499 319
o@(3) Macrovision Corp. 17,410 471
o McAfee, Inc. 15,100 365
o Pixar 300 24
o@ Polycom, Inc. 20,957 433
Reynolds & Reynolds Co., Class A 500 12
Robert Half International, Inc. 11,400 302
o RSA Security, Inc. 900 18
o Sapient Corp. 1,600 13
The Brink's Co. 9,700 311
o Tibco Software, Inc. 4,500 44
o United Defense Industries, Inc. 7,900 317
o@ United Online, Inc. 21,944 206
o VeriSign, Inc. 17,093 459
-----------
7,940
CHEMICAL 2.2%
--------------------------------------------------------------------------
Cabot Corp. 9,900 337
Georgia Gulf Corp. 3,500 159
MacDermid, Inc. 3,300 104
@ Monsanto Co. 700 30
@ PPG Industries, Inc. 5,100 325
@ Rohm & Haas Co. 4,700 199
@ Sigma Aldrich Corp. 6,516 363
-----------
1,517
CONSTRUCTION 1.7%
--------------------------------------------------------------------------
@ KB Home 2,200 181
@ Masco Corp. 11,300 387
The Stanley Works 400 18
Vulcan Materials Co. 7,000 348
o Wesco International, Inc. 8,100 203
-----------
1,137
CONSUMER DURABLES 1.3%
--------------------------------------------------------------------------
@ Black & Decker Corp. 5,300 426
o@ Penn National Gaming, Inc. 9,364 389
Toro Co. 1,500 102
-----------
917
CONTAINERS 0.4%
--------------------------------------------------------------------------
o Crown Cork & Seal Co., Inc. 22,000 250
ELECTRONICS 7.2%
--------------------------------------------------------------------------
o Aspect Telecomunications Corp. 1,200 11
o Avid Technology, Inc. 8,023 425
AVX Corp. 6,000 72
o Cree Resh, Inc. 300 10
o Dionex Corp. 3,691 207
o Getty Images, Inc. 4,800 284
@(4) Harman International Industries,
Inc. 3,900 469
ITT Industries, Inc. 300 24
See financial notes. 55
SCHWAB HEDGED EQUITY FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o@ LAM Research Corp. 2,910 76
Linear Technology Corp. 10,900 413
o LSI Logic Corp. 15,500 71
@ Motorola, Inc. 22,000 380
PerkinElmer, Inc. 22,000 452
@ Qualcomm, Inc. 10,200 427
@ Scientific Atlanta, Inc. 14,200 389
o Siliconix, Inc. 993 41
o Synopsys, Inc. 22,000 357
o Tellabs, Inc. 3,300 26
o Thermo Electron Corp. 100 3
Thomas & Betts Corp. 8,800 249
o Western Wireless Corp. Class A 12,670 369
o Zebra Technology Corp., Class A 3,000 159
-----------
4,914
ENERGY: RAW MATERIALS 2.3%
--------------------------------------------------------------------------
Burlington Resources, Inc. 9,200 382
Devon Energy Corp. 1,300 96
o FMC Technologies, Inc. 12,700 384
@ Occidental Petroleum Corp. 4,600 257
@ Peabody Energy Corp. 6,900 440
-----------
1,559
FOOD & AGRICULTURE 1.5%
--------------------------------------------------------------------------
o 7-Eleven, Inc. 7,400 156
Corn Products International, Inc. 8,800 433
H.J. Heinz Co. 2,800 102
@ Kellogg Co. 8,000 344
-----------
1,035
HEALTHCARE / DRUGS & MEDICINE 7.1%
--------------------------------------------------------------------------
o Amerigroup Corp. 1,000 60
Applied Biosystems Group 20,900 399
@ Bausch & Lomb, Inc. 6,200 378
@ Becton Dickinson & Co. 8,400 441
o Cephalon, Inc. 8,406 401
o@ Conventry Healthcare, Inc. 8,750 358
o@ DaVita, Inc. 10,350 307
Gendex Corp. 155 8
o Humana, Inc. 2,200 42
Johnson & Johnson, Inc. 7,300 426
Medicis Pharmaceutical Corp., Class A
10,300 419
Merck & Co., Inc. 1,000 31
o@ Pacificare Health Systems, Inc. 1,900 68
Select Medical Corp. 3,500 60
o Sierra Health Services, Inc. 8,900 425
@ United Healthcare Corp. 4,800 347
@ Valeant Pharmaceuticals International
18,300 439
o@ VISX, Inc. 16,300 272
-----------
4,881
HOUSEHOLD PRODUCTS 0.4%
--------------------------------------------------------------------------
Estee Lauder Cos., Inc., Class A 5,800 249
Gillette Co. 1,500 62
-----------
311
INSURANCE 8.0%
--------------------------------------------------------------------------
Aetna, Inc. 300 28
@ AFLAC, Inc. 7,300 262
Alfa Corp. 1,700 24
@ Allstate Corp. 5,700 274
AMBAC, Inc. 4,200 328
Arthur J. Gallagher & Co. 14,200 399
Cigna Corp. 600 38
o CNA Financial Corp. 8,500 203
Delphi Financial Group Inc., Class A
4,150 170
@ Fidelity National Financial, Inc. 8,705 328
First American Financial Corp. 12,500 390
Lincoln National Corp. 6,400 280
Metlife, Inc. 8,400 322
Nationwide Financial Services, Inc. 6,300 218
Odyssey Re Holdings Corp. 4,000 87
o Ohio Casualty Corp. 3,501 73
Prudential Financial, Inc. 8,500 395
Reinsurance Group of America, Inc.
3,500 151
Safeco Corp. 6,891 319
StanCorp. Financial Group, Inc. 3,300 249
@ The Progressive Corp. 3,600 337
Transatlantic Holdings, Inc. 925 54
o UICI 200 6
Unitrin, Inc. 2,300 99
56 See financial notes.
SCHWAB HEDGED EQUITY FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
@ W.R. Berkley Corp. 8,250 353
o Wellchoice, Inc. 2,100 88
-----------
5,475
MEDIA 1.7%
--------------------------------------------------------------------------
John Wiley & Sons, Inc. 1,600 52
McClatchy Co., Class A 1,000 70
@ McGraw Hill Cos., Inc. 5,100 440
Readers Digest Association, Inc.
16,500 232
o Time Warner, Inc. 22,000 366
-----------
1,160
MISCELLANEOUS FINANCE 2.7%
--------------------------------------------------------------------------
o@ Americredit Co. 19,700 382
o Bok Financial Corp. 800 36
@ Capital One Financial Corp. 5,500 406
o Compucredit Corp. 3,212 61
@ Countrywide Credit Industries, Inc.
12,500 399
@ Franklin Resources, Inc. 5,300 321
MBNA Corp. 3,500 90
R & G Financial Corp., Class B 3,000 113
Santander Bancorp 330 9
The Goldman Sachs Group, Inc. 100 10
-----------
1,827
NON-DURABLES & ENTERTAINMENT 2.7%
--------------------------------------------------------------------------
o@ American Greetings Corp., Class A
16,200 429
Hasbro, Inc. 17,300 306
o Jack In The Box, Inc. 8,400 280
McDonalds Corp. 14,000 408
o Starbucks Corp. 100 5
@ Yum! Brands, Inc. 9,800 426
-----------
1,854
NON-FERROUS METALS 0.5%
--------------------------------------------------------------------------
o@ Phelps Dodge Corp. 3,800 333
OIL: DOMESTIC 1.7%
--------------------------------------------------------------------------
o@ Cal Dive International, Inc. 12,241 433
ChevronTexaco Corp. 200 11
Sunoco, Inc. 3,000 223
o@ Tesoro Petroleum Corp. 13,900 421
o Todco, Class A 2,200 37
o Universal Compression Holdings, Inc.
200 7
-----------
1,132
OIL: INTERNATIONAL 0.6%
--------------------------------------------------------------------------
o@ Exxon Mobil Corp. 8,600 423
OPTICAL & PHOTO 0.9%
--------------------------------------------------------------------------
o Corning, Inc. 22,000 252
o Ingram Micro, Inc., Class A 22,000 379
-----------
631
PAPER & FOREST PRODUCTS 2.0%
--------------------------------------------------------------------------
Louisiana-Pacific Corp. 7,900 194
Meadwestavco Corp. 12,500 394
Potlatch Corp. 4,000 188
Temple-Inland, Inc. 5,900 349
Weyerhaeuser Co. 3,700 232
-----------
1,357
PRODUCER GOODS & MANUFACTURING 2.7%
--------------------------------------------------------------------------
Emerson Electric Co. 2,100 135
o@ FMC Corp. 8,100 355
@ Graco, Inc. 7,950 273
Grainger, Inc. 200 12
HNI Corp. 1,300 53
Hubbell, Inc. 4,200 192
o KOS Pharmaceuticals, Inc. 200 7
Mathews International Corp., Class A
3,159 106
Parker Hannifin Corp. 200 14
Steelcase, Inc., Class A 8,100 106
o@ Terex Corp. 10,300 391
Timken Co. 7,200 173
-----------
1,817
RAILROAD & SHIPPING 0.7%
--------------------------------------------------------------------------
@ Overseas Shipholding Group, Inc.
8,100 461
See financial notes. 57
SCHWAB HEDGED EQUITY FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
RETAIL 5.5%
--------------------------------------------------------------------------
Aaron Rents, Inc. 8,750 190
Abercrombie & Fitch Co., Class A
11,400 447
o@ Barnes & Noble, Inc. 8,700 289
Circuit City Stores, Inc. 22,000 357
Claire's Stores, Inc. 16,000 416
Costco Cos., Inc. 6,400 307
Michael's Stores, Inc. 2,400 70
o Petco Animal Supplies, Inc. 10,526 377
o Rite Aid Corp. 20,000 74
Ruddick Corp. 5,000 101
o Staples, Inc. 12,957 385
The Gap, Inc. 17,300 346
o Toys `R' Us, Inc. 22,000 396
-----------
3,755
STEEL 1.2%
--------------------------------------------------------------------------
Carpenter Technology Corp. 8,800 418
United States Steel Corp. 10,900 400
-----------
818
TELEPHONE 2.9%
--------------------------------------------------------------------------
Alltel Corp. 3,600 198
o American Tower Corp. 7,800 134
AT&T Corp. 2,300 39
o Avaya, Inc. 22,000 317
BellSouth Corp. 9,400 250
@ Century Telephone Enterprises, Inc.
12,900 414
o Citizens Communications Co. 22,000 295
SBC Communications, Inc. 1,100 28
Verizon Communications, Inc. 7,400 289
-----------
1,964
TOBACCO 0.3%
--------------------------------------------------------------------------
UST, Inc. 4,900 202
TRAVEL & RECREATION 0.8%
--------------------------------------------------------------------------
o Argosy Gaming Co. 8,400 332
Choice Hotels International, Inc. 3,800 190
-----------
522
TRUCKING & FREIGHT 2.9%
--------------------------------------------------------------------------
CNF, Inc. 9,500 416
Heartland Express, Inc. 10,645 218
J.B. Hunt Transport Services, Inc.
10,300 421
o Landstar System, Inc. 6,738 458
Paccar, Inc. 6,413 444
-----------
1,957
UTILITIES: ELECTRIC & GAS 5.0%
--------------------------------------------------------------------------
o AES Corp. 22,000 240
American Electric Power Co., Inc. 9,900 326
Constellation Energy Group, Inc. 8,700 353
Duke Energy Corp. 16,300 400
@(2) Edison International 15,600 476
@ Exelon Corp. 900 36
FirstEnergy Corp. 4,000 165
Kinder Morgan, Inc. 1,400 90
National Fuel Gas Co. 8,600 241
Questar Corp. 5,300 254
@ TXU Corp. 7,100 435
Xcel Energy, Inc. 22,000 376
-----------
3,392
SHORT-TERM INVESTMENTS 7.7% of net assets
OTHER INVESTMENT COMPANIES 7.7%
--------------------------------------------------------------------------
Provident Institutional Funds--
TempCash 935,792 936
Provident Institutional Funds--
TempFund 4,310,801 4,311
-----------
5,247
END OF INVESTMENTS.
SHORT SALES 27.8% of net assets
AEROSPACE / DEFENSE 0.6%
--------------------------------------------------------------------------
(1) Engineered Support Systems, Inc.
8,695 418
58 See financial notes.
SCHWAB HEDGED EQUITY FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
AIR TRANSPORTATION 0.3%
--------------------------------------------------------------------------
Jetblue Airways Corp. 7,788 172
Southwest Airlines, Inc. 3,100 49
-----------
221
AUTOMOBILE PRODUCTS / MOTOR VEHICLES 0.6%
--------------------------------------------------------------------------
American Axle & Manufacturing Holdings,
Inc. 800 23
General Motors Corp. 1,300 50
O'Reilly Automotive, Inc. 3,662 158
Sonic Automotive, Inc. 1,400 28
Superior Industries International, Inc.
4,600 126
-----------
385
AUTOMOTIVE PRODUCTS 0.1%
--------------------------------------------------------------------------
Arvin Meritor, Inc. 2,000 37
BANKS 0.4%
--------------------------------------------------------------------------
Capitol Federal Financial 1,393 47
Fifth Third Bancorp 3,700 182
First Bancorp., Inc. 493 13
FNB Corp. 2,500 51
Hudson United Bancorp. 300 12
-----------
305
BUSINESS MACHINES & SOFTWARE 0.2%
--------------------------------------------------------------------------
Diebold, Inc. 1,800 86
Novell, Inc. 10,309 75
Sandisk Corp. 300 6
-----------
167
BUSINESS SERVICES 3.0%
--------------------------------------------------------------------------
Bearingpoint, Inc. 18,700 163
Corinthian Colleges, Inc. 15,800 227
(3) DST Systems, Inc. 8,500 381
GTech Holdings Corp. 6,600 156
Mercury Interactive Corp. 2,700 117
National Instruments Corp. 6,967 192
Omnicom Group, Inc. 1,800 142
PeopleSoft, Inc. 1,100 23
Red Hat, Inc. 10,200 131
Take Two Interactive Software, Inc.
2,700 89
Weight Watchers International, Inc.
7,000 251
Wynn Resorts Ltd. 3,500 204
-----------
2,076
CHEMICAL 0.0%
--------------------------------------------------------------------------
Crompton Corp. 1,100 10
CONSTRUCTION 0.6%
--------------------------------------------------------------------------
Fluor Corp. 3,800 176
Hovnanian Enterprises, Inc. 300 11
Meritage Corp. 200 18
Pulte Corp. 3,700 203
-----------
408
CONSUMER DURABLES 0.1%
--------------------------------------------------------------------------
Mohawk Industries, Inc. 1,100 94
ELECTRONICS 1.6%
--------------------------------------------------------------------------
American Power Conversion Corp.
9,937 192
Amis Holdings, Inc. 317 5
Amkor Technology, Inc. 1,000 5
Andrew Corp. 19,404 271
Arrow Electronics, Inc. 3,900 93
Broadcom Corp., Class A 300 8
Cox Radio, Inc. 1,000 16
Intersil Holding Corp. 6,500 106
Silicon Laboratories, Inc. 3,618 108
Xilinx, Inc. 9,900 304
-----------
1,108
ENERGY: RAW MATERIALS 0.7%
--------------------------------------------------------------------------
Arch Coal, Inc. 6,200 202
Tidewater, Inc. 8,900 275
-----------
477
FOOD & AGRICULTURE 1.0%
--------------------------------------------------------------------------
Coca-Cola Enterprises, Inc. 8,900 186
Dean Foods Co. 500 15
Ralcorp Holdings, Inc. 2,400 88
Sensient Technologies Corp. 8,400 183
See financial notes. 59
SCHWAB HEDGED EQUITY FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Smithfield Foods, Inc. 700 17
Sysco Corp. 5,400 174
-----------
663
GOLD 0.3%
--------------------------------------------------------------------------
Newmont Mining Corp. 3,600 171
HEALTHCARE / DRUGS & MEDICINE 3.3%
--------------------------------------------------------------------------
Accredo Heath, Inc. 1,400 32
Atherogenics, Inc. 4,000 120
Beckman Coulter, Inc. 100 6
Chiron Corp. 200 7
Cymer, Inc. 100 3
Eli Lilly & Co. 3,300 181
Forest Laboratories, Inc. 1,300 58
Genzyme Corp. 2,700 142
HCA, Inc. 2,000 73
Health Management Associates, Inc.
4,900 101
Healthcare Compare Corp. 2,465 39
Henry Schein, Inc. 2,100 133
Human Genome Sciences, Inc. 6,300 65
Ivax Corp. 11,625 210
Martek Biosciences Corp. 3,384 159
Medicines Company 1,300 35
NBTY, Inc. 3,000 83
Neurocrine Biosciences, Inc. 3,913 182
(5) Omnicare, Inc. 12,300 339
Par Pharmaceutical Cos., Inc. 200 8
Pediatrix Medical Group, Inc. 1,600 90
Pharmaceutical Product Developement,
Inc. 2,085 88
Quest Diagnostic, Inc. 900 79
Tenet Healthcare Corp. 300 3
-----------
2,236
INSURANCE 0.7%
--------------------------------------------------------------------------
Fremont General Corp. 9,200 198
Jefferson-Pilot Corp. 1,500 72
MBIA, Inc. 2,300 133
The Commerce Group, Inc. 400 20
The Phoenix Cos., Inc. 1,700 18
UnumProvident Corp. 2,200 30
-----------
471
MEDIA 0.5%
--------------------------------------------------------------------------
Citadel Broadcasting Corp. 4,300 63
Clear Channel Communications, Inc.
500 17
CNET Networks, Inc. 7,500 61
Gaylord Entertainment Co., Class A
100 3
Knight-Ridder, Inc. 2,500 171
-----------
315
MISCELLANEOUS FINANCE 1.9%
--------------------------------------------------------------------------
A.G. Edwards, Inc. 100 4
CapitalSource, Inc. 5,900 132
Downey Financial Corp. 200 11
Federated Investors, Inc. 10,500 304
First Marblehead Corp. (The) 4,900 263
Lehman Brothers Holdings, Inc. 900 74
MAF Bancorp, Inc. 4,136 177
Morgan Stanley 1,800 92
Queens County Bancorp, Inc. 11,000 202
Waddell & Reed Financial, Inc. 100 2
Webster Financial Corp. 400 19
-----------
1,280
NON-DURABLES & ENTERTAINMENT 1.3%
--------------------------------------------------------------------------
Electronic Arts, Inc. 2,100 94
Krispy Kreme Doughnuts, Inc. 3,500 37
Leapfrog Enterprises, Inc. 2,100 26
Mattel, Inc. 6,100 107
Outback Steakhouse, Inc. 3,000 119
Panera Bread Co., Class A 600 21
The Cheesecake Factory, Inc. 5,100 221
Tupperware Corp. 9,300 155
Wendy's International, Inc. 2,400 80
-----------
860
NON-FERROUS METALS 0.4%
--------------------------------------------------------------------------
Alcoa, Inc. 2,600 85
Freeport-McMoRan Copper & Gold, Inc.,
Class B 4,500 163
-----------
248
OIL: DOMESTIC 1.1%
--------------------------------------------------------------------------
Chesapeake Energy Corp. 7,900 127
Patina Oil & Gas Corp 3,400 97
60 See financial notes.
SCHWAB HEDGED EQUITY FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Patterson Energy, Inc. 1,100 21
Quicksilver Resources, Inc. 100 3
St. Mary Land & Exploration Co. 1,200 47
Stone Energy Corp. 4,000 165
XTO Energy Inc. 9,000 300
-----------
760
OIL: INTERNATIONAL 0.2%
--------------------------------------------------------------------------
Global SantaFe Corp. 4,900 145
OPTICAL & PHOTO 0.1%
--------------------------------------------------------------------------
Lexar Media, Inc. 12,500 85
PRODUCER GOODS & MANUFACTURING 2.1%
--------------------------------------------------------------------------
Avery Dennison Corp. 2,500 152
Caterpillar, Inc. 2,100 169
Curtiss-Wright Corp. 1,400 78
General Electric Co. 7,200 246
GrafTech International Ltd. 18,000 167
Herman Miller, Inc. 100 2
Johnson Controls, Inc. 900 52
Pall Corp. 6,500 168
Teleflex, Inc. 3,700 162
Trinity Industries, Inc. 1,000 31
York International Corp. 6,100 194
-----------
1,421
RETAIL 3.1%
--------------------------------------------------------------------------
Autozone, Inc. 1,200 98
Carmax, Inc. 5,600 148
CVS Corp. 2,700 117
Dollar Tree Stores, Inc. 300 9
Family Dollar Stores, Inc. 5,900 174
(4) Foot Locker, Inc. 14,800 361
Kroger Co. 100 2
May Department Stores Co. 6,700 175
Petsmart, Inc. 7,505 240
Pier 1 Imports, Inc. 100 2
Ross Stores, Inc. 3,622 95
Safeway, Inc. 12,600 230
Target Corp. 1,100 55
The TJX Max Cos., Inc. 3,600 86
Tiffany & Co. 5,700 167
Tractor Supply Co. 1,300 47
Walgreen Co. 400 14
Whole Foods Market, Inc. 1,000 81
-----------
2,101
STEEL 0.0%
--------------------------------------------------------------------------
Worthington Industries, Inc. 400 8
TELEPHONE 0.5%
--------------------------------------------------------------------------
Sprint Corp. 400 8
UTStarcom, Inc. 18,250 313
-----------
321
TOBACCO 0.3%
--------------------------------------------------------------------------
Universal Corp. 4,200 192
TRAVEL & RECREATION 0.4%
--------------------------------------------------------------------------
Callaway Golf Co. 4,600 48
Carnival Corp. 2,400 121
Dick's Sporting Goods, Inc. 2,100 76
Station Casinos, Inc. 500 25
-----------
270
TRUCKING & FREIGHT 0.2%
--------------------------------------------------------------------------
C.H. Robinson Worldwide, Inc. 3,052 165
UTILITIES: ELECTRIC & GAS 2.2%
--------------------------------------------------------------------------
Aqua America, Inc. 4,900 107
Consolidated Edison, Inc. 1,500 65
Entergy Corp. 900 59
Equitable Resources, Inc. 6,000 332
Indiana Energy, Inc. 4,100 106
NiSource, Inc. 12,600 270
(2) Pepco Holdings, Inc. 18,800 388
Piedmont Natural Gas Co., Inc. 400 18
Puget Energy, Inc. 6,000 140
Southern Union Co. 2,200 48
-----------
1,533
END OF SHORT SALE POSITIONS.
See financial notes. 61
SCHWAB HEDGED EQUITY FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value $72,212 a
Deposits with broker for short sales 14,722
Receivables:
Fund shares sold 373
Interest 17
Dividends 36
Prepaid expenses + 12
-----------
TOTAL ASSETS 87,372
LIABILITIES
- --------------------------------------------------------------------------------
Securities sold short, at value 18,951 b
Payables:
Fund shares redeemed 58
Dividends on short sales 13
Investment adviser and administrator fees 15
Transfer agent and shareholder service fees 2
Accrued expenses + 42
-----------
TOTAL LIABILITIES 19,081
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 87,372
TOTAL LIABILITIES - 19,081
-----------
NET ASSETS $68,291
NET ASSETS BY SOURCE
Capital received from investors 55,599
Net realized capital gains 3,563 c
Net unrealized capital gains 9,129 c
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$68,291 5,251 $13.01
Unless stated, all numbers x 1,000.
a The fund paid $62,992 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $66,141
Sales/maturities $53,201
b The proceeds for securities sold short is $18,860
c These derive from investments and short sales.
FEDERAL TAX DATA
- -------------------------------------------------------
PORTFOLIO COST $63,218
NET UNREALIZED GAINS AND LOSSES:
Gains $10,216
Losses + (1,222)
-----------
$8,994
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $--
Long-term capital gains $3,789
CAPITAL LOSSES UTILIZED $260
RECLASSIFICATIONS:
Net investment income not
yet distributed $455
Reclassified as:
Net realized capital gains ($238)
Capital received from investors ($217)
62 See financial notes.
SCHWAB HEDGED EQUITY FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $732 a
Interest + 95
-----------
TOTAL INVESTMENT INCOME 827
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized gains on investments 6,542
Net realized losses on short sales (2,356)
-----------
NET REALIZED GAINS 4,186
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 1,981
Net unrealized gains on short sales + 616
-----------
NET UNREALIZED GAINS 2,597
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 922 b
Transfer agent and shareholder service fees 132 c
Trustees' fees 5 d
Custodian and portfolio accounting fees 65
Professional fees 43
Registration fees 18
Shareholder reports 9
Interest expense 53
Other expenses + 4
-----------
Total expenses before short sales 1,251
Dividends on short sales 175
Expense reduction + (144)e
-----------
NET EXPENSES 1,282
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 827
NET EXPENSES - 1,282
-----------
NET INVESTMENT LOSS (455)
NET REALIZED GAINS 4,186 f
NET UNREALIZED GAINS + 2,597 f
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $6,328
Unless stated, all numbers x 1,000.
a An additional $1 was withheld for foreign taxes.
b Calculated as 1.75% of average daily net assets. These fees are paid to
Charles Schwab Investment Management, Inc. (CSIM).
c Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% of
the fund's assets. These fees are paid to Charles Schwab & Co., Inc.
(Schwab).
d For the fund's independent trustees only.
e This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 28,
2005, to 2.00% of average daily net assets. This limit excludes interest,
taxes, certain non-routine expenses and expenses for dividends and
interest paid on securities sold short.
f These add up to a net gain on investments of $6,783.
See financial notes. 63
SCHWAB HEDGED EQUITY FUND
Statement of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment loss ($455) ($338)
Net realized gains or losses 4,186 (235)
Net unrealized gains + 2,597 6,703
---------------------------------------------
INCREASE IN NET ASSETS
FROM OPERATIONS $6,328 $6,130
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
Shares sold 2,509 $31,194 1,672 $17,074
Shares redeemed + (1,073) (13,199) (1,153) (11,663) a
-------------------------------------------------
NET TRANSACTIONS IN FUND
SHARES 1,436 $17,995 519 $5,411
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 3,815 $43,968 3,296 $32,427
Total increase + 1,436 24,323 519 11,541 b
-------------------------------------------------
END OF PERIOD 5,251 $68,291 3,815 $43,968 c
Unless stated, all numbers x 1,000.
a The fund charges 1.50% of early withdrawal fees on shares redeemed 180
days or less after the purchase:
CURRENT PERIOD $41
PRIOR PERIOD $42
Dollar amounts are net of the redemption proceeds.
b Figures for shares represent shares sold plus shares reinvested, minus
shares redeemed. Figures for net assets represent the changes in net
assets from operations plus the changes in value of transactions in fund
shares, minus distributions paid.
c There was no distributable net investment income at the end of the current
and prior period.
64 See financial notes.
COMMUNICATIONS FOCUS FUND
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 7/3/00 1-
10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- ---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 3.57 2.84 4.16 8.13 10.00
-------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income or loss 0.05 0.02 0.03 (0.00) 2 0.00 2
Net realized and unrealized gains or losses 0.27 0.74 (1.35) (3.97) (1.87)
-------------------------------------------------------------------------
Total income or loss from investment operations 0.32 0.76 (1.32) (3.97) (1.87)
Less distributions:
Dividends from net investment income (0.01) (0.03) -- (0.00) 2 --
-------------------------------------------------------------------------
Net asset value at end of period 3.88 3.57 2.84 4.16 8.13
-------------------------------------------------------------------------
Total return (%) 9.14 26.87 (31.73) (48.82) (18.70) 3
RATIOS/SUPPLEMENTAL DATA (%)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.11 4 1.04 5 0.89 0.90 6 0.89 7
Gross operating expenses 1.68 1.77 1.68 1.30 1.71 7
Net investment income or loss 1.37 0.45 0.69 (0.02) 0.07 7
Portfolio turnover rate 80 179 94 154 45 3
Net assets, end of period ($ x 1,000,000) 10 11 9 16 32
1 Commencement of operations.
2 Per-share amount was less than $0.01.
3 Not annualized.
4 The ratio of net operating expenses would have been 1.10% if interest expense
had not been included.
5 The ratio of net operating expenses would have been 1.03% if interest expense
had not been included.
6 The ratio of net operating expenses would have been 0.89% if interest expense
had not been included.
7 Annualized.
See financial notes. 65
COMMUNICATIONS FOCUS FUND
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q is
available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top ten holding
o Non-income producing security
@ This security or a portion of this security is on loan
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
98.3% COMMON STOCK 9,347 10,197
1.7% SHORT-TERM
INVESTMENT 178 178
- --------------------------------------------------------------------------------
100.0% TOTAL INVESTMENTS 9,525 10,375
9.6% COLLATERAL INVESTED
FOR SECURITIES ON LOAN 994 994
(9.6)% OTHER ASSETS AND
LIABILITIES, NET (999)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 10,370
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 98.3% of net assets
BUSINESS MACHINES & SOFTWARE 4.0%
--------------------------------------------------------------------------
@o PTEK Holdings, Inc. 42,000 418
CONSUMER DURABLES 2.5%
--------------------------------------------------------------------------
o Gemstar--TV Guide
International, Inc. 45,000 259
ELECTRONICS 4.8%
--------------------------------------------------------------------------
o(10) Western Wireless Corp., Class A 17,000 496
MEDIA 10.0%
--------------------------------------------------------------------------
o American Tower Corp., Class A 15,500 265
John Wiley & Sons, Class A 6,000 195
McClatchy Co., Class A 3,000 209
The McGraw-Hill Cos., Inc. 4,300 371
------------
1,040
TELEPHONE 77.0%
--------------------------------------------------------------------------
@o Alamosa Holdings, Inc. 25,000 251
(3) Alltel Corp. 10,300 566
(1) AT&T Corp. 33,900 580
(7) BellSouth Corp. 19,837 529
(9) CenturyTel, Inc. 15,600 501
o(5) Citizens Communications Co. 41,500 556
o(2) Commonwealth Telephone
Enterprises, Inc. 12,600 575
CT Communications, Inc. 23,900 299
D&E Communications, Inc. 18,000 223
Hickory Tech Corp. 31,900 364
o(6) Nextel Communications, Inc.,
Class A 20,300 538
North Pittsburgh Systems, Inc. 19,300 398
o Qwest Communications
International, Inc. 121,000 414
(8) SBC Communications, Inc. 20,804 525
Telephone & Data Systems, Inc. 4,500 337
@o Time Warner Telecom, Inc.,
Class A 50,000 256
o U.S. Cellular Corp. 2,000 83
o Ubiquitel, Inc. 46,000 261
@o US LEC Corp., Class A 50,895 170
(4) Verizon Communications, Inc. 14,282 558
------------
7,984
66 See financial notes.
COMMUNICATIONS FOCUS FUND
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENT
1.7% of net assets
HSBC Bank, USA Grand
Cayman Time Deposit
1.29%, 11/01/04 178 178
END OF INVESTMENTS.
SECURITY AND NUMBER OF SHARES
COLLATERAL INVESTED FOR SECURITIES ON LOAN
9.6% of net assets
OTHER INVESTMENT COMPANIES 9.6%
-------------------------------------------------------------------------
Securities Lending Investment
Fund 993,975 994
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN.
See financial notes. 67
COMMUNICATIONS FOCUS FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value (including $929 of securities on loan) $10,375 a
Collateral invested for securities on loan 994
Receivables:
Fund shares sold 1
Dividends 26
Prepaid expenses + 6
------------
TOTAL ASSETS 11,402
LIABILITIES
- --------------------------------------------------------------------------------
Collateral invested for securities on loan 994
Payables:
Fund shares redeemed 9
Trustees' fees 1
Accrued expenses + 28
------------
TOTAL LIABILITIES 1,032
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 11,402
TOTAL LIABILITIES - 1,032
------------
NET ASSETS $10,370
NET ASSETS BY SOURCE
Capital received from investors 35,483
Net investment income not yet distributed 145
Net realized capital losses (26,108)
Net unrealized capital gains 850
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$10,370 2,672 $3.88
Unless stated, all numbers x 1,000.
a The fund paid $9,525 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $8,602
Sales/maturities $10,243
The fund's total security transactions with other SchwabFunds(R) during the
period were $39.
FEDERAL TAX DATA
- -------------------------------------------------------
PORTFOLIO COST $9,738
NET UNREALIZED GAINS AND LOSSES:
Gains $1,242
Losses + (605)
------------
$637
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $145
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $402
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2008 $824
2009 13,397
2010 8,364
2011 + 3,310
------------
$25,895
68 See financial notes.
COMMUNICATIONS FOCUS FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $264
Securities on loan + 1
--------
TOTAL INVESTMENT INCOME 265
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized gains on investments 522
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 232
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 58 a
Transfer agent and shareholder service fees 27 b
Trustees' fees 4 c
Custodian fees 32
Portfolio accounting fees 1
Professional fees 31
Registration fees 14
Shareholder reports 9
Other expenses + 4
--------
Total expenses 180
Expense reduction - 61 d
--------
NET EXPENSES 119
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 265
NET EXPENSES - 119
--------
NET INVESTMENT INCOME 146
NET REALIZED GAINS 522 e
NET UNREALIZED GAINS + 232 e
--------
INCREASE IN NET ASSETS FROM OPERATIONS $900
Unless stated, all numbers x 1,000.
a Calculated as 0.54% of average daily net assets. These fees are paid to
Charles Schwab Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% of the
fund's assets. These fees are paid to Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d Includes $54 from the investment adviser (CSIM) and $7 from the transfer agent
and shareholder service agent (Schwab). These reductions reflect a guarantee
by CSIM and Schwab to limit the operating expenses of this fund through
February 28, 2005, to 1.10% of average daily net assets. This limit excludes
interest, taxes and certain non-routine expenses.
e These add up to a net gain on investments of $754.
See financial notes. 69
COMMUNICATIONS FOCUS FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- ---------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income $146 $44
Net realized gains or losses 522 (2,109)
Net unrealized gains + 232 4,443
------------------------------------------
INCREASE IN NET ASSETS
FROM OPERATIONS 900 2,378
DISTRIBUTIONS PAID
- ---------------------------------------------------------------------------------
Dividends from net investment income $44 $87 a,b
TRANSACTIONS IN FUND SHARES
- ---------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
Shares sold 392 $1,470 825 $2,570
Shares reinvested 11 39 27 78
Shares redeemed + (834) (3,077) (1,019) (3,138) c
-------------------------------------------------
NET TRANSACTIONS
IN FUND SHARES (431) ($1,568) (167) ($490)
SHARES OUTSTANDING AND NET ASSETS
- ---------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 3,103 $11,082 3,270 $9,281
Total increase or
decrease + (431) (712) (167) 1,801 d
-------------------------------------------------
END OF PERIOD 2,672 $10,370 3,103 $11,082 e
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
The fund designates $44 of the dividend distribution for the fiscal year ended
10/31/04 as qualified dividends for the purpose of the maximum rate under
Section 1(h)(ii) of the Internal Revenue Code. Shareholders will be notified
in January 2005 via IRS Form 1099 of the amounts for the use in preparing
their 2004 income tax return.
b The tax-basis components of distributions paid are:
CURRENT PERIOD
Ordinary income $44
Long-term capital gains $--
PRIOR PERIOD
Ordinary income $87
Long-term capital gains $--
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase:
CURRENT PERIOD $2
PRIOR PERIOD $6
Dollar amounts are net of the redemption proceeds.
d Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
e Includes distributable net investment income in the amount of $145 and $43 at
the end of the current period and prior period, respectively.
70 See financial notes.
FINANCIAL SERVICES FOCUS FUND
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 7/3/00 1-
10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 11.77 9.44 9.75 11.86 10.00
----------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.08 0.11 0.12 0.09 0.04
Net realized and unrealized gains or losses 1.37 2.37 (0.28) (1.76) 1.82
----------------------------------------------------------------------
Total income or loss from investment operations 1.45 2.48 (0.16) (1.67) 1.86
Less distributions:
Dividends from net investment income (0.10) (0.15) (0.09) (0.06) --
Distributions from net realized gains -- -- (0.06) (0.38) --
----------------------------------------------------------------------
Total distributions (0.10) (0.15) (0.15) (0.44) --
----------------------------------------------------------------------
Net asset value at end of period 13.12 11.77 9.44 9.75 11.86
----------------------------------------------------------------------
Total return (%) 12.39 26.68 (1.78) (14.51) 18.60 2
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.05 1.04 3 0.89 0.89 0.89 4
Gross operating expenses 1.25 1.49 1.32 1.23 1.99 4
Net investment income 0.62 1.05 1.20 0.75 1.04 4
Portfolio turnover rate 85 181 131 151 40 2
Net assets, end of period ($ x 1,000,000) 20 18 17 21 24
1 Commencement of operations.
2 Not annualized.
3 The ratio of net operating expenses would have been 1.03% if interest expense
had not been included.
4 Annualized.
See financial notes. 71
FINANCIAL SERVICES FOCUS FUND
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q is
available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top ten holding
o Non-income producing security
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
99.8% COMMON STOCK 17,483 19,519
- --------------------------------------------------------------------------------
99.8% TOTAL INVESTMENTS 17,483 19,519
0.6% COLLATERAL INVESTED
FOR SECURITIES ON LOAN 116 116
(0.4)% OTHER ASSETS AND
LIABILITIES, NET (75)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 19,560
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 99.8% of net assets
BANKS 46.9%
--------------------------------------------------------------------------
Associated Banc-Corp. 11,500 399
BancFirst Corp. 2,500 163
Bank of America Corp. 6,260 280
(6) Bank of Hawaii Corp. 15,000 716
(10) City National Corp. 7,100 489
Columbia Banking Systems, Inc. 9,000 220
(5) Comerica, Inc. 13,100 806
Doral Financial Corp. 3,800 160
First Charter Corp. 5,000 128
First Merchants Corp. 4,000 99
Hancock Holding Co. 4,800 152
Hibernia Corp., Class A 2,500 72
Huntington Bancshares, Inc. 13,300 319
(4) KeyCorp, Inc. 25,100 843
Marshall & Ilsley Corp. 7,000 294
(1) Mellon Financial Corp. 34,000 983
National City Corp. 9,200 359
(2) Northern Trust Corp. 22,500 957
Popular, Inc. 12,500 321
(3) UnionBanCal Corp. 15,700 954
Wachovia Corp. 6,500 320
WesBanco, Inc. 3,000 91
WSFS Financial Corp. 1,000 53
-----------
9,178
ELECTRONICS 1.1%
--------------------------------------------------------------------------
o American Physicians Capital, Inc. 6,500 207
INSURANCE 23.2%
--------------------------------------------------------------------------
AFLAC, Inc. 9,600 344
AMBAC Financial Group, Inc. 3,100 242
American International Group,
Inc. 1,000 61
AON Corp. 3,000 61
Arthur J. Gallagher & Co. 10,100 284
Chubb Corp. 4,400 317
o CNA Financial Corp. 7,300 175
Delphi Financial Group, Inc.,
Class A 3,900 159
Fidelity National Financial, Inc. 6,900 260
First American Corp. 11,600 362
Horace Mann Educators Corp. 5,000 85
(9) Metlife, Inc. 13,000 499
Nationwide Financial Services, Inc.,
Class A 9,900 343
Prudential Financial, Inc. 6,300 293
72 See financial notes.
FINANCIAL SERVICES FOCUS FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Reinsurance Group of America,
Inc. 8,500 366
Safeco Corp. 7,000 324
W.R. Berkley Corp. 8,500 363
-----------
4,538
MISCELLANEOUS FINANCE 26.7%
--------------------------------------------------------------------------
1st Source Corp. 2,000 54
Advanta Corp., Class B 12,000 292
o AmeriCredit Corp. 14,500 281
o Berkshire Hathaway, Inc., Class A 5 421
Berkshire Hills Bancorp, Inc. 700 26
Capital Corp. of the West 4,858 224
(8) Capital One Financial Corp. 6,800 502
o CompuCredit Corp. 16,000 305
(7) Countrywide Financial Corp. 17,198 549
o E*TRADE Financial Corp. 25,800 333
Franklin Resources, Inc. 5,800 352
Goldman Sachs Group, Inc. 4,000 394
o Instinet Group, Inc. 50,000 240
MBNA Corp. 13,390 343
Nuveen Investments, Inc., Class A 7,100 224
o Providian Financial Corp. 15,300 238
Raymond James Financial, Inc. 15,700 410
Santander BanCorp 1,000 28
-----------
5,216
REAL PROPERTY 1.9%
--------------------------------------------------------------------------
The St. Joe Co. 2,600 132
o Trammell Crow Co. 13,000 201
o United Capital Corp. 2,100 47
-----------
380
END OF INVESTMENTS.
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COLLATERAL INVESTED FOR SECURITIES ON LOAN
0.6% of net assets
OTHER INVESTMENT COMPANIES 0.6%
--------------------------------------------------------------------------
Securities Lending Investment
Fund 115,500 116
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN.
See financial notes. 73
FINANCIAL SERVICES FOCUS FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- -------------------------------------------------------------------------------
Investments, at value $19,519 a
Collateral invested for securities on loan 116
Receivables:
Fund shares sold 11
Dividends 13
Investments sold 1,297
Prepaid expenses + 6
----------
TOTAL ASSETS 20,962
LIABILITIES
- -------------------------------------------------------------------------------
Bank overdraft 93
Payables:
Due to brokers 116
Fund shares redeemed 4
Investments bought 1,162
Investment adviser and administrator fees 1
Trustees' fees 1
Accrued expenses + 25
----------
TOTAL LIABILITIES 1,402
NET ASSETS
- -------------------------------------------------------------------------------
TOTAL ASSETS 20,962
TOTAL LIABILITIES - 1,402
----------
NET ASSETS $19,560
NET ASSETS BY SOURCE
Capital received from investors 16,042
Net investment income not yet distributed 87
Net realized capital gains 1,395
Net unrealized capital gains 2,036
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$19,560 1,491 $13.12
Unless stated, all numbers x 1,000.
a The fund paid $17,483 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $16,897
Sales/maturities $17,912
The fund's total security transactions with other SchwabFunds(R) during the
period were $49.
FEDERAL TAX DATA
- -------------------------------------------------------
PORTFOLIO COST $17,490
NET UNREALIZED GAINS AND LOSSES:
Gains $2,330
Losses + (301)
-----------
$2,029
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $87
Long-term capital gains $1,402
CAPITAL LOSSES UTILIZED $911
RECLASSIFICATIONS:
Net investment income not
yet distributed $3
Reclassified as:
Net realized capital gains ($3)
74 See financial notes.
FINANCIAL SERVICES FOCUS FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $331
Securities on loan + 1
----------
TOTAL INVESTMENT INCOME 332
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized gains on investments 2,314
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized losses on investments (253)
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 107 a
Transfer agent and shareholder service fees 50 b
Trustees' fees 4 c
Custodian fees 30
Portfolio accounting fees 3
Professional fees 31
Registration fees 16
Shareholder reports 4
Other expenses + 3
----------
Total expenses 248
Expense reduction - 39 d
----------
NET EXPENSES 209
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 332
NET EXPENSES - 209
----------
NET INVESTMENT INCOME 123
NET REALIZED GAINS 2,314 e
NET UNREALIZED LOSSES + (253) e
----------
INCREASE IN NET ASSETS FROM OPERATIONS $2,184
Unless stated, all numbers x 1,000.
a Calculated as 0.54% of average daily net assets. These fees are paid to
Charles Schwab Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% of the
fund's assets. These fees are paid to Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 28,
2005, to 1.10% of average daily net assets. This limit excludes interest,
taxes and certain non-routine expenses.
e These add up to a net gain on investments of $2,061.
See financial notes. 75
FINANCIAL SERVICES FOCUS FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income $123 $176
Net realized gains 2,314 326
Net unrealized gains or losses + (253) 3,471
----------------------------------------
INCREASE IN NET ASSETS
FROM OPERATIONS 2,184 3,973
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME $158 $260 a, b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
Shares sold 369 $4,651 231 $2,407
Shares reinvested 12 142 25 236
Shares redeemed + (457) (5,709) (509) (5,079) c
-----------------------------------------------
NET TRANSACTIONS
IN FUND SHARES (76) ($916) (253) ($2,436)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 1,567 $18,450 1,820 $17,173
Total increase
or decrease + (76) 1,110 (253) 1,277 d
-----------------------------------------------
END OF PERIOD 1,491 $19,560 1,567 $18,450 e
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
The fund designates $158 of the dividend distribution for the fiscal year
ended 10/31/04 as qualified dividends for the purpose of the maximum rate
under Section 1(h)(ii) of the Internal Revenue Code. Shareholders will be
notified in January 2005 via IRS Form 1099 of the amounts for the use in
preparing their 2004 income tax return.
b The tax-basis components of distributions paid are:
CURRENT PERIOD
Ordinary income $158
Long-term capital gains $--
PRIOR PERIOD
Ordinary income $260
Long-term capital gains $--
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase:
CURRENT PERIOD $5
PRIOR PERIOD $4
Dollar amounts are net of the redemption proceeds.
d Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
e Includes distributable net investment income in the amount of $87 and $119 at
the end of the current period and prior period, respectively.
