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 - October 31, 2003
Item 1: Report(s) to Shareholders.
SCHWAB EQUITY INDEX FUNDS
ANNUAL REPORT
October 31, 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 take a
look at the factors that shaped fund performance during the report period.
Performance at a Glance........... 5
Schwab S&P 500 Fund
Investor Shares: SWPIX Select Shares(R): SWPPX
e.Shares(R): SWPEX
The fund's goal is to track the total return of
the S&P 500(R) Index. 1
Performance and Fund Facts....... 7
Financial Statements............ 23
Schwab 1000 Fund(R)
Investor Shares: SNXFX Select Shares: SNXSX
The fund's goal is to match the total return of the Schwab 1000
Index(R).
Performance and Fund Facts....... 11
Financial Statements............. 38
Schwab Small-Cap Index Fund(R)
Investor Shares: SWSMX Select Shares: SWSSX
The fund's goal is to track the total return of small
capitalization U.S. stocks, as measured by the Schwab Small-Cap Index(R).
Performance and Fund Facts....... 14
Financial Statements............. 59
Schwab Total Stock Market Index Fund(R)
Investor Shares: SWTIX Select Shares: SWTSX
The fund's goal is to track the total return of the entire U.S. stock market,
as measured by the Wilshire 5000 Total Market Index. 2
Performance and Fund Facts......... 17
Financial Statements............... 79
Schwab International Index Fund(R)
Investor Shares: SWINX Select Shares: SWISX
The fund's goal is to track the total return of large, publicly traded
non-U.S. companies from countries with developed equity markets outside the
United States, as measured by the Schwab International Index(R).
Performance and Fund Facts......... 20
Financial Statements.............. 125
Financial Notes........................................................ 137
Fund Trustees.......................................................... 142
Glossary............................................................... 145
Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM)
Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab).
1 Standard & Poor's(R), S&P(R), S&P 500(R), Standard & Poor's 500(R) and 500(R)
are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for
use by the fund. The fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's, and Standard & Poor's makes no representation regarding the
advisability of investing in the fund.
2 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.
[PHOTO OF CHARLES R. SCHWAB]
CHARLES R. SCHWAB, Chairman
FROM THE CHAIRMAN
In the past few months, the mutual fund industry has been rocked by the
discovery of improper practices and arrangements. Investors large and small have
seen their confidence shaken, and understandably so.
Similarly, you may have also read about a limited number of potential late
trading issues at Charles Schwab & Co., Inc. and certain limited market timing
arrangements at U.S. Trust. Many firms, including our own, have begun thorough
investigations of their broker processes and procedures. We are continuing to
scrutinize such transactions and arrangements, and are working closely with
regulatory authorities. We are pleased to report that to date we have found no
indications of illegal or improper activities by Charles Schwab Investment
Management ("CSIM"), the investment advisor who manages the SchwabFunds(R).
I fully believe that even a small number of irregularities is unacceptable. We
have spent nearly 30 years building an ethical firm, and our business is founded
on a commitment to doing what's right for investors. That commitment leaves no
room for any failures to follow company policies or industry regulations.
Given the importance of mutual funds to American investors, I can understand why
investors find the recent news to be disturbing. At the same time, I would
caution investors not to overreact. Before taking any action, investors should
consider implications to their portfolio, tax situation and long-term financial
goals.
Ultimately, mutual funds still offer all the features that have made them so
popular--diversification, liquidity, convenience, low investment minimums, and
professional management. For individual investors especially, mutual funds
continue to be one of the most cost-effective investment vehicles available. To
date, millions of Americans have relied on mutual funds as an important way to
invest for retirement, their children's education, and other financial goals. We
see no reason why mutual funds cannot continue to do the same for millions more
Americans in the years to come.
Sincerely,
/s/ Charles R. Schwab
MANAGEMENT'S DISCUSSION
for the year ended October 31, 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 SchwabFunds(R) Shareholders:
By now, many of you have read the significant media coverage regarding the
mutual fund industry. We are pleased to report that to date we have found no
indications of illegal or improper activities by Charles Schwab Investment
Management ("CSIM"), the investment advisor who manages the SchwabFunds.
Similarly, you may have also read about a limited number of potential late
trading issues at Charles Schwab & Co., Inc. and certain limited market timing
arrangements at U.S. Trust. CSIM, which is a separate Charles Schwab
subsidiary, has been conducting its own review of the SchwabFunds policies and
procedures regarding market timing and late trading. We have examined over two
years of activity by CSIM personnel and have not found the types of improper
market timing or late trading arrangements that you have been reading about. Our
research is still ongoing, so some of these facts may change. Here are our key
findings to date:
- - THE INTEGRITY OF OUR STAFF: We have not found any indication that any CSIM
employees, including portfolio managers and senior managers, have engaged in
improper or inappropriate trading for their own account.
- - MARKET TIMING & LATE TRADING: We have not found any special arrangements with
any shareholders to permit market timing or trading of SchwabFunds after
market close.
- - HEDGE FUNDS: We have not found any special arrangements with hedge funds or
other private investment vehicles that would permit them to trade in a way
that was inconsistent with a fund's policies and procedures.
As part of the recent mutual fund investigations, requests for information were
sent by the SEC to about 90 of the largest mutual fund companies. As the
nation's 11th largest fund family with over $140 billion under management,
SchwabFunds also received a request from the SEC. We take these requests very
seriously and are working closely with the regulators on this matter.
Charles Schwab founded his firm 30 years ago with a vision to create the most
useful and ethical financial services firm in the world. We live by that
philosophy every day and nothing means more to our business than the trust of
our shareholders.
Your investment in SchwabFunds is an indication of the trust you place in us. As
the managers of your money, we have a special obligation to live up to that
trust. I want to thank you for investing with us, and want to assure you that we
strive relentlessly to operate our business with the highest ethical standards
and an unwavering commitment to serve you, our SchwabFunds shareholders.
Sincerely,
/s/ Randall W. Merk
2 Schwab Equity Index Funds
[PHOTO OF GERI HOM]
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.
[PHOTO OF LARRY MANO]
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 and the Market
THE ECONOMY CONTINUED TO GATHER STRENGTH DURING THE REPORT PERIOD, BUT
IMPROVEMENT REMAINED SLUGGISH AND UNEVEN. Although numerous factors had been
indicating that the U.S. economy was in recovery when the report period began,
many remained concerned about the slow pace of improvement, in particular the
absence of job growth. However, the government reported an 8.2% increase in GDP
for the third quarter of 2003, job growth for October 2003 was the largest since
January 2003, and merger activity picked up--indications that the economy may
have gained real strength during the report period.
GOVERNMENT POLICIES WERE STRONGLY AIMED AT STIMULATING THE ECONOMY.
The Federal Reserve (the Fed) cut short-term interest rates twice during the
period--0.50% in November 2002 and 0.25% in June 2003--bringing the Fed funds
target rate to a 45-year low of 1.00%. On the fiscal side, stimulus measures
included tax cuts.
Consumer spending held up strongly throughout the economic downturn, bolstered
in part by unprecedented activity in mortgage refinancing (as individuals took
advantage of the opportunity to refinance at historically low rates). During the
period, we also saw business capital spending show signs of life after declining
for the past few years.
STOCK PRICES ROSE SIGNIFICANTLY OVER THE PERIOD, EVEN AS SKEPTICISM LINGERED
ABOUT THE QUALITY OF THE RALLY. After more than two years of generally negative
performance, U.S. equity markets reached an apparent bottom during the report
period, then rose strongly, ending the period with significant gains. During the
report period, the Nasdaq Composite Index rose 46%, while the S&P 500(R) Index
rose nearly 21%.
One striking feature of the overall U.S. stock market during the report period
is that stocks with more speculative characteristics tended to perform better
than stocks with more demonstrable quality. For example, companies with low
earnings or dividends generally outperformed companies with higher earnings or
dividends. This held true for other measures of quality as well, such as debt to
equity: those with higher levels of debt performed better than companies with
lower levels of debt. Consistent with this trend, small-cap stocks (which tend
to be more
Schwab Equity Index Funds 3
MANAGEMENT'S DISCUSSION continued
Factors that have been linked to superior long-term stock performance were
not the factors that investors appeared to value most during the period.
speculative) performed well during the period, and microcap stocks performed
even better. Large-cap stocks lagged both groups, but still performed well.
Many market observers have asked why lower quality securities outperformed
higher quality and whether it could continue. There are many possible answers,
but we believe the more important point is that in the long run, quality has
been shown to be a superior indicator of performance.
DESPITE THE DIVIDEND TAX CUT, DIVIDEND STOCKS UNDERPERFORMED THE OVERALL MARKET
DURING THE PERIOD. Congress passed the tax cut during the period as part of the
government's economic stimulus efforts. The cut reduced the double taxation of
corporate dividends, thus lowering the cost of capital and encouraging
investment. Since companies that pay dividends are generally more established
and less speculative, we see the underperformance of these stocks as being part
of the larger market trend mentioned earlier.
U.S. INVESTORS SAW GAINS OVERSEAS, HELPED BY CURRENCY TRENDS. Most foreign
markets showed positive total returns for the period, and these returns were
augmented by the fact that the United States dollar fell versus most major
foreign currencies.
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.
20.80% S&P 500(R) INDEX: measures U.S. large-cap stocks
43.37% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
27.03% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in
Europe, Australasia and the Far East
4.91% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond market
[LINE GRAPH]
Lehman Brothers
U.S. Aggregate MSCI-EAFE(R) Russell 2000(R) S&P 500(R)
Bond Index Index Index Index
31-Oct-02 0.00 0.00 0.00 0.00
01-Nov-02 -0.18 -0.35 2.67 1.72
08-Nov-02 0.59 0.98 1.50 1.07
15-Nov-02 0.25 1.69 3.40 2.83
22-Nov-02 -0.07 4.00 7.19 5.20
29-Nov-02 -0.03 4.54 8.92 5.89
06-Dec-02 0.52 1.29 6.37 3.21
13-Dec-02 0.86 -0.52 4.07 0.67
20-Dec-02 1.42 -0.45 3.79 1.41
27-Dec-02 1.99 -0.85 3.12 -0.85
03-Jan-03 1.36 2.96 4.80 2.93
10-Jan-03 1.18 3.07 6.46 5.13
17-Jan-03 1.83 2.26 4.25 2.23
24-Jan-03 2.20 -0.96 0.76 -2.34
31-Jan-03 2.13 -3.19 0.01 -2.95
07-Feb-03 2.47 -4.39 -3.56 -5.84
14-Feb-03 2.45 -3.79 -3.60 -5.20
21-Feb-03 2.75 -3.22 -2.01 -3.66
28-Feb-03 3.54 -5.42 -3.01 -4.40
07-Mar-03 3.83 -8.07 -4.69 -5.75
14-Mar-03 3.45 -7.78 -4.59 -5.20
21-Mar-03 2.18 -3.65 1.31 1.92
28-Mar-03 3.12 -5.36 -0.65 -1.73
04-Apr-03 3.13 -4.01 0.61 0.04
11-Apr-03 3.15 -3.78 0.10 -1.11
18-Apr-03 3.40 -0.82 3.46 1.78
25-Apr-03 3.97 -1.11 4.77 2.38
02-May-03 4.15 2.54 9.99 6.00
09-May-03 5.05 4.64 11.59 6.42
16-May-03 5.84 6.77 11.94 7.74
23-May-03 6.21 6.25 12.96 6.49
30-May-03 6.26 7.98 19.10 9.98
06-Jun-03 6.35 12.02 22.61 12.79
13-Jun-03 7.36 13.35 21.52 12.94
20-Jun-03 6.41 14.39 21.49 13.76
27-Jun-03 5.85 11.29 21.36 11.58
04-Jul-03 5.69 12.74 23.44 12.69
11-Jul-03 5.85 12.64 28.17 14.17
18-Jul-03 4.74 10.95 25.74 13.63
25-Jul-03 4.06 13.99 26.87 14.25
01-Aug-03 2.43 12.70 26.70 12.19
08-Aug-03 3.59 12.44 22.90 11.92
15-Aug-03 2.56 15.65 27.79 13.51
22-Aug-03 2.95 16.17 31.49 13.81
29-Aug-03 3.16 16.01 34.75 15.56
05-Sep-03 3.79 19.26 37.87 17.14
12-Sep-03 4.28 19.87 37.96 16.87
19-Sep-03 4.79 23.18 41.00 18.91
26-Sep-03 5.48 20.32 31.60 14.43
03-Oct-03 4.78 24.97 38.95 18.25
10-Oct-03 4.75 27.25 40.81 19.25
17-Oct-03 4.23 27.96 41.18 19.42
24-Oct-03 5.08 25.40 37.41 18.24
31-Oct-03 4.91 27.03 43.37 20.80
These figures assume dividends and distributions were reinvested. Index
figures do not include trading and management costs, which would lower
performance. Indices are unmanaged and you can't invest in them directly.
Remember that past performance is not an indication of future results.
Data source: Charles Schwab & Co., Inc.
4 Schwab Equity Index Funds
PERFORMANCE AT A GLANCE
Total return for the 12 months ended 10/31/03
SCHWAB S&P 500 FUND
Investor Shares......................... 20.39%
Select Shares(R)........................ 20.62%
e.Shares(R)............................. 20.55%
Benchmark............................... 20.80%
Performance Details.pages 7-9
SCHWAB 1000 FUND(R)
Investor Shares......................... 21.34%
Select Shares........................... 21.52%
Benchmark............................... 21.84%
Performance Details.pages 11-12
SCHWAB SMALL-CAP INDEX FUND(R)
Investor Shares......................... 38.72%
Select Shares........................... 39.02%
Benchmark............................... 39.00%
Performance Details.pages 14-15
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
Investor Shares......................... 23.24%
Select Shares........................... 23.50%
Benchmark............................... 24.43%
Performance Details pages 17-18
SCHWAB INTERNATIONAL INDEX FUND(R)
Investor Shares......................... 24.24%
Select Shares........................... 24.50%
Benchmark............................... 25.55%
Performance Details pages 20-21
THE FUNDS
All of the funds in this report posted double-digit total returns for the report
period. October 2003, the last month of the period, was an especially strong
month for the broad U.S. stock market, and marked the seventh positive month of
the last eight. All funds met the goal of closely tracking their respective
benchmark indices.
The SCHWAB S&P 500 FUND ended the report period up more than 20%, as the S&P
500(R) Index closed above 1050 for the first time since May of 2002.
Third-quarter earnings were 5% above consensus estimates for the 79% of the
companies in the index that had reported their third-quarter earnings by the
time this report was written. Information technology, which had been especially
hard-hit in recent years, led all sectors during the period with a notable 41%
total return. Even the weakest sector, telecom services, was up 3%. The fund was
again able to operate tax-efficiently, making no capital gains distribution for
2002.
The results for the SCHWAB 1000 FUND were fairly similar. The fund's inclusion
of mid-cap stocks, which as a category outperformed large-caps, added about a
percentage point to the index's total return compared to that of the S&P 500
Index. More than half of the fund's performance came from just two sectors:
information technology and financial. The fund was again able to operate
tax-efficiently, making no capital gains distribution for 2002.
With small-caps outperforming mid- and large-caps, during the period, the SCHWAB
SMALL-CAP INDEX FUND was able to post total returns approaching 40% for the
report period. Even the worst-performing
---------------------------------------------------------
Past performance does not indicate future results.
Expenses may be partially absorbed by CSIM and Schwab. Without these reductions,
the funds' total return would have been lower. Performance does not reflect the
deduction of taxes that a shareholder would pay on fund distributions or on the
redemption of fund shares.
All fund and index figures on this page assume dividends and distributions were
reinvested. Index figures do not include trading and management costs, which
would lower performance. Indices are unmanaged, and you cannot invest in them
directly. Each 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. For more
current performance information visit www.schwab.com or call 1-800-435-4000.
Small company stocks are subject to greater volatility than other asset
categories. Foreign securities can involve risks such as political and economic
instability and currency risk.
Schwab Equity Index Funds 5
MANAGEMENT'S DISCUSSION continued
Even the worst-performing sector in each fund posted a positive return,
with formerly hard-hit sectors such as information technology leading the
rebound.
sector, consumer staples, had a double-digit return (15%), while telecom rose a
remarkable 76%. Historically, October has been a bad month for small-cap stocks.
However, October 2003 saw small-caps gain 8% (as measured by the Schwab
Small-Cap Index). Investors should note that the gains in small-caps were
accompanied by high volatility: small-cap stock prices moved more than 1% a day
on over 80% of the trading days during the period.
Exposure to volatile but high-performing small-cap stocks helped lift the SCHWAB
TOTAL STOCK MARKET INDEX FUND(R) to a total return of more than 23%. Although
small-cap stocks represent only a small portion of the fund's assets, their
strong performance helped the fund modestly outpace such large-cap funds as the
Schwab S&P 500 Fund. The best-performing sector, technology, was up 42%; the
worst-performing, communication services, was up 5%.
Total return for the SCHWAB INTERNATIONAL INDEX FUND(R) was more than 24%.
Internationally, many of the same factors appeared to be at work as in the
United States. Smaller stocks led the field, with high volatility a feature of
these stocks in most markets, and speculative stocks proving more popular than
stocks of companies with sound fundamentals. All countries in the index posted
positive total returns, led by Sweden and Canada, both of which were up by at
least 50%.
Nothing in this report represents a recommendation of a security by the
investment adviser. Manager views and portfolio holdings may have changed
subsequent to the report date.
6 Schwab Equity Index Funds
SCHWAB S&P 500 FUND
INVESTOR SHARES PERFORMANCE as of 10/31/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Investor Shares with
its benchmark and Morningstar category. The table below the chart shows two
types of after-tax returns.
[BAR CHART]
Fund Category:
Fund: Benchmark: MORNINGSTAR
INVESTOR S&P 500(R) LARGE-CAP
SHARES INDEX BLEND
1 YEAR 20.39% 20.80% 19.40%
5 YEARS 0.23% 0.53% 0.72%
SINCE INCEPTION: 5/1/96 7.77% 8.19% 6.53%
1 YEAR 5 YEARS SINCE INCEPTION
------ ------- ---------------
MORNINGSTAR MORNINGSTAR MORNINGSTAR
INVESTOR LARGE-CAP INVESTOR LARGE-CAP INVESTOR LARGE-CAP
TOTAL RETURNS AFTER TAX SHARES BLEND SHARES BLEND SHARES BLEND
- --------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 19.71% 17.07% -0.17% -0.61% 7.39% n/a
- --------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 13.13% 10.62% 0.00% 0.26% 6.29% n/a
- --------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the fund's Investor Shares, compared with a similar investment in
its benchmark.
$17,539 INVESTOR SHARES
$18,054 S&P 500 INDEX
[LINE GRAPH]
Investor S&P 500
Shares Index
30-Apr-96 $10,000 $10,000
31-May-96 $10,250 $10,257
30-Jun-96 $10,290 $10,296
31-Jul-96 $9,840 $9,841
31-Aug-96 $10,040 $10,049
30-Sep-96 $10,600 $10,613
31-Oct-96 $10,880 $10,906
30-Nov-96 $11,690 $11,731
31-Dec-96 $11,462 $11,498
31-Jan-97 $12,157 $12,216
28-Feb-97 $12,248 $12,312
31-Mar-97 $11,744 $11,808
30-Apr-97 $12,430 $12,511
31-May-97 $13,186 $13,272
30-Jun-97 $13,760 $13,867
31-Jul-97 $14,849 $14,969
31-Aug-97 $14,012 $14,131
30-Sep-97 $14,778 $14,904
31-Oct-97 $14,284 $14,406
30-Nov-97 $14,930 $15,073
31-Dec-97 $15,184 $15,332
31-Jan-98 $15,357 $15,502
28-Feb-98 $16,455 $16,620
31-Mar-98 $17,289 $17,471
30-Apr-98 $17,452 $17,647
31-May-98 $17,147 $17,344
30-Jun-98 $17,838 $18,048
31-Jul-98 $17,645 $17,857
31-Aug-98 $15,092 $15,278
30-Sep-98 $16,058 $16,257
31-Oct-98 $17,340 $17,579
30-Nov-98 $18,387 $18,645
31-Dec-98 $19,443 $19,718
31-Jan-99 $20,253 $20,543
28-Feb-99 $19,617 $19,904
31-Mar-99 $20,397 $20,700
30-Apr-99 $21,176 $21,501
31-May-99 $20,663 $20,994
30-Jun-99 $21,812 $22,159
31-Jul-99 $21,125 $21,467
31-Aug-99 $21,012 $21,360
30-Sep-99 $20,428 $20,775
31-Oct-99 $21,709 $22,090
30-Nov-99 $22,150 $22,539
31-Dec-99 $23,448 $23,866
31-Jan-00 $22,266 $22,668
29-Feb-00 $21,841 $22,239
31-Mar-00 $23,967 $24,414
30-Apr-00 $23,241 $23,679
31-May-00 $22,753 $23,194
30-Jun-00 $23,313 $23,767
31-Jul-00 $22,940 $23,396
31-Aug-00 $24,361 $24,849
30-Sep-00 $23,075 $23,537
31-Oct-00 $22,971 $23,438
30-Nov-00 $21,156 $21,591
31-Dec-00 $21,261 $21,697
31-Jan-01 $22,014 $22,467
28-Feb-01 $19,996 $20,418
31-Mar-01 $18,730 $19,124
30-Apr-01 $20,174 $20,610
31-May-01 $20,310 $20,748
30-Jun-01 $19,808 $20,244
31-Jul-01 $19,609 $20,045
31-Aug-01 $18,375 $18,790
30-Sep-01 $16,890 $17,272
31-Oct-01 $17,204 $17,602
30-Nov-01 $18,521 $18,952
31-Dec-01 $18,678 $19,119
31-Jan-02 $18,403 $18,840
28-Feb-02 $18,044 $18,476
31-Mar-02 $18,710 $19,171
30-Apr-02 $17,579 $18,009
31-May-02 $17,442 $17,876
30-Jun-02 $16,195 $16,603
31-Jul-02 $14,938 $15,310
31-Aug-02 $15,023 $15,409
30-Sep-02 $13,396 $13,734
31-Oct-02 $14,568 $14,943
30-Nov-02 $15,424 $15,823
31-Dec-02 $14,516 $14,894
31-Jan-03 $14,130 $14,504
28-Feb-03 $13,915 $14,286
31-Mar-03 $14,044 $14,425
30-Apr-03 $15,202 $15,614
31-May-03 $15,995 $16,436
30-Jun-03 $16,188 $16,647
31-Jul-03 $16,478 $16,940
31-Aug-03 $16,788 $17,270
30-Sep-03 $16,606 $17,087
31-Oct-03 $17,539 $18,054
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.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/03 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. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
Schwab Equity Index Funds 7
SCHWAB S&P 500 FUND
SELECT SHARES(R) PERFORMANCE as of 10/31/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Select Shares with its
benchmark and Morningstar category. The table below the chart shows two types of
after-tax returns.
[BAR CHART]
Fund Category:
Fund: Benchmark: MORNINGSTAR
SELECT S&P 500(R) LARGE-CAP
SHARES INDEX BLEND
1 YEAR 20.62% 20.80% 19.40%
5 YEARS 0.39% 0.53% 0.72%
SINCE INCEPTION: 5/19/97 4.99% 5.18% 4.30%
1 YEAR 5 YEARS SINCE INCEPTION
------ ------- ---------------
MORNINGSTAR MORNINGSTAR MORNINGSTAR
SELECT LARGE-CAP SELECT LARGE-CAP SELECT LARGE-CAP
TOTAL RETURNS AFTER TAX SHARES BLEND SHARES BLEND SHARES BLEND
- --------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 19.86% 17.07% -0.07% -0.61% 4.56% n/a
- --------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 13.26% 10.62% 0.10% 0.26% 3.88% n/a
- --------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A HYPOTHETICAL $50,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $50,000
investment (the minimum investment for this share class) in the fund's Select
Shares, compared with a similar investment in its benchmark.
$68,480 SELECT SHARES
$69,281 S&P 500 INDEX
[LINE GRAPH]
Select S&P 500
Shares Index
19-May-97 $50,000 $50,000
31-May-97 $50,935 $50,930
30-Jun-97 $53,190 $53,212
31-Jul-97 $57,395 $57,442
31-Aug-97 $54,165 $54,225
30-Sep-97 $57,120 $57,191
31-Oct-97 $55,215 $55,281
30-Nov-97 $57,745 $57,841
31-Dec-97 $58,745 $58,836
31-Jan-98 $59,375 $59,489
28-Feb-98 $63,660 $63,778
31-Mar-98 $66,880 $67,043
30-Apr-98 $67,550 $67,720
31-May-98 $66,370 $66,556
30-Jun-98 $69,040 $69,258
31-Jul-98 $68,295 $68,524
31-Aug-98 $58,435 $58,629
30-Sep-98 $62,165 $62,387
31-Oct-98 $67,155 $67,459
30-Nov-98 $71,245 $71,547
31-Dec-98 $75,340 $75,668
31-Jan-99 $78,475 $78,831
28-Feb-99 $76,015 $76,379
31-Mar-99 $79,030 $79,434
30-Apr-99 $82,085 $82,509
31-May-99 $80,140 $80,561
30-Jun-99 $84,545 $85,033
31-Jul-99 $81,885 $82,380
31-Aug-99 $81,490 $81,968
30-Sep-99 $79,230 $79,721
31-Oct-99 $84,230 $84,767
30-Nov-99 $85,935 $86,491
31-Dec-99 $91,000 $91,585
31-Jan-00 $86,420 $86,987
29-Feb-00 $84,770 $85,341
31-Mar-00 $93,050 $93,687
30-Apr-00 $90,235 $90,867
31-May-00 $88,350 $89,004
30-Jun-00 $90,515 $91,203
31-Jul-00 $89,110 $89,780
31-Aug-00 $94,655 $95,356
30-Sep-00 $89,635 $90,322
31-Oct-00 $89,230 $89,942
30-Nov-00 $82,200 $82,855
31-Dec-00 $82,655 $83,261
31-Jan-01 $85,540 $86,217
28-Feb-01 $77,745 $78,354
31-Mar-01 $72,835 $73,386
30-Apr-01 $78,480 $79,088
31-May-01 $78,965 $79,618
30-Jun-01 $77,055 $77,683
31-Jul-01 $76,285 $76,922
31-Aug-01 $71,500 $72,107
30-Sep-01 $65,735 $66,280
31-Oct-01 $66,955 $67,546
30-Nov-01 $72,065 $72,727
31-Dec-01 $72,700 $73,367
31-Jan-02 $71,635 $72,296
28-Feb-02 $70,240 $70,901
31-Mar-02 $72,865 $73,567
30-Apr-02 $68,430 $69,108
31-May-02 $67,940 $68,597
30-Jun-02 $63,095 $63,713
31-Jul-02 $58,170 $58,750
31-Aug-02 $58,580 $59,132
30-Sep-02 $52,175 $52,704
31-Oct-02 $56,775 $57,342
30-Nov-02 $60,140 $60,719
31-Dec-02 $56,585 $57,155
31-Jan-03 $55,085 $55,658
28-Feb-03 $54,250 $54,823
31-Mar-03 $54,790 $55,355
30-Apr-03 $59,300 $59,916
31-May-03 $62,430 $63,073
30-Jun-03 $63,180 $63,881
31-Jul-03 $64,305 $65,005
31-Aug-03 $65,560 $66,273
30-Sep-03 $64,850 $65,570
31-Oct-03 $68,480 $69,281
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.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/03 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. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
8 Schwab Equity Index Funds
SCHWAB S&P 500 FUND
e.SHARES(R) PERFORMANCE as of 10/31/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's e.Shares with its
benchmark and Morningstar category. The table below the chart shows two types of
after-tax returns.
[BAR CHART]
Fund Category:
Benchmark: MORNINGSTAR
Fund: S&P 500(R) LARGE-CAP
e.SHARES INDEX BLEND
1 YEAR 20.55% 20.80% 19.40%
5 YEARS 0.30% 0.53% 0.72%
SINCE INCEPTION: 5/1/96 7.87% 8.19% 6.53%
1 YEAR 5 YEARS SINCE INCEPTION
------ ------- ---------------
MORNINGSTAR MORNINGSTAR MORNINGSTAR
LARGE-CAP LARGE-CAP LARGE-CAP
TOTAL RETURNS AFTER TAX e.SHARES BLEND e.SHARES BLEND e.SHARES BLEND
- --------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 19.84% 17.07% -0.14% -0.61% 7.45% n/a
- --------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 13.22% 10.62% 0.04% 0.26% 6.35% n/a
- --------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the fund's e.Shares, compared with a similar investment in its
benchmark.
$17,656 e.SHARES
$18,054 S&P 500 INDEX
[LINE GRAPH]
S&P 500
e.Shares Index
30-Apr-96 $10,000 $10,000
31-May-96 $10,250 $10,257
30-Jun-96 $10,290 $10,296
31-Jul-96 $9,840 $9,841
31-Aug-96 $10,050 $10,049
30-Sep-96 $10,600 $10,613
31-Oct-96 $10,890 $10,906
30-Nov-96 $11,710 $11,731
31-Dec-96 $11,473 $11,498
31-Jan-97 $12,179 $12,216
28-Feb-97 $12,270 $12,312
31-Mar-97 $11,766 $11,808
30-Apr-97 $12,452 $12,511
31-May-97 $13,209 $13,272
30-Jun-97 $13,794 $13,867
31-Jul-97 $14,873 $14,969
31-Aug-97 $14,036 $14,131
30-Sep-97 $14,803 $14,904
31-Oct-97 $14,318 $14,406
30-Nov-97 $14,964 $15,073
31-Dec-97 $15,227 $15,332
31-Jan-98 $15,390 $15,502
28-Feb-98 $16,490 $16,620
31-Mar-98 $17,336 $17,471
30-Apr-98 $17,499 $17,647
31-May-98 $17,193 $17,344
30-Jun-98 $17,886 $18,048
31-Jul-98 $17,692 $17,857
31-Aug-98 $15,136 $15,278
30-Sep-98 $16,103 $16,257
31-Oct-98 $17,397 $17,579
30-Nov-98 $18,446 $18,645
31-Dec-98 $19,504 $19,718
31-Jan-99 $20,316 $20,543
28-Feb-99 $19,679 $19,904
31-Mar-99 $20,459 $20,700
30-Apr-99 $21,240 $21,501
31-May-99 $20,737 $20,994
30-Jun-99 $21,878 $22,159
31-Jul-99 $21,199 $21,467
31-Aug-99 $21,086 $21,360
30-Sep-99 $20,501 $20,775
31-Oct-99 $21,795 $22,090
30-Nov-99 $22,227 $22,539
31-Dec-99 $23,536 $23,866
31-Jan-00 $22,350 $22,668
29-Feb-00 $21,924 $22,239
31-Mar-00 $24,057 $24,414
30-Apr-00 $23,328 $23,679
31-May-00 $22,850 $23,194
30-Jun-00 $23,401 $23,767
31-Jul-00 $23,037 $23,396
31-Aug-00 $24,462 $24,849
30-Sep-00 $23,172 $23,537
31-Oct-00 $23,068 $23,438
30-Nov-00 $21,247 $21,591
31-Dec-00 $21,364 $21,697
31-Jan-01 $22,110 $22,467
28-Feb-01 $20,092 $20,418
31-Mar-01 $18,821 $19,124
30-Apr-01 $20,271 $20,610
31-May-01 $20,407 $20,748
30-Jun-01 $19,903 $20,244
31-Jul-01 $19,703 $20,045
31-Aug-01 $18,463 $18,790
30-Sep-01 $16,971 $17,272
31-Oct-01 $17,297 $17,602
30-Nov-01 $18,610 $18,952
31-Dec-01 $18,768 $19,119
31-Jan-02 $18,492 $18,840
28-Feb-02 $18,141 $18,476
31-Mar-02 $18,810 $19,171
30-Apr-02 $17,674 $18,009
31-May-02 $17,536 $17,876
30-Jun-02 $16,282 $16,603
31-Jul-02 $15,019 $15,310
31-Aug-02 $15,114 $15,409
30-Sep-02 $13,468 $13,734
31-Oct-02 $14,647 $14,943
30-Nov-02 $15,507 $15,823
31-Dec-02 $14,593 $14,894
31-Jan-03 $14,216 $14,504
28-Feb-03 $14,000 $14,286
31-Mar-03 $14,129 $14,425
30-Apr-03 $15,294 $15,614
31-May-03 $16,092 $16,436
30-Jun-03 $16,297 $16,647
31-Jul-03 $16,578 $16,940
31-Aug-03 $16,890 $17,270
30-Sep-03 $16,707 $17,087
31-Oct-03 $17,656 $18,054
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.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/03 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. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
Schwab Equity Index Funds 9
SCHWAB S&P 500 FUND
FUND FACTS as of 10/31/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 502
- ----------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $86,757
- ----------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 22.3
- ----------------------------------------------------------
PRICE/BOOK RATIO (P/B) 3.2
- ----------------------------------------------------------
PORTFOLIO TURNOVER RATE 3%
- ----------------------------------------------------------
TOP HOLDINGS 2
% OF
SECURITY NET ASSETS
- --------------------------------------------------------
(1) GENERAL ELECTRIC CO. 3.0%
- --------------------------------------------------------
(2) MICROSOFT CORP. 2.9%
- --------------------------------------------------------
(3) WAL-MART STORES, INC. 2.6%
- --------------------------------------------------------
(4) PFIZER, INC. 2.5%
- --------------------------------------------------------
(5) CITIGROUP, INC. 2.5%
- --------------------------------------------------------
(6) EXXON MOBIL CORP. 2.5%
- --------------------------------------------------------
(7) INTEL CORP. 2.2%
- --------------------------------------------------------
(8) AMERICAN INTERNATIONAL GROUP, INC. 1.6%
- --------------------------------------------------------
(9) INTERNATIONAL BUSINESS MACHINES CORP. 1.6%
- --------------------------------------------------------
(10) JOHNSON & JOHNSON 1.5%
- --------------------------------------------------------
TOTAL 22.9%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
31.7% CONSUMER NON-DURABLES
21.1% FINANCE
20.4% TECHNOLOGY
6.6% MATERIALS & SERVICES
6.1% UTILITIES
5.5% ENERGY
5.2% CAPITAL GOODS
1.7% TRANSPORTATION
1.6% CONSUMER DURABLES
0.1% OTHER
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/03, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
10 Schwab Equity Index Funds
SCHWAB 1000 FUND(R)
INVESTOR SHARES PERFORMANCE as of 10/31/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Investor Shares with
its benchmark and Morningstar category. The table below the chart shows two
types of after-tax returns.
[BAR CHART]
Fund Category:
Fund: Benchmark: MORNINGSTAR
INVESTOR SCHWAB 1000 LARGE-CAP
SHARES INDEX(R) BLEND
1 YEAR 21.34% 21.84% 19.40%
5 YEARS 1.09% 1.35% 0.72%
10 YEARS 10.06% 10.48% 8.72%
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
MORNINGSTAR MORNINGSTAR MORNINGSTAR
INVESTOR LARGE-CAP INVESTOR LARGE-CAP INVESTOR LARGE-CAP
TOTAL RETURNS AFTER TAX SHARES BLEND SHARES BLEND SHARES BLEND
- --------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 20.74% 17.07% 0.75% -0.61% 9.59% 6.71%
- --------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 13.76% 10.62% 0.71% 0.26% 8.31% 6.57%
- --------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance over ten years of a hypothetical $10,000 investment
in the fund's Investor Shares, compared with a similar investment in its
benchmark and an additional index.
$26,099 INVESTOR SHARES
$27,104 SCHWAB 1000 INDEX
$26,959 S&P 500 INDEX
[LINE GRAPH]
Schwab
Investor 1000 S&P 500
Shares Index Index
31-Oct-93 $10,000 $10,000 $10,000
30-Nov-93 $9,860 $9,859 $9,905
31-Dec-93 $10,035 $10,034 $10,025
31-Jan-94 $10,340 $10,353 $10,366
28-Feb-94 $10,075 $10,092 $10,085
31-Mar-94 $9,629 $9,645 $9,646
30-Apr-94 $9,739 $9,759 $9,770
31-May-94 $9,856 $9,878 $9,929
30-Jun-94 $9,589 $9,614 $9,686
31-Jul-94 $9,897 $9,929 $10,003
31-Aug-94 $10,315 $10,360 $10,412
30-Sep-94 $10,079 $10,125 $10,158
31-Oct-94 $10,276 $10,322 $10,386
30-Nov-94 $9,905 $9,953 $10,008
31-Dec-94 $10,024 $10,082 $10,156
31-Jan-95 $10,280 $10,342 $10,419
28-Feb-95 $10,687 $10,766 $10,824
31-Mar-95 $10,966 $11,055 $11,144
30-Apr-95 $11,237 $11,334 $11,471
31-May-95 $11,644 $11,753 $11,929
30-Jun-95 $11,954 $12,077 $12,206
31-Jul-95 $12,409 $12,531 $12,610
31-Aug-95 $12,504 $12,629 $12,641
30-Sep-95 $12,999 $13,145 $13,175
31-Oct-95 $12,936 $13,079 $13,127
30-Nov-95 $13,494 $13,656 $13,702
31-Dec-95 $13,694 $13,860 $13,967
31-Jan-96 $14,098 $14,281 $14,442
29-Feb-96 $14,308 $14,493 $14,576
31-Mar-96 $14,437 $14,633 $14,716
30-Apr-96 $14,680 $14,882 $14,932
31-May-96 $15,028 $15,242 $15,316
30-Jun-96 $14,987 $15,218 $15,374
31-Jul-96 $14,276 $14,496 $14,694
31-Aug-96 $14,664 $14,887 $15,005
30-Sep-96 $15,481 $15,721 $15,848
31-Oct-96 $15,796 $16,038 $16,285
30-Nov-96 $16,936 $17,200 $17,516
31-Dec-96 $16,649 $16,920 $17,169
31-Jan-97 $17,606 $17,900 $18,241
28-Feb-97 $17,672 $17,963 $18,385
31-Mar-97 $16,886 $17,179 $17,631
30-Apr-97 $17,795 $18,086 $18,682
31-May-97 $18,924 $19,255 $19,818
30-Jun-97 $19,710 $20,069 $20,706
31-Jul-97 $21,306 $21,689 $22,352
31-Aug-97 $20,283 $20,664 $21,100
30-Sep-97 $21,372 $21,775 $22,254
31-Oct-97 $20,667 $21,060 $21,511
30-Nov-97 $21,535 $21,958 $22,507
31-Dec-97 $21,963 $22,398 $22,894
31-Jan-98 $22,120 $22,570 $23,148
28-Feb-98 $23,749 $24,253 $24,817
31-Mar-98 $24,956 $25,509 $26,088
30-Apr-98 $25,213 $25,787 $26,351
31-May-98 $24,659 $25,224 $25,898
30-Jun-98 $25,651 $26,236 $26,949
31-Jul-98 $25,295 $25,870 $26,664
31-Aug-98 $21,517 $22,007 $22,813
30-Sep-98 $22,905 $23,446 $24,276
31-Oct-98 $24,725 $25,342 $26,249
30-Nov-98 $26,263 $26,923 $27,840
31-Dec-98 $27,928 $28,628 $29,444
31-Jan-99 $28,986 $29,716 $30,674
28-Feb-99 $28,012 $28,750 $29,720
31-Mar-99 $29,136 $29,895 $30,909
30-Apr-99 $30,320 $31,129 $32,105
31-May-99 $29,620 $30,419 $31,348
30-Jun-99 $31,095 $31,958 $33,088
31-Jul-99 $30,103 $30,940 $32,055
31-Aug-99 $29,812 $30,686 $31,895
30-Sep-99 $29,019 $29,774 $31,021
31-Oct-99 $30,937 $31,783 $32,984
30-Nov-99 $31,687 $32,525 $33,655
31-Dec-99 $33,794 $34,704 $35,637
31-Jan-00 $32,208 $33,087 $33,848
29-Feb-00 $32,216 $33,130 $33,207
31-Mar-00 $35,001 $36,012 $36,455
30-Apr-00 $33,684 $34,660 $35,358
31-May-00 $32,803 $33,758 $34,633
30-Jun-00 $33,684 $34,682 $35,488
31-Jul-00 $33,190 $34,150 $34,935
31-Aug-00 $35,438 $36,472 $37,105
30-Sep-00 $33,802 $34,787 $35,146
31-Oct-00 $33,517 $34,510 $34,998
30-Nov-00 $30,656 $31,568 $32,240
31-Dec-00 $31,018 $31,934 $32,398
31-Jan-01 $32,073 $32,999 $33,548
28-Feb-01 $29,101 $29,941 $30,489
31-Mar-01 $27,117 $27,904 $28,556
30-Apr-01 $29,329 $30,197 $30,775
31-May-01 $29,515 $30,395 $30,981
30-Jun-01 $28,864 $29,732 $30,228
31-Jul-01 $28,476 $29,342 $29,932
31-Aug-01 $26,661 $27,481 $28,058
30-Sep-01 $24,423 $25,178 $25,791
31-Oct-01 $24,971 $25,753 $26,283
30-Nov-01 $26,880 $27,725 $28,299
31-Dec-01 $27,216 $28,081 $28,548
31-Jan-02 $26,901 $27,761 $28,132
28-Feb-02 $26,381 $27,234 $27,589
31-Mar-02 $27,438 $28,334 $28,626
30-Apr-02 $25,947 $26,802 $26,891
31-May-02 $25,700 $26,551 $26,692
30-Jun-02 $23,843 $24,633 $24,792
31-Jul-02 $22,054 $22,789 $22,860
31-Aug-02 $22,191 $22,936 $23,009
30-Sep-02 $19,882 $20,553 $20,508
31-Oct-02 $21,509 $22,246 $22,313
30-Nov-02 $22,753 $23,535 $23,627
31-Dec-02 $21,449 $22,189 $22,240
31-Jan-03 $20,913 $21,648 $21,657
28-Feb-03 $20,569 $21,296 $21,332
31-Mar-03 $20,801 $21,537 $21,539
30-Apr-03 $22,458 $23,257 $23,314
31-May-03 $23,674 $24,534 $24,543
30-Jun-03 $23,976 $24,854 $24,857
31-Jul-03 $24,460 $25,363 $25,295
31-Aug-03 $24,960 $25,900 $25,788
30-Sep-03 $24,666 $25,607 $25,514
31-Oct-03 $26,099 $27,104 $26,959
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.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/03 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. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
Schwab Equity Index Funds 11
SCHWAB 1000 FUND(R)
SELECT SHARES(R) PERFORMANCE as of 10/31/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Select Shares with its
benchmark and Morningstar category. The table below the chart shows two types of
after-tax returns.
[BAR CHART]
Fund Category:
Fund: Benchmark: MORNINGSTAR
SELECT SCHWAB 1000 LARGE-CAP
SHARES INDEX(R) BLEND
1 YEAR 21.52% 21.84% 19.40%
5 YEARS 1.22% 1.35% 0.72%
SINCE INCEPTION: 5/19/97 5.58% 5.78% 4.30%
1 YEAR 5 YEARS SINCE INCEPTION
------ ------- ---------------
MORNINGSTAR MORNINGSTAR MORNINGSTAR
SELECT LARGE-CAP SELECT LARGE-CAP SELECT LARGE-CAP
TOTAL RETURNS AFTER TAX SHARES BLEND SHARES BLEND SHARES BLEND
- --------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 20.87% 17.07% 0.83% -0.61% 5.20% n/a
- --------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 13.87% 10.62% 0.79% 0.26% 4.39% n/a
- --------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A HYPOTHETICAL $50,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $50,000
investment (the minimum investment for this share class) in the fund's Select
Shares, compared with a similar investment in its benchmark and an additional
index.
$70,990 SELECT SHARES
$71,880 SCHWAB 1000 INDEX
$69,281 S&P 500 INDEX
[LINE GRAPH]
Schwab
Select 1000 S&P 500
Shares Index Index
19-May-97 $50,000 $50,000 $50,000
31-May-97 $51,040 $51,064 $50,930
30-Jun-97 $53,180 $53,222 $53,212
31-Jul-97 $57,490 $57,518 $57,442
31-Aug-97 $54,750 $54,801 $54,225
30-Sep-97 $57,685 $57,746 $57,191
31-Oct-97 $55,785 $55,851 $55,281
30-Nov-97 $58,150 $58,233 $57,841
31-Dec-97 $59,325 $59,398 $58,836
31-Jan-98 $59,725 $59,855 $59,489
28-Feb-98 $64,145 $64,318 $63,778
31-Mar-98 $67,405 $67,648 $67,043
30-Apr-98 $68,100 $68,387 $67,720
31-May-98 $66,625 $66,893 $66,556
30-Jun-98 $69,305 $69,578 $69,258
31-Jul-98 $68,345 $68,606 $68,524
31-Aug-98 $58,140 $58,362 $58,629
30-Sep-98 $61,915 $62,179 $62,387
31-Oct-98 $66,825 $67,206 $67,459
30-Nov-98 $71,000 $71,400 $71,547
31-Dec-98 $75,505 $75,922 $75,668
31-Jan-99 $78,385 $78,805 $78,831
28-Feb-99 $75,750 $76,244 $76,379
31-Mar-99 $78,795 $79,282 $79,434
30-Apr-99 $82,015 $82,553 $82,509
31-May-99 $80,120 $80,671 $80,561
30-Jun-99 $84,110 $84,753 $85,033
31-Jul-99 $81,450 $82,052 $82,380
31-Aug-99 $80,665 $81,380 $81,968
30-Sep-99 $78,545 $78,960 $79,721
31-Oct-99 $83,725 $84,287 $84,767
30-Nov-99 $85,755 $86,255 $86,491
31-Dec-99 $91,470 $92,034 $91,585
31-Jan-00 $87,180 $87,747 $86,987
29-Feb-00 $87,225 $87,861 $85,341
31-Mar-00 $94,765 $95,504 $93,687
30-Apr-00 $91,200 $91,917 $90,867
31-May-00 $88,835 $89,525 $89,004
30-Jun-00 $91,220 $91,977 $91,203
31-Jul-00 $89,905 $90,566 $89,780
31-Aug-00 $95,990 $96,722 $95,356
30-Sep-00 $91,585 $92,255 $90,322
31-Oct-00 $90,810 $91,519 $89,942
30-Nov-00 $83,065 $83,717 $82,855
31-Dec-00 $84,050 $84,689 $83,261
31-Jan-01 $86,935 $87,511 $86,217
28-Feb-01 $78,875 $79,404 $78,354
31-Mar-01 $73,515 $74,002 $73,386
30-Apr-01 $79,515 $80,081 $79,088
31-May-01 $80,020 $80,608 $79,618
30-Jun-01 $78,280 $78,847 $77,683
31-Jul-01 $77,225 $77,815 $76,922
31-Aug-01 $72,325 $72,879 $72,107
30-Sep-01 $66,255 $66,771 $66,280
31-Oct-01 $67,745 $68,296 $67,546
30-Nov-01 $72,920 $73,526 $72,727
31-Dec-01 $73,845 $74,470 $73,367
31-Jan-02 $72,990 $73,622 $72,296
28-Feb-02 $71,600 $72,223 $70,901
31-Mar-02 $74,445 $75,140 $73,567
30-Apr-02 $70,445 $71,078 $69,108
31-May-02 $69,775 $70,413 $68,597
30-Jun-02 $64,710 $65,326 $63,713
31-Jul-02 $59,875 $60,436 $58,750
31-Aug-02 $60,245 $60,827 $59,132
30-Sep-02 $53,980 $54,506 $52,704
31-Oct-02 $58,420 $58,995 $57,342
30-Nov-02 $61,795 $62,414 $60,719
31-Dec-02 $58,255 $58,846 $57,155
31-Jan-03 $56,805 $57,410 $55,658
28-Feb-03 $55,865 $56,475 $54,823
31-Mar-03 $56,500 $57,115 $55,355
30-Apr-03 $61,025 $61,676 $59,916
31-May-03 $64,355 $65,062 $63,073
30-Jun-03 $65,175 $65,913 $63,881
31-Jul-03 $66,490 $67,261 $65,005
31-Aug-03 $67,875 $68,686 $66,273
30-Sep-03 $67,075 $67,908 $65,570
31-Oct-03 $70,990 $71,880 $69,281
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.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/03 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. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
12 Schwab Equity Index Funds
SCHWAB 1000 FUND(R)
FUND FACTS as of 10/31/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 989
- ----------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $77,401
- ----------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 22.4
- ----------------------------------------------------------
PRICE/BOOK RATIO (P/B) 3.1
- ----------------------------------------------------------
PORTFOLIO TURNOVER RATE 5%
- ----------------------------------------------------------
TOP HOLDINGS 2
% OF
SECURITY NET ASSETS
- --------------------------------------------------------
(1) GENERAL ELECTRIC CO. 2.6%
- --------------------------------------------------------
(2) MICROSOFT CORP. 2.6%
- --------------------------------------------------------
(3) WAL-MART STORES, INC. 2.3%
- --------------------------------------------------------
(4) PFIZER, INC. 2.2%
- --------------------------------------------------------
(5) CITIGROUP, INC. 2.2%
- --------------------------------------------------------
(6) EXXON MOBIL CORP. 2.2%
- --------------------------------------------------------
(7) INTEL CORP. 1.9%
- --------------------------------------------------------
(8) AMERICAN INTERNATIONAL GROUP, INC. 1.4%
- --------------------------------------------------------
(9) INTERNATIONAL BUSINESS MACHINES CORP 1.4%
- --------------------------------------------------------
(10) JOHNSON & JOHNSON 1.4%
- --------------------------------------------------------
TOTAL 20.2%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
31.0% CONSUMER NON-DURABLES
22.6% FINANCE
19.5% TECHNOLOGY
7.2% MATERIALS & SERVICES
6.2% UTILITIES
5.0% ENERGY
4.8% CAPITAL GOODS
2.0% CONSUMER DURABLES
1.7% TRANSPORTATION
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/03, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
Schwab Equity Index Funds 13
SCHWAB SMALL-CAP INDEX FUND(R)
INVESTOR SHARES PERFORMANCE as of 10/31/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Investor Shares with
its benchmark and Morningstar category. The table below the chart shows two
types of after-tax returns.
[BAR CHART]
Benchmark: Fund Category:
Fund: SCHWAB MORNINGSTAR
INVESTOR SMALL-CAP SMALL-CAP
SHARES INDEX(R) BLEND
1 YEAR 38.72% 39.00% 37.84%
5 YEARS 8.50% 9.14% 11.38%
SINCE INCEPTION: 12/3/93 9.05% 10.06% 10.00%
1 YEAR 5 YEARS SINCE INCEPTION
------ ------- ---------------
MORNINGSTAR MORNINGSTAR MORNINGSTAR
INVESTOR SMALL-CAP INVESTOR SMALL-CAP INVESTOR SMALL-CAP
TOTAL RETURNS AFTER TAX SHARES BLEND SHARES BLEND SHARES BLEND
- --------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 38.17% 35.45% 7.16% 9.77% 8.28% n/a
- --------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 25.04% 22.22% 6.53% 8.74% 7.40% n/a
- --------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the fund's Investor Shares, compared with a similar investment in
its benchmark and an additional index.
$23,616 INVESTOR SHARES
$25,881 SCHWAB SMALL-CAP INDEX
$23,834 RUSSELL 2000 INDEX
[LINE GRAPH]
Schwab Russell
Investor Small-Cap 2000
Shares Index Index
03-Dec-93 $10,000 $10,000 $10,000
31-Dec-93 $10,154 $10,234 $10,186
31-Jan-94 $10,394 $10,469 $10,505
28-Feb-94 $10,334 $10,430 $10,467
31-Mar-94 $9,783 $9,871 $9,915
30-Apr-94 $9,753 $9,847 $9,974
31-May-94 $9,613 $9,692 $9,861
30-Jun-94 $9,333 $9,419 $9,529
31-Jul-94 $9,493 $9,614 $9,685
31-Aug-94 $10,134 $10,249 $10,225
30-Sep-94 $10,094 $10,191 $10,190
31-Oct-94 $10,064 $10,149 $10,149
30-Nov-94 $9,663 $9,767 $9,739
31-Dec-94 $9,841 $10,000 $10,000
31-Jan-95 $9,730 $9,838 $9,874
28-Feb-95 $10,082 $10,229 $10,285
31-Mar-95 $10,334 $10,442 $10,461
30-Apr-95 $10,566 $10,671 $10,693
31-May-95 $10,717 $10,809 $10,877
30-Jun-95 $11,211 $11,356 $11,441
31-Jul-95 $11,866 $12,021 $12,100
31-Aug-95 $12,077 $12,270 $12,351
30-Sep-95 $12,309 $12,510 $12,572
31-Oct-95 $11,785 $11,910 $12,010
30-Nov-95 $12,329 $12,482 $12,514
31-Dec-95 $12,562 $12,782 $12,845
31-Jan-96 $12,491 $12,749 $12,831
29-Feb-96 $12,967 $13,261 $13,231
31-Mar-96 $13,170 $13,492 $13,501
30-Apr-96 $13,899 $14,206 $14,223
31-May-96 $14,384 $14,692 $14,784
30-Jun-96 $13,848 $14,222 $14,176
31-Jul-96 $12,643 $13,075 $12,938
31-Aug-96 $13,413 $13,904 $13,690
30-Sep-96 $14,010 $14,416 $14,225
31-Oct-96 $13,757 $14,169 $14,006
30-Nov-96 $14,344 $14,733 $14,583
31-Dec-96 $14,508 $15,007 $14,965
31-Jan-97 $14,895 $15,361 $15,265
28-Feb-97 $14,376 $14,986 $14,895
31-Mar-97 $13,654 $14,257 $14,192
30-Apr-97 $13,756 $14,299 $14,232
31-May-97 $15,383 $16,050 $15,815
30-Jun-97 $16,125 $16,880 $16,493
31-Jul-97 $17,213 $17,842 $17,260
31-Aug-97 $17,538 $18,243 $17,655
30-Sep-97 $18,850 $19,675 $18,948
31-Oct-97 $18,026 $18,816 $18,116
30-Nov-97 $17,843 $18,645 $17,998
31-Dec-97 $18,236 $19,035 $18,313
31-Jan-98 $17,787 $18,736 $18,024
28-Feb-98 $19,195 $20,285 $19,356
31-Mar-98 $20,042 $21,199 $20,153
30-Apr-98 $20,144 $21,344 $20,264
31-May-98 $18,930 $20,090 $19,172
30-Jun-98 $18,960 $20,146 $19,212
31-Jul-98 $17,471 $18,597 $17,656
31-Aug-98 $14,062 $15,011 $14,227
30-Sep-98 $14,991 $15,953 $15,341
31-Oct-98 $15,705 $16,709 $15,967
30-Nov-98 $16,532 $17,576 $16,804
31-Dec-98 $17,584 $18,719 $17,844
31-Jan-99 $17,617 $18,800 $18,081
28-Feb-99 $16,145 $17,229 $16,617
31-Mar-99 $16,372 $17,559 $16,876
30-Apr-99 $17,660 $19,165 $18,388
31-May-99 $17,974 $19,500 $18,656
30-Jun-99 $18,969 $20,778 $19,500
31-Jul-99 $18,872 $20,615 $18,965
31-Aug-99 $18,309 $20,033 $18,264
30-Sep-99 $18,493 $20,204 $18,267
31-Oct-99 $18,839 $20,537 $18,342
30-Nov-99 $20,008 $21,820 $19,437
31-Dec-99 $21,839 $23,899 $21,637
31-Jan-00 $21,015 $23,005 $21,289
29-Feb-00 $23,801 $26,015 $24,804
31-Mar-00 $23,075 $25,333 $23,169
30-Apr-00 $21,936 $24,109 $21,774
31-May-00 $20,904 $22,940 $20,505
30-Jun-00 $22,674 $24,856 $22,293
31-Jul-00 $21,774 $23,890 $21,575
31-Aug-00 $23,964 $26,291 $23,221
30-Sep-00 $23,238 $25,490 $22,539
31-Oct-00 $22,836 $25,023 $21,533
30-Nov-00 $20,646 $22,641 $19,322
31-Dec-00 $22,654 $24,835 $20,982
31-Jan-01 $23,024 $25,169 $22,075
28-Feb-01 $21,285 $23,270 $20,627
31-Mar-01 $20,322 $22,219 $19,618
30-Apr-01 $21,951 $24,019 $21,152
31-May-01 $22,543 $24,663 $21,673
30-Jun-01 $23,543 $25,768 $22,420
31-Jul-01 $22,481 $24,623 $21,207
31-Aug-01 $21,852 $23,925 $20,522
30-Sep-01 $18,767 $20,554 $17,760
31-Oct-01 $19,718 $21,583 $18,799
30-Nov-01 $21,161 $23,175 $20,254
31-Dec-01 $22,451 $24,571 $21,504
31-Jan-02 $21,643 $23,657 $21,280
28-Feb-02 $20,873 $22,815 $20,697
31-Mar-02 $22,682 $24,807 $22,361
30-Apr-02 $22,566 $24,674 $22,565
31-May-02 $21,527 $23,545 $21,563
30-Jun-02 $20,398 $22,307 $20,493
31-Jul-02 $17,614 $19,254 $17,399
31-Aug-02 $17,704 $19,366 $17,355
30-Sep-02 $16,562 $18,114 $16,109
31-Oct-02 $17,024 $18,619 $16,626
30-Nov-02 $18,333 $20,051 $18,109
31-Dec-02 $17,407 $19,061 $17,101
31-Jan-03 $16,591 $18,118 $16,627
28-Feb-03 $16,033 $17,527 $16,125
31-Mar-03 $16,228 $17,746 $16,333
30-Apr-03 $17,913 $19,604 $17,881
30-May-03 $19,844 $21,710 $19,800
29-Jun-03 $20,194 $22,102 $20,158
30-Jul-03 $21,244 $23,268 $21,420
30-Aug-03 $22,281 $24,407 $22,401
29-Sep-03 $21,814 $23,904 $21,987
30-Oct-03 $23,616 $25,881 $23,834
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.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/03 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. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
14 Schwab Equity Index Funds
SCHWAB SMALL-CAP INDEX FUND(R)
SELECT SHARES(R) PERFORMANCE as of 10/31/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Select Shares with its
benchmark and Morningstar category. The table below the chart shows two types of
after-tax returns.
[BAR CHART]
Benchmark: Fund Category:
Fund: SCHWAB MORNINGSTAR
SELECT SMALL-CAP SMALL-CAP
SHARES INDEX(R) BLEND
1 YEAR 39.02% 39.00% 37.84%
5 YEARS 8.64% 9.14% 11.38%
SINCE INCEPTION: 5/19/97 7.71% 8.41% 9.26%
1 YEAR 5 YEARS SINCE INCEPTION
------ ------- ---------------
MORNINGSTAR MORNINGSTAR MORNINGSTAR
SELECT SMALL-CAP SELECT SMALL-CAP SELECT SMALL-CAP
TOTAL RETURNS AFTER TAX SHARES BLEND SHARES BLEND SHARES BLEND
- --------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 38.40% 35.45% 7.25% 9.77% 6.62% n/a
- --------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 25.22% 22.22% 6.62% 8.74% 5.99% n/a
- --------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A HYPOTHETICAL $50,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $50,000
investment (the minimum investment for this share class) in the fund's Select
Shares, compared with a similar investment in its benchmark and an additional
index.
$80,775 SELECT SHARES
$84,240 SCHWAB SMALL-CAP INDEX
$78,307 RUSSELL 2000 INDEX
[LINE GRAPH]
Schwab Russell
Select Small-Cap 2000
Shares Index Index
19-May-97 $50,000 $50,000 $50,000
31-May-97 $52,170 $52,242 $51,960
30-Jun-97 $54,690 $54,942 $54,189
31-Jul-97 $58,415 $58,075 $56,709
31-Aug-97 $59,485 $59,380 $58,008
30-Sep-97 $63,965 $64,039 $62,254
31-Oct-97 $61,205 $61,244 $59,521
30-Nov-97 $60,550 $60,687 $59,134
31-Dec-97 $61,920 $61,958 $60,169
31-Jan-98 $60,400 $60,983 $59,218
28-Feb-98 $65,175 $66,026 $63,594
31-Mar-98 $68,050 $69,002 $66,214
30-Apr-98 $68,430 $69,473 $66,578
31-May-98 $64,310 $65,391 $62,990
30-Jun-98 $64,415 $65,575 $63,122
31-Jul-98 $59,360 $60,531 $58,009
31-Aug-98 $47,790 $48,861 $46,744
30-Sep-98 $50,945 $51,924 $50,404
31-Oct-98 $53,365 $54,386 $52,460
30-Nov-98 $56,170 $57,207 $55,209
31-Dec-98 $59,775 $60,929 $58,627
31-Jan-99 $59,925 $61,193 $59,407
28-Feb-99 $54,925 $56,079 $54,595
31-Mar-99 $55,660 $57,152 $55,446
30-Apr-99 $60,070 $62,380 $60,414
31-May-99 $61,140 $63,470 $61,296
30-Jun-99 $64,555 $67,629 $64,067
31-Jul-99 $64,225 $67,099 $62,311
31-Aug-99 $62,315 $65,206 $60,006
30-Sep-99 $62,940 $65,762 $60,018
31-Oct-99 $64,115 $66,846 $60,264
30-Nov-99 $68,125 $71,021 $63,862
31-Dec-99 $74,390 $77,788 $71,091
31-Jan-00 $71,585 $74,879 $69,946
29-Feb-00 $81,065 $84,677 $81,495
31-Mar-00 $78,595 $82,458 $76,124
30-Apr-00 $74,755 $78,471 $71,541
31-May-00 $71,250 $74,666 $67,371
30-Jun-00 $77,265 $80,904 $73,245
31-Jul-00 $74,205 $77,761 $70,887
31-Aug-00 $81,655 $85,575 $76,295
30-Sep-00 $79,185 $82,968 $74,052
31-Oct-00 $77,820 $81,448 $70,749
30-Nov-00 $70,405 $73,694 $63,484
31-Dec-00 $77,230 $80,834 $68,937
31-Jan-01 $78,490 $81,923 $72,528
28-Feb-01 $72,565 $75,742 $67,770
31-Mar-01 $69,285 $72,319 $64,457
30-Apr-01 $74,875 $78,181 $69,497
31-May-01 $76,850 $80,277 $71,207
30-Jun-01 $80,300 $83,871 $73,663
31-Jul-01 $76,685 $80,145 $69,678
31-Aug-01 $74,540 $77,873 $67,427
30-Sep-01 $64,030 $66,902 $58,352
31-Oct-01 $67,265 $70,251 $61,765
30-Nov-01 $72,230 $75,432 $66,546
31-Dec-01 $76,610 $79,977 $70,652
31-Jan-02 $73,855 $77,001 $69,917
28-Feb-02 $71,230 $74,261 $68,001
31-Mar-02 $77,400 $80,744 $73,469
30-Apr-02 $77,005 $80,311 $74,137
31-May-02 $73,505 $76,636 $70,846
30-Jun-02 $69,655 $72,606 $67,332
31-Jul-02 $60,160 $62,669 $57,165
31-Aug-02 $60,465 $63,034 $57,022
30-Sep-02 $56,530 $58,961 $52,927
31-Oct-02 $58,105 $60,603 $54,626
30-Nov-02 $62,610 $65,263 $59,499
31-Dec-02 $59,485 $62,041 $56,185
31-Jan-03 $56,655 $58,974 $54,629
28-Feb-03 $54,795 $57,049 $52,979
31-Mar-03 $55,460 $57,761 $53,662
30-Apr-03 $61,255 $63,810 $58,749
31-May-03 $67,805 $70,666 $65,053
30-Jun-03 $69,000 $71,940 $66,231
31-Jul-03 $72,630 $75,736 $70,377
31-Aug-03 $76,170 $79,443 $73,600
30-Sep-03 $74,625 $77,805 $72,238
31-Oct-03 $80,775 $84,240 $78,307
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.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/03 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. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
Schwab Equity Index Funds 15
SCHWAB SMALL-CAP INDEX FUND(R)
FUND FACTS as of 10/31/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / / / / /
Medium / / / / / /
Small / / /X/ / /
STATISTICS
NUMBER OF HOLDINGS 977
- ----------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $952
- ----------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 46.8
- ----------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.1
- ----------------------------------------------------------
PORTFOLIO TURNOVER RATE 34%
- ----------------------------------------------------------
TOP HOLDINGS 2
% OF
SECURITY NET ASSETS
- --------------------------------------------------------
(1) AMKOR TECHNOLOGY, INC. 0.4%
- --------------------------------------------------------
(2) COGNIZANT TECHNOLOGY SOLUTIONS CORP. 0.4%
- --------------------------------------------------------
(3) SILICON LABORATORIES, INC. 0.4%
- --------------------------------------------------------
(4) IMCLONE SYSTEMS, INC. 0.4%
- --------------------------------------------------------
(5) RED HAT, INC. 0.4%
- --------------------------------------------------------
(6) CYPRESS SEMICONDUCTOR CORP. 0.4%
- --------------------------------------------------------
(7) PHARMACEUTICAL RESOURCES, INC. 0.3%
- --------------------------------------------------------
(8) HOVNANIAN ENTERPRISES, INC., Class A 0.3%
- --------------------------------------------------------
(9) AMERICAN TOWER CORP., Class A 0.3%
- --------------------------------------------------------
(10) RAMBUS, INC. 0.3%
- --------------------------------------------------------
TOTAL 3.6%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
20.8% CONSUMER NON-DURABLES
20.5% FINANCE
19.7% TECHNOLOGY
19.5% MATERIALS & SERVICES
6.1% CAPITAL GOODS
4.2% ENERGY
3.6% UTILITIES
3.1% CONSUMER DURABLES
2.5% TRANSPORTATION
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/03, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
16 Schwab Equity Index Funds
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
INVESTOR SHARES PERFORMANCE as of 10/31/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Investor Shares with
its benchmark and Morningstar category. The table below the chart shows two
types of after-tax returns.
[BAR CHART]
Fund Category:
Fund: Benchmark: MORNINGSTAR
INVESTOR WILSHIRE 5000 LARGE-CAP
SHARES TOTAL MARKET BLEND
1 YEAR 23.24% 24.43% 19.40%
3 YEARS -7.19% -7.07% -8.47%
SINCE INCEPTION: 6/1/99 -2.28% -2.20% -2.98%
1 YEAR 3 YEARS SINCE INCEPTION
------ ------- ---------------
MORNINGSTAR MORNINGSTAR MORNINGSTAR
INVESTOR LARGE-CAP INVESTOR LARGE-CAP INVESTOR LARGE-CAP
TOTAL RETURNS AFTER TAX SHARES BLEND SHARES BLEND SHARES BLEND
- --------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 22.69% 17.07% -7.53% -9.59% -2.56% n/a
- --------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 15.00% 10.62% -5.82% -7.09% -1.94% n/a
- --------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the fund's Investor Shares, compared with a similar investment in
its benchmark.
$9,030 INVESTOR SHARES
$9,064 WILSHIRE 5000 TOTAL MARKET INDEX
[LINE GRAPH]
Wilshire
5000
Total
Investor Market
Shares Index
01-Jun-99 $10,000 $10,000
30-Jun-99 $10,515 $10,518
31-Jul-99 $10,165 $10,180
31-Aug-99 $10,070 $10,086
30-Sep-99 $9,820 $9,822
31-Oct-99 $10,435 $10,447
30-Nov-99 $10,790 $10,797
31-Dec-99 $11,605 $11,617
31-Jan-00 $11,108 $11,135
29-Feb-00 $11,374 $11,384
31-Mar-00 $12,022 $12,060
30-Apr-00 $11,399 $11,432
31-May-00 $11,012 $11,033
30-Jun-00 $11,484 $11,519
31-Jul-00 $11,258 $11,284
31-Aug-00 $12,077 $12,104
30-Sep-00 $11,520 $11,538
31-Oct-00 $11,294 $11,294
30-Nov-00 $10,179 $10,170
31-Dec-00 $10,371 $10,351
31-Jan-01 $10,746 $10,748
28-Feb-01 $9,724 $9,729
31-Mar-01 $9,066 $9,074
30-Apr-01 $9,815 $9,821
31-May-01 $9,911 $9,919
30-Jun-01 $9,754 $9,752
31-Jul-01 $9,587 $9,591
31-Aug-01 $9,010 $9,011
30-Sep-01 $8,206 $8,202
31-Oct-01 $8,408 $8,410
30-Nov-01 $9,046 $9,054
31-Dec-01 $9,211 $9,217
31-Jan-02 $9,093 $9,102
28-Feb-02 $8,915 $8,915
31-Mar-02 $9,308 $9,305
30-Apr-02 $8,874 $8,851
31-May-02 $8,766 $8,747
30-Jun-02 $8,169 $8,132
31-Jul-02 $7,516 $7,476
31-Aug-02 $7,567 $7,520
30-Sep-02 $6,816 $6,765
31-Oct-02 $7,327 $7,283
30-Nov-02 $7,740 $7,722
31-Dec-02 $7,320 $7,294
31-Jan-03 $7,139 $7,111
28-Feb-03 $7,010 $6,990
31-Mar-03 $7,098 $7,069
30-Apr-03 $7,656 $7,649
31-May-03 $8,105 $8,116
30-Jun-03 $8,229 $8,237
31-Jul-03 $8,415 $8,435
31-Aug-03 $8,611 $8,637
30-Sep-03 $8,513 $8,542
31-Oct-03 $9,030 $9,064
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.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/03 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. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
Schwab Equity Index Funds 17
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
SELECT SHARES(R) PERFORMANCE as of 10/31/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Select Shares with its
benchmark and Morningstar category. The table below the chart shows two types of
after-tax returns.
[BAR CHART]
Fund Category:
Fund: Benchmark: MORNINGSTAR
SELECT WILSHIRE 5000 LARGE-CAP
SHARES TOTAL MARKET BLEND
1 YEAR 23.50% 24.43% 19.40%
3 YEARS -7.04% -7.07% -8.47%
SINCE INCEPTION: 6/1/99 -2.14% -2.20% -2.98%
1 YEAR 3 YEARS SINCE INCEPTION
------ ------- ---------------
MORNINGSTAR MORNINGSTAR MORNINGSTAR
SELECT LARGE-CAP SELECT LARGE-CAP SELECT LARGE-CAP
TOTAL RETURNS AFTER TAX SHARES BLEND SHARES BLEND SHARES BLEND
- --------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 22.89% 17.07% -7.43% -9.59% -2.45% n/a
- --------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 15.16% 10.62% -5.73% -7.09% -1.85% n/a
- --------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A HYPOTHETICAL $50,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $50,000
investment (the minimum investment for this share class) in the fund's Select
Shares, compared with a similar investment in its benchmark.
$45,435 SELECT SHARES
$45,318 WILSHIRE 5000 TOTAL MARKET INDEX
[LINE GRAPH]
Wilshire 5000
Select Total Market
Shares Index
01-Jun-99 $50,000 $50,000
30-Jun-99 $52,600 $52,590
31-Jul-99 $50,850 $50,902
31-Aug-99 $50,350 $50,428
30-Sep-99 $49,125 $49,112
31-Oct-99 $52,225 $52,236
30-Nov-99 $53,975 $53,986
31-Dec-99 $58,065 $58,083
31-Jan-00 $55,605 $55,673
29-Feb-00 $56,935 $56,920
31-Mar-00 $60,150 $60,301
30-Apr-00 $57,060 $57,159
31-May-00 $55,130 $55,164
30-Jun-00 $57,515 $57,597
31-Jul-00 $56,385 $56,422
31-Aug-00 $60,480 $60,518
30-Sep-00 $57,715 $57,692
31-Oct-00 $56,560 $56,469
30-Nov-00 $51,010 $50,850
31-Dec-00 $51,975 $51,755
31-Jan-01 $53,850 $53,738
28-Feb-01 $48,730 $48,643
31-Mar-01 $45,435 $45,370
30-Apr-01 $49,185 $49,104
31-May-01 $49,695 $49,595
30-Jun-01 $48,910 $48,761
31-Jul-01 $48,070 $47,957
31-Aug-01 $45,185 $45,055
30-Sep-01 $41,155 $41,009
31-Oct-01 $42,190 $42,051
30-Nov-01 $45,385 $45,268
31-Dec-01 $46,210 $46,083
31-Jan-02 $45,645 $45,511
28-Feb-02 $44,725 $44,574
31-Mar-02 $46,720 $46,526
30-Apr-02 $44,520 $44,256
31-May-02 $44,010 $43,734
30-Jun-02 $41,015 $40,659
31-Jul-02 $37,735 $37,378
31-Aug-02 $37,990 $37,598
30-Sep-02 $34,230 $33,827
31-Oct-02 $36,790 $36,415
30-Nov-02 $38,860 $38,611
31-Dec-02 $36,775 $36,472
31-Jan-03 $35,865 $35,553
28-Feb-03 $35,245 $34,952
31-Mar-03 $35,660 $35,347
30-Apr-03 $38,485 $38,245
31-May-03 $40,740 $40,582
30-Jun-03 $41,365 $41,183
31-Jul-03 $42,325 $42,175
31-Aug-03 $43,310 $43,187
30-Sep-03 $42,815 $42,708
31-Oct-03 $45,435 $45,318
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.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/03 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. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
18 Schwab Equity Index Funds
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
FUND FACTS as of 10/31/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 3,090
- ----------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $69,285
- ----------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 22.8
- ----------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.9
- ----------------------------------------------------------
PORTFOLIO TURNOVER RATE 3%
- ----------------------------------------------------------
TOP HOLDINGS 2
% OF
SECURITY NET ASSETS
- --------------------------------------------------------
(1) GENERAL ELECTRIC CO. 2.3%
- --------------------------------------------------------
(2) MICROSOFT CORP. 2.3%
- --------------------------------------------------------
(3) WAL-MART STORES, INC. 2.1%
- --------------------------------------------------------
(4) CITIGROUP, INC. 2.0%
- --------------------------------------------------------
(5) EXXON MOBIL CORP. 2.0%
- --------------------------------------------------------
(6) PFIZER, INC. 2.0%
- --------------------------------------------------------
(7) INTEL CORP. 1.7%
- --------------------------------------------------------
(8) AMERICAN INTERNATIONAL GROUP, INC. 1.3%
- --------------------------------------------------------
(9) INTERNATIONAL BUSINESS MACHINES CORP. 1.3%
- --------------------------------------------------------
(10) JOHNSON & JOHNSON 1.2%
- --------------------------------------------------------
TOTAL 18.2%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
29.4% CONSUMER NON-DURABLES
22.5% FINANCE
19.2% TECHNOLOGY
8.9% MATERIALS & SERVICES
5.9% UTILITIES
5.4% ENERGY
4.9% CAPITAL GOODS
2.1% CONSUMER DURABLES
1.7% TRANSPORTATION
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/03, which may have changed since then, and is not a
precise indication of risk or performance -- past, present, or future.
2 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
Schwab Equity Index Funds 19
SCHWAB INTERNATIONAL INDEX FUND(R)
INVESTOR SHARES PERFORMANCE as of 10/31/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Investor Shares with
its benchmark and Morningstar category. The table below the chart shows two
types of after-tax returns.
[BAR CHART]
Fund Category:
Benchmark: MORNINGSTAR
Fund: SCHWAB FOREIGN
INVESTOR INTERNATIONAL LARGE-CAP
SHARES INDEX(R) BLEND
1 YEAR 24.24% 25.55% 22.49%
5 YEARS -0.89% -0.22% 0.15%
10 YEARS 3.50% 4.08% 3.83%
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
MORNINGSTAR MORNINGSTAR MORNINGSTAR
FOREIGN FOREIGN FOREIGN
INVESTOR LARGE-CAP INVESTOR LARGE-CAP INVESTOR LARGE-CAP
TOTAL RETURNS AFTER TAX SHARES BLEND SHARES BLEND SHARES BLEND
- --------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 23.25% 19.99% -1.39% -1.15% 3.03% 2.31%
- --------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 15.55% 12.45% -0.95% -0.21% 2.63% 2.66%
- --------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the fund's Investor Shares, compared with a similar investment in
its benchmark and an additional index.
$14,110 INVESTOR SHARES
$14,917 SCHWAB INTERNATIONAL INDEX
$13,746 MSCI-EAFE INDEX
[LINE GRAPH]
Schwab
Investor International MSCI-EAFE
Shares Index Index
31-Oct-93 $10,000 $10,000 $10,000
30-Nov-93 $9,281 $9,299 $9,126
31-Dec-93 $9,946 $9,970 $9,785
31-Jan-94 $10,610 $10,646 $10,612
28-Feb-94 $10,402 $10,448 $10,582
31-Mar-94 $10,006 $10,005 $10,126
30-Apr-94 $10,303 $10,371 $10,555
31-May-94 $10,253 $10,277 $10,495
30-Jun-94 $10,333 $10,336 $10,643
31-Jul-94 $10,491 $10,517 $10,745
31-Aug-94 $10,779 $10,819 $11,000
30-Sep-94 $10,403 $10,447 $10,653
31-Oct-94 $10,788 $10,846 $11,008
30-Nov-94 $10,274 $10,306 $10,479
31-Dec-94 $10,329 $10,391 $10,545
31-Jan-95 $9,959 $10,086 $10,140
28-Feb-95 $10,039 $10,114 $10,110
31-Mar-95 $10,600 $10,785 $10,741
30-Apr-95 $10,981 $11,160 $11,145
31-May-95 $11,011 $11,118 $11,013
30-Jun-95 $10,901 $10,985 $10,820
31-Jul-95 $11,452 $11,632 $11,494
31-Aug-95 $11,071 $11,197 $11,056
30-Sep-95 $11,300 $11,470 $11,272
31-Oct-95 $11,151 $11,273 $10,968
30-Nov-95 $11,391 $11,589 $11,273
31-Dec-95 $11,798 $12,037 $11,728
31-Jan-96 $11,829 $12,076 $11,776
29-Feb-96 $11,848 $12,099 $11,816
31-Mar-96 $12,051 $12,324 $12,066
30-Apr-96 $12,345 $12,615 $12,417
31-May-96 $12,213 $12,467 $12,189
30-Jun-96 $12,304 $12,551 $12,257
31-Jul-96 $11,960 $12,226 $11,899
31-Aug-96 $12,072 $12,333 $11,925
30-Sep-96 $12,406 $12,696 $12,243
31-Oct-96 $12,385 $12,653 $12,118
30-Nov-96 $12,942 $13,240 $12,600
31-Dec-96 $12,874 $13,123 $12,437
31-Jan-97 $12,453 $12,687 $12,002
28-Feb-97 $12,637 $12,899 $12,199
31-Mar-97 $12,741 $12,986 $12,243
30-Apr-97 $12,833 $13,126 $12,308
31-May-97 $13,777 $14,089 $13,109
30-Jun-97 $14,548 $14,912 $13,831
31-Jul-97 $14,989 $15,315 $14,055
31-Aug-97 $13,900 $14,210 $13,005
30-Sep-97 $14,855 $15,102 $13,734
31-Oct-97 $13,664 $13,879 $12,678
30-Nov-97 $13,654 $13,825 $12,548
31-Dec-97 $13,815 $14,020 $12,657
31-Jan-98 $14,323 $14,587 $13,236
28-Feb-98 $15,155 $15,469 $14,086
31-Mar-98 $15,549 $15,875 $14,520
30-Apr-98 $15,653 $15,982 $14,634
31-May-98 $15,653 $15,943 $14,563
30-Jun-98 $15,788 $16,047 $14,673
31-Jul-98 $15,830 $16,150 $14,821
31-Aug-98 $13,877 $14,115 $12,985
30-Sep-98 $13,431 $13,653 $12,586
31-Oct-98 $14,760 $15,084 $13,898
30-Nov-98 $15,518 $15,932 $14,609
31-Dec-98 $16,004 $16,455 $15,187
31-Jan-99 $15,951 $16,367 $15,141
28-Feb-99 $15,595 $16,044 $14,781
31-Mar-99 $16,297 $16,781 $15,397
30-Apr-99 $16,958 $17,503 $16,021
31-May-99 $16,129 $16,620 $15,195
30-Jun-99 $16,748 $17,297 $15,788
31-Jul-99 $17,356 $17,941 $16,257
31-Aug-99 $17,512 $18,108 $16,317
30-Sep-99 $17,837 $18,418 $16,482
31-Oct-99 $18,791 $19,399 $17,100
30-Nov-99 $19,650 $20,242 $17,693
31-Dec-99 $21,383 $22,020 $19,282
31-Jan-00 $19,703 $20,421 $18,058
29-Feb-00 $19,978 $20,751 $18,544
31-Mar-00 $21,140 $21,929 $19,263
30-Apr-00 $19,999 $20,743 $18,250
31-May-00 $19,429 $20,135 $17,805
30-Jun-00 $20,158 $20,886 $18,501
31-Jul-00 $19,376 $20,076 $17,726
31-Aug-00 $19,725 $20,429 $17,879
30-Sep-00 $18,700 $19,374 $17,009
31-Oct-00 $18,098 $18,770 $16,607
30-Nov-00 $17,274 $17,925 $15,984
31-Dec-00 $17,622 $18,303 $16,552
31-Jan-01 $17,771 $18,498 $16,557
28-Feb-01 $16,248 $16,892 $15,318
31-Mar-01 $15,155 $15,723 $14,278
30-Apr-01 $16,195 $16,806 $15,259
31-May-01 $15,616 $16,178 $14,695
30-Jun-01 $14,951 $15,487 $14,091
31-Jul-01 $14,575 $15,113 $13,847
31-Aug-01 $14,157 $14,690 $13,526
30-Sep-01 $12,881 $13,360 $12,156
31-Oct-01 $13,106 $13,616 $12,467
30-Nov-01 $13,513 $14,042 $12,927
31-Dec-01 $13,614 $14,137 $13,003
31-Jan-02 $12,909 $13,401 $12,313
28-Feb-02 $13,007 $13,516 $12,399
31-Mar-02 $13,722 $14,228 $13,070
30-Apr-02 $13,766 $14,346 $13,156
31-May-02 $13,951 $14,549 $13,323
30-Jun-02 $13,386 $13,960 $12,793
31-Jul-02 $12,074 $12,598 $11,530
31-Aug-02 $12,041 $12,571 $11,503
30-Sep-02 $10,739 $11,213 $10,268
31-Oct-02 $11,358 $11,881 $10,819
30-Nov-02 $11,834 $12,406 $11,311
31-Dec-02 $11,486 $12,009 $10,931
31-Jan-03 $10,987 $11,505 $10,475
28-Feb-03 $10,766 $11,269 $10,235
31-Mar-03 $10,544 $11,047 $10,034
30-Apr-03 $11,541 $12,132 $11,018
31-May-03 $12,238 $12,859 $11,685
30-Jun-03 $12,527 $13,165 $11,968
31-Jul-03 $12,781 $13,464 $12,258
31-Aug-03 $12,981 $13,693 $12,553
30-Sep-03 $13,335 $14,075 $12,940
31-Oct-03 $14,110 $14,917 $13,746
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.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/03 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. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
20 Schwab Equity Index Funds
SCHWAB INTERNATIONAL INDEX FUND(R)
SELECT SHARES(R) PERFORMANCE as of 10/31/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund's Select Shares with its
benchmark and Morningstar category. The table below the chart shows two types of
after-tax returns.
[BAR CHART]
Fund Category:
Benchmark: MORNINGSTAR
Fund: SCHWAB FOREIGN
SELECT INTERNATIONAL LARGE-CAP
SHARES INDEX(R) BLEND
1 YEAR 24.50% 25.55% 22.49%
5 YEARS -0.78% -0.22% 0.15%
SINCE INCEPTION: 5/19/97 0.30% 0.66% 0.44%
1 YEAR 5 YEARS SINCE INCEPTION
------ ------- ---------------
MORNINGSTAR MORNINGSTAR MORNINGSTAR
FOREIGN FOREIGN FOREIGN
SELECT LARGE-CAP SELECT LARGE-CAP SELECT LARGE-CAP
TOTAL RETURNS AFTER TAX SHARES BLEND SHARES BLEND SHARES BLEND
- --------------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 23.45% 19.99% -1.32% -1.15% -0.20% n/a
- --------------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 15.71% 12.45% -0.88% -0.21% 0.00% n/a
- --------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A HYPOTHETICAL $50,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $50,000
investment (the minimum investment for this share class) in the fund's Select
Shares, compared with a similar investment in its benchmark and an additional
index.
$50,980 SELECT SHARES
$52,179 SCHWAB INTERNATIONAL INDEX
$51,640 MSCI-EAFE INDEX
[LINE GRAPH]
Schwab
Select International MSCI-EAFE
Shares Index Index
19-May-97 $50,000 $50,000 $50,000
31-May-97 $49,375 $49,283 $49,248
30-Jun-97 $52,170 $52,161 $51,961
31-Jul-97 $53,755 $53,571 $52,803
31-Aug-97 $49,815 $49,706 $48,859
30-Sep-97 $53,240 $52,827 $51,595
31-Oct-97 $49,005 $48,550 $47,627
30-Nov-97 $48,970 $48,360 $47,141
31-Dec-97 $49,580 $49,042 $47,551
31-Jan-98 $51,405 $51,027 $49,725
28-Feb-98 $54,385 $54,111 $52,917
31-Mar-98 $55,800 $55,529 $54,547
30-Apr-98 $56,175 $55,905 $54,978
31-May-98 $56,175 $55,770 $54,708
30-Jun-98 $56,655 $56,133 $55,124
31-Jul-98 $56,845 $56,493 $55,681
31-Aug-98 $49,840 $49,376 $48,782
30-Sep-98 $48,240 $47,757 $47,284
31-Oct-98 $53,005 $52,763 $52,211
30-Nov-98 $55,725 $55,732 $54,885
31-Dec-98 $57,490 $57,561 $57,053
31-Jan-99 $57,305 $57,252 $56,881
28-Feb-99 $56,025 $56,122 $55,528
31-Mar-99 $58,585 $58,699 $57,843
30-Apr-99 $60,955 $61,225 $60,186
31-May-99 $57,980 $58,137 $57,086
30-Jun-99 $60,200 $60,507 $59,313
31-Jul-99 $62,385 $62,757 $61,074
31-Aug-99 $62,950 $63,342 $61,300
30-Sep-99 $64,115 $64,425 $61,919
31-Oct-99 $67,575 $67,857 $64,241
30-Nov-99 $70,660 $70,806 $66,470
31-Dec-99 $76,920 $77,025 $72,439
31-Jan-00 $70,880 $71,433 $67,839
29-Feb-00 $71,870 $72,588 $69,664
31-Mar-00 $76,050 $76,708 $72,367
30-Apr-00 $71,905 $72,561 $68,561
31-May-00 $69,895 $70,431 $66,888
30-Jun-00 $72,515 $73,058 $69,503
31-Jul-00 $69,740 $70,228 $66,591
31-Aug-00 $70,995 $71,462 $67,169
30-Sep-00 $67,310 $67,769 $63,898
31-Oct-00 $65,110 $65,658 $62,390
30-Nov-00 $62,185 $62,703 $60,050
31-Dec-00 $63,455 $64,024 $62,182
31-Jan-01 $63,955 $64,706 $62,201
28-Feb-01 $58,470 $59,090 $57,548
31-Mar-01 $54,570 $55,001 $53,641
30-Apr-01 $58,315 $58,788 $57,326
31-May-01 $56,230 $56,592 $55,205
30-Jun-01 $53,835 $54,175 $52,936
31-Jul-01 $52,485 $52,866 $52,020
31-Aug-01 $51,015 $51,386 $50,813
30-Sep-01 $46,385 $46,733 $45,666
31-Oct-01 $47,235 $47,628 $46,835
30-Nov-01 $48,700 $49,119 $48,563
31-Dec-01 $49,040 $49,452 $48,850
31-Jan-02 $46,540 $46,876 $46,256
28-Feb-02 $46,890 $47,279 $46,579
31-Mar-02 $49,430 $49,771 $49,099
30-Apr-02 $49,590 $50,183 $49,423
31-May-02 $50,255 $50,891 $50,051
30-Jun-02 $48,220 $48,833 $48,059
31-Jul-02 $43,525 $44,067 $43,316
31-Aug-02 $43,410 $43,973 $43,216
30-Sep-02 $38,715 $39,225 $38,575
31-Oct-02 $40,945 $41,560 $40,646
30-Nov-02 $42,665 $43,395 $42,491
31-Dec-02 $41,385 $42,009 $41,064
31-Jan-03 $39,625 $40,243 $39,351
28-Feb-03 $38,825 $39,419 $38,450
31-Mar-03 $38,025 $38,642 $37,697
30-Apr-03 $41,625 $42,438 $41,391
31-May-03 $44,140 $44,981 $43,899
30-Jun-03 $45,180 $46,051 $44,961
31-Jul-03 $46,140 $47,098 $46,050
31-Aug-03 $46,860 $47,898 $47,159
30-Sep-03 $48,140 $49,233 $48,612
31-Oct-03 $50,980 $52,179 $51,640
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.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/03 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. Some funds
in this category may not use tax-efficient strategies.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
Schwab Equity Index Funds 21
SCHWAB INTERNATIONAL INDEX FUND(R)
FUND FACTS as of 10/31/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
TOP HOLDINGS 2
% OF
SECURITY NET ASSETS
- --------------------------------------------------------
(1) HSBC HOLDINGS PLC 2.9%
- --------------------------------------------------------
(2) BP PLC 2.7%
- --------------------------------------------------------
(3) VODAFONE GROUP PLC 2.6%
- --------------------------------------------------------
(4) GLAXOSMITHKLINE PLC 2.3%
- --------------------------------------------------------
(5) TOTAL FINA ELF SA 1.8%
- --------------------------------------------------------
(6) ROYAL DUTCH PETROLEUM CO. 1.7%
- --------------------------------------------------------
(7) NOVARTIS AG 1.6%
- --------------------------------------------------------
(8) NESTLE SA 1.6%
- --------------------------------------------------------
(9) ASTRAZENECA PLC 1.5%
- --------------------------------------------------------
(10) TOYOTA MOTOR CORP. 1.4%
- --------------------------------------------------------
TOTAL 20.1%
STATISTICS
NUMBER OF HOLDINGS 355
- ----------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $46,938
- ----------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 28.5
- ----------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.0
- ----------------------------------------------------------
PORTFOLIO TURNOVER RATE 7%
- ----------------------------------------------------------
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
27.6% FINANCE
23.5% MATERIALS & SERVICES
18.9% CONSUMER NON-DURABLES
10.5% UTILITIES
7.2% TRANSPORTATION
4.7% ENERGY
2.7% TECHNOLOGY
2.5% CONSUMER DURABLES
2.4% CAPITAL GOODS
COUNTRY WEIGHTINGS % of Portfolio
This chart shows the fund's country composition as of the report date.
[PIE CHART]
27.9% UNITED KINGDOM
19.2% JAPAN
10.5% FRANCE
8.0% SWITZERLAND
7.0% GERMANY
5.8% CANADA
5.7% NETHERLANDS
4.3% AUSTRALIA
3.6% SPAIN
3.1% ITALY
4.9% OTHER
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/03, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
22 Schwab Equity Index Funds
SCHWAB S&P 500 FUND
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98-
INVESTOR SHARES 10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- ------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 13.79 16.45 22.15 21.17 17.05
-----------------------------------------------------
Income or loss from investment operations:
Net investment income 0.20 0.20 0.17 0.17 0.17
Net realized and unrealized gains or losses 2.57 (2.68) (5.70) 1.06 4.10
-----------------------------------------------------
Total income or loss from investment operations 2.77 (2.48) (5.53) 1.23 4.27
Less distributions:
Dividends from net investment income (0.20) (0.18) (0.17) (0.18) (0.15)
Distributions from net realized gains -- -- -- (0.07) --
-----------------------------------------------------
Total distributions (0.20) (0.18) (0.17) (0.25) (0.15)
-----------------------------------------------------
Net asset value at end of period 16.36 13.79 16.45 22.15 21.17
-----------------------------------------------------
Total return (%) 20.39 (15.32) (25.11) 5.81 25.20
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.36 0.35 0.35 0.35 1 0.35
Gross operating expenses 0.46 0.46 0.46 0.52 0.62
Net investment income 1.45 1.21 0.95 0.81 1.01
Portfolio turnover rate 3 8 4 9 3
Net assets, end of period ($ x 1,000,000) 3,510 2,760 3,070 3,617 3,183
1 The ratio of net operating expenses would have been 0.36% if certain
non-routine expenses (proxy fees) had been included.
See financial notes. 23
SCHWAB S&P 500 FUND
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98-
SELECT SHARES(R) 10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- ------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 13.83 16.50 22.21 21.23 17.09
-----------------------------------------------------
Income or loss from investment operations:
Net investment income 0.24 0.22 0.20 0.20 0.20
Net realized and unrealized gains or losses 2.57 (2.69) (5.71) 1.06 4.12
-----------------------------------------------------
Total income or loss from investment operations 2.81 (2.47) (5.51) 1.26 4.32
Less distributions:
Dividends from net investment income (0.23) (0.20) (0.20) (0.21) (0.18)
Distributions from net realized gains -- -- -- (0.07) --
-----------------------------------------------------
Total distributions (0.23) (0.20) (0.20) (0.28) (0.18)
-----------------------------------------------------
Net asset value at end of period 16.41 13.83 16.50 22.21 21.23
-----------------------------------------------------
Total return (%) 20.62 (15.20) (24.97) 5.94 25.42
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.19 0.19 0.19 0.19 1 0.19
Gross operating expenses 0.31 0.31 0.31 0.36 0.47
Net investment income 1.63 1.37 1.11 0.98 1.17
Portfolio turnover rate 3 8 4 9 3
Net assets, end of period ($ x 1,000,000) 3,692 3,029 3,563 4,357 3,750
1 The ratio of net operating expenses would have been 0.20% if certain
non-routine expenses (proxy fees) had been included.
24 See financial notes.
SCHWAB S&P 500 FUND
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98-
E.SHARES(R) 10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- ------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 13.79 16.46 22.17 21.21 17.08
-----------------------------------------------------
Income or loss from investment operations:
Net investment income 0.23 0.23 0.20 0.20 0.20
Net realized and unrealized gains or losses 2.56 (2.71) (5.71) 1.04 4.09
-----------------------------------------------------
Total income or loss from investment operations 2.79 (2.48) (5.51) 1.24 4.29
Less distributions:
Dividends from net investment income (0.21) (0.19) (0.20) (0.21) (0.16)
Distributions from net realized gains -- -- -- (0.07) --
-----------------------------------------------------
Total distributions (0.21) (0.19) (0.20) (0.28) (0.16)
-----------------------------------------------------
Net asset value at end of period 16.37 13.79 16.46 22.17 21.21
-----------------------------------------------------
Total return (%) 20.55 (15.32) (25.02) 5.84 25.28
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.28 0.28 0.28 0.28 1 0.28
Gross operating expenses 0.31 0.31 0.31 0.36 0.48
Net investment income 1.54 1.28 1.02 0.88 1.08
Portfolio turnover rate 3 8 4 9 3
Net assets, end of period ($ x 1,000,000) 246 220 304 441 435
1 The ratio of net operating expenses would have been 0.29% if certain
non-routine expenses (proxy fees) had been included.
See financial notes. 25
SCHWAB S&P 500 FUND
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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 7,270,728 7,431,392
0.1% SHORT-TERM
INVESTMENT 9,324 9,324
0.0% U.S. TREASURY
OBLIGATIONS 838 839
- --------------------------------------------------------------------------------
99.9% TOTAL INVESTMENTS 7,280,890 7,441,555
16.2% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 1,208,122 1,208,122
(16.1)% OTHER ASSETS AND
LIABILITIES, NET (1,202,293)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 7,447,384
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 99.8% of net assets
AEROSPACE / DEFENSE 1.6%
--------------------------------------------------------------------------
The Boeing Co. 644,022 24,788
Crane Co. 44,919 1,262
General Dynamics Corp. 149,982 12,553
Goodrich Corp. 88,739 2,451
Lockheed Martin Corp. 345,596 16,022
Northrop Grumman Corp. 142,372 12,728
Raytheon Co. 315,772 8,362
Rockwell Automation, Inc. 139,698 4,338
Rockwell Collins, Inc. 135,398 3,717
Textron, Inc. 104,629 5,199
United Technologies Corp. 358,313 30,345
-------------
121,765
AIR TRANSPORTATION 1.3%
--------------------------------------------------------------------------
Delta Air Lines, Inc. 94,113 1,225
FedEx Corp. 229,042 17,352
Sabre Holdings Corp. 106,153 2,326
Southwest Airlines Co. 597,218 11,586
United Parcel Service, Inc., Class B 860,669 62,416
-------------
94,905
ALCOHOLIC BEVERAGES 0.5%
--------------------------------------------------------------------------
Adolph Coors Co., Class B 26,531 1,487
Anheuser-Busch Cos., Inc. 633,134 31,188
Brown-Forman Corp., Class B 45,734 3,859
-------------
36,534
APPAREL 0.3%
--------------------------------------------------------------------------
Jones Apparel Group, Inc. 96,343 3,324
Liz Claiborne, Inc. 83,728 3,089
Nike, Inc., Class B 203,117 12,978
Reebok International Ltd. 43,859 1,708
VF Corp. 84,078 3,569
-------------
24,668
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.1%
--------------------------------------------------------------------------
Cooper Tire & Rubber Co. 52,866 1,039
Cummins, Inc. 33,451 1,586
Dana Corp. 110,209 1,794
Danaher Corp. 117,589 9,742
Delphi Corp. 420,900 3,746
Eaton Corp. 57,948 5,809
Ford Motor Co. 1,396,612 16,941
General Motors Corp. 428,528 18,285
Genuine Parts Co. 132,090 4,203
o Goodyear Tire & Rubber Co. 123,681 849
Harley-Davidson, Inc. 232,933 11,043
o Navistar International Corp. 50,800 2,054
Visteon Corp. 99,156 641
-------------
77,732
BANKS 7.7%
--------------------------------------------------------------------------
AmSouth Bancorp. 267,065 6,308
Bank of America Corp. 1,145,433 86,744
26 See financial notes.
SCHWAB S&P 500 FUND
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
The Bank of New York
Co., Inc. 590,514 18,418
Bank One Corp. 863,815 36,669
BB&T Corp. 410,959 15,892
Comerica, Inc. 133,259 6,860
Fifth Third Bancorp 437,905 25,381
First Tennessee National Corp. 96,900 4,395
FleetBoston Financial Corp. 803,127 32,438
Huntington Bancshares, Inc. 171,950 3,724
J.P. Morgan Chase & Co. 1,559,224 55,976
KeyCorp, Inc. 321,765 9,090
Marshall & Ilsley Corp. 173,996 6,233
Mellon Financial Corp. 327,413 9,780
National City Corp. 470,473 15,366
North Fork Bancorp., Inc. 119,300 4,650
Northern Trust Corp. 167,112 7,762
PNC Financial Services Group, Inc. 215,427 11,540
Regions Financial Corp. 170,436 6,264
SouthTrust Corp. 260,207 8,288
State Street Corp. 256,511 13,431
SunTrust Banks, Inc. 215,349 14,444
Synovus Financial Corp. 228,432 6,305
U.S. Bancorp 1,471,491 40,054
Union Planters Corp. 149,052 4,959
Wachovia Corp. 1,017,821 46,687
Wells Fargo & Co. 1,284,657 72,352
Zions Bancorp. 70,147 4,299
-------------
574,309
BUSINESS MACHINES & SOFTWARE 9.6%
--------------------------------------------------------------------------
Adobe Systems, Inc. 179,789 7,882
o Apple Computer, Inc. 278,276 6,370
Autodesk, Inc. 83,954 1,616
o BMC Software, Inc. 172,408 2,996
o Cisco Systems, Inc. 5,366,183 112,582
o Compuware Corp. 281,522 1,582
o Comverse Technology,
Inc. 142,615 2,573
o Dell, Inc. 1,964,932 70,973
o EMC Corp. 1,678,655 23,233
o Gateway, Inc. 234,837 1,184
Hewlett-Packard Co. 2,332,278 52,033
(9) International Business Machines
Corp. 1,325,093 118,569
o Lexmark International, Inc.,
Class A 100,530 7,400
=(2) Microsoft Corp. 8,270,090 216,263
o NCR Corp. 73,899 2,656
o Network Appliance, Inc. 261,047 6,443
o Novell, Inc. 278,565 1,635
o Oracle Corp. 4,004,749 47,897
Pitney Bowes, Inc. 179,015 7,357
o Siebel Systems, Inc. 370,966 4,670
o Sun Microsystems, Inc. 2,446,358 9,688
o Unisys Corp. 248,827 3,822
o Xerox Corp. 602,360 6,325
-------------
715,749
BUSINESS SERVICES 3.9%
--------------------------------------------------------------------------
o Allied Waste Industries, Inc. 157,115 1,772
o Apollo Group, Inc., Class A 136,300 8,659
Automatic Data Processing, Inc. 455,682 17,197
o Cendant Corp. 771,954 15,771
Cintas Corp. 130,305 5,559
o Citrix Systems, Inc. 130,566 3,301
Computer Associates International, Inc. 443,166 10,423
o Computer Sciences Corp. 142,718 5,655
o Concord EFS, Inc. 378,471 4,046
o Convergys Corp. 110,751 1,779
Deluxe Corp. 42,466 1,714
o eBay, Inc. 493,070 27,582
Electronic Data Systems Corp. 363,921 7,806
Equifax, Inc. 107,607 2,630
First Data Corp. 567,264 20,251
o Fiserv, Inc. 146,264 5,166
H&R Block, Inc. 136,187 6,413
IMS Health, Inc. 183,907 4,327
o Interpublic Group of Cos., Inc. 298,357 4,440
o Intuit, Inc. 156,279 7,811
o Mercury Interactive Corp. 66,943 3,109
o Monster Worldwide, Inc. 83,965 2,139
Omnicom Group, Inc. 147,364 11,760
See financial notes. 27
SCHWAB S&P 500 FUND
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Parametric Technology Corp. 187,230 582
Paychex, Inc. 289,062 11,250
o PeopleSoft, Inc. 271,701 5,641
o Robert Half International, Inc. 128,524 3,034
o Sungard Data Systems, Inc. 218,305 6,124
o Symantec Corp. 116,401 7,758
Tyco International Ltd. 1,525,900 31,861
o Veritas Software Corp. 324,242 11,721
Waste Management, Inc. 451,805 11,711
o Yahoo!, Inc. 494,829 21,624
-------------
290,616
CHEMICALS 1.4%
--------------------------------------------------------------------------
Air Products & Chemicals, Inc. 175,301 7,960
Dow Chemical Co. 700,650 26,408
E.I. du Pont de Nemours & Co. 762,438 30,803
Eastman Chemical Co. 59,183 1,921
Ecolab, Inc. 198,798 5,346
Great Lakes Chemical Corp. 35,237 758
o Hercules, Inc. 82,003 857
Monsanto Co. 197,498 4,947
PPG Industries, Inc. 132,163 7,619
Praxair, Inc. 127,294 8,857
Rohm & Haas Co. 170,959 6,719
Sigma-Aldrich Corp. 52,726 2,765
-------------
104,960
CONSTRUCTION 0.4%
--------------------------------------------------------------------------
Centex Corp. 48,868 4,765
Fluor Corp. 64,302 2,384
KB Home 34,866 2,388
Masco Corp. 357,473 9,831
Pulte Homes, Inc. 46,575 4,029
The Sherwin-Williams Co. 114,364 3,836
The Stanley Works 62,640 2,088
Vulcan Materials Co. 78,918 3,497
-------------
32,818
CONSUMER DURABLES 0.2%
--------------------------------------------------------------------------
Black & Decker Corp. 58,086 2,777
Leggett & Platt, Inc. 146,312 3,057
Maytag Corp. 57,971 1,473
Newell Rubbermaid, Inc. 209,537 4,777
Whirlpool Corp. 53,431 3,765
-------------
15,849
CONTAINERS 0.1%
--------------------------------------------------------------------------
Ball Corp. 44,056 2,476
Bemis Co. 40,729 1,883
o Pactiv Corp. 122,064 2,691
o Sealed Air Corp. 63,771 3,395
-------------
10,445
ELECTRONICS 6.2%
--------------------------------------------------------------------------
o ADC Telecommunications, Inc. 603,138 1,538
o Advanced Micro Devices, Inc. 259,913 3,951
o Agilent Technologies, Inc. 360,875 8,993
o Altera Corp. 290,881 5,885
American Power Conversion Corp. 153,555 3,106
o Analog Devices, Inc. 277,883 12,319
o Andrew Corp. 114,924 1,503
o Applied Materials, Inc. 1,264,942 29,562
o Applied Micro Circuits Corp. 226,273 1,317
o Broadcom Corp., Class A 224,933 7,187
o CIENA Corp. 351,972 2,256
(7) Intel Corp. 4,981,205 164,629
ITT Industries, Inc. 73,010 4,964
o Jabil Circuit, Inc. 149,319 4,159
o JDS Uniphase Corp. 1,081,585 3,840
o KLA-Tencor Corp. 147,010 8,428
Linear Technology Corp. 239,108 10,188
o LSI Logic Corp. 285,590 2,639
o Lucent Technologies, Inc. 3,170,104 10,144
Maxim Integrated Products, Inc. 248,749 12,365
o Micron Technology, Inc. 465,235 6,671
Molex, Inc. 146,907 4,611
Motorola, Inc. 1,779,352 24,075
o National Semiconductor
Corp. 138,754 5,638
o Novellus Systems, Inc. 115,539 4,771
o Nvidia Corp. 116,965 2,068
PerkinElmer, Inc. 92,308 1,662
o PMC - Sierra, Inc. 128,086 2,327
28 See financial notes.
SCHWAB S&P 500 FUND
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Power-One, Inc. 62,573 567
o QLogic Corp. 70,738 3,965
Qualcomm, Inc. 605,918 28,781
o Sanmina--SCI Corp. 398,529 4,204
Scientific-- Atlanta, Inc. 112,699 3,336
o Solectron Corp. 623,609 3,455
Symbol Technologies, Inc. 173,927 2,172
Tektronix, Inc. 65,499 1,681
o Tellabs, Inc. 312,653 2,354
o Teradyne, Inc. 140,324 3,197
Texas Instruments, Inc. 1,322,847 38,257
o Thermo Electron Corp. 123,063 2,705
o Thomas & Betts Corp. 44,556 793
o Waters Corp. 96,300 3,027
o Xilinx, Inc. 259,666 8,231
-------------
457,521
ENERGY: RAW MATERIALS 1.3%
--------------------------------------------------------------------------
Anadarko Petroleum Corp. 191,717 8,363
Apache Corp. 126,190 8,798
Baker Hughes, Inc. 256,086 7,237
o BJ Services Co. 119,400 3,917
Burlington Resources, Inc. 154,522 7,516
Devon Energy Corp. 178,337 8,649
EOG Resources, Inc. 90,133 3,798
Halliburton Co. 333,008 7,952
o Noble Corp. 103,457 3,552
Occidental Petroleum Corp. 291,610 10,282
o Rowan Cos., Inc. 69,670 1,669
Schlumberger Ltd. 445,787 20,939
-------------
92,672
FOOD & AGRICULTURE 3.7%
--------------------------------------------------------------------------
Archer-Daniels-Midland Co. 487,407 6,994
Campbell Soup Co. 314,009 8,139
The Coca-Cola Co. 1,881,619 87,307
Coca-Cola Enterprises, Inc. 342,039 6,896
ConAgra Foods, Inc. 410,504 9,786
General Mills, Inc. 287,030 12,873
H.J. Heinz Co. 270,171 9,545
Hershey Foods Corp. 101,553 7,830
Kellogg Co. 310,527 10,288
McCormick & Co., Inc. 106,601 3,160
The Pepsi Bottling Group, Inc. 210,342 4,689
PepsiCo, Inc. 1,322,394 63,237
Sara Lee Corp. 591,138 11,781
Supervalu, Inc. 102,901 2,595
Sysco Corp. 496,710 16,719
Wm. Wrigley Jr. Co. 174,311 9,831
-------------
271,670
GOLD 0.2%
--------------------------------------------------------------------------
Newmont Mining Corp. 310,851 13,609
HEALTHCARE / DRUGS & MEDICINE 12.9%
--------------------------------------------------------------------------
Abbott Laboratories 1,193,733 50,877
Allergan, Inc. 99,596 7,531
AmerisourceBergen Corp. 85,453 4,851
o Amgen, Inc. 986,839 60,947
o Anthem, Inc. 105,740 7,236
Applied Biosystems Group--
Applera Corp. 157,833 3,643
Bausch & Lomb, Inc. 39,537 1,904
Baxter International, Inc. 463,802 12,328
Becton Dickinson & Co. 194,976 7,128
o Biogen, Inc. 113,407 4,590
Biomet, Inc. 194,456 6,973
o Boston Scientific Corp. 314,266 21,282
Bristol-Myers Squibb Co. 1,480,008 37,548
C.R. Bard, Inc. 41,129 3,292
Cardinal Health, Inc. 342,274 20,311
o Chiron Corp. 142,078 7,762
Eli Lilly & Co. 857,927 57,155
o Express Scripts, Inc. 60,000 3,295
o Forest Laboratories, Inc. 280,240 14,015
o Genzyme Corp. -- General
Division 169,186 7,766
Guidant Corp. 235,874 12,032
HCA, Inc. 379,922 14,532
Health Management Associates, Inc.,
Class A 180,429 3,996
See financial notes. 29
SCHWAB S&P 500 FUND
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Humana, Inc. 124,343 2,523
(10) Johnson & Johnson 2,272,356 114,368
o King Pharmaceuticals, Inc. 187,724 2,515
Manor Care, Inc. 67,759 2,255
McKesson Corp. 220,583 6,677
o Medco Health Solutions, Inc. 204,639 6,794
o Medimmune, Inc. 193,581 5,161
Medtronic, Inc. 932,124 42,477
Merck & Co., Inc. 1,713,842 75,838
(4) Pfizer, Inc. 5,955,711 188,200
o Quest Diagnostics 81,055 5,483
Schering-Plough Corp. 1,121,384 17,124
o St. Jude Medical, Inc. 131,142 7,627
Stryker Corp. 153,897 12,483
o Tenet Healthcare Corp. 360,505 4,975
UnitedHealth Group, Inc. 455,766 23,189
o Watson Pharmaceuticals, Inc. 83,237 3,269
o WellPoint Health
Networks, Inc. 111,422 9,905
Wyeth 1,020,382 45,040
o Zimmer Holdings, Inc. 176,192 11,243
-------------
958,140
HOUSEHOLD PRODUCTS 2.3%
--------------------------------------------------------------------------
Alberto-Culver Co., Class B 43,951 2,786
Avon Products, Inc. 181,527 12,337
Clorox Co. 165,110 7,479
Colgate-Palmolive Co. 412,739 21,954
The Gillette Co. 780,677 24,904
International Flavors &
Fragrances, Inc. 69,728 2,308
Procter & Gamble Co. 992,513 97,554
-------------
169,322
INSURANCE 4.8%
--------------------------------------------------------------------------
ACE Ltd. 212,000 7,632
Aetna, Inc. 117,847 6,766
AFLAC, Inc. 393,064 14,339
The Allstate Corp. 537,300 21,223
AMBAC Financial Group, Inc. 83,554 5,911
(8) American International
Group, Inc. 1,996,450 121,444
AON Corp. 238,426 5,221
Chubb Corp. 143,077 9,559
CIGNA Corp. 108,571 6,194
Cincinnati Financial Corp. 123,208 5,042
Hartford Financial Services
Group, Inc. 215,567 11,835
Jefferson-Pilot Corp. 110,614 5,281
John Hancock Financial Services, Inc. 222,007 7,848
Lincoln National Corp. 137,597 5,494
Loews Corp. 142,787 6,140
Marsh & McLennan Cos., Inc. 409,020 17,486
MBIA, Inc. 110,393 6,580
Metlife, Inc. 582,118 18,278
MGIC Investment Corp. 77,579 3,980
Principal Financial Group, Inc. 246,724 7,735
The Progressive Corp. 166,968 12,322
Prudential Financial, Inc. 419,100 16,194
Safeco Corp. 104,621 3,839
St. Paul Cos., Inc. 174,394 6,650
Torchmark Corp. 86,710 3,805
Travelers Property Casualty Corp.,
Class B 765,599 12,533
UnumProvident Corp. 225,526 3,692
XL Capital Ltd., Class A 104,565 7,267
-------------
360,290
MEDIA 3.8%
--------------------------------------------------------------------------
Clear Channel
Communications, Inc. 471,722 19,256
o Comcast Corp., Class A 1,722,610 58,431
Dow Jones & Co., Inc. 64,009 3,327
Gannett Co., Inc. 205,769 17,307
Knight-Ridder, Inc. 61,087 4,479
The McGraw-Hill Cos., Inc. 148,062 9,913
Meredith Corp. 39,218 1,903
New York Times Co., Class A 113,850 5,411
R.R. Donnelley & Sons Co. 83,996 2,184
o Time Warner, Inc. 3,450,276 52,755
Tribune Co. 239,639 11,754
o Univision Communications, Inc.,
Class A 245,184 8,324
30 See financial notes.
SCHWAB S&P 500 FUND
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Viacom, Inc., Class B 1,341,869 53,500
The Walt Disney Co. 1,564,105 35,411
-------------
283,955
MISCELLANEOUS 0.6%
--------------------------------------------------------------------------
3M Co. 598,376 47,194
MISCELLANEOUS FINANCE 8.1%
--------------------------------------------------------------------------
American Express Co. 983,481 46,155
The Bear Stearns Cos., Inc. 75,729 5,774
Capital One Financial Corp. 173,711 10,562
/ The Charles Schwab Corp. 1,031,750 13,991
Charter One Financial, Inc. 173,453 5,544
(5) Citigroup, Inc. 3,942,239 186,862
Countrywide Financial Corp. 105,616 11,102
Fannie Mae 744,727 53,389
Federated Investors, Inc., Class B 81,300 2,248
Franklin Resources, Inc. 193,688 9,185
Freddie Mac 533,902 29,968
Golden West Financial Corp. 116,305 11,680
Goldman Sachs Group, Inc. 361,500 33,945
Janus Capital Group, Inc. 178,307 2,521
Lehman Brothers Holdings, Inc. 186,004 13,392
MBNA Corp. 977,593 24,195
Merrill Lynch & Co., Inc. 716,334 42,407
Moody's Corp. 116,409 6,732
Morgan Stanley 831,439 45,621
o Providian Financial Corp. 216,172 2,402
SLM Corp. 343,683 13,459
T. Rowe Price Group, Inc. 95,307 3,922
Washington Mutual, Inc. 706,221 30,897
-------------
605,953
NON-DURABLES & ENTERTAINMENT 1.2%
--------------------------------------------------------------------------
o American Greetings Corp.,
Class A 56,888 1,214
Darden Restaurants, Inc. 126,412 2,648
o Electronic Arts, Inc. 111,378 11,031
Fortune Brands, Inc. 112,791 7,348
Hasbro, Inc. 129,312 2,819
International Game
Technology 264,552 8,664
Mattel, Inc. 335,693 6,499
McDonald's Corp. 972,896 24,332
o Starbucks Corp. 298,059 9,419
Tupperware Corp. 43,789 659
Wendy's International, Inc. 85,337 3,162
o Yum! Brands, Inc. 222,998 7,613
-------------
85,408
NON-FERROUS METALS 0.4%
--------------------------------------------------------------------------
Alcoa, Inc. 646,687 20,416
Engelhard Corp. 95,939 2,742
Freeport-McMoran Copper
& Gold, Inc., Class B 126,715 4,910
o Phelps Dodge Corp. 68,480 4,228
-------------
32,296
OIL: DOMESTIC 0.9%
--------------------------------------------------------------------------
Amerada Hess Corp. 70,261 3,627
Ashland, Inc. 53,145 1,979
ConocoPhillips 521,248 29,789
Kerr-McGee Corp. 75,470 3,132
Marathon Oil Corp. 236,579 6,996
o Nabors Industries Ltd. 111,107 4,200
Sunoco, Inc. 57,302 2,508
o Transocean, Inc. 240,599 4,617
Unocal Corp. 197,422 6,254
-------------
63,102
OIL: INTERNATIONAL 3.3%
--------------------------------------------------------------------------
ChevronTexaco Corp. 818,957 60,848
(6) Exxon Mobil Corp. 5,078,347 185,766
-------------
246,614
OPTICAL & PHOTO 0.2%
--------------------------------------------------------------------------
o Corning, Inc. 1,013,875 11,132
Eastman Kodak Co. 220,974 5,399
-------------
16,531
PAPER & FOREST PRODUCTS 0.8%
--------------------------------------------------------------------------
Boise Cascade Corp. 43,653 1,225
Georgia-Pacific Corp. 193,318 5,080
International Paper Co. 364,813 14,355
See financial notes. 31
SCHWAB S&P 500 FUND
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Kimberly-Clark Corp. 388,900 20,538
o Louisiana-Pacific Corp. 79,408 1,510
MeadWestvaco Corp. 151,777 3,934
Temple-Inland, Inc. 41,926 2,265
Weyerhaeuser Co. 168,097 10,125
-------------
59,032
PRODUCER GOODS & MANUFACTURING 4.8%
--------------------------------------------------------------------------
o American Standard
Cos., Inc. 55,900 5,350
Avery Dennison Corp. 83,772 4,405
Caterpillar, Inc. 263,101 19,280
Cooper Industries Ltd., Class A 72,442 3,832
Deere & Co. 182,292 11,051
Dover Corp. 153,706 5,998
Emerson Electric Co. 322,181 18,284
=(1) General Electric Co. 7,662,270 222,282
Honeywell International, Inc. 655,680 20,070
Illinois Tool Works, Inc. 238,165 17,517
Ingersoll-Rand Co., Class A 132,964 8,031
Johnson Controls, Inc. 69,334 7,455
o Millipore Corp. 37,784 1,657
Pall Corp. 92,974 2,176
Parker Hannifin Corp. 91,418 4,660
Snap-On, Inc. 44,189 1,296
W.W. Grainger, Inc. 68,199 3,122
-------------
356,466
RAILROAD & SHIPPING 0.4%
--------------------------------------------------------------------------
Burlington Northern
Santa Fe Corp. 284,277 8,227
CSX Corp. 163,740 5,210
Norfolk Southern Corp. 294,282 5,930
Union Pacific Corp. 197,337 12,353
-------------
31,720
REAL PROPERTY 0.4%
--------------------------------------------------------------------------
Apartment Investment &
Management Co., Class A 72,500 2,965
Equity Office Properties Trust 306,006 8,571
Equity Residential 208,829 6,108
Plum Creek Timber Co., Inc. 144,500 3,808
ProLogis 138,400 4,088
Simon Property Group, Inc. 145,800 6,573
-------------
32,113
RETAIL 7.4%
--------------------------------------------------------------------------
Albertson's, Inc. 282,510 5,732
o Autonation, Inc. 214,100 4,004
o AutoZone, Inc. 68,977 6,629
o Bed, Bath & Beyond, Inc. 226,687 9,575
o Best Buy Co., Inc. 247,472 14,430
o Big Lots, Inc. 87,567 1,314
Circuit City Stores, Inc. 158,574 1,513
o Costco Wholesale Corp. 349,933 12,377
CVS Corp. 299,627 10,541
Dillards, Inc., Class A 62,888 1,017
Dollar General Corp. 253,824 5,704
Family Dollar Stores, Inc. 132,990 5,800
Federated Department Stores, Inc. 143,646 6,830
The Gap, Inc. 682,936 13,030
Home Depot, Inc. 1,756,211 65,103
J.C. Penney Co., Inc.
Holding Co. 208,006 4,919
o Kohl's Corp. 259,771 14,565
o Kroger Co. 571,485 9,995
Limited Brands, Inc. 397,498 6,996
Lowe's Cos., Inc. 600,019 35,359
The May Department Stores Co. 217,801 6,090
Nordstrom, Inc. 104,076 3,173
o Office Depot, Inc. 233,133 3,481
RadioShack Corp. 126,108 3,782
o Safeway, Inc. 337,377 7,119
Sears, Roebuck & Co. 218,510 11,500
o Staples, Inc. 373,442 10,016
Target Corp. 697,715 27,727
Tiffany & Co. 109,553 5,198
TJX Cos., Inc. 392,966 8,248
o Toys `R' Us, Inc. 160,316 2,084
=(3) Wal-Mart Stores, Inc. 3,343,641 197,108
Walgreen Co. 782,744 27,255
Winn-Dixie Stores, Inc. 105,395 853
-------------
549,067
32 See financial notes.
SCHWAB S&P 500 FUND
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
STEEL 0.1%
--------------------------------------------------------------------------
Allegheny Technologies, Inc. 60,584 463
Nucor Corp. 58,905 3,230
United States Steel Corp. 75,446 1,784
Worthington Industries, Inc. 69,657 1,016
-------------
6,493
TELEPHONE 3.4%
--------------------------------------------------------------------------
Alltel Corp. 237,668 11,235
AT&T Corp. 602,440 11,199
o AT&T Wireless
Services, Inc. 2,068,032 14,993
o Avaya, Inc. 316,675 4,098
BellSouth Corp. 1,410,708 37,116
CenturyTel, Inc. 109,133 3,902
o Citizens Communications Co. 211,157 2,629
o Nextel Communications, Inc.,
Class A 788,871 19,091
o Qwest Communications
International, Inc. 1,282,142 4,526
SBC Communications, Inc. 2,540,633 60,924
Sprint Corp. (FON Group) 688,155 11,010
o Sprint Corp. (PCS Group) 788,062 3,428
Verizon Communications, Inc. 2,107,422 70,809
-------------
254,960
TOBACCO 1.1%
--------------------------------------------------------------------------
Altria Group, Inc. 1,553,865 72,255
R.J. Reynolds Tobacco Holdings, Inc. 63,900 3,069
UST, Inc. 125,374 4,265
-------------
79,589
TRAVEL & RECREATION 0.5%
--------------------------------------------------------------------------
Brunswick Corp. 66,972 1,987
Carnival Corp. 480,912 16,789
Harrah's Entertainment, Inc. 86,097 3,745
Hilton Hotels Corp. 284,697 4,510
Marriott International, Inc., Class A 178,134 7,695
Starwood Hotels & Resorts
Worldwide, Inc. 153,921 5,192
-------------
39,918
TRUCKING & FREIGHT 0.1%
--------------------------------------------------------------------------
Paccar, Inc. 89,970 7,104
Ryder Systems, Inc. 50,813 1,524
-------------
8,628
UTILITIES: ELECTRIC & GAS 2.8%
--------------------------------------------------------------------------
o The AES Corp. 472,190 4,132
o Allegheny Energy, Inc. 93,242 987
Ameren Corp. 124,880 5,576
American Electric Power Co., Inc. 300,085 8,459
o Calpine Corp. 283,341 1,306
Centerpoint Energy, Inc. 226,615 2,223
Cinergy Corp. 136,058 4,940
o CMS Energy Corp. 109,346 888
Consolidated Edison, Inc. 171,470 6,939
Constellation Energy Group, Inc. 128,786 4,684
Dominion Resources, Inc. 246,282 15,171
DTE Energy Co. 130,383 4,809
Duke Energy Corp. 690,912 12,540
o Dynegy, Inc., Class A 276,351 1,108
o Edison International 247,077 4,870
El Paso Corp. 457,625 3,359
Entergy Corp. 174,608 9,411
Exelon Corp. 250,396 15,888
FirstEnergy Corp. 247,745 8,520
FPL Group, Inc. 139,198 8,873
KeySpan Corp. 122,365 4,279
Kinder Morgan, Inc. 93,339 4,998
Nicor, Inc. 31,789 1,090
NiSource, Inc. 200,255 4,147
Peoples Energy Corp. 27,820 1,125
o PG&E Corp. 315,720 7,719
Pinnacle West Capital Corp. 70,250 2,568
PPL Corp. 134,648 5,375
Progress Energy, Inc. 185,355 7,989
Public Service Enterprise Group, Inc. 174,439 7,129
Sempra Energy 170,781 4,748
The Southern Co. 555,055 16,541
TECO Energy, Inc. 142,669 1,873
See financial notes. 33
SCHWAB S&P 500 FUND
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TXU Corp. 244,850 5,588
Williams Cos., Inc. 390,973 3,988
Xcel Energy, Inc. 301,175 4,939
-------------
208,779
SHORT-TERM INVESTMENT
0.1% of net assets
Provident Institutional
TempFund 9,323,808 9,324
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
U.S. TREASURY OBLIGATIONS
0.0% of net assets
= U.S. Treasury Bills
0.82%-0.93%, 12/18/03 840 839
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
COLLATERAL INVESTED FOR SECURITIES ON LOAN
16.2% of net assets
COMMERCIAL PAPER & OTHER CORPORATE OBLIGATIONS
--------------------------------------------------------------------------
American Express Centurion Bank
1.11%, 12/12/03 21,686 21,686
1.11%, 01/27/04 24,508 24,508
American Express Credit Corp.
1.11%, 04/16/04 24,676 24,676
1.09%, 05/13/04 21,248 21,248
Canadian Imperial Bank Corp.
1.09%, 05/28/04 24,965 24,965
CC USA, Inc.
1.08%, 11/17/03 8,073 8,056
Concord Minutemen Capital Corp.
1.11%, 01/09/04 38,078 37,978
1.08%, 11/14/03 16,884 16,852
1.08%, 11/18/03 38,674 38,594
1.07%, 11/19/03 39,095 39,065
Crown Point Funding Corp.
1.11%, 01/16/04 33,641 33,559
1.08%, 11/14/03 21,970 21,926
Depfa Bank PLC
1.08%, 11/18/03 30,539 30,456
Fairway Finance Corp.
1.10%, 01/12/04 61,443 61,267
General Electric Capital Corp.
1.08%, 05/10/04 13,115 13,115
Lexington Parker
1.07%, 11/06/03 25,960 25,936
Svenska Handelsbanken
1.39%, 10/27/04 18,012 18,010
Tulip Funding Corp.
1.07%, 11/10/03 24,004 23,981
Westdeutsche Landesbank AG
1.09%, 09/23/04 25,550 25,545
1.09%, 09/29/04 25,840 25,834
1.08%, 10/12/04 5,080 5,080
-------------
542,337
SHORT-TERM INVESTMENTS
-------------------------------------------------------------------------
Wells Fargo Bank, Time Deposit
1.06%, 11/03/03 80,842 80,842
SECURITY AND NUMBER OF SHARES
OTHER INVESTMENT COMPANIES
--------------------------------------------------------------------------
Institutional Money Market
Trust 584,942,519 584,943
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN. For totals, please see the
first page of holdings for this fund.
34 See financial notes.
SCHWAB S&P 500 FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value
(including $1,166,865 of securities on loan) $7,441,555 a
Collateral held for securities on loan 1,208,122
Receivables:
Fund shares sold 8,247
Interest 9
Dividends 9,970
Investments sold 1,517
Due from broker for futures 11
Income from securities on loan 121
Prepaid expenses + 84
--------------
TOTAL ASSETS 8,669,636
LIABILITIES
- --------------------------------------------------------------------------------
Collateral held for securities on loan 1,208,122
Payables:
Fund shares redeemed 13,002
Investments bought 358
Investment adviser and administrator fees 39
Transfer agent and shareholder service fees 40
Accrued expenses + 691
--------------
TOTAL LIABILITIES 1,222,252
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 8,669,636
TOTAL LIABILITIES - 1,222,252
--------------
NET ASSETS $7,447,384
NET ASSETS BY SOURCE
Capital received from investors 7,837,028
Net investment income not yet distributed 80,919
Net realized capital losses (631,612)
Net unrealized capital gains 161,049 b
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $3,510,048 214,555 $16.36
Select Shares(R) $3,691,726 224,944 $16.41
e.Shares(R) $245,610 15,007 $16.37
Unless stated, all numbers x 1,000.
a The fund paid $7,280,890 for these securities. Not counting short-term
obligations and government securities, the fund paid $505,804 for securities
during the report period and received $214,532 from securities it sold or that
matured.
b These derive from investments and futures. As of the report date, the fund had
forty-three open S&P 500 futures contracts due to expire on December 18, 2003,
with an aggregate contract value of $11,282 and net unrealized gains of $384.
FEDERAL TAX DATA
- ------------------------------------------------------
PORTFOLIO COST $7,362,738
NET UNREALIZED GAINS AND LOSSES:
Gains $1,494,337
Losses + (1,415,520)
--------------
$78,817
UNDISTRIBUTED EARNINGS:
Ordinary income $80,917
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2008 $26,504
2009 50,224
2010 400,268
2011 + 72,382
--------------
$549,378
See financial notes. 35
SCHWAB S&P 500 FUND
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $ 115,956
Interest 86
Securities on loan + 1,082
---------------
TOTAL INVESTMENT INCOME 117,124
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments sold (60,537)
Net realized gains on futures contracts + 1,196
---------------
NET REALIZED LOSSES (59,341)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 1,201,575
Net unrealized gains on futures contracts + 368
---------------
NET UNREALIZED GAINS 1,201,943
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 11,122 a
Transfer agent and shareholder service fees:
Investor Shares 7,554 b
Select Shares(R) 3,207 b
e.Shares(R) 226 b
Trustees' fees 43 c
Custodian fees 183
Portfolio accounting fees 976
Professional fees 64
Registration fees 132
Shareholder reports 636
Interest expense 10
Other expenses + 134
---------------
Total expenses 24,287
Expense reduction - 6,555 d
---------------
NET EXPENSES 17,732
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 117,124
NET EXPENSES - 17,732
---------------
NET INVESTMENT INCOME 99,392
NET REALIZED LOSSES (59,341) e
NET UNREALIZED GAINS + 1,201,943 e
---------------
INCREASE IN NET ASSETS FROM OPERATIONS $ 1,241,994
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.20% of the first
$500 million and 0.17% of the assets beyond that.
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20%, 0.05%,
and 0.05% of the assets of each respective share class. These fees are paid to
Charles Schwab & Co.
c For the fund's independent trustees only.
d Includes $1,672 from the investment adviser (CSIM) and $4,883 from the
transfer agent and shareholder service agent (Schwab). These reductions
reflect a guarantee by CSIM and Schwab to limit the operating expenses of this
fund through February 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 $1,142,602.
36 See financial notes.
SCHWAB S&P 500 FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income $99,392 $91,487
Net realized losses (59,341) (350,232)
Net unrealized gains or losses + 1,201,943 (899,126)
-------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 1,241,994 (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, b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
SHARES SOLD
Investor Shares 50,095 $730,445 55,877 $908,494
Select Shares 51,800 753,457 69,223 1,121,910
e.Shares + 4,668 67,061 5,190 83,737
----------------------------------------------
TOTAL SHARES SOLD 106,563 $1,550,963 130,290 $2,114,141
SHARES REINVESTED
Investor Shares 2,857 $39,062 1,850 $31,991
Select Shares 3,300 45,211 2,314 40,073
e.Shares + 224 3,062 178 3,074
----------------------------------------------
TOTAL SHARES REINVESTED 6,381 $87,335 4,342 $75,138
SHARES REDEEMED
Investor Shares (38,573) ($558,964) (44,191) ($692,759)
Select Shares (49,150) (705,422) (68,436) (1,061,022)
e.Shares + (5,869) (84,347) (7,834) (123,864)
----------------------------------------------
TOTAL SHARES REDEEMED (93,592) ($1,348,733) (120,461) ($1,877,645) c
NET TRANSACTIONS IN
FUND SHARES 19,352 $289,565 14,171 $311,634
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 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 + 19,352 1,438,021 14,171 (927,169) d
----------------------------------------------
END OF PERIOD 454,506 $7,447,384 435,154 $6,009,363 e
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
b The tax-basis components of distributions paid are:
CURRENT PRIOR
PERIOD PERIOD
Ordinary Income $93,538 $80,932
Long-term capital gains $-- $--
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase.
CURRENT PRIOR
PERIOD PERIOD
Investor Shares $236 $423
Select Shares 302 438
e.Shares + 22 + 28
----------- -----------
TOTAL $560 $889
Dollar amounts are net of the redemption proceeds.
d Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
e Includes distributable net investment income in the amount of $80,919 and
$75,065 for the current period and prior period, respectively.
Percent of fund shares owned by other SchwabFunds(R) as of the end of the
current period:
SCHWAB MARKETTRACK PORTFOLIOS(R)
All Equity Portfolio 2.6%
Growth Portfolio 1.9%
Balanced Portfolio 1.2%
Conservative Portfolio 0.6%
See financial notes. 37
SCHWAB 1000 FUND(R)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98-
INVESTOR SHARES 10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 25.25 29.57 39.95 37.12 29.90
----------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.33 0.31 0.26 0.26 0.26
Net realized and unrealized gains or losses 4.99 (4.36) (10.40) 2.83 7.21
----------------------------------------------------------------------------
Total income or loss from investment operations 5.32 (4.05) (10.14) 3.09 7.47
Less distributions:
Dividends from net investment income (0.32) (0.27) (0.24) (0.26) (0.25)
----------------------------------------------------------------------------
Net asset value at end of period 30.25 25.25 29.57 39.95 37.12
----------------------------------------------------------------------------
Total return (%) 21.34 (13.87) (25.50) 8.34 25.12
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.49 0.46 0.46 0.46 1 0.46
Gross operating expenses 0.51 0.52 0.51 0.51 0.51
Net investment income 1.27 1.04 0.78 0.63 0.78
Portfolio turnover rate 5 9 8 9 3
Net assets, end of period ($ x 1,000,000) 3,974 3,223 3,852 5,083 4,925
1 The ratio of net operating expenses would have been 0.47% if certain
non-routine expenses (proxy fees) had been included.
38 See financial notes.
SCHWAB 1000 FUND(R)
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98-
SELECT SHARES(R) 10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 25.26 29.58 39.98 37.16 29.93
----------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.37 0.35 0.31 0.29 0.30
Net realized and unrealized gains or losses 4.99 (4.36) (10.41) 2.84 7.22
----------------------------------------------------------------------------
Total income or loss from investment operations 5.36 (4.01) (10.10) 3.13 7.52
Less distributions:
Dividends from net investment income (0.35) (0.31) (0.30) (0.31) (0.29)
----------------------------------------------------------------------------
Net asset value at end of period 30.27 25.26 29.58 39.98 37.16
----------------------------------------------------------------------------
Total return (%) 21.52 (13.77) (25.40) 8.46 25.29
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.35 0.35 0.35 0.35 1 0.35
Gross operating expenses 0.36 0.37 0.36 0.36 0.37
Net investment income 1.41 1.15 0.89 0.74 0.89
Portfolio turnover rate 5 9 8 9 3
Net assets, end of period ($ x 1,000,000) 1,996 1,588 1,911 2,159 2,214
1 The ratio of net operating expenses would have been 0.36% if certain
non-routine expenses (proxy fees) had been included.
