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
----------------------------------------------------
(Address of principal executive offices) (Zip code)
Randall W. Merk
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: November 1, 2002 - April 30, 2003
Item 1: Report(s) to Shareholders
Schwab Equity Index Funds
SEMIANNUAL REPORT
April 30, 2003
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 discuss
the factors that affected fund performance during the report period.
Fund Performance and Related Data
Fund and index performance data, fund facts, portfolio holdings
and fund financials.
Schwab S&P 500 Fund.................................................. 6
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
Schwab 1000 Fund(R).................................................. 23
Investor Shares: SNXFX Select Shares: SNXSX The fund's goal is to
track the total return of the Schwab 1000 Index(R).
Schwab Small-Cap Index Fund(R)....................................... 45
Investor Shares: SWSMX Select Shares: SWSSX The fund's goal is to
track the total return of the Schwab Small-Cap Index(R).
Schwab Total Stock Market Index Fund(R).............................. 68
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 Wilshire 5000 Total Market Index. 2
Schwab International Index Fund(R)................................... 119
Investor Shares: SWINX Select Shares: SWISX The fund's goal is to
track the total return of the Schwab International Index(R).
Financial Notes........................................................ 133
Glossary............................................................... 137
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 Wilshire and Wilshire 5000 are registered service marks of Wilshire
Associates, Inc. The fund is not sponsored, endorsed, sold or promoted
by Wilshire Associates, and Wilshire Associates is not in any way
affiliated with the fund. Wilshire Associates makes no representation
regarding the advisability of investing in the fund or in any stock
included in the Wilshire 5000.
FROM THE CHAIRMAN
[PHOTO OF CHARLES R. SCHWAB]
Charles R. Schwab
Chairman
Without question, these are challenging times for America's investors. But I
believe that they also may provide opportunities, especially for those who stay
involved with their investment portfolios and review their mutual fund holdings
with their investment objectives in mind.
As this report goes to press, the President has signed into law a new tax
package that I believe offers significant potential benefits for all investors.
The new tax package will reduce the rate of taxation on many corporate dividends
and on capital gains. I believe that reducing these taxes could serve as a
stimulus to the stock market, thereby benefiting all owners of U.S. stocks.
For years, corporate dividends have been taxed twice: first when the corporation
earned the money, and again when investors received the dividend. In my view,
this has provided an incentive for corporations to retain profits as cash rather
than sharing them with their shareholders. I believe reducing the dividend tax
gives companies the right incentives to invest and create new jobs.
Here at Schwab, we are actively exploring ways to help investors meet their
financial objectives. At SchwabFunds(R), these efforts are being led by the new
president of SchwabFunds, Randall Merk. Randy brings a wealth of experience to
the job, and we welcome his leadership, vision and wisdom.
On behalf of SchwabFunds, I'd like to thank you for investing with us. Your
continued trust and support mean a great deal to us. In turn, it's our mission
to help you meet your financial goals.
Sincerely,
/s/ Charles R. Schwab
MANAGEMENT'S DISCUSSION November 1, 2002--April 30, 2003
[PHOTO OF RANDALL W. MERK]
RANDALL W. MERK is President and CEO of Charles Schwab Investment Management,
Inc. and is president of each of the funds covered in this report. He joined the
firm in August of 2002, bringing with him 24 years of experience in the asset
management industry.
Dear Shareholder:
As one of the newer members of the SchwabFunds(R) team, I've been struck by the
talent and integrity of the people here. Above all, I've been impressed with the
dedication they show to understanding the needs and concerns of our
shareholders.
That dedication is particularly important right now. Times of market volatility
and uncertainty about world events demand as high a level of diligence as ever
on the part of investment professionals. At SchwabFunds we are keenly aware of
this, and we continue to work hard to uphold the best interests of our
shareholders.
Mutual funds are facing many initiatives at the moment. These include changes in
corporate governance practices, such as the Sarbanes-Oxley Act (which requires
senior management certification of financial reports), and new regulations
affecting disclosures of mutual funds' proxy voting practices. Many of these
changes have the potential to benefit shareholders, and I want to assure you
that we'll keep you informed of the progress we are making with them.
In the meantime, it is worth keeping in mind that the basic tenets of mutual
fund investing remain unchanged. In particular, time-tested investment practices
such as asset allocation and diversification are as important as ever. The range
of choices available from SchwabFunds can make it easy to diversify your
portfolio. In addition, as our range of funds grows, we'll let you know when new
funds are launched (or you can stay informed by visiting
www.schwab.com/schwabfunds).
In closing, let me thank you for choosing SchwabFunds for your mutual fund
investments. We're committed to helping you reach your financial goals. If there
is something more that we can do to help, I hope you'll let us know.
Sincerely,
/s/ Randall W. Merk
Schwab Equity Index Funds
2
[PHOTO OF GERI HOM & LARRY MANO]
GERI HOM, a vice president and senior portfolio manager of the investment
adviser, has overall responsibility for the management of the funds. Prior to
joining the firm in 1995, she worked for nearly 15 years in equity management.
LARRY MANO, a director and a portfolio manager, is responsible for the
day-to-day management of the Total Stock Market and International Index funds.
Prior to joining the firm in 1998, he worked for 20 years in equity management.
THE ECONOMY
THE WAR IN IRAQ DOMINATED HEADLINES, ALTHOUGH IT WAS NOT THE ONLY FACTOR
AFFECTING THE ECONOMY. As the report period began, the nation's focus was
divided between fundamental economic issues and concerns over the looming war
with Iraq. Once the war arrived, attention focused on Iraq and the progress of
political and military actions. Toward the end of the report period, as
intensive military action drew to a close, the nation's focus shifted and its
level of concern over war-related uncertainty declined.
One reflection of this pattern of changing concerns over the war was the price
of oil. Leading up to the war, oil prices continued to ratchet up to nearly $40
a barrel. But the price quickly dropped to around $30 a barrel when it began to
appear that the major fighting would not last long.
The economy that Americans found at the end of the war was not much different
than it had been during the period before the war. Gross Domestic Product was
positive but weak, while joblessness edged up to 6%. Consumer spending remained
strong, helped in part by widespread discounts and depressed prices in most
sectors (aside from healthcare and oil). But discounted prices for consumers
translated into thin profits for companies, and business capital spending
remained minimal. A half-percent interest rate cut in November 2002 showed the
Federal Reserve continuing to apply economic stimulus; the president and
Congress contributed by advancing new fiscal and tax policies.
THE MARKET
MOST TYPES OF STOCKS POSTED GAINS FOR THE PERIOD, WITH SMALL-CAP GROWTH STOCKS
AND LARGE-CAP VALUE STOCKS LEADING THE WAY. Positive returns were welcome news
after prior declines. However, the volatility that has characterized the market
in recent years continued throughout the period.
The strongest month of the period for stocks was April 2003, which saw the
market rise as the military action in Iraq ended and as the first corporate
earnings reports for 2002 appeared to indicate some improvement over the
disappointing earnings of 2001. Another factor that we believe may have helped
lift the market during the period was the increasing possibility of a dividend
tax cut.
Schwab Equity Index Funds
3
MANAGEMENT'S DISCUSSION continued
Stock prices during the period appeared to generally reflect companies'
established earning power, although anticipated future earnings began to drive
returns in some sectors.
Looking at stock prices during the period, it appeared that investors were
reluctant to give much consideration to projections of future earnings (which
may or may not turn out to be accurate) when deciding how much they were willing
to pay for a stock.
In our view, this was a sign of lingering skepticism among investors about
earnings projections, whether those projections came from corporate management
or from analysts. As the report period came to a close, there were some issues
that remained unresolved. For instance, there were still companies coming
forward with earnings restatements or with large one-time charges. There were
also questions about how companies account for pension plan liabilities, and how
related practices might trigger another round of earnings restatements. We
believe investors' sensitivity to factors such as these was likely heightened by
the memory of the many recent high-profile cases of corporate malfeasance.
THE FUNDS
ALL OF THE EQUITY INDEX FUNDS POSTED POSITIVE TOTAL RETURNS FOR THE REPORT
PERIOD. Because the funds in this report are index funds, they are affected by
the same factors that impact their respective benchmark indices.
The total return of the SCHWAB S&P 500 FUND was similar to that of its
benchmark, the S&P 500(R) Index, which was 4.48% for the period. During the
period, six companies were dropped from the S&P 500(R) Index and replaced by
others. Being added to or dropped from the S&P 500 often
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.
4.48% S&P 500(R)INDEX: measures U.S. large-cap stocks
7.55% RUSSELL 2000(R)INDEX: measures U.S. small-cap stocks
1.81% MSCI-EAFE(R)INDEX: measures (in U.S. dollars) large-cap stocks
in Europe, Australasia and the Far East
4.31% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S.
bond market
[LINE GRAPH]
Lehman Brother U.S.
Aggregate Bond Index MSCI-EAFE Index Russell 2000 Index S&P 500 Index
31-Oct-02 0 0 0 0
Nov-02 -0.18 -0.36 2.6 1.72
Nov-02 0.59 1.71 2.65 1.95
Nov-02 0.25 0.52 3.5 2.2
Nov-02 -0.07 3.64 6.59 5.6
Nov-02 -0.03 4.7 9.98 6.2
Dec-02 0.52 0.96 5.77 2.59
Dec-02 0.86 -0.03 6.05 2.06
Dec-02 1.42 -1.25 2.87 0.14
Dec-02 1.99 0.71 4.5 0.75
Jan-03 1.36 2.13 5.44 3.01
Jan-03 1.18 2.45 6.35 5.14
Jan-03 1.83 3.2 6.09 3.7
Jan-03 2.2 -0.55 3.09 0.61
Jan-03 2.12 -3.01 -1.19 -4.19
Feb-03 2.47 -3.67 -1.94 -4.88
Feb-03 2.45 -4.75 -4.58 -7.18
Feb-03 2.75 -3.54 -3.25 -4.91
Feb-03 3.54 -6.69 -2.77 -4.84
Mar-03 3.82 -6.69 -4.79 -6.53
Mar-03 3.45 -10.09 -4.3 -5.38
Mar-03 2.18 -5.24 -0.25 -0.36
Mar-03 3.12 -5.07 -0.45 -1.16
Apr-03 3.12 -4.67 1.13 -0.23
Apr-03 3.14 -3.48 0.46 -0.74
Apr-03 3.4 -0.88 3.46 1.78
Apr-03 3.96 0.21 5.76 3.82
30-Apr-03 4.31 1.81 7.55 4.48
These figures assume dividends and distributions were reinvested. Index figures
don't include trading and management costs, which would lower performance.
Indices are unmanaged and you can't invest in them directly. Remember that past
performance is not an indication of future results.
Data source: Charles Schwab & Co., Inc.
Schwab Equity Index Funds
4
Each of the funds remained fully invested for the period, allowing for a small
portion of assets held in cash to maintain liquidity for fund expenses and
shareholder transactions.
has an immediate effect on a stock's price. We adjusted the fund's portfolio to
track these six changes, but sought to manage our transactions to avoid buying
at highs and selling at lows while still avoiding the risk of missing out on
exposure to market gains.
The total return for the SCHWAB 1000 FUND(R) was similar to its benchmark, the
Schwab 1000 Index(R), which had a total return of 4.55% for the period. The
SCHWAB SMALL-CAP INDEX FUND(R) also performed similarly to its benchmark, the
Schwab Small-Cap Index(R), which had a total return of 5.29%.In January
2003,regular yearly readjustments were made to both of these indices, bringing
their composition in line with current market composition. A total of 118
companies were replaced in the Schwab 1000 Index and 566 in the Schwab Small-Cap
Index. The stocks in both funds were then adjusted accordingly. Small-cap stocks
moved higher in April 2003, and mid-caps saw some of that interest as well. We
attribute this to the end of heavy fighting in Iraq (there was similar market
movement after the Gulf War in 1991) and to the fact that small-cap stocks
historically have often been the first to revive in a bear market.
The small-cap rally in April helped the performance of the SCHWAB TOTAL STOCK
MARKET INDEX FUND(R), but it also contributed to the fund's tracking error (the
difference between fund total return and index total return). Although the fund
owns shares in 3,000 of the over 5,000 names in the Wilshire 5000,those it does
not hold--typically the smallest and least liquid stocks--were among the better
performers for this period. In spite of this, the fund still performed similarly
to its benchmark, the Wilshire 5000 Index, which had a total return of 5.02% for
the period.
International markets were modestly positive for the period.The Schwab
International Index(R), the benchmark for the SCHWAB INTERNATIONAL INDEX
FUND(R),had a total return of 2.11%, outperforming the broader MSCI-EAFE
Index. This was due to the benchmark's exposure to Canada (which is not in the
MSCI-EAFE) and its smaller weighting in Japan, which performed poorly. The fund
itself lagged both indices, largely because of the higher trading costs
associated with international investing and the fact that the fund has expenses
that the indices do not have.
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.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
Index figures are not annualized.
The views expressed here are those of fund management only. 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 Equity Index Funds
5
SCHWAB S&P 500 FUND
PERFORMANCE as of 4/30/03: Investor Shares
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Investor Shares with
the S&P 500(R) Index and the Morningstar Large-Cap Blend Fund category. The
table below the chart shows two types of after-tax returns.
[BAR CHART]
INVESTOR SHARES S&P 500 INDEX CATEGORY AVERAGE
6 MONTHS 4.35% 4.48% 3.31%
1 YEAR -13.52% -13.31% -14.72%
5 YEARS -2.72% -2.43% -3.05%
SINCE INCEPTION: 5/1/96 6.16% 6.57% n/a
6 MONTHS 1 YEAR
-------- ------
INVESTOR SHARES CATEGORY AVERAGE INVESTOR SHARES CATEGORY AVERAGE
TOTAL RETURNS AFTER TAX
- -------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 3.76% 1.05% -14.01% -16.49%
- -------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 2.69% 0.75% -8.46% -10.00%
- -------------------------------------------------------------------------------------------------------------
5 YEARS SINCE INCEPTION
------- ----------------
INVESTOR SHARES CATEGORY AVERAGE INVESTOR SHARES CATEGORY AVERAGE
TOTAL RETURNS AFTER TAX
- -------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) -3.11% -4.40% 5.76% --
- -------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) -2.30% -2.60% 4.91% --
- -------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A $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
the S&P 500 Index.
$15,202 INVESTOR SHARES
$15,614 S&P 500 INDEX
[LINE CHART]
INVESTOR
SHARES S&P 500 Index
30-Apr-96 10000 10000
May-96 10250 10257
Jun-96 10290 10296
Jul-96 9840 9841
Aug-96 10040 10049
Sep-96 10600 10613
Oct-96 10880 10906
Nov-96 11690 11731
Dec-96 11462 11498
Jan-97 12157 12216
Feb-97 12248 12312
Mar-97 11744 11808
Apr-97 12430 12511
May-97 13186 13272
Jun-97 13760 13867
Jul-97 14849 14969
Aug-97 14012 14131
Sep-97 14778 14904
Oct-97 14284 14406
Nov-97 14930 15073
Dec-97 15184 15332
Jan-98 15357 15502
Feb-98 16455 16620
Mar-98 17289 17471
Apr-98 17452 17647
May-98 17147 17344
Jun-98 17838 18048
Jul-98 17645 17857
Aug-98 15092 15278
Sep-98 16058 16257
Oct-98 17340 17579
Nov-98 18387 18645
Dec-98 19443 19718
Jan-99 20253 20543
Feb-99 19617 19904
Mar-99 20397 20700
Apr-99 21176 21501
May-99 20663 20994
Jun-99 21812 22159
Jul-99 21125 21467
Aug-99 21012 21360
Sep-99 20428 20775
Oct-99 21709 22090
Nov-99 22150 22539
Dec-99 23448 23866
Jan-00 22266 22668
Feb-00 21841 22239
Mar-00 23967 24414
Apr-00 23241 23679
May-00 22753 23194
Jun-00 23313 23767
Jul-00 22940 23396
Aug-00 24361 24849
Sep-00 23075 23537
Oct-00 22971 23438
Nov-00 21156 21591
Dec-00 21261 21697
Jan-01 22014 22467
Feb-01 19996 20418
Mar-01 18730 19124
Apr-01 20174 20610
May-01 20310 20748
Jun-01 19808 20244
Jul-01 19609 20045
Aug-01 18375 18790
Sep-01 16890 17272
Oct-01 17204 17602
Nov-01 18521 18952
Dec-01 18678 19119
Jan-02 18403 18840
Feb-02 18044 18476
Mar-02 18710 19171
Apr-02 17579 18009
May-02 17442 17876
Jun-02 16195 16603
Jul-02 14938 15310
Aug-02 15023 15409
Sep-02 13396 13734
Oct-02 14568 14943
Nov-02 15424 15823
Dec-02 14516 14894
Jan-03 14130 14504
Feb-03 13915 14286
Mar-03 14044 14425
30-Apr-03 15202 15614
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.
The fund's share price and principal values change, and when you sell your
shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results. Results for the report period
are not annualized.
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 4/30/03 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. As of 4/30/03, the total number of funds in the Morningstar
Large-Cap Blend Fund category for the six-month, one-and five-year periods
was 1,410, 1,362 and 711, respectively. These funds may or may not use
tax-efficient strategies.
2 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower.
Schwab Equity Index Funds
6
SCHWAB S&P 500 FUND
Select Shares(R)
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Select Shares with the
S&P 500(R) Index and the Morningstar Large-Cap Blend Fund category. The table
below the chart shows two types of after-tax returns.
[BAR CHART]
SELECT SHARES S&P 500 INDEX CATEGORY AVERAGE
6 MONTHS 4.45% 4.48% 3.31%
1 YEAR -13.35% -13.31% -14.72%
5 YEARS -2.57% -2.43% -3.05%
SINCE INCEPTION: 5/19/97 2.91% 3.09% n/a
6 MONTHS 1 YEAR
-------- ------
SELECT SHARES CATEGORY AVERAGE SELECT SHARES CATEGORY AVERAGE
TOTAL RETURNS AFTER TAX
- -------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 3.79% 1.05% -13.89% -16.49%
- -------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 2.74% 0.75% -8.35% -10.00%
- -------------------------------------------------------------------------------------------------------------
5 YEARS SINCE INCEPTION
------- ---------------
SELECT SHARES CATEGORY AVERAGE SELECT SHARES CATEGORY AVERAGE
TOTAL RETURNS AFTER TAX
- --------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) -3.02% -4.40% 2.44% --
- --------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) -2.21% -2.60% 2.16% --
- --------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A $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 the S&P 500 Index.
$59,300 SELECT SHARES
$59,916 S&P 500 INDEX
[LINE GRAPH]
SELECT
SHARES S&P 500 Index
19-May-97 50000 50000
May-97 50935 50930
Jun-97 53190 53212
Jul-97 57395 57442
Aug-97 54165 54225
Sep-97 57120 57191
Oct-97 55215 55281
Nov-97 57745 57841
Dec-97 58745 58836
Jan-98 59375 59489
Feb-98 63660 63778
Mar-98 66880 67043
Apr-98 67550 67720
May-98 66370 66556
Jun-98 69040 69258
Jul-98 68295 68524
Aug-98 58435 58629
Sep-98 62165 62387
Oct-98 67155 67459
Nov-98 71245 71547
Dec-98 75340 75668
Jan-99 78475 78831
Feb-99 76015 76379
Mar-99 79030 79434
Apr-99 82085 82509
May-99 80140 80561
Jun-99 84545 85033
Jul-99 81885 82380
Aug-99 81490 81968
Sep-99 79230 79721
Oct-99 84230 84767
Nov-99 85935 86491
Dec-99 91000 91585
Jan-00 86420 86987
Feb-00 84770 85341
Mar-00 93050 93687
Apr-00 90235 90867
May-00 88350 89004
Jun-00 90515 91203
Jul-00 89110 89780
Aug-00 94655 95356
Sep-00 89635 90322
Oct-00 89230 89942
Nov-00 82200 82855
Dec-00 82655 83261
Jan-01 85540 86217
Feb-01 77745 78354
Mar-01 72835 73386
Apr-01 78480 79088
May-01 78965 79618
Jun-01 77055 77683
Jul-01 76285 76922
Aug-01 71500 72107
Sep-01 65735 66280
Oct-01 66955 67546
Nov-01 72065 72727
Dec-01 72700 73367
Jan-02 71635 72296
Feb-02 70240 70901
Mar-02 72865 73567
Apr-02 68430 69108
May-02 67940 68597
Jun-02 63095 63713
Jul-02 58170 58750
Aug-02 58580 59132
Sep-02 52175 52704
Oct-02 56775 57342
Nov-02 60140 60719
Dec-02 56585 57155
Jan-03 55085 55658
Feb-03 54250 54823
Mar-03 54790 55355
30-Apr-03 59300 59916
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.
The fund's share price and principal values change, and when you sell your
shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results. Results for the report period
are not annualized.
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 4/30/03 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. As of 4/30/03, the total number of funds in the Morningstar
Large-Cap Blend Fund category for the six-month, one-and five-year periods
was 1,410, 1,362 and 711, respectively. These funds may or may not use
tax-efficient strategies.
2 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower.
Schwab Equity Index Funds
7
SCHWAB S&P 500 FUND
e.Shares(R)
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's e.Shares with the S&P
500(R) Index and the Morningstar Large-Cap Blend Fund category. The table below
the chart shows two types of after-tax returns.
[BAR CHART]
e.SHARES S&P 500 INDEX CATEGORY AVERAGE
6 MONTHS 4.42% 4.48% 3.31%
1 YEAR -13.46% -13.31% -14.72%
5 YEARS -2.66% -2.43% -3.05%
SINCE INCEPTION: 5/1/96 6.26% 6.57% n/a
6 MONTHS 1 YEAR
-------- ------
e.SHARES CATEGORY AVERAGE e.SHARES CATEGORY AVERAGE
TOTAL RETURNS AFTER TAX
- -------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 3.81% 1.05% -13.97% -16.49%
- -------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 2.73% 0.75% -8.43% -10.00%
- -------------------------------------------------------------------------------------------------------------
5 YEARS SINCE INCEPTION
------- ---------------
e.SHARES CATEGORY AVERAGE e.SHARES CATEGORY AVERAGE
TOTAL RETURNS AFTER TAX
- -------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) -3.08% -4.40% 5.81% --
- -------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) -2.27% -2.60% 4.97% --
- -------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A $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 the S&P
500 Index.
$15,294 e.SHARES
$15,614 S&P 500 INDEX
[LINE GRAPH]
e.SHARES S&P 500 Index
30-Apr-96 10000 10000
May-96 10250 10257
Jun-96 10290 10296
Jul-96 9840 9841
Aug-96 10050 10049
Sep-96 10600 10613
Oct-96 10890 10906
Nov-96 11710 11731
Dec-96 11473 11498
Jan-97 12179 12216
Feb-97 12270 12312
Mar-97 11766 11808
Apr-97 12452 12511
May-97 13209 13272
Jun-97 13794 13867
Jul-97 14873 14969
Aug-97 14036 14131
Sep-97 14803 14904
Oct-97 14318 14406
Nov-97 14964 15073
Dec-97 15227 15332
Jan-98 15390 15502
Feb-98 16490 16620
Mar-98 17336 17471
Apr-98 17499 17647
May-98 17193 17344
Jun-98 17886 18048
Jul-98 17692 17857
Aug-98 15136 15278
Sep-98 16103 16257
Oct-98 17397 17579
Nov-98 18446 18645
Dec-98 19504 19718
Jan-99 20316 20543
Feb-99 19679 19904
Mar-99 20459 20700
Apr-99 21240 21501
May-99 20737 20994
Jun-99 21878 22159
Jul-99 21199 21467
Aug-99 21086 21360
Sep-99 20501 20775
Oct-99 21795 22090
Nov-99 22227 22539
Dec-99 23536 23866
Jan-00 22350 22668
Feb-00 21924 22239
Mar-00 24057 24414
Apr-00 23328 23679
May-00 22850 23194
Jun-00 23401 23767
Jul-00 23037 23396
Aug-00 24462 24849
Sep-00 23172 23537
Oct-00 23068 23438
Nov-00 21247 21591
Dec-00 21364 21697
Jan-01 22110 22467
Feb-01 20092 20418
Mar-01 18821 19124
Apr-01 20271 20610
May-01 20407 20748
Jun-01 19903 20244
Jul-01 19703 20045
Aug-01 18463 18790
Sep-01 16971 17272
Oct-01 17297 17602
Nov-01 18610 18952
Dec-01 18768 19119
Jan-02 18492 18840
Feb-02 18141 18476
Mar-02 18810 19171
Apr-02 17674 18009
May-02 17536 17876
Jun-02 16282 16603
Jul-02 15019 15310
Aug-02 15114 15409
Sep-02 13468 13734
Oct-02 14647 14943
Nov-02 15507 15823
Dec-02 14593 14894
Jan-03 14216 14504
Feb-03 14000 14286
Mar-03 14129 14425
30-Apr-03 15294 15614
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.
The fund's share price and principal values change, and when you sell your
shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results. Results for the report period
are not annualized.
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 4/30/03 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. As of 4/30/03, the total number of funds in the Morningstar
Large-Cap Blend Fund category for the six-month, one-and five-year periods
was 1,410, 1,362 and 711, respectively. These funds may or may not use
tax-efficient strategies.
2 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower.
Schwab Equity Index Funds
8
SCHWAB S&P 500 FUND
FUND FACTS as of 4/30/03
FUND CATEGORY 1
INVESTMENT STYLE 1
MARKET CAP Value Blend Growth
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 504
- ---------------------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $48,401
- ---------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 24.5
- ---------------------------------------------------------
PRICE/BOOK RATIO (P/B) 4.5
- ---------------------------------------------------------
PORTFOLIO TURNOVER RATE 2 2%
- ---------------------------------------------------------
EXPENSE RATIO 3
Investor Shares 0.37%
Select Shares(R) 0.19%
e.Shares(R) 0.28%
- ---------------------------------------------------------
TOP HOLDINGS 4
% OF
SECURITY INVESTMENTS
(1) GENERAL ELECTRIC CO. 3.5%
- ---------------------------------------------------------
(2) MICROSOFT CORP. 3.2%
- ---------------------------------------------------------
(3) WAL-MART STORES, INC. 2.9%
- ---------------------------------------------------------
(4) PFIZER, INC. 2.9%
- ---------------------------------------------------------
(5) EXXON MOBIL CORP. 2.8%
- ---------------------------------------------------------
(6) CITIGROUP, INC. 2.4%
- ---------------------------------------------------------
(7) JOHNSON & JOHNSON 2.0%
- ---------------------------------------------------------
(8) AMERICAN INTERNATIONAL GROUP, INC. 1.8%
- ---------------------------------------------------------
(9) INTERNATIONAL BUSINESS MACHINES CORP. 1.7%
- ---------------------------------------------------------
(10) MERCK & CO., INC. 1.5%
- ---------------------------------------------------------
TOTAL 24.7%
- ---------------------------------------------------------
INDUSTRY WEIGHTINGS
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
14.7% HEALTHCARE/DRUGS & MEDICINE
9.5% BUSINESS MACHINES & SOFTWARE
7.7% BANKS
7.5% MISCELLANEOUS FINANCE
7.3% RETAIL
5.2% PRODUCER GOODS & MANUFACTURING
5.1% INSURANCE
4.5% FOOD & AGRICULTURE
4.4% ELECTRONICS
34.1% OTHER
1 Source: Morningstar, Inc. This style assessment is the result of comparing the
fund with the S&P 500(R) Index, based on P/E, P/B and median market cap. The
assessment reflects the fund's portfolio as of 4/30/03, which may have changed
since then, and is not a precise indication of risk or performance--past,
present or future.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes and certain non-routine expenses).
4 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
Schwab Equity Index Funds
9
SCHWAB S&P 500 FUND -- Financials
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
INVESTOR SHARES 4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
--------------------------------------------------------------------
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 13.79 16.45 22.15 21.17 17.05 14.17
--------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.10 0.20 0.17 0.17 0.17 0.16
Net realized and unrealized gains or losses 0.49 (2.68) (5.70) 1.06 4.10 2.85
--------------------------------------------------------------------
Total income or loss from investment operations 0.59 (2.48) (5.53) 1.23 4.27 3.01
Less distributions:
Dividends from net investment income (0.20) (0.18) (0.17) (0.18) (0.15) (0.13)
Distributions from net realized gains -- -- -- (0.07) -- --
--------------------------------------------------------------------
Total distributions (0.20) (0.18) (0.17) (0.25) (0.15) (0.13)
--------------------------------------------------------------------
Net asset value at end of period 14.18 13.79 16.45 22.15 21.17 17.05
--------------------------------------------------------------------
Total return (%) 4.35 2 (15.32) (25.11) 5.81 25.20 21.39
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.36 3 0.35 0.35 0.35 1 0.35 0.35
Expense reductions reflected in above ratio 0.10 3 0.11 0.11 0.16 0.27 0.28
Ratio of net investment income to
average net assets 1.49 3 1.21 0.95 0.81 1.01 1.25
Portfolio turnover rate 2 2 8 4 9 3 1
Net assets, end of period ($ x 1,000,000) 2,933 2,760 3,070 3,617 3,183 1,935
1 Would have been 0.36% if certain non-routine expenses (proxy fees) had been
included.
2 Not annualized.
3 Annualized.
See financial notes.
10
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
SELECT SHARES(R) 4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
- ----------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 13.83 16.50 22.21 21.23 17.09 14.19
--------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.12 0.22 0.20 0.20 0.20 0.26
Net realized and unrealized gains or losses 0.49 (2.69) (5.71) 1.06 4.12 2.78
--------------------------------------------------------------------
Total income or loss from investment operations 0.61 (2.47) (5.51) 1.26 4.32 3.04
Less distributions:
Dividends from net investment income (0.23) (0.20) (0.20) (0.21) (0.18) (0.14)
Distributions from net realized gains -- -- -- (0.07) -- --
--------------------------------------------------------------------
Total distributions (0.23) (0.20) (0.20) (0.28) (0.18) (0.14)
--------------------------------------------------------------------
Net asset value at end of period 14.21 13.83 16.50 22.21 21.23 17.09
--------------------------------------------------------------------
Total return (%) 4.45 3 (15.20) (24.97) 5.94 25.42 21.63
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.19 4 0.19 0.19 0.19 1 0.19 0.19
Expense reductions reflected in above ratio 0.12 4 0.12 0.12 0.16 0.28 0.28
Ratio of net investment income to
average net assets 1.67 4 1.37 1.11 0.98 1.17 1.40
Portfolio turnover rate 2 3 8 4 9 3 1
Net assets, end of period ($ x 1,000,000) 3,113 3,029 3,563 4,357 3,750 1,548
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
E.SHARES(R) 4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
- ----------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 13.79 16.46 22.17 21.21 17.08 14.19
--------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.11 0.23 0.20 0.20 0.20 0.15
Net realized and unrealized gains or losses 0.49 (2.71) (5.71) 1.04 4.09 2.88
--------------------------------------------------------------------
Total income or loss from investment operations 0.60 (2.48) (5.51) 1.24 4.29 3.03
Less distributions:
Dividends from net investment income (0.21) (0.19) (0.20) (0.21) (0.16) (0.14)
Distributions from net realized gains -- -- -- (0.07) -- --
--------------------------------------------------------------------
Total distributions (0.21) (0.19) (0.20) (0.28) (0.16) (0.14)
--------------------------------------------------------------------
Net asset value at end of period 14.18 13.79 16.46 22.17 21.21 17.08
--------------------------------------------------------------------
Total return (%) 4.42 3 (15.32) (25.02) 5.84 25.28 21.50
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.28 4 0.28 0.28 0.28 2 0.28 0.28
Expense reductions reflected in above ratio 0.03 4 0.03 0.03 0.07 0.20 0.24
Ratio of net investment income to
average net assets 1.57 4 1.28 1.02 0.88 1.08 1.32
Portfolio turnover rate 2 3 8 4 9 3 1
Net assets, end of period ($ x 1,000,000) 223 220 304 441 435 281
1 Would have been 0.20% if certain non-routine expenses (proxy fees) had been
included.
2 Would have been 0.29% if certain non-routine expenses (proxy fees) had been
included.
3 Not annualized.
4 Annualized.
See financial notes.
11
SCHWAB&P 500 FUND -- Financials
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
= Collateral for open futures contracts
/ Issuer is affiliated with the fund's adviser
COST MARKET VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- ------------------------------------------------------------------------
99.8% COMMON STOCK 7,029,029 6,257,750
0.2% SHORT-TERM
INVESTMENT 10,974 10,974
0.0% U.S. TREASURY
OBLIGATIONS 549 549
- ------------------------------------------------------------------------
100.0% TOTAL INVESTMENTS 7,040,552 6,269,273
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 99.8% of investments
AEROSPACE / DEFENSE 1.5%
------------------------------------------------------------------
The Boeing Co. 619,522 16,901
Crane Co. 44,919 877
General Dynamics Corp. 149,482 9,278
Goodrich Corp. 84,839 1,194
Lockheed Martin Corp. 337,596 16,897
Northrop Grumman Corp. 134,772 11,853
Raytheon Co. 297,872 8,915
Rockwell Automation, Inc. 135,698 3,094
Rockwell Collins, Inc. 135,398 2,895
Textron, Inc. 100,629 2,967
United Technologies Corp. 346,613 21,424
------
96,295
AIR TRANSPORTATION 0.4%
------------------------------------------------------------------
Delta Air Lines, Inc. 94,113 1,204
FedEx Corp. 221,042 13,236
Southwest Airlines Co. 569,118 9,083
------
23,523
ALCOHOLIC BEVERAGES 0.6%
------------------------------------------------------------------
Adolph Coors Co., Class B 26,531 1,420
Anheuser-Busch Cos., Inc. 631,734 31,511
Brown-Forman Corp., Class B 45,734 3,501
------
36,432
APPAREL 0.3%
------------------------------------------------------------------
o Jones Apparel Group, Inc. 96,343 2,748
Liz Claiborne, Inc. 79,728 2,593
Nike, Inc., Class B 195,117 10,445
o Reebok International Ltd. 43,859 1,362
VF Corp. 80,028 3,148
------
20,296
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.1%
------------------------------------------------------------------
o Autonation, Inc. 214,100 2,965
Cooper Tire & Rubber Co. 52,866 744
Cummins, Inc. 29,451 798
Dana Corp. 110,209 1,024
Danaher Corp. 114,789 7,918
Delphi Corp. 407,700 3,425
Eaton Corp. 53,348 4,378
Ford Motor Co. 1,353,012 13,936
General Motors Corp. 414,028 14,926
Genuine Parts Co. 127,090 4,063
Goodyear Tire & Rubber Co. 123,681 708
Harley-Davidson, Inc. 225,133 10,005
o Navistar International Corp. 50,100 1,398
Visteon Corp. 99,156 695
------
66,983
BANKS 7.7%
------------------------------------------------------------------
AmSouth Bancorp. 263,365 5,544
Bank of America Corp. 1,112,333 82,368
The Bank of New York Co., Inc. 566,114 14,974
Bank One Corp. 861,015 31,040
BB&T Corp. 350,759 11,435
Comerica, Inc. 133,259 5,798
Fifth Third Bancorp 426,905 21,042
First Tennessee National Corp. 92,900 4,069
FleetBoston Financial Corp. 774,627 20,543
Golden West Financial Corp. 116,305 8,772
Huntington Bancshares, Inc. 171,950 3,346
See financial notes.
12
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
J.P. Morgan Chase & Co. 1,475,724 43,312
KeyCorp, Inc. 313,865 7,567
Marshall & Ilsley Corp. 160,696 4,728
Mellon Financial Corp. 317,913 8,409
National City Corp. 451,473 13,526
North Fork Bancorp., Inc. 119,300 3,861
Northern Trust Corp. 163,112 5,725
PNC Financial Services
Group, Inc. 211,427 9,282
o Providian Financial Corp. 216,172 1,593
Regions Financial Corp. 163,436 5,509
SouthTrust Corp. 256,207 6,882
State Street Corp. 244,011 8,548
SunTrust Banks, Inc. 211,349 12,093
Synovus Financial Corp. 224,032 4,362
U.S. Bancorp 1,413,091 31,300
Union Planters Corp. 145,652 4,157
Wachovia Corp. 1,004,421 38,379
Wells Fargo & Co. 1,250,357 60,342
Zions Bancorp. 65,847 3,244
-------
481,750
BUSINESS MACHINES & SOFTWARE 9.5%
------------------------------------------------------------------
Adobe Systems, Inc. 171,789 5,937
o Apple Computer, Inc. 265,676 3,773
Autodesk, Inc. 94,454 1,470
o BMC Software, Inc. 172,408 2,572
o Cisco Systems, Inc. 5,293,883 79,620
o Compuware Corp. 281,522 1,236
o Comverse Technology, Inc. 137,215 1,793
o Dell Computer Corp. 1,917,932 55,448
o EMC Corp. 1,624,855 14,770
o Gateway, Inc. 234,837 676
Hewlett-Packard Co. 2,250,078 36,676
(9) International Business Machines
Corp. 1,249,993 106,124
o Lexmark International, Inc.,
Class A 92,530 6,894
=(2) Microsoft Corp. 7,908,390 202,218
o NCR Corp. 73,899 1,620
o Network Appliance, Inc. 246,747 3,277
o Novell, Inc. 256,265 705
o Novellus Systems, Inc. 107,539 3,015
o Oracle Corp. 3,927,149 46,655
Pitney Bowes, Inc. 175,015 6,145
o Sun Microsystems, Inc. 2,347,658 7,747
o Unisys Corp. 242,527 2,522
o Xerox Corp. 555,260 5,475
-------
596,368
BUSINESS SERVICES 3.7%
------------------------------------------------------------------
o Allied Waste Industries, Inc. 147,315 1,223
o Apollo Group, Inc., Class A 127,800 6,927
Automatic Data Processing, Inc. 443,882 14,928
o Cendant Corp. 758,254 10,828
Cintas Corp. 126,305 4,534
o Citrix Systems, Inc. 130,566 2,475
Computer Associates
International, Inc. 424,166 6,888
o Computer Sciences Corp. 143,218 4,719
o Concord EFS, Inc. 372,571 5,153
o Convergys Corp. 128,151 2,079
Deluxe Corp. 36,066 1,587
o eBay, Inc. 228,885 21,234
Electronic Data Systems Corp. 359,821 6,531
Equifax, Inc. 103,607 2,403
First Data Corp. 554,864 21,767
o Fiserv, Inc. 142,264 4,188
H&R Block, Inc. 132,187 5,105
Interpublic Group of Cos., Inc. 282,857 3,225
o Intuit, Inc. 156,279 6,060
o Mercury Interactive Corp. 62,943 2,136
Moody's Corp. 112,409 5,428
Omnicom Group, Inc. 133,064 8,237
o Parametric Technology Corp. 187,230 618
Paychex, Inc. 276,562 8,612
o PeopleSoft, Inc. 228,301 3,431
o QLogic Corp. 70,738 3,112
o Robert Half International, Inc. 128,524 2,092
o Siebel Systems, Inc. 352,066 3,052
o Sungard Data Systems, Inc. 207,305 4,457
o Symantec Corp. 108,601 4,773
o Thermo Electron Corp. 123,063 2,236
o TMP Worldwide, Inc. 84,165 1,411
Tyco International Ltd. 1,475,100 23,012
See financial notes.
13
SCHWAB S&P 500 FUND -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Veritas Software Corp. 301,342 6,633
Waste Management, Inc. 444,105 9,646
o Yahoo!, Inc. 436,829 10,825
-------
231,565
CHEMICAL 2.1%
------------------------------------------------------------------
3M Co. 289,188 36,449
Air Products & Chemicals, Inc. 167,301 7,206
Dow Chemical Co. 671,050 21,903
E.I. du Pont de Nemours & Co. 733,438 31,193
Eastman Chemical Co. 55,183 1,685
Ecolab, Inc. 95,399 4,874
Great Lakes Chemical Corp. 35,237 865
o Hercules, Inc. 82,003 832
PPG Industries, Inc. 124,163 6,023
Praxair, Inc. 118,494 6,882
Rohm & Haas Co. 162,959 5,396
The Sherwin-Williams Co. 117,614 3,279
Sigma-Aldrich Corp. 52,726 2,627
-------
129,214
CONSTRUCTION 0.3%
------------------------------------------------------------------
Centex Corp. 45,868 3,028
Fluor Corp. 60,302 2,085
KB Home Corp. 34,866 1,718
Masco Corp. 360,373 7,593
o McDermott International, Inc. 42,423 138
Pulte Homes, Inc. 46,575 2,701
The Stanley Works 62,640 1,505
Vulcan Materials Co. 74,118 2,592
------
21,360
CONSUMER DURABLE 0.1%
------------------------------------------------------------------
Black & Decker Corp. 64,986 2,681
Leggett & Platt, Inc. 142,312 2,939
Maytag Corp. 57,971 1,208
Whirlpool Corp. 49,431 2,644
-----
9,472
CONSUMER NON-DURABLE 1.0%
------------------------------------------------------------------
o American Greetings Corp.,
Class A 56,888 828
Darden Restaurants, Inc. 126,412 2,214
o Electronic Arts, Inc. 107,378 6,364
Fortune Brands, Inc. 109,191 5,285
Hasbro, Inc. 129,712 2,076
o International Game Technology 64,338 5,552
Mattel, Inc. 323,293 7,028
McDonald's Corp. 935,696 16,001
Newell Rubbermaid, Inc. 195,737 5,966
o Starbucks Corp. 285,359 6,703
Tupperware Corp. 43,789 607
Wendy's International, Inc. 85,337 2,478
------
61,102
CONTAINERS 0.1%
------------------------------------------------------------------
Ball Corp. 44,056 2,474
Bemis Co. 40,729 1,860
o Pactiv Corp. 116,064 2,381
o Sealed Air Corp. 61,771 2,647
-----
9,362
ELECTRONICS 4.4%
------------------------------------------------------------------
o ADC Telecommunications, Inc. 603,138 1,440
o Advanced Micro Devices, Inc. 257,513 1,916
o Agilent Technologies, Inc. 352,875 5,653
o Altera Corp. 280,381 4,433
o American Power Conversion
Corp. 143,555 2,237
o Analog Devices, Inc. 274,683 9,098
o Andrew Corp. 75,024 576
Applied Biosystems Group--
Applera Corp. 153,233 2,686
o Applied Materials, Inc. 1,215,642 17,748
o Applied Micro Circuits Corp. 226,273 1,014
o Broadcom Corp., Class A 203,833 3,647
o CIENA Corp. 320,072 1,559
Intel Corp. 4,895,705 90,081
ITT Industries, Inc. 69,010 4,023
o Jabil Circuit, Inc. 144,719 2,706
o JDS Uniphase Corp. 1,029,485 3,325
o KLA-Tencor Corp. 139,010 5,699
Linear Technology Corp. 231,108 7,966
o LSI Logic Corp. 277,990 1,490
o Lucent Technologies, Inc. 2,541,304 4,574
Maxim Integrated Products, Inc. 236,749 9,302
See financial notes.
14
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Micron Technology, Inc. 443,135 3,767
Molex, Inc. 142,907 3,336
Motorola, Inc. 1,694,852 13,406
o National Semiconductor Corp. 134,754 2,524
o Nvidia Corp. 111,865 1,596
PerkinElmer, Inc. 92,308 916
o PMC -- Sierra, Inc. 121,586 1,003
o Power-One, Inc. 53,873 315
Qualcomm, Inc. 583,518 18,608
o Sanmina -- SCI Corp. 398,529 1,913
o Solectron Corp. 603,409 1,925
Symbol Technologies, Inc. 173,927 1,901
o Tektronix, Inc. 65,499 1,229
o Tellabs, Inc. 302,053 1,867
o Teradyne, Inc. 135,924 1,577
Texas Instruments, Inc. 1,277,947 23,629
o Thomas & Betts Corp. 44,556 705
o Univision Communications, Inc.,
Class A 166,984 5,056
o Waters Corp. 96,300 2,312
o Xilinx, Inc. 246,766 6,680
-------
275,438
ENERGY: RAW MATERIALS 1.4%
------------------------------------------------------------------
Anadarko Petroleum Corp. 183,917 8,166
Apache Corp. 117,190 6,709
Baker Hughes, Inc. 248,286 6,952
o BJ Services Co. 115,400 4,213
Burlington Resources, Inc. 149,522 6,924
Devon Energy Corp. 170,337 8,049
EOG Resources, Inc. 85,133 3,182
Halliburton Co. 329,008 7,044
Nabors Industries Ltd. 107,107 4,199
o Noble Corp. 99,457 3,078
Occidental Petroleum Corp. 279,810 8,352
Rowan Cos., Inc. 68,370 1,402
Schlumberger Ltd. 429,787 18,021
-------
86,291
FOOD & AGRICULTURE 4.5%
------------------------------------------------------------------
Altria Group, Inc. 1,526,665 46,960
Archer-Daniels-Midland Co. 473,307 5,244
Campbell Soup Co. 300,709 6,625
The Coca-Cola Co. 1,832,519 74,034
Coca-Cola Enterprises, Inc. 331,239 6,456
ConAgra Foods, Inc. 393,804 8,270
o Del Monte Foods Co. 49 --
General Mills, Inc. 271,030 12,226
H.J. Heinz Co. 258,171 7,714
Hershey Foods Corp. 101,553 6,626
Kellogg Co. 306,527 10,036
McCormick & Co., Inc. 102,601 2,543
Monsanto Co. 193,398 3,365
The Pepsi Bottling Group, Inc. 204,342 4,197
PepsiCo, Inc. 1,277,094 55,273
Sara Lee Corp. 575,738 9,661
Supervalu, Inc. 98,901 1,629
Sysco Corp. 481,010 13,819
Wm. Wrigley Jr. Co. 166,311 9,432
-------
284,110
GOLD 0.1%
------------------------------------------------------------------
Newmont Mining Corp. 297,251 8,032
HEALTHCARE / DRUGS & MEDICINE 14.7%
------------------------------------------------------------------
Abbott Laboratories 1,156,533 46,990
Allergan, Inc. 95,596 6,716
AmerisourceBergen Corp. 81,453 4,712
o Amgen, Inc. 950,939 58,302
o Anthem, Inc. 105,740 7,258
Bausch & Lomb, Inc. 39,537 1,390
Baxter International, Inc. 434,502 9,994
Becton Dickinson & Co. 188,676 6,679
o Biogen, Inc. 109,407 4,156
Biomet, Inc. 190,456 5,801
o Boston Scientific Corp. 306,666 13,202
Bristol-Myers Squibb Co. 1,428,708 36,489
C.R. Bard, Inc. 41,129 2,607
Cardinal Health, Inc. 336,074 18,578
o Chiron Corp. 138,078 5,638
Eli Lilly & Co. 830,027 52,972
o Forest Laboratories, Inc. 268,240 13,873
o Genzyme Corp. -- General
Division 159,986 6,444
o Guidant Corp. 227,874 8,885
HCA, Inc. 379,822 12,192
See financial notes.
15
SCHWAB S&P 500 FUND -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Health Management Associates, Inc.,
Class A 176,129 3,005
o Humana, Inc. 124,343 1,374
IMS Health, Inc. 179,107 2,758
(7) Johnson & Johnson 2,194,256 123,668
o King Pharmaceuticals, Inc. 175,724 2,216
o Manor Care, Inc. 74,359 1,446
McKesson Corp. 212,583 5,897
o Medimmune, Inc. 185,581 6,546
Medtronic, Inc. 903,124 43,115
(10) Merck & Co., Inc. 1,659,642 96,558
(4) Pfizer, Inc. 5,888,511 181,072
o Quest Diagnostics 77,055 4,604
o Quintiles Transnational Corp. 88,081 1,238
Schering-Plough Corp. 1,081,484 19,575
o St. Jude Medical, Inc. 131,292 6,888
Stryker Corp. 146,297 9,803
o Tenet Healthcare Corp. 360,505 5,350
UnitedHealth Group, Inc. 224,583 20,691
o Watson Pharmaceuticals, Inc. 79,237 2,303
o WellPoint Health Networks, Inc. 111,422 8,461
Wyeth 980,382 42,676
o Zimmer Holdings, Inc. 142,292 6,674
-------
918,796
HOUSEHOLD PRODUCTS 2.5%
------------------------------------------------------------------
Alberto-Culver Co., Class B 43,951 2,166
Avon Products, Inc. 173,527 10,094
Clorox Co. 165,110 7,466
Colgate-Palmolive Co. 398,239 22,767
The Gillette Co. 771,377 23,489
International Flavors & Fragrances,
Inc. 69,728 2,216
Procter & Gamble Co. 955,013 85,808
-------
154,006
INSURANCE 5.1%
------------------------------------------------------------------
ACE Ltd. 191,700 6,341
Aetna, Inc. 111,347 5,545
AFLAC, Inc. 381,064 12,465
The Allstate Corp. 519,300 19,624
AMBAC Financial Group, Inc. 79,954 4,665
(8) American International
Group, Inc. 1,929,250 111,800
AON Corp. 228,426 5,062
Chubb Corp. 126,977 6,716
CIGNA Corp. 108,771 5,689
Cincinnati Financial Corp. 118,208 4,356
Hartford Financial Services
Group, Inc. 190,767 7,776
Jefferson-Pilot Corp. 106,614 4,274
John Hancock Financial
Services, Inc. 211,007 6,123
Lincoln National Corp. 129,597 4,142
Loews Corp. 138,787 5,728
Marsh & McLennan Cos., Inc. 396,020 18,882
MBIA, Inc. 105,893 4,733
Metlife, Inc. 515,018 14,796
MGIC Investment Corp. 73,579 3,345
Principal Financial Group, Inc. 246,724 7,180
The Progressive Corp. 168,868 11,483
Prudential Financial, Inc. 418,600 13,383
Safeco Corp. 100,621 3,875
St. Paul Cos., Inc. 166,394 5,714
Torchmark Corp. 86,710 3,360
Travelers Property Casualty Corp.,
Class B 741,599 12,051
UnumProvident Corp. 178,126 2,048
XL Capital Ltd., Class A 100,565 8,277
-------
319,433
MEDIA 4.0%
------------------------------------------------------------------
o AOL Time Warner, Inc. 3,303,276 45,189
o Clear Channel Communications,
Inc. 450,322 17,612
o Comcast Corp., Class A 1,705,510 54,423
Dow Jones & Co., Inc. 60,009 2,376
Gannett Co., Inc. 197,769 14,975
Knight-Ridder, Inc. 61,087 3,943
The McGraw-Hill Cos., Inc. 144,062 8,412
Meredith Corp. 35,218 1,522
New York Times Co., Class A 113,850 5,281
R.R. Donnelley & Sons Co. 83,996 1,693
Tribune Co. 226,639 11,101
o Viacom, Inc., Class B 1,302,069 56,523
The Walt Disney Co. 1,504,405 28,072
-------
251,122
See financial notes.
16
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
MISCELLANEOUS FINANCE 7.5%
------------------------------------------------------------------
American Express Co. 972,181 36,807
The Bear Stearns Cos., Inc. 73,729 4,928
Capital One Financial Corp. 164,511 6,888
/ The Charles Schwab Corp. 984,150 8,493
Charter One Financial, Inc. 165,453 4,806
(6) Citigroup, Inc. 3,798,439 149,089
Countrywide Financial Corp. 93,616 6,328
Fannie Mae 735,327 53,230
Federated Investors, Inc., Class B 81,300 2,219
Franklin Resources, Inc. 189,688 6,616
Freddie Mac 515,802 29,865
Goldman Sachs Group, Inc. 349,700 26,542
Janus Capital Group, Inc. 164,607 2,288
Lehman Brothers Holdings, Inc. 178,204 11,222
MBNA Corp. 943,593 17,834
Merrill Lynch & Co., Inc. 638,834 26,224
Morgan Stanley 799,139 35,762
SLM Corp. 114,561 12,831
T. Rowe Price Group, Inc. 91,307 2,787
Washington Mutual, Inc. 707,421 27,943
-------
472,702
NON-FERROUS METALS 0.3%
------------------------------------------------------------------
Alcoa, Inc. 621,387 14,249
Engelhard Corp. 95,939 2,355
Freeport-McMoran Copper & Gold, Inc.,
Class B 117,615 2,036
o Phelps Dodge Corp. 63,480 1,980
------
20,620
OIL: DOMESTIC 0.8%
------------------------------------------------------------------
Amerada Hess Corp. 66,461 3,001
Ashland, Inc. 49,145 1,457
ConocoPhillips 501,648 25,233
Kerr-McGee Corp. 82,970 3,494
Marathon Oil Corp. 228,879 5,212
Sunoco, Inc. 55,502 2,065
Transocean, Inc. 235,599 4,488
Unocal Corp. 189,422 5,247
------
50,197
OIL: INTERNATIONAL 3.6%
------------------------------------------------------------------
ChevronTexaco Corp. 790,957 49,680
(5) Exxon Mobil Corp. 4,985,147 175,477
-------
225,157
OPTICAL & PHOTO 0.1%
------------------------------------------------------------------
Eastman Kodak Co. 220,974 6,609
PAPER & FOREST PRODUCTS 0.8%
------------------------------------------------------------------
Boise Cascade Corp. 43,653 1,003
Georgia-Pacific Corp. 183,018 2,826
International Paper Co. 353,813 12,649
Kimberly-Clark Corp. 382,100 19,017
o Louisiana-Pacific Corp. 79,408 641
MeadWestvaco Corp. 147,777 3,486
Temple-Inland, Inc. 39,926 1,809
Weyerhaeuser Co. 163,297 8,098
------
49,529
PRODUCER GOODS & MANUFACTURING 5.2%
------------------------------------------------------------------
o American Standard Cos., Inc. 55,900 3,980
Avery Dennison Corp. 81,772 4,335
Caterpillar, Inc. 255,101 13,418
Cooper Industries Ltd., Class A 68,442 2,539
o Corning, Inc. 880,375 4,772
Deere & Co. 178,292 7,850
Dover Corp. 149,706 4,303
Emerson Electric Co. 313,181 15,878
=(1) General Electric Co. 7,354,170 216,580
Honeywell International, Inc. 632,280 14,922
Illinois Tool Works, Inc. 226,165 14,470
Ingersoll-Rand Co., Class A 124,964 5,508
Johnson Controls, Inc. 66,334 5,455
o Millipore Corp. 33,784 1,154
Pall Corp. 92,974 1,964
Parker Hannifin Corp. 87,418 3,556
Snap-On, Inc. 44,189 1,297
W.W. Grainger, Inc. 68,199 3,147
-------
325,128
RAILROAD & SHIPPING 0.5%
------------------------------------------------------------------
Burlington Northern Santa Fe
Corp. 276,477 7,786
CSX Corp. 159,740 5,108
See financial notes.
17
SCHWAB S&P 500 FUND -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Norfolk Southern Corp. 283,782 6,019
Union Pacific Corp. 189,337 11,269
-------
30,182
REAL PROPERTY 0.4%
------------------------------------------------------------------
Apartment Investment &
Management Co., Class A 68,500 2,587
Equity Office Properties Trust 301,506 7,830
Equity Residential 198,329 5,139
Plum Creek Timber Co., Inc. 134,500 3,128
Simon Property Group, Inc. 138,000 5,067
-------
23,751
RETAIL 7.3%
------------------------------------------------------------------
Albertson's, Inc. 277,510 5,511
o AutoZone, Inc. 72,177 5,833
o Bed, Bath & Beyond, Inc. 217,687 8,601
o Best Buy Co., Inc. 238,472 8,246
o Big Lots, Inc. 87,567 1,096
Circuit City Stores, Inc. 158,574 909
o Costco Wholesale Corp. 337,933 11,703
CVS Corp. 286,727 6,942
Dillards, Inc., Class A 62,888 879
Dollar General Corp. 248,824 3,618
Family Dollar Stores, Inc. 124,990 4,273
o Federated Department Stores,
Inc. 143,646 4,398
o The Gap, Inc. 652,336 10,848
Home Depot, Inc. 1,718,411 48,339
J.C. Penney Co., Inc.
Holding Co. 198,906 3,393
o Kohl's Corp. 242,271 13,761
o Kroger Co. 566,385 8,099
Limited Brands, Inc. 385,598 5,607
Lowe's Cos., Inc. 576,019 25,282
The May Department
Stores Co. 213,401 4,614
Nordstrom, Inc. 100,076 1,734
o Office Depot, Inc. 227,133 2,876
RadioShack Corp. 123,208 2,921
o Safeway, Inc. 323,777 5,381
Sears, Roebuck & Co. 231,260 6,554
o Staples, Inc. 349,342 6,651
Target Corp. 670,115 22,409
Tiffany & Co. 105,553 2,928
TJX Cos., Inc. 386,866 7,447
o Toys 'R' Us, Inc. 160,316 1,643
=(3) Wal-Mart Stores, Inc. 3,263,241 183,786
Walgreen Co. 756,444 23,344
Winn-Dixie Stores, Inc. 105,395 1,321
o Yum! Brands, Inc. 218,498 5,397
-------
456,344
STEEL 0.1%
------------------------------------------------------------------
Allegheny Technologies, Inc. 60,584 252
Nucor Corp. 58,905 2,406
United States Steel Corp. 75,446 1,080
Worthington Industries, Inc. 61,657 828
-------
4,566
TELEPHONE 3.8%
------------------------------------------------------------------
Alltel Corp. 228,668 10,715
AT&T Corp. 585,140 9,977
o AT&T Wireless Services, Inc. 2,019,732 13,048
o Avaya, Inc. 271,675 1,060
BellSouth Corp. 1,372,508 34,985
CenturyTel, Inc. 105,133 3,096
o Citizens Communications Co. 211,157 2,308
o Nextel Communications, Inc.,
Class A 758,771 11,222
o Qwest Communications
International, Inc. 1,243,142 4,687
SBC Communications, Inc. 2,452,433 57,289
Scientific-Atlanta, Inc. 112,699 1,831
Sprint Corp. (FON Group) 660,155 7,598
o Sprint Corp. (PCS Group) 731,062 2,559
Verizon Communications,
Inc. 2,034,622 76,054
-------
236,429
TOBACCO 0.1%
------------------------------------------------------------------
R.J. Reynolds Tobacco Holdings,
Inc. 63,900 1,800
UST, Inc. 125,374 3,928
-------
5,728
TRAVEL & RECREATION 0.5%
------------------------------------------------------------------
Brunswick Corp. 66,972 1,462
Carnival Corp. 464,912 12,827
See financial notes.
18
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Harrah's Entertainment, Inc. 81,797 3,222
Hilton Hotels Corp. 278,497 3,710
Marriott International, Inc.,
Class A 174,134 6,253
Sabre Holdings Corp. 104,353 2,182
Starwood Hotels & Resorts
Worldwide, Inc. 145,921 3,916
-------
33,572
TRUCKING & FREIGHT 0.9%
------------------------------------------------------------------
Paccar, Inc. 86,970 5,080
Ryder Systems, Inc. 45,213 1,123
United Parcel Service, Inc.,
Class B 829,469 51,527
-------
57,730
UTILITIES: ELECTRIC & GAS 2.8%
------------------------------------------------------------------
o The AES Corp. 402,890 2,421
Allegheny Energy, Inc. 93,242 774
Ameren Corp. 116,880 4,790
American Electric Power Co.,
Inc. 284,985 7,518
o Calpine Corp. 283,341 1,521
Centerpoint Energy, Inc. 226,615 1,790
Cinergy Corp. 125,058 4,269
CMS Energy Corp. 97,546 608
Consolidated Edison, Inc. 155,670 6,051
Constellation Energy Group, Inc. 120,786 3,537
Dominion Resources, Inc. 228,182 13,504
DTE Energy Co. 122,383 4,934
Duke Energy Corp. 657,512 11,566
Dynegy, Inc., Class A 266,551 1,173
o Edison International 242,577 3,539
El Paso Corp. 434,325 3,257
Entergy Corp. 166,608 7,766
Exelon Corp. 237,896 12,618
FirstEnergy Corp. 218,645 7,375
FPL Group, Inc. 135,198 8,229
KeySpan Corp. 114,365 3,874
Kinder Morgan, Inc. 88,839 4,177
o Mirant Corp. 300,463 994
Nicor, Inc. 31,789 956
NiSource, Inc. 183,455 3,467
Peoples Energy Corp. 27,820 1,081
o PG&E Corp. 297,120 4,451
Pinnacle West Capital Corp. 66,250 2,201
PPL Corp. 120,248 4,353
Progress Energy, Inc. 173,355 7,243
Public Service Enterprise
Group, Inc. 162,439 6,249
Sempra Energy 157,481 4,227
The Southern Co. 524,855 15,268
TECO Energy, Inc. 127,169 1,372
Texas Genco Holdings, Inc. 58 1
TXU Corp. 235,850 4,698
Williams Cos., Inc. 390,973 2,717
Xcel Energy, Inc. 294,875 3,987
-------
178,556
SHORT-TERM INVESTMENT 0.2% of investments
Provident Institutional
TempFund 10,974,034 10,974
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
U.S. TREASURY OBLIGATIONS
0.0% of investments
= U.S. Treasury Bills
1.08%-1.15%, 06/19/03 550 549
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
19
SCHWAB S&P 500 FUND -- Financials
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- ------------------------------------------------------------------------
Investments, at market value
(including $311,879 of securities on loan) $6,269,273 a
Collateral held for securities on loan 321,409
Receivables:
Fund shares sold 6,955
Interest 8
Dividends 6,608
Income from lending securities 13
Prepaid expenses + 47
------------
TOTAL ASSETS 6,604,313
LIABILITIES
- ------------------------------------------------------------------------
Collateral held for securities on loan 321,409
Payables:
Fund shares redeemed 6,679
Investments bought 6,072
Investment adviser and administrator fees 103
Transfer agent and shareholder service fees 67
Accrued expenses + 610
------------
TOTAL LIABILITIES 334,940
NET ASSETS
- ------------------------------------------------------------------------
TOTAL ASSETS 6,604,313
TOTAL LIABILITIES - 334,940
------------
NET ASSETS $6,269,373
NET ASSETS BY SOURCE
Capital received from investors 7,639,909
Net investment income not yet distributed 28,227
Net realized capital losses (627,965)
Net unrealized capital losses (770,798) b
NET ASSET VALUE (NAV)
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $2,933,127 206,882 $14.18
Select Shares(R) $3,112,982 219,069 $14.21
e.Shares(R) $ 223,264 15,748 $14.18
a The fund paid $7,040,552 for these securities. Not counting short-term
obligations and government securities, the fund paid $192,617 for securities
during the report period and received $148,188 from securities it sold or
that matured.
b These derive from investments and futures. As of the report date, the fund
had thirty-two open S&P 500 futures contracts due to expire on June 20, 2003,
with a contract value of $7,329 and unrealized gains of $481.
FEDERAL TAX DATA
- ----------------------------------------------------
PORTFOLIO COST $ 7,132,787
NET UNREALIZED GAINS AND LOSSES:
Gains $ 1,019,944
Losses + (1,883,458)
--------------
($ 863,514)
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS: $ 75,064
Ordinary income
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2008 $ 26,504
2009 50,224
2010 + 401,760
--------------
$ 478,488
See financial notes.
20
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- ------------------------------------------------------------------------
Dividends $ 54,222
Interest 33
Lending of securities + 473
------------
TOTAL INVESTMENT INCOME 54,728
NET REALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------
Net realized losses on investments sold (55,391)
Net realized losses on futures contracts + (303)
------------
NET REALIZED LOSSES (55,694)
NET UNREALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------
Net unrealized gains on investments 269,631
Net unrealized gains on futures contracts + 465
------------
NET UNREALIZED GAINS 270,096
EXPENSES
- ------------------------------------------------------------------------
Investment adviser and administrator fees 5,111 a
Transfer agent and shareholder service fees:
Investor Shares 3,441 b
Select Shares(R) 1,479 b
e.Shares(R) 107 b
Trustees' fees 19 c
Custodian fees 94
Portfolio accounting fees 461
Professional fees 28
Registration fees 54
Shareholder reports 366
Interest expense 8
Other expenses + 55
------------
Total expenses 11,223
Expense reduction - 3,195 d
------------
NET EXPENSES 8,028
INCREASE IN NET ASSETS FROM OPERATIONS
- ------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 54,728
NET EXPENSES - 8,028
------------
NET INVESTMENT INCOME 46,700
NET REALIZED LOSSES (55,694)e
NET UNREALIZED GAINS + 270,096 e
------------
INCREASE IN NET ASSETS FROM OPERATIONS $ 261,102
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.
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.
c For the fund's independent trustees only.
d Includes $855 from the investment adviser (CSIM) and $2,340 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 29, 2004, as follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
- ---------------------------------------
Investor Shares 0.37
Select Shares 0.19
e.Shares 0.28
Prior to March 1, 2003, the limit was 0.35% for the Investor Shares. This
limit doesn't include interest, taxes and certain non-routine expenses.
e These add up to a net gain on investments of $214,402.
See financial notes.
21
SCHWAB S&P 500 FUND -- Financials
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for current period are unaudited.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income $ 46,700 $ 91,487
Net realized losses (55,694) (350,232)
Net unrealized gains or losses + 270,096 (899,126)
-----------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 261,102 (1,157,871)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income
Investor Shares 40,628 33,227
Select Shares(R) 49,532 44,304
e.Shares(R) + 3,378 3,401
-----------------------------------
TOTAL DIVIDENDS FROM NET INVESTMENT INCOME $ 93,538 $ 80,932 a
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
SHARES SOLD
Investor Shares 23,478 $ 320,651 55,877 $ 908,494
Select Shares 26,179 357,604 69,223 1,121,910
e.Shares + 2,723 37,075 5,190 83,737
----------- ------------- ------------ ------------
TOTAL SHARES SOLD 52,380 $ 715,330 130,290 $ 2,114,141
SHARES REINVESTED
Investor Shares 2,972 $ 40,628 1,850 $ 31,991
Select Shares 3,615 49,532 2,314 40,073
e.Shares + 247 3,378 178 3,074
----------- ------------- ------------ ------------
TOTAL SHARES REINVESTED 6,834 $ 93,538 4,342 $ 75,138
SHARES REDEEMED
Investor Shares (19,744) ($267,757) (44,191) ($692,759)
Select Shares (29,719) (405,173) (68,436) (1,061,022)
e.Shares + (3,206) (43,492) (7,834) (123,864)
----------- ------------- ------------ -------------
TOTAL SHARES REDEEMED (52,669) ($716,422) (120,461) ($1,877,645) b
NET INCREASE 6,545 $ 92,446 14,171 $ 311,634
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 435,154 $6,009,363 420,983 $ 6,936,532
Total increase or
decrease + 6,545 260,010 14,171 (927,169)c
------------------------------------------------------
END OF PERIOD 441,699 $6,269,373 435,15 $6,009,363 d
a The tax-basis components of distributions paid for the prior period are:
Ordinary Income $80,932
Long-term capital gains $ --
b Dollar amounts are net of proceeds received from early withdrawal fees the
fund charges on shares sold 180 days or less after buying them.
CURRENT PERIOD
Investor Shares $ 107
Select Shares 183
e.Shares + 13
----------
TOTAL $ 303
PRIOR PERIOD
Investor Shares $ 423
Select Shares 438
e.Shares + 28
----------
TOTAL $ 889
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 net investment income not yet distributed in the amount of $28,227
and $75,065 for the current period and the prior period, respectively.
Percent of fund shares owned by other SchwabFunds(R) as of the end of the
current period:
SCHWAB MARKETTRACK PORTFOLIOS(R)
All Equity Portfolio 2.5%
Growth Portfolio 1.9%
Balanced Portfolio 1.3%
Conservative Portfolio 0.7%
See financial notes.
22
SCHWAB 1000 FUND(R)
PERFORMANCE as of 4/30/03: Investor Shares
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1,2
This bar chart compares pre-tax performance of the fund's Investor Shares with
the Schwab 1000 Index(R) and the Morningstar Large-Cap Blend Fund category. The
table below the chart shows two types of after-tax returns.
[BAR CHART]
INVESTOR SCHWAB 1000 CATEGORY
SHARES INDEX AVERAGE
6 MONTHS 4.41% 4.55% 3.31%
1 YEAR -13.45% -13.23% -14.72%
5 YEARS -2.29% -2.04% -3.05%
10 YEARS 9.27% 9.69% 8.06%
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
-------- ------- -------- --------
INVESTOR CATEGORY INVESTOR CATEGORY INVESTOR CATEGORY INVESTOR CATEGORY
TOTAL RETURNS AFTER TAX SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
- -----------------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 3.90% 1.05% -13.87% -16.49% -2.61% -4.40% 8.75% 5.96%
- -----------------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 2.73% 0.75% -8.41% -10.00% -1.95% -2.60% 7.59% 6.06%
- -----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A $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 two
indices: the Schwab 1000 Index and the S&P 500(R) Index.
$24,270 INVESTOR SHARES
$25,237 SCHWAB 1000 INDEX
$25,137 S&P 500 INDEX
[LINE GRAPH]
INVESTOR Schwab 1000 S&P 500
SHARES Index Index
30-Apr-93 10000 10000 10000
May-93 10290 10297 10268
Jun-93 10339 10350 10298
Jul-93 10297 10323 10256
Aug-93 10689 10723 10645
Sep-93 10656 10692 10563
Oct-93 10807 10851 10782
Nov-93 10656 10699 10680
Dec-93 10845 10888 10809
Jan-94 11174 11234 11176
Feb-94 10887 10952 10873
Mar-94 10406 10466 10400
Apr-94 10524 10590 10534
May-94 10651 10719 10705
Jun-94 10363 10433 10443
Jul-94 10696 10775 10785
Aug-94 11147 11243 11227
Sep-94 10892 10987 10953
Oct-94 11105 11201 11198
Nov-94 10705 10800 10790
Dec-94 10833 10941 10950
Jan-95 11109 11222 11234
Feb-95 11549 11683 11671
Mar-95 11850 11996 12015
Apr-95 12143 12299 12368
May-95 12583 12754 12862
Jun-95 12919 13105 13160
Jul-95 13410 13598 13596
Aug-95 13513 13705 13630
Sep-95 14048 14265 14205
Oct-95 13979 14193 14154
Nov-95 14582 14819 14774
Dec-95 14799 15040 15059
Jan-96 15236 15497 15571
Feb-96 15462 15727 15716
Mar-96 15602 15879 15866
Apr-96 15865 16149 16100
May-96 16240 16540 16513
Jun-96 16196 16513 16576
Jul-96 15427 15730 15844
Aug-96 15847 16154 16178
Sep-96 16729 17059 17087
Oct-96 17070 17404 17559
Nov-96 18302 18664 18886
Dec-96 17992 18361 18512
Jan-97 19027 19424 19667
Feb-97 19098 19493 19823
Mar-97 18248 18642 19010
Apr-97 19230 19626 20143
May-97 20451 20894 21367
Jun-97 21300 21777 22325
Jul-97 23025 23536 24100
Aug-97 21919 22424 22750
Sep-97 23096 23629 23994
Oct-97 22335 22853 23193
Nov-97 23272 23828 24267
Dec-97 23735 24305 24684
Jan-98 23905 24492 24958
Feb-98 25665 26318 26758
Mar-98 26970 27681 28128
Apr-98 27247 27983 28412
May-98 26648 27372 27923
Jun-98 27720 28470 29057
Jul-98 27336 28073 28749
Aug-98 23252 23881 24597
Sep-98 24753 25443 26174
Oct-98 26719 27499 28302
Nov-98 28381 29216 30017
Dec-98 30181 31066 31746
Jan-99 31325 32246 33073
Feb-99 30271 31198 32045
Mar-99 31486 32441 33326
Apr-99 32765 33780 34616
May-99 32009 33009 33799
Jun-99 33603 34680 35675
Jul-99 32532 33574 34562
Aug-99 32217 33299 34389
Sep-99 31360 32309 33447
Oct-99 33433 34489 35564
Nov-99 34243 35294 36287
Dec-99 36520 37659 38424
Jan-00 34806 35905 36495
Feb-00 34815 35951 35804
Mar-00 37825 39079 39306
Apr-00 36402 37611 38123
May-00 35450 36632 37341
Jun-00 36402 37635 38264
Jul-00 35867 37058 37667
Aug-00 38296 39577 40006
Sep-00 36528 37749 37894
Oct-00 36220 37448 37735
Nov-00 33129 34256 34761
Dec-00 33520 34654 34932
Jan-01 34660 35808 36172
Feb-01 31448 32491 32873
Mar-01 29304 30280 30789
Apr-01 31695 32768 33181
May-01 31896 32983 33403
Jun-01 31193 32263 32592
Jul-01 30773 31841 32272
Aug-01 28811 29821 30252
Sep-01 26393 27322 27808
Oct-01 26986 27945 28339
Nov-01 29048 30086 30512
Dec-01 29412 30472 30781
Jan-02 29071 30125 30331
Feb-02 28510 29553 29746
Mar-02 29651 30746 30865
Apr-02 28040 29084 28994
May-02 27773 28812 28780
Jun-02 25766 26730 26730
Jul-02 23833 24729 24648
Aug-02 23981 24889 24808
Sep-02 21486 22303 22112
Oct-02 23244 24140 24058
Nov-02 24588 25539 25475
Dec-02 23179 24079 23979
Jan-03 22600 23491 23351
Feb-03 22228 23109 23001
Mar-03 22479 23370 23224
30-Apr-03 24270 25237 25137
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.
The fund's share price and principal values change, and when you sell your
shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results. Results for the report period
are not annualized.
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 4/30/03 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. As of
4/30/03, the total number of funds in the Morningstar Large-Cap Blend Fund
category for the six-month, one-, five- and ten-year periods was 1,410, 1,362,
711 and 215, respectively. These funds may or may not use tax-efficient
strategies.
2 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower.
Schwab Equity Index Funds
23
SCHWAB 1000 FUND(R)
Select Shares(R)
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Select Shares with
the Schwab 1000 Index(R) and the Morningstar Large-Cap Blend Fund category.
The table below the chart shows two types of after-tax returns.
[BAR CHART]
SELECT SHARES SCHWAB 1000 INDEX CATEGORY AVERAGE
6 MONTH 4.46% 4.55% 3.31%
1 YEAR -13.37% -13.23% -14.72%
5 YEARS -2.17% -2.04% -3.05%
Since Inception:5/9/97 3.41% 3.59% n/a
6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION
-------- ------ ------- ---------------
TOTAL RETURNS AFTER TAX SELECT CATEGORY SELECT CATEGORY SELECT CATEGORY SELECT CATEGORY
SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 3.90% 1.05% -13.84% -16.49% -2.54% -4.40% 3.00% --
- ------------------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 2.76% 0.75% -8.37% -10.00% -1.88% -2.60% 2.58% --
- ------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A $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 two indices: the Schwab 1000
Index and the S&P 500(R) Index.
$61,025 SELECT SHARES
$61,676 SCHWAB 1000 INDEX
$59,916 S&P 500 INDEX
[LINE GRAPH]
SELECT SCHWAB 1000 S&P 500
Shares Index Index
19-May-97 50000 50000 50000
May-97 51040 51064 50930
Jun-97 53180 53222 53212
Jul-97 57490 57518 57442
Aug-97 54750 54801 54225
Sep-97 57685 57746 57191
Oct-97 55785 55851 55281
Nov-97 58150 58233 57841
Dec-97 59325 59398 58836
Jan-98 59725 59855 59489
Feb-98 64145 64318 63778
Mar-98 67405 67648 67043
Apr-98 68100 68387 67720
May-98 66625 66893 66556
Jun-98 69305 69578 69258
Jul-98 68345 68606 68524
Aug-98 58140 58362 58629
Sep-98 61915 62179 62387
Oct-98 66825 67206 67459
Nov-98 71000 71400 71547
Dec-98 75505 75922 75668
Jan-99 78385 78805 78831
Feb-99 75750 76244 76379
Mar-99 78795 79282 79434
Apr-99 82015 82553 82509
May-99 80120 80671 80561
Jun-99 84110 84753 85033
Jul-99 81450 82052 82380
Aug-99 80665 81380 81968
Sep-99 78545 78960 79721
Oct-99 83725 84287 84767
Nov-99 85755 86255 86491
Dec-99 91470 92034 91585
Jan-00 87180 87747 86987
Feb-00 87225 87861 85341
Mar-00 94765 95504 93687
Apr-00 91200 91917 90867
May-00 88835 89525 89004
Jun-00 91220 91977 91203
Jul-00 89905 90566 89780
Aug-00 95990 96722 95356
Sep-00 91585 92255 90322
Oct-00 90810 91519 89942
Nov-00 83065 83717 82855
Dec-00 84050 84689 83261
Jan-01 86935 87511 86217
Feb-01 78875 79404 78354
Mar-01 73515 74002 73386
Apr-01 79515 80081 79088
May-01 80020 80608 79618
Jun-01 78280 78847 77683
Jul-01 77225 77815 76922
Aug-01 72325 72879 72107
Sep-01 66255 66771 66280
Oct-01 67745 68296 67546
Nov-01 72920 73526 72727
Dec-01 73845 74470 73367
Jan-02 72990 73622 72296
Feb-02 71600 72223 70901
Mar-02 74445 75140 73567
Apr-02 70445 71078 69108
May-02 69775 70413 68597
Jun-02 64710 65326 63713
Jul-02 59875 60436 58750
Aug-02 60245 60827 59132
Sep-02 53980 54506 52704
Oct-02 58420 58995 57342
Nov-02 61795 62414 60719
Dec-02 58255 58846 57155
Jan-03 56805 57410 55658
Feb-03 55865 56475 54823
Mar-03 56500 57115 55355
30-Apr-03 61025 61676 59916
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.
The fund's share price and principal values change, and when you sell your
shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results. Results for the report period
are not annualized.
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 4/30/03 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. As of
4/30/03, the total number of funds in the Morningstar Large-Cap Blend Fund
category for the six-month, one-and five-year periods was 1,410, 1,362 and
711, respectively. These funds may or may not use tax-efficient strategies.
2 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower.
Schwab Equity Index Funds
24
SCHWAB 1000 FUND(R)
FUND FACTS as of 4/30/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE 1
MARKET CAP Value Blend Growth
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 998
- -----------------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $36,905
- -----------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 24.4
- -----------------------------------------------------
PRICE/BOOK RATIO (P/B) 4.4
- -----------------------------------------------------
PORTFOLIO TURNOVER RATE 2 5%
- -----------------------------------------------------
EXPENSE RATIO 3
Investor Shares 0.51%
Select Shares(R) 0.36%
- -----------------------------------------------------
TOP HOLDINGS 4
% OF
SECURITY INVESTMENTS
- -----------------------------------------------------
(1) GENERAL ELECTRIC CO. 3.1%
- ----------------------------------------------------
(2) MICROSOFT CORP. 2.9%
- ----------------------------------------------------
(3) WAL-MART STORES, INC. 2.6%
- ----------------------------------------------------
(4) PFIZER, INC. 2.6%
- ----------------------------------------------------
(5) EXXON MOBIL CORP. 2.5%
- ----------------------------------------------------
(6) CITIGROUP, INC. 2.1%
- ----------------------------------------------------
(7) JOHNSON & JOHNSON 1.7%
- ----------------------------------------------------
(8) AMERICAN INTERNATIONAL GROUP, INC. 1.6%
- ----------------------------------------------------
(9) INTERNATIONAL BUSINESS MACHINES CORP. 1.5%
- ----------------------------------------------------
(10) MERCK & CO., INC. 1.4%
- ----------------------------------------------------
TOTAL 22.0%
INDUSTRY WEIGHTINGS
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
14.3% HEALTHCARE/DRUGS & MEDICINE
8.7% BUSINESS MACHINES & SOFTWARE
8.3% MISCELLANEOUS FINANCE
7.9% BANKS
6.9% RETAIL
4.9% MEDIA
4.7% PRODUCER GOODS & MANUFACTURING
4.7% INSURANCE
4.4% FOOD & AGRICULTURE
35.2% OTHER
1 Source: Morningstar, Inc. This style assessment is the result of comparing
the fund with the S&P 500(R) Index, based on P/E, P/B and median market cap.
The assessment reflects the fund's portfolio as of 4/30/03, which may have
changed since then, and is not a precise indication of risk or
performance--past, present or future.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes and certain non-routine expenses).
4 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
Schwab Equity Index Funds
25
SCHWAB 1000 FUND(R) -- Financials
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
INVESTOR SHARES 4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- --------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 25.25 29.57 39.95 37.12 29.90 25.25
-----------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.16 0.31 0.26 0.26 0.26 0.27
Net realized and unrealized gains or losses 0.94 (4.36) (10.40) 2.83 7.21 4.64
-----------------------------------------------------------
Total income or loss from investment operations 1.10 (4.05) (10.14) 3.09 7.47 4.91
Less distributions:
Dividends from net investment income (0.32) (0.27) (0.24) (0.26) (0.25) (0.26)
-----------------------------------------------------------
Net asset value at end of period 26.03 25.25 29.57 39.95 37.12 29.90
-----------------------------------------------------------
Total return (%) 4.41 2 (13.87) (25.50) 8.34 25.12 19.63
RATIOS/SUPPLEMENTAL DATA (%)
- --------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.48 3 0.46 0.46 0.46 1 0.46 0.46
Expense reductions reflected in above ratio 0.04 3 0.06 0.05 0.04 0.05 0.05
Ratio of net investment income to
average net assets 1.32 3 1.04 0.78 0.63 0.78 1.02
Portfolio turnover rate 5 2 9 8 9 3 2
Net assets, end of period ($ x 1,000,000) 3,371 3,223 3,852 5,083 4,925 3,657
1 Would have been 0.47% if certain non-routine expenses (proxy fees) had been
included.
2 Not annualized.
3 Annualized.
See financial notes.
26
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
SELECT SHARES(R) 4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
- ----------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------------
Net asset valueat beginning of period 25.26 29.58 39.98 37.16 29.93 25.26
-------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.18 0.35 0.31 0.29 0.30 0.32
Net realized and unrealized gains or losses 0.93 (4.36) (10.41) 2.84 7.22 4.63
-------------------------------------------------------------
Total income or loss from investment operations 1.11 (4.01) (10.10) 3.13 7.52 4.95
Less distributions:
Dividends from net investment income (0.35) (0.31) (0.30) (0.31) (0.29) (0.28)
-------------------------------------------------------------
Net asset value at end of period 26.02 25.26 29.58 39.98 37.16 29.93
-------------------------------------------------------------
Total return (%) 4.46 2 (13.77) (25.40) 8.46 25.29 19.79
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.35 3 0.35 0.35 0.35 1 0.35 0.35
Expense reductions reflected in above ratio 0.02 3 0.02 0.01 -- 0.02 0.04
Ratio of net investment income to
average net assets 1.44 3 1.15 0.89 0.74 0.89 1.11
Portfolio turnover rate 5 2 9 8 9 3 2
Net assets, end of period ($ x 1,000,000) 1,692 1,588 1,911 2,159 2,214 1,041
1 Would have been 0.36% if certain non-routine expenses (proxy fees) had been
included.
2 Not annualized.
3 Annualized.
See financial notes.
27
SCHWAB 1000 FUND(R) -- Financials
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
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)
COST MARKET VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- -----------------------------------------------------------------------------
99.9% COMMON STOCK 3,846,418 5,055,387
0.1% SHORT-TERM INVESTMENT 6,931 6,931
0.0% U.S. TREASURY OBLIGATION 369 369
0.0% WARRANTS -- --
- -----------------------------------------------------------------------------
100.0% TOTAL INVESTMENTS 3,853,718 5,062,687
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 99.9% of investments
AEROSPACE / DEFENSE 1.4%
The Boeing Co. 444,182 12,117
Crane Co. 31,050 607
General Dynamics Corp. 106,400 6,604
Goodrich Corp. 61,892 871
Lockheed Martin Corp. 241,584 12,091
Northrop Grumman Corp. 96,597 8,496
Raytheon Co. 223,000 6,674
Rockwell Automation, Inc. 98,600 2,248
Rockwell Collins, Inc. 95,100 2,033
Textron, Inc. 71,400 2,106
United Technologies Corp. 248,427 15,355
-----------
69,202
AIR TRANSPORTATION 0.3%
----------------------------------------------------------------------
Delta Air Lines, Inc. 64,200 821
FedEx Corp. 157,160 9,411
Southwest Airlines Co. 408,225 6,515
-----------
16,747
ALCOHOLIC BEVERAGES 0.5%
----------------------------------------------------------------------
Adolph Coors Co., Class B 18,800 1,006
Anheuser-Busch Cos., Inc. 453,600 22,626
Brown-Forman Corp., Class B 31,578 2,417
o Constellation Brands, Inc.,
Class A 47,000 1,260
-----------
27,309
APPAREL 0.5%
----------------------------------------------------------------------
o Abercrombie & Fitch Co., Class A 50,700 1,667
o Chico's FAS, Inc. 44,200 1,076
o Coach, Inc. 48,164 2,096
Foot Locker, Inc. 73,400 807
o Jones Apparel Group, Inc. 67,100 1,914
Liz Claiborne, Inc. 58,000 1,887
Nike, Inc., Class B 139,900 7,489
o Polo Ralph Lauren Corp. 23,300 546
o Reebok International Ltd. 31,200 969
Talbots, Inc. 30,000 859
o Timberland Co., Class A 19,100 955
VF Corp. 58,600 2,305
-----------
22,570
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.3%
----------------------------------------------------------------------
o Advance Auto Parts, Inc. 18,600 925
o American Axle & Manufacturing Holdings, Inc. 25,900 646
ArvinMeritor, Inc. 35,400 560
o Autonation, Inc. 162,600 2,252
BorgWarner, Inc. 14,000 821
Carlisle Cos., Inc. 16,000 726
o Carmax, Inc. 53,600 1,134
Cooper Tire & Rubber Co. 38,300 539
o Copart, Inc. 48,000 405
Cummins, Inc. 21,600 586
Dana Corp. 77,189 717
Danaher Corp. 81,200 5,601
Delphi Corp. 295,400 2,481
Donaldson Co., Inc. 22,900 914
Eaton Corp. 37,700 3,094
Ford Motor Co. 970,670 9,998
General Motors Corp. 295,934 10,668
See financial notes.
28
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o General Motors Corp., Class H 505,194 5,961
Genuine Parts Co. 92,775 2,966
Goodyear Tire & Rubber Co. 91,200 522
Harley-Davidson, Inc. 159,300 7,079
o Lear Corp. 34,200 1,359
o Navistar International Corp. 35,500 991
o O'Reilly Automotive, Inc. 27,800 825
Oshkosh Truck Corp. 8,900 498
Polaris Industries, Inc. 11,900 629
o SPX Corp. 43,800 1,481
Superior Industries International,
Inc. 14,400 570
-----------
64,948
BANKS 7.9%
----------------------------------------------------------------------
AmSouth Bancorp. 186,875 3,934
Associated Banc-Corp. 38,825 1,357
Bancorpsouth, Inc. 40,800 820
Bank of America Corp. 795,322 58,894
Bank of Hawaii Corp. 33,750 1,112
The Bank of New York Co., Inc. 404,100 10,688
Bank One Corp. 616,093 22,210
Banknorth Group, Inc. 85,800 2,049
BB&T Corp. 251,000 8,183
Citizens Banking Corp. 23,000 528
City National Corp. 26,000 1,070
The Colonial BancGroup, Inc. 64,400 820
Comerica, Inc. 92,774 4,037
Commerce Bancorp, Inc. N.J. 35,100 1,428
Commerce Bancshares, Inc. 34,848 1,319
Community First Bankshares, Inc. 20,400 549
Compass Bancshares, Inc. 68,112 2,297
Cullen/Frost Bankers, Inc. 26,500 869
Fifth Third Bancorp 304,930 15,030
First Citizens BancShares, Inc.,
Class A 6,000 584
First Midwest Bancorp, Inc. 25,700 712
First Tennessee National Corp. 66,200 2,900
First Virginia Banks, Inc. 42,287 1,727
FirstMerit Corp. 44,000 902
FleetBoston Financial Corp. 553,815 14,687
FNB Corp. 22,800 694
Fulton Financial Corp. 55,388 1,104
Golden West Financial Corp. 81,900 6,177
GreenPoint Financial Corp. 51,800 2,474
Hibernia Corp., Class A 82,000 1,486
Hudson City Bancorp, Inc. 102,500 2,375
Hudson United Bancorp 23,500 784
Huntington Bancshares, Inc. 122,435 2,383
Independence Community Bank 29,700 777
J.P. Morgan Chase & Co. 1,054,590 30,952
KeyCorp, Inc. 222,946 5,375
M&T Bank Corp. 63,801 5,389
Marshall & Ilsley Corp. 115,470 3,397
Mellon Financial Corp. 226,088 5,980
Mercantile Bankshares Corp. 35,775 1,372
National City Corp. 323,400 9,689
National Commerce Financial Corp. 106,650 2,169
New York Community Bancorp., Inc. 55,800 1,937
North Fork Bancorp., Inc. 85,900 2,780
Northern Trust Corp. 116,850 4,101
Old National Bancorp. 32,962 719
Park National Corp. 7,100 699
Peoples Bank-Bridgeport 32,000 843
PNC Financial Services Group, Inc. 149,730 6,573
Popular, Inc. 70,800 2,587
Provident Financial Group, Inc. 25,400 601
o Providian Financial Corp. 150,400 1,108
Regions Financial Corp. 116,965 3,943
Roslyn Bancorp., Inc. 43,050 821
Sky Financial Group, Inc. 45,530 918
SouthTrust Corp. 182,474 4,901
State Street Corp. 176,100 6,169
SunTrust Banks, Inc. 149,456 8,552
Synovus Financial Corp. 159,662 3,109
Transatlantic Holdings, Inc. 27,300 1,856
Trustmark Corp. 32,000 787
U.S. Bancorp 1,011,753 22,410
Union Planters Corp. 105,000 2,997
UnionBanCal Corp. 80,200 3,240
United Bankshares, Inc. 21,900 633
Valley National Bancorp 49,600 1,312
Wachovia Corp. 720,020 27,512
Wells Fargo & Co. 894,932 43,189
Westamerica Bancorp. 17,400 750
See financial notes.
29
SCHWAB 1000 FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Whitney Holding Corp. 20,900 706
Wilmington Trust Corp. 34,000 915
Zions Bancorp. 47,300 2,330
-----------
400,281
BUSINESS MACHINES & SOFTWARE 8.7%
----------------------------------------------------------------------
o 3Com Corp. 191,150 994
Adobe Systems, Inc. 122,800 4,244
o Apple Computer, Inc. 189,600 2,692
Autodesk, Inc. 58,700 913
o BMC Software, Inc. 122,400 1,826
o CACI International, Inc., Class A 14,800 517
o Cisco Systems, Inc. 3,777,800 56,818
o Compuware Corp. 196,600 863
o Comverse Technology, Inc. 97,600 1,276
o Dell Computer Corp. 1,364,300 39,442
Diebold, Inc. 37,418 1,496
o EMC Corp. 1,158,600 10,532
Fair Isaac Corp. 26,350 1,372
o Gateway, Inc. 168,600 486
Hewlett-Packard Co. 1,614,540 26,317
IKON Office Solutions, Inc. 75,000 582
o Ingram Micro, Inc., Class A 78,400 784
(9) International Business Machines Corp. 894,000 75,901
o Juniper Networks, Inc. 198,600 2,030
o Lexmark International, Inc.,
Class A 67,400 5,022
o Maxtor Corp. 125,500 690
Microchip Technology, Inc. 105,700 2,198
=(2) Microsoft Corp. 5,660,300 144,734
o NCR Corp. 50,651 1,110
o Network Appliance, Inc. 178,600 2,372
o Novell, Inc. 189,600 521
o Novellus Systems, Inc. 79,400 2,226
o Oracle Corp. 2,803,614 33,307
Pitney Bowes, Inc. 125,100 4,392
~o Seagate Escrow Security 126,560 36
o Storage Technology Corp. 57,300 1,416
o Sun Microsystems, Inc. 1,689,900 5,577
o Sybase, Inc. 49,300 631
o Tech Data Corp. 29,400 706
Total System Services, Inc. 102,400 1,894
o Unisys Corp. 173,650 1,806
o Xerox Corp. 387,250 3,818
-----------
441,541
BUSINESS SERVICES 3.9%
----------------------------------------------------------------------
o Affiliated Computer Services, Inc.,
Class A 70,700 3,372
o Allied Waste Industries, Inc. 110,065 914
o Apollo Group, Inc., Class A 92,750 5,027
Automatic Data Processing, Inc. 315,900 10,624
o BEA Systems, Inc. 213,400 2,286
o BearingPoint, Inc. 98,600 806
o Career Education Corp. 24,000 1,443
o CDW Computer Centers, Inc. 43,700 1,863
o Cendant Corp. 541,648 7,735
o Ceridian Corp. 77,100 1,076
o Cerner Corp. 18,500 370
o Certegy, Inc. 34,600 865
o Checkfree Corp. 41,000 1,130
o ChoicePoint, Inc. 44,166 1,558
Cintas Corp. 90,400 3,245
o Citrix Systems, Inc. 88,900 1,686
Computer Associates International, Inc. 301,279 4,893
o Computer Sciences Corp. 98,696 3,252
o Concord EFS, Inc. 267,924 3,705
o Convergys Corp. 90,200 1,463
o Corinthian Colleges, Inc. 22,600 1,035
o Corporate Executive Board Co. 19,400 795
o D&B Corp. 38,700 1,463
Deluxe Corp. 32,200 1,417
o DeVry, Inc. 36,400 842
o DST Systems, Inc. 64,100 1,968
o eBay, Inc. 164,500 15,261
o Education Management Corp. 18,400 898
Electronic Data Systems Corp. 250,000 4,537
Equifax, Inc. 75,900 1,760
First Data Corp. 397,604 15,598
o Fiserv, Inc. 101,589 2,991
Global Payments, Inc. 19,200 595
o GTECH Holdings Corp. 29,600 997
H&R Block, Inc. 93,900 3,626
o Interactive Data Corp. 47,700 763
Interpublic Group of Cos., Inc. 200,650 2,287
o Intuit, Inc. 108,800 4,219
See financial notes.
30
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Iron Mountain, Inc. 44,200 1,761
o ITT Educational Services, Inc. 23,700 699
o J.D. Edwards & Co. 62,000 743
Jack Henry & Associates, Inc. 45,500 593
o Jacobs Engineering Group, Inc. 30,200 1,243
o Lamar Advertising Co. 44,300 1,591
Manpower, Inc. 39,800 1,309
o Mercury Interactive Corp. 44,000 1,493
Moody's Corp. 80,500 3,887
o National Instruments Corp. 26,600 853
o Network Associates, Inc. 81,400 930
Omnicom Group, Inc. 99,900 6,184
o Overture Services, Inc. 30,400 325
Paychex, Inc. 197,642 6,155
o PeopleSoft, Inc. 165,200 2,483
o Peregrine Systems, Inc. 102,600 29
o Perot Systems Corp., Class A 56,400 599
o Pixar, Inc. 26,800 1,565
o QLogic Corp. 48,700 2,142
The Reynolds & Reynolds Co., Class A 36,200 1,043
o Robert Half International, Inc. 90,200 1,468
o Sandisk Corp. 35,900 869
SEI Investments Co. 55,100 1,451
The ServiceMaster Co. 156,800 1,419
o Siebel Systems, Inc. 252,000 2,185
Sonoco Products Co. 50,141 1,096
o Stericycle, Inc. 21,700 853
o Sungard Data Systems, Inc. 149,200 3,208
o Symantec Corp. 77,500 3,406
o Synopsys, Inc. 39,300 1,912
o Thermo Electron Corp. 86,984 1,580
o TMP Worldwide, Inc. 57,900 971
o VeriSign, Inc. 123,335 1,532
o Veritas Software Corp. 216,379 4,762
Viad Corp. 45,900 923
Waste Management, Inc. 318,475 6,917
o Yahoo!, Inc. 311,200 7,712
----------
196,256
CHEMICAL 2.0%
----------------------------------------------------------------------
3M Co. 207,000 26,090
Air Products & Chemicals, Inc. 120,200 5,177
o Airgas, Inc. 37,300 755
Albemarle Corp. 21,700 586
Cabot Corp. 31,900 889
o Cabot Microelectronics Corp. 12,700 549
o Cytec Industries, Inc. 20,400 653
Dow Chemical Co. 482,252 15,741
E.I. du Pont de Nemours & Co. 525,089 22,332
Eastman Chemical Co. 40,125 1,225
Ecolab, Inc. 69,300 3,540
Great Lakes Chemical Corp. 26,200 643
Lubrizol Corp. 26,800 847
Lyondell Chemical Co. 83,200 1,211
PPG Industries, Inc. 90,100 4,371
Praxair, Inc. 86,000 4,995
Rohm & Haas Co. 117,014 3,874
RPM International, Inc. 59,800 739
The Sherwin-Williams Co. 77,900 2,172
Sigma-Aldrich Corp. 39,200 1,953
Valspar Corp. 26,100 1,127
----------
99,469
CONSTRUCTION 0.5%
----------------------------------------------------------------------
Centex Corp. 34,100 2,251
Clayton Homes, Inc. 70,782 878
D.R. Horton, Inc. 81,522 1,932
Florida Rock Industries, Inc. 14,900 566
Fluor Corp. 41,700 1,442
KB Home Corp. 25,000 1,232
Lafarge North America, Inc. 35,700 1,137
Lennar Corp., Class A 35,300 1,915
Martin Marietta Materials, Inc. 25,300 748
Masco Corp. 267,800 5,643
MDC Holdings, Inc. 13,900 641
o NVR, Inc. 5,700 2,039
Pulte Homes, Inc. 31,900 1,850
The Stanley Works 46,000 1,105
o Toll Brothers, Inc. 36,600 851
Vulcan Materials Co. 52,700 1,843
----------
26,073
CONSUMER DURABLE 0.3%
----------------------------------------------------------------------
Black & Decker Corp. 41,950 1,730
o Energizer Holdings, Inc. 47,200 1,360
Ethan Allen Interiors, Inc. 19,700 664
o Furniture Brands International, Inc. 29,300 696
See financial notes.
31
SCHWAB 1000 FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Hillenbrand Industries, Inc. 34,000 1,697
La-Z-Boy, Inc. 29,400 574
Leggett & Platt, Inc. 101,300 2,092
Maytag Corp. 40,650 847
o Mohawk Industries, Inc. 34,439 1,910
o Rent-A-Center, Inc. 18,200 1,168
Whirlpool Corp. 37,400 2,001
----------
14,739
CONSUMER NON-DURABLE 1.1%
----------------------------------------------------------------------
o American Greetings Corp.,
Class A 37,600 547
Applebee's International, Inc. 28,650 785
o Aramark Corp., Class B 40,900 939
o Brinker International, Inc. 50,600 1,607
CBRL Group, Inc. 25,800 822
o The Cheesecake Factory 26,350 832
o Cytyc Corp. 60,200 795
Darden Restaurants, Inc. 88,950 1,558
o Electronic Arts, Inc. 75,500 4,475
Fastenal Co. 39,400 1,363
Fortune Brands, Inc. 79,600 3,853
Hasbro, Inc. 89,987 1,440
o International Game Technology 45,000 3,883
International Speedway Corp.,
Class A 27,600 1,085
o Krispy Kreme Doughnuts, Inc. 28,900 939
Lancaster Colony Corp. 18,900 808
Mattel, Inc. 229,320 4,985
McDonald's Corp. 669,000 11,440
Newell Rubbermaid, Inc. 141,109 4,301
Outback Steakhouse, Inc. 40,375 1,443
o Panera Bread Co., Class A 15,200 517
Regis Corp. 22,600 640
Ruby Tuesday, Inc. 33,300 656
o Starbucks Corp. 203,900 4,790
Wendy's International, Inc. 60,100 1,745
----------
56,248
CONTAINERS 0.2%
----------------------------------------------------------------------
Ball Corp. 29,600 1,662
Bemis Co. 27,600 1,260
o Crown Holdings, Inc. 88,900 471
o Owens-Illinois, Inc. 76,700 682
o Packaging Corp. of America 54,400 1,023
o Pactiv Corp. 84,350 1,731
o Sealed Air Corp. 43,699 1,873
----------
8,702
ELECTRONICS 4.4%
----------------------------------------------------------------------
o Acxiom Corp. 46,400 648
o ADC Telecommunications, Inc. 414,300 989
o Adelphia Communications, Class A 75,707 14
o Advanced Fibre Communications, Inc. 43,800 670
o Advanced Micro Devices, Inc. 178,700 1,330
o Agere Systems, Inc., Class A 868,500 1,555
o Agilent Technologies, Inc. 245,800 3,938
o Alliant Techsystems, Inc. 19,900 1,069
o Altera Corp. 201,700 3,189
o American Power Conversion Corp. 103,900 1,619
o Amphenol Corp., Class A 22,200 983
o Analog Devices, Inc. 192,100 6,362
Applied Biosystems Group-- Applera Corp. 108,900 1,909
o Applied Materials, Inc. 869,800 12,699
o Applied Micro Circuits Corp. 157,200 704
o Arrow Electronics, Inc. 52,000 878
o Atmel Corp. 242,200 446
o Avnet, Inc. 62,200 793
AVX Corp. 90,600 963
o Broadcom Corp., Class A 143,500 2,567
o Cadence Design Systems, Inc. 139,850 1,599
o CIENA Corp. 224,400 1,093
o Cree, Inc. 37,900 756
o Cymer, Inc. 17,800 508
o Emulex Corp. 42,700 875
o Fairchild Semiconductor International,
Inc., Class A 60,900 723
o Fisher Scientific 28,500 821
International, Inc.
o Gentex Corp. 39,600 1,196
o Getty Images, Inc. 27,900 944
Harman International Industries, Inc. 16,700 1,112
Harris Corp. 34,600 988
o Hearst-Argyle Television, Inc. 48,100 1,159
o Imation Corp. 18,400 631
o Integrated Circuit Systems, Inc. 35,300 767
See financial notes.
32
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Intel Corp. 3,504,200 64,477
o International Rectifier Corp. 33,300 753
o Intersil Corp., Class A 71,100 1,315
ITT Industries, Inc. 48,800 2,845
o Jabil Circuit, Inc. 103,100 1,928
o JDS Uniphase Corp. 735,755 2,377
o KLA-Tencor Corp. 100,200 4,108
o L-3 Communications Holdings, Inc. 49,200 2,185
o Lam Research Corp. 67,100 975
Linear Technology Corp. 164,200 5,660
o LSI Logic Corp. 193,300 1,036
o Lucent Technologies, Inc. 1,785,119 3,213
Maxim Integrated Products, Inc. 170,529 6,700
o Micron Technology, Inc. 319,700 2,717
Molex, Inc. 100,021 2,335
Motorola, Inc. 1,211,386 9,582
o National Semiconductor Corp. 94,100 1,763
o Nvidia Corp. 82,700 1,180
PerkinElmer, Inc. 65,800 653
Qualcomm, Inc. 417,500 13,314
o RF Micro Devices, Inc. 95,000 451
o Riverstone Networks, Inc. 1 --
o Sanmina-- SCI Corp. 274,652 1,318
o Skyworks Solutions, Inc. 71,600 383
o Solectron Corp. 429,500 1,370
Symbol Technologies, Inc. 119,970 1,311
o Tektronix, Inc. 45,200 848
o Tellabs, Inc. 214,200 1,324
o Teradyne, Inc. 95,300 1,106
Texas Instruments, Inc. 914,255 16,905
o Univision Communications, Inc.,
Class A 121,100 3,667
o Vishay Intertechnology, Inc. 83,150 1,039
o Waters Corp. 67,100 1,611
o WebMD Corp. 154,500 1,489
o Western Digital Corp. 100,700 940
o Xilinx, Inc. 177,400 4,802
-----------
224,177
ENERGY: RAW MATERIALS 1.3%
-------------------------------------------------------------
Anadarko Petroleum Corp. 131,380 5,833
Apache Corp. 85,160 4,875
Arch Coal, Inc. 27,300 494
Baker Hughes, Inc. 186,520 5,223
o BJ Services Co. 83,600 3,052
Burlington Resources, Inc. 106,767 4,944
Chesapeake Energy Corp. 112,500 907
o Cooper Cameron Corp. 28,200 1,350
Devon Energy Corp. 153,117 7,235
ENSCO International, Inc. 77,400 1,966
EOG Resources, Inc. 61,500 2,299
o FMC Technologies, Inc. 34,100 642
o Forest Oil Corp. 24,500 509
o Grant Prideco, Inc. 63,000 719
Halliburton Co. 228,860 4,900
Helmerich & Payne, Inc. 25,900 666
o Key Energy Services, Inc. 66,800 673
Noble Energy, Inc. 29,700 986
Occidental Petroleum Corp. 200,100 5,973
o Patterson-UTI Energy, Inc. 41,200 1,363
Peabody Energy Corp. 27,300 767
o Pride International, Inc. 70,000 1,086
Rowan Cos., Inc. 48,600 996
o Smith International, Inc. 52,800 1,878
Tidewater, Inc. 31,600 850
Valero Energy Corp. 59,188 2,175
o Varco International, Inc. 50,400 886
Western Gas Resources, Inc. 17,200 631
XTO Energy, Inc. 95,533 1,863
-----------
65,741
FOOD & AGRICULTURE 4.4%
-------------------------------------------------------------
Altria Group, Inc. 1,094,200 33,657
Archer-Daniels-Midland Co. 340,036 3,768
Campbell Soup Co. 215,100 4,739
The Coca-Cola Co. 1,311,800 52,997
Coca-Cola Enterprises, Inc. 235,600 4,592
ConAgra Foods, Inc. 283,259 5,948
Corn Products International, Inc. 18,600 556
o Dean Foods Co. 49,500 2,155
o Del Monte Foods Co. 108,295 861
Dreyer's Grand Ice Cream, Inc. 18,200 1,163
General Mills, Inc. 195,250 8,808
H.J. Heinz Co. 184,500 5,513
Hershey Foods Corp. 72,900 4,757
Hormel Foods Corp. 72,200 1,661
See financial notes.
33
SCHWAB 1000 FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
IMC Global, Inc. 59,860 542
The J.M. Smuckers Co. 25,800 936
Kellogg Co. 214,400 7,019
Kraft Foods, Inc., Class A 147,700 4,564
McCormick & Co., Inc. 74,700 1,852
Monsanto Co. 138,248 2,405
The Pepsi Bottling Group, Inc. 148,300 3,046
PepsiAmericas, Inc. 78,100 975
PepsiCo, Inc. 913,560 39,539
o Performance Food Group Co. 23,500 824
Sara Lee Corp. 415,200 6,967
o The Scotts Co., Class A 17,500 997
Sensient Technologies Corp. 24,700 546
o Smithfield Foods, Inc. 56,800 1,113
Supervalu, Inc. 69,400 1,143
Sysco Corp. 345,500 9,926
Tootsie Roll Industries, Inc. 27,730 804
Tyson Foods, Inc., Class A 183,382 1,766
o Whole Foods Market, Inc. 31,900 1,893
Wm. Wrigley Jr. Co. 119,200 6,760
-----------
224,792
GOLD 0.1%
--------------------------------------------------------------
Newmont Mining Corp. 210,838 5,697
HEALTHCARE / DRUGS & MEDICINE 14.3%
--------------------------------------------------------------
Abbott Laboratories 827,500 33,621
o Accredo Health, Inc. 24,700 365
o AdvancePCS Corp. 46,700 1,404
o Affymetrix, Inc. 30,400 564
Allergan, Inc. 69,400 4,875
AmerisourceBergen Corp. 57,795 3,343
o Amgen, Inc. 679,940 41,687
o Amylin Pharmaceuticals, Inc. 47,500 910
o Andrx Corp. 37,200 600
o Anthem, Inc. 75,600 5,189
o Apogent Technologies, Inc. 55,700 957
o Apria Healthcare Group, Inc. 28,600 671
o Barr Laboratories, Inc. 35,350 1,965
Bausch & Lomb, Inc. 28,100 988
Baxter International, Inc. 311,900 7,174
Beckman Coulter, Inc. 32,400 1,259
Becton Dickinson & Co. 133,600 4,729
o Biogen, Inc. 77,600 2,948
Biomet, Inc. 137,000 4,173
o Boston Scientific Corp. 216,042 9,301
Bristol-Myers Squibb Co. 1,023,100 26,130
C.R. Bard, Inc. 28,300 1,794
Cardinal Health, Inc. 238,956 13,209
o Caremark Rx, Inc. 135,500 2,698
o Celgene Corp. 41,000 1,091
o Cephalon, Inc. 29,600 1,209
o Charles River Laboratories
International, Inc. 23,500 638
o Chiron Corp. 97,912 3,998
o Community Health Systems, Inc. 51,300 975
o Covance, Inc. 31,200 553
o Coventry Health Care, Inc. 31,200 1,274
o DaVita, Inc. 31,400 647
Dentsply International, Inc. 40,650 1,522
Diagnostic Products Corp. 14,900 589
o Edwards Lifesciences Corp. 31,300 904
Eli Lilly & Co. 594,768 37,958
o Express Scripts, Inc. 40,600 2,394
o First Health Group Corp. 52,800 1,323
o Forest Laboratories, Inc. 192,200 9,941
o Genzyme Corp.-- General
Division 113,500 4,572
o Gilead Sciences, Inc. 104,200 4,808
o Guidant Corp. 161,072 6,280
HCA, Inc. 271,472 8,714
Health Management Associates, Inc.,
Class A 126,528 2,159
o Health Net, Inc. 66,300 1,730
o Henry Schein, Inc. 22,900 988
o Human Genome Sciences, Inc. 67,000 783
o Humana, Inc. 84,300 932
o ICOS Corp. 32,300 864
o Idec Pharmaceuticals Corp. 79,600 2,607
o IDEXX Laboratories, Inc. 17,900 698
o Igen International, Inc. 12,400 451
IMS Health, Inc. 129,100 1,988
Invacare Corp. 16,200 518
o Invitrogen Corp. 26,900 880
o IVAX Corp. 101,125 1,625
(7) Johnson & Johnson 1,571,320 88,560
o King Pharmaceuticals, Inc. 125,166 1,578
See financial notes.
34
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Laboratory Corp. of America
Holdings 78,900 2,324
o LifePoint Hospitals, Inc. 20,600 402
o Lincare Holdings, Inc. 55,000 1,670
o Manor Care, Inc. 50,200 976
McKesson Corp. 153,328 4,253
o Medicis Pharmaceutical Corp.,
Class A 14,100 813
o Medimmune, Inc. 132,450 4,672
Medtronic, Inc. 645,100 30,797
(10) Merck & Co., Inc. 1,187,908 69,112
o Mid Atlantic Medical
Services, Inc. 24,900 1,084
o Millennium Pharmaceuticals,
Inc. 149,720 1,647
Mylan Laboratories 97,475 2,756
o NBTY, Inc. 34,500 535
o Neurocrine Biosciences, Inc. 16,000 724
Omnicare, Inc. 49,100 1,302
o Oxford Health Plans, Inc. 45,500 1,332
o Patterson Dental Co. 35,400 1,422
o Pediatrix Medical Group, Inc. 13,200 421
(4) Pfizer, Inc. 4,216,812 129,667
o Pharmaceutical Product
Development, Inc. 28,800 754
o Quest Diagnostics 56,300 3,364
o Quintiles Transnational Corp. 61,160 859
o Renal Care Group, Inc. 25,100 813
o Respironics, Inc. 17,400 669
Schering-Plough Corp. 772,900 13,989
o SICOR, Inc. 60,900 1,092
o St. Jude Medical, Inc. 94,300 4,947
o Steris Corp. 36,000 817
Stryker Corp. 104,900 7,029
o Techne Corp. 21,600 480
o Tenet Healthcare Corp. 253,709 3,765
o Triad Hospitals, Inc. 38,900 856
UnitedHealth Group, Inc. 162,000 14,925
o Universal Health Services,
Class B 31,400 1,214
o Varian Medical Systems, Inc. 37,300 2,009
o Vertex Pharmaceuticals, Inc. 39,800 480
o Watson Pharmaceuticals, Inc. 55,500 1,613
o WellPoint Health Networks, Inc. 79,350 6,026
Wyeth 700,200 30,480
o Zimmer Holdings, Inc. 103,400 4,849
-----------
723,244
HOUSEHOLD PRODUCTS 2.2%
--------------------------------------------------------------
Alberto-Culver Co., Class B 30,300 1,493
Avon Products, Inc. 124,400 7,236
Church & Dwight Co., Inc. 20,800 655
Clorox Co. 116,400 5,264
Colgate-Palmolive Co. 283,900 16,231
The Dial Corp. 49,500 1,031
The Estee Lauder Cos., Inc.,
Class A 65,000 2,112
The Gillette Co. 553,110 16,842
International Flavors &
Fragrances, Inc. 51,000 1,621
Procter & Gamble Co. 684,100 61,466
-----------
113,951
INSURANCE 4.7%
--------------------------------------------------------------
21st Century Insurance Group 44,500 602
Aetna, Inc. 80,265 3,997
AFLAC, Inc. 272,400 8,910
o Alleghany Corp. 4,242 721
The Allstate Corp. 372,048 14,060
AMBAC Financial Group, Inc. 61,200 3,571
American Financial Group, Inc. 36,000 798
(8) American International
Group, Inc. 1,379,771 79,958
American National Insurance Co. 13,700 1,096
AmerUs Group Co. 20,200 529
AON Corp. 163,112 3,615
Arthur J. Gallagher & Co. 45,800 1,145
Brown & Brown, Inc. 37,900 1,356
Chubb Corp. 90,900 4,808
CIGNA Corp. 74,400 3,891
Cincinnati Financial Corp. 86,014 3,170
o CNA Financial Corp. 118,200 2,831
Commerce Group, Inc. 16,800 623
Erie Indemnity Co., Class A 37,300 1,394
Fidelity National Financial, Inc. 54,578 1,877
First American Corp. 37,600 996
Hartford Financial Services
Group, Inc. 134,600 5,486
HCC Insurance Holdings, Inc. 32,400 891
Hilb, Rogal & Hamilton Co. 18,400 654
See financial notes.
35
SCHWAB 1000 FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Jefferson-Pilot Corp. 76,587 3,070
John Hancock Financial
Services, Inc. 151,800 4,405
Leucadia National Corp. 30,700 1,170
Lincoln National Corp. 94,000 3,004
Loews Corp. 98,400 4,061
o Markel Corp. 5,200 1,260
Marsh & McLennan Cos., Inc. 283,700 13,527
MBIA, Inc. 77,500 3,464
Mercury General Corp. 28,200 1,241
MGIC Investment Corp. 54,200 2,464
Mony Group, Inc. 24,300 564
Nationwide Financial Services, Inc.,
Class A 29,300 825
Odyssey Re Holdings Corp. 33,900 712
Old Republic International Corp. 62,775 1,921
The PMI Group, Inc. 47,000 1,449
Principal Financial Group, Inc. 175,200 5,098
The Progressive Corp. 115,200 7,834
Protective Life Corp. 35,800 1,029
Prudential Financial, Inc. 299,500 9,575
Radian Group, Inc. 48,700 1,933
Reinsurance Group of
America, Inc. 25,600 733
Safeco Corp. 73,400 2,827
St. Paul Cos., Inc. 119,854 4,116
Stancorp Financial Group, Inc. 15,200 816
Torchmark Corp. 63,000 2,441
Travelers Property Casualty Corp.,
Class B 530,499 8,621
Unitrin, Inc. 35,100 867
UnumProvident Corp. 125,671 1,445
W.R. Berkley Corp. 29,700 1,379
Wesco Financial Corp. 1,800 524
-----------
239,354
MEDIA 4.9%
--------------------------------------------------------------
o AOL Time Warner, Inc. 2,360,930 32,298
Belo Corp., Class A 60,600 1,364
o Cablevision Systems Corp., NY Group,
Class A 123,200 2,762
o Clear Channel Communications,
Inc. 323,229 12,642
o Comcast Corp., Class A 1,221,080 38,965
o Cox Communications, Inc.,
Class A 312,586 10,347
Dow Jones & Co., Inc. 42,850 1,697
The E.W. Scripps Co., Class A 43,475 3,445
o EchoStar Communications Corp.,
Class A 128,000 3,835
o Emmis Communications Corp.,
Class A 27,700 525
o Entercom Communications Corp. 26,000 1,263
o Fox Entertainment Group, Inc.,
Class A 185,200 4,704
Gannett Co., Inc. 140,900 10,669
Harte-Hanks, Inc. 47,300 851
o Hispanic Broadcasting Corp. 56,500 1,449
Hollinger International, Inc. 57,400 534
John Wiley & Sons, Class A 32,200 789
Knight-Ridder, Inc. 42,800 2,763
Lee Enterprises, Inc. 23,100 829
o Liberty Media Corp., Class A 1,251,400 13,765
McClatchy Co., Class A 23,900 1,401
The McGraw-Hill Cos., Inc. 102,750 6,000
Media General, Inc., Class A 12,100 665
Meredith Corp. 27,700 1,197
o Metro-Goldwyn-Mayer, Inc. 129,720 1,446
New York Times Co., Class A 80,726 3,744
o PanAmSat Corp. 79,900 1,382
R.R. Donnelley & Sons Co. 58,900 1,187
The Reader's Digest Association, Inc.,
Class A 50,800 610
o Scholastic Corp. 20,400 580
Tribune Co. 160,600 7,866
o USA Interactive 253,074 7,580
o Valassis Communications, Inc. 27,300 726
o Viacom, Inc., Class B 931,079 40,418
The Walt Disney Co. 1,080,321 20,159
Washington Post, Class B 6,900 5,030
o Westwood One, Inc. 55,200 1,926
-----------
247,413
MISCELLANEOUS 0.0%
--------------------------------------------------------------
o Radio One, Inc., Class A 54,400 845
MISCELLANEOUS FINANCE 8.3%
--------------------------------------------------------------
A.G. Edwards, Inc. 41,043 1,224
o Affiliated Managers Group 11,400 528
See financial notes.
36
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Allied Capital Corp. 57,100 1,210
American Express Co. 694,200 26,282
o AmeriCredit Corp. 79,500 540
o Ameritrade Holding Corp. 223,500 1,122
Astoria Financial Corp. 45,300 1,133
The Bear Stearns Cos., Inc. 52,071 3,480
o Berkshire Hathaway, Inc., Class A 771 53,827
o The BISYS Group, Inc. 62,600 1,057
o BOK Financial Corp. 28,822 1,039
Capital One Financial Corp. 117,450 4,918
/ The Charles Schwab Corp. 708,397 6,113
Charter One Financial, Inc. 119,504 3,472
Chicago Mercantile Exchange 16,600 939
(6) Citigroup, Inc. 2,719,101 106,725
Commercial Federal Corp. 23,500 506
Countrywide Financial Corp. 67,785 4,582
Downey Financial Corp. 14,600 641
o E*TRADE Group, Inc. 187,900 1,033
Eaton Vance Corp. 36,000 1,073
Fannie Mae 526,300 38,099
Federated Investors, Inc., Class B 59,150 1,614
Franklin Resources, Inc. 137,100 4,782
Freddie Mac 367,800 21,296
Goldman Sachs Group, Inc. 250,400 19,005
IndyMac Bancorp, Inc. 28,800 642
International Bancshares Corp. 16,400 719
o Investment Technology Group, Inc. 25,000 357
Investors Financial Services Corp. 33,500 731
Janus Capital Group, Inc. 115,600 1,607
Jefferies Group, Inc. 14,000 543
LaBranche & Co., Inc. 31,000 514
Legg Mason, Inc. 35,600 1,933
Lehman Brothers Holdings, Inc. 127,560 8,032
MBNA Corp. 675,880 12,774
Merrill Lynch & Co., Inc. 456,000 18,719
Morgan Stanley 573,110 25,647
Nueberger Berman, Inc. 36,200 1,111
Nuveen Investments, Inc., Class A 48,500 1,188
Raymond James Financial, Inc. 25,200 723
SLM Corp. 81,750 9,156
Sovereign Bancorp., Inc. 138,400 2,138
Staten Island Bancorp., Inc. 31,400 539
Student Loan Corp. 10,500 1,126
T. Rowe Price Group, Inc. 63,600 1,941
TCF Financial Corp. 38,600 1,529
Waddell & Reed Financial, Inc.,
Class A 41,800 836
Washington Federal, Inc. 36,181 789
Washington Mutual, Inc. 504,910 19,944
Webster Financial Corp. 24,000 901
-----------
420,379
NON-FERROUS METALS 0.3%
--------------------------------------------------------------
Alcoa, Inc. 445,295 10,211
Engelhard Corp. 66,387 1,630
Freeport-McMoran Copper & Gold, Inc.,
Class B 75,294 1,303
o Phelps Dodge Corp. 46,200 1,441
-----------
14,585
OIL: DOMESTIC 0.8%
--------------------------------------------------------------
Amerada Hess Corp. 47,800 2,158
Ashland, Inc. 35,400 1,050
ConocoPhillips 358,578 18,037
Diamond Offshore Drilling 67,700 1,262
Kerr-McGee Corp. 52,102 2,194
Marathon Oil Corp. 164,300 3,741
Murphy Oil Corp. 47,740 1,989
o National-Oilwell, Inc. 44,200 928
o Newfield Exploration Co. 26,900 925
o Pioneer Natural Resources Co. 60,800 1,454
Pogo Producing Co. 31,800 1,259
Sunoco, Inc. 39,700 1,477
Unocal Corp. 136,034 3,768
-----------
40,242
OIL: INTERNATIONAL 3.2%
--------------------------------------------------------------
ChevronTexaco Corp. 568,446 35,704
(5) Exxon Mobil Corp. 3,559,130 125,281
-----------
160,985
OPTICAL & PHOTO 0.1%
--------------------------------------------------------------
Eastman Kodak Co. 153,800 4,600
PAPER & FOREST PRODUCTS 0.8%
--------------------------------------------------------------
Boise Cascade Corp. 30,400 698
Bowater, Inc. 28,800 1,121
Georgia-Pacific Corp. 130,088 2,009
See financial notes.
37
SCHWAB 1000 FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
International Paper Co. 251,945 9,007
Kimberly-Clark Corp. 271,960 13,536
MeadWestvaco Corp. 103,953 2,452
Rayonier, Inc. 14,500 730
o Smurfit-Stone Container Corp. 127,100 1,788
Temple-Inland, Inc. 27,900 1,264
Weyerhaeuser Co. 115,800 5,743
-----------
38,348
PRODUCER GOODS & MANUFACTURING 4.7%
--------------------------------------------------------------
o AGCO Corp. 39,100 712
o American Standard Cos., Inc. 39,200 2,791
Ametek, Inc. 17,200 648
Aptargroup, Inc. 18,600 640
Avery Dennison Corp. 59,200 3,138
Blyth, Inc. 24,100 636
Caterpillar, Inc. 182,900 9,621
o Corning, Inc. 628,241 3,405
Deere & Co. 126,000 5,548
Dover Corp. 107,200 3,081
Emerson Electric Co. 223,400 11,326
=(1) General Electric Co. 5,263,500 155,010
Graco, Inc. 24,800 761
Harsco Corp. 21,100 727
Herman Miller, Inc. 39,000 682
HON Industries, Inc. 30,700 908
Honeywell International, Inc. 452,563 10,681
Hubbell, Inc., Class B 30,838 990
IDEX Corp. 16,900 538
Illinois Tool Works, Inc. 163,442 10,457
Johnson Controls, Inc. 48,100 3,956
Kennametal, Inc. 18,300 576
o Millipore Corp. 25,200 861
Pall Corp. 63,933 1,350
Parker Hannifin Corp. 61,475 2,501
Pentair, Inc. 25,700 990
Precision Castparts Corp. 27,300 756
Roper Industries, Inc. 16,300 499
Snap-On, Inc. 30,450 894
Teleflex, Inc. 20,500 787
The Timken Co. 44,400 786
W.W. Grainger, Inc. 47,600 2,197
o Zebra Technologies Corp.,
Class A 16,500 1,100
-----------
239,553
RAILROAD & SHIPPING 0.4%
--------------------------------------------------------------
Alexander & Baldwin, Inc. 21,500 574
Burlington Northern Santa Fe
Corp. 198,253 5,583
CSX Corp. 112,800 3,607
GATX Corp. 25,500 480
Norfolk Southern Corp. 204,600 4,340
Union Pacific Corp. 133,661 7,956
-----------
22,540
REAL PROPERTY 1.4%
--------------------------------------------------------------
AMB Property Corp. 42,900 1,171
Annaly Mortgage Management, Inc. 44,000 836
Apartment Investment & Management Co.,
Class A 48,800 1,843
Archstone-Smith Trust 94,100 2,145
Arden Realty, Inc. 32,900 784
AvalonBay Communities, Inc. 35,600 1,420
Boston Properties, Inc. 51,600 2,023
BRE Properties, Class A 23,700 729
Camden Property Trust 22,300 779
CarrAmerica Realty Corp. 27,700 722
o Catellus Development Corp. 45,400 962
CBL & Associates Properties, Inc. 15,500 658
Centerpoint Properties Trust 12,000 695
Chelsea Property Group, Inc. 21,600 857
Cousins Properties, Inc. 25,400 667
Crescent Real Estate Equity Co. 52,000 737
Developers Diversified Realty Corp. 44,200 1,114
Duke Realty Corp. 70,200 1,923
Equity Office Properties Trust 216,000 5,610
Equity Residential 142,800 3,700
Federal Realty Investment Trust 22,600 697
First Industrial Realty Trust 20,100 562
Forest City Enterprises, Inc.,
Class A 25,750 941
General Growth Properties, Inc. 32,500 1,808
Health Care Property Investors,
Inc. 30,700 1,143
See financial notes.
38
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Health Care Real Estate
Investment Trust, Inc. 20,400 581
Healthcare Realty Trust, Inc. 22,000 606
Heritage Property Investment
Trust 21,600 549
Highwoods Properties, Inc. 27,800 563
Hospitality Properties Trust 32,600 939
HRPT Properties Trust 67,000 605
iStar Financial, Inc. 51,000 1,526
Kimco Realty Corp. 54,400 1,969
Liberty Property Trust 39,800 1,245
The Macerich Co. 28,100 927
Mack-Cali Realty Corp. 30,000 947
The Mills Corp. 22,400 716
New Plan Excel Realty Trust 50,400 1,007
Pan Pacific Retail Properties, Inc. 20,700 810
Plum Creek Timber Co., Inc. 96,100 2,235
Prentiss Properties Trust 20,300 558
Prologis 92,708 2,386
Public Storage, Inc. 61,200 1,968
Realty Income Corp. 18,200 684
Reckson Associates Realty Corp. 26,000 490
Regency Centers Corp. 32,500 1,072
The Rouse Co. 45,200 1,571
Shurgard Storage Centers, Inc.,
Class A 18,700 611
Simon Property Group, Inc. 97,500 3,580
The St. Joe Co. 39,900 1,169
Thornburg Mortgage, Inc. 29,700 665
Trizec Properties, Inc. 78,100 727
United Dominion Realty Trust, Inc. 55,400 925
Vornado Realty Trust 56,400 2,143
Weingarten Realty Investment 37,000 1,462
-----------
69,762
RETAIL 6.9%
--------------------------------------------------------------
o 99 Cents Only Stores 36,466 1,074
Albertson's, Inc. 199,542 3,963
o Amazon.com, Inc. 204,300 5,857
o AutoZone, Inc. 51,200 4,138
o Barnes & Noble, Inc. 35,100 691
o Bed, Bath & Beyond, Inc. 156,200 6,171
o Best Buy Co., Inc. 169,150 5,849
o Big Lots, Inc. 60,400 756
o BJ's Wholesale Club, Inc. 36,400 514
o Borders Group, Inc. 41,400 662
Circuit City Stores, Inc. 109,300 626
Claire's Stores, Inc. 25,400 660
o Costco Wholesale Corp. 239,908 8,308
CVS Corp. 206,414 4,997
Dillards, Inc., Class A 44,100 617
Dollar General Corp. 176,269 2,563
o Dollar Tree Stores, Inc. 59,300 1,509
Family Dollar Stores, Inc. 89,900 3,074
o Federated Department Stores,
Inc. 102,100 3,126
o The Gap, Inc. 464,700 7,728
Home Depot, Inc. 1,228,397 34,555
J.C. Penney Co., Inc. Holding
Co. 142,300 2,428
o Kohl's Corp. 179,300 10,184
o Kroger Co. 404,230 5,781
Limited Brands, Inc. 275,268 4,002
Lowe's Cos., Inc. 412,300 18,096
The May Department Stores
Co. 152,350 3,294
o Michaels Stores, Inc. 36,900 1,153
o The Neiman Marcus Group, Inc.,
Class A 25,000 801
Nordstrom, Inc. 70,500 1,222
o Office Depot, Inc. 163,548 2,071
o Payless Shoesource, Inc. 35,400 561
o PETsMART, Inc. 74,100 1,121
Pier 1 Imports, Inc. 48,100 893
RadioShack Corp. 89,532 2,123
o Rite Aid Corp. 267,800 911
Ross Stores, Inc. 40,500 1,535
o Safeway, Inc. 231,580 3,849
o Saks, Inc. 74,440 666
Sears, Roebuck & Co. 166,500 4,719
o Staples, Inc. 248,060 4,723
Target Corp. 481,000 16,085
Tiffany & Co. 75,600 2,097
TJX Cos., Inc. 276,600 5,325
o Toys `R' Us, Inc. 110,580 1,133
=(3) Wal-Mart Stores, Inc. 2,336,400 131,586
Walgreen Co. 540,900 16,692
See financial notes.