76 See financial notes.
HEALTH CARE FOCUS FUND
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 7/3/00 1-
10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 8.43 7.12 9.00 10.27 10.00
--------------------------------------------------------------------
Income or loss from investment operations:
Net investment income or loss (0.06) 0.01 0.03 0.00 2 (0.00) 2
Net realized and unrealized gains or losses 2.41 1.33 (1.90) (1.10) 0.27
--------------------------------------------------------------------
Total income or loss from investment operations 2.35 1.34 (1.87) (1.10) 0.27
Less distributions:
Dividends from net investment income -- (0.03) (0.01) (0.00) 2 --
Distributions from net realized gains -- -- -- (0.17) --
--------------------------------------------------------------------
Total distributions -- (0.03) (0.01) (0.17) --
--------------------------------------------------------------------
Net asset value at end of period 10.78 8.43 7.12 9.00 10.27
--------------------------------------------------------------------
Total return (%) 27.88 18.96 (20.84) (10.94) 2.70 3
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.04 1.04 0.89 0.89 0.89 4
Gross operating expenses 1.07 1.34 1.18 1.17 2.04 4
Net investment income or loss (0.73) 0.13 0.25 0.06 (0.02) 4
Portfolio turnover rate 105 200 99 92 41 3
Net assets, end of period ($ x 1,000,000) 54 25 21 32 28
1 Commencement of operations.
2 Per share amount was less than $0.01.
3 Not annualized.
4 Annualized.
See financial notes. 77
HEALTH CARE FOCUS FUND
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q is
available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top ten holding
o Non-income producing security
@ This security or a portion of this security is on loan
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
99.9% COMMON STOCK 47,574 53,880
0.0% SHORT-TERM
INVESTMENT 3 3
0.0% RIGHTS -- --
- --------------------------------------------------------------------------------
99.9% TOTAL INVESTMENTS 47,577 53,883
2.0% COLLATERAL INVESTED
FOR SECURITIES ON LOAN 1,055 1,055
(1.9)% OTHER ASSETS AND
LIABILITIES, NET (1,006)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 53,932
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 99.9% of net assets
BUSINESS SERVICES 9.0%
--------------------------------------------------------------------------
o Gentiva Health Services, Inc. 76,000 1,290
IMS Health, Inc. 65,100 1,379
o PDI, Inc. 34,192 978
o Trizetto Group, Inc. 24,800 169
o Ventiv Health, Inc. 60,000 1,038
-----------
4,854
ELECTRONICS 3.3%
--------------------------------------------------------------------------
(3) PerkinElmer, Inc. 87,600 1,799
HEALTHCARE / DRUGS & MEDICINE 76.2%
--------------------------------------------------------------------------
o Alliance Imaging, Inc. 31,900 237
o(4) AMERIGROUP Corp. 29,800 1,788
Applied Biosystems Group --
Applera Corp. 75,400 1,439
Bausch & Lomb, Inc. 23,800 1,451
(9) Becton Dickinson & Co. 31,300 1,643
C.R. Bard, Inc. 21,800 1,238
o Cephalon, Inc. 32,400 1,544
@o Community Health Systems,
Inc. 46,900 1,258
o Coventry Health Care, Inc. 31,400 1,284
o DaVita, Inc. 54,050 1,601
o Express Scripts, Inc. 24,500 1,568
o First Horizon Pharmaceutical
Corp. 48,400 1,190
o Genesis HealthCare Corp. 11,000 337
o Haemonetics Corp. 48,000 1,577
o(2) Humana, Inc. 94,900 1,817
(10) Johnson & Johnson 28,000 1,635
o Kensey Nash Corp. 45,000 1,287
o(7) Laboratory Corp. of America
Holdings 37,000 1,695
Manor Care, Inc. 39,600 1,296
Medicis Pharmaceutical Corp.,
Class A 35,600 1,448
Merck & Co., Inc. 32,200 1,008
o Millennium Pharmaceuticals,
Inc. 43,800 569
o Molecular Devices Corp. 14,500 290
o(6) Pacificare Health Systems,
Inc. 48,500 1,728
o Pozen, Inc. 10,000 88
Select Medical Corp. 62,600 1,076
o Sierra Health Services, Inc. 27,400 1,308
o Techne Corp. 20,000 720
78 See financial notes.
HEALTH CARE FOCUS FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Third Wave Technologies,
Inc. 119,600 919
(5) UnitedHealth Group, Inc. 24,300 1,759
Valeant Pharmaceuticals
International 40,600 974
o Visx, Inc. 70,000 1,168
Vital Signs, Inc. 6,800 235
(1) Wyeth 49,000 1,943
-----------
41,118
INSURANCE 8.9%
--------------------------------------------------------------------------
Aetna, Inc. 17,200 1,634
CIGNA Corp. 23,200 1,472
o(8) WellChoice, Inc. 40,000 1,670
-----------
4,776
PRODUCER GOODS & MANUFACTURING 2.5%
--------------------------------------------------------------------------
o Kos Pharmaceuticals, Inc. 15,000 536
Matthews International Corp.,
Class A 23,800 797
-----------
1,333
RIGHTS 0.0% of net assets
HEALTHCARE / DRUGS & MEDICINE 0.0%
--------------------------------------------------------------------------
OSI Pharmaceuticals, Inc.
expires 01/18/05 458 --
SECURITY FACE AMOUNT VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENT
0.0% of net assets
Brown Brothers Harriman,
Grand Cayman Time Deposit
1.29%, 11/01/04 3 3
END OF INVESTMENTS.
SECURITY AND NUMBER OF SHARES
COLLATERAL INVESTED FOR SECURITIES ON LOAN
2.0% of net assets
OTHER INVESTMENT COMPANIES 2.0%
--------------------------------------------------------------------------
Securities Lending Investment
Fund 1,055,450 1,055
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN.
See financial notes. 79
HEALTH CARE FOCUS FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value (including $1,034 of securities on loan) $53,883 a
Collateral invested for securities on loan 1,055
Receivables:
Fund shares sold 81
Dividends 11
Investments sold 2
Prepaid expenses + 8
----------
TOTAL ASSETS 55,040
LIABILITIES
- --------------------------------------------------------------------------------
Collateral invested for securities on loan 1,055
Payables:
Fund shares redeemed 16
Investment adviser and administrator fees 3
Transfer agent and shareholder service fees 1
Accrued expenses + 33
----------
TOTAL LIABILITIES 1,108
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 55,040
TOTAL LIABILITIES - 1,108
-----------
NET ASSETS $53,932
NET ASSETS BY SOURCE
Capital received from investors 52,337
Net realized capital losses (4,711)
Net unrealized capital gains 6,306
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$53,932 5,005 $10.78
Unless stated, all numbers x 1,000.
a The fund paid $47,577 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $64,485
Sales/maturities $43,469
FEDERAL TAX DATA
- ---------------------------------------------------------
PORTFOLIO COST $47,760
NET UNREALIZED GAINS AND LOSSES:
Gains $8,074
Losses + (1,951)
------------
$6,123
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $--
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $4,567
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $890
2011 + 3,638
-----------
$4,528
RECLASSIFICATIONS:
Net investment income not
yet distributed $303
Reclassified as:
Capital received from investors ($303)
80 See financial notes.
HEALTH CARE FOCUS FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $127
Interest 2
Securities on loan + 1
----------
TOTAL INVESTMENT INCOME 130
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized gains on investments 4,394
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 3,441
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 224 a
Transfer agent and shareholder service fees 104 b
Trustees' fees 5 c
Custodian fees 35
Portfolio accounting fees 6
Professional fees 32
Registration fees 20
Shareholder reports 13
Other expenses + 3
----------
Total expenses 442
Expense reduction - 9 d
----------
NET EXPENSES 433
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 130
NET EXPENSES - 433
----------
NET INVESTMENT LOSS (303)
NET REALIZED GAINS 4,394 e
NET UNREALIZED GAINS + 3,441 e
----------
INCREASE IN NET ASSETS FROM OPERATIONS $7,532
Unless stated, all numbers x 1,000.
a Calculated as 0.54% of average daily net assets. These fees are paid to
Charles Schwab Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% of the
fund's assets. These fees are paid to Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 28,
2005, to 1.10% of average daily net assets. This limit excludes interest,
taxes and certain non-routine expenses.
e These add up to a net gain on investments of $7,835.
See financial notes. 81
HEALTH CARE FOCUS FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment income or loss ($303) $29
Net realized gains or losses 4,394 (2,899)
Net unrealized gains + 3,441 6,783
----------------------------------------
INCREASE IN NET ASSETS
FROM OPERATIONS 7,532 3,913
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income $-- $99 a
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
Shares sold 3,244 $33,738 612 $4,654
Shares reinvested -- -- 13 90
Shares redeemed + (1,206) (12,342) (672) (5,019) b
------------------------------------------------
NET TRANSACTIONS
IN FUND SHARES 2,038 $21,396 (47) ($275)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 2,967 $25,004 3,014 $21,465
Total increase or
decrease + 2,038 28,928 (47) 3,539 c
--------------------------------------------------
END OF PERIOD 5,005 $53,932 2,967 $25,004 d
Unless stated, all numbers x 1,000.
a The tax-basis components of distributions paid are:
CURRENT PERIOD
Ordinary income $--
Long-term capital gains $--
PRIOR PERIOD
Ordinary income $99
Long-term capital gains $--
b The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase:
CURRENT PERIOD $41
PRIOR PERIOD $5
Dollar amounts are net of the redemption proceeds.
c Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
d There was no distributable net investment income at the end of the current and
prior period.
82 See financial notes.
TECHNOLOGY FOCUS FUND
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/03- 11/1/02- 11/1/01- 11/1/00- 7/3/00 1-
10/31/04 10/31/03 10/31/02 10/31/01 10/31/00
- -------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 4.32 2.90 3.86 8.52 10.00
-------------------------------------------------------------------
Income or loss from investment operations:
Net investment loss (0.04) (0.02) (0.02) (0.03) (0.02)
Net realized and unrealized gains or losses 0.14 1.44 (0.94) (4.63) (1.46)
-------------------------------------------------------------------
Total income or loss from investment operations 0.10 1.42 (0.96) (4.66) (1.48)
-------------------------------------------------------------------
Net asset value at end of period 4.42 4.32 2.90 3.86 8.52
-------------------------------------------------------------------
Total return (%) 2.31 48.97 (24.87) (54.69) (14.80) 2
RATIOS/SUPPLEMENTAL DATA (%)
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.02 3 1.04 0.89 0.89 0.89 4
Gross operating expenses 1.02 1.25 1.15 1.16 1.52 4
Net investment loss (0.78) (0.65) (0.57) (0.65) (0.63) 4
Portfolio turnover rate 109 165 117 120 37 2
Net assets, end of period ($ x 1,000,000) 49 43 26 39 48
1 Commencement of operations.
2 Not annualized.
3 The ratio of net operating expenses would have been 1.01% if interest expense
had not been included.
4 Annualized.
See financial notes. 83
TECHNOLOGY FOCUS FUND
PORTFOLIO HOLDINGS as of October 31, 2004
This section shows all the securities in the fund's portfolio by industry
classification and their value, as of the report date.
The fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is
available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information on the operation of the Public Reference Room.
The schedule of portfolio holdings filed on the fund's most recent Form N-Q is
available by visiting Schwab's website at www.schwab.com/schwabfunds.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top ten holding
o Non-income producing security
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
100.1% COMMON STOCK 44,835 49,144
- --------------------------------------------------------------------------------
100.1% TOTAL INVESTMENTS 44,835 49,144
(0.1)% OTHER ASSETS AND
LIABILITIES, NET (29)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 49,115
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 100.1% of net assets
AIR TRANSPORTATION 1.9%
--------------------------------------------------------------------------
Sabre Holdings Corp., Class A 43,900 944
BUSINESS MACHINES & SOFTWARE 31.3%
--------------------------------------------------------------------------
Adobe Systems, Inc. 22,200 1,243
o Apple Computer, Inc. 6,900 362
Autodesk, Inc. 20,800 1,097
o(7) Cisco Systems, Inc. 73,460 1,411
o(8) Digi International, Inc. 96,200 1,317
(1) International Business Machines
Corp. 27,600 2,477
o Lexmark International, Inc.,
Class A 12,000 997
Microsoft Corp. 12,700 356
o(10) NCR Corp. 23,100 1,302
o(2) Oracle Corp. 180,148 2,281
o Storage Technology Corp. 17,000 459
o Sun Microsystems, Inc. 167,700 760
o(9) Xerox Corp. 88,300 1,304
-----------
15,366
BUSINESS SERVICES 29.9%
--------------------------------------------------------------------------
o Ansys, Inc. 20,000 552
(6) Automatic Data Processing, Inc. 33,700 1,462
(3) Certegy, Inc. 64,200 2,270
o Checkfree Corp. 33,100 1,026
o Citrix Systems, Inc. 39,800 960
o Earthlink, Inc. 106,800 1,103
o Hewitt Associates, Inc., Class A 21,000 589
o Intuit, Inc. 14,600 662
o Parametric Technology Corp. 95,900 498
o Pec Solutions, Inc. 8,000 112
o Polycom, Inc. 52,800 1,090
o Progress Software Corp. 52,800 1,049
SS&C Technologies, Inc. 52,000 1,229
o Synopsys, Inc. 33,000 536
o Transaction Systems Architects, Inc.,
Class A 38,700 635
o United Online, Inc. 95,700 899
-----------
14,672
ELECTRONICS 29.6%
--------------------------------------------------------------------------
Agilysys, Inc. 59,100 1,010
o Applied Materials, Inc. 79,500 1,280
o Aspect Communications Corp. 51,200 487
o Avid Technology, Inc. 11,700 620
Intel Corp. 37,260 829
o Lam Research Corp. 16,400 427
84 See financial notes.
TECHNOLOGY FOCUS FUND
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Linear Technology Corp. 26,200 992
o Littelfuse, Inc. 10,276 335
o LSI Logic Corp. 173,900 791
o Microtune, Inc. 200,500 884
(4) Motorola, Inc. 129,000 2,227
MTS Systems Corp. 29,000 748
o Neoware Systems, Inc. 34,700 279
o Plantronics, Inc. 11,400 496
(5) Qualcomm, Inc. 36,400 1,522
Scientific-Atlanta, Inc. 32,800 898
o Siliconix, Inc. 9,816 407
o Supertex, Inc. 13,000 279
-----------
14,511
OPTICAL & PHOTO 4.7%
--------------------------------------------------------------------------
o Ingram Micro, Inc., Class A 63,700 1,099
o Photronics, Inc. 68,700 1,206
-----------
2,305
PRODUCER GOODS & MANUFACTURING 0.5%
--------------------------------------------------------------------------
o Tyler Technologies, Inc. 28,000 244
TELEPHONE 2.2%
--------------------------------------------------------------------------
o Avaya, Inc. 76,500 1,102
END OF INVESTMENTS.
See financial notes. 85
TECHNOLOGY FOCUS FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2004. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at value $49,144 a
Receivables:
Fund shares sold 6
Dividends 4
Investments sold 461
Prepaid expenses + 7
-----------
TOTAL ASSETS 49,622
LIABILITIES
- --------------------------------------------------------------------------------
Bank overdraft 313
Payables:
Fund shares redeemed 77
Investments bought 79
Investment adviser and administrator fees 2
Transfer agent and shareholder service fees 1
Trustees' fees 1
Accrued expenses + 34
-----------
TOTAL LIABILITIES 507
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 49,622
TOTAL LIABILITIES - 507
-----------
NET ASSETS $49,115
NET ASSETS BY SOURCE
Capital received from investors 86,037
Net realized capital losses (41,231)
Net unrealized capital gains 4,309
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$49,115 11,101 $4.42
Unless stated, all numbers x 1,000.
a The fund paid $44,835 for these securities.
Not counting short-term obligations and government securities, the fund's
security transactions during the period were:
Purchases $61,732
Sales/maturities $55,799
FEDERAL TAX DATA
- ---------------------------------------------------------
PORTFOLIO COST $44,945
NET UNREALIZED GAINS AND LOSSES:
Gains $6,435
Losses + (2,236)
------------
$4,199
AS OF OCTOBER 31, 2004:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $--
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $2,579
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2009 $16,276
2010 18,148
2011 + 6,697
------------
$41,121
RECLASSIFICATIONS:
Net investment income not
yet distributed $405
Reclassified as:
Capital received from investors ($405)
86 See financial notes.
TECHNOLOGY FOCUS FUND
Statement of
OPERATIONS
For November 1, 2003 through October 31, 2004. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $117
Interest 1
Securities on loan + 1
----------
TOTAL INVESTMENT INCOME 119
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized gains on investments 2,569
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized losses on investments (2,375)
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 279 a
Transfer agent and shareholder service fees 129 b
Trustees' fees 5 c
Custodian fees 31
Portfolio accounting fees 7
Professional fees 35
Registration fees 18
Shareholder reports 17
Interest expense 1
Other expenses + 3
----------
Total expenses 525
Expense reduction - 1 d
----------
NET EXPENSES 524
DECREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 119
NET EXPENSES - 524
----------
NET INVESTMENT LOSS (405)
NET REALIZED GAINS 2,569 e
NET UNREALIZED LOSSES + (2,375) e
----------
DECREASE IN NET ASSETS FROM OPERATIONS ($211)
Unless stated, all numbers x 1,000.
a Calculated as 0.54% of average daily net assets. These fees are paid to
Charles Schwab Investment Management, Inc. (CSIM).
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% of the
fund's assets. These fees are paid to Charles Schwab & Co., Inc. (Schwab).
c For the fund's independent trustees only.
d This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 28,
2005, to 1.10% of average daily net assets. This limit excludes interest,
taxes and certain non-routine expenses.
e These add up to a net gain on investments of $194.
See financial notes. 87
TECHNOLOGY FOCUS FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
Net investment loss ($405) ($200)
Net realized gains or losses 2,569 (3,310)
Net unrealized gains or losses + (2,375) 16,615
----------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS ($211) $13,105
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES VALUE SHARES VALUE
Shares sold 4,936 $23,679 3,313 $11,831
Shares redeemed + (3,798) (17,389) (2,226) (7,601) a
--------------------------------------------------
NET TRANSACTIONS
IN FUND SHARES 1,138 $6,290 1,087 $4,230
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/03-10/31/04 11/1/02-10/31/03
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 9,963 $43,036 8,876 $25,701
Total increase + 1,138 6,079 1,087 17,335 b
--------------------------------------------------
END OF PERIOD 11,101 $49,115 9,963 $43,036 c
Unless stated, all numbers x 1,000.
a The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase:
CURRENT PERIOD $44
PRIOR PERIOD $17
Dollar amounts are net of the redemption proceeds.
b Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
c There was no distributable net investment income at the end of the current and
prior period.
88 See financial notes.
FUNDS USING SCHWAB EQUITY RATINGS
FINANCIAL NOTES
BUSINESS STRUCTURE OF THE FUNDS
EACH OF THE FUNDS DISCUSSED IN THIS REPORT IS A SERIES OF SCHWAB CAPITAL TRUST,
A NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended. The sidebar shows the funds in this report and their trust.
BOTH SCHWAB DIVIDEND EQUITY FUND AND SCHWAB SMALL-CAP EQUITY FUND OFFER TWO
SHARE CLASSES: Investor Shares and Select Shares. Shares of each class represent
interest in the same portfolio, but each class has different expenses and
investment minimums. Schwab Core Equity Fund, Schwab Hedged Equity Fund,
Communications Focus Fund, Financial Services Focus Fund, Health Care Focus Fund
and Technology Focus Fund each offer one share class.
Shares are bought and sold at net asset value (NAV), which is the price for all
outstanding shares. Each share has a par value of 1/1,000 of a cent, and the
trust may issue as many shares as necessary.
FUND OPERATIONS
Most of the funds' investments are described in the fund-by-fund sections
earlier in this report. However, there are certain other fund operations and
policies that may affect a fund's financials, as described below. Other policies
concerning the funds' business operations also are described here.
THE FUNDS PAY DIVIDENDS from net investment income and make distributions from
net capital gains once a year.
THE FUNDS MAY INVEST IN FUTURES CONTRACTS. Futures contracts involve certain
risks because they can be very sensitive to market movements.
One risk is that the price of a futures contract may not move in perfect
correlation with the price of the underlying securities. Another risk is that,
at certain times, it may be impossible for a fund to close out a position in a
futures contract, due to a difference in trading hours or to market conditions
that may reduce the liquidity for a futures contract or its underlying
securities. The potential for losses associated with futures contracts may
exceed amounts recorded in the Statement of Assets and Liabilities.
Because futures carry inherent risks, a fund must give the broker a deposit of
cash and/or securities (the "initial margin") whenever it enters into a futures
contract. The amount of the deposit may vary from one contract to another, but
it is generally a percentage of the contract amount.
THE TRUST AND ITS FUNDS
This list shows all of the funds included in Schwab Capital Trust. The funds
discussed in this report are highlighted.
SCHWAB CAPITAL TRUST organized May 7, 1993
Schwab S&P 500 Fund
Schwab Small-Cap Index Fund
Schwab Total Stock Market Index Fund
Schwab International Index Fund
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Laudus U.S. MarketMasters Fund
Laudus Balanced MarketMasters Fund
Laudus Small-Cap MarketMasters Fund
Laudus International MarketMasters Fund
Schwab Core Equity Fund
Schwab Dividend Equity Fund
Schwab Small-Cap Equity Fund
Schwab Hedged Equity Fund
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab Institutional Select S&P 500 Fund
Schwab Institutional Select Large-Cap Value Index Fund
Schwab Institutional Select Small-Cap Value Index Fund
89
FUNDS USING SCHWAB EQUITY RATINGS
Futures are traded publicly on exchanges, and their market value changes daily.
A fund records the change in market value of futures, and also the change in the
amount of margin deposit required ("variation margin").
THE FUNDS MAY ENTER INTO REPURCHASE AGREEMENTS. In a repurchase agreement, a
fund buys a security from another party (usually a financial institution) with
the agreement that it be sold back in the future. The date, price and other
conditions are all specified when the agreement is created.
The funds' repurchase agreements will be fully collateralized by U.S. government
securities. All collateral is held by the funds' custodian (or, with tri-party
agreements, the agent's bank) and is monitored daily to ensure that its market
value is at least equal to the repurchase price under the agreement.
THE SCHWAB HEDGED EQUITY FUND MAY SELL SECURITIES SHORT (SELL SECURITIES IT DOES
NOT OWN). When it does so, the fund also places assets worth at least 100% of
the value of the short securities into a segregated account, as collateral. If
the market value of the short securities subsequently falls, the fund can
realize a gain by closing the position. However, if the value rises, the fund
typically would have to add to its collateral or close out its short position at
a loss. The potential for losses associated with short positions is much greater
than the original value of the securities sold short and may exceed amounts
recorded in the Statements of Assets and Liabilities.
THE FUNDS MAY INVEST IN FORWARD CURRENCY CONTRACTS IN CONNECTION WITH THE
PURCHASE AND SALE OF PORTFOLIO SECURITIES TO MINIMIZE THE UNCERTAINTY OF CHANGES
IN FUTURE EXCHANGE RATES. "Forwards," as they are known, are contracts to buy
and sell a currency at a set price on a future date. Forwards are similar to
futures except that they are not publicly traded, but are agreements directly
between two parties. As with futures, forwards involve certain risks that are
not fully reflected in the fund's financials. If counter-parties to the
contracts are unable to meet the terms of the contracts or if the value of the
foreign currency changes unfavorably, the fund could sustain a loss.
THE FUNDS MAY LOAN SECURITIES TO CERTAIN BROKERS, DEALERS AND OTHER FINANCIAL
INSTITUTIONS WHO PAY THE FUNDS NEGOTIATED FEES. The funds receive cash, letters
of credit or U.S. government securities as collateral on these loans. All of the
cash collateral received is reinvested in high quality, short-term investments.
The value of the collateral must be at least 102% of the market value of the
loaned securities as of the first day of the loan, and at least 100% each day
thereafter.
THE FUNDS PAY FEES TO AFFILIATES OF THE INVESTMENT ADVISER FOR VARIOUS SERVICES.
Through their trust, the funds have agreements with Charles Schwab Investment
Management, Inc. (CSIM) to provide investment advisory and administrative
services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent
and shareholder services.
Although these agreements specify certain fees for these services, CSIM and
Schwab have made additional agreements with the funds that may limit the total
expenses charged. The rates and limitations for these fees vary from fund to
fund, and are described in each fund's Statement of Operations.
THE FUNDS MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING RELATED PARTIES. The
funds may make direct transactions with certain other Schwab funds when
practical. When one fund is seeking to sell a security that another is seeking
to buy, an interfund transaction can allow both funds to benefit by reducing
transaction costs. This practice is limited to funds that share the same
investment adviser, trustees and officers.
Pursuant to an exemptive order issued by the SEC, the funds may enter into
interfund borrowing and lending transactions within the SchwabFunds(R). All
90
FUNDS USING SCHWAB EQUITY RATINGS
loans are for temporary or emergency purposes only. The interest rate charged on
the loan is the average of the overnight repurchase agreement rate and the
short-term bank loan rate. The interfund lending facility is subject to the
oversight and periodic review of the Board of Trustees of the SchwabFunds(R).
TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/OR DIRECTORS OF THE INVESTMENT
ADVISER OR SCHWAB. Federal securities law limits the percentage of such
"interested persons" who may serve on a trust's board, and the trust was in
compliance with these limitations throughout the report period. The trust did
not pay any of these persons for their service as trustees, but it did pay
non-interested persons (independent trustees), as noted in each fund's Statement
of Operations.
THE FUNDS MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The funds may obtain
temporary bank loans through the trusts to which they belong, to use for meeting
shareholder redemptions or for extraordinary or emergency purposes. The
SchwabFunds have custodian overdraft facilities and line of credit arrangements
of $150 million and $100 million with PNC Bank, N.A. and Bank of America, N.A.,
respectively. The funds pay interest on the amounts they borrow at rates that
are negotiated periodically.
AMOUNT WEIGHTED
OUTSTANDING AVERAGE AVERAGE
AT 10/31/04 BORROWING* INTEREST
FUND ($ x 1,000) ($ x 1,000) RATE* (%)
- --------------------------------------------------------------------------------
SCHWAB CORE
EQUITY FUND -- 1,077 1.37
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP
EQUITY FUND -- 328 1.48
- --------------------------------------------------------------------------------
SCHWAB HEDGED
EQUITY FUND -- 84 1.38
- --------------------------------------------------------------------------------
COMMUNICATIONS
FOCUS FUND -- 40 1.56
- --------------------------------------------------------------------------------
FINANCIAL SERVICES
FOCUS FUND 93 68 1.81
- --------------------------------------------------------------------------------
HEALTH CARE FOCUS FUND -- 56 1.53
- --------------------------------------------------------------------------------
TECHNOLOGY FOCUS FUND 313 125 1.70
- --------------------------------------------------------------------------------
* Based on the number of days for which the borrowing is outstanding.
THE FUNDS INTEND TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR
REGULATED INVESTMENT COMPANIES. Accordingly, the funds distribute substantially
all of their net investment income and net realized capital gains (if any) to
their respective shareholders each year. As long as a fund meets the tax
requirements, it is not required to pay federal income tax. The net investment
income and net realized capital gains and losses may differ for financial
statement and tax purposes primarily due to differing treatments for net
operating losses and losses on wash sales.
UNDER THE FUNDS' ORGANIZATIONAL DOCUMENTS, ITS OFFICERS AND TRUSTEES ARE
INDEMNIFIED AGAINST CERTAIN LIABILITY ARISING OUT OF THE PERFORMANCE OF THEIR
DUTIES TO THE FUNDS. In addition, in the normal course of business the funds
enter into contracts with their vendors and others that provide general
indemnifications. The funds' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the funds.
However, based on experience, the funds expect the risk of loss to be remote.
SUBSEQUENT EVENT. On November 16, 2004, the Board of Trustees approved the
closing and liquidation of the Schwab Communications Focus Fund. The fund will
liquidate all of its outstanding shares on or shortly after January 14, 2005.
ACCOUNTING POLICIES
The following are the main policies the funds use in preparing their financial
statements.
THE FUNDS VALUE THE SECURITIES IN THEIR PORTFOLIOS EVERY BUSINESS DAY. The funds
use the following policies to value various types of securities:
91
FUNDS USING SCHWAB EQUITY RATINGS
- - SECURITIES TRADED ON AN EXCHANGE OR OVER-THE-COUNTER: valued at the closing
value for the day, or, on days when no closing value has been reported,
halfway between the most recent bid and asked quotes. Securities that are
primarily traded on foreign exchanges are valued at the closing values of such
securities on their respective exchanges with these values then translated
into U.S. dollars at the current exchange rate.
- - SECURITIES FOR WHICH NO MARKET QUOTATIONS ARE READILY AVAILABLE or when a
significant event has occurred between the time of the security's last close
and the time that a fund calculates net asset value: valued at fair value, as
determined in good faith by the fund's investment adviser using guidelines
adopted by the fund's Board of Trustees and the Pricing Committee. Some of the
more common reasons that may necessitate that a security be valued at fair
value include: the security's trading has been halted or suspended; the
security has been de-listed from a national exchange; the security's primary
trading market is temporarily closed at a time when under normal conditions it
would be open; or the security's primary pricing source is not able or willing
to provide a price.
- - FUTURES AND FORWARDS: open contracts are valued at their settlement prices as
of the close of their exchanges (for futures) or at a market value based on
that day's exchange rates (for forwards). When a fund closes out a futures or
forwards position, it calculates the difference between the value of the
position at the beginning and at the end, and records a realized gain or loss
accordingly.
- - SHORT-TERM SECURITIES (60 DAYS OR LESS TO MATURITY): valued at amortized cost.
SCHWAB HEDGED EQUITY FUND SELLS SECURITIES SHORT, it records the proceeds
received as an asset and the obligation to buy back the securities as a
liability. At the time a short sale is initiated, the asset and the liability
are of equal value and effectively cancel each other out. Subsequently, the fund
values the liability side of the transaction according to the market price of
the securities sold short, and values the asset side according to the value of
the proceeds. When the fund closes out a short position (buys the security), it
records the outcome as a realized gain or loss. Interest accrued on securities
sold short is recorded as an expense on the fund's records.
SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the
security is executed.
DIVIDENDS AND DISTRIBUTIONS FROM PORTFOLIO SECURITIES are recorded on the date
they are effective (the ex-dividend date), although the funds record certain
foreign security dividends on the day they learn of the ex-dividend date.
INCOME FROM INTEREST AND THE ACCRETION OF DISCOUNT is recorded as it accrues.
REALIZED GAINS AND LOSSES from security transactions are based on the identified
costs of the securities involved.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES are reported in U.S.
dollars. For assets and liabilities held on a given date, the dollar value is
based on market exchange rates in effect on that date. Transactions involving
foreign currencies, including purchases, sales, income receipts and expense
payments, are calculated using exchange rates in effect on the transaction date.
EXPENSES that are specific to a fund are charged directly to that fund. Expenses
that are common to all funds within a trust generally are allocated among the
funds in proportion to their average daily net assets.
FOR FUNDS OFFERING MULTIPLE SHARE CLASSES, all of the realized and unrealized
gains or losses and net investment income, other than class specific expenses,
are allocated daily to each class in proportion to its average daily net assets.
92
FUNDS USING SCHWAB EQUITY RATINGS
EACH FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND
ACCOUNTING, and is considered a separate entity for tax purposes. Within its
account, each fund also keeps certain assets in segregated accounts, as may be
required by securities law.
THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH ACCOUNTING PRINCIPLES
GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. Notwithstanding this,
shareholders should understand that in order to follow these principles, fund
management has to make estimates and assumptions that affect the information
reported in the financial statements. It's possible that once the results are
known, they may turn out to be different from these estimates.
93
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF:
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
In our opinion, the accompanying statements of assets and liabilities, including
the portfolio holdings, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of Schwab Core Equity Fund, Schwab Dividend
Equity Fund, Schwab Small-Cap Equity Fund, Schwab Hedged Equity Fund,
Communications Focus Fund, Financial Services Focus Fund, Health Care Focus Fund
and Technology Focus Fund (eight of the portfolios constituting Schwab Capital
Trust) (hereafter collectively referred to as the "Funds") at October 31, 2004,
the results of each of their operations for the year then ended, and the changes
in each of their net assets and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at October 31, 2004 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
As described in the footnotes to the financial statements, the Board of Trustees
has approved the closing and liquidation of Communications Focus Fund effective
January 14, 2005.
PRICEWATERHOUSECOOPERS LLP
San Francisco, CA
December 16, 2004
94
FUND TRUSTEES
A fund's Board of Trustees is responsible for protecting the interests of
that fund's shareholders. The tables below give information about the
people who serve as trustees and officers for the SchwabFunds(R),
including the funds covered in this report. Trustees remain in office
until they resign, retire or are removed by shareholder vote. 1
Under the Investment Company Act of 1940, any officer, director, or
employee of Schwab or CSIM is considered an "interested person," meaning
that he or she is considered to have a business interest in Schwab or
CSIM. These individuals are listed as "interested trustees." The
"independent trustees" are individuals who, under the 1940 Act, are not
considered to have a business interest in Schwab or CSIM.
Each of the SchwabFunds (of which there were 51 as of 10/31/04) belongs to
one of these trusts: The Charles Schwab Family of Funds, Schwab
Investments, Schwab Capital Trust or Schwab Annuity Portfolios. Currently
all these trusts have the same trustees and officers. The address for all
trustees and officers is 101 Montgomery Street, San Francisco, CA 94104.
You can find more information about the trustees and officers in the
Statement of Additional Information, which is available free by calling
1-800-435-4000.
INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S);
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
CHARLES R. SCHWAB 2 Chair, Trustee: Chair, CEO, Director, The Charles Schwab Corp., Charles Schwab &
7/29/37 Family of Funds, 1989; Co., Inc.; Chair, Director, Charles Schwab Investment Management,
Investments, 1991; Inc.; Chair, Charles Schwab Holdings (UK); CEO, Director, Charles
Capital Trust, 1993; Schwab Holdings, Inc.; Chair, CEO Schwab (SIS) Holdings, Inc. I,
Annuity Portfolios, 1994. Schwab International Holdings, Inc.; Director, Charles Schwab Bank,
N.A., U.S. Trust Corp., United States Trust Co. of New York, Siebel
Systems (software), Xsign, Inc. (electronic payment systems),
TrustMark, Inc., All Kinds of Minds (education); Trustee, Stanford
University. Until 5/04: Director, The Gap, Inc. (clothing retailer). Until
5/03: Co-CEO, The Charles Schwab Corp. Until 3/02: Director,
Audiobase, Inc. (Internet audio solutions). Until 5/02: Director,
Vodaphone AirTouch PLC (telecommunications). Until 7/01: Director,
The Charles Schwab Trust Co.
1 The SchwabFunds retirement policy requires that independent trustees elected
after January 1, 2000 retire at age 72 or after twenty years of service as a
trustee, whichever comes first. Independent trustees elected prior to January
1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will
retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on
December 31, 2010.
2 In addition to his position with the investment adviser and the distributor,
Mr. Schwab also owns stock of The Charles Schwab Corporation.
95
INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUST OFFICE(S) HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
EVELYN DILSAVER President, CEO EVP, President, Charles Schwab Investment Management, Inc;
5/4/55 (all trusts). Until 7/04: SVP for Development and Distribution, Asset Management
Products and Services Enterprise; Until 6/03: EVP, CFO, Administrative
Officer, U.S. Trust Corp.
- -----------------------------------------------------------------------------------------------------------------------------------
STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Director, Charles Schwab Investment
4/5/55 Officer (all trusts). Management, Inc.; Chief Investment Officer, The Charles Schwab
Trust Co.
- -----------------------------------------------------------------------------------------------------------------------------------
KIMON DAIFOTIS SVP, Chief Investment Since 9/04: Chief Investment Officer, Fixed Income, Charles
7/10/59 Officer (all trusts). Schwab Investment Management, Inc.; Since 6/04: SVP, Charles Schwab
Investment Management, Inc.; Until 6/04: VP, Charles Schwab
Investment Management, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
JEFF MORTIMER SVP, Chief Investment Since 5/04: SVP, Chief Investment Officer, Equities, Charles Schwab
9/29/63 Officer (all trusts). Investment Management, Inc.; Since 6/04: VP, Chief Investment
Officer, Laudus Trust; Until 5/04: VP, Charles Schwab Investment
Management, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
RANDALL FILLMORE Chief Compliance Since 9/04: SVP, Institutional Compliance and Chief Compliance
11/11/60 Officer (all trusts). Officer, Charles Schwab Investment Management, Inc.; Until 9/04:
VP, Charles Schwab & Co., Charles Schwab Investment Management,
Inc.; Until 2002: VP of Internal Audit, Charles Schwab & Co.;
Prior to 2000: PricewaterhouseCoopers.
- -----------------------------------------------------------------------------------------------------------------------------------
KOJI E. FELTON Secretary (all trusts). SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab
3/13/61 Investment Management, Inc. Until 6/98: Branch Chief in Enforcement,
U.S. Securities and Exchange Commission, San Francisco.
- -----------------------------------------------------------------------------------------------------------------------------------
GEORGE PEREIRA 1 Treasurer, Principal Since 11/04: SVP, CFO, Charles Schwab Investment Management,
6/9/64 Financial Officer Inc.; Until 11/04: SVP, Financial Reporting, Charles Schwab & Co., Inc.;
(all trusts). Until 12/99: Chief Financial Officer, Commerzbank Capital Markets;
Until 9/99: Managing Director at the New York Stock Exchange.
1 Elected to his position on the SchwabFunds Board on November 16, 2004.
96
INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- -----------------------------------------------------------------------------------------------------------------------------------
MARIANN BYERWALTER 2000 (all trusts). Chair, JDN Corp. Advisory LLC; Trustee, Stanford University, America
8/13/60 First Cos., (venture capital/fund management), Redwood Trust, Inc.
(mortgage finance), Stanford Hospitals and Clinics, SRI International
(research), PMI Group, Inc. (mortgage insurance), Lucile Packard
Children's Hospital, Laudus Trust, Laudus Variable Insurance Trust.
2001: Special Advisor to the President, Stanford University. Until 2002:
Director, LookSmart, Ltd. (Internet infrastructure). Until 2001: VP,
Business Affairs, CFO, Stanford University.
- -----------------------------------------------------------------------------------------------------------------------------------
DONALD F. DORWARD Family of Funds, 1989; CEO, Dorward & Associates (corporate management, marketing and
9/23/31 Investments, 1991; communications consulting). Until 1999: EVP, Managing Director,
Capital Trust, 1993; Grey Advertising.
Annuity Portfolios,1994.
- -----------------------------------------------------------------------------------------------------------------------------------
WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp. (bio-pharmaceuticals). Trustee, Solectron Corp.
11/22/41 (manufacturing), Airlease Ltd. (aircraft leasing), Mission West
Properties (commercial real estate), Stratex Corp. (network equipment);
Public Governor, Laudus Trust, Laudus Variable Insurance Trust;
Member, executive committee, Pacific Stock & Options Exchange.
Until 2003: Trustee, Tenera, Inc. (services and software). Until 1998:
Dean, Haas School of Business, University of California, Berkeley.
- -----------------------------------------------------------------------------------------------------------------------------------
ROBERT G. HOLMES Family of Funds, 1989; Chair, CEO, Director, Semloh Financial, Inc. (international financial
5/15/31 Investments, 1991; services and investment advice).
Capital Trust, 1993;
Annuity Portfolios,1994.
- -----------------------------------------------------------------------------------------------------------------------------------
GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors);
9/28/50 Trustee, Rorento N.V. (investments -- Netherlands), Cooper Industries
(electrical products, tools and hardware); Member, audit committee,
Northern Border Partners, L.P. (energy). Until 2002: Director, Pennzoil-
Quaker State Co. (oil and gas).
- -----------------------------------------------------------------------------------------------------------------------------------
DONALD R. STEPHENS Family of Funds, 1989; Managing Partner, D.R. Stephens & Co. (investments). Until 1996:
6/28/38 Investments, 1991; Chair, CEO, North American Trust (real estate investment trust).
Capital Trust, 1993;
Annuity Portfolios, 1994.
- -----------------------------------------------------------------------------------------------------------------------------------
MICHAEL W. WILSEY Family of Funds, 1989; Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate
8/18/43 Investments, 1991; and investments).
Capital Trust, 1993;
Annuity Portfolios, 1994.
97
GLOSSARY
ASSET ALLOCATION The practice of dividing a portfolio among different asset
classes, with each asset class assigned a particular percentage.
ASSET CLASS A group of securities with similar structure and basic
characteristics. Stocks, bonds and cash are the three main examples of asset
classes.
BETA A historical measure of an investment's volatility relative to a market
index (usually the S&P 500(R)). The index is defined as having a beta of 1.00.
Investments with a beta higher than 1.00 have been more volatile than the index;
those with a beta of less than 1.00 have been less volatile.
BOND A security representing a loan from the investor to the issuer. A bond
typically pays interest at a fixed rate (the "coupon rate") until a specified
date (the "maturity date"), at which time the issuer returns the money borrowed
("principal" or "face value") to the bondholder. Because of their structure,
bonds are sometimes called "fixed income securities" or "debt securities."
An individual bond is subject to the credit risk of the issuer. Changes in
interest rates can affect a bond's market value prior to call or maturity. There
is no guarantee that a bond's yield to call or maturity will provide a positive
return over the rate of inflation.
BOND FUND A bond fund is subject to the same credit, interest rate, and
inflation risks as bonds. In addition, a bond fund incurs ongoing fees and
expenses. A bond fund's net asset value will fluctuate with the price of the
underlying bonds and the portfolio turnover activity; return of principal is not
guaranteed.
CAP, CAPITALIZATION See "market cap."
CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an
investment and its value at a later time. If the investment has been sold, the
capital gain or loss is considered a realized gain or loss. If the investment is
still held, the gain or loss is still "on paper" and is considered unrealized.
EARNINGS GROWTH RATE For a mutual fund, the average yearly rate at which the
earnings of the companies in the fund's portfolio have grown, measured over the
past five years.
EARNINGS PER SHARE (EPS) A company's earnings, or net income, for the past 12
months, divided by the number of shares outstanding.
EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to
cover the fund's operating expenses. An expense ratio of 0.50% means that a
fund's expenses amount to half of one percent of its average net assets a year.
MARKET CAP, MARKET CAPITALIZATION The value of a company as determined by the
total value of all shares of its stock outstanding.
MEDIAN MARKET CAP The midpoint of the range of market caps of the stocks held by
a fund. There are different ways of calculating median market cap. With a simple
median, half of the stocks in the fund's portfolio would be larger than the
median, and half would be smaller. With a weighted median (the type that is
calculated for these funds), half of the fund's assets are invested in stocks
that are larger than the median market cap, and half in stocks that are smaller.
NET ASSET VALUE (NAV) The value of one share of a mutual fund. NAV is calculated
by taking the fund's total assets, subtracting liabilities, and dividing by the
number of shares outstanding.
OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual
fund, indicates all shares currently held by investors.
PRICE-TO-BOOK RATIO (P/B) The market price of a company's stock compared with
its "book value." A mutual fund's P/B is the weighted average of the P/B of all
stocks in the fund's portfolio.
PRICE-TO-EARNINGS RATIO (P/E) The market price of a company's stock compared
with earnings over the past year. A mutual fund's P/E is the weighted average of
the P/E of all stocks in the fund's portfolio.
RETURN ON EQUITY (ROE) The average yearly rate of return for each dollar of
investors' money, measured over the past five years.
STOCK A share of ownership, or equity, in the issuing company.