See financial notes. 39
SCHWAB 1000 FUND(R)
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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)
- --------------------------------------------------------------------------------
99.9% COMMON STOCK 3,959,733 5,961,669
0.0% SHORT-TERM
INVESTMENT 467 467
0.0% U.S. TREASURY
OBLIGATION 200 200
- --------------------------------------------------------------------------------
99.9% TOTAL INVESTMENTS 3,960,400 5,962,336
18.2% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 1,085,371 1,085,371
(18.1)% OTHER ASSETS AND
LIABILITIES, NET (1,078,074)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 5,969,633
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 99.9% of net assets
AEROSPACE / DEFENSE 1.5%
--------------------------------------------------------------------------
The Boeing Co. 453,182 17,443
Crane Co. 31,050 873
General Dynamics Corp. 108,400 9,073
Goodrich Corp. 61,892 1,709
o L-3 Communications
Holdings, Inc. 51,200 2,393
Lockheed Martin Corp. 243,584 11,293
Northrop Grumman Corp. 98,597 8,815
Raytheon Co. 223,000 5,905
Rockwell Automation, Inc. 98,600 3,062
Rockwell Collins, Inc. 95,100 2,610
Textron, Inc. 73,400 3,647
United Technologies Corp. 254,427 21,547
--------
88,370
AIR TRANSPORTATION 1.1%
--------------------------------------------------------------------------
Delta Air Lines, Inc. 64,200 836
FedEx Corp. 161,160 12,210
Sabre Holdings Corp. 76,100 1,667
Southwest Airlines Co. 421,925 8,185
United Parcel Service, Inc.,
Class B 607,500 44,056
---------
66,954
ALCOHOLIC BEVERAGES 0.5%
--------------------------------------------------------------------------
Adolph Coors Co., Class B 18,800 1,054
Anheuser-Busch Cos., Inc. 448,800 22,108
Brown-Forman Corp., Class B 33,578 2,833
o Constellation Brands, Inc.,
Class A 55,700 1,747
---------
27,742
APPAREL 0.4%
--------------------------------------------------------------------------
o Coach, Inc. 98,328 3,487
Jones Apparel Group, Inc. 69,100 2,384
Liz Claiborne, Inc. 58,000 2,140
Nike, Inc., Class B 141,900 9,067
Polo Ralph Lauren Corp. 26,500 806
Reebok International Ltd. 31,200 1,215
o Timberland Co., Class A 19,100 992
VF Corp. 58,600 2,487
---------
22,578
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.3%
--------------------------------------------------------------------------
o American Axle & Manufacturing
Holdings, Inc. 27,900 965
ArvinMeritor, Inc. 35,400 594
BorgWarner, Inc. 14,000 1,114
Carlisle Cos., Inc. 16,000 918
40 See financial notes.
SCHWAB 1000 FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Cooper Tire & Rubber Co. 38,300 753
Cummins, Inc. 21,600 1,024
Dana Corp. 77,189 1,257
Danaher Corp. 83,200 6,893
Delphi Corp. 301,400 2,682
Donaldson Co., Inc. 22,900 1,310
Eaton Corp. 40,700 4,080
Ford Motor Co. 988,970 11,996
General Motors Corp. 302,934 12,926
o General Motors Corp.,
Class H 595,294 9,781
Gentex Corp. 41,600 1,625
Genuine Parts Co. 92,775 2,952
o Goodyear Tire & Rubber Co. 91,200 626
Harley-Davidson, Inc. 163,300 7,742
o Lear Corp. 36,200 2,103
o Navistar International Corp. 35,500 1,435
Oshkosh Truck Corp. 17,800 816
Polaris Industries, Inc. 11,900 1,019
Superior Industries
International, Inc. 14,400 612
---------
75,223
BANKS 7.8%
--------------------------------------------------------------------------
AmSouth Bancorp. 200,875 4,745
Associated Banc-Corp. 38,825 1,598
Bancorpsouth, Inc. 40,800 959
Bank of America Corp. 808,322 61,214
Bank of Hawaii Corp. 33,750 1,330
The Bank of New York
Co., Inc. 415,700 12,966
Bank One Corp. 613,993 26,064
Banknorth Group, Inc. 85,800 2,687
BB&T Corp. 298,681 11,550
Citizens Banking Corp. Michigan 23,000 673
City National Corp. 26,000 1,565
The Colonial BancGroup, Inc. 64,400 1,010
Comerica, Inc. 94,774 4,879
Commerce Bancorp, Inc. N.J. 39,900 1,929
Commerce Bancshares, Inc. 34,848 1,669
Community First Bankshares, Inc. 20,400 554
Compass Bancshares, Inc. 68,112 2,573
Cullen/Frost Bankers, Inc. 26,500 1,027
Fifth Third Bancorp 308,930 17,906
First Citizens BancShares, Inc.,
Class A 6,000 684
First Midwest Bancorp, Inc. Illinois 25,700 794
First Tennessee National Corp. 68,200 3,094
FirstMerit Corp. 44,000 1,134
FleetBoston Financial Corp. 568,615 22,966
FNB Corp. 23,940 791
Fulton Financial Corp. 59,187 1,222
Hibernia Corp., Class A 82,000 1,852
Hudson City Bancorp, Inc. 102,500 3,540
Hudson United Bancorp 23,500 853
Huntington Bancshares, Inc. 124,935 2,706
J.P. Morgan Chase & Co. 1,099,990 39,490
KeyCorp, Inc. 227,446 6,425
M&T Bank Corp. 65,801 6,179
Marshall & Ilsley Corp. 123,470 4,423
Mellon Financial Corp. 232,388 6,941
Mercantile Bankshares Corp. 42,575 1,804
National City Corp. 332,400 10,856
National Commerce Financial
Corp. 108,850 2,990
North Fork Bancorp., Inc. 85,900 3,348
Northern Trust Corp. 120,850 5,613
Old National Bancorp. 32,962 732
Park National Corp. 7,100 830
Peoples Bank-Bridgeport 32,000 1,048
PNC Financial Services
Group, Inc. 151,730 8,128
Popular, Inc. 70,800 3,186
Provident Financial Group, Inc. 25,400 748
Regions Financial Corp. 119,065 4,376
Sky Financial Group, Inc. 48,530 1,182
SouthTrust Corp. 184,474 5,876
State Street Corp. 180,100 9,430
SunTrust Banks, Inc. 151,456 10,158
Synovus Financial Corp. 161,762 4,465
TCF Financial Corp. 38,600 2,014
Trustmark Corp. 32,000 911
U.S. Bancorp 1,040,053 28,310
See financial notes. 41
SCHWAB 1000 FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Union Planters Corp. 107,000 3,560
UnionBanCal Corp. 80,200 4,344
United Bankshares, Inc. 21,900 662
Valley National Bancorp 49,599 1,451
Wachovia Corp. 726,220 33,312
Wells Fargo & Co. 906,932 51,078
Westamerica Bancorp. 17,400 871
Whitney Holding Corp. 20,900 794
Wilmington Trust Corp. 34,000 1,145
Zions Bancorp. 49,300 3,022
---------
466,236
BUSINESS MACHINES & SOFTWARE 8.9%
--------------------------------------------------------------------------
o 3Com Corp. 191,150 1,376
Adobe Systems, Inc. 124,800 5,471
o Apple Computer, Inc. 196,100 4,489
Autodesk, Inc. 58,700 1,130
o BEA Systems, Inc. 221,900 3,084
o BMC Software, Inc. 122,400 2,127
o Cisco Systems, Inc. 3,792,500 79,567
o Compuware Corp. 196,600 1,105
o Comverse Technology, Inc. 101,200 1,826
o Dell, Inc. 1,387,200 50,106
Diebold, Inc. 39,418 2,249
o EMC Corp. 1,181,700 16,355
Fair Isaac Corp. 26,350 1,681
o Gateway, Inc. 168,600 850
Hewlett-Packard Co. 1,648,340 36,774
IKON Office Solutions, Inc. 75,000 630
(9) International Business
Machines Corp. 935,500 83,709
o Juniper Networks, Inc. 207,300 3,729
o Lexmark International, Inc.,
Class A 69,400 5,109
o Maxtor Corp. 132,600 1,813
Microchip Technology, Inc. 110,500 3,614
=(2) Microsoft Corp. 5,843,100 152,797
o NCR Corp. 50,651 1,820
o Network Appliance, Inc. 184,600 4,556
o Novell, Inc. 200,300 1,176
o Oracle Corp. 2,824,114 33,776
Pitney Bowes, Inc. 125,100 5,142
o Sandisk Corp. 41,900 3,377
o Seagate Escrow Security 126,560 36
o Siebel Systems, Inc. 263,200 3,314
o Storage Technology Corp. 57,300 1,381
o Sun Microsystems, Inc. 1,732,800 6,862
o Sybase, Inc. 49,300 882
o Tech Data Corp. 29,400 968
Total System Services, Inc. 104,400 2,879
o Unisys Corp. 177,450 2,726
o Xerox Corp. 426,050 4,473
---------
532,959
BUSINESS SERVICES 4.1%
--------------------------------------------------------------------------
o Affiliated Computer Services, Inc.,
Class A 70,700 3,459
o Affymetrix, Inc. 30,400 779
o Allied Waste Industries, Inc. 110,065 1,241
o Apollo Group, Inc., Class A 94,750 6,019
o Aramark Corp., Class B 50,400 1,347
Automatic Data Processing, Inc. 321,900 12,148
o BearingPoint, Inc. 98,600 927
o The BISYS Group, Inc. 62,600 895
o CACI International, Inc., Class A 14,800 733
o Career Education Corp. 56,000 2,999
CDW Corp. 45,700 2,744
o Cendant Corp. 549,348 11,223
o Ceridian Corp. 80,000 1,680
o Cerner Corp. 18,500 784
Certegy, Inc. 34,600 1,165
o Checkfree Corp. 41,000 1,129
o ChoicePoint, Inc. 46,666 1,635
Cintas Corp. 92,900 3,963
o Citrix Systems, Inc. 94,900 2,399
Computer Associates
International, Inc. 310,779 7,309
o Computer Sciences Corp. 100,696 3,990
o Concord EFS, Inc. 271,524 2,903
o Convergys Corp. 90,200 1,449
o Copart, Inc. 48,000 599
o Corinthian Colleges, Inc. 24,600 1,523
42 See financial notes.
SCHWAB 1000 FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Corporate Executive Board Co. 19,400 990
o D&B Corp. 40,700 1,895
Deluxe Corp. 32,200 1,300
o DeVry, Inc. 36,400 883
o DST Systems, Inc. 64,100 2,424
o eBay, Inc. 347,500 19,439
o Education Management Corp. 18,400 1,162
Electronic Data Systems Corp. 256,800 5,508
Equifax, Inc. 75,900 1,855
First Data Corp. 401,604 14,337
o Fiserv, Inc. 103,589 3,659
Global Payments, Inc. 19,200 800
GTECH Holdings Corp. 31,600 1,412
H&R Block, Inc. 99,900 4,704
o ICOS Corp. 34,300 1,602
IMS Health, Inc. 129,100 3,038
o Interpublic Group of Cos., Inc. 209,650 3,120
o Intuit, Inc. 110,800 5,538
o Invitrogen Corp. 26,900 1,711
o Iron Mountain, Inc. 46,200 1,767
o ITT Educational Services, Inc. 23,700 1,180
Jack Henry & Associates, Inc. 45,500 909
o Jacobs Engineering Group, Inc. 30,200 1,399
o Lamar Advertising Co. 46,300 1,403
Manpower, Inc. 41,800 1,939
o Mercury Interactive Corp. 46,000 2,136
o Monster Worldwide, Inc. 60,100 1,531
National Instruments Corp. 26,600 1,133
o Network Associates, Inc. 86,500 1,205
Omnicom Group, Inc. 101,900 8,132
Paychex, Inc. 203,842 7,933
o PeopleSoft, Inc. 216,306 4,490
o Peregrine Systems, Inc. 102,600 51
o Perot Systems Corp., Class A 56,400 599
o Pixar, Inc. 28,800 1,982
Republic Services, Inc. 88,800 2,065
The Reynolds & Reynolds Co.,
Class A 36,200 983
o Robert Half International, Inc. 90,200 2,130
The ServiceMaster Co. 156,800 1,798
o Stericycle, Inc. 21,700 1,002
o Sungard Data Systems, Inc. 153,800 4,314
o Symantec Corp. 84,000 5,599
o Synopsys, Inc. 82,600 2,620
o VeriSign, Inc. 126,635 2,010
o Veritas Software Corp. 229,079 8,281
Viad Corp. 45,900 1,147
o Waste Connections, Inc. 14,600 506
Waste Management, Inc. 318,475 8,255
o WebMD Corp. 160,500 1,250
o Yahoo!, Inc. 362,906 15,859
---------
246,027
CHEMICALS 1.4%
--------------------------------------------------------------------------
Air Products & Chemicals, Inc. 122,200 5,549
Airgas, Inc. 37,300 714
Albemarle Corp. 21,700 582
Cabot Corp. 31,900 890
o Celgene Corp. 43,000 1,793
o Cytec Industries, Inc. 20,400 712
Dow Chemical Co. 496,552 18,715
E.I. du Pont de Nemours & Co. 538,689 21,763
Eastman Chemical Co. 40,125 1,303
Ecolab, Inc. 141,100 3,794
Great Lakes Chemical Corp. 26,200 563
IMC Global, Inc. 59,860 419
Lubrizol Corp. 26,800 812
Lyondell Chemical Co. 93,800 1,341
Monsanto Co. 140,648 3,523
PPG Industries, Inc. 92,100 5,310
Praxair, Inc. 88,000 6,123
Rohm & Haas Co. 119,114 4,681
RPM International, Inc. 59,800 864
Sigma-Aldrich Corp. 39,200 2,056
Valspar Corp. 26,100 1,245
---------
82,752
CONSTRUCTION 0.7%
--------------------------------------------------------------------------
Centex Corp. 34,100 3,325
D.R. Horton, Inc. 83,822 3,336
Florida Rock Industries, Inc. 14,900 853
See financial notes. 43
SCHWAB 1000 FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Fluor Corp. 43,800 1,624
KB Home 25,000 1,712
Lafarge North America, Inc. 37,800 1,365
Lennar Corp., Class A 42,600 3,913
Martin Marietta Materials, Inc. 25,300 1,037
Masco Corp. 267,800 7,364
MDC Holdings, Inc. 15,290 1,029
o NVR, Inc. 4,700 2,300
Pulte Homes, Inc. 33,900 2,933
The Sherwin-Williams Co. 83,900 2,814
The Stanley Works 46,000 1,534
o Toll Brothers, Inc. 39,400 1,451
Vulcan Materials Co. 54,700 2,424
o West Corp. 34,400 833
---------
39,847
CONSUMER DURABLES 0.3%
--------------------------------------------------------------------------
Black & Decker Corp. 43,150 2,063
Ethan Allen Interiors, Inc. 19,700 725
Furniture Brands International, Inc. 29,300 711
Hillenbrand Industries, Inc. 34,000 2,024
La-Z-Boy, Inc. 29,400 594
Leggett & Platt, Inc. 103,400 2,160
Maytag Corp. 40,650 1,032
o Mohawk Industries, Inc. 36,439 2,701
Newell Rubbermaid, Inc. 147,109 3,354
Whirlpool Corp. 37,400 2,636
---------
18,000
CONTAINERS 0.2%
--------------------------------------------------------------------------
Ball Corp. 31,600 1,776
Bemis Co. 27,600 1,276
o Crown Holdings, Inc. 88,900 702
o Owens-Illinois, Inc. 76,700 943
o Pactiv Corp. 84,350 1,860
o Sealed Air Corp. 50,699 2,699
Sonoco Products Co. 50,141 1,067
---------
10,323
ELECTRONICS 6.0%
--------------------------------------------------------------------------
o Acxiom Corp. 46,400 738
o ADC Telecommunications, Inc. 414,300 1,057
o Adelphia Communications,
Class A 75,707 26
o Advanced Fibre
Communications, Inc. 46,300 1,115
o Advanced Micro Devices, Inc. 185,600 2,821
o Agere Systems, Inc., Class A 886,500 3,085
o Agilent Technologies, Inc. 252,700 6,297
o Alliant Techsystems, Inc. 19,900 1,030
o Altera Corp. 205,400 4,155
American Power Conversion
Corp. 113,900 2,304
o Amphenol Corp., Class A 22,200 1,304
o Analog Devices, Inc. 202,100 8,959
o Applied Materials, Inc. 894,900 20,914
o Applied Micro Circuits Corp. 157,200 915
o Arrow Electronics, Inc. 52,000 1,110
o Atmel Corp. 253,300 1,429
o Avnet, Inc. 62,200 1,207
AVX Corp. 90,600 1,332
o Broadcom Corp., Class A 159,200 5,086
o Cabot Microelectronics Corp. 12,700 724
o Cadence Design Systems, Inc. 146,250 2,251
o CIENA Corp. 250,600 1,606
o Cree, Inc. 37,900 673
o Cymer, Inc. 17,800 813
o Emulex Corp. 42,700 1,209
o Energizer Holdings, Inc. 47,200 1,737
o Fairchild Semiconductor International, Inc.,
Class A 60,900 1,376
o Getty Images, Inc. 30,100 1,346
Harman International
Industries, Inc. 18,700 2,397
Harris Corp. 34,600 1,288
o Hearst-Argyle Television, Inc. 48,100 1,165
o Integrated Circuit Systems, Inc. 37,300 1,252
(7) Intel Corp. 3,517,600 116,257
o Interactive Data Corp. 47,700 820
o International Rectifier Corp. 35,300 1,685
Intersil Corp., Class A 73,100 1,885
ITT Industries, Inc. 50,800 3,454
o Jabil Circuit, Inc. 109,100 3,038
o JDS Uniphase Corp. 767,755 2,726
44 See financial notes.
SCHWAB 1000 FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o KLA-Tencor Corp. 102,200 5,859
o Lam Research Corp. 67,100 1,929
Linear Technology Corp. 168,200 7,167
o LSI Logic Corp. 201,200 1,859
o Lucent Technologies, Inc. 2,246,619 7,189
Maxim Integrated Products, Inc. 174,529 8,676
o Micron Technology, Inc. 329,100 4,719
Molex, Inc. 102,021 3,202
Motorola, Inc. 1,253,186 16,956
o National Semiconductor Corp. 98,400 3,998
o Novellus Systems, Inc. 81,600 3,369
o Nvidia Corp. 85,600 1,513
PerkinElmer, Inc. 65,800 1,185
o QLogic Corp. 50,700 2,842
Qualcomm, Inc. 429,100 20,382
o RF Micro Devices, Inc. 95,000 1,113
o Sanmina -- SCI Corp. 271,652 2,866
Scientific -- Atlanta, Inc. 80,200 2,374
o Skyworks Solutions, Inc. 79,500 682
o Solectron Corp. 444,800 2,464
Symbol Technologies, Inc. 119,970 1,498
Tektronix, Inc. 45,200 1,160
o Tellabs, Inc. 221,800 1,670
o Teradyne, Inc. 102,000 2,324
Texas Instruments, Inc. 935,455 27,053
o Thermo Electron Corp. 86,984 1,912
o Vishay Intertechnology, Inc. 83,150 1,559
o Waters Corp. 75,100 2,360
o Western Digital Corp. 110,500 1,486
o Xilinx, Inc. 183,800 5,827
o Zebra Technologies Corp.,
Class A 24,750 1,410
---------
361,189
ENERGY: RAW MATERIALS 1.1%
--------------------------------------------------------------------------
Anadarko Petroleum Corp. 135,380 5,905
Apache Corp. 87,160 6,077
Arch Coal, Inc. 27,300 669
Baker Hughes, Inc. 181,520 5,130
o BJ Services Co. 85,600 2,809
Burlington Resources, Inc. 108,767 5,290
o Cooper Cameron Corp. 30,200 1,293
Devon Energy Corp. 125,516 6,088
ENSCO International, Inc. 79,400 2,092
EOG Resources, Inc. 66,500 2,802
o FMC Technologies, Inc. 34,100 685
o Forest Oil Corp. 28,700 673
o Grant Prideco, Inc. 63,000 714
Halliburton Co. 234,360 5,596
Helmerich & Payne, Inc. 25,900 687
o Key Energy Services, Inc. 66,800 583
Noble Energy, Inc. 29,700 1,180
Occidental Petroleum Corp. 206,200 7,271
Peabody Energy Corp. 29,300 977
o Rowan Cos., Inc. 48,600 1,164
o Smith International, Inc. 54,800 2,040
Tidewater, Inc. 31,600 866
Valero Energy Corp. 61,288 2,617
Western Gas Resources, Inc. 17,200 731
---------
63,939
FOOD & AGRICULTURE 3.6%
--------------------------------------------------------------------------
Archer-Daniels-Midland Co. 344,336 4,941
Campbell Soup Co. 221,700 5,746
The Coca-Cola Co. 1,327,300 61,587
Coca-Cola Enterprises, Inc. 242,400 4,887
ConAgra Foods, Inc. 291,259 6,944
Corn Products International, Inc. 18,600 630
o Dean Foods Co. 83,150 2,515
o Del Monte Foods Co. 108,295 1,030
Dreyer's Grand Ice Cream
Holdings, Inc. 18,200 1,409
General Mills, Inc. 201,250 9,026
H.J. Heinz Co. 193,500 6,836
Hershey Foods Corp. 72,900 5,621
Hormel Foods Corp. 74,800 1,847
The J.M. Smuckers Co. 25,800 1,129
Kellogg Co. 220,400 7,302
Kraft Foods, Inc., Class A 149,700 4,356
McCormick & Co., Inc. 74,700 2,214
The Pepsi Bottling Group, Inc. 148,300 3,306
PepsiAmericas, Inc. 78,100 1,170
See financial notes. 45
SCHWAB 1000 FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
PepsiCo, Inc. 932,360 44,585
o Performance Food Group Co. 23,500 875
Sara Lee Corp. 418,200 8,335
o The Scotts Co., Class A 17,500 1,011
Sensient Technologies Corp. 24,700 474
o Smithfield Foods, Inc. 56,800 1,208
Supervalu, Inc. 72,000 1,816
Sysco Corp. 349,500 11,764
Tootsie Roll Industries, Inc. 27,730 915
Tyson Foods, Inc., Class A 188,382 2,688
Wm. Wrigley Jr. Co. 121,200 6,836
---------
213,003
GOLD 0.2%
--------------------------------------------------------------------------
Newmont Mining Corp. 219,538 9,611
HEALTHCARE / DRUGS & MEDICINE 12.7%
--------------------------------------------------------------------------
Abbott Laboratories 843,700 35,958
o Accredo Health, Inc. 24,700 789
o AdvancePCS Corp. 48,700 2,507
Allergan, Inc. 71,400 5,399
AmerisourceBergen Corp. 59,795 3,395
o Amgen, Inc. 698,440 43,136
o Amylin Pharmaceuticals, Inc. 50,100 1,369
o Andrx Corp. 37,200 740
o Anthem, Inc. 75,600 5,173
o Apogent Technologies, Inc. 52,800 1,159
Applied Biosystems Group --
Applera Corp. 111,300 2,569
o Apria Healthcare Group, Inc. 28,600 829
o Barr Laboratories, Inc. 35,350 2,714
Bausch & Lomb, Inc. 28,100 1,353
Baxter International, Inc. 327,600 8,708
Beckman Coulter, Inc. 32,400 1,609
Becton Dickinson & Co. 136,800 5,001
o Biogen, Inc. 79,400 3,213
Biomet, Inc. 139,000 4,985
o Boston Scientific Corp. 222,142 15,043
Bristol-Myers Squibb Co. 1,047,500 26,575
C.R. Bard, Inc. 29,200 2,337
Cardinal Health, Inc. 240,956 14,298
o Caremark Rx, Inc. 142,800 3,577
o Cephalon, Inc. 29,600 1,390
o Charles River Laboratories
International, Inc. 23,500 758
o Chiron Corp. 99,912 5,458
o Community Health Systems, Inc. 51,300 1,232
o Covance, Inc. 31,200 812
o Coventry Health Care, Inc. 33,200 1,818
o Cytyc Corp. 60,200 778
o DaVita, Inc. 35,700 1,253
Dentsply International, Inc. 42,650 1,885
Diagnostic Products Corp. 14,900 608
o Edwards Lifesciences Corp. 33,500 971
Eli Lilly & Co. 606,868 40,430
o Express Scripts, Inc. 43,100 2,367
o First Health Group Corp. 52,800 1,289
o Forest Laboratories, Inc. 196,600 9,832
o Genzyme Corp. -- General
Division 119,500 5,485
o Gilead Sciences, Inc. 109,300 5,966
Guidant Corp. 166,072 8,471
HCA, Inc. 275,472 10,537
Health Management Associates, Inc.,
Class A 129,428 2,867
o Health Net, Inc. 66,300 2,094
o Henry Schein, Inc. 22,900 1,421
o Human Genome Sciences, Inc. 67,000 932
o Humana, Inc. 87,400 1,773
o Idec Pharmaceuticals Corp. 83,600 2,937
o IDEXX Laboratories, Inc. 17,900 847
o Igen International, Inc. 12,400 719
Invacare Corp. 16,200 665
o IVAX Corp. 107,125 2,063
(10) Johnson & Johnson 1,604,220 80,740
o King Pharmaceuticals, Inc. 135,166 1,811
o Laboratory Corp. of America
Holdings 78,900 2,797
o LifePoint Hospitals, Inc. 20,600 530
o Lincare Holdings, Inc. 55,000 2,142
Manor Care, Inc. 50,200 1,671
McKesson Corp. 155,328 4,702
46 See financial notes.
SCHWAB 1000 FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Medco Health Solutions, Inc. 145,022 4,815
Medicis Pharmaceutical Corp.,
Class A 14,100 893
o Medimmune, Inc. 141,450 3,771
Medtronic, Inc. 656,400 29,912
Merck & Co., Inc. 1,209,208 53,507
o Mid Atlantic Medical
Services, Inc. 26,900 1,571
o Millennium Pharmaceuticals, Inc. 159,520 2,540
Mylan Laboratories, Inc. 149,212 3,603
o NBTY, Inc. 34,500 940
o Neurocrine Biosciences, Inc. 19,000 890
Omnicare, Inc. 53,300 2,044
o Oxford Health Plans, Inc. 45,500 1,843
o Patterson Dental Co. 37,400 2,393
o Pediatrix Medical Group, Inc. 13,200 706
(4) Pfizer, Inc. 4,215,412 133,207
o Pharmaceutical Product
Development, Inc. 28,800 866
o Quest Diagnostics 56,300 3,809
o Renal Care Group, Inc. 25,100 942
o Respironics, Inc. 17,400 725
Schering-Plough Corp. 792,800 12,106
o SICOR, Inc. 64,200 1,721
o St. Jude Medical, Inc. 96,600 5,618
o Steris Corp. 36,000 750
Stryker Corp. 106,900 8,671
o Techne Corp. 21,600 752
o Tenet Healthcare Corp. 252,409 3,483
o Triad Hospitals, Inc. 38,900 1,195
UnitedHealth Group, Inc. 321,400 16,353
o Universal Health Services,
Class B 31,400 1,477
o Varian Medical Systems, Inc. 37,300 2,385
o Vertex Pharmaceuticals, Inc. 39,800 522
o Watson Pharmaceuticals, Inc. 57,500 2,258
o WellPoint Health Networks, Inc. 79,350 7,054
Wyeth 718,900 31,732
o Zimmer Holdings, Inc. 123,600 7,887
---------
757,428
HOUSEHOLD PRODUCTS 2.1%
--------------------------------------------------------------------------
Alberto-Culver Co., Class B 32,300 2,048
Avon Products, Inc. 128,400 8,726
Church & Dwight Co., Inc. 20,800 775
Clorox Co. 116,400 5,273
Colgate-Palmolive Co. 289,900 15,420
The Dial Corp. 49,500 1,188
The Estee Lauder Cos., Inc.,
Class A 67,000 2,505
The Gillette Co. 550,910 17,574
International Flavors &
Fragrances, Inc. 51,000 1,688
Procter & Gamble Co. 700,300 68,833
---------
124,030
INSURANCE 4.5%
--------------------------------------------------------------------------
21st Century Insurance Group 44,500 628
Aetna, Inc. 85,265 4,895
AFLAC, Inc. 276,900 10,101
o Alleghany Corp. 4,242 855
The Allstate Corp. 379,048 14,972
AMBAC Financial Group, Inc. 61,200 4,329
American Financial Group, Inc. 36,000 802
(8) American International
Group, Inc. 1,408,771 85,696
American National Insurance Co. 13,700 1,138
AmerUs Group Co. 20,200 763
AON Corp. 169,112 3,704
Arthur J. Gallagher & Co. 48,300 1,410
Brown & Brown, Inc. 37,900 1,154
Chubb Corp. 101,200 6,761
CIGNA Corp. 76,400 4,359
Cincinnati Financial Corp. 86,014 3,520
o CNA Financial Corp. 118,200 2,551
Commerce Group, Inc. 16,800 668
Erie Indemnity Co., Class A 33,300 1,331
Fidelity National Financial, Inc. 79,222 2,450
First American Corp. 40,900 1,172
Hartford Financial Services
Group, Inc. 153,100 8,405
HCC Insurance Holdings, Inc. 32,400 944
See financial notes. 47
SCHWAB 1000 FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Hilb, Rogal & Hamilton Co. 18,400 552
Jefferson-Pilot Corp. 76,587 3,656
John Hancock Financial
Services, Inc. 155,900 5,511
Lincoln National Corp. 96,000 3,833
Loews Corp. 100,400 4,317
o Markel Corp. 5,200 1,312
Marsh & McLennan Cos., Inc. 287,700 12,299
MBIA, Inc. 77,500 4,620
Mercury General Corp. 28,200 1,340
MGIC Investment Corp. 54,200 2,781
Mony Group, Inc. 24,300 778
Nationwide Financial Services, Inc.,
Class A 29,300 995
Odyssey Re Holdings Corp. 33,900 711
Old Republic International Corp. 71,775 2,580
The PMI Group, Inc. 50,700 1,938
Principal Financial Group, Inc. 175,200 5,493
The Progressive Corp. 117,200 8,649
Protective Life Corp. 35,800 1,162
Prudential Financial, Inc. 294,400 11,376
Radian Group, Inc. 50,700 2,682
Reinsurance Group of America, Inc. 25,600 1,023
Safeco Corp. 73,400 2,694
St. Paul Cos., Inc. 122,054 4,654
Stancorp Financial Group, Inc. 15,200 958
Torchmark Corp. 63,000 2,764
Transatlantic Holdings, Inc. 29,300 2,247
Travelers Property Casualty Corp.,
Class B 540,999 8,856
Unitrin, Inc. 35,100 1,299
UnumProvident Corp. 159,371 2,609
W.R. Berkley Corp. 44,550 1,528
---------
267,825
MEDIA 4.4%
--------------------------------------------------------------------------
Belo Corp., Class A 60,600 1,652
o Cablevision Systems Corp., NY Group,
Class A 123,200 2,489
Clear Channel
Communications, Inc. 331,629 13,537
o Comcast Corp., Class A 1,214,780 41,205
o Cox Communications, Inc.,
Class A 318,586 10,854
Dow Jones & Co., Inc. 44,850 2,331
The E.W. Scripps Co., Class A 43,475 4,039
o EchoStar Communications Corp.,
Class A 135,000 5,173
o Emmis Communications Corp.,
Class A 27,700 614
o Entercom Communications
Corp. 28,000 1,283
o Fox Entertainment Group, Inc.,
Class A 189,700 5,255
Gannett Co., Inc. 146,900 12,356
Harte-Hanks, Inc. 47,300 940
Hollinger International, Inc. 57,400 771
o InterActiveCorp 356,927 13,103
John Wiley & Sons, Class A 32,200 837
Knight-Ridder, Inc. 44,800 3,285
Lee Enterprises, Inc. 23,100 974
McClatchy Co., Class A 25,900 1,676
The McGraw-Hill Cos., Inc. 102,750 6,879
Media General, Inc., Class A 12,100 799
Meredith Corp. 27,700 1,344
o Metro-Goldwyn-Mayer, Inc. 98,955 1,579
New York Times Co., Class A 80,726 3,837
o PanAmSat Corp. 79,900 1,654
R.R. Donnelley & Sons Co. 61,300 1,594
o Radio One, Inc., Class A 54,400 872
The Reader's Digest Association, Inc.,
Class A 50,800 748
o Scholastic Corp. 20,400 631
o Time Warner, Inc. 2,438,430 37,283
Tribune Co. 168,800 8,280
o Univision Communications, Inc.,
Class A 172,910 5,870
o Valassis Communications, Inc. 27,300 707
Viacom, Inc., Class B 947,779 37,788
The Walt Disney Co. 1,102,421 24,959
Washington Post, Class B 5,100 3,761
o Westwood One, Inc. 55,200 1,652
---------
262,611
48 See financial notes.
SCHWAB 1000 FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
MISCELLANEOUS 0.6%
--------------------------------------------------------------------------
3M Co. 424,000 33,441
MISCELLANEOUS FINANCE 8.8%
--------------------------------------------------------------------------
A.G. Edwards, Inc. 47,043 1,905
o Affiliated Managers Group, Inc. 11,400 827
Allied Capital Corp. 64,700 1,608
American Express Co. 696,700 32,696
o AmeriCredit Corp. 84,500 1,132
o Ameritrade Holding Corp. 229,200 3,126
Astoria Financial Corp. 45,300 1,569
The Bear Stearns Cos., Inc. 54,071 4,123
o Berkshire Hathaway, Inc., Class A 621 48,320
o BOK Financial Corp. 29,686 1,122
Capital One Financial Corp. 123,550 7,512
/ The Charles Schwab Corp. 730,197 9,901
Charter One Financial, Inc. 121,704 3,890
Chicago Mercantile Exchange 18,600 1,264
(5) Citigroup, Inc. 2,781,701 131,853
Commercial Federal Corp. 23,500 605
Countrywide Financial Corp. 74,885 7,872
Downey Financial Corp. 14,600 670
o E*TRADE Group, Inc. 195,300 2,012
Eaton Vance Corp. 36,000 1,256
Fannie Mae 526,800 37,766
Federated Investors, Inc.,
Class B 59,150 1,635
Franklin Resources, Inc. 135,700 6,435
Freddie Mac 376,400 21,127
Golden West Financial Corp. 81,900 8,225
Goldman Sachs Group, Inc. 257,100 24,142
GreenPoint Financial Corp. 77,700 2,420
Independence Community
Bank Corp. 29,700 1,091
IndyMac Bancorp, Inc. 28,800 847
International Bancshares Corp. 20,500 941
o Investment Technology Group, Inc. 25,000 497
Investors Financial Services Corp. 33,500 1,184
Janus Capital Group, Inc. 127,400 1,801
Jefferies Group, Inc. 30,000 930
LaBranche & Co., Inc. 31,000 328
Legg Mason, Inc. 35,600 2,964
Lehman Brothers Holdings, Inc. 131,560 9,472
Leucadia National Corp. 32,700 1,373
MBNA Corp. 688,880 17,050
Merrill Lynch & Co., Inc. 505,500 29,926
Moody's Corp. 80,500 4,655
Morgan Stanley 587,110 32,215
New York Community
Bancorp., Inc. 76,400 2,766
Nueberger Berman, Inc. 38,200 1,656
Nuveen Investments, Inc.,
Class A 48,500 1,358
o Providian Financial Corp. 155,900 1,732
Raymond James Financial, Inc. 25,200 1,028
Roslyn Bancorp., Inc. 43,050 1,160
SEI Investments Co. 55,100 1,605
SLM Corp. 245,250 9,604
Sovereign Bancorp., Inc. 156,500 3,257
Staten Island Bancorp., Inc. 31,400 626
Student Loan Corp. 10,500 1,360
T. Rowe Price Group, Inc. 65,600 2,699
Waddell & Reed Financial, Inc.,
Class A 44,200 980
Washington Federal, Inc. 36,181 953
Washington Mutual, Inc. 504,910 22,090
Webster Financial Corp. 24,000 1,073
Wesco Financial Corp. 3,800 1,248
---------
525,482
NON-DURABLES & ENTERTAINMENT 1.2%
--------------------------------------------------------------------------
o American Greetings Corp., Class A 37,600 802
Applebee's International, Inc. 28,650 1,075
o Brinker International, Inc. 52,600 1,674
CBRL Group, Inc. 25,800 1,000
o The Cheesecake Factory 26,350 1,052
Darden Restaurants, Inc. 88,950 1,863
o Electronic Arts, Inc. 79,500 7,874
Fortune Brands, Inc. 79,600 5,186
Hasbro, Inc. 93,187 2,031
International Game Technology 185,900 6,088
See financial notes. 49
SCHWAB 1000 FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
International Speedway Corp.,
Class A 27,600 1,174
o Krispy Kreme Doughnuts, Inc. 31,200 1,352
Lancaster Colony Corp. 18,900 751
Mattel, Inc. 235,720 4,564
McDonald's Corp. 685,700 17,149
Outback Steakhouse, Inc. 40,375 1,696
o Panera Bread Co., Class A 15,200 611
Regis Corp. 22,600 859
Ruby Tuesday, Inc. 33,300 911
o Starbucks Corp. 209,600 6,623
Wendy's International, Inc. 60,100 2,227
o Yum! Brands, Inc. 163,620 5,586
---------
72,148
NON-FERROUS METALS 0.4%
--------------------------------------------------------------------------
Alcoa, Inc. 456,195 14,402
Engelhard Corp. 66,387 1,897
Freeport-McMoran Copper &
Gold, Inc., Class B 89,694 3,476
o Phelps Dodge Corp. 48,200 2,976
---------
22,751
OIL: DOMESTIC 0.9%
--------------------------------------------------------------------------
Amerada Hess Corp. 47,800 2,467
Ashland, Inc. 35,400 1,318
Chesapeake Energy Corp. 112,500 1,342
ConocoPhillips 368,078 21,036
Diamond Offshore Drilling, Inc. 67,700 1,249
Kerr-McGee Corp. 57,102 2,370
Marathon Oil Corp. 166,500 4,923
Murphy Oil Corp. 49,740 2,934
o National-Oilwell, Inc. 44,200 843
o Newfield Exploration Co. 29,300 1,164
o Patterson-UTI Energy, Inc. 43,200 1,235
o Pioneer Natural Resources Co. 63,300 1,674
Pogo Producing Co. 33,800 1,413
o Pride International, Inc. 70,000 1,147
Sunoco, Inc. 41,700 1,825
Unocal Corp. 138,034 4,373
o Varco International, Inc. 50,400 886
XTO Energy, Inc. 98,633 2,335
---------
54,534
OIL: INTERNATIONAL 2.9%
--------------------------------------------------------------------------
ChevronTexaco Corp. 576,946 42,867
(6) Exxon Mobil Corp. 3,591,830 131,389
---------
174,256
OPTICAL & PHOTO 0.2%
--------------------------------------------------------------------------
o Corning, Inc. 716,141 7,863
Eastman Kodak Co. 155,800 3,806
Imation Corp. 18,400 627
o Ingram Micro, Inc., Class A 78,400 1,160
---------
13,456
PAPER & FOREST PRODUCTS 0.8%
--------------------------------------------------------------------------
Boise Cascade Corp. 30,400 853
Bowater, Inc. 28,800 1,176
Georgia-Pacific Corp. 136,688 3,592
International Paper Co. 257,945 10,150
Kimberly-Clark Corp. 273,960 14,468
MeadWestvaco Corp. 106,053 2,749
o Packaging Corp. of America 54,400 1,072
Rayonier, Inc. 21,750 914
o Smurfit-Stone Container Corp. 130,900 2,029
Temple-Inland, Inc. 29,900 1,615
Weyerhaeuser Co. 117,800 7,095
---------
45,713
PRODUCER GOODS & MANUFACTURING 4.4%
--------------------------------------------------------------------------
o AGCO Corp. 39,100 704
o American Standard Cos., Inc. 39,200 3,752
Ametek, Inc. 17,200 809
Aptargroup, Inc. 18,600 666
Avery Dennison Corp. 59,200 3,113
Blyth, Inc. 24,100 674
Caterpillar, Inc. 186,900 13,696
Deere & Co. 130,500 7,911
Dover Corp. 109,200 4,261
Emerson Electric Co. 227,400 12,905
50 See financial notes.
SCHWAB 1000 FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Fastenal Co. 41,400 1,841
o Fisher Scientific International,
Inc. 28,500 1,147
=(1) General Electric Co. 5,413,500 157,046
Graco, Inc. 24,800 945
Harsco Corp. 21,100 808
Herman Miller, Inc. 39,000 896
HON Industries, Inc. 30,700 1,259
Honeywell International, Inc. 463,263 14,181
Hubbell, Inc., Class B 30,838 1,321
IDEX Corp. 16,900 628
Illinois Tool Works, Inc. 167,442 12,315
Johnson Controls, Inc. 48,100 5,172
Kennametal, Inc. 18,300 675
o Millipore Corp. 25,200 1,105
Pall Corp. 66,933 1,566
Parker Hannifin Corp. 63,475 3,235
Pentair, Inc. 25,700 1,054
Precision Castparts Corp. 27,300 1,123
Roper Industries, Inc. 18,300 904
Snap-On, Inc. 30,450 893
o SPX Corp. 43,800 2,108
Teleflex, Inc. 20,500 943
The Timken Co. 44,400 745
W.W. Grainger, Inc. 49,600 2,271
---------
262,672
RAILROAD & SHIPPING 0.4%
--------------------------------------------------------------------------
Alexander & Baldwin, Inc. 21,500 667
Burlington Northern Santa Fe
Corp. 199,553 5,775
CSX Corp. 120,800 3,844
GATX Corp. 25,500 573
Norfolk Southern Corp. 210,600 4,244
Union Pacific Corp. 137,661 8,617
---------
23,720
REAL PROPERTY 1.4%
--------------------------------------------------------------------------
AMB Property Corp. 42,900 1,287
Annaly Mortgage
Management, Inc. 49,200 804
Apartment Investment & Management
Co., Class A 50,800 2,078
Archstone-Smith Trust 101,000 2,697
Arden Realty, Inc. 32,900 920
AvalonBay Communities, Inc. 37,800 1,726
Boston Properties, Inc. 51,600 2,283
BRE Properties, Class A 26,600 861
Camden Property Trust 22,300 883
CarrAmerica Realty Corp. 27,700 833
Catellus Development Corp. 48,100 1,071
CBL & Associates Properties, Inc. 15,500 826
Centerpoint Properties Trust 12,000 815
Chelsea Property Group, Inc. 23,600 1,161
Cousins Properties, Inc. 25,400 730
Crescent Real Estate Equity Co. 52,000 798
Developers Diversified Realty
Corp. 46,400 1,341
Duke Realty Corp. 72,200 2,114
Equity Office Properties Trust 218,200 6,112
Equity Residential 146,300 4,279
Federal Realty Investment Trust 26,600 1,010
First Industrial Realty Trust 20,100 649
Forest City Enterprises, Inc.,
Class A 25,750 1,141
General Growth Properties, Inc. 38,400 2,938
Health Care Property Investors,
Inc. 34,700 1,618
Health Care Real Estate Investment
Trust, Inc. 22,800 756
Healthcare Realty Trust, Inc. 22,000 743
Heritage Property Investment
Trust 21,600 609
Highwoods Properties, Inc. 27,800 689
Hospitality Properties Trust 32,600 1,195
o Host Marriott Corp. 156,700 1,638
HRPT Properties Trust 76,200 713
iStar Financial, Inc. 53,000 2,017
Kimco Realty Corp. 59,200 2,466
Liberty Property Trust 42,100 1,532
The Macerich Co. 28,100 1,130
Mack-Cali Realty Corp. 30,000 1,131
The Mills Corp. 24,400 996
New Plan Excel Realty Trust 50,400 1,144
Pan Pacific Retail Properties, Inc. 20,700 918
See financial notes. 51
SCHWAB 1000 FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Plum Creek Timber Co., Inc. 98,100 2,585
Prentiss Properties Trust 22,300 674
ProLogis 96,808 2,860
Public Storage, Inc. 68,000 2,720
Realty Income Corp. 18,200 717
Reckson Associates Realty Corp. 26,000 578
Regency Centers Corp. 32,500 1,205
The Rouse Co. 47,200 2,030
Shurgard Storage Centers, Inc.,
Class A 24,200 876
Simon Property Group, Inc. 103,600 4,670
The St. Joe Co. 39,900 1,318
Thornburg Mortgage, Inc. 35,500 967
Trizec Properties, Inc. 78,100 1,043
United Dominion Realty Trust, Inc. 64,700 1,129
Vornado Realty Trust 60,400 3,053
Weingarten Realty Investment 27,000 1,168
---------
86,245
RETAIL 7.3%
--------------------------------------------------------------------------
o 99 Cents Only Stores 38,566 1,148
o Abercrombie & Fitch Co., Class A 52,700 1,502
o Advance Auto Parts, Inc. 20,600 1,611
Albertson's, Inc. 203,542 4,130
o Amazon.com, Inc. 215,400 11,722
o Autonation, Inc. 162,600 3,041
o AutoZone, Inc. 47,900 4,603
o Barnes & Noble, Inc. 35,100 1,046
o Bed, Bath & Beyond, Inc. 160,200 6,767
o Best Buy Co., Inc. 173,150 10,096
o Big Lots, Inc. 60,400 907
o BJ's Wholesale Club, Inc. 36,400 935
o Borders Group, Inc. 41,400 938
o Carmax, Inc. 55,600 1,752
o Chico's FAS, Inc. 46,200 1,734
Circuit City Stores, Inc. 109,300 1,043
Claire's Stores, Inc. 25,400 983
o Costco Wholesale Corp. 246,208 8,708
CVS Corp. 212,414 7,473
Dillards, Inc., Class A 44,100 713
Dollar General Corp. 179,369 4,030
o Dollar Tree Stores, Inc. 61,300 2,340
Family Dollar Stores, Inc. 91,900 4,008
Federated Department
Stores, Inc. 102,100 4,855
Foot Locker, Inc. 76,900 1,376
The Gap, Inc. 481,700 9,191
Home Depot, Inc. 1,242,097 46,045
J.C. Penney Co., Inc.
Holding Co. 146,300 3,460
o Kohl's Corp. 183,700 10,300
o Kroger Co. 407,530 7,128
Limited Brands, Inc. 278,968 4,910
Lowe's Cos., Inc. 423,600 24,963
The May Department
Stores Co. 156,350 4,372
Michaels Stores, Inc. 36,900 1,752
o The Neiman Marcus Group, Inc.,
Class A 25,000 1,189
Nordstrom, Inc. 73,100 2,229
o O'Reilly Automotive, Inc. 27,800 1,203
o Office Depot, Inc. 163,548 2,442
o Payless Shoesource, Inc. 35,400 468
PETsMART, Inc. 76,500 1,959
Pier 1 Imports, Inc. 48,100 1,111
RadioShack Corp. 96,532 2,895
o Rent-A-Center, Inc. 53,750 1,680
o Rite Aid Corp. 278,300 1,595
Ross Stores, Inc. 40,500 2,025
o Safeway, Inc. 236,880 4,998
o Saks, Inc. 74,440 1,035
Sears, Roebuck & Co. 166,600 8,768
o Staples, Inc. 264,160 7,085
Talbots, Inc. 30,000 986
Target Corp. 490,800 19,504
Tiffany & Co. 77,600 3,682
TJX Cos., Inc. 279,900 5,875
o Toys `R' Us, Inc. 115,080 1,496
=(3) Wal-Mart Stores, Inc. 2,361,500 139,210
52 See financial notes.
SCHWAB 1000 FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Walgreen Co. 552,300 19,231
o Whole Foods Market, Inc. 31,900 1,890
o Williams-Sonoma, Inc. 71,400 2,523
Winn-Dixie Stores, Inc. 73,300 593
o Zale Corp. 13,760 712
---------
435,966
STEEL 0.1%
--------------------------------------------------------------------------
Nucor Corp. 43,300 2,374
United States Steel Corp. 53,260 1,260
Worthington Industries, Inc. 51,600 752
---------
4,386
TELEPHONE 3.3%
--------------------------------------------------------------------------
Adtran, Inc. 21,400 1,456
Alltel Corp. 170,667 8,067
AT&T Corp. 425,017 7,901
o AT&T Wireless Services, Inc. 1,466,121 10,629
BellSouth Corp. 997,100 26,234
CenturyTel, Inc. 78,087 2,792
o Citizens Communications Co. 149,718 1,864
o Level 3 Communications, Inc. 351,400 1,894
o Liberty Media Corp., Class A 1,334,100 13,461
o Nextel Communications, Inc.,
Class A 557,600 13,494
o Nextel Partners, Inc., Class A 93,100 1,119
o Qwest Communications
International, Inc. 904,647 3,193
SBC Communications, Inc. 1,793,428 43,006
Sprint Corp. (FON Group) 486,368 7,782
o Sprint Corp. (PCS Group) 549,121 2,389
Telephone & Data Systems, Inc. 30,600 1,916
o U.S. Cellular Corp. 46,700 1,581
Verizon Communications,
Inc. 1,489,393 50,044
---------
198,822
TOBACCO 0.9%
--------------------------------------------------------------------------
Altria Group, Inc. 1,096,200 50,973
R.J. Reynolds Tobacco Holdings,
Inc. 45,800 2,200
UST, Inc. 89,900 3,059
---------
56,232
TRAVEL & RECREATION 0.4%
--------------------------------------------------------------------------
Brunswick Corp. 46,900 1,392
o Extended Stay America, Inc. 48,800 717
Harrah's Entertainment, Inc. 60,100 2,614
Hilton Hotels Corp. 202,567 3,209
Mandalay Resort Group 35,800 1,405
Marriott International, Inc.,
Class A 125,700 5,430
o MGM MIRAGE 82,200 2,918
o Park Place Entertainment Corp. 163,000 1,565
Speedway Motorsports, Inc. 22,000 636
Starwood Hotels & Resorts
Worldwide, Inc. 107,700 3,633
Station Casinos, Inc. 30,100 895
---------
24,414
TRUCKING & FREIGHT 0.2%
--------------------------------------------------------------------------
C.H. Robinson Worldwide, Inc. 46,000 1,802
CNF, Inc. 25,700 900
Expeditors International
Washington, Inc. 56,200 2,110
Heartland Express, Inc. 26,100 648
o J.B. Hunt Transport Services, Inc. 41,000 1,041
Paccar, Inc. 62,280 4,918
Ryder Systems, Inc. 32,500 975
o Swift Transportation Co., Inc. 43,400 973
Werner Enterprises, Inc. 41,500 749
---------
14,116
UTILITIES: ELECTRIC & GAS 2.9%
--------------------------------------------------------------------------
o The AES Corp. 328,906 2,878
AGL Resources, Inc. 32,300 909
Allete, Inc. 46,700 1,411
Alliant Energy Corp. 57,800 1,391
Ameren Corp. 87,430 3,904
American Electric Power
Co., Inc. 211,820 5,971
Atmos Energy Corp. 26,400 647
o Calpine Corp. 196,500 906
Centerpoint Energy, Inc. 164,917 1,618
Cinergy Corp. 94,465 3,430
See financial notes. 53
SCHWAB 1000 FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o CMS Energy Corp. 75,000 609
Consolidated Edison, Inc. 121,800 4,929
Constellation Energy Group, Inc. 89,950 3,271
Dominion Resources, Inc. 174,016 10,719
DPL, Inc. 65,692 1,197
DTE Energy Co. 91,183 3,363
Duke Energy Corp. 487,362 8,846
Duquesne Light Holdings, Inc. 38,700 622
o Edison International 182,400 3,595
El Paso Corp. 317,646 2,332
Energy East Corp. 78,184 1,755
Entergy Corp. 123,421 6,652
Equitable Resources, Inc. 32,600 1,343
Exelon Corp. 175,987 11,166
FirstEnergy Corp. 175,098 6,022
FPL Group, Inc. 99,000 6,310
Great Plains Energy, Inc. 37,600 1,199
Hawaiian Electric Industries, Inc. 19,100 874
KeySpan Corp. 85,434 2,988
Kinder Morgan, Inc. 67,200 3,599
MDU Resources Group, Inc. 59,700 1,351
National Fuel Gas Co. 41,700 932
Nicor, Inc. 22,800 781
NiSource, Inc. 139,880 2,897
Northeast Utilities, Inc. 70,500 1,328
NSTAR 27,500 1,284
OGE Energy Corp. 45,100 1,029
Oneok, Inc. 37,800 752
Peoples Energy Corp. 18,500 748
Pepco Holdings, Inc. 91,525 1,611
o PG&E Corp. 222,258 5,434
Philadelphia Suburban Corp. 38,700 914
Piedmont Natural Gas Co. 17,200 683
Pinnacle West Capital Corp. 49,000 1,791
PPL Corp. 95,120 3,797
Progress Energy, Inc. 131,100 5,650
Public Service Enterprise
Group, Inc. 121,200 4,953
Puget Energy, Inc. 48,300 1,098
Questar Corp. 44,500 1,413
SCANA Corp. 59,600 2,044
Sempra Energy 120,638 3,354
The Southern Co. 392,100 11,685
TECO Energy, Inc. 100,800 1,324
TXU Corp. 173,012 3,948
UGI Corp. 21,600 665
Vectren Corp. 40,000 944
WGL Holdings, Inc. 25,300 700
Williams Cos., Inc. 274,309 2,798
Wisconsin Energy Corp. 62,200 2,037
WPS Resources Corp. 16,600 736
Xcel Energy, Inc. 215,335 3,531
---------
176,668
SHORT-TERM INVESTMENT
0.0% of net assets
Provident Institutional
TempFund 466,624 467
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
U.S. TREASURY OBLIGATION
0.0% of net assets
= U.S. Treasury Bill
0.93%, 12/18/03 200 200
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
54 See financial notes.
SCHWAB 1000 FUND(R)
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
COLLATERAL INVESTED FOR SECURITIES ON LOAN
18.2% of net assets
COMMERCIAL PAPER & OTHER CORPORATE OBLIGATIONS
--------------------------------------------------------------------------
American Express Centurion Bank
1.11%, 12/12/03 16,589 16,589
1.11%, 01/27/04 10,890 10,890
American Express Credit Corp.
1.11%, 04/16/04 45,006 45,006
1.09%, 05/13/04 10,308 10,308
Canadian Imperial Bank Corp.
1.09%, 05/28/04 29,321 29,316
CC USA, Inc.
1.08%, 11/17/03 15,856 15,824
Concord Minutemen Capital Corp.
1.11%, 01/09/04 24,998 24,933
1.08%, 11/14/03 25,557 25,509
1.08%, 11/18/03 27,683 27,626
1.07%, 11/19/03 22,412 22,395
Crown Point Funding Corp.
1.11%, 01/16/04 35,351 35,265
1.08%, 11/14/03 28,474 28,416
Depfa Bank PLC
1.08%, 11/18/03 41,117 41,005
1.08%, 12/22/03 5,090 5,076
Fairway Finance Corp.
1.10%, 01/12/04 10,198 10,169
General Electric Capital Corp.
1.08%, 05/10/04 42,650 42,650
Lexington Parker
1.07%, 11/06/03 16,286 16,271
Svenska Handelsbanken
1.39%, 10/27/04 40,561 40,557
Tulip Funding Corp.
1.07%, 11/10/03 15,580 15,565
Westdeutsche Landesbank AG
1.09%, 09/23/04 23,350 22,345
1.09%, 09/29/04 12,558 12,555
1.08%, 10/12/04 2,114 2,114
---------- ----------
500,384
SHORT-TERM INVESTMENTS
--------------------------------------------------------------------------
Wells Fargo Bank, Time Deposit
1.06%, 11/03/03 69,773 69,773
SECURITY AND NUMBER OF SHARES
OTHER INVESTMENT COMPANIES
--------------------------------------------------------------------------
Institutional Money Market
Trust 515,213,849 515,214
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN. For totals, please see the
first page of holdings for this fund.
See financial notes. 55
SCHWAB 1000 FUND(R)
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value
(including $1,047,251 of securities on loan) $5,962,336 a
Collateral held for securities on loan 1,085,371
Receivables:
Fund shares sold 3,844
Interest 2
Dividends 7,666
Investments sold 816
Due from broker for futures 3
Income from securities on loan 144
Prepaid expenses + 80
--------------
TOTAL ASSETS 7,060,262
LIABILITIES
- --------------------------------------------------------------------------------
Collateral held for securities on loan 1,085,371
Payables:
Fund shares redeemed 3,806
Investments bought 746
Investment adviser and administrator fees 53
Transfer agent and shareholder service fees 66
Accrued expenses + 587
--------------
TOTAL LIABILITIES 1,090,629
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 7,060,262
TOTAL LIABILITIES - 1,090,629
--------------
NET ASSETS $5,969,633
NET ASSETS BY SOURCE
Capital received from investors 4,460,996
Net investment income not yet distributed 55,633
Net realized capital losses (549,038)
Net unrealized capital gains 2,002,042 b
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $3,974,081 131,357 $30.25
Select Shares(R) $1,995,552 65,933 $30.27
Unless stated, all numbers x 1,000.
a The fund paid $3,960,400 for these securities. Not counting short-term
obligations and government securities, the fund paid $450,859 for securities
during the report period and received $268,270 from securities it sold or that
matured.
b These derive from investments and futures. As of the report date, the fund had
twelve open S&P 500 futures contracts due to expire on December 18, 2003, with
an aggregate contract value of $3,149 and net unrealized gains of $106.
FEDERAL TAX DATA
- -------------------------------------------------
PORTFOLIO COST $3,981,035
NET UNREALIZED GAINS AND LOSSES:
Gains $2,461,677
Losses + (480,376)
--------------
$1,981,301
AS OF OCTOBER 31, 2003:
NET UNDISTRIBUTED EARNINGS:
Ordinary income $55,588
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2004 $844
2005 2,606
2006 650
2007 11,853
2009 97,811
2010 250,410
2011 + 164,078
------------
$528,252
RECLASSIFICATIONS:
Net realized capital losses $415
Reclassified as:
Capital received from investors ($415)
56 See financial notes.
SCHWAB 1000 FUND(R)
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $90,420 a
Interest 58
Securities on loan + 1,168
--------------
TOTAL INVESTMENT INCOME 91,646
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments sold (169,559)
Net realized gains on futures contracts + 730
--------------
NET REALIZED LOSSES (168,829)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 1,141,108
Net unrealized gains on futures contracts + 40
--------------
NET UNREALIZED GAINS 1,141,148
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 11,814 b
Transfer agent and shareholder service fees:
Investor Shares 8,646 c
Select Shares(R) 1,730 c
Trustees' fees 33 d
Custodian fees 168
Portfolio accounting fees 776
Professional fees 56
Registration fees 116
Shareholder reports 598
Interest expense 5
Other expenses + 59
--------------
Total expenses 24,001
Expense reduction - 831 e
--------------
NET EXPENSES 23,170
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 91,646
NET EXPENSES - 23,170
--------------
NET INVESTMENT INCOME 68,476
NET REALIZED LOSSES (168,829) f
NET UNREALIZED GAINS + 1,141,148 f
--------------
INCREASE IN NET ASSETS FROM OPERATIONS $1,040,795
Unless stated, all numbers x 1,000.
a An additional $5 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. These fees are paid to
Charles Schwab & Co.
d For the fund's independent trustees only.
e Includes $407 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 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 $972,319.
See financial notes. 57
SCHWAB 1000 FUND(R)
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income $68,476 $61,586
Net realized losses (168,829) (250,220)
Net unrealized gains or losses + 1,141,148 (624,054)
-------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 1,040,795 (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, b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
SHARES SOLD
Investor Shares 23,357 $623,574 23,138 $680,418
Select Shares + 14,563 384,508 13,770 407,100
------------------------------------------------------
TOTAL SHARES SOLD 37,920 $1,008,082 36,908 $1,087,518
SHARES REINVESTED
Investor Shares 1,516 $38,050 1,048 $32,699
Select Shares + 766 19,200 539 16,793
------------------------------------------------------
TOTAL SHARES REINVESTED 2,282 $57,250 1,587 $49,492
SHARES REDEEMED
Investor Shares (21,127) ($560,404) (26,817) ($764,754)
Select Shares + (12,277) (323,765) (16,042) (456,881)
------------------------------------------------------
TOTAL SHARES REDEEMED (33,404) ($884,169) (42,859) ($1,221,635) c
NET TRANSACTIONS
IN FUND SHARES 6,798 $181,163 (4,364) ($84,625)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 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 + 6,798 1,158,646 (4,364) (952,087) d
------------------------------------------------------
END OF PERIOD 197,290 $5,969,633 190,492 $4,810,987 e
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
b The tax-basis components of distributions paid are:
CURRENT PERIOD:
Ordinary Income $63,312
Long-term capital gains $--
PRIOR PERIOD:
Ordinary Income $54,774
Long-term capital gains $--
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase.
CURRENT PERIOD:
Investor Shares $222
Select Shares + 163
-------
TOTAL $385
PRIOR PERIOD:
Investor Shares $323
Select Shares + 190
-------
TOTAL $513
Dollar amounts are net of the redemption proceeds.
d Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
e Includes distributable net investment income in the amount of $55,633 and
$50,469 for the current period and for prior period, respectively.
58 See financial notes.
SCHWAB SMALL-CAP INDEX FUND(R)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98-
INVESTOR SHARES 10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value at beginning of period 13.27 15.98 21.06 17.41 15.39
----------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.11 0.13 0.07 0.07 0.06
Net realized and unrealized gains or losses 4.98 (2.17) (2.76) 3.62 2.89
----------------------------------------------------------------------------
Total income or loss from investment operations 5.09 (2.04) (2.69) 3.69 2.95
Less distributions:
Dividends from net investment income (0.14) (0.09) (0.08) (0.04) (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)
----------------------------------------------------------------------------
Net asset value at end of period 18.22 13.27 15.98 21.06 17.41
----------------------------------------------------------------------------
Total return (%) 38.72 (13.66) (13.66) 21.22 19.96
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.56 0.49 0.49 0.49 1 0.49
Gross operating expenses 0.60 0.60 0.61 0.66 0.79
Net investment income 0.74 0.77 0.49 0.44 0.33
Portfolio turnover rate 34 44 49 54 41
Net assets, end of period ($ x 1,000,000) 886 722 804 803 452
1 The ratio of net operating expenses would have been 0.50% if certain
non-routine expenses (proxy fees) had been included.
See financial notes. 59
SCHWAB SMALL-CAP INDEX FUND(R)
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98-
SELECT SHARES(R) 10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 13.28 16.00 21.09 17.44 15.41
-----------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.14 0.14 0.11 0.11 0.07
Net realized and unrealized gains or losses 4.99 (2.18) (2.78) 3.61 2.90
-----------------------------------------------------------------------------
Total income or loss from investment operations 5.13 (2.04) (2.67) 3.72 2.97
Less distributions:
Dividends from net investment income (0.16) (0.10) (0.11) (0.07) (0.07)
Distributions from net realized gains -- (0.58) (2.31) -- (0.87)
-----------------------------------------------------------------------------
Total distributions (0.16) (0.68) (2.42) (0.07) (0.94)
-----------------------------------------------------------------------------
Net asset value at end of period 18.25 13.28 16.00 21.09 17.44
-----------------------------------------------------------------------------
Total return (%) 39.02 (13.62) (13.56) 21.37 20.14
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.41 0.38 0.38 0.38 1 0.38
Gross operating expenses 0.45 0.45 0.46 0.51 0.65
Net investment income 0.89 0.88 0.60 0.55 0.44
Portfolio turnover rate 34 44 49 54 41
Net assets, end of period ($ x 1,000,000) 759 638 727 757 447
1 The ratio of net operating expenses would have been 0.39% if certain
non-routine expenses (proxy fees) had been included.
60 See financial notes.
SCHWAB SMALL-CAP INDEX FUND(R)
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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)
- --------------------------------------------------------------------------------
99.8% COMMON STOCK 1,334,511 1,642,535
0.0% U.S. TREASURY
OBLIGATIONS 150 150
- --------------------------------------------------------------------------------
99.8% TOTAL INVESTMENTS 1,334,661 1,642,685
7.5% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 122,374 122,374
(7.3)% OTHER ASSETS AND
LIABILITIES, NET (119,767)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 1,645,292
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 99.8% of net assets
AEROSPACE / DEFENSE 0.9%
--------------------------------------------------------------------------
o Armor Holdings, Inc. 63,700 1,242
o DRS Technologies, Inc. 52,000 1,251
EDO Corp. 45,300 1,010
Engineered Support Systems, Inc. 36,900 2,495
o ESCO Technologies, Inc. 29,900 1,300
o Esterline Technologies Corp. 48,000 1,063
GenCorp, Inc. 100,300 950
o Teledyne Technologies, Inc. 73,000 1,204
o Trimble Navigation Ltd. 72,700 2,010
o Veeco Instruments, Inc. 66,270 1,680
-------
14,205
AIR TRANSPORTATION 1.0%
--------------------------------------------------------------------------
o AirTran Holdings, Inc. 165,900 2,689
o Alaska Air Group, Inc. 60,700 1,748
o Atlantic Coast Airlines
Holdings, Inc. 104,800 1,160
o Continental Airlines, Inc.,
Class B 149,300 2,852
o EGL, Inc. 107,400 1,752
o ExpressJet Holdings, Inc. 123,100 1,883
o Northwest Airlines Corp.,
Class A 195,100 2,671
SkyWest, Inc. 132,400 2,448
-------
17,203
ALCOHOLIC BEVERAGES 0.0%
--------------------------------------------------------------------------
o The Robert Mondavi Corp.,
Class A 21,500 754
APPAREL 1.3%
--------------------------------------------------------------------------
o Aeropostale, Inc. 82,500 2,545
Brown Shoe Co., Inc. 41,400 1,432
The Buckle, Inc. 49,650 1,113
o The J. Jill Group, Inc. 43,500 529
K-Swiss, Inc., Class A 40,100 1,762
Kellwood Co. 60,900 2,275
Kenneth Cole Productions, Inc.,
Class A 44,350 1,313
Oshkosh B'Gosh, Inc., Class A 26,600 574
Phillips-Van Heusen Corp. 69,600 1,193
o Quiksilver, Inc. 124,900 2,145
Russell Corp. 74,200 1,356
o Stage Stores, Inc. 42,700 1,229
Stride Rite Corp. 89,400 1,077
o Unifi, Inc. 124,100 619
Wolverine World Wide, Inc. 91,600 1,850
-------
21,012
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.6%
--------------------------------------------------------------------------
A.O. Smith Corp., Class B 67,100 2,124
o Aftermarket Technology Corp. 53,300 632
Arctic Cat, Inc. 49,500 1,115
Bandag, Inc. 45,000 1,647
o CSK Auto Corp. 99,600 1,708
See financial notes. 61
SCHWAB SMALL-CAP INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Fleetwood Enterprises, Inc. 80,300 809
o Group 1 Automotive, Inc. 50,700 1,796
Modine Manufacturing Co. 77,500 1,983
o Monaco Coach Corp. 65,900 1,588
Myers Industries, Inc. 71,100 867
Sonic Automotive, Inc. 67,400 1,530
o TBC Corp. 51,000 1,387
Thor Industries, Inc. 63,600 4,078
o United Auto Group, Inc. 91,700 2,381
Winnebago Industries, Inc. 41,800 2,437
------
26,082
BANKS 7.3%
--------------------------------------------------------------------------
Alabama National Bancorp 29,400 1,548
Allegiant Bancorp, Inc. 39,200 862
Anchor Bancorp Wisconsin, Inc. 53,300 1,327
BancFirst Corp. 16,700 901
BankAtlantic Bancorp, Inc.,
Class A 119,900 2,013
Boston Private Financial
Holdings, Inc. 48,600 1,238
Capital City Bank Group, Inc. 31,250 1,208
Capitol Bancorp Ltd. 28,300 750
Chemical Financial Corp. 54,187 1,883
Chittenden Corp. 84,025 2,704
City Holding Co. 38,400 1,299
Community Bank System, Inc. 29,900 1,458
Community Trust Bancorp, Inc. 28,000 903
Connecticut Bancshares, Inc. 24,300 1,256
Corus Bankshares, Inc. 30,700 1,805
Dime Community
Bancshares, Inc. 58,850 1,641
Financial Institutions, Inc. 27,000 675
First Busey Corp., Class A 30,800 831
First Charter Corp. 69,400 1,423
First Commonwealth Financial
Corp. 134,100 1,851
First Essex Bancorp, Inc. 17,000 925
First Federal Capital Corp. 46,500 1,022
First Financial Bancorp 101,830 1,690
First Financial Bancshares, Inc. 35,731 1,502
First Merchants Corp. 40,530 1,083
First Republic Bank 34,100 1,221
o FirstFed Financial Corp. 39,600 1,782
Frontier Financial Corp. 42,900 1,345
Gold Banc Corp., Inc. 92,000 1,189
Greater Bay Bancorp 118,000 3,181
Hancock Holding Co. 34,917 1,998
Harbor Florida Bancshares, Inc. 54,700 1,472
Harleysville National Corp. 54,693 1,652
Independent Bank Corp. 33,400 976
Integra Bank Corp. 39,570 827
Irwin Financial Corp. 59,200 1,659
MAF Bancorp., Inc. 60,225 2,525
Main Street Banks, Inc. 40,000 1,043
Mid-State Bancshares 53,700 1,306
Midwest Banc Holdings, Inc. 41,300 973
o Movie Gallery, Inc. 72,000 1,489
National Penn Bancshares, Inc. 55,710 1,660
NBT Bancorp., Inc. 75,600 1,588
Net.B@nk, Inc. 108,600 1,489
OceanFirst Financial Corp. 32,200 842
Old Second Bancorp, Inc. 15,400 708
Omega Financial Corp. 17,700 640
Oriental Financial Group 40,650 1,041
PFF Bancorp, Inc. 37,800 1,410
Prosperity Bancshares, Inc. 43,600 1,007
Provident Bankshares Corp. 56,194 1,744
Republic Bancorp, Inc. 130,420 1,894
Riggs National Corp. 64,800 1,070
S&T Bancorp, Inc. 60,600 1,832
o S1 Corp. 159,000 1,285
Sandy Spring Bancorp, Inc. 33,700 1,216
Seacoast Banking Corp.
of Florida 31,700 561
Second Bancorp., Inc. 22,300 618
o Silicon Valley Bancshares 78,700 2,762
= The South Financial Group, Inc. 114,200 2,984
= Southwest Bancorp of Texas, Inc. 78,000 2,801
Sterling Bancorp 34,000 993
Sterling Bancshares, Inc. 98,950 1,138
Suffolk Bancorp 26,100 914
Susquehanna Bancshares, Inc. 91,075 2,281
= Texas Regional Bancshares, Inc.,
Class A 67,219 2,437
Tompkins Trustco, Inc. 16,800 816
62 See financial notes.
SCHWAB SMALL-CAP INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Troy Financial Corp. 21,700 765
The Trust Co. of New Jersey 43,100 1,354
Trustco Bank Corp. 168,420 2,198
UCBH Holdings, Inc. 103,100 3,682
UMB Financial Corp. 50,293 2,516
Umpqua Holdings Corp. 66,700 1,364
United Community Financial
Corp. 80,600 893
United National Bancorp. 43,300 1,522
Unizan Financial Corp. 50,300 1,027
USB Holding Co., Inc. 46,200 864
WesBanco, Inc. 47,000 1,253
WestCorp., Inc. 103,300 3,907
Wintrust Financial Corp. 43,300 1,877
WSFS Financial Corp. 16,500 704
-------
120,093
BUSINESS MACHINES & SOFTWARE 2.6%
--------------------------------------------------------------------------
o Adaptec, Inc. 247,200 2,104
o Advanced Digital Information Corp. 142,400 2,314
Analogic Corp. 29,600 1,292
=o Arbitron, Inc. 68,700 2,714
o Ascential Software Corp. 129,375 2,871
=o Avocent Corp. 104,786 3,961
Black Box Corp. 41,300 1,778
o Borland Software Corp. 170,500 1,514
o Cray, Inc. 152,600 1,987
o Enterasys Networks, Inc. 469,600 1,831
o Hanger Orthopedic Group, Inc. 49,800 849
o Imagistics International, Inc. 38,500 1,238
o Intergraph Corp. 106,100 2,765
o Invision Technologies, Inc. 39,600 1,076
o Iomega Corp. 118,660 654
Landamerica Financial
Group, Inc. 42,700 2,135
o LTX Corp. 111,100 1,587
o Micromuse, Inc. 179,400 1,444
o MICROS Systems, Inc. 38,700 1,567
o PalmOne, Inc. 72,000 1,032
o PalmSource, Inc. 22,320 852
o Scansource, Inc. 27,000 1,161
o The Titan Corp. 176,800 3,734
------
42,460
BUSINESS SERVICES 13.1%
--------------------------------------------------------------------------
o 4Kids Entertainment, Inc. 31,000 758
ABM Industries, Inc. 112,200 1,746
o Advent Software, Inc. 73,400 1,344
o The Advisory Board Co. 34,700 1,263
Advo, Inc. 45,100 2,022
o Agile Software Corp. 111,500 1,223
o Altiris, Inc. 53,700 1,846
o American Management
Systems, Inc. 97,200 1,439
o AMN Healthcare Services, Inc. 64,633 977
o Ansys, Inc. 33,800 1,205
o Anteon International Corp. 77,200 2,636
o Ariba, Inc. 627,700 2,040
=o Barra, Inc. 44,700 1,699
Bowne & Co., Inc. 76,600 1,149
o Bright Horizons Family
Solutions, Inc. 28,600 1,229
The Brink's Co. 124,400 2,494
=o Brocade Communications
Systems, Inc. 591,400 3,874
o Catalina Marketing Corp. 121,300 2,141
CDI Corp. 45,500 1,490
o Cell Genesys, Inc. 81,400 1,045
o Ciber, Inc. 139,900 1,290
o Clarent Corp. 105,200 4
o(2) Cognizant Technology
Solutions Corp. 139,900 6,350
o Connetics Corp. 74,500 1,334
o CoStar Group, Inc. 36,800 1,386
o Cross Country Healthcare, Inc. 73,200 1,017
o CSG Systems International, Inc. 120,300 1,382
o Dendrite International, Inc. 88,850 1,342
o Digital Insight Corp. 74,900 1,571
o Digital River, Inc. 69,700 1,908
o Diversa Corp. 97,800 824
o Documentum, Inc. 114,500 3,406
o DoubleClick, Inc. 313,200 2,609
o E.piphany, Inc. 168,100 1,167
o Echelon Corp. 90,200 1,171
o eFunds Corp. 106,600 1,707
o Exelixis, Inc. 146,400 1,088
See financial notes. 63
SCHWAB SMALL-CAP INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Exult, Inc. 244,800 1,941
o F5 Networks, Inc. 61,100 1,528
Factset Research Systems, Inc. 77,100 3,365
o FileNet Corp. 83,100 2,220
o Forrester Research, Inc. 53,100 905
o Freemarkets, Inc. 97,100 608
o FTI Consulting, Inc. 95,100 1,892
G&K Services, Inc., Class A 46,850 1,546
o Gartner, Inc., Class B 288,500 3,517
o Genesis Health Ventures, Inc. 89,700 2,413
o Global Imaging Systems, Inc. 49,500 1,438
Grey Global Group, Inc. 3,100 2,077
o Heidrick & Struggles
International, Inc. 41,700 824
o Hyperion Solutions Corp. 89,645 3,002
o Identix, Inc. 195,032 1,121
o IDT Corp. 57,900 1,074
o IDX Systems Corp. 66,900 1,753
o Informatica Corp. 183,300 1,998
o Infospace, Inc. 70,950 1,850
o Intercept, Inc. 49,000 481
=o Internet Security Systems 113,100 1,856
o Interwoven, Inc. 242,200 918
o JDA Software Group, Inc. 65,100 1,394
John H. Harland Co. 64,000 1,743
o Keane, Inc. 144,900 1,904
o Korn/Ferry International 85,600 748
o Kroll, Inc. 89,900 2,091
o Kronos, Inc. 44,925 2,695
o Labor Ready, Inc. 89,000 967
o Macrovision Corp. 112,600 2,474
o Magma Design
Automation, Inc. 70,800 1,715
o Mantech International Corp.,
Class A 37,900 927
o MAXIMUS, Inc. 48,100 1,679
o Maxygen, Inc. 80,100 761
o Mentor Graphics Corp. 156,300 2,618
o MPS Group, Inc. 235,100 2,245
o MRO Software, Inc. 55,600 703
Nautilus Group, Inc. 76,949 1,201
o NCO Group, Inc. 59,000 1,404
NDCHealth Corp. 79,200 2,090
o NetIQ Corp. 128,700 1,562
New England Business
Service, Inc. 30,200 879
Newcastle Investment Corp. 65,700 1,537
o Openwave Systems, Inc. 140,500 1,834
o Parametric Technology Corp. 612,100 1,904
o Paxar Corp. 88,435 1,059
o Per-Se Technologies, Inc. 69,500 945
=o Polycom, Inc. 225,500 4,517
o Pre-Paid Legal Services, Inc. 39,900 1,084
o PRG-Schultz International, Inc. 142,800 678
o Progress Software Corp. 77,200 1,704
o ProQuest Co. 63,800 1,895
=o R.H. Donnelley Corp. 69,400 2,977
o Radiant Systems, Inc. 67,500 450
o RealNetworks, Inc. 362,500 2,411
o(5) Red Hat, Inc. 390,500 5,873
o Renaissance Learning, Inc. 69,900 1,759
o Resources Connection, Inc. 50,300 1,244
o Right Management
Consultants, Inc. 52,100 940
Roto-Rooter, Inc. 23,100 815
o RSA Security, Inc. 132,300 1,716
o Serena Software, Inc. 93,900 1,620
o SourceCorp 36,900 865
Spartech Corp. 65,900 1,528
o Spherion Corp. 139,800 1,216
o SRA International, Inc., Class A 37,200 1,620
The Standard Register Co. 64,100 1,128
Startek, Inc. 32,900 1,093
Strayer Education, Inc. 23,000 2,252
o Sycamore Networks, Inc. 624,500 3,123
o Sylvan Learning Systems, Inc. 94,100 2,663
o Symyx Technologies, Inc. 71,500 1,512
o Systems & Computer
Technology Corp. 77,200 1,135
o TeleTech Holdings, Inc. 169,000 1,112
o Telik, Inc. 77,700 1,579
o Tetra Tech, Inc. 123,218 2,770
o Tetra Technologies, Inc. 50,100 1,133
o Tier Technologies, Inc., Class B 37,200 381
64 See financial notes.
SCHWAB SMALL-CAP INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Trizetto Group, Inc. 112,600 766
o Tularik, Inc. 125,400 1,576
o United Online, Inc. 96,800 2,787
o UNOVA, Inc. 135,300 2,937
o URS Corp. 72,600 1,589
o Verity, Inc. 83,700 1,176
o Vignette Corp. 576,900 1,448
o Watson Wyatt & Co. Holdings 76,200 1,833
o WebEx Communications, Inc. 94,500 2,088
o webMethods, Inc. 113,600 986
o Websense, Inc. 50,700 1,186
o Wind River Systems, Inc. 177,600 1,190
-------
214,937
CHEMICALS 2.0%
--------------------------------------------------------------------------
A. Schulman, Inc. 66,900 1,270
Arch Chemicals, Inc. 53,100 1,178
o Bio-Rad Laboratories, Inc.,
Class A 57,800 3,020
Brady Corp., Class A 52,800 1,864
= Crompton Corp. 252,700 1,354
o Entegris, Inc. 162,400 2,137
= Ferro Corp. 93,100 1,911
Georgia Gulf Corp. 74,400 2,001
H.B. Fuller Co. 65,400 1,621
=o Hercules, Inc. 253,200 2,646
MacDermid, Inc. 70,300 2,101
Millennium Chemicals,
Inc. 142,800 1,431
Olin Corp. 133,900 2,331
o PolyOne Corp. 209,300 1,011
o Rogers Corp. 36,900 1,475
Rollins, Inc. 104,450 2,122
Solutia, Inc. 240,100 641
Tredegar Corp. 87,400 1,362
WD-40 Co. 38,600 1,253
Wellman, Inc. 78,300 646
------
33,375
CONSTRUCTION 2.3%
--------------------------------------------------------------------------
American Woodmark Corp. 18,600 913
o Beazer Homes USA, Inc. 30,269 3,012
Centex Construction
Products, Inc. 41,200 2,221
o Dycom Industries, Inc. 109,200 2,360
ElkCorp 45,850 1,165
o EMCOR Group, Inc. 34,200 1,289
Granite Construction, Inc. 96,225 1,924
o(8) Hovnanian Enterprises, Inc.,
Class A 67,300 5,470
o Insituform Technologies, Inc.,
Class A 60,000 858
M/I Schottenstein Homes, Inc. 33,200 1,382
o NCI Building Systems, Inc. 43,100 937
o Palm Harbor Homes, Inc. 54,300 1,007
The Ryland Group, Inc. 55,600 4,943
o Simpson Manufacturing
Co., Inc. 56,400 2,524
Standard-Pacific Corp. 72,400 3,464
o Surebeam Corp., Class A 132,000 39
Texas Industries, Inc. 47,700 1,296
o USG Corp. 98,000 1,641
Walter Industries, Inc. 95,000 1,129
------
37,574
CONSUMER DURABLES 1.0%
--------------------------------------------------------------------------
o Genlyte Group, Inc. 31,400 1,481
o Griffon Corp. 67,400 1,304
Haverty Furniture Cos., Inc. 48,500 1,006
o Helen of Troy Ltd. 64,800 1,454
Kimball International, Inc.,
Class B 87,700 1,359
o Select Comfort Corp. 73,000 2,285
Sturm Ruger & Co., Inc. 65,000 738
Thomas Industries, Inc. 40,000 1,208
Toro Co. 56,000 2,783
o United Rentals, Inc. 174,700 3,043
------
16,661
CONTAINERS 0.2%
--------------------------------------------------------------------------
Greif, Inc., Class A 50,700 1,649
o Silgan Holdings, Inc. 42,800 1,369
------
3,018
ELECTRONICS 11.3%
--------------------------------------------------------------------------
o Actel Corp. 57,300 1,546
Acuity Brands, Inc. 94,200 2,025
See financial notes. 65
SCHWAB SMALL-CAP INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Agilysys, Inc. 72,900 749
o(1) Amkor Technology, Inc. 378,000 7,125
o Andrew Corp. 346,945 4,538
o Anixter International, Inc. 82,000 1,958
o Arris Group, Inc. 177,200 1,063
o Artisan Components, Inc. 49,800 1,021
o Asyst Technologies, Inc. 88,700 1,654
o ATMI, Inc. 69,800 1,605
o Avid Technology, Inc. 67,300 3,482
o Axcelis Technologies, Inc. 227,000 2,402
Belden, Inc. 57,300 1,074
o Benchmark Electronics, Inc. 56,700 2,762
o Brooks Automation, Inc. 83,524 2,084
C&D Technologies, Inc. 59,900 1,194
o Cable Design Technologies
Corp. 102,075 984
o CCC Information Services
Group, Inc. 62,000 1,042
o Celera Genomics Group -
Applera Corp. 162,900 2,178
o Checkpoint Systems, Inc. 76,500 1,441
o ChipPAC, Inc., Class A 216,400 1,805
o CMGI, Inc. 894,500 1,682
o Coherent, Inc. 67,200 1,546
Cohu, Inc. 48,400 971
=o CommScope, Inc. 136,400 2,113
o Conexant Systems, Inc. 615,100 3,586
o Corvis Corp. 924,000 1,321
o Cox Radio, Inc., Class A 95,900 2,121
o Credence Systems Corp. 136,100 2,220
CTS Corp. 78,400 868
Cubic Corp. 61,300 1,741
o Cyberonics 51,700 1,414
o(6) Cypress Semiconductor Corp. 268,800 5,768
o Dionex Corp. 47,200 2,008
o DSP Group, Inc. 62,500 1,493
o Dupont Photomasks, Inc. 42,600 987
o Electro Rent Corp. 53,722 787
o Electro Scientific Industries, Inc. 63,200 1,552
=o Electronics for Imaging 118,700 3,217
o ESS Technology, Inc. 88,700 1,231
o Exar Corp. 90,700 1,459
o FEI Co. 74,100 1,760
o Flir Systems, Inc. 75,200 2,351
o FuelCell Energy, Inc. 84,300 1,286
o GlobespanVirata, Inc. 304,300 1,875
o Hollywood Entertainment Corp. 140,200 2,131
o Hutchinson Technology, Inc. 58,300 1,954
o Intermagnetics General Corp. 37,714 888
o Itron, Inc. 47,400 971
o Kemet Corp. 196,600 2,605
o Kopin Corp. 159,400 1,168
o Kulicke & Soffa Industries, Inc. 109,200 1,603
=o Lattice Semiconductor Corp. 258,600 2,017
o Littelfuse, Inc. 49,700 1,322
=o Macromedia, Inc. 140,200 2,679
o Mercury Computer Systems, Inc. 50,000 1,076
Methode Electronics, Class A 84,400 1,005
o MKS Instruments, Inc. 118,000 3,068
o Monolithic System Technology,
Inc. 65,300 532
o Mykrolis Corp. 92,700 1,367
o New Focus, Inc. 152,500 792
o Newport Corp. 89,000 1,403
o Omnivision Technologies, Inc. 61,300 3,482
Park Electrochemical Corp. 45,350 1,111
o Photon Dynamics, Inc. 37,500 1,418
o Pinnacle Systems, Inc. 146,300 1,017
o Planar Systems, Inc. 33,400 773
o Plantronics, Inc. 100,900 2,806
o Plexus Corp. 96,500 1,669
o Power Integrations, Inc. 67,300 2,343
o Power-One, Inc. 191,400 1,734
o Powerwave Technologies, Inc. 143,300 933
o Quantum Corp. 396,000 1,232
=o(10) Rambus, Inc. 219,700 5,440
o Rayovac Corp. 72,900 1,199
o Rudolph Technologies, Inc. 34,100 892
o ScanSoft, Inc. 222,500 1,286
o Semtech Corp. 166,700 3,701
o Silicon Image, Inc. 157,900 1,110
=o(3) Silicon Laboratories, Inc. 111,000 5,992
66 See financial notes.
SCHWAB SMALL-CAP INDEX FUND
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Silicon Storage Technology, Inc. 218,300 2,441
o Standard Microsystems Corp. 38,400 1,152
o Technitrol, Inc. 91,100 1,986
o Tekelec 138,900 2,235
=o Thomas & Betts Corp. 132,600 2,360
o THQ, Inc. 86,150 1,528
o Triquint Semiconductor, Inc. 306,700 2,199
o Varian Semiconductor Equipment
Associates, Inc. 77,900 3,766
=o Varian, Inc. 77,300 2,768
o Viasat, Inc. 59,400 1,166
o Vicor Corp. 97,000 984
o Vitesse Semiconductor Corp. 468,100 3,295
o Western Wireless Corp.,
Class A 165,900 3,218
o Wilson Greatbatch Technologies,
Inc. 47,600 1,795
o Zoran Corp. 89,300 1,488
-------
186,189
ENERGY: RAW MATERIALS 2.5%
--------------------------------------------------------------------------
o Atwood Oceanics, Inc. 32,100 831
Berry Petroleum Co., Class A 47,600 866
Cabot Oil & Gas Corp. 73,900 1,888
CARBO Ceramics, Inc. 35,900 1,508
o Dril-Quip, Inc. 39,600 594
o Evergreen Resources, Inc. 89,400 2,452
o Grey Wolf, Inc. 420,900 1,351
o Hanover Compressor Co. 165,600 1,756
o Headwaters, Inc. 65,200 1,222
o Hydril Co. 53,400 1,252
o Joy Global, Inc. 111,500 2,125
o Kirby Corp. 54,900 1,613
Massey Energy Co. 171,100 2,378
o McDermott International, Inc. 144,700 1,071
o Newpark Resources, Inc. 179,400 721
NL Industries, Inc. 109,900 1,933
o Offshore Logistics, Inc. 53,300 1,162
Penn Virginia Corp. 19,700 894
o Plains Resources, Inc. 54,700 725
o Prima Energy Corp. 29,200 812
o Range Resources Corp. 122,100 934
o Seacor Smit, Inc. 42,650 1,635
o Southwestern Energy Co. 77,800 1,509
o Swift Energy Co. 63,600 884
TC Pipelines L.P. 36,900 1,164
=o Tom Brown, Inc. 103,700 2,802
o Unit Corp. 94,700 1,836
USEC, Inc. 188,600 1,405
o W-H Energy Services, Inc. 61,300 961
------
40,284
FOOD & AGRICULTURE 1.5%
--------------------------------------------------------------------------
o 7-Eleven, Inc. 238,040 3,797
o American Italian Pasta Co.,
Class A 39,700 1,518
o Chiquita Brands International,
Inc. 90,400 1,672
Coca-Cola Bottling Co.
Consolidated 15,100 763
Delta & Pine Land Co. 87,300 1,996
o Fisher Communications, Inc. 18,900 903
Flowers Foods, Inc. 104,400 2,477
o Hain Celestial Group, Inc. 77,200 1,629
o International Multifoods Corp. 45,000 1,004
= Interstate Bakeries 101,600 1,491
o J & J Snack Foods Corp. 19,900 710
Lance, Inc. 66,100 856
o Ralcorp Holdings, Inc. 66,566 1,831
o Tejon Ranch Co. 33,400 1,313
o United Natural Foods, Inc. 45,000 1,741
o Wild Oats Markets, Inc. 68,100 707
------
24,408
GOLD 0.1%
--------------------------------------------------------------------------
Royal Gold, Inc. 46,900 972
HEALTHCARE / DRUGS & MEDICINE 10.6%
--------------------------------------------------------------------------
o aaiPharma, Inc. 63,350 1,146
o Abgenix, Inc. 202,600 2,482
o Advanced Medical Optics, Inc. 65,900 1,329
o Advanced Neuromodulation
Systems, Inc. 43,500 1,783
See financial notes. 67
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Albany Molecular Research, Inc. 71,600 1,052
o Alexion Pharmaceuticals, Inc. 45,000 832
o Alkermes, Inc. 197,200 2,558
Alpharma, Inc., Class A 119,800 2,180
o American Healthways, Inc. 33,900 1,405
o American Medical Systems
Holdings, Inc. 75,000 1,500
o AMERIGROUP Corp. 53,800 2,250
o Amsurg Corp. 46,000 1,656
o Antigenics, Inc. 91,200 998
Arrow International, Inc. 99,000 2,612
o Atrix Labs, Inc. 42,800 860
o Beverly Enterprises, Inc. 247,100 1,500
o BioMarin Pharmaceuticals, Inc. 147,900 1,035
o Biosite, Inc. 34,000 877
Cambrex Corp. 59,200 1,399
o Centene Corp. 42,550 1,302
o Cerus Corp. 39,000 175
o Chattem, Inc. 46,800 687
o Cima Labs, Inc. 32,300 1,014
o Conmed Corp. 65,800 1,339
Cooper Cos., Inc. 70,800 3,076
o Corixa Corp. 115,700 691
o Corvel Corp. 24,400 881
o CV Therapeutics, Inc. 64,700 1,141
Datascope Corp. 34,900 1,162
=o Endo Pharmaceutical
Holdings, Inc. 300,400 4,915
o Enzo Biochem, Inc. 68,061 1,259
o Enzon Pharmaceuticals, Inc. 101,700 1,135
o First Horizon Pharmaceutical
Corp. 79,600 563
o Gen-Probe, Inc. 107,000 2,864
o Genta, Inc. 167,300 1,790
o Haemonetics Corp. 55,200 1,273
ICN Pharmaceuticals, Inc. 188,300 3,636
o ICU Medical, Inc. 30,700 1,037
o(4) ImClone Systems, Inc. 169,800 5,901
o Inamed Corp. 52,400 4,526
o Incyte Corp. 167,000 882
o Integra LifeSciences Holdings
Corp. 59,500 2,007
o InterMune, Inc. 73,800 1,476
o Isis Pharmaceuticals, Inc. 125,500 835
o Kindred Healthcare, Inc. 40,800 1,683
o KV Pharmaceutical Co., Class A 110,175 2,644
o La Jolla Pharmaceutical Co. 94,300 322
Landauer, Inc. 19,300 755
o Ligand Pharmaceuticals, Inc.,
Class B 156,900 2,162
o Martek Biosciences Corp. 60,200 2,914
o Medarex, Inc. 163,800 1,171
o Medicines Co. 105,100 2,801
Mentor Corp. 106,400 2,155
o Merit Medical Systems, Inc. 43,466 1,138
Mine Safety Appliances Co. 27,400 1,551
o Myriad Genetics, Inc. 58,700 743
o Nektar Therapeutics 126,300 1,660
o NPS Pharmacuticals, Inc. 85,000 2,238
Oakley, Inc. 156,300 1,696
o Ocular Sciences, Inc. 53,800 1,503
o Odyssey HealthCare, Inc. 82,650 2,293
o Orthodontic Centers of America,
Inc. 114,200 1,009
o OSI Pharmaceuticals, Inc. 84,500 2,366
Owens & Minor, Inc. 78,400 1,595
o Pacificare Health Systems, Inc. 84,000 4,998
o Parexel International Corp. 59,800 1,000
Perrigo Co. 162,100 2,180
=o(7) Pharmaceutical Resources, Inc. 76,500 5,529
PolyMedica Corp. 55,600 1,640
o Priority Healthcare Corp.,
Class B 100,300 2,169
o Protein Design Labs, Inc. 207,200 2,793
o Province Healthcare Co. 112,300 1,442
o PSS World Medical, Inc. 154,500 1,440
Regeneron Pharmaceuticals,
Inc. 115,800 1,603
o RehabCare Group, Inc. 38,900 608
=o Resmed, Inc. 75,700 3,162
=o Sepracor, Inc. 192,300 5,121
o Serologicals Corp. 56,200 899
o Sierra Health Services, Inc. 63,400 1,477
o Sola International, Inc. 56,900 976
68 See financial notes.
SCHWAB SMALL-CAP INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Sunrise Senior Living, Inc. 48,100 1,390
o SurModics, Inc. 40,300 847
o Sybron Dental Specialties, Inc. 86,500 1,989
o Tanox, Inc. 100,500 1,804
o Thoratec Corp. 126,200 1,942
o Transkaryotic Therapies, Inc. 75,700 992
o Trimeris, Inc. 49,000 1,254
o United Surgical Partners
International, Inc. 62,400 1,882
o United Therapeutics Corp. 49,500 996
o US Oncology, Inc. 195,472 2,138
o Vaxgen, Inc. 45,700 431
o Ventana Medical Systems, Inc. 37,900 1,586
o Viasys Healthcare, Inc. 67,900 1,226
o Vicuron Pharmaceuticals, Inc. 122,600 2,250
o Visx, Inc. 110,300 2,676
West Pharmaceutical Services,
Inc. 33,400 1,104
o Wright Medical Group, Inc. 73,900 2,169
o XOMA Ltd. 171,300 1,283
o Zoll Medical Corp. 19,500 663
-------
175,079
HOUSEHOLD PRODUCTS 0.2%
--------------------------------------------------------------------------
o Elizabeth Arden, Inc. 42,900 858
Nu Skin Enterprises, Inc.,
Class A 82,600 1,311
o Playtex Products, Inc. 127,400 765
-------
2,934
INSURANCE 2.9%
--------------------------------------------------------------------------
= Alfa Corp. 181,100 2,334
o Allmerica Financial Corp. 121,100 3,225
o Argonaut Group, Inc. 48,900 785
o Clark, Inc. 41,400 623
o CNA Surety Corp. 97,500 1,064
Delphi Financial Group, Inc.,
Class A 46,571 2,346
FBL Financial Group, Inc.,
Class A 62,100 1,621
Fremont General Corp. 172,400 2,867
Great American Financial
Resources, Inc. 99,750 1,551
Harleysville Group, Inc. 68,500 1,525
Hooper Holmes, Inc. 146,200 762
Horace Mann Educators Corp. 94,900 1,257
Kansas City Life Insurance Co. 27,900 1,310
Liberty Corp. 44,300 1,974
o Ohio Casualty Corp. 139,200 2,130
o Philadelphia Consolidated
Holding Co. 49,000 2,310
The Phoenix Cos., Inc. 213,600 2,350
PMA Capital Corp., Class A 70,900 932
Presidential Life Corp. 67,000 1,029
o ProAssurance Corp. 66,496 2,001
RLI Corp. 56,650 1,903
Selective Insurance Group, Inc. 59,900 1,839
State Auto Financial Corp. 89,200 2,391
Sterling Financial Corp. 38,600 1,095
o Stewart Information Services
Corp. 41,500 1,293
o Triad Guaranty, Inc. 32,700 1,613
o UICI 105,400 1,577
United Fire & Casualty Co. 22,400 893
Zenith National Insurance
Corp. 44,100 1,354
-------
47,954
MEDIA 2.6%
--------------------------------------------------------------------------
o Adolor Corp. 71,800 1,312
Advanced Marketing Services,
Inc. 46,600 534
o AMC Entertainment, Inc. 84,200 1,145
o(9) American Tower Corp.,
Class A 470,800 5,461
Banta Corp. 58,200 2,227
Blockbuster, Inc., Class A 82,200 1,584
o Charter Communications, Inc.,
Class A 672,200 2,870
o CNET Networks, Inc. 322,300 2,624
o Consolidated Graphics, Inc. 30,400 841
o Cumulus Media, Inc., Class A 112,380 2,105
o Entravision Communications Corp.,
Class A 167,500 1,603
o Gaylord Entertainment Co. 76,700 2,067
Gray Television, Inc. 93,100 1,184
See financial notes. 69
SCHWAB SMALL-CAP INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Information Holdings, Inc. 49,400 1,108
o Insight Communications Co. 118,300 1,146
o Journal Register Co. 94,400 1,891
o Lin TV Corp., Class A 62,200 1,403
o Mediacom Communications
Corp. 208,200 1,457
o Primedia, Inc. 589,600 1,586
Pulitzer, Inc. 21,200 1,103
o Regent Communications, Inc. 111,100 664
o Saga Communications, Inc.,
Class A 41,900 796
o Salem Communications Corp.,
Class A 42,100 979
o Sinclair Broadcast Group, Inc.,
Class A 102,400 1,192
o Spanish Broadcasting System,
Class A 84,000 756
o Tivo, Inc. 143,800 1,153
o Valuevision Media, Inc.,
Class A 80,700 1,311
------
42,102
MISCELLANEOUS 0.1%
--------------------------------------------------------------------------
o Coinstar, Inc. 52,100 763
MISCELLANEOUS FINANCE 4.4%
--------------------------------------------------------------------------
1st Source Corp. 49,100 982
Amcore Financial, Inc. 56,550 1,527
American Capital Strategies
Ltd. 124,700 3,367
o Bankunited Financial Corp.,
Class A 66,500 1,470
o Bay View Capital Corp. 144,600 879
Blackrock, Inc. 41,500 2,131
o Boca Resorts, Inc., Class A 89,800 1,212
Cathay Bancorp., Inc. 51,900 2,511
Central Pacific Financial Co. 36,700 960
Charter Municipal Mortgage
Acceptance Co. 94,600 1,815
o CompuCredit Corp. 107,100 2,117
o Corrections Corp. of America 81,000 1,989
CVB Financial Corp. 100,340 2,002
East-West Bancorp, Inc. 54,500 2,675
o eSpeed, Inc., Class A 67,600 1,842
Fidelity Bankshares, Inc. 34,800 943
o Financial Federal Corp. 41,700 1,399
First Community Bancorp 36,500 1,278
First Financial Corp. 29,200 862
First Financial Holdings, Inc. 30,100 908
First Indiana Corp. 37,800 690
First Sentinel Bancorp., Inc. 63,591 1,186
Flagstar Bancorp., Inc. 135,900 3,031
Glacier Bancorp, Inc. 44,330 1,364
Hudson River Bancorp 35,400 1,182
Independent Bank Corp.
Michigan 44,420 1,285
o Knight Trading Group, Inc. 254,000 3,515
o La Quinta Corp. 346,900 2,140
o Local Financial Corp. 40,100 778
MB Financial, Inc. 39,600 1,873
MCG Capital Corp. 86,000 1,512
McGrath RentCorp 27,100 772
o Meritage Corp. 30,400 1,797
The Midland Co. 40,600 936
o National Western Life Insurance Co.,
Class A 8,000 1,151
New Century Financial Corp. 78,600 2,914
Northwest Bancorp, Inc. 108,649 2,263
= Pacific Capital Bancorp. 77,399 2,636
Pacific Northwest Bancorp 39,000 1,515
o Saxon Capital, Inc. 67,200 1,267
Seacoast Financial Services
Corp. 57,600 1,475
United Community Banks, Inc. 51,000 1,619
Value Line, Inc. 22,100 1,094
Waypoint Financial Corp. 76,400 1,591
------
72,455
NON-DURABLES & ENTERTAINMENT 3.8%
--------------------------------------------------------------------------
Action Performance Cos., Inc. 41,800 856
=o Activision, Inc. 201,100 3,035
o AFC Enterprises, Inc. 67,900 1,137
Bob Evans Farms, Inc. 78,400 2,317
o California Pizza Kitchen, Inc. 44,100 820
o CEC Entertainment, Inc. 58,500 2,861
Churchill Downs, Inc. 29,300 1,126
70 See financial notes.
SCHWAB SMALL-CAP INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Electronics Boutique Holdings
Corp. 57,600 1,639
o Fossil, Inc. 105,850 2,858
Handleman Co. 56,400 1,001
IHOP Corp. 49,700 1,844
o Isle of Capri Casinos, Inc. 66,700 1,391
o Jack in the Box, Inc. 82,700 1,504
o Jakks Pacific, Inc. 48,200 627
Landry's Restaurants, Inc. 62,200 1,557
Lone Star Steakhouse &
Saloon, Inc. 47,000 1,028
o Marvel Enterprises, Inc. 169,300 4,986
o O'Charleys, Inc. 46,200 778
o P.F. Chang's China Bistro, Inc. 57,300 2,793
o Papa John's International, Inc. 38,900 1,023
o Penn National Gaming, Inc. 90,400 2,142
o Rare Hospitality International Inc. 75,950 1,884
Russ Berrie & Co., Inc. 46,300 1,660
o Ryan's Family Steak Houses, Inc. 95,950 1,337
o SCP Pool Corp. 79,725 2,790
=o Service Corp. International 687,000 3,332
o Sonic Corp. 89,200 2,481
o Sotheby's Holdings, Inc.,
Class A 136,100 1,449
o The Steak N Shake Co. 63,700 1,102
o Stewart Enterprises, Inc.,
Class A 236,700 966
o Take-Two Interactive
Software, Inc. 94,300 3,730
The Topps Co., Inc. 92,300 943
Triarc Cos., Class B 96,000 1,023
Triarc Cos., Inc. 48,000 500
Tupperware Corp. 132,300 1,991
------
62,511
NON-FERROUS METALS 0.6%
--------------------------------------------------------------------------
Commercial Metals Co. 64,766 1,599
o Hecla Mining Co. 231,600 1,367
Minerals Technologies, Inc. 45,500 2,493
=o Mueller Industries, Inc. 79,100 2,496
Reliance Steel & Aluminum
Co. 73,175 2,100
------
10,055
OIL: DOMESTIC 2.0%
--------------------------------------------------------------------------
o CAL Dive International, Inc. 86,700 1,797
o Comstock Resources, Inc. 70,900 1,059
o Encore Acquisition Co. 69,300 1,594
Frontier Oil Corp. 62,200 995
o Global Industries Ltd. 231,300 1,069
o Gulfmark Offshore, Inc. 47,000 656
Holly Corp. 35,200 877
=o Houston Exploration Co. 71,400 2,499
o Magnum Hunter Resources,
Inc. 156,800 1,356
Patina Oil & Gas Corp. 76,406 3,223
o Quicksilver Resource, Inc. 49,400 1,270
o Remington Oil & Gas Corp. 62,400 1,114
o Spinnaker Exploration Co. 76,500 1,958
St. Mary Land & Exploration Co. 65,400 1,707
o Stone Energy Corp. 60,640 2,191
o Superior Energy Services, Inc. 170,400 1,523
o Tesoro Petroleum Corp. 146,500 1,670
o Ultra Petroleum Corp. 170,700 3,124
o Universal Compression
Holdings, Inc. 70,800 1,557
Vintage Petroleum, Inc. 147,700 1,706
------
32,945
OPTICAL & PHOTO 0.3%
--------------------------------------------------------------------------
o Lexar Media, Inc. 172,000 3,941
o Photronics, Inc. 70,900 1,527
------
5,468
PAPER & FOREST PRODUCTS 0.7%
--------------------------------------------------------------------------
o Caraustar Industries, Inc. 66,500 639
Chesapeake Corp. 34,800 849
Deltic Timber Corp. 28,000 802
Glatfelter 100,200 1,278
Longview Fibre Co. 120,100 1,291
Potlatch Corp. 66,000 2,063
Rock-Tennessee Co.,
Class A 79,200 1,275
Universal Forest Products,
Inc. 40,500 1,199
Wausau-Mosinee Paper
Corp. 119,125 1,472
------
10,868
See financial notes. 71
SCHWAB SMALL-CAP INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
PRODUCER GOODS & MANUFACTURING 5.6%
--------------------------------------------------------------------------
o Actuant Corp., Class A 53,200 1,715
o Advanced Energy Industries,
Inc. 72,800 1,662
o Aeroflex, Inc. 149,600 1,388
Albany International Corp.,
Class A 74,083 2,289
Applied Industrial Technologies,
Inc. 44,900 1,013
Baldor Electric Co. 76,120 1,621
Barnes Group, Inc. 51,200 1,494
= Briggs & Stratton Corp. 49,200 3,199
Clarcor, Inc. 57,250 2,327
Cognex Corp. 98,500 2,645
o Cuno, Inc. 37,200 1,484
Curtiss-Wright Corp. 23,200 1,717
Federal Signal Corp. 109,200 1,615
=o Flowserve Corp. 127,334 2,605
=o FMC Corp. 81,800 2,291
Franklin Electric Co., Inc. 25,100 1,531
o Gardner Denver, Inc. 36,400 752
o GrafTech International Ltd. 152,200 1,581
Helix Technology Corp. 59,100 1,061
Hughes Supply, Inc. 54,450 2,105
o Ionics, Inc. 37,700 1,074
o Jarden Corp. 31,700 1,309
JLG Industries, Inc. 97,600 1,165
Kaydon Corp. 63,900 1,519
Lennox International, Inc. 134,200 2,220
Libbey, Inc. 30,091 800
= Lincoln Electric Holdings, Inc. 93,800 2,288
o Lone Star Technologies, Inc. 65,000 905
Manitowoc Co., Inc. 59,862 1,299
Matthews International Corp.,
Class A 72,600 1,959
o Maverick Tube Corp. 94,200 1,591
o Micrel, Inc. 207,500 3,424
o Moog, Inc., Class A 30,100 1,276
MSC Industrial Direct Co., Class A 79,500 1,880
NACCO Industries, Inc., Class A 15,150 1,194
Nordson Corp. 76,800 2,128
o Oceaneering International, Inc. 55,900 1,289
o Possis Medical, Inc. 33,500 545
Regal Beloit 56,700 1,154
Robbins & Myers, Inc. 32,900 694
Sauer-Danfoss, Inc. 109,300 1,550
o Sequa Corp., Class A 23,700 1,130
o The Shaw Group, Inc. 115,300 1,574
o SPS Technologies, Inc. 29,800 1,470
Standex International Corp. 27,700 705
Steelcase, Inc., Class A 97,200 1,142
Stewart & Stevenson Services,
Inc. 64,800 1,083
Tecumseh Products Co.,
Class A 41,400 1,697
Tennant Co. 20,100 795
o Terex Corp. 109,600 2,473
Trinity Industries, Inc. 103,050 2,623
o Triumph Group, Inc. 37,000 1,208
Valmont Industries, Inc. 53,900 1,121
Watsco, Inc. 60,900 1,304
Watts Water Technologies, Inc.,
Class A 64,500 1,146
Woodward Governor Co. 25,800 1,194
= York International Corp. 90,500 3,596
------
91,619
RAILROAD & SHIPPING 0.5%
--------------------------------------------------------------------------
Florida East Coast Industries,
Class A 83,800 2,491
o Genessee & Wyoming, Inc.,
Class A 31,900 775
o Kansas City Southern Railway 137,800 1,823
Overseas Shipholding Group 77,000 2,099
Wabtec Corp. 100,121 1,532
------
8,720
REAL PROPERTY 5.7%
--------------------------------------------------------------------------
Alexandria Real Estate Equities,
Inc. 43,600 2,224
AMLI Residential Properties 40,200 1,023
Anthracite Capital, Inc. 114,200 1,164
Anworth Mortgage Asset Corp. 71,000 997
Bedford Property Investors, Inc. 39,200 1,029
72 See financial notes.
SCHWAB SMALL-CAP INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
= Brandywine Realty Trust 81,600 2,068
Capital Automotive Real Estate
Investment Trust 70,300 2,187
Capstead Mortgage Corp. 34,200 457
Colonial Properties Trust 59,500 2,201
Commercial Net Lease Realty 105,500 1,815
Cornerstone Realty Income Trust,
Inc. 118,800 982
Corporate Office Properties Trust
SBI 66,900 1,294
Crown American Realty Trust 71,200 853
EastGroup Properties, Inc. 41,800 1,218
Entertainment Properties Trust 45,800 1,474
Equity One, Inc. 150,400 2,519
Essex Property Trust, Inc. 51,500 3,084
FelCor Lodging Trust, Inc. 131,000 1,335
Gables Residential Trust 60,800 1,957
Getty Realty Corp. 50,600 1,252
Glenborough Realty Trust, Inc. 63,000 1,228
Glimcher Realty Trust 78,300 1,658
Great Lakes Real Estate Investment
Trust 36,700 588
Home Properties of NY, Inc. 64,800 2,495
IMPAC Mortgage Holdings, Inc. 112,100 1,687
Innkeepers USA Trust 83,100 723
Investors Real Estate Trust 78,000 775
o Jones Lang LaSalle, Inc. 73,700 1,404
Keystone Property Trust 48,600 972
Kilroy Realty Corp. 63,600 1,838
Koger Equity, Inc. 48,800 945
Kramont Realty Trust 53,800 924
LaSalle Hotel Properties 42,900 723
Lexington Corp. Properties Trust 79,900 1,532
LNR Property Corp. 45,600 1,865
Manufactured Home Communities,
Inc. 50,200 1,908
o Meristar Hospitality Corp. 137,900 942
MFA Mortgage Investments,
Inc. 131,100 1,255
Mid-America Apartment Communities,
Inc. 44,800 1,407
National Health Investors, Inc. 60,700 1,290
Nationwide Health Properties,
Inc. 133,700 2,447
Novastar Financial, Inc. 25,700 1,895
Parkway Properties, Inc. 23,100 1,018
Pennsylvania Real Estate Investment
Trust 51,000 1,703
Post Properties, Inc. 84,800 2,239
PS Business Parks, Inc. 49,000 1,847
RAIT Investment Trust 48,600 1,135
Redwood Trust, Inc. 39,100 1,939
Saul Centers, Inc. 36,000 979
Senior Housing Properties
Trust 135,100 2,012
SL Green Realty Corp. 76,100 2,751
Sovran Self Storage, Inc. 30,300 1,026
Summit Properties, Inc. 66,300 1,482
Sun Communities, Inc. 42,500 1,549
Tanger Factory Outlet Centers 22,200 896
Taubman Centers, Inc. 112,300 2,264
The Town & Country Trust 38,000 883
o Trammell Crow Co. 83,600 1,138
Universal Health Realty Income 27,900 781
US Restaurant Properties, Inc. 45,700 731
Ventas, Inc. 180,000 3,366
= Washington Real Estate Investment
Trust 90,200 2,670
------
94,043
RETAIL 4.2%
--------------------------------------------------------------------------
o Alloy, Inc. 88,100 395
o American Eagle Outfitters, Inc. 160,400 2,565
o AnnTaylor Stores Corp. 99,999 3,580
o Blue Rhino Corp. 38,400 445
Burlington Coat Factory Warehouse
Corp. 103,340 2,217
Casey's General Stores, Inc. 113,500 1,759
The Cato Corp., Class A 46,500 981
o Central Garden & Pet Co. 39,900 1,104
o Charming Shoppes, Inc. 260,500 1,706
o The Children's Place Retail Stores,
Inc. 59,400 1,788
Christopher & Banks Corp. 82,950 2,422
o Cost Plus, Inc. 48,900 2,243
o The Dress Barn, Inc. 69,500 973
o Duane Reade, Inc. 50,900 700
See financial notes. 73
SCHWAB SMALL-CAP INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Fred's, Inc. 87,525 3,298
o Genesco, Inc. 51,700 871
o Great Atlantic & Pacific Tea
Co. 86,600 541
o Guitar Center, Inc. 53,600 1,745
o The Gymboree Corp. 69,200 1,142
Hancock Fabrics, Inc. 42,500 634
o HOT Topic, Inc. 108,373 3,111
o Insight Enterprises, Inc. 104,850 1,764
o Jo-Ann Stores, Inc., Class A 45,400 1,362
=o Linens 'N Things, Inc. 101,400 2,993
Longs Drug Stores Corp. 86,300 1,933
o The Men's Wearhouse, Inc. 90,650 2,671
o OfficeMax, Inc. 285,900 2,739
o Pacific Sunwear of California 177,280 4,093
Pep Boys-Manny, Moe & Jack 123,600 2,377
Ruddick Corp. 104,700 1,671
o School Specialty, Inc. 43,200 1,204
o ShopKo Stores, Inc. 66,800 1,034
o Too, Inc. 76,700 1,266
o Tractor Supply Co. 85,400 3,579
o Urban Outfitters, Inc. 87,200 2,909
Weis Markets, Inc. 62,800 2,295
o West Marine, Inc. 42,300 937
o The Wet Seal, Inc., Class A 59,825 658
------
69,705
STEEL 0.4%
--------------------------------------------------------------------------
Allegheny Technologies, Inc. 188,100 1,439
Carpenter Technology Corp. 51,500 1,331
Gibraltar Steel Corp. 38,100 915
Quanex Corp. 35,000 1,402
o Steel Dynamics, Inc. 109,800 2,046
------
7,133
TELEPHONE 0.9%
--------------------------------------------------------------------------
o Cincinnati Bell, Inc. 555,300 2,838
o Commonwealth Telephone Enterprises,
Inc. 54,100 2,205
o Extreme Networks, Inc. 266,100 2,288
o General Communication, Inc.,
Class A 129,300 1,275
Inter-Tel, Inc. 58,600 1,476
o Interdigital Communications
Corp. 127,100 2,159
o Price Communications Corp. 124,100 1,560
SureWest Communications 32,800 1,308
------
15,109
TOBACCO 0.3%
--------------------------------------------------------------------------
DIMON, Inc. 101,600 731
Schweitzer-Mauduit International, Inc. 34,200 910
= Universal Corp. 57,100 2,488
Vector Group Ltd. 87,976 1,386
------
5,515
TRAVEL & RECREATION 1.4%
--------------------------------------------------------------------------
o Alliance Gaming Corp. 111,900 2,714
o American Classic Voyages Co. 52,800 --
o Argosy Gaming Co. 65,100 1,549
o Aztar Corp. 79,900 1,668
Callaway Golf Co. 171,500 2,787
Central Parking Corp. 75,400 910
o Choice Hotels International,
Inc. 81,200 2,681
o Dollar Thrifty Automotive Group,
Inc. 56,100 1,469
The Marcus Corp. 70,225 1,050
o Multimedia Games, Inc. 28,500 1,072
o Prime Hospitality Corp. 101,500 924
o Scientific Games Corp.,
Class A 137,500 1,829
o Shuffle Master, Inc. 37,600 1,145
o Six Flags, Inc. 214,200 1,268
o Vail Resorts, Inc. 65,100 872
o WMS Industries, Inc. 65,200 1,508
------
23,446
TRUCKING & FREIGHT 0.9%
--------------------------------------------------------------------------
Arkansas Best Corp. 56,900 1,884
o Forward Air Corp. 48,600 1,413
o Knight Transportation, Inc. 85,000 2,139
o Landstar Systems, Inc. 34,400 2,513
o PAM Transportation Services,
Inc. 24,700 467
74 See financial notes.
SCHWAB SMALL-CAP INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Roadway Corp. 45,600 2,337
USF Corp. 62,200 1,985
o Yellow Corp. 66,200 2,175
------
14,913
UTILITIES: ELECTRIC & GAS 3.0%
--------------------------------------------------------------------------
o Allegheny Energy, Inc. 288,600 3,053
American States Water Co. 35,250 864
o Aquila, Inc. 436,100 1,723
Avista Corp. 111,100 1,889
Black Hills Corp. 71,600 2,303
California Water Service Group 34,300 938
CH Energy Group, Inc. 35,700 1,564
Cleco Corp. 108,000 1,809
o Dynegy, Inc., Class A 848,700 3,403
o El Paso Electric Co. 109,400 1,328
The Empire District Electric Co. 53,400 1,132
= Energen Corp. 81,100 2,990
Idacorp, Inc. 86,600 2,351
The Laclede Group, Inc. 44,400 1,259
MGE Energy, Inc. 40,900 1,297
New Jersey Resources Corp. 62,100 2,350
Northwest Natural Gas Co. 58,800 1,705
NUI Corp. 38,800 662
Otter Tail Corp. 58,500 1,561
PNM Resources, Inc. 89,700 2,537
o Sierra Pacific Resources 269,600 1,610
South Jersey Industries 27,900 1,058
o Southern Union Co. 159,673 2,812
Southwest Gas Corp. 77,100 1,741
UIL Holdings Corp. 33,600 1,262
Unisource Energy Corp. 77,380 1,493
= Westar Energy, Inc. 164,000 3,277
------
49,971
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
U.S. TREASURY OBLIGATIONS
0.0% of net assets
= U.S. Treasury Bills
0.85%-0.93%, 12/18/03 150 150
END OF INVESTMENTS. For totals, please see the first page of holdings for
this fund.
SECURITY AND NUMBER OF SHARES
COLLATERAL INVESTED FOR SECURITIES ON LOAN
7.5% of net assets
OTHER INVESTMENT COMPANIES
--------------------------------------------------------------------------
Securities Lending Investment
Fund 122,374,453 122,374
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN. For totals, please see
the first page of holdings for this fund.
See financial notes. 75
SCHWAB SMALL-CAP INDEX FUND(R)
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- ------------------------------------------------------------------------------
Investments, at market value
(including $116,026 of securities of loan) $1,642,685 a
Collateral held for securities on loan 122,374
Receivables:
Fund shares sold 1,708
Dividends 881
Investments sold 4,112
Income from securities on loan 58
Prepaid expenses + 36
---------------
TOTAL ASSETS 1,771,854
LIABILITIES
- ------------------------------------------------------------------------------
Collateral held for securities on loan 122,374
Cash overdraft 785
Payables:
Fund shares redeemed 2,299
Interest expenses 1
Investments bought 846
Due to broker for futures 10
Investment adviser and administrator fees 24
Transfer agent and shareholder service fees 4
Accrued expenses + 219
---------------
TOTAL LIABILITIES 126,562
NET ASSETS
- ------------------------------------------------------------------------------
TOTAL ASSETS 1,771,854
TOTAL LIABILITIES - 126,562
---------------
NET ASSETS $1,645,292
NET ASSETS BY SOURCE
Capital received from investors 1,617,099
Net investment income not yet distributed 7,747
Net realized capital losses (287,631)
Net unrealized capital gains 308,077 b
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $886,035 48,632 $18.22
Select Shares(R) $759,257 41,603 $18.25
Unless stated, all numbers x 1,000.
a The fund paid $1,334,661 for these securities. Not counting short-term
obligations and government securities, the fund paid $469,511 for securities
during the report period and received $646,990 from securities it sold or that
matured.
b These derive from investments and futures. As of the report date, the fund had
seven open Russell 2000 futures contracts due to expire on December 21, 2003,
with an aggregate contract value of $1,849 and net unrealized gains of $53.
FEDERAL TAX DATA
- -----------------------------------------------------
PORTFOLIO COST $1,338,069
NET UNREALIZED GAINS AND LOSSES:
Gains $441,758
Losses + (137,142)
---------------
$304,616
NET UNDISTRIBUTED EARNINGS:
Ordinary income $7,747
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $86,072
2011 + 198,098
---------------
$284,170
RECLASSIFICATIONS:
Net realized capital losses $39
Reclassified as:
Net investment income
not yet distributed ($39)
76 See financial notes.
SCHWAB SMALL-CAP INDEX FUND(R)
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- ------------------------------------------------------------------------------
Dividends $17,535 a
Interest 9
Securities on loan + 682
-------------
TOTAL INVESTMENT INCOME 18,226
NET REALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net realized losses on investments sold (194,040)
Net realized gains on futures contracts + 61
-------------
NET REALIZED LOSSES (193,979)
NET UNREALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net unrealized gains on investments 656,430
Net unrealized gains on futures contracts + 37
-------------
NET UNREALIZED GAINS 656,467
EXPENSES
- ------------------------------------------------------------------------------
Investment adviser and administrator fees 4,169 b
Transfer agent and shareholder service fees:
Investor Shares 1,869 c
Select Shares(R) 652 c
Trustees' fees 10 d
Custodian fees 161
Portfolio accounting fees 220
Professional fees 44
Registration fees 52
Shareholder reports 166
Interest expense 15
Other expenses + 17
-------------
Total expenses 7,375
Expense reduction - 523 e
-------------
NET EXPENSES 6,852
INCREASE IN NET ASSETS FROM OPERATIONS
- ------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 18,226
NET EXPENSES - 6,852
-------------
NET INVESTMENT INCOME 11,374
NET REALIZED LOSSES (193,979) f
NET UNREALIZED GAINS + 656,467 f
-------------
INCREASE IN NET ASSETS FROM OPERATIONS $473,862
Unless stated, all numbers x 1,000.
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. These fees are paid to
Charles Schwab & Co.
d For the fund's independent trustees only.
e Includes $337 from the investment adviser (CSIM) and $186 from the transfer
agent and shareholder service agent (Schwab). These reductions reflect a
guarantee by CSIM and Schwab to limit the operating expenses of this fund
through February 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 $462,488.
See financial notes. 77
SCHWAB SMALL-CAP INDEX FUND(R)
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- ---------------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income $11,374 $13,371
Net realized losses (193,979) (78,341)
Net unrealized gains or losses + 656,467 (171,545)
----------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 473,862 (236,515)
DISTRIBUTIONS PAID
- ---------------------------------------------------------------------------------------
DIVIDENDS FROM NET INVESTMENT INCOME
Investor Shares 7,507 4,403
Select Shares(R) + 7,345 4,635
----------------------------------------
TOTAL DIVIDENDS FROM NET INVESTMENT INCOME 14,852 9,038 a
DISTRIBUTIONS FROM NET REALIZED GAINS
Investor Shares -- 29,754
Select Shares + -- 26,290
----------------------------------------
TOTAL DISTRIBUTIONS FROM NET REALIZED GAINS -- 56,044
TOTAL DISTRIBUTIONS $14,852 $65,082 b
TRANSACTIONS IN FUND SHARES
- ---------------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
SHARES SOLD
Investor Shares 6,678 $101,578 14,769 $243,412
Select Shares + 6,760 99,820 14,560 231,836
-----------------------------------------------------
TOTAL SHARES SOLD 13,438 $201,398 29,329 $475,248
SHARES REINVESTED
Investor Shares 522 $7,085 1,919 $32,335
Select Shares + 503 6,844 1,710 28,842
-----------------------------------------------------
TOTAL SHARES REINVESTED 1,025 $13,929 3,629 $61,177
SHARES REDEEMED
Investor Shares (12,997) ($188,682) (12,547) ($192,562)
Select Shares + (13,679) (200,308) (13,662) (212,752)
-----------------------------------------------------
TOTAL SHARES REDEEMED (26,676) ($388,990) (26,209) ($405,314) c
NET TRANSACTIONS
IN FUND SHARES (12,213) ($173,663) 6,749 $131,111
SHARES OUTSTANDING AND NET ASSETS
- ---------------------------------------------------------------------------------------
11/1/02-10/31/03 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 + (12,213) 285,347 6,749 (170,486) d
-----------------------------------------------------
END OF PERIOD 90,235 $1,645,292 102,448 $1,359,945 e
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
b The tax-basis components of distributions paid are:
CURRENT PRIOR
PERIOD PERIOD
Ordinary
Income $14,852 $9,038
Long-term
capital gains $-- $56,044
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase.
CURRENT PRIOR
PERIOD PERIOD
Investor Shares $70 $128
Select Shares + 39 + 65
-------- --------
TOTAL $109 $193
Dollar amounts are net of the redemption proceeds.
d Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
e Includes distributable net investment income in the amount of $7,747 and
$11,264 for the current period and prior period, respectively.
Percent of fund shares owned by other SchwabFunds(R) as of the end of the
current period:
SCHWAB MARKETTRACK PORTFOLIOS(R)
All Equity Portfolio 6.5%
Growth Portfolio 7.1%
Balanced Portfolio 4.8%
Conservative Portfolio 1.8%
SCHWAB ANNUITY PORTFOLIOS
Growth Portfolio II 0.3%
78 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 6/1/99 1-
INVESTOR SHARES 10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
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 0.16 0.16 0.15 0.16 0.07
Net realized and unrealized gains or losses 3.14 (2.27) (5.87) 1.56 0.80
---------------------------------------------------------------------------
Total income or loss from investment operations 3.30 (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 17.48 14.35 16.62 22.49 20.87
---------------------------------------------------------------------------
Total return (%) 23.24 (12.86) (25.55) 8.23 4.35 2
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.53 0.40 0.40 0.40 3 0.40 4
Gross operating expenses 0.59 0.62 0.65 0.67 0.91 4
Net investment income 1.18 1.11 0.94 0.76 0.92 4
Portfolio turnover rate 3 2 2 2 1 2
Net assets, end of period ($ x 1,000,000) 469 263 224 218 136
1 Commencement of operations.
2 Not annualized.
3 The ratio of net operating expenses would have been 0.41% if certain
non-routine expenses (proxy fees) had been included.
4 Annualized.
See financial notes. 79
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 6/1/99(1)-
SELECT SHARES(R) 10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 14.37 16.65 22.52 20.89 20.00
------------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.20 0.19 0.18 0.17 0.07
Net realized and unrealized gains or losses 3.14 (2.29) (5.87) 1.56 0.82
------------------------------------------------------------------------------
Total income or loss from investment operations 3.34 (2.10) (5.69) 1.73 0.89
Less distributions:
Dividends from net investment income (0.19) (0.18) (0.18) (0.10) --
------------------------------------------------------------------------------
Net asset value at end of period 17.52 14.37 16.65 22.52 20.89
------------------------------------------------------------------------------
Total return (%) 23.50 (12.81) (25.40) 8.30 4.45 2
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.36 0.27 0.27 0.27 3 0.27 4
Gross operating expenses 0.44 0.47 0.50 0.52 0.74 4
Net investment income 1.35 1.24 1.07 0.89 1.05 4
Portfolio turnover rate 3 2 2 2 1 2
Net assets, end of period ($ x 1,000,000) 429 264 257 262 149
1 Commencement of operations.
2 Not annualized.
3 The ratio of net operating expenses would have been 0.28% if certain
non-routine expenses (proxy fees) had been included.