39
SCHWAB 1000 FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Williams-Sonoma, Inc. 60,400 1,563
Winn-Dixie Stores, Inc. 73,300 918
o Yum! Brands, Inc. 155,620 3,845
o Zale Corp. 17,200 601
-----------
347,416
STEEL 0.1%
--------------------------------------------------------------
Nucor Corp. 40,600 1,658
United States Steel Corp. 53,260 763
Worthington Industries, Inc. 44,600 599
-----------
3,020
TELEPHONE 3.4%
--------------------------------------------------------------
o Adtran, Inc. 19,400 785
Alltel Corp. 163,667 7,669
AT&T Corp. 405,617 6,916
o AT&T Wireless Services, Inc. 1,427,321 9,221
BellSouth Corp. 982,900 25,054
CenturyTel, Inc. 74,087 2,182
o Citizens Communications Co. 149,718 1,636
o Level 3 Communications, Inc. 219,900 1,258
o Nextel Communications, Inc.,
Class A 541,800 8,013
o Nextel Partners, Inc., Class A 87,300 507
o Qwest Communications International,
Inc. 893,747 3,369
SBC Communications, Inc. 1,756,228 41,026
Scientific-Atlanta, Inc. 80,200 1,303
Sprint Corp. (FON Group) 471,468 5,427
o Sprint Corp. (PCS Group) 526,521 1,843
Telephone & Data Systems, Inc. 30,600 1,319
o U.S. Cellular Corp. 44,700 1,075
Verizon Communications, Inc. 1,447,093 54,092
o West Corp. 34,400 777
-----------
173,472
TOBACCO 0.1%
--------------------------------------------------------------
R.J. Reynolds Tobacco Holdings,
Inc. 45,800 1,290
UST, Inc. 87,900 2,754
-----------
4,044
TRAVEL & RECREATION 0.5%
--------------------------------------------------------------
Brunswick Corp. 46,900 1,024
o Expedia, Inc. 21,400 1,237
o Extended Stay America, Inc. 48,800 579
o Harrah's Entertainment, Inc. 60,100 2,367
Hilton Hotels Corp. 198,767 2,647
o Host Marriott Corp. 138,300 1,068
o Hotels.com, Class A 9,800 702
o Mandalay Resort Group 35,800 946
Marriott International, Inc.,
Class A 123,700 4,442
o MGM MIRAGE 82,200 2,336
o Park Place Entertainment Corp. 156,400 1,164
Sabre Holdings Corp. 76,100 1,591
Speedway Motorsports, Inc. 22,000 535
Starwood Hotels & Resorts
Worldwide, Inc. 105,700 2,837
o Station Casinos, Inc. 30,100 650
-----------
24,125
TRUCKING & FREIGHT 1.0%
--------------------------------------------------------------
C.H. Robinson Worldwide, Inc. 44,000 1,619
CNF, Inc. 25,700 780
Expeditors International
Washington, Inc. 54,200 1,971
o Heartland Express, Inc. 26,100 600
o J.B. Hunt Transport Services, Inc. 20,500 708
Paccar, Inc. 62,280 3,638
Ryder Systems, Inc. 32,500 807
o Swift Transportation Co., Inc. 43,400 787
United Parcel Service, Inc.,
Class B 595,000 36,961
Werner Enterprises, Inc. 33,200 750
-----------
48,621
UTILITIES: ELECTRIC & GAS 3.0%
--------------------------------------------------------------
o The AES Corp. 282,806 1,700
AGL Resources, Inc. 32,300 831
Allete, Inc. 44,500 1,057
Alliant Energy Corp. 47,700 838
Ameren Corp. 83,430 3,419
American Electric Power Corp. 203,920 5,379
Atmos Energy Corp. 23,400 533
o Calpine Corp. 196,500 1,055
Centerpoint Energy, Inc. 158,217 1,250
Cinergy Corp. 89,565 3,058
CMS Energy Corp. 75,000 467
Consolidated Edison, Inc. 113,000 4,392
See financial notes.
40
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Constellation Energy Group, Inc. 87,750 2,569
Dominion Resources, Inc. 161,716 9,570
DPL, Inc. 65,692 909
DQE, Inc. 38,700 526
DTE Energy Co. 89,183 3,596
Duke Energy Corp. 469,162 8,253
o Edison International 172,400 2,515
El Paso Corp. 311,546 2,337
Energy East Corp. 75,184 1,370
Entergy Corp. 117,421 5,473
Equitable Resources, Inc. 32,600 1,252
Exelon Corp. 169,887 9,011
FirstEnergy Corp. 156,698 5,285
FPL Group, Inc. 97,000 5,904
Great Plains Energy, Inc. 37,600 984
Hawaiian Electric Industries, Inc. 19,100 790
KeySpan Corp. 83,234 2,819
Kinder Morgan, Inc. 65,200 3,066
MDU Resources Group, Inc. 37,300 1,110
National Fuel Gas Co. 41,700 978
Nicor, Inc. 22,800 685
NiSource, Inc. 130,480 2,466
Northeast Utilities, Inc. 70,500 1,052
NSTAR 27,500 1,188
OGE Energy Corp. 40,700 731
Oneok, Inc. 37,800 717
Peoples Energy Corp. 18,500 719
Pepco Holdings, Inc. 85,025 1,461
o PG&E Corp. 213,858 3,204
Philadelphia Suburban Corp. 35,300 800
Piedmont Natural Gas Co. 17,200 643
Pinnacle West Capital Corp. 47,000 1,561
PPL Corp. 87,620 3,172
Progress Energy, Inc. 125,100 5,227
Public Service Enterprise
Group, Inc. 117,600 4,524
Puget Energy, Inc. 48,300 1,020
Questar Corp. 44,500 1,344
o Republic Services, Inc. 85,300 1,830
SCANA Corp. 57,600 1,828
Sempra Energy 108,638 2,916
The Southern Co. 377,500 10,981
TECO Energy, Inc. 91,400 986
TXU Corp. 170,112 3,389
UGI Corp. 21,600 683
Vectren Corp. 35,300 821
o Waste Connections, Inc. 14,600 491
WGL Holdings, Inc. 25,300 683
Williams Cos., Inc. 268,609 1,867
Wisconsin Energy Corp. 62,200 1,638
WPS Resources Corp. 16,600 669
Xcel Energy, Inc. 207,435 2,804
-----------
154,396
WARRANTS
0.0% of investments
ELECTRONICS 0.0%
--------------------------------------------------------------
o Per-Se Technologies, Inc.
expires 07/8/03 488 --
SHORT-TERM INVESTMENT
0.1% of investments
Provident Institutional
TempFund 6,930,825 6,931
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
U.S. TREASURY OBLIGATION
0.0% of investments
= U.S. Treasury Bill
1.13%, 06/19/03 370 369
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
41
SCHWAB 1000 FUND(R) -- Financials
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------
Investments, at market value
(including $528,985 of securities on loan) $ 5,062,687 a
Collateral held for securities on loan 547,914
Receivables:
Fund shares sold 3,499
Interest 6
Dividends 5,034
Investments sold 1,281
Income from lending securities 25
Prepaid expenses + 44
-------------
TOTAL ASSETS 5,620,490
LIABILITIES
- --------------------------------------------------------------------
Collateral held for securities on loan 547,914
Payables:
Fund shares redeemed 2,433
Investments bought 5,790
Investment adviser and administrator fees 126
Transfer agent and shareholder service fees 111
Accrued expenses + 583
-------------
TOTAL LIABILITIES 556,957
NET ASSETS
- --------------------------------------------------------------------
TOTAL ASSETS 5,620,490
TOTAL LIABILITIES - 556,957
-------------
NET ASSETS $ 5,063,533
NET ASSETS BY SOURCE
Capital received from investors 4,384,207
Net investment income not yet distributed 19,575
Net realized capital losses (549,628)
Net unrealized capital gains 1,209,379 b
NET ASSET VALUE (NAV)
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $3,371,248 129,528 $26.03
Select Shares(R) $1,692,285 65,044 $26.02
a The fund paid $3,853,718 for these securities. Not counting short-term
obligations and government securities, the fund paid $303,086 for securities
during the report period and received $234,643 from securities it sold or
that matured.
b These derive from investments and futures. As of the report date, the fund
had twenty-four open S&P 500 futures contracts due to expire on June 20,
2003, with a contract value of $5,497 and unrealized gains of $410.
FEDERAL TAX DATA
- --------------------------------------------------------------------
PORTFOLIO COST $ 3,873,597
NET UNREALIZED GAINS AND LOSSES:
Gains $ 1,835,496
Losses + (646,406)
--------------
$ 1,189,090
AS OF OCTOBER 31, 2002:
NET UNDISTRIBUTED EARNINGS:
Ordinary income
$ 50,469
Long-term capital gains $ --
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2003 $ 415
2004 844
2005 2,606
2006 650
2007 11,853
2009 97,811
2010 + 250,781
--------------
$ 364,960
See financial notes.
42
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------
Dividends $ 42,273 a
Interest 25
Lending of securities + 495
--------------
TOTAL INVESTMENT INCOME 42,793
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------
Net realized losses on investments sold (168,853)
Net realized losses on futures contracts + (151)
--------------
NET REALIZED LOSSES (169,004)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------
Net unrealized gains on investments 348,141
Net unrealized gains on futures contracts + 344
--------------
NET UNREALIZED GAINS 348,485
EXPENSES
- --------------------------------------------------------------------
Investment adviser and administrator fees 5,437 b
Transfer agent and shareholder service fees:
Investor Shares 3,970 c
Select Shares(R) 793 c
Trustees' fees 16 d
Custodian fees 88
Portfolio accounting fees 366
Professional fees 29
Registration fees 55
Shareholder reports 340
Interest expense 4
Other expenses + 32
--------------
Total expenses 11,130
Expense reduction - 755 e
--------------
NET EXPENSES 10,375
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------
TOTAL INVESTMENT INCOME 42,793
NET EXPENSES - 10,375
--------------
NET INVESTMENT INCOME 32,418
NET REALIZED LOSSES (169,004)f
NET UNREALIZED GAINS + 348,485 f
--------------
INCREASE IN NET ASSETS FROM OPERATIONS $ 211,899
a An additional $3 was withheld for foreign taxes.
b Calculated as a percentage of average daily net assets: 0.30% of the first
$500 million and 0.22% of assets beyond that.
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.
d For the fund's independent trustees only.
e Includes $331 from the investment adviser (CSIM) and $424 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 29, 2004, as follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
-------------------------------------
Investor Shares 0.51
Select Shares 0.36
Prior to March 1, 2003, the limits were 0.46% and 0.35% for the Investor
Shares and Select Shares, respectively. This limit doesn't include interest,
taxes and certain non-routine expenses.
f These add up to a net gain on investments of $179,481.
See financial notes.
43
SCHWAB 1000 FUND(R) -- Financials
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for current period are unaudited.
OPERATIONS
- -------------------------------------------------------------------------------------------
11/1/02-4/3003 11/1/01-10/31/02
Net investment income $ 32,418 $ 61,586
Net realized losses (169,004) (250,220)
Net unrealized gains or losses + 348,485 (624,054)
------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 211,899 (812,688)
DISTRIBUTIONS PAID
- -------------------------------------------------------------------------------------------
Dividends from net investment income
Investor Shares 40,944 35,185
Select Shares(R) + 22,368 19,589
------------------------------------
TOTAL DIVIDENDS FROM NET INVESTMENT INCOME $ 63,312 $ 54,774 a
TRANSACTIONS IN FUND SHARES
- -------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
SHARES SOLD
Investor Shares 11,597 $ 289,580 23,138 $680,418
Select Shares + 8,345 207,969 13,770 407,100
--------------------------------------------------
TOTAL SHARES SOLD 19,942 $ 497,549 36,908 $ 1,087,518
SHARES REINVESTED
Investor Shares 1,632 $ 40,944 1,048 $ 32,699
Select Shares + 892 22,368 539 16,793
--------------------------------------------------
TOTAL SHARES REINVESTED 2,524 63,312 1,587 $ 49,492
SHARES REDEEMED
Investor Shares (11,312) ($ 280,910) (26,817) ($ 764,754)
Select Shares + (7,074) (175,992) (16,042) (456,881)
--------------------------------------------------
TOTAL SHARES REDEEMED (18,386) ($ 456,902) (42,859) ($ 1,221,635) b
NET INCREASE OR DECREASE 4,080 $ 103,959 (4,364) ($ 84,625)
SHARES OUTSTANDING AND NET ASSETS
- -------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 190,492 $4,810,987 194,856 $ 5,763,074
Total increase or
decrease + 4,080 252,546 (4,364) (952,087) c
--------------------------------------------------
END OF PERIOD 194,572 $5,063,533 190,492 $ 4,810,987 d
a The tax-basis components of distributions paid for the prior period are:
Ordinary Income $54,774
Long-term capital gains $ --
b Dollar amounts are net of proceeds received from early withdrawal fees the
fund charges on shares sold 180 days or less after buying them.
CURRENT PERIOD
Investor Shares $ 102
Select Shares + 60
------------
TOTAL $ 162
PRIOR PERIOD
Investor Shares $ 323
Select Shares + 190
------------
TOTAL $ 513
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 net investment income not yet distributed in the amount of $19,575
and $50,469 for the current period and for the prior period, respectively.
See financial notes.
44
SCHWAB SMALL-CAP INDEX FUND (R)
PERFORMANCE as of 4/30/03: Investor Shares
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Investor Shares with
the Schwab Small-Cap Index(R) and the Morningstar Small-Cap Blend Fund category.
The table below the chart shows two types of after-tax returns.
[BAR CHART]
INVESTOR SHARES SCHWAB SMALL-CAP INDEX CATEGORY AVERAGE
6 MONTHS 5.22% 5.29% 5.17%
1 YEAR -20.62% -20.55% -19.81%
5 YEARS -2.32% -1.69% 0.63%
SINCE INCEPTION: 12/3/93 6.39% 7.41% n/a
6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION
-------- ------ ------- ---------------
TOTAL RETURNS AFTER TAX INVESTOR CATEGORY INVESTOR CATEGORY INVESTOR CATEGORY INVESTOR CATEGORY
SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
- ---------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 4.80% 2.85% -20.93% -21.51% -3.52% -0.96% 5.60% --
- ---------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 3.24% 2.26% -12.88% -12.74% -2.06% 0.02% 5.15% --
- ---------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A $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
two indices: the Schwab Small-Cap Index and the Russell 2000(R) Index.
$17,913 INVESTOR SHARES
$19,604 SCHWAB SMALL-CAP INDEX
$17,881 RUSSELL 2000 INDEX
[LINE GRAPH]
INVESTOR SHARES SCHWAB SMALL-CAP INDEX RUSSELL 2000 INDEX
3-Dec-93 10000 10000 10000
Dec-93 10154 10234 10186
Jan-94 10394 10469 10505
Feb-94 10334 10430 10467
Mar-94 9783 9871 9915
Apr-94 9753 9847 9974
May-94 9613 9692 9861
Jun-94 9333 9419 9529
Jul-94 9493 9614 9685
Aug-94 10134 10249 10225
Sep-94 10094 10191 10190
Oct-94 10064 10149 10149
Nov-94 9663 9767 9739
Dec-94 9841 10000 10000
Jan-95 9730 9838 9874
Feb-95 10082 10229 10285
Mar-95 10334 10442 10461
Apr-95 10566 10671 10693
May-95 10717 10809 10877
Jun-95 11211 11356 11441
Jul-95 11866 12021 12100
Aug-95 12077 12270 12351
Sep-95 12309 12510 12572
Oct-95 11785 11910 12010
Nov-95 12329 12482 12514
Dec-95 12562 12782 12845
Jan-96 12491 12749 12831
Feb-96 12967 13261 13231
Mar-96 13170 13492 13501
Apr-96 13899 14206 14223
May-96 14384 14692 14784
Jun-96 13848 14222 14176
Jul-96 12643 13075 12938
Aug-96 13413 13904 13690
Sep-96 14010 14416 14225
Oct-96 13757 14169 14006
Nov-96 14344 14733 14583
Dec-96 14508 15007 14965
Jan-97 14895 15361 15265
Feb-97 14376 14986 14895
Mar-97 13654 14257 14192
Apr-97 13756 14299 14232
May-97 15383 16050 15815
Jun-97 16125 16880 16493
Jul-97 17213 17842 17260
Aug-97 17538 18243 17655
Sep-97 18850 19675 18948
Oct-97 18026 18816 18116
Nov-97 17843 18645 17998
Dec-97 18236 19035 18313
Jan-98 17787 18736 18024
Feb-98 19195 20285 19356
Mar-98 20042 21199 20153
Apr-98 20144 21344 20264
May-98 18930 20090 19172
Jun-98 18960 20146 19212
Jul-98 17471 18597 17656
Aug-98 14062 15011 14227
Sep-98 14991 15953 15341
Oct-98 15705 16709 15967
Nov-98 16532 17576 16804
Dec-98 17584 18719 17844
Jan-99 17617 18800 18081
Feb-99 16145 17229 16617
Mar-99 16372 17559 16876
Apr-99 17660 19165 18388
May-99 17974 19500 18656
Jun-99 18969 20778 19500
Jul-99 18872 20615 18965
Aug-99 18309 20033 18264
Sep-99 18493 20204 18267
Oct-99 18839 20537 18342
Nov-99 20008 21820 19437
Dec-99 21839 23899 21637
Jan-00 21015 23005 21289
Feb-00 23801 26015 24804
Mar-00 23075 25333 23169
Apr-00 21936 24109 21774
May-00 20904 22940 20505
Jun-00 22674 24856 22293
Jul-00 21774 23890 21575
Aug-00 23964 26291 23221
Sep-00 23238 25490 22539
Oct-00 22836 25023 21533
Nov-00 20646 22641 19322
Dec-00 22654 24835 20982
Jan-01 23024 25169 22075
Feb-01 21285 23270 20627
Mar-01 20322 22219 19618
Apr-01 21951 24019 21152
May-01 22543 24663 21673
Jun-01 23543 25768 22420
Jul-01 22481 24623 21207
Aug-01 21852 23925 20522
Sep-01 18767 20554 17760
Oct-01 19718 21583 18799
Nov-01 21161 23175 20254
Dec-01 22451 24571 21504
Jan-02 21643 23657 21280
Feb-02 20873 22815 20697
Mar-02 22682 24807 22361
Apr-02 22566 24674 22565
May-02 21527 23545 21563
Jun-02 20398 22307 20493
Jul-02 17614 19254 17399
Aug-02 17704 19366 17355
Sep-02 16562 18114 16109
Oct-02 17024 18619 16626
Nov-02 18333 20051 18109
Dec-02 17407 19061 17101
Jan-03 16591 18118 16627
Feb-03 16033 17527 16125
Mar-03 16228 17746 16333
Apr-03 17913 19604 17881
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. The
fund's share price and principal values change, and when you sell your shares,
they may be worth more or less than what you paid for them. Past performance
does not indicate future results. Results for the report period are not
annualized.
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 4/30/03 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. As of 4/30/03, the total number of funds in the Morningstar
Small-Cap Blend Fund category for the six-month, one-and five-year periods
was 349, 342 and 190, respectively. These funds may or may not use
tax-efficient strategies.
2 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower.
Schwab Equity Index Funds
45
SCHWAB SMALL-CAP INDEX FUND(R)
Select Shares(R)
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Select Shares with the
Schwab Small-Cap Index(R) and the Morningstar Small-Cap Blend Fund category. The
table below the chart shows two types of after-tax returns.
[BAR CHART]
SELECT SHARES SCHWAB SMALL-CAP INDEX CATEGORY AVERAGE
6 MONTHS 5.43% 5.29% 5.17%
1 YEAR -20.45% -20.55% -19.81%
5 YEARS -2.19% -1.69% 0.63%
SINCE INCEPTION: 3.47% 4.18% n/a
6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION
-------- ------ ------- ---------------
TOTAL RETURNS AFTER TAX SELECT CATEGORY SELECT CATEGORY SELECT CATEGORY SELECT CATEGORY
SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
- --------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 4.96% 2.85% -20.80% -21.51% -3.44% -0.96% 2.33% --
- --------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 3.37% 2.26% -12.77% -12.74% -1.98% 0.02% 2.58% --
PERFORMANCE OF A $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 two indices: the Schwab Small-Cap
Index and the Russell 2000(R) Index.
$61,255 SELECT SHARES
$63,810 SCHWAB SMALL-CAP INDEX
$58,749 RUSSELL 2000 INDEX
[LINE GRAPH]
SELECT SHARES SCHWAB SMALL-CAP INDEX RUSSELL 2000 INDEX
19-May-97 50000 50000 50000
May-97 52170 52242 51960
Jun-97 54690 54942 54189
Jul-97 58415 58075 56709
Aug-97 59485 59380 58008
Sep-97 63965 64039 62254
Oct-97 61205 61244 59521
Nov-97 60550 60687 59134
Dec-97 61920 61958 60169
Jan-98 60400 60983 59218
Feb-98 65175 66026 63594
Mar-98 68050 69002 66214
Apr-98 68430 69473 66578
May-98 64310 65391 62990
Jun-98 64415 65575 63122
Jul-98 59360 60531 58009
Aug-98 47790 48861 46744
Sep-98 50945 51924 50404
Oct-98 53365 54386 52460
Nov-98 56170 57207 55209
Dec-98 59775 60929 58627
Jan-99 59925 61193 59407
Feb-99 54925 56079 54595
Mar-99 55660 57152 55446
Apr-99 60070 62380 60414
May-99 61140 63470 61296
Jun-99 64555 67629 64067
Jul-99 64225 67099 62311
Aug-99 62315 65206 60006
Sep-99 62940 65762 60018
Oct-99 64115 66846 60264
Nov-99 68125 71021 63862
Dec-99 74390 77788 71091
Jan-00 71585 74879 69946
Feb-00 81065 84677 81495
Mar-00 78595 82458 76124
Apr-00 74755 78471 71541
May-00 71250 74666 67371
Jun-00 77265 80904 73245
Jul-00 74205 77761 70887
Aug-00 81655 85575 76295
Sep-00 79185 82968 74052
Oct-00 77820 81448 70749
Nov-00 70405 73694 63484
Dec-00 77230 80834 68937
Jan-01 78490 81923 72528
Feb-01 72565 75742 67770
Mar-01 69285 72319 64457
Apr-01 74875 78181 69497
May-01 76850 80277 71207
Jun-01 80300 83871 73663
Jul-01 76685 80145 69678
Aug-01 74540 77873 67427
Sep-01 64030 66902 58352
Oct-01 67265 70251 61765
Nov-01 72230 75432 66546
Dec-01 76610 79977 70652
Jan-02 73855 77001 69917
Feb-02 71230 74261 68001
Mar-02 77400 80744 73469
Apr-02 77005 80311 74137
May-02 73505 76636 70846
Jun-02 69655 72606 67332
Jul-02 60160 62669 57165
Aug-02 60465 63034 57022
Sep-02 56530 58961 52927
Oct-02 58105 60603 54626
Nov-02 62610 65263 59499
Dec-02 59485 62041 56185
Jan-03 56655 58974 54629
Feb-03 54795 57049 52979
Mar-03 55460 57761 53662
Apr-03 61255 63810 58749
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. The
fund's share price and principal values change, and when you sell your shares,
they may be worth more or less than what you paid for them. Past performance
does not indicate future results. Results for the report period are not
annualized.
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 4/30/03 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. As of 4/30/03, the total number of funds in the Morningstar
Small-Cap Blend Fund category for the six-month, one-and five-year periods
was 349, 342 and 190, respectively. These funds may or may not use
tax-efficient strategies.
2 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower.
Schwab Equity Index Funds
46
SCHWAB SMALL-CAP INDEX FUND(R)
FUND FACTS as of 4/30/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / / / / /
Medium / / / / / /
Small / / /X/ / /
STATISTICS
NUMBER OF HOLDINGS 996
- -----------------------------------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $ 635
- -----------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 22.9
- -----------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.6
- -----------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 2 34%
- -----------------------------------------------------------------------
EXPENSE RATIO 3
Investor Shares 0.60%
Select Shares(R) 0.42%
- -----------------------------------------------------------------------
TOP HOLDINGS 4
% OF
SECURITY INVESTMENTS
- -----------------------------------------------------------------------
(1) ENDO PHARMACEUTICAL HOLDINGS, INC. 0.3%
- -----------------------------------------------------------------------
(2) DYNEGY, INC. Class A 0.3%
- -----------------------------------------------------------------------
(3) SEPRACOR, INC. 0.3%
- -----------------------------------------------------------------------
(4) PHARMACEUTICAL RESOURCES, INC. 0.3%
- -----------------------------------------------------------------------
(5) RAMBUS, INC. 0.3%
- -----------------------------------------------------------------------
(6) THE RYLAND GROUP, INC. 0.3%
- -----------------------------------------------------------------------
(7) SILICON LABORATORIES, INC. 0.3%
- -----------------------------------------------------------------------
(8) IMCLONE SYSTEMS, INC. 0.2%
- -----------------------------------------------------------------------
(9) MIRANT CORP. 0.2%
- -----------------------------------------------------------------------
(10) AVOCENT CORP. 0.2%
- -----------------------------------------------------------------------
TOTAL 2.7%
- -----------------------------------------------------------------------
INDUSTRY WEIGHTINGS
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
11.7% BUSINESS SERVICES
10.6% HEALTHCARE/DRUGS & MEDICINE
9.7% ELECTRONICS
8.2% BANKS
6.5% REAL PROPERTY
4.8% PRODUCER GOODS & MANUFACTURING
3.6% CONSUMER NON-DURABLE
3.6% UTILITIES: ELECTRIC & GAS
3.4% MISCELLANEOUS FINANCE
37.9% OTHER
1 Source: Morningstar, Inc. This style assessment is the result of comparing the
fund with the S&P 500(R) Index, based on P/E, P/B and median market cap. The
assessment reflects the fund's portfolio as of 4/30/03, which may have changed
since then, and is not a precise indication of risk or performance--past,
present or future.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes, and certain non-routine expenses).
4 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
Schwab Equity Index Funds
47
SCHWAB SMALL-CAP INDEX FUND(R) -- Financials
FINANCIAL TABLES
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
INVESTOR SHARES 4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
- ----------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 13.27 15.98 21.06 17.41 15.39 17.73
-----------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.06 0.13 0.07 0.07 0.06 0.05
Net realized and unrealized gains or losses 0.63 (2.17) (2.76) 3.62 2.89 (2.33)
-----------------------------------------------------------------
Total income or loss from investment operations 0.69 (2.04) (2.69) 3.69 2.95 (2.28)
Less distributions:
Dividends from net investment income (0.14) (0.09) (0.08) (0.04) (0.06) (0.06)
Distributions from net realized gains -- (0.58) (2.31) -- (0.87) --
-----------------------------------------------------------------
Total distributions (0.14) (0.67) (2.39) (0.04) (0.93) (0.06)
-----------------------------------------------------------------
Net asset value at end of period 13.82 13.27 15.98 21.06 17.41 15.39
-----------------------------------------------------------------
Total return (%) 5.22 2 (13.66) (13.66) 21.22 19.96 (12.88)
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.53 3 0.49 0.49 0.49 1 0.49 0.49
Expense reductions reflected in above ratio 0.07 3 0.11 0.12 0.16 0.30 0.32
Ratio of net investment income to
average net assets 0.83 3 0.77 0.49 0.44 0.33 0.35
Portfolio turnover rate 34 2 44 49 54 41 40
Net assets, end of period ($ x 1,000,000) 693 722 804 803 452 480
1 Would have been 0.50% if certain non-routine expenses (proxy fees) had been
included.
2 Not annualized.
3 Annualized.
See financial notes.
48
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
SELECT SHARES(R) 4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
- ---------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ---------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 13.28 16.00 21.09 17.44 15.41 17.75
----------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.07 0.14 0.11 0.11 0.07 0.08
Net realized and unrealized gains or losses 0.65 (2.18) (2.78) 3.61 2.90 (2.35)
----------------------------------------------------------
Total income or loss from investment operations 0.72 (2.04) (2.67) 3.72 2.97 (2.27)
Less distributions:
Dividends from net investment income (0.16) (0.10) (0.11) (0.07) (0.07) (0.07)
Distributions from net realized gains -- (0.58) (2.31) -- (0.87) --
----------------------------------------------------------
Total distributions (0.16) (0.68) (2.42) (0.07) (0.94) (0.07)
----------------------------------------------------------
Net asset value at end of period 13.84 13.28 16.00 21.09 17.44 15.41
----------------------------------------------------------
Total return (%) 5.43 2 (13.62) (13.56) 21.37 20.14 (12.81)
RATIOS/SUPPLEMENTAL DATA (%)
- ---------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.39 3 0.38 0.38 0.38 1 0.38 0.38
Expense reductions reflected in above ratio 0.06 3 0.07 0.08 0.12 0.27 0.33
Ratio of net investment income to
average net assets 0.96 3 0.88 0.60 0.55 0.44 0.46
Portfolio turnover rate 34 2 44 49 54 41 40
Net assets, end of period ($ x 1,000,000) 614 638 727 757 447 150
1 Would have been 0.39% if certain non-routine expenses (proxy fees) had been
included.
2 Not annualized.
3 Annualized.
See financial notes.
49
SCHWAB SMALL-CAP INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
* American Depositary Receipt
= Collateral for open futures contracts
~ Security is valued at fair value
(see Accounting Policies)
COST MARKET VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
100.0% COMMON STOCK 1,404,562 1,305,568
0.0% U.S. TREASURY OBLIGATIONS 115 115
- --------------------------------------------------------------------------------
100.0% TOTAL INVESTMENTS 1,404,677 1,305,683
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 100.0% of investments
AEROSPACE / DEFENSE 1.1%
--------------------------------------------------------------------------
o Armor Holdings, Inc. 64,400 776
Curtiss-Wright Corp. 23,200 1,398
o DRS Technologies, Inc. 54,000 1,513
EDO Corp. 48,300 911
Engineered Support Systems, Inc. 38,900 1,351
o ESCO Technologies, Inc. 29,900 1,173
GenCorp Inc. 106,200 807
o Moog, Inc., Class A 35,100 1,116
o Sequa Corp., Class A 23,700 729
o Teledyne Technologies, Inc. 78,700 1,108
o Trimble Navigation Ltd. 69,400 1,752
o Triumph Group, Inc. 37,000 972
o Veeco Instruments, Inc. 69,070 1,111
-----------
14,717
AIR TRANSPORTATION 1.1%
--------------------------------------------------------------------------
Airborne, Inc. 115,000 2,284
o AirTran Holdings, Inc. 170,200 1,336
o Alaska Air Group, Inc. 63,200 1,127
o Atlantic Coast Airlines Holdings, Inc. 98,300 821
o Continental Airlines, Inc., Class B 155,800 1,421
o EGL, Inc. 113,500 1,820
o ExpressJet Holdings, Inc. 153,800 1,776
o Northwest Airlines Corp., Class A 196,600 1,618
SkyWest, Inc. 139,000 1,778
-----------
13,981
ALCOHOLIC BEVERAGES 0.0%
--------------------------------------------------------------------------
o The Robert Mondavi Corp., Class A 23,500 577
APPAREL 2.5%
--------------------------------------------------------------------------
o Aeropostale, Inc. 84,500 1,521
Brown Shoe Co., Inc. 41,400 1,210
o The Buckle, Inc. 49,650 894
o The Children's Place Retail Stores, Inc. 62,900 956
o Christopher & Banks Corp. 61,300 1,542
o The Dress Barn, Inc. 69,500 1,044
o Genesco, Inc. 51,700 776
o The Gymboree Corp. 69,200 1,156
o The J. Jill Group, Inc. 43,500 624
o Jo-Ann Stores, Inc., Class A 47,400 1,232
K-Swiss, Inc., Class A 42,100 1,252
Kellwood Co. 60,900 1,804
o Kenneth Cole Productions, Inc., Class A 46,350 1,068
o The Men's Wearhouse, Inc. 95,650 1,593
o Nautica Enterprises, Inc. 80,200 913
Oshkosh B'Gosh, Inc., Class A 30,100 915
o Pacific Sunwear of California 117,187 2,675
Phillips-Van Heusen Corp. 73,200 972
o Quiksilver, Inc. 62,450 2,036
Russell Corp. 77,100 1,474
Stride Rite Corp. 94,800 835
o Too, Inc. 81,700 1,516
o Unifi, Inc. 132,300 787
See financial notes.
50
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Urban Outfitters, Inc. 45,600 1,360
o The Wet Seal, Inc., Class A 59,825 610
Wolverine World Wide, Inc. 97,500 1,798
-----------
32,563
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.8%
--------------------------------------------------------------------------
A.O. Smith Corp., Class B 69,100 2,061
o Aftermarket Technology Corp. 60,300 643
Arctic Cat, Inc. 52,400 955
Bandag, Inc. 45,000 1,568
Clarcor, Inc. 59,250 2,217
o CSK Auto Corp. 108,600 1,113
o Fleetwood Enterprises, Inc. 88,300 445
o Group 1 Automotive, Inc. 52,700 1,450
Mcgrath Rentcorp 29,100 720
Modine Manufacturing Co. 80,100 1,618
o Monaco Coach Corp. 68,900 931
Myers Industries, Inc. 73,100 734
o Sonic Automotive, Inc. 67,400 1,163
o TBC Corp. 51,000 816
Thor Industries, Inc. 68,100 2,178
o United Auto Group, Inc. 93,400 1,592
o United Rentals, Inc. 181,800 1,872
Winnebago Industries, Inc. 44,000 1,629
-----------
23,705
BANKS 8.2%
--------------------------------------------------------------------------
Alabama National Bancorp 29,400 1,355
Allegiant Bancorp, Inc. 39,200 675
Anchor Bancorp Wisconsin, Inc. 58,200 1,347
BancFirst Corp. 19,500 972
BankAtlantic Bancorp, Inc.,
Class A 128,800 1,484
Boston Private Financial Holdings, Inc. 46,100 869
Capital City Bank Group, Inc. 25,000 963
Capitol Bancorp Ltd. 26,300 559
Chemical Financial Corp. 56,187 1,655
Chittenden Corp. 84,025 2,273
City Holding Co. 39,400 1,127
Community Bank System, Inc. 29,900 1,036
Community Trust Bancorp, Inc. 30,000 808
Connecticut Bancshares, Inc. 26,300 1,123
Corus Bankshares, Inc. 33,700 1,453
Dime Community Bancshares 61,250 1,412
East-West Bancorp, Inc. 56,700 1,919
F&M Bancorp/Frederick MD 26,200 1,259
Fidelity Bankshares, Inc. 38,800 823
Financial Institutions, Inc. 27,000 593
First Busey Corp., Class A 33,000 782
First Charter Corp. 72,000 1,251
First Commonwealth Financial
Corp. 140,600 1,698
First Community Bancorp 36,500 1,087
First Essex Bancorp, Inc. 19,000 665
First Federal Capital Corp. 46,500 879
First Financial Bancorp 107,330 1,683
First Financial Bancshares, Inc. 28,825 1,154
First Merchants Corp. 41,600 990
o First Republic Bank 32,100 806
o FirstFed Financial Corp. 39,600 1,287
Frontier Financial Corp. 45,400 1,230
Gold Banc Corp., Inc. 95,000 836
Hancock Holding Co. 37,117 1,680
Harbor Florida Bancshares, Inc. 56,900 1,515
Harleysville National Corp. 45,755 1,212
Independent Bank Corp. 35,600 722
Integra Bank Corp. 42,470 723
Irwin Financial Corp. 66,200 1,569
MAF Bancorp., Inc. 55,225 1,864
Main Street Banks, Inc. 38,000 803
Mid-State Bancshares 56,400 1,038
Midwest Banc Holdings, Inc. 41,300 743
National Penn Bancshares, Inc. 55,558 1,653
NBT Bancorp., Inc. 78,400 1,426
Net.B@nk, Inc. 118,700 1,185
OceanFirst Financial Corp. 32,200 714
Old Second Bancorp, Inc. 17,900 710
Omega Financial Corp. 19,700 690
Oriental Financial Group 40,650 1,000
Pacific Northwest Bancorp 41,000 1,155
PFF Bancorp, Inc. 29,000 977
Prosperity Bancshares, Inc. 46,500 819
See financial notes.
51
SCHWAB SMALL-CAP INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Provident Bankshares Corp. 58,194 1,478
Republic Bancorp, Inc. 138,920 1,805
Riggs National Corp. 68,000 941
S&T Bancorp, Inc. 63,100 1,738
Sandy Spring Bancorp, Inc. 33,700 1,068
Seacoast Banking Corp. of
Florida 34,000 628
Seacoast Financial Services
Corp. 56,600 1,068
Second Bancorp., Inc. 22,300 530
o Silicon Valley Bancshares 93,700 2,191
= The South Financial Group, Inc. 112,400 2,754
=o Southwest Bancorp of Texas, Inc. 81,200 2,759
Sterling Bancorp 29,200 798
Sterling Bancshares, Inc. 105,450 1,255
Sterling Financial Corp. 32,100 772
Suffolk Bancorp 28,100 883
Susquehanna Bancshares, Inc. 95,375 2,170
= Texas Regional Bancshares, Inc.,
Class A 69,220 2,513
Tompkins Trustco, Inc. 18,000 828
Troy Financial Corp. 21,700 587
The Trust Co. of New Jersey 43,100 1,208
Trustco Bank Corp. 178,120 1,858
UCBH Holdings, Inc. 99,200 2,524
UMB Financial Corp. 52,293 2,068
Umpqua Holdings Corp. 66,700 1,311
United Community Banks, Inc. 51,000 1,292
United Community Financial
Corp. 85,800 784
United National Bancorp. 45,400 1,171
Unizan Financial Corp. 52,300 911
USB Holding Co., Inc. 44,000 726
Waypoint Financial Corp. 85,700 1,564
WesBanco, Inc. 49,000 1,221
WestCorp., Inc. 93,000 1,972
Wintrust Financial Corp. 40,300 1,225
WSFS Financial Corp. 22,400 771
-----------
107,623
BUSINESS MACHINES & SOFTWARE 3.2%
--------------------------------------------------------------------------
o Activision, Inc. 147,400 2,255
o Adaptec, Inc. 255,900 1,750
o Advanced Digital Information
Corp. 150,300 1,205
Analogic Corp. 31,600 1,509
=o Arbitron, Inc. 70,700 2,408
o Ascential Software Corp. 551,100 2,116
=o(10)Avocent Corp. 106,786 3,163
Black Box Corp. 45,700 1,451
o Borland Software Corp. 170,500 1,546
o Cray, Inc. 152,600 1,152
o E.piphany, Inc. 178,800 796
o Global Imaging Systems, Inc. 52,100 964
o Imagistics International, Inc. 42,800 921
o Informatica Corp. 195,900 1,279
o Intergraph Corp. 111,300 2,271
o Invision Technologies, Inc. 39,600 941
o Iomega Corp. 123,760 1,151
o LTX Corp. 111,100 750
o Magma Design Automation, Inc. 75,300 1,130
o Micromuse, Inc. 179,400 1,173
o MICROS Systems, Inc. 40,700 1,019
o Palm, Inc. 71,300 684
o ProQuest Co. 66,800 1,675
o Quantum Corp. 396,000 1,366
o Renaissance Learning, Inc. 75,200 1,433
o S1 Corp. 166,500 733
o Scansource, Inc. 29,000 577
o SRA International, Inc., Class A 31,000 733
o Systems & Computer Technology
Corp. 82,100 589
o The Titan Corp. 184,800 1,484
o WebEx Communications, Inc. 98,200 1,012
-----------
41,236
BUSINESS SERVICES 11.7%
--------------------------------------------------------------------------
o 4Kids Entertainment, Inc. 31,000 477
o aaiPharma, Inc. 66,450 751
ABM Industries, Inc. 117,200 1,623
o Actel Corp. 57,300 1,135
o Advent Software, Inc. 78,400 987
o The Advisory Board Co. 34,700 1,271
o Advo, Inc. 47,100 1,852
See financial notes.
52
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Agile Software Corp. 111,500 774
o Altiris, Inc. 48,700 794
o American Management
Systems, Inc. 101,200 1,245
o Ansys, Inc. 33,800 894
o Anteon International Corp. 82,400 1,951
o Ariba, Inc. 640,800 2,089
=o Barra, Inc. 46,700 1,525
Bowne & Co., Inc. 80,400 907
Brady Corp., Class A 54,800 1,836
o Bright Horizons Family
Solutions, Inc. 28,600 859
=o Brocade Communications
Systems, Inc. 547,800 3,161
o CDI Corp. 45,500 1,271
Chemed Corp. 24,100 840
o Ciber, Inc. 140,900 765
o Clarent Corp. 105,200 1
o Cognizant Technology Solutions
Corp. 144,000 2,586
o Coinstar, Inc. 52,100 953
o Connetics Corp. 74,500 1,258
o CoStar Group, Inc. 38,800 864
o Credence Systems, Corp. 146,100 1,037
o Cross Country, Inc. 78,200 886
o CSG Systems International,
Inc. 124,400 1,310
o Dendrite International, Inc. 88,850 910
o Digital Insight Corp. 77,400 1,251
o Digital River, Inc. 64,800 1,083
o Documentum, Inc. 114,500 2,106
o DoubleClick, Inc. 325,600 2,800
o Echelon Corp. 95,200 1,247
o eFunds Corp. 111,400 1,019
o Enterasys Networks, Inc. 484,900 1,164
o Exult, Inc. 257,000 1,848
o F5 Networks, Inc. 63,900 879
Factset Research Systems, Inc. 81,100 2,822
o Fidelity National Information
Solutions, Inc. 94,700 1,662
o Filenet Corp. 86,100 1,325
o Forrester Research, Inc. 56,600 876
o Freemarkets, Inc. 103,500 675
o FTI Consulting, Inc. 63,400 2,869
G&K Services, Inc., Class A 48,850 1,335
o Gartner, Inc., Class B 197,100 1,545
o Heidrick & Struggles
International, Inc. 44,700 626
o Hyperion Solutions Corp. 83,945 2,374
~o i2 Technologies, Inc. 1,063,800 628
o Identix, Inc. 195,032 956
o IDT Corp. 61,500 878
o IDX Systems Corp. 69,300 1,017
o Infospace, Inc. 73,950 921
o Intercept, Inc. 49,000 352
o Interwoven, Inc. 262,200 496
o JDA Software Group, Inc. 61,100 688
John H. Harland Co. 66,500 1,593
o Keane, Inc. 163,100 1,572
o Korn/Ferry International 93,000 640
o Kroll, Inc. 93,900 2,094
o Kronos, Inc. 46,925 2,141
o Labor Ready, Inc. 101,000 651
=o Legato Systems, Inc. 267,500 1,584
o Lending Tree, Inc. 54,900 778
o Macrovision Corp. 107,600 1,901
o MAXIMUS, Inc. 51,100 1,232
o Mentor Graphics Corp. 148,300 1,545
o Mercury Computer Systems, Inc. 50,000 1,050
o MPS Group, Inc. 247,100 1,668
o MRO Software, Inc. 59,600 511
Nautilus Group, Inc. 76,949 977
o NCO Group, Inc. 61,600 1,032
o NETIQ Corp. 133,200 1,835
New England Business Service,
Inc. 30,200 769
o Parametric Technology Corp. 632,100 2,086
o Paxar Corp. 94,435 976
o Per-Se Technologies, Inc. 74,000 646
= Pittston Brink's Group 131,300 1,674
o Planar Systems, Inc. 33,400 587
=o Polycom, Inc. 239,600 2,353
o Pre-Paid Legal Services, Inc. 42,900 989
See financial notes.
53
SCHWAB SMALL-CAP INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o PRG-Schultz International, Inc. 152,700 974
o ProBusiness Services, Inc. 67,200 947
o Progress Software Corp. 79,800 1,555
=o R.H. Donnelley Corp. 73,400 2,192
o Radiant Systems, Inc. 67,500 427
o RealNetworks, Inc. 377,400 1,936
o Red Hat, Inc. 407,000 2,442
o Resources Connection, Inc. 50,300 1,097
o Right Management Consultants,
Inc. 55,800 697
o RSA Security, Inc. 136,800 1,312
o Seacor Smit, Inc. 47,050 1,685
o Serena Software, Inc. 97,400 1,535
o SourceCorp 36,900 583
o Spherion Corp. 144,800 630
The Standard Register Co. 67,200 1,161
o Startek, Inc. 32,900 910
Strayer Education, Inc. 24,000 1,561
o Sycamore Networks, Inc. 657,100 2,122
o Sylvan Learning Systems, Inc. 97,100 1,703
o Take-Two Interactive Software,
Inc. 98,300 2,212
o TeleTech Holdings, Inc. 179,300 732
o Tetra Tech, Inc. 126,918 1,967
o Tetra Technologies, Inc. 33,400 888
o Tier Technologies, Inc., Class B 44,700 295
o Trizetto Group, Inc. 112,600 608
o Tularik, Inc. 134,900 738
o United Online, Inc. 100,800 2,254
o UNOVA, Inc. 139,600 1,027
o URS Corp. 77,600 1,102
o Verity, Inc. 83,200 1,375
o Vignette Corp. 600,800 1,238
Wabtec Corp. 104,421 1,280
= Wallace Computer Services,
Inc. 100,800 2,634
o Watson Wyatt & Co. Holdings 78,800 1,608
o webMethods, Inc. 113,600 1,143
o Websense, Inc. 40,800 582
o Wind River Systems, Inc. 194,600 644
-------
152,934
CHEMICAL 2.5%
-------------------------------------------------------------------------
A. Schulman, Inc. 70,300 1,150
Arch Chemicals, Inc. 53,100 1,133
Cambrex Corp. 62,000 1,079
= Crompton Corp. 273,600 1,757
= Ferro Corp. 97,400 2,303
=o FMC Corp. 84,300 1,528
Georgia Gulf Corp. 76,900 1,738
H.B. Fuller Co. 67,600 1,658
=o Hercules, Inc. 262,900 2,668
MacDermid, Inc. 77,400 1,759
Millennium Chemicals, Inc. 142,800 1,986
Olin Corp. 138,900 2,517
PolyOne Corp. 219,300 1,013
Rollins, Inc. 106,950 2,590
Solutia, Inc. 257,500 350
Spartech Corp. 69,900 1,513
o SurModics, Inc. 40,300 1,464
o Symyx Technologies, Inc. 73,800 1,153
Tredegar Corp. 92,900 1,195
WD-40 Co. 38,600 1,021
Wellman, Inc. 78,300 896
------
32,471
CONSTRUCTION 2.3%
-------------------------------------------------------------------------
o Beazer Homes USA, Inc. 30,769 2,162
CARBO Ceramics, Inc. 35,900 1,351
Centex Construction Products,
Inc. 43,200 1,670
o Dycom Industries, Inc. 115,100 1,271
ElkCorp 45,850 928
o EMCOR Group, Inc. 34,200 1,747
Granite Construction, Inc. 99,425 1,670
o Hovnanian Enterprises, Inc.,
Class A 57,300 2,281
o Insituform Technologies, Inc.,
Class A 63,200 1,008
M/I Schottenstein Homes, Inc. 35,200 1,202
o McDermott International, Inc. 156,700 509
o Meritage Corp. 32,400 1,236
o NCI Building Systems, Inc. 45,800 737
See financial notes.
54
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Palm Harbor Homes, Inc. 54,300 909
o Photon Dynamics, Inc. 37,500 821
(6) The Ryland Group, Inc. 61,100 3,313
o Simpson Manufacturing Co., Inc. 56,400 1,981
Standard-Pacific Corp. 78,400 2,372
Texas Industries, Inc. 49,700 981
o USG Corp. 106,300 745
Walter Industries, Inc. 106,500 1,081
----------
29,975
CONSUMER DURABLE 1.0%
--------------------------------------------------------------------------
American Woodmark Corp. 18,600 892
o Genlyte Group, Inc. 31,400 1,184
o Griffon Corp. 78,700 1,072
Haverty Furniture Cos., Inc. 53,500 752
o Helen of Troy Ltd. 67,200 951
Kimball International, Inc.,
Class B 91,400 1,461
=o Linens 'N Things, Inc. 101,400 2,149
o Select Comfort Corp. 73,000 992
Sturm Ruger & Co., Inc. 65,000 578
Thomas Industries, Inc. 40,000 1,076
Toro Co. 60,000 2,239
----------
13,346
CONSUMER NON-DURABLE 3.6%
--------------------------------------------------------------------------
Action Performance Cos., Inc. 41,800 773
o AFC Enterprises, Inc. 67,900 1,073
o California Pizza Kitchen, Inc. 44,100 889
o Catalina Marketing Corp. 128,700 2,295
o CEC Entertainment, Inc. 65,600 1,975
Churchill Downs, Inc. 31,300 1,156
o Corvis Corp. 975,600 692
o Fossil, Inc. 105,850 1,935
o Handleman Co. 61,500 1,042
IHOP Corp. 49,700 1,307
o Isle of Capri Casinos, Inc. 69,700 900
o Jack in the Box, Inc. 87,900 1,565
o Jakks Pacific, Inc. 48,200 626
Landry's Restaurants, Inc. 66,200 1,238
Lone Star Steakhouse & Saloon,
Inc. 49,500 1,038
The Marcus Corp. 70,225 997
o Marvel Enterprises, Inc. 147,200 2,479
o O'Charleys, Inc. 46,200 935
o P.F. Chang's China Bistro, Inc. 59,300 2,485
o Papa John's International, Inc. 43,900 1,044
o Penn National Gaming, Inc. 94,400 1,844
o Rare Hospitality International Inc. 52,100 1,518
Russ Berrie & Co., Inc. 48,300 1,588
o Ryan's Family Steak Houses, Inc. 104,250 1,292
o SCP Pool Corp. 55,150 1,820
=o Service Corp. International 713,800 2,413
o Sonic Corp. 92,200 2,490
o Sotheby's Holdings, Inc.,
Class A 148,100 1,302
o The Steak N Shake Co. 66,100 765
o Stewart Enterprises, Inc.,
Class A 256,700 752
o The Topps Co., Inc. 99,300 924
o Triarc Cos., Inc. 48,000 1,329
Tupperware Corp. 139,300 1,931
----------
46,412
CONTAINERS 0.2%
--------------------------------------------------------------------------
Greif Inc., Class A 52,900 1,082
o Silgan Holdings, Inc. 42,800 1,139
----------
2,221
ELECTRONICS 9.7%
--------------------------------------------------------------------------
o Allen Telecom, Inc. 67,800 917
o Amkor Technology, Inc. 397,700 3,011
o Andrew Corp. 234,600 1,799
o Anixter International, Inc. 89,900 2,066
o Artisan Components, Inc. 41,500 820
o Asyst Technologies, Inc. 94,200 449
o ATMI, Inc. 73,300 1,547
o Avid Technology, Inc. 63,200 1,736
o Axcelis Technologies, Inc. 237,000 1,346
Belden, Inc. 57,300 681
o Benchmark Electronics, Inc. 58,700 1,523
o Brooks Automation, Inc. 89,524 758
C&D Technologies, Inc. 63,100 839
o Cable Design Technologies
Corp. 109,275 755
See financial notes.
55
SCHWAB SMALL-CAP INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o CCC Information Services
Group, Inc. 62,000 1,032
o Checkpoint Systems, Inc. 79,900 1,067
o ChipPAC, Inc., Class A 224,100 1,210
o CMGI, Inc. 965,700 956
o Coherent, Inc. 69,300 1,594
Cohu, Inc. 51,200 922
=o CommScope, Inc. 142,400 1,220
o Conexant Systems, Inc. 642,000 1,168
o Cox Radio, Inc., Class A 95,900 2,187
CTS Corp. 83,100 694
Cubic Corp. 63,600 1,233
o Cyberonics 51,700 1,180
o Cypress Semiconductor
Corp. 296,300 2,584
o Dionex Corp. 49,200 1,693
o DSP Group, Inc. 64,600 1,350
o Dupont Photomasks, Inc. 35,100 653
o Electro Rent Corp. 51,722 516
o Electro Scientific Industries,
Inc. 65,600 881
o Electronics Boutique Holdings
Corp. 61,600 1,152
=o Electronics for Imaging 129,200 2,481
o Entegris, Inc. 170,900 1,960
o ESS Technology, Inc. 94,600 655
o Esterline Technologies Corp. 51,000 905
o Exar Corp. 95,700 1,412
o FEI Co. 78,100 1,428
o Flir Systems, Inc. 39,700 2,068
o Gen-Probe, Inc. 56,500 1,754
o GlobespanVirata, Inc. 311,000 1,888
Helix Technology Corp. 64,100 738
o Hollywood Entertainment
Corp. 143,400 2,545
o Hutchinson Technology, Inc. 60,300 1,426
o Intermagnetics General Corp. 40,414 785
=o Internet Security Systems 119,600 1,569
o Itron, Inc. 49,500 991
o Kemet Corp. 207,500 1,903
o Kopin Corp. 166,300 800
o Kulicke & Soffa Industries, Inc. 121,200 629
=o Lattice Semiconductor Corp. 258,600 2,245
o Littelfuse, Inc. 51,900 1,015
=o Macromedia, Inc. 146,200 1,844
Methode Electronics, Class A 84,400 886
o Micrel, Inc. 207,500 2,430
o MKS Instruments, Inc. 122,000 1,703
o Monolithic System Technology,
Inc. 74,300 446
o Mykrolis Corp. 97,700 784
o New Focus, Inc. 152,500 503
o Newport Corp. 92,000 1,189
o Omnivision Technologies, Inc. 54,600 1,326
Park Electrochemical Corp. 48,050 857
o Photronics, Inc. 70,900 891
o Pinnacle Systems, Inc. 146,300 1,383
Pioneer Standard Electronics,
Inc. 78,400 760
o Plantronics, Inc. 106,500 1,970
o Plexus Corp. 87,400 890
o Power Intergrations, Inc. 68,000 1,505
o Power-One, Inc. 191,400 1,120
o Powerwave Technologies,
Inc. 161,400 649
o(5) Rambus, Inc. 233,700 3,342
o Rayovac Corp. 77,900 810
o Riverstone Networks, Inc. 301,600 371
o Rogers Corp. 36,900 1,221
o Rudolph Technologies, Inc. 40,100 606
o ScanSoft, Inc. 155,400 803
o Semtech Corp. 175,000 2,783
o Silicon Image, Inc. 157,900 944
=o(7) Silicon Laboratories, Inc. 116,000 3,300
o Silicon Storage Technology,
Inc. 228,800 721
o Standard Microsystems Corp. 41,100 520
o Technitrol, Inc. 96,700 1,527
o Tekelec 145,800 1,569
=o Thomas & Betts Corp. 139,200 2,201
o THQ, Inc. 95,650 1,352
o Triquint Semiconductor, Inc. 318,700 1,119
o Varian Semiconductor Equipment
Associates, Inc. 80,900 1,865
See financial notes.
56
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
=o Varian, Inc. 81,300 2,570
o Viasat, Inc. 63,900 680
o Vicor Corp. 104,000 699
o Visx, Inc. 123,700 1,937
o Vitesse Semiconductor
Corp. 488,100 1,518
o Western Wireless Corp.,
Class A 173,400 1,061
o Zoran Corp. 64,300 1,144
----------
126,535
ENERGY: RAW MATERIALS 2.6%
--------------------------------------------------------------------------
o Atwood Oceanics, Inc. 32,100 836
Berry Petroleum Co., Class A 50,700 786
Cabot Oil & Gas Corp. 76,100 1,865
o Comstock Resources, Inc. 70,900 787
o Dril-Quip, Inc. 42,500 654
o Encore Acquisition Co. 72,000 1,241
o Evergreen Resources, Inc. 44,700 2,126
o FuelCell Energy, Inc. 84,300 519
o Grey Wolf, Inc. 435,900 1,765
o Headwaters, Inc. 65,200 1,069
The Laclede Group, Inc. 44,400 1,070
Massey Energy Co. 179,700 1,874
o Newpark Resources, Inc. 179,400 841
NL Industries 115,200 2,005
o Offshore Logistics, Inc. 53,300 1,013
Penn Virginia Corp. 22,000 857
o Plains Resources, Inc. 58,900 714
o Prima Energy Corp. 31,400 616
o Quicksilver Resource, Inc. 49,400 1,142
o Range Resources Corp. 134,100 793
o Southwestern Energy Co. 77,800 1,036
o Swift Energy Co. 66,800 556
TC Pipelines L.P. 42,300 1,153
=o Tom Brown, Inc. 94,000 2,305
o Ultra Petroleum Corp. 178,500 1,785
o Unit Corp. 94,700 1,856
USEC, Inc. 196,100 1,098
o W-H Energy Services, Inc. 64,300 1,157
----------
33,519
FOOD & AGRICULTURE 1.6%
--------------------------------------------------------------------------
o American Italian Pasta Co.,
Class A 42,200 1,861
Bob Evans Farms, Inc. 82,700 2,098
o Chiquita Brands International,
Inc. 95,400 1,283
Coca-Cola Bottling Co.
Consolidated 21,200 1,075
Delta & Pine Land Co. 91,900 2,138
Fleming Cos., Inc. 133,900 13
Flowers Foods, Inc. 71,600 2,026
o Hain Celestial Group, Inc. 80,600 1,391
o International Multifoods Corp. 45,000 862
= Interstate Bakeries 108,600 1,137
o J & J Snack Foods Corp. 21,900 686
Lance, Inc. 71,500 529
o Ralcorp Holdings, Inc. 69,566 1,732
o Surebeam Corp., Class A 142,000 409
o Tejon Ranch Co. 33,400 927
o United Natural Foods, Inc. 45,000 1,314
Vector Group Ltd. 83,787 938
o Wild Oats Markets, Inc. 72,900 789
----------
21,208
GOLD 0.1%
--------------------------------------------------------------------------
Royal Gold, Inc. 46,900 748
HEALTHCARE / DRUGS & MEDICINE 10.6%
--------------------------------------------------------------------------
o Abgenix, Inc. 202,600 1,925
o Adolor Corp. 74,900 1,048
o Advanced Medical Optics, Inc. 68,600 962
o Advanced Neuromodulation
Systems, Inc. 29,000 1,214
o Albany Molecular Research, Inc. 77,600 896
o Alexion Pharmaceuticals, Inc. 44,500 587
o Alkermes, Inc. 155,200 1,549
Alpharma, Inc., Class A 122,200 2,279
o American Healthways, Inc. 33,900 837
o American Medical Systems
Holdings, Inc. 77,600 1,232
o AMERIGROUP Corp. 48,300 1,406
See financial notes.
57
SCHWAB SMALL-CAP INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o AMN Healthcare Services, Inc. 92,600 843
o Amsurg Corp. 49,500 1,286
o Antigenics, Inc. 91,200 897
Arrow International, Inc. 51,500 2,197
o Atrix Labs, Inc. 42,800 752
o Beverly Enterprises, Inc. 257,700 492
o Bio-Rad Laboratories, Inc.,
Class A 59,800 2,796
o BioMarin Pharmaceuticals, Inc. 147,900 1,624
o Biosite, Inc. 35,500 1,515
o Celera Genomics Group - Applera
Corp. 173,000 1,816
o Cell Genesys, Inc. 88,500 789
o Cerus Corp. 39,000 316
o Chattem, Inc. 46,800 640
o Cima Labs, Inc. 34,800 840
o Conmed Corp. 68,400 1,192
Cooper Cos., Inc. 73,300 2,045
o Corixa Corp. 120,700 865
o Corvel Corp. 24,400 764
o CV Therapeutics, Inc. 64,700 1,293
Datascope Corp. 34,900 998
o Diversa Corp. 97,800 1,011
=o(1) Endo Pharmaceutical Holdings,
Inc. 244,700 4,042
o Enzo Biochem, Inc. 67,868 1,016
o Enzon Pharmaceuticals, Inc. 101,700 1,395
o Exelixis, Inc. 137,900 1,175
o First Horizon Pharmaceutical Corp. 87,100 236
o Genesis Health Ventures, Inc. 99,900 1,495
o Genta, Inc. 176,300 1,319
o Haemonetics Corp. 57,900 1,027
o Hanger Orthopedic Group, Inc. 49,800 513
Hooper Holmes, Inc. 154,200 933
ICN Pharmaceuticals, Inc. 201,000 1,759
o ICU Medical, Inc. 32,800 1,042
o(8) ImClone Systems, Inc. 177,000 3,228
o Impath, Inc. 33,200 488
o Inamed Corp. 51,800 1,932
o Incyte Genomics, Inc. 167,000 576
o Integra LifeSciences Holdings
Corp. 64,500 1,722
o InterMune, Inc. 76,300 1,551
o Isis Pharmaceuticals, Inc. 125,500 694
o Kindred Healthcare, Inc. 43,400 647
o KV Pharmaceutical Co., Class A 79,850 1,796
o La Jolla Pharmaceutical Co. 94,300 208
Landauer, Inc. 19,300 740
o Ligand Pharmaceuticals, Inc.,
Class B 156,900 1,396
o Martek Biosciences Corp. 55,200 1,878
o Maxygen, Inc. 84,600 694
o Medarex, Inc. 163,800 683
o Medicines Co. 110,100 2,263
Mentor Corp. 111,800 2,069
o Merit Medical Systems, Inc. 34,100 668
o Myriad Genetics, Inc. 58,700 700
NDCHealth Corp. 83,300 1,604
o Nektar Therapeutics 132,300 1,061
o NPS Pharmaceuticals, Inc. 76,900 1,465
o Odyssey HealthCare, Inc. 55,100 1,424
o Orthodontic Centers of
America, Inc. 123,200 715
o OSI Pharmaceuticals, Inc. 87,500 1,837
Owens & Minor, Inc. 81,800 1,521
o Pacificare Health Systems, Inc. 86,000 2,738
o Parexel International Corp. 61,800 798
Perrigo Co. 166,500 2,557
=o(4) Pharmaceutical Resources, Inc. 78,500 3,450
PolyMedica Corp. 30,300 1,129
o Possis Medical, Inc. 33,500 643
o Priority Healthcare Corp.,
Class B 100,300 2,287
o Protein Design Labs, Inc. 214,100 2,126
o Province Healthcare Co. 116,600 1,166
o PSS World Medical, Inc. 164,800 990
o Regeneron Pharmaceuticals,
Inc. 94,200 596
o RehabCare Group, Inc. 38,900 680
oo Resmed, Inc. 79,200 2,905
o Sangstat Medical Corp. 62,400 786
=o(3) Sepracor, Inc. 200,400 3,838
o Serologicals Corp. 60,000 554
o Sierra Health Services, Inc. 66,100 1,097
See financial notes.
58
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Sola International, Inc. 60,300 845
o Sunrise Assisted Living, Inc. 53,200 1,436
o Sybron Dental Specialties, Inc. 91,400 1,860
o Tanox, Inc. 106,500 1,683
o Telik, Inc. 77,700 1,022
o Thoratec Corp. 132,700 1,825
o Transkaryotic Therapies, Inc. 85,700 514
o Trimeris, Inc. 50,500 2,242
o United Surgical Partners
International, Inc. 64,500 1,195
o United Therapeutics Corp. 49,500 888
o US Oncology, Inc. 216,672 1,556
o Vaxgen, Inc. 35,700 107
o Ventana Medical Systems 35,900 822
o Viasys Healthcare, Inc. 62,400 1,011
o Vicuron Pharmaceuticals, Inc. 94,900 1,115
West Pharmaceutical Services,
Inc. 35,600 849
o Wright Medical Group, Inc. 77,900 1,479
o XOMA Ltd. 154,800 771
o Zoll Medical Corp. 22,000 711
----------
138,689
HOUSEHOLD PRODUCTS 0.2%
--------------------------------------------------------------------------
o Elizabeth Arden, Inc. 46,300 588
Nu Skin Enterprises, Inc., Class A 87,600 789
o Playtex Products, Inc. 147,400 1,083
----------
2,460
INSURANCE 3.3%
--------------------------------------------------------------------------
= Alfa Corp. 189,600 2,448
o Allmerica Financial Corp. 126,100 1,929
Argonaut Group, Inc. 53,000 534
o Clark/Bardes, Inc. 41,400 484
CNA Surety Corp. 102,700 943
o Cobalt Corp. 100,000 1,645
Delphi Financial Group, Inc.,
Class A 48,571 2,140
FBL Financial Group, Inc.,
Class A 63,100 1,267
Fremont General Corp. 181,400 1,698
Great American Financial
Resources, Inc. 101,750 1,440
Harleysville Group, Inc. 71,900 1,697
Horace Mann Educators Corp. 98,400 1,453
Kansas City Life Insurance Co. 27,900 1,135
Landamerica Financial Group,
Inc. 42,700 1,754
Liberty Corp. 46,300 2,045
The Midland Co. 43,100 879
o National Western Life Insurance Co.,
Class A 8,200 813
o Ohio Casualty Corp. 145,200 1,819
o Philadelphia Consolidated
Holding Co. 52,000 2,028
The Phoenix Cos., Inc. 226,500 1,789
PMA Capital Corp., Class A 76,900 657
Presidential Life Corp. 72,000 582
o ProAssurance Corp. 68,796 1,781
RLI Corp. 58,650 1,733
Selective Insurance Group, Inc. 62,900 1,578
State Auto Financial Corp. 93,800 1,763
o Stewart Information Services
Corp. 41,500 1,107
o Triad Guaranty, Inc. 32,700 1,303
o UICI 115,900 1,379
United Fire & Casualty Co. 24,400 785
Zenith National Insurance
Corp. 44,100 1,136
----------
43,744
MEDIA 2.8%
--------------------------------------------------------------------------
Advanced Marketing Services 46,600 549
o AMC Entertainment, Inc. 84,200 807
o American Tower Corp., Class A 444,500 2,951
o Arris Group, Inc. 197,200 769
Banta Corp. 60,200 1,869
o Charter Communications, Inc.,
Class A 703,400 1,175
o CNET Networks, Inc. 332,800 1,208
o Consolidated Graphics, Inc. 32,700 625
o Cumulus Media, Inc., Class A 111,900 1,929
o Entravision Communications Corp.,
Class A 167,500 1,275
o Fisher Communications, Inc. 20,900 927
o Gaylord Entertainment Co. 81,000 1,686
Gray Television, Inc. 93,100 1,029
See financial notes.
59
SCHWAB SMALL-CAP INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Grey Global Group, Inc. 3,100 2,017
o Information Holdings, Inc. 53,100 924
o Insight Communications Co. 122,300 1,679
o Journal Register Co. 100,300 1,776
o Mediacom Communications
Corp. 215,200 2,150
o Movie Gallery, Inc. 76,500 1,414
o Price Communications Corp. 132,000 1,612
o Primedia, Inc. 623,300 1,621
Pulitzer, Inc. 21,200 988
o Saga Communications, Inc.,
Class A 44,600 901
o Salem Communications Corp.,
Class A 42,100 887
o Sinclair Broadcast Group, Inc.,
Class A 102,400 1,085
o Spanish Broadcasting System,
Class A 91,000 698
o Tivo, Inc. 141,800 844
o Valuevision Media, Inc.,
Class A 86,700 1,100
----------
36,495
MISCELLANEOUS 0.6%
--------------------------------------------------------------------------
o Centene Corp. 26,500 849
o Extreme Networks, Inc. 281,100 1,189
o Lin TV Corp., Class A 62,200 1,487
o Mantech International Corp.,
Class A 37,900 591
Mine Safety Appliances Co. 32,400 1,239
o Regent Communications, Inc. 111,100 666
o Wilson Greatbatch Technologies,
Inc. 49,600 1,626
----------
7,647
MISCELLANEOUS FINANCE 3.4%
--------------------------------------------------------------------------
1st Source Corp. 52,100 690
Amcore Financial, Inc. 58,950 1,381
American Capital Strategies Ltd. 112,700 2,734
Anworth Mortgage Asset Corp. 59,600 833
o Bankunited Financial Corp.,
Class A 60,500 1,143
o Bay View Capital Corp. 154,200 884
o Blackrock, Inc. 42,000 1,910
Cathay Bancorp., Inc. 42,200 1,836
Charter Municipal Mortgage
Acceptance Co. 108,100 2,059
o CompuCredit Corp. 112,300 850
CPB, Inc. 38,800 987
CVB Financial Corp. 104,940 2,130
o eSpeed, Inc., Class A 67,600 882
o Financial Federal Corp. 43,700 979
First Financial Corp. 16,600 847
First Financial Holdings, Inc. 30,100 810
First Indiana Corp. 37,800 631
First Sentinel Bancorp., Inc. 69,291 1,048
Flagstar Bancorp., Inc. 70,200 2,324
Glacier Bancorp, Inc. 40,300 1,124
Greater Bay Bancorp 122,600 1,962
Hudson River Bancorp 35,400 870
Independent Bank Corp. Michigan 42,200 1,006
o Knight Trading Group, Inc. 269,000 1,361
o Local Financial Corp. 42,100 631
MB Financial, Inc. 41,600 1,563
MCG Capital Corp. 76,900 827
New Century Financial Corp. 59,300 2,184
Northwest Bancorp, Inc. 114,849 1,872
= Pacific Capital Bancorp. 81,499 2,658
Redwood Trust, Inc. 37,100 1,233
o Saxon Capital, Inc. 67,200 991
Value Line, Inc. 24,100 1,167
----------
44,407
NON-FERROUS METALS 0.7%
--------------------------------------------------------------------------
Commercial Metals Co. 67,766 1,048
o Hecla Mining Co. 231,600 866
Kaydon Corp. 71,800 1,601
Minerals Technologies, Inc. 47,500 2,102
=o Mueller Industries, Inc. 82,100 2,098
Reliance Steel & Aluminum Co. 75,975 1,291
----------
9,006
OIL: DOMESTIC 1.6%
--------------------------------------------------------------------------
o CAL Dive International, Inc. 89,700 1,444
Frontier Oil Corp. 62,200 1,052
o Global Industries Ltd. 241,300 1,071
See financial notes.
60
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Holly Corp. 37,200 1,060
=o Houston Exploration Co. 73,400 2,053
o Magnum Hunter Resources, Inc. 163,500 921
Patina Oil & Gas Corp. 64,325 2,221
o Remington Oil & Gas Corp. 62,400 978
o Spinnaker Exploration Co. 79,500 1,701
St. Mary Land & Exploration Co. 67,400 1,727
o Stone Energy Corp. 62,640 2,201
o Superior Energy Services, Inc. 176,300 1,596
o Tesoro Petroleum Corp. 145,100 1,127
Vintage Petroleum, Inc. 153,200 1,498
----------
20,650
OPTICAL & PHOTO 0.2%
--------------------------------------------------------------------------
o Oakley, Inc. 165,800 1,741
o Ocular Sciences, Inc. 47,800 693
----------
2,434
PAPER & FOREST PRODUCTS 0.7%
--------------------------------------------------------------------------
o Caraustar Industries, Inc. 68,500 471
Chesapeake Corp. 37,200 668
Deltic Timber Corp. 29,000 709
Glatfelter 105,200 1,205
Longview Fibre Co. 125,500 958
Potlatch Corp. 68,100 1,624
Rock-Tennessee Co.,
Class A 82,200 1,101
Universal Forest Products, Inc. 43,500 766
Wausau-Mosinee Paper Corp. 124,125 1,321
----------
8,823
PRODUCER GOODS & MANUFACTURING 4.8%
--------------------------------------------------------------------------
o Actuant Corp., Class A 26,600 987
Acuity Brands, Inc. 99,800 1,520
o Advanced Energy Industries, Inc. 78,800 757
o Aeroflex, Inc. 147,600 794
Albany International Corp.,
Class A 78,083 1,854
Applied Industrial Technologies,
Inc. 44,900 830
Baldor Electric Co. 81,820 1,820
Barnes Group, Inc. 46,400 976
= Briggs & Stratton 51,200 2,311
o Cognex Corp. 102,600 2,246
o Cuno, Inc. 37,700 1,351
Federal Signal Corp. 113,200 1,956
=o Flowserve Corp. 127,334 1,966
Franklin Electric Co., Inc. 25,100 1,301
o Gardner Denver, Inc. 38,900 771
o GrafTech International Ltd. 137,900 554
o Hanover Compressor Co. 160,500 1,350
Hughes Supply, Inc. 56,650 1,590
o Hydril Co. 53,400 1,271
o Ionics, Inc. 33,900 644
o Jarden Corp. 31,700 935
JLG Industries, Inc. 105,600 574
o Joy Global, Inc. 111,500 1,379
Lennox International, Inc. 137,900 2,049
Libbey, Inc. 32,091 721
= Lincoln Electric Holdings, Inc. 101,800 1,956
o Lone Star Technologies, Inc. 68,000 1,444
Manitowoc Co., Inc. 62,262 1,158
Matthews International Corp.,
Class A 74,600 1,758
o MSC Industrial Direct Co.,
Class A 82,300 1,523
NACCO Industries, Inc., Class A 16,150 848
Nordson Corp. 81,000 2,046
o Oceaneering International, Inc. 58,900 1,329
Regal Beloit 59,400 1,019
Robbins & Myers, Inc. 35,300 607
Sauer-Danfoss, Inc. 113,400 1,027
o SPS Technologies, Inc. 32,200 849
Standex International Corp. 29,700 627
Steelcase, Inc., Class A 97,200 932
Stewart & Stevenson Services 68,000 912
Tecumseh Products Co., Class A 43,400 1,746
Tennant Co. 22,100 730
o Terex Corp. 106,300 1,759
Trinity Industries, Inc. 103,050 1,706
o Universal Compression
Holdings, Inc. 73,400 1,332
Watsco, Inc. 60,900 943
Watts Industries, Inc., Class A 64,500 1,055
Woodward Governor Co. 25,800 955
= York International Corp. 95,000 2,271
----------
63,039
See financial notes.
61
SCHWAB SMALL-CAP INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
RAILROAD & SHIPPING 0.5%
--------------------------------------------------------------------------
Florida East Coast Industries,
Class A 87,800 2,270
o Genessee & Wyoming, Inc.,
Class A 31,900 552
o Gulfmark Offshore, Inc. 47,000 620
o Kansas City Southern 145,800 1,614
Overseas Shipholding
Group 82,600 1,554
----------
6,610
REAL PROPERTY 6.5%
--------------------------------------------------------------------------
Alexandria Real Estate
Equities, Inc. 45,600 1,929
AMLI Residential Properties 40,200 910
Anthracite Capital, Inc. 114,200 1,353
Bedford Property Investors 39,200 1,045
= Brandywine Realty Trust 84,600 1,887
Capital Automotive Real Estate
Investment Trust 66,800 1,729
Capstead Mortgage Corp. 34,200 381
= Chateau Communities, Inc. 70,000 1,513
Colonial Properties Trust 53,600 1,823
Commercial Net Lease Realty 97,300 1,572
Cornerstone Realty Income
Trust, Inc. 118,800 834
Corporate Office Properties
Trust SBI 56,400 860
o Corrections Corp. of America 66,700 1,417
Crown American Realty Trust 78,700 804
Eastgroup Properties 37,600 977
Entertainment Properties Trust 40,300 1,086
Equity One, Inc. 140,900 2,239
Essex Property Trust, Inc. 42,400 2,331
FelCor Lodging Trust, Inc. 141,000 1,000
Gables Residential Trust 57,800 1,640
Getty Realty Corp. 50,600 1,006
Glenborough Realty Trust, Inc. 66,100 1,096
Glimcher Realty Trust 82,300 1,700
Great Lakes Real Estate Investment
Trust 40,700 601
Home Properties of NY, Inc. 66,300 2,303
IMPAC Mortgage Holdings,
Inc. 116,200 1,548
Innkeepers USA Trust 92,100 694
Investors Real Estate Trust 78,000 764
o Jones Lang LaSalle, Inc. 73,700 1,111
Keystone Property Trust 52,600 905
Kilroy Realty Corp. 66,600 1,653
Koger Equity, Inc. 52,300 837
Kramont Realty Trust 57,300 877
o La Quinta Corp. 366,600 1,243
LaSalle Hotel Properties 46,000 644
Lexington Corp. Properties
Trust 71,500 1,233
LNR Property Corp. 52,600 1,853
Manufactured Home Communities,
Inc. 52,200 1,672
Meristar Hospitality Corp. 110,600 460
MFA Mortgage Investments, Inc. 111,100 1,041
Mid Atlantic Realty Trust 43,800 812
Mid-America Apartment Communities,
Inc. 41,800 1,074
National Health Investors, Inc. 63,400 1,030
Nationwide Health Properties,
Inc. 118,800 1,663
Newcastle Investment Corp. 57,000 993
Novastar Financial, Inc. 23,700 1,018
Parkway Properties, Inc. 23,100 892
Pennsylvania Real Estate Investment
Trust 38,800 1,108
Post Properties, Inc. 88,800 2,287
PS Business Parks, Inc. 51,000 1,587
RAIT Investment Trust 48,600 1,093
RFS Hotel Investors, Inc. 70,000 752
Saul Centers, Inc. 36,000 849
Senior Housing Properties
Trust 139,500 1,741
SL Green Realty Corp. 72,700 2,343
Sovran Self Storage, Inc. 30,300 890
Summit Properties, Inc. 65,800 1,271
Sun Communities, Inc. 42,500 1,638
Tanger Factory Outlet Centers 22,200 715
Taubman Centers, Inc. 126,300 2,211
The Town & Country Trust 38,000 847
o Trammell Crow Co. 88,800 773
Universal Health Realty Income 27,900 730
See financial notes.
62
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
US Restaurant Properties, Inc. 48,700 713
Ventas, Inc. 190,100 2,471
= Washington Real Estate Investment
Trust 94,200 2,462
----------
84,534
RETAIL 3.0%
--------------------------------------------------------------------------
o 7-Eleven, Inc. 252,440 2,269
o Alloy, Inc. 97,100 588
o American Eagle Outfitters, Inc. 170,500 2,984
o AnnTaylor Stores Corp. 108,099 2,558
Blockbuster, Inc., Class A 85,400 1,527
o Blue Rhino Corp. 38,400 521
Burlington Coat Factory Warehouse
Corp. 105,340 1,870
Casey's General Stores, Inc. 120,000 1,554
The Cato Corp., Class A 60,200 1,234
o Central Garden & Pet Co. 42,900 1,040
o Charming Shoppes, Inc. 271,300 1,275
o Cost Plus, Inc. 51,400 1,580
o Duane Reade, Inc. 50,900 685
Fred's, Inc. 61,850 2,007
o Great Atlantic & Pacific Tea Co. 94,600 577
o Guitar Center, Inc. 53,600 1,241
Hancock Fabrics, Inc. 42,500 663
o HOT Topic, Inc. 74,249 1,815
o Insight Enterprises, Inc. 97,250 733
Longs Drug Stores Corp. 92,300 1,430
o OfficeMax, Inc. 300,300 1,697
Pep Boys-Manny, Moe & Jack 123,600 1,058
Ruddick Corp. 112,400 1,496
o School Specialty, Inc. 43,200 802
o ShopKo Stores, Inc. 71,000 854
o Stage Stores, Inc. 48,100 1,006
o Tractor Supply Co. 42,700 1,808
Weis Markets, Inc. 64,900 2,074
o West Marine, Inc. 47,300 773
----------
39,719
STEEL 0.6%
--------------------------------------------------------------------------
Allegheny Technologies, Inc. 175,100 727
Carpenter Technology Corp. 54,900 717
Gibraltar Steel Corp. 38,900 673
o Maverick Tube Corp. 98,700 1,756
Quanex Corp. 39,200 1,127
o The Shaw Group, Inc. 90,300 1,052
o Steel Dynamics, Inc. 114,800 1,389
Valmont Industries, Inc. 56,600 1,093
----------
8,534
TELEPHONE 0.9%
--------------------------------------------------------------------------
o Broadwing, Inc. 523,800 2,425
o Commonwealth Telephone
Enterprises, Inc. 55,600 2,210
o General Communication, Inc.,
Class A 137,100 849
Inter-Tel, Inc. 58,600 964
o Interdigital Communications
Corp. 127,100 2,864
o Lexar Media, Inc. 128,700 624
o Openwave Systems, Inc. 440,600 762
SureWest Communications 35,300 936
----------
11,634
TOBACCO 0.3%
--------------------------------------------------------------------------
DIMON, Inc. 109,500 718
Schweitzer-Mauduit International, Inc. 36,700 803
= Universal Corp. 59,300 2,316
----------
3,837
TRAVEL & RECREATION 1.4%
--------------------------------------------------------------------------
o Alliance Gaming Corp. 118,100 1,886
o American Classic Voyages Co. 52,800 --
o Argosy Gaming Co. 69,100 1,408
o Aztar Corp. 87,100 1,240
o Boca Resorts, Inc., Class A 94,200 1,168
Callaway Golf Co. 181,800 2,533
Central Parking Corp. 75,400 754
o Choice Hotels International, Inc. 89,200 2,177
o Dollar Thrifty Automotive Group,
Inc. 58,100 953
o Multimedia Games, Inc. 31,500 794
o Prime Hospitality Corp. 86,100 573
o Scientific Games Corp., Class A 143,500 936
See financial notes.
63
SCHWAB SMALL-CAP INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Shuffle Master, Inc. 40,600 930
o Six Flags, Inc. 223,200 1,312
o Vail Resorts, Inc. 65,100 781
o WMS Industries, Inc. 73,200 987
----------
18,432
TRUCKING & FREIGHT 1.1%
--------------------------------------------------------------------------
Arkansas Best Corp. 58,900 1,493
o Forward Air Corp. 50,600 1,273
o Kirby Corp. 56,900 1,488
o Knight Transportation, Inc. 89,200 2,150
o Landstar Systems, Inc. 36,900 2,293
o PAM Transportation Services,
Inc. 24,700 587
Roadway Corp. 45,600 1,690
USFreightways Corp. 64,200 1,830
o Yellow Corp. 70,200 1,874
----------
14,678
UTILITIES: ELECTRIC & GAS 3.6%
--------------------------------------------------------------------------
Allegheny Energy, Inc. 301,700 2,504
American States Water Co. 35,250 911
Aquila, Inc. 436,100 1,212
Avista Corp. 115,300 1,364
Black Hills Corp. 66,100 1,883
California Water Service Group 36,300 993
CH Energy Group, Inc. 37,700 1,585
Cleco Corp. 113,000 1,695
(2) Dynegy, Inc., Class A 886,600 3,901
o El Paso Electric Co. 120,000 1,361
The Empire District Electric Co. 53,400 1,051
= Energen Corp. 83,100 2,726
Idacorp, Inc. 91,100 2,331
MGE Energy, Inc. 40,900 1,182
o(9) Mirant Corp. 964,200 3,192
New Jersey Resources Corp. 64,100 2,195
Northwest Natural Gas Co. 60,800 1,570
NUI Corp. 38,800 546
Otter Tail Corp. 60,800 1,666
PNM Resources, Inc. 94,200 2,090
o Sierra Pacific Resources 224,600 829
South Jersey Industries 29,900 1,046
o Southern Union Co. 134,570 1,877
Southwest Gas Corp. 79,600 1,652
UIL Holdings Corp. 33,600 1,213
Unisource Energy Corp. 80,580 1,437
= Westar Energy, Inc. 171,600 2,413
----------
46,425
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
U.S. TREASURY OBLIGATIONS
0.0% of investments
= U.S. Treasury Bills,
1.10%-1.13%, 06/19/03 115 115
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
64
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value
(including $8,369 of securities of loan) $ 1,305,683 a
Collateral held for securities on loan 8,674
Receivables:
Fund shares sold 406
Dividends 832
Investments sold 6,038
Due from brokers for futures 8
Income from lending securities 24
Prepaid expenses + 20
---------------
TOTAL ASSETS 1,321,685
LIABILITIES
- --------------------------------------------------------------------------------
Collateral held for securities on loan 8,674
Borrowing from custodian 2,616
Payables:
Fund shares redeemed 3,229
Investment adviser and administrator fees 44
Transfer agent and shareholder service fees 24
Accrued expenses + 226
---------------
TOTAL LIABILITIES 14,813
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 1,321,685
TOTAL LIABILITIES - 14,813
---------------
NET ASSETS $ 1,306,872
NET ASSETS BY SOURCE
Capital received from investors 1,685,536
Net investment income not yet distributed 2,135
Net realized capital losses (281,914)
Net unrealized capital losses (98,885) b
NET ASSET VALUE (NAV)
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $ 693,202 50,144 $13.82
Select Shares(R) $ 613,670 44,355 $13.84
a The fund paid $1,404,677 for these securities. Not counting short-term
obligations and government securities, the fund paid $441,956 for securities
during the report period and received $555,136 from securities it sold or that
matured.
b These derive from investments and futures. As of the report date, the fund had
five open Russell 2000 futures contracts due to expire on June 19, 2003, with
a contract value of $997 and unrealized gains of $109.
FEDERAL TAX DATA
- -----------------------------------------------------------------
PORTFOLIO COST $ 1,408,727
NET UNREALIZED GAINS AND LOSSES:
Gains $ 167,672
Losses + (270,716)
-----------------
($103,044)
AS OF OCTOBER 31, 2002:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $11,077
Long-term capital gains $ --
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $ 86,072
See financial notes.
65
SCHWAB SMALL-CAP INDEX FUND(R) -- Financials
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $ 8,444 a
Interest 7
Lending of securities + 259
---------------
TOTAL INVESTMENT INCOME 8,710
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments sold (187,880)
Net realized losses on futures contracts + (343)
---------------
NET REALIZED LOSSES (188,223)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 249,412
Net unrealized gains on futures contracts + 93
---------------
NET UNREALIZED GAINS 249,505
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 1,923 b
Transfer agent and shareholder service fees:
Investor Shares 854 c
Select Shares(R) 301 c
Trustees' fees 6 d
Custodian fees 73
Portfolio accounting fees 104
Professional fees 19
Registration fees 29
Shareholder reports 104
Interest expense 11
Other expenses + 9
---------------
Total expenses 3,433
Expense reduction - 447 e
---------------
NET EXPENSES 2,986
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 8,710
NET EXPENSES - 2,986
---------------
NET INVESTMENT INCOME 5,724
NET REALIZED LOSSES (188,223) f
NET UNREALIZED GAINS + 249,505 f
---------------
INCREASE IN NET ASSETS FROM OPERATIONS $ 67,006
a An additional $3 was withheld for foreign taxes.
b Calculated as a percentage of average daily net assets: 0.33% of the first
$500 million and 0.28% of assets beyond that.
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.
d For the fund's independent trustees only.
e Includes $325 from the investment adviser (CSIM) and $122 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 29, 2004, as follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
- ---------------------------------------
Investor Shares 0.60
Select Shares 0.42
Prior to March 1, 2003, these limits were 0.49% and 0.38% for the Investor
Shares and Select Shares, respectively. This limit doesn't include interest,
taxes and certain non-routine expenses.
f These add up to a net gain on investments of $61,282.
See financial notes.
66
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for current period are unaudited.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income $ 5,724 $ 13,371
Net realized losses (188,223) (78,341)
Net unrealized gains or losses + 249,505 (171,545)
-------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 67,006 (236,515)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME
Investor Shares 7,508 4,403
Select Shares(R) + 7,345 4,635
-------------------------------------
TOTAL DIVIDENDS FROM NET INVESTMENT INCOME 14,853 9,038
DISTRIBUTIONS FROM NET REALIZED GAINS
Investor Shares -- 29,754
Select Shares + -- 26,290
-------------------------------------
TOTAL DISTRIBUTIONS FROM NET REALIZED GAINS -- 56,044
TOTAL DISTRIBUTIONS $ 14,853 $ 65,082 a
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
SHARES SOLD
Investor Shares 2,571 $ 33,833 14,769 $ 243,412
Select Shares + 3,375 43,720 14,560 231,836
----------------------------------------------------
TOTAL SHARES SOLD 5,946 $ 77,553 29,329 $ 475,248
SHARES REINVESTED
Investor Shares 552 $ 7,508 1,919 $ 32,335
Select Shares + 540 7,345 1,710 28,842
----------------------------------------------------
TOTAL SHARES REINVESTED 1,092 $ 14,853 3,629 $ 61,177
SHARES REDEEMED
Investor Shares (7,408) ($96,837) (12,547) ($192,562)
Select Shares + (7,579) (100,795) (13,662) (212,752)
----------------------------------------------------
TOTAL SHARES REDEEMED (14,987) ($197,632) (26,209) ($405,314) b
NET INCREASE OR DECREASE (7,949) ($105,226) 6,749 $ 131,111
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 102,448 $1,359,945 95,699 $1,530,431
Total increase or
decrease + (7,949) (53,073) 6,749 (170,486) c
----------------------------------------------------
END OF PERIOD 94,499 $1,306,872 102,448 $1,359,945 d
a The tax-basis components of distributions paid for the prior period are:
Ordinary Income $ 9,038
Long-term capital gains $56,044
b Dollar amounts are net of proceeds received from early withdrawal fees that
the fund charges on shares sold 180 days or less after buying them.
CURRENT PERIOD
Investor Shares $ 24
Select Shares + 15
---------
TOTAL $ 39
PRIOR PERIOD
Investor Shares $128
Select Shares + 65
---------
TOTAL $193
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 net investment income not yet distributed in the amount of $2,135 and
$11,264 for the current period and the prior period, respectively.
Percent of fund shares owned by other SchwabFunds(R) as of the end of the
current period:
SCHWAB MARKETTRACK PORTFOLIOS(R)
All Equity Portfolio 6.9%
Growth Portfolio 7.8%
Balanced Portfolio 5.4%
Conservative Portfolio 2.1%
SCHWAB ANNUITY PORTFOLIOS
Growth Portfolio II 0.3%
See financial notes.
67
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PERFORMANCE as of 4/30/03: Investor Shares
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1,2
This bar chart compares pre-tax performance of the fund's Investor Shares with
the Wilshire 5000 Total Market Index and the Morningstar Large-Cap Blend Fund
category. The table below the chart shows two types of after-tax returns.
[BAR CHART]
INVESTOR SHARES WILSHIRE 5000 TOTAL MARKET INDEX CATEGORY AVERAGE
6 MONTHS 4.49% 5.02% 3.31%
1 YEAR -13.73% -13.59% -14.72%
SINCE INCEPTION:6/1/99 -6.58% -6.60% n/a
6 MONTHS 1 YEAR
-------- ------
TOTAL RETURNS AFTER TAX INVESTOR SHARES CATEGORY AVERAGE INVESTOR SHARES CATEGORY AVERAGE
- -------------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 4.02% 1.05% -14.11% -16.49%
- -------------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 2.78% 0.75% -8.58% -10.00%
- -------------------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
---------------
TOTAL RETURNS AFTER TAX INVESTOR SHARES CATEGORY AVERAGE
- -------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) -6.88% --
- -------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) -5.28% --
- -------------------------------------------------------------------------------
PERFORMANCE OF A $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
the Wilshire 5000 Total Market Index.
$7,656 INVESTOR SHARES
$7,649 WILSHIRE 5000 TOTAL MARKET INDEX
[LINE GRAPH]
Investor Wilshire
Shares 5000 Index
1-Jun-99 10000 10000
Jun-99 10515 10518
Jul-99 10165 10180
Aug-99 10070 10086
Sep-99 9820 9822
Oct-99 10435 10447
Nov-99 10790 10797
Dec-99 11605 11617
Jan-00 11108 11135
Feb-00 11374 11384
Mar-00 12022 12060
Apr-00 11399 11432
May-00 11012 11033
Jun-00 11484 11519
Jul-00 11258 11284
Aug-00 12077 12104
Sep-00 11520 11538
Oct-00 11294 11294
Nov-00 10179 10170
Dec-00 10371 10351
Jan-01 10746 10748
Feb-01 9724 9729
Mar-01 9066 9074
Apr-01 9815 9821
May-01 9911 9919
Jun-01 9754 9752
Jul-01 9587 9591
Aug-01 9010 9011
Sep-01 8206 8202
Oct-01 8408 8410
Nov-01 9046 9054
Dec-01 9211 9217
Jan-02 9093 9102
Feb-02 8915 8915
Mar-02 9308 9305
Apr-02 8874 8851
May-02 8766 8747
Jun-02 8169 8132
Jul-02 7516 7476
Aug-02 7567 7520
Sep-02 6816 6765
Oct-02 7327 7283
Nov-02 7740 7722
Dec-02 7320 7294
Jan-03 7139 7111
Feb-03 7010 6990
Mar-03 7098 7069
30-Apr-03 7656 7649
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.
The fund's share price and principal values change, and when you sell your
shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results. Results for the report period
are not annualized.
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 4/30/03 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. As of
4/30/03, the total number of funds in the Morningstar Large-Cap Blend Fund
category for the six-month and one-year periods was 1,410 and 1,362,
respectively. These funds may or may not use tax-efficient strategies.
2 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower.
Schwab Equity Index Funds
68
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
Select Shares(R)
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Select Shares with the
Wilshire 5000 Total Market Index and the Morningstar Large-Cap Blend Fund
category. The table below the chart shows two types of after-tax returns.
[BAR CHART]
SELECT SHARES WILSHIRE 5000 TOTAL MARKET INDEX CATEGORY AVERAGE
6 MONTHS 4.61% 5.02% 3.31%
1 YEAR -13.56% -13.59% -14.72%
SINCE INCEPTION:6/1/99 -6.45% -6.60% n/a
6 MONTHS 1 YEAR
-------- ------
TOTAL RETURNS AFTER TAX SELECT SHARES CATEGORY AVERAGE SELECT SHARES CATEGORY AVERAGE
- -------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 4.09% 1.05% -13.98% -16.49%
- -------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 2.85% 0.75% -8.48% -10.00%
- -------------------------------------------------------------------------------------------------------------
SINCE INCEPTION
---------------
TOTAL RETURNS AFTER TAX SELECT SHARES CATEGORY AVERAGE
- ----------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) -6.79% --
- ----------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) -5.20% --
- ----------------------------------------------------------------------------
PERFORMANCE OF A $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 the Wilshire 5000 Total Market
Index.
$38,485 SELECT SHARES
$38,245 WILSHIRE 5000 TOTAL MARKET INDEX
[LINE GRAPH]
Select Wilshire
Shares 5000 Index
1-Jun-99 50000 50000
Jun-99 52600 52590
Jul-99 50850 50902
Aug-99 50350 50428
Sep-99 49125 49112
Oct-99 52225 52236
Nov-99 53975 53986
Dec-99 58065 58083
Jan-00 55605 55673
Feb-00 56935 56920
Mar-00 60150 60301
Apr-00 57060 57159
May-00 55130 55164
Jun-00 57515 57597
Jul-00 56385 56422
Aug-00 60480 60518
Sep-00 57715 57692
Oct-00 56560 56469
Nov-00 51010 50850
Dec-00 51975 51755
Jan-01 53850 53738
Feb-01 48730 48643
Mar-01 45435 45370
Apr-01 49185 49104
May-01 49695 49595
Jun-01 48910 48761
Jul-01 48070 47957
Aug-01 45185 45055
Sep-01 41155 41009
Oct-01 42190 42051
Nov-01 45385 45268
Dec-01 46210 46083
Jan-02 45645 45511
Feb-02 44725 44574
Mar-02 46720 46526
Apr-02 44520 44256
May-02 44010 43734
Jun-02 41015 40659
Jul-02 37735 37378
Aug-02 37990 37598
Sep-02 34230 33827
Oct-02 36790 36415
Nov-02 38860 38611
Dec-02 36775 36472
Jan-03 35865 35553
Feb-03 35245 34952
Mar-03 35660 35347
30-Apr-03 38485 38245
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.
The fund's share price and principal values change, and when you sell your
shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results. Results for the report period
are not annualized.
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 4/30/03 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. As of
4/30/03, the total number of funds in the Morningstar Large-Cap Blend Fund
category for the six-month and one-year periods was 1,410 and 1,362,
respectively. These funds may or may not use tax-efficient strategies.
2 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower.
Schwab Equity Index Funds
69
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
FUND FACTS as of 4/30/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 3,156
- ----------------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $ 25,962
- ----------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 23.8
- ----------------------------------------------------
PRICE/BOOK RATIO (P/B) 4.2
- ----------------------------------------------------
PORTFOLIO TURNOVER RATE 2 1%
- ----------------------------------------------------
EXPENSE RATIO 3
Investor Shares 0.58%
Select Shares(R) 0.39%
- ----------------------------------------------------
TOP HOLDINGS 4
% OF
SECURITY INVESTMENTS
- -------------------------------------------------------
(1) GENERAL ELECTRIC CO. 2.7%
- -------------------------------------------------------
(2) MICROSOFT CORP. 2.5%
- -------------------------------------------------------
(3) WAL-MART STORES, INC. 2.3%
- -------------------------------------------------------
(4) PFIZER, INC. 2.2%
- -------------------------------------------------------
(5) EXXON MOBIL CORP. 2.2%
- -------------------------------------------------------
(6) CITIGROUP, INC. 1.9%
- -------------------------------------------------------
(7) JOHNSON & JOHNSON 1.6%
- -------------------------------------------------------
(8) AMERICAN INTERNATIONAL GROUP, INC. 1.3%
- -------------------------------------------------------
(9) INTERNATIONAL BUSINESS MACHINES CORP. 1.3%
- -------------------------------------------------------
(10) MERCK & CO., INC. 1.2%
- -------------------------------------------------------
TOTAL 19.2%
INDUSTRY WEIGHTINGS
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
13.6% HEALTHCARE/DRUGS & MEDICINE
8.1% BUSINESS MACHINES & SOFTWARE
7.8% BANKS
7.7% MISCELLANEOUS FINANCE
6.2% RETAIL
4.7% INSURANCE
4.6% BUSINESS SERVICES
4.6% PRODUCER GOODS & MANUFACTURING
4.5% ELECTRONICS
38.2% OTHER
1 Source: Morningstar, Inc. This style assessment is the result of comparing the
fund with the S&P 500(R) Index, based on P/E, P/B and median market cap. The
assessment reflects the fund's portfolio as of 4/30/03, which may have changed
since then, and is not a precise indication of risk or performance--past,
present or future.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes, and certain non-routine expenses).
4 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
Schwab Equity Index Funds
70
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 6/1/99 1-
INVESTOR SHARES 4/30/03 10/31/02 10/31/01 10/31/00 10/31/99
- ----------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 14.35 16.62 22.49 20.87 20.00
---------------------------------------------------
Income or loss from investment operations:
Net investment income 0.08 0.16 0.15 0.16 0.07
Net realized and unrealized gains or losses 0.56 (2.27) (5.87) 1.56 0.80
---------------------------------------------------
Total income or loss from investment operations 0.64 (2.11) (5.72) 1.72 0.87
Less distributions:
Dividends from net investment income (0.17) (0.16) (0.15) (0.10) --
---------------------------------------------------
Net asset value at end of period 14.82 14.35 16.62 22.49 20.87
---------------------------------------------------
Total return (%) 4.49 2 (12.86) (25.55) 8.23 4.35 2
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.46 3 0.40 0.40 0.40 4 0.40 3
Expense reductions reflected in above ratio 0.15 3 0.22 0.25 0.26 0.51 3
Ratio of net investment income to
average net assets 1.27 3 1.11 0.94 0.76 0.92 3
Portfolio turnover rate 1 2 2 2 2 1 2
Net assets, end of period ($ x 1,000,000) 344 263 224 218 136
1 Commencement of operations.
2 Not annualized.
3 Annualized.
4 Would have been 0.41% if certain non-routine expenses (proxy fees) had been
included.
See financial notes.
71
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
11/1/02- 11/1/01- 11/1/00- 11/1/99- 6/1/99 1-
SELECT SHARES(R) 4/30/03 10/31/02 10/31/01 10/31/00 10/31/99
- ----------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 14.37 16.65 22.52 20.89 20.00
---------------------------------------------------
Income or loss from investment operations:
Net investment income 0.10 0.19 0.18 0.17 0.07
Net realized and unrealized gains or losses 0.56 (2.29) (5.87) 1.56 0.82
---------------------------------------------------
Total income or loss from investment operations 0.66 (2.10) (5.69) 1.73 0.89
Less distributions:
Dividends from net investment income (0.19) (0.18) (0.18) (0.10) --
---------------------------------------------------
Net asset value at end of period 14.84 14.37 16.65 22.52 20.89
---------------------------------------------------
Total return (%) 4.61 2 (12.81) (25.40) 8.30 4.45 2
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.31 3 0.27 0.27 0.27 4 0.27 3
Expense reductions reflected in above ratio 0.15 3 0.20 0.23 0.24 0.47 3
Ratio of net investment income to
average net assets 1.43 3 1.24 1.07 0.89 1.05 3
Portfolio turnover rate 1 2 2 2 2 1 2
Net assets, end of period ($ x 1,000,000) 332 264 257 262 149
1 Commencement of operations.
2 Not annualized.
3 Annualized.
4 Would have been 0.28% if certain non-routine expenses (proxy fees) had been
included.
See financial notes.
72
PORTFOLIO HOLDINGS As of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
O Non-income producing security
* American Depositary Receipt
= Collateral for open futures contracts
/ Issuer is affiliated with the fund's adviser
~ Security is valued at fair value (see Accounting Policies)
COST MARKET VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
--------------------------------------------------------------------
98.6% COMMON STOCK 818,295 667,610
1.3% SHORT-TERM INVESTMENT 9,093 9,093
0.1% U.S. TREASURY OBLIGATION 529 529
0.0% PREFERRED STOCK 4 4
0.0% CONVERTIBLE BONDS -- 2
0.0% RIGHTS 120 1
0.0% WARRANTS -- --
--------------------------------------------------------------------
100.0% TOTAL INVESTMENTS 828,041 677,239
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 98.6% of investments
AEROSPACE / DEFENSE 1.3%
---------------------------------------------------------------------
o Aerosonic Corp. 1,000 10
o The Allied Defense Group, Inc. 500 8
o BE Aerospace, Inc. 1,100 2
The Boeing Co. 51,300 1,399
Crane Co. 3,000 59
Curtiss-Wright Corp. 400 24
o DRS Technologies, Inc. 1,200 34
o Ducommun, Inc. 4,300 52
EDO Corp. 900 17
Engineered Support Systems, Inc. 1,650 57
o EnPro Industries, Inc. 920 6
o ESCO Technologies, Inc. 1,400 55
o The Fairchild Corp., Class A 3,100 15
GenCorp Inc. 2,500 19
General Dynamics Corp. 8,900 552
Goodrich Corp. 11,204 158
Heico Corp., Class A 2,260 14
o Integrated Defense Technologies, Inc. 900 13
Kaman Corp., Class A 1,300 13
o Kellstrom Industries, Inc. 600 --
o KVH Industries, Inc. 1,300 20
Lockheed Martin Corp. 28,552 1,429
o Moog, Inc., Class A 2,350 75
Northrop Grumman Corp. 7,816 687
o Orbital Sciences Corp. 2,600 15
Raytheon Co. 26,400 790
Rockwell Automation, Inc. 13,200 301
Rockwell Collins, Inc. 13,100 280
o SatCon Technology Corp. 900 1
o Sequa Corp., Class A 2,800 86
o Teledyne Technologies, Inc. 12,157 171
Textron, Inc. 8,300 245
o Transtechnology Corp. 500 2
o Trimble Navigation Ltd. 3,800 96
o Triumph Group, Inc. 1,200 32
United Technologies Corp. 32,534 2,011
o Veeco Instruments, Inc. 1,000 16
o Veridian Corp. 1,500 28
----------
8,792
AIR TRANSPORTATION 0.4%
---------------------------------------------------------------------
Airborne, Inc. 2,600 52
o Alaska Air Group, Inc. 8,600 153
o ATA Holdings Corp. 1,200 5
o Atlantic Coast Airlines Holdings, Inc. 1,600 13
o Continental Airlines, Inc., Class B 2,000 18
Delta Air Lines, Inc. 5,400 69
o EGL, Inc. 1,650 26
o ExpressJet Holdings, Inc. 3,000 35
FedEx Corp. 28,263 1,692
See financial notes.
73
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Hawk Corp., Class A 1,800 5
o JetBlue Airways Corp. 3,650 115
o Mesa Air Group, Inc. 1,300 7
o Mesaba Holdings, Inc. 1,100 7
o Northwest Airlines Corp., Class A 3,500 29
SkyWest, Inc. 2,000 26
Southwest Airlines Co. 32,925 525
o Timco Aviation Services, Inc. 80 --
----------
2,777
ALCOHOLIC BEVERAGES 0.5%
---------------------------------------------------------------------
Adolph Coors Co., Class B 1,300 70
Anheuser-Busch Cos., Inc. 54,500 2,718
Brown-Forman Corp., Class B 3,706 284
o Constellation Brands, Inc., Class A 8,800 236
----------
3,308
APPAREL 0.8%
---------------------------------------------------------------------
o Abercrombie & Fitch Co., Class A 8,300 273
Brown Shoe Co., Inc. 3,300 96
o The Buckle, Inc. 1,000 18
o Casual Male Corp. 1,100 --
o Chico's FAS, Inc. 3,150 77
o The Children's Place Retail Stores, Inc. 1,800 27
o Christopher & Banks Corp. 7,300 184
o Coach, Inc. 4,002 174
o Columbia Sportswear Co. 1,850 89
o The Dress Barn, Inc. 5,500 83
o Finlay Enterprises, Inc. 1,000 13
Foot Locker, Inc. 5,900 65
o Footstar, Inc. 600 6
o Genesco, Inc. 1,300 19
o Guess?, Inc. 2,700 11
o The Gymboree Corp. 3,100 52
Haggar Corp. 1,200 12
o Hampshire Group Ltd. 1,000 30
o Jo-Ann Stores, Inc., Class A 3,300 86
o Jones Apparel Group, Inc. 12,156 347
K-Swiss, Inc., Class A 1,200 36
Kellwood Co. 2,900 86
o Kenneth Cole Productions, Inc., Class A 3,100 71
Liz Claiborne, Inc. 18,600 605
o Maxwell Shoe Co., Inc., Class A 1,000 12
o The Men's Wearhouse, Inc. 2,400 40
Nike, Inc., Class B 20,700 1,108
Oshkosh B'Gosh, Inc., Class A 1,200 36
Oxford Industries, Inc. 2,500 84
o Pacific Sunwear of California 4,750 108
Phillips-Van Heusen Corp. 1,800 24
o Polo Ralph Lauren Corp. 3,500 82
o Quiksilver, Inc. 1,000 33
o Reebok International Ltd. 8,000 248
Russell Corp. 2,600 50
o Saucony, Inc., Class B 1,900 22
o Shoe Carnival, Inc. 1,200 17
o Skechers USA, Inc., Class A 6,500 44
o Steven Madden Ltd. 1,800 32
Stride Rite Corp. 2,900 26
Superior Uniform Group, Inc. 1,600 18
Talbots, Inc. 2,700 77
o Tandy Brands Accessories, Inc. 1,000 10
o Tarrant Apparel Group 1,700 7
o Timberland Co., Class A 1,400 70
o Too, Inc. 1,742 32
o Unifi, Inc. 1,900 11
o Urban Outfitters, Inc. 1,600 48
VF Corp. 15,000 590
o The Wet Seal, Inc., Class A 3,075 31
Wolverine World Wide, Inc. 5,200 96
----------
5,416
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.4%
---------------------------------------------------------------------
A.O. Smith Corp., Class B 1,300 39
Aaron Rents, Inc., Class A 1,100 23
o Advance Auto Parts, Inc. 1,680 84
o Aftermarket Technology Corp. 4,300 46
o American Axle & Manufacturing Holdings, Inc. 2,300 57
o ANC Rental Corp. 3,037 --
See financial notes.
74
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
ArvinMeritor, Inc. 14,800 234
o Asbury Automotive Group,
Inc. 1,600 15
o Autonation, Inc. 21,600 299
Bandag, Inc. 3,200 112
BorgWarner, Inc. 2,700 158
Carlisle Cos., Inc. 3,600 163
o Carmax, Inc. 3,923 83
Cascade Corp. 4,400 67
Clarcor, Inc. 1,200 45
o Collins & Aikman Corp. 1,400 6
Cooper Tire & Rubber Co. 6,400 90
o Copart, Inc. 4,050 34
Cummins, Inc. 1,400 38
Dana Corp. 40,800 379
Danaher Corp. 9,500 655
Delphi Corp. 26,600 223
Donaldson Co., Inc. 1,900 76
o Dura Automotive Systems, Inc.,
Class A 12,100 97
Eaton Corp. 6,300 517
Federal Screw Works 250 9
Ford Motor Co. 110,536 1,139
General Motors Corp. 26,386 951
o General Motors Corp., Class H 57,682 681
Genuine Parts Co. 8,000 256
Goodyear Tire & Rubber Co. 6,500 37
o Group 1 Automotive, Inc. 1,400 39
Harley-Davidson, Inc. 18,500 822
o Hayes Lemmerz International, Inc. 700 --
o Keystone Automotive Industries, Inc. 5,500 101
o Lear Corp. 5,800 230
o Lithia Motors, Inc., Class A 700 9
Magna International, Inc., Class A 459 27
Mcgrath Rentcorp 800 20
o Midas, Inc. 1,300 10
Modine Manufacturing Co. 3,700 75
o Monaco Coach Corp. 1,200 16
o Monro Muffler Brake, Inc. 700 16
Myers Industries, Inc. 2,346 24
o NationsRent, Inc. 2,000 --
o Navistar International Corp. 1,900 53
o O'Reilly Automotive, Inc. 2,200 65
Oshkosh Truck Corp. 2,250 126
Polaris Industries, Inc. 1,600 85
o Rent-Way, Inc. 3,200 14
o Rush Enterprises, Inc., Class A 500 2
o Rush Enterprises, Inc., Class B 500 2
o Sonic Automotive, Inc. 1,400 24
o SPX Corp. 8,610 291
Standard Motor Products, Inc. 2,000 23
o Stoneridge, Inc. 1,700 18
o Strattec Security Corp. 1,500 75
Superior Industries
International, Inc. 800 32
o TBC Corp. 5,300 85
o Tenneco Automotive, Inc. 1,980 8
Thor Industries, Inc. 1,000 32
Titan International, Inc. 800 1
o Tower Automotive, Inc. 2,300 6
o United Auto Group, Inc. 1,000 17
o United Rentals, Inc. 3,400 35
Visteon Corp. 5,451 38
Winnebago Industries, Inc. 6,300 233
----------
9,267
BANKS 7.8%
----------------------------------------------------------------------
ABC Bancorp 1,500 21
Abigail Adams National Bancorp 500 8
Albama National Bancorp 1,600 74
AmSouth Bancorp. 21,803 459
Anchor Bancorp Wisconsin, Inc. 3,100 72
Arrow Financial Corp. 771 22
Associated Banc-Corp. 4,146 145
BancFirst Corp. 500 25
Bancorpsouth, Inc. 4,612 93
Bank Mutual Corp. 1,000 30
Bank of America Corp. 95,200 7,050
Bank of Hawaii Corp. 3,500 115
The Bank of New York Co., Inc. 41,800 1,106
Bank One Corp. 72,200 2,603
BankAtlantic Bancorp, Inc., Class A 2,200 25
See financial notes.
75
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Banknorth Group, Inc. 6,974 167
Bay State Bancorp, Inc. 1,000 26
BB&T Corp. 21,888 714
Berkshire Bancorp, Inc. 1,200 40
Boston Private Financial
Holdings, Inc. 2,129 40
Brookline Bancorp, Inc. 2,405 32
Bryn Mawr Bank Corp. 700 25
BSB Bancorp, Inc. 900 22
Camden National Corp. 700 18
Capital City Bank Group, Inc. 1,200 46
o Capital Crossing Bank 1,000 29
Capitol Bancorp Ltd. 1,500 32
Capitol Federal Financial 4,420 138
Cascade Bancorp 2,124 34
Cavalry Bancorp, Inc. 500 8
CCBT Financial Cos., Inc. 200 5
o Central Coast Bancorp 1,331 23
Century Bancorp, Inc., Class A 800 21
Charter Financial Corp. 900 28
Chemical Financial Corp. 1,318 39
Chesterfield Financial Corp. 1,500 31
Chittenden Corp. 1,818 49
Citizens Banking Corp. 2,090 48
Citizens First Bancorp, Inc. 700 15
Citizens South Banking Corp. 1,000 13
City Holding Co. 1,800 51
City National Corp. 3,100 128
The Colonial BancGroup, Inc. 4,600 59
Columbia Bancorp 700 18
o Columbia Banking Systems, Inc. 1,859 29
Comerica, Inc. 8,396 365
Commerce Bancorp, Inc. N.J. 3,060 124
Commerce Bancshares, Inc. 11,518 436
o The Commercial Capital Bancorp,
Inc. 4,000 52
Community Bank System, Inc. 700 24
Community First Bankshares, Inc. 2,000 54
Community Trust Bancorp, Inc. 2,056 55
Compass Bancshares, Inc. 11,400 384
Connecticut Bancshares, Inc. 700 30
Corus Bankshares, Inc. 500 22
Cullen/Frost Bankers, Inc. 3,300 108
Dime Community Bancshares 2,250 52
Doral Financial Corp. 4,600 184
East-West Bancorp, Inc. 1,300 44
Exchange National Bancshares, Inc. 500 25
F&M Bancorp/Frederick MD 1,000 48
Fidelity Bankshares, Inc. 1,933 41
Fifth Third Bancorp 34,488 1,700
First Bancorp Puerto Rico 2,100 65
First Busey Corp., Class A 1,000 24
First Charter Corp. 3,500 61
First Citizens BancShares, Inc.,
Class A 300 29
First Commonwealth Financial
Corp. 2,100 25
First Essex Bancorp, Inc. 700 24
First Federal Capital Corp. 2,500 47
First Financial Bancorp 1,839 29
First Financial Bancshares, Inc. 1,200 48
First M & F Corp. 1,000 38
First Merchants Corp. 992 24
First Midwest Bancorp, Inc. 3,125 87
First Oak Brook Bancshares, Inc. 1,000 31
First of Long Island Corp. 2,000 68
First Place Financial Corp. 2,900 46
o First Republic Bank 1,300 33
First Tennessee National Corp. 10,800 473
First United Corp. 2,200 51
First Virginia Banks, Inc. 7,300 298
Firstfed America Bancorp, Inc. 1,000 31
o FirstFed Financial Corp. 2,900 94
FirstMerit Corp. 4,800 98
FleetBoston Financial Corp. 65,777 1,744
FNB Corp. 2,514 76
Franklin Financial Corp. 700 21
Frontier Financial Corp. 700 19
Fulton Financial Corp. 5,150 103
GA Financial, Inc. 1,100 29
GBC Bancorp California 600 16
Gold Banc Corp., Inc. 1,400 12
Golden West Financial Corp. 9,400 709
See financial notes.
76
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Great Southern Bancorp, Inc. 700 27
GreenPoint Financial Corp. 6,100 291
Hancock Holding Co. 1,050 48
Harbor Florida Bancshares, Inc. 1,100 29
Harleysville National Corp. 882 23
Hibernia Corp., Class A 16,900 306
Home Federal Bancorp 800 20
Horizon Financial Corp. 2,156 34
* HSBC Holdings PLC 13,001 711
Hudson City Bancorp, Inc. 19,100 443
Hudson United Bancorp 5,740 191
Huntington Bancshares, Inc. 13,290 259
Independence Community Bank
Corp. 3,600 94
Independent Bank Corp. 1,000 20
Integra Bank Corp. 1,225 21
Interchange Financial Services
Corp. 1,050 19
Irwin Financial Corp. 3,700 88
J.P. Morgan Chase & Co. 121,780 3,574
KeyCorp, Inc. 18,500 446
Lakeland Financial Corp. 1,100 29
M&T Bank Corp. 6,962 588
MAF Bancorp., Inc. 3,200 108
Main Street Banks, Inc. 1,000 21
MainSource Financial Group,
Inc. 1,000 24
Marshall & Ilsley Corp. 12,450 366
MASSBANK Corp. 1,500 46
Mellon Financial Corp. 20,800 550
Mercantile Bankshares Corp. 4,400 169
Merchants Bancshares, Inc. 750 18
Mid-State Bancshares 3,500 64
Midwest Banc Holdings, Inc. 1,300 23
Nara Bancorp, Inc. 2,000 29
National City Corp. 39,000 1,168
National Commerce Financial
Corp. 11,650 237
National Penn Bancshares, Inc. 3,244 96
NBT Bancorp., Inc. 1,400 25
Net.B@nk, Inc. 3,300 33
New York Community Bancorp.,
Inc. 5,277 183
NewMil Bancorp, Inc. 1,000 23
North Fork Bancorp., Inc. 7,300 236
North Valley Bancorp 1,000 22
Northern Trust Corp. 9,800 344
OceanFirst Financial Corp. 1,050 23
Old National Bancorp 3,283 72
Omega Financial Corp. 1,000 35
Oriental Financial Group 1,375 34
Pacific Crest Capital, Inc. 1,000 19
Pacific Northwest Bancorp 1,000 28
Park National Corp. 805 79
Partners Trust Financial Group,
Inc. 5,000 98
Patriot Bank Corp. 550 10
Pennfed Finance Services, Inc. 2,000 54
Peoples Bank-Bridgeport 2,500 66
PFF Bancorp, Inc. 800 27
PNC Financial Services Group,
Inc. 15,700 689
Popular, Inc. 13,400 490
Port Financial Corp. 1,500 81
Progress Financial Corp. 1,365 19
Prosperity Bancshares, Inc. 2,400 42
Provident Bankshares Corp. 2,382 60
Provident Financial Group, Inc. 2,100 50
o Providian Financial Corp. 11,400 84
o Quaker City Bancorp, Inc. 1,250 46
Regions Financial Corp. 13,500 455
Republic Bancorp, Inc. 5,154 67
Republic Bancorp, Inc., Class A 1,500 20
Riggs National Corp. 2,000 28
Roslyn Bancorp., Inc. 4,550 87
S&T Bancorp, Inc. 1,400 39
Sandy Spring Bancorp, Inc. 2,900 92
Santander BanCorp 1,760 25
Seacoast Banking Corp. of Florida 1,800 33
Seacoast Financial Services Corp. 1,600 30
Second Bancorp., Inc. 900 21
Shore Bancshares, Inc. 500 18
o Silicon Valley Bancshares 2,200 51
Simmons First National Corp.,
Class A 500 19
See financial notes.
77
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Sky Financial Group, Inc. 4,376 88
The South Financial Group, Inc. 3,000 73
Southern Financial Bancorp, Inc. 230 8
SouthTrust Corp. 18,354 493
o Southwest Bancorp of Texas, Inc. 1,500 51
Southwest Bancorp, Inc. 1,650 40
St. Francis Capital Corp. 1,200 30
State Bancorp, Inc. 800 15
State Street Corp. 18,500 648
Sterling Bancorp 1,219 33
Sterling Bancshares, Inc. 2,100 25
Sterling Financial Corp. 1,000 24
Suffolk Bancorp 2,400 75
o Sun Bancorp, Inc. N.J. 3,150 51
SunTrust Banks, Inc. 15,700 898
Superior Financial Corp. 1,000 19
Susquehanna Bancshares, Inc. 2,700 61
SY Bancorp, Inc. 700 26
Synovus Financial Corp. 13,800 269
Texas Regional Bancshares, Inc.,
Class A 1,551 56
Timberland Bancorp, Inc. 1,000 20
Tompkins Trustco, Inc. 700 32
Transatlantic Holdings, Inc. 2,650 180
The Trust Co. of New Jersey 3,000 84
Trustco Bank Corp. 2,857 30
Trustmark Corp. 4,300 106
U.S. Bancorp 118,331 2,621
UCBH Holdings, Inc. 2,200 56
UMB Financial Corp. 1,787 71
Umpqua Holdings Corp. 343 7
Union Bankshares Corp. 700 19
Union Planters Corp. 15,950 455
UnionBanCal Corp. 22,600 913
United Bankshares, Inc. 1,900 55
United Community Financial
Corp 1,900 17
United National Bancorp 1,230 32
Unizan Financial Corp. 1,371 24
USB Holding Co., Inc. 1,693 28
Valley National Bancorp 5,235 139
Wachovia Corp. 84,036 3,211
Washington Trust Bancorp, Inc. 1,000 21
Waypoint Financial Corp. 1,573 29
Wells Fargo & Co. 105,181 5,076
WesBanco, Inc. 3,200 80
West Coast Bancorp 1,200 19
Westamerica Bancorp 1,700 73
WestCorp., Inc. 2,207 47
Whitney Holding Corp. 1,950 66
Willow Grove Bancorp, Inc. 1,596 24
Wilmington Trust Corp. 3,200 86
Wintrust Financial Corp. 1,800 55
WSFS Financial Corp. 1,000 34
Zions Bancorp 4,200 207
-----------
53,014
BUSINESS MACHINES & SOFTWARE 8.1%
- ---------------------------------------------------------------------
o 3Com Corp. 12,400 64
o 3D Systems Corp. 1,400 7
o The 3DO Co. 262 --
o Activision, Inc. 3,300 50
o Adaptec, Inc. 5,700 39
Adobe Systems, Inc. 17,500 605
o Advanced Digital Information
Corp. 2,600 21
Analogic Corp. 5,200 248
o Andersen Group, Inc. 1,400 6
o Apple Computer, Inc. 15,700 223
o Arbitron, Inc. 7,320 249
o Artesyn Technologies, Inc. 1,100 5
o Ascential Software Corp. 11,650 45
Autodesk, Inc. 6,400 100
o Avici Systems, Inc. 375 2
o Avocent Corp. 13,963 414
o Bell Microproducts, Inc. 1,000 5
Black Box Corp. 5,200 165
o Blue Coat Systems, Inc. 340 2
o Blue Martini Software, Inc. 285 1
o BMC Software, Inc. 19,000 283
o Borland Software Corp. 3,000 27
o Brio Software, Inc. 2,300 4
o BroadVision, Inc. 1,090 4
o CACI International, Inc., Class A 4,100 143
See financial notes.
78
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Cisco Systems, Inc. 445,369 6,698
o Cognitronics Corp. 2,600 4
o Compuware Corp. 19,900 87
o Comverse Technology, Inc. 17,800 233
o Concerto Software, Inc. 1,100 5
o Concurrent Computer Corp. 3,000 6
o Dell Computer Corp. 158,400 4,579
Diebold, Inc. 4,300 172
o Digital Lightwave, Inc. 1,300 1
o Docent, Inc. 633 2
o E.piphany, Inc. 2,100 9
o EMC Corp. 120,874 1,099
o EXE Technologies, Inc. 371 1
Fair Isaac Corp. 2,163 113
o FalconStor Software, Inc. 1,200 5
o Firstwave Technologies, Inc. 1,000 12
o Foundry Networks, Inc. 4,300 47
o Gateway, Inc. 11,800 34
o General Binding Corp. 500 4
o Global Imaging Systems, Inc. 2,100 39
o Handspring, Inc. 4,700 3
Hewlett-Packard Co. 181,916 2,965
IKON Office Solutions, Inc. 8,500 66
o Imagistics International, Inc. 2,840 61
o Immersion Corp. 800 1
o Informatica Corp. 2,700 18
o Inforte Corp. 3,700 24
o Ingram Micro, Inc., Class A 6,400 64
o Input/Output, Inc. 3,400 11
o Inrange Technologies Corp., Class B 3,000 7
o Integrated Device Technology, Inc. 4,200 43
o Intelli-Check, Inc. 500 4
o Interactive Intelligence, Inc. 1,000 3
o Intergraph Corp. 9,700 198
o Interland, Inc. 5,100 4
(9) International Business Machines
Corp. 105,350 8,944
o InterVoice, Inc. 1,678 3
o Invision Technologies, Inc. 1,500 36
o Iomega Corp. 12,400 115
o Juniper Networks, Inc. 13,600 139
o Kana Software, Inc. 528 3
o Lantronix, Inc. 1,900 1
o Lexmark International, Inc.,
Class A 10,900 812
o LTX Corp. 1,900 13
o Magma Design Automation, Inc. 1,700 25
o Matrixone, Inc. 1,700 6
o Maxtor Corp. 8,748 48
o Maxwell Technologies, Inc. 1,000 6
Microchip Technology, Inc. 9,975 207
o Micromuse, Inc. 2,900 19
o MICROS Systems, Inc. 5,500 138
=(2) Microsoft Corp. 670,960 17,156
o MicroStrategy, Inc., Class A 4,781 132
o MIPS Technology, Inc., Class A 1,100 2
o MSC.Software Corp. 1,800 11
o Nassda Corp. 500 3
o NCR Corp. 11,900 261
o Netegrity, Inc. 1,500 7
o NetScreen Technologies, Inc. 1,400 28
o Network Appliance, Inc. 13,500 179
o Novell, Inc. 14,600 40
o Novellus Systems, Inc. 6,671 187
o Nuance Communications, Inc. 1,000 4
o Opnet Technologies, Inc. 1,100 8
o Oracle Corp. 322,200 3,828
o Palm, Inc. 1,146 11
o Pec Solutions, Inc. 1,000 15
Pitney Bowes, Inc. 15,000 527
o Printronix, Inc. 2,400 24
o ProQuest Co. 1,700 43
o Quantum Corp. 5,500 19
o Quovadx, Inc. 2,600 7
o Rainbow Technologies, Inc. 5,000 45
o Read-Rite Corp. 1,180 1
o Renaissance Learning, Inc. 2,100 40
o Roxio, Inc. 724 4
o S1 Corp. 12,930 57
o Saba Software, Inc. 2,000 2
o Sagent Technology, Inc. 1,500 --
o Scansource, Inc. 600 12
See financial notes.