TOTAL RETURN The percentage that an investor would have earned or lost on an
investment in the fund assuming dividends and distributions were reinvested.
WEIGHTED AVERAGE For mutual funds, an average that gives the same weight to each
security as the security represents in the fund's portfolio.
YIELD The income paid out by an investment, expressed as a percentage of the
investment's market value.
98
NOTES
NOTES
SchwabFunds(R) offers you a complete family of mutual funds, each one based on a
clearly defined investment approach and using disciplined management strategies.
The list at right shows all currently available SchwabFunds.
Whether you're an experienced investor or just starting out, SchwabFunds can
help you achieve your financial goals. An investor should consider a fund's
investment objectives, risks, and charges and expenses carefully before
investing or sending money. This and other important information can be found in
the fund's prospectus. Please call 1-800-435-4000 for a prospectus and brochure
for any SchwabFund. Please read the prospectus carefully before you invest. This
report must be preceded or accompanied by a current prospectus.
METHODS FOR PLACING ORDERS
The following information outlines how Schwab investors can place orders. If you
are investing through a third-party investment provider, methods for placing
orders may be different.
INTERNET 1
www.schwab.com
SCHWAB BY PHONE(TM) 2
Use our automated voice service or speak to a representative. Call
1-800-435-4000, day or night (for TDD service, call 1-800-345-2550).
TELEBROKER(R)
Use our automated touch-tone phone service at 1-800-272-4922.
MAIL
Write to SchwabFunds at:
P.O. Box 3812
Englewood, CO
80155-3812
When selling or exchanging shares, be sure to include the signatures of at least
one of the persons whose name is on the account.
PROXY VOTING POLICIES, PROCEDURES AND RESULTS
A description of the proxy voting policies and procedures used to determine how
to vote proxies on behalf of the funds is available without charge, upon
request, by visiting Schwab's web site at www.schwab.com/schwabfunds, the SEC's
web site at http://www.sec.gov, or by contacting SchwabFunds at 1-800-435-4000.
Information regarding how a fund voted proxies relating to portfolio securities
during the most recent twelve-month period ended June 30 is available, without
charge, by visiting Schwab's web site at www.schwab.com/schwabfunds or the SEC's
website at http://www.sec.gov.
1 Shares of Sweep Investments(TM) may not be purchased directly over the
Internet.
2 Orders placed in person or through a telephone representative may be subject
to a service fee payable to Schwab.
THE SCHWABFUNDS FAMILY(R)
STOCK FUNDS
Schwab S&P 500 Fund
Schwab 1000 Fund(R)
Schwab Small-Cap Index Fund(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab(R) Institutional Select(R) Funds
Schwab(R) Institutional Select(R) S&P 500 Fund
Schwab(R) Institutional Select(R) Large-Cap Value Index Fund
Schwab(R) Institutional Select(R) Small-Cap Value Index Fund
ASSET ALLOCATION FUNDS
Schwab MarketTrack Portfolios(R)
Schwab MarketTrack All Equity Portfolio(TM)
Schwab MarketTrack Growth Portfolio(TM)
Schwab MarketTrack Balanced Portfolio(TM)
Schwab MarketTrack Conservative Portfolio(TM)
BOND FUNDS
Schwab YieldPlus Fund(R)
Schwab Short-Term Bond Market Fund(TM)
Schwab Total Bond Market Fund(TM)
Schwab GNMA Fund(TM)
Schwab Short/Intermediate Tax-Free Bond Fund(TM)
Schwab Long-Term Tax-Free Bond Fund(TM)
Schwab California Short/Intermediate
Tax-Free Bond Fund(TM)
Schwab California Long-Term Tax-Free Bond Fund(TM)
SCHWAB MONEY FUNDS
Schwab offers an array of money market funds that seek high current income
consistent with safety and liquidity. 3 Choose from taxable or tax-advantaged
alternatives. Many can be linked to your Schwab account to "sweep" cash
balances automatically, subject to availability, when you're between
investments. Or, for your larger cash reserves, choose one of our Value
Advantage Investments(R).
3 Investments in money market funds are neither insured nor guaranteed by the
Federal Deposit Insurance Corporation (FDIC) or any other government agency
and, although they seek to preserve the value of your investment at $1 per
share, it is possible to lose money.
[CHARLES SCHWAB LOGO]
INVESTMENT ADVISER
Charles Schwab Investment Management, Inc.
101 Montgomery Street, San Francisco, CA 94104
DISTRIBUTOR
Charles Schwab & Co., Inc. (Schwab)
FUNDS
SchwabFunds(R)
P.O. Box 3812, Englewood, CO 80155-3812
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
(C)2004 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC
Printed on recycled paper.
REG26298-01
ITEM 2: CODE OF ETHICS.
(a) Registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer, and any other persons
who perform a similar function, regardless of whether these individuals
are employed by Registrant or a third party.
(c) During the period covered by the report, no amendments were made to the
provisions of this code of ethics.
(d) During the period covered by the report, Registrant did not grant any
waivers, including implicit waivers, from the provisions of this code
of ethics.
(f)(1) Registrant has filed this code of ethics as an exhibit pursuant to Item
11(a)(1) of Form N-CSR.
ITEM 3: AUDIT COMMITTEE FINANCIAL EXPERT.
Registrant's Board of Trustees has determined that William Hasler,
Mariann Byerwalter and Donald Stephens, currently serving on its audit
committee, are "audit committee financial experts," as such term is
defined in Item 3 of Form N-CSR. Each of these members of Registrant's
audit committee is "independent" under the standards set forth in Item
3 of Form N-CSR.
The designation of each of Messrs. Hasler and Stephens and Ms.
Byerwalter as an "audit committee financial expert" pursuant to Item 3
of Form N-CSR does not (i) impose upon such individual any duties,
obligations, or liability that are greater than the duties, obligations
and liability imposed upon such individual as a member of Registrant's
audit committee or Board of Trustees in the absence of such
designation; and (ii) affect the duties, obligations or liability of
any other member of Registrant's audit committee or Board of Trustees.
ITEM 4: PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Below are the aggregate fees billed for each of the last two fiscal years
for professional services rendered by the principal accountant for the audit of
Registrant's annual financial statements or services that are normally provided
by the accountant in connection with statutory and regulatory filings or
engagements.
Audit Fees
----------
2004: $603,872 2003: $555,576
(b) Below are the aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are reasonably
related to the
performance of the audit of Registrant's financial statements and are not
reported under paragraph (a) above.
Audit-Related Fees
------------------
For services rendered to Registrant:
-----------------------------------
2004: $45,038 2003: $43,134
Nature of these services: tax provision review.
------------------------
In each of the last two fiscal years there were no "Audit-Related Fees"
required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X.
(c) Below are the aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning.
Tax Fees
--------
For services rendered to Registrant:
------------------------------------
2004: $66,633 2003: $59,686
Nature of these services: preparation and review of tax returns.
------------------------
In each of the last two fiscal years there were no "Tax Fees" required
to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
(d) Below are the aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than the
services reported in paragraphs (a) through (c) above.
All Other Fees
--------------
For services rendered to Registrant:
------------------------------------
2004: $10,792 2003: $10,869
Nature of these services: review of the methodology of allocation of
------------------------ Charles Schwab & Co., Inc. ("Schwab")
expenses for purposes of Section 15(c) of
the Investment Company Act of 1940.
In each of the last two fiscal years there were no "All Other Fees"
required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X.
(E)(1) Registrant's audit committee does not have pre-approval policies and
procedures as described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
(2) There were no services described in each of paragraphs (b) through (d) above
(including services required to be approved by Registrant's audit committee
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X) that were
approved by Registrant's audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
(F) Not applicable.
(G) Below are the aggregate non-audit fees billed in each of the last two fiscal
years by Registrant's principal accountant for services rendered to Registrant,
to Registrant's investment adviser, and to any entity controlling, controlled
by, or under common control with Registrant's investment adviser that provides
ongoing services to Registrant.
2004: $285,955 2003: $439,733
Although not required to be included in the amounts disclosed under this
paragraph (g) or any other paragraph of this Item 4, below are the aggregate
fees billed in each of the last two fiscal years by Registrant's principal
accountant for tax compliance services rendered to U.S. Trust, an entity under
common control with Registrant's investment adviser that DOES NOT provide
services to Registrant.
2004: $4,402,056 2003: $4,141,356
(H) During the past fiscal year, all non-audit services provided by Registrant's
principal accountant to either Registrant's investment adviser or to any entity
controlling, controlled by, or under common control with Registrant's investment
adviser that provides ongoing services to Registrant were pre-approved. Included
in the audit committee's pre-approval was the review and consideration as to
whether the provision of these non-audit services is compatible with maintaining
the principal accountant's independence.
ITEM 5: AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6: SCHEDULE OF INVESTMENTS.
Except as noted below, the schedules of investments are included as part of the
report to shareholders filed under Item 1 of this Form. The schedules of
investments for the Schwab S&P 500 Fund, Schwab Small-Cap Index Fund, Schwab
Total Stock Market Index Fund, and Schwab International Index Fund are filed
under this Item.
SCHWAB CAPITAL TRUST
SCHWAB S&P 500 FUND
PORTFOLIO HOLDINGS as of October 31, 2004
The following is the schedule of portfolio holdings at 10/31/04. The schedule
should be read in conjunction with the fund's annual report for the fiscal year
ended 10/31/04.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top Ten Holding
o Non-income producing security
= Collateral for open futures contracts
/ Issuer is affiliated with the fund's adviser
@ This security or a portion of this security is on loan
COST VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
99.9% COMMON STOCK 7,443,407 8,204,858
0.1% SHORT-TERM
INVESTMENT 9,415 9,415
0.0% U.S. TREASURY
OBLIGATIONS 973 973
- --------------------------------------------------------------------------------
100.0% TOTAL INVESTMENTS 7,453,795 8,215,246
7.8% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 641,932 641,932
(7.8)% OTHER ASSETS AND
LIABILITIES, NET (639,803)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 8,217,375
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
COMMON STOCK 99.9% of net assets
AEROSPACE / DEFENSE 1.9%
--------------------------------------------------------------------------
@ The Boeing Co. 655,222 32,696
Crane Co. 44,919 1,252
General Dynamics Corp. 155,082 15,837
Goodrich Corp. 92,739 2,859
Lockheed Martin Corp. 343,496 18,923
Northrop Grumman Corp. 280,344 14,508
Raytheon Co. 351,072 12,807
Rockwell Automation, Inc. 144,498 6,024
@ Rockwell Collins, Inc. 139,398 4,944
Textron, Inc. 106,929 7,287
United Technologies Corp. 399,913 37,120
-----------
154,257
AIR TRANSPORTATION 1.3%
--------------------------------------------------------------------------
@o Delta Air Lines, Inc. 94,113 513
@ FedEx Corp. 232,042 21,144
@ Sabre Holdings Corp., Class A 110,153 2,369
Southwest Airlines Co. 614,218 9,686
United Parcel Service, Inc., Class B
875,969 69,359
-----------
103,071
ALCOHOLIC BEVERAGES 0.5%
--------------------------------------------------------------------------
@ Adolph Coors Co., Class B 28,531 1,903
@ Anheuser-Busch Cos., Inc. 625,034 31,220
Brown-Forman Corp., Class B 95,468 4,287
-----------
37,410
APPAREL 0.5%
--------------------------------------------------------------------------
o Coach, Inc. 146,000 6,808
Jones Apparel Group, Inc. 100,343 3,542
Liz Claiborne, Inc. 83,728 3,423
@ Nike, Inc., Class B 205,317 16,694
@ Reebok International Ltd. 47,859 1,771
VF Corp. 84,078 4,526
-----------
36,764
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.1%
--------------------------------------------------------------------------
Cooper Tire & Rubber Co. 56,866 1,108
Cummins, Inc. 33,451 2,344
Dana Corp. 115,009 1,715
@ Danaher Corp. 239,278 13,191
@ Delphi Corp. 433,000 3,642
Eaton Corp. 117,896 7,539
@ Ford Motor Co. 1,422,912 18,541
@ General Motors Corp. 437,828 16,878
Genuine Parts Co. 136,090 5,429
@o Goodyear Tire & Rubber Co. 135,681 1,368
@ Harley-Davidson, Inc. 230,333 13,260
@0 Navistar International Corp. 54,800 1,893
@ Visteon Corp. 99,156 705
-----------
87,613
BANKS 8.0%
--------------------------------------------------------------------------
@ AmSouth Bancorp. 275,065 7,259
(7) Bank of America Corp. 3,185,172 142,664
The Bank of New York Co., Inc. 606,514 19,687
BB&T Corp. 429,459 17,655
Comerica, Inc. 134,859 8,295
1
SCHWAB S&P 500 FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
Fifth Third Bancorp 443,505 21,816
First Horizon National Corp. 96,900 4,194
@ Huntington Bancshares, Inc. 179,750 4,305
JPMorgan Chase & Co. 2,789,215 107,664
KeyCorp, Inc. 321,365 10,795
M&T Bank Corp. 92,304 9,507
Marshall & Ilsley Corp. 174,996 7,345
Mellon Financial Corp. 330,613 9,555
National City Corp. 515,773 20,100
North Fork Bancorp., Inc. 242,500 10,694
@ Northern Trust Corp. 171,112 7,279
PNC Financial Services Group, Inc.
220,027 11,507
Regions Financial Corp. 358,510 12,576
SouthTrust Corp. 256,507 11,176
State Street Corp. 262,111 11,808
SunTrust Banks, Inc. 278,749 19,618
Synovus Financial Corp. 235,632 6,407
U.S. Bancorp 1,460,541 41,786
Wachovia Corp. 1,021,821 50,284
Wells Fargo & Co. 1,322,357 78,971
Zions Bancorp. 70,147 4,642
-----------
657,589
BUSINESS MACHINES & SOFTWARE 9.0%
--------------------------------------------------------------------------
Adobe Systems, Inc. 185,489 10,393
@ Apple Computer, Inc. 301,876 15,858
Autodesk, Inc. 87,954 4,640
@o BMC Software, Inc. 176,808 3,345
o Cisco Systems, Inc. 5,294,483 101,707
o Compuware Corp. 296,522 1,717
o Comverse Technology, Inc. 148,815 3,071
o Dell, Inc. 1,955,032 68,543
@o EMC Corp. 1,890,655 24,333
o Gateway, Inc. 290,537 1,700
Hewlett-Packard Co. 2,349,878 43,849
(10) International Business Machines
Corp. 1,311,743 117,729
@o Lexmark International, Inc., Class A
100,530 8,355
=(3) Microsoft Corp. 8,513,790 238,301
o NCR Corp. 73,899 4,164
o Network Appliance, Inc. 278,347 6,811
o Novell, Inc. 291,365 2,095
@o Oracle Corp. 4,033,549 51,065
Pitney Bowes, Inc. 180,015 7,876
o Siebel Systems, Inc. 384,366 3,651
o Sun Microsystems, Inc. 2,575,758 11,668
o Unisys Corp. 260,027 2,761
@o Xerox Corp. 652,960 9,644
-----------
743,276
BUSINESS SERVICES 4.5%
--------------------------------------------------------------------------
@o Affiliated Computer Services, Inc., Class A
103,375 5,639
o Allied Waste Industries, Inc. 247,115 2,016
o Apollo Group, Inc., Class A 150,300 9,920
Automatic Data Processing, Inc. 459,682 19,946
Cendant Corp. 821,254 16,910
@ Cintas Corp. 134,305 5,794
o Citrix Systems, Inc. 130,566 3,150
Computer Associates International, Inc.
456,066 12,638
@o Computer Sciences Corp. 146,718 7,287
o Convergys Corp. 110,751 1,441
Deluxe Corp. 38,466 1,465
o eBay, Inc. 514,370 50,208
Electronic Data Systems Corp. 398,621 8,479
Equifax, Inc. 107,607 2,814
First Data Corp. 667,288 27,546
o Fiserv, Inc. 152,764 5,429
H&R Block, Inc. 128,287 6,100
IMS Health, Inc. 182,707 3,870
o Interpublic Group of Cos., Inc. 325,157 3,986
o Intuit, Inc. 149,479 6,780
@o Mercury Interactive Corp. 70,943 3,081
@o Monster Worldwide, Inc. 87,965 2,467
@ Omnicom Group, Inc. 147,364 11,627
o Parametric Technology Corp. 206,030 1,069
Paychex, Inc. 293,462 9,624
PeopleSoft, Inc. 284,601 5,911
Robert Half International, Inc. 132,524 3,516
o SunGard Data Systems, Inc. 222,305 5,889
@o Symantec Corp. 242,502 13,808
Tyco International Ltd. 1,573,000 48,999
o Veritas Software Corp. 332,242 7,269
Waste Management, Inc. 450,805 12,839
o Yahoo! Inc. 1,058,458 38,306
-----------
365,823
CHEMICALS 1.5%
--------------------------------------------------------------------------
Air Products & Chemicals, Inc. 177,301 9,429
Dow Chemical Co. 727,450 32,692
E.I. du Pont de Nemours & Co. 778,038 33,354
Eastman Chemical Co. 59,183 2,809
@ Ecolab, Inc. 198,798 6,729
Great Lakes Chemical Corp. 38,937 998
o Hercules, Inc. 82,003 1,171
Monsanto Co. 206,398 8,824
PPG Industries, Inc. 132,163 8,425
@ Praxair, Inc. 253,588 10,701
2
SCHWAB S&P 500 FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
Rohm & Haas Co. 174,959 7,417
Sigma-Aldrich Corp. 54,726 3,045
-----------
125,594
CONSTRUCTION 0.5%
--------------------------------------------------------------------------
Centex Corp. 97,736 5,076
@ Fluor Corp. 64,302 2,986
KB Home 36,866 3,032
@ Masco Corp. 341,573 11,702
Pulte Homes, Inc. 97,150 5,332
The Sherwin-Williams Co. 111,364 4,758
The Stanley Works 63,440 2,824
Vulcan Materials Co. 78,918 3,929
-----------
39,639
CONSUMER DURABLES 0.2%
--------------------------------------------------------------------------
Black & Decker Corp. 62,086 4,984
Leggett & Platt, Inc. 150,312 4,228
Maytag Corp. 61,971 1,079
Newell Rubbermaid, Inc. 213,537 4,604
Whirlpool Corp. 53,431 3,139
-----------
18,034
CONTAINERS 0.1%
--------------------------------------------------------------------------
Ball Corp. 88,112 3,511
Bemis Co. 81,458 2,156
o Pactiv Corp. 121,164 2,871
o Sealed Air Corp. 65,771 3,258
-----------
11,796
ELECTRONICS 5.0%
--------------------------------------------------------------------------
@o ADC Telecommunications, Inc. 632,138 1,397
@o Advanced Micro Devices, Inc. 272,013 4,575
@o Agilent Technologies, Inc. 384,975 9,647
o Altera Corp. 294,881 6,703
American Power Conversion Corp. 153,555 2,961
@ Analog Devices, Inc. 291,783 11,747
o Andrew Corp. 120,024 1,678
o Applied Materials, Inc. 1,321,542 21,277
o Applied Micro Circuits Corp. 238,073 867
o Broadcom Corp., Class A 250,633 6,780
o CIENA Corp. 449,272 1,110
@ Intel Corp. 5,023,205 111,817
ITT Industries, Inc. 72,010 5,843
o Jabil Circuit, Inc. 157,319 3,824
o JDS Uniphase Corp. 1,107,285 3,510
@o KLA-Tencor Corp. 155,010 7,058
Linear Technology Corp. 240,408 9,107
o LSI Logic Corp. 293,990 1,338
@o Lucent Technologies, Inc. 3,338,204 11,851
@ Maxim Integrated Products, Inc. 251,249 11,052
@o Micron Technology, Inc. 477,135 5,811
Molex, Inc. 146,907 4,344
@ Motorola, Inc. 1,838,552 31,733
o National Semiconductor Corp. 278,108 4,644
o Novellus Systems, Inc. 114,939 2,978
o Nvidia Corp. 125,865 1,821
PerkinElmer, Inc. 97,208 1,997
o PMC - Sierra, Inc. 133,386 1,369
o Power-One, Inc. 62,573 439
o QLogic Corp. 74,738 2,429
Qualcomm, Inc. 1,266,736 52,962
o Sanmina -- SCI Corp. 406,629 3,253
Scientific-Atlanta, Inc. 117,199 3,210
o Solectron Corp. 749,409 3,912
Symbol Technologies, Inc. 180,827 2,656
Tektronix, Inc. 71,399 2,165
o Tellabs, Inc. 322,453 2,580
o Teradyne, Inc. 148,524 2,460
@ Texas Instruments, Inc. 1,348,447 32,969
o Thermo Electron Corp. 127,063 3,685
@o Waters Corp. 93,000 3,840
Xilinx, Inc. 270,166 8,267
-----------
413,666
ENERGY: RAW MATERIALS 1.8%
--------------------------------------------------------------------------
@ Anadarko Petroleum Corp. 195,717 13,201
Apache Corp. 252,380 12,796
@ Baker Hughes, Inc. 259,586 11,118
@o BJ Services Co. 124,400 6,344
Burlington Resources, Inc. 309,044 12,825
Devon Energy Corp. 187,037 13,835
EOG Resources, Inc. 90,133 5,999
Halliburton Co. 344,508 12,761
o Noble Corp. 103,457 4,726
Occidental Petroleum Corp. 307,810 17,185
@o Rowan Cos., Inc. 80,970 2,067
Schlumberger Ltd. 457,887 28,820
Valero Energy Corp. 198,800 8,543
-----------
150,220
FOOD & AGRICULTURE 3.4%
--------------------------------------------------------------------------
Archer-Daniels-Midland Co. 505,107 9,784
Campbell Soup Co. 322,209 8,648
The Coca-Cola Co. 1,893,069 76,972
Coca-Cola Enterprises, Inc. 366,639 7,666
ConAgra Foods, Inc. 410,604 10,840
General Mills, Inc. 295,030 13,055
H.J. Heinz Co. 274,171 9,966
Hershey Foods Corp. 191,606 9,712
Kellogg Co. 319,427 13,735
3
SCHWAB S&P 500 FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
McCormick & Co., Inc. 106,601 3,777
The Pepsi Bottling Group, Inc. 200,742 5,629
PepsiCo, Inc. 1,326,494 65,768
Sara Lee Corp. 617,438 14,374
Supervalu, Inc. 102,901 3,035
Sysco Corp. 498,610 16,090
Wm. Wrigley Jr. Co. 174,311 11,400
-----------
280,451
GOLD 0.2%
--------------------------------------------------------------------------
@ Newmont Mining Corp. 345,651 16,425
HEALTHCARE / DRUGS & MEDICINE 12.2%
--------------------------------------------------------------------------
Abbott Laboratories 1,222,533 52,117
@ Allergan, Inc. 102,596 7,342
@ AmerisourceBergen Corp. 87,353 4,808
@o Amgen, Inc. 985,789 55,993
@o Anthem, Inc. 108,740 8,743
Applied Biosystems Group -- Applera
Corp. 156,833 2,992
Bausch & Lomb, Inc. 39,537 2,410
@ Baxter International, Inc. 475,802 14,636
Becton Dickinson & Co. 196,776 10,331
@o Biogen Idec, Inc. 264,918 15,408
@ Biomet, Inc. 198,156 9,250
o Boston Scientific Corp. 659,732 23,288
Bristol-Myers Squibb Co. 1,511,208 35,408
C.R. Bard, Inc. 82,258 4,672
Cardinal Health, Inc. 335,974 15,707
o Caremark Rx, Inc. 362,644 10,868
@o Chiron Corp. 146,078 4,736
Eli Lilly & Co. 878,527 48,240
@o Express Scripts, Inc. 60,000 3,840
o Forest Laboratories, Inc. 287,240 12,811
@o Genzyme Corp. 177,186 9,297
o Gilead Sciences, Inc. 334,300 11,577
Guidant Corp. 243,874 16,247
@ HCA, Inc. 379,022 13,921
@ Health Management Associates, Inc.,
Class A 190,429 3,934
o Hospira, Inc. 121,133 3,865
o Humana, Inc. 124,343 2,381
@(8) Johnson & Johnson 2,324,156 135,684
@o King Pharmaceuticals, Inc. 187,724 2,048
Manor Care, Inc. 71,759 2,349
McKesson Corp. 227,183 6,057
@o Medco Health Solutions, Inc. 212,639 7,211
Medimmune, Inc. 193,581 5,501
Medtronic, Inc. 942,124 48,152
Merck & Co., Inc. 1,730,042 54,168
@ Mylan Laboratories, Inc. 209,700 3,611
(6) Pfizer, Inc. 5,912,611 171,170
Quest Diagnostics 81,055 7,095
Schering-Plough Corp. 1,148,084 20,792
o St. Jude Medical, Inc. 137,442 10,524
Stryker Corp. 311,894 13,439
o Tenet Healthcare Corp. 360,505 3,865
UnitedHealth Group, Inc. 517,316 37,454
o Watson Pharmaceuticals, Inc. 83,237 2,333
o WellPoint Health Networks, Inc. 121,322 11,848
Wyeth 1,034,682 41,025
o Zimmer Holdings, Inc. 190,692 14,796
-----------
1,003,944
HOUSEHOLD PRODUCTS 2.2%
--------------------------------------------------------------------------
Alberto-Culver Co., Class B 70,426 3,159
@ Avon Products, Inc. 367,854 14,549
Clorox Co. 165,110 9,015
Colgate-Palmolive Co. 413,539 18,452
The Gillette Co. 781,577 32,420
International Flavors & Fragrances, Inc.
72,428 2,828
= Procter & Gamble Co. 1,990,726 101,886
-----------
182,309
INSURANCE 4.6%
--------------------------------------------------------------------------
ACE Ltd. 220,000 8,373
Aetna, Inc. 118,847 11,290
AFLAC, Inc. 396,464 14,225
The Allstate Corp. 539,100 25,925
AMBAC Financial Group, Inc. 83,554 6,522
(9) American International Group, Inc.
2,040,150 123,858
@ AON Corp. 246,426 5,030
@ Chubb Corp. 148,677 10,724
CIGNA Corp. 108,571 6,890
Cincinnati Financial Corp. 130,868 5,464
Hartford Financial Services Group, Inc.
227,367 13,296
Jefferson-Pilot Corp. 103,914 5,018
Lincoln National Corp. 138,597 6,071
Loews Corp. 144,787 8,673
Marsh & McLennan Cos., Inc. 407,520 11,272
@ MBIA, Inc. 113,393 6,561
Metlife, Inc. 589,218 22,597
MGIC Investment Corp. 77,579 4,989
Principal Financial Group, Inc. 241,524 9,120
The Progressive Corp. 156,768 14,666
Prudential Financial, Inc. 402,500 18,704
@ Safeco Corp. 98,021 4,532
The St. Paul Travelors Cos., Inc.
517,355 17,569
Torchmark Corp. 86,710 4,684
@ UnumProvident Corp. 230,026 3,142
4
SCHWAB S&P 500 FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
@ XL Capital Ltd., Class A 108,565 7,871
-----------
377,066
MEDIA 3.5%
--------------------------------------------------------------------------
Clear Channel Communications, Inc.
459,122 15,335
@o Comcast Corp., Class A 1,742,810 51,413
Dow Jones & Co., Inc. 64,009 2,833
Gannett Co., Inc. 207,069 17,176
@ Knight-Ridder, Inc. 61,087 4,186
The McGraw-Hill Cos., Inc. 148,062 12,770
Meredith Corp. 39,218 1,922
New York Times Co., Class A 117,850 4,720
R.R. Donnelley & Sons Co. 167,196 5,258
o Time Warner, Inc. 3,558,276 59,210
Tribune Co. 255,239 11,026
@o Univision Communications, Inc., Class A
251,484 7,786
@ Viacom, Inc., Class B 1,358,469 49,571
The Walt Disney Co. 1,593,305 40,183
-----------
283,389
MISCELLANEOUS 0.6%
--------------------------------------------------------------------------
3M Co. 607,876 47,153
MISCELLANEOUS FINANCE 7.7%
--------------------------------------------------------------------------
American Express Co. 990,581 52,570
The Bear Stearns Cos., Inc. 81,229 7,696
@ Capital One Financial Corp. 186,911 13,787
/ The Charles Schwab Corp. 1,063,150 9,728
CIT Group, Inc. 80,000 3,232
(4) Citigroup, Inc. 4,056,339 179,980
Countrywide Financial Corp. 434,662 13,879
o E*TRADE Financial Corp. 285,500 3,683
Fannie Mae 753,227 52,839
Federated Investors, Inc., Class B
85,300 2,473
Franklin Resources, Inc. 193,688 11,741
Freddie Mac 535,802 35,684
Golden West Financial Corp. 118,205 13,821
@ Goldman Sachs Group, Inc. 378,200 37,207
Janus Capital Group, Inc. 186,007 2,837
Lehman Brothers Holdings, Inc. 211,104 17,342
MBNA Corp. 995,193 25,507
Merrill Lynch & Co., Inc. 730,834 39,421
Moody's Corp. 116,409 9,058
Morgan Stanley 855,539 43,709
o Providian Financial Corp. 223,272 3,472
SLM Corp. 341,883 15,474
Sovereign Bancorp, Inc. 265,600 5,750
@ T. Rowe Price Group, Inc. 99,307 5,538
Washington Mutual, Inc. 679,021 26,285
-----------
632,713
NON-DURABLES & ENTERTAINMENT 1.2%
--------------------------------------------------------------------------
Darden Restaurants, Inc. 126,412 3,097
@o Electronic Arts, Inc. 234,756 10,545
@ Fortune Brands, Inc. 113,691 8,279
Hasbro, Inc. 133,312 2,358
International Game Technology 272,552 9,005
@ Mattel, Inc. 328,493 5,752
McDonald's Corp. 981,496 28,611
o Starbucks Corp. 309,259 16,354
Wendy's International, Inc. 89,337 2,981
Yum! Brands, Inc. 225,398 9,805
-----------
96,787
NON-FERROUS METALS 0.4%
--------------------------------------------------------------------------
Alcoa, Inc. 676,287 21,979
Engelhard Corp. 95,939 2,715
Freeport-McMoran Copper & Gold, Inc.,
Class B 134,615 4,876
Phelps Dodge Corp. 72,480 6,345
-----------
35,915
OIL: DOMESTIC 1.2%
--------------------------------------------------------------------------
Amerada Hess Corp. 70,261 5,671
Ashland, Inc. 53,145 3,062
ConocoPhillips 535,948 45,186
Kerr-McGee Corp. 115,420 6,835
Marathon Oil Corp. 273,479 10,422
o Nabors Industries Ltd. 115,107 5,654
Sunoco, Inc. 59,302 4,410
o Transocean, Inc. 249,199 8,784
Unocal Corp. 206,022 8,602
-----------
98,626
OIL: INTERNATIONAL 4.1%
--------------------------------------------------------------------------
ChevronTexaco Corp. 1,663,314 88,255
(2) Exxon Mobil Corp. 5,094,097 250,732
-----------
338,987
OPTICAL & PHOTO 0.2%
--------------------------------------------------------------------------
@o Corning, Inc. 1,070,275 12,255
5
SCHWAB S&P 500 FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
@ Eastman Kodak Co. 224,974 6,812
-----------
19,067
PAPER & FOREST PRODUCTS 0.8%
--------------------------------------------------------------------------
o Boise Cascade Corp. 66,153 1,953
@ Georgia-Pacific Corp. 197,318 6,825
International Paper Co. 376,413 14,496
Kimberly-Clark Corp. 389,600 23,247
Louisiana-Pacific Corp. 83,408 2,044
MeadWestvaco Corp. 155,777 4,912
Temple-Inland, Inc. 41,926 2,479
@ Weyerhaeuser Co. 188,097 11,782
-----------
67,738
PRODUCER GOODS & MANUFACTURING 5.4%
--------------------------------------------------------------------------
o American Standard Cos., Inc. 167,700 6,133
@o Avery Dennison Corp. 85,872 5,224
Caterpillar, Inc. 266,901 21,496
Cooper Industries Ltd., Class A 72,442 4,629
Deere & Co. 194,192 11,609
Dover Corp. 157,706 6,193
@ Emerson Electric Co. 328,181 21,020
@o Fisher Scientific International, Inc.
88,722 5,089
@=(1) General Electric Co. 8,267,470 282,086
Honeywell International, Inc. 667,980 22,498
Illinois Tool Works, Inc. 235,165 21,701
Ingersoll-Rand Co., Class A 134,964 9,237
Johnson Controls, Inc. 147,168 8,440
o Millipore Corp. 37,784 1,738
Pall Corp. 96,974 2,508
Parker Hannifin Corp. 91,418 6,457
Snap-On, Inc. 44,189 1,298
W.W. Grainger, Inc. 72,199 4,230
-----------
441,586
RAILROAD & SHIPPING 0.5%
--------------------------------------------------------------------------
Burlington Northern Santa Fe Corp.
288,677 12,070
CSX Corp. 167,740 6,122
Norfolk Southern Corp. 302,882 10,283
Union Pacific Corp. 201,337 12,678
-----------
41,153
REAL PROPERTY 0.5%
--------------------------------------------------------------------------
@ Apartment Investment & Management Co.,
Class A 72,500 2,660
Equity Office Properties Trust 314,006 8,830
@ Equity Residential 217,429 7,251
Plum Creek Timber Co., Inc. 144,500 5,244
ProLogis 142,400 5,551
Simon Property Group, Inc. 172,100 10,037
-----------
39,573
RETAIL 6.7%
--------------------------------------------------------------------------
@ Albertson's, Inc. 286,510 6,535
@o Autonation, Inc. 209,100 3,603
@o AutoZone, Inc. 64,777 5,299
o Bed, Bath & Beyond, Inc. 234,687 9,573
Best Buy Co., Inc. 252,672 14,963
o Big Lots, Inc. 87,567 1,085
Circuit City Stores, Inc. 158,574 2,577
@ Costco Wholesale Corp. 357,933 17,159
@ CVS Corp. 308,727 13,417
Dillards, Inc., Class A 62,888 1,289
Dollar General Corp. 260,124 5,007
@ Family Dollar Stores, Inc. 132,990 3,930
Federated Department Stores, Inc.
140,046 7,065
@ The Gap, Inc. 699,936 13,985
@ Home Depot, Inc. 1,719,111 70,621
@ J.C. Penney Co., Inc. Holding Co.
220,106 7,613
o Kohl's Corp. 265,171 13,460
o Kroger Co. 581,385 8,785
@ Limitedbrands 363,498 9,007
@ Lowe's Cos., Inc. 611,019 34,388
@ The May Department Stores Co.
225,801 5,884
Nordstrom, Inc. 108,076 4,667
o Office Depot, Inc. 243,533 3,943
RadioShack Corp. 125,208 3,747
@o Safeway, Inc. 345,477 6,302
@ Sears, Roebuck & Co. 165,710 5,800
Staples, Inc. 386,542 11,496
Target Corp. 707,815 35,405
@ Tiffany & Co. 113,553 3,331
TJX Cos., Inc. 385,766 9,251
o Toys 'R' Us, Inc. 166,616 3,001
=(5) Wal-Mart Stores, Inc. 3,322,091 179,127
Walgreen Co. 798,044 28,642
@ Winn-Dixie Stores, Inc. 105,395 363
-----------
550,320
STEEL 0.1%
--------------------------------------------------------------------------
Allegheny Technologies, Inc. 70,584 1,186
@ Nucor Corp. 122,610 5,178
@ United States Steel Corp. 87,046 3,196
Worthington Industries, Inc. 69,657 1,383
-----------
10,943
6
SCHWAB S&P 500 FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
TELEPHONE 3.4%
--------------------------------------------------------------------------
Alltel Corp. 240,168 13,192
@ AT&T Corp. 621,840 10,640
o Avaya, Inc. 346,075 4,983
BellSouth Corp. 1,425,708 38,024
CenturyTel, Inc. 110,133 3,534
o Citizens Communications Co. 258,057 3,458
o Nextel Communications, Inc., Class A
860,271 22,789
o Qwest Communications International, Inc.
1,381,642 4,725
SBC Communications, Inc. 2,594,733 65,543
Sprint Corp. (FON Group) 1,130,036 23,674
@ Verizon Communications, Inc. 2,167,822 84,762
-----------
275,324
TOBACCO 1.1%
--------------------------------------------------------------------------
Altria Group, Inc. 1,606,665 77,859
@ Reynolds American, Inc. 114,809 7,906
UST, Inc. 127,974 5,267
-----------
91,032
TRAVEL & RECREATION 0.7%
--------------------------------------------------------------------------
Brunswick Corp. 73,572 3,452
@ Carnival Corp. 491,712 24,861
@ Harrah's Entertainment, Inc. 86,097 5,038
Hilton Hotels Corp. 296,097 5,892
Marriott International, Inc., Class A
175,734 9,576
Starwood Hotels & Resorts Worldwide,
Inc. 161,921 7,729
-----------
56,548
TRUCKING & FREIGHT 0.1%
--------------------------------------------------------------------------
@ Paccar, Inc. 134,955 9,353
Ryder Systems, Inc. 50,813 2,546
-----------
11,899
UTILITIES: ELECTRIC & GAS 3.2%
--------------------------------------------------------------------------
o The AES Corp. 503,090 5,484
@o Allegheny Energy, Inc. 99,242 1,817
@ Ameren Corp. 150,280 7,213
@ American Electric Power Co., Inc.
307,485 10,126
@o Calpine Corp. 414,241 1,031
@ Centerpoint Energy, Inc. 235,015 2,470
@ Cinergy Corp. 140,058 5,535
@o CMS Energy Corp. 147,646 1,382
@ Consolidated Edison, Inc. 187,570 8,150
Constellation Energy Group, Inc. 132,786 5,394
Dominion Resources, Inc. 256,982 16,529
DTE Energy Co. 134,383 5,740
@ Duke Energy Corp. 729,612 17,897
@0 Dynegy, Inc., Class A 291,051 1,435
Edison International 255,377 7,789
@ El Paso Corp. 492,325 4,401
@ Entergy Corp. 178,608 11,674
@ Exelon Corp. 513,692 20,353
FirstEnergy Corp. 258,545 10,686
@ FPL Group, Inc. 143,198 9,866
@ KeySpan Corp. 126,365 5,048
Kinder Morgan, Inc. 96,339 6,201
Nicor, Inc. 35,789 1,343
NiSource, Inc. 204,355 4,383
Peoples Energy Corp. 27,820 1,190
o PG&E Corp. 311,920 9,994
Pinnacle West Capital Corp. 70,250 2,994
PPL Corp. 146,648 7,626
Progress Energy, Inc. 193,355 7,986
@ Public Service Enterprise Group, Inc.
185,439 7,898
Sempra Energy 178,781 5,996
@ The Southern Co. 575,055 18,166
TECO Energy, Inc. 154,169 2,158
TXU Corp. 236,850 14,500
@ Williams Cos., Inc. 429,773 5,377
Xcel Energy, Inc. 311,475 5,326
-----------
261,158
SHORT-TERM INVESTMENT 0.1% of net assets
Provident Institutional
TempFund 9,414,995 9,415
FACE
SECURITY AMOUNT
RATE, MATURITY DATE ($ X 1,000)
= U.S. Treasury Bills
1.54%-1.66%, 12/16/04 975 973
END OF INVESTMENTS.
7
SCHWAB S&P 500 FUND
PORTFOLIO HOLDINGS continued
FACE
SECURITY AMOUNT VALUE
RATE, MATURITY DATE ($ X 1,000) ($ X 1,000)
COLLATERAL INVESTED FOR SECURITIES ON LOAN
7.8% OF NET ASSETS
COMMERCIAL PAPER & OTHER CORPORATE OBLIGATIONS 3.3%
--------------------------------------------------------------------------
Canadian Imperial Bank of
Commerce/New York
1.92%, 11/29/04 23,101 23,097
1.72%, 05/25/05 21,894 21,890
Crown Point Capital
1.80%, 11/05/04 8,536 8,523
Foreningssparbanken AB
1.83%, 11/15/04 63,439 63,430
Fortis Bank NY
1.78%, 06/06/05 9,163 9,162
2.06%, 06/08/05 6,590 6,589
Societe Generale NY
1.95%, 11/01/04 60,728 60,715
1.83%, 11/15/04 21,790 21,782
Westdeutsche Landesbank AG
1.50%, 01/10/05 54,770 54,756
-----------
269,944
SHORT-TERM INVESTMENTS 4.5%
--------------------------------------------------------------------------
Citibank, Time Deposit
1.76%, 11/01/04 15,069 15,069
SECURITY AND NUMBER OF SHARES
Institutional Money Market
Trust 356,919,456 356,919
-----------
371,988
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN.
In addition to the above, the fund held the following at 10/31/04. All numbers x
$1,000 except number of contracts.