4 Annualized.
80 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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)
- --------------------------------------------------------------------------------
99.2% COMMON STOCK 918,872 891,598
0.1% U.S. TREASURY
OBLIGATIONS 310 310
0.0% RIGHTS 120 7
0.0% PREFERRED STOCK 3 4
0.0% WARRANTS 55 --
- --------------------------------------------------------------------------------
99.3% TOTAL INVESTMENTS 919,360 891,919
10.9% COLLATERAL INVESTED
FOR SECURITIES ON LOAN 98,169 98,169
(10.2)% OTHER ASSETS AND
LIABILITIES, NET (91,500)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 898,588
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 99.2% of net assets
AEROSPACE/DEFENSE 1.4%
--------------------------------------------------------------------------
~o Aerosonic Corp. 1,000 7
The Boeing Co. 59,300 2,282
Crane Co. 5,000 141
o DRS Technologies, Inc. 1,200 29
EDO Corp. 900 20
Engineered Support Systems, Inc. 1,650 112
o EnPro Industries, Inc. 920 9
o ESCO Technologies, Inc. 1,400 61
o Esterline Technologies Corp. 2,900 64
GenCorp, Inc. 2,500 24
General Dynamics Corp. 13,200 1,105
Goodrich Corp. 8,404 232
Heico Corp., Class A 2,260 27
o Integrated Defense Technologies, Inc. 900 15
Kaman Corp., Class A 1,300 16
o KVH Industries, Inc. 1,300 36
o L-3 Communications Holdings, Inc. 6,600 309
Lockheed Martin Corp. 31,552 1,463
Northrop Grumman Corp. 12,516 1,119
Raytheon Co. 29,900 792
Rockwell Automation, Inc. 13,200 410
Rockwell Collins, Inc. 13,100 360
o SatCon Technology Corp. 900 3
o Teledyne Technologies, Inc. 12,157 200
Textron, Inc. 9,300 462
o Timco Aviation Services, Inc. 80 --
o Transtechnology Corp. 500 3
o Trimble Navigation Ltd. 3,800 105
United Technologies Corp. 35,534 3,009
o Veeco Instruments, Inc. 1,000 25
-------
12,440
AIR TRANSPORTATION 1.1%
--------------------------------------------------------------------------
o AirTran Holdings, Inc. 2,000 32
o Alaska Air Group, Inc. 1,900 55
o AMR Corp. 2,500 33
o ATA Holdings Corp. 1,200 12
o Atlantic Coast Airlines
Holdings, Inc. 1,600 18
o Continental Airlines, Inc.,
Class B 5,000 95
Delta Air Lines, Inc. 8,500 111
o EGL, Inc. 4,150 68
o ExpressJet Holdings, Inc. 3,000 46
FedEx Corp. 28,263 2,141
o Hawk Corp., Class A 1,800 7
o JetBlue Airways Corp. 3,650 210
o Kellstrom Industries, Inc. 600 --
o MAIR Holdings, Inc. 1,100 8
o Mesa Air Group, Inc. 1,300 14
o Northwest Airlines Corp.,
Class A 3,500 48
Sabre Holdings Corp. 9,901 217
See financial notes. 81
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
SkyWest, Inc. 4,000 74
Southwest Airlines Co. 54,225 1,052
United Parcel Service, Inc.,
Class B 80,480 5,836
-------
10,077
ALCOHOLIC BEVERAGES 0.4%
--------------------------------------------------------------------------
Adolph Coors Co., Class B 2,500 140
Anheuser-Busch Cos., Inc. 59,000 2,906
Brown-Forman Corp., Class B 3,706 313
o Constellation Brands, Inc.,
Class A 8,800 276
o National Beverage Corp. 3,700 56
-------
3,691
APPAREL 0.5%
--------------------------------------------------------------------------
Brown Shoe Co., Inc. 3,300 114
The Buckle, Inc. 1,000 22
o Casual Male Corp. 1,100 --
o Coach, Inc. 8,004 284
o Columbia Sportswear Co. 1,850 108
o Finlay Enterprises, Inc. 1,000 15
o Guess?, Inc. 2,700 32
Haggar Corp. 1,200 19
o Hampshire Group Ltd. 1,000 35
Jones Apparel Group, Inc. 12,156 419
K-Swiss, Inc., Class A 1,200 53
Kellwood Co. 2,900 108
Kenneth Cole Productions, Inc.,
Class A 3,100 92
Liz Claiborne, Inc. 18,600 686
o Maxwell Shoe Co., Inc., Class A 1,000 16
Nike, Inc., Class B 20,700 1,323
Oshkosh B'Gosh, Inc., Class A 1,200 26
Phillips-Van Heusen Corp. 1,800 31
Polo Ralph Lauren Corp. 3,500 106
o Quiksilver, Inc. 2,000 34
Reebok International Ltd. 8,000 312
Russell Corp. 2,600 48
Saucony, Inc., Class B 1,900 31
o Skechers USA, Inc., Class A 6,500 49
o Stage Stores, Inc. 1,200 34
o Steven Madden Ltd. 1,800 39
Stride Rite Corp. 2,900 35
Superior Uniform Group, Inc. 1,600 25
Tandy Brands Accessories, Inc. 1,000 15
o Tarrant Apparel Group 1,700 7
o Timberland Co., Class A 1,400 73
o Unifi, Inc. 1,900 9
VF Corp. 15,000 637
Wolverine World Wide, Inc. 5,200 105
-------
4,942
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.3%
--------------------------------------------------------------------------
A.O. Smith Corp., Class B 1,300 41
o Aftermarket Technology Corp. 4,300 51
o American Axle & Manufacturing
Holdings, Inc. 5,300 183
ArvinMeritor, Inc. 4,900 82
Bandag, Inc. 3,200 117
BorgWarner, Inc. 2,700 215
Carlisle Cos., Inc. 3,600 206
Cascade Corp. 4,400 105
o Collins & Aikman Corp. 1,400 4
Cooper Tire & Rubber Co. 6,400 126
Cummins, Inc. 1,400 66
Dana Corp. 40,800 664
Danaher Corp. 9,500 787
Delphi Corp. 26,600 237
Donaldson Co., Inc. 1,900 109
o Dura Automotive Systems, Inc.,
Class A 12,100 117
Eaton Corp. 6,300 632
Federal Screw Works 250 8
Ford Motor Co. 131,736 1,598
General Motors Corp. 39,386 1,681
o General Motors Corp., Class H 80,182 1,317
Gentex Corp. 2,300 90
Genuine Parts Co. 8,000 255
o Goodyear Tire & Rubber Co. 6,500 45
o Group 1 Automotive, Inc. 1,400 50
Harley-Davidson, Inc. 22,500 1,067
o Keystone Automotive Industries, Inc. 1,800 45
o Lear Corp. 5,800 337
Lithia Motors, Inc., Class A 700 17
Magna International, Inc., Class A 459 37
o MarineMax, Inc. 800 15
o Midas, Inc. 1,300 17
82 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Modine Manufacturing Co. 3,700 95
o Monaco Coach Corp. 1,200 29
o Monro Muffler Brake, Inc. 700 23
Myers Industries, Inc. 2,346 29
o Navistar International Corp. 1,900 77
Oshkosh Truck Corp. 4,500 206
Polaris Industries, Inc. 1,600 137
o Rush Enterprises, Inc., Class A 500 4
o Rush Enterprises, Inc., Class B 500 5
Sonic Automotive, Inc. 1,400 32
Standard Motor Products, Inc. 2,000 22
o Stoneridge, Inc. 1,700 23
Superior Industries International, Inc. 800 34
o TBC Corp. 1,100 30
Thor Industries, Inc. 1,000 64
Titan International, Inc. 800 1
o Tower Automotive, Inc. 2,300 9
o United Auto Group, Inc. 1,000 26
o United Defense Industries, Inc. 900 29
o UQM Technologies, Inc. 1,500 5
Visteon Corp. 5,451 35
Winnebago Industries, Inc. 1,300 76
-------
11,312
BANKS 7.7%
--------------------------------------------------------------------------
ABC Bancorp 1,500 25
Abigail Adams National Bancorp 500 9
Alabama National Bancorp 1,600 84
AmSouth Bancorp. 25,903 612
Anchor Bancorp Wisconsin, Inc. 3,100 77
Arrow Financial Corp. 963 26
Associated Banc-Corp. 5,146 212
BancFirst Corp. 500 27
Bancorpsouth, Inc. 4,612 108
Bank Mutual Corp. 3,669 43
Bank of America Corp. 109,200 8,270
Bank of Hawaii Corp. 3,500 138
The Bank of New York Co., Inc. 54,500 1,700
Bank One Corp. 80,700 3,426
BankAtlantic Bancorp, Inc.,
Class A 2,200 37
Banknorth Group, Inc. 6,974 218
BB&T Corp. 38,386 1,484
Berkshire Bancorp, Inc. 1,200 55
Boston Private Financial
Holdings, Inc. 2,129 54
Brookline Bancorp, Inc. 2,405 36
Bryn Mawr Bank Corp. 1,400 33
BSB Bancorp, Inc. 900 28
Camden National Corp. 700 21
Capital City Bank Group, Inc. 1,500 58
o Capital Crossing Bank 1,000 38
Capitol Bancorp Ltd. 1,500 40
Capitol Federal Financial 4,420 164
Cascade Bancorp 2,124 40
Cavalry Bancorp, Inc. 500 9
CCBT Financial Cos., Inc. 200 5
o Central Coast Bancorp 1,331 23
Century Bancorp, Inc., Class A 800 28
Chemical Financial Corp. 1,318 46
Chittenden Corp. 1,818 59
Citizens Banking Corp. Michigan 2,090 61
Citizens South Banking Corp. 1,000 15
City Holding Co. 1,800 61
City National Corp. 3,100 187
The Colonial BancGroup, Inc. 4,600 72
Columbia Bancorp 700 19
Columbia Banking Systems, Inc. 1,859 36
Comerica, Inc. 13,496 695
Commerce Bancorp, Inc. N.J. 3,060 148
Commerce Bancshares, Inc. 11,518 552
Community Bank System, Inc. 700 34
Community First Bankshares, Inc. 2,000 54
Community Trust Bancorp, Inc. 2,056 66
Compass Bancshares, Inc. 11,400 431
Connecticut Bancshares, Inc. 700 36
Corus Bankshares, Inc. 500 29
Cullen/Frost Bankers, Inc. 3,300 128
Dime Community Bancshares, Inc. 2,250 63
Doral Financial Corp. 4,600 232
Exchange National Bancshares, Inc. 750 27
Fifth Third Bancorp 40,588 2,353
First Bancorp Puerto Rico 2,100 70
First Busey Corp., Class A 1,000 27
First Charter Corp. 3,500 72
See financial notes. 83
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
First Citizens BancShares, Inc.,
Class A 300 34
First Commonwealth Financial
Corp. 2,100 29
First Essex Bancorp, Inc. 700 38
First Federal Capital Corp. 2,500 55
First Financial Bancorp 1,839 31
First Financial Bancshares, Inc. 1,500 63
First M & F Corp. 1,000 37
First Merchants Corp. 1,041 28
First Midwest Bancorp, Inc. Illinois 3,125 97
First Niagra Financial Group, Inc. 3,104 44
First Oak Brook Bancshares, Inc. 1,500 43
First of Long Island Corp. 2,000 83
First Republic Bank 1,300 47
First Tennessee National Corp. 10,800 490
Firstfed America Bancorp, Inc. 2,000 51
o FirstFed Financial Corp. 2,900 131
FirstMerit Corp. 4,800 124
FleetBoston Financial Corp. 76,277 3,081
FNB Corp. 2,639 87
Franklin Financial Corp. Tennessee 700 22
Frontier Financial Corp. 700 22
Fulton Financial Corp. 5,150 106
GA Financial, Inc. 1,100 31
Gold Banc Corp., Inc. 1,400 18
Great Southern Bancorp, Inc. 700 28
Greater Bay Bancorp 2,906 78
Hancock Holding Co. 1,050 60
Harbor Florida Bancshares, Inc. 1,100 30
Harleysville National Corp. 1,102 33
Hibernia Corp., Class A 16,900 382
Home Federal Bancorp 800 22
Horizon Financial Corp. 2,156 38
* HSBC Holdings PLC 13,000 976
Hudson City Bancorp, Inc. 19,100 660
Hudson United Bancorp 5,740 208
Huntington Bancshares, Inc. 13,290 288
Independent Bank Corp. 1,000 29
Integra Bank Corp. 1,225 26
Interchange Financial Services
Corp. 1,050 26
o Internet Capital Group, Inc. 7,000 3
Irwin Financial Corp. 3,700 104
J.P. Morgan Chase & Co. 145,580 5,226
KeyCorp, Inc. 29,300 828
Lakeland Financial Corp. 1,100 40
M&T Bank Corp. 8,962 842
MAF Bancorp., Inc. 700 29
Main Street Banks, Inc. 1,000 26
MainSource Financial Group, Inc. 1,000 28
Marshall & Ilsley Corp. 16,150 579
MASSBANK Corp. 1,500 61
Mellon Financial Corp. 30,300 905
Mercantile Bankshares Corp. 5,574 236
Merchants Bancshares, Inc. 750 21
Mid-State Bancshares 3,500 85
Midwest Banc Holdings, Inc. 1,300 31
o Movie Gallery, Inc. 1,525 32
Nara Bancorp, Inc. 2,000 45
National City Corp. 44,100 1,440
National Commerce Financial
Corp. 11,650 320
National Penn Bancshares, Inc. 906 27
NBT Bancorp., Inc. 1,400 29
Net.B@nk, Inc. 3,300 45
NewMil Bancorp, Inc. 1,000 26
North Fork Bancorp., Inc. 7,300 285
North Valley Bancorp 1,500 24
Northern Trust Corp. 15,500 720
OceanFirst Financial Corp. 1,050 27
Old National Bancorp. 3,283 73
Omega Financial Corp. 1,000 36
Oriental Financial Group 1,375 35
Pacific Crest Capital, Inc. 1,000 26
Park National Corp. 805 94
Patriot Bank Corp. 550 12
Pennfed Finance Services, Inc. 2,000 63
Peoples Bank-Bridgeport 2,500 82
Peoples Financial Corp. 3,000 49
PFF Bancorp, Inc. 1,120 42
PNC Financial Services Group,
Inc. 19,700 1,055
Popular, Inc. 13,400 603
Progress Financial Corp. 1,365 42
Prosperity Bancshares, Inc. 2,400 55
84 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Provident Bankshares Corp. 2,382 74
Provident Financial Group, Inc. 2,100 62
o Quaker City Bancorp, Inc. 1,250 53
Regions Financial Corp. 16,900 621
Republic Bancorp, Inc. 5,154 75
Republic Bancorp, Inc., Class A 1,500 30
Riggs National Corp. 2,000 33
S&T Bancorp, Inc. 1,400 42
o S1 Corp. 12,930 105
Sandy Spring Bancorp, Inc. 2,900 105
Seacoast Banking Corp. of Florida 1,980 35
Second Bancorp., Inc. 900 25
Shore Bancshares, Inc. 500 19
o Silicon Valley Bancshares 2,200 77
Simmons First National Corp.,
Class A 1,000 26
Sky Financial Group, Inc. 4,376 107
The South Financial Group, Inc. 3,000 78
SouthTrust Corp. 23,554 750
Southwest Bancorp of Texas, Inc. 1,500 54
Southwest Bancorp, Inc. 3,300 52
St. Francis Capital Corp. 1,200 40
State Bancorp, Inc. 840 17
State Street Corp. 23,000 1,204
Sterling Bancorp 1,523 45
Sterling Bancshares, Inc. 2,100 24
o Sterling Financial Corp. 847 27
Suffolk Bancorp 2,400 84
o Sun Bancorp, Inc. N.J. 3,150 74
SunTrust Banks, Inc. 20,200 1,355
Susquehanna Bancshares, Inc. 2,700 68
SY Bancorp, Inc. 1,400 28
Synovus Financial Corp. 18,700 516
TCF Financial Corp. 4,300 224
Texas Regional Bancshares, Inc.,
Class A 1,551 56
Timberland Bancorp, Inc. 1,000 24
Tompkins Trustco, Inc. 770 37
TriCo Bancshares 200 6
The Trust Co. of New Jersey 3,000 94
Trustco Bank Corp. 2,857 37
Trustmark Corp. 4,300 122
U.S. Bancorp 137,631 3,746
UCBH Holdings, Inc. 2,200 79
UMB Financial Corp. 1,787 89
Umpqua Holdings Corp. 343 7
Union Bankshares Corp. 700 22
Union Planters Corp. 15,950 531
UnionBanCal Corp. 22,600 1,224
United Bankshares, Inc. 1,900 58
United Community Financial
Corp. 1,900 21
United National Bancorp. 1,230 43
Unizan Financial Corp. 1,371 28
USB Holding Co., Inc. 1,777 33
Valley National Bancorp 6,435 188
Wachovia Corp. 95,036 4,359
Washington Trust Bancorp, Inc. 1,000 28
Wells Fargo & Co. 120,381 6,780
WesBanco, Inc. 3,200 85
West Coast Bancorp 1,200 25
Westamerica Bancorp. 1,700 85
WestCorp., Inc. 2,207 83
Whitney Holding Corp. 1,950 74
Wilmington Trust Corp. 3,200 108
Wintrust Financial Corp. 1,800 78
WSFS Financial Corp. 1,000 43
Zions Bancorp. 5,200 319
-------
69,349
BUSINESS MACHINES & SOFTWARE 8.3%
--------------------------------------------------------------------------
o 3Com Corp. 17,900 129
o 3D Systems Corp. 1,400 13
o Adaptec, Inc. 5,700 49
Adobe Systems, Inc. 17,500 767
o Advanced Digital Information
Corp. 2,600 42
Analogic Corp. 5,200 227
o Andersen Group, Inc. 1,400 7
o Apple Computer, Inc. 18,700 428
o Arbitron, Inc. 2,120 84
o Artesyn Technologies, Inc. 1,100 9
o Ascential Software Corp. 2,912 65
Autodesk, Inc. 8,400 162
o Avici Systems, Inc. 375 2
o Avocent Corp. 13,963 528
See financial notes. 85
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o BEA Systems, Inc. 27,900 388
Black Box Corp. 5,200 224
o BMC Software, Inc. 19,000 330
o Borland Software Corp. 3,000 27
o Cisco Systems, Inc. 511,969 10,741
o Cognitronics Corp. 2,600 7
o Compuware Corp. 19,900 112
o Comverse Technology, Inc. 13,400 242
o Concerto Software, Inc. 1,100 13
o Concurrent Computer Corp. 3,000 14
o CoSine Communications, Inc. 730 5
o Dell, Inc. 186,800 6,747
Diebold, Inc. 5,300 302
o Digital Lightwave, Inc. 1,300 1
o EMC Corp. 164,834 2,281
o Enterasys Networks, Inc. 8,500 33
Fair Isaac Corp. 5,163 329
o Flow International Corp. 900 3
o Foundry Networks, Inc. 4,300 100
o Gadzoox Networks, Inc. 600 --
o Gateway, Inc. 11,800 59
o General Binding Corp. 500 7
o Hanger Orthopedic Group, Inc. 5,400 92
Hewlett-Packard Co. 218,916 4,884
IKON Office Solutions, Inc. 8,500 71
o Imagistics International, Inc. 2,840 91
o Immersion Corp. 800 5
o Input/Output, Inc. 3,400 14
o Integrated Device Technology,
Inc. 4,200 66
o Intergraph Corp. 9,700 253
o Interland, Inc. 510 4
(9) International Business Machines
Corp. 125,850 11,261
o InterVoice, Inc. 1,678 17
o Invision Technologies, Inc. 1,500 41
o Iomega Corp. 12,400 68
o Juniper Networks, Inc. 13,600 245
Landamerica Financial Group,
Inc. 5,800 290
o Lantronix, Inc. 1,900 2
o Lexmark International, Inc.,
Class A 10,900 802
o LTX Corp. 1,900 27
o Maxtor Corp. 14,748 202
o McData Corp., Class A 2,617 27
Microchip Technology, Inc. 13,975 457
o Micromuse, Inc. 2,900 23
o MICROS Systems, Inc. 5,500 223
=(2) Microsoft Corp. 786,660 20,571
o MIPS Technology, Inc., Class A 1,100 5
o MSC.Software Corp. 1,800 19
o NCR Corp. 11,900 428
o Network Appliance, Inc. 13,500 333
o Novell, Inc. 25,600 150
o Oracle Corp. 381,900 4,568
o PalmOne, Inc. 1,569 22
o PalmSource, Inc. -- --
Pitney Bowes, Inc. 17,000 699
o Precis, Inc. 1,200 5
o Printronix, Inc. 2,400 34
o Rainbow Technologies, Inc. 5,000 62
o Read-Rite Corp. 1,180 --
o Roxio, Inc. 724 7
o Sandisk Corp. 5,500 443
o Scansource, Inc. 600 26
o Seagate Escrow Security 7,500 2
o Siebel Systems, Inc. 18,100 228
o Silicon Graphics, Inc. 4,800 5
o SoftBrands, Inc. 671 1
o Storage Technology Corp. 14,400 347
o StorageNetworks, Inc. 2,100 4
o Sun Microsystems, Inc. 226,230 896
o Sybase, Inc. 19,036 341
o Tech Data Corp. 2,800 92
o The Titan Corp. 6,381 135
Total System Services, Inc. 13,800 381
o Ultimate Electronics, Inc. 400 4
o Unisys Corp. 23,100 355
o Vitria Technology, Inc. 925 5
o Xerox Corp. 57,200 601
-------
74,411
BUSINESS SERVICES 5.1%
--------------------------------------------------------------------------
o 4Kids Entertainment, Inc. 1,000 24
Aaron Rents, Inc., Class A 1,650 34
ABM Industries, Inc. 2,400 37
86 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Actuate Corp. 2,300 8
o Administaff, Inc. 2,800 32
o Advent Software, Inc. 1,600 29
o The Advisory Board Co. 1,000 36
Advo, Inc. 2,700 121
o Aether Systems, Inc. 1,100 5
o Affiliated Computer Services, Inc.,
Class A 9,500 465
o Affymetrix, Inc. 2,300 59
o Agile Software Corp. 1,900 21
o Akamai Technologies, Inc. 4,038 32
o The Allied Defense Group, Inc. 500 10
o Allied Waste Industries, Inc. 14,300 161
Ambassadors International, Inc. 1,700 22
o America Online Latin America, Inc.,
Class A 2,500 6
o American Locker Group, Inc. 500 6
o American Management Systems,
Inc. 4,200 62
o American Superconductor Corp. 700 7
o AMN Healthcare Services, Inc. 1,610 24
o Analysts International Corp. 2,400 7
Angelica Corp. 1,000 21
o Ansoft Corp. 2,300 27
o answerthink, Inc. 1,700 9
o Ansys, Inc. 1,700 61
o Anteon International Corp. 2,000 68
o Apollo Group, Inc., Class A 12,050 766
o Applied Molecular Evolution, Inc. 2,100 26
o Aramark Corp., Class B 6,800 182
o Arena Pharmaceuticals, Inc. 800 6
o Ariba, Inc. 9,200 30
o Art Technology Group, Inc. 2,200 4
o Artistdirect, Inc. 1,000 --
o Ask Jeeves, Inc. 1,900 36
o Aspen Technology, Inc. 1,000 8
o At Road, Inc. 4,400 57
o Atari, Inc. 1,600 6
Automatic Data Processing, Inc. 42,600 1,608
o Barra, Inc. 3,250 124
o BearingPoint, Inc. 7,100 67
o BindView Development Corp. 1,700 4
o The BISYS Group, Inc. 6,000 86
o Blue Coat Systems, Inc. 340 6
o Blue Martini Software, Inc. 285 1
o Bottomline Technologies, Inc. 500 4
Bowne & Co., Inc. 1,700 26
o Braun Consulting, Inc. 1,300 3
o Bright Horizons Family Solutions,
Inc. 1,300 56
The Brink's Co. 5,600 112
o BroadVision, Inc. 1,090 5
o Brocade Communications
Systems, Inc. 9,500 62
o BSQUARE Corp. 1,600 3
o CACI International, Inc., Class A 4,100 203
o Career Education Corp. 8,614 461
o Carreker Corp. 1,200 12
o Casella Waste Systems, Inc.,
Class A 2,500 31
o Catalina Marketing Corp. 2,900 51
o Catapult Communications Corp. 1,600 22
CDI Corp. 1,200 39
CDW Corp. 6,800 408
o Cell Genesys, Inc. 1,500 19
o Cendant Corp. 74,220 1,516
o Centra Software, Inc. 2,400 7
o Ceridian Corp. 19,500 410
o Cerner Corp. 1,700 72
Certegy, Inc. 4,150 140
o Charles River Associates, Inc. 2,500 77
o Checkfree Corp. 5,400 149
o Chindex International, Inc. 1,100 25
o ChoicePoint, Inc. 3,400 119
o Chordiant Software, Inc. 1,100 5
o Ciber, Inc. 1,900 18
Cintas Corp. 12,850 548
o Citrix Systems, Inc. 20,000 506
o Clarent Corp. 1,545 --
o Clarus Corp. 1,200 9
o Click Commerce, Inc. 320 2
o Closure Medical Corp. 3,400 105
o Cognizant Technology Solutions
Corp. 5,300 241
o Com21, Inc. 1,400 --
o Comarco, Inc. 500 4
See financial notes. 87
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Commerce One, Inc. 730 1
Computer Associates
International, Inc. 42,226 993
o Computer Sciences Corp. 13,238 524
o Concord Communications, Inc. 1,600 29
o Concord EFS, Inc. 34,300 367
o Connetics Corp. 3,400 61
o Convergys Corp. 10,500 169
o Copart, Inc. 6,550 82
o Corillian Corp. 2,000 13
o Corinthian Colleges, Inc. 4,600 285
o Corio, Inc. 1,400 4
o Cornell Cos., Inc. 2,100 30
o Corporate Executive Board Co. 2,700 138
o Correctional Services Corp. 2,000 5
o CoStar Group, Inc. 800 30
Courier Corp. 2,800 153
o Covansys Corp. 2,500 24
o Credit Acceptance Corp. 2,400 28
o Cross Country Healthcare, Inc. 1,600 22
o Cross Media Marketing Corp. 1,391 --
o CSG Systems International, Inc. 2,900 33
o CuraGen Corp. 2,100 13
o CycleLogic, Inc. 2 --
o Cysive, Inc. 1,000 3
o D&B Corp. 16,000 745
o Daleen Technologies, Inc. 800 --
o Datastream Systems, Inc. 1,300 10
Deluxe Corp. 3,800 153
o Dendrite International, Inc. 1,100 17
o DeVry, Inc. 4,800 116
o Digex, Inc. 1,800 2
o Digimarc Corp. 1,000 17
o Digital Insight Corp. 2,300 48
o Digital River, Inc. 2,100 57
o Digitalthink, Inc. 1,300 3
o Digitas, Inc. 1,500 13
o Diversa Corp. 1,100 9
o Divine, Inc., Class A 161 --
o Docent, Inc. 633 3
o Documentum, Inc. 4,300 128
o DoubleClick, Inc. 8,237 69
o DST Systems, Inc. 8,100 306
o Dyax Corp. 2,000 10
o E.piphany, Inc. 2,100 15
o Earthlink, Inc. 7,350 67
o eBay, Inc. 45,424 2,541
o Echelon Corp. 1,200 16
o Eclipsys Corp. 1,800 21
o Edgewater Technology, Inc. 767 4
o Edison Schools, Inc. 1,900 3
o Education Management Corp. 1,700 107
o eFunds Corp. 2,502 40
Electronic Data Systems Corp. 34,100 731
o eLoyalty Corp. 190 1
o Embarcadero Technologies, Inc. 2,900 37
o Encysive Pharmaceuticals, Inc. 2,600 16
o Engage, Inc. 4,900 --
Ennis Business Forms, Inc. 4,500 65
o Entrust, Inc. 2,800 13
o EPIQ Systems, Inc. 1,550 26
o ePresence, Inc. 2,700 11
Equifax, Inc. 9,300 227
o EXE Technologies, Inc. 371 3
o Exelixis, Inc. 1,800 13
o Exponent, Inc. 3,000 63
o Exult, Inc. 4,100 33
o Ezenia!, Inc. 1,000 --
o F5 Networks, Inc. 3,300 83
Factset Research Systems, Inc. 2,500 109
o Falcon Products, Inc. 1,500 9
o FalconStor Software, Inc. 1,200 9
o Fargo Electronics, Inc. 2,000 28
o FileNet Corp. 3,800 102
o First Consulting Group, Inc. 1,800 10
First Data Corp. 53,500 1,910
o Firstwave Technologies, Inc. 1,000 6
o Fiserv, Inc. 12,800 452
o Five Star Quality Care, Inc. 135 --
o Forrester Research, Inc. 1,600 27
o Freemarkets, Inc. 3,300 21
Friedman Billings Ramsey Group, Inc.,
Class A 8,180 163
o FTI Consulting, Inc. 2,700 54
G&K Services, Inc., Class A 1,200 40
o Gartner, Inc., Class B 8,051 98
88 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Genaissance Pharmaceuticals, Inc. 1,800 5
o Genencor International, Inc. 14,000 214
o Genesis Health Ventures, Inc. 12,500 336
o GenesisIntermedia, Inc. 1,200 --
o Gentiva Health Services, Inc. 750 9
o Genuity, Inc., Class A 280 --
o Geoworks Corp. 800 --
o Global Imaging Systems, Inc. 2,100 61
Global Payments, Inc. 8,520 355
o GP Strategies Corp. 1,500 11
Grey Global Group, Inc. 200 134
GTECH Holdings Corp. 4,700 210
H&R Block, Inc. 21,300 1,003
o HA-LO Industries, Inc. 2,100 --
o Hall, Kinion & Associates, Inc. 900 4
o Heidrick & Struggles International,
Inc. 3,100 61
o Hewitt Associates, Inc., Class A 7,000 180
o Hudson Highland Group, Inc. 360 8
o Hyperion Solutions Corp. 2,850 95
o I-Many, Inc. 1,300 1
o iBEAM Broadcasting Corp. 290 --
o ICOS Corp. 2,700 126
o ICT Group, Inc. 500 7
o Identix, Inc. 1,600 9
o IDT Corp. 1,700 32
o IDX Systems Corp. 1,500 39
o iGate Corp. 1,300 7
IMS Health, Inc. 16,300 384
o InFocus Corp. 1,600 11
o Infonet Services Corp., Class B 11,200 27
o Informatica Corp. 6,700 73
o Information Resources, Inc. 2,500 12
o Inforte Corp. 3,700 35
o Infospace, Inc. 3,872 101
o infoUSA, Inc. 2,300 19
o Innodata Corp. 2,400 7
o Interactive Intelligence, Inc. 1,000 3
o Intercept, Inc. 1,500 15
o Internap Network Services Corp. 4,600 5
o Internet Security Systems 4,600 75
o Interpublic Group of Cos., Inc. 16,644 248
o Interwoven, Inc. 3,700 14
o Intrado, Inc. 1,100 20
o Intuit, Inc. 14,215 710
o Invitrogen Corp. 3,629 231
o Iron Mountain, Inc. 6,525 250
o The IT Group, Inc. 1,900 --
o ITT Educational Services, Inc. 6,000 299
Jack Henry & Associates, Inc. 6,300 126
o Jacobs Engineering Group, Inc. 3,800 176
o JDA Software Group, Inc. 2,000 43
John H. Harland Co. 3,500 95
o Kana Software, Inc. 528 2
o Keane, Inc. 3,960 52
o Keith Cos., Inc. 3,000 37
Kelly Services, Inc., Class A 3,200 78
o Kinder Morgan Management LLC 3,102 118
o Korn/Ferry International 1,100 10
o Kroll, Inc. 1,900 44
o Kronos, Inc. 1,250 75
o Lamar Advertising Co. 3,200 97
o Learning Tree International, Inc. 1,400 25
o Liberate Technologies 5,900 20
o Lightbridge, Inc. 2,200 21
o LookSmart Ltd. 2,400 4
o Luminex Corp. 800 7
o Macrovision Corp. 3,100 68
o Magma Design Automation, Inc. 1,700 41
o Management Network Group, Inc. 2,400 7
o Manhattan Associates, Inc. 1,300 36
Manpower, Inc. 5,200 241
o Manugistics Group, Inc. 2,300 17
o MAPICS, Inc. 1,000 11
o Mapinfo Corp. 525 5
o Marimba, Inc. 2,000 10
o Matria Healthcare, Inc. 1,200 20
o Matrixone, Inc. 1,700 9
o MAXIMUS, Inc. 1,700 59
o Maxygen, Inc. 1,500 14
o MCSi, Inc. 1,248 --
o Mechanical Technology, Inc. 1,800 12
o Media Arts Group, Inc. 2,000 5
o Medical Staffing Network Holdings,
Inc. 1,300 10
o MemberWorks, Inc. 4,500 130
See financial notes. 89
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Mentor Graphics Corp. 5,700 95
o Mercury Interactive Corp. 3,300 153
o Meta Group, Inc. 1,100 7
o MetaSolv, Inc. 2,800 6
o Metricom, Inc. 1,400 --
o Metro One Telecommunications 4,400 12
o Michael Baker Corp. 500 5
o MicroStrategy, Inc., Class A 856 47
o Microvision, Inc. 900 6
o Millenium Cell, Inc. 2,200 7
o Mindspeed Technologies, Inc. 3,598 18
o Moldflow Corp. 300 3
o Monster Worldwide, Inc. 4,800 122
o MPS Group, Inc. 8,100 77
o MRO Software, Inc. 3,900 49
o Multi-Color Corp. 500 12
o Napro Biotheraputics, Inc. 1,200 2
o Nassda Corp. 500 4
National Instruments Corp. 2,050 87
o National Processing, Inc. 3,200 71
Nautilus Group, Inc. 1,625 25
o Navigant Consulting, Inc. 2,500 41
o NCO Group, Inc. 1,761 42
NDCHealth Corp. 1,900 50
o Neoforma, Inc. 1,500 24
o Neon Systems, Inc. 2,400 12
o NeoRx Corp. 400 2
o Netcentives, Inc. 2,000 --
o Netegrity, Inc. 1,500 18
o NetIQ Corp. 7,704 94
o Netratings, Inc. 3,000 31
o Netscout Systems, Inc. 1,800 10
o NetScreen Technologies, Inc. 1,400 37
o Netsolve, Inc. 1,600 13
o Network Associates, Inc. 11,945 166
o Network Commerce, Inc. 140 --
New England Business Service,
Inc. 2,300 67
Newcastle Investment Corp. 2,200 51
o NMS Communications Corp. 1,500 6
o Nuance Communications, Inc. 1,000 7
o NYFIX, Inc. 750 6
Omnicom Group, Inc. 14,300 1,141
o On Assignment, Inc. 1,700 9
o OneSource Information Services,
Inc. 3,800 38
o Onyx Software Corp. 350 2
o Openwave Systems, Inc. 2,771 36
o Opnet Technologies, Inc. 1,100 15
o Opsware, Inc. 800 7
o Option Care, Inc. 1,500 15
o Orbital Sciences Corp. 2,600 24
o Orchid BioSciences, Inc. 1,400 2
o Pac-West Telecomm, Inc. 1,900 5
o Packeteer, Inc. 1,100 19
o Paradigm Genetics, Inc. 400 --
o Parametric Technology Corp. 9,700 30
o Paxar Corp. 2,300 28
Paychex, Inc. 27,400 1,066
o PC-Tel, Inc. 1,400 14
o PDI, Inc. 400 9
o Pec Solutions, Inc. 1,000 15
o Pegasus Solutions, Inc. 3,900 43
o PeopleSoft, Inc. 18,593 386
o Per-Se Technologies, Inc. 10,000 136
o Peregrine Systems, Inc. 7,015 3
o Perot Systems Corp., Class A 4,600 49
o Phoenix Technologies Ltd. 1,300 9
o Pixar, Inc. 2,600 179
o PLATO Learning, Inc. 1,433 15
o Polycom, Inc. 6,700 134
o Pomeroy IT Solutions, Inc. 2,100 30
o Portal Software, Inc. 1,220 20
o Pre-Paid Legal Services, Inc. 1,100 30
o PRG-Schultz International, Inc. 2,500 12
o Priceline.com, Inc. 1,483 42
o Progress Software Corp. 4 ,200 93
o ProQuest Co. 1,700 50
o ProsoftTraining 900 --
o Pumatech, Inc. 1,500 10
o QRS Corp. 1,450 15
o Quality Systems, Inc. 900 43
o Quest Software, Inc. 5,000 75
o Quintus Corp. 1,500 --
Quixote Corp. 1,300 31
o Quovadx, Inc. 2,600 14
90 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o R.H. Donnelley Corp. 2,000 86
o Radiant Systems, Inc. 1,300 9
o RealNetworks, Inc. 6,000 40
o Red Hat, Inc. 7,100 107
o Redback Networks, Inc. 5,600 2
o Register.com 1,296 6
o RemedyTemp, Inc., Class A 1,200 14
o Renaissance Learning, Inc. 2,100 53
Republic Services, Inc. 17,700 412
o Resources Connection, Inc. 600 15
o Retek, Inc. 3,843 39
The Reynolds & Reynolds Co.,
Class A 5,000 136
o Right Management Consultants,
Inc. 4,625 83
o Robert Half International, Inc. 7,500 177
o Ross Systems, Inc. 1,000 19
Roto-Rooter, Inc. 1,200 42
RPC, Inc. 900 9
o RSA Security, Inc. 5,000 65
o Rural Cellular Corp., Class A 1,200 12
o Saba Software, Inc. 500 2
o SafeNet, Inc. 900 30
o Sagent Technology, Inc. 1,500 --
o Sanchez Computer Associates, Inc. 1,800 7
o Sapient Corp. 3,600 20
o Seachange International, Inc. 850 13
o Secure Computing Corp. 3,200 46
o Seebeyond Technology Corp. 3,100 11
o Selectica, Inc. 1,900 8
o Sequenom, Inc. 1,600 5
o Serena Software, Inc. 2,100 36
The ServiceMaster Co. 20,400 234
o SFBC International, Inc. 1000 29
o Sirius Satellite Radio, Inc. 1,200 3
o Sitel Corp. 2,800 5
*o Skillsoft PLC 4,971 40
o Sonic Foundry, Inc. 600 1
o SONICblue, Inc. 2,600 --
o SonicWALL, Inc. 4,900 40
o SourceCorp 1,100 26
Spartech Corp. 1,700 39
o Spherion Corp. 1,830 16
o SportsLine.com, Inc. 2,300 3
o SPSS, Inc. 700 13
SS&C Technologies, Inc. 7,400 163
The Standard Register Co. 4,100 72
Startek, Inc. 1,400 46
o Stericycle, Inc. 2,200 102
o Stratasys, Inc. 900 43
Strayer Education, Inc. 700 69
o Sungard Data Systems, Inc. 20,900 586
o SupportSoft, Inc. 2,300 28
o Sycamore Networks, Inc. 18,200 91
o Sylvan Learning Systems, Inc. 2,200 62
o Symantec Corp. 14,200 946
o Symyx Technologies, Inc. 1,300 27
o Synopsys, Inc. 10,684 339
o Synplicity, Inc. 1,200 8
Syntel, Inc. 2,500 62
o Systems & Computer Technology
Corp. 3,400 50
Talx Corp. 1,700 37
o Telecommunication Systems, Inc.,
Class A 1,300 7
o TeleTech Holdings, Inc. 5,000 33
o Tetra Tech, Inc. 12,031 270
o Tetra Technologies, Inc. 1,200 27
o TIBCO Software, Inc. 8,500 55
o Tier Technologies, Inc., Class B 500 5
o Transaction Systems Architects, Inc.,
Class A 5,200 104
o TransAxis, Inc. 17 --
o TRC Cos., Inc. 1,350 24
o Trizetto Group, Inc. 3,400 23
o Tularik, Inc. 2,100 26
o Tumbleweed Communications
Corp. 2,000 13
o Unify Corp. 1,200 1
o United Online, Inc. 4,100 118
o Universal Access Global Holdings,
Inc. 145 1
o Universal Electronics, Inc. 2,200 29
o UNOVA, Inc. 3,100 67
o URS Corp. 1,700 37
o Usinternetworking, Inc. 1,100 --
o VA Software Corp. 1,427 7
See financial notes. 91
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Vastera, Inc. 2,000 7
o Ventiv Health, Inc. 2,233 19
o VeriSign, Inc. 18,375 292
o Verisity Ltd. 1,000 12
o Veritas Software Corp. 30,024 1,085
o Verity, Inc. 1,600 22
o Verso Technologies, Inc. 1,363 5
o Vertel Corp. 900 --
Viad Corp. 14,500 362
o The viaLink Co. 700 --
o Viewlocity, Inc. 60 --
o Viewpoint Corp. 2,000 2
o Vignette Corp. 8,948 22
o Vixel Corp. 600 6
o Volt Information Sciences, Inc. 2,100 37
o Wackenhut Corrections Corp. 3,800 79
o Waste Connections, Inc. 1,000 35
o Waste Industries USA, Inc. 1,500 14
Waste Management, Inc. 42,100 1,091
o WatchGuard Technologies, Inc. 1,800 10
o Watson Wyatt & Co. Holdings 4,600 111
o Wave Systems Corp., Class A 1,800 5
o WebEx Communications, Inc. 2,500 55
o WebMD Corp. 19,426 151
o webMethods, Inc. 1,921 17
o Websense, Inc. 2,500 59
o Weight Watchers International, Inc. 6,200 229
o Westaff, Inc. 2,000 5
o Wind River Systems, Inc. 3,160 21
o Wireless Facilities, Inc. 1,800 31
o Witness Systems, Inc. 2,100 16
o WorldGate Communications, Inc. 2,000 2
o Wynn Resorts Ltd. 4,000 81
o Xybernaut Corp. 1,400 3
o Yahoo!, Inc. 44,472 1,943
o Zamba Corp. 2,000 1
o Zap.com Corp. 32 --
o Zix Corp. 900 8
-------
45,687
CHEMICALS 1.4%
--------------------------------------------------------------------------
A. Schulman, Inc. 2,300 44
Aceto Corp. 5,250 82
o AEP Industries, Inc. 400 3
Air Products & Chemicals,
Inc. 15,200 690
Airgas, Inc. 5,000 96
Albemarle Corp. 2,000 54
Arch Chemicals, Inc. 2,700 60
o Bio-Rad Laboratories, Inc.,
Class A 1,000 52
Brady Corp., Class A 700 25
Cabot Corp. 2,700 75
Calgon Carbon Corp. 2,300 15
o Celgene Corp. 3,000 125
Crompton Corp. 4,424 24
o Cytec Industries, Inc. 7,400 258
Dow Chemical Co. 65,266 2,460
E.I. du Pont de Nemours & Co. 72,695 2,937
Eastman Chemical Co. 3,100 101
Ecolab, Inc. 19,000 511
o Entegris, Inc. 3,000 39
o Ethyl Corp. 2,000 32
Ferro Corp. 4,200 86
o Foamex International, Inc. 2,600 12
Georgia Gulf Corp. 3,300 89
Great Lakes Chemical Corp. 3,600 77
H.B. Fuller Co. 2,000 50
Hawkins, Inc. 1,900 24
o Hercules, Inc. 8,500 89
IMC Global, Inc. 3,500 24
Lubrizol Corp. 3,400 103
Lyondell Chemical Co. 4,600 66
MacDermid, Inc. 3,800 114
o Matrixx Initiatives, Inc. 1,700 24
Millennium Chemicals, Inc. 2,400 24
Monsanto Co. 18,645 467
Oil-Dri Corp. of America 400 6
Olin Corp. 1,820 32
o OM Group, Inc. 900 16
o Omnova Solutions, Inc. 1,000 3
o Oxigene, Inc. 900 9
Penford Corp. 1,700 24
o PolyOne Corp. 3,200 15
PPG Industries, Inc. 11,600 669
Praxair, Inc. 11,600 807
92 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Rogers Corp. 300 12
Rohm & Haas Co. 26,753 1,051
Rollins, Inc. 1,950 40
RPM International, Inc. 7,100 103
Sigma-Aldrich Corp. 6,300 330
Solutia, Inc. 4,100 11
Stepan Co. 1,200 30
Tredegar Corp. 2,600 40
o Trex Co., Inc. 500 18
o Twinlab Corp. 900 --
o Uniroyal Technology Corp. 1,100 --
Valspar Corp. 4,200 200
WD-40 Co. 1,600 52
Wellman, Inc. 5,400 45
o Zoltek Cos., Inc. 1,500 7
-------
12,452
CONSTRUCTION 0.8%
--------------------------------------------------------------------------
American Woodmark Corp. 500 24
Ameron International Corp. 3,400 112
Apogee Enterprises, Inc. 2,000 21
o Armstrong Holdings, Inc. 1,600 2
o Beazer Homes USA, Inc. 851 85
Brookfield Homes Corp. 3,500 76
Building Material Holding Corp. 4,000 56
o Cavco Industries, Inc. 205 5
Centex Construction Products, Inc. 3,200 172
Centex Corp. 4,100 400
Craftmade International, Inc. 2,800 67
D.R. Horton, Inc. 12,302 490
o Dominion Homes, Inc. 500 14
o Dycom Industries, Inc. 2,399 52
ElkCorp 950 24
o EMCOR Group, Inc. 900 34
Florida Rock Industries, Inc. 1,550 89
Fluor Corp. 5,600 208
o Global Power Equipment Group,
Inc. 1,000 6
Granite Construction, Inc. 1,850 37
o Hovnanian Enterprises, Inc.,
Class A 3,100 252
o Huttig Building Products, Inc. 811 2
o Insituform Technologies, Inc.,
Class A 1,300 19
o Integrated Electrical Services,
Inc. 1,800 13
KB Home 3,900 267
Lafarge North America, Inc. 6,200 224
Lennar Corp., Class A 4,745 436
Lennar Corp., Class B 474 41
M/I Schottenstein Homes, Inc. 1,800 75
Martin Marietta Materials, Inc. 4,200 172
Masco Corp. 33,300 916
o Mastec, Inc. 5,350 69
MDC Holdings, Inc. 1,331 90
o NCI Building Systems, Inc. 2,900 63
o NVR, Inc. 500 245
o Palm Harbor Homes, Inc. 2,700 50
o Performance Technologies, Inc. 1,600 17
Pulte Homes, Inc. 4,436 384
o Quanta Services, Inc. 2,400 20
The Ryland Group, Inc. 3,400 302
o SBA Communications Corp. 1,300 5
The Sherwin-Williams Co. 10,500 352
o Simpson Manufacturing Co., Inc. 1,600 72
o Socket Communications, Inc. 800 2
Standard-Pacific Corp. 2,400 115
The Stanley Works 6,600 220
o Stone & Webster, Inc. 700 --
o Surebeam Corp., Class A 2,711 1
Texas Industries, Inc. 1,000 27
o Toll Brothers, Inc. 5,600 206
United Mobile Homes, Inc. 1,600 26
o USG Corp. 3,900 65
Vulcan Materials Co. 6,900 306
Walter Industries, Inc. 1,900 23
o WCI Communities, Inc. 1,300 28
o WESCO International, Inc. 2,300 16
o West Corp. 4,500 109
o Westell Technologies, Inc.,
Class A 2,560 21
o Yankee Candle Co., Inc. 3,700 103
-------
7,328
CONSUMER DURABLES 0.4%
--------------------------------------------------------------------------
o Applica, Inc. 3,100 23
Black & Decker Corp. 7,100 339
See financial notes. 93
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Champion Enterprises, Inc. 2,200 16
o Chromcraft Revington, Inc. 1,300 16
Compx International, Inc. 800 5
Ethan Allen Interiors, Inc. 1,700 63
Flexsteel Industries, Inc. 600 12
Furniture Brands International,
Inc. 2,200 53
o Gemstar -TV Guide International,
Inc. 18,160 85
o Genlyte Group, Inc. 1,600 75
o Griffon Corp. 2,200 43
Haverty Furniture Cos., Inc. 1,700 35
o Helen of Troy Ltd. 2,000 45
Hillenbrand Industries, Inc. 3,300 196
o Interface, Inc., Class A 3,300 18
Isco, Inc. 200 2
Kimball International, Inc.,
Class B 3,600 56
La-Z-Boy, Inc. 5,800 117
Leggett & Platt, Inc. 13,700 286
Maytag Corp. 4,600 117
o MITY Enterprises, Inc. 600 9
o Mohawk Industries, Inc. 4,819 357
National Presto Industries, Inc. 400 14
Newell Rubbermaid, Inc. 18,900 431
o Recoton Corp. 500 --
o Restoration Hardware, Inc. 1,700 14
o Salton, Inc. 1,100 12
Skyline Corp. 100 3
o SLI, Inc. 1,600 --
Stanley Furniture Co., Inc. 2,600 80
Sturm Ruger & Co., Inc. 1,100 12
Thomas Industries, Inc. 700 21
Toro Co. 800 40
o United Rentals, Inc. 5,900 103
Virco Manufacturing Corp. 1,170 7
o Water Pik Technologies, Inc. 195 2
Whirlpool Corp. 7,500 529
-------
3,236
CONTAINERS 0.2%
--------------------------------------------------------------------------
Ball Corp. 2,800 157
Bemis Co. 3,200 148
o Crown Holdings, Inc. 3,600 28
Greif, Inc., Class A 3,700 120
o Mobile Mini, Inc. 600 13
o Mod-Pac Corp. 500 4
o Mod-Pac Corp., Class B 125 1
o Owens-Illinois, Inc. 16,200 199
o Packaging Dynamics Corp. 260 3
o Pactiv Corp. 12,400 273
o Sealed Air Corp. 8,500 453
o Silgan Holdings, Inc. 2,900 93
Sonoco Products Co. 4,100 87
-------
1,579
ELECTRONICS 6.3%
--------------------------------------------------------------------------
o ACT Manufacturing, Inc. 900 --
o ACT Teleconferencing, Inc. 1,100 1
o Actel Corp. 1,100 30
Acuity Brands, Inc. 17,200 370
o Acxiom Corp. 25,700 409
o Adaptive Broadband Corp. 1,000 --
o ADC Telecommunications, Inc. 28,220 72
o ADE Corp. 600 15
o Adelphia Business Solutions, Inc. 4,638 --
o Adelphia Communications,
Class A 6,301 2
o Advanced Fibre Communications,
Inc. 3,500 84
o Advanced Micro Devices, Inc. 14,500 220
o Advanced Power Technology, Inc. 1,500 11
o Agere Systems, Inc., Class A 50,116 174
o Agilent Technologies, Inc. 34,317 855
Agilysys, Inc. 1,600 16
o Airnet Communications Corp. 1,300 1
o Alliance Fiber Optic Products, Inc. 2,100 5
o Alliance Semiconductor Corp. 1,200 9
o Alliant Techsystems, Inc. 2,437 126
o Altera Corp. 27,900 564
o American Physicians Capital, Inc. 2,500 66
American Power Conversion
Corp. 14,100 285
o American Science & Engineering,
Inc. 500 7
o American Technical Ceramics Corp. 500 4
o AMIS Holdings, Inc. 2,500 50
o Amkor Technology, Inc. 11,900 224
94 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Amphenol Corp., Class A 2,900 170
o Anadigics, Inc. 1,150 6
o Analog Devices, Inc. 25,200 1,117
o Anaren, Inc. 800 11
o Andrew Corp. 10,925 143
o Anixter International, Inc. 3,300 79
o Applied Materials, Inc. 119,998 2,804
o Applied Micro Circuits Corp. 12,238 71
o Arris Group, Inc. 2,600 16
o Arrow Electronics, Inc. 12,000 256
o Artisan Components, Inc. 1,100 23
o Aspect Communications Corp. 4,200 57
o Astronics Corp. 1,000 6
o Astronics Corp., Class B 250 1
o Asyst Technologies, Inc. 1,700 32
o Atmel Corp. 17,900 101
o ATMI, Inc. 1,400 32
o Audiovox Corp., Class A 1,600 19
o Avanex Corp. 2,100 11
o Avid Technology, Inc. 1,100 57
o Avnet, Inc. 8,288 161
AVX Corp. 7,500 110
o Aware, Inc. 1,100 4
o Axcelis Technologies, Inc. 7,044 75
o AXT, Inc. 800 2
Badger Meter, Inc. 1,000 36
BEI Technologies, Inc. 1,200 22
Bel Fuse, Inc., Class A 1,200 31
Belden, Inc. 800 15
o Bell Microproducts, Inc. 1,000 8
o Benchmark Electronics, Inc. 6,700 326
Boston Acoustics, Inc. 1,300 15
o Broadcom Corp., Class A 12,700 406
o Brooks Automation, Inc. 1,364 34
o Bruker BioSciences Corp. 2,100 11
C&D Technologies, Inc. 2,000 40
o C-COR.net Corp. 1,600 16
o Cable Design Technologies Corp. 1,700 16
o Cabot Microelectronics Corp. 660 38
o Cadence Design Systems, Inc. 11,600 179
o California Amplifier, Inc. 1,000 10
o Caliper Technologies Corp. 700 4
o Captaris, Inc. 2,200 13
o CCC Information Services
Group, Inc. 13,100 220
o Celera Genomics Group - Applera
Corp. 5,600 75
Chase Corp. 100 1
o Checkpoint Systems, Inc. 4,600 87
o ChipPAC, Inc., Class A 6,600 55
o Chronimed, Inc. 600 5
o CIENA Corp. 17,294 111
o Cirrus Logic, Inc. 3,800 31
o ClearOne Communications, Inc. 1,000 2
o CMGI, Inc. 14,086 27
o Coherent, Inc. 1,800 41
Cohu, Inc. 1,100 22
o CommScope, Inc. 4,900 76
o Computer Network Technology
Corp. 1,100 11
o Comtech Telecommunications 1,450 43
o Conexant Systems, Inc. 10,796 63
o Corvis Corp. 13,000 19
o Cox Radio, Inc., Class A 4,600 102
o Credence Systems Corp. 1,700 28
o Cree, Inc. 2,900 52
CTS Corp. 800 9
Cubic Corp. 1,200 34
o Cyberonics 3,700 101
o Cymer, Inc. 1,700 78
o Cypress Semiconductor Corp. 8,500 182
o Daktronics, Inc. 5,600 87
o DDI Corp. 1,600 --
o Diodes, Inc. 1,900 45
o Dionex Corp. 1,200 51
o DSP Group, Inc. 3,300 79
o Ducommun, Inc. 4,300 80
o Dupont Photomasks, Inc. 1,900 44
o Dynamics Research Corp. 1,200 20
o Electro Rent Corp. 2,600 38
o Electro Scientific Industries, Inc. 1,300 32
o Electroglas, Inc. 900 3
o Electronics for Imaging 3,400 92
o Emcore Corp. 1,500 7
o EMS Technologies, Inc. 1,000 18
See financial notes. 95
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Emulex Corp. 5,900 167
o Energizer Holdings, Inc. 6,333 233
o Energy Conversion Devices, Inc. 600 7
o Entrada Networks, Inc. 75 --
o ESS Technology, Inc. 3,100 43
o Exar Corp. 1,800 29
o Excel Technology, Inc. 600 17
o Fairchild Semiconductor International,
Inc., Class A 4,100 93
o FEI Co. 1,500 36
o First Virtual Communications, Inc. 240 --
o Flir Systems, Inc. 2,400 75
o FormFactor, Inc. 2,500 62
Frequency Electronics, Inc. 500 5
o FSI International, Inc. 1,300 8
o FuelCell Energy, Inc. 1,200 18
o General Cable Corp. 2,200 21
o Genus, Inc. 500 3
o Gerber Scientific, Inc. 1,900 15
o Getty Images, Inc. 4,600 206
o Glenayre Technologies, Inc. 2,300 7
o GlobespanVirata, Inc. 8,556 53
o GTC Biotherapeutics, Inc. 1,800 6
Harman International Industries,
Inc. 3,400 436
o Harmonic, Inc. 6,342 49
Harris Corp. 4,000 149
o Harvard Bioscience, Inc. 500 4
o Hearst-Argyle Television, Inc. 3,700 90
o Herley Industries, Inc. 500 9
o HI/FN, Inc. 800 8
o Hollywood Entertainment Corp. 4,300 65
o Hutchinson Technology, Inc. 17,100 573
o Illumina, Inc. 1,500 9
o Integrated Circuit Systems,
Inc. 5,400 181
o Integrated Silicon Solutions,
Inc. 900 13
(7) Intel Corp. 472,532 15,617
o Intelli-Check, Inc. 500 4
o Interactive Data Corp. 20,700 356
o Intermagnetics General Corp. 1,371 32
o International Rectifier Corp. 4,100 196
Intersil Corp., Class A 9,864 254
o Itron, Inc. 1,500 31
ITT Industries, Inc. 6,200 422
o Ixia 5,200 62
o IXYS Corp. 900 9
o Jabil Circuit, Inc. 13,400 373
o JDS Uniphase Corp. 54,424 193
Keithley Instruments, Inc. 700 11
o Kemet Corp. 3,700 49
o KLA-Tencor Corp. 12,500 717
o Kopin Corp. 2,500 18
o Kulicke & Soffa Industries, Inc. 1,900 28
o Lam Research Corp. 9,100 262
o Lattice Semiconductor Corp. 4,600 36
o LeCroy Corp. 900 15
o Lightpath Technologies, Inc.,
Class A 75 --
Linear Technology Corp. 25,000 1,065
o Littelfuse, Inc. 4,500 120
o Logicvision, Inc. 1,000 4
o Loral Space & Communications 1,390 --
o LSI Logic Corp. 27,464 254
o Lucent Technologies, Inc. 286,923 918
o Macromedia, Inc. 4,500 86
o Manufacturers Services Ltd. 2,500 15
o Mattson Technology, Inc. 4,100 58
Maxim Integrated Products, Inc. 22,453 1,116
o Maxwell Technologies, Inc. 1,000 8
o Measurement Specialties, Inc. 700 9
o MEMC Electronic Materials, Inc. 11,800 132
o Mercury Computer Systems, Inc. 3,600 77
o Mestek, Inc. 700 13
o Metawave Communications Corp. 1,900 --
Methode Electronics, Class A 3,600 43
o Micron Technology, Inc. 25,500 366
o Microsemi Corp. 3,500 72
o Microtune, Inc. 2,200 5
o MKS Instruments, Inc. 1,700 44
Mocon, Inc. 600 5
Molex, Inc. 16,125 506
o Monolithic System Technology, Inc. 1,200 10
Motorola, Inc. 169,155 2,289
96 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o MRV Communications, Inc. 4,307 13
MTS Systems Corp. 4,500 79
o Mykrolis Corp. 3,021 45
o Nanogen, Inc. 1,500 5
o Nanometrics, Inc. 300 4
o National Semiconductor Corp. 12,100 492
o Netopia, Inc. 2,100 21
o New Focus, Inc. 2,800 15
o Newport Corp. 4,200 66
o Novellus Systems, Inc. 6,671 275
o Novoste Corp. 1,600 8
o Nvidia Corp. 7,000 124
o Omnivision Technologies, Inc. 1,400 80
o Oplink Communications, Inc. 4,600 11
o Optical Communication Products,
Inc. 500 1
o OSI Systems, Inc. 1,200 22
o P-Com Inc. 520 --
Park Electrochemical Corp. 1,100 27
o Parkervision, Inc. 400 4
o ParthusCeva, Inc. 433 3
o Paxson Communications Corp. 1,900 10
o Pemstar, Inc. 1,600 6
o Pericom Semiconductor Corp. 1,400 16
PerkinElmer, Inc. 8,977 162
o Photon Dynamics, Inc. 900 34
o Pinnacle Systems, Inc. 1,800 13
o Pixelworks, Inc. 1,600 19
o Planar Systems, Inc. 3,700 86
o Plantronics, Inc. 4,000 111
o Plexus Corp. 1,700 29
o PLX Technology, Inc. 1,300 11
o Powell Industries, Inc. 1,000 19
o Power Integrations, Inc. 1,400 49
o Power-One, Inc. 6,000 54
o Powerwave Technologies, Inc. 3,200 21
o Proxim Corp., Class A 5,412 8
o QLogic Corp. 7,022 394
Qualcomm, Inc. 56,300 2,674
o Quantum Corp. 5,500 17
o QuickLogic Corp. 900 5
o Radisys Corp. 3,700 72
o Rambus, Inc. 5,700 41
Raven Industries, Inc. 1,400 37
o Rayovac Corp. 2,800 46
o Remec, Inc. 2,500 28
o Rex Stores Corp. 1,875 30
o RF Micro Devices, Inc. 7,200 84
Richardson Electronics Ltd. 1,300 13
o Robotic Vision Systems, Inc. 1,000 1
o Rofin-Sinar Technologies, Inc. 1,900 45
o Rudolph Technologies, Inc. 500 13
o Sanmina-SCI Corp. 35,816 378
o SBS Technologies, Inc. 1,700 23
o ScanSoft, Inc. 1,204 7
Scientific-Atlanta, Inc. 11,900 352
o SCM Microsystems, Inc. 1,200 10
o Seagate Technology 6,000 138
o Semitool, Inc. 1,800 16
o Semtech Corp. 3,200 71
o Silicon Image, Inc. 2,000 14
o Silicon Laboratories, Inc. 2,500 135
o Silicon Storage Technology, Inc. 3,500 39
o Siliconix, Inc. 8,100 411
o Sipex Corp. 1,600 14
o Sirenza Microdevices, Inc. 1,300 6
o Skyworks Solutions, Inc. 5,689 49
o Solectron Corp. 36,820 204
o Somera Communications, Inc. 1,900 3
o Spectralink Corp. 1,000 18
o Spherix, Inc. 500 3
o Standard Microsystems Corp. 1,100 33
o Stratex Networks, Inc. 2,800 9
o Superconductor Technologies, Inc. 1,600 8
o Superior Telecom, Inc. 1,124 --
o Supertex, Inc. 1,400 26
Symbol Technologies, Inc. 16,437 205
o Symmetricom, Inc. 8,450 61
o Synaptics, Inc. 1,000 13
o T/R Systems, Inc. 1,500 2
o Taser International, Inc. 1,000 63
o Technitrol, Inc. 4,000 87
o Tekelec 8,700 140
Tektronix, Inc. 5,300 136
See financial notes. 97
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Tellabs, Inc. 28,300 213
o Tellium, Inc. 4,000 6
o Teradyne, Inc. 13,059 298
o Terayon Communication Systems
Corp. 2,800 19
o Tessco Technologies, Inc. 900 12
Texas Instruments, Inc. 127,397 3,684
o Therma-Wave, Inc. 1,000 5
o Thermo Electron Corp. 26,550 584
o Thomas & Betts Corp. 7,300 130
o THQ, Inc. 1,950 35
o Three-Five Systems, Inc. 1,099 5
o Tollgrade Communications, Inc. 1,100 17
o Transmeta Corp. 4,500 18
o Transwitch Corp. 3,100 10
o Tripath Technology, Inc. 1,800 9
o Triquint Semiconductor, Inc. 5,310 38
o Troy Group, Inc. 2,000 5
o TTM Technologies, Inc. 4,400 71
o Tweeter Home Entertainment Group,
Inc. 1,100 9
United Industrial Corp. 1,200 21
Unitil Corp. 600 15
o Valence Technology, Inc. 1,400 5
o Varian Semiconductor Equipment
Associates, Inc. 1,500 73
o Varian, Inc. 5,800 208
o Viasat, Inc. 1,000 20
o Vicor Corp. 1,700 17
o Virage Logic Corp. 1,400 14
o Vishay Intertechnology, Inc. 11,781 221
o Vitesse Semiconductor Corp. 6,986 49
o Waters Corp. 8,700 273
o Western Digital Corp. 13,200 178
o Western Wireless Corp., Class A 5,200 101
o Wilson Greatbatch Technologies,
Inc. 1,100 41
o WJ Communications, Inc. 2,300 14
o Xicor, Inc. 1,000 11
o Xilinx, Inc. 24,600 780
o YDI Wireless, Inc. 100 --
o Zebra Technologies Corp.,
Class A 4,250 242
o Zoran Corp. 1,761 29
-------
56,542
ENERGY: RAW MATERIALS 1.5%
--------------------------------------------------------------------------
Alliance Resource Partners L.P. 1,700 50
Anadarko Petroleum Corp. 17,030 743
Apache Corp. 10,936 762
APCO Argentina, Inc. 200 5
Arch Coal, Inc. 3,500 86
o Atwood Oceanics, Inc. 1,200 31
Baker Hughes, Inc. 23,300 658
Berry Petroleum Co., Class A 2,000 36
o BJ Services Co. 11,800 387
Buckeye Partners L.P. 3,400 147
Burlington Resources, Inc. 14,000 681
Cabot Oil & Gas Corp. 14,400 368
CARBO Ceramics, Inc. 500 21
o Cimarex Energy Co. 3,122 64
o Cooper Cameron Corp. 3,300 141
o CREDO Petroleum Corp. 1,200 21
o Denbury Resources, Inc. 4,900 62
Devon Energy Corp. 15,680 761
ENSCO International, Inc. 5,700 150
Enterprise Products Partners
L.P. 17,000 368
EOG Resources, Inc. 11,400 480
o Evergreen Resources, Inc. 1,600 44
o FMC Technologies, Inc. 4,591 92
o Forest Oil Corp. 4,450 104
o Friede Goldman Halter, Inc. 1,855 --
o Grant Prideco, Inc. 3,600 41
o Grey Wolf, Inc. 5,800 19
Halliburton Co. 31,200 745
o Hanover Compressor Co. 5,600 59
Helmerich & Payne, Inc. 2,300 61
o Hydril Co. 2,500 59
Inergy L.P. 1,000 45
o Joy Global, Inc. 8,600 164
o Key Energy Services, Inc. 4,800 42
Kinder Morgan Energy Partners L.P. 1,502 64
98 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Kirby Corp. 1,300 38
Lufkin Industries, Inc. 500 12
Massey Energy Co. 6,000 83
Natural Resource Partners L.P. 2,000 66
NL Industries, Inc. 2,800 49
o Noble Corp. 10,100 347
Noble Energy, Inc. 3,500 139
Occidental Petroleum Corp. 28,100 991
o Offshore Logistics, Inc. 1,100 24
o Oil States International, Inc. 3,600 44
o Parker Drilling Co. 2,800 6
Peabody Energy Corp. 3,800 127
Penn Virginia Resource
Partners L.P. 1,000 33
Plains All American
Pipeline L.P. 4,600 138
o Plains Resources, Inc. 4,000 53
o Range Resources Corp. 2,400 18
o Reliant Resources, Inc. 20,125 100
o Rowan Cos., Inc. 3,400 81
Schlumberger Ltd. 42,500 1,996
o Seacor Smit, Inc. 1,250 48
o Smith International, Inc. 7,400 276
TC Pipelines L.P. 400 13
Tidewater, Inc. 2,700 74
o Tom Brown, Inc. 3,200 86
o Unit Corp. 2,400 47
USEC, Inc. 3,000 22
Valero Energy Corp. 8,649 369
o W-H Energy Services, Inc. 900 14
o Weatherford International Ltd. 4,800 167
Western Gas Resources, Inc. 2,000 85
o Westmoreland Coal Co. 3,500 52
World Fuel Services Corp. 500 14
o Xanser Corp. 1,400 3
-------
13,176
FOOD & AGRICULTURE 3.3%
--------------------------------------------------------------------------
o 7-Eleven, Inc. 5,000 80
o American Italian Pasta Co., Class A 1,000 38
The Andersons, Inc. 1,500 24
Archer-Daniels-Midland Co. 45,958 660
o Aurora Foods, Inc. 2,500 --
Bridgford Foods Corp. 300 2
Bunge Ltd. 6,800 184
Campbell Soup Co. 24,500 635
o Chiquita Brands International,
Inc. 10,000 185
Coca-Cola Bottling Co.
Consolidated 400 20
The Coca-Cola Co. 178,100 8,264
Coca-Cola Enterprises, Inc. 27,200 548
ConAgra Foods, Inc. 38,293 913
Consolidated-Tomoka Land Co. 900 27
Corn Products International, Inc. 7,800 264
o Dean Foods Co. 8,613 261
o Del Monte Foods Co. 8,931 85
Delta & Pine Land Co. 2,000 46
Dreyer's Grand Ice Cream
Holdings, Inc. 2,300 178
o Eden Bioscience Corp. 1,000 2
o Embrex, Inc. 1,300 13
Fleming Cos., Inc. 3,400 --
Flowers Foods, Inc. 19,515 463
Fresh Brands, Inc. 1,800 23
Fresh Del Monte Produce, Inc. 4,200 105
General Mills, Inc. 25,800 1,157
o Green Mountain Coffee
Roasters, Inc. 900 19
o Griffen Land & Nurseries, Inc. 300 4
H.J. Heinz Co. 21,900 774
o Hain Celestial Group, Inc. 1,406 30
Hershey Foods Corp. 8,200 632
Hormel Foods Corp. 6,500 160
Ingles Markets, Inc., Class A 300 3
Interstate Bakeries 3,200 47
o J & J Snack Foods Corp. 3,200 114
The J.M. Smuckers Co. 2,438 107
o John B. Sanfilippo & Son 5,000 172
Kellogg Co. 28,900 957
Kraft Foods, Inc., Class A 14,500 422
Lance, Inc. 1,900 25
o Lesco, Inc. 500 6
Lindsay Manufacturing Co. 800 19
Marsh Supermarkets, Inc., Class B 1,000 11
o Maui Land & Pineapple Co., Inc. 800 22
See financial notes. 99
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
McCormick & Co., Inc. 5,800 172
MGP Ingredients, Inc. 1,700 16
o Monterey Pasta Co. 700 3
Nash Finch Co. 1,700 27
o Neogen Corp. 500 10
o The Pantry, Inc. 400 7
o Peet's Coffee & Tea, Inc. 1,800 30
The Pepsi Bottling Group, Inc. 18,200 406
PepsiAmericas, Inc. 13,200 198
PepsiCo, Inc. 124,800 5,968
o Performance Food Group Co. 1,900 71
Pilgrim's Pride Corp., Class B 1,400 18
o Ralcorp Holdings, Inc. 6,700 184
Rocky Mountain Chocolate
Factory, Inc. 1,000 11
Sanderson Farms, Inc. 3,500 123
Sara Lee Corp. 54,378 1,084
o The Scotts Co., Class A 2,800 162
Seaboard Corp. 200 51
Sensient Technologies Corp. 2,300 44
o Smart & Final, Inc. 2,700 19
o Smithfield Foods, Inc. 6,300 134
o Spartan Stores, Inc. 500 2
Standard Commercial Corp. 1,100 21
Supervalu, Inc. 18,087 456
Sysco Corp. 47,036 1,583
Tasty Baking Co. 500 4
o Tejon Ranch Co. 674 27
Tootsie Roll Industries, Inc. 2,190 72
Tyson Foods, Inc., Class A 15,240 217
o United Natural Foods, Inc. 1,300 50
o VistaCare, Inc., Class A 1,000 35
o Wild Oats Markets, Inc. 3,800 39
Wm. Wrigley Jr. Co. 11,600 654
o Zapata Corp. 1,000 54
-------
29,653
GOLD 0.2%
--------------------------------------------------------------------------
Barrick Gold Corp. 5,565 109
o Glamis Gold Ltd. 8,600 120
o Golden Cycle Gold Corp. 600 6
o Meridian Gold, Inc. 6,600 84
Newmont Mining Corp. 29,051 1,272
Royal Gold, Inc. 3,100 64
-------
1,655
HEALTHCARE / DRUGS & MEDICINE 12.4%
--------------------------------------------------------------------------
o 1-800 Contacts, Inc. 500 11
o aaiPharma, Inc. 1,800 33
Abbott Laboratories 112,505 4,795
o Abgenix, Inc. 3,600 44
o Abiomed, Inc. 800 7
o Accredo Health, Inc. 2,841 91
o Aclara BioSciences, Inc. 2,400 8
o Advanced Medical Optics, Inc. 2,400 48
o Advanced Neuromodulation
Systems, Inc. 1,050 43
o AdvancePCS Corp. 6,300 324
o AeroGen, Inc. 3,200 2
o Alaris Medical Systems, Inc. 5,000 78
o Albany Molecular Research, Inc. 1,600 24
o Align Technology, Inc. 8,700 134
o Alkermes, Inc. 3,100 40
Allergan, Inc. 9,400 711
o Alliance Imaging, Inc. 1,800 8
o Alliance Pharmaceutical Corp. 220 --
o Allscripts Healthcare
Solutions, Inc. 1,900 10
Alpharma, Inc., Class A 3,700 67
o America Service Group, Inc. 800 21
o American Healthways, Inc. 1,550 64
o American Medical Systems
Holdings, Inc. 1,400 28
o AMERIGROUP Corp. 900 38
AmerisourceBergen Corp. 4,824 274
o Amgen, Inc. 90,368 5,581
o Amsurg Corp. 700 25
o Amylin Pharmaceuticals, Inc. 2,300 63
o Andrx Corp. 3,900 78
o Anthem, Inc. 14,417 987
o Antigenics, Inc. 1,400 15
o Aphton Corp. 800 6
o Apogent Technologies, Inc. 7,100 156
Applied Biosystems Group -
Applera Corp. 11,400 263
100 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Apria Healthcare Group, Inc. 10,500 305
o Arqule, Inc. 1,300 7
Arrow International, Inc. 6,400 169
o Arthrocare Corp. 1,400 31
o Aspect Medical Systems, Inc. 1,200 11
o Atrix Labs, Inc. 1,400 28
o AVANIR Pharmaceuticals, Class A 1,900 3
o Avant Immunotherapeutics, Inc. 3,000 7
o Avigen, Inc. 900 6
o Barr Laboratories, Inc. 3,354 258
Bausch & Lomb, Inc. 3,400 164
Baxter International, Inc. 26,118 694
Beckman Coulter, Inc. 5,100 253
Becton Dickinson & Co. 17,300 633
o Beverly Enterprises, Inc. 3,800 23
o BioCryst Pharmaceuticals, Inc. 1,400 11
o Biogen, Inc. 11,500 465
o BioMarin Pharmaceuticals, Inc. 1,800 13
Biomet, Inc. 17,625 632
o Biopure Corp. 1,200 4
o Bioreliance Corp. 1,200 41
o Biosite, Inc. 1,400 36
o Biosource International, Inc. 1,500 11
o Bone Care International, Inc. 1,400 20
o Boston Scientific Corp. 30,900 2,093
o Bradley Pharmaceuticals, Inc. 1,700 46
Bristol-Myers Squibb Co. 140,550 3,566
C.R. Bard, Inc. 4,000 320
Cambrex Corp. 900 21
Cardinal Health, Inc. 30,660 1,819
o Caremark Rx, Inc. 19,900 499
o Cell Therapeutics, Inc. 1,400 15
o Centene Corp. 500 15
o Cephalon, Inc. 3,500 164
o Cerus Corp. 500 2
o Charles River Laboratories
International, Inc. 1,900 61
o Chattem, Inc. 1,200 18
o Chiron Corp. 12,600 688
o Cholestech Corp. 1,700 12
o ChromaVision Medical Systems, Inc. 1,100 1
o Ciphergen Biosystems, Inc. 1,700 19
o Community Health Systems, Inc. 7,100 171
o Conmed Corp. 1,700 35
Cooper Cos., Inc. 2,200 96
o Corixa Corp. 1,802 11
o Corvel Corp. 1,900 69
o Covance, Inc. 5,800 151
o Coventry Health Care, Inc. 9,600 526
o CryoLife, Inc. 750 5
o CTI Molecular Imaging, Inc. 2,000 32
o Cubist Pharmaceuticals, Inc. 1,900 22
o Curis, Inc. 3,140 15
o CV Therapeutics, Inc. 1,100 19
o Cygnus, Inc. 600 --
o Cyotgen Corp. 230 3
o Cytyc Corp. 7,800 101
D&K Healthcare Resources, Inc. 700 9
o Dade Behring Holdings, Inc. 2,600 80
Datascope Corp. 1,000 33
o DaVita, Inc. 16,500 579
o Deltagen, Inc. 2,200 --
o Dendreon Corp. 1,400 12
Dentsply International, Inc. 6,550 289
Diagnostic Products Corp. 1,700 69
o Digene Corp. 1,400 49
o DJ Orthopedics, Inc. 3,000 54
o Durect Corp. 2,000 4
o Dynacq International, Inc. 3,616 61
o Edwards Lifesciences Corp. 3,900 113
Eli Lilly & Co. 80,200 5,343
o Emisphere Technologies, Inc. 800 5
o Endo Pharmaceutical Holdings,
Inc. 10,500 172
o Entremed, Inc. 1,200 6
o Enzo Biochem, Inc. 1,697 31
o Enzon Pharmaceuticals, Inc. 1,900 21
o Eon Labs, Inc. 2,400 101
o Express Scripts, Inc. 6,300 346
o First Health Group Corp. 5,700 139
o First Horizon Pharmaceutical Corp. 900 6
o Forest Laboratories, Inc. 25,000 1,250
o Gen-Probe, Inc. 3,400 91
o Gene Logic, Inc. 1,300 6
See financial notes. 101
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Genelabs Technologies, Inc. 800 1
o Genentech, Inc. 15,700 1,287
o Genome Therapeutics Corp. 2,100 6
o Genta, Inc. 2,900 31
o Genzyme Corp.-General
Division 15,232 699
o Geron Corp. 1,000 13
o Gilead Sciences, Inc. 14,060 767
Guidant Corp. 25,816 1,317
o Guilford Pharmaceuticals, Inc. 1,200 9
o Haemonetics Corp. 3,700 85
HCA, Inc. 29,100 1,113
Health Management Associates,
Inc., Class A 15,900 352
o Health Net, Inc. 16,600 524
Healthcare Services Group 2,500 41
o HealthExtras, Inc. 1,900 22
o HealthTronics Surgical Services,
Inc. 2,500 17
o Henry Schein, Inc. 2,300 143
o Hologic, Inc. 2,600 35
o Human Genome Sciences, Inc. 5,100 71
o Humana, Inc. 18,900 384
o I-Stat Corp. 600 7
ICN Pharmaceuticals, Inc. 5,400 104
o ICU Medical, Inc. 550 19
o Idec Pharmaceuticals Corp. 6,900 242
o IDEXX Laboratories, Inc. 2,500 118
o Igen International, Inc. 1,300 75
o Ii-Vi, Inc. 1,900 45
o ImClone Systems, Inc. 4,435 154
o Immucor, Inc. 750 22
o Immunogen, Inc. 1,500 7
o Immunomedics, Inc. 2,400 20
o IMPAC Medical Systems, Inc. 3,000 71
o Impax Laboratories, Inc. 1,600 19
o Inamed Corp. 9,300 803
o Incyte Corp. 2,600 14
o Indevus Pharmaceuticals, Inc. 1,800 10
o Inspire Pharmaceuticals, Inc. 1,300 24
o Integra LifeSciences Holdings
Corp. 1,100 37
o InterMune, Inc. 1,100 22
o Intuitive Surgical, Inc. 1,050 15
Invacare Corp. 2,000 82
o Inveresk Research Group, Inc. 1,700 39
o Isis Pharmaceuticals, Inc. 1,900 13
o IVAX Corp. 8,750 169
(10) Johnson & Johnson 214,870 10,814
o Kendle International, Inc. 1,700 11
o Kindred Healthcare, Inc. 2,312 95
o King Pharmaceuticals, Inc. 18,516 248
o Kosan Biosciences, Inc. 2,500 23
o KV Pharmaceutical Co., Class A 2,700 65
o Laboratory Corp. of America
Holdings 10,300 365
Landauer, Inc. 1,100 43
o Large Scale Biology Corp. 2,400 4
o Lexicon Genetics, Inc. 1,900 11
o LifePoint Hospitals, Inc. 2,300 59
o Ligand Pharmaceuticals, Inc.,
Class B 2,300 32
o Lincare Holdings, Inc. 7,100 277
o Magellan Health Services, Inc. 2,200 --
Manor Care, Inc. 8,000 266
o Maxim Pharmaceuticals, Inc. 2,400 14
McKesson Corp. 19,900 602
o Med-Design Corp. 1,200 4
o Medamicus, Inc. 500 6
o Medarex, Inc. 3,000 21
o Medcath Corp. 1,500 16
o Medco Health Solutions, Inc. 18,638 619
o Medicines Co. 1,700 45
Medicis Pharmaceutical Corp.,
Class A 1,700 108
o Medimmune, Inc. 17,375 463
o Medis Technologies Ltd. 1,110 10
o MedQuist, Inc. 3,217 54
Medtronic, Inc. 87,974 4,009
Mentor Corp. 3,000 61
Merck & Co., Inc. 158,552 7,016
o Merit Medical Systems, Inc. 1,666 44
o MGI Pharma, Inc. 1,900 71
o Mid Atlantic Medical Services, Inc. 8,300 485
o Millennium Pharmaceuticals, Inc. 11,956 190
o MIM Corp. 1,500 9
102 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Mine Safety Appliances Co. 900 51
o Molecular Devices Corp. 8,100 144
Mylan Laboratories, Inc. 45,000 1,087
o Myriad Genetics, Inc. 1,400 18
o Nabi Biopharmaceuticals 2,800 31
o National Healthcare Corp. 600 12
Nature's Sunshine Products, Inc. 2,000 16
o NBTY, Inc. 16,000 436
o Nektar Therapeutics 2,200 29
o Neose Technologies, Inc. 500 4
o Neurocrine Biosciences, Inc. 1,400 66
o Neurogen Corp. 800 4
o Northfield Laboratories, Inc. 1,100 7
o Noven Pharmacuticals, Inc. 5,500 56
o NPS Pharmacuticals, Inc. 1,000 26
o Nuvelo, Inc. 900 3
Oakley, Inc. 4,200 46
o Ocular Sciences, Inc. 1,500 42
o Odyssey HealthCare, Inc. 2,250 62
Omnicare, Inc. 7,500 288
o Onyx Pharmaceuticals, Inc. 1,800 44
o OraSure Technologies, Inc. 1,500 13
o Orthodontic Centers of America, Inc. 2,112 19
o OSI Pharmaceuticals, Inc. 1,690 47
Owens & Minor, Inc. 2,000 41
o Oxford Health Plans, Inc. 21,700 879
o Pacificare Health Systems, Inc. 9,400 559
o Pain Therapeutics, Inc. 2,600 16
o Parexel International Corp. 2,400 40
o Patterson Dental Co. 5,300 339
o Pediatrix Medical Group, Inc. 3,000 160
Perrigo Co. 4,300 58
(6) Pfizer, Inc. 555,352 17,549
o Pharmaceutical Product Development, Inc. 2,500 75
o Pharmaceutical Resources, Inc. 1,900 137
o Pharmacopeia, Inc. 1,300 16
o Pharmacyclics, Inc. 1,100 6
PolyMedica Corp. 4,400 130
o Pozen, Inc. 1,300 16
o Praecis Pharmaceuticals, Inc. 1,600 11
o Priority Healthcare Corp., Class B 2,000 43
o Protein Design Labs, Inc. 4,100 55
o Province Healthcare Co. 2,325 30
o PSS World Medical, Inc. 2,800 26
o QMed, Inc. 500 4
o Quest Diagnostics 7,410 501
o Regeneration Technologies, Inc. 1,700 20
o Regeneron Pharmaceuticals, Inc. 1,900 26
o RehabCare Group, Inc. 4,000 63
o Renal Care Group, Inc. 4,700 176
o Resmed, Inc. 2,000 84
o Respironics, Inc. 1,900 79
o Sangamo Biosciences, Inc. 1,200 6
o Savient Pharmaceuticals, Inc. 2,300 14
Schering-Plough Corp. 80,950 1,236
o Select Medical Corp. 2,500 84
o Sepracor, Inc. 6,600 176
o Serologicals Corp. 1,200 19
o SICOR, Inc. 7,200 193
o Sierra Health Services, Inc. 11,700 273
o Sola International, Inc. 2,700 46
o SonoSite, Inc. 1,600 32
o Specialty Laboratories 700 9
o St. Jude Medical, Inc. 12,300 715
o Steris Corp. 6,100 127
Stryker Corp. 13,800 1,119
o Sunrise Senior Living, Inc. 4,900 142
o Sunrise Technologies International, Inc. 1,700 --
o SuperGen, Inc. 900 9
o Sybron Dental Specialties, Inc. 4,633 107
o Tanox, Inc. 1,900 34
o Techne Corp. 3,800 132
o Tenet Healthcare Corp. 30,150 416
o Theragenics Corp. 2,500 11
o Therasense, Inc. 2,300 42
o Third Wave Technologies, Inc. 1,800 6
o Thoratec Corp. 2,636 41
o Titan Pharmaceuticals, Inc. 800 3
o Transgenomic, Inc. 1,200 3
o Transkaryotic Therapies, Inc. 900 12
o Triad Hospitals, Inc. 6,044 186
See financial notes. 103
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Trimeris, Inc. 500 13
o TriPath Imaging, Inc. 2,600 24
o Tripos, Inc. 1,000 7
o United Surgical Partners International, Inc. 1,400 42
UnitedHealth Group, Inc. 42,200 2,147
o Universal Health Services, Class B 4,000 188
o Urologix, Inc. 1,800 8
o US Oncology, Inc. 5,200 57
o USANA Health Sciences, Inc. 1,000 33
o Utah Medical Products, Inc. 2,500 59
o Varian Medical Systems, Inc. 4,700 301
o Vaxgen, Inc. 600 6
o VCA Antech, Inc. 2,700 76
o Ventana Medical Systems, Inc. 1,200 50
o Vertex Pharmaceuticals, Inc. 3,144 41
o Viasys Healthcare, Inc. 1,482 27
o Vical, Inc. 1,600 9
o Viropharma, Inc. 1,000 3
o Visx, Inc. 3,100 75
Vital Signs, Inc. 1,900 58
o Watson Pharmaceuticals, Inc. 7,732 304
o WellPoint Health Networks, Inc. 10,180 905
West Pharmaceutical Services, Inc. 3,300 109
o Wright Medical Group, Inc. 1,700 50
Wyeth 96,900 4,277
o XOMA Ltd. 2,400 18
Young Innovations, Inc. 2,000 60
o Zimmer Holdings, Inc. 13,300 849
o Zymogenetics, Inc. 2,000 25
-------
111,298
HOUSEHOLD PRODUCTS 1.9%
--------------------------------------------------------------------------
Alberto-Culver Co., Class B 3,300 209
Avon Products, Inc. 17,000 1,155
Church & Dwight Co., Inc. 3,300 123
Clorox Co. 27,000 1,223
Colgate-Palmolive Co. 35,500 1,888
The Dial Corp. 13,100 315
The Estee Lauder Cos., Inc., Class A 10,300 385
The Gillette Co. 70,900 2,262
Inter Parfums, Inc. 675 9
International Flavors & Fragrances, Inc. 4,400 146
Nu Skin Enterprises, Inc., Class A 6,500 103
Procter & Gamble Co. 93,700 9,210
------
17,028
INSURANCE 4.4%
--------------------------------------------------------------------------
21st Century Holding Co. 1,000 19
21st Century Insurance Group 7,200 101
Aetna, Inc. 14,800 850
AFLAC, Inc. 37,600 1,372
Alfa Corp. 4,800 62
o Alleghany Corp. 212 43
o Allmerica Financial Corp. 2,400 64
The Allstate Corp. 50,874 2,010
AMBAC Financial Group, Inc. 7,250 513
American Financial Group, Inc. 5,500 122
(8) American International Group, Inc. 185,222 11,267
o American Medical Security Group, Inc. 5,600 128
American National Insurance Co. 1,300 108
AmerUs Group Co. 1,900 72
AON Corp. 23,000 504
o Arch Capital Group Ltd. 1,400 51
o Argonaut Group, Inc. 2,400 38
Arthur J. Gallagher & Co. 4,300 125
Baldwin & Lyons, Inc., Class B 750 18
Brown & Brown, Inc. 3,000 91
Chubb Corp. 13,547 905
CIGNA Corp. 10,300 588
Cincinnati Financial Corp. 12,200 499
o Clark, Inc. 1,700 26
o CNA Financial Corp. 15,700 339
o CNA Surety Corp. 2,200 24
Commerce Group, Inc. 1,600 64
Crawford & Co., Class B 1,600 11
Delphi Financial Group, Inc., Class A 3,010 152
EMC Insurance Group, Inc. 1,200 20
Erie Indemnity Co., Class A 3,000 120
FBL Financial Group, Inc., Class A 2,090 55
Fidelity National Financial, Inc. 14,503 448
First American Corp. 4,800 137
104 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
First United Corp. 2,200 51
o FPIC Insurance Group, Inc. 400 7
Fremont General Corp. 2,000 33
Great American Financial Resources, Inc. 2,800 44
Harleysville Group, Inc. 1,800 40
Hartford Financial Services Group, Inc. 19,400 1,065
HCC Insurance Holdings, Inc. 2,100 61
Hilb, Rogal & Hamilton Co. 2,000 60
Hooper Holmes, Inc. 2,100 11
Horace Mann Educators Corp. 1,800 24
Independence Holding Co. 1,500 35
Infinity Property & Casualty Corp. 2,500 81
Jefferson-Pilot Corp. 10,100 482
John Hancock Financial Services, Inc. 19,900 703
Liberty Corp. 1,000 45
Lincoln National Corp. 12,600 503
Loews Corp. 12,500 537
o Markel Corp. 300 76
Marsh & McLennan Cos., Inc. 43,000 1,838
MBIA, Inc. 9,750 581
Mercury General Corp. 2,900 138
Metlife, Inc. 55,500 1,743
MGIC Investment Corp. 6,300 323
o MIIX Group, Inc. 2,400 4
Mony Group, Inc. 1,500 48
o National Medical Health Card Systems, Inc. 800 12
Nationwide Financial Services, Inc., Class A 1,300 44
o Navigators Group, Inc. 1,500 48
NYMAGIC, Inc. 2,100 50
Odyssey Re Holdings Corp. 2,900 61
o Ohio Casualty Corp. 3,000 46
Old Republic International Corp. 10,900 392
o Penn Treaty American Corp. 600 1
Penn-America Group, Inc. 1,400 21
o Philadelphia Consolidated Holding Co. 1,000 47
The Phoenix Cos., Inc. 4,500 49
PMA Capital Corp., Class A 700 9
The PMI Group, Inc. 5,600 214
Presidential Life Corp. 1,000 15
Principal Financial Group, Inc. 22,400 702
o ProAssurance Corp. 1,670 50
The Progressive Corp. 23,300 1,720
Protective Life Corp. 5,500 179
Prudential Financial, Inc. 38,500 1,488
Radian Group, Inc. 9,202 487
Reinsurance Group of America, Inc. 2,600 104
RLI Corp. 2,800 94
Safeco Corp. 10,000 367
Safety Insurance Group, Inc. 1,000 16
SCPIE Holdings, Inc. 700 9
Selective Insurance Group, Inc. 1,200 37
o SNTL Corp. - Litigation Trust Certificates 1,300 --
St. Paul Cos., Inc. 16,200 618
Stancorp Financial Group, Inc. 2,500 158
State Auto Financial Corp. 1,300 35
Sterling Financial Corp. 1,000 28
o Stewart Information Services Corp. 3,700 115
Torchmark Corp. 10,600 465
Transatlantic Holdings, Inc. 2,650 203
Travelers Property Casualty Corp., Class A 20,549 335
Travelers Property Casualty Corp., Class B 36,790 602
o Triad Guaranty, Inc. 1,700 84
o UICI 2,500 37
United Fire & Casualty Co. 500 20
Unitrin, Inc. 3,100 115
UnumProvident Corp. 13,414 220
o USI Holdings Corp. 4,500 57
W.R. Berkley Corp. 10,200 350
o WellChoice, Inc. 2,500 81
Zenith National Insurance Corp. 1,100 34
------
39,298
MEDIA 4.0%
--------------------------------------------------------------------------
o Acme Communications, Inc. 1,900 16
o Adolor Corp. 1,700 31
Advanced Marketing Services, Inc. 900 10
o AMC Entertainment, Inc. 2,900 40
See financial notes. 105
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o American Tower Corp., Class A 14,500 168
Banta Corp. 2,700 103
Belo Corp., Class A 9,400 256
Blockbuster, Inc., Class A 6,900 133
o Cablevision Systems Corp., NY Group, Class A 16,300 329
Cadmus Communications Corp. 1,900 23
o Charter Communications, Inc., Class A 20,300 87
Clear Channel Communications, Inc. 44,221 1,805
o CNET Networks, Inc. 9,983 81
o Comcast Corp., Class A 68,336 2,318
o Comcast Corp., Special Class A 42,800 1,396
o Consolidated Graphics, Inc. 3,900 108
o Cox Communications, Inc., Class A 42,135 1,436
o Crown Media Holdings, Inc., Class A 3,500 31
o Cumulus Media, Inc., Class A 2,600 49
o Daily Journal Corp. 500 14
o DGSE Cos., Inc. 700 1
Dow Jones & Co., Inc. 5,000 260
The E.W. Scripps Co., Class A 6,000 558
o EchoStar Communications Corp., Class A 18,300 701
o Emmis Communications Corp., Class A 4,300 95
o Entercom Communications Corp. 3,000 137
o Entravision Communications Corp., Class A 5,000 48
o Fox Entertainment Group, Inc., Class A 25,350 702
Gannett Co., Inc. 18,500 1,556
o Gaylord Entertainment Co. 1,800 49
o GC Cos., Inc. 500 --
Gray Television, Inc. 3,100 39
Gray Television, Inc., Class A 1,000 13
Harte-Hanks, Inc. 8,100 161
Hollinger International, Inc. 7,300 98
o Information Holdings, Inc. 2,200 49
o Insight Communications Co. 2,700 26
o InterActiveCorp 47,117 1,730
John Wiley & Sons, Class A 3,800 99
o Journal Register Co. 3,200 64
Knight-Ridder, Inc. 5,700 418
Lee Enterprises, Inc. 2,500 105
o Lifeline Systems, Inc. 2,300 81
o Lin TV Corp., Class A 3,300 74
o Lynch Interactive Corp. 900 23
o Martha Stewart Living Omnimedia, Class A 1,400 14
McClatchy Co., Class A 7,200 466
The McGraw-Hill Cos., Inc. 17,300 1,158
Media General, Inc., Class A 2,000 132
o Mediacom Communications Corp. 7,600 53
Meredith Corp. 6,000 291
o Merrimac Industries, Inc. 600 3
o Metro-Goldwyn-Mayer, Inc. 13,134 210
New York Times Co., Class A 10,200 485
o PanAmSat Corp. 15,400 319
o Quipp, Inc. 900 11
R.R. Donnelley & Sons Co. 7,700 200
o Radio One, Inc., Class A 9,500 152
o Radio Unica Communications Corp. 300 --
The Reader's Digest Association, Inc., Class A 7,300 108
Regal Entertainment Group, Class A 4,200 86
o Saga Communications, Inc., Class A 1,250 24
o Salem Communications Corp., Class A 900 21
o Scholastic Corp. 2,200 68
o Sinclair Broadcast Group, Inc., Class A 2,300 27
Thomas Nelson, Inc. 800 13
o Time Warner, Inc. 329,252 5,034
o Tivo, Inc. 4,500 36
Tribune Co. 21,900 1,074
o Univision Communications, Inc. Class A 23,010 781
o Valassis Communications, Inc. 5,900 153
o Valuevision Media, Inc., Class A 1,400 23
Viacom, Inc., Class B 128,012 5,104
The Walt Disney Co. 146,650 3,320
Washington Post, Class B 600 443
o Westwood One, Inc. 7,200 216
o XM Satellite Radio Holdings, Inc., Class A 10,300 209
------
35,755
106 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
MISCELLANEOUS 0.5%
--------------------------------------------------------------------------
3M Co. 56,000 4,417
o ABX Air, Inc. 6,900 24
o ANC Rental Corp. 3,037 --
o AT&T Latin America Corp., Class A 2,100 --
o Breakaway Solutions, Inc. 1,400 --
o Coinstar, Inc. 5,200 76
Harbor Global Co. Ltd. 160 2
o i2 Technologies, Inc. 15,300 27
o Jupiter Media Metrix, Inc. 1,673 --
o NetFlix, Inc. 3,000 172
o Nucentrix Broadband Networks, Inc. 2,100 --
o Scient, Inc. 624 --
o Vialta, Inc. 34 --
-----
4,718
MISCELLANEOUS FINANCE 8.5%
--------------------------------------------------------------------------
1st Source Corp. 1,571 31
o A.B. Watley Group, Inc. 1,300 --
A.G. Edwards, Inc. 5,900 239
o Acacia Research - Acacia Technologies 330 2
o Acacia Research - CombiMatrix 184 1
o Actrade Financial Technologies Ltd. 1,000 1
Advanta Corp., Class A 7,400 81
o Affiliated Managers Group, Inc. 1,200 87
Alliance Capital Management Holding L.P. 5,200 175
Allied Capital Corp. 8,515 212
Amcore Financial, Inc. 1,200 32
American Capital Strategies Ltd. 5,100 138
American Express Co. 94,150 4,418
American Home Mortgage Holdings, Inc. 2,000 42
o AmeriCredit Corp. 3,800 51
o Ameritrade Holding Corp. 28,800 393
Asta Funding, Inc. 1,000 30
Astoria Financial Corp. 7,000 242
Bank of the Ozarks, Inc. 1,400 60
o Bankunited Financial Corp., Class A 2,200 49
Banner Corp. 1,200 28
o Bay View Capital Corp. 5,061 31
The Bear Stearns Cos., Inc. 13,620 1,039
o Berkshire Hathaway, Inc., Class A 92 7,159
Berkshire Hills Bancorp, Inc. 1,400 50
Blackrock, Inc. 400 21
o Boca Resorts, Inc., Class A 1,800 24
o BOK Financial Corp. 3,437 130
BP Prudhoe Bay Royalty Trust 2,200 46
o Cadiz, Inc. 2,100 --
Camco Financial Corp. 700 12
o Capital Corp. of the West 1,050 40
Capital One Financial Corp. 17,600 1,070
Cash America International, Inc. 2,500 48
Cathay Bancorp., Inc. 1,600 77
Central Pacific Financial Co. 900 24
/ The Charles Schwab Corp. 98,620 1,337
Charter Financial Corp. 900 30
Charter Municipal Mortgage Acceptance Co. 1,400 27
Charter One Financial, Inc. 15,125 483
Chesterfield Financial Corp. 1,500 35
Chicago Mercantile Exchange 1,800 122
CIT Group, Inc. 16,100 541
=(4) Citigroup, Inc. 376,436 17,843
Citizens First Bancorp, Inc. 700 16
Coastal Bancorp, Inc. 800 27
Coastal Financial Corp. 2,281 37
o The Commercial Capital Bancorp, Inc. 2,500 47
Commercial Federal Corp. 2,300 59
o CompuCredit Corp. 4,400 87
o Corrections Corp. of America 3,828 94
Countrywide Financial Corp. 8,900 936
Cross Timbers Royalty Trust 1,500 38
CVB Financial Corp. 2,166 43
Downey Financial Corp. 2,000 92
o DVI, Inc. 1,200 --
o E*TRADE Group, Inc. 25,035 258
East-West Bancorp, Inc. 1,300 64
Eaton Vance Corp. 5,800 202
o eSpeed, Inc., Class A 3,300 90
Fannie Mae 69,900 5,011
Federated Investors, Inc., Class B 7,450 206
See financial notes. 107
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Fidelity Bankshares, Inc. 1,933 52
o Financial Federal Corp. 800 27
Financial Industries Corp. 700 10
First Financial Corp. 600 18
First Financial Holdings, Inc. 1,400 42
First Indiana Corp. 1,375 25
First Place Financial Corp. 2,900 56
First Sentinel Bancorp., Inc. 2,300 43
Flagstar Bancorp., Inc. 4,500 100
Flushing Financial Corp. 1,200 29
Franklin Resources, Inc. 17,600 835
Freddie Mac 50,500 2,835
o Gabelli Asset Management, Inc., Class A 700 25
Glacier Bancorp, Inc. 550 17
Golden West Financial Corp. 10,400 1,044
Goldman Sachs Group, Inc. 36,400 3,418
o Golf Trust of America, Inc. L.P. 2,400 7
GreenPoint Financial Corp. 9,150 285
o Hawthorne Financial Corp. 1,050 27
Heritage Financial Corp. 700 15
Hudson River Bancorp 1,600 53
Hugoton Royalty Trust 3,300 66
IBERIABANK Corp. 700 36
Independence Community Bank Corp. 3,600 132
Independent Bank Corp. Michigan 1,637 47
IndyMac Bancorp, Inc. 3,400 100
o Instinet Group, Inc. 1,200 7
International Bancshares Corp. 1,877 86
Interpool, Inc. 1,200 18
o Investment Technology Group, Inc. 2,250 45
Investors Financial Services Corp. 5,500 194
o ITLA Capital Corp. 700 33
Janus Capital Group, Inc. 16,500 233
Jefferies Group, Inc. 1,600 50
Klamath First Bancorp, Inc. 2,700 65
o Knight Trading Group, Inc. 9,700 134
o LabOne, Inc. 2,100 58
LaBranche & Co., Inc. 2,400 25
Legg Mason, Inc. 4,200 350
Lehman Brothers Holdings, Inc. 16,500 1,188
Leucadia National Corp. 3,100 130
o Local Financial Corp. 2,000 39
o Mail-Well, Inc. 1,300 5
MB Financial, Inc. 1,200 57
MBNA Corp. 97,650 2,417
MCG Capital Corp. 2,200 39
McGrath RentCorp 800 23
o Meritage Corp. 1,000 59
Merrill Lynch & Co., Inc. 68,800 4,073
Metris Cos., Inc. 3,000 14
o MicroFinancial, Inc. 1,900 6
The Midland Co. 1,800 41
Moody's Corp. 10,300 596
Morgan Stanley 79,800 4,379
MutualFirst Financial, Inc. 2,000 56
o National Financial Partners Corp. 2,500 68
o National Western Life Insurance Co., Class A 300 43
o NCO Portfolio Management, Inc. 2,600 18
New Century Financial Corp. 3,600 133
New York Community Bancorp., Inc. 9,736 352
o NextCard, Inc. 2,600 --
o North American Scientific, Inc. 700 5
Northrim BanCorp, Inc. 2,500 52
Northway Financial, Inc. 200 7
Northwest Bancorp, Inc. 2,500 52
Nueberger Berman, Inc. 3,950 171
Nuveen Investments, Inc., Class A 6,300 176
Oak Hill Financial, Inc. 1,000 30
o Ocwen Financial Corp. 2,920 14
PAB Bankshares, Inc. 700 10
Pacific Capital Bancorp. 2,133 73
Pacific Northwest Bancorp 1,000 39
Partners Trust Financial Group, Inc. 1,700 43
The Peoples Holding Co. 500 24
o Petrocorp, Inc. 3,000 40
PMC Commercial Trust 1,500 21
o Portfolio Recovery Associates, Inc. 2,000 52
Provident Financial Holdings 500 16
o Providian Financial Corp. 18,900 210
R&G Financial Corp., Class B 1,700 56
Raymond James Financial, Inc. 4,600 188
108 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Resource America, Inc., Class A 2,000 25
Roslyn Bancorp., Inc. 4,550 123
Santander BanCorp 1,760 44
o Saxon Capital, Inc. 1,000 19
Seacoast Financial Services Corp. 1,973 51
SEI Investments Co. 7,200 210
o Siebert Financial Corp. 2,900 12
SLM Corp. 31,800 1,245
o SoundView Technology Group, Inc. 600 7
Southern Financial Bancorp, Inc. 253 9
Sovereign Bancorp., Inc. 19,860 413
State Financial Services Corp., Class A 2,000 53
Staten Island Bancorp., Inc. 2,900 58
Student Loan Corp. 1,700 220
SWS Group, Inc. 1,141 25
T. Rowe Price Group, Inc. 8,200 337
o Tarragon Realty Investors, Inc. 2,359 37
TF Financial Corp. 700 23
o UnitedGlobalCom, Inc., Class A 2,200 16
Value Line, Inc. 300 15
W Holding Co., Inc. 2,100 49
W.P. Carey & Co. LLC 1,600 52
Waddell & Reed Financial, Inc., Class A 4,750 105
Washington Federal, Inc. 4,064 107
Washington Mutual, Inc. 66,078 2,891
Waypoint Financial Corp. 1,651 34
Webster Financial Corp. 3,012 135
o Wellsford Real Properties, Inc. 1,400 25
Wesco Financial Corp. 200 66
Westwood Holdings Group, Inc. 285 5
o WFS Financial, Inc. 4,100 179
White Mountains Insurance Group, Inc. 200 85
Willow Grove Bancorp, Inc. 1,596 27
o World Acceptance Corp. 2,500 45
------
76,212
NON-DURABLES & ENTERTAINMENT 1.4%
--------------------------------------------------------------------------
o The 3DO Co. 262 --
o A.T. Cross Co., Class A 2,400 15
Action Performance Cos., Inc. 1,100 23
o Activision, Inc. 4,950 75
o AFC Enterprises, Inc. 1,000 17
o American Greetings Corp., Class A 8,500 181
Applebee's International, Inc. 2,775 104
Bob Evans Farms, Inc. 2,200 65
Boyd Gaming Corp. 2,800 43
o Boyds Collection Ltd. 2,200 11
o Brinker International, Inc. 6,900 220
o Buca, Inc. 1,100 6
CBRL Group, Inc. 3,300 128
o CEC Entertainment, Inc. 1,350 66
o Centillium Communications, Inc. 1,000 5
o Championship Auto Racing Teams, Inc. 1,000 --
o The Cheesecake Factory 1,925 77
Churchill Downs, Inc. 900 35
o CKE Restaurants, Inc. 1,800 13
Darden Restaurants, Inc. 10,800 226
o Dave and Buster's, Inc. 1,700 22
o Department 56, Inc. 3,300 46
Dover Motorsports, Inc. 1,400 5
o Drew Industries, Inc. 2,500 63
o Electronic Arts, Inc. 10,100 1,000
o Electronics Boutique Holdings Corp. 1,300 37
o Enesco Group, Inc. 1,100 11
o Equity Marketing, Inc. 500 7
The First Years, Inc. 4,000 57
Fortune Brands, Inc. 17,700 1,153
o Fossil, Inc. 1,975 53
o Garden Fresh Restaurant Corp. 1,700 27
Handleman Co. 6,600 117
Hasbro, Inc. 12,000 262
o Hibbet Sporting Goods, Inc. 1,575 43
o Hollywood Media Corp. 1,100 2
IHOP Corp. 500 19
International Game Technology 23,600 773
International Speedway Corp., Class A 3,245 138
o Isle of Capri Casinos, Inc. 9,400 196
o Jack in the Box, Inc. 1,700 31
o Krispy Kreme Doughnuts, Inc. 2,100 91
Lancaster Colony Corp. 3,400 135
See financial notes. 109
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Landry's Restaurants, Inc. 1,800 45
Lone Star Steakhouse & Saloon, Inc. 4,400 96
o Luby's, Inc. 1,400 4
o Marvel Enterprises, Inc. 7,800 230
Mattel, Inc. 31,300 606
McDonald's Corp. 91,800 2,296
o Midway Games, Inc. 2,100 6
Movado Group, Inc. 3,700 89
o O'Charleys, Inc. 400 7
o On Command Corp. 1,500 3
Oneida Ltd. 700 3
Outback Steakhouse, Inc. 4,500 189
o P.F. Chang's China Bistro, Inc. 800 39
o Panera Bread Co., Class A 800 32
o Papa John's International, Inc. 1,700 45
o Peco II, Inc. 1,200 1
o Penn National Gaming, Inc. 1,900 45
o Rare Hospitality International Inc. 825 20
o RC2 Corp. 2,200 47
Regis Corp. 3,900 148
Riviana Foods, Inc. 1,200 33
Ruby Tuesday, Inc. 3,100 85
Russ Berrie & Co., Inc. 1,000 36
o Ryan's Family Steak Houses, Inc. 2,250 31
o SCP Pool Corp. 1,275 45
o Service Corp. International 20,100 98
o Smith & Wollensky Restaurant Group, Inc. 900 5
o Sonic Corp. 1,875 52
o Sotheby's Holdings, Inc., Class A 2,800 30
o Starbucks Corp. 28,300 894
o The Steak N Shake Co. 1,580 27
o Stewart Enterprises, Inc., Class A 4,200 17
o Student Advantage, Inc. 19 --
o Take-Two Interactive Software, Inc. 8,000 316
The Topps Co., Inc. 1,700 17
o Trans World Entertainment Corp. 1,500 10
Triarc Cos., Inc., Class B 1,400 15
Triarc Cos., Inc. 700 7
Tupperware Corp. 2,300 35
Wendy's International, Inc. 7,300 270
World Wrestling Entertainment, Inc. 900 10
o Yum! Brands, Inc. 21,500 734
------
12,316
NON-FERROUS METALS 0.4%
--------------------------------------------------------------------------
o A.M. Castle & Co. 1,500 8
Alcoa, Inc. 58,464 1,846
o Brush Engineered Materials, Inc. 1,100 14
o Century Aluminum Co. 600 10
Commercial Metals Co. 1,000 25
Commonwealth Industries, Inc. 1,300 9
o Encore Wire Corp. 500 8
Engelhard Corp. 9,300 266
Freeport-McMoran Copper & Gold, Inc., Class B 16,000 620
o Imco Recycling, Inc. 2,400 18
o Kaiser Aluminum Corp. 2,000 --
Minerals Technologies, Inc. 3,100 170
o Mueller Industries, Inc. 1,700 54
o Phelps Dodge Corp. 7,330 452
Reliance Steel & Aluminum Co. 1,250 36
o RTI International Metals, Inc. 4,000 48
Southern Peru Copper Corp. 1,500 43
o Stillwater Mining Co. 1,133 8
o Titanium Metals Corp. 180 6
o Wolverine Tube, Inc. 1,000 5
-----
3,646
OIL: DOMESTIC 1.1%
--------------------------------------------------------------------------
Amerada Hess Corp. 6,400 330
Ashland, Inc. 4,000 149
o CAL Dive International, Inc. 1,500 31
Chesapeake Energy Corp. 6,600 79
o Comstock Resources, Inc. 4,500 67
ConocoPhillips 47,598 2,720
Consol Energy, Inc. 5,800 126
Crosstex Energy L.P. 1,000 42
Diamond Offshore Drilling, Inc. 9,300 172
o Enbridge Energy Management LLC 1,064 48
o Encore Acquisition Co. 1,500 35
o Energy Partners Ltd. 1,700 20
Frontier Oil Corp. 3,600 58
110 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Global Industries Ltd. 4,400 20
o Gulf Island Fabrication, Inc. 2,800 42
o Gulfmark Offshore, Inc. 1,600 22
o Harvest Natural Resources, Inc. 6,000 41
Holly Corp. 2,000 50
o Houston Exploration Co. 5,400 189
Kaneb Services LLC 1,466 41
Kerr-McGee Corp. 10,519 437
Magellan Midstream Partners 1,200 58
o Magnum Hunter Resources, Inc. 1,750 15
Marathon Oil Corp. 23,000 680
Markwest Energy Partners L.P. 500 19
o Meridian Resource Corp. 3,100 12
Murphy Oil Corp. 6,000 354
o Nabors Industries Ltd. 9,317 352
o National-Oilwell, Inc. 5,569 106
o Newfield Exploration Co. 3,700 147
o Nuevo Energy Co. 2,300 45
o OYO Geospace Corp. 300 4
Pacific Energy Partners L.P. 1,000 26
Patina Oil & Gas Corp. 3,125 132
o Patterson-UTI Energy, Inc. 6,600 189
o Pioneer Natural Resources Co. 8,400 222
o Plains Exploration & Production Co. 2,520 34
Pogo Producing Co. 6,300 263
o Premcor, Inc. 2,600 61
o Pride International, Inc. 5,200 85
o Quicksilver Resource, Inc. 1,400 36
o Remington Oil & Gas Corp. 1,400 25
o Spinnaker Exploration Co. 900 23
St. Mary Land & Exploration Co. 3,700 97
o Stone Energy Corp. 976 35
Sunoco Logistics Partners L.P. 2,000 68
Sunoco, Inc. 5,500 241
o Superior Energy Services, Inc. 4,900 44
o Syntroleum Corp. 4,000 16
TEPPCO Partners L.P. 4,000 151
o Tesoro Petroleum Corp. 4,800 55
o Transmontaigne, Inc. 1,600 9
o Transocean, Inc. 22,731 436
o Ultra Petroleum Corp. 6,500 119
o Universal Compression Holdings, Inc. 400 9
Unocal Corp. 20,007 634
Valero L.P. 1,600 73
o Varco International, Inc. 7,140 126
Vintage Petroleum, Inc. 10,500 121
o Westport Resources Corp. 5,725 137
XTO Energy, Inc. 13,566 321
------
10,299
OIL: INTERNATIONAL 2.6%
--------------------------------------------------------------------------
o ATP Oil & Gas Corp. 1,600 8
ChevronTexaco Corp. 78,317 5,819
=(5) Exxon Mobil Corp. 479,816 17,552
GlobalSantaFe Corp. 16,655 375
------
23,754
OPTICAL & PHOTO 0.2%
--------------------------------------------------------------------------
o APA Optics, Inc. 1,000 3
o August Technology Corp. 1,300 25
o BMC Industries, Inc. 2,100 --
o Corning, Inc. 96,307 1,057
CPI Corp. 400 8
o Drexler Technology Corp. 1,000 15
Eastman Kodak Co. 26,000 635
o Fischer Imaging Corp. 500 2
Imation Corp. 2,000 68
o Ingram Micro, Inc., Class A 10,400 154
o Lexar Media, Inc. 5,400 124
o Meade Instruments Corp. 800 3
o Photronics, Inc. 1,400 30
o Polaroid Corp. 3,800 --
o StockerYale, Inc. 500 1
o Zomax, Inc. 2,000 12
o Zygo Corp. 500 8
-----
2,145
PAPER & FOREST PRODUCTS 0.7%
--------------------------------------------------------------------------
Boise Cascade Corp. 2,800 79
Bowater, Inc. 2,300 94
o Buckeye Technologies, Inc. 1,200 11
Chesapeake Corp. 1,000 24
CSS Industries, Inc. 900 24
Deltic Timber Corp. 700 20
Georgia-Pacific Corp. 44,365 1,166
See financial notes. 111
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
International Paper Co. 35,304 1,389
o Kadant, Inc. 1 --
Kimberly-Clark Corp. 35,139 1,856
o Louisiana-Pacific Corp. 4,800 91
MeadWestvaco Corp. 8,674 225
o Packaging Corp. of America 6,000 118
Potlatch Corp. 13,400 419
Rayonier, Inc. 1,500 63
Rock-Tennessee Co., Class A 2,000 32
o Smurfit-Stone Container Corp. 10,900 169
Temple-Inland, Inc. 1,900 103
Wausau-Mosinee Paper Corp. 4,700 58
Weyerhaeuser Co. 11,250 678
-----
6,619
PRODUCER GOODS & MANUFACTURING 4.5%
--------------------------------------------------------------------------
o Aaon, Inc. 1,575 29
o Actuant Corp., Class A 2,840 92
o Advanced Energy Industries, Inc. 3,900 89
o Aeroflex, Inc. 5,400 50
o AGCO Corp. 3,762 68
Alamo Group, Inc. 500 7
Albany International Corp., Class A 3,918 121
o American Standard Cos., Inc. 4,800 459
Ametek, Inc. 2,100 99
Applied Industrial Technologies, Inc. 2,900 65
Aptargroup, Inc. 2,200 79
o Astec Industries, Inc. 500 6
Avery Dennison Corp. 7,200 379
o AZZ, Inc. 700 9
Baldor Electric Co. 3,800 81
Barnes Group, Inc. 700 20
o BE Aerospace, Inc. 1,100 6
BHA Group Holdings, Inc. 1,500 35
o Blount International, Inc. 1,200 6
Blyth, Inc. 2,300 64
Briggs & Stratton Corp. 3,000 195
Butler Manufacturing Co. 1,200 21
o Cantel Medical Corp. 1,381 20
o Capstone Turbine Corp. 2,600 5
Caterpillar, Inc. 26,200 1,920
CIRCOR International, Inc. 1,250 26
Clarcor, Inc. 1,700 69
Cognex Corp. 2,900 78
o Columbus McKinnon Corp. 2,400 13
Cooper Industries Ltd., Class A 7,200 381
o Cuno, Inc. 1,300 52
Curtiss-Wright Corp. 400 30
o CyberCare, Inc. 900 --
o Daisytek International Corp. 1,700 --
Deere & Co. 16,200 982
o DiamondCluster International, Inc., Class A 1,000 9
Dover Corp. 14,200 554
o DT Industries, Inc. 1,200 1
o Duratek, Inc. 1,500 14
Emerson Electric Co. 29,500 1,674
o Evergreen Solar, Inc. 1,000 3
o The Fairchild Corp., Class A 3,100 15
Fastenal Co. 3,600 160
Federal Signal Corp. 2,800 41
o Fisher Scientific International, Inc. 4,900 197
o Flowserve Corp. 3,900 80
o FMC Corp. 3,100 87
o Foster Wheeler Ltd. 2,500 3
Franklin Electric Co., Inc. 1,900 116
o Gardner Denver, Inc. 2,700 56
= (1) General Electric Co. 714,566 20,730
The Gorman-Rupp Co. 800 19
Graco, Inc. 4,675 178
o GrafTech International Ltd. 2,100 22
Hardinge, Inc. 1,800 17
Harsco Corp. 3,100 119
Helix Technology Corp. 1,100 20
Herman Miller, Inc. 5,700 131
o Hexcel Corp. 2,000 14
HON Industries, Inc. 4,000 164
Honeywell International, Inc. 60,962 1,866
Hubbell, Inc., Class B 3,800 163
Hughes Supply, Inc. 1,300 50
o Ibis Technology Corp. 800 9
IDEX Corp. 2,100 78
Illinois Tool Works, Inc. 22,850 1,681
Ingersoll-Rand Co., Class A 11,200 676
112 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Ionics, Inc. 400 11
o Jacuzzi Brands, Inc. 2,000 14
o Jarden Corp. 1,100 45
JLG Industries, Inc. 1,800 21
Johnson Controls, Inc. 6,000 645
o Juno Lighting, Inc. 1,429 27
Kaydon Corp. 3,300 78
Kennametal, Inc. 1,500 55
Knape & Vogt Manufacturing Co. 2,200 26
o Kos Pharmaceuticals, Inc. 700 28
o Ladish Co., Inc. 1,300 10
Lawson Products, Inc. 2,000 60
Lennox International, Inc. 5,271 87
Libbey, Inc. 1,500 40
Lincoln Electric Holdings, Inc. 3,900 95
o Lone Star Technologies, Inc. 1,700 24
o Magnetek, Inc. 1,500 9
Manitowoc Co., Inc. 1,300 28
o Material Sciences Corp. 4,000 38
Matthews International Corp., Class A 1,900 51
o Maverick Tube Corp. 1,000 17
o Merix Corp. 1,200 21
o Micrel, Inc. 3,600 59
o Middleby Corp. 3,500 91
Milacron, Inc. 2,300 5
o Millipore Corp. 2,600 114
o Modtech Holdings, Inc. 1,000 8
o Moog, Inc., Class A 2,350 100
MSC Industrial Direct Co., Class A 4,300 102
NACCO Industries, Inc., Class A 1,300 102
o NATCO Group, Inc., Class A 1,200 8
NN, Inc. 1,800 22
Nordson Corp. 4,000 111
o Oceaneering International, Inc. 1,300 30
Pall Corp. 8,400 197
o Park-Ohio Holdings Corp. 2,600 23
Parker Hannifin Corp. 8,500 433
Penn Engineering & Manufacturing Corp. 1,000 18
Pentair, Inc. 3,500 144
o Plug Power, Inc. 2,248 14
o Possis Medical, Inc. 1,100 18
Precision Castparts Corp. 4,300 177
o Presstek, Inc. 1,100 8
o Proton Energy Systems, Inc. 1,400 4
Regal Beloit 1,200 24
o Research Frontiers, Inc. 800 8
Robbins & Myers, Inc. 1,400 30
o ROHN Industries, Inc. 1,800 --
Roper Industries, Inc. 1,500 74
o Safeguard Scientifics, Inc. 3,300 13
Sauer-Danfoss, Inc. 2,300 33
o Sequa Corp., Class A 2,800 134
o The Shaw Group, Inc. 2,000 27
Snap-On, Inc. 4,000 117
o SPS Technologies, Inc. 1,200 59
o SPX Corp. 8,610 414
Standex International Corp. 3,000 76
Steelcase, Inc., Class A 3,500 41
Stewart & Stevenson Services, Inc. 1,000 17
o Strattec Security Corp. 1,500 80
Tecumseh Products Co., Class A 700 29
Teleflex, Inc. 1,800 83
Tennant Co. 2,100 83
o Tenneco Automotive, Inc. 1,980 12
o Terex Corp. 1,200 27
The Timken Co. 7,300 122
Trinity Industries, Inc. 1,100 28
o Triumph Group, Inc. 1,200 39
o Ultratech Stepper, Inc. 1,300 41
Valhi, Inc. 8,600 108
Valmont Industries, Inc. 2,400 50
W.W. Grainger, Inc. 7,300 334
Watsco, Inc. 3,400 73
Watts Water Technologies, Inc., Class A 1,500 27
Woodward Governor Co. 500 23
X-Rite, Inc. 2,000 22
York International Corp. 3,800 151
------
40,120
RAILROAD & SHIPPING 0.4%
--------------------------------------------------------------------------
Alexander & Baldwin, Inc. 5,600 174
Burlington Northern Santa Fe Corp. 27,800 804
See financial notes. 113
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
CSX Corp. 14,600 465
Florida East Coast Industries, Class A 3,600 107
GATX Corp. 4,000 90
o Greenbrier Cos., Inc. 1,600 20
o Kansas City Southern Railway 2,550 34
Maritrans, Inc. 2,500 39
Norfolk Southern Corp. 26,400 532
o OMI Corp. 4,000 27
Overseas Shipholding Group 1,200 33
o SCS Transportation, Inc. 1,600 24
Union Pacific Corp. 19,500 1,221
Wabtec Corp. 2,828 43
-----
3,613
REAL PROPERTY 1.7%
--------------------------------------------------------------------------
o Alexander's, Inc. 700 75
Alexandria Real Estate Equities, Inc. 2,500 127
AMB Property Corp. 4,800 144
American Land Lease, Inc. 1,700 31
American Mortgage Acceptance Co. 1,500 25
o American Real Estate Partners L.P. 2,300 27
o American Realty Investors, Inc. 1,037 11
o American Retirement Corp. 700 2
AMLI Residential Properties 1,000 25
Annaly Mortgage Management, Inc. 6,900 113
Anthracite Capital, Inc. 4,900 50
Anworth Mortgage Asset Corp. 1,000 14
Apartment Investment & Management Co., Class A 7,400 303
Archstone-Smith Trust 15,285 408
Arden Realty, Inc. 5,500 154
AvalonBay Communities, Inc. 6,100 279
o Avatar Holdings, Inc. 700 23
Bedford Property Investors, Inc. 2,900 76
Boston Properties, Inc. 7,400 327
Brandywine Realty Trust 3,000 76
BRE Properties, Class A 2,500 81
Burnham Pacific Properties, Inc. 2,400 1
Camden Property Trust 2,300 91
Capital Automotive Real Estate Investment Trust 3,300 103
Capstead Mortgage Corp. 2,240 30
CarrAmerica Realty Corp. 2,900 87
Catellus Development Corp. 6,600 147
CBL & Associates Properties, Inc. 2,200 117
Centerpoint Properties Trust 1,800 122
Chelsea Property Group, Inc. 4,000 197
Colonial Properties Trust 2,500 92
Commercial Net Lease Realty 3,320 57
Cornerstone Realty Income Trust, Inc. 2,200 18
Corporate Office Properties Trust SBI 3,500 68
Correctional Properties Trust 1,600 43
Cousins Properties, Inc. 2,700 78
Crescent Real Estate Equity Co. 7,400 114
Developers Diversified Realty Corp. 5,112 148
Duke Realty Corp. 10,490 307
EastGroup Properties, Inc. 900 26
Entertainment Properties Trust 2,700 87
Equity Inns, Inc. 2,700 23
Equity Office Properties Trust 27,738 777
Equity One, Inc. 6,600 111
Equity Residential 18,700 547
Essex Property Trust, Inc. 2,600 156
Federal Realty Investment Trust 2,700 102
FelCor Lodging Trust, Inc. 3,200 33
First Industrial Realty Trust 2,600 84
Forest City Enterprises, Inc., Class A 2,700 120
Gables Residential Trust 3,500 113
General Growth Properties, Inc. 5,200 398
Getty Realty Corp. 2,000 49
Glenborough Realty Trust, Inc. 2,900 57
Glimcher Realty Trust 3,800 80
Great Lakes Real Estate Investment Trust 1,000 16
Health Care Property Investors, Inc. 5,324 248
Health Care Real Estate Investment Trust, Inc. 2,700 90
Healthcare Realty Trust, Inc. 2,400 81
Heritage Property Investment Trust 2,000 56
Highwoods Properties, Inc. 3,100 77
Home Properties of NY, Inc. 2,500 96
o Homestore, Inc. 4,200 15
Hospitality Properties Trust 3,500 128
o Host Marriott Corp. 20,400 213
HRPT Properties Trust 7,100 66
114 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
IMPAC Mortgage Holdings, Inc. 4,800 72
Innkeepers USA Trust 1,500 13
iStar Financial, Inc. 6,890 262
o Jones Lang LaSalle, Inc. 2,300 44
Keystone Property Trust 1,300 26
Kilroy Realty Corp. 2,300 66
Kimco Realty Corp. 6,850 285
Koger Equity, Inc. 2,700 52
Kramont Realty Trust 1,400 24
LaSalle Hotel Properties 1,000 17
Lexington Corp. Properties Trust 3,000 58
Liberty Property Trust 5,300 193
LNR Property Corp. 1,200 49
LTC Properties, Inc. 2,800 33
The Macerich Co. 2,700 109
Mack-Cali Realty Corp. 3,400 128
Maguire Properties, Inc. 3,000 65
Manufactured Home Communities, Inc. 3,000 114
o Meristar Hospitality Corp. 2,200 15
MI Developments, Inc. 229 6
Mid-America Apartment Communities, Inc. 2,500 78
The Mills Corp. 2,400 98
National Health Investors, Inc. 3,100 66
National Health Realty, Inc. 2,300 39
Nationwide Health Properties, Inc. 5,100 93
New Plan Excel Realty Trust 6,000 136
Newhall Land & Farming Co. L.P. 2,500 100
Novastar Financial, Inc. 1,000 74
Omega Healthcare Investors, Inc. 2,784 21
Pan Pacific Retail Properties, Inc. 2,201 98
Parkway Properties, Inc. 500 22
Plum Creek Timber Co., Inc. 12,547 331
Post Properties, Inc. 2,200 58
Prentiss Properties Trust 2,700 82
o Price Legacy Corp. 242 1
ProLogis 12,574 371
PS Business Parks, Inc. 500 19
Public Storage, Inc. 8,400 336
RAIT Investment Trust 3,300 77
Ramco-Gershenson Properties 1,400 34
Realty Income Corp. 2,300 91
Reckson Associates Realty Corp. 2,800 62
Redwood Trust, Inc. 2,500 124
Regency Centers Corp. 3,200 119
The Rouse Co. 5,400 232
Saul Centers, Inc. 2,100 57
Senior Housing Properties Trust 4,950 74
Shelbourne Properties I, Inc. 500 9
Shelbourne Properties III, Inc. 500 8
Shurgard Storage Centers, Inc., Class A 3,000 109
Simon Property Group, Inc. 14,900 672
SL Green Realty Corp. 1,700 61
Sovran Self Storage, Inc. 800 27
The St. Joe Co. 5,300 175
Summit Properties, Inc. 3,300 74
Sun Communities, Inc. 500 18
Tanger Factory Outlet Centers 800 32
Taubman Centers, Inc. 4,100 83
Thornburg Mortgage, Inc. 5,300 144
The Town & Country Trust 1,000 23
o Trammell Crow Co. 1,300 18
Trizec Properties, Inc. 10,200 136
United Dominion Realty Trust, Inc. 9,400 164
Universal Health Realty Income 900 25
Urstadt Biddle Properties, Inc. 500 7
Urstadt Biddle Properties, Inc., Class A 1,000 14
US Restaurant Properties, Inc. 1,000 16
Ventas, Inc. 5,800 108
Vornado Realty Trust 8,000 404
Washington Real Estate Investment Trust 3,100 92
Weingarten Realty Investment 3,650 158
------
15,141
RETAIL 6.8%
--------------------------------------------------------------------------
o 1-800-Flowers.com, Inc., Class A 3,700 39
o 99 Cents Only Stores 3,066 91
o A.C. Moore Arts & Crafts, Inc. 1,400 32
o Abercrombie & Fitch Co., Class A 8,300 237
o Advance Auto Parts, Inc. 1,680 131
Albertson's, Inc. 25,468 517
o Alloy, Inc. 3,100 14
See financial notes. 115
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Amazon.com, Inc. 28,700 1,562
o American Eagle Outfitters, Inc. 5,050 81
o AnnTaylor Stores Corp. 6,550 234
Arden Group, Inc., Class A 600 42
o Asbury Automotive Group, Inc. 1,600 27
o Autonation, Inc. 21,600 404
o AutoZone, Inc. 8,900 855
o Barnes & Noble, Inc. 7,400 221
o Bed, Bath & Beyond, Inc. 21,200 895
o Best Buy Co., Inc. 23,650 1,379
o Big Lots, Inc. 11,100 167
o BJ's Wholesale Club, Inc. 6,100 157
Blair Corp. 1,500 34
o Borders Group, Inc. 9,000 204
o Brightpoint, Inc. 1,650 47
o Brookstone, Inc. 4,950 101
Burlington Coat Factory Warehouse Corp. 2,500 54
o Carmax, Inc. 3,923 124
Casey's General Stores, Inc. 2,600 40
The Cato Corp., Class A 1,200 25
o Central Garden & Pet Co. 1,600 44
o Charming Shoppes, Inc. 3,700 24
o Chico's FAS, Inc. 3,150 118
o The Children's Place Retail Stores, Inc. 1,800 54
Christopher & Banks Corp. 2,650 77
Circuit City Stores, Inc. 12,500 119
Claire's Stores, Inc. 8,000 310
o Coldwater Creek, Inc. 1,575 20
o Cole National Corp. 1,300 29
o Cost Plus, Inc. 700 32
o Costco Wholesale Corp. 30,600 1,082
CVS Corp. 28,000 985
DEB Shops, Inc. 1,600 31
Dillards, Inc., Class A 6,000 97
Dollar General Corp. 25,275 568
o Dollar Tree Stores, Inc. 5,150 197
o The Dress Barn, Inc. 5,500 77
o Duane Reade, Inc. 700 10
o Duckwall-ALCO Stores, Inc. 1,800 27
Family Dollar Stores, Inc. 7,700 336
Federated Department Stores, Inc. 22,400 1,065
o The Finish Line, Class A 1,800 55
Foot Locker, Inc. 14,100 252
o Footstar, Inc. 600 4
Fred's, Inc. 3,262 123
Friedman's, Inc., Class A 1,500 18
o FTD, Inc., Class A 1,500 37
o GameStop Corp., Class A 500 8
The Gap, Inc. 65,900 1,257
o Genesco, Inc. 1,300 22
o Great Atlantic & Pacific Tea Co. 2,200 14
o Guitar Center, Inc. 1,700 55
o The Gymboree Corp. 3,100 51
Home Depot, Inc. 163,000 6,042
o HOT Topic, Inc. 6,300 181
o Insight Enterprises, Inc. 2,150 36
J.C. Penney Co., Inc. Holding Co. 20,100 475
o Jo-Ann Stores, Inc., Class A 3,300 99
o Kirkland's, Inc. 1,000 22
o Kohl's Corp. 19,300 1,082
o Kroger Co. 53,300 932
Limited Brands, Inc. 39,144 689
o Linens `N Things, Inc. 4,800 142
Longs Drug Stores Corp. 1,800 40
Lowe's Cos., Inc. 56,200 3,312
The May Department Stores Co. 13,500 377
o The Men's Wearhouse, Inc. 2,400 71
Michaels Stores, Inc. 4,900 233
o The Neiman Marcus Group, Inc., Class A 2,700 128
o Nobel Learning Communities, Inc. 500 3
Nordstrom, Inc. 10,300 314
o O'Reilly Automotive, Inc. 2,200 95
o Office Depot, Inc. 21,000 314
o OfficeMax, Inc. 6,700 64
o Pacific Sunwear of California 9,975 230
o Party City Corp. 1,300 18
o Pathmark Stores, Inc. 1,400 10
o Payless Shoesource, Inc. 2,406 32
o PC Connection, Inc. 3,000 31
Pep Boys-Manny, Moe & Jack 2,500 48
PETsMART, Inc. 7,600 195
Pier 1 Imports, Inc. 3,900 90
o Pricesmart, Inc. 200 2
116 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
RadioShack Corp. 11,600 348
o Rent-A-Center, Inc. 5,250 164
o Retail Ventures, Inc. 700 4
o Rite Aid Corp. 34,900 200
Ross Stores, Inc. 4,200 210
Ruddick Corp. 3,100 49
o Safeway, Inc. 30,900 652
o Saks, Inc. 16,900 235
o School Specialty, Inc. 1,600 45
Sears, Roebuck & Co. 21,200 1,116
o Shoe Carnival, Inc. 1,200 21
o ShopKo Stores, Inc. 8,900 138
o Spiegel, Inc., Class A 5,000 1
o Staples, Inc. 34,700 931
Talbots, Inc. 5,700 187
Target Corp. 64,600 2,567
Tiffany & Co. 6,500 308
TJX Cos., Inc. 35,400 743
o Too, Inc. 1,742 29
o Toys `R' Us, Inc. 15,300 199
o Tractor Supply Co. 1,500 63
o Tuesday Morning Corp. 2,500 80
Unifirst Corp. 3,900 103
o United Stationers, Inc. 2,900 108
o Urban Outfitters, Inc. 3,200 107
=(3) Wal-Mart Stores, Inc. 317,100 18,693
Walgreen Co. 73,900 2,573
Weis Markets, Inc. 1,700 62
o West Marine, Inc. 1,100 24
o The Wet Seal, Inc., Class A 3,075 34
o Whitehall Jewellers, Inc. 1,800 22
o Whole Foods Market, Inc. 3,600 213
o Williams-Sonoma, Inc. 9,200 325
o Winmark Corp. 1,200 22
Winn-Dixie Stores, Inc. 16,800 136
o Zale Corp. 1,260 65
------
60,996
STEEL 0.1%
--------------------------------------------------------------------------
o AK Steel Holding Corp. 4,027 10
Allegheny Technologies, Inc. 3,650 28
Ampco-Pittsburgh Corp. 2,800 34
Intermet Corp. 4,100 18
Nucor Corp. 3,000 164
Quanex Corp. 2,500 100
Roanoke Electric Steel Corp. 800 8
Ryerson Tull, Inc. 1,600 13
Schnitzer Steel Industries, Inc., Class A 1,100 41
o Steel Dynamics, Inc. 1,700 32
Steel Technologies, Inc. 700 11
United States Steel Corp. 7,400 175
Worthington Industries, Inc. 4,700 69
---
703
TELEPHONE 3.2%
--------------------------------------------------------------------------
Adtran, Inc. 3,500 238
o Alaska Communications Systems Group, Inc. 2,700 13
Alltel Corp. 23,935 1,131
Applied Signal Technology, Inc. 2,100 43
AT&T Corp. 58,947 1,096
o AT&T Wireless Services, Inc. 192,734 1,397
Atlantic Tele-Network, Inc. 1,300 33
o Avaya, Inc. 30,385 393
BellSouth Corp. 134,450 3,537
o Centennial Communications Corp. 3,500 21
CenturyTel, Inc. 10,500 375
o Cincinnati Bell, Inc. 18,568 95
o Citizens Communications Co. 22,400 279
o Commonwealth Telephone Enterprises, Inc. 9,400 383
o Computer Access Technology Corp. 800 3
o Copper Mountain Networks, Inc. 200 2
o Covad Communications Group, Inc. 7,000 31
o Crown Castle International Corp. 20,900 265
o CTC Communications Group, Inc. 1,550 --
D&E Communications, Inc. 2,000 28
o Ditech Communications Corp. 1,600 17
o Equinix, Inc. 65 1
o Extreme Networks, Inc. 4,500 39
o Finisar Corp. 7,900 25
o Goamerica, Inc. 1,800 1
Hickory Tech Corp. 1,100 13
o ID Systems, Inc. 500 5
o Inet Technologies, Inc. 2,200 30
Inter-Tel, Inc. 6,000 151
See financial notes. 117
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Interdigital Communications Corp. 2,000 34
o ITC Deltacom, Inc. 13 --
o ITXC Corp. 1,600 6
o j2 Global Communications, Inc. 2,000 57
o Level 3 Communications, Inc. 28,000 151
o Liberty Media Corp., Class A 176,077 1,777
o McLeodUSA, Inc., Class A Escrow 21,892 --
o Mpower Holding Corp. 27 --
o Net2Phone, Inc. 1,600 9
o Network Plus Corp. 2,000 --
o Nextel Communications, Inc., Class A 74,600 1,805
o Nextel Partners, Inc., Class A 6,700 81
North Pittsburgh Systems, Inc. 3,500 64
o Novatel Wireless, Inc. 160 1
o NTL, Inc. 3,500 216
NWH, Inc. 1,000 19
o Occam Networks, Inc. 1,900 --
o OmniSky Corp. 2,900 --
o Pegasus Communications Corp. 3,160 58
o PentaStar Communications, Inc. 600 --
o Price Communications Corp. 3,855 48
o Qwest Communications International, Inc. 118,337 418
o RCN Corp. 2,300 3
SBC Communications, Inc. 240,712 5,772
o Sonus Networks, Inc. 15,400 126
Sprint Corp. (FON Group) 72,700 1,163
o Sprint Corp. (PCS Group) 70,600 307
o SR Telecom, Inc. 60 --
o Sunrise Telecom, Inc. 2,000 8
Telephone & Data Systems, Inc. 4,300 269
o Time Warner Telecom, Inc., Class A 2,000 21
o Turnstone Systems, Inc. 1,600 5
o U.S. Cellular Corp. 3,600 122
o U.S. Wireless Corp. 400 --
o Ulticom, Inc. 2,300 24
o Utstarcom, Inc. 1,200 38
Verizon Communications, Inc. 200,286 6,730
Warwick Valley Telephone Co. 600 19
o WilTel Communications, Inc. 4,800 85
------
29,081
TOBACCO 0.8%
--------------------------------------------------------------------------
Altria Group, Inc. 144,800 6,733
o M & F Worldwide Corp. 1,200 13
R.J. Reynolds Tobacco Holdings, Inc. 7,332 352
Schweitzer-Mauduit International, Inc. 5,800 154
Universal Corp. 1,800 79
UST, Inc. 7,700 262
Vector Group Ltd. 1,227 20
-----
7,613
TRAVEL & RECREATION 0.7%
--------------------------------------------------------------------------
o Alliance Gaming Corp. 3,000 73
o Ambassadors Group, Inc. 1,700 32
o Amerco, Inc. 900 17
o American Classic Voyages Co. 900 --
o Ameristar Casinos, Inc. 1,700 36
o Argosy Gaming Co. 1,600 38
o Aztar Corp. 1,900 40
o Bally Total Fitness Holding Corp. 1,300 9
Brunswick Corp. 13,900 412
Callaway Golf Co. 5,600 91
Carnival Corp. 35,500 1,239
Cedar Fair L.P. 5,300 151
Central Parking Corp. 1,600 19
o Choice Hotels International, Inc. 3,400 112
o Dick's Sporting Goods, Inc. 500 23
o Dollar Thrifty Automotive Group, Inc. 1,000 26
Dover Downs Gaming & Entertainment, Inc. 1,480 14
o Empire Resorts, Inc. 500 6
o Extended Stay America, Inc. 6,300 93
Harrah's Entertainment, Inc. 9,900 431
Hilton Hotels Corp. 27,926 442
o Interstate Hotels & Resorts, Inc. 82 1
o K2, Inc. 1,700 28
o Lakes Entertainment, Inc. 900 12
Mandalay Resort Group 4,100 161
The Marcus Corp. 4,600 69
Marine Products Corp. 180 3
Marriott International, Inc., Class A 16,200 700
o MGM MIRAGE 12,300 437
118 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o MTR Gaming Group, Inc. 2,300 25
o Multimedia Games, Inc. 750 28
o Navigant International, Inc. 4,300 65
o Park Place Entertainment Corp. 20,300 195
o Prime Hospitality Corp. 1,800 16
o Rent-Way, Inc. 3,200 19
o ResortQuest International, Inc. 3,000 22
Royal Caribbean Cruises Ltd. 12,800 380
o Scientific Games Corp., Class A 6,500 86
o Shuffle Master, Inc. 1,250 38
o Six Flags, Inc. 3,500 21
Speedway Motorsports, Inc. 2,300 66
o The Sports Authority, Inc. 370 14
Starwood Hotels & Resorts Worldwide, Inc. 15,230 514
Station Casinos, Inc. 4,650 138
o Stellent, Inc. 1,100 10
o Vail Resorts, Inc. 1,300 17
o WMS Industries, Inc. 1,500 35
-----
6,404
TRUCKING & FREIGHT 0.3%
--------------------------------------------------------------------------
Arkansas Best Corp. 1,100 36
BancTrust Financial Group, Inc. 1,100 17
C.H. Robinson Worldwide, Inc. 7,500 294
CNF, Inc. 2,000 70
o Consolidated Freightways Corp. 2,700 --
Expeditors International Washington, Inc. 5,600 210
o Forward Air Corp. 1,100 32
Heartland Express, Inc. 1,971 49
o J.B. Hunt Transport Services, Inc. 4,000 102
o Knight Transportation, Inc. 1,800 45
o Landstar Systems, Inc. 3,800 278
o Old Dominion Freight Line 1,800 58
Paccar, Inc. 9,400 742
o Pacer International, Inc. 2,800 58
Roadway Corp. 1,400 72
Ryder Systems, Inc. 6,400 192
o Swift Transportation Co., Inc. 5,970 134
USF Corp. 1,300 41
Werner Enterprises, Inc. 3,332 60
o Yellow Corp. 1,200 39
-----
2,529
UTILITIES: ELECTRIC & GAS 2.7%
--------------------------------------------------------------------------
o The AES Corp. 41,596 364
AGL Resources, Inc. 4,300 121
o Allegheny Energy, Inc. 8,000 85
Allete, Inc. 5,700 172
Alliant Energy Corp. 4,300 103
Ameren Corp. 12,100 540
American Electric Power Co., Inc. 28,320 798
American States Water Co. 950 23
Atmos Energy Corp. 1,800 44
Avista Corp. 3,800 65
o BayCorp Holdings Ltd. 6 --
Black Hills Corp. 1,400 45
o Calpine Corp. 12,300 57
Cascade Natural Gas Corp. 1,000 19
Centerpoint Energy, Inc. 21,100 207
Central Vermont Public Service Corp. 2,700 62
CH Energy Group, Inc. 1,900 83
Cinergy Corp. 12,600 457
Cleco Corp. 3,400 57
o CMS Energy Corp. 5,000 41
Consolidated Edison, Inc. 10,300 417
Constellation Energy Group, Inc. 16,800 611
o Covanta Energy Corp. 2,100 --
Dominion Resources, Inc. 21,610 1,331
DPL, Inc. 8,952 163
DTE Energy Co. 11,301 417
Duke Energy Corp. 57,200 1,038
Duquesne Light Holdings, Inc. 6,100 98
o Edison International 58,700 1,157
El Paso Corp. 27,887 205
o El Paso Electric Co. 2,800 34
Energen Corp. 2,600 96
Energy East Corp. 9,714 218
Entergy Corp. 15,700 846
Equitable Resources, Inc. 4,400 181
Exelon Corp. 27,237 1,728
FirstEnergy Corp. 23,217 798
Florida Public Utilites Co. 1,066 16
FPL Group, Inc. 12,200 778
Great Plains Energy, Inc. 9,000 287
See financial notes. 119
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Green Mountain Power Corp. 3,800 86
Hawaiian Electric Industries, Inc. 2,600 119
Idacorp, Inc. 1,700 46
KeySpan Corp. 10,900 381
Kinder Morgan, Inc. 10,700 573
The Laclede Group, Inc. 800 23
MDU Resources Group, Inc. 7,950 180
MGE Energy, Inc. 400 13
National Fuel Gas Co. 5,800 130
New Jersey Resources Corp. 1,650 62
o NewPower Holdings, Inc. 3,800 2
Nicor, Inc. 3,000 103
NiSource, Inc. 22,864 474
Northeast Utilities, Inc. 5,624 106
Northwest Natural Gas Co. 3,200 93
NSTAR 3,867 181
OGE Energy Corp. 3,500 80
Oneok, Inc. 4,400 88
Otter Tail Corp. 1,100 29
Peoples Energy Corp. 3,200 129
Pepco Holdings, Inc. 5,000 88
o PG&E Corp. 29,900 731
Philadelphia Suburban Corp. 2,937 69
Piedmont Natural Gas Co. 1,600 64
Pinnacle West Capital Corp. 3,800 139
PNM Resources, Inc. 2,000 57
PPL Corp. 12,500 499
Progress Energy, Inc. 16,159 696
Public Service Enterprise Group, Inc. 10,000 409
Puget Energy, Inc. 7,500 170
Questar Corp. 8,100 257
SCANA Corp. 7,905 271
Sempra Energy 16,675 464
o Sierra Pacific Resources 4,476 27
The Southern Co. 53,900 1,606
o Southern Union Co. 3,010 53
Southwest Gas Corp. 1,100 25
TECO Energy, Inc. 5,600 74
Texas Genco Holdings, Inc. 2,680 80
TXU Corp. 14,900 340
o U.S. Energy Systems, Inc. 600 1
UGI Corp. 5,100 157
UIL Holdings Corp. 6,200 233
Unisource Energy Corp. 2,100 41
Vectren Corp. 5,766 136
Westar Energy, Inc. 5,700 114
WGL Holdings, Inc. 3,000 83
Williams Cos., Inc. 36,860 376
Wisconsin Energy Corp. 8,400 275
WPS Resources Corp. 2,400 106
Xcel Energy, Inc. 29,195 479
------
24,780
PREFERRED STOCK
0.0% of net assets
REAL PROPERTY 0.0%
--------------------------------------------------------------------------
Commercial Net Lease Realty 147 4
WARRANTS
0.0% of net assets
AIR TRANSPORTATION 0.0%
--------------------------------------------------------------------------
Timco Aviation Services expires 2/28/07, 160 --
BUSINESS MACHINES & SOFTWARE 0.0%
--------------------------------------------------------------------------
MicroStrategy, Inc. expires 6/24/04, 57 --
NON-FERROUS METALS 0.0%
--------------------------------------------------------------------------
Metals USA, Inc. expires 10/31/07, 97 --
REAL PROPERTY 0.0%
--------------------------------------------------------------------------
Pinnacle Holdings, Inc. expires 11/13/07, 9 --
120 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
RIGHTS
0.0% of net assets
BUSINESS MACHINES & SOFTWARE 0.0%
--------------------------------------------------------------------------
Comdisco Holding Co. 4,700 4
HEALTHCARE/DRUGS & MEDICINE 0.0%
--------------------------------------------------------------------------
Cell Pathways, Inc. 1,600 --
TELEPHONE 0.0%
--------------------------------------------------------------------------
XO Communications, Inc. expires 1/14/03 8,601 3
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
U.S. TREASURY OBLIGATIONS
0.1% of net assets
= U.S. Treasury Bills
0.84%-0.93%, 12/18/03 310 310
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
COLLATERAL INVESTED FOR SECURITIES ON LOAN
10.9% of net assets
COMMERCIAL PAPER & OTHER CORPORATE OBLIGATIONS
--------------------------------------------------------------------------
American Express Centurion Bank
1.11%, 12/12/03 4,378 4,378
1.11%, 01/27/04 1,579 1,579
American Express Credit Corp.
1.11%, 04/16/04 2,492 2,492
1.09%, 05/13/04 2,424 2,424
Canadian Imperial Bank Corp.
1.09%, 05/28/04 2,707 2,707
Concord Minutemen Capital Corp.
1.11%, 01/09/04 1,118 1,115
1.08%, 11/14/03 3,651 3,644
1.08%, 11/18/03 1,181 1,178
1.07%, 11/19/03 2,962 2,960
Crown Point Funding Corp.
1.11%, 01/16/04 3,403 3,394
1.08%, 11/14/03 2,459 2,454
Depfa Bank PLC
1.08%, 11/18/03 2,260 2,254
1.08%, 12/22/03 1,278 1,274
Fairway Finance Corp.
1.10%, 01/12/04 1,235 1,232
General Electric Capital Corp.
1.08%, 05/10/04 1,392 1,392
Lexington Parker
1.07%, 11/06/03 580 580
Svenska Handelsbanken
1.39%, 10/27/04 2,553 2,553
Tulip Funding Corp.
1.07%, 11/10/03 4,803 4,798
Westdeutsche Landesbank AG
1.09%, 09/23/04 2,324 2,323
1.09%, 09/29/04 3,676 3,675
1.08%, 10/12/04 926 926
------
49,332
SHORT-TERM INVESTMENTS
--------------------------------------------------------------------------
Wells Fargo Bank Time Deposit
1.06%, 11/03/03 6,436 6,436
SECURITY AND NUMBER OF SHARES
OTHER INVESTMENT COMPANIES
--------------------------------------------------------------------------
Institutional Money Market Trust 42,401,212 42,401
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN. For totals, please see the
first page of holdings for this fund.
See financial notes. 121
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- ----------------------------------------------------------------------------------
Investments, at market value
(including $94,850 of securities on loan) $891,919 a
Collateral held for securities on loan 98,169
Receivables:
Fund shares sold 1,684
Interest 4
Dividends 1,084
Investments sold 14,512
Income from securities on loan 15
Prepaid expenses + 43
---------
TOTAL ASSETS 1,007,430
LIABILITIES
- ----------------------------------------------------------------------------------
Collateral held for securities on loan 98,169
Cash Overdraft 6,958
Payables:
Fund shares redeemed 386
Investments bought 3,173
Due to broker for futures 14
Investment adviser and administrator fees 1
Transfer agent and shareholder service fees 10
Accrued expenses + 131
---------
TOTAL LIABILITIES 108,842
NET ASSETS
- ----------------------------------------------------------------------------------
TOTAL ASSETS 1,007,430
TOTAL LIABILITIES - 108,842
---------
NET ASSETS $898,588
NET ASSETS BY SOURCE
Capital received from investors 941,236
Net investment income not yet distributed 7,185
Net realized capital losses (22,578)
Net unrealized capital losses (27,255) b
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $469,499 26,863 $17.48
Select Shares(R) $429,089 24,495 $17.52
Unless stated, all numbers x 1,000.
a The fund paid $919,360 for these securities. Not counting short-term
obligations and government securities, the fund paid $241,442 for securities
during the report period and received $22,234 from securities it sold or that
matured.
b These derive from investments and futures. As of the report date, the fund had
eleven open S&P 500 futures contracts due to expire on December 18, 2003, with
an aggregate contract value of $2,886 and net unrealized gains of $89 and
twelve open Russell 2000 futures due to expire on December 21, 2003 with an
aggregate contract value of $3,170 and net unrealized gains of $97.
FEDERAL TAX DATA
- ---------------------------------------------------------------
PORTFOLIO COST $920,253
NET UNREALIZED GAINS AND LOSSES:
Gains $139,980
Losses + (168,314)
------------
($28,334)
UNDISTRIBUTED EARNINGS:
Ordinary income $7,180
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2007 $18
2008 3,413
2009 2,000
2010 11,486
2011 + 4,577
------------
$21,494
RECLASSIFICATIONS:
Net realized capital losses $3
Reclassified as:
Net investment income
not yet distributed ($3)
122 See financial notes.
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- ---------------------------------------------------------------------------------
Dividends $11,488 a
Interest 58
Securities on loan + 216
-------------
TOTAL INVESTMENT INCOME 11,762
NET REALIZED GAINS AND LOSSES
- ---------------------------------------------------------------------------------
Net realized losses on investments sold (6,655)
Net realized gains on futures contracts + 1,361
-------------
NET REALIZED LOSSES (5,294)
NET UNREALIZED GAINS AND LOSSES
- ---------------------------------------------------------------------------------
Net unrealized gains on investments 155,330
Net unrealized gains on futures contracts + 222
-------------
NET UNREALIZED GAINS 155,552
EXPENSES
- ---------------------------------------------------------------------------------
Investment adviser and administrator fees 1,913 b
Transfer agent and shareholder service fees:
Investor Shares 872 c
Select Shares(R) 339 c
Trustees' fees 9 d
Custodian fees 58
Portfolio accounting fees 116
Professional fees 39
Registration fees 89
Shareholder reports 90
Other expenses + 27
-------------
Total expenses 3,552
Expense reduction - 492 e
-------------
NET EXPENSES 3,060
INCREASE IN NET ASSETS FROM OPERATIONS
- ---------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 11,762
NET EXPENSES - 3,060
-------------
NET INVESTMENT INCOME 8,702
NET REALIZED LOSSES (5,294) f
NET UNREALIZED GAINS + 155,552 f
-------------
INCREASE IN NET ASSETS FROM OPERATIONS $158,960
Unless stated, all numbers x 1,000.
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. These fees are paid to
Charles Schwab & Co.
d For the fund's independent trustees only.
e Includes $386 from the investment adviser (CSIM) and $106 from the transfer
agent and shareholder service agent (Schwab). These reductions reflect a
guarantee by CSIM and Schwab to limit the operating expenses of this fund
through February 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 $150,258
See financial notes. 123
SCHWAB TOTAL STOCK MARKET INDEX FUND(R)
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- -----------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income $8,702 $6,337
Net realized losses (5,294) (11,625)
Net unrealized gains or losses + 155,552 (71,931)
-------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 158,960 (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, b
TRANSACTIONS IN FUND SHARES
- -------------------------------------------------------- -----------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
SHARES SOLD
Investor Shares 12,774 $194,287 8,607 $139,890
Select Shares + 11,399 172,567 7,243 117,125
----------------------------------------------------
TOTAL SHARES SOLD 24,173 $366,854 15,850 $257,015
SHARES REINVESTED
Investor Shares 209 $2,984 120 $2,114
Select Shares + 203 2,911 139 2,439
----------------------------------------------------
TOTAL SHARES REINVESTED 412 $5,895 259 $4,553
SHARES REDEEMED
Investor Shares (4,461) ($68,649) (3,882) ($62,511)
Select Shares + (5,507) (85,326) (4,446) (70,982)
----------------------------------------------------
TOTAL SHARES REDEEMED (9,968) ($153,975) (8,328) ($133,493) c
NET TRANSACTIONS
IN FUND SHARES 14,617 $218,774 7,781 $128,075
SHARES OUTSTANDING AND NET ASSETS
- -------------------------------------------------------------------------------
11/1/02-10/31/03 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 + 14,617 371,027 7,781 45,791 d
--------------------------------------------------------
END OF PERIOD 51,358 $898,588 36,741 $527,561 e
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
b The tax-basis components of distributions paid are:
CURRENT PERIOD:
Ordinary Income $6,707
Long-term capital gains $--
PRIOR PERIOD:
Ordinary Income $5,065
Long-term capital gains $--
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase.
CURRENT PERIOD:
Investor Shares $76
Select Shares + 173
-----
TOTAL $249
PRIOR PERIOD:
Investor Shares $65
Select Shares + 60
-----
TOTAL $125
Dollar amounts are net of the redemption proceeds.
d Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
e Includes distributable net investment income in the amount of $7,185 and
$5,193 for the current period and prior period, respectively.
124 See financial notes.
SCHWAB INTERNATIONAL INDEX FUND(R)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98-
INVESTOR SHARES 10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
PER-SHARE DATA ($)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 10.47 12.22 17.13 17.93 14.21
---------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.23 0.21 0.15 0.20 0.19
Net realized and unrealized gains or losses 2.25 (1.82) (4.81) (0.85) 3.66
---------------------------------------------------------------------------
Total income or loss from investment operations 2.48 (1.61) (4.66) (0.65) 3.85
Less distributions:
Dividends from net investment income (0.21) (0.14) (0.25) (0.15) (0.13)
---------------------------------------------------------------------------
Net asset value at end of period 12.74 10.47 12.22 17.13 17.93
---------------------------------------------------------------------------
Total return (%) 24.24 (13.34) (27.58) (3.69) 27.31
RATIOS/SUPPLEMENTAL DATA (%)
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.65 0.58 0.58 0.58 1 0.58
Gross operating expenses 0.74 0.76 0.75 0.82 0.99
Net investment income 2.01 1.70 1.14 1.60 1.24
Portfolio turnover rate 7 13 18 16 5
Net assets, end of period ($ x 1,000,000) 494 443 519 637 447
1 The ratio of net operating expenses would have been 0.59% if certain
non-routine expenses (proxy fees) had been included.
See financial notes. 125
SCHWAB INTERNATIONAL INDEX FUND(R)
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98-
SELECT SHARES(R) 10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
PER-SHARE DATA ($)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 10.47 12.23 17.14 17.96 14.23
---------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.25 0.21 0.16 0.27 0.18
Net realized and unrealized gains or losses 2.26 (1.82) (4.80) (0.91) 3.70
---------------------------------------------------------------------------
Total income or loss from investment operations 2.51 (1.61) (4.64) (0.64) 3.88
Less distributions:
Dividends from net investment income (0.23) (0.15) (0.27) (0.18) (0.15)
---------------------------------------------------------------------------
Net asset value at end of period 12.75 10.47 12.23 17.14 17.96
---------------------------------------------------------------------------
Total return (%) 24.50 (13.31) (27.45) (3.65) 27.49
RATIOS/SUPPLEMENTAL DATA (%)
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.49 0.47 0.47 0.47 1 0.47
Gross operating expenses 0.59 0.61 0.60 0.67 0.86
Net investment income 2.19 1.81 1.25 1.71 1.57
Portfolio turnover rate 7 13 18 16 5
Net assets, end of period ($ x 1,000,000) 629 536 616 700 449
1 The ratio of net operating expenses would have been 0.48% if certain
non-routine expenses (proxy fees) had been included.
126 See financial notes.
SCHWAB INTERNATIONAL INDEX FUND(R)
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by country 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 ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
99.4% FOREIGN
COMMON STOCK 1,070,673 1,115,751
0.4% FOREIGN
PREFERRED STOCK 2,913 4,024
0.0% WARRANTS 724 606
0.0% RIGHTS -- 392
0.0% SHORT-TERM INVESTMENT 43 43
- --------------------------------------------------------------------------------
99.8% TOTAL INVESTMENTS 1,074,353 1,120,816
4.5% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 50,420 50,420
(4.3)% OTHER ASSETS AND
LIABILITIES, NET (48,298)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 1,122,938
FOREIGN COMMON STOCK 99.4% of net assets
AUSTRALIA 4.0%
--------------------------------------------------------------------------
Amcor Ltd. 170,097 1,026
AMP Ltd. 243,014 1,135
Australia & New Zealand Banking Group Ltd. 299,660 3,785
BHP Billiton Ltd. 753,530 6,266
Coles Myer Ltd. 218,165 1,203
Commonwealth Bank of Australia 256,408 5,003
Foster's Group Ltd. 446,157 1,447
Insurance Australia Group Ltd. 337,549 1,066
Macquarie Bank Ltd. 41,612 1,029
Macquarie Infrastructure Group 386,221 869
National Australia Bank Ltd. 306,901 6,661
News Corp. Ltd. 292,452 2,604
QBE Insurance Group Ltd. 125,449 917
Rio Tinto Ltd. 60,818 1,538
Suncorp-Metway Ltd. 107,619 990
Telstra Corp. Ltd. 416,897 1,402
Wesfarmers Ltd. 80,774 1,662
Westpac Banking Corp. 346,721 3,973
Woodside Petroleum Ltd. 101,251 951
Woolworths Ltd. 202,146 1,595
------
45,122
BELGIUM 0.7%
--------------------------------------------------------------------------
Dexia 121,918 1,920
Electrabel SA 6,048 1,673
Fortis 211,219 3,767
Solvay SA 12,932 963
------
8,323
CANADA 5.8%
--------------------------------------------------------------------------
Alcan, Inc. 62,405 2,490
Bank of Montreal 99,813 3,736
Bank of Nova Scotia 99,352 4,935
Barrick Gold Corp. 110,291 2,146
BCE, Inc. 65,656 1,487
o Biovail Corp. 27,400 659
Bombardier, Inc., Class B 279,400 1,255
Brascan Corp. 31,900 908
Canadian Imperial Bank of Commerce 75,516 3,392
Canadian National Railway Co. 39,116 2,352
Canadian Natural Resources Ltd. 25,900 1,100
Canadian Pacific Railway Ltd. 32,300 905
Enbridge, Inc. 33,700 1,324
EnCana Corp. 97,217 3,339
George Weston Ltd. 11,500 900
Imperial Oil Ltd. 24,010 956
o Inco Ltd. 37,300 1,238
See financial notes. 127
SCHWAB INTERNATIONAL INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Loblaw Cos. Ltd. 21,098 1,022
Magna International, Inc., Class A 16,447 1,319
Manulife Financial Corp. 98,250 2,982
o MI Developments, Inc., Class A 8,223 207
National Bank of Canada 36,900 1,145
o Nortel Networks Corp. 784,900 3,502
Petro-Canada 48,400 1,951
Placer Dome, Inc. 83,200 1,285
Power Corp. of Canada 35,402 1,163
Power Financial Corp. 26,300 906
Royal Bank of Canada 136,817 6,589
Sun Life Financial Services of Canada, Inc. 130,364 3,223
Suncor Energy, Inc. 81,600 1,714
Talisman Energy, Inc. 25,625 1,252
Thomson Corp. 40,000 1,310
TransCanada Corp. 94,561 1,930
-------
64,622
DENMARK 0.6%
--------------------------------------------------------------------------
AP Moller-Maersk A/S 224 1,759
Danske Bank A/S 103,537 2,089
Novo-Nordisk A/S, Class B 50,724 1,824
TDC A/S 23,628 759
-------
6,431
FRANCE 10.5%
--------------------------------------------------------------------------
Accor SA 37,106 1,459
Air Liquide SA 19,987 2,962
o Alcatel SA, Class A 245,737 3,242
Arcelor SA 74,513 1,063
Aventis SA 134,970 7,147
AXA 281,489 5,334
BNP Paribas 161,683 8,496
Bouygues 42,044 1,144
o Cap Gemini SA 21,739 1,096
Carrefour SA 112,519 5,907
Cie Generale D'Optique Essilor International SA 19,882 956
Compagnie de Saint-Gobain 60,643 2,558
Credit Agricole SA 67,809 1,440
European Aeronautic Defense & Space Co. 61,447 1,250
o France Telecom SA 158,066 3,826
Groupe Danone 24,586 3,710
L'oreal 69,764 5,158
Lafarge SA 33,456 2,396
Lagardere S.C.A. 24,730 1,244
LVMH Moet-Hennessy Louis Vuitton SA 44,980 3,109
Michelin (C.G.D.E.), Class B 28,839 1,131
Pechiney, Class A 15,156 838
Pernod-Ricard 11,468 1,107
Peugeot SA 37,097 1,591
Pinault-Printemps-Redoute SA 14,727 1,501
Renault SA 30,391 2,010
Sanofi-Synthelabo SA 74,329 4,601
Schneider Electric SA 40,373 2,363
Societe Generale, Class A 65,700 4,880
Societe Television Francaise 1 26,048 781
STMicroelectronics NV 117,296 3,123
Suez SA 155,587 2,496
(5) Total Fina Elf SA 131,656 20,463
Veolia Environnement 52,576 1,173
Vinci SA 13,931 1,010
o Vivendi Universal SA 177,845 3,736
*o Vivendi Universal SA 54,392 1,144
-------
117,445
GERMANY 6.9%
--------------------------------------------------------------------------
Adidas-Salomon AG 9,200 852
Allianz AG 55,988 6,002
Altana AG 12,100 763
BASF AG 108,135 4,960
Bayer AG 128,045 3,077
o Bayerische Hypo-und
Vereinsbank AG 66,874 1,473
Commerzbank AG 88,400 1,747
DaimlerChrysler AG 173,770 6,482
Deutsche Bank AG 106,276 7,010
Deutsche Boerse AG 19,400 1,079
Deutsche Post AG 75,227 1,447
o Deutsche Telekom AG 420,162 6,618
128 See financial notes.
SCHWAB INTERNATIONAL INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
E.ON AG 118,150 5,972
o Hypo Real Estate Holding 16,719 292
o Infineon Technologies AG 75,100 1,107
Linde AG 18,812 863
Metro AG 29,214 1,195
Muenchener Rueckversicherungs AG 23,640 2,819
RWE AG 69,676 1,936
SAP AG 40,624 5,910
Schering AG 33,246 1,553
Siemens AG 160,190 10,801
ThyssenKrupp AG 63,966 1,067
Volkswagen AG 46,293 2,335
------
77,360
HONG KONG / CHINA 1.3%
--------------------------------------------------------------------------
Cheung Kong Holdings Ltd. 299,000 2,493
CLP Holdings Ltd. 387,080 1,749
Hang Seng Bank Ltd. 154,700 1,932
Hong Kong & China Gas Co. 718,400 994
HongKong Electric Holdings 277,756 1,084
Hutchison Whampoa Ltd. 445,800 3,459
Sun Hung Kai Properties Ltd. 265,694 2,250
Swire Pacific Ltd., Class A 190,000 1,160
------
15,121
ITALY 3.1%
--------------------------------------------------------------------------
Alleanza Assicurazioni SPA 100,995 1,011
Assicurazioni Generali SPA 194,418 4,475
Banca Intesa SPA 735,870 2,481
Banco Popolare di Verona e
Novara 75,422 1,166
Enel SPA 429,348 2,685
ENI-Ente Nazionale Idrocarburi
SPA 514,100 8,164
Mediaset SPA 110,368 1,115
Mediobanca SPA 95,210 957
Riunione Adriatica di Sicurta SPA 60,519 946
Sanpaolo IMI SPA 189,885 2,137
o Telecom Italia SPA 1,239,033 2,149
TIM SPA 753,178 3,476
UniCredito Italiano SPA 767,312 3,782
------
34,544
JAPAN 19.2%
--------------------------------------------------------------------------
Advantest Corp. 13,000 968
Aeon Co. Ltd. 48,000 1,585
Ajinomoto Co., Inc. 111,000 1,121
Asahi Glass Co. Ltd. 146,000 1,153
Asahi Kasei Corp. 250,000 1,192
Bridgestone Corp. 126,000 1,650
Canon, Inc. 171,000 8,275
Chubu Electric Power Co., Inc. 122,100 2,449
Dai Nippon Printing Co. Ltd. 117,000 1,807
Denso Corp. 92,000 1,745
East Japan Railway Co. 653 2,958
Eisai Co. Ltd. 37,000 868
Fanuc Ltd. 24,300 1,461
Fuji Photo Film Co. Ltd. 92,000 2,711
Fujisawa Pharmaceutical Co. Ltd. 47,000 970
o Fujitsu Ltd. 326,000 2,043
Honda Motor Co. Ltd. 158,700 6,265
Hoya Corp. 23,600 2,136
Ito-Yokado Co. Ltd. 68,000 2,499
Itochu Corp. 273,000 921
Japan Tobacco, Inc. 158 1,055
o JFE Holdings, Inc. 94,000 2,403
The Kansai Electric Power Co. 130,000 2,247
Kao Corp. 109,000 2,241
KDDI Corp. 1 2
Keyence Corp. 6,900 1,518
o Kinki Nippon Railway Co. Ltd. 305,830 921
Kirin Brewery Co. Ltd. 127,000 1,015
Komatsu Ltd. 193,000 1,045
Konica Minolta Holdings, Inc. 81,000 1,065
Kyocera Corp. 34,500 2,077
See financial notes. 129
SCHWAB INTERNATIONAL INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Kyushu Electric Power Co. 82,400 1,361
Matsushita Electric Industrial Co. Ltd. 420,912 5,548
Millea Holdings, Inc. 303 3,611
Mitsubishi Corp. 219,000 2,273
Mitsubishi Electric Corp. 303,000 1,353
Mitsubishi Estate Co. Ltd. 190,000 1,822
Mitsubishi Heavy Industries Ltd. 565,000 1,552
Mitsubishi Tokyo Financial Group, Inc. 819 5,885
Mitsui & Co. Ltd. 239,000 1,739
Mitsui Fudosan Co. Ltd. 142,000 1,321
Mitsui Sumitomo Insurance Co. Ltd. 273,000 2,250
o Mizuho Financial Group, Inc. 1,155 2,826
Murata Manufacturing Co. Ltd. 47,900 2,723
NEC Corp. 269,000 2,376
Nikko Cordial Corp. 283,000 1,527
Nintendo Co. Ltd. 19,700 1,521
Nippon Oil Corp. 250,000 1,235
Nippon Steel Corp. 1,020,000 2,097
Nippon Telegraph & Telephone Corp. 1,053 4,703
Nissan Motor Co. Ltd. 506,000 5,671
Nitto Denko Corp. 28,000 1,470
Nomura Holdings, Inc. 359,000 6,165
NTT Data Corp. 284 1,258
NTT DoCoMo, Inc. 3,570 7,729
OJI Paper Co. Ltd. 165,000 878
Olympus Corp. 43,000 943
Omron Corp. 43,000 943
Osaka Gas Co. Ltd. 394,000 1,089
Pioneer Corp. 31,000 773
Ricoh Co. Ltd. 131,000 2,484
Rohm Co. Ltd. 21,000 2,831
Sankyo Co. Ltd. 60,000 961
Sanyo Electric Co. Ltd. 309,000 1,417
Secom Co. Ltd. 43,500 1,701
Sekisui House Ltd. 94,000 923
Seven-Eleven Japan Co. 78,000 2,469
Sharp Corp. 184,000 2,897
Shin-Etsu Chemical Co. Ltd. 74,900 2,787
Shionogi & Co. Ltd. 61,000 1,024
The Shizuoka Bank Ltd. 116,000 819
SMC Corp. 11,000 1,324
Softbank Corp. 41,000 2,107
Sompo Japan Insurance, Inc. 160,000 1,324
Sony Corp. 175,500 6,114
Sumitomo Corp. 137,000 951
Sumitomo Electric Industries Ltd. 131,000 1,126
Sumitomo Mitsui Financial Group, Inc. 764 3,843
Takeda Chemical Industries Ltd. 172,200 6,093
TDK Corp. 22,000 1,441
Tohoku Electric Power Co. 83,700 1,357
The Tokyo Electric Power Co., Inc. 230,300 4,912
Tokyo Electron Ltd. 31,000 2,222
Tokyo Gas Co. Ltd. 507,000 1,739
Toppan Printing Co. Ltd. 122,000 1,119
Toshiba Corp. 566,000 2,270
(10) Toyota Motor Corp. 551,500 15,702
o UFJ Holdings, Inc. 686 2,931
West Japan Railway Co. 225 837
Yamanouchi Pharmaceutical Co. Ltd. 59,000 1,481
Yamato Transport Co. Ltd. 78,000 1,037
-------
215,251
NETHERLANDS 5.7%
--------------------------------------------------------------------------
ABN Amro Holdings NV 298,017 6,253
Aegon NV 276,549 3,626
Akzo Nobel NV 51,942 1,642
o ASML Holding NV 93,364 1,620
DSM NV 16,462 755
Heineken NV 39,259 1,401
ING Groep NV 340,404 7,068
o Koninklijke Ahold NV 138,958 1,176
130 See financial notes.
SCHWAB INTERNATIONAL INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Koninklijke Philips Electronics
NV 263,980 7,117
Reed Elsevier NV 117,871 1,313
(6) Royal Dutch Petroleum Co. 422,591 18,752
o Royal KPN NV 360,914 2,744
TPG NV 67,143 1,448
Unilever NV 113,789 6,610
VNU NV 47,654 1,451
Wolters Kluwer NV 55,267 777
------
63,753
SINGAPORE 0.6%
--------------------------------------------------------------------------
DBS Group Holdings Ltd. 217,778 1,789
Oversea-Chinese Banking Corp. 185,000 1,286
Singapore Press Holdings Co. Ltd. 74,666 845
Singapore Telecommunications Ltd. 1,180,696 1,166
United Overseas Bank Ltd. 237,000 1,851
------
6,937
SPAIN 3.6%
--------------------------------------------------------------------------
Altadis SA 57,998 1,406
o Antena 3 Television SA 3,262 107
Banco Bilbao Vizcaya Argentaria SA 604,944 6,941
Banco Popular Espanol 29,001 1,508
Banco Santander Central Hispano SA 854,969 8,200
Endesa SA 186,597 2,961
Gas Natural SDG SA 37,672 724
Iberdrola SA 149,580 2,495
Inditex SA 47,334 978
Repsol YPF SA 178,984 3,121
Telefonica SA 964,517 11,997
------
40,438
SWEDEN 1.6%
--------------------------------------------------------------------------
Electrolux AB, Series B 61,579 1,263
Hennes & Mauritz AB, Series B 98,150 2,082
Nordea AB 486,740 3,020
Sandvik AB 44,107 1,312
Skandinaviska Enskilda Banken, Series A 85,410 1,029
Svenska Cellulosa AB, Series B 41,064 1,550
Svenska Handelsbanken AB, Series A 112,602 1,985
o Telefonaktiebolaget LM Ericsson, Class B 3,006,733 5,165
Volvo AB, Series B 40,445 1,130
------
18,536
SWITZERLAND 8.0%
--------------------------------------------------------------------------
o ABB Ltd. 204,408 1,202
Adecco SA, Registered 26,587 1,568
o Ciba Specialty Chemicals AG 14,322 948
Compangnie Financiere Richemont AG, Series A 102,430 2,305
Credit Suisse Group 237,823 8,379
Holcim Ltd. 30,865 1,299
(8) Nestle SA, Registered 81,268 17,892
(7) Novartis AG, Registered 476,511 18,163
Roche Holdings -- Genus 143,196 11,849
Serono SA, Series B 1,193 824
Swiss Reinsurance, Registered 65,184 4,103
Swisscom AG, Registered 5,043 1,467
Syngenta AG 20,323 1,089
UBS AG, Registered 238,248 14,630
o Zurich Financial Services AG 28,547 3,656
------
89,374
UNITED KINGDOM 27.8%
--------------------------------------------------------------------------
Amersham PLC 136,906 1,704
Amvescap PLC 119,189 944
(9) AstraZeneca PLC 350,878 16,481
Aviva PLC 444,350 3,646
See financial notes. 131
SCHWAB INTERNATIONAL INDEX FUND(R)
PORTFOLIO HOLDINGS continued
MKT.
VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
BAA PLC 211,384 1,672
BAE Systems PLC 605,069 1,879
Barclays PLC 1,321,019 11,141
BG Group PLC 727,751 3,319
BHP Billiton PLC 472,369 3,709
BOC Group PLC 97,556 1,330
Boots Group PLC 162,117 1,960
(2) BP PLC 4,449,092 30,879
British American Tobacco PLC 319,563 3,864
British Land Co. PLC 100,943 886
o British Sky Broadcasting PLC 246,398 2,676
BT Group PLC 1,748,011 5,502
Cable & Wireless PLC 485,728 1,123
Cadbury Schweppes PLC 431,126 2,764
Carnival PLC 36,790 1,270
Centrica PLC 861,673 2,698
Compass Group PLC 440,157 2,538
Diageo PLC 614,379 7,225
Dixons Group PLC 356,181 820
Emap PLC 52,220 709
Friends Provident PLC 333,413 777
(4) GlaxoSmithKline PLC 1,197,647 25,648
Granada PLC 564,218 1,123
GUS PLC 205,342 2,509
Hanson Plc 150,209 1,040
HBOS PLC 766,462 8,916
Hilton Group PLC 350,064 1,152
(1) HSBC Holdings PLC 2,165,929 32,528
Imperial Tobacco Group PLC 142,051 2,355
o Intercontinental Hotels Group PLC 149,688 1,358
J. Sainsbury PLC 313,408 1,506
Kingfisher PLC 442,761 2,123
Land Securities Group PLC 95,357 1,458
Legal & General Group PLC 1,220,030 2,153
Lloyds TSB Group PLC 1,130,020 7,848
Man Group PLC 57,326 1,410
Marks & Spencer Group PLC 443,141 2,164
National Grid Transco PLC 616,442 3,936
Next PLC 57,431 1,150
Pearson PLC 158,738 1,643
Prudential PLC 410,142 3,182
Reckitt Benckiser PLC 111,099 2,338
Reed Elsevier PLC 261,955 2,036
Rentokil Initial PLC 364,152 1,380
Reuters Group PLC 267,194 1,164
Rio Tinto PLC 216,014 5,238
Rolls-Royce Group PLC 296,618 955
Royal Bank of Scotland Group PLC 556,113 14,901
SABMiller PLC 162,857 1,376
Safeway PLC 215,328 1,060
Sage Group PLC 246,979 782
Scottish & Newcastle PLC 145,929 856
Scottish & Southern Energy PLC 173,758 1,809
Scottish Power PLC 382,227 2,270
Severn Trent Water PLC 70,101 842
Shell Transport & Trading Co. PLC 1,919,478 11,987
Smith & Nephew PLC 175,479 1,394
Smiths Group PLC 107,917 1,285
Tesco PLC 1,445,671 5,796
Unilever PLC 548,778 4,679
United Utilities PLC 124,590 996
(3) Vodafone Group PLC 13,840,849 29,065
Wolseley PLC 111,522 1,367
WPP Group PLC 230,860 2,200
-------
312,494
UNITED STATES 0.0%
--------------------------------------------------------------------------
o NTL Europe, Inc. 41 --
132 See financial notes.
SCHWAB INTERNATIONAL INDEX FUND(R)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
FOREIGN PREFERRED STOCK
0.4% of net assets
AUSTRALIA 0.3%
--------------------------------------------------------------------------
News Corp. Ltd. 425,956 3,134
GERMANY 0.1%
--------------------------------------------------------------------------
Henkel KGaA 12,100 890
WARRANTS
0.0% of net assets
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 1
o France Telecom-CVG Equant NV, expires 06/29/04, 35,326 605
----
606
UNITED STATES 0.0%
--------------------------------------------------------------------------
o NTL, Inc., Series A, expires 01/13/11, 48 --
RIGHTS
0.0% of net assets
AUSTRALIA 0.0%
--------------------------------------------------------------------------
o AMP Ltd. 243,014 14
o Australia & New Zealand Banking Group Ltd. 54,484 167
----
181
FRANCE 0.0%
--------------------------------------------------------------------------
o Credit Agricole SA 67,809 16
GERMANY 0.0%
--------------------------------------------------------------------------
o Muenchener Rueckversicherungs AG 23,640 195
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENT
0.0% of net assets
Brown Brothers Harriman,
Grand Cayman Time Deposit
0.50%, 11/03/03 43 43
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
SECURITY AND NUMBER OF SHARES
COLLATERAL INVESTED FOR SECURITIES ON LOAN
4.5% of net assets
OTHER INVESTMENT COMPANIES
--------------------------------------------------------------------------
Securities Lending Investment Fund 50,419,584 50,420
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN. For totals, please see the
first page of holdings for this fund.
See financial notes. 133
SCHWAB INTERNATIONAL INDEX FUND(R)
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- ------------------------------------------------------------------------------
Investments, at market value
(including $47,564 of securities on loan) $1,120,816 a
Collateral held for securities on loan 50,420
Foreign currency 28 b
Receivables:
Fund shares sold 1,077
Dividends 1,578
Income from securities on loan 17
Dividend tax reclaim 408
Prepaid expenses + 27
--------------
TOTAL ASSETS 1,174,371
LIABILITIES
- ------------------------------------------------------------------------------
Collateral held for securities on loan 50,420
Cash overdraft 28
Payables:
Fund shares redeemed 706
Investment adviser and administrator fees 13
Transfer agent and shareholder service fees 9
Accrued expenses + 257
--------------
TOTAL LIABILITIES 51,433
NET ASSETS
- ------------------------------------------------------------------------------
TOTAL ASSETS 1,174,371
TOTAL LIABILITIES - 51,433
--------------
NET ASSETS $1,122,938
NET ASSETS BY SOURCE
Capital received from investors 1,363,651
Net investment income not yet distributed 20,044
Net realized capital losses (307,255)
Net unrealized capital gains 46,498
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $493,559 38,727 $12.74
Select Shares(R) $629,379 49,374 $12.75
Unless stated, all numbers x 1,000.
a The fund paid $1,074,353 for these securities. Not counting short-term
obligations and government securities, the fund paid $73,693 for securities
during the report period, and received $133,500 from securities it sold or
that matured.
b The fund paid $27 for these currencies.
FEDERAL TAX DATA
- ----------------------------------------------------
PORTFOLIO COST $1,079,866
NET UNREALIZED GAINS AND LOSSES:
Gains $170,034
Losses + (129,084)
-------------
$40,950
UNDISTRIBUTED EARNINGS:
Ordinary income $20,158
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2004 $1,743
2005 1,837
2006 11,905
2007 7
2008 3,669
2009 130,942
2010 112,722
2011 + 39,016
-------------
$301,841
RECLASSIFICATIONS:
Capital received from investors $4
Net investment income not
yet distributed $233
Reclassified as:
Net realized capital losses ($237)
134 See financial notes.
SCHWAB INTERNATIONAL INDEX FUND(R)
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- ------------------------------------------------------------------------------
Dividends $25,891 a
Interest 12
Securities on loan + 801
-----------
TOTAL INVESTMENT INCOME 26,704
NET REALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net realized losses on investments sold (38,072)
Net realized gains on foreign currency transactions + 233
-----------
NET REALIZED LOSSES (37,839)
NET UNREALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net unrealized gains on investments 241,990
Net unrealized losses on foreign currency transactions + (36)
-----------
NET UNREALIZED GAINS 241,954
EXPENSES
- ------------------------------------------------------------------------------
Investment adviser and administrator fees 4,046 b
Transfer agent and shareholder service fees:
Investor Shares 1,105 c
Select Shares(R) 557 c
Trustees' fees 9 d
Custodian fees 434
Portfolio accounting fees 162
Professional fees 39
Registration fees 44
Shareholder reports 117
Interest expense 5
Other expenses + 19
-----------
Total expenses 6,537
Expense reduction - 907 e
-----------
NET EXPENSES 5,630
INCREASE IN NET ASSETS FROM OPERATIONS
- ------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 26,704
NET EXPENSES - 5,630
-----------
NET INVESTMENT INCOME 21,074
NET REALIZED LOSSES (37,839) f
NET UNREALIZED GAINS + 241,954 f
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $225,189
Unless stated, all numbers x 1,000.
a An additional $3,149 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. These fees are paid to
Charles Schwab & Co.
d For the fund's independent trustees only.
e Includes $697 from the investment adviser (CSIM) and $210 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 $204,115.
See financial notes. 135
SCHWAB INTERNATIONAL INDEX FUND(R)
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- ------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net Investment income $21,074 $19,959
Net realized losses (37,839) (111,855)
Net unrealized gains or losses + 241,954 (61,568)
----------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 225,189 (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
- ------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
SHARES SOLD
Investor Shares 5,440 $59,471 10,848 $131,550
Select Shares + 8,086 86,648 14,690 174,196
----------------------------------------------
TOTAL SHARES SOLD 13,526 $146,119 25,538 $305,746
SHARES REINVESTED
Investor Shares 815 $8,329 456 $5,554
Select Shares + 1,072 10,936 610 7,432
----------------------------------------------
TOTAL SHARES REINVESTED 1,887 $19,265 1,066 $12,986
SHARES REDEEMED
Investor Shares (9,803) ($105,853) (11,478) ($134,445)
Select Shares + (10,942) (119,750) (14,549) (173,548)
----------------------------------------------
TOTAL SHARES REDEEMED (20,745) ($225,603) (26,027) ($307,993) b
NET TRANSACTIONS
IN FUND SHARES (5,332) ($60,219) 577 $10,739
SHARES OUTSTANDING AND NET ASSETS
- ------------------------------------------------------------------------------
11/1/02-10/31/03 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 + (5,332) 144,307 577 (156,570) c
-------------------------------------------------
END OF PERIOD 88,101 $1,122,938 93,433 $978,631 d
Unless stated, all numbers x 1,000.
a The tax-basis components of distributions paid are:
CURRENT PERIOD:
Ordinary Income $20,663
Long-term capital gains $--
PRIOR PERIOD:
Ordinary Income $13,845
Long-term capital gains $--
b The fund charges 1.50% of early withdrawal fees on shares redeemed 180 days or
less after the purchase.
CURRENT PERIOD:
Investor Shares $62
Select Shares + 46
-------
TOTAL $108
PRIOR PERIOD:
Investor Shares $170
Select Shares + 56
-------
TOTAL $226
Dollar amounts are net of the redemption proceeds.
c Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
d Includes distributable net investment income in the amount of $20,044 and
$19,400 for the current period and prior period, respectively.
Percent of fund shares owned by other SchwabFunds(R) as of the end of the
current period:
SCHWAB MARKETTRACK PORTFOLIOS(R)
All Equity Portfolio 11.4%
Growth Portfolio 10.3%
Balanced Portfolio 6.9%
Conservative Portfolio 2.6%
SCHWAB ANNUITY PORTFOLIOS
Growth Portfolio II 0.5%
136 See financial notes.
SCHWAB EQUITY INDEX FUNDS
FINANCIAL NOTES
BUSINESS STRUCTURE OF THE FUNDS
EACH OF THE FUNDS DISCUSSED IN THIS REPORT IS A SERIES OF A NO-LOAD, OPEN-END
MANAGEMENT INVESTMENT COMPANY. Each of these companies is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended. The sidebar shows the funds in this report by trust.
THE FUNDS OFFER MULTIPLE SHARE CLASSES. For any given fund, shares of each class
represent interests in the same portfolio, but each class has different expenses
and investment minimums. In addition, one share class, e.Shares(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 -- -- --
- --------------------------------------------------------------------------------
SCHWAB 1000 -- --
- --------------------------------------------------------------------------------
SMALL-CAP INDEX -- --
- --------------------------------------------------------------------------------
TOTAL STOCK MARKET INDEX -- --
- --------------------------------------------------------------------------------
INTERNATIONAL INDEX -- --
- --------------------------------------------------------------------------------
For these funds, shares are bought and sold at net asset value (NAV), which is
the price for all outstanding shares. Each share has a par value of 1/1,000 of a
cent, and the trusts may issue as many shares as necessary.
THE TRUSTS AND THEIR FUNDS
This list shows the trust containing each fund in this report, along with all
other funds included in these trusts. The funds discussed in this report are
highlighted.
SCHWAB INVESTMENTS organized October 26, 1990
Schwab 1000 Fund(R)
Schwab Short-Term Bond Market Fund(TM)
Schwab Total Bond Market Fund(TM)
Schwab YieldPlus Fund(R)
Schwab Short/Intermediate Tax-Free Bond Fund(TM)
Schwab Long-Term Tax-Free Bond Fund(TM)
Schwab California Short/Intermediate Tax-Free
Bond Fund(TM)
Schwab California Long-Term Tax-Free Bond Fund(TM)
Schwab GNMA Fund(TM)
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 MarketTrack All Equity Portfolio(TM)
Schwab MarketTrack Growth Portfolio(TM)
Schwab MarketTrack Balanced Portfolio(TM)
Schwab MarketTrack Conservative Portfolio(TM)
Schwab U.S. MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Institutional Select S&P 500 Fund
Institutional Select Large-Cap Value Index Fund
Institutional Select Small-Cap Value Index Fund
137
SCHWAB EQUITY INDEX FUNDS
FUND OPERATIONS
Most of the funds' investments are described in the fund-by-fund sections
earlier in this report. However, there are certain other 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 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 LOAN SECURITIES TO CERTAIN BROKERS, DEALERS AND OTHER FINANCIAL
INSTITUTIONS WHO PAY THE FUNDS NEGOTIATED FEES. The funds receive cash, letters
of credit or U.S. government securities as collateral on these loans. All of the
cash collateral received is reinvested in high quality, short-term investments.
The value of the collateral must be at least 102% of the market value of the
loaned securities as of the first day of the loan, and at least 100% each day
thereafter.
THE FUNDS PAY FEES TO AFFILIATES OF THE INVESTMENT ADVISER FOR VARIOUS SERVICES.
Through their trusts, the funds have agreements with Charles Schwab Investment
Management, Inc. (CSIM) to provide investment advisory and administrative
services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent
and shareholder services.
Although these agreements specify certain fees for these services, CSIM and
Schwab have made additional agreements with the funds that may limit the total
138
SCHWAB EQUITY INDEX FUNDS
expenses charged. The rates and limitations for these fees vary from fund to
fund, and are described in each fund's Statement of Operations.
THE FUNDS MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING RELATED PARTIES. For
instance, a fund may own shares of The Charles Schwab Corporation if that
company is included in its index. The funds also may let other SchwabFunds(R)
buy and sell fund shares, particularly Schwab MarketTrack Portfolios(R), which
seek to provide investors with allocated portfolios of Schwab index funds.
The funds may make direct transactions with certain other SchwabFunds(R) when
practical. When one fund is seeking to sell a security that another is seeking
to buy, an interfund transaction can allow both funds to benefit by reducing
transaction costs. This practice is limited to funds that share the same
investment adviser, trustees and officers.
Pursuant to an exemptive order issued by the SEC, the funds may enter into
interfund borrowing and lending transactions within the SchwabFunds(R). All
loans are for temporary or emergency purposes only. The interest rate charged on
the loan is the average of the overnight repurchase agreement rate and the
short-term bank loan rate. The interfund lending facility is subject to the
oversight and periodic review of the Board of Trustees of the SchwabFunds(R).
TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/ OR DIRECTORS OF THE INVESTMENT
ADVISER OR SCHWAB. Federal securities law limits the percentage of such
"interested persons" who may serve on a trust's board, and the trusts were in
compliance with these limitations throughout the report period. The trusts did
not pay any of these persons for their service as trustees, but they did pay the
non-interested persons (independent trustees), as noted in each fund's Statement
of Operations.
THE FUNDS MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The funds may obtain
temporary bank loans through the trusts to which they belong, to use for meeting
shareholder redemptions or for extraordinary or emergency purposes. The trusts
have custodian overdraft facilities and line of credit arrangements of $150
million and $100 million with PNC Bank, N.A. and Bank of America, N.A.,
respectively. The funds pay interest on the amounts they borrow at rates that
are negotiated periodically.
AMOUNT WEIGHTED
OUTSTANDING AVERAGE AVERAGE
AT 10/31/03 BORROWING* INTEREST RATE*
FUND ($ x 1,000) ($ x 1,000) (%)
- --------------------------------------------------------------------------------
SCHWAB
S&P 500 FUND -- 5,678 1.61
- --------------------------------------------------------------------------------
SCHWAB 1000(R) -- 2,293 1.62
- --------------------------------------------------------------------------------
SCHWAB SMALL-CAP
INDEX FUND(R) 785 1,895 1.70
- --------------------------------------------------------------------------------
SCHWAB TOTAL STOCK
MARKET INDEX FUND(R) 6,958 2,839 1.53
- --------------------------------------------------------------------------------
SCHWAB INTERNATIONAL
INDEX FUND(R) 28 1,016 1.67
- --------------------------------------------------------------------------------
* Based on the number of days for which the borrowing is outstanding.
THE FUNDS INTEND TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR
REGULATED INVESTMENT COMPANIES. Accordingly, the funds distribute substantially
all of their net investment income and net realized capital gains (if any) to
their respective shareholders each year. As long as a fund meets the tax
requirements, it is not required to pay federal income tax. The net investment
income and net realized capital gains and losses may differ for financial
statement and tax purposes primarily due to differing treatments of losses on
wash sales and foreign currency transactions.
UNDER THE FUNDS' ORGANIZATIONAL DOCUMENTS, ITS OFFICERS AND TRUSTEES ARE
INDEMNIFIED AGAINST CERTAIN LIABILITY ARISING OUT OF THE PERFORMANCE OF THEIR
DUTIES TO THE FUNDS. In addition, in the normal course of business the funds
enter into contracts with their vendors and others that provide general
indemnifications. The funds' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the funds.
However, based on experience, the funds expect the risk of loss to be remote.
139
SCHWAB EQUITY INDEX FUNDS(R)
ACCOUNTING POLICIES
The following are the main policies the funds use in preparing their financial
statements.
THE FUNDS VALUE THE SECURITIES IN THEIR PORTFOLIOS EVERY BUSINESS DAY. The funds
use the following policies to value various types of securities:
- - SECURITIES TRADED ON AN EXCHANGE OR OVER-THE-COUNTER: valued at closing value
for the day, or, on days when no closing value has been reported, halfway
between the most recent bid and asked quotes.
- - SECURITIES 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 DISCOUNT is recorded as it accrues.
REALIZED GAINS AND LOSSES from security transactions are based on the identified
costs of the securities involved.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES are reported in U.S.
dollars. For assets and liabilities held on a given date, the dollar value is
based on market exchange rates in effect on that date. Transactions involving
foreign currencies, including purchases, sales, income receipts and expense
payments, are calculated using exchange rates in effect on the transaction date.
EXPENSES that are specific to a fund are charged directly to that fund. Expenses
that are common to all funds within a trust generally are allocated among the
funds in proportion to their average daily net assets.
FOR FUNDS OFFERING MULTIPLE SHARE CLASSES, all of the realized and unrealized
gains or losses and net investment income, other than class specific expenses,
are allocated daily to each class in proportion to its average daily net assets.
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.
140
SCHWAB EQUITY INDEX FUNDS
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF:
Schwab S&P 500 Fund
Schwab 1000 Fund(R)
Schwab Small-Cap Index Fund(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
In our opinion, the accompanying statements of assets and
liabilities, including the portfolio holdings, and the related
statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the
financial position of Schwab S&P 500 Fund, Schwab 1000 Fund (one
of the portfolios constituting Schwab Investments), Schwab Total
Stock Market Index Fund, Schwab Small-Cap Index Fund, and Schwab
International Index Fund (hereafter collectively referred to as
the "funds") at October 31, 2003, and the results of each of their
operations for the year then ended, the changes in each of their
net assets and the financial highlights for each of the periods
presented, in conformity with accounting principles generally
accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the funds'
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits
of these financial statements in accordance with auditing
standards generally accepted in the United States of America,
which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31,
2003 by correspondence with the custodians and brokers, provide a
reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
San Francisco, CA
December 12, 2003
141
SCHWAB EQUITY INDEX FUNDS
FUND TRUSTEES
A fund's Board of Trustees is responsible for protecting the
interests of that fund's shareholders. The tables below give
information about the people who serve as trustees and officers
for the SchwabFunds(R), including the funds covered in this
report. Trustees remain in office until they resign, retire or
are removed by shareholder vote.1
Under the Investment Company Act of 1940, any officer, director,
or employee of Schwab or CSIM is considered an "interested
person," meaning that he or she is considered to have a business
interest in Schwab or CSIM. These individuals are listed as
"interested trustees." The "independent trustees" are
individuals who, under the 1940 Act, are not considered to have
a business interest in Schwab or CSIM.
Each of the SchwabFunds (of which there were 49 as of 10/31/03)
belongs to one of these trusts: The Charles Schwab Family of
Funds, Schwab Investments, Schwab Capital Trust or Schwab
Annuity Portfolios. Currently all these trusts have the same
trustees and officers. The address for all trustees and officers
is 101 Montgomery Street, San Francisco, CA 94104. You can find
more information about the trustees and officers in the
Statement of Additional Information, which is available free by
calling 1-800-435-4000.
INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S);
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
CHARLES R. SCHWAB 2 Chair, Trustee: Chair, Director, The Charles Schwab Corp.; CEO, Director, Schwab
7/29/37 Family of Funds, 1989; Holdings, Inc.; Chair, Director, Charles Schwab & Co., Inc.; Charles
Investments, 1991; Schwab Investment Management, Inc.; Chair, Charles Schwab
Capital Trust, 1993; Holdings, Inc. I, Schwab International Holdings, Inc.; Director, U.S.
Annuity Portfolios, 1994. Trust Corp., United States Trust Co. of New York, The Gap, Inc.
(clothing retailer), Siebel Systems (software); Trustee, Stanford
University. Until 6/03: Director, Xsign, Inc. (electronic payment
systems). Until 5/03: Co-Chair, The Charles Schwab Corporation.
Until 5/02: Director, Vodafone AirTouch PLC (telecom). Until 3/02:
Director, Audiobase, Inc. (Internet audio solutions). Until 7/01:
Director, The Charles Schwab Trust Company. Until 1/99: Director,
Schwab Retirement Plan Services, Inc., Mayer & Schweitzer, Inc.
(securities brokerage subsidiary of The Charles Schwab Corp.),
Performance Technologies, Inc. (technology), TrustMark, Inc.
1 The SchwabFunds retirement policy requires that independent trustees elected
after January 1, 2000 retire at age 72 or after twenty years of service as a
trustee, whichever comes first. Independent trustees elected prior to January
1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will
retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on
December 31, 2010.
2 In addition to their positions with the investment adviser and the
distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr.
Lyons's immediate family members, also own stock of The Charles Schwab
Corporation.
142
SCHWAB EQUITY INDEX FUNDS
INDIVIDUALS WHO ARE INTERESTED TRUSTEES BUT NOT OFFICERS OF THE TRUST
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
DAWN G. LEPORE 1 Trustee: 2003 Vice Chair, EVP, The Charles Schwab Corp.; Until 10/01: CIO, The
3/21/54 (all trusts) Charles Schwab Corporation. Until 1999: EVP, The Charles Schwab
Corporation. Director, Wal-Mart Stores, eBay, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
JEFFREY M. LYONS 1 Trustee: 2002 EVP, Asset Management Products and Services, Charles Schwab &
2/22/55 (all trusts). Co., Inc. Until 9/01: EVP, Mutual Funds, Charles Schwab & Co., Inc.
INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUST OFFICE(S) HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
RANDALL W. MERK President, CEO President, CEO, Charles Schwab Investment Management, Inc;
7/25/54 (all trusts). EVP, Charles Schwab & Co., Inc.; Director, Charles Schwab Worldwide
Funds PLC, Charles Schwab Asset Management (Ireland) Ltd. Until
9/02: President, CIO, American Century Investment Management;
Director, American Century Cos., Inc. Until 6/01: CIO, Fixed Income,
American Century Cos., Inc. Until 1997: SVP, Director, Fixed Income
and Quantitative Equity Portfolio Management, Twentieth Century
Investors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
TAI-CHIN TUNG Treasurer, Principal SVP, CFO, Charles Schwab Investment Management, Inc.; VP,
3/7/51 Financial Officer The Charles Schwab Trust Co.; Director, Charles Schwab Asset
(all trusts). Management (Ireland) Ltd., Charles Schwab Worldwide Funds PLC.
- ------------------------------------------------------------------------------------------------------------------------------------
STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Director, Charles Schwab Investment
4/5/55 Officer Management, Inc.; CIO, The Charles Schwab Trust Co.
(all trusts).
- ------------------------------------------------------------------------------------------------------------------------------------
KOJI E. FELTON Secretary SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab
3/13/61 (all trusts). Investment Management, Inc. Until 6/98: Branch Chief in Enforcement,
U.S. Securities and Exchange Commission, San Francisco.
1 In addition to their positions with the investment adviser and the
distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr.
Lyons's immediate family members, also own stock of The Charles Schwab
Corporation.
143
SCHWAB EQUITY INDEX FUNDS
INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
MARIANN BYERWALTER 2000 (all trusts). Chair, JDN Corp. Advisory LLC; Trustee, Stanford University,
8/13/60 Director, America First Cos., (venture capital/fund management),
Redwood Trust, Inc. (mortgage finance), Stanford Hospitals and
Clinics, SRI International (research), PMI Group, Inc.
(mortgage insurance), Lucile Packard Children's Hospital. 2001:
Special Advisor to the President, Stanford University. Until 2002:
Director, LookSmart, Ltd. (Internet infrastructure). Until 2001: VP,
Business Affairs, CFO, Stanford University.
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD F. DORWARD Family of Funds, 1989; CEO, Dorward & Associates (management, marketing and
9/23/31 Investments, 1991; communications consulting). Until 1999: EVP, Managing Director,
Capital Trust, 1993; Grey Advertising.
Annuity Portfolios, 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp. (bio-pharmaceuticals). Director, Non-Executive
11/22/41 Chairman, Solectron Corp. (manufacturing), Airlease Ltd. (aircraft
leasing), Mission West Properties (commercial real estate), Stratex
Networks (telecommunications); Public Governor, Member, executive
committee, Pacific Stock & Options Exchange. Director, Digital
Microwave Corp. (network equipment). Until 1998: Dean, Haas School
of Business, University of California, Berkeley.
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT G. HOLMES Family of Funds, 1989; Chair, CEO, Director, Semloh Financial, Inc. (international financial
5/15/31 Investments, 1991; services and investment advice).
Capital Trust, 1993;
Annuity Portfolios, 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors);
9/28/50 Director, Pennzoil-Quaker State Co. (oil and gas), Rorento N.V.
(investments -- Netherlands), Cooper Industries (electrical
products); Member, audit committee, Northern Border Partners, L.P.
(energy).
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD R. STEPHENS Family of Funds, 1989; Managing Partner, D.R. Stephens & Co. (investments). Until 1996:
6/28/38 Investments, 1991; Chair, CEO, North American Trust (real estate investments).
Capital Trust, 1993;
Annuity Portfolios, 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL W. WILSEY Family of Funds, 1989; Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate and
8/18/43 Investments, 1991; investments).
Capital Trust, 1993;
Annuity Portfolios, 1994.
144
SCHWAB EQUITY INDEX FUNDS
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.
145
NOTES
NOTES
NOTES
CONTACT SCHWAB
SchwabFunds(R) offers you a complete family of mutual funds, each one based on a
clearly defined investment approach and using disciplined 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 directly over the
Internet.
2 Orders placed in person or through a telephone representative may be subject
to a service fee payable to Schwab.
THE SCHWABFUNDS FAMILY(R)
STOCK FUNDS
Schwab S&P 500 Fund
Schwab 1000 Fund(R)
Schwab Small-Cap Index Fund(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab 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 MarketTrack All Equity Portfolio(TM)
Schwab MarketTrack Growth Portfolio(TM)
Schwab MarketTrack Balanced Portfolio(TM)
Schwab MarketTrack Conservative Portfolio(TM)
BOND FUNDS
Schwab YieldPlus Fund(R)
Schwab Short-Term Bond Market Fund(TM)
Schwab Total Bond Market Fund(TM)
Schwab GNMA Fund(TM)
Schwab Short/Intermediate Tax-Free Bond Fund(TM)
Schwab Long-Term Tax-Free Bond Fund(TM)
Schwab California Short/Intermediate
Tax-Free Bond Fund(TM)
Schwab California Long-Term Tax-Free Bond Fund(TM)
SCHWAB MONEY FUNDS
Schwab offers an array of money market funds that seek high current income
consistent with safety and liquidity. 3 Choose from taxable or tax-advantaged
alternatives. Many can be linked to your Schwab account to "sweep" cash balances
automatically 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.
REG13810-06
SCHWAB MARKETMASTERS FUNDS(TM)
ANNUAL REPORT
October 31, 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 take a
look at the factors that shaped fund performance during the
report period.
Performance at a Glance ............... 5
Schwab U.S. MarketMasters Fund(TM)
Ticker Symbol: SWOGX
The fund seeks capital growth.
Performance and Fund Facts ............ 7
Financial Statements .................. 15
Schwab Balanced MarketMasters Fund(TM)
Ticker Symbol: SWOBX
The fund seeks capital growth and income.
Performance and Fund Facts ............ 9
Financial Statements .................. 23
Schwab Small-Cap MarketMasters Fund(TM)
Ticker Symbol: SWOSX
The fund seeks long-term capital appreciation.
Performance and Fund Facts ............ 11
Financial Statements .................. 39
Schwab International MarketMasters Fund(TM)
Ticker Symbol: SWOIX
The fund seeks long-term capital appreciation.
Performance and Fund Facts ............ 13
Financial Statements .................. 50
Financial Notes ...................................................... 62
Fund Trustees ........................................................ 68
Glossary ............................................................. 71
Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM)
Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab).
[PHOTO OF CHARLES R. SCHWAB]
CHARLES R. SCHWAB, Chairman
FROM THE CHAIRMAN
In the past few months, the mutual fund industry has been rocked by the
discovery of improper practices and arrangements. Investors large and small have
seen their confidence shaken, and understandably so.
Similarly, you may have also read about a limited number of potential late
trading issues at Charles Schwab & Co., Inc. and certain limited market timing
arrangements at U.S. Trust. Many firms, including our own, have begun thorough
investigations of their broker processes and procedures. We are continuing to
scrutinize such transactions and arrangements, and are working closely with
regulatory authorities. We are pleased to report that to date we have found no
indications of illegal or improper activities by Charles Schwab Investment
Management ("CSIM"), the investment advisor who manages the SchwabFunds(R).
I fully believe that even a small number of irregularities is unacceptable. We
have spent nearly 30 years building an ethical firm, and our business is founded
on a commitment to doing what's right for investors. That commitment leaves no
room for any failures to follow company policies or industry regulations.
Given the importance of mutual funds to American investors, I can understand why
investors find the recent news to be disturbing. At the same time, I would
caution investors not to overreact. Before taking any action, investors should
consider implications to their portfolio, tax situation and long-term financial
goals.
Ultimately, mutual funds still offer all the features that have made them so
popular--diversification, liquidity, convenience, low investment minimums, and
professional management. For individual investors especially, mutual funds
continue to be one of the most cost-effective investment vehicles available. To
date, millions of Americans have relied on mutual funds as an important way to
invest for retirement, their children's education, and other financial goals. We
see no reason why mutual funds cannot continue to do the same for millions more
Americans in the years to come.
Sincerely,
/s/ Charles R. Schwab
MANAGEMENT'S DISCUSSION
for the year ended October 31, 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 SchwabFunds(R) Shareholders:
By now, many of you have read the significant media coverage regarding the
mutual fund industry. We are pleased to report that to date we have found no
indications of illegal or improper activities by Charles Schwab Investment
Management ("CSIM"), the investment advisor who manages the SchwabFunds.
Similarly, you may have also read about a limited number of potential late
trading issues at Charles Schwab & Co., Inc. and certain limited market timing
arrangements at U.S. Trust. CSIM, which is a separate Charles Schwab
subsidiary, has been conducting its own review of the SchwabFunds policies and
procedures regarding market timing and late trading. We have examined over
two years of activity by CSIM personnel and have not found the types of improper
market timing or late trading arrangements that you have been reading about. Our
research is still ongoing, so some of these facts may change. Here are our key
findings to date:
- - THE INTEGRITY OF OUR STAFF: We have not found any indication that any CSIM
employees, including portfolio managers and senior managers, have engaged in
improper or inappropriate trading for their own account.
- - MARKET TIMING & LATE TRADING: We have not found any special arrangements with
any shareholders to permit market timing or trading of SchwabFunds after
market close.
- - HEDGE FUNDS: We have not found any special arrangements with hedge funds or
other private investment vehicles that would permit them to trade in a way
that was inconsistent with a fund's policies and procedures.
As part of the recent mutual fund investigations, requests for information were
sent by the SEC to about 90 of the largest mutual fund companies. As the
nation's 11th largest fund family with over $140 billion under management,
SchwabFunds also received a request from the SEC. We take these requests very
seriously and are working closely with the regulators on this matter.
Charles Schwab founded his firm 30 years ago with a vision to create the most
useful and ethical financial services firm in the world. We live by that
philosophy every day and nothing means more to our business than the trust of
our shareholders.
Your investment in SchwabFunds is an indication of the trust you place in us. As
the managers of your money, we have a special obligation to live up to that
trust. I want to thank you for investing with us, and want to assure you that we
strive relentlessly to operate our business with the highest ethical standards
and an unwavering commitment to serve you, our SchwabFunds shareholders.
Sincerely,
/s/ Randall W. Merk
2 Schwab MarketMasters Funds(TM)
[PHOTO OF JEFFREY MORTIMER AND KIMBERLY FORMON]
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.
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 AND THE MARKET
THE ECONOMY CONTINUED TO GATHER STRENGTH DURING THE REPORT PERIOD, BUT
IMPROVEMENT REMAINED SLUGGISH AND UNEVEN. Although numerous factors had been
indicating that the U.S. economy was in recovery when the report period began,
many remained concerned about the slow pace of improvement, in particular the
absence of job growth. However, the government reported an 8.2% increase in GDP
for the third quarter of 2003, job growth for October 2003 was the largest since
January 2003, and merger activity picked up--indications that the economy may
have gained real strength during the report period.
GOVERNMENT POLICIES WERE STRONGLY AIMED AT STIMULATING THE ECONOMY. The Federal
Reserve (the Fed) cut short-term interest rates twice during the period--0.50%
in November 2002 and 0.25% in June 2003--bringing the Fed funds target rate to a
45-year low of 1.00%. On the fiscal side, stimulus measures included tax cuts.
Consumer spending held up strongly throughout the economic downturn, bolstered
in part by unprecedented activity in mortgage refinancing (as individuals took
advantage of the opportunity to refinance at historically low rates). During the
period, we also saw business capital spending show signs of life after declining
for the past few years.
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.
- -20.80% S&P 500(R) INDEX: measures U.S. large-cap stocks
- -43.37% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
- -27.03% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in
Europe, Australasia and the Far East
- -4.91% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond market
[LINE GRAPH]
Lehman Brothers Russell
U.S. Aggregate MSCI EAFE(R) 2000(R) S&P 500(R)
Bond Index Index Index Index
31-Oct-02 0.00 0.00 0.00 0.00
01-Nov-02 -0.18 -0.35 2.67 1.72
08-Nov-02 0.59 0.98 1.50 1.07
15-Nov-02 0.25 1.69 3.40 2.83
22-Nov-02 -0.07 4.00 7.19 5.20
29-Nov-02 -0.03 4.54 8.92 5.89
06-Dec-02 0.52 1.29 6.37 3.21
13-Dec-02 0.86 -0.52 4.07 0.67
20-Dec-02 1.42 -0.45 3.79 1.41
27-Dec-02 1.99 -0.85 3.12 -0.85
03-Jan-03 1.36 2.96 4.80 2.93
10-Jan-03 1.18 3.07 6.46 5.13
17-Jan-03 1.83 2.26 4.25 2.23
24-Jan-03 2.20 -0.96 0.76 -2.34
31-Jan-03 2.13 -3.19 0.01 -2.95
07-Feb-03 2.47 -4.39 -3.56 -5.84
14-Feb-03 2.45 -3.79 -3.60 -5.20
21-Feb-03 2.75 -3.22 -2.01 -3.66
28-Feb-03 3.54 -5.42 -3.01 -4.40
07-Mar-03 3.83 -8.07 -4.69 -5.75
14-Mar-03 3.45 -7.78 -4.59 -5.20
21-Mar-03 2.18 -3.65 1.31 1.92
28-Mar-03 3.12 -5.36 -0.65 -1.73
04-Apr-03 3.13 -4.01 0.61 0.04
11-Apr-03 3.15 -3.78 0.10 -1.11
18-Apr-03 3.40 -0.82 3.46 1.78
25-Apr-03 3.97 -1.11 4.77 2.38
02-May-03 4.15 2.54 9.99 6.00
09-May-03 5.05 4.64 11.59 6.42
16-May-03 5.84 6.77 11.94 7.74
23-May-03 6.21 6.25 12.96 6.49
30-May-03 6.26 7.98 19.10 9.98
06-Jun-03 6.35 12.02 22.61 12.79
13-Jun-03 7.36 13.35 21.52 12.94
20-Jun-03 6.41 14.39 21.49 13.76
27-Jun-03 5.85 11.29 21.36 11.58
04-Jul-03 5.69 12.74 23.44 12.69
11-Jul-03 5.85 12.64 28.17 14.17
18-Jul-03 4.74 10.95 25.74 13.63
25-Jul-03 4.06 13.99 26.87 14.25
01-Aug-03 2.43 12.70 26.70 12.19
08-Aug-03 3.59 12.44 22.90 11.92
15-Aug-03 2.56 15.65 27.79 13.51
22-Aug-03 2.95 16.17 31.49 13.81
29-Aug-03 3.16 16.01 34.75 15.56
05-Sep-03 3.79 19.26 37.87 17.14
12-Sep-03 4.28 19.87 37.96 16.87
19-Sep-03 4.79 23.18 41.00 18.91
26-Sep-03 5.48 20.32 31.60 14.43
03-Oct-03 4.78 24.97 38.95 18.25
10-Oct-03 4.75 27.25 40.81 19.25
17-Oct-03 4.23 27.96 41.18 19.42
24-Oct-03 5.08 25.40 37.41 18.24
31-Oct-03 4.91 27.03 43.37 20.80
These figures assume dividends and distributions were reinvested. Index figures
do not include trading and management costs, which would lower performance.
Indices are unmanaged and you 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) 3
Even the worst-performing sector in each fund posted a positive return,
with formerly hard-hit sectors such as information technology leading the
rebound.
STOCK PRICES ROSE SIGNIFICANTLY OVER THE PERIOD, EVEN AS SKEPTICISM LINGERED
ABOUT THE QUALITY OF THE RALLY. After more than two years of generally negative
performance, U.S. equity markets reached an apparent bottom during the report
period, then rose strongly, ending the period with significant gains. During the
report period, the Nasdaq Composite Index rose 46%, while the S&P 500(R) Index
rose nearly 21%.
One striking feature of the overall U.S. stock market during the report period
is that stocks with more speculative characteristics tended to perform better
than stocks with more demonstrable quality. For example, companies with low
earnings or dividends generally outperformed companies with higher earnings or
dividends. This held true for other measures of quality as well, such as debt to
equity: those with higher levels of debt performed better than companies with
lower levels of debt. Consistent with this trend, small-cap stocks (which tend
to be more speculative) performed well during the period, and microcap stocks
performed even better. Large-cap stocks lagged both groups, but still performed
well.
Many market observers have asked why lower quality securities outperformed
higher quality and whether it could continue. There are many possible answers,
but we believe the more important point is that in the long run, quality has
been shown to be a superior indicator of performance.
DESPITE THE DIVIDEND TAX CUT, DIVIDEND STOCKS UNDERPERFORMED THE OVERALL MARKET
DURING THE PERIOD. Congress passed the tax cut during the period as part of the
government's economic stimulus efforts. The cut reduced the double taxation of
corporate dividends, thus lowering the cost of capital and encouraging
investment. Since companies that pay dividends are generally more established
and less speculative, we see the underperformance of these stocks as being part
of the larger market trend mentioned earlier.
U.S. INVESTORS SAW GAINS OVERSEAS, HELPED BY CURRENCY TRENDS. Most foreign
markets showed positive total returns for the period, and these returns were
augmented by the fact that the United States dollar fell versus most major
foreign currencies.
4 Schwab MarketMasters Funds(TM)
PERFORMANCE AT A GLANCE
Total return for the 12 months ended 10/31/03
SCHWAB U.S.
MARKETMASTERS FUND(TM) .......... 32.89%
Benchmark ....................... 20.80%
Category Average ................ 19.40%
Performance Details ............. page 7
SCHWAB BALANCED
MARKETMASTERS FUND(TM) .......... 20.25%
Benchmark ....................... 14.54%
Category Average ................ 15.87%
Performance Details ............. page 9
SCHWAB SMALL-CAP
MARKETMASTERS FUND(TM) .......... 54.32%
Benchmark ....................... 43.37%
Category Average ................ 37.84%
Performance Details ............. page 11
SCHWAB INTERNATIONAL
MARKETMASTERS FUND(TM) .......... 36.74%
Benchmark ....................... 27.03%
Category Average ................ 22.49%
Performance Details ............. page 13
THE FUNDS
All of the funds posted positive total returns and outperformed their respective
benchmarks and category averages for the report period. We're pleased to be able
to report such results in this first 12-month report for the funds since their
transition to a multi-manager format.
During the period, we remained in close contact with each fund's sub-advisers,
and made adjustments to all sub-advisers' allocations based on a combination of
market conditions and daily cash flows. Just prior to the report period, and
during it as well, we believed that small-cap stocks would lead a market
recovery. Consequently, we positioned each fund to participate more fully in
this opportunity. Each fund benefited from this strategy.
In the SCHWAB U.S. MARKETMASTERS FUND, Harris Associates L.P. and TCW Investment
Management Company (TCW) were the primary reasons for the fund's strong
performance. We see their strong performance as a reflection of their stock
selection, industry allocations, and the fact that during the period, small- and
mid-cap stocks generally performed better than large-cap stocks. Their ability
and willingness to capitalize on this were beneficial to the fund overall.
For most of the period, the portfolio 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, 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
----------------------------------------------------
Past performance does not indicate future results.
Expenses may be partially absorbed by CSIM and Schwab. Without these reductions,
the funds' total return would have been lower. Performance does not reflect the
deduction of taxes that a shareholder would pay on fund distributions or on the
redemption of fund shares.
All fund and index figures on this page assume dividends and distributions were
reinvested. Benchmark index figures do not include trading and management costs,
which would lower performance. Indices are unmanaged, and you cannot invest in
them directly. Each 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. For
more current performance information visit www.schwab.com or call
1-800-435-4000.
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.
Schwab MarketMasters Funds(TM) 5
Positioning the funds to have greater exposure to small-cap stocks proved
a significant contributor to performance during this report period.
and we did not want to be underweighted in stocks during the early
part of the report period.
Perkins, Wolf, McDonnell and Company, LLC was the best performing sub-adviser
for the fund over the past year. 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 LLC also performed well, with
superior security selection being the primary driver of performance.
In the SCHWAB SMALL-CAP MARKETMASTERS FUND(TM), outperformance was primarily
driven by Royce & Associates, LLC. Stock selection, exposure to the technology
sector and owning stocks in the micro-cap area were the main drivers for their
strong returns. Early in the report period we added assets to Royce,
anticipating their strong performance. They were the largest holding in the fund
during the period, and ended the period at just over 40% of fund assets.
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. The main elements of American Century's
performance were country allocation and stock selection. A relatively high
allocation to emerging markets also proved beneficial.
Believing the market would reward international small company stocks, we began
adding assets to American Century early in the period. This move, as well as the
performance of American Century, 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.
Nothing in this report represents a recommendation of a security by the
investment adviser. Manager views and portfolio holdings may have changed
subsequent to the report date.
6 Schwab MarketMasters Funds(TM)
SCHWAB U.S. MARKETMASTERS FUND(TM)
PERFORMANCE AS OF 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1,2
This chart compares performance of the fund with a benchmark and the fund's
Morningstar category.
[BAR CHART]
Fund Category:
Benchmark: MORNINGSTAR
S&P 500(R) LARGE CAP
FUND INDEX BLEND
1 YEAR 32.89 20.80 19.40%
5 YEARS 3.91 0.53 0.72%
SINCE INCEPTION: 11/18/96 5.80 6.81 5.48%
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with a similar investment in a benchmark.
$14,801 FUND
$15,808 S&P 500 INDEX
[LINE GRAPH]
S&P 500(R)
Fund Index
18-Nov-96 $10,000 $10,000
30-Nov-96 $10,120 $10,271
31-Dec-96 $10,077 $10,068
31-Jan-97 $10,371 $10,696
28-Feb-97 $10,310 $10,780
31-Mar-97 $10,016 $10,338
30-Apr-97 $10,229 $10,955
31-May-97 $10,848 $11,621
30-Jun-97 $11,274 $12,141
31-Jul-97 $11,841 $13,106
31-Aug-97 $11,547 $12,372
30-Sep-97 $12,145 $13,049
31-Oct-97 $11,760 $12,613
30-Nov-97 $11,750 $13,197
31-Dec-97 $11,927 $13,424
31-Jan-98 $11,959 $13,573
28-Feb-98 $12,622 $14,552
31-Mar-98 $13,146 $15,297
30-Apr-98 $13,242 $15,452
31-May-98 $13,135 $15,186
30-Jun-98 $13,306 $15,802
31-Jul-98 $13,135 $15,635
31-Aug-98 $11,639 $13,377
30-Sep-98 $11,745 $14,235
31-Oct-98 $12,216 $15,392
30-Nov-98 $12,814 $16,325
31-Dec-98 $13,734 $17,265
31-Jan-99 $14,255 $17,987
28-Feb-99 $13,712 $17,427
31-Mar-99 $14,266 $18,124
30-Apr-99 $14,830 $18,826
31-May-99 $14,487 $18,381
30-Jun-99 $15,118 $19,402
31-Jul-99 $14,919 $18,796
31-Aug-99 $14,896 $18,702
30-Sep-99 $14,819 $18,190
31-Oct-99 $15,560 $19,341
30-Nov-99 $16,557 $19,734
31-Dec-99 $18,630 $20,897
31-Jan-00 $17,808 $19,848
29-Feb-00 $19,681 $19,472
31-Mar-00 $19,516 $21,376
30-Apr-00 $18,086 $20,733
31-May-00 $17,289 $20,308
30-Jun-00 $18,263 $20,809
31-Jul-00 $17,922 $20,485
31-Aug-00 $18,997 $21,757
30-Sep-00 $18,213 $20,608
31-Oct-00 $17,580 $20,522
30-Nov-00 $16,099 $18,905
31-Dec-00 $16,401 $18,997
31-Jan-01 $16,873 $19,672
28-Feb-01 $15,516 $17,878
31-Mar-01 $14,690 $16,744
30-Apr-01 $15,855 $18,045
31-May-01 $15,782 $18,166
30-Jun-01 $15,634 $17,725
31-Jul-01 $15,206 $17,551
31-Aug-01 $14,557 $16,452
30-Sep-01 $13,186 $15,123
31-Oct-01 $13,569 $15,412
30-Nov-01 $14,602 $16,594
31-Dec-01 $14,979 $16,740
31-Jan-02 $14,696 $16,496
28-Feb-02 $14,324 $16,177
31-Mar-02 $14,801 $16,785
30-Apr-02 $14,146 $15,768
31-May-02 $13,848 $15,652
30-Jun-02 $12,716 $14,537
31-Jul-02 $11,495 $13,405
31-Aug-02 $11,570 $13,492
30-Sep-02 $10,453 $12,025
31-Oct-02 $11,138 $13,084
30-Nov-02 $12,135 $13,854
31-Dec-02 $11,316 $13,041
31-Jan-03 $11,123 $12,699
28-Feb-03 $10,959 $12,509
31-Mar-03 $11,093 $12,630
30-Apr-03 $12,254 $13,671
31-May-03 $13,252 $14,391
30-Jun-03 $13,475 $14,575
31-Jul-03 $13,773 $14,832
31-Aug-03 $14,250 $15,121
30-Sep-03 $13,878 $14,961
31-Oct-03 $14,801 $15,808
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.
Because the fund was originally an asset allocation fund with a multi-fund
strategy, its performance prior to June 3, 2002 does not reflect the current
strategy and may have been different if it did.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
Schwab MarketMasters Funds(TM) 7
SCHWAB U.S. MARKETMASTERS FUND(TM)
FUND FACTS AS OF 10/31/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
TOP HOLDINGS 2
SECURITY % OF NET ASSETS
- --------------------------------------------------------------------------------
(1) TIME WARNER, INC. 2.2%
- --------------------------------------------------------------------------------
(2) WASHINGTON MUTUAL, INC. 2.0%
- --------------------------------------------------------------------------------
(3) FIRST DATA CORP. 1.9%
- --------------------------------------------------------------------------------
(4) PFIZER, INC. 1.8%
- --------------------------------------------------------------------------------
(5) CENDANT CORP. 1.8%
- --------------------------------------------------------------------------------
(6) CARNIVAL CORP. 1.7%
- --------------------------------------------------------------------------------
(7) CITIGROUP, INC. 1.6%
- --------------------------------------------------------------------------------
(8) INTERPUBLIC GROUP OF COS., INC. 1.4%
- --------------------------------------------------------------------------------
(9) GUIDANT CORP. 1.4%
- --------------------------------------------------------------------------------
(10) HEALTH MANAGEMENT ASSOCIATES, INC. 1.3%
- --------------------------------------------------------------------------------
TOTAL 17.1%
STATISTICS
NUMBER OF HOLDINGS 167
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $37,967
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 28.9
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.5
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 97%
- --------------------------------------------------------------------------------
INVESTMENT MANAGERS AND ALLOCATIONS
% OF
INVESTMENT MANAGER INVESTMENT STYLE NET ASSETS
- --------------------------------------------------------------------------------
EAGLE ASSET Large-Cap Growth 21.3%
MANAGEMENT, INC.
- --------------------------------------------------------------------------------
HARRIS ASSOCIATES L.P. Mid/Large-Cap 22.5%
Value
- --------------------------------------------------------------------------------
TCW INVESTMENT Small/Mid-Cap 23.2%
MANAGEMENT COMPANY Blend
- --------------------------------------------------------------------------------
THORNBURG INVESTMENT Large-Cap Blend 30.2%
MANAGEMENT, INC.
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS % OF PORTFOLIO
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
30.7% CONSUMER NON-DURABLES
23.6% TECHNOLOGY
15.8% FINANCE
11.1% MATERIALS & SERVICES
3.9% ENERGY
3.1% UTILITIES
3.1% CONSUMER DURABLES
2.7% CAPITAL GOODS
0.6% TRANSPORTATION
5.4% CASH & CASH EQUIVALENTS
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics.
The fund's market capitalization placement is determined by the geometric
mean of its holdings' market capitalizations. The assessment reflects the
fund's portfolio as of 10/31/03, which may have changed since then, and is
not a precise indication of risk or performance -- past, present, or future.
2 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
8 Schwab MarketMasters Funds(TM)
SCHWAB BALANCED MARKETMASTERS FUND(TM)
PERFORMANCE AS OF 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1
This chart compares performance of the fund with a benchmark and the fund's
Morningstar category.
[BAR CHART]
Fund Category:
Benchmark: MORNINGSTAR
BALANCED MODERATE
FUND BLENDED INDEX ALLOCATION
1 YEAR 20.25 14.54 15.87
5 YEARS 5.83 3.33 3.00
SINCE INCEPTION: 11/18/96 7.04 7.40 5.64
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with a similar investment in a benchmark and
two additional indices.
$16,051 FUND
$16,430 BALANCED BLENDED INDEX
$15,808 S&P 500 INDEX
$16,183 LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX
[LINE GRAPH]
Balanced Lehman Brothers(R)
Blended S&P 500(R) U.S. Aggregate
Fund Index Index Bond Index
18-Nov-96 $10,000 $10,000 $10,000 $10,000
30-Nov-96 $10,100 $10,191 $10,271 $10,071
31-Dec-96 $10,059 $10,032 $10,068 $9,977
31-Jan-97 $10,322 $10,420 $10,696 $10,008
28-Feb-97 $10,271 $10,480 $10,780 $10,033
31-Mar-97 $10,018 $10,175 $10,338 $9,922
30-Apr-97 $10,200 $10,600 $10,955 $10,071
31-May-97 $10,676 $11,027 $11,621 $10,166
30-Jun-97 $11,041 $11,376 $12,141 $10,287
31-Jul-97 $11,517 $12,042 $13,106 $10,565
31-Aug-97 $11,284 $11,596 $12,372 $10,475
30-Sep-97 $11,770 $12,046 $13,049 $10,630
31-Oct-97 $11,527 $11,874 $12,613 $10,784
30-Nov-97 $11,558 $12,226 $13,197 $10,834
31-Dec-97 $11,719 $12,401 $13,424 $10,943
31-Jan-98 $11,762 $12,547 $13,573 $11,084
28-Feb-98 $12,251 $13,086 $14,552 $11,075
31-Mar-98 $12,634 $13,506 $15,297 $11,112
30-Apr-98 $12,688 $13,616 $15,452 $11,170
31-May-98 $12,613 $13,527 $15,186 $11,276
30-Jun-98 $12,783 $13,903 $15,802 $11,372
31-Jul-98 $12,677 $13,826 $15,635 $11,396
31-Aug-98 $11,581 $12,718 $13,377 $11,582
30-Sep-98 $11,740 $13,326 $14,235 $11,853
31-Oct-98 $12,092 $13,948 $15,392 $11,790
30-Nov-98 $12,560 $14,487 $16,325 $11,857
31-Dec-98 $13,311 $15,005 $17,265 $11,893
31-Jan-99 $13,693 $15,424 $17,987 $11,977
28-Feb-99 $13,224 $15,028 $17,427 $11,768
31-Mar-99 $13,650 $15,422 $18,124 $11,832
30-Apr-99 $14,130 $15,800 $18,826 $11,870
31-May-99 $13,868 $15,521 $18,381 $11,766
30-Jun-99 $14,326 $16,018 $19,402 $11,728
31-Jul-99 $14,141 $15,691 $18,796 $11,679
31-Aug-99 $14,119 $15,641 $18,702 $11,673
30-Sep-99 $14,119 $15,456 $18,190 $11,808
31-Oct-99 $14,664 $16,066 $19,341 $11,852
30-Nov-99 $15,341 $16,261 $19,734 $11,851
31-Dec-99 $16,742 $16,805 $20,897 $11,794
31-Jan-00 $16,155 $16,276 $19,848 $11,755
29-Feb-00 $17,353 $16,170 $19,472 $11,897
31-Mar-00 $17,390 $17,204 $21,376 $12,054
30-Apr-00 $16,534 $16,874 $20,733 $12,019
31-May-00 $16,033 $16,663 $20,308 $12,013
30-Jun-00 $16,705 $17,048 $20,809 $12,263
31-Jul-00 $16,498 $16,951 $20,485 $12,375
31-Aug-00 $17,341 $17,681 $21,757 $12,554
30-Sep-00 $16,815 $17,165 $20,608 $12,633
31-Oct-00 $16,424 $17,167 $20,522 $12,717
30-Nov-00 $15,508 $16,468 $18,905 $12,925
31-Dec-00 $15,879 $16,639 $18,997 $13,166
31-Jan-01 $16,326 $17,102 $19,672 $13,380
28-Feb-01 $15,502 $16,226 $17,878 $13,497
31-Mar-01 $14,887 $15,641 $16,744 $13,564
30-Apr-01 $15,669 $16,344 $18,045 $13,507
31-May-01 $15,683 $16,449 $18,166 $13,588
30-Jun-01 $15,530 $16,234 $17,725 $13,640
31-Jul-01 $16,748 $16,284 $17,551 $13,945
31-Aug-01 $14,873 $15,747 $16,452 $14,106
30-Sep-01 $13,826 $15,057 $15,123 $14,269
31-Oct-01 $14,133 $15,355 $15,412 $14,568
30-Nov-01 $14,859 $15,977 $16,594 $14,367
31-Dec-01 $15,090 $16,021 $16,740 $14,275
31-Jan-02 $14,933 $15,932 $16,496 $14,390
28-Feb-02 $14,733 $15,810 $16,177 $14,530
31-Mar-02 $15,133 $16,061 $16,785 $14,289
30-Apr-02 $14,919 $15,602 $15,768 $14,566
31-May-02 $14,776 $15,586 $15,652 $14,690
30-Jun-02 $14,219 $14,974 $14,537 $14,817
31-Jul-02 $13,534 $14,347 $13,405 $14,997
31-Aug-02 $13,734 $14,500 $13,492 $15,250
30-Sep-02 $12,963 $13,648 $12,025 $15,497
31-Oct-02 $13,348 $14,343 $13,084 $15,426
30-Nov-02 $13,891 $14,849 $13,854 $15,421
31-Dec-02 $13,659 $14,449 $13,041 $15,741
31-Jan-03 $13,572 $14,227 $12,699 $15,755
28-Feb-03 $13,528 $14,177 $12,509 $15,972
31-Mar-03 $13,557 $14,255 $12,630 $15,959
30-Apr-03 $14,210 $15,007 $13,671 $16,092
31-May-03 $14,906 $15,593 $14,391 $16,391
30-Jun-03 $15,051 $15,701 $14,575 $16,358
31-Jul-03 $15,065 $15,656 $14,832 $15,809
31-Aug-03 $15,428 $15,880 $15,121 $15,913
30-Sep-03 $15,486 $15,947 $14,961 $16,335
31-Oct-03 $16,051 $16,430 $15,808 $16,183
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.
Because the fund originally used a different asset allocation strategy and a
multi-fund strategy, its performance prior to June 3, 2002 does not reflect
the current strategy and may have been different if it did.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. The Balanced Blended Index is
composed of 60% S&P 500 Index and 40% Lehman Brothers U.S. Aggregate Bond
Index.
Schwab MarketMasters Funds(TM) 9
SCHWAB BALANCED MARKETMASTERS FUND(TM)
FUND FACTS as of 10/31/03
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) CITIGROUP, INC. 2.0%
- --------------------------------------------------------------------------------
(2) GINNIE MAE II 6.50%, 11/19/33 1.9%
- --------------------------------------------------------------------------------
(3) U.S. TREASURY INDEX PARTICIPATION NOTE 1.9%
3.38%, 01/15/07
- --------------------------------------------------------------------------------
(4) U.S. TREASURY BOND 7.50%, 11/15/16 1.8%
- --------------------------------------------------------------------------------
(5) U.S. TREASURY NOTE 3.63%, 05/15/03 1.8%
- --------------------------------------------------------------------------------
(6) U.S. TREASURY NOTE 2.00%, 11/30/04 1.4%
- --------------------------------------------------------------------------------
(7) BANK OF AMERICA CORP. 1.1%
- --------------------------------------------------------------------------------
(8) FANNIE MAE 6.50%, 11/13/33 1.0%
- --------------------------------------------------------------------------------
(9) FANNIE MAE 4.00%, 08/01/18 0.9%
- --------------------------------------------------------------------------------
(10) U.S. TREASURY INDEX PARTICIPATION NOTE 0.9%
3.63%, 01/15/08
- --------------------------------------------------------------------------------
TOTAL 14.7%
STATISTICS
NUMBER OF LONG HOLDINGS 385
- --------------------------------------------------------------------------------
NUMBER OF SHORT POSITIONS 5
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $39,301
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 16.8
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.2
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 256%
- --------------------------------------------------------------------------------
INVESTMENT MANAGERS AND ALLOCATIONS
% OF
INVESTMENT MANAGER INVESTMENT STYLE NET ASSETS
- --------------------------------------------------------------------------------
ARONSON + JOHNSON + Large-Cap Value 32.9%
ORTIZ, LP
- --------------------------------------------------------------------------------
EAGLE ASSET Large-Cap Growth 12.2%
MANAGEMENT, INC.
- --------------------------------------------------------------------------------
JANUS CAPITAL Mid-Cap Value 17.3%
MANAGEMENT LLC/
PERKINS, WOLF,
MCDONNELL AND
COMPANY, LLC
- --------------------------------------------------------------------------------
PACIFIC INVESTMENT Total Return 35.3%
MANAGEMENT Fixed-Income
COMPANY LLC
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS % OF EQUITY SECURITIES
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
27.2% FINANCE
20.9% CONSUMER NON-DURABLES
13.9% TECHNOLOGY
13.8% MATERIALS & SERVICES
8.8% ENERGY
6.5% UTILITIES
4.3% CONSUMER DURABLES
3.1% CAPITAL GOODS
1.5% TRANSPORTATION
1 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
10 Schwab MarketMasters Funds(TM)
SCHWAB SMALL-CAP MARKETMASTERS FUND(TM)
PERFORMANCE as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1,2
This chart compares performance of the fund with a benchmark and the fund's
Morningstar category.
[BAR CHART]
BENCHMARK: FUND CATEGORY:
RUSSELL MORNINGSTAR
2000(R) SMALL-CAP
FUND INDEX BLEND
1 YEAR 54.32% 43.37% 37.84%
5 YEARS 8.91% 8.34% 11.38%
SINCE INCEPTION: 9/16/97 4.91% 4.35% 6.25%
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with a similar investment in a benchmark.
$13,416 FUND
$12,980 RUSSELL 2000 INDEX
[LINE GRAPH]
Russell
2000(R)
Fund Index
16-Sep-97 $10,000 $10,000
30-Sep-97 $10,260 $10,319
31-Oct-97 $9,930 $9,866
30-Nov-97 $9,770 $9,802
31-Dec-97 $9,886 $9,973
31-Jan-98 $9,701 $9,816
28-Feb-98 $10,277 $10,541
31-Mar-98 $10,781 $10,976
30-Apr-98 $10,832 $11,036
31-May-98 $10,359 $10,441
30-Jun-98 $10,411 $10,463
31-Jul-98 $9,896 $9,615
31-Aug-98 $8,271 $7,748
30-Sep-98 $8,435 $8,355
31-Oct-98 $8,754 $8,696
30-Nov-98 $9,238 $9,151
31-Dec-98 $9,946 $9,718
31-Jan-99 $10,101 $9,847
28-Feb-99 $9,563 $9,049
31-Mar-99 $10,029 $9,191
30-Apr-99 $10,773 $10,014
31-May-99 $10,752 $10,160
30-Jun-99 $11,311 $10,620
31-Jul-99 $11,228 $10,329
31-Aug-99 $10,938 $9,946
30-Sep-99 $10,990 $9,948
31-Oct-99 $11,414 $9,989
30-Nov-99 $12,272 $10,586
31-Dec-99 $13,714 $11,784
31-Jan-00 $13,339 $11,594
29-Feb-00 $15,171 $13,508
31-Mar-00 $14,496 $12,618
30-Apr-00 $13,178 $11,859
31-May-00 $12,482 $11,167
30-Jun-00 $14,003 $12,141
31-Jul-00 $13,478 $11,750
31-Aug-00 $14,924 $12,647
30-Sep-00 $14,164 $12,275
31-Oct-00 $13,146 $11,727
30-Nov-00 $11,325 $10,523
31-Dec-00 $12,156 $11,427
31-Jan-01 $12,795 $12,022
28-Feb-01 $11,698 $11,233
31-Mar-01 $10,879 $10,684
30-Apr-01 $11,927 $11,520
31-May-01 $12,325 $11,803
30-Jun-01 $12,674 $12,210
31-Jul-01 $12,168 $11,550
31-Aug-01 $11,590 $11,177
30-Sep-01 $10,012 $9,672
31-Oct-01 $10,518 $10,238
30-Nov-01 $11,421 $11,030
31-Dec-01 $12,144 $11,711
31-Jan-02 $11,951 $11,589
28-Feb-02 $11,612 $11,272
31-Mar-02 $12,520 $12,178
30-Apr-02 $12,471 $12,289
31-May-02 $12,060 $11,743
30-Jun-02 $11,164 $11,161
31-Jul-02 $9,469 $9,475
31-Aug-02 $9,323 $9,452
30-Sep-02 $8,476 $8,773
31-Oct-02 $8,694 $9,055
30-Nov-02 $9,481 $9,862
31-Dec-02 $8,997 $9,313
31-Jan-03 $8,864 $9,055
28-Feb-03 $8,585 $8,782
31-Mar-03 $8,573 $8,895
30-Apr-03 $9,384 $9,738
31-May-03 $10,668 $10,783
30-Jun-03 $10,946 $10,978
31-Jul-03 $11,600 $11,665
31-Aug-03 $12,314 $12,200
30-Sep-03 $12,193 $11,974
31-Oct-03 $13,416 $12,980
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.
Because the fund originally used a multi-fund strategy, its performance prior
to June 3, 2002 does not reflect the current strategy and may have been
different if it did.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
Schwab MarketMasters Funds(TM) 11
SCHWAB SMALL-CAP MARKETMASTERS FUND(TM)
FUND FACTS AS OF 10/31/03
FUND CATEGORY 1
[MATRIX]
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large / / / / / /
Medium / / / / / /
Small / / /X/ / /
TOP HOLDINGS 2
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) EFUNDS CORP. 1.1%
- --------------------------------------------------------------------------------
(2) IONICS, INC. 0.9%
- --------------------------------------------------------------------------------
(3) FLOWSERVE CORP. 0.8%
- --------------------------------------------------------------------------------
(4) HOVNANIAN ENTERPRISES, INC. 0.8%
- --------------------------------------------------------------------------------
(5) BALDOR ELECTRIC CO. 0.8%
- --------------------------------------------------------------------------------
(6) ASCENTIAL SOFTWARE CORP. 0.7%
- --------------------------------------------------------------------------------
(7) PULTE CORP. 0.7%
- --------------------------------------------------------------------------------
(8) MDC HOLDINGS, INC. 0.7%
- --------------------------------------------------------------------------------
(9) PALL CORP. 0.7%
- --------------------------------------------------------------------------------
(10) RAYOVAC CORP. 0.6%
- --------------------------------------------------------------------------------
TOTAL 7.8%
STATISTICS
NUMBER OF HOLDINGS 407
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $1,566
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) --
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 1.7
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 94%
- --------------------------------------------------------------------------------
INVESTMENT MANAGERS AND ALLOCATIONS
% OF
INVESTMENT MANAGER INVESTMENT STYLE NET ASSETS
- --------------------------------------------------------------------------------
ROYCE & ASSOCIATES, Small-Cap Value 40.5%
LLC
- --------------------------------------------------------------------------------
TCW INVESTMENT Small/Mid-Cap 15.8%
MANAGEMENT COMPANY Blend
- --------------------------------------------------------------------------------
TOCQUEVILLE ASSET Small-Cap Blend 22.7%
MANAGEMENT LP
- --------------------------------------------------------------------------------
VEREDUS ASSET Small-Cap Growth 19.7%
MANAGEMENT LLC
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS % OF PORTFOLIO
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
27.0% TECHNOLOGY
25.8% MATERIALS & SERVICES
17.4% CONSUMER NON-DURABLES
7.0% CAPITAL GOODS
6.9% ENERGY
4.9% FINANCE
4.4% CONSUMER DURABLES
1.7% TRANSPORTATION
0.6% UTILITIES
4.3% CASH & CASH EQUIVALENTS
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics.
The fund's market capitalization placement is determined by the geometric
mean of its holdings' market capitalizations. The assessment reflects the
fund's portfolio as of 10/31/03, which may have changed since then, and is
not a precise indication of risk or performance -- past, present, or future.
2 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
12 Schwab MarketMasters Funds(TM)
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM)
PERFORMANCE AS OF 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1,2
This chart compares performance of the fund with a benchmark and the fund's
Morningstar category.
[BAR CHART]
Fund Category:
Benchmark: MORNINGSTAR
MSCI-EAFE R FOREIGN
FUND INDEX LARGE-CAP BLEND
1 YEAR 36.74% 27.03% 22.49%
5 YEARS 9.04% -0.22% 0.15%
SINCE INCEPTION: 10/16/96 8.39% 1.57% 2.07%
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with a similar investment in a benchmark.
$17,638 FUND
$11,158 MSCI-EAFE INDEX
[LINE GRAPH]
MSCI EAFE(R)
FUND INDEX
16-Oct-96 $10,000 $10,000
31-Oct-96 $9,910 $9,836
30-Nov-96 $10,220 $10,228
31-Dec-96 $10,313 $10,096
31-Jan-97 $10,426 $9,742
28-Feb-97 $10,599 $9,902
31-Mar-97 $10,558 $9,938
30-Apr-97 $10,609 $9,991
31-May-97 $11,209 $10,641
30-Jun-97 $11,697 $11,227
31-Jul-97 $11,962 $11,409
31-Aug-97 $11,199 $10,557
30-Sep-97 $11,830 $11,148
31-Oct-97 $11,046 $10,291
30-Nov-97 $10,894 $10,186
31-Dec-97 $11,016 $10,274
31-Jan-98 $11,146 $10,744
28-Feb-98 $11,925 $11,434
31-Mar-98 $12,670 $11,786
30-Apr-98 $12,952 $11,879
31-May-98 $13,265 $11,821
30-Jun-98 $13,157 $11,911
31-Jul-98 $13,525 $12,031
31-Aug-98 $11,654 $10,540
30-Sep-98 $11,006 $10,217
31-Oct-98 $11,438 $11,281
30-Nov-98 $12,011 $11,859
31-Dec-98 $12,481 $12,327
31-Jan-99 $12,820 $12,290
28-Feb-99 $12,415 $11,998
31-Mar-99 $12,853 $12,498
30-Apr-99 $13,815 $13,004
31-May-99 $13,170 $12,335
30-Jun-99 $14,428 $12,816
31-Jul-99 $14,985 $13,196
31-Aug-99 $15,248 $13,245
30-Sep-99 $15,401 $13,379
31-Oct-99 $16,232 $13,881
30-Nov-99 $18,683 $14,362
31-Dec-99 $21,819 $15,652
31-Jan-00 $21,236 $14,658
29-Feb-00 $24,410 $15,052
31-Mar-00 $23,356 $15,636
30-Apr-00 $21,149 $14,814
31-May-00 $20,120 $14,452
30-Jun-00 $21,100 $15,018
31-Jul-00 $20,554 $14,388
31-Aug-00 $21,249 $14,513
30-Sep-00 $20,120 $13,806
31-Oct-00 $19,253 $13,481
30-Nov-00 $18,050 $12,975
31-Dec-00 $18,672 $13,436
31-Jan-01 $18,893 $13,440
28-Feb-01 $17,883 $12,434
31-Mar-01 $16,680 $11,590
30-Apr-01 $17,538 $12,386
31-May-01 $17,496 $11,928
30-Jun-01 $17,178 $11,438
31-Jul-01 $16,639 $11,240
31-Aug-01 $16,182 $10,979
30-Sep-01 $14,495 $9,867
31-Oct-01 $14,937 $10,120
30-Nov-01 $15,588 $10,493
31-Dec-01 $16,028 $10,555
31-Jan-02 $15,659 $ 9,994
28-Feb-02 $15,762 $10,064
31-Mar-02 $16,515 $10,609
30-Apr-02 $16,397 $10,679
31-May-02 $16,338 $10,815
30-Jun-02 $15,674 $10,384
31-Jul-02 $14,006 $9,359
31-Aug-02 $13,947 $9,338
30-Sep-02 $12,368 $8,335
31-Oct-02 $12,899 $8,782
30-Nov-02 $13,548 $9,181
31-Dec-02 $13,092 $8,873
31-Jan-03 $12,560 $8,503
28-Feb-03 $12,103 $8,308
31-Mar-03 $11,911 $8,145
30-Apr-03 $13,224 $8,943
31-May-03 $14,184 $9,485
30-Jun-03 $14,700 $9,715
31-Jul-03 $15,291 $9,950
31-Aug-03 $15,925 $10,190
30-Sep-03 $16,368 $10,504
31-Oct-03 $17,638 $11,158
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.
Because the fund originally used a multi-fund strategy, its performance prior
to June 3, 2002 does not reflect the current strategy and may have been
different if it did.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
Schwab MarketMasters Funds(TM) 13
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM)
FUND FACTS AS OF 10/31/03
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) DIAGEO PLC 1.5%
- --------------------------------------------------------------------------------
(2) NESTLE SA 1.4%
- --------------------------------------------------------------------------------
(3) DEUTSCHE BOERSE AG 1.3%
- --------------------------------------------------------------------------------
(4) VIVENDI UNIVERSAL SA 1.2%
- --------------------------------------------------------------------------------
(5) GRUPO TELEVISA SA DE CV 1.1%
- --------------------------------------------------------------------------------
(6) GLAXOSMITHKLINE PLC 1.1%
- --------------------------------------------------------------------------------
(7) HENKEL KGAA 1.1%
- --------------------------------------------------------------------------------
(8) AVENTIS SA 1.0%
- --------------------------------------------------------------------------------
(9) JOHN FAIRFAX HOLDINGS LTD. 1.0%
- --------------------------------------------------------------------------------
(10) MICHAEL PAGE GROUP PLC 1.0%
- --------------------------------------------------------------------------------
TOTAL 11.7%
STATISTICS
NUMBER OF HOLDINGS 362
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $14,972
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 27.5
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.5
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 99%
INVESTMENT MANAGERS AND ALLOCATIONS
% OF
INVESTMENT MANAGER INVESTMENT STYLE NET ASSETS
AMERICAN CENTURY International 23.2%
INVESTMENT Small Company
MANAGEMENT, INC.
- --------------------------------------------------------------------------------
ARTISAN PARTNERS International 17.1%
LIMITED PARTNERSHIP Growth
- --------------------------------------------------------------------------------
HARRIS ASSOCIATES L.P. International 32.3%
Value
- --------------------------------------------------------------------------------
WILLIAM BLAIR & International 24.6%
COMPANY, LLC Growth
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS % OF PORTFOLIO
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
33.6% MATERIALS & SERVICES
18.6% FINANCE
18.3% CONSUMER NON-DURABLES
5.6% TRANSPORTATION
5.5% CAPITAL GOODS
3.6% UTILITIES
3.4% TECHNOLOGY
2.4% ENERGY
1.7% CONSUMER DURABLES
7.3% CASH & CASH EQUIVALENTS
COUNTRY WEIGHTINGS % OF PORTFOLIO
This chart shows the fund's country composition as of the report date.
[PIE CHART]
16.1% JAPAN
15.5% UNITED KINGDOM
8.5% GERMANY
7.9% FRANCE
7.6% SWITZERLAND
3.4% NETHERLANDS
3.0% MEXICO
2.9% HONG KONG
2.8% SOUTH KOREA
32.3% OTHER
1 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
14 Schwab MarketMasters Funds(TM)
SCHWAB U.S. MARKETMASTERS FUND(TM)
Financial Statements
FINANCIAL HIGHLIGHTS
11/1/02 - 11/1/01 - 11/1/00 - 11/1/99 - 11/1/98 -
10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- -----------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value at beginning of period 7.48 9.20 13.89 14.06 11.43
---------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income or loss (0.01) 0.06 0.38 0.38 0.16
Net realized and unrealized gains or losses 2.47 (1.68) (3.21) 1.55 2.91
---------------------------------------------------------------------------
Total income or loss from investment operations 2.46 (1.62) (2.83) 1.93 3.07
Less distributions:
Dividends from net investment income -- (0.10) (0.46) (0.33) (0.21)
Distributions from net realized gains -- -- (1.40) (1.77) (0.23)
---------------------------------------------------------------------------
Total distributions -- (0.10) (1.86) (2.10) (0.44)
---------------------------------------------------------------------------
Net asset value at end of period 9.94 7.48 9.20 13.89 14.06
---------------------------------------------------------------------------
Total return (%) 32.89 (17.92) (22.81) 12.98 27.38
RATIOS/SUPPLEMENTAL DATA (%)
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.25 0.74 1,2 0.50 2 0.50 2,3 0.50 2
Gross operating expenses 1.42 1.16 2 0.89 2 0.89 2 0.93 2
Net investment income or loss (0.12) 0.50 3.27 2.34 1.23
Portfolio turnover rate 97 390 145 179 284
Net assets, end of period ($ x 1,000,000) 169 129 176 248 181
1 The ratio of net operating expenses would have been 0.83% if certain
non-routine expenses (proxy fees) had been included.
2 Prior to the fund's change in structure on June 3, 2002, the expenses incurred
by underlying funds in which the fund invested were not included in this
ratio.
3 The ratio of net operating expenses would have been 0.51% if certain
non-routine expenses (proxy fees) had been included.
See financial notes. 15
SCHWAB U.S. MARKETMASTERS FUND(TM)
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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 futures contracts
* American Depositary Receipt
COST MARKET VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
93.7% COMMON STOCK 133,161 158,010
0.4% FOREIGN COMMON STOCK 481 715
0.2% SHORT-TERM INVESTMENTS 295 295
5.4% OTHER INVESTMENTS 9,139 9,139
- --------------------------------------------------------------------------------
99.7% TOTAL INVESTMENTS 143,076 168,159
0.3% OTHER ASSETS AND LIABILITIES, NET 460
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 168,619
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 93.7% of Net Assets
AEROSPACE / DEFENSE 0.6%
--------------------------------------------------------------------------
Lockheed Martin Corp. 9,550 443
United Technologies Corp. 6,400 542
------
985
AIR TRANSPORTATION 0.4%
--------------------------------------------------------------------------
Southwest Airlines, Inc. 37,500 728
APPAREL 0.7%
--------------------------------------------------------------------------
Jones Apparel Group, Inc. 35,565 1,227
BANKS 4.1%
--------------------------------------------------------------------------
Bank of America Corp. 3,550 269
o Bank of New York Co., Inc. 57,700 1,800
BankNorth Group, Inc. 29,800 933
Chase Manhattan Corp. 500 18
Mellon Financial Corp. 27,900 833
North Fork Bancorp, Inc. 19,400 756
o Silicon Valley Bancshares 10,500 369
Wells Fargo & Co. 24,600 1,385
Zions Bancorp. 10,000 613
------
6,976
BUSINESS MACHINES & SOFTWARE 4.6%
--------------------------------------------------------------------------
o Cisco Systems, Inc. 62,600 1,313
o Dell Computer Corp. 25,200 910
o EMC Corp. 23,230 322
Hewlett Packard Co. 87,750 1,958
o Maxtor Corp. 41,200 563
Microsoft Corp. 50,600 1,323
o Oracle Systems Corp. 34,100 408
o Tech Data Corp. 11,000 362
o Unisys Corp. 41,000 630
------
7,789
BUSINESS SERVICES 9.2%
--------------------------------------------------------------------------
o Accenture, Ltd. 13,700 321
o Affiliated Computer Services, Inc. 17,500 856
o Aspen Technology, Inc. 79,500 636
o(5) Cendant Corp. 144,900 2,960
o Doubleclick, Inc. 63,400 528
o Ebay, Inc. 2,850 159
o Eclipsys Corp. 50,700 601
(3) First Data Corp. 88,750 3,168
(8) Interpublic Group of Cos., Inc. 161,500 2,403
o Lamar Advertising Co. 13,200 400
o Network Associates, Inc. 64,000 892
Reynolds & Reynolds Co., Class A 21,600 587
o Veritas Software Corp. 10,150 367
Waste Management, Inc. 65,000 1,685
------
15,563
CHEMICAL 0.2%
--------------------------------------------------------------------------
Rohm & Haas Co. 10,800 424
16 See financial notes.
SCHWAB U.S. MARKETMASTERS FUND(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
CONSUMER DURABLES 0.7%
--------------------------------------------------------------------------
o Leggett & Platt, Inc. 24,700 516
o Maytag Corp. 28,200 716
------
1,232
ELECTRONICS 14.5%
--------------------------------------------------------------------------
o Agere Systems, Inc., Class B 358,200 1,214
o Agilent Technologies, Inc. 35,850 893
o Alliant Techsystems, Inc. 13,300 688
o Anixter International, Inc. 21,100 504
o Applied Materials, Inc. 20,400 477
o Arrow Electronics, Inc. 36,500 779
o ASML Holding N.V. 20,800 365
o Celestica, Inc. 43,600 619
o Cox Radio, Inc. 12,250 271
o Fairchild Semiconductor Corp. 36,100 816
o Flextronics International Ltd. 18,550 260
o General Motors Corp. Class H 96,100 1,579
Intel Corp. 49,100 1,623
o LAM Research Corp. 17,750 510
o LSI Logic Corp. 161,350 1,491
o Macromedia, Inc. 18,350 351
o National Semiconductor Corp. 23,650 961
o Nextel Communications, Inc., Class A
45,900 1,111
o Novellus System, Inc. 5,150 213
PerkinElmer, Inc. 44,900 809
Seagate Technology 41,200 947
Symbol Technologies, Inc. 28,700 358
*o Taiwan Semiconductor Co. Ltd. 62,823 695
o Tektronix, Inc. 33,600 862
o Teradyne, Inc. 59,700 1,360
Texas Instruments, Inc. 40,300 1,165
o Uniphase Corp. 86,700 308
o Vishay Intertechnology, Inc. 51,400 964
o Waters Corp. 66,500 2,090
------
24,283
ENERGY: RAW MATERIALS 0.8%
--------------------------------------------------------------------------
o Cooper Cameron Corp. 12,500 535
Devon Energy Corp. 11,600 563
ENSCO International, Inc. 11,400 300
------
1,398
FOOD & AGRICULTURE 0.9%
--------------------------------------------------------------------------
The Pepsi Bottling Group, Inc. 70,000 1,560
HEALTHCARE / DRUGS & MEDICINE 12.6%
--------------------------------------------------------------------------
Abbott Laboratories 10,050 428
Amgen, Inc. 8,650 534
o Apogent Technologies, Inc. 44,900 986
Beckman Coulter, Inc. 13,900 690
o Caremark Rx, Inc. 38,400 962
o Charles River Laboratories, Inc. 22,100 712
Eli Lilly & Co. 4,800 320
o Genzyme Corp. 28,775 1,321
o Gilead Sciences, Inc. 5,500 300
o(9) Guidant Corp. 46,000 2,346
(10) Health Management Associates, Inc. 99,100 2,195
o Health Net, Inc. 23,150 731
o IDEC Pharmaceutical Corp. 15,650 550
Johnson & Johnson, Inc. 28,050 1,412
o Medimmune, Inc. 37,650 1,004
Medtronic, Inc. 5,700 260
Merck & Co., Inc. 12,750 564
(4) Pfizer, Inc. 98,500 3,113
o Quest Diagnostic, Inc. 29,100 1,969
o St. Jude Medical, Inc. 2,100 122
o Univision Communications, Inc. 9,000 306
Wyeth 9,550 421
------
21,246
HOUSEHOLD PRODUCTS 0.6%
--------------------------------------------------------------------------
o Estee Lauder Cos., Inc., Class A 11,600 433
Procter & Gamble Co. 5,400 531
------
964
INSURANCE 2.1%
--------------------------------------------------------------------------
Lincoln National Corp. 25,500 1,018
MBIA, Inc. 18,200 1,085
St. Paul Cos., Inc. 39,000 1,487
------
3,590
MEDIA 8.3%
--------------------------------------------------------------------------
Cablevision Systems New York Group,
Class A 90,000 1,818
See financial notes. 17
SCHWAB U.S. MARKETMASTERS FUND(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Clear Channel Communications, Inc. 11,650 476
o Comcast Corp. Class A 61,400 2,003
o EchoStar Communications Corp. 5,950 228
o Fox Entertainment Group, Inc., Class A 34,100 945
o InterActive Corp. 33,080 1,214
Meredith Corp. 5,000 243
o Metro Goldwyn Mayer, Inc. 46,300 739
Readers Digest Association, Inc. 39,400 580
o The Walt Disney Co. 34,600 783
o(1) Time Warner, Inc. 246,100 3,763
o Viacom, Inc., Class B 19,450 775
o Westwood One, Inc. 12,150 364
------
13,931
MISCELLANEOUS 0.2%
--------------------------------------------------------------------------
o DigitalNet Holdings, Inc. 2,800 64
3M Co. 3,000 237
------
301
MISCELLANEOUS FINANCE 8.4%
--------------------------------------------------------------------------
American Express Co. 4,450 209
(7) Citigroup, Inc. 57,800 2,740
Countrywide Credit Industries, Inc. 8,550 899
o E*TRADE Group, Inc. 160,000 1,648
Fannie Mae 23,100 1,656
Freddie Mac 14,200 797
Lehman Brothers Holdings, Inc. 6,100 439
Merrill Lynch & Co., Inc. 2,350 139
Sovereign Bancorp, Inc. 90,000 1,873
The Goldman Sachs Group, Inc. 5,000 469
(2) Washington Mutual, Inc. 75,200 3,290
------
14,159
NON-DURABLES & ENTERTAINMENT 3.3%
--------------------------------------------------------------------------
o American Greetings Corp. Class A 32,000 683
Darden Restaurants, Inc. 31,100 651
o Electronic Arts, Inc. 15,700 1,555
o EMCOR Group, Inc. 23,100 871
o Yum! Brands, Inc. 50,000 1,707
------
5,467
NON-FERROUS METALS 0.5%
--------------------------------------------------------------------------
o Phelps Dodge Corp. 13,700 846
OIL: DOMESTIC 2.8%
--------------------------------------------------------------------------
Amerada Hess Corp. 19,300 996
Marathon Oil Corp. 41,100 1,215
o Pride International, Inc. 17,900 293
o Transocean, Inc. 38,400 737
Unocal Corp. 46,700 1,480
------
4,721
PAPER & FOREST PRODUCTS 0.7%
--------------------------------------------------------------------------
Kimberly-Clark Corp. 22,400 1,183
PRODUCER GOODS & MANUFACTURING 2.3%
--------------------------------------------------------------------------
Deere & Co. 18,500 1,122
Dover Corp. 15,000 585
General Electric Co. 38,050 1,104
Pall Corp. 16,900 395
York International Corp. 18,300 727
------
3,933
REAL PROPERTY 0.4%
--------------------------------------------------------------------------
Boston Properties, Inc. 16,800 743
RETAIL 9.9%
--------------------------------------------------------------------------
o American Eagle Outfitters, Inc. 39,300 629
o Best Buy Co., Inc. 30,000 1,749
Circuit City Stores, Inc. 67,100 640
o Costco Cos., Inc. 50,000 1,769
Home Depot, Inc. 19,700 730
J.C. Penny Co., Inc. 45,300 1,071
o Kohls Corp. 8,550 479
o Kroger Co. 80,000 1,399
Lowe's Cos., Inc. 25,400 1,497
Talbots, Inc. 18,500 608
Target Corp. 34,750 1,381
The Gap, Inc. 110,000 2,099
Tiffany & Co. 35,000 1,661
Wal-Mart Stores, Inc. 15,550 917
------
16,629
18 See financial notes.
SCHWAB U.S. MARKETMASTERS FUND(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TELEPHONE 1.0%
--------------------------------------------------------------------------
o Liberty Media Corp. Class A 160,000 1,614
TRAVEL & RECREATION 2.2%
--------------------------------------------------------------------------
(6) Carnival Corp. 81,950 2,861
o Harrah's Entertainment, Inc. 7,850 342
o Starwood Hotel & Resorts Worldwide, Inc. 14,600 492
-----
3,695
TRUCKING & FREIGHT 0.2%
--------------------------------------------------------------------------
United Parcel Service, Inc. 3,800 276
Overnite Corp. 3,150 70
-----
346
UTILITIES: ELECTRIC & GAS 1.5%
--------------------------------------------------------------------------
Dominion Resources, Inc. 26,700 1,645
El Paso Energy Corp. 113,400 832
-----
2,477
FOREIGN COMMON STOCKS 0.4% of Net Assets
SOUTH KOREA 0.4%
--------------------------------------------------------------------------
Samsung Electronics Co. 1,800 715
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENTS 0.2% of Net Assets
U.S. GOVERNMENT SECURITIES 0.2%
--------------------------------------------------------------------------
= U.S. Treasury Bills
0.93%, 12/18/03 295 295
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OTHER INVESTMENTS 5.4% of Net Assets
OTHER INVESTMENT COMPANIES 5.4%
--------------------------------------------------------------------------
Provident Institutional Funds --
TempCash 882,417 882
= Provident Institutional Funds --
TempFund 8,257,350 8,257
-----
9,139
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
See financial notes. 19
SCHWAB U.S. MARKETMASTERS FUND(TM)
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value $168,159 a
Receivables:
Fund shares sold 148
Dividends 159
Due from brokers for futures 4
Investments sold 1,810
Prepaid expenses + 10
------------
TOTAL ASSETS 170,290
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 38
Investments bought 1,575
Investment adviser and administrator fees 8
Transfer agency and shareholder service fees 2
Accrued expenses + 48
------------
TOTAL LIABILITIES 1,671
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 170,290
TOTAL LIABILITIES - 1,671
------------
NET ASSETS $168,619
NET ASSETS BY SOURCE
Capital received from investors 207,552
Net realized capital losses (64,185) b
Net unrealized capital gains 25,252 b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS + /OUTSTANDING = NAV
$ 168,619 16,965 $9.94
Unless stated, all numbers x 1,000.
a The fund paid $143,076 for these securities. Not counting short-term
obligations and government securities, the fund paid $129,549 for securities
during the report period and received $126,742 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 seventeen open S&P 500 futures contracts due
to expire on December 19, 2003, with an aggregate net contract value of 4,460
and a net unrealized gain of $169.
FEDERAL TAX DATA
- ------------------------------------------------------
PORTFOLIO COST $144,331
NET UNREALIZED GAINS AND LOSSES:
Gains $27,209
Losses + (3,381)
-------------
$23,828
UNDISTRIBUTED EARNINGS:
Ordinary income $--
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount:
2009 $27,772
2010 34,385
2011 + 604
-------------
$62,761
RECLASSIFICATIONS:
Net investment income not
yet distributed $170
Reclassified as:
Capital received
from investors ($170)
20 See financial notes.
SCHWAB U.S. MARKETMASTERS FUND(TM)
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $1,580 a
Interest + 2
-----------
TOTAL INVESTMENT INCOME 1,582
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments sold (444)
Net realized gains of futures contracts + 474
-----------
NET REALIZED GAINS 30
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 40,325
Net unrealized losses on futures contracts + (195)
-----------
NET UNREALIZED GAINS 40,130
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 1,402 b
Transfer agent and shareholder service fees 350 c
Trustees' fees 6 d
Custodian and portfolio accounting fees 109
Professional fees 34
Registration fees 15
Shareholder reports 60
Other expenses + 11
-----------
Total expenses 1,987
Expense reduction + (235) e
-----------
NET EXPENSES 1,752
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,582
NET EXPENSES - 1,752
-----------
NET INVESTMENT LOSS (170)
NET REALIZED GAINS 30 f
NET UNREALIZED GAINS + 40,130 f
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $39,990
Unless stated, all numbers x 1,000.
a An additional $10 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. These fees are paid to Charles Schwab & Co.
d For the fund's independent trustees only.
e This reduction was made by the investment advisor (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 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 $40,160.
See financial notes. 21
SCHWAB U.S. MARKETMASTERS FUND(TM)
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02 - 10/31/03 11/1/01 - 10/31/02
Net investment income or losses ($170) $834
Net realized gains or losses 30 (35,944)
Net unrealized gains + 40,130 5,875
---------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 39,990 (29,235)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income -- 1,826 a
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/02 - 10/31/03 11/1/01 - 10/31/02
SHARES VALUE SHARES VALUE
Shares sold 3,184 $28,358 2,107 $18,996
Shares reinvested -- -- 180 1,826
Shares redeemed + (3,420) (28,461) (4,234) (37,188)
------------------------------------------------
NET TRANSACTIONS IN FUND
SHARES (236) ($103) (1,947) ($16,366)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02 - 10/31/03 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 + (236) 39,887 (1,947) (47,427) b
-------------------------------------------------
END OF PERIOD 16,965 $168,619 17,201 $128,732 c
Unless stated, all numbers x 1,000.
a The tax-basis components of distributions are:
CURRENT PERIOD
Ordinary income $--
Long-term capital gains $--
PRIOR PERIOD
Ordinary income $1,826
Long-term capital gains $--
b Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
c There is no distributable net investment income at the end of the current and
prior period.
22 See financial notes.
SCHWAB BALANCED MARKETMASTERS FUND(TM)
Financial Statements
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98-
10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 9.35 10.12 13.44 13.44 11.36
------------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.12 0.20 0.43 0.45 0.27
Net realized and unrealized gains or losses 1.75 (0.73) (2.12) 1.18 2.11
------------------------------------------------------------------------------
Total income or loss from investment operations 1.87 (0.53) (1.69) 1.63 2.38
Less distributions:
Dividends from net investment income (0.15) (0.24) (0.52) (0.35) (0.30)
Distributions from net realized gains -- -- (1.11) (1.28) --
------------------------------------------------------------------------------
Total distributions (0.15) (0.24) (1.63) (1.63) (0.30)
------------------------------------------------------------------------------
Net asset value at end of period 11.07 9.35 10.12 13.44 13.44
------------------------------------------------------------------------------
Total return (%) 20.25 (5.55) (13.95) 12.00 21.28
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.10 0.72 1,2 0.50 2 0.50 2,3 0.50 2
Gross operating expenses 1.33 1.10 2 0.89 2 0.90 2 0.95 2
Net investment income 1.13 1.89 3.67 3.18 2.20
Portfolio turnover rate 256 380 95 114 244
Net assets, end of period ($ x 1,000,000) 109 97 118 153 122
1 The ratio of net operating expenses would have been 0.76% if certain
non-routine expenses (proxy fees) had been included.
2 Prior to the fund's change in structure on June 3, 2002, the expenses incurred
by underlying funds in which the fund invested were not included in this
ratio.
3 The ratio of net operating expenses would have been 0.51% if certain
non-routine expenses (proxy fees) had been included.
See financial notes. 23
SCHWAB BALANCED MARKETMASTERS FUND(TM)
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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 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/
PROCEEDS MARKET VALUE
HOLDINGS BY CATEGORY ($ x 1,000) ($ x 1,000)
- --------------------------------------------------------------
60.9% COMMON STOCK 57,032 66,343
8.7% U.S. GOVERNMENT
SECURITIES 9,488 9,532
13.5% AGENCY MORTGAGE-
BACKED SECURITIES 14,813 14,763
3.9% CORPORATE BONDS 4,001 4,202
1.8% MUNICIPAL BONDS 2,010 1,945
1.3% NON-AGENCY
MORTGAGE-BACKED
SECURITIES 1,399 1,395
8.5% SHORT-TERM
INVESTMENTS 9,258 9,259
6.4% OTHER INVESTMENTS 7,019 7,019
0.0% OPTIONS 2 2
- --------------------------------------------------------------
105.0% TOTAL INVESTMENTS 105,022 114,460
(11.9%) SHORT SALES (12,875) (12,948)
(0.1%) OPTIONS WRITTEN (182) (158)
7.0% OTHER ASSETS AND
LIABILITIES, NET 7,619
- --------------------------------------------------------------
100.0% TOTAL NET ASSETS 108,973
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 60.9% of Net Assets
AEROSPACE / DEFENSE 0.3%
--------------------------------------------------------------------------
Lockheed Martin Corp. 3,400 157
United Technologies Corp. 2,300 195
-----
352
ALCOHOLIC BEVERAGES 0.1%
--------------------------------------------------------------------------
Coors (Adolph) Co. Class B 1,800 101
APPAREL 0.1%
--------------------------------------------------------------------------
o Jones Apparel Group, Inc. 4,100 141
AUTOMOBILE PRODUCTS / MOTOR VEHICLES 2.1%
--------------------------------------------------------------------------
Autoliv, Inc. 16,400 543
o Autonation, Inc. 12,400 232
Borg Warner, Inc. 2,000 159
Cooper Tire & Rubber Co. 5,200 102
Genuine Parts Co. 8,800 280
o Lear Corp. 3,900 227
* Magna International, Inc. 3,000 241
Polars Industries Partners LP 1,500 128
Smith (A.O.) Corp. Class B 3,000 95
o United Defense Industries, Inc. 7,700 249
-----
2,256
BANKS 5.5%
--------------------------------------------------------------------------
Associated Bancorp. 4,300 177
(7) Bank of America Corp. 16,400 1,242
Bank of Hawaii Corp. 1,000 39
Brookline Bancorp, Inc. 11,300 167
Chase Manhattan Corp. 16,650 598
City National Corp. 3,100 187
o Compass Bancshares, Inc. 5,000 189
* Doral Financial Corp. 6,900 348
First Tennessee National Corp. 6,600 299
Marshall & Ilsley Corp. 5,700 204
Mercantile Bankshares Corp. 6,000 254
PNC Financial Services Corp. 2,800 150
Popular, Inc. 4,100 185
-----
Regions Financial Corp. 7,300 268
24 See financial notes.
SCHWAB BALANCED MARKETMASTERS FUND(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Southtrust Corp. 7,300 233
Union Planters Corp. 6,700 223
UnionBanCal Corp. 6,400 347
Wachovia Corp. 17,300 794
Wilmington Trust Co. 3,800 128
------
6,032
BUSINESS MACHINES & SOFTWARE 2.6%
--------------------------------------------------------------------------
o Adaptec, Inc. 4,400 38
Autodesk, Inc. 6,500 125
o Cisco Systems, Inc. 36,100 757
o Dell Computer Corp. 9,100 329
o EMC Corp. 8,700 120
Hewlett Packard Co. 8,200 183
o Integrated Device Technology, Inc. 11,000 173
Microsoft Corp. 19,550 511
o Oracle Systems Corp. 12,650 151
o Sybase, Inc. 16,600 297
o Tech Data Corp. 4,500 148
------
2,832
BUSINESS SERVICES 3.4%
--------------------------------------------------------------------------
o Accenture, Ltd. 22,400 524
o Cendant Corp. 39,950 816
o Citrix Systems, Inc. 6,200 157
o Convergys Corp. 8,800 141
o Ebay, Inc. 1,000 56
Factset Research Systems, Inc. 2,900 127
First Data Corp. 4,200 150
o GTech Holdings Corp. 3,800 170
H&R Block, Inc. 3,100 146
o Informatica Corp. 9,200 100
o Internet Security Systems, Inc. 7,400 121
o Invitrogen Corp. 2,300 146
o ITT Educational Services, Inc. 2,800 140
o Lamar Advertising Co. 4,900 149
o Netiq Corp. 8,400 102
o Openwave Systems, Inc. 5,700 74
o Polycom, Inc. 7,600 152
o Priority Healthcare Corp. Class B 4,400 95
o Republic Services, Inc., Class A 9,500 221
o Veritas Software Corp. 3,750 136
------
3,723
CHEMICAL 0.7%
--------------------------------------------------------------------------
Air Products & Chemicals, Inc. 2,000 91
o Cytec Industries, Inc. 7,200 251
Lubrizol Corp. 3,200 97
Monsanto Co. 9,700 243
Sigma Aldrich Corp. 1,500 79
------
761
CONSTRUCTION 1.9%
--------------------------------------------------------------------------
Centex Corp. 3,500 341
o Dycom Industries, Inc. 4,400 95
o EMCOR Group, Inc. 2,100 79
Fluor Corp. 5,000 186
KB Home 4,100 281
o NVR, Inc. 300 147
Pulte Corp. 6,800 588
Standard Pacific Corp. 4,000 191
The Ryland Group, Inc. 1,800 160
------
2,068
CONSUMER DURABLES 0.6%
--------------------------------------------------------------------------
o Furniture Brands International, Inc. 4,100 100
Hillenbrand Indutries, Inc. 4,100 244
La-Z-Boy Chair Co. 8,800 178
Newell Rubbermaid, Inc. 3,200 73
o Rent-A-Center, Inc. 3,500 109
------
704
CONTAINERS 0.1%
--------------------------------------------------------------------------
Ball Corp. 2,200 124
ELECTRONICS 4.1%
--------------------------------------------------------------------------
o Agilent Technologies, Inc. 13,500 336
o Applied Materials, Inc. 7,500 175
o ASML Holding N.V. 8,250 145
o Avnet, Inc. 10,200 198
o Cox Radio, Inc. 4,600 102
o Fairchild Semiconductor Corp. 20,000 452
o Flextronics International Ltd. 6,850 96
See financial notes. 25
SCHWAB BALANCED MARKETMASTERS FUND(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Intel Corp. 23,250 768
o LAM Research Corp. 6,550 188
o LSI Logic Corp. 28,550 264
o National Semiconductor Corp. 3,650 148
o Newport Corp. 7,200 114
o Nextel Communications, Inc., Class A 6,900 167
o Novellus System, Inc. 1,900 79
o Pinnacle Systems, Inc. 14,700 102
Scientific Atlanta, Inc. 9,800 290
o Silicon Storage Technologies, Inc. 8,200 92
o Stratex Networks, Inc. 19,000 61
o Synopsys, Inc. 4,000 127
*o Taiwan Semiconductor Co. Ltd. 23,133 256
o Tellabs, Inc. 13,700 103
o Uniphase Corp. 32,500 115
o Vishay Intertechnology, Inc. 6,400 120
------
4,498
ENERGY: RAW MATERIALS 2.0%
--------------------------------------------------------------------------
Anadarko Petroleum Corp. 2,500 109
Arch Coal, Inc. 7,500 184
Burlington Resources, Inc. 4,400 214
EOG Resources, Inc. 4,200 177
o Forest Oil Corp. 6,300 148
o Joy Global, Inc. 12,500 238
o Key Energy Group, Inc. 15,000 131
Noble Energy, Inc. 5,000 198
Occidental Petroleum Corp. 12,000 423
Tidewater, Inc. 7,000 192
Valero Energy Corp. 4,400 188
------
2,202
FOOD & AGRICULTURE 1.4%
--------------------------------------------------------------------------
Agrium, Inc. 19,800 304
Bunge Ltd. 5,300 144
Fresh Del Monte Produce, Inc. 9,400 235
H.J. Heinz Co. 2,700 95
Hormel Foods Corp. 4,000 99
Supervalu, Inc. 18,500 466
Tyson Foods, Inc. 15,600 223
------
1,566
HEALTHCARE / DRUGS & MEDICINE 5.6%
--------------------------------------------------------------------------
Abbott Laboratories 3,950 168
o American Pharmaceutical Partners, Inc. 7,200 175
Amgen, Inc. 3,350 207
Bausch & Lomb, Inc. 3,300 159
Bristol-Meyers Squibb Co. 6,900 175
o Covance, Inc. 5,200 135
o Cytec Corp. 7,300 94
Eli Lilly & Co. 2,700 180
o Gilead Sciences, Inc. 1,950 107
o Haemonetics Corp. 2,700 62
o Health Net, Inc. 9,200 291
o Humana, Inc. 5,800 118
o IDEC Pharmaceutical Corp. 5,500 193
Invacare Corp. 4,200 172
Johnson & Johnson, Inc. 10,650 536
o King Pharmaceuticals, Inc. 11,700 157
o Laboratory Corporation of America 5,600 199
o Lifepoint Hospitals, Inc. 3,600 93
o Manor Care, Inc. 6,900 230
McKesson Corp. 7,650 232
o Medimmune, Inc. 13,950 372
Medtronic, Inc. 2,400 109
Merck & Co., Inc. 7,550 334
Mylan Laboratories, Inc. 2,250 54
Omnicare, Inc. 6,100 234
o Pacificare Health Systems, Inc. 3,300 196
Pfizer, Inc. 16,750 529
o Province Healthcare Co. 11,300 145
o St. Jude Medical, Inc. 700 41
o Steris Corp. 4,700 98
o Univision Communications, Inc. 3,600 122
Wyeth 3,350 148
------
6,065
HOUSEHOLD PRODUCTS 0.2%
--------------------------------------------------------------------------
Procter & Gamble Co. 1,800 177
INSURANCE 3.5%
--------------------------------------------------------------------------
Allstate Corp. 11,900 470
Cincinnati Financial Corp. 3,300 135
26 See financial notes.
SCHWAB BALANCED MARKETMASTERS FUND(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Everest Reinsurance Group Ltd. 3,400 282
Fidelity National Financial, Inc. 9,125 282
First American Financial Corp. 9,600 275
Lincoln National Corp. 6,200 248
Mercury General Corp. 3,600 171
Old Republic International Corp. 12,500 449
PMI Group, Inc. 8,400 321
o Principal Financial Group, Inc. 11,300 354
Radian Group, Inc. 5,100 270
RenaissanceRe Holdings Ltd. 5,800 261
o StanCorp Financial Group, Inc. 2,100 132
Torchmark Corp. 4,300 189
------
3,839
MEDIA 2.3%
--------------------------------------------------------------------------
Blockbuster, Inc. 7,200 139
o Clear Channel Communications, Inc. 4,400 180
o Comcast Corp. Class A 2,400 78
o EchoStar Communications Corp. 2,200 84
Knight-Ridder, Inc. 1,800 132
McGraw Hill Cos., Inc. 1,700 114
o Panamsat Corp. 7,900 163
Readers Digest Association, Inc. 11,900 175
o The Walt Disney Co. 13,800 312
o Time Warner, Inc. 31,300 479
o Tom Brown, Inc. 7,000 189
o Viacom, Inc., Class B 7,550 301
o Westwood One, Inc. 4,700 141
------
2,487
MISCELLANEOUS 0.1%
--------------------------------------------------------------------------
o DigitalNet Holdings, Inc. 1,000 23
3M Co. 1,000 79
------
102
MISCELLANEOUS FINANCE 7.4%
--------------------------------------------------------------------------
A.G. Edwards, Inc. 3,300 134
American Express Co. 1,700 80
Astoria Financial Corp. 4,900 170
CIT Group, Inc. 7,800 262
(1) Citigroup, Inc. 46,100 2,185
Countrywide Credit Industries, Inc. 6,900 725
Fannie Mae 1,800 129
Flagstar Bancorp, Inc. 9,400 210
o Franklin Resources, Inc. 3,000 142
Home Properties of New York, Inc. 5,500 212
Independence Community Bank Corp. 4,100 151
IndyMac Bankcorp, Inc. 9,500 279
IPC Holdings Ltd. 7,500 281
Lehman Brothers Holdings, Inc. 5,550 399
LNR Property Corp. 3,700 151
MDC Holdings, Inc. 4,000 269
Merrill Lynch & Co., Inc. 700 41
Morgan Stanley 8,600 472
The Bear Stearns Cos., Inc. 4,900 374
The Goldman Sachs Group, Inc. 1,800 169
Waddell & Reed Financial, Inc. 5,400 120
Washington Federal, Inc. 10,400 274
Washington Mutual, Inc. 14,300 626
Webster Financial Corp. 3,600 161
------
8,016
NON-DURABLES & ENTERTAINMENT 0.9%
--------------------------------------------------------------------------
o Activision, Inc. 12,550 189
o American Greetings Corp. Class A 5,300 113
o CBRL Group, Inc. 7,500 291
o Energizer Holdings, Inc. 4,200 155
Wendy's International, Inc. 5,000 185
------
933
NON-FERROUS METALS 0.6%
--------------------------------------------------------------------------
Alcan Aluminum Ltd. 3,600 144
Engelhard Corp. 4,600 131
Freeport-McMoRan Copper & Gold, Inc.,
Class B 9,200 357
------
632
OIL: DOMESTIC 2.4%
--------------------------------------------------------------------------
Amerada Hess Corp. 5,200 268
o Cal Dive International, Inc. 7,800 162
Chesapeake Energy Corp. 12,800 153
Chevron Corp. 1,900 141
o Cimarex Energy Co. 4,500 92
Marathon Oil Corp. 12,500 370
o National Oilwell, Inc. 4,600 88
o Newfield Exploration Co. 5,800 230
See financial notes. 27
SCHWAB BALANCED MARKETMASTERS FUND(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Precision Drilling Corp. 6,300 248
Sunoco, Inc. 6,400 280
Talisman Energy, Inc. 3,200 156
Teekay Shipping Corp. 9,900 477
------
2,665
OIL: INTERNATIONAL 0.9%
--------------------------------------------------------------------------
ExxonMobil Corp. 23,200 849
GlobalSantaFe Corp. 4,600 103
------
952
OPTICAL & PHOTO 0.3%
--------------------------------------------------------------------------
Eastman Kodak Co. 6,900 169
o Ingram Micro, Inc., Class A 13,800 204
------
373
PAPER & FOREST PRODUCTS 0.5%
--------------------------------------------------------------------------
o Louisiana-Pacific Corp. 7,100 135
Rayonier, Inc. 5,250 221
Temple Inland, Inc. 4,500 243
------
599
PRODUCER GOODS & MANUFACTURING 1.4%
--------------------------------------------------------------------------
Briggs & Stratton Corp. 1,800 117
General Electric Co. 13,450 390
Graco, Inc. 3,600 137
Grainger, Inc. 3,500 160
Harsco Corp. 4,000 153
Hon Industries, Inc. 2,900 119
o Mettler-Toledo International, Inc. 5,800 223
Pentair, Inc. 2,800 115
Trinity Industries, Inc. 5,000 127
------
1,541
RAILROAD & SHIPPING 0.3%
--------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 3,000 87
* Canadian Pacific Railway Ltd. 2,600 73
o Kansas City Southern Industries, Inc. 15,800 209
------
369
REAL PROPERTY 0.3%
--------------------------------------------------------------------------
First Industrial Realty Trust, Inc. 5,700 184
Plum Creek Timber Co., Inc. 3,300 87
------
271
RETAIL 3.1%
--------------------------------------------------------------------------
Albertson's, Inc. 15,100 306
o Barnes & Noble, Inc. 7,800 232
o BJ's Wholesale Club, Inc. 8,200 211
Claire's Stores, Inc. 3,900 151
CVS Corp. 7,100 250
o Federated Department Stores, Inc. 9,200 437
Foot Locker, Inc. 5,200 93
Home Depot, Inc. 7,150 265
o Kohls Corp. 3,150 177
o Kroger Co. 21,300 372
o Safeway, Inc. 8,000 169
Talbots, Inc. 2,400 79
Tandy Corp. 4,300 129
Target Corp. 1,650 66
o Toys `R' Us, Inc. 3,800 49
Wal-Mart Stores, Inc. 6,150 363
------
3,349
SANITARY SERVICES 0.3%
--------------------------------------------------------------------------
o Citizens Utilities Co., Class B 21,600 269
STEEL 0.3%
--------------------------------------------------------------------------
Nucor Corp. 1,900 104
o Steel Dynamics, Inc. 10,700 199
------
303
TELECOMMUNICATIONS SERVICES & EQUIPMENT 0.1%
--------------------------------------------------------------------------
o Advanced Fibre Communications, Inc. 3,600 87
TELEPHONE 1.6%
--------------------------------------------------------------------------
o Amdocs Ltd. 7,600 163
BellSouth Corp. 26,100 687
SBC Communications, Inc. 15,600 374
Verizon Communications, Inc. 15,600 524
------
1,748
TOBACCO 0.5%
--------------------------------------------------------------------------
Altria Group, Inc. 3,100 144
See financial notes.
28
SCHWAB BALANCED MARKETMASTERS FUND(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
R.J. Reynolds Tobacco Holdings, Inc. 7,800 375
------
519
TRAVEL & RECREATION 0.6%
--------------------------------------------------------------------------
Carnival Corp. 2,350 82
*o Fairmont Hotels & Resorts, Inc. 7,000 180
o Harrah's Entertainment, Inc. 3,100 135
o Mandalay Resort Group 3,500 137
Station Casinos, Inc. 4,800 143
------
677
TRUCKING & FREIGHT 0.7%
--------------------------------------------------------------------------
o CNF, Inc. 3,200 112
o Overnite Corp. 1,150 26
Ryder Systems, Inc. 8,800 264
o Sanmina-SCI Corp. 6,200 65
U.S. Freightways Corp. 5,700 182
United Parcel Service, Inc. 1,400 101
------
750
UTILITIES : ELECTRIC & GAS 2.1%
--------------------------------------------------------------------------
Alliant Energy Corp. 6,000 144
American Electric Power Co., Inc. 5,100 144
Constellation Energy Group, Inc. 5,100 185
o Edison International 17,300 341
Entergy Corp. 2,400 129
Exelon Corp. 2,100 133
Nisource, Inc. 9,600 199
Northeast Utilities 7,400 140
Oneok, Inc. 7,100 141
Sempra Energy 12,600 350
Wisconsin Energy Corp. 6,400 210
Xcel Energy, Inc. 8,800 144
------
2,260
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
U.S. GOVERNMENT SECURITIES 8.7% of Net Assets
U.S. Treasury Bond
@(4) 7.50%, 11/15/16 1,550 1,961
5.50%, 08/15/28 100 103
U.S. Treasury Index Participation
Note
@(3) 3.38%, 01/15/07 1,600 2,033
@(10) 3.63%, 01/15/08 750 952
U.S. Treasury Note
@(6) 2.00%, 11/30/04 1,500 1,512
@ 1.75%, 12/31/04 500 503
~(5) 3.63%, 05/15/13 2,000 1,916
4.25%, 08/15/13 400 398
U.S. Treasury Stripped Bond
0.00%, 11/15/16 300 154
------
9,532
AGENCY MORTGAGE-BACKED SECURITIES
13.5% of Net Assets
Fannie Mae
Pool# 535846
6.00%, 04/01/16 78 81
Pool# 670372
6.00%, 09/01/17 249 259
Pool# 555454
6.00%, 03/01/18 275 286
Pool# 726026
= 4.00%, 08/01/18 731 712
Pool# 727446
= 4.00%, 08/01/18 495 482
Pool# 731349
=(9) 4.00%, 08/01/18 991 967
Pool# 732337
= 4.00%, 08/01/18 685 667
Pool# 733374
4.00%, 08/01/18 56 54
Pool# 727380
= 4.00%, 09/01/18 495 483
Pool# 729667
= 4.00%, 09/01/18 496 484
Pool# 503041
6.50%, 07/01/29 85 88
Series 2002-16 Class TK
5.50%, 07/25/29 130 131
Pool# 560551
= 6.50%, 11/01/30 571 594
Pool# 586142
= 6.50%, 06/01/31 75 78
Pool# 589646
6.50%, 06/01/31 84 87
= Pool# 190313
6.50%, 07/01/31 200 207
Pool# 581669
= 6.50%, 07/01/31 547 569
Pool# 581861
= 6.50%, 07/01/31 561 584
Pool# 609508
= 6.50%, 10/01/31 67 70
See financial notes.
29
SCHWAB BALANCED MARKETMASTERS FUND(TM)
PORTFOLIO HOLDINGS continued
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
Pool# 613782
6.50%, 11/01/31 71 74
Pool# 632288
= 6.50%, 02/01/32 527 548
Pool# 638016
6.50%, 04/01/32 601 624
Pool# 569666
6.50%, 05/01/32 63 65
Pool# 630039
6.50%, 07/01/32 16 17
Pool# 656465
6.50%, 09/01/32 543 565
Pool# 732153
4.50%, 07/01/33 481 458
Pool# 733910
4.50%, 08/01/33 518 494
~ 5.50%, 11/13/33 800 808
~(8) 6.50%, 11/13/33 1,000 1,039
Series 2003-W1 Class 1A1
6.50%, 12/25/42 168 178
Freddie Mac
Series 2535 Class DT
5.00%, 09/15/16 236 243
Pool# C90580
= 6.00%, 09/01/22 455 469
Series 2504 Class B
6.00%, 08/15/26 98 98
Series 2553 Class JD
4.50%, 08/15/31 114 112
Ginnie Mae II
~(2) 6.50%, 11/19/33 2,000 2,088
------
14,763
CORPORATE BONDS 3.9% of Net Assets
FIXED-RATE OBLIGATIONS 2.7%
--------------------------------------------------------------------------
@ AT&T Corp.
8.50%, 11/15/31 250 284
El Paso Corp.
7.80%, 08/01/31 250 191
7.75%, 01/15/32 150 114
Federal Republic of Brazil
Series C
8.00%, 04/15/14 369 346
@ Ford Motor Co.
8.90%, 01/15/32 500 492
@ General Motors Corp.
6.88%, 08/28/12 750 770
Pemex Project Funding Master
Trust
9.13%, 10/13/10 250 295
@ Republic of Panama
9.38%, 01/16/23 250 273
United Mexican States
Series A
6.38%, 01/16/13 150 155
------
2,920
VARIABLE-RATE OBLIGATIONS 1.2%
--------------------------------------------------------------------------
@ British Telecom PLC
2.41%, 12/15/03 500 501
Entergy Gulf States 144A
2.04%, 12/18/03 200 201
Federal Republic of Brazil
Series EI
2.13%, 04/15/04 80 78
@ National Rural Utilities
Series C
2.11%, 01/26/04 500 502
------
1,282
MUNICIPAL BONDS 1.8% of Net Assets
@ California State
Revenue Anticipation Note
Warrant, Series A
2.00%, 06/16/04 300 301
@ Golden State, California
Securitization Corp.
Revenue Bond, Series 2003-A-1
6.25%, 06/01/33 250 221
+@ Massachusetts State Water
Resource Authority
General Revenue Bond,
Series 2002J
5.00%, 08/01/32 250 251
@ Tobacco Settlement Financing
Corp. of Rhode Island
Revenue Bond, Series 2002A
6.25%, 06/01/42 500 420
+@ Triborough, New York Bridge
& Tunnel Authority
Revenue Bond, Series 2002B
5.00%, 11/15/32 750 752
------
1,945
30 See financial notes.
SCHWAB BALANCED MARKETMASTERS FUND(TM)
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
NON-AGENCY MORTGAGE-BACKED SECURITIES
1.3% of Net Assets
VARIABLE-RATE OBLIGATIONS 1.1%
--------------------------------------------------------------------------
Bear Stearns Adjustable Rate
Mortgage Trust
Series 2002-11 Class 1A1
5.68%, 11/01/03 199 200
Series 2002-5 Class 6A
6.05%, 11/01/03 95 95
Series 2002-9 Class 2A
5.44%, 11/01/03 198 201
Structured Asset Securities Corp.
Series 2002-13 Class 2A1
1.62%, 11/01/03 583 585
Wells Fargo Mortgage Backed
Securities Trust
Series 2002-E Class 2A1
5.22%, 11/01/03 109 111
------
1,192
FIXED-RATE OBLIGATIONS 0.2%
--------------------------------------------------------------------------
Residential Funding Mortgage
Security I
Series -S9 Class A1
6.50%, 03/25/32 201 203
SHORT-TERM INVESTMENTS 8.5% of Net Assets
COMMERCIAL PAPER & OTHER CORPORATE
OBLIGATIONS 6.0%
--------------------------------------------------------------------------
BP Capital Markets PLC
1.08%, 03/02/04 600 598
= Danske Corp.
1.07%, 11/12/03 900 900
= General Electric Capital Corp.
1.06%, 12/18/03 1,000 999
= HBOS Treasury Services PLC
1.07%, 12/10/03 1,000 999
= Kraft Foods
2.08%, 02/27/04 300 300
Rabobank Nederland
1.07%, 01/20/04 900 898
Royal Bank of Scotland
1.08%, 02/03/04 800 798
UBS Finance, Inc.
1.06%, 01/21/04 1,000 997
------
6,489
U.S. GOVERNMENT SECURITIES 2.5%
--------------------------------------------------------------------------
Fannie Mae
@ 1.07%, 11/05/03 1,100 1,100
U.S. Treasury Bills
= 0.96%, 12/04/03 85 85
= 0.92%, 12/11/03 50 50
= 0.87%, 12/18/03 65 65
= 0.92%, 12/18/03 150 150
= 0.93%, 12/18/03 205 205
= 0.94%, 12/18/03 120 120
1.00%, 04/08/04 1,000 995
------
2,770
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OTHER INVESTMENTS 6.4% of Net Assets
OTHER INVESTMENT COMPANIES 6.4%
--------------------------------------------------------------------------
= Provident Institutional Funds--
TempCash 1,578,741 1,579
= Provident Institutional Funds--
TempFund 5,439,594 5,440
------
7,019
NUMBER OF MKT. VALUE
SECURITY DESCRIPTION CONTRACTS ($ x 1,000)
OPTIONS 0.0% of Net Assets
PUT OPTIONS 0.0%
--------------------------------------------------------------------------
10 Year U.S. Treasury Note
Future, Strike Price 100.00,
Expires 11/22/03 100 2
3 Month Eurodollar Future,
Strike Price 95.00,
Expires 03/15/04 20 --
------
2
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
See financial notes. 31
SCHWAB BALANCED MARKETMASTERS FUND(TM)
PORTFOLIO HOLDINGS continued
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT SALES 11.9% of Net Assets
FOREIGN GOVERNMENT SECURITIES 1.1%
--------------------------------------------------------------------------
Obrigacoes do Tesouro
5.00%, 06/15/12 1,000 1,222
U.S. GOVERNMENT SECURITIES 10.8%
--------------------------------------------------------------------------
U.S. Treasury Note
4.38%, 05/15/07 500 529
5.50%, 05/15/09 4,800 5,320
3.63%, 05/15/13 5,200 4,980
4.25%, 08/15/13 900 897
------
11,726
NUMBER OF MKT. VALUE
SECURITY DESCRIPTION CONTRACTS ($ x 1,000)
OPTIONS WRITTEN 0.1% of Net Assets
CALL OPTIONS 0.1%
--------------------------------------------------------------------------
3 Month LIBOR, Strike Price
3.00, Expires 11/12/03 120 --
3 Month LIBOR, Strike Price
5.00, Expires 01/07/05 370 130
------
130
PUT OPTIONS 0.0%
--------------------------------------------------------------------------
3 Month LIBOR, Strike Price
5.50, Expires 12/17/03 80 --
3 Month LIBOR, Strike Price
7.00, Expires 01/07/05 370 28
------
28
--------------------------------------------------------------------------
END OF SHORT SALES AND OPTIONS WRITTEN. For totals, please see the first page of
holdings for this fund.
32 See financial notes.
SCHWAB BALANCED MARKETMASTERS FUND(TM)
In addition to the above, the fund held the following at 10/31/03. All numbers x
1,000.
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 4,500 (42)
EUROPEAN EURO
Interest Rate
Receive variable rate payments of 6
month LIBOR, Pay fixed rate payments of
4.00%, expires 12/17/13, Barclays Bank
PLC 2,300 31
Receive variable rate payments of 6
month LIBOR, Pay fixed rate payments of
3.50%, expires 09/15/05, Barclays Bank
PLC 10,600 (18)
JAPANESE YEN
Interest Rate
Receive variable rate payments of 6
month LIBOR, Pay fixed rate payments of
1.07%, expires 06/02/12, Morgan Stanley 50,000 16
Receive variable rate payments of 6
month LIBOR, Pay fixed rate payments of
1.07%, expires 06/02/12, Goldman Sachs 50,000 20
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 3,100 1
Receive variable rate payments of
3 month LIBOR, Pay fixed rate
payments of 1.50%, expires 03/29/05,
J.P. Morgan 400 1
U.S. DOLLARS
Credit Default
Eli Lilly & Co. Rate 0.16%,
expires 12/20/08, Barclays Bank PLC 100 --
Johnson & Johnson, Inc. Rate 0.11%,
expires 12/20/08, Lehman Brothers, Inc. 100 --
Eaton Corp. Rate 0.28%,
expires 12/20/08, Citibank N.A. 100 --
Whirlpool Corp. Rate 0.29%,
expires 12/20/08, Lehman Brothers, Inc. 100 --
Home Depot, Inc. Rate 0.12%,
expires 12/20/08, Lehman Brothers, Inc. 100 --
See financial notes. 33
SCHWAB BALANCED MARKETMASTERS FUND(TM)
All numbers x 1,000 except number of futures contracts.
SWAP AGREEMENTS (CONTINUED)
Notional Unrealized
Amount Gains/(Losses)
Fedex Corp. Rate 0.29%,
expires 12/20/08, Citibank N.A. 100 --
Allstate Corp. Rate 0.26%,
expires 12/20/08, Morgan Stanley 100 --
Wal-mart Stores, Inc. Rate 0.14%,
expires 12/20/08, Citibank N.A. 200 --
Ingersoll-Rand Co. Ltd. Rate 0.32%,
expires 12/20/08, Merrill Lynch 100 --
Emerson Electric Co. Rate 0.21%,
expires 12/20/08, Morgan Stanley 100 --
AutoZone, Inc. Rate 0.35%,
expires 12/20/08, UBS, AG 200 1
Radioshack Corp. Rate 0.35%,
expires 12/20/08, Lehman Brothers, Inc. 100 --
Masco Corp. Rate 0.30%,
expires 12/20/08, Lehman Brothers, Inc. 100 --
------
10
FUTURES CONTRACTS
Number of Contract Unrealized
Contracts Value Gains/(Losses)
S&P 500 Index, Long
expires 12/19/03 8 2,099 61
90 Day Eurodollar, Long
expires 03/14/05 32 7,767 (27)
90 Day Eurodollar, Long
expires 06/13/05 24 5,804 10
90 Day Eurodollar, Long
expires 09/13/04 1 245 2
90 Day Eurodollar, Short
expires 09/19/05 (8) (1,928) (3)
10 Year, Long
U.S. Treasury Note,
expires 03/22/04 20 2,217 (4)
10 Year, Long
U.S. Treasury Note,
expires 12/19/03 127 14,262 247
20 Year, Short
U.S. Treasury Note,
expires 12/19/03 (16) (1,740) (59)
90 Day LIBOR, Long
exprires, 03/17/04 1 203 (2)
90 Day LIBOR, Long
exprires, 03/17/05 3 602 (11)
34 See financial notes.
SCHWAB BALANCED MARKETMASTERS FUND(TM)
All numbers x 1,000 except number of futures contracts.
FUTURES CONTRACTS (CONTINUED)
Number of Contract Unrealized
Contracts Value Gains/(Losses)
90 Day LIBOR, Long
exprires, 06/16/04 1 202 (2)
90 Day LIBOR, Long
exprires, 09/16/04 1 202 (3)
90 Day LIBOR, Long
exprires, 12/16/04 5 1,007 (7)
3 Month, Long
Eurodollar LIBOR,
expires, 12/13/04 4 1,128 (1)
10 Year, Long
Eurobond,
expires 12/10/03 27 3,539 (40)
------
161
FORWARD FOREIGN CURRENCY CONTRACTS
Amount of Amount of
Currency to Currency to Currency to Currency to Unrealized
Expiration Date be Received be Received be Delivered be Delivered Gains/(Losses)
11/05/2003 European Euro 649 U.S. Dollars 755 (3)
11/05/2003 U.S. Dollars 183 European Euro 159 (1)
12/11/2003 U.S. Dollars 17 British Pounds 10 --
09/08/2004 China Renminbi 6,077 U.S. Dollars 750 7
------
3
See financial notes. 35
SCHWAB BALANCED MARKETMASTERS FUND(TM)
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value $114,460 a
Foreign currency 115 b
Swap agreements, at fair value 122 c
Receivables:
Fund shares sold 17
Dividends 79
Interest 286
Due from brokers for futures 62
Investments sold 1,401
Investments sold short 14,390
Unrealized gains on forward foreign currency contracts 7
Prepaid expenses + 7
-------------
TOTAL ASSETS 130,946
LIABILITIES
- --------------------------------------------------------------------------------
Securities sold short at market value 12,948 d
Options written, at value 158 e
Payables:
Fund shares redeemed 91
Investments bought 7,215
Covered short sales 1,240
Interest on short sales 264
Investment adviser and administrator fees 4
Transfer agency and shareholder service fees 2
Unrealized losses on forward foreign currency contracts 4
Accrued expenses + 47
-------------
TOTAL LIABILITIES 21,973
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 130,946
TOTAL LIABILITIES - 21,973
-------------
NET ASSETS $108,973
NET ASSETS BY SOURCE
Capital received from investors 117,023
Net investment income not yet distributed 1,066
Net realized capital losses (18,702) f
Net unrealized capital gains 9,586 f
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$ 108,973 9,843 $ 11.07
Unless stated, all numbers x 1,000.
a The fund paid $105,022 for these securities. Not counting short-term
obligations and government securities, the fund paid $89,008 for securities
during the report period and received $101,702 from securities it sold or that
matured. For long-term government securities, the fund paid $146,761 during
the report period and received $152,193 for securities it sold or that
matured.
b The fund paid $108 for this currency.
c The fund paid $112 to enter into these swap agreements.
d The proceeds for securities sold short is $12,875.
e OPTIONS NUMBER PREMIUMS
WRITTEN OF CONTRACTS RECEIVED
------- ------------ --------
Beginning of
period 980 $188
Options written 1,434 $57
Options closed (416) ($52)
Options expired (1,058) ($11)
Options
exercised + -- --
------------------------------
End of period 940 $182
f These derive from investments, short sales, options, foreign currency
transactions, futures and swap agreements.
FEDERAL TAX DATA
- ---------------------------------------------------
PORTFOLIO COST $105,425
NET UNREALIZED GAINS AND LOSSES:
Gains $10,388
Losses + (1,353)
-------------
$9,035
UNDISTRIBUTED EARNINGS:
Ordinary income $1,062
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $511
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount:
2009 $8,981
2010 + 9,116
-------------
$18,097
RECLASSIFICATIONS:
Net investment income not
yet distributed $287
Reclassified as:
Net realized capital gains ($287)
See financial notes.
36
SCHWAB BALANCED MARKETMASTERS FUND(TM)
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $1,018 a
Interest + 1,205
-------------
TOTAL INVESTMENT INCOME 2,223
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized gains on investments sold 250
Net realized gains on short sales 113
Net realized gains on foreign currency transactions 41
Net realized losses on option contracts (107)
Net realized gains on futures contracts 951
Net realized losses on swap agreements + (331)
-------------
NET REALIZED GAINS 917
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 15,901
Net unrealized losses on short sales (73)
Net unrealized gains on foreign currency transactions 118
Net unrealized gains on option contracts 207
Net unrealized losses on futures contracts (40)
Net unrealized gains on swap agreements + 336
-------------
NET UNREALIZED GAINS 16,449
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 847 b
Transfer agent and shareholder service fees 249 c
Trustees' fees 6 d
Custodian and portfolio accounting fees 129
Professional fees 32
Registration fees 16
Shareholder reports 28
Other expenses + 16
-------------
Total expenses 1,323
Expense reduction + (226) e
-------------
NET EXPENSES 1,097
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 2,223
NET EXPENSES - 1,097
-------------
NET INVESTMENT INCOME 1,126
NET REALIZED GAINS 917 f
NET UNREALIZED GAINS + 16,449 f
-------------
INCREASE IN NET ASSETS FROM OPERATIONS $18,492
Unless stated, all numbers x 1,000.
a An additional $3 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. These fees are paid to Charles Schwab & Co.
d For the fund's independent trustees only.
e This reduction was made by the investment advisor (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 29,
2004, to 1.10% of average daily net assets. This limit doesn't include
interest, taxes and non-routine expenses.
f These add up to a net gain on investments of $17,366.
See financial notes.
37
SCHWAB BALANCED MARKETMASTERS FUND(TM)
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income $1,126 $2,119
Net realized gains or losses 917 (9,475)
Net unrealized gains + 16,449 1,868
-------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 18,492 (5,488)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income $1,516 $2,727 a
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
Shares sold 1,150 $11,825 1,632 $16,319
Shares reinvested 151 1,431 257 2,727
Shares redeemed + (1,851) (18,430) (3,131) (31,384)
---------------------------------------------------
NET TRANSACTIONS IN FUND
SHARES (550) ($5,174) (1,242) ($12,338)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 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 + (550) 11,802 (1,242) (20,553) b
--------------------------------------------------
END OF PERIOD 9,843 $108,973 10,393 $97,171 c
Unless stated, all numbers x 1,000.
a The tax-basis components of distributions are:
CURRENT PERIOD
Ordinary income $1,516
Long-term capital gains $--
PRIOR PERIOD
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 distributable net investment income in the amount of $1,066 and
$1,169 at the end of the current and prior period, respectively.
38 See financial notes.
SCHWAB SMALL-CAP MARKETMASTERS FUND(TM)
Financial Statements
FINANCIAL HIGHLIGHTS
11/1/02 - 11/1/01 - 11/1/00 - 11/1/99 - 11/1/98
10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
PER-SHARE DATA ($)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 7.18 8.73 12.27 11.04 8.51
----------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income or loss (0.09) 0.04 0.41 0.39 0.24
Net realized and unrealized gains or losses 3.99 (1.54) (2.68) 1.30 2.34
----------------------------------------------------------------------------
Total income or loss from investment operations 3.90 (1.50) (2.27) 1.69 2.58
Less distributions:
Dividends from net investment income (0.00) 1 (0.03) (0.55) (0.46) (0.05)
Distributions from net realized gains -- (0.02) (0.72) -- --
----------------------------------------------------------------------------
Total distributions -- (0.05) (1.27) (0.46) (0.05)
----------------------------------------------------------------------------
Net asset value at end of period 11.08 7.18 8.73 12.27 11.04
----------------------------------------------------------------------------
Total return (%) 54.32 (17.34) (19.99) 15.17 30.38
RATIOS/SUPPLEMENTAL DATA (%)
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.55 0.84 2, 3 0.50 3 0.50 3, 4 0.50 3
Gross operating expenses 1.80 1.31 3 0.91 3 0.92 3 1.01 3
Net investment income or loss (0.98) 0.06 4.17 2.86 2.23
Portfolio turnover rate 94 324 172 128 145
Net assets, end of period ($ x 1,000,000) 115 81 111 162 123
1 Per-share amount was less than $0.01.
2 The ratio of net operating expenses would have been 0.93% if certain
non-routine expenses (proxy fees) had been included.
3 Prior to the fund's change in structure on June 3, 2002, the expenses incurred
by underlying funds in which the fund invested were not included in this
ratio.
4 The ratio of net operating expenses would have been 0.51% if certain
non-routine expenses (proxy fees) had been included.