79
1
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o SCM Microsystems, Inc. 1,200 5
~o Seagate Escrow Security 7,500 2
o Silicon Graphics, Inc. 4,800 5
*o Skillsoft PLC 4,971 18
o Socket Communications, Inc. 800 1
o SoftBrands, Inc. 671 1
o Stellent, Inc. 1,100 5
o Storage Technology Corp. 14,400 356
o StorageNetworks, Inc. 2,100 2
o Sun Microsystems, Inc. 149,130 492
o Sybase, Inc. 19,036 244
o Synaptics, Inc. 1,000 8
o Systems & Computer Technology
Corp. 3,400 24
o T/R Systems, Inc. 1,500 1
o Tech Data Corp. 2,800 67
o The Titan Corp. 3,881 31
Total System Services, Inc. 13,800 255
o Troy Group, Inc. 2,000 5
o Tumbleweed Communications
Corp. 2,000 3
o Ultimate Electronics, Inc. 400 3
o Unisys Corp. 18,500 192
o Universal Access Global Holdings,
Inc. 2,900 1
o Vastera, Inc. 2,000 10
o Viewlocity, Inc. 60 --
o Virage Logic Corp. 1,400 6
o Vitria Technology, Inc. 3,700 3
o WebEx Communications, Inc. 2,500 26
o Xanser Corp. 1,400 2
o Xerox Corp. 41,200 406
-----------
54,676
BUSINESS SERVICES 4.6%
- ---------------------------------------------------------------------
o 1-800 Contacts, Inc. 500 11
o 4Kids Entertainment, Inc. 1,000 15
o aaiPharma, Inc. 1,800 20
ABM Industries, Inc. 2,400 33
o Actel Corp. 1,100 22
o Actuate Corp. 2,300 4
o Administaff, Inc. 2,800 18
o Advent Software, Inc. 1,600 20
o The Advisory Board Co. 1,000 37
o Advo, Inc. 2,700 106
o Aether Systems, Inc. 1,100 4
o Affiliated Computer Services, Inc.,
Class A 6,000 286
o Agile Software Corp. 1,900 13
o AHL Services, Inc. 2,200 3
o Akamai Technologies, Inc. 4,038 10
o Allied Waste Industries, Inc. 7,800 65
o Ambassadors International, Inc. 1,700 16
o America Online Latin America, Inc.,
Class A 2,500 1
American Management Systems,
Inc 4,200 52
o Analysts International Corp. 2,400 5
Angelica Corp. 1,000 17
o Ansoft Corp. 2,300 20
o answerthink, Inc. 1,700 3
o Ansys, Inc. 1,700 45
o Anteon International Corp. 2,000 47
o Apollo Group, Inc., Class A 12,050 653
o Ariba, Inc. 9,200 30
o Art Technology Group, Inc. 2,200 2
o Artistdirect, Inc. 1,000 1
o Ask Jeeves, Inc. 1,900 16
o Aspen Technology, Inc. 1,000 3
o At Road, Inc. 900 6
Automatic Data Processing, Inc. 37,600 1,264
o Barra, Inc. 3,250 106
o BEA Systems, Inc. 16,400 176
o BearingPoint, Inc. 7,100 58
o BindView Development Corp. 1,700 2
o Bottomline Technologies, Inc. 500 3
Bowne & Co., Inc. 1,700 19
Brady Corp., Class A 700 23
o Bright Horizons Family Solutions,
Inc 1,300 39
o Brocade Communications Systems,
Inc 9,500 55
o BSQUARE Corp. 1,600 1
o CareCentric, Inc. 119 --
See financial notes.
80
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Career Education Corp. 2,600 156
o Carreker Corp. 1,200 5
o Casella Waste Systems, Inc.,
Class A 2,500 21
o Catapult Communications
Corp 1,600 14
o CDI Corp. 1,200 34
o CDW Computer Centers, Inc. 4,300 183
o Cendant Corp. 65,220 931
o Centra Software, Inc. 2,400 3
o Ceridian Corp. 19,500 272
o Cerner Corp. 1,700 34
o Certegy, Inc. 3,650 91
o Charles River Associates, Inc. 2,500 54
o Checkfree Corp. 2,900 80
Chemed Corp. 1,200 42
o ChoicePoint, Inc. 3,400 120
o Chordiant Software, Inc. 1,100 1
o Ciber, Inc. 1,900 10
Cintas Corp. 7,050 253
o Citrix Systems, Inc. 20,000 379
o Clarent Corp. 1,545 --
o Clarus Corp. 1,200 6
o Click Commerce, Inc. 320 1
o Cognizant Technology Solutions
Corp 300 5
o Coinstar, Inc. 5,200 95
o Com21, Inc. 1,400 --
o Comarco, Inc. 500 3
o Commerce One, Inc. 730 2
o Computer Access Technology
Corp. 800 2
Computer Associates International,
Inc. 35,226 572
o Computer Sciences Corp. 15,738 519
o Concord EFS, Inc. 21,800 301
o Connetics Corp. 3,400 57
o Convergys Corp. 10,500 170
o Corillian Corp. 2,000 2
o Corinthian Colleges, Inc. 4,600 211
o Corio, Inc. 1,400 2
o Cornell Cos., Inc. 2,100 23
o Corporate Executive Board Co. 1,700 70
o Correctional Services Corp. 2,000 6
o CoStar Group, Inc. 800 18
Courier Corp. 2,800 137
o Covansys Corp. 2,500 6
o Credence Systems, Corp. 1,700 12
o Cross Country, Inc. 1,600 18
o Cross Media Marketing Corp. 1,391 --
o CSG Systems International,
Inc. 2,900 31
o CycleLogic, Inc. 2 --
o Cysive, Inc. 1,000 2
o D&B Corp. 16,000 605
o Daleen Technologies, Inc. 800 --
o Datastream Systems, Inc. 1,300 11
Deluxe Corp. 7,700 339
o Dendrite International, Inc. 1,100 11
o DeVry, Inc. 4,800 111
o DiamondCluster International, Inc.,
Class A 1,000 2
o Dice, Inc. 1,000 --
o Digex, Inc. 1,800 1
o Digimarc Corp. 1,000 13
Digital Courier Technologies, Inc. 1,700 --
o Digital Insight Corp. 2,300 37
o Digital River, Inc. 2,100 35
o Digitalthink, Inc. 1,300 3
o Digitas, Inc. 1,500 6
o Divine, Inc., Class A 161 --
o Documentum, Inc. 1,800 33
o DoubleClick, Inc. 8,237 71
o DST Systems, Inc. 5,400 166
o Duratek, Inc. 1,500 15
o Dyax Corp. 2,000 4
o Dynamics Research Corp. 1,200 12
o Earthlink, Inc. 7,350 51
o eBay, Inc. 15,912 1,476
o Echelon Corp. 1,200 16
o Eclipsys Corp. 1,800 16
o Edgewater Technology, Inc. 767 3
o Edison Schools, Inc. 1,900 2
See financial notes.
81
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Education Management Corp. 1,700 83
o eFunds Corp. 2,502 23
Electronic Data Systems Corp. 21,600 392
o ELITE Information Group, Inc. 1,500 21
o eLoyalty Corp. 190 1
o Embarcadero Technologies, Inc. 2,900 20
o Engage, Inc. 4,900 1
Ennis Business Forms 4,500 56
o Enterasys Networks, Inc. 8,500 20
o Entrada Networks, Inc. 75 --
o Entrust, Inc. 2,800 7
o EPIQ Systems, Inc. 1,550 32
o ePresence, Inc. 2,700 5
Equifax, Inc. 9,300 216
o Equinix, Inc. 65 --
o Exponent, Inc. 3,000 42
o Exult, Inc. 4,100 29
o Ezenia!, Inc. 1,000 --
o F5 Networks, Inc. 3,300 45
Factset Research Systems, Inc. 1,500 52
o Falcon Products, Inc. 1,500 6
o Fargo Electronics, Inc. 2,000 20
o Fidelity National Information
Solutions, Inc. 1,100 19
o Filenet Corp. 1,300 20
o First Consulting Group, Inc. 1,800 9
First Data Corp. 47,000 1,844
o Fiserv, Inc. 9,300 274
o Forrester Research, Inc. 1,600 25
o Freemarkets, Inc. 3,300 22
o FTI Consulting, Inc. 1,800 81
G&K Services, Inc., Class A 1,200 33
o Gartner, Inc., Class B 3,551 28
o Gemstar -- TV Guide International,
Inc. 18,160 73
o Genuity, Inc., Class A 280 --
o Geoworks Corp. 800 --
Global Payments, Inc. 8,520 264
o GP Strategies Corp. 1,500 8
o GTECH Holdings Corp. 4,700 158
H&R Block, Inc. 21,300 823
o HA-LO Industries, Inc. 2,100 --
o Hall, Kinion & Associates, Inc. 900 2
o Heidrick & Struggles International,
Inc. 3,100 43
o Hewitt Associates, Inc., Class A 7,000 194
o Homestore, Inc. 4,200 4
o Hudson Highland Group, Inc. 360 5
o Hyperion Solutions Corp. 9,300 263
o I-Many, Inc. 1,300 1
~o i2 Technologies, Inc. 15,300 9
o iBEAM Broadcasting Corp. 290 --
o ICT Group, Inc. 500 4
o Identix, Inc. 1,600 8
o IDT Corp. 1,700 24
o IDX Systems Corp. 1,500 22
o iGate Corp. 1,300 4
o InFocus Corp. 1,600 7
o Infogrames, Inc. 1,600 7
o Infonet Services Corp., Class B 11,200 14
o Information Resources, Inc. 2,500 6
o Infospace, Inc. 872 11
o infoUSA, Inc. 2,300 12
o Innodata Corp. 2,400 3
o Integrated Silicon Solutions, 900 3
Inc.
o Interactive Data Corp. 20,700 331
o Intercept, Inc. 1,500 11
o Internap Network Services Corp. 4,600 2
o Internet Capital Group, Inc. 7,000 3
Interpublic Group of Cos., Inc. 16,644 190
o Interwoven, Inc. 3,700 7
o Intuit, Inc. 11,215 435
o Iron Mountain, Inc. 3,525 140
o The IT Group, Inc. 1,900 --
o ITT Educational Services, Inc. 6,000 177
o J.D. Edwards & Co. 6,300 75
Jack Henry & Associates, Inc. 3,300 43
o Jacobs Engineering Group, Inc. 2,000 82
o JDA Software Group, Inc. 2,000 23
John H. Harland Co. 3,500 84
o Jupiter Media Metrix, Inc. 1,673 --
o Keane, Inc. 3,960 38
See financial notes.
82
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Keith Cos., Inc. 3,000 33
Kelly Services, Inc., Class A 3,200 74
o Key3Media Group, Inc. 2,400 --
o Korn/Ferry International 1,100 8
o Kroll, Inc. 1,900 42
o Kronos, Inc. 1,250 57
o Lamar Advertising Co. 3,200 115
o Learning Tree International, Inc. 1,400 20
o Legato Systems, Inc. 4,400 26
o LendingTree, Inc. 1,000 14
o Liberate Technologies 5,900 15
o Lightbridge, Inc. 2,200 16
o Looksmart Ltd. 2,400 8
o Luminex Corp. 800 5
o Macrovision Corp. 2,300 41
o Manhattan Associates, Inc. 1,300 31
Manpower, Inc. 3,700 122
o Manugistics Group, Inc. 2,300 7
o MAPICS, Inc. 1,000 6
o Mapinfo Corp. 525 3
o Marimba, Inc. 2,000 4
o MAXIMUS, Inc. 1,700 41
o MCSi, Inc. 1,248 --
o Mechanical Technology, Inc. 1,800 4
o Media Arts Group, Inc. 2,000 5
o Medical Staffing Network Holdings, Inc. 1,300 10
o Medis Technologies Ltd. 1,110 9
o MemberWorks, Inc. 4,500 99
o Mentor Graphics Corp. 3,200 33
o Mercator Software, Inc. 1,100 2
o Mercury Computer Systems, Inc. 3,600 76
o Mercury Interactive Corp. 3,300 112
o Meta Group, Inc. 1,100 4
o MetaSolv, Inc. 2,800 4
o Metricom, Inc. 1,400 --
o Michael Baker Corp. 500 4
o Microvision, Inc. 900 4
o Millenium Cell, Inc. 2,200 4
o Moldflow Corp. 300 2
Moody's Corp. 9,300 449
o MPS Group, Inc. 4,100 28
o MRO Software, Inc. 3,900 33
o Multi-Color Corp. 500 8
o National Instruments Corp. 2,050 66
o National Processing, Inc. 2,700 43
National Service Industries, Inc. 450 4
Nautilus Group, Inc. 1,625 21
o Navigant Consulting, Inc. 2,500 19
o NCO Group, Inc. 1,761 30
o Neoforma, Inc. 1,500 16
o Neon Systems, Inc. 2,400 4
o Netcentives, Inc. 2,000 --
o NETIQ Corp. 7,704 106
o Netratings, Inc. 3,000 19
o Netscout Systems, Inc. 1,800 5
o Netsolve, Inc. 1,600 10
o Network Associates, Inc. 8,445 97
o Network Commerce, Inc. 140 --
New England Business Service, Inc. 2,300 59
o Nobel Learning Communities, Inc. 500 2
o NYFIX, Inc. 750 4
o Oak Technology, Inc. 2,200 11
Omnicom Group, Inc. 8,800 545
o On Assignment, Inc. 1,700 8
o Onesource Information Service 3,800 24
o Onyx Software Corp. 1,400 1
o Opsware, Inc. 800 3
o Overture Services, Inc. 2,900 31
o Packeteer, Inc. 1,100 14
o Parametric Technology Corp. 9,700 32
o Paxar Corp. 2,300 24
Paychex, Inc. 22,400 698
o PC-Tel, Inc. 1,400 13
o PDI, Inc. 400 4
o Pegasus Solutions, Inc. 11,200 133
o PeopleSoft, Inc. 13,400 201
o Per-Se Technologies, Inc. 10,000 87
o Peregrine Systems, Inc. 7,015 2
o Performance Technologies, Inc. 1,600 8
o Perot Systems Corp., Class A 4,600 49
See financial notes.
83
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Phoenix Technologies Ltd. 1,300 6
Pittston Brink's Group 5,600 71
o Pixar, Inc. 2,600 152
o Planar Systems, Inc. 1,200 21
o PLATO Learning, Inc. 1,433 7
o Polycom, Inc. 4,400 43
o Pomeroy Computer Resources, Inc. 2,100 15
o Portal Software, Inc. 6,100 8
o Praecis Pharmaceuticals, Inc. 1,600 7
o Pre-Paid Legal Services, Inc. 1,100 25
o Precis, Inc. 1,200 5
o Predictive Systems, Inc. 1,700 1
o PRG-Schultz International, Inc. 2,500 16
o Priceline.com, Inc. 8,900 20
o ProBusiness Services, Inc. 2,200 31
o Progress Software Corp. 4,200 82
o ProsoftTraining 900 --
o Pumatech, Inc. 1,500 5
o QLogic Corp. 4,022 177
o QRS Corp. 1,450 8
o Quality Systems, Inc. 3,500 106
o Quest Software, Inc. 5,000 54
o Quintus Corp. 1,500 --
Quixote Corp. 3,800 69
o R.H. Donnelley Corp. 2,000 60
o Radiant Systems, Inc. 1,300 8
o Radisys Corp. 700 6
o RealNetworks, Inc. 6,000 31
o Red Hat, Inc. 7,100 43
o Redback Networks, Inc. 5,600 3
o Register.com 2,600 15
o RemedyTemp, Inc., Class A 1,200 14
o Resources Connection, Inc. 600 13
o Retek, Inc. 3,843 24
The Reynolds & Reynolds Co.,
Class A 5,000 144
o Right Management Consultants,
Inc. 4,625 58
o Robert Half International, Inc. 7,500 122
o Ross Systems, Inc. 1,000 13
o RSA Security, Inc. 2,000 19
o Rural Cellular Corp., Class A 1,200 1
o SafeNet, Inc. 900 21
o Sanchez Computer Associates,
Inc. 1,800 9
o Sandisk Corp. 2,500 61
o Sapient Corp. 3,600 7
o SBS Technologies, Inc. 1,700 14
o Scient, Inc. 624 --
o Seachange International, Inc. 850 7
o Seacor Smit, Inc. 1,250 45
o Secure Computing Corp. 3,200 18
o Seebeyond Technology Corp. 3,100 7
SEI Investments Co. 6,200 163
o Selectica, Inc. 1,900 6
o Serena Software, Inc. 2,100 33
The ServiceMaster Co. 20,400 185
o SFBC International, Inc. 1,000 16
o Siebel Systems, Inc. 18,100 157
o Sirius Satellite Radio, Inc. 1,200 1
o Sitel Corp. 2,800 4
o Sonic Foundry, Inc. 600 --
o SONICblue, Inc. 2,600 --
o SonicWALL, Inc. 4,900 17
Sonoco Products Co. 4,100 90
o Sonus Networks, Inc. 7,400 24
o SourceCorp 1,100 17
o Spherion Corp. 1,830 8
o Spherix, Inc. 500 3
o SportsLine.com, Inc. 2,300 2
o SPSS, Inc. 700 9
o SS&C Technologies, Inc. 7,400 102
The Standard Register Co. 4,100 71
o Startek, Inc. 7,400 205
o Stericycle, Inc. 2,200 86
o Stratasys, Inc. 4,500 106
Strayer Education, Inc. 700 46
o Student Advantage, Inc. 190 --
o Sungard Data Systems, Inc. 18,900 406
o Sunrise Telecom, Inc. 2,000 5
o SupportSoft, Inc. 2,300 8
o Sycamore Networks, Inc. 11,000 36
See financial notes.
84
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Sylvan Learning Systems, Inc. 2,200 39
o Symantec Corp. 14,200 624
o Synopsys, Inc. 3,342 163
o Synplicity, Inc. 1,200 4
o Syntel, Inc. 2,500 38
o Take-Two Interactive Software,Inc. 8,000 180
Talx Corp. 4,200 53
o Tanning Technology Corp. 900 1
o TeleTech Holdings, Inc. 5,000 20
o Tetra Tech, Inc. 12,031 186
o Tetra Technologies, Inc. 800 21
o Thermo Electron Corp. 26,550 482
o TIBCO Software, Inc. 8,500 42
o Tier Technologies, Inc., Class B 500 3
o TMP Worldwide, Inc. 4,800 80
o Transaction Systems Architects, Inc.,
Class A 5,200 36
o TRC Cos., Inc. 1,350 15
o Trizetto Group, Inc. 3,400 18
o Tularik, Inc. 2,100 11
o Unify Corp. 1,200 --
o United Online, Inc. 4,100 92
o Universal Electronics, Inc. 2,200 23
o UNOVA, Inc. 3,100 23
o URS Corp. 1,700 24
o Usinternetworking, Inc. 1,100 --
o VA Software Corp. 1,427 1
o Ventiv Health, Inc. 2,233 8
o VeriSign, Inc. 10,875 135
o Verisity Ltd. 1,000 12
o Veritas Software Corp. 20,024 441
o Verity, Inc. 1,600 26
o Vertel Corp. 900 --
Viad Corp. 14,500 292
o The viaLink Co. 700 --
o Viewpoint Corp. 2,000 2
o Vignette Corp. 8,948 18
o Vixel Corp. 600 2
o Volt Information Sciences, Inc. 2,100 28
Wabtec Corp. 5,328 65
o Wackenhut Corrections Corp. 3,800 42
Wallace Computer Services, Inc. 15,500 405
o Waste Industries USA, Inc. 1,500 10
Waste Management, Inc. 37,600 817
o WatchGuard Technologies, Inc. 1,800 8
o Watson Wyatt & Co. Holdings 4,600 94
o Wave Systems Corp., Class A 1,800 2
o webMethods, Inc. 1,921 19
o Websense, Inc. 2,500 36
o Weight Watchers International, Inc. 6,200 291
o Westaff, Inc. 2,000 4
o Wind River Systems, Inc. 3,160 10
o Wireless Facilities, Inc. 1,800 13
o Witness Systems, Inc. 2,100 7
o WorldGate Communications, Inc. 2,000 1
o Xybernaut Corp. 1,400 1
o Yahoo!, Inc. 31,201 773
o Zamba Corp. 2,000 --
o Zap.com Corp. 32 --
o Zix Corp. 900 4
-----------
31,576
CHEMICAL 1.9%
---------------------------------------------------------------
3M Co. 24,700 3,113
A. Schulman, Inc. 2,300 38
Aceto Corp. 5,250 89
Air Products & Chemicals, Inc. 10,500 452
o Airgas, Inc. 5,000 101
Albemarle Corp. 2,000 54
Arch Chemicals, Inc. 2,700 58
Cabot Corp. 2,700 75
o Cabot Microelectronics Corp. 660 29
Calgon Carbon Corp. 2,300 12
Cambrex Corp. 900 16
Chase Corp. 100 1
Crompton Corp. 4,424 28
o Cytec Industries, Inc. 7,400 237
Dow Chemical Co. 43,266 1,412
E.I. du Pont de Nemours & Co. 67,195 2,858
Eastman Chemical Co. 3,100 95
Ecolab, Inc. 5,500 281
o Ethyl Corp. 2,000 20
Ferro Corp. 1,200 28
o FMC Corp. 3,100 56
See financial notes.
85
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Foamex International, Inc. 2,600 3
Georgia Gulf Corp. 3,300 75
Great Lakes Chemical Corp. 3,600 88
H.B. Fuller Co. 2,000 49
Hawkins, Inc. 1,900 19
o Hercules, Inc. 4,000 41
Lubrizol Corp. 3,400 107
Lyondell Chemical Co. 4,600 67
MacDermid, Inc. 3,800 86
o Matrixx Initiatives, Inc. 1,700 12
Millennium Chemicals, Inc. 2,400 33
Oil-Dri Corp. of America 400 4
Olin Corp. 1,820 33
OM Group, Inc. 900 11
o Omnova Solutions, Inc. 1,000 4
Penford Corp. 1,700 23
PolyOne Corp. 3,200 15
PPG Industries, Inc. 9,600 466
Praxair, Inc. 14,900 865
Rohm & Haas Co. 26,753 886
Rollins, Inc. 1,950 47
RPM International, Inc. 7,100 88
The Sherwin-Williams Co. 9,500 265
Sigma-Aldrich Corp. 4,300 214
Solutia, Inc. 4,100 6
Spartech Corp. 1,700 37
Stepan Co. 1,200 30
o Symyx Technologies, Inc. 1,300 20
Tredegar Corp. 2,600 33
o Twinlab Corp. 900 --
Valhi, Inc. 5,600 64
Valspar Corp. 2,200 95
WD-40 Co. 1,600 42
Wellman, Inc. 11,700 134
o Zoltek Cos., Inc. 1,500 4
-----------
13,019
CONSTRUCTION 0.6%
---------------------------------------------------------------
Ameron International Corp. 1,700 114
Apogee Enterprises, Inc. 2,000 21
o Armstrong Holdings, Inc. 1,600 1
o Beazer Homes USA, Inc. 851 60
o Brookfield Homes Corp. 3,800 58
Building Material Holding Corp. 4,000 50
Butler Manufacturing Co. 1,200 20
CARBO Ceramics, Inc. 500 19
Centex Construction Products, Inc. 3,200 124
Centex Corp. 4,100 271
o Champion Enterprises, Inc. 2,200 5
Clayton Homes, Inc. 6,000 74
Craftmade International, Inc. 2,800 41
D.R. Horton, Inc. 9,802 232
o Dominion Homes, Inc. 500 9
o Dycom Industries, Inc. 2,399 26
ElkCorp 950 19
o EMCOR Group, Inc. 900 46
Florida Rock Industries, Inc. 1,550 59
Fluor Corp. 5,600 194
o Foster Wheeler Ltd. 2,500 5
Granite Construction, Inc. 1,850 31
o Hovnanian Enterprises, Inc.,
Class A 3,100 123
o Huttig Building Products, Inc. 811 2
o Insituform Technologies, Inc.,
Class A 1,300 21
o Integrated Electrical Services,
Inc. 1,800 10
Interface, Inc., Class A 3,300 12
KB Home Corp. 3,900 192
Lafarge North America, Inc. 3,700 118
Lawson Products, Inc. 2,000 54
Lennar Corp., Class A 4,745 257
Lennar Corp., Class B 474 25
M/I Schottenstein Homes, Inc. 1,800 62
Martin Marietta Materials, Inc. 2,200 65
Masco Corp. 20,400 430
MDC Holdings, Inc. 1,210 56
o Meritage Corp. 1,000 38
o Modtech Holdings, Inc. 1,000 8
o NCI Building Systems, Inc. 2,900 47
o NVR, Inc. 500 179
o Palm Harbor Homes, Inc. 1,200 20
o Photon Dynamics, Inc. 900 20
Pulte Homes, Inc. 2,936 170
See financial notes.
86
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Quanta Services, Inc. 2,400 8
The Ryland Group, Inc. 3,400 184
o Simpson Manufacturing Co.,
Inc. 1,600 56
Skyline Corp. 100 3
Standard-Pacific Corp. 2,400 73
The Stanley Works 4,600 111
o Stone & Webster, Inc. 700 --
Texas Industries, Inc. 1,000 20
o Toll Brothers, Inc. 5,600 130
o Trex Co., Inc. 3,000 123
o USG Corp. 1,400 10
Vulcan Materials Co. 4,700 164
Walter Industries, Inc. 1,900 19
~o Washington Group International,
Inc. 1,500 --
o WCI Communities, Inc. 1,300 18
o WESCO International, Inc. 2,300 10
-----------
4,317
CONSUMER DURABLE 0.4%
---------------------------------------------------------------
American Woodmark Corp. 500 24
o Applica, Inc. 3,100 16
Black & Decker Corp. 7,100 293
o Chromcraft Revington, Inc. 1,300 14
Compx International, Inc. 800 4
o Energizer Holdings, Inc. 6,333 183
Ethan Allen Interiors, Inc. 1,700 57
Flexsteel Industries, Inc. 600 8
o Furniture Brands International, Inc. 2,200 52
o Genlyte Group, Inc. 1,600 60
o Griffon Corp. 2,200 30
Haverty Furniture Cos., Inc. 1,700 24
o Helen of Troy Ltd. 2,000 28
Hillenbrand Industries, Inc. 3,300 165
Isco, Inc. 200 2
Kimball International, Inc., Class B 3,600 58
La-Z-Boy, Inc. 5,800 113
Leggett & Platt, Inc. 20,100 415
o Linens `N Things, Inc. 4,800 102
Maytag Corp. 4,600 96
o MITY Enterprises, Inc. 600 6
o Mohawk Industries, Inc. 2,819 156
National Presto Industries, Inc. 400 12
o Recoton Corp. 500 --
o Rent-A-Center, Inc. 2,800 180
o Restoration Hardware, Inc. 1,700 7
o Salton, Inc. 1,100 14
o SLI, Inc. 1,600 --
Stanley Furniture Co., Inc. 2,600 64
Sturm Ruger & Co., Inc. 1,100 10
Thomas Industries, Inc. 700 19
Toro Co. 800 30
Virco Manufacturing Corp. 1,170 11
o Water Pik Technologies, Inc. 195 2
Whirlpool Corp. 7,500 401
-----------
2,656
CONSUMER NON-DURABLE 1.3%
---------------------------------------------------------------
o A.T. Cross Co., Class A 2,400 12
Action Performance Cos., Inc. 1,100 20
o AFC Enterprises, Inc. 1,000 16
o American Greetings Corp., Class A 8,500 124
Applebee's International, Inc. 2,775 76
o Aramark Corp., Class B 4,300 99
o Boyd Gaming Corp. 2,800 40
o Boyds Collection Ltd. 2,200 11
o Brinker International, Inc. 6,900 219
o Buca, Inc. 1,100 6
o Catalina Marketing Corp. 2,900 52
CBRL Group, Inc. 2,300 73
o CEC Entertainment, Inc. 1,350 41
Cedar Fair L.P. 5,300 138
o Championship Auto Racing Teams,
Inc. 1,000 4
o The Cheesecake Factory 1,925 61
Churchill Downs, Inc. 900 33
o CKE Restaurants, Inc. 1,800 10
o Corvis Corp. 13,000 9
o Cytyc Corp. 7,800 103
Darden Restaurants, Inc. 7,800 137
o Dave and Buster's, Inc. 1,700 15
o Department 56, Inc. 3,300 39
See financial notes.
87
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Dover Motorsports, Inc. 1,400 5
o Drew Industries, Inc. 2,500 38
o Electronic Arts, Inc. 8,600 510
o Equity Marketing, Inc. 500 7
Fastenal Co. 3,600 125
The First Years, Inc. 4,000 48
Fortune Brands, Inc. 17,700 857
o Fossil, Inc. 1,975 36
o Garden Fresh Restaurant Corp. 1,700 15
o Handleman Co. 6,600 112
Hasbro, Inc. 12,000 192
o Hibbet Sporting Goods, Inc. 1,050 28
o Hollywood Media Corp. 1,100 1
IHOP Corp. 500 13
o International Game Technology 5,900 509
International Speedway Corp.,
Class A 2,245 88
o Isle of Capri Casinos, Inc. 9,400 121
o Jack in the Box, Inc. 1,700 30
o Krispy Kreme Doughnuts, Inc. 2,100 68
Lancaster Colony Corp. 3,400 145
Landry's Restaurants, Inc. 1,800 34
Lone Star Steakhouse & Saloon,
Inc. 4,400 92
o Luby's, Inc. 1,400 3
The Marcus Corp. 4,600 65
o Marvel Enterprises, Inc. 7,800 131
Mattel, Inc. 34,300 746
McDonald's Corp. 71,800 1,228
o Midway Games, Inc. 2,100 7
Movado Group, Inc. 3,700 76
Newell Rubbermaid, Inc. 8,900 576
o O'Charleys, Inc. 400 8
o On Command Corp. 1,500 1
Oneida Ltd. 700 8
Outback Steakhouse, Inc. 4,500 161
o P.F. Chang's China Bistro, Inc. 800 34
o Panera Bread Co., Class A 800 27
o Papa John's International, Inc. 6,200 147
o Penn National Gaming, Inc. 1,900 37
o Rare Hospitality International Inc. 550 16
Regis Corp. 1,900 54
Riviana Foods, Inc. 1,200 31
Ruby Tuesday, Inc. 3,100 61
Russ Berrie & Co., Inc. 1,000 33
o Ryan's Family Steak Houses, Inc. 2,250 28
o SCP Pool Corp. 850 28
o Service Corp. International 11,800 40
o Sonic Corp. 1,875 51
o Sotheby's Holdings, Inc., Class A 2,800 25
o Starbucks Corp. 15,800 371
o The Steak N Shake Co. 1,580 18
o Stewart Enterprises, Inc., Class A 4,200 12
o The Topps Co., Inc. 1,700 16
o Trans World Entertainment Corp. 1,500 5
o Triarc Cos., Inc. 700 19
Tupperware Corp. 2,300 32
Wendy's International, Inc. 4,800 139
o World Wrestling Entertainment,
Inc. 900 8
o Yankee Candle Co., Inc. 3,700 81
-----------
8,735
CONTAINERS 0.2%
---------------------------------------------------------------
o AEP Industries, Inc. 400 3
o American Locker Group, Inc. 500 7
o Astronics Corp. 1,000 3
o Astronics Corp., Class B 250 1
Ball Corp. 2,800 157
Bemis Co. 3,200 146
o Crown Holdings, Inc. 3,600 19
Greif Inc., Class A 3,700 76
o Mobile Mini, Inc. 600 9
o Mod-Pac Corp. 500 3
Mod-Pac Corp., Class B 125 1
o Owens-Illinois, Inc. 16,200 144
o Packaging Corp. of America 4,400 83
o Packaging Dynamics Corp. 260 2
o Pactiv Corp. 12,400 254
o Sealed Air Corp. 8,500 364
o Silgan Holdings, Inc. 2,900 77
-----
1,349
See financial notes.
88
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
ELECTRONICS 4.5%
---------------------------------------------------------------
o ACT Manufacturing, Inc. 900 --
o Acxiom Corp. 25,700 359
o Adaptive Broadband Corp. 1,000 --
o ADC Telecommunications, Inc. 28,220 67
o ADE Corp. 600 4
o Adelphia Business Solutions, Inc. 4,638 --
o Adelphia Communications,
Class A 6,301 1
o Advanced Fibre Communications,
Inc. 3,500 54
o Advanced Micro Devices, Inc. 14,500 108
o Advanced Power Technology, Inc. 1,500 6
o Agere Systems, Inc., Class A 30,616 55
o Agilent Technologies, Inc. 29,317 470
o Airnet Communications Corp. 1,300 --
o Allen Telecom, Inc. 3,000 41
o Alliance Fiber Optic Products, Inc. 2,100 1
o Alliance Semiconductor Corp. 1,200 5
o Alliant Techsystems, Inc. 2,437 131
o Altera Corp. 23,900 378
o American Power Conversion Corp. 18,800 293
o American Science & Engineering, Inc. 500 4
o American Superconductor Corp. 700 3
o American Technical Ceramics Corp. 500 2
o Amkor Technology, Inc. 6,900 52
o Amphenol Corp., Class A 2,900 128
o Anadigics, Inc. 1,150 2
o Analog Devices, Inc. 22,400 742
o Anaren, Inc. 800 6
o Andrew Corp. 3,600 28
o Anixter International, Inc. 3,300 76
o APA Optics, Inc. 1,000 1
Applied Biosystems Group -- Applera
Corp. 11,400 200
o Applied Materials, Inc. 72,498 1,058
o Applied Micro Circuits Corp. 12,238 55
~o APW Ltd. 1,700 --
o Arrow Electronics, Inc. 12,000 203
o Artisan Components, Inc. 1,100 22
o Aspect Communications Corp. 1,700 6
o AstroPower, Inc. 750 2
o Asyst Technologies, Inc. 1,700 8
o Atmel Corp. 17,900 33
o ATMI, Inc. 1,400 30
o Audiovox Corp., Class A 1,600 12
o Avanex Corp. 2,100 2
o Avid Technology, Inc. 1,100 30
o Avnet, Inc. 4,788 61
AVX Corp. 7,500 80
o Aware, Inc. 1,100 2
o Axcelis Technologies, Inc. 7,044 40
o AXT, Inc. 800 1
Badger Meter, Inc. 1,000 28
BEI Technologies, Inc. 1,200 10
o Bel Fuse, Inc., Class A 1,200 20
Belden, Inc. 800 10
o Benchmark Electronics, Inc. 6,700 174
o BMC Industries, Inc. 2,100 3
Boston Acoustics, Inc. 1,300 12
o Broadcom Corp., Class A 10,700 191
o Brooks Automation, Inc. 1,364 12
o Bruker Daltonics, Inc. 2,100 7
C&D Technologies, Inc. 2,000 27
o C-COR.net Corp. 1,600 5
o Cable Design Technologies Corp. 1,700 12
o Cadence Design Systems, Inc. 11,600 133
o Caliper Technologies Corp. 700 2
o Captaris, Inc. 2,200 7
o CCC Information Services Group, Inc. 13,10 218
o Checkpoint Systems, Inc. 2,100 28
o ChipPAC, Inc., Class A 6,600 36
o CIENA Corp. 17,294 84
o Cirrus Logic, Inc. 3,800 10
o CMGI, Inc. 14,086 14
o Coherent, Inc. 1,800 41
Cohu, Inc. 1,100 20
o CommScope, Inc. 1,900 16
o Computer Network Technology
Corp. 1,100 6
o Comtech Telecommunications 5,500 80
o Concord Communications, Inc. 1,600 20
See financial notes.
89
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Conexant Systems, Inc. 10,796 20
o Cox Radio, Inc., Class A 4,600 105
o Cree, Inc. 2,900 58
CTS Corp. 800 7
Cubic Corp. 1,200 23
o Cyberonics 1,200 27
o Cymer, Inc. 1,700 49
o Cypress Semiconductor Corp. 5,800 51
o Dade Behring Holdings, Inc. 1,000 21
o Daktronics, Inc. 5,600 79
o DDI Corp. 1,600 --
o Diodes, Inc. 5,000 76
o Dionex Corp. 1,200 41
o DSP Group, Inc. 3,300 69
o Dupont Photomasks, Inc. 5,500 102
o NElectro Rent Corp. 2,600 26
o Electro Scientific Industries, Inc. 1,300 17
o Electroglas, Inc. 900 1
o Electronics Boutique Holdings
Corp. 1,300 24
o Electronics for Imaging 2,900 56
o Emcore Corp. 1,500 3
o EMS Technologies, Inc. 1,000 12
o Emulex Corp. 26,200 537
o Entegris, Inc. 3,000 34
o ESS Technology, Inc. 3,100 21
o Esterline Technologies Corp. 2,900 51
o Exar Corp. 1,800 27
o Excel Technology, Inc. 600 14
o Fairchild Semiconductor International, Inc., Class A 4,100 49
o FEI Co. 1,500 27
o Finisar Corp. 7,900 7
o Fisher Scientific International, Inc. 4,900 141
o Flir Systems, Inc. 1,200 62
Frequency Electronics, Inc. 500 5
o FSI International, Inc. 1,300 3
o Gadzoox Networks, Inc. 600 --
o Gen-Probe, Inc. 3,000 93
o Genencor International, Inc. 14,000 155
General Cable Corp. 2,200 10
o Gentex Corp. 2,300 69
o Genus, Inc. 500 1
o Gerber Scientific, Inc. 1,900 16
o Getty Images, Inc. 4,600 156
o Glenayre Technologies, Inc. 2,300 2
o GlobespanVirata, Inc. 5,556 34
Harman International Industries,
Inc. 3,400 226
o Harmonic, Inc. 6,342 22
Harris Corp. 4,000 114
o Hearst-Argyle Television, Inc. 7,700 185
Helix Technology Corp. 1,100 13
o Herley Industries, Inc. 500 8
o HI/FN, Inc. 800 4
o Hollywood Entertainment Corp. 11,100 197
o Hutchinson Technology, Inc. 17,100 404
o Ibis Technology Corp. 800 4
o ID Systems, Inc. 500 3
o Imation Corp. 2,000 69
o Integrated Circuit Systems, Inc. 2,900 63
Intel Corp. 412,932 7,598
o Intermagnetics General Corp. 1,371 27
o International Rectifier Corp. 2,600 59
o Internet Security Systems 2,100 28
o Intersil Corp., Class A 5,164 96
o Itron, Inc. 1,500 30
ITT Industries, Inc. 6,200 361
o Ixia 2,200 13
o IXYS Corp. 900 6
o Jabil Circuit, Inc. 10,400 194
o JDS Uniphase Corp. 54,424 176
o JNI Corp. 1,400 5
Keithley Instruments, Inc. 700 9
o Kemet Corp. 3,700 34
o KLA-Tencor Corp. 8,400 344
o Kopin Corp. 2,500 12
o Kulicke & Soffa Industries, Inc. 1,900 10
o L-3 Communications Holdings,
Inc. 5,600 249
o Lam Research Corp. 5,700 83
o Lattice Semiconductor Corp. 4,600 40
See financial notes.
90
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o LeCroy Corp. 900 9
o Lightpath Technologies, Inc.,
Class A 75 --
Linear Technology Corp. 13,500 465
o Littelfuse, Inc. 4,500 88
o Logicvision, Inc. 1,000 2
o Loral Space & Communications
Corp. 13,900 4
o LSI Logic Corp. 19,564 105
o Lucent Technologies, Inc. 131,423 237
o Macromedia, Inc. 28,000 353
o Manufacturers Services Ltd. 2,500 10
o Mattson Technology, Inc. 1,100 4
Maxim Integrated Products, Inc. 14,253 560
o McData Corp., Class A 2,617 28
o Measurement Specialties, Inc. 700 3
o MEMC Electronic Materials, Inc. 11,800 140
o Merix Corp. 1,200 5
o Merrimac Industries, Inc. 600 2
o Mestek, Inc. 700 13
o Metawave Communications Corp. 1,900 --
Methode Electronics, Class A 1,100 12
o Metromedia Fiber Network, Inc.,
Class A 18,010 --
o Micrel, Inc. 3,600 42
o Micron Technology, Inc. 25,500 217
o Microsemi Corp. 1,000 12
o Microtune, Inc. 2,200 4
o MKS Instruments, Inc. 1,700 24
Mocon, Inc. 600 4
Molex, Inc. 10,125 236
o Monolithic System Technology,
Inc. 1,200 7
Motorola, Inc. 102,455 810
o MRV Communications, Inc. 4,307 6
MTS Systems Corp. 4,500 56
o Multilink Technology Corp. 340 --
o Mykrolis Corp. 3,021 24
o Nanogen, Inc. 1,500 2
o Nanometrics, Inc. 300 1
o National Semiconductor Corp. 7,600 142
o Netopia, Inc. 2,100 5
o Netro Corp. 573 2
o New Focus, Inc. 2,800 9
o Newport Corp. 1,700 22
o Novoste Corp. 1,600 12
o Nvidia Corp. 7,000 100
o Omnivision Technologies, Inc. 1,400 34
o Oplink Communications, Inc. 4,600 4
o Optical Communication Products,
Inc. 500 1
o OSI Systems, Inc. 1,200 18
o OYO Geospace Corp. 300 3
o P-Com Inc. 520 --
Park Electrochemical Corp. 1,100 20
o Parkervision, Inc. 400 4
o ParthusCeva, Inc. 433 2
o Pemstar, Inc. 1,600 5
o Pericom Semiconductor Corp. 1,400 12
PerkinElmer, Inc. 5,977 59
o Photronics, Inc. 1,400 18
o Pinnacle Systems, Inc. 1,800 17
Pioneer Standard Electronics, Inc. 1,600 16
o Pixelworks, Inc. 1,600 12
o Plantronics, Inc. 4,000 74
o Plexus Corp. 1,700 17
o PLX Technology, Inc. 1,300 4
o Powell Industries, Inc. 1,000 14
o Power Intergrations, Inc. 1,400 31
o Power-One, Inc. 2,500 15
o Powerwave Technologies, Inc. 3,200 13
o Proxim Corp., Class A 5,412 4
Qualcomm, Inc. 49,300 1,572
o QuickLogic Corp. 900 1
o Rambus, Inc. 5,700 82
Raven Industries, Inc. 1,400 23
o Rayovac Corp. 2,800 29
o Remec, Inc. 2,500 12
o Rex Stores Corp. 1,875 20
o RF Micro Devices, Inc. 7,200 34
Richardson Electronics Ltd. 1,300 10
o Riverstone Networks, Inc. 7,645 9
o Rofin-Sinar Technologies, Inc. 1,900 27
See financial notes.
91
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Rogers Corp. 2,800 93
o Rudolph Technologies, Inc. 500 8
o Sanmina-SCI Corp. 21,916 105
o Semitool, Inc. 1,800 8
o Semtech Corp. 3,200 51
o Signal Technology Corp. 4,500 59
o Silicon Image, Inc. 2,000 12
o Silicon Laboratories, Inc. 2,500 71
o Silicon Storage Technology, Inc. 3,500 11
o Siliconix, Inc. 8,100 229
o Sipex Corp. 1,600 5
o Sirenza Microdevices, Inc. 1,300 2
o Skyworks Solutions, Inc. 5,689 30
o Solectron Corp. 26,820 86
o Spectralink Corp. 1,000 8
o SpeechWorks International, Inc. 1,400 6
o Standard Microsystems Corp. 1,100 14
o StockerYale, Inc. 500 --
o Superconductor Technologies 1,600 4
o Superior Telecom, Inc. 1,124 --
o Supertex, Inc. 1,400 22
Symbol Technologies, Inc. 9,637 105
o Symmetricom, Inc. 8,450 35
o Synavant, Inc. 1,325 3
o Taser International, Inc. 1,000 8
o Technitrol, Inc. 1,500 24
o Tekelec 8,700 94
o Tektronix, Inc. 5,300 99
o Telaxis Communications Corp. 400 --
o Tellabs, Inc. 21,600 133
o Teradyne, Inc. 7,059 82
o Terayon Communication Systems
Corp. 2,800 5
o Tessco Technologies, Inc. 900 6
Texas Instruments, Inc. 106,297 1,965
o Therma-Wave, Inc. 1,000 1
o Thomas & Betts Corp. 7,300 115
o THQ, Inc. 1,950 28
o Three-Five Systems, Inc. 1,099 6
o Tollgrade Communications, Inc. 1,100 16
o Transmeta Corp. 4,500 4
o Transwitch Corp. 3,100 3
o Tripath Technology, Inc. 1,800 1
o Triquint Semiconductor, Inc. 5,310 19
o TTM Technologies, Inc. 1,900 9
o Tweeter Home Entertainment Group,
Inc. 1,100 6
o Ulticom, Inc. 2,300 17
United Industrial Corp. 1,200 16
Unitil Corp. 600 14
o Univision Communications, Inc.,
Class A 14,000 424
o UQM Technologies, Inc. 1,500 4
o Valence Technology, Inc. 1,400 4
o Varian Semiconductor Equipment
Associates, Inc. 1,500 35
o Varian, Inc. 5,800 183
o Viasat, Inc. 1,000 11
~ Viasystems Group, Inc. 4,200 --
o Vicor Corp. 1,700 11
o Vishay Intertechnology, Inc. 6,281 79
o Visx, Inc. 2,100 33
o Vitesse Semiconductor Corp. 6,800 21
o Waters Corp. 6,100 146
o WebMD Corp. 14,426 139
o Western Digital Corp. 7,200 67
o Western Wireless Corp., Class A 2,700 17
o WilTel Communications, Inc. 4,800 53
o Xicor, Inc. 1,000 6
o Xilinx, Inc. 17,900 485
o Zoran Corp. 1,250 22
-----------
30,526
ENERGY: RAW MATERIALS 1.8%
---------------------------------------------------------------
Alliance Resource Partners L.P. 1,700 42
Anadarko Petroleum Corp. 15,030 667
Apache Corp. 9,936 569
APCO Argentina, Inc. 200 5
Arch Coal, Inc. 2,000 36
o ATP Oil & Gas Corp. 1,600 5
o Atwood Oceanics, Inc. 1,200 31
Baker Hughes, Inc. 20,300 568
Berry Petroleum Co., Class A 2,000 31
See financial notes.
92
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o BJ Services Co. 6,800 248
BP Prudhoe Bay Royalty Trust 2,200 32
Buckeye Partners L.P. 3,400 123
Burlington Resources, Inc. 11,000 509
Cabot Oil & Gas Corp. 14,400 353
Chesapeake Energy Corp. 6,600 53
o Comstock Resources, Inc. 4,500 50
o Cooper Cameron Corp. 2,300 110
Cross Timbers Royalty Trust 1,400 29
o Crosstex Energy L.P. 1,000 26
o Denbury Resources, Inc. 4,900 52
Devon Energy Corp. 15,680 741
Enbridge Energy Management LLC 1,023 42
o Encore Acquisition Co. 1,500 26
o Energy Conversion Devices, Inc. 600 6
o Energy Partners Ltd. 1,700 17
ENSCO International, Inc. 5,700 145
Enterprise Products Partners L.P. 10,500 238
EOG Resources, Inc. 11,400 426
o Evergreen Resources, Inc. 800 38
o Evergreen Solar, Inc. 1,000 2
o FMC Technologies, Inc. 4,591 86
o Forest Oil Corp. 4,450 92
o Friede Goldman Halter, Inc. 1,855 --
o FuelCell Energy, Inc. 1,200 7
o Grant Prideco, Inc. 3,600 41
o Grey Wolf, Inc. 5,800 24
Halliburton Co. 39,600 848
Helmerich & Payne, Inc. 2,300 59
Hugoton Royalty Trust 3,300 48
Kaneb Services LLC 1,466 34
o Key Energy Services, Inc. 4,800 48
Kinder Morgan Energy Partners L.P. 1,502 59
The Laclede Group, Inc. 800 19
Lufkin Industries, Inc. 500 11
o Markwest Energy Partners L.P. 500 14
Massey Energy Co. 3,500 37
Nabors Industries Ltd. 11,817 463
Natural Resource Partners L.P. 2,000 51
NL Industries 2,800 49
o Noble Corp. 6,100 189
Noble Energy, Inc. 3,500 116
Occidental Petroleum Corp. 24,100 719
o Offshore Logistics, Inc. 1,100 21
o Oil States International, Inc. 17,800 203
Pacific Energy Partners L.P. 1,000 23
o Parker Drilling Co. 2,800 6
o Patterson-UTI Energy, Inc. 3,100 103
Peabody Energy Corp. 2,300 65
Penn Virginia Resource
Partners L.P. 1,000 26
Plains All American Pipeline
L.P. 4,600 131
o Plains Exploration & Production
Co. 1,500 13
o Plains Resources, Inc. 1,500 18
o Premcor, Inc. 2,600 58
o Pride International, Inc. 5,200 81
o Proton Energy Systems, Inc. 1,400 4
o Quicksilver Resource, Inc. 1,400 32
o Range Resources Corp. 2,400 14
Rowan Cos., Inc. 3,400 70
RPC, Inc. 900 10
Schlumberger Ltd. 30,000 1,258
o Smith International, Inc. 4,400 156
TC Pipelines L.P. 2,900 79
Tidewater, Inc. 2,700 73
o Tom Brown, Inc. 3,200 78
o Ultra Petroleum Corp. 4,000 40
o Unit Corp. 2,400 47
USEC, Inc. 3,000 17
Valero Energy Corp. 8,649 318
Valero L.P. 1,600 63
o Varco International, Inc. 5,140 90
o W-H Energy Services, Inc. 900 16
Weatherford International Ltd. 4,800 193
Western Gas Resources, Inc. 2,000 73
o Westmoreland Coal Co. 3,500 53
o Westport Resources Corp. 5,725 119
Williams Energy Partners L.P. 1,200 51
World Fuel Services Corp. 500 11
XTO Energy, Inc. 9,066 177
-----------
12,024
See financial notes.
93
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
FOOD & AGRICULTURE 4.2%
---------------------------------------------------------------
Altria Group, Inc. 127,700 3,928
o American Italian Pasta Co.,
Class A 1,000 44
The Andersons, Inc. 1,500 17
Archer-Daniels-Midland Co. 63,858 708
o Aurora Foods, Inc. 2,500 1
Bob Evans Farms, Inc. 2,200 56
Bridgford Foods Corp. 300 2
Bunge Ltd. 5,800 162
o Cadiz, Inc. 2,100 --
Campbell Soup Co. 24,500 540
o Chiquita Brands International,
Inc. 10,000 135
Coca-Cola Bottling Co.
Consolidated 400 20
The Coca-Cola Co. 146,800 5,931
Coca-Cola Enterprises, Inc. 27,200 530
ConAgra Foods, Inc. 51,093 1,073
Corn Products International, Inc. 7,800 233
o Dean Foods Co. 5,742 250
o Del Monte Foods Co. 8,931 71
Delta & Pine Land Co. 2,000 47
Dreyer's Grand Ice Cream, Inc. 2,300 147
o Eden Bioscience Corp. 1,000 2
o Embrex, Inc. 1,300 12
Fleming Cos., Inc. 3,400 --
Flowers Foods, Inc. 13,010 368
Fresh Brands, Inc. 1,800 24
Fresh Del Monte Produce, Inc. 4,200 82
General Mills, Inc. 21,900 988
o Green Mountain Coffee Roasters,
Inc. 900 16
o Griffen Land & Nurseries, Inc. 300 4
H.J. Heinz Co. 21,900 654
o Hain Celestial Group, Inc. 1,406 24
Hershey Foods Corp. 8,200 535
Hormel Foods Corp. 6,500 150
IMC Global, Inc. 3,500 32
Ingles Markets, Inc., Class A 300 3
Interstate Bakeries 8,000 84
o J & J Snack Foods Corp. 3,200 100
The J.M. Smuckers Co. 2,438 88
o John B. Sanfilippo & Son 5,000 94
Kellogg Co. 24,900 815
Kraft Foods, Inc., Class A 14,500 448
Lance, Inc. 1,900 14
o Lesco, Inc. 500 5
Lindsay Manufacturing Co. 800 17
o M & F Worldwide Corp. 1,200 9
Marsh Supermarkets, Inc., Class B 1,000 11
o Maui Land & Pineapple Co., Inc. 800 17
McCormick & Co., Inc. 5,800 144
MGP Ingredients, Inc. 1,700 12
Monsanto Co. 16,645 290
o Monterey Pasta Co. 700 2
Nash Finch Co. 1,700 21
o National Beverage Corp. 3,700 52
o Neogen Corp. 500 8
o The Pantry, Inc. 400 3
o Peet's Coffee & Tea, Inc. 1,800 31
The Pepsi Bottling Group, Inc. 18,200 374
PepsiAmericas, Inc. 13,200 165
PepsiCo, Inc. 106,600 4,614
o Performance Food Group Co. 1,900 67
Pilgrim's Pride Corp., Class B 1,400 12
o Ralcorp Holdings, Inc. 6,700 167
o Rocky Mountain Chocolate
Factory, Inc. 1,000 8
Sanderson Farms, Inc. 3,500 66
Sara Lee Corp. 47,378 795
o The Scotts Co., Class A 2,800 159
Seaboard Corp. 200 42
Sensient Technologies Corp. 2,300 51
o Smithfield Foods, Inc. 6,300 123
o Spartan Stores, Inc. 500 1
Supervalu, Inc. 18,087 298
o Surebeam Corp., Class A 2,711 8
Sysco Corp. 39,536 1,136
Tasty Baking Co. 500 4
o Tejon Ranch Co. 674 19
Tootsie Roll Industries, Inc. 2,190 63
Tyson Foods, Inc., Class A 15,240 147
o United Natural Foods, Inc. 1,300 38
See financial notes.
94
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Vector Group Ltd. 1,169 13
o Whole Foods Market, Inc. 6,100 362
o Wild Oats Markets, Inc. 3,800 41
Wm. Wrigley Jr. Co. 9,600 544
o Zapata Corp. 1,000 37
-----------
28,408
GOLD 0.1%
---------------------------------------------------------------
Barrick Gold Corp. 5,565 83
Glamis Gold Ltd. 4,000 45
o Golden Cycle Gold Corp. 600 10
Meridian Gold, Inc. 6,600 67
Newmont Mining Corp. 11,251 304
Royal Gold, Inc. 3,700 59
-----------
568
HEALTHCARE / DRUGS & MEDICINE 13.6%
---------------------------------------------------------------
Abbott Laboratories 96,205 3,909
o Abgenix, Inc. 3,600 34
o Abiomed, Inc. 800 3
o Acacia Research-- CombiMatrix 184 --
o Accredo Health, Inc. 2,841 42
o Aclara BioSciences, Inc. 2,400 5
o Adolor Corp. 1,700 24
o Advanced Medical Optics, Inc. 2,400 34
o Advanced Neuromodulation
Systems, Inc. 700 29
o AdvancePCS Corp. 5,300 159
o AeroGen, Inc. 3,200 1
o Affymetrix, Inc. 2,300 43
o Alaris Medical, Inc. 5,000 48
o Albany Molecular Research, Inc. 1,600 18
o Align Technology, Inc. 1,700 13
o Alkermes, Inc. 3,100 31
Allergan, Inc. 8,400 590
o Alliance Imaging, Inc. 1,800 8
o Alliance Pharmaceutical Corp. 220 --
o Allscripts Healthcare Solutions, 1,900 5
Inc.
Alpharma, Inc., Class A 3,700 69
o America Service Group, Inc. 800 10
o American Healthways, Inc. 1,550 38
o American Medical Security Group,Inc. 5,600 95
o American Medical Systems
Holdings, Inc. 1,400 22
o AMERIGROUP Corp. 900 26
AmerisourceBergen Corp. 4,824 279
o Amgen, Inc. 78,668 4,823
o AMN Healthcare Services, Inc. 2,200 20
o Amsurg Corp. 700 18
o Amylin Pharmaceuticals, Inc. 2,300 44
o Andrx Corp. 3,900 63
o Anthem, Inc. 14,417 990
o Antigenics, Inc. 1,400 14
o Aphton Corp. 800 3
o Apogent Technologies, Inc. 5,100 88
o Applied Molecular Evolution, Inc. 2,100 7
o Apria Healthcare Group, Inc. 10,500 246
o Arena Pharmaceuticals, Inc. 800 5
o Arqule, Inc. 1,300 5
Arrow International, Inc. 3,200 137
o Arthrocare Corp. 1,400 21
o Aspect Medical Systems, Inc. 1,200 5
o Atrix Labs, Inc. 1,400 25
o AVANIR Pharmaceuticals, Class A 1,900 3
o Avant Immunotherapeutics, Inc. 3,000 4
o Avigen, Inc. 900 3
o Barr Laboratories, Inc. 3,354 186
Bausch & Lomb, Inc. 3,400 120
Baxter International, Inc. 26,118 601
Beckman Coulter, Inc. 3,100 120
Becton Dickinson & Co. 17,300 612
o Beverly Enterprises, Inc. 3,800 7
o Bio-Rad Laboratories, Inc., Class A 1,000 47
o Bio-Technology General Corp. 2,300 8
o BioCryst Pharmaceuticals, Inc. 1,400 2
o Biogen, Inc. 6,500 247
o BioMarin Pharmaceuticals, Inc. 1,800 20
Biomet, Inc. 17,625 537
o Biopure Corp. 1,200 4
o Bioreliance Corp. 4,000 80
o Biosite, Inc. 1,400 60
o Biosource International, Inc. 1,500 9
o Bone Care International, Inc. 1,400 11
o Boston Scientific Corp. 23,400 1,007
See financial notes.
95
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Bradley Pharmaceuticals, Inc. 5,500 79
Bristol-Myers Squibb Co. 21,550 3,104
C.R. Bard, Inc. 4,000 254
o Cantel Medical Corp. 1,381 19
Cardinal Health, Inc. 24,660 1,363
o Caremark Rx, Inc. 16,900 336
o Celera Genomics Group - Applera
Corp. 3,100 33
o Celgene Corp. 3,000 80
o Cell Genesys, Inc. 1,500 13
o Cell Pathways, Inc. 1,600 2
o Cell Therapeutics, Inc. 1,400 13
o Cephalon, Inc. 3,500 143
o Cerus Corp. 500 4
o Charles River Laboratories
International, Inc. 1,900 52
o Chattem, Inc. 1,200 16
o Chiron Corp. 10,100 412
o Cholestech Corp. 1,700 20
o ChromaVision Medical Systems, Inc. 1,100 1
o Chronimed, Inc. 600 5
o Ciphergen Biosystems, Inc. 1,700 8
o Closure Medical Corp. 3,400 61
o Community Health Systems, Inc. 4,100 78
o Conmed Corp. 1,700 30
Cooper Cos., Inc. 2,200 61
o Corixa Corp. 1,802 13
o Corvel Corp. 1,900 59
o Covance, Inc. 5,800 103
o Coventry Health Care, Inc. 9,600 392
o CryoLife, Inc. 750 6
o CTI Molecular Imaging, Inc. 2,000 37
o Cubist Pharmaceuticals, Inc. 1,900 18
o CuraGen Corp. 2,100 10
o Curis, Inc. 3,140 7
o CV Therapeutics, Inc. 1,100 22
o CyberCare, Inc. 900 --
o Cygnus, Inc. 600 --
o Cyotgen Corp. 230 1
D&K Healthcare Resources, Inc. 700 9
Datascope Corp. 1,000 29
o DaVita, Inc. 16,500 340
o Deltagen, Inc. 2,200 1
o Dendreon Corp. 1,400 7
Dentsply International, Inc. 4,050 152
Diagnostic Products Corp. 1,700 67
o Digene Corp. 1,400 27
o Diversa Corp. 1,100 11
o DJ Orthopedics, Inc. 500 3
o Durect Corp. 2,000 6
o Dynacq International, Inc. 3,600 46
o Edwards Lifesciences Corp. 3,900 113
Eli Lilly & Co. 59,500 3,797
o Emisphere Technologies, Inc. 800 2
o Endo Pharmaceutical Holdings,
Inc. 8,000 132
o Entremed, Inc. 1,200 3
o Enzo Biochem, Inc. 1,617 24
o Enzon Pharmaceuticals, Inc. 1,900 26
o Eon Labs, Inc. 2,400 74
o Exelixis, Inc. 1,800 15
o Express Scripts, Inc. 3,800 224
o First Health Group Corp. 4,400 110
o First Horizon Pharmaceutical Corp. 900 2
o Fischer Imaging Corp. 500 2
o Forest Laboratories, Inc. 25,000 1,293
o Genaissance Pharmaceuticals, Inc. 1,800 2
o Gene Logic, Inc. 1,300 9
o Genelabs Technologies 800 1
o Genentech, Inc. 9,700 369
o Genesis Health Ventures, Inc. 12,500 187
o Genome Therapeutics Corp. 2,100 5
o Genta, Inc. 2,900 22
o Gentiva Health Services 750 7
o Genzyme Corp. -- General Division 9,232 372
o Geron Corp. 1,000 5
o Gilead Sciences, Inc. 11,360 524
o GTC Biotherapeutics, Inc. 1,800 3
o Guidant Corp. 25,816 1,007
o Guilford Pharmaceuticals, Inc. 1,200 6
o Haemonetics Corp. 3,700 66
o Hanger Orthopedic Group, Inc. 5,400 56
Harvard Bioscience, Inc. 500 2
HCA, Inc. 23,600 758
See financial notes.
96
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Health Management Associates, Inc.,
Class A 10,900 186
o Health Net, Inc. 16,600 433
o Healthcare Services Group 2,500 33
o HealthExtras, Inc. 1,900 8
o HealthTronics Surgical Services,Inc. 2,500 20
o Henry Schein, Inc. 2,300 99
o Hologic, Inc. 2,600 23
Hooper Holmes, Inc. 2,100 13
o Human Genome Sciences, Inc. 5,100 60
o Humana, Inc. 18,900 209
o I-Stat Corp. 600 4
ICN Pharmaceuticals, Inc. 4,600 40
o ICOS Corp. 2,700 72
o ICU Medical, Inc. 550 17
o Idec Pharmaceuticals Corp. 6,900 226
o Idexx Laboratories, Inc. 7,000 273
o Igen International, Inc. 1,300 47
o Ii-Vi, Inc. 5,000 97
o Illumina, Inc. 1,500 3
o ImClone Systems, Inc. 4,435 81
o Immucor, Inc. 750 15
o Immunogen, Inc. 1,500 5
o Immunomedics, Inc. 2,400 9
o IMPAC Medical Systems, Inc. 3,000 53
o Impax Laboratories, Inc. 1,600 9
IMS Health, Inc. 16,300 251
o Inamed Corp. 9,300 347
o Incyte Genomics, Inc. 2,600 9
o Indevus Pharmaceuticals, Inc. 1,800 7
o Inspire Pharmaceuticals, Inc. 1,300 19
o Integra LifeSciences Holdings
Corp. 3,600 96
o InterMune, Inc. 1,100 22
o Intuitive Surgical, Inc. 2,100 13
Invacare Corp. 2,000 64
o Inveresk Research Group, Inc. 1,700 24
o Invitrogen Corp. 3,629 119
o Isis Pharmaceuticals, Inc. 1,900 11
o IVAX Corp. 8,750 141
(7) Johnson & Johnson 187,670 10,577
o Kendle International, Inc. 1,700 8
o Kindred Healthcare, Inc. 2,312 34
o King Pharmaceuticals, Inc. 16,016 202
o Kos Pharmaceuticals, Inc. 700 14
o Kosan Biosciences, Inc. 2,500 16
o KV Pharmaceutical Co., Class A 1,800 40
o LabOne, Inc. 2,100 40
o Laboratory Corp. of America
Holdings 13,500 398
Landauer, Inc. 1,100 42
o Large Scale Biology Corp. 2,400 2
o LifePoint Hospitals, Inc. 2,300 45
o Ligand Pharmaceuticals, Inc.,
Class B 2,300 20
o Lincare Holdings, Inc. 4,900 149
o Magellan Health Services, Inc. 2,200 --
o Manor Care, Inc. 8,000 156
o Matria Healthcare, Inc. 1,200 15
o Maxim Pharmaceuticals, Inc. 2,400 9
o Maxygen, Inc. 1,500 12
McKesson Corp. 18,900 524
o Med-Design Corp. 1,200 5
o Medamicus, Inc. 500 4
o Medarex, Inc. 3,000 13
o Medcath Corp. 1,500 7
o Medicines Co. 1,700 35
o Medicis Pharmaceutical Corp.,
Class A 1,700 98
o Medimmune, Inc. 9,875 348
o MedQuist, Inc. 3,217 61
Medtronic, Inc. 74,874 3,574
Mentor Corp. 3,000 56
(10) Merck & Co., Inc. 139,552 8,119
o Merit Medical Systems, Inc. 1,250 24
o MGI Pharma, Inc. 1,900 27
o Mid Atlantic Medical Services,
Inc. 8,300 361
o Millennium Pharmaceuticals,Inc. 11,956 132
o MIM Corp. 1,500 11
o Molecular Devices Corp. 8,100 102
Mylan Laboratories, Inc. 30,000 848
See financial notes.
97
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Myriad Genetics, Inc. 1,400 17
o Nabi Biopharmaceuticals 2,800 18
o Napro Biotherapeutics, Inc. 1,200 1
o National Healthcare Corp. 600 11
o National Medical Health Card
Systems, Inc. 800 7
Nature's Sunshine Products,
Inc. 2,000 19
o NBTY, Inc. 16,000 248
NDCHealth Corp. 1,900 37
o Nektar Therapeutics 2,200 18
o NeoRx Corp. 400 1
o Neose Technologies, Inc. 500 4
o Neurocrine Biosciences, Inc. 1,400 63
o Neurogen Corp. 800 3
o North American Scientific, Inc. 700 5
o Northfield Laboratories, Inc. 1,100 7
o Noven Pharmacuticals, Inc. 5,500 53
o NPS Pharmacuticals, Inc. 1,000 19
o Nuvelo, Inc. 900 1
o NWH, Inc. 1,000 17
o Odyssey HealthCare, Inc. 1,500 39
Omnicare, Inc. 7,500 199
o Onyx Pharmaceuticals, Inc. 1,800 16
o Option Care, Inc. 1,500 14
o OraSure Technologies, Inc. 1,500 10
o Orchid BioSciences, Inc.. 1,400 1
o Organogenesis, Inc 2,100 --
o Orthodontic Centers of America,
Inc. 2,112 12
o OSI Pharmaceuticals, Inc. 1,600 34
Owens & Minor, Inc. 1,500 28
o Oxford Health Plans, Inc. 21,700 635
o Oxigene, Inc. 900 2
o Pacificare Health Systems, Inc. 9,400 299
o Pain Therapeutics, Inc. 2,600 8
o Paradigm Genetics, Inc. 400 --
Parexel International Corp. 2,400 31
o Patterson Dental Co. 3,300 133
o Pediatrix Medical Group, Inc. 3,000 96
Perrigo Co. 3,300 51
(4) Pfizer, Inc. 487,052 14,977
o Pharmaceutical Product Development,
Inc. 2,500 65
o Pharmaceutical Resources, Inc. 1,900 84
o Pharmacopeia, Inc. 1,300 12
o Pharmacyclics, Inc. 1,100 4
PolyMedica Corp. 2,200 82
o Possis Medical, Inc. 1,100 21
o Pozen, Inc. 1,300 6
o PracticeWorks, Inc. 2,000 24
o Priority Healthcare Corp., Class B 2,000 46
o Protein Design Labs, Inc. 4,100 41
o Province Healthcare Co. 2,325 23
o PSS World Medical, Inc. 2,800 17
o QMed, Inc. 500 3
o Quest Diagnostics 6,410 383
o Quintiles Transnational Corp. 10,600 149
o Regeneration Technologies, Inc. 1,700 17
o Regeneron Pharmaceuticals, Inc. 1,900 12
o RehabCare Group, Inc. 1,500 26
o Renal Care Group, Inc. 4,700 152
o Resmed, Inc. 2,000 73
o Respironics, Inc. 1,900 73
o Sangamo Biosciences, Inc. 1,200 3
o Sangstat Medical Corp. 2,000 25
Schering-Plough Corp. 60,950 1,103
o Select Medical Corp. 2,500 42
o Sepracor, Inc. 3,100 59
o Sequenom, Inc. 1,600 3
o Serologicals Corp. 1,200 11
o SICOR, Inc. 5,200 93
o Sierra Health Services, Inc. 11,700 194
o Sola International, Inc. 2,700 38
o SonoSite, Inc. 1,600 26
o Specialty Laboratories 700 6
o St. Jude Medical, Inc. 14,800 776
o Steris Corp. 6,100 138
Stryker Corp. 11,300 757
o Sunrise Assisted Living, Inc. 4,900 132
o Sunrise Technologies
International 1,700 --
o SuperGen, Inc. 900 3
o Sybron Dental Specialties, Inc. 4,633 94
See financial notes.
98
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Tanox, Inc. 1,900 30
o Techne Corp. 1,300 29
o Tenet Healthcare Corp. 30,150 447
o Texas Biotech Corp. 2,600 5
o Theragenics Corp. 2,500 11
o Therasense, Inc. 2,300 18
o Third Wave Technologies, Inc. 1,800 7
o Thoratec Corp. 2,636 36
o Titan Pharmaceuticals, Inc. 800 1
o Transgenomic, Inc. 1,200 1
o Transkaryotic Therapies, Inc. 900 5
o Triad Hospitals, Inc. 3,544 78
o Trimeris, Inc. 500 22
o TriPath Imaging, Inc. 2,600 10
o Tripos, Inc. 1,000 5
o United Defense Industries, Inc. 900 22
o United Surgical Partners International,
Inc. 1,400 26
UnitedHealth Group, Inc. 21,100 1,944
o Universal Health Services,
Class B 3,000 116
o Urologix, Inc. 1,800 3
o US Oncology, Inc. 3,700 27
o USANA Health Sciences, Inc . 3,000 81
o Utah Medical Products, Inc . 2,500 48
o Varian Medical Systems, Inc. 3,600 194
o Vaxgen, Inc. 600 2
o VCA Antech, Inc. 2,700 45
o Ventana Medical Systems 1, 200 27
o Vertex Pharmaceuticals, Inc. 3,144 38
o Viasys Healthcare, Inc. 1,482 24
o Vical, Inc. 1,600 4
o Viropharma, Inc. 1,000 3
o VistaCare, Inc., Class A 3 ,500 71
Vital Signs, Inc. 1,900 54
o Watson Pharmaceuticals, Inc. 11,032 321
o WellChoice, Inc. 2,500 53
o WellPoint Health Networks, Inc. 9,700 737
West Pharmaceutical Services, Inc. 3,300 79
o Whitman Education Group, Inc. 1,500 22
o Wright Medical Group, Inc. 1,700 32
Wyeth 83,000 3,613
o XOMA Ltd. 2,400 12
o Young Innovations, Inc. 2,000 44
o Zimmer Holdings, Inc. 7,300 342
o Zymogenetics, Inc. 2,000 23
----------
92,456
HOUSEHOLD PRODUCTS 2.2%
--------------------------------------------------------
Alberto-Culver Co., Class B 3,300 163
Avon Products, Inc. 17,000 989
Church & Dwight Co., Inc. 3,300 104
Clorox Co. 27,000 1,221
Colgate-Palmolive Co. 31,500 1,801
o DEL Laboratories, Inc. 1,000 23
The Dial Corp. 13,100 273
The Estee Lauder Cos., Inc.,
Class A 10,300 335
The Gillette Co. 68,900 2,098
o Inter Parfums, Inc. 675 5
International Flavors & Fragrances,
Inc. 6,900 219
Nu Skin Enterprises, Inc.,
Class A 6,500 58
o Playtex Products, Inc. 2,800 20
Procter & Gamble Co. 82,200 7,386
o Revlon, Inc., Class A 1,800 6
----------
14,701
INSURANCE 4.7%
--------------------------------------------------------
21st Century Holding Co. 1,000 13
21st Century Insurance Group 4,700 64
Aetna, Inc. 14,800 737
AFLAC, Inc. 31,600 1,034
Alfa Corp. 4,800 62
o Alleghany Corp. 212 36
o Allmerica Financial Corp. 2,400 37
The Allstate Corp. 43,874 1,658
AMBAC Financial Group, Inc. 5,250 306
American Financial Group, Inc. 3,000 67
(8) American International Group,
Inc. 154,922 8,978
American National Insurance
Co. 1,300 104
See financial notes.
99
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o American Physicians Capital,
Inc. 2,500 57
AmerUs Group Co. 1,900 50
AON Corp. 11,500 255
Arch Capital Group Ltd. 1,400 49
Argonaut Group, Inc. 2,400 24
Arthur J. Gallagher & Co. 4,300 107
Baldwin & Lyons, Inc., Class B 750 17
Brown & Brown, Inc. 3,000 107
Chubb Corp. 7,047 373
CIGNA Corp. 10,300 539
Cincinnati Financial Corp. 12,200 450
o Clark/Bardes, Inc. 1,700 20
o CNA Financial Corp. 13,700 328
CNA Surety Corp. 2,200 20
o Cobalt Corp. 3,900 64
Commerce Group, Inc. 1,600 59
o Conseco, Inc. 12,600 --
Crawford & Co., Class B 1,600 8
Delphi Financial Group, Inc.,
Class A 3,010 133
EMC Insurance Group, Inc. 1,200 23
Erie Indemnity Co., Class A 3,000 112
FBL Financial Group, Inc.,
Class A 2,090 42
Fidelity National Financial, Inc. 10,872 374
Financial Industries Corp. 700 10
First American Corp. 4,800 127
o FPIC Insurance Group, Inc. 400 4
Fremont General Corp. 2,000 19
Great American Financial
Resources, Inc. 2,800 40
Harleysville Group, Inc. 1,800 42
Hartford Financial Services
Group, Inc. 16,300 664
HCC Insurance Holdings, Inc. 2,100 58
Hilb, Rogal & Hamilton Co. 2,000 71
Horace Mann Educators Corp. 1,800 27
Independence Holding Co. 1,500 29
o Infinity Property & Casualty Corp. 2,500 53
Jefferson-Pilot Corp. 7,100 285
John Hancock Financial Services,
Inc. 17,900 519
Kansas City Life Insurance Co. 2,000 81
Landamerica Financial Group, Inc. 5,800 238
Leucadia National Corp. 3,100 118
Liberty Corp. 1,000 44
Lincoln National Corp. 12,600 403
Loews Corp. 9,900 409
o Markel Corp. 300 73
Marsh & McLennan Cos., Inc. 43,000 2,050
MBIA, Inc. 8,050 360
Mercury General Corp. 2,900 128
Metlife, Inc. 43,000 1,235
MGIC Investment Corp. 6,300 286
The Midland Co. 1,800 37
o MIIX Group, Inc. 2,400 1
Mony Group, Inc. 1,500 35
o National Western Life Insurance Co.,
Class A 300 30
Nationwide Financial Services, Inc.,
Class A 1,300 37
o Navigators Group, Inc. 1,500 40
NYMAGIC, Inc. 2,100 46
Odyssey Re Holdings Corp. 2,900 61
o Ohio Casualty Corp. 3,000 38
Old Republic International Corp. 10,900 334
o Penn Treaty American Corp. 600 1
Penn-America Group, Inc. 1,400 15
o Philadelphia Consolidated Holding
Co. 1,000 39
The Phoenix Cos., Inc. 4,500 36
PMA Capital Corp., Class A 700 6
The PMI Group, Inc. 8,100 250
Presidential Life Corp. 1,000 8
Principal Financial Group, Inc. 20,900 608
o ProAssurance Corp. 1,670 43
The Progressive Corp. 23,300 1,584
Protective Life Corp. 5,500 158
Prudential Financial, Inc. 32,500 1,039
Radian Group, Inc. 9,202 365
Reinsurance Group of America,
Inc. 2,600 74
RLI Corp. 2,800 83
Safeco Corp. 8,500 327
Safety Insurance Group,
Inc. 1,000 14
See financial notes.
100
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
SCPIE Holdings, Inc. 700 6
Selective Insurance Group, Inc. 1,200 30
o SNTL Corp.-- Litigation Trust
Certificates 1,300 --
St. Paul Cos., Inc. 8,100 278
Stancorp Financial Group, Inc. 2,500 134
State Auto Financial Corp. 1,300 24
o Stewart Information Services
Corp. 3,700 99
Torchmark Corp. 10,600 411
Travelers Property Casualty Corp.,
Class A 20,549 333
Travelers Property Casualty Corp.,
Class B 27,290 443
o Triad Guaranty, Inc. 1,700 68
Trico Bancshares 200 5
o UICI 2,500 30
United Fire & Casualty Co. 500 16
Unitrin, Inc. 3,100 77
UnumProvident Corp. 13,414 154
o USI Holdings Corp. 4,500 47
W.R. Berkley Corp. 6,800 316
Wesco Financial Corp. 200 58
White Mountains Insurance Group,
Inc. 200 75
Zenith National Insurance
Corp. 1,100 28
----------
31,621
MEDIA 4.5%
--------------------------------------------------------
o Acacia Research -- Acacia
Technologies 330 --
o Acme Communications, Inc. 1,900 13
Advanced Marketing Services 900 11
o AMC Entertainment, Inc. 2,900 28
o American Tower Corp., Class A 7,200 48
o AOL Time Warner, Inc. 272,952 3,734
o Arris Group, Inc. 2,600 10
Banta Corp. 2,700 84
Belo Corp., Class A 9,400 212
o Cablevision Systems Corp., NY Group,
Class A 14,300 321
Cadmus Communications Corp. 1,900 17
o California Amplifier, Inc. 1,000 3
o Charter Communications, Inc.,
Class A 11,800 20
o Clear Channel Communications,
Inc. 37,221 1,456
o CNET Networks, Inc. 4,983 18
o Comcast Corp., Class A 57,336 1,830
o Comcast Corp., Special Class A 42,800 1,287
o Consolidated Graphics, Inc. 3,900 75
o Cox Communications, Inc.,
Class A 36,135 1,196
o CTC Communications Group,
Inc. 1,550 --
o Cumulus Media, Inc., Class A 2,600 45
o Daily Journal Corp. 500 12
Dow Jones & Co., Inc. 5,000 198
o Drexler Technology Corp. 1,000 16
The E.W. Scripps Co., Class A 5,000 396
o EchoStar Communications Corp.,
Class A 14,800 443
o Emmis Communications Corp.,
Class A 2,800 53
o Entercom Communications Corp. 3,000 146
o Fox Entertainment Group, Inc.,
Class A 25,350 644
Gannett Co., Inc. 16,500 1,249
o Gaylord Entertainment Co. 1,800 37
o GC Cos., Inc. 500 --
o GenesisIntermedia, Inc. 1,200 --
Gray Television, Inc. 1,600 18
Gray Television, Inc., Class A 1,000 13
Grey Global Group, Inc. 200 130
Harte-Hanks, Inc. 8,100 146
o Hispanic Broadcasting Corp. 6,600 169
Hollinger International, Inc. 5,300 49
o Information Holdings, Inc. 2,200 38
o Insight Communications Co. 2,700 37
John Wiley & Sons, Class A 3,800 93
o Journal Register Co. 3,200 57
Knight-Ridder, Inc. 5,700 368
Lee Enterprises, Inc. 2,500 90
o Liberty Media Corp., Class A 148,377 1,632
o Lifeline Systems, Inc. 2,300 55
See financial notes.
101
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
~o Loews Cineplex Entertainment Corp. 900 --
o Lynch Interactive Corp. 900 19
o Martha Stewart Living Omnimedia,
Class A 1,400 12
McClatchy Co., Class A 7,200 422
The McGraw-Hill Cos., Inc. 17,300 1,010
Media General, Inc., Class A 2,000 110
o Mediacom Communications Corp. 4,600 46
Meredith Corp. 6,000 259
o Metro-Goldwyn-Mayer, Inc. 15,217 170
o Movie Gallery, Inc. 1,525 28
New York Times Co., Class A 9,200 427
o PanAmSat Corp. 15,400 266
o Paxson Communications Corp. 1,900 7
o Pegasus Communications Corp. 3,160 85
o Price Communications Corp. 13,255 162
Pulitzer, Inc. 2,000 93
o Quipp, Inc. 900 9
R.R. Donnelley & Sons Co. 7,700 155
o Radio Unica Communications 300 --
The Reader's Digest Association, Inc.,
Class A 5,300 64
o Saga Communications, Inc.,
Class A 1,250 25
o Salem Communications Corp.,
Class A 900 19
o Scholastic Corp. 2,200 63
o Sinclair Broadcast Group, Inc.,
Class A 2,300 24
o Thomas Nelson, Inc. 800 7
Tribune Co. 18,900 926
o UnitedGlobalCom, Inc., Class A 2,200 9
o USA Interactive 37,927 1,136
o Valassis Communications, Inc. 5,900 157
o Valuevision Media, Inc., Class A 1,400 18
o Viacom, Inc., Class B 109,312 4,745
o Vialta, Inc. 34 --
The Walt Disney Co. 124,650 2,326
Washington Post, Class B 600 437
o Westwood One, Inc. 13,300 464
o XM Satellite Radio Holdings, Inc.,
Class A 3,600 35
----------
30,232
MISCELLANEOUS 0.1%
--------------------------------------------------------
o 1-800-Flowers.com, Inc., Class A 3,700 28
o Braun Consulting 1,300 1
o Breakaway Solutions, Inc. 1,400 --
o Centene Corp. 2,000 64
o Extreme Networks, Inc. 4,500 19
o Five Star Quality Care, Inc. 135 --
o FTD, Inc., Class A 1,500 36
o Keynote Systems, Inc. 1,000 10
o Lin TV Corp., Class A 3,300 79
o Mail-Well, Inc. 1,300 4
o Management Network Group,
Inc. 2,400 3
Mine Safety Appliances Co. 900 34
o Occam Networks, Inc. 1,900 --
o Radio One, Inc., Class A 9,500 148
Regal Entertainment Group,
Class A 2,200 43
o Wilson Greatbatch Technologies,
Inc. 1,100 36
----------
505
MISCELLANEOUS FINANCE 7.7%
--------------------------------------------------------
1st Source Corp. 1,571 21
o A.B. Watley Group, Inc. 1,300 --
A.G. Edwards, Inc. 3,900 116
Actrade Financial Technologies Ltd. 1,000 1
Advanta Corp., Class A 7,400 53
o Affiliated Managers Group 1,200 56
Alliance Capital Management
Holding L.P. 4,000 128
Allied Capital Corp. 4,515 96
Amcore Financial, Inc. 1,200 28
American Capital Strategies Ltd. 2,600 63
American Express Co. 81,650 3,091
American Home Mortgage
Holdings, Inc. 2,000 24
o AmeriCredit Corp. 3,800 26
o Ameritrade Holding Corp. 6,300 32
Anworth Mortgage Asset Corp. 1,000 14
o Asta Funding, Inc. 1,000 20
Astoria Financial Corp. 4,500 113
See financial notes.
102
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Bank of the Ozarks, Inc. 1,400 48
o Bankunited Financial Corp.,
Class A 2,200 42
Banner Corp. 1,200 20
o Bay View Capital Corp. 5,061 29
The Bear Stearns Cos., Inc. 13,620 910
o Berkshire Hathaway, Inc.,
Class A 92 6,423
Berkshire Hills Bancorp, Inc. 1,400 37
o The BISYS Group, Inc. 6,000 101
o Blackrock, Inc. 2,900 132
o BOK Financial Corp. 3,337 120
Camco Financial Corp. 700 10
o Capital Corp. of the West 1,050 27
Capital One Financial Corp. 10,600 444
Cathay Bancorp., Inc. 1,600 70
/ The Charles Schwab Corp. 63,820 551
Charter Municipal Mortgage
Acceptance Co. 1,400 27
Charter One Financial, Inc. 14,125 410
Chicago Mercantile Exchange 1,800 102
CIT Group, Inc. 11,600 236
=(6)Citigroup, Inc. 320,436 12,577
Coastal Bancorp, Inc. 800 24
Coastal Financial Corp. 1,886 24
Commercial Federal Corp. 2,300 49
o CompuCredit Corp. 1,900 14
Countrywide Financial Corp. 7,900 534
CPB, Inc. 900 23
o Credit Acceptance Corp. 2,400 19
CVB Financial Corp. 2,166 44
Downey Financial Corp. 2,000 88
o DVI, Inc. 1,200 11
o E*TRADE Group, Inc. 15,035 83
Eaton Vance Corp. 3,800 113
o eSpeed, Inc., Class A 3,300 43
Fannie Mae 62,900 4,553
Federated Investors, Inc., Class B 6,350 173
o Financial Federal Corp. 800 18
First Financial Corp. 300 15
First Financial Holdings, Inc. 1,400 38
First Indiana Corp. 1,375 23
First Niagra Financial Group, Inc. 3,104 38
First Sentinel Bancorp., Inc. 2,300 35
Flagstar Bancorp., Inc. 2,250 74
Flushing Financial Corp. 1,200 23
Franklin Resources, Inc. 15,100 527
Freddie Mac 44,500 2,577
o Friedman Billings Ramsey Group, Inc.,
Class A 13,180 145
o Gabelli Asset Management, Inc.,
Class A 700 22
Glacier Bancorp, Inc. 500 14
Goldman Sachs Group, Inc. 28,900 2,193
Greater Bay Bancorp 2,906 46
o Hawthorne Financial Corp. 700 22
Heritage Financial Corp. 700 15
Hudson River Bancorp 1,600 39
IBERIABANK Corp. 700 30
Independent Bank Corp. Michigan 1,488 35
IndyMac Bancorp, Inc. 3,400 76
o Instinet Group, Inc. 1,200 4
International Bancshares Corp. 1,502 66
Interpool, Inc. 1,200 18
o Investment Technology Group, Inc. 2,250 32
Investors Financial Services Corp. 3,000 65
o Itla Capital Corp. 700 25
Janus Capital Group, Inc. 10,800 150
Jefferies Group, Inc. 800 31
Klamath First Bancorp, Inc. 2,700 46
o Knight Trading Group, Inc. 6,700 34
LaBranche & Co., Inc. 2,400 40
Legg Mason, Inc. 4,200 228
Lehman Brothers Holdings, Inc. 16,500 1,039
o Local Financial Corp. 2,000 30
MB Financial, Inc. 1,200 45
MBNA Corp. 97,650 1,846
MCG Capital Corp. 2,200 24
Merrill Lynch & Co., Inc. 50,800 2,085
Metris Cos., Inc. 3,000 11
MicroFinancial, Inc. 1,900 2
Morgan Stanley 67,100 3,003
MutualFirst Financial, Inc. 2,000 45
o NCO Portfolio Management, Inc. 2,600 15
See financial notes.
103
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)--Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
New Century Financial Corp. 2,400 88
o NextCard, Inc. 2,600 --
Northrim BanCorp, Inc. 2,500 38
Northway Financial, Inc. 200 6
Northwest Bancorp, Inc. 2,500 41
Nueberger Berman, Inc. 3,950 121
Nuveen Investments, Inc.,
Class A 5,300 130
Oak Hill Financial, Inc. 1,000 24
o Ocwen Financial Corp. 2,920 10
PAB Bankshares, Inc. 700 7
Pacific Capital Bancorp. 2,133 70
Peoples Financial Corp. 3,000 42
The Peoples Holding Co. 500 22
o Petrocorp, Inc. 3,000 33
o Portfolio Recovery Associates, Inc. 2,000 55
Provident Financial Holdings 500 14
R&G Financial Corp., Class B 1,700 46
Raymond James Financial, Inc. 2,100 60
Redwood Trust, Inc. 2,500 83
Resource America, Inc., Class A 2,000 17
o Saxon Capital, Inc. 1,000 15
o Siebert Financial Corp. 2,900 8
SLM Corp. 9,600 1,075
o SoundView Technology Group, Inc. 3,000 5
Sovereign Bancorp., Inc. 12,460 192
State Financial Services Corp.,
Class A 2,000 41
Staten Island Bancorp., Inc. 2,900 50
o Sterling Financial Corp. 770 18
Student Loan Corp. 1,700 182
SWS Group, Inc. 1,141 19
T. Rowe Price Group, Inc. 6,200 189
TCF Financial Corp. 4,300 170
TF Financial Corp. 700 18
Value Line, Inc. 300 15
W Holding Co., Inc. 2,100 41
Waddell & Reed Financial, Inc.,
Class A 4,750 95
Washington Federal, Inc. 4,064 89
Washington Mutual, Inc. 59,078 2,334
Webster Financial Corp. 3,012 113
Westwood Holdings Group, Inc. 285 4
o WFS Financial, Inc. 1,600 36
o World Acceptance Corp. 2,500 27
----------
52,525
NON-FERROUS METALS 0.3%
--------------------------------------------------------
o A.M. Castle & Co. 1,500 7
Alcoa, Inc. 41,464 951
Ampco-Pittsburgh Corp. 2,800 37
o Brush Engineered Materials, Inc. 1,100 6
Century Aluminum Co. 600 4
CIRCOR International, Inc. 1,250 20
Commercial Metals Co. 1,000 16
Commonwealth Industries, Inc. 1,300 6
o Encore Wire Corp. 500 4
Engelhard Corp. 6,800 167
Freeport-McMoran Copper & Gold, Inc.,
Class B 11,300 196
o Imco Recycling, Inc. 2,400 17
o Kaiser Aluminum Corp. 2,000 --
Kaydon Corp. 3,300 74
o Metals USA, Inc. 1,000 --
Minerals Technologies, Inc. 1,600 71
o Mueller Industries, Inc. 1,700 43
o Phelps Dodge Corp. 4,830 151
Reliance Steel & Aluminum Co. 1,250 21
o RTI International Metals, Inc. 4,000 40
Southern Peru Copper Corp. 5,200 81
o Stillwater Mining Co. 1,300 4
o Titanium Metals Corp. 180 4
o Wolverine Tube, Inc. 1,000 5
----------
1,925
OIL: DOMESTIC 0.9%
--------------------------------------------------------
o 3TEC Energy Corp. 1,200 19
Amerada Hess Corp. 5,400 244
Ashland, Inc. 4,000 119
o CAL Dive International, Inc. 1,500 24
o Cimarex Energy Co. 3,122 61
ConocoPhillips 39,698 1,997
Consol Energy, Inc. 3,800 65
o CREDO Petroleum Corp. 1,200 13
Diamond Offshore Drilling 6,400 119
See financial notes.
104
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Frontier Oil Corp. 3,600 61
o Global Industries Ltd. 4,400 20
o Gulf Island Fabrication, Inc. 2,800 47
o Harvest Natural Resources, Inc. 6,000 31
Holly Corp. 2,000 57
o Houston Exploration Co. 5,400 151
Kerr-McGee Corp. 10,519 443
o Magnum Hunter Resources, Inc. 1,750 10
Marathon Oil Corp. 20,000 455
o Meridian Resource Corp. 3,100 3
Murphy Oil Corp. 4,000 167
o National-Oilwell, Inc. 5,569 117
o Newfield Exploration Co. 3,700 127
o Nuevo Energy Co. 2,300 31
Patina Oil & Gas Corp. 2,500 86
o Pioneer Natural Resources Co. 6,400 153
Pogo Producing Co. 6,300 249
o Remington Oil & Gas Corp. 1,400 22
o Spinnaker Exploration Co. 900 19
St. Mary Land & Exploration Co. 1,200 31
o Stone Energy Corp. 976 34
Sunoco Logistics Partners L.P. 2,000 57
Sunoco, Inc. 5,500 205
o Superior Energy Services, Inc. 2,400 22
o Syntroleum Corp. 4,000 9
TEPPCO Partners L.P. 4,000 130
o Tesoro Petroleum Corp. 1,800 14
o Transmontaigne, Inc. 1,600 7
Transocean, Inc. 20,731 395
Unocal Corp. 13,507 374
Vintage Petroleum, Inc. 10,500 103
----------
6,291
OIL: INTERNATIONAL 2.9%
--------------------------------------------------------
ChevronTexaco Corp. 66,817 4,197
=(5)Exxon Mobil Corp. 423,216 14,897
GlobalSantaFe Corp. 19,855 420
----------
19,514
OPTICAL & PHOTO 0.1%
--------------------------------------------------------
o August Technology Corp. 1,300 5
CPI Corp. 400 5
Eastman Kodak Co. 26,000 778
o Meade Instruments Corp. 800 2
o Oakley, Inc. 2,700 28
o Ocular Sciences, Inc. 1,500 22
o Polaroid Corp. 3,800 --
o Robotic Vision Systems, Inc. 1,000 --
o Zomax, Inc. 2,000 7
o Zygo Corp. 500 4
----------
851
PAPER & FOREST PRODUCTS 0.8%
--------------------------------------------------------
Boise Cascade Corp. 2,800 64
Bowater, Inc. 2,300 89
o Buckeye Technologies, Inc. 1,200 6
o Caraustar Industries, Inc. 1,300 9
Chesapeake Corp. 1,000 18
CSS Industries, Inc. 600 22
Deltic Timber Corp. 700 17
o Fibermark, Inc. 1,100 6
Georgia-Pacific Corp. 44,365 685
Glatfelter 2,200 25
International Paper Co. 32,804 1,173
Kimberly-Clark Corp. 33,139 1,649
Longview Fibre Co. 1,800 14
o Louisiana-Pacific Corp. 4,800 39
o Lydall, Inc. 1,400 13
MeadWestvaco Corp. 8,674 205
Potlatch Corp. 13,400 320
Rayonier, Inc. 1,000 50
Rock-Tennessee Co., Class A 2,000 27
o Smurfit-Stone Container Corp. 10,900 153
Temple-Inland, Inc. 1,900 86
Universal Forest Products, Inc. 1,800 32
Wausau-Mosinee Paper Corp. 4,700 50
Weyerhaeuser Co. 8,850 439
----------
5,191
PRODUCER GOODS & MANUFACTURING 4.6%
--------------------------------------------------------
o Aaon, Inc. 1,575 22
o Actuant Corp., Class A 1,420 53
Acuity Brands, Inc. 17,200 262
o Advanced Energy Industries, Inc. 900 9
See financial notes.
105
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)--Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Aeroflex, Inc. 2,400 13
o AGCO Corp. 3,762 69
Alamo Group, Inc. 500 6
Albany International Corp.,
Class A 3,918 93
o American Standard Cos., Inc. 3,800 271
Ametek, Inc. 1,600 60
Applied Industrial Technologies,
Inc. 2,900 54
Aptargroup, Inc. 1,700 59
o Astec Industries, Inc. 500 4
Avery Dennison Corp. 6,200 329
o AZZ, Inc. 700 7
Baldor Electric, Co. 1,300 29
Barnes Group, Inc. 700 15
BHA Group Holdings, Inc. 1,500 32
o Blount International, Inc. 1,200 7
Blyth, Inc. 2,300 61
Briggs & Stratton 3,000 135
o Capstone Turbine Corp. 2,600 2
Caterpillar, Inc. 16,700 878
o Cognex Corp. 1,900 42
o Columbus McKinnon Corp. 2,400 4
Cooper Industries Ltd., Class A 7,200 267
o Corning, Inc. 38,407 208
o Cuno, Inc. 1,300 47
o Daisytek International Corp. 1,700 1
Deere & Co. 13,200 581
Dover Corp. 12,400 356
o DT Industries, Inc. 1,200 1
Emerson Electric Co. 29,500 1,496
o Encompass Services Corp. 2,525 --
Federal Signal Corp. 2,800 48
o Flow International Corp. 900 1
o Flowserve Corp. 1,900 29
Franklin Electric Co., Inc. 400 21
o Gardner Denver, Inc. 2,700 54
=(1) General Electric Co. 621,066 18,290
o Global Power Equipment Group,
Inc. 1,000 6
The Gorman-Rupp Co. 800 16
Graco, Inc. 4,675 144
o GrafTech International Ltd. 2,100 8
o Hanover Compressor Co. 3,100 26
Harbor Global Co. Ltd. 160 1
Hardinge, Inc. 1,800 12
Harsco Corp. 3,100 107
Herman Miller, Inc. 5,700 100
o Hexcel Corp. 2,000 8
HON Industries, Inc. 4,000 118
Honeywell International, Inc. 46,962 1,108
Hubbell, Inc., Class B 3,800 122
Hughes Supply, Inc. 1,300 36
o Hydril Co. 2,500 60
IDEX Corp. 2,100 67
Illinois Tool Works, Inc. 18,850 1,206
Ingersoll-Rand Co., Class A 11,200 494
o Ionics, Inc. 400 8
o Jarden Corp. 3,600 106
JLG Industries, Inc. 1,800 10
Johnson Controls, Inc. 5,000 411
o Joy Global, Inc. 8,600 106
o Juno Lighting, Inc. 1,429 18
o Kadant, Inc. 921 15
Kennametal, Inc. 1,500 47
Knape & Vogt Manufacturing Co. 2,200 24
o Ladish Co., Inc. 1,300 6
Lennox International, Inc. 5,271 78
Libbey, Inc. 1,500 34
Lincoln Electric Holdings, Inc. 1,900 36
o Lone Star Technologies, Inc. 1,700 36
o Magnetek, Inc. 1,500 3
Manitowoc Co., Inc. 1,300 24
Matthews International Corp., Class A 1,900 45
o Middleby Corp. 3,500 41
Milacron, Inc. 2,300 12
o Millipore Corp. 2,600 89
o MSC Industrial Direct Co.,
Class A 4,300 80
NACCO Industries, Inc., Class A 1,300 68
o NATCO Group, Inc., Class A 1,200 7
NN, Inc. 1,800 19
Nordson Corp. 4,000 101
See financial notes.
106
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Oceaneering International, Inc. 1,300 29
Pall Corp. 5,900 125
o Park-Ohio Holdings Corp. 2,600 12
Parker Hannifin Corp. 6,500 264
Penn Engineering & Manufacturing
Corp. 1,000 13
Pentair, Inc. 7,200 277
Precision Castparts Corp. 2,300 64
o Presstek, Inc. 1,100 5
Regal Beloit 1,200 21
o Research Frontiers, Inc. 800 6
Robbins & Myers, Inc. 1,400 24
o ROHN Industries, Inc. 1,800 1
Roper Industries, Inc. 1,500 46
o Safeguard Scientifics, Inc. 3,300 6
Sauer-Danfoss, Inc. 2,300 21
Snap-On, Inc. 3,000 88
o SPS Technologies, Inc. 1,200 32
Standex International Corp. 3,000 63
Steelcase, Inc., Class A 1,000 10
Stewart & Stevenson Services 1,000 13
Tecumseh Products Co., Class A 700 28
Teleflex, Inc. 1,800 69
Tennant Co. 600 20
o Terex Corp. 1,200 20
The Timken Co. 7,300 129
Trinity Industries, Inc. 1,100 18
o U.S. Industries, Inc. 2,000 9
o Ultratech Stepper, Inc. 1,300 18
o Uniroyal Technology Corp. 1,100 --
o Universal Compression Holdings, Inc. 400 7
W.W. Grainger, Inc. 5,300 245
Watsco, Inc. 3,400 53
Watts Industries, Inc., Class A 1,000 16
Woodward Governor Co. 500 19
X-Rite, Inc. 2,000 20
York International Corp. 3,800 91
o Zebra Technologies Corp.,
Class A 1,500 100
----------
30,961
RAILROAD & SHIPPING 0.4%
--------------------------------------------------------
Alexander & Baldwin, Inc. 5,600 150
Burlington Northern Santa Fe Corp. 24,300 684
CSX Corp. 11,400 365
Florida East Coast Industries,
Class A 3,600 93
GATX Corp. 2,000 38
o Greenbrier Cos., Inc. 1,600 13
o Gulfmark Offshore, Inc. 1,600 21
o Kansas City Southern 2,550 28
Maritrans, Inc. 2,500 35
Norfolk Southern Corp. 17,900 380
Overseas Shipholding Group 1,200 23
o RailAmerica, Inc. 1,466 11
o Todd Shipyards Corp. 1,000 14
o Transport Corp. of America 1,100 6
Union Pacific Corp. 13,500 803
----------
2,664
REAL PROPERTY 1.8%
--------------------------------------------------------
o Alexander's, Inc. 700 51
Alexandria Real Estate Equities, Inc. 2,500 106
AMB Property Corp. 4,800 131
American Land Lease, Inc. 1,700 27
American Mortgage Acceptance Co. 1,500 23
o American Real Estate Partners L.P. 2,300 25
o American Realty Investors, Inc. 1,037 13
o American Retirement Corp. 700 1
AMLI Residential Properties 1,000 23
Annaly Mortgage Management, Inc. 4,400 84
Anthracite Capital, Inc. 4,900 58
Apartment Investment & Management Co.,
Class A 7,400 279
Archstone-Smith Trust 11,285 257
Arden Realty, Inc. 3,500 83
AvalonBay Communities, Inc. 4,000 160
o Avatar Holdings, Inc. 700 17
Bedford Property Investors 2,900 77
Boston Properties, Inc. 7,400 290
Brandywine Realty Trust 3,000 67
BRE Properties, Class A 2,500 77
Burnham Pacific Properties, Inc. 2,400 1
Camden Property Trust 2,300 80
See financial notes.
107
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Capital Automotive Real Estate
Investment Trust 3,300 85
Capstead Mortgage Corp. 2,240 25
CarrAmerica Realty Corp. 2,900 76
o Catellus Development Corp. 4,100 87
CBL & Associates Properties, Inc. 2,200 93
Centerpoint Properties Trust 1,800 104
Chateau Communities, Inc. 3,300 71
Chelsea Property Group, Inc. 2,000 79
Colonial Properties Trust 2,500 85
Commercial Net Lease Realty 3,320 54
Consolidated-Tomoka Land Co. 900 22
Cornerstone Realty Income Trust, Inc. 2,200 16
Corporate Office Properties Trust SBI 3,500 53
Correctional Properties Trust 1,600 35
o Corrections Corp. of America 3,828 81
Cousins Properties, Inc. 2,700 71
Crescent Real Estate Equity Co. 5,400 77
Developers Diversified Realty Corp. 5,112 129
Duke Realty Corp. 8,490 233
Eastgroup Properties 3,400 88
Entertainment Properties Trust 2,700 73
Equity Inns, Inc. 2,700 18
Equity Office Properties Trust 25,738 668
Equity One, Inc. 3,600 57
Equity Residential 16,700 433
Essex Property Trust, Inc. 2,600 143
Federal Realty Investment Trust 2,700 83
FelCor Lodging Trust, Inc. 3,200 23
First Industrial Realty Trust 2,600 73
Forest City Enterprises, Inc.,
Class A 2,700 99
Gables Residential Trust 3,500 99
General Growth Properties, Inc. 5,200 289
Getty Realty Corp. 2,000 40
Glenborough Realty Trust, Inc. 2,900 48
Glimcher Realty Trust 3,800 79
o Golf Trust of America, Inc. L.P. 2,400 5
Great Lakes Real Estate Investment
Trust 1,000 15
Health Care Property Investors,
Inc. 3,324 124
Health Care Real Estate Investment
Trust, Inc. 2,700 77
Healthcare Realty Trust, Inc. 2,400 66
Heritage Property Investment
Trust 2,000 51
Highwoods Properties, Inc. 3,100 63
Home Properties of NY, Inc. 2,500 87
Hospitality Properties Trust 3,500 101
HRPT Properties Trust 7,100 64
IMPAC Mortgage Holdings, Inc. 4,800 64
Innkeepers USA Trust 1,500 11
o Insignia Financial Group, Inc. 3,700 41
iStar Financial, Inc. 5,390 161
o Jones Lang LaSalle, Inc. 2,300 35
Keystone Property Trust 1,300 22
Kilroy Realty Corp. 2,300 57
Kimco Realty Corp. 6,850 248
Koger Equity, Inc. 2,700 43
Kramont Realty Trust 1,400 21
LaSalle Hotel Properties 1,000 14
Lexington Corp. Properties Trust 3,000 52
Liberty Property Trust 4,300 135
LNR Property Corp. 1,200 42
LTC Properties, Inc. 2,800 22
The Macerich Co. 2,700 89
Mack-Cali Realty Corp. 3,400 107
Manufactured Home Communities,
Inc. 3,000 96
Meristar Hospitality Corp. 2,200 9
Mid Atlanic Realty Trust 2,000 37
Mid-America Apartment Communities,
Inc. 2,500 64
The Mills Corp. 2,400 77
National Health Investors, Inc. 3,100 50
National Health Realty, Inc. 2,300 35
Nationwide Health Properties, Inc. 5,100 71
New Plan Excel Realty Trust 6,000 120
Newcastle Investment Corp. 2,200 38
Newhall Land & Farming Co. L.P. 2,500 72
Novastar Financial, Inc. 1,000 43
o Omega Healthcare Investors, Inc. 2,784 8
Pan Pacific Retail Properties, Inc. 2,201 86
See financial notes.
108
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Parkway Properties, Inc. 500 19
o Pinnacle Holdings, Inc. 2,000 --
Plum Creek Timber Co., Inc. 10,547 245
PMC Commercial Trust 1,500 20
Post Properties, Inc. 2,200 57
Prentiss Properties Trust 2,700 74
o Price Legacy Corp. 242 1
Prologis 10,574 272
PS Business Parks, Inc. 3,000 93
Public Storage, Inc. 7,400 238
RAIT Investment Trust 3,300 74
Ramco-Gershenson Properties 1,400 32
Realty Income Corp. 2,300 87
Reckson Associates Realty Corp. 2,800 53
Regency Centers Corp. 3,200 106
RFS Hotel Investors, Inc. 1,100 12
The Rouse Co. 5,500 191
Saul Centers, Inc. 2,100 50
Senior Housing Properties Trust 4,950 62
Shelbourne Properties I, Inc. 500 11
Shelbourne Properties III, Inc. 500 11
Shurgard Storage Centers, Inc.,
Class A 3,000 98
Simon Property Group, Inc. 11,400 419
SL Green Realty Corp. 1,700 55
Sovran Self Storage, Inc. 800 24
The St. Joe Co. 5,300 155
Summit Properties, Inc. 3,300 64
Sun Communities, Inc. 3,000 116
Tanger Factory Outlet Centers 800 26
o Tarragon Realty Investors, Inc. 2,359 37
Taubman Centers, Inc. 1,600 28
Thornburg Mortgage, Inc. 2,800 63
The Town & Country Trust 1,000 22
o Trammell Crow Co. 1,300 11
Trizec Properties, Inc. 7,200 67
United Dominion Realty Trust, Inc. 5,900 99
United Mobile Homes, Inc. 1,600 23
Universal Health Realty Income 900 24
Urstadt Biddle Properties, Inc. 500 6
Urstadt Biddle Properties, Inc.,
Class A 1,000 12
US Restaurant Properties, Inc. 1,000 15
Ventas, Inc. 5,800 75
Vornado Realty Trust 7,000 266
W.P. Carey & Co. LLC 1,600 42
Washington Real Estate Investment
Trust 3,100 81
Weingarten Realty Investment 3,650 144
o Wellsford Real Properties, Inc. 1,400 22
----------
12,044
RETAIL 6.2%
--------------------------------------------------------
o 7-Eleven, Inc. 5,000 45
o 99 Cents Only Stores 3,066 90
o A.C. Moore Arts & Crafts, Inc. 1,400 24
Albertson's, Inc. 23,468 466
o Alloy, Inc. 3,100 19
o Amazon.com, Inc. 21,200 608
o American Eagle Outfitters, Inc. 8,150 143
o AnnTaylor Stores Corp. 6,550 155
o Arden Group, Inc., Class A 600 36
o AutoZone, Inc. 8,900 719
o Barnes & Noble, Inc. 3,100 61
o Bed, Bath & Beyond, Inc. 16,000 632
o Best Buy Co., Inc. 19,650 680
o Big Lots, Inc. 4,400 55
o BJ's Wholesale Club, Inc. 3,100 44
Blair Corp. 1,500 33
Blockbuster, Inc., Class A 6,900 123
o Borders Group, Inc. 3,900 62
o Brightpoint, Inc. 5,000 76
o Brookstone, Inc. 3,300 54
Burlington Coat Factory Warehouse
Corp. 2,500 44
Casey's General Stores, Inc. 2,600 34
Cash America International, Inc. 2,500 26
The Cato Corp., Class A 1,200 25
o Central Garden & Pet Co. 6,000 145
o Charming Shoppes, Inc. 3,700 17
o Chindex International, Inc. 550 6
Circuit City Stores, Inc. 12,500 72
Claire's Stores, Inc. 4,800 125
See financial notes.
109
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Coldwater Creek, Inc. 1,050 10
o Cole National Corp. 1,300 11
o Cost Plus, Inc. 700 22
o Costco Wholesale Corp. 19,600 679
CVS Corp. 15,500 375
DEB Shops, Inc. 1,600 31
o DGSE Cos., Inc. 700 1
o Dick's Sporting Goods, Inc. 3,000 90
Dillards, Inc., Class A 4,000 56
Dollar General Corp. 21,275 309
o Dollar Tree Stores, Inc. 5,150 131
o Duane Reade, Inc. 700 9
o Duckwall-ALCO Stores, Inc. 1,800 17
o Enesco Group, Inc. 1,100 9
~ EToys, Inc. 3,500 --
Family Dollar Stores, Inc. 7,700 263
o Federated Department Stores, Inc. 22,400 686
o The Finish Line, Class A 1,800 30
Fred's, Inc. 2,175 71
Friedman's, Inc., Class A 1,500 17
o GameStop Corp. 500 6
o The Gap, Inc. 54,400 905
o Great Atlantic & Pacific Tea Co. 2,200 13
o Guitar Center, Inc. 1,700 39
Home Depot, Inc. 142,000 3,994
o HOT Topic, Inc. 4,200 103
Inergy L.P. 1,000 34
o Insight Enterprises, Inc. 2,150 16
J.C. Penney Co., Inc. Holding Co. 16,600 283
o Kirkland's, Inc. 1,000 15
o Kohl's Corp. 17,000 966
o Kroger Co. 48,300 691
o Lillian Vernon Corp. 500 4
Limited Brands, Inc. 27,644 402
Longs Drug Stores Corp. 1,800 28
Lowe's Cos., Inc. 47,700 2,094
The May Department Stores Co. 13,500 292
o Michaels Stores, Inc. 2,900 91
o The Neiman Marcus Group, Inc.,
Class A 1,700 55
Nordstrom, Inc. 5,800 101
o Office Depot, Inc. 19,300 244
o OfficeMax, Inc. 6,700 38
o Party City Corp. 1,300 13
o Pathmark Stores, Inc. 1,400 10
o Payless Shoesource, Inc. 2,406 38
o PC Connection, Inc. 3,000 21
Pep Boys-Manny, Moe & Jack 2,500 21
o PETsMART, Inc. 7,600 115
Pier 1 Imports, Inc. 3,900 72
o Pricesmart, Inc. 200 3
RadioShack Corp. 11,600 275
o Rite Aid Corp. 19,900 68
Ross Stores, Inc. 4,200 159
Ruddick Corp. 3,100 41
o Safeway, Inc. 26,900 447
o Saks, Inc. 7,500 67
o School Specialty, Inc. 1,600 30
Sears, Roebuck & Co. 18,200 516
o ShopKo Stores, Inc. 8,900 107
o Smart & Final, Inc. 2,700 12
o Smith & Wollensky Restaurant Group,
Inc. 900 4
o Spiegel, Inc., Class A 5,000 --
o Stage Stores, Inc. 1,200 25
o Staples, Inc. 29,200 556
Target Corp. 51,900 1,736
Tiffany & Co. 6,500 180
TJX Cos., Inc. 32,400 624
o Toys `R' Us, Inc. 8,300 85
o Tractor Supply Co. 2,000 85
o Tuesday Morning Corp. 2,500 58
Unifirst Corp. 3,900 64
o United Stationers, Inc. 1,400 38
o Value City Department Stores, Inc. 700 1
=(3) Wal-Mart Stores, Inc. 276,700 15,584
Walgreen Co. 62,600 1,932
Weis Markets, Inc. 1,700 54
o West Marine, Inc. 1,100 18
o Whitehall Jewellers, Inc. 1,800 16
o Williams-Sonoma, Inc. 6,200 160
o Winmark Corp. 1,200 16
Winn-Dixie Stores, Inc. 10,000 125
o Yum! Brands, Inc. 19,500 482
o Zale Corp. 4,700 164
----------
41,872
See financial notes.
110
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
STEEL 0.1%
--------------------------------------------------------
o AK Steel Holding Corp. 4,027 12
Allegheny Technologies, Inc. 3,650 15
Intermet Corp. 4,100 15
o Material Sciences Corp. 4,000 32
o Maverick Tube Corp. 1,000 18
Nucor Corp. 3,000 123
Quanex Corp. 2,500 72
Roanoke Electric Steel Corp. 800 6
Ryerson Tull, Inc. 1,600 12
Schnitzer Steel Industries, Inc.,
Class A 3,500 100
o The Shaw Group, Inc. 2,000 23
o Steel Dynamics, Inc. 1,700 21
Steel Technologies, Inc. 700 8
United States Steel Corp. 10,300 147
Valmont Industries, Inc. 2,400 46
Worthington Industries, Inc. 3,700 50
----------
700
TELEPHONE 3.1%
--------------------------------------------------------
o ACT Teleconferencing, Inc. 1,100 2
o Adtran, Inc. 1,600 65
Advanced Switching Communications,
Inc. 1,800 --
o Alaska Communications Systems Group,
Inc. 2,700 7
Alltel Corp. 19,935 934
Applied Signal Technology, Inc. 5,000 72
AT&T Corp. 45,447 775
o AT&T Latin America Corp., Class A 2,100 --
o AT&T Wireless Services, Inc. 131,734 851
Atlantic Tele-Network, Inc. 1,300 22
o Avaya, Inc. 11,385 44
BellSouth Corp. 114,450 2,917
o Broadwing, Inc. 8,568 40
o Centennial Communications Corp. 3,500 7
o Centillium Communications, Inc. 1,000 6
CenturyTel, Inc. 10,500 309
o Citizens Communications Co. 19,500 213
o ClearOne Communications, Inc. 1,000 1
o Commonwealth Telephone Enterprises,
Inc. 9,400 374
o Copper Mountain Networks, Inc. 200 1
o CoSine Communications, Inc. 730 4
o Crown Castle International Corp. 8,900 57
D&E Communications, Inc. 2,000 22
o Ditech Communications Corp. 1,600 7
o First Virtual Communications, Inc. 1,200 1
o Goamerica, Inc. 1,800 1
Hickory Tech Corp. 1,100 10
o Inet Technologies, Inc. 2,200 18
o Integrated Telecom Express, Inc. 1,800 4
Inter-Tel, Inc. 6,000 99
o Interdigital Communications Corp. 2,000 45
o Intrado, Inc. 1,100 11
o ITC Deltacom, Inc. 13 --
o ITXC Corp. 1,600 3
o j2 Global Communications, Inc. 1,000 30
o Level 3 Communications, Inc. 13,900 79
o Lexar Media, Inc. 1,400 7
o Lexicon Genetics, Inc. 1,900 9
o Mastec, Inc. 1,850 4
o MCK Communications, Inc. 1,600 3
~ McLeodUSA, Inc., Class A
Escrow Security 21,892 --
o Metro One Telecommunications 4,400 28
o Mpower Holding Corp. 27 --
~ NEON Communications, Inc. 1,700 --
o Net2Phone, Inc. 1,600 7
o Network Plus Corp. 2,000 --
o Nextel Communications, Inc.,
Class A 59,100 874
o Nextel Partners, Inc., Class A 6,700 39
o NMS Communications Corp. 1,500 1
North Pittsburgh Systems, Inc. 3,500 48
o Novatel Wireless, Inc. 160 --
o Nucentrix Broadband Networks, Inc. 2,100 4
o OmniSky Corp. 2,900 --
o Openwave Systems, Inc. 8,315 14
o Pac-West Telecomm, Inc. 1,900 1
o Peco II, Inc. 1,200 1
o PentaStar Communications, Inc. 600 --
o Qwest Communications International,
Inc. 68,237 257
See financial notes.
111
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o RCN Corp. 2,300 2
o SBA Communications Corp. 1,300 2
SBC Communications, Inc. 206,012 4,812
Scientific-Atlanta, Inc. 11,900 193
o Somera Communications, Inc. 1,900 2
Sprint Corp. (FON Group) 72,700 837
o Sprint Corp. (PCS Group) 42,100 147
o Stratex Networks, Inc. 2,800 7
o Telecommunication Systems, Inc.,
Class A 1,300 2
Telephone & Data Systems, Inc. 2,300 99
~o Teligent, Inc., Class A 1,000 --
o Tellium, Inc. 4,000 2
o Time Warner Telecom, Inc.,
Class A 2,000 7
o Turnstone Systems, Inc. 1,600 4
o U.S. Cellular Corp. 3,600 87
o U.S. Wireless Corp. 400 --
o Utstarcom, Inc. 1,200 26
Verizon Communications, Inc. 169,786 6,347
~o Viatel, Inc. 2,111 --
Warwick Valley Telephone Co. 200 16
o West Corp. 3,500 79
o Westell Technologies, Inc.,
Class A 2,560 11
o WJ Communications, Inc. 2,300 2
----------
21,012
TOBACCO 0.1%
--------------------------------------------------------
R.J. Reynolds Tobacco Holdings, Inc. 4,832 136
Schweitzer-Mauduit International,
Inc. 5,800 127
Standard Commercial Corp. 1,100 18
Universal Corp. 3,800 148
UST, Inc. 7,700 241
----------
670
TRAVEL & RECREATION 0.7%
--------------------------------------------------------
o Alliance Gaming Corp. 3,000 48
o Alpha Hospitality Corp. 500 5
o Ambassadors Group, Inc. 1,700 21
o Amerco, Inc. 900 7
o American Classic Voyages Co. 900 --
o Ameristar Casinos, Inc. 1,700 23
o Argosy Gaming Co. 1,600 33
o Aztar Corp. 1,900 27
o Bally Total Fitness Holding Corp. 1,300 8
o Boca Resorts, Inc., Class A 1,800 22
Brunswick Corp. 13,900 303
Callaway Golf Co. 3,600 50
Carnival Corp. 26,400 728
Central Parking Corp. 1,600 16
o Choice Hotels International, Inc. 3,400 83
o Dollar Thrifty Automotive Group,
Inc. 1,000 16
Dover Downs Gaming & Entertainment,
Inc. 1,480 15
o Expedia, Inc. 2,200 127
o Extended Stay America, Inc. 3,800 45
o Harrah's Entertainment, Inc. 9,900 390
Hilton Hotels Corp. 22,426 299
o Host Marriott Corp. 13,900 107
o Hotels.com, Class A 1,800 129
o Interstate Hotels & Resorts, Inc. 82 --
o K2, Inc. 1,700 16
o Lakes Entertainment, Inc. 900 5
o Mandalay Resort Group 6,600 174
Marine Products Corp. 180 2
o MarineMax, Inc. 800 9
Marriott International, Inc.,
Class A 12,700 456
o MGM MIRAGE 12,300 350
o MTR Gaming Group, Inc. 2,300 19
o Multimedia Games, Inc. 750 19
o Navigant International, Inc. 4,300 46
o Park Place Entertainment Corp. 15,800 117
o Prime Hospitality Corp. 1,800 12
o RC2 Corp. 2,200 35
See financial notes.
112
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o ResortQuest International, Inc. 3,000 9
Royal Caribbean Cruises Ltd. 12,800 238
Sabre Holdings Corp. 7,501 157
o Scientific Games Corp., Class A 3,000 20
o Shuffle Master, Inc. 1,250 29
o Six Flags, Inc. 3,500 21
Speedway Motorsports, Inc. 2,300 56
o The Sports Authority, Inc. 1,000 9
Starwood Hotels & Resorts Worldwide,
Inc. 8,730 234
o Station Casinos, Inc. 4,650 100
o Vail Resorts, Inc. 1,300 16
o WMS Industries, Inc. 1,500 20
o Wynn Resorts Ltd. 4,000 68
----------
4,739
TRUCKING & FREIGHT 0.9%
-------------------------------------------------------
Arkansas Best Corp. 1,100 28
BancTrust Financial Group, Inc. 1,100 17
C.H. Robinson Worldwide, Inc. 7,500 276
CNF, Inc. 2,000 61
o Consolidated Freightways Corp. 2,700 --
Expeditors International Washington,
Inc. 5,600 204
o Forward Air Corp. 1,100 28
o Heartland Express, Inc. 1,971 45
o J.B. Hunt Transport Services, Inc. 2,000 69
o Kirby Corp. 1,300 34
o Knight Transportation, Inc. 1,800 43
o Landstar Systems, Inc. 3,800 236
o Martin Midstream Partners L.P. 1,000 20
o Old Dominion Freight Line 1,200 40
Paccar, Inc. 6,900 403
o Pacer International, Inc. 1,800 29
Roadway Corp. 5,600 208
Ryder Systems, Inc. 6,400 159
o SCS Transportation, Inc. 1,600 19
o Swift Transportation Co., Inc. 3,970 72
United Parcel Service, Inc.,
Class B 70,480 4,378
USFreightways Corp. 1,300 37
Werner Enterprises, Inc. 2,666 60
o Yellow Corp. 1,200 32
----------
6,498
UTILITIES: ELECTRIC & GAS 3.0%
--------------------------------------------------------
o The AES Corp. 21,596 130
AGL Resources, Inc. 4,300 111
Allegheny Energy, Inc. 7,000 58
Allete, Inc. 4,200 100
Alliant Energy Corp. 4,300 75
Ameren Corp. 8,100 332
American Electric Power Co., Inc. 17,320 457
American States Water Co. 950 25
Atmos Energy Corp. 1,800 41
Avista Corp. 3,800 45
o BayCorp Holdings Ltd. 6 --
Black Hills Corp. 1,400 40
o Calpine Corp. 12,300 66
Cascade Natural Gas Corp. 1,000 19
Centerpoint Energy, Inc. 13,600 107
Central Vermont Public Service
Corp. 2,700 48
CH Energy Group, Inc. 900 38
Cinergy Corp. 8,800 300
Cleco Corp. 8,900 133
CMS Energy Corp. 5,000 31
Consolidated Edison, Inc. 10,300 400
Constellation Energy Group,
Inc. 16,800 492
o Covanta Energy Corp. 2,100 --
Dominion Resources, Inc. 18,610 1,101
DPL, Inc. 6,952 96
DQE, Inc. 6,100 83
DTE Energy Co. 7,301 294
Duke Energy Corp. 44,700 786
o Edison International 58,700 856
El Paso Corp. 27,887 209
o El Paso Electric Co. 2,800 32
Energen Corp. 7,100 233
Energy East Corp. 8,214 150
Entergy Corp. 13,700 639
See financial notes.
113
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Equitable Resources, Inc. 7,100 273
Exelon Corp. 27,237 1,445
FirstEnergy Corp. 15,617 527
Florida Public Utilities Co. 1,066 16
FPL Group, Inc. 9,700 590
Great Plains Energy, Inc. 9,000 236
Green Mountain Power Corp. 3,800 79
Hawaiian Electric Industries, Inc. 2,600 108
Idacorp, Inc. 1,700 43
KeySpan Corp. 8,400 285
Kinder Morgan, Inc. 10,700 503
MDU Resources Group, Inc. 5,300 158
MGE Energy, Inc. 400 12
o Mirant Corp. 20,206 67
National Fuel Gas Co. 5,800 136
New Jersey Resources Corp. 1,650 57
o NewPower Holdings, Inc. 3,800 1
Nicor, Inc. 2,000 60
NiSource, Inc. 22,864 432
Northeast Utilities, Inc. 5,624 84
Northwest Natural Gas Co. 1,200 31
NSTAR 3,867 167
OGE Energy Corp. 3,500 63
Oneok, Inc. 4,400 83
Otter Tail Corp. 1,100 30
Peoples Energy Corp. 3,200 124
Pepco Holdings, Inc. 5,000 86
o PG&E Corp. 19,900 298
Philadelphia Suburban Corp. 2,937 67
Piedmont Natural Gas Co. 1,600 60
Pinnacle West Capital Corp. 3,800 126
o Plug Power, Inc. 2,248 11
PNM Resources, Inc. 2,000 44
PPL Corp. 15,000 543
Progress Energy, Inc. 12,159 508
Public Service Enterprise Group,
Inc. 10,000 385
Puget Energy, Inc. 7,500 158
Questar Corp. 8,100 245
o Reliant Resources, Inc. 12,625 71
o Republic Services, Inc. 17,700 380
SCANA Corp. 17,005 540
Sempra Energy 11,175 300
o Sierra Pacific Resources 4,476 17
The Southern Co. 44,400 1,292
o Southern Union Co. 2,867 40
Southwest Gas Corp. 1,100 23
TECO Energy, Inc. 5,600 60
Texas Genco Holdings, Inc. 2,680 47
TXU Corp. 12,900 257
o U.S. Energy Systems, Inc. 600 1
UGI Corp. 5,100 161
UIL Holdings Corp. 6,200 224
Unisource Energy Corp. 2,100 37
Vectren Corp. 5,766 134
o Waste Connections, Inc. 1,000 34
Westar Energy, Inc. 3,700 52
WGL Holdings, Inc. 2,000 54
Williams Cos., Inc. 22,060 153
Wisconsin Energy Corp. 14,300 377
WPS Resources Corp. 1,400 56
Xcel Energy, Inc. 17,195 232
----------
20,210
PREFERRED STOCK 0.0% of investments
HEALTHCARE / DRUGS & MEDICINE 0.0%
--------------------------------------------------------
Dynacq International, Inc., Class A 16 --
REAL PROPERTY 0.0%
--------------------------------------------------------
Commercial Net Lease Realty 147 4
See financial notes.
114
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
CONVERTIBLE BONDS
0.0% of investments
BUSINESS MACHINES & SOFTWARE 0.0%
-------------------------------------------------------------------------
MicroStrategy, Inc., Class A,
7.50%, Convertible
until 06/24/07 2 2
SECURITY AND NUMBER OF SHARES
WARRANTS
0.0% of investments
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 --
RIGHTS
0.0% of investments
BUSINESS MACHINES & SOFTWARE 0.0%
-------------------------------------------------------------------------
o Comdisco Holding Co. 4,700 1
SHORT-TERM INVESTMENT
1.3% of investments
Provident Institutional
TempFund 9,092,628 9,093
U.S. TREASURY OBLIGATION
0.1% of investments
= U.S. Treasury Bill
1.62%, 06/19/03 530 529
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
115
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- -------------------------------------------------------------------------
Investments, at market value
(including $95,849 of securities on loan) $ 677,239 a
Collateral held for securities on loan 99,519
Receivables:
Fund shares sold 1,259
Interest 7
Dividends 645
Investments sold 77
Due from brokers for futures 20
Income from lending securities 14
Prepaid expenses + 40
-------------
TOTAL ASSETS 778,820
LIABILITIES
- -------------------------------------------------------------------------
Collateral held for securities on loan 99,519
Payables:
Fund shares redeemed 609
Investments bought 2,450
Investment adviser and administrator fees 21
Transfer agent and shareholder service fees 12
Accrued expenses + 95
-------------
TOTAL LIABILITIES 102,706
NET ASSETS
- -------------------------------------------------------------------------
TOTAL ASSETS 778,820
TOTAL LIABILITIES - 102,706
------------
NET ASSETS $ 676,114
NET ASSETS BY SOURCE
Capital received from investors 847,455
Net investment income not yet distributed 2,314
Net realized capital losses (23,537)
Net unrealized capital losses (150,118) b
NET ASSET VALUE (NAV)
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $343,859 23,196 $14.82
Select Shares(R) $332,255 22,388 $14.84
a The fund paid $828,041 for these securities. Not counting short-term
obligations and government securities, the fund paid $123,796 for securities
during the report period and received $5,876 from securities it sold or that
matured.
b These derive from investments and futures. As of the report date, the fund had
twenty-four open S&P 500 futures contracts due to expire on June 20, 2003,
with a contract value of $5,497 and unrealized gains of $431 and thirteen
open Russell 2000 futures due to expire on June 19, 2003 with a contract value
of $2,591 and unrealized gains of $253.