NUMBER
OF CONTRACT UNREALIZED
CONTRACTS VALUE GAINS
FUTURES CONTRACTS
S&P 500 Index,
Long expires
12/17/04 10 2,826 68
8
SCHWAB CAPITAL TRUST
SCHWAB SMALL-CAP INDEX FUND(R)
PORTFOLIO HOLDINGS as of October 31, 2004
The following is the schedule of portfolio holdings at 10/31/04. The schedule
should be read in conjunction with the fund's annual report for the fiscal year
ended 10/31/04.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top Ten Holding
o Non-income producing security
= Collateral for open futures contracts
@ This security or a portion of this security is on loan
COST VALUE
HOLDINGS BY CATEGORY ($X1,000) ($X1,000)
- --------------------------------------------------------------------------------
100.0% COMMON STOCK 1,387,803 1,628,595
0.0% SHORT-TERM
INVESTMENT 787 787
0.0% U.S. TREASURY
OBLIGATIONS 120 120
- --------------------------------------------------------------------------------
100.0% TOTAL INVESTMENTS 1,388,710 1,629,502
8.6% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 140,272 140,272
(8.6)% OTHER ASSETS AND
LIABILITIES, NET (140,048)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 1,629,726
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
COMMON STOCK 100.0% of net assets
AEROSPACE / DEFENSE 1.0%
--------------------------------------------------------------------------
o Armor Holdings, Inc. 70,200 2,599
o DRS Technologies, Inc. 60,900 2,206
EDO Corp. 44,900 1,256
= Engineered Support Systems, Inc. 58,950 2,832
o ESCO Technologies, Inc. 29,100 2,031
o Esterline Technologies Corp. 47,900 1,514
@ GenCorp, Inc. 89,400 1,243
o Teledyne Technologies, Inc. 73,300 1,874
o Veeco Instruments, Inc. 67,370 1,316
-----------
16,871
AIR TRANSPORTATION 1.1%
--------------------------------------------------------------------------
o AAR Corp. 73,100 859
o AirTran Holdings, Inc. 189,300 2,200
o Alaska Air Group, Inc. 65,800 1,733
@o America West Holdings Corp., Class B 81,300 372
o Aviall, Inc. 73,000 1,581
@o Continental Airlines, Inc., Class B 150,870 1,400
o EGL, Inc. 96,100 3,073
o ExpressJet Holdings, Inc. 108,300 1,204
o FLYi, Inc. 104,900 147
o Frontier Airlines, Inc. 82,200 687
@o Mesa Air Group, Inc. 72,800 418
@o Northwest Airlines Corp. 196,700 1,741
SkyWest, Inc. 131,500 2,246
-----------
17,661
ALCOHOLIC BEVERAGES 0.1%
--------------------------------------------------------------------------
o The Robert Mondavi Corp., Class A 36,600 1,994
APPAREL 1.6%
--------------------------------------------------------------------------
o Aeropostale, Inc. 120,950 3,816
Brown Shoe Co., Inc. 41,600 1,136
The Buckle, Inc. 49,350 1,274
K-Swiss, Inc., Class A 61,200 1,530
Kellwood Co. 60,900 1,916
Kenneth Cole Productions, Inc., Class A 45,750 1,212
Oxford Industries, Inc. 37,100 1,376
Phillips-Van Heusen Corp. 70,250 1,601
o Quiksilver, Inc. 130,000 3,543
Russell Corp. 74,200 1,283
o Stage Stores, Inc. 42,900 1,545
Stride Rite Corp. 90,000 932
o The Warnaco Group, Inc. 96,200 1,962
Wolverine World Wide, Inc. 85,100 2,590
-----------
25,716
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.6%
--------------------------------------------------------------------------
A.O. Smith Corp., Class B 60,600 1,608
1
SCHWAB SMALL-CAP INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
Arctic Cat, Inc. 32,400 814
Bandag, Inc. 43,300 1,992
o CSK Auto Corp. 105,200 1,540
o Fleetwood Enterprises, Inc. 123,400 1,554
o Group 1 Automotive, Inc. 51,000 1,443
o Keystone Automotive Industries, Inc. 34,800 627
Lithia Motors, Inc., Class A 42,400 960
Modine Manufacturing Co. 72,600 2,230
Monaco Coach Corp. 66,100 1,173
Sonic Automotive, Inc. 66,500 1,345
@ Superior Industries International, Inc. 60,300 1,644
o TBC Corp. 49,200 1,094
@o Tower Automotive, Inc. 133,700 199
=o(3) United Defense Industries, Inc. 118,600 4,761
Winnebago Industries, Inc. 76,200 2,393
-----------
25,377
BANKS 7.0%
--------------------------------------------------------------------------
Alabama National Bancorp 36,200 2,313
Anchor Bancorp Wisconsin, Inc. 52,600 1,364
BancFirst Corp. 17,300 1,125
BankAtlantic Bancorp, Inc., Class A 132,700 2,321
Boston Private Financial Holdings, Inc. 62,100 1,524
Brookline Bancorp, Inc. 133,800 2,073
Capital City Bank Group, Inc. 30,750 1,203
Capitol Bancorp Ltd. 32,800 1,007
Chemical Financial Corp. 50,387 1,881
City Holding Co. 37,700 1,306
Community Bank System, Inc. 64,900 1,792
Community Banks, Inc. 28,135 820
Community First Bankshares, Inc. 83,100 2,677
Community Trust Bancorp, Inc. 28,300 934
Corus Bankshares, Inc. 59,900 2,756
Dime Community Bancshares, Inc. 84,575 1,358
First Charter Corp. 67,200 1,716
First Commonwealth Financial Corp. 157,000 2,280
First Federal Capital Corp. 50,700 1,688
First Financial Bancorp 99,830 1,741
First Financial Bancshares, Inc. 35,431 1,494
First Merchants Corp. 40,130 998
First Niagra Financial Group, Inc. 179,677 2,505
First Republic Bank 34,500 1,663
o FirstFed Financial Corp. 35,530 1,826
Frontier Financial Corp. 42,000 1,617
Gold Banc Corp., Inc. 91,200 1,327
Hancock Holding Co. 73,434 2,324
Harbor Florida Bancshares, Inc. 53,000 1,698
Harleysville National Corp. 55,842 1,428
Independent Bank Corp. 34,200 1,128
Integra Bank Corp. 39,670 870
Irwin Financial Corp. 63,600 1,586
= MAF Bancorp., Inc. 70,725 3,032
Main Street Banks, Inc. 44,400 1,304
Mid-State Bancshares 53,400 1,433
Midwest Banc Holdings, Inc. 41,000 851
National Penn Bancshares, Inc. 78,838 2,086
NBT Bancorp., Inc. 71,000 1,643
NetBank, Inc. 106,700 990
Oriental Financial Group 49,015 1,389
PFF Bancorp, Inc. 37,600 1,483
PrivateBancorp, Inc. 45,400 1,469
Prosperity Bancshares, Inc. 49,500 1,349
Provident Bankshares Corp. 74,994 2,605
Republic Bancorp, Inc. 145,662 2,434
Riggs National Corp. 65,200 1,376
S&T Bancorp, Inc. 56,000 2,018
o S1 Corp. 160,100 1,503
Sandy Spring Bancorp, Inc. 33,200 1,148
Simmons First National Corp., Class A 32,300 870
= Southwest Bancorp of Texas, Inc. 156,200 3,661
Sterling Bancorp NY 35,400 1,022
Sterling Bancshares, Inc. Texas 101,850 1,443
o Sterling Financial Corp. Washington 49,850 1,873
Suffolk Bancorp 25,900 798
Susquehanna Bancshares, Inc. 108,775 2,705
Texas Regional Bancshares, Inc., Class A 106,628 3,405
Tompkins Trustco, Inc. 17,200 787
Trustco Bank Corp. NY 169,320 2,267
UMB Financial Corp. 46,093 2,371
Umpqua Holdings Corp. 97,552 2,427
@ United Community Financial Corp. 72,600 811
Unizan Financial Corp. 49,100 1,305
USB Holding Co., Inc. 46,905 1,275
WesBanco, Inc. 45,200 1,370
Wintrust Financial Corp. 44,800 2,554
-----------
113,400
BUSINESS MACHINES & SOFTWARE 2.2%
--------------------------------------------------------------------------
o Adaptec, Inc. 248,680 1,940
o Advanced Digital Information Corp. 146,000 1,307
Analogic Corp. 30,600 1,302
=o Arbitron, Inc. 66,000 2,387
2
SCHWAB SMALL-CAP INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o Artesyn Technologies, Inc. 88,600 859
Black Box Corp. 40,500 1,591
o Borland Software Corp. 183,800 1,882
o Cray, Inc. 194,500 650
o Enterasys Networks, Inc. 484,600 678
@o FindWhat.com 67,100 1,345
o Imagistics International, Inc. 37,700 1,298
o Intergraph Corp. 77,521 1,933
o InterVoice, Inc. 79,800 988
o Interwoven, Inc. 90,730 823
o Invision Technologies, Inc. 38,000 1,755
Landamerica Financial Group, Inc. 41,500 2,031
o LTX Corp. 140,600 914
o McData Corp., Class A 266,200 1,672
o Micromuse, Inc. 180,800 775
o Micros Systems, Inc. 38,800 2,294
o Omnicell, Inc. 51,200 529
@o PalmOne, Inc. 107,000 3,100
@o PTEK Holdings, Inc. 157,700 1,571
o Scansource, Inc. 28,100 1,740
o Zhone Technologies, Inc. 198,000 507
-----------
35,871
BUSINESS SERVICES 14.5%
--------------------------------------------------------------------------
@o Road, Inc. 118,260 745
ABM Industries, Inc. 110,300 2,289
o Administaff, Inc. 61,400 703
o Advent Software, Inc. 75,140 1,567
o The Advisory Board Co. 39,200 1,277
Advo, Inc. 68,850 2,200
o Agile Software Corp. 116,600 996
o Alderwoods Group, Inc. 89,000 902
@o Altiris, Inc. 57,700 1,569
@o American Superconductor Corp. 62,900 727
@o AMN Healthcare Services, Inc. 65,033 767
o Ansys, Inc. 68,000 1,877
o aQuantive, Inc. 138,120 1,236
@o Ariba, Inc. 138,006 2,118
o Ask Jeeves, Inc. 127,500 3,287
o Aspen Technology, Inc. 94,900 570
Bowne & Co., Inc. 80,200 997
o Bright Horizons Family Solutions, Inc. 29,900 1,893
=o CACI International, Inc., Class A 65,700 4,006
o Catalina Marketing Corp. 116,800 2,991
CDI Corp. 44,900 741
o Cell Genesys, Inc. 102,900 675
o Century Business Services, Inc.179,915 797
@=o Cerner Corp. 77,700 3,508
Chemed Corp. 26,500 1,602
o Ciber, Inc. 135,600 1,226
o Clarent Corp. 105,200 3
o Connetics Corp. 80,060 2,152
o CoStar Group, Inc. 40,600 1,639
o Cross Country Healthcare, Inc. 72,500 1,075
o CSG Systems International, Inc. 112,400 1,889
@o CuraGen Corp. 115,600 570
o Dendrite International, Inc. 94,030 1,378
o Digital Insight Corp. 77,800 1,218
@o Digital River, Inc. 72,100 2,401
o Digitas, Inc. 129,700 1,167
o Diversa Corp. 97,000 836
o Dot Hill Systems Corp. 100,200 626
o E.piphany, Inc. 174,300 763
@o Echelon Corp. 93,300 659
o Eclipsys Corp. 99,400 1,687
o eFunds Corp. 107,000 2,107
o Embarcadero Technologies, Inc. 61,000 496
o Encysive Pharmaceuticals, Inc. 119,100 1,040
o Epicor Software Corp. 112,700 1,732
o eResearch Technology, Inc. 114,700 1,341
o Euronet Worldwide, Inc. 68,200 1,563
o Exelixis, Inc. 162,100 1,443
@o F5 Networks, Inc. 78,280 3,127
o FileNet Corp. 89,100 2,480
o Forrester Research, Inc. 51,000 787
o FTI Consulting, Inc. 95,100 1,784
G&K Services, Inc., Class A 47,250 1,856
o Global Imaging Systems, Inc. 49,700 1,749
Grey Global Group, Inc. 2,620 2,623
o Harris Interactive, Inc. 129,500 881
o Heidrick & Struggles International, Inc. 41,600 1,191
o Hewitt Associates, Inc., Class A 118,380 3,318
o Identix, Inc. 190,632 1,390
o IDT Corp. 49,400 649
o IDX Systems Corp. 68,500 2,297
o InFocus Corp. 90,800 585
o Informatica Corp. 194,220 1,517
o Infospace, Inc. 71,390 3,748
o infoUSA, Inc. 118,800 1,244
o Internap Network Services Corp. 595,400 458
o Internet Security Systems 108,200 2,354
o JDA Software Group, Inc. 65,700 738
John H. Harland Co. 63,790 2,056
o Keane, Inc. 130,900 2,070
o Korn/Ferry International 85,000 1,479
o Labor Ready, Inc. 90,100 1,293
o Lionbridge Technologies, Inc. 105,600 495
=o Macrovision Corp. 106,140 2,870
o Magma Design Automation, Inc. 76,600 993
o Manhattan Associates, Inc. 66,700 1,372
o Mantech International Corp., Class A 63,100 1,364
o Manugistics Group, Inc. 187,300 478
3
SCHWAB SMALL-CAP INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o MAXIMUS, Inc. 49,690 1,351
o Mentor Graphics Corp. 158,900 1,850
@o MicroStrategy, Inc., Class A 36,500 2,189
@o Mindspeed Technologies, Inc. 229,200 543
o MPS Group, Inc. 237,000 2,496
o MRO Software, Inc. 57,300 625
@ Nautilus Group, Inc. 72,749 1,430
o Navigant Consulting, Inc. 104,750 2,605
o NCO Group, Inc. 71,860 1,922
NDCHealth Corp. 81,770 1,373
o NeighborCare, Inc. 100,700 2,581
o Netegrity, Inc. 77,700 827
o NetIQ Corp. 129,280 1,639
Newcastle Investment Corp. 78,600 2,406
o NIC, Inc. 134,700 567
o Openwave Systems, Inc. 147,500 1,736
@o Opsware, Inc. 181,700 983
@o Orbital Sciences Corp. 111,030 1,149
o Packeteer, Inc. 75,300 929
o Parametric Technology Corp. 583,075 3,026
o Paxar Corp. 89,185 1,967
o PDI, Inc. 32,800 938
o Per-Se Technologies, Inc. 63,900 932
@o Pre-Paid Legal Services, Inc. 37,300 1,040
@o Priceline.com, Inc. 84,300 1,681
o Progress Software Corp. 81,180 1,612
o ProQuest Co. 64,300 1,676
o QAD, Inc. 72,400 553
=o R.H. Donnelley Corp. 67,700 3,673
o RealNetworks, Inc. 383,100 1,858
@ Renaissance Learning, Inc. 70,800 1,347
o Resources Connection, Inc. 51,800 2,175
o Retek, Inc. 128,900 712
o RSA Security, Inc. 138,300 2,830
o SafeNet, Inc. 53,880 1,650
o Sapient Corp. 271,700 2,187
@o Seachange International, Inc. 57,400 978
o Secure Computing Corp. 82,000 643
o Seebeyond Technology Corp. 189,800 595
o Serena Software, Inc. 99,100 1,758
o SonicWALL, Inc. 160,560 803
o SourceCorp 37,000 621
Spartech Corp. 71,500 1,802
o Spherion Corp. 137,600 989
o SRA International, Inc., Class A 49,630 2,668
SS&C Technologies, Inc. 50,900 1,203
The Standard Register Co. 54,700 581
Startek, Inc. 32,800 907
@o STATS ChipPAC Ltd. 158,099 934
Strayer Education, Inc. 31,400 3,047
o SupportSoft, Inc. 96,600 490
o Symyx Technologies, Inc. 72,700 1,779
o TeleTech Holdings, Inc. 168,800 1,688
o Telik, Inc. 98,000 1,808
o Tetra Technologies, Inc. 49,600 1,485
o Transaction Systems Architects, Inc., Class A 84,300 1,382
=o United Online, Inc. 141,500 1,329
o URS Corp. 90,270 2,491
o Valueclick, Inc. 176,400 1,639
o Verity, Inc. 84,500 1,092
o Vignette Corp. 632,000 702
o Waste Connections, Inc. 106,950 3,371
Watson Wyatt & Co. Holdings 74,880 1,988
@o WebEx Communications, Inc. 98,200 2,160
o webMethods, Inc. 117,700 816
o Websense, Inc. 52,240 2,119
o Wind River Systems, Inc. 183,500 2,457
o Wireless Facilities, Inc. 151,600 1,119
@o(1) Wynn Resorts Ltd. 183,440 10,667
-----------
235,466
CHEMICALS 2.2%
--------------------------------------------------------------------------
A. Schulman, Inc. 68,400 1,358
Amcol International Corp. 66,800 1,175
Arch Chemicals, Inc. 52,700 1,494
Brady Corp., Class A 53,000 2,874
Crompton Corp. 259,860 2,417
o Entegris, Inc. 164,900 1,526
Ferro Corp. 94,800 1,997
Georgia Gulf Corp. 71,100 3,219
H.B. Fuller Co. 64,800 1,743
MacDermid, Inc. 68,900 2,174
o Millennium Chemicals, Inc. 139,900 3,005
o NewMarket Corp 36,000 807
o OM Group, Inc. 59,900 1,976
o PolyOne Corp. 208,800 1,581
o Rogers Corp. 37,000 1,588
Rollins, Inc. 101,050 2,663
Tredegar Corp. 85,000 1,424
o Trex Co., Inc. 33,300 1,336
WD-40 Co. 39,100 1,105
-----------
35,462
CONSTRUCTION 2.0%
--------------------------------------------------------------------------
American Woodmark Corp. 36,800 1,368
@= Beazer Homes USA, Inc. 30,369 3,334
o Ceradyne, Inc. 36,150 1,550
@ Eagle Materials, Inc. 42,300 2,923
ElkCorp 43,150 1,215
o EMCOR Group, Inc. 30,600 1,211
Granite Construction, Inc. 87,825 2,132
o Insituform Technologies, Inc., Class A 61,300 1,215
o Integrated Electrical Services, Inc. 82,600 314
4
SCHWAB SMALL-CAP INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
M/I Homes, Inc. 32,100 1,380
o Mastec, Inc. 111,400 770
o NCI Building Systems, Inc. 44,100 1,418
@o Palm Harbor Homes, Inc. 51,800 776
o Quanta Services, Inc. 264,400 1,777
= Simpson Manufacturing Co., Inc. 52,700 3,388
o Surebeam Corp., Class A 132,000 2
Texas Industries, Inc. 48,000 2,445
@o USG Corp. 97,400 2,181
Walter Industries, Inc. 84,000 1,429
o WCI Communities, Inc. 99,700 2,353
-----------
33,181
CONSUMER DURABLES 1.1%
--------------------------------------------------------------------------
o Champion Enterprises, Inc. 157,000 1,710
o Genlyte Group, Inc. 30,600 2,251
o Griffon Corp. 67,800 1,508
Haverty Furniture Cos., Inc. 41,900 707
o Helen of Troy Ltd. 58,500 1,553
Kimball International, Inc., Class B 86,400 1,171
= La-Z-Boy, Inc. 119,400 1,575
o Red Robin Gourmet Burgers, Inc. 35,600 1,485
@o Select Comfort Corp. 82,800 1,417
Thomas Industries, Inc. 39,100 1,322
@ Toro Co. 54,500 3,720
-----------
18,419
CONTAINERS 0.3%
--------------------------------------------------------------------------
Greif, Inc., Class A 50,800 2,111
Silgan Holdings, Inc. 41,200 1,955
-----------
4,066
ELECTRONICS 7.8%
--------------------------------------------------------------------------
o Actel Corp. 59,000 895
Acuity Brands, Inc. 94,700 2,512
Agilysys, Inc. 70,400 1,203
Anixter International, Inc. 77,600 2,998
o Arris Group, Inc. 199,600 928
o Artisan Components, Inc. 51,500 1,666
o Aspect Communications Corp. 133,100 1,266
o Asyst Technologies, Inc. 108,700 582
o ATMI, Inc. 70,800 1,653
@o Avanex Corp. 310,400 854
o Axcelis Technologies, Inc. 222,400 1,913
Belden CDT, Inc. 106,537 2,368
=o Benchmark Electronics, Inc. 88,550 3,008
@o Biolase Technology, Inc. 55,500 379
@o Broadwing Corp. 109,090 621
o Brooks Automation, Inc. 101,424 1,509
o Bruker BioSciences Corp. 206,700 713
C&D Technologies, Inc. 57,600 1,031
o C-COR.net Corp. 98,700 742
=o Cabot Microelectronics Corp. 55,600 2,003
o CCC Information Services Group, Inc. 45,963 842
o Celera Genomics Group -- Applera Corp. 165,430 2,121
o Cepheid, Inc. 94,000 848
o Checkpoint Systems, Inc. 86,200 1,474
o Cirrus Logic, Inc. 186,800 943
=o CMGI, Inc. 909,900 1,247
o Coherent, Inc. 68,400 1,650
Cohu, Inc. 48,600 762
o CommScope, Inc. 114,450 2,061
o Comtech Telecommunications Corp. 32,200 883
o Cox Radio, Inc., Class A 95,400 1,517
o Credence Systems Corp. 214,400 1,619
CTS Corp. 77,000 1,017
Cubic Corp. 60,800 1,338
o Cyberonics 53,600 1,006
o Daktronics, Inc. 42,300 1,044
o Dionex Corp. 47,000 2,632
o DSP Group, Inc. 57,900 1,148
o Dupont Photomasks, Inc. 36,300 952
o Electro Scientific Industries, Inc. 63,700 1,080
o ESS Technology, Inc. 90,300 591
o Exar Corp. 92,372 1,387
o Excel Technology, Inc. 26,700 673
o Faro Technologies, Inc. 31,400 780
o FEI Co. 75,400 1,460
@o FuelCell Energy, Inc. 109,300 1,348
o Genesis Microchip, Inc. 73,600 1,043
o Harmonic, Inc. 164,800 1,371
o Hollywood Entertainment Corp. 136,600 1,328
@o Hutchinson Technology, Inc. 59,160 1,988
o Integrated Silicon Solutions, Inc. 78,800 592
o Intermagnetics General Corp. 62,171 1,585
o Kopin Corp. 161,400 591
@o Kulicke & Soffa Industries, Inc. 116,600 833
=o Lattice Semiconductor Corp. 256,600 1,275
o Littelfuse, Inc. 50,320 1,641
=o Macromedia, Inc. 150,600 4,087
o Mattson Technology, Inc. 111,300 934
o Mercury Computer Systems, Inc. 48,100 1,215
Methode Electronics, Class A 81,700 1,097
@o Microsemi Corp. 133,000 2,067
o MRV Communications, Inc. 245,100 850
MTS Systems Corp. 47,500 1,225
o Mykrolis Corp. 95,000 998
o Netopia, Inc. 31,600 79
o Newport Corp. 88,400 998
o Oplink Communications, Inc. 335,600 646
5
SCHWAB SMALL-CAP INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
Park Electrochemical Corp. 44,550 936
o Photon Dynamics, Inc. 38,000 695
o Pinnacle Systems, Inc. 157,900 736
o Pixelworks, Inc. 100,600 1,136
o Plexus Corp. 95,200 1,180
o Power Integrations, Inc. 69,600 1,489
o Power-One, Inc. 192,100 1,349
o Powerwave Technologies, Inc. 233,500 1,744
o Quantum Corp. 413,600 1,108
o Rayovac Corp. 76,800 1,913
o Remec, Inc. 111,300 613
o Rofin-Sinar Technologies, Inc. 32,900 986
o Rudolph Technologies, Inc. 37,500 566
o ScanSoft, Inc. 237,500 920
o Silicon Image, Inc. 168,400 2,307
o Silicon Storage Technology, Inc. 217,700 1,622
Spectralink Corp. 43,100 526
o Standard Microsystems Corp. 41,400 912
o Stratex Networks, Inc. 193,200 351
o Superconductor Technologies, Inc. 111,000 118
o Synaptics, Inc. 56,000 1,772
o Technitrol, Inc. 91,600 1,495
o Tekelec 141,800 3,165
Tektronix, Inc. -- --
o Terayon Communication Systems Corp. 169,200 277
o THQ, Inc. 84,210 1,592
o Transmeta Corp. 394,700 825
o Triquint Semiconductor, Inc. 306,900 1,093
o TTM Technologies, Inc. 92,000 862
=o Varian, Inc. 74,500 2,718
o Viasat, Inc. 60,000 1,133
o Vicor Corp. 69,600 647
o Wilson Greatbatch Technologies, Inc. 48,400 820
o Zoran Corp. 97,200 981
-----------
126,297
ENERGY: RAW MATERIALS 3.4%
--------------------------------------------------------------------------
o Atwood Oceanics, Inc. 31,400 1,506
Berry Petroleum Co., Class A 48,900 1,866
Cabot Oil & Gas Corp. 74,500 3,152
CARBO Ceramics, Inc. 35,300 2,550
o Cimarex Energy Co. 93,900 3,369
o Denbury Resources, Inc. 117,600 2,916
@o Grey Wolf, Inc. 422,680 2,190
o Hanover Compressor Co. 190,700 2,483
o Headwaters, Inc. 76,400 2,407
o Hydril Co. 36,400 1,601
@o KFX, Inc. 125,600 1,173
o Kirby Corp. 55,000 2,310
o McDermott International, Inc. 150,600 2,056
NL Industries, Inc. 109,700 2,189
o Offshore Logistics, Inc. 51,200 1,851
o Oil States International, Inc. 110,700 2,032
Penn Virginia Corp. 41,000 1,476
Range Resources Corp. 153,900 2,416
o Seacor Holdings, Inc. 38,750 1,845
o Southwestern Energy Co. 81,820 3,759
o Swift Energy Co. 60,700 1,472
@o TC Pipelines L.P. 37,500 1,425
Unit Corp. 99,500 3,690
USEC, Inc. 187,800 1,814
o W-H Energy Services, Inc. 62,100 1,264
World Fuel Services Corp. 24,800 846
-----------
55,658
FOOD & AGRICULTURE 1.2%
--------------------------------------------------------------------------
@ American Italian Pasta Co., Class A 40,200 816
o Chiquita Brands International, Inc. 92,300 1,663
Delta & Pine Land Co. 87,100 2,292
Farmer Brothers Co. 32,600 870
o Fisher Communications, Inc. 19,800 932
o Hain Celestial Group, Inc. 79,743 1,290
@ Interstate Bakeries 104,600 430
Lance, Inc. 66,000 1,114
o Ralcorp Holdings, Inc. 64,166 2,358
Sanderson Farms, Inc. 45,100 1,465
Sensient Technologies Corp. 105,600 2,294
@o Tejon Ranch Co. 32,800 1,177
o United Natural Foods, Inc. 83,000 2,257
@o VistaCare, Inc., Class A 35,200 546
o Wild Oats Markets, Inc. 48,000 292
-----------
19,796
GOLD 0.0%
--------------------------------------------------------------------------
Royal Gold, Inc. 47,900 767
HEALTHCARE / DRUGS & MEDICINE 11.0%
--------------------------------------------------------------------------
=o Abgenix, Inc. 198,700 1,810
o Accelrys, Inc. 56,100 323
o Advanced Medical Optics, Inc. 79,400 3,105
o Advanced Neuromodulation Systems, Inc. 45,900 1,461
o Albany Molecular Research, Inc. 73,100 630
o Alexion Pharmaceuticals, Inc. 61,300 1,094
Alpharma, Inc., Class A 116,900 1,981
@o American Healthways, Inc. 73,900 2,230
o American Medical Systems Holdings, Inc. 70,700 2,623
6
SCHWAB SMALL-CAP INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o AMERIGROUP Corp. 55,600 3,336
o Amsurg Corp. 68,250 1,596
@o Antigenics, Inc. 104,200 705
o Ariad Pharmaceuticals, Inc. 120,500 683
Arrow International, Inc. 92,900 2,654
@o Arthrocare Corp. 48,200 1,485
@o Atherogenics, Inc. 78,300 2,344
o Atrix Labs, Inc. 49,800 1,543
o Beverly Enterprises, Inc. 243,300 2,114
o BioMarin Pharmaceuticals, Inc. 146,100 603
@o Biosite, Inc. 35,000 1,708
Cambrex Corp. 57,600 1,289
o Centene Corp. 45,150 2,141
o Charles River Laboratories International, Inc. 40,954 1,916
o Conmed Corp. 67,900 1,906
o Corvel Corp. 24,700 646
o Cubist Pharmaceuticals, Inc. 91,200 931
@o CV Therapeutics, Inc. 72,000 1,205
Datascope Corp. 33,500 1,087
o Dendreon Corp. 125,500 1,298
= Diagnostic Products Corp. 65,400 2,887
o Digene Corp. 44,800 1,127
o Discovery Laboratories, Inc. 104,900 714
o DJ Orthopedics, Inc. 48,600 829
o Encore Medical Corp. 98,900 508
o Enzo Biochem, Inc. 71,464 1,264
o Enzon Pharmaceuticals, Inc. 99,560 1,610
o Epix Medical, Inc. 51,900 811
o First Horizon Pharmaceutical Corp. 81,200 1,996
o Genesis HealthCare Corp. 45,484 1,395
@o Genta, Inc. 178,400 446
@o Geron Corp. 96,900 761
o Haemonetics Corp. 56,600 1,859
o HealthExtras, Inc. 73,800 1,053
@o ICU Medical, Inc. 31,000 696
o Ii-Vi, Inc. 31,400 1,075
o Ilex Oncology, Inc. 82,400 2,081
o Immucor, Inc. 67,550 2,084
o Impax Laboratories, Inc. 131,600 1,942
@o Incyte Corp. 165,100 1,717
o Inspire Pharmaceuticals, Inc. 86,400 1,353
o Integra LifeSciences Holdings Corp. 65,200 2,092
@o InterMune, Inc. 72,500 940
o Intuitive Surgical, Inc. 74,900 2,186
= Invacare Corp. 67,700 3,126
@o Inverness Medical Innovations, Inc. 46,100 953
o Isis Pharmaceuticals, Inc. 129,600 603
o Kindred Healthcare, Inc. 80,200 1,933
o Kyphon, Inc. 87,700 2,203
Landauer, Inc. 20,400 995
o Lexicon Genetics, Inc. 145,400 947
=o LifePoint Hospitals, Inc. 85,800 2,782
@o Ligand Pharmaceuticals, Inc., Class B 167,600 1,494
@o Medarex, Inc. 174,900 1,331
Mentor Corp. 95,600 3,327
o Merit Medical Systems, Inc. 60,054 622
@=o MGI Pharma, Inc. 153,200 4,086
Mine Safety Appliances Co. 88,000 3,319
o Myriad Genetics, Inc. 68,200 1,209
o Nabi Biopharmaceuticals 130,976 1,814
o Nektar Therapeutics 179,460 2,586
o Noven Pharmacuticals, Inc. 53,000 1,195
@o NPS Pharmacuticals, Inc. 85,100 1,454
Oakley, Inc. 142,200 1,806
@o OCA, Inc. 115,400 477
o Ocular Sciences, Inc. 54,600 2,667
o Odyssey HealthCare, Inc. 82,850 640
o Onyx Pharmaceuticals, Inc. 77,800 2,183
Owens & Minor, Inc. 87,900 2,302
o Parexel International Corp. 59,500 1,145
=o Pediatrix Medical Group, Inc. 52,300 2,942
Perrigo Co. 153,000 2,782
@ PolyMedica Corp. 59,500 2,082
o Priority Healthcare Corp., Class B 83,600 1,510
o Province Healthcare Co. 112,300 2,408
o PSS World Medical, Inc. 147,000 1,656
@o Regeneron Pharmaceuticals, Inc. 120,800 878
o RehabCare Group, Inc. 37,000 850
=o Resmed, Inc. 76,200 3,581
@o Serologicals Corp. 55,600 1,315
o Sierra Health Services, Inc. 62,200 2,968
o Sola International, Inc. 72,400 1,389
@o Sunrise Senior Living, Inc. 46,500 1,772
@o SuperGen, Inc. 98,000 598
@o SurModics, Inc. 40,200 1,079
o Sybron Dental Specialties, Inc. 86,000 2,801
@o Tanox, Inc. 100,040 1,571
@o Thoratec Corp. 128,800 1,131
o Transkaryotic Therapies, Inc. 78,800 1,364
o United Surgical Partners International, Inc. 63,900 2,237
o United Therapeutics Corp. 48,400 1,513
@o USANA Health Sciences, Inc. 43,400 1,295
o Ventana Medical Systems, Inc. 34,200 1,851
o Vertex Pharmaceuticals, Inc. 177,400 1,930
o Viasys Healthcare, Inc. 70,410 1,203
=o Vicuron Pharmaceuticals, Inc. 122,900 1,723
=o Visx, Inc. 110,700 1,846
West Pharmaceutical Services, Inc. 67,200 1,540
o Wright Medical Group, Inc. 73,900 1,909
7
SCHWAB SMALL-CAP INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o XOMA Ltd. 195,400 401
-----------
179,197
HOUSEHOLD PRODUCTS 0.1%
--------------------------------------------------------------------------
o Elizabeth Arden, Inc. 62,800 1,506
o Playtex Products, Inc. 138,800 870
-----------
2,376
INSURANCE 3.1%
--------------------------------------------------------------------------
Alfa Corp. 177,100 2,462
o Argonaut Group, Inc. 63,000 1,166
Baldwin & Lyons, Inc., Class B 35,600 893
o CNA Surety Corp. 98,500 1,159
Commerce Group, Inc. 74,100 3,750
Delphi Financial Group, Inc., Class A 70,676 2,889
FBL Financial Group, Inc., Class A 64,700 1,676
Great American Financial Resources, Inc. 107,750 1,692
Harleysville Group, Inc. 67,800 1,412
Hooper Holmes, Inc. 148,500 780
Horace Mann Educators Corp. 96,100 1,634
Kansas City Life Insurance Co. 27,500 1,127
Liberty Corp. 43,600 1,763
o Navigators Group, Inc. 28,900 852
o Ohio Casualty Corp. 131,100 2,737
o Philadelphia Consolidated Holding Co. 50,000 2,899
Presidential Life Corp. 67,300 1,075
o ProAssurance Corp. 64,796 2,313
RLI Corp. 56,950 2,166
@ Selective Insurance Group, Inc. 62,800 2,454
State Auto Financial Corp. 88,400 2,515
Sterling Financial Corp. 49,350 1,308
Stewart Information Services Corp. 38,400 1,629
o Triad Guaranty, Inc. 32,700 1,782
o UICI 98,800 2,922
United Fire & Casualty Co. 22,800 1,371
o USI Holdings Corp. 106,200 1,032
@ Zenith National Insurance Corp. 42,600 1,750
-----------
51,208
MEDIA 2.1%
--------------------------------------------------------------------------
o Adolor Corp. 89,000 1,054
o AMC Entertainment, Inc. 83,600 1,606
o Applied Films Corp. 33,800 784
Banta Corp. 56,800 2,310
@ Blockbuster, Inc., Class A 85,600 582
o CNET Networks, Inc. 307,300 2,511
o Consolidated Graphics, Inc. 30,700 1,311
o Entravision Communications Corp., Class A 135,500 1,091
o Gaylord Entertainment Co. 84,600 2,835
Gray Television, Inc. 109,400 1,453
o Information Holdings, Inc. 47,300 1,295
o Insight Communications Co., Class A 133,100 1,126
o Journal Register Co. 93,500 1,758
o Lin TV Corp., Class A 60,400 1,098
o Mediacom Communications Corp., Class A 268,600 1,759
Movie Gallery, Inc. 74,900 1,212
o Primedia, Inc. 596,000 1,520
Pulitzer, Inc. 22,400 1,181
@ Regal Entertainment Group, Class A 120,100 2,391
o Salem Communications Corp., Class A 47,100 1,177
Sinclair Broadcast Group, Inc., Class A 190,300 1,332
o Spanish Broadcasting System, Class A 146,716 1,485
@o Tivo, Inc. 179,800 1,209
o Valuevision Media, Inc., Class A 84,200 879
-----------
34,959
MISCELLANEOUS 0.3%
--------------------------------------------------------------------------
o Coinstar, Inc. 48,600 1,255
@o NetFlix, Inc. 115,600 1,095
o Salix Pharmaceuticals Ltd. 82,200 1,318
o Saxon Capital, Inc. 66,000 1,267
-----------
4,935
MISCELLANEOUS FINANCE 5.3%
--------------------------------------------------------------------------
1st Source Corp. 47,800 1,296
Amcore Financial, Inc. 55,650 1,693
o Bankunited Financial Corp., Class A 67,700 2,014
Blackrock, Inc., Class A 41,200 3,028
o Boca Resorts, Inc., Class A 90,800 2,152
Cash America International, Inc. 64,470 1,631
=(6) Cathay General Bancorp., Inc. 112,400 4,429
Central Pacific Financial Co. 46,400 1,418
CharterMac 110,900 2,568
The Commercial Capital Bancorp, Inc. 119,033 2,670
Commercial Federal Corp. 86,900 2,417
o CompuCredit Corp. 100,300 1,909
o Corrections Corp. of America 79,900 2,777
CVB Financial Corp. 110,174 2,732
= Downey Financial Corp. 60,440 3,340
8
SCHWAB SMALL-CAP INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
(7) East-West Bancorp, Inc. 109,700 4,392
o eSpeed, Inc., Class A 99,440 979
Fidelity Bankshares, Inc. 34,400 1,337
o Financial Federal Corp. 42,700 1,593
First Community Bancorp 34,800 1,461
First Financial Corp. Indiana 31,000 979
First Financial Holdings, Inc. 29,000 881
Glacier Bancorp, Inc. 55,687 1,763
Hudson River Bancorp 68,800 1,349
IBERIABANK Corp. 14,700 897
Independent Bank Corp. Michigan 44,720 1,215
o Investment Technology Group, Inc. 99,400 1,531
=o La Quinta Corp. 396,700 3,193
o LabOne, Inc. 38,900 1,167
@o LaBranche & Co., Inc. 135,700 962
MB Financial, Inc. 61,600 2,633
MCG Capital Corp. 87,800 1,560
o Meritage Corp. 27,600 2,448
The Midland Co. 42,800 1,183
o National Western Life Insurance Co., Class A 7,500 1,126
Northwest Bancorp, Inc. 108,349 2,579
o Ocwen Financial Corp. 138,260 1,037
@o Portfolio Recovery Associates, Inc. 35,100 1,184
Provident Financial Services, Inc. 20,838 375
United Community Banks, Inc. Georgia 77,500 1,866
@o(2) UnitedGlobalCom, Inc., Class A 858,200 6,419
Value Line, Inc. 23,400 847
Waypoint Financial Corp. 73,700 2,024
o World Acceptance Corp. 41,000 959
-----------
86,013
NON-DURABLES & ENTERTAINMENT 2.7%
--------------------------------------------------------------------------
@o AFC Enterprises, Inc. 67,900 1,472
=o CEC Entertainment, Inc. 80,850 3,074
Churchill Downs, Inc. 30,200 1,147
@o CKE Restaurants, Inc. 127,200 1,535
@o Electronics Boutique Holdings Corp. 55,300 1,888
Handleman Co. 53,400 1,149
o Hibbet Sporting Goods, Inc. 50,950 1,139
IHOP Corp. 44,100 1,689
o Isle of Capri Casinos, Inc. 63,600 1,441
o Jack in the Box, Inc. 81,900 2,733
Landry's Restaurants, Inc. 60,400 1,636
@o Leapfrog Enterprises, Inc. 132,700 1,619
Lone Star Steakhouse & Saloon, Inc. 47,500 1,145
@o P.F. Chang's China Bistro, Inc. 58,000 2,949
@o Papa John's International, Inc. 39,700 1,282
o Penn National Gaming, Inc. 90,240 3,748
o Rare Hospitality International Inc. 76,050 2,107
Russ Berrie & Co., Inc. 47,400 988
o Ryan's Restaurant Group, Inc. 92,250 1,291
o Sotheby's Holdings, Inc., Class A 140,800 2,632
o The Steak N Shake Co. 62,100 1,023
o Stewart Enterprises, Inc., Class A 229,900 1,637
The Topps Co., Inc. 93,400 941
Triarc Cos., Class B 137,200 1,568
Tupperware Corp. 132,500 2,211
-----------
44,044
NON-FERROUS METALS 0.9%
--------------------------------------------------------------------------
o Century Aluminum Co. 68,500 1,585
Commercial Metals Co. 61,366 2,218
Gibraltar Industries, Inc. 44,300 1,551
o Hecla Mining Co. 269,200 1,814
Minerals Technologies, Inc. 45,800 2,753
Reliance Steel & Aluminum Co. 73,375 2,518
Southern Peru Copper Corp. 32,000 1,382
-----------
13,821
OIL: DOMESTIC 2.8%
--------------------------------------------------------------------------
o CAL Dive International, Inc. 86,700 3,070
o Comstock Resources, Inc. 76,600 1,685
o Encore Acquisition Co. 72,500 2,367
o Energy Partners Ltd. 73,300 1,287
Frontier Oil Corp. 59,500 1,463
o Global Industries Ltd. 251,700 1,689
Holly Corp. 71,850 1,764
o KCS Energy, Inc. 111,200 1,513
o Magnum Hunter Resources, Inc. 193,300 2,339
o(9) Plains Exploration & Production Co. 167,478 4,187
@o Quicksilver Resources, Inc. 107,600 3,403
o Remington Oil & Gas Corp. 60,800 1,547
o Spinnaker Exploration Co. 76,410 2,439
St. Mary Land & Exploration Co. 63,500 2,504
o Stone Energy Corp. 56,740 2,336
o Superior Energy Services, Inc. 169,500 2,185
o(5) Tesoro Petroleum Corp. 148,100 4,485
o Universal Compression Holdings, Inc. 70,600 2,441
Vintage Petroleum, Inc. 147,200 3,091
-----------
45,795
9
SCHWAB SMALL-CAP INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
OPTICAL & PHOTO 0.1%
--------------------------------------------------------------------------
o August Technology Corp. 40,700 317
o Photronics, Inc. 74,000 1,299
-----------
1,616
PAPER & FOREST PRODUCTS 0.8%
--------------------------------------------------------------------------
o Buckeye Technologies, Inc. 84,000 886
o Caraustar Industries, Inc. 64,700 962
Chesapeake Corp. 43,300 1,005
Glatfelter 99,600 1,238
o Longview Fibre Co. 116,200 1,789
Potlatch Corp. 63,000 2,967
Rock-Tennessee Co., Class A 79,600 1,238
Universal Forest Products, Inc. 40,100 1,471
Wausau-Mosinee Paper Corp. 115,025 1,799
-----------
13,355
PRODUCER GOODS & MANUFACTURING 6.0%
--------------------------------------------------------------------------
o Actuant Corp., Class A 49,900 1,980
o Advanced Energy Industries, Inc. 74,400 734
o Aeroflex, Inc. 168,900 1,875
Albany International Corp., Class A 73,783 2,215
Applied Industrial Technologies, Inc. 44,100 1,641
= Aptargroup, Inc. 79,100 3,711
Baldor Electric Co. 74,620 1,748
Barnes Group, Inc. 52,100 1,355
Clarcor, Inc. 54,250 2,675
o Cuno, Inc. 37,900 2,179
Curtiss-Wright Corp. 44,700 2,495
Federal Signal Corp. 109,200 1,815
Franklin Electric Co., Inc. 46,800 1,796
o Gardner Denver, Inc. 45,300 1,358
Helix Technology Corp. 59,200 831
= Hughes Supply, Inc. 133,800 3,801
= IDEX Corp. 108,300 3,996
@o Ionics, Inc. 51,200 1,459
o Jacuzzi Brands, Inc. 170,900 1,478
o Jarden Corp. 61,700 2,167
JLG Industries, Inc. 98,800 1,648
Kaydon Corp. 64,100 1,897
= Kennametal, Inc. 79,300 3,690
=o Kos Pharmaceuticals, Inc. 79,200 2,827
Lennox International, Inc. 128,500 1,858
Libbey, Inc. 31,191 566
Lincoln Electric Holdings, Inc. 92,400 3,084
o Lone Star Technologies, Inc. 65,400 1,727
Manitowoc Co., Inc. 60,562 2,138
Matthews International Corp., Class A 72,900 2,443
o Maverick Tube Corp. 96,200 2,537
o Moog, Inc., Class A 58,250 2,186
MSC Industrial Direct Co., Class A 94,000 3,209
NACCO Industries, Inc., Class A 15,850 1,481
o Oceaneering International, Inc. 56,400 2,005
@o Plug Power, Inc. 165,600 991
Regal Beloit Corp. 56,000 1,310
o Safeguard Scientifics, Inc. 277,300 463
Sauer-Danfoss, Inc. 107,600 1,948
o Sequa Corp., Class A 23,800 1,285
@o The Shaw Group, Inc. 143,900 1,754
@o Sonic Solutions, Inc. 49,100 975
Steelcase, Inc., Class A 115,000 1,506
Stewart & Stevenson Services, Inc. 65,300 1,110
Tecumseh Products Co., Class A 42,000 1,818
Tennant Co. 20,500 836
o Triumph Group, Inc. 35,900 1,234
o Tyler Technologies, Inc. 94,000 820
o Ultratech Stepper, Inc. 54,600 929
Valmont Industries, Inc. 54,500 1,185
Watsco, Inc. 51,100 1,454
Watts Water Technologies, Inc., Class A 72,000 1,868
Woodward Governor Co. 25,600 1,550
-----------
97,641
RAILROAD & SHIPPING 0.4%
--------------------------------------------------------------------------
o Genesee & Wyoming, Inc., Class A 51,700 1,309
o Kansas City Southern Railway 142,500 2,415
o RailAmerica, Inc. 76,800 852
Westinghouse Air Brake Technologies Corp. 99,221 2,011
-----------
6,587
REAL PROPERTY 6.3%
--------------------------------------------------------------------------
o Alexander's, Inc. 11,300 2,233
Alexandria Real Estate Equities, Inc. 43,900 2,900
American Home Mortgage Investment Corp. 89,400 2,470
AMLI Residential Properties 54,500 1,715
Anthracite Capital, Inc. 115,100 1,333
@ Anworth Mortgage Asset Corp. 101,200 1,035
Bedford Property Investors, Inc. 37,500 1,078
= Brandywine Realty Trust 119,300 3,510
Capital Automotive Real Estate Investment Trust 81,300 2,623
10
SCHWAB SMALL-CAP INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
Colonial Properties Trust 61,400 2,393
Commercial Net Lease Realty 117,600 2,261
Cornerstone Realty Income Trust, Inc. 125,900 1,236
Corporate Office Properties Trust SBI 77,200 2,117
CRT Properties, Inc. 60,800 1,347
EastGroup Properties, Inc. 47,400 1,679
Entertainment Properties Trust 53,600 2,139
Equity Inns, Inc. 101,700 966
o FelCor Lodging Trust, Inc. 135,200 1,571
Gables Residential Trust 65,700 2,398
Getty Realty Corp. 55,900 1,572
Glenborough Realty Trust, Inc. 72,400 1,520
Glimcher Realty Trust 80,500 2,079
o Homestore, Inc. 274,000 670
IMPAC Mortgage Holdings, Inc. 139,600 3,156
Investors Real Estate Trust 91,900 933
o Jones Lang LaSalle, Inc. 72,400 2,317
Kilroy Realty Corp. 60,600 2,409
Kramont Realty Trust 55,400 1,045
LaSalle Hotel Properties 60,900 1,749
Lexington Corp. Properties Trust 109,500 2,457
LNR Property Corp. 44,900 2,808
Manufactured Home Communities, Inc. 51,600 1,780
o Meristar Hospitality Corp. 200,000 1,168
MFA Mortgage Investments, Inc. 165,100 1,393
Mid-America Apartment Communities, Inc. 46,200 1,817
National Health Investors, Inc. 62,300 1,782
(8) New Century Financial Corp. 77,200 4,258
@ Novastar Financial, Inc. 53,200 2,302
Parkway Properties, Inc. 24,700 1,254
Post Properties, Inc. 85,500 2,744
PS Business Parks, Inc. 49,400 2,170
RAIT Investment Trust 57,200 1,528
Ramco-Gershenson Properties 38,100 1,029
Redwood Trust, Inc. 47,500 2,858
Saul Centers, Inc. 36,600 1,189
Senior Housing Properties Trust 135,800 2,548
Sovran Self Storage, Inc. 33,700 1,317
Summit Properties, Inc. 71,300 2,163
Sun Communities, Inc. 42,800 1,664
Tanger Factory Outlet Centers 30,800 1,455
Taubman Centers, Inc. 107,400 3,082
The Town & Country Trust 39,000 1,077
o Trammell Crow Co. 84,400 1,304
US Restaurant Properties, Inc. 51,700 916
-----------
102,517
RETAIL 3.4%
--------------------------------------------------------------------------
o A.C. Moore Arts & Crafts, Inc. 43,200 1,113
Aaron Rents, Inc. 105,850 2,297
o Big 5 Sporting Goods Corp. 52,100 1,323
Burlington Coat Factory Warehouse Corp. 100,540 2,219
Casey's General Stores, Inc. 111,600 1,987
The Cato Corp., Class A 45,600 1,047
o Central Garden & Pet Co. 40,600 1,450
o Charming Shoppes, Inc. 260,200 1,985
o The Children's Place Retail Stores, Inc. 60,820 1,878
Christopher & Banks Corp. 85,950 1,397
o Cost Plus, Inc. 50,000 1,615
o The Dress Barn, Inc. 64,800 1,039
o Drugstore.com, Inc. 178,700 568
The Finish Line, Class A 54,100 1,874
o Guitar Center, Inc. 53,460 2,386
o The Gymboree Corp. 70,100 848
o Insight Enterprises, Inc. 109,450 2,031
o Jo-Ann Stores, Inc. 50,910 1,255
Longs Drug Stores Corp. 84,100 2,077
o The Men's Wearhouse, Inc. 82,250 2,556
o Payless Shoesource, Inc. 155,610 1,480
o Petco Animal Supplies, Inc. 32,800 1,173
Ruddick Corp. 103,500 2,083
@o School Specialty, Inc. 41,700 1,706
o Sharper Image Corp. 34,300 702
o ShopKo Stores, Inc. 66,100 1,140
o Too, Inc. 77,800 1,713
=o Tractor Supply Co. 82,080 2,978
=o United Stationers, Inc. 73,100 3,253
Weis Markets, Inc. 61,600 2,264
@o West Marine, Inc. 44,900 1,101
=o Zale Corp. 112,500 3,209
-----------
55,747
STEEL 1.1%
--------------------------------------------------------------------------
o AK Steel Holding Corp. 229,000 2,182
Allegheny Technologies, Inc. 208,000 3,497
Carpenter Technology Corp. 51,800 2,458
@o Cleveland-Cliffs, Inc. 24,100 1,757
Quanex Corp. 37,300 1,891
Schnitzer Steel Industries, Inc., Class A 67,000 1,893
Steel Dynamics, Inc. 111,900 3,715
-----------
17,393
TELEPHONE 1.2%
--------------------------------------------------------------------------
o Autobytel.com, Inc. 83,900 584
11
SCHWAB SMALL-CAP INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o Commonwealth Telephone Enterprises, Inc. 44,600 2,035
o Ditech Communications Corp. 73,200 1,679
@o Dobson Communications Corp., Class A 275,600 366
o Equinix, Inc. 41,500 1,564
o Extreme Networks, Inc. 270,800 1,584
@o Finisar Corp. 503,440 740
o General Communication, Inc., Class A 130,000 1,191
Inter-Tel, Inc. 58,400 1,577
=o Interdigital Communications Corp. 116,400 1,851
@o j2 Global Communications, Inc. 52,200 1,574
o Price Communications Corp. 128,100 2,041
@o Primus Telecommunications Group, Inc. 205,900 393
SureWest Communications 33,300 944
@o Time Warner Telecom, Inc., Class A 163,500 837
@o Utstarcom, Inc. 22,800 390
-----------
19,350
TOBACCO 0.3%
--------------------------------------------------------------------------
Schweitzer-Mauduit International, Inc. 34,100 1,076
Universal Corp. 57,200 2,619
@ Vector Group Ltd. 82,049 1,268
-----------
4,963
TRAVEL & RECREATION 1.6%
--------------------------------------------------------------------------
o Argosy Gaming Co. 65,400 2,589
o Aztar Corp. 77,200 2,389
Central Parking Corp. 83,200 1,127
@o Dick's Sporting Goods, Inc. 75,300 2,711
o Dollar Thrifty Automotive Group, Inc. 57,400 1,385
o K2, Inc. 103,900 1,685
The Marcus Corp. 46,225 983
@o Multimedia Games, Inc. 61,600 813
o(10) Scientific Games Corp., Class A 194,200 4,113
@o Shuffle Master, Inc. 52,100 2,193
o Six Flags, Inc. 211,700 1,067
o The Sports Authority, Inc. 58,100 1,405
o Vail Resorts, Inc. 63,100 1,266
o WMS Industries, Inc. 68,300 1,998
-----------
25,724
TRUCKING & FREIGHT 1.1%
--------------------------------------------------------------------------
Arkansas Best Corp. 56,800 2,220
o Forward Air Corp. 48,700 2,005
o Knight Transportation, Inc. 121,100 2,845
o(4) Landstar Systems, Inc. 67,300 4,573
o Old Dominion Freight Line 54,700 1,533
o Pacer International, Inc. 84,500 1,500
USF Corp. 62,900 2,254
o Wabash National Corp. 61,400 1,509
-----------
18,439
UTILITIES: ELECTRIC & GAS 2.3%
--------------------------------------------------------------------------
American States Water Co. 34,850 857
o Aquila, Inc. 525,100 1,665
Avista Corp. 108,400 1,927
Black Hills Corp. 73,500 2,165
California Water Service Group 38,800 1,144
CH Energy Group, Inc. 36,000 1,607
Cleco Corp. 98,700 1,798
o El Paso Electric Co. 107,900 1,797
The Empire District Electric Co. 57,700 1,203
The Laclede Group, Inc. 46,700 1,408
MGE Energy, Inc. 42,300 1,341
New Jersey Resources Corp. 62,700 2,578
Northwest Natural Gas Co. 62,000 1,965
Otter Tail Corp. 58,300 1,508
PNM Resources, Inc. 136,250 3,172
@o Sierra Pacific Resources 249,100 2,391
South Jersey Industries 30,700 1,449
Southwest Gas Corp. 78,600 1,920
UIL Holdings Corp. 32,800 1,662
@ Unisource Energy Corp. 76,580 1,883
o Veritas DGC, Inc. 69,800 1,473
-----------
36,913
FACE
SECURITY AMOUNT
RATE, MATURITY DATE ($ X 1,000)
SHORT-TERM INVESTMENT 0.0% of net assets
HSBC Bank, USA Grand
Cayman Time Deposit
1.29%, 11/01/04 787 787
12
SCHWAB SMALL-CAP INDEX FUND
PORTFOLIO HOLDINGS continued
FACE
SECURITY AMOUNT VALUE
RATE, MATURITY DATE ($ X 1,000) ($ X 1,000)
U.S. TREASURY OBLIGATIONS 0.0% of net assets
= U.S. Treasury Bills
1.59%-1.65%, 12/16/04 120 120
END OF INVESTMENTS.