See financial notes. 39
SCHWAB SMALL-CAP MARKETMASTERS FUNDP(TM)
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification and their market value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
= Collateral for futures contracts
* American Depositary Receipt
COST MARKET VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
95.5% COMMON STOCK 88,474 109,830
0.1% SHORT-TERM
INVESTMENTS 110 110
4.2% OTHER INVESTMENTS 4,820 4,820
- --------------------------------------------------------------------------------
99.8% TOTAL INVESTMENTS 93,404 114,760
0.2% OTHER ASSETS AND
LIABILITIES, NET 287
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 115,047
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 95.5% of Net Assets
AEROSPACE / DEFENSE 0.5%
--------------------------------------------------------------------------
o Esterline Technologies Corp. 12,400 275
o Veeco Instruments, Inc. 9,600 243
-----
518
AIR TRANSPORTATION 0.7%
--------------------------------------------------------------------------
o Aviall, Inc. 9,200 140
o CPI Aerostructures, Inc. 2,700 30
o Hawk Corp. Class A 30,100 116
o Mesa Airlines, Inc. 12,800 138
Southwest Airlines, Inc. 17,900 347
-----
771
APPAREL 1.3%
--------------------------------------------------------------------------
o Hartmarx Corp. 28,000 120
o Jones Apparel Group, Inc. 16,585 572
Phillips-Van Heusen Corp. 9,200 158
o The Dixie Group, Inc. 15,000 108
o The Warnaco Group, Inc. 20,200 352
o Tommy Hilfiger Corp. 10,000 147
-----
1,457
AUTOMOBILE PRODUCTS / MOTOR VEHICLES 0.9%
--------------------------------------------------------------------------
o CSK Auto Corp. 19,400 333
o Fleetwood Enterprises, Inc. 23,000 232
Lamson & Sessions Co. 4,900 29
o National RV Holdings, Inc. 19,700 213
Spartan Motors, Inc. 23,500 219
-----
1,026
BANKS 1.5%
--------------------------------------------------------------------------
BankNorth Group, Inc. 13,600 426
Mellon Financial Corp. 12,300 367
North Fork Bancorp, Inc. 9,000 351
o Silicon Valley Bancshares 4,900 172
o Texas Capital Banshares, Inc. 8,300 113
Zions Bancorp. 4,600 282
-----
1,711
BUSINESS MACHINES & SOFTWARE 4.8%
--------------------------------------------------------------------------
o Advanced Digital Information Corp. 15,700 255
o(6) Ascential Software Corp. 36,500 810
o Borland Software Corp. 9,400 83
o Computer Horizons Corp. 171,600 652
o Concurrent Computer Corp. 18,600 87
o Cray, Inc. 1,400 18
o DIGI International, Inc. 40,000 368
o Flow International Corp. 100,000 311
o Hypercom Corp. 24,700 122
o Interland, Inc. 300 2
o Interphase Corp. 36,000 572
o Lantronix, Inc. 26,900 32
o Maxtor Corp. 27,500 376
o MSC Software Corp. 16,700 172
o Omnicell, Inc. 17,700 252
o Printronix, Inc. 500 7
o SCM Microsystems, Inc. 11,100 92
40 See financial notes.
SCHWAB SMALL-CAP MARKETMASTERS FUND(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Systems & Computer Technology Corp. 38,500 566
o Tech Data Corp. 5,300 175
o Ultimate Electronics, Inc. 13,000 117
o Unisys Corp. 19,100 293
o White Electronics Designs Corp. 3,200 35
-----
5,397
BUSINESS SERVICES 13.2%
--------------------------------------------------------------------------
o Alliance Semiconductor Corp. 39,500 304
o American Management Systems, Inc. 45,500 673
Analogic Corp. 4,000 174
o Ansoft Corp. 30,000 351
o Aquantive, Inc. 4,300 45
o Aspen Technology, Inc. 56,500 452
o Bottomline Technology, Inc. 19,700 142
Bowne & Co., Inc. 24,000 360
o Carreker Corp. 19,400 189
o Computer Task Group, Inc. 58,900 227
o Connective Therapeutics, Inc. 11,200 201
o Credence Systems Corp. 39,900 651
o Cross Country Healthcare, Inc. 8,200 114
o Dot Hill Systems Corp. 8,700 117
o(1) eFunds Corp. 77,800 1,246
o Epicor Software Corp. 17,500 177
o Epresence, Inc. 17,900 71
o Harris Interactive, Inc. 7,400 49
o Indus International, Inc. 7,900 20
o InFocus Corp. 64,900 428
o Internap Network Services Corp. 56,500 63
Interpublic Group of Cos., Inc. 23,400 348
o Ivillage, Inc. 25,800 76
o JDA Software Group, Inc. 18,200 390
o Keane, Inc. 46,600 612
o ManTech International Corp. Class A 900 22
o Mapics, Inc. 11,900 129
o Medical Staffing Network Holdings, Inc. 10,900 85
o Metasolv, Inc. 56,900 114
o Modem Media Poppe Tyson, Inc. 84,000 469
o Netiq Corp. 18,800 228
o Netsolve, Inc. 15,200 123
o Network Associates, Inc. 29,700 414
o Openwave Systems, Inc. 18,033 235
o Phoenix Technologies Ltd. 26,000 171
o Planar Systems, Inc. 2,600 60
o Polycom, Inc. 31,000 621
o Portal Software, Inc. 10,020 160
o Prime Medical Services, Inc. 15,800 68
o Priority Healthcare Corp. Class B 24,400 528
o Radiant Systems, Inc. 16,700 111
Reynolds & Reynolds Co., Class A 10,200 277
o Rogue Wave Software, Inc. 12,000 70
o RSA Security, Inc. 13,100 170
o SafeNet, Inc. 2,700 90
o SCB Computer Technology, Inc. 2,600 5
Standard Register Co. 14,100 248
o Stericycle, Inc. 13,200 610
o Technology Solutions Corp. 75,300 106
o Teledyne Technologies, Inc. 2,200 36
o Tetra Technologies, Inc. 19,050 431
o The Management Network Group, Inc. 48,300 140
o The TriZetto Group, Inc. 14,300 97
o Universal Electronics, Inc. 20,000 260
o Unova, Inc. 22,300 484
o Valueclick, Inc. 14,800 119
o Versant Corp. 17,800 32
o Volt Information Sciences, Inc. 21,400 374
o Watchguard Technologies, Inc. 16,000 92
o WebEx Communications, Inc. 14,100 311
o Wireless Facilities, Inc. 13,800 237
------
15,207
CHEMICAL 2.5%
--------------------------------------------------------------------------
A. Schulman, Inc. 13,100 249
o Applied Extrusion Technologies, Inc. 57,500 143
Calgon Carbon Corp. 47,500 305
Deswell Industries, Inc. 10,000 249
o Gundle Enviromental Systems, Inc. 8,000 137
H.B. Fuller Co. 6,200 154
MacDermid, Inc. 10,000 299
See financial notes. 41
SCHWAB SMALL-CAP MARKETMASTERS FUND(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Olin Corp. 26,600 463
o Peak International Ltd. 10,000 60
o Polyone Corp. 50,300 243
Quaker Chemical Corp. 8,300 220
Rohm & Haas Co. 5,000 196
Wellman, Inc. 22,100 182
-----
2,900
CONSTRUCTION 5.2%
--------------------------------------------------------------------------
D.R. Horton, Inc. 13,500 537
o EMCOR Group, Inc. 10,900 411
o(4) Hovnanian Enterprises, Inc. 11,000 894
KB Home 7,100 486
o NCI Building Systems, Inc. 2,000 44
(7) Pulte Corp. 9,100 787
Standard Pacific Corp. 7,600 364
Texas Industries, Inc. 10,600 288
The Ryland Group, Inc. 4,400 391
o Toll Brothers, Inc. 19,600 722
o WCI Communities, Inc. 32,400 706
o Westell Technologies, Inc., Class A 14,000 117
o Wilsons, The Leather Experts, Inc. 24,800 230
-----
5,977
CONSUMER DURABLES 2.1%
--------------------------------------------------------------------------
Bassett Furniture Industries, Inc. 9,700 152
o Bush Industries, Inc., Class A 89,100 420
o Champion Enterprises, Inc. 56,000 398
o Furniture Brands International, Inc. 11,700 284
o Griffon Corp. 8,100 157
o Interface, Inc. 24,600 136
o Leggett & Platt, Inc. 11,500 240
o Maytag Corp. 13,100 333
o Salton, Inc. 23,400 250
o Water PIK Technologies, Inc. 2,800 31
-----
2,401
CONTAINERS 0.6%
--------------------------------------------------------------------------
o Graphic Packaging Corp. 35,300 136
o Mobile Mini, Inc. 27,400 578
-----
714
ELECTRONICS 17.1%
--------------------------------------------------------------------------
o Advanced Fibre Communications, Inc. 16,700 402
o Agere Systems, Inc., Class B 170,300 577
o Alliant Techsystems, Inc. 6,200 321
o Anadigics, Inc. 14,600 74
o Andrew Corp. 16,200 212
o Anixter International, Inc. 9,800 234
o Applied Micro Circuits Corp. 29,500 172
o Arris Group, Inc. 15,100 91
o Arrow Electronics, Inc. 17,000 363
o Avnet, Inc. 13,000 252
Belden, Inc. 7,600 143
o Bell Industries, Inc. 50,000 135
o Bell Microproducts, Inc. 45,000 380
Bonso Electronics International, Inc. 1,500 10
o Brooks Automation, Inc. 10,200 255
C & D Technologies, Inc. 26,000 518
o C-COR.Net Corp. 24,900 251
o Cable Design Techologies 26,100 252
o California Micro Devices Corp. 26,700 226
o Captaris, Inc. 48,300 287
o Celestica, Inc. 20,300 288
Cohu, Inc. 3,400 68
o Computer Network Technology 13,200 131
CTS Corp. 18,000 199
o DSP Group, Inc. 14,100 337
o Del Global Technologies Corp. 50,000 104
Ducommun, Inc. 5,000 94
o FSI International, Inc. 64,500 406
o Gerber Scientific, Inc. 38,500 304
o Glenayre Technologies, Inc. 31,900 97
o Globespan, Inc. 56,700 349
o Harmonic Lightwaves, Inc. 24,600 191
o Innovex, Inc. 13,200 149
o Integrated Silicon Solution, Inc. 16,000 226
Keithley Instruments, Inc. 15,500 250
o Lecroy Corp. 15,000 255
o LSI Logic Corp. 40,400 373
o Macromedia, Inc. 8,500 162
o Manufacturers Services Ltd. 59,500 366
42 See financial notes.
SCHWAB SMALL-CAP MARKETMASTERS FUND(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Maxwell Technologies, Inc. 25,000 203
o MEMC Electronic Materials, Inc. 28,900 324
o National Semiconductor Corp. 6,225 253
o Netopia, Inc. 14,000 143
o OSI Systems, Inc. 9,400 173
Park Electrochemical Corp. 10,800 265
o Pemstar, Inc. 17,600 62
o Pericom Semiconductor Corp. 20,000 228
PerkinElmer, Inc. 20,900 376
o Pinnacle Systems, Inc. 13,700 95
o PLX Technology, Inc. 21,600 180
o PMC-Sierra, Inc. 23,400 425
o Powerwave Technologies, Inc. 106,000 690
o(10) Rayovac Corp. 45,400 746
o Rex Stores Corp. 20,000 315
o SBS Technologies, Inc. 6,300 86
o Silicon Image, Inc. 29,900 210
o Silicon Storage Technologies, Inc. 12,600 141
o Standard Microsystems Corp. 12,600 378
Symbol Technologies, Inc. 13,300 166
o Symmetricom, Inc. 62,500 450
o Tekelec 17,700 285
o Tektronix, Inc. 16,100 413
o Teradyne, Inc. 27,700 631
o TRC Cos., Inc. 24,100 427
o Triquint Semiconductor, Inc. 15,000 108
o TTM Technologies, Inc. 13,300 214
o Tweeter Home Entertainment Group, Inc. 26,000 217
o Varian Semiconductor Equipment
Associates, Inc. 2,600 126
o Vicor Corp. 26,100 265
o Vishay Intertechnology, Inc. 39,000 731
o Waters Corp. 7,800 245
Western Digital Corp. 41,000 552
------
19,627
ENERGY: RAW MATERIALS 1.8%
--------------------------------------------------------------------------
o Cooper Cameron Corp. 5,800 248
Devon Energy Corp. 5,400 262
ENSCO International, Inc. 4,600 121
o Forest Oil Corp. 11,700 274
o Horizon Offshore, Inc. 5,300 21
o Key Energy Group, Inc. 28,100 245
o Offshore Logistics, Inc. 12,200 266
o Swift Energy Co. 24,500 341
o Xanser Corp. 126,000 313
------
2,091
FOOD & AGRICULTURE 1.6%
--------------------------------------------------------------------------
Delta & Pineland Co. 26,200 599
o Galaxy Nutritional Foods, Inc. 70,500 279
o International Multifoods Corp. 18,900 422
o Lesco, Inc. 16,100 182
o Terra Industries, Inc. 40,000 107
o VistaCare, Inc., Class A 6,200 214
o Wild Oats Markets, Inc. 8,900 92
------
1,895
GOLD 0.6%
--------------------------------------------------------------------------
o Kinross Gold Corp. 48,891 402
o Meridian Gold, Inc. 26,200 334
------
736
HEALTHCARE / DRUGS & MEDICINE 9.4%
--------------------------------------------------------------------------
o Amerigroup Corp. 11,600 485
o Apogent Technologies, Inc. 21,300 468
Bausch & Lomb, Inc. 12,900 621
Beckman Coulter, Inc. 6,900 343
o Cardiodynamics International Corp. 99,500 572
o Centene Corp. 22,942 702
o Charles River Laboratories, Inc. 10,300 332
o Cholestech Corp. 29,925 219
o Cytec Corp. 30,500 394
o Eon Labs, Inc. 9,900 417
Health Management Associates, Inc. 7,700 171
o Health Net, Inc. 10,800 341
Heico Corp. 8,800 135
o Hologic, Inc. 11,600 158
o Humana, Inc. 26,400 536
o Intuitive Surgical, Inc. 26,450 383
o Ivax Corp. 30,500 587
o Martek Biosciences Corp. 8,400 407
o Medsource Technologies, Inc. 5,000 25
o Neurocrine Biosciences, Inc. 6,500 304
See financial notes. 43
SCHWAB SMALL-CAP MARKETMASTERS FUND(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Omnicare, Inc. 14,000 537
o Pharmaceutical Product Developement, Inc. 20,000 601
o Pharmacopeia, Inc. 11,200 140
o Province Healthcare Co. 48,400 622
o Quest Diagnostic, Inc. 5,900 399
o Quest Medical, Inc. 6,750 277
o SciClone Pharmaceuticals, Inc. 6,000 48
o Transgenomic, Inc. 82,500 173
o Tripos, Inc. 12,500 87
o Wright Medical Group, Inc. 10,100 296
-----
10,780
HOUSEHOLD PRODUCTS 0.4%
--------------------------------------------------------------------------
o Estee Lauder Cos., Inc., Class A 5,500 205
o Playtex Products, Inc. 32,900 198
-----
403
INSURANCE 0.7%
--------------------------------------------------------------------------
o American Medical Security Corp. 8,400 192
Hooper Holmes, Inc. 86,650 451
Horace Mann Educators Corp. 15,000 199
-----
842
MEDIA 2.4%
--------------------------------------------------------------------------
o Carmike Cinemas, Inc. 6,400 205
o Emmis Communications Corp. 14,100 313
o Insight Communications Co., Inc. 22,000 213
o Journal Communications, Inc., Class A 8,500 151
o Journal Register Co. 11,700 234
McClatchy Co., Class A 4,000 259
Meredith Corp. 2,300 112
o Metro Goldwyn Mayer, Inc. 19,035 304
o Network Equipment Technologies, Inc. 34,900 365
Readers Digest Association, Inc. 18,300 269
o Regent Communications, Inc. 17,000 102
Valassis Communications, Inc. 9,400 243
-----
2,770
MISCELLANEOUS 0.3%
--------------------------------------------------------------------------
* Pengrowth Energy Trust 14,100 185
o 3Com Corp. 28,300 204
-----
389
MISCELLANEOUS FINANCE 3.0%
--------------------------------------------------------------------------
o Accredited Home Lenders Holding Co. 10,400 298
Countrywide Credit Industries, Inc. 2,700 284
o eSpeed, Inc., Class A 5,700 155
o Knight Trading Group, Inc. 39,600 548
McGrath Rent Corp. 5,000 142
(8) MDC Holdings, Inc. 11,330 763
o Metris Cos., Inc. 22,000 104
o Portfolio Recovery Associates, Inc. 12,800 331
Raymond James Financial, Inc. 6,500 265
The Chicago Mercantile Exchange 9,100 618
-----
3,508
NON-DURABLES & ENTERTAINMENT 2.3%
--------------------------------------------------------------------------
o A.T. Cross Co. 38,900 239
o Centillium Communications, Inc. 16,400 88
o Champs Entertainment, Inc. 16,000 126
Darden Restaurants, Inc. 14,500 304
IHOP Corp. 9,000 334
o Jakks Pacific, Inc. 12,000 156
Landry's Restaurants, Inc. 14,600 365
o Marvel Enterprises, Inc. 13,300 392
Movado Group, Inc. 3,000 72
Oneida Ltd. 20,000 95
o Rubio's Restaurant, Inc. 9,100 46
Topps, Inc. 14,200 145
Tupperware Corp. 15,700 236
-----
2,598
NON-FERROUS METALS 1.3%
--------------------------------------------------------------------------
o Brush Engineered Materials, Inc. 20,000 255
o Century Aluminum Co. 33,500 551
o Phelps Dodge Corp. 6,200 383
o Titanium Metals Corp. 9,050 333
-----
1,522
44 See financial notes.
SCHWAB SMALL-CAP MARKETMASTERS FUND(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OIL: DOMESTIC 4.8%
--------------------------------------------------------------------------
o Comstock Resources, Inc. 14,900 222
o Core Laboratories N.V. 25,500 390
o Global Industry Ltd. 155,500 718
o Gulfmark Offshore, Inc. 14,400 201
o Nuevo Energy Co. 10,900 214
o Patterson Energy, Inc. 15,700 449
o Pioneer Natural Resouces Co. 14,700 389
Pogo Producing Co. 8,600 360
o Pride International, Inc. 34,300 562
o Quicksilver Resources, Inc. 2,200 56
Spinnaker Exploration Co. 28,200 722
o Transocean, Inc. 17,800 342
o Varco International, Inc. 15,100 266
o W-H Energy Services, Inc. 14,600 229
o Westport Resources Corp. 17,000 407
-----
5,527
OPTICAL & PHOTO 0.3%
--------------------------------------------------------------------------
o Lexar Media, Inc. 12,700 291
o Zygo Corp. 6,200 93
-----
384
PAPER & FOREST PRODUCTS 0.3%
--------------------------------------------------------------------------
Longview Fibre Co. 20,300 218
o Lydall, Inc. 12,900 154
-----
372
PRODUCER GOODS & MANUFACTURING 7.9%
--------------------------------------------------------------------------
(5) Baldor Electric Co. 41,600 886
o BE Aerospace, Inc. 14,400 81
o Butler Manufacturing Co. 1,000 18
Circor International, Inc. 15,000 309
o Comfort Systems USA, Inc. 12,600 52
Dover Corp. 7,000 273
o DT Industries, Inc. 20,000 21
o(3) Flowserve Corp. 46,700 955
o Gardner Denver, Inc. 7,300 151
o GrafTech International Ltd. 14,800 154
o GSI Lumonics, Inc. 26,600 290
o Hexcel Corp 24,900 170
o(2) Ionics, Inc. 34,700 989
JLG Industries, Inc. 17,200 205
Lennox International, Inc. 12,100 200
o Lone Star Technologies, Inc. 17,100 238
o Magnetek, Inc. 14,300 87
o Material Sciences Corp. 2,800 26
o Merix Corp. 15,300 272
o Metron Technology N.V. 15,100 65
o Modtech Holdings, Inc. 10,000 78
o Norstan, Inc. 18,600 53
o Oceaneering International, Inc. 30,700 708
(9) Pall Corp. 31,950 748
Regal Beloit Corp. 15,000 305
o Spectrum Control, Inc. 35,000 273
Steelcase, Inc. 48,500 570
TB Wood's Corp. 200 2
o Terex Corp. 2,600 59
o The Fairchild Corp. Class A 8,300 41
o The Shaw Group, Inc. 8,400 115
Timken Co. 22,500 377
York International Corp. 8,600 342
-----
9,113
RAILROAD & SHIPPING 0.4%
--------------------------------------------------------------------------
o Omi Corp. 22,200 150
o Sharper Image Corp. 1,300 37
o Stelmar Shipping Ltd. 15,000 296
-----
483
RETAIL 4.2%
--------------------------------------------------------------------------
o Alloy Online, Inc. 30,600 137
o American Eagle Outfitters, Inc. 18,300 293
o Bombay Co., Inc. 1,200 16
Brown Group, Inc. 5,000 173
o Burlington Coat Factory Warehouse Corp. 15,000 322
o Casual Male Retail Group, Inc. 13,200 117
o Charlotte Russe Holding, Inc. 14,100 190
o Coldwater Creek, Inc. 22,500 278
Dillard Department Stores, Inc. 14,000 226
o Gadzooks, Inc. 10,000 67
o InterTan, Inc. 19,800 208
J.C. Penny Co., Inc. 21,400 506
o Linens 'n Things, Inc. 12,200 360
Longs Drug Stores Co. 19,000 426
See financial notes. 45
SCHWAB SMALL-CAP MARKETMASTERS FUND(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Petco Animal Supplies, Inc. 5,300 176
o Saks, Inc. 30,000 417
Sea Containers Ltd., Class A 17,200 264
Shopko Stores, Inc. 8,700 135
Talbots, Inc. 9,500 312
o Wetseal, Inc., Class A 14,100 155
-----
4,778
STEEL 0.1%
--------------------------------------------------------------------------
o Oregon Steel Mills, Inc. 26,400 94
TELEPHONE 0.6%
--------------------------------------------------------------------------
o Carrier Access Corp. 32,500 328
o General Communication, Inc. 18,800 185
o Globecomm Systems, Inc. 4,600 19
Inter-Tel, Inc., Class A 4,000 101
o ITXC Corp. 18,000 62
-----
695
TRAVEL & RECREATION 1.7%
--------------------------------------------------------------------------
o Alliance Gaming Corp. 11,000 267
Carnival Corp. 7,400 258
o Dick's Sporting Goods, Inc. 4,500 207
o Orient Express Hotels Ltd. 17,800 312
o Rent Way, Inc. 23,200 139
o Starwood Hotel & Resorts Worldwide, Inc. 6,800 229
Station Casinos, Inc. 11,500 342
o Vail Resorts, Inc. 17,500 235
-----
1,989
TRUCKING & FREIGHT 0.7%
--------------------------------------------------------------------------
Arkansas Best Corp. 10,800 357
o Covenant Transportation, Inc., Class A 10,000 191
o Yellow Freight Systems, Inc. 7,600 250
-----
798
UTILITIES: ELECTRIC & GAS 0.3%
--------------------------------------------------------------------------
Williams Cos., Inc. 35,000 357
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENTS 0.1% of Net Assets
U.S. GOVERNMENT SECURITIES 0.1%
--------------------------------------------------------------------------
= U.S. Treasury Bills
0.88%, 12/18/03 10 10
0.93%, 12/18/03 100 100
----
110
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OTHER INVESTMENTS 4.2% of Net Assets
OTHER INVESTMENT COMPANIES 4.2%
--------------------------------------------------------------------------
= Provident Institutional Funds --
TempFund 4,819,758 4,820
==========================================================================
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
46 See financial notes.
SCHWAB SMALL-CAP MARKETMASTERS FUND(TM)
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value $114,760 a
Receivables:
Fund shares sold 82
Dividends 31
Due from brokers for futures 1
Investments sold 830
Prepaid expenses + 7
------------
TOTAL ASSETS 115,711
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 61
Investments bought 545
Investment adviser and administrator fees 7
Transfer agency and shareholder service fees 2
Accrued expenses + 49
------------
TOTAL LIABILITIES 664
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 115,711
TOTAL LIABILITIES - 664
------------
NET ASSETS $115,047
NET ASSETS BY SOURCE
Capital received from investors 116,619
Net realized capital losses (22,963) b
Net unrealized capital gains 21,391 b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$115,047 10,380 $11.08
Unless stated, all numbers x 1,000.
a The fund paid $93,404 for these securities. Not counting short-term
obligations and government securities, the fund paid $81,741 for securities
during the report period and received $91,202 from securities it sold or that
matured.
b These derive from investments and futures. As of the report date, the fund had
five open S&P 500 futures contracts due to expire on December 19, 2003, with
an aggregate net contract value of $1,312 and a net unrealized gain of $35.
FEDERAL TAX DATA
- ---------------------------------------------------
PORTFOLIO COST $94,209
NET UNREALIZED GAINS AND LOSSES:
Gains $24,205
Losses + (3,654)
-----------
$20,551
UNDISTRIBUTED EARNINGS:
Ordinary income $--
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $3,062
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Lossamount:
2009 $12,029
2010 + 10,153
-----------
$22,182
RECLASSIFICATIONS:
Net investment income not
yet distributed $886
Reclassified as:
Capital received from
investors ($886)
See financial notes. 47
SCHWAB SMALL-CAP MARKETMASTERS FUND(TM)
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $515 a
Interest + 2
------------
TOTAL INVESTMENT INCOME 517
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized gains on investments sold 2,908
Net realized gains on futures contracts + 62
------------
NET REALIZED GAINS 2,970
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 38,968
Net unrealized losses on futures contracts + (24)
------------
NET UNREALIZED GAINS 38,944
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 1,177 b
Transfer agent and shareholder service fees 226 c
Trustees' fees 5 d
Custodian and portfolio accounting fees 115
Professional fees 31
Registration fees 14
Shareholder reports 47
Other expenses + 16
------------
Total expenses 1,631
Expense reduction + (228) e
------------
NET EXPENSES 1,403
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 517
NET EXPENSES - 1,403
------------
NET INVESTMENT LOSS (886)
NET REALIZED GAINS 2,970 f
NET UNREALIZED GAINS + 38,944 f
------------
INCREASE IN NET ASSETS FROM OPERATIONS $41,028
Unless stated, all numbers x 1,000.
a An additional $5 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. These fees are paid to Charles Schwab & Co.
d For the fund's independent trustees only.
e This reduction was made by the investment advisor (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 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 $41,914.
48 See financial notes.
SCHWAB SMALL-CAP MARKETMASTERS FUND(TM)
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income or loss ($886) $ 63
Net realized gains or losses 2,970 (9,332)
Net unrealized gains or losses + 38,944 (7,786)
-------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 41,028 (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
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
Shares sold 1,528 $ 14,258 1,228 $ 11,362
Shares reinvested 0 * 36 3 639
Shares redeemed + (2,500) (21,725) (2,698) (24,170)
----------------------------------------
NET TRANSACTIONS IN FUND
SHARES (972) ($7,464) (1,407) ($12,169)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 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 + (972) 33,561 (1,407) (29,863) b
-----------------------------------------
END OF PERIOD 10,380 $ 115,047 11,352 $ 81,486 c
* Amount was less than 500 shares.
Unless stated, all numbers x 1,000.
a The tax-basis components of distributions are:
CURRENT PERIOD
Ordinary income $3
Long-term capital gains $--
PRIOR PERIOD
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 distributable net investment income in the amount of $-- and $3 at
the end of the current and prior period, respectively.
See financial notes. 49
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM)
Financial Statements
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98-
10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- -------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- -------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 8.74 10.80 15.53 14.84 10.58
------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.03 0.10 0.73 0.53 0.11
Net realized and unrealized gains or losses 3.18 (1.43) (3.90) 2.49 4.28
------------------------------------------------------------
Total income or loss from investment operations 3.21 (1.33) (3.17) 3.02 4.39
Less distributions:
Dividends from net investment income (0.00) 1 (0.07) (0.77) (0.49) (0.13)
Distributions from net realized gains -- (0.66) (0.79) (1.84) --
------------------------------------------------------------
Total distributions -- (0.73) (1.56) (2.33) (0.13)
------------------------------------------------------------
Net asset value at end of period 11.95 8.74 10.80 15.53 14.84
------------------------------------------------------------
Total return (%) 36.74 (13.65) (22.41) 18.61 41.92
RATIOS/SUPPLEMENTAL DATA (%)
- -------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
Net operating expenses 1.65 0.93 2,3 0.50 3 0.50 3,4 0.50 3
Gross operating expenses 1.92 1.32 3 0.88 3 0.90 3 0.97 3
Net investment income 0.33 0.60 5.13 1.94 0.94
Portfolio turnover rate 99 158 51 80 249
Net assets, end of period ($ x 1,000,000) 302 206 215 278 104
1 Per-share amount was less than $0.01.
2 The ratio of net operating expenses would have been 0.99% if certain
non-routine expenses (proxy fees) had been included.
3 Prior to the fund's change in structure on June 3, 2002, the expenses incurred
by underlying funds in which the fund invested were not included in this
ratio.
4 The ratio of net operating expenses would have been 0.51% if certain
non-routine expenses (proxy fees) had been included.
50 See financial notes.
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM)
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by country and
their market value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
* American Depositary Receipt
= Collateral for open futures contracts
COST MARKET VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
93.1% FOREIGN COMMON
STOCK 234,812 281,310
0.2% COMMON STOCK 315 469
0.2% SHORT-TERM
INVESTMENTS 510 510
7.2% OTHER INVESTMENTS 21,761 21,761
- --------------------------------------------------------------------------------
100.7% TOTAL INVESTMENTS 257,398 304,050
(0.7%) OTHER ASSETS AND
LIABILITIES, NET (2,061)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 301,989
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
FOREIGN COMMON STOCKS 93.1% of Net Assets
AUSTRALIA 2.5%
--------------------------------------------------------------------------
AMP Ltd. 7,900 37
AMP Ltd. Rights 7,900 1
Commonwealth Bank of Australia
16,350 319
(9) John Fairfax Holdings Ltd. 1,194,000 3,067
Jubilee Mines NL 386,653 1,164
Macquarie Bank Ltd. 42,800 1,058
Portman Ltd. 979,832 1,119
Sigma Co. Ltd. 33,400 159
Toll Holdings Ltd. 87,500 519
------------
7,443
AUSTRIA 0.3%
--------------------------------------------------------------------------
Erste Bank der Oesterreichischen
Sparkassen AG 8,350 923
BELGIUM 0.3%
--------------------------------------------------------------------------
Interbrew SA 34,600 810
BRAZIL 1.7%
--------------------------------------------------------------------------
Banco Bradesco SA 26,624,000 112
Banco Itau SA Preffered 988,600 81
Companhia de Bebidas das Americas
2,370,000 507
Confeccoes Guararapes SA 17,505 69
* Eregli Demir Ve Celik Fabrik
16,578,700 349
Gerdau SA 30,420 443
* Petroleo Brasileiro SA 6,800 160
Sadia SA 1,016,727 1,070
* Telemig Celular Participacoes ADR
33,224 1,058
*o Telesp Celular Participacoes SA
51,900 296
Usiminas SA 142,766 1,142
------------
5,287
CANADA 2.8%
--------------------------------------------------------------------------
Bennett Environmental, Inc. 56,080 1,050
Bombardier, Inc., Class B 24,300 109
o CanWest Global Communications
Corp. 25,100 238
Cinram International, Inc. 49,850 1,039
o Cognos, Inc. 13,000 449
o Corus Entertainment, Inc. 17,300 354
Encana Corp. 21,400 735
o Hip Interactive Corp 110,104 326
Home Capital Group, Inc., Class B
21,089 465
o MacDonald, Dettwiler and Associates Ltd.
12,650 218
Manulife Financial Corp. 20,800 631
Petro Canada 15,700 633
Peyto Energy Trust 69,984 1,200
o Precision Drilling Corp. 7,700 303
See financial notes. 51
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM)
PORTFOLIO HOLDINGS continued
MKT VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Research in Motion Ltd. 11,600 513
o Shoppers Drug Mart Corp. 14,350 315
------------
8,578
CHINA 0.3%
--------------------------------------------------------------------------
Huaneng Power International, Inc.
600,400 936
CZECH REPUBLIC 0.2%
--------------------------------------------------------------------------
o Unipetrol A/S 220,470 503
DENMARK 0.9%
--------------------------------------------------------------------------
A P Moller - Maersk A/S 36 283
GN Store Nord A/S 155,069 1,006
Novo Nordisk A/S 9,900 356
o TopDanmark Development A/S 21,500 1,069
------------
2,714
ESTONIA 0.1%
--------------------------------------------------------------------------
Hansabank Ltd. 7,900 180
FINLAND 0.8%
--------------------------------------------------------------------------
Metso Oyj 171,100 1,918
Nokian Renkaat Oyj 4,900 366
------------
2,284
FRANCE 7.9%
--------------------------------------------------------------------------
(8) Aventis SA 59,700 3,161
Banque National de Paris 39,800 2,091
Bonduelle 2,900 230
Camaieu 4,502 340
Carrefour SA 16,290 855
o Christian Dior SA 22,000 1,226
o Dassault Systemes SA 14,700 624
Ipsos 12,548 1,059
o JC Decaux SA 47,200 695
Klepierre 6,800 363
M6 Metropole Television 7,000 199
o Michelin (C.G.D.E.), Class B 33,500 1,314
Mr. Bricolage SA 5,600 161
o Neopost SA 54,500 2,706
o Orpea 12,100 193
o Pernod-Ricard 18,375 1,773
o Publicis Groupe SA 72,000 2,252
Rhodia SA 46,310 234
Rodriguez Group 3,700 251
o Sanofi-Synthelabo SA 10,800 669
(4) Vivendi Universal SA 171,100 3,594
------------
23,990
GERMANY 8.6%
--------------------------------------------------------------------------
Allianz AG 19,170 2,055
Altana AG 11,700 737
AWD Holding AG 39,408 1,100
o Bayerische Motoren-Werke AG 73,500 2,944
o DAB Bank AG 107,873 859
DaimlerChrysler AG 4,600 172
(3) Deutsche Boerse AG 68,600 3,814
o Deutsche Telekom AG 53,400 841
Funkwerk AG 21,105 650
GFK AG 30,279 759
(7) Henkel KGaA 45,800 3,188
Henkel KGaA - VORZUG 15,600 1,147
o Hypo Real Estate Holding AG 2,200 38
o Infineon Technologies AG 4,500 66
o Linde AG 18,900 867
Muenchener Rueckversicherungs-
Gesellschaft AG 12,000 1,431
o Muenchener Rueckversicherungs-
Gesellschaft AG Rights 12,000 99
Puma AG 3,180 464
o SAP AG 10,100 1,469
o SBS Broadcasting SA 30,164 855
o SGL Carbon AG 52,278 982
Stada Arzneimittel AG 7,250 376
United Internet AG 51,226 1,075
------------
25,988
GREECE 0.8%
--------------------------------------------------------------------------
Coca-Cola Hellenic Bottling Co. SA
34,100 661
Folli-Follie SA 11,100 260
Germanos SA 47,075 1,018
*o Stet Hellas Telecommunications SA
43,512 493
------------
2,432
52 See financial notes.
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM)
MKT VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
HONG KONG 2.9%
--------------------------------------------------------------------------
Anhui Conch Cement Co. Ltd. 884,000 1,007
Cheung Kong Holdings Ltd. 8,400 70
China Insurance International Holdings
Co. Ltd. 260,000 174
China Petroleum and Chemical Corp.
(Sinopec) 604,000 200
Citic Pacific Ltd. 54,800 128
CNOOC Ltd. 154,100 291
o Convenience Retail Asia Ltd. 670,000 198
Denway Motors Ltd. 400,000 330
o Dongfang Electrical Machinery Co. Ltd.
2,325,000 764
Esprit Holdings Ltd. 175,000 550
Giordano International Ltd. 3,070,000 1,384
Hong Kong & China Gas Co. Ltd.
91,600 127
HSBC Holdings PLC 50,500 761
Li & Fung Ltd. 364,200 612
o PICC Property and Casualty Co. 36,000 8
Swire Pacific Ltd. Series A 4,800 29
Techtronic Industries Co. Ltd. 817,000 2,251
------------
8,884
HUNGARY 0.0%
--------------------------------------------------------------------------
Magyar Tavkozlesi Rt (Matav) 8,900 32
* Magyar Tavkozlesi Rt (Matav) SP 700 13
------------
45
INDIA 0.5%
--------------------------------------------------------------------------
* Doctor Reddy's Laboratories Ltd.
15,900 424
* HDFC Bank Ltd. 6,500 168
* Infosys Technologies Ltd. 9,850 834
------------
1,426
INDONESIA 0.1%
--------------------------------------------------------------------------
PT Unilever Indonesia Tbk 590,000 224
IRELAND 1.3%
--------------------------------------------------------------------------
Anglo Irish Bank Corp. PLC 60,900 731
Bank of Ireland 198,000 2,440
Grafton Group PLC 30,100 187
*o Ryanair Holdings PLC 11,300 582
------------
3,940
ISRAEL 1.0%
--------------------------------------------------------------------------
o M-Systems Flash Disk Pioneers Ltd.
52,104 1,032
*o Orbotech Ltd. 60,000 1,425
* Teva Pharmaceutical Industries Ltd.
9,600 546
------------
3,003
ITALY 1.7%
--------------------------------------------------------------------------
Banco Popolare di Verona e Novara Scrl
118,000 1,824
o Mediolanum SPA 19,925 139
Merloni Elettrodomestici SPA 24,900 420
Saeco International Group SPA 34,500 144
o San Paolo IMI SPA 224,000 2,521
o Telecom Italia SPA 60,470 105
------------
5,153
JAPAN 16.2%
--------------------------------------------------------------------------
Acom Co. Ltd 200 9
Asahi Breweries Ltd. 4,300 36
Askul Corp. 6,800 358
* Belluna Co. Ltd. 5,885 234
Calsonic Kansei Corp. 58,000 442
Canon, Inc. 26,600 1,287
Cawachi Ltd. 3,400 241
o Chiyoda Corp. 212,000 1,383
Credit Saison Co. Ltd. 4,600 96
o Cyber Agent Ltd. 122 254
o Cyber Agent Ltd. W/I 122 233
Daiwa Securities Group, Inc. 257,000 1,880
o E-System Corp. 309 469
East Japan Railway Co. 65 294
Fanuc Ltd. 15,000 902
Fuji Television Network, Inc. 22 117
Geomatec Co. Ltd. 30,000 770
Glory Ltd. 23,500 737
Goldcrest Co. Ltd. 26,200 1,192
Hino Motors Ltd. 80,300 459
Honda Motor Co. Ltd. 34,500 1,362
Hoya Corp. 10,000 905
Index Corp. 110 739
Japan Airlines System Corp. 46,000 132
See financial notes. 53
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Japan Aviation Electronics Industry, Ltd.
97,000 1,054
Japan Telecom Holdings Co. Ltd. 157 470
Japan Tobacco, Inc. 68 454
Kappa Create Co. Ltd. 3,150 271
o Kennedy-Wilson Japan 206 656
Keyence Corp. 4,500 990
Koha Co. Ltd. 26,000 1,033
o Komatsu Electronic Metals Co. Ltd.
98,300 928
Komeri Co. Ltd. 9,900 226
o Makino Milling Machine Co. Ltd.
218,000 1,154
Meitec Corp. 63,100 2,256
Misumi Corp. 5,500 251
Nakanish, Inc. 3,000 155
NEC Electronics Corp. 9,876 760
Nikko Cordial Corp. 187,600 1,012
Nintendo Co. Ltd. 6,100 471
Nippon Broadcasting System, Inc. 1,200 51
Nippon Telegraph & Telephone Corp. 65 290
Nippon Television Network Corp. 200 29
Nippon Thompson Co. Ltd. 174,000 1,159
Nissan Motor Co. Ltd. 108,700 1,218
Nitori Co. Ltd. 4,500 287
Nitto Denko Corp. 21,500 1,128
Nomura Holdings, Inc. 93,000 1,597
Okinawa Cellular Telephone Co. 53 344
Okura Industrial Co. Ltd. 81,000 715
Oracle Corp. Japan 10,600 622
o Pasona, Inc. 133 955
Pioneer Corp. 22,000 548
Point, Inc. 1,200 28
Promise Co. Ltd. 11,600 521
Quin Land Co. Ltd. 4 48
Round One Corp. 247 508
o Round One Corp. W/I 247 528
Sankyo Aluminium Industry Co. Ltd.
319,000 1,181
Sawai Pharmaceutical Co. Ltd. 4,400 155
Sharp Corp. 52,000 819
SMC Corp. 7,500 903
Sumitomo Trust and Banking Co. Ltd.
195,600 1,092
o Take and Give Needs Co. Ltd. 22 943
Takeda Chemical Industries Ltd. 73,000 2,583
Tamron Co. Ltd. 34,000 1,902
The Fuji Fire & Marine Insurance Co. Ltd.
16,300 42
Tokyo Broadcasting System, Inc. 7,600 122
Tokyu Corp. 23,800 118
Uniden Corp. 60,000 1,141
USS Co. Ltd. 4,290 305
Yamanouchi Pharmaceutical Co. Ltd.
6,700 168
Yamato Transport Co. Ltd. 12,400 165
------------
48,887
MEXICO 3.0%
--------------------------------------------------------------------------
America Mobil SA de CV 345,100 410
o Consorcio ARA SA de CV 41,900 114
o Corporacion Geo SA, Series B 225,379 1,210
* Fomento Economico Mexicano SA de CV
44,400 1,586
o Grupo Financiero BBVA Bancomer SA
de CV 448,000 380
Grupo Modelo SA de CV 149,900 377
*o(5) Grupo Televisa SA de CV 85,800 3,325
* Telefonos de Mexico SA 21,009 675
Wal-Mart de Mexico SA de CV, Series C
218,000 568
Wal-Mart de Mexico SA de CV, Series V
192,500 537
------------
9,182
NETHERLANDS 3.4%
--------------------------------------------------------------------------
AKZO Nobel N.V. 86,000 2,719
o ASM Lithography Holding N.V. 50,500 877
o ASML Holding N.V. 5,300 93
Euronext N.V. 123,300 3,017
Fortis N.V. 67,920 1,207
o Qiagen N.V. 26,500 311
o Versatel Telecom International N.V.
701,964 1,616
Wolters Kluwer N.V. 30,700 431
------------
10,271
54 See financial notes.
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM)
MRT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
NORWAY 0.8%
--------------------------------------------------------------------------
Ekornes ASA 39,242 655
Scibsted ASA 58,112 1,023
Tandberg Television ASA 96,114 361
Telenor ASA 61,000 332
------------
2,371
POLAND 0.2%
--------------------------------------------------------------------------
Bank Polska Kasa Opieki Grupa Pekao
SA 15,600 446
Grupa Kety SA 10,708 316
------------
762
PORTUGAL 0.2%
--------------------------------------------------------------------------
Impresa Sociedade Gestora de
Participacoes, SA 146,943 606
RUSSIA 0.5%
--------------------------------------------------------------------------
* Lukoil Holding Co. 4,600 372
* OAO Gazprom SP 500 12
*o Uralsvyazinform 162,733 999
------------
1,383
SINGAPORE 2.5%
--------------------------------------------------------------------------
o Accord Customer Care Solutions Ltd.
2,667,000 996
Cosco Investments 2,963,600 1,064
DBS Group Holdings Ltd. 68,000 559
First Engineering Ltd. 2,342,800 1,184
Hyflux Ltd. 146,000 154
o Neptune Orient Lines Ltd. 774,900 988
Osim International Ltd. 244,000 149
Unisteel Technology Ltd. 265,000 201
United Overseas Bank Ltd. 238,000 1,859
Venture International 32,000 347
------------
7,501
SOUTH AFRICA 0.3%
--------------------------------------------------------------------------
Edgars Consolidated Stores Ltd. 18,000 265
o MTN Group Ltd. 128,000 458
Nortel Healthcare Holdings Ltd.
383,600 245
------------
968
SOUTH KOREA 2.8%
--------------------------------------------------------------------------
o Kookmin Bank 11,100 405
Korea Electric Power Corp. 18,050 348
* KT Corp. 3,600 71
o Kumho Electric, Inc. 6,920 239
o Osung LST Co. Ltd. 101,942 926
POSCO 1,680 196
Samsung Electronics Co. 4,700 1,867
o Sekonix Co. Ltd. 29,240 689
SK Telecom Co. Ltd. 16,000 2,826
Sungshin Cement Co. Ltd. 46,890 1,022
------------
8,589
SPAIN 1.2%
--------------------------------------------------------------------------
Antena 3 Television SA 192 6
Banco Popular Espanol SA 11,200 583
Grupo Ferrovial SA 10,400 297
Inditex SA 21,000 434
Prisa-Promotora de Informaciones SA
48,600 539
Prosegur Compania de Seguridad SA
13,600 221
o Repsol YPF 42,600 743
Telefonica SA 56,753 706
------------
3,529
SWEDEN 1.2%
--------------------------------------------------------------------------
Atlas Copco AB, Series A 16,800 590
D. Carnegie & Co. AB 91,264 948
Ericsson Telefonab LM AB, Class B
692,800 1,190
*o Erricson Telefonab LM SP
12,000 205
Gunnebo AB 13,400 296
Lindex AB 11,934 349
Sandvik AB 3,200 95
------------
3,673
SWITZERLAND 7.7%
--------------------------------------------------------------------------
Actelion Holdings Ltd. 2,400 228
Adecco SA 18,300 1,079
Ciba Specialty Chemicals Holdings, Inc.
11,645 770
Clariant AG 49,170 692
See financial notes. 55
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Credit Swisse Group 78,900 2,780
Givaudan AG 6,000 2,705
Julius Baer Holding AG, Class B 1,490 483
o Logitech International SA 9,250 371
Lonza Group AG 5,000 245
o Micronas Semiconductor Holding AG
4,200 175
(2) Nestle SA 19,207 4,229
Novartis AG 62,910 2,398
Roche Holding AG Genusschein 7,700 637
Schweizerische Rueckversicherung
4,000 252
Serono SA, Class B 721 498
o SEZ Holding AG 37,124 1,223
Swatch Group AG 15,700 1,672
United Bank of Switzerland AG 45,025 2,765
------------
23,202
TAIWAN 2.3%
--------------------------------------------------------------------------
Career Technology (MFG.) Co. Ltd.
570,000 772
* Chunghwa Telecom Co. Ltd. 24,800 384
o Eva Airways Corp. 924,015 392
o Flexium Interconnect, Inc. 262,000 285
Hon Hai Precision Industry Co. Ltd.
138,000 617
King Yuan Electronics Co. Ltd. 413,000 371
Largan Precision Co. Ltd. 82,000 876
MediaTek, Inc. 44,000 453
Novatek Microelectronics Corp. Ltd.
197,000 620
Optimax Technology Corp. 212,000 593
o Powertech Technology, Inc. 149,000 219
Premier Image Technology Corp.
264,000 435
Quanta Computer, Inc. 26,400 72
*o Taiwan Semiconductor Manufacturing Co.
Ltd. 436,000 860
------------
6,949
THAILAND 0.3%
--------------------------------------------------------------------------
Aeon Thana Sinsap (Thailand) Public Co.
Ltd. 46,500 230
o Bangkok Bank Public Co. Ltd. 80,000 172
Land and House Public Co. Ltd.
936,000 317
o Tisco Financial Public Co. Ltd. 225,300 188
------------
907
TURKEY 0.2%
--------------------------------------------------------------------------
*o Dogan Yayin Holding A/S 98,293,403 274
Enka Insaat ve Sanayi A/S 6,883,000 241
------------
515
UNITED KINGDOM 15.6%
--------------------------------------------------------------------------
3I Group PLC 47,500 500
o Acambis PLC 53,500 326
Aegis Group PLC 1,090,000 1,845
Associated British Ports Holdings PLC
303,500 2,189
BAE Systems PLC 242,700 754
BG Group PLC 345,200 1,574
BHP Billiton PLC 162,000 1,272
Bloomsbury Publishing PLC 106,540 474
British Sky Broadcasting Group PLC
192,547 2,091
Cadbury Schweppes PLC 357,500 2,292
o Cambridge Antibody Tech Group PLC
21,500 194
Capital Group PLC 113,800 477
Carlton Communications PLC 94,300 346
Cattles PLC 59,500 322
Compass Group PLC 249,600 1,439
(1) Diageo PLC 382,500 4,498
o Enodis PLC 1,515,000 1,967
Enterprise Inns PLC 19,200 275
French Connection Group PLC 24,565 822
Galen Holdings PLC 23,800 304
(6) GlaxoSmithKline PLC 152,400 3,264
Granada PLC 497,400 990
HBOS PLC 86,700 1,008
Imperial Chemical Industries PLC
311,060 1,023
Kesa Electricals PLC 60,560 251
Kingfisher PLC 169,963 815
Lloyds TSB Group PLC 137,920 958
Man Group PLC 30,200 742
Marks & Spencer Group PLC 228,900 1,118
56 See financial notes.
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
MFI Furniture Group PLC 102,700 283
(10) Michael Page Group PLC 971,400 3,033
Next PLC 22,900 458
o Orascom Telecommunications 9,000 44
Reckitt Benkiser PLC 47,697 1,004
Reed Elsevier PLC 238,000 1,850
Reuters Holdings Group PLC 20,400 89
RTL Group SA 4,060 226
Signet Group PLC 1,060,000 1,862
Standard Chartered PLC 92,700 1,483
Tesco PLC 580,100 2,326
Topps Tiles PLC 22,485 178
Vodafone Group PLC 25,000 52
o Wolfson Microelectronics PLC 63,151 254
------------
47,272
COMMON STOCK 0.2% of Net Assets
UNITED STATES 0.2%
--------------------------------------------------------------------------
o Golden Telecom, Inc. 18,100 469
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENTS 0.2% of Net Assets
U.S. GOVERNMENT SECURITIES 0.2%
--------------------------------------------------------------------------
= U.S. Treasury Bills
0.82%, 12/18/03 10 10
0.84%, 12/18/03 20 20
0.85%, 12/18/03 50 50
0.86%, 12/18/03 20 20
0.87%, 12/18/03 110 110
0.88%, 12/18/03 30 30
0.92%, 12/18/03 60 60
0.93%, 12/18/03 210 210
------------
510
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OTHER INVESTMENTS 7.2% of Net Assets
OTHER INVESTMENT COMPANIES 6.9%
--------------------------------------------------------------------------
Provident Institutional Funds --
TempCash 5,948,170 5,948
= Provident Institutional Funds --
TempFund 14,989,116 14,989
------------
20,937
OTHER 0.3%
--------------------------------------------------------------------------
PNC Bank - Money Market Account
824,000 824
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
See financial notes. 57
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM)
In addition to the above, the fund held the following at 10/31/03. 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)
11/03/2003 U.S. Dollars 24 Australian Dollars 34 --
11/03/2003 Norway Krone 2,507 U.S. Dollars 358 (3)
11/03/2003 Canadian Dollars 86 U.S. Dollars 66 --
11/03/2003 Mexican Pesos 1,791 U.S. Dollars 162 --
11/03/2003 Swiss Francs 123 U.S. Dollars 93 --
11/03/2003 U.S. Dollars 391 European Euro 336 --
11/03/2003 U.S. Dollars 114 British Pounds 67 --
11/03/2003 Sweden Krona 3,147 U.S. Dollars 410 (7)
11/03/2003 European Euro 19 U.S. Dollars 22 --
11/03/2003 Singapore Dollars 271 U.S. Dollars 156 --
11/04/2003 Singapore Dollars 463 U.S. Dollars 267 1
11/04/2003 Swiss Francs 124 U.S. Dollars 93 --
11/04/2003 Canadian Dollars 80 U.S. Dollars 61 --
11/04/2003 Japanese Yen 43,361 U.S. Dollars 401 5
11/04/2003 U.S. Dollars 52 Swiss Francs 70 --
11/04/2003 U.S. Dollars 52 European Euro 46 --
11/04/2003 U.S. Dollars 82 British Pounds 48 --
11/04/2003 U.S. Dollars 88 Czech Koruna 2,409 --
11/05/2003 Australian Dollars 137 U.S. Dollars 96 (1)
11/05/2003 U.S. Dollars 31 Czech Koruna 857 --
11/05/2003 U.S. Dollars 43 Australian Dollars 62 (1)
11/05/2003 Japanese Yen 39,392 U.S. Dollars 363 4
11/05/2003 Swiss Francs 6 U.S. Dollars 5 --
11/05/2003 U.S. Dollars 54 European Euro 47 --
11/05/2003 U.S. Dollars 104 British Pounds 61 --
11/05/2003 U.S. Dollars 52 Poland Zloty 209 --
11/05/2003 Sweden Krona 69 U.S. Dollars 9 --
11/06/2003 Japanese Yen 11,656 U.S. Dollars 107 (1)
11/06/2003 U.S. Dollars 8 Japanese Yen 875 --
--------------
(3)
58 See financial notes.
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM)
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value $304,050 a
Foreign currency 325 b
Cash 267
Receivables:
Fund shares sold 851
Dividends 381
Foreign tax reclaims 145
Investments sold 3,434
Due from brokers for futures 7
Unrealized appreciation on foreign currency contracts 10
Prepaid expenses + 11
------------
TOTAL ASSETS 309,481
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 93
Investments bought 7,292
Investment adviser and administrator fees 16
Transfer agency and shareholder service fees 4
Unrealized depreciation on foreign currency contracts 13
Accrued expenses + 74
------------
TOTAL LIABILITIES 7,492
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 309,481
TOTAL LIABILITIES - 7,492
------------
NET ASSETS $301,989
NET ASSETS BY SOURCE
Capital received from investors 354,469
Net investment income not yet distributed 493
Net realized capital losses (99,813) c
Net unrealized capital gains 46,840 c
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$ 301,989 25,276 $11.95
Unless stated, all numbers x 1,000
a The fund paid $257,398 for these securities. Not counting short-term
obligations and government securities, the fund paid $227,042 for securities
during the report period and received $214,477 from securities it sold or that
matured.
b The fund paid $325 for these currencies.
c These derive from investments, foreign currency transactions and futures. As
of the report date, the fund has twenty-eight open S&P 500 futures contracts
due to expire on December 19, 2003, with an aggregate net contract value of
$7,347 and a net unrealized gain of $143.
FEDERAL TAX DATA
- ----------------------------------------------------
PORTFOLIO COST $260,151
NET UNREALIZED GAINS AND LOSSES:
Gains $49,615
Losses + (5,716)
------------
$43,899
UNDISTRIBUTED EARNINGS:
Ordinary income $1,008
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount:
2009 $40,326
2010 53,351
2011 + 3,747
------------
$97,424
RECLASSIFICATIONS:
Net investment income not
yet distributed ($243)
Reclassified as:
Net realized capital gains $243
See financial notes. 59
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM)
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $4,449 a
Interest + 4
------------
TOTAL INVESTMENT INCOME 4,453
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments sold (6,348)
Net realized losses on foreign currency transactions (448)
Net realized gains on futures sold + 715
------------
NET REALIZED LOSSES (6,081)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 80,131
Net unrealized gains on foreign currency transactions 40
Net unrealized gains on futures contracts + 158
------------
NET UNREALIZED GAINS 80,329
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 3,147 b
Transfer agent and shareholder service fees 562 c
Trustees' fees 6 d
Custodian and portfolio accounting fees 424
Professional fees 40
Registration fees 21
Shareholder reports 72
Other expenses + 37
------------
Total expenses 4,309
Expense reduction + (596) e
------------
NET EXPENSES 3,713
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 4,453
NET EXPENSES - 3,713
------------
NET INVESTMENT INCOME 740
NET REALIZED LOSSES (6,081) f
NET UNREALIZED GAINS + 80,329 f
------------
INCREASE IN NET ASSETS FROM OPERATIONS $74,988
Unless stated, all numbers x 1,000
a An additional $570 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. These fees are paid to Charles Schwab & Co.
d For the fund's independent trustees only.
e This reduction was made by the investment advisor (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 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 $74,248.
60 See financial notes.
SCHWAB INTERNATIONAL MARKETMASTERS FUND(TM)
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- ---------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income $740 $1,366
Net realized losses (6,081) (53,129)
Net unrealized gains + 80,329 18,541
--------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 74,988 (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
- ---------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
Shares sold 6,539 $66,048 7,580 $77,749
Shares reinvested 2 13 1,338 14,503
Shares redeemed + (4,801) (44,770) (5,309) (53,981) b
-----------------------------------------
NET TRANSACTIONS IN FUND
SHARES 1,740 $21,291 3,609 $38,271
SHARES OUTSTANDING AND NET ASSETS
- ---------------------------------------------------------------------------------
11/1/02-10/31/03 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 + 1,740 96,265 3,609 (9,455) c
------------------------------------------
END OF PERIOD 25,276 $301,989 23,536 $205,724 d
Unless stated, all numbers x 1,000
a The tax-basis components of distributions are:
CURRENT PERIOD
Ordinary income $14
Long-term capital gains $--
PRIOR PERIOD
Ordinary income $1,423
Long-term capital gains $13,081
b The fund charges 1.50% of early withdrawal fees on shares redeemed 180 days or
less after the purchase:
CURRENT PERIOD $52
PRIOR PERIOD $61
Dollar amounts are net of the redemption proceeds.
c Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
d Includes distributable net investment income in the amount of $493 and $10 at
the end of the current and prior period, respectively.
See financial notes. 61
SCHWAB MARKETMASTERS FUNDS(TM)
FINANCIAL NOTES
BUSINESS STRUCTURE OF THE FUNDS
EACH OF THE FUNDS DISCUSSED IN THIS REPORT IS A SERIES OF SCHWAB CAPITAL TRUST,
A NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended. The sidebar shows the funds in this report and their trust.
Prior to June 3, 2002, each fund invested in a mix of actively managed mutual
funds. The transition to their 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 MarketTrack All Equity Portfolio(TM)
Schwab MarketTrack Growth Portfolio(TM)
Schwab MarketTrack Balanced Portfolio(TM)
Schwab MarketTrack Conservative Portfolio(TM)
Schwab U.S. MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
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
(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.
62
SCHWAB MARKETMASTERS FUNDS(TM)
Because futures carry inherent risks, the funds must give the broker a deposit
of cash and/or securities (the "initial margin") whenever they enter into the
futures contract. The amount of the deposit may vary from one contract to
another, but it is generally a percentage of the contract amount.
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) INVEST IN FORWARD CURRENCY CONTRACTS IN CONNECTION WITH
THE PURCHASE AND SALE OF PORTFOLIO SECURITIES TO MINIMIZE THE UNCERTAINTY OF
CHANGES IN FUTURE EXCHANGE RATES. "Forwards," as they are known, are contracts
to buy and sell a currency at a set price on a future date. Similar to futures,
forwards are agreements directly between two parties, however forwards are not
publicly traded.
As with futures, forwards involve certain risks that are not fully reflected in
the fund's financials. If counterparties to the contracts are unable to meet
the terms of the contracts or if the value of the foreign currency changes
unfavorably, the fund could sustain a loss.
THE FUNDS MAY ENTER INTO REPURCHASE AGREEMENTS. In a repurchase agreement, a
fund buys a security from another party (usually a financial institution) with
the agreement that it be sold back in the future. The date, price and other
conditions are all specified when the agreement is created.
The funds' repurchase agreements will be fully collateralized by U.S. government
securities. All collateral is held by the funds' custodian (or, with tri-party
agreements, the agent's bank) and is monitored daily to ensure that its market
value is at least equal to the repurchase price under the agreement.
THE FUNDS MAY ENTER INTO SWAP AGREEMENTS. In these transactions, a fund and a
counterparty agree to swap payments that are based on two different rates. The
counterparty is typically a large financial institution, and the terms of the
swap are specified in advance. For example, a fund may agree that for six months
it will pay the counterparty the equivalent of the interest on a given amount
invested at LIBOR (the London Interbank Offered Rate). In exchange, the
counterparty might agree to pay a fund the equivalent of the same amount
invested in a certain bond index during this same six month period.
Swap agreements carry certain risks. Because the net gains or losses stemming
from a swap agreement depend on the movements of one rate relative to another, a
fund could experience unanticipated losses if one or both rates failed to behave
as expected. A fund also could lose money if a counterparty failed to honor the
terms of a swap agreement.
The Credit Swap or "Credit Default Swap" is a bilateral financial contract in
which one counterparty (the Protection Buyer) pays a periodic fee, typically
expressed in basis points on the notional amount, in return for a Contingent
Payment by the Protection Seller following a Credit Event of a Reference Entity.
The definitions of a Credit Event and the settlement mechanism used to determine
the Contingent
63
SCHWAB MARKETMASTERS FUNDS(TM)
Payment are flexible and determined by negotiation between the counterparties at
the inception of the transaction.
THE FUNDS ARE AUTHORIZED TO WRITE AND PURCHASE PUT AND CALL OPTIONS. The risk in
writing a call option is that a fund gives up the opportunity for profit if the
market price of the security increases. The risk in writing a put option is that
the funds may incur a loss if the market price of the security decreases and the
option is exercised. The risk in purchasing an option is that a fund pays a
premium whether or not the option is exercised. The funds also have the
additional risk of being unable to enter into a closing transaction at an
acceptable price if a liquid secondary market does not exist.
THE FUNDS MAY ENTER INTO "TBA" (TO BE ANNOUNCED) PURCHASE COMMITMENTS TO
PURCHASE SECURITIES FOR A FIXED PRICE AT A FUTURE DATE, TYPICALLY NOT EXCEEDING
45 DAYS. TBAs may be considered securities in themselves, and involve a risk of
loss if the value of the security to be purchased declines prior to settlement
date. This risk is in addition to the risk of decline in a fund's other assets.
THE FUNDS PAY FEES TO AFFILIATES OF THE INVESTMENT ADVISER FOR VARIOUS SERVICES.
Through their trust, the funds have agreements with Charles Schwab Investment
Management, Inc. (CSIM) to provide investment advisory and administrative
services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent
and shareholder services.
Although these agreements specify certain fees for these services, CSIM and
Schwab have made additional agreements with the funds that may limit the total
expenses charged. The rates and limitations for these fees vary from fund to
fund, and are described in each fund's Statement of Operations.
The adviser is responsible for compensating each fund's investment managers.
THE FUNDS MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING AFFILIATES. Pursuant to
an exemptive order issued by the SEC, the funds may enter into interfund
borrowing and lending transactions within the SchwabFunds(R). All loans are for
temporary or emergency purposes only. The interest rate charged on the loan is
the average of the overnight repurchase agreement rate and the short-term bank
loan rate. The interfund lending facility is subject to the oversight and
periodic review of the Board of Trustees of the SchwabFunds(R).
TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/OR DIRECTORS OF THE INVESTMENT
ADVISER OR SCHWAB. Federal securities law limits the percentage of such
"interested persons" who may serve on a trust's board, and the trust was in
compliance with these limitations throughout the report period. The trust did
not pay any of these persons for their service as trustees, but it did pay
non-interested persons (independent trustees), as noted in each fund's Statement
of Operations.
THE FUNDS MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The funds may obtain
temporary bank loans through the 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 and $100 million with PNC Bank, N.A. and Bank of America, N.A.,
respectively. The funds pay interest on the amounts they borrow at rates that
are negotiated periodically.
AMOUNT WEIGHTED
OUTSTANDING AVERAGE AVERAGE
AT 10/31/03 BORROWING* INTEREST
FUND ($ 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) -- 293 1.41
- -------------------------------------------------------------------------
SCHWAB INTERNATIONAL
MARKETMASTERS FUND(TM) -- 235 1.60
- -------------------------------------------------------------------------
*Based on the number of days for which the borrowing is outstanding.
64
SCHWAB MARKETMASTERS FUNDS(TM)
THE FUNDS INTEND TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR
REGULATED INVESTMENT COMPANIES. Accordingly, the funds distribute substantially
all of their net investment income and net realized capital gains (if any) to
their respective shareholders each year. As long as a fund meets the tax
requirements, it is not required to pay federal income tax. The net investment
income and net realized capital gains and losses may differ for financial
statement and tax purposes primarily due to differing treatments of losses on
wash sales, foreign currency transactions and paydown gains and losses.
UNDER THE FUNDS' ORGANIZATIONAL DOCUMENTS, ITS OFFICERS AND TRUSTEES ARE
INDEMNIFIED AGAINST CERTAIN LIABILITY ARISING OUT OF THE PERFORMANCE OF THEIR
DUTIES TO THE FUNDS. In addition, in the normal course of business the funds
enter into contracts with their vendors and others that provide general
indemnifications. The funds' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the funds.
However, based on experience, the funds expect the risk of loss to be remote.
ACCOUNTING POLICIES
The following are the main policies the funds use in preparing their financial
statements.
THE FUNDS VALUE THE SECURITIES IN THEIR PORTFOLIOS EVERY BUSINESS DAY. The funds
use the following policies to value various types of securities:
- - SECURITIES TRADED ON AN EXCHANGE OR OVER-THE-COUNTER: valued at the closing
value for the day, or, on days when no closing value has been reported,
halfway between the most recent bid and asked quotes.
- - SECURITIES 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 funds' Board of Trustees.
- - BONDS AND NOTES: valued at halfway between the most recent bid and asked
quotes or, if such quotes are unavailable, at prices for securities of
comparable maturity, credit quality and type. Valuations for bonds and notes
are provided by an independent bond-pricing service.
- - FUTURES AND FORWARDS: open contracts are valued at their settlement prices as
of the close of their exchanges (for futures) or at a market value based on
that day's exchange rates (for forwards). When a fund closes out a futures or
forwards position, it calculates the difference between the value of the
position at the beginning and at the end, and records a realized gain or loss
accordingly.
- - SWAP AGREEMENTS: each open contract is valued at fair value using guidelines
adopted by the funds' Board of Trustees, using a formula that varies with the
specific terms of the agreement.
- - OPTIONS: open contracts are valued at their last quoted sale price or in the
case of swaptions (options on swaps) at fair value, that varies with the
specific terms of the underlying swap agreement.
- - SHORT-TERM SECURITIES (60 DAYS OR LESS TO MATURITY): valued at amortized cost.
SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the
security is executed.
IF A FUND SELLS SECURITIES SHORT, it records the proceeds received as an asset
and the obligation to buy back the securities as a liability. At the time a
short sale is initiated, the asset and the liability are of equal value and
effectively cancel each other out. Subsequently, the fund values the liability
side of the transaction according to the market price of the securities sold
short, and values the asset side according to the value of the proceeds. When
the fund closes out a short position (buys the security), it records the outcome
as a realized gain or loss. Interest accrued or dividends paid on securities
sold short are recorded as an expense on the fund's records.
65
SCHWAB MARKETMASTERS FUNDS(TM)
OPTIONS purchased are recorded as assets and written options are recorded as
liabilities to the extent of premiums paid or received. Each fund will realize a
gain or loss when the option transaction expires or closes. When an option is
exercised, the proceeds on sales for a written call option, the purchase cost
for a written put option or the cost of a security for a purchased put or call
option is adjusted by the amount of the premium received or paid.
SWAP premiums paid are recorded as assets and premiums received are recorded as
liabilities.
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.
EXPENSES that are specific to a fund are charged directly to that fund. Expenses
that are common to all funds within a trust generally are allocated among the
funds in proportion to their average daily net assets.
EACH FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND
ACCOUNTING, and is considered a separate entity for tax purposes. Within its
account, each fund also keeps certain assets in segregated accounts, as may be
required by securities law.
THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH ACCOUNTING PRINCIPLES
GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. Notwithstanding this,
shareholders should understand that in order to follow these principles, fund
management has to make estimates and assumptions that affect the information
reported in the financial statements. It's possible that once the results are
known, they may turn out to be different from these estimates.
66
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF:
Schwab U.S. MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
In our opinion, the accompanying statements of assets and liabilities, including
the portfolio holdings, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of Schwab U.S. MarketMasters Fund(TM), Schwab
Balanced MarketMasters Fund(TM), Schwab Small-Cap MarketMasters Fund(TM) and
Schwab International MarketMasters Fund(TM) (four of the portfolios constituting
Schwab Capital Trust) (hereafter collectively referred to as the "funds") at
October 31, 2003, and the results of each of their operations for the period
then ended, the changes in each of their net assets and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at October 31, 2003 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
San Francisco, CA
December 12, 2003
67
SCHWAB MARKETMASTERS FUNDS(TM)
FUND TRUSTEES
A fund's Board of Trustees is responsible for protecting the interests of
that fund's shareholders. The tables below give information about the
people who serve as trustees and officers for the SchwabFunds(R),
including the funds covered in this report. Trustees remain in office
until they resign, retire or are removed by shareholder vote. 1
Under the Investment Company Act of 1940, any officer, director, or
employee of Schwab or CSIM is considered an "interested person," meaning
that he or she is considered to have a business interest in Schwab or
CSIM. These individuals are listed as "interested trustees." The
"independent trustees" are individuals who, under the 1940 Act, are not
considered to have a business interest in Schwab or CSIM.
Each of the SchwabFunds (of which there were 49 as of 10/31/03) belongs
to one of these trusts: The Charles Schwab Family of Funds, Schwab
Investments, Schwab Capital Trust or Schwab Annuity Portfolios. Currently
all these trusts have the same trustees and officers. The address for all
trustees and officers is 101 Montgomery Street, San Francisco, CA 94104.
You can find more information about the trustees and officers in the
Statement of Additional Information, which is available free by calling
1-800-435-4000.
INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S);
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ----------------------------------------------------------------------------------------------------------------------------
CHARLES R. SCHWAB 2 Chair, Trustee: Chair, Director, The Charles Schwab Corp.; CEO, Director, Schwab
7/29/37 Family of Funds, 1989; Holdings, Inc.; Chair, Director, Charles Schwab & Co., Inc.; Charles
Investments, 1991; Schwab Investment Management, Inc.; Chair, Charles Schwab
Capital Trust, 1993; Holdings, Inc. I, Schwab International Holdings, Inc.; Director,
Annuity Portfolios, 1994. U.S. Trust Corp., United States Trust Co. of New York, The Gap, Inc.
(clothing retailer), Siebel Systems (software); Trustee, Stanford
University. Until 6/03: Director, Xsign, Inc. (electronic payment
systems). Until 5/03: Co-Chair, The Charles Schwab Corporation.
Until 5/02: Director, Vodafone AirTouch PLC (telecom). Until 3/02:
Director, Audiobase, Inc. (Internet audio solutions). Until 7/01:
Director, The Charles Schwab Trust Company. Until 1/99: Director,
Schwab Retirement Plan Services, Inc., Mayer & Schweitzer, Inc.
(securities brokerage subsidiary of The Charles Schwab Corp.),
Performance Technologies, Inc. (technology), TrustMark, Inc.
1 The SchwabFunds retirement policy requires that independent trustees elected
after January 1, 2000 retire at age 72 or after twenty years of service as a
trustee, whichever comes first. Independent trustees elected prior to January
1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will
retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on
December 31, 2010.
2 In addition to their positions with the investment adviser and the
distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr.
Lyons's immediate family members, also own stock of The Charles Schwab
Corporation.
68
SCHWAB MARKETMASTERS FUNDS(TM)
INDIVIDUALS WHO ARE INTERESTED TRUSTEES BUT NOT OFFICERS OF THE TRUST
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ----------------------------------------------------------------------------------------------------------------------------
DAWN G. LEPORE 1 Trustee:2003 Vice Chair, EVP, The Charles Schwab Corp.; Until 10/01: CIO, The
3/21/54 (all trusts) Charles Schwab Corporation. Until 1999: EVP, The Charles Schwab
Corporation. Director, Wal-Mart Stores, eBay, Inc.
- ----------------------------------------------------------------------------------------------------------------------------
JEFFREY M. LYONS 1 Trustee: 2002 EVP, Asset Management Products and Services, Charles Schwab &
2/22/55 (all trusts). Co., Inc. Until 9/01: EVP, Mutual Funds, Charles Schwab & Co., Inc.
INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUST OFFICE(S) HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ----------------------------------------------------------------------------------------------------------------------------
RANDALL W. MERK President, CEO President, CEO, Charles Schwab Investment Management, Inc;
7/25/54 (all trusts). EVP, Charles Schwab & Co., Inc.; Director, Charles Schwab Worldwide
Funds PLC, Charles Schwab Asset Management (Ireland) Ltd. Until
9/02: President, CIO, American Century Investment Management;
Director, American Century Cos., Inc. Until 6/01: CIO, Fixed Income,
American Century Cos., Inc. Until 1997: SVP, Director, Fixed Income
and Quantitative Equity Portfolio Management, Twentieth Century
Investors, Inc.
- ----------------------------------------------------------------------------------------------------------------------------
TAI-CHIN TUNG Treasurer, Principal SVP, CFO, Charles Schwab Investment Management, Inc.; VP,
3/7/51 Financial Officer The Charles Schwab Trust Co.; Director, Charles Schwab Asset
(all trusts). Management (Ireland) Ltd., Charles Schwab Worldwide Funds PLC.
- ----------------------------------------------------------------------------------------------------------------------------
STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Director, Charles Schwab Investment
4/5/55 Officer Management, Inc.; CIO, The Charles Schwab Trust Co.
(all trusts).
- ----------------------------------------------------------------------------------------------------------------------------
KOJI E. FELTON Secretary SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab
3/13/61 (all trusts). Investment Management, Inc. Until 6/98: Branch Chief in Enforcement,
U.S. Securities and Exchange Commission, San Francisco.
1 In addition to their positions with the investment adviser and the
distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr.
Lyons's immediate family members, also own stock of The Charles Schwab
Corporation.
69
SCHWAB MARKETMASTERS FUNDS(TM)
INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- --------------------------------------------------------------------------------------------------------------------------------
MARIANN BYERWALTER 2000 (all trusts). Chair, JDN Corp. Advisory LLC; Trustee, Stanford University, Director,
8/13/60 America First Cos., (venture capital/fund management), Redwood Trust, Inc.
(mortgage finance), Stanford Hospitals and Clinics, SRI International
(research), PMI Group, Inc. (mortgage insurance), Lucile Packard
Children's Hospital. 2001: Special Advisor to the President, Stanford
University. Until 2002: Director, LookSmart, Ltd. (Internet infrastructure).
Until 2001: VP, Business Affairs, CFO, Stanford University.
- --------------------------------------------------------------------------------------------------------------------------------
DONALD F. DORWARD Family of Funds, 1989; CEO, Dorward & Associates (management, marketing and
9/23/31 Investments, 1991; communications consulting). Until 1999: EVP, Managing Director,
Capital Trust, 1993; Grey Advertising.
Annuity Portfolios, 1994.
- --------------------------------------------------------------------------------------------------------------------------------
WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp. (bio-pharmaceuticals). Director, Non-Executive
11/22/41 Chairman, Solectron Corp. (manufacturing), Airlease Ltd. (aircraft
leasing), Mission West Properties (commercial real estate), Stratex
Networks (telecommunications); Public Governor, Member, executive
committee, Pacific Stock & Options Exchange. Director, Digital
Microwave Corp. (network equipment). Until 1998: Dean, Haas
School of Business, University of California, Berkeley.
- --------------------------------------------------------------------------------------------------------------------------------
ROBERT G. HOLMES Family of Funds, 1989; Chair, CEO, Director, Semloh Financial, Inc. (international financial
5/15/31 Investments, 1991; services and investment advice).
Capital Trust, 1993;
Annuity Portfolios, 1994.
- --------------------------------------------------------------------------------------------------------------------------------
GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors);
9/28/50 Director, Pennzoil-Quaker State Co. (oil and gas), Rorento N.V.
(investments -- Netherlands), Cooper Industries (electrical products);
Member, audit committee, Northern Border Partners, L.P. (energy).
- --------------------------------------------------------------------------------------------------------------------------------
DONALD R. STEPHENS Family of Funds, 1989; Managing Partner, D.R. Stephens & Co. (investments). Until 1996:
6/28/38 Investments, 1991; Chair, CEO, North American Trust (real estate investments).
Capital Trust, 1993;
Annuity Portfolios, 1994.
- --------------------------------------------------------------------------------------------------------------------------------
MICHAEL W. WILSEY Family of Funds, 1989; Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate and
8/18/43 Investments, 1991; investments).
Capital Trust, 1993;
Annuity Portfolios, 1994.
70
SCHWAB MARKETMASTERS FUNDS(TM)
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.
71
NOTES
CONTACT SCHWAB
SchwabFunds(R) offers you a complete family of mutual funds, each one based on a
clearly defined investment approach and using disciplined 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 directly over the
Internet.
2 Orders placed in person or through a telephone representative may be subject
to a service fee payable to Schwab.
THE SCHWABFUNDS FAMILY(R)
STOCK FUNDS
Schwab S&P 500 Fund
Schwab 1000 Fund(R)
Schwab Small-Cap Index Fund(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab 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 MarketTrack All Equity Portfolio(TM)
Schwab MarketTrack Growth Portfolio(TM)
Schwab MarketTrack Balanced Portfolio(TM)
Schwab MarketTrack Conservative Portfolio(TM)
BOND FUNDS
Schwab YieldPlus Fund(R)
Schwab Short-Term Bond Market Fund(TM)
Schwab Total Bond Market Fund(TM)
Schwab GNMA Fund(TM)
Schwab Short/Intermediate Tax-Free Bond Fund(TM)
Schwab Long-Term Tax-Free Bond Fund(TM)
Schwab California Short/Intermediate
Tax-Free Bond Fund(TM)
Schwab California Long-Term Tax-Free Bond Fund(TM)
SCHWAB MONEY FUNDS
Schwab offers an array of money market funds that seek high current income
consistent with safety and liquidity. 3 Choose from taxable or tax-advantaged
alternatives. Many can be linked to your Schwab account to "sweep" cash
balances automatically 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.
REG13812-06
SCHWAB MARKETTRACK PORTFOLIOS(R)
ANNUAL REPORT
October 31, 2003
Schwab MarketTrack
All Equity Portfolio(TM)
Schwab MarketTrack
Growth Portfolio(TM)
Schwab MarketTrack
Balanced Portfolio(TM)
Schwab MarketTrack
Conservative Portfolio(TM)
[CHARLES SCHWAB LOGO]
Four portfolios that combine the power of indexing with the benefits of asset
allocation.
IN THIS REPORT
Management's Discussion ........................................... 2
The president of SchwabFunds(R) and the funds'
managers take a look at the factors that shaped
fund performance during the report period.
Performance at a Glance ........................................ 5
Schwab MarketTrack All Equity Portfolio(TM)
Ticker Symbol: SWEGX
The portfolio seeks high capital growth through
an all-stock portfolio.
Performance and Fund Facts ..................................... 6
Financial Statements ........................................... 14
Schwab MarketTrack Growth Portfolio(TM)
Ticker Symbol: SWHGX
The portfolio seeks high capital growth with less
volatility than an all-stock portfolio.
Performance and Fund Facts ..................................... 8
Financial Statements ........................................... 19
Schwab MarketTrack Balanced Portfolio(TM)
Ticker Symbol: SWBGX
The portfolio seeks both capital growth and income.
Performance and Fund Facts ..................................... 10
Financial Statements ........................................... 31
Schwab MarketTrack Conservative Portfolio(TM)
Ticker Symbol: SWCGX
The portfolio seeks income and more growth
potential than an all-bond portfolio.
Performance and Fund Facts ..................................... 12
Financial Statements ........................................... 43
Financial Notes .................................................. 55
Fund Trustees .................................................... 60
Glossary ......................................................... 63
Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM)
Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab).
[PHOTO OF CHARLES R. SCHWAB]
CHARLES R. SCHWAB, Chairman
FROM THE CHAIRMAN
In the past few months, the mutual fund industry has been rocked by the
discovery of improper practices and arrangements. Investors large and small have
seen their confidence shaken, and understandably so.
Similarly, you may have also read about a limited number of potential late
trading issues at Charles Schwab & Co., Inc. and certain limited market timing
arrangements at U.S. Trust. Many firms, including our own, have begun thorough
investigations of their broker processes and procedures. We are continuing to
scrutinize such transactions and arrangements, and are working closely with
regulatory authorities. We are pleased to report that to date we have found no
indications of illegal or improper activities by Charles Schwab Investment
Management ("CSIM"), the investment advisor who manages the SchwabFunds(R).
I fully believe that even a small number of irregularities is unacceptable. We
have spent nearly 30 years building an ethical firm, and our business is founded
on a commitment to doing what's right for investors. That commitment leaves no
room for any failures to follow company policies or industry regulations.
Given the importance of mutual funds to American investors, I can understand why
investors find the recent news to be disturbing. At the same time, I would
caution investors not to overreact. Before taking any action, investors should
consider implications to their portfolio, tax situation and long-term financial
goals.
Ultimately, mutual funds still offer all the features that have made them so
popular--diversification, liquidity, convenience, low investment minimums, and
professional management. For individual investors especially, mutual funds
continue to be one of the most cost-effective investment vehicles available. To
date, millions of Americans have relied on mutual funds as an important way to
invest for retirement, their children's education, and other financial goals. We
see no reason why mutual funds cannot continue to do the same for millions more
Americans in the years to come.
Sincerely,
/s/ Charles R. Schwab
MANAGEMENT'S DISCUSSION
for the year ended October 31, 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 SchwabFunds(R) Shareholders:
By now, many of you have read the significant media coverage regarding the
mutual fund industry. We are pleased to report that to date we have found no
indications of illegal or improper activities by Charles Schwab Investment
Management ("CSIM"), the investment advisor who manages the SchwabFunds.
Similarly, you may have also read about a limited number of potential late
trading issues at Charles Schwab & Co., Inc. and certain limited market
timing arrangements at U.S. Trust. CSIM, which is a separate Charles Schwab
subsidiary, has been conducting its own review of the SchwabFunds policies and
procedures regarding market timing and late trading. We have examined over
two years of activity by CSIM personnel and have not found the types of improper
market timing or late trading arrangements that you have been reading about. Our
research is still ongoing, so some of these facts may change. Here are our key
findings to date:
- - THE INTEGRITY OF OUR STAFF: We have not found any indication that any CSIM
employees, including portfolio managers and senior managers, have engaged in
improper or inappropriate trading for their own account.
- - MARKET TIMING & LATE TRADING: We have not found any special arrangements with
any shareholders to permit market timing or trading of SchwabFunds after
market close.
- - HEDGE FUNDS: We have not found any special arrangements with hedge funds or
other private investment vehicles that would permit them to trade in a way
that was inconsistent with a fund's policies and procedures.
As part of the recent mutual fund investigations, requests for information were
sent by the SEC to about 90 of the largest mutual fund companies. As the
nation's 11th largest fund family with over $140 billion under management,
SchwabFunds also received a request from the SEC. We take these requests very
seriously and are working closely with the regulators on this matter.
Charles Schwab founded his firm 30 years ago with a vision to create the most
useful and ethical financial services firm in the world. We live by that
philosophy every day and nothing means more to our business than the trust of
our shareholders.
Your investment in SchwabFunds is an indication of the trust you place in us. As
the managers of your money, we have a special obligation to live up to that
trust. I want to thank you for investing with us, and want to assure you that we
strive relentlessly to operate our business with the highest ethical standards
and an unwavering commitment to serve you, our SchwabFunds shareholders.
Sincerely,
/s/ Randall W. Merk
2 Schwab MarketTrack Portfolios(R)
[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 Market-Track Portfolios. Prior to joining the firm
in 1997, he worked for more than 18 years in research and asset management.
THE ECONOMY AND THE MARKET
THE ECONOMY CONTINUED TO GATHER STRENGTH DURING THE REPORT PERIOD, BUT
IMPROVEMENT REMAINED SLUGGISH AND UNEVEN. Although numerous factors had been
indicating that the U.S. economy was in recovery when the report period began,
many remained concerned about the slow pace of improvement, in particular the
absence of job growth. However, the government reported an 8.2% increase in GDP
for the third quarter of 2003, job growth for October 2003 was the largest since
January 2003, and merger activity picked up--indications that the economy may
have gained real strength during the report period.
GOVERNMENT POLICIES WERE STRONGLY AIMED AT STIMULATING THE ECONOMY. The Federal
Reserve (the Fed) cut short-term interest rates twice during the period--0.50%
in November 2002 and 0.25% in June 2003--bringing the Fed funds target rate to a
45-year low of 1.00%. On the fiscal side, stimulus measures included tax cuts.
Consumer spending held up strongly throughout the economic downturn, bolstered
in part by unprecedented activity in mortgage refinancing (as individuals took
advantage of the opportunity to refinance at historically low rates). During the
period, we also saw business capital spending show signs of life after declining
for the past few years.
STOCK PRICES ROSE SIGNIFICANTLY OVER THE PERIOD, EVEN AS SKEPTICISM LINGERED
ABOUT THE QUALITY OF THE RALLY. After more than two years of generally negative
performance, U.S. equity markets reached an apparent bottom during the report
period, then rose strongly, ending the period with significant gains. During the
report period, the Nasdaq Composite Index rose 46%, while the S&P 500(R) Index
rose nearly 21%.
One striking feature of the overall U.S. stock market during the report period
is that stocks with more speculative characteristics tended to perform better
than stocks with more demonstrable quality. For example, companies with low
earnings or dividends generally outperformed companies with higher earnings or
dividends. This held true for other measures of quality as well, such as debt to
equity: those with higher levels of debt performed better than companies with
lower levels of debt. Consistent with this trend, small-cap stocks (which tend
to be more
Schwab MarketTrack Portfolios(R) 3
Even the worst-performing sectors in the economy posted a positive return,
with formerly hard-hit sectors such as information technology leading the
rebound.
speculative) performed well during the period, and microcap stocks performed
even better. Large-cap stocks lagged both groups, but still performed well.
Many market observers have asked why lower quality securities outperformed
higher quality and whether it could continue. There are many possible answers,
but we believe the more important point is that in the long run, quality has
been shown to be a superior indicator of performance.
DESPITE THE DIVIDEND TAX CUT, DIVIDEND STOCKS UNDERPERFORMED THE OVERALL MARKET
DURING THE PERIOD. Congress passed the tax cut during the period as part of the
government's economic stimulus efforts. The cut reduced the double taxation of
corporate dividends, thus lowering the cost of capital and encouraging
investment. Since companies that pay dividends are generally more established
and less speculative, we see the underperformance of these stocks as being part
of the larger market trend mentioned earlier.
U.S. INVESTORS SAW GAINS OVERSEAS, HELPED BY CURRENCY TRENDS. Most foreign
markets showed positive total returns for the period, and these returns were
augmented by the fact that the United States dollar fell versus most major
foreign currencies.
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.
20.80% S&P 500(R) INDEX: measures U.S. large-cap stocks
43.37% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
27.03% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in
Europe, Australasia and the Far East
4.91% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond
market
1.15% THREE-MONTH U.S. TREASURY BILLS (T-BILLS): measures short-term U.S.
Treasury obligations
[LINE GRAPH]
Lehman Brothers Three-Month
U.S. Aggregate MSCI EAFE(R) Russell 2000(R) S&P 500(R) U.S. Treasury Bills
Bond Index Index Index Index (T-Bills)
31-Oct-2002 0.00 0.00 0.00 0.00 0.00
01-Nov-2002 -0.18 -0.35 2.67 1.72 0.01
08-Nov-2002 0.59 0.98 1.50 1.07 0.07
15-Nov-2002 0.25 1.69 3.40 2.83 0.09
22-Nov-2002 -0.07 4.00 7.19 5.20 0.11
29-Nov-2002 -0.03 4.54 8.92 5.89 0.14
06-Dec-2002 0.52 1.29 6.37 3.21 0.16
13-Dec-2002 0.86 -0.52 4.07 0.67 0.19
20-Dec-2002 1.42 -0.45 3.79 1.41 0.21
27-Dec-2002 1.99 -0.85 3.12 -0.85 0.24
03-Jan-2003 1.36 2.96 4.80 2.93 0.25
10-Jan-2003 1.18 3.07 6.46 5.13 0.28
17-Jan-2003 1.83 2.26 4.25 2.23 0.30
24-Jan-2003 2.20 -0.96 0.76 -2.34 0.33
31-Jan-2003 2.13 -3.19 0.01 -2.95 0.35
07-Feb-2003 2.47 -4.39 -3.56 -5.84 0.37
14-Feb-2003 2.45 -3.79 -3.60 -5.20 0.39
21-Feb-2003 2.75 -3.22 -2.01 -3.66 0.41
28-Feb-2003 3.54 -5.42 -3.01 -4.40 0.43
07-Mar-2003 3.83 -8.07 -4.69 -5.75 0.47
14-Mar-2003 3.45 -7.78 -4.59 -5.20 0.49
21-Mar-2003 2.18 -3.65 1.31 1.92 0.51
28-Mar-2003 3.12 -5.36 -0.65 -1.73 0.53
04-Apr-2003 3.13 -4.01 0.61 0.04 0.55
11-Apr-2003 3.15 -3.78 0.10 -1.11 0.57
18-Apr-2003 3.40 -0.82 3.46 1.78 0.59
25-Apr-2003 3.97 -1.11 4.77 2.38 0.62
02-May-2003 4.15 2.54 9.99 6.00 0.64
09-May-2003 5.05 4.64 11.59 6.42 0.67
16-May-2003 5.84 6.77 11.94 7.74 0.69
23-May-2003 6.21 6.25 12.96 6.49 0.71
30-May-2003 6.26 7.98 19.10 9.98 0.73
06-Jun-2003 6.35 12.02 22.61 12.79 0.75
13-Jun-2003 7.36 13.35 21.52 12.94 0.80
20-Jun-2003 6.41 14.39 21.49 13.76 0.82
27-Jun-2003 5.85 11.29 21.36 11.58 0.83
04-Jul-2003 5.69 12.74 23.44 12.69 0.85
11-Jul-2003 5.85 12.64 28.17 14.17 0.87
18-Jul-2003 4.74 10.95 25.74 13.63 0.88
25-Jul-2003 4.06 13.99 26.87 14.25 0.90
01-Aug-2003 2.43 12.70 26.70 12.19 0.91
08-Aug-2003 3.59 12.44 22.90 11.92 0.93
15-Aug-2003 2.56 15.65 27.79 13.51 0.95
22-Aug-2003 2.95 16.17 31.49 13.81 0.97
29-Aug-2003 3.16 16.01 34.75 15.56 0.99
05-Sep-2003 3.79 19.26 37.87 17.14 1.01
12-Sep-2003 4.28 19.87 37.96 16.87 1.03
19-Sep-2003 4.79 23.18 41.00 18.91 1.04
26-Sep-2003 5.48 20.32 31.60 14.43 1.06
03-Oct-2003 4.78 24.97 38.95 18.25 1.08
10-Oct-2003 4.75 27.25 40.81 19.25 1.10
17-Oct-2003 4.23 27.96 41.18 19.42 1.12
24-Oct-2003 5.08 25.40 37.41 18.24 1.13
31-Oct-2003 4.91 27.03 43.37 20.80 1.15
These figures assume dividends and distributions were reinvested. Index figures
do not include trading and management costs, which would lower performance.
Indices are unmanaged and you can't invest in them directly. Remember that past
performance is not an indication of future results.
Data source: Charles Schwab & Co., Inc.
4 Schwab MarketTrack Portfolios(R)
PERFORMANCE AT A GLANCE
Total return for the 12 months ended 10/31/03
SCHWAB MARKETTRACK
ALL EQUITY PORTFOLIO(TM) ......... 25.77%
Benchmark ........................ 25.42%
Performance Details .............. page 6
SCHWAB MARKETTRACK
GROWTH PORTFOLIO(TM) ............. 21.18%
Benchmark ........................ 21.26%
Performance Details .............. page 8
SCHWAB MARKETTRACK
BALANCED PORTFOLIO(TM) ........... 17.12%
Benchmark ........................ 17.31%
Performance Details .............. page 10
SCHWAB MARKETTRACK
CONSERVATIVE PORTFOLIO(TM) ....... 12.98%
Benchmark ........................ 13.45%
Performance Details .............. page 12
THE PORTFOLIOS
All of the portfolios posted double-digit total returns for the report period.
October 2003, the last month of the period, was an especially strong month for
the broad U.S. stock market, and marked the seventh positive month of the last
eight.
The S&P 500(R) Index closed above 1050 for the first time since May of 2002.
Third-quarter earnings were 5% above consensus estimates for the 79% of the
companies in the index that had reported their third-quarter earnings by the
time this report was written. Telecom services, the weakest sector in the S&P
500, was up 3%. Information technology, which had been especially hard-hit in
recent years, led all sectors in the S&P 500 during the period with a notable
41% total return.
Bonds were up modestly for the report period; the Lehman Aggregate Bond Index
had a total return of nearly 5%. After trending down, interest rates spiked up
sharply in June 2003, pushing down bond prices.
Of the four portfolios, it was the SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO that
had the highest total return for the period. The fund's exposure to small-cap
and international stocks, and its lack of exposure to the bond market, helped it
outperform the S&P 500.
Exposure to small-cap and international stocks also contributed positively to
the performance of the SCHWAB MARKETTRACK GROWTH PORTFOLIO, helping it post a
total return similar to that of the S&P 500 even though it had some bond market
exposure.
Increasingly larger exposure to bonds meant progressively lower total returns
for the SCHWAB MARKETTRACK BALANCED PORTFOLIO and the SCHWAB MARKETTRACK
CONSERVATIVE PORTFOLIO. However, these portfolios did experience less volatility
than either of the other two portfolios.
---------------------------------------------------------
Past performance does not indicate future results.
Expenses may be partially absorbed by CSIM and Schwab. Without these reductions,
the portfolios' total return would have been lower. Performance does not reflect
the deduction of taxes that a shareholder would pay on portfolio distributions
or on the redemption of portfolio shares.
All portfolio and index figures on this page assume dividends and distributions
were reinvested. Index figures do not include trading and management costs,
which would lower performance. Indices are unmanaged, and you cannot invest in
them directly. Each 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. For more current performance information visit www.schwab.com or call
1-800-435-4000.
Small company stocks are subject to greater volatility than other asset
categories. Foreign securities can involve risks such as political and economic
instability and currency risk.
Nothing in this report represents a recommendation of a security by the
investment adviser. Manager views and portfolio holdings may have changed
subsequent to the report date.
Schwab MarketTrack Portfolios(R) 5
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO(TM)
PERFORMANCE as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the portfolio with a benchmark and the
portfolio's Morningstar category.
[BAR CHART]
Benchmark: Fund Category:
ALL EQUITY MORNINGSTAR
COMPOSITE LARGE-CAP
PORTFOLIO INDEX BLEND
--------- ----- -----
1 YEAR 25.77% 25.42% 19.40%
5 YEARS 1.79% 3.71% .72%
SINCE INCEPTION: 5/1/96 0.25% n/a -0.12%
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the portfolio, compared with a similar investment in a benchmark
and an additional index.
$10,140 PORTFOLIO
$10,967 ALL EQUITY COMPOSITE INDEX
$10,150 S&P 500 INDEX
[LINE GRAPH]
ALL EQUITY
COMPOSITE S&P 500
PORTFOLIO INDEX INDEX
20-May-1998 $10,000 $10,000
31-May-1998 $ 9,850 $10,000 $ 9,751
30-Jun-1998 $10,050 $10,115 $10,147
31-Jul-1998 $ 9,810 $ 9,896 $10,039
31-Aug-1998 $ 8,330 $ 8,345 $ 8,590
30-Sep-1998 $ 8,610 $ 8,578 $ 9,140
31-Oct-1998 $ 9,280 $ 9,142 $ 9,883
30-Nov-1998 $ 9,800 $ 9,652 $10,482
31-Dec-1998 $10,303 $10,168 $11,086
31-Jan-1999 $10,483 $10,339 $11,549
28-Feb-1999 $10,041 $ 9,911 $11,190
31-Mar-1999 $10,383 $10,217 $11,638
30-Apr-1999 $10,896 $10,750 $12,088
31-May-1999 $10,664 $10,599 $11,803
30-Jun-1999 $11,197 $11,165 $12,458
31-Jul-1999 $11,137 $11,096 $12,069
31-Aug-1999 $11,056 $10,974 $12,009
30-Sep-1999 $11,006 $10,857 $11,680
31-Oct-1999 $11,539 $11,262 $12,419
30-Nov-1999 $11,971 $11,820 $12,672
31-Dec-1999 $12,885 $12,884 $13,418
31-Jan-2000 $12,162 $12,359 $12,744
29-Feb-2000 $12,498 $12,966 $12,503
31-Mar-2000 $13,159 $13,492 $13,726
30-Apr-2000 $12,610 $12,906 $13,313
31-May-2000 $12,223 $12,549 $13,040
30-Jun-2000 $12,752 $13,078 $13,362
31-Jul-2000 $12,386 $12,812 $13,154
31-Aug-2000 $13,098 $13,553 $13,971
30-Sep-2000 $12,477 $13,031 $13,233
31-Oct-2000 $12,274 $12,749 $13,177
30-Nov-2000 $11,378 $11,852 $12,139
31-Dec-2000 $11,736 $12,380 $12,198
31-Jan-2001 $11,996 $12,657 $12,632
28-Feb-2001 $10,967 $11,713 $11,480
31-Mar-2001 $10,302 $10,966 $10,752
30-Apr-2001 $11,081 $11,792 $11,587
31-May-2001 $11,061 $11,818 $11,665
30-Jun-2001 $10,925 $11,629 $11,381
31-Jul-2001 $10,655 $11,366 $11,270
31-Aug-2001 $10,187 $10,889 $10,564
30-Sep-2001 $ 9,179 $ 9,762 $ 9,711
31-Oct-2001 $ 9,418 $10,071 $ 9,896
30-Nov-2001 $10,000 $10,700 $10,655
31-Dec-2001 $10,205 $10,968 $10,749
31-Jan-2002 $ 9,887 $10,717 $10,592
28-Feb-2002 $ 9,728 $10,571 $10,388
31-Mar-2002 $10,258 $11,132 $10,778
30-Apr-2002 $ 9,972 $10,902 $10,125
31-May-2002 $ 9,855 $10,783 $10,050
30-Jun-2002 $ 9,293 $10,157 $ 9,335
31-Jul-2002 $ 8,380 $ 9,152 $ 8,607
31-Aug-2002 $ 8,402 $ 9,165 $ 8,663
30-Sep-2002 $ 7,585 $ 8,290 $ 7,722
31-Oct-2002 $ 8,062 $ 8,744 $ 8,401
30-Nov-2002 $ 8,529 $ 9,229 $ 8,896
31-Dec-2002 $ 8,118 $ 8,793 $ 8,374
31-Jan-2003 $ 7,817 $ 8,526 $ 8,154
28-Feb-2003 $ 7,645 $ 8,327 $ 8,032
31-Mar-2003 $ 7,656 $ 8,324 $ 8,110
30-Apr-2003 $ 8,355 $ 9,023 $ 8,778
31-May-2003 $ 8,925 $ 9,621 $ 9,241
30-Jun-2003 $ 9,075 $ 9,786 $ 9,359
31-Jul-2003 $ 9,323 $10,061 $ 9,524
31-Aug-2003 $ 9,559 $10,351 $ 9,710
30-Sep-2003 $ 9,538 $10,305 $ 9,607
31-Oct-2003 $10,140 $10,967 $10,150
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
The portfolio's share price and principal values change, and when you sell
your shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results.
1 Portfolio expenses have been partially absorbed by CSIM and Schwab. Without
these reductions, the portfolio's returns would have been lower. These returns
do not reflect the deduction of taxes that a shareholder would pay on
portfolio distributions or the redemption of portfolio shares.
2 The All Equity Composite Index is composed of Morningstar category averages
and is calculated using the following portion allocations: 45% large-cap
stocks, 25% small-cap stocks and 30% foreign stocks. Source: Morningstar, Inc.
6 Schwab MarketTrack Portfolios(R)
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO(TM)
FUND FACTS as of 10/31/03
Portfolio Category 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 5
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $53,008
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 30.4
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.5
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 10%
- --------------------------------------------------------------------------------
TOP HOLDINGS 2
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) SCHWAB S&P 500 FUND 44.8%
Select Shares(R)
- --------------------------------------------------------------------------------
(2) SCHWAB INTERNATIONAL 29.9%
INDEX FUND(R)
Select Shares
- --------------------------------------------------------------------------------
(3) SCHWAB SMALL-CAP INDEX 25.0%
FUND(R)
Select Shares
- --------------------------------------------------------------------------------
TOTAL 99.7%
ASSET CLASS WEIGHTINGS % of Portfolio
This chart shows the portfolio's asset class composition as of the report date.
[PIE CHART]
44.7% LARGE-CAP STOCKS
29.9% INTERNATIONAL STOCKS
25.1% SMALL-CAP STOCKS
0.3% SHORT-TERM INVESTMENTS
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the portfolio based on a ten-factor model for value and growth
characteristics. The portfolio's market capitalization placement is determined
by the geometric mean of its holdings' market capitalizations. The assessment
reflects the portfolio's holdings as of 10/31/03, which may have changed since
then, and is not a precise indication of risk or performance--past, present,
or future.
2 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
Schwab MarketTrack Portfolios(R) 7
SCHWAB MARKETTRACK GROWTH PORTFOLIO(TM)
PERFORMANCE as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the portfolio with a benchmark and the
portfolio's Morningstar category.
[BAR CHART]
Benchmark: Fund Category:
GROWTH MORNINGSTAR
COMPOSITE MODERATE
PORTFOLIO INDEX ALLOCATION
1 YEAR 21.18% 21.26% 15.87%
5 YEARS 2.83% 4.22% 3.00%
SINCE INCEPTION: 11/20/95 7.16% n/a 7.02%
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the portfolio, compared with a similar investment in a benchmark
and two additional indices.
$17,338 PORTFOLIO
$17,489 GROWTH COMPOSITE INDEX
$19,879 S&P 500 INDEX
$17,171 LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX
[LINE GRAPH]
Lehman
Growth Brothers
Composite S&P 500 U.S. Aggregate
Portfolio Index Index Bond Index
20-Nov-95 $10,000 $10,000 $10,000
30-Nov-95 $10,080 $10,000 $10,104 $10,076
31-Dec-95 $10,292 $10,178 $10,299 $10,217
31-Jan-96 $10,442 $10,337 $10,649 $10,285
29-Feb-96 $10,533 $10,462 $10,748 $10,106
31-Mar-96 $10,623 $10,589 $10,852 $10,035
30-Apr-96 $10,803 $10,870 $11,011 $9,979
31-May-96 $10,954 $11,039 $11,294 $9,959
30-Jun-96 $10,934 $10,994 $11,337 $10,092
31-Jul-96 $10,523 $10,563 $10,836 $10,120
31-Aug-96 $10,733 $10,817 $11,064 $10,102
30-Sep-96 $11,184 $11,204 $11,686 $10,278
31-Oct-96 $11,324 $11,270 $12,009 $10,506
30-Nov-96 $11,896 $11,765 $12,917 $10,686
31-Dec-96 $11,784 $11,739 $12,661 $10,587
31-Jan-97 $12,008 $12,002 $13,451 $10,620
28-Feb-97 $12,028 $11,995 $13,557 $10,646
31-Mar-97 $11,692 $11,712 $13,001 $10,528
30-Apr-97 $12,038 $11,915 $13,776 $10,686
31-May-97 $12,793 $12,637 $14,614 $10,787
30-Jun-97 $13,313 $13,122 $15,268 $10,916
31-Jul-97 $14,087 $13,802 $16,482 $11,210
31-Aug-97 $13,618 $13,416 $15,559 $11,115
30-Sep-97 $14,301 $14,089 $16,410 $11,280
31-Oct-97 $13,853 $13,577 $15,862 $11,443
30-Nov-97 $14,098 $13,661 $16,597 $11,496
31-Dec-97 $14,259 $13,804 $16,882 $11,612
31-Jan-98 $14,410 $13,913 $17,070 $11,761
28-Feb-98 $15,220 $14,688 $18,300 $11,751
31-Mar-98 $15,738 $15,251 $19,237 $11,791
30-Apr-98 $15,846 $15,393 $19,432 $11,852
31-May-98 $15,576 $15,155 $19,097 $11,965
30-Jun-98 $15,868 $15,309 $19,873 $12,067
31-Jul-98 $15,555 $15,056 $19,662 $12,092
31-Aug-98 $13,729 $13,195 $16,823 $12,289
30-Sep-98 $14,194 $13,524 $17,901 $12,577
31-Oct-98 $15,080 $14,221 $19,357 $12,510
30-Nov-98 $15,760 $14,871 $20,530 $12,581
31-Dec-98 $16,422 $15,515 $21,712 $12,619
31-Jan-99 $16,718 $15,738 $22,620 $12,709
28-Feb-99 $16,103 $15,176 $21,916 $12,486
31-Mar-99 $16,576 $15,570 $22,793 $12,555
30-Apr-99 $17,224 $16,230 $23,675 $12,595
31-May-99 $16,916 $16,021 $23,116 $12,484
30-Jun-99 $17,586 $16,699 $24,399 $12,444
31-Jul-99 $17,465 $16,620 $23,638 $12,392
31-Aug-99 $17,355 $16,475 $23,520 $12,386
30-Sep-99 $17,290 $16,368 $22,875 $12,530
31-Oct-99 $17,982 $16,861 $24,323 $12,576
30-Nov-99 $18,520 $17,544 $24,817 $12,575
31-Dec-99 $19,602 $18,810 $26,279 $12,514
31-Jan-00 $18,730 $18,188 $24,960 $12,473
29-Feb-00 $19,155 $18,945 $24,487 $12,624
31-Mar-00 $20,049 $19,586 $26,882 $12,791
30-Apr-00 $19,389 $18,885 $26,073 $12,754
31-May-00 $18,931 $18,461 $25,539 $12,747
30-Jun-00 $19,635 $19,150 $26,169 $13,012
31-Jul-00 $19,233 $18,861 $25,761 $13,131
31-Aug-00 $20,206 $19,765 $27,361 $13,321
30-Sep-00 $19,456 $19,176 $25,917 $13,405
31-Oct-00 $19,255 $18,851 $25,808 $13,493
30-Nov-00 $18,148 $17,842 $23,774 $13,715
31-Dec-00 $18,660 $18,536 $23,891 $13,970
31-Jan-01 $19,052 $18,917 $24,739 $14,198
28-Feb-01 $17,758 $17,818 $22,483 $14,321
31-Mar-01 $16,938 $16,922 $21,057 $14,393
30-Apr-01 $17,955 $17,929 $22,693 $14,332
31-May-01 $18,001 $17,973 $22,845 $14,418
30-Jun-01 $17,851 $17,752 $22,290 $14,473
31-Jul-01 $17,574 $17,490 $22,072 $14,797
31-Aug-01 $16,973 $16,938 $20,690 $14,967
30-Sep-01 $15,667 $15,553 $19,018 $15,141
31-Oct-01 $16,037 $15,993 $19,382 $15,457
30-Nov-01 $16,823 $16,758 $20,868 $15,244
31-Dec-01 $17,086 $17,077 $21,052 $15,147
31-Jan-02 $16,706 $16,775 $20,744 $15,269
28-Feb-02 $16,492 $16,618 $20,344 $15,417
31-Mar-02 $17,157 $17,287 $21,109 $15,161
30-Apr-02 $16,753 $17,055 $19,830 $15,456
31-May-02 $16,623 $16,930 $19,683 $15,587
30-Jun-02 $15,863 $16,156 $18,282 $15,723
31-Jul-02 $14,652 $14,890 $16,858 $15,913
31-Aug-02 $14,747 $14,943 $16,967 $16,182
30-Sep-02 $13,619 $13,831 $15,123 $16,444
31-Oct-02 $14,307 $14,423 $16,454 $16,368
30-Nov-02 $14,984 $15,068 $17,423 $16,363
31-Dec-02 $14,440 $14,550 $16,400 $16,702
31-Jan-03 $14,030 $14,197 $15,970 $16,717
28-Feb-03 $13,825 $13,962 $15,731 $16,948
31-Mar-03 $13,849 $13,954 $15,883 $16,934
30-Apr-03 $14,863 $14,916 $17,192 $17,075
31-May-03 $15,720 $15,751 $18,098 $17,392
30-Jun-03 $15,913 $15,967 $18,330 $17,358
31-Jul-03 $16,167 $16,249 $18,652 $16,774
31-Aug-03 $16,517 $16,639 $19,016 $16,885
30-Sep-03 $16,529 $16,652 $18,815 $17,332
31-Oct-03 $17,338 $17,489 $19,879 $17,171
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
The portfolio's share price and principal values change, and when you sell
your shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results.
1 Portfolio expenses have been partially absorbed by CSIM and Schwab. Without
these reductions, the portfolio's returns would have been lower. These returns
do not reflect the deduction of taxes that a shareholder would pay on
portfolio distributions or the redemption of portfolio shares.
2 The Growth Composite Index is composed of Morningstar category averages and
cash equivalents as represented by the 90-day T-bill and is calculated using
the following portfolio allocations: 40% large-cap stocks, 20% small-cap
stocks, 20% foreign stocks, 15% bonds and 5% cash. Source: Morningstar, Inc.
8 Schwab MarketTrack Portfolios(R)
SCHWAB MARKETTRACK GROWTH PORTFOLIO(TM)
Fund Facts as of 10/31/03
PORTFOLIO CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 506
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $47,303
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 31.9
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.4
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 9%
- --------------------------------------------------------------------------------
TOP HOLDINGS 2
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) SCHWAB S&P 500 FUND 23.9%
Select Shares(R)
- --------------------------------------------------------------------------------
(2) SCHWAB SMALL-CAP INDEX FUND(R) 20.2%
Select Shares
- --------------------------------------------------------------------------------
(3) SCHWAB INTERNATIONAL INDEX FUND(R) 20.0%
Select Shares
- --------------------------------------------------------------------------------
(4) SCHWAB TOTAL BOND MARKET FUND(TM) 14.9%
- --------------------------------------------------------------------------------
(5) GENERAL ELECTRIC CO. 0.5%
- --------------------------------------------------------------------------------
(6) MICROSOFT CORP. 0.5%
- --------------------------------------------------------------------------------
(7) WAL-MART STORES, INC. 0.4%
- --------------------------------------------------------------------------------
(8) PFIZER, INC. 0.4%
- --------------------------------------------------------------------------------
(9) CITIGROUP, INC. 0.4%
- --------------------------------------------------------------------------------
(10) EXXON MOBIL CORP. 0.4%
- --------------------------------------------------------------------------------
TOTAL 81.6%
ASSET CLASS WEIGHTINGS % of Portfolio
This chart shows the portfolio's asset class composition as of the report date.
[PIE CHART]
40.2% LARGE CAP STOCKS
20.2% SMALL-CAP STOCKS
20.0% INTERNATIONAL STOCKS
15.0% BONDS
4.6% SHORT-TERM INVESTMENTS
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the portfolio based on a ten-factor model for value and growth
characteristics. The portfolio's market capitalization placement is determined
by the geometric mean of its holdings' market capitalizations. The assessment
reflects the portfolio's holdings as of 10/31/03, which may have changed since
then, and is not a precise indication of risk or performance--past, present,
or future.
2 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
Schwab MarketTrack Portfolios(R) 9
SCHWAB MARKETTRACK BALANCED PORTFOLIO(TM)
Performance as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the portfolio with a benchmark and the
portfolio's Morningstar category.
[BAR CHART]
Benchmark: Fund Category:
BALANCED MORNINGSTAR
COMPOSITE MODERATE
PORTFOLIO INDEX ALLOCATION
1 YEAR 17.12% 17.31% 15.87%
5 YEARS 3.74% 4.79% 3.00%
SINCE INCEPTION: 11/20/95 7.05% N/A 7.02%
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the portfolio, compared with a similar investment in a benchmark
and two additional indices.
$17,193 PORTFOLIO
$17,500 BALANCED COMPOSITE INDEX
$19,879 S&P 500 INDEX
$17,171 LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX
[LINE GRAPH]
LEHMAN
BALANCED BROTHERS
COMPOSITE S&P 500 U.S. AGGREGATE
PORTFOLIO INDEX INDEX BOND INDEX
20-Nov-95 $10,000 $10,000 $10,000
30-Nov-95 $10,080 $10,000 $10,104 $10,076
31-Dec-95 $10,270 $10,160 $10,299 $10,217
31-Jan-96 $10,390 $10,296 $10,649 $10,285
29-Feb-96 $10,410 $10,350 $10,748 $10,106
31-Mar-96 $10,460 $10,425 $10,852 $10,035
30-Apr-96 $10,581 $10,614 $11,011 $9,979
31-May-96 $10,691 $10,744 $11,294 $9,959
30-Jun-96 $10,711 $10,736 $11,337 $10,092
31-Jul-96 $10,410 $10,421 $10,836 $10,120
31-Aug-96 $10,551 $10,615 $11,064 $10,102
30-Sep-96 $10,912 $10,956 $11,686 $10,278
31-Oct-96 $11,082 $11,067 $12,009 $10,506
30-Nov-96 $11,534 $11,487 $12,917 $10,686
31-Dec-96 $11,415 $11,438 $12,661 $10,587
31-Jan-97 $11,589 $11,662 $13,451 $10,620
28-Feb-97 $11,589 $11,658 $13,557 $10,646
31-Mar-97 $11,334 $11,402 $13,001 $10,528
30-Apr-97 $11,620 $11,603 $13,776 $10,686
31-May-97 $12,183 $12,159 $14,614 $10,787
30-Jun-97 $12,593 $12,541 $15,268 $10,916
31-Jul-97 $13,217 $13,135 $16,482 $11,210
31-Aug-97 $12,849 $12,845 $15,559 $11,115
30-Sep-97 $13,391 $13,371 $16,410 $11,280
31-Oct-97 $13,125 $13,064 $15,862 $11,443
30-Nov-97 $13,309 $13,153 $16,597 $11,496
31-Dec-97 $13,443 $13,290 $16,882 $11,612
31-Jan-98 $13,582 $13,399 $17,070 $11,761
28-Feb-98 $14,149 $13,959 $18,300 $11,751
31-Mar-98 $14,523 $14,372 $19,237 $11,791
30-Apr-98 $14,608 $14,486 $19,432 $11,852
31-May-98 $14,448 $14,337 $19,097 $11,965
30-Jun-98 $14,672 $14,492 $19,873 $12,067
31-Jul-98 $14,469 $14,300 $19,662 $12,092
31-Aug-98 $13,262 $13,005 $16,823 $12,289
30-Sep-98 $13,668 $13,362 $17,901 $12,577
31-Oct-98 $14,309 $13,852 $19,357 $12,510
30-Nov-98 $14,800 $14,353 $20,530 $12,581
31-Dec-98 $15,281 $14,851 $21,712 $12,619
31-Jan-99 $15,523 $15,048 $22,620 $12,709
28-Feb-99 $15,028 $14,574 $21,916 $12,486
31-Mar-99 $15,369 $14,887 $22,793 $12,555
30-Apr-99 $15,820 $15,372 $23,675 $12,595
31-May-99 $15,567 $15,197 $23,116 $12,484
30-Jun-99 $16,018 $15,667 $24,399 $12,444
31-Jul-99 $15,930 $15,568 $23,638 $12,392
31-Aug-99 $15,842 $15,448 $23,520 $12,386
30-Sep-99 $15,853 $15,392 $22,875 $12,530
31-Oct-99 $16,337 $15,754 $24,323 $12,576
30-Nov-99 $16,711 $16,210 $24,817 $12,575
31-Dec-99 $17,420 $17,043 $26,279 $12,514
31-Jan-00 $16,823 $16,615 $24,960 $12,473
29-Feb-00 $17,150 $17,141 $24,487 $12,624
31-Mar-00 $17,815 $17,672 $26,882 $12,791
30-Apr-00 $17,353 $17,195 $26,073 $12,754
31-May-00 $17,037 $16,901 $25,539 $12,747
30-Jun-00 $17,601 $17,445 $26,169 $13,012
31-Jul-00 $17,364 $17,298 $25,761 $13,131
31-Aug-00 $18,085 $18,012 $27,361 $13,321
30-Sep-00 $17,612 $17,649 $25,917 $13,405
31-Oct-00 $17,499 $17,456 $25,808 $13,493
30-Nov-00 $16,812 $16,791 $23,774 $13,715
31-Dec-00 $17,241 $17,355 $23,891 $13,970
31-Jan-01 $17,569 $17,708 $24,739 $14,198
28-Feb-01 $16,713 $16,970 $22,483 $14,321
31-Mar-01 $16,162 $16,352 $21,057 $14,393
30-Apr-01 $16,877 $17,069 $22,693 $14,332
31-May-01 $16,936 $17,148 $22,845 $14,418
30-Jun-01 $16,842 $17,008 $22,290 $14,473
31-Jul-01 $16,748 $16,918 $22,072 $14,797
31-Aug-01 $16,350 $16,539 $20,690 $14,967
30-Sep-01 $15,447 $15,563 $19,018 $15,141
31-Oct-01 $15,798 $15,961 $19,382 $15,457
30-Nov-01 $16,314 $16,510 $20,868 $15,244
31-Dec-01 $16,483 $16,719 $21,052 $15,147
31-Jan-02 $16,239 $16,539 $20,744 $15,269
28-Feb-02 $16,105 $16,436 $20,344 $15,417
31-Mar-02 $16,519 $16,865 $21,109 $15,161
30-Apr-02 $16,288 $16,726 $19,830 $15,456
31-May-02 $16,227 $16,653 $19,683 $15,587
30-Jun-02 $15,691 $16,070 $18,282 $15,723
31-Jul-02 $14,838 $15,157 $16,858 $15,913
31-Aug-02 $14,972 $15,263 $16,967 $16,182
30-Sep-02 $14,156 $14,462 $15,123 $16,444
31-Oct-02 $14,680 $14,918 $16,454 $16,368
30-Nov-02 $15,204 $15,438 $17,423 $16,363
31-Dec-02 $14,860 $15,101 $16,400 $16,702
31-Jan-03 $14,548 $14,844 $15,970 $16,717
28-Feb-03 $14,436 $14,714 $15,731 $16,948
31-Mar-03 $14,473 $14,723 $15,883 $16,934
30-Apr-03 $15,284 $15,514 $17,192 $17,075
31-May-03 $16,008 $16,238 $18,098 $17,392
30-Jun-03 $16,145 $16,395 $18,330 $17,358
31-Jul-03 $16,207 $16,483 $18,652 $16,774
31-Aug-03 $16,494 $16,802 $19,016 $16,885
30-Sep-03 $16,619 $16,894 $18,815 $17,332
31-Oct-03 $17,193 $17,500 $19,879 $17,171
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.
1 Portfolio expenses have been partially absorbed by CSIM and Schwab. Without
these reductions, the portfolio's returns would have been lower. These returns
do not reflect the deduction of taxes that a shareholder would pay on
portfolio distributions or the redemption of portfolio shares.
2 The Balanced Composite Index is composed of Morningstar category averages and
cash equivalents as represented by the 90-day T-bill and is calculated using
the following portfolio allocations: 30% large-cap stocks, 15% small-caps
stocks, 15% foreign stocks, 35% bonds and 5% cash. Source: Morningstar, Inc.
10 Schwab MarketTrack Portfolios(R)
SCHWAB MARKETTRACK BALANCED PORTFOLIO(TM)
FUND FACTS as of 10/31/03
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
- -----------------------------------------------------------
(1) SCHWAB TOTAL BOND MARKET FUND(TM) 35.0%
- -----------------------------------------------------------
(2) SCHWAB S&P 500 FUND 18.0%
Select Shares(R)
- -----------------------------------------------------------
(3) SCHWAB SMALL-CAP INDEX FUND(R) 15.2%
Select Shares
- -----------------------------------------------------------
(4) SCHWAB INTERNATIONAL INDEX FUND(R) 15.0%
Select Shares
- -----------------------------------------------------------
(5) GENERAL ELECTRIC CO. 0.4%
- -----------------------------------------------------------
(6) MICROSOFT CORP. 0.4%
- -----------------------------------------------------------
(7) WALMART STORES, INC. 0.3%
- -----------------------------------------------------------
(8) PFIZER, INC. 0.3%
- -----------------------------------------------------------
(9) CITIGROUP, INC. 0.3%
- -----------------------------------------------------------
(10) EXXON MOBIL CORP. 0.3%
- -----------------------------------------------------------
TOTAL 85.2%
STATISTICS
NUMBER OF HOLDINGS 505
- ----------------------------------
PORTFOLIO TURNOVER RATE 17%
- ----------------------------------
ASSET CLASS WEIGHTINGS % of Portfolio
This chart shows the portfolio's asset class composition as of the report date.
[PIE CHART]
35.1% BONDS
30.3% LARGE-CAP STOCKS
15.0% INTERNATIONAL STOCKS
15.2% SMALL-CAP STOCKS
4.4% 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.
Schwab MarketTrack Portfolios(R) 11
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(TM)
PERFORMANCE as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the portfolio with a benchmark and the
portfolio's Morningstar category.
Benchmark: Fund Category:
CONSERVATIVE MORNINGSTAR
COMPOSITE CONSERVATIVE
PORTFOLIO INDEX ALLOCATION
1 YEAR 12.98% 13.45% 10.52%
5 YEARS 4.47% 5.16% 4.02%
SINCE INCEPTION: 11/20/95 6.76% N/A 6.94%
[BAR CHART]
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the portfolio, compared with a similar investment in a benchmark
and two additional indices.
$16,837 PORTFOLIO
$17,069 CONSERVATIVE COMPOSITE INDEX
$19,879 S&P 500 INDEX
$17,171 LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX
[LINE GRAPH]
Conservative Lehman Brothers
Composite S&P 500 U.S. Aggregate
Portfolio Index Index Bond Index
20-Nov-1995 $10,000 $10,000 $10,000
30-Nov-1995 $10,080 $10,000 $10,104 $10,076
31-Dec-1995 $10,237 $10,151 $10,299 $10,217
31-Jan-1996 $10,337 $10,261 $10,649 $10,285
29-Feb-1996 $10,297 $10,239 $10,748 $10,106
31-Mar-1996 $10,287 $10,266 $10,852 $10,035
30-Apr-1996 $10,337 $10,371 $11,011 $ 9,979
31-May-1996 $10,378 $10,451 $11,294 $ 9,959
30-Jun-1996 $10,439 $10,485 $11,337 $10,092
31-Jul-1996 $10,256 $10,287 $10,836 $10,120
31-Aug-1996 $10,337 $10,413 $11,064 $10,102
30-Sep-1996 $10,643 $10,693 $11,686 $10,278
31-Oct-1996 $10,818 $10,837 $12,009 $10,506
30-Nov-1996 $11,179 $11,173 $12,917 $10,686
31-Dec-1996 $11,070 $11,111 $12,661 $10,587
31-Jan-1997 $11,174 $11,267 $13,451 $10,620
28-Feb-1997 $11,184 $11,277 $13,557 $10,646
31-Mar-1997 $10,965 $11,071 $13,001 $10,528
30-Apr-1997 $11,206 $11,250 $13,776 $10,686
31-May-1997 $11,604 $11,642 $14,614 $10,787
30-Jun-1997 $11,896 $11,931 $15,268 $10,916
31-Jul-1997 $12,413 $12,413 $16,482 $11,210
31-Aug-1997 $12,160 $12,192 $15,559 $11,115
30-Sep-1997 $12,540 $12,583 $16,410 $11,280
31-Oct-1997 $12,455 $12,438 $15,862 $11,443
30-Nov-1997 $12,603 $12,510 $16,597 $11,496
31-Dec-1997 $12,698 $12,634 $16,882 $11,612
31-Jan-1998 $12,829 $12,755 $17,070 $11,761
28-Feb-1998 $13,189 $13,108 $18,300 $11,751
31-Mar-1998 $13,418 $13,383 $19,237 $11,791
30-Apr-1998 $13,484 $13,473 $19,432 $11,852
31-May-1998 $13,431 $13,420 $19,097 $11,965
30-Jun-1998 $13,595 $13,550 $19,873 $12,067
31-Jul-1998 $13,484 $13,437 $19,662 $12,092
31-Aug-1998 $12,774 $12,669 $16,823 $12,289
30-Sep-1998 $13,139 $12,989 $17,901 $12,577
31-Oct-1998 $13,530 $13,275 $19,357 $12,510
30-Nov-1998 $13,843 $13,624 $20,530 $12,581
31-Dec-1998 $14,166 $13,958 $21,712 $12,619
31-Jan-1999 $14,348 $14,112 $22,620 $12,709
28-Feb-1999 $13,950 $13,731 $21,916 $12,486
31-Mar-1999 $14,200 $13,959 $22,793 $12,555
30-Apr-1999 $14,475 $14,279 $23,675 $12,595
31-May-1999 $14,269 $14,123 $23,116 $12,484
30-Jun-1999 $14,521 $14,398 $24,399 $12,444
31-Jul-1999 $14,452 $14,322 $23,638 $12,392
31-Aug-1999 $14,395 $14,240 $23,520 $12,386
30-Sep-1999 $14,464 $14,251 $22,875 $12,530
31-Oct-1999 $14,766 $14,483 $24,323 $12,576
30-Nov-1999 $14,986 $14,768 $24,817 $12,575
31-Dec-1999 $15,398 $15,258 $26,279 $12,514
31-Jan-2000 $15,022 $14,985 $24,960 $12,473
29-Feb-2000 $15,269 $15,352 $24,487 $12,624
31-Mar-2000 $15,738 $15,730 $26,882 $12,791
30-Apr-2000 $15,442 $15,416 $26,073 $12,754
31-May-2000 $15,229 $15,227 $25,539 $12,747
30-Jun-2000 $15,667 $15,655 $26,169 $13,012
31-Jul-2000 $15,584 $15,606 $25,761 $13,131
31-Aug-2000 $16,085 $16,102 $27,361 $13,321
30-Sep-2000 $15,835 $15,919 $25,917 $13,405
31-Oct-2000 $15,787 $15,818 $25,808 $13,493
30-Nov-2000 $15,462 $15,488 $23,774 $13,715
31-Dec-2000 $15,815 $15,932 $23,891 $13,970
31-Jan-2001 $16,087 $16,236 $24,739 $14,198
28-Feb-2001 $15,594 $15,833 $22,483 $14,321
31-Mar-2001 $15,297 $15,470 $21,057 $14,393
30-Apr-2001 $15,732 $15,896 $22,693 $14,332
31-May-2001 $15,807 $15,976 $22,845 $14,418
30-Jun-2001 $15,770 $15,904 $22,290 $14,473
31-Jul-2001 $15,820 $15,961 $22,072 $14,797
31-Aug-2001 $15,632 $15,775 $20,690 $14,967
30-Sep-2001 $15,107 $15,190 $19,018 $15,141
31-Oct-2001 $15,410 $15,540 $19,382 $15,457
30-Nov-2001 $15,675 $15,836 $20,868 $15,244
31-Dec-2001 $15,759 $15,936 $21,052 $15,147
31-Jan-2002 $15,643 $15,851 $20,744 $15,269
28-Feb-2002 $15,592 $15,824 $20,344 $15,417
31-Mar-2002 $15,759 $16,021 $21,109 $15,161
30-Apr-2002 $15,682 $16,016 $19,830 $15,456
31-May-2002 $15,695 $16,009 $19,683 $15,587
30-Jun-2002 $15,384 $15,647 $18,282 $15,723
31-Jul-2002 $14,875 $15,082 $16,858 $15,913
31-Aug-2002 $15,045 $15,233 $16,967 $16,182
30-Sep-2002 $14,575 $14,762 $15,123 $16,444
31-Oct-2002 $14,903 $15,045 $16,454 $16,368
30-Nov-2002 $15,243 $15,412 $17,423 $16,363
31-Dec-2002 $15,125 $15,286 $16,400 $16,702
31-Jan-2003 $14,926 $15,121 $15,970 $16,717
28-Feb-2003 $14,913 $15,100 $15,731 $16,948
31-Mar-2003 $14,939 $15,106 $15,883 $16,934
30-Apr-2003 $15,539 $15,699 $17,192 $17,075
31-May-2003 $16,113 $16,285 $18,098 $17,392
30-Jun-2003 $16,193 $16,384 $18,330 $17,358
31-Jul-2003 $16,059 $16,271 $18,652 $16,774
31-Aug-2003 $16,286 $16,513 $19,016 $16,885
30-Sep-2003 $16,501 $16,711 $18,815 $17,332
31-Oct-2003 $16,837 $17,069 $19,879 $17,171
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.
1 Portfolio expenses have been partially absorbed by CSIM and Schwab. Without
these reductions, the portfolio's returns would have been lower. These returns
do not reflect the deduction of taxes that a shareholder would pay on
portfolio distributions or the redemption of portfolio shares.
2 The Conservative Composite Index is composed of Morningstar category averages
and cash equivalents as represented by the 90-day T-bill and is calculated
using the following portfolio allocations: 20% large-cap stocks, 10% small-cap
stocks, 10% foreign stocks, 55% bonds and 5% cash. Source: Morningstar, Inc.
12 Schwab MarketTrack Portfolios(R)
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(TM)
FUND FACTS as of 10/31/03
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
- -----------------------------------------------------
(1) SCHWAB TOTAL BOND MARKET 54.8%
FUND(TM)
- -----------------------------------------------------
(2) SCHWAB S&P 500 FUND 15.1%
Select Shares(R)
- -----------------------------------------------------
(3) SCHWAB SMALL-CAP INDEX FUND(R) 10.3%
Select Shares
- -----------------------------------------------------
(4) SCHWAB INTERNATIONAL INDEX FUND(R) 10.1%
Select Shares
- -----------------------------------------------------
(5) GENERAL ELECTRIC CO. 0.2%
- -----------------------------------------------------
(6) MICROSOFT CORP. 0.2%
- -----------------------------------------------------
(7) WAL-MART STORES, INC. 0.1%
- -----------------------------------------------------
(8) PFIZER, INC. 0.1%
- -----------------------------------------------------
(9) CITIGROUP, INC. 0.1%
- -----------------------------------------------------
(1O) EXXON MOBIL CORP. 0.1%
- -----------------------------------------------------
TOTAL 91.1%
STATISTICS
NUMBER OF HOLDINGS 507
- ----------------------------------
PORTFOLIO TURNOVER RATE 17%
- ----------------------------------
ASSET CLASS WEIGHTINGS % of Portfolio
This chart shows the portfolio's asset class composition as of the report date.
[PIE CHART]
54.9% BONDS
20.2% LARGE-CAP STOCKS
10.3% SMALL-CAP STOCKS
10.1% INTERNATIONAL STOCKS
4.5% 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.
Schwab MarketTrack Portfolios(R) 13
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98-
10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
PER-SHARE DATA ($)
- -----------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 7.60 9.06 12.06 11.48 9.28
---------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.09 0.05 0.22 0.04 0.03
Net realized and unrealized gains or losses 1.85 (1.32) (2.99) 0.69 2.22
---------------------------------------------------------------
Total income or loss from investment operations 1.94 (1.27) (2.77) 0.73 2.25
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 9.43 7.60 9.06 12.06 11.48
---------------------------------------------------------------
Total return (%) 25.77 (14.40) (23.27) 6.37 24.34
RATIOS/SUPPLEMENTAL DATA (%)
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses(1) 0.50 0.50 0.50 0.56 2 0.54
Gross operating expenses 0.76 0.77 0.77 0.84 0.97
Net investment income 1.10 0.58 1.93 0.05 0.13
Portfolio turnover rate 10 15 5 3 6
Net assets, end of period ($ x 1,000,000) 427 353 405 441 203
1 The expenses incurred by underlying funds in which the portfolio invests are
not included in this ratio. The income received by the portfolio from
underlying funds is reduced by those expenses.
2 The ratio of net operating expenses would have been 0.57% if certain
non-routine expenses (proxy fees) had been included.
14 See financial notes.
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO(TM)
PORTFOLIO HOLDINGS as of October 31, 2003
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 ($x1,000) ($x1,000)
99.7% OTHER INVESTMENT COMPANIES 476,972 425,833
0.2% SHORT-TERM INVESTMENT 976 976
0.0% U.S. TREASURY OBLIGATION 100 100
- ------------------------------------------------------------------------------
99.9% TOTAL INVESTMENTS 478,048 426,909
0.1% OTHER ASSETS AND LIABILITIES, NET 352
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 427,261
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OTHER INVESTMENT COMPANIES
99.7% of net assets
/(2) Schwab International Index Fund(R),
Select Shares(R) 10,006,225 127,579
/(1) Schwab S&P 500 Fund(TM),
Select Shares 11,654,990 191,258
/(3) Schwab Small-Cap Index Fund(R),
Select Shares 5,862,799 106,996
-----------
425,833
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENT
0.2% of net assets
Bank One, Grand Cayman
Time Deposit
0.50%, 11/01/03 976 976
U.S. TREASURY OBLIGATION
0.0% of net assets
= U.S. Treasury Bill
0.93%, 12/18/03 100 100
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
See financial notes. 15
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO(TM)
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value $426,909 a
Receivables:
Fund shares sold 181
Investments sold 641
Due from brokers for futures 2
Prepaid expenses + 8
---------------
TOTAL ASSETS 427,741
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 370
Investment adviser and administrator fees 5
Transfer agent and shareholder service fees 6
Accrued expenses + 99
---------------
TOTAL LIABILITIES 480
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 427,741
TOTAL LIABILITIES - 480
---------------
NET ASSETS 427,261
NET ASSETS BY SOURCE
Capital received from investors 512,596
Distributions in excess of net investment income (1,522)
Net realized capital losses (32,727)
Net unrealized capital losses (51,086) b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$427,261 45,330 $9.43
Unless stated, all numbers x 1,000.
a The fund paid $478,048 for these securities. Not counting short-term
obligations and government securities, the fund paid $36,480 for securities
during the report period and received $46,556 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 2.6%
Small-Cap Index Fund(R) 6.5%
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 December 18, 2003, with an
aggregate contract value of $1,574 and net unrealized gains of $53.
FEDERAL TAX DATA
- ---------------------------------------------------
PORTFOLIO COST $486,118
NET UNREALIZED GAINS AND LOSSES:
Gains $7,551
Losses + (66,760)
-----------
($59,209)
AS OF DECEMBER 31, 2002:
UNDISTRIBUTED EARNINGS:
Ordinary income $39
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 12/31 of: Loss amount:
2011 $11,058
DEFERRED CAPITAL LOSSES $13,545
16 See financial notes.
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO(TM)
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- -------------------------------------------------------------------
Dividends $5,996
Interest + 9
------------------
TOTAL INVESTMENT INCOME 6,005
NET REALIZED GAINS AND LOSSES
- -------------------------------------------------------------------
Net realized losses on investments sold (10,273)
Net realized gains on futures contracts + 176
------------------
NET REALIZED LOSSES (10,097)
NET UNREALIZED GAINS AND LOSSES
- -------------------------------------------------------------------
Net unrealized gains on investments 94,347
Net unrealized gains on futures contracts + 78
------------------
NET UNREALIZED GAINS 94,425
EXPENSES
- -------------------------------------------------------------------
Investment adviser and administrator fees 1,647 a
Transfer agent and shareholder service fees 936 b
Trustees' fees 7 c
Custodian fees 35
Portfolio accounting fees 55
Professional fees 33
Registration fees 23
Shareholder reports 104
Other expenses + 7
-----------------
Total expenses 2,847
Expense reduction - 975 d
-----------------
NET EXPENSES 1,872
INCREASE IN NET ASSETS FROM OPERATIONS
- -------------------------------------------------------------------
TOTAL INVESTMENT INCOME 6,005
NET EXPENSES - 1,872
-----------------
NET INVESTMENT INCOME 4,133
NET REALIZED LOSSES (10,097) e
NET UNREALIZED GAINS + 94,425 e
-----------------
INCREASE IN NET ASSETS FROM OPERATIONS $88,461
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.44% of the first
$500 million and 0.39% of assets beyond that.
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% of the
fund's assets. These fees are paid to Charles Schwab & Co.
c For the fund's independent trustees only.
d This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 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 $84,328.
See financial notes. 17
SCHWAB MARKETTRACK ALL EQUITY PORTFOLIO(TM)
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- ---------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income $4,133 $2,413
Net realized losses (10,097) (13,794)
Net unrealized gains or losses + 94,425 (51,352)
---------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 88,461 (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
- ---------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
Shares sold 7,189 $58,084 10,638 $96,109
Shares reinvested 618 4,696 910 8,668
Shares redeemed + (8,992) (72,607) (9,783) (85,204)
-------------------------------------------
NET TRANSACTIONS IN
FUND SHARES (1,185) ($9,827) 1,765 $19,573
SHARES OUTSTANDING AND NET ASSETS
- ---------------------------------------------------------------------------------
11/1/02-10/31/03 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 + (1,185) 73,819 1,765 (52,005) b
-------------------------------------------
END OF PERIOD 45,330 $427,261 46,515 $353,442 c
Unless stated, all numbers x 1,000.
a The tax-basis components of distributions paid are:
CURRENT PERIOD:
Ordinary Income $3,978
Long-term capital gains $837
PRIOR PERIOD:
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
$1,522 and $1,677 at the end of the current period and the prior period,
respectively.
18 See financial notes.
SCHWAB MARKETTRACK GROWTH PORTFOLIO(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98-
10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- --------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- --------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 12.05 13.88 17.22 16.37 13.96
------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.18 0.19 0.41 0.22 0.18
Net realized and unrealized gains or losses 2.33 (1.62) (3.22) 0.94 2.48
------------------------------------------------------
Total income or loss from investment operations 2.51 (1.43) (2.81) 1.16 2.66
Less distributions:
Dividends from net investment income (0.20) (0.24) (0.44) (0.18) (0.22)
Distributions from net realized gains -- (0.16) (0.09) (0.13) (0.03)
------------------------------------------------------
Total distributions (0.20) (0.40) (0.53) (0.31) (0.25)
------------------------------------------------------
Net asset value at end of period 14.36 12.05 13.88 17.22 16.37
------------------------------------------------------
Total return (%) 21.18 (10.78) (16.71) 7.08 19.24
RATIOS/SUPPLEMENTAL DATA (%)
- --------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1 0.50 0.50 0.50 0.56 2 0.58
Gross operating expenses 0.74 0.75 0.74 0.82 0.91
Net investment income 1.48 1.35 2.58 1.32 1.21
Portfolio turnover rate 9 21 10 12 7
Net assets, end of period ($ x 1,000,000) 578 510 511 566 428
1 The expenses incurred by underlying funds in which the portfolio invests are
not included in this ratio. The income received by the portfolio from
underlying funds is reduced by those expenses.
2 The ratio of net operating expenses would have been 0.57% if certain
non-routine expenses (proxy fees) had been included.