FEDERAL TAX DATA
- ---------------------------------------------------
PORTFOLIO COST $ 828,166
NET UNREALIZED GAINS AND LOSSES:
Gains $ 62,422
Losses + (213,349)
--------------
($150,927)
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $ 5,193
Long-term capital gains $ --
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2007 $ 18
2008 3,413
2009 2,000
2010 + 11,487
--------------
$ 16,918
See financial notes.
116
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- -------------------------------------------------------------------------
Dividends $ 4,767 a
Interest 29
Lending of securities + 135
-------------
TOTAL INVESTMENT INCOME 4,931
NET REALIZED GAINS AND LOSSES
- -------------------------------------------------------------------------
Net realized losses on investments sold (6,001)
Net realized losses on futures contracts + (249)
-------------
NET REALIZED LOSSES (6,250)
NET UNREALIZED GAINS AND LOSSES
- -------------------------------------------------------------------------
Net unrealized gains on investments 31,969
Net unrealized gains on futures contracts + 720
-------------
NET UNREALIZED GAINS 32,689
EXPENSES
- -------------------------------------------------------------------------
Investment adviser and administrator fees 822 b
Transfer agent and shareholder service fees:
Investor Shares 357 c
Select Shares(R) 141 c
Trustees' fees 4 d
Custodian fees 29
Portfolio accounting fees 50
Professional fees 16
Registration fees 35
Shareholder reports 38
Other expenses + 16
Total expenses 1,508
------------
Expense reduction - 405 e
-------------
NET EXPENSES 1,103
INCREASE IN NET ASSETS FROM OPERATIONS
- -------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 4,931
NET EXPENSES - 1,103
------------
NET INVESTMENT INCOME 3,828
NET REALIZED LOSSES (6,250) f
NET UNREALIZED GAINS + 32,689 f
-------------
INCREASE IN NET ASSETS FROM OPERATIONS $ 30,267
a An additional $1 was withheld for foreign taxes.
b Calculated as a percentage of average daily net assets: 0.30% of the first
$500 million and 0.22% of assets beyond that.
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.
d For the fund's independent trustees only.
e Includes $367 from the investment adviser (CSIM) and $38 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 29, 2004, as follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
------------------------------------------
Investor Shares 0.58
Select Shares 0.39
Prior to March 1, 2003, these limits were 0.40% and 0.27% for the Investor
Shares and Select Shares, respectively. This limit doesn't include interest,
taxes and certain non-routine expenses.
f These add up to a net gain on investments of $26,439.
See financial notes.
117
SCHWAB TOTAL STOCK MARKET INDEX FUND(R) -- Financials
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000. Figures for
current period are unaudited.
OPERATIONS
- ---------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/01-10/31/02
Net investment income $ 3,828 $ 6,337
Net realized losses (6,250) (11,625)
Net unrealized gains or losses + 32,689 (71,931)
----------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 30,267 (77,219)
DISTRIBUTIONS PAID
- ---------------------------------------------------------------------------------------------
Dividends from net investment income
Investor Shares 3,195 2,256
Select Shares(R) + 3,512 2,809
----------------------------------
TOTAL DIVIDENDS FROM NET INVESTMENT INCOME $ 6,707 $ 5,065 a
TRANSACTIONS IN FUND SHARES
- ---------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
SHARES SOLD
Investor Shares 6,586 $ 93,071 8,607 $ 139,890
Select Shares + 6,450 91,371 7,243 117,125
-----------------------------------------------------
TOTAL SHARES SOLD 13,036 $ 184,44 15,850 $ 257,015
SHARES REINVESTED
Investor Shares 224 $ 3,195 120 $ 2,114
Select Shares + 245 3,512 139 2,439
-----------------------------------------------------
TOTAL SHARES REINVESTED 469 $ 6,707 259 $ 4,553
SHARES REDEEMED
Investor Shares (1,955) ($ 27,650 (3,882) ($ 62,511)
Select Shares + (2,707) (38,506) (4,446) (70,982)
-----------------------------------------------------
TOTAL SHARES REDEEMED (4,662) ($ 66,156) (8,328) ($ 133,493) b
NET INCREASE 8,843 $ 124,993 7,781 $ 128,075
SHARES OUTSTANDING AND NET ASSETS
- ---------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 36,741 $ 527,561 28,960 $ 481,770
Total increase + 8,843 148,553 7,781 45,791 c
-----------------------------------------------------
END OF PERIOD 45,584 $ 676,114 36,741 $ 527,561 d
a The tax-basis components of distributions paid for the prior period are:
Ordinary Income $5,065
Long-term capital gains $ --
b Dollar amounts are net of proceeds received early withdrawal fees that the
fund charges on shares sold 180 days or less after buying them.
CURRENT PERIOD
Investor Shares $ 33
Select Shares + 21
---------
TOTAL $ 54
PRIOR PERIOD
Investor Shares $ 65
Select Shares + 60
---------
TOTAL $ 125
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 net investment income not yet distributed in the amount of $2,314 and
$5,193 for the current period and the prior period, respectively.
See financial notes.
118
SCHWAB INTERNATIONAL INDEX FUND(R)
Performance as of 4/30/03: Investor Shares
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Investor Shares with
the Schwab International Index(R) and the Morningstar Foreign Stock Fund
category. The table below the chart shows two types of after-tax returns.
[BAR CHART]
INVESTOR SHARES SCHWAB INTERNATIONAL INDEX CATEGORY AVERAGE
6 MONTHS 1.62% 2.11% 1.38%
1 YEAR -16.16% -15.43% -17.62%
5 YEARS -5.91% -5.36% -5.04%
SINCE INCEPTION: 9/9/93 1.65% 2.19% n/a
6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTIONS
------------------ ------------------ ------------------ ------------------
INVESTOR CATEGORY INVESTOR CATEGORY INVESTOR CATEGORY INVESTOR CATEGORY
TOTAL RETURNS AFTER TAX SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
- --------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 0.81% -0.91% -16.83% -19.34% -6.38% -6.33% 1.17% --
- --------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 0.98% -0.43% -10.11% -11.75% -4.78% -4.10% 1.12% --
- --------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A $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
two indices: the Schwab International Index and the MSCI-EAFE(R) Index.
$11,714 INVESTOR SHARES
$12,334 SCHWAB INTERNATIONAL INDEX
$11,072 MSCI-EAFE INDEX
[LINE GRAPH]
INVESTOR SHARES SCHWAB INTERNATIONAL INDEX MSCI-EAFE INDEX
09-Sep-93 10000 10000 10000
Sep-93 9770 9786 9749
Oct-93 10150 10167 10049
Nov-93 9420 9454 9171
Dec-93 10096 10137 9833
Jan-94 10769 10823 10664
Feb-94 10558 10623 10634
Mar-94 10156 10172 10176
Apr-94 10458 10544 10607
May-94 10407 10448 10547
Jun-94 10488 10508 10696
Jul-94 10649 10692 10798
Aug-94 10941 10999 11054
Sep-94 10559 10621 10706
Oct-94 10950 11026 11062
Nov-94 10428 10478 10530
Dec-94 10484 10564 10597
Jan-95 10108 10254 10190
Feb-95 10189 10282 10160
Mar-95 10759 10964 10794
Apr-95 11145 11346 11200
May-95 11176 11303 11067
Jun-95 11064 11168 10873
Jul-95 11623 11826 11550
Aug-95 11237 11384 11110
Sep-95 11470 11661 11327
Oct-95 11318 11461 11022
Nov-95 11562 11782 11329
Dec-95 11975 12238 11785
Jan-96 12006 12277 11834
Feb-96 12026 12300 11874
Mar-96 12232 12529 12126
Apr-96 12530 12826 12478
May-96 12396 12674 12249
Jun-96 12489 12761 12317
Jul-96 12139 12430 11958
Aug-96 12253 12538 11984
Sep-96 12592 12907 12303
Oct-96 12571 12863 12177
Nov-96 13136 13460 12662
Dec-96 13067 13341 12499
Jan-97 12640 12898 12061
Feb-97 12827 13114 12259
Mar-97 12932 13202 12303
Apr-97 13025 13344 12368
May-97 13984 14324 13174
Jun-97 14766 15160 13899
Jul-97 15214 15570 14125
Aug-97 14109 14447 13070
Sep-97 15078 15354 13801
Oct-97 13869 14110 12740
Nov-97 13859 14055 12610
Dec-97 14022 14254 12720
Jan-98 14538 14830 13301
Feb-98 15382 15727 14155
Mar-98 15782 16139 14591
Apr-98 15888 16248 14706
May-98 15888 16209 14634
Jun-98 16025 16315 14745
Jul-98 16067 16419 14894
Aug-98 14085 14350 13049
Sep-98 13632 13880 12648
Oct-98 14981 15335 13966
Nov-98 15751 16198 14681
Dec-98 16244 16729 15261
Jan-99 16190 16640 15216
Feb-99 15829 16311 14853
Mar-99 16541 17060 15473
Apr-99 17212 17794 16099
May-99 16371 16897 15270
Jun-99 16999 17586 15866
Jul-99 17616 18240 16337
Aug-99 17775 18410 16398
Sep-99 18105 18724 16563
Oct-99 19073 19722 17184
Nov-99 19945 20579 17781
Dec-99 21704 22386 19377
Jan-00 19999 20761 18147
Feb-00 20278 21097 18635
Mar-00 21457 22294 19358
Apr-00 20299 21089 18340
May-00 19720 20470 17892
Jun-00 20460 21234 18592
Jul-00 19667 20411 17813
Aug-00 20021 20770 17967
Sep-00 18980 19696 17092
Oct-00 18369 19083 16689
Nov-00 17533 18224 16063
Dec-00 17886 18608 16633
Jan-01 18038 18806 16638
Feb-01 16492 17174 15394
Mar-01 15382 15985 14349
Apr-01 16438 17086 15334
May-01 15850 16448 14767
Jun-01 15175 15745 14160
Jul-01 14794 15365 13915
Aug-01 14369 14935 13592
Sep-01 13074 13582 12215
Oct-01 13303 13843 12528
Nov-01 13716 14276 12990
Dec-01 13818 14373 13067
Jan-02 13103 13624 12373
Feb-02 13202 13741 12460
Mar-02 13928 14466 13134
Apr-02 13972 14585 13221
May-02 14160 14791 13388
Jun-02 13587 14193 12856
Jul-02 12255 12808 11587
Aug-02 12222 12780 11560
Sep-02 10900 11400 10319
Oct-02 11528 12079 10873
Nov-02 12012 12612 11366
Dec-02 11658 12210 10984
Jan-03 11152 11696 10526
Feb-03 10927 11457 10285
Mar-03 10702 11231 10084
Apr-03 11714 12334 11072
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. The
fund's share price and principal values change, and when you sell your shares,
they may be worth more or less than what you paid for them. Past performance
does not indicate future results. Results for the report period are not
annualized.
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 4/30/03 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. As of
4/30/03, the total number of funds in the Morningstar Foreign Stock Fund
category for the six-month, one- and five-year periods was 938, 898 and 516,
respectively. These funds may or may not use tax-efficient strategies.
2 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower.
Schwab Equity Index Funds
119
SCHWAB INTERNATIONAL INDEX FUND(R)
SELECT SHARES(R)
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Select Shares with the
Schwab International Index(R) and the Morningstar Foreign Stock Fund category.
The table below the chart shows two types of after-tax returns.
[BAR CHART]
SELECT SHARES SCHWAB INTERNATIONAL INDEX CATEGORY AVERAGE
6 MONTHS 1.65% 2.11% 1.38%
1 YEAR -16.06% -15.43% -17.62%
5 YEARS -5.82% -5.36% -5.04%
SINCE INCEPTION: 5/19/97 -3.03% -2.71% n/a
6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION
----------------- ------------------ ----------------- -----------------
TOTAL RETURN AFTER TAX SELECT CATEGORY SELECT CATEGORY SELECT CATEGORY SELECT CATEGORY
SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
- ---------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 0.79% -0.91% -16.77% -19.34% -6.34% -6.33% -3.56% --
- ---------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 1.00% -0.43% -10.05% -11.75% -4.73% -4.10% -2.60% --
- ---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A $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 two indices: the Schwab
International Index and the MSCI-EAFE(R) Index.
$41,625 SELECT SHARES
$42,438 SCHWAB INTERNATIONAL INDEX
$41,391 MSCI-EAFE INDEX
[LINE GRAPH]
SELECT SHARE SCHWAB INTERNATIONAL INDEX MSCI-EAFE INDEX
19-May-97 50000 50000 50000
May-97 49375 49283 49248
Jun-97 52170 52161 51961
Jul-97 53755 53571 52803
Aug-97 49815 49706 48859
Sep-97 53240 52827 51595
Oct-97 49005 48550 47627
Nov-97 48970 48360 47141
Dec-97 49580 49042 47551
Jan-98 51405 51027 49725
Feb-98 54385 54111 52917
Mar-98 55800 55529 54547
Apr-98 56175 55905 54978
May-98 56175 55770 54708
Jun-98 56655 56133 55124
Jul-98 56845 56493 55681
Aug-98 49840 49376 48782
Sep-98 48240 47757 47284
Oct-98 53005 52763 52211
Nov-98 55725 55732 54885
Dec-98 57490 57561 57053
Jan-99 57305 57252 56881
Feb-99 56025 56122 55528
Mar-99 58585 58699 57843
Apr-99 60955 61225 60186
May-99 57980 58137 57086
Jun-99 60200 60507 59313
Jul-99 62385 62757 61074
Aug-99 62950 63342 61300
Sep-99 64115 64425 61919
Oct-99 67575 67857 64241
Nov-99 70660 70806 66470
Dec-99 76920 77025 72439
Jan-00 70880 71433 67839
Feb-00 71870 72588 69664
Mar-00 76050 76708 72367
Apr-00 71905 72561 68561
May-00 69895 70431 66888
Jun-00 72515 73058 69503
Jul-00 69740 70228 66591
Aug-00 70995 71462 67169
Sep-00 67310 67769 63898
Oct-00 65110 65658 62390
Nov-00 62185 62703 60050
Dec-00 63455 64024 62182
Jan-01 63955 64706 62201
Feb-01 58470 59090 57548
Mar-01 54570 55001 53641
Apr-01 58315 58788 57326
May-01 56230 56592 55205
Jun-01 53835 54175 52936
Jul-01 52485 52866 52020
Aug-01 51015 51386 50813
Sep-01 46385 46733 45666
Oct-01 47235 47628 46835
Nov-01 48700 49119 48563
Dec-01 49040 49452 48850
Jan-02 46540 46876 46256
Feb-02 46890 47279 46579
Mar-02 49430 49771 49099
Apr-02 49590 50183 49423
May-02 50255 50891 50051
Jun-02 48220 48833 48059
Jul-02 43525 44067 43316
Aug-02 43410 43973 43216
Sep-02 38715 39225 38575
Oct-02 40945 41560 40646
Nov-02 42665 43395 42491
Dec-02 41385 42009 41064
Jan-03 39625 40243 39351
Feb-03 38825 39419 38450
Mar-03 38025 38642 37697
Apr-03 41625 42438 41391
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. The
fund's share price and principal values change, and when you sell your shares,
they may be worth more or less than what you paid for them. Past performance
does not indicate future results. Results for the report period are not
annualized.
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 4/30/03 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. As of
4/30/03, the total number of funds in the Morningstar Foreign Stock Fund
category for the six-month, one-and five-year periods was 938, 898 and 516,
respectively. These funds may or may not use tax-efficient strategies.
2 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower.
Schwab Equity Index Funds
120
SCHWAB INTERNATIONAL INDEX FUND(R)
FUND FACTS as of 4/30/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP VALUE BLEND GROWTH
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
- ------------------------------------------------------------------------
NUMBER OF HOLDINGS 355
- ------------------------------------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $27,205
- ------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 18.8
- ------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.9
- ------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 2 0%
- ------------------------------------------------------------------------
EXPENSE RATIO 3
Investor Shares 0.69%
Select Shares(R) 0.50%
- ------------------------------------------------------------------------
TOP HOLDINGS 4
% OF
SECURITY INVESTMENTS
- -----------------------------------------------------------------------
(1) BP PLC 3.1%
- -----------------------------------------------------------------------
(2) VODAFONE GROUP PLC 3.0%
- -----------------------------------------------------------------------
(3) GLAXOSMITHKLINE PLC 2.6%
- -----------------------------------------------------------------------
(4) NOVARTIS AG, REGISTERED 2.4%
- -----------------------------------------------------------------------
(5) HSBC HOLDINGS PLC 2.3%
- -----------------------------------------------------------------------
(6) ROYAL DUTCH PETROLEUM CO. 1.9%
- -----------------------------------------------------------------------
(7) TOTAL FINA ELF SA 1.8%
- -----------------------------------------------------------------------
(8) NESTLE SA, REGISTERED 1.8%
- -----------------------------------------------------------------------
(9) ROYAL BANK OF SCOTLAND GROUP PLC 1.6%
- -----------------------------------------------------------------------
(10) ASTRAZENECA PLC 1.5%
- -----------------------------------------------------------------------
TOTAL 22.0%
- -----------------------------------------------------------------------
COUNTRY WEIGHTINGS
This chart shows the fund's country composition as of the report date.
[PIE CHART]
29.8% UNITED KINGDOM
17.2% JAPAN
10.5% FRANCE
8.7% SWITZERLAND
6.6% GERMANY
5.7% NETHERLANDS
4.8% CANADA
4.0% ITALY
3.9% SPAIN
8.8% OTHER
1 Source: Morningstar, Inc. This style assessment is the result of comparing the
fund with the S&P 500(R) Index, based on P/E, P/B and median market cap. The
assessment reflects the fund's portfolio as of 4/30/03, which may have changed
since then, and is not a precise indication of risk or performance--past,
present or future.
2 Portfolio turnover rate was less than 1% and was not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes, and certain non-routine expenses).
4 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
Schwab Equity Index Funds
121
SCHWAB INTERNATIONAL INDEX FUND(R) -- Financials
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
INVESTOR SHARES 4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
- ----------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 10.47 12.22 17.13 17.93 14.21 13.31
-----------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.11 0.21 0.15 0.20 0.19 0.17
Net realized and unrealized gains or losses 0.05 (1.82) (4.81) (0.85) 3.66 0.88
-----------------------------------------------------------
Total income or loss from investment operations 0.16 (1.61) (4.66) (0.65) 3.85 1.05
Less distributions:
Dividends from net investment income (0.21) (0.14) (0.25) (0.15) (0.13) (0.15)
-----------------------------------------------------------
Net asset value at end of period 10.42 10.47 12.22 17.13 17.93 14.21
-----------------------------------------------------------
Total return (%) 1.62 2 (13.34) (27.58) (3.69) 27.31 8.02
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.62 3 0.58 0.58 0.58 1 0.58 0.58
Expense reductions reflected in above ratio 0.15 3 0.18 0.17 0.23 0.41 0.46
Ratio of net investment income to
average net assets 2.03 3 1.70 1.14 1.60 1.24 1.35
Portfolio turnover rate 0 2,4 13 18 16 5 6
Net assets, end of period ($ x 1,000,000) 418 443 519 637 447 428
1 Would have been 0.59% if certain non-routine expenses (proxy fees) had been
included.
2 Not annualized.
3 Annualized.
4 Portfolio turnover rate was less than 1%.
See financial notes.
122
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
SELECT SHARES(R) 4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
- ----------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 10.47 12.23 17.14 17.96 14.23 13.32
-----------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.11 0.21 0.16 0.27 0.18 0.22
Net realized and unrealized gains or losses 0.06 (1.82) (4.80) (0.91) 3.70 0.85
-----------------------------------------------------------
Total income or loss from investment operations 0.17 (1.61) (4.64) (0.64) 3.88 1.07
Less distributions:
Dividends from net investment income (0.23) (0.15) (0.27) (0.18) (0.15) (0.16)
-----------------------------------------------------------
Net asset value at end of period 10.41 10.47 12.23 17.14 17.96 14.23
-----------------------------------------------------------
Total return (%) 1.65 2 (13.31) (27.45) (3.65) 27.49 8.16
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.48 3 0.47 0.47 0.47 1 0.47 0.47
Expense reductions reflected in above ratio 0.14 3 0.14 0.13 0.19 0.39 0.48
Ratio of net investment income to
average net assets 2.20 3 1.81 1.25 1.71 1.57 1.49
Portfolio turnover rate 0 2,4 13 18 16 5 6
Net assets, end of period ($ x 1,000,000) 535 536 616 700 449 94
1 Would have been 0.48% if certain non-routine expenses (proxy fees) had been
included.
2 Not annualized.
3 Annualized.
4 Portfolio turnover rate was less than 1%.
See financial notes.
123
SCHWAB INTERNATIONAL INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
* American Depositary Receipt
COST MARKET VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- ----------------------------------------------------------------------
99.6% FOREIGN
COMMON STOCK 1,115,159 943,714
0.3% FOREIGN
PREFERRED STOCK 1,990 2,467
0.1% SHORT-TERM INVESTMENT 941 941
0.0% WARRANTS 724 567
- ----------------------------------------------------------------------
100.0% TOTAL INVESTMENTS 1,118,814 947,689
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
FOREIGN COMMON STOCK
99.6% of investments
AUSTRALIA 3.7%
---------------------------------------------------------------
Alumina Ltd. 247,399 675
AMP Ltd. 243,014 1,327
Australia & New Zealand Banking
Group Ltd. 317,170 3,700
BHP Billiton Ltd. 783,724 4,432
Commonwealth Bank of
Australia 256,408 4,366
Foster's Group Ltd. 446,157 1,250
National Australia Bank Ltd. 317,312 6,451
News Corp. Ltd. 318,091 2,265
Rio Tinto Ltd. 60,818 1,209
St. George Bank Ltd. 102,544 1,270
Telstra Corp. Ltd. 416,897 1,098
Wesfarmers Ltd. 80,774 1,238
Westpac Banking Corp. 365,973 3,642
Woodside Petroleum Ltd. 101,251 726
Woolworths Ltd. 202,146 1,634
-----------
35,283
BELGIUM 0.9%
---------------------------------------------------------------
Dexia 143,074 1,640
Electrabel SA 6,048 1,450
Fortis 207,210 3,478
Interbrew 32,585 727
Solvay SA 9,156 647
-----------
7,942
CANADA 4.8%
---------------------------------------------------------------
Alcan, Inc. 62,405 1,827
Bank of Montreal 99,813 2,790
Bank of Nova Scotia 105,952 4,120
Barrick Gold Corp. 110,291 1,675
BCE, Inc. 65,656 1,298
Bombardier, Inc., Class B 192,500 466
Canadian Imperial Bank of
Commerce 75,516 2,516
Canadian National Railway Co. 43,316 2,103
Enbridge, Inc. 33,700 1,025
EnCana Corp. 97,217 3,186
George Weston Ltd. 11,500 746
Imperial Oil Ltd. 24,010 728
Loblaw Cos. Ltd. 21,098 824
Magna International, Inc.,
Class A 16,447 966
Manulife Financial Corp. 98,250 2,619
Petro-Canada 48,400 1,595
Power Corp. of Canada 35,402 993
Power Financial Corp. 26,300 756
Royal Bank of Canada 136,817 5,703
Sun Life Financial Services of
Canada, Inc. 130,364 2,676
Suncor Energy, Inc. 97,200 1,598
Talisman Energy, Inc. 25,625 1,022
Toronto-Dominion Bank 131,000 3,099
TransCanada PipeLines Ltd. 94,561 1,509
-----------
45,840
DENMARK 0.5%
---------------------------------------------------------------
Danske Bank A/S 114,004 2,193
Novo-Nordisk A/S, Class B 56,110 2,033
TDC A/S 23,628 588
-----------
4,814
See financial notes.
124
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
FRANCE 10.5%
---------------------------------------------------------------
Accor SA 42,457 1,399
Air Liquide SA 21,416 3,243
Alcatel SA, Class A 172,263 1,411
o Arcelor SA 74,513 843
Aventis SA 138,614 7,040
AXA 293,535 4,458
BNP Paribas 165,829 7,784
Bouygues 33,690 824
Carrefour SA 112,519 4,894
Compagnie de Saint-Gobain 66,004 2,285
Credit Lyonnais SA 33,600 2,083
European Aeronautic Defense &
Space Co. 61,447 571
France Telecom SA 78,001 1,802
Groupe Danone 26,016 3,682
L'oreal 69,764 4,987
Lafarge SA 26,873 1,805
Lagardere S.C.A. 29,349 1,121
LVMH Moet-Hennessy Louis
Vuitton SA 44,980 1,963
Michelin (C.G.D.E.), Class B 28,839 1,067
Orange SA 135,797 1,088
Pernod-Ricard 11,468 1,007
Peugeot SA 31,001 1,451
Pinault-Printemps-Redoute SA 14,727 1,029
Renault SA 34,002 1,470
Sanofi-Synthelabo SA 82,658 4,931
Schneider Electric SA 44,309 2,098
Societe Generale, Class A 61,511 3,762
Societe Television Francaise 126,048 732
STMicroelectronics NV 117,296 2,424
Suez SA 169,102 2,753
o Thomson 33,486 491
(7) Total Fina Elf SA 131,572 17,253
Veolia Environment 52,576 1,135
Vinci SA 13,931 907
Vivendi Universal SA 189,024 3,080
*o Vivendi Universal SA 54,392 893
-----------
99,766
GERMANY 6.6%
---------------------------------------------------------------
Allianz AG 38,188 2,700
Altana AG 15,200 748
BASF AG 107,935 4,815
Bayer AG 147,945 2,700
Bayerische Hypo-und Vereinsbank
AG 66,874 890
Bayerische Motoren Werke
AG 67,500 2,250
Beiersdorf AG 4,671 581
DaimlerChrysler AG 181,970 5,869
Degussa AG 17,800 517
Deutsche Bank AG 117,776 6,091
Deutsche Post AG 75,227 897
Deutsche Telekom AG 440,562 5,890
E.ON AG 122,150 5,847
o Infineon Technologies AG 75,100 557
Linde AG 18,812 709
Metro AG 29,214 811
Muenchener Rueckversicherungs
AG 21,140 2,112
RWE AG 77,776 2,092
SAP AG 42,324 4,336
Schering AG 37,346 1,665
Siemens AG 168,790 8,414
ThyssenKrupp AG 63,966 655
Volkswagen AG 46,293 1,627
-----------
62,773
HONG KONG / CHINA 1.1%
---------------------------------------------------------------
Cheung Kong Holdings Ltd. 327,000 1,807
CLP Holdings Ltd. 387,080 1,583
Hang Seng Bank Ltd. 154,700 1,532
Hong Kong & China Gas Co. 718,400 847
HongKong Electric Holdings 277,756 1,115
Hutchison Whampoa Ltd. 445,800 2,481
Sun Hung Kai Properties
Ltd. 265,694 1,247
-----------
10,612
See financial notes.
125
SCHWAB INTERNATIONAL INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
ITALY 4.0%
---------------------------------------------------------------
Alleanza Assicurazioni SPA 100,995 945
Assicurazioni Generali SPA 214,116 4,920
Banca Intesa SPA 735,870 1,905
Enel SPA 429,348 2,568
ENI-Ente Nazionale Idrocarburi
SPA 579,022 8,252
Mediaset SPA 133,088 1,138
Olivetti SPA 1,240,760 1,408
Riunione Adriatica di Sicurta
SPA 78,031 1,125
Sanpaolo IMI SPA 189,885 1,566
Seat-Pagine Gialle SPA 1,247,385 846
Telecom Italia SPA 506,188 4,135
Telecom Italia SPA -- RNC 413,196 2,034
TIM SPA 809,627 3,813
UniCredito Italiano SPA 733,582 3,209
-----------
37,864
JAPAN 17.2%
---------------------------------------------------------------
Advantest Corp. 16,700 560
Aeon Co. Ltd. 48,000 1,091
Ajinomoto Co., Inc. 111,000 1,126
Asahi Glass Co. Ltd. 146,000 777
The Bank of Yokohama Ltd. 205,000 724
Bridgestone Corp. 126,000 1,429
Canon, Inc. 177,000 7,154
Central Japan Railway Co. 202 1,311
Chubu Electric Power Co., Inc. 135,100 2,719
The Chugoku Electric Power Co.,
Inc. 56,000 901
Dai Nippon Printing Co. Ltd. 117,000 1,136
Daiichi Pharmaceutical Co. Ltd. 51,000 646
Daikin Industries Ltd. 34,000 566
Denso Corp. 110,000 1,568
East Japan Railway Co. 653 2,957
Eisai Co. Ltd. 47,000 830
Fanuc Ltd. 24,300 994
Fuji Photo Film Co. Ltd. 92,000 2,345
Fujisawa Pharmaceutical Co.
Ltd. 47,000 796
o Fujitsu Ltd. 326,000 910
Hitachi Ltd. 616,000 2,056
Honda Motor Co. Ltd. 132,700 4,395
Hoya Corp. 23,600 1,395
Ito-Yokado Co. Ltd. 78,000 1,835
Itochu Corp. 273,000 572
Japan Telecom Holdings Co.
Ltd. 208 569
Japan Tobacco, Inc. 158 921
The Kansai Electric Power Co. 146,000 2,442
Kao Corp. 123,000 2,243
KDDI Corp. 506 1,537
Keyence Corp. 6,930 1,114
o Kinki Nippon Railway Co. Ltd. 305,830 764
Kirin Brewery Co. Ltd. 127,000 980
Kyocera Corp. 34,500 1,684
Kyushu Electric Power Co. 85,400 1,328
Matsushita Electric Industrial Co.
Ltd. 469,912 3,743
o Millea Holdings, Inc. 302 1,960
Mitsubishi Corp. 219,000 1,302
Mitsubishi Electric Corp. 303,000 785
Mitsubishi Estate Co. Ltd. 190,000 1,112
Mitsubishi Heavy Industries
Ltd. 565,000 1,255
Mitsubishi Tokyo Financial Group,
Inc. 707 2,395
Mitsui & Co. Ltd. 239,000 1,132
Mitsui Fudosan Co. Ltd. 142,000 764
Mitsui Sumitomo Insurance Co.
Ltd. 273,000 1,282
o Mizuho Financial Group, Inc. 1,155 617
Murata Manufacturing Co. Ltd. 47,900 1,707
o NEC Corp. 298,000 932
Nikko Cordial Corp. 283,000 759
Nintendo Co. Ltd. 21,700 1,696
Nippon Express Co. Ltd. 161,000 601
Nippon Oil Corp. 298,000 1,187
Nippon Steel Corp. 1,020,000 1,138
Nippon Telegraph & Telephone
Corp. 1,100 3,855
Nippon Unipac Holding 188 604
Nissan Motor Co. Ltd. 477,000 3,660
Nitto Denko Corp. 28,000 805
See financial notes.
126
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Nomura Holdings, Inc. 372,000 3,684
NTT Data Corp. 284 672
NTT DoCoMo, Inc. 3,685 7,601
OJI Paper Co. Ltd. 165,000 624
Oriental Land Co. Ltd. 10,000 418
Osaka Gas Co. Ltd. 394,000 1,140
Ricoh Co. Ltd. 131,000 2,009
Rohm Co. Ltd. 23,000 2,370
Sankyo Co. Ltd. 77,000 1,116
Sanyo Electric Co. Ltd. 309,000 966
Secom Co. Ltd. 43,500 1,014
Sekisui House Ltd. 117,000 859
Seven-Eleven Japan Co. 78,000 1,857
Sharp Corp. 184,000 1,929
Shin-Etsu Chemical Co. Ltd. 74,900 2,242
Shiseido Co. Ltd. 74,000 676
The Shizuoka Bank Ltd. 116,000 766
SMC Corp. 11,000 828
Sompo Japan Insurance, Inc. 160,000 731
Sony Corp. 185,500 4,511
Sumitomo Chemical Co. Ltd. 248,000 672
Sumitomo Corp. 137,000 551
Sumitomo Electric Industries
Ltd. 131,000 733
o Sumitomo Mitsui Financial Group,
Inc. 764 1,198
The Sumitomo Trust & Banking Co.
Ltd. 154,000 436
Suzuki Motor Corp. 76,000 900
Takeda Chemical Industries Ltd. 166,200 6,090
Takefuji Corp. 16,590 864
TDK Corp. 22,000 764
Tohoku Electric Power Co. 83,700 1,333
The Tokyo Electric Power Co.,
Inc. 240,300 4,876
Tokyo Electron Ltd. 31,000 1,162
Tokyo Gas Co. Ltd. 507,000 1,649
Toppan Printing Co. Ltd. 122,000 773
Toshiba Corp. 566,000 1,509
Tostem Inax Holding Corp. 54,000 576
Toyota Motor Corp. 491,500 11,127
o UFJ Holdings, Inc. 686 552
West Japan Railway Co. 225 702
Yamanouchi Pharmaceutical Co.
Ltd. 67,000 1,691
Yamato Transport Co. Ltd. 78,000 873
-----------
162,710
NETHERLANDS 5.7%
---------------------------------------------------------------
ABN Amro Holdings NV 298,017 5,035
Aegon NV 205,317 2,087
Akzo Nobel NV 58,760 1,306
o ASML Holding NV 73,563 635
Heineken NV 39,259 1,458
ING Groep NV 355,884 5,779
Koninklijke Ahold NV 138,958 636
Koninklijke Philips Electronics
NV 273,305 5,084
Reed Elsevier NV 141,007 1,605
(6) Royal Dutch Petroleum Co. 433,569 17,734
o Royal KPN NV 360,914 2,401
TPG NV 67,143 1,048
Unilever NV 117,468 7,400
VNU NV 47,654 1,383
-----------
53,591
SINGAPORE 0.6%
---------------------------------------------------------------
DBS Group Holdings Ltd. 217,778 1,067
Haw Par Corp. Ltd. 834 2
Oversea-Chinese Banking Corp. 217,000 1,155
Singapore Airlines Ltd. 123,000 655
Singapore Telecommunications
Ltd. 1,402,696 1,145
United Overseas Bank Ltd. 237,000 1,388
-----------
5,412
SPAIN 3.9%
---------------------------------------------------------------
Altadis SA 57,998 1,495
Banco Bilbao Vizcaya Argentaria
SA 632,702 6,369
Banco Popular Espanol 37,692 1,827
Banco Santander Central Hispano
SA 879,450 6,910
Endesa SA 186,597 2,647
Gas Natural SDG SA 37,672 721
See financial notes.
127
SCHWAB INTERNATIONAL INDEX FUND(R) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Iberdrola SA 162,340 2,614
Inditex SA 47,334 943
Repsol YPF SA 191,744 2,793
o Telefonica SA 982,643 10,868
-----------
37,187
SWEDEN 1.6%
---------------------------------------------------------------
Electrolux AB, Series B 61,579 1,156
ForeningsSparbanken AB 85,887 1,165
Hennes & Mauritz AB, Series B 98,150 2,184
Nordea AB 486,286 2,580
Sandvik AB 44,107 1,121
Securitas AB, Class B 69,245 813
Skandinaviska Enskilda Banken,
Series A 85,410 887
Svenska Cellulosa AB, Series B 41,064 1,391
o Telefonaktiebolaget LM Ericsson,
Class B 3,287,942 2,995
Volvo AB, Series B 40,445 808
-----------
15,100
SWITZERLAND 8.7%
---------------------------------------------------------------
o ABB Ltd. 204,408 629
Adecco SA, Registered 20,902 802
Ciba Specialty Chemicals AG 14,322 990
Compangnie Financiere Richemont AG,
Series A 113,260 1,674
Credit Suisse Group 213,040 5,089
Holcim Ltd., Class B 6,173 1,158
(8) Nestle SA, Registered 82,243 16,766
(4) Novartis AG, Registered 569,772 22,475
Roche Holdings-- Bearer 6,610 680
Roche Holdings-- Genus 144,526 9,196
Serono SA, Series B 1,519 824
Swiss Reinsurance, Registered 65,184 4,258
Swisscom AG, Registered 5,801 1,794
Syngenta AG 20,323 1,049
UBS AG, Registered 259,229 12,299
Zurich Financial Services AG 28,547 3,010
-----------
82,693
UNITED KINGDOM 29.8%
---------------------------------------------------------------
3i Group PLC 137,145 1,019
Abbey National PLC 293,941 2,088
Alliance & Leicester PLC 84,836 1,100
Allied Domecq PLC 240,096 1,347
Amersham PLC 136,906 984
Amvescap PLC 119,189 648
Associated British Foods PLC 77,195 664
(10) AstraZeneca PLC 357,487 14,027
Aviva PLC 471,307 3,314
BAA PLC 211,384 1,632
BAE Systems PLC 676,284 1,373
Barclays PLC 1,346,817 9,304
BG Group PLC 727,751 2,911
BHP Billiton PLC 472,369 2,416
BOC Group PLC 97,556 1,230
Boots Group PLC 181,534 1,661
(1) BP PLC 4,643,336 29,425
British American Tobacco PLC 339,458 3,255
o British Sky Broadcasting PLC 246,398 2,554
BT Group PLC 1,818,581 5,210
Cadbury Schweppes PLC 431,126 2,401
Carnival PLC 46,883 1,170
Centrica PLC 861,673 2,290
Compass Group PLC 477,238 2,197
Diageo PLC 660,104 7,322
Dixons Group PLC 451,176 802
(3) GlaxoSmithKline PLC 1,249,431 25,041
GUS PLC 205,342 1,898
HBOS PLC 781,981 9,161
Hilton Group PLC 350,064 856
(5) HSBC Holdings PLC 1,977,771 21,668
Imperial Chemical Industries
PLC 268,422 557
Imperial Tobacco Group PLC 155,757 2,606
o Intercontinental Hotels Group
PLC 166,984 1,014
J. Sainsbury PLC 313,408 1,185
Kingfisher PLC 561,129 2,193
Land Securities Group PLC 95,357 1,154
Legal & General Group PLC 1,423,718 1,763
Lloyds TSB Group PLC 1,157,315 7,611
See financial notes.
128
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Man Group PLC 57,326 967
Marks & Spencer Group PLC 488,160 2,274
o Mitchells & Butlers PLC 166,984 566
National Grid Transco PLC 649,264 4,265
Northern Rock PLC 91,392 1,045
Pearson PLC 179,933 1,500
Prudential PLC 410,142 2,511
Reckitt Benckiser PLC 111,099 1,959
Reed Elsevier PLC 261,955 2,089
Rentokil Initial PLC 364,152 1,088
Reuters Group PLC 322,330 695
Rio Tinto PLC 216,014 4,129
(9) Royal Bank of Scotland Group
PLC 566,423 14,856
Scottish & Newcastle PLC 145,929 834
Scottish & Southern Energy
PLC 173,758 1,786
Scottish Power PLC 382,227 2,375
Shell Transport & Trading Co.
PLC 1,988,261 11,909
Smith & Nephew PLC 175,479 1,170
Smiths Group PLC 107,917 1,154
Standard Chartered PLC 221,252 2,468
Tesco PLC 1,500,750 4,749
Unilever PLC 577,965 5,681
United Utilities PLC 124,590 1,197
(2) Vodafone Group PLC 14,241,429 28,110
Wm. Morrison Supermarkets 268,328 800
Wolseley PLC 129,857 1,256
WPP Group PLC 230,860 1,643
-----------
282,127
UNITED STATES 0.0%
---------------------------------------------------------------
o NTL Europe, Inc. 41 --
FOREIGN PREFERRED STOCK
0.3% of investments
AUSTRALIA 0.3%
---------------------------------------------------------------
o News Corp. Ltd. 417,655 2,467
WARRANTS
0.0% of investments
FRANCE 0.0%
---------------------------------------------------------------
o Casino Guichard Perrachon SA,
expires 12/15/03 1,026 --
o Casino Guichard Perrachon SA,
expires 12/15/05 1,026 --
o France Telecom-CVG Equant NV,
expires 06/29/04 35,326 567
-----------
567
UNITED STATES 0.0%
---------------------------------------------------------------
o NTL, Inc., Series A,
expires 01/13/11 48 --
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
SHORT-TERM INVESTMENT
0.1% of investments
Bank One, Grand Cayman
Time Deposit
0.80%, 05/01/03 941 941
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
129
SCHWAB INTERNATIONAL INDEX FUND(R) -- Financials
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- ----------------------------------------------------------------------
Investments, at market value
(including $132,774 of securities on loan) $ 947,689 a
Collateral held for securities on loan 139,657
Foreign currency 21 b
Receivables:
Fund shares sold 895
Dividends 5,343
Income from lending securities 140
Dividend tax reclaim 589
Prepaid expenses + 18
-----------
TOTAL ASSETS 1,094,352
LIABILITIES
- ----------------------------------------------------------------------
Collateral held for securities on loan 139,657
Payables:
Fund shares redeemed 603
Interest expenses 1
Withholding taxes 82
Investment adviser and administrator fees 36
Transfer agent and shareholder service fees 15
Accrued expenses + 403
-----------
TOTAL LIABILITIES 140,797
NET ASSETS
- ----------------------------------------------------------------------
TOTAL ASSETS 1,094,352
TOTAL LIABILITIES - 140,797
-----------
NET ASSETS $ 953,555
NET ASSETS BY SOURCE
Capital received from investors 1,404,727
Net investment income not yet distributed 8,690
Net realized capital losses (288,858)
Net unrealized capital losses (171,004)
NET ASSET VALUE (NAV)
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $418,292 40,149 $10.42
Select Shares(R) $535,263 51,414 $10.41
a The fund paid $1,118,814 for these securities. Not counting short-term
obligations and government securities, the fund paid $22 for securities
during the report period, and received $34,599 from securities it sold or that
matured.
b The fund paid $21 for these currencies.
FEDERAL TAX DATA
- ----------------------------------------------------------------------
PORTFOLIO COST $1,124,779
NET UNREALIZED GAINS AND LOSSES:
Gains $ 87,510
Losses + (264,600)
------------
($ 177,090)
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $ 19,471
Long-term capital gains $ --
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2004 $ 1,743
2005 1,836
2006 11,905
2007 7
2008 3,669
2009 130,942
2010 + 112,722
------------
$ 262,824
See financial notes.
130
SCHWAB INTERNATIONAL INDEX FUND(R) -- Financials
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- ----------------------------------------------------------------------
Dividends $ 12,209 a
Interest 8
Lending of securities + 274
-----------
TOTAL INVESTMENT INCOME 12,491
NET REALIZED GAINS AND LOSSES
- ----------------------------------------------------------------------
Net realized losses on investments sold (19,738)
Net realized gains on foreign currency transactions + 59
-----------
NET REALIZED LOSSES (19,679)
NET UNREALIZED GAINS AND LOSSES
- ----------------------------------------------------------------------
Net unrealized gains on investments 24,403
Net unrealized gains on foreign currency transactions + 49
-----------
NET UNREALIZED GAINS 24,452
EXPENSES
- ----------------------------------------------------------------------
Investment adviser and administrator fees 1,906 b
Transfer agent and shareholder service fees:
Investor Shares 523 c
Select Shares(R) 260 c
Trustees' fees 5 d
Custodian fees 302
Portfolio accounting fees 78
Professional fees 17
Registration fees 22
Shareholder reports 76
Interest expense 4
Other expenses + 10
-----------
Total expenses 3,203
Expense reduction - 665 e
-----------
NET EXPENSES 2,538
INCREASE IN NET ASSETS FROM OPERATIONS
- ----------------------------------------------------------------------
TOTAL INVESTMENT INCOME 12,491
NET EXPENSES - 2,538
-----------
NET INVESTMENT INCOME 9,953
NET REALIZED LOSSES (19,679) f
NET UNREALIZED GAINS + 24,452 f
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $ 14,726
a An additional $1,636 was withheld for foreign taxes.
b Calculated as a percentage of average daily net assets: 0.43% of the first
$500 million and 0.38% of assets beyond that.
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.
d For the fund's independent trustees only.
e Includes $574 from the investment adviser (CSIM) and $91 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 29, 2004, as follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
- -------------------------------------------------------
Investor Shares 0.69
Select Shares 0.50
Prior to March 1, 2003, these limits were 0.58% and 0.47% for the Investor
Shares and Select Shares, respectively. This limit doesn't include interest,
taxes and certain non-routine expenses.
f These add up to a net gain on investments of $4,773.
See financial notes.
131
SCHWAB INTERNATIONAL INDEX FUND(R) -- Financials
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for current period are unaudited.
OPERATIONS
- ------------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net Investment income $ 9,953 $ 19,959
Net realized losses (19,679) (111,855)
Net unrealized gains or losses + 24,452 (61,568)
-------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 14,726 (153,464)
DISTRIBUTIONS PAID
- ------------------------------------------------------------------------------------------------
Dividends from net investment income
Investor Shares 9,001 5,966
Select Shares(R) + 11,662 7,879
-------------------------------------
TOTAL DIVIDENDS FROM NET INVESTMENT INCOME $ 20,663 $ 13,845 a
TRANSACTIONS IN FUND SHARES
- ----------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
SHARES SOLD
Investor Shares 2,718 $ 27,512 10,848 $ 131,550
Select Shares + 4,873 48,820 14,690 174,196
--------------------------------------------------------
TOTAL SHARES SOLD 7,591 $ 76,332 25,538 $ 305,746
SHARES REINVESTED
Investor Shares 881 $ 9,001 456 $ 5,554
Select Shares + 1,143 11,662 610 7,432
--------------------------------------------------------
TOTAL SHARES REINVESTED 2,024 $ 20,663 1,066 $ 12,986
SHARES REDEEMED
Investor Shares (5,725) ($ 57,772) (11,478) ($ 134,445)
Select Shares + (5,760) (58,362) (14,549) (173,548)
--------------------------------------------------------
TOTAL SHARES REDEEMED (11,485) ($ 116,134) (26,027) ($ 307,993) b
NET INCREASE OR DECREASE (1,870) ($ 19,139) 577 $ 10,739
SHARES OUTSTANDING AND NET ASSETS
- ----------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 93,433 $ 978,631 92,856 $1,135,201
Total increase or
decrease + (1,870) (25,076) 577 (156,570) c
--------------------------------------------------------
END OF PERIOD 91,563 $ 953,555 93,433 $ 978,631 d
a The tax-basis components of distributions paid for the prior period are:
Ordinary Income $13,845
Long-term capital gains $ --
b Dollar amounts are net of proceeds received from early withdrawal fees that
the fund charges on shares sold 180 days or less after buying them.
CURRENT PERIOD
Investor Shares $ 43
Select Shares + 27
------
TOTAL $ 70
PRIOR PERIOD
Investor Shares $170
Select Shares + 56
------
TOTAL $226
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 net investment income not yet distributed in the amount of $8,690 and
$19,400 for the current period and the prior period, respectively.
Percent of fund shares owned by other SchwabFunds(R) as of the end of the
current period:
SCHWAB MARKETTRACK PORTFOLIOS(R)
All Equity Portfolio 11.4%
Growth Portfolio 10.7%
Balanced Portfolio 7.4%
Conservative Portfolio 2.9%
SCHWAB ANNUITY PORTFOLIOS
Growth Portfolio II 0.4%
See financial notes.
132
FINANCIAL NOTES UNAUDITED
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(R), 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(R) e.SHARES
- ------------------------------------------------------------------------
S&P 500 O O O
- ------------------------------------------------------------------------
SCHWAB 1000 O O
- ------------------------------------------------------------------------
SMALL-CAP INDEX O O
- ------------------------------------------------------------------------
TOTAL STOCK MARKET INDEX O O
- ------------------------------------------------------------------------
INTERNATIONAL INDEX O O
- ------------------------------------------------------------------------
For these funds, shares are bought and sold at net asset value, or NAV, which is
the price for all outstanding shares. Each share has a par value of 1/1,000 of a
cent, and the 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(R)
Schwab Short-Term Bond Market Fund
Schwab Total Bond Market Fund
Schwab YieldPlus Fund(R)
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(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
Schwab Core Equity Fund(TM)
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Schwab U.S. MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Hedged Equity Fund(TM)
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Institutional Select S&P 500 Fund
Institutional Select Large-Cap Value Index Fund
Institutional Select Small-Cap Value Index Fund
Schwab Equity Index Funds
133
FUND OPERATIONS
Most of the funds'investments are described in the fund-by-fund sections earlier
in this report. However, there are certain other investments 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.
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.
The 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(R) 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 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 trusts
have custodian overdraft facilities and line of credit arrangements of $150
million, $100 million and $150 million with PNC Bank, N.A., Bank of America,
N.A. and The Bank of New York, respectively. The funds pay interest on the
amounts they borrow at rates that are negotiated periodically.
Schwab Equity Index Funds
134
AMOUNT
OUTSTANDING AVERAGE AVERAGE
AT 4/30/03 BORROWING* INTEREST
FUND ($ x 1,000) ($ x 1,000) RATE* (%)
- ---------------------------------------------------------------------
SCHWAB
S&P 500 FUND -- 5,007 1.64
- ---------------------------------------------------------------------
SCHWAB 1000(R) -- 1,888 1.70
- ---------------------------------------------------------------------
SCHWAB SMALL-CAP
INDEX FUND(R) 2,616 2,076 1.74
- ---------------------------------------------------------------------
SCHWAB TOTAL STOCK
MARKET INDEX FUND(R) -- 1,810 1.65
- ---------------------------------------------------------------------
SCHWAB INTERNATIONAL
INDEX FUND(R) -- 1,323 1.73
- ---------------------------------------------------------------------
* For the six-month period ended 4/30/03.
THE FUNDS PAY FEES 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.
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.
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 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(R) when
practical. When one fund is seeking to sell a security that another is seeking
to buy, an interfund transaction can allow both funds to benefit by reducing
transaction costs. This practice is limited to funds that share the same
investment adviser, trustees and officers.
THE 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 realized net 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.
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.
Schwab Equity Index Funds
135
- - SECURITIES FOR WHICH NO MARKET QUOTATIONS ARE READILY AVAILABLE: valued at
fair value, as determined in good faith by the fund's investment adviser
using guidelines adopted by the fund's Board of Trustees.
- - FUTURES 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 DISCOUNTS is recorded as it accrues.
REALIZED GAINS AND LOSSES from security transactions are based on the identified
costs of the securities involved.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES are reported in U.S.
dollars. For assets and liabilities held on a given date, the dollar value is
based on market exchange rates in effect on that date. Transactions involving
foreign currencies, including purchases, sales, income receipts and expense
payments, are 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 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 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.
Schwab Equity Index Funds
136
GLOSSARY
Words and phrases that appear in financial reports often have specific meanings
that are different from their everyday meanings. The glossary below tells you
what is meant by the following terms when they are used in this report.
ASSET ALLOCATION The practice of dividing a portfolio among different asset
classes, with each asset class assigned a particular percentage.
ASSET CLASS A group of securities with similar structure and basic
characteristics. Stocks, bonds and cash are the three main examples of asset
classes.
BETA A historical measure of an investment's volatility relative to a market
index (usually the S&P 500). The index is defined as having a beta of 1.00.
Investments with a beta higher than 1.00 have been more volatile than the index;
those with a beta of less than 1.00 have been less volatile.
BOND A security representing a loan from the investor to the issuer. A bond
typically pays interest at a fixed rate (the "coupon rate") until a specified
date (the "maturity date"), at which time the issuer returns the money borrowed
("principal" or "face value") to the bondholder. Because of their structure,
bonds are sometimes called "fixed income securities" or "debt securities."
CAP, CAPITALIZATION See "market cap."
CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an
investment and its value at a later time. If the investment has been sold, the
capital gain or loss is considered a realized gain or loss. If the investment is
still held, the gain or loss is still "on paper" and is considered unrealized.
EARNINGS GROWTH RATE For a mutual fund, the average yearly rate at which the
earnings of the companies in the fund's portfolio have grown, measured over the
past five years.
EARNINGS PER SHARE (EPS) A company's earnings, or net income, for the past 12
months, divided by the number of shares outstanding.
EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to
cover the fund's operating expenses. An expense ratio of 0.50% means that a
fund's expenses amount to half of one percent of its average net assets a year.
MARKET CAP, MARKET CAPITALIZATION The value of a company as determined by the
total value of all shares of its stock outstanding.
MEDIAN MARKET CAP The midpoint of the range of market caps of the stocks held by
a fund. There are different ways of calculating median market cap. With a simple
median, half of the stocks in the fund's portfolio would be larger than the
median, and half would be smaller. With a weighted median (the type that is
calculated for these funds), half of the fund's assets are invested in stocks
that are larger than the median market cap, and half in stocks that are smaller.
NET ASSET VALUE (NAV) The value of one share of a mutual fund. NAV is calculated
by taking the fund's total assets, subtracting liabilities, and dividing by the
number of shares outstanding.
OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual
fund, indicates all shares currently held by investors.
PRICE-TO-BOOK RATIO (P/B) The market price of a company's stock compared with
its "book value." A mutual fund's P/B is the weighted average of the P/B of all
stocks in the fund's portfolio.
PRICE-TO-EARNINGS RATIO (P/E) The market price of a company's stock compared
with earnings over the past year. A mutual fund's P/E is the weighted average of
the P/E of all stocks in the fund's portfolio.
RETURN ON EQUITY (ROE) The average yearly rate of return for each dollar of
investors' money, measured over the past five years.
STOCK A share of ownership, or equity, in the issuing company.
TOTAL RETURN The 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.
Schwab Equity Index Funds
137
NOTES
NOTES
NOTES
CONTACT SCHWAB
SchwabFunds(R) offers you a complete family of mutual funds, each one based on a
time-tested investment approach and using disciplined, clearly defined
management strategies.
Actively managed funds include multi-manager stock funds, a fund that uses
long-short strategies, and a range of taxable and tax-free bond funds. Index
funds include large-cap, small-cap and international stock funds. 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. Please call 1-800-435-4000 for a free
prospectus and brochure for any Schwab Fund. 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)
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.
1 Shares of Sweep Investments(TM) may not be purchased over the Internet.
2 Orders placed in person or through a telephone representative are subject to a
service fee payable to Schwab.
THE SCHWABFUNDS FAMILY
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 Hedged Equity Fund(TM)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab MarketMasters Funds(TM)
Schwab U.S. MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
ASSET ALLOCATION FUNDS
Schwab MarketTrack Portfolios(R)
Schwab All Equity Portfolio
Schwab Growth Portfolio
Schwab Balanced Portfolio
Schwab Conservative Portfolio
BOND FUNDS
Schwab YieldPlus Fund(R)
Schwab Short-Term Bond Market Fund
Schwab Total Bond Market Fund
Schwab GNMA 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 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 when you're between investments. Or, for your larger cash
reserves, choose one of our Value Advantage Investments(R).
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
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) 2003 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
Printed on recycled paper.
REG13562-05
Schwab Core Equity Fund(TM)
SEMIANNUAL REPORT
APRIl 30, 2003
[CHARLES SCHWAB LOGO]
Using the power of Schwab Equity Ratings(TM) in seeking to provide long-term
capital appreciation with overall risk management.
In This Report
Management's Discussion .............................................. 2
The president of SchwabFunds(R) and the fund's managers discuss the
factors that affected fund performance during the report period.
Fund Performance and Related Data
Fund and index performance data, fund facts, portfolio holdings and
fund financials.
Schwab Core Equity Fund(TM) ........................................ 6
Ticker Symbol: SWANX
The fund seeks long-term capital growth.
Financial Notes ...................................................... 16
Glossary ............................................................. 19
FROM THE CHAIRMAN
[PHOTO OF CHARLES R. SCHWAB]
Charles R. Schwab
Chairman
Without question, these are challenging times for America's investors. But I
believe that they also may provide opportunities, especially for those who stay
involved with their investment portfolios and review their mutual fund holdings
with their investment objectives in mind.
As this report goes to press, the President has signed into law a new tax
package that I believe offers significant potential benefits for all investors.
The new tax package will reduce the rate of taxation on many corporate dividends
and on capital gains. I believe that reducing these taxes could serve as a
stimulus to the stock market, thereby benefiting all owners of U.S. stocks.
For years, corporate dividends have been taxed twice: first when the corporation
earned the money, and again when investors received the dividend. In my view,
this has provided an incentive for corporations to retain profits as cash rather
than sharing them with their shareholders. I believe reducing the dividend tax
gives companies the right incentives to invest and create new jobs.
Here at Schwab, we are actively exploring ways to help investors meet their
financial objectives. At SchwabFunds(R), these efforts are being led by the new
president of SchwabFunds, Randall Merk. Randy brings a wealth of experience to
the job, and we welcome his leadership, vision and wisdom.
On behalf of SchwabFunds, I'd like to thank you for investing with us. Your
continued trust and support mean a great deal to us. In turn, it's our mission
to help you meet your financial goals.
Sincerely,
/s/ Charles R. Schwab
MANAGEMENT'S DISCUSSION November 1, 2002--April 30, 2003
[PHOTO OF RANDALL W. MERK]
RANDALL W. MERK is President and CEO of Charles Schwab Investment Management,
Inc. and is president of each of the funds covered in this report. He joined the
firm in August of 2002, bringing with him 24 years of experience in the asset
management industry.
Dear Shareholder:
As one of the newer members of the SchwabFunds(R) team, I've been struck by the
talent and integrity of the people here. Above all, I've been impressed with the
dedication they show to understanding the needs and concerns of our
shareholders.
That dedication is particularly important right now. Times of market volatility
and uncertainty about world events demand as high a level of diligence as ever
on the part of investment professionals. At SchwabFunds we are keenly aware of
this, and we continue to work hard to uphold the best interests of our
shareholders.
Mutual funds are facing many initiatives at the moment. These include changes in
corporate governance practices, such as the Sarbanes-Oxley Act (which requires
senior management certification of financial reports), and new regulations
affecting disclosures of mutual funds' proxy voting practices. Many of these
changes have the potential to benefit shareholders, and I want to assure you
that we'll keep you informed of the progress we are making with them.
In the meantime, it is worth keeping in mind that the basic tenets of mutual
fund investing remain unchanged. In particular, time-tested investment practices
such as asset allocation and diversification are as important as ever. The range
of choices available from SchwabFunds can make it easy to diversify your
portfolio. In addition, as our range of funds grows, we'll let you know when new
funds are launched (or you can stay informed by visiting
www.schwab.com/schwabfunds).
In closing, let me thank you for choosing SchwabFunds for your mutual fund
investments. We're committed to helping you reach your financial goals. If there
is something more that we can do to help, I hope you'll let us know.
Sincerely,
/s/ Randall W. Merk
Schwab Core Equity Fund(TM)
2
[PHOTO OF GERI HOM AND LARRY MANO]
GERI HOM, a vice president and senior portfolio manager of the investment
adviser, has overall responsibility for the management of the fund. Prior to
joining the firm in 1995, she worked for nearly 15 years in equity management.
LARRY MANO, a director and a portfolio manager, is responsible for the
day-to-day management of the fund. Prior to joining the firm in 1998, he worked
for 20 years in equity management.
THE ECONOMY
THE WAR IN IRAQ DOMINATED HEADLINES, ALTHOUGH IT WAS NOT THE ONLY FACTOR
AFFECTING THE ECONOMY. As the report period began, the nation's focus was
divided between fundamental economic issues and concerns over the looming war
with Iraq. Once the war arrived, attention focused on Iraq and the progress of
political and military actions. Toward the end of the report period, as
intensive military action drew to a close, the nation's focus shifted and its
level of concern over war-related uncertainty declined.
One reflection of this pattern of changing concerns over the war was the price
of oil. Leading up to the war, oil prices continued to ratchet up to nearly $40
a barrel. But the price quickly dropped to around $30 a barrel when it began to
appear that the major fighting would not last long.
The economy that Americans found at the end of the war was not much different
than it had been during the period before the war. Gross Domestic Product was
positive but weak, while joblessness edged up to 6%.Consumer spending remained
strong, helped in part by widespread discounts and depressed prices in most
sectors (aside from healthcare and oil).But discounted prices for consumers
translated into thin profits for companies, and business capital spending
remained minimal. A half-percent interest rate cut in November 2002 showed the
Federal Reserve continuing to apply economic stimulus; the president and
Congress contributed by advancing new fiscal and tax policies.
THE MARKET
MOST TYPES OF STOCKS POSTED GAINS FOR THE PERIOD, WITH SMALL-CAP GROWTH STOCKS
AND LARGE-CAP VALUE STOCKS LEADING THE WAY. Positive returns were welcome news
after prior declines. However, the volatility that has characterized the market
in recent years continued throughout the period.
The strongest month of the period for stocks was April 2003, which saw the
market rise as the military action in Iraq ended and as the first corporate
earnings reports for 2002 appeared to indicate some improvement over the
disappointing earnings of 2001.Another factor that we believe may have helped
lift the market during the period was the increasing possibility of a dividend
tax cut.
Schwab Core Equity Fund (TM)
3
MANAGEMENT'S DISCUSSION continued
Stock prices during the period appeared to generally reflect companies'
established earning power, although anticipated future earnings began to
drive returns in some sectors.
Looking at stock prices during the period, it appeared that investors were
reluctant to give much consideration to projections of future earnings (which
may or may not turn out to be accurate) when deciding how much they were willing
to pay for a stock.
In our view, this was a sign of lingering skepticism among investors about
earnings projections, whether those projections came from corporate management
or from analysts. As the report period came to a close, there were some issues
that remained unresolved. For instance, there were still companies coming
forward with earnings restatements or with large one-time charges. There were
also questions about how companies account for pension plan liabilities, and how
related practices might trigger another round of earnings restatements. We
believe investor's sensitivity to factors such as these was likely heightened by
the memory of the many recent high-profile cases of corporate malfeasance.
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.
4.48% S&P 500(R) INDEX: measures U.S. large-cap stocks
7.55% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
1.81% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in Europe,
Australasia and the Far East
4.31% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond market
[LINE GRAPH]
Lehman Brothers U.S.
Aggregate MSCI-EAFE Russell 2000 S&P 500
Bond Index Index Index Index
31-Oct-02 0 0 0 0
Nov-02 -0.18 -0.36 2.6 1.72
Nov-02 0.59 1.71 2.65 1.95
Nov-02 0.25 0.52 3.5 2.2
Nov-02 -0.07 3.64 6.59 5.6
Nov-02 -0.03 4.7 9.98 6.2
Dec-02 0.52 0.96 5.77 2.59
Dec-02 0.86 -0.03 6.05 2.06
Dec-02 1.42 -1.25 2.87 0.14
Dec-02 1.99 0.71 4.5 0.75
Jan-03 1.36 2.13 5.44 3.01
Jan-03 1.18 2.45 6.35 5.14
Jan-03 1.83 3.2 6.09 3.7
Jan-03 2.2 -0.55 3.09 0.61
Jan-03 2.12 -3.01 -1.19 -4.19
Feb-03 2.47 -3.67 -1.94 -4.88
Feb-03 2.45 -4.75 -4.58 -7.18
Feb-03 2.75 -3.54 -3.25 -4.91
Feb-03 3.54 -6.69 -2.77 -4.84
Mar-03 3.82 -6.69 -4.79 -6.53
Mar-03 3.45 -10.09 -4.3 -5.38
Mar-03 2.18 -5.24 -0.25 -0.36
Mar-03 3.12 -5.07 -0.45 -1.16
Apr-03 3.12 -4.67 1.13 -0.23
Apr-03 3.14 -3.48 0.46 -0.74
Apr-03 3.4 -0.88 3.46 1.78
Apr-03 3.96 0.21 5.76 3.82
30-Apr-03 4.31 1.81 7.55 4.48
These figures assume dividends and distributions were reinvested. Index figures
don't include trading and management costs, which would lower performance.
Indices are unmanaged and you can't invest in them directly. Remember that past
performance is not an indication of future results.
Data source: Charles Schwab & Co., Inc.
Schwab Core Equity Fund (TM)
4
The fund uses schwab equity ratings TM to aid in stock selection,
typically investing in stocks that have ratings of a or b and avoiding
those with ratings of d or f.
THE FUND
ALTHOUGH THE FUND MAINTAINED SIMILAR INDUSTRY WEIGHTINGS TO THE S&P 500(R)
INDEX, ITS BENCHMARK, IT DID NOT PERFORM AS WELL AS THAT INDEX DURING THE
SIX-MONTH REPORT PERIOD. After rising at the beginning of the period only to
fall back into negative territory, the fund rebounded in March and April 2003
when U.S. stocks in general rose.
In our view, the main reason the fund underperformed its benchmark during the
period was that the market recovery that was underway as the report period
opened appeared to be led mainly by rebounding stocks with higher price
volatility and higher growth expectations, whereas the fund's strategy favors
stocks with lower risk, solid fundamentals and attractive valuation
characteristics.
During the report period, we saw some stocks with ratings of D or F outperform
those rated A or B. However, Schwab Equity Ratings' research has indicated that
although higher risk stocks at times can outperform the market (especially
during strong market uptrends), these performance surges historically have
tended to be unsustainable. Shareholders should bear in mind that the fund is
intended for long-term investment, and that it is designed to outperform the S&P
500 over the long term while exhibiting similar risk.
Schwab Equity Ratings are produced by the Schwab Equity Model Development
Department.
The views expressed here are those of fund management only. 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 Core Equity Fund (TM)
5
SCHWAB CORE EQUITY FUND TM
PERFORMANCE as of 4/30/03
AVERAGE ANNUAL TOTAL RETURNS 1,2
This chart compares performance of the fund with the S&P 500(R) Index and the
Morningstar Large-Cap Blend Fund category.
[BAR CHART]
FUND S & P 500 INDEX CATEGORY AVERAGE
6 MONTHS 1.35 4.48 3.31
1 YEAR -12.95 -13.31 -14.72
5 YEARS -1.76 -2.43 -3.05
SINCE INCEPTION: 7/1/96 6.63 6.28 n/a
PERFORMANCE OF A $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 the S&P 500 Index.
$15,509 FUND
$15,165 S&P 500 INDEX
[LINE GRAPH]
Fund S&P 500 Index
30-Jun-96 10000 10000
Jul-96 9690 9558
Aug-96 9880 9760
Sep-96 10620 10308
Oct-96 11010 10593
Nov-96 11640 11393
Dec-96 11368 11168
Jan-97 11959 11865
Feb-97 11908 11958
Mar-97 11287 11468
Apr-97 12081 12152
May-97 12722 12890
Jun-97 13272 13468
Jul-97 14462 14539
Aug-97 13821 13724
Sep-97 14646 14475
Oct-97 13964 13992
Nov-97 14676 14640
Dec-97 14963 14891
Jan-98 15054 15057
Feb-98 16155 16142
Mar-98 16801 16969
Apr-98 16949 17140
May-98 16620 16845
Jun-98 17448 17529
Jul-98 17198 17343
Aug-98 14555 14839
Sep-98 15565 15790
Oct-98 16529 17074
Nov-98 17561 18109
Dec-98 19158 19152
Jan-99 20138 19952
Feb-99 19134 19332
Mar-99 19961 20105
Apr-99 20882 20883
May-99 20493 20390
Jun-99 21910 21522
Jul-99 21189 20850
Aug-99 21154 20746
Sep-99 20658 20177
Oct-99 22347 21455
Nov-99 22808 21891
Dec-99 24474 23180
Jan-00 23416 22017
Feb-00 24296 21600
Mar-00 26222 23712
Apr-00 25087 22998
May-00 24232 22527
Jun-00 24844 23083
Jul-00 24309 22723
Aug-00 25839 24135
Sep-00 24117 22860
Oct-00 23633 22764
Nov-00 22000 20971
Dec-00 22589 21073
Jan-01 22575 21821
Feb-01 20549 19831
Mar-01 19250 18574
Apr-01 20507 20017
May-01 20577 20151
Jun-01 20228 19662
Jul-01 19711 19469
Aug-01 18342 18250
Sep-01 17071 16776
Oct-01 17504 17096
Nov-01 18495 18407
Dec-01 18547 18569
Jan-02 18280 18298
Feb-02 17887 17945
Mar-02 18660 18620
Apr-02 17816 17491
May-02 17788 17362
Jun-02 16692 16126
Jul-02 15611 14870
Aug-02 15737 14966
Sep-02 14290 13339
Oct-02 15301 14513
Nov-02 15667 15368
Dec-02 14971 14466
Jan-03 14546 14087
Feb-03 14221 13876
Mar-03 14504 14010
30-Apr-03 15509 15165
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.
The fund's share price and principal values change, and when you sell your
shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results. Results for the report period
are not annualized.
1 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower. These returns also 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. As of 4/30/03, the total
number of funds in the Morningstar Large-Cap Blend Fund category for the
six-month, one- and five-year periods was 1,410, 1,362, and 711, respectively.
6
SCHWAB CORE EQUITY FUND TM
FUND FACTS as of 4/30/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 164
- -------------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $37,795
- -------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 21.2
- -------------------------------------------------
PRICE/BOOK RATIO (P/B) 4.4
- -------------------------------------------------
PORTFOLIO TURNOVER RATE 2 43%
- -------------------------------------------------
EXPENSE RATIO 3 0.75%
- -------------------------------------------------
TOP HOLDINGS 4
% OF
SECURITY INVESTMENTS
- -------------------------------------------------
(1) BANK OF AMERICA CORP. 5.7%
- -------------------------------------------------
(2) JOHNSON & JOHNSON 4.6%
- -------------------------------------------------
(3) PROCTER & GAMBLE CO. 4.5%
- -------------------------------------------------
(4) MICROSOFT CORP. 4.1%
- -------------------------------------------------
(5) CITIGROUP, INC. 3.3%
- -------------------------------------------------
(6) THE PROGRESSIVE CORP. 2.7%
- -------------------------------------------------
(7) CISCO SYSTEMS, INC. 2.7%
- -------------------------------------------------
(8) FANNIE MAE 2.4%
- -------------------------------------------------
(9) SBC COMMUNICATIONS, INC. 2.3%
- -------------------------------------------------
(10) VERIZON COMMUNICATIONS, INC. 2.2%
- -------------------------------------------------
TOTAL 34.5%
- -------------------------------------------------
INDUSTRY WEIGHTINGS
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
12.9% HEALTHCARE/DRUGS & MEDICINE
10.1% BUSINESS MACHINES & SOFTWARE
9.5% BANKS
8.0% MISCELLANEOUS FINANCE
7.5% TELEPHONE
7.1% INSURANCE
5.7% BUSINESS SERVICES
5.4% HOUSEHOLD PRODUCTS
4.2% ELECTRONICS
29.6% OTHER
1 Source: Morningstar, Inc. This style assessment is the result of comparing the
fund with the S&P 500(R) Index, based on P/E, P/B and median market cap. The
assessment reflects the fund's portfolio as of 4/30/03, which may have changed
since then, and is not a precise indication of risk or performance-past,
present or future.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes and certain non-routine expenses).
4 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
7
SCHWAB CORE EQUITY FUND TM -- Financials
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- --------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 10.89 12.53 18.53 18.91 14.57 13.72
-----------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.04 0.08 0.08 0.05 0.06 0.10
Net realized and unrealized gains or losses 0.10 (1.64) (4.57) 1.08 4.94 2.20
-----------------------------------------------------------
Total income or loss from investment operations 0.14 (1.56) (4.49) 1.13 5.00 2.30
Less distributions:
Dividends from net investment income (0.07) (0.08) (0.07) (0.04) (0.09) (0.12)
Distributions from net realized gains -- -- (1.44) (1.47) (0.57) (1.33)
-----------------------------------------------------------
Total distributions (0.07) (0.08) (1.51) (1.51) (0.66) (1.45)
-----------------------------------------------------------
Net asset value at end of period 10.96 10.89 12.53 18.53 18.91 14.57
-----------------------------------------------------------
Total return (%) 1.35 2 (12.58) (25.93) 5.75 35.20 18.37
RATIOS/SUPPLEMENTAL DATA (%)
- --------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.75 3 0.75 0.75 0.75 1 0.75 0.75
Expense reductions reflected in above ratio 0.15 3 0.16 0.13 0.11 0.18 0.37
Ratio of net investment income to
average net assets 0.85 3 0.63 0.55 0.29 0.34 0.70
Portfolio turnover rate 43 2 114 106 96 99 115
Net assets, end of period ($ x 1,000,000) 195 179 210 342 289 192
1 Would have been 0.76% if certain non-routine expenses (proxy fees) had been
included.
2 Not annualized.
3 Annualized.
See financial notes.
8
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
= Collateral for open futures contracts
COST MARKET VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------
98.8% COMMON STOCK 181,634 191,892
1.1% SHORT-TERM
INVESTMENT 2,104 2,104
0.1% U.S. TREASURY
OBLIGATION 270 270
- --------------------------------------------------------
100.0% TOTAL INVESTMENTS 184,008 194,266
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 98.8% of investments
AEROSPACE / DEFENSE 2.4%
-------------------------------------------------------
The Boeing Co. 37,000 1,009
Rockwell Automation, Inc. 35,300 805
United Technologies Corp. 47,200 2,918
---------
4,732
AIR TRANSPORTATION 1.5%
-------------------------------------------------------
FedEx Corp. 49,500 2,964
ALCOHOLIC BEVERAGES 0.0%
-------------------------------------------------------
Anheuser-Busch Cos., Inc. 500 25
APPAREL 1.6%
-------------------------------------------------------
o Jones Apparel Group, Inc. 16,000 456
Liz Claiborne, Inc. 24,200 787
Nike, Inc., Class B 7,500 402
VF Corp. 36,800 1,448
---------
3,093
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.0%
-------------------------------------------------------
Dana Corp. 64,600 600
Delphi Corp. 6,000 50
Eaton Corp. 14,100 1,157
o SPX Corp. 6,200 210
---------
2,017
BANKS 9.5%
-------------------------------------------------------
=(1) Bank of America Corp. 150,000 11,108
UnionBanCal Corp. 20,600 832
Wachovia Corp. 96,000 3,668
Wells Fargo & Co. 59,800 2,886
---------
18,494
BUSINESS MACHINES & SOFTWARE 10.1%
-------------------------------------------------------
Adobe Systems, Inc. 10,800 373
o BMC Software, Inc. 22,300 333
o(7) Cisco Systems, Inc. 345,800 5,201
o Dell Computer Corp. 54,800 1,584
o EMC Corp. 24,900 226
International Business Machines
Corp. 10,200 866
o Lexmark International, Inc.,
Class A 10,800 805
=(4) Microsoft Corp. 313,800 8,024
o Oracle Corp. 53,500 636
o Storage Technology Corp. 12,500 309
o Sybase, Inc. 17,200 220
o Xerox Corp. 105,000 1,035
---------
19,612
BUSINESS SERVICES 5.7%
-------------------------------------------------------
Automatic Data Processing, Inc. 34,300 1,153
o Cendant Corp. 119,000 1,699
o Computer Sciences Corp. 22,900 755
o D&B Corp. 18,000 680
o DoubleClick, Inc. 15,900 137
First Data Corp. 72,400 2,840
o Gartner, Inc., Class B 23,000 180
H&R Block, Inc. 23,300 900
o ITT Educational Services, Inc. 4,800 142
o Mercury Computer Systems, Inc. 6,200 130
Pittston Brink's Group 6,400 82
See financial notes.
9
SCHWAB CORE EQUITY FUND TM -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Symantec Corp. 4,500 198
o Take-Two Interactive Software,
Inc. 10,300 232
o TeleTech Holdings, Inc. 5,000 20
o Thermo Electron Corp. 60,300 1,096
Viad Corp. 37,700 758
----------
11,002
CHEMICAL 3.7%
-------------------------------------------------------
3M Co. 24,900 3,138
E.I. du Pont de Nemours & Co. 84,900 3,611
MacDermid, Inc. 2,500 57
Praxair, Inc. 3,000 174
The Sherwin-Williams Co. 8,500 237
----------
7,217
CONSUMER DURABLE 0.4%
-------------------------------------------------------
Black & Decker Corp. 16,400 677
CONSUMER NON-DURABLE 1.5%
-------------------------------------------------------
o American Greetings Corp.,
Class A 21,000 306
o Cytyc Corp. 32,900 434
Fortune Brands, Inc. 4,500 218
o Marvel Enterprises, Inc. 26,400 445
Mattel, Inc. 62,000 1,348
Newell Rubbermaid, Inc. 3,200 97
----------
2,848
CONTAINERS 0.1%
-------------------------------------------------------
o Pactiv Corp. 8,700 179
ELECTRONICS 4.2%
-------------------------------------------------------
o Acxiom Corp. 43,600 609
o American Power Conversion Corp. 23,300 363
o Emulex Corp. 29,600 606
o Fisher Scientific International, Inc. 29,400 847
o Hutchinson Technology, Inc. 22,000 520
Intel Corp. 182,000 3,349
o LSI Logic Corp. 51,300 275
o Siliconix, Inc. 10,100 285
Texas Instruments, Inc. 64,900 1,200
----------
8,054
ENERGY: RAW MATERIALS 0.5%
-------------------------------------------------------
Anadarko Petroleum Corp. 14,500 644
Cabot Oil & Gas Corp. 6,000 147
Occidental Petroleum Corp. 5,400 161
----------
952
FOOD & AGRICULTURE 1.6%
-------------------------------------------------------
Altria Group, Inc. 20,100 618
Archer-Daniels-Midland Co. 300 3
ConAgra Foods, Inc. 30,200 634
Corn Products International, Inc. 18,700 559
Fresh Del Monte Produce, Inc. 300 6
Kellogg Co. 24,300 796
The Pepsi Bottling Group, Inc. 500 10
PepsiCo, Inc. 10,800 468
----------
3,094
HEALTHCARE / DRUGS & MEDICINE 12.9%
-------------------------------------------------------
o Anthem, Inc. 12,700 872
o Apria Healthcare Group, Inc. 5,000 117
Becton Dickinson & Co. 29,800 1,055
C.R. Bard, Inc. 17,100 1,084
o Cephalon, Inc. 8,000 327
o Coventry Health Care, Inc. 4,000 163
o Health Net, Inc. 30,400 793
o Humana, Inc. 2,200 24
ICN Pharmaceuticals, Inc. 7,300 64
o Invitrogen Corp. 3,600 118
=(2) Johnson & Johnson 158,800 8,950
o King Pharmaceuticals, Inc. 91,100 1,149
o Laboratory Corp. of America
Holdings 2,500 74
McKesson Corp. 13,800 383
Merck & Co., Inc. 59,800 3,479
Mylan Laboratories, Inc. 38,850 1,098
o Oxford Health Plans, Inc. 18,800 550
o Pacificare Health Systems, Inc. 24,000 764
o Pediatrix Medical Group, Inc. 8,500 271
o Quintiles Transnational Corp. 6,100 86
o Sunrise Assisted Living, Inc. 15,900 429
UnitedHealth Group, Inc. 32,600 3,003
o US Oncology, Inc. 18,900 136
----------
24,989
See financial notes.
10
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
HOUSEHOLD PRODUCTS 5.4%
-------------------------------------------------------
Clorox Co. 37,900 1,714
(3) Procter & Gamble Co. 96,800 8,697
----------
10,411
INSURANCE 7.1%
-------------------------------------------------------
AFLAC, Inc. 83,900 2,744
o CNA Financial Corp. 500 12
Fidelity National Financial, Inc. 21,500 740
Landamerica Financial Group, Inc. 1,500 62
Marsh & McLennan Cos., Inc. 64,900 3,095
Metlife, Inc. 20,000 575
Principal Financial Group, Inc. 24,200 704
(6) The Progressive Corp. 78,300 5,324
Protective Life Corp. 8,400 241
Radian Group, Inc. 9,500 377
----------
13,874
MEDIA 3.1%
-------------------------------------------------------
Belo Corp., Class A 6,500 146
The McGraw-Hill Cos., Inc. 27,100 1,582
o Valassis Communications, Inc. 25,000 665
o Viacom, Inc., Class B 75,400 3,273
Washington Post, Class B 400 292
----------
5,958
MISCELLANEOUS FINANCE 8.0%
-------------------------------------------------------
American Express Co. 39,600 1,499
Charter One Financial, Inc. 16,130 469
=(5) Citigroup, Inc. 161,933 6,356
(8) Fannie Mae 64,000 4,633
Freddle Mac 29,300 1,696
Legg Mason, Inc. 16,600 901
Nuveen Investments, Inc.,
Class A 1,500 37
----------
15,591
OIL: DOMESTIC 2.5%
-------------------------------------------------------
Kerr-McGee Corp. 59,500 2,506
o Newfield Exploration Co. 52,600 1,809
Patina Oil & Gas Corp. 1,000 34
Vintage Petroleum, Inc. 49,600 485
----------
4,834
OIL: INTERNATIONAL 0.3%
-------------------------------------------------------
Exxon Mobil Corp. 18,700 658
OPTICAL & PHOTO 0.5%
-------------------------------------------------------
Eastman Kodak Co. 32,400 969
PAPER & FOREST PRODUCTS 0.7%
-------------------------------------------------------
International Paper Co. 35,600 1,273
o Louisiana-Pacific Corp. 11,800 95
----------
1,368
PRODUCER GOODS & MANUFACTURING 0.7%
-------------------------------------------------------
Albany International Corp., Class A 6,300 150
Briggs & Stratton Corp. 1,000 45
HON Industries, Inc. 30,300 896
Pentair, Inc. 8,400 324
----------
1,415
RETAIL 4.0%
-------------------------------------------------------
o Best Buy Co., Inc. 31,900 1,103
o Federated Department Stores, Inc. 66,300 2,030
o The Gap, Inc. 17,700 294
J.C. Penney Co., Inc. Holding Co. 49,800 850
Lowe's Cos., Inc. 8,400 369
o Office Depot, Inc. 73,400 929
o OfficeMax, Inc. 18,000 102
o Staples, Inc. 80,500 1,533
TJX Cos., Inc. 1,500 29
Wal-Mart Stores, Inc. 6,000 338
Winn-Dixie Stores, Inc. 16,300 204
----------
7,781
TELEPHONE 7.5%
-------------------------------------------------------
AT&T Corp. 5,020 86
BellSouth Corp. 105,500 2,689
o Commonwealth Telephone Enterprises,
Inc. 3,000 119
o Crown Castle International Corp. 44,300 282
o Level 3 Communications, Inc. 94,900 543
o Nextel Communications, Inc.,
Class A 71,200 1,053
(9) SBC Communications, Inc. 187,600 4,382
See financial notes.
11
SCHWAB CORE EQUITY FUND TM -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Sprint Corp. (FON Group) 94,000 1,082
(10) Verizon Communications, Inc. 115,700 4,325
----------
14,561
TRAVEL & RECREATION 0.3%
-------------------------------------------------------
o Harrah's Entertainment, Inc. 14,100 555
UTILITIES: ELECTRIC & GAS 2.0%
-------------------------------------------------------
Exelon Corp. 47,500 2,519
Great Plains Energy, Inc. 41,900 1,096
Kinder Morgan, Inc. 800 38
PPL Corp. 8,700 315
----------
3,968
SHORT-TERM INVESTMENT
1.1% of investments
Provident Institutional
TempFund 2,104,017 2,104
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
U.S. TREASURY OBLIGATION
0.1% of investments
= U.S. Treasury Bill
1.13%, 06/19/03 270 270
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
12
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited All numbers x 1,000 except NAV.
ASSETS
- -----------------------------------------------------------------
Investments, at market value
(including $4,910 of securities on loan) $194,266 a
Collateral held for securities on loan 5,107
Receivables:
Fund shares sold 270
Due from brokers for futures 3
Interest 2
Dividends 228
Prepaid expenses + 13
-----------
TOTAL ASSETS 199,889
LIABILITIES
- ----------------------------------------------------------------
Collateral held for securities on loan 5,107
Payables:
Fund shares redeemed 73
Investment adviser and administrator fees 9
Transfer agent and shareholder service fees 5
Accrued expenses + 79
-----------
TOTAL LIABILITIES 5,273
NET ASSETS
- ----------------------------------------------------------------
TOTAL ASSETS 199,889
TOTAL LIABILITIES - 5,273
-----------
NET ASSETS $194,616
NET ASSETS BY SOURCE
Capital received from investors 234,390
Net investment income not yet distributed 510
Net realized capital losses (50,892)
Net unrealized capital gains 10,608 b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$194,616 17,751 $10.96
a The fund paid $184,008 for these securities. Not counting short-term
obligations and government securities, the fund paid $91,124 for securities
during the report period and received $76,793 from securities it sold or that
matured.
b These derive from investments and futures. As of the report date, the fund had
fourteen open S&P 500 futures contracts due to expire on June 20, 2003, with a
contract value of $3,206 and unrealized gains of $300 and two open Russell
2000 futures contracts due to expire on June 19, 2003, with a contract value
of $399 and unrealized gains of $50.
FEDERAL TAX DATA
- ----------------------------------------------
PORTFOLIO COST $184,018
NET UNREALIZED GAINS AND LOSSES:
Gains $ 19,519
Losses + (9,271)
------------
$ 10,248
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $ 1,009
Long-term capital gains $ --
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2009 $ 26,773
2010 + 8,790
------------
$ 35,563
See financial notes.
13
SCHWAB CORE EQUITY FUND TM -- Financials
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- -------------------------------------------------------------
Dividends $ 1,411
Interest + 21
------------
TOTAL INVESTMENT INCOME 1,432
NET REALIZED GAINS AND LOSSES
- -------------------------------------------------------------
Net realized losses on investments sold (14,953)
Net realized losses on futures contracts + (323)
------------
NET REALIZED LOSSES (15,276)
NET UNREALIZED GAINS AND LOSSES
- -------------------------------------------------------------
Net unrealized gains on investments 16,813
Net unrealized gains on futures contracts + 387
------------
NET UNREALIZED GAINS 17,200
EXPENSES
- -------------------------------------------------------------
Investment adviser and administrator fees 482 a
Transfer agent and shareholder service fees 223 b
Trustees' fees 3 c
Custodian fees 13
Portfolio accounting fees 13
Professional fees 11
Registration fees 16
Shareholder reports 43
Other expenses + 2
------------
Total expenses 806
Expense reduction - 136 d
------------
NET EXPENSES 670
INCREASE IN NET ASSETS FROM OPERATIONS
- -------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,432
NET EXPENSES - 670
------------
NET INVESTMENT INCOME 762
NET REALIZED LOSSES (15,276) e
NET UNREALIZED GAINS + 17,200 e
------------
INCREASE IN NET ASSETS FROM OPERATIONS $ 2,686
a Calculated as a percentage of average daily net assets: 0.54% of the first
$500 million and 0.49% of assets beyond that.
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.
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 at least
February 29, 2004, to 0.75% of average daily net assets. This limit doesn't
include interest, taxes and certain non-routine expenses.
e These add up to a net gain on investments of $1,924.
See financial notes.
14
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000. Figures for
current period are unaudited.
OPERATIONS
- ---------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income $ 762 $ 1,234
Net realized losses (15,276) (7,462)
Net unrealized gains or losses + 17,200 (17,836)
----------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 2,686 (24,064)
DISTRIBUTIONS PAID
- ---------------------------------------------------------------------------
Dividends from net investment income $ 1,261 $ 1,269 a
TRANSACTIONS IN FUND SHARES
- ---------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 2,736 $ 29,191 3,029 $ 34,629
Shares reinvested 119 1,261 89 1,172
Shares redeemed + (1,583) (16,719) (3,376) (40,795)
-----------------------------------------------
NET INCREASE OR DECREASE 1,272 $ 13,733 (258) ($4,994)
SHARES OUTSTANDING AND NET ASSETS
- ---------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 16,479 $179,458 16,737 $209,785
Total increase or
decrease + 1,272 15,158 (258) (30,327) b
-----------------------------------------------
END OF PERIOD 17,751 $194,616 16,479 $179,458 c
a The tax-basis components of distributions paid for the prior period are:
Ordinary income $ 1,269
Long-term capital gains $ --
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 from transactions in fund shares, minus
distributions paid.
c Includes net investment income not yet distributed in the amount of $510 and
$1,009 at the end of the current period and the prior period, respectively.
See financial notes.
15
FINANCIAL NOTES unaudited
BUSINESS STRUCTURE OF THE FUND
THE FUND DISCUSSED IN THIS REPORT IS A SERIES OF SCHWAB CAPITAL TRUST, A
NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940,as amended. The sidebar shows the fund in this report and its trust.
THE FUND OFFERS ONE SHARE CLASS. Shares are bought and sold at net asset value,
or NAV, which is the price for all outstanding shares. Each share has a par
value of 1/1,000 of a cent, and the trust may issue as many shares as necessary.
FUND OPERATIONS
Most of the fund's investments are described earlier in this report. However,
there are certain other investments and policies that may affect the fund's
financials, as described below. Other policies concerning the fund's business
operations also are described here.
THE FUND PAYS DIVIDENDS from net investment income and makes distributions from
net capital gains once a year.
THE FUND MAY INVEST IN FUTURES CONTRACTS. 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.
Because futures carry inherent risks, the fund must give the broker a deposit of
cash and/or securities (the "initial margin") whenever it enters into a futures
contract. The amount of the deposit may vary from one contract to another, but
it is generally a percentage of the contract amount.
Futures are traded publicly on exchanges, and their market value changes daily.
The fund records the change in market value of futures, and also the change in
the amount of margin deposit required ("variation margin").
THE FUND MAY LOAN SECURITIES TO CERTAIN BROKERS, DEALERS AND OTHER FINANCIAL
INSTITUTIONS WHO PAY THE FUND NEGOTIATED FEES. The fund receives cash, letters
of credit or U.S. government securities as collateral
THE TRUST AND ITS FUNDS
This list shows all of the funds included in Schwab Capital Trust. The fund
discussed in this report is highlighted.
SCHWAB CAPITAL TRUST organized May 7, 1993
Schwab S&P 500 Fund
Schwab Small-Cap Index Fund(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
Schwab Core Equity Fund (TM)
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Schwab U.S. MarketMasters Fund (TM)
Schwab Balanced MarketMasters Fund (TM)
Schwab Small-Cap MarketMasters Fund (TM)
Schwab International MarketMasters Fund (TM)
Schwab Hedged Equity Fund (TM)
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Institutional Select S&P 500 Fund
Institutional Select Large-Cap Value Index Fund
Institutional Select Small-Cap Value Index Fund
Schwab Core Equity Fund (TM)
16
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 FUND MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The fund may obtain
temporary bank loans through its trust, to use for meeting shareholder
redemptions or for extraordinary or emergency purposes. The trust has custodian
overdraft facilities and line of credit arrangements of $150 million,$100
million and $150 million with PNC Bank, N.A., Bank of America, N.A. and The Bank
of New York, respectively. The fund pays interest on the amounts it borrows at
rates that are negotiated periodically.
THE FUND PAYS FEES FOR VARIOUS SERVICES. Through its trust, the fund has
agreements with Charles Schwab Investment Management, Inc. (CSIM) to provide
investment advisory and administrative services and with Charles Schwab & Co.,
Inc.(Schwab) to provide transfer agent and shareholder services.
Although these agreements specify certain fees for these services ,CSIM and
Schwab have made additional agreements with the fund that may limit the total
expenses charged. The rates and limitations for these fees are described in the
fund's Statement of Operations.
On February 19,2002,the Board of Trustees approved terminating the agreement
with the sub-adviser of the fund. As of June 1, 2002, CSIM had sole
responsibility for managing the fund.
On May 22, 2002, the Board of Trustees approved changing the name of the fund to
the Schwab Core Equity Fund TM , effective June 1, 2002.
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 the fund's Statement
of Operations.
THE FUND MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING RELATED PARTIES. For
instance, the fund may own shares of The Charles Schwab Corporation if that
company is selected by its investment process.
The fund may make direct transactions with certain other SchwabFunds(R) when
practical. When one fund is seeking to sell a security that another is seeking
to buy, an interfund transaction can allow both funds to benefit by reducing
transaction costs. This practice is limited to funds that share the same
investment adviser, trustees and officers.
THE FUND INTENDS TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR
REGULATED INVESTMENT COMPANIES. Accordingly, the fund distributes substantially
all of its net investment income and realized net capital gains (if any) to its
shareholders each year. As long as the fund meets the tax requirements, it is
not required to pay federal income tax.
Schwab Core Equity Fund (TM)
17
ACCOUNTING POLICIES
The following are the main policies the fund uses in preparing its financial
statements.
THE FUND VALUES THE SECURITIES IN ITS PORTFOLIO EVERY BUSINESS DAY. The fund
uses the following policies to value various types of securities:
o 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.
o SECURITIES FOR WHICH NO MARKET QUOTATIONS ARE READILY AVAILABLE: 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.
o FUTURES: open contracts are valued at their settlement prices as of the close
of their exchanges. When the fund closes out a futures position, it calculates
the difference between the value of the position at the beginning and at the
end, and records a realized gain or loss accordingly.
o SHORT-TERM SECURITIES (60 DAYS OR LESS TO MATURITY): valued at amortized cost.
SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the
security is executed.
DIVIDENDS AND DISTRIBUTIONS FROM PORTFOLIO SECURITIES are recorded on the date
they are effective (the ex-dividend date), although the fund records certain
foreign security dividends on the day it learns of the ex-dividend date.
INCOME FROM INTEREST AND THE ACCRETION OF DISCOUNTS is recorded as it accrues.
REALIZED GAINS AND LOSSES from security transactions are based on the identified
costs of the securities involved.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES are reported in U.S.
dollars. For assets and liabilities held on a given date, the dollar value is
based on market exchange rates in effect on that date. Transactions involving
foreign currencies, including purchases, sales, income receipts and expense
payments, are calculated using exchange rates in effect on the transaction date.
EXPENSES that are specific to the fund are charged directly to the fund.
Expenses that are common to all funds within a trust generally are allocated
among the funds in proportion to their net assets.
THE FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND
ACCOUNTING, and is considered a separate entity for tax purposes. Within its
account, the fund also keeps certain assets in segregated accounts, as may be
required by securities law.
THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH 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.
Schwab Core Equity Fund (TM)
18
GLOSSARY
Words and phrases that appear in financial reports often have specific meanings
that are different from their everyday meanings. The glossary below tells you
what is meant by the following terms when they are used in this report.
ASSET ALLOCATION The practice of dividing a portfolio among different asset
classes, with each asset class assigned a particular percentage.
ASSET CLASS A group of securities with similar structure and basic
characteristics. Stocks, bonds and cash are the three main examples of asset
classes.
BETA A historical measure of an investment's volatility relative to a market
index (usually the S&P 500). The index is defined as having a beta of 1.00.
Investments with a beta higher than 1.00 have been more volatile than the index;
those with a beta of less than 1.00 have been less volatile.
BOND A security representing a loan from the investor to the issuer. A bond
typically pays interest at a fixed rate (the "coupon rate") until a specified
date (the "maturity date"), at which time the issuer returns the money borrowed
("principal" or "face value") to the bondholder. Because of their structure,
bonds are sometimes called "fixed income securities" or "debt securities."
CAP, CAPITALIZATION See "market cap."
CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an
investment and its value at a later time. If the investment has been sold, the
capital gain or loss is considered a realized gain or loss. If the investment is
still held, the gain or loss is still "on paper" and is considered unrealized.
EARNINGS GROWTH RATE For a mutual fund, the average yearly rate at which the
earnings of the companies in the fund's portfolio have grown, measured over the
past five years.
EARNINGS PER SHARE (EPS) A company's earnings, or net income, for the past 12
months, divided by the number of shares outstanding.
EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to
cover the fund's operating expenses. An expense ratio of 0.50% means that a
fund's expenses amount to half of one percent of its average net assets a year.
MARKET CAP, MARKET CAPITALIZATION The value of a company as determined by the
total value of all shares of its stock outstanding.
MEDIAN MARKET CAP The midpoint of the range of market caps of the stocks held by
a fund. There are different ways of calculating median market cap. With a simple
median, half of the stocks in the fund's portfolio would be larger than the
median, and half would be smaller. With a weighted median (the type that is
calculated for these funds), half of the fund's assets are invested in stocks
that are larger than the median market cap, and half in stocks that are smaller.
NET ASSET VALUE (NAV) The value of one share of a mutual fund. NAV is calculated
by taking the fund's total assets, subtracting liabilities, and dividing by the
number of shares outstanding.
OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual
fund, indicates all shares currently held by investors.
PRICE-TO-BOOK RATIO (P/B) The market price of a company's stock compared with
its "book value." A mutual fund's P/B is the weighted average of the P/B of all
stocks in the fund's portfolio.
PRICE-TO-EARNINGS RATIO (P/E) The market price of a company's stock compared
with earnings over the past year. A mutual fund's P/E is the weighted average of
the P/E of all stocks in the fund's portfolio.
RETURN ON EQUITY (ROE) The average yearly rate of return for each dollar of
investors' money, measured over the past five years.
STOCK A share of ownership, or equity, in the issuing company.
TOTAL RETURN The 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.
Schwab Core Equity Fund (TM)
19
NOTES
CONTACT SCHWAB
SchwabFunds(R) offers you a complete family of mutual funds, each one based on a
time-tested investment approach and using disciplined, clearly defined
management strategies.
Actively managed funds include multi-manager stock funds, a fund that uses
long-short strategies, and a range of taxable and tax-free bond funds. Index
funds include large-cap, small-cap and international stock funds. 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. Please call 1-800-435-4000 for a free
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)
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.
1 Shares of Sweep Investments TM may not be purchased over the Internet.
2 Orders placed in person or through a telephone representative are subject to a
service fee payable to Schwab.
THE SCHWABFUNDS FAMILY
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 Hedged Equity Fund(TM)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab MarketMasters Funds(TM)
Schwab U.S. MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
ASSET ALLOCATION FUNDS
Schwab MarketTrack Portfolios(R)
Schwab All Equity Portfolio
Schwab Growth Portfolio
Schwab Balanced Portfolio
Schwab Conservative Portfolio
BOND FUNDS
Schwab YieldPlus Fund(R)
Schwab Short-Term Bond Market Fund
Schwab Total Bond Market Fund
Schwab GNMA 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 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 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
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)2003 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
Printed on recycled paper.
REG13561-05
Schwab MarketTrack Portfolios(R)
SEMIANNUAL REPORT
April 30, 2003
Schwab MarketTrack
All Equity Portfolio
Schwab MarketTrack
Growth Portfolio
Schwab MarketTrack
Balanced Portfolio
Schwab MarketTrack
Conservative Portfolio
[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 portfolios' managers discuss
the factors that affected portfolio performance during the report
period.
Portfolio Performance and Related Data
Portfolio and index performance data, portfolio facts, holdings and
portfolio financials.
Schwab MarketTrack All Equity Portfolio............................. 6
Ticker Symbol: SWEGX
The portfolio seeks high capital growth through an all-stock
portfolio.
Schwab MarketTrack Growth Portfolio................................. 13
Ticker Symbol: SWHGX
The portfolio seeks high capital growth with less volatility than an
all-stock portfolio.
Schwab MarketTrack Balanced Portfolio............................... 27
Ticker Symbol: SWBGX
The portfolio seeks both capital growth and income.
Schwab MarketTrack Conservative Portfolio........................... 41
Ticker Symbol: SWCGX
The portfolio seeks income and more growth potential than an
all-bond portfolio.
Financial Notes....................................................... 55
Glossary.............................................................. 58
FROM THE CHAIRMAN
[PHOTO OF CHARLES SCHWAB]
Charles R. Schwab
Chairman
Without question, these are challenging times for America's investors. But I
believe that they also may provide opportunities, especially for those who stay
involved with their investment portfolios and review their mutual fund holdings
with their investment objectives in mind.
As this report goes to press, the President has signed into law a new tax
package that I believe offers significant potential benefits for all investors.
The new tax package will reduce the rate of taxation on many corporate dividends
and on capital gains. I believe that reducing these taxes could serve as a
stimulus to the stock market, thereby benefiting all owners of U.S. stocks.
For years, corporate dividends have been taxed twice: first when the corporation
earned the money, and again when investors received the dividend. In my view,
this has provided an incentive for corporations to retain profits as cash rather
than sharing them with their shareholders. I believe reducing the dividend tax
gives companies the right incentives to invest and create new jobs.
Here at Schwab, we are actively exploring ways to help investors meet their
financial objectives. At SchwabFunds(R), these efforts are being led by the new
president of SchwabFunds, Randall Merk. Randy brings a wealth of experience to
the job, and we welcome his leadership, vision and wisdom.
On behalf of SchwabFunds, I'd like to thank you for investing with us. Your
continued trust and support mean a great deal to us. In turn, it's our mission
to help you meet your financial goals.
Sincerely,
/s/ Charles Schwab
MANAGEMENT'S DISCUSSION November 1, 2002--April 30, 2003
[PHOTO OF RANDALL MERK]
RANDALL W. MERK is President and CEO of Charles Schwab Investment Management,
Inc. and is president of each of the funds covered in this report. He joined the
firm in August of 2002, bringing with him 24 years of experience in the asset
management industry.
Dear Shareholder:
As one of the newer members of the SchwabFunds(R) team, I've been struck by the
talent and integrity of the people here. Above all, I've been impressed with the
dedication they show to understanding the needs and concerns of our
shareholders.
That dedication is particularly important right now. Times of market volatility
and uncertainty about world events demand as high a level of diligence as ever
on the part of investment professionals. At SchwabFunds we are keenly aware of
this, and we continue to work hard to uphold the best interests of our
shareholders.
Mutual funds are facing many initiatives at the moment. These include changes in
corporate governance practices, such as the Sarbanes-Oxley Act (which requires
senior management certification of financial reports), and new regulations
affecting disclosures of mutual funds' proxy voting practices. Many of these
changes have the potential to benefit shareholders, and I want to assure you
that we'll keep you informed of the progress we are making with them.
In the meantime, it is worth keeping in mind that the basic tenets of mutual
fund investing remain unchanged. In particular, time-tested investment practices
such as asset allocation and diversification are as important as ever. The range
of choices available from SchwabFunds can make it easy to diversify your
portfolio. In addition, as our range of funds grows, we'll let you know when new
funds are launched (or you can stay informed by visiting
www.schwab.com/schwabfunds).
In closing, let me thank you for choosing SchwabFunds for your mutual fund
investments. We're committed to helping you reach your financial goals. If there
is something more that we can do to help, I hope you'll let us know.
Sincerely,
/s/ Randall Merk
Schwab MarketTrack Portfolios(R)
2
[PHOTO OF GERI HOM AND KIMON DAIFOTIS]
GERI HOM, a vice president and senior portfolio manager of the investment
adviser, is responsible for the day-to-day management of the equity portions of
the Schwab MarketTrack Portfolios(R). Prior to joining the firm in 1995, she
worked for nearly 15 years in equity management.
KIMON DAIFOTIS, CFA, a vice president and senior portfolio manager of the
investment adviser, is responsible for the day-to-day 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.
THE ECONOMY
THE WAR IN IRAQ DOMINATED HEADLINES, ALTHOUGH IT WAS NOT THE ONLY FACTOR
AFFECTING THE ECONOMY. As the report period began, the nation's focus was
divided between fundamental economic issues and concerns over the looming war
with Iraq. Once the war arrived, attention focused on Iraq and the progress of
political and military actions. Toward the end of the report period, as
intensive military action drew to a close, the nation's focus shifted and its
level of concern over war-related uncertainty declined.
One reflection of this pattern of changing concerns over the war was the price
of oil. Leading up to the war, oil prices continued to ratchet up to nearly $40
a barrel. But the price quickly dropped to around $30 a barrel when it began to
appear that the major fighting would not last long.
The economy that Americans found at the end of the war was not much different
than it had been during the period before the war. Gross Domestic Product was
positive but weak, while joblessness edged up to 6%. Consumer spending remained
strong, helped in part by widespread discounts and depressed prices in most
sectors (aside from healthcare and oil). But discounted prices for consumers
translated into thin profits for companies, and business capital spending
remained minimal. A half-percent interest rate cut in November 2002 showed the
Federal Reserve continuing to apply economic stimulus; the president and
Congress contributed by advancing new fiscal and tax policies.
THE MARKET
MOST TYPES OF STOCKS POSTED GAINS FOR THE PERIOD, WITH SMALL-CAP GROWTH STOCKS
AND LARGE-CAP VALUE STOCKS LEADING THE WAY. Positive returns were welcome news
after prior declines. However, the volatility that has characterized the market
in recent years continued throughout the period.
The strongest month of the period for stocks was April 2003, which saw the
market rise as the military action in Iraq ended and as the first corporate
earnings reports for 2002 appeared to indicate some improvement over the
disappointing earnings of 2001. Another factor that we believe may have helped
lift the market during the period was the increasing possibility of a dividend
tax cut.
Schwab MarketTrack Portfolios(R)
3
MANAGEMENT'S DISCUSSION continued
STOCK PRICES DURING THE PERIOD APPEARED TO GENERALLY REFLECT COMPANIES'
ESTABLISHED EARNING POWER, ALTHOUGH ANTICIPATED FUTURE EARNINGS BEGAN TO DRIVE
RETURNS IN SOME SECTORS.
Looking at stock prices during the period, it appeared that investors were
reluctant to give much consideration to projections of future earnings (which
may or may not turn out to be accurate) when deciding how much they were willing
to pay for a stock.
In our view, this was a sign of lingering skepticism among investors about
earnings projections, whether those projections came from corporate management
or from analysts. As the report period came to a close, there were some issues
that remained unresolved. For instance, there were still companies coming
forward with earnings restatements or with large one-time charges. There were
also questions about how companies account for pension plan liabilities, and how
related practices might trigger another round of earnings restatements. We
believe investors' sensitivity to factors such as these was likely heightened by
the memory of the many recent high-profile cases of corporate malfeasance.
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.
4.48% S&P 500(R) INDEX: measures U.S. large-cap stocks
7.55% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
1.81% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in
Europe, Australasia and the Far East
4.31% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond
market
0.63% THREE-MONTH U.S. TREASURY BILLS (T-BILLS): measures short-term U.S.
Treasury obligations
[LINE GRAPH]
Lehman
Brother U.S.
Aggregate MSCI-EAFE Russell 2000 S&P 500 3-Month
Bond Index Index Index Index T-Bills
31-Oct-02 0 0 0 0 0
Nov-02 -0.18 -0.36 2.6 1.72 0.01
Nov-02 0.59 1.71 2.65 1.95 0.07
Nov-02 0.25 0.52 3.5 2.2 0.09
Nov-02 -0.07 3.64 6.59 5.6 0.12
Nov-02 -0.03 4.7 9.98 6.2 0.14
Dec-02 0.52 0.96 5.77 2.59 0.16
Dec-02 0.86 -0.03 6.05 2.06 0.19
Dec-02 1.42 -1.25 2.87 0.14 0.21
Dec-02 1.99 0.71 4.5 0.75 0.24
Jan-03 1.36 2.13 5.44 3.01 0.26
Jan-03 1.18 2.45 6.35 5.14 0.28
Jan-03 1.83 3.2 6.09 3.7 0.3
Jan-03 2.2 -0.55 3.09 0.61 0.33
Jan-03 2.12 -3.01 -1.19 -4.19 0.35
Feb-03 2.47 -3.67 -1.94 -4.88 0.37
Feb-03 2.45 -4.75 -4.58 -7.18 0.39
Feb-03 2.75 -3.54 -3.25 -4.91 0.41
Feb-03 3.54 -6.69 -2.77 -4.84 0.43
Mar-03 3.82 -6.69 -4.79 -6.53 0.47
Mar-03 3.45 -10.09 -4.3 -5.38 0.49
Mar-03 2.18 -5.24 -0.25 -0.36 0.51
Mar-03 3.12 -5.07 -0.45 -1.16 0.53
Apr-03 3.12 -4.67 1.13 -0.23 0.56
Apr-03 3.14 -3.48 0.46 -0.74 0.57
Apr-03 3.4 -0.88 3.46 1.78 0.59
Apr-03 3.96 0.21 5.76 3.82 0.62
30-Apr-03 4.31 1.81 7.55 4.48 0.63
These figures assume dividends and distributions were reinvested. Index figures
don't include trading and management costs, which would lower performance.
Indices are unmanaged and you can't invest in them directly. Remember that past
performance is not an indication of future results.
Data source: Charles Schwab & Co., Inc.
Schwab MarketTrack Portfolios(R)
4
OVERALL, IT WAS BONDS, LARGE-CAP VALUE STOCKS AND SMALL-CAP GROWTH STOCKS THAT
CONTRIBUTED MOST TO THE PORTFOLIOS' PERFORMANCE.
THE PORTFOLIOS
ALL OF THE PORTFOLIOS POSTED POSITIVE TOTAL RETURNS FOR THE PERIOD, with bonds
continuing to perform well and most of the broad stock indices being positive
also.
Of the four portfolios, the SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO had the
best performance for the period, coming close to matching the performance of the
Conservative Composite Index. The SCHWAB MARKET TRACK BALANCED PORTFOLIO had the
next-best performance, and slightly outperformed the Balanced Composite Index.
These portfolios were helped by their larger exposure to bond investments and
smaller exposure to international stock investments, where overall performance
was positive but weak.
Conversely, the SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO and SCHWAB MARKETTRACK
GROWTH PORTFOLIO saw their performance held back by their exposure to
international stocks. The All Equity Portfolio underperformed the S&P 500(R)
Index by close to a percentage point, while the Growth Portfolio slightly
outperformed the Growth Composite Index.
All of the portfolios benefited, to varying degrees, from a general resurgence
in stock prices, particularly during April 2003, the final month of the period.
Among large-caps, value stocks proved to be of more interest to investors,
although many of these stocks are the same names that not long ago were
considered growth stocks. With their prices substantially lower during the
report period than they were during the technology boom, these companies met the
requirements for being considered value stocks, even though the industries to
which they belong are still considered long-term growth industries.
Small-cap stocks were another bright spot, performing particularly strongly in
April. Most of the interest here appeared to be focused on growth stocks rather
than value stocks.
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.
The views expressed here are those of portfolio management only. 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(R)
5
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO
PERFORMANCE as of 4/30/03
AVERAGE ANNUAL TOTAL RETURNS 1,2
This chart compares performance of the portfolio with the S&P 500(R) Index and
the All Equity Composite Index.
[BAR CHART]
ALL EQUITY
S&P 500 COMPOSITE
PORTFOLIO INDEX INDEX
6 MONTHS 3.63 4.48 3.37
1 YEAR -16.21 -13.31 -17.14
SINCE INCEPTION: 5/19/96 -3.57 -2.6 N/A
PERFORMANCE OF A $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 two indices:
the S&P 500 Index and the All Equity Composite Index.
$8,355 PORTFOLIO
$8,778 S&P 500 INDEX
$9,166 ALL EQUITY COMPOSITE INDEX
[LINE GRAPH]
S&P 500 All Equity
PORTFOLIO Index Composite Index
19-May-98 10000 10000
May-98 9850 9751 10000
Jun-98 10050 10147 10104
Jul-98 9810 10039 9884
Aug-98 8330 8590 8339
Sep-98 8610 9140 8572
Oct-98 9280 9883 9125
Nov-98 9800 10482 9633
Dec-98 10303 11086 10142
Jan-99 10483 11549 10312
Feb-99 10041 11190 9899
Mar-99 10383 11638 10203
Apr-99 10896 12088 10753
May-99 10664 11803 10610
Jun-99 11197 12458 11193
Jul-99 11137 12069 11134
Aug-99 11056 12009 11018
Sep-99 11006 11680 10903
Oct-99 11539 12419 11304
Nov-99 11971 12672 11902
Dec-99 12885 13418 12979
Jan-00 12162 12744 12489
Feb-00 12498 12503 13162
Mar-00 13159 13726 13660
Apr-00 12610 13313 13050
May-00 12223 13040 12672
Jun-00 12752 13362 13225
Jul-00 12386 13154 12970
Aug-00 13098 13971 13739
Sep-00 12477 13233 13215
Oct-00 12274 13177 12906
Nov-00 11378 12139 11976
Dec-00 11736 12198 12515
Jan-01 11996 12632 12800
Feb-01 10967 11480 11854
Mar-01 10302 10752 11082
Apr-01 11081 11587 11911
May-01 11061 11665 11959
Jun-01 10925 11381 11768
Jul-01 10655 11270 11491
Aug-01 10187 10564 11016
Sep-01 9179 9711 9858
Oct-01 9418 9896 10184
Nov-01 10000 10655 10826
Dec-01 10205 10749 11100
Jan-02 9887 10592 10863
Feb-02 9728 10388 10714
Mar-02 10258 10778 11286
Apr-02 9972 10125 11062
May-02 9855 10050 10947
Jun-02 9293 9335 10314
Jul-02 8380 8607 9298
Aug-02 8402 8663 9306
Sep-02 7585 7722 8429
Oct-02 8062 8401 8867
Nov-02 8529 8896 9353
Dec-02 8118 8374 8920
Jan-03 7817 8154 8662
Feb-03 7645 8032 8459
Mar-03 7656 8110 8461
30-Apr-03 8355 8778 9166
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.
The portfolio's share price and principal values change, and when you sell
your shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results. Results for the report period
are not annualized.
1 Portfolio returns reflect expense reductions by the portfolio's investment
adviser (CSIM) and Schwab. Without these reductions, the portfolio's returns
would have been lower. These returns also 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. As of 4/30/03, the total
number of funds in the Morningstar Large-Cap Blend, Small-Cap Blend and
Foreign Stock Fund categories for the six-month and one-year periods was
1,410,349,938 and 1,362,342,898, respectively.
Schwab MarketTrack Portfolios(R)
6
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO
FUND FACTS AS OF 4/30/03
PORTFOLIO CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
- -------------------------------------------------
NUMBER OF HOLDINGS 5
- -------------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $32,227
- -------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 22.4
- -------------------------------------------------
PRICE/BOOK RATIO (P/B) 3.6
- -------------------------------------------------
PORTFOLIO TURNOVER RATE 2 6%
- -------------------------------------------------
EXPENSE RATIO 3 0.50%
- -------------------------------------------------
TOP HOLDINGS 4
% OF
SECURITY INVESTMENTS
- ------------------------------------------------------
(1) SCHWAB S&P 500 FUND 44.3%
Select Shares(R)
- ------------------------------------------------------
(2) SCHWAB INTERNATIONAL INDEX FUND(R) 30.2%
Select Shares
- ------------------------------------------------------
(3) SCHWAB SMALL-CAP INDEX FUND(R) 25.2%
Select Shares
- ------------------------------------------------------
TOTAL 99.7%
ASSET CLASS WEIGHTINGS
This chart shows the portfolio's asset class composition as of the report date.
[PIE CHART]
44.3% LARGE-CAP STOCKS
30.2% INTERNATIONAL STOCKS
25.2% SMALL-CAP STOCK
0.3% SHORT TERM INVESTMENT
1 Source: Morningstar, Inc. This style assessment is the result of comparing the
portfolio with the S&P 500(R) Index, based on P/E, P/B and median market cap.
The assessment reflects the portfolio's holdings as of 4/30/03, which may have
changed since then, and is not a precise indication of risk or
performance--past, present or future.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes and certain non-routine expenses). 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.
4 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
Schwab MarketTrack Portfolios(R)
7
MARKETTRACK ALL EQUITY PORTFOLIO -- Financials
FINANCIAL TABLES
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 5/19/98 1-
4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
PER-SHARE DATA ($)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 7.60 9.06 12.06 11.48 9.28 10.00
-------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income or loss 0.11 0.05 0.22 0.04 0.03 (0.01)
Net realized and unrealized gains or losses 0.17 (1.32) (2.99) 0.69 2.22 (0.71)
-------------------------------------------------------------------------
Total income or loss from investment operations 0.28 (1.27) (2.77) 0.73 2.25 (0.72)
Less distributions:
Dividends from net investment income (0.09) (0.05) (0.22) (0.05) (0.05) --
Distributions from net realized gains (0.02) (0.14) (0.01) (0.10) -- --
-------------------------------------------------------------------------
Total distributions (0.11) (0.19) (0.23) (0.15) (0.05) --
-------------------------------------------------------------------------
Net asset value at end of period 7.77 7.60 9.06 12.06 11.48 9.28
-------------------------------------------------------------------------
Total return (%) 3.63 2 (14.40) (23.27) 6.37 24.34 (7.20) 2
RATIOS/SUPPLEMENTAL DATA (%)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 5 0.50 3 0.50 0.50 0.56 4 0.54 0.39 3
Expense reductions reflected in above ratio 0.27 3 0.27 0.27 0.27 0.43 0.74 3
Ratio of net investment income or loss to
average net assets 1.47 2 0.58 1.93 0.05 0.13 (0.36) 3
Portfolio turnover rate 6 2 15 5 3 6 2 2
Net assets, end of period ($ x 1,000,000) 360 353 405 441 203 117
1 Commencement of operations.
2 Not annualized.
3 Annualized.
4 Would have been 0.57% if certain non-routine expenses (proxy fees) had been
included.
5 The expense 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.
See financial notes.
8
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top holding
= Collateral for open futures contracts
/ Issuer is affiliated with the fund's adviser
COST MARKET VALUE
HOLDINGS BY CATEGORY ($ x 1, 000) ($ x 1, 000)
- --------------------------------------------------------------------------------
99.7% OTHER INVESTMENT
COMPANIES 489,378 358,473
0.3% SHORT-TERM
INVESTMENT 1,152 1,152
0.0% U.S. TREASURY
OBLIGATION 100 100
- --------------------------------------------------------------------------------
100.0% TOTAL INVESTMENTS 490,630 359,725
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OTHER INVESTMENT COMPANIES
99.7% of investments
/(2) Schwab International Index Fund(R),
Select Shares(R) 10,420,018 108,472
/=(1) Schwab S&P 500 Fund,
Select Shares 11,209,882 159,293
/(3) Schwab Small-Cap Index Fund(R),
Select Shares 6,554,038 90,708
--------
358,473
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENT
0.3% of investments
Bank One, Grand Cayman
Time Deposit
0.80%, 05/01/03 1,152 1,152
U.S. TREASURY OBLIGATION
0.0% of investments
= U.S. Treasury Bill
1.13%, 06/19/03 100 100
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
9
MARKETTRACK ALL EQUITY PORTFOLIO -- Financials
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- -------------------------------------------------------------------------
Investments, at market value $359,725 a
Receivables:
Fund shares sold 167
Investments sold 807
Prepaid expenses + 11
------------
TOTAL ASSETS 360,710
LIABILITIES
- -------------------------------------------------------------------------
Payables:
Fund shares redeemed 295
Investments bought 675
Investment adviser and administrator fees 7
Transfer agent and shareholder service fees 10
Accrued expenses + 120
------------
TOTAL LIABILITIES 1,107
NET ASSETS
- -------------------------------------------------------------------------
TOTAL ASSETS 360,710
TOTAL LIABILITIES - 1,107
------------
NET ASSETS $359,603
NET ASSETS BY SOURCE
Capital received from investors 520,925
Distributions in excess of net investment income (520)
Net realized capital losses (30,047)
Net unrealized capital losses (130,755) b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$359,603 46,278 $7.77
a The fund paid $490,630 for these securities. Not counting short-term
obligations and government securities, the fund paid $22,215 for securities
during the report period and received $22,866 from securities it sold or that
matured.
Percent of fund shares of other Schwab funds owned as of the end of the report
period:
SCHWAB EQUITY INDEX FUNDS
S&P 500 Fund 2.5%
Small-Cap Index Fund(R) 6.9%
International Index Fund(R) 11.4%
b These derive from investments and futures. As of the report date, the fund had
six open S&P 500 futures contracts due to expire on June 20, 2003, with a
contract value of $1,374 and unrealized gains of $150.
FEDERAL TAX DATA
- -----------------------------------------------------
PORTFOLIO COST $501,034
NET UNREALIZED GAINS AND LOSSES:
Gains $410
Losses + (141,719)
------------
($141,309)
AS OF DECEMBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $39
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 12/31 of: Loss amount:
2010 $ 13,353
DEFERRED CAPITAL LOSSES $813
See financial notes.
10
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- -------------------------------------------------------------------
Dividends $5,996
Interest + 5
-------------
TOTAL INVESTMENT INCOME 6,001
NET REALIZED GAINS AND LOSSES
- -------------------------------------------------------------------
Net realized losses on investments sold (7,290)
Net realized losses on futures contracts + (127)
-------------
NET REALIZED LOSSES (7,417)
NET UNREALIZED GAINS AND LOSSES
- -------------------------------------------------------------------
Net unrealized gains on investments 14,581
Net unrealized gains on futures contracts + 175
-------------
NET UNREALIZED GAINS 14,756
EXPENSES
- -------------------------------------------------------------------
Investment adviser and administrator fees 762 a
Transfer agent and shareholder service fees 433 b
Trustees' fees 4 c
Custodian fees 19
Portfolio accounting fees 26
Professional fees 12
Registration fees 14
Shareholder reports 67
Other expenses + 1
-------------
Total expenses 1,338
Expense reduction - 472 d
-------------
NET EXPENSES 866
INCREASE IN NET ASSETS FROM OPERATIONS
- -------------------------------------------------------------------
TOTAL INVESTMENT INCOME 6,001
NET EXPENSES - 866
-------------
NET INVESTMENT INCOME 5,135
NET REALIZED LOSSES (7,417) e
NET UNREALIZED GAINS + 14,756 e
-------------
INCREASE IN NET ASSETS FROM OPERATIONS $12,474
a Calculated as a percentage of average daily net assets: 0.44% of the first
$500 million and 0.39% of assets beyond that.
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.
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 at least
February 29, 2004, to 0.50% of average daily net assets. This limit doesn't
include interest, taxes and certain non-routine expenses.
e These add up to a net gain on investments of $7,339.
See financial notes.
11
MARKETTRACK ALL EQUITY PORTFOLIO -- Financials
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000
Figures for current period are unaudited.
OPERATIONS
- -----------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income $5,135 $2,413
Net realized losses (7,417) (13,794)
Net unrealized gains or losses + 14,756 (51,352)
------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 12,474 (62,733)
DISTRIBUTIONS PAID
- -----------------------------------------------------------------------------
Dividends from net investment income 3,978 2,429
Distributions from net realized gains + 837 6,416
------------------------------------
TOTAL DISTRIBUTIONS PAID $4,815 $8,845 a
TRANSACTIONS IN FUND SHARES
- ----------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 3,838 $28,735 10,638 $96,109
Shares reinvested 635 4,815 910 8,668
Shares redeemed + (4,710) (35,048) (9,783) (85,204)
------------------------------------------------
NET INCREASE OR DECREASE (237) ($1,498) 1,765 $19,573
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 46,515 $353,442 44,750 $405,447
Total increase or
decrease + (237) 6,161 1,765 (52,005)b
----------------------------------------------------
END OF PERIOD 46,278 $359,603 46,515 $353,442 c
a The tax-basis components of distributions paid for the prior period are:
Ordinary income $2,484
Long-term capital gains $6,361
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 Includes distributions in excess of net investment income in the amount of
$520 and $1,677 at the end of the current period and the prior period,
respectively.
See financial notes.
12
SCHWAB MARKETTRACK GROWTH PORTFOLIO
PERFORMANCE as of 4/30/03
AVERAGE ANNUAL TOTAL RETURNS 1,2
This chart compares performance of the portfolio with the S&P 500(R) Index, the
Lehman Brothers U.S. Aggregate Bond Index and the Growth Composite Index.
[BAR CHART]
LEHMAN BROTHERS GROWTH
S&P 500 U.S. AGGREGATE COMPOSITE
PORTFOLIO INDEX BOND INDEX INDEX
- --------------------------------------------------------------------------------
6 MONTHS 3.88 4.48 4.31 3.57
1 YEAR -11.28 -13.31 10.47 -12.46
5 YEARS -1.27 -2.43 7.57 -0.35
SINCE INCEPTION: 11/20/95 5.46 7.54 7.44 N/A
PERFORMANCE OF A $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 three
indices: the S&P 500 Index, the Lehman Brothers U.S. Aggregate Bond Index and
the Growth Composite Index.
$14,863 PORTFOLIO
$17,192 S&P 500 INDEX
$17,075 LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX
$15,143 GROWTH COMPOSITE INDEX
[LINE CHART]
Lehman Brothers Growth
U.S. Aggregate Composite
PORTFOLIO S&P 500 Index Bond Index Index
20-Nov-95 10000 10000 10000
Nov-95 10080 10104 10076 10000
Dec-95 10292 10299 10217 10177
Jan-96 10442 10649 10285 10344
Feb-96 10533 10748 10106 10473
Mar-96 10623 10852 10035 10597
Apr-96 10803 11011 9979 10887
May-96 10954 11294 9959 11062
Jun-96 10934 11337 10092 11017
Jul-96 10523 10836 10120 10580
Aug-96 10733 11064 10102 10839
Sep-96 11184 11686 10278 11220
Oct-96 11324 12009 10506 11288
Nov-96 11896 12917 10686 11778
Dec-96 11784 12661 10587 11758
Jan-97 12008 13451 10620 12037
Feb-97 12028 13557 10646 12027
Mar-97 11692 13001 10528 11743
Apr-97 12038 13776 10686 11936
May-97 12793 14614 10787 12653
Jun-97 13313 15268 10916 13130
Jul-97 14087 16482 11210 13800
Aug-97 13618 15559 11115 13424
Sep-97 14301 16410 11280 14098
Oct-97 13853 15862 11443 13592
Nov-97 14098 16597 11496 13667
Dec-97 14259 16882 11612 13805
Jan-98 14410 17070 11761 13904
Feb-98 15220 18300 11751 14685
Mar-98 15738 19237 11791 15264
Apr-98 15846 19432 11852 15409
May-98 15576 19097 11965 15177
Jun-98 15868 19873 12067 15318
Jul-98 15555 19662 12092 15063
Aug-98 13729 16823 12289 13206
Sep-98 14194 17901 12577 13534
Oct-98 15080 19357 12510 14221
Nov-98 15760 20530 12581 14869
Dec-98 16422 21712 12619 15505
Jan-99 16718 22620 12709 15729
Feb-99 16103 21916 12486 15185
Mar-99 16576 22793 12555 15577
Apr-99 17224 23675 12595 16260
May-99 16916 23116 12484 16062
Jun-99 17586 24399 12444 16762
Jul-99 17465 23638 12392 16696
Aug-99 17355 23520 12386 16559
Sep-99 17290 22875 12530 16454
Oct-99 17982 24323 12576 16943
Nov-99 18520 24817 12575 17675
Dec-99 19602 26279 12514 18959
Jan-00 18730 24960 12473 18379
Feb-00 19155 24487 12624 19217
Mar-00 20049 26882 12791 19824
Apr-00 19389 26073 12754 19095
May-00 18931 25539 12747 18647
Jun-00 19635 26169 13012 19365
Jul-00 19233 25761 13131 19089
Aug-00 20206 27361 13321 20028
Sep-00 19456 25917 13405 19436
Oct-00 19255 25808 13493 19081
Nov-00 18148 23774 13715 18033
Dec-00 18660 23891 13970 18740
Jan-01 19052 24739 14198 19131
Feb-01 17758 22483 14321 18032
Mar-01 16938 21057 14393 17105
Apr-01 17955 22693 14332 18116
May-01 18001 22845 14418 18189
Jun-01 17851 22290 14473 17965
Jul-01 17574 22072 14797 17687
Aug-01 16973 20690 14967 17137
Sep-01 15667 19018 15141 15712
Oct-01 16037 19382 15457 16174
Nov-01 16823 20868 15244 16955
Dec-01 17086 21052 15147 17283
Jan-02 16706 20744 15269 17000
Feb-02 16492 20344 15417 16840
Mar-02 17157 21109 15161 17523
Apr-02 16753 19830 15456 17298
May-02 16623 19683 15587 17179
Jun-02 15863 18282 15723 16397
Jul-02 14652 16858 15913 15117
Aug-02 14747 16967 16182 15166
Sep-02 13619 15123 16444 14052
Oct-02 14307 16454 16368 14621
Nov-02 14984 17423 16363 15268
Dec-02 14440 16400 16702 14753
Jan-03 14030 15970 16717 14414
Feb-03 13825 15731 16948 14174
Mar-03 13849 15883 16934 14173
30-Apr-03 14863 17192 17075 15143
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.