COLLATERAL INVESTED FOR SECURITIES ON LOAN
8.6% of net assets
SECURITY AND NUMBER OF SHARES
SHORT-TERM INVESTMENT 8.6%
--------------------------------------------------------------------------
Securities Lending Investment Fund 140,271,911 140,272
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN.
In addition to the above, the fund held the following at 10/31/04.
All numbers x $1,000 except number of futures contracts.
NUMBER
OF CONTRACT UNREALIZED
CONTRACTS VALUE GAINS
FUTURES CONTRACTS
Russell 2000
Index, Long
expires 12/17/04 4 1,169 35
13
SCHWAB CAPITAL TRUST
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS as of October 31, 2004
The following is the schedule of portfolio holdings at 10/31/04. The schedule
should be read in conjunction with the fund's annual report for the fiscal year
ended 10/31/04.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top Ten Holding
o Non-income producing security
= Collateral for open futures contracts
/ Issuer is affiliated with the fund's adviser
> Security is valued at fair value (see Accounting Policies)
@ This security or a portion of this security is on loan
For fixed-rate obligations, the rate shown is the interest rate (the rate
established when the obligation was issued) and the maturity date shown is the
stated legal maturity.
COST VALUE
HOLDINGS BY CATEGORY ($X1,000) ($X1,000)
- --------------------------------------------------------------------------------
98.9% COMMON STOCK 1,070,799 1,127,570
0.7% SHORT-TERM INVESTMENT 8,015 8,015
0.0% U.S. TREASURY OBLIGATION 399 399
0.0% PREFERRED STOCK 68 69
0.0% CORPORATE BONDS 15 16
0.0% RIGHTS 130 8
0.0% WARRANTS 286 2
- --------------------------------------------------------------------------------
99.6% TOTAL INVESTMENTS 1,079,712 1,136,079
6.3% COLLATERAL INVESTED FOR SECURITIES ON LOAN 71,496 71,496
(5.9)% OTHER ASSETS AND LIABILITIES, NET (66,895)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 1,140,680
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
COMMON STOCK 98.9% of net assets
AEROSPACE / DEFENSE 1.6%
---------------------------------------------------------------------------
o Aerosonic Corp. 300 1
o Armor Holdings, Inc. 3,000 111
The Boeing Co. 68,800 3,433
@ Crane Co. 5,000 139
o DRS Technologies, Inc. 1,382 50
EDO Corp. 900 25
Engineered Support Systems, Inc. 2,475 119
o EnPro Industries, Inc. 920 20
o ESCO Technologies, Inc. 1,400 98
o Esterline Technologies Corp. 2,400 76
GenCorp, Inc. 2,500 35
General Dynamics Corp. 15,700 1,603
Goodrich Corp. 8,404 259
Heico Corp., Class A 2,286 32
Kaman Corp., Class A 1,300 14
o KVH Industries, Inc. 1,300 11
@ L-3 Communications Holdings, Inc. 9,100 600
Lockheed Martin Corp. 37,052 2,041
Northrop Grumman Corp. 30,032 1,554
Raytheon Co. 34,900 1,273
Rockwell Automation, Inc. 15,700 655
Rockwell Collins, Inc. 13,100 465
o SatCon Technology Corp. 900 2
o Teledyne Technologies, Inc. 12,157 311
Textron, Inc. 11,800 804
o Transtechnology Corp. 500 4
o Trimble Navigation Ltd. 5,700 164
United Technologies Corp. 42,034 3,902
o Veeco Instruments, Inc. 3,500 68
-----------
17,869
AIR TRANSPORTATION 1.0%
---------------------------------------------------------------------------
o AAR Corp. 2,500 29
o AirTran Holdings, Inc. 5,800 67
o Alaska Air Group, Inc. 1,900 50
@o AMR Corp. 12,000 93
@o ATA Holdings Corp. 1,200 1
o Aviall, Inc. 2,500 54
o Continental Airlines, Inc., Class B 5,000 47
@o Delta Air Lines, Inc. 10,300 56
o EGL, Inc. 4,150 133
o ExpressJet Holdings, Inc. 3,000 33
o FedEx Corp. 28,063 2,557
o FLYi, Inc. 1,600 2
o Hawk Corp., Class A 1,800 14
@o JetBlue Airways Corp. 7,975 176
1
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o MAIR Holdings, Inc. 1,100 10
o Mesa Air Group, Inc. 1,300 8
o Northwest Airlines Corp. 6,500 58
Sabre Holdings Corp., Class A 12,401 267
SkyWest, Inc. 4,000 68
Southwest Airlines Co. 64,125 1,011
United Parcel Service, Inc., Class B 91,480 7,243
-----------
11,977
ALCOHOLIC BEVERAGES 0.4%
---------------------------------------------------------------------------
Adolph Coors Co., Class B 2,500 167
Anheuser-Busch Cos., Inc. 67,000 3,347
Brown-Forman Corp., Class B 9,912 445
o Constellation Brands, Inc., Class A 8,800 345
National Beverage Corp. 7,400 60
o The Robert Mondavi Corp., Class A 2,500 136
-----------
4,500
APPAREL 0.6%
---------------------------------------------------------------------------
Brown Shoe Co., Inc. 3,300 90
The Buckle, Inc. 1,000 26
o Carter's, Inc. 2,500 79
o Coach, Inc. 16,004 746
o Columbia Sportswear Co. 4,350 263
o Finlay Enterprises, Inc. 1,000 20
o Guess?, Inc. 2,700 45
Haggar Corp. 1,200 20
o Hampshire Group Ltd. 1,000 31
o The J. Jill Group, Inc. 2,000 35
Jones Apparel Group, Inc. 12,156 429
K-Swiss, Inc., Class A 2,400 60
Kellwood Co. 2,900 91
Kenneth Cole Productions, Inc., Class A 3,100 82
Liz Claiborne, Inc. 18,600 760
Nike, Inc., Class B 20,700 1,683
Oshkosh B'Gosh, Inc., Class A 1,200 22
Phillips-Van Heusen Corp. 1,800 41
Polo Ralph Lauren Corp. 3,500 129
o Quiksilver, Inc. 2,000 55
Reebok International Ltd. 8,000 296
Russell Corp. 2,600 45
Saucony, Inc., Class B 1,900 46
o Skechers USA, Inc., Class A 6,500 72
o Stage Stores, Inc. 1,200 43
o Steven Madden Ltd. 1,800 29
Stride Rite Corp. 2,900 30
Superior Uniform Group, Inc. 1,600 23
Tandy Brands Accessories, Inc. 1,000 14
o Tarrant Apparel Group 1,700 2
o Timberland Co., Class A 1,400 86
o Unifi, Inc. 1,900 6
VF Corp. 15,000 807
o The Warnaco Group, Inc. 2,500 51
Wolverine World Wide, Inc. 5,200 158
-----------
6,415
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.1%
---------------------------------------------------------------------------
A.O. Smith Corp., Class B 1,300 35
o Aftermarket Technology Corp. 2,511 36
American Axle & Manufacturing Holdings, Inc. 5,300 152
ArvinMeritor, Inc. 4,900 91
Bandag, Inc. 3,200 147
BorgWarner, Inc. 5,400 250
Carlisle Cos., Inc. 3,600 209
Cascade Corp. 4,400 131
o Collins & Aikman Corp. 1,400 5
Cooper Tire & Rubber Co. 6,400 125
o CSK Auto Corp. 3,500 51
Cummins, Inc. 3,900 273
Dana Corp. 40,800 608
Danaher Corp. 24,000 1,323
@ Delphi Corp. 45,600 384
Donaldson Co., Inc. 8,800 261
o Dura Automotive Systems, Inc., Class A 12,100 102
Eaton Corp. 12,600 806
Federal Screw Works 250 8
@ Ford Motor Co. 148,736 1,938
General Motors Corp. 45,386 1,750
@ Gentex Corp. 2,300 76
Genuine Parts Co. 13,500 539
@o Goodyear Tire & Rubber Co. 12,500 126
o Group 1 Automotive, Inc. 1,400 40
Harley-Davidson, Inc. 25,500 1,468
o Keystone Automotive Industries, Inc. 1,800 32
@ Lear Corp. 5,800 313
Lithia Motors, Inc., Class A 700 16
o MarineMax, Inc. 800 20
o Midas, Inc. 1,300 25
Modine Manufacturing Co. 3,700 114
Monaco Coach Corp. 1,200 21
o Monro Muffler Brake, Inc. 1,050 26
Myers Industries, Inc. 2,580 27
@o Navistar International Corp. 6,900 238
@ Oshkosh Truck Corp. 4,500 265
Polaris Industries, Inc. 3,200 190
o Rush Enterprises, Inc., Class B 500 8
Sonic Automotive, Inc. 1,400 28
Standard Motor Products, Inc. 2,000 30
2
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o Stoneridge, Inc. 1,700 23
Superior Industries International, Inc. 800 22
o TBC Corp. 100 2
Thor Industries, Inc. 4,500 125
Titan International, Inc. 800 8
@o Tower Automotive, Inc. 2,300 3
United Auto Group, Inc. 1,000 27
o United Defense Industries, Inc. 900 36
o UQM Technologies, Inc. 1,500 4
@ Visteon Corp. 5,451 39
Winnebago Industries, Inc. 2,600 82
-----------
12,658
BANKS 7.7%
---------------------------------------------------------------------------
ABC Bancorp 1,500 31
Abigail Adams National Bancorp 500 9
Alabama National Bancorp 1,600 102
@ AmSouth Bancorp. 28,403 750
Anchor Bancorp Wisconsin, Inc. 3,100 80
Arrow Financial Corp. 991 29
@ Associated Banc-Corp. 10,719 372
BancFirst Corp. 500 33
Bancorpsouth, Inc. 7,612 181
Bank Mutual Corp. 6,168 76
(7) Bank of America Corp. 338,518 15,162
Bank of Hawaii Corp. 3,500 167
The Bank of New York Co., Inc. 65,500 2,126
BankAtlantic Bancorp, Inc., Class A 2,200 38
Banknorth Group, Inc. 14,890 525
BB&T Corp. 46,386 1,907
Berkshire Bancorp, Inc. 3,600 66
Boston Private Financial Holdings, Inc. 2,129 52
@ Brookline Bancorp, Inc. 2,405 37
Bryn Mawr Bank Corp. 1,400 27
Camden National Corp. 700 26
Capital City Bank Group, Inc. 1,500 59
o Capital Crossing Bank 2,000 55
Capitol Bancorp Ltd. 1,500 46
@ Capitol Federal Financial 6,920 235
Cascade Bancorp 2,655 54
Cavalry Bancorp, Inc. 500 9
o Central Coast Bancorp 1,464 33
Century Bancorp, Inc., Class A 800 25
Chemical Financial Corp. 1,318 49
Chittenden Corp. 2,272 64
Citizens Banking Corp. Michigan 4,590 150
Citizens South Banking Corp. 1,000 13
City Holding Co. 1,800 62
City National Corp. 3,100 214
The Colonial BancGroup, Inc. 10,100 219
Columbia Bancorp 700 22
Columbia Banking Systems, Inc. 1,951 48
Comerica, Inc. 13,496 830
@ Commerce Bancorp, Inc. N.J. 5,660 335
Commerce Bancshares, Inc. 12,093 594
Community Bank System, Inc. 1,400 39
Community First Bankshares, Inc. 2,000 64
Community Trust Bancorp, Inc. 2,261 75
@ Compass Bancshares, Inc. 11,400 545
Corus Bankshares, Inc. 2,000 92
Cullen/Frost Bankers, Inc. 3,300 162
Dime Community Bancshares, Inc. 3,375 54
@ Doral Financial Corp. 9,900 416
Exchange National Bancshares, Inc. 750 24
Fifth Third Bancorp 46,003 2,263
First Bancorp Puerto Rico 2,100 115
First Busey Corp. 1,500 28
First Charter Corp. 3,500 89
First Citizens BancShares, Inc., Class A 300 35
First Commonwealth Financial Corp. 2,504 36
First Federal Capital Corp. 2,500 83
First Financial Bancorp 1,839 32
First Financial Bancshares, Inc. 1,500 63
First Horizon National Corp. 10,800 467
First M & F Corp. 1,000 34
First Merchants Corp. 1,041 26
First Midwest Bancorp, Inc. Illinois 3,125 109
First National Bankshares of Florida, Inc. 6,117 151
First Niagra Financial Group, Inc. 3,104 43
First Oak Brook Bancshares, Inc. 1,500 47
The First of Long Island Corp. 2,000 88
First Republic Bank 800 39
o FirstFed Financial Corp. 2,900 149
FirstMerit Corp. 7,300 191
FNB Corp. 2,639 54
Frontier Financial Corp. 700 27
Fulton Financial Corp. 11,182 240
Gold Banc Corp., Inc. 1,400 20
Great Southern Bancorp, Inc. 1,400 47
Greater Bay Bancorp 5,406 169
Hancock Holding Co. 2,100 66
Harbor Florida Bancshares, Inc. 1,100 35
Harleysville National Corp. 1,157 30
Hibernia Corp., Class A 16,900 490
Home Federal Bancorp 800 19
Horizon Financial Corp. 2,156 42
Hudson City Bancorp, Inc. 19,100 698
Hudson United Bancorp 5,740 228
Huntington Bancshares, Inc. 18,290 438
Independent Bank Corp. 1,000 33
3
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
Integra Bank Corp. 1,225 27
Interchange Financial Services Corp. 1,050 26
o Internet Capital Group, Inc. 350 2
Irwin Financial Corp. 3,700 92
JPMorgan Chase & Co. 295,944 11,423
KeyCorp, Inc. 34,300 1,152
Lakeland Financial Corp. 1,100 39
M&T Bank Corp. 8,962 923
MAF Bancorp., Inc. 1,648 71
Main Street Banks, Inc. 1,000 29
MainSource Financial Group, Inc. 1,575 34
Marshall & Ilsley Corp. 19,150 804
MASSBANK Corp. 1,500 56
Mellon Financial Corp. 35,800 1,035
Mercantile Bankshares Corp. 5,574 272
Merchants Bancshares, Inc. 750 22
Mid-State Bancshares 3,500 94
Midwest Banc Holdings, Inc. 1,300 27
Nara Bancorp, Inc. 4,000 76
National City Corp. 56,821 2,214
National Penn Bancshares, Inc. 1,132 30
NBT Bancorp., Inc. 1,400 32
NetBank, Inc. 3,300 31
NewMil Bancorp, Inc. 1,000 29
North Fork Bancorp., Inc. 29,274 1,291
North Valley Bancorp 1,500 28
Northern Trust Corp. 18,500 787
OceanFirst Financial Corp. 1,050 25
Old National Bancorp. 5,947 147
Omega Financial Corp. 1,000 36
Oriental Financial Group 1,512 43
Park National Corp. 805 105
Pennfed Finance Services, Inc. 2,000 65
Peoples Bank-Bridgeport 8,250 309
Peoples Financial Corp. 3,000 55
PFF Bancorp, Inc. 1,120 44
PNC Financial Services Group, Inc. 24,500 1,281
Popular, Inc. 26,800 689
Prosperity Bancshares, Inc. 2,400 65
Provident Bankshares Corp. 1,657 58
Regions Financial Corp. 39,314 1,379
Republic Bancorp, Inc. 4,669 78
Republic Bancorp, Inc., Class A 1,575 44
Riggs National Corp. 1,500 32
S&T Bancorp, Inc. 1,400 50
o S1 Corp. 12,930 121
Sandy Spring Bancorp, Inc. 2,900 100
Seacoast Banking Corp. of Florida 1,980 43
Shore Bancshares, Inc. 500 15
@o Silicon Valley Bancshares 2,200 88
Simmons First National Corp., Class A 1,000 27
Sky Financial Group, Inc. 8,510 229
The South Financial Group, Inc. 4,500 135
SouthTrust Corp. 28,554 1,244
Southwest Bancorp of Texas, Inc. 7,000 164
Southwest Bancorp, Inc. Oklahoma 3,300 77
State Bancorp, Inc. 882 20
State Street Corp. 28,000 1,261
Sterling Bancorp NY 1,523 44
Sterling Bancshares, Inc. Texas 2,100 30
o Sterling Financial Corp. Washington 1,218 46
Suffolk Bancorp 2,400 74
o Sun Bancorp, Inc. N.J. 3,307 77
SunTrust Banks, Inc. 31,842 2,241
Susquehanna Bancshares, Inc. 3,168 79
SY Bancorp, Inc. 1,400 32
Synovus Financial Corp. 24,600 669
TCF Financial Corp. 13,600 429
Texas Regional Bancshares, Inc., Class A 2,326 74
Timberland Bancorp, Inc. 1,000 25
Tompkins Trustco, Inc. 770 35
TriCo Bancshares 400 9
Trustco Bank Corp. NY 2,857 38
Trustmark Corp. 4,300 136
U.S. Bancorp 158,531 4,536
UCBH Holdings, Inc. 4,700 203
UMB Financial Corp. 1,787 92
Umpqua Holdings Corp. 343 9
Union Bankshares Corp. 700 23
UnionBanCal Corp. 22,600 1,373
United Bankshares, Inc. 3,400 125
Unizan Financial Corp. 1,371 36
USB Holding Co., Inc. 1,865 51
Valley National Bancorp 7,756 220
Wachovia Corp. 108,236 5,326
Washington Trust Bancorp, Inc. 1,000 28
Wells Fargo & Co. 140,077 8,365
WesBanco, Inc. 3,200 97
West Coast Bancorp 1,200 28
Westamerica Bancorp. 1,700 97
WestCorp., Inc. 4,707 188
Whitney Holding Corp. 4,450 194
Wilmington Trust Corp. 5,700 197
Wintrust Financial Corp. 1,800 103
WSFS Financial Corp. 1,000 54
Zions Bancorp. 7,700 510
-----------
87,675
BUSINESS MACHINES & SOFTWARE 7.5%
---------------------------------------------------------------------------
o 3Com Corp. 17,900 74
o 3D Systems Corp. 1,400 16
4
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o Adaptec, Inc. 5,700 44
Adobe Systems, Inc. 20,000 1,121
o Advanced Digital Information Corp. 2,600 23
Analogic Corp. 4,700 200
o Apple Computer, Inc. 30,800 1,618
o Arbitron, Inc. 2,120 77
o Artesyn Technologies, Inc. 1,100 11
o Ascential Software Corp. 2,912 41
Autodesk, Inc. 8,400 443
o Avici Systems, Inc. 375 2
o Avocent Corp. 13,963 497
o BEA Systems, Inc. 30,400 247
Black Box Corp. 5,200 204
o BMC Software, Inc. 19,000 359
o Borland Software Corp. 3,000 31
o Cisco Systems, Inc. 563,969 10,834
o Cognitronics Corp. 2,600 9
o Compuware Corp. 19,900 115
o Comverse Technology, Inc. 13,400 277
o Concurrent Computer Corp. 3,000 6
o CoSine Communications, Inc. 730 2
o Dell, Inc. 209,300 7,338
@ Diebold, Inc. 5,300 254
o Digital Lightwave, Inc. 1,300 1
o EMC Corp. 199,686 2,570
o Enterasys Networks, Inc. 8,500 12
Fair Isaac Corp. 7,744 234
o Flow International Corp. 900 3
o Foundry Networks, Inc. 9,300 113
o Gateway, Inc. 11,800 69
o General Binding Corp. 500 7
o Hanger Orthopedic Group, Inc. 5,400 35
Hewlett-Packard Co. 252,916 4,719
IKON Office Solutions, Inc. 12,500 131
o Imagistics International, Inc. 2,840 98
o Immersion Corp. 800 4
o Input/Output, Inc. 4,200 29
o Integrated Device Technology, Inc. 4,200 50
o Intellisync Corp. 1,500 3
@o Intergraph Corp. 9,700 242
o Interland, Inc. 510 2
(10) International Business Machines Corp. 139,850 12,552
o InterVoice, Inc. 1,678 21
o Interwoven, Inc. 5,925 54
o Invision Technologies, Inc. 1,500 69
Iomega Corp. 12,400 57
@o Juniper Networks, Inc. 38,065 1,013
@ Landamerica Financial Group, Inc. 5,300 259
o Lantronix, Inc. 1,900 2
@o LaserCard Corp. 1,000 8
o Lawson Software, Inc. 8,000 46
o Lexmark International, Inc., Class A 10,900 906
o LTX Corp. 1,900 12
o Maxtor Corp. 17,748 53
o McData Corp., Class A 2,617 16
Microchip Technology, Inc. 16,475 498
o Micromuse, Inc. 2,900 12
o Micros Systems, Inc. 5,500 325
=(3) Microsoft Corp. 892,760 24,988
o MIPS Technology, Inc., Class A 1,100 9
o MSC.Software Corp. 1,800 16
o NCR Corp. 11,900 671
o Network Appliance, Inc. 27,500 673
o Novell, Inc. 25,600 184
o Oracle Corp. 429,500 5,437
@o PalmOne, Inc. 1,569 45
o PalmSource, Inc. 2,500 56
@o Peregrine Systems, Inc. 144 3
Pitney Bowes, Inc. 20,000 875
o Precis, Inc. 1,200 3
o Printronix, Inc. 2,400 40
o Roxio, Inc. 724 4
@o Sandisk Corp. 11,000 230
o Scansource, Inc. 600 37
>o Seagate Escrow Security 7,500 2
o Siebel Systems, Inc. 25,100 238
@o Silicon Graphics, Inc. 4,800 6
@o SoftBrands, Inc. 689 1
o Storage Technology Corp. 14,400 389
>o StorageNetworks, Inc. 2,100 --
o Sun Microsystems, Inc. 248,230 1,124
o Sybase, Inc. 19,036 301
o Tech Data Corp. 5,300 214
o The Titan Corp. 6,381 95
Total System Services, Inc. 16,300 385
o Unisys Corp. 27,600 293
o Versata, Inc. 9 --
o Vitria Technology, Inc. 925 3
@o Xerox Corp. 65,700 970
o Zhone Technologies, Inc. 1,000 3
-----------
85,363
BUSINESS SERVICES 5.8%
---------------------------------------------------------------------------
o 4Kids Entertainment, Inc. 1,000 18
@o Road, Inc. 4,400 28
Aaron Rents, Inc., Class A 2,175 44
ABM Industries, Inc. 4,900 102
o Actuate Corp. 2,300 6
o Adesa, Inc. 8,200 165
o Administaff, Inc. 2,800 32
o Advent Software, Inc. 4,100 86
o The Advisory Board Co. 1,000 33
Advo, Inc. 4,050 129
5
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o Aether Systems, Inc. 1,100 4
@o Affiliated Computer Services, Inc., Class A 12,000 655
o Affymetrix, Inc. 4,900 149
o Agile Software Corp. 1,900 16
o Akamai Technologies, Inc. 8,938 124
o The Allied Defense Group, Inc. 500 10
o Allied Waste Industries, Inc. 26,600 217
Ambassadors International, Inc. 1,700 22
o American Locker Group, Inc. 500 6
o American Superconductor Corp. 700 8
o AMN Healthcare Services, Inc. 4,110 49
o Analysts International Corp. 2,400 9
Angelica Corp. 2,500 60
o Ansoft Corp. 2,300 37
o answerthink, Inc. 1,700 7
o Ansys, Inc. 3,400 94
o Anteon International Corp. 2,000 79
o Apollo Group, Inc., Class A 17,050 1,125
Aramark Corp., Class B 9,300 210
o Arena Pharmaceuticals, Inc. 800 4
o Ariba, Inc. 2,770 43
>o Artistdirect, Inc. 1,000 --
@o Ask Jeeves, Inc. 4,400 113
o Aspen Technology, Inc. 6,000 36
o Atari, Inc. 1,600 2
Automatic Data Processing, Inc. 48,100 2,087
o BearingPoint, Inc. 7,100 62
o BindView Development Corp. 1,700 6
o The BISYS Group, Inc. 9,000 131
o Blue Coat Systems, Inc. 340 6
o Blue Martini Software, Inc. 285 1
o Bottomline Technologies, Inc. 2,000 20
Bowne & Co., Inc. 4,200 52
o Braun Consulting, Inc. 1,300 3
o Bright Horizons Family Solutions, Inc. 1,300 82
The Brink's Co. 5,600 180
@o BroadVision, Inc. 1,090 3
o Brocade Communications Systems, Inc. 21,000 143
o CACI International, Inc., Class A 2,100 128
@o Career Education Corp. 8,614 270
o Carreker Corp. 3,700 33
o Casella Waste Systems, Inc., Class A 2,500 31
o Catalina Marketing Corp. 5,900 151
o Catapult Communications Corp. 1,600 39
CDI Corp. 3,700 61
@ CDW Corp. 6,800 422
o Cell Genesys, Inc. 1,500 10
Cendant Corp. 83,720 1,724
o Centra Software, Inc. 2,400 4
o Ceridian Corp. 19,500 336
@o Cerner Corp. 4,200 190
Certegy, Inc. 4,150 147
o Charles River Associates, Inc. 2,500 100
o Checkfree Corp. 7,900 245
Chemed Corp. 700 42
o Chindex International, Inc. 2,200 17
o ChoicePoint, Inc. 6,900 287
o Chordiant Software, Inc. 1,100 3
o Ciber, Inc. 1,900 17
@ Cintas Corp. 15,350 662
o Citrix Systems, Inc. 20,000 483
o Clarent Corp. 1,545 --
o Clarus Corp. 1,200 9
o Click Commerce, Inc. 320 2
o Closure Medical Corp. 3,400 58
o Cognizant Technology Solutions Corp., Class A 10,600 360
o Com21, Inc. 1,400 --
o Comarco, Inc. 500 4
Computer Associates International, Inc. 47,226 1,309
o Computer Sciences Corp. 16,238 807
o Concord Communications, Inc. 1,600 13
o Connetics Corp. 3,400 91
o Convergys Corp. 10,500 137
o Copart, Inc. 6,550 122
o Corillian Corp. 2,000 10
o Corinthian Colleges, Inc. 9,200 132
o Corio, Inc. 1,400 2
o Cornell Cos., Inc. 2,100 29
@ Corporate Executive Board Co. 2,700 172
o Correctional Services Corp. 2,000 5
o CoStar Group, Inc. 800 32
Courier Corp. 4,200 183
o Covansys Corp. 5,000 58
o Credit Acceptance Corp. 2,400 53
o Cross Country Healthcare, Inc. 1,600 24
o CSG Systems International, Inc. 5,400 91
o CuraGen Corp. 2,100 10
o Datastream Systems, Inc. 1,300 8
Deluxe Corp. 3,800 145
o Dendrite International, Inc. 3,600 53
@o DeVry, Inc. 4,800 70
o Digimarc Corp. 3,500 32
o Digital Insight Corp. 2,300 36
o Digital River, Inc. 2,100 70
o Digitas, Inc. 4,000 36
o Diversa Corp. 1,100 9
o Divine, Inc., Class A 161 --
o DoubleClick, Inc. 10,737 68
@o DST Systems, Inc. 8,100 363
o Dun & Bradstreet Corp. 16,000 905
o Dyax Corp. 2,000 11
o E.piphany, Inc. 2,100 9
6
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o Earthlink, Inc. 11,850 122
o eBay, Inc. 52,924 5,166
o Echelon Corp. 3,700 26
o Eclipsys Corp. 1,800 31
o Edgewater Technology, Inc. 767 3
o Education Management Corp. 5,900 158
o eFunds Corp. 5,002 98
Electronic Data Systems Corp. 42,100 895
o eLoyalty Corp. 190 1
o Embarcadero Technologies, Inc. 2,900 24
o Encysive Pharmaceuticals, Inc. 2,600 23
Ennis, Inc. 4,500 91
o Entrust, Inc. 2,800 9
o EPIQ Systems, Inc. 550 8
>o ePresence, Inc. 2,700 --
Equifax, Inc. 11,800 309
@o eResearch Technology, Inc. 5,625 66
o Exelixis, Inc. 1,800 16
o Exponent, Inc. 3,000 81
o F5 Networks, Inc. 3,300 132
Factset Research Systems, Inc. 2,500 125
o Falcon Products, Inc. 1,500 3
@o FalconStor Software, Inc. 1,200 9
o Fargo Electronics, Inc. 2,000 26
@o FileNet Corp. 3,800 106
o First Consulting Group, Inc. 1,800 8
First Data Corp. 71,932 2,969
o Firstwave Technologies, Inc. 1,000 1
o Fiserv, Inc. 15,300 544
o Five Star Quality Care, Inc. 135 1
o Forrester Research, Inc. 4,100 63
Friedman Billings Ramsey Group, Inc., Class A 12,080 207
o FTI Consulting, Inc. 2,700 51
G&K Services, Inc., Class A 3,700 145
o Gartner, Inc., Class A 10,300 123
@o Genaissance Pharmaceuticals, Inc. 1,800 3
o Genencor International, Inc. 14,000 217
o Gentiva Health Services, Inc. 3,250 55
>o Genuity, Inc., Class A 280 --
o Geoworks Corp. 800 --
o Global Imaging Systems, Inc. 2,100 74
@ Global Payments, Inc. 8,520 467
@o Google, Inc., Class A 22,500 4,291
o GP Strategies Corp. 1,500 12
Grey Global Group, Inc. 200 200
GTECH Holdings Corp. 9,400 223
H&R Block, Inc. 21,300 1,013
>o HA-LO Industries, Inc. 2,100 --
@o Heidrick & Struggles International, Inc. 3,100 89
o Hewitt Associates, Inc., Class A 7,820 219
o Hudson Highland Group, Inc. 360 10
o Hyperion Solutions Corp. 2,850 114
@o IAC/InterActiveCorp 57,117 1,235
o iBEAM Broadcasting Corp. 290 --
@o ICOS Corp. 2,700 61
o ICT Group, Inc. 500 4
o Identix, Inc. 1,600 12
o IDT Corp. 4,200 55
o IDX Systems Corp. 4,000 134
o iGate Corp. 1,300 5
IMS Health, Inc. 19,300 409
o InFocus Corp. 1,600 10
o Infonet Services Corp., Class B 11,200 20
o Informatica Corp. 6,700 52
o Inforte Corp. 3,700 25
@o Infospace, Inc. 3,872 203
o infoUSA, Inc. 2,300 24
o Innodata Isogen, Inc. 2,400 12
o Interactive Intelligence, Inc. 1,000 4
o Intercept, Inc. 1,500 28
o Internet Security Systems 4,600 100
o Interpublic Group of Cos., Inc. 34,144 419
o Intrado, Inc. 3,600 49
o Intuit, Inc. 16,715 758
@o Invitrogen Corp. 3,629 210
@o Iron Mountain, Inc. 9,787 323
o ITT Educational Services, Inc. 6,000 228
Jack Henry & Associates, Inc. 6,300 117
o Jacobs Engineering Group, Inc. 3,800 155
o JDA Software Group, Inc. 2,000 22
John H. Harland Co. 3,500 113
o Kana Software, Inc. 528 1
o Kanbay International, Inc. 3,000 72
o Keane, Inc. 3,960 63
o Keith Cos., Inc. 3,000 51
Kelly Services, Inc., Class A 3,200 86
o Kforce, Inc. 405 4
o Kinder Morgan Management LLC 3,321 137
o Korn/Ferry International 3,600 63
o Kronos, Inc. 1,875 92
@o Lamar Advertising Co., Class A 6,700 278
o Laureate Education, Inc. 4,700 184
o Learning Tree International, Inc. 1,400 19
o Liberate Technologies 5,900 14
o Lightbridge, Inc. 2,200 11
o LookSmart Ltd. 2,400 4
o Luminex Corp. 800 6
o Macrovision Corp. 3,100 84
o Magma Design Automation, Inc. 1,700 22
o Management Network Group, Inc. 2,400 5
o Manhattan Associates, Inc. 1,300 27
Manpower, Inc. 6,991 316
o Manugistics Group, Inc. 2,300 6
o MAPICS, Inc. 1,000 9
o Mapinfo Corp. 3,125 31
7
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o Matria Healthcare, Inc. 1,200 37
o Matrixone, Inc. 1,700 10
o MAXIMUS, Inc. 1,700 46
o Maxygen, Inc. 1,500 14
o McAfee, Inc. 14,445 350
o Mechanical Technology, Inc. 1,800 8
o Medical Staffing Network Holdings, Inc. 1,300 10
o MemberWorks, Inc. 4,500 134
o Mentor Graphics Corp. 5,700 66
@o Mercury Interactive Corp. 7,500 326
o Meta Group, Inc. 1,100 5
o MetaSolv, Inc. 2,800 7
o Metro One Telecommunications 4,400 7
o Michael Baker Corp. 500 9
@o MicroStrategy, Inc., Class A 856 51
@o Microvision, Inc. 900 5
o Millenium Cell, Inc. 2,200 2
o Mindspeed Technologies, Inc. 7,598 18
o Moldflow Corp. 300 4
@o Monster Worldwide, Inc. 9,800 275
o MPS Group, Inc. 8,100 85
o MRO Software, Inc. 3,900 43
o Multi-Color Corp. 750 11
o Nassda Corp. 500 2
National Instruments Corp. 5,675 156
Nautilus Group, Inc. 4,125 81
o Navigant Consulting, Inc. 2,500 62
o NAVTEQ Corp. 6,100 246
o NCO Group, Inc. 2,701 72
NDCHealth Corp. 1,900 32
o NeighborCare, Inc. 12,500 320
o Neoforma, Inc. 1,500 10
o Neon Systems, Inc. 2,400 9
o NeoRx Corp. 400 1
o Netegrity, Inc. 1,500 16
o NetIQ Corp. 7,704 98
o Netratings, Inc. 3,000 57
o Netscout Systems, Inc. 1,800 12
o Netsolve, Inc. 1,600 18
Newcastle Investment Corp. 2,200 67
o NMS Communications Corp. 1,500 7
o Nuance Communications, Inc. 1,000 4
o NYFIX, Inc. 750 4
Omnicom Group, Inc. 16,800 1,326
o On Assignment, Inc. 1,700 9
o Onyx Software Corp. 350 1
o Openwave Systems, Inc. 5,271 62
o Opnet Technologies, Inc. 3,600 28
o Opsware, Inc. 800 4
Option Care, Inc. 1,500 20
o Orbital Sciences Corp. 2,600 27
o Packeteer, Inc. 1,100 14
o Parametric Technology Corp. 9,700 50
o Paxar Corp. 2,300 51
Paychex, Inc. 32,400 1,063
o PC-Tel, Inc. 1,400 11
o PDI, Inc. 2,900 83
o Pec Solutions, Inc. 1,000 14
o Pegasus Solutions, Inc. 3,900 41
o PeopleSoft, Inc. 29,693 617
o Per-Se Technologies, Inc. 10,000 146
o Perot Systems Corp., Class A 9,100 146
o Phoenix Technologies Ltd. 1,300 8
o Pixar, Inc. 5,600 450
o PLATO Learning, Inc. 1,433 13
o Polycom, Inc. 9,200 190
o Pomeroy IT Solutions, Inc. 2,100 27
o Portal Software, Inc. 1,220 3
@o Pre-Paid Legal Services, Inc. 3,600 100
o PRG-Schultz International, Inc. 2,500 13
@o Priceline.com, Inc. 3,983 79
o Progress Software Corp. 4,200 83
o ProQuest Co. 1,700 44
o QRS Corp. 450 3
o Quality Systems, Inc. 900 46
o Quest Software, Inc. 7,700 113
Quixote Corp. 1,300 23
o Quovadx, Inc. 2,600 5
o R.H. Donnelley Corp. 2,000 109
o Radiant Systems, Inc. 1,300 7
o RealNetworks, Inc. 6,000 29
@o Red Hat, Inc. 7,100 91
o Redback Networks, Inc. 8,076 36
o Register.com 1,296 7
o RemedyTemp, Inc., Class A 1,200 12
Renaissance Learning, Inc. 2,100 40
Republic Services, Inc. 17,700 545
o Resources Connection, Inc. 3,100 130
o Retek, Inc. 3,843 21
The Reynolds & Reynolds Co., Class A 7,500 185
Robert Half International, Inc. 14,000 371
RPC, Inc. 3,400 71
o RSA Security, Inc. 5,000 102
o Rural Cellular Corp., Class A 1,200 7
o Saba Software, Inc. 500 2
o SafeNet, Inc. 2,770 85
o Sagent Technology, Inc. 1,500 --
o Sapient Corp. 9,100 73
o Seachange International, Inc. 3,350 57
o Secure Computing Corp. 3,200 25
o Seebeyond Technology Corp. 3,100 10
o Selectica, Inc. 1,900 7
o Serena Software, Inc. 4,600 82
The ServiceMaster Co. 22,900 294
o SFBC International, Inc. 1,500 42
@o Sirius Satellite Radio, Inc. 1,200 5
8
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o Sitel Corp. 2,800 5
o Sonic Foundry, Inc. 600 1
o SONICblue, Inc. 2,600 --
o SonicWALL, Inc. 4,900 25
o SourceCorp 3,600 60
Spartech Corp. 4,200 106
o Spherion Corp. 1,830 13
o SportsLine.com, Inc. 2,300 4
o SPSS, Inc. 3,200 43
SS&C Technologies, Inc. 11,100 262
The Standard Register Co. 4,100 44
Startek, Inc. 1,400 39
o Stericycle, Inc. 4,700 213
o Stratasys, Inc. 1,350 40
Strayer Education, Inc. 700 68
o SumTotal Systems, Inc. 463 2
o SunGard Data Systems, Inc. 23,900 633
o SupportSoft, Inc. 4,800 24
o Sycamore Networks, Inc. 18,200 67
o Symantec Corp. 28,400 1,617
o Symyx Technologies, Inc. 3,800 93
o Synopsys, Inc. 13,684 222
o Synplicity, Inc. 1,200 6
Syntel, Inc. 2,500 46
Talx Corp. 1,700 48
o TeleCommunication Systems, Inc., Class A 1,300 4
@o TeleTech Holdings, Inc. 5,000 50
o Tetra Tech, Inc. 12,031 158
o Tetra Technologies, Inc. 3,700 111
o TIBCO Software, Inc. 16,000 156
o Tier Technologies, Inc., Class B 500 4
o Transaction Systems Architects, Inc., Class A 5,200 85
o TRC Cos., Inc. 1,350 24
o Trizetto Group, Inc. 5,900 40
o Tumbleweed Communications Corp. 2,000 8
o United Online, Inc. 6,150 58
o Universal Electronics, Inc. 2,200 39
@o UNOVA, Inc. 5,600 86
o URS Corp. 3,700 102
o Usinternetworking, Inc. 1,100 --
o VA Software Corp. 1,427 3
o Valueclick, Inc. 6,000 56
o Vastera, Inc. 2,000 3
o Ventiv Health, Inc. 2,233 39
o Verint Systems, Inc. 2,500 97
o VeriSign, Inc. 20,875 560
o Verisity Ltd. 4,500 32
o Veritas Software Corp. 35,024 766
o Verity, Inc. 4,100 53
o Vertel Corp. 900 --
Viad Corp. 3,625 78
o Viewpoint Corp. 2,000 6
o Vignette Corp. 8,948 10
o Volt Information Sciences, Inc. 2,100 61
o Waste Connections, Inc. 5,250 165
Waste Industries USA, Inc. 1,500 17
Waste Management, Inc. 48,100 1,370
o WatchGuard Technologies, Inc. 1,800 7
Watson Wyatt & Co. Holdings 4,600 122
o WebEx Communications, Inc. 2,500 55
o WebMD Corp. 19,426 147
o webMethods, Inc. 1,921 13
o Websense, Inc. 2,500 101
o Weight Watchers International, Inc. 8,700 313
o Westaff, Inc. 2,000 6
o Wind River Systems, Inc. 6,760 91
o Wireless Facilities, Inc. 1,800 13
o Witness Systems, Inc. 2,100 33
@o WorldGate Communications, Inc. 2,000 3
@o Wynn Resorts Ltd. 4,000 233
o Xybernaut Corp. 1,400 2
o Yahoo! Inc. 111,144 4,022
@o Zix Corp. 900 5
-----------
65,670
CHEMICALS 1.5%
---------------------------------------------------------------------------
@ A. Schulman, Inc. 2,300 46
Aceto Corp. 7,875 124
o AEP Industries, Inc. 400 4
Air Products & Chemicals, Inc. 17,700 941
Airgas, Inc. 5,000 123
Albemarle Corp. 4,500 161
Amcol International Corp. 5,000 88
Arch Chemicals, Inc. 2,700 77
o Bio-Rad Laboratories, Inc., Class A 1,000 52
Brady Corp., Class A 700 38
Cabot Corp. 5,200 177
Calgon Carbon Corp. 2,300 16
@o Celgene Corp. 11,000 326
Crompton Corp. 8,924 83
Cytec Industries, Inc. 7,400 344
Dow Chemical Co. 76,266 3,427
E.I. du Pont de Nemours & Co. 83,195 3,567
Eastman Chemical Co. 5,600 266
Ecolab, Inc. 21,500 728
o Entegris, Inc. 6,000 56
Ferro Corp. 4,200 89
o Foamex International, Inc. 2,600 10
Georgia Gulf Corp. 3,300 149
Great Lakes Chemical Corp. 3,600 92
H.B. Fuller Co. 2,000 54
Hawkins, Inc. 1,900 23
9
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o Hercules, Inc. 8,500 121
Kronos Worldwide, Inc. 2,504 100
Lubrizol Corp. 3,400 118
Lyondell Chemical Co. 14,800 340
MacDermid, Inc. 3,800 120
o Matrixx Initiatives, Inc. 1,700 21
o Millennium Chemicals, Inc. 5,400 116
Monsanto Co. 21,645 925
o The Mosaic Co. 9,500 143
o NewMarket Corp 2,000 45
Oil-Dri Corp. of America 400 6
Olin Corp. 4,820 90
o OM Group, Inc. 2,400 79
o Omnova Solutions, Inc. 3,400 18
o Oxigene, Inc. 900 5
Penford Corp. 2,700 42
o PolyOne Corp. 3,200 24
PPG Industries, Inc. 13,900 886
Praxair, Inc. 25,700 1,085
o Rogers Corp. 300 13
Rohm & Haas Co. 26,753 1,134
Rollins, Inc. 4,450 117
RPM International, Inc. 9,600 169
Sigma-Aldrich Corp. 6,300 351
Stepan Co. 1,200 29
Tredegar Corp. 2,600 44
o Trex Co., Inc. 500 20
o Uniroyal Technology Corp. 1,100 --
Valspar Corp. 4,200 196
WD-40 Co. 1,600 45
Wellman, Inc. 5,400 40
o Westlake Chemical Corp. 1,000 23
@o Zoltek Cos., Inc. 1,500 13
-----------
17,539
CONSTRUCTION 0.9%
---------------------------------------------------------------------------
American Woodmark Corp. 1,000 37
Ameron International Corp. 3,400 115
Apogee Enterprises, Inc. 1,200 15
o Armstrong Holdings, Inc. 1,600 2
@ Beazer Homes USA, Inc. 851 93
Brookfield Homes Corp. 3,500 91
Building Material Holding Corp. 4,000 116
o Cavco Industries, Inc. 205 8
Centex Corp. 10,700 556