See financial notes. 19
SCHWAB MARKETTRACK GROWTH PORTFOLIO(TM)
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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)
- --------------------------------------------------------------------------------
79.0% OTHER INVESTMENT
COMPANIES 449,560 456,627
16.3% COMMON STOCK 68,910 94,102
4.6% SHORT-TERM
INVESTMENTS 26,359 26,359
- --------------------------------------------------------------------------------
99.9% TOTAL INVESTMENTS 544,829 577,088
0.1% OTHER ASSETS AND
LIABILITIES, NET 625
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 577,713
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 16.3% of net assets
AEROSPACE / DEFENSE 0.3%
--------------------------------------------------------------------------
The Boeing Co. 8,078 311
Crane Co. 300 9
General Dynamics Corp. 2,000 167
Goodrich Corp. 1,100 30
Lockheed Martin Corp. 4,300 199
Northrop Grumman Corp. 1,796 161
Raytheon Co. 3,900 103
Rockwell Automation, Inc. 1,900 59
Rockwell Collins, Inc. 1,900 52
Textron, Inc. 1,500 75
United Technologies Corp. 4,600 390
-------------
1,556
AIR TRANSPORTATION 0.2%
--------------------------------------------------------------------------
Delta Air Lines, Inc. 1,300 17
FedEx Corp. 2,920 221
Sabre Holdings Corp. 1,283 28
Southwest Airlines Co. 7,480 145
United Parcel Service, Inc.,
Class B 10,818 785
-------------
1,196
ALCOHOLIC BEVERAGES 0.1%
--------------------------------------------------------------------------
Adolph Coors Co., Class B 400 22
Anheuser-Busch Cos., Inc. 8,200 404
Brown-Forman Corp., Class B 602 51
-------------
477
APPAREL 0.1%
--------------------------------------------------------------------------
Jones Apparel Group, Inc. 1,200 41
Liz Claiborne, Inc. 1,200 44
Nike, Inc., Class B 2,500 160
Reebok International Ltd. 500 20
VF Corp. 1,200 51
-------------
316
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 0.2%
--------------------------------------------------------------------------
Cooper Tire & Rubber Co. 700 14
Cummins, Inc. 200 9
Dana Corp. 1,578 26
Danaher Corp. 1,400 116
Delphi Corp. 5,743 51
Eaton Corp. 700 70
Ford Motor Co. 18,103 220
General Motors Corp. 5,425 232
Genuine Parts Co. 1,800 57
o Goodyear Tire & Rubber Co. 1,600 11
Harley-Davidson, Inc. 3,000 142
o Navistar International Corp. 700 28
Visteon Corp. 1,558 10
-------------
986
BANKS 1.3%
--------------------------------------------------------------------------
AmSouth Bancorp. 3,900 92
Bank of America Corp. 14,548 1,102
The Bank of New York Co., Inc. 7,300 228
Bank One Corp. 10,875 462
20 See financial notes.
SCHWAB MARKETTRACK GROWTH PORTFOLIO(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
BB&T Corp. 5,300 205
Comerica, Inc. 1,700 88
Fifth Third Bancorp 5,669 329
First Tennessee National Corp. 1,200 54
FleetBoston Financial Corp. 10,110 408
Huntington Bancshares, Inc. 2,262 49
J.P. Morgan Chase & Co. 19,960 717
KeyCorp, Inc. 4,400 124
Marshall & Ilsley Corp. 2,056 74
Mellon Financial Corp. 4,100 122
National City Corp. 6,100 199
North Fork Bancorp., Inc. 1,600 62
Northern Trust Corp. 2,200 102
PNC Financial Services Group, Inc. 2,800 150
Regions Financial Corp. 2,100 77
SouthTrust Corp. 3,400 108
State Street Corp. 3,300 173
SunTrust Banks, Inc. 2,800 188
Synovus Financial Corp. 2,750 76
U.S. Bancorp 18,662 508
Union Planters Corp. 1,950 65
Wachovia Corp. 12,884 591
Wells Fargo & Co. 16,415 924
Zions Bancorp. 900 55
-------------
7,332
BUSINESS MACHINES & SOFTWARE 1.6%
--------------------------------------------------------------------------
Adobe Systems, Inc. 2,400 105
o Apple Computer, Inc. 3,200 73
Autodesk, Inc. 1,200 23
o BMC Software, Inc. 2,400 42
o Cisco Systems, Inc. 67,900 1,424
o Compuware Corp. 3,600 20
o Comverse Technology, Inc. 1,400 25
o Dell, Inc. 25,100 907
o EMC Corp. 20,986 290
o Gateway, Inc. 3,100 16
Hewlett-Packard Co. 29,903 667
International Business Machines
Corp. 16,800 1,503
o Lexmark International, Inc., Class A 1,300 96
(6) Microsoft Corp. 104,700 2,738
o NCR Corp. 1,000 36
o Network Appliance, Inc. 3,400 84
o Novell, Inc. 3,200 19
o Oracle Corp. 50,648 606
Pitney Bowes, Inc. 2,300 94
o Siebel Systems, Inc. 4,300 54
o Sun Microsystems, Inc. 30,800 122
o Unisys Corp. 3,100 48
o Xerox Corp. 7,800 82
-------------
9,074
BUSINESS SERVICES 0.6%
--------------------------------------------------------------------------
o Allied Waste Industries, Inc. 1,900 21
o Apollo Group, Inc., Class A 1,700 108
Automatic Data Processing, Inc. 5,700 215
o Cendant Corp. 9,532 195
Cintas Corp. 1,638 70
o Citrix Systems, Inc. 1,800 46
Computer Associates International,
Inc. 5,625 132
o Computer Sciences Corp. 1,680 67
o Concord EFS, Inc. 4,900 52
o Convergys Corp. 1,354 22
Deluxe Corp. 700 28
o eBay, Inc. 6,068 340
Electronic Data Systems Corp. 4,600 99
Equifax, Inc. 1,200 29
First Data Corp. 7,100 254
o Fiserv, Inc. 1,800 64
H&R Block, Inc. 1,700 80
IMS Health, Inc. 2,300 54
o Interpublic Group of Cos., Inc. 3,700 55
o Intuit, Inc. 1,972 99
o Mercury Interactive Corp. 800 37
o Monster Worldwide, Inc. 954 24
Omnicom Group, Inc. 1,800 144
o Parametric Technology Corp. 2,700 8
Paychex, Inc. 3,600 140
o PeopleSoft, Inc. 2,900 60
o Robert Half International, Inc. 1,700 40
o Sungard Data Systems, Inc. 2,725 76
o Symantec Corp. 1,400 93
Tyco International Ltd. 19,303 403
See financial notes. 21
SCHWAB MARKETTRACK GROWTH PORTFOLIO(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Veritas Software Corp. 4,200 152
Waste Management, Inc. 6,117 159
o Yahoo!, Inc. 6,300 275
-------------
3,641
CHEMICALS 0.2%
--------------------------------------------------------------------------
Air Products & Chemicals, Inc. 2,300 104
Dow Chemical Co. 8,694 328
E.I. du Pont de Nemours & Co. 9,592 388
Eastman Chemical Co. 800 26
Ecolab, Inc. 2,800 75
Great Lakes Chemical Corp. 600 13
o Hercules, Inc. 900 9
Monsanto Co. 2,093 52
PPG Industries, Inc. 1,500 87
Praxair, Inc. 1,600 111
Rohm & Haas Co. 2,205 87
Sigma-Aldrich Corp. 600 32
-------------
1,312
CONSTRUCTION 0.1%
--------------------------------------------------------------------------
Centex Corp. 600 59
Fluor Corp. 500 19
KB Home 400 27
Masco Corp. 4,700 129
Pulte Homes, Inc. 700 61
The Sherwin-Williams Co. 1,200 40
The Stanley Works 600 20
Vulcan Materials Co. 800 35
-------------
390
CONSUMER DURABLES 0.0%
--------------------------------------------------------------------------
Black & Decker Corp. 900 43
Leggett & Platt, Inc. 2,000 42
Maytag Corp. 900 23
Newell Rubbermaid, Inc. 2,745 63
Whirlpool Corp. 800 56
-------------
227
CONTAINERS 0.0%
--------------------------------------------------------------------------
Ball Corp. 400 23
Bemis Co. 500 23
o Pactiv Corp. 1,500 33
o Sealed Air Corp. 882 47
-------------
126
ELECTRONICS 1.0%
--------------------------------------------------------------------------
o ADC Telecommunications, Inc. 6,000 15
o Advanced Micro Devices, Inc. 2,840 43
o Agilent Technologies, Inc. 4,437 110
o Altera Corp. 3,680 74
American Power Conversion Corp. 1,725 35
o Analog Devices, Inc. 3,400 151
o Andrew Corp. 850 11
o Applied Materials, Inc. 16,200 379
o Applied Micro Circuits Corp. 2,862 17
o Broadcom Corp., Class A 2,900 93
o CIENA Corp. 3,200 20
Intel Corp. 63,000 2,082
ITT Industries, Inc. 900 61
o Jabil Circuit, Inc. 1,998 56
o JDS Uniphase Corp. 12,589 45
o KLA-Tencor Corp. 1,800 103
Linear Technology Corp. 3,000 128
o LSI Logic Corp. 3,000 28
o Lucent Technologies, Inc. 40,092 128
Maxim Integrated Products, Inc. 3,100 154
o Micron Technology, Inc. 5,400 77
Molex, Inc. 1,875 59
Motorola, Inc. 21,931 297
o National Semiconductor Corp. 1,700 69
o Novellus Systems, Inc. 1,325 55
o Nvidia Corp. 1,400 25
PerkinElmer, Inc. 1,000 18
o PMC -- Sierra, Inc. 1,600 29
o Power-One, Inc. 400 4
o QLogic Corp. 869 49
Qualcomm, Inc. 7,600 361
o Sanmina -- SCI Corp. 5,000 53
Scientific-Atlanta, Inc. 1,600 47
o Solectron Corp. 7,900 44
Symbol Technologies, Inc. 1,908 24
Tektronix, Inc. 900 23
o Tellabs, Inc. 4,000 30
o Teradyne, Inc. 1,700 39
22 See financial notes.
SCHWAB MARKETTRACK GROWTH PORTFOLIO(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Texas Instruments, Inc. 16,800 486
o Thermo Electron Corp. 1,300 28
o Thomas & Betts Corp. 481 8
o Waters Corp. 1,300 41
o Xilinx, Inc. 3,200 101
-------------
5,700
ENERGY: RAW MATERIALS 0.2%
--------------------------------------------------------------------------
Anadarko Petroleum Corp. 2,418 105
Apache Corp. 1,654 115
Baker Hughes, Inc. 2,960 84
o BJ Services Co. 1,500 49
Burlington Resources, Inc. 1,905 93
Devon Energy Corp. 2,300 112
EOG Resources, Inc. 1,128 47
Halliburton Co. 4,158 99
o Noble Corp. 1,300 45
Occidental Petroleum Corp. 3,600 127
o Rowan Cos., Inc. 600 14
Schlumberger Ltd. 5,700 268
-------------
1,158
FOOD & AGRICULTURE 0.6%
--------------------------------------------------------------------------
Archer-Daniels-Midland Co. 6,532 94
Campbell Soup Co. 4,200 109
The Coca-Cola Co. 23,800 1,104
Coca-Cola Enterprises, Inc. 4,000 81
ConAgra Foods, Inc. 4,900 117
General Mills, Inc. 3,576 160
H.J. Heinz Co. 3,400 120
Hershey Foods Corp. 1,200 93
Kellogg Co. 3,900 129
McCormick & Co., Inc. 1,400 42
The Pepsi Bottling Group, Inc. 2,832 63
PepsiCo, Inc. 16,860 806
Sara Lee Corp. 7,600 151
Supervalu, Inc. 1,400 35
Sysco Corp. 6,600 222
Wm. Wrigley Jr. Co. 2,200 124
-------------
3,450
GOLD 0.0%
--------------------------------------------------------------------------
Newmont Mining Corp. 3,801 166
HEALTHCARE / DRUGS & MEDICINE 2.1%
--------------------------------------------------------------------------
Abbott Laboratories 15,300 652
Allergan, Inc. 1,300 98
AmerisourceBergen Corp. 1,000 57
o Amgen, Inc. 12,488 771
o Anthem, Inc. 1,351 92
Applied Biosystems Group --
Applera Corp. 2,000 46
Bausch & Lomb, Inc. 600 29
Baxter International, Inc. 5,600 149
Becton Dickinson & Co. 2,600 95
o Biogen, Inc. 1,500 61
Biomet, Inc. 2,475 89
o Boston Scientific Corp. 4,074 276
Bristol-Myers Squibb Co. 19,000 482
C.R. Bard, Inc. 400 32
Cardinal Health, Inc. 4,400 261
o Chiron Corp. 1,800 98
Eli Lilly & Co. 10,900 726
o Express Scripts, Inc. 800 44
o Forest Laboratories, Inc. 3,400 170
o Genzyme Corp. -- General Division 2,100 96
Guidant Corp. 3,000 153
HCA, Inc. 5,000 191
Health Management Associates, Inc.,
Class A 2,400 53
o Humana, Inc. 1,400 28
Johnson & Johnson 28,854 1,452
o King Pharmaceuticals, Inc. 2,133 29
Manor Care, Inc. 1,100 37
McKesson Corp. 2,654 80
o Medco Health Solutions, Inc. 2,641 88
o Medimmune, Inc. 2,400 64
Medtronic, Inc. 11,800 538
Merck & Co., Inc. 21,600 956
(8) Pfizer, Inc. 75,376 2,382
o Quest Diagnostics 1,101 75
Schering-Plough Corp. 14,100 215
o St. Jude Medical, Inc. 1,750 102
Stryker Corp. 1,892 154
o Tenet Healthcare Corp. 4,650 64
UnitedHealth Group, Inc. 5,700 290
See financial notes. 23
SCHWAB MARKETTRACK GROWTH PORTFOLIO(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Watson Pharmaceuticals, Inc. 1,000 39
o WellPoint Health Networks, Inc. 1,400 125
Wyeth 13,100 578
o Zimmer Holdings, Inc. 2,300 147
-------------
12,164
HOUSEHOLD PRODUCTS 0.4%
--------------------------------------------------------------------------
Alberto-Culver Co., Class B 600 38
Avon Products, Inc. 2,400 163
Clorox Co. 2,200 100
Colgate-Palmolive Co. 5,300 282
The Gillette Co. 10,200 325
International Flavors & Fragrances,
Inc. 1,100 36
Procter & Gamble Co. 12,600 1,239
-------------
2,183
INSURANCE 0.8%
--------------------------------------------------------------------------
ACE Ltd. 2,500 90
Aetna, Inc. 1,424 82
AFLAC, Inc. 5,200 190
The Allstate Corp. 7,000 277
AMBAC Financial Group, Inc. 1,015 72
American International Group,
Inc. 25,251 1,536
AON Corp. 2,625 57
Chubb Corp. 1,700 114
CIGNA Corp. 1,400 80
Cincinnati Financial Corp. 1,800 74
Hartford Financial Services Group,
Inc. 2,700 148
Jefferson-Pilot Corp. 1,412 67
John Hancock Financial Services,
Inc. 2,977 105
Lincoln National Corp. 1,900 76
Loews Corp. 2,000 86
Marsh & McLennan Cos., Inc. 5,200 222
MBIA, Inc. 1,350 80
Metlife, Inc. 7,310 230
MGIC Investment Corp. 900 46
Principal Financial Group, Inc. 3,465 109
The Progressive Corp. 2,100 155
Prudential Financial, Inc. 5,200 201
Safeco Corp. 1,100 40
St. Paul Cos., Inc. 2,250 86
Torchmark Corp. 1,100 48
Travelers Property Casualty Corp.,
Class B 9,699 159
UnumProvident Corp. 2,349 38
XL Capital Ltd., Class A 1,200 83
-------------
4,551
MEDIA 0.6%
--------------------------------------------------------------------------
Clear Channel Communications,
Inc. 6,017 246
o Comcast Corp., Class A 21,843 741
Dow Jones & Co., Inc. 800 42
Gannett Co., Inc. 2,700 227
Knight-Ridder, Inc. 900 66
The McGraw-Hill Cos., Inc. 2,000 134
Meredith Corp. 500 24
New York Times Co., Class A 1,700 81
R.R. Donnelley & Sons Co. 1,200 31
o Time Warner, Inc. 44,150 675
Tribune Co. 3,100 152
o Univision Communications, Inc.,
Class A 3,104 105
Viacom, Inc., Class B 16,981 677
The Walt Disney Co. 20,319 460
-------------
3,661
MISCELLANEOUS 0.1%
--------------------------------------------------------------------------
3M Co. 7,600 599
MISCELLANEOUS FINANCE 1.3%
--------------------------------------------------------------------------
American Express Co. 12,400 582
The Bear Stearns Cos., Inc. 882 67
Capital One Financial Corp. 2,100 128
/ The Charles Schwab Corp. 13,042 177
Charter One Financial, Inc. 2,315 74
(9) Citigroup, Inc. 49,792 2,360
Countrywide Financial Corp. 1,400 147
Fannie Mae 9,400 674
Federated Investors, Inc., Class B 1,100 30
Franklin Resources, Inc. 2,500 118
Freddie Mac 6,900 387
24 See financial notes.
SCHWAB MARKETTRACK GROWTH PORTFOLIO(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Golden West Financial Corp. 1,400 141
Goldman Sachs Group, Inc. 4,579 430
Janus Capital Group, Inc. 2,200 31
Lehman Brothers Holdings, Inc. 2,400 173
MBNA Corp. 12,550 311
Merrill Lynch & Co., Inc. 9,000 533
Moody's Corp. 1,500 87
Morgan Stanley 10,600 582
o Providian Financial Corp. 2,900 32
SLM Corp. 4,500 176
T. Rowe Price Group, Inc. 1,200 49
Washington Mutual, Inc. 8,882 389
-------------
7,678
NON-DURABLES & ENTERTAINMENT 0.2%
--------------------------------------------------------------------------
o American Greetings Corp., Class A 300 6
Darden Restaurants, Inc. 1,800 38
o Electronic Arts, Inc. 1,333 132
Fortune Brands, Inc. 1,400 91
Hasbro, Inc. 1,650 36
International Game Technology 3,400 111
Mattel, Inc. 4,150 80
McDonald's Corp. 12,700 318
o Starbucks Corp. 3,560 113
Tupperware Corp. 400 6
Wendy's International, Inc. 1,000 37
o Yum! Brands, Inc. 3,120 107
-------------
1,075
NON-FERROUS METALS 0.1%
--------------------------------------------------------------------------
Alcoa, Inc. 8,472 267
Engelhard Corp. 1,300 37
Freeport-McMoran Copper & Gold,
Inc., Class B 1,700 66
o Phelps Dodge Corp. 810 50
-------------
420
OIL: DOMESTIC 0.1%
--------------------------------------------------------------------------
Amerada Hess Corp. 1,000 52
Ashland, Inc. 800 30
ConocoPhillips 6,546 374
Kerr-McGee Corp. 869 36
Marathon Oil Corp. 3,100 92
o Nabors Industries Ltd. 1,400 53
Sunoco, Inc. 900 39
o Transocean, Inc. 2,945 56
Unocal Corp. 2,400 76
-------------
808
OIL: INTERNATIONAL 0.5%
--------------------------------------------------------------------------
ChevronTexaco Corp. 10,327 767
(10) Exxon Mobil Corp. 64,258 2,351
-------------
3,118
OPTICAL & PHOTO 0.0%
--------------------------------------------------------------------------
o Corning, Inc. 12,300 135
Eastman Kodak Co. 3,100 76
-------------
211
PAPER & FOREST PRODUCTS 0.1%
--------------------------------------------------------------------------
Boise Cascade Corp. 600 17
Georgia-Pacific Corp. 2,228 59
International Paper Co. 4,846 191
Kimberly-Clark Corp. 5,060 267
o Louisiana-Pacific Corp. 600 11
MeadWestvaco Corp. 1,970 51
Temple-Inland, Inc. 600 32
Weyerhaeuser Co. 2,300 139
-------------
767
PRODUCER GOODS & MANUFACTURING 0.8%
--------------------------------------------------------------------------
o American Standard Cos., Inc. 700 67
Avery Dennison Corp. 1,200 63
Caterpillar, Inc. 3,300 242
Cooper Industries Ltd., Class A 900 48
Deere & Co. 2,300 139
Dover Corp. 2,000 78
Emerson Electric Co. 4,000 227
(5) General Electric Co. 97,000 2,814
Honeywell International, Inc. 8,437 258
Illinois Tool Works, Inc. 3,000 221
Ingersoll-Rand Co., Class A 1,650 100
Johnson Controls, Inc. 800 86
o Millipore Corp. 400 17
Pall Corp. 1,000 23
Parker Hannifin Corp. 1,150 59
See financial notes. 25
SCHWAB MARKETTRACK GROWTH PORTFOLIO(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Snap-On, Inc. 600 18
W.W. Grainger, Inc. 900 41
-------------
4,501
RAILROAD & SHIPPING 0.1%
--------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 3,800 110
CSX Corp. 2,200 70
Norfolk Southern Corp. 3,600 73
Union Pacific Corp. 2,500 156
-------------
409
REAL PROPERTY 0.1%
--------------------------------------------------------------------------
Apartment Investment & Management
Co., Class A 900 37
Equity Office Properties Trust 3,900 109
Equity Residential 2,600 76
Plum Creek Timber Co., Inc. 1,700 45
ProLogis 1,700 50
Simon Property Group, Inc. 1,700 77
-------------
394
RETAIL 1.2%
--------------------------------------------------------------------------
Albertson's, Inc. 3,538 72
o Autonation, Inc. 3,000 56
o AutoZone, Inc. 800 77
o Bed, Bath & Beyond, Inc. 2,800 118
o Best Buy Co., Inc. 3,150 184
o Big Lots, Inc. 1,100 16
Circuit City Stores, Inc. 2,000 19
o Costco Wholesale Corp. 4,400 156
CVS Corp. 3,900 137
Dillards, Inc., Class A 500 8
Dollar General Corp. 3,303 74
Family Dollar Stores, Inc. 1,700 74
Federated Department Stores, Inc. 1,700 81
The Gap, Inc. 8,300 158
Home Depot, Inc. 22,300 827
J.C. Penney Co., Inc. Holding Co. 2,500 59
o Kohl's Corp. 3,200 179
o Kroger Co. 7,200 126
Limited Brands, Inc. 4,994 88
Lowe's Cos., Inc. 7,600 448
The May Department Stores Co. 2,800 78
Nordstrom, Inc. 1,300 40
o Office Depot, Inc. 3,700 55
RadioShack Corp. 1,900 57
o Safeway, Inc. 4,200 89
Sears, Roebuck & Co. 2,700 142
o Staples, Inc. 4,350 117
Target Corp. 8,800 350
Tiffany & Co. 1,400 66
TJX Cos., Inc. 5,200 109
o Toys `R' Us, Inc. 2,600 34
(7) Wal-Mart Stores, Inc. 42,300 2,494
Walgreen Co. 9,900 345
Winn-Dixie Stores, Inc. 1,500 12
-------------
6,945
STEEL 0.0%
--------------------------------------------------------------------------
Allegheny Technologies, Inc. 735 6
Nucor Corp. 900 49
United States Steel Corp. 900 21
Worthington Industries, Inc. 900 13
-------------
89
TELEPHONE 0.6%
--------------------------------------------------------------------------
Alltel Corp. 3,100 147
AT&T Corp. 7,358 137
o AT&T Wireless Services, Inc. 26,561 193
o Avaya, Inc. 4,132 53
BellSouth Corp. 17,800 468
CenturyTel, Inc. 1,350 48
o Citizens Communications Co. 2,576 32
o Nextel Communications, Inc.,
Class A 9,800 237
o Qwest Communications International,
Inc. 15,773 56
SBC Communications, Inc. 32,336 775
Sprint Corp. (FON Group) 8,600 138
o Sprint Corp. (PCS Group) 8,800 38
Verizon Communications, Inc. 26,958 906
-------------
3,228
TOBACCO 0.2%
--------------------------------------------------------------------------
Altria Group, Inc. 19,800 921
R.J. Reynolds Tobacco Holdings, Inc. 900 43
UST, Inc. 1,600 54
-------------
1,018
26 See financial notes.
SCHWAB MARKETTRACK GROWTH PORTFOLIO(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TRAVEL & RECREATION 0.1%
--------------------------------------------------------------------------
Brunswick Corp. 900 27
Carnival Corp. 6,100 213
Harrah's Entertainment, Inc. 1,300 56
Hilton Hotels Corp. 3,600 57
Marriott International, Inc., Class A 2,200 95
Starwood Hotels & Resorts Worldwide,
Inc. 1,900 64
-------------
512
TRUCKING & FREIGHT 0.0%
--------------------------------------------------------------------------
Paccar, Inc. 1,050 83
Ryder Systems, Inc. 400 12
-------------
95
UTILITIES: ELECTRIC & GAS 0.4%
--------------------------------------------------------------------------
o The AES Corp. 4,800 42
o Allegheny Energy, Inc. 1,070 11
Ameren Corp. 1,500 67
American Electric Power Co., Inc. 3,860 109
o Calpine Corp. 2,700 12
Centerpoint Energy, Inc. 2,949 29
Cinergy Corp. 1,600 58
o CMS Energy Corp. 1,000 8
Consolidated Edison, Inc. 2,100 85
Constellation Energy Group, Inc. 1,700 62
Dominion Resources, Inc. 2,978 183
DTE Energy Co. 1,400 52
Duke Energy Corp. 8,852 161
o Dynegy, Inc., Class A 3,100 12
o Edison International 3,200 63
El Paso Corp. 5,006 37
Entergy Corp. 2,400 129
Exelon Corp. 3,112 197
FirstEnergy Corp. 2,895 100
FPL Group, Inc. 1,900 121
KeySpan Corp. 1,300 46
Kinder Morgan, Inc. 1,107 59
Nicor, Inc. 500 17
NiSource, Inc. 2,646 55
Peoples Energy Corp. 200 8
o PG&E Corp. 3,600 88
Pinnacle West Capital Corp. 800 29
PPL Corp. 1,800 72
Progress Energy, Inc. 2,475 107
Public Service Enterprise Group, Inc. 2,000 82
Sempra Energy 2,103 59
The Southern Co. 7,200 215
TECO Energy, Inc. 1,300 17
TXU Corp. 2,767 63
Williams Cos., Inc. 5,000 51
Xcel Energy, Inc. 3,850 63
-------------
2,569
OTHER INVESTMENT COMPANIES
79.0% of net assets
/(3) Schwab International Index
Fund(R), Select Shares(R) 9,064,806 115,576
/(1) Schwab S&P 500 Fund
Select Shares 8,419,451 138,164
/(2) Schwab Small-Cap Index
Fund(R), Select Shares 6,384,931 116,525
/(4) Schwab Total Bond
Market Fund(TM) 8,352,184 86,362
-------------
456,627
SHORT-TERM INVESTMENTS
4.6% of net assets
/ Schwab Value Advantage
Money Fund(R), Investor
Shares 25,952,297 25,952
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
Bank One, Grand Cayman
Time Deposit
0.50%, 11/01/03 407 407
-------------
26,359
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
See financial notes. 27
SCHWAB MARKETTRACK GROWTH PORTFOLIO(TM)
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value $ 577,088 a
Receivables:
Fund shares sold 298
Dividends 141
Investments sold 699
Prepaid expenses + 14
------------
TOTAL ASSETS 578,240
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 413
Investment adviser and administrator fees 6
Transfer agent and shareholder service fees 8
Accrued expenses + 100
------------
TOTAL LIABILITIES 527
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 578,240
TOTAL LIABILITIES - 527
------------
NET ASSETS $577,713
NET ASSETS BY SOURCE
Capital received from investors 567,910
Net investment income not yet distributed 1,500
Net realized capital losses (23,956)
Net unrealized capital gains 32,259
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$577,713 40,218 $14.36
Unless stated, all numbers x 1,000.
a The fund paid $544,829 for these securities. Not counting short-term
obligations and government securities, the fund paid $43,899 for securities
during the report period and received $72,658 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(TM) 1.9%
Small-Cap Index Fund(R) 7.1%
International Index Fund(R) 10.3%
SCHWAB BOND FUNDS
Total Bond Market Fund(TM) 8.2%
SCHWAB MONEY FUNDS
Value Advantage
Money Fund(R) 0.1%
FEDERAL TAX DATA
- -------------------------------------------------
PORTFOLIO COST $550,619
NET UNREALIZED GAINS AND LOSSES:
Gains $66,420
Losses + (39,951)
------------
$26,469
UNDISTRIBUTED EARNINGS:
Ordinary income $1,500
Long-term capital gains $ --
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $1,799
2011 + 16,367
------------
$18,166
28 See financial notes.
SCHWAB MARKETTRACK GROWTH PORTFOLIO(TM)
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- ------------------------------------------------------------------------------
Dividends $10,395
Interest + 6
----------
TOTAL INVESTMENT INCOME 10,401
NET REALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net realized losses on investments sold (13,961)
Net realized gains received from underlying funds + 227
----------
NET REALIZED LOSSES (13,734)
NET UNREALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net unrealized gains on investments 107,668
EXPENSES
- ------------------------------------------------------------------------------
Investment adviser and administrator fees 2,292 a
Transfer agent and shareholder service fees 1,310 b
Trustees' fees 8 c
Custodian fees 43
Portfolio accounting fees 77
Professional fees 34
Registration fees 24
Shareholder reports 85
Other expenses + 12
------------
Total expenses 3,885
Expense reduction - 1,265 d
------------
NET EXPENSES 2,620
INCREASE IN NET ASSETS FROM OPERATIONS
- ------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 10,401
NET EXPENSES - 2,620
------------
NET INVESTMENT INCOME 7,781
NET REALIZED LOSSES (13,734)e
NET UNREALIZED GAINS + 107,668 e
------------
INCREASE IN NET ASSETS FROM OPERATIONS $101,715
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.44% of the first
$500 million and 0.39% of assets beyond that.
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% of the
fund's assets. These fees are paid to Charles Schwab & Co.
c For the fund's independent trustees only.
d This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 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 $93,934.
See financial notes. 29
SCHWAB MARKETTRACK GROWTH PORTFOLIO(TM)
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income $7,781 $7,322
Net realized losses (13,734) (5,594)
Net unrealized gains or losses + 107,668 (66,308)
-------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 101,715 (64,580)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income 8,524 8,889 a
Distributions from net realized gains + -- 5,834
-------------------------------------
TOTAL DISTRIBUTIONS PAID $8,524 $14,723 b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
Shares sold 5,664 $72,375 12,796 $173,232
Shares reinvested 694 8,339 1,010 14,418
Shares redeemed + (8,438) (105,988) (8,337) (109,730)
----------------------------------------
NET TRANSACTIONS IN
FUND SHARES (2,080) ($25,274) 5,469 $77,920
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 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 + (2,080) 67,917 5,469 (1,383)c
-----------------------------------------
END OF PERIOD 40,218 $577,713 42,298 $509,796 d
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 57% of the fund's dividends for the report period qualify
for the dividends-received deduction.
b The tax-basis components of distributions paid are:
CURRENT PERIOD:
Ordinary Income $8,524
Long-term capital gains $--
PRIOR PERIOD:
Ordinary Income $8,889
Long-term capital gains $5,834
c Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
d Includes distributable net investment income in the amount of $1,500 and
$2,243 at the end of the current period and prior period, respectively.
30 See financial notes.
SCHWAB MARKETTRACK BALANCED PORTFOLIO(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98-
10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- -----------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 12.05 13.47 15.53 14.85 13.39
------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.25 0.32 0.45 0.36 0.29
Net realized and unrealized gains or losses 1.77 (1.22) (1.92) 0.69 1.57
------------------------------------------------------------------
Total income or loss from investment operations 2.02 (0.90) (1.47) 1.05 1.86
Less distributions:
Dividends from net investment income (0.29) (0.40) (0.49) (0.28) (0.33)
Distributions from net realized gains -- (0.12) (0.10) (0.09) (0.07)
------------------------------------------------------------------
Total distributions (0.29) (0.52) (0.59) (0.37) (0.40)
------------------------------------------------------------------
Net asset value at end of period 13.78 12.05 13.47 15.53 14.85
------------------------------------------------------------------
Total return (%) 17.12 (7.08) (9.72) 7.11 14.18
RATIOS/SUPPLEMENTAL DATA (%)
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Net operating expenses 1 0.50 0.50 0.50 0.56 2 0.58
Gross operating expenses 0.74 0.74 0.74 0.82 0.91
Net investment income 1.98 2.35 3.31 2.46 2.25
Portfolio turnover rate 17 31 21 18 7
Net assets, end of period ($ x 1,000,000) 516 462 497 510 403
1 The expenses incurred by underlying funds in which the portfolio invests are
not included in this ratio.
The income received by the portfolio from underlying funds is reduced by those
expenses.
2 The ratio of net operating expenses would have been 0.57% if certain
non-routine expenses (proxy fees) had been included.
See financial notes. 31
SCHWAB MARKETTRACK BALANCED PORTFOLIO(TM)
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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 ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
83.2% OTHER INVESTMENT
COMPANIES 410,881 429,355
12.2% COMMON STOCK 46,840 63,227
4.4% SHORT-TERM
INVESTMENT 22,735 22,735
- --------------------------------------------------------------------------------
99.8% TOTAL INVESTMENTS 480,456 515,317
0.2% OTHER ASSETS AND
LIABILITIES, NET 1,050
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 516,367
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 12.2% of net assets
AEROSPACE/DEFENSE 0.2%
--------------------------------------------------------------------------
The Boeing Co. 5,484 211
Crane Co. 200 6
General Dynamics Corp. 1,300 109
Goodrich Corp. 700 19
Lockheed Martin Corp. 2,900 134
Northrop Grumman Corp. 1,128 101
Raytheon Co. 2,600 69
Rockwell Automation, Inc. 1,200 37
Rockwell Collins, Inc. 1,200 33
Textron, Inc. 1,000 50
United Technologies Corp. 3,000 254
-------
1,023
AIR TRANSPORTATION 0.2%
--------------------------------------------------------------------------
Delta Air Lines, Inc. 900 12
FedEx Corp. 1,960 148
Sabre Holdings Corp. 922 20
Southwest Airlines Co. 5,137 100
United Parcel Service, Inc., Class B 7,385 536
-------
816
ALCOHOLIC BEVERAGES 0.1%
--------------------------------------------------------------------------
Adolph Coors Co., Class B 200 11
Anheuser-Busch Cos., Inc. 5,400 266
Brown-Forman Corp., Class B 402 34
-------
311
APPAREL 0.0%
--------------------------------------------------------------------------
Jones Apparel Group, Inc. 800 27
Liz Claiborne, Inc. 800 29
Nike, Inc., Class B 1,700 109
Reebok International Ltd. 300 12
VF Corp. 800 34
-------
211
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 0.1%
--------------------------------------------------------------------------
Cooper Tire & Rubber Co. 400 8
Cummins, Inc. 300 14
Dana Corp. 1,085 18
Danaher Corp. 900 74
Delphi Corp. 3,884 34
Eaton Corp. 500 50
Ford Motor Co. 12,185 148
General Motors Corp. 3,650 156
Genuine Parts Co. 1,150 37
o Goodyear Tire & Rubber Co. 1,000 7
Harley-Davidson, Inc. 2,000 95
o Navistar International Corp. 400 16
Visteon Corp. 1,047 7
-------
664
BANKS 0.9%
--------------------------------------------------------------------------
AmSouth Bancorp. 2,600 61
Bank of America Corp. 9,780 741
The Bank of New York Co., Inc. 4,900 153
Bank One Corp. 7,557 321
32 See financial notes.
SCHWAB MARKETTRACK BALANCED PORTFOLIO(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
BB&T Corp. 3,600 139
Comerica, Inc. 1,000 52
Fifth Third Bancorp 3,858 224
First Tennessee National Corp. 800 36
FleetBoston Financial Corp. 6,778 274
Huntington Bancshares, Inc. 1,597 35
J.P. Morgan Chase & Co. 13,266 476
KeyCorp, Inc. 2,600 73
Marshall & Ilsley Corp. 1,344 48
Mellon Financial Corp. 2,800 84
National City Corp. 4,100 134
North Fork Bancorp., Inc. 1,100 43
Northern Trust Corp. 1,400 65
PNC Financial Services Group, Inc. 1,900 102
Regions Financial Corp. 1,400 51
SouthTrust Corp. 2,200 70
State Street Corp. 2,200 115
SunTrust Banks, Inc. 1,900 127
Synovus Financial Corp. 1,900 52
U.S. Bancorp 12,554 342
Union Planters Corp. 1,350 45
Wachovia Corp. 8,836 405
Wells Fargo & Co. 10,835 610
Zions Bancorp. 600 37
-------
4,915
BUSINESS MACHINES & SOFTWARE 1.2%
-------------------------------------------------- -------------
Adobe Systems, Inc. 1,600 70
o Apple Computer, Inc. 2,200 50
Autodesk, Inc. 800 15
o BMC Software, Inc. 1,600 28
o Cisco Systems, Inc. 45,800 961
o Compuware Corp. 2,400 14
o Comverse Technology, Inc. 1,000 18
o Dell, Inc. 16,900 610
o EMC Corp. 14,162 196
o Gateway, Inc. 2,100 11
Hewlett-Packard Co. 19,724 440
International Business Machines Corp. 11,300 1,011
o Lexmark International, Inc., Class A 800 59
(6) Microsoft Corp. 70,300 1,838
o NCR Corp. 600 22
o Network Appliance, Inc. 2,000 49
o Novell, Inc. 2,200 13
o Oracle Corp. 34,000 407
Pitney Bowes, Inc. 1,600 66
o Siebel Systems, Inc. 3,000 38
o Sun Microsystems, Inc. 20,800 82
o Unisys Corp. 2,100 32
o Xerox Corp. 5,200 55
-------
6,085
BUSINESS SERVICES 0.5%
-------------------------------------------------- -------------
o Allied Waste Industries, Inc. 1,300 15
o Apollo Group, Inc., Class A 1,100 70
Automatic Data Processing, Inc. 3,900 147
o Cendant Corp. 6,415 131
Cintas Corp. 1,102 47
o Citrix Systems, Inc. 1,200 30
Computer Associates International, Inc. 3,825 90
o Computer Sciences Corp. 1,090 43
o Concord EFS, Inc. 3,300 35
o Convergys Corp. 869 14
Deluxe Corp. 500 20
o eBay, Inc. 4,208 235
Electronic Data Systems Corp. 3,100 67
Equifax, Inc. 900 22
First Data Corp. 4,900 175
o Fiserv, Inc. 1,200 42
H&R Block, Inc. 1,200 57
IMS Health, Inc. 1,500 35
o Interpublic Group of Cos., Inc. 2,500 37
o Intuit, Inc. 1,327 66
o Mercury Interactive Corp. 500 23
o Monster Worldwide, Inc. 666 17
Omnicom Group, Inc. 1,200 96
o Parametric Technology Corp. 1,800 6
Paychex, Inc. 2,475 96
o PeopleSoft, Inc. 1,900 40
o Robert Half International, Inc. 1,200 28
o Sungard Data Systems, Inc. 1,832 51
o Symantec Corp. 999 67
Tyco International Ltd. 12,949 270
See financial notes. 33
SCHWAB MARKETTRACK BALANCED PORTFOLIO(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Veritas Software Corp. 2,600 94
Waste Management, Inc. 4,112 107
o Yahoo!, Inc. 4,200 184
-------
2,457
CHEMICALS 0.2%
--------------------------------------------------------------------------
Air Products & Chemicals, Inc. 1,500 68
Dow Chemical Co. 6,049 228
E.I. du Pont de Nemours & Co. 6,484 262
Eastman Chemical Co. 600 19
Ecolab, Inc. 2,000 54
Great Lakes Chemical Corp. 400 9
o Hercules, Inc. 700 7
Monsanto Co. 1,427 36
PPG Industries, Inc. 1,200 69
Praxair, Inc. 1,000 70
Rohm & Haas Co. 1,421 56
Sigma-Aldrich Corp. 500 26
-------
904
CONSTRUCTION 0.1%
--------------------------------------------------------------------------
Centex Corp. 400 39
Fluor Corp. 500 18
KB Home 300 21
Masco Corp. 3,000 82
Pulte Homes, Inc. 400 35
The Sherwin-Williams Co. 1,100 37
The Stanley Works 600 20
Vulcan Materials Co. 700 31
-------
283
CONSUMER DURABLES 0.0%
--------------------------------------------------------------------------
Black & Decker Corp. 600 29
Leggett & Platt, Inc. 1,300 27
Maytag Corp. 600 15
Newell Rubbermaid, Inc. 1,872 43
Whirlpool Corp. 500 35
-------
149
CONTAINERS 0.0%
--------------------------------------------------------------------------
Ball Corp. 400 22
Bemis Co. 300 14
o Pactiv Corp. 1,000 22
o Sealed Air Corp. 621 33
-------
91
ELECTRONICS 0.7%
--------------------------------------------------------------------------
o ADC Telecommunications, Inc. 5,000 13
o Advanced Micro Devices, Inc. 2,040 31
o Agilent Technologies, Inc. 2,917 73
o Altera Corp. 2,546 51
American Power Conversion Corp. 1,175 24
o Analog Devices, Inc. 2,300 102
o Andrew Corp. 1,025 13
o Applied Materials, Inc. 10,900 255
o Applied Micro Circuits Corp. 1,928 11
o Broadcom Corp., Class A 2,000 64
o CIENA Corp. 2,100 13
Intel Corp. 42,300 1,398
ITT Industries, Inc. 600 41
o Jabil Circuit, Inc. 1,341 37
o JDS Uniphase Corp. 8,464 30
o KLA-Tencor Corp. 1,200 69
Linear Technology Corp. 2,000 85
o LSI Logic Corp. 2,000 18
o Lucent Technologies, Inc. 26,905 86
Maxim Integrated Products, Inc. 2,100 104
o Micron Technology, Inc. 3,600 52
Molex, Inc. 1,250 39
Motorola, Inc. 14,770 200
o National Semiconductor Corp. 1,100 45
o Novellus Systems, Inc. 900 37
o Nvidia Corp. 900 16
PerkinElmer, Inc. 600 11
o PMC-- Sierra, Inc. 1,100 20
o Power-One, Inc. 240 2
o QLogic Corp. 585 33
Qualcomm, Inc. 5,100 242
o Sanmina-- SCI Corp. 3,400 36
Scientific-Atlanta, Inc. 1,000 30
o Solectron Corp. 5,300 29
Symbol Technologies, Inc. 1,284 16
Tektronix, Inc. 500 13
o Tellabs, Inc. 2,700 20
o Teradyne, Inc. 1,100 25
34 See financial notes.
2SCHWAB MARKETTRACK BALANCED PORTFOLIO(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Texas Instruments, Inc. 11,300 327
o Thermo Electron Corp. 900 20
o Thomas & Betts Corp. 381 7
o Waters Corp. 900 28
o Xilinx, Inc. 2,100 67
-------
3,833
ENERGY: RAW MATERIALS 0.2%
--------------------------------------------------------------------------
Anadarko Petroleum Corp. 1,510 66
Apache Corp. 1,024 71
Baker Hughes, Inc. 2,250 64
o BJ Services Co. 1,000 33
Burlington Resources, Inc. 1,410 68
Devon Energy Corp. 1,500 73
EOG Resources, Inc. 759 32
Halliburton Co. 2,974 71
o Noble Corp. 900 31
Occidental Petroleum Corp. 2,400 85
o Rowan Cos., Inc. 600 14
Schlumberger Ltd. 3,900 183
-------
791
FOOD & AGRICULTURE 0.4%
--------------------------------------------------------------------------
Archer-Daniels-Midland Co. 4,446 64
Campbell Soup Co. 2,800 72
The Coca-Cola Co. 16,100 747
Coca-Cola Enterprises, Inc. 2,700 54
ConAgra Foods, Inc. 3,300 79
General Mills, Inc. 2,392 107
H.J. Heinz Co. 2,300 81
Hershey Foods Corp. 800 62
Kellogg Co. 2,700 89
McCormick & Co., Inc. 900 27
The Pepsi Bottling Group, Inc. 1,826 41
PepsiCo, Inc. 11,370 544
Sara Lee Corp. 5,100 102
Supervalu, Inc. 900 23
Sysco Corp. 4,400 148
Wm. Wrigley Jr. Co. 1,600 90
-------
2,330
GOLD 0.0%
--------------------------------------------------------------------------
Newmont Mining Corp. 2,554 112
HEALTHCARE / DRUGS & MEDICINE 1.6%
--------------------------------------------------------------------------
Abbott Laboratories 10,200 435
Allergan, Inc. 900 68
AmerisourceBergen Corp. 700 40
o Amgen, Inc. 8,340 515
o Anthem, Inc. 926 63
Applied Biosystems Group -- Applera
Corp. 1,400 32
Bausch & Lomb, Inc. 400 19
Baxter International, Inc. 3,800 101
Becton Dickinson & Co. 1,800 66
o Biogen, Inc. 1,000 40
Biomet, Inc. 1,575 56
o Boston Scientific Corp. 2,774 188
Bristol-Myers Squibb Co. 12,800 325
C.R. Bard, Inc. 300 24
Cardinal Health, Inc. 2,975 177
o Chiron Corp. 1,200 66
Eli Lilly & Co. 7,400 493
o Express Scripts, Inc. 500 27
o Forest Laboratories, Inc. 2,400 120
o Genzyme Corp. -- General Division 1,400 64
Guidant Corp. 2,000 102
HCA, Inc. 3,400 130
Health Management Associates, Inc.,
Class A 1,600 35
o Humana, Inc. 800 16
Johnson & Johnson 19,272 970
o King Pharmaceuticals, Inc. 1,388 19
Manor Care, Inc. 500 17
McKesson Corp. 1,773 54
o Medco Health Solutions, Inc. 1,784 59
o Medimmune, Inc. 1,400 37
Medtronic, Inc. 7,800 355
Merck & Co., Inc. 14,500 642
(8) Pfizer, Inc. 50,586 1,599
o Quest Diagnostics 735 50
Schering-Plough Corp. 9,500 145
o St. Jude Medical, Inc. 1,060 62
Stryker Corp. 1,273 103
o Tenet Healthcare Corp. 3,150 43
UnitedHealth Group, Inc. 4,000 204
See financial notes. 35
SCHWAB MARKETTRACK BALANCED PORTFOLIO(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Watson Pharmaceuticals, Inc. 600 24
o WellPoint Health Networks, Inc. 1,000 89
Wyeth 8,800 388
o Zimmer Holdings, Inc. 1,500 96
-------
8,158
HOUSEHOLD PRODUCTS 0.3%
--------------------------------------------------------------------------
Alberto-Culver Co., Class B 400 25
Avon Products, Inc. 1,500 102
Clorox Co. 1,600 73
Colgate-Palmolive Co. 3,600 192
The Gillette Co. 6,700 214
International Flavors & Fragrances,
Inc. 800 26
Procter & Gamble Co. 8,500 835
-------
1,467
INSURANCE 0.6%
--------------------------------------------------------------------------
ACE Ltd. 1,700 61
Aetna, Inc. 1,034 59
AFLAC, Inc. 3,600 131
The Allstate Corp. 4,700 186
AMBAC Financial Group, Inc. 684 48
American International Group,
Inc. 16,942 1,031
AON Corp. 1,725 38
Chubb Corp. 1,100 73
CIGNA Corp. 1,000 57
Cincinnati Financial Corp. 1,200 49
Hartford Financial Services Group,
Inc. 1,800 99
Jefferson-Pilot Corp. 1,050 50
John Hancock Financial Services,
Inc. 2,004 71
Lincoln National Corp. 1,300 52
Loews Corp. 1,200 52
Marsh & McLennan Cos., Inc. 3,600 154
MBIA, Inc. 1,050 63
Metlife, Inc. 4,986 157
MGIC Investment Corp. 700 36
Principal Financial Group, Inc. 2,329 73
The Progressive Corp. 1,500 111
Prudential Financial, Inc. 3,500 135
Safeco Corp. 800 29
St. Paul Cos., Inc. 1,424 54
Torchmark Corp. 800 35
Travelers Property Casualty Corp.,
Class B 6,500 106
UnumProvident Corp. 1,657 27
XL Capital Ltd., Class A 800 56
-------
3,093
MEDIA 0.5%
--------------------------------------------------------------------------
Clear Channel Communications,
Inc. 4,080 167
o Comcast Corp., Class A 14,661 497
Dow Jones & Co., Inc. 600 31
Gannett Co., Inc. 1,700 143
Knight-Ridder, Inc. 600 44
The McGraw-Hill Cos., Inc. 1,200 80
Meredith Corp. 300 15
New York Times Co., Class A 1,100 52
R.R. Donnelley & Sons Co. 800 21
o Time Warner, Inc. 29,650 453
Tribune Co. 1,900 93
o Univision Communications, Inc.,
Class A 2,048 70
Viacom, Inc., Class B 11,418 455
The Walt Disney Co. 13,717 311
-------
2,432
MISCELLANEOUS 0.1%
--------------------------------------------------------------------------
3M Co. 5,200 410
MISCELLANEOUS FINANCE 1.0%
--------------------------------------------------------------------------
American Express Co. 8,300 389
The Bear Stearns Cos., Inc. 602 46
Capital One Financial Corp. 1,500 91
/ The Charles Schwab Corp. 8,783 119
Charter One Financial, Inc. 1,620 52
(9) Citigroup, Inc. 33,476 1,587
Countrywide Financial Corp. 800 84
Fannie Mae 6,300 452
Federated Investors, Inc., Class B 700 19
Franklin Resources, Inc. 1,700 81
Freddie Mac 4,500 253
Golden West Financial Corp. 900 90
Goldman Sachs Group, Inc. 3,079 289
Janus Capital Group, Inc. 1,400 20
Lehman Brothers Holdings, Inc. 1,600 115
36 See financial notes.
SCHWAB MARKETTRACK BALANCED PORTFOLIO(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
MBNA Corp. 8,268 205
Merrill Lynch & Co., Inc. 6,100 361
Moody's Corp. 1,000 58
Morgan Stanley 7,010 385
o Providian Financial Corp. 1,900 21
SLM Corp. 3,000 117
T. Rowe Price Group, Inc. 800 33
Washington Mutual, Inc. 5,974 261
-------
5,128
NON-DURABLES & ENTERTAINMENT 0.1%
--------------------------------------------------------------------------
o American Greetings Corp., Class A 400 9
Darden Restaurants, Inc. 1,350 28
o Electronic Arts, Inc. 896 89
Fortune Brands, Inc. 1,000 65
Hasbro, Inc. 1,275 28
International Game Technology 2,000 65
Mattel, Inc. 2,825 55
McDonald's Corp. 8,600 215
o Starbucks Corp. 2,440 77
Tupperware Corp. 200 3
Wendy's International, Inc. 800 30
o Yum! Brands, Inc. 2,060 70
-------
734
NON-FERROUS METALS 0.1%
--------------------------------------------------------------------------
Alcoa, Inc. 5,648 178
Engelhard Corp. 800 23
Freeport-McMoran Copper & Gold, Inc.,
Class B 1,100 43
o Phelps Dodge Corp. 540 33
-------
277
OIL: DOMESTIC 0.1%
--------------------------------------------------------------------------
Amerada Hess Corp. 600 31
Ashland, Inc. 500 18
ConocoPhillips 4,324 247
Kerr-McGee Corp. 621 26
Marathon Oil Corp. 2,100 62
o Nabors Industries Ltd. 1,000 38
Sunoco, Inc. 600 26
o Transocean, Inc. 2,016 39
Unocal Corp. 1,600 51
-------
538
OIL: INTERNATIONAL 0.4%
--------------------------------------------------------------------------
ChevronTexaco Corp. 6,895 512
(10) Exxon Mobil Corp. 43,120 1,578
-------
2,090
OPTICAL & PHOTO 0.0%
--------------------------------------------------------------------------
o Corning, Inc. 8,300 91
Eastman Kodak Co. 2,000 49
-------
140
PAPER & FOREST PRODUCTS 0.1%
--------------------------------------------------------------------------
Boise Cascade Corp. 400 11
Georgia-Pacific Corp. 1,496 39
International Paper Co. 3,166 125
Kimberly-Clark Corp. 3,380 179
o Louisiana-Pacific Corp. 700 13
MeadWestvaco Corp. 1,279 33
Temple-Inland, Inc. 400 22
Weyerhaeuser Co. 1,400 84
-------
506
PRODUCER GOODS & MANUFACTURING 0.6%
--------------------------------------------------------------------------
o American Standard Cos., Inc. 500 48
Avery Dennison Corp. 700 37
Caterpillar, Inc. 2,300 169
Cooper Industries Ltd., Class A 600 32
Deere & Co. 1,500 91
Dover Corp. 1,400 55
Emerson Electric Co. 2,800 159
(5) General Electric Co. 65,200 1,891
Honeywell International, Inc. 5,700 174
Illinois Tool Works, Inc. 2,000 147
Ingersoll-Rand Co., Class A 1,100 66
Johnson Controls, Inc. 500 54
o Millipore Corp. 200 9
Pall Corp. 800 19
Parker Hannifin Corp. 700 36
Snap-On, Inc. 350 10
W.W. Grainger, Inc. 600 27
-------
3,024
See financial notes. 37
SCHWAB MARKETTRACK BALANCED PORTFOLIO(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
RAILROAD & SHIPPING 0.1%
--------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 2,500 72
CSX Corp. 1,500 48
Norfolk Southern Corp. 2,500 50
Union Pacific Corp. 1,700 107
-------
277
REAL PROPERTY 0.0%
--------------------------------------------------------------------------
Apartment Investment & Management Co.,
Class A 600 24
Equity Office Properties Trust 2,600 73
Equity Residential 1,700 50
Plum Creek Timber Co., Inc. 1,200 32
ProLogis 1,200 35
Simon Property Group, Inc. 1,100 50
-------
264
RETAIL 0.9%
--------------------------------------------------------------------------
Albertson's, Inc. 2,671 54
o Autonation, Inc. 2,000 37
o AutoZone, Inc. 500 48
o Bed, Bath & Beyond, Inc. 1,800 76
o Best Buy Co., Inc. 2,100 122
o Big Lots, Inc. 700 11
Circuit City Stores, Inc. 1,400 13
o Costco Wholesale Corp. 3,000 106
CVS Corp. 2,600 91
Dillards, Inc., Class A 700 11
Dollar General Corp. 2,202 49
Family Dollar Stores, Inc. 1,100 48
Federated Department Stores, Inc. 1,400 67
The Gap, Inc. 5,662 108
Home Depot, Inc. 15,100 560
J.C. Penney Co., Inc. Holding Co. 1,700 40
o Kohl's Corp. 2,200 123
o Kroger Co. 5,300 93
Limited Brands, Inc. 3,388 60
Lowe's Cos., Inc. 5,000 295
The May Department Stores Co. 2,100 59
Nordstrom, Inc. 900 27
o Office Depot, Inc. 2,500 37
RadioShack Corp. 1,300 39
o Safeway, Inc. 2,800 59
Sears, Roebuck & Co. 1,800 95
o Staples, Inc. 3,050 82
Target Corp. 5,800 231
Tiffany & Co. 950 45
TJX Cos., Inc. 3,600 76
o Toys `R' Us, Inc. 1,200 16
(7) Wal-Mart Stores, Inc. 28,400 1,674
Walgreen Co. 6,600 230
Winn-Dixie Stores, Inc. 1,200 10
-------
4,692
STEEL 0.0%
--------------------------------------------------------------------------
Allegheny Technologies, Inc. 492 4
Nucor Corp. 600 33
United States Steel Corp. 500 12
Worthington Industries, Inc. 300 4
-------
53
TELEPHONE 0.4%
--------------------------------------------------------------------------
Alltel Corp. 2,100 99
AT&T Corp. 4,941 92
o AT&T Wireless Services, Inc. 17,825 129
o Avaya, Inc. 2,775 36
BellSouth Corp. 12,200 321
CenturyTel, Inc. 900 32
o Citizens Communications Co. 1,732 22
o Nextel Communications, Inc.,
Class A 6,800 165
o Qwest Communications International,
Inc. 10,622 37
SBC Communications, Inc. 21,788 522
Sprint Corp. (FON Group) 5,800 93
o Sprint Corp. (PCS Group) 5,900 26
Verizon Communications, Inc. 17,836 599
-------
2,173
TOBACCO 0.1%
--------------------------------------------------------------------------
Altria Group, Inc. 13,200 614
R.J. Reynolds Tobacco Holdings, Inc. 600 29
UST, Inc. 1,100 37
-------
680
38 See financial notes.
SCHWAB MARKETTRACK BALANCED PORTFOLIO(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ X 1,000)
TRAVEL & RECREATION 0.1%
--------------------------------------------------------------------------
Brunswick Corp. 600 18
Carnival Corp. 4,100 143
Harrah's Entertainment, Inc. 900 39
Hilton Hotels Corp. 2,500 40
Marriott International, Inc., Class A 1,500 65
Starwood Hotels & Resorts Worldwide,
Inc. 1,200 40
-------
345
TRUCKING & FREIGHT 0.0%
--------------------------------------------------------------------------
Paccar, Inc. 700 55
Ryder Systems, Inc. 400 12
-------
67
UTILITIES: ELECTRIC & GAS 0.3%
--------------------------------------------------------------------------
o The AES Corp. 3,200 28
o Allegheny Energy, Inc. 720 8
Ameren Corp. 900 40
American Electric Power Co., Inc. 2,580 73
o Calpine Corp. 1,800 8
Centerpoint Energy, Inc. 1,924 19
Cinergy Corp. 1,000 36
o CMS Energy Corp. 700 6
Consolidated Edison, Inc. 1,500 61
Constellation Energy Group, Inc. 1,000 36
Dominion Resources, Inc. 2,167 133
DTE Energy Co. 1,000 37
Duke Energy Corp. 5,952 108
o Dynegy, Inc., Class A 2,100 8
o Edison International 2,200 43
El Paso Corp. 3,222 24
Entergy Corp. 1,500 81
Exelon Corp. 2,162 137
FirstEnergy Corp. 2,030 70
FPL Group, Inc. 1,300 83
KeySpan Corp. 900 31
Kinder Morgan, Inc. 745 40
Nicor, Inc. 300 10
NiSource, Inc. 1,351 28
Peoples Energy Corp. 200 8
o PG&E Corp. 2,400 59
Pinnacle West Capital Corp. 600 22
PPL Corp. 1,000 40
Progress Energy, Inc. 1,593 69
Public Service Enterprise Group,
Inc. 1,500 61
Sempra Energy 1,360 38
The Southern Co. 4,500 134
TECO Energy, Inc. 900 12
TXU Corp. 2,122 48
Williams Cos., Inc. 3,000 31
Xcel Energy, Inc. 2,085 34
-------
1,704
OTHER INVESTMENT COMPANIES
83.2% of net assets
/(4) Schwab International Index
Fund(R), Select Shares(R) 6,068,707 77,376
/(2) Schwab S&P 500 Fund,
Select Shares 5,656,804 92,828
/(3) Schwab Small-Cap Index Fund(R),
Select Shares 4,289,107 78,276
/(1) Schwab Total Bond
Market Fund(TM) 17,492,671 180,875
-------
429,355
SHORT-TERM INVESTMENT
4.4% of net assets
/ Schwab Value Advantage
Money Fund(R), Investor
Shares 22,735,356 22,735
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
See financial notes. 39
SCHWAB MARKETTRACK BALANCED PORTFOLIO(TM)
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value $515,317 a
Receivables:
Fund shares sold 387
Dividends 107
Investments sold 1,002
Prepaid expenses + 24
-----------
TOTAL ASSETS 516,837
LIABILITIES
- --------------------------------------------------------------------------------
Cash Overdraft 39
Payables:
Fund shares redeemed 340
Investment adviser and administrator fees 6
Transfer agent and shareholder service fees 7
Accrued expenses + 78
-----------
TOTAL LIABILITIES 470
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 516,837
TOTAL LIABILITIES - 470
-----------
NET ASSETS $516,367
NET ASSETS BY SOURCE
Capital received from investors 499,538
Net investment income not yet distributed 3,839
Net realized capital losses (21,871)
Net unrealized capital gains 34,861
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$516,367 37,478 $13.78
Unless stated, all numbers x 1,000.
a The fund paid $480,456 for these securities. Not counting short-term
obligations and government securities, the fund paid $76,793 for securities
during the report period and received $90,708 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 1.2%
Small-Cap Index Fund(R) 4.8%
International Index Fund(R) 6.9%
SCHWAB BOND FUNDS
Total Bond Market Fund(TM) 17.3%
SCHWAB MONEY FUNDS
Value Advantage
Money Fund(R) 0.1%
FEDERAL TAX DATA
----------------------------------------------------
PORTFOLIO COST $490,162
NET UNREALIZED GAINS AND LOSSES:
Gains $49,976
Losses + (24,821)
-------------
$25,155
UNDISTRIBUTED EARNINGS:
Ordinary income $3,839
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $303
2011 + 11,862
-------------
$12,165
40 See financial notes.
SCHWAB MARKETTRACK BALANCED PORTFOLIO(TM)
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $11,868
Interest + 5
------------
TOTAL INVESTMENT INCOME 11,873
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments sold (9,665)
Net realized gains received from underlying funds + 483
------------
NET REALIZED LOSSES (9,182)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 75,317
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 2,103 a
Transfer agent and shareholder service fees 1,195 b
Trustees' fees 7 c
Custodian fees 42
Portfolio accounting fees 70
Professional fees 33
Registration fees 23
Shareholder reports 44
Other expenses + 10
------------
Total expenses 3,527
Expense reduction - 1,137 d
------------
NET EXPENSES 2,390
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 11,873
NET EXPENSES - 2,390
------------
NET INVESTMENT INCOME 9,483
NET REALIZED LOSSES (9,182) e
NET UNREALIZED GAINS + 75,317 e
------------
INCREASE IN NET ASSETS FROM OPERATIONS $75,618
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.44% of the first
$500 million and 0.39% of assets beyond that.
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% of the
fund's assets. These fees are paid to Charles Schwab & Co.
c For the fund's independent trustees only.
d This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 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 $66,135.
See financial notes. 41
SCHWAB MARKETTRACK BALANCED PORTFOLIO(TM)
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income $9,483 $11,937
Net realized losses (9,182) (5,624)
Net unrealized gains or losses + 75,317 (44,321)
--------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 75,618 (38,008)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income 11,180 14,684 a
Distributions from net realized gains + -- 4,608
--------------------------------------
TOTAL DISTRIBUTIONS PAID $11,180 $19,292 b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
Shares sold 6,802 $85,681 9,389 $123,245
Shares reinvested 904 10,796 1,388 18,646
Shares redeemed + (8,594) (107,008) (9,314) (119,076)
-------------------------------------------------------
NET TRANSACTIONS IN
FUND SHARES (888) ($10,531) 1,463 $22,815
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 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 + (888) 53,907 1,463 (34,485) c
--------------------------------------------------------
END OF PERIOD 37,478 $516,367 38,366 $462,460 d
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 33% of the fund's dividends for the report period qualify
for the dividends-received deduction.
b The tax-basis components of distributions paid are:
CURRENT PERIOD:
Ordinary Income $11,180
Long-term capital gains $--
PRIOR PERIOD:
Ordinary Income $15,072
Long-term capital gains $4,220
c Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
d Includes distributable net investment income in the amount of $3,839 and
$5,536 at the end of the current period and prior period, respectively.
42 See financial notes.
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98-
10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 11.37 12.22 13.12 12.73 12.11
------------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.29 0.40 0.49 0.47 0.41
Net realized and unrealized gains or losses 1.16 (0.78) (0.80) 0.41 0.68
------------------------------------------------------------------------------
Total income or loss from investment operations 1.45 (0.38) (0.31) 0.88 1.09
Less distributions:
Dividends from net investment income (0.29) (0.41) (0.50) (0.46) (0.40)
Distributions from net realized gains -- (0.06) (0.09) (0.03) (0.07)
------------------------------------------------------------------------------
Total distributions (0.29) (0.47) (0.59) (0.49) (0.47)
------------------------------------------------------------------------------
Net asset value at end of period 12.53 11.37 12.22 13.12 12.73
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Total return (%) 12.98 (3.29) (2.39) 6.92 9.13
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1 0.50 0.50 0.50 0.56 2 0.57
Gross operating expenses 0.75 0.76 0.77 0.84 0.92
Net investment income 2.44 3.17 3.85 3.58 3.28
Portfolio turnover rate 17 32 15 16 8
Net assets, end of period ($ x 1,000,000) 289 263 211 194 167
1 The expenses incurred by underlying funds in which the portfolio invests are
not included in this ratio. The income received by the portfolio from
underlying funds is reduced by those expenses.
2 The ratio of net operating expenses would have been 0.57% if certain
non-routine expenses (proxy fees) had been included.
See financial notes. 43
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(TM)
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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 ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
90.3% OTHER INVESTMENT
COMPANIES 245,779 260,507
5.2% COMMON STOCK 12,278 14,920
4.5% SHORT-TERM
INVESTMENTS 13,038 13,038
- --------------------------------------------------------------------------------
100.0% TOTAL INVESTMENTS 271,095 288,465
0.0% OTHER ASSETS AND
LIABILITIES, NET 137
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 288,602
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 5.2% of net assets
AEROSPACE / DEFENSE 0.1%
--------------------------------------------------------------------------
The Boeing Co. 1,346 52
Crane Co. 150 4
General Dynamics Corp. 300 25
Goodrich Corp. 200 6
Lockheed Martin Corp. 700 33
Northrop Grumman Corp. 257 23
Raytheon Co. 600 16
Rockwell Automation, Inc. 300 9
Rockwell Collins, Inc. 300 8
Textron, Inc. 200 10
United Technologies Corp. 700 58
------------
244
AIR TRANSPORTATION 0.1%
--------------------------------------------------------------------------
Delta Air Lines, Inc. 200 2
FedEx Corp. 460 35
Sabre Holdings Corp. 244 5
Southwest Airlines Co. 1,218 24
United Parcel Service, Inc.,
Class B 1,762 128
------------
194
ALCOHOLIC BEVERAGES 0.0%
--------------------------------------------------------------------------
Adolph Coors Co., Class B 50 3
Anheuser-Busch Cos., Inc. 1,300 64
Brown-Forman Corp., Class B 75 6
------------
73
APPAREL 0.0%
--------------------------------------------------------------------------
Jones Apparel Group, Inc. 200 7
Liz Claiborne, Inc. 200 7
Nike, Inc., Class B 400 26
Reebok International Ltd. 100 4
VF Corp. 200 8
------------
52
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 0.1%
--------------------------------------------------------------------------
Cooper Tire & Rubber Co. 100 2
Cummins, Inc. 100 5
Dana Corp. 292 5
Danaher Corp. 250 21
Delphi Corp. 868 8
Eaton Corp. 100 10
Ford Motor Co. 2,921 35
General Motors Corp. 825 35
Genuine Parts Co. 250 8
o Goodyear Tire & Rubber Co. 300 2
Harley-Davidson, Inc. 500 24
o Navistar International Corp. 100 4
Visteon Corp. 248 1
------------
160
BANKS 0.4%
--------------------------------------------------------------------------
AmSouth Bancorp. 600 14
Bank of America Corp. 2,311 175
The Bank of New York Co., Inc. 1,200 37
44 See financial notes.
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Bank One Corp. 1,696 72
BB&T Corp. 850 33
Comerica, Inc. 300 16
Fifth Third Bancorp 867 50
First Tennessee National Corp. 200 9
FleetBoston Financial Corp. 1,557 63
Huntington Bancshares, Inc. 423 9
J.P. Morgan Chase & Co. 3,114 112
KeyCorp, Inc. 700 20
Marshall & Ilsley Corp. 322 12
Mellon Financial Corp. 700 21
National City Corp. 1,000 33
North Fork Bancorp., Inc. 300 12
Northern Trust Corp. 300 14
PNC Financial Services Group, Inc. 400 21
Regions Financial Corp. 300 11
SouthTrust Corp. 500 16
State Street Corp. 500 26
SunTrust Banks, Inc. 400 27
Synovus Financial Corp. 400 11
U.S. Bancorp 3,022 82
Union Planters Corp. 300 10
Wachovia Corp. 2,100 96
Wells Fargo & Co. 2,560 144
Zions Bancorp. 100 6
------------
1,152
BUSINESS MACHINES & SOFTWARE 0.5%
--------------------------------------------------------------------------
Adobe Systems, Inc. 400 18
o Apple Computer, Inc. 600 14
Autodesk, Inc. 200 4
o BMC Software, Inc. 400 7
o Cisco Systems, Inc. 10,750 226
o Compuware Corp. 600 3
o Comverse Technology, Inc. 300 5
o Dell, Inc. 4,000 144
o EMC Corp. 3,350 46
o Gateway, Inc. 500 3
Hewlett-Packard Co. 4,703 105
International Business Machines
Corp. 2,650 237
o Lexmark International, Inc., Class A 200 15
(6) Microsoft Corp. 16,600 434
o NCR Corp. 200 7
o Network Appliance, Inc. 500 12
o Novell, Inc. 500 3
o Oracle Corp. 8,200 98
Pitney Bowes, Inc. 400 16
o Siebel Systems, Inc. 600 8
o Sun Microsystems, Inc. 5,000 20
o Unisys Corp. 500 8
o Xerox Corp. 1,000 10
------------
1,443
BUSINESS SERVICES 0.2%
--------------------------------------------------------------------------
o Allied Waste Industries, Inc. 300 3
o Apollo Group, Inc., Class A 300 19
Automatic Data Processing, Inc. 900 34
o Cendant Corp. 1,459 30
Cintas Corp. 260 11
o Citrix Systems, Inc. 300 8
Computer Associates International,
Inc. 850 20
o Computer Sciences Corp. 258 10
o Concord EFS, Inc. 800 9
o Convergys Corp. 174 3
Deluxe Corp. 100 4
o eBay, Inc. 1,004 56
Electronic Data Systems Corp. 700 15
Equifax, Inc. 200 5
First Data Corp. 1,100 39
o Fiserv, Inc. 300 11
H&R Block, Inc. 300 14
IMS Health, Inc. 350 8
o Interpublic Group of Cos., Inc. 600 9
o Intuit, Inc. 313 16
o Mercury Interactive Corp. 100 5
o Monster Worldwide, Inc. 191 5
Omnicom Group, Inc. 300 24
o Parametric Technology Corp. 500 2
Paychex, Inc. 525 20
o PeopleSoft, Inc. 400 8
o Robert Half International, Inc. 300 7
o Sungard Data Systems, Inc. 433 12
o Symantec Corp. 201 13
Tyco International Ltd. 3,013 63
See financial notes. 45
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Veritas Software Corp. 600 22
Waste Management, Inc. 907 23
o Yahoo!, Inc. 1,000 44
------------
572
CHEMICALS 0.1%
--------------------------------------------------------------------------
Air Products & Chemicals, Inc. 300 14
Dow Chemical Co. 1,472 56
E.I. du Pont de Nemours & Co. 1,525 62
Eastman Chemical Co. 100 3
Ecolab, Inc. 400 11
Great Lakes Chemical Corp. 100 2
o Hercules, Inc. 200 2
Monsanto Co. 332 8
PPG Industries, Inc. 300 17
Praxair, Inc. 250 17
Rohm & Haas Co. 373 15
Sigma-Aldrich Corp. 100 5
------------
212
CONSTRUCTION 0.0%
--------------------------------------------------------------------------
Centex Corp. 100 10
Fluor Corp. 100 4
KB Home 100 7
Masco Corp. 700 19
Pulte Homes, Inc. 100 9
The Sherwin-Williams Co. 300 10
The Stanley Works 100 3
Vulcan Materials Co. 200 9
------------
71
CONSUMER DURABLES 0.0%
--------------------------------------------------------------------------
Black & Decker Corp. 100 5
Leggett & Platt, Inc. 300 6
Maytag Corp. 100 3
Newell Rubbermaid, Inc. 436 10
Whirlpool Corp. 100 7
------------
31
CONTAINERS 0.0%
--------------------------------------------------------------------------
Ball Corp. 100 6
Bemis Co. 100 5
o Pactiv Corp. 300 6
o Sealed Air Corp. 153 8
------------
25
ELECTRONICS 0.3%
--------------------------------------------------------------------------
o ADC Telecommunications, Inc. 1,000 3
o Advanced Micro Devices, Inc. 560 8
o Agilent Technologies, Inc. 710 18
o Altera Corp. 510 10
American Power Conversion Corp. 225 5
o Analog Devices, Inc. 600 27
o Andrew Corp. 100 1
o Applied Materials, Inc. 2,600 61
o Applied Micro Circuits Corp. 455 3
o Broadcom Corp., Class A 492 16
o CIENA Corp. 500 3
Intel Corp. 9,950 329
ITT Industries, Inc. 150 10
o Jabil Circuit, Inc. 322 9
o JDS Uniphase Corp. 2,010 7
o KLA-Tencor Corp. 300 17
Linear Technology Corp. 500 21
o LSI Logic Corp. 500 5
o Lucent Technologies, Inc. 7,019 22
Maxim Integrated Products, Inc. 500 25
o Micron Technology, Inc. 900 13
Molex, Inc. 250 8
Motorola, Inc. 3,666 50
o National Semiconductor Corp. 300 12
o Novellus Systems, Inc. 250 10
o Nvidia Corp. 200 4
PerkinElmer, Inc. 200 4
o PMC -- Sierra, Inc. 300 5
o Power-One, Inc. 57 --
o QLogic Corp. 138 8
Qualcomm, Inc. 1,200 57
o Sanmina -- SCI Corp. 800 8
Scientific-Atlanta, Inc. 200 6
o Solectron Corp. 1,000 6
Symbol Technologies, Inc. 303 4
Tektronix, Inc. 200 5
o Tellabs, Inc. 600 4
o Teradyne, Inc. 300 7
46 See financial notes.
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Texas Instruments, Inc. 2,700 78
o Thermo Electron Corp. 200 4
o Thomas & Betts Corp. 100 2
o Waters Corp. 200 6
o Xilinx, Inc. 500 16
------------
917
ENERGY: RAW MATERIALS 0.1%
--------------------------------------------------------------------------
Anadarko Petroleum Corp. 367 16
Apache Corp. 231 16
Baker Hughes, Inc. 470 13
o BJ Services Co. 200 7
Burlington Resources, Inc. 300 15
Devon Energy Corp. 400 19
EOG Resources, Inc. 180 8
Halliburton Co. 714 17
o Noble Corp. 200 7
Occidental Petroleum Corp. 600 21
o Rowan Cos., Inc. 100 2
Schlumberger Ltd. 900 42
------------
183
FOOD & AGRICULTURE 0.2%
--------------------------------------------------------------------------
Archer-Daniels-Midland Co. 1,014 15
Campbell Soup Co. 700 18
The Coca-Cola Co. 3,800 176
Coca-Cola Enterprises, Inc. 700 14
ConAgra Foods, Inc. 800 19
General Mills, Inc. 582 26
H.J. Heinz Co. 600 21
Hershey Foods Corp. 200 16
Kellogg Co. 600 20
McCormick & Co., Inc. 200 6
The Pepsi Bottling Group, Inc. 500 11
PepsiCo, Inc. 2,660 127
Sara Lee Corp. 1,200 24
Supervalu, Inc. 200 5
Sysco Corp. 1,000 34
Wm. Wrigley Jr. Co. 300 17
------------
549
GOLD 0.0%
--------------------------------------------------------------------------
Newmont Mining Corp. 643 28
HEALTHCARE / DRUGS & MEDICINE 0.7%
--------------------------------------------------------------------------
Abbott Laboratories 2,400 102
Allergan, Inc. 200 15
AmerisourceBergen Corp. 200 11
o Amgen, Inc. 1,952 121
o Anthem, Inc. 200 14
Applied Biosystems Group --
Applera Corp. 300 7
Bausch & Lomb, Inc. 100 5
Baxter International, Inc. 900 24
Becton Dickinson & Co. 400 15
o Biogen, Inc. 200 8
Biomet, Inc. 450 16
o Boston Scientific Corp. 634 43
Bristol-Myers Squibb Co. 3,000 76
C.R. Bard, Inc. 100 8
Cardinal Health, Inc. 700 42
o Chiron Corp. 300 16
Eli Lilly & Co. 1,725 115
o Express Scripts, Inc. 100 5
o Forest Laboratories, Inc. 600 30
o Genzyme Corp.-- General Division 325 15
Guidant Corp. 500 26
HCA, Inc. 800 31
Health Management Associates, Inc.,
Class A 400 9
o Humana, Inc. 200 4
Johnson & Johnson 4,592 231
o King Pharmaceuticals, Inc. 366 5
Manor Care, Inc. 100 3
McKesson Corp. 422 13
o Medco Health Solutions, Inc. 422 14
o Medimmune, Inc. 400 11
Medtronic, Inc. 1,900 87
Merck & Co., Inc. 3,400 150
(8) Pfizer, Inc. 11,907 376
o Quest Diagnostics 189 13
Schering-Plough Corp. 2,300 35
o St. Jude Medical, Inc. 300 17
Stryker Corp. 301 24
o Tenet Healthcare Corp. 750 10
UnitedHealth Group, Inc. 950 48
See financial notes. 47
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Watson Pharmaceuticals, Inc. 200 8
o WellPoint Health Networks, Inc. 200 18
Wyeth 2,000 88
o Zimmer Holdings, Inc. 300 19
------------
1,928
HOUSEHOLD PRODUCTS 0.1%
--------------------------------------------------------------------------
Alberto-Culver Co., Class B 100 6
Avon Products, Inc. 350 24
Clorox Co. 300 14
Colgate-Palmolive Co. 800 42
The Gillette Co. 1,600 51
International Flavors & Fragrances,
Inc. 200 7
Procter & Gamble Co. 2,000 197
------------
341
INSURANCE 0.3%
--------------------------------------------------------------------------
ACE Ltd. 400 14
Aetna, Inc. 222 13
AFLAC, Inc. 800 29
The Allstate Corp. 1,100 43
AMBAC Financial Group, Inc. 162 11
American International Group, Inc. 3,979 242
AON Corp. 475 10
Chubb Corp. 300 20
CIGNA Corp. 200 11
Cincinnati Financial Corp. 300 12
Hartford Financial Services Group,
Inc. 400 22
Jefferson-Pilot Corp. 225 11
John Hancock Financial Services,
Inc. 473 17
Lincoln National Corp. 300 12
Loews Corp. 300 13
Marsh & McLennan Cos., Inc. 800 34
MBIA, Inc. 200 12
Metlife, Inc. 1,178 37
MGIC Investment Corp. 150 8
Principal Financial Group, Inc. 550 17
The Progressive Corp. 350 26
Prudential Financial, Inc. 900 35
Safeco Corp. 200 7
St. Paul Cos., Inc. 356 14
Torchmark Corp. 200 9
Travelers Property Casualty Corp.,
Class B 1,500 25
UnumProvident Corp. 346 6
XL Capital Ltd., Class A 200 14
------------
724
MEDIA 0.2%
--------------------------------------------------------------------------
Clear Channel Communications, Inc. 967 39
o Comcast Corp., Class A 3,463 117
Dow Jones & Co., Inc. 100 5
Gannett Co., Inc. 400 34
Knight-Ridder, Inc. 100 7
The McGraw-Hill Cos., Inc. 300 20
Meredith Corp. 100 5
New York Times Co., Class A 200 10
R.R. Donnelley & Sons Co. 200 5
o Time Warner, Inc. 7,050 108
Tribune Co. 500 25
o Univision Communications, Inc.,
Class A 519 18
Viacom, Inc., Class B 2,660 106
The Walt Disney Co. 3,227 73
------------
572
MISCELLANEOUS 0.0%
--------------------------------------------------------------------------
3M Co. 1,200 95
MISCELLANEOUS FINANCE 0.4%
--------------------------------------------------------------------------
American Express Co. 2,000 94
The Bear Stearns Cos., Inc. 145 11
Capital One Financial Corp. 300 18
/ The Charles Schwab Corp. 2,125 29
Charter One Financial, Inc. 346 11
(9) Citigroup, Inc. 7,882 374
Countrywide Financial Corp. 200 21
Fannie Mae 1,525 109
Federated Investors, Inc., Class B 200 6
Franklin Resources, Inc. 400 19
Freddie Mac 1,100 62
Golden West Financial Corp. 250 25
Goldman Sachs Group, Inc. 728 68
48 See financial notes.
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Janus Capital Group, Inc. 400 6
Lehman Brothers Holdings, Inc. 400 29
MBNA Corp. 1,957 48
Merrill Lynch & Co., Inc. 1,400 83
Moody's Corp. 200 12
Morgan Stanley 1,630 89
o Providian Financial Corp. 400 4
SLM Corp. 750 29
T. Rowe Price Group, Inc. 200 8
Washington Mutual, Inc. 1,431 63
------------
1,218
NON-DURABLES & ENTERTAINMENT 0.1%
--------------------------------------------------------------------------
o American Greetings Corp., Class A 100 2
Darden Restaurants, Inc. 300 6
o Electronic Arts, Inc. 212 21
Fortune Brands, Inc. 200 13
Hasbro, Inc. 325 7
International Game Technology 456 15
Mattel, Inc. 650 13
McDonald's Corp. 2,000 50
o Starbucks Corp. 560 18
Tupperware Corp. 100 2
Wendy's International, Inc. 200 7
o Yum! Brands, Inc. 480 16
------------
170
NON-FERROUS METALS 0.0%
--------------------------------------------------------------------------
Alcoa, Inc. 1,312 41
Engelhard Corp. 200 6
Freeport-McMoran Copper & Gold, Inc.,
Class B 300 12
o Phelps Dodge Corp. 135 8
------------
67
OIL: DOMESTIC 0.0%
--------------------------------------------------------------------------
Amerada Hess Corp. 100 5
Ashland, Inc. 100 4
ConocoPhillips 1,027 59
Kerr-McGee Corp. 136 6
Marathon Oil Corp. 500 15
o Nabors Industries Ltd. 200 7
Sunoco, Inc. 100 4
o Transocean, Inc. 474 9
Unocal Corp. 400 13
------------
122
OIL: INTERNATIONAL 0.2%
--------------------------------------------------------------------------
ChevronTexaco Corp. 1,643 122
(10) Exxon Mobil Corp. 10,168 372
------------
494
OPTICAL & PHOTO 0.0%
--------------------------------------------------------------------------
o Corning, Inc. 1,900 21
Eastman Kodak Co. 500 12
------------
33
PAPER & FOREST PRODUCTS 0.0%
--------------------------------------------------------------------------
Boise Cascade Corp. 100 3
Georgia-Pacific Corp. 379 10
International Paper Co. 789 31
Kimberly-Clark Corp. 756 40
o Louisiana-Pacific Corp. 100 2
MeadWestvaco Corp. 394 10
Temple-Inland, Inc. 100 5
Weyerhaeuser Co. 350 21
------------
122
PRODUCER GOODS & MANUFACTURING 0.3%
--------------------------------------------------------------------------
o American Standard Cos., Inc. 100 10
Avery Dennison Corp. 200 10
Caterpillar, Inc. 550 40
Cooper Industries Ltd., Class A 100 5
Deere & Co. 400 24
Dover Corp. 300 12
Emerson Electric Co. 600 34
(5) General Electric Co. 15,350 445
Honeywell International, Inc. 1,275 39
Illinois Tool Works, Inc. 500 37
Ingersoll-Rand Co., Class A 250 15
Johnson Controls, Inc. 150 16
o Millipore Corp. 100 4
Pall Corp. 200 5
Parker Hannifin Corp. 150 8
Snap-On, Inc. 100 3
W.W. Grainger, Inc. 100 5
------------
712
See financial notes. 49
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(TM)
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 10
Norfolk Southern Corp. 600 12
Union Pacific Corp. 400 25
------------
64
REAL PROPERTY 0.0%
--------------------------------------------------------------------------
Apartment Investment & Management
Co., Class A 100 4
Equity Office Properties Trust 600 17
Equity Residential 400 12
Plum Creek Timber Co., Inc. 300 8
ProLogis 300 9
Simon Property Group, Inc. 300 13
------------
63
RETAIL 0.4%
--------------------------------------------------------------------------
Albertson's, Inc. 652 13
o Autonation, Inc. 500 9
o AutoZone, Inc. 150 14
o Bed, Bath & Beyond, Inc. 400 17
o Best Buy Co., Inc. 450 26
o Big Lots, Inc. 200 3
Circuit City Stores, Inc. 300 3
o Costco Wholesale Corp. 700 25
CVS Corp. 600 21
Dillards, Inc., Class A 200 3
Dollar General Corp. 515 12
Family Dollar Stores, Inc. 300 13
Federated Department Stores, Inc. 300 14
The Gap, Inc. 1,362 26
Home Depot, Inc. 3,600 133
J.C. Penney Co., Inc. Holding Co. 400 10
o Kohl's Corp. 500 28
o Kroger Co. 1,200 21
Limited Brands, Inc. 818 14
Lowe's Cos., Inc. 1,200 71
The May Department Stores Co. 500 14
Nordstrom, Inc. 200 6
o Office Depot, Inc. 600 9
RadioShack Corp. 300 9
o Safeway, Inc. 650 14
Sears, Roebuck & Co. 400 21
o Staples, Inc. 750 20
Target Corp. 1,400 56
Tiffany & Co. 250 12
TJX Cos., Inc. 800 17
o Toys `R' Us, Inc. 300 4
(7) Wal-Mart Stores, Inc. 6,700 395
Walgreen Co. 1,600 56
Winn-Dixie Stores, Inc. 300 2
------------
1,111
STEEL 0.0%
--------------------------------------------------------------------------
Allegheny Technologies, Inc. 146 1
Nucor Corp. 100 6
United States Steel Corp. 100 2
Worthington Industries, Inc. 100 1
------------
10
TELEPHONE 0.2%
--------------------------------------------------------------------------
Alltel Corp. 500 24
AT&T Corp. 1,181 22
o AT&T Wireless Services, Inc. 4,265 31
o Avaya, Inc. 418 5
BellSouth Corp. 2,900 76
CenturyTel, Inc. 250 9
o Citizens Communications Co. 410 5
o Nextel Communications, Inc.,
Class A 1,500 36
o Qwest Communications International,
Inc. 2,524 9
SBC Communications, Inc. 5,175 124
Sprint Corp. (FON Group) 1,300 21
o Sprint Corp. (PCS Group) 1,400 6
Verizon Communications, Inc. 4,188 141
------------
509
TOBACCO 0.1%
--------------------------------------------------------------------------
Altria Group, Inc. 3,100 144
R.J. Reynolds Tobacco Holdings, Inc. 100 5
UST, Inc. 300 10
------------
159
50 See financial notes.
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TRAVEL & RECREATION 0.0%
--------------------------------------------------------------------------
Brunswick Corp. 100 3
Carnival Corp. 1,000 35
Harrah's Entertainment, Inc. 200 9
Hilton Hotels Corp. 600 10
Marriott International, Inc., Class A 400 17
Starwood Hotels & Resorts Worldwide,
Inc. 300 10
------------
84
TRUCKING & FREIGHT 0.0%
--------------------------------------------------------------------------
Paccar, Inc. 200 16
Ryder Systems, Inc. 100 3
------------
19
UTILITIES: ELECTRIC & GAS 0.1%
--------------------------------------------------------------------------
o The AES Corp. 800 7
o Allegheny Energy, Inc. 170 2
Ameren Corp. 200 9
American Electric Power Co., Inc. 580 16
o Calpine Corp. 400 2
Centerpoint Energy, Inc. 474 5
Cinergy Corp. 300 11
o CMS Energy Corp. 200 2
Consolidated Edison, Inc. 300 12
Constellation Energy Group, Inc. 200 7
Dominion Resources, Inc. 515 32
DTE Energy Co. 200 7
Duke Energy Corp. 1,408 26
o Dynegy, Inc., Class A 500 2
o Edison International 500 10
El Paso Corp. 769 6
Entergy Corp. 350 19
Exelon Corp. 512 32
FirstEnergy Corp. 533 18
FPL Group, Inc. 300 19
KeySpan Corp. 200 7
Kinder Morgan, Inc. 176 9
Nicor, Inc. 100 3
NiSource, Inc. 376 8
o PG&E Corp. 600 15
Pinnacle West Capital Corp. 100 4
PPL Corp. 300 12
Progress Energy, Inc. 354 15
Public Service Enterprise Group, Inc. 300 12
Sempra Energy 297 8
The Southern Co. 1,100 33
TECO Energy, Inc. 200 3
TXU Corp. 400 9
Williams Cos., Inc. 700 7
Xcel Energy, Inc. 510 8
------------
397
OTHER INVESTMENT COMPANIES
90.3% of net assets
/(4) Schwab International Index Fund(R),
Select Shares(R) 2,285,605 29,142
/(2) Schwab S&P 500 Fund,
Select Shares 2,650,069 43,488
/(3) Schwab Small-Cap Index Fund(R),
Select Shares 1,621,064 29,584
/(1) Schwab Total Bond
Market Fund(TM) 15,308,841 158,293
------------
260,507
SHORT-TERM INVESTMENTS
4.5% of net assets
/ Schwab Value Advantage
Money Fund(R), Investor
Shares 12,984,216 12,984
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
Brown Brothers Harriman,
Grand Cayman Time Deposit
0.50%, 11/01/03 54 54
------------
13,038
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
See financial notes. 51
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(TM)
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value $288,465 a
Receivables:
Fund shares sold 149
Dividends 38
Investments sold 151
Prepaid expenses + 13
------------
TOTAL ASSETS 288,816
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 155
Investment adviser and administrator fees 3
Transfer agent and shareholder service fees 4
Accrued expenses + 52
------------
TOTAL LIABILITIES 214
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 288,816
TOTAL LIABILITIES - 214
------------
NET ASSETS $288,602
NET ASSETS BY SOURCE
Capital received from investors 277,228
Net investment income not yet distributed 503
Net realized capital losses (6,499)
Net unrealized capital gains 17,370
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$288,602 23,031 $12.53
Unless stated, all numbers x 1,000.
a The fund paid $271,095 for these securities. Not counting short-term
obligations and government securities, the fund paid $43,037 for securities
during the report period and received $44,044 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 0.6%
Small-Cap Index Fund(R) 1.8%
International Index Fund(R) 2.6%
SCHWAB BOND FUNDS
Total Bond Market Fund(TM) 15.1%
SCHWAB MONEY FUNDS
Value Advantage
Money Fund(R) Less than 0.1%
FEDERAL TAX DATA
- ------------------------------------------------
PORTFOLIO COST $272,787
NET UNREALIZED GAINS AND LOSSES:
Gains 20,564
Losses + (4,886)
-----------
$15,678
UNDISTRIBUTED EARNINGS:
Ordinary income $503
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $892
2011 + 3,915
-----------
$4,807
52 See financial notes.
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(TM)
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $8,023
Interest + 3
------------
TOTAL INVESTMENT INCOME 8,026
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments sold (3,087)
Net realized gains received from underlying funds + 425
------------
NET REALIZED LOSSES (2,662)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 29,372
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 1,200 a
Transfer agent and shareholder service fees 682 b
Trustees' fees 7 c
Custodian fees 31
Portfolio accounting fees 40
Professional fees 34
Registration fees 20
Shareholder reports 25
Other expenses + 7
------------
Total expenses 2,046
Expense reduction - 682 d
------------
NET EXPENSES 1,364
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 8,026
NET EXPENSES - 1,364
------------
NET INVESTMENT INCOME 6,662
NET REALIZED LOSSES (2,662) e
NET UNREALIZED GAINS + 29,372 e
------------
INCREASE IN NET ASSETS FROM OPERATIONS $33,372
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.44% of the first
$500 million and 0.39% of assets beyond that.
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% of the
fund's assets. These fees are paid to Charles Schwab & Co.
c For the fund's independent trustees only.
d This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 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 $26,710.
See financial notes. 53
SCHWAB MARKETTRACK CONSERVATIVE PORTFOLIO(TM)
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income $6,662 $7,614
Net realized losses (2,662) (1,948)
Net unrealized gains or losses + 29,372 (15,307)
-------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 33,372 (9,641)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income 6,687 7,675 a
Distributions from net realized gains + -- 1,042
-------------------------------------
TOTAL DISTRIBUTIONS PAID $6,687 $8,717 b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
Shares sold 4,632 $54,499 10,860 $128,363
Shares reinvested 548 6,370 710 8,460
Shares redeemed + (5,315) (62,339) (5,685) (66,334)
-------------------------------------------------
NET TRANSACTIONS IN
FUND SHARES (135) ($1,470) 5,885 $70,489
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 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 + (135) 25,215 5,885 52,131 c
-------------------------------------------------
END OF PERIOD 23,031 $288,602 23,166 $263,387 d
Unless stated, all numbers are x 1,000.
a UNAUDITED
For corporations, 5% of the fund's dividends for the current report period
qualify for the dividends-received deduction.
The fund also designates $193 of the distribution paid from net investment
income during the current fiscal year as qualified dividends for the purpose
of the maximum rate under Section 1(h)(ii) of the Internal Revenue Code.
Shareholders will be notified in January 2004 of the amounts for use in
preparing their 2003 income tax returns.
b The tax-basis components of distributions paid are:
CURRENT PERIOD:
Ordinary Income $6,687
Long-term capital gains $--
PRIOR PERIOD:
Ordinary Income $7,675
Long-term capital gains $1,042
c Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
d Includes distributable net investment income in the amount of $503 and $528 at
the end of the current period and prior period, respectively.
54 See financial notes.
SCHWAB MARKETTRACK PORTFOLIOS(R)
FINANCIAL NOTES
BUSINESS STRUCTURE OF THE FUNDS
EACH OF THE FUNDS DISCUSSED IN THIS REPORT IS A SERIES OF SCHWAB CAPITAL TRUST,
A NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended. The sidebar shows the funds in this report and their trust.
THE FUNDS OFFER ONE SHARE CLASS. Shares are bought and sold at net asset value
(NAV), which is the price for all outstanding shares. Each share has a par value
of 1/1,000 of a cent, and the trust may issue as many shares as necessary.
FUND OPERATIONS
Most of the funds' investments are described in the fund-by-fund sections
earlier in this report. However, there are certain other 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 MarketTrack All Equity Portfolio(TM)
Schwab MarketTrack Growth Portfolio(TM)
Schwab MarketTrack Balanced Portfolio(TM)
Schwab MarketTrack Conservative Portfolio(TM)
Schwab U.S. MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Communications Focus Fund(TM)
Financial Services Focus Fund(TM)
Health Care Focus Fund(TM)
Technology Focus Fund(TM)
Institutional Select S&P 500 Fund(TM)
Institutional Select Large-Cap Value Index
Fund(TM)
Institutional Select Small-Cap Value Index
Fund(TM)
55
SCHWAB MARKETTRACK PORTFOLIOS(R)
The funds' repurchase agreements will be fully collateralized by U.S. government
securities. All collateral is held by the funds' custodian (or, with tri-party
agreements, the agent's bank) and is monitored daily to ensure that its market
value is at least equal to the repurchase price under the agreement.
THE FUNDS PAY FEES TO AFFILIATES OF THE INVESTMENT ADVISER FOR VARIOUS SERVICES.
Through their trust, the funds have agreements with Charles Schwab Investment
Management, Inc. (CSIM) to provide investment advisory and administrative
services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent
and shareholder services.
Although these agreements specify certain fees for these services, CSIM and
Schwab have made additional agreements with the funds that may limit the total
expenses charged. The rates and limitations for these fees vary from fund to
fund, and are described in each fund's Statement of Operations.
THE FUNDS MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING RELATED PARTIES. For
instance, a fund may own shares of The Charles Schwab Corporation if that
company is included in its index.
Pursuant to an exemptive order issued by the SEC, the funds may invest in other
related funds. The percentages of fund shares of other related funds owned are
shown in each fund's Statement of Assets and Liabilities.
The funds may make direct transactions with certain other SchwabFunds(R) when
practical. When one fund is seeking to sell a security that another is seeking
to buy, an interfund transaction can allow both funds to benefit by reducing
transaction costs. This practice is limited to funds that share the same
investment adviser, trustees and officers.
Pursuant to an exemptive order issued by the SEC, the funds may enter into
interfund borrowing and lending transactions within the SchwabFunds(R). All
loans are for temporary or emergency purposes only. The interest rate charged on
the loan is the average of the overnight repurchase agreement rate and the
short-term bank loan rate. The interfund lending facility is subject to the
oversight and periodic review of the Board of Trustees of the SchwabFunds.
TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/ OR DIRECTORS OF THE INVESTMENT
ADVISER OR SCHWAB. Federal securities law limits the percentage of such
"interested persons" who may serve on a trust's board, and the trust was in
compliance with these limitations throughout the report period. The trust did
not pay any of these persons for their service as trustees, but it did pay
non-interested persons (independent trustees), as noted in each fund's Statement
of Operations.
THE FUNDS MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The funds may obtain
temporary bank loans through the trusts to which they belong, to use for meeting
shareholder redemptions or for extraordinary or emergency purposes. The trusts
have custodian overdraft facilities and line of credit arrangements of $150
million and $100 million with PNC Bank, N.A. and Bank of America, N.A.,
respectively. The funds pay interest on the amounts they borrow at rates that
are negotiated periodically.
AMOUNT WEIGHTED
OUTSTANDING AVERAGE AVERAGE
AT 10/31/03 BORROWING* INTEREST
FUND ($ x 1,000) ($ x 1,000) RATE* (%)
- --------------------------------------------------------------------------------
MARKETTRACK
GROWTH PORTFOLIO(TM) -- 206 1.65
- --------------------------------------------------------------------------------
MARKETTRACK
BALANCED PORTFOLIO(TM) 39 341 1.71
- --------------------------------------------------------------------------------
MARKETTRACK
CONSERVATIVE PORTFOLIO(TM) -- 98 1.56
- --------------------------------------------------------------------------------
* Based on the number of days for which the borrowing is outstanding.
THE FUNDS INTEND TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR
REGULATED INVESTMENT COMPANIES. Accordingly, the funds distribute substantially
all of their net investment income and net realized capital gains (if any) to
their respective shareholders each year. As long as a fund meets the tax
requirements, it
56
SCHWAB MARKETTRACK PORTFOLIOS(R)
is not required to pay federal income tax. The net investment income and net
realized capital gains and losses may differ for financial statement and tax
purposes primarily due to differing treatments of losses on washsales.
UNDER THE FUNDS' ORGANIZATIONAL DOCUMENTS, ITS OFFICERS AND TRUSTEES ARE
INDEMNIFIED AGAINST CERTAIN LIABILITY ARISING OUT OF THE PERFORMANCE OF THEIR
DUTIES TO THE FUNDS. In addition, in the normal course of business the funds
enter into contracts with their vendors and others that provide general
indemnifications. The funds' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the funds.
However, based on experience, the funds expect the risk of loss to be remote.
ACCOUNTING POLICIES
The following are the main policies the funds use in preparing their financial
statements.
THE FUNDS VALUE THE SECURITIES IN THEIR PORTFOLIOS EVERY BUSINESS DAY. The funds
use the following policies to value various types of securities:
- - SECURITIES TRADED ON AN EXCHANGE OR OVER-THE-COUNTER: valued at the closing
value for the day, or, on days when no closing value has been reported,
halfway between the most recent bid and asked quotes.
- - SECURITIES 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 DISCOUNT is recorded as it accrues.
REALIZED GAINS AND LOSSES from security transactions are based on the identified
costs of the securities involved.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES are reported in U.S.
dollars. For assets and liabilities held on a given date, the dollar value is
based on market exchange rates in effect on that date. Transactions involving
foreign currencies, including purchases, sales, income receipts and expense
payments, are calculated using exchange rates in effect on the transaction date.
EXPENSES that are specific to a fund are charged directly to that fund. Expenses
that are common to all funds within a trust generally are allocated among the
funds in proportion to their average daily net assets.
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.
57
SCHWAB MARKETTRACK PORTFOLIOS(R)
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.
58
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF:
Schwab MarketTrack All Equity Portfolio(TM)
Schwab MarketTrack Growth Portfolio(TM)
Schwab MarketTrack Balanced Portfolio(TM)
Schwab MarketTrack Conservative Portfolio(TM)
In our opinion, the accompanying statements of assets and liabilities, including
the portfolio holdings, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of Schwab MarketTrack All Equity Portfolio,
Schwab MarketTrack Growth Portfolio, Schwab MarketTrack Balanced Portfolio and
Schwab MarketTrack Conservative Portfolio (four of the portfolios constituting
Schwab Capital Trust)(hereafter collectively referred to as the "funds") at
October 31, 2003, and the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
San Francisco, CA
December 12, 2003
59
SCHWAB MARKETTRACK PORTFOLIOS(R)
FUND TRUSTEES
A fund's Board of Trustees is responsible for protecting the interests of
that fund's shareholders. The tables below give information about the
people who serve as trustees and officers for the SchwabFunds(R),
including the funds covered in this report. Trustees remain in office
until they resign, retire or are removed by shareholder vote. 1
Under the Investment Company Act of 1940, any officer, director, or
employee of Schwab or CSIM is considered an "interested person," meaning
that he or she is considered to have a business interest in Schwab or
CSIM. These individuals are listed as "interested trustees." The
"independent trustees" are individuals who, under the 1940 Act, are not
considered to have a business interest in Schwab or CSIM.
Each of the SchwabFunds (of which there were 49 as of 10/31/03) belongs to
one of these trusts: The Charles Schwab Family of Funds, Schwab
Investments, Schwab Capital Trust or Schwab Annuity Portfolios. Currently
all these trusts have the same trustees and officers. The address for all
trustees and officers is 101 Montgomery Street, San Francisco, CA 94104.
You can find more information about the trustees and officers in the
Statement of Additional Information, which is available free by calling
1-800-435-4000.
INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S);
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
CHARLES R. SCHWAB 2 Chair, Trustee: Chair, Director, The Charles Schwab Corp.; CEO, Director, Schwab Holdings,
7/29/37 Family of Funds, 1989; Inc.; Chair, Director, Charles Schwab & Co., Inc.; Charles Schwab Investment
Investments, 1991; Management, Inc.; Chair, Charles Schwab Holdings, Inc. I, Schwab
Capital Trust, 1993; International Holdings, Inc.; Director, U.S. Trust Corp., United States Trust
Annuity Portfolios, 1994. Co. of New York, The Gap, Inc. (clothing retailer), Siebel Systems
(software); Trustee, Stanford University. Until 6/03: Director, Xsign, Inc.
(electronic payment systems). Until 5/03: Co-Chair, The Charles Schwab
Corporation. Until 5/02: Director, Vodafone AirTouch PLC (telecom). Until
3/02: Director, Audiobase, Inc. (Internet audio solutions). Until 7/01:
Director, The Charles Schwab Trust Company. Until 1/99: Director, Schwab
Retirement Plan Services, Inc., Mayer & Schweitzer, Inc. (securities
brokerage subsidiary of The Charles Schwab Corp.), Performance Technologies,
Inc. (technology), TrustMark, Inc.
1 The SchwabFunds retirement policy requires that independent trustees elected
after January 1, 2000 retire at age 72 or after twenty years of service as a
trustee, whichever comes first. Independent trustees elected prior to January
1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will
retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on
December 31, 2010.
2 In addition to their positions with the investment adviser and the
distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr.
Lyons's immediate family members, also own stock of The Charles Schwab
Corporation.
60
SCHWAB MARKETTRACK PORTFOLIOS(R)
INDIVIDUALS WHO ARE INTERESTED TRUSTEES BUT NOT OFFICERS OF THE TRUST
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
DAWN G. LEPORE 1 Trustee: 2003 Vice Chair, EVP, The Charles Schwab Corp.; Until 10/01: CIO, The Charles
3/21/54 (all trusts). Schwab Corporation. Until 1999: EVP, The Charles Schwab Corporation.
Director, Wal-Mart Stores, eBay, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
JEFFREY M. LYONS 1 Trustee: 2002 EVP, Asset Management Products and Services, Charles Schwab & Co., Inc. Until
2/22/55 (all trusts). 9/01: EVP, Mutual Funds, Charles Schwab & Co., Inc.
INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUST OFFICE(S) HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
RANDALL W. MERK President, CEO President, CEO, Charles Schwab Investment Management, Inc; EVP, Charles
7/25/54 (all trusts). Schwab & Co., Inc.; Director, Charles Schwab Worldwide Funds PLC, Charles
Schwab Asset Management (Ireland) Ltd. Until 9/02: President, CIO, American
Century Investment Management; Director, American Century Cos., Inc. Until
6/01: CIO, Fixed Income, American Century Cos., Inc. Until 1997: SVP,
Director, Fixed Income and Quantitative Equity Portfolio Management,
Twentieth Century Investors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
TAI-CHIN TUNG Treasurer, Principal SVP, CFO, Charles Schwab Investment Management, Inc.; VP, The Charles Schwab
3/7/51 Financial Officer Trust Co.; Director, Charles Schwab Asset Management (Ireland) Ltd., Charles
(all trusts). Schwab Worldwide Funds PLC.
- ------------------------------------------------------------------------------------------------------------------------------------
STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Director, Charles Schwab Investment
4/5/55 Officer Management, Inc.; CIO, The Charles Schwab Trust Co.
(all trusts).
- ------------------------------------------------------------------------------------------------------------------------------------
KOJI E. FELTON Secretary SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab Investment
3/13/61 (all trusts). Management, Inc. Until 6/98: Branch Chief in Enforcement, U.S. Securities and
Exchange Commission, San Francisco.
- ------------------------------------------------------------------------------------------------------------------------------------
1 In addition to their positions with the investment adviser and the
distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr.
Lyons's immediate family members, also own stock of The Charles Schwab
Corporation.
61
SCHWAB MARKETTRACK PORTFOLIOS(R)
INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
MARIANN BYERWALTER 2000 (all trusts). Chair, JDN Corp. Advisory LLC; Trustee, Stanford University, Director,
8/13/60 America First Cos., (venture capital/fund management), Redwood Trust, Inc.
(mortgage finance), Stanford Hospitals and Clinics, SRI International
(research), PMI Group, Inc. (mortgage insurance), Lucile Packard Children's
Hospital. 2001: Special Advisor to the President, Stanford University. Until
2002: Director, LookSmart, Ltd. (Internet infrastructure). Until 2001: VP,
Business Affairs, CFO, Stanford University.
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD F. DORWARD Family of Funds, 1989; CEO, Dorward & Associates (management, marketing and communications
9/23/31 Investments, 1991; consulting). Until 1999: EVP, Managing Director, Grey Advertising.
Capital Trust, 1993;
Annuity Portfolios, 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp. (bio-pharmaceuticals). Director, Non-Executive Chairman,
11/22/41 Solectron Corp. (manufacturing), Airlease Ltd. (aircraft leasing), Mission
West Properties (commercial real estate), Networks (telecommunications);
Public Governor, Member, executive executive committee, Pacific Stock &
Options Exchange. Director, Digital Microwave Corp. (network equipment).
Until 1998: Dean, School of Business, University of California, Berkeley.
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT G. HOLMES Family of Funds, 1989; Chair, CEO, Director, Semloh Financial, Inc. (international financial
5/15/31 Investments, 1991; services and investment advice).
Capital Trust, 1993;
Annuity Portfolios, 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors); Director,
9/28/50 Pennzoil-Quaker State Co. (oil and gas), Rorento N.V. (investments --
Netherlands), Cooper Industries (electrical products); Member, audit
committee, Northern Border Partners, L.P. (energy).
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD R. STEPHENS Family of Funds, 1989; Managing Partner, D.R. Stephens & Co. (investments). Until 1996: Chair, CEO,
6/28/38 Investments, 1991; North American Trust (real estate investments).
Capital Trust, 1993;
Annuity Portfolios, 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL W. WILSEY Family of Funds, 1989; Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate and
8/18/43 Investments, 1991; investments).
Capital Trust, 1993;
Annuity Portfolios, 1994.
62
SCHWAB MARKETTRACK PORTFOLIOS(R)
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.
63
NOTES
CONTACT SCHWAB
SchwabFunds(R) offers you a complete family of mutual funds, each one based on a
clearly defined investment approach and using disciplined 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 directly over the
Internet.
2 Orders placed in person or through a telephone representative may be subject
to a service fee payable to Schwab.
THE SCHWABFUNDS FAMILY(R)
STOCK FUNDS
Schwab S&P 500 Fund
Schwab 1000 Fund(R)
Schwab Small-Cap Index Fund(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab 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 MarketTrack All Equity Portfolio(TM)
Schwab MarketTrack Growth Portfolio(TM)
Schwab MarketTrack Balanced Portfolio(TM)
Schwab MarketTrack Conservative Portfolio(TM)
BOND FUNDS
Schwab YieldPlus Fund(R)
Schwab Short-Term Bond Market Fund(TM)
Schwab Total Bond Market Fund(TM)
Schwab GNMA Fund(TM)
Schwab Short/Intermediate Tax-Free Bond Fund(TM)
Schwab Long-Term Tax-Free Bond Fund(TM)
Schwab California Short/Intermediate
Tax-Free Bond Fund(TM)
Schwab California Long-Term Tax-Free Bond Fund(TM)
SCHWAB MONEY FUNDS
Schwab offers an array of money market funds that seek high current income
consistent with safety and liquidity. 3 Choose from taxable or tax-advantaged
alternatives. Many can be linked to your Schwab account to "sweep" cash balances
automatically 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.
REG13813-06
INSTITUTIONAL SELECT(R) FUNDS
ANNUAL REPORT
October 31, 2003
Institutional Select(R)
S&P 500 Fund
Institutional Select(R)
Large-Cap Value Index Fund
Institutional Select(R)
Small-Cap Value Index Fund
[CHARLES SCHWAB LOGO]
Three funds designed to capture the performance of specific segments of the U.S.
stock market.
IN THIS REPORT
Management's Discussion .............................................. 2
The president of SchwabFunds(R) and the funds' managers take a
look at the factors that shaped fund performance during the
report period.
Performance at a Glance .............. 5
Institutional Select(R) S&P 500 Fund
Ticker Symbol: ISLCX
The fund seeks high total return by tracking the performance
of the S&P 500(R) Index. 1
Performance and Fund Facts ........... 7
Financial Statements ................. 13
Institutional Select(R) Large-Cap Value Index Fund
Ticker Symbol: ISLVX
The fund seeks high total return by tracking the performance
of the S&P 500/Barra Value Index. 1
Performance and Fund Facts ........... 9
Financial Statements ................. 25
Institutional Select(R) Small-Cap Value Index Fund
Ticker Symbol: ISSVX
The fund seeks high total return by tracking the performance
of the S&P Small Cap 600/Barra Value Index. 1
Performance and Fund Facts ........... 11
Financial Statements ................. 36
Financial Notes ...................................................... 47
Fund Trustees ........................................................ 52
Glossary ............................................................. 55
Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM)
Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab).
1 Standard & Poor's(R), S&P(R), S&P 500(R), Standard & Poor's 500(R),
500(R), S&P 500/Barra Value Index and S&P 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 R. SCHWAB]
CHARLES R. SCHWAB, Chairman
FROM THE CHAIRMAN
In the past few months, the mutual fund industry has been rocked by the
discovery of improper practices and arrangements. Investors large and small have
seen their confidence shaken, and understandably so.
Similarly, you may have also read about a limited number of potential late
trading issues at Charles Schwab & Co., Inc. and certain limited market timing
arrangements at U.S. Trust. Many firms, including our own, have begun thorough
investigations of their broker processes and procedures. We are continuing to
scrutinize such transactions and arrangements, and are working closely with
regulatory authorities. We are pleased to report that to date we have found no
indications of illegal or improper activities by Charles Schwab Investment
Management ("CSIM"), the investment advisor who manages the SchwabFunds(R).
I fully believe that even a small number of irregularities is unacceptable. We
have spent nearly 30 years building an ethical firm, and our business is founded
on a commitment to doing what's right for investors. That commitment leaves no
room for any failures to follow company policies or industry regulations.
Given the importance of mutual funds to American investors, I can understand why
investors find the recent news to be disturbing. At the same time, I would
caution investors not to overreact. Before taking any action, investors should
consider implications to their portfolio, tax situation and long-term financial
goals.
Ultimately, mutual funds still offer all the features that have made them so
popular--diversification, liquidity, convenience, low investment minimums, and
professional management. For individual investors especially, mutual funds
continue to be one of the most cost-effective investment vehicles available. To
date, millions of Americans have relied on mutual funds as an important way to
invest for retirement, their children's education, and other financial goals. We
see no reason why mutual funds cannot continue to do the same for millions more
Americans in the years to come.
Sincerely,
/s/ Charles R. Schwab
MANAGEMENT'S DISCUSSION for the year ended October 31, 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 SchwabFunds(R) Shareholders:
By now, many of you have read the significant media coverage regarding the
mutual fund industry. We are pleased to report that to date we have found no
indications of illegal or improper activities by Charles Schwab Investment
Management ("CSIM"), the investment advisor who manages the SchwabFunds.
Similarly, you may have also read about a limited number of potential late
trading issues at Charles Schwab & Co., Inc. and certain limited market
timing arrangements at U.S. Trust. CSIM, which is a separate Charles Schwab
subsidiary, has been conducting its own review of the SchwabFunds policies and
procedures regarding market timing and late trading. We have examined over
two years of activity by CSIM personnel and have not found the types of improper
market timing or late trading arrangements that you have been reading about. Our
research is still ongoing, so some of these facts may change. Here are our key
findings to date:
- - THE INTEGRITY OF OUR STAFF: We have not found any indication that any CSIM
employees, including portfolio managers and senior managers, have engaged in
improper or inappropriate trading for their own account.
- - MARKET TIMING & LATE TRADING: We have not found any special arrangements with
any shareholders to permit market timing or trading of SchwabFunds after
market close.
- - HEDGE FUNDS: We have not found any special arrangements with hedge funds or
other private investment vehicles that would permit them to trade in a way
that was inconsistent with a fund's policies and procedures.
As part of the recent mutual fund investigations, requests for information were
sent by the SEC to about 90 of the largest mutual fund companies. As the
nation's 11th largest fund family with over $140 billion under management,
SchwabFunds also received a request from the SEC. We take these requests very
seriously and are working closely with the regulators on this matter.
Charles Schwab founded his firm 30 years ago with a vision to create the most
useful and ethical financial services firm in the world. We live by that
philosophy every day and nothing means more to our business than the trust of
our shareholders.
Your investment in SchwabFunds is an indication of the trust you place in us. As
the managers of your money, we have a special obligation to live up to that
trust. I want to thank you for investing with us, and want to assure you that we
strive relentlessly to operate our business with the highest ethical standards
and an unwavering commitment to serve you, our SchwabFunds shareholders.
Sincerely,
/s/ Randall W. Merk
2 Institutional Select(R) Funds
[PHOTO OF GERI HOM]
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.
[PHOTO OF LARRY MANO]
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 AND THE MARKET
THE ECONOMY CONTINUED TO GATHER STRENGTH DURING THE REPORT PERIOD, BUT
IMPROVEMENT REMAINED SLUGGISH AND UNEVEN. Although numerous factors had been
indicating that the U.S. economy was in recovery when the report period began,
many remained concerned about the slow pace of improvement, in particular the
absence of job growth. However, the government reported an 8.2% increase in GDP
for the third quarter of 2003, job growth for October 2003 was the largest since
January 2003, and merger activity picked up--indications that the economy may
have gained real strength during the report period.
GOVERNMENT POLICIES WERE STRONGLY AIMED AT STIMULATING THE ECONOMY.
The Federal Reserve (the Fed) cut short-term interest rates twice during the
period--0.50% in November 2002 and 0.25% in June 2003--bringing the Fed
funds target rate to a 45-year low of 1.00%. On the fiscal side, stimulus
measures included tax cuts.
Consumer spending held up strongly throughout the economic downturn, bolstered
in part by unprecedented activity in mortgage refinancing (as individuals took
advantage of the opportunity to refinance at historically low rates). During the
period, we also saw business capital spending show signs of life after declining
for the past few years.
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.
20.80% S&P 500(R) INDEX: measures U.S. large-cap stocks
43.37% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
27.03% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in
Europe, Australasia and the Far East
4.91% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond market
[LINE GRAPH]
Lehman Brothers Russell
U.S. Aggregate MSCI EAFE(R) 2000(R) S&P 500(R)
Bond Index Index Index Index
31-Oct-02 0.00 0.00 0.00 0.00
1-Nov-02 -0.18 -0.35 2.67 1.72
8-Nov-02 0.59 0.98 1.50 1.07
15-Nov-02 0.25 1.69 3.40 2.83
22-Nov-02 -0.07 4.00 7.19 5.20
29-Nov-02 -0.03 4.54 8.92 5.89
6-Dec-02 0.52 1.29 6.37 3.21
13-Dec-02 0.86 -0.52 4.07 0.67
20-Dec-02 1.42 -0.45 3.79 1.41
27-Dec-02 1.99 -0.85 3.12 -0.85
3-Jan-03 1.36 2.96 4.80 2.93
10-Jan-03 1.18 3.07 6.46 5.13
17-Jan-03 1.83 2.26 4.25 2.23
24-Jan-03 2.20 -0.96 0.76 -2.34
31-Jan-03 2.13 -3.19 0.01 -2.95
7-Feb-03 2.47 -4.39 -3.56 -5.84
14-Feb-03 2.45 -3.79 -3.60 -5.20
21-Feb-03 2.75 -3.22 -2.01 -3.66
28-Feb-03 3.54 -5.42 -3.01 -4.40
7-Mar-03 3.83 -8.07 -4.69 -5.75
14-Mar-03 3.45 -7.78 -4.59 -5.20
21-Mar-03 2.18 -3.65 1.31 1.92
28-Mar-03 3.12 -5.36 -0.65 -1.73
4-Apr-03 3.13 -4.01 0.61 0.04
11-Apr-03 3.15 -3.78 0.10 -1.11
18-Apr-03 3.40 -0.82 3.46 1.78
25-Apr-03 3.97 -1.11 4.77 2.38
2-May-03 4.15 2.54 9.99 6.00
9-May-03 5.05 4.64 11.59 6.42
16-May-03 5.84 6.77 11.94 7.74
23-May-03 6.21 6.25 12.96 6.49
30-May-03 6.26 7.98 19.10 9.98
6-Jun-03 6.35 12.02 22.61 12.79
13-Jun-03 7.36 13.35 21.52 12.94
20-Jun-03 6.41 14.39 21.49 13.76
27-Jun-03 5.85 11.29 21.36 11.58
4-Jul-03 5.69 12.74 23.44 12.69
11-Jul-03 5.85 12.64 28.17 14.17
18-Jul-03 4.74 10.95 25.74 13.63
25-Jul-03 4.06 13.99 26.87 14.25
1-Aug-03 2.43 12.70 26.70 12.19
8-Aug-03 3.59 12.44 22.90 11.92
15-Aug-03 2.56 15.65 27.79 13.51
22-Aug-03 2.95 16.17 31.49 13.81
29-Aug-03 3.16 16.01 34.75 15.56
5-Sep-03 3.79 19.26 37.87 17.14
12-Sep-03 4.28 19.87 37.96 16.87
19-Sep-03 4.79 23.18 41.00 18.91
26-Sep-03 5.48 20.32 31.60 14.43
3-Oct-03 4.78 24.97 38.95 18.25
10-Oct-03 4.75 27.25 40.81 19.25
17-Oct-03 4.23 27.96 41.18 19.42
24-Oct-03 5.08 25.40 37.41 18.24
31-Oct-03 4.91 27.03 43.37 20.80
These figures assume dividends and distributions were reinvested. Index figures
do not include trading and management costs, which would lower performance.
Indices are unmanaged and you can't invest in them directly. Remember that past
performance is not an indication of future results. Data source: Charles Schwab
& Co., Inc.
Institutional Select(R) Funds 3
Even the worst-performing sector in each fund posted a positive return,
with formerly hard-hit sectors such as information technology leading the
rebound.
STOCK PRICES ROSE SIGNIFICANTLY OVER THE PERIOD, EVEN AS SKEPTICISM LINGERED
ABOUT THE QUALITY OF THE RALLY. After more than two years of generally negative
performance, U.S. equity markets reached an apparent bottom during the report
period, then rose strongly, ending the period with significant gains. During the
report period, the Nasdaq Composite Index rose 46%, while the S&P 500(R) Index
rose nearly 21%.
One striking feature of the overall U.S. stock market during the report period
is that stocks with more speculative characteristics tended to perform better
than stocks with more demonstrable quality. For example, companies with low
earnings or dividends generally outperformed companies with higher earnings or
dividends. This held true for other measures of quality as well, such as debt to
equity: those with higher levels of debt performed better than companies with
lower levels of debt. Consistent with this trend, small-cap stocks (which tend
to be more speculative) performed well during the period, and microcap stocks
performed even better. Large-cap stocks lagged both groups, but still performed
well.
Many market observers have asked why lower quality securities outperformed
higher quality and whether it could continue. There are many possible answers,
but we believe the more important point is that in the long run, quality has
been shown to be a superior indicator of performance.
DESPITE THE DIVIDEND TAX CUT, DIVIDEND STOCKS UNDERPERFORMED THE OVERALL MARKET
DURING THE PERIOD. Congress passed the tax cut during the period as part of the
government's economic stimulus efforts. The cut reduced the double taxation of
corporate dividends, thus lowering the cost of capital and encouraging
investment. Since companies that pay dividends are generally more established
and less speculative, we see the underperformance of these stocks as being part
of the larger market trend mentioned earlier.
4 Institutional Select(R) Funds
PERFORMANCE AT A GLANCE
Total return for the 12 months ended 10/31/03
INSTITUTIONAL SELECT(R)
S&P 500 FUND ........................ 20.65%
Benchmark ........................... 20.80%
Performance Details ................. page 7
INSTITUTIONAL SELECT(R)LARGE-CAP
VALUE INDEX FUND .................... 24.40%
Benchmark ........................... 24.82%
Performance Details ................. page 9
INSTITUTIONAL SELECT(R)SMALL-CAP
VALUE INDEX FUND .................... 33.52%
Benchmark ........................... 34.25%
Performance Details ................. page 11
THE FUNDS
All of the funds in this report posted double-digit total returns for the report
period. October 2003, the last month of the period, was an especially strong
month for the broad U.S. stock market and marked the seventh positive month of
the last eight.
Signs of strength abounded, especially toward the end of the period. The S&P 500
Index closed above 1050 for the first time since May of 2002. Third-quarter
earnings were 5% above consensus estimates for the 79% of the companies in the
index that had reported their third-quarter earnings by the time this report was
written.
Telecom services, the weakest sector in the S&P 500, was up 3%. Information
technology, which had been especially hard-hit in recent years, led all sectors
in the S&P 500 during the period with a notable 41% total return.
The INSTITUTIONAL SELECT S&P 500 FUND ended the report period up more than 20%.
The fund met its goal of closely tracking its benchmark index. The fund was able
to operate tax-efficiently, making no capital gains distribution for 2002.
Both the INSTITUTIONAL SELECT LARGE-CAP VALUE INDEX FUND and INSTITUTIONAL
SELECT SMALL-CAP VALUE INDEX FUND benefited from the fact that the S&P 500/Barra
Value Index and the S&P SmallCap 600/Barra Value Index outperformed the S&P 500
and S&P 600 indices, respectively. The difference was especially pronounced
among large-caps (the growth portion of the S&P 500 was up 17% and the value
portion up 25%). The small-cap fund also benefited from the fact that small-caps
outperformed mid-
---------------------------------------------------------
Past performance does not indicate future results.
Expenses may be partially absorbed by CSIM and Schwab. Without these reductions,
the funds' total return would have been lower. Performance does not reflect the
deduction of taxes that a shareholder would pay on fund distributions or on the
redemption of fund shares.
All fund and index figures on this page assume dividends and distributions were
reinvested. Index figures do not include trading and management costs, which
would lower performance. Indices are unmanaged, and you cannot invest in them
directly. Each 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. For more
current performance information visit www.schwab.com or call 1-800-435-4000.
Small company stocks are subject to greater volatility than other asset
categories.
Institutional Select(R) Funds 5
Factors that have been linked to superior long-term stock performance were
not the factors that investors appeared to value most during the period.
and large-caps during the period. Even the worst-performing small-cap sector,
communications, had a double-digit return (about 14%), while technology rose a
remarkable 70%. Historically, October has been a bad month for small-cap stocks.
However, October 2003 saw small-caps gain 8% (as measured by the Schwab
Small-Cap Index). Investors should note that the gains in small-caps were
accompanied by high volatility: small-cap stock prices moved more than 1% a day
on over 80% of the trading days during the period.
Nothing in this report represents a recommendation of a security by the
investment adviser. Manager views and portfolio holdings may have changed
subsequent to the report date.
6 Institutional Select(R) Funds
INSTITUTIONAL SELECT(R) S&P 500 FUND
PERFORMANCE as of 10/31/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund with its benchmark and
Morningstar category. The table below the chart shows two types of after-tax
returns.
[BAR CHART]
Benchmark: Fund Category:
S&P 500(R) MORNINGSTAR
FUND INDEX LARGE-CAP BLEND
1 YEAR 20.65% 20.80% 19.40%
3 YEARS -8.42% -8.34% -8.47%
SINCE INCEPTION: 2/1/99 -2.81% -2.68% -2.33%
1 YEAR 3 YEARS SINCE INCEPTION
------ ------- ---------------
Fund Category: Fund Category: Fund Category:
MORNINGSTAR MORNINGSTAR MORNINGSTAR
TOTAL RETURNS AFTER TAX FUND LARGE-CAP BLEND FUND LARGE-CAP BLEND FUND LARGE-CAP BLEND
- ----------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 19.85% 17.07% -8.91% -9.59% -3.22% n/a
- ----------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 13.27% 10.62% -6.84% -7.09% -2.41% n/a
- ----------------------------------------------------------------------------------------------------------
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the fund compared with a similar investment in its benchmark.
[LINE GRAPH]
$8,732 FUND
$8,789 S&P 500 INDEX
Fund S&P 500 Index
1-Feb-99 $10,000 $10,000
28-Feb-99 $9,680 $9,689
31-Mar-99 $10,070 $10,077
30-Apr-99 $10,460 $10,467
31-May-99 $10,200 $10,220
30-Jun-99 $10,770 $10,787
31-Jul-99 $10,440 $10,450
31-Aug-99 $10,380 $10,398
30-Sep-99 $10,100 $10,113
31-Oct-99 $10,740 $10,753
30-Nov-99 $10,950 $10,972
31-Dec-99 $11,602 $11,618
31-Jan-00 $11,016 $11,035
29-Feb-00 $10,804 $10,826
31-Mar-00 $11,864 $11,885
30-Apr-00 $11,501 $11,527
31-May-00 $11,259 $11,291
30-Jun-00 $11,541 $11,569
31-Jul-00 $11,360 $11,389
31-Aug-00 $12,066 $12,096
30-Sep-00 $11,420 $11,458
31-Oct-00 $11,370 $11,410
30-Nov-00 $10,481 $10,510
31-Dec-00 $10,534 $10,562
31-Jan-01 $10,901 $10,937
28-Feb-01 $9,911 $9,939
31-Mar-01 $9,278 $9,309
30-Apr-01 $10,003 $10,033
31-May-01 $10,064 $10,100
30-Jun-01 $9,819 $9,854
31-Jul-01 $9,717 $9,758
31-Aug-01 $9,115 $9,147
30-Sep-01 $8,380 $8,408
31-Oct-01 $8,533 $8,569
30-Nov-01 $9,187 $9,226
31-Dec-01 $9,264 $9,307
31-Jan-02 $9,130 $9,171
28-Feb-02 $8,954 $8,994
31-Mar-02 $9,295 $9,332
30-Apr-02 $8,726 $8,767
31-May-02 $8,664 $8,702
30-Jun-02 $8,044 $8,082
31-Jul-02 $7,424 $7,453
31-Aug-02 $7,465 $7,501
30-Sep-02 $6,659 $6,686
31-Oct-02 $7,238 $7,274
30-Nov-02 $7,672 $7,702
31-Dec-02 $7,217 $7,250
31-Jan-03 $7,028 $7,060
28-Feb-03 $6,922 $6,954
31-Mar-03 $6,986 $7,022
30-Apr-03 $7,564 $7,601
31-May-03 $7,953 $8,001
30-Jun-03 $8,059 $8,104
31-Jul-03 $8,195 $8,246
31-Aug-03 $8,353 $8,407
30-Sep-03 $8,269 $8,318
31-Oct-03 $8,732 $8,789
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
The fund's share price and principal values change, and when you sell your
shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/03 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
Institutional Select(R) Funds 7
INSTITUTIONAL SELECT(R) S&P 500 FUND
FUND FACTS as of 10/31/03
FUND CATEGORY 1
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 501
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $86,757
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 22.3
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 3.2
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 4%
TOP HOLDINGS 2
SECURITY % OF NET ASSETS
- --------------------------------------------------------------------------------
(1) GENERAL ELECTRIC CO. 3.0%
- --------------------------------------------------------------------------------
(2) MICROSOFT CORP. 2.9%
- --------------------------------------------------------------------------------
(3) WAL-MART STORES, INC. 2.6%
- --------------------------------------------------------------------------------
(4) PFIZER, INC. 2.5%
- --------------------------------------------------------------------------------
(5) CITIGROUP, INC. 2.5%
- --------------------------------------------------------------------------------
(6) EXXON MOBIL CORP. 2.5%
- --------------------------------------------------------------------------------
(7) INTEL CORP. 2.2%
- --------------------------------------------------------------------------------
(8) AMERICAN INTERNATIONAL GROUP, INC. 1.6%
- --------------------------------------------------------------------------------
(9) INTERNATIONAL BUSINESS MACHINES CORP. 1.6%
- --------------------------------------------------------------------------------
(10) JOHNSON & JOHNSON 1.5%
- --------------------------------------------------------------------------------
TOTAL 22.9%
SECTOR WEIGHTINGS % OF PORTFOLIO
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
31.8% CONSUMER NON-DURABLES
21.2% FINANCE
20.4% TECHNOLOGY
6.6% MATERIALS & SERVICES
6.1% UTILITIES
5.5% ENERGY
5.2% CAPITAL GOODS
1.7% TRANSPORTATION
1.5% CONSUMER DURABLES
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/03, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
8 Institutional Select(R) Funds
INSTITUTIONAL SELECT(R) LARGE-CAP VALUE INDEX FUND
PERFORMANCE as of 10/31/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund with its benchmark and
Morningstar category. The table below the chart shows two types of after-tax
returns.
Benchmark: Fund Category:
S&P 500/BARRA MORNINGSTAR
FUND VALUE INDEX LARGE-CAP VALUE
1 YEAR 24.40% 24.82% 21.28%
3 YEARS -5.09% -4.99% -2.11%
SINCE INCEPTION: 2/1/99 -0.01% 0.19% 1.01%
1 YEAR 3 YEARS SINCE INCEPTION
------ ------- ---------------
FUND CATEGORY: FUND CATEGORY: FUND CATEGORY:
MORNINGSTAR MORNINGSTAR MORNINGSTAR
TOTAL RETURNS AFTER TAX FUND LARGE-CAP VALUE FUND LARGE-CAP VALUE LARGE-CAP VALUE FUND
- ----------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 23.20% 18.61% -6.41% -3.58% -1.07% n/a
- ----------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 15.63% 11.76% -4.58% -2.33% -0.46% n/a
- ----------------------------------------------------------------------------------------------------------------
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with a similar investment in its benchmark.
[LINE GRAPH]
$9,996 FUND
$10,075 S&P 500/BARRA VALUE INDEX
Fund S&P 500/Barra Value Index
1-Feb-99 $10,000 $10,000
28-Feb-99 $9,780 $9,785
31-Mar-99 $10,080 $10,081
30-Apr-99 $10,930 $10,950
31-May-99 $10,730 $10,756
30-Jun-99 $11,140 $11,169
31-Jul-99 $10,790 $10,826
31-Aug-99 $10,520 $10,553
30-Sep-99 $10,110 $10,140
31-Oct-99 $10,680 $10,712
30-Nov-99 $10,620 $10,649
31-Dec-99 $11,008 $11,049
31-Jan-00 $10,650 $10,698
29-Feb-00 $9,996 $10,030
31-Mar-00 $11,039 $11,076
30-Apr-00 $10,957 $11,001
31-May-00 $10,988 $11,036
30-Jun-00 $10,548 $10,600
31-Jul-00 $10,763 $10,812
31-Aug-00 $11,489 $11,537
30-Sep-00 $11,478 $11,535
31-Oct-00 $11,693 $11,751
30-Nov-00 $11,090 $11,149
31-Dec-00 $11,662 $11,723
31-Jan-01 $12,154 $12,218
28-Feb-01 $11,342 $11,408
31-Mar-01 $10,894 $10,957
30-Apr-01 $11,630 $11,700
31-May-01 $11,748 $11,823
30-Jun-01 $11,363 $11,440
31-Jul-01 $11,171 $11,242
31-Aug-01 $10,520 $10,592
30-Sep-01 $9,526 $9,586
31-Oct-01 $9,526 $9,586
30-Nov-01 $10,114 $10,195
31-Dec-01 $10,275 $10,350
31-Jan-02 $9,994 $10,066
28-Feb-02 $9,904 $9,976
31-Mar-02 $10,410 $10,487
30-Apr-02 $9,893 $9,962
31-May-02 $9,938 $10,002
30-Jun-02 $9,319 $9,370
31-Jul-02 $8,328 $8,358
31-Aug-02 $8,373 $8,414
30-Sep-02 $7,428 $7,453
31-Oct-02 $8,036 $8,072
30-Nov-02 $8,598 $8,639
31-Dec-02 $8,149 $8,190
31-Jan-03 $7,930 $7,966
28-Feb-03 $7,711 $7,749
31-Mar-03 $7,711 $7,739
30-Apr-03 $8,461 $8,504
31-May-03 $9,073 $9,130
30-Jun-03 $9,131 $9,197
31-Jul-03 $9,338 $9,401
31-Aug-03 $9,535 $9,604
30-Sep-03 $9,361 $9,430
31-Oct-03 $9,996 $10,075
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
The fund's share price and principal values change, and when you sell your
shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/03 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
Institutional Select(R) Funds 9
INSTITUTIONAL SELECT(R) LARGE-CAP VALUE INDEX FUND
FUND FACTS as of 10/31/03
FUND CATEGORY 1
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large /X/ / / / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 344
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $58,250
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 19.1
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.2
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 24%
- --------------------------------------------------------------------------------
TOP HOLDINGS 2
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) CITIGROUP, INC. 5.6%
- --------------------------------------------------------------------------------
(2) EXXON MOBIL CORP. 5.6%
- --------------------------------------------------------------------------------
(3) AMERICAN INTERNATIONAL GROUP, INC. 3.6%
- --------------------------------------------------------------------------------
(4) BANK OF AMERICA CORP. 2.6%
- --------------------------------------------------------------------------------
(5) WELLS FARGO & CO. 2.2%
- --------------------------------------------------------------------------------
(6) VERIZON COMMUNICATIONS, INC. 2.1%
- --------------------------------------------------------------------------------
(7) SBC COMMUNICATIONS, INC. 1.8%
- --------------------------------------------------------------------------------
(8) CHEVRONTEXACO CORP. 1.8%
- --------------------------------------------------------------------------------
(9) COMCAST CORP., Class A 1.8%
- --------------------------------------------------------------------------------
(10) J.P. MORGAN CHASE & CO. 1.7%
- --------------------------------------------------------------------------------
TOTAL 28.8%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
36.6% FINANCE
15.9% CONSUMER NON-DURABLES
11.3% TECHNOLOGY
11.1% UTILITIES
10.2% ENERGY
7.4% MATERIALS & SERVICES
2.5% CAPITAL GOODS
1.9% CONSUMER DURABLES
1.7% TRANSPORTATION
1.4% OTHER
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/03, which may have changed since then, and is not a
precise indication of risk or performance -- past, present, or future.
2 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
10 Institutional Select(R) Funds
INSTITUTIONAL SELECT(R) SMALL-CAP VALUE INDEX FUND
PERFORMANCE as of 10/31/03
PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2
This bar chart compares pre-tax performance of the fund with its benchmark and
Morningstar category. The table below the chart shows two types of after-tax
returns.
Benchmark: Fund Category:
S&P SMALLCAP 600/BARRA MORNINGSTAR
FUND VALUE INDEX SMALL-CAP VALUE
1 YEAR 33.52% 34.25% 37.60%
3 YEARS 10.36% 10.49% 13.78%
SINCE INCEPTION: 2/1/99 10.22% 10.32% 11.99%
1 YEAR 3 YEARS SINCE INCEPTION
------ ------- ---------------
Fund Category: Fund Category: Fund Category:
MORNINGSTAR MORNINGSTAR MORNINGSTAR
TOTAL RETURNS AFTER TAX FUND SMALL-CAP VALUE FUND SMALL-CAP VALUE FUND SMALL-CAP VALUE
- ----------------------------------------------------------------------------------------------------------------
PRE-LIQUIDATION (still own shares) 32.97% 35.02% 8.14% 12.13% 8.36% n/a
- ----------------------------------------------------------------------------------------------------------------
POST-LIQUIDATION (shares were sold) 21.67% 22.15% 7.32% 10.41% 7.43% n/a
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2
This graph shows performance since inception of a hypothetical $10,000
investment in the fund compared with a similar investment in its benchmark.
[LINE GRAPH]
$15,876 FUND
$15,947 S&P SMALLCAP 600/BARRA VALUE INDEX
S&P Small Cap
Fund 600/Barra Value Index
1-Feb-99 $10,000 $10,000
28-Feb-99 $9,170 $9,186
31-Mar-99 $9,130 $9,150
30-Apr-99 $9,920 $9,947
31-May-99 $10,310 $10,345
30-Jun-99 $10,930 $10,973
31-Jul-99 $10,760 $10,802
31-Aug-99 $10,310 $10,349
30-Sep-99 $10,120 $10,159
31-Oct-99 $9,890 $9,924
30-Nov-99 $10,120 $10,147
31-Dec-99 $10,411 $10,425
31-Jan-00 $9,886 $9,891
29-Feb-00 $10,338 $10,338
31-Mar-00 $10,716 $10,720
30-Apr-00 $10,801 $10,795
31-May-00 $10,611 $10,619
30-Jun-00 $10,916 $10,923
31-Jul-00 $11,127 $11,139
31-Aug-00 $11,789 $11,789
30-Sep-00 $11,747 $11,765
31-Oct-00 $11,810 $11,823
30-Nov-00 $11,021 $11,042
31-Dec-00 $12,583 $12,601
31-Jan-01 $13,572 $13,599
28-Feb-01 $12,993 $13,025
31-Mar-01 $12,458 $12,484
30-Apr-01 $13,208 $13,236
31-May-01 $13,549 $13,573
30-Jun-01 $14,084 $14,092
31-Jul-01 $13,936 $13,959
31-Aug-01 $13,709 $13,735
30-Sep-01 $11,754 $11,769
31-Oct-01 $12,299 $12,307
30-Nov-01 $13,265 $13,292
31-Dec-01 $14,218 $14,251
31-Jan-02 $14,469 $14,518
28-Feb-02 $14,406 $14,455
31-Mar-02 $15,658 $15,712
30-Apr-02 $16,296 $16,354
31-May-02 $15,683 $15,734
30-Jun-02 $15,019 $15,031
31-Jul-02 $12,604 $12,587
31-Aug-02 $12,579 $12,571
30-Sep-02 $11,665 $11,645
31-Oct-02 $11,890 $11,879
30-Nov-02 $12,504 $12,521
31-Dec-02 $12,182 $12,189
31-Jan-03 $11,676 $11,686
28-Feb-03 $11,259 $11,253
31-Mar-03 $11,221 $11,218
30-Apr-03 $12,220 $12,234
31-May-03 $13,333 $13,374
30-Jun-03 $13,726 $13,771
31-Jul-03 $14,383 $14,445
31-Aug-03 $15,079 $15,139
30-Sep-03 $14,573 $14,643
31-Oct-03 $15,876 $15,947
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unman-aged, and you cannot invest in them directly.
The fund's share price and principal values change, and when you sell your
shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results.
1 The pre-tax total return and the graph do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. After-tax returns are calculated using the highest historical
individual federal marginal income tax rates in effect as of 10/31/03 and do
not reflect the impact of state and local taxes or the alternative minimum
tax. Actual returns depend on an investor's situation and may differ from
those shown. After-tax returns may not be relevant to investors who hold their
fund shares through tax-deferred arrangements. Pre-liquidation after-tax
returns reflect the tax effects of purchases and sales of securities within
the fund portfolios and assume investors continue to hold fund shares at the
end of the measurement periods. Post-liquidation figures assume investors sold
fund shares at the end of the measurement periods and reflect both the effects
of taxable distributions and any taxable gains or losses realized upon the
sale of shares. Source for category information: Morningstar, Inc.
2 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower.
Institutional Select(R) Funds 11
INSTITUTIONAL SELECT(R) SMALL-CAP VALUE INDEX FUND
FUND FACTS as of 10/31/03
FUND CATEGORY 1
INVESTMENT STYLE
MARKET CAP Value Blend Growth
Large / / / / / /
Medium / / / / / /
Small /X/ / / / /
STATISTICS
NUMBER OF HOLDINGS 376
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $792
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 26.0
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 1.6
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 36%
- --------------------------------------------------------------------------------
TOP HOLDINGS 2
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) NEWFIELD EXPLORATION CO. 1.1%
- --------------------------------------------------------------------------------
(2) RAYMOND JAMES FINANCIAL, INC. 1.0%
- --------------------------------------------------------------------------------
(3) MDC HOLDINGS, INC. 1.0%
- --------------------------------------------------------------------------------
(4) JEFFERIES GROUP, INC. 0.8%
- --------------------------------------------------------------------------------
(5) ANNTAYLOR STORES CORP. 0.8%
- --------------------------------------------------------------------------------
(6) STANDARD-PACIFIC CORP. 0.8%
- --------------------------------------------------------------------------------
(7) WHITNEY HOLDING CORP. 0.8%
- --------------------------------------------------------------------------------
(8) BRIGGS & STRATTON CORP. 0.7%
- --------------------------------------------------------------------------------
(9) CERNER CORP. 0.7%
- --------------------------------------------------------------------------------
(10) THE TIMKEN CO. 0.7%
- --------------------------------------------------------------------------------
TOTAL 8.4%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
19.6% MATERIALS & SERVICES
19.4% CONSUMER NON-DURABLES
16.7% FINANCE
15.6% TECHNOLOGY
9.7% CAPITAL GOODS
5.6% UTILITIES
5.3% ENERGY
5.1% CONSUMER DURABLES
2.9% TRANSPORTATION
0.1% OTHER
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/03, which may have changed since then, and is not a
precise indication of risk or performance--past, present, or future.
2 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
12 Institutional Select(R) Funds
INSTITUTIONAL SELECT(R) S&P 500 FUND
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 2/1/99 1-
10/31/03 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 0.12 0.12 0.12 0.11 0.07
Net realized and unrealized gains or losses 1.30 (1.37) (2.91) 0.52 0.67
------------------------------------------------------------------------------
Total income or loss from investment operations 1.42 (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 8.30 7.00 8.36 11.26 10.74
------------------------------------------------------------------------------
Total return (%) 20.65 (15.18) (24.95) 5.86 7.40 2
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.15 0.15 0.15 0.15 3 0.13 4
Gross operating expenses 0.36 0.37 0.37 0.38 0.55 4
Net investment income 1.65 1.38 1.14 1.06 1.37 4
Portfolio turnover rate 4 12 13 6 1 2
Net assets, end of period ($ x 1,000,000) 272 203 261 382 238
1 Commencement of operations.
2 Not annualized.
3 The ratio of net operating expenses would have been 0.16% if certain
non-routine expenses (proxy fees) had been included.