The portfolio's share price and principal values change, and when you sell
your shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results. Results for the report period
are not annualized.
1 Portfolio returns reflect expense reductions by the portfolio's investment
adviser (CSIM) and Schwab. Without these reductions, the portfolio's returns
would have been lower. These returns also 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. As of 4/30/03, the total
number of funds in the Morningstar Large-Cap Blend, Small-Cap Blend, Foreign
and Intermediate-Term Bond Fund categories for the six-month, one- and
five-year periods was 1,410,349,938,741; 1,362,342,898,707; and
711,190,516,439, respectively.
Schwab MarketTrack Portfolios(R)
13
SCHWAB MARKETTRACK GROWTH PORTFOLIO
FUND FACTS as of 4/30/03
PORTFOLIO CATEGORY 1
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 509
- -------------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $48,630
- -------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 22.6
- -------------------------------------------------
PRICE/BOOK RATIO (P/B) 3.6
- -------------------------------------------------
PORTFOLIO TURNOVER RATE 2 6%
- -------------------------------------------------
EXPENSE RATIO 3 0.50%
- -------------------------------------------------
TOP HOLDINGS 4
% OF
SECURITY INVESTMENTS
- ---------------------------------------------------------
(1) SCHWAB S&P 500 FUND 23.8%
Select Shares(R)
- ---------------------------------------------------------
(2) SCHWAB INTERNATIONAL INDEX FUND(R) 20.2%
Select Shares
- ---------------------------------------------------------
(3) SCHWAB SMALL-CAP INDEX FUND(R) 20.1%
Select Shares
- ---------------------------------------------------------
(4) SCHWAB TOTAL BOND MARKET FUND 14.8%
- ---------------------------------------------------------
(5) GENERAL ELECTRIC CO. 0.6%
- ---------------------------------------------------------
(6) MICROSOFT CORP. 0.5%
- ---------------------------------------------------------
(7) WAL-MART STORES, INC. 0.5%
- ---------------------------------------------------------
(8) PFIZER, INC. 0.5%
- ---------------------------------------------------------
(9) EXXON MOBIL CORP. 0.5%
- ---------------------------------------------------------
(10) CITIGROUP, INC. 0.4%
- ---------------------------------------------------------
TOTAL 81.9%
ASSET CLASS WEIGHTINGS
This chart shows the portfolio's asset class composition as of the report date.
[PIE CHART]
40.1% LARGE-CAP STOCKS
20.2% INTERNATIONAL STOCKS
20.1% SMALL-CAP STOCK
14.8% BONDS
4.8% SHORT TERM INVESTMENT
1 Source: Morningstar, Inc. This style assessment is the result of comparing the
portfolio with the S&P 500(R) Index, based on P/E, P/B and median market cap.
The assessment reflects the portfolio's holdings as of 4/30/03, which may have
changed since then, and is not a precise indication of risk or
performance--past, present or future.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes and certain non-routine expenses). 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.
4 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
Schwab MarketTrack Portfolios(R)
14
FINANCIAL TABLES
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
PER-SHARE DATA ($)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 12.05 13.88 17.22 16.37 13.96 13.59
--------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.16 0.19 0.41 0.22 0.18 0.16
Net realized and unrealized gains or losses 0.30 (1.62) (3.22) 0.94 2.48 0.99
--------------------------------------------------------------------------
Total income or loss from investment operations 0.46 (1.43) (2.81) 1.16 2.66 1.15
Less distributions:
Dividends from net investment income (0.20) (0.24) (0.44) (0.18) (0.22) (0.16)
Distributions from net realized gains -- (0.16) (0.09) (0.13) (0.03) (0.62)
--------------------------------------------------------------------------
Total distributions (0.20) (0.40) (0.53) (0.31) (0.25) (0.78)
--------------------------------------------------------------------------
Net asset value at end of period 12.31 12.05 13.88 17.22 16.37 13.96
--------------------------------------------------------------------------
Total return (%) 3.88 2 (10.78) (16.71) 7.08 19.24 8.85
RATIOS/SUPPLEMENTAL DATA (%)
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 4 0.50 3 0.50 0.50 0.56 1 0.58 0.60
Expense reductions reflected in above ratio 0.25 3 0.25 0.24 0.25 0.33 0.50
Ratio of net investment income to
average net assets 1.36 2 1.35 2.58 1.32 1.21 1.34
Portfolio turnover rate 6 2 21 10 12 7 14
Net assets, end of period ($ x 1,000,000) 504 510 511 566 428 276
1 Would have been 0.57% if certain non-routine expenses (proxy fees) had been
included.
2 Not annualized.
3 Annualized.
4 The expense 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.
See financial notes.
15
MARKETTRACK GROWTH PORTFOLIO -- Financials
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
/ Issuer is affiliated with the fund's adviser
COST MARKET VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- -------------------------------------------------------------
78.9% OTHER INVESTMENT
COMPANIES 465,038 397,884
16.3% COMMON STOCK 68,847 81,995
4.8% SHORT-TERM
INVESTMENTS 24,009 24,009
- -------------------------------------------------------------
100.0% TOTAL INVESTMENTS 557,894 503,888
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK
16.3% of investments
AEROSPACE / DEFENSE 0.3%
--------------------------------------------------------------------------
The Boeing Co. 8,078 220
Crane Co. 300 6
General Dynamics Corp. 2,000 124
Goodrich Corp. 1,100 16
Lockheed Martin Corp. 4,300 215
Northrop Grumman Corp. 1,796 158
Raytheon Co. 3,900 117
Rockwell Automation, Inc. 1,900 43
Rockwell Collins, Inc. 1,900 41
Textron, Inc. 1,500 44
United Technologies Corp. 4,600 284
---------
1,268
AIR TRANSPORTATION 0.1%
--------------------------------------------------------------------------
Delta Air Lines, Inc. 1,300 17
FedEx Corp. 2,920 175
Southwest Airlines Co. 7,480 119
----------
311
ALCOHOLIC BEVERAGES 0.1%
--------------------------------------------------------------------------
Adolph Coors Co., Class B 400 21
Anheuser-Busch Cos., Inc. 8,500 424
Brown-Forman Corp., Class B 602 46
----------
491
APPAREL 0.1%
--------------------------------------------------------------------------
o Jones Apparel Group, Inc. 1,200 34
Liz Claiborne, Inc. 1,200 39
Nike, Inc., Class B 2,800 150
o Reebok International Ltd. 500 16
VF Corp. 1,200 47
----------
286
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 0.2%
--------------------------------------------------------------------------
o Autonation, Inc. 3,000 42
Cooper Tire & Rubber Co. 700 10
Cummins, Inc. 200 5
Dana Corp. 1,578 15
Danaher Corp. 1,400 97
Delphi Corp. 5,743 48
Eaton Corp. 700 57
Ford Motor Co. 18,103 186
General Motors Corp. 5,425 196
Genuine Parts Co. 1,800 58
Goodyear Tire & Rubber Co. 1,600 9
Harley-Davidson, Inc. 3,000 133
o Navistar International Corp. 700 19
Visteon Corp. 1,558 11
----------
886
BANKS 1.3%
--------------------------------------------------------------------------
AmSouth Bancorp. 3,900 82
Bank of America Corp. 14,548 1,077
The Bank of New York Co., Inc. 7,300 193
Bank One Corp. 11,375 410
BB&T Corp. 4,400 144
Comerica, Inc. 1,700 74
Fifth Third Bancorp 5,669 279
First Tennessee National Corp. 1,200 53
FleetBoston Financial Corp. 10,110 268
Golden West Financial Corp. 1,600 121
See financial notes.
16
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Huntington Bancshares, Inc. 2,262 44
J.P. Morgan Chase & Co. 19,260 565
KeyCorp, Inc. 4,400 106
Marshall & Ilsley Corp. 2,056 61
Mellon Financial Corp. 4,600 122
National City Corp. 6,100 183
North Fork Bancorp., Inc. 1,600 52
Northern Trust Corp. 2,200 77
PNC Financial Services Group, Inc. 2,800 123
o Providian Financial Corp. 2,900 21
Regions Financial Corp. 2,100 71
South Trust Corp. 3,400 91
State Street Corp. 3,000 105
SunTrust Banks, Inc. 2,800 160
Synovus Financial Corp. 2,750 54
U.S. Bancorp 18,662 413
Union Planters Corp. 1,950 56
Wachovia Corp. 13,484 515
Wells Fargo & Co. 16,615 802
Zions Bancorp. 900 44
----------
6,366
BUSINESS MACHINES & SOFTWARE 1.6%
--------------------------------------------------------------------------
Adobe Systems, Inc. 2,400 83
o Apple Computer, Inc. 3,200 45
AutoDesk, Inc. 1,200 19
o BMC Software, Inc. 2,400 36
o Cisco Systems, Inc. 70,900 1,066
o Compuware Corp. 3,600 16
o Comverse Technology, Inc. 1,400 18
o Dell Computer Corp. 25,100 726
o EMC Corp. 20,986 191
o Gateway, Inc. 3,100 9
Hewlett-Packard Co. 29,203 476
International Business Machines Corp. 16,400 1,392
o Lexmark International, Inc., Class A 1,300 97
(6)Microsoft Corp. 104,000 2,659
o NCR Corp. 1,000 22
o Network Appliance, Inc. 2,800 37
o Novell, Inc. 3,200 9
o Novellus Systems, Inc. 1,325 37
o Oracle Corp. 52,048 618
Pitney Bowes, Inc. 2,300 81
o Sun Microsystems, Inc. 30,800 102
o Unisys Corp. 3,100 32
o Xerox Corp. 6,600 65
----------
7,836
BUSINESS SERVICES 0.6%
--------------------------------------------------------------------------
o Allied Waste Industries, Inc. 1,900 16
o Apollo Group, Inc., Class A 1,700 92
Automatic Data Processing, Inc. 6,200 209
o Cendant Corp. 9,532 136
Cintas Corp. 1,638 59
o Citrix Systems, Inc. 1,800 34
Computer Associates International, Inc. 5,625 91
o Computer Sciences Corp. 1,680 55
o Concord EFS, Inc. 4,900 68
o Convergys Corp. 1,354 22
Deluxe Corp. 700 31
o eBay, Inc. 3,034 281
Electronic Data Systems Corp. 4,600 84
Equifax, Inc. 1,200 28
First Data Corp. 7,600 298
o Fiserv, Inc. 1,800 53
H&R Block, Inc. 2,000 77
Interpublic Group of Cos., Inc. 3,700 42
o Intuit, Inc. 1,972 76
o Mercury Interactive Corp. 800 27
Moody's Corp. 1,500 72
Omnicom Group, Inc. 1,800 111
o Parametric Technology Corp. 2,700 9
Paychex, Inc. 3,600 112
o PeopleSoft, Inc. 2,900 44
o QLogic Corp. 869 38
o Robert Half International, Inc. 1,700 28
o Siebel Systems, Inc. 4,300 37
o Sungard Data Systems, Inc. 2,725 59
o Symantec Corp. 1,400 62
o Thermo Electron Corp. 1,300 24
o TMP Worldwide, Inc. 954 16
Tyco International Ltd. 19,303 301
o Veritas Software Corp. 3,800 84
Waste Management, Inc. 6,117 133
See financial notes.
17
MARKETTRACK GROWTH PORTFOLIO -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Yahoo!, Inc. 5,300 131
----------
3,040
CHEMICAL 0.3%
-------------------------------------------------------------------------
3M Co. 3,800 479
Air Products & Chemicals, Inc. 2,300 99
Dow Chemical Co. 8,694 284
E.I. du Pont de Nemours & Co. 9,592 408
Eastman Chemical Co. 800 24
Ecolab, Inc. 1,400 72
Great Lakes Chemical Corp. 600 15
o Hercules, Inc. 900 9
PPG Industries, Inc. 1,500 73
Praxair, Inc. 1,600 93
Rohm & Haas Co. 2,205 73
The Sherwin-Williams Co. 1,200 33
Sigma-Aldrich Corp. 900 45
---------
1,707
CONSTRUCTION 0.1%
-------------------------------------------------------------------------
Centex Corp. 600 40
Fluor Corp. 500 17
KB Home Corp. 400 20
Masco Corp. 4,700 99
o McDermott International, Inc. 800 3
Pulte Homes, Inc. 400 23
The Stanley Works 600 14
Vulcan Materials Co. 800 28
----------
244
CONSUMER DURABLE 0.0%
-------------------------------------------------------------------------
Black & Decker Corp. 900 37
Leggett & Platt, Inc. 2,000 41
Maytag Corp. 900 19
Whirlpool Corp. 800 43
----------
140
CONSUMER NON-DURABLE 0.2%
-------------------------------------------------------------------------
o American Greetings Corp., Class A 300 4
Darden Restaurants, Inc. 1,800 32
o Electronic Arts, Inc. 1,333 79
Fortune Brands, Inc. 1,600 77
Hasbro, Inc. 1,650 26
o International Game Technology 700 60
Mattel, Inc. 4,150 90
McDonald's Corp. 12,700 217
Newell Rubbermaid, Inc. 2,745 84
o Starbucks Corp. 3,560 84
Tupperware Corp. 400 6
Wendy's International, Inc. 1,000 29
----------
788
CONTAINERS 0.0%
-------------------------------------------------------------------------
Ball Corp. 400 22
Bemis Co. 500 23
o Pactiv Corp. 1,500 31
o Sealed Air Corp. 582 25
----------
101
ELECTRONICS 0.7%
-------------------------------------------------------------------------
o ADC Telecommunications, Inc. 6,000 14
o Advanced Micro Devices, Inc. 2,840 21
o Agilent Technologies, Inc. 4,437 71
o Altera Corp. 3,680 58
o American Power Conversion Corp. 1,725 27
o Analog Devices, Inc. 3,400 113
o Andrew Corp. 850 6
Applied Biosystems Group -- Applera Corp. 2,000 35
o Applied Materials, Inc. 15,600 228
o Applied Micro Circuits Corp. 2,862 13
o Broadcom Corp., Class A 2,300 41
o CIENA Corp. 3,200 15
Intel Corp. 65,200 1,200
ITT Industries, Inc. 900 52
o Jabil Circuit, Inc. 1,398 26
o JDS Uniphase Corp. 12,589 41
o KLA-Tencor Corp. 1,800 74
Linear Technology Corp. 3,000 103
o LSI Logic Corp. 3,000 16
o Lucent Technologies, Inc. 31,592 57
Maxim Integrated Products, Inc. 3,100 122
o Micron Technology, Inc. 5,400 46
Molex, Inc. 1,875 44
Motorola, Inc. 21,931 173
o National Semiconductor Corp. 1,700 32
See financial notes.
18
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Nvidia Corp. 1,400 20
PerkinElmer, Inc. 1,000 10
o PMC -- Sierra, Inc. 1,600 13
o Power-One, Inc. 400 2
Qualcomm, Inc. 7,600 242
o Sanmina-SCI Corp. 5,000 24
o Solectron Corp. 7,900 25
Symbol Technologies, Inc. 1,908 21
o Tektronix, Inc. 900 17
o Tellabs, Inc. 4,000 25
o Teradyne, Inc. 1,700 20
Texas Instruments, Inc. 16,800 311
o Thomas & Betts Corp. 481 8
o Univision Communications, Inc., Class A 2,004 61
o Waters Corp. 1,300 31
o Xilinx, Inc. 3,200 87
----------
3,545
ENERGY: RAW MATERIALS 0.2%
--------------------------------------------------------------------------
Anadarko Petroleum Corp. 2,418 107
Apache Corp. 1,354 78
Baker Hughes, Inc. 2,960 83
o BJ Services Co. 1,500 55
Burlington Resources, Inc. 1,905 88
Devon Energy Corp. 1,500 71
EOG Resources, Inc. 1,128 42
Halliburton Co. 4,158 89
Nabors Industries Ltd. 1,400 55
o Noble Corp. 1,300 40
Occidental Petroleum Corp. 3,600 108
Rowan Cos., Inc. 600 12
Schlumberger Ltd. 5,400 226
----------
1,054
FOOD & AGRICULTURE 0.7%
--------------------------------------------------------------------------
Altria Group, Inc. 20,200 621
Archer-Daniels-Midland Co. 6,532 72
Campbell Soup Co. 4,200 92
The Coca-Cola Co. 24,100 974
Coca-Cola Enterprises, Inc. 4,000 78
ConAgra Foods, Inc. 4,900 103
General Mills, Inc. 3,576 161
H.J. Heinz Co. 3,400 102
Hershey Foods Corp. 1,500 98
Kellogg Co. 3,900 128
McCormick & Co., Inc. 1,400 35
Monsanto Co. 2,093 36
The Pepsi Bottling Group, Inc. 2,832 58
PepsiCo, Inc. 16,860 730
Sara Lee Corp. 7,600 127
Supervalu, Inc. 1,400 23
Sysco Corp. 6,600 190
Wm. Wrigley Jr. Co. 2,200 125
----------
3,753
GOLD 0.0%
--------------------------------------------------------------------------
Newmont Mining Corp. 3,801 103
HEALTHCARE / DRUGS & MEDICINE 2.4%
--------------------------------------------------------------------------
Abbott Laboratories 15,000 609
Allergan, Inc. 1,300 91
AmerisourceBergen Corp. 1,000 58
o Amgen, Inc. 12,388 760
o Anthem, Inc. 1,351 93
Bausch & Lomb, Inc. 600 21
Baxter International, Inc. 5,600 129
Becton Dickinson & Co. 2,600 92
o Biogen, Inc. 1,500 57
Biomet, Inc. 2,475 75
o Boston Scientific Corp. 4,074 175
Bristol-Myers Squibb Co. 19,000 485
C.R. Bard, Inc. 400 25
Cardinal Health, Inc. 4,400 243
o Chiron Corp. 1,800 74
Eli Lilly & Co. 10,900 696
o Forest Laboratories, Inc. 3,400 176
o Genzyme Corp.-- General Division 2,100 85
o Guidant Corp. 3,000 117
HCA, Inc. 5,000 161
Health Management Associates, Inc., Class A 2,400 41
o Humana, Inc. 1,400 16
IMS Health, Inc. 3,000 46
Johnson & Johnson 28,854 1,626
o King Pharmaceuticals, Inc. 2,133 27
See financial notes.
19
MARKETTRACK GROWTH PORTFOLIO -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Manor Care, Inc. 1,100 21
McKesson Corp. 2,654 74
o Medimmune, Inc. 2,400 85
Medtronic, Inc. 11,800 563
Merck & Co., Inc. 21,900 1,274
(8) Pfizer, Inc. 77,076 2,370
o Quest Diagnostics 801 48
o Quintiles Transnational Corp. 1,200 17
Schering-Plough Corp. 14,100 255
o St. Jude Medical, Inc. 1,450 76
Stryker Corp. 1,892 127
o Tenet Healthcare Corp. 4,650 69
UnitedHealth Group, Inc. 3,000 276
o Watson Pharmaceuticals, Inc. 1,000 29
o WellPoint Health Networks, Inc. 1,400 106
Wyeth 12,700 553
o Zimmer Holdings, Inc. 1,800 84
----------
12,005
HOUSEHOLD PRODUCTS 0.4%
--------------------------------------------------------------------------
Alberto-Culver Co., Class B 600 29
Avon Products, Inc. 2,400 140
Clorox Co. 2,200 99
Colgate-Palmolive Co. 5,300 303
The Gillette Co. 10,600 323
International Flavors & Fragrances, Inc. 1,100 35
Procter & Gamble Co. 12,600 1,132
----------
2,061
INSURANCE 0.8%
--------------------------------------------------------------------------
ACE Ltd. 2,500 83
Aetna, Inc. 1,424 71
AFLAC, Inc. 5,200 170
The Allstate Corp. 7,000 264
AMBAC Financial Group, Inc. 1,015 59
American International Group, Inc. 25,251 1,463
AON Corp. 2,625 58
Chubb Corp. 1,700 90
CIGNA Corp. 1,400 73
Cincinnati Financial Corp. 1,800 66
Hartford Financial Services Group, Inc. 2,400 98
Jefferson-Pilot Corp. 1,612 65
John Hancock Financial Services, Inc. 2,977 86
Lincoln National Corp. 1,900 61
Loews Corp. 2,000 83
Marsh & McLennan Cos., Inc. 5,200 248
MBIA, Inc. 1,350 60
Metlife, Inc. 6,810 196
MGIC Investment Corp. 1,200 55
Principal Financial Group, Inc. 3,465 101
The Progressive Corp. 2,100 143
Prudential Financial, Inc. 5,700 182
Safeco Corp. 1,100 42
St. Paul Cos., Inc. 1,850 63
Torchmark Corp. 1,100 43
Travelers Property Casualty Corp., Class B 9,699 158
UnumProvident Corp. 2,349 27
XL Capital Ltd., Class A 1,200 99
----------
4,207
MEDIA 0.7%
--------------------------------------------------------------------------
o AOL Time Warner, Inc. 42,850 586
o Clear Channel Communications, Inc. 5,717 224
o Comcast Corp., Class A 21,843 697
Dow Jones & Co., Inc. 800 32
Gannett Co., Inc. 2,700 204
Knight-Ridder, Inc. 900 58
The McGraw-Hill Cos., Inc. 2,000 117
Meredith Corp. 500 22
New York Times Co., Class A 1,700 79
R.R. Donnelley & Sons Co. 1,200 24
Tribune Co. 2,800 137
o Viacom, Inc., Class B 16,881 733
The Walt Disney Co. 20,319 379
----------
3,292
MISCELLANEOUS FINANCE 1.2%
--------------------------------------------------------------------------
American Express Co. 12,900 488
The Bear Stearns Cos., Inc. 1,182 79
Capital One Financial Corp. 2,100 88
/ The Charles Schwab Corp. 13,042 113
Charter One Financial, Inc. 2,315 67
See financial notes.
20
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
(10) Citigroup, Inc. 49,792 1,954
Countrywide Financial Corp. 1,100 74
Fannie Mae 9,700 702
Federated Investors, Inc., Class B 1,100 30
Franklin Resources, Inc. 2,500 87
Freddie Mac 6,900 399
Goldman Sachs Group, Inc. 4,579 348
Janus Capital Group, Inc. 2,200 31
Lehman Brothers Holdings, Inc. 2,400 151
MBNA Corp. 11,850 224
Merrill Lynch & Co., Inc. 8,400 345
Morgan Stanley 10,600 474
SLM Corp. 1,500 168
T. Rowe Price Group, Inc. 1,200 37
Washington Mutual, Inc. 9,282 367
----------
6,226
NON-FERROUS METALS 0.1%
--------------------------------------------------------------------------
Alcoa, Inc. 8,472 194
Engelhard Corp. 1,300 32
Freeport-McMoran Copper & Gold, Inc., Class B 800 14
Inco Ltd. 79 2
o Phelps Dodge Corp. 810 25
----------
267
OIL: DOMESTIC 0.1%
--------------------------------------------------------------------------
Amerada Hess Corp. 1,000 45
Ashland, Inc. 800 24
ConocoPhillips 6,546 329
Kerr-McGee Corp. 869 37
Marathon Oil Corp. 3,100 71
Sunoco, Inc. 900 33
Transocean, Inc. 2,945 56
Unocal Corp. 2,400 66
----------
661
OIL: INTERNATIONAL 0.6%
--------------------------------------------------------------------------
ChevronTexaco Corp. 10,327 649
(9) Exxon Mobil Corp. 65,658 2,311
----------
2,960
OPTICAL & PHOTO 0.0%
--------------------------------------------------------------------------
Eastman Kodak Co. 3,100 93
PAPER & FOREST PRODUCTS 0.1%
--------------------------------------------------------------------------
Boise Cascade Corp. 600 14
Georgia-Pacific Corp. 2,228 34
International Paper Co. 4,846 173
Kimberly-Clark Corp. 5,060 252
o Louisiana-Pacific Corp. 600 5
MeadWestvaco Corp. 1,970 47
Temple-Inland, Inc. 600 27
Weyerhaeuser Co. 2,300 114
----------
666
PRODUCER GOODS & MANUFACTURING 0.8%
--------------------------------------------------------------------------
o American Standard Cos., Inc. 700 50
Avery Dennison Corp. 1,200 64
Caterpillar, Inc. 3,500 184
Cooper Industries Ltd., Class A 900 33
o Corning, Inc. 8,700 47
Deere & Co. 2,300 101
Dover Corp. 2,000 57
Emerson Electric Co. 4,000 203
(5) General Electric Co. 96,200 2,833
Honeywell International, Inc. 7,837 185
Illinois Tool Works, Inc. 3,000 192
Ingersoll-Rand Co., Class A 1,650 73
Johnson Controls, Inc. 800 66
o Millipore Corp. 400 14
Pall Corp. 1,000 21
Parker Hannifin Corp. 1,150 47
Snap-On, Inc. 600 18
W.W. Grainger, Inc. 900 41
----------
4,229
RAILROAD & SHIPPING 0.1%
--------------------------------------------------------------------------
Burlington Northern Santa Fe
Corp. 3,800 107
CSX Corp. 2,200 71
Norfolk Southern Corp. 3,600 76
Union Pacific Corp. 2,500 149
----------
403
REAL PROPERTY 0.1%
--------------------------------------------------------------------------
Apartment Investment &
Management Co., Class A 900 34
See financial notes.
21
MARKETTRACK GROWTH PORTFOLIO -- Financials
PORTFOLIO HOLDINGS Continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Equity Office Properties Trust 3,900 101
Equity Residential 2,600 67
Plum Creek Timber Co., Inc. 1,700 40
Simon Property Group, Inc. 1,700 63
----------
305
RETAIL 1.2%
--------------------------------------------------------------------------
Albertson's, Inc. 4,138 82
o AutoZone, Inc. 1,000 81
o Bed, Bath & Beyond, Inc. 2,800 111
o Best Buy Co., Inc. 2,850 99
o Big Lots, Inc. 1,100 14
Circuit City Stores, Inc. 2,000 11
o Costco Wholesale Corp. 4,400 152
CVS Corp. 3,900 94
Dillards, Inc., Class A 500 7
Dollar General Corp. 3,303 48
Family Dollar Stores, Inc. 1,700 58
o Federated Department Stores, Inc. 2,100 64
o The Gap, Inc. 8,300 138
Home Depot, Inc. 22,900 644
J.C. Penney Co., Inc. Holding Co. 2,500 43
o Kohl's Corp. 3,200 182
o Kroger Co. 8,200 117
Limited Brands, Inc. 4,994 73
Lowe's Cos., Inc. 7,600 334
The May Department Stores Co. 2,800 61
Nordstrom, Inc. 1,300 22
o Office Depot, Inc. 3,700 47
RadioShack Corp. 1,900 45
o Safeway, Inc. 4,900 81
Sears, Roebuck & Co. 3,200 91
o Staples, Inc. 4,350 83
Target Corp. 8,800 294
Tiffany & Co. 1,400 39
TJX Cos., Inc. 5,200 100
o Toys 'R' Us, Inc. 2,600 27
(7) Wal-Mart Stores, Inc. 43,100 2,427
Walgreen Co. 9,900 305
Winn-Dixie Stores, Inc. 1,500 19
o Yum! Brands, Inc. 3,120 77
----------
6,070
STEEL 0.0%
--------------------------------------------------------------------------
Allegheny Technologies, Inc. 735 3
Nucor Corp. 900 37
United States Steel Corp. 900 13
Worthington Industries, Inc. 900 12
----------
65
TELEPHONE 0.6%
--------------------------------------------------------------------------
Alltel Corp. 3,100 145
AT&T Corp. 7,358 125
o AT&T Wireless Services, Inc. 24,461 158
o Avaya, Inc. 2,632 10
BellSouth Corp. 18,400 469
CenturyTel, Inc. 1,350 40
o Citizens Communications Co. 2,576 28
o Nextel Communications, Inc., Class A 8,800 130
o Qwest Communications International, Inc. 15,773 60
SBC Communications, Inc. 32,336 755
Scientific-Atlanta, Inc. 1,600 26
Sprint Corp. (FON Group) 8,600 99
o Sprint Corp. (PCS Group) 8,800 31
Verizon Communications, Inc. 26,558 993
----------
3,069
TOBACCO 0.0%
--------------------------------------------------------------------------
R.J. Reynolds Tobacco Holdings, Inc. 900 25
UST, Inc. 1,600 50
----------
75
TRAVEL & RECREATION 0.1%
--------------------------------------------------------------------------
Brunswick Corp. 900 20
Carnival Corp. 6,100 168
o Harrah's Entertainment, Inc. 1,300 51
Hilton Hotels Corp. 3,600 48
Marriott International, Inc., Class A 2,600 93
Sabre Holdings Corp. 1,283 27
Starwood Hotels & Resorts Worldwide, Inc. 1,900 51
----------
458
See financial notes.
22
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TRUCKING & FREIGHT 0.1%
--------------------------------------------------------------------------
Paccar, Inc. 1,050 61
Ryder Systems, Inc. 400 10
United Parcel Service, Inc., Class B 10,818 672
----------
743
UTILITIES: ELECTRIC & GAS 0.4%
--------------------------------------------------------------------------
o The AES Corp. 4,800 29
Allegheny Energy, Inc. 1,070 9
Ameren Corp. 1,500 61
American Electric Power Co., Inc. 3,160 83
o Calpine Corp. 2,700 14
Centerpoint Energy, Inc. 2,949 23
Cinergy Corp. 1,600 55
CMS Energy Corp. 1,000 6
Consolidated Edison, Inc. 2,100 82
Constellation Energy Group, Inc. 1,300 38
Dominion Resources, Inc. 2,978 176
DTE Energy Co. 1,400 56
Duke Energy Corp. 7,952 140
Dynegy, Inc., Class A 3,100 14
o Edison International 3,200 47
El Paso Corp. 5,006 37
Entergy Corp. 2,400 112
Exelon Corp. 3,112 165
FirstEnergy Corp. 2,895 98
FPL Group, Inc. 1,900 116
KeySpan Corp. 1,300 44
Kinder Morgan, Inc. 1,107 52
o Mirant Corp. 2,624 9
Nicor, Inc. 500 15
NiSource, Inc. 1,946 37
Peoples Energy Corp. 200 8
o PG&E Corp. 3,600 54
Pinnacle West Capital Corp. 800 27
PPL Corp. 1,400 51
Progress Energy, Inc. 1,975 82
Public Service Enterprise Group, Inc. 2,000 77
Sempra Energy 2,103 56
The Southern Co. 6,600 192
TECO Energy, Inc. 1,300 14
TXU Corp. 2,767 55
Williams Cos., Inc. 5,000 35
Xcel Energy, Inc. 3,850 52
----------
2,221
OTHER INVESTMENT COMPANIES
78.9% of investments
--------------------------------------------------------------------------
/(2) Schwab International Index
Fund(R), Select Shares(R) 9,784,545 101,847
/(1) Schwab S&P 500 Fund,
Select Shares 8,440,614 119,941
/(3) Schwab Small-Cap Index
Fund(R), Select Shares 7,342,259 101,617
/(4) Schwab Total Bond
Market Fund 7,133,996 74,479
----------
397,884
SHORT-TERM INVESTMENTS
4.8% of investments
--------------------------------------------------------------------------
/ Schwab Value Advantage
Money Fund(R), Investor
Shares 22,659,153 22,659
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
Bank One, Grand Cayman
Time Deposit
0.80%, 05/01/03 1,350 1,350
----------
24,009
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
23
MARKETTRACK GROWTH PORTFOLIO -- Financials
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value $503,888 a
Receivables:
Fund shares sold 180
Dividends 101
Dividend tax reclaim 3
Investments sold 504
Prepaid expenses + 8
----------
TOTAL ASSETS 504,684
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 249
Investment adviser and administrator fees 11
Transfer agent and shareholder service fees 13
Accrued expenses + 110
----------
TOTAL LIABILITIES 383
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 504,684
TOTAL LIABILITIES - 383
----------
NET ASSETS $504,301
NET ASSETS BY SOURCE
Capital received from investors 577,793
Net investment income not yet distributed 540
Net realized capital losses (20,026)
Net unrealized capital losses (54,006)
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$504,301 40,954 $12.31
a The fund paid $557,894 for these securities. Not counting short-term
obligations and government securities, the fund paid $27,777 for securities
during the report period and received $45,049 from securities it sold or that
matured.
Percent of fund shares of other Schwab funds owned as of the end of the report
period:
SCHWAB EQUITY INDEX FUNDS
S&P 500 Fund 1.9%
Small-Cap Index Fund(R) 7.8%
International Index Fund(R) 10.7%
SCHWAB BOND FUNDS
Total Bond Market Fund 7.1%
SCHWAB MONEY FUNDS
Value Advantage
Money Fund(R) 0.1%
FEDERAL TAX DATA
- ---------------------------------------------------------------
PORTFOLIO COST $566,145
NET UNREALIZED GAINS AND LOSSES:
Gains $35,190
Losses + (97,447)
----------
($62,257)
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $2,242
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $1,910
See financial notes.
24
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- ---------------------------------------------------------------------------
Dividends $8,059
Interest + 3
------------
TOTAL INVESTMENT INCOME 8,062
NET REALIZED GAINS AND LOSSES
- ---------------------------------------------------------------------------
Net realized losses on investments sold (10,031)
Net realized gains received from underlying funds + 227
------------
NET REALIZED LOSSES (9,804)
NET UNREALIZED GAINS AND LOSSES
- ---------------------------------------------------------------------------
Net unrealized gains on investments 21,403
EXPENSES
- ---------------------------------------------------------------------------
Investment adviser and administrator fees 1,090 a
Transfer agent and shareholder service fees 621 b
Trustees' fees 4 c
Custodian fees 25
Portfolio accounting fees 37
Professional fees 14
Registration fees 13
Shareholder reports 55
Other expenses + 4
------------
Total expenses 1,863
Expense reduction - 622 d
------------
NET EXPENSES 1,241
INCREASE IN NET ASSETS FROM OPERATIONS
- ---------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 8,062
NET EXPENSES - 1,241
------------
NET INVESTMENT INCOME 6,821
NET REALIZED LOSSES (9,804)e
NET UNREALIZED GAINS + 21,403 e
------------
INCREASE IN NET ASSETS FROM OPERATIONS $18,420
a Calculated as a percentage of average daily net assets: 0.44% of the first
$500 million and 0.39% of assets beyond that.
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.
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 at least
February 29, 2004, to 0.50% of average daily net assets. This limit doesn't
include interest, taxes and certain non-routine expenses.
e These add up to a net gain on investments of $11,599.
See financial notes.
25
MARKETTRACK GROWTH PORTFOLIO -- Financials
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for current period are unaudited.
OPERATIONS
- -------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income $6,821 $7,322
Net realized losses (9,804) (5,594)
Net unrealized gains or losses + 21,403 (66,308)
---------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 18,420 (64,580)
DISTRIBUTIONS PAID
- -------------------------------------------------------------------------------
Dividends from net investment income 8,524 8,889
Distributions from net realized gains + -- 5,834
--------------------------------------
TOTAL DISTRIBUTIONS PAID $8,524 $14,723 a
TRANSACTIONS IN FUND SHARES
- ---------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 2,800 $33,591 12,796 $173,232
Shares reinvested 709 8,524 1,010 14,418
Shares redeemed + (4,853) (57,506) (8,337) (109,730)
--------------------------------------------
NET INCREASE OR DECREASE (1,344) ($15,391) 5,469 $77,920
SHARES OUTSTANDING AND NET ASSETS
- -------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 42,298 $509,796 36,829 $511,179
Total increase or
decrease + (1,344) (5,495) 5,469 (1,383)b
------------------------------------------------
END OF PERIOD 40,954 $504,301 42,298 $509,796 c
a The tax-basis components of distributions paid for the prior period are:
Ordinary income $8,889
Long-term capital gains $5,834
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 Includes net investment income not yet distributed in the amount of $540 and
$2,243 at the end of the current period and the prior period, respectively.
See financial notes.
26
SCHWAB MARKETTRACK BALANCED PORTFOLIO
PERFORMANCE as of 4/30/03
AVERAGE ANNUAL TOTAL RETURNS 1,2
This chart compares performance of the portfolio with the S&P 500(R) Index, the
Lehman Brothers U.S. Aggregate Bond Index and the Balanced Composite Index.
[BAR CHART]
LEHMAN BROTHERS BALANCED
S&P 500 U.S. AGGREGATE COMPOSITE
PORTFOLIO INDEX BOND INDEX INDEX
6 MONTHS 4.12 4.48 4.31 4.06
1 YEAR -6.16 -13.31 10.47 -7.21
5 YEARS 0.91 -2.43 7.57 1.56
SINCE INCEPTION: 11/20/95 5.86 7.54 7.44 N/A
PERFORMANCE OF A $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 three
indices: the S&P 500 Index, the Lehman Brothers U.S. Aggregate Bond Index and
the Balanced Composite Index.
$15,284 PORTFOLIO
$17,192 S&P 500 INDEX
$17,075 LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX
$15,653 BALANCED COMPOSITE INDEX
[LINE CHART]
Lehman Brothers Balanced
S&P 500 U.S. Aggregate Composite
PORTFOLIO Index Bond Index Index
20-Nov-95 10000 10000 10000
Nov-95 10080 10104 10076 10000
Dec-95 10270 10299 10217 10159
Jan-96 10390 10649 10285 10300
Feb-96 10410 10748 10106 10357
Mar-96 10460 10852 10035 10430
Apr-96 10581 11011 9979 10625
May-96 10691 11294 9959 10759
Jun-96 10711 11337 10092 10750
Jul-96 10410 10836 10120 10432
Aug-96 10551 11064 10102 10629
Sep-96 10912 11686 10278 10966
Oct-96 11082 12009 10506 11078
Nov-96 11534 12917 10686 11494
Dec-96 11415 12661 10587 11449
Jan-97 11589 13451 10620 11682
Feb-97 11589 13557 10646 11676
Mar-97 11334 13001 10528 11421
Apr-97 11620 13776 10686 11615
May-97 12183 14614 10787 12167
Jun-97 12593 15268 10916 12543
Jul-97 13217 16482 11210 13130
Aug-97 12849 15559 11115 12847
Sep-97 13391 16410 11280 13372
Oct-97 13125 15862 11443 13068
Nov-97 13309 16597 11496 13152
Dec-97 13443 16882 11612 13284
Jan-98 13582 17070 11761 13386
Feb-98 14149 18300 11751 13949
Mar-98 14523 19237 11791 14370
Apr-98 14608 19432 11852 14485
May-98 14448 19097 11965 14339
Jun-98 14672 19873 12067 14487
Jul-98 14469 19662 12092 14294
Aug-98 13262 16823 12289 13004
Sep-98 13668 17901 12577 13361
Oct-98 14309 19357 12510 13846
Nov-98 14800 20530 12581 14343
Dec-98 15281 21712 12619 14836
Jan-99 15523 22620 12709 15032
Feb-99 15028 21916 12486 14571
Mar-99 15369 22793 12555 14882
Apr-99 15820 23675 12595 15380
May-99 15567 23116 12484 15213
Jun-99 16018 24399 12444 15695
Jul-99 15930 23638 12392 15604
Aug-99 15842 23520 12386 15488
Sep-99 15853 22875 12530 15434
Oct-99 16337 24323 12576 15794
Nov-99 16711 24817 12575 16277
Dec-99 17420 26279 12514 17118
Jan-00 16823 24960 12473 16714
Feb-00 17150 24487 12624 17285
Mar-00 17815 26882 12791 17797
Apr-00 17353 26073 12754 17306
May-00 17037 25539 12747 16999
Jun-00 17601 26169 13012 17558
Jul-00 17364 25761 13131 17420
Aug-00 18085 27361 13321 18151
Sep-00 17612 25917 13405 17790
Oct-00 17499 25808 13493 17581
Nov-00 16812 23774 13715 16898
Dec-00 17241 23891 13970 17467
Jan-01 17569 24739 14198 17824
Feb-01 16713 22483 14321 17090
Mar-01 16162 21057 14393 16458
Apr-01 16877 22693 14332 17176
May-01 16936 22845 14418 17272
Jun-01 16842 22290 14473 17131
Jul-01 16748 22072 14797 17032
Aug-01 16350 20690 14967 16655
Sep-01 15447 19018 15141 15659
Oct-01 15798 19382 15457 16070
Nov-01 16314 20868 15244 16627
Dec-01 16483 21052 15147 16840
Jan-02 16239 20744 15269 16671
Feb-02 16105 20344 15417 16566
Mar-02 16519 21109 15161 17002
Apr-02 16288 19830 15456 16870
May-02 16227 19683 15587 16801
Jun-02 15691 18282 15723 16216
Jul-02 14838 16858 15913 15298
Aug-02 14972 16967 16182 15403
Sep-02 14156 15123 16444 14604
Oct-02 14680 16454 16368 15043
Nov-02 15204 17423 16363 15561
Dec-02 14860 16400 16702 15230
Jan-03 14548 15970 16717 14981
Feb-03 14436 15731 16948 14849
Mar-03 14473 15883 16934 14862
30-Apr-03 15284 17192 17075 15653
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.
The portfolio's share price and principal values change, and when you sell
your shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results. Results for the report period
are not annualized.
1 Portfolio returns reflect expense reductions by the portfolio's investment
adviser (CSIM) and Schwab. Without these reductions, the portfolio's returns
would have been lower. These returns also 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. As of 4/30/03, the total
number of funds in the Morningstar Large-Cap Blend, Small-Cap Blend, Foreign
and Intermediate-Term Bond Fund categories for the six-month, one- and
five-year periods was 1,410,349,938,741; 1,362,342,898,707; and
711,190,516,439, respectively.
Schwab MarketTrack Portfolios(R)
27
SCHWAB MARKETTRACK BALANCED PORTFOLIO
FUND FACTS as of 4/30/03
TOP HOLDINGS 1
% OF
SECURITY INVESTMENTS
- -------------------------------------------------------
(1) SCHWAB TOTAL BOND MARKET FUND 34.8%
- -------------------------------------------------------
(2) SCHWAB S&P 500 FUND 18.1%
Select Shares(R)
- -------------------------------------------------------
(3) SCHWAB INTERNATIONAL INDEX FUND(R) 15.2%
Select Shares
- -------------------------------------------------------
(4) SCHWAB SMALL-CAP INDEX FUND(R) 15.1%
Select Shares
- -------------------------------------------------------
(5) GENERAL ELECTRIC CO. 0.4%
- -------------------------------------------------------
(6) MICROSOFT CORP. 0.4%
- -------------------------------------------------------
(7) WAL-MART STORES, INC. 0.4%
- -------------------------------------------------------
(8) PFIZER, INC. 0.3%
- -------------------------------------------------------
(9) EXXON MOBIL CORP. 0.3%
- -------------------------------------------------------
(10) CITIGROUP, INC. 0.3%
- -------------------------------------------------------
TOTAL 85.3%
STATISTICS
NUMBER OF HOLDINGS 507
- -------------------------------------------------------
PORTFOLIO TURNOVER RATE 2 12%
- -------------------------------------------------------
EXPENSE RATIO 3 0.50%
- -------------------------------------------------------
ASSET CLASS WEIGHTINGS
This chart shows the portfolio's asset class composition as of the report date.
[PIE CHART]
34.8% BONDS
30.0% LARGE-CAP STOCKS
15.2% INTERNATIONAL STOCKS
15.1% SMALL-CAP STOCKS
4.9% SHORT-TERM INVESTMENTS
1 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes and certain non-routine expenses). 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.
Schwab MarketTrack Portfolios(R)
28
FINANCIAL TABLES
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- -------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 12.05 13.47 15.53 14.85 13.39 12.82
----------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.18 0.32 0.45 0.36 0.29 0.25
Net realized and unrealized gains or losses 0.31 (1.22) (1.92) 0.69 1.57 0.86
----------------------------------------------------------
Total income or loss from investment operations 0.49 (0.90) (1.47) 1.05 1.86 1.11
Less distributions:
Dividends from net investment income (0.29) (0.40) (0.49) (0.28) (0.33) (0.23)
Distributions from net realized gains -- (0.12) (0.10) (0.09) (0.07) (0.31)
----------------------------------------------------------
Total distributions (0.29) (0.52) (0.59) (0.37) (0.40) (0.54)
----------------------------------------------------------
Net asset value at end of period 12.25 12.05 13.47 15.53 14.85 13.39
----------------------------------------------------------
Total return (%) 4.12 2 (7.08) (9.72) 7.11 14.18 9.02
RATIOS/SUPPLEMENTAL DATA (%)
- --------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 4 0.50 3 0.50 0.50 0.56 1 0.58 0.59
Expense reductions reflected in above ratio 0.24 3 0.24 0.24 0.25 0.33 0.51
Ratio of net investment income to
average net assets 1.52 2 2.35 3.31 2.46 2.25 2.33
Portfolio turnover rate 12 2 31 21 18 7 32
Net assets, end of period ($ x 1,000,000) 464 462 497 510 403 264
1 Would have been 0.57% if certain non-routine expenses (proxy fees) had been
included.
2 Not annualized
3 Annualized
4 The expense 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.
See financial notes.
29
MARKETTRACK BALANCED PORTFOLIO -- Financials
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
/ Issuer is affiliated with the fund's adviser
COST MARKET VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- -----------------------------------------------------------
83.2% OTHER INVESTMENT
COMPANIES 417,825 386,459
11.9% COMMON STOCK 46,794 55,118
4.9% SHORT-TERM
INVESTMENTS 22,737 22,737
- -----------------------------------------------------------
100.0% TOTAL INVESTMENTS 487,356 464,314
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK
11.9% of investments
AEROSPACE / DEFENSE 0.2%
-------------------------------------------------------------------------
The Boeing Co. 5,484 150
Crane Co. 200 4
General Dynamics Corp. 1,300 81
Goodrich Corp. 700 10
Lockheed Martin Corp. 2,900 145
Northrop Grumman Corp. 1,128 99
Raytheon Co. 2,600 78
Rockwell Automation, Inc. 1,200 27
Rockwell Collins, Inc. 1,200 26
Textron, Inc. 1,000 29
United Technologies Corp. 3,200 198
----------
847
AIR TRANSPORTATION 0.1%
-------------------------------------------------------------------------
Delta Air Lines, Inc. 900 12
FedEx Corp. 1,960 117
Southwest Airlines Co. 4,537 72
----------
201
ALCOHOLIC BEVERAGES 0.1%
-------------------------------------------------------------------------
Adolph Coors Co., Class B 200 11
Anheuser-Busch Cos., Inc. 5,800 289
Brown-Forman Corp., Class B 402 31
----------
331
APPAREL 0.0%
-------------------------------------------------------------------------
o Jones Apparel Group, Inc. 800 23
Liz Claiborne, Inc. 800 26
Nike, Inc., Class B 1,700 91
o Reebok International Ltd. 300 9
VF Corp. 800 32
----------
181
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 0.1%
-------------------------------------------------------------------------
o Autonation, Inc. 2,000 28
Cooper Tire & Rubber Co. 400 6
Cummins, Inc. 300 8
Dana Corp. 1,085 10
Danaher Corp. 900 62
Delphi Corp. 3,884 33
Eaton Corp. 500 41
Ford Motor Co. 12,185 125
General Motors Corp. 3,650 131
Genuine Parts Co. 1,150 37
Goodyear Tire & Rubber Co. 1,000 6
Harley-Davidson, Inc. 2,000 89
o Navistar International Corp. 400 11
Visteon Corp. 1,047 7
----------
594
BANKS 0.9%
-------------------------------------------------------------------------
AmSouth Bancorp. 2,600 55
Bank of America Corp. 9,780 724
The Bank of New York Co., Inc. 4,900 130
Bank One Corp. 7,557 272
BB&T Corp. 3,000 98
Comerica, Inc. 1,000 43
Fifth Third Bancorp 3,858 190
First Tennessee National Corp. 800 35
FleetBoston Financial Corp. 6,778 180
See financial notes.
30
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Golden West Financial Corp. 1,100 83
Huntington Bancshares, Inc. 1,597 31
J.P. Morgan Chase & Co. 12,766 375
KeyCorp, Inc. 2,600 63
Marshall & Ilsley Corp. 1,344 39
Mellon Financial Corp. 3,100 82
National City Corp. 4,100 123
North Fork Bancorp., Inc. 1,100 36
Northern Trust Corp. 1,400 49
PNC Financial Services Group, Inc. 1,900 83
o Providian Financial Corp. 1,900 14
Regions Financial Corp. 1,400 47
SouthTrust Corp. 2,200 59
State Street Corp. 2,200 77
SunTrust Banks, Inc. 1,900 109
Synovus Financial Corp. 1,900 37
U.S. Bancorp 12,554 278
Union Planters Corp. 1,350 38
Wachovia Corp. 8,836 338
Wells Fargo & Co. 11,135 537
Zions Bancorp. 600 30
----------
4,255
BUSINESS MACHINES & SOFTWARE 1.1%
-------------------------------------------------------------------------
Adobe Systems, Inc. 1,600 55
o Apple Computer, Inc. 2,200 31
Autodesk, Inc. 800 12
o BMC Software, Inc. 1,600 24
o Cisco Systems, Inc. 47,700 717
o Compuware Corp. 2,400 11
o Comverse Technology, Inc. 1,000 13
o Dell Computer Corp. 16,900 489
o EMC Corp. 14,162 129
o Gateway, Inc. 2,100 6
Hewlett-Packard Co. 19,724 321
International Business Machines Corp. 11,000 934
o Lexmark International, Inc., Class A 800 60
(6)Microsoft Corp. 69,600 1,780
o NCR Corp. 600 13
o Network Appliance, Inc. 2,000 27
o Novell, Inc. 2,200 6
o Novellus Systems, Inc. 900 25
o Oracle Corp. 34,900 415
Pitney Bowes, Inc. 1,600 56
o Sun Microsystems, Inc. 20,800 69
o Unisys Corp. 2,100 22
o Xerox Corp. 4,200 41
----------
5,256
BUSINESS SERVICES 0.4%
-------------------------------------------------------------------------
o Allied Waste Industries, Inc. 1,300 11
o Apollo Group, Inc., Class A 1,100 60
Automatic Data Processing, Inc. 3,900 131
o Cendant Corp. 6,415 92
Cintas Corp. 1,102 40
o Citrix Systems, Inc. 1,200 23
Computer Associates International, Inc. 3,825 62
o Computer Sciences Corp. 1,090 36
o Concord EFS, Inc. 3,300 46
o Convergys Corp. 869 14
Deluxe Corp. 500 22
o eBay, Inc. 2,004 186
Electronic Data Systems Corp. 3,100 56
Equifax, Inc. 900 21
First Data Corp. 5,200 204
o Fiserv, Inc. 1,200 35
H&R Block, Inc. 1,200 46
Interpublic Group of Cos., Inc. 2,500 29
o Intuit, Inc. 1,327 51
o Mercury Interactive Corp. 500 17
Moody's Corp. 1,000 48
Omnicom Group, Inc. 1,200 74
o Parametric Technology Corp. 1,800 6
Paychex, Inc. 2,475 77
o PeopleSoft, Inc. 1,900 29
o QLogic Corp. 585 26
o Robert Half International, Inc. 1,200 20
o Siebel Systems, Inc. 3,000 26
o Sungard Data Systems, Inc. 1,832 39
o Symantec Corp. 999 44
o Thermo Electron Corp. 900 16
See financial notes.
31
MARKETTRACK BALANCED PORTFOLIO -- Financials
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o TMP Worldwide, Inc. 666 11
Tyco International Ltd. 12,949 202
o Veritas Software Corp. 2,600 57
Waste Management, Inc. 4,112 89
o Yahoo!, Inc. 3,600 89
----------
2,035
CHEMICAL 0.3%
-------------------------------------------------------------------------
3M Co. 2,600 328
Air Products & Chemicals, Inc. 1,500 65
Dow Chemical Co. 5,649 184
E.I. du Pont de Nemours & Co. 6,484 276
Eastman Chemical Co. 600 18
Ecolab, Inc. 1,000 51
Great Lakes Chemical Corp. 400 10
o Hercules, Inc. 700 7
PPG Industries, Inc. 1,200 58
Praxair, Inc. 1,000 58
Rohm & Haas Co. 1,421 47
The Sherwin-Williams Co. 1,100 31
Sigma-Aldrich Corp. 500 25
----------
1,158
CONSTRUCTION 0.0%
-------------------------------------------------------------------------
Centex Corp. 400 26
Fluor Corp. 500 17
KB Home Corp. 300 15
Masco Corp. 3,000 63
o McDermott International, Inc. 400 1
Pulte Homes, Inc. 400 23
The Stanley Works 600 15
Vulcan Materials Co. 700 25
----------
185
CONSUMER DURABLE 0.0%
-------------------------------------------------------------------------
Black & Decker Corp. 600 25
Leggett & Platt, Inc. 1,300 27
Maytag Corp. 600 12
Whirlpool Corp. 500 27
----------
91
CONSUMER NON-DURABLE 0.1%
-------------------------------------------------------------------------
o American Greetings Corp., Class A 400 6
Darden Restaurants, Inc. 1,350 24
o Electronic Arts, Inc. 896 53
Fortune Brands, Inc. 1,000 48
Hasbro, Inc. 1,275 20
o International Game Technology 500 43
Mattel, Inc. 2,825 62
McDonald's Corp. 8,600 147
Newell Rubbermaid, Inc. 1,872 57
o Starbucks Corp. 2,440 57
Tupperware Corp. 200 3
Wendy's International, Inc. 800 23
----------
543
CONTAINERS 0.0%
-------------------------------------------------------------------------
Ball Corp. 200 11
Bemis Co. 300 14
o Pactiv Corp. 1,000 20
o Sealed Air Corp. 621 27
----------
72
ELECTRONICS 0.5%
-------------------------------------------------------------------------
o ADC Telecommunications, Inc. 5,000 12
o Advanced Micro Devices, Inc. 2,040 15
o Agilent Technologies, Inc. 2,917 47
o Altera Corp. 2,546 40
o American Power Conversion Corp. 1,175 18
o Analog Devices, Inc. 2,300 76
o Andrew Corp. 325 2
Applied Biosystems Group -- Applera Corp. 1,400 24
o Applied Materials, Inc. 10,400 152
o Applied Micro Circuits Corp. 1,928 9
o Broadcom Corp., Class A 1,500 27
o CIENA Corp. 2,100 10
Intel Corp. 43,800 806
ITT Industries, Inc. 600 35
o Jabil Circuit, Inc. 941 18
o JDS Uniphase Corp. 8,464 27
o KLA-Tencor Corp. 1,200 49
Linear Technology Corp. 2,000 69
o LSI Logic Corp. 2,000 11
o Lucent Technologies, Inc. 21,305 38
Maxim Integrated Products, Inc. 2,100 82
See financial notes.
32
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Micron Technology, Inc. 3,600 31
Molex, Inc. 1,250 29
Motorola, Inc. 14,770 117
o National Semiconductor Corp. 1,100 21
o Nvidia Corp. 900 13
PerkinElmer, Inc. 600 6
o PMC -- Sierra, Inc. 1,100 9
o Power-One, Inc. 240 1
Qualcomm, Inc. 5,100 163
o Sanmina -- SCI Corp. 3,400 16
o Solectron Corp. 5,300 17
Symbol Technologies, Inc. 1,284 14
o Tektronix, Inc. 500 9
o Tellabs, Inc. 2,700 17
o Teradyne, Inc. 1,100 13
Texas Instruments, Inc. 11,300 209
o Thomas & Betts Corp. 381 6
o Univision Communications, Inc., Class A 1,348 41
o Waters Corp. 900 22
o Xilinx, Inc. 2,100 57
----------
2,378
ENERGY: RAW MATERIALS 0.2%
-------------------------------------------------------------------------
Anadarko Petroleum Corp. 1,510 67
Apache Corp. 924 53
Baker Hughes, Inc. 2,250 63
o BJ Services Co. 1,000 37
Burlington Resources, Inc. 1,410 65
Devon Energy Corp. 1,000 47
EOG Resources, Inc. 759 28
Halliburton Co. 2,974 64
Nabors Industries Ltd. 1,000 39
o Noble Corp. 900 28
Occidental Petroleum Corp. 2,400 72
Rowan Cos., Inc. 600 12
Schlumberger Ltd. 3,600 151
----------
726
FOOD & AGRICULTURE 0.6%
-------------------------------------------------------------------------
Altria Group, Inc. 13,500 415
Archer-Daniels-Midland Co. 4,446 49
Campbell Soup Co. 2,800 62
The Coca-Cola Co. 16,200 654
Coca-Cola Enterprises, Inc. 2,700 53
ConAgra Foods, Inc. 3,300 69
General Mills, Inc. 2,392 108
H.J. Heinz Co. 2,300 69
Hershey Foods Corp. 1,000 65
Kellogg Co. 2,700 88
McCormick & Co., Inc. 900 22
Monsanto Co. 1,427 25
The Pepsi Bottling Group, Inc. 1,826 38
PepsiCo, Inc. 11,370 492
Sara Lee Corp. 5,100 86
Supervalu, Inc. 900 15
Sysco Corp. 4,400 126
Wm. Wrigley Jr. Co. 1,600 91
----------
2,527
GOLD 0.0%
-------------------------------------------------------------------------
Newmont Mining Corp. 2,554 69
HEALTHCARE / DRUGS & MEDICINE 1.7%
-------------------------------------------------------------------------
Abbott Laboratories 10,200 414
Allergan, Inc. 900 63
AmerisourceBergen Corp. 700 41
o Amgen, Inc. 8,340 511
o Anthem, Inc. 926 64
Bausch & Lomb, Inc. 400 14
Baxter International, Inc. 3,800 87
Becton Dickinson & Co. 1,800 64
o Biogen, Inc. 1,000 38
Biomet, Inc. 1,575 48
o Boston Scientific Corp. 2,774 119
Bristol-Myers Squibb Co. 12,800 327
C.R. Bard, Inc. 300 19
Cardinal Health, Inc. 2,975 165
o Chiron Corp. 1,200 49
Eli Lilly & Co. 7,400 472
o Forest Laboratories, Inc. 2,400 124
o Genzyme Corp. -- General Division 1,400 56
o Guidant Corp. 2,000 78
HCA, Inc. 3,400 109
Health Management Associates, Inc., Class A 1,600 27
See financial notes.
33
MARKETTRACK BALANCED PORTFOLIO -- Financials
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Humana, Inc. 800 9
IMS Health, Inc. 2,000 31
Johnson & Johnson 19,572 1,103
o King Pharmaceuticals, Inc. 1,388 18
o Manor Care, Inc. 500 10
McKesson Corp. 1,773 49
o Medimmune, Inc. 1,400 49
Medtronic, Inc. 7,800 372
Merck & Co., Inc. 14,800 861
(8) Pfizer, Inc. 51,886 1,596
o Quest Diagnostics 535 32
o Quintiles Transnational Corp. 800 11
Schering-Plough Corp. 9,500 172
o St. Jude Medical, Inc. 1,060 56
Stryker Corp. 1,273 85
o Tenet Healthcare Corp. 3,150 47
UnitedHealth Group, Inc. 2,000 184
o Watson Pharmaceuticals, Inc. 600 18
o WellPoint Health Networks, Inc. 1,000 76
Wyeth 8,500 370
o Zimmer Holdings, Inc. 1,200 56
----------
8,094
HOUSEHOLD PRODUCTS 0.3%
-------------------------------------------------------------------------
Alberto-Culver Co., Class B 400 20
Avon Products, Inc. 1,500 87
Clorox Co. 1,600 72
Colgate-Palmolive Co. 3,600 206
The Gillette Co. 6,700 204
International Flavors & Fragrances, Inc. 800 25
Procter & Gamble Co. 8,500 764
----------
1,378
INSURANCE 0.6%
-------------------------------------------------------------------------
ACE Ltd. 1,700 56
Aetna, Inc. 834 42
AFLAC, Inc. 3,600 118
The Allstate Corp. 4,700 178
AMBAC Financial Group, Inc. 684 40
American International Group, Inc. 17,142 993
AON Corp. 1,725 38
Chubb Corp. 1,100 58
CIGNA Corp. 1,000 52
Cincinnati Financial Corp. 1,200 44
Hartford Financial Services Group, Inc. 1,600 65
Jefferson-Pilot Corp. 1,050 42
John Hancock Financial Services, Inc. 2,004 58
Lincoln National Corp. 1,300 42
Loews Corp. 1,200 49
Marsh & McLennan Cos., Inc. 3,600 172
MBIA, Inc. 1,050 47
Metlife, Inc. 4,586 132
MGIC Investment Corp. 700 32
Principal Financial Group, Inc. 2,329 68
The Progressive Corp. 1,500 102
Prudential Financial, Inc. 3,800 121
Safeco Corp. 800 31
St. Paul Cos., Inc. 1,424 49
Torchmark Corp. 800 31
Travelers Property Casualty Corp., Class B 6,500 106
UnumProvident Corp. 1,657 19
XL Capital Ltd., Class A 800 66
----------
2,851
MEDIA 0.5%
-------------------------------------------------------------------------
o AOL Time Warner, Inc. 28,750 393
o Clear Channel Communications, Inc. 3,780 148
o Comcast Corp., Class A 14,661 468
Dow Jones & Co., Inc. 600 24
Gannett Co., Inc. 1,700 129
Knight-Ridder, Inc. 600 39
The McGraw-Hill Cos., Inc. 1,400 82
Meredith Corp. 300 13
New York Times Co., Class A 1,100 51
R.R. Donnelley & Sons Co. 800 16
Tribune Co. 1,900 93
o Viacom, Inc., Class B 11,418 495
The Walt Disney Co. 13,717 256
----------
2,207
See financial notes.
34
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
MISCELLANEOUS FINANCE 0.9%
-------------------------------------------------------------------------
American Express Co. 8,700 329
The Bear Stearns Cos., Inc. 602 40
Capital One Financial Corp. 1,300 54
/ The Charles Schwab Corp. 8,783 76
Charter One Financial, Inc. 1,620 47
(10) Citigroup, Inc. 33,476 1,314
Countrywide Financial Corp. 800 54
Fannie Mae 6,500 471
Federated Investors, Inc., Class B 700 19
Franklin Resources, Inc. 1,700 59
Freddie Mac 4,500 261
Goldman Sachs Group, Inc. 3,079 234
Janus Capital Group, Inc. 1,400 20
Lehman Brothers Holdings, Inc. 1,600 101
MBNA Corp. 8,268 156
Merrill Lynch & Co., Inc. 5,500 226
Morgan Stanley 7,310 327
SLM Corp. 1,000 112
T. Rowe Price Group, Inc. 800 24
Washington Mutual, Inc. 6,274 248
----------
4,172
NON-FERROUS METALS 0.0%
-------------------------------------------------------------------------
Alcoa, Inc. 5,648 129
Engelhard Corp. 800 20
Freeport-McMoran Copper & Gold, Inc., Class B 1,100 19
o Phelps Dodge Corp. 540 17
----------
185
OIL: DOMESTIC 0.1%
-------------------------------------------------------------------------
Amerada Hess Corp. 600 27
Ashland, Inc. 500 15
ConocoPhillips 4,324 218
Kerr-McGee Corp. 621 26
Marathon Oil Corp. 2,100 48
Sunoco, Inc. 600 22
Transocean, Inc. 2,016 38
Unocal Corp. 1,600 44
----------
438
OIL: INTERNATIONAL 0.4%
-------------------------------------------------------------------------
ChevronTexaco Corp. 6,895 433
(9) Exxon Mobil Corp. 43,920 1,546
----------
1,979
OPTICAL & PHOTO 0.0%
-------------------------------------------------------------------------
Eastman Kodak Co. 2,000 60
PAPER & FOREST PRODUCTS 0.1%
-------------------------------------------------------------------------
Boise Cascade Corp. 400 9
Georgia-Pacific Corp. 1,496 23
International Paper Co. 3,166 113
Kimberly-Clark Corp. 3,380 168
o Louisiana-Pacific Corp. 700 6
MeadWestvaco Corp. 1,279 30
Temple-Inland, Inc. 400 18
Weyerhaeuser Co. 1,400 70
----------
437
PRODUCER GOODS & MANUFACTURING 0.6%
-------------------------------------------------------------------------
o American Standard Cos., Inc. 500 36
Avery Dennison Corp. 700 37
Caterpillar, Inc. 2,300 121
Cooper Industries Ltd., Class A 600 22
o Corning, Inc. 6,000 33
Deere & Co. 1,500 66
Dover Corp. 1,400 40
Emerson Electric Co. 2,800 142
(5) General Electric Co. 64,700 1,905
Honeywell International, Inc. 5,300 125
Illinois Tool Works, Inc. 2,000 128
Ingersoll-Rand Co., Class A 1,100 49
Johnson Controls, Inc. 500 41
o Millipore Corp. 200 7
Pall Corp. 800 17
Parker Hannifin Corp. 700 28
Snap-On, Inc. 350 10
W.W. Grainger, Inc. 600 28
----------
2,835
RAILROAD & SHIPPING 0.1%
-------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 2,500 71
CSX Corp. 1,500 48
Norfolk Southern Corp. 2,500 53
See financial notes.
35
MARKETTRACK BALANCED PORTFOLIO -- Financials
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Union Pacific Corp. 1,700 101
----------
273
REAL PROPERTY 0.1%
-------------------------------------------------------------------------
Apartment Investment &
Management Co., Class A 600 23
Equity Office Properties Trust 2,600 68
Equity Residential 1,700 44
Plum Creek Timber Co., Inc. 1,200 28
Simon Property Group, Inc. 1,100 40
----------
203
RETAIL 0.9%
-------------------------------------------------------------------------
Albertson's, Inc. 2,671 53
o AutoZone, Inc. 700 56
o Bed, Bath & Beyond, Inc. 1,800 71
o Best Buy Co., Inc. 2,100 73
o Big Lots, Inc. 700 9
Circuit City Stores, Inc. 1,400 8
o Costco Wholesale Corp. 3,000 104
CVS Corp. 2,600 63
Dillards, Inc., Class A 700 10
Dollar General Corp. 2,202 32
Family Dollar Stores, Inc. 1,100 38
o Federated Department Stores, Inc. 1,400 43
o The Gap, Inc. 5,662 94
Home Depot, Inc. 15,100 425
J.C. Penney Co., Inc. Holding Co. 1,700 29
o Kohl's Corp. 2,200 125
o Kroger Co. 5,300 76
Limited Brands, Inc. 3,388 49
Lowe's Cos., Inc. 5,000 219
The May Department Stores Co. 2,100 45
Nordstrom, Inc. 900 16
o Office Depot, Inc. 2,500 32
RadioShack Corp. 1,300 31
o Safeway, Inc. 3,300 55
Sears, Roebuck & Co. 2,100 59
o Staples, Inc. 3,050 58
Target Corp. 5,800 194
Tiffany & Co. 950 26
TJX Cos., Inc. 3,600 69
o Toys 'R' Us, Inc. 1,200 12
(7) Wal-Mart Stores, Inc. 29,000 1,633
Walgreen Co. 6,600 204
Winn-Dixie Stores, Inc. 1,200 15
o Yum! Brands, Inc. 2,060 51
----------
4,077
STEEL 0.0%
-------------------------------------------------------------------------
Allegheny Technologies, Inc. 492 2
Nucor Corp. 600 25
United States Steel Corp. 500 7
Worthington Industries, Inc. 300 4
----------
38
TELEPHONE 0.5%
-------------------------------------------------------------------------
Alltel Corp. 2,100 98
AT&T Corp. 4,941 84
o AT&T Wireless Services, Inc. 16,425 106
o Avaya, Inc. 1,775 7
BellSouth Corp. 12,200 311
CenturyTel, Inc. 900 27
o Citizens Communications Co. 1,732 19
o Nextel Communications, Inc., Class A 6,300 93
o Qwest Communications International, Inc. 10,622 40
SBC Communications, Inc. 21,788 509
Scientific-Atlanta, Inc. 1,000 16
Sprint Corp. (FON Group) 5,800 67
o Sprint Corp. (PCS Group) 5,900 21
Verizon Communications, Inc. 17,836 667
----------
2,065
TOBACCO 0.0%
-------------------------------------------------------------------------
R.J. Reynolds Tobacco Holdings,
Inc. 600 17
UST, Inc. 1,100 34
----------
51
TRAVEL & RECREATION 0.1%
-------------------------------------------------------------------------
Brunswick Corp. 600 13
Carnival Corp. 4,100 113
o Harrah's Entertainment, Inc. 900 36
Hilton Hotels Corp. 2,500 33
Marriott International, Inc., Class A 1,500 54
See financial notes.
36
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Sabre Holdings Corp. 922 19
Starwood Hotels & Resorts
Worldwide, Inc. 1,200 32
----------
300
TRUCKING & FREIGHT 0.1%
---------------------------------------------------------
Paccar, Inc. 900 52
Ryder Systems, Inc. 400 10
United Parcel Service, Inc., Class B 7,385 459
----------
521
UTILITIES: ELECTRIC & GAS 0.3%
---------------------------------------------------------
o The AES Corp. 3,200 19
Allegheny Energy, Inc. 720 6
Ameren Corp. 900 37
American Electric Power Co., Inc. 2,080 55
o Calpine Corp. 1,800 10
Centerpoint Energy, Inc. 1,924 15
Cinergy Corp. 1,000 34
CMS Energy Corp. 700 4
Consolidated Edison, Inc. 1,500 58
Constellation Energy Group, Inc. 1,000 29
Dominion Resources, Inc. 1,967 116
DTE Energy Co. 1,000 40
Duke Energy Corp. 5,352 94
Dynegy, Inc., Class A 2,100 9
o Edison International 2,200 32
El Paso Corp. 3,222 24
Entergy Corp. 1,500 70
Exelon Corp. 2,162 115
FirstEnergy Corp. 2,030 68
FPL Group, Inc. 1,300 79
KeySpan Corp. 900 31
Kinder Morgan, Inc. 745 35
o Mirant Corp. 1,789 6
Nicor, Inc. 300 9
NiSource, Inc. 1,351 26
Peoples Energy Corp. 200 8
o PG&E Corp. 2,400 36
Pinnacle West Capital Corp. 600 20
PPL Corp. 1,000 36
Progress Energy, Inc. 1,593 67
Public Service Enterprise Group, Inc. 1,500 58
Sempra Energy 1,360 37
The Southern Co. 4,500 131
TECO Energy, Inc. 900 10
TXU Corp. 1,622 32
Williams Cos., Inc. 3,000 21
Xcel Energy, Inc. 2,085 28
----------
1,505
OTHER INVESTMENT COMPANIES
83.2% of investments
---------------------------------------------------------
/(3) Schwab International Index
Fund(R), Select Shares(R) 6,774,137 70,519
/(2) Schwab S&P 500 Fund,
Select Shares 5,922,597 84,160
/(4) Schwab Small-Cap Index Fund(R),
Select Shares 5,073,377 70,215
/(1) Schwab Total Bond
Market Fund 15,475,531 161,565
----------
386,459
SHORT-TERM INVESTMENTS
4.9% of investments
---------------------------------------------------------
/ Schwab Value Advantage
Money Fund(R), Investor
Shares 21,150,755 21,151
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
Bank One, Grand Cayman
Time Deposit
0.80%, 05/01/03 1,586 1,586
----------
22,737
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
37
MARKETTRACK BALANCED PORTFOLIO -- Financials
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- ----------------------------------------------------------------
Investments, at market value $464,314 a
Receivables:
Fund shares sold 108
Dividends 80
Investments sold 504
Prepaid expenses + 6
-----------
TOTAL ASSETS 465,012
LIABILITIES
- ----------------------------------------------------------------
Payables:
Fund shares redeemed 295
Investments bought 300
Investment adviser and administrator fees 10
Transfer agent and shareholder service fees 13
Accrued expenses + 80
-----------
TOTAL LIABILITIES 698
NET ASSETS
- ----------------------------------------------------------------
TOTAL ASSETS 465,012
TOTAL LIABILITIES - 698
-----------
NET ASSETS $464,314
NET ASSETS BY SOURCE
Capital received from investors 505,008
Net investment income not yet distributed 1,393
Net realized capital losses (19,045)
Net unrealized capital losses (23,042)
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$464,314 37,890 $12.25
a The fund paid $487,356 for these securities. Not counting short-term
obligations and government securities, the fund paid $50,548 for securities
during the report period and received $60,391 from securities it sold or that
matured.
Percent of fund shares of other Schwab funds owned as of the end of the report
period:
SCHWAB EQUITY INDEX FUNDS
S&P 500 Fund 1.3%
Small-Cap Index Fund(R) 5.4%
International Index Fund(R) 7.4%
SCHWAB BOND FUNDS
Total Bond Market Fund 15.4%
SCHWAB MONEY FUNDS
Value Advantage
Money Fund(R) 0.1%
FEDERAL TAX DATA
- ----------------------------------------------------------------
PORTFOLIO COST $501,174
NET UNREALIZED GAINS AND LOSSES:
Gains $31,010
Losses + (67,870)
-----------
($36,860)
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $5,536
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $827
See financial notes.
38
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- ----------------------------------------------------------------------------
Dividends $8,179
Interest + 2
-------------
TOTAL INVESTMENT INCOME 8,181
NET REALIZED GAINS AND LOSSES
- ----------------------------------------------------------------------------
Net realized losses on investments sold (6,839)
Net realized gains received from underlying funds + 483
-------------
NET REALIZED LOSSES (6,356)
NET UNREALIZED GAINS AND LOSSES
- ----------------------------------------------------------------------------
Net unrealized gains on investments 17,414
EXPENSES
- ----------------------------------------------------------------------------
Investment adviser and administrator fees 1,007 a
Transfer agent and shareholder service fees 572 b
Trustees' fees 4 c
Custodian fees 23
Portfolio accounting fees 34
Professional fees 14
Registration fees 13
Shareholder reports 28
Other expenses + 3
-------------
Total expenses 1,698
Expense reduction - 554 d
-------------
NET EXPENSES 1,144
INCREASE IN NET ASSETS FROM OPERATIONS
- ----------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 8,181
NET EXPENSES - 1,144
NET INVESTMENT INCOME 7,037
NET REALIZED LOSSES (6,356)e
NET UNREALIZED GAINS + 17,414 e
-------------
INCREASE IN NET ASSETS FROM OPERATIONS $18,095
a Calculated as a percentage of average daily net assets: 0.44% of the first
$500 million and 0.39% of assets beyond that.
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.
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 at least
February 29, 2004, to 0.50% of average daily net assets. This limit doesn't
include interest, taxes and certain non-routine expenses.
e These add up to a net gain on investments of $11,058.
See financial notes.
39
MARKETTRACK BALANCED PORTFOLIO -- Financials
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for current period are unaudited.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income $7,037 $11,937
Net realized losses (6,356) (5,624)
Net unrealized gains or losses + 17,414 (44,321)
---------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 18,095 (38,008)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income 11,180 14,684
Distributions from net realized gains + -- 4,608
---------------------------------------
TOTAL DISTRIBUTIONS PAID $11,180 $19,292 a
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 3,240 $38,817 9,389 $123,245
Shares reinvested 936 11,180 1,388 18,646
Shares redeemed + (4,652) (55,058) (9,314) (119,076)
-------------------------------------------
NET INCREASE OR DECREASE (476) ($5,061) 1,463 $22,815
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 38,366 $462,460 36,903 $496,945
Total increase or
decrease + (476) 1,854 1,463 (34,485)b
--------------------------------------------
END OF PERIOD 37,890 $464,314 38,366 $462,460 c
a The tax-basis components of distributions paid for the period are:
Ordinary income $15,072
Long-term capital gains $4,220
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 Includes net investment income not yet distributed in the amount of $1,393 and
$5,536 at the end of the current period and the prior period, respectively.
See financial notes.
40
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
PERFORMANCE as of 4/30/03
AVERAGE ANNUAL TOTAL RETURNS 1,2
This chart compares performance of the portfolio with the S&P 500(R) Index, the
Lehman Brothers U.S. Aggregate Bond Index and the Conservative Composite Index.
[BAR CHART]
S&P 500 LEHMAN BROTHERS U.S. CONSERVATIVE
PORTFOLIO INDEX AGGREGATE BOND INDEX COMPOSITE INDEX
6 MONTHS 4.27 4.48 4.31 4.37
1 YEAR -0.91 -13.31 10.47 -1.96
5 YEARS 2.88 -2.43 7.57 3.25
SINCE INCEPTION: 11/20/95 6.09 7.54 7.44 n/a
PERFORMANCE OF A $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 three
indices: the S&P 500 Index, the Lehman Brothers U.S. Aggregate Bond Index and
the Conservative Composite Index.
$15,539 PORTFOLIO
$17,192 S&P 500 INDEX
$17,075 LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX
$15,802 CONSERVATIVE COMPOSITE INDEX
[LINE GRAPH]
S&P 500 Lehman Brothers U.S. Conservative
PORTFOLIO Index Aggregate Bond Index Composite Index
20-Nov-95 10000 10000 10000
Nov-95 10080 10104 10076 10000
Dec-95 10237 10299 10217 10150
Jan-96 10337 10649 10285 10264
Feb-96 10297 10748 10106 10244
Mar-96 10287 10852 10035 10270
Apr-96 10337 11011 9979 10380
May-96 10378 11294 9959 10463
Jun-96 10439 11337 10092 10495
Jul-96 10256 10836 10120 10295
Aug-96 10337 11064 10102 10424
Sep-96 10643 11686 10278 10701
Oct-96 10818 12009 10506 10845
Nov-96 11179 12917 10686 11178
Dec-96 11070 12661 10587 11119
Jan-97 11174 13451 10620 11282
Feb-97 11184 13557 10646 11290
Mar-97 10965 13001 10528 11085
Apr-97 11206 13776 10686 11259
May-97 11604 14614 10787 11649
Jun-97 11896 15268 10916 11933
Jul-97 12413 16482 11210 12408
Aug-97 12160 15559 11115 12193
Sep-97 12540 16410 11280 12582
Oct-97 12455 15862 11443 12439
Nov-97 12603 16597 11496 12508
Dec-97 12698 16882 11612 12627
Jan-98 12829 17070 11761 12743
Feb-98 13189 18300 11751 13098
Mar-98 13418 19237 11791 13378
Apr-98 13484 19432 11852 13469
May-98 13431 19097 11965 13417
Jun-98 13595 19873 12067 13542
Jul-98 13484 19662 12092 13429
Aug-98 12774 16823 12289 12665
Sep-98 13139 17901 12577 12986
Oct-98 13530 19357 12510 13270
Nov-98 13843 20530 12581 13615
Dec-98 14166 21712 12619 13947
Jan-99 14348 22620 12709 14099
Feb-99 13950 21916 12486 13728
Mar-99 14200 22793 12555 13956
Apr-99 14475 23675 12595 14284
May-99 14269 23116 12484 14134
Jun-99 14521 24399 12444 14417
Jul-99 14452 23638 12392 14346
Aug-99 14395 23520 12386 14268
Sep-99 14464 22875 12530 14280
Oct-99 14766 24323 12576 14510
Nov-99 14986 24817 12575 14812
Dec-99 15398 26279 12514 15306
Jan-00 15022 24960 12473 15048
Feb-00 15269 24487 12624 15440
Mar-00 15738 26882 12791 15808
Apr-00 15442 26073 12754 15488
May-00 15229 25539 12747 15292
Jun-00 15667 26169 13012 15729
Jul-00 15584 25761 13131 15685
Aug-00 16085 27361 13321 16191
Sep-00 15835 25917 13405 16010
Oct-00 15787 25808 13493 15901
Nov-00 15462 23774 13715 15562
Dec-00 15815 23891 13970 16008
Jan-01 16087 24739 14198 16315
Feb-01 15594 22483 14321 15915
Mar-01 15297 21057 14393 15545
Apr-01 15732 22693 14332 15974
May-01 15807 22845 14418 16064
Jun-01 15770 22290 14473 15992
Jul-01 15820 22072 14797 16043
Aug-01 15632 20690 14967 15858
Sep-01 15107 19018 15141 15262
Oct-01 15410 19382 15457 15619
Nov-01 15675 20868 15244 15920
Dec-01 15759 21052 15147 16022
Jan-02 15643 20744 15269 15944
Feb-02 15592 20344 15417 15917
Mar-02 15759 21109 15161 16118
Apr-02 15682 19830 15456 16118
May-02 15695 19683 15587 16115
Jun-02 15384 18282 15723 15752
Jul-02 14875 16858 15913 15186
Aug-02 15045 16967 16182 15337
Sep-02 14575 15123 16444 14870
Oct-02 14903 16454 16368 15140
Nov-02 15243 17423 16363 15503
Dec-02 15125 16400 16702 15384
Jan-03 14926 15970 16717 15224
Feb-03 14913 15731 16948 15204
Mar-03 14939 15883 16934 15211
30-Apr-03 15539 17192 17075 15802
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.
The portfolio's share price and principal values change, and when you sell
your shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results. Results for the report period
are not annualized.
1 Portfolio returns reflect expense reductions by the portfolio's investment
adviser (CSIM) and Schwab. Without these reductions, the portfolio's returns
would have been lower. These returns also 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. As of 4/30/03, the total
number of funds in the Morningstar Large-Cap Blend, Small-Cap Blend, Foreign
and Intermediate-Term Bond Fund categories for the six-month, one- and
five-year periods was 1,410,349,938,741; 1,362,342,898,707; and
711,190,516,439, respectively.
Schwab MarketTrack Portfolios(R)
41
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO
FUND FACTS as of 4/30/03
TOP HOLDINGS 1
- --------------------------------------------------------------
SECURITY % OF
INVESTMENTS
- --------------------------------------------------------------
(1) SCHWAB TOTAL BOND MARKET FUND 54.7%
- --------------------------------------------------------------
(2) SCHWAB S&P 500 FUND 15.2%
Select Shares(R)
- --------------------------------------------------------------
(3) SCHWAB INTERNATIONAL INDEX FUND(R) 10.2%
Select Shares
- --------------------------------------------------------------
(4) SCHWAB SMALL-CAP INDEX FUND(R) 10.2%
Select Shares
- --------------------------------------------------------------
(5) GENERAL ELECTRIC CO. 0.2%
- --------------------------------------------------------------
(6) MICROSOFT CORP. 0.2%
- --------------------------------------------------------------
(7) PFIZER, INC. 0.1%
- --------------------------------------------------------------
(8) WAL-MART STORES, INC. 0.1%
- --------------------------------------------------------------
(9) EXXON MOBIL CORP. 0.1%
- --------------------------------------------------------------
(10) CITIGROUP, INC. 0.1%
- --------------------------------------------------------------
TOTAL 91.1%
STATISTICS
NUMBER OF HOLDINGS 507
- -------------------------------------------------------
PORTFOLIO TURNOVER RATE 2 11%
- -------------------------------------------------------
EXPENSE RATIO 3 0.50%
- -------------------------------------------------------
ASSET CLASS WEIGHTINGS
This chart shows the portfolio's asset class composition as of the report date.
[PIE CHART]
54.7% BONDS
20.1% LARGE-CAP STOCKS
10.2% INTERNATIONAL STOCKS
10.2% SMALL-CAP STOCKS
4.8% SHORT-TERM INVESTMENTS
1 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes and certain non-routine expenses). 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.
Schwab MarketTrack Portfolios(R)
42
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
- ---------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ---------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 11.37 12.22 13.12 12.73 12.11 11.71
----------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.19 0.40 0.49 0.47 0.41 0.35
Net realized and unrealized gains or losses 0.29 (0.78) (0.80) 0.41 0.68 0.64
----------------------------------------------------------
Total income or loss from investment operations 0.48 (0.38) (0.31) 0.88 1.09 0.99
Less distributions:
Dividends from net investment income (0.20) (0.41) (0.50) (0.46) (0.40) (0.35)
Distributions from net realized gains -- (0.06) (0.09) (0.03) (0.07) (0.24)
----------------------------------------------------------
Total distributions 0.20) (0.47) (0.59) (0.49) (0.47) (0.59)
----------------------------------------------------------
Net asset value at end of period 11.65 11.37 12.22 3.12 12.73 12.11
----------------------------------------------------------
Total return (%) 4.27 2 (3.29) (2.39) 6.92 9.13 8.64
RATIOS/SUPPLEMENTAL DATA (%)
- ---------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 4 0.50 3 0.50 0.50 0.56 1 0.57 0.58
Expense reductions reflected in above ratio 0.25 3 0.26 0.27 0.27 0.35 0.64
Ratio of net investment income to
average net assets 1.68 2 3.17 3.85 3.58 3.28 3.26
Portfolio turnover rate 11 2 32 15 16 8 58
Net assets, end of period ($ x 1,000,000) 267 263 211 194 167 115
1 Would have been 0.57% if certain non-routine expenses (proxy fees) had been
included.
2 Not annualized.
3 Annualized.
4 The expense 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.
See financial notes.
43
MARKETTRACK CONSERVATIVE PORTFOLIO -- Financials
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
/ Issuer is affiliated with the fund's adviser
COST MARKET VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- -----------------------------------------------------
90.3% OTHER INVESTMENT
COMPANIES 245,975 241,591
4.9% COMMON STOCK 12,283 13,011
4.8% SHORT-TERM
INVESTMENTS 12,818 12,818
- -----------------------------------------------------
100.0% TOTAL INVESTMENTS 271,076 267,420
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK
4.9% of investments
AEROSPACE / DEFENSE 0.1%
--------------------------------------------------------------------------
The Boeing Co. 1,346 37
Crane Co. 150 3
General Dynamics Corp. 300 19
Goodrich Corp. 200 3
Lockheed Martin Corp. 700 35
Northrop Grumman Corp. 307 27
Raytheon Co. 600 18
Rockwell Automation, Inc. 300 7
Rockwell Collins, Inc. 300 6
Textron, Inc. 200 6
United Technologies Corp. 700 43
-----------
204
AIR TRANSPORTATION 0.0%
--------------------------------------------------------------------------
Delta Air Lines, Inc. 200 3
FedEx Corp. 460 28
Southwest Airlines Co. 1,218 19
-----------
50
ALCOHOLIC BEVERAGES 0.0%
--------------------------------------------------------------------------
Adolph Coors Co., Class B 100 5
Anheuser-Busch Cos., Inc. 1,300 65
Brown-Forman Corp., Class B 75 6
-----------
76
APPAREL 0.0%
--------------------------------------------------------------------------
o Jones Apparel Group, Inc. 200 6
Liz Claiborne, Inc. 200 7
Nike, Inc., Class B 400 21
o Reebok International Ltd. 100 3
VF Corp. 200 8
-----------
45
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 0.1%
--------------------------------------------------------------------------
o Autonation, Inc. 500 7
Cooper Tire & Rubber Co. 100 1
Cummins, Inc. 100 2
Dana Corp. 292 3
Danaher Corp. 200 14
Delphi Corp. 868 7
Eaton Corp. 100 8
Ford Motor Co. 2,921 30
General Motors Corp. 825 30
Genuine Parts Co. 250 8
Goodyear Tire & Rubber Co. 300 2
Harley-Davidson, Inc. 500 22
o Navistar International Corp. 100 3
Visteon Corp. 248 2
-----------
139
BANKS 0.4%
--------------------------------------------------------------------------
AmSouth Bancorp. 600 13
Bank of America Corp. 2,311 171
The Bank of New York Co., Inc. 1,100 29
See financial notes.
44
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Bank One Corp. 1,846 67
BB&T Corp. 700 23
Comerica, Inc. 300 13
Fifth Third Bancorp 867 43
First Tennessee National Corp. 200 9
FleetBoston Financial Corp. 1,557 41
Golden West Financial Corp. 200 15
Huntington Bancshares, Inc. 423 8
J.P. Morgan Chase & Co. 3,014 88
KeyCorp, Inc. 700 17
Marshall & Ilsley Corp. 322 9
Mellon Financial Corp. 700 18
National City Corp. 1,000 30
North Fork Bancorp., Inc. 300 10
Northern Trust Corp. 300 11
PNC Financial Services Group, Inc. 400 18
o Providian Financial Corp. 400 3
Regions Financial Corp. 300 10
SouthTrust Corp. 500 13
State Street Corp. 500 17
SunTrust Banks, Inc. 400 23
Synovus Financial Corp. 400 8
U.S. Bancorp 3,022 67
Union Planters Corp. 300 9
Wachovia Corp. 2,100 80
Wells Fargo & Co. 2,660 128
Zions Bancorp. 100 5
-----------
996
BUSINESS MACHINES & SOFTWARE 0.5%
--------------------------------------------------------------------------
Adobe Systems, Inc. 400 14
o Apple Computer, Inc. 400 6
Autodesk, Inc. 200 3
o BMC Software, Inc. 400 6
o Cisco Systems, Inc. 11,100 167
o Compuware Corp. 600 3
o Comverse Technology, Inc. 300 4
o Dell Computer Corp. 4,000 116
o EMC Corp. 3,350 30
o Gateway, Inc. 500 1
Hewlett-Packard Co. 4,803 78
International Business Machines Corp. 2,550 217
o Lexmark International, Inc., Class A 200 15
(6) Microsoft Corp. 16,400 419
o NCR Corp. 200 4
o Network Appliance, Inc. 500 7
o Novell, Inc. 500 1
o Novellus Systems, Inc. 150 4
o Oracle Corp. 8,200 97
Pitney Bowes, Inc. 400 14
o Sun Microsystems, Inc. 5,000 17
o Unisys Corp. 500 5
o Xerox Corp. 1,000 10
-----------
1,238
BUSINESS SERVICES 0.2%
--------------------------------------------------------------------------
o Allied Waste Industries, Inc. 300 2
o Apollo Group, Inc., Class A 300 16
Automatic Data Processing, Inc. 1,000 34
o Cendant Corp. 1,459 21
Cintas Corp. 260 9
o Citrix Systems, Inc. 300 6
Computer Associates International, Inc. 850 14
o Computer Sciences Corp. 258 8
o Concord EFS, Inc. 800 11
o Convergys Corp. 174 3
Deluxe Corp. 100 4
o eBay, Inc. 502 47
Electronic Data Systems Corp. 700 13
Equifax, Inc. 200 5
First Data Corp. 1,200 47
o Fiserv, Inc. 300 9
H&R Block, Inc. 300 12
Interpublic Group of Cos., Inc. 600 7
o Intuit, Inc. 313 12
o Mercury Interactive Corp. 100 3
Moody's Corp. 300 14
Omnicom Group, Inc. 300 19
o Parametric Technology Corp. 500 2
Paychex, Inc. 525 16
o PeopleSoft, Inc. 400 6
o QLogic Corp. 138 6
o Robert Half International, Inc. 300 5
See financial notes.
45
MARKETTRACK CONSERVATIVE PORTFOLIO -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Siebel Systems, Inc. 600 5
o Sungard Data Systems, Inc. 433 9
o Symantec Corp. 201 9
o Thermo Electron Corp. 200 4
o TMP Worldwide, Inc. 191 3
Tyco International Ltd. 3,013 47
o Veritas Software Corp. 600 13
Waste Management, Inc. 1,007 22
o Yahoo!, Inc. 800 20
-----------
483
CHEMICAL 0.1%
--------------------------------------------------------------------------
3M Co. 600 76
Air Products & Chemicals, Inc. 400 17
Dow Chemical Co. 1,322 43
E.I. du Pont de Nemours & Co. 1,525 65
Eastman Chemical Co. 100 3
Ecolab, Inc. 200 10
Great Lakes Chemical Corp. 100 2
o Hercules, Inc. 200 2
PPG Industries, Inc. 300 15
Praxair, Inc. 200 12
Rohm & Haas Co. 373 12
The Sherwin-Williams Co. 300 8
Sigma-Aldrich Corp. 100 5
-----------
270
CONSTRUCTION 0.0%
--------------------------------------------------------------------------
Centex Corp. 100 7
Fluor Corp. 100 3
KB Home Corp. 100 5
Masco Corp. 700 15
o McDermott International, Inc. 100 --
Pulte Homes, Inc. 100 6
The Stanley Works 100 2
Vulcan Materials Co. 200 7
-----------
45
CONSUMER DURABLE 0.0%
--------------------------------------------------------------------------
Black & Decker Corp. 200 8
Leggett & Platt, Inc. 300 6
Maytag Corp. 100 2
Whirlpool Corp. 100 6
-----------
22
CONSUMER NON-DURABLE 0.1%
--------------------------------------------------------------------------
o American Greetings Corp., Class A 100 2
Darden Restaurants, Inc. 300 5
o Electronic Arts, Inc. 212 13
Fortune Brands, Inc. 200 10
Hasbro, Inc. 325 5
o International Game Technology 114 10
Mattel, Inc. 650 14
McDonald's Corp. 2,000 34
Newell Rubbermaid, Inc. 436 13
o Starbucks Corp. 560 13
Tupperware Corp. 100 1
Wendy's International, Inc. 200 6
-----------
126
CONTAINERS 0.0%
--------------------------------------------------------------------------
Ball Corp. 100 6
Bemis Co. 100 5
o Pactiv Corp. 300 6
o Sealed Air Corp. 153 6
-----------
23
ELECTRONICS 0.2%
--------------------------------------------------------------------------
o ADC Telecommunications, Inc. 1,000 2
o Advanced Micro Devices, Inc. 560 4
o Agilent Technologies, Inc. 710 11
o Altera Corp. 510 8
o American Power Conversion Corp. 225 4
o Analog Devices, Inc. 600 20
o Andrew Corp. 100 1
Applied Biosystems Group -- Applera Corp. 300 5
o Applied Materials, Inc. 2,400 35
o Applied Micro Circuits Corp. 455 2
o Broadcom Corp., Class A 342 6
o CIENA Corp. 500 2
Intel Corp. 10,400 191
ITT Industries, Inc. 100 6
o Jabil Circuit, Inc. 222 4
o JDS Uniphase Corp. 2,010 7
o KLA-Tencor Corp. 300 12
See financial notes.
46
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Linear Technology Corp. 500 17
o LSI Logic Corp. 500 3
o Lucent Technologies, Inc. 5,019 9
Maxim Integrated Products, Inc. 500 20
o Micron Technology, Inc. 900 8
Molex, Inc. 250 6
Motorola, Inc. 3,316 26
o National Semiconductor Corp. 300 6
o Nvidia Corp. 200 3
PerkinElmer, Inc. 200 2
o PMC -- Sierra, Inc. 300 2
o Power-One, Inc. 57 --
Qualcomm, Inc. 1,200 38
o Sanmina -- SCI Corp. 800 4
o Solectron Corp. 1,000 3
Symbol Technologies, Inc. 303 3
o Tektronix, Inc. 200 4
o Tellabs, Inc. 600 4
o Teradyne, Inc. 300 3
Texas Instruments, Inc. 2,700 50
o Thomas & Betts Corp. 100 2
o Univision Communications, Inc., Class A 319 10
o Waters Corp. 200 5
o Xilinx, Inc. 500 14
-----------
562
ENERGY: RAW MATERIALS 0.1%
--------------------------------------------------------------------------
Anadarko Petroleum Corp. 367 16
Apache Corp. 231 13
Baker Hughes, Inc. 470 13
o BJ Services Co. 200 7
Burlington Resources, Inc. 300 14
Devon Energy Corp. 200 10
EOG Resources, Inc. 180 7
Halliburton Co. 714 15
Nabors Industries Ltd. 200 8
o Noble Corp. 200 6
Occidental Petroleum Corp. 600 18
Rowan Cos., Inc. 100 2
Schlumberger Ltd. 900 38
-----------
167
FOOD & AGRICULTURE 0.2%
--------------------------------------------------------------------------
Altria Group, Inc. 3,100 95
Archer-Daniels-Midland Co. 1,014 11
Campbell Soup Co. 700 15
The Coca-Cola Co. 3,800 154
Coca-Cola Enterprises, Inc. 700 14
ConAgra Foods, Inc. 800 17
General Mills, Inc. 582 26
H.J. Heinz Co. 600 18
Hershey Foods Corp. 200 13
Kellogg Co. 600 20
McCormick & Co., Inc. 200 5
Monsanto Co. 332 6
The Pepsi Bottling Group, Inc. 500 10
PepsiCo, Inc. 2,660 115
Sara Lee Corp. 1,200 20
Supervalu, Inc. 200 3
Sysco Corp. 1,000 29
Wm. Wrigley Jr. Co. 400 23
-----------
594
GOLD 0.0%
--------------------------------------------------------------------------
Newmont Mining Corp. 643 17
HEALTHCARE / DRUGS & MEDICINE 0.7%
--------------------------------------------------------------------------
Abbott Laboratories 2,400 97
Allergan, Inc. 200 14
AmerisourceBergen Corp. 200 11
o Amgen, Inc. 1,952 120
o Anthem, Inc. 250 17
Bausch & Lomb, Inc. 100 3
Baxter International, Inc. 900 21
Becton Dickinson & Co. 400 14
o Biogen, Inc. 200 8
Biomet, Inc. 450 14
o Boston Scientific Corp. 634 27
Bristol-Myers Squibb Co. 3,000 77
C.R. Bard, Inc. 100 6
Cardinal Health, Inc. 700 39
o Chiron Corp. 300 12
Eli Lilly & Co. 1,725 110
o Forest Laboratories, Inc. 600 31
See financial notes.
47
MARKETTRACK CONSERVATIVE PORTFOLIO -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Genzyme Corp.-- General Division 325 13
o Guidant Corp. 500 19
HCA, Inc. 800 26
Health Management Associates, Inc., Class A 400 7
o Humana, Inc. 200 2
IMS Health, Inc. 500 8
Johnson & Johnson 4,592 259
o King Pharmaceuticals, Inc. 366 5
o Manor Care, Inc. 100 2
McKesson Corp. 422 12
o Medimmune, Inc. 300 10
Medtronic, Inc. 1,900 91
Merck & Co., Inc. 3,500 204
(7) Pfizer, Inc. 12,308 378
o Quest Diagnostics 189 11
o Quintiles Transnational Corp. 200 3
Schering-Plough Corp. 2,300 42
o St. Jude Medical, Inc. 300 16
Stryker Corp. 301 20
o Tenet Healthcare Corp. 750 11
UnitedHealth Group, Inc. 500 46
o Watson Pharmaceuticals, Inc. 100 3
o WellPoint Health Networks, Inc. 200 15
Wyeth 2,000 87
o Zimmer Holdings, Inc. 300 14
-----------
1,925
HOUSEHOLD PRODUCTS 0.1%
--------------------------------------------------------------------------
Alberto-Culver Co., Class B 100 5
Avon Products, Inc. 400 23
Clorox Co. 300 13
Colgate-Palmolive Co. 800 46
The Gillette Co. 1,700 52
International Flavors & Fragrances, Inc. 200 6
Procter & Gamble Co. 2,000 180
-----------
325
INSURANCE 0.3%
--------------------------------------------------------------------------
ACE Ltd. 400 13
Aetna, Inc. 222 11
AFLAC, Inc. 800 26
The Allstate Corp. 1,100 42
AMBAC Financial Group, Inc. 162 9
American International Group, Inc. 3,979 231
AON Corp. 375 8
Chubb Corp. 300 16
CIGNA Corp. 200 11
Cincinnati Financial Corp. 300 11
Hartford Financial Services Group, Inc. 400 16
Jefferson-Pilot Corp. 225 9
John Hancock Financial Services, Inc. 473 14
Lincoln National Corp. 300 10
Loews Corp. 300 12
Marsh & McLennan Cos., Inc. 800 38
MBIA, Inc. 200 9
Metlife, Inc. 1,178 34
MGIC Investment Corp. 200 9
Principal Financial Group, Inc. 550 16
The Progressive Corp. 300 20
Prudential Financial, Inc. 900 29
Safeco Corp. 200 8
St. Paul Cos., Inc. 356 12
Torchmark Corp. 200 8
Travelers Property Casualty Corp., Class B 1,500 24
UnumProvident Corp. 346 4
XL Capital Ltd., Class A 200 16
-----------
666
MEDIA 0.2%
--------------------------------------------------------------------------
o AOL Time Warner, Inc. 6,850 94
o Clear Channel Communications, Inc. 967 38
o Comcast Corp., Class A 3,463 111
Dow Jones & Co., Inc. 100 4
Gannett Co., Inc. 400 30
Knight-Ridder, Inc. 100 6
The McGraw-Hill Cos., Inc. 300 18
Meredith Corp. 100 4
New York Times Co., Class A 300 14
R.R. Donnelley & Sons Co. 200 4
See financial notes.
48
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Tribune Co. 500 25
o Viacom, Inc., Class B 2,660 115
The Walt Disney Co. 3,227 60
-----------
523
MISCELLANEOUS FINANCE 0.4%
--------------------------------------------------------------------------
American Express Co. 2,100 80
The Bear Stearns Cos., Inc. 145 10
Capital One Financial Corp. 300 13
/ The Charles Schwab Corp. 2,125 18
Charter One Financial, Inc. 346 10
(10) Citigroup, Inc. 7,882 309
Countrywide Financial Corp. 200 14
Fannie Mae 1,525 110
Federated Investors, Inc., Class B 200 5
Franklin Resources, Inc. 400 14
Freddie Mac 1,100 64
Goldman Sachs Group, Inc. 728 55
Janus Capital Group, Inc. 400 6
Lehman Brothers Holdings, Inc. 400 25
MBNA Corp. 1,957 37
Merrill Lynch & Co., Inc. 1,300 53
Morgan Stanley 1,730 77
SLM Corp. 250 28
T. Rowe Price Group, Inc. 200 6
Washington Mutual, Inc. 1,431 57
-----------
991
NON-FERROUS METALS 0.0%
--------------------------------------------------------------------------
Alcoa, Inc. 1,312 30
Engelhard Corp. 200 5
Freeport-McMoran Copper & Gold, Inc., Class B 300 5
o Phelps Dodge Corp. 135 4
-----------
44
OIL: DOMESTIC 0.0%
--------------------------------------------------------------------------
Amerada Hess Corp. 100 4
Ashland, Inc. 100 3
ConocoPhillips 1,027 52
Kerr-McGee Corp. 136 6
Marathon Oil Corp. 500 11
Sunoco, Inc. 100 4
Transocean, Inc. 474 9
Unocal Corp. 400 11
-----------
100
OIL: INTERNATIONAL 0.2%
--------------------------------------------------------------------------
ChevronTexaco Corp. 1,643 103
(9) Exxon Mobil Corp. 10,268 362
-----------
465
OPTICAL & PHOTO 0.0%
--------------------------------------------------------------------------
Eastman Kodak Co. 500 15
PAPER & FOREST PRODUCTS 0.0%
--------------------------------------------------------------------------
Boise Cascade Corp. 100 2
Georgia-Pacific Corp. 379 6
International Paper Co. 789 28
Kimberly-Clark Corp. 756 38
o Louisiana-Pacific Corp. 100 1
MeadWestvaco Corp. 394 9
Temple-Inland, Inc. 100 5
Weyerhaeuser Co. 300 15
-----------
104
PRODUCER GOODS & MANUFACTURING 0.3%
--------------------------------------------------------------------------
o American Standard Cos., Inc. 100 7
Avery Dennison Corp. 200 11
Caterpillar, Inc. 600 31
Cooper Industries Ltd., Class A 100 4
o Corning, Inc. 1,400 8
Deere & Co. 400 18
Dover Corp. 300 9
Emerson Electric Co. 700 35
(5) General Electric Co. 15,300 451
Honeywell International, Inc. 1,275 30
Illinois Tool Works, Inc. 500 32
Ingersoll-Rand Co., Class A 250 11
Johnson Controls, Inc. 100 8
o Millipore Corp. 100 3
Pall Corp. 200 4
Parker Hannifin Corp. 150 6
Snap-On, Inc. 100 3
W.W. Grainger, Inc. 100 5
-----------
676
See financial notes.
49
MARKETTRACK CONSERVATIVE PORTFOLIO -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
RAILROAD & SHIPPING 0.0%
--------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 600 17
CSX Corp. 300 9
Norfolk Southern Corp. 600 13
Union Pacific Corp. 400 24
-----------
63
REAL PROPERTY 0.0%
--------------------------------------------------------------------------
Apartment Investment & Management Co., Class A 100 4
Equity Office Properties Trust 600 16
Equity Residential 400 10
Plum Creek Timber Co., Inc. 300 7
Simon Property Group, Inc. 300 11
-----------
48
RETAIL 0.4%
--------------------------------------------------------------------------
Albertson's, Inc. 652 13
o AutoZone, Inc. 200 16
o Bed, Bath & Beyond, Inc. 400 16
o Best Buy Co., Inc. 450 16
o Big Lots, Inc. 200 3
Circuit City Stores, Inc. 300 2
o Costco Wholesale Corp. 700 24
CVS Corp. 600 15
Dillards, Inc., Class A 200 3
Dollar General Corp. 515 8
Family Dollar Stores, Inc. 300 10
o Federated Department Stores, Inc. 300 9
o The Gap, Inc. 1,362 23
Home Depot, Inc. 3,600 101
J.C. Penney Co., Inc. Holding Co. 400 7
o Kohl's Corp. 500 28
o Kroger Co. 1,200 17
Limited Brands, Inc. 818 12
Lowe's Cos., Inc. 1,200 53
The May Department Stores Co. 500 11
Nordstrom, Inc. 200 3
o Office Depot, Inc. 600 8
RadioShack Corp. 300 7
o Safeway, Inc. 800 13
Sears, Roebuck & Co. 500 14
o Staples, Inc. 750 14
Target Corp. 1,400 47
Tiffany & Co. 150 4
TJX Cos., Inc. 800 15
o Toys 'R' Us, Inc. 300 3
(8) Wal-Mart Stores, Inc. 6,700 377
Walgreen Co. 1,600 49
Winn-Dixie Stores, Inc. 300 4
o Yum! Brands, Inc. 480 12
-----------
957
STEEL 0.0%
--------------------------------------------------------------------------
Allegheny Technologies, Inc. 146 1
Nucor Corp. 100 4
United States Steel Corp. 100 1
Worthington Industries, Inc. 100 1
-----------
7
TELEPHONE 0.2%
--------------------------------------------------------------------------
Alltel Corp. 500 23
AT&T Corp. 1,181 20
o AT&T Wireless Services, Inc. 3,865 25
o Avaya, Inc. 418 2
BellSouth Corp. 2,900 74
CenturyTel, Inc. 250 7
o Citizens Communications Co. 410 4
o Nextel Communications, Inc., Class A 1,500 22
o Qwest Communications International, Inc. 2,524 10
SBC Communications, Inc. 5,175 121
Scientific-Atlanta, Inc. 200 3
Sprint Corp. (FON Group) 1,300 15
o Sprint Corp. (PCS Group) 1,400 5
Verizon Communications, Inc. 4,188 157
-----------
488
TOBACCO 0.0%
--------------------------------------------------------------------------
R.J. Reynolds Tobacco Holdings, Inc. 100 3
UST, Inc. 300 9
-----------
12
TRAVEL & RECREATION 0.0%
--------------------------------------------------------------------------
Brunswick Corp. 100 2
Carnival Corp. 900 25
o Harrah's Entertainment, Inc. 200 8
See financial notes.
50
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Hilton Hotels Corp. 600 8
Marriott International, Inc., Class A 400 14
Sabre Holdings Corp. 244 5
Starwood Hotels & Resorts Worldwide, Inc. 300 8
-----------
70
TRUCKING & FREIGHT 0.0%
--------------------------------------------------------------------------
Paccar, Inc. 150 9
Ryder Systems, Inc. 100 3
United Parcel Service, Inc., Class B 1,762 109
-----------
121
UTILITIES: ELECTRIC & GAS 0.1%
--------------------------------------------------------------------------
o The AES Corp. 800 5
Allegheny Energy, Inc. 170 1
Ameren Corp. 200 8
American Electric Power Co., Inc. 480 13
o Calpine Corp. 400 2
Centerpoint Energy, Inc. 474 4
Cinergy Corp. 300 10
CMS Energy Corp. 200 1
Consolidated Edison, Inc. 300 12
Constellation Energy Group, Inc. 200 6
Dominion Resources, Inc. 515 30
DTE Energy Co. 200 8
Duke Energy Corp. 1,408 25
Dynegy, Inc., Class A 500 2
o Edison International 500 7
El Paso Corp. 769 6
Entergy Corp. 400 19
Exelon Corp. 462 25
FirstEnergy Corp. 533 18
FPL Group, Inc. 300 18
KeySpan Corp. 200 7
Kinder Morgan, Inc. 176 8
o Mirant Corp. 397 1
Nicor, Inc. 100 3
NiSource, Inc. 376 7
o PG&E Corp. 600 9
Pinnacle West Capital Corp. 100 3
PPL Corp. 200 7
Progress Energy, Inc. 354 15
Public Service Enterprise Group, Inc. 300 12
Sempra Energy 297 8
The Southern Co. 1,100 32
TECO Energy, Inc. 200 2
TXU Corp. 400 8
Williams Cos., Inc. 700 5
Xcel Energy, Inc. 510 7
-----------
354
OTHER INVESTMENT COMPANIES
90.3% of investments
/(3) Schwab International Index Fund(R),
Select Shares(R) 2,625,139 27,328
/(2) Schwab S&P 500 Fund,
Select Shares 2,870,982 40,796
/(4) Schwab Small-Cap Index Fund(R),
Select Shares 1,958,095 27,100
/(1) Schwab Total Bond Market Fund 14,019,801 146,367
-----------
241,591
SHORT-TERM INVESTMENTS
4.8% of investments
/ Schwab Value Advantage
Money Fund(R), Investor
Shares 12,335,903 12,336
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
Bank One, Grand Cayman
Time Deposit
0.80%, 05/01/2003 482 482
-----------
12,818
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
51
MARKETTRACK CONSERVATIVE PORTFOLIO -- Financials
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- -------------------------------------------------------------------------------
Investments, at market value $267,420 a
Receivables:
Fund shares sold 73
Dividends 31
Investments sold 403
Prepaid expenses + 6
-----------
TOTAL ASSETS 267,933
LIABILITIES
- -------------------------------------------------------------------------------
Payables:
Fund shares redeemed 451
Investment adviser and administrator fees 6
Transfer agent and shareholder service fees 7
Accrued expenses + 40
-----------
TOTAL LIABILITIES 504
NET ASSETS
- -------------------------------------------------------------------------------
TOTAL ASSETS 267,933
TOTAL LIABILITIES - 504
-----------
NET ASSETS $267,429
NET ASSETS BY SOURCE
Capital received from investors 276,452
Net investment income not yet distributed 370
Net realized capital losses (5,737)
Net unrealized capital losses (3,656)
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$267,429 22,964 $11.65
a The fund paid $271,076 for these securities. Not counting short-term
obligations and government securities, the fund paid $27,008 for securities
during the report period and received $28,577 from securities it sold or that
matured.
Percent of fund shares of other Schwab funds owned as of the end of the
report period:
SCHWAB EQUITY INDEX FUNDS
S&P 500 Fund 0.7%
Small-Cap Index Fund(R) 2.1%
International Index Fund(R) 2.9%
SCHWAB BOND FUNDS
Total Bond Market Fund 13.9%
SCHWAB MONEY FUNDS
Value Advantage
Money Fund(R) Less than 0.1%
FEDERAL TAX DATA
- ------------------------------------------------
PORTFOLIO COST $274,544
NET UNREALIZED GAINS AND LOSSES:
Gains $12,442
Losses + (19,566)
------------
($7,124)
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $528
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $1,009
See financial notes.
52
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------
Dividends $5,100
Interest + 2
----------------
TOTAL INVESTMENT INCOME 5,102
NET REALIZED GAINS AND LOSSES
- ---------------------------------------------------------------------------------------------
Net realized losses on investments sold (2,325)
Net realized gains received from underlying funds + 425
----------------
NET REALIZED LOSSES (1,900)
NET UNREALIZED GAINS AND LOSSES
- ---------------------------------------------------------------------------------------------
Net unrealized gains on investments 8,346
EXPENSES
- ---------------------------------------------------------------------------------------------
Investment adviser and administrator fees 576 a
Transfer agent and shareholder service fees 327 b
Trustees' fees 4 c
Custodian fees 17
Portfolio accounting fees 20
Professional fees 14
Registration fees 11
Shareholder reports 13
Other expenses + 3
----------------
Total expenses 985
Expense reduction - 330 d
----------------
NET EXPENSES 655
INCREASE IN NET ASSETS FROM OPERATIONS
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 5,102
NET EXPENSES - 655
----------------
NET INVESTMENT INCOME 4,447
NET REALIZED LOSSES (1,900) e
NET UNREALIZED GAINS + 8,346 e
----------------
Increase in net assets from operations $10,893
a Calculated as a percentage of average daily net assets: 0.44% of the first
$500 million and 0.39% of assets beyond that.
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.
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 at least
February 29, 2004, to 0.50% of average daily net assets. This limit doesn't
include interest, taxes and certain non-routine expenses.
e These add up to a net gain on investments of $6,446.
See financial notes.
53
MARKETTRACK CONSERVATIVE PORTFOLIO -- Financials
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for current period are unaudited.
OPERATIONS
- -----------------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income $4,447 $7,614
Net realized losses (1,900) (1,948)
Net unrealized gains or losses + 8,346 (15,307)
-----------------------------------------
INCREASE OR DECREASE IN NET ASSETS FROM OPERATIONS 10,893 (9,641)
DISTRIBUTIONS PAID
- -----------------------------------------------------------------------------------------------------
Dividends from net investment income 4,605 7,675
Distributions from net realized gains + -- 1,042
-----------------------------------------
TOTAL DISTRIBUTIONS PAID $4,605 $8,717 a
TRANSACTIONS IN FUND SHARES
- -----------------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 2,323 $26,390 10,860 $128,363
Shares reinvested 405 4,605 710 8,460
Shares redeemed + (2,930) (33,241) (5,685) (66,334)
---------------------------------------------------------
NET INCREASE OR DECREASE (202) ($2,246) 5,885 $70,489
SHARES OUTSTANDING AND NET ASSETS
- -----------------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 23,166 $263,387 17,281 $211,256
Total increase or
decrease + (202) 4,042 5,885 52,131 b
---------------------------------------------------------
END OF PERIOD 22,964 $267,429 23,166 $263,387 c
a The tax-basis components of distributions paid for the prior period are:
Ordinary income $7,675
Long-term capital gains $1,042
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 Includes net investment income not yet distributed in the amount of $370 and
$528 at the end of the current period and the prior period, respectively.
See financial notes.
54
FINANCIAL NOTES unaudited
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,
or NAV, which is the price for all outstanding shares. Each share has a par
value of 1/1,000 of a cent, and the 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 investments 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.
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.
The 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 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(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
Schwab Core Equity Fund(TM)
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Schwab U.S. MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Hedged Equity Fund(TM)
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Institutional Select S&P 500 Fund
Institutional Select Large-Cap Value Index Fund
Institutional Select Small-Cap Value Index Fund
Schwab MarketTrack Portfolios(R)
55
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 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 trusts
have custodian overdraft facilities and line of credit arrangements of $150
million, $100 million and $150 million with PNC Bank, N.A., Bank of America,
N.A. and The Bank of New York, respectively. The funds pay interest on the
amounts they borrow at rates that are negotiated periodically.
AMOUNT
OUTSTANDING AVERAGE AVERAGE
AT 4/30/03 BORROWING* INTEREST
FUND ($ x 1,000) ($ x 1,000) RATE* (%)
- ---------------------------------------------------------------------------------
MARKETTRACK
GROWTH PORTFOLIO -- 298 1.72
- ---------------------------------------------------------------------------------
MARKETTRACK
BALANCED PORTFOLIO -- 392 1.71
- ---------------------------------------------------------------------------------
MARKETTRACK
CONSERVATIVE PORTFOLIO -- 57 1.69
- ---------------------------------------------------------------------------------
* For the six-month period ended 4/30/03.
THE FUNDS PAY FEES 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.
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 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.
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 realized net 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.
Schwab MarketTrack Portfolios(R)
56
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 FOR WHICH NO MARKET QUOTATIONS ARE READILY AVAILABLE: valued at
fair value, as determined in good faith by the fund's investment adviser
using guidelines adopted by the fund's Board of Trustees.
- - FUTURES 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 DISCOUNTS is recorded as it accrues.
REALIZED GAINS AND LOSSES from security transactions are based on the identified
costs of the securities involved.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES are reported in U.S.
dollars. For assets and liabilities held on a given date, the dollar value is
based on market exchange rates in effect on that date. Transactions involving
foreign currencies, including purchases, sales, income receipts and expense
payments, are 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 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.
Schwab MarketTrack Portfolios(R)
57
GLOSSARY
Words and phrases that appear in financial reports often have specific meanings
that are different from their everyday meanings. The glossary below tells you
what is meant by the following terms when they are used in this report.
ASSET ALLOCATION The practice of dividing a portfolio among different asset
classes, with each asset class assigned a particular percentage.
ASSET CLASS A group of securities with similar structure and basic
characteristics. Stocks, bonds and cash are the three main examples of asset
classes.
BETA A historical measure of an investment's volatility relative to a market
index (usually the S&P 500). The index is defined as having a beta of 1.00.
Investments with a beta higher than 1.00 have been more volatile than the index;
those with a beta of less than 1.00 have been less volatile.
BOND A security representing a loan from the investor to the issuer. A bond
typically pays interest at a fixed rate (the "coupon rate") until a specified
date (the "maturity date"), at which time the issuer returns the money borrowed
("principal" or "face value") to the bondholder. Because of their structure,
bonds are sometimes called "fixed income securities" or "debt securities."
CAP, CAPITALIZATION See "market cap."
CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an
investment and its value at a later time. If the investment has been sold, the
capital gain or loss is considered a realized gain or loss. If the investment is
still held, the gain or loss is still "on paper" and is considered unrealized.
EARNINGS GROWTH RATE For a mutual fund, the average yearly rate at which the
earnings of the companies in the fund's portfolio have grown, measured over the
past five years.
EARNINGS PER SHARE (EPS) A company's earnings, or net income, for the past 12
months, divided by the number of shares outstanding.
EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to
cover the fund's operating expenses. An expense ratio of 0.50% means that a
fund's expenses amount to half of one percent of its average net assets a year.
MARKET CAP, MARKET CAPITALIZATION The value of a company as determined by the
total value of all shares of its stock outstanding.
MEDIAN MARKET CAP The midpoint of the range of market caps of the stocks held by
a fund. There are different ways of calculating median market cap. With a simple
median, half of the stocks in the fund's portfolio would be larger than the
median, and half would be smaller. With a weighted median (the type that is
calculated for these funds), half of the fund's assets are invested in stocks
that are larger than the median market cap, and half in stocks that are smaller.
NET ASSET VALUE (NAV) The value of one share of a mutual fund. NAV is calculated
by taking the fund's total assets, subtracting liabilities, and dividing by the
number of shares outstanding.
OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual
fund, indicates all shares currently held by investors.
PRICE-TO-BOOK RATIO (P/B) The market price of a company's stock compared with
its "book value." A mutual fund's P/B is the weighted average of the P/B of all
stocks in the fund's portfolio.
PRICE-TO-EARNINGS RATIO (P/E) The market price of a company's stock compared
with earnings over the past year. A mutual fund's P/E is the weighted average of
the P/E of all stocks in the fund's portfolio.
RETURN ON EQUITY (ROE) The average yearly rate of return for each dollar of
investors' money, measured over the past five years.
STOCK A share of ownership, or equity, in the issuing company.
TOTAL RETURN The 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.
Schwab MarketTrack Portfolios(R)
58
NOTES
NOTES
CONTACT SCHWAB
SchwabFunds(R) offers you a complete family of mutual funds, each one based on a
time-tested investment approach and using disciplined, clearly defined
management strategies.
Actively managed funds include multi-manager stock funds, a fund that uses
long-short strategies, and a range of taxable and tax-free bond funds. Index
funds include large-cap, small-cap and international stock funds. 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. Please call 1-800-435-4000 for a free
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)
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.
1 Shares of Sweep Investments(TM) may not be purchased over the Internet.
2 Orders placed in person or through a telephone representative are subject to a
service fee payable to Schwab.
THE SCHWABFUNDS FAMILY
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 Hedged Equity Fund(TM)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab MarketMasters Funds(TM)
Schwab U.S. MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
ASSET ALLOCATION FUNDS
Schwab MarketTrack Portfolios(R)
Schwab All Equity Portfolio
Schwab Growth Portfolio
Schwab Balanced Portfolio
Schwab Conservative Portfolio
BOND FUNDS
Schwab YieldPlus Fund(R)
Schwab Short-Term Bond Market Fund
Schwab Total Bond Market Fund
Schwab GNMA 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 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 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
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) 2003 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
Printed on recycled paper.
REG13559-05
Schwab MarketMasters Funds(TM)
SEMIANNUAL REPORT
April 30, 2003
Schwab U.S.
MarketMasters Fund(TM)
Schwab Balanced
MarketMasters Fund(TM)
Schwab Small-Cap
MarketMasters Fund(TM)
Schwab International
MarketMasters Fund(TM)
[CHARLES SCHWAB LOGO]
Four distinct funds, each combining the expertise of leading investment managers
with Schwab's overall supervision.
In This Report
Management's Discussion .................................. 2
The president of SchwabFunds(R) and the funds' managers
discuss the factors that affected fund performance
during the report period.
Fund Performance and Related Data
Fund and index performance data, fund facts, portfolio
holdings and fund financials.
Schwab U.S. MarketMasters Fund(TM) ..................... 6
Ticker Symbol: SWOGX
The fund seeks capital growth.
Schwab Balanced MarketMasters Fund(TM) ................. 16
Ticker Symbol: SWOBX
The fund seeks capital growth and income.
Schwab Small-Cap MarketMasters Fund(TM) ................ 32
Ticker Symbol: SWOSX
The fund seeks long-term capital appreciation.
Schwab International MarketMasters Fund(TM) ............ 44
Ticker Symbol: SWOIX
The fund seeks long-term capital appreciation.
Financial Notes .......................................... 57
Glossary ................................................. 62
FROM THE CHAIRMAN
[PHOTO OF CHARLES R. SCHWAB]
Charles R. Schwab
Chairman
Without question, these are challenging times for America's investors. But I
believe that they also may provide opportunities, especially for those who stay
involved with their investment portfolios and review their mutual fund holdings
with their investment objectives in mind.
As this report goes to press, the President has signed into law a new tax
package that I believe offers significant potential benefits for all investors.
The new tax package will reduce the rate of taxation on many corporate dividends
and on capital gains. I believe that reducing these taxes could serve as a
stimulus to the stock market, thereby benefiting all owners of U.S. stocks.
For years, corporate dividends have been taxed twice: first when the corporation
earned the money, and again when investors received the dividend. In my view,
this has provided an incentive for corporations to retain profits as cash rather
than sharing them with their shareholders. I believe reducing the dividend tax
gives companies the right incentives to invest and create new jobs.
Here at Schwab, we are actively exploring ways to help investors meet their
financial objectives. At SchwabFunds(R), these efforts are being led by the new
president of SchwabFunds, Randall Merk. Randy brings a wealth of experience to
the job, and we welcome his leadership, vision and wisdom.
On behalf of SchwabFunds, I'd like to thank you for investing with us. Your
continued trust and support mean a great deal to us. In turn, it's our mission
to help you meet your financial goals.
Sincerely,
/s/ Charles R. Schwab
MANAGEMENT'S DISCUSSION November 1, 2002--April 30, 2003
[PHOTO OF RANDALL W. MERK]
RANDALL W. MERK is President and CEO of Charles Schwab Investment Management,
Inc. and is president of each of the funds covered in this report. He joined the
firm in August of 2002, bringing with him 24 years of experience in the asset
management industry.
Dear Shareholder:
As one of the newer members of the SchwabFunds(R) team, I've been struck by the
talent and integrity of the people here. Above all, I've been impressed with the
dedication they show to understanding the needs and concerns of our
shareholders.
That dedication is particularly important right now. Times of market volatility
and uncertainty about world events demand as high a level of diligence as ever
on the part of investment professionals. At SchwabFunds we are keenly aware of
this, and we continue to work hard to uphold the best interests of our
shareholders.
Mutual funds are facing many initiatives at the moment. These include changes in
corporate governance practices, such as the Sarbanes-Oxley Act (which requires
senior management certification of financial reports), and new regulations
affecting disclosures of mutual funds' proxy voting practices. Many of these
changes have the potential to benefit shareholders, and I want to assure you
that we'll keep you informed of the progress we are making with them.
In the meantime, it is worth keeping in mind that the basic tenets of mutual
fund investing remain unchanged. In particular, time-tested investment practices
such as asset allocation and diversification are as important as ever. The range
of choices available from SchwabFunds can make it easy to diversify your
portfolio. In addition, as our range of funds grows, we'll let you know when new
funds are launched (or you can stay informed by visiting
www.schwab.com/schwabfunds).
In closing, let me thank you for choosing SchwabFunds for your mutual fund
investments. We're committed to helping you reach your financial goals. If there
is something more that we can do to help, I hope you'll let us know.
Sincerely,
/s/ Randall W. Merk
Schwab MarketMasters Funds(TM)
2
[PHOTO OF JEFFREY MORTIMER]
JEFFREY MORTIMER, CFA, a vice president of the investment adviser, has overall
responsibility for the management of the fund. Prior to joining the firm in
1997, he worked for nine years in asset allocation and manager selection.
On February 28, 2003, Kimberly Formon was named co-manager of the four
MarketMasters Funds(TM).
[PHOTO OF KIMBERLY FORMON]
KIMBERLY FORMON, CFA, a director and portfolio manager of the investment
advisor, 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 ECONOMY
THE WAR IN IRAQ DOMINATED HEADLINES, ALTHOUGH IT WAS NOT THE ONLY FACTOR
AFFECTING THE ECONOMY. As the report period began, the nation's focus was
divided between fundamental economic issues and concerns over the looming war
with Iraq. Once the war arrived, attention focused on Iraq and the progress of
political and military actions. Toward the end of the report period, as
intensive military action drew to a close, the nation's focus shifted and its
level of concern over war-related uncertainty declined.
One reflection of this pattern of changing concerns over the war was the price
of oil. Leading up to the war, oil prices continued to ratchet up to nearly $40
a barrel. But the price quickly dropped to around $30 a barrel when it began to
appear that the major fighting would not last long.
The economy that Americans found at the end of the war was not much different
than it had been during the period before the war. Gross Domestic Product was
positive but weak, while joblessness edged up to 6%. Consumer spending remained
strong, helped in part by widespread discounts and depressed prices in most
sectors (aside from healthcare and oil). But discounted prices for consumers
translated into thin profits for companies, and business capital spending
remained minimal. A half-percent interest rate cut in November 2002 showed the
Federal Reserve continuing to apply economic stimulus; the president and
Congress contributed by advancing new fiscal and tax policies.
THE MARKET
MOST TYPES OF STOCKS POSTED GAINS FOR THE PERIOD, WITH SMALL-CAP GROWTH STOCKS
AND LARGE-CAP VALUE STOCKS LEADING THE WAY. Positive returns were welcome news
after prior declines. However, the volatility that has characterized the market
in recent years continued throughout the period.
The strongest month of the period for stocks was April 2003, which saw the
market rise as the military action in Iraq ended and as the first corporate
earnings reports for 2002 appeared to indicate some improvement over the
disappointing earnings of 2001. Another factor that we believe may have helped
lift the market during the period was the increasing possibility of a dividend
tax cut.
Looking at stock prices during the period, it appeared that investors were
reluctant to give much consideration to projections of future earnings (which
may or may not turn out to be accurate) when deciding how much they were willing
to pay for a stock.