Craftmade International, Inc. 2,800 58
D.R. Horton, Inc. 18,453 554
o Dominion Homes, Inc. 500 10
o Dycom Industries, Inc. 5,399 176
Eagle Materials, Inc. 3,381 234
ElkCorp 3,450 97
o EMCOR Group, Inc. 700 28
Florida Rock Industries, Inc. 2,325 120
Fluor Corp. 5,600 260
o Global Power Equipment Group, Inc. 1,000 8
Granite Construction, Inc. 4,850 118
o Hovnanian Enterprises, Inc., Class A 6,200 233
o Huttig Building Products, Inc. 811 6
o Insituform Technologies, Inc., Class A 1,300 26
o Integrated Electrical Services, Inc. 1,800 7
KB Home 3,900 321
Lafarge North America, Inc. 6,200 304
Lennar Corp., Class A 14,490 652
Levitt Corp., Class A 550 13
M/I Homes, Inc. 1,800 77
Martin Marietta Materials, Inc. 4,200 191
Masco Corp. 35,800 1,227
o Mastec, Inc. 5,350 37
MDC Holdings, Inc. 1,464 112
o NCI Building Systems, Inc. 2,900 93
@o NVR, Inc. 500 314
o Palm Harbor Homes, Inc. 2,700 40
o Performance Technologies, Inc. 1,600 10
Pulte Homes, Inc. 11,372 624
o Quanta Services, Inc. 8,900 60
The Ryland Group, Inc. 3,400 324
o SBA Communications Corp. 1,300 11
The Sherwin-Williams Co. 13,000 555
Simpson Manufacturing Co., Inc. 1,600 103
o Socket Communications, Inc. 800 1
Standard-Pacific Corp. 2,400 135
The Stanley Works 6,600 294
o Surebeam Corp., Class A 2,711 --
@ Technical Olympic USA, Inc. 2,250 57
Texas Industries, Inc. 1,000 51
o Toll Brothers, Inc. 5,600 260
United Mobile Homes, Inc. 1,600 23
@o USG Corp. 3,900 87
Vulcan Materials Co. 9,400 468
Walter Industries, Inc. 1,900 32
o WCI Communities, Inc. 3,800 90
o WESCO International, Inc. 4,800 120
o West Corp. 4,500 127
o Westell Technologies, Inc., Class A 2,560 14
o Yankee Candle Co., Inc. 3,700 103
-----------
9,898
CONSUMER DURABLES 0.4%
---------------------------------------------------------------------------
o Applica, Inc. 3,100 12
Black & Decker Corp. 7,100 570
o Champion Enterprises, Inc. 4,700 51
o Chromcraft Revington, Inc. 1,300 16
10
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o Compx International, Inc. 800 12
Ethan Allen Interiors, Inc. 4,200 160
Flexsteel Industries, Inc. 600 11
Furniture Brands International, Inc. 4,700 102
o Gemstar -- TV Guide International, Inc. 21,160 122
o Genlyte Group, Inc. 1,600 118
o Griffon Corp. 2,590 58
Haverty Furniture Cos., Inc. 4,200 71
o Helen of Troy Ltd. 2,000 53
Hillenbrand Industries, Inc. 5,800 289
o Interface, Inc., Class A 3,300 29
Kimball International, Inc., Class B 3,600 49
La-Z-Boy, Inc. 5,800 76
Leggett & Platt, Inc. 16,200 456
@ Maytag Corp. 7,100 123
o MITY Enterprises, Inc. 600 9
@o Mohawk Industries, Inc. 4,819 410
National Presto Industries, Inc. 400 16
Newell Rubbermaid, Inc. 23,900 515
o Recoton Corp. 500 --
o Restoration Hardware, Inc. 1,700 9
@o Salton, Inc. 1,100 7
Skyline Corp. 100 4
Stanley Furniture Co., Inc. 2,600 116
Sturm Ruger & Co., Inc. 2,800 25
o Tempur-Pedic International, Inc. 8,000 130
Thomas Industries, Inc. 3,200 108
@ Toro Co. 800 55
o United Rentals, Inc. 5,900 91
o Virco Manufacturing Corp. 1,170 9
o Water Pik Technologies, Inc. 195 3
Whirlpool Corp. 6,000 352
-----------
4,237
CONTAINERS 0.2%
---------------------------------------------------------------------------
Ball Corp. 12,600 502
Bemis Co. 6,400 169
o Crown Holdings, Inc. 6,100 69
Greif, Inc., Class A 3,700 154
o Mobile Mini, Inc. 600 17
o Mod-Pac Corp. 500 6
o Owens-Illinois, Inc. 16,200 300
Packaging Dynamics Corp. 260 4
o Pactiv Corp. 12,400 294
o Sealed Air Corp. 8,500 421
Silgan Holdings, Inc. 2,900 138
@ Sonoco Products Co. 4,100 109
-----------
2,183
ELECTRONICS 5.3%
---------------------------------------------------------------------------
o ACT Teleconferencing, Inc. 1,100 1
o Actel Corp. 1,100 17
Acuity Brands, Inc. 17,200 456
@ Acxiom Corp. 25,700 643
o ADC Telecommunications, Inc. 28,220 62
o ADE Corp. 3,100 48
o Adelphia Communications, Class A 6,301 2
o Advanced Fibre Communications, Inc. 3,500 55
@o Advanced Micro Devices, Inc. 29,000 488
o Advanced Power Technology, Inc. 1,500 11
o Agere Systems, Inc., Class A 70,116 85
o Agilent Technologies, Inc. 39,317 985
Agilysys, Inc. 1,600 27
o Alliance Semiconductor Corp. 1,200 4
o Alliant Techsystems, Inc. 2,437 140
o Altera Corp. 30,400 691
o American Physicians Capital, Inc. 2,500 80
American Power Conversion Corp. 16,600 320
o American Science & Engineering, Inc. 500 18
o American Technical Ceramics Corp. 500 6
o AMIS Holdings, Inc. 2,500 38
@o Amkor Technology, Inc. 14,400 72
o Amphenol Corp., Class A 8,800 302
o Anadigics, Inc. 1,150 3
Analog Devices, Inc. 30,200 1,216
o Anaren, Inc. 3,300 40
o Andrew Corp. 10,925 153
Anixter International, Inc. 3,300 128
o Applied Materials, Inc. 139,098 2,239
o Applied Micro Circuits Corp. 12,238 45
o Arris Group, Inc. 2,600 12
o Arrow Electronics, Inc. 12,000 288
o Artisan Components, Inc. 1,100 36
o Aspect Communications Corp. 4,200 40
o Astronics Corp. 1,250 6
o Asyst Technologies, Inc. 1,700 9
o Atmel Corp. 37,900 121
o ATMI, Inc. 1,400 33
o Audiovox Corp., Class A 1,600 23
o Avanex Corp. 2,100 6
o Avid Technology, Inc. 3,600 191
o Avnet, Inc. 11,288 191
AVX Corp. 14,000 168
o Aware, Inc. 1,100 3
o Axcelis Technologies, Inc. 7,044 61
o AXT, Inc. 800 1
Badger Meter, Inc. 1,000 49
11
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
BEI Technologies, Inc. 3,700 111
Bel Fuse, Inc., Class A 1,200 35
Belden CDT, Inc. 4,400 98
o Bell Microproducts, Inc. 1,000 9
o Benchmark Electronics, Inc. 10,050 341
o BioVeris Corp. 3,800 24
Boston Acoustics, Inc. 1,300 17
o Broadcom Corp., Class A 26,200 709
o Brooks Automation, Inc. 1,364 20
o Bruker BioSciences Corp. 2,100 7
C&D Technologies, Inc. 4,500 81
o C-COR.net Corp. 3,100 23
o Cabot Microelectronics Corp. 660 24
@o Cadence Design Systems, Inc. 22,600 281
o CalAmp Corp. 1,000 7
o Captaris, Inc. 2,200 10
o CCC Information Services Group, Inc. 7,322 134
o Celera Genomics Group -- Applera Corp. 5,600 72
o Ceva, Inc. 433 3
Chase Corp. 100 2
o Checkpoint Systems, Inc. 4,600 79
o Chronimed, Inc. 600 4
o CIENA Corp. 17,294 43
o Cirrus Logic, Inc. 3,800 19
o ClearOne Communications, Inc. 1,000 4
o CMGI, Inc. 14,086 19
o Coherent, Inc. 1,300 31
Cohu, Inc. 1,100 17
o CommScope, Inc. 4,900 88
o Computer Network Technology Corp. 1,100 5
o Comtech Telecommunications Corp. 1,450 40
@o Conexant Systems, Inc. 25,046 43
o Cox Radio, Inc., Class A 4,600 73
o Credence Systems Corp. 1,700 13
@o Cree, Inc. 6,000 207
CTS Corp. 5,800 77
Cubic Corp. 1,200 26
@o Cyberonics 3,700 69
o Cymer, Inc. 1,700 48
o Cypress Semiconductor Corp. 8,500 90
o Daktronics, Inc. 5,600 138
o DDi Corp. 8 --
o Diodes, Inc. 2,850 83
o Dionex Corp. 1,200 67
o DSP Group, Inc. 3,300 65
o Ducommun, Inc. 4,300 101
o Dupont Photomasks, Inc. 1,900 50
o Dynamics Research Corp. 1,200 21
o Electro Rent Corp. 5,100 58
o Electro Scientific Industries, Inc. 1,300 22
o Electroglas, Inc. 900 3
o Electronics for Imaging 3,400 61
o Emcore Corp. 1,500 2
o EMS Technologies, Inc. 1,000 17
o Emulex Corp. 5,900 62
@o Energizer Holdings, Inc. 6,333 294
@o Energy Conversion Devices, Inc. 600 10
o ESS Technology, Inc. 2,100 14
o Exar Corp. 3,300 50
o Excel Technology, Inc. 600 15
o Fairchild Semiconductor International, Inc., Class A 8,600 124
o FEI Co. 1,500 29
o First Virtual Communications, Inc. 240 --
@o Flir Systems, Inc. 2,400 128
o FormFactor, Inc. 2,500 59
Frequency Electronics, Inc. 500 6
o FSI International, Inc. 1,300 6
o FuelCell Energy, Inc. 1,200 15
o General Cable Corp. 2,200 27
o Genus, Inc. 500 1
o Gerber Scientific, Inc. 1,900 15
@o Getty Images, Inc. 4,600 272
o Glenayre Technologies, Inc. 2,300 4
o GTC Biotherapeutics, Inc. 1,800 3
Harman International Industries, Inc. 6,800 817
o Harmonic, Inc. 6,342 53
Harris Corp. 7,000 431
o Harvard Bioscience, Inc. 500 2
Hearst-Argyle Television, Inc. 3,700 96
o Herley Industries, Inc. 4,000 70
o HI/FN, Inc. 800 6
o Hollywood Entertainment Corp. 4,300 42
@o Hutchinson Technology, Inc. 16,600 558
o Illumina, Inc. 1,500 10
o Integrated Circuit Systems, Inc. 5,400 122
o Integrated Silicon Solutions, Inc. 3,400 26
Intel Corp. 533,832 11,883
@o Intelli-Check, Inc. 500 3
o Interactive Data Corp. 20,700 408
o Intermagnetics General Corp. 2,056 52
o International Rectifier Corp. 6,600 262
@ Intersil Corp., Class A 12,364 202
o Itron, Inc. 2,500 52
ITT Industries, Inc. 8,700 706
o Ixia 5,200 66
o IXYS Corp. 900 6
o Jabil Circuit, Inc. 15,400 374
o JDS Uniphase Corp. 112,424 356
Keithley Instruments, Inc. 3,200 56
o Kemet Corp. 6,700 52
@o KLA-Tencor Corp. 15,000 683
o Kopin Corp. 2,500 9
12
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o Kulicke & Soffa Industries, Inc. 4,400 31
o Lam Research Corp. 11,600 302
o Lattice Semiconductor Corp. 4,600 23
o LeCroy Corp. 900 15
o Lightpath Technologies, Inc., Class A 75 --
Linear Technology Corp. 25,000 947
o Littelfuse, Inc. 4,500 147
o Logicvision, Inc. 1,000 2
o LSI Logic Corp. 29,964 136
o Lucent Technologies, Inc. 301,923 1,072
o Macromedia, Inc. 4,500 122
o Mattson Technology, Inc. 4,100 34
Maxim Integrated Products, Inc. 27,453 1,208
o Maxwell Technologies, Inc. 1,000 11
o Measurement Specialties, Inc. 700 18
o MEMC Electronic Materials, Inc. 16,300 153
o Mercury Computer Systems, Inc. 3,600 91
o Mestek, Inc. 700 13
Methode Electronics, Class A 3,600 48
o Micron Technology, Inc. 49,500 603
o Microsemi Corp. 7,000 109
o MKS Instruments, Inc. 4,300 68
Mocon, Inc. 600 5
Molex, Inc. 16,125 477
o Monolithic System Technology, Inc. 1,200 5
Motorola, Inc. 193,455 3,339
o MRV Communications, Inc. 4,307 15
MTS Systems Corp. 4,500 116
o Mykrolis Corp. 3,021 32
@o Nanogen, Inc. 1,500 6
o Nanometrics, Inc. 300 4
o National Semiconductor Corp. 29,200 488
o Netopia, Inc. 2,100 5
o Newport Corp. 4,200 47
o Novellus Systems, Inc. 11,171 289
o Novoste Corp. 1,600 2
o Nvidia Corp. 7,000 101
@o Omnivision Technologies, Inc. 2,800 45
o Oplink Communications, Inc. 4,600 9
o Optical Communication Products, Inc. 500 1
o OSI Systems, Inc. 3,700 64
Park Electrochemical Corp. 3,600 76
@o Parkervision, Inc. 400 2
o Paxson Communications Corp. 1,900 2
o Pemstar, Inc. 1,600 3
o Pericom Semiconductor Corp. 600 5
PerkinElmer, Inc. 11,477 236
@o Photon Dynamics, Inc. 3,400 62
o Pinnacle Systems, Inc. 1,800 8
o Pixelworks, Inc. 4,100 46
o Planar Systems, Inc. 3,700 36
o Plantronics, Inc. 4,000 174
o Plexus Corp. 1,700 21
o PLX Technology, Inc. 1,300 12
o Powell Industries, Inc. 1,000 16
@o Power Integrations, Inc. 1,400 30
o Power-One, Inc. 6,000 42
o Powerwave Technologies, Inc. 3,200 24
o QLogic Corp. 8,522 277
Qualcomm, Inc. 135,100 5,649
o Quantum Corp. 5,500 15
o QuickLogic Corp. 900 2
o Radisys Corp. 3,700 49
o Rambus, Inc. 8,200 141
Raven Industries, Inc. 2,800 63
o Rayovac Corp. 2,800 70
o Remec, Inc. 2,500 14
o Rex Stores Corp. 1,875 29
o RF Micro Devices, Inc. 13,700 89
Richardson Electronics Ltd. 1,300 11
o Rofin-Sinar Technologies, Inc. 1,900 57
o Rudolph Technologies, Inc. 500 8
o Sanmina -- SCI Corp. 41,316 331
o SBS Technologies, Inc. 1,700 23
o ScanSoft, Inc. 1,204 5
Scientific-Atlanta, Inc. 11,900 326
o SCM Microsystems, Inc. 1,200 4
o Seagate Technology 8,500 107
o Semitool, Inc. 4,300 33
o Semtech Corp. 6,000 125
o Silicon Image, Inc. 2,000 27
o Silicon Laboratories, Inc. 5,000 150
o Silicon Storage Technology, Inc. 7,000 52
o Siliconix, Inc. 8,100 335
o Sipex Corp. 1,600 9
o Sirenza Microdevices, Inc. 1,300 6
o Sirf Technology Holdings, Inc. 3,500 41
o Skyworks Solutions, Inc. 5,689 51
o Solectron Corp. 81,520 426
o Somera Communications, Inc. 1,900 2
Spectralink Corp. 1,000 12
o Spherix, Inc. 500 2
o Standard Microsystems Corp. 3,600 79
o Stratex Networks, Inc. 2,800 5
@>o Superior Telecom, Inc. 1,124 --
o Supertex, Inc. 1,400 30
Symbol Technologies, Inc. 19,437 286
o Symmetricom, Inc. 8,450 72
o Synaptics, Inc. 3,500 111
@o Taser International, Inc. 6,000 245
o Technitrol, Inc. 4,000 65
o Tekelec 8,700 194
Tektronix, Inc. 9,202 279
@>o TelCove 4,638 --
o Tellabs, Inc. 32,800 262
o Teradyne, Inc. 15,559 258
13
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o Terayon Communication Systems Corp. 2,800 5
o Tessco Technologies, Inc. 900 12
o Tessera Technologies, Inc. 3,000 84
Texas Instruments, Inc. 143,397 3,506
o Therma-Wave, Inc. 1,000 3
o Thermo Electron Corp. 26,550 770
o Thomas & Betts Corp. 7,300 207
o THQ, Inc. 1,950 37
o Three-Five Systems, Inc. 1,099 2
o Tollgrade Communications, Inc. 3,600 34
@o Transmeta Corp. 4,500 9
@o Transwitch Corp. 3,100 3
o Tripath Technology, Inc. 1,800 2
o Triquint Semiconductor, Inc. 5,310 19
o Troy Group, Inc. 2,000 6
o TTM Technologies, Inc. 4,400 41
o Tweeter Home Entertainment Group, Inc. 1,100 7
United Industrial Corp. 1,200 38
Unitil Corp. 600 17
@o Valence Technology, Inc. 1,400 5
o Varian Semiconductor Equipment Associates, Inc. 1,500 52
o Varian, Inc. 5,800 212
o Viasat, Inc. 3,500 66
o Vicor Corp. 4,200 39
o Virage Logic Corp. 1,400 22
@o Vishay Intertechnology, Inc. 11,781 152
o Vitesse Semiconductor Corp. 6,986 19
o Waters Corp. 8,700 359
o Western Digital Corp. 15,700 131
o Western Wireless Corp., Class A 7,700 224
o Wilson Greatbatch Technologies, Inc. 1,100 19
o WJ Communications, Inc. 2,300 5
Xilinx, Inc. 27,600 845
o YDI Wireless, Inc. 100 --
o Zebra Technologies Corp., Class A 6,375 338
o Zoran Corp. 1,761 18
-----------
60,574
ENERGY: RAW MATERIALS 2.0%
---------------------------------------------------------------------------
Alliance Resource Partners L.P. 1,700 98
Anadarko Petroleum Corp. 19,530 1,317
Apache Corp. 28,372 1,438
APCO Argentina, Inc. 200 7
Arch Coal, Inc. 3,500 114
o Atwood Oceanics, Inc. 1,200 58
Baker Hughes, Inc. 28,300 1,212
Berry Petroleum Co., Class A 2,000 76
o BJ Services Co. 14,300 729
Buckeye Partners L.P. 3,400 139
Burlington Resources, Inc. 34,000 1,411
Cabot Oil & Gas Corp. 14,400 609
CARBO Ceramics, Inc. 3,000 217
o Cimarex Energy Co. 3,122 112
o Cooper Cameron Corp. 3,300 160
o CREDO Petroleum Corp. 1,800 25
o Denbury Resources, Inc. 4,900 122
Devon Energy Corp. 18,680 1,382
ENSCO International, Inc. 11,200 342
Enterprise Products Partners L.P. 17,000 392
EOG Resources, Inc. 11,400 759
o FMC Technologies, Inc. 4,591 139
o Forest Oil Corp. 4,450 136
o Grant Prideco, Inc. 6,100 125
o Grey Wolf, Inc. 5,800 30
Halliburton Co. 36,700 1,359
o Hanover Compressor Co. 5,600 73
@o Headwaters, Inc. 2,500 79
Helmerich & Payne, Inc. 4,800 137
o Hydril Co. 2,500 110
@ Inergy L.P. 2,000 54
Joy Global, Inc. 8,600 291
o Key Energy Services, Inc. 10,300 118
o Kirby Corp. 2,800 118
Lufkin Industries, Inc. 500 18
Massey Energy Co. 6,800 183
@ Natural Resource Partners L.P. 2,000 88
NL Industries, Inc. 5,300 106
o Noble Corp. 10,100 461
Noble Energy, Inc. 3,500 203
Occidental Petroleum Corp. 33,100 1,848
o Offshore Logistics, Inc. 3,600 130
o Oil States International, Inc. 3,600 66
o Parker Drilling Co. 2,800 11
Peabody Energy Corp. 3,800 242
@ Penn Virginia Resource Partners L.P. 2,500 108
Plains All American Pipeline L.P. 4,600 163
Range Resources Corp. 5,400 85
o Reliant Energy, Inc. 22,625 233
o Rowan Cos., Inc. 3,400 87
Schlumberger Ltd. 50,000 3,147
o Seacor Holdings, Inc. 1,250 60
@o Smith International, Inc. 7,400 430
o Swift Energy Co. 2,500 61
o TC Pipelines L.P. 2,400 91
Tidewater, Inc. 2,700 84
Unit Corp. 4,400 163
USEC, Inc. 3,000 29
Valero Energy Corp. 22,298 958
o W-H Energy Services, Inc. 900 18
o Weatherford International Ltd. 10,600 554
14
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
Western Gas Resources, Inc. 4,000 117
o Westmoreland Coal Co. 3,500 81
World Fuel Services Corp. 3,000 102
o Xanser Corp. 1,400 4
-----------
23,419
FOOD & AGRICULTURE 3.1%
---------------------------------------------------------------------------
o 7-Eleven, Inc. 5,000 105
@ American Italian Pasta Co., Class A 1,000 20
The Andersons, Inc. 1,500 35
Archer-Daniels-Midland Co. 53,958 1,045
>o Aurora Foods, Inc. 2,500 --
Bridgford Foods Corp. 300 3
o Cadiz, Inc. 84 1
Campbell Soup Co. 35,400 950
o Chiquita Brands International, Inc. 10,000 180
Coca-Cola Bottling Co. Consolidated 400 21
The Coca-Cola Co. 202,200 8,221
Coca-Cola Enterprises, Inc. 37,200 778
ConAgra Foods, Inc. 43,293 1,143
Consolidated-Tomoka Land Co. 900 33
Corn Products International, Inc. 7,800 384
o Dean Foods Co. 8,613 257
o Del Monte Foods Co. 8,931 95
Delta & Pine Land Co. 2,000 53
o Embrex, Inc. 1,300 17
@> Fleming Cos., Inc. 3,400 --
Flowers Foods, Inc. 19,515 495
Fresh Brands, Inc. 1,800 14
Fresh Del Monte Produce, Inc. 4,200 110
General Mills, Inc. 31,300 1,385
o Green Mountain Coffee Roasters, Inc. 900 23
o Griffen Land & Nurseries, Inc. 300 8
H.J. Heinz Co. 27,900 1,014
o Hain Celestial Group, Inc. 1,406 23
Hershey Foods Corp. 21,400 1,085
Hormel Foods Corp. 6,500 183
Ingles Markets, Inc., Class A 300 4
@ Interstate Bakeries 3,200 13
o J & J Snack Foods Corp. 3,200 142
@ The J.M. Smuckers Co. 2,438 109
o John B. Sanfilippo & Son 5,000 90
Kellogg Co. 34,400 1,479
@ Kraft Foods, Inc., Class A 37,500 1,249
Lance, Inc. 2,900 49
o Lesco, Inc. 500 6
Lindsay Manufacturing Co. 800 19
Marsh Supermarkets, Inc., Class B 1,000 11
o Maui Land & Pineapple Co., Inc. 800 26
McCormick & Co., Inc. 8,300 294
MGP Ingredients, Inc. 3,400 28
o Monterey Pasta Co. 700 3
Nash Finch Co. 1,700 52
o Neogen Corp. 625 12
o The Pantry, Inc. 400 9
o Peet's Coffee & Tea, Inc. 1,800 46
The Pepsi Bottling Group, Inc. 23,400 656
PepsiAmericas, Inc. 13,200 267
PepsiCo, Inc. 140,800 6,981
o Performance Food Group Co. 1,900 44
Pilgrim's Pride Corp., Class B 1,400 38
o Ralcorp Holdings, Inc. 6,700 246
Rocky Mountain Chocolate Factory, Inc. 1,650 21
Sanderson Farms, Inc. 5,250 171
Sara Lee Corp. 64,378 1,499
o The Scotts Co., Class A 2,800 180
Seaboard Corp. 200 139
Sensient Technologies Corp. 2,300 50
o Smart & Final, Inc. 2,700 40
o Smithfield Foods, Inc. 6,300 153
o Spartan Stores, Inc. 500 2
Standard Commercial Corp. 1,100 18
Supervalu, Inc. 18,087 533
Sysco Corp. 52,036 1,679
Tasty Baking Co. 500 4
o Tejon Ranch Co. 674 24
Tootsie Roll Industries, Inc. 2,255 68
Tyson Foods, Inc., Class A 27,840 404
o United Natural Foods, Inc. 2,600 71
@o VistaCare, Inc., Class A 1,000 16
o Wild Oats Markets, Inc. 3,800 23
Wm. Wrigley Jr. Co. 19,100 1,249
o Zapata Corp. 1,000 59
-----------
35,957
GOLD 0.2%
---------------------------------------------------------------------------
o Glamis Gold Ltd. 11,100 220
o Meridian Gold, Inc. 6,600 111
Newmont Mining Corp. 34,251 1,628
Royal Gold, Inc. 3,100 50
-----------
2,009
HEALTHCARE / DRUGS & MEDICINE 11.5%
---------------------------------------------------------------------------
o 1-800 Contacts, Inc. 500 8
@o aaiPharma, Inc. 4,300 12
Abbott Laboratories 128,205 5,465
o Abgenix, Inc. 7,100 65
o Abiomed, Inc. 800 9
o Accelrys, Inc. 1,300 7
15
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
@o Accredo Health, Inc. 2,841 65
o Aclara BioSciences, Inc. 2,400 9
@o Advanced Medical Optics, Inc. 2,400 94
o Advanced Neuromodulation Systems, Inc. 1,050 33
@o AeroGen, Inc. 640 1
o Albany Molecular Research, Inc. 1,600 14
o Align Technology, Inc. 8,700 90
o Alkermes, Inc. 3,100 38
@ Allergan, Inc. 11,900 852
o Alliance Imaging, Inc. 1,800 13
o Allscripts Healthcare Solutions, Inc. 1,900 18
Alpharma, Inc., Class A 3,700 63
o Amedisys, Inc. 2,500 76
o America Service Group, Inc. 3,300 118
@o American Healthways, Inc. 3,100 94
o American Medical Systems Holdings, Inc. 3,900 145
@o AMERIGROUP Corp. 900 54
AmerisourceBergen Corp. 10,324 568
o Amgen, Inc. 107,168 6,087
o Amsurg Corp. 4,800 112
o Amylin Pharmaceuticals, Inc. 2,300 49
o Andrx Corp. 6,400 138
@o Anthem, Inc. 14,417 1,159
o Antigenics, Inc. 1,400 9
o Aphton Corp. 800 3
Applied Biosystems Group -- Applera Corp. 16,500 315
@o Apria Healthcare Group, Inc. 10,500 287
o Arqule, Inc. 8,800 40
Arrow International, Inc. 6,400 183
o Arthrocare Corp. 1,400 43
o Aspect Medical Systems, Inc. 3,700 67
o Atrix Labs, Inc. 1,400 43
o AVANIR Pharmaceuticals, Class A 1,900 6
o Avant Immunotherapeutics, Inc. 3,000 6
o Avigen, Inc. 900 3
o Barr Pharmaceuticals, Inc. 8,781 331
Bausch & Lomb, Inc. 3,400 207
Baxter International, Inc. 50,118 1,542
Beckman Coulter, Inc. 5,100 303
Becton Dickinson & Co. 21,300 1,118
o Beverly Enterprises, Inc. 8,800 76
o BioCryst Pharmaceuticals, Inc. 1,400 7
o Biogen Idec, Inc. 28,125 1,636
o BioMarin Pharmaceuticals, Inc. 1,800 7
Biomet, Inc. 20,125 939
@o Biosite, Inc. 1,400 68
o Biosource International, Inc. 1,500 9
o Bone Care International, Inc. 1,400 32
o Boston Scientific Corp. 67,800 2,393
o Bradley Pharmaceuticals, Inc. 1,700 28
Bristol-Myers Squibb Co. 161,550 3,785
C.R. Bard, Inc. 8,000 454
o Caliper Life Sciences, Inc. 700 5
Cambrex Corp. 3,400 76
Cardinal Health, Inc. 36,160 1,690
@o Caremark Rx, Inc. 37,090 1,112
@o Cell Therapeutics, Inc. 1,400 9
o Centene Corp. 500 24
@o Cephalon, Inc. 3,500 167
o Cerus Corp. 500 1
@o Charles River Laboratories International, Inc. 6,416 300
o Chattem, Inc. 1,200 40
o Chiron Corp. 15,100 490
o Cholestech Corp. 1,700 14
o ChromaVision Medical Systems, Inc. 1,100 1
o Ciphergen Biosystems, Inc. 1,700 6
CNS, Inc. 5,000 57
o Collagenex Pharmaceuticals, Inc. 3,000 18
o Community Health Systems, Inc. 7,100 190
o Conmed Corp. 1,700 48
@ Cooper Cos., Inc. 2,200 155
o Corixa Corp. 1,802 7
o Corvel Corp. 1,900 50
o Covance, Inc. 5,800 230
o Coventry Health Care, Inc. 14,400 589
@o CryoLife, Inc. 750 5
o CTI Molecular Imaging, Inc. 2,000 16
o Cubist Pharmaceuticals, Inc. 1,900 19
o Curis, Inc. 3,140 12
o CV Therapeutics, Inc. 1,100 18
o Cytogen Corp. 230 2
o Cytyc Corp. 7,800 204
D&K Healthcare Resources, Inc. 3,200 23
o Dade Behring Holdings, Inc. 2,600 146
Datascope Corp. 2,500 81
o DaVita, Inc. 24,750 733
o Deltagen, Inc. 2,200 --
o Dendreon Corp. 1,400 14
Dentsply International, Inc. 6,550 341
Diagnostic Products Corp. 1,700 75
o Digene Corp. 1,400 35
o DJ Orthopedics, Inc. 3,000 51
o Durect Corp. 2,000 4
@o Dynacq Healthcare, Inc. 3,616 18
@o Edwards Lifesciences Corp. 3,900 133
Eli Lilly & Co. 92,400 5,074
o Emisphere Technologies, Inc. 800 2
o Endo Pharmaceutical Holdings, Inc. 10,500 229
o Enpath Medical, Inc. 3,000 27
o Entremed, Inc. 1,200 3
16
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o Enzo Biochem, Inc. 1,782 32
o Enzon Pharmaceuticals, Inc. 4,400 71
o Eon Labs, Inc. 7,800 192
@o Express Scripts, Inc. 6,300 403
o Eyetech Pharmaceuticals, Inc. 2,500 106
o First Health Group Corp. 8,700 139
o First Horizon Pharmaceutical Corp. 3,400 84
o Forest Laboratories, Inc. 27,500 1,227
@o Gen-Probe, Inc. 3,400 119
o Gene Logic, Inc. 1,300 4
o Genelabs Technologies, Inc. 800 1
o Genentech, Inc. 43,300 1,971
o Genesis HealthCare Corp. 6,250 192
o Genta, Inc. 2,900 7
o Genzyme Corp. 15,232 799
@o Geron Corp. 1,000 8
o Gilead Sciences, Inc. 36,620 1,268
Guidant Corp. 25,816 1,720
o Guilford Pharmaceuticals, Inc. 1,200 5
o Haemonetics Corp. 3,700 122
@ HCA, Inc. 39,100 1,436
Health Management Associates, Inc., Class A 15,900 328
@o Health Net, Inc. 16,600 403
Healthcare Services Group 3,750 69
o HealthExtras, Inc. 1,900 27
o HealthTronics Surgical Services, Inc. 3,500 24
o Henry Schein, Inc. 2,300 145
o Hologic, Inc. 2,600 52
o Hospira, Inc. 14,070 449
o Human Genome Sciences, Inc. 5,100 52
o Humana, Inc. 18,900 362
@o ICU Medical, Inc. 550 12
o Idexx Laboratories, Inc. 2,500 125
o Ii-Vi, Inc. 1,900 65
o ImClone Systems, Inc. 6,935 304
o Immucor, Inc. 1,687 52
o Immunogen, Inc. 1,500 8
o Immunomedics, Inc. 2,400 7
o IMPAC Medical Systems, Inc. 3,000 47
o Impax Laboratories, Inc. 1,600 24
o Inamed Corp. 13,950 741
o Incyte Corp. 2,600 27
o Indevus Pharmaceuticals, Inc. 1,800 12
o Inspire Pharmaceuticals, Inc. 1,300 20
@o Integra LifeSciences Holdings Corp. 1,100 35
o InterMune, Inc. 1,100 14
o Intuitive Surgical, Inc. 1,050 31
Invacare Corp. 2,000 92
o Isis Pharmaceuticals, Inc. 1,900 9
@o IVAX Corp. 18,437 334
(8) Johnson & Johnson 246,370 14,383
o Kendle International, Inc. 2,700 17
o Kindred Healthcare, Inc. 4,624 111
o Kinetic Concepts, Inc. 2,500 125
@o King Pharmaceuticals, Inc. 18,516 202
o Kosan Biosciences, Inc. 2,500 16
o KV Pharmaceutical Co., Class A 2,700 54
o Kyphon, Inc. 3,000 75
o Laboratory Corp. of America Holdings 12,800 586
Landauer, Inc. 1,100 54
o Lexicon Genetics, Inc. 6,900 45
@o LifePoint Hospitals, Inc. 2,300 75
@o Ligand Pharmaceuticals, Inc., Class B 2,300 21
@o Lincare Holdings, Inc. 7,100 261
o Magellan Health Services, Inc. 3,007 112
Manor Care, Inc. 8,000 262
@o Maxim Pharmaceuticals, Inc. 2,400 6
McKesson Corp. 22,900 611
@o Med-Design Corp. 1,200 1
o Medarex, Inc. 3,000 23
o Medcath Corp. 1,500 26
@o Medco Health Solutions, Inc. 23,638 802
o Medical Action Industries, Inc. 2,500 42
o Medicines Co. 1,700 45
Medicis Pharmaceutical Corp., Class A 3,400 138
o Medimmune, Inc. 19,875 565
@o Medis Technologies Ltd. 1,110 14
Medtronic, Inc. 100,974 5,161
@ Mentor Corp. 3,000 104
Merck & Co., Inc. 183,552 5,747
Meridian Bioscience, Inc. 5,000 67
o Merit Medical Systems, Inc. 2,222 23
o MGI Pharma, Inc. 3,800 101
o Millennium Pharmaceuticals, Inc. 25,856 336
o MIM Corp. 1,500 9
Mine Safety Appliances Co. 2,700 102
o Molecular Devices Corp. 8,100 162
o Molina Healthcare, Inc. 2,500 92
@ Mylan Laboratories, Inc. 45,000 775
o Myogen, Inc. 2,500 22
o Myriad Genetics, Inc. 1,400 25
o Nabi Biopharmaceuticals 2,800 39
National Healthcare Corp. 600 18
Nature's Sunshine Products, Inc. 4,000 61
o NBTY, Inc. 16,000 441
o Nektar Therapeutics 2,200 32
o Neose Technologies, Inc. 500 4
o Neurocrine Biosciences, Inc. 1,400 65
o Neurogen Corp. 800 6
@o Northfield Laboratories, Inc. 1,100 15
o Noven Pharmacuticals, Inc. 5,500 124
17
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o NPS Pharmacuticals, Inc. 1,000 17
o Nutraceutical International Corp. 5,000 78
o Nuvelo, Inc. 300 3
Oakley, Inc. 6,700 85
@o OCA, Inc. 2,112 9
o Ocular Sciences, Inc. 1,500 73
o Odyssey HealthCare, Inc. 2,250 17
Omnicare, Inc. 7,500 207
o Onyx Pharmaceuticals, Inc. 1,800 51
o OraSure Technologies, Inc. 1,500 10
o Orchid BioSciences, Inc. 280 3
o Oscient Pharmaceuticals Corp. 2,100 7
o OSI Pharmaceuticals, Inc. 1,692 110
Owens & Minor, Inc. 2,000 52
@o Pacificare Health Systems, Inc. 18,800 670
o Pain Therapeutics, Inc. 2,600 18
o Par Pharmaceutical Cos., Inc. 1,900 75
o Parexel International Corp. 2,400 46
@o Patterson Cos., Inc. 10,600 398
o Pediatrix Medical Group, Inc. 3,000 169
Perrigo Co. 7,300 133
(6) Pfizer, Inc. 631,552 18,283
o Pharmaceutical Product Development, Inc. 5,000 211
o Pharmacopeia Drug Discovery, Inc. 650 4
o Pharmacyclics, Inc. 1,100 13
o Pharmion Corp. 2,500 115
PolyMedica Corp. 4,400 154
o Pozen, Inc. 1,300 11
o Praecis Pharmaceuticals, Inc. 1,600 3
o Priority Healthcare Corp., Class B 2,000 36
o Protein Design Labs, Inc. 4,100 79
o Province Healthcare Co. 4,825 103
o PSS World Medical, Inc. 5,800 65
o QMed, Inc. 500 4
Quest Diagnostics 7,410 649
o Regeneration Technologies, Inc. 1,700 13
o Regeneron Pharmaceuticals, Inc. 1,900 14
o RehabCare Group, Inc. 4,000 92
o Renal Care Group, Inc. 7,050 222
o Res-Care, Inc. 4,500 55
o Resmed, Inc. 2,000 94
o Respironics, Inc. 1,900 97
o Sangamo Biosciences, Inc. 1,200 5
o Savient Pharmaceuticals, Inc. 2,300 5
Schering-Plough Corp. 121,750 2,205
Select Medical Corp. 7,500 129
o Sepracor, Inc. 6,600 303
o Serologicals Corp. 1,200 28
@o Sierra Health Services, Inc. 11,700 558
o Sola International, Inc. 2,700 52
o SonoSite, Inc. 1,600 46
o Specialty Laboratories 700 7
o St. Jude Medical, Inc. 14,800 1,133
o Steris Corp. 6,100 126
Stryker Corp. 33,600 1,448
o Sunrise Senior Living, Inc. 4,900 187
o SuperGen, Inc. 900 5
o Sybron Dental Specialties, Inc. 4,633 151
o Symbion, Inc. 2,500 39
o Tanox, Inc. 4,900 77
o Techne Corp. 3,800 137
o Tenet Healthcare Corp. 36,650 393
o Theragenics Corp. 2,500 9
o Third Wave Technologies, Inc. 1,800 14
@o Thoratec Corp. 2,636 23
o Titan Pharmaceuticals, Inc. 800 2
o Transgenomic, Inc. 1,200 2
o Transkaryotic Therapies, Inc. 3,400 59
o Triad Hospitals, Inc. 6,044 200
o Trimeris, Inc. 500 6
o TriPath Imaging, Inc. 2,600 18
o Tripos, Inc. 6,000 24
o United Surgical Partners International, Inc. 1,400 49
UnitedHealth Group, Inc. 66,300 4,800
Universal Health Services, Class B 4,000 166
o Urologix, Inc. 1,800 9
o US Physical Therapy, Inc. 3,500 53
o USANA Health Sciences, Inc. 1,000 30
o Utah Medical Products, Inc. 2,500 45
Valeant Pharmaceuticals International 7,900 190
o Varian Medical Systems, Inc. 11,900 478
o VCA Antech, Inc. 5,400 121
o Ventana Medical Systems, Inc. 1,200 65
o Vertex Pharmaceuticals, Inc. 3,144 34
o Viasys Healthcare, Inc. 2,982 51
o Vical, Inc. 1,600 8
@o Viropharma, Inc. 1,000 3
o Visx, Inc. 3,100 52
Vital Signs, Inc. 1,900 66
o Watson Pharmaceuticals, Inc. 7,732 217
o WellPoint Health Networks, Inc. 12,680 1,238
West Pharmaceutical Services, Inc. 6,600 151
o Wright Medical Group, Inc. 1,700 44
Wyeth 109,400 4,338
o XOMA Ltd. 2,400 5
Young Innovations, Inc. 2,000 64
o Zimmer Holdings, Inc. 20,300 1,575
o Zymogenetics, Inc. 2,000 38
-----------
131,748
HOUSEHOLD PRODUCTS 1.8%
---------------------------------------------------------------------------
Alberto-Culver Co., Class B 6,950 312
18
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
Avon Products, Inc. 39,000 1,542
Church & Dwight Co., Inc. 4,950 135
Clorox Co. 27,000 1,474
Colgate-Palmolive Co. 42,500 1,896
The Estee Lauder Cos., Inc., Class A 10,300 442
The Gillette Co. 81,400 3,377
Inter Parfums, Inc. 675 9
International Flavors & Fragrances, Inc. 4,400 172
@ Nu Skin Enterprises, Inc., Class A 6,500 126
= Procter & Gamble Co. 213,400 10,922
-----------
20,407
INSURANCE 4.3%
---------------------------------------------------------------------------
@ 21st Century Holding Co. 1,500 16
21st Century Insurance Group 7,200 95
Aetna, Inc. 14,800 1,406
AFLAC, Inc. 42,600 1,528
Alfa Corp. 6,800 95
o Alleghany Corp. 216 62
o Allmerica Financial Corp. 4,900 147
The Allstate Corp. 58,874 2,831
AMBAC Financial Group, Inc. 10,250 800
American Financial Group, Inc. 5,500 163
(9) American International Group, Inc. 216,222 13,127
American National Insurance Co. 1,300 137
@ AmerUs Group Co. 4,400 184
@ AON Corp. 25,500 520
o Arch Capital Group Ltd. 3,900 147
o Argonaut Group, Inc. 2,400 44
Arthur J. Gallagher & Co. 6,800 191
Baldwin & Lyons, Inc., Class B 750 19
Brown & Brown, Inc. 5,500 230
Chubb Corp. 16,547 1,194
CIGNA Corp. 12,800 812
Cincinnati Financial Corp. 12,810 535
o Clark, Inc. 1,700 22
o CNA Financial Corp. 20,900 500
o CNA Surety Corp. 2,200 26
Commerce Group, Inc. 1,600 81
Crawford & Co., Class B 1,600 11
Delphi Financial Group, Inc., Class A 4,515 185
EMC Insurance Group, Inc. 1,200 24
Erie Indemnity Co., Class A 5,500 276
FBL Financial Group, Inc., Class A 2,090 54
Fidelity National Financial, Inc. 16,017 604
First American Corp. 7,800 243
First United Corp. 2,200 46
o FPIC Insurance Group, Inc. 400 11
@ Fremont General Corp. 6,200 133
o Genworth Financial, Inc. 19,000 453
Great American Financial Resources, Inc. 2,800 44
Harleysville Group, Inc. 1,800 37
Hartford Financial Services Group, Inc. 24,400 1,427
HCC Insurance Holdings, Inc. 5,300 157
Hilb, Rogal & Hobbs Co. 3,000 95
Hooper Holmes, Inc. 4,600 24
Horace Mann Educators Corp. 1,800 31
Independence Holding Co. 2,700 51
Infinity Property & Casualty Corp. 2,500 78
Jefferson-Pilot Corp. 12,600 608
Liberty Corp. 1,000 40
Lincoln National Corp. 15,100 661
Loews Corp. 15,000 898
o Markel Corp. 300 95
Marsh & McLennan Cos., Inc. 43,000 1,189
MBIA, Inc. 13,750 796
Mercury General Corp. 5,400 278
Metlife, Inc. 62,000 2,378
MGIC Investment Corp. 9,300 598
o MIIX Group, Inc. 2,400 --
o National Medical Health Card Systems, Inc. 800 17
Nationwide Financial Services, Inc., Class A 1,300 45
o Navigators Group, Inc. 1,500 44
NYMAGIC, Inc. 2,100 43
@ Odyssey Re Holdings Corp. 5,400 118
o Ohio Casualty Corp. 5,500 115
Old Republic International Corp. 16,350 382
o Penn Treaty American Corp. 600 1
Penn-America Group, Inc. 1,400 21
o Philadelphia Consolidated Holding Co. 1,000 58
The Phoenix Cos., Inc. 7,000 74
PMA Capital Corp., Class A 700 6
@ The PMI Group, Inc. 8,100 314
Presidential Life Corp. 1,000 16
Principal Financial Group, Inc. 25,400 959
o ProAssurance Corp. 1,670 60