4 Annualized.
See financial notes. 13
INSTITUTIONAL SELECT(R) S&P 500 FUND
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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 related to the fund's adviser
COST MARKET VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
99.9% COMMON STOCK 298,729 271,155
0.0% U.S. TREASURY
OBLIGATION 80 80
- --------------------------------------------------------------------------------
99.9% TOTAL INVESTMENTS 298,809 271,235
0.1% OTHER ASSETS AND
LIABILITIES, NET 274
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 271,509
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 99.9% of net assets
AEROSPACE / DEFENSE 1.6%
--------------------------------------------------------------------------
The Boeing Co. 23,400 901
Crane Co. 1,500 42
General Dynamics Corp. 5,600 469
Goodrich Corp. 3,200 88
Lockheed Martin Corp. 12,500 580
Northrop Grumman Corp. 5,214 466
Raytheon Co. 11,400 302
Rockwell Automation, Inc. 5,100 158
Rockwell Collins, Inc. 4,700 129
Textron, Inc. 3,700 184
United Technologies Corp. 13,000 1,101
-----
4,420
AIR TRANSPORTATION 1.3%
--------------------------------------------------------------------------
Delta Air Lines, Inc. 3,200 41
FedEx Corp. 8,300 629
Sabre Holdings Corp. 3,918 86
Southwest Airlines Co. 21,750 422
United Parcel Service, Inc.,
Class B 31,424 2,278
-----
3,456
ALCOHOLIC BEVERAGES 0.5%
--------------------------------------------------------------------------
Adolph Coors Co., Class B 1,000 56
Anheuser-Busch Cos., Inc. 23,300 1,148
Brown-Forman Corp., Class B 1,604 135
-----
1,339
APPAREL 0.3%
--------------------------------------------------------------------------
Jones Apparel Group, Inc. 3,600 124
Liz Claiborne, Inc. 3,100 114
Nike, Inc., Class B 7,500 479
Reebok International Ltd. 1,500 59
VF Corp. 3,200 136
-----
912
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.1%
--------------------------------------------------------------------------
Cooper Tire & Rubber Co. 1,800 35
Cummins, Inc. 1,200 57
Dana Corp. 3,800 62
Danaher Corp. 4,200 348
Delphi Corp. 15,349 137
Eaton Corp. 2,100 210
Ford Motor Co. 50,911 617
General Motors Corp. 15,475 660
Genuine Parts Co. 4,800 153
o Goodyear Tire & Rubber Co. 4,700 32
Harley-Davidson, Inc. 8,600 408
o Navistar International Corp. 2,100 85
Visteon Corp. 3,669 24
-----
2,828
BANKS 7.7%
--------------------------------------------------------------------------
AmSouth Bancorp. 9,600 227
Bank of America Corp. 41,600 3,150
The Bank of New York Co., Inc. 21,400 668
Bank One Corp. 31,800 1,350
BB&T Corp. 15,000 580
Comerica, Inc. 5,100 263
Fifth Third Bancorp 16,069 931
First Tennessee National Corp. 3,600 163
14 See financial notes.
INSTITUTIONAL SELECT(R) S&P 500 FUND
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
FleetBoston Financial Corp. 29,433 1,189
Huntington Bancshares, Inc. 6,283 136
J.P. Morgan Chase & Co. 56,940 2,044
KeyCorp, Inc. 11,500 325
Marshall & Ilsley Corp. 6,228 223
Mellon Financial Corp. 12,000 358
National City Corp. 16,900 552
North Fork Bancorp., Inc. 4,500 175
Northern Trust Corp. 6,000 279
PNC Financial Services Group, Inc. 8,100 434
Regions Financial Corp. 6,000 221
SouthTrust Corp. 9,300 296
State Street Corp. 9,500 497
SunTrust Banks, Inc. 8,000 537
Synovus Financial Corp. 8,300 229
U.S. Bancorp 53,707 1,462
Union Planters Corp. 5,650 188
Wachovia Corp. 37,400 1,716
Wells Fargo & Co. 47,113 2,653
Zions Bancorp. 2,400 147
------
20,993
BUSINESS MACHINES & SOFTWARE 9.6%
--------------------------------------------------------------------------
Adobe Systems, Inc. 6,700 294
o Apple Computer, Inc. 10,100 231
Autodesk, Inc. 3,000 58
o BMC Software, Inc. 6,200 108
o Cisco Systems, Inc. 195,900 4,110
o Compuware Corp. 10,500 59
o Comverse Technology, Inc. 4,900 88
o Dell, Inc. 71,700 2,590
o EMC Corp. 61,124 846
o Gateway, Inc. 8,700 44
Hewlett-Packard Co. 85,001 1,896
(9) International Business Machines Corp. 48,200 4,313
o Lexmark International, Inc., Class A 3,600 265
=(2) Microsoft Corp. 302,100 7,900
o NCR Corp. 2,600 93
o Network Appliance, Inc. 9,500 235
o Novell, Inc. 10,100 59
o Oracle Corp. 146,200 1,749
Pitney Bowes, Inc. 6,400 263
o Siebel Systems, Inc. 13,800 174
o Sun Microsystems, Inc. 90,000 356
o Unisys Corp. 9,000 138
o Xerox Corp. 22,000 231
------
26,100
BUSINESS SERVICES 3.9%
--------------------------------------------------------------------------
o Allied Waste Industries, Inc. 5,800 65
o Apollo Group, Inc., Class A 4,800 305
Automatic Data Processing, Inc. 16,600 627
o Cendant Corp. 28,070 574
Cintas Corp. 4,620 197
o Citrix Systems, Inc. 4,300 109
Computer Associates International, Inc. 15,900 374
o Computer Sciences Corp. 5,100 202
o Concord EFS, Inc. 13,700 146
o Convergys Corp. 4,525 73
Deluxe Corp. 1,700 69
o eBay, Inc. 18,182 1,017
Electronic Data Systems Corp. 13,200 283
Equifax, Inc. 3,900 95
First Data Corp. 20,700 739
o Fiserv, Inc. 5,350 189
H&R Block, Inc. 5,000 235
IMS Health, Inc. 6,500 153
o Interpublic Group of Cos., Inc. 10,700 159
o Intuit, Inc. 5,883 294
o Mercury Interactive Corp. 2,500 116
o Monster Worldwide, Inc. 2,961 75
Omnicom Group, Inc. 5,500 439
o Parametric Technology Corp. 7,100 22
Paychex, Inc. 10,325 402
o PeopleSoft, Inc. 10,500 218
o Robert Half International, Inc. 4,600 109
o Sungard Data Systems, Inc. 8,013 225
o Symantec Corp. 4,200 280
Tyco International Ltd. 55,876 1,167
o Veritas Software Corp. 11,900 430
Waste Management, Inc. 16,400 425
o Yahoo!, Inc. 18,100 791
------
10,604
See financial notes. 15
INSTITUTIONAL SELECT(R) S&P 500 FUND
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
CHEMICALS 1.4%
--------------------------------------------------------------------------
Air Products & Chemicals, Inc. 6,300 286
Dow Chemical Co. 25,760 971
E.I. du Pont de Nemours & Co. 27,982 1,131
Eastman Chemical Co. 2,200 72
Ecolab, Inc. 7,200 194
Great Lakes Chemical Corp. 1,400 30
o Hercules, Inc. 2,900 30
Monsanto Co. 7,117 178
PPG Industries, Inc. 4,600 265
Praxair, Inc. 4,500 313
Rohm & Haas Co. 6,363 250
Sigma-Aldrich Corp. 2,200 115
-----
3,835
CONSTRUCTION 0.5%
--------------------------------------------------------------------------
Centex Corp. 2,000 195
Fluor Corp. 2,100 78
KB Home 1,500 103
Masco Corp. 13,200 363
Pulte Homes, Inc. 1,600 138
The Sherwin-Williams Co. 4,000 134
The Stanley Works 2,200 73
Vulcan Materials Co. 3,000 133
-----
1,217
CONSUMER DURABLES 0.2%
--------------------------------------------------------------------------
Black & Decker Corp. 2,100 100
Leggett & Platt, Inc. 5,200 109
Maytag Corp. 2,000 51
Newell Rubbermaid, Inc. 7,667 175
Whirlpool Corp. 1,800 127
-----
562
CONTAINERS 0.1%
--------------------------------------------------------------------------
Ball Corp. 1,600 90
Bemis Co. 1,400 65
o Pactiv Corp. 4,100 90
o Sealed Air Corp. 2,400 128
-----
373
ELECTRONICS 6.1%
--------------------------------------------------------------------------
o ADC Telecommunications, Inc. 22,100 56
o Advanced Micro Devices, Inc. 9,600 146
o Agilent Technologies, Inc. 12,884 321
o Altera Corp. 10,320 209
American Power Conversion Corp. 5,150 104
o Analog Devices, Inc. 10,200 452
o Andrew Corp. 4,200 55
o Applied Materials, Inc. 46,400 1,084
o Applied Micro Circuits Corp. 8,221 48
o Broadcom Corp., Class A 8,300 265
o CIENA Corp. 13,100 84
(7) Intel Corp. 182,000 6,015
ITT Industries, Inc. 2,800 190
o Jabil Circuit, Inc. 5,414 151
o JDS Uniphase Corp. 39,628 141
o KLA-Tencor Corp. 5,300 304
Linear Technology Corp. 8,600 366
o LSI Logic Corp. 10,300 95
o Lucent Technologies, Inc. 116,145 372
Maxim Integrated Products, Inc. 8,900 442
o Micron Technology, Inc. 16,700 239
Molex, Inc. 5,300 166
Motorola, Inc. 64,726 876
o National Semiconductor Corp. 5,100 207
o Novellus Systems, Inc. 4,050 167
o Nvidia Corp. 4,100 73
PerkinElmer, Inc. 3,300 59
o PMC - Sierra, Inc. 4,600 84
o Power-One, Inc. 2,300 21
o QLogic Corp. 2,513 141
Qualcomm, Inc. 22,000 1,045
o Sanmina-SCI Corp. 14,200 150
Scientific-Atlanta, Inc. 4,300 127
o Solectron Corp. 22,900 127
Symbol Technologies, Inc. 6,136 77
Tektronix, Inc. 2,100 54
o Tellabs, Inc. 11,400 86
o Teradyne, Inc. 4,900 112
Texas Instruments, Inc. 48,300 1,397
o Thermo Electron Corp. 4,400 97
16 See financial notes.
INSTITUTIONAL SELECT(R) S&P 500 FUND
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Thomas & Betts Corp. 1,500 27
o Waters Corp. 3,600 113
o Xilinx, Inc. 9,500 301
------
16,646
ENERGY: RAW MATERIALS 1.3%
--------------------------------------------------------------------------
Anadarko Petroleum Corp. 7,121 311
Apache Corp. 4,432 309
Baker Hughes, Inc. 9,500 269
o BJ Services Co. 4,400 144
Burlington Resources, Inc. 5,800 282
Devon Energy Corp. 6,400 310
EOG Resources, Inc. 3,322 140
Halliburton Co. 12,200 291
o Noble Corp. 3,500 120
Occidental Petroleum Corp. 10,600 374
o Rowan Cos., Inc. 2,500 60
Schlumberger Ltd. 16,500 775
------
3,385
FOOD & AGRICULTURE 3.6%
--------------------------------------------------------------------------
Archer-Daniels-Midland Co. 17,648 253
Campbell Soup Co. 11,500 298
The Coca-Cola Co. 68,500 3,178
Coca-Cola Enterprises, Inc. 12,500 252
ConAgra Foods, Inc. 14,900 355
General Mills, Inc. 10,500 471
H.J. Heinz Co. 9,600 339
Hershey Foods Corp. 3,600 278
Kellogg Co. 11,500 381
McCormick & Co., Inc. 3,999 119
The Pepsi Bottling Group, Inc. 7,580 169
PepsiCo, Inc. 48,080 2,299
Sara Lee Corp. 21,500 429
Supervalu, Inc. 3,500 88
Sysco Corp. 18,000 606
Wm. Wrigley Jr. Co. 6,200 350
------
9,865
GOLD 0.2%
--------------------------------------------------------------------------
Newmont Mining Corp. 11,200 490
HEALTHCARE / DRUGS & MEDICINE 12.9%
--------------------------------------------------------------------------
Abbott Laboratories 43,600 1,858
Allergan, Inc. 3,600 272
AmerisourceBergen Corp. 3,100 176
o Amgen, Inc. 36,000 2,223
o Anthem, Inc. 4,028 276
Applied Biosystems Group --
Applera Corp. 5,600 129
Bausch & Lomb, Inc. 1,700 82
Baxter International, Inc. 16,900 449
Becton Dickinson & Co. 7,000 256
o Biogen, Inc. 4,200 170
Biomet, Inc. 7,000 251
o Boston Scientific Corp. 11,500 779
Bristol-Myers Squibb Co. 54,100 1,372
C.R. Bard, Inc. 1,600 128
Cardinal Health, Inc. 12,700 754
o Chiron Corp. 5,400 295
Eli Lilly & Co. 31,400 2,092
o Express Scripts, Inc. 2,200 121
o Forest Laboratories, Inc. 10,200 510
o Genzyme Corp. - General Division 6,100 280
Guidant Corp. 8,500 434
HCA, Inc. 14,200 543
Health Management Associates, Inc.,
Class A 6,400 142
o Humana, Inc. 4,200 85
(10) Johnson & Johnson 83,068 4,181
o King Pharmaceuticals, Inc. 6,433 86
Manor Care, Inc. 2,600 86
McKesson Corp. 8,100 245
o Medco Health Solutions, Inc. 7,489 249
o Medimmune, Inc. 7,200 192
Medtronic, Inc. 34,000 1,549
Merck & Co., Inc. 62,500 2,766
=(4) Pfizer, Inc. 217,597 6,876
o Quest Diagnostics 3,137 212
Schering-Plough Corp. 41,000 626
o St. Jude Medical, Inc. 4,900 285
Stryker Corp. 5,620 456
o Tenet Healthcare Corp. 12,700 175
UnitedHealth Group, Inc. 16,600 845
See financial notes. 17
INSTITUTIONAL SELECT(R) S&P 500 FUND
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Watson Pharmaceuticals, Inc. 3,100 122
o WellPoint Health Networks, Inc. 4,000 356
Wyeth 37,300 1,646
o Zimmer Holdings, Inc. 6,300 402
------
35,032
HOUSEHOLD PRODUCTS 2.3%
--------------------------------------------------------------------------
Alberto-Culver Co., Class B 1,900 121
Avon Products, Inc. 6,800 462
Clorox Co. 6,000 272
Colgate-Palmolive Co. 14,900 793
The Gillette Co. 28,500 909
International Flavors & Fragrances, Inc. 2,700 89
Procter & Gamble Co. 36,200 3,558
------
6,204
INSURANCE 4.9%
--------------------------------------------------------------------------
ACE Ltd. 7,900 284
Aetna, Inc. 4,500 258
AFLAC, Inc. 14,300 522
The Allstate Corp. 19,700 778
AMBAC Financial Group, Inc. 3,133 222
(8) American International Group, Inc. 72,800 4,428
AON Corp. 8,400 184
Chubb Corp. 5,100 341
CIGNA Corp. 4,000 228
Cincinnati Financial Corp. 4,500 184
Hartford Financial Services Group, Inc. 8,100 445
Jefferson-Pilot Corp. 3,900 186
John Hancock Financial Services, Inc. 8,181 289
Lincoln National Corp. 5,100 204
Loews Corp. 5,200 224
Marsh & McLennan Cos., Inc. 14,900 637
MBIA, Inc. 4,000 238
Metlife, Inc. 21,257 667
MGIC Investment Corp. 2,900 149
Principal Financial Group, Inc. 8,884 279
The Progressive Corp. 6,100 450
Prudential Financial, Inc. 15,300 591
Safeco Corp. 4,000 147
St. Paul Cos., Inc. 6,500 248
Torchmark Corp. 3,300 145
Travelers Property Casualty Corp.,
Class B 27,900 457
UnumProvident Corp. 8,260 135
XL Capital Ltd., Class A 4,000 278
------
13,198
MEDIA 3.8%
--------------------------------------------------------------------------
Clear Channel Communications, Inc. 17,295 706
o Comcast Corp., Class A 62,738 2,128
Dow Jones & Co., Inc. 2,500 130
Gannett Co., Inc. 7,600 639
Knight-Ridder, Inc. 2,400 176
The McGraw-Hill Cos., Inc. 5,300 355
Meredith Corp. 1,600 78
New York Times Co., Class A 4,200 200
R.R. Donnelley & Sons Co. 3,000 78
o Time Warner, Inc. 126,000 1,926
Tribune Co. 8,900 437
o Univision Communications, Inc.,
Class A 8,994 305
Viacom, Inc., Class B 48,945 1,951
The Walt Disney Co. 56,900 1,288
------
10,397
MISCELLANEOUS 0.6%
--------------------------------------------------------------------------
3M Co. 21,800 1,719
MISCELLANEOUS FINANCE 8.2%
--------------------------------------------------------------------------
American Express Co. 36,000 1,689
The Bear Stearns Cos., Inc. 2,846 217
Capital One Financial Corp. 6,400 389
/ The Charles Schwab Corp. 37,838 513
Charter One Financial, Inc. 6,379 204
=(5) Citigroup, Inc. 143,900 6,821
Countrywide Financial Corp. 3,700 389
Fannie Mae 27,300 1,957
Federated Investors, Inc., Class B 2,800 77
Franklin Resources, Inc. 7,000 332
18 See financial notes.
INSTITUTIONAL SELECT(R) S&P 500 FUND
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Freddie Mac 19,400 1,089
Golden West Financial Corp. 4,300 432
Goldman Sachs Group, Inc. 13,254 1,245
Janus Capital Group, Inc. 6,400 90
Lehman Brothers Holdings, Inc. 6,900 497
MBNA Corp. 35,550 880
Merrill Lynch & Co., Inc. 26,200 1,551
Moody's Corp. 4,200 243
Morgan Stanley 30,300 1,663
o Providian Financial Corp. 7,900 88
SLM Corp. 12,600 493
T. Rowe Price Group, Inc. 3,600 148
Washington Mutual, Inc. 26,000 1,138
------
22,145
NON-DURABLES & ENTERTAINMENT 1.1%
--------------------------------------------------------------------------
o American Greetings Corp., Class A 1,700 36
Darden Restaurants, Inc. 4,500 94
o Electronic Arts, Inc. 4,025 399
Fortune Brands, Inc. 4,200 274
Hasbro, Inc. 4,600 100
International Game Technology 9,600 315
Mattel, Inc. 12,200 236
McDonald's Corp. 35,400 885
o Starbucks Corp. 10,840 343
Tupperware Corp. 1,600 24
Wendy's International, Inc. 3,000 111
o Yum! Brands, Inc. 8,000 273
------
3,090
NON-FERROUS METALS 0.4%
--------------------------------------------------------------------------
Alcoa, Inc. 23,504 742
Engelhard Corp. 3,600 103
Freeport-McMoran Copper & Gold, Inc.,
Class B 4,700 182
o Phelps Dodge Corp. 2,560 158
------
1,185
OIL: DOMESTIC 0.9%
--------------------------------------------------------------------------
Amerada Hess Corp. 2,400 124
Ashland, Inc. 1,900 71
ConocoPhillips 19,049 1,089
Kerr-McGee Corp. 2,673 111
Marathon Oil Corp. 8,400 248
o Nabors Industries Ltd. 4,200 159
Sunoco, Inc. 2,200 96
o Transocean, Inc. 8,720 167
Unocal Corp. 7,000 222
------
2,287
OIL: INTERNATIONAL 3.3%
--------------------------------------------------------------------------
ChevronTexaco Corp. 29,896 2,221
=(6) Exxon Mobil Corp. 185,520 6,787
------
9,008
OPTICAL & PHOTO 0.2%
--------------------------------------------------------------------------
o Corning, Inc. 37,000 406
Eastman Kodak Co. 8,000 196
------
602
PAPER & FOREST PRODUCTS 0.8%
--------------------------------------------------------------------------
Boise Cascade Corp. 1,400 39
Georgia-Pacific Corp. 6,886 181
International Paper Co. 13,439 529
Kimberly-Clark Corp. 14,300 755
o Louisiana-Pacific Corp. 3,000 57
MeadWestvaco Corp. 5,522 143
Temple-Inland, Inc. 1,400 76
Weyerhaeuser Co. 6,000 361
------
2,141
PRODUCER GOODS & MANUFACTURING 4.8%
--------------------------------------------------------------------------
o American Standard Cos., Inc. 2,000 191
Avery Dennison Corp. 3,100 163
Caterpillar, Inc. 9,500 696
Cooper Industries Ltd., Class A 2,500 132
Deere & Co. 6,600 400
Dover Corp. 5,800 226
Emerson Electric Co. 11,800 670
=(1) General Electric Co. 279,900 8,120
Honeywell International, Inc. 23,862 730
Illinois Tool Works, Inc. 8,700 640
Ingersoll-Rand Co., Class A 4,700 284
Johnson Controls, Inc. 2,400 258
See financial notes. 19
INSTITUTIONAL SELECT(R) S&P 500 FUND
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Millipore Corp. 1,200 53
Pall Corp. 3,400 80
Parker Hannifin Corp. 3,400 173
Snap-On, Inc. 1,400 41
W.W. Grainger, Inc. 2,400 110
------
12,967
RAILROAD & SHIPPING 0.4%
--------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 10,500 304
CSX Corp. 5,700 181
Norfolk Southern Corp. 10,900 220
Union Pacific Corp. 7,300 457
------
1,162
REAL PROPERTY 0.4%
--------------------------------------------------------------------------
Apartment Investment & Management Co.,
Class A 2,700 110
Equity Office Properties Trust 11,100 311
Equity Residential 7,700 225
Plum Creek Timber Co., Inc. 5,000 132
ProLogis 4,900 145
Simon Property Group, Inc. 5,200 234
------
1,157
RETAIL 7.4%
--------------------------------------------------------------------------
Albertson's, Inc. 10,183 207
o Autonation, Inc. 7,800 146
o AutoZone, Inc. 2,500 240
o Bed, Bath & Beyond, Inc. 8,200 346
o Best Buy Co., Inc. 8,900 519
o Big Lots, Inc. 2,900 44
Circuit City Stores, Inc. 5,500 52
o Costco Wholesale Corp. 12,700 449
CVS Corp. 11,000 387
Dillards, Inc., Class A 2,200 36
Dollar General Corp. 9,050 203
Family Dollar Stores, Inc. 5,000 218
Federated Department Stores, Inc. 5,400 257
The Gap, Inc. 24,700 471
Home Depot, Inc. 64,000 2,372
J.C. Penney Co., Inc. Holding Co. 7,300 173
o Kohl's Corp. 9,700 544
o Kroger Co. 20,900 366
Limited Brands, Inc. 14,400 253
Lowe's Cos., Inc. 21,800 1,285
The May Department Stores Co. 7,800 218
Nordstrom, Inc. 3,900 119
o Office Depot, Inc. 8,600 128
RadioShack Corp. 4,800 144
o Safeway, Inc. 12,300 260
Sears, Roebuck & Co. 7,800 411
o Staples, Inc. 13,600 365
Target Corp. 25,300 1,005
Tiffany & Co. 3,950 187
TJX Cos., Inc. 14,200 298
o Toys `R' Us, Inc. 5,800 75
=(3) Wal-Mart Stores, Inc. 122,000 7,192
Walgreen Co. 28,400 989
Winn-Dixie Stores, Inc. 3,800 31
------
19,990
STEEL 0.1%
--------------------------------------------------------------------------
Allegheny Technologies, Inc. 2,350 18
Nucor Corp. 2,400 132
United States Steel Corp. 2,600 61
Worthington Industries, Inc. 2,100 31
------
242
TELEPHONE 3.4%
--------------------------------------------------------------------------
Alltel Corp. 8,600 407
AT&T Corp. 21,697 403
o AT&T Wireless Services, Inc. 75,446 547
o Avaya, Inc. 11,595 150
BellSouth Corp. 51,700 1,360
CenturyTel, Inc. 3,900 140
o Citizens Communications Co. 7,686 96
o Nextel Communications, Inc.,
Class A 28,800 697
o Qwest Communications
International, Inc. 47,121 166
SBC Communications, Inc. 92,630 2,221
Sprint Corp. (FON Group) 24,900 398
o Sprint Corp. (PCS Group) 28,700 125
Verizon Communications, Inc. 76,828 2,581
------
9,291
20 See financial notes.
INSTITUTIONAL SELECT(R) S&P 500 FUND
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TOBACCO 1.1%
--------------------------------------------------------------------------
Altria Group, Inc. 56,600 2,632
R.J. Reynolds Tobacco Holdings,
Inc. 2,300 110
UST, Inc. 4,500 153
-----
2,895
TRAVEL & RECREATION 0.6%
--------------------------------------------------------------------------
Brunswick Corp. 2,400 71
Carnival Corp. 17,700 618
Harrah's Entertainment, Inc. 3,200 139
Hilton Hotels Corp. 10,200 162
Marriott International, Inc., Class A 6,700 290
Starwood Hotels & Resorts
Worldwide, Inc. 5,700 192
-----
1,472
TRUCKING & FREIGHT 0.1%
--------------------------------------------------------------------------
Paccar, Inc. 3,250 257
Ryder Systems, Inc. 1,700 51
-----
308
UTILITIES: ELECTRIC & GAS 2.8%
--------------------------------------------------------------------------
o The AES Corp. 17,200 150
o Allegheny Energy, Inc. 3,201 34
Ameren Corp. 4,700 210
American Electric Power Co., Inc. 10,980 309
o Calpine Corp. 10,700 49
Centerpoint Energy, Inc. 8,400 82
Cinergy Corp. 4,800 174
o CMS Energy Corp. 3,700 30
Consolidated Edison, Inc. 6,200 251
Constellation Energy Group, Inc. 4,800 175
Dominion Resources, Inc. 9,191 566
DTE Energy Co. 4,800 177
Duke Energy Corp. 24,900 452
o Dynegy, Inc., Class A 10,100 40
o Edison International 8,800 173
El Paso Corp. 16,426 121
Entergy Corp. 6,400 345
Exelon Corp. 9,150 581
FirstEnergy Corp. 9,088 312
FPL Group, Inc. 5,100 325
KeySpan Corp. 4,300 150
Kinder Morgan, Inc. 3,505 188
Nicor, Inc. 1,400 48
NiSource, Inc. 7,127 148
Peoples Energy Corp. 1,200 49
o PG&E Corp. 11,400 279
Pinnacle West Capital Corp. 2,400 88
PPL Corp. 5,000 200
Progress Energy, Inc. 6,726 290
Public Service Enterprise Group, Inc. 6,400 262
Sempra Energy 6,285 175
The Southern Co. 20,400 608
TECO Energy, Inc. 5,200 68
TXU Corp. 8,900 203
Williams Cos., Inc. 14,200 145
Xcel Energy, Inc. 11,060 181
------
7,638
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
U.S TREASURY OBLIGATION
0.0% of net assets
= U.S. Treasury Bill
0.93%, 12/18/03 80 80
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
See financial notes. 21
INSTITUTIONAL SELECT(R) S&P 500 FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value $271,235 a
Receivables:
Fund shares sold 218
Interest 1
Dividends 364
Investments sold 416
Prepaid expenses + 14
------------
TOTAL ASSETS 272,248
LIABILITIES
- --------------------------------------------------------------------------------
Cash overdraft 74
Payables:
Fund shares redeemed 517
Investments bought 82
Transfer agent and shareholder service fees 1
Accrued expenses + 65
------------
TOTAL LIABILITIES 739
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 272,248
TOTAL LIABILITIES - 739
------------
NET ASSETS $271,509
NET ASSETS BY SOURCE
Capital received from investors 347,404
Net investment income not yet distributed 3,116
Net realized capital losses (51,446)
Net unrealized capital losses (27,565) b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$ 271,509 32,708 $ 8.30
Unless stated, all numbers x 1,000.
a The fund paid $298,809 for these securities. Not counting short-term
obligations and government securities, the fund paid $37,388 for securities
during the report period and received $8,410 from securities it sold or that
matured.
b These derive from investments and futures. As of the report date, the fund had
one open S&P 500 futures contract due to expire on December 18, 2003, with an
aggregate contract value of $262 and net unrealized gains of $9.
FEDERAL TAX DATA
- ----------------------------------------------------
PORTFOLIO COST $302,636
NET UNREALIZED GAINS AND LOSSES:
Gains $36,479
Losses + (67,880)
--------------
($31,401)
UNDISTRIBUTED EARNINGS:
Ordinary income $3,116
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2008 $ 465
2009 17,888
2010 27,646
2011 + 1,611
--------------
$47,610
22 See financial notes.
INSTITUTIONAL SELECT(R) S&P 500 FUND
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $4,079
Interest 16
Securities on loan + 27
-----------
TOTAL INVESTMENT INCOME 4,122
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments sold (1,936)
Net realized gains on futures contracts + 400
-----------
NET REALIZED LOSSES (1,536)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 42,974
Net unrealized losses on futures contracts + (64)
-----------
NET UNREALIZED GAINS 42,910
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 412 a
Transfer agent and shareholder service fees 229 b
Trustees' fees 6 c
Custodian fees 32
Portfolio accounting fees 34
Professional fees 27
Registration fees 32
Shareholder reports 36
Interest expense 1
Other expenses + 18
-----------
Total expenses 827
Expense reduction - 483 d
-----------
NET EXPENSES 344
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 4,122
NET EXPENSES - 344
-----------
NET INVESTMENT INCOME 3,778
NET REALIZED LOSSES (1,536) e
NET UNREALIZED GAINS + 42,910 e
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $45,152
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.18% of the first $1
billion and 0.15% of assets beyond that.
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.05% of the
fund's assets. These fees are paid to Charles Schwab & Co.
c For the fund's independent trustees only.
d Includes $412 from the investment adviser (CSIM) and $71 from the transfer
agent and shareholder service agent (Schwab). These reductions reflect a
guarantee by CSIM and Schwab to limit the operating expenses of this fund
through December 31, 2005, to 0.15% 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 $41,374.
See financial notes. 23
INSTITUTIONAL SELECT(R) S&P 500 FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income $3,778 $3,541
Net realized losses (1,536) (24,773)
Net unrealized gains or losses + 42,910 (19,562)
--------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 45,152 (40,794)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income $3,544 $3,522 a, b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
Shares sold 13,049 $95,187 13,395 $109,254
Shares reinvested 407 2,823 338 2,960
Shares redeemed + (9,685) (70,755) (15,951) (125,789) c
------------------------------------------------------
NET TRANSACTIONS
IN FUND SHARES 3,771 $27,255 (2,218) ($13,575)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 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 + 3,771 68,863 (2,218) (57,891) d
------------------------------------------------------
END OF PERIOD 32,708 $271,509 28,937 $202,646 e
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
b The tax-basis components of distributions paid are:
CURRENT PERIOD:
Ordinary Income $3,544
Long-term capital gains $--
PRIOR PERIOD:
Ordinary Income $3,522
Long-term capital gains $--
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase.
CURRENT PERIOD $21
PRIOR PERIOD $116
Dollar amounts are net of the redemption proceeds.
d Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
e Includes distributable net investment income in the amount of $3,116 and
$2,882 for the current period and prior period, respectively.
24 See financial notes.
INSTITUTIONAL SELECT(R) LARGE-CAP VALUE INDEX FUND
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 2/1/99 1-
10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
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 0.15 0.18 0.14 0.15 0.09
Net realized and unrealized gains or losses 1.55 (1.49) (2.19) 0.84 0.59
------------------------------------------------------------------------------
Total income or loss from investment operations 1.70 (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 8.66 7.14 8.92 11.44 10.68
------------------------------------------------------------------------------
Total return (%) 24.40 (15.65) (18.53) 9.48 6.80 2
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.25 0.25 3 0.25 0.25 4 0.21 5
Gross operating expenses 0.45 0.48 0.45 0.51 0.70 5
Net investment income 1.94 1.72 1.47 1.64 1.62 5
Portfolio turnover rate 24 26 47 27 19 2
Net assets, end of period ($ x 1,000,000) 79 70 128 129 71
1 Commencement of operations.
2 Not annualized.
3 The ratio of net operating expenses would have been 0.26% if certain
non-routine expenses (interest expense) had been included.
4 The ratio of net operating expenses would have been 0.26% if certain
non-routine expenses (proxy fees) had been included.
5 Annualized.
See financial notes. 25
INSTITUTIONAL SELECT(R) LARGE-CAP VALUE INDEX FUND
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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 related to the fund's adviser
COST MARKET VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
98.3% COMMON STOCK 76,571 77,967
1.3% SHORT-TERM
INVESTMENT 1,041 1,041
0.1% U.S. TREASURY
OBLIGATIONS 60 60
- --------------------------------------------------------------------------------
99.7% TOTAL INVESTMENTS 77,672 79,068
33.7% COLLATERAL INVESTED
FOR SECURITIES ON LOAN 26,723 26,723
(33.4)% OTHER ASSETS AND
LIABILITIES, NET (26,511)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 79,280
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 98.3% of net assets
AEROSPACE / DEFENSE 2.3%
--------------------------------------------------------------------------
The Boeing Co. 13,400 516
Crane Co. 1,200 34
General Dynamics Corp. 3,200 268
Goodrich Corp. 1,900 53
Lockheed Martin Corp. 7,200 334
Northrop Grumman Corp. 2,824 252
Raytheon Co. 6,700 177
Rockwell Automation, Inc. 2,900 90
Textron, Inc. 2,100 104
-----------
1,828
AIR TRANSPORTATION 0.8%
--------------------------------------------------------------------------
Delta Air Lines, Inc. 1,800 23
FedEx Corp. 4,700 356
Sabre Holdings Corp. 2,200 48
Southwest Airlines Co. 12,500 243
-----------
670
ALCOHOLIC BEVERAGES 0.0%
--------------------------------------------------------------------------
Adolph Coors Co., Class B 500 28
APPAREL 0.3%
--------------------------------------------------------------------------
Jones Apparel Group, Inc. 2,100 73
Liz Claiborne, Inc. 1,800 66
Reebok International Ltd. 900 35
VF Corp. 1,800 76
-----------
250
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.7%
--------------------------------------------------------------------------
Cooper Tire & Rubber Co. 1,300 26
Cummins, Inc. 600 28
Dana Corp. 2,500 41
Danaher Corp. 2,500 207
Delphi Corp. 9,500 84
Eaton Corp. 1,200 120
Ford Motor Co. 29,009 352
General Motors Corp. 8,875 379
Genuine Parts Co. 2,700 86
o Goodyear Tire & Rubber Co. 2,800 19
Visteon Corp. 1,985 13
-----------
1,355
BANKS 14.4%
--------------------------------------------------------------------------
AmSouth Bancorp. 5,700 135
(4) Bank of America Corp. 23,900 1,810
The Bank of New York Co., Inc. 12,100 377
Bank One Corp. 18,100 768
BB&T Corp. 8,300 321
Comerica, Inc. 2,700 139
First Tennessee National Corp. 2,200 100
FleetBoston Financial Corp. 16,602 671
Huntington Bancshares, Inc. 3,941 85
26 See financial notes.
INSTITUTIONAL SELECT(R) LARGE-CAP VALUE INDEX FUND
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
(10) J.P. Morgan Chase & Co. 32,510 1,167
KeyCorp, Inc. 6,700 189
Marshall & Ilsley Corp. 3,666 131
Mellon Financial Corp. 7,000 209
National City Corp. 9,700 317
North Fork Bancorp., Inc. 2,500 98
Northern Trust Corp. 3,600 167
PNC Financial Services Group, Inc. 4,600 247
Regions Financial Corp. 3,600 132
SouthTrust Corp. 5,400 172
State Street Corp. 5,400 283
SunTrust Banks, Inc. 4,400 295
Synovus Financial Corp. 4,700 130
U.S. Bancorp 30,378 827
UBS AG-Registered 3 --
Union Planters Corp. 3,250 108
Wachovia Corp. 21,400 982
(5) Wells Fargo & Co. 26,800 1,509
Zions Bancorp. 1,400 86
-----------
11,455
BUSINESS MACHINES & SOFTWARE 2.9%
--------------------------------------------------------------------------
o Apple Computer, Inc. 5,800 133
Autodesk, Inc. 1,700 33
o BMC Software, Inc. 4,000 70
o Compuware Corp. 6,100 34
o Comverse Technology, Inc. 3,000 54
o EMC Corp. 34,900 483
o Gateway, Inc. 4,900 25
Hewlett-Packard Co. 48,598 1,084
o NCR Corp. 1,600 57
o Novell, Inc. 6,000 35
o Siebel Systems, Inc. 7,700 97
o Sun Microsystems, Inc. 50,600 200
-----------
2,305
BUSINESS SERVICES 2.9%
--------------------------------------------------------------------------
o Allied Waste Industries, Inc. 3,200 36
o Cendant Corp. 16,700 341
Computer Associates International,
Inc. 9,300 219
o Computer Sciences Corp. 3,100 123
o Convergys Corp. 2,300 37
Electronic Data Systems Corp. 7,700 165
o Fiserv, Inc. 3,000 106
o Interpublic Group of Cos., Inc. 6,000 89
o Intuit, Inc. 1 --
o Parametric Technology Corp. 4,100 13
o PeopleSoft, Inc. 5,000 104
o Sungard Data Systems, Inc. 4,500 126
Tyco International Ltd. 31,901 666
Waste Management, Inc. 9,700 252
-----------
2,277
CHEMICALS 0.8%
--------------------------------------------------------------------------
Air Products & Chemicals, Inc. 3,700 168
Eastman Chemical Co. 1,200 39
Great Lakes Chemical Corp. 700 15
Monsanto Co. 4,200 105
PPG Industries, Inc. 2,800 161
Rohm & Haas Co. 3,605 142
-----------
630
CONSTRUCTION 0.9%
--------------------------------------------------------------------------
Centex Corp. 1,000 98
Fluor Corp. 1,300 48
KB Home 800 55
Masco Corp. 7,600 209
Pulte Homes, Inc. 1,000 87
The Sherwin-Williams Co. 2,400 80
The Stanley Works 1,300 43
Vulcan Materials Co. 1,600 71
-----------
691
CONSUMER DURABLES 0.2%
--------------------------------------------------------------------------
Leggett & Platt, Inc. 3,100 65
Newell Rubbermaid, Inc. 4,400 100
-----------
165
CONTAINERS 0.1%
--------------------------------------------------------------------------
Bemis Co. 900 42
o Pactiv Corp. 2,600 57
-----------
99
See financial notes. 27
INSTITUTIONAL SELECT(R) LARGE-CAP VALUE INDEX FUND
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
ELECTRONICS 4.6%
--------------------------------------------------------------------------
o ADC Telecommunications, Inc. 12,800 33
o Advanced Micro Devices, Inc. 5,200 79
o Agilent Technologies, Inc. 7,500 187
American Power Conversion Corp. 3,200 65
o Andrew Corp. 2,200 29
o Applied Materials, Inc. 26,300 615
o Applied Micro Circuits Corp. 5,200 30
o CIENA Corp. 7,600 49
o Jabil Circuit, Inc. 3,109 86
o JDS Uniphase Corp. 23,100 82
o LSI Logic Corp. 6,200 57
o Micron Technology, Inc. 9,700 139
Molex, Inc. 3,000 94
Motorola, Inc. 37,185 503
o National Semiconductor Corp. 2,800 114
o Novellus Systems, Inc. 2,400 99
PerkinElmer, Inc. 2,100 38
o Power-One, Inc. 1,100 10
o Sanmina-SCI Corp. 8,100 85
Scientific-Atlanta, Inc. 2,500 74
o Solectron Corp. 14,800 82
Symbol Technologies, Inc. 3,500 44
Tektronix, Inc. 1,600 41
o Tellabs, Inc. 6,600 50
o Teradyne, Inc. 2,900 66
Texas Instruments, Inc. 27,500 795
o Thermo Electron Corp. 2,700 59
o Thomas & Betts Corp. 1,000 18
-----------
3,623
ENERGY: RAW MATERIALS 1.8%
--------------------------------------------------------------------------
Anadarko Petroleum Corp. 4,038 176
Apache Corp. 2,535 177
Baker Hughes, Inc. 5,400 152
Burlington Resources, Inc. 3,100 151
Devon Energy Corp. 3,800 184
EOG Resources, Inc. 1,900 80
Halliburton Co. 7,000 167
o Noble Corp. 2,000 69
Occidental Petroleum Corp. 6,100 215
o Rowan Cos., Inc. 1,500 36
-----------
1,407
FOOD & AGRICULTURE 0.8%
--------------------------------------------------------------------------
Archer-Daniels-Midland Co. 10,005 144
Coca-Cola Enterprises, Inc. 7,300 147
ConAgra Foods, Inc. 8,400 200
The Pepsi Bottling Group, Inc. 4,500 100
Supervalu, Inc. 2,200 56
-----------
647
GOLD 0.4%
--------------------------------------------------------------------------
Newmont Mining Corp. 6,400 280
HEALTHCARE / DRUGS & MEDICINE 3.1%
--------------------------------------------------------------------------
AmerisourceBergen Corp. 1,800 102
o Anthem, Inc. 2,329 160
Applied Biosystems Group --
Applera Corp. 3,200 74
Bausch & Lomb, Inc. 900 43
Cardinal Health, Inc. 7,200 427
HCA, Inc. 8,000 306
Health Management Associates, Inc.,
Class A 3,700 82
o Humana, Inc. 2,600 53
o King Pharmaceuticals, Inc. 3,600 48
Manor Care, Inc. 1,500 50
McKesson Corp. 4,500 136
o Medco Health Solutions, Inc. 4,200 140
o Quest Diagnostics 1,614 109
Schering-Plough Corp. 23,400 357
o Tenet Healthcare Corp. 7,500 104
o Watson Pharmaceuticals, Inc. 1,700 67
o WellPoint Health Networks, Inc. 2,400 213
-----------
2,471
HOUSEHOLD PRODUCTS 0.1%
--------------------------------------------------------------------------
Alberto-Culver Co., Class B 1,000 63
28 See financial notes.
INSTITUTIONAL SELECT(R) LARGE-CAP VALUE INDEX FUND
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
INSURANCE 8.7%
--------------------------------------------------------------------------
ACE Ltd. 4,400 158
Aetna, Inc. 2,500 144
AFLAC, Inc. 8,200 299
The Allstate Corp. 11,200 442
AMBAC Financial Group, Inc. 1,800 127
=(3) American International Group, Inc. 41,548 2,527
AON Corp. 5,050 111
Chubb Corp. 3,000 201
CIGNA Corp. 2,300 131
Cincinnati Financial Corp. 2,600 106
Hartford Financial Services Group,
Inc. 4,400 242
Jefferson-Pilot Corp. 2,200 105
John Hancock Financial Services, Inc. 4,541 161
Lincoln National Corp. 2,800 112
Loews Corp. 3,000 129
MBIA, Inc. 2,350 140
Metlife, Inc. 12,078 379
MGIC Investment Corp. 1,600 82
Principal Financial Group, Inc. 5,200 163
Prudential Financial, Inc. 8,800 340
Safeco Corp. 2,300 85
St. Paul Cos., Inc. 3,700 141
Torchmark Corp. 1,900 83
Travelers Property Casualty Corp.,
Class B 16,099 264
UnumProvident Corp. 4,649 76
XL Capital Ltd., Class A 2,100 146
-----------
6,894
MEDIA 6.6%
--------------------------------------------------------------------------
Clear Channel Communications,
Inc. 9,839 402
o(9) Comcast Corp., Class A 35,883 1,217
Gannett Co., Inc. 4,400 370
R.R. Donnelley & Sons Co. 1,900 49
o Time Warner, Inc. 71,700 1,096
Tribune Co. 5,080 249
Viacom, Inc., Class B 27,901 1,113
The Walt Disney Co. 32,400 734
-----------
5,230
MISCELLANEOUS FINANCE 12.6%
--------------------------------------------------------------------------
The Bear Stearns Cos., Inc. 1,501 114
Capital One Financial Corp. 3,600 219
/ The Charles Schwab Corp. 21,600 293
Charter One Financial, Inc. 3,652 117
=(1) Citigroup, Inc. 82,273 3,900
Countrywide Financial Corp. 2,200 231
Franklin Resources, Inc. 4,100 194
Freddie Mac 11,100 623
Golden West Financial Corp. 2,400 241
Goldman Sachs Group, Inc. 7,600 714
Janus Capital Group, Inc. 3,700 52
Lehman Brothers Holdings, Inc. 3,800 274
MBNA Corp. 20,400 505
Merrill Lynch & Co., Inc. 14,900 882
Morgan Stanley 17,400 955
o Providian Financial Corp. 4,600 51
Washington Mutual, Inc. 14,750 645
-----------
10,010
NON-DURABLES & ENTERTAINMENT 1.1%
--------------------------------------------------------------------------
o American Greetings Corp., Class A 1,000 21
Darden Restaurants, Inc. 2,700 57
Fortune Brands, Inc. 2,300 150
Hasbro, Inc. 2,850 62
McDonald's Corp. 20,300 508
Wendy's International, Inc. 1,700 63
-----------
861
NON-FERROUS METALS 0.7%
--------------------------------------------------------------------------
Alcoa, Inc. 13,432 424
Engelhard Corp. 2,100 60
o Phelps Dodge Corp. 1,420 88
-----------
572
OIL: DOMESTIC 1.7%
--------------------------------------------------------------------------
Amerada Hess Corp. 1,500 77
Ashland, Inc. 900 34
ConocoPhillips 10,852 620
Kerr-McGee Corp. 1,600 66
Marathon Oil Corp. 4,900 145
o Nabors Industries Ltd. 2,350 89
See financial notes. 29
INSTITUTIONAL SELECT(R) LARGE-CAP VALUE INDEX FUND
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Sunoco, Inc. 1,300 57
o Transocean, Inc. 5,048 97
Unocal Corp. 4,200 133
-----------
1,318
OIL: INTERNATIONAL 6.5%
--------------------------------------------------------------------------
(8) ChevronTexaco Corp. 17,112 1,271
=(2) Exxon Mobil Corp. 105,950 3,876
-----------
5,147
OPTICAL & PHOTO 0.4%
--------------------------------------------------------------------------
o Corning, Inc. 21,200 233
Eastman Kodak Co. 4,500 110
-----------
343
PAPER & FOREST PRODUCTS 1.0%
--------------------------------------------------------------------------
Boise Cascade Corp. 1,000 28
Georgia-Pacific Corp. 4,010 105
International Paper Co. 7,715 304
o Louisiana-Pacific Corp. 1,700 32
MeadWestvaco Corp. 3,146 82
Temple-Inland, Inc. 800 43
Weyerhaeuser Co. 3,500 211
-----------
805
PRODUCER GOODS & MANUFACTURING 2.8%
--------------------------------------------------------------------------
Caterpillar, Inc. 5,600 410
Cooper Industries Ltd., Class A 1,500 79
Deere & Co. 3,900 237
Dover Corp. 3,300 129
Honeywell International, Inc. 13,687 419
Illinois Tool Works, Inc. 4,900 360
Ingersoll-Rand Co., Class A 2,800 169
Johnson Controls, Inc. 1,400 151
Pall Corp. 1,900 45
Parker Hannifin Corp. 1,900 97
Snap-On, Inc. 1,000 29
W.W. Grainger, Inc. 1,200 55
-----------
2,180
RAILROAD & SHIPPING 0.8%
--------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 5,800 168
CSX Corp. 3,500 111
Norfolk Southern Corp. 6,200 125
Union Pacific Corp. 4,000 251
-----------
655
REAL PROPERTY 0.8%
--------------------------------------------------------------------------
Apartment Investment & Management Co.,
Class A 1,500 61
Equity Office Properties Trust 6,300 176
Equity Residential 4,400 129
Plum Creek Timber Co., Inc. 2,900 76
ProLogis 2,900 86
Simon Property Group, Inc. 3,100 140
-----------
668
RETAIL 3.6%
--------------------------------------------------------------------------
Albertson's, Inc. 5,838 118
o Autonation, Inc. 4,300 80
o Big Lots, Inc. 1,800 27
Circuit City Stores, Inc. 3,100 30
o Costco Wholesale Corp. 7,400 262
CVS Corp. 6,200 218
Dillards, Inc., Class A 1,200 19
Federated Department Stores, Inc. 3,200 152
J.C. Penney Co., Inc. Holding Co. 4,400 104
o Kroger Co. 11,800 206
Limited Brands, Inc. 8,400 148
The May Department Stores Co. 4,500 126
Nordstrom, Inc. 2,100 64
o Office Depot, Inc. 4,800 72
o Safeway, Inc. 7,000 148
Sears, Roebuck & Co. 4,800 253
o Staples, Inc. 7,800 209
Target Corp. 14,400 572
o Toys `R' Us, Inc. 3,700 48
Winn-Dixie Stores, Inc. 2,200 18
-----------
2,874
30 See financial notes.
INSTITUTIONAL SELECT(R) LARGE-CAP VALUE INDEX FUND
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
STEEL 0.2%
--------------------------------------------------------------------------
Allegheny Technologies, Inc. 550 4
Nucor Corp. 1,200 66
United States Steel Corp. 1,600 38
Worthington Industries, Inc. 1,400 20
-----------
128
TELEPHONE 5.9%
--------------------------------------------------------------------------
Alltel Corp. 5,100 241
AT&T Corp. 12,452 231
o AT&T Wireless Services, Inc. 42,845 311
BellSouth Corp. 29,400 774
CenturyTel, Inc. 2,500 89
o Citizens Communications Co. 4,248 53
(7) SBC Communications, Inc. 53,100 1,273
Sprint Corp. (FON Group) 14,300 229
(6) Verizon Communications, Inc. 43,900 1,475
-----------
4,676
TOBACCO 0.1%
--------------------------------------------------------------------------
R.J. Reynolds Tobacco Holdings, Inc. 1,300 62
TRAVEL & RECREATION 1.1%
--------------------------------------------------------------------------
Brunswick Corp. 1,600 48
Carnival Corp. 10,000 349
Harrah's Entertainment, Inc. 1,700 74
Hilton Hotels Corp. 5,900 93
Marriott International, Inc., Class A 3,700 160
Starwood Hotels & Resorts
Worldwide, Inc. 3,200 108
-----------
832
TRUCKING & FREIGHT 0.2%
--------------------------------------------------------------------------
Paccar, Inc. 1,950 154
Ryder Systems, Inc. 1,200 36
-----------
190
UTILITIES: ELECTRIC & GAS 5.4%
--------------------------------------------------------------------------
o Allegheny Energy, Inc. 2,100 22
Ameren Corp. 2,500 112
American Electric Power Co., Inc. 6,440 181
o Calpine Corp. 6,000 28
Centerpoint Energy, Inc. 5,400 53
Cinergy Corp. 2,800 102
o CMS Energy Corp. 2,200 18
Consolidated Edison, Inc. 3,500 142
Constellation Energy Group, Inc. 2,800 102
Dominion Resources, Inc. 5,048 311
DTE Energy Co. 2,600 96
Duke Energy Corp. 14,300 260
o Dynegy, Inc., Class A 5,500 22
o Edison International 5,600 110
El Paso Corp. 9,073 67
Entergy Corp. 3,700 199
Exelon Corp. 5,300 336
FirstEnergy Corp. 5,122 176
FPL Group, Inc. 2,900 185
KeySpan Corp. 2,500 87
Kinder Morgan, Inc. 2,145 115
Nicor, Inc. 800 27
NiSource, Inc. 4,515 93
Peoples Energy Corp. 500 20
o PG&E Corp. 6,600 161
Pinnacle West Capital Corp. 1,500 55
PPL Corp. 2,800 112
Progress Energy, Inc. 3,806 164
Public Service Enterprise Group,
Inc. 3,500 143
Sempra Energy 3,300 92
The Southern Co. 11,500 343
TECO Energy, Inc. 3,000 39
TXU Corp. 5,000 114
Williams Cos., Inc. 8,400 86
Xcel Energy, Inc. 6,410 105
-----------
4,278
SHORT-TERM INVESTMENT
1.3% of net assets
Provident Institutional
TempFund 1,041,239 1,041
See financial notes. 31
INSTITUTIONAL SELECT(R) LARGE-CAP VALUE INDEX FUND
PORTFOLIO HOLDINGS continued
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
U.S. TREASURY OBLIGATIONS
0.1% of net assets
= U.S. Treasury Bills
0.85%-0.93%, 12/18/03 60 60
END OF INVESTMENTS. For totals, please see the first page of holdings for
this fund.
COLLATERAL INVESTED FOR SECURITIES ON LOAN
33.7% of net assets
COMMERCIAL PAPER & OTHER CORPORATE OBLIGATIONS
--------------------------------------------------------------------------
American Express Centurion Bank
1.11%, 12/12/03 103 103
1.11%, 01/27/04 148 148
American Express Credit Corp.
1.11%, 04/16/04 536 536
1.09%, 05/13/04 171 171
Canadian Imperial Bank Corp.
1.09%, 05/28/04 624 623
CC USA, Inc.
1.08%, 11/17/03 134 133
Concord Minutemen Capital Corp.
1.11%, 01/09/04 3,736 3,726
1.08%, 11/14/03 571 570
1.08%, 11/18/03 341 341
1.07%, 11/19/03 1,815 1,814
Crown Point Funding Corp.
1.11%, 11/16/04 445 444
1.08%, 11/14/03 220 219
Depfa Bank PLC
1.08%, 11/18/03 1,286 1,282
Fairway Finance Corp.
1.10%, 01/12/04 133 133
General Electric Capital Corp.
1.08%, 05/10/04 831 831
Lexington Parker
1.07%, 11/06/03 944 943
Svenska Handelsbanken
1.39%, 10/27/04 147 147
Tulip Funding Corp.
1.07%, 11/10/03 1,738 1,736
Westdeutsche Landesbank AG
1.09%, 09/23/04 640 640
1.09%, 09/29/04 222 222
------
14,762
SHORT-TERM INVESTMENT
--------------------------------------------------------------------------
Wells Fargo Bank Time Deposit
1.06%, 11/03/03 1,529 1,529
SECURITY AND NUMBER OF SHARES
OTHER INVESTMENT COMPANIES
--------------------------------------------------------------------------
Institutional Money Market
Trust 10,432,383 10,432
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN. For totals, please see
the first page of holdings for this fund.
32 See financial notes.
INSTITUTIONAL SELECT(R) LARGE-CAP VALUE INDEX FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value (including
$25,908 of securities on loan) $79,068 a
Collateral held for securities on loan 26,723
Receivables:
Fund shares sold 120
Interest 1
Dividends 134
Due from broker for futures 2
Income from securities on loan 2
Prepaid expenses + 10
----------
TOTAL ASSETS 106,060
LIABILITIES
- --------------------------------------------------------------------------------
Collateral held for securities on loan 26,723
Payables:
Fund shares redeemed 11
Investment adviser and administrator fees 1
Accrued expenses + 45
----------
TOTAL LIABILITIES 26,780
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 106,060
TOTAL LIABILITIES - 26,780
----------
NET ASSETS $79,280
NET ASSETS BY SOURCE
Capital received from investors 110,995
Net investment income not yet distributed 1,097
Net realized capital losses (34,243)
Net unrealized capital gains 1,431 b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$79,280 9,157 $8.66
Unless stated, all numbers x 1,000.
a The fund paid $77,672 for these securities. Not counting short-term
obligations and government securities, the fund paid $16,837 for securities
during the report period and received $23,115 from securities it sold or that
matured.
b These derive from investments and futures. As of the report date, the fund
had five open S&P 500 futures contracts due to expire on December 18, 2003,
with an aggregate contract value of $1,312 and net unrealized gains of $35.
FEDERAL TAX DATA
- --------------------------------------------------------------------------------
PORTFOLIO COST $79,551
NET UNREALIZED GAINS AND LOSSES:
Gains $12,696
Losses + (13,179)
----------
($483)
UNDISTRIBUTED EARNINGS:
Ordinary income $1,098
Long-term capital gains $ --
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $25,956
2011 + 6,374
----------
$32,330
See financial notes. 33
INSTITUTIONAL SELECT(R) LARGE-CAP VALUE INDEX FUND
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $1,521
Interest 5
Securities on loan + 9
----------
TOTAL INVESTMENT INCOME 1,535
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments sold (6,161)
Net realized gains on futures contracts + 34
----------
NET REALIZED LOSSES (6,127)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 20,445
Net unrealized gains on futures contracts + 24
----------
NET UNREALIZED GAINS 20,469
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 140 a
Transfer agent and shareholder service fees 70 b
Trustees' fees 5 c
Custodian fees 14
Portfolio accounting fees 10
Professional fees 22
Registration fees 21
Shareholder reports 16
Interest expenses 1
Other expenses + 13
----------
Total expenses 312
Expense reduction - 135 d
----------
NET EXPENSES 177
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,535
NET EXPENSES - 177
----------
NET INVESTMENT INCOME 1,358
NET REALIZED LOSSES (6,127) e
NET UNREALIZED GAINS + 20,469 e
----------
INCREASE IN NET ASSETS FROM OPERATIONS $15,700
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.20% of the first $1
billion and 0.18% of assets beyond that.
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.05% of the
fund's assets. These fees are paid to Charles Schwab & Co.
c For the fund's independent trustees only.
d Includes $120 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 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 $14,342.
34 See financial notes.
INSTITUTIONAL SELECT(R) LARGE-CAP VALUE INDEX FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income $1,358 $1,845
Net realized losses (6,127) (22,048)
Net unrealized gains + 20,469 5,276
------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 15,700 (14,927)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income 1,700 2,118 a
Distributions from net realized gains + -- 4,400
------------------------------
TOTAL DISTRIBUTIONS PAID $1,700 $6,518 b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
Shares sold 3,034 $23,065 4,767 $40,217
Shares reinvested 200 1,408 611 5,412
Shares redeemed + (3,938) (29,626) (9,892) (81,906) c
------------------------------------------------
NET TRANSACTIONS
IN FUND SHARES (704) ($5,153) (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 increase
or decrease + (704) 8,847 (4,514) (57,722) d
------------------------------------------------
END OF PERIOD 9,157 $79,280 9,861 $70,433 e
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
b The tax-basis components of distributions paid are:
CURRENT PERIOD:
Ordinary Income $1,700
Long-term capital gains $--
PRIOR PERIOD:
Ordinary Income $3,921
Long-term capital gains $2,597
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days
or less after the purchase:
CURRENT PERIOD $12
PRIOR PERIOD $64
Dollar amounts are net of the redemption proceeds.
d Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
e Includes distributable net investment income in the amount of $1,097 and
$1,439 for the current period and prior period, respectively.
See financial notes. 35
INSTITUTIONAL SELECT(R) SMALL-CAP VALUE INDEX FUND
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 2/1/99 1-
10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------
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 0.11 0.10 0.09 0.09 0.07
Net realized and unrealized gains or losses 3.04 (0.32) 0.32 1.74 (0.18)
-----------------------------------------------------------
Total income or loss from investment operations 3.15 (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 12.55 9.50 10.82 11.23 9.89
-----------------------------------------------------------
Total return (%) 33.52 (3.32) 4.14 19.42 (1.10) 2
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.32 0.32 3 0.32 0.27 4 0.00 5
Gross operating expenses 0.63 0.61 0.61 0.66 0.98 5
Net investment income 0.95 0.81 0.87 0.94 1.25 5
Portfolio turnover rate 36 56 69 71 38 2
Net assets, end of period ($ x 1,000,000) 36 37 47 39 32
1 Commencement of operations.
2 Not annualized.
3 The ratio of net operating expenses would have been 0.33% if certain
non-routine expenses (interest expense) had been included.
4 The ratio of net operating expenses would have been 0.28% if certain
non-routine expenses (proxy fees) had been included.
5 Annualized.
36 See financial notes.
INSTITUTIONAL SELECT(R) SMALL-CAP VALUE INDEX FUND
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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)
- --------------------------------------------------------------------------------
99.3% COMMON STOCK 28,223 35,596
0.1% U.S. TREASURY
OBLIGATION 25 25
- --------------------------------------------------------------------------------
99.4% TOTAL INVESTMENTS 28,248 35,621
6.8% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 2,441 2,441
(6.2)% OTHER ASSETS AND
LIABILITIES, NET (2,229)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 35,833
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 99.3% of net assets
AEROSPACE / DEFENSE 1.7%
--------------------------------------------------------------------------
o Armor Holdings, Inc. 5,000 97
o DRS Technologies, Inc. 3,600 87
EDO Corp. 3,600 80
o Esterline Technologies Corp. 3,800 84
GenCorp, Inc. 7,900 75
Kaman Corp., Class A 4,100 50
o Veeco Instruments, Inc. 4,800 122
-----
595
AIR TRANSPORTATION 1.3%
--------------------------------------------------------------------------
o AAR Corp. 5,200 57
o Atlantic Coast Airlines Holdings, Inc. 7,100 78
o Frontier Airlines, Inc. 5,100 82
o Mesa Air Group, Inc. 5,200 56
SkyWest, Inc. 9,900 183
-----
456
APPAREL 2.3%
--------------------------------------------------------------------------
o= Ashworth, Inc. 1,400 12
Brown Shoe Co., Inc. 3,200 111
Haggar Corp. 1,100 17
Kellwood Co. 4,800 179
Oxford Industries, Inc. 1,100 75
Phillips-Van Heusen Corp. 5,000 86
Russell Corp. 5,300 97
Stride Rite Corp. 7,200 87
Wolverine World Wide, Inc. 7,300 147
-----
811
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 2.1%
--------------------------------------------------------------------------
A.O. Smith Corp., Class B 5,200 165
Coachmen Industries, Inc. 2,400 37
o Fleetwood Enterprises, Inc. 6,600 67
o Group 1 Automotive, Inc. 3,800 135
o Midas, Inc. 2,400 32
o Monaco Coach Corp. 4,700 113
Myers Industries, Inc. 5,500 67
Standard Motor Products, Inc. 2,800 31
o TBC Corp. 3,500 95
o Tower Automotive, Inc. 7,700 31
-----
773
BANKS 5.4%
--------------------------------------------------------------------------
Anchor Bancorp Wisconsin, Inc. 4,100 102
Brookline Bancorp, Inc. 9,500 141
Chittenden Corp. 6,500 209
First Republic Bank 2,500 89
o FirstFed Financial Corp. 3,100 140
Irwin Financial Corp. 4,700 132
MAF Bancorp., Inc. 4,300 180
Provident Bankshares Corp. 4,305 134
Riggs National Corp. 4,600 76
The South Financial Group, Inc. 8,300 217
Susquehanna Bancshares, Inc. 6,800 170
Umpqua Holdings Corp. 4,000 82
=(7) Whitney Holding Corp. 7,150 271
-----
1,943
See financial notes. 37
INSTITUTIONAL SELECT(R) SMALL-CAP VALUE INDEX FUND
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
BUSINESS MACHINES & SOFTWARE 2.8%
--------------------------------------------------------------------------
=o Adaptec, Inc. 18,700 159
Analogic Corp. 2,400 105
o Artesyn Technologies, Inc. 7,100 58
Black Box Corp. 3,200 138
o Brooktrout, Inc. 2,400 34
o Concerto Software, Inc. 1,400 17
o Digi International, Inc. 3,600 33
o Imagistics International, Inc. 3,100 100
o Input/Output, Inc. 9,200 38
o Invision Technologies, Inc. 3,100 84
Landamerica Financial Group, Inc. 3,400 170
o Roxio, Inc. 3,900 40
o Ultimate Electronics, Inc. 2,000 18
-----
994
BUSINESS SERVICES 8.5%
--------------------------------------------------------------------------
o 4Kids Entertainment, Inc. 2,400 59
ABM Industries, Inc. 8,700 135
o American Management Systems, Inc. 7,700 114
Angelica Corp. 1,700 35
Bowne & Co., Inc. 5,400 81
o Catapult Communications Corp. 1,900 26
CDI Corp. 3,200 105
o(9) Cerner Corp. 5,900 250
o Ciber, Inc. 11,700 108
o Cross Country Healthcare, Inc. 5,000 69
o eFunds Corp. 8,500 136
G&K Services, Inc., Class A 3,700 122
o Global Imaging Systems, Inc. 3,500 102
o Heidrick & Struggles International, Inc. 3,300 65
o Insurance Auto Auctions, Inc. 1,700 22
o JDA Software Group, Inc. 4,500 96
o Kroll, Inc. 6,800 158
o Mapinfo Corp. 2,600 24
o MAXIMUS, Inc. 3,800 133
o Metro One Telecommunications 1,800 5
o MRO Software, Inc. 4,500 57
Nautilus Group, Inc. 5,300 83
o NCO Group, Inc. 4,700 112
o NYFIX, Inc. 5,500 44
o On Assignment, Inc. 2,900 15
o Paxar Corp. 6,300 75
o Pegasus Solutions, Inc. 3,600 39
o Phoenix Technologies Ltd. 3,000 20
o PRG-Schultz International, Inc. 10,900 52
o QRS Corp. 2,900 30
o Radiant Systems, Inc. 3,600 24
Roto-Rooter, Inc. 1,500 53
o SourceCorp 3,000 70
o Spherion Corp. 9,700 84
o SPSS, Inc. 3,200 58
The Standard Register Co. 5,200 92
o Systems & Computer Technology Corp. 6,000 88
Talx Corp. 1,900 41
o URS Corp. 5,700 125
o Volt Information Sciences, Inc. 2,800 49
-----
3,056
CHEMICALS 1.8%
--------------------------------------------------------------------------
A. Schulman, Inc. 4,700 89
Arch Chemicals, Inc. 4,100 91
H.B. Fuller Co. 5,000 124
=o OM Group, Inc. 4,600 82
o Omnova Solutions, Inc. 5,400 19
Penford Corp. 1,600 22
o PolyOne Corp. 14,700 71
Tredegar Corp. 6,400 100
Wellman, Inc. 5,100 42
-----
640
CONSTRUCTION 2.6%
--------------------------------------------------------------------------
Apogee Enterprises, Inc. 4,400 46
Building Material Holding Corp. 1,900 27
o EMCOR Group, Inc. 2,300 87
o Insituform Technologies, Inc., Class A 4,800 68
(3) MDC Holdings, Inc. 5,184 349
(6) Standard-Pacific Corp. 5,700 273
Texas Industries, Inc. 3,300 89
-----
939
38 See financial notes.
INSTITUTIONAL SELECT(R) SMALL-CAP VALUE INDEX FUND
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
CONSUMER DURABLES 1.5%
--------------------------------------------------------------------------
o Applica, Inc. 3,700 27
Bassett Furniture Industries, Inc. 2,200 35
o Griffon Corp. 4,990 96
Haverty Furniture Cos., Inc. 3,900 81
o Interface, Inc., Class A 8,500 47
National Presto Industries, Inc. 1,200 42
o Salton, Inc. 2,000 21
Skyline Corp. 1,400 48
Sturm Ruger & Co., Inc. 4,200 48
Thomas Industries, Inc. 2,800 85
-----
530
CONTAINERS 0.1%
--------------------------------------------------------------------------
o Mobile Mini, Inc. 2,400 51
ELECTRONICS 10.2%
--------------------------------------------------------------------------
Acuity Brands, Inc. 7,500 161
Agilysys, Inc . 4,800 49
o Alliance Semiconductor Corp. 6,300 49
o Anixter International, Inc. 6,000 143
o Audiovox Corp., Class A 3,400 41
o Axcelis Technologies, Inc. 16,300 172
Bel Fuse, Inc., Class B 2,000 53
Belden, Inc. 4,600 86
o Bell Microproducts, Inc. 3,700 31
o Benchmark Electronics, Inc. 4,500 219
o Brooks Automation, Inc. 6,000 150
C&D Technologies, Inc. 4,700 94
o C-COR.net Corp. 6,200 62
o Cable Design Technologies Corp. 6,750 65
o Captaris, Inc. 5,000 30
o Checkpoint Systems, Inc. 6,000 113
o Coherent, Inc. 5,300 122
CTS Corp. 6,200 69
o Dupont Photomasks, Inc. 2,800 65
o Electro Scientific Industries, Inc. 4,600 113
o ESS Technology, Inc. 6,800 94
o Exar Corp. 6,700 108
o FEI Co. 5,300 126
o Gerber Scientific, Inc. 4,000 32
o Hutchinson Technology, Inc. 4,500 151
o Intermagnetics General Corp. 2,600 61
Methode Electronics, Class A 6,600 79
Park Electrochemical Corp. 3,100 76
o Pericom Semiconductor Corp. 4,000 46
o Radisys Corp. 3,200 63
o Rudolph Technologies, Inc. 2,500 65
o SBS Technologies, Inc. 2,500 34
o SCM Microsystems, Inc. 2,500 21
=o Skyworks Solutions, Inc. 24,300 208
o Standard Microsystems Corp. 3,100 93
o Symmetricom, Inc. 7,600 55
o Technitrol, Inc. 7,300 159
o THQ, Inc. 6,100 108
o Three-Five Systems, Inc. 2,200 10
o Tollgrade Communications, Inc. 1,800 28
o Viasat, Inc. 4,700 92
o Vicor Corp. 7,600 77
-----
3,673
ENERGY: RAW MATERIALS 3.2%
--------------------------------------------------------------------------
o Atwood Oceanics, Inc. 2,200 57
o Cimarex Energy Co. 6,800 139
o Dril-Quip, Inc. 3,200 48
o Kirby Corp. 4,400 129
Massey Energy Co. 13,600 189
o Offshore Logistics, Inc. 4,000 87
o Seacor Smit, Inc. 3,100 119
o Southwestern Energy Co. 5,900 115
o Swift Energy Co. 4,200 58
=o Tom Brown, Inc. 7,200 195
-----
1,136
FOOD & AGRICULTURE 2.5%
--------------------------------------------------------------------------
= Corn Products International, Inc. 6,400 217
Flowers Foods, Inc. 8,000 190
o Hain Celestial Group, Inc. 5,600 118
o International Multifoods Corp. 3,100 69
o J & J Snack Foods Corp. 1,500 54
Lance, Inc. 4,900 64
Nash Finch Co. 1,800 28
o Ralcorp Holdings, Inc. 5,900 162
-----
902
See financial notes. 39
INSTITUTIONAL SELECT(R) SMALL-CAP VALUE INDEX FUND
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
HEALTHCARE / DRUGS & MEDICINE 5.7%
--------------------------------------------------------------------------
Alpharma, Inc., Class A 8,500 155
o Arqule, Inc. 3,700 19
Cambrex Corp. 4,200 99
o Cima Labs, Inc. 2,200 69
o Conmed Corp. 5,000 102
o Curative Health Services, Inc. 1,900 27
Datascope Corp. 2,700 90
o Haemonetics Corp. 4,400 101
o Hologic, Inc. 3,600 49
Invacare Corp. 5,000 205
Nature's Sunshine Products, Inc. 2,300 18
o Orthodontic Centers of America, Inc. 8,300 73
o Parexel International Corp. 4,100 69
=o Pediatrix Medical Group, Inc. 4,000 214
o Province Healthcare Co. 8,900 114
o RehabCare Group, Inc. 2,900 45
o Savient Pharmaceuticals, Inc. 9,600 58
o Sola International, Inc. 4,500 77
o Sunrise Senior Living, Inc. 4,000 116
o Theragenics Corp. 3,600 16
o US Oncology, Inc. 14,700 161
o Viasys Healthcare, Inc. 4,800 87
Vital Signs, Inc. 2,200 67
-----
2,031
INSURANCE 3.7%
--------------------------------------------------------------------------
Delphi Financial Group, Inc., Class A 3,545 179
Fremont General Corp. 13,800 229
Hooper Holmes, Inc. 11,500 60
o Philadelphia Consolidated Holding Co. 3,800 179
Presidential Life Corp. 4,800 74
RLI Corp. 4,100 138
SCPIE Holdings, Inc. 1,300 17
Selective Insurance Group, Inc. 4,400 135
o Stewart Information Services Corp. 3,200 100
o UICI 8,000 120
Zenith National Insurance Corp. 2,900 89
-----
1,320
MEDIA 0.7%
--------------------------------------------------------------------------
= Advanced Marketing Services, Inc. 3,000 34
o Consolidated Graphics, Inc. 2,400 67
o Information Holdings, Inc. 3,400 76
o Network Equipment Technologies, Inc. 3,600 38
Thomas Nelson, Inc. 2,600 41
-----
256
MISCELLANEOUS FINANCE 5.2%
--------------------------------------------------------------------------
o Bankunited Financial Corp., Class A 4,900 108
Cash America International, Inc. 4,400 84
= Commercial Federal Corp. 7,900 203
= Downey Financial Corp. 4,700 216
o Financial Federal Corp. 3,100 104
=(4) Jefferies Group, Inc. 9,200 285
=(2) Raymond James Financial, Inc. 8,600 351
Seacoast Financial Services Corp. 4,400 113
= Staten Island Bancorp., Inc. 9,600 191
SWS Group, Inc. 2,997 65
Waypoint Financial Corp. 6,240 130
-----
1,850
NON-DURABLES & ENTERTAINMENT 3.2%
--------------------------------------------------------------------------
o A.T. Cross Co., Class A 2,400 15
Action Performance Cos., Inc. 2,700 55
o Department 56, Inc. 2,000 28
o Enesco Group, Inc. 2,500 25
o Huffy Corp. 1,700 10
IHOP Corp. 3,600 134
o Jack in the Box, Inc. 6,000 109
o Jakks Pacific, Inc. 3,700 48
Landry's Restaurants, Inc. 4,500 113
Lone Star Steakhouse & Saloon, Inc. 3,759 82
=o Midway Games, Inc. 7,200 20
o O'Charleys, Inc. 3,300 56
o Rare Hospitality International Inc. 5,600 139
Russ Berrie & Co., Inc. 3,500 126
o Ryan's Family Steak Houses, Inc. 7,200 100
Triarc Cos., Class B 9,800 104
-----
1,164
40 See financial notes.
INSTITUTIONAL SELECT(R) SMALL-CAP VALUE INDEX FUND
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
NON-FERROUS METALS 1.9%
--------------------------------------------------------------------------
=o A.M. Castle & Co. 1,900 10
o Brush Engineered Materials, Inc. 2,900 37
o Century Aluminum Co. 3,900 64
Commercial Metals Co. 5,100 126
Commonwealth Industries, Inc. 1,800 12
o Imco Recycling, Inc. 2,200 17
o Mueller Industries, Inc. 5,800 183
Reliance Steel & Aluminum Co. 5,800 166
o RTI International Metals, Inc. 3,800 46
o Wolverine Tube, Inc. 1,200 6
-----
667
OIL: DOMESTIC 2.5%
--------------------------------------------------------------------------
=o(1) Newfield Exploration Co. 10,000 397
o Nuevo Energy Co. 3,500 69
o Spinnaker Exploration Co. 5,400 138
o Stone Energy Corp. 4,300 156
Vintage Petroleum, Inc. 11,700 135
-----
895
OPTICAL & PHOTO 0.3%
--------------------------------------------------------------------------
o Meade Instruments Corp. 2,100 8
o Photronics, Inc. 5,500 118
-----
126
PAPER & FOREST PRODUCTS 1.3%
--------------------------------------------------------------------------
o Buckeye Technologies, Inc. 6,800 61
o Caraustar Industries, Inc. 3,900 38
Chesapeake Corp. 2,800 68
Deltic Timber Corp. 2,200 63
o Lydall, Inc. 2,500 30
Pope & Talbot, Inc. 2,400 34
Rock-Tennessee Co., Class A 6,300 101
Universal Forest Products, Inc. 2,900 86
-----
481
PRODUCER GOODS & MANUFACTURING 8.8%
--------------------------------------------------------------------------
o Aeroflex, Inc. 10,700 99
Albany International Corp., Class A 5,900 182
Applied Industrial Technologies, Inc. 3,300 74
= Aptargroup, Inc. 6,500 233
o Astec Industries, Inc. 3,600 46
Barnes Group, Inc. 3,700 108
=(8) Briggs & Stratton Corp. 4,000 260
= Butler Manufacturing Co. 800 14
o Concord Camera Corp. 5,100 65
Curtiss-Wright Corp. 1,700 126
Fedders Corp. 4,910 29
o Gardner Denver, Inc. 2,600 54
Hughes Supply, Inc. 4,100 158
o Ionics, Inc. 2,900 83
JLG Industries, Inc. 6,900 82
Lawson Products, Inc. 1,700 51
Lennox International, Inc. 10,612 176
=o Magnetek, Inc. 2,600 16
Manitowoc Co., Inc. 4,300 93
o Material Sciences Corp. 2,500 23
Milacron, Inc. 5,000 12
Regal Beloit 4,600 94
Robbins & Myers, Inc. 2,600 55
o The Shaw Group, Inc. 6,300 86
o SPS Technologies, Inc. 2,100 104
Standex International Corp. 2,200 56
Stewart & Stevenson Services, Inc. 5,200 87
(10) The Timken Co. 14,400 242
o Triumph Group, Inc. 2,600 85
Valmont Industries, Inc. 4,100 85
Watsco, Inc. 4,400 94
Watts Water Technologies, Inc., Class A 5,000 89
Woodward Governor Co. 1,800 83
-----
3,144
RAILROAD & SHIPPING 0.4%
--------------------------------------------------------------------------
o Kansas City Southern Railway 10,400 138
REAL PROPERTY 1.8%
--------------------------------------------------------------------------
= Colonial Properties Trust 4,400 163
Gables Residential Trust 4,700 151
Glenborough Realty Trust, Inc. 4,600 90
See financial notes. 41
INSTITUTIONAL SELECT(R) SMALL-CAP VALUE INDEX FUND
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
= Kilroy Realty Corp. 4,700 136
Lexington Corp. Properties Trust 6,000 115
-----
655
RETAIL 7.7%
--------------------------------------------------------------------------
Aaron Rents, Inc. 5,300 116
=o(5) AnnTaylor Stores Corp. 7,700 276
Burlington Coat Factory Warehouse Corp. 7,500 161
Casey's General Stores, Inc. 8,700 135
The Cato Corp., Class A 3,200 68
o The Children's Place Retail Stores, Inc. 4,300 129
o The Dress Barn, Inc. 4,500 63
o Duane Reade, Inc. 3,800 52
o Footstar, Inc. 2,800 18
o Genesco, Inc. 4,000 67
Goody's Family Clothing, Inc. 6,000 63
o Great Atlantic & Pacific Tea Co. 7,000 44
o Insight Enterprises, Inc. 7,600 128
o Jo-Ann Stores, Inc., Class A 3,400 102
o Linens 'N Things, Inc. 7,400 218
o The Men's Wearhouse, Inc. 7,200 212
Pep Boys-Manny, Moe & Jack 9,000 173
o School Specialty, Inc. 3,100 86
o ShopKo Stores, Inc. 5,300 82
o Stein Mart, Inc. 6,200 45
o United Stationers, Inc. 5,800 216
o The Wet Seal, Inc., Class A 4,800 53
=o Zale Corp. 4,580 237
-----
2,744
STEEL 1.1%
--------------------------------------------------------------------------
o Cleveland-Cliffs, Inc. 1,700 51
Intermet Corp. 4,400 19
Quanex Corp. 2,900 116
Ryerson Tull, Inc. 4,200 34
o Steel Dynamics, Inc. 8,100 151
Steel Technologies, Inc. 1,600 25
-----
396
TELEPHONE 0.3%
--------------------------------------------------------------------------
o General Communication, Inc., Class A 10,200 101
TOBACCO 0.3%
--------------------------------------------------------------------------
DIMON, Inc. 6,700 48
Schweitzer-Mauduit International, Inc. 2,700 72
-----
120
TRAVEL & RECREATION 1.7%
--------------------------------------------------------------------------
o Aztar Corp. 5,800 121
o Bally Total Fitness Holding Corp. 6,000 40
Central Parking Corp. 5,900 71
o K2, Inc. 4,500 75
The Marcus Corp. 5,400 81
o Pinnacle Entertainment, Inc. 4,000 35
o Prime Hospitality Corp. 7,300 66
o WMS Industries, Inc. 5,000 116
-----
605
TRUCKING & FREIGHT 1.3%
--------------------------------------------------------------------------
Arkansas Best Corp. 4,300 142
Roadway Corp. 3,200 164
USF Corp. 4,600 147
-----
453
UTILITIES: ELECTRIC & GAS 5.4%
--------------------------------------------------------------------------
American States Water Co. 2,400 59
Atmos Energy Corp. 8,400 206
Avista Corp. 8,800 150
Cascade Natural Gas Corp. 1,700 33
Central Vermont Public Service Corp. 2,200 51
CH Energy Group, Inc. 2,500 109
Cleco Corp. 8,200 137
o El Paso Electric Co. 7,800 95
= Energen Corp. 6,000 221
= Green Mountain Power Corp. 900 20
The Laclede Group, Inc. 3,500 99
Northwest Natural Gas Co. 4,300 125
NUI Corp. 2,600 44
42 See financial notes.
INSTITUTIONAL SELECT(R) SMALL-CAP VALUE INDEX FUND
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Southern Union Co. 12,029 212
Southwest Gas Corp. 5,800 131
UIL Holdings Corp. 2,600 98
Unisource Energy Corp. 6,100 117
o Veritas DGC, Inc. 5,000 44
-----
1,951
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
U.S. TREASURY OBLIGATION
0.1% of net assets
= U.S. Treasury Bill
0.93%, 12/18/03 25 25
END OF INVESTMENTS. 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)
COLLATERAL INVESTED FOR SECURITIES ON LOAN
6.8% of net assets
COMMERCIAL PAPER & OTHER CORPORATE OBLIGATIONS
----------------------------------------------------------- ---------------
American Express Centurion Bank
1.11%, 12/12/03 212 212
Crown Point Funding Corp.
1.08%, 11/14/03 342 341
Westdeutsche Landesbank AG
1.09%, 09/23/04 140 140
-----
693
SHORT-TERM INVESTMENT
Wells Fargo Bank, Time Deposit
1.06%, 11/03/03 202 202
SECURITY AND NUMBER OF SHARES
OTHER INVESTMENT COMPANIES
---------------------------------------------------------------------------
Institutional Money Market
Trust 1,546,268 1,546
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN. For totals, please see the
first page of holdings for this fund.
See financial notes. 43
INSTITUTIONAL SELECT(R) SMALL-CAP VALUE INDEX FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- -------------------------------------------------------------------------------
Investments, at market value (including
$2,336 of securities on loan) $35,621 a
Collateral held for securities on loan 2,441
Receivables:
Fund shares sold 32
Dividends 29
Investments sold 471
Income from securities on loan 1
Prepaid expenses + 9
----------
TOTAL ASSETS 38,604
LIABILITIES
- -------------------------------------------------------------------------------
Collateral held for securities on loan 2,441
Cash overdraft 214
Payables:
Fund shares redeemed 74
Due to brokers for futures 1
Accrued expenses + 41
----------
TOTAL LIABILITIES 2,771
NET ASSETS
- -------------------------------------------------------------------------------
TOTAL ASSETS 38,604
TOTAL LIABILITIES - 2,771
----------
NET ASSETS $35,833
NET ASSETS BY SOURCE
Capital received from investors 29,563
Net investment income not yet distributed 268
Net realized capital losses (1,381)
Net unrealized capital gains 7,383 b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$35,833 2,856 $12.55
Unless stated, all numbers x 1,000.
a The fund paid $28,248 for these securities. Not counting short-term
obligations and government securities, the fund paid $12,718 for securities
during the report period and received $24,042 from securities it sold or that
matured.
b These derive from investments and futures. As of the report date, the fund had
one open Russell 2000 futures contract due to expire on December 21, 2003,
with an aggregate contract value of $264 and net unrealized gains of $10.
FEDERAL TAX DATA
- ---------------------------------------------
PORTFOLIO COST $28,755
NET UNREALIZED GAINS AND LOSSES:
Gains $9,075
Losses + (2,209)
-----------
$6,866
UNDISTRIBUTED EARNINGS:
Ordinary income $268
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $542
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $864
44 See financial notes.
INSTITUTIONAL SELECT(R) SMALL-CAP VALUE INDEX FUND
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- -------------------------------------------------------------------------------
Dividends $448
Interest 1
Securities on loan + 7
----------
TOTAL INVESTMENT INCOME 456
NET REALIZED GAINS AND LOSSES
- -------------------------------------------------------------------------------
Net realized gains on investments sold 842
Net realized losses on futures contracts + (9)
----------
NET REALIZED GAINS 833
NET UNREALIZED GAINS AND LOSSES
- -------------------------------------------------------------------------------
Net unrealized gains on investments 9,148
Net unrealized gains on futures contracts + 10
----------
NET UNREALIZED GAINS 9,158
EXPENSES
- -------------------------------------------------------------------------------
Investment adviser and administrator fees 90 a
Transfer agent and shareholder service fees 36 b
Trustees' fees 5 c
Custodian fees 18
Portfolio accounting fees 5
Professional fees 25
Registration fees 15
Shareholder reports 15
Interest expense 1
Other expenses + 15
----------
Total expenses 225
Expense reduction - 110 d
----------
NET EXPENSES 115
INCREASE IN NET ASSETS FROM OPERATIONS
- -------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 456
NET EXPENSES - 115
----------
NET INVESTMENT INCOME 341
NET REALIZED GAINS 833 e
NET UNREALIZED GAINS + 9,158 e
----------
INCREASE IN NET ASSETS FROM OPERATIONS $10,332
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.25% of the first $1
billion and 0.23% of assets beyond that.
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.05% of the
fund's assets. These fees are paid to Charles Schwab & Co.
c For the fund's independent trustees only.
d Includes $90 from the investment adviser (CSIM) and $20 from the transfer
agent and shareholder service agent (Schwab). These reductions reflect a
guarantee by CSIM and Schwab to limit the operating expenses of this fund
through December 31, 2005, to 0.32% of average daily net assets. This limit
doesn't include interest, taxes and certain non-routine expenses.
e These add up to a net gain on investments of $9,991.
See financial notes. 45
INSTITUTIONAL SELECT(R) SMALL-CAP VALUE INDEX FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- -------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income $341 $413
Net realized gains or losses 833 (781)
Net unrealized gains or losses + 9,158 (836)
------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 10,332 (1,204)
DISTRIBUTIONS PAID
- -------------------------------------------------------------------------------
Dividends from net investment income 401 451 a
Distributions from net realized gains + -- 4,324
------------------------------------
TOTAL DISTRIBUTIONS PAID $401 $4,775 b
TRANSACTIONS IN FUND SHARES
- -------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
Shares sold 727 $7,355 1,550 $17,684
Shares reinvested 34 331 328 3,590
Shares redeemed + (1,794) (18,743) (2,360) (25,619)
-----------------------------------------------------
NET TRANSACTIONS
IN FUND SHARES (1,033) ($11,057) (482) ($4,345) c
SHARES OUTSTANDING AND NET ASSETS
- -------------------------------------------------------------------------------
11/1/02-10/31/03 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 + (1,033) (1,126) (482) (10,324) d
------------------------------------------------------
END OF PERIOD 2,856 $35,833 3,889 $36,959 e
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
b The tax-basis components of distributions paid are:
CURRENT PERIOD:
Ordinary Income $401
Long-term capital gains $--
PRIOR PERIOD:
Ordinary Income $3,482
Long-term capital gains $1,293
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase:
CURRENT PERIOD $3
PRIOR PERIOD $14
d Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
e Includes distributable net investment income in the amount of $268 and $328
for the current period and prior period, respectively.
46 See financial notes.
SCHWAB INSTITUTIONAL SELECT(R) FUNDS
FINANCIAL NOTES
BUSINESS STRUCTURE OF THE FUNDS
EACH OF THE FUNDS DISCUSSED IN THIS REPORT IS A SERIES OF A NO-LOAD, OPEN-END
MANAGEMENT INVESTMENT COMPANY. The company is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended. The sidebar shows the funds in this report and their trust.
THE FUNDS OFFER ONE SHARE CLASS. Shares are bought and sold at net asset value
(NAV), which is the price for all outstanding shares. Each share has a par value
of 1/1,000 of a cent, and the trust may issue as many shares as necessary.
FUND OPERATIONS
Most of the funds' investments are described in the fund-by-fund sections
earlier in this report. However, there are certain other 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 MarketTrack All Equity Portfolio(TM)
Schwab MarketTrack Growth Portfolio(TM)
Schwab MarketTrack Balanced Portfolio(TM)
Schwab MarketTrack Conservative Portfolio(TM)
Schwab U.S. MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Institutional Select S&P 500 Fund
Institutional Select Large-Cap Value Index Fund
Institutional Select Small-Cap Value Index Fund
47
SCHWAB INSTITUTIONAL SELECT(R) FUNDS
The funds' repurchase agreements will be fully collateralized by U.S. government
securities. All collateral is held by the funds' custodian (or, with tri-party
agreements, the agent's bank) and is monitored daily to ensure that its market
value is at least equal to the repurchase price under the agreement.
THE FUNDS MAY LOAN SECURITIES TO CERTAIN BROKERS, DEALERS AND OTHER FINANCIAL
INSTITUTIONS WHO PAY THE FUNDS NEGOTIATED FEES. The funds receive cash, letters
of credit or U.S. government securities as collateral on these loans. All of the
cash collateral received is reinvested in high quality, short-term investments.
The value of the collateral must be at least 102% of the market value of the
loaned securities as of the first day of the loan, and at least 100% each day
thereafter.
THE FUNDS PAY FEES TO AFFILIATES OF THE INVESTMENT ADVISER FOR VARIOUS SERVICES.
Through their trust, the funds have agreements with Charles Schwab Investment
Management, Inc. (CSIM) to provide investment advisory and administrative
services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent
and shareholder services.
Although these agreements specify certain fees for these services, CSIM and
Schwab have made additional agreements with the funds that may limit the total
expenses charged. The rates and limitations for these fees vary from fund to
fund, and are described in each fund's Statement of Operations.
THE FUNDS MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING RELATED PARTIES. For
instance, a fund may own shares of The Charles Schwab Corporation if that
company is included in its index.
The funds may make direct transactions with certain other SchwabFunds(R) when
practical. When one fund is seeking to sell a security that another is seeking
to buy, an interfund transaction can allow both funds to benefit by reducing
transaction costs. This practice is limited to funds that share the same
investment adviser, trustees and officers.
Pursuant to an exemptive order issued by the SEC, the funds may enter into
interfund borrowing and lending transactions within the SchwabFunds(R). All
loans are for temporary or emergency purposes only. The interest rate charged on
the loan is the average of the overnight repurchase agreement rate and the
short-term bank loan rate. The interfund lending facility is subject to the
oversight and periodic review of the Board of Trustees of the SchwabFunds.
TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/OR DIRECTORS OF THE INVESTMENT
ADVISER OR SCHWAB. Federal securities law limits the percentage of such
"interested persons" who may serve on a trust's board, and the trusts were in
compliance with these limitations throughout the report period. The trust did
not pay any of these persons for their service as trustees, but they did pay the
non-interested persons (independent trustees), as noted in each fund's Statement
of Operations.
THE FUNDS MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The funds may obtain
temporary bank loans through the trust to which they belong, to use for meeting
shareholder redemptions or for extraordinary or emergency purposes. The trusts
have custodian overdraft facilities and line of credit arrangements of $150
million and $100 million with PNC Bank, N.A. and Bank of America, N.A.,
respectively. The funds pay interest on the amounts they borrow at rates that
are negotiated periodically.
AMOUNT WEIGHTED
OUTSTANDING AVERAGE AVERAGE
AT 10/31/03 BORROWING* INTEREST
FUND ($ x 1,000) ($ x 1,000) RATE* (%)
- --------------------------------------------------------------------------------
INSTITUTIONAL SELECT
S&P 500 FUND 74 1,112 2.01
- --------------------------------------------------------------------------------
INSTITUTIONAL SELECT
LARGE-CAP VALUE
INDEX FUND -- 481 1.57
- --------------------------------------------------------------------------------
INSTITUTIONAL SELECT
SMALL-CAP VALUE
INDEX FUND -- 162 1.49
- --------------------------------------------------------------------------------
* Based on the number of days for which the borrowing is outstanding.
48
SCHWAB INSTITUTIONAL SELECT(R) FUNDS
THE FUNDS INTEND TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR
REGULATED INVESTMENT COMPANIES. Accordingly, the funds distribute substantially
all of their net investment income and net realized capital gains (if any) to
their respective shareholders each year. As long as a fund meets the tax
requirements, it is not required to pay federal income tax. The net investment
income and net realized capital gains and losses may differ for financial
statement and tax purposes primarily due to differing treatments of losses on
wash sales.
UNDER THE FUNDS' ORGANIZATIONAL DOCUMENTS, ITS OFFICERS AND TRUSTEES ARE
INDEMNIFIED AGAINST CERTAIN LIABILITY ARISING OUT OF THE PERFORMANCE OF THEIR
DUTIES TO THE FUNDS. In addition, in the normal course of business the funds
enter into contracts with their vendors and others that provide general
indemnifications. The funds' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the funds.
However, based on experience, the funds expect the risk of loss to be remote.
ACCOUNTING POLICIES
The following are the main policies the funds use in preparing their financial
statements.
THE FUNDS VALUE THE SECURITIES IN THEIR PORTFOLIOS EVERY BUSINESS DAY. The funds
use the following policies to value various types of securities:
- - SECURITIES TRADED ON AN EXCHANGE OR OVER-THE-COUNTER: valued at the closing
value for the day, or, on days when no closing value has been reported,
halfway between the most recent bid and asked quotes.
- - SECURITIES 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 DISCOUNT is recorded as it accrues.
REALIZED GAINS AND LOSSES from security transactions are based on the identified
costs of the securities involved.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES are reported in U.S.
dollars. For assets and liabilities held on a given date, the dollar value is
based on market exchange rates in effect on that date. Transactions involving
foreign currencies, including purchases, sales, income receipts and expense
payments, are calculated using exchange rates in
49
SCHWAB INSTITUTIONAL SELECT(R) FUNDS
effect on the transaction date.
EXPENSES that are specific to a fund are charged directly to that fund. Expenses
that are common to all funds within a trust generally are allocated among the
funds in proportion to their average daily net assets.
EACH FUND MAINTAINS ITS OWN ACCOUNT FOR PURPOSES OF HOLDING ASSETS AND
ACCOUNTING, and is considered a separate entity for tax purposes. Within its
account, each fund also keeps certain assets in segregated accounts, as may be
required by securities law.
THE ACCOUNTING POLICIES DESCRIBED ABOVE CONFORM WITH ACCOUNTING PRINCIPLES
GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. Notwithstanding this,
shareholders should understand that in order to follow these principles, fund
management has to make estimates and assumptions that affect the information
reported in the financial statements. It's possible that once the results are
known, they may turn out to be different from these estimates.
50
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF:
Schwab Institutional Select S&P 500 Fund
Schwab Institutional Select Large-Cap Value Index Fund
Schwab Institutional Select Small-Cap Value Index Fund
In our opinion, the accompanying statements of assets and liabilities, including
the portfolio holdings, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of Schwab Institutional Select S&P 500 Fund,
Schwab Institutional Select Large-Cap Value Index Fund and Schwab Institutional
Select Small-Cap Value Index Fund, (three of the portfolios constituting Schwab
Capital Trust) (hereafter collectively referred to as the "funds") at October
31, 2003, and the results of each of their operations for the year then ended,
the changes in each of their net assets for the two years in the period then
ended and the financial highlights for each of the periods presented, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the funds' management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
San Francisco, CA
December 12, 2003
51
INSTITUTIONAL SELECT(R) FUNDS
FUND TRUSTEES
A fund's Board of Trustees is responsible for protecting the interests of
that fund's shareholders. The tables below give information about the
people who serve as trustees and officers for the SchwabFunds(R),
including the funds covered in this report. Trustees remain in office
until they resign, retire or are removed by shareholder vote. 1
Under the Investment Company Act of 1940, any officer, director, or
employee of Schwab or CSIM is considered an "interested person," meaning
that he or she is considered to have a business interest in Schwab or
CSIM. These individuals are listed as "interested trustees." The
"independent trustees" are individuals who, under the 1940 Act, are not
considered to have a business interest in Schwab or CSIM.
Each of the SchwabFunds (of which there were 49 as of 10/31/03) belongs to
one of these trusts: The Charles Schwab Family of Funds, Schwab
Investments, Schwab Capital Trust or Schwab Annuity Portfolios. Currently
all these trusts have the same trustees and officers. The address for all
trustees and officers is 101 Montgomery Street, San Francisco, CA 94104.
You can find more information about the trustees and officers in the
Statement of Additional Information, which is available free by calling
1-800-435-4000.
INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S);
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
CHARLES R. SCHWAB 2 Chair, Trustee: Chair, Director, The Charles Schwab Corp.; CEO, Director, Schwab
7/29/37 Family of Funds, 1989; Holdings, Inc.; Chair, Director, Charles Schwab & Co., Inc.; Charles
Investments, 1991; Schwab Investment Management, Inc.; Chair, Charles Schwab
Capital Trust, 1993; Holdings, Inc. I, Schwab International Holdings, Inc.; Director,
Annuity Portfolios, 1994. U.S. Trust Corp., United States Trust Co. of New York, The Gap, Inc.
(clothing retailer), Siebel Systems (software); Trustee, Stanford
University. Until 6/03: Director, Xsign, Inc. (electronic payment
systems). Until 5/03: Co-Chair, The Charles Schwab Corporation.
Until 5/02: Director, Vodafone AirTouch PLC (telecom). Until 3/02:
Director, Audiobase, Inc. (Internet audio solutions). Until 7/01:
Director, The Charles Schwab Trust Company. Until 1/99: Director,
Schwab Retirement Plan Services, Inc., Mayer & Schweitzer, Inc.
(securities brokerage subsidiary of The Charles Schwab Corp.),
Performance Technologies, Inc. (technology), TrustMark, Inc.
1 The SchwabFunds retirement policy requires that independent trustees elected
after January 1, 2000 retire at age 72 or after twenty years of service as a
trustee, whichever comes first. Independent trustees elected prior to January
1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will
retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on
December 31, 2010.
2 In addition to their positions with the investment adviser and the
distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr.
Lyons's immediate family members, also own stock of The Charles Schwab
Corporation.
52
INSTITUTIONAL SELECT(R) FUNDS
INDIVIDUALS WHO ARE INTERESTED TRUSTEES BUT NOT OFFICERS OF THE TRUST
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
DAWN G. LEPORE 1 Trustee:2003 Vice Chair, EVP, The Charles Schwab Corp.; Until 10/01: CIO, The
3/21/54 (all trusts) Charles Schwab Corporation. Until 1999: EVP, The Charles Schwab
Corporation. Director, Wal-Mart Stores, eBay, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
JEFFREY M. LYONS 1 Trustee: 2002 EVP, Asset Management Products and Services, Charles Schwab &
2/22/55 (all trusts). Co., Inc. Until 9/01: EVP, Mutual Funds, Charles Schwab & Co., Inc.
INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUST OFFICE(S) HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
RANDALL W. MERK President, CEO President, CEO, Charles Schwab Investment Management, Inc;
7/25/54 (all trusts). EVP, Charles Schwab & Co., Inc.; Director, Charles Schwab Worldwide
Funds PLC, Charles Schwab Asset Management (Ireland) Ltd. Until
9/02: President, CIO, American Century Investment Management;
Director, American Century Cos., Inc. Until 6/01: CIO, Fixed Income,
American Century Cos., Inc. Until 1997: SVP, Director, Fixed Income
and Quantitative Equity Portfolio Management, Twentieth Century
Investors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
TAI-CHIN TUNG Treasurer, Principal SVP, CFO, Charles Schwab Investment Management, Inc.; VP,
3/7/51 Financial Officer The Charles Schwab Trust Co.; Director, Charles Schwab Asset
(all trusts). Management (Ireland) Ltd., Charles Schwab Worldwide Funds PLC.
- ------------------------------------------------------------------------------------------------------------------------------------
STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Director, Charles Schwab Investment
4/5/55 Officer Management, Inc.; CIO, The Charles Schwab Trust Co.
(all trusts).
- ------------------------------------------------------------------------------------------------------------------------------------
KOJI E. FELTON Secretary SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab
3/13/61 (all trusts). Investment Management, Inc. Until 6/98: Branch Chief in Enforcement,
U.S. Securities and Exchange Commission, San Francisco.
1 In addition to their positions with the investment adviser and the
distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr.
Lyons's immediate family members, also own stock of The Charles Schwab
Corporation.
53
INSTITUTIONAL SELECT(R) FUNDS
INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
MARIANN BYERWALTER 2000 (all trusts). Chair, JDN Corp. Advisory LLC; Trustee, Stanford University,
8/13/60 Director, America First Cos., (venture capital/fund management),
Redwood Trust, Inc. (mortgage finance), Stanford Hospitals and
Clinics, SRI International (research), PMI Group, Inc. (mortgage
insurance), Lucile Packard Children's Hospital. 2001: Special
Advisor to the President, Stanford University. Until 2002: Director,
LookSmart, Ltd. (Internet infrastructure). Until 2001: VP, Business
Affairs, CFO, Stanford University.
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD F. DORWARD Family of Funds, 1989; CEO, Dorward & Associates (management, marketing and
9/23/31 Investments, 1991; communications consulting). Until 1999: EVP, Managing Director,
Capital Trust, 1993; Grey Advertising.
Annuity Portfolios, 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp. (bio-pharmaceuticals). Director, Non-Executive
11/22/41 Chairman, Solectron Corp. (manufacturing), Airlease Ltd. (aircraft
leasing), Mission West Properties (commercial real estate), Networks
(telecommunications); Public Governor, Member, executive executive
committee, Pacific Stock & Options Exchange. Director, Digital
Microwave Corp. (network equipment). Until 1998: Dean, School of
Business, University of California, Berkeley.
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT G. HOLMES Family of Funds, 1989; Chair, CEO, Director, Semloh Financial, Inc. (international
5/15/31 Investments, 1991; financial services and investment advice).
Capital Trust, 1993;
Annuity Portfolios, 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors);
9/28/50 Director, Pennzoil-Quaker State Co. (oil and gas), Rorento N.V.
(investments -- Netherlands), Cooper Industries (electrical
products); Member, audit committee, Northern Border Partners, L.P.
(energy).
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD R. STEPHENS Family of Funds, 1989; Managing Partner, D.R. Stephens & Co. (investments). Until 1996:
6/28/38 Investments, 1991; Chair, CEO, North American Trust (real estate investments).
Capital Trust, 1993;
Annuity Portfolios, 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL W. WILSEY Family of Funds, 1989; Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate and
8/18/43 Investments, 1991; investments).
Capital Trust, 1993;
Annuity Portfolios, 1994.
54
INSTITUTIONAL SELECT(R) FUNDS
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.
55
NOTES
CONTACT SCHWAB
SchwabFunds(R) offers you a complete family of mutual funds, each one based on a
clearly defined investment approach and using disciplined 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 directly over the
Internet.
2 Orders placed in person or through a telephone representative may be subject
to a service fee payable to Schwab.
THE SCHWABFUNDS FAMILY(R)
STOCK FUNDS
Schwab S&P 500 Fund
Schwab 1000 Fund(R)
Schwab Small-Cap Index Fund(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab 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 MarketTrack All Equity Portfolio(TM)
Schwab MarketTrack Growth Portfolio(TM)
Schwab MarketTrack Balanced Portfolio(TM)
Schwab MarketTrack Conservative Portfolio(TM)
BOND FUNDS
Schwab YieldPlus Fund(R)
Schwab Short-Term Bond Market Fund(TM)
Schwab Total Bond Market Fund(TM)
Schwab GNMA Fund(TM)
Schwab Short/Intermediate Tax-Free Bond Fund(TM)
Schwab Long-Term Tax-Free Bond Fund(TM)
Schwab California Short/Intermediate
Tax-Free Bond Fund(TM)
Schwab California Long-Term Tax-Free Bond Fund(TM)
SCHWAB MONEY FUNDS
Schwab offers an array of money market funds that seek high current income
consistent with safety and liquidity. 3 Choose from taxable or tax-advantaged
alternatives. Many can be linked to your Schwab account to "sweep" cash
balances automatically 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.
REG14310-04
FUNDS USING SCHWAB EQUITY RATINGS(TM)
ANNUAL REPORT
October 31, 2003
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
[CHARLES SCHWAB LOGO]
The power of Schwab Equity Ratings(TM).
The convenience and diversification of mutual funds.
IN THIS REPORT
Management's Discussion .............................................. 2
The president of SchwabFunds(R) and the funds'
managers take a look at the factors that shaped
fund performance during the report period.
Performance at a Glance ........................ 6
Schwab Core Equity Fund(TM)
Ticker Symbol: SWANX
The fund seeks long-term capital growth.
Performance and Fund Facts ..................... 9
Financial Statements ........................... 27
Schwab Dividend Equity Fund(TM)
Investor Shares: SWDIX Select Shares: SWDSX
The fund seeks current income and capital appreciation.
Performance and Fund Facts ..................... 11
Financial Statements ........................... 35
Schwab Small-Cap Equity Fund(TM)
Investor Shares: SWSIX Select Shares: SWSCX
The fund seeks long-term capital growth.
Performance and Fund Facts ..................... 14
Financial Statements ........................... 43
Schwab Hedged Equity Fund(TM)
Ticker Symbol: SWHEX
The fund's principal investment objective is long-term
capital appreciation over market cycles with lower
volatility than the broad equity market.
Performance and Fund Facts ..................... 17
Financial Statements ........................... 52
Communications Focus Fund
Ticker Symbol: SWCFX
The fund's goal is to seek long-term capital growth.
Performance and Fund Facts .................... 19
Financial Statements .......................... 63
Financial Services Focus Fund
Ticker Symbol: SWFFX
The fund's goal is to seek long-term capital growth.
Performance and Fund Facts .................... 21
Financial Statements .......................... 69
Health Care Focus Fund
Ticker Symbol: SWHFX
The fund's goal is to seek long-term capital growth.
Performance and Fund Facts .................... 23
Financial Statements .......................... 75
Technology Focus Fund
Ticker Symbol: SWTFX
The fund's goal is to seek long-term capital growth.
Performance and Fund Facts .................... 25
Financial Statements .......................... 80
Financial Notes ...................................................... 86
Fund Trustees ........................................................ 91
Glossary ............................................................. 94
Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM)
Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab).
[PHOTO OF CHARLES R. SCHWAB]
CHARLES R. SCHWAB, Chairman
FROM THE CHAIRMAN
In the past few months, the mutual fund industry has been rocked by the
discovery of improper practices and arrangements. Investors large and small have
seen their confidence shaken, and understandably so.
Similarly, you may have also read about a limited number of potential late
trading issues at Charles Schwab & Co., Inc. and certain limited market timing
arrangements at U.S. Trust. Many firms, including our own, have begun thorough
investigations of their broker processes and procedures. We are continuing to
scrutinize such transactions and arrangements, and are working closely with
regulatory authorities. We are pleased to report that to date we have found no
indications of illegal or improper activities by Charles Schwab Investment
Management ("CSIM"), the investment advisor who manages the SchwabFunds(R).
I fully believe that even a small number of irregularities is unacceptable. We
have spent nearly 30 years building an ethical firm, and our business is founded
on a commitment to doing what's right for investors. That commitment leaves no
room for any failures to follow company policies or industry regulations.
Given the importance of mutual funds to American investors, I can understand why
investors find the recent news to be disturbing. At the same time, I would
caution investors not to overreact. Before taking any action, investors should
consider implications to their portfolio, tax situation and long-term financial
goals.
Ultimately, mutual funds still offer all the features that have made them so
popular--diversification, liquidity, convenience, low investment minimums, and
professional management. For individual investors especially, mutual funds
continue to be one of the most cost-effective investment vehicles available. To
date, millions of Americans have relied on mutual funds as an important way to
invest for retirement, their children's education, and other financial goals. We
see no reason why mutual funds cannot continue to do the same for millions more
Americans in the years to come.
Sincerely,
/s/ Charles R. Schwab
[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.
MANAGEMENT'S DISCUSSION
for the year ended October 31, 2003
Dear SchwabFunds(R) Shareholders:
By now, many of you have read the significant media coverage regarding the
mutual fund industry. We are pleased to report that to date we have found no
indications of illegal or improper activities by Charles Schwab Investment
Management ("CSIM"), the investment advisor who manages the SchwabFunds.
Similarly, you may have also read about a limited number of potential late
trading issues at Charles Schwab & Co., Inc. and certain limited market
timing arrangements at U.S. Trust. CSIM, which is a separate Charles Schwab
subsidiary, has been conducting its own review of the SchwabFunds policies and
procedures regarding market timing and late trading. We have examined over
two years of activity by CSIM personnel and have not found the types of improper
market timing or late trading arrangements that you have been reading about. Our
research is still ongoing, so some of these facts may change. Here are our key
findings to date:
- - THE INTEGRITY OF OUR STAFF: We have not found any indication that any CSIM
employees, including portfolio managers and senior managers, have engaged in
improper or inappropriate trading for their own account.
- - MARKET TIMING & LATE TRADING: We have not found any special arrangements with
any shareholders to permit market timing or trading of SchwabFunds after
market close.
- - HEDGE FUNDS: We have not found any special arrangements with hedge funds or
other private investment vehicles that would permit them to trade in a way
that was inconsistent with a fund's policies and procedures.
As part of the recent mutual fund investigations, requests for information were
sent by the SEC to about 90 of the largest mutual fund companies. As the
nation's 11th largest fund family with over $140 billion under management,
SchwabFunds also received a request from the SEC. We take these requests very
seriously and are working closely with the regulators on this matter.
Charles Schwab founded his firm 30 years ago with a vision to create the most
useful and ethical financial services firm in the world. We live by that
philosophy every day and nothing means more to our business than the trust of
our shareholders.
Your investment in SchwabFunds is an indication of the trust you place in us. As
the managers of your money, we have a special obligation to live up to that
trust. I want to thank you for investing with us, and want to assure you that we
strive relentlessly to operate our business with the highest ethical standards
and an unwavering commitment to serve you, our SchwabFunds shareholders.
Sincerely,
/s/ Randall W. Merk
2 Funds Using Schwab Equity Ratings(TM)
Factors that have been linked to superior long-term stock performance were
not the factors that investors appeared to value most during the period.
THE ECONOMY AND THE MARKET
THE ECONOMY CONTINUED TO GATHER STRENGTH DURING THE REPORT PERIOD, BUT
IMPROVEMENT REMAINED SLUGGISH AND UNEVEN. Although numerous factors had been
indicating that the U.S. economy was in recovery when the report period began,
many remained concerned about the slow pace of improvement, in particular the
absence of job growth. However, the government reported an 8.2% increase in GDP
for the third quarter of 2003, job growth for October 2003 was the largest since
January 2003, and merger activity picked up--indications that the economy may
have gained real strength during the report period.
GOVERNMENT POLICIES WERE STRONGLY AIMED AT STIMULATING THE ECONOMY. The Federal
Reserve (the Fed) cut short-term interest rates twice during the period--0.50%
in November 2002 and 0.25% in June 2003--bringing the Fed funds target rate to a
45-year low of 1.00%. On the fiscal side, stimulus measures included tax cuts.
Consumer spending held up strongly throughout the economic downturn, bolstered
in part by unprecedented activity in mortgage refinancing (as individuals took
advantage of the opportunity to refinance at historically low rates). During the
period, we also saw business capital spending show signs of life after declining
for the past few years.
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.
20.80% S&P 500(R) INDEX: measures U.S. large-cap stocks
43.37% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks
27.03% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in
Europe, Australasia and the Far East
4.91% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond market
[LINE GRAPH]
Lehman Brothers
U.S. Aggregate MSCI-EAFE(R) Russell 2000(R) S&P 500(R)
Bond Index Index Index Index
31-Oct-02 0.00 0.00 0.00 0.00
01-Nov-02 -0.18 -0.35 2.67 1.72
08-Nov-02 0.59 0.98 1.50 1.07
15-Nov-02 0.25 1.69 3.40 2.83
22-Nov-02 -0.07 4.00 7.19 5.20
29-Nov-02 -0.03 4.54 8.92 5.89
06-Dec-02 0.52 1.29 6.37 3.21
13-Dec-02 0.86 -0.52 4.07 0.67
20-Dec-02 1.42 -0.45 3.79 1.41
27-Dec-02 1.99 -0.85 3.12 -0.85
03-Jan-03 1.36 2.96 4.80 2.93
10-Jan-03 1.18 3.07 6.46 5.13
17-Jan-03 1.83 2.26 4.25 2.23
24-Jan-03 2.20 -0.96 0.76 -2.34
31-Jan-03 2.13 -3.19 0.01 -2.95
07-Feb-03 2.47 -4.39 -3.56 -5.84
14-Feb-03 2.45 -3.79 -3.60 -5.20
21-Feb-03 2.75 -3.22 -2.01 -3.66
28-Feb-03 3.54 -5.42 -3.01 -4.40
07-Mar-03 3.83 -8.07 -4.69 -5.75
14-Mar-03 3.45 -7.78 -4.59 -5.20
21-Mar-03 2.18 -3.65 1.31 1.92
28-Mar-03 3.12 -5.36 -0.65 -1.73
04-Apr-03 3.13 -4.01 0.61 0.04
11-Apr-03 3.15 -3.78 0.10 -1.11
18-Apr-03 3.40 -0.82 3.46 1.78
25-Apr-03 3.97 -1.11 4.77 2.38
02-May-03 4.15 2.54 9.99 6.00
09-May-03 5.05 4.64 11.59 6.42
16-May-03 5.84 6.77 11.94 7.74
23-May-03 6.21 6.25 12.96 6.49
30-May-03 6.26 7.98 19.10 9.98
06-Jun-03 6.35 12.02 22.61 12.79
13-Jun-03 7.36 13.35 21.52 12.94
20-Jun-03 6.41 14.39 21.49 13.76
27-Jun-03 5.85 11.29 21.36 11.58
04-Jul-03 5.69 12.74 23.44 12.69
11-Jul-03 5.85 12.64 28.17 14.17
18-Jul-03 4.74 10.95 25.74 13.63
25-Jul-03 4.06 13.99 26.87 14.25
01-Aug-03 2.43 12.70 26.70 12.19
08-Aug-03 3.59 12.44 22.90 11.92
15-Aug-03 2.56 15.65 27.79 13.51
22-Aug-03 2.95 16.17 31.49 13.81
29-Aug-03 3.16 16.01 34.75 15.56
05-Sep-03 3.79 19.26 37.87 17.14
12-Sep-03 4.28 19.87 37.96 16.87
19-Sep-03 4.79 23.18 41.00 18.91
26-Sep-03 5.48 20.32 31.60 14.43
03-Oct-03 4.78 24.97 38.95 18.25
10-Oct-03 4.75 27.25 40.81 19.25
17-Oct-03 4.23 27.96 41.18 19.42
24-Oct-03 5.08 25.40 37.41 18.24
31-Oct-03 4.91 27.03 43.37 20.80
These figures assume dividends and distributions were reinvested. Index figures
do not include trading and management costs, which would lower performance.
Indices are unmanaged and you can't invest in them directly. Remember that past
performance is not an indication of future results.
Data source: Charles Schwab & Co., Inc.
Funds Using Schwab Equity Ratings(TM) 3
MANAGEMENT'S DISCUSSION continued
[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 Core Equity,
Hedged Equity, Small-Cap Equity and Focus funds, and is lead manager for the
Dividend Equity 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 Core Equity, Dividend Equity, Financial Services
Focus and Technology Focus funds. Prior to joining the firm in 1998, he worked
for 20 years in equity management.
[PHOTO OF KIM DAIFOTIS]
KIM DAIFOTIS, CFA, a vice president and senior portfolio manager of the
investment adviser, is responsible for management of preferred stocks and
convertible securities for the Dividend Equity Fund. He joined the firm in 1997,
and has worked in fixed-income asset management and research since 1982.
STOCK PRICES ROSE SIGNIFICANTLY OVER THE PERIOD, EVEN AS SKEPTICISM LINGERED
ABOUT THE QUALITY OF THE RALLY. After more than two years of generally negative
performance, U.S. equity markets reached an apparent bottom during the report
period, then rose strongly, ending the period with significant gains. During the
report period, the Nasdaq Composite Index rose 46%, while the S&P 500(R) Index
rose nearly 21%.
One striking feature of the overall U.S. stock market during the report period
is that stocks with more speculative characteristics tended to perform better
than stocks with more demonstrable quality. For example, companies with low
earnings or dividends generally outperformed companies with higher earnings or
dividends. This held true for other measures of quality as well, such as debt to
equity: those with higher levels of debt performed better than companies with
lower levels of debt. Consistent with this trend, small-cap stocks (which tend
to be more speculative) performed well during the period, and microcap stocks
performed even better. Large-cap stocks lagged both groups, but still performed
well.
Many market observers have asked why lower quality securities outperformed
higher quality and whether it could continue. There are many possible answers,
but we believe the more important point is that in the long run, quality has
been shown to be a superior indicator of performance.
DESPITE THE DIVIDEND TAX CUT, DIVIDEND STOCKS UNDERPERFORMED THE OVERALL MARKET
DURING THE PERIOD. Congress passed the tax cut during the period as part of the
government's economic stimulus efforts. The cut reduced the double taxation of
corporate dividends, thus lowering the cost of capital and encouraging
investment. Since companies that pay dividends are generally more established
and less speculative, we see the underperformance of these stocks as being part
of the larger market trend mentioned earlier.
4 Funds Using Schwab Equity Ratings(TM)
[PHOTO OF ROBIN JACKSON]
ROBIN JACKSON, a portfolio manager of the investment adviser, is responsible for
the day-to-day management of the Hedged Equity Fund. 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.
[PHOTO OF ELIE SPIESEL]
ELIE SPIESEL, a portfolio manager of the investment adviser, shares
responsibility for the day-to-day management of the Hedged Equity Fund. Prior to
joining the firm in 2001, he spent 12 years in long/short portfolio management.
THE FUNDS
All of the funds in this report that were in operation for the entire report
period posted double-digit total returns. October 2003, the last month of the
period, was an especially strong month for the broad U.S. stock market and
marked the seventh positive month of the last eight.
The S&P 500(R) Index closed above 1050 for the first time since May of 2002.
Third-quarter earnings were 5% above consensus estimates for the 79% of the
companies in the index that had reported their third-quarter earnings by the
time this report was written. Information technology, which had been especially
hard-hit in recent years, led all S&P 500 sectors during the period with a
notable 41% total return.
At the same time, we cannot help but notice that the funds' performance would
have benefited even more had higher quality stocks performed better. The Schwab
Equity Ratings are designed to evaluate companies based on a variety of factors
that can be correlated with stock price. The funds that use Schwab Equity
Ratings bought stocks that showed higher quality characteristics, as determined
by the ratings.
As discussed earlier, however, these were not the types of stocks that led the
market during the report period; rather, it was the stocks assigned lower
rankings by Schwab Equity Ratings that led the market. While the use of the
ratings therefore limited the performance of most of these funds during the
period covered by this report, we also believe that investing in lower-rated
stocks--that is, those whose earnings and potential for growth appear to be
little to none--would have meant exposing the funds to undue risk. We continue
to believe the basic premise of the Schwab Equity Ratings remains sound and that
the ratings have the potential to contribute to performance over multi-year
periods. We note that the market rally appeared to broaden toward the end of the
report period, with higher-rated stocks improving their performance relative to
lower-rated stocks in September and October 2003.
All sectors in the SCHWAB CORE EQUITY FUND posted positive total returns, with
the weakest sector, basic materials, up 2%. Technology, the leading sector, was
up 32%. The fund's emphasis on less speculative stocks helped limit the fund's
volatility.
---------------------------------------------------------
Schwab Equity Ratings are produced by the Schwab Equity Model Development
Department.
Funds Using Schwab Equity Ratings(TM) 5
MANAGEMENT'S DISCUSSION continued
PERFORMANCE AT A GLANCE
Total return for the 12 months ended 10/31/03, except where noted
SCHWAB CORE EQUITY FUND(TM) ......... 17.54%
Benchmark ........................... 20.80%
Category Average .................... 19.40%
Performance Details ................. page 9
SCHWAB DIVIDEND EQUITY FUND(TM)
Total return for 9/1/03 - 10/31/03
Investor Shares ..................... 6.00%
Select Shares(R) .................... 6.00%
Benchmark ........................... 4.54%
Category Average .................... 4.26%
Performance Details ................. pages 11-12
SCHWAB SMALL-CAP EQUITY FUND(TM)
Total return for 7/2/03 - 10/31/03
Investor Shares ..................... 18.10%
Select Shares ....................... 18.10%
Benchmark ........................... 16.36%
Category Average .................... 16.60%
Performance Details ................. pages 14-15
SCHWAB HEDGED
EQUITY FUND(TM) ..................... 17.17%
Benchmark ........................... 20.80%
Category Average .................... 15.87%
Performance Details ................. page 17
The SCHWAB DIVIDEND EQUITY FUND ended its first two months with a total return
of 6%. The fund's avoidance of lower-rated stocks, which led the market during
the period, did not help the fund's performance. The fund was equally weighted
across its holdings, a strategy designed to minimize stock-specific risk, and
this strategy helped performance. The fund's dividend yield for the two-month
period was 3.4%, which compares favorably to a yield of 1.7% for the S&P 500
Index (see page 13 for SEC yield information).
With small-caps outperforming mid- and large-caps during the period, the SCHWAB
SMALL-CAP EQUITY FUND was able to post a total return of more than 18% for its
first four months. With this fund, the use of Schwab Equity Ratings provided a
more positive contribution to fund performance, because unlike the broader
market, higher quality small-cap stocks performed better than lower quality
small-cap stocks. Even the worst-performing sector, energy, had a 3% return for
these four months, while information technology rose a remarkable 31%.
Historically, October has been a bad month for small-cap stocks. However,
October 2003 saw small-caps gain 8% (as measured by the Schwab Small-Cap Index).
Investors should note that the gains in small-caps were accompanied by high
volatility: small-cap stock prices moved more than 1% a day on over 80% of the
trading days during the period.
Funds that make use of hedging techniques, such as the SCHWAB HEDGED EQUITY
FUND(TM), sometimes fare less well during market run-ups than funds that do not
engage in hedging, and that was the case here, with the fund returning 17%
during the report period. The fund's strategy of short-selling lower-rated
stocks undercut the fund's performance for the period: performance for the
fund's long positions alone was over 27%, while performance for its short
positions was close to -28%. At the same
--------------------------------------------------------
Past performance does not indicate future results.
Expenses may be partially absorbed by CSIM and Schwab. Without these reductions,
the funds' total return would have been lower. Performance does not reflect the
deduction of taxes that a shareholder would pay on fund distributions or on the
redemption of fund shares.
All fund and index figures on this page and the following page assume dividends
and distributions were reinvested. Benchmark index figures do not include
trading and management costs, which would lower performance. Indices are
unmanaged, and you cannot invest in them directly. Each 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. For more current performance information visit
www.schwab.com or call 1-800-435-4000.
Small company stocks are subject to greater volatility than other asset
categories.
Schwab Equity Ratings are produced by the Schwab Equity Model Development
Department.
6 Funds Using Schwab Equity Ratings(TM)
PERFORMANCE AT A GLANCE
Total return for the 12 months ended 10/31/03
COMMUNICATIONS
FOCUS FUND .............................. 26.87%
Benchmark ............................... -0.16%
Category Average ........................ 34.96%
Performance Details ..................... page 19
FINANCIAL SERVICES
FOCUS FUND .............................. 26.68%
Benchmark ............................... 20.96%
Category Average ........................ 25.68%
Performance Details ..................... page 21
HEALTH CARE FOCUS FUND .................. 18.96%
Benchmark ............................... 6.94%
Category Average ........................ 21.27%
Performance Details ..................... page 23
TECHNOLOGY FOCUS FUND ................... 48.97%
Benchmark ............................... 42.14%
Category Average ........................ 53.50%
Performance Details ..................... page 25
time, the fund did achieve its total return for the period with significantly
less volatility than the S&P 500. As of the end of the report period, the fund
had slightly more exposure to finance and services stocks, and slightly less
exposure to energy and technology, compared to the S&P 500(R) Index. The fund
maintained a long-short ratio of 4:1 throughout the report period, in keeping
with its disciplined strategy.
The four SCHWAB FOCUS FUNDS switched to using Schwab Equity Ratings in July of
2003. In choosing stocks, each Focus Fund generally chooses the higher rated
stocks in its sector from the universe of stocks rated by the Schwab Equity
Ratings (about 3,500). Since switching to Schwab Equity Ratings, each fund has
tended to invest an equal portion of assets in each of the stocks in its
portfolio.
The COMMUNICATIONS FOCUS FUND significantly outperformed its benchmark but
trailed its category average. Only one sub-industry, capital goods, was
negative, while the strongest, retailing, was up nearly 48%. The fund benefited
from not owning two bellwether stocks, Nokia and Nortel Networks, both foreign
stocks that are not ranked by the Schwab Equity Ratings. These stocks were down
17% and 21% respectively, on concerns over growth prospects and stock
valuations. While we are pleased with the fund's performance for the period, we
note that this sector continues to face major structural challenges. New
companies and technologies are only adding pressure to an already highly
competitive environment, while regulatory rulings threaten to further
commoditize services.
----------------------------------------------------------
Past performance does not indicate future results.
Expenses may be partially absorbed by CSIM and Schwab. Without these reductions,
the funds' total return would have been lower. Performance does not reflect the
deduction of taxes that a shareholder would pay on fund distributions or on the
redemption of fund shares.
Since each of the Focus Funds focuses its investments on companies involved in a
specific sector, these funds may involve a greater degree of risk than an
investment in other mutual funds with greater diversification.
Schwab Equity Ratings are produced by the Schwab Equity Model Development
Department.
The Hedged Equity Fund's long positions can decline in value at the same time
the value of its shorted stocks increases, thereby increasing the potential for
loss. The potential loss associated with short positions is much greater than
the original value of the securities sold. The use of borrowing and short sales
may cause the fund to have higher expenses than those of equity funds that do
not use such techniques.
Funds Using Schwab Equity Ratings(TM) 7
MANAGEMENT'S DISCUSSION continued
The sector-specific Schwab Focus Funds were one area where Schwab Equity
Ratings appear to have contributed more positively to performance during
the report period.
The financial services sector outperformed the broader market during the report
period, and the FINANCIAL SERVICES FOCUS FUND did so as well. As in the broader
market, this sector saw large-cap stocks underperforming small-caps. However,
unlike the broader market, this sector saw higher quality stocks outperform
lower quality stocks, and this helped the fund's performance. A wide gulf
separated the best- and worst-performing subindustries in this sector: real
property was up 69%, while business services was down 34%.
The HEALTH CARE FOCUS FUND significantly outperformed its benchmark, but trailed
its category average. The 12 months of the report period were a mixed year for
the health care sector. The biotechnology, health services and medical products
subindustries all posted gains, but pharmaceuticals lagged, partly on concerns
that current pricing practices may be under threat. Based on such factors as
biotechnology advances and the healthcare needs of an aging population, we
continue to believe that this sector has long-term growth potential.
The TECHNOLOGY FOCUS FUND returned nearly 49% for the period, outperforming the
S&P technology sector. The fund clearly benefited from the resurgence of
interest in tech stocks, evidently fueled by investors who believed that these
stocks had fallen so far that a reassessment was due. Stocks rated F rose 67%,
but those rated A also rose substantially: by 53%. As in the financial sector, a
wide gulf separated the best- and worst-performing subindustries in this sector:
electronics was up 89%, while optics and photo was down 11%.
Since each of the Focus funds focuses its investments on companies involved in a
specific sector, these funds may involve a greater degree of risk than an
investment in other mutual funds with greater diversification.
Nothing in this report represents a recommendation of a security by the
investment adviser. Manager views and portfolio holdings may have changed
subsequent to the report date.
8 Funds Using Schwab Equity Ratings(TM)
SCHWAB CORE EQUITY FUND(TM)
PERFORMANCE as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund with its benchmark and Morningstar
category.
[BAR CHART]
Fund Category:
Benchmark: MORNINGSTAR
S&P 500(R) LARGE-CAP
FUND INDEX BLEND
1 YEAR 17.54% 20.80% 19.40%
5 YEARS 1.70% 0.53% 0.72%
SINCE INCEPTION: 7/1/96 8.33% 7.96% 6.36%
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with a similar investment in its benchmark.
$17,985 FUND
$17,535 S&P 500 INDEX
[LINE GRAPH]
S&P 500
Fund Index
30-Jun-96 $10,000 $10,000
31-Jul-96 $9,690 $9,558
31-Aug-96 $9,880 $9,760
30-Sep-96 $10,620 $10,308
31-Oct-96 $11,010 $10,593
30-Nov-96 $11,640 $11,393
31-Dec-96 $11,368 $11,168
31-Jan-97 $11,959 $11,865
28-Feb-97 $11,908 $11,958
31-Mar-97 $11,287 $11,468
30-Apr-97 $12,081 $12,152
31-May-97 $12,722 $12,890
30-Jun-97 $13,272 $13,468
31-Jul-97 $14,462 $14,539
31-Aug-97 $13,821 $13,724
30-Sep-97 $14,646 $14,475
31-Oct-97 $13,964 $13,992
30-Nov-97 $14,676 $14,640
31-Dec-97 $14,963 $14,891
31-Jan-98 $15,054 $15,057
28-Feb-98 $16,155 $16,142
31-Mar-98 $16,801 $16,969
30-Apr-98 $16,949 $17,140
31-May-98 $16,620 $16,845
30-Jun-98 $17,448 $17,529
31-Jul-98 $17,198 $17,343
31-Aug-98 $14,555 $14,839
30-Sep-98 $15,565 $15,790
31-Oct-98 $16,529 $17,074
30-Nov-98 $17,561 $18,109
31-Dec-98 $19,158 $19,152
31-Jan-99 $20,138 $19,952
28-Feb-99 $19,134 $19,332
31-Mar-99 $19,961 $20,105
30-Apr-99 $20,882 $20,883
31-May-99 $20,493 $20,390
30-Jun-99 $21,910 $21,522
31-Jul-99 $21,189 $20,850
31-Aug-99 $21,154 $20,746
30-Sep-99 $20,658 $20,177
31-Oct-99 $22,347 $21,455
30-Nov-99 $22,808 $21,891
31-Dec-99 $24,474 $23,180
31-Jan-00 $23,416 $22,017
29-Feb-00 $24,296 $21,600
31-Mar-00 $26,222 $23,712
30-Apr-00 $25,087 $22,998
31-May-00 $24,232 $22,527
30-Jun-00 $24,844 $23,083
31-Jul-00 $24,309 $22,723
31-Aug-00 $25,839 $24,135
30-Sep-00 $24,117 $22,860
31-Oct-00 $23,633 $22,764
30-Nov-00 $22,000 $20,971
31-Dec-00 $22,589 $21,073
31-Jan-01 $22,575 $21,821
28-Feb-01 $20,549 $19,831
31-Mar-01 $19,250 $18,574
30-Apr-01 $20,507 $20,017
31-May-01 $20,577 $20,151
30-Jun-01 $20,228 $19,662
31-Jul-01 $19,711 $19,469
31-Aug-01 $18,342 $18,250
30-Sep-01 $17,071 $16,776
31-Oct-01 $17,504 $17,096
30-Nov-01 $18,495 $18,407
31-Dec-01 $18,547 $18,569
31-Jan-02 $18,280 $18,298
28-Feb-02 $17,887 $17,945
31-Mar-02 $18,660 $18,620
30-Apr-02 $17,816 $17,491
31-May-02 $17,788 $17,362
30-Jun-02 $16,692 $16,126
31-Jul-02 $15,611 $14,870
31-Aug-02 $15,737 $14,966
30-Sep-02 $14,290 $13,339
31-Oct-02 $15,301 $14,513
30-Nov-02 $15,667 $15,368
31-Dec-02 $14,971 $14,466
31-Jan-03 $14,546 $14,087
28-Feb-03 $14,221 $13,876
31-Mar-03 $14,504 $14,010
30-Apr-03 $15,509 $15,165
31-May-03 $16,343 $15,964
30-Jun-03 $16,556 $16,168
31-Jul-03 $16,881 $16,453
31-Aug-03 $17,164 $16,774
30-Sep-03 $17,051 $16,596
31-Oct-03 $17,985 $17,535
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
The fund's share price and principal values change, and when you sell your
shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
Funds Using Schwab Equity Ratings(TM) 9
SCHWAB CORE EQUITY FUND(TM)
FUND FACTS as of 10/31/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large / / /X/ / /
Medium / / / / / /
Small / / / / / /
STATISTICS
NUMBER OF HOLDINGS 164
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $75,382
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 18.6
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 3.2
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 73%
- --------------------------------------------------------------------------------
TOP HOLDINGS 2
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) PROCTER & GAMBLE CO. 4.4%
- --------------------------------------------------------------------------------
(2) BANK OF AMERICA CORP. 4.4%
- --------------------------------------------------------------------------------
(3) INTEL CORP. 4.1%
- --------------------------------------------------------------------------------
(4) CITIGROUP, INC. 3.5%
- --------------------------------------------------------------------------------
(5) MICROSOFT CORP. 3.5%
- --------------------------------------------------------------------------------
(6) CISCO SYSTEMS, INC. 3.3%
- --------------------------------------------------------------------------------
(7) FANNIE MAE 2.9%
- --------------------------------------------------------------------------------
(8) EXXON MOBIL CORP. 2.9%
- --------------------------------------------------------------------------------
(9) THE PROGRESSIVE CORP. 2.4%
- --------------------------------------------------------------------------------
(10) WACHOVIA CORP. 2.2%
- --------------------------------------------------------------------------------
TOTAL 33.6%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
25.2% FINANCE
25.1% CONSUMER NON-DURABLES
19.0% TECHNOLOGY
9.5% UTILITIES
7.9% MATERIALS & SERVICES
6.0% ENERGY
4.5% CAPITAL GOODS
1.9% TRANSPORTATION
0.9% OTHER
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/03, which may have changed since then, and is not a
precise indication of risk or performance -- past, present, or future.
2 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
10 Funds Using Schwab Equity Ratings(TM)
SCHWAB DIVIDEND EQUITY FUND(TM)
INVESTOR SHARES PERFORMANCE as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund's Investor Shares with a benchmark
and the fund's Morningstar category.
[BAR CHART]
Fund Category:
Fund: Benchmark: MORNINGSTAR
INVESTOR S&P 500(R) LARGE-CAP
SHARES INDEX BLEND
SINCE INCEPTION: 9/2/03 6.00% 4.54% 4.26%
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund's Investor Shares, compared with a similar investment in
a benchmark.
$10,600 INVESTOR SHARES
$10,454 S&P 500 INDEX
[LINE GRAPH]
Investor S&P 500
Shares Index
02-Sep-03 $10,000 $10,000
30-Sep-03 $9,900 $9,894
31-Oct-03 $10,600 $10,454
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.
1 Fund expenses have been absorbed by CSIM and Schwab. Without these reductions,
the fund's returns would have been lower. These returns do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.
2 Source for category information: Morningstar, Inc.
Funds Using Schwab Equity Ratings(TM) 11
SCHWAB DIVIDEND EQUITY FUND(TM)
SELECT SHARES(R) PERFORMANCE as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund's Select Shares with a benchmark and
the fund's Morningstar category.
[BAR CHART]
Fund Category:
Fund: Benchmark: MORNINGSTAR
SELECT S&P 500(R) LARGE-CAP
SHARES INDEX BLEND
SINCE INCEPTION: 9/2/03 6.00% 4.54% 4.26%
PERFORMANCE OF A HYPOTHETICAL $50,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $50,000
investment (the minimum investment for this share class) in the fund's Select
Shares, compared with a similar investment in a benchmark.
$53,000 SELECT SHARES
$52,270 S&P 500 INDEX
[LINE GRAPH]
Select S&P 500
Shares Index
02-Sep-03 $50,000 $50,000
30-Sep-03 $49,500 $49,470
31-Oct-03 $53,000 $52,270
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.
1 Fund expenses have been absorbed by CSIM and Schwab. Without these reductions,
the fund's returns would have been lower. These returns do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares.
2 Source for category information: Morningstar, Inc.
12 Funds Using Schwab Equity Ratings(TM)
SCHWAB DIVIDEND EQUITY FUND(TM)
FUND FACTS as of 10/31/03
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) FLEETBOSTON FINANCIAL CORP. 1.3%
- --------------------------------------------------------------------------------
(2) CARLISLE COS., INC. 1.2%
- --------------------------------------------------------------------------------
(3) OSHKOSH TRUCK CORP. 1.2%
- --------------------------------------------------------------------------------
(4) ROHM & HAAS CO. 1.2%
- --------------------------------------------------------------------------------
(5) CHEVRONTEXACO CORP. 1.2%
- --------------------------------------------------------------------------------
(6) BANK OF AMERICA CORP. 1.1%
- --------------------------------------------------------------------------------
(7) BLACK & DECKER CORP. 1.1%
- --------------------------------------------------------------------------------
(8) ROCKWELL AUTOMATION, INC. 1.1%
- --------------------------------------------------------------------------------
(9) 3M CO. 1.1%
- --------------------------------------------------------------------------------
(10) BRUNSWICK CORP. 1.1%
- --------------------------------------------------------------------------------
TOTAL 11.6%
PORTFOLIO STATISTICS
NUMBER OF HOLDINGS 101
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $26,051
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 15.4
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.4
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 2 2%
- --------------------------------------------------------------------------------
SEC YIELD 3 3.19%
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
24.2% FINANCE
23.7% UTILITIES
16.9% CONSUMER NON-DURABLES
11.8% MATERIALS & SERVICES
7.9% CONSUMER DURABLES
4.2% TECHNOLOGY
4.2% CAPITAL GOODS
3.3% ENERGY
2.1% TRANSPORTATION
1.7% 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 Portfolio expenses have been absorbed by CSIM and Schwab. Without these
reductions, the portfolio's 30-day SEC yield would have been 1.95%. The yield
does not reflect the deduction of taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares.
Funds Using Schwab Equity Ratings(TM) 13
SCHWAB SMALL-CAP EQUITY FUND(TM)
INVESTOR SHARES PERFORMANCE as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund's Investor Shares with its benchmark
and Morningstar category.
[BAR CHART]
Fund Category:
Fund: Benchmark: MORNINGSTAR
INVESTOR S&P SMALLCAP SMALL-CAP
SHARES 600 INDEX BLEND
SINCE INCEPTION: 7/1/03 18.10% 16.36% 16.60%
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund's Investor Shares, compared with a similar investment in
its benchmark.
$11,810 INVESTOR SHARES
$11,636 S&P SMALLCAP 600 INDEX
[LINE GRAPH]
Investor S&P SmallCap
Shares 600 Index
01-Jul-03 $10,000 $10,000
31-Jul-03 $10,590 $10,520
31-Aug-03 $10,920 $11,032
30-Sep-03 $10,800 $10,708
31-Oct-03 $11,810 $11,636
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.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
14 Funds Using Schwab Equity Ratings(TM)
SCHWAB SMALL-CAP EQUITY FUND(TM)
SELECT SHARES(R) PERFORMANCE as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund's Select Shares with its benchmark
and Morningstar category.
[BAR CHART]
Fund Category:
Fund: Benchmark: MORNINGSTAR
SELECT S&P SMALLCAP SMALL-CAP
SHARES 600 INDEX BLEND
SINCE INCEPTION: 7/1/03 18.10% 16.36% 16.60%
PERFORMANCE OF A HYPOTHETICAL $50,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $50,000
investment (the minimum investment for this share class) in the fund's Select
Shares, compared with a similar investment in its benchmark.
$59,050 SELECT SHARES
$58,182 S&P SMALLCAP 600 INDEX
[LINE GRAPH]
Select S&P SmallCap
Shares 600 Index
01-Jul-03 $50,000 $50,000
31-Jul-03 $52,950 $52,600
31-Aug-03 $54,600 $55,162
30-Sep-03 $54,000 $53,540
31-Oct-03 $59,050 $58,182
All figures on this page assume dividends and distributions were reinvested.
Index figures do not include trading and management costs, which would lower
performance. Indices are unmanaged, and you cannot invest in them directly.
The fund's share price and principal values change, and when you sell your
shares, they may be worth more or less than what you paid for them. Past
performance does not indicate future results.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
Funds Using Schwab Equity Ratings(TM) 15
SCHWAB SMALL-CAP EQUITY FUND(TM)
FUND FACTS as of 10/31/03
FUND CATEGORY 1
[GRAPHIC]
INVESTMENT STYLE
Value Blend Growth
MARKET CAP
Large / / / / / /
Medium / / / / / /
Small / / /X/ / /
STATISTICS
NUMBER OF HOLDINGS 180
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $911
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 20.7
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.3
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 2 39%
- --------------------------------------------------------------------------------
TOP HOLDINGS 3
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) GRACO, INC. 1.5%
- --------------------------------------------------------------------------------
(2) MID ATLANTIC MEDICAL SERVICES, INC. 1.4%
- --------------------------------------------------------------------------------
(3) FIRST BANCORP PUERTO RICO 1.3%
- --------------------------------------------------------------------------------
(4) STRIDE RITE CORP. 1.3%
- --------------------------------------------------------------------------------
(5) FIRSTFED FINANCIAL CORP. 1.2%
- --------------------------------------------------------------------------------
(6) UGI CORP. 1.2%
- --------------------------------------------------------------------------------
(7) OSKOSH TRUCK CORP. 1.2%
- --------------------------------------------------------------------------------
(8) CHOICE HOTELS INTERNATIONAL, INC. 1.2%
- --------------------------------------------------------------------------------
(9) CHURCH & DWIGHT CO., INC. 1.1%
- --------------------------------------------------------------------------------
(10) ASPECT COMMUNICATIONS CORP. 1.0%
- --------------------------------------------------------------------------------
TOTAL 12.4%
SECTOR WEIGHTINGS % of Portfolio
This chart shows the fund's sector composition as of the report date. A sector
is a portion of the overall stock market that is made up of industries whose
business components share similar characteristics.
[PIE CHART]
23.7% MATERIALS & SERVICES
20.5% CONSUMER NON-DURABLES
15.6% TECHNOLOGY
13.7% FINANCE
7.1% CONSUMER DURABLES
5.6% CAPITAL GOODS
5.3% ENERGY
3.6% UTILITIES
2.8% TRANSPORTATION
2.1% OTHER
1 Source: Morningstar, Inc. This style assessment is the result of evaluating
the fund based on a ten-factor model for value and growth characteristics. The
fund's market capitalization placement is determined by the geometric mean of
its holdings' market capitalizations. The assessment reflects the fund's
portfolio as of 10/31/03, which may have changed since then, and is not a
precise indication of risk or performance -- past, present, or future.
2 Not annualized.
3 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
16 Funds Using Schwab Equity Ratings(TM)
SCHWAB HEDGED EQUITY FUND(TM)
PERFORMANCE as of 10/31/03
TOTAL RETURNS 1, 2
This chart compares performance of the fund with a benchmark and the fund's
Morningstar category.
[BAR CHART]
Fund Category:
Benchmark: MORNINGSTAR
S&P 500(R) MODERATE
FUND INDEX ALLOCATION
1 YEAR 17.17% 20.80% 15.87%
SINCE INCEPTION: 9/3/02 12.94% 14.50% 11.25%
PERFORMANCE OF A HYPOTHETICAL $25,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $25,000
investment in the fund (the minimum investment for this fund), compared with a
similar investment in a benchmark.
$28,825 FUND
$29,291 S&P 500 INDEX
[LINE GRAPH]
S&P 500
Fund Index
03-Sep-02 $25,000 $25,000
30-Sep-02 $23,850 $22,283
31-Oct-02 $24,600 $24,243
30-Nov-02 $24,700 $25,671
31-Dec-02 $24,375 $24,164
31-Jan-03 $24,050 $23,531
28-Feb-03 $23,850 $23,178
31-Mar-03 $24,275 $23,403
30-Apr-03 $25,225 $25,332
31-May-03 $26,125 $26,667
30-Jun-03 $26,425 $27,008
31-Jul-03 $26,750 $27,483
31-Aug-03 $27,100 $28,019
30-Sep-03 $26,975 $27,722
31-Oct-03 $28,825 $29,291
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.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
Funds Using Schwab Equity Ratings(TM) 17
SCHWAB HEDGED EQUITY FUND(TM)
FUND FACTS as of 10/31/03
TOP LONG HOLDINGS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) ROCKWELL INTERNATIONAL CORP. 0.8%
- --------------------------------------------------------------------------------
(2) PANAMSAT CORP. 0.8%
- --------------------------------------------------------------------------------
(3) DEERE & CO. 0.8%
- --------------------------------------------------------------------------------
(4) EATON CORP. 0.8%
- --------------------------------------------------------------------------------
(5) INTEL CORP. 0.8%
- --------------------------------------------------------------------------------
TOTAL 4.0%
TOP SHORT POSITIONS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) MANDALAY RESORT GROUP 0.7%
- --------------------------------------------------------------------------------
(2) 99 CENTS ONLY STORES 0.7%
- --------------------------------------------------------------------------------
(3) ASTORIA FINANCIAL CORP. 0.6%
- --------------------------------------------------------------------------------
(4) SCOTTS CO., Class A 0.6%
- --------------------------------------------------------------------------------
(5) SUPERIOR INDUSTRIES INTERNATIONAL, INC. 0.6%
- --------------------------------------------------------------------------------
TOTAL 3.2%
STATISTICS
LONG SHORT
HOLDINGS POSITIONS
- --------------------------------------------------------------------------------
NUMBER OF HOLDINGS 207 127
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP $12,935 $4,924
($ x 1,000,000)
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 17.4 31.1
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.4 2.2
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 2 114% --
- --------------------------------------------------------------------------------
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 into the short positions, the fund did not
intend to hold the positions for more than one year.
18 Funds Using Schwab Equity Ratings(TM)
COMMUNICATIONS FOCUS FUND
PERFORMANCE as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund with a benchmark and the fund's
Morningstar category.
[BAR CHART]
Benchmark:
S&P Fund Category:
COMMUNICATIONS MORNINGSTAR
FUND SECTOR INDEX COMMUNICATIONS
1 YEAR 26.87% -0.16% 34.96%
3 YEARS -23.75% -25.14% -25.27%
SINCE INCEPTION: 7/3/00 -26.35% -25.05% -26.64%
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with a similar investment in a benchmark and an
additional index.
$3,604 FUND
$3,820 S&P COMMUNICATIONS SECTOR INDEX
$7,596 S&P 500 INDEX
[LINE GRAPH]
S&P Communications S&P 500
Fund Sector Index Index
03-Jul-00 $10,000 $10,000 $10,000
31-Jul-00 $9,490 $9,209 $9,844
31-Aug-00 $9,720 $9,013 $10,455
30-Sep-00 $8,510 $8,907 $9,903
31-Oct-00 $8,130 $9,105 $9,862
30-Nov-00 $6,740 $7,798 $9,085
31-Dec-00 $6,402 $7,191 $9,129
31-Jan-01 $7,382 $8,226 $9,453
28-Feb-01 $5,972 $7,478 $8,591
31-Mar-01 $5,462 $7,100 $8,046
30-Apr-01 $5,972 $7,392 $8,672
31-May-01 $5,682 $7,278 $8,730
30-Jun-01 $5,232 $6,973 $8,518
31-Jul-01 $5,142 $7,254 $8,434
31-Aug-01 $4,581 $6,575 $7,906
30-Sep-01 $4,281 $6,927 $7,267
31-Oct-01 $4,161 $5,988 $7,406
30-Nov-01 $4,471 $6,096 $7,974
31-Dec-01 $4,511 $6,196 $8,044
31-Jan-02 $4,181 $5,692 $7,927
28-Feb-02 $3,931 $5,327 $7,774
31-Mar-02 $3,961 $5,217 $8,066
30-Apr-02 $3,461 $4,396 $7,577
31-May-02 $3,481 $4,539 $7,521
30-Jun-02 $2,941 $3,963 $6,986
31-Jul-02 $2,651 $3,450 $6,442
31-Aug-02 $2,681 $3,392 $6,484
30-Sep-02 $2,361 $2,912 $5,779
31-Oct-02 $2,841 $3,826 $6,287
30-Nov-02 $3,211 $4,287 $6,658
31-Dec-02 $2,877 $3,959 $6,267
31-Jan-03 $2,857 $3,684 $6,103
28-Feb-03 $2,746 $3,377 $6,011
31-Mar-03 $2,726 $3,367 $6,069
30-Apr-03 $3,029 $3,669 $6,570
31-May-03 $3,261 $3,915 $6,916
30-Jun-03 $3,331 $4,059 $7,004
31-Jul-03 $3,362 $3,813 $7,128
31-Aug-03 $3,362 $3,816 $7,267
30-Sep-03 $3,352 $3,654 $7,190
31-Oct-03 $3,604 $3,820 $7,596
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.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
Funds Using Schwab Equity Ratings(TM) 19
COMMUNICATIONS FOCUS FUND
FUND FACTS as of 10/31/03
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) PANAMSAT CORP. 4.1%
- --------------------------------------------------------------------------------
(2) PRIMUS TELECOMMUNICATIONS GROUP, INC. 4.1%
- --------------------------------------------------------------------------------
(3) CROWN CASTLE INTERNATIONAL CORP. 3.9%
- --------------------------------------------------------------------------------
(4) BELLSOUTH CORP. 3.8%
- --------------------------------------------------------------------------------
(5) NEXTEL COMMUNICATIONS, INC., Class A 3.7%
- --------------------------------------------------------------------------------
(6) SBA COMMUNICATIONS CORP. 3.5%
- --------------------------------------------------------------------------------
(7) GENERAL COMMUNICATION, INC., Class A 3.5%
- --------------------------------------------------------------------------------
(8) TIME WARNER TELECOM, INC., Class A 3.5%
- --------------------------------------------------------------------------------
(9) AT&T CORP. 3.4%
- --------------------------------------------------------------------------------
(10) CINCINNATI BELL, INC. 3.4%
- --------------------------------------------------------------------------------
TOTAL 36.9%
STATISTICS
NUMBER OF HOLDINGS 31
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $11,457
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 35.3
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 1.5
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 179%
- --------------------------------------------------------------------------------
INDUSTRY WEIGHTINGS % of Portfolio
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
79.7% TELEPHONE
7.3% MEDIA
3.5% CONSTRUCTION
3.2% BUSINESS MACHINES & SOFTWARE
3.1% BUSINESS SERVICES
3.1% ELECTRONICS
0.1% OTHER
1 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
20 Funds Using Schwab Equity Ratings(TM)
FINANCIAL SERVICES FOCUS FUND
PERFORMANCE as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund with a benchmark and the fund's
Morningstar category.
[BAR CHART]
Benchmark: Fund Category:
S&P FINANCIAL MORNINGSTAR
SERVICES FINANCIAL
FUND SECTOR INDEX SERVICES
1 YEAR 26.68% 20.96% 25.68%
3 YEARS 2.08% -1.04% 5.38%
SINCE INCEPTION: 7/3/00 7.21% 5.29% 11.42%
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with a similar investment in a benchmark and an
additional index.
$12,615 FUND
$11,877 S&P FINANCIAL SERVICES SECTOR INDEX
$7,596 S&P 500 INDEX
[LINE GRAPH]
S&P Financial
Services Sector S&P 500
Fund Index Index
03-Jul-00 $10,000 $10,000 $10,000
31-Jul-00 $10,770 $11,000 $9,844
31-Aug-00 $11,830 $12,016 $10,455
30-Sep-00 $12,050 $12,323 $9,903
31-Oct-00 $11,860 $12,259 $9,862
30-Nov-00 $11,200 $11,537 $9,085
31-Dec-00 $12,136 $12,652 $9,129
31-Jan-01 $11,928 $12,566 $9,453
28-Feb-01 $11,501 $11,761 $8,591
31-Mar-01 $11,023 $11,384 $8,046
30-Apr-01 $11,637 $11,805 $8,672
31-May-01 $12,032 $12,251 $8,730
30-Jun-01 $12,094 $12,272 $8,518
31-Jul-01 $11,761 $12,103 $8,434
31-Aug-01 $11,096 $11,355 $7,906
30-Sep-01 $10,368 $10,687 $7,267
31-Oct-01 $10,139 $10,443 $7,406
30-Nov-01 $10,805 $11,164 $7,974
31-Dec-01 $11,172 $11,431 $8,044
31-Jan-02 $10,919 $11,253 $7,927
28-Feb-02 $10,982 $11,120 $7,774
31-Mar-02 $11,499 $11,823 $8,066
30-Apr-02 $11,351 $11,556 $7,577
31-May-02 $11,362 $11,514 $7,521
30-Jun-02 $10,866 $10,948 $6,986
31-Jul-02 $10,433 $10,085 $6,442
31-Aug-02 $10,549 $10,277 $6,484
30-Sep-02 $9,378 $9,072 $5,779
31-Oct-02 $9,959 $9,819 $6,287
30-Nov-02 $10,212 $10,192 $6,658
31-Dec-02 $9,786 $9,657 $6,267
31-Jan-03 $9,593 $9,471 $6,103
28-Feb-03 $9,379 $9,168 $6,011
31-Mar-03 $9,464 $9,114 $6,069
30-Apr-03 $10,558 $10,172 $6,570
31-May-03 $11,051 $10,705 $6,916
30-Jun-03 $11,136 $10,718 $7,004
31-Jul-03 $11,458 $11,185 $7,128
31-Aug-03 $11,447 $11,079 $7,267
30-Sep-03 $11,597 $11,131 $7,190
31-Oct-03 $12,615 $11,877 $7,596
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.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
Funds Using Schwab Equity Ratings(TM) 21
FINANCIAL SERVICES FOCUS FUND
FUND FACTS as of 10/31/03
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) COUNTRYWIDE FINANCIAL CORP. 2.4%
- --------------------------------------------------------------------------------
(2) WFS FINANCIAL, INC. 2.2%
- --------------------------------------------------------------------------------
(3) CAPITAL CORP. OF THE WEST 2.2%
- --------------------------------------------------------------------------------
(4) CITY NATIONAL CORP. 2.2%
- --------------------------------------------------------------------------------
(5) BANK OF HAWAII CORP. 2.2%
- --------------------------------------------------------------------------------
(6) INDYMAC BANCORP, INC. 2.2%
- --------------------------------------------------------------------------------
(7) SAFECO CORP. 2.1%
- --------------------------------------------------------------------------------
(8) POPULAR, INC. 2.1%
- --------------------------------------------------------------------------------
(9) CASH AMERICA INTERNATIONAL, INC. 2.1%
- --------------------------------------------------------------------------------
(10) METLIFE, INC. 2.1%
- --------------------------------------------------------------------------------
TOTAL 21.8%
STATISTICS
NUMBER OF HOLDINGS 54
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $14,610
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 11.0
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.0
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 181%
- --------------------------------------------------------------------------------
INDUSTRY WEIGHTINGS % of Portfolio
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
34.8% MISCELLANEOUS FINANCE
32.8% BANKS
29.7% INSURANCE
2.0% BUSINESS MACHINES & SOFTWARE
0.7% REAL PROPERTY
1 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
22 Funds Using Schwab Equity Ratings(TM)
HEALTH CARE FOCUS FUND
PERFORMANCE as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund with a benchmark and the fund's
Morningstar category.
[BAR CHART]
Benchmark:
S&P HEALTH Fund Category:
CARE SECTOR MORNINGSTAR
FUND INDEX HEALTH CARE
1 YEAR 18.96% 6.94% 21.27%
3 YEARS -5.70% -6.66% -8.03%
SINCE INCEPTION: 7/3/00 -4.38% -4.84% -4.69%
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with a similar investment in a benchmark and an
additional index.
$8,613 FUND
$8,475 S&P HEALTH CARE SECTOR INDEX
$7,596 S&P 500 INDEX
[LINE GRAPH]
S&P Health
Care Sector S&P 500
Fund Index Index
03-Jul-00 $10,000 $10,000 $10,000
31-Jul-00 $9,450 $9,484 $9,844
31-Aug-00 $9,820 $9,647 $10,455
30-Sep-00 $10,160 $10,123 $9,903
31-Oct-00 $10,270 $10,420 $9,862
30-Nov-00 $10,460 $10,750 $9,085
31-Dec-00 $10,905 $11,105 $9,129
31-Jan-01 $9,848 $10,175 $9,453
28-Feb-01 $9,797 $10,167 $8,591
31-Mar-01 $8,892 $9,380 $8,046
30-Apr-01 $9,268 $9,716 $8,672
31-May-01 $9,492 $9,854 $8,730
30-Jun-01 $9,278 $9,512 $8,518
31-Jul-01 $9,594 $9,914 $8,434
31-Aug-01 $9,258 $9,582 $7,906
30-Sep-01 $9,228 $9,610 $7,267
31-Oct-01 $9,146 $9,580 $7,406
30-Nov-01 $9,624 $10,036 $7,974
31-Dec-01 $9,335 $9,770 $8,044
31-Jan-02 $9,111 $9,632 $7,927
28-Feb-02 $8,989 $9,632 $7,774
31-Mar-02 $9,101 $9,696 $8,066
30-Apr-02 $8,582 $9,148 $7,577
31-May-02 $8,389 $8,942 $7,521
30-Jun-02 $7,657 $8,124 $6,986
31-Jul-02 $7,291 $7,914 $6,442
31-Aug-02 $7,433 $7,993 $6,484
30-Sep-02 $6,986 $7,519 $5,779
31-Oct-02 $7,240 $7,925 $6,287
30-Nov-02 $7,342 $8,095 $6,658
31-Dec-02 $7,060 $7,815 $6,267
31-Jan-03 $7,009 $7,782 $6,103
28-Feb-03 $6,825 $7,619 $6,011
31-Mar-03 $7,080 $7,888 $6,069
30-Apr-03 $7,377 $8,157 $6,570
31-May-03 $7,560 $8,363 $6,916
30-Jun-03 $8,030 $8,712 $7,004
31-Jul-03 $8,245 $8,653 $7,128
31-Aug-03 $8,173 $8,357 $7,267
30-Sep-03 $8,276 $8,381 $7,190
31-Oct-03 $8,613 $8,475 $7,596
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.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
Funds Using Schwab Equity Ratings(TM) 23
HEALTH CARE FOCUS FUND
FUND FACTS as of 10/31/03
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
- --------------------------------------------------------------------------------
(1) VENTIV HEALTH, INC. 3.1%
- --------------------------------------------------------------------------------
(2) MICROTEK MEDICAL HOLDINGS, INC. 3.0%
- --------------------------------------------------------------------------------
(3) UNITEDHEALTH GROUP, INC. 2.9%
- --------------------------------------------------------------------------------
(4) DJ ORTHOPEDICS, INC. 2.9%
- --------------------------------------------------------------------------------
(5) DAVITA, INC. 2.8%
- --------------------------------------------------------------------------------
(6) IMS HEALTH, INC. 2.8%
- --------------------------------------------------------------------------------
(7) CYTYC CORP. 2.8%
- --------------------------------------------------------------------------------
(8) SYBRON DENTAL SPECIALITIES, INC. 2.7%
- --------------------------------------------------------------------------------
(9) BECTON DICKINSON & CO. 2.7%
- --------------------------------------------------------------------------------
(10) FISHER SCIENTIFIC INTERNATIONAL, INC. 2.7%
- --------------------------------------------------------------------------------
TOTAL 28.4%
STATISTICS
NUMBER OF HOLDINGS 40
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $6,045
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) 17.7
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 2.5
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 200%
- --------------------------------------------------------------------------------
INDUSTRY WEIGHTINGS % of Portfolio
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
76.5% HEALTHCARE/DRUGS & MEDICINE
13.4% BUSINESS SERVICES
5.1% CONSUMER NON-DURABLES
2.7% PRODUCER GOODS & MANUFACTURING
2.3% INSURANCE
1 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
24 Funds Using Schwab Equity Ratings(TM)
TECHNOLOGY FOCUS FUND
PERFORMANCE as of 10/31/03
AVERAGE ANNUAL TOTAL RETURNS 1, 2
This chart compares performance of the fund with a benchmark and the fund's
Morningstar category.