Schwab MarketMasters Funds(TM)
3
MANAGEMENT'S DISCUSSION continued
STOCK PRICES DURING THE PERIOD APPEARED TO GENERALLY REFLECT COMPANIES'
ESTABLISHED EARNING POWER, ALTHOUGH ANTICIPATED FUTURE EARNINGS BEGAN TO DRIVE
RETURNS IN SOME SECTORS.
In our view, this was a sign of lingering skepticism among investors about
earnings projections, whether those projections came from corporate management
or from analysts. As the report period came to a close, there were some issues
that remained unresolved. For instance, there were still companies coming
forward with earnings restatements or with large one-time charges. There were
also questions about how companies account for pension plan liabilities, and how
related practices might trigger another round of earnings restatements. We
believe investors' sensitivity to factors such as these was likely heightened by
the memory of the many recent high-profile cases of corporate malfeasance.
THE FUNDS
ALL OF THE FUNDS POSTED POSITIVE TOTAL RETURNS AND OUTPERFORMED THEIR RESPECTIVE
BENCHMARKS AND CATEGORY AVERAGES FOR THE REPORT PERIOD. During the period, we
remained in close contact with each fund's sub-advisers, and we made adjustments
to most sub-advisers' allocations based on a combination of market conditions
and daily cash flows. Just prior to the reporting period, and during it as well,
we believed that small-cap stocks would lead a market recovery. Consequently, we
positioned each fund to more fully participate in this opportunity. Each fund
benefited from this strategy.
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.
4.48% S&P 500(R) INDEX: measures U.S. large-cap stocks
7.55% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
1.81% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in
Europe, Australasia and the Far East
4.31% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond
market
[LINE GRAPH]
Lehman Brothers U.S. Russell 2000
Aggregate Bond Index MSCI-EAFE Index Index S&P 500 Index
31-Oct-02 0 0 0 0
Nov-02 -0.18 -0.36 2.6 1.72
Nov-02 0.59 1.71 2.65 1.95
Nov-02 0.25 0.52 3.5 2.2
Nov-02 -0.07 3.64 6.59 5.6
Nov-02 -0.03 4.7 9.98 6.2
Dec-02 0.52 0.96 5.77 2.59
Dec-02 0.86 -0.03 6.05 2.06
Dec-02 1.42 -1.25 2.87 0.14
Dec-02 1.99 0.71 4.5 0.75
Jan-03 1.36 2.13 5.44 3.01
Jan-03 1.18 2.45 6.35 5.14
Jan-03 1.83 3.2 6.09 3.7
Jan-03 2.2 -0.55 3.09 0.61
Jan-03 2.12 -3.01 -1.19 -4.19
Feb-03 2.47 -3.67 -1.94 -4.88
Feb-03 2.45 -4.75 -4.58 -7.18
Feb-03 2.75 -3.54 -3.25 -4.91
Feb-03 3.54 -6.69 -2.77 -4.84
Mar-03 3.82 -6.69 -4.79 -6.53
Mar-03 3.45 -10.09 -4.3 -5.38
Mar-03 2.18 -5.24 -0.25 -0.36
Mar-03 3.12 -5.07 -0.45 -1.16
Apr-03 3.12 -4.67 1.13 -0.23
Apr-03 3.14 -3.48 0.46 -0.74
Apr-03 3.4 -0.88 3.46 1.78
Apr-03 3.96 0.21 5.76 3.82
30-Apr-03 4.31 1.81 7.55 4.48
These figures assume dividends and distributions were reinvested. Index figures
don't include trading and management costs, which would lower performance.
Indices are unmanaged and you can't invest in them directly. Remember that past
performance is not an indication of future results.
Data source: Charles Schwab & Co., Inc.
Schwab MarketMasters Funds(TM)
4
MANY OF THE SUB-ADVISERS BENEFITED FROM ACTIONS THEY TOOK AT THE MARKET'S LOW
FOR THE REPORT PERIOD.
In the SCHWAB U.S. MARKETMASTERS FUND(TM), outperformance was led by Harris
Associates LP and by TCW Investment Management Company (TCW), the
best-performing sub-advisers for the fund. We see their strong performance as a
reflection both of their stock selection and the fact that during the period,
small- and mid-cap stocks generally performed better than large-cap stocks.
During the period, the fund maintained a weighting of over 20% each in Harris
and TCW, in order to capitalize on our belief that small company stocks were
likely to perform well, which they did. This was instrumental in helping the
fund outperform its benchmark.
In the SCHWAB BALANCED MARKETMASTERS FUND(TM), we reallocated assets from
fixed-income to equities in order to maintain a 60:40 stock-to-bond allocation,
as declines in stock prices had reduced our equity allocation and we did not
want to be underweighted in stocks.
Janus Capital Management LLC was the best performing sub-adviser for the fund.
We attribute its strong performance to stock selection and asset class strength.
On the fixed-income side, our bond sub-adviser, Pacific Investment Management
Company, Inc., also performed well.
In the SCHWAB SMALL-CAP MARKETMASTERS FUND(TM), outperformance was primarily
driven by Royce & Associates, LLC and by TCW. For both firms, stock selection
and exposure to the technology sector were the main drivers for strong returns.
Early in the report period we added assets to these sub-advisers' allocations,
anticipating their strong performance.
In the SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM), outperformance was led by
American Century Investment Management, Inc., the sub-adviser who manages the
small-cap component of the portfolio. Believing the market would reward
international small company stocks, we began adding assets to American Century
early in the period. This was instrumental to the fund's outperformance of its
benchmark, an index that mainly consists of large-cap stocks.
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.
The views expressed here are those of fund management only. 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 MarketMasters Funds(TM)
5
SCHWAB U.S. MARKETMASTERS FUND(TM)
PERFORMANCE as of 4/30/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund with the S&P 500(R) Index and the
Morningstar Large-Cap Blend Fund category.
[BAR CHART]
FUND S&P 500 Index Category Average
6 MONTHS 10.03% 4.48% 3.31%
1 YEAR -13.37% -13.31% -14.72%
5 YEARS -1.54% -2.43% -3.05%
SINCE INCEPTION: 11/18/96 3.20% 4.96% n/a
PERFORMANCE OF A $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 the S&P 500 Index.
$12,254 Fund
$13,671 S&P 500 Index
[LINE GRAPH]
SWOGX S&P 500 Index
18-Nov-96 10000 10000
Nov-96 10120 10271
Dec-96 10077 10068
Jan-97 10371 10696
Feb-97 10310 10780
Mar-97 10016 10338
Apr-97 10229 10955
May-97 10848 11621
Jun-97 11274 12141
Jul-97 11841 13106
Aug-97 11547 12372
Sep-97 12145 13049
Oct-97 11760 12613
Nov-97 11750 13197
Dec-97 11927 13424
Jan-98 11959 13573
Feb-98 12622 14552
Mar-98 13146 15297
Apr-98 13242 15452
May-98 13135 15186
Jun-98 13306 15802
Jul-98 13135 15635
Aug-98 11639 13377
Sep-98 11745 14235
Oct-98 12216 15392
Nov-98 12814 16325
Dec-98 13734 17265
Jan-99 14255 17987
Feb-99 13712 17427
Mar-99 14266 18124
Apr-99 14830 18826
May-99 14487 18381
Jun-99 15118 19402
Jul-99 14919 18796
Aug-99 14896 18702
Sep-99 14819 18190
Oct-99 15560 19341
Nov-99 16557 19734
Dec-99 18630 20897
Jan-00 17808 19848
Feb-00 19681 19472
Mar-00 19516 21376
Apr-00 18086 20733
May-00 17289 20308
Jun-00 18263 20809
Jul-00 17922 20485
Aug-00 18997 21757
Sep-00 18213 20608
Oct-00 17580 20522
Nov-00 16099 18905
Dec-00 16401 18997
Jan-01 16873 19672
Feb-01 15516 17878
Mar-01 14690 16744
Apr-01 15855 18045
May-01 15782 18166
Jun-01 15634 17725
Jul-01 15206 17551
Aug-01 14557 16452
Sep-01 13186 15123
Oct-01 13569 15412
Nov-01 14602 16594
Dec-01 14979 16740
Jan-02 14696 16496
Feb-02 14324 16177
Mar-02 14801 16785
Apr-02 14146 15768
May-02 13848 15652
Jun-02 12716 14537
Jul-02 11495 13405
Aug-02 11570 13492
Sep-02 10453 12025
Oct-02 11138 13084
Nov-02 12135 13854
Dec-02 11316 13041
Jan-03 11123 12699
Feb-03 10959 12509
Mar-03 11093 12630
Apr-03 12254 13671
Oct-01 13569 15412
Nov-01 14602 16594
Dec-01 14979 16740
Jan-02 14696 16496
Feb-02 14324 16177
Mar-02 14801 16785
Apr-02 14146 15768
May-02 13848 15652
Jun-02 12716 14537
Jul-02 11495 13405
Aug-02 11570 13492
Sep-02 10453 12025
Oct-02 11138 13084
Nov-02 12135 13854
Dec-02 11316 13041
Jan-03 11123 12699
Feb-03 10959 12509
Mar-03 11093 12630
30-Apr-03 12254 13671
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. The
fund's share price and principal values change, and when you sell your shares,
they may be worth more or less than what you paid for them. Past performance
does not indicate future results. Results for the report period are not
annualized.
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 returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower. These returns also 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. As of 4/30/03, the total
number of funds in the Morningstar Large-Cap Blend Fund category for the
six-month, one- and five-year periods was 1,410, 1,362 and 711, respectively.
Schwab MarketMasters Funds(TM)
6
SCHWAB U.S. MARKETMASTERS FUND(TM)
FUND FACTS as of 4/30/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 171
- --------------------------------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $ 14,383
- --------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 24.0
- --------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 3.5
- --------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 2 51%
- --------------------------------------------------------------------
EXPENSE RATIO 3 1.25%
- --------------------------------------------------------------------
TOP HOLDINGS 4
% OF
SECURITY INVESTMENTS
- --------------------------------------------------------------------
(1) AOL TIME WARNER, INC. 2.3%
- --------------------------------------------------------------------
(2) WASHINGTON MUTUAL, INC. 2.3%
- --------------------------------------------------------------------
(3) PFIZER, INC. 2.2%
- --------------------------------------------------------------------
(4) MICROSOFT CORP. 2.1%
- --------------------------------------------------------------------
(5) CENDANT CORP. 1.9%
- --------------------------------------------------------------------
(6) CARNIVAL CORP. 1.9%
- --------------------------------------------------------------------
(7) CABLEVISION SYSTEMS OF NEW YORK GROUP Class A 1.7%
- --------------------------------------------------------------------
(8) BEST BUY CO., INC. 1.6%
- --------------------------------------------------------------------
(9) WATERS CORP. 1.6%
- --------------------------------------------------------------------
(10) GAP, INC. 1.4%
- --------------------------------------------------------------------
TOTAL 19.0%
INVESTMENT MANAGERS AND ALLOCATIONS
INVESTMENT MANAGER INVESTMENT STYLE % OF ASSETS
- --------------------------------------------------------------------
EAGLE ASSET Large-Cap Growth 22.5%
MANAGEMENT, INC.
- --------------------------------------------------------------------
HARRIS ASSOCIATES L.P. Mid/Large-Cap 23.6%
Value
- --------------------------------------------------------------------
TCW INVESTMENT Small/Mid-Cap 20.5%
MANAGEMENT COMPANY Blend
- --------------------------------------------------------------------
THORNBURG INVESTMENT Large-Cap Blend 32.3%
MANAGEMENT, INC.
- --------------------------------------------------------------------
CASH -- 1.1%
- --------------------------------------------------------------------
1 Source: Morningstar, Inc. This style assessment is the result of comparing
the fund with the S&P 500(R) Index based on P/E, P/B and median market cap.
The assessment reflects the fund as of 4/30/03, which may have changed since
then, and is not a precise indication of risk or performance--past, present or
future.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes and certain non-routine expenses).
4 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
Schwab MarketMasters Funds(TM)
7
SCHWAB U.S. MARKETMASTERS FUND(TM) -- Financials
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
- ------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 7.48 9.20 13.89 14.06 11.43 11.60
---------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income or loss (0.00) 6 0.06 0.38 0.38 0.16 0.32
Net realized and unrealized gains or losses 0.75 (1.68) (3.21) 1.55 2.91 0.11
---------------------------------------------------------------------------
Total income or loss from investment operations 0.75 (1.62) (2.83) 1.93 3.07 0.43
Less distributions:
Dividends from net investment income -- (0.10) (0.46) (0.33) (0.21) (0.29)
Distributions from net realized gains -- -- (1.40) (1.77) (0.23) (0.31)
---------------------------------------------------------------------------
Total distributions -- (0.10) (1.86) (2.10) (0.44) (0.60)
---------------------------------------------------------------------------
Net asset value at end of period 8.23 7.48 9.20 13.89 14.06 11.43
---------------------------------------------------------------------------
Total return (%) 10.03 1 (17.92) (22.81) 12.98 27.38 3.87
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 1.25 2 0.74 4, 5 0.50 4 0.50 3, 4 0.50 4 0.50 4
Expense reductions reflected in above ratio 0.17 2 0.33 0.39 0.38 0.43 0.67
Ratio of net investment income or loss to
average net assets (0.01) 2 0.50 3.27 2.34 1.23 2.66
Portfolio turnover rate 51 1 390 145 179 284 384
Net assets, end of period ($ x 1,000,000) 132 129 176 248 181 152
1 Not annualized.
2 Annualized.
3 Would have been 0.51% if certain non-routine expenses (proxy fees) had been
included.
4 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.
5 Would have been 0.83% if certain non-routine expenses (proxy fees) had been
included.
6 Per-share amount was less than $0.01.
See financial notes.
8
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
= Collateral for open futures contracts
* American Depositary Receipt
COST MARKET VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- -----------------------------------------------------------
95.0% COMMON STOCK 123,105 124,987
0.3% FOREIGN COMMON
STOCK 481 452
4.7% SHORT-TERM
INVESTMENTS 6,172 6,172
- -----------------------------------------------------------
100.0% TOTAL INVESTMENTS 129,758 131,611
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 95.0% of investments
AEROSPACE / DEFENSE 0.9%
--------------------------------------------------------------------------
Lockheed Martin Corp. 12,700 635
Raytheon Co. 14,500 434
The Boeing Co. 4,500 123
---------
1,192
AIR TRANSPORTATION 0.5%
--------------------------------------------------------------------------
Southwest Airlines, Inc. 40,300 643
ALCOHOLIC BEVERAGES 0.5%
--------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 13,050 651
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 0.3%
--------------------------------------------------------------------------
Cummins Engine, Inc. 8,200 222
o SPX Corp. 4,350 147
---------
369
BANKS 4.7%
--------------------------------------------------------------------------
o Bank of New York Co., Inc. 49,500 1,309
BankNorth Group, Inc. 26,200 626
Mellon Financial Corp. 23,700 627
North Fork Bancorp, Inc. 8,500 275
o Silicon Valley Bancshares 14,500 339
Southtrust Corp. 15,600 419
Valley National Bancorp 9,135 242
Wells Fargo & Co. 24,600 1,187
Wilmington Trust Co. 23,830 641
Zions Bancorp 11,900 586
---------
6,251
BUSINESS MACHINES & SOFTWARE 5.0%
--------------------------------------------------------------------------
o Cisco Systems, Inc. 69,850 1,050
o Dell Computer Corp. 27,300 789
o EMC Corp. 5,850 53
Hewlett Packard Co. 49,800 812
International Business Machines Corp. 5,300 450
o Maxtor Corp. 57,200 315
(4)Microsoft Corp. 109,100 2,790
o Unisys Corp. 26,300 273
---------
6,532
BUSINESS SERVICES 9.6%
--------------------------------------------------------------------------
o Advent Software, Inc. 35,320 445
o Affiliated Computer Services, Inc. 17,500 835
o Aspen Technology, Inc. 79,500 265
o(5)Cendant Corp. 171,500 2,449
o Cerner Corp. 12,400 248
o Doubleclick, Inc. 43,000 370
o DST Systems, Inc. 30,000 921
Electronic Data Systems Corp. 43,100 782
First Data Corp. 43,400 1,703
o Hotel Reservations Network, Inc. 7,700 551
Interpublic Group of Cos., Inc. 153,000 1,744
o Network Associates, Inc. 39,400 450
Omnicom Group, Inc. 3,000 186
Reynolds & Reynolds Co., Class A 19,700 568
o Teledyne Technologies, Inc. 32,400 456
Tyco International Ltd. 41,400 646
---------
12,619
See financial notes.
9
SCHWAB U.S. MARKETMASTERS FUND(TM)--Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
CHEMICAL 0.3%
--------------------------------------------------------------------------
3M Co. 1,100 139
Rohm & Haas Co. 9,000 298
---------
437
CONSTRUCTION 0.4%
--------------------------------------------------------------------------
o Toll Brothers, Inc. 21,300 495
CONSUMER NON-DURABLE 2.2%
--------------------------------------------------------------------------
o Electronic Arts, Inc. 15,700 931
o EMCOR Group, Inc. 12,100 618
Wendy's International, Inc. 5,800 168
o Yum! Brands, Inc. 50,000 1,235
---------
2,952
ELECTRONICS 8.6%
--------------------------------------------------------------------------
o Agere Systems, Inc. 217,500 389
o Agere Systems, Inc., Class B 328,200 561
o Alliant Techsystems, Inc. 6,800 365
o Anixter International, Inc. 17,100 393
o Arrow Electronics, Inc. 23,900 403
o Celestica, Inc. 14,000 162
Intel Corp. 60,050 1,105
o KLA-Tencor Corp. 8,100 332
Linear Technology Corp. 1,850 64
o LSI Logic Corp. 84,100 451
o Macromedia, Inc. 29,400 371
Maxim Integrated Products, Inc. 2,400 94
o National Semiconductor Corp. 45,300 848
PerkinElmer, Inc. 43,400 431
Symbol Technologies, Inc. 34,300 375
*o Taiwan Semiconductor Co. Ltd. 53,790 450
o Tektronix, Inc. 30,600 574
o Teradyne, Inc. 67,800 787
Texas Instruments, Inc. 30,150 557
o Vishay Intertechnology, Inc. 49,000 613
(9)Waters Corp. 85,200 2,046
----------
11,371
ENERGY: RAW MATERIALS 0.7%
--------------------------------------------------------------------------
o Cooper Cameron Corp. 4,700 225
Devon Energy Corp. 5,200 246
ENSCO International, Inc. 16,150 410
----------
881
FOOD & AGRICULTURE 0.6%
--------------------------------------------------------------------------
o Hain Celestial Group, Inc. 44,900 775
HEALTHCARE / DRUGS & MEDICINE 14.7%
--------------------------------------------------------------------------
Abbott Laboratories 15,800 642
o Amgen, Inc. 3,450 211
o Apogent Technologies, Inc. 41,300 709
Baxter International, Inc. 37,900 872
Beckman Coulter, Inc. 13,100 509
o Boston Scientific Corp. 3,250 140
o Caremark Rx, Inc. 84,400 1,680
Eli Lilly & Co. 6,250 399
o Genzyme Corp. 37,975 1,530
o Guidant Corp. 46,000 1,794
HCA, Inc. 3,850 124
Health Management Associates, Inc. 74,000 1,262
o Health Net, Inc. 18,800 490
Johnson & Johnson, Inc. 20,700 1,167
Medtronic, Inc. 6,550 313
Merck & Co., Inc. 14,200 826
(3)Pfizer, Inc. 95,750 2,944
o PSS World Medical, Inc. 33,300 200
o Quest Diagnostic, Inc. 8,400 502
Schering-Plough Corp. 40,000 724
o St. Jude Medical, Inc. 2,300 121
United Healthcare Corp. 2,550 235
Univision Communications, Inc. 9,300 282
Wyeth 38,350 1,669
----------
19,345
HOUSEHOLD PRODUCTS 1.0%
--------------------------------------------------------------------------
Colgate-Palmolive Co. 7,050 403
o Estee Lauder Cos., Inc., Class A 10,600 344
Procter & Gamble Co. 5,950 535
----------
1,282
INSURANCE 2.9%
--------------------------------------------------------------------------
American International Group, Inc. 2,950 171
Chubb Corp. 17,200 910
See financial notes.
10
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
MBIA, Inc. 9,500 425
o Prudential Financial, Inc. 43,300 1,384
The Hartford Financial Services Group, Inc. 9,450 385
o The Phoenix Cos., Inc. 31,200 246
Travelers Property Casualty Corp. 14,277 232
----------
3,753
MEDIA 9.6%
--------------------------------------------------------------------------
o(1) AOL Time Warner, Inc. 219,100 2,997
Belo Corp., Class A 7,100 160
o(7) Cablevision Systems of New York Group, Class A 100,000 2,242
o Clear Channel Communications, Inc. 10,600 415
o Comcast Corp., Class A 54,100 1,626
o Cumulus Media, Inc. 6,300 109
o Fox Entertainment Group, Inc., Class A 39,250 997
Gannett, Inc. 2,500 189
o Hispanic Broadcasting Corp. 350 9
Meredith Corp. 8,300 359
o Metro Goldwyn Mayer, Inc. 46,300 516
o The Walt Disney Co. 67,900 1,267
o USA Interactive, Inc. 33,600 1,006
o Viacom, Inc., Class B 18,350 797
----------
12,689
MISCELLANEOUS FINANCE 9.1%
--------------------------------------------------------------------------
American Express Co. 19,600 742
Citigroup, Inc. 20,250 795
Countrywide Credit Industries, Inc. 10,400 703
o E*trade Group, Inc. 160,000 880
Fannie Mae 20,350 1,473
Lehman Brothers Holdings, Inc. 5,400 340
MBNA Corp. 58,700 1,110
Merrill Lynch & Co., Inc. 4,100 168
Morgan Stanley 21,000 940
Sovereign Bancorp, Inc. 90,000 1,391
The Goldman Sachs Group, Inc. 5,800 440
(2) Washington Mutual, Inc. 75,200 2,970
----------
11,952
NON-FERROUS METALS 0.3%
--------------------------------------------------------------------------
o Phelps Dodge Corp. 11,000 343
OIL: DOMESTIC 1.9%
--------------------------------------------------------------------------
Marathon Oil Corp. 41,100 936
o Pride International, Inc. 16,500 256
Unocal Corp. 46,700 1,294
----------
2,486
OIL: INTERNATIONAL 0.8%
--------------------------------------------------------------------------
* BP, PLC 28,600 1,102
PAPER & FOREST PRODUCTS 0.8%
--------------------------------------------------------------------------
Kimberly-Clark Corp. 22,400 1,115
PRODUCER GOODS & MANUFACTURING 1.9%
--------------------------------------------------------------------------
Dover Corp. 17,900 514
General Electric Co. 34,650 1,020
Pall Corp. 24,800 524
York International Corp. 17,600 421
----------
2,479
REAL PROPERTY 0.5%
--------------------------------------------------------------------------
Boston Properties, Inc. 16,800 659
RETAIL 9.6%
--------------------------------------------------------------------------
American Eagle Outfitters, Inc. 33,500 586
o(8) Best Buy Co., Inc. 59,700 2,065
Costco Companies, Inc. 30,000 1,039
(10) Gap, Inc. 110,000 1,829
Home Depot, Inc. 39,350 1,107
J.C. Penny Co., Inc. 23,700 404
o Kroger Co. 80,000 1,144
Lowe's Cos., Inc. 21,700 952
Talbots, Inc. 18,200 522
Target Corp. 8,250 276
Tiffany & Co. 65,000 1,803
Wal Mart Stores, Inc. 15,700 884
----------
12,611
See financial notes.
11
SCHWAB U.S. MARKETMASTERS FUND(TM) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TELEPHONE 2.2%
--------------------------------------------------------------------------
Amdocs Ltd. 57,400 1,014
o Level 3 Communications, Inc. 19,100 109
o Liberty Media Corp., Class A 160,000 1,760
----------
2,883
TRAVEL & RECREATION 2.6%
--------------------------------------------------------------------------
(6) Carnival Corp. 88,750 2,449
o Harrah's Entertainment, Inc. 7,650 301
o Starwood Hotel & Resorts Worldwide, Inc. 23,300 625
----------
3,375
TRUCKING & FREIGHT 0.2%
--------------------------------------------------------------------------
United Parcel Service, Inc. 4,950 308
UTILITIES: ELECTRIC & GAS 2.6%
--------------------------------------------------------------------------
Duke Energy Corp. 90,000 1,583
El Paso Energy Corp. 127,700 958
TXU Corp. 45,000 896
----------
3,437
FOREIGN COMMON STOCK 0.3% of investments
SOUTH KOREA 0.3%
--------------------------------------------------------------------------
Samsung Electronics Co. 1,800 452
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENTS 4.7% of investments
U.S. GOVERNMENT SECURITIES 0.1%
--------------------------------------------------------------------------
= U.S. Treasury Bills
1.13%, 06/19/03 100 100
1.15%, 06/19/03 20 20
----------
120
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OTHER INVESTMENT COMPANIES 4.6%
--------------------------------------------------------------------------
Provident Institutional Funds--
TempCash 102,029 102
o Provident Institutional Funds--
TempFund 5,950,256 5,950
----------
6,052
--------------------------------------------------------------------------
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
12
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- -----------------------------------------------------------------------------
Investments, at market value $131,611 a
Receivables:
Fund shares sold 16
Dividends 114
Investments sold 916
Prepaid expenses + 7
-------------
TOTAL ASSETS 132,664
LIABILITIES
- -----------------------------------------------------------------------------
Payables:
Fund shares redeemed 69
Investments bought 560
Investment adviser and administrator fees 12
Transfer agency and shareholder service fees 4
Accrued expenses + 37
-------------
TOTAL LIABILITIES 682
NET ASSETS
- -----------------------------------------------------------------------------
TOTAL ASSETS 132,664
TOTAL LIABILITIES - 682
------------
NET ASSETS $131,982
------------
NET ASSETS BY SOURCE
Capital received from investors 199,078
Net investment loss (6)
Net realized capital losses (68,942) b
Net unrealized capital gains 1,852 b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$131,982 16,045 $8.23
a The fund paid $129,758 for these securities. Not counting short-term
obligations and government securities, the fund paid $60,378 for securities
during the report period and received $63,169 from securities it sold or that
matured.
b These derive from investments, foreign currency transactions and futures. As
of the report date, the fund had six open S&P 500 futures contracts due to
expire on June 20, 2003, with a contract value of $1,374 and an unrealized
loss of $1.
FEDERAL TAX DATA
- -----------------------------------------------------------------------------
PORTFOLIO COST $131,496
NET UNREALIZED GAINS AND LOSSES:
Gains $9,834
Losses + (9,719)
-------------
$115
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $--
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount:
2009 $27,772
2010 + 34,385
-------------
$62,157
See financial notes.
13
SCHWAB U.S. MARKETMASTERS FUND(TM) -- Financials
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- ------------------------------------------------------------------------------
Dividends $782 a
Interest + 2
-------------
TOTAL INVESTMENT INCOME 784
NET REALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net realized losses on investments sold (5,083)
Net realized gains of futures contracts + 356
-------------
NET REALIZED LOSSES (4,727)
NET UNREALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net unrealized gains on investments 17,095
Net unrealized losses on futures contracts + (365)
-------------
NET UNREALIZED GAINS 16,730
EXPENSES
- ------------------------------------------------------------------------------
Investment adviser and administrator fees 632 b
Transfer agent and shareholder service fees 158 c
Trustees' fees 3 d
Custodian and portfolio accounting fees 54
Professional fees 16
Registration fees 6
Shareholder reports 21
Other expenses + 7
-------------
Total expenses 897
Expense reduction - 107 e
-------------
NET EXPENSES 790
INCREASE IN NET ASSETS FROM OPERATIONS
- ------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 784
NET EXPENSES - 790
-------------
NET INVESTMENT LOSS (6)
NET REALIZED LOSSES (4,727) f
NET UNREALIZED GAINS + 16,730 f
-------------
INCREASE IN NET ASSETS FROM OPERATIONS $11,997
a An additional $7 was withheld for foreign taxes.
b Calculated as 1.00% of average daily net assets.
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.
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 at least
February 29, 2004, to 1.25% of average daily net assets. This limit doesn't
include interest, taxes and certain non-routine expenses.
f These add up to a net gain on investments of $12,003.
See financial notes.
14
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for current period are unaudited.
OPERATIONS
- ------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income or losses ($6) $834
Net realized losses (4,727) (35,944)
Net unrealized gains + 16,730 5,875
-------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 11,997 (29,235)
DISTRIBUTIONS PAID
- -------------------------------------------------------------------------------
Dividends from net investment income -- 1,826
Distributions from net realized gains + -- --
-------------------------------------
TOTAL DISTRIBUTIONS PAID $-- $1,826 a
TRANSACTIONS IN FUND SHARES
- -----------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 804 $6,214 2,107 $18,996
Shares reinvested -- -- 180 1,826
Shares redeemed + (1,960) (14,961) (4,234) (37,188)
--------------------------------------------
NET DECREASE (1,156) ($8,747) (1,947) ($16,366)
SHARES OUTSTANDING AND NET ASSETS
- ------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 17,201 $128,732 19,148 $176,159
Total increase or decrease+ (1,156) 3,250 (1,947) (47,427) b
-------------------------------------------
END OF PERIOD 16,045 $131,982 17,201 $128,732 c
a The tax-basis components of distributions paid for the prior period are:
Ordinary income $1,826
Long-term capital gains $--
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 Includes net investment loss in the amount of $6 for the current period and
$-- for the prior period.
See financial notes.
15
Schwab Balanced MarketMasters Fund(TM)
PERFORMANCE as of 4/30/03
AVERAGE ANNUAL TOTAL RETURNS 1
This chart compares performance of the fund with the S&P 500(R) Index and the
Balanced Blended Index.
[BAR CHART]
FUND S&P 500 INDEX BALANCED BLENDED INDEX
6 MONTHS 6.45% 4.48% 4.63%
1 YEAR -4.75% -13.31% -3.81%
5 YEAR 2.29% -2.43% 1.97%
SINCE INCEPTION: 11/18/96 5.6% 4.97% 6.5%
PERFORMANCE OF A $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with similar investments in two indices: the
S&P 500 Index and the Balanced Blended Index.
$14,210 FUND
$13,671 S&P 500 INDEX
$15,007 BALANCED BLENDED INDEX
[LINE GRAPH]
Fund S&P 500 Index Balanced Blended Index
18-Nov-96 10000 10000 10000
Nov-96 10100 10271 10191
Dec-96 10059 10068 10032
Jan-97 10322 10696 10420
Feb-97 10271 10780 10480
Mar-97 10018 10338 10175
Apr-97 10200 10955 10600
May-97 10676 11621 11027
Jun-97 11041 12141 11376
Jul-97 11517 13106 12042
Aug-97 11284 12372 11596
Sep-97 11770 13049 12046
Oct-97 11527 12613 11874
Nov-97 11558 13197 12226
Dec-97 11719 13424 12401
Jan-98 11762 13573 12547
Feb-98 12251 14552 13086
Mar-98 12634 15297 13506
Apr-98 12688 15452 13616
May-98 12613 15186 13527
Jun-98 12783 15802 13903
Jul-98 12677 15635 13826
Aug-98 11581 13377 12718
Sep-98 11740 14235 13326
Oct-98 12092 15392 13948
Nov-98 12560 16325 14487
Dec-98 13311 17265 15005
Jan-99 13693 17987 15424
Feb-99 13224 17427 15028
Mar-99 13650 18124 15422
Apr-99 14130 18826 15800
May-99 13868 18381 15521
Jun-99 14326 19402 16018
Jul-99 14141 18796 15691
Aug-99 14119 18702 15641
Sep-99 14119 18190 15456
Oct-99 14664 19341 16066
Nov-99 15341 19734 16261
Dec-99 16742 20897 16805
Jan-00 16155 19848 16276
Feb-00 17353 19472 16170
Mar-00 17390 21376 17204
Apr-00 16534 20733 16874
May-00 16033 20308 16663
Jun-00 16705 20809 17048
Jul-00 16498 20485 16951
Aug-00 17341 21757 17681
Sep-00 16815 20608 17165
Oct-00 16424 20522 17167
Nov-00 15508 18905 16468
Dec-00 15879 18997 16639
Jan-01 16326 19672 17102
Feb-01 15502 17878 16226
Mar-01 14887 16744 15641
Apr-01 15669 18045 16344
May-01 15683 18166 16449
Jun-01 15530 17725 16234
Jul-01 16748 17551 16284
Aug-01 14873 16452 15747
Sep-01 13826 15123 15057
Oct-01 14133 15412 15355
Nov-01 14859 16594 15977
Dec-01 15090 16740 16021
Jan-02 14933 16496 15932
Feb-02 14733 16177 15810
Mar-02 15133 16785 16061
Apr-02 14919 15768 15602
May-02 14776 15652 15586
Jun-02 14219 14537 14974
Jul-02 13534 13405 14347
Aug-02 13734 13492 14500
Sep-02 12963 12025 13648
Oct-02 13348 13084 14343
Nov-02 13891 13854 14849
Dec-02 13659 13041 14449
Jan-03 13572 12699 14227
Feb-03 13528 12509 14177
Mar-03 13557 12630 14255
30-Apr-03 14210 13671 15007
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. The
fund's share price and principal values change, and when you sell your shares,
they may be worth more or less than what you paid for them. Past performance
does not indicate future results. Results for the report period are not
annualized.
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 returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower. These returns also 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 Index and 40% Lehman
Brothers U.S. Aggregate Bond Index.
Schwab MarketMasters Funds(TM)
16
SCHWAB BALANCED MARKETMASTERS FUND(TM)
FUND FACTS as of 4/30/03
TOP HOLDINGS 1
SECURITY % OF INVESTMENTS
- --------------------------------------------------------------
(1) FANNIE MAE 1.23%, 07/02/03 3.8%
- --------------------------------------------------------------
(2) FANNIE MAE 1.20%, 06/18/03 2.2%
- --------------------------------------------------------------
(3) GINNIE MAE 6.50%, 05/21/33 2.0%
- --------------------------------------------------------------
(4) U.S. TREASURY BOND 7.50%, 11/15/16 1.9%
- --------------------------------------------------------------
(5) U.S. TREASURY INDEX PARTICIPATION NOTE
3.38%, 01/15/07 1.9%
- --------------------------------------------------------------
(6) FREDDIE MAC 1.15%, 07/15/03 1.6%
- --------------------------------------------------------------
(7) CITIGROUP, INC. 1.5%
- --------------------------------------------------------------
(8) U.S. TREASURY NOTE 2.00%, 11/30/04 1.4%
- --------------------------------------------------------------
(9) ROYAL BANK OF SCOTLAND 1.24%, 05/02/03 1.4%
- --------------------------------------------------------------
(10) SVENSKA HANDELSBANKEN, INC.
1.24%, 05/02/03 1.4%
- --------------------------------------------------------------
TOTAL 19.1%
- --------------------------------------------------------------
STATISTICS
NUMBER OF LONG HOLDINGS 346
- --------------------------------------------------------------
NUMBER OF SHORT POSITIONS 5
- --------------------------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $ 5,228
- --------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 19.5
- --------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.8
- --------------------------------------------------------------
PORTFOLIO TURNOVER RATE 2 141%
- --------------------------------------------------------------
EXPENSE RATIO 3 1.10%
- --------------------------------------------------------------
INVESTMENT MANAGERS AND ALLOCATIONS
INVESTMENT MANAGER INVESTMENT STYLE % OF ASSETS
- --------------------------------------------------------------
ARONSON + JOHNSON + Large-Cap Value 30.4%
ORTIZ, LP
- --------------------------------------------------------------
EAGLE ASSET Large-Cap Growth 12.1%
MANAGEMENT, INC.
- --------------------------------------------------------------
JANUS CAPITAL Mid-Cap Value 16.1%
MANAGEMENT LLC/
PERKINS, WOLF,
MCDONNELL &CO.
- --------------------------------------------------------------
PACIFIC INVESTMENT Total Return 39.2%
MANAGEMENT COMPANY Fixed-Income
- --------------------------------------------------------------
CASH -- 2.2%
- --------------------------------------------------------------
1 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes and certain non-routine expenses).
Schwab MarketMasters Funds(TM)
17
SCHWAB BALANCED MARKETMASTERS FUND(TM) -- Financials
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
- ----------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 9.35 10.12 13.44 13.44 11.36 11.38
-------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.07 0.20 0.43 0.45 0.27 0.36
Net realized and unrealized gains or losses 0.53 (0.73) (2.12) 1.18 2.11 0.18
-------------------------------------------------------------------
Total income or loss from investment operations 0.60 (0.53) (1.69) 1.63 2.38 0.54
Less distributions:
Dividends from net investment income (0.15) (0.24) (0.52) (0.35) (0.30) (0.34)
Distributions from net realized gains -- -- (1.11) (1.28) -- (0.22)
-------------------------------------------------------------------
Total distributions (0.15) (0.24) (1.63) (1.63) (0.30) (0.56)
-------------------------------------------------------------------
Net asset value at end of period 9.80 9.35 10.12 13.44 13.44 11.36
-------------------------------------------------------------------
Total return (%) 6.45 1 (5.55) (13.95) 12.00 21.28 4.89
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 1.10 2 0.72 4,5 0.50 4 0.50 3,4 0.50 4 0.50 4
Expense reductions reflected in above ratio 0.22 2 0.34 0.39 0.39 0.45 0.69
Ratio of net investment income to
average net assets 1.402 1.89 3.67 3.18 2.20 3.21
Portfolio turnover rate 141 1 380 95 114 244 353
Net assets, end of period ($ x 1,000,000) 97 97 118 153 122 93
1 Not annualized.
2 Annualized.
3 Would have been 0.51% if certain non-routine expenses (proxy fees) had been
included.
4 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.
5 Would have been 0.76% if certain non-routine expenses (proxy fees) had been
included.
See financial notes.
18
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date. We use the symbols below to designate certain
characteristics. With the top ten holdings, the number in the circle is the
security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
= Collateral for open futures contracts
* American Depositary Receipt
+ Credit-enhanced security
@ Collateral for Short Sales
~ 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 date or demand date.
COST/ MARKET
PROCEEDS VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- --------------------------------------------------------
52.4% COMMON STOCK 55,507 54,948
7.3% U.S. GOVERNMENT
SECURITIES 7,603 7,706
5.2% AGENCY MORTGAGE-
BACKED SECURITIES 5,378 5,409
4.6% CORPORATE BONDS 4,510 4,818
2.9% FOREIGN GOVERNMENT
SECURITIES 2,972 3,065
2.5% MUNICIPAL BONDS 2,709 2,656
2.3% NON-AGENCY
MORTGAGE-BACKED
SECURITIES 2,362 2,379
22.8% SHORT-TERM
INVESTMENTS 23,874 23,875
0.0% OPTIONS -- --
- --------------------------------------------------------
100.0% TOTAL INVESTMENTS 104,915 104,856
OTHER POSITIONS BY CATEGORY
- --------------------------------------------------------
SHORT SALES 3,976 4,025
OPTIONS WRITTEN 196 220
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 52.4% of investments
AEROSPACE / DEFENSE 0.4%
---------------------------------------------------------------------------
Lockheed Martin Corp. 4,650 233
Raytheon Co. 5,750 172
The Boeing Co. 1,900 52
-----------
457
AIR TRANSPORTATION 0.1%
---------------------------------------------------------------------------
Fedex Corp. 2,300 138
ALCOHOLIC BEVERAGES 0.3%
---------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 5,400 269
APPAREL 0.3%
---------------------------------------------------------------------------
Columbia Sportswear Co. 2,400 115
Timberland Co. 4,500 225
-----------
340
AUTOMOBILE PRODUCTS / MOTOR VEHICLES 1.8%
---------------------------------------------------------------------------
= Autoliv, Inc. 18,600 452
o Autonation, Inc. 17,800 247
Borg Warner, Inc. 2,000 117
= Genuine Parts Co. 8,200 262
o Lear Corp. 3,900 155
=* Magna International, Inc. 3,500 205
0'Reilly Automotive, Inc. 6,000 178
Polars Industries Partners LP 3,500 185
o SPX Corp. 2,500 85
-----------
1,886
BANKS 3.8%
---------------------------------------------------------------------------
= Associated Bancorp 3,900 136
BancorpSouth, Inc. 11,000 221
Bank of America Corp. 15,100 1,118
=o Compass Bancshares, Inc. 13,200 445
* Doral Financial Corp. 6,900 276
First Tennessee National Corp. 6,600 289
= Greater Bay Bancorp 4,000 64
= Mercantile Bankshares Corp. 6,000 230
National City Corp. 7,800 234
= PNC Financial Corp. 2,800 123
See financial notes.
19
SCHWAB BALANCED MARKETMASTERS FUND(TM) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Regions Financial Corp. 7,300 246
= Southtrust Corp. 8,500 229
Union Planters Corp. 9,800 280
= Wilmington Trust Co. 3,800 102
-----------
3,993
BUSINESS MACHINES & SOFTWARE 2.7%
--------------------------------------------------------------------------
=o Adaptec, Inc. 16,700 114
=o Advanced Digital Information Corp. 17,000 136
= Autodesk, Inc. 6,500 101
o Cisco Systems, Inc. 32,700 492
o Dell Computer Corp. 10,400 301
o EMC Corp. 4,200 38
Icon Office Solutions, Inc. 14,300 111
International Business Machines Corp. 1,900 161
Microsoft Corp. 24,850 636
o Sandisk Corp. 4,800 116
o Sun Microsystems, Inc. 33,600 111
Sybase, Inc. 16,600 213
=o Tech Data Corp. 4,500 108
=o 3 Com Corp. 12,000 62
Xerox Corp. 12,700 125
-----------
2,825
BUSINESS SERVICES 2.6%
--------------------------------------------------------------------------
o Accenture, Ltd. 17,300 277
=o Cendant Corp. 31,200 445
o Citrix Systems, Inc. 6,200 118
o Computer Sciences Corp. 9,500 313
=o Filenet Corp. 5,700 88
First Data Corp. 2,550 100
o Gtech Holdings Corp. 7,400 249
H&R Block, Inc. 2,800 108
=o InFocus Corp. 15,000 67
=o Informatica Corp. 12,000 78
=o Iona Technologies PLC 30,000 41
o ITT Educational Services, Inc. 6,300 186
Omnicom Group, Inc. 1,050 65
=o Republic Services, Inc., Class A 9,500 204
=o Sonicwall, Inc. 21,000 75
Tyco International Ltd. 15,950 249
o Yahoo! Inc. 3,100 77
-----------
2,740
CHEMICAL 0.7%
--------------------------------------------------------------------------
3M Co. 350 44
o Cytec Industries, Inc. 7,200 230
= Great Lakes Chemical Corp. 3,200 79
Lubrizol Corp. 2,900 92
Monsanto Co. 10,200 177
Sigma Aldrich Corp. 2,500 125
-----------
747
CONSTRUCTION 1.6%
--------------------------------------------------------------------------
Centex Corp. 4,400 290
=o Dycom Industries, Inc. 11,500 127
= Fluor Corp. 3,300 114
KB Home 5,200 256
o NVR, Inc. 800 286
= Pulte Corp. 4,500 261
The Ryland Group, Inc. 4,400 239
= Standard Pacific Corp. 4,000 121
-----------
1,694
CONSUMER DURABLE 0.6%
--------------------------------------------------------------------------
=o Furniture Brands International, Inc. 8,500 202
= La-Z-Boy Chair Co. 10,300 201
o Rent-A-Center, Inc. 3,900 250
-----------
653
CONSUMER NON-DURABLE 0.9%
--------------------------------------------------------------------------
o CBRL Group, Inc. 7,500 239
o Energizer Holdings, Inc. 7,800 225
o Mattel, Inc. 9,400 204
Outback Steakhouse, Inc. 3,300 118
= Wendy's International, Inc. 6,100 177
-----------
963
CONTAINERS 0.2%
--------------------------------------------------------------------------
Ball Corp. 2,200 123
o Owens Illinois, Inc. 6,600 59
-----------
182
See financial notes.
20
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
ELECTRONICS 1.8%
--------------------------------------------------------------------------
=o Asyst Technologies, Inc. 15,000 72
=o C-COR. Net Corp. 17,000 58
=o Fairchild Semiconductor Corp. 8,100 96
Intel Corp. 23,050 424
Linear Technology Corp. 150 5
Maxim Integrated Products, Inc. 900 35
=o Newport Corp. 8,000 103
o Nextel Communications, Inc., Class A 11,300 167
Scientific Atlanta, Inc. 11,900 193
=o Silicon Storage Technologies, 37,000 117
=o Stratex Networks, Inc. 45,000 111
o* Taiwan Semiconductor Co. Ltd. 21,290 178
Texas Instruments, Inc. 11,650 216
=o Vishay Intertechnology, Inc. 9,000 113
-----------
1,888
ENERGY: RAW MATERIALS 1.4%
--------------------------------------------------------------------------
= Devon Energy Corp. 2,815 133
ENSCO International, Inc. 2,700 69
=o Forest Oil Corp. 5,500 114
Hewlett Packard Co. 1,900 31
=o Joy Global, Inc. 18,000 223
=o Key Energy Group, Inc. 15,000 151
= Noble Energy, Inc. 7,800 259
Occidental Petroleum Corp. 12,000 358
= Tidewater, Inc. 6,400 172
-----------
1,510
FOOD & AGRICULTURE 0.6%
--------------------------------------------------------------------------
Bunge Ltd. 6,200 174
Fresh del Monte Produce, Inc. 8,500 165
= Hormel Foods Corp. 4,000 92
= Supervalu, Inc. 10,000 165
-----------
596
HEALTHCARE / DRUGS & MEDICINE 5.3%
--------------------------------------------------------------------------
Abbott Laboratories 6,250 254
o Amgen, Inc. 1,500 92
o Apria Healthcare Group, Inc. 4,800 113
Baxter International, Inc. 15,100 347
= Beckman Coulter, Inc. 3,000 117
o Boston Scientific Corp. 1,150 49
=o Charles River Laboratories, Inc. 3,000 81
o Conventry Healthcare, Inc. 5,600 229
=o Cytec Corp. 8,000 106
Eli Lilly & Co. 3,200 204
= HCA, Inc. 1,300 42
o Health Net, Inc. 4,400 115
=o Humana, Inc. 9,000 99
= Invacare Corp. 5,000 160
Johnson & Johnson, Inc. 7,750 437
o King Pharmaceuticals, Inc. 6,600 83
=o Laboratory Corporation of America 6,200 183
o Lincare Holdings, Inc. 3,700 112
o Manor Care, Inc. 8,300 161
= McKesson Corp. 5,000 139
Medtronic, Inc. 2,750 131
Merck & Co., Inc. 8,500 494
Mylan Laboratories, Inc. 8,700 246
= Omnicare, Inc. 9,000 239
Pfizer, Inc. 16,900 520
=o Province Healthcare Co. 17,000 170
=o Sicor, Inc. 2,800 50
o St. Jude Medical, Inc. 800 42
=o Tenet Healthcare Corp. 4,500 67
United Healthcare Corp. 900 83
Univision Communications, Inc. 3,700 112
o Watson Pharmaceuticals, Inc. 3,900 113
Wyeth 2,550 111
-----------
5,501
HOUSEHOLD PRODUCTS 0.6%
--------------------------------------------------------------------------
Clorox Co. 6,200 280
Colgate-Palmolive Co. 2,850 163
Procter & Gamble Co. 2,150 193
-----------
636
INSURANCE 3.0%
--------------------------------------------------------------------------
Allstate 5,000 189
American International Group, Inc. 1,050 61
o Cincinnati Financial Corp. 3,300 121
o Everest Re Group Ltd. 5,600 390
Fidelity National Financial, Inc. 7,300 251
See financial notes.
21
SCHWAB BALANCED MARKETMASTERS FUND(TM) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
First American Financial Corp. 9,600 254
= Lincoln National Corp. 6,000 192
Loews Corp. 5,200 214
= Old Republic International Corp. 10,400 318
PMI Group, Inc. 4,900 151
o Principal Financial Group, Inc. 9,200 268
RenaissanceRe Holdings Ltd. 5,800 257
o StanCorp. Financial Group, Inc. 2,100 113
The Hartford Financial Services Group, Inc. 3,800 155
Torchmark Corp. 4,300 167
Travelers Property Casualty Corp. 5,661 92
-----------
3,193
MEDIA 1.6%
--------------------------------------------------------------------------
Belo Corp., Class A 5,600 126
Blockbuster, Inc. 7,200 129
o Clear Channel Communications, Inc. 4,300 168
o Fox Entertainment Group, Inc., Class A 2,250 57
Gannett, Inc. 900 68
o Hispanic Broadcasting Corp. 1,650 42
Knight-Ridder, Inc. 1,800 116
McGraw Hill, Inc. 2,100 123
Media General, Inc. 1,600 88
= Readers Digest Association, Inc. 14,000 168
o Tom Brown, Inc. 4,500 111
o The Walt Disney Co. 11,100 207
o Viacom, Inc., Class B 7,250 315
-----------
1,718
MISCELLANEOUS 0.0%
--------------------------------------------------------------------------
=o Openwave Systems, Inc. 27,000 47
MISCELLANEOUS FINANCE 7.5%
--------------------------------------------------------------------------
= A.G. Edwards, Inc. 4,300 128
American Express Co. 7,500 284
= Astoria Financial Corp. 11,000 275
The Bear Stearns Cos., Inc. 4,900 328
= CIT Group, Inc. 3,800 77
(7)Citigroup, Inc. 39,950 1,568
= Countrywide Credit Industries, 7,400 500
Fannie Mae 7,550 547
=o Franklin Resources, Inc. 3,500 122
Freddie Mac 5,000 290
Golden West Financial Corp. 4,700 354
GreenPoint Financial Corp. 6,200 296
= Home Properties of New York, 5,500 191
Independence Community Bank Corp. 4,100 107
IndyMac Bankcorp., Inc. 9,500 212
= IPC Holdings Ltd. 7,000 240
= Legg Mason, Inc. 1,800 98
Lehman Brothers Holdings, Inc. 6,400 403
= Liberty Property Trust 5,500 172
LNR Property Corp. 5,100 180
= Mack-Cali Realty Corp. 4,500 142
Merrill Lynch & Co., Inc. 2,150 88
Morgan Stanley 4,800 215
The Goldman Sachs Group, Inc. 2,150 163
= Waddell & Reed Financial, Inc. 8,000 160
Washington Mutual, Inc. 14,300 565
Webster Financial Corp. 3,600 135
-----------
7,840
NON-FERROUS METALS 0.4%
--------------------------------------------------------------------------
Alcan Aluminum Ltd. 3,600 106
Engelhard Corp. 4,600 113
o Inco Ltd. 11,600 213
-----------
432
OIL: DOMESTIC 2.3%
--------------------------------------------------------------------------
Amerada Hess Corp. 5,200 235
o Cimarex Energy Co. 8,000 158
= Kerr-McGee Corp. 2,900 122
= Marathon Oil Corp. 17,900 408
= Murphy Oil Corp. 2,000 83
=o Newfield Exploration Co. 9,000 309
=o Precision Drilling Corp. 3,000 103
=o Stone Energy Corp. 5,000 176
Sunoco, Inc. 6,400 238
Talisman Energy, Inc. 6,200 247
= Teekay Shipping Corp. 9,900 376
-----------
2,455
See financial notes.
22
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OIL: INTERNATIONAL 1.3%
--------------------------------------------------------------------------
* BP, PLC 3,050 118
ExxonMobil Corp. 31,800 1,119
GlobalSantaFe Corp. 3,500 74
-----------
1,311
OPTICAL & PHOTO 0.3%
--------------------------------------------------------------------------
Eastman Kodak Co. 6,200 185
o Ingram Micro, Inc., Class A 13,800 138
-----------
323
PAPER & FOREST PRODUCTS 0.3%
--------------------------------------------------------------------------
= Rayonier, Inc. 3,500 176
Temple Inland, Inc. 3,000 136
-----------
312
PRODUCER GOODS & MANUFACTURING 1.4%
--------------------------------------------------------------------------
= Briggs & Stratton Corp. 3,500 158
General Electric Co. 12,450 367
= Harsco Corp. 5,000 172
= Manitowoc, Inc. 3,500 65
=o Mettler-Toledo International, Inc. 5,000 178
Precision Castparts Corp. 8,500 235
= Tecumseh Products Co., Class A 4,000 161
= Trinity Industries, Inc. 6,700 111
-----------
1,447
RAILROAD & SHIPPING 0.1%
--------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 3,000 85
* Canadian Pacific Railway Ltd. 2,600 60
-----------
145
REAL PROPERTY 0.2%
--------------------------------------------------------------------------
Plum Creek Timber Co., Inc. 3,300 77
Vornado Realty Trust 3,000 114
-----------
191
RETAIL 2.8%
--------------------------------------------------------------------------
Albertson's, Inc. 15,100 300
o Amercrombie & Fitch Co. 5,100 168
=o Ann Taylor Stores Corp. 800 19
Claire's Stores, Inc. 8,800 229
= CVS Corp. 7,700 186
=o Federated Department Stores, Inc. 4,000 122
= Foot Locker, Inc. 15,000 165
Home Depot, Inc. 14,850 418
o Kroger Co. 21,300 305
o Safeway, Inc. 11,500 191
= Talbots, Inc. 5,000 143
Target Corp. 2,050 69
=o Toys `R' Us, Inc. 10,000 102
Wal-Mart Stores, Inc. 6,000 338
Winn Dixie Stores, Inc. 8,800 110
-----------
2,865
SANITARY SERVICES 0.2%
--------------------------------------------------------------------------
o Citizens Utilities Co., Class B 21,600 236
STEEL 0.5%
--------------------------------------------------------------------------
= Nucor Corp. 3,800 155
=o Steel Dynamics, Inc. 11,000 133
Worthington Industries, Inc. 11,800 159
-----------
447
TELECOMMUNICATIONS SERVICES & EQUIPMENT 0.1%
--------------------------------------------------------------------------
o Advanced Fibre Communications 4,300 66
TELEPHONE 1.8%
--------------------------------------------------------------------------
o Adtran, Inc. 4,100 166
Amdocs Ltd. 7,600 134
BellSouth Corp. 14,500 370
SBC Communications, Inc. 12,100 283
Sprint Corp. 26,100 300
Verizon Communications, Inc. 15,600 583
-----------
1,836
TRAVEL & RECREATION 0.5%
--------------------------------------------------------------------------
Callaway Golf Co. 9,200 128
Carnival Corp. 4,400 121
*o Fairmont Hotels & Resorts, Inc. 7,000 161
o Harrah's Entertainment, Inc. 2,950 116
-----------
526
TRUCKING & FREIGHT 0.7%
--------------------------------------------------------------------------
=o CNF, Inc. 5,500 167
See financial notes.
23
SCHWAB BALANCED MARKETMASTERS FUND(TM) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Paccar, Inc. 2,000 117
Ryder Systems, Inc. 8,800 218
United Parcel Service, Inc. 1,850 115
= U.S. Freightways Corp. 4,300 123
-----------
740
UTILITIES: ELECTRIC & GAS 1.7%
--------------------------------------------------------------------------
o AES Corp. 2,000 12
American Electric Power Co., Inc. 9,100 240
Constellation Energy Group, Inc. 5,100 149
o Edison International 21,100 308
Entergy Corp. 2,400 112
Nisource, Inc. 9,600 181
Oneok, Inc. 7,100 135
Pinnacle West Capital Co. 4,700 156
Sempra Energy 12,600 338
Wisconsin Energy Corp. 6,400 169
-----------
1,800
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
U.S. GOVERNMENT SECURITIES
7.3% of investments
U.S. Treasury Bond
@(4) 7.50%, 11/15/16 1,550 2,042
6.25%, 08/15/23 450 533
U.S. Treasury Index Participation
Note
(5) 3.38%, 01/15/07 1,600 2,014
3.63%, 01/15/08 750 940
U.S. Treasury Note
(8) 2.00%, 11/30/04 1,500 1,516
1.75%, 12/31/04 500 503
U.S. Treasury Stripped Bond
0.00%, 11/15/16 300 158
-----------
7,706
AGENCY MORTGAGE-BACKED SECURITIES
5.2% of investments
Fannie Mae
~ 5.50%, 05/14/33 800 822
~ 6.50%, 05/14/33 1,000 1,042
Series 2002-16 Class TK
5.50%, 07/25/29 532 540
Series 2003-W1 Class 1A1
6.50%, 12/25/42 193 205
Ginnie Mae
6.50%, 09/15/31 427 449
6.50%, 11/15/31 246 259
~(3) 6.50%, 05/21/33 2,000 2,092
-----------
5,409
CORPORATE BONDS 4.6% of investments
FIXED-RATE OBLIGATIONS 3.4%
--------------------------------------------------------------------------
AT&T Corp.
8.50%, 11/15/31 250 279
El Paso Corp.
7.80%, 08/01/31 250 199
7.75%, 01/15/32 150 119
Federal Republic of Brazil
8.00%, 04/15/14 369 326
Ford Motor Co.
8.90%, 01/15/32 500 499
General Motors Corp.
6.88%, 08/28/12 750 764
Pemex Project Funding Master
Trust
9.13%, 10/13/10 250 301
Republic of Panama
9.38%, 01/16/23 250 271
Sprint Capital Corp.
8.38%, 03/15/12 250 279
United Mexican States
Series A
6.38%, 01/16/13 500 525
-----------
3,562
VARIABLE-RATE OBLIGATIONS 1.2%
--------------------------------------------------------------------------
British Telecom PLC
2.55%, 12/15/03 500 502
National Rural Utilities
Series C
2.32%, 04/26/04 500 504
Weyerhaeuser Co.
2.38%, 09/15/03 250 250
-----------
1,256
See financial notes.
24
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
FOREIGN GOVERNMENT SECURITIES
2.9% of investments
Bundes Republic of Deutschland
@~ 5.25%, 07/04/10 800 972
@~ 5.00%, 07/04/11 800 956
~ 6.50%, 07/04/27 200 275
~ 4.75%, 07/04/28 400 438
~ Canadian Government Bond
4.50%, 09/01/07 600 424
-----------
3,065
MUNICIPAL BONDS 2.5% of investments
= California State
Revenue Anticipation Note
2.50%, 06/27/03 1,000 1,001
Golden State, California
Securitization Corp.
Revenue Bond, Series 2003-A-1
6.25%, 06/01/33 250 220
+ 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%, 06/01/42 500 413
+ Triborough, New York Bridge &
Tunnel Authority
Revenue Bond, Series 2002B
5.00%, 11/15/32 750 766
-----------
2,656
NON-AGENCY MORTGAGE-BACKED SECURITIES
2.3% of investments
VARIABLE-RATE OBLIGATIONS 2.3%
--------------------------------------------------------------------------
Bear Stearns Adjustable Rate
Mortgage Trust
Series 2002-11 Class 1A1
5.68%, 01/25/33 452 461
Series 2002-5 Class 6A
6.05%, 06/25/32 229 236
Series 2002-9 Class 2A
5.44%, 10/25/32 405 413
Structured Asset Securities
Corp.
Series 2002-13 Class 2A1
1.82%, 07/25/32 1,000 1,008
Wells Fargo Mortgage Backed
Securities Trust
Series 2002-E Class 2A1
5.22%, 09/25/32 255 261
-----------
2,379
SHORT-TERM INVESTMENTS 22.8% of investments
U.S. GOVERNMENT SECURITIES 9.5%
--------------------------------------------------------------------------
Fannie Mae
(2) 1.20%, 06/18/03 2,300 2,297
(1) 1.23%, 07/02/03 4,000 3,992
Freddie Mac
= 1.29%, 05/22/03 700 699
(6) 1.15%, 07/15/03 1,700 1,696
U.S. Treasury Bills
1.16%, 05/01/03 800 800
= 1.15%, 05/08/03 60 60
= 1.16%, 05/15/03 145 145
= 1.17%, 05/15/03 10 10
= 1.13%, 06/19/03 175 175
= 1.15%, 06/19/03 35 35
-----------
9,909
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OTHER INVESTMENT COMPANIES 5.0%
--------------------------------------------------------------------------
= Provident Institutional Funds--
TempCash 933,241 933
Provident Institutional Funds--
TempFund 4,336,231 4,336
---------
5,269
OTHER 0.1%
--------------------------------------------------------------------------
PNC Bank - Money Market Account
99,000 99
See financial notes.
25
SCHWAB BALANCED MARKETMASTERS FUND(TM) -- Financials
PORTFOLIO HOLDINGS continued
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
COMMERCIAL PAPER & OTHER CORPORATE
OBLIGATIONS 8.2%
--------------------------------------------------------------------------
CBA (Delaware) Finance, Inc.
1.25%, 05/28/03 500 499
Danske Corp.
1.22%, 05/12/03 1,400 1,399
HBOs Treasury Services PLC
1.26%, 05/01/03 1,000 1,000
= Rabobank Nederland
1.23%, 05/05/03 1,500 1,500
(9) Royal Bank of Scotland
1.24%, 05/02/03 1,500 1,500
(10) Svenska Handelsbanken, Inc.
1.24%, 05/02/03 1,500 1,500
= UBS Finance, Inc.
1.23%, 05/07/03 1,200 1,200
-----------
8,598
NUMBER OF MKT. VALUE
SECURITY DESCRIPTION CONTRACTS ($ x 1,000)
OPTIONS 0.0% of investments
PUT OPTIONS 0.0%
--------------------------------------------------------------------------
Eurodollar LIBOR Future, Strike Price
93.75, Expires 12/15/03 15 --
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT SALES
--------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES
Bundes Republic of Deutschland
5.25%, 07/04/10 800 972
5.00%, 07/04/11 800 956
-----------
1,928
U.S. GOVERNMENT SECURITIES
--------------------------------------------------------------------------
U.S. Treasury Note
4.38%, 05/15/07 500 537
5.50%, 05/15/09 900 1,018
4.88%, 02/15/12 500 542
-----------
2,097
NUMBER OF MKT. VALUE
SECURITY DESCRIPTION CONTRACTS ($ x 1,000)
OPTIONS WRITTEN
CALL OPTIONS
- --------------------------------------------------------------------------------
3 Month LIBOR, Strike Price
3.00, Expires 11/12/03 120 7
3 Month LIBOR, Strike Price
4.00, Expires 07/22/03 50 3
3 Month LIBOR, Strike Price
5.00, Expires 01/17/05 370 178
U.S. Treasury Note Futures,
Strike Price 116,
Expires 05/24/03 6 2
U.S. Treasury Note Futures,
Strike Price 117,
Expires 05/24/03 4 1
-----------
191
PUT OPTIONS
- --------------------------------------------------------------------------------
3 Month LIBOR, Strike Price
5.50, Expires 12/17/03 80 3
3 Month LIBOR, Strike Price
7.00, Expires 01/07/05 370 26
U.S. Treasury Note Futures,
Strike Price 108,
Expires 05/24/03 4 --
-----------
29
- --------------------------------------------------------------------------------
END OF SHORT SALES AND OPTIONS WRITTEN. For totals, please see the first page of
holdings for the fund.
See financial notes.
26
In addition to the above, the fund held the following at 4/30/03. All numbers x
1,000 except number of futures contracts.
SWAP AGREEMENTS
Notional Unrealized
Amount Gains/(Losses)
BRITISH POUNDS
Interest Rate
Receive variable-rate payments of
6 month LIBOR, Pay fixed-rate
payments of 4.25%, expires 03/17/05,
Morgan Stanley 9,000 55
SWISS FRANCS
Interest Rate
Receive variable-rate payments of
3 month LIBOR, Pay fixed-rate
payments of 1.50%, expires 03/29/05,
Merrill Lynch 1,400 1
U.S. DOLLARS
Credit Default
General Electric Capital Corp. Rate .30%,
expires 6/17/03, Morgan Stanley 500 --
Interest Rate
Receive variable-rate payments of
3 month LIBOR, Pay fixed-rate
payments of 5.0%, expires 06/18/08,
Merrill Lynch 5,000 (165)
Receive variable-rate payments of
3 month LIBOR, Pay fixed-rate
payments of 5.0%, expires 06/18/13,
Goldman Sachs 2,400 (93)
Receive variable-rate payments of
3 month LIBOR, Pay fixed-rate
payments of 5.0%, expires 06/18/13,
Bank of America 600 (28)
-----------
(230)
See financial notes.
27
SCHWAB BALANCED MARKETMASTERS FUND(TM) -- Financials
FUTURES CONTRACTS
Number of Contract Unrealized
Contracts Value Gains/(Losses)
S&P 500 Index, expires 06/20/03 6 1,374 84
90 Day Eurodollar, expires 03/15/04 16 3,941 48
90 Day Eurodollar, expires 06/14/04 4 982 1
10 Year U.S. Treasury Note, expires 06/19/03 128 14,736 68
90 Day LIBOR, expires 03/17/04 2 385 --
90 Day LIBOR, expires 06/16/04 2 385 --
Eurodollar, expires 12/15/03 2 494 1
Eurodollar, expires 09/13/04 4 979 6
3 Month Eurodollar LIBOR, expires 06/14/04 8 2,175 11
------------
219
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)
05/15/2003 U.S. Dollars 47 European Euro 44 (2)
09/08/2003 Mexican Pesos 3,493 U.S. Dollars 300 31
------------
29
See financial notes.
28
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- -----------------------------------------------------------------------------
Investments, at market value $104,856 a
Foreign currency 101 b
Receivables:
Fund shares sold 20
Dividends 51
Interest 354
Due from brokers for futures 87
Investments sold 3,436
Investments sold short 3,976
Unrealized gains on forward foreign currency contracts 29
Prepaid expenses + 5
------------
TOTAL ASSETS 112,915
LIABILITIES
- -----------------------------------------------------------------------------
Securities sold short at market value 4,025 c
Options written, at value 220 d
Swap agreements, at fair value 549 e
Payables:
Fund shares redeemed 8
Investments bought 11,267
Investment adviser and administrator fees 7
Transfer agency and shareholder service fees 3
Accrued expenses + 31
------------
TOTAL LIABILITIES 16,110
NET ASSETS
- -----------------------------------------------------------------------------
TOTAL ASSETS 112,915
TOTAL LIABILITIES - 16,110
------------
NET ASSETS $96,805
NET ASSETS BY SOURCE
Capital received from investors 117,373
Net investment income not yet distributed 328
Net realized capital losses (20,708) f
Net unrealized capital losses (188) f
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$96,805 9,882 $9.80
a The fund paid $104,915 for these securities. Not counting short-term
obligations and government securities, the fund paid $52,482 for securities
during the report period and received $63,578 from securities it sold or that
matured. For long-term government securities, the fund paid $69,647 during the
report period and received $83,400 for securities it sold or that matured.
b The fund paid $92 for this currency.
c The proceeds for securities sold short is $3,976.
d
NUMBER PREMIUMS
OF CONTRACTS RECEIVED
------------ --------
Options written,
beginning of
period 980 $188
Options written 264 34
Options closed (240) (26)
Options
exercised + - -
------------------------
Options written,
end of period 1,004 $196
e The fund received $319 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 $101,546
NET UNREALIZED GAINS AND LOSSES:
Gains $3,159
Losses + (3,874)
-------------
$(715)
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $1,131
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount:
2009 $9,491
2010 + 9,124
-------------
$18,615
See financial notes.
29
SCHWAB BALANCED MARKETMASTERS FUND(TM) -- Financials
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- ------------------------------------------------------------------------------
Dividends $494 a
Interest + 699
------------
TOTAL INVESTMENT INCOME 1,193
NET REALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net realized losses on investments sold (1,380)
Net realized losses on short sales (66)
Net realized gains on foreign currency transactions 22
Net realized losses on option contracts (142)
Net realized gains on futures contracts 504
Net realized losses on swap agreements + (307)
------------
NET REALIZED LOSSES (1,369)
NET UNREALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net unrealized gains on investments 6,406
Net unrealized losses on short sales (49)
Net unrealized gains on foreign currency transactions 45
Net unrealized gains on option contracts 159
Net unrealized gains on futures contracts 18
Net unrealized gains on swap agreements + 96
------------
NET UNREALIZED GAINS 6,675
EXPENSES
- ------------------------------------------------------------------------------
Investment adviser and administrator fees 406 b
Transfer agent and shareholder service fees 119 c
Trustees' fees 3 d
Custodian and portfolio accounting fees 60
Professional fees 15
Registration fees 7
Shareholder reports 10
Other expenses + 8
------------
Total expenses 628
Expense reduction - 103 e
------------
NET EXPENSES 525
INCREASE IN NET ASSETS FROM OPERATIONS
- ------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,193
NET EXPENSES - 525
------------
NET INVESTMENT INCOME 668
NET REALIZED LOSSES (1,369) f
NET UNREALIZED GAINS + 6,675 f
------------
INCREASE IN NET ASSETS FROM OPERATIONS $5,974
a An additional $1 was withheld for foreign taxes.
b Calculated as 0.85% of average daily net assets.
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.
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 at least
February 29, 2004, to 1.10% of average daily net assets. This limit doesn't
include interest, taxes and certain non-routine expenses.
f These add up to a net gain on investments of $5,306.
See financial notes.
30
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for the current period are unaudited.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income $668 $2,119
Net realized losses (1,369) (9,475)
Net unrealized gains + 6,675 1,868
-----------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 5,974 (5,488)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income $1,516 $2,727 a
TRANSACTIONS IN FUND SHARES
- ------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 325 $3,079 1,632 $16,319
Shares reinvested 151 1,431 257 2,727
Shares redeemed + (987) (9,334) (3,131) (31,384)
---------------------------------------------
NET DECREASE (511) ($4,824) (1,242) ($12,338)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 10,393 $97,171 11,635 $117,724
Total increase or decrease + (511) (366) (1,242) (20,553) b
-----------------------------------------------
END OF PERIOD 9,882 $96,805 10,393 $97,171 c
a The tax-basis components of distributions paid for the prior period are:
Ordinary income $2,727
Long-term capital gains $ --
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 Includes net investment income not yet distributed in the amount of $328 and
$1,169 at the end of the current period and the prior periods, respectively.
See financial notes.
31
SCHWAB SMALL-CAP MARKETMASTERS FUND(TM)
PERFORMANCE as of 4/30/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund with the Russell 2000(R) Index and
the Morningstar Small-Cap Fund category.
[BAR CHART]
FUND ROSSELL 2000 INDEX CATEGORY AVERAGE
6 MONTHS 7.94% 7.55% 5.17%
1 YEAR -24.75% - 20.76% - 19.81%
5 YEARS - 2.83% - 2.47% 0.63%
SINCE INCEPTION: 9/16/97 - 1.12% - 0.47% n/a
PERFORMANCE OF A $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 the Russell 2000
Index.
$9,384 FUND
$9,738 RUSSELL 2000 INDEX
[LINE GRAPH]
FUND Russell 2000 Index
16-Sep-97 10000 10000
Sep-97 10260 10319
Oct-97 9930 9866
Nov-97 9770 9802
Dec-97 9886 9973
Jan-98 9701 9816
Feb-98 10277 10541
Mar-98 10781 10976
Apr-98 10832 11036
May-98 10359 10441
Jun-98 10411 10463
Jul-98 9896 9615
Aug-98 8271 7748
Sep-98 8435 8355
Oct-98 8754 8696
Nov-98 9238 9151
Dec-98 9946 9718
Jan-99 10101 9847
Feb-99 9563 9049
Mar-99 10029 9191
Apr-99 10773 10014
May-99 10752 10160
Jun-99 11311 10620
Jul-99 11228 10329
Aug-99 10938 9946
Sep-99 10990 9948
Oct-99 11414 9989
Nov-99 12272 10586
Dec-99 13714 11784
Jan-00 13339 11594
Feb-00 15171 13508
Mar-00 14496 12618
Apr-00 13178 11859
May-00 12482 11167
Jun-00 14003 12141
Jul-00 13478 11750
Aug-00 14924 12647
Sep-00 14164 12275
Oct-00 13146 11727
Nov-00 11325 10523
Dec-00 12156 11427
Jan-01 12795 12022
Feb-01 11698 11233
Mar-01 10879 10684
Apr-01 11927 11520
May-01 12325 11803
Jun-01 12674 12210
Jul-01 12168 11550
Aug-01 11590 11177
Sep-01 10012 9672
Oct-01 10518 10238
Nov-01 11421 11030
Dec-01 12144 11711
Jan-02 11951 11589
Feb-02 11612 11272
Mar-02 12520 12178
Apr-02 12471 12289
May-02 12060 11743
Jun-02 11164 11161
Jul-02 9469 9475
Aug-02 9323 9452
Sep-02 8476 8773
Oct-02 8694 9055
Nov-02 9481 9862
Dec-02 8997 9313
Jan-03 8864 9055
Feb-03 8585 8782
Mar-03 8573 8895
30-Apr-03 9384 9738
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. The
fund's share price and principal values change, and when you sell your shares,
they may be worth more or less than what you paid for them. Past performance
does not indicate future results. Results for the report period are not
annualized.
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 returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower. These returns also 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. As of 4/30/03, the total
number of funds in the Morningstar Small-Cap Blend Fund category for the
six-month, one- and five-year periods was 349, 342 and 190, respectively.
Schwab MarketMasters Funds(TM)
32
SCHWAB SMALL-CAP MARKETMASTERS FUND (TM)
Fund Facts as of 4/30/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / / / / /
Medium / / / / / /
Small / / /X/ / /
STATISTICS
NUMBER OF HOLDINGS 318
- ---------------------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $ 641
- ---------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 27.1
- ---------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.2
- ---------------------------------------------------------
PORTFOLIO TURNOVER RATE 2 49%
- ---------------------------------------------------------
EXPENSE RATIO 3 1.55%
- ---------------------------------------------------------
TOP HOLDINGS 4
% OF
SECURITY INVESTMENTS
- ---------------------------------------------------------
(1) COMPUTER HORIZONS CORP. 1.1%
- ---------------------------------------------------------
(2) CENTENE CORP. 1.0%
- ---------------------------------------------------------
(3) KINROSS GOLD CORP. 1.0%
- ---------------------------------------------------------
(4) BALDOR ELECTRIC CO. 0.9%
- ---------------------------------------------------------
(5) PULTE CORP. 0.9%
- ---------------------------------------------------------
(6) FLOWSERVE CORP. 0.9%
- ---------------------------------------------------------
(7) CUMMINS ENGINE, INC. 0.9%
- ---------------------------------------------------------
(8) KB HOME 0.9%
- ---------------------------------------------------------
(9) EFUNDS CORP. 0.9%
- ---------------------------------------------------------
(10) OCEANEERING INTERNATIONAL, INC. 0.8%
- ---------------------------------------------------------
TOTAL 9.3%
INVESTMENT MANAGERS AND ALLOCATIONS
INVESTMENT MANAGER INVESTMENT STYLE % OF ASSETS
- ---------------------------------------------------------
ROYCE & ASSOCIATES, Small-Cap Value 35.6%
LLC
- ---------------------------------------------------------
TCW INVESTMENT Small/Mid-Cap 17.0%
MANAGEMENT COMPANY Blend
- ---------------------------------------------------------
TOCQUEVILLE ASSET Small-Cap Blend 24.6%
MANAGEMENT LP
- ---------------------------------------------------------
VEREDUS ASSET Small-Cap Growth 21.6%
MANAGEMENT LLC
- ---------------------------------------------------------
CASH -- 1.2%
- ---------------------------------------------------------
1 Source: Morningstar, Inc. This style assessment is the result of comparing the
fund with the S&P 500(R)Index based on P/E, P/B and median market cap. The
assessment reflects the fund as of 4/30/03, which may have changed since then,
and is not a precise indication of risk or performance--past, present or
future.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes and certain non-routine expenses).
4 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
Schwab MarketMasters Funds(TM)
33
SCHWAB SMALL-CAP MARKETMASTERS FUND (TM) -- Financials
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report,which describes the fund's business
structure,accounting practices and other matters.Because this is a semiannual
report,information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
- ------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 7.18 8.73 12.27 11.04 8.51 9.93
---------------------------------------------------------------------
Income or loss from investment operations:
Net investment income or loss (0.04) 0.04 0.41 0.39 0.24 0.21
Net realized and unrealized gains or losses 0.61 (1.54) (2.68) 1.30 2.34 (1.36)
---------------------------------------------------------------------
Total income or loss from investment operations 0.57 (1.50) (2.27) 1.69 2.58 (1.15)
Less distributions:
Dividends from net investment income (0.00) 6 (0.03) (0.55) (0.46) (0.05) (0.24)
Distributions from net realized gains -- (0.02) (0.72) -- -- (0.03)
---------------------------------------------------------------------
Total distributions -- (0.05) (1.27) (0.46) (0.05) (0.27)
---------------------------------------------------------------------
Net asset value at end of period 7.75 7.18 8.73 12.27 11.04 8.51
---------------------------------------------------------------------
Total return (%) 7.94 1 (17.34) (19.99) 15.17 30.38 (11.84)
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 1.55 2 0.84 4,5 0.50 4 0.50 3,4 0.50 4 0.50 4
Expense reductions reflected in above ratio 0.26 2 0.38 0.41 0.41 0.51 0.69
Ratio of net investment income or loss to
average net assets (0.94) 2 0.06 4.17 2.86 2.23 2.65
Portfolio turnover rate 49 1 324 172 128 145 166
Net assets, end of period ($ x 1,000,000) 82 81 111 162 123 129
1 Not annualized.
2 Annualized.
3 Would have been 0.51% if certain non-routine expenses (proxy fees) had been
included.
4 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.
5 Would have been 0.93% if certain non-routine expenses (proxy fees) had been
included.
6 Per-share amount was less than $0.01.
See financial notes.
34
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
= Collateral for open futures contracts
* American Depositary Receipt
COST MARKET VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- ------------------------------------------------------
95.4% COMMON STOCK 82,041 78,015
4.6% SHORT-TERM
INVESTMENTS 3,793 3,793
- ------------------------------------------------------
100.0% TOTAL INVESTMENTS 85,834 81,808
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 95.4% of investments
AEROSPACE / DEFENSE 0.5%
--------------------------------------------------------------
Gencorp., Inc. 20,000 152
o Veeco Instruments, Inc. 14,700 236
-----------
388
AIR TRANSPORTATION 1.4%
--------------------------------------------------------------
o Continental Airlines, Inc. 12,100 110
Delta Air Lines, Inc. 32,200 412
Jetblue Airways Corp. 5,550 175
o Mesa Airlines, Inc. 26,100 140
Southwest Airlines, Inc. 20,800 332
-----------
1,169
APPAREL 1.0%
--------------------------------------------------------------
o Hartmarx Corp. 102,500 239
Phillips-Van Heusen Corp. 8,500 113
o The Dixie Group, Inc. 35,700 107
o The Warnaco Group, Inc. 14,900 164
o Tommy Hilfiger Corp. 25,000 205
-----------
828
AUTOMOBILE PRODUCTS / MOTOR VEHICLES 1.5%
--------------------------------------------------------------
(7) Cummins Engine, Inc. 26,900 729
Dana Corp. 21,400 199
o Fleetwood Enterprises, Inc. 13,500 68
o National RV Holdings, Inc. 29,700 116
Spartan Motors, Inc. 15,000 140
-----------
1,252
BANKS 1.7%
--------------------------------------------------------------
BankNorth Group, Inc. 13,600 325
Mellon Financial Corp. 11,600 308
North Fork Bancorp, Inc. 4,400 142
o Silicon Valley Bancshares 7,500 175
Valley National Bancorp 4,935 131
Zions Bancorp 6,200 305
-----------
1,386
BUSINESS MACHINES & SOFTWARE 4.9%
--------------------------------------------------------------
o Ascential Software Corp. 146,000 561
o(1) Computer Horizons Corp. 223,700 937
o Concurrent Computer Corp. 18,300 37
o Cray, Inc. 27,500 208
o DIGI International, Inc. 64,900 275
o Hypercom Corp. 47,000 219
o Input Output, Inc. 13,400 42
o Interphase Corp. 52,000 260
o Intervoice, Inc. 86,200 149
o Maxtor Corp. 52,500 289
o MSC Software Corp. 27,000 167
o Systems & Computer Technology Corp. 69,700 500
o Unisys Corp. 13,600 141
o White Electronics Designs Corp. 27,500 215
-----------
4,000
BUSINESS SERVICES 11.7%
--------------------------------------------------------------
Analogic Corp. 4,000 191
o Ansoft Corp. 32,500 277
o Aspen Technology, Inc. 98,400 329
Bowne & Co., Inc. 13,000 147
o Carreker Corp. 40,000 150
o Cerner Corp. 6,400 128
o Ciber, Inc. 600 3
See financial notes.
35
SCHWAB SMALL-CAP MARKETMASTERS FUND (TM) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Computer Task Group, Inc. 56,000 124
o Connective Therapeutics, Inc. 11,700 198
o Credence Systems Corp. 28,500 202
o Documentum, Inc. 7,400 136
o Dot Hill Systems Corp. 43,100 289
o(9) eFunds Corp. 77,800 712
o Epicor Software Corp. 81,800 230
o Epresence, Inc. 82,500 165
o Gentiva Health Services, Inc. 8,200 75
o Harris Interactive, Inc. 19,200 92
o Hyperion Solutions Corp. 6,800 192
o Internap Network Services Corp. 56,500 25
Interpublic Group of Cos., Inc. 22,200 253
o Invitrogen Corp. 4,500 147
o Keane, Inc. 42,600 411
o Legato Systems, Inc. 22,300 132
o LendingTree, Inc. 18,400 261
o Mapics, Inc. 40,000 240
o MCSI, Inc. 36,400 3
o Mentor Graphics Corp. 10,900 113
o Metasolv, Inc. 56,900 75
o Modem Media Poppe Tyson, Inc. 76,800 160
o Network Associates, Inc. 20,300 232
o Parametric Technology Corp. 58,400 193
o Phoenix Technologies Ltd. 26,000 118
o Planar Systems, Inc. 15,000 264
Reynolds & Reynolds Co., Class A 10,200 294
o Sina Corp. 21,100 208
o Stericycle, Inc. 15,600 613
o Technology Solutions Corp. 45,300 52
o Teledyne Technologies, Inc. 18,300 258
o Tetra Technologies, Inc. 12,700 338
o Universal Electronics, Inc. 22,500 235
o Unova, Inc. 88,900 654
o Valueclick, Inc. 53,100 215
o Volt Information Sciences, Inc. 16,000 212
o Watchguard Technologies, Inc. 27,200 120
o Wireless Facilities, Inc. 10,500 73
-----------
9,539
CHEMICAL 2.9%
--------------------------------------------------------------
A. Schulman, Inc. 13,100 214
o Applied Extrusion Technologies, Inc. 57,500 113
Calgon Carbon Corp. 50,000 255
Deswell Industries, Inc. 16,500 264
o Gundle Environmental Systems, Inc. 22,000 268
MacDermid, Inc. 10,000 227
Olin Corp. 18,100 328
Polyone Corp. 47,800 221
Quaker Chemical Corp. 7,500 168
Rohm & Haas Co. 4,500 149
Wellman, Inc. 16,500 189
-----------
2,396
CONSTRUCTION 5.1%
--------------------------------------------------------------
D.R. Horton, Inc. 17,700 420
o Dominion Homes, Inc. 2,000 34
o EMCOR Group, Inc. 6,300 322
o Hovanian Enterprises, Inc. 9,500 378
(8) KB Home 14,700 724
(5) Pulte Corp. 12,900 748
The Ryland Group, Inc. 11,600 629
Standard Pacific Corp. 10,400 315
o Toll Brothers, Inc. 10,800 251
o Westell Technologies, Inc., Class A 59,500 262
o Wilsons, The Leather Experts, Inc. 18,200 90
-----------
4,173
CONSUMER DURABLE 0.7%
--------------------------------------------------------------
Bush Industries, Inc., Class A 89,100 227
o Champion Enterprises, Inc. 62,700 152
o Griffon Corp. 13,500 184
-----------
563
CONSUMER NON-DURABLE 2.2%
--------------------------------------------------------------
o A.T. Cross Co. 38,900 199
o CBRL Group, Inc. 7,900 252
o Centillium Communications, Inc. 42,500 246
o Champs Entertainment, Inc. 16,000 84
IHOP Corp. 11,500 303
See financial notes.
36
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Oneida Ltd. 18,000 199
o P.F. Chang's China Bistro, Inc. 4,300 180
o Steinway Musical Instruments, Inc. 14,000 197
o Topps, Inc. 11,500 107
-----------
1,767
CONTAINERS 0.1%
--------------------------------------------------------------
o Graphic Packaging International Corp. 18,700 94
DRUGS 0.1%
--------------------------------------------------------------
o Neurocrine Biosciences, Inc. 1,000 45
ELECTRONICS 14.8%
--------------------------------------------------------------
o Agere Systems, Inc. 96,100 172
o Agere Systems, Inc., Class B 170,300 291
o Allen Group, Inc. 19,400 262
o Alliant Techsystems, Inc. 4,500 242
o Anadigics, Inc. 39,400 82
o Anixter International, Inc. 8,900 205
o Arris Group, Inc. 52,000 203
o Arrow Electronics, Inc. 12,300 208
o Bell Microproducts, Inc. 41,900 192
o Brooks Automation, Inc. 22,000 186
o C-COR.Net Corp. 64,500 220
o Captaris, Inc. 116,000 371
o Celestica, Inc. 7,200 83
o Computer Network Technology 26,000 147
o Comtech Telecommunications Corp. 23,000 334
CTS Corp. 40,500 338
o FSI International, Inc. 64,500 152
o Genesis Microchip, Inc. 13,100 225
o Gerber Scientific, Inc. 36,500 301
o Good Guys, Inc. 80,000 130
o Harmonic Lightwaves, Inc. 46,900 163
Keithley Instruments, Inc. 15,500 189
o KLA-Tencor Corp. 4,200 172
o Lecroy Corp. 8,800 89
o LSI Logic Corp. 52,200 280
o Macromedia, Inc. 15,200 192
o Manufacturers Services Ltd. 58,500 225
o Maxwell Technologies, Inc. 25,000 147
o MEMC Electronic Materials, Inc. 25,100 298
o Microsemi Corp. 9,100 107
MTS Systems Corp. 13,500 169
o National Semiconductor Corp. 23,425 439
o Netopia, Inc. 80,000 179
Park Electrochemical Corp. 12,500 223
PerkinElmer, Inc. 22,700 225
o Pinnacle Systems, Inc. 9,300 88
o PLX Technology, Inc. 20,100 56
o Powerwave Technologies, Inc. 107,900 434
o Rayovac Corp. 45,400 472
o Rex Stores Corp. 17,500 188
o Standard Microsystems Corp. 13,800 175
Symbol Technologies, Inc. 17,800 195
o Symmetricom, Inc. 60,000 247
o Tektronix, Inc. 15,800 297
o Teradyne, Inc. 35,500 412
o Triquint Semiconductor, Inc. 57,500 202
o TTM Technologies, Inc. 24,600 116
o Tweeter Home Entertainment Group, Inc. 22,000 127
o Varian Semiconductor Equipment
Associates, Inc. 8,000 184
o Vicor Corp. 26,100 175
o Vishay Intertechnology, Inc. 49,800 622
o Vitesse Semiconductor, Inc. 40,400 126
Waters Corp. 7,800 187
o Western Wireless Corp. Class A 17,200 105
o Xicor, Inc. 44,200 263
-----------
12,112
ENERGY: RAW MATERIALS 2.1%
--------------------------------------------------------------
Cabot Oil & Gas, Inc. 9,000 220
o Cooper Cameron Corp. 2,500 120
Devon Energy Corp. 2,700 128
ENSCO International, Inc. 4,600 117
o Forest Oil Corp. 5,000 104
o Key Energy Group, Inc. 28,100 283
o Swift Energy Co. 24,500 204
o Tesco Corp. 23,000 244
o Trico Marine Services, Inc. 52,200 103
See financial notes.
37
SCHWAB SMALL-CAP MARKETMASTERS FUND (TM) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Xanser Corp. 126,000 220
-----------
1,743
FOOD & AGRICULTURE 2.6%
--------------------------------------------------------------
Delta & Pineland Co. 22,500 523
o Galaxy Nutritional Foods, Inc. 80,500 141
o Hain Celestial Group, Inc. 23,200 400
o International Multifoods Corp. 25,700 492
o Lesco, Inc. 16,100 169
o Terra Industries, Inc. 110,000 171
o Wild Oats Markets, Inc. 21,500 233
-----------
2,129
GOLD 1.0%
--------------------------------------------------------------
o(3) Kinross Gold Corp. 130,181 797
HEALTHCARE / DRUGS & MEDICINE 11.8%
--------------------------------------------------------------
o Accredo Heath, Inc. 8,800 130
o Align Technology, Inc. 3,300 25
o Amerigroup Corp. 11,600 338
o Apogent Technologies, Inc. 21,300 366
Bausch & Lomb, Inc. 12,900 454
Beckman Coulter, Inc. 6,900 268
o Cardiodynamics International Corp. 99,500 275
o(2) Centene Corp. 26,128 837
o Chattem, Inc. 14,100 193
o Cholestech Corp. 29,925 346
o Columbia Laboratories, Inc. 49,500 244
o Conventry Healthcare, Inc. 9,200 375
o Covance, Inc. 10,600 188
o Cytec Corp. 25,000 330
o Eon Labs, Inc. 9,400 288
o First Horizon Pharmaceutical Corp. 15,600 42
o Health Net, Inc. 9,700 253
o Humana, Inc. 62,000 685
o Intuitive Surgical, Inc. 38,300 239
o Ivax Corp. 36,900 593
o Merit Medical Systems, Inc. 4,300 84
o Mid Atlantic Medical Services, Inc. 5,900 257
o MIM Corp. 23,000 168
Omnicare, Inc. 24,100 639
Owens & Minor, Inc. 8,000 149
o Pharmaceutical Product Development, Inc. 15,500 406
o Pharmacopeia, Inc. 11,200 100
o Province Healthcare Co. 48,400 484
o PSS World Medical, Inc. 17,300 104
o Quest Medical, Inc. 4,100 172
o Sicor, Inc. 14,900 267
o Transgenomic, Inc. 75,000 86
o Viasys Healthcare, Inc. 17,100 277
-----------
9,662
HOUSEHOLD PRODUCTS 0.2%
--------------------------------------------------------------
o Estee Lauder Cos., Inc., Class A 5,500 179
INSURANCE 1.1%
--------------------------------------------------------------
First American Financial Corp. 13,800 366
Hooper Holmes, Inc. 24,800 150
Horace Mann Educators Corp. 15,000 222
o The Phoenix Cos., Inc. 16,000 126
-----------
864
MEDIA 1.5%
--------------------------------------------------------------
Belo Corp., Class A 4,600 104
o Journal Register Co. 11,200 198
Meredith Corp. 4,400 190
o Metro Goldwyn Mayer, Inc. 32,835 366
o Network Equipment Technologies, Inc. 49,900 358
-----------
1,216
MISCELLANEOUS 0.9%
--------------------------------------------------------------
o Aquantive, Inc. 31,400 206
o Mantech International Corp., Class A 10,600 165
o Openwave Systems, Inc. 65,900 114
o Portfolio Recovery Associates, Inc. 4,700 128
o Silicon Image, Inc. 14,800 89
o Surebeam Corp. 21,800 63
-----------
765
MISCELLANEOUS FINANCE 2.1%
--------------------------------------------------------------
Countrywide Credit Industries, Inc. 5,400 365
o eSpeed, Inc., Class A 21,500 281
See financial notes.
38
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
IPC Holdings Ltd. 5,100 175
Jefferies Group, Inc. 9,900 384
MDC Holdings, Inc. 10,300 475
-----------
1,680
MISCELLANEOUS MANUFACTURING INDUSTRIES 0.0%
--------------------------------------------------------------
o Pro Assuarance, Inc. 600 16
NON-FERROUS METALS 0.8%
--------------------------------------------------------------
Century Aluminum Co. 32,500 216
o Phelps Dodge Corp. 5,700 178
o Titanium Metals Corp. 11,550 280
-----------
674
OIL: DOMESTIC 5.5%
--------------------------------------------------------------
o Core Laboratories NV 46,000 460
o Global Industry Ltd. 155,500 690
o Gulfmark Offshore, Inc. 10,300 136
o Patterson Energy, Inc. 11,900 394
o Pioneer Natural Resources Co. 14,700 352
Pogo Producing Co. 8,600 341
o Pride International, Inc. 32,500 504
St. Mary Land & Exploration Co. 10,200 261
o Ultra Petroleum Corp. 24,900 249
o Varco International, Inc. 33,200 584
o W-H Energy Services, Inc. 11,700 211
o Westport Resources Corp. 17,000 354
-----------
4,536
OIL: INTERNATIONAL 0.2%
--------------------------------------------------------------
* Pengrowth Energy Trust 18,500 187
OPTICAL & PHOTO 0.2%
--------------------------------------------------------------
BMC Industries, Inc. 122,500 178
PAPER & FOREST PRODUCTS 0.4%
--------------------------------------------------------------
Longview Fibre Co. 22,600 172
o Lydall, Inc. 12,900 123
-----------
295
PRODUCER GOODS & MANUFACTURING 7.8%
--------------------------------------------------------------
(4) Baldor Electric Co. 33,700 749
Circor International, Inc. 17,500 286
Dover Corp. 9,300 267
o(6) Flowserve Corp. 47,600 735
o Gardner Denver, Inc. 8,500 169
o GSI Lumonics, Inc. 29,500 129
o Ionics, Inc. 34,700 659
JLG Industries, Inc. 24,000 131
o Kos Pharmaceuticals, Inc. 7,700 157
Lennox International, Inc. 13,500 201
o Lone Star Technologies, Inc. 12,700 270
o Merix Corp. 30,000 132
o Moog, Inc., Class A 5,500 175
o(10) Oceaneering International, Inc. 30,700 693
Pall Corp. 32,300 682
Regal Beloit Corp. 15,000 257
Steelcase, Inc. 48,500 465
York International Corp. 8,600 205
-----------
6,362
RAILROAD & SHIPPING 0.6%
--------------------------------------------------------------
o Omi Corp. 46,500 225
o Stelmar Shipping Ltd. 15,000 228
-----------
453
REAL PROPERTY 0.1%
--------------------------------------------------------------
Saint Joe Corp. 3,200 94
RETAIL 4.1%
--------------------------------------------------------------
o American Eagle Outfitters, Inc. 17,800 312
o Bombay Co., Inc. 16,400 138
Brown Group, Inc. 4,500 132
o Burlington Coat Factory Warehouse Corp.
14,000 249
o Chico's FAS, Inc. 15,300 372
Claire's Stores, Inc. 14,300 372
o Coldwater Creek, Inc. 11,000 107
o InterTan, Inc. 28,500 172
J.C. Penny Co., Inc. 12,100 206
Longs Drug Stores Co. 15,100 234
o Saks, Inc. 27,500 246
Talbots, Inc. 9,700 278
o Tractor Supply Co. 7,700 326
o West Marine, Inc. 10,000 163
o Wetseal, Inc., Class A 7,400 75
-----------
3,382
See financial notes.
39
SCHWAB SMALL-CAP MARKETMASTERS FUND (TM) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TELEPHONE 0.4%
--------------------------------------------------------------
o General Communication, Inc. 30,000 186
Inter-Tel, Inc. Class A 7,300 120
o ITXC Corp. 20,200 33
-----------
339
TRAVEL & RECREATION 2.7%
--------------------------------------------------------------
o Alliance Gaming Corp. 24,500 391
Carnival Corp. 7,500 207
o Dick's Sporting Goods, Inc. 8,500 256
Nam Tai Electronics, Inc. 6,000 163
o Orient Express Hotels Ltd. 22,000 248
Regal Entertainment Group, Class A
10,200 200
o Starwood Hotel & Resorts Worldwide,
Inc. 12,400 333
Station Casinos, Inc. 11,500 248
o Vail Resorts, Inc. 15,000 180
-----------
2,226
TRUCKING & FREIGHT 0.5%
--------------------------------------------------------------
Arkansas Best Corp. 8,000 203
o Covenant Transportation, Inc., Class A
10,000 182
-----------
385
UTILITIES: ELECTRIC & GAS 0.2%
--------------------------------------------------------------
Williams Cos., Inc. 20,300 141
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENTS 4.6% of investments
U.S. GOVERNMENT SECURITIES 0.1%
--------------------------------------------------------------
= U.S. Treasury Bill
1.13%, 06/19/03 100 100
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OTHER INVESTMENT COMPANIES 4.5%
--------------------------------------------------------------
= Provident Institutional Funds--
TempFund 3,693,334 3,693
--------------------------------------------------------------
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
40
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- ------------------------------------------------------------------------
Investments, at market value $81,808 a
Receivables:
Fund shares sold 41
Dividends 22
Investments sold 989
Prepaid expenses + 2
------------
TOTAL ASSETS 82,862
LIABILITIES
- ------------------------------------------------------------------------
Payables:
Fund shares redeemed 11
Investments bought 401
Investment adviser and administrator fees 10
Transfer agency and shareholder service fees 2
Accrued expenses + 39
------------
TOTAL LIABILITIES 463
NET ASSETS
- ------------------------------------------------------------------------
TOTAL ASSETS 82,862
TOTAL LIABILITIES - 463
------------
NET ASSETS $82,399
NET ASSETS BY SOURCE
Capital received from investors 119,653
Distributions in excess of net investment income (375)
Net realized capital losses (32,853) b
Net unrealized capital losses (4,026) b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$82,399 10,631 $7.75
a The fund paid $85,834 for these securities. Not counting short-term
obligations and government securities, the fund paid $37,442 for securities
during the report period and received $43,442 from securities it sold or
that matured.
b These derive from investments and futures.
FEDERAL TAX DATA
- ------------------------------------------------------------------------
PORTFOLIO COST $86,716
NET UNREALIZED GAINS AND LOSSES:
Gains $ 7,042
Losses + (11,950)
------------
($4,908)
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $3
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount:
2009 $15,091
2010 + 10,153
------------
$25,244
See financial notes.
41
SCHWAB SMALL-CAP MARKETMASTERS FUND(TM) -- Financials
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- ---------------------------------------------------------------
Dividends $244 a
Interest + 2
------------
TOTAL INVESTMENT INCOME 246
NET REALIZED GAINS AND LOSSES
- ---------------------------------------------------------------
Net realized losses on investments sold (6,983)
Net realized gains on futures contracts + 63
------------
NET REALIZED LOSSES (6,920)
NET UNREALIZED GAINS AND LOSSES
- ---------------------------------------------------------------
Net unrealized gains on investments 13,586
Net unrealized losses on futures contracts + (59)
------------
NET UNREALIZED GAINS 13,527
EXPENSES
- ---------------------------------------------------------------
Investment adviser and administrator fees 521 b
Transfer agent and shareholder service fees 100 c
Trustees' fees 3 d
Custodian and portfolio accounting fees 54
Professional fees 15
Registration fees 6
Shareholder reports 18
Other expenses + 8
------------
Total expenses 725
Expense reduction - 104 e
------------
NET EXPENSES 621
INCREASE IN NET ASSETS FROM OPERATIONS
- ---------------------------------------------------------------
TOTAL INVESTMENT INCOME 246
NET EXPENSES - 621
------------
NET INVESTMENT LOSS (375)
NET REALIZED LOSSES (6,920) f
NET UNREALIZED GAINS + 13,527 f
------------
INCREASE IN NET ASSETS FROM OPERATIONS $6,232
a An additional $3 was withheld for foreign taxes.
b Calculated as 1.30% of average daily net assets.
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.
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 at least
February 29, 2004, to 1.55% of average daily net assets. This limit doesn't
include interest, taxes and certain non-routine expenses.
f These add up to a net gain on investments of $6,607.
See financial notes.
42
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for the current period are unaudited.
OPERATIONS
- -----------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income or loss ($375) $63
Net realized losses (6,920) (9,332)
Net unrealized gains or losses + 13,527 (7,786)
----------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 6,232 (17,055)
DISTRIBUTIONS PAID
- -----------------------------------------------------------------------------
Dividends from net investment income 3 332
Distributions from net realized gains + -- 307
----------------------------------
TOTAL DISTRIBUTIONS PAID $3 $639 a
TRANSACTIONS IN FUND SHARES
- -----------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 281 $2,073 1,228 $11,362
Shares reinvested -- 3 63 639
Shares redeemed + (1,002) (7,392) (2,698) (24,170)
---------------------------------------------------
NET DECREASE (721) ($5,316) (1,407) ($12,169)
SHARES OUTSTANDING AND NET ASSETS
- -----------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 11,352 $81,486 12,759 $111,349
Total increase or decrease + (721) 913 (1,407) (29,863) b
-----------------------------------------------
END OF PERIOD 10,631 $82,399 11,352 $81,486 c
a The tax-basis components of distributions paid for the prior period are:
Ordinary income $332
Long-term capital gains $307
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 Includes distributions in excess of net investment income in the amount of
$375 for the current period and net investment income not yet distributed in
the amount of $3 at the end of the prior period.
See financial notes.
43
Schwab International MarketMasters Fund(TM)
Performance as of 4/30/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund with the MSCI-EAFE(R)Index and the
Morningstar Foreign Stock Fund category.
[BAR CHART]
FUND MSCI-EAFE INDEX CATEGORY AVERAGE
6 MONTHS 2.52% 1.81% 1.38%
1 YEAR -19.35% -16.27% -17.62%
5 YEARS 0.42% -5.52% -5.04%
SINCE INCEPTION : 10/16/96 4.36% -1.69% n/a
PERFORMANCE OF A $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 the MSCI-EAFE
Index.
$13,224 FUND
$8,943 MSCI-EAFE INDEX
FUND MSCI-EAFE Index
16-Oct-96 10000 10000
Oct-96 9910 9836
Nov-96 10220 10228
Dec-96 10313 10096
Jan-97 10426 9742
Feb-97 10599 9902
Mar-97 10558 9938
Apr-97 10609 9991
May-97 11209 10641
Jun-97 11697 11227
Jul-97 11962 11409
Aug-97 11199 10557
Sep-97 11830 11148
Oct-97 11046 10291
Nov-97 10894 10186
Dec-97 11016 10274
Jan-98 11146 10744
Feb-98 11925 11434
Mar-98 12670 11786
Apr-98 12952 11879
May-98 13265 11821
Jun-98 13157 11911
Jul-98 13525 12031
Aug-98 11654 10540
Sep-98 11006 10217
Oct-98 11438 11281
Nov-98 12011 11859
Dec-98 12481 12327
Jan-99 12820 12290
Feb-99 12415 11998
Mar-99 12853 12498
Apr-99 13815 13004
May-99 13170 12335
Jun-99 14428 12816
Jul-99 14985 13196
Aug-99 15248 13245
Sep-99 15401 13379
Oct-99 16232 13881
Nov-99 18683 14362
Dec-99 21819 15652
Jan-00 21236 14658
Feb-00 24410 15052
Mar-00 23356 15636
Apr-00 21149 14814
May-00 20120 14452
Jun-00 21100 15018
Jul-00 20554 14388
Aug-00 21249 14513
Sep-00 20120 13806
Oct-00 19253 13481
Nov-00 18050 12975
Dec-00 18672 13436
Jan-01 18893 13440
Feb-01 17883 12434
Mar-01 16680 11590
Apr-01 17538 12386
May-01 17496 11928
Jun-01 17178 11438
Jul-01 16639 11240
Aug-01 16182 10979
Sep-01 14495 9867
Oct-01 14937 10120
Nov-01 15588 10493
Dec-01 16028 10555
Jan-02 15659 9994
Feb-02 15762 10064
Mar-02 16515 10609
Apr-02 16397 10679
May-02 16338 10815
Jun-02 15674 10384
Jul-02 14006 9359
Aug-02 13947 9338
Sep-02 12368 8335
Oct-02 12899 8782
Nov-02 13548 9181
Dec-02 13092 8873
Jan-03 12560 8503
Feb-03 12103 8308
Mar-03 11911 8145
30-Apr-03 13224 8943
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. The
fund's share price and principal values change, and when you sell your shares,
they may be worth more or less than what you paid for them. Past performance
does not indicate future results. Results for the report period are not
annualized.
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 returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower. These returns also 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. As of 4/30/03, the total
number of funds in the Morningstar Foreign Stock Fund category for the
six-month, one- and five-year periods was 938,898 and 516, respectively.
Schwab MarketMasters Funds(TM)
44
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM)
FUND FACTS as of 4/30/03
TOP HOLDINGS 1
% OF
SECURITY INVESTMENTS
- --------------------------------------------------------------
(1) DIAGEO PLC 1.9%
- --------------------------------------------------------------
(2) GLAXOSMITHKLINE PLC 1.4%
- --------------------------------------------------------------
(3) VIVENDI UNIVERSAL SA 1.3%
- --------------------------------------------------------------
(4) ERICSSON TELEFONAB LM AB Class B 1.3%
- --------------------------------------------------------------
(5) EURONEXT NV 1.3%
- --------------------------------------------------------------
(6) SAN PAOLO IMI SPA 1.3%
- --------------------------------------------------------------
(7) GRUPO TELEVISA SA DE CV 1.3%
- --------------------------------------------------------------
(8) AVENTIS SA 1.3%
- --------------------------------------------------------------
(9) BANQUE NATIONAL DE PARIS 1.3%
- --------------------------------------------------------------
(10) AEGIS GROUP PLC 1.2%
- --------------------------------------------------------------
TOTAL 13.6%
STATISTICS
NUMBER OF HOLDINGS 321
- --------------------------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $ 4,898
- --------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 21.0
- --------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 3.2
- --------------------------------------------------------------
PORTFOLIO TURNOVER RATE 2 40%
- --------------------------------------------------------------
EXPENSE RATIO 3 1.65%
- --------------------------------------------------------------
INVESTMENT MANAGERS AND ALLOCATIONS
INVESTMENT MANAGER INVESTMENT STYLE % OF ASSETS
- --------------------------------------------------------------
AMERICAN CENTURY International 19.7%
INVESTMENT Small Company
MANAGEMENT, INC.
- --------------------------------------------------------------
ARTISAN PARTNERS International 20.3%
LIMITED PARTNERSHIP Growth
- --------------------------------------------------------------
HARRIS ASSOCIATES L.P. International 35.9%
Value
- --------------------------------------------------------------
WILLIAM BLAIR & International 21.7%
COMPANY, LLC Growth
- --------------------------------------------------------------
CASH -- 2.4%
- --------------------------------------------------------------
1 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes and certain non-routine expenses).
Schwab MarketMasters Funds(TM)
45
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM) -- Financials
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure,accounting practices and other matters. Because this is a semiannual
report,information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98- 11/1/97-
4/30/03 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98
- --------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 8.74 10.80 15.53 14.84 10.58 10.86
---------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.02 0.10 0.73 0.53 0.11 0.34
Net realized and unrealized gains or losses 0.20 (1.43) (3.90) 2.49 4.28 0.02
---------------------------------------------------------------------
Total income or loss from investment operations 0.22 (1.33) (3.17) 3.02 4.39 0.36
Less distributions:
Dividends from net investment income (0.00) 6 (0.07) (0.77) (0.49) (0.13) (0.34)
Distributions from net realized gains -- (0.66) (0.79) (1.84) -- (0.30)
---------------------------------------------------------------------
Total distributions -- (0.73) (1.56) (2.33) (0.13) (0.64)
---------------------------------------------------------------------
Net asset value at end of period 8.96 8.74 10.80 15.53 14.84 10.58
---------------------------------------------------------------------
Total return (%) 2.52 1 (13.65) (22.41) 18.61 41.92 3.55
RATIOS/SUPPLEMENTAL DATA (%)
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 1.65 2 0.93 4,5 0.50 4 0.50 3,4 0.50 4 0.50 4
Expense reductions reflected in above ratio 0.27 2 0.33 0.38 0.39 0.47 0.70
Ratio of net investment income to
average net assets 0.52 2 0.60 5.13 1.94 0.94 2.96
Portfolio turnover rate 40 1 158 51 80 249 236
Net assets, end of period ($ x 1,000,000) 208 206 215 278 104 74
1 Not annualized.
2 Annualized.
3 Would have been 0.51% if certain non-routine expenses (proxy fees) had been
included.
4 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.
5 Would have been 0.99% if certain non-routine expenses (proxy fees) had been
included.
6 Per-share amount was less than $0.01.
See financial notes.
46
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top
ten holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
* American Depositary Receipt
= Collateral for open futures contracts
COST MARKET VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- ----------------------------------------------------------------
94.8% FOREIGN COMMON
STOCK 207,078 196,450
0.2% COMMON STOCK 394 427
5.0% SHORT-TERM
INVESTMENTS 10,365 10,365
- ----------------------------------------------------------------
100.0% TOTAL INVESTMENTS 217,837 207,242
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
FOREIGN COMMON STOCK 94.8% of investments
AUSTRALIA 3.3%
----------------------------------------------------------
APN News & Media Ltd. 390,900 825
Billabong International Ltd. 51,000 182
Commonwealth Bank of Australia 17,850 304
G.U.D. Holdings Ltd. 242,708 613
John Fairfax Holdings Ltd. 1,194,000 2,278
Jubilee Mines NL 218,132 251
Macquarie Bank Ltd. 41,500 651
National Australia Bank Ltd. 9,117 185
Onesteel Ltd. 556,876 596
Toll Holdings Ltd. 87,500 387
West Australian Newspapers Holdings Ltd.
187,300 621
----------
6,893
AUSTRIA 0.4%
----------------------------------------------------------
Erste Bank der Oesterreichischen
Sparkassen AG 6,250 494
Mayr Melnhof Karton AG 4,530 384
----------
878
BELGIUM 0.7%
----------------------------------------------------------
Cofinimmo SA 4,800 584
Colruyt NV 500 33
Interbrew SA 35,600 794
----------
1,411
BERMUDA 0.3%
----------------------------------------------------------
* Ace Ltd. 16,200 536
BRAZIL 0.9%
----------------------------------------------------------
Banco Bradesco SA 10,279,000 43
Banco Itau SA Preffered 645,700 43
Companhia de Bebidas das Americas
1,881,600 380
* Companhia de Bebidas Spon 1,100 22
Confeccoes Guararapes SA 17,505 40
Gerdau SA 23,400,000 289
o Petroleo Brasileiro SA 6,700 124
*o Telesp Celular Participacoes SA 46,300 178
Usiminas SA 196,000 741
----------
1,860
CANADA 1.9%
----------------------------------------------------------
o Coolbrands International, Inc. 77,800 428
o Gildan Activewear, Inc. 22,100 608
o Kingsway Financial Services, Inc.
33,150 381
Manulife Financial Corp. 27,400 730
Mega Bloks, Inc. 39,700 637
* Nortel Networks Corp. 17,600 46
Petro Canada 11,600 382
o Shoppers Drug Mart Corp. 17,850 297
Suncor Energy, Inc. 26,050 428
----------
3,937
CAYMAN ISLANDS 0.1%
----------------------------------------------------------
*o Sina Corp. 20,000 197
CHINA 0.7%
----------------------------------------------------------
o CanWest Global Communications Corp.
23,700 135
o Corus Entertainment, Inc. 16,900 250
Encana Corp. 17,000 557
See financial notes.
47
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Huaneng Power International, Inc.
428,000 406
----------
1,348
CROATIA 0.7%
----------------------------------------------------------
o Cogeco Cable, Inc. 17,800 204
Ensign Resource Service Group, Inc.
48,100 617
Goldcorp, Inc. 12,500 130
o MacDonald, Dettwiler and Associates Ltd.
10,850 175
Research in Motion Ltd. 21,000 327
Telus Corp. 6,000 87
----------
1,540
CZECH REPUBLIC 0.3%
----------------------------------------------------------
o Unipetrol A/S 329,600 554
DENMARK 1.4%
----------------------------------------------------------
o Bavarian Nordic A/S 7,587 207
GN Store Nord A/S 63,500 217
Group 4 Falck 25,000 436
H. Lundbeck A/S 12,400 257
Novo Nordisk A/S 13,800 500
Radiometer A/S 11,800 674
o TopDanmark Development A/S 20,100 656
----------
2,947
EGYPT 0.1%
----------------------------------------------------------
Egyptian Mobile Services 25,929 208
FINLAND 0.8%
----------------------------------------------------------
Metso Oyj 171,100 1,623
FRANCE 10.3%
----------------------------------------------------------
April Group 15,500 225
(8) Aventis SA 51,600 2,621
AXA 50,075 761
(9) Banque National de Paris 55,600 2,610
Bonduelle 2,500 190
Carrefour SA 21,790 948
Christian Dior SA 18,500 659
o JC Decaux SA 47,200 456
Klepierre 6,000 272
LVMH Moet Hennessy Louis Vutton SA
11,000 480
Michelin (C.G.D.E.), CLB 33,500 1,239
o Neopost SA 54,500 1,885
Pernod-Ricard 18,375 1,613
Publicis Groupe SA 105,500 2,328
Rhodia SA 50,710 317
Rodriguez Group 7,200 289
Sanofi-Synthelabo SA 1,900 113
Societe Generale 12,200 746
STMicroelectronics NV 39,150 809
(3) Vivendi Universal SA 171,100 2,788
----------
21,349
GERMANY 6.9%
----------------------------------------------------------
Allianz AG 20,670 1,461
Altana AG 5,300 261
Bayerische Motoren-Werke AG 54,000 1,800
Deutsche Boerse AG 17,400 816
Dragerwerk AG 14,100 468
o Freenet de AG 27,990 597
Henkel KGaA 36,500 2,077
Henkel KGaA - VORZUG 15,800 1,026
Linde AG 19,800 746
Medion AG 9,600 359
Muenchener Rueckversicherungs-
Gesellschaft AG 11,175 1,116
Puma AG 3,180 305
SAP AG 7,100 727
o Singulus Technologies AG 23,909 414
Stada Arzneimittel AG 16,054 840
United Internet AG 49,538 629
Zapf Creaton AG 16,007 586
----------
14,228
GREECE 0.9%
----------------------------------------------------------
Coca-Cola Hellenic Bottling Company SA
29,900 437
Folli-Follie SA 11,100 124
Germanos SA 15,196 216
*o Stet Hellas Telecommunications SA
44,000 412
See financial notes.
48
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Teletypos SA 103,473 619
-----------
1,808
HONG KONG 2.1%
----------------------------------------------------------
Brilliance China Automotive Holdings Ltd.
2,344,000 547
China Pharmaceutical Enterprise &
Investment Corp. Ltd. 2,308,000 644
o Convenience Retail Asia Ltd. 670,000 145
Esprit Holdings Ltd. 112,550 221
Giordano International Ltd. 3,308,000 891
Li & Fung Ltd. 278,200 312
Petrochina Co. Ltd. 165,400 38
Techtronic Industries Co. Ltd. 773,000 971
Tong Ren Tang Technologies Co. Ltd.
355,000 582
-----------
4,351
INDIA 0.4%
----------------------------------------------------------
* Doctor Reddy's Laboratories Ltd. 15,900 301
* HDFC Bank Ltd. 14,000 229
* Infosys Technologies Ltd. 9,850 405
-----------
935
INDONESIA 0.4%
----------------------------------------------------------
PT Kalbe Farma Tbk 9,436,000 435
PT Tempo Scan Pacific Tbk 318,200 196
Unilever Indonesia Tbk PT 59,000 143
-----------
774
IRELAND 0.6%
----------------------------------------------------------
Allied Irish Banks PLC 940 14
Anglo Irish Bank Corp. PLC 67,900 511
Paddy Power PLC 37,260 208
*o Ryanair Holdings PLC 11,100 440
-----------
1,173
ISRAEL 1.1%
----------------------------------------------------------
*o Orbotech Ltd. 112,000 1,539
* Teva Pharmaceutical Industries Ltd.
15,100 705
-----------
2,244
ITALY 3.1%
----------------------------------------------------------
Banco Popolare di Verona e Novara Scrl
156,000 2,119
Industria Machine Automatiche SPA
7,600 81
Mediaset SPA 10,800 92
Merloni Elettrodomestici SPA 24,900 303
Permasteelisa SPA 12,300 224
Saeco International Group SPA 25,700 99
(6) San Paolo IMI SPA 324,000 2,672
Telecom Italia SPA 168,700 830
-----------
6,420
JAPAN 12.2%
----------------------------------------------------------
Arisawa Manufacturing Co. Ltd. 36,920 856
Askul Corp. 8,200 238
Belluna Co. Ltd. 5,350 196
Belluna Co. Ltd., Rights 535 --
Canon, Inc. 13,000 525
Cawachi Ltd. 2,700 151
o Chiyoda Corp. 150,000 530
Daiwa Securities Group, Inc. 457,000 1,797
Don Quijote Co. Ltd. 2,600 236
o Eizo Nanao Corp. 13,200 163
Faith, Inc. 87 376
Goe Co. Ltd. 111 458
Honda Motor Co. Ltd. 34,800 1,153
Hoya Corp. 8,800 520
Index Corp 42 211
Intage, Inc. 31,400 329
Japan Tobacco, Inc. 90 524
Kappa Create Co. Ltd. 4,550 233
o Kennedy-Wilson Japan 136 190
Keyence Corp. 4,290 690
Komeri Co. Ltd. 10,300 208
Meitec Corp. 78,100 1,984
Melco, Inc. 9,400 184
Mimasu Semiconductor Industry Co. Ltd.
53,000 593
Moshi Moshi Hotline, Inc. 13,800 544
Nintendo Co. Ltd. 6,100 477
Nissan Motor Co. Ltd. 91,200 700
Nitto Denko Corp. 23,000 661
Nomura Holdings, Inc. 62,000 614
Noritsu Koki Co. Ltd. 24,000 724
Pigeon Corp. 21,800 214
See financial notes.
49
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Pioneer Corp. 34,500 691
Plenus Co. Ltd 6,120 163
Promise Co. Ltd 14,000 458
Round One Corp. 223 419
Sanseido Co. Ltd. 77,200 623
Sato Corp. 2,020 35
Sharp Corp. 66,000 692
SMC Corp. 5,600 422
Sony Corp. 1,600 39
Sugi Pharmacy Co. Ltd. 16,000 737
Sumitomo Trust and Banking Co. Ltd.
133,000 377
Takeda Chemical Industries Ltd. 53,000 1,942
Tamron Co. Ltd. 18,000 398
The Goodwill Group, Inc. 54 196
Toyota Motor Corp. 5,300 120
Tsuruha Co. Ltd. 2,400 38
USS Co. Ltd. 4,290 219
Yamada Denki Co. Ltd. 18,600 359
Yamaichi Electronics Co. 47,800 631
Yamanouchi Pharmaceutical Co. Ltd.
1,600 40
Yodogawa Steel Works Ltd. 135,000 365
-----------
25,243
MEXICO 4.3%
----------------------------------------------------------
America Mobil SA de CV 712,200 595
o Corporacion Geo SA, Series B 79,000 218
* Fomento Economico Mexicano SA de CV
61,000 2,315
o Grupo Financiero BBVA Bancomer
SA de CV 448,000 390
Grupo Modelo SA de CV 188,300 421
*o(7) Grupo Televisa SA de CV 87,700 2,661
* Telefonos de Mexico SA 39,309 1,187
Wal-Mart de Mexico SA de CV, Series C
199,900 509
Wal-Mart de Mexico SA de CV, Series V
225,300 624
-----------
8,920
NETHERLANDS 6.4%
----------------------------------------------------------
ABN AMRO Holdings NV 48,400 818
AKZO Nobel NV 97,500 2,167
o ASM Lithography Holding NV 49,800 430
(5) Euronext NV 123,300 2,725
Fortis NV 66,220 1,103
Heineken NV 11,300 420
Hunter Douglas NV 49,000 1,433
ING Groep NV 7,600 123
* Royal Dutch Petroleum Co. 18,590 760
Sligro Beheer NV 7,322 338
* Unilever NV 900 57
Unilever NV 18,580 1,170
o Versatel Telecom International NV
1,487,636 1,378
Wolters Kluwer NV 33,900 441
-----------
13,363
NEW ZEALAND 0.1%
----------------------------------------------------------
Warehouse Group Ltd. 67,020 210
POLAND 0.1%
----------------------------------------------------------
Bank Polska Kasa Opieki Grupa Pekao
SA 5,700 128
PORTUGAL 0.3%
----------------------------------------------------------
Portugal Telecom SGPS SA 93,900 672
RUSSIA 0.4%
----------------------------------------------------------
* Lukoil Holding Co. 1,500 103
* Rostelecom SA 95,400 816
* Yukos 100 17
-----------
936
SINGAPORE 0.7%
----------------------------------------------------------
DBS Group Holdings Ltd. 68,000 333
Hyflux Ltd. 1,016,700 744
Unisteel Technology Ltd. 329,000 118
Venture International 32,000 267
-----------
1,462
SOUTH AFRICA 0.2%
----------------------------------------------------------
Nortel Healthcare Holdings Ltd. 820,000 344
See financial notes.
50
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
SOUTH KOREA 0.9%
----------------------------------------------------------
Hana Bank 22,600 195
o KH Vatec Co. Ltd. 1,213 63
Samsung Electronics Co. 2,900 728
SK Telecom Co. Ltd. 6,400 890
-----------
1,876
SPAIN 1.9%
----------------------------------------------------------
Banco Bilbao Vizcaya Argentaria SA
2,300 23
Banco Popular Espanol SA 11,200 543
o Baron de Ley SA 17,400 544
CIA Distribution Integral Logista SA
9,138 204
Grupo Ferrovial SA 10,400 276
Inditex SA 27,600 550
Miquel y Costas & Miquel SA 7,015 196
Prisa-Promotora de Informaciones SA
43,700 332
Prosegur Compania de Seguridad SA
300 4
Repsol YPF 36,600 533
Telefonica SA 69,170 765
Telefonica SA, Rights 1,383 15
-----------
3,985
SWEDEN 3.5%
----------------------------------------------------------
Autoliv, Inc. 64,600 1,580
Billerud AB 54,244 719
(4) Ericsson Telefonab LM AB, Class B
3,029,300 2,759
Gunnebo AB 13,400 231
Hemkopskedja 31,740 594
Hennes & Mauritz Ab-B 32,250 718
Kungsleden AB 35,900 557
Nordea AB 4,300 23
-----------
7,181
SWITZERLAND 6.8%
----------------------------------------------------------
Ciba Specialty Chemicals Holdings, Inc.
16,720 1,155
Clariant AG 52,270 584
Credit Suisse Group 92,900 2,219
Credit Suisse, Rights 99,600 --
Givaudan AG 3,800 1,471
Julius Baer Holding AG, Class B 1,465 308
o Logitech International SA 11,750 433
o Micronas Semiconductor Holding AG
11,200 260
Nestle SA 7,532 1,536
Novartis AG 35,210 1,389
PSP Swiss Property AG 9,590 1,082
Roche Holding AG Bearer 400 41
Roche Holding AG Genusschein 3,100 197
Schweizerische Rueckversicherung
3,000 196
Serono SA, Class B 490 266
Swatch Group AG 15,700 1,320
United Bank of Switzerland AG 34,300 1,627
-----------
14,084
TAIWAN 0.5%
----------------------------------------------------------
Ambit Microsystems Corp. 76,000 217
o Eva Airways Corp. 591,000 181
Hon Hai Precision Industry Co. Ltd.
86,000 269
*o Taiwan Semiconductor Co. Ltd. 53,300 446
-----------
1,113
THAILAND 0.8%
----------------------------------------------------------
o Bank of Ayudhya Public Co. Ltd.
2,757,100 579
Banpu Public Co. Ltd. 684,400 615
Land and House Public Co. Ltd. For Reg
936,000 168
o Tipco Asphalt PCL 659,900 335
-----------
1,697
TURKEY 0.1%
----------------------------------------------------------
Enka Insaat ve Sanayi AS 3,757,500 131
UNITED KINGDOM 18.2%
----------------------------------------------------------
3I Group PLC 33,500 249
Abbot Group PLC 171,700 387
o Acambis PLC 39,800 180
(10) Aegis Group PLC 2,040,000 2,388
Associated British Ports Holdings PLC
226,500 1,421
See financial notes.
51
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Autonomy Corp. 176,811 458
BAE Systems PLC 264,700 537
BG Group PLC 254,700 1,019
BHP Billiton PLC 151,341 774
Boots Group PLC 40,300 369
British Sky Broadcasting Group PLC
76,800 796
British Telecommunications PLC 32,900 94
Cadbury Schweppes PLC 312,500 1,741
o Cairn Energy PLC 119,700 595
o Cambridge Antibody Tech Group PLC
26,000 170
Capital Group PLC 161,100 653
Carlton Communications PLC 123,400 207
Cattles PLC 59,500 301
Compass Group PLC 287,100 1,322
(1) Diageo PLC 347,100 3,850
o Enodis PLC 1,848,000 1,019
Enterprise Inns PLC 22,400 223
(2) PLC 140,700 2,820
Goshawk Insurance Holding PLC
362,177 616
Granada PLC 472,900 516
HBOS PLC 86,700 1,016
o Helphire Group PLC 108,923 336
Hit Entertainment PLC 52,500 185
* HSBC Holdings PLC 400 22
Imperial Chemical Industries PLC
295,960 614
Kingfisher PLC 31,200 122
Lloyds TSB Group PLC 178,520 1,174
Man Group PLC 30,200 509
Marks & Spencer Group PLC 205,500 957
Michael Page Group PLC 1,295,600 1,936
*o NDS Group PLC 31,200 401
Nestor Healthcare Group PLC 2,800 9
Next PLC 41,700 629
Northern Rock PLC 32,000 366
Pearson PLC 4,300 36
o Powderject Pharmaceutical 18,300 152
Reckitt Benkiser PLC 34,597 610
RTL Group SA 2,060 78
Signet Group PLC 1,300,000 1,745
Standard Chartered PLC 49,900 557
Tesco PLC 534,500 1,691
Vodafone Group PLC 376,500 743
Wellington Underwriting PLC 428,085 592
* Willis Group Holdings Ltd. 9,500 296
Yule Catto & Co. 77,900 410
-----------
37,891
COMMON STOCK 0.2% of investments
UNITED STATES 0.2%
----------------------------------------------------------
o Central European Distribution
Corp. 7,900 215
o Golden Telecom, Inc. 12,500 212
-----------
427
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENTS 5.0% of investments
U.S. GOVERNMENT SECURITIES 0.2%
----------------------------------------------------------
= U.S. Treasury Bills
1.09%, 06/19/03 55 55
1.13%, 06/19/03 250 250
1.14%, 06/19/03 50 50
----------
355
SECURITY AND NUMBER OF SHARES MKT. VALUE
($ x 1,000)
OTHER INVESTMENT COMPANIES 4.8%
----------------------------------------------------------
= Provident Institutional Funds--
TempFund 10,010,344 10,010
----------------------------------------------------------
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
52
In addition to the above, the fund held the following at 4/30/03. All numbers x
1,000.
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)
05/01/2003 Canadian Dollars 10 U.S. Dollars 7 --
05/01/2003 U.S. Dollars 50 British Pounds 31 --
05/02/2003 British Pounds 10 U.S. Dollars 15 --
05/02/2003 Canadian Dollars 31 U.S. Dollars 22 --
05/02/2003 Hong Kong Dollars 150 U.S. Dollars 19 --
05/02/2003 U.S. Dollars 6 Swiss Francs 9 --
05/02/2003 U.S. Dollars 19 European Euro 18 --
05/02/2003 U.S. Dollars 4 European Euro 4 --
05/05/2003 Canadian Dollars 16 U.S. Dollars 11 --
05/05/2003 Hong Kong Dollars 145 U.S. Dollars 19 --
05/05/2003 Swiss Francs 22 U.S. Dollars 16 --
05/05/2003 U.S. Dollars 10 European Euro 9 --
05/06/2003 British Pounds 9 U.S. Dollars 15 --
05/06/2003 European Euro 1 U.S. Dollars 1 --
05/06/2003 U.S. Dollars 17 Swiss Francs 24 --
05/06/2003 U.S. Dollars 13 Japanese Yen 1,527 --
See financial notes.