The Progressive Corp. 21,300 1,993
Protective Life Corp. 5,500 216
Prudential Financial, Inc. 45,500 2,114
Radian Group, Inc. 9,202 441
@ Reinsurance Group of America, Inc. 5,100 220
RLI Corp. 2,800 106
Safeco Corp. 12,500 578
Safety Insurance Group, Inc. 1,000 23
SCPIE Holdings, Inc. 700 6
Selective Insurance Group, Inc. 1,200 47
19
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o SNTL Corp. -- Litigation Trust Certificates 1,300 --
The St. Paul Travelers Cos., Inc. 54,550 1,853
Stancorp Financial Group, Inc. 2,500 188
State Auto Financial Corp. 1,300 37
Sterling Financial Corp. 1,250 33
Stewart Information Services Corp. 3,700 157
Torchmark Corp. 10,600 573
Transatlantic Holdings, Inc. 6,437 375
o Triad Guaranty, Inc. 1,700 93
o UICI 2,500 74
United Fire & Casualty Co. 500 30
Unitrin, Inc. 5,600 242
UnumProvident Corp. 23,914 327
o USI Holdings Corp. 4,500 44
W.R. Berkley Corp. 10,200 436
o WellChoice, Inc. 6,800 284
@ Zenith National Insurance Corp. 600 25
-----------
49,225
MEDIA 3.8%
---------------------------------------------------------------------------
o Acme Communications, Inc. 1,900 11
o Adolor Corp. 1,700 20
o Advanced Marketing Services, Inc. 2,400 25
o AMC Entertainment, Inc. 5,400 104
o America's Car Mart, Inc. 2,500 86
@o American Tower Corp., Class A 19,500 335
Banta Corp. 2,700 110
Belo Corp., Class A 9,400 219
Blockbuster, Inc., Class A 6,900 47
@o Cablevision Systems Corp., NY Group, Class A 18,800 387
Cadmus Communications Corp. 3,900 58
o Carmike Cinemas, Inc. 2,500 89
@o Charter Communications, Inc., Class A 20,300 51
o Citadel Broadcasting Corp. 2,500 36
Clear Channel Communications, Inc. 49,721 1,661
@o CNET Networks, Inc. 9,983 82
o Comcast Corp., Class A 148,336 4,376
o Comcast Corp., Special Class A 42,800 1,243
o Consolidated Graphics, Inc. 3,900 167
o Cox Communications, Inc., Class A 50,635 1,744
o Crown Media Holdings, Inc., Class A 6,000 54
o Cumulus Media, Inc., Class A 5,100 83
o DAG Media, Inc. 2,500 9
o Daily Journal Corp. 500 18
o DGSE Cos., Inc. 700 2
o The DIRECTV Group, Inc. 83,476 1,400
Dow Jones & Co., Inc. 9,000 398
The E.W. Scripps Co., Class A 12,000 573
o EchoStar Communications Corp., Class A 21,300 673
o Emmis Communications Corp., Class A 4,300 80
o Entercom Communications Corp. 3,000 100
o Entravision Communications Corp., Class A 5,000 40
o Fox Entertainment Group, Inc., Class A 36,250 1,075
Gannett Co., Inc. 23,500 1,949
o Gaylord Entertainment Co. 2,625 88
>o GC Cos., Inc. 500 --
Gray Television, Inc. 5,600 74
Harte-Hanks, Inc. 8,100 208
Hollinger International, Inc., Class A 7,300 130
o Information Holdings, Inc. 2,200 60
o Insight Communications Co., Class A 5,200 44
John Wiley & Sons, Class A 6,300 204
Journal Communications, Inc., Class A 7,500 121
o Journal Register Co. 3,200 60
Knight-Ridder, Inc. 5,700 391
Lee Enterprises, Inc. 2,500 116
o Liberty Media International, Inc., Class A 10,961 395
o Lifeline Systems, Inc. 4,600 111
o Lin TV Corp., Class A 3,300 60
o Lynch Interactive Corp. 900 28
@o Martha Stewart Living Omnimedia, Class A 3,900 69
McClatchy Co., Class A 7,200 500
The McGraw-Hill Cos., Inc. 17,300 1,492
Media General, Inc., Class A 2,000 117
o Mediacom Communications Corp., Class A 7,600 50
Meredith Corp. 6,000 294
o Merrimac Industries, Inc. 600 5
Metro-Goldwyn-Mayer, Inc. 13,134 155
o Moscow CableCom Corp. 1,400 10
@ Movie Gallery, Inc. 3,525 57
o Network Equipment Technologies, Inc. 5,000 43
New York Times Co., Class A 13,200 529
o Nexstar Broadcasting Group, Inc., Class A 4,500 33
o Playboy Enterprises, Inc., Class B 4,500 50
Pulitzer, Inc. 3,000 158
o Quipp, Inc. 900 12
R.R. Donnelley & Sons Co. 17,000 535
20
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o Radio One, Inc., Class A 9,500 139
>o Radio Unica Communications Corp. 300 --
The Reader's Digest Association, Inc., Class A 7,300 103
@ Regal Entertainment Group, Class A 4,200 84
o Saga Communications, Inc., Class A 3,750 63
o Salem Communications Corp., Class A 900 22
o Scholastic Corp. 2,200 67
Sinclair Broadcast Group, Inc., Class A 4,800 34
o The Source Interlink Cos., Inc. 5,000 50
o The Sportsman's Guide, Inc. 5,000 117
Thomas Nelson, Inc. 3,300 73
o Time Warner, Inc. 367,052 6,108
@o Tivo, Inc. 4,500 30
Tribune Co. 26,900 1,162
@o Univision Communications, Inc., Class A 25,510 790
o Valassis Communications, Inc. 5,900 203
o Valuevision Media, Inc., Class A 1,400 15
Viacom, Inc., Class B 144,012 5,255
The Walt Disney Co. 167,150 4,216
Washington Post, Class B 600 549
o Westwood One, Inc. 7,200 166
o XM Satellite Radio Holdings, Inc., Class A 15,300 494
-----------
43,244
MISCELLANEOUS 0.5%
---------------------------------------------------------------------------
3M Co. 65,000 5,042
o Alliance Data Systems Corp. 6,600 279
o Coinstar, Inc. 5,200 134
o The Geo Group, Inc. 3,800 76
o i2 Technologies, Inc. 15,300 11
>o Jupiter Media Metrix, Inc. 1,673 --
o Life Time Fitness, Inc. 2,500 58
@o NetFlix, Inc. 6,000 57
@>o Nucentrix Broadband Networks, Inc. 2,100 5
o Saxon Capital, Inc. 3,500 67
-----------
5,729
MISCELLANEOUS FINANCE 7.9%
---------------------------------------------------------------------------
1st Source Corp. 1,571 43
A.G. Edwards, Inc. 5,900 214
@o Accredited Home Lenders Holding Co. 2,500 90
@>o Actrade Financial Technologies Ltd. 1,000 --
Advanta Corp., Class A 7,400 169
o Affiliated Managers Group, Inc. 1,800 101
Alliance Capital Management Holding L.P. 5,200 198
@ Allied Capital Corp. 11,015 293
Amcore Financial, Inc. 1,200 37
@ American Capital Strategies Ltd. 5,100 158
American Express Co. 105,150 5,580
o AmeriCredit Corp. 12,300 239
o Ameritrade Holding Corp. 34,300 447
Apollo Investment Corp. 5,000 68
o Asset Acceptance Capital Corp. 2,500 46
Asta Funding, Inc. 2,000 36
@ Astoria Financial Corp. 7,000 274
Bank of the Ozarks, Inc. 2,800 90
@o Bankunited Financial Corp., Class A 2,200 65
Banner Corp. 1,200 36
o Bay View Capital Corp. 506 8
The Bear Stearns Cos., Inc. 13,620 1,290
o Berkshire Hathaway, Inc., Class A 96 8,088
Berkshire Hills Bancorp, Inc. 1,400 53
Blackrock, Inc., Class A 400 29
o Boca Resorts, Inc., Class A 4,300 102
o BOK Financial Corp. 4,540 207
@o BP Prudhoe Bay Royalty Trust 2,200 98
Camco Financial Corp. 700 11
Capital Corp. of the West 1,050 48
@ Capital One Financial Corp. 19,900 1,468
Cash America International, Inc. 2,500 63
Cathay General Bancorp., Inc. 3,200 126
Central Pacific Financial Co. 900 27
o Cenveo, Inc. 1,300 4
/ The Charles Schwab Corp. 111,120 1,017
Charter Financial Corp. 900 34
CharterMac 3,900 90
Chesterfield Financial Corp. 1,500 47
@ Chicago Mercantile Exchange 1,800 316
CIT Group, Inc. 18,600 751
=(5) Citigroup, Inc. 424,936 18,854
Citizens First Bancorp, Inc. 700 17
Coastal Financial Corp. 2,759 41
The Commercial Capital Bancorp, Inc. 5,362 120
Commercial Federal Corp. 3,000 83
o CompuCredit Corp. 4,400 84
o Corrections Corp. of America 3,828 133
Countrywide Financial Corp. 53,000 1,692
Cross Timbers Royalty Trust 1,500 54
CVB Financial Corp. 3,382 84
Downey Financial Corp. 2,000 111
o E*TRADE Financial Corp. 30,035 387
East-West Bancorp, Inc. 2,600 104
Eaton Vance Corp. 5,800 253
21
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o eSpeed, Inc., Class A 3,300 32
Fannie Mae 81,400 5,710
Federated Investors, Inc., Class B 9,950 288
Fidelity Bankshares, Inc. 1,933 75
o Financial Federal Corp. 3,300 123
Financial Industries Corp. 700 6
First Financial Corp. Indiana 600 19
First Financial Holdings, Inc. 1,400 43
First Indiana Corp. 1,375 30
o The First Marblehead Corp. 5,000 268
First Place Financial Corp. Ohio 2,900 57
Flagstar Bancorp., Inc. 6,200 130
Flushing Financial Corp. 3,300 64
Franklin Resources, Inc. 20,600 1,249
Freddie Mac 57,700 3,843
@ Gabelli Asset Management, Inc., Class A 700 32
Glacier Bancorp, Inc. 3,812 121
Golden West Financial Corp. 11,900 1,391
Goldman Sachs Group, Inc. 38,700 3,807
Heritage Financial Corp. 700 15
Hudson River Bancorp 3,200 63
Hugoton Royalty Trust 3,300 94
IBERIABANK Corp. 700 43
Independence Community Bank Corp. 6,600 248
Independent Bank Corp. Michigan 1,636 44
IndyMac Bancorp, Inc. 3,400 110
o Instinet Group, Inc. 1,200 6
International Bancshares Corp. 3,662 135
Interpool, Inc. 1,200 21
o Investment Technology Group, Inc. 4,750 73
@ Investors Financial Services Corp. 5,500 212
o ITLA Capital Corp. 700 34
Janus Capital Group, Inc. 19,200 293
Jefferies Group, Inc. 4,100 165
o Knight Trading Group, Inc., Class A 9,700 101
o La Quinta Corp. 13,000 105
o LabOne, Inc. 2,100 63
o LaBranche & Co., Inc. 2,400 17
@ Legg Mason, Inc. 10,050 640
Lehman Brothers Holdings, Inc. 23,872 1,961
Leucadia National Corp. 5,136 304
MB Financial, Inc. 1,800 77
MBNA Corp. 104,650 2,682
MCG Capital Corp. 4,700 84
McGrath RentCorp 800 31
o Meritage Corp. 500 44
Merrill Lynch & Co., Inc. 79,800 4,304
o Metris Cos., Inc. 3,000 29
o MicroFinancial, Inc. 1,900 9
The Midland Co. 1,800 50
MoneyGram International, Inc. 14,500 270
Moody's Corp. 13,300 1,035
Morgan Stanley 90,300 4,613
MutualFirst Financial, Inc. 2,000 48
National Financial Partners Corp. 2,500 77
o National Western Life Insurance Co., Class A 300 45
o Nelnet, Inc., Class A 4,500 87
New York Community Bancorp, Inc. 22,697 417
>o NextCard, Inc. 2,600 --
o North American Scientific, Inc. 700 4
Northrim BanCorp, Inc. 2,500 57
Northway Financial, Inc. 200 7
Northwest Bancorp, Inc. 5,000 119
Nuveen Investments, Inc., Class A 7,300 231
Oak Hill Financial, Inc. 1,000 38
o Ocwen Financial Corp. 5,920 44
PAB Bankshares, Inc. 700 9
Pacific Capital Bancorp. 2,844 91
Partners Trust Financial Group, Inc. 3,971 40
The Peoples Holding Co. 750 25
o Piper Jaffray Cos. 950 42
PMC Commercial Trust 1,500 22
o Portfolio Recovery Associates, Inc. 2,000 67
Provident Financial Holdings 750 22
Provident Financial Services, Inc. 917 16
o Providian Financial Corp. 23,900 372
R&G Financial Corp., Class B 2,550 96
Raymond James Financial, Inc. 6,900 180
Resource America, Inc., Class A 2,000 49
Santander BanCorp 4,686 131
SEI Investments Co. 9,700 349
o Siebert Financial Corp. 2,900 10
SLM Corp. 37,300 1,688
Sovereign Bancorp, Inc. 28,942 627
State Financial Services Corp., Class A 2,000 57
Student Loan Corp. 1,700 249
SWS Group, Inc. 1,141 22
T. Rowe Price Group, Inc. 10,700 597
@o Tarragon Corp. 2,948 40
TF Financial Corp. 700 20
United Community Banks, Inc. Georgia 3,750 90
o UnitedGlobalCom, Inc., Class A 31,000 232
Value Line, Inc. 300 11
W Holding Co., Inc. 7,803 156
@ W.P. Carey & Co. LLC 4,100 127
Waddell & Reed Financial, Inc., Class A 7,250 152
Washington Federal, Inc. 7,220 184
22
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
Washington Mutual, Inc. 73,578 2,848
Waypoint Financial Corp. 3,651 100
Webster Financial Corp. 3,790 181
o Wellsford Real Properties, Inc. 1,400 22
Wesco Financial Corp. 200 69
Westwood Holdings Group, Inc. 285 5
o WFS Financial, Inc. 4,100 181
White Mountains Insurance Group Ltd. 200 102
Willow Grove Bancorp, Inc. 1,596 27
o World Acceptance Corp. 1,000 23
-----------
89,846
NON-DURABLES & ENTERTAINMENT 1.4%
---------------------------------------------------------------------------
o A.T. Cross Co., Class A 2,400 12
Action Performance Cos., Inc. 600 6
o Activision, Inc. 11,175 162
o AFC Enterprises, Inc. 1,000 22
o American Greetings Corp., Class A 8,500 225
Applebee's International, Inc. 7,912 181
Bob Evans Farms, Inc. 2,200 52
@ Boyd Gaming Corp. 5,300 177
o Boyds Collection Ltd. 2,200 7
@o Brinker International, Inc. 6,900 223
o Buca, Inc. 1,100 5
o Cabela's, Inc., Class A 3,500 88
CBRL Group, Inc. 3,300 120
o CEC Entertainment, Inc. 2,025 77
o Centillium Communications, Inc. 1,000 2
@o The Cheesecake Factory 1,925 84
Churchill Downs, Inc. 900 34
o CKE Restaurants, Inc. 4,800 58
Darden Restaurants, Inc. 13,300 326
o Dave and Buster's, Inc. 1,700 30
o Department 56, Inc. 3,300 50
Dover Motorsports, Inc. 1,400 7
o Drew Industries, Inc. 2,500 78
o Electronic Arts, Inc. 25,200 1,132
o Electronics Boutique Holdings Corp. 1,300 44
o EMAK Worldwide, Inc. 500 5
o Enesco Group, Inc. 1,100 7
Fortune Brands, Inc. 17,700 1,289
o Fossil, Inc. 2,962 88
Handleman Co. 6,600 142
Hasbro, Inc. 14,500 256
o Hibbet Sporting Goods, Inc. 2,362 53
o Hollywood Media Corp. 1,100 4
IHOP Corp. 3,000 115
International Game Technology 29,100 961
International Speedway Corp., Class A 3,245 153
o Isle of Capri Casinos, Inc. 9,400 213
o Jack in the Box, Inc. 4,200 140
@o Krispy Kreme Doughnuts, Inc. 2,100 22
Lancaster Colony Corp. 3,400 146
Landry's Restaurants, Inc. 1,800 49
Lone Star Steakhouse & Saloon, Inc. 4,400 106
o Luby's, Inc. 1,400 9
@o Marvel Enterprises, Inc. 11,700 180
Mattel, Inc. 34,300 601
McDonald's Corp. 102,800 2,997
o Midway Games, Inc. 5,600 53
Movado Group, Inc. 7,400 128
o O'Charleys, Inc. 400 6
@o Oneida Ltd. 700 1
Outback Steakhouse, Inc. 7,000 277
@o P.F. Chang's China Bistro, Inc. 800 41
@o Panera Bread Co., Class A 800 28
o Papa John's International, Inc. 1,700 55
o Penn National Gaming, Inc. 4,900 203
o Rare Hospitality International Inc. 3,325 92
o RC2 Corp. 2,200 61
Regis Corp. 3,900 167
Ruby Tuesday, Inc. 5,600 138
Russ Berrie & Co., Inc. 1,000 21
o Ryan's Restaurant Group, Inc. 2,250 31
SCP Pool Corp. 5,662 165
o Service Corp. International 24,100 159
o Smith & Wollensky Restaurant Group, Inc. 900 5
o Sonic Corp. 2,812 77
o Sotheby's Holdings, Inc., Class A 2,938 55
o Starbucks Corp. 31,300 1,655
o The Steak N Shake Co. 1,580 26
o Stewart Enterprises, Inc., Class A 7,200 51
@o Take-Two Interactive Software, Inc. 8,000 264
The Topps Co., Inc. 1,700 17
o Trans World Entertainment Corp. 1,500 16
Triarc Cos., Class B 4,400 50
Tupperware Corp. 4,800 80
Wendy's International, Inc. 10,300 344
World Wrestling Entertainment, Inc. 4,900 61
Yum! Brands, Inc. 24,000 1,044
-----------
16,109
NON-FERROUS METALS 0.4%
---------------------------------------------------------------------------
o A.M. Castle & Co. 1,500 17
Alcoa, Inc. 70,464 2,290
o Brush Engineered Materials, Inc. 3,600 56
o Century Aluminum Co. 3,100 72
Commercial Metals Co. 3,500 127
23
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o Commonwealth Industries, Inc. 1,300 12
o Encore Wire Corp. 3,000 37
Engelhard Corp. 9,300 263
Freeport-McMoran Copper & Gold, Inc., Class B 16,000 580
Gibraltar Industries, Inc. 2,500 88
o Imco Recycling, Inc. 1,400 16
o Kaiser Aluminum Corp. 2,000 --
Minerals Technologies, Inc. 3,100 186
Mueller Industries, Inc. 1,700 45
Phelps Dodge Corp. 7,330 642
Reliance Steel & Aluminum Co. 4,250 146
o RTI International Metals, Inc. 4,000 80
Southern Peru Copper Corp. 5,400 233
o Stillwater Mining Co. 1,133 14
o Titanium Metals Corp. 900 17
o Wolverine Tube, Inc. 1,000 10
-----------
4,931
OIL: DOMESTIC 1.6%
---------------------------------------------------------------------------
Amerada Hess Corp. 6,400 517
Ashland, Inc. 7,000 403
o CAL Dive International, Inc. 4,000 142
Chesapeake Energy Corp. 19,200 309
o Comstock Resources, Inc. 4,500 99
ConocoPhillips 56,098 4,730
Consol Energy, Inc. 8,300 294
Crosstex Energy L.P. 2,000 63
@ Diamond Offshore Drilling, Inc. 12,300 416
o Enbridge Energy Management LLC 1,153 51
o Encore Acquisition Co. 1,500 49
o Energy Partners Ltd. 1,700 30
Frontier Oil Corp. 3,600 88
o Global Industries Ltd. 4,400 30
Gulf Island Fabrication, Inc. 2,800 57
o Gulfmark Offshore, Inc. 1,600 31
o Harvest Natural Resources, Inc. 6,000 91
Holly Corp. 4,000 98
o Houston Exploration Co. 5,400 316
@ Kaneb Services LLC 1,466 46
Kerr-McGee Corp. 14,583 864
@ Magellan Midstream Partners 1,200 66
o Magnum Hunter Resources, Inc. 5,750 70
Marathon Oil Corp. 29,000 1,105
@ Markwest Energy Partners L.P. 500 22
o Meridian Resource Corp. 3,100 25
Murphy Oil Corp. 8,500 680
o Nabors Industries Ltd. 11,817 580
@o National-Oilwell, Inc. 5,569 188
o Newfield Exploration Co. 3,700 215
o OYO Geospace Corp. 300 5
Pacific Energy Partners L.P. 3,500 99
Patina Oil & Gas Corp. 6,250 179
Patterson-UTI Energy, Inc. 13,200 254
Pioneer Natural Resources Co. 14,333 464
o Plains Exploration & Production Co. 6,579 164
Pogo Producing Co. 6,300 289
o Premcor, Inc. 6,100 238
o Pride International, Inc. 10,200 188
o Quicksilver Resources, Inc. 2,800 89
o Remington Oil & Gas Corp. 2,900 74
o Spinnaker Exploration Co. 2,900 93
St. Mary Land & Exploration Co. 3,700 146
o Stone Energy Corp. 976 40
Sunoco Logistics Partners L.P. 2,000 79
Sunoco, Inc. 5,500 409
o Superior Energy Services, Inc. 4,900 63
o Syntroleum Corp. 4,000 28
TEPPCO Partners L.P. 4,000 157
o Tesoro Petroleum Corp. 4,800 145
o Todco, Class A 5,500 93
o Transmontaigne, Inc. 1,600 9
o Transocean, Inc. 25,231 889
o Ultra Petroleum Corp. 6,500 316
o Universal Compression Holdings, Inc. 2,900 100
Unocal Corp. 22,507 940
Valero L.P. 1,600 90
o Varco International, Inc. 7,140 198
Vintage Petroleum, Inc. 10,500 221
XTO Energy, Inc. 19,457 649
-----------
18,383
OIL: INTERNATIONAL 3.2%
---------------------------------------------------------------------------
@o ATP Oil & Gas Corp. 1,600 21
ChevronTexaco Corp. 179,634 9,532
=(2) Exxon Mobil Corp. 537,816 26,471
GlobalSantaFe Corp. 19,155 565
-----------
36,589
OPTICAL & PHOTO 0.2%
---------------------------------------------------------------------------
o APA Optics, Inc. 1,000 1
o August Technology Corp. 1,300 10
o BMC Industries, Inc. 2,100 --
o Corning, Inc. 112,607 1,289
CPI Corp. 400 5
@ Eastman Kodak Co. 26,000 787
o Fischer Imaging Corp. 500 2
Imation Corp. 2,000 63
o Ingram Micro, Inc., Class A 13,400 231
@o Lexar Media, Inc. 5,400 37
o Meade Instruments Corp. 800 3
o Photronics, Inc. 1,400 25
24
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
>o Polaroid Corp. 3,800 --
o Zomax, Inc. 2,000 7
o Zygo Corp. 500 5
-----------
2,465
PAPER & FOREST PRODUCTS 0.8%
---------------------------------------------------------------------------
o Boise Cascade Corp. 6,400 189
Bowater, Inc. 2,300 85
o Buckeye Technologies, Inc. 1,200 13
Chesapeake Corp. 1,000 23
CSS Industries, Inc. 900 28
Deltic Timber Corp. 700 28
@ Georgia-Pacific Corp. 44,365 1,535
International Paper Co. 39,304 1,514
o Kadant, Inc. 1 --
Kimberly-Clark Corp. 40,639 2,425
Louisiana-Pacific Corp. 4,800 118
MeadWestvaco Corp. 11,674 368
Packaging Corp. of America 6,000 131
Potlatch Corp. 13,400 631
Rayonier, Inc. 1,592 75
Rock-Tennessee Co., Class A 1,500 23
@o Smurfit-Stone Container Corp. 10,900 189
Temple-Inland, Inc. 4,400 260
Wausau-Mosinee Paper Corp. 4,700 73
Weyerhaeuser Co. 16,750 1,049
-----------
8,757
PRODUCER GOODS & MANUFACTURING 4.9%
---------------------------------------------------------------------------
o Aaon, Inc. 4,075 60
o Actuant Corp., Class A 2,840 113
o Advanced Energy Industries, Inc. 3,900 38
o Aeroflex, Inc. 5,400 60
@o AGCO Corp. 3,762 73
Alamo Group, Inc. 500 9
Albany International Corp., Class A 3,918 118
o American Standard Cos., Inc. 17,900 655
Ametek, Inc. 4,200 138
Applied Industrial Technologies, Inc. 2,900 108
Aptargroup, Inc. 2,200 103
o Astec Industries, Inc. 500 7
Avery Dennison Corp. 9,700 590
o AZZ, Inc. 700 9
Baldor Electric Co. 3,800 89
Barnes Group, Inc. 500 13
o BE Aerospace, Inc. 1,100 9
o Blount International, Inc. 1,200 17
Blyth, Inc. 4,800 144
Briggs & Stratton Corp. 3,000 215
o Cantel Medical Corp. 2,381 53
o Capstone Turbine Corp. 2,600 5
Caterpillar, Inc. 28,700 2,312
CIRCOR International, Inc. 3,750 71
Clarcor, Inc. 1,700 84
Cognex Corp. 2,900 74
o Columbus McKinnon Corp. 2,400 19
Cooper Industries Ltd., Class A 7,200 460
o Cuno, Inc. 1,300 75
Curtiss-Wright Corp. 300 17
@o CyberCare, Inc. 900 --
Deere & Co. 21,500 1,285
o DiamondCluster International, Inc., Class A 1,000 12
Dover Corp. 16,700 656
o Duratek, Inc. 4,000 81
Emerson Electric Co. 35,000 2,242
@o Evergreen Solar, Inc. 1,000 3
o The Fairchild Corp., Class A 3,100 11
@ Fastenal Co. 6,600 365
Federal Signal Corp. 2,800 47
o Fisher Scientific International, Inc. 8,876 509
o Flowserve Corp. 3,900 84
o FMC Corp. 3,100 136
Franklin Electric Co., Inc. 3,800 146
o Gardner Denver, Inc. 1,700 51
=(1) General Electric Co. 863,066 29,448
The Gorman-Rupp Co. 2,875 62
Graco, Inc. 7,012 241
o GrafTech International Ltd. 2,100 19
Hardinge, Inc. 1,800 20
Harsco Corp. 3,100 150
Helix Technology Corp. 1,100 15
Herman Miller, Inc. 5,700 132
o Hexcel Corp. 2,000 31
HNI Corp. 4,000 162
Honeywell International, Inc. 71,062 2,393
Hubbell, Inc., Class B 3,800 174
Hughes Supply, Inc. 2,600 74
o Ibis Technology Corp. 800 2
IDEX Corp. 3,150 116
Illinois Tool Works, Inc. 25,850 2,385
Ingersoll-Rand Co., Class A 13,700 938
o Ionics, Inc. 400 11
o Jacuzzi Brands, Inc. 2,000 17
o Jarden Corp. 1,650 58
JLG Industries, Inc. 1,800 30
Johnson Controls, Inc. 15,000 860
Juno Lighting, Inc. 1,429 53
Kaydon Corp. 3,300 98
Kennametal, Inc. 4,000 186
Knape & Vogt Manufacturing Co. 2,200 29
o Kos Pharmaceuticals, Inc. 700 25
o Ladish Co., Inc. 1,300 13
Lawson Products, Inc. 2,000 87
25
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
Lennox International, Inc. 4,771 69
Libbey, Inc. 500 9
Lincoln Electric Holdings, Inc. 3,900 130
o Lone Star Technologies, Inc. 1,200 32
o Magnetek, Inc. 1,500 9
Manitowoc Co., Inc. 2,900 102
o Material Sciences Corp. 4,000 52
Matthews International Corp., Class A 1,900 64
o Maverick Tube Corp. 3,800 100
o Merix Corp. 3,700 38
o Micrel, Inc. 6,800 76
Middleby Corp. 3,500 172
o Milacron, Inc. 2,300 6
o Millipore Corp. 5,100 235
o Modtech Holdings, Inc. 1,000 8
o Moog, Inc., Class A 3,525 132
MSC Industrial Direct Co., Class A 4,300 147
NACCO Industries, Inc., Class A 1,300 122
o NATCO Group, Inc., Class A 1,200 11
NN, Inc. 1,800 20
Nordson Corp. 4,000 140
o Oceaneering International, Inc. 3,600 128
Pall Corp. 10,900 282
o Park-Ohio Holdings Corp. 2,600 54
Parker Hannifin Corp. 11,000 777
Penn Engineering & Manufacturing Corp. 1,000 18
Pentair, Inc. 7,000 262
o Plug Power, Inc. 2,248 13
o Possis Medical, Inc. 1,100 12
Precision Castparts Corp. 5,151 309
o Presstek, Inc. 1,100 11
Regal Beloit Corp. 3,200 75
@o Research Frontiers, Inc. 800 6
Robbins & Myers, Inc. 600 13
Roper Industries, Inc. 1,500 93
o Safeguard Scientifics, Inc. 3,300 6
Sauer-Danfoss, Inc. 3,800 69
o Sequa Corp., Class A 2,800 151
o The Shaw Group, Inc. 2,000 24
Snap-On, Inc. 4,000 118
@ SPX Corp. 8,610 330
Standex International Corp. 3,000 79
Steelcase, Inc., Class A 3,500 46
Stewart & Stevenson Services, Inc. 1,000 17
o Strattec Security Corp. 1,500 94
Tecumseh Products Co., Class A 3,200 139
Teleflex, Inc. 4,300 188
Tennant Co. 2,100 86
o Tenneco Automotive, Inc. 1,980 25
@o Terex Corp. 3,700 141
The Timken Co. 6,600 158
Trinity Industries, Inc. 1,100 34
o Triumph Group, Inc. 1,200 41
o Ultratech Stepper, Inc. 1,300 22
Valhi, Inc. 8,600 131
Valmont Industries, Inc. 1,900 41
W.W. Grainger, Inc. 7,300 428
Watsco, Inc. 3,400 97
Watts Water Technologies, Inc., Class A 1,000 26
Woodward Governor Co. 500 30
X-Rite, Inc. 2,000 26
York International Corp. 3,800 121
-----------
55,590
RAILROAD & SHIPPING 0.5%
---------------------------------------------------------------------------
Alexander & Baldwin, Inc. 5,600 205
Burlington Northern Santa Fe Corp. 30,300 1,267
CSX Corp. 17,100 624
Florida East Coast Industries, Class A 3,600 136
GATX Corp. 4,000 109
o General Maritime Corp. 3,000 114
o Greenbrier Cos., Inc. 1,600 40
o Kansas City Southern Railway 5,050 86
Maritrans, Inc. 2,500 42
Norfolk Southern Corp. 31,400 1,066
OMI Corp. 6,500 117
Overseas Shipholding Group 3,700 211
o SCS Transportation, Inc. 4,100 74
Union Pacific Corp. 22,000 1,385
Westinghouse Air Brake Technologies Corp. 2,828 57
-----------
5,533
REAL PROPERTY 2.1%
---------------------------------------------------------------------------
Affordable Residential Communities 3,000 39
o Alexander's, Inc. 700 138
Alexandria Real Estate Equities, Inc. 2,500 165
AMB Property Corp. 7,300 274
American Financial Realty Trust 8,500 125
American Home Mortgage Investment Corp. 2,000 55
American Land Lease, Inc. 1,700 34
American Mortgage Acceptance Co. 1,500 24
o American Real Estate Partners L.P. 3,800 83
o American Realty Investors, Inc. 1,037 8
o American Retirement Corp. 700 6
26
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
AMLI Residential Properties 1,000 31
Annaly Mortgage Management, Inc. 9,400 169
Anthracite Capital, Inc. 4,900 57
Anworth Mortgage Asset Corp. 1,000 10
@ Apartment Investment & Management Co., Class A 7,400 272
Archstone-Smith Trust 15,285 513
Arden Realty, Inc. 5,500 187
AvalonBay Communities, Inc. 6,100 399
o Avatar Holdings, Inc. 700 31
Bedford Property Investors, Inc. 2,900 83
Boston Properties, Inc. 9,900 591
Brandywine Realty Trust 3,000 88
BRE Properties, Class A 5,000 199
Camden Property Trust 2,300 104
Capital Automotive Real Estate Investment Trust 2,800 90
@ Capstead Mortgage Corp. 2,240 25
CarrAmerica Realty Corp. 5,400 174
Catellus Development Corp. 9,689 279
o CB Richard Ellis Group, Inc., Class A 4,500 117
CBL & Associates Properties, Inc. 2,200 144
Centerpoint Properties Trust 3,600 167
Colonial Properties Trust 2,000 78
Commercial Net Lease Realty 3,320 64
Cornerstone Realty Income Trust, Inc. 2,200 22
Corporate Office Properties Trust SBI 3,500 96
Correctional Properties Trust 1,600 43
Cousins Properties, Inc. 5,200 194
Crescent Real Estate Equity Co. 7,400 118
CRT Properties, Inc. 2,700 60
Developers Diversified Realty Corp. 7,612 318
Duke Realty Corp. 12,990 443
EastGroup Properties, Inc. 900 32
Entertainment Properties Trust 2,200 88
Equity Inns, Inc. 2,700 26
Equity Office Properties Trust 32,738 921
Equity One, Inc. 6,600 139
Equity Residential 24,700 824
@ Essex Property Trust, Inc. 2,600 204
Federal Realty Investment Trust 5,200 247
o FelCor Lodging Trust, Inc. 5,700 66
First Industrial Realty Trust 2,600 100
Forest City Enterprises, Inc., Class A 5,200 286
Gables Residential Trust 3,000 109
General Growth Properties, Inc. 18,600 614
Getty Realty Corp. 2,000 56
Glenborough Realty Trust, Inc. 2,400 50
Glimcher Realty Trust 3,800 98
Global Signal, Inc. 5,000 119
o Golf Trust of America, Inc. L.P. 2,400 5
Health Care Property Investors, Inc. 10,648 296
Health Care Real Estate Investment Trust, Inc. 5,200 187
Healthcare Realty Trust, Inc. 2,400 97
Heritage Property Investment Trust 4,000 122
Highwoods Properties, Inc. 5,600 139
Home Properties, Inc. 2,500 103
o Homestore, Inc. 4,200 10
Hospitality Properties Trust 6,000 257
@o Host Marriott Corp. 25,400 370
HRPT Properties Trust 13,500 151
IMPAC Mortgage Holdings, Inc. 4,800 109
Inland Real Estate Corp. 5,500 83
Innkeepers USA Trust 1,500 21
iStar Financial, Inc. 9,390 389
o Jones Lang LaSalle, Inc. 2,300 74
Kilroy Realty Corp. 1,800 72
Kimco Realty Corp. 9,350 510
Kramont Realty Trust 1,400 26
LaSalle Hotel Properties 3,500 101
@ Lexington Corp. Properties Trust 3,000 67
Liberty Property Trust 8,300 337
LNR Property Corp. 1,200 75
LTC Properties, Inc. 2,800 53
The Macerich Co. 5,200 311
Mack-Cali Realty Corp. 5,900 261
Maguire Properties, Inc. 3,000 78
Manufactured Home Communities, Inc. 3,000 103
o Meristar Hospitality Corp. 2,200 13
MFA Mortgage Investments, Inc. 5,500 46
Mid-America Apartment Communities, Inc. 2,500 98
The Mills Corp. 5,400 299
National Health Investors, Inc. 3,100 89
National Health Realty, Inc. 2,300 46
Nationwide Health Properties, Inc. 5,100 115
@ New Century Financial Corp. 3,600 199
New Plan Excel Realty Trust 8,500 222
@ Novastar Financial, Inc. 2,000 87
Omega Healthcare Investors, Inc. 2,784 31
Pan Pacific Retail Properties, Inc. 2,201 125
Parkway Properties, Inc. 500 25
Pennsylvania Real Estate Investment Trust 2,500 101
Plum Creek Timber Co., Inc. 15,047 546
Post Properties, Inc. 2,200 71
Prentiss Properties Trust 2,700 97
Price Legacy Corp. 60 1
27
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
ProLogis 15,074 588
PS Business Parks, Inc. 3,000 132
Public Storage, Inc. 10,900 570
RAIT Investment Trust 3,300 88
Ramco-Gershenson Properties 1,400 38
Realty Income Corp. 2,300 110
Reckson Associates Realty Corp. 5,300 161
Redwood Trust, Inc. 2,500 150
@ Regency Centers Corp. 5,700 279
The Rouse Co. 7,900 527
Saul Centers, Inc. 2,100 68
Senior Housing Properties Trust 4,950 93
>o Shelbourne Properties I 500 5
>o Shelbourne Properties III 500 3
Shurgard Storage Centers, Inc., Class A 4,500 179
Simon Property Group, Inc. 18,574 1,083
SL Green Realty Corp. 4,200 230
Sovran Self Storage, Inc. 800 31
The St. Joe Co. 5,300 270
Summit Properties, Inc. 3,300 100
Sun Communities, Inc. 3,000 117
Tanger Factory Outlet Centers 800 38
Taubman Centers, Inc. 4,100 118
@ Thornburg Mortgage, Inc. 7,800 223
The Town & Country Trust 1,000 28
o Trammell Crow Co. 2,800 43
Trizec Properties, Inc. 12,700 203
United Dominion Realty Trust, Inc. 9,400 198
Universal Health Realty Income 900 28
Urstadt Biddle Properties, Inc. 500 8
Urstadt Biddle Properties, Inc., Class A 1,000 16
US Restaurant Properties, Inc. 1,000 18
Ventas, Inc. 5,800 156
Vornado Realty Trust 10,500 706
Washington Real Estate Investment Trust 3,100 97
Weingarten Realty Investment 7,975 288
-----------
23,704
RETAIL 6.1%
---------------------------------------------------------------------------
o 1-800-Flowers.com, Inc., Class A 3,700 30
@o 99 Cents Only Stores 3,066 47
o A.C. Moore Arts & Crafts, Inc. 1,400 36
Aaron Rents, Inc. 3,750 81
@ Abercrombie & Fitch Co., Class A 8,300 325
o Advance Auto Parts, Inc. 6,360 249
Albertson's, Inc. 30,468 695
o Alloy, Inc. 3,100 12
@o Amazon.com, Inc. 33,700 1,150
@o American Eagle Outfitters, Inc. 5,050 206
o AnnTaylor Stores Corp. 9,825 221
Arden Group, Inc., Class A 600 59
o Asbury Automotive Group, Inc. 4,100 55
@o Autonation, Inc. 21,600 372
@o AutoZone, Inc. 8,900 728
o Barnes & Noble, Inc. 7,400 246
o Bed, Bath & Beyond, Inc. 23,700 967
@ Best Buy Co., Inc. 26,150 1,549
o Big Lots, Inc. 11,100 138
@o BJ's Wholesale Club, Inc. 6,100 177
Blair Corp. 1,500 47
Borders Group, Inc. 9,000 205
o Brightpoint, Inc. 1,650 25
o Brookstone, Inc. 7,425 142
Burlington Coat Factory Warehouse Corp. 2,500 55
o Carmax, Inc. 3,923 103
Casey's General Stores, Inc. 5,100 91
The Cato Corp., Class A 1,200 28
o Central Garden & Pet Co. 1,600 57
o Charming Shoppes, Inc. 7,700 59
o Chico's FAS, Inc. 6,650 266
o The Children's Place Retail Stores, Inc. 1,800 56
Christopher & Banks Corp. 2,650 43
Circuit City Stores, Inc. 16,500 268
@ Claire's Stores, Inc. 16,000 416
o Coldwater Creek, Inc. 6,112 141
o Cost Plus, Inc. 700 23
Costco Wholesale Corp. 38,600 1,850
CVS Corp. 33,500 1,456
DEB Shops, Inc. 1,600 39
Dillards, Inc., Class A 5,500 113
Dollar General Corp. 27,775 535
@o Dollar Tree Stores, Inc. 8,650 250
o The Dress Barn, Inc. 5,500 88
o Duckwall-ALCO Stores, Inc. 1,800 29
Family Dollar Stores, Inc. 10,200 301
Federated Department Stores, Inc. 22,400 1,130
The Finish Line, Class A 1,800 62
Foot Locker, Inc. 14,100 344
@o Footstar, Inc. 600 2
Fred's, Inc. 3,262 57
Friedman's, Inc., Class A 6,500 11
o GameStop Corp., Class A 500 10
@ The Gap, Inc. 73,900 1,477
o Genesco, Inc. 4,300 110
Goody's Family Clothing, Inc. 5,000 44
o Great Atlantic & Pacific Tea Co. 2,200 14
o Guitar Center, Inc. 1,700 76
o The Gymboree Corp. 2,100 25
Home Depot, Inc. 187,000 7,682
o HOT Topic, Inc. 6,300 130
o Insight Enterprises, Inc. 4,650 86
28
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
J.C. Penney Co., Inc. Holding Co. 22,400 775
o Jo-Ann Stores, Inc. 3,795 94
o Kirkland's, Inc. 1,000 9
o Kohl's Corp. 25,800 1,310
o Kroger Co. 60,800 919
@ Limitedbrands 42,144 1,044
o Linens 'N Things, Inc. 4,300 104
Longs Drug Stores Corp. 3,300 82
Lowe's Cos., Inc. 63,700 3,585
@ The May Department Stores Co. 24,000 625
o The Men's Wearhouse, Inc. 2,400 75
Michaels Stores, Inc. 9,800 285
@ The Neiman Marcus Group, Inc., Class A 2,700 164
o Nobel Learning Communities, Inc. 500 4
Nordstrom, Inc. 10,300 445
o O'Reilly Automotive, Inc. 2,200 95
o Office Depot, Inc. 26,000 421
Pacific Sunwear of California 9,975 234
o Party City Corp. 3,800 56
o Pathmark Stores, Inc. 3,900 17
o Payless Shoesource, Inc. 5,906 56
o PC Connection, Inc. 3,000 22
Pep Boys-Manny, Moe & Jack 2,500 36
o Petco Animal Supplies, Inc. 5,000 179
PETsMART, Inc. 11,100 355
Pier 1 Imports, Inc. 3,900 70