53
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM) -- Financials
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- ------------------------------------------------------------------------
Investments, at market value $207,242 a
Foreign currency 580 b
Receivables:
Fund shares sold 94
Dividends 1,121
Foreign tax reclaims 86
Investments sold 2,034
Prepaid expenses + 9
------------
TOTAL ASSETS 211,166
LIABILITIES
- ------------------------------------------------------------------------
Payables:
Fund shares redeemed 69
Withholding taxes 3
Investments bought 2,667
Investment adviser and administrator fees 26
Transfer agency and shareholder service fees 6
Accrued expenses + 67
------------
TOTAL LIABILITIES 2,838
NET ASSETS
- ------------------------------------------------------------------------
TOTAL ASSETS 211,166
TOTAL LIABILITIES - 2,838
------------
NET ASSETS $208,328
NET ASSETS BY SOURCE
Capital received from investors 331,024
Net investment income not yet distributed 515
Net realized capital losses (112,825) c
Net unrealized capital losses (10,386) c
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$208,328 23,260 $8.96
a The fund paid $217,837 for these securities. Not counting short-term
obligations and government securities, the fund paid $93,918 for securities
during the report period and received $77,259 from securities it sold or
that matured.
b The fund paid $582 for these currencies.
c These derive from investments, foreign currency transactions and futures. As
of the report date, the fund has sixteen open S&P 500 futures contracts due to
expire on June 20, 2003, with a contract value of $3,664 and an unrealized
gain of $161.
FEDERAL TAX DATA
- ------------------------------------------------------------------------
PORTFOLIO COST $220,021
NET UNREALIZED GAINS AND LOSSES:
Gains $11,009
Losses + (23,788)
------------
($12,779)
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $14
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount:
2009 $40,326
2010 + 53,351
------------
$93,677
See financial notes.
54
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- ---------------------------------------------------------------------
Dividends $2,178 a
Interest + 1
-----------
TOTAL INVESTMENT INCOME 2,179
NET REALIZED GAINS AND LOSSES
- ---------------------------------------------------------------------
Net realized losses on investments sold (18,892)
Net realized losses on foreign currency transactions (227)
Net realized gains on futures sold + 269
-----------
NET REALIZED LOSSES (18,850)
NET UNREALIZED GAINS AND LOSSES
- ---------------------------------------------------------------------
Net unrealized gains on investments 22,884
Net unrealized gains on foreign currency transactions 43
Net unrealized gains on futures contracts + 176
-----------
NET UNREALIZED GAINS 23,103
EXPENSES
- ---------------------------------------------------------------------
Investment adviser and administrator fees 1,408 b
Transfer agent and shareholder service fees 251 c
Trustees' fees 4 d
Custodian and portfolio accounting fees 201
Professional fees 19
Registration fees 9
Shareholder reports 25
Other expenses + 16
-----------
Total expenses 1,933
Expense reduction - 273 e
-----------
NET EXPENSES 1,660
INCREASE IN NET ASSETS FROM OPERATIONS
- ---------------------------------------------------------------------
TOTAL INVESTMENT INCOME 2,179
NET EXPENSES - 1,660
------------
NET INVESTMENT INCOME 519
NET REALIZED LOSSES (18,850) f
NET UNREALIZED GAINS + 23,103 f
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $4,772
a An additional $223 was withheld for foreign taxes.
b Calculated as 1.40% of average daily net assets.
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.
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 at least
February 29, 2004, to 1.65% of average daily net assets. This limit doesn't
include interest, taxes and certain non-routine expenses.
f These add up to a net gain on investments of $4,253.
See financial notes.
55
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM) -- Financials
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000. Figures for the
current period are unaudited.
OPERATIONS
- ----------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income $519 $1,366
Net realized losses (18,850) (53,129)
Net unrealized gains + 23,103 18,541
---------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 4,772 (33,222)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------
Dividends from net investment income 14 1,423
Distributions from net realized gains + -- 13,081
---------------------------------
TOTAL DISTRIBUTIONS PAID $14 $14,504 a
TRANSACTIONS IN FUND SHARES
- ---------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 2,499 $21,598 7,580 $77,749
Shares reinvested 2 13 1,338 14,503
Shares redeemed + (2,777) (23,765) (5,309) (53,981) b
--------------------------------------------
NET INCREASE OR DECREASE (276) ($2,154) 3,609 $38,271
SHARES OUTSTANDING AND NET ASSETS
- -----------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 23,536 $205,724 19,927 $215,179
Total increase or decrease + (276) 2,604 3,609 (9,455) c
---------------------------------------------
END OF PERIOD 23,260 $208,328 23,536 $205,724 d
a The tax-basis components of distributions paid for the prior period are:
Ordinary income $ 1,423
Long-term capital gains $13,081
b Dollar amounts are net of proceeds received from early withdrawal fees that
the fund charges on shares sold 180 days or less after buying them:
CURRENT PERIOD $20
PRIOR PERIOD $61
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 net investment income not yet distributed in the amount of $515 and
$10 at the end of the current and prior periods, respectively.
See financial notes.
56
FINANCIAL NOTES unaudited
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 current names and multi-manager strategy began on
June 3, 2002.
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(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
Schwab Core Equity Fund(TM)
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Schwab U.S. MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Hedged Equity Fund(TM)
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Institutional Select S&P 500 Fund
Institutional Select Large-Cap Value Index Fund
Institutional Select Small-Cap Value Index Fund
THE FUNDS OFFER ONE SHARE CLASS. Shares are bought and sold at net asset value,
or NAV, which is the price for all outstanding shares. Each share has a par
value of 1/1,000 of a cent, and the 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 investments 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.
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
57
contract. The amount of the deposit may vary from one contract to another, but
it is generally a percentage of the contract amount.
Futures are traded publicly on exchanges, and their market value changes daily.
The 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 SCHWAB BALANCED MARKETMASTERS FUND(TM) AND SCHWAB INTERNATIONAL
MARKETMASTERS FUND(TM) 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 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 term of the
swap is 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 counter-
party might agree to pay a fund the equivalent of the same amount invested in a
certain bond index during this same six months.
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.
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.
Schwab MarketMasters Fund(TM)
58
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 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 trust
has custodian overdraft facilities and line of credit arrangements of $150
million, $100 million and $150 million with PNC Bank, N.A., Bank of America,
N.A. and The Bank of New York, respectively. The funds pay interest on the
amounts they borrow at rates that are negotiated periodically.
AMOUNT
OUTSTANDING AVERAGE AVERAGE
AT 4/30/03 BORROWING* INTEREST
FUND ($ x 1,000) ($ x 1,000) RATE* (%)
- ------------------------------------------------------------------
SCHWAB U.S.
MARKETMASTERS FUND(TM) -- 79 1.66
- ------------------------------------------------------------------
SCHWAB BALANCED
MARKETMASTERS FUND(TM) -- 284 1.63
- ------------------------------------------------------------------
SCHWAB SMALL-CAP
MARKETMASTERS FUND(TM) -- 12 1.60
- ------------------------------------------------------------------
SCHWAB INTERNATIONAL
MARKETMASTERS FUND(TM) -- 235 1.60
- ------------------------------------------------------------------
* For the six-month period ended April 30, 2003.
THE FUNDS PAY FEES 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.
Adviser is responsible for compensating each fund's investment managers.
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 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 realized net 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.
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
last-quoted sale price or closing price for the day, or, on days when no sale
has been reported, halfway between the most recent bid and asked quotes.
- - SECURITIES FOR WHICH NO QUOTED VALUE IS AVAILABLE, are 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.
59
- - 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 the 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.
- - SWAP AGREEMENTS: each open contract is valued at fair value using guidelines
adopted by the fund's 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 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.
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 bought 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.
Schwab MarketMasters Fund(TM)
60
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 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.
61
GLOSSARY
Words and phrases that appear in financial reports often have specific meanings
that are different from their everyday meanings. The glossary below tells you
what is meant by the following terms when they are used in this report.
ASSET ALLOCATION The practice of dividing a portfolio among different asset
classes, with each asset class assigned a particular percentage.
ASSET CLASS A group of securities with similar structure and basic
characteristics. Stocks, bonds and cash are the three main examples of asset
classes.
BETA A historical measure of an investment's volatility relative to a market
index (usually the S&P 500). The index is defined as having a beta of 1.00.
Investments with a beta higher than 1.00 have been more volatile than the index;
those with a beta of less than 1.00 have been less volatile.
BOND A security representing a loan from the investor to the issuer. A bond
typically pays interest at a fixed rate (the "coupon rate") until a specified
date (the "maturity date"), at which time the issuer returns the money borrowed
("principal" or "face value") to the bondholder. Because of their structure,
bonds are sometimes called "fixed income securities" or "debt securities."
CAP, CAPITALIZATION See "market cap."
CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an
investment and its value at a later time. If the investment has been sold, the
capital gain or loss is considered a realized gain or loss. If the investment
is still held, the gain or loss is still "on paper" and is considered
unrealized.
EARNINGS GROWTH RATE For a mutual fund, the average yearly rate at which the
earnings of the companies in the fund's portfolio have grown, measured over the
past five years.
EARNINGS PER SHARE (EPS) A company's earnings, or net income, for the past 12
months, divided by the number of shares outstanding.
EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to
cover the fund's operating expenses. An expense ratio of 0.50% means that a
fund's expenses amount to half of one percent of its average net assets a year.
MARKET CAP, MARKET CAPITALIZATION The value of a company as determined by the
total value of all shares of its stock outstanding.
MEDIAN MARKET CAP The midpoint of the range of market caps of the stocks held by
a fund. There are different ways of calculating median market cap. With a simple
median, half of the stocks in the fund's portfolio would be larger than the
median, and half would be smaller. With a weighted median (the type that is
calculated for these funds), half of the fund's assets are invested in stocks
that are larger than the median market cap, and half in stocks that are smaller.
NET ASSET VALUE (NAV) The value of one share of a mutual fund. NAV is calculated
by taking the fund's total assets, subtracting liabilities, and dividing by the
number of shares outstanding.
OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual
fund, indicates all shares currently held by investors.
PRICE-TO-BOOK RATIO (P/B) The market price of a company's stock compared with
its "book value." A mutual fund's P/B is the weighted average of the P/B of all
stocks in the fund's portfolio.
PRICE-TO-EARNINGS RATIO (P/E) The market price of a company's stock compared
with earnings over the past year. A mutual fund's P/E is the weighted average of
the P/E of all stocks in the fund's portfolio.
RETURN ON EQUITY (ROE) The average yearly rate of return for each dollar of
investors' money, measured over the past five years.
STOCK A share of ownership, or equity, in the issuing company.
TOTAL RETURN The 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.
Schwab MarketMasters Funds(TM)
62
NOTES
NOTES
CONTACT SCHWAB
SchwabFunds(R) offers you a complete family of mutual funds, each one based on a
time-tested investment approach and using disciplined,clearly defined management
strategies.
Actively managed funds include multi-manager stock funds, a fund that uses
long-short strategies, and a range of taxable and tax-free bond funds. Index
funds include large-cap,small-cap and international stock funds. 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. Please call 1-800-435-4000 for a free
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)
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.
1 Shares of Sweep Investments(TM) may not be purchased over the Internet.
2 Orders placed in person or through a telephone representative are subject to
a service fee payable to Schwab.
THE SCHWABFUNDS FAMILY
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 Hedged Equity Fund(TM)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab MarketMasters Funds(TM)
Schwab U.S. MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
ASSET ALLOCATION FUNDS
Schwab MarketTrack Portfolios(R)
Schwab All Equity Portfolio
Schwab Growth Portfolio
Schwab Balanced Portfolio
Schwab Conservative Portfolio
BOND FUNDS
Schwab YieldPlus Fund(R)
Schwab Short-Term Bond Market Fund
Schwab Total Bond Market Fund
Schwab GNMA 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 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 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
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)2003 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
Printed on recycled paper.
REG13563-05
Institutional Select(R) Funds
SEMIANNUAL REPORT
April 30, 2003
Institutional Select
S&P 500 Fund
Institutional Select
Large-Cap Value Index Fund
Institutional Select
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 discuss the
factors that affected fund performance during the report period.
Fund Performance and Related Data
Fund and index performance data, fund facts, portfolio holdings and
fund financials.
Institutional Select S&P 500 Fund .................................. 6
Ticker Symbol: ISLCX
The fund seeks high total return by tracking the performance of the
S&P 500(R) Index. 1
Institutional Select Large-Cap Value Index Fund .................... 20
Ticker Symbol: ISLVX
The fund seeks high total return by tracking the performance of the
S&P 500/Barra Value Index. 1
Institutional Select Small-Cap Value Index Fund .................... 32
Ticker Symbol: ISSVX
The fund seeks high total return by tracking the performance of the
S&P Small Cap 600/Barra Value Index. 1
Financial Notes ...................................................... 45
Glossary ............................................................. 48
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 Small Cap 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 R. Schwab
Chairman
FROM THE CHAIRMAN
Without question, these are challenging times for America's investors. But I
believe that they also may provide opportunities, especially for those who stay
involved with their investment portfolios and review their mutual fund holdings
with their investment objectives in mind.
As this report goes to press, the President has signed into law a new tax
package that I believe offers significant potential benefits for all investors.
The new tax package will reduce the rate of taxation on many corporate dividends
and on capital gains. I believe that reducing these taxes could serve as a
stimulus to the stock market, thereby benefiting all owners of U.S. stocks.
For years, corporate dividends have been taxed twice: first when the corporation
earned the money, and again when investors received the dividend. In my view,
this has provided an incentive for corporations to retain profits as cash rather
than sharing them with their shareholders. I believe reducing the dividend tax
gives companies the right incentives to invest and create new jobs.
Here at Schwab, we are actively exploring ways to help investors meet their
financial objectives. At SchwabFunds(R), these efforts are being led by the new
president of SchwabFunds, Randall Merk. Randy brings a wealth of experience to
the job, and we welcome his leadership, vision and wisdom.
On behalf of SchwabFunds, I'd like to thank you for investing with us. Your
continued trust and support mean a great deal to us. In turn, it's our mission
to help you meet your financial goals.
Sincerely,
/s/ Charles R. Schwab
MANAGEMENT'S DISCUSSION November 1, 2002--April 30, 2003
[PHOTO OF RANDALL W. MERK]
RANDALL W. MERK is President and CEO of Charles Schwab Investment Management,
Inc. and is president of each of the funds covered in this report. He joined the
firm in August of 2002, bringing with him 24 years of experience in the asset
management industry.
Dear Shareholder:
As one of the newer members of the SchwabFunds(R) team, I've been struck by the
talent and integrity of the people here. Above all, I've been impressed with the
dedication they show to understanding the needs and concerns of our
shareholders.
That dedication is particularly important right now. Times of market volatility
and uncertainty about world events demand as high a level of diligence as ever
on the part of investment professionals. At SchwabFunds we are keenly aware of
this, and we continue to work hard to uphold the best interests of our
shareholders.
Mutual funds are facing many initiatives at the moment. These include changes in
corporate governance practices, such as the Sarbanes-Oxley Act (which requires
senior management certification of financial reports), and new regulations
affecting disclosures of mutual funds' proxy voting practices. Many of these
changes have the potential to benefit shareholders, and I want to assure you
that we'll keep you informed of the progress we are making with them.
In the meantime, it is worth keeping in mind that the basic tenets of mutual
fund investing remain unchanged. In particular, time-tested investment practices
such as asset allocation and diversification are as important as ever. The range
of choices available from SchwabFunds can make it easy to diversify your
portfolio. In addition, as our range of funds grows, we'll let you know when new
funds are launched (or you can stay informed by visiting
www.schwab.com/schwabfunds).
In closing, let me thank you for choosing SchwabFunds for your mutual fund
investments. We're committed to helping you reach your financial goals. If there
is something more that we can do to help, I hope you'll let us know.
Sincerely,
/s/ Randall W. Merk
Schwab Institutional Select(R) Funds
2
[PHOTO OF GERI HOM AND LARRY MANO]
GERI HOM, a vice president and senior portfolio manager of the investment
adviser, has overall responsibility for the management of the funds. Prior to
joining the firm in 1995, she worked for nearly 15 years in equity management.
LARRY MANO, a director and a portfolio manager, is responsible for the
day-to-day management of the Large-Cap and Small-Cap funds. Prior to joining the
firm in 1998, he worked for 20 years in equity management.
THE ECONOMY
THE WAR IN IRAQ DOMINATED HEADLINES, ALTHOUGH IT WAS NOT THE ONLY FACTOR
AFFECTING THE ECONOMY. As the report period began, the nation's focus was
divided between fundamental economic issues and concerns over the looming war
with Iraq. Once the war arrived, attention focused on Iraq and the progress of
political and military actions. Toward the end of the report period, as
intensive military action drew to a close, the nation's focus shifted and its
level of concern over war-related uncertainty declined.
One reflection of this pattern of changing concerns over the war was the price
of oil. Leading up to the war, oil prices continued to ratchet up to nearly $40
a barrel. But the price quickly dropped to around $30 a barrel when it began to
appear that the major fighting would not last long.
The economy that Americans found at the end of the war was not much different
than it had been during the period before the war. Gross Domestic Product was
positive but weak, while joblessness edged up to 6%. Consumer spending remained
strong, helped in part by widespread discounts and depressed prices in most
sectors (aside from healthcare and oil). But discounted prices for consumers
translated into thin profits for companies, and business capital spending
remained minimal. A half-percent interest rate cut in November 2002 showed the
Federal Reserve continuing to apply economic stimulus; the president and
Congress contributed by advancing new fiscal and tax policies.
THE MARKET
MOST TYPES OF STOCKS POSTED GAINS FOR THE PERIOD, WITH SMALL-CAP GROWTH STOCKS
AND LARGE-CAP VALUE STOCKS LEADING THE WAY. Positive returns were welcome news
after prior declines. However, the volatility that has characterized the market
in recent years continued throughout the period.
The strongest month of the period for stocks was April 2003, which saw the
market rise as the military action in Iraq ended and as the first corporate
earnings reports for 2002 appeared to indicate some improvement over the
disappointing earnings of 2001. Another factor that we believe may have helped
lift the market during the period was the increasing possibility of a dividend
tax cut.
Schwab Institutional Select(R) Funds
3
MANAGEMENT'S DISCUSSION continued
STOCK PRICES DURING THE PERIOD APPEARED TO GENERALLY REFLECT COMPANIES'
ESTABLISHED EARNING POWER, ALTHOUGH ANTICIPATED FUTURE EARNINGS BEGAN TO DRIVE
RETURNS IN SOME SECTORS.
Looking at stock prices during the period, it appeared that investors were
reluctant to give much consideration to projections of future earnings (which
may or may not turn out to be accurate) when deciding how much they were willing
to pay for a stock.
In our view, this was a sign of lingering skepticism among investors about
earnings projections, whether those projections came from corporate management
or from analysts. As the report period came to a close, there were some issues
that remained unresolved. For instance, there were still companies coming
forward with earnings restatements or with large one-time charges. There were
also questions about how companies account for pension plan liabilities, and how
related practices might trigger another round of earnings restatements. We
believe investors' sensitivity to factors such as these was likely heightened by
the memory of the many recent high-profile cases of corporate malfeasance.
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.
4.48% S&P 500(R) INDEX: measures U.S. large-cap stocks
7.55% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
1.81% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in
Europe, Australasia and the Far East
4.31% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond
market
[LINE GRAPH]
Lehman Brother U.S
Aggregate MSCI-EAFE Russell 2000 S&P 500
Bond Index Index Index Index
31-Oct-02 0 0 0 0
Nov-02 -0.18 -0.36 2.6 1.72
Nov-02 0.59 1.71 2.65 1.95
Nov-02 0.25 0.52 3.5 2.2
Nov-02 -0.07 3.64 6.59 5.6
Nov-02 -0.03 4.7 9.98 6.2
Dec-02 0.52 0.96 5.77 2.59
Dec-02 0.86 -0.03 6.05 2.06
Dec-02 1.42 -1.25 2.87 0.14
Dec-02 1.99 0.71 4.5 0.75
Jan-03 1.36 2.13 5.44 3.01
Jan-03 1.18 2.45 6.35 5.14
Jan-03 1.83 3.2 6.09 3.7
Jan-03 2.2 -0.55 3.09 0.61
Jan-03 2.12 -3.01 -1.19 -4.19
Feb-03 2.47 -3.67 -1.94 -4.88
Feb-03 2.45 -4.75 -4.58 -7.18
Feb-03 2.75 -3.54 -3.25 -4.91
Feb-03 3.54 -6.69 -2.77 -4.84
Mar-03 3.82 -6.69 -4.79 -6.53
Mar-03 3.45 -10.09 -4.3 -5.38
Mar-03 2.18 -5.24 -0.25 -0.36
Mar-03 3.12 -5.07 -0.45 -1.16
Apr-03 3.12 -4.67 1.13 -0.23
Apr-03 3.14 -3.48 0.46 -0.74
Apr-03 3.4 -0.88 3.46 1.78
Apr-03 3.96 0.21 5.76 3.82
30-Apr-03 4.31 1.81 7.55 4.48
These figures assume dividends and distributions were reinvested. Index figures
don't include trading and management costs, which would lower performance.
Indices are unmanaged and you can't invest in them directly. Remember that past
performance is not an indication of future results.
Data source: Charles Schwab & Co., Inc.
Schwab Institutional Select(R) Funds
4
EACH OF THE FUNDS REMAINED FULLY INVESTED FOR THE PERIOD, ALLOWING FOR A SMALL
PORTION OF ASSETS HELD IN CASH TO MAINTAIN LIQUIDITY FOR FUND EXPENSES AND
SHAREHOLDER TRANSACTIONS.
THE FUNDS
ALL OF THE INSTITUTIONAL SELECT FUNDS POSTED POSITIVE TOTAL RETURNS FOR THE
REPORT PERIOD. Because the funds in this report are index funds, they are
affected by the same factors that impact their respective benchmark indices.
The total return of the INSTITUTIONAL SELECT S&P 500 FUND was similar to that of
its benchmark, the S&P 500(R) Index, which was 4.48% for the period. During the
period, six companies were dropped from the S&P 500(R) Index and replaced by
others. Being added to or dropped from the S&P 500 often has an immediate effect
on a stock's price. We adjusted the fund's portfolio to track these six
changes, but sought to manage our transactions to avoid buying at highs and
selling at lows while still avoiding the risk of missing out on exposure to
market gains.
Strong performance from large-cap value stocks led the INSTITUTIONAL SELECT
LARGE-CAP VALUE INDEX FUND to be the best-performing of the three funds covered
in this report. Its total return was similar to its benchmark, the S&P 500/Barra
Value Index, which was 5.36%. Not long ago, many of these value stocks were
considered growth stocks. With decreased earnings and stock prices, these stocks
now fit the criteria for value investing, even though they remain in growth
industries. The fund benefited from this confluence of the growth and value
categories as these "new economy" companies once again attracted the interest of
investors.
Gains were modest for the INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND.
Though small-cap stocks generally performed well during the report period,
small-cap growth stocks outperformed small-cap value stocks. The fund's total
return was similar to its benchmark, the S&P Small Cap 600/Barra Value Index,
which was 2.98%.
Small-company stocks are subject to greater volatility than other asset
categories.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
Index figures are not annualized.
The views expressed here are those of fund management only. 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(R) Funds
5
Institutional Select Funds
INSTITUTIONAL SELECT S&P 500 FUND
PERFORMANCE as of 4/30/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1,2
This bar chart compares pre-tax performance of the fund with the S&P 500(R)
Index and the Morningstar Large-Cap Blend Fund category. The table below the
chart shows two types of after-tax returns.
[BAR CHART]
S&P 500 CATEGORY
FUND INDEX AVERAGE
6 MONTHS 4.51% 4.48% 3.31%
1 YEAR -13.32% -13.31% -14.72%
SINCE INCEPTION: 2/1/99 -6.36% -6.25% n/a
6 MONTHS 1 YEAR SINCE INCEPTION
CATEGORY CATEGORY CATEGORY
TOTAL RETURNS AFTER TAX FUND AVERAGE FUND AVERAGE FUND AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 3.82% 1.05% -13.89% -16.49% -6.79% --
- ------------------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 2.78% 0.75% -8.34% -10.00% -5.15% --
- ------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A $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 the S&P 500 Index.
$7,564 FUND
$7,601 S&P 500 INDEX
[LINE GRAPH]
S&P 500/Value
Fund Index
1-Feb-99 10000 10000
Feb-99 9680 9689
Mar-99 10070 10077
Apr-99 10460 10467
May-99 10200 10220
Jun-99 10770 10787
Jul-99 10440 10450
Aug-99 10380 10398
Sep-99 10100 10113
Oct-99 10740 10753
Nov-99 10950 10972
Dec-99 11602 11618
Jan-00 11016 11035
Feb-00 10804 10826
Mar-00 11864 11885
Apr-00 11501 11527
May-00 11259 11291
Jun-00 11541 11569
Jul-00 11360 11389
Aug-00 12066 12096
Sep-00 11420 11458
Oct-00 11370 11410
Nov-00 10481 10510
Dec-00 10534 10562
Jan-01 10901 10937
Feb-01 9911 9939
Mar-01 9278 9309
Apr-01 10003 10033
May-01 10064 10100
Jun-01 9819 9854
Jul-01 9717 9758
Aug-01 9115 9147
Sep-01 8380 8408
Oct-01 8533 8569
Nov-01 9187 9226
Dec-01 9264 9307
Jan-02 9130 9171
Feb-02 8954 8994
Mar-02 9295 9332
Apr-02 8726 8767
May-02 8664 8702
Jun-02 8044 8082
Jul-02 7424 7453
Aug-02 7465 7501
Sep-02 6659 6686
Oct-02 7238 7274
Nov-02 7672 7702
Dec-02 7217 7250
Jan-03 7028 7060
Feb-03 6922 6954
Mar-03 6986 7022
30-Apr-03 7564 7601
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.
The fund's share price and principal values change, and when you sell your
shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results. Results for the report period
are not annualized.
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 4/30/03 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. As of 4/30/03, the total number of funds in the
Morningstar Large-Cap Blend Fund category for the six-month and one-year
periods was 1,410 and 1,362, respectively.
2 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower.
Schwab Institutional Select(R) Funds
6
INSTITUTIONAL SELECT S&P 500 FUND
Fund Facts as of 4/30/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
- -----------------------------------------------
NUMBER OF HOLDINGS 502
- -----------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $46,783
- -----------------------------------------------
PRICE/EARNINGS RATIO (P/E) 24.3
- -----------------------------------------------
PRICE/BOOK RATIO (P/B) 4.4
- -----------------------------------------------
PORTFOLIO TURNOVER RATE 2 2%
- -----------------------------------------------
EXPENSE RATIO 3 0.15%
- -----------------------------------------------
TOP HOLDINGS 4
SECURITY % OF INVESTMENTS
- -------------------------------------------------------------
(1) GENERAL ELECTRIC CO. 3.4%
- -------------------------------------------------------------
(2) MICROSOFT CORP. 3.2%
- -------------------------------------------------------------
(3) WAL-MART STORES, INC. 2.9%
- -------------------------------------------------------------
(4) PFIZER, INC. 2.9%
- -------------------------------------------------------------
(5) EXXON MOBIL CORP. 2.8%
- -------------------------------------------------------------
(6) CITIGROUP, INC. 2.4%
- -------------------------------------------------------------
(7) JOHNSON & JOHNSON 2.0%
- -------------------------------------------------------------
(8) AMERICAN INTERNATIONAL GROUP, INC. 1.8%
- -------------------------------------------------------------
(9) INTERNATIONAL BUSINESS MACHINES CORP. 1.7%
- -------------------------------------------------------------
(10) MERCK & CO., INC. 1.5%
- -------------------------------------------------------------
TOTAL 24.6%
INDUSTRY WEIGHTINGS
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
14.6% HEALTHCARE/DRUG & MEDICINE
9.4% BUSINESS MACHINES & SOFTWARE
7.6% BANKS
7.5% MISCELLANEOUS FINANCE
7.2% RETAIL
5.2% PRODUCER GOODS & MANUFACTURING
5.0% INSURANCE
4.5% FOOD & AGRICULTURE
4.4% ELECTRONICS
34.6% OTHER
1 Source: Morningstar, Inc. This style assessment is the result of comparing the
fund with the S&P 500(R) Index, based on P/E, P/B and median market cap. The
assessment reflects the fund's portfolio as of 4/30/03, which may have changed
since then, and is not a precise indication of risk or performance--past,
present or future.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 12/31/05 (excluding
interest, taxes, and certain non-routine expenses).
4 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
Schwab Institutional Select(R) Funds
7
INSTITUTIONAL SELECT S&P 500 FUND -- Financials
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 2/1/99 1-
4/30/03 10/31/02 10/31/01 10/31/00 10/31/99
- ----------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 7.00 8.36 11.26 10.74 10.00
------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.06 0.12 0.12 0.11 0.07
Net realized and unrealized gains or losses 0.25 (1.37) (2.91) 0.52 0.67
------------------------------------------------------
Total income or loss from investment operations 0.31 (1.25) (2.79) 0.63 0.74
Less distributions:
Dividends from net investment income (0.12) (0.11) (0.11) (0.09) --
Distributions from net realized gains -- -- -- (0.02) --
------------------------------------------------------
Total distributions (0.12) (0.11) (0.11) (0.11) --
------------------------------------------------------
Net asset value at end of period 7.19 7.00 8.36 11.26 10.74
------------------------------------------------------
Total return (%) 4.51 2 (15.18) (24.95) 5.86 7.40 2
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.15 3 0.15 0.15 0.15 4 0.13 3
Expense reductions reflected in above ratio 0.23 3 0.22 0.22 0.22 0.42 3
Ratio of net investment income to
average net assets 1.69 3 1.38 1.14 1.06 1.37 3
Portfolio turnover rate 2 2 12 13 6 1 2
Net assets, end of period ($ x 1,000,000) 221 203 261 382 238
1 Commencement of operations.
2 Not annualized.
3 Annualized.
4 Would have been 0.16% if certain non-routine expenses (proxy fees) had been
included.
See financial notes.
8
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
= Collateral for open futures contracts
/ Issuer is affiliated with the fund's adviser
COST MARKET VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- --------------------------------------------------
99.0% COMMON STOCK 280,423 218,906
0.9% SHORT-TERM
INVESTMENT 1,920 1,920
0.1% U.S. TREASURY
OBLIGATIONS 315 315
- --------------------------------------------------
100.0% TOTAL INVESTMENTS 282,658 221,141
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 99.0% of investments
AEROSPACE / DEFENSE 1.5%
---------------------------------------------------------------------------
The Boeing Co. 21,700 592
Crane Co. 1,500 29
General Dynamics Corp. 5,200 323
Goodrich Corp. 2,800 39
Lockheed Martin Corp. 11,700 586
Northrop Grumman Corp. 4,814 423
Raytheon Co. 10,400 311
Rockwell Automation, Inc. 4,600 105
Rockwell Collins, Inc. 4,700 101
Textron, Inc. 3,300 97
United Technologies Corp. 12,600 779
-----------
3,385
AIR TRANSPORTATION 0.4%
---------------------------------------------------------------------------
Delta Air Lines, Inc. 3,200 41
FedEx Corp. 7,900 473
Southwest Airlines Co. 20,050 320
-----------
834
ALCOHOLIC BEVERAGES 0.6%
---------------------------------------------------------------------------
Adolph Coors Co., Class B 1,000 54
Anheuser-Busch Cos., Inc. 22,200 1,107
Brown-Forman Corp., Class B 1,604 123
-----------
1,284
APPAREL 0.3%
---------------------------------------------------------------------------
o Jones Apparel Group, Inc. 3,200 91
Liz Claiborne, Inc. 2,700 88
Nike, Inc., Class B 6,700 359
o Reebok International Ltd. 1,500 46
VF Corp. 2,800 110
-----------
694
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.1%
---------------------------------------------------------------------------
o Autonation, Inc. 7,800 108
Cooper Tire & Rubber Co. 1,800 25
Cummins, Inc. 1,200 32
Dana Corp. 3,800 35
Danaher Corp. 4,200 290
Delphi Corp. 14,149 119
Eaton Corp. 1,900 156
Ford Motor Co. 47,511 489
General Motors Corp. 14,475 522
Genuine Parts Co. 4,400 141
Goodyear Tire & Rubber Co. 4,300 25
Harley-Davidson, Inc. 7,800 347
o Navistar International Corp. 1,700 47
Visteon Corp. 3,669 26
-----------
2,362
BANKS 7.6%
---------------------------------------------------------------------------
AmSouth Bancorp. 8,900 187
Bank of America Corp. 39,000 2,888
The Bank of New York Co., Inc. 19,500 516
See financial notes.
9
INSTITUTIONAL SELECT S&P 500 FUND -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Bank One Corp. 29,900 1,078
BB&T Corp. 12,100 394
Comerica, Inc. 4,700 205
Fifth Third Bancorp 14,869 733
First Tennessee National Corp. 3,200 140
FleetBoston Financial Corp. 27,133 720
Golden West Financial Corp. 3,900 294
Huntington Bancshares, Inc. 5,883 115
J.P. Morgan Chase & Co. 51,440 1,510
KeyCorp, Inc. 10,900 263
Marshall & Ilsley Corp. 5,828 171
Mellon Financial Corp. 11,000 291
National City Corp. 15,800 473
North Fork Bancorp., Inc. 4,100 133
Northern Trust Corp. 5,600 197
PNC Financial Services Group, Inc. 7,300 320
o Providian Financial Corp. 7,900 58
Regions Financial Corp. 5,600 189
SouthTrust Corp. 8,800 236
State Street Corp. 8,700 305
SunTrust Banks, Inc. 7,200 412
Synovus Financial Corp. 7,500 146
U.S. Bancorp 49,507 1,097
Union Planters Corp. 4,850 138
Wachovia Corp. 35,000 1,337
Wells Fargo & Co. 43,613 2,105
Zions Bancorp. 2,400 118
-----------
16,769
BUSINESS MACHINES & SOFTWARE 9.4%
---------------------------------------------------------------------------
Adobe Systems, Inc. 5,800 201
o Apple Computer, Inc. 9,100 129
Autodesk, Inc. 3,000 47
o BMC Software, Inc. 5,800 87
o Cisco Systems, Inc. 183,600 2,761
o Compuware Corp. 10,100 44
o Comverse Technology, Inc. 4,900 64
o Dell Computer Corp. 66,800 1,931
o EMC Corp. 56,924 518
o Gateway, Inc. 8,700 25
Hewlett-Packard Co. 78,901 1,286
(9) International Business Machines Corp. 44,000 3,736
o Lexmark International, Inc., Class A 3,200 238
=(2) Microsoft Corp. 276,700 7,075
o NCR Corp. 2,600 57
o Network Appliance, Inc. 8,600 114
o Novell, Inc. 9,700 27
o Novellus Systems, Inc. 3,650 102
o Oracle Corp. 136,300 1,619
Pitney Bowes, Inc. 6,000 211
o Sun Microsystems, Inc. 82,500 272
o Unisys Corp. 8,600 90
o Xerox Corp. 20,500 202
-----------
20,836
BUSINESS SERVICES 3.6%
---------------------------------------------------------------------------
o Allied Waste Industries, Inc. 5,400 45
o Apollo Group, Inc., Class A 4,400 238
Automatic Data Processing, Inc. 15,500 521
o Cendant Corp. 26,570 379
Cintas Corp. 4,220 151
o Citrix Systems, Inc. 4,300 82
Computer Associates International, Inc. 14,500 235
o Computer Sciences Corp. 4,700 155
o Concord EFS, Inc. 12,900 178
o Convergys Corp. 4,525 73
Deluxe Corp. 1,700 75
o eBay, Inc. 7,991 741
Electronic Data Systems Corp. 12,100 220
Equifax, Inc. 3,500 81
First Data Corp. 19,600 769
o Fiserv, Inc. 4,950 146
H&R Block, Inc. 4,600 178
Interpublic Group of Cos., Inc. 9,800 112
o Intuit, Inc. 5,483 213
o Mercury Interactive Corp. 2,000 68
Moody's Corp. 3,800 184
Omnicom Group, Inc. 5,100 316
See financial notes.
10
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Parametric Technology Corp. 7,100 23
Paychex, Inc. 9,525 297
o PeopleSoft, Inc. 7,700 116
o QLogic Corp. 2,513 111
o Robert Half International, Inc. 4,600 75
o Siebel Systems, Inc. 12,500 108
o Sungard Data Systems, Inc. 7,113 153
o Symantec Corp. 3,800 167
o Thermo Electron Corp. 4,000 73
o TMP Worldwide, Inc. 2,961 50
Tyco International Ltd. 51,376 801
o Veritas Software Corp. 10,400 229
Waste Management, Inc. 15,300 332
o Yahoo!, Inc. 15,100 374
-----------
8,069
CHEMICAL 2.1%
---------------------------------------------------------------------------
3M Co. 10,300 1,298
Air Products & Chemicals, Inc. 5,900 254
Dow Chemical Co. 23,660 772
E.I. du Pont de Nemours & Co. 25,782 1,097
Eastman Chemical Co. 1,800 55
Ecolab, Inc. 3,400 174
Great Lakes Chemical Corp. 1,400 34
o Hercules, Inc. 2,900 30
PPG Industries, Inc. 4,600 223
Praxair, Inc. 4,100 238
Rohm & Haas Co. 5,563 184
The Sherwin-Williams Co. 4,700 131
Sigma-Aldrich Corp. 1,800 90
-----------
4,580
CONSTRUCTION 0.3%
---------------------------------------------------------------------------
Centex Corp. 1,600 106
Fluor Corp. 2,100 72
KB Home Corp. 1,100 54
Masco Corp. 12,400 261
o McDermott International, Inc. 1,900 6
Pulte Homes, Inc. 1,600 93
The Stanley Works 2,200 53
Vulcan Materials Co. 2,600 91
-----------
736
CONSUMER DURABLE 0.2%
---------------------------------------------------------------------------
Black & Decker Corp. 2,600 107
Leggett & Platt, Inc. 4,800 99
Maytag Corp. 2,000 42
Whirlpool Corp. 1,800 96
-----------
344
CONSUMER NON-DURABLE 1.0%
---------------------------------------------------------------------------
o American Greetings Corp.,
Class A 3,300 48
Darden Restaurants, Inc. 4,500 79
o Electronic Arts, Inc. 3,625 215
Fortune Brands, Inc. 3,800 184
Hasbro, Inc. 4,200 67
o International Game Technology 2,300 199
Mattel, Inc. 11,000 239
McDonald's Corp. 32,700 559
Newell Rubbermaid, Inc. 6,867 209
o Starbucks Corp. 9,840 231
Tupperware Corp. 1,600 22
Wendy's International, Inc. 3,000 87
-----------
2,139
CONTAINERS 0.1%
---------------------------------------------------------------------------
Ball Corp. 1,600 90
Bemis Co. 1,400 64
o Pactiv Corp. 4,100 84
o Sealed Air Corp. 2,000 86
-----------
324
ELECTRONICS 4.4%
---------------------------------------------------------------------------
o ADC Telecommunications, Inc. 21,700 52
o Advanced Micro Devices, Inc. 8,700 65
o Agilent Technologies, Inc. 11,684 187
o Altera Corp. 9,620 152
o American Power Conversion Corp. 5,150 80
o Analog Devices, Inc. 9,300 308
o Andrew Corp. 2,800 21
Applied Biosystems Group -- Applera Corp. 5,200 91
o Applied Materials, Inc. 42,600 622
o Applied Micro Circuits Corp. 8,221 37
o Broadcom Corp., Class A 7,000 125
o CIENA Corp. 11,600 56
See financial notes.
11
INSTITUTIONAL SELECT S&P 500 FUND -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Intel Corp. 171,400 3,154
ITT Industries, Inc. 2,400 140
o Jabil Circuit, Inc. 5,014 94
o JDS Uniphase Corp. 36,528 118
o KLA-Tencor Corp. 4,900 201
Linear Technology Corp. 8,200 283
o LSI Logic Corp. 9,400 50
o Lucent Technologies, Inc. 87,945 158
Maxim Integrated Products, Inc. 8,500 334
o Micron Technology, Inc. 15,700 133
Molex, Inc. 4,900 114
Motorola, Inc. 59,526 471
o National Semiconductor Corp. 4,700 88
o Nvidia Corp. 4,100 59
PerkinElmer, Inc. 3,300 33
o PMC -- Sierra, Inc. 4,600 38
o Power-One, Inc. 2,300 13
Qualcomm, Inc. 20,500 654
o Sanmina -- SCI Corp. 14,200 68
o Solectron Corp. 21,400 68
Symbol Technologies, Inc. 5,636 62
o Tektronix, Inc. 2,100 39
o Tellabs, Inc. 10,600 66
o Teradyne, Inc. 4,900 57
Texas Instruments, Inc. 44,800 828
o Thomas & Betts Corp. 1,500 24
o Univision Communications, Inc., Class A 5,994 182
o Waters Corp. 3,200 77
o Xilinx, Inc. 8,600 233
-----------
9,635
ENERGY: RAW MATERIALS 1.4%
---------------------------------------------------------------------------
Anadarko Petroleum Corp. 6,321 281
Apache Corp. 4,032 231
Baker Hughes, Inc. 8,600 241
o BJ Services Co. 4,000 146
Burlington Resources, Inc. 5,400 250
Devon Energy Corp. 6,000 283
EOG Resources, Inc. 2,922 109
Halliburton Co. 11,200 240
Nabors Industries Ltd. 3,800 149
o Noble Corp. 3,500 108
Occidental Petroleum Corp. 9,600 287
Rowan Cos., Inc. 2,500 51
Schlumberger Ltd. 15,200 637
-----------
3,013
FOOD & AGRICULTURE 4.5%
---------------------------------------------------------------------------
Altria Group, Inc. 53,400 1,643
Archer-Daniels-Midland Co. 16,648 184
Campbell Soup Co. 10,500 231
The Coca-Cola Co. 64,300 2,598
Coca-Cola Enterprises, Inc. 11,400 222
ConAgra Foods, Inc. 13,700 288
General Mills, Inc. 9,700 437
H.J. Heinz Co. 9,200 275
Hershey Foods Corp. 3,600 235
Kellogg Co. 10,300 337
McCormick & Co., Inc. 3,599 89
Monsanto Co. 6,717 117
The Pepsi Bottling Group, Inc. 6,980 143
PepsiCo, Inc. 44,480 1,925
Sara Lee Corp. 20,300 341
Supervalu, Inc. 3,500 58
Sysco Corp. 16,700 480
Wm. Wrigley Jr. Co. 5,800 329
-----------
9,932
GOLD 0.1%
---------------------------------------------------------------------------
Newmont Mining Corp. 10,400 281
HEALTHCARE / DRUGS & MEDICINE 14.6%
---------------------------------------------------------------------------
Abbott Laboratories 40,600 1,650
Allergan, Inc. 3,500 246
AmerisourceBergen Corp. 3,100 179
o Amgen, Inc. 33,300 2,042
o Anthem, Inc. 3,628 249
Bausch & Lomb, Inc. 1,300 46
Baxter International, Inc. 15,000 345
Becton Dickinson & Co. 6,600 234
o Biogen, Inc. 3,800 144
Biomet, Inc. 6,600 201
o Boston Scientific Corp. 10,700 461
Bristol-Myers Squibb Co. 49,900 1,274
See financial notes.
12
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
C.R. Bard, Inc. 1,600 101
Cardinal Health, Inc. 11,900 658
o Chiron Corp. 5,000 204
Eli Lilly & Co. 29,300 1,870
o Forest Laboratories, Inc. 9,300 481
o Genzyme Corp.-- General Division 5,700 230
o Guidant Corp. 8,100 316
HCA, Inc. 13,400 430
Health Management Associates, Inc., Class A 5,900 101
o Humana, Inc. 4,200 46
IMS Health, Inc. 6,000 92
(7) Johnson & Johnson 76,868 4,332
o King Pharmaceuticals, Inc. 5,933 75
o Manor Care, Inc. 2,600 51
McKesson Corp. 7,300 202
o Medimmune, Inc. 6,400 226
Medtronic, Inc. 31,400 1,499
(10) Merck & Co., Inc. 58,300 3,392
=(4) Pfizer, Inc. 206,197 6,341
o Quest Diagnostics 2,737 163
o Quintiles Transnational Corp. 3,100 44
Schering-Plough Corp. 37,600 681
o St. Jude Medical, Inc. 4,500 236
Stryker Corp. 5,220 350
o Tenet Healthcare Corp. 12,300 182
UnitedHealth Group, Inc. 8,100 746
o Watson Pharmaceuticals, Inc. 2,700 78
o WellPoint Health Networks, Inc. 4,000 304
Wyeth 34,400 1,497
o Zimmer Holdings, Inc. 4,900 230
-----------
32,229
HOUSEHOLD PRODUCTS 2.4%
---------------------------------------------------------------------------
Alberto-Culver Co., Class B 1,500 74
Avon Products, Inc. 6,000 349
Clorox Co. 5,600 253
Colgate-Palmolive Co. 14,000 801
The Gillette Co. 27,100 825
International Flavors & Fragrances, Inc. 2,300 73
Procter & Gamble Co. 33,500 3,010
-----------
5,385
INSURANCE 5.0%
---------------------------------------------------------------------------
ACE Ltd. 6,700 222
Aetna, Inc. 4,100 204
AFLAC, Inc. 13,500 442
The Allstate Corp. 18,300 692
AMBAC Financial Group, Inc. 3,133 183
(8) American International Group, Inc. 67,600 3,917
AON Corp. 7,800 173
Chubb Corp. 4,300 227
CIGNA Corp. 3,600 188
Cincinnati Financial Corp. 4,100 151
Hartford Financial Services Group, Inc. 6,400 261
Jefferson-Pilot Corp. 3,900 156
John Hancock Financial Services, Inc. 7,281 211
Lincoln National Corp. 4,700 150
Loews Corp. 4,800 198
Marsh & McLennan Cos., Inc. 14,100 672
MBIA, Inc. 3,600 161
Metlife, Inc. 18,157 522
MGIC Investment Corp. 2,500 114
Principal Financial Group, Inc. 8,484 247
The Progressive Corp. 5,700 388
Prudential Financial, Inc. 14,500 464
Safeco Corp. 3,600 139
St. Paul Cos., Inc. 5,700 196
Torchmark Corp. 2,900 112
Travelers Property Casualty Corp., Class B 26,000 422
UnumProvident Corp. 6,160 71
XL Capital Ltd., Class A 3,600 296
-----------
11,179
MEDIA 4.0%
---------------------------------------------------------------------------
o AOL Time Warner, Inc. 115,500 1,580
o Clear Channel Communications, Inc. 15,995 626
o Comcast Corp., Class A 59,638 1,903
Dow Jones & Co., Inc. 2,100 83
Gannett Co., Inc. 6,800 515
See financial notes.
13
INSTITUTIONAL SELECT S&P 500 FUND -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Knight-Ridder, Inc. 2,000 129
The McGraw-Hill Cos., Inc. 4,900 286
Meredith Corp. 1,200 52
New York Times Co., Class A 3,800 176
R.R. Donnelley & Sons Co. 3,000 60
Tribune Co. 8,100 397
o Viacom, Inc., Class B 45,445 1,973
The Walt Disney Co. 52,800 985
-----------
8,765
MISCELLANEOUS FINANCE 7.5%
---------------------------------------------------------------------------
American Express Co. 34,100 1,291
The Bear Stearns Cos., Inc. 2,846 190
Capital One Financial Corp. 5,600 234
/ The Charles Schwab Corp. 34,638 299
Charter One Financial, Inc. 5,579 162
=(6) Citigroup, Inc. 133,100 5,224
Countrywide Financial Corp. 3,300 223
Fannie Mae 25,700 1,860
Federated Investors, Inc., Class B 2,800 76
Franklin Resources, Inc. 6,500 227
Freddie Mac 18,100 1,048
Goldman Sachs Group, Inc. 12,454 945
Janus Capital Group, Inc. 5,500 76
Lehman Brothers Holdings, Inc. 6,500 409
MBNA Corp. 33,050 625
Merrill Lynch & Co., Inc. 22,400 920
Morgan Stanley 27,900 1,249
SLM Corp. 3,900 437
T. Rowe Price Group, Inc. 3,200 98
Washington Mutual, Inc. 24,500 968
-----------
16,561
NON-FERROUS METALS 0.3%
---------------------------------------------------------------------------
Alcoa, Inc. 21,804 500
Engelhard Corp. 3,200 79
Freeport-McMoran Copper & Gold, Inc., Class B 4,700 81
o Phelps Dodge Corp. 2,160 67
-----------
727
OIL: DOMESTIC 0.8%
---------------------------------------------------------------------------
Amerada Hess Corp. 2,400 108
Ashland, Inc. 1,900 56
ConocoPhillips 17,649 888
Kerr-McGee Corp. 3,073 130
Marathon Oil Corp. 7,900 180
Sunoco, Inc. 1,800 67
Transocean, Inc. 7,920 151
Unocal Corp. 6,500 180
-----------
1,760
OIL: INTERNATIONAL 3.5%
---------------------------------------------------------------------------
ChevronTexaco Corp. 27,496 1,727
=(5) Exxon Mobil Corp. 174,120 6,129
-----------
7,856
OPTICAL & PHOTO 0.1%
---------------------------------------------------------------------------
Eastman Kodak Co. 8,000 239
PAPER & FOREST PRODUCTS 0.8%
---------------------------------------------------------------------------
Boise Cascade Corp. 1,400 32
Georgia-Pacific Corp. 6,086 94
International Paper Co. 12,239 438
Kimberly-Clark Corp. 13,400 667
o Louisiana-Pacific Corp. 3,000 24
MeadWestvaco Corp. 5,122 121
Temple-Inland, Inc. 1,400 63
Weyerhaeuser Co. 5,600 278
-----------
1,717
PRODUCER GOODS & MANUFACTURING 5.2%
---------------------------------------------------------------------------
o American Standard Cos., Inc. 2,000 142
Avery Dennison Corp. 3,100 164
Caterpillar, Inc. 9,100 479
Cooper Industries Ltd., Class A 2,500 93
o Corning, Inc. 30,900 167
Deere & Co. 6,200 273
Dover Corp. 5,000 144
Emerson Electric Co. 11,000 558
=(1) General Electric Co. 257,300 7,578
Honeywell International, Inc. 22,162 523
Illinois Tool Works, Inc. 7,900 505
Ingersoll-Rand Co., Class A 4,300 190
See financial notes.
14
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Johnson Controls, Inc. 2,400 197
o Millipore Corp. 1,200 41
Pall Corp. 3,000 63
Parker Hannifin Corp. 3,400 138
Snap-On, Inc. 1,400 41
W.W. Grainger, Inc. 2,400 111
-----------
11,407
RAILROAD & SHIPPING 0.5%
---------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 9,500 268
CSX Corp. 5,300 169
Norfolk Southern Corp. 9,800 208
Union Pacific Corp. 6,500 387
-----------
1,032
REAL PROPERTY 0.4%
---------------------------------------------------------------------------
Apartment Investment & Management
Co., Class A 2,300 87
Equity Office Properties Trust 10,700 278
Equity Residential 6,800 176
Plum Creek Timber Co., Inc. 4,500 105
Simon Property Group, Inc. 4,800 176
-----------
822
RETAIL 7.2%
---------------------------------------------------------------------------
Albertson's, Inc. 9,783 194
o AutoZone, Inc. 2,700 218
o Bed, Bath & Beyond, Inc. 7,400 292
o Best Buy Co., Inc. 8,100 280
o Big Lots, Inc. 2,900 36
Circuit City Stores, Inc. 5,500 32
o Costco Wholesale Corp. 11,700 405
CVS Corp. 10,000 242
Dillards, Inc., Class A 2,200 31
Dollar General Corp. 8,250 120
Family Dollar Stores, Inc. 4,600 157
o Federated Department Stores, Inc. 5,000 153
o The Gap, Inc. 22,800 379
Home Depot, Inc. 60,100 1,691
J.C. Penney Co., Inc. Holding Co. 6,600 113
o Kohl's Corp. 8,900 506
o Kroger Co. 19,700 282
Limited Brands, Inc. 13,500 196
Lowe's Cos., Inc. 20,400 895
The May Department Stores Co. 7,200 156
Nordstrom, Inc. 3,500 61
o Office Depot, Inc. 7,800 99
RadioShack Corp. 4,400 104
o Safeway, Inc. 11,200 186
Sears, Roebuck & Co. 7,900 224
o Staples, Inc. 12,200 232
Target Corp. 23,600 789
Tiffany & Co. 3,550 99
TJX Cos., Inc. 13,300 256
o Toys `R' Us, Inc. 5,400 55
=(3) Wal-Mart Stores, Inc. 114,400 6,443
Walgreen Co. 26,400 815
Winn-Dixie Stores, Inc. 3,400 43
o Yum! Brands, Inc. 7,500 185
-----------
15,969
STEEL 0.1%
---------------------------------------------------------------------------
Allegheny Technologies, Inc. 2,350 10
Nucor Corp. 2,400 98
United States Steel Corp. 2,600 37
Worthington Industries, Inc. 2,100 28
-----------
173
TELEPHONE 3.7%
---------------------------------------------------------------------------
Alltel Corp. 8,200 384
AT&T Corp. 19,997 341
o AT&T Wireless Services, Inc. 69,946 452
o Avaya, Inc. 9,795 38
BellSouth Corp. 47,900 1,221
CenturyTel, Inc. 3,500 103
o Citizens Communications Co. 7,286 80
o Nextel Communications, Inc., Class A 26,600 393
o Qwest Communications International, Inc. 43,821 165
SBC Communications, Inc. 85,930 2,007
Scientific-Atlanta, Inc. 3,900 63
Sprint Corp. (FON Group) 24,500 282
See financial notes.
15
INSTITUTIONAL SELECT S&P 500 FUND -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Sprint Corp. (PCS Group) 25,900 91
Verizon Communications, Inc. 70,828 2,648
-----------
8,268
TOBACCO 0.1%
---------------------------------------------------------------------------
R.J. Reynolds Tobacco Holdings, Inc. 2,300 65
UST, Inc. 4,100 128
-----------
193
TRAVEL & RECREATION 0.5%
---------------------------------------------------------------------------
Brunswick Corp. 2,400 52
Carnival Corp. 16,300 450
o Harrah's Entertainment, Inc. 2,800 110
Hilton Hotels Corp. 9,400 125
Marriott International, Inc.,
Class A 5,900 212
Sabre Holdings Corp. 3,518 74
Starwood Hotels & Resorts Worldwide, Inc. 4,900 132
-----------
1,155
TRUCKING & FREIGHT 0.9%
---------------------------------------------------------------------------
Paccar, Inc. 3,250 190
Ryder Systems, Inc. 1,700 42
United Parcel Service, Inc., Class B 29,024 1,803
-----------
2,035
UTILITIES: ELECTRIC & GAS 2.8%
---------------------------------------------------------------------------
o The AES Corp. 14,600 88
Allegheny Energy, Inc. 3,201 27
Ameren Corp. 4,300 176
American Electric Power Co., Inc. 9,780 258
o Calpine Corp. 10,300 55
Centerpoint Energy, Inc. 8,000 63
Cinergy Corp. 4,400 150
CMS Energy Corp. 3,700 23
Consolidated Edison, Inc. 5,400 210
Constellation Energy Group, Inc. 4,000 117
Dominion Resources, Inc. 7,991 473
DTE Energy Co. 4,400 177
Duke Energy Corp. 23,000 405
Dynegy, Inc., Class A 9,700 43
o Edison International 8,400 123
El Paso Corp. 15,226 114
Entergy Corp. 5,600 261
Exelon Corp. 8,350 443
FirstEnergy Corp. 7,788 263
FPL Group, Inc. 4,700 286
KeySpan Corp. 3,900 132
Kinder Morgan, Inc. 3,105 146
o Mirant Corp. 10,754 36
Nicor, Inc. 1,000 30
NiSource, Inc. 6,327 120
Peoples Energy Corp. 800 31
o PG&E Corp. 10,300 154
Pinnacle West Capital Corp. 2,400 80
PPL Corp. 4,100 148
Progress Energy, Inc. 6,126 256
Public Service Enterprise Group, Inc. 5,600 215
Sempra Energy 5,185 139
The Southern Co. 18,400 535
TECO Energy, Inc. 4,300 46
TXU Corp. 8,000 159
Williams Cos., Inc. 14,200 99
Xcel Energy, Inc. 10,060 136
-----------
6,217
SHORT-TERM INVESTMENT
0.9% of investments
Provident Institutional TempFund 1,919,790 1,920
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
U.S. TREASURY OBLIGATIONS
0.1% of investments
= U.S. Treasury Bills,
1.13%-1.15%, 06/19/03 315 315
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
16
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- ---------------------------------------------------------------------------------
Investments, at market value (including
$6,816 of securities on loan) $221,141 a
Collateral held for securities on loan 6,997
Receivables:
Fund shares sold 217
Interest 2
Dividends 230
Prepaid expenses + 13
------------
TOTAL ASSETS 228,600
LIABILITIES
- ---------------------------------------------------------------------------------
Collateral held for securities on loan 6,997
Payables:
Fund shares redeemed 258
Investments bought 258
Transfer agent and shareholder service fees 2
Accrued expenses + 63
------------
TOTAL LIABILITIES 7,578
NET ASSETS
- ---------------------------------------------------------------------------------
TOTAL ASSETS 228,600
TOTAL LIABILITIES - 7,578
------------
NET ASSETS $221,022
NET ASSETS BY SOURCE
Capital received from investors 332,691
Net investment income not yet distributed 1,065
Net realized capital losses (51,444)
Net unrealized capital losses (61,290) b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$221,022 30,754 $7.19
a The fund paid $282,658 for these securities. Not counting short-term
obligations and government securities, the fund paid $14,395 for securities
during the report period and received $4,168 from securities it sold or that
matured.
b These derive from investments and futures. As of the report date, the fund had
ten open S&P 500 futures contracts due to expire on June 20, 2003, with a
contract value of $2,290 and unrealized gains of $227.
FEDERAL TAX DATA
- --------------------------------------------------------------------------------
PORTFOLIO COST $286,101
NET UNREALIZED GAINS AND LOSSES:
Gains $20,809
Losses + (85,769)
-----------
($64,960)
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $2,882
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2008 $465
2009 17,888
2010 + 28,528
-----------
$46,881
See financial notes.
17
INSTITUTIONAL SELECT S&P 500 FUND -- Financials
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- ---------------------------------------------------------------------------------
Dividends $1,857
Interest 10
Lending of securities + 13
------------
TOTAL INVESTMENT INCOME 1,880
NET REALIZED GAINS AND LOSSES
- ---------------------------------------------------------------------------------
Net realized losses on investments sold (1,505)
Net realized losses on futures contracts + (29)
------------
NET REALIZED LOSSES (1,534)
NET UNREALIZED GAINS AND LOSSES
- ---------------------------------------------------------------------------------
Net unrealized gains on investments 9,031
Net unrealized gains on futures contracts + 154
------------
NET UNREALIZED GAINS 9,185
EXPENSES
- ---------------------------------------------------------------------------------
Investment adviser and administrator fees 183 a
Transfer agent and shareholder service fees 102 b
Trustees' fees 3 c
Custodian fees 21
Portfolio accounting fees 15
Professional fees 11
Registration fees 17
Shareholder reports 23
Interest expense 1
Other expenses + 10
------------
Total expenses 386
Expense reduction - 233 d
------------
NET EXPENSES 153
INCREASE IN NET ASSETS FROM OPERATIONS
- ---------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,880
NET EXPENSES - 153
------------
NET INVESTMENT INCOME 1,727
NET REALIZED LOSSES (1,534) e
NET UNREALIZED GAINS + 9,185 e
------------
INCREASE IN NET ASSETS FROM OPERATIONS $9,378
a Calculated as a percentage of average daily net assets: 0.18% of the first $1
billion and 0.15% of assets beyond that.
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.
c For the fund's independent trustees only.
d Includes $183 from the investment adviser (CSIM) and $50 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 December 31, 2005, to 0.15% of average daily net assets. This
limit doesn't include interest, taxes and certain non-routine expenses.
e These add up to a net gain on investments of $7,651.
See financial notes.
18
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for current period are unaudited.
OPERATIONS
- --------------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income $1,727 $3,541
Net realized losses (1,534) (24,773)
Net unrealized gains or losses + 9,185 (19,562)
------------------------------------
INCREASE OR DECREASE IN NET ASSETS FROM OPERATIONS 9,378 (40,794)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------------------------
Dividends from net investment income $3,544 $3,522 a
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 6,856 $47,221 13,395 $109,254
Shares reinvested 511 3,544 338 2,960
Shares redeemed + (5,550) (38,223) (15,951) (125,789) b
---------------------------------------------------------------------
NET INCREASE OR DECREASE 1,817 $12,542 (2,218) ($13,575)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 28,937 $202,646 31,155 $260,537
Total increase
or decrease 1,817 18,376 (2,218) (57,891) c
---------------------------------------------------------------------
END OF PERIOD 30,754 $221,022 28,937 $202,646 d
a The tax-basis components of distributions paid for the prior period are:
Ordinary Income $3,522
Long-term capital gains $--
b Dollar amounts are net of proceeds received from early withdrawal fees that
the fund charges on shares sold 180 days or less after buying them.
CURRENT PERIOD $12
PRIOR PERIOD $116
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 net investment income not yet distributed in the amount of $1,065 and
$2,882 for the current period and the prior period, respectively.
See financial notes.
19
INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND
PERFORMANCE as of 4/30/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1,2
This bar chart compares pre-tax performance of the fund with the S&P 500/Barra
Value Index and the Morningstar Large-Cap Value Fund category. The table below
the chart shows two types of after-tax returns.
[BAR CHART]
S&P 500/BARRA CATEGORY
FUND VALUE INDEX AVERAGE
6 MONTHS 5.30% 5.36% 4.26%
1 YEAR -14.47% -14.62% -15.64%
SINCE INCEPTION: 2/1/99 -3.86% -3.74% n/a
6 MONTHS 1 YEAR SINCE INCEPTION
CATEGORY CATEGORY CATEGORY
TOTAL RETURNS AFTER TAX FUND AVERAGE FUND AVERAGE FUND AVERAGE
- ----------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 4.28% 1.69% -15.30% -17.68% -5.00% --
- ----------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (still were sold) 3.26% 1.28% -9.07% -10.57% -3.45% --
- ----------------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A $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 the S&P 500/Barra
Value Index.
$8,461 FUND
$8,504 S&P 500/BARRA VALUE INDEX
[LINE GRAPH]
S&P 500/Barra Value
Fund Index
01-Feb-99 10000 10000
Feb-99 9780 9785
Mar-99 10080 10081
Apr-99 10930 10950
May-99 10730 10756
Jun-99 11140 11169
Jul-99 10790 10826
Aug-99 10520 10553
Sep-99 10110 10140
Oct-99 10680 10712
Nov-99 10620 10649
Dec-99 11008 11049
Jan-00 10650 10698
Feb-00 9996 10030
Mar-00 11039 11076
Apr-00 10957 11001
May-00 10988 11036
Jun-00 10548 10600
Jul-00 10763 10812
Aug-00 11489 11537
Sep-00 11478 11535
Oct-00 11693 11751
Nov-00 11090 11149
Dec-00 11662 11723
Jan-01 12154 12218
Feb-01 11342 11408
Mar-01 10894 10957
Apr-01 11630 11700
May-01 11748 11823
Jun-01 11363 11440
Jul-01 11171 11242
Aug-01 10520 10592
Sep-01 9526 9586
Oct-01 9526 9586
Nov-01 10114 10195
Dec-01 10275 10350
Jan-02 9994 10066
Feb-02 9904 9976
Mar-02 10410 10487
Apr-02 9893 9962
May-02 9938 10002
Jun-02 9319 9370
Jul-02 8328 8358
Aug-02 8373 8414
Sep-02 7428 7453
Oct-02 8036 8072
Nov-02 8598 8639
Dec-02 8149 8190
Jan-03 7930 7966
Feb-03 7711 7749
Mar-03 7711 7739
30-Apr-03 8461 8504
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.
The fund's share price and principal values change, and when you sell your
shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results. Results for the report period
are not annualized.
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
4/30/03 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. As of 4/30/03, the total number of
funds in the Morningstar Large-Cap Value Fund category for the six-month and
one-year periods was 936 and 883, respectively.
2 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower.
Schwab Institutional Select(R) Funds
20
INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND
FUND FACTS as of 4/30/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large /X/ / / / /
Medium / / / / / /
Small / / / / / /
STATISTICS
- ----------------------------------------------
NUMBER OF HOLDINGS 354
- ----------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $24,606
- ----------------------------------------------
PRICE/EARNINGS RATIO (P/E) 21.0
- ----------------------------------------------
PRICE/BOOK RATIO (P/B) 2.2
- ----------------------------------------------
PORTFOLIO TURNOVER RATE 2 11%
- ----------------------------------------------
EXPENSE RATIO 3 0.25%
- ----------------------------------------------
TOP HOLDINGS 4
SECURITY % OF INVESTMENTS
- -------------------------------------------------------------
(1) EXXON MOBIL CORP. 5.7%
- -------------------------------------------------------------
(2) CITIGROUP, INC. 4.8%
- -------------------------------------------------------------
(3) AMERICAN INTERNATIONAL GROUP. INC. 3.6%
- -------------------------------------------------------------
(4) BANK OF AMERICA CORP. 2.7%
- -------------------------------------------------------------
(5) WELLS FARGO & CO. 1.9%
- -------------------------------------------------------------
(6) SBC COMMUNICATIONS, INC. 1.9%
- -------------------------------------------------------------
(7) VIACOM, INC. Class B 1.8%
- -------------------------------------------------------------
(8) COMCAST CORP. Class A 1.7%
- -------------------------------------------------------------
(9) CHEVRON TEXACO CORP. 1.6%
- -------------------------------------------------------------
(10) HOME DEPOT, INC. 1.5%
- -------------------------------------------------------------
TOTAL 27.2%
INDUSTRY WEIGHTINGS
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
14.4% BANKS
11.6% MISCELLANEOUS FINANCE
9.3% INSURANCE
7.5% MEDIA
7.3% OIL: INTERNATIONAL
5.8% UTILITIES: ELECTRIC & GAS
4.7% TELEPHONE
3.9% RETAIL
3.0% AEROSPACE/DEFENSE
32.5% OTHER
1 Source: Morningstar, Inc. This style assessment is the result of comparing the
fund with the S&P 500(R) Index, based on P/E, P/B and median market cap. The
assessment reflects the fund's portfolio as of 4/30/03, which may have changed
since then, and is not a precise indication of risk or performance--past,
present or future.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 12/31/05 (excluding
interest, taxes, and certain non-routine expenses).
4 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
Schwab Institutional Select(R) Funds
21
INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND -- Financials
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 2/1/99 1-
4/30/03 10/31/02 10/31/01 10/31/00 10/31/99
- ----------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 7.14 8.92 11.44 10.68 10.00
------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.07 0.18 0.14 0.15 0.09
Net realized and unrealized gains or losses 0.30 (1.49) (2.19) 0.84 0.59
------------------------------------------------------
Total income or loss from investment operations 0.37 (1.31) (2.05) 0.99 0.68
Less distributions:
Dividends from net investment income (0.18) (0.15) (0.15) (0.11) --
Distributions from net realized gains -- (0.32) (0.32) (0.12) --
------------------------------------------------------
Total distributions (0.18) (0.47) (0.47) (0.23) --
------------------------------------------------------
Net asset value at end of period 7.33 7.14 8.92 11.44 10.68
------------------------------------------------------
Total return (%) 5.30 2 (15.65) (18.53) 9.48 6.80 2
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.25 3 0.25 5 0.25 0.25 4 0.21 3
Expense reductions reflected in above ratio 0.25 3 0.22 0.20 0.25 0.49 3
Ratio of net investment income to
average net assets 1.93 3 1.72 1.47 1.64 1.62 3
Portfolio turnover rate 11 2 26 47 27 19 2
Net assets, end of period ($ x 1,000,000) 69 70 128 129 71
1 Commencement of operations.
2 Not annualized.
3 Annualized.
4 Would have been 0.26% if certain non-routine expenses (proxy fees) had been
included.
5 Would have been 0.26% if certain non-routine expenses (interest expense) had
been included.
See financial notes.
22
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
= Collateral for open futures contracts
COST MARKET VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- --------------------------------------------------
98.8% COMMON STOCK 79,652 68,429
1.1% SHORT-TERM
INVESTMENT 781 781
0.1% U.S. TREASURY
OBLIGATIONS 60 60
- --------------------------------------------------
100.0% TOTAL INVESTMENTS 80,493 69,270
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 98.8% of investments
AEROSPACE / DEFENSE 3.0%
---------------------------------------------------------------------------
The Boeing Co. 13,800 376
Crane Co. 800 16
General Dynamics Corp. 2,700 168
Goodrich Corp. 1,800 25
Lockheed Martin Corp. 7,800 390
Northrop Grumman Corp. 2,724 240
Raytheon Co. 7,100 212
Rockwell Automation, Inc. 3,400 77
Textron, Inc. 2,400 71
United Technologies Corp. 8,100 501
---------
2,076
AIR TRANSPORTATION 0.8%
---------------------------------------------------------------------------
Delta Air Lines, Inc. 1,400 18
FedEx Corp. 5,300 317
Southwest Airlines Co. 12,500 200
-----------
535
ALCOHOLIC BEVERAGES 0.0%
---------------------------------------------------------------------------
Adolph Coors Co., Class B 400 21
APPAREL 0.7%
---------------------------------------------------------------------------
o Jones Apparel Group, Inc. 2,100 60
Liz Claiborne, Inc. 1,900 62
Nike, Inc., Class B 4,500 241
o Reebok International Ltd. 1,100 34
VF Corp. 2,000 78
-----------
475
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.8%
---------------------------------------------------------------------------
o Autonation, Inc. 4,800 66
Cooper Tire & Rubber Co. 5,500 35
Cummins, Inc. 700 19
Dana Corp. 3,100 29
Danaher Corp. 2,500 172
Delphi Corp. 9,400 79
Eaton Corp. 1,200 98
Ford Motor Co. 30,809 317
General Motors Corp. 8,975 324
Genuine Parts Co. 2,800 90
Goodyear Tire & Rubber Co. 1,700 10
o Navistar International Corp. 700 20
Visteon Corp. 885 6
-----------
1,265
BANKS 14.4%
---------------------------------------------------------------------------
AmSouth Bancorp. 5,800 122
(4) Bank of America Corp. 25,100 1,859
The Bank of New York Co., Inc. 11,000 291
Bank One Corp. 19,400 699
BB&T Corp. 7,500 244
Comerica, Inc. 2,600 113
First Tennessee National Corp. 2,300 101
FleetBoston Financial Corp. 17,102 453
Golden West Financial Corp. 2,700 204
Huntington Bancshares, Inc. 3,841 75
J.P. Morgan Chase & Co. 34,410 1,010
KeyCorp, Inc. 6,500 157
Marshall & Ilsley Corp. 3,766 111
See financial notes.
23
INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
National City Corp. 10,500 315
Northern Trust Corp. 2,700 95
PNC Financial Services Group, Inc. 4,700 206
o Providian Financial Corp. 2,800 21
Regions Financial Corp. 3,700 125
SouthTrust Corp. 5,600 150
State Street Corp. 6,300 221
SunTrust Banks, Inc. 4,400 252
Synovus Financial Corp. 4,000 78
U.S. Bancorp 31,578 699
UBS AG-Registered 3 --
Union Planters Corp. 3,250 93
Wachovia Corp. 22,600 863
(5) Wells Fargo & Co. 27,900 1,346
Zions Bancorp. 1,400 69
---------
9,972
BUSINESS MACHINES & SOFTWARE 2.7%
---------------------------------------------------------------------------
o Apple Computer, Inc. 5,500 78
Autodesk, Inc. 1,300 20
o BMC Software, Inc. 4,400 66
o Compuware Corp. 4,900 22
o Comverse Technology, Inc. 3,600 47
o EMC Corp. 37,700 343
o Gateway, Inc. 2,200 6
Hewlett-Packard Co. 49,298 804
o NCR Corp. 1,600 35
o Novell, Inc. 5,000 14
o Novellus Systems, Inc. 2,400 67
o Sun Microsystems, Inc. 56,100 185
o Unisys Corp. 6,100 63
o Xerox Corp. 14,200 140
---------
1,890
BUSINESS SERVICES 2.9%
---------------------------------------------------------------------------
o Allied Waste Industries, Inc. 9,200 76
o Cendant Corp. 17,200 246
Computer Associates International, Inc. 9,700 158
o Computer Sciences Corp. 3,000 99
o Convergys Corp. 3,000 49
Electronic Data Systems Corp. 7,900 143
Interpublic Group of Cos., Inc. 5,400 62
o Intuit, Inc. 1 --
o Parametric Technology Corp. 1,700 6
o PeopleSoft, Inc. 4,600 69
o Siebel Systems, Inc. 6,900 60
o Sungard Data Systems, Inc. 4,700 101
o Thermo Electron Corp. 3,000 54
o TMP Worldwide, Inc. 1,100 18
Tyco International Ltd. 32,901 513
o Veritas Software Corp. 6,900 152
Waste Management, Inc. 10,100 219
---------
2,025
CHEMICAL 2.5%
---------------------------------------------------------------------------
Air Products & Chemicals, Inc. 4,000 172
Dow Chemical Co. 14,416 471
E.I. du Pont de Nemours & Co. 16,500 702
Eastman Chemical Co. 1,000 30
Great Lakes Chemical Corp. 1,000 25
o Hercules, Inc. 2,800 28
PPG Industries, Inc. 2,800 136
Rohm & Haas Co. 3,505 116
The Sherwin-Williams Co. 2,700 75
---------
1,755
CONSTRUCTION 0.7%
---------------------------------------------------------------------------
Centex Corp. 1,200 79
Fluor Corp. 1,400 48
KB Home Corp. 900 44
Masco Corp. 7,900 167
Pulte Homes, Inc. 1,000 58
The Stanley Works 1,400 34
Vulcan Materials Co. 1,400 49
-------
479
CONSUMER DURABLE 0.2%
---------------------------------------------------------------------------
Black & Decker Corp. 1,300 54
Leggett & Platt, Inc. 3,500 72
--------
126
CONSUMER NON-DURABLE 0.9%
---------------------------------------------------------------------------
o American Greetings Corp., Class A 1,400 20
Darden Restaurants, Inc. 2,800 49
Fortune Brands, Inc. 2,600 126
See financial notes.
24
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Hasbro, Inc. 2,650 43
McDonald's Corp. 20,400 349
Wendy's International, Inc. 1,700 49
------
636
CONTAINERS 0.1%
---------------------------------------------------------------------------
Bemis Co. 900 41
o Sealed Air Corp. 1,400 60
-------
101
ELECTRONICS 2.9%
---------------------------------------------------------------------------
o ADC Telecommunications, Inc. 10,900 26
o Advanced Micro Devices, Inc. 4,400 33
o Agilent Technologies, Inc. 7,600 122
o American Power Conversion, Corp. 3,500 55
o Andrew Corp. 1,200 9
o Applied Micro Circuits Corp. 5,200 23
o Broadcom Corp., Class A 4,500 80
o CIENA Corp. 6,200 30
ITT Industries, Inc. 1,900 111
o Jabil Circuit, Inc. 3,209 60
o JDS Uniphase Corp. 22,900 74
o LSI Logic Corp. 7,400 40
o Micron Technology, Inc. 9,800 83
Molex, Inc. 3,100 72
Motorola, Inc. 36,985 293
o National Semiconductor Corp. 3,200 60
o Nvidia Corp. 1,500 21
PerkinElmer, Inc. 2,100 21
o Power-One, Inc. 400 2
o Sanmina -- SCI Corp. 6,300 30
o Solectron Corp. 13,400 43
Symbol Technologies, Inc. 3,400 37
o Tektronix, Inc. 2,000 38
o Tellabs, Inc. 6,700 41
o Teradyne, Inc. 2,600 30
Texas Instruments, Inc. 28,600 529
o Thomas & Betts Corp. 3,400 54
--------
2,017
ENERGY: RAW MATERIALS 2.6%
---------------------------------------------------------------------------
Anadarko Petroleum Corp. 4,138 184
Apache Corp. 2,835 162
Baker Hughes, Inc. 5,900 165
Burlington Resources, Inc. 3,400 157
Devon Energy Corp. 2,600 123
EOG Resources, Inc. 2,300 86
Halliburton Co. 6,600 141
Nabors Industries Ltd. 2,450 96
o Noble Corp. 1,900 59
Occidental Petroleum Corp. 6,200 185
Rowan Cos., Inc. 1,200 25
Schlumberger Ltd. 9,200 386
---------
1,769
FOOD & AGRICULTURE 0.8%
---------------------------------------------------------------------------
Archer-Daniels-Midland Co. 11,505 127
Coca-Cola Enterprises, Inc. 7,900 154
ConAgra Foods, Inc. 9,200 193
Monsanto Co. 4,200 73
Supervalu, Inc. 1,800 30
-------
577
GOLD 0.2%
---------------------------------------------------------------------------
Newmont Mining Corp. 6,300 170
HEALTHCARE / DRUGS & MEDICINE 2.1%
---------------------------------------------------------------------------
AmerisourceBergen Corp. 1,500 87
o Anthem, Inc. 2,429 167
Bausch & Lomb, Inc. 800 28
Becton Dickinson & Co. 4,200 149
C.R. Bard, Inc. 900 57
o Genzyme Corp. -- General Division 3,200 129
Health Management Associates, Inc., Class A 3,600 61
o Humana, Inc. 3,300 37
o King Pharmaceuticals, Inc. 3,800 48
o Manor Care, Inc. 1,600 31
McKesson Corp. 4,800 133
o Quest Diagnostics 1,714 102
o Quintiles Transnational Corp. 1,900 27
o Tenet Healthcare Corp. 8,100 120
o Watson Pharmaceuticals, Inc. 1,900 55
o WellPoint Health Networks, Inc. 2,500 190
---------
1,421
See financial notes.
25
INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
HOUSEHOLD PRODUCTS 0.0%
---------------------------------------------------------------------------
Alberto-Culver Co., Class B 500 25
INSURANCE 9.3%
---------------------------------------------------------------------------
ACE Ltd. 4,100 136
Aetna, Inc. 2,700 134
AFLAC, Inc. 8,900 291
The Allstate Corp. 12,200 461
AMBAC Financial Group, Inc. 1,700 99
=(3) American International Group, Inc. 43,048 2,495
AON Corp. 5,050 112
Chubb Corp. 2,500 132
CIGNA Corp. 2,100 110
Cincinnati Financial Corp. 2,700 100
Hartford Financial Services Group, Inc. 4,200 171
Jefferson-Pilot Corp. 2,500 100
John Hancock Financial Services, Inc. 4,841 141
Lincoln National Corp. 2,700 86
Loews Corp. 2,800 116
MBIA, Inc. 2,150 96
Metlife, Inc. 12,078 347
MGIC Investment Corp. 1,900 86
Principal Financial Group, Inc. 5,500 160
Prudential Financial, Inc. 9,300 297
Safeco Corp. 2,300 89
St. Paul Cos., Inc. 3,400 117
Torchmark Corp. 2,200 85
Travelers Property Casualty Corp., Class B 17,699 288
UnumProvident Corp. 2,549 29
XL Capital Ltd., Class A 2,200 181
---------
6,459
MEDIA 7.5%
---------------------------------------------------------------------------
o AOL Time Warner, Inc. 72,400 990
o Clear Channel Communications, Inc. 9,739 381
o(8) Comcast Corp., Class A 37,183 1,186
Gannett Co., Inc. 4,300 326
Knight-Ridder, Inc. 1,500 97
R.R. Donnelley & Sons Co. 4,500 91
Tribune Co. 5,180 254
o(7) Viacom, Inc., Class B 29,001 1,259
The Walt Disney Co. 33,700 629
---------
5,213
MISCELLANEOUS FINANCE 11.6%
---------------------------------------------------------------------------
The Bear Stearns Cos., Inc. 1,701 114
Capital One Financial Corp. 3,400 142
Charter One Financial, Inc. 3,852 112
=(2) Citigroup, Inc. 85,573 3,359
Countrywide Financial Corp. 2,100 142
Franklin Resources, Inc. 4,200 146
Freddie Mac 11,400 660
Goldman Sachs Group, Inc. 7,700 584
Janus Capital Group, Inc. 3,000 42
Lehman Brothers Holdings, Inc. 4,000 252
MBNA Corp. 21,100 399
Merrill Lynch & Co., Inc. 14,300 587
Morgan Stanley 18,100 810
T. Rowe Price Group, Inc. 1,100 34
Washington Mutual, Inc. 15,950 630
---------
8,013
NON-FERROUS METALS 0.6%
---------------------------------------------------------------------------
Alcoa, Inc. 13,932 319
Engelhard Corp. 1,900 47
o Phelps Dodge Corp. 1,320 41
-------
407
OIL: DOMESTIC 1.6%
---------------------------------------------------------------------------
Amerada Hess Corp. 1,600 72
Ashland, Inc. 800 24
ConocoPhillips 11,152 561
Kerr-McGee Corp. 1,800 76
Marathon Oil Corp. 5,100 116
Sunoco, Inc. 1,200 45
Transocean, Inc. 5,248 100
Unocal Corp. 4,300 119
---------
1,113
OIL: INTERNATIONAL 7.3%
---------------------------------------------------------------------------
(9) ChevronTexaco Corp. 17,212 1,081
=(1) Exxon Mobil Corp. 112,050 3,944
---------
5,025
See financial notes.
26
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OPTICAL & PHOTO 0.2%
---------------------------------------------------------------------------
Eastman Kodak Co. 5,100 153
PAPER & FOREST PRODUCTS 1.0%
---------------------------------------------------------------------------
Boise Cascade Corp. 500 12
Georgia-Pacific Corp. 4,110 63
International Paper Co. 8,515 304
o Louisiana-Pacific Corp. 4,500 36
MeadWestvaco Corp. 3,146 74
Temple-Inland, Inc. 700 32
Weyerhaeuser Co. 3,300 164
-------
685
PRODUCER GOODS & MANUFACTURING 2.6%
---------------------------------------------------------------------------
Caterpillar, Inc. 5,300 279
Cooper Industries Ltd., Class A 2,000 74
o Corning, Inc. 12,900 70
Deere & Co. 4,200 185
Dover Corp. 3,300 95
Honeywell International, Inc. 14,387 340
Illinois Tool Works, Inc. 5,000 320
Ingersoll-Rand Co., Class A 2,800 123
Johnson Controls, Inc. 1,500 123
Pall Corp. 1,600 34
Parker Hannifin Corp. 2,000 81
Snap-On, Inc. 500 15
W.W. Grainger, Inc. 1,600 74
--------
1,813
RAILROAD & SHIPPING 1.0%
---------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 7,000 197
CSX Corp. 3,200 103
Norfolk Southern Corp. 5,800 123
Union Pacific Corp. 4,200 250
-------
673
REAL PROPERTY 0.8%
---------------------------------------------------------------------------
Apartment Investment & Management Co., Class A 1,900 72
Equity Office Properties Trust 6,800 176
Equity Residential 4,700 122
Plum Creek Timber Co., Inc. 2,800 65
Simon Property Group, Inc. 3,000 110
-------
545
RETAIL 3.9%
---------------------------------------------------------------------------
Albertson's, Inc. 6,538 130
o Big Lots, Inc. 1,100 14
Circuit City Stores, Inc. 2,100 12
o Costco Wholesale Corp. 7,300 253
CVS Corp. 6,100 148
Dillards, Inc., Class A 4,300 60
o Federated Department Stores, Inc. 3,600 110
(10) Home Depot, Inc. 37,600 1,058
J.C. Penney Co., Inc. Holding Co. 4,700 80
o Kroger Co. 13,100 187
Limited Brands, Inc. 7,700 112
The May Department Stores Co. 4,500 97
Nordstrom, Inc. 1,900 33
o Office Depot, Inc. 5,600 71
o Safeway, Inc. 7,200 120
Sears, Roebuck & Co. 5,100 144
o Toys `R' Us, Inc. 3,100 32
Winn-Dixie Stores, Inc. 4,500 56
---------
2,717
STEEL 0.2%
---------------------------------------------------------------------------
Allegheny Technologies, Inc. 550 3
Nucor Corp. 1,200 49
United States Steel Corp. 2,800 40
Worthington Industries, Inc. 1,500 20
-------
112
TELEPHONE 4.7%
---------------------------------------------------------------------------
Alltel Corp. 5,200 244
AT&T Corp. 12,452 212
o AT&T Wireless Services, Inc. 44,445 287
BellSouth Corp. 30,700 782
CenturyTel, Inc. 2,600 77
o Citizens Communications Co. 4,548 50
o Qwest Communications International, Inc. 25,600 96
(6) SBC Communications, Inc. 54,900 1,282
Scientific-Atlanta, Inc. 2,500 41
Sprint Corp. (FON Group) 15,600 180
---------
3,251
See financial notes.
27
INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TOBACCO 0.1%
---------------------------------------------------------------------------
R.J. Reynolds Tobacco Holdings, Inc. 1,400 39
TRAVEL & RECREATION 1.1%
---------------------------------------------------------------------------
Brunswick Corp. 4,000 87
Carnival Corp. 9,200 254
o Harrah's Entertainment, Inc. 2,000 79
Hilton Hotels Corp. 6,000 80
Marriott International, Inc., Class A 3,700 133
Sabre Holdings Corp. 1,500 31
Starwood Hotels & Resorts Worldwide, Inc. 3,200 86
-------
750
TRUCKING & FREIGHT 0.2%
---------------------------------------------------------------------------
Paccar, Inc. 1,850 108
Ryder Systems, Inc. 1,300 32
-------
140
UTILITIES: ELECTRIC & GAS 5.8%
---------------------------------------------------------------------------
o The AES Corp. 7,700 46
Allegheny Energy, Inc. 5,500 46
Ameren Corp. 2,600 107
American Electric Power Co., Inc. 5,540 146
o Calpine Corp. 5,300 28
Centerpoint Energy, Inc. 10,000 79
Cinergy Corp. 2,700 92
CMS Energy Corp. 1,300 8
Consolidated Edison, Inc. 3,500 136
Constellation Energy Group, Inc. 3,200 94
Dominion Resources, Inc. 5,048 299
DTE Energy Co. 2,800 113
Duke Energy Corp. 14,500 255
Dynegy, Inc., Class A 2,000 9
o Edison International 6,200 90
El Paso Corp. 9,073 68
Entergy Corp. 4,000 186
Exelon Corp. 5,600 297
FirstEnergy Corp. 4,822 163
FPL Group, Inc. 3,100 189
KeySpan Corp. 2,300 78
Kinder Morgan, Inc. 2,045 96
o Mirant Corp. 4,940 16
Nicor, Inc. 800 24
NiSource, Inc. 4,715 89
Peoples Energy Corp. 600 23
o PG&E Corp. 6,300 94
Pinnacle West Capital Corp. 1,200 40
PPL Corp. 2,800 101
Progress Energy, Inc. 3,806 159
Public Service Enterprise Group, Inc. 3,400 131
Sempra Energy 3,500 94
The Southern Co. 12,000 349
TECO Energy, Inc. 2,300 25
Texas Genco Holdings, Inc. 225 4
TXU Corp. 5,000 100
Williams Cos., Inc. 4,700 33
Xcel Energy, Inc. 5,810 79
---------
3,986
SHORT-TERM INVESTMENT
1.1% of investments
Provident Institutional TempFund 781,403 781
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
U.S. TREASURY OBLIGATION
0.1% of investments
= U.S. Treasury Bill
1.13%, 06/19/03 60 60
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
28
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- ---------------------------------------------------------------------------------
Investments, at market value (including
$3,526 of securities on loan) $69,270 a
Collateral held for securities on loan 3,600
Receivables:
Fund shares sold 57
Interest 1
Dividends 77
Prepaid expenses + 9
------------
TOTAL ASSETS 73,014
LIABILITIES
- ---------------------------------------------------------------------------------
Collateral held for securities on loan 3,600
Payables:
Fund shares redeemed 72
Investments bought 165
Transfer agent and shareholder service fees 1
Accrued expenses + 61
------------
TOTAL LIABILITIES 3,899
NET ASSETS
- ---------------------------------------------------------------------------------
TOTAL ASSETS 73,014
TOTAL LIABILITIES - 3,899
------------
NET ASSETS $69,115
NET ASSETS BY SOURCE
Capital received from investors 113,128
Net investment income not yet distributed 370
Net realized capital losses (33,183)
Net unrealized capital losses (11,200) b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$69,115 9,432 $7.33
a The fund paid $80,493 for these securities. Not counting short-term
obligations and government securities, the fund paid $7,161 for securities
during the report period and received $11,500 from securities it sold or that
matured.
b These derive from investments and futures. As of the report date, the fund had
ten open S&P 500 futures contracts due to expire on June 30, 2003, with a
contract value of $687 and unrealized gains of $23.
FEDERAL TAX DATA
- --------------------------------------------------------------------------------
PORTFOLIO COST $82,360
NET UNREALIZED GAINS AND LOSSES:
Gains $6,905
Losses + (19,995)
-----------
(13,090)
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $1,439
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $25,956
See financial notes.
29
INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND -- Financials
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $710
Interest 2
Lending of securities + 2
-----------
TOTAL INVESTMENT INCOME 714
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments sold (5,020)
Net realized losses on futures contracts + (47)
-----------
NET REALIZED LOSSES (5,067)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 7,826
Net unrealized gains on futures contracts + 12
-----------
NET UNREALIZED GAINS 7,838
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 66 a
Transfer agent and shareholder service fees 33 b
Trustees' fees 2 c
Custodian fees 11
Portfolio accounting fees 5
Professional fees 12
Registration fees 12
Shareholder reports 15
Other expenses + 9
-----------
Total expenses 165
Expense reduction - 82 d
-----------
NET EXPENSES 83
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 714
NET EXPENSES - 83
NET INVESTMENT INCOME 631
-----------
NET REALIZED LOSSES (5,067) e
NET UNREALIZED GAINS + 7,838 e
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $3,402
a Calculated as a percentage of average daily net assets: 0.20% of the first
$1 billion and 0.18% of assets beyond that.
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.
c For the fund's independent trustees only.
d Includes $67 from the investment adviser (CSIM) and $15 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 December 31, 2005, to 0.25% of average daily net assets.
This limit doesn't include interest, taxes and certain non-routine
expenses.
e These add up to a net gain on investments of $2,771.
See financial notes.
30
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for current period are unaudited.
OPERATIONS
- --------------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income $631 $1,845
Net realized losses (5,067) (22,048)
Net unrealized gains or losses + 7,838 5,276
------------------------------------
INCREASE OR DECREASE IN NET ASSETS FROM OPERATIONS 3,402 (14,927)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------------------------
Dividends from net investment income 1,700 2,118
Distributions from net realized gains + -- 4,400
------------------------------------
TOTAL DISTRIBUTION PAID $1,700 $6,518 a
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 1,492 $10,572 4,767 $40,217
Shares reinvested 240 1,700 611 5,412
Shares redeemed + (2,161) (15,292) (9,892) (81,906) b
---------------------------------------------------------------------
NET INCREASE OR DECREASE (429) ($3,020) (4,514) ($36,277)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 9,861 $70,433 14,375 $128,155
Total decrease + (429) (1,318) (4,514) (57,722) c
-------------------------------------------------------------------
END OF PERIOD 9,432 $69,115 9,861 $70,433 d
a The tax-basis components of distributions paid for the prior period are:
Ordinary Income $3,921
Long-term capital gains $2,597
b Dollar amounts are net of proceeds received from early withdrawal fees that
the fund charges on shares sold 180 days or less after buying them.
CURRENT PERIOD $5
PRIOR PERIOD $64
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 net investment income not yet distributed in the amount of $370 and
$1,439 for the current period and the prior period, respectively.
See financial notes.
31
INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND
PERFORMANCE as of 4/30/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1,2
This bar chart compares pre-tax performance of the fund with the S&P Small Cap
600/Barra Value Index and the Morningstar Small-Cap Value Fund category. The
table below the chart shows two types of after-tax returns.
[BAR CHART]
S&P 500 CATEGORY
FUND INDEX AVERAGE
6 Months 2.77 2.98 6.43
1 Year -25.01 -25.2 -17.39
Since Inception: 2/1/99 4.83 4.86 n/a
6 MONTHS 1 YEAR SINCE INCEPTION
CATEGORY CATEGORY CATEGORY
TOTAL RETURNS AFTER TAX FUND AVERAGE FUND AVERAGE FUND AVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 2.35% 4.16% -25.32% -19.15% -2.86% --
- ------------------------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 1.72% 3.16% -15.61% -11.16% -3.05% --
- ------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A $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 the S&P Small Cap
600/Barra Value Index.
$12,220 FUND
$12,234 S&P SMALL CAP 600/BARRA VALUE INDEX
[LINE CHART]
Fund S&P Small Cap 600/Barra Value Index
- -------------------------------------------------------------
1-Feb-99 10000 10000
Feb-99 9170 9186
Mar-99 9130 9150
Apr-99 9920 9947
May-99 10310 10345
Jun-99 10930 10973
Jul-99 10760 10802
Aug-99 10310 10349
Sep-99 10120 10159
Oct-99 9890 9924
Nov-99 10120 10147
Dec-99 10411 10425
Jan-00 9886 9891
Feb-00 10338 10338
Mar-00 10716 10720
Apr-00 10801 10795
May-00 10611 10619
Jun-00 10916 10923
Jul-00 11127 11139
Aug-00 11789 11789
Sep-00 11747 11765
Oct-00 11810 11823
Nov-00 11021 11042
Dec-00 12583 12601
Jan-01 13572 13599
Feb-01 12993 13025
Mar-01 12458 12484
Apr-01 13208 13236
May-01 13549 13573
Jun-01 14084 14092
Jul-01 13936 13959
Aug-01 13709 13735
Sep-01 11754 11769
Oct-01 12299 12307
Nov-01 13265 13292
Dec-01 14218 14251
Jan-02 14469 14518
Feb-02 14406 14455
Mar-02 15658 15712
Apr-02 16296 16354
May-02 15683 15734
Jun-02 15019 15031
Jul-02 12604 12587
Aug-02 12579 12571
Sep-02 11665 11645
Oct-02 11890 11879
Nov-02 12504 12521
Dec-02 12182 12189
Jan-03 11676 11686
Feb-03 11259 11253
Mar-03 11221 11218
30-Apr-03 12220 12234
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.
The fund's share price and principal values change, and when you sell your
shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results. Results for the report period
are not annualized.
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
4/30/03 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 2 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. As of 4/30/03, the total number of
funds in the Morningstar Small-Cap Value Fund category for the six-month and
one-year periods was 257 and 253, respectively.
2 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower.
Schwab Institutional Select(R) Funds
32
INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND
FUND FACTS as of 4/30/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / / / / /
Medium / / / / / /
Small /X/ / / / /
STATISTICS
- -----------------------------------------------
NUMBER OF HOLDINGS 386
- -----------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $573
- -----------------------------------------------
PRICE/EARNINGS RATIO (P/E) 19.2
- -----------------------------------------------
PRICE/BOOK RATIO (P/B) 1.4
- -----------------------------------------------
PORTFOLIO TURNOVER RATE 2 21%
- -----------------------------------------------
EXPENSE RATIO 3 0.32%
- -----------------------------------------------
TOP HOLDINGS 4
SECURITY % OF INVESTMENTS
- ---------------------------------------------------------
(1) THE RYLAND GROUP, INC. 1.0%
- ---------------------------------------------------------
(2) WASHINGTON FEDERAL, INC. 1.0%
- ---------------------------------------------------------
(3) THE TIMKEN CO. 0.9%
- ---------------------------------------------------------
(4) WHITNEY HOLDING CORP. 0.9%
- ---------------------------------------------------------
(5) RAYMOND JAMES FINANCIAL, INC. 0.8%
- ---------------------------------------------------------
(6) APTARGROUP, INC. 0.8%
- ---------------------------------------------------------
(7) DOWNEY FINANCIAL CORP. 0.8%
- ---------------------------------------------------------
(8) MDC HOLDINGS, INC. 0.8%
- ---------------------------------------------------------
(9) PIEDMONT NATURAL GAS CO. 0.7%
- ---------------------------------------------------------
(10) ENERGEN CORP. 0.7%
- ---------------------------------------------------------
TOTAL 8.4%
INDUSTRY WEIGHTINGS
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
9.1% ELECTRONICS
8.5% PRODUCER GOODS & MANUFACTURING
7.2% BUSINESS SERVICES
6.4% UTILITIES: ELECTRIC & GAS
6.2% MISCELLANEOUS FINANCE
5.6% HEALTHCARE/DRUGS & MEDICINE
5.5% BANKS
4.6% RETAIL
4.3% APPAREL
42.6% OTHER
1 Source: Morningstar, Inc. This style assessment is the result of comparing
the fund with the S&P 500(R) Index, based on P/E, P/B and median market cap.
The assessment reflects the fund's portfolio as of 4/30/03, which may have
changed since then, and is not a precise indication of risk or
performance--past, present or future.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 12/31/05
(excluding interest, taxes, and certain non-routine expenses).
4 This list is not a recommendation of any security by the investment
adviser. Portfolio holdings may have changed since the report date.
Schwab Institutional Select(R) Funds
33
INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND -- Financials
FINANCIAL TABLES
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 2/1/99 1-
4/30/03 10/31/02 10/31/01 10/31/00 10/31/99
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 9.50 10.82 11.23 9.89 10.00
-----------------------------------------------------
Income or loss from investment operations:
Net investment income 0.05 0.10 0.09 0.09 0.07
Net realized and unrealized gains or losses 0.21 (0.32) 0.32 1.74 (0.18)
-----------------------------------------------------
Total income or loss from investment operations 0.26 (0.22) 0.41 1.83 (0.11)
Less distributions:
Dividends from net investment income (0.10) (0.10) (0.08) (0.09) --
Distributions from net realized gains -- (1.00) (0.74) (0.40) --
-----------------------------------------------------
Total distributions (0.10) (1.10) (0.82) (0.49) --
-----------------------------------------------------
Net asset value at end of period 9.66 9.50 10.82 11.23 9.89
-----------------------------------------------------
Total return (%) 2.77 2 (3.32) 4.14 19.42 (1.10) 2
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.32 3 0.32 5 0.32 0.27 4 0.00 3
Expense reductions reflected in above ratio 0.36 3 0.28 0.29 0.38 0.98 3
Ratio of net investment income to
average net assets 1.03 3 0.81 0.87 0.94 1.25 3
Portfolio turnover rate 21 2 56 69 71 38 2
Net assets, end of period ($ x 1,000,000) 35 37 47 39 32
1 Commencement of operations.
2 Not annualized.
3 Annualized.
4 Would have been 0.28% if certain non-routine expenses (proxy fees) had
been included.
5 Would have been 0.33% if certain non-routine expenses (interest expense)
had been included.
See financial notes.
34
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
COST MARKET VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- -------------------------------------------------------------------
100.0% COMMON STOCK 35,642 34,924
- -------------------------------------------------------------------
100.0% TOTAL INVESTMENTS 35,642 34,924
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 100.0% of investments
AEROSPACE / DEFENSE 1.4%
---------------------------------------------------------------------------
o Armor Holdings, Inc. 5,900 71
Curtiss-Wright Corp. 2,000 121
GenCorp, Inc. 9,000 68
Kaman Corp., Class A 4,500 45
o Triumph Group, Inc. 3,100 81
o Veeco Instruments, Inc. 6,000 97
---------
483
AIR TRANSPORTATION 0.9%
---------------------------------------------------------------------------
AAR Corp. 6,000 23
o Atlantic Coast Airlines Holdings, Inc. 9,600 80
o Frontier Airlines, Inc. 5,600 34
o Mesa Air Group, Inc. 6,300 34
SkyWest, Inc. 11,900 152
---------
323
APPAREL 4.3%
---------------------------------------------------------------------------
o Ashworth, Inc. 1,600 9
Brown Shoe Co., Inc. 4,000 117
o The Children's Place Retail Stores, Inc. 5,000 76
o The Dress Barn, Inc. 6,700 101
o Footstar, Inc. 3,800 35
o Goody's Family Clothing, Inc. 5,700 28
Haggar Corp. 1,500 16
o Jo-Ann Stores, Inc., Class A 4,300 112
Kellwood Co. 5,800 172
o The Men's Wearhouse, Inc. 9,300 155
o Nautica Enterprises, Inc. 6,700 76
Oxford Industries, Inc. 1,700 57
Phillips-Van Heusen Corp. 6,200 82
Russell Corp. 7,800 149
Stride Rite Corp. 11,700 103
o The Wet Seal, Inc., Class A 5,900 60
Wolverine World Wide, Inc. 9,200 170
---------
1,518
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 2.4%
---------------------------------------------------------------------------
A.O. Smith Corp., Class B 6,400 191
Aaron Rents, Inc. 4,300 96
Arctic Cat, Inc. 4,700 86
o Fleetwood Enterprises, Inc. 6,500 33
o Group 1 Automotive, Inc. 4,700 129
o Midas, Inc. 2,100 17
o Monaco Coach Corp. 5,500 74
Myers Industries, Inc. 6,000 60
Standard Motor Products, Inc. 2,400 28
o TBC Corp. 5,200 83
o Tower Automotive, Inc. 10,700 30
---------
827
BANKS 5.5%
---------------------------------------------------------------------------
Anchor Bancorp Wisconsin, Inc. 6,000 139
Comerica, Inc. 6 --
o First Republic Bank 3,000 75
o FirstFed Financial Corp. 4,100 133
GBC Bancorp California 2,300 63
Irwin Financial Corp. 5,600 133
MAF Bancorp., Inc. 5,200 176
Provident Bankshares Corp. 5,505 140
Riggs National Corp. 5,800 80
See financial notes.
35
INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Seacoast Financial Services Corp. 5,000 94
The South Financial Group, Inc. 9,700 238
Susquehanna Bancshares, Inc. 8,400 191
Waypoint Financial Corp. 8,100 148
(4) Whitney Holding Corp. 8,950 302
----------
1,912
BUSINESS MACHINES & SOFTWARE 2.6%
---------------------------------------------------------------------------
o Adaptec, Inc. 22,500 154
Analogic Corp. 2,800 134
o Artesyn Technologies, Inc. 8,300 35
o Bell Microproducts, Inc. 3,300 15
Black Box Corp. 5,200 165
o Concerto Software, Inc. 5,300 24
o Digi International, Inc. 2,500 11
o Global Imaging Systems, Inc. 5,000 92
o Imagistics International, Inc. 4,300 93
o Input/Output, Inc. 10,500 33
o Netegrity, Inc. 4,100 19
o Network Equipment Technologies, Inc. 4,100 29
o Roxio, Inc. 3,400 18
o SCM Microsystems, Inc. 2,500 10
o Systems & Computer Technology Corp. 6,600 47
o Ultimate Electronics, Inc. 2,300 19
----------
898
BUSINESS SERVICES 7.2%
---------------------------------------------------------------------------
ABM Industries, Inc. 10,000 138
o Actel Corp. 4,500 89
o Administaff, Inc. 5,300 34
o American Management Systems, Inc. 8,900 109
Angelica Corp. 2,300 39
Bowne & Co., Inc. 6,600 74
o Brooktrout, Inc. 2,800 14
o Carreker Corp. 3,600 13
o CDI Corp. 3,900 109
Chemed Corp. 1,800 63
o Ciber, Inc. 12,900 70
o Dendrite International, Inc. 7,700 79
o eFunds Corp. 9,900 91
o Heidrick & Struggles International, Inc. 3,900 55
o JDA Software Group, Inc. 5,400 61
o Mapinfo Corp. 2,200 11
o NCO Group, Inc. 5,400 90
o NYFIX, Inc. 5,000 24
o On Assignment, Inc. 5,000 24
o Paxar Corp. 7,700 80
o PC-Tel, Inc. 6,500 60
o Pegasus Solutions, Inc. 8,100 96
o Phoenix Technologies Ltd. 3,600 16
o PRG-Schultz International, Inc. 12,800 82
o Radisys Corp. 5,500 46
o SBS Technologies, Inc. 2,500 20
o Seacor Smit, Inc. 4,100 147
o SourceCorp 3,300 52
o Spherion Corp. 10,800 47
o SPSS, Inc. 3,300 41
The Standard Register Co. 6,400 111
Talx Corp. 3,300 42
o Tetra Tech, Inc. 10,900 169
o Tetra Technologies, Inc. 2,800 74
o URS Corp. 5,800 82
o Verity, Inc. 7,000 116
o Volt Information Sciences, Inc. 3,600 48
---------
2,516
CHEMICAL 2.4%
---------------------------------------------------------------------------
A. Schulman, Inc. 6,000 98
Arch Chemicals, Inc. 5,200 111
Cambrex Corp. 5,200 91
H.B. Fuller Co. 6,200 152
OM Group, Inc. 5,300 62
o Omnova Solutions, Inc. 9,000 32
Penford Corp. 2,000 27
PolyOne Corp. 19,100 88
Tredegar Corp. 7,700 99
Wellman, Inc. 7,200 82
---------
842
See financial notes.
36
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
CONSTRUCTION 4.3%
---------------------------------------------------------------------------
Apogee Enterprises, Inc. 7,400 76
Building Material Holding Corp. 3,500 43
Butler Manufacturing Co. 1,100 18
ElkCorp 3,400 69
o EMCOR Group, Inc. 3,100 158
o Insituform Technologies, Inc., Class A 5,000 80
Interface, Inc., Class A 9,900 36
Lawson Products, Inc. 2,400 65
(8) MDC Holdings, Inc. 5,713 263
(1) The Ryland Group, Inc. 6,300 342
Skyline Corp. 1,600 47
Standard-Pacific Corp. 6,800 206
Texas Industries, Inc. 4,300 85
----------
1,488
CONSUMER DURABLE 1.9%
---------------------------------------------------------------------------
o Applica, Inc. 4,300 23
Bassett Furniture Industries, Inc. 1,900 23
Coachmen Industries, Inc. 3,200 41
o Griffon Corp. 7,890 107
Haverty Furniture Cos., Inc. 4,200 59
o Linens `N Things, Inc. 9,000 191
National Presto Industries, Inc. 1,300 39
o Salton, Inc. 2,600 33
Sturm Ruger & Co., Inc. 5,700 51
Thomas Industries, Inc. 3,400 91
---------
658
CONSUMER NON-DURABLE 4.0%
---------------------------------------------------------------------------
o A.T. Cross Co., Class A 5,300 27
Action Performance Cos., Inc. 3,000 55
o Department 56, Inc. 3,600 43
o Huffy Corp. 2,500 14
IHOP Corp. 4,300 113
o Jack in the Box, Inc. 7,400 132
o Jakks Pacific, Inc. 4,600 60
Landry's Restaurants, Inc. 5,700 107
Lone Star Steakhouse & Saloon, Inc. 5,659 119
The Marcus Corp. 7,200 102
o O'Charleys, Inc. 3,900 79
o Rare Hospitality International Inc. 4,500 131
Russ Berrie & Co., Inc. 4,100 135
o Ryan's Family Steak Houses, Inc. 8,800 109
o The Steak N Shake Co. 5,100 59
o Triarc Cos., Inc. 4,200 116
-----------
1,401
CONTAINERS 0.1%
---------------------------------------------------------------------------
o Mobile Mini, Inc. 2,900 46
ELECTRONICS 9.1%
---------------------------------------------------------------------------
o Allen Telecom, Inc. 6,200 84
o Alliance Semiconductor Corp. 5,900 22
o Anixter International, Inc. 7,900 182
o AstroPower, Inc. 3,900 12
o Audiovox Corp., Class A 4,300 31
o Axcelis Technologies, Inc. 20,500 116
Bel Fuse, Inc., Class B 2,000 39
Belden, Inc. 4,900 58
o Benchmark Electronics, Inc. 5,500 143
o Brooks Automation, Inc. 7,300 62
C&D Technologies, Inc. 6,100 81
o C-COR.net Corp. 6,700 23
o Cable Design Technologies Corp. 13,550 94
o Captaris, Inc. 8,100 26
o Checkpoint Systems, Inc. 7,400 99
o Coherent, Inc. 6,000 138
Cohu, Inc. 3,700 67
CTS Corp. 7,300 61
o DSP Group, Inc. 6,100 128
o Dupont Photomasks, Inc. 3,300 61
o Electro Scientific Industries, Inc. 5,600 75
o ESS Technology, Inc. 8,000 55
o Esterline Technologies Corp. 4,500 80
o Exar Corp. 8,000 118
o FEI Co. 2,200 40
o Gerber Scientific, Inc. 5,200 43
o Hutchinson Technology, Inc. 7,800 184
Methode Electronics, Class A 8,900 93
See financial notes.
37
INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Microsemi Corp. 5,600 66
Park Electrochemical Corp. 4,000 71
o Pericom Semiconductor Corp. 4,900 42
o Photronics, Inc. 6,800 86
Pioneer Standard Electronics, Inc. 6,200 60
o Skyworks Solutions, Inc. 28,500 152
o Standard Microsystems Corp. 3,100 39
o Supertex, Inc. 1,900 30
o Symmetricom, Inc. 4,200 17
o Technitrol, Inc. 8,200 130
o THQ, Inc. 8,000 113
o Three-Five Systems, Inc. 3,700 19
o Tollgrade Communications, Inc. 2,400 35
o Viasat, Inc. 5,300 56
o Vicor Corp. 8,500 57
-----------
3,188
ENERGY: RAW MATERIALS 3.1%
---------------------------------------------------------------------------
o Atwood Oceanics, Inc. 2,800 73
o Dril-Quip, Inc. 3,500 54
The Laclede Group, Inc. 3,900 94
Massey Energy Co. 15,200 159
o Offshore Logistics, Inc. 4,400 84
o Southwestern Energy Co. 6,100 81
o Swift Energy Co. 5,400 45
o Tom Brown, Inc. 8,700 213
o Unit Corp. 9,000 176
o W-H Energy Services, Inc. 5,600 101
-----------
1,080
FOOD & AGRICULTURE 2.6%
---------------------------------------------------------------------------
Corn Products International, Inc. 8,400 251
Flowers Foods, Inc. 6,000 170
o Hain Celestial Group, Inc. 7,600 131
o International Multifoods Corp. 3,700 71
o J & J Snack Foods Corp. 2,200 69
Lance, Inc. 6,100 45
Nash Finch Co. 1,600 20
o Ralcorp Holdings, Inc. 6,500 162
-----------
919
HEALTHCARE / DRUGS & MEDICINE 5.6%
---------------------------------------------------------------------------
Alpharma, Inc., Class A 10,700 200
o Arqule, Inc. 1,900 8
o Bio-Technology General Corp. 10,600 37
o Cima Labs, Inc. 2,900 70
o Conmed Corp. 6,100 106
o CryoLife, Inc. 3,400 26
o Curative Health Services, Inc. 2,100 26
Datascope Corp. 3,000 86
o Hologic, Inc. 3,400 31
Hooper Holmes, Inc. 12,600 76
o Impath, Inc. 2,700 40
Nature's Sunshine Products, Inc. 4,200 40
o Orthodontic Centers of America, Inc. 9,700 56
o Osteotech, Inc. 2,900 30
o Parexel International Corp. 5,300 68
o Pediatrix Medical Group, Inc. 6,100 194
PolyMedica Corp. 2,700 101
o Province Healthcare Co. 10,000 100
o RehabCare Group, Inc. 3,100 54
o Sola International, Inc. 6,300 88
o Sunrise Assisted Living, Inc. 5,900 159
o Theragenics Corp. 7,800 35
o US Oncology, Inc. 20,800 149
o Viasys Healthcare, Inc. 5,100 83
Vital Signs, Inc. 3,300 94
-----------
1,957
INSURANCE 4.0%
---------------------------------------------------------------------------
Delphi Financial Group, Inc., Class A 4,845 213
Fremont General Corp. 15,100 141
o Insurance Auto Auctions, Inc. 2,100 25
Landamerica Financial Group, Inc. 4,100 168
o Philadelphia Consolidated Holding Co. 4,600 180
Presidential Life Corp. 5,700 46
RLI Corp. 4,800 142
SCPIE Holdings, Inc. 1,200 11
See financial notes.
38
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Selective Insurance Group, Inc. 5,400 136
o Stewart Information Services Corp. 4,400 117
o UICI 9,700 116
Zenith National Insurance Corp. 3,800 98
-----------
1,393
MEDIA 0.5%
---------------------------------------------------------------------------
o Consolidated Graphics, Inc. 3,900 74
o Information Holdings, Inc. 4,600 80
o Thomas Nelson, Inc. 3,300 31
-----------
185
MISCELLANEOUS FINANCE 6.2%
---------------------------------------------------------------------------
o Bankunited Financial Corp., Class A 5,000 94
Commercial Federal Corp. 9,300 200
(7) Downey Financial Corp. 6,300 277
o Financial Federal Corp. 3,600 81
Flagstar Bancorp., Inc. 6,000 199
Jefferies Group, Inc. 5,500 213
New Century Financial Corp. 5,700 210
(5) Raymond James Financial, Inc. 10,200 293
Staten Island Bancorp., Inc. 12,400 213
SWS Group, Inc. 3,197 53
(2) Washington Federal, Inc. 15,523 338
-----------
2,171
NON-FERROUS METALS 1.7%
---------------------------------------------------------------------------
o A.M. Castle & Co. 1,800 8
o Brush Engineered Materials, Inc. 3,600 19
Century Aluminum Co. 4,700 31
o Cleveland-Cliffs, Inc. 1,900 34
Commercial Metals Co. 5,600 87
Commonwealth Industries, Inc. 1,900 9
o Imco Recycling, Inc. 3,700 26
o Mueller Industries, Inc. 7,000 179
Reliance Steel & Aluminum Co. 6,500 110
o RTI International Metals, Inc. 4,700 47
o Stillwater Mining Co. 8,000 22
o Wolverine Tube, Inc. 2,900 16
-----------
588
OIL: DOMESTIC 2.1%
---------------------------------------------------------------------------
o Cimarex Energy Co. 8,600 169
o Nuevo Energy Co. 4,800 64
o Spinnaker Exploration Co. 7,000 150
o Stone Energy Corp. 5,600 197
Vintage Petroleum, Inc. 15,000 147
-----------
727
OPTICAL & PHOTO 0.2%
---------------------------------------------------------------------------
o Concord Camera Corp. 5,100 29
CPI Corp. 1,600 21
o Meade Instruments Corp. 2,600 7
-----------
57
PAPER & FOREST PRODUCTS 1.2%
---------------------------------------------------------------------------
o Buckeye Technologies, Inc. 6,900 37
o Caraustar Industries, Inc. 5,100 35
Chesapeake Corp. 3,400 61
Deltic Timber Corp. 2,400 59
o Lydall, Inc. 2,900 28
Pope & Talbot, Inc. 2,800 37
Rock-Tennessee Co., Class A 6,900 92
Universal Forest Products, Inc. 3,600 63
-----------
412
PRODUCER GOODS & MANUFACTURING 8.5%
---------------------------------------------------------------------------
Acuity Brands, Inc. 11,100 169
o Aeroflex, Inc. 11,800 63
Albany International Corp., Class A 7,100 169
Applied Industrial Technologies, Inc. 4,800 89
(6) Aptargroup, Inc. 8,300 286
o Astec Industries, Inc. 3,600 29
Barnes Group, Inc. 4,700 99
Briggs & Stratton Corp. 5,100 230
Fedders Corp. 5,510 19
See financial notes.
39
INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Gardner Denver, Inc. 3,900 77
Hughes Supply, Inc. 5,000 140
o Ionics, Inc. 3,400 65
JLG Industries, Inc. 8,600 47
Lennox International, Inc. 13,512 201
o Lone Star Technologies, Inc. 5,700 121
o Magnetek, Inc. 2,200 5
Milacron, Inc. 8,400 44
o Oceaneering International, Inc. 5,100 115
Regal Beloit Corp. 5,000 86
Robbins & Myers, Inc. 2,800 48
o SPS Technologies, Inc. 2,600 69
Standex International Corp. 3,100 65
Stewart & Stevenson Services 5,600 75
(3) The Timken Co. 18,000 319
o Ultratech Stepper, Inc. 4,200 59
Watsco, Inc. 6,500 101
Watts Industries, Inc., Class A 5,500 90
Woodward Governor Co. 2,300 85
-----------
2,965
RAILROAD & SHIPPING 0.4%
---------------------------------------------------------------------------
o Kansas City Southern 12,800 142
REAL PROPERTY 2.6%
---------------------------------------------------------------------------
Capital Automotive Real Estate Investment Trust 5,700 148
Colonial Properties Trust 4,600 156
Gables Residential Trust 4,800 136
Glenborough Realty Trust, Inc. 5,400 90
Kilroy Realty Corp. 5,800 144
Shurgard Storage Centers, Inc., Class A 7,300 238
-----------
912
RETAIL 4.6%
---------------------------------------------------------------------------
o AnnTaylor Stores Corp. 9,400 222
Burlington Coat Factory Warehouse Corp. 9,700 172
Casey's General Stores, Inc. 10,200 132
Cash America International, Inc. 6,300 65
The Cato Corp., Class A 5,000 102
o Duane Reade, Inc. 4,400 59
o Enesco Group, Inc. 3,200 25
o Great Atlantic & Pacific Tea Co. 6,700 41
o Insight Enterprises, Inc. 8,500 64
Pep Boys-Manny, Moe & Jack 12,500 107
o School Specialty, Inc. 3,600 67
o ShopKo Stores, Inc. 6,200 75
o Stein Mart, Inc. 8,200 45
o United Stationers, Inc. 7,700 209
o Zale Corp. 6,700 234
-----------
1,619
STEEL 1.7%
---------------------------------------------------------------------------
Intermet Corp. 6,700 25
o Material Sciences Corp. 3,700 30
o Maverick Tube Corp. 8,300 148
Quanex Corp. 4,000 115
Ryerson Tull, Inc. 4,800 36
o The Shaw Group, Inc. 7,600 88
o Steel Dynamics, Inc. 9,700 117
Steel Technologies, Inc. 1,600 18
-----------
577
TELEPHONE 0.3%
---------------------------------------------------------------------------
o General Communication, Inc.,
Class A 11,600 72
o Metro One Telecommunications 5,600 36
-----------
108
TOBACCO 0.4%
---------------------------------------------------------------------------
DIMON, Inc. 10,600 70
Schweitzer-Mauduit International, Inc. 3,400 74
-----------
144
TRAVEL & RECREATION 1.0%
---------------------------------------------------------------------------
o Aztar Corp. 7,600 108
o Bally Total Fitness Holding Corp. 6,000 38
Central Parking Corp. 7,200 72
o K2, Inc. 3,900 37
o Pinnacle Entertainment, Inc. 6,700 36
o Prime Hospitality Corp. 8,600 58
-----------
349
See financial notes.
40
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TRUCKING & FREIGHT 0.8%
---------------------------------------------------------------------------
o Kirby Corp. 5,000 131
USFreightways Corp. 5,600 159
-----------
290
UTILITIES: ELECTRIC & GAS 6.4%
---------------------------------------------------------------------------
American States Water Co. 3,100 80
Atmos Energy Corp. 9,300 212
Avista Corp. 10,800 128
Cascade Natural Gas Corp. 2,200 42
Central Vermont Public Service Corp. 2,900 51
CH Energy Group, Inc. 3,200 135
Cleco Corp. 9,600 144
o El Paso Electric Co. 10,300 117
(10) Energen Corp. 7,700 253
Green Mountain Power Corp. 1,600 33
Northwest Natural Gas Co. 5,200 134
Northwestern Corp. 5,000 12
NUI Corp. 3,000 42
(9) Piedmont Natural Gas Co. 7,000 261
o Southern Union Co. 11,747 164
Southwest Gas Corp. 6,800 141
UIL Holdings Corp. 3,200 116
Unisource Energy Corp. 6,900 123
o Veritas DGC, Inc. 6,000 41
-----------
2,229
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
41
INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND -- Financials
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- -----------------------------------------------------------------------------
Investments, at market value (including
$2,171 of securities on loan) $34,924 a
Collateral held for securities on loan 2,263
Receivables:
Fund shares sold 7
Dividends 25
Investments sold 151
Prepaid expenses + 6
---------
TOTAL ASSETS 37,376
LIABILITIES
- -----------------------------------------------------------------------------
Collateral held for securities on loan 2,263
Borrowing from custodian 95
Payables:
Fund shares redeemed 60
Accrued expenses + 38
---------
TOTAL LIABILITIES 2,456
NET ASSETS
- -----------------------------------------------------------------------------
TOTAL ASSETS 37,376
TOTAL LIABILITIES - 2,456
---------
NET ASSETS $34,920
NET ASSETS BY SOURCE
Capital received from investors 38,091
Net investment income not yet distributed 107
Net realized capital losses (2,560)
Net unrealized capital losses (718)
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$34,920 3,615 $9.66
a The fund paid $35,642 for these securities. Not counting short-term
obligations and government securities, the fund paid $7,472 for securities
during the report period and received $10,209 from securities it sold or
that matured.
FEDERAL TAX DATA
- ----------------------------------------------
PORTFOLIO COST $36,244
NET UNREALIZED GAINS AND LOSSES:
Gains $5,247
Losses + (6,567)
---------
$(1,320)
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $328
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $1,411
See financial notes.
42
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003 unaudited. All numbers x 1,000.
INVESTMENT INCOME
- ------------------------------------------------------------------------------
Dividends $231
Interest 1
Lending of securities + 4
---------
TOTAL INVESTMENT INCOME 236
NET REALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net realized losses on investments sold (326)
Net realized losses on futures contracts + (20)
---------
NET REALIZED LOSSES (346)
NET UNREALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net unrealized gains on investments 1,057
EXPENSES
- ------------------------------------------------------------------------------
Investment adviser and administrator fees 44 a
Transfer agent and shareholder service fees 18 b
Trustees' fees 2 c
Custodian fees 14
Portfolio accounting fees 3
Professional fees 10
Registration fees 9
Shareholder reports 10
Other expenses + 9
---------
Total expenses 119
Expense reduction - 63 d
---------
NET EXPENSES 56
INCREASE IN NET ASSETS FROM OPERATIONS
- ------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 236
NET EXPENSES - 56
---------
NET INVESTMENT INCOME 180
NET REALIZED LOSSES (346) e
NET UNREALIZED GAINS + 1,057 e
---------
INCREASE IN NET ASSETS FROM OPERATIONS $891
a Calculated as a percentage of average daily net assets: 0.25% of the first
$1 billion and 0.23% of assets beyond that.
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.
c For the fund's independent trustees only.
d Includes $44 from the investment adviser (CSIM) and $16 from the transfer
agent and shareholder service agent (Schwab). In addition, the total
expenses reimbursed by the investment adviser was $3. These reductions
reflect a guarantee by CSIM and Schwab to limit the operating expenses of
this fund through at least December 31, 2005, to 0.32% of average daily net
assets. This limit doesn't include interest, taxes and certain non-routine
expenses.
e These add up to a net gain on investments of $711.
See financial notes.
43
INSTITUTIONAL SELECT SMALL-CAP VALUE INDEX FUND -- Financials
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for current period are unaudited.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income $180 $413
Net realized losses (346) (781)
Net unrealized gains or losses + 1,057 (836)
----------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 891 (1,204)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income 401 451
Distributions from net realized gains + -- 4,324
----------------------------------
TOTAL DISTRIBUTIONS PAID $401 $4,775 a
TRANSACTIONS IN FUND SHARES
- ---------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 463 $4,398 1,550 $17,684
Shares reinvested 41 401 328 3,590
Shares redeemed + (778) (7,328) (2,360) (25,619) b
------------------------------------------------
NET DECREASE (274) ($2,529) (482) ($4,345)
SHARES OUTSTANDING AND NET ASSETS
- ----------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 3,889 $36,959 4,371 $47,283
Total decrease + (274) (2,039) (482) (10,324) c
-------------------------------------------------
END OF PERIOD 3,615 $34,920 3,889 $36,959 d
a The tax-basis components of distributions paid for the prior period are:
Ordinary Income $3,482
Long-term capital gains $1,293
b Dollar amounts are net of proceeds received from early withdrawal fees that
the fund charges on shares sold 180 days or less after buying them:
CURRENT PERIOD $1
PRIOR PERIOD $14
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 net investment income not yet distributed in the amount of $107
and $328 for the current period and the prior period, respectively.
See financial notes.
44
FINANCIAL NOTES UNAUDITED
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. 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,
or NAV, which is the price for all outstanding shares. Each share has a par
value of 1/1,000 of a cent, and the 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 investments 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.
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.
The 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 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(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
Schwab Core Equity Fund(TM)
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Schwab U.S. MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Hedged Equity Fund(TM)
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Institutional Select S&P 500 Fund
Institutional Select Large-Cap Value Index Fund
Institutional Select Small-Cap Value Index Fund
Schwab Institutional Select(R) Funds
45
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 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 trusts
have custodian overdraft facilities and line of credit arrangements of $150
million, $100 million and $150 million with PNC Bank, N.A., Bank of America,
N.A. and The Bank of New York, respectively. The funds pay interest on the
amounts they borrow at rates that are negotiated periodically.
AMOUNT
OUTSTANDING AVERAGE AVERAGE
AT 4/30/03 BORROWING* INTEREST
FUND ($ x 1,000) ($ x 1,000) RATE* (%)
- -------------------------------------------------------------------------
INSTITUTIONAL SELECT
S&P 500 FUND -- 1,398 2.03
- -------------------------------------------------------------------------
INSTITUTIONAL SELECT
LARGE-CAP VALUE
INDEX FUND -- 264 1.66
- -------------------------------------------------------------------------
INSTITUTIONAL SELECT
SMALL-CAP VALUE
INDEX FUND 95 72 1.73
- -------------------------------------------------------------------------
* For the six-month period ended 4/30/03.
THE FUNDS PAY FEES 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.
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 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.
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 realized net 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.
Schwab Institutional Select(R) Funds
46
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 FOR WHICH NO MARKET QUOTATIONS ARE READILY AVAILABLE: valued at
fair value, as determined in good faith by the fund's investment adviser
using guidelines adopted by the fund's Board of Trustees.
- - FUTURES 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 DISCOUNTS is recorded as it accrues.
REALIZED GAINS AND LOSSES from security transactions are based on the identified
costs of the securities involved.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES are reported in U.S.
dollars. For assets and liabilities held on a given date, the dollar value is
based on market exchange rates in effect on that date. Transactions involving
foreign currencies, including purchases, sales, income receipts and expense
payments, are 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 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.
Schwab Institutional Select(R) Funds
47
GLOSSARY
Words and phrases that appear in financial reports often have specific meanings
that are different from their everyday meanings. The glossary below tells you
what is meant by the following terms when they are used in this report.
ASSET ALLOCATION The practice of dividing a portfolio among different asset
classes, with each asset class assigned a particular percentage.
ASSET CLASS A group of securities with similar structure and basic
characteristics. Stocks, bonds and cash are the three main examples of asset
classes.