o Pricesmart, Inc. 200 2
RadioShack Corp. 14,100 422
o Rent-A-Center, Inc. 5,250 126
o Retail Ventures, Inc. 700 5
o Rite Aid Corp. 40,400 150
Ross Stores, Inc. 13,400 352
Ruddick Corp. 3,100 62
o Safeway, Inc. 33,400 609
Saks, Inc. 16,900 207
@o School Specialty, Inc. 1,600 65
@ Sears, Roebuck & Co. 21,200 742
o Shoe Carnival, Inc. 1,200 14
o ShopKo Stores, Inc. 8,900 153
> Spiegel, Inc., Class A 5,000 --
Staples, Inc. 41,200 1,225
o Stein Mart, Inc. 3,800 63
Talbots, Inc. 5,700 150
Target Corp. 74,600 3,731
@ Tiffany & Co. 11,500 337
TJX Cos., Inc. 40,400 969
o Too, Inc. 1,742 38
o Toys 'R' Us, Inc. 18,300 330
o Tractor Supply Co. 4,000 145
o Tuesday Morning Corp. 2,500 82
Unifirst Corp. 3,900 104
o United Stationers, Inc. 2,900 129
o Urban Outfitters, Inc. 6,400 262
=(4) Wal-Mart Stores, Inc. 354,600 19,120
Walgreen Co. 84,400 3,029
Weis Markets, Inc. 1,700 62
o West Marine, Inc. 1,100 27
o Whitehall Jewellers, Inc. 1,800 14
Whole Foods Market, Inc. 6,100 497
@o Williams-Sonoma, Inc. 9,200 351
o Winmark Corp. 1,200 31
@ Winn-Dixie Stores, Inc. 16,800 58
o Zale Corp. 5,020 143
-----------
70,156
STEEL 0.2%
---------------------------------------------------------------------------
o AK Steel Holding Corp. 4,027 38
Allegheny Technologies, Inc. 7,700 129
Ampco-Pittsburgh Corp. 2,800 37
Carpenter Technology Corp. 2,500 119
o International Steel Group, Inc. 7,900 292
@ Nucor Corp. 11,000 465
Quanex Corp. 2,500 127
Roanoke Electric Steel Corp. 800 12
Ryerson Tull, Inc. 1,600 26
Schnitzer Steel Industries, Inc., Class A 1,650 47
Steel Dynamics, Inc. 3,500 116
Steel Technologies, Inc. 3,700 89
o United States Steel Corp. 9,900 363
Worthington Industries, Inc. 7,200 143
-----------
2,003
TELEPHONE 3.1%
---------------------------------------------------------------------------
Adtran, Inc. 7,000 151
@o Alamosa Holdings, Inc. 8,000 80
o Alaska Communications Systems Group, Inc. 2,700 19
Alltel Corp. 26,435 1,452
Applied Signal Technology, Inc. 2,100 64
AT&T Corp. 63,947 1,094
o AT&T Latin America Corp., Class A 2,100 --
Atlantic Tele-Network, Inc. 1,300 39
o Avaya, Inc. 35,385 510
BellSouth Corp. 150,450 4,013
o Carrier Access Corp. 2,500 22
o Centennial Communications Corp. 8,000 50
CenturyTel, Inc. 10,500 337
o Cincinnati Bell, Inc. 18,568 63
o Citizens Communications Co. 22,400 300
o Commonwealth Telephone Enterprises, Inc. 9,400 429
o Computer Access Technology Corp. 800 5
29
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
Copper Mountain Networks, Inc. 5,200 13
@o Covad Communications Group, Inc. 7,000 10
Crown Castle International Corp. 20,900 320
CT Communications, Inc. 4,500 56
@>o CTC Communications Group, Inc. 1,550 --
D&E Communications, Inc. 4,000 49
o Ditech Communications Corp. 4,100 94
o Equinix, Inc. 2,565 97
o Extreme Networks, Inc. 4,500 26
o Finisar Corp. 7,900 12
@o Global Crossing Ltd. 2,500 35
Hickory Tech Corp. 6,100 70
o ID Systems, Inc. 3,000 45
Inter-Tel, Inc. 6,000 162
o Interdigital Communications Corp. 4,500 72
o j2 Global Communications, Inc. 2,000 60
@o Level 3 Communications, Inc. 53,000 178
o Liberty Media Corp., Class A 219,239 1,956
o MCI, Inc. 23,300 402
@>o McLeodUSA, Inc., Class A Escrow 21,892 --
o Net2Phone, Inc. 1,600 6
o Nextel Communications, Inc., Class A 88,900 2,355
@o Nextel Partners, Inc., Class A 15,200 256
North Pittsburgh Systems, Inc. 3,500 72
o Novatel Wireless, Inc. 160 3
o NTL, Inc. 6,000 399
NWH, Inc. 2,500 40
@o Pegasus Communications Corp., Class A 6,320 52
o Price Communications Corp. 4,047 64
o Primus Telecommunications Group, Inc. 7,500 14
o Qwest Communications International, Inc. 118,337 405
@o RCN Corp. 2,300 --
SBC Communications, Inc. 273,212 6,901
o Sonus Networks, Inc. 19,400 114
o Spectrasite, Inc. 4,000 205
Sprint Corp. (FON Group) 116,750 2,446
Sunrise Telecom, Inc. 2,000 5
o Talk America Holdings, Inc. 5,000 28
o Teleglobe International Holdings Ltd. 400 1
Telephone & Data Systems, Inc. 4,300 322
o Time Warner Telecom, Inc., Class A 4,500 23
o U.S. Cellular Corp. 6,100 254
>o U.S. Wireless Corp. 400 --
o Ubiquitel, Inc. 10,000 57
o Ulticom, Inc. 4,800 83
o Utstarcom, Inc. 1,200 21
Verizon Communications, Inc. 228,786 8,946
Warwick Valley Telephone Co. 2,100 51
-----------
35,408
TOBACCO 0.9%
---------------------------------------------------------------------------
Altria Group, Inc. 168,800 8,180
o M&F Worldwide Corp. 1,200 16
@ Reynolds American, Inc. 11,332 780
Schweitzer-Mauduit International, Inc. 5,800 183
Universal Corp. 1,800 83
UST, Inc. 12,700 523
Vector Group Ltd. 3,388 52
-----------
9,817
TRAVEL & RECREATION 0.9%
---------------------------------------------------------------------------
o Alliance Gaming Corp. 3,000 28
Ambassadors Group, Inc. 1,700 53
o Amerco, Inc. 900 36
Ameristar Casinos, Inc. 1,700 59
o Argosy Gaming Co. 1,600 63
o Aztar Corp. 1,900 59
o Bally Total Fitness Holding Corp. 6,500 26
Brunswick Corp. 13,900 652
o Caesars Entertainment, Inc. 24,300 435
Callaway Golf Co. 5,600 58
@ Carnival Corp. 50,000 2,528
Cedar Fair L.P. 5,300 154
Central Parking Corp. 1,600 22
Choice Hotels International, Inc. 3,400 170
o Dick's Sporting Goods, Inc. 1,000 36
o Dollar Thrifty Automotive Group, Inc. 3,500 84
Dover Downs Gaming & Entertainment, Inc. 1,480 15
o Empire Resorts, Inc. 500 4
Harrah's Entertainment, Inc. 9,900 579
Hilton Hotels Corp. 30,426 605
o Interstate Hotels & Resorts, Inc. 82 --
o K2, Inc. 1,700 28
o Laidlaw International, Inc. 8,200 137
@o Lakes Entertainment, Inc. 1,800 21
Mandalay Resort Group 6,600 454
The Marcus Corp. 4,600 98
Marine Products Corp. 270 5
Marriott International, Inc., Class A 18,700 1,019
o MGM Mirage 12,300 662
o MTR Gaming Group, Inc. 2,300 21
@o Multimedia Games, Inc. 1,500 20
o Navigant International, Inc. 4,300 54
o Rent-Way, Inc. 3,200 25
30
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
o Scientific Games Corp., Class A 6,500 138
@o Shuffle Master, Inc. 1,875 79
o Six Flags, Inc. 7,500 38
Speedway Motorsports, Inc. 2,300 76
o The Sports Authority, Inc. 370 9
Starwood Hotels & Resorts Worldwide, Inc. 17,730 846
@ Station Casinos, Inc. 4,650 237
o Stellent, Inc. 1,100 8
o Vail Resorts, Inc. 3,800 76
@o WMS Industries, Inc. 1,500 44
-----------
9,761
TRUCKING & FREIGHT 0.4%
---------------------------------------------------------------------------
Arkansas Best Corp. 1,100 43
BancTrust Financial Group, Inc. 1,100 21
@ C.H. Robinson Worldwide, Inc. 7,500 405
CNF, Inc. 4,500 197
Expeditors International Washington, Inc. 8,100 462
o Forward Air Corp. 3,600 148
Heartland Express, Inc. 6,706 137
J.B. Hunt Transport Services, Inc. 6,500 266
o Knight Transportation, Inc. 2,700 63
o Landstar Systems, Inc. 7,600 516
o Old Dominion Freight Line 2,700 76
Overnite Corp. 2,500 81
Paccar, Inc. 14,100 977
o Pacer International, Inc. 2,800 50
Ryder Systems, Inc. 6,400 321
o Swift Transportation Co., Inc. 5,970 113
USF Corp. 1,300 47
@o Wabash National Corp. 2,500 61
Werner Enterprises, Inc. 5,832 124
o Yellow Roadway Corp. 4,594 220
-----------
4,328
UTILITIES: ELECTRIC & GAS 3.1%
---------------------------------------------------------------------------
o The AES Corp. 52,596 573
AGL Resources, Inc. 4,300 134
o Allegheny Energy, Inc. 10,500 192
Allete, Inc. 2,733 93
Alliant Energy Corp. 9,300 245
Ameren Corp. 15,100 725
American Electric Power Co., Inc. 33,820 1,114
American States Water Co. 950 23
Aqua America, Inc. 3,671 80
Atmos Energy Corp. 4,200 108
Avista Corp. 3,800 68
o BayCorp Holdings Ltd. 6 --
Black Hills Corp. 1,400 41
@o Calpine Corp. 12,300 31
Cascade Natural Gas Corp. 3,500 71
@ Centerpoint Energy, Inc. 26,100 274
Central Vermont Public Service Corp. 2,700 59
CH Energy Group, Inc. 1,900 85
@ Cinergy Corp. 15,100 597
Cleco Corp. 3,400 62
o CMS Energy Corp. 5,000 47
@ Consolidated Edison, Inc. 17,000 739
Constellation Energy Group, Inc. 16,800 682
o Distributed Energy Systems Corp. 1,400 3
Dominion Resources, Inc. 26,610 1,712
DPL, Inc. 11,452 247
DTE Energy Co. 13,801 589
@ Duke Energy Corp. 76,800 1,884
@ Duquesne Light Holdings, Inc. 6,100 105
Edison International 58,700 1,790
@ El Paso Corp. 51,387 459
o El Paso Electric Co. 2,800 47
Energen Corp. 2,600 140
Energy East Corp. 12,214 308
Entergy Corp. 18,200 1,190
Equitable Resources, Inc. 4,400 243
Exelon Corp. 54,474 2,158
FirstEnergy Corp. 28,217 1,166
Florida Public Utilites Co. 1,066 18
FPL Group, Inc. 14,700 1,013
@ Great Plains Energy, Inc. 9,000 256
Green Mountain Power Corp. 3,800 98
Hawaiian Electric Industries, Inc. 5,200 146
Idacorp, Inc. 4,200 130
@ KeySpan Corp. 13,400 535
Kinder Morgan, Inc. 10,700 689
The Laclede Group, Inc. 3,300 100
MDU Resources Group, Inc. 10,950 281
MGE Energy, Inc. 400 13
National Fuel Gas Co. 5,800 163
New Jersey Resources Corp. 1,650 68
Nicor, Inc. 3,000 113
NiSource, Inc. 22,864 490
@ Northeast Utilities, Inc. 10,124 196
Northwest Natural Gas Co. 2,700 86
o NRG Energy, Inc. 9,000 250
NSTAR 3,867 191
NUI Corp. 2,500 34
OGE Energy Corp. 6,500 165
@ Oneok, Inc. 7,400 199
Otter Tail Corp. 1,100 29
Peoples Energy Corp. 3,200 137
Pepco Holdings, Inc. 5,000 103
o PG&E Corp. 34,900 1,118
Piedmont Natural Gas Co. 1,600 73
Pinnacle West Capital Corp. 6,800 290
31
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
PNM Resources, Inc. 5,500 128
PPL Corp. 15,000 780
Progress Energy, Inc. 21,159 874
@ Public Service Enterprise Group, Inc. 19,000 809
Puget Energy, Inc. 7,500 174
Questar Corp. 8,100 389
@ SCANA Corp. 7,905 293
Sempra Energy 19,175 643
o Sierra Pacific Resources 4,476 43
@ The Southern Co. 60,900 1,924
o Southern Union Co. 5,785 127
Southwest Gas Corp. 3,600 88
TECO Energy, Inc. 5,600 78
Texas Genco Holdings, Inc. 5,680 265
TXU Corp. 26,400 1,616
UGI Corp. 4,100 158
UIL Holdings Corp. 5,400 274
@ Unisource Energy Corp. 3,800 93
Vectren Corp. 5,766 149
o Veritas DGC, Inc. 3,000 63
Westar Energy, Inc. 8,200 172
WGL Holdings, Inc. 3,000 85
@ Williams Cos., Inc. 42,360 530
Wisconsin Energy Corp. 11,400 372
WPS Resources Corp. 2,400 114
Xcel Energy, Inc. 34,195 585
-----------
35,894
PREFERRED STOCK 0.0% of net assets
REAL PROPERTY 0.0%
---------------------------------------------------------------------------
Commercial Net Lease Realty 147 4
Simon Property Group LP 1,200 65
-----------
69
FACE
SECURITY AMOUNT
RATE, MATURITY DATE ($ X 1,000)
CORPORATE BONDS 0.0% of net assets
FIXED-RATE OBLIGATIONS 0.0%
---------------------------------------------------------------------------
Brookfield Homes Corp.
12.00%, 06/30/20 15 16
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
WARRANTS 0.0% of net assets
AIR TRANSPORTATION 0.0%
---------------------------------------------------------------------------
>o Timco Aviation Services expires 02/28/07
160 --
BUSINESS MACHINES & SOFTWARE 0.0%
---------------------------------------------------------------------------
o MicroStrategy, Inc. expires 06/24/04 57 --
BUSINESS SERVICES 0.0%
---------------------------------------------------------------------------
o Redback Networks, Inc. expires 01/02/11
81 --
@o Redback Networks, Inc. expires 01/02/11
85 --
ELECTRONICS 0.0%
---------------------------------------------------------------------------
>o Pinnacle Holdings, Inc. expires 11/13/07
9 --
HEALTHCARE / DRUGS & MEDICINE 0.0%
---------------------------------------------------------------------------
o Magellan Health Services, Inc. expires
01/05/11 7 --
NON-FERROUS METALS 0.0%
---------------------------------------------------------------------------
o Metals USA, Inc. expires 10/31/07 97 --
REAL PROPERTY 0.0%
---------------------------------------------------------------------------
o General Growth Properties, Inc. expires
11/09/04 1,860 2
RIGHTS 0.0% of net assets
BUSINESS MACHINES & SOFTWARE 0.0%
---------------------------------------------------------------------------
o Comdisco Holding Co. 4,700 2
BUSINESS SERVICES 0.0%
---------------------------------------------------------------------------
o Information Resources, Inc. 2,500 6
HEALTHCARE / DRUGS & MEDICINE 0.0%
---------------------------------------------------------------------------
o OSI Pharmaceuticals, Inc. expires
01/18/05 1,640 --
TELEPHONE 0.0%
---------------------------------------------------------------------------
>o WilTel Communications, Inc. 4,800 --
32
SCHWAB TOTAL STOCK MARKET INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
SHORT-TERM INVESTMENTS 0.7% of net assets
Provident Institutional TempFund
8,014,950 8,015
FACE
SECURITY AMOUNT
RATE, MATURITY DATE ($ X 1,000)
> U.S. Treasury Bill
1.63%, 12/16/04 400 399
END OF INVESTMENTS.
COLLATERAL INVESTED FOR SECURITIES ON LOAN
6.3% of net assets
COMMERCIAL PAPER & OTHER CORPORATE OBLIGATIONS 2.5%
---------------------------------------------------------------------------
Canadian Imperial Bank of Commerce/New York
1.92%, 11/29/04 3,848 3,847
1.72%, 05/25/05 1,516 1,516
Crown Point Capital
1.80%, 11/05/04 1,851 1,851
Foreningssparbanken AB
1.83%, 11/15/04 10,855 10,853
Fortis Bank NY
1.78%, 06/06/05 1,381 1,381
Societe Generale NY
1.95%, 11/01/04 5,456 5,455
1.83%, 11/15/04 1,571 1,570
Westdeutsche Landesbank AG
1.50%, 01/10/05 2,340 2,339
-----------
28,812
SHORT-TERM INVESTMENTS 3.8%
---------------------------------------------------------------------------
Citibank, Time Deposit
1.76%, 11/01/04 1,709 1,709
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
Institutional Money Market
Trust 40,974,861 40,975
-----------
42,684
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN.
In addition to the above, the fund held the following at 10/31/04. All
numbers x $1,000 except number of contracts.
NUMBER
OF CONTRACT UNREALIZED
CONTRACTS VALUE GAINS
FUTURES CONTRACTS
Russell 2000
Index, Long
expires 12/17/04 4 1,169 29
S&P 500 Index,
Long expires
12/17/04 23 6,499 50
----------
79
33
SCHWAB CAPITAL TRUST
SCHWAB INTERNATIONAL INDEX FUND(R)
PORTFOLIO HOLDINGS as of October 31, 2004
The following is the schedule of portfolio holdings at 10/31/04. The schedule
should be read in conjunction with the fund's annual report for the fiscal year
ended 10/31/04.
We use the symbols below to designate certain characteristics of the securities.
With the top ten holdings, the number in the circle is the security's rank among
the top ten.
(1) Top Ten Holding
o Non-income producing security
* American Depositary Receipt
> Security is valued at fair value (see Accounting Policies)
@ This security or a portion of this security is on loan
COST VALUE
HOLDINGS BY CATEGORY ($X1,000) ($X1,000)
- --------------------------------------------------------------------------------
99.3% FOREIGN COMMON STOCK 995,647 1,228,866
0.4% FOREIGN PREFERRED STOCK 3,801 5,016
0.2% SHORT-TERM INVESTMENT 1,954 1,954
0.0% RIGHTS -- 107
0.0% WARRANTS 200 --
- --------------------------------------------------------------------------------
99.9% TOTAL INVESTMENTS 1,001,602 1,235,943
8.4% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 103,711 103,711
(8.3)% OTHER ASSETS AND
LIABILITIES, NET (102,147)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 1,237,507
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
FOREIGN COMMON STOCK 99.3% of net assets
AUSTRALIA 4.1%
--------------------------------------------------------------------------
AMP Ltd. 250,773 1,195
Australia & New Zealand Banking Group Ltd. 358,594 5,464
BHP Billiton Ltd. 727,139 7,521
@ Coles Myer Ltd. 218,165 1,555
Commonwealth Bank of Australia 245,112 5,877
Foster's Group Ltd. 374,154 1,411
Insurance Australia Group Ltd. 337,549 1,359
Macquarie Bank Ltd. 41,612 1,231
Macquarie Infrastructure Group 386,221 1,070
@ National Australia Bank Ltd. 296,328 6,257
@ News Corp. Ltd. 266,154 2,141
@ QBE Insurance Group Ltd. 125,449 1,287
@ Rio Tinto Ltd. 60,818 1,663
Suncorp-Metway Ltd. 107,619 1,376
Telstra Corp. Ltd. 416,897 1,454
Wesfarmers Ltd. 68,881 1,788
Westpac Banking Corp. 346,721 4,890
Woodside Petroleum Ltd. 81,387 1,184
Woolworths Ltd. 202,146 2,020
-----------
50,743
BELGIUM 0.9%
--------------------------------------------------------------------------
@ Dexia 121,918 2,435
Electrabel SA 5,314 1,981
Fortis 201,153 5,094
Solvay SA 12,932 1,300
-----------
10,810
CANADA 6.2%
--------------------------------------------------------------------------
@ Alcan, Inc. 62,405 2,883
Bank of Montreal 99,813 4,709
@ Bank of Nova Scotia 198,704 6,451
Barrick Gold Corp. 99,691 2,256
@ BCE, Inc. 53,656 1,244
@ Brascan Corp. 47,850 1,702
@ Canadian Imperial Bank of Commerce 71,216 4,315
Canadian National Railway Co. 54,467 2,929
Canadian Natural Resources Ltd. 51,800 2,178
@ Enbridge, Inc. 33,700 1,461
EnCana Corp. 85,217 4,220
@ Imperial Oil Ltd. 24,010 1,396
o Inco Ltd. 37,300 1,317
Loblaw Cos. Ltd. 21,098 1,143
Magna International, Inc., Class A 16,447 1,211
Manulife Financial Corp. 156,550 7,300
@ National Bank of Canada 36,900 1,476
o Nortel Networks Corp. 784,900 2,651
1
SCHWAB INTERNATIONAL INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
Petro-Canada 43,200 2,355
Placer Dome, Inc. 83,200 1,786
Power Corp. of Canada 59,004 1,418
@ Power Financial Corp. 52,600 1,294
@ Royal Bank of Canada 127,717 6,638
@ Sun Life Financial Services of Canada, Inc. 122,164 3,752
Suncor Energy, Inc. 81,600 2,786
Talisman Energy, Inc. 76,875 2,061
@ Thomson Corp. 40,000 1,386
@ TransCanada Corp. 94,561 2,142
-----------
76,460
DENMARK 0.6%
--------------------------------------------------------------------------
AP Moller-Maersk A/S 224 1,649
Danske Bank A/S 93,525 2,606
Novo-Nordisk A/S, Class B 46,150 2,287
TDC A/S 23,628 872
-----------
7,414
FRANCE 10.6%
--------------------------------------------------------------------------
Accor SA 37,106 1,536
Air Liquide SA 20,461 3,295
@o Alcatel SA, Class A 245,737 3,582
Arcelor SA 72,096 1,343
AXA 261,489 5,611
BNP Paribas 157,814 10,710
Bouygues 42,044 1,651
Carrefour SA 112,519 4,914
Cie Generale D'Optique Essilor International SA 19,882 1,345
@ Compagnie de Saint-Gobain 60,643 3,321
Credit Agricole SA 128,809 3,764
France Telecom SA 209,724 5,986
o Groupe Danone 46,320 3,865
L'Oreal SA 58,705 3,991
Lafarge SA 30,598 2,785
Lagardere S.C.A. 24,730 1,589
LVMH Moet-Hennessy Louis Vuitton SA 44,980 3,073
Michelin (C.G.D.E.), Class B 28,839 1,565
Pernod-Ricard 9,539 1,317
Peugeot SA 32,613 1,998
Pinault-Printemps-Redoute SA 12,173 1,144
Renault SA 34,255 2,858
Sanofi-Aventis 173,827 12,670
Schneider Electric SA 40,373 2,665
Societe Generale, Class A 62,745 5,803
STMicroelectronics NV 117,296 2,156
Suez SA 155,587 3,626
@(5) Total SA 110,932 23,001
Veolia Environnement 52,576 1,588
Vinci SA 13,931 1,654
@o Vivendi Universal SA 177,845 4,844
*o Vivendi Universal SA 54,392 1,492
-----------
130,742
GERMANY 7.2%
--------------------------------------------------------------------------
Adidas-Salomon AG 9,200 1,282
Allianz AG 54,188 5,747
BASF AG 103,335 6,428
Bayer AG 128,045 3,617
o Bayerische Hypo-und Vereinsbank AG 66,874 1,304
o Commerzbank AG 88,400 1,611
DaimlerChrysler AG 168,370 6,935
Deutsche Bank AG 99,862 7,570
Deutsche Boerse AG 19,400 966
Deutsche Post AG 75,227 1,466
o Deutsche Telekom AG 487,262 9,310
E.ON AG 118,150 9,586
o Infineon Technologies AG 123,500 1,342
Linde AG 14,312 862
Metro AG 29,214 1,391
Muenchener Rueckversicherungs AG 30,394 2,965
RWE AG 69,676 3,680
SAP AG 39,024 6,628
Schering AG 33,246 2,131
Siemens AG 153,790 11,415
ThyssenKrupp AG 63,966 1,196
Volkswagen AG 40,893 1,811
-----------
89,243
HONG KONG / CHINA 1.3%
--------------------------------------------------------------------------
Cheung Kong Holdings Ltd. 299,000 2,478
CLP Holdings Ltd. 340,080 1,953
Hang Seng Bank Ltd. 154,700 2,057
Hong Kong & China Gas Co. 718,400 1,384
HongKong Electric Holdings 277,756 1,242
o Hutchison Telecommunications International Ltd. 5,517 4
Hutchison Whampoa Ltd. 413,800 3,176
Sun Hung Kai Properties Ltd. 265,694 2,458
Swire Pacific Ltd., Class A 190,000 1,343
-----------
16,095
2
SCHWAB INTERNATIONAL INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
ITALY 3.5%
--------------------------------------------------------------------------
Alleanza Assicurazioni SPA 100,995 1,188
Assicurazioni Generali SPA 185,554 5,493
Banca Intesa SPA 645,355 2,635
Banco Popolare di Verona e Novara 75,422 1,334
@ Enel SPA 429,348 3,872
ENI-Ente Nazionale Idrocarburi SPA 490,576 11,108
Mediaset SPA 110,368 1,255
Mediobanca SPA 95,210 1,315
Riunione Adriatica di Sicurta SPA 60,519 1,275
Sanpaolo IMI SPA 189,885 2,401
Telecom Italia SPA 1,132,740 2,810
TIM SPA 753,178 4,426
UniCredito Italiano SPA 856,214 4,585
-----------
43,697
JAPAN 17.8%
--------------------------------------------------------------------------
Aeon Co. Ltd. 84,000 1,342
Ajinomoto Co., Inc. 111,000 1,227
Asahi Glass Co. Ltd. 146,000 1,339
Asahi Kasei Corp. 250,000 1,064
Bridgestone Corp. 126,000 2,278
Canon, Inc. 162,000 7,979
@ Chubu Electric Power Co., Inc. 122,100 2,650
Dai Nippon Printing Co. Ltd. 117,000 1,599
Denso Corp. 92,000 2,201
East Japan Railway Co. 653 3,425
Eisai Co. Ltd. 37,000 1,063
Fanuc Ltd. 24,300 1,465
Fuji Photo Film Co. Ltd. 92,000 3,136
Fujisawa Pharmaceutical Co. Ltd. 47,000 1,226
Fujitsu Ltd. 326,000 1,937
Honda Motor Co. Ltd. 152,700 7,362
Hoya Corp. 21,600 2,213
Ito-Yokado Co. Ltd. 68,000 2,433
Itochu Corp. 273,000 1,172
Japan Tobacco, Inc. 126 1,105
JFE Holdings, Inc. 94,000 2,518
@ The Kansai Electric Power Co. 130,000 2,434
Kao Corp. 109,000 2,510
KDDI Corp. -- 2
Keyence Corp. 5,900 1,327
o Kintetsu Corp. 305,830 971
Kirin Brewery Co. Ltd. 127,000 1,139
Komatsu Ltd. 193,000 1,289
Konica Minolta Holdings, Inc. 81,000 1,079
Kyocera Corp. 31,500 2,281
Kyushu Electric Power Co. 82,400 1,630
@ Matsushita Electric Industrial Co. Ltd. 403,912 5,846
Millea Holdings, Inc. 284 3,744
Mitsubishi Corp. 198,000 2,183
Mitsubishi Electric Corp. 303,000 1,415
@ Mitsubishi Estate Co. Ltd. 190,000 2,002
Mitsubishi Heavy Industries Ltd. 565,000 1,586
Mitsubishi Tokyo Financial Group, Inc. 787 6,670
Mitsui & Co. Ltd. 239,000 2,005
Mitsui Fudosan Co. Ltd. 142,000 1,504
Mitsui Sumitomo Insurance Co. Ltd. 247,000 2,024
Mizuho Financial Group, Inc. 1,255 4,834
Murata Manufacturing Co. Ltd. 43,900 2,088
NEC Corp. 269,000 1,490
@ Nikko Cordial Corp. 240,000 1,071
Nintendo Co. Ltd. 19,700 2,219
Nippon Oil Corp. 250,000 1,584
Nippon Steel Corp. 1,020,000 2,382
Nippon Telegraph & Telephone Corp. 1,007 4,267
Nissan Motor Co. Ltd. 486,000 5,469
Nitto Denko Corp. 28,000 1,326
Nomura Holdings, Inc. 345,000 4,224
NTT DoCoMo, Inc. 3,541 6,236
OJI Paper Co. Ltd. 165,000 940
Omron Corp. 43,000 974
Osaka Gas Co. Ltd. 394,000 1,139
Ricoh Co. Ltd. 118,000 2,200
Rohm Co. Ltd. 21,000 2,152
Sankyo Co. Ltd. 59,000 1,222
@ Sanyo Electric Co. Ltd. 309,000 986
Secom Co. Ltd. 38,500 1,396
Sekisui House Ltd. 94,000 968
Seven-Eleven Japan Co. Ltd. 71,000 2,053
@ Sharp Corp. 184,000 2,537
@ Shin-Etsu Chemical Co. Ltd. 68,900 2,615
Shionogi & Co. Ltd. 61,000 945
SMC Corp. 11,000 1,176
@ Softbank Corp. 41,000 1,853
Sompo Japan Insurance, Inc. 160,000 1,392
3
SCHWAB INTERNATIONAL INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
Sony Corp. 168,500 5,855
@ Sumitomo Corp. 137,000 1,018
Sumitomo Electric Industries Ltd. 131,000 1,240
Sumitomo Mitsui Financial Group, Inc. 764 4,957
Takeda Pharmaceutical Co. Ltd. 160,200 7,724
TDK Corp. 22,000 1,525
Tohoku Electric Power Co. 83,700 1,426
The Tokyo Electric Power Co., Inc. 219,300 4,956
Tokyo Electron Ltd. 28,000 1,516
@ Tokyo Gas Co. Ltd. 507,000 1,886
Toppan Printing Co. Ltd. 122,000 1,176
Toshiba Corp. 566,000 2,276
(8) Toyota Motor Corp. 538,500 20,944
o UFJ Holdings, Inc. 686 3,177
West Japan Railway Co. 225 896
@ Yamanouchi Pharmaceutical Co. Ltd. 59,000 2,161
Yamato Transport Co. Ltd. 78,000 1,050
-----------
219,896
NETHERLANDS 5.6%
--------------------------------------------------------------------------
ABN Amro Holdings NV 298,017 7,108
@ Aegon NV 259,846 2,836
Akzo Nobel NV 51,942 1,948
@o ASML Holding NV 93,364 1,327
European Aeronautic Defense & Space Co. 51,882 1,475
Heineken Nv 49,073 1,538
ING Groep NV 340,404 8,985
o Koninklijke Ahold NV 218,958 1,515
Koninklijke Philips Electronics NV 255,925 6,039
Reed Elsevier NV 117,871 1,544
(7) Royal Dutch Petroleum Co. 398,487 21,589
Royal KPN NV 360,914 2,878
TPG NV 67,143 1,618
Unilever NV 110,002 6,381
VNU NV 47,654 1,298
Wolters Kluwer NV 55,267 1,005
-----------
69,084
SINGAPORE 0.1%
--------------------------------------------------------------------------
Singapore Telecommunications Ltd. 1,096,370 1,593
SPAIN 3.9%
--------------------------------------------------------------------------
Altadis SA 49,394 1,808
Banco Bilbao Vizcaya Argentaria SA 587,573 9,193
@ Banco Popular Espanol 29,001 1,641
@ Banco Santander Central Hispano SA 834,597 9,290
Endesa SA 173,742 3,516
Iberdrola SA 149,580 3,265
Inditex SA 47,334 1,199
Repsol YPF SA 178,984 3,868
Telefonica SA 900,159 14,817
-----------
48,597
SWEDEN 1.9%
--------------------------------------------------------------------------
Electrolux AB, Series B 61,579 1,138
Hennes & Mauritz AB, Series B 88,355 2,565
Nordea Bank AB 420,569 3,621
Sandvik AB 44,107 1,646
Skandinaviska Enskilda Banken, Series A 85,410 1,417
Svenska Cellulosa AB, Series B 35,963 1,335
Svenska Handelsbanken AB, Series A 112,602 2,430
o Telefonaktiebolaget LM Ericsson, Class B 2,846,579 8,244
Volvo AB, Series B 40,445 1,527
-----------
23,923
SWITZERLAND 7.8%
--------------------------------------------------------------------------
o ABB Ltd. 336,908 1,941
Adecco SA, Registered 26,587 1,276
Compangnie Financiere Richemont AG, Series A 102,430 2,894
o Credit Suisse Group 218,120 7,434
Holcim Ltd. 30,865 1,644
(9) Nestle SA, Registered 77,668 18,311
(6) Novartis AG, Registered 460,530 21,887
Roche Holdings -- Genus 135,932 13,848
Swiss Reinsurance, Registered 65,184 3,988
Swisscom AG, Registered 5,043 1,810
o Syngenta AG 20,323 1,932
UBS AG, Registered 216,176 15,528
Zurich Financial Services AG 28,547 4,051
-----------
96,544
4
SCHWAB INTERNATIONAL INDEX FUND
PORTFOLIO HOLDINGS continued
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
UNITED KINGDOM 27.8%
--------------------------------------------------------------------------
AstraZeneca PLC 328,216 13,423
Aviva PLC 444,350 4,437
BAA PLC 211,384 2,221
BAE Systems PLC 605,069 2,641
Barclays PLC 1,265,372 12,335
BG Group PLC 679,151 4,418
BHP Billiton PLC 472,369 4,791
BOC Group PLC 97,556 1,568
Boots Group PLC 162,117 1,955
(1) BP PLC 4,216,549 40,755
British American Tobacco PLC 301,717 4,533
British Land Co. PLC 100,943 1,378
British Sky Broadcasting PLC 246,398 2,296
BT Group PLC 1,675,638 5,703
Cable & Wireless PLC 485,728 930
Cadbury Schweppes PLC 396,080 3,284
Carnival PLC 30,775 1,625
Centrica Plc 775,505 3,421
Compass Group PLC 440,157 1,815
Diageo PLC 596,684 7,965
Dixons Group PLC 356,181 1,121
Friends Provident PLC 333,413 831
(4) GlaxoSmithKline PLC 1,142,422 24,010
GUS PLC 188,042 3,070
Hanson Plc 150,209 1,106
HBOS PLC 747,598 9,993
Hilton Group PLC 287,543 1,358
(2) HSBC Holdings PLC 2,103,680 33,901
Imperial Tobacco Group PLC 142,051 3,311
Intercontinental Hotels Group PLC 149,688 1,828
ITV PLC 564,218 1,106
J. Sainsbury PLC 234,962 1,110
Kingfisher PLC 442,761 2,452
Land Securities Group PLC 95,357 2,084
Legal & General Group PLC 1,220,030 2,213
Lloyds TSB Group PLC 1,065,026 8,411
Man Group PLC 57,326 1,373
Marks & Spencer Group PLC 443,141 2,915
National Grid Transco PLC 584,973 5,075
Next PLC 57,431 1,757
Pearson PLC 158,738 1,739
Prudential PLC 382,001 2,803
Reckitt Benckiser PLC 111,099 3,041
Reed Elsevier PLC 236,461 2,108
Rentokil Initial PLC 364,152 1,034
Reuters Group PLC 267,194 1,815
Rio Tinto PLC 206,808 5,396
Rolls-Royce Group PLC 296,618 1,409
Rolls-Royce Group PLC, B Shares 9,432,452 18
(10) Royal Bank of Scotland Group PLC 547,776 16,109
SABMiller PLC 162,857 2,344
Scottish & Newcastle PLC 145,929 1,078
Scottish & Southern Energy PLC 173,758 2,657
Scottish Power PLC 347,294 2,798
Severn Trent Water PLC 70,101 1,176
o Shell Transport & Trading Co. PLC 1,852,117 14,550
Smith & Nephew PLC 175,479 1,487
Smiths Group PLC 107,917 1,474
Tesco PLC 1,445,671 7,602
Unilever PLC 523,823 4,406
United Utilities PLC 99,658 1,048
(3) Vodafone Group PLC 12,980,507 33,179
Wolseley PLC 111,522 1,923
WPP Group PLC 230,860 2,312
-----------
344,025
FOREIGN PREFERRED STOCK 0.4% of net assets
AUSTRALIA 0.3%
--------------------------------------------------------------------------
News Corp. Ltd. 524,340 4,113
GERMANY 0.1%
--------------------------------------------------------------------------
Henkel KGaA 12,100 903
WARRANTS 0.0% of net assets
FRANCE 0.0%
--------------------------------------------------------------------------
>o Casino Guichard Perrachon SA, expires 12/15/05 1,026 --
UNITED STATES 0.0%
--------------------------------------------------------------------------
o NTL, Inc., Series A, expires 01/13/11 48 --
RIGHTS 0.0% of net assets
UNITED KINGDOM 0.0%
--------------------------------------------------------------------------
o Prudential PLC 63,666 107
5
SCHWAB INTERNATIONAL INDEX FUND
PORTFOLIO HOLDINGS continued
FACE
SECURITY AMOUNT
RATE, MATURITY DATE ($ X 1,000)
SHORT-TERM INVESTMENT 0.2% of net assets
HSBC Bank, USA Grand
Cayman Time Deposit
1.29%, 11/01/04 1,954 1,954
--------------------------------------------------------------------------
END OF INVESTMENTS.
COLLATERAL INVESTED FOR SECURITIES ON LOAN
8.4% of net assets
SHORT-TERM INVESTMENT 8.4%
--------------------------------------------------------------------------
Securities Lending Investment
Fund 103,710,647 103,711
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN.
6
ITEM 7: DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8: PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9: PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 11: CONTROLS AND PROCEDURES.
(a) Based on their evaluation of Registrant's disclosure controls and
procedures, as of a date within 90 days of the filing date, Registrant's
Chief Executive Officer, Evelyn Dilsaver and Registrant's Principal
Financial Officer, George Pereira, have concluded that Registrant's
disclosure controls and procedures are: (i) reasonably designed to ensure
that information required to be disclosed in this report is appropriately
communicated to Registrant's officers to allow timely decisions regarding
disclosures required in this report; (ii) reasonably designed to ensure that
information required to be disclosed in this report is recorded, processed,
summarized and reported in a timely manner; and (iii) are effective in
achieving the goals described in (i) and (ii) above.
(b) During the second fiscal quarter of the period covered by this report, there
have been no changes in Registrant's internal control over financial
reporting that the above officers believe to have materially affected, or to
be reasonably likely to materially affect, Registrant's internal control
over financial reporting.
ITEM 12: EXHIBITS.
(a)(1) Registrant's code of ethics (that is the subject of the disclosure
required by Item 2(a)) is attached.
(2) Separate certifications for Registrant's principal executive officer and
principal financial officer, as required by Rule 30a-2(a) under the 1940
Act, are attached.
(3) Not applicable.
(b) A certification for Registrant's principal executive officer and principal
financial officer, as required by Rule 30a-2(b) under the 1940 Act, is
attached. This certification is being furnished to the Securities and
Exchange Commission solely pursuant to 18 U.S.C. section 1350 and is not
being filed as part of the Form N-CSR with the Commission.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Schwab Capital Trust
By: /s/ Evelyn Dilsaver
----------------------------
Evelyn Dilsaver
Chief Executive Officer
Date: December 16, 2004
-----------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Evelyn Dilsaver
----------------------------
Evelyn Dilsaver
Chief Executive Officer
Date: December 16, 2004
-----------
By: /s/ George Pereira
----------------------------
George Pereira
Principal Financial Officer
Date: December 16, 2004
-----------