BETA A historical measure of an investment's volatility relative to a market
index (usually the S&P 500). The index is defined as having a beta of 1.00.
Investments with a beta higher than 1.00 have been more volatile than the index;
those with a beta of less than 1.00 have been less volatile.
BOND A security representing a loan from the investor to the issuer. A bond
typically pays interest at a fixed rate (the "coupon rate") until a specified
date (the "maturity date"), at which time the issuer returns the money borrowed
("principal" or "face value") to the bondholder. Because of their structure,
bonds are sometimes called "fixed income securities" or "debt securities."
CAP, CAPITALIZATION See "market cap."
CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an
investment and its value at a later time. If the investment has been sold, the
capital gain or loss is considered a realized gain or loss. If the investment is
still held, the gain or loss is still "on paper" and is considered unrealized.
EARNINGS GROWTH RATE For a mutual fund, the average yearly rate at which the
earnings of the companies in the fund's portfolio have grown, measured over the
past five years.
EARNINGS PER SHARE (EPS) A company's earnings, or net income, for the past 12
months, divided by the number of shares outstanding.
EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to
cover the fund's operating expenses. An expense ratio of 0.50% means that a
fund's expenses amount to half of one percent of its average net assets a year.
MARKET CAP, MARKET CAPITALIZATION The value of a company as determined by the
total value of all shares of its stock outstanding.
MEDIAN MARKET CAP The midpoint of the range of market caps of the stocks held by
a fund. There are different ways of calculating median market cap. With a simple
median, half of the stocks in the fund's portfolio would be larger than the
median, and half would be smaller. With a weighted median (the type that is
calculated for these funds), half of the fund's assets are invested in stocks
that are larger than the median market cap, and half in stocks that are smaller.
NET ASSET VALUE (NAV) The value of one share of a mutual fund. NAV is calculated
by taking the fund's total assets, subtracting liabilities, and dividing by the
number of shares outstanding.
OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual
fund, indicates all shares currently held by investors.
PRICE-TO-BOOK RATIO (P/B) The market price of a company's stock compared with
its "book value." A mutual fund's P/B is the weighted average of the P/B of all
stocks in the fund's portfolio.
PRICE-TO-EARNINGS RATIO (P/E) The market price of a company's stock compared
with earnings over the past year. A mutual fund's P/E is the weighted average of
the P/E of all stocks in the fund's portfolio.
RETURN ON EQUITY (ROE) The average yearly rate of return for each dollar of
investors' money, measured over the past five years.
STOCK A share of ownership, or equity, in the issuing company.
TOTAL RETURN The 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.
Schwab Institutional Select(R) Funds
48
CONTACT SCHWAB
SchwabFunds(R) offers you a complete family of mutual funds, each one based on a
time-tested investment approach and using disciplined, clearly defined
management strategies.
Actively managed funds include multi-manager stock funds, a fund that uses
long-short strategies, and a range of taxable and tax-free bond funds. Index
funds include large-cap, small-cap and international stock funds. 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. Please call 1-800-435-4000 for a free
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)
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.
1 Shares of Sweep Investments(TM) may not be purchased over the Internet.
2 Orders placed in person or through a telephone representative are subject to a
service fee payable to Schwab.
THE SCHWABFUNDS FAMILY
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 Hedged Equity Fund(TM)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab MarketMasters Funds(TM)
Schwab U.S. MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
ASSET ALLOCATION FUNDS
Schwab MarketTrack Portfolios(R)
Schwab All Equity Portfolio
Schwab Growth Portfolio
Schwab Balanced Portfolio
Schwab Conservative Portfolio
BOND FUNDS
Schwab YieldPlus Fund(R)
Schwab Short-Term Bond Market Fund
Schwab Total Bond Market Fund
Schwab GNMA 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 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 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
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) 2003 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
Printed on recycled paper.
REG 13995-04
Schwab Hedged Equity Fund(TM)
SEMIANNUAL REPORT
APRIL 30, 2003
[CHARLES SCHWAB LOGO]
A mutual fund that leverages Schwab Equity Ratings(TM) to seek long-term
capital appreciation over market cycles with lower volatility than the broad
equity market.
In This Report
Management's Discussion .............................................. 2
The president of SchwabFunds(R) and the fund's manager discuss the
factors that affected fund performance during the report period.
Fund Performance and Related Data
Fund and index performance data, fund facts, portfolio holdings and
fund financials.
Schwab Hedged Equity Fund(TM)....................................... 6
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.
Financial Notes....................................................... 18
Glossary.............................................................. 21
FROM THE CHAIRMAN
[PHOTO OF CHARLES R. SCHWAB]
Charles R. Schwab
Chairman
Without question, these are challenging times for America's investors. But I
believe that they also may provide opportunities, especially for those who stay
involved with their investment portfolios and review their mutual fund holdings
with their investment objectives in mind.
As this report goes to press, the President has signed into law a new tax
package that I believe offers significant potential benefits for all investors.
The new tax package will reduce the rate of taxation on many corporate dividends
and on capital gains. I believe that reducing these taxes could serve as a
stimulus to the stock market, thereby benefiting all owners of U.S. stocks.
For years, corporate dividends have been taxed twice: first when the corporation
earned the money, and again when investors received the dividend. In my view,
this has provided an incentive for corporations to retain profits as cash rather
than sharing them with their shareholders. I believe reducing the dividend tax
gives companies the right incentives to invest and create new jobs.
Here at Schwab, we are actively exploring ways to help investors meet their
financial objectives. At SchwabFunds(R), these efforts are being led by the new
president of SchwabFunds, Randall Merk. Randy brings a wealth of experience to
the job, and we welcome his leadership, vision and wisdom.
On behalf of SchwabFunds, I'd like to thank you for investing with us. Your
continued trust and support mean a great deal to us. In turn, it's our mission
to help you meet your financial goals.
Sincerely,
/s/ Charles R. Schwab
MANAGEMENT'S DISCUSSION November 1, 2002 -- April 30, 2003
[PHOTO OF RANDALL W. MERK]
RANDALL W. MERK is President and CEO of Charles Schwab Investment Management,
Inc. and is president of each of the funds covered in this report. He joined the
firm in August of 2002, bringing with him 24 years of experience in the asset
management industry.
Dear Shareholder:
As one of the newer members of the SchwabFunds(R) team, I've been struck by the
talent and integrity of the people here. Above all, I've been impressed with the
dedication they show to understanding the needs and concerns of our
shareholders.
That dedication is particularly important right now. Times of market volatility
and uncertainty about world events demand as high a level of diligence as ever
on the part of investment professionals. At SchwabFunds we are keenly aware of
this, and we continue to work hard to uphold the best interests of our
shareholders.
Mutual funds are facing many initiatives at the moment. These include changes in
corporate governance practices, such as the Sarbanes-Oxley Act (which requires
senior management certification of financial reports), and new regulations
affecting disclosures of mutual funds' proxy voting practices. Many of these
changes have the potential to benefit shareholders, and I want to assure you
that we'll keep you informed of the progress we are making with them.
In the meantime, it is worth keeping in mind that the basic tenets of mutual
fund investing remain unchanged. In particular, time-tested investment practices
such as asset allocation and diversification are as important as ever. The range
of choices available from SchwabFunds can make it easy to diversify your
portfolio. In addition, as our range of funds grows, we'll let you know when new
funds are launched (or you can stay informed by visiting
www.schwab.com/schwabfunds).
In closing, let me thank you for choosing SchwabFunds for your mutual fund
investments. We're committed to helping you reach your financial goals. If there
is something more that we can do to help, I hope you'll let us know.
Sincerely,
/s/ Randall W. Merk
Schwab Hedged Equity Fund(TM)
2
[PHOTO OF ROBIN JACKSON]
ROBIN JACKSON, a portfolio manager of the investment adviser, has day-to-day
responsibility for fund management. Prior to joining the firm in 2001, he worked
for 13 years in various portfolio management positions, developing and
implementing long- and short-trading strategies.
THE ECONOMY
THE WAR IN IRAQ DOMINATED HEADLINES, ALTHOUGH IT WAS NOT THE ONLY FACTOR
AFFECTING THE ECONOMY. As the report period began, the nation's focus was
divided between fundamental economic issues and concerns over the looming war
with Iraq. Once the war arrived, attention focused on Iraq and the progress of
political and military actions. Toward the end of the report period, as
intensive military action drew to a close, the nation's focus shifted and its
level of concern over war-related uncertainty declined.
One reflection of this pattern of changing concerns over the war was the price
of oil. Leading up to the war, oil prices continued to ratchet up to nearly $40
a barrel. But the price quickly dropped to around $30 a barrel when it began to
appear that the major fighting would not last long.
The economy that Americans found at the end of the war was not much different
than it had been during the period before the war. Gross Domestic Product was
positive but weak, while joblessness edged up to 6%. Consumer spending remained
strong, helped in part by widespread discounts and depressed prices in most
sectors (aside from healthcare and oil). But discounted prices for consumers
translated into thin profits for companies, and business capital spending
remained minimal. A half-percent interest rate cut in November 2002 showed the
Federal Reserve continuing to apply economic stimulus; the president and
Congress contributed by advancing new fiscal and tax policies.
THE MARKET
MOST TYPES OF STOCKS POSTED GAINS FOR THE PERIOD, WITH SMALL-CAP GROWTH STOCKS
AND LARGE-CAP VALUE STOCKS LEADING THE WAY. Positive returns were welcome news
after prior declines. However, the volatility that has characterized the market
in recent years continued throughout the period.
The strongest month of the period for stocks was April 2003, which saw the
market rise as the military action in Iraq ended and as the first corporate
earnings reports for 2002 appeared to indicate some improvement over the
disappointing earnings of 2001. Another factor that we believe may have helped
lift the market during the period was the increasing possibility of a dividend
tax cut.
Schwab Hedged Equity Fund(TM)
3
MANAGEMENT'S DISCUSSION continued
STOCK PRICES DURING THE PERIOD APPEARED TO GENERALLY REFLECT COMPANIES'
ESTABLISHED EARNING POWER, ALTHOUGH ANTICIPATED FUTURE EARNINGS BEGAN TO DRIVE
RETURNS IN SOME SECTORS.
Looking at stock prices during the period, it appeared that investors were
reluctant to give much consideration to projections of future earnings (which
may or may not turn out to be accurate) when deciding how much they were willing
to pay for a stock.
In our view, this was a sign of lingering skepticism among investors about
earnings projections, whether those projections came from corporate management
or from analysts. As the report period came to a close, there were some issues
that remained unresolved. For instance, there were still companies coming
forward with earnings restatements or with large one-time charges. There were
also questions about how companies account for pension plan liabilities, and how
related practices might trigger another round of earnings restatements. We
believe investors' sensitivity to factors such as these was likely heightened by
the memory of the many recent high-profile cases of corporate malfeasance.
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.
4.48% S&P 500(R) INDEX: measures U.S. large-cap stocks
7.55% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
1.81% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in
Europe, Australasia and the Far East
4.31% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond
market
[LINE GRAPH]
Lehman Brothers
U.S. Aggregate MSCI-EAFE Russell 2000 S&P 500
Bond Index Index Index Index
31-OCT-2002 0 0 0 0
NOV-2002 -0.18 -0.36 2.6 1.72
NOV-2002 0.59 1.71 2.65 1.95
NOV-2002 0.25 0.52 3.5 2.2
NOV-2002 -0.07 3.64 6.59 5.6
NOV-2002 -0.03 4.7 9.98 6.2
DEC-2002 0.52 0.96 5.77 2.59
DEC-2002 0.86 -0.03 6.05 2.06
DEC-2002 1.42 -1.25 2.87 0.14
DEC-2002 1.99 0.71 4.5 0.75
JAN-2003 1.36 2.13 5.44 3.01
JAN-2003 1.18 2.45 6.35 5.14
JAN-2003 1.83 3.2 6.09 3.7
JAN-2003 2.2 -0.55 3.09 0.61
JAN-2003 2.12 -3.01 -1.19 -4.19
FEB-2003 2.47 -3.67 -1.94 -4.88
FEB-2003 2.45 -4.75 -4.58 -7.18
FEB-2003 2.75 -3.54 -3.25 -4.91
FEB-2003 3.54 -6.69 -2.77 -4.84
MAR-2003 3.82 -6.69 -4.79 -6.53
MAR-2003 3.45 -10.09 -4.3 -5.38
MAR-2003 2.18 -5.24 -0.25 -0.36
MAR-2003 3.12 -5.07 -0.45 -1.16
APR-2003 3.12 -4.67 1.13 -0.23
APR-2003 3.14 -3.48 0.46 -0.74
APR-2003 3.4 -0.88 3.46 1.78
APR-2003 3.96 0.21 5.76 3.82
30-APR-2003 4.31 1.81 7.55 4.48
These figures assume dividends and distributions were reinvested. Index figures
don't include trading and management costs, which would lower performance.
Indices are unmanaged and you can't invest in them directly. Remember that past
performance is not an indication of future results.
Data source: Charles Schwab & Co., Inc.
Schwab Hedged Equity Fund(TM)
4
THE FUND USES SCHWAB EQUITY RATINGS(TM) TO AID IT IN DECIDING WHICH STOCKS TO
BUY, AVOID OR SELL SHORT.
THE FUND
THE FUND HAD A POSITIVE TOTAL RETURN FOR THE PERIOD, BUT UNDERPERFORMED THE S&P
500(R) INDEX, ITS BENCHMARK. After rising at the beginning of the period only to
fall back into negative territory, the fund rebounded in March and April 2003
when U.S. stocks in general rose.
In our view, there were two main reasons why the fund underperformed its
benchmark during the period. First, the fund's hedging strategy, which is
designed to reduce exposure to market risk, can lead to short-term
underperformance in a rising stock market environment. Second, the market
recovery that was underway as the report period opened appeared to be led mainly
by rebounding stocks with higher price volatility and higher growth
expectations, whereas the fund's strategy favors stocks with lower risk, solid
fundamentals and attractive valuation characteristics.
The fund's strategy involves investing primarily in stocks that are rated A or B
by Schwab Equity Ratings(TM), and selling short those stocks with ratings of D
or F in anticipation that their prices may fall. During the report period, we
saw some stocks with ratings of D or F outperform those rated A or B. However,
Schwab Equity Ratings' research has indicated that although higher risk stocks
at times can outperform the market (especially during strong market uptrends),
these performance surges historically have tended to be unsustainable.
Shareholders should bear in mind that the fund's goal includes not only seeking
long-term capital appreciation, but managing risk. It addresses the risk
management side with several tools, including short sales. During the report
period, the fund's total return lagged that of the S&P 500 by nearly 2% while
only exhibiting about 33% of the volatility of that index (as measured by beta).
Another way to compare the volatility of the fund to that of the index is to
look at the best and worst months during the period. The best monthly total
return during the period for the S&P 500 was 8.24%, while its worst month was
- -5.87%. In contrast, the fund's best month was 3.91% and its worst month was
- -1.33%, a much narrower range. 1
Schwab Equity Ratings are produced by the Schwab Equity Model Development
Department.
The views expressed here are those of fund management only. 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 Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower. These returns are not annualized. Past performance does not
indicate future results.
Schwab Hedged Equity Fund(TM)
5
SCHWAB HEDGED EQUITY FUND(TM)
PERFORMANCE as of 4/30/03
TOTAL RETURNS 1,2
This chart compares performance of the fund with the S&P 500(R) Index and the
Morningstar Domestic Hybrid Fund category.
[BAR CHART]
S&P 500 CATEGORY
FUND INDEX AVERAGE
6 Months 2.54% 4.48% 3.99%
Since Inception:9/3/02 0.90% 1.33% n/a
PERFORMANCE OF A $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 the S&P 500 Index.
$25,225 FUND
$25,332 S&P 500 INDEX
[LINE GRAPH]
Fund S&P 500 Index
3-SEP-02 25000 25000
SEP-02 23850 22283
OCT-02 24600 24243
NOV-02 24700 25671
DEC-02 24375 24164
JAN-03 24050 23531
FEB-03 23850 23178
MAR-03 24275 23403
4-APR-03 25225 25332
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. The
fund's share price and principal values change, and when you sell your shares,
they may be worth more or less than what you paid for them. Past performance
does not indicate future results. Results for the report period are not
annualized.
The 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.
1 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower. These returns also 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. As of 4/30/03, there were
1,016 funds in the Morningstar Domestic Hybrid Fund category for the
six-month period.
6
SCHWAB HEDGED EQUITY FUND(TM)
Fund Facts as of 4/30/03
TOP LONG HOLDINGS 1
% OF
SECURITY NET ASSETS
- ---------------------------------------------------
(1) CONVENTRY HEALTH CARE, INC. 1.0%
- ---------------------------------------------------
(2) FEDEX CORP. 0.9%
- ---------------------------------------------------
(3) BLACK & DECKER CORP. 0.9%
- ---------------------------------------------------
(4) FIRST AMERICAN FINANCIAL CORP. 0.9%
- ---------------------------------------------------
(5) AMDOCS LTD. 0.9%
- ---------------------------------------------------
TOTAL 4.6%
TOP SHORT POSITIONS 1
% OF
SECURITY NET ASSETS
- ---------------------------------------------------
(1) ST. PAUL COS., INC. 0.7%
- ---------------------------------------------------
(2) A.G. EDWARDS, INC. 0.7%
- ---------------------------------------------------
(3) THE MAY DEPARTMENT STORES CO. 0.7%
- ---------------------------------------------------
(4) SCHOLASTIC CORP. 0.6%
- ---------------------------------------------------
(5) BAXTER INTERNATIONAL, INC. 0.6%
- ---------------------------------------------------
TOTAL 3.3%
STATISTICS
LONG SHORT
HOLDINGS POSITIONS
- ----------------------------------------------------------
NUMBER OF HOLDINGS 189 91
- ----------------------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $3,267 $2,075
- ----------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 14.5 21.7
- ----------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.0 2.0
- ----------------------------------------------------------
PORTFOLIO TURNOVER RATE 2,3 58% --
- ----------------------------------------------------------
1 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
2 Short positions have been excluded from the calculation of portfolio
turnover because at the time of entering the short positions, the fund did
not intend to hold the positions for more than one year.
3 Not annualized.
7
SCHWAB HEDGED EQUITY FUND(TM) -- Financials
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 9/3/02 1-
4/30/03 10/31/02
- ----------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------
Net asset value at beginning of period 9.84 10.00
------------------
Income or loss from investment operations:
Net investment loss (0.05) (0.01)
Net realized and unrealized gains or losses 0.30 (0.15)
------------------
Total income or losses from investment operations 0.25 (0.16)
------------------
Net asset value at end of period 10.09 9.84
------------------
Total return (%) 2.54 2 (1.60) 2
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------
Ratio of net operating expenses to average
net assets (including dividend expense
on short sales) 2.41 3 2.39 3
Ratio of net operating expenses to average
net assets (excluding dividend expense
on short sales) 2.00 3 2.00 3
Expense reductions reflected in above ratios 0.45 3 0.94 3
Ratio of net investment loss to
average net assets (0.94) 3 (0.79) 3
Portfolio turnover rate 58 2 68 2
Net assets, end of period ($ x 1,000,000) 36 32
1 Commencement of operations.
2 Not annualized.
3 Annualized.
See financial notes.
8
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top five
long holdings and short positions, the number in the circle is the security's
rank among their respective top five.
(1) Top five long holdings/short positions
o Non-income producing security
@ Collateral for short sales
COST/ MARKET
PROCEEDS VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- ---------------------------------------------------------------------------
100.0% COMMON STOCK 34,240 35,785
SHORT SALES BY CATEGORY
- ---------------------------------------------------------------------------
COMMON STOCK 8,810 9,072
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 100.0% of investments
AEROSPACE / DEFENSE 2.2%
---------------------------------------------------------------------
Lockheed Martin Corp. 3,700 186
Rockwell International Corp. 13,600 310
United Technologies Corp. 4,500 278
-----------
774
AIR TRANSPORTATION 0.9%
---------------------------------------------------------------------
@(2) Fedex Corp. 5,600 335
APPAREL 2.8%
---------------------------------------------------------------------
o@ Jones Apparel Group, Inc. 3,800 109
@ Liz Claiborne, Inc. 10,000 325
o@ Reebok International Ltd. 9,600 298
@ VF Corp. 7,200 283
-----------
1,015
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 3.5%
---------------------------------------------------------------------
Autoliv, Inc. 3,100 75
@ Carlisle Cos., Inc. 6,400 290
@ Cooper Tire & Rubber Co. 12,000 169
Dana Corp. 20,000 186
Delphi Automotive Systems 1,000 8
@ Eaton Corp. 3,400 279
Ford Motor Co. 1,500 16
o Lear Corp. 5,400 215
o SPX Corp. 800 27
-----------
1,265
BANK 5.8%
---------------------------------------------------------------------
Amsouth Bancorp 400 9
BankAmerica Corp. 2,000 148
Commerce Bancshares, Inc. 5,750 218
Community First Bankshares, Inc. 7,400 199
Cullen Frost Bankers, Inc. 5,500 180
Doral Financial Corp. 7,000 280
First Midwest Bancorp, Inc. 4,700 130
Hudson City Bancorp, Inc. 3,100 72
Hudson United Bancorp 4,600 153
Popular, Inc. 706 26
Trustmark Corp. 1,398 34
@ UnionBanCal Corp. 7,500 303
Wachovia Corp. 7,900 302
Westamerica Bancorp 211 9
Whitney Holding Corp. 619 21
-----------
2,084
BUSINESS MACHINES & SOFTWARE 5.4%
---------------------------------------------------------------------
Adobe Systems, Inc. 9,100 314
o Avocent Corp. 10,000 296
o BMC Software, Inc. 16,400 245
o Cisco Systems, Inc. 11,800 177
o@ Lexmark International, Inc., Class A 4,400 328
o Storage Technology Corp. 5,700 141
o Sybase, Inc. 17,700 227
o Xerox Corp. 20,000 197
-----------
1,925
BUSINESS SERVICES 8.5%
---------------------------------------------------------------------
Automatic Data Processing, Inc. 2,400 81
o Citrix Systems, Inc. 16,368 310
o Computer Sciences Corp. 500 17
Global Payments, Inc. 1,800 56
o GTech Holdings Corp. 9,000 303
See financial notes.
9
SCHWAB HEDGED EQUITY FUND(TM) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
@ H&R Block, Inc. 6,800 263
o Invitrogen Corp. 9,947 325
o Pittston Brink's Group 7,300 93
o Republic Services, Inc., Class A 11,900 255
o Symantec Corp. 5,800 255
o Take-Two Interactive Software, Inc. 9,900 223
o@ The Dunn & Bradstreet Corp. 8,200 310
o University of Phoenix Online, Inc. 7,100 313
Viad Corp. 12,200 245
-----------
3,049
CHEMICAL 5.2%
---------------------------------------------------------------------
@ 3M Co. 2,100 265
Albemarle Corp. 5,000 135
Crompton Corp. 100 --
o Cytec Industries, Inc. 7,300 234
@ E.I. du Pont de Nemours & Co. 7,500 319
Great Lakes Chemical Corp. 11,500 282
o Hercules, Inc. 11,500 117
Lubrizol Corp. 5,400 171
Praxair, Inc. 5,500 319
-----------
1,842
CONSTRUCTION 2.2%
---------------------------------------------------------------------
Fluor Corp. 1,000 34
o Lennar Corp. 5,200 282
The Ryland Group, Inc. 3,000 163
The Sherwin-Williams Co. 10,500 293
-----------
772
CONSUMER DURABLE 1.7%
---------------------------------------------------------------------
(3) Black & Decker Corp. 8,100 334
o@ Rent-A-Center, Inc. 4,500 289
-----------
623
CONSUMER NON-DURABLE 2.6%
---------------------------------------------------------------------
@ Fortune Brands, Inc. 6,000 290
Lancaster Colony Corp. 5,200 222
o Mattel, Inc. 12,800 278
o Yum! Brands, Inc. 5,000 124
-----------
914
CONTAINERS 0.8%
---------------------------------------------------------------------
o PactivCorp. 14,100 289
ELECTRONICS 3.1%
---------------------------------------------------------------------
o@ Acxiom Corp. 18,000 251
o American Power Conversion Corp. 18,007 280
o LSI Logic Corp. 1,300 7
o Nextel Communications, Inc., Class A 18,500 274
o Thermo Electron Corp. 13,900 253
o Thomas & Betts Corp. 2,600 41
-----------
1,106
ENERGY: RAW MATERIALS 0.1%
---------------------------------------------------------------------
Valero Energy Corp. 1,200 44
FOOD & AGRICULTURE 2.5%
---------------------------------------------------------------------
Corn Products International, Inc. 6,800 203
Dean Foods Co. 5,100 222
Fresh del Monte Produce, Inc. 10,300 201
Hershey Foods Corp. 4,200 274
-----------
900
HEALTHCARE / DRUGS & MEDICINE 11.6%
---------------------------------------------------------------------
o Anthem Inc. 100 7
o Apria Healthcare Group, Inc. 10,400 244
Becton Dickinson & Co. 8,700 308
@ C.R. Bard, Inc. 5,100 323
o Caremark Rx, Inc. 400 8
o Cephalon, Inc. 3,000 123
o@(1) Conventry Health Care, Inc. 8,900 363
o Cytec Corp. 16,100 213
o Guidant Corp. 500 20
o@ Health Net, Inc. 11,500 300
o IDEXX Corp. 3,000 117
Johnson & Johnson, Inc. 4,900 276
o Manor Care, Inc. 2,400 47
Merck & Co., Inc. 100 6
@ Mylan Laboratories, Inc. 9,300 263
o Oxford Health Plans, Inc. 9,000 263
o PacifiCare Health Systems, Inc. 9,900 315
See financial notes.
10
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Quintiles Transnational Corp. 8,640 121
o St. Jude Medical, Inc. 6,000 315
o SterisCorp. 10,400 236
United Healthcare Corp. 3,000 276
-----------
4,144
HOUSEHOLD PRODUCTS 2.6%
---------------------------------------------------------------------
@ Clorox Co. 6,100 276
International Flavors & Fragrances, Inc. 8,800 280
NU Skin Enterprises, Inc., Class A 6,100 55
Procter & Gamble Co. 3,100 279
The Dial Corp. 1,800 37
-----------
927
INSURANCE 8.9%
---------------------------------------------------------------------
Aetna, Inc. 500 25
AFLAC, Inc. 5,700 186
o CNA Financial Corp. 4,200 101
@ Fidelity National Financial, Inc. 9,000 310
@(4) First American Financial Corp. 12,400 329
@ Marsh & McLennan Cos., Inc. 5,900 281
Odyssey Re Holdings Corp. 6,800 143
Old Republic International Corp. 10,300 315
o Principal Financial Group, Inc. 10,400 303
Protective Life Corp. 6,900 198
Radian Group, Inc. 2,300 91
Safeco Corp. 1,000 39
o StanCorp. Financial Group, Inc. 4,400 236
@ The Progressive Corp. 4,200 286
Torchmark Corp. 400 15
W.R. Berkley Corp. 4,700 218
Willis Group Holdings Ltd. 3,000 93
-----------
3,169
MEDIA 4.7%
---------------------------------------------------------------------
@ Blockbuster, Inc. 16,900 302
Harte-Hanks Communications, Inc. 6,400 115
McClatchy Co., Class A 2,800 164
McGraw Hill Cos., Inc. 3,400 199
Media General, Inc. 3,400 187
Meredith Corp. 7,100 307
Tribune Co. 2,200 108
o Valassis Communications, Inc. 10,800 287
-----------
1,669
MISCELLANEOUS FINANCE 6.1%
---------------------------------------------------------------------
o eSpeed, Inc., Class A 5,300 69
@ Fannie Mae 4,000 290
Freddie Mac 5,200 301
GreenPoint Financial Corp. 6,500 311
Independence Community Bank Corp. 8,464 221
@ Legg Mason, Inc. 5,900 320
@ Nuveen Investments, Inc. 2,300 56
SLM Corp. 2,700 303
@ The Bear Stearns Cos., Inc. 4,500 301
-----------
2,172
NON-FERROUS METALS 0.8%
---------------------------------------------------------------------
Freeport-McMoran Copper & Gold, Inc. Class B 16,000 277
OIL: DOMESTIC 0.9%
---------------------------------------------------------------------
Kerr-McGee Corp. 6,900 291
o Newfield Exploration Co. 1,000 34
-----------
325
OPTICAL & PHOTO 0.8%
---------------------------------------------------------------------
Eastman Kodak Co. 9,600 287
PAPER & FOREST PRODUCTS 0.8%
---------------------------------------------------------------------
International Paper Co. 8,300 297
PRODUCER GOODS & MANUFACTURING 3.6%
---------------------------------------------------------------------
Deere & Co. 6,900 304
o Fisher Scientific International, Inc. 9,200 265
Graco, Inc. 3,100 95
Harsco Corp. 4,800 165
Hon Industries, Inc. 4,500 133
Pentair, Inc. 7,500 289
The Timken Co. 100 2
York International Corp. 1,500 36
-----------
1,289
See financial notes.
11
SCHWAB HEDGED EQUITY FUND(TM) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
RETAIL 2.6%
---------------------------------------------------------------------
o Best Buy Co., Inc. 1,000 35
Claire's Stores, Inc. 3,800 99
Dollar General Corp. 300 4
o@ Federated Department Stores, Inc. 10,300 315
J.C. Penny Co., Inc. (Holding Co.) 3,100 53
o Office Depot, Inc. 4,900 62
o Staples, Inc. 800 15
The Gap, Inc. 5,800 97
@ Winn Dixie Stores, Inc. 18,900 237
-----------
917
STEEL 0.8%
---------------------------------------------------------------------
United States Steel Corp. 20,000 286
TELEPHONE 3.3%
---------------------------------------------------------------------
(5) Amdocs Ltd. 18,600 329
AT&T Wireless Group 7,200 47
BellSouth Corp. 12,600 321
o Crown Castle International Corp. 20,000 127
SBC Communications, Inc. 3,900 91
Sprint Corp. 20,000 230
Verizon Communications, Inc. 1,000 37
-----------
1,182
TRAVEL & RECREATION 1.7%
---------------------------------------------------------------------
Brunswick Corp. 1,000 22
o Harrah's Entertainment, Inc. 7,100 279
o MGM Mirage 7,500 213
Station Casinos, Inc. 5,400 117
-----------
631
TRUCKING & FREIGHT 0.0%
---------------------------------------------------------------------
C.H. Robinson Worldwide, Inc. 400 15
UTILITIES: ELECTRIC & GAS 3.5%
---------------------------------------------------------------------
Constellation Energy Group, Inc. 200 6
o Edison International 15,800 231
@ Exelon Corp. 6,100 324
Great Plains Energy, Inc. 11,700 306
Hawaiian Electric Industries, Inc. 300 12
Kinder Morgan, Inc. 300 14
Questar Corp. 1,300 39
UGI Corp. 8,250 261
Wisconsin Energy Corp. 2,600 68
-----------
1,261
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
12
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
SHORT SALES - COMMON STOCK
AEROSPACE / DEFENSE
---------------------------------------------------------------------
Northrop Grumman Corp. 2,300 202
AIR TRANSPORTATION
---------------------------------------------------------------------
Delta Air Lines, Inc. 900 11
Jetblue Airways Corp. 1,200 38
Sabre Group Holdings, Inc. 8,700 182
-----------
231
ALCOHOLIC BEVERAGES
---------------------------------------------------------------------
Adolph Coors Co., Class B 3,000 161
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES
---------------------------------------------------------------------
Navistar International Corp. 4,000 112
O'Reilly Automotive, Inc. 6,885 204
Superior Industries International, Inc. 4,400 174
-----------
490
BANKS
---------------------------------------------------------------------
BB&T Corp. 4,500 147
Southwest Bancorp of Texas, Inc. 700 24
Synovus Financial Corp. 7,200 140
The Colonial Bancgroup, Inc. 10,600 135
-----------
446
BUSINESS MACHINES & SOFTWARE
---------------------------------------------------------------------
Network Appliance, Inc. 7,800 104
Total System Services, Inc. 2,300 42
-----------
146
BUSINESS SERVICES
---------------------------------------------------------------------
Copart, Inc. 7,400 62
Education Management Corp. 3,900 190
FTI Consulting, Inc. 2,300 104
Kinder Morgan Management LLC 509 18
Performance Food Group Co. 4,499 158
-----------
532
CHEMICAL
---------------------------------------------------------------------
Cabot Corp. 4,200 117
Eastman Chemical Co. 200 6
Lyondell Chemical Co. 7,500 109
Olin Corp. 400 7
-----------
239
CONSTRUCTION
---------------------------------------------------------------------
Martin Marietta Materials, Inc. 5,300 157
CONSUMER DURABLE
---------------------------------------------------------------------
Furniture Brands International, Inc. 6,700 159
CONSUMER NON-DURABLE
---------------------------------------------------------------------
Krispy Kreme Doughnuts, Inc. 4,800 156
Ruby Tuesday, Inc. 8,700 171
-----------
327
ELECTRONICS
---------------------------------------------------------------------
Advanced Mirco Devices, Inc. 10,800 80
Cadence Design System, Inc. 3,100 35
Integrated Circuit Systems, Inc. 5,300 115
Nvidia Corp. 10,700 153
Skyworks Solutions, Inc. 600 3
Waters Corp. 5,600) 135
-----------
521
ENERGY: RAW MATERIALS
---------------------------------------------------------------------
Helmerich & Payne, Inc. 5,500 142
Noble Drilling Corp. 2,400 74
Rowan Cos., Inc. 100 2
Tidewater, Inc. 1,800 48
-----------
266
FOOD & AGRICULTURE
---------------------------------------------------------------------
Dreyer's Grand Ice Cream, Inc. 500 32
Smithfield Foods, Inc. 600 12
Tyson Foods, Inc. 2,900 28
-----------
72
HEALTHCARE / DRUGS & MEDICINE
---------------------------------------------------------------------
Amylin Pharmaceuticals, Inc. 1,580 30
(5) Baxter International, Inc. 9,800 225
See financial notes.
13
SCHWAB HEDGED EQUITY FUND(TM) -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Cymer, Inc. 2,600 74
IDEC Pharmaceutical Corp. 4,200 138
Medimmune, Inc. 6,169 218
Univision Communications, Inc. 2,500 76
-----------
761
HOUSEHOLD PRODUCTS
---------------------------------------------------------------------
Alberto Culver Co., Class B 2,600 128
INSURANCE
---------------------------------------------------------------------
Arthur J. Gallagher & Co. 5,700 142
(1) St. Paul Cos, Inc. 7,400 254
UnumProvident Corp. 400 5
-----------
401
MEDIA
---------------------------------------------------------------------
(4) Scholastic Corp. 8,000 227
MISCELLANEOUS FINANCE
---------------------------------------------------------------------
(2) A.G. Edwards, Inc. 8,300 247
Janus Capital Group, Inc. 200 3
W Holding Co, Inc. 3,700 73
Waddell & Reed Financial, Inc. 9,900 198
-----------
521
OIL: DOMESTIC
---------------------------------------------------------------------
Chesapeake Energy Corp. 11,900 96
Spinnaker Exploration Co. 3,500 75
-----------
171
PAPER & FOREST PRODUCTS
---------------------------------------------------------------------
Temple Inland, Inc. 1,200 55
PRODUCER GOODS & MANUFACTURING
---------------------------------------------------------------------
Caterpillar, Inc. 4,000 210
General Electric Co. 1,300 38
Johnson Controls, Inc. 200 17
Kennametal, Inc. 200 6
Millipore Corp. 2,600 89
Roper Industries, Inc. 4,500 138
-----------
498
RAILROADS
---------------------------------------------------------------------
Union Pacific Corp. 300 18
REAL PROPERTY
---------------------------------------------------------------------
Catellus Development Corp. 7,000 148
RETAIL
---------------------------------------------------------------------
99 Cents Only Stores 1,200 35
American Eagle Outfitters, Inc. 1,600 28
Carmax, Inc. 3,800 80
Costco Cos., Inc. 4,200 145
Family Dollar Stores, Inc. 200 7
Limited Brands, Inc. 14,000 204
Nordstrom, Inc. 7,600 132
Target Corp. 1,200 40
(3) The May Department Stores Co. 11,400 247
The Neiman-Marcus Group, Inc., Class A 3,500 112
Tiffany & Co. 5,300 147
-----------
1,177
TRAVEL & RECREATION
---------------------------------------------------------------------
Carnival Corp. 5,800 160
TRUCKING & FREIGHT
---------------------------------------------------------------------
J.B. Hunt Transport Services, Inc. 1,800 62
Swift Transportation Co, Inc. 4,300 78
Werner Enterprises, Inc. 400 9
-----------
149
UTILITIES: ELECTRIC & GAS
---------------------------------------------------------------------
Alliant Energy Corp. 4,900 86
El Paso Corp. 7,200 54
KeySpan Corp. 4,800 163
Northeast Utilities,Inc. 1,300 19
Philadelphia Suburban Corp. 1,500 34
Public Service Enterprise Group, Inc. 1,700 66
Teco Energy, Inc. 14,200 153
TXU Corp. 1,600 32
WPS Resources Corp. 1,200 48
Xcel Energy, Inc. 4,000 54
-----------
709
END OF SHORT SALE POSITIONS. For totals, please see the first page of holdings
for the fund.
See financial notes.
14
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------
Investments, at market value $35,785 a
Deposits with broker for short sales 9,233
Receivables:
Fund shares sold 25
Interest 5
Dividends 20
Investments sold 1,483
Investments sold short 123
Prepaid expenses + 5
-----------
TOTAL ASSETS 46,679
LIABILITIES
- ---------------------------------------------------------------------------
Securities sold short, at market value 9,072 b
Payables:
Dividends on short sales 12
Investments bought 1,452
Borrowings from custodian 130
Investment adviser and administrator fees 5
Transfer agent and shareholder service fees 1
Accrued expenses + 47
-----------
TOTAL LIABILITIES 10,719
NET ASSETS
- ---------------------------------------------------------------------------
TOTAL ASSETS 46,679
TOTAL LIABILITIES - 10,719
-----------
NET ASSETS $35,960
NET ASSETS BY SOURCE
Capital received from investors 35,388
Net investment loss (167)
Net realized capital losses (544) c
Net unrealized capital gains 1,283 c
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$35,960 3,562 $10.09
a The fund paid $34,240 for these securities. Not counting short-term
obligations and government securities, the fund paid $23,273 for securities
during the report period and received $20,206 from securities it sold.
b The proceeds for securities sold short is $8,810.
c These derive from investments and short sales.
FEDERAL TAX DATA
- ----------------------------------------------------------------
PORTFOLIO COST $25,585
NET UNREALIZED GAINS AND LOSSES:
Gains $ 2,958
Losses + (1,830)
----------
$ 1,128
AS OF OCTOBER 31,2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $ --
Long-term capital gains $ --
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount:
2010 $ 46
See financial notes.
15
SCHWAB HEDGED EQUITY FUND(TM) -- Financials
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- -------------------------------------------------------------------------
Dividends $ 227
Interest + 33
---------
TOTAL INVESTMENT INCOME 260
NET REALIZED GAINS AND LOSSES
- -------------------------------------------------------------------------
Net realized losses on investments sold (624)
Net realized gains on short sales + 230
---------
NET REALIZED LOSSES (394)
NET UNREALIZED GAINS AND LOSSES
- -------------------------------------------------------------------------
Net unrealized gains on investments 2,280
Net unrealized losses on short sales + (826)
---------
NET UNREALIZED GAINS 1,454
EXPENSES
- -------------------------------------------------------------------------
Investment adviser and administrator fees 311 a
Transfer agent and shareholder service fees 44 b
Trustees' fees 3 c
Custodian and portfolio accounting fees 34
Professional fees 20
Registration fees 5
Shareholder reports 16
Other expenses + 2
---------
Total expenses before short sales 435
Dividends on short sales 72
Expense reduction + (80) d
---------
NET EXPENSES 427
INCREASE IN NET ASSETS FROM OPERATIONS
- -------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 260
NET EXPENSES + 427
---------
NET INVESTMENT LOSS (167)
NET REALIZED LOSSES (394) e
NET UNREALIZED GAINS + 1,454 e
---------
INCREASE IN NET ASSETS FROM OPERATIONS $ 893
a Calculated as 1.75% of average daily net assets.
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.
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 (Schwab) to limit the operating
expenses of this fund through at least February 29, 2004 to 2.00% of average
daily net assets. This limit doesn't include interest, taxes, certain
non-routine expenses and expenses for dividends on securities sold short.
e These add up to a net gain on investments of $1,060.
See financial notes.
16
Statement of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for the current period are unaudited.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-4/30/03 9/3/02*-10/31/02
Net investment loss ($167) ($35)
Net realized losses (394) (150)
Net unrealized gains or losses + 1,454 (171)
-----------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 893 (356)
TRANSACTIONS IN FUND SHARES
- -------------------------------------------------------------------------------
11/1/02-4/30/03 9/3/02-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 968 $9,446 3,397 $33,733
Shares redeemed + (702) (6,806) (101) (950) a
-------------------------------------------------
NET INCREASE 266 $2,640 3,296 $32,783
SHARES OUTSTANDING AND NET ASSETS
- -------------------------------------------------------------------------------
11/1/02-4/30/03 9/3/02-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 3,296 $32,427 -- $ --
Total increase + 266 3,533 3,296 32,427 b
--------------------------------------------------
END OF PERIOD 3,562 $35,960 3,296 $32,427 c
* Commencement of operations.
a Dollar amount is net of proceeds from early withdrawal fees that the fund
charges on shares sold 180 days or less after buying them:
CURRENT PERIOD $33
PRIOR PERIOD $14
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 Includes net investment loss in the amount of $167 at the end of the current
period.
See financial notes.
17
FINANCIAL NOTES unaudited
BUSINESS STRUCTURE OF THE FUND
THE FUND DISCUSSED IN THIS REPORT IS A SERIES OF SCHWAB CAPITAL TRUST, A
NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended. The sidebar shows the fund in this report and its trust.
THE FUND OFFERS ONE SHARE CLASS. Shares are bought and sold at net asset value,
or NAV, which is the price for all outstanding shares. Each share has a par
value of 1/1,000 of a cent, and the trust may issue as many shares as necessary.
THE TRUST AND ITS FUNDS
This list shows all of the funds included in Schwab Capital Trust. The fund
discussed in this report is highlighted.
SCHWAB CAPITAL TRUST organized May 7, 1993
Schwab S&P 500 Fund
Schwab Small-Cap Index Fund(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
Schwab Core Equity Fund(TM)
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Schwab U.S. MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Hedged Equity Fund(TM)
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Institutional Select S&P 500 Fund
Institutional Select Large-Cap Value Index Fund
Institutional Select Small-Cap Value Index Fund
FUND OPERATIONS
Most of the fund's investments are described earlier in this report. However,
there are certain other investments and policies that may affect the fund's
financials, as described below. Other policies concerning the fund's business
operations also are described here.
THE FUND PAYS DIVIDENDS from net investment income and makes distributions from
net capital gains once a year.
THE FUND SELLS SECURITIES SHORT (SELLING 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 the collateral or close out the 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 Statement of Assets and Liabilities.
THE FUND 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.
Because futures carry inherent risks, the fund must give the broker a deposit of
cash and/or securities (the "initial margin") whenever it enters into a futures
contract. The amount of the deposit may vary from
Schwab Hedged Equity Fund(TM)
18
one contract to another, but it is generally a percentage of the contract
amount.
Futures are traded publicly on exchanges, and their market value changes daily.
The fund records the change in market value of futures, and also the change in
the amount of margin deposit required ("variation margin").
THE FUND MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The fund may obtain
temporary bank loans through its trust to which it belongs, to use for meeting
shareholder redemptions or for extraordinary or emergency purposes. The trust
has custodian overdraft facilities and line of credit arrangements of $150
million, $100 million and $150 million with PNC Bank, N.A., Bank of America,
N.A. and The Bank of New York, respectively. The fund pays interest on the
amounts it borrows at rates that are negotiated periodically.
AMOUNT
OUTSTANDING AVERAGE AVERAGE
AT 4/30/03 BORROWING* INTEREST
($ x 1,000) ($ x 1,000) RATE * (%)
- --------------------------------------------------
130 313 1.62
* For the six-month period ended April 30, 2003.
THE FUND PAYS FEES FOR VARIOUS SERVICES. Through its trust, the fund has
agreements with Charles Schwab Investment Management, Inc. (CSIM) to provide
investment advisory and administrative services and with Charles Schwab & Co.,
Inc. (Schwab) to provide transfer agent and shareholder services.
Although these agreements specify certain fees for these services, CSIM and
Schwab have made additional agreements with the fund that may limit the total
expenses charged. The rates and limitations for these fees are described in the
fund's Statement of Operations.
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 the fund's Statement
of Operations.
THE FUND MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING RELATED PARTIES. These
transactions may include other SchwabFunds(TM) when practical. When one fund is
seeking to sell a security that another is seeking to buy, an interfund
transaction can allow both funds to benefit by reducing transaction costs. This
practice is limited to funds that share the same investment adviser, trustees
and officers.
THE FUND INTENDS TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR
REGULATED INVESTMENT COMPANIES. Accordingly, the fund distributes substantially
all of its net investment income and realized net capital gains (if any) to its
shareholders each year. As long as the fund meets the tax requirements, it is
not required to pay federal income tax.
ACCOUNTING POLICIES
The following are the main policies the fund uses in preparing its financial
statements.
THE FUND VALUES THE SECURITIES IN ITS PORTFOLIO EVERY BUSINESS DAY. The fund
uses the following policies to value various types of securities:
- - 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 FOR WHICH NO QUOTED VALUE IS READILY AVAILABLE: valued at fair
value, as determined in good faith by the fund's investment adviser using
guidelines adopted by the fund's Board of Trustees.
- - FUTURES: open contracts are valued at their settlement prices as of the close
of their exchanges. When the fund closes out a futures position, it calculates
the difference between the value of the position at the
19
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.
WHEN THE 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. Dividends paid on securities sold short are 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 fund records certain
foreign security dividends on the day it learns of the ex-dividend date.
INCOME FROM INTEREST AND THE ACCRETION OF DISCOUNTS is recorded as it accrues.
REALIZED GAINS AND LOSSES from security transactions are based on the identified
costs of the securities involved.
EXPENSES that are specific to the fund are charged directly to the fund.
Expenses that are common to all funds within a trust generally are allocated
among the funds in proportion to their net assets.
THE FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND
ACCOUNTING, and is considered a separate entity for tax purposes. Within its
account, the fund also keeps certain assets in segregated accounts, as may be
required by securities law.
THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH 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.
Schwab Hedged Equity Fund(TM)
20
GLOSSARY
Words and phrases that appear in financial reports often have specific meanings
that are different from their everyday meanings. The glossary below tells you
what is meant by the following terms when they are used in this report.
ASSET ALLOCATION The practice of dividing a portfolio among different asset
classes, with each asset class assigned a particular percentage.
ASSET CLASS A group of securities with similar structure and basic
characteristics. Stocks, bonds and cash are the three main examples of asset
classes.
BETA A historical measure of an investment's volatility relative to a market
index (usually the S&P 500). The index is defined as having a beta of 1.00.
Investments with a beta higher than 1.00 have been more volatile than the index;
those with a beta of less than 1.00 have been less volatile.
BOND A security representing a loan from the investor to the issuer. A bond
typically pays interest at a fixed rate (the "coupon rate") until a specified
date (the "maturity date"), at which time the issuer returns the money borrowed
("principal" or "face value") to the bondholder. Because of their structure,
bonds are sometimes called "fixed income securities" or "debt securities."
CAP, CAPITALIZATION See "market cap."
CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an
investment and its value at a later time. If the investment has been sold, the
capital gain or loss is considered a realized gain or loss. If the investment
is still held, the gain or loss is still "on paper" and is considered
unrealized.
EARNINGS GROWTH RATE For a mutual fund, the average yearly rate at which the
earnings of the companies in the fund's portfolio have grown, measured over the
past five years.
EARNINGS PER SHARE (EPS) A company's earnings, or net income, for the past 12
months, divided by the number of shares outstanding.
EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to
cover the fund's operating expenses. An expense ratio of 0.50% means that a
fund's expenses amount to half of one percent of its average net assets a year.
MARKET CAP, MARKET CAPITALIZATION The value of a company as determined by the
total value of all shares of its stock outstanding.
MEDIAN MARKET CAP The midpoint of the range of market caps of the stocks held by
a fund. There are different ways of calculating median market cap. With a simple
median, half of the stocks in the fund's portfolio would be larger than the
median, and half would be smaller. With a weighted median (the type that is
calculated for these funds), half of the fund's assets are invested in stocks
that are larger than the median market cap, and half in stocks that are smaller.
NET ASSET VALUE (NAV) The value of one share of a mutual fund. NAV is calculated
by taking the fund's total assets, subtracting liabilities, and dividing by the
number of shares outstanding.
OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual
fund, indicates all shares currently held by investors.
PRICE-TO-BOOK RATIO (P/B) The market price of a company's stock compared with
its "book value." A mutual fund's P/B is the weighted average of the P/B of all
stocks in the fund's portfolio.
PRICE-TO-EARNINGS RATIO (P/E) The market price of a company's stock compared
with earnings over the past year. A mutual fund's P/E is the weighted average of
the P/E of all stocks in the fund's portfolio.
RETURN ON EQUITY (ROE) The average yearly rate of return for each dollar of
investors' money, measured over the past five years.
STOCK A share of ownership, or equity, in the issuing company.
TOTAL RETURN The 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.
Schwab Hedged Equity Fund(TM)
21
NOTES
NOTES
NOTES
CONTACT SCHWAB
SchwabFunds(R) offers you a complete family of mutual funds, each one based on a
time-tested investment approach and using disciplined, clearly defined
management strategies.
Actively managed funds include multi-manager stock funds, a fund that uses
long-short strategies, and a range of taxable and tax-free bond funds. Index
funds include large-cap, small-cap and international stock funds. 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. Please call 1-800-435-4000 for a free
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)
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.
1 Shares of Sweep Investments(TM) may not be purchased over the Internet.
2 Orders placed in person or through a telephone representative are subject to a
service fee payable to Schwab.
THE SCHWABFUNDS FAMILY
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 Hedged Equity Fund(TM)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab MarketMasters Funds(TM)
Schwab U.S. MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
ASSET ALLOCATION FUNDS
Schwab MarketTrack Portfolios(R)
Schwab All Equity Portfolio
Schwab Growth Portfolio
Schwab Balanced Portfolio
Schwab Conservative Portfolio
BOND FUNDS
Schwab YieldPlus Fund(R)
Schwab Short-Term Bond Market Fund
Schwab Total Bond Market Fund
Schwab GNMA 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 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 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
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)2003 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
Printed on recycled paper.
REG25389
Schwab Focus Funds
SEMIANNUAL REPORT
April 30, 2003
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
[CHARLES SCHWAB LOGO]
Four ways to add focus to your portfolio using sector investing.
In This Report
Management's Discussion............................................... 2
The president of SchwabFunds(R) and the funds' managers discuss the
factors that affected fund performance during the report period.
Fund Performance and Related Data
Fund and index performance data, fund facts, portfolio holdings and
fund financials.
Communications Focus Fund............................................. 6
Ticker Symbol: SWCFX
The fund's goal is to seek long-term capital growth.
Financial Services Focus Fund......................................... 14
Ticker Symbol: SWFFX
The fund's goal is to seek long-term capital growth.
Health Care Focus Fund................................................ 22
Ticker Symbol: SWHFX
The fund's goal is to seek long-term capital growth.
Technology Focus Fund................................................. 30
Ticker Symbol: SWTFX
The fund's goal is to seek long-term capital growth.
Financial Notes....................................................... 38
Glossary.............................................................. 41
FROM THE CHAIRMAN
[PHOTO OF CHARLES R. SCHWAB]
Charles R. Schwab
Chairman
Without question, these are challenging times for America's investors. But I
believe that they also may provide opportunities, especially for those who stay
involved with their investment portfolios and review their mutual fund holdings
with their investment objectives in mind.
As this report goes to press, the President has signed into law a new tax
package that I believe offers significant potential benefits for all investors.
The new tax package will reduce the rate of taxation on many corporate dividends
and on capital gains. I believe that reducing these taxes could serve as a
stimulus to the stock market, thereby benefiting all owners of U.S. stocks.
For years, corporate dividends have been taxed twice: first when the corporation
earned the money, and again when investors received the dividend. In my view,
this has provided an incentive for corporations to retain profits as cash rather
than sharing them with their shareholders. I believe reducing the dividend tax
gives companies the right incentives to invest and create new jobs.
Here at Schwab, we are actively exploring ways to help investors meet their
financial objectives. At SchwabFunds(R), these efforts are being led by the new
president of SchwabFunds, Randall Merk. Randy brings a wealth of experience to
the job, and we welcome his leadership, vision and wisdom.
On behalf of SchwabFunds, I'd like to thank you for investing with us. Your
continued trust and support mean a great deal to us. In turn, it's our mission
to help you meet your financial goals.
Sincerely,
/s/ Charles R. Schwab
MANAGEMENT'S DISCUSSION November 1, 2002--April 30, 2003
[PHOTO OF RANDALL W. MERK]
RANDALL W. MERK is President and CEO of Charles Schwab Investment Management,
Inc. and is president of each of the funds covered in this report. He joined the
firm in August of 2002, bringing with him 24 years of experience in the asset
management industry.
Dear Shareholder:
As one of the newer members of the SchwabFunds(R) team, I've been struck by the
talent and integrity of the people here. Above all, I've been impressed with the
dedication they show to understanding the needs and concerns of our
shareholders.
That dedication is particularly important right now. Times of market volatility
and uncertainty about world events demand as high a level of diligence as ever
on the part of investment professionals. At SchwabFunds we are keenly aware of
this, and we continue to work hard to uphold the best interests of our
shareholders.
Mutual funds are facing many initiatives at the moment. These include changes in
corporate governance practices, such as the Sarbanes-Oxley Act (which requires
senior management certification of financial reports), and new regulations
affecting disclosures of mutual funds' proxy voting practices. Many of these
changes have the potential to benefit shareholders, and I want to assure you
that we'll keep you informed of the progress we are making with them.
In the meantime, it is worth keeping in mind that the basic tenets of mutual
fund investing remain unchanged. In particular, time-tested investment practices
such as asset allocation and diversification are as important as ever. The range
of choices available from SchwabFunds can make it easy to diversify your
portfolio. In addition, as our range of funds grows, we'll let you know when new
funds are launched (or you can stay informed by visiting
www.schwab.com/schwabfunds).
In closing, let me thank you for choosing SchwabFunds for your mutual fund
investments. We're committed to helping you reach your financial goals. If there
is something more that we can do to help, I hope you'll let us know.
Sincerely,
/s/ Randall W. Merk
Schwab Focus Funds
2
[PHOTO OF GERI HOM AND LARRY MANO]
GERI HOM, a vice president and senior portfolio manager of the investment
adviser, has overall responsibility for the management of the funds. Prior to
joining the firm in 1995, she worked for nearly 15 years in equity management.
LARRY MANO, a director and a portfolio manager, is responsible for the
day-to-day management of the Financial Services and Technology funds. Prior to
joining the firm in 1998, he worked for 20 years in equity management.
THE ECONOMY
THE WAR IN IRAQ DOMINATED HEADLINES, ALTHOUGH IT WAS NOT THE ONLY FACTOR
AFFECTING THE ECONOMY. As the report period began, the nation's focus was
divided between fundamental economic issues and concerns over the looming war
with Iraq. Once the war arrived, attention focused on Iraq and the progress of
political and military actions. Toward the end of the report period, as
intensive military action drew to a close, the nation's focus shifted and its
level of concern over war-related uncertainty declined.
One reflection of this pattern of changing concerns over the war was the price
of oil. Leading up to the war, oil prices continued to ratchet up to nearly $40
a barrel. But the price quickly dropped to around $30 a barrel when it began to
appear that the major fighting would not last long.
The economy that Americans found at the end of the war was not much different
than it had been during the period before the war. Gross Domestic Product was
positive but weak, while joblessness edged up to 6%. Consumer spending remained
strong, helped in part by widespread discounts and depressed prices in most
sectors (aside from healthcare and oil). But discounted prices for consumers
translated into thin profits for companies, and business capital spending
remained minimal. A half-percent interest rate cut in November 2002 showed the
Federal Reserve continuing to apply economic stimulus; the president and
Congress contributed by advancing new fiscal and tax policies.
THE MARKET
MOST TYPES OF STOCKS POSTED GAINS FOR THE PERIOD, WITH SMALL-CAP GROWTH STOCKS
AND LARGE-CAP VALUE STOCKS LEADING THE WAY. Positive returns were welcome news
after prior declines. However, the volatility that has characterized the market
in recent years continued throughout the period.
The strongest month of the period for stocks was April 2003, which saw the
market rise as the military action in Iraq ended and as the first corporate
earnings reports for 2002 appeared to indicate some improvement over the
disappointing earnings of 2001. Another factor that we believe may have helped
lift the market during the period was the increasing possibility of a dividend
tax cut.
Schwab Focus Funds
3
MANAGEMENT'S DISCUSSION continued
STOCK PRICES DURING THE PERIOD APPEARED TO GENERALLY REFLECT COMPANIES'
ESTABLISHED EARNING POWER, ALTHOUGH ANTICIPATED FUTURE EARNINGS BEGAN TO DRIVE
RETURNS IN SOME SECTORS.
Looking at stock prices during the period, it appeared that investors were
reluctant to give much consideration to projections of future earnings (which
may or may not turn out to be accurate) when deciding how much they were willing
to pay for a stock.
In our view, this was a sign of lingering skepticism among investors about
earnings projections, whether those projections came from corporate management
or from analysts. As the report period came to a close, there were some issues
that remained unresolved. For instance, there were still companies coming
forward with earnings restatements or with large one-time charges. There were
also questions about how companies account for pension plan liabilities, and how
related practices might trigger another round of earnings restatements. We
believe investors' sensitivity to factors such as these was likely heightened by
the memory of the many recent high-profile cases of corporate malfeasance.
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.
4.48% S&P 500(R) INDEX: measures U.S. large-cap stocks
7.55% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
1.81% MSCI-EAFE (R) INDEX: measures (in U.S. dollars) large-cap stocks in
Europe, Australasia and the Far East
4.31% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond market
[LINE GRAPH]
Lehman Russell 2000
Aggregate MSCI EAFE Small-Cap S&P 500
Bond Index Index Index Index
31-Oct-02 0 0 0 0
Nov-02 -0.18 -0.36 2.6 1.72
Nov-02 0.59 1.71 2.65 1.95
Nov-02 0.25 0.52 3.5 2.2
Nov-02 -0.07 3.64 6.59 5.6
Nov-02 -0.03 4.7 9.98 6.2
Dec-02 0.52 0.96 5.77 2.59
Dec-02 0.86 -0.03 6.05 2.06
Dec-02 1.42 -1.25 2.87 0.14
Dec-02 1.99 0.71 4.5 0.75
Jan-03 1.36 2.13 5.44 3.01
Jan-03 1.18 2.45 6.35 5.14
Jan-03 1.83 3.2 6.09 3.7
Jan-03 2.2 -0.55 3.09 0.61
Jan-03 2.12 -3.01 -1.19 -4.19
Feb-03 2.47 -3.67 -1.94 -4.88
Feb-03 2.45 -4.75 -4.58 -7.18
Feb-03 2.75 -3.54 -3.25 -4.91
Feb-03 3.54 -6.69 -2.77 -4.84
Mar-03 3.82 -6.69 -4.79 -6.53
Mar-03 3.45 -10.09 -4.3 -5.38
Mar-03 2.18 -5.24 -0.25 -0.36
Mar-03 3.12 -5.07 -0.45 -1.16
Apr-03 3.12 -4.67 1.13 -0.23
Apr-03 3.14 -3.48 0.46 -0.74
Apr-03 3.4 -0.88 3.46 1.78
Apr-03 3.96 0.21 5.76 3.82
30-Apr-03 4.31 1.81 7.55 4.48
These figures assume dividends and distributions were reinvested. Index figures
don't include trading and management costs, which would lower performance.
Indices are unmanaged and you can't invest in them directly. Remember that past
performance is not an indication of future results.
Data source: Charles Schwab & Co., Inc.
Schwab Focus Funds
4
ALL FOUR FOCUS FUNDS POSTED POSITIVE TOTAL RETURNS FOR THE REPORT PERIOD, AND
TWO FUNDS OUTPERFORMED THEIR BENCHMARKS.
THE FUNDS
During the report period, the COMMUNICATIONS FOCUS FUND posted positive total
returns and outperformed both its S&P sector and the overall S&P 500(R) Index.
The fund was helped by a weighting of almost 20% in broadcasting, which as a
category was up nearly 22% for the period. Strong performance from
communications equipment stocks also helped. The worst performing category was
telephone company stocks, down more than 1%, although the fund was underweighted
in this category.
The FINANCIAL SERVICES FOCUS FUND also posted positive total returns and
outperformed both its S&P sector and the overall S&P 500 Index for the report
period. The fund benefited from a large position in General Electric 1. Also,
the fund's stocks of banks, investment managers and multi-line insurance
companies did well, while its property and casualty stocks fared poorly.
The HEALTH CARE FOCUS FUND underperformed its S&P sector and the overall S&P 500
Index, but did succeed in turning in a positive total return for the report
period. Health care commercial services was the fund's best performing category,
with returns of over 26%, while hospital management was the worst performing
category, falling more than 35% for the period. The fund's underweighting of
biotech stocks, which performed well, hampered its total return.
The TECHNOLOGY FOCUS FUND lagged its S&P sector and category average, due mainly
to stockpicking: the fund held several large-cap underperformers that weren't
included in the index (which has fewer names than the fund). However, the fund's
performance was still strong enough to outperform the overall S&P 500 Index and
to make the fund the top performer of the four funds covered in this report.
Several computer-related industries--software, peripherals, and services--led in
performance, while aerospace and defense was the worst performer, hurt by the
airline industry's ongoing problems.
Since each fund 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.
The views expressed here are those of fund management only. 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 General Electric represented 10.5% of the fund's portfolio as of 4/30/03.
Schwab Focus Funds
5
COMMUNICATIONS FOCUS FUND
PERFORMANCE as of 4/30/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund with the S&P Communications Sector
Index and the Morningstar Communications Fund category.
[BAR CHART]
S&P COMMUNICATIONS CATEGORY
FUND SECTOR INDEX AVERAGE
6 MONTHS 6.61 -2.57 7.18
1 YEAR -12.49 -13.14 -17
SINCE INCEPTION -34.4 -28.16 n/a
7/3/00
PERFORMANCE OF A $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 two indices: the
S&P Communications Sector Index and the S&P 500(R) Index.
$3,029 FUND
$3,919 S&P COMMUNICATIONS SECTOR INDEX
$6,570 S&P 500 INDEX
[LINE GRAPH]
S&P
Communications S&P 500
Fund Sector Index Index
03-Jul-00 10000 10000 10000
Jul-00 9490 9205 9844
Aug-00 9720 8986 10455
Sep-00 8510 8910 9903
Oct-00 8130 9130 9862
Nov-00 6740 7825 9085
Dec-00 6402 7206 9129
Jan-01 7382 8264 9453
Feb-01 5972 7522 8591
Mar-01 5462 7148 8046
Apr-01 5972 7452 8672
May-01 5682 7333 8730
Jun-01 5232 7016 8518
Jul-01 5142 7335 8434
Aug-01 4581 6654 7906
Sep-01 4281 7035 7267
Oct-01 4161 6105 7406
Nov-01 4471 6215 7974
Dec-01 4511 6323 8044
Jan-02 4181 5830 7927
Feb-02 3931 5456 7774
Mar-02 3961 5341 8066
Apr-02 3461 4511 7577
May-02 3481 4676 7521
Jun-02 2941 4092 6986
Jul-02 2651 3583 6442
Aug-02 2681 3520 6484
Sep-02 2361 3026 5779
Oct-02 2841 4022 6287
Nov-02 3211 4505 6658
Dec-02 2877 4166 6267
Jan-03 2857 3899 6103
Feb-03 2746 3574 6011
Mar-03 2726 3565 6069
30-Apr-03 3029 3919 6570
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. The fund's share price and principal values change, and when you
sell your shares, they may be worth more or less than what you paid for them.
Past performance does not indicate future results. Results for the report
period are not annualized.
1 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower. 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. As of 4/30/03, there were
52 funds in the Morningstar Communications Fund category for the six-month and
one-year periods.
Schwab Focus Funds
6
COMMUNICATIONS FOCUS FUND
Fund Facts as of 4/30/03
TOP HOLDINGS 1
% OF
SECURITY INVESTMENTS
- -------------------------------------------------------
(1) VERIZON COMMUNICATIONS, INC. 10.1%
- -------------------------------------------------------
(2) VODAFONE GROUP PLC 7.6%
- -------------------------------------------------------
(3) SBC COMMUNICATIONS, INC. 6.8%
- -------------------------------------------------------
(4) AOL TIME WARNER, INC. 6.4%
- -------------------------------------------------------
(5) COMCAST CORP. Class A 6.0%
- -------------------------------------------------------
(6) BELLSOUTH CORP. 4.6%
- -------------------------------------------------------
(7) THE WALT DISNEY CO. 4.3%
- -------------------------------------------------------
(8) LIBERTY MEDIA CORP. Class A 4.1%
- -------------------------------------------------------
(9) NOKIA OYJ 3.2%
- -------------------------------------------------------
(10) NEXTEL COMMUNICATION, INC. Class A 2.8%
- -------------------------------------------------------
TOTAL 55.9%
STATISTICS
NUMBER OF HOLDINGS 51
- -------------------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $33,434
- -------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) --
- -------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.4
- -------------------------------------------------------
PORTFOLIO TURNOVER RATE 2 60%
- -------------------------------------------------------
EXPENSE RATIO 3 1.10%
INDUSTRY WEIGHTINGS
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
54.1% TELEPHONE
33.7% MEDIA
10.5% ELECTRONICS
1.0% PRODUCER GOODS & MANUFACTURING
0.7% OTHER
1 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes and certain non-routine expenses).
Schwab Focus Funds
7
COMMUNICATIONS FOCUS FUND -- Financials
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 7/3/00 1-
4/30/03 10/31/02 10/31/01 10/31/00
- --------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- --------------------------------------------------------------------------------------------
Net asset value at beginning of period 2.84 4.16 8.13 10.00
------------------------------------------
Income or loss from investment operations:
Net investment income or loss 0.01 0.03 (0.00) 2 0.00 2
Net realized and unrealized gains or losses 0.18 (1.35) (3.97) (1.87)
------------------------------------------
Total income or loss from investment operations 0.19 (1.32) (3.97) (1.87)
Less distributions:
Dividends from net investment income (0.03) -- (0.00) 2 --
------------------------------------------
Net asset value at end of period 3.00 2.84 4.16 8.13
------------------------------------------
Total return (%) 6.61 3 (31.73) (48.82) (18.70) 3
RATIOS/SUPPLEMENTAL DATA (%)
- --------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.96 4 0.89 0.89 5 0.89 4
Expense reductions reflected in above ratio 0.85 4 0.79 0.40 0.82 4
Ratio of net investment income or loss to
average net assets 0.71 4 0.69 (0.02) 0.07 4
Portfolio turnover rate 60 3 94 154 45 3
Net assets, end of period ($ x 1,000,000) 10 9 16 32
1 Commencement of operations.
2 Per-share amount was less than $0.01.
3 Not annualized.
4 Annualized.
5 Would have been 0.90% if certain non-routine expenses (interest expense) had
been included.
See financial notes.
8
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top
ten holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
* American Depositary Receipt
COST MARKET VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- ----------------------------------------------------------
99.3% COMMON STOCK 11,178 9,598
0.7% SHORT-TERM INVESTMENT 63 63
- ----------------------------------------------------------
100.0% TOTAL INVESTMENTS 11,241 9,661
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 99.3% of investments
ELECTRONICS 10.5%
----------------------------------------------------------------
o Allen Telecom, Inc. 4,600 62
o JDS Uniphase Corp. 17,600 57
o Lucent Technologies, Inc. 48,900 88
Motorola, Inc. 24,190 191
*(9) Nokia Oyj 18,653 309
Qualcomm, Inc. 7,600 242
o Univision Communications, Inc.,
Class A 2,000 61
-----------
1,010
MEDIA 33.7%
----------------------------------------------------------------
o American Tower Corp., Class A 9,000 60
o(4) AOL Time Warner, Inc. 44,900 614
o Clear Channel Communications, Inc. 6,442 252
o(5) Comcast Corp., Class A 18,119 578
o Comcast Corp., Special Class A 8,400 253
o Cox Communications, Inc., Class A 4,400 146
o EchoStar Communications Corp.,
Class A 2,600 78
o Emmis Communications Corp.,
Class A 3,500 66
o Fox Entertainment Group, Inc.,
Class A 5,700 145
o Hispanic Broadcasting Corp. 2,000 51
o(8) Liberty Media Corp., Class A 35,973 396
o PanAmSat Corp. 3,000 52
o USA Interactive 4,000 120
(7) The Walt Disney Co. 22,095 412
o Westwood One, Inc. 1,100 38
-----------
3,261
PRODUCER GOODS & MANUFACTURING 1.0%
----------------------------------------------------------------
o Corning, Inc. 18,300 99
TELEPHONE 54.1%
----------------------------------------------------------------
* Alcatel SA 6,300 51
Alltel Corp. 2,500 117
* America Movil SA, Series L 9,300 156
AT&T Corp. 4,278 73
o AT&T Wireless Services, Inc. 20,134 130
(6) BellSouth Corp. 17,337 442
o Broadwing, Inc. 14,900 69
*o China Mobile Ltd. 26,400 264
* China Telecom Corp. Ltd. 2,100 40
o Citizens Communications Co. 7,800 85
* Deutsche Telekom AG 3,602 48
* KT Corp. 7,400 150
o Level 3 Communications, Inc. 16,900 97
* Matav-Cable Systems Media Ltd. 3,600 70
*o Mobile TeleSystems OJSC 2,100 101
o(10)Nextel Communications, Inc.,
Class A 18,100 268
o Nextel Partners, Inc.,
Class A 10,200 59
* Nippon Telegraph & Telephone
Corp. 10,100 176
o Qwest Communications
International, Inc. 19,200 72
(3) SBC Communications, Inc. 28,304 661
* SK Telecom Co. Ltd. 6,600 100
Sprint Corp. (FON Group) 7,600 88
* Telecom Corp. of New Zealand Ltd. 2,700 58
* Telefonaktiebolaget LM Ericsson 9,626 87
See financial notes.
9
COMMUNICATIONS FOCUS FUND -- FINANCIALS
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
(1) Verizon Communications, Inc. 26,082 975
* Vimpel-Communications 1,300 52
*(2) Vodafone Group PLC 37,372 739
-----------
5,228
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
SHORT-TERM INVESTMENT
0.7% of investments
----------------------------------------------------------------
Brown Brothers Harriman,
Grand Cayman Time Deposit
0.80%, 05/01/03 63 63
----------------------------------------------------------------
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
10
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- ----------------------------------------------------------------------
Investments, at market value
(including $195 of securities on loan) $9,661 a
Collateral held for securities on loan 200
Receivables:
Dividends 31
Prepaid expenses + 6
-----------
TOTAL ASSETS 9,898
LIABILITIES
- ----------------------------------------------------------------------
Collateral held for securities on loan 200
Payables:
Fund shares redeemed 5
Investments bought 50
Accrued expenses + 42
-----------
TOTAL LIABILITIES 297
NET ASSETS
- ----------------------------------------------------------------------
TOTAL ASSETS 9,898
TOTAL LIABILITIES - 297
-----------
NET ASSETS $9,601
NET ASSETS BY SOURCE
Capital received from investors 37,363
Net investment income not yet distributed 32
Net realized capital losses (26,214)
Net unrealized capital losses (1,580)
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$9,601 3,200 $3.00
a The fund paid $11,241 for these securities. Not counting short-term
obligations and government securities, the fund paid $5,562 for securities
during the report period and received $5,786 from securities it sold or that
matured.
FEDERAL TAX DATA
- -----------------------------------------------------------------------
PORTFOLIO COST $12,481
NET UNREALIZED GAINS AND LOSSES:
Gains $657
Losses + (3,477)
-----------
($2,820)
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $86
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2008 $1,226
2009 13,397
2010 + 8,364
-----------
$22,987
See financial notes.
11
COMMUNICATIONS FOCUS FUND -- Financials
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------
Dividends $77 a
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------
Net realized losses on investments sold (1,693)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------
Net unrealized gains on investments 2,245
EXPENSES
- --------------------------------------------------------------------------
Investment adviser and administrator fees 25 b
Transfer agent and shareholder service fees 12 c
Trustees' fees 2 d
Custodian fees 20
Portfolio accounting fees 1
Professional fees 11
Registration fees 5
Shareholder reports 7
Other expenses + 1
-----------
Total expenses 84
Expense reduction - 40 e
-----------
NET EXPENSES 44
INCREASE IN NET ASSETS FROM OPERATIONS
- ------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 77
NET EXPENSES - 44
-----------
NET INVESTMENT INCOME 33
NET REALIZED LOSSES (1,693) f
NET UNREALIZED GAINS + 2,245 f
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $585
a An additional $2 was withheld for foreign taxes.
b Calculated as 0.54% of average daily net assets.
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.
d For the fund's independent trustees only.
e Includes $25 from the investment adviser (CSIM) and $10 from the transfer
agent and shareholder service agent (Schwab). In addition, the total expenses
reimbursed by the investment adviser was $5. These reductions reflect a
guarantee by CSIM and Schwab to limit the operating expenses of this fund
through at least February 29, 2004, to 1.10% of average daily net assets.
Prior to March 1, 2003, this limit was 0.89%. This limit doesn't include
interest, taxes and certain non- routine expenses.
f These add up to a net gain on investments of $552.
See financial notes.
12
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for current period are unaudited.
OPERATIONS
- -----------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income $33 $86
Net realized losses (1,693) (6,355)
Net unrealized gains + 2,245 1,679
--------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 585 (4,590)
DISTRIBUTIONS PAID
- -----------------------------------------------------------------------------
Dividends from net investment income $87 $--
TRANSACTIONS IN FUND SHARES
- -----------------------------------------------------------------------------
11/1/02-4/30/02 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 404 $1,171 655 $2,313
Shares reinvested 30 87 -- --
Shares redeemed + (504) (1,436) (1,190) (4,283) a
-------------------------------------------------
NET DECREASE (70) ($178) (535) ($1,970)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 3,270 $9,281 3,805 $15,841
Total increase or
decrease + (70) 320 (535) (6,560) b
--------------------------------------------------
END OF PERIOD 3,200 $9,601 3,270 $9,281 c
a Dollar amounts are net of proceeds received from early withdrawal fees that
the fund charges on shares sold 180 days or less after buying them:
CURRENT PERIOD $3
PRIOR PERIOD $4
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 Includes net investment income not yet distributed in the amount of $32 and
$86 at the end of the current period and the prior period, respectively.
See financial notes.
13
FINANCIAL SERVICES FOCUS FUND
PERFORMANCE as of 4/30/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund with the S&P Financial Services
Sector Index and the Morningstar Financial Services Fund category.
[BAR CHART]
S&P COMMUNICATIONS CATEGORY
FUND SECTOR INDEX AVERAGE
6 MONTHS 6.01 4.95 4.94
1 YEAR -6.99 -9.71 -10.15
SINCE INCEPTION 1.93 1.63 n/a
7/3/00
PERFORMANCE OF A $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 two indices: the
S&P Financial Services Sector Index and the S&P 500(R) Index.
$10,558 FUND
$10,469 S&P FINANCIAL SERVICES SECTOR INDEX
$6,570 S&P 500 INDEX
[LINE GRAPH]
S&P Financial Services Sector
Fund Index S&P 500 Index
03-Jul-00 10000 10000 10000
Jul-00 10770 11034 9844
Aug-00 11830 12093 10455
Sep-00 12050 12381 9903
Oct-00 11860 12327 9862
Nov-00 11200 11601 9085
Dec-00 12136 12648 9129
Jan-01 11928 12613 9453
Feb-01 11501 11784 8591
Mar-01 11023 11429 8046
Apr-01 11637 11855 8672
May-01 12032 12332 8730
Jun-01 12094 12327 8518
Jul-01 11761 12128 8434
Aug-01 11096 11389 7906
Sep-01 10368 10717 7267
Oct-01 10139 10518 7406
Nov-01 10805 11269 7974
Dec-01 11172 11515 8044
Jan-02 10919 11335 7927
Feb-02 10982 11170 7774
Mar-02 11499 11913 8066
Apr-02 11351 11595 7577
May-02 11362 11575 7521
Jun-02 10866 11026 6986
Jul-02 10433 10151 6442
Aug-02 10549 10359 6484
Sep-02 9378 9148 5779
Oct-02 9959 9976 6287
Nov-02 10212 10386 6658
Dec-02 9786 9830 6267
Jan-03 9593 9665 6103
Feb-03 9379 9363 6011
Mar-03 9464 9326 6069
30-Apr-03 10558 10469 6570
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. The
fund's share price and principal values change, and when you sell your shares,
they may be worth more or less than what you paid for them. Past performance
does not indicate future results. Results for the report period are not
annualized.
1 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower. 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. As of 4/30/03, there were
109 funds in the Morningstar Financial Services Fund category for the
six-month and one-year periods.
Schwab Focus Funds
14
FINANCIAL SERVICES FOCUS FUND
FUND FACTS as of 4/30/03
TOP HOLDINGS 1
% OF
SECURITY INVESTMENTS
- ---------------------------------------------------
(1) GENERAL ELECTRIC CO. 10.5%
- ---------------------------------------------------
(2) BANK OF AMERICA CORP. 6.5%
- ---------------------------------------------------
(3) AMERICAN INTERNATIONAL GROUP, INC. 5.6%
- ---------------------------------------------------
(4) CITIGROUP, INC. 4.5%
- ---------------------------------------------------
(5) BERKSHIRE HATHAWAY, INC. CLASS A 3.9%
- ---------------------------------------------------
(6) WELLS FARGO & Co. 3.5%
- ---------------------------------------------------
(7) WACHOVIA CORP. 3.1%
- ---------------------------------------------------
(8) FANNIA MAA 3.0%
- ---------------------------------------------------
(9) BANK ONA CORP. 2.5%
- ---------------------------------------------------
(10) PRUDENTIAL FINANCIAL, INC. 2.3%
- ---------------------------------------------------
TOTAL 45.4%
STATISTICS
NUMBER OF HOLDINGS 99
- ---------------------------------------------------
MEDIAN MARKET CAP ($ X 1,000,000) $ 35,079
- ---------------------------------------------------
PRICA/EARNINGS RATIO (P/E) 17.9
- ---------------------------------------------------
PRICA/BOOK RATIO (P/B) 2.5
- ---------------------------------------------------
PORTFOLIO TURNOVER RATE 2 63%
- ---------------------------------------------------
EXPENSE RATIO 3 1.10%
- ---------------------------------------------------
INDUSTRY WEIGHTINGS
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
31.3% BANKS
28.4% MISCELLANEOUS FINANCE
23.2% INSURANCE
10.5% PRODUCER GOODS & MANUFACTURING
6.2% REAL PROPERTY
0.4% OTHER
1 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes and certain non-routine expenses).
Schwab Focus Funds
15
FINANCIAL SERVICES FOCUS FUND -- Financials
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 7/3/00 1-
4/30/03 10/31/02 10/31/01 10/31/00
- --------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- --------------------------------------------------------------------------------------------
Net asset value at beginning of period 9.44 9.75 11.86 10.00
-----------------------------------------
Income or loss from investment operations:
Net investment income 0.07 0.12 0.09 0.04
Net realized and unrealized gains or losses 0.49 (0.28) (1.76) 1.82
-----------------------------------------
Total income or loss from investment operations 0.56 (0.16) (1.67) 1.86
Less distributions:
Dividends from net investment income (0.15) (0.09) (0.06) --
Distributions from net realized gains -- (0.06) (0.38) --
-----------------------------------------
Total distributions (0.15) (0.15) (0.44) --
-----------------------------------------
Net asset value at end of period 9.85 9.44 9.75 11.86
-----------------------------------------
Total return (%) 6.01 2 (1.78) (14.51) 18.60 2
RATIOS/SUPPLEMENTAL DATA (%)
- --------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.96 3 0.89 0.89 0.89 3
Expense reductions reflected in above ratio 0.55 3 0.43 0.34 1.10 3
Ratio of net investment income to
average net assets 1.28 3 1.20 0.75 1.04 3
Portfolio turnover rate 63 2 131 151 40 2
Net assets, end of period ($ x 1,000,000) 16 17 21 24
1 Commencement of operations.
2 Not annualized.
3 Annualized.
See financial notes.
16
PORTFOLIO HOLDINGS as of April 30, 2003, unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
COST MARKET VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- --------------------------------------------------------
99.6% COMMON STOCK 15,753 16,137
0.4% SHORT-TERM
INVESTMENT 68 68
------ ------
100.0% TOTAL INVESTMENTS 15,821 16,205
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK
99.6% of investments
BANKS 31.3%
-------------------------------------------------------------
Bancorpsouth, Inc. 1,300 26
(2) Bank of America Corp. 14,180 1,050
The Bank of New York Co., Inc. 4,100 108
(9) Bank One Corp. 11,200 404
BB&T Corp. 5,260 171
City Holding Co. 2,700 77
Comerica, Inc. 2,300 100
Fifth Third Bancorp 3,490 172
FleetBoston Financial Corp. 7,980 212
Gold Banc Corp., Inc. 4,800 42
Golden West Financial Corp. 600 45
GreenPoint Financial Corp. 1,400 67
Hudson City Bancorp, Inc. 2,500 58
Huntington Bancshares, Inc. 3,300 64
Irwin Financial Corp. 3,000 71
J.P. Morgan Chase & Co. 11,964 351
KeyCorp, Inc. 3,000 72
Midwest Banc Holdings, Inc. 1,900 34
National City Corp. 4,800 144
o Providian Financial Corp. 5,900 44
Regions Financial Corp. 2,200 74
Roslyn Bancorp., Inc. 300 6
SouthTrust Corp. 1,500 40
Sterling Bancshares, Inc. 3,400 41
SunTrust Banks, Inc. 1,200 69
U.S. Bancorp 15,615 346
UnionBanCal Corp. 2,700 109
(7) Wachovia Corp. 13,000 497
(6) Wells Fargo & Co. 11,600 560
WesBanco, Inc. 1,000 25
-----
5,079
INSURANCE 23.2%
-------------------------------------------------------------
ACE Ltd. 600 20
Aetna, Inc. 3,200 159
AFLAC, Inc. 2,600 85
o Allmerica Financial Corp. 100 2
The Allstate Corp. 6,200 234
American Financial Group, Inc. 2,480 55
(3) American International Group, Inc. 15,747 913
AmerUs Group Co. 1,300 34
Cincinnati Financial Corp. 1,700 63
o CNA Financial Corp. 8,900 213
Fremont General Corp. 6,600 62
Hartford Financial Services Group, Inc. 1,900 77
John Hancock Financial Services, Inc. 2,220 64
Landamerica Financial Group, Inc. 2,200 90
Loews Corp. 2,700 111
Marsh & McLennan Cos., Inc. 3,400 162
Metlife, Inc. 5,600 161
Odyssey Re Holdings Corp. 600 13
The Phoenix Cos., Inc. 5,300 42
PMA Capital Corp., Class A 9,000 77
Principal Financial Group, Inc. 4,200 122
The Progressive Corp. 800 54
(10)Prudential Financial, Inc. 11,600 371
Radian Group, Inc. 1,200 48
Safeco Corp. 1,000 38
St. Paul Cos., Inc. 4,400 151
See financial notes.
17
FINANCIAL SERVICES FOCUS FUND -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Travelers Property Casualty Corp.,
Class A 1,101 18
Travelers Property Casualty Corp.,
Class B 9,700 158
o UICI 3,600 43
UnumProvident Corp. 1,200 14
XL Capital Ltd., Class A 1,300 107
------
3,761
MISCELLANEOUS FINANCE 28.4%
-------------------------------------------------------------
American Capital Strategies Ltd. 400 10
American Express Co. 9,660 366
The Bear Stearns Cos., Inc. 1,800 120
o(5) Berkshire Hathaway, Inc., Class A 9 628
Capital One Financial Corp. 2,800 117
Charter Municipal Mortgage
Acceptance Co. 600 11
Charter One Financial, Inc. 6,147 179
CIT Group, Inc. 10,300 210
(4) Citigroup, Inc. 18,775 737
Countrywide Financial Corp. 1,300 88
(8) Fannie Mae 6,720 486
Franklin Resources, Inc. 1,500 52
Freddie Mac 4,300 249
Goldman Sachs Group, Inc. 2,820 214
MBNA Corp. 5,690 108
Merrill Lynch & Co., Inc. 5,400 222
Morgan Stanley 6,520 292
New Century Financial Corp. 1,100 40
o Portfolio Recovery Associates, Inc. 1,100 30
o Saxon Capital, Inc. 2,800 41
SLM Corp. 800 90
Sovereign Bancorp., Inc. 7,500 116
Washington Mutual, Inc. 4,740 187
-------
4,593
PRODUCER GOODS & MANUFACTURING 10.5%
-------------------------------------------------------------
(1) General Electric Co. 57,760 1,701
REAL PROPERTY 6.2%
-------------------------------------------------------------
Corporate Office Properties Trust SBI 900 14
Developers Diversified Realty Corp. 6,200 156
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Entertainment Properties Trust 800 21
Equity Office Properties Trust 2,500 65
Getty Realty Corp. 7,200 143
Heritage Property Investment
Trust 3,500 89
HRPT Properties Trust 14,500 131
iStar Financial, Inc. 200 6
Kimco Realty Corp. 6,100 221
Koger Equity, Inc. 2,600 42
o La Quinta Corp. 8,500 29
Reckson Associates Realty Corp. 100 2
Simon Property Group, Inc. 2,300 84
------
1,003
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
SHORT-TERM INVESTMENT
0.4% of investments
Brown Brothers Harriman,
Grand Cayman Time Deposit
0.80%, 05/01/03 68 68
-------------------------------------------------------------
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
18
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- ------------------------------------------------------------------------
Investments, at market value $16,205 a
Receivables:
Dividends 13
Prepaid expenses + 6
-----------
TOTAL ASSETS 16,224
LIABILITIES
- ------------------------------------------------------------------------
Accrued expenses + 36
-----------
TOTAL LIABILITIES 36
NET ASSETS
- ------------------------------------------------------------------------
TOTAL ASSETS 16,224
TOTAL LIABILITIES - 36
-----------
NET ASSETS $16,188
NET ASSETS BY SOURCE
Capital received from investors 17,783
Net investment income not yet distributed 44
Net realized capital losses (2,023)
Net unrealized capital gains 384
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$16,188 1,643 $9.85
a The fund paid $15,821 for these securities. Not counting short-term
obligations and government securities, the fund paid $10,023 for securities
during the report period and received $11,839 from securities it sold or that
matured.
FEDERAL TAX DATA
- ------------------------------------------------------------------------
PORTFOLIO COST $16,127
NET UNREALIZED GAINS AND LOSSES:
Gains $1,736
Losses + (1,658)
-----------
$78
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $203
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $953
See financial notes.
19
FINANCIAL SERVICES FUND -- Financials
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- ---------------------------------------------------------------------------
Dividends $177
NET REALIZED GAINS AND LOSSES
- ---------------------------------------------------------------------------
Net realized losses on investments sold (781)
NET UNREALIZED GAINS AND LOSSES
- ---------------------------------------------------------------------------
Net unrealized gains on investments 1,566
EXPENSES
- ---------------------------------------------------------------------------
Investment adviser and administrator fees 43 a
Transfer agent and shareholder service fees 20 b
Trustees' fees 3 c
Custodian fees 27
Portfolio accounting fees 1
Professional fees 11
Registration fees 7
Shareholder reports 6
Other expenses + 1
-----------
Total expenses 119
Expense reduction - 43 d
-----------
NET EXPENSES 76
INCREASE IN NET ASSETS FROM OPERATIONS
- ---------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 177
NET EXPENSES - 76
-----------
NET INVESTMENT INCOME 101
NET REALIZED LOSSES (781) e
NET UNREALIZED GAINS + 1,566 e
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $886
a Calculated as 0.54% of average daily net assets.
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.
c For the fund's independent trustees only.
d Includes $39 from the investment adviser (CSIM) and $4 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 29, 2004, to 1.10% of average daily net assets. Prior to March
1, 2003, this limit was 0.89%. This limit doesn't include interest, taxes and
certain non-routine expenses.
e These add up to a net gain on investments of $785.
See financial notes.
20
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for current period are unaudited.
OPERATIONS
- ------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income $101 $251
Net realized losses (781) (668)
Net unrealized gains + 1,566 224
-------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 886 (193)
DISTRIBUTIONS PAID
- ------------------------------------------------------------------------------
Dividends from net investment income 260 193
Distributions from net realized gains + -- 123
-------------------------------------
TOTAL DISTRIBUTIONS PAID $260 $316 a
TRANSACTIONS IN FUND SHARES
- ------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 50 $475 237 $2,445
Shares reinvested 28 260 29 290
Shares redeemed + (255) (2,346) (633) (6,384) b
---------------------- -----------------------
NET DECREASE (177) ($1,611) (367) ($3,649)
SHARES OUTSTANDING AND NET ASSETS
- ------------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 1,820 $17,173 2,187 $21,331
Total decrease + (177) (985) (367) (4,158) c
------------------------------------------------
END OF PERIOD 1,643 $16,188 1,820 $17,173 d
a The tax-basis components of distributions paid for the
prior year are:
Ordinary income $316
Long-term capital gains $--
b Dollar amounts are net of proceeds received from early withdrawal fees that
the fund charges on shares sold 180 days or less after buying them:
CURRENT PERIOD $1
PRIOR PERIOD $4
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 net investment income not yet distributed in the amount of $44 and
$203 at the end of the current period and the prior period, respectively.
See financial notes
21
HEALTH CARE FOCUS FUND
PERFORMANCE as of 4/30/03
AVERAGE ANNUAL TOTAL RETURNS 1,2
This chart compares performance of the fund with the S&P Health Care Sector
Index and the Morningstar Health Care Fund category.
[BAR CHART]
FUND S&P HEALTH CARE SECTOR INDEX CATEGORY AVERAGE
6 MONTHS 1.89% 3.78% 4.93%
1 YEAR -14.05% -9.07% 12.54%
SINCE INCEPTION: 7/3/00 -10.18% -6.38% n/a
PERFORMANCE OF A $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 two indices: the
S&P Health Care Sector Index and the S&P 500(R) Index.
[LINE CHART]
$7,377 FUND
$8,296 S&P HEALTH CARE SECTOR INDEX
$6,570 S&P 500 INDEX
SWHFX S&P Health Care Sector Index S&P 500 Index
03-Jul-00 10000 10000 10000
Jul-00 9450 9439 9844
Aug-00 9820 9504 10455
Sep-00 10160 9976 9903
Oct-00 10270 10342 9862
Nov-00 10460 10782 9085
Dec-00 10905 11084 9129
Jan-01 9848 10180 9453
Feb-01 9797 10204 8591
Mar-01 8892 9446 8046
Apr-01 9268 9705 8672
May-01 9492 9824 8730
Jun-01 9278 9367 8518
Jul-01 9594 9871 8434
Aug-01 9258 9522 7906
Sep-01 9228 9660 7267
Oct-01 9146 9613 7406
Nov-01 9624 10081 7974
Dec-01 9335 9760 8044
Jan-02 9111 9668 7927
Feb-02 8989 9706 7774
Mar-02 9101 9726 8066
Apr-02 8582 9124 7577
May-02 8389 8950 7521
Jun-02 7657 8129 6986
Jul-02 7291 7962 6442
Aug-02 7433 8060 6484
Sep-02 6986 7542 5779
Oct-02 7240 7994 6287
Nov-02 7342 8210 6658
Dec-02 7060 7922 6267
Jan-03 7009 7892 6103
Feb-03 6825 7750 6011
Mar-03 7080 8016 6069
30-Apr-03 7377 8296 6570
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. The
fund's share price and principal values change, and when you sell your shares,
they may be worth more or less than what you paid for them. Past performance
does not indicate future results. Results for the report period are not
annualized.
1 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower. 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. As of 4/30/03, the total
number of funds in the Morningstar Health Care Fund category for the six-month
and one-year periods was 184 and 179, respectively.
Schwab Focus Funds
22
HEALTH CARE FOCUS FUND
FUND FACTS as of 4/30/03
TOP HOLDINGS 1
% OF
SECURITY INVESTMENTS
- -------------------------------------------------
(1) PFIZER, INC. 17.4%
- -------------------------------------------------
(2) JOHNSON & JOHNSON 13.9%
- -------------------------------------------------
(3) MERCK & CO., INC. 10.2%
- -------------------------------------------------
(4) BRISTOL-MYERS SQUIBB CO. 7.2%
- -------------------------------------------------
(5) ELI LILLY & CO. 4.7%
- -------------------------------------------------
(6) WYETH 4.1%
- -------------------------------------------------
(7) ABBOTT LABORATORIES 3.8%
- -------------------------------------------------
(8) MEDTRONIC, INC. 3.8%
- -------------------------------------------------
(9) BOSTON SCIENTIFIC CORP. 3.4%
- -------------------------------------------------
(10) UNITEDHEALTH GROUP, INC. 2.5%
- -------------------------------------------------
TOTAL 71.0%
STATISTICS
NUMBER OF HOLDINGS 50
- -------------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $68,551
- -------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 23.5
- -------------------------------------------------
PRICE/BOOK RATIO (P/B) 6.4
- -------------------------------------------------
PORTFOLIO TURNOVER RATE 2 54%
- -------------------------------------------------
EXPENSE RATIO 3 1.10%
- -------------------------------------------------
INDUSTRY WEIGHTINGS
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
97.8% HEALTHCARE/DRUG & MEDICINE
2.2% OTHER
1 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes and certain non-routine expenses).
Schwab Focus Funds
23
HEALTH CARE FOCUS FUND -- Financials
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 7/3/00 1-
4/30/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------
Net asset value at beginning of period 7.12 9.00 10.27 10.00
----------------------------------------
Income or loss from investment operations:
Net investment income or loss 0.02 0.03 0.00 2 (0.00) 2
Net realized and unrealized gains or losses 0.11 (1.90) (1.10) 0.27
----------------------------------------
Total income or loss from investment operations 0.13 (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 7.22 7.12 9.00 10.27
----------------------------------------
Total return (%) 1.89 3 (20.84) (10.94) 2.70 3
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.96 4 0.89 0.89 0.89 4
Expense reductions reflected in above ratio 0.38 4 0.29 0.28 1.15 4
Ratio of net investment income or loss to
average net assets 0.53 4 0.25 0.06 (0.02) 4
Portfolio turnover rate 54 3 99 92 41 3
Net assets, end of period ($ x 1,000,000) 21 21 32 28
1 Commencement of operations.
2 Per share amount was less than $0.01.
3 Not annualized.
4 Annualized.
See financial notes.
24
PORTFOLIO HOLDINGS as of April 30, 2003 unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
COST MARKET VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- ----------------------------------------------------
99.7% COMMON STOCK 22,870 21,060
0.3% SHORT-TERM
INVESTMENT 56 56
- ----------------------------------------------------
100.0% TOTAL INVESTMENTS 22,926 21,116
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK
99.7% of investments
BUSINESS SERVICES 0.7%
----------------------------------------------------------
o Thermo Electron Corp. 8,000 145
CONSUMER NON-DURABLE 0.2%
----------------------------------------------------------
o Service Corp. International 14,500 49
HEALTHCARE / DRUGS & MEDICINE 97.8%
----------------------------------------------------------
(7) Abbott Laboratories 19,785 804
Alpharma, Inc., Class A 4,300 80
AmerisourceBergen Corp. 3,200 185
o Anthem, Inc. 2,900 199
o Apogent Technologies, Inc. 9,000 155
o Biosite, Inc. 800 34
o (9) Boston Scientific Corp. 16,900 728
(4) Bristol-Myers Squibb Co. 59,410 1,517
Cardinal Health, Inc. 8,350 462
o Chattem, Inc. 8,300 113
o Covance, Inc. 4,500 80
o Coventry Health Care, Inc. 2,300 94
(5) Eli Lilly & Co. 15,620 997
o Endo Pharmaceutical Holdings, Inc. 3,300 55
o Forest Laboratories, Inc., Class A 7,400 383
HCA, Inc. 10,400 334
o Health Net, Inc. 4,800 125
o Humana, Inc. 9,800 108
(2) Johnson & Johnson 51,980 2,930
o King Pharmaceuticals, Inc. 9,400 119
o Martek Biosciences Corp. 1,700 58
McKesson Corp. 11,200 311
(8) Medtronic, Inc. 16,820 803
(3) Merck & Co., Inc. 37,105 2,159
Mylan Laboratories, Inc. 1,500 42
Omnicare, Inc. 5,600 148
o Pacificare Health Systems, Inc. 10,900 347
o Pediatrix Medical Group, Inc. 5,600 178
(1) Pfizer, Inc. 119,423 3,672
o Pharmaceutical Resources, Inc. 1,800 79
PolyMedica Corp. 3,200 119
o PSS World Medical, Inc. 38,300 230
o Sierra Health Services, Inc. 3,400 56
o Sola International, Inc. 14,100 198
o St. Jude Medical, Inc. 1,900 100
o Steris Corp. 3,300 75
o Thoratec Corp. 5,500 76
o Triad Hospitals, Inc. 4,600 101
(10) UnitedHealth Group, Inc. 5,700 525
o VCA Antech, Inc. 13,900 233
Vital Signs, Inc. 3,200 91
o Watson Pharmaceuticals, Inc. 3,300 96
o WellPoint Health Networks, Inc. 1,200 91
West Pharmaceutical Services, Inc. 11,600 277
o Wright Medical Group, Inc. 10,900 207
(6) Wyeth 20,100 875
-------
20,649
INSURANCE 1.0%
-------------------------------------------------------
o Cobalt Corp. 13,200 217
See financial notes.
25
HEALTH CARE FOCUS FUND -- Financials
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENT
0.3% of investments
Brown Brothers Harriman,
Grand Cayman Time Deposit
0.80%, 05/01/03 56 56
----------------------------------------------------------
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
26
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- -----------------------------------------------------------------------
Investments, at market value
(including $99 of securities on loan) $21,116 a
Collateral held for securities on loan 103
Receivables:
Fund shares sold 17
Dividends 21
Prepaid expenses + 7
-----------
TOTAL ASSETS 21,264
LIABILITIES
- -----------------------------------------------------------------------
Collateral held for securities on loan 103
Payables:
Fund shares redeemed 11
Investments bought 25
Investment adviser and administrator fees 1
Transfer agent and shareholder service fees 1
Accrued expenses + 33
-----------
TOTAL LIABILITIES 174
NET ASSETS
- -----------------------------------------------------------------------
TOTAL ASSETS 21,264
TOTAL LIABILITIES - 174
-----------
NET ASSETS $21,090
NET ASSETS BY SOURCE
Capital received from investors 30,872
Net investment income not yet distributed 19
Net realized capital losses (7,991)
Net unrealized capital losses (1,810)
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$21,090 2,921 $7.22
a The fund paid $22,926 for these securities. Not counting short-term
obligations and government securities, the fund paid $11,205 for securities
during the report period and received $11,941 from securities it sold or that
matured.
FEDERAL TAX DATA
- -----------------------------------------------------------------------
PORTFOLIO COST $23,597
NET UNREALIZED GAINS AND LOSSES:
Gains $1,341
Losses + (3,822)
-----------
($2,481)
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $64
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2009 $1,467
2010 + 4,029
-----------
$5,496
See financial notes.
27
HEALTH CARE FOCUS FUND -- Financials
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- -----------------------------------------------------------------------
Dividends $152
NET REALIZED GAINS AND LOSSES
- -----------------------------------------------------------------------
Net realized losses on investments sold (1,785)
NET UNREALIZED GAINS AND LOSSES
- -----------------------------------------------------------------------
Net unrealized gains on investments 2,108
EXPENSES
- -----------------------------------------------------------------------
Investment adviser and administrator fees 55 a
Transfer agent and shareholder service fees 26 b
Trustees' fees 2 c
Custodian fees 21
Portfolio accounting fees 2
Professional fees 11
Registration fees 7
Shareholder reports 11
Other expenses + 1
-----------
Total expenses 136
Expense reduction - 38 d
-----------
NET EXPENSES 98
INCREASE IN NET ASSETS FROM OPERATIONS
- -----------------------------------------------------------------------
TOTAL INVESTMENT INCOME 152
NET EXPENSES - 98
-----------
NET INVESTMENT INCOME 54
NET REALIZED LOSSES (1,785) e
NET UNREALIZED GAINS + 2,108 e
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $377
a Calculated as 0.54% of average daily net assets.
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.
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 at least
February 29, 2004, to 1.10% of average daily net assets. Prior to March 1,
2003, this limit was 0.89%. This limit doesn't include interest, taxes and
certain non-routine expenses.
e These add up to a net gain on investments of $323.
See financial notes.
28
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
Figures for current period are unaudited.
OPERATIONS
- ----------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment income $54 $69
Net realized losses (1,785) (3,607)
Net unrealized gains or losses + 2,108 (3,051)
------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 377 (6,589)
DISTRIBUTIONS PAID
- ----------------------------------------------------------------------------
Dividends from net investment income $99 $19 a
TRANSACTIONS IN FUND SHARES
- ----------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 232 $1,609 640 $5,425
Shares reinvested 14 99 2 17
Shares redeemed +(339) (2,361) (1,184) (9,378)
-----------------------------------------
NET DECREASE (93) ($653) (542) ($3,936) b
SHARES OUTSTANDING AND NET ASSETS
- ----------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 3,014 $21,465 3,556 $32,009
Total decrease + (93) (375) (542) (10,544) c
-------------------------------------------
END OF PERIOD 2,921 $21,090 3,014 $21,465 d
a The tax-basis components of distributions paid for the prior year are:
Ordinary income $19
Long-term capital gains $--
b Dollar amounts are net of proceeds received from early withdrawal fees that
the fund charges on shares sold 180 days or less after buying them:
CURRENT PERIOD $2
PRIOR PERIOD$ $7
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 net investment income not yet distributed in the amount of $19 and
$64 at the end of the current period and the prior period, respectively.
See financial notes.
29
TECHNOLOGY FOCUS FUND
PERFORMANCE as of 4/30/03
AVERAGE ANNUAL TOTAL RETURNS 1,2
This chart compares performance of the fund with the S&P Technology Sector Index
and the Morningstar Technology Fund category.
[BAR CHART]
FUND S&P TECHNOLOGY SECTOR INDEX CATEGORY AVERAGE
6 MONTHS 7.24 8.61 10.23
1 YEAR -19.01 -16.2 -23.12
SINCE INCEPTION: 7/3/00 -33.79 -35.49 n/a
PERFORMANCE OF A $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 two indices: the
S&P Technology Sector Index and the S&P 500(R) Index.
$3,110 FUND
$2,889 S&P TECHNOLOGY SECTOR INDEX
$6,570 S&P 500 INDEX
[LINE CHART]
Fund S&P Technology Sector Index S&P 500 Index
3-Jul-00 10000 10000 10000
Jul-00 9480 9523 9844
Aug-00 10910 10590 10455
Sep-00 9220 8607 9903
Oct-00 8520 8109 9862
Nov-00 6500 6440 9085
Dec-00 5940 5734 9129
Jan-01 6950 6761 9453
Feb-01 5110 4868 8591
Mar-01 4420 4250 8046
Apr-01 5320 4969 8672
May-01 5240 4721 8730
Jun-01 5290 4776 8518
Jul-01 4850 4492 8434
Aug-01 4210 3926 7906
Sep-01 3270 3154 7267
Oct-01 3860 3702 7406
Nov-01 4480 4334 7974
Dec-01 4500 4250 8044
Jan-02 4560 4309 7927
Feb-02 4040 3705 7774
Mar-02 4320 3934 8066
Apr-02 3840 3447 7577
May-02 3670 3314 7521
Jun-02 3290 2912 6986
Jul-02 2950 2669 6442
Aug-02 2880 2637 6484
Sep-02 2450 2175 5779
Oct-02 2900 2660 6287
Nov-02 3310 3108 6658
Dec-02 2890 2660 6267
Jan-03 2840 2615 6103
Feb-03 2860 2681 6011
Mar-03 2810 2650 6069
30-Apr-03 3110 2889 6570
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. The
fund's share price and principal values change, and when you sell your shares,
they may be worth more or less than what you paid for them. Past performance
does not indicate future results. Results for the report period are not
annualized.
1 Fund returns reflect expense reductions by the fund's investment adviser
(CSIM) and Schwab. Without these reductions, the fund's returns would have
been lower. 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. As of 4/30/03, the total
number of funds in the Morningstar Technology Fund category for the six-month
and one-year periods was 335 and 331, respectively.
Schwab Focus Funds
30
TECHNOLOGY FOCUS FUND
FUND FACTS as of 4/30/03
TOP HOLDINGS 1
% OF
SECURITY INVESTMENTS
- -----------------------------------------------------------
(1) MICROSOFT CORP. 17.3%
- -----------------------------------------------------------
(2) INTERNATIONAL BUSINESS MACHINES CORP. 8.7%
- -----------------------------------------------------------
(3) INTEL CORP. 8.6%
- -----------------------------------------------------------
(4) CISCO SYSTEMS, INC. 7.1%
- -----------------------------------------------------------
(5) DELL COMPUTER CORP. 4.8%
- -----------------------------------------------------------
(6) ORACLE CORP. 3.9%
- -----------------------------------------------------------
(7) HEWLETT-PACKARD CO. 3.2%
- -----------------------------------------------------------
(8) UNITED TECHNOLOGIES CORP. 2.4%
- -----------------------------------------------------------
(9) TEXAS INSTRUMENTS, INC. 2.1%
- -----------------------------------------------------------
(10) APPLIED MATERIALS, INC. 1.7%
- -----------------------------------------------------------
TOTAL 59.8%
STATISTICS
NUMBER OF HOLDINGS 101
- -----------------------------------------------------------
MEDIAN MARKET CAP ($ x 1,000,000) $59,850
- -----------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 33.6
- -----------------------------------------------------------
PRICE/BOOK RATIO (P/B) 5.1
- -----------------------------------------------------------
PORTFOLIO TURNOVER RATE 2 46%
- -----------------------------------------------------------
EXPENSE RATIO 3 1.10%
- -----------------------------------------------------------
INDUSTRY WEIGHTINGS
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
52.7% BUSINESS MACHINES & SOFTWARE
24.0% ELECTRONICS
9.4% BUSINESS SERVICES
8.7% AEROSPACE/DEFENSE
5.2% OTHER
1 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
2 Not annualized.
3 Guaranteed by Schwab and the investment adviser through 2/29/04 (excluding
interest, taxes and certain non-routine expenses).
Schwab Focus Funds
31
TECHNOLOGY FOCUS FUND -- Financials
Financial Tables
These tables provide additional data on the fund's performance, portfolio
holdings and business operations. Complementing the tables is the financial
notes section at the end of this report, which describes the fund's business
structure, accounting practices and other matters. Because this is a semiannual
report, information for the current report period is unaudited.
Look online at WWW.SCHWAB.COM/SCHWABFUNDS/HOW2READ for guides that are designed
to help you read the financial tables in any SchwabFunds(R) shareholder report.
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 7/3/00 1-
4/30/03 10/31/02 10/31/01 10/31/00
- -----------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- -----------------------------------------------------------------------------------------------
Net asset value at beginning of period 2.90 3.86 8.52 10.00
-------------------------------------------
Income or loss from investment operations:
Net investment loss (0.01) (0.02) (0.03) (0.02)
Net realized and unrealized gains or losses 0.22 (0.94) (4.63) (1.46)
-------------------------------------------
Total income or loss from investment operations 0.21 (0.96) (4.66) (1.48)
-------------------------------------------
Net asset value at end of period 3.11 2.90 3.86 8.52
-------------------------------------------
Total return (%) 7.24 2 (24.87) (54.69) (14.80) 2
RATIOS/SUPPLEMENTAL DATA (%)
- -----------------------------------------------------------------------------------------------
Ratio of net operating expenses to
average net assets 0.96 3 0.89 0.89 0.89 3
Expense reductions reflected in above ratio 0.32 3 0.26 0.27 0.63 3
Ratio of net investment loss to
average net assets (0.43) 3 (0.57) (0.65) (0.63) 3
Portfolio turnover rate 46 2 117 120 37 2
Net assets, end of period ($ x 1,000,000) 28 26 39 48
1 Commencement of operations
2 Not annualized.
3 Annualized.
See financial notes.
32
PORTFOLIO HOLDINGS as of April 30, 2003 unaudited
This section shows all the securities in the fund's portfolio and their market
value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
COST MARKET VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- --------------------------------------------------------
99.7% COMMON STOCK 32,826 27,677
0.3% SHORT-TERM
INVESTMENT 80 80
- --------------------------------------------------------
100.0% TOTAL INVESTMENTS 32,905 27,757
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK
99.7% of investments
AEROSPACE / DEFENSE 8.7%
----------------------------------------------------------
The Boeing Co. 16,200 442
General Dynamics Corp. 3,500 217
Lockheed Martin Corp. 7,900 395
Raytheon Co. 8,200 246
Rockwell Collins, Inc. 16,700 357
o Sequa Corp., Class A 2,800 86
(8) United Technologies Corp. 10,700 661
-----
2,404
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 0.5%
----------------------------------------------------------
Danaher Corp. 2,200 152
BUSINESS MACHINES & SOFTWARE 52.7%
----------------------------------------------------------
Adobe Systems, Inc. 4,200 145
o Advanced Digital Information Corp. 6,900 55
Analogic Corp. 500 24
o Avocent Corp. 7,100 210
o BMC Software, Inc. 3,300 49
o (4) Cisco Systems, Inc. 130,360 1,961
o Cray, Inc. 12,300 93
o (5) Dell Computer Corp. 46,416 1,342
o EMC Corp. 33,916 308
o Foundry Networks, Inc. 8,400 91
(7) Hewlett-Packard Co. 55,317 902
IKON Office Solutions, Inc. 9,540 74
o Ingram Micro, Inc., Class A 12,000 120
o Intergraph Corp. 6,500 133
(2) International Business Machines
Corp. 28,536 2,423
o Lexmark International, Inc., Class A 1,000 74
o Maxtor Corp. 29,000 159
Microchip Technology, Inc. 2,100 44
(1) Microsoft Corp. 187,684 4,799
o Network Appliance, Inc. 6,600 88
o (6) Oracle Corp. 91,648 1,089
o Palm, Inc. 2,900 28
o SRA International, Inc., Class A 2,200 52
o Storage Technology Corp. 2,100 52
o The Titan Corp. 9,900 79
o Xerox Corp. 22,700 224
------
14,618
BUSINESS SERVICES 9.4%
----------------------------------------------------------
o Anteon International Corp. 5,800 137
o Ariba, Inc. 21,300 70
o BEA Systems, Inc. 4,000 43
o Checkfree Corp. 4,500 124
Computer Associates International,
Inc. 5,800 94
o DoubleClick, Inc. 2,900 25
o Earthlink, Inc. 11,000 76
o eBay, Inc. 4,300 399
o Hyperion Solutions Corp. 1,500 42
o IDX Systems Corp. 2,600 38
o Infospace, Inc. 5,400 67
o Intuit, Inc. 2,600 101
o J.D. Edwards & Co. 4,100 49
o Mercury Interactive Corp. 2,000 68
o NETIQ Corp. 7,100 98
o Network Associates, Inc. 3,600 41
o Overture Services, Inc. 5,200 56
See financial notes.
33
TECHNOLOGY FOCUS FUND -- Financials
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o PeopleSoft, Inc. 4,400 66
o Red Hat, Inc. 8,000 48
o Sandisk Corp. 9,900 240
o Symantec Corp. 3,400 149
o United Online, Inc. 9,200 206
o Verint Systems, Inc. 2,200 43
o Veritas Software Corp. 7,052 155
o Yahoo!, Inc. 6,576 163
-----
2,598
CONSUMER NON-DURABLE 0.3%
----------------------------------------------------------
o Electronic Arts, Inc. 1,300 77
ELECTRONICS 24.0%
----------------------------------------------------------
o Agere Systems, Inc., Class A 83,900 150
o Agilent Technologies, Inc. 9,400 151
o Amkor Technology, Inc. 17,700 134
o Analog Devices, Inc. 4,972 165
o (10)Applied Materials, Inc. 32,312 472
o Applied Micro Circuits Corp. 14,200 64
o Atmel Corp. 22,300 41
o Avid Technology, Inc. 5,100 140
o Avnet, Inc. 7,800 99
o Benchmark Electronics, Inc. 6,000 156
o Broadcom Corp., Class A 12,500 224
o CCC Information Services Group, Inc. 6,100 101
o Cree, Inc. 1,300 26
Cubic Corp. 2,300 45
o Cypress Semiconductor Corp. 700 6
o Entegris, Inc. 20,500 235
(3) Intel Corp. 130,160 2,395
ITT Industries, Inc. 3,700 216
Linear Technology Corp. 3,600 124
o Macromedia, Inc. 3,800 48
Maxim Integrated Products, Inc. 2,800 110
o National Semiconductor Corp. 16,500 309
o Omnivision Technologies, Inc. 1,300 31
o Photronics, Inc. 2,000 25
o Pinnacle Systems, Inc. 9,700 92
o PMC-- Sierra, Inc. 8,600 71
o Power-One, Inc. 21,000 123
o Sanmina-SCI Corp. 12,900 62
o Silicon Image, Inc. 9,400 56
Symbol Technologies, Inc. 6,800 74
(9) Texas Instruments, Inc. 31,100 575
o Xilinx, Inc. 5,000 135
-----
6,655
MISCELLANEOUS 0.5%
----------------------------------------------------------
o Extreme Networks, Inc. 12,800 54
o NetFlix, Inc. 3,600 83
---
137
MISCELLANEOUS FINANCE 0.5%
----------------------------------------------------------
o E*TRADE Group, Inc. 26,600 146
PRODUCER GOODS & MANUFACTURING 1.8%
----------------------------------------------------------
o Aeroflex, Inc. 3,600 20
Ametek, Inc. 1,600 60
Honeywell International, Inc. 17,800 420
---
500
RETAIL 1.0%
----------------------------------------------------------
o Amazon.com, Inc. 10,200 292
TRAVEL & RECREATION 0.3%
----------------------------------------------------------
o Scientific Games Corp., Class A 15,000 98
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
SHORT-TERM INVESTMENT
0.3% of investments
Brown Brothers Harriman,
Grand Cayman Time Deposit
0.80%, 05/01/03 80 80
----------------------------------------------------------
END OF PORTFOLIO HOLDINGS. For totals, please see the first page of holdings for
this fund.
See financial notes.
34
Statement of
ASSETS AND LIABILITIES
As of April 30, 2003; unaudited. All numbers x 1,000 except NAV.
ASSETS
- -----------------------------------------------------------------------
Investments, at market value
(including $107 of securities on loan) $27,757 a
Collateral held for securities on loan 112
Receivables:
Fund shares sold 92
Dividends 5
Prepaid expenses + 7
-----------
TOTAL ASSETS 27,973
LIABILITIES
- -----------------------------------------------------------------------
Collateral held for securities on loan 112
Payables:
Fund shares redeemed 14
Investment adviser and administrator fees 1
Transfer agent and shareholder service fees 1
Accrued expenses + 45
-----------
TOTAL LIABILITIES 173
NET ASSETS
- -----------------------------------------------------------------------
TOTAL ASSETS 27,973
TOTAL LIABILITIES - 173
-----------
NET ASSETS $27,800
NET ASSETS BY SOURCE
Capital received from investors 76,386
Net investment loss (56)
Net realized capital losses (43,382)
Net unrealized capital losses (5,148)
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$27,800 8,944 $3.11
a The fund paid $32,905 for these securities. Not counting short-term
obligations and government securities, the fund paid $12,182 for securities
during the report period and received $12,062 from securities it sold or that
matured.
FEDERAL TAX DATA
- -----------------------------------------------------------------------
PORTFOLIO COST $35,297
NET UNREALIZED GAINS AND LOSSES:
Gains $2,217
Losses + (9,757)
----------
($7,540)
AS OF OCTOBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $--
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2008 $723
2009 18,131
2010 + 18,264
----------
$37,118
See financial notes.
35
TECHNOLOGY FOCUS FUND -- Financials
Statement of
OPERATIONS
For November 1, 2002 through April 30, 2003; unaudited. All numbers x 1,000.
INVESTMENT INCOME
- -----------------------------------------------------------------
Dividends $69
NET REALIZED GAINS AND LOSSES
- -----------------------------------------------------------------
Net realized losses on investments sold (2,892)
NET UNREALIZED GAINS AND LOSSES
- -----------------------------------------------------------------
Net unrealized gains on investments 4,783
EXPENSES
- -----------------------------------------------------------------
Investment adviser and administrator fees 70 a
Transfer agent and shareholder service fees 33 b
Trustees' fees 3 c
Custodian fees 24
Portfolio accounting fees 2
Professional fees 11
Registration fees 7
Shareholder reports 15
Other expenses + 1
-----------
Total expenses 166
Expense reduction - 41 d
-----------
NET EXPENSES 125
INCREASE IN NET ASSETS FROM OPERATIONS
- -----------------------------------------------------------------
TOTAL INVESTMENT INCOME 69
NET EXPENSES - 125
-----------
NET INVESTMENT LOSS (56)
NET REALIZED LOSSES (2,892) e
NET UNREALIZED GAINS + 4,783 e
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $1,835
a Calculated as 0.54% of average daily net assets.
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.
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 at least
February 29, 2004, to 1.10% of average daily net assets. Prior to March 1,
2003, this limit was 0.89%. This limit doesn't include interest, taxes and
certain non-routine expenses.
e These add up to a net gain on investments of $1,891.
See financial notes.
36
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000. Figures for
current period are unaudited.
OPERATIONS
- -----------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
Net investment loss $(56) $(211)
Net realized losses (2,892) (14,163)
Net unrealized gains + 4,783 4,018
-------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS $1,835 $(10,356)
TRANSACTIONS IN FUND SHARES
- -----------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
QUANTITY VALUE QUANTITY VALUE
Shares sold 1,137 $3,442 2,770 $10,781
Shares redeemed + (1,069) (3,178) (3,948) (13,544) a
--------------------------------------------
NET INCREASE OR
DECREASE 68 $264 (1,178) $(2,763)
SHARES OUTSTANDING AND NET ASSETS
- -----------------------------------------------------------------------------
11/1/02-4/30/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 8,876 $25,701 10,054 $38,820
Total increase or
decrease + 68 2,099 (1,178) (13,119) b
----------------------------------------------
END OF PERIOD 8,944 $27,800 8,876 $25,701 c
a Dollar amounts are net of proceeds received from early withdrawal fees that
the fund charges on shares sold 180 days or less after buying them:
CURRENT PERIOD $7
PRIOR PERIOD $15
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 Includes net investment loss in the amount of $56 for the current period and
$-- for the prior period.
See financial notes.
37
FINANCIAL NOTES unaudited
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,
or NAV, which is the price for all outstanding shares. Each share has a par
value of 1/1,000 of a cent, and the trust may issue as many shares as necessary.
THE TRUST AND ITS FUNDS
This list shows all of the funds included in Schwab Capital Trust. The funds
discussed in this report are highlighted.
SCHWAB CAPITAL TRUST organized May 7, 1993
Schwab S&P 500 Fund
Schwab Small-Cap Index Fund(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
Schwab Core Equity Fund(TM)
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
Schwab U.S. MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Hedged Equity Fund(TM)
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Institutional Select S&P 500 Fund
Institutional Select Large-Cap Value Index Fund
Institutional Select Small-Cap Value Index Fund
FUND OPERATIONS
Most of the funds' investments are described in the fund-by-fund sections
earlier in this report. However, there are certain other investments 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.
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.
The fund records the change in market value of futures, and also the change in
the amount of margin deposit required ("variation margin").
THE COMMUNICATIONS FOCUS 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.
Schwab Focus Funds
38
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 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 trusts
have custodian overdraft facilities and line of credit arrangements of $150
million, $100 million and $150 million with PNC Bank, N.A., Bank of America,
N.A. and The Bank of New York, respectively. The funds pay interest on the
amounts they borrow at rates that are negotiated periodically.
AMOUNT
OUTSTANDING AVERAGE AVERAGE
AT 4/30/03 BORROWING* INTEREST
FUND ($ x 1,000) ($ x 1,000) RATE*(%)
- -----------------------------------------------------------------
COMMUNICATIONS
FOCUS FUND -- 48 1.70
- -----------------------------------------------------------------
FINANCIAL SERVICES
FOCUS FUND -- 52 1.71
- -----------------------------------------------------------------
HEALTH CARE
FOCUS FUND -- 46 1.70
- -----------------------------------------------------------------
TECHNOLOGY
FOCUS FUND -- 67 1.74
- -----------------------------------------------------------------
* For the six-month period ended 4/30/03.
THE FUNDS PAY FEES 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.
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 ENGAGE IN CERTAIN TRANSACTIONS INVOLVING RELATED PARTIES. These
transactions may include 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.
Schwab Focus Funds
39
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 realized net 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.
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 FOR WHICH NO MARKET QUOTATIONS ARE READILY AVAILABLE: valued at
fair value, as determined in good faith by the fund's investment adviser
using guidelines adopted by the fund's Board of Trustees.
- - FUTURES 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 DISCOUNTS is recorded as it accrues.
REALIZED GAINS AND LOSSES from security transactions are based on the identified
costs of the securities involved.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES are reported in
U.S. dollars. For assets and liabilities held on a given date, the dollar value
is based on market exchange rates in effect on that date. Transactions involving
foreign currencies, including purchases, sales, income receipts and expense
payments, are 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 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.
Schwab Focus Funds
40
GLOSSARY
Words and phrases that appear in financial reports often have specific meanings
that are different from their everyday meanings. The glossary below tells you
what is meant by the following terms when they are used in this report.
ASSET ALLOCATION The practice of dividing a portfolio among different asset
classes, with each asset class assigned a particular percentage.
ASSET CLASS A group of securities with similar structure and basic
characteristics. Stocks, bonds and cash are the three main examples of asset
classes.
BETA A historical measure of an investment's volatility relative to a market
index (usually the S&P 500). The index is defined as having a beta of 1.00.
Investments with a beta higher than 1.00 have been more volatile than the index;
those with a beta of less than 1.00 have been less volatile.
BOND A security representing a loan from the investor to the issuer. A bond
typically pays interest at a fixed rate (the "coupon rate") until a specified
date (the "maturity date"), at which time the issuer returns the money borrowed
("principal" or "face value") to the bondholder. Because of their structure,
bonds are sometimes called "fixed income securities" or "debt securities."
CAP, CAPITALIZATION See "market cap."
CAPITAL GAIN, CAPITAL LOSS The difference between the amount paid for an
investment and its value at a later time. If the investment has been sold, the
capital gain or loss is considered a realized gain or loss. If the investment is
still held, the gain or loss is still "on paper" and is considered unrealized.
EARNINGS GROWTH RATE For a mutual fund, the average yearly rate at which the
earnings of the companies in the fund's portfolio have grown, measured over the
past five years.
EARNINGS PER SHARE (EPS) A company's earnings, or net income, for the past 12
months, divided by the number of shares outstanding.
EXPENSE RATIO The amount that is taken from a mutual fund's assets each year to
cover the fund's operating expenses. An expense ratio of 0.50% means that a
fund's expenses amount to half of one percent of its average net assets a year.
MARKET CAP, MARKET CAPITALIZATION The value of a company as determined by the
total value of all shares of its stock outstanding.
MEDIAN MARKET CAP The midpoint of the range of market caps of the stocks held by
a fund. There are different ways of calculating median market cap. With a simple
median, half of the stocks in the fund's portfolio would be larger than the
median, and half would be smaller. With a weighted median (the type that is
calculated for these funds), half of the fund's assets are invested in stocks
that are larger than the median market cap, and half in stocks that are smaller.
NET ASSET VALUE (NAV) The value of one share of a mutual fund. NAV is calculated
by taking the fund's total assets, subtracting liabilities, and dividing by the
number of shares outstanding.
OUTSTANDING SHARES, SHARES OUTSTANDING When speaking of a company or mutual
fund, indicates all shares currently held by investors.
PRICE-TO-BOOK RATIO (P/B) The market price of a company's stock compared with
its "book value." A mutual fund's P/B is the weighted average of the P/B of all
stocks in the fund's portfolio.
PRICE-TO-EARNINGS RATIO (P/E) The market price of a company's stock compared
with earnings over the past year. A mutual fund's P/E is the weighted average of
the P/E of all stocks in the fund's portfolio.
RETURN ON EQUITY (ROE) The average yearly rate of return for each dollar of
investors' money, measured over the past five years.
STOCK A share of ownership, or equity, in the issuing company.
TOTAL RETURN The 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.
Schwab Focus Funds
41
NOTES
NOTES
NOTES
CONTACT SCHWAB
SchwabFunds(R) offers you a complete family of mutual funds, each one based on a
time-tested investment approach and using disciplined, clearly defined
management strategies.
Actively managed funds include multi-manager stock funds, a fund that uses
long-short strategies, and a range of taxable and tax-free bond funds. Index
funds include large-cap, small-cap and international stock funds. 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. Please call 1-800-435-4000 for a free
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)
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.
1 Shares of Sweep Investments(TM)may not be purchased over the Internet.
2 Orders placed in person or through a telephone representative are subject to
a service fee payable to Schwab.
THE SCHWABFUNDS FAMILY
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 Hedged Equity Fund(TM)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab MarketMasters Funds(TM)
Schwab U.S. MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
ASSET ALLOCATION FUNDS
Schwab MarketTrack Portfolios(R)
Schwab All Equity Portfolio
Schwab Growth Portfolio
Schwab Balanced Portfolio
Schwab Conservative Portfolio
BOND FUNDS
Schwab YieldPlus Fund(R)
Schwab Short-Term Bond Market Fund
Schwab Total Bond Market Fund
Schwab GNMA 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 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 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
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)2003 Charles Schwab & Co., Inc. All rights reserved.
Member SIPC/NYSE.
Printed on recycled paper.
REG21470-02
Item 2: Code of Ethics - Not applicable to this semi-annual report.
Item 3: Audit Committee Financial Expert - Not applicable to this semi-annual
report.
Item 4: Principal Accountant Fees and Services - Not applicable to this
semi-annual report.
Item 5: Not applicable.
Item 6: Reserved.
Item 7: Not applicable.
Item 8: Reserved.
Item 9: 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, Randall W. Merk and Registrant's Chief Financial Officer,
Tai-Chin Tung, 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) There have been no changes in Registrant's internal controls that the above
officers believe to be significant, or in other factors that the above officers
believe could significantly affect these controls, including any corrective
action with regard to significant deficiencies and material weakness, since the
date of the evaluation referred to above.
Item 10: Exhibits attached hereto.
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/ Randall W. Merk
----------------------------------
Randall W. Merk
Chief Executive Officer
Date: July 7, 2003
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/ Randall W. Merk
--------------------------------
Randall W. Merk
Chief Executive Officer
Date: July 7, 2003
By: /s/ Tai-Chin Tung
--------------------------------
Tai-Chin Tung
Chief Financial Officer
Date: July 7, 2003