[BAR CHART]
Benchmark: Fund Category:
S&P TECHNOLOGY MORNINGSTAR
FUND SECTOR INDEX TECHNOLOGY
1 YEAR 48.97% 42.14% 53.50%
3 YEARS -20.26% -21.91% -27.05%
SINCE INCEPTION: 7/3/00 -22.24% -24.60% -27.85%
PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 1
This graph shows performance since inception of a hypothetical $10,000
investment in the fund, compared with a similar investment in a benchmark and an
additional index.
$4,320 FUND
$3,899 S&P TECHNOLOGY SECTOR INDEX
$7,596 S&P 500 INDEX
[LINE GRAPH]
S&P
Technology
Sector S&P 500
Fund Index Index
03-Jul-00 $10,000 $10,000 $10,000
31-Jul-00 $9,480 $9,481 $9,844
31-Aug-00 $10,910 $10,592 $10,455
30-Sep-00 $9,220 $8,692 $9,903
31-Oct-00 $8,520 $8,186 $9,862
30-Nov-00 $6,500 $6,474 $9,085
31-Dec-00 $5,940 $5,831 $9,129
31-Jan-01 $6,950 $6,868 $9,453
28-Feb-01 $5,110 $4,989 $8,591
31-Mar-01 $4,420 $4,357 $8,046
30-Apr-01 $5,320 $5,105 $8,672
31-May-01 $5,240 $4,861 $8,730
30-Jun-01 $5,290 $4,918 $8,518
31-Jul-01 $4,850 $4,642 $8,434
31-Aug-01 $4,210 $4,087 $7,906
30-Sep-01 $3,270 $3,273 $7,267
31-Oct-01 $3,860 $3,845 $7,406
30-Nov-01 $4,480 $4,481 $7,974
31-Dec-01 $4,500 $4,415 $8,044
31-Jan-02 $4,560 $4,474 $7,927
28-Feb-02 $4,040 $3,860 $7,774
31-Mar-02 $4,320 $4,129 $8,066
30-Apr-02 $3,840 $3,640 $7,577
31-May-02 $3,670 $3,495 $7,521
30-Jun-02 $3,290 $3,065 $6,986
31-Jul-02 $2,950 $2,772 $6,442
31-Aug-02 $2,880 $2,731 $6,484
30-Sep-02 $2,450 $2,257 $5,779
31-Oct-02 $2,900 $2,743 $6,287
30-Nov-02 $3,310 $3,214 $6,658
31-Dec-02 $2,890 $2,753 $6,267
31-Jan-03 $2,840 $2,707 $6,103
28-Feb-03 $2,860 $2,762 $6,011
31-Mar-03 $2,810 $2,722 $6,069
30-Apr-03 $3,110 $2,971 $6,570
31-May-03 $3,400 $3,234 $6,916
30-Jun-03 $3,430 $3,235 $7,004
31-Jul-03 $3,720 $3,418 $7,128
31-Aug-03 $3,980 $3,631 $7,267
30-Sep-03 $3,890 $3,592 $7,190
31-Oct-03 $4,320 $3,899 $7,596
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.
1 Fund expenses have been partially absorbed by CSIM and Schwab. Without these
reductions, the fund's returns would have been lower. These returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
2 Source for category information: Morningstar, Inc.
Funds Using Schwab Equity Ratings(TM) 25
TECHNOLOGY FOCUS FUND
FUND FACTS as of 10/31/03
TOP HOLDINGS 1
% OF
SECURITY NET ASSETS
(1) TRANSACTION SYSTEMS ARCHITECTS, INC., Class A 3.3%
- --------------------------------------------------------------------------------
(2) EPICOR SOFTWARE CORP. 2.3%
- --------------------------------------------------------------------------------
(3) CISCO SYSTEMS, INC. 2.3%
- --------------------------------------------------------------------------------
(4) ATMEL CORP. 2.2%
- --------------------------------------------------------------------------------
(5) CITRIX SYSTEMS, INC. 2.1%
- --------------------------------------------------------------------------------
(6) INTEL CORP. 2.1%
- --------------------------------------------------------------------------------
(7) SYBASE, INC. 2.1%
- --------------------------------------------------------------------------------
(8) BENCHMARK ELECTRONICS, INC. 2.0%
- --------------------------------------------------------------------------------
(9) ADOBE SYSTEMS, INC. 2.0%
- --------------------------------------------------------------------------------
(10) AVAYA, INC. 2.0%
- --------------------------------------------------------------------------------
TOTAL 22.4%
STATISTICS
NUMBER OF HOLDINGS 74
- --------------------------------------------------------------------------------
WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $12,091
- --------------------------------------------------------------------------------
PRICE/EARNINGS RATIO (P/E) --
- --------------------------------------------------------------------------------
PRICE/BOOK RATIO (P/B) 3.1
- --------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 165%
- --------------------------------------------------------------------------------
INDUSTRY WEIGHTINGS % of Portfolio
This chart shows the fund's industry composition as of the report date.
[PIE CHART]
34.6% ELECTRONICS
30.9% BUSINESS SERVICES
17.5% BUSINESS MACHINES & SOFTWARE
5.9% PRODUCER GOODS & MANUFACTURING
5.4% AEROSPACE & DEFENSE
4.1% TELEPHONE
1.0% MEDIA
0.3% HEALTHCARE/DRUGS & MEDICINE
0.3% OTHER
1 This list is not a recommendation of any security by the investment adviser.
Portfolio holdings may have changed since the report date.
26 Funds Using Schwab Equity Ratings(TM)
SCHWAB CORE EQUITY FUND(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 11/1/99- 11/1/98-
10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 10.89 12.53 18.53 18.91 14.57
Income or loss from investment operations:
Net investment income 0.10 0.08 0.08 0.05 0.06
Net realized and unrealized gains or losses 1.79 (1.64) (4.57) 1.08 4.94
---------------------------------------------------------------------------
Total income or loss from investment operations 1.89 (1.56) (4.49) 1.13 5.00
Less distributions:
Dividends from net investment income (0.07) (0.08) (0.07) (0.04) (0.09)
Distributions from net realized gains -- -- (1.44) (1.47) (0.57)
---------------------------------------------------------------------------
Total distributions (0.07) (0.08) (1.51) (1.51) (0.66)
---------------------------------------------------------------------------
Net asset value at end of period 12.71 10.89 12.53 18.53 18.91
---------------------------------------------------------------------------
Total return (%) 17.54 (12.58) (25.93) 5.75 35.20
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 0.75 0.75 0.75 0.75 1 0.75
Gross operating expenses 0.88 0.91 0.88 0.87 0.93
Net investment income 0.94 0.63 0.55 0.29 0.34
Portfolio turnover rate 73 114 106 96 99
Net assets, end of period ($ x 1,000,000) 237 179 210 342 289
1 The ratio of net operating expenses would have been 0.76% if certain
non-routine expenses (proxy fees) had been included.
See financial notes. 27
SCHWAB CORE EQUITY FUND(TM)
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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)
- --------------------------------------------------------------------------------
99.5% COMMON STOCK 198,733 235,860
0.3% SHORT-TERM
INVESTMENT 688 688
0.0% U.S. TREASURY
OBLIGATIONS 65 65
- --------------------------------------------------------------------------------
99.8% TOTAL INVESTMENTS 199,486 236,613
18.5% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 43,898 43,898
(18.3)% OTHER ASSETS AND
LIABILITIES, NET (43,453)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 237,058
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 99.5% of net assets
AEROSPACE / DEFENSE 2.1%
------------------------------------------------------------------------
Rockwell Automation, Inc. 34,000 1,056
United Technologies Corp. 47,200 3,997
------
5,053
AIR TRANSPORTATION 1.9%
------------------------------------------------------------------------
o ExpressJet Holdings, Inc. 22,000 336
FedEx Corp. 27,900 2,114
United Parcel Service, Inc.,
Class B 28,200 2,045
------
4,495
ALCOHOLIC BEVERAGES 0.2%
------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 9,500 468
APPAREL 0.6%
------------------------------------------------------------------------
Liz Claiborne, Inc. 12,000 443
o Timberland Co., Class A 3,500 182
VF Corp. 20,500 870
------
1,495
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 1.1%
------------------------------------------------------------------------
Dana Corp. 64,600 1,052
Eaton Corp. 12,200 1,223
Ford Motor Co. 25,300 307
------
2,582
BANKS 8.5%
------------------------------------------------------------------------
=(2) Bank of America Corp. 137,600 10,421
Bank One Corp. 30,000 1,274
UnionBanCal Corp. 20,600 1,116
(10) Wachovia Corp. 113,000 5,183
Wells Fargo & Co. 38,400 2,163
------
20,157
BUSINESS MACHINES & SOFTWARE 10.0%
------------------------------------------------------------------------
Adobe Systems, Inc. 6,800 298
o(6) Cisco Systems, Inc. 368,900 7,740
o Dell, Inc. 51,400 1,856
International Business Machines
Corp. 17,700 1,584
Landamerica Financial
Group, Inc. 200
o Lexmark International, Inc.,
Class A 15,300 1,126
=(5) Microsoft Corp. 313,800 8,206
o Oracle Corp. 125,500 1,501
o Storage Technology Corp. 12,500 301
o Xerox Corp. 105,000 1,102
------
23,724
BUSINESS SERVICES 3.5%
------------------------------------------------------------------------
Automatic Data Processing, Inc. 15,100 570
o Cendant Corp. 119,000 2,431
o Citrix Systems, Inc. 14,500 367
Computer Associates
International, Inc. 22,400 527
o CSG Systems International, Inc. 17,500 201
o D&B Corp. 2,900 135
28 See financial notes.
SCHWAB CORE EQUITY FUND(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
=o Gartner, Inc., Class B 23,000 280
H&R Block, Inc. 16,000 753
IMS Health, Inc. 9,200 216
o Intuit, Inc. 7,000 350
o Invitrogen Corp. 4,600 293
o Macrovision Corp. 6,900 152
Republic Services, Inc. 20,100 467
o Sycamore Networks, Inc. 16,400 82
o VeriSign, Inc. 44,000 698
o Veritas Software Corp. 23,500 850
------
8,372
CHEMICALS 1.7%
------------------------------------------------------------------------
Albemarle Corp. 6,500 174
E.I. du Pont de Nemours
& Co. 74,900 3,026
MacDermid, Inc. 4,300 129
PPG Industries, Inc. 12,000 692
------
4,021
CONSTRUCTION 0.1%
------------------------------------------------------------------------
Centex Corp. 2,500 244
CONSUMER DURABLES 0.3%
------------------------------------------------------------------------
Black & Decker Corp. 16,400 784
ELECTRONICS 5.4%
------------------------------------------------------------------------
o Amkor Technology, Inc. 46,100 869
o Applied Micro Circuits
Corp. 10,000 58
o Atmel Corp. 23,500 132
o GlobespanVirata, Inc. 55,600 342
(3) Intel Corp. 293,000 9,684
o LSI Logic Corp. 51,300 474
Motorola, Inc. 17,500 237
o Plantronics, Inc. 4,600 128
Scientific-Atlanta, Inc. 25,300 749
o Thermo Electron Corp. 10,000 220
------
12,893
ENERGY: RAW MATERIALS 0.3%
------------------------------------------------------------------------
Cabot Oil & Gas Corp. 6,000 153
EOG Resources, Inc. 13,700 578
------
731
FOOD & AGRICULTURE 1.8%
------------------------------------------------------------------------
Hershey Foods Corp. 13,000 1,002
Kellogg Co. 24,300 805
PepsiCo, Inc. 26,300 1,258
Tyson Foods, Inc.,
Class A 85,500 1,220
------
4,285
HEALTHCARE / DRUGS & MEDICINE 11.4%
------------------------------------------------------------------------
o Anthem, Inc. 11,700 801
Bausch & Lomb, Inc. 25,500 1,228
Becton Dickinson & Co. 32,300 1,181
Bristol-Myers Squibb Co. 133,200 3,379
C.R. Bard, Inc. 6,800 544
o Coventry Health Care, Inc. 9,500 520
o Cytyc Corp. 32,900 425
o DaVita, Inc. 17,000 597
o Health Net, Inc. 35,900 1,134
ICN Pharmaceuticals, Inc. 43,800 846
= Johnson & Johnson 32,900 1,656
McKesson Corp. 4,900 148
Merck & Co., Inc. 87,300 3,863
Mylan Laboratories, Inc. 26,775 647
o Oxford Health Plans, Inc. 18,800 761
o Pacificare Health Systems, Inc. 24,000 1,428
o Pediatrix Medical Group, Inc. 10,000 534
o Sunrise Senior Living, Inc. 13,100 379
o Sybron Dental Specialties, Inc. 13,500 310
UnitedHealth Group, Inc. 80,200 4,081
o WellPoint Health Networks, Inc. 15,000 1,334
Wyeth 27,000 1,192
------
26,988
HOUSEHOLD PRODUCTS 4.4%
------------------------------------------------------------------------
Clorox Co. 500 23
(1) Procter & Gamble Co. 106,800 10,497
------
10,520
INSURANCE 7.2%
------------------------------------------------------------------------
Aetna, Inc. 25,000 1,435
AFLAC, Inc. 91,900 3,352
The Allstate Corp. 38,500 1,521
Fidelity National Financial, Inc. 26,475 819
See financial notes. 29
SCHWAB CORE EQUITY FUND(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Marsh & McLennan Cos., Inc. 64,900 2,774
Metlife, Inc. 20,000 628
Principal Financial Group, Inc. 24,200 759
(9) The Progressive Corp. 78,300 5,779
Radian Group, Inc. 1,800 95
------
17,162
MEDIA 1.8%
------------------------------------------------------------------------
o CNET Networks, Inc. 47,500 387
o EchoStar Communications Corp.,
Class A 4,500 172
The McGraw-Hill Cos., Inc. 2,100 141
o Time Warner, Inc. 36,500 558
Viacom, Inc., Class B 65,100 2,595
Washington Post, Class B 400 295
------
4,148
MISCELLANEOUS 1.7%
------------------------------------------------------------------------
3M Co. 50,900 4,014
MISCELLANEOUS FINANCE 9.4%
------------------------------------------------------------------------
American Express Co. 39,600 1,858
=(4) Citigroup, Inc. 176,433 8,363
(7) Fannie Mae 96,500 6,918
Goldman Sachs Group, Inc. 26,500 2,488
Legg Mason, Inc. 14,000 1,166
Lehman Brothers Holdings, Inc. 11,000 792
MBNA Corp. 5,500 136
Morgan Stanley 10,000 549
------
22,270
NON-DURABLES & ENTERTAINMENT 1.9%
------------------------------------------------------------------------
o American Greetings Corp.,
Class A 27,500 586
Fortune Brands, Inc. 27,500 1,792
Hasbro, Inc. 25,500 556
o Marvel Enterprises, Inc. 25,800 760
McDonald's Corp. 13,500 338
o Yum! Brands, Inc. 14,000 478
------
4,510
OIL: DOMESTIC 2.0%
------------------------------------------------------------------------
Kerr-McGee Corp. 66,500 2,760
Marathon Oil Corp. 4,000 118
o Newfield Exploration Co. 23,800 945
Pogo Producing Co. 12,000 502
Vintage Petroleum, Inc. 26,300 304
------
4,629
OIL: INTERNATIONAL 3.7%
------------------------------------------------------------------------
ChevronTexaco Corp. 27,000 2,006
(8) Exxon Mobil Corp. 186,700 6,830
------
8,836
OPTICAL & PHOTO 0.2%
------------------------------------------------------------------------
Eastman Kodak Co. 13,800 337
o Ingram Micro, Inc., Class A 15,000 222
------
559
PAPER & FOREST PRODUCTS 0.4%
------------------------------------------------------------------------
International Paper Co. 25,500 1,003
PRODUCER GOODS & MANUFACTURING 2.3%
Albany International Corp.,
Class A 20,900 646
Briggs & Stratton Corp. 14,500 942
Deere & Co. 48,500 2,940
HON Industries, Inc. 17,900 734
o SPX Corp. 2,800 135
------
5,397
RETAIL 5.1%
------------------------------------------------------------------------
o AnnTaylor Stores Corp. 26,300 941
o Best Buy Co., Inc. 4,500 262
Claire's Stores, Inc. 15,000 580
Dollar General Corp. 61,000 1,371
Federated Department
Stores, Inc. 68,300 3,248
The Gap, Inc. 121,700 2,322
RadioShack Corp. 46,000 1,380
o Rent-A-Center, Inc. 3,000 94
o Rite Aid Corp. 103,000 590
o Staples, Inc. 31,900 856
o United Stationers, Inc. 11,000 409
------
12,053
TELEPHONE 7.6%
------------------------------------------------------------------------
Alltel Corp. 3,500 165
AT&T Corp. 3,020 56
30 See financial notes.
SCHWAB CORE EQUITY FUND(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o AT&T Wireless Services, Inc. 132,000 957
o Avaya, Inc. 10,900 141
BellSouth Corp. 126,500 3,328
o Crown Castle International
Corp. 36,400 461
o Level 3 Communications, Inc. 79,500 429
o Nextel Communications, Inc.,
Class A 104,000 2,517
SBC Communications, Inc. 205,600 4,930
Sprint Corp. (FON Group) 57,700 923
Verizon Communications, Inc. 118,200 3,972
------
17,879
TRAVEL & RECREATION 0.8%
------------------------------------------------------------------------
Harrah's Entertainment, Inc. 37,100 1,614
o MGM MIRAGE 7,000 248
------
1,862
TRUCKING & FREIGHT 0.1%
------------------------------------------------------------------------
o Landstar Systems, Inc. 1,300 95
UTILITIES: ELECTRIC & GAS 2.0%
------------------------------------------------------------------------
Constellation Energy Group, Inc. 6,000 218
= Exelon Corp. 48,500 3,077
Great Plains Energy, Inc. 41,900 1,336
------
4,631
SHORT-TERM INVESTMENT
0.3% of net assets
Provident Institutional
TempFund 688,328 688
SECURITY FACE VALUE
RATE, MATURITY DATE ($ x 1,000)
U.S. TREASURY OBLIGATIONS
0.0% of net assets
= U.S. Treasury Bills
0.85%-0.88%, 12/18/03 65 65
END OF INVESTMENTS. 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)
COLLATERAL INVESTED FOR SECURITIES ON LOAN
18.5% of net assets
COMMERCIAL PAPER & OTHER CORPORATE
OBLIGATIONS
------------------------------------------------------------------------
American Express Centurion Bank
1.11%, 12/12/03 897 897
Canadian Imperial Bank Corp.
1.09%, 05/28/04 273 273
CC USA, Inc.
1.08%, 11/17/03 672 671
Concord Minutemen Capital Corp.
1.11%, 01/09/04 1,801 1,797
1.08%, 11/18/03 1,491 1,488
1.07%, 11/19/03 4,524 4,520
Crown Point Funding Corp.
1.11%, 01/16/04 2,294 2,290
1.08%, 11/14/03 515 514
Depfa Bank PLC
1.08%, 11/18/03 432 431
General Electric Capital Corp.
1.08%, 05/10/04 331 331
Tulip Funding Corp.
1.07%, 11/10/03 3,338 3,335
Westdeutsche Landesbank AG
1.09%, 09/29/04 6,571 6,570
1.09%, 09/23/04 1,097 1,097
------
24,214
SHORT-TERM INVESTMENTS
------------------------------------------------------------------------
Wells Fargo Bank, Time Deposit
1.06%, 11/03/03 2,647 2,647
SECURITY AND NUMBER OF SHARES
OTHER INVESTMENT COMPANIES
------------------------------------------------------------------------
Institutional Money Market
Trust 17,037,123 17,037
END OF COLLATERAL INVESTED FROM SECURITIES ON LOAN. For totals, please see the
first page of holdings for this fund.
See financial notes. 31
SCHWAB CORE EQUITY FUND(TM)
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- ------------------------------------------------------------------------------
Investments, at market value
(including $42,542 of securities on loan) $236,613 a
Collateral held for securities on loan 43,898
Receivables:
Fund shares sold 244
Due from brokers for futures 1
Dividends 423
Income from securities on loan 6
Prepaid expenses + 12
-----------
TOTAL ASSETS 281,197
LIABILITIES
- ------------------------------------------------------------------------------
Collateral held for securities on loan 43,898
Payables:
Fund shares redeemed 161
Investment adviser and administrator fees 5
Transfer agent and shareholder service fees 3
Accrued expenses + 72
-----------
TOTAL LIABILITIES 44,139
NET ASSETS
- ------------------------------------------------------------------------------
TOTAL ASSETS 281,197
TOTAL LIABILITIES - 44,139
-----------
NET ASSETS $237,058
NET ASSETS BY SOURCE
Capital received from investors 244,832
Net investment income not yet distributed 1,643
Net realized capital losses (46,572)
Net unrealized capital gains 37,155 b
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$237,058 18,648 $12.71
Unless stated, all numbers x 1,000.
a The fund paid $199,486 for these securities. Not counting short-term
obligations and government securities, the fund paid $172,172 for securities
during the report period and received $144,317 from securities it sold or that
matured.
b These derive from investments and futures. As of the report date, the fund had
three open S&P 500 futures contracts due to expire on December 18, 2003, with
an aggregate net contract value of $787 and net unrealized gains of $28.
FEDERAL TAX DATA
- ------------------------------------------------
PORTFOLIO COST $199,498
NET UNREALIZED GAINS AND LOSSES:
Gains $43,729
Losses + (6,614)
-----------
$37,115
UNDISTRIBUTED EARNINGS:
Ordinary income $1,643
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2009 $26,773
2010 8,588
2011 + 11,171
-----------
$46,532
32 See financial notes.
SCHWAB CORE EQUITY FUND(TM)
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $3,354
Interest 31
Securities on loan + 18
-----------
TOTAL INVESTMENT INCOME 3,403
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments sold (11,378)
Net realized gains on futures contracts + 422
-----------
NET REALIZED LOSSES (10,956)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 43,682
Net unrealized gains on futures contracts + 65
-----------
NET UNREALIZED GAINS 43,747
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 1,085 a
Transfer agent and shareholder service fees 502 b
Trustees' fees 5 c
Custodian fees 23
Portfolio accounting fees 29
Professional fees 27
Registration fees 32
Shareholder reports 67
Other expenses + 3
-----------
Total expenses 1,773
Expense reduction - 265 d
-----------
NET EXPENSES 1,508
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 3,403
NET EXPENSES - 1,508
-----------
NET INVESTMENT INCOME 1,895
NET REALIZED LOSSES (10,956) e
NET UNREALIZED GAINS + 43,747 e
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $34,686
Unless stated, all numbers x 1,000.
a Calculated as a percentage of average daily net assets: 0.54% of the first
$500 million and 0.49% of assets beyond that.
b Calculated as a percentage of average daily net assets: for transfer agent
services, 0.05% of the fund's assets; for shareholder services, 0.20% of the
fund's assets. These fees are paid to Charles Schwab & Co.
c For the fund's independent trustees only.
d This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 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 $32,791.
See financial notes. 33
SCHWAB CORE EQUITY FUND(TM)
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income $1,895 $1,234
Net realized losses (10,956) (7,462)
Net unrealized gains or losses + 43,747 (17,836)
-----------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 34,686 (24,064)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income $1,261 $1,269 a, b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
Shares sold 5,806 $65,590 3,029 $34,629
Shares reinvested 109 1,152 89 1,172
Shares redeemed + (3,746) (42,567) (3,376) (40,795)
-------------------------------------------------------
NET TRANSACTIONS
IN FUND SHARES 2,169 $24,175 (258) ($4,994)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 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 + 2,169 57,600 (258) (30,327) c
-------------------------------------------------------
END OF PERIOD 18,648 $237,058 16,479 $179,458 d
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
b The tax-basis components of distributions paid are:
CURRENT PERIOD:
Ordinary Income $1,261
Long-term capital gains $--
PRIOR PERIOD:
Ordinary Income $1,269
Long-term capital gains $--
c Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value from transactions in fund shares, minus
distributions paid.
d Includes distributable net investment income in the amount of $1,643 and
$1,009 at the end of the current period and prior period, respectively.
34 See financial notes.
SCHWAB DIVIDEND EQUITY FUND(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
9/2/03 1-
INVESTOR SHARES 10/31/03
- --------------------------------------------------------------------------------
PER-SHARE DATA ($)
- --------------------------------------------------------------------------------
Net asset value at beginning of period 10.00
----------------------------
Income from investment operations:
Net investment income 0.05
Net realized and unrealized gains 0.55
----------------------------
Total income from investment operations 0.60
----------------------------
Net asset value at end of period 10.60
----------------------------
Total return (%) 6.00 2
RATIOS/SUPPLEMENTAL DATA (%)
- --------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses --
Gross operating expenses 1.34 3
Net investment income 3.41 3
Portfolio turnover rate 2 2
Net assets, end of period ($ x 1,000,000) 94
1 Commencement of operations.
2 Not annualized.
3 Annualized.
See financial notes. 35
SCHWAB DIVIDEND EQUITY FUND(TM)
9/2/03 1-
SELECT SHARES(R) 10/31/03
- --------------------------------------------------------------------------------
PER-SHARE DATA ($)
- --------------------------------------------------------------------------------
Net asset value at beginning of period 10.00
----------------------------
Income from investment operations:
Net investment income 0.05
Net realized and unrealized gains 0.55
----------------------------
Total income from investment operations 0.60
----------------------------
Net asset value at end of period 10.60
----------------------------
Total return (%) 6.00 2
RATIOS/SUPPLEMENTAL DATA (%)
- --------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses --
Gross operating expenses 1.19 3
Net investment income 3.41 3
Portfolio turnover rate 2 2
Net assets, end of period ($ x 1,000,000) 111
1 Commencement of operations.
2 Not annualized.
3 Annualized.
36 See financial notes.
SCHWAB DIVIDEND EQUITY FUND(TM)
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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
COST MARKET VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
99.6% COMMON STOCK 194,362 203,992
1.8% SHORT-TERM
INVESTMENTS 3,630 3,630
- --------------------------------------------------------------------------------
101.4% TOTAL INVESTMENTS 197,992 207,622
(1.4)% OTHER ASSETS AND
LIABILITIES, NET (2,820)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 204,802
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 99.6% of net assets
AEROSPACE / DEFENSE 1.1%
--------------------------------------------------------------------------
(8) Rockwell Automation, Inc. 73,100 2,270
AIR TRANSPORTATION 1.1%
--------------------------------------------------------------------------
United Parcel Service, Inc.,
Class B 30,900 2,241
APPAREL 1.0%
--------------------------------------------------------------------------
VF Corp. 50,400 2,139
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 4.8%
--------------------------------------------------------------------------
Bandag, Inc. 19,000 695
(2) Carlisle Cos., Inc. 43,100 2,472
Ford Motor Co. 178,700 2,168
General Motors Corp. 51,000 2,176
(3) Oshkosh Truck Corp. 52,000 2,383
-------
9,894
BANKS 15.2%
--------------------------------------------------------------------------
AmSouth Bancorp. 93,000 2,197
(6) Bank of America Corp. 30,200 2,287
Bank One Corp. 51,700 2,195
(1) FleetBoston Financial
Corp. 64,000 2,585
J.P. Morgan Chase & Co. 61,700 2,215
National City Corp. 65,900 2,152
National Commerce Financial
Corp. 79,800 2,192
PNC Financial Services
Group, Inc. 40,900 2,191
Regions Financial Corp. 59,900 2,201
U.S. Bancorp 79,800 2,172
Union Planters Corp. 64,200 2,136
UnionBanCal Corp. 41,000 2,221
Wachovia Corp. 48,700 2,234
Wells Fargo & Co. 39,200 2,208
-------
31,186
BUSINESS MACHINES & SOFTWARE 1.1%
--------------------------------------------------------------------------
Pitney Bowes, Inc. 53,200 2,186
BUSINESS SERVICES 3.1%
--------------------------------------------------------------------------
GTECH Holdings Corp. 46,500 2,078
H&R Block, Inc. 46,400 2,185
Viad Corp. 86,000 2,148
-------
6,411
CHEMICALS 7.5%
--------------------------------------------------------------------------
Dow Chemical Co. 57,800 2,178
E.I. du Pont de Nemours
& Co. 53,900 2,178
Lubrizol Corp. 68,900 2,088
Monsanto Co. 87,000 2,179
PPG Industries, Inc. 39,000 2,248
(4) Rohm & Haas Co. 60,500 2,378
RPM International, Inc. 141,000 2,037
-------
15,286
CONSUMER DURABLES 2.1%
--------------------------------------------------------------------------
(7) Black & Decker Corp. 47,700 2,281
Maytag Corp. 77,100 1,958
-------
4,239
ELECTRONICS 2.1%
--------------------------------------------------------------------------
Acuity Brands, Inc. 98,500 2,118
PerkinElmer, Inc. 116,500 2,098
-------
4,216
See financial notes. 37
SCHWAB DIVIDEND EQUITY FUND(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
FOOD & AGRICULTURE 3.2%
--------------------------------------------------------------------------
ConAgra Foods, Inc. 88,200 2,103
H.J. Heinz Co. 62,000 2,190
Kellogg Co. 65,900 2,183
-------
6,476
HEALTHCARE / DRUGS & MEDICINE 1.9%
--------------------------------------------------------------------------
Bristol-Myers Squibb Co. 86,700 2,199
Merck & Co., Inc. 39,200 1,735
-------
3,934
HOUSEHOLD PRODUCTS 3.2%
--------------------------------------------------------------------------
Clorox Co. 47,500 2,152
The Gillette Co. 68,000 2,169
Procter & Gamble Co. 22,600 2,221
-------
6,542
INSURANCE 5.2%
--------------------------------------------------------------------------
The Allstate Corp. 56,200 2,220
Cincinnati Financial Corp. 53,400 2,185
Lincoln National Corp. 50,200 2,004
Marsh & McLennan Cos., Inc. 44,700 1,911
Mercury General Corp. 47,100 2,239
-------
10,559
MEDIA 1.1%
--------------------------------------------------------------------------
R.R. Donnelley & Sons Co. 84,600 2,200
MISCELLANEOUS 1.1%
--------------------------------------------------------------------------
(9) 3M Co. 28,700 2,264
MISCELLANEOUS FINANCE 4.1%
--------------------------------------------------------------------------
Citigroup, Inc. 46,300 2,195
GreenPoint Financial Corp. 70,700 2,202
Washington Federal, Inc. 68,900 1,815
Washington Mutual, Inc. 51,500 2,253
-------
8,465
NON-DURABLES & ENTERTAINMENT 1.1%
--------------------------------------------------------------------------
Fortune Brands, Inc. 34,500 2,248
OIL: DOMESTIC 1.1%
--------------------------------------------------------------------------
Kerr-McGee Corp. 52,600 2,183
OIL: INTERNATIONAL 2.2%
--------------------------------------------------------------------------
(5) ChevronTexaco Corp. 31,800 2,363
Exxon Mobil Corp. 60,800 2,224
-------
4,587
OPTICAL & PHOTO 0.2%
--------------------------------------------------------------------------
Eastman Kodak Co. 16,900 413
PAPER & FOREST PRODUCTS 0.7%
--------------------------------------------------------------------------
Rayonier, Inc. 33,100 1,392
PRODUCER GOODS & MANUFACTURING 4.2%
--------------------------------------------------------------------------
Briggs & Stratton Corp. 34,300 2,230
Harsco Corp. 55,700 2,134
Hubbell, Inc., Class B 51,300 2,197
Lennox International, Inc. 128,000 2,117
-------
8,678
RAILROAD & SHIPPING 1.0%
--------------------------------------------------------------------------
Alexander & Baldwin, Inc. 69,200 2,146
RETAIL 3.3%
--------------------------------------------------------------------------
Albertson's, Inc. 95,200 1,931
Federated Department Stores, Inc. 46,600 2,216
Limited Brands, Inc. 120,800 2,126
RadioShack Corp. 16,000 480
-------
6,753
STEEL 0.7%
--------------------------------------------------------------------------
Worthington Industries, Inc. 98,400 1,435
TELEPHONE 6.4%
--------------------------------------------------------------------------
Alltel Corp. 47,300 2,236
AT&T Corp. 111,600 2,075
BellSouth Corp. 83,600 2,199
SBC Communications, Inc. 92,000 2,206
Sprint Corp. (FON Group) 137,800 2,205
Verizon Communications,
Inc. 64,300 2,160
-------
13,081
38 See financial notes.
SCHWAB DIVIDEND EQUITY FUND(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
TOBACCO 1.1%
--------------------------------------------------------------------------
Altria Group, Inc. 47,300 2,199
TRAVEL & RECREATION 1.1%
--------------------------------------------------------------------------
(10) Brunswick Corp. 76,200 2,261
UTILITIES: ELECTRIC & GAS 17.6%
--------------------------------------------------------------------------
Centerpoint Energy, Inc. 219,000 2,148
CH Energy Group, Inc. 38,000 1,664
Constellation Energy Group, Inc. 61,200 2,226
DPL, Inc. 120,000 2,186
Duquesne Light Holdings, Inc. 122,000 1,961
Energy East Corp. 95,800 2,151
Exelon Corp. 34,200 2,170
FirstEnergy Corp. 63,100 2,170
Great Plains Energy, Inc. 68,100 2,171
Hawaiian Electric Industries, Inc. 48,500 2,220
National Fuel Gas Co. 77,800 1,739
OGE Energy Corp. 70,200 1,601
PPL Corp. 44,600 1,781
Puget Energy, Inc. 94,200 2,141
UGI Corp. 70,800 2,181
Westar Energy, Inc. 106,900 2,137
WGL Holdings, Inc. 64,100 1,772
WPS Resources Corp. 38,100 1,689
-------
36,108
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENTS
1.8% of net assets
Bank One, Grand Cayman
Time Deposit
0.50%, 11/01/03 3,600 3,600
Brown Brothers Harriman,
Grand Cayman Time Deposit
0.50%, 11/01/03 30 30
-------
3,630
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
See financial notes. 39
SCHWAB DIVIDEND EQUITY FUND(TM)
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value $207,622 a
Receivables:
Fund shares sold 2,643
Dividends 485
Reimbursement from adviser 40
Prepaid expenses + 41
-------------
TOTAL ASSETS 210,831
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 64
Investments bought 5,910
Accrued expenses + 55
-------------
TOTAL LIABILITIES 6,029
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 210,831
TOTAL LIABILITIES - 6,029
-------------
NET ASSETS $204,802
NET ASSETS BY SOURCE
Capital from investors 194,602
Net investment income not yet distributed 931
Net realized capital losses (361)
Net unrealized capital gains 9,630
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $93,916 8,862 $10.60
Select Shares(R) $110,886 10,463 $10.60
Unless stated, all numbers x 1,000.
a The fund paid $197,992 for these securities. Not counting short-term
obligations and government securities, the fund paid $198,508 for securities
during the report period and received $3,754 from securities it sold or that
matured.
FEDERAL TAX DATA
- --------------------------------------------------
PORTFOLIO COST 198,085
NET UNREALIZED GAINS AND LOSSES:
Gains 11,856
Losses + (2,319)
-------------
$9,537
UNDISTRIBUTED EARNINGS:
Ordinary income $931
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2011 $268
40 See financial notes.
SCHWAB DIVIDEND EQUITY FUND(TM)
Statement of
OPERATIONS
For September 2, 2003 (commencement of operations) through October 31, 2003.
All x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $925
Interest + 6
-----------
TOTAL INVESTMENT INCOME 931
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on investments sold (361)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 9,630
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 232 a
Transfer agent and shareholder service fees:
Investor Shares 30 b
Select Shares(R) 15 b
Trustees' fees 1 c
Custodian fees 3
Portfolio accounting fees 7
Professional fees 17
Registration fees 19
Shareholder reports 18
Other expenses + 1
-----------
Total expenses 343
Expense reduction - 343 d
-----------
NET EXPENSES --
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 931
NET EXPENSES - --
-----------
NET INVESTMENT INCOME 931
NET REALIZED LOSSES (361) e
NET UNREALIZED GAINS + 9,630 e
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $10,200
Unless stated, all numbers x 1,000.
a Calculated as 0.85% 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% and
0.05% of the assets of each respective share class. These fees are paid to
Charles Schwab & Co.
c For the fund's independent trustees only.
d Includes $232 from the investment adviser (CSIM) and $46 from the transfer
agent and shareholder service agent (Schwab). In addition, the total expenses
reimbursed by the investment adviser was $65. These reductions reflect a
guarantee by CSIM and Schwab to limit the annual operating expenses of this
fund through May 3, 2004 at 0.00% for both Investor Shares and Select(R)
shares.
e These add up to a net gain on investments of $9,269.
See financial notes. 41
SCHWAB DIVIDEND EQUITY FUND(TM)
Statements of
CHANGES IN NET ASSETS
For the current report period only. Because the fund commenced operations on
September 2, 2003, it has no prior report period. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
9/2/03-10/31/03
Net investment income $931
Net realized losses (361)
Net unrealized gains + 9,630
--------------------
INCREASE IN NET ASSETS
FROM OPERATIONS $10,200
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
9/2/03-10/31/03
SHARES VALUE
SHARES SOLD
Investor Shares 9,018 $90,936
Select Shares + 10,753 108,229
------------------------------
TOTAL SHARES SOLD 19,771 $199,165
SHARES REDEEMED
Investor Shares (156) ($1,596)
Select Shares + (290) (2,967)
------------------------------
TOTAL SHARES REDEEMED (446) ($4,563)
NET TRANSACTIONS IN FUND
SHARES 19,325 194,602
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
9/2/03-10/31/03
SHARES NET ASSETS
Beginning of period -- $--
Total increase + 19,325 204,802 a
------------------------------
END OF PERIOD 19,325 $204,802 b
Unless stated, all numbers x 1,000.
a 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.
b Includes distributable net investment income in the amount of $931 at the end
of the current period.
42 See financial notes.
SCHWAB SMALL-CAP EQUITY FUND(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
7/1/03 1-
INVESTOR SHARES 10/31/03
- --------------------------------------------------------------------------------
PER-SHARE DATA ($)
- --------------------------------------------------------------------------------
Net asset value at beginning of period 10.00
----------------------------------
Income or loss from investment operations:
Net investment loss (0.02)
Net realized and unrealized gains 1.83
----------------------------------
Total income from investment operations 1.81
----------------------------------
Net asset value at end of period 11.81
----------------------------------
Total return (%) 18.10 2
RATIOS/SUPPLEMENTAL DATA (%)
- --------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.30 3
Gross operating expenses 1.73 3
Net investment loss (0.54) 3
Portfolio turnover rate 39 2
Net assets, end of period ($ x 1,000,000) 26
1 Commencement of operations.
2 Not annualized.
3 Annualized.
See financial notes. 43
SCHWAB SMALL-CAP EQUITY FUND(TM)
7/1/03 1-
SELECT SHARES(R) 10/31/03
- --------------------------------------------------------------------------------
PER-SHARE DATA ($)
- --------------------------------------------------------------------------------
Net asset value at beginning of period 10.00
----------------------------------
Income or loss from investment operations:
Net investment loss (0.01)
Net realized and unrealized gains 1.82
----------------------------------
Total income from investment operations 1.81
----------------------------------
Net asset value at end of period 11.81
----------------------------------
Total return (%) 18.10 2
RATIOS/SUPPLEMENTAL DATA (%)
- --------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.12 3
Gross operating expenses 1.58 3
Net investment loss (0.36) 3
Portfolio turnover rate 39 2
Net assets, end of period ($ x 1,000,000) 14
1 Commencement of operations.
2 Not annualized.
3 Annualized.
44 See financial notes.
SCHWAB SMALL-CAP EQUITY FUND(TM)
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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)
- --------------------------------------------------------------------------------
97.5% COMMON STOCK 34,482 38,881
1.9% SHORT-TERM
INVESTMENT 751 751
0.2% U.S. TREASURY
OBLIGATION 75 75
- --------------------------------------------------------------------------------
99.6% TOTAL INVESTMENTS 35,308 39,707
0.4% OTHER ASSETS AND
LIABILITIES, NET 144
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 39,851
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 97.5% of net assets
AEROSPACE / DEFENSE 1.3%
-------------------------------------------------------------------------
o Armor Holdings, Inc. 6,200 121
o EnPro Industries, Inc. 16,700 169
o Teledyne Technologies, Inc. 13,200 217
-----
507
AIR TRANSPORTATION 0.8%
-------------------------------------------------------------------------
o EGL, Inc. 6,200 101
o MAIR Holdings, Inc. 28,500 200
-----
301
APPAREL 3.6%
-------------------------------------------------------------------------
K-Swiss, Inc., Class A 5,400 237
Kellwood Co. 7,800 292
o Stage Stores, Inc. 7,800 224
=(4) Stride Rite Corp. 42,400 511
Wolverine World Wide, Inc. 9,000 182
-----
1,446
AUTOMOTIVE PRODUCTS / MOTOR VEHICLES 3.2%
-------------------------------------------------------------------------
Carlisle Cos., Inc. 2,700 155
o CSK Auto Corp. 17,300 297
o Dura Automotive Systems, Inc.,
Class A 18,800 181
=(7) Oshkosh Truck Corp. 10,100 463
o Stoneridge, Inc. 13,100 179
-----
1,275
BANKS 6.0%
-------------------------------------------------------------------------
Anchor Bancorp Wisconsin, Inc. 12,500 311
BancFirst Corp. 1,800 97
Cullen/Frost Bankers, Inc. 4,400 171
Dime Community Bancshares, Inc. 3,700 103
=(3) First Bancorp Puerto Rico 15,700 523
=(5) FirstFed Financial Corp. 10,500 472
Hudson United Bancorp 8,100 294
Mid-State Bancshares 6,000 146
Second Bancorp., Inc. 10,200 283
-----
2,400
BUSINESS MACHINES & SOFTWARE 1.3%
-------------------------------------------------------------------------
Analogic Corp. 3,000 131
o Imagistics International, Inc. 8,200 263
o PTEK Holdings, Inc. 13,900 121
-----
515
BUSINESS SERVICES 13.9%
-------------------------------------------------------------------------
o 4Kids Entertainment, Inc. 6,200 152
Advo, Inc. 4,600 206
o Aether Systems, Inc. 19,800 95
o Barra, Inc. 4,300 163
Courier Corp. 2,000 110
o Credit Acceptance Corp. 10,600 124
= Factset Research Systems, Inc. 4,200 183
o Forrester Research, Inc. 5,700 97
o Genencor International, Inc. 7,300 112
o Gentiva Health Services, Inc. 16,100 184
See financial notes. 45
SCHWAB SMALL-CAP EQUITY FUND(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Gevity HR, Inc. 8,100 122
Global Payments, Inc. 3,500 146
o GSI Commerce, Inc. 37,900 370
o Informatica Corp. 20,000 218
o infoUSA, Inc. 17,900 147
o ITT Educational Services, Inc. 6,300 314
= John H. Harland Co. 14,800 403
o Kronos, Inc. 2,600 156
o MemberWorks, Inc. 7,900 228
o National Processing, Inc. 8,900 197
o Per-Se Technologies, Inc. 10,400 141
o Progress Software Corp. 7,600 168
o SYKES Enterprises, Inc. 21,200 198
o Tetra Tech, Inc. 10,000 225
o Transaction Systems Architects,
Inc., Class A 19,100 382
o Ventiv Health, Inc. 25,400 213
o Watson Wyatt & Co. Holdings 6,800 163
o WebEx Communications, Inc. 14,200 314
-----
5,531
CHEMICALS 2.5%
-------------------------------------------------------------------------
Amcol International Corp. 13,500 243
Arch Chemicals, Inc. 12,300 273
o Ethyl Corp. 22,700 365
Ferro Corp. 5,000 103
-----
984
CONSTRUCTION 3.0%
-------------------------------------------------------------------------
Centex Construction Products,
Inc. 4,400 237
Florida Rock Industries, Inc. 2,800 160
= M/I Schottenstein Homes, Inc. 6,000 250
MDC Holdings, Inc. 4,500 303
The Ryland Group, Inc. 3,000 267
-----
1,217
CONSUMER DURABLES 1.5%
-------------------------------------------------------------------------
o Genlyte Group, Inc. 5,200 245
Kimball International, Inc.,
Class B 13,000 201
Stanley Furniture Co., Inc. 4,700 145
-----
591
ELECTRONICS 11.6%
-------------------------------------------------------------------------
= Acuity Brands, Inc. 10,300 221
o Acxiom Corp. 17,500 278
o Alliant Techsystems, Inc. 4,100 212
=o(10) Aspect Communications
Corp. 30,500 413
=o Benchmark Electronics,
Inc. 7,800 380
o Checkpoint Systems, Inc. 17,400 328
o Dionex Corp. 3,500 149
Harman International Industries,
Inc. 3,200 410
o Interactive Data Corp. 14,700 253
o Littelfuse, Inc. 7,000 186
o Mattson Technology, Inc. 10,200 145
o Planar Systems, Inc. 15,200 352
o Radisys Corp. 7,100 139
Raven Industries, Inc. 8,200 214
o Supertex, Inc. 5,000 94
o Technitrol, Inc. 11,400 249
o Tekelec 15,300 246
o Thomas & Betts Corp. 9,100 162
o Western Wireless Corp.,
Class A 11,000 213
-----
4,644
ENERGY: RAW MATERIALS 2.5%
-------------------------------------------------------------------------
=o FMC Technologies, Inc. 17,400 350
o Joy Global, Inc. 10,700 204
o Plains Resources, Inc. 19,500 258
o Prima Energy Corp. 6,300 175
-----
987
FOOD & AGRICULTURE 3.6%
-------------------------------------------------------------------------
o 7-Eleven, Inc. 20,300 324
Corn Products International, Inc. 4,100 139
o Darling International, Inc. 42,600 120
o J & J Snack Foods Corp. 4,000 143
Lance, Inc. 13,100 170
o The Pantry, Inc. 18,800 308
Sanderson Farms, Inc. 6,400 225
-----
1,429
46 See financial notes.
SCHWAB SMALL-CAP EQUITY FUND(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
HEALTHCARE / DRUGS & MEDICINE 10.4%
-------------------------------------------------------------------------
o America Service Group, Inc. 9,300 240
Arrow International, Inc. 10,700 282
o Beverly Enterprises, Inc. 22,500 137
o Conmed Corp. 8,000 163
o DJ Orthopedics, Inc. 15,000 269
o Ii-Vi, Inc. 4,400 104
o Inamed Corp. 1,300 112
Medicis Pharmaceutical Corp.,
Class A 3,700 234
=o(2) Mid Atlantic Medical Services, Inc. 9,700 567
o MIM Corp. 14,500 85
Mine Safety Appliances Co. 5,400 306
Nature's Sunshine Products, Inc. 15,200 122
o Osteotech, Inc. 21,000 170
Owens & Minor, Inc. 9,900 201
o PSS World Medical, Inc. 26,300 245
o Sierra Health Services, Inc. 6,800 158
o Techne Corp. 4,200 146
o Third Wave Technologies, Inc. 6,000 21
o Visx, Inc. 7,400 180
West Pharmaceutical
Services, Inc. 4,800 159
o Wright Medical Group, Inc. 9,000 264
-----
4,165
HOUSEHOLD PRODUCTS 1.1%
-------------------------------------------------------------------------
=(9) Church & Dwight Co., Inc. 11,600 432
INSURANCE 3.2%
-------------------------------------------------------------------------
= Delphi Financial Group, Inc.,
Class A 6,100 307
o FPIC Insurance Group, Inc. 9,000 159
Odyssey Re Holdings Corp. 12,400 260
State Auto Financial Corp. 7,100 190
o Stewart Information Services
Corp. 8,300 259
o Universal American Financial
Corp. 9,900 100
-----
1,275
MISCELLANEOUS FINANCE 3.9%
-------------------------------------------------------------------------
o Affiliated Managers Group,
Inc. 4,500 326
Cash America International, Inc. 14,600 279
Fidelity Bankshares, Inc. 4,000 108
First Financial Holdings, Inc. 5,800 175
Independent Bank Corp.
Michigan 4,180 121
MB Financial, Inc. 2,900 137
McGrath RentCorp 3,600 103
o Meritage Corp. 2,800 165
Waypoint Financial Corp. 7,245 151
-----
1,565
NON-DURABLES & ENTERTAINMENT 3.5%
-------------------------------------------------------------------------
o Barnes & Noble.com, Inc. 43,700 101
Handleman Co. 16,400 291
o Isle of Capri Casinos, Inc. 9,100 190
= Lone Star Steakhouse & Saloon,
Inc. 17,100 374
o SCP Pool Corp. 2,900 101
o Service Corp. International 71,400 346
-----
1,403
OIL: DOMESTIC 2.8%
-------------------------------------------------------------------------
o Clayton Williams Energy, Inc. 9,900 208
o Encore Acquisition Co. 12,500 288
o Houston Exploration Co. 3,900 137
o KCS Energy, Inc. 20,100 160
o Nuevo Energy Co. 8,200 161
o Universal Compression
Holdings, Inc. 7,600 167
-----
1,121
PAPER & FOREST PRODUCTS 0.3%
-------------------------------------------------------------------------
Wausau-Mosinee Paper Corp. 10,700 132
PRODUCER GOODS & MANUFACTURING 6.2%
-------------------------------------------------------------------------
Aptargroup, Inc. 6,900 247
Cognex Corp. 6,300 169
Franklin Electric Co., Inc. 5,100 311
=(1) Graco, Inc. 15,600 594
Lennox International, Inc. 12,600 209
MSC Industrial Direct Co.,
Class A 6,400 151
Nordson Corp. 4,300 119
=o Oceaneering International,
Inc. 8,400 194
See financial notes. 47
SCHWAB SMALL-CAP EQUITY FUND(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Sauer-Danfoss, Inc. 20,400 289
Tennant Co. 5,100 202
-----
2,485
RAILROAD & SHIPPING 1.1%
-------------------------------------------------------------------------
Alexander & Baldwin, Inc. 7,000 217
o OMI Corp. 34,400 232
-----
449
REAL PROPERTY 0.5%
-------------------------------------------------------------------------
o Trammell Crow Co. 13,500 184
RETAIL 3.7%
-------------------------------------------------------------------------
o Borders Group, Inc. 12,500 283
=o The Men's Wearhouse, Inc. 7,200 212
o Pacific Sunwear of California 9,300 215
o Pathmark Stores, Inc. 35,000 240
Ruddick Corp. 9,700 155
o Urban Outfitters, Inc. 11,000 367
-----
1,472
TELEPHONE 2.2%
-------------------------------------------------------------------------
o Dobson Communications Corp.,
Class A 19,300 167
o General Communication, Inc.,
Class A 25,200 249
o Inet Technologies, Inc. 10,500 141
North Pittsburgh Systems, Inc. 5,500 101
o Primus Telecommunications
Group, Inc. 22,100 204
-----
862
TRAVEL & RECREATION 1.5%
-------------------------------------------------------------------------
o(8) Choice Hotels International, Inc. 13,900 459
The Marcus Corp. 9,200 138
-----
597
TRUCKING & FREIGHT 0.9%
-------------------------------------------------------------------------
o Forward Air Corp. 8,200 238
o Pacer International, Inc. 5,600 116
-----
354
UTILITIES: ELECTRIC & GAS 1.4%
-------------------------------------------------------------------------
Central Vermont Public Service Corp. 3,900 90
=(6) UGI Corp. 15,200 468
-----
558
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENT
1.9% of net assets
Bank One, Grand Cayman
Time Deposit
0.50%, 11/01/03 751 751
U.S. TREASURY OBLIGATION
0.2% of net assets
= U.S. Treasury Bill
0.93%, 12/18/03 75 75
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
48 See financial notes.
SCHWAB SMALL-CAP EQUITY FUND(TM)
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value $39,707 a
Receivables:
Fund shares sold 169
Dividends 11
Prepaid expenses + 14
-----------
TOTAL ASSETS 39,901
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 12
Due to brokers for futures 4
Investment adviser and administrator fees 1
Accrued expenses + 33
-----------
TOTAL LIABILITIES 50
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 39,901
TOTAL LIABILITIES - 50
-----------
NET ASSETS $39,851
NET ASSETS BY SOURCE
Capital received from investors 34,686
Net realized capital gains 736
Net unrealized capital gains 4,429 b
NET ASSET VALUE (NAV) BY SHARE CLASS
SHARES
SHARE CLASS NET ASSETS / OUTSTANDING = NAV
Investor Shares $25,593 2,167 $11.81
Select Shares(R) $14,258 1,207 $11.81
Unless stated, all numbers x 1,000.
a The fund paid $35,308 for these securities. Not counting short-term
obligations and government securities, the fund paid $45,563 for securities
during the report period and received $11,693 from securities it sold or that
matured.
b These derive from investments and futures. As of the report date, the fund had
three open Russell 2000 futures contracts due to expire on December 21, 2003,
with an aggregate net contract value of $793 and net unrealized gains of $30.
FEDERAL TAX DATA
-----------------------------------------------
PORTFOLIO COST $35,308
NET UNREALIZED GAINS AND LOSSES:
Gains $4,809
Losses + (410)
----------
$4,399
UNDISTRIBUTED EARNINGS:
Ordinary income $643
Long-term capital gains $123
RECLASSIFICATIONS:
Net investment income not yet
distributed $50
Reclassified as:
Net realized capital gains ($50)
See financial notes. 49
SCHWAB SMALL-CAP EQUITY FUND(TM)
Statement of
OPERATIONS
For July 1, 2003 (commencement of operations) through October 31, 2003.
All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $78
Interest + 3
----------
TOTAL INVESTMENT INCOME 81
NET REALIZED GAINS AND LOSSES
- -------------------------------------------------------------------------------
Net realized gains on investments sold 611
Net realized gains received on futures contracts + 175
----------
NET REALIZED GAINS 786
NET UNREALIZED GAINS AND LOSSES
- -------------------------------------------------------------------------------
Net unrealized gains on investments 4,399
Net unrealized gains on futures contracts + 30
----------
NET UNREALIZED GAINS 4,429
EXPENSES
- -------------------------------------------------------------------------------
Investment adviser and administrator fees 112 a
Transfer agent and shareholder service fees:
Investor Shares 17 b
Select Shares(R) 4 b
Trustees' fees 2 c
Custodian fees 4
Portfolio accounting fees 6
Professional fees 16
Registration fees 6
Shareholder reports 10
Other expenses + 1
----------
Total expenses 178
Expense reduction - 47 d
----------
NET EXPENSES 131
INCREASE IN NET ASSETS FROM OPERATIONS
- -------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 81
NET EXPENSES - 131
----------
NET INVESTMENT LOSS (50)
NET REALIZED GAINS 786 e
NET UNREALIZED GAINS + 4,429 e
----------
INCREASE IN NET ASSETS FROM OPERATIONS $5,165
Unless stated, all numbers x 1,000.
a Calculated as 1.05% 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% and
0.05% of the assets of each respective share class. These fees are paid to
Charles Schwab & Co.
c For the fund's independent trustees only.
d Includes $46 from the investment adviser (CSIM) and $1 from the transfer agent
and shareholder service agent (Schwab). These reductions reflect a guarantee
by CSIM and Schwab to limit the operating expenses of this fund through
February 28, 2005, as follows:
% OF AVERAGE
SHARE CLASS DAILY NET ASSETS
----------------------------------------------------
Investor Shares 1.30
Select Shares 1.12
This limit doesn't include interest, taxes and certain non-routine expenses.
e These add up to a net gain on investments of $5,215.
50 See financial notes.
SCHWAB SMALL-CAP EQUITY FUND(TM)
Statements of
CHANGES IN NET ASSETS
For the current report period only. Because the fund commenced operations on
July 1, 2003, it has no prior report period. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
7/1/03-10/31/03
Net investment loss ($50)
Net realized gains 786
Net unrealized gains + 4,429
----------------
INCREASE IN NET ASSETS
FROM OPERATIONS $5,165
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
7/1/03-10/31/03
SHARES VALUE
SHARES SOLD
Investor Shares 2,272 $ 23,526
Select Shares + 1,245 12,704
-----------------------------
TOTAL SHARES SOLD 3,517 $ 36,230
SHARES REDEEMED
Investor Shares (105) ($1,137)
Select Shares + (38) (407)
-----------------------------
TOTAL SHARES REDEEMED (143) ($1,544)
NET TRANSACTIONS IN FUND
SHARES 3,374 $ 34,686
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
7/1/03-10/31/03
SHARES NET ASSETS
Beginning of period -- $--
Total increase + 3,374 39,851 a
-----------------------------
END OF PERIOD 3,374 $39,851 b
Unless stated, all numbers x 1,000.
a Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
b There is no distributable net investment income at the end of the current
period.
See financial notes. 51
SCHWAB HEDGED EQUITY FUND(TM)
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 9/3/02 1-
10/31/03 10/31/02
- --------------------------------------------------------------------------------
PER-SHARE DATA ($)
- --------------------------------------------------------------------------------
Net asset value at beginning of period 9.84 10.00
---------------------
Income or loss from investment operations:
Net investment loss (0.09) (0.01)
Net realized and unrealized gains or losses 1.78 (0.15)
---------------------
Total income or loss from investment operations 1.69 (0.16)
---------------------
Net asset value at end of period 11.53 9.84
---------------------
Total return (%) 17.17 (1.60) 2
RATIOS/SUPPLEMENTAL DATA (%)
- --------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses (including dividend
expense on short sales) 2.37 2.39 3
Net operating expenses (excluding dividend
expense on short sales) 2.00 2.00 3
Gross operating expenses 2.77 3.33 3
Net investment loss (0.90) (0.79) 3
Portfolio turnover rate 114 68 2
Net assets, end of period ($ x 1,000,000) 44 32
1 Commencement of operations.
2 Not annualized.
3 Annualized.
52 See financial notes.
SCHWAB HEDGED EQUITY FUND(TM)
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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/
PROCEEDS MARKET VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
103.5% COMMON STOCK 38,262 45,501
0.9% SHORT-TERM
INVESTMENT 393 393
- --------------------------------------------------------------------------------
104.4% TOTAL INVESTMENTS 38,655 45,894
(26.3)% SHORT SALES (10,830) (11,537)
21.9% OTHER ASSETS AND
LIABILITIES, NET 9,611
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 43,968
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 103.5% of net assets
AEROSPACE / DEFENSE 2.1%
--------------------------------------------------------------------------
Lockheed Martin Corp. 5,800 269
@(1) Rockwell International Corp. 11,400 354
@ United Technologies Corp. 3,500 296
------------
919
AIR TRANSPORTATION 0.4%
--------------------------------------------------------------------------
@ Fedex Corp. 2,100 159
APPAREL 0.3%
--------------------------------------------------------------------------
Timberland Co. 2,300 120
AUTOMOBILE PRODUCTS / MOTOR VEHICLES 3.6%
--------------------------------------------------------------------------
Advance Auto Parts, Inc. 300 23
o American Axle & Manufacturing Holdings,
Inc. 6,300 218
@ Carlisle Cos., Inc. 5,800 333
@(4) Eaton Corp. 3,400 341
Ford Motor Co. 18,500 224
o Lear Corp. 5,400 314
Oshkosh Truck Corp. Class B 3,100 142
------------
1,595
BANKS 7.6%
--------------------------------------------------------------------------
Associated Bancorp. 5,600 231
BancorpSouth, Inc. 2,600 61
Bank of America Corp. 3,500 265
Commerce Bancshares, Inc. 5,950 285
Cullen Frost Bankers, Inc. 5,500 213
@ Doral Financial Corp. 5,500 278
First Bancorp Puerto Rico 2,100 70
First Midwest Bancorp, Inc. 3,916 121
Hudson City Bancorp, Inc. 2,600 90
National City Corp. 8,300 271
PNC Financial Services Corp. 4,900 262
Popular, Inc. 7,006 315
@ UnionBanCal Corp. 5,200 282
Wachovia Corp. 6,800 312
Zions Bancorp. 4,649 285
------------
3,341
BUSINESS MACHINES & SOFTWARE 3.1%
--------------------------------------------------------------------------
@o Cisco Systems, Inc. 15,400 323
@o Lexmark International, Inc., Class A 3,700 272
o Storage Technology Corp. 11,400 275
o Sybase, Inc. 16,200 290
o Xerox Corp. 20,000 210
------------
1,370
BUSINESS SERVICES 4.6%
--------------------------------------------------------------------------
o Cendant Corp. 3,200 65
@o Citrix Systems, Inc. 12,516 317
Factset Research Systems, Inc. 6,100 266
Global Payments, Inc. 1,800 75
@o GTech Holdings Corp. 6,300 282
IMS Health, Inc. 13,400 315
See financial notes. 53
SCHWAB HEDGED EQUITY FUND(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o National Processing, Inc. 1,000 22
o Polycom, Inc. 4,400 88
o Republic Services, Inc., Class A 11,900 277
o VeriSign, Inc. 20,000 317
------------
2,024
CHEMICAL 3.7%
--------------------------------------------------------------------------
Albemarle Corp. 1,000 27
o Cytec Industries, Inc. 6,200 216
@ E.I. Du Pont de Nemours & Co. 7,000 283
o Hercules, Inc. 11,500 120
Lubrizol Corp. 1,900 58
Monsanto Co. 11,600 291
PPG Industries, Inc. 5,000 288
Rohm & Haas Co. 8,400 330
------------
1,613
CONSTRUCTION 2.5%
--------------------------------------------------------------------------
D.R. Horton, Inc. 4,400 175
KB Home 4,800 329
The Ryland Group, Inc. 3,400 302
The Sherwin-Williams Co. 9,100 305
------------
1,111
CONSUMER DURABLES 1.4%
--------------------------------------------------------------------------
@ Black & Decker Corp. 6,600 316
@o Rent-A-Center, Inc. 9,250 289
------------
605
CONTAINERS 1.1%
--------------------------------------------------------------------------
Crown Cork & Seal Co., Inc. 20,000 158
o Pactiv Corp. 14,100 311
------------
469
ELECTRONICS 6.1%
--------------------------------------------------------------------------
@o Amkor Technology, Inc. 16,720 315
o Applied Micro Circuits Corp. 1,700 10
Benchmark Electronics, Inc. 6,200 302
o Globespan, Inc. 20,000 123
(5) Intel Corp. 10,100 334
Motorola, Inc. 20,000 271
o Nextel Communications, Inc.,
Class A 13,600 329
@o Plantronics, Inc. 11,100 309
Scientific Atlanta, Inc. 9,000 266
o Synopsys, Inc. 10,100 320
o Tektronix, Inc. 600 16
o Thermo Electron Corp. 3,200 70
o Waters Corp. 300 9
------------
2,674
ENERGY: RAW MATERIALS 1.2%
--------------------------------------------------------------------------
Devon Energy Corp. 1,300 63
EOG Resources, Inc. 6,800 286
o FMC Technologies, Inc. 8,600 173
------------
522
FOOD & AGRICULTURE 3.3%
--------------------------------------------------------------------------
7-Eleven, Inc. 4,700 75
Corn Products International, Inc. 4,500 153
Dean Foods Co. 4,000 121
Fresh Del Monte Produce, Inc. 10,300 257
Hershey Foods Corp. 4,200 324
Kellogg Co. 4,500 149
PepsiAmericas, Inc. 5,000 75
Tyson Foods, Inc. 19,700 281
------------
1,435
HEALTHCARE / DRUGS & MEDICINE 7.3%
--------------------------------------------------------------------------
@ Bausch & Lomb, Inc. 6,800 327
Becton Dickinson & Co. 7,500 274
Bristol-Meyers Squibb Co. 700 18
@ C.R. Bard, Inc. 3,600 288
@o Coventry Healthcare, Inc. 5,000 274
o Cytec Corp. 20,000 258
o DaVita, Inc. 8,200 288
@o Health Net, Inc. 8,800 278
ICN Pharmaceuticals, Inc. 15,300 295
o Manor Care, Inc. 2,400 80
Medicis Pharmaceutical Corp.,
Class A 200 13
@ Mylan Laboratories, Inc. 11,550 279
@o Pacificare Health Systems, Inc. 600 36
54 See financial notes.
SCHWAB HEDGED EQUITY FUND(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Pediatrix Medical Group, Inc. 500 27
United Healthcare Corp. 5,300 270
o Universal Health Services, Inc.,
Class B 4,300 202
------------
3,207
HOUSEHOLD PRODUCTS 2.7%
--------------------------------------------------------------------------
Church & Dwight, Inc. 5,900 220
@ Clorox Co. 6,100 276
o Estee Lauder Cos., Inc., Class A 8,400 314
Gillette Co. 1,700 54
Procter & Gamble Co. 3,100 305
The Dial Corp. 1,800 43
------------
1,212
INSURANCE 8.1%
--------------------------------------------------------------------------
AFLAC, Inc. 9,100 332
Allstate Corp. 7,700 304
AMBAC, Inc. 500 35
Delphi Financial Group Inc.,
Class A 1,600 81
@ Fidelity National Financial, Inc. 9,450 292
@ First American Financial Corp. 11,000 315
@ Marsh & McLennan Cos., Inc. 5,900 252
Metlife, Inc. 5,000 157
Odyssey Re Holdings Corp. 3,800 80
Old Republic International Corp. 8,600 309
o Principal Financial Group, Inc. 9,100 285
@ The Progressive Corp. 4,200 310
Safeco Corp. 8,091 297
o StanCorp. Financial Group, Inc. 3,600 227
Torchmark Corp. 400 18
W.R. Berkley Corp. 7,450 256
------------
3,550
MEDIA 4.8%
--------------------------------------------------------------------------
@ Blockbuster, Inc. 13,800 266
o EchoStar Communications Corp. 7,871 302
Harte-Hanks Communications,
Inc. 6,400 127
McClatchy Co., Class A 1,900 123
McGraw Hill Cos., Inc. 3,400 228
Media General, Inc. 1,500 99
@ Meredith Corp. 6,500 315
o(2) PanAmSat Corp. 17,082 354
Readers Digest Association, Inc. 13,600 200
Tribune Co. 2,200 108
------------
2,122
MISCELLANEOUS 1.2%
--------------------------------------------------------------------------
@ 3M Co. 4,200 331
o SpectraSite, Inc. 5,200 202
------------
533
MISCELLANEOUS FINANCE 7.3%
--------------------------------------------------------------------------
o Affiliated Managers Group, Inc. 4,400 319
@ The Bear Stearns Cos., Inc. 3,700 282
Citigroup, Inc. 600 28
Countrywide Credit Industries, Inc. 3,000 315
o E*TRADE Group, Inc. 20,000 206
@ Fannie Mae 4,100 294
GreenPoint Financial Corp. 8,100 252
Independence Community Bank
Corp. 7,964 293
IndyMac Bankcorp., Inc. 6,000 176
@ Legg Mason, Inc. 4,000 333
Lehman Brothers Holdings, Inc. 4,000 288
MBNA Corp. 3,500 87
Morgan Stanley 600 33
@ Nuveen Investments, Inc. 2,100 59
SLM Corp. 6,600 259
o WFS Financial, Inc. 200 9
------------
3,233
NON-DURABLES & ENTERTAINMENT 4.2%
--------------------------------------------------------------------------
o American Greetings Corp.,
Class A 11,000 235
@o Energizer Holdings, Inc. 8,400 309
@ Fortune Brands, Inc. 5,000 326
Hasbro, Inc. 15,200 331
o Marvel Enterprises, Inc. 700 21
o The Yankee Candle Co. 10,600 296
o Yum! Brands, Inc. 9,700 331
------------
1,849
See financial notes. 55
SCHWAB HEDGED EQUITY FUND(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OIL: DOMESTIC 1.4%
--------------------------------------------------------------------------
Kerr-McGee Corp. 6,900 286
o Newfield Exploration Co. 7,400 294
Pogo Producing Co. 800 34
------------
614
OPTICAL & PHOTO 1.1%
--------------------------------------------------------------------------
@ Eastman Kodak Co. 9,600 235
o Ingram Micro, Inc., Class A 16,100 238
------------
473
PAPER & FOREST PRODUCTS 0.6%
--------------------------------------------------------------------------
@ International Paper Co. 1,200 47
o Packaging Corp. of America 10,100 199
------------
246
PRODUCER GOODS & MANUFACTURING 4.0%
--------------------------------------------------------------------------
Briggs & Stratton Corp. 5,100 332
(3) Deere & Co. 5,700 345
@o Fisher Scientific International, Inc. 7,200 290
Graco, Inc. 5,800 221
Harsco Corp. 4,400 169
Herman Miller, Inc. 9,500 218
Hon Industries, Inc. 4,900 201
------------
1,776
RETAIL 5.8%
--------------------------------------------------------------------------
o Barnes & Noble, Inc. 11,100 331
Borders Group, Inc. 13,000 294
Claire's Stores, Inc. 3,800 147
Dollar General Corp. 14,000 315
@o Federated Department Stores, Inc. 6,100 290
The Gap, Inc. 16,000 305
The Neiman-Marcus Group, Inc.,
Class A 6,000 285
o Rite Aid Corp. 2,100 12
o Saks, Inc. 20,000 278
o Staples, Inc. 300 8
Tandy Corp. 10,000 300
------------
2,565
TELEPHONE 5.5%
--------------------------------------------------------------------------
Alltel Corp. 900 43
@o Amdocs Ltd. 12,600 270
AT&T Corp. 3,100 58
AT&T Wireless Group 20,000 145
Avaya, Inc. 5,200 67
BellSouth Corp. 11,200 295
Century Telephone Enterprises,
Inc. 8,400 300
o Commonwealth Telephone Enterprises,
Inc. 5,180 211
o Crown Castle International Corp. 20,000 253
SBC Communications, Inc. 7,600 182
@ Sprint Corp. 20,000 320
o Time Warner Telecom, Inc.,
Class A 19,986 207
Verizon Communications, Inc. 2,200 74
------------
2,425
TRAVEL & RECREATION 2.7%
--------------------------------------------------------------------------
Brunswick Corp. 10,500 311
o Harrah's Entertainment, Inc. 7,100 309
Mariott International, Inc., Class A 6,500 281
@o MGM Mirage 8,400 298
------------
1,199
TRUCKING & FREIGHT 1.4%
--------------------------------------------------------------------------
o CNF, Inc. 8,400 294
Landstar System, Inc. 4,399 321
------------
615
UTILITIES: ELECTRIC & GAS 4.4%
--------------------------------------------------------------------------
Constellation Energy Group, Inc. 8,700 316
o Edison International 15,800 311
Energy East Corp. 6,600 148
@ Exelon Corp. 4,500 286
Great Plains Energy, Inc. 10,000 319
Kinder Morgan, Inc. 1,400 75
Questar Corp. 6,800 216
UGI Corp. 8,250 254
------------
1,925
56 See financial notes.
SCHWAB HEDGED EQUITY FUND(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
SHORT-TERM INVESTMENT 0.9% of net assets
Provident Institutional Funds-
TempFund 392,593 393
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
SHORT SALES 26.3% of net assets
AEROSPACE / DEFENSE 0.4%
--------------------------------------------------------------------------
The Boeing Co. 4,100 158
AIR TRANSPORTATION 0.3%
--------------------------------------------------------------------------
JetBlue Airways Corp. 2,192 126
ALCOHOLIC BEVERAGES 0.4%
--------------------------------------------------------------------------
Brown-Forman Corp. 600 51
Constellation Brands, Inc.,
Class A 3,200 100
------------
151
AUTOMOBILE PRODUCTS / MOTOR VEHICLES 1.7%
--------------------------------------------------------------------------
Genuine Parts Co. 2,000 64
Goodyear Tire & Rubber Co. 16,400 112
Navistar International Corp. 3,700 149
O'Reilly Automotive, Inc. 2,257 98
(5) Superior Industries International,
Inc. 6,300 268
United Auto Group, Inc. 2,900 75
------------
766
BANKS 0.7%
--------------------------------------------------------------------------
Greater Bay Bancorp. 4,352 117
Southwest Bancorp of Texas, Inc. 5,313 191
------------
308
BUSINESS MACHINES & SOFTWARE 0.4%
--------------------------------------------------------------------------
Comverse Technology, Inc. 9,000 162
Icon Office Solutions, Inc. 800 7
Juniper Networks, Inc. 1,200 22
------------
191
BUSINESS SERVICES 2.3%
--------------------------------------------------------------------------
Bearingpoint, Inc. 20,000 188
Brocade Communications Systems,
Inc. 900 6
FTI Consulting, Inc. 600 12
Interpublic Group of Cos., Inc. 7,100 106
Mercury Interactive Corp. 4,100 190
National Instruments Corp. 3,500 149
Netscreen Technologies, Inc. 6,320 168
PeopleSoft, Inc. 1,800 37
Performance Food Group Co. 3,999 149
Sylvan Learning Systems, Inc. 100 3
------------
1,008
CHEMICAL 1.0%
--------------------------------------------------------------------------
Celgene Corp. 1,000 42
Great Lakes Chemical Corp. 10,800 232
Lyondell Petrochemical Co. 10,300 147
------------
421
CONSTRUCTION 0.1%
--------------------------------------------------------------------------
Beazer Homes USA, Inc. 500 50
The Stanley Works 100 3
------------
53
CONSUMER DURABLES 0.5%
--------------------------------------------------------------------------
Newell Rubbermaid, Inc. 10,200 233
CONTAINERS 0.0%
--------------------------------------------------------------------------
Owens - Illinois, Inc. 1,000 12
ELECTRONICS 1.2%
--------------------------------------------------------------------------
Advanced Fibre Communications,
Inc. 2,400 58
Advanced Micro Devices, Inc. 1,400 21
See financial notes. 57
SCHWAB HEDGED EQUITY FUND(TM)
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Nvidia Corp. 7,900 140
OmniVision Technologies, Inc. 300 17
Power Intergrations, Inc. 2,100 73
Skyworks Solutions, Inc. 5,600 48
Western Digital Corp. 11,300 152
-----------
509
ENERGY: RAW MATERIALS 1.0%
--------------------------------------------------------------------------
Evergreen Resources, Inc. 1,600 44
Grant Prideco, Inc. 300 4
Helmerich & Payne, Inc. 4,900 130
Key Energy Group, Inc. 4,500 39
Noble Drilling Corp. 1,000 34
Rowan Cos., Inc. 1,100 26
Tidewater, Inc. 5,600 154
-----------
431
FOOD & AGRICULTURE 1.2%
--------------------------------------------------------------------------
Del Monte Foods Co. 6,800 65
Sara Lee Corp. 200 4
(4) Scotts Co., Class A 4,800 277
Sensient Technologies Corp. 9,800 188
-----------
534
HEALTHCARE / DRUGS & MEDICINE 3.2%
--------------------------------------------------------------------------
Alkermes, Inc. 13,696 178
Amgen, Inc. 100 6
Amylin Pharmaceuticals, Inc. 500 14
Applied Biosystems Group 11,000 254
Baxter International, Inc. 7,000 186
Cymer, Inc. 4,600 210
Diagnostic Products Corp. 800 33
Eli Lilly & Co. 1,300 87
HCA, Inc. 4,000 153
IDEC Pharmaceutical Corp. 4,400 154
Pharmaceutical Resources, Inc. 500 36
Protein Design Labs, Inc. 2,309 31
Schering-Plough Corp. 4,000 61
-----------
1,403
HOUSEHOLD PRODUCTS 0.1%
--------------------------------------------------------------------------
Alberto Culver Co., Class B 400 25
INSURANCE 1.0%
--------------------------------------------------------------------------
American National Insurance Co. 300 25
The Commerce Group ,Inc. 300 12
Erie Indemnity Co. 1,400 56
Hilb, Rogal & Hamilton Co. 400 12
Jefferson-Pilot Corp. 200 10
MGIC Investment Corp. 4,600 236
St. Paul Cos., Inc. 2,000 76
UnumProvident Corp. 700 11
-----------
438
MEDIA 0.7%
--------------------------------------------------------------------------
Cablevision Systems New York Group,
Class A 6,500 131
Entravision Communications
Corp. 3,400 33
Scholastic Corp. 2,696 83
Valassis Communications, Inc. 1,600 42
-----------
289
MISCELLANEOUS FINANCE 1.3%
--------------------------------------------------------------------------
Americredit Co. 4,500 60
(3) Astoria Financial Corp. 8,100 281
Janus Capital Group, Inc. 1,300 18
Leucadia National Corp. 100 4
MAF Bancorp, Inc. 4,498 189
Staten Island Bancorp, Inc. 100 2
Waddell & Reed Financial, Inc. 500 11
-----------
565
NON-DURABLES & ENTERTAINMENT 0.5%
--------------------------------------------------------------------------
The Cheesecake Factory, Inc. 2,000 80
Krispy Kreme Doughnuts, Inc. 1,900 82
Ruby Tuesday, Inc. 2,800 77
-----------
239
58 See financial notes.
SCHWAB HEDGED EQUITY FUND(TM)
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
OIL: DOMESTIC 1.3%
--------------------------------------------------------------------------
Ashland Oil, Inc. 5,000 186
Murphy Oil Corp. 3,000 177
National Oilwell, Inc. 800 15
Premcor, Inc. 5,400 128
Spinnaker Exploration Co. 3,100 79
------------
585
PAPER & FOREST PRODUCTS 0.0%
--------------------------------------------------------------------------
Smurfit-Stone Container Corp. 100 2
PRODUCER GOODS & MANUFACTURING 1.5%
--------------------------------------------------------------------------
AGCO Corp. 3,800 68
Avery Dennison Corp. 2,700 142
Fastenal Co. 4,992 222
Grainger, Inc. 1,900 87
Pentair, Inc. 100 4
Teleflex, Inc. 3,100 143
Timken Co. 400 7
------------
673
RAILROAD & SHIPPING 0.4%
--------------------------------------------------------------------------
CSX Corp. 3,900 124
Norfolk Southern Corp. 1,900 38
------------
162
RETAIL 1.5%
--------------------------------------------------------------------------
(2) 99 Cents Only Stores 9,600 286
Carmax, Inc. 2,400 76
Fred's, Inc. 200 8
Kohls Corp. 900 50
Pier 1 Imports, Inc. 2,200 51
Target Corp. 500 20
Whole Foods Market, Inc. 2,500 148
Winn Dixie Stores, Inc. 800 6
------------
645
TELEPHONE 0.0%
--------------------------------------------------------------------------
Sonus Networks, Inc. 300 3
Telephone & Data Systems, Inc. 100 6
United States Cellular Corp. 300 10
------------
19
TOBACCO 0.3%
--------------------------------------------------------------------------
UST, Inc. 4,200 143
TRAVEL & RECREATION 1.2%
--------------------------------------------------------------------------
Carnival Corp. 6,400 224
(1) Mandalay Resort Group 7,600 298
------------
522
UTILITIES: ELECTRIC & GAS 2.1%
--------------------------------------------------------------------------
Allegheny Power System, Inc. 8,400 89
Consolidated Edison, Inc. 1,500 61
El Paso Energy Corp. 6,300 46
Equitable Resources, Inc. 3,900 161
Northeast Utilities 300 5
Piedmont Natural Gas Co., Inc. 600 24
Pinnacle West Capital Co. 3,500 128
Public Service Enterprise Group,
Inc. 2,100 86
Scana Corp. 4,100 140
Teco Energy, Inc. 9,300 122
Texas Genco Holding, Inc. 1,300 39
TXU Corp. 1,100 25
------------
926
END OF SHORT SALE POSITIONS. For totals, please see the first page of holdings
for this fund.
See financial notes. 59
SCHWAB HEDGED EQUITY FUND(TM)
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- --------------------------------------------------------------------------------
Investments, at market value $45,894 a
Deposits with broker for short sales 9,185
Receivables:
Fund shares sold 500
Interest 5
Dividends 32
Prepaid expenses + 12
-----------
TOTAL ASSETS 55,628
LIABILITIES
- --------------------------------------------------------------------------------
Securities sold short, at market value 11,537 b
Payables:
Dividends on short sales 4
Fund shares redeemed 68
Investment adviser and administrator fees 3
Transfer agent and shareholder service fees 1
Accrued expenses + 47
-----------
TOTAL LIABILITIES 11,660
NET ASSETS
- --------------------------------------------------------------------------------
TOTAL ASSETS 55,628
TOTAL LIABILITIES - 11,660
-----------
NET ASSETS $43,968
NET ASSETS BY SOURCE
Capital received from investors 37,821
Net realized capital losses (385) c
Net unrealized capital gains 6,532 c
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$43,968 3,815 $11.53
Unless stated, all numbers x 1,000.
a The fund paid $38,655 for these securities. Not counting short-term
obligations and government securities, the fund paid $47,778 for securities
during the report period and received $42,802 from securities it sold or that
matured.
b The proceeds for securities sold short is $10,830.
c These derive from investments and short sales.
FEDERAL TAX DATA
- ---------------------------------------------------
PORTFOLIO COST $38,781
NET UNREALIZED GAINS AND LOSSES:
Gains $7,503
Losses + (390)
-----------
$7,113
UNDISTRIBUTED EARNINGS:
Ordinary income $--
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount:
2010 $46
2011 + 214
-----------
$260
RECLASSIFICATIONS:
Net investment income not yet
distributed $338
Reclassified as:
Capital received from investors ($338)
60 See financial notes.
SCHWAB HEDGED EQUITY FUND(TM)
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends $488
Interest + 62
----------
TOTAL INVESTMENT INCOME 550
NET REALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net realized losses on short sales (1,725)
Net realized gains on investments sold 1,490
----------
NET REALIZED LOSSES (235)
NET UNREALIZED GAINS AND LOSSES
- --------------------------------------------------------------------------------
Net unrealized gains on investments 7,974
Net unrealized losses on short sales + (1,271)
----------
NET UNREALIZED GAINS 6,703
EXPENSES
- --------------------------------------------------------------------------------
Investment adviser and administrator fees 656 a
Transfer agent and shareholder service fees 94 b
Trustees' fees 5 c
Custodian and portfolio accounting fees 61
Professional fees 39
Registration fees 11
Shareholder reports 30
Other expenses + 4
----------
Total expenses before short sales 900
Dividends on short sales 138
Expense reduction + (150) d
----------
NET EXPENSES 888
INCREASE IN NET ASSETS FROM OPERATIONS
- --------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 550
NET EXPENSES - 888
----------
NET INVESTMENT LOSS (338)
NET REALIZED LOSSES (235) e
NET UNREALIZED GAINS + 6,703 e
----------
INCREASE IN NET ASSETS FROM OPERATIONS $6,130
Unless stated, all numbers x 1,000.
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. These fees are paid to Charles Schwab & Co.
c For the fund's independent trustees only.
d This reduction was made by the investment adviser (CSIM). It reflects a
guarantee by CSIM and the transfer agent and shareholder service agent
(Schwab) to limit the operating expenses of this fund through February 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 $6,468.
See financial notes. 61
SCHWAB HEDGED EQUITY FUND(TM)
Statement of
CHANGES IN NET ASSETS
For the current and prior report period. All numbers x 1,000.
OPERATIONS
- ---------------------------------------------------------------------------------
11/1/02-10/31/03 9/3/02*-10/31/02
Net investment loss ($338) ($35)
Net realized losses (235) (150)
Net unrealized gains or losses + 6,703 (171)
--------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS $6,130 ($356)
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/02-10/31/03 9/3/02-10/31/02
SHARES VALUE SHARES VALUE
Shares sold 1,672 $17,074 3,397 $33,733
Shares redeemed + (1,153) (11,663) (101) (950) a
--------------------------------------------
NET TRANSACTIONS IN FUND
SHARES 519 $ 5,411 3,296 $32,783
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 9/3/02-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 3,296 $32,427 -- $--
Total increase + 519 11,541 3,296 32,427 b
-------------------------------------------
END OF PERIOD 3,815 $43,968 3,296 $32,427 c
Unless stated, all numbers x 1,000.
a The fund charges 1.50% of early withdrawal fees on shares redeemed 180 days or
less after the purchase:
CURRENT PERIOD $42
PRIOR PERIOD $14
Dollar amounts are net of the redemption proceeds.
b Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
c There is no distributable net investment income at the end of the current and
prior period.
* Commencement of operations.
62 See financial notes.
COMMUNICATIONS FOCUS FUND
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 7/3/00 1-
10/31/03 10/31/02 10/31/01 10/31/00
- ----------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------------
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 0.02 0.03 (0.00) 2 0.00 2
Net realized and unrealized gains or losses 0.74 (1.35) (3.97) (1.87)
---------------------------------------------------------
Total income or loss from investment operations 0.76 (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 3.57 2.84 4.16 8.13
---------------------------------------------------------
Total return (%) 26.87 (31.73) (48.82) (18.70) 3
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.03 4 0.89 0.89 5 0.89 6
Gross operating expenses 1.77 1.68 1.30 1.71 6
Net investment income or loss 0.45 0.69 (0.02) 0.07 6
Portfolio turnover rate 179 94 154 45 3
Net assets, end of period ($ x 1,000,000) 11 9 16 32
1 Commencement of operations.
2 Per-share amount was less than $0.01.
3 Not annualized.
4 The ratio of net operating expenses would have been 1.04% if certain
non-routine expenses (interest expense) had been included.
5 The ratio of net operating expenses would have been 0.90% if certain
non-routine expenses (interest expense) had been included.
6 Annualized.
See financial notes. 63
COMMUNICATIONS FOCUS FUND
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification and their market value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
COST MARKET VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- -------------------------------------------------------------------------------
100.0% COMMON STOCK 10,466 11,084
0.2% SHORT-TERM
INVESTMENT 16 16
- -------------------------------------------------------------------------------
100.2% TOTAL INVESTMENTS 10,482 11,100
7.5% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 831 831
(7.7)% OTHER ASSETS AND
LIABILITIES, NET (849)
- -------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 11,082
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 100.0% of net assets
BUSINESS MACHINES & SOFTWARE 3.1%
--------------------------------------------------------------------------
o PTEK Holdings, Inc. 40,000 348
BUSINESS SERVICES 3.1%
--------------------------------------------------------------------------
o Aether Systems, Inc. 71,000 341
CONSTRUCTION 3.5%
--------------------------------------------------------------------------
o(6) SBA Communications Corp. 96,500 392
ELECTRONICS 3.1%
--------------------------------------------------------------------------
o Hungarian Telephone & Cable 34,900 339
MEDIA 7.3%
--------------------------------------------------------------------------
o EchoStar Communications Corp.,
Class A 9,300 356
o(1) PanAmSat Corp. 22,100 458
-------
814
TELEPHONE 79.9%
--------------------------------------------------------------------------
Alltel Corp. 7,300 345
(9) AT&T Corp. 20,500 381
o AT&T Wireless Services, Inc. 50,734 368
(4) BellSouth Corp. 15,937 419
CenturyTel, Inc. 9,600 343
o(10) Cincinnati Bell, Inc. 74,300 380
o Citizens Communications Co. 28,600 356
o Commonwealth Telephone
Enterprises, Inc. 8,100 330
o(3) Crown Castle International Corp. 33,800 428
CT Communications, Inc. 24,900 346
o Dobson Communications Corp.,
Class A 42,300 367
o(7) General Communication, Inc.,
Class A 39,000 385
Hickory Tech Corp. 30,900 369
o(5) Nextel Communications, Inc.,
Class A 16,900 409
North Pittsburgh Systems, Inc. 20,300 373
o Price Communications Corp. 24,100 303
o(2) Primus Telecommunications
Group, Inc. 49,400 456
SBC Communications, Inc. 14,404 345
Sprint Corp. (FON Group) 23,300 373
o Sprint Corp. (PCS Group) 73,600 320
o Talk America Holdings, Inc. 28,700 358
o(8) Time Warner Telecom, Inc.,
Class A 37,000 383
o US LEC Corp., Class A 69,000 364
Verizon Communications, Inc. 10,382 349
-------
8,850
64 See financial notes.
COMMUNICATIONS FOCUS FUND
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENT
0.2% of net assets
Brown Brothers Harriman,
Grand Cayman Time Deposit
0.50%, 11/01/03 16 16
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COLLATERAL INVESTED FOR SECURITIES ON LOAN
7.5% of net assets
OTHER INVESTMENT COMPANIES
- --------------------------------------------------------------------------------
Securities Lending Investment
Fund 830,650 831
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN. For totals, please see the
first page of holdings for this fund.
See financial notes. 65
COMMUNICATIONS FOCUS FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- ------------------------------------------------------------------------------
Investments, at market value
(including $782 of securities on loan) $11,100 a
Collateral held for securities on loan 831
Receivables:
Dividends 15
Reimbursement from adviser 4
Prepaid expenses + 5
-----------
TOTAL ASSETS 11,955
LIABILITIES
- ------------------------------------------------------------------------------
Collateral held for securities on loan 831
Payables:
Fund shares redeemed 13
Accrued expenses + 29
-----------
TOTAL LIABILITIES 873
NET ASSETS
- ------------------------------------------------------------------------------
TOTAL ASSETS 11,955
TOTAL LIABILITIES - 873
-----------
NET ASSETS $11,082
NET ASSETS BY SOURCE
Capital received from investors 37,051
Net investment income not yet distributed 43
Net realized capital losses (26,630)
Net unrealized capital gains 618
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$11,082 3,103 $3.57
Unless stated, all numbers x 1,000.
a The fund paid $10,482 for these securities. Not counting short-term
obligations and government securities, the fund paid $17,697 for securities
during the report period and received $18,215 from securities it sold or that
matured.
FEDERAL TAX DATA
- ----------------------------------------------------
PORTFOLIO COST $10,814
NET UNREALIZED GAINS AND LOSSES:
Gains $1,264
Losses + (978)
------------
$286
UNDISTRIBUTED EARNINGS:
Ordinary income $43
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2008 $1,226
2009 13,397
2010 8,364
2011 + 3,311
------------
$26,298
66 See financial notes.
COMMUNICATIONS FOCUS FUND
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- ------------------------------------------------------------------------------
Dividends $146 a
Interest + 1
----------
TOTAL INVESTMENT INCOME 147
NET REALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net realized losses on investments sold (2,109)
NET UNREALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net unrealized gains on investments 4,443
EXPENSES
- ------------------------------------------------------------------------------
Investment adviser and administrator fees 54 b
Transfer agent and shareholder service fees 25 c
Trustees' fees 4 d
Custodian fees 36
Portfolio accounting fees 1
Professional fees 26
Registration fees 10
Shareholder reports 19
Other expenses + 1
----------
Total expenses 176
Expense reduction - 73 e
----------
NET EXPENSES 103
INCREASE IN NET ASSETS FROM OPERATIONS
- ------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 147
NET EXPENSES - 103
----------
NET INVESTMENT INCOME 44
NET REALIZED LOSSES (2,109) f
NET UNREALIZED GAINS + 4,443 f
----------
INCREASE IN NET ASSETS FROM OPERATIONS $2,378
Unless stated, all numbers x 1,000.
a An additional $4 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. These fees are paid to Charles Schwab & Co.
d For the fund's independent trustees only.
e Includes $53 from the investment adviser (CSIM) and $12 from the transfer
agent and shareholder service agent (Schwab). In addition, the total expenses
reimbursed by the investment adviser was $8. These reductions reflect a
guarantee by CSIM and Schwab to limit the operating expenses of this fund
through February 28, 2005, to 1.10% of average daily net assets. 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 $2,334.
See financial notes. 67
COMMUNICATIONS FOCUS FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- ----------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income $44 $86
Net realized losses (2,109) (6,355)
Net unrealized gains + 4,443 1,679
------------------ --------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 2,378 (4,590)
DISTRIBUTIONS PAID
- ----------------------------------------------------------------------------
Dividends from net investment income $87 $-- a, b
TRANSACTIONS IN FUND SHARES
- ----------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
Shares sold 825 $2,570 655 $2,313
Shares reinvested 27 78 -- --
Shares redeemed + (1,019) (3,138) (1,190) (4,283) c
---------------------------------------------------
NET TRANSACTIONS
IN FUND SHARES (167) ($490) (535) ($1,970)
SHARES OUTSTANDING AND NET ASSETS
- ----------------------------------------------------------------------------
11/1/02-10/31/03 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 + (167) 1,801 (535) (6,560) d
---------------------------------------------------
END OF PERIOD 3,103 $11,082 3,270 $9,281 e
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
b The tax-basis components of distributions paid are:
CURRENT PERIOD:
Ordinary Income $87
Long-term capital gains $--
PRIOR PERIOD:
Ordinary Income $--
Long-term capital gains $--
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase:
CURRENT PERIOD $6
PRIOR PERIOD $4
Dollar amounts are net of the redemption proceeds.
d Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
e Includes distributable net investment income in the amount of $43 and $86 at
the end of the current period and prior period, respectively.
68 See financial notes.
FINANCIAL SERVICES FOCUS FUND
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 7/3/00 1-
10/31/03 10/31/02 10/31/01 10/31/00
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 9.44 9.75 11.86 10.00
-----------------------------------------------------------------------------
Income or loss from investment operations:
Net investment income 0.11 0.12 0.09 0.04
Net realized and unrealized gains or losses 2.37 (0.28) (1.76) 1.82
-----------------------------------------------------------------------------
Total income or loss from investment operations 2.48 (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 11.77 9.44 9.75 11.86
-----------------------------------------------------------------------------
Total return (%) 26.68 (1.78) (14.51) 18.60 2
RATIOS/SUPPLEMENTAL DATA (%)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.03 3 0.89 0.89 0.89 4
Gross operating expenses 1.49 1.32 1.23 1.99 4
Net investment income 1.05 1.20 0.75 1.04 4
Portfolio turnover rate 181 131 151 40 2
Net assets, end of period ($ x 1,000,000) 18 17 21 24
1 Commencement of operations.
2 Not annualized.
3 The ratio of net operating expenses would have been 1.04% if certain
non-routine expenses (interest expense) had been included.
4 Annualized.
See financial notes. 69
FINANCIAL SERVICES FOCUS FUND
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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 ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
100.1% COMMON STOCK 16,183 18,472
- --------------------------------------------------------------------------------
100.1% TOTAL INVESTMENTS 16,183 18,472
1.4% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 249 249
(1.5)% OTHER ASSETS AND LIABILITIES, NET (271)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 18,450
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 100.1% of net assets
BANKS 32.8%
---------------------------------------------------------------------------
Anchor Bancorp Wisconsin, Inc. 14,000 349
Associated Banc-Corp. 9,000 370
BancFirst Corp. 2,500 135
Bancorpsouth, Inc. 16,000 376
Bank of America Corp. 4,480 339
(5) Bank of Hawaii Corp. 10,100 398
(4) City National Corp. 6,700 403
Doral Financial Corp. 7,400 374
First Bancorp Puerto Rico 11,200 373
First Community Bancshares,
Inc. Virginia 4,400 156
o FirstFed Financial Corp. 8,400 378
National City Corp. 11,700 382
OceanFirst Financial Corp. 11,200 293
(8) Popular, Inc. 8,800 396
Second Bancorp., Inc. 8,000 222
UnionBanCal Corp. 6,900 374
Wachovia Corp. 8,000 367
Zions Bancorp. 6,000 368
----------
6,053
BUSINESS MACHINES & SOFTWARE 2.0%
---------------------------------------------------------------------------
Landamerica Financial Group, Inc. 7,500 375
INSURANCE 29.7%
---------------------------------------------------------------------------
Aetna, Inc. 5,700 326
AFLAC, Inc. 10,500 383
AMBAC Financial Group, Inc. 5,000 354
Delphi Financial Group, Inc.,
Class A 7,000 353
Fidelity National Financial, Inc. 12,000 371
First American Corp. 13,100 375
(10) Metlife, Inc. 12,200 383
Odyssey Re Holdings Corp. 17,500 367
Old Republic International Corp. 10,000 360
Principal Financial Group, Inc. 11,800 370
The Progressive Corp. 4,800 354
Reinsurance Group of America, Inc. 8,500 340
(7) Safeco Corp. 10,800 396
Stancorp Financial Group, Inc. 5,900 372
o Stewart Information Services Corp. 11,900 371
----------
5,475
MISCELLANEOUS FINANCE 34.9%
---------------------------------------------------------------------------
o Affiliated Managers Group, Inc. 5,200 377
Berkshire Hills Bancorp, Inc. 3,000 108
o(3) Capital Corp. of the West 10,800 414
(9) Cash America International, Inc. 20,200 386
Citigroup, Inc. 7,375 350
o CompuCredit Corp. 18,700 370
(1) Countrywide Financial Corp. 4,300 452
o Delta Financial Corp. 25,000 189
o E*TRADE Group, Inc. 34,200 352
Fannie Mae 5,120 367
First Financial Holdings, Inc. 3,000 90
70 See financial notes.
FINANCIAL SERVICES FOCUS FUND
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
Franklin Resources, Inc. 7,600 360
GreenPoint Financial Corp. 12,250 382
Independence Community Bank Corp. 9,800 360
(6) IndyMac Bancorp, Inc. 13,500 397
Lehman Brothers Holdings, Inc. 4,900 353
MBNA Corp. 14,390 356
Nuveen Investments, Inc., Class A 12,700 356
o(2) WFS Financial, Inc. 9,500 414
----------
6,433
REAL PROPERTY 0.7%
---------------------------------------------------------------------------
o Trammell Crow Co. 10,000 136
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COLLATERAL INVESTED FOR SECURITIES ON LOAN
1.4% of net assets
OTHER INVESTMENT COMPANIES
---------------------------------------------------------------------------
Securities Lending Investment Fund 248,710 249
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN. For totals, please see the
first page of holdings for this fund.
See financial notes. 71
FINANCIAL SERVICES FOCUS FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- ------------------------------------------------------------------------------
Investments, at market value
(including $237 of securities on loan) $18,472 a
Collateral held for securities on loan 249
Receivables:
Fund shares sold 35
Dividends 18
Prepaid expenses + 5
-------------
TOTAL ASSETS 18,779
LIABILITIES
- ------------------------------------------------------------------------------
Collateral held for securities on loan 249
Cash overdraft 40
Payables:
Fund shares redeemed 8
Accrued expenses + 32
-------------
TOTAL LIABILITIES 329
NET ASSETS
- ------------------------------------------------------------------------------
TOTAL ASSETS 18,779
TOTAL LIABILITIES - 329
-------------
NET ASSETS $18,450
NET ASSETS BY SOURCE
Capital received from investors 16,958
Net investment income not yet distributed 119
Net realized capital losses (916)
Net unrealized capital gains 2,289
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$18,450 1,567 $11.77
Unless stated, all numbers x 1,000.
a The fund paid $16,183 for these securities. Not counting short-term
obligations and government securities, the fund paid $30,081 for securities
during the report period and received $32,579 from securities it sold or that
matured.
FEDERAL TAX DATA
- -----------------------------------------------------
PORTFOLIO COST 16,188
NET UNREALIZED GAINS AND LOSSES:
Gains $2,410
Losses + (126)
---------------
$2,284
UNDISTRIBUTED EARNINGS:
Ordinary income $119
Long-term capital gains $--
CAPITAL LOSSES UTILIZED $37
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2010 $911
72 See financial notes.
FINANCIAL SERVICES FOCUS FUND
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- -------------------------------------------------------------------------------
Dividends $347
Securities on loan + 1
------------
TOTAL INVESTMENT INCOME 348
NET REALIZED GAINS AND LOSSES
- -------------------------------------------------------------------------------
Net realized gains on investments sold 326
NET UNREALIZED GAINS AND LOSSES
- -------------------------------------------------------------------------------
Net unrealized gains on investments 3,471
EXPENSES
- -------------------------------------------------------------------------------
Investment adviser and administrator fees 90 a
Transfer agent and shareholder service fees 42 b
Trustees' fees 4 c
Custodian fees 52
Portfolio accounting fees 3
Professional fees 25
Registration fees 12
Shareholder reports 16
Other expenses + 3
------------
Total expenses 247
Expense reduction - 75 d
------------
NET EXPENSES 172
INCREASE IN NET ASSETS FROM OPERATIONS
- -------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 348
NET EXPENSES - 172
------------
NET INVESTMENT INCOME 176
NET REALIZED GAINS 326 e
NET UNREALIZED GAINS + 3,471 e
------------
INCREASE IN NET ASSETS FROM OPERATIONS $3,973
Unless stated, all numbers x 1,000.
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. These fees are paid to Charles Schwab & Co.
c For the fund's independent trustees only.
d Includes $69 from the investment adviser (CSIM) and $5 from the transfer agent
and shareholder service agent (Schwab). In addition, the total expenses
reimbursed by the investment adviser was $1. These reductions reflect a
guarantee by CSIM and Schwab to limit the operating expenses of this fund
through February 28, 2005, to 1.10% of average daily net assets. 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 $3,797.
See financial notes. 73
FINANCIAL SERVICES FOCUS FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- ------------------------------------------------------------------------------
11/1/02-10/31/02 11/1/01-10/31/03
Net investment income $176 $251
Net realized gains or losses 326 (668)
Net unrealized gains + 3,471 224
-------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 3,973 (193)
DISTRIBUTIONS PAID
- ------------------------------------------------------------------------------
Dividends from net investment income 260 193 a
Distributions from net realized gains + -- 123
-------------------------------------
TOTAL DISTRIBUTIONS PAID $260 $316 b
TRANSACTIONS IN FUND SHARES
- ------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
Shares sold 231 $2,407 237 $2,445
Shares reinvested 25 236 29 290
Shares redeemed + (509) (5,079) (633) (6,384) c
----------------------------------------------
NET TRANSACTIONS
IN FUND SHARES (253) ($2,436) (367) ($3,649)
SHARES OUTSTANDING AND NET ASSETS
- ------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 1,820 $17,173 2,187 $21,331
Total increase or decrease + (253) 1,277 (367) (4,158) d
----------------------------------------------
END OF PERIOD 1,567 $18,450 1,820 $17,173 e
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
b The tax-basis components of distributions paid are:
CURRENT PERIOD:
Ordinary income $260
Long-term capital gains $--
PRIOR PERIOD:
Ordinary income $316
Long-term capital gains $--
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase:
CURRENT PERIOD $4
PRIOR PERIOD $4
Dollar amounts are net of the redemption proceeds.
d Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
e Includes distributable net investment income in the amount of $119 and $203 at
the end of the current period and prior period, respectively.
74 See financial notes.
HEALTH CARE FOCUS FUND
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 7/3/00 1-
10/31/03 10/31/02 10/31/01 10/31/00
PER-SHARE DATA ($)
- -----------------------------------------------------------------------------------------------------------------------------------
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 0.01 0.03 0.00 2 (0.00) 2
Net realized and unrealized gains or losses 1.33 (1.90) (1.10) 0.27
---------------------------------------------------------------------------
Total income or loss from investment operations 1.34 (1.87) (1.10) 0.27
Less distributions:
Dividends from net investment income (0.03) (0.01) (0.00) 2 --
Distributions from net realized gains -- -- (0.17) --
---------------------------------------------------------------------------
Total distributions (0.03) (0.01) (0.17) --
---------------------------------------------------------------------------
Net asset value at end of period 8.43 7.12 9.00 10.27
---------------------------------------------------------------------------
Total return (%) 18.96 (20.84) (10.94) 2.70 3
RATIOS/SUPPLEMENTAL DATA (%)
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.04 0.89 0.89 0.89 4
Gross operating expenses 1.34 1.18 1.17 2.04 4
Net investment income or loss 0.13 0.25 0.06 (0.02) 4
Portfolio turnover rate 200 99 92 41 3
Net assets, end of period ($ x 1,000,000) 25 21 32 28
1 Commencement of operations.
2 Per share amount was less than $0.01.
3 Not annualized.
4 Annualized.
See financial notes. 75
HEALTH CARE FOCUS FUND
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification and their market value, as of the report date.
We use the symbols below to designate certain characteristics. With the top ten
holdings, the number in the circle is the security's rank among the top ten.
(1) Top ten holding
o Non-income producing security
COST MARKET VALUE
HOLDINGS BY CATEGORY ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
100.1% COMMON STOCK 22,165 25,030
- --------------------------------------------------------------------------------
100.1% TOTAL INVESTMENTS 22,165 25,030
(0.1)% OTHER ASSETS AND
LIABILITIES, NET (26)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 25,004
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 100.1% of net assets
BUSINESS SERVICES 13.4%
--------------------------------------------------------------------------
o Genesis Health Ventures, Inc. 23,000 619
o Gentiva Health Services, Inc. 55,000 627
(6) IMS Health, Inc. 29,700 699
o Invitrogen Corp. 10,000 636
o(1) Ventiv Health, Inc. 92,900 780
------------
3,361
HEALTHCARE / DRUGS & MEDICINE 76.6%
--------------------------------------------------------------------------
o Anthem, Inc. 9,600 657
o Arqule, Inc. 115,000 598
Arrow International, Inc. 23,000 607
Bausch & Lomb, Inc. 12,500 602
(9) Becton Dickinson & Co. 18,300 669
CNS, Inc. 53,000 639
o Coventry Health Care, Inc. 11,600 635
o(7) Cytyc Corp. 54,000 698
o(5) DaVita, Inc. 20,200 709
o(4) DJ Orthopedics, Inc. 40,400 725
o Health Net, Inc. 19,400 613
o Henry Schein, Inc. 10,500 652
ICN Pharmaceuticals, Inc. 32,300 624
Johnson & Johnson 8,880 447
o Lincare Holdings, Inc. 15,700 611
o(2) Microtek Medical Holdings, Inc. 192,000 753
o Mid Atlantic Medical Services, Inc. 9,800 572
o MIM Corp. 83,000 489
Mylan Laboratories, Inc. 24,450 590
o Nutraceutical International Corp. 55,000 642
Owens & Minor, Inc. 30,500 620
o Oxford Health Plans, Inc. 14,700 595
o Pacificare Health Systems, Inc. 10,200 607
o Pediatrix Medical Group, Inc. 12,000 641
o PSS World Medical, Inc. 68,500 638
o Sierra Health Services, Inc. 27,300 636
o(8) Sybron Dental Specialties, Inc. 29,500 679
o Third Wave Technologies, Inc. 89,800 313
(3) UnitedHealth Group, Inc. 14,300 728
o Universal Health Services,
Class B 13,000 612
o WellPoint Health Networks, Inc. 6,200 551
------------
19,152
INSURANCE 2.3%
--------------------------------------------------------------------------
Aetna, Inc. 10,100 580
NON-DURABLES & ENTERTAINMENT 5.1%
--------------------------------------------------------------------------
o Service Corp. International 133,800 649
o Stewart Enterprises, Inc.,
Class A 153,000 624
------------
1,273
PRODUCER GOODS & MANUFACTURING 2.7%
--------------------------------------------------------------------------
o(10) Fisher Scientific International, Inc. 16,500 664
END OF INVESTMENTS. For totals, please see the first page of holdings for this
fund.
76 See financial notes.
HEALTH CARE FOCUS FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- ---------------------------------------------------------------------------------
Investments, at market value $25,030 a
Receivables:
Fund shares sold 6
Dividends 2
Investments sold 179
Prepaid expenses + 5
-------------
TOTAL ASSETS 25,222
LIABILITIES
- ---------------------------------------------------------------------------------
Cash overdraft 172
Payables:
Fund shares redeemed 16
Accrued expenses + 30
-------------
TOTAL LIABILITIES 218
NET ASSETS
- ---------------------------------------------------------------------------------
TOTAL ASSETS 25,222
TOTAL LIABILITIES - 218
-------------
NET ASSETS $25,004
NET ASSETS BY SOURCE
Capital received from investors 31,244
Net realized capital losses (9,105)
Net unrealized capital gains 2,865
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$25,004 2,967 $8.43
Unless stated, all numbers x 1,000.
a The fund paid $22,165 for these securities. Not counting short-term
obligations and government securities, the fund paid $44,025 for securities
during the report period and received $44,353 from securities it sold or that
matured.
FEDERAL TAX DATA
- ----------------------------------------------------
PORTFOLIO COST $22,175
NET UNREALIZED GAINS AND LOSSES:
Gains $3,366
Losses + (511)
------------
$2,855
UNDISTRIBUTED EARNINGS:
Ordinary income $--
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2009 $1,467
2010 3,990
2011 + 3,638
------------
$9,095
RECLASSIFICATIONS:
Net investment income
not yet distributed $6
Reclassified as:
Capital received from investors ($6)
See financial notes. 77
HEALTH CARE FOCUS FUND
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- ---------------------------------------------------------------------------------
Dividends $255
Interest 1
Securities on loan + 1
-------------
TOTAL INVESTMENT INCOME 257
NET REALIZED GAINS AND LOSSES
- ---------------------------------------------------------------------------------
Net realized losses on investments sold (2,899)
NET UNREALIZED GAINS AND LOSSES
- ---------------------------------------------------------------------------------
Net unrealized gains on investments 6,783
EXPENSES
- ---------------------------------------------------------------------------------
Investment adviser and administrator fees 119 a
Transfer agent and shareholder service fees 55 b
Trustees' fees 5 c
Custodian fees 39
Portfolio accounting fees 3
Professional fees 27
Registration fees 13
Shareholder reports 30
Other expenses + 3
-------------
Total expenses 294
Expense reduction - 66 d
-------------
NET EXPENSES 228
INCREASE IN NET ASSETS FROM OPERATIONS
- ---------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 257
NET EXPENSES - 228
-------------
NET INVESTMENT INCOME 29
NET REALIZED LOSSES (2,899) e
NET UNREALIZED GAINS + 6,783 e
-------------
INCREASE IN NET ASSETS FROM OPERATIONS $3,913
Unless stated, all numbers x 1,000.
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. These fees are paid to Charles Schwab & Co.
c For the fund's independent trustees only.
d Includes $64 from the investment adviser (CSIM) and $1 from the transfer agent
and shareholder service agent (Schwab). In addition, the total expense
reimbursed by the investment adviser was $1. It reflects a guarantee by CSIM
and the transfer agent and shareholder service agent (Schwab) to limit the
operating expenses of this fund through February 28, 2005, to 1.10% of average
daily net assets. 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 $3,884.
78 See financial notes.
HEALTH CARE FOCUS FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment income $29 $69
Net realized losses (2,899) (3,607)
Net unrealized gains or losses + 6,783 (3,051)
-------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS 3,913 (6,589)
DISTRIBUTIONS PAID
- --------------------------------------------------------------------------------
Dividends from net investment income $99 $19 a, b
TRANSACTIONS IN FUND SHARES
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
Shares sold 612 $4,654 640 $5,425
Shares reinvested 13 90 2 17
Shares redeemed + (672) (5,019) (1,184) (9,378) c
---------------------------------------------------
NET TRANSACTIONS
IN FUND SHARES (47) ($275) (542) ($3,936)
SHARES OUTSTANDING AND NET ASSETS
- --------------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES NET ASSETS SHARES NET ASSETS
Beginning of period 3,014 $21,465 3,556 $32,009
Total increase
or decrease + (47) 3,539 (542) (10,544) d
---------------------------------------------------
END OF PERIOD 2,967 $25,004 3,014 $21,465 e
Unless stated, all numbers x 1,000.
a UNAUDITED
For corporations, 100% of the fund's dividends for the report period qualify
for the dividends-received deduction.
b The tax-basis components of distributions paid are:
CURRENT PERIOD:
Ordinary Income $99
Long-term capital gains $--
PRIOR PERIOD:
Ordinary Income $19
Long-term capital gains $--
c The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase:
CURRENT PERIOD $5
PRIOR PERIOD $7
Dollar amounts are net of the redemption proceeds.
d Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
e Includes distributable net investment income in the amount of $-- and $64 at
the end of the current period and prior period, respectively.
See financial notes. 79
TECHNOLOGY FOCUS FUND
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
11/1/02- 11/1/01- 11/1/00- 7/3/00 1-
10/31/03 10/31/02 10/31/01 10/31/00
- ----------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period 2.90 3.86 8.52 10.00
---------------------------------------------------------------
Income or loss from investment operations:
Net investment loss (0.02) (0.02) (0.03) (0.02)
Net realized and unrealized gains or losses 1.44 (0.94) (4.63) (1.46)
---------------------------------------------------------------
Total income or loss from investment operations 1.42 (0.96) (4.66) (1.48)
---------------------------------------------------------------
Net asset value at end of period 4.32 2.90 3.86 8.52
---------------------------------------------------------------
Total return (%) 48.97 (24.87) (54.69) (14.80) 2
RATIOS/SUPPLEMENTAL DATA (%)
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net operating expenses 1.04 0.89 0.89 0.89 3
Gross operating expenses 1.25 1.15 1.16 1.52 3
Net investment loss (0.65) (0.57) (0.65) (0.63) 3
Portfolio turnover rate 165 117 120 37 2
Net assets, end of period ($ x 1,000,000) 43 26 39 48
1 Commencement of operations.
2 Not annualized.
3 Annualized.
80 See financial notes.
TECHNOLOGY FOCUS FUND
PORTFOLIO HOLDINGS as of October 31, 2003
This section shows all the securities in the fund's portfolio by industry
classification 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 ($x1,000) ($x1,000)
- --------------------------------------------------------------------------------
100.0% COMMON STOCK 36,335 43,019
0.3% SHORT-TERM
INVESTMENT 152 152
- --------------------------------------------------------------------------------
100.3% TOTAL INVESTMENTS 36,487 43,171
1.8% COLLATERAL INVESTED FOR
SECURITIES ON LOAN 770 770
(2.1)% OTHER ASSETS AND
LIABILITIES, NET (905)
- --------------------------------------------------------------------------------
100.0% TOTAL NET ASSETS 43,036
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
COMMON STOCK 100.0% of net assets
AEROSPACE / DEFENSE 5.5%
--------------------------------------------------------------------------
Lockheed Martin Corp. 14,900 692
Rockwell Collins, Inc. 30,400 834
United Technologies Corp. 9,700 822
-----------
2,348
BUSINESS MACHINES & SOFTWARE 17.5%
--------------------------------------------------------------------------
(9) Adobe Systems, Inc. 19,900 872
o Artesyn Technologies, Inc. 68,000 560
o(3) Cisco Systems, Inc. 47,260 992
o Digi International, Inc. 57,000 524
o Intergraph Corp. 30,000 782
o Lexmark International, Inc.,
Class A 11,600 854
o Oracle Corp. 57,148 683
o Storage Technology Corp. 25,000 602
o(7) Sybase, Inc. 50,400 902
o Xerox Corp. 73,300 770
-----------
7,541
BUSINESS SERVICES 31.0%
--------------------------------------------------------------------------
o Akamai Technologies, Inc. 98,000 774
o Amdocs Ltd. 26,000 558
o Ariba, Inc. 109,800 357
o Centra Software, Inc. 37,000 107
o(5) Citrix Systems, Inc. 36,300 917
o Concord EFS, Inc. 25,000 267
o CSG Systems
International, Inc. 43,500 500
o Digital Impact, Inc. 80,000 232
o(2) Epicor Software Corp. 100,000 1,011
Factset Research Systems, Inc. 14,000 611
o Forrester Research, Inc. 21,000 358
o Gartner, Inc., Class B 30,000 366
o infoUSA, Inc. 64,000 525
o Intuit, Inc. 14,600 730
o Macrovision Corp. 30,000 659
o Mobius Management
Systems, Inc. 19,000 245
o MRO Software, Inc. 35,900 454
o Progress Software Corp. 28,000 618
SS&C Technologies, Inc. 33,000 726
o Sycamore Networks, Inc. 138,000 690
o SYKES Enterprises, Inc. 42,500 396
o Synopsys, Inc. 26,000 825
o(1) Transaction Systems Architects, Inc.,
Class A 70,000 1,400
-----------
13,326
ELECTRONICS 34.7%
--------------------------------------------------------------------------
o Amkor Technology, Inc. 33,900 639
o(4) Atmel Corp. 171,400 967
o(8) Benchmark Electronics, Inc. 18,000 877
o Checkpoint Systems, Inc. 44,400 836
o Computer Network
Technology Corp. 25,000 247
o Comtech Telecommunications 24,500 722
o Gerber Scientific, Inc. 30,000 237
o GlobespanVirata, Inc. 80,000 493
o Hutchinson Technology, Inc. 18,000 603
(6) Intel Corp. 27,660 914
o Komag, Inc. 40,000 754
See financial notes. 81
TECHNOLOGY FOCUS FUND
PORTFOLIO HOLDINGS continued
MKT. VALUE
SECURITY AND NUMBER OF SHARES ($ x 1,000)
o Littelfuse, Inc. 10,000 266
o LSI Logic Corp. 42,300 391
o Mattson Technology, Inc. 59,000 838
MTS Systems Corp. 20,000 352
o National Semiconductor Corp. 7,500 305
o ON Semiconductor Corp. 145,000 623
PerkinElmer, Inc. 38,600 695
o Plantronics, Inc. 30,000 834
o QuickLogic Corp. 32,000 162
o Radisys Corp. 36,000 704
o Rofin-Sinar Technologies, Inc. 30,000 713
Scientific-Atlanta, Inc. 25,000 740
o Solectron Corp. 100,000 554
o Tekelec 30,000 483
-----------
14,949
HEALTHCARE / DRUGS & MEDICINE 0.3%
--------------------------------------------------------------------------
o Allscripts Healthcare
Solutions, Inc. 23,000 119
MEDIA 1.0%
--------------------------------------------------------------------------
o CNET Networks, Inc. 30,000 244
o Raindance
Communications, Inc. 60,000 175
-----------
419
PRODUCER GOODS & MANUFACTURING 5.9%
--------------------------------------------------------------------------
Ametek, Inc. 16,400 772
o Catalyst Semiconductor, Inc. 60,000 434
o Compucom Systems, Inc. 115,000 587
o Safeguard Scientifics, Inc. 125,000 476
o Tyler Technologies, Inc. 35,000 277
-----------
2,546
TELEPHONE 4.1%
--------------------------------------------------------------------------
o(10) Avaya, Inc. 67,100 868
o Ditech Communications Corp. 50,000 528
o Inet Technologies, Inc. 15,000 202
o Net2Phone, Inc. 30,000 173
-----------
1,771
SECURITY FACE VALUE MKT. VALUE
RATE, MATURITY DATE ($ x 1,000) ($ x 1,000)
SHORT-TERM INVESTMENT
0.3% of net assets
Bank of America, London
Time Deposit
0.50%, 11/01/03 152 152
END OF INVESTMENTS. For totals, please see the first page of holdings for
this fund.
SECURITY AND NUMBER OF SHARES
COLLATERAL INVESTED FOR SECURITIES ON LOAN
1.8% of net assets
OTHER INVESTMENT COMPANIES
--------------------------------------------------------------------------
Securities Lending Investment
Fund 769,500 770
END OF COLLATERAL INVESTED FOR SECURITIES ON LOAN. For totals, please see the
first page of holdings for this fund.
82 See financial notes.
TECHNOLOGY FOCUS FUND
Statement of
ASSETS AND LIABILITIES
As of October 31, 2003. All numbers x 1,000 except NAV.
ASSETS
- ------------------------------------------------------------------------------
Investments, at market value
(including $743 of securities on loan) $43,171 a
Collateral held for securities on loan 770
Receivables:
Fund shares sold 56
Dividends 3
Investments sold 354
Prepaid expenses + 6
-----------
TOTAL ASSETS 44,360
LIABILITIES
- ------------------------------------------------------------------------------
Collateral held for securities on loan 770
Payables:
Fund shares redeemed 11
Investments bought 506
Accrued expenses + 37
-----------
TOTAL LIABILITIES 1,324
NET ASSETS
- ------------------------------------------------------------------------------
TOTAL ASSETS 44,360
TOTAL LIABILITIES - 1,324
-----------
NET ASSETS $43,036
NET ASSETS BY SOURCE
Capital received from investors 80,152
Net realized capital losses (43,800)
Net unrealized capital gains 6,684
NET ASSET VALUE (NAV)
SHARES
NET ASSETS / OUTSTANDING = NAV
$43,036 9,963 $4.32
Unless stated, all numbers x 1,000.
a The fund paid $36,487 for these securities. Not counting short-term
obligations and government securities, the fund paid $54,557 for securities
during the report period and received $50,510 from securities it sold or that
matured.
FEDERAL TAX DATA
- ---------------------------------------------------
PORTFOLIO COST $36,588
NET UNREALIZED GAINS AND LOSSES:
Gains $8,091
Losses + (1,508)
----------
$6,583
UNDISTRIBUTED EARNINGS:
Ordinary income $--
Long-term capital gains $--
UNUSED CAPITAL LOSSES:
Expires 10/31 of: Loss amount
2008 $723
2009 18,131
2010 18,148
2011 + 6,697
----------
$43,699
RECLASSIFICATIONS:
Net investment income
not yet distributed $200
Reclassified as:
Capital received from investors ($200)
See financial notes. 83
TECHNOLOGY FOCUS FUND
Statement of
OPERATIONS
For November 1, 2002 through October 31, 2003. All numbers x 1,000.
INVESTMENT INCOME
- ------------------------------------------------------------------------------
Dividends $117
Interest 1
Securities on loan + 1
----------
TOTAL INVESTMENT INCOME 119
NET REALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net realized losses on investments sold (3,310)
NET UNREALIZED GAINS AND LOSSES
- ------------------------------------------------------------------------------
Net unrealized gains on investments 16,615
EXPENSES
- ------------------------------------------------------------------------------
Investment adviser and administrator fees 165 a
Transfer agent and shareholder service fees 77 b
Trustees' fees 5 c
Custodian fees 56
Portfolio accounting fees 4
Professional fees 27
Registration fees 13
Shareholder reports 32
Other expenses + 4
----------
Total expenses 383
Expense reduction - 64 d
----------
NET EXPENSES 319
INCREASE IN NET ASSETS FROM OPERATIONS
- ------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 119
NET EXPENSES - 319
----------
NET INVESTMENT LOSS (200)
NET REALIZED LOSSES (3,310) e
NET UNREALIZED GAINS + 16,615 e
----------
INCREASE IN NET ASSETS FROM OPERATIONS $13,105
Unless stated, all numbers x 1,000.
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. These fees are paid to Charles Schwab & Co.
c For the fund's independent trustees only.
d Includes $62 from the investment adviser (CSIM) and $2 from the transfer agent
and shareholder service agent (Schwab). It reflects a guarantee by CSIM and
the transfer agent and shareholder service agent (Schwab) to limit the
operating expenses of this fund through February 28, 2005, to 1.10% of average
daily net assets. 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 $13,305.
84 See financial notes.
TECHNOLOGY FOCUS FUND
Statements of
CHANGES IN NET ASSETS
For the current and prior report periods. All numbers x 1,000.
OPERATIONS
- ---------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
Net investment loss ($200) ($211)
Net realized losses (3,310) (14,163)
Net unrealized gains + 16,615 4,018
-------------------------------------
INCREASE OR DECREASE IN NET ASSETS
FROM OPERATIONS $13,105 ($10,356)
TRANSACTIONS IN FUND SHARES
- ----------------------------------------------------------------------------
11/1/02-10/31/03 11/1/01-10/31/02
SHARES VALUE SHARES VALUE
Shares sold 3,313 $11,831 2,770 $10,781
Shares redeemed + (2,226) (7,601) (3,948) (13,544) a
-------------------------------------------------------
NET TRANSACTIONS
IN FUND SHARES 1,087 $4,230 (1,178) ($2,763)
SHARES OUTSTANDING AND NET ASSETS
- ----------------------------------------------------------------------------
11/1/02-10/31/03 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 + 1,087 17,335 (1,178) (13,119) b
-------------------------------------------------------
END OF PERIOD 9,963 $43,036 8,876 $25,701 c
Unless stated, all numbers x 1,000.
a The fund charges 0.75% of early withdrawal fees on shares redeemed 180 days or
less after the purchase:
CURRENT PERIOD $17
PRIOR PERIOD $15
Dollar amounts are net of the redemption proceeds.
b Figures for shares represent shares sold plus shares reinvested, minus shares
redeemed. Figures for net assets represent the changes in net assets from
operations plus the changes in value of transactions in fund shares, minus
distributions paid.
c There is no distributable net investment income at the end of the current
period and prior period, respectively.
See financial notes. 85
FUNDS USING SCHWAB EQUITY RATINGS(TM)
FINANCIAL NOTES
BUSINESS STRUCTURE OF THE FUNDS
EACH OF THE FUNDS DISCUSSED IN THIS REPORT IS A SERIES OF SCHWAB CAPITAL TRUST,
A NO-LOAD, OPEN-END MANAGEMENT INVESTMENT COMPANY. The company is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended. The sidebar shows the funds in this report and their trust.
BOTH SCHWAB DIVIDEND EQUITY FUND(TM) AND SCHWAB SMALL-CAP EQUITY FUND(TM) OFFER
TWO SHARE CLASSES: Investor Shares and Select Shares(R). Shares of each class
represent interest in the same portfolio, but each class has different expenses
and investment minimums. Schwab Core Equity Fund(TM), Schwab Hedged Equity
Fund(TM), Communications Focus Fund, Financial Services Focus Fund, HealthCare
Focus Fund and Technology Focus Fund each offer one share class.
Shares are bought and sold at net asset value (NAV), which is the price for all
outstanding shares. Each share has a par value of 1/1,000 of a cent, and the
trust may issue as many shares as necessary.
FUND OPERATIONS
Most of the funds' investments are described in the fund-by-fund sections
earlier in this report. However, there are certain other 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.
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 MarketTrack All Equity Portfolio(TM)
Schwab MarketTrack Growth Portfolio(TM)
Schwab MarketTrack Balanced Portfolio(TM)
Schwab MarketTrack Conservative Portfolio(TM)
Schwab U.S. MarketMasters Fund(TM)
Schwab Balanced MarketMasters Fund(TM)
Schwab Small-Cap MarketMasters Fund(TM)
Schwab International MarketMasters Fund(TM)
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Institutional Select S&P 500 Fund
Institutional Select Large-Cap Value Index Fund
Institutional Select Small-Cap Value Index Fund
86
FUNDS USING SCHWAB EQUITY RATINGS(TM)
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 funds' repurchase agreements will be fully collateralized by U.S. government
securities. All collateral is held by the funds' custodian (or, with tri-party
agreements, the agent's bank) and is monitored daily to ensure that its market
value is at least equal to the repurchase price under the agreement.
THE SCHWAB HEDGED EQUITY FUND(TM) MAY SELL SECURITIES SHORT (SELL SECURITIES IT
DOES NOT OWN). When it does so, the fund also places assets worth at least 100%
of the value of the short securities into a segregated account, as collateral.
If the market value of the short securities subsequently falls, the fund can
realize a gain by closing the position. However, if the value rises, the fund
typically would have to add to its collateral or close out its short position at
a loss. The potential for losses associated with short positions is much greater
than the original value of the securities sold short and may exceed amounts
recorded in the Statements of Assets and Liabilities.
THE 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.
Forwards are similar to futures except that they are not publicly traded, but
are agreements directly between two parties.
As with futures, forwards involve certain risks that are not fully reflected in
the fund's financials. If counter-parties to the contracts are unable to meet
the terms of the contracts or if the value of the foreign currency changes
unfavorably, the fund could sustain a loss.
THE FUNDS MAY LOAN SECURITIES TO CERTAIN BROKERS, DEALERS AND OTHER FINANCIAL
INSTITUTIONS WHO PAY THE FUNDS NEGOTIATED FEES. The funds receive cash, letters
of credit or U.S. government securities as collateral on these loans. All of the
cash collateral received is reinvested in high quality, short-term investments.
The value of the collateral must be at least 102% of the market value of the
loaned securities as of the first day of the loan, and at least 100% each day
thereafter.
THE FUNDS PAY FEES TO AFFILIATES OF THE INVESTMENT ADVISER FOR VARIOUS SERVICES.
Through their trust, the funds have agreements with Charles Schwab Investment
Management, Inc. (CSIM) to provide investment advisory and administrative
services and with Charles Schwab & Co., Inc. (Schwab) to provide transfer agent
and shareholder services.
Although these agreements specify certain fees for these services, CSIM and
Schwab have made additional agreements with the funds that may limit the total
expenses charged. The rates and limitations for these fees vary from fund to
fund, and are described in each fund's Statement of Operations.
THE FUNDS MAY ENGAGE IN CERTAIN TRANSACTIONS INVOLVING RELATED PARTIES. The
funds may make direct transactions with certain other Schwab funds when
practical. When one fund is seeking to sell a security that another is seeking
to buy, an interfund transaction can allow both funds to benefit by reducing
transaction costs. This practice is limited to funds that share the same
investment adviser, trustees and officers.
Pursuant to an exemptive order issued by the SEC, the funds may enter into
interfund borrowing and
87
FUNDS USING SCHWAB EQUITY RATINGS(TM)
lending transactions within the SchwabFunds(R). All loans are for temporary or
emergency purposes only. The interest rate charged on the loan is the average of
the overnight repurchase agreement rate and the short-term bank loan rate. The
interfund lending facility is subject to the oversight and periodic review of
the Board of Trustees of the SchwabFunds.
TRUSTEES MAY INCLUDE PEOPLE WHO ARE OFFICERS AND/ OR DIRECTORS OF THE INVESTMENT
ADVISER OR SCHWAB.Federal securities law limits the percentage of such
"interested persons" who may serve on a trust's board, and the trust was in
compliance with these limitations throughout the report period. The trust did
not pay any of these persons for their service as trustees, but it did pay
non-interested persons (independent trustees), as noted in each fund's Statement
of Operations.
THE FUNDS MAY BORROW MONEY FROM BANKS AND CUSTODIANS. The funds may obtain
temporary bank loans through the trusts to which they belong, to use for meeting
shareholder redemptions or for extraordinary or emergency purposes. The trusts
have custodian overdraft facilities and line of credit arrangements of $150
million and $100 million with PNC Bank, N.A. and Bank of America, N.A.,
respectively. The funds pay interest on the amounts they borrow at rates that
are negotiated periodically.
AMOUNT WEIGHTED
OUTSTANDING AVERAGE AVERAGE
AT 10/31/03 BORROWING* INTEREST
FUND ($ x 1,000) ($ x 1,000) RATE* (%)
- --------------------------------------------------------------------------------
SCHWAB CORE
EQUITY FUND(TM) -- 481 1.39
- --------------------------------------------------------------------------------
SCHWAB HEDGED
EQUITY FUND(TM) -- 313 1.62
- --------------------------------------------------------------------------------
COMMUNICATIONS
FOCUS FUND -- 47 1.63
- --------------------------------------------------------------------------------
FINANCIAL SERVICES
FOCUS FUND 40 52 1.63
- --------------------------------------------------------------------------------
HEALTH CARE FOCUS FUND 172 46 1.65
- --------------------------------------------------------------------------------
TECHNOLOGY FOCUS FUND -- 73 1.67
- --------------------------------------------------------------------------------
* Based on the number of days for which the borrowing is outstanding.
THE FUNDS INTEND TO MEET FEDERAL INCOME AND EXCISE TAX REQUIREMENTS FOR
REGULATED INVESTMENT COMPANIES. Accordingly, the funds distribute substantially
all of their net investment income and net realized capital gains (if any) to
their respective shareholders each year. As long as a fund meets the tax
requirements, it is not required to pay federal income tax. The net investment
income and net realized capital gains and losses may differ for financial
statement and tax purposes primarily due to differing treatments for net
operating losses and losses on wash sales.
UNDER THE FUNDS' ORGANIZATIONAL DOCUMENTS, ITS OFFICERS AND TRUSTEES ARE
INDEMNIFIED AGAINST CERTAIN LIABILITY ARISING OUT OF THE PERFORMANCE OF THEIR
DUTIES TO THE FUNDS. In addition, in the normal course of business the funds
enter into contracts with their vendors and others that provide general
indemnifications. The funds' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the funds.
However, based on experience, the funds expect the risk of loss to be remote.
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.
88
FUNDS USING SCHWAB EQUITY RATINGS(TM)
- - 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.
IF THE SCHWAB HEDGED EQUITY FUND(TM) SELLS SECURITIES SHORT, it records the
proceeds received as an asset and the obligation to buy back the securities as a
liability. At the time a short sale is initiated, the asset and the liability
are of equal value and effectively cancel each other out. Subsequently, the fund
values the liability side of the transaction according to the market price of
the securities sold short, and values the asset side according to the value of
the proceeds. When the fund closes out a short position (buys the security), it
records the outcome as a realized gain or loss. Interest accrued on securities
sold short is recorded as an expense on the fund's records.
SECURITY TRANSACTIONS are recorded as of the date the order to buy or sell the
security is executed.
DIVIDENDS AND DISTRIBUTIONS FROM PORTFOLIO SECURITIES are recorded on the date
they are effective (the ex-dividend date), although the funds record certain
foreign security dividends on the day they learn of the ex-dividend date.
INCOME FROM INTEREST AND THE ACCRETION OF DISCOUNT is recorded as it accrues.
REALIZED GAINS AND LOSSES from security transactions are based on the identified
costs of the securities involved.
ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES are reported in U.S.
dollars. For assets and liabilities held on a given date, the dollar value is
based on market exchange rates in effect on that date. Transactions involving
foreign currencies, including purchases, sales, income receipts and expense
payments, are calculated using exchange rates in effect on the transaction date.
EXPENSES that are specific to a fund are charged directly to that fund. Expenses
that are common to all funds within a trust generally are allocated among the
funds in proportion to their average daily net assets.
FOR FUNDS OFFERING MULTIPLE SHARE CLASSES, all of the realized and unrealized
gains or losses and net investment income, other than class specific expenses,
are allocated daily to each class in proportion to its average daily net assets.
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.
89
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF:
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
In our opinion, the accompanying statements of assets and liabilities, including
the portfolio holdings, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of Schwab Core Equity Fund, Schwab Dividend
Equity Fund, Schwab Small-Cap Equity Fund, Schwab Hedged Equity Fund,
Communications Focus Fund, Financial Services Focus Fund, Health Care Focus Fund
and Technology Focus Fund (eight of the portfolios constituting Schwab Capital
Trust) (hereafter collectively referred to as the "funds") at October 31, 2003,
and the results of each of their operations, the changes in each of their net
assets and the financial highlights for each of the periods presented, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the funds' management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSECOOPERS LLP
San Francisco, CA
December 12, 2003
90
FUNDS USING SCHWAB EQUITY RATINGS(TM)
FUND TRUSTEES
A fund's Board of Trustees is responsible for protecting the interests of
that fund's shareholders. The tables below give information about the
people who serve as trustees and officers for the SchwabFunds(R),
including the funds covered in this report. Trustees remain in office
until they resign, retire or are removed by shareholder vote.1
Under the Investment Company Act of 1940, any officer, director, or
employee of Schwab or CSIM is considered an "interested person," meaning
that he or she is considered to have a business interest in Schwab or
CSIM. These individuals are listed as "interested trustees." The
"independent trustees" are individuals who, under the 1940 Act, are not
considered to have a business interest in Schwab or CSIM.
Each of the SchwabFunds (of which there were 49 as of 10/31/03) belongs to
one of these trusts: The Charles Schwab Family of Funds, Schwab
Investments, Schwab Capital Trust or Schwab Annuity Portfolios. Currently
all these trusts have the same trustees and officers. The address for all
trustees and officers is 101 Montgomery Street, San Francisco, CA 94104.
You can find more information about the trustees and officers in the
Statement of Additional Information, which is available free by calling
1-800-435-4000.
INDIVIDUALS WHO ARE INTERESTED TRUSTEES AND OFFICERS OF THE TRUST
TRUST POSITION(S);
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
CHARLES R. SCHWAB 2 Chair, Trustee: Chair, Director, The Charles Schwab Corp.; CEO, Director, Schwab
7/29/37 Family of Funds, 1989; Holdings, Inc.; Chair, Director, Charles Schwab & Co., Inc.; Charles
Investments, 1991; Schwab Investment Management, Inc.; Chair, Charles Schwab
Capital Trust, 1993; Holdings, Inc. I, Schwab International Holdings, Inc.; Director,
Annuity Portfolios, 1994. U.S. Trust Corp., United States Trust Co. of New York, The Gap, Inc.
(clothing retailer), Siebel Systems (software); Trustee, Stanford
University. Until 6/03: Director, Xsign, Inc. (electronic payment
systems). Until 5/03: Co-Chair, The Charles Schwab Corporation.
Until 5/02: Director, Vodafone AirTouch PLC (telecom). Until 3/02:
Director, Audiobase, Inc. (Internet audio solutions). Until 7/01:
Director, The Charles Schwab Trust Company. Until 1/99: Director,
Schwab Retirement Plan Services, Inc., Mayer & Schweitzer, Inc.
(securities brokerage subsidiary of The Charles Schwab Corp.),
Performance Technologies, Inc. (technology), TrustMark, Inc.
1 The SchwabFunds retirement policy requires that independent trustees elected
after January 1, 2000 retire at age 72 or after twenty years of service as a
trustee, whichever comes first. Independent trustees elected prior to January
1, 2000 will retire on the following schedule: Messrs. Holmes and Dorward will
retire on December 31, 2007, and Messrs. Stephens and Wilsey will retire on
December 31, 2010.
2 In addition to their positions with the investment adviser and the
distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr.
Lyons's immediate family members, also own stock of The Charles Schwab
Corporation.
91
FUNDS USING SCHWAB EQUITY RATINGS(TM)
INDIVIDUALS WHO ARE INTERESTED TRUSTEES BUT NOT OFFICERS OF THE TRUST
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
DAWN G. LEPORE 1 Trustee:2003 Vice Chair, EVP, The Charles Schwab Corp.; Until 10/01: CIO, The
3/21/54 (all trusts) Charles Schwab Corporation. Until 1999: EVP, The Charles Schwab
Corporation. Director, Wal-Mart Stores, eBay, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
JEFFREY M. LYONS 1 Trustee: 2002 EVP, Asset Management Products and Services, Charles Schwab &
2/22/55 (all trusts). Co., Inc. Until 9/01: EVP, Mutual Funds, Charles Schwab & Co., Inc.
INDIVIDUALS WHO ARE OFFICERS OF THE TRUST BUT NOT TRUSTEES
NAME AND BIRTHDATE TRUST OFFICE(S) HELD MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
RANDALL W. MERK President, CEO President, CEO, Charles Schwab Investment Management, Inc;
7/25/54 (all trusts). EVP, Charles Schwab & Co., Inc.; Director, Charles Schwab Worldwide
Funds PLC, Charles Schwab Asset Management (Ireland) Ltd. Until
9/02: President, CIO, American Century Investment Management;
Director, American Century Cos., Inc. Until 6/01: CIO, Fixed Income,
American Century Cos., Inc. Until 1997: SVP, Director, Fixed Income
and Quantitative Equity Portfolio Management, Twentieth Century
Investors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
TAI-CHIN TUNG Treasurer, Principal SVP, CFO, Charles Schwab Investment Management, Inc.; VP,
3/7/51 Financial Officer The Charles Schwab Trust Co.; Director, Charles Schwab Asset
(all trusts). Management (Ireland) Ltd., Charles Schwab Worldwide Funds PLC.
- ------------------------------------------------------------------------------------------------------------------------------------
STEPHEN B. WARD SVP, Chief Investment SVP, Chief Investment Officer, Director, Charles Schwab Investment
4/5/55 Officer Management, Inc.; CIO, The Charles Schwab Trust Co.
(all trusts).
- ------------------------------------------------------------------------------------------------------------------------------------
KOJI E. FELTON Secretary SVP, Chief Counsel, Assistant Corporate Secretary, Charles Schwab
3/13/61 (all trusts). Investment Management, Inc. Until 6/98: Branch Chief in Enforcement,
U.S. Securities and Exchange Commission, San Francisco.
1 In addition to their positions with the investment adviser and the
distributor, Ms. Lepore and Messrs. Schwab and Lyons, as well as some of Mr.
Lyons's immediate family members, also own stock of The Charles Schwab
Corporation.
92
FUNDS USING SCHWAB EQUITY RATINGS(TM)
INDIVIDUALS WHO ARE INDEPENDENT TRUSTEES
NAME AND BIRTHDATE TRUSTEE SINCE MAIN OCCUPATIONS AND OTHER DIRECTORSHIPS AND AFFILIATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
MARIANN BYERWALTER 2000 (all trusts). Chair, JDN Corp. Advisory LLC; Trustee, Stanford University,
8/13/60 Director, America First Cos., (venture capital/fund management),
Redwood Trust, Inc.(mortgage finance), Stanford Hospitals and
Clinics, SRI International (research), PMI Group, Inc. (mortgage
insurance), Lucile Packard Children's Hospital. 2001: Special
Advisor to the President, Stanford University. Until 2002: Director,
LookSmart,Ltd.(Internet infrastructure). Until 2001: VP, Business
Affairs, CFO, Stanford University.
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD F. DORWARD Family of Funds, 1989; CEO, Dorward & Associates (management, marketing and
9/23/31 Investments, 1991; communications consulting). Until 1999: EVP, Managing Director,
Capital Trust, 1993; Grey Advertising.
Annuity Portfolios, 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
WILLIAM A. HASLER 2000 (all trusts). Co-CEO, Aphton Corp. (bio-pharmaceuticals). Director, Non-Executive
11/22/41 Chairman, Solectron Corp. (manufacturing), Airlease Ltd. (aircraft
leasing), Mission West Properties (commercial real estate), Stratex
Networks (telecommunications); Public Governor, Member, executive
committee, Pacific Stock & Options Exchange. Director, Digital
Microwave Corp. (network equipment). Until 1998: Dean, Haas School
of Business, University of California, Berkeley.
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT G. HOLMES Family of Funds, 1989; Chair, CEO, Director, Semloh Financial, Inc. (international
5/15/31 Investments, 1991; financial services and investment advice).
Capital Trust, 1993;
Annuity Portfolios, 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
GERALD B. SMITH 2000 (all trusts). Chair, CEO, Founder, Smith Graham & Co. (investment advisors);
9/28/50 Director, Pennzoil-Quaker State Co. (oil and gas), Rorento N.V.
(investments -- Netherlands), Cooper Industries (electrical
products); Member, audit committee, Northern Border Partners, L.P.
(energy).
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD R. STEPHENS Family of Funds, 1989; Managing Partner, D.R. Stephens & Co. (investments). Until 1996:
6/28/38 Investments, 1991; Chair, CEO, North American Trust (real estate investments).
Capital Trust, 1993;
Annuity Portfolios, 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
MICHAEL W. WILSEY Family of Funds, 1989; Chair, CEO, Wilsey Bennett, Inc. (transportation, real estate and
8/18/43 Investments, 1991; investments).
Capital Trust, 1993;
Annuity Portfolios, 1994.
93
FUNDS USING SCHWAB EQUITY RATINGS(TM)
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.
94
NOTES
NOTES
CONTACT SCHWAB
SchwabFunds(R) offers you a complete family of mutual funds, each one based on a
clearly defined investment approach and using disciplined 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 directly over the
Internet.
2 Orders placed in person or through a telephone representative may be subject
to a service fee payable to Schwab.
THE SCHWABFUNDS FAMILY(R)
STOCK FUNDS
Schwab S&P 500 Fund
Schwab 1000 Fund(R)
Schwab Small-Cap Index Fund(R)
Schwab Total Stock Market Index Fund(R)
Schwab International Index Fund(R)
Schwab Core Equity Fund(TM)
Schwab Dividend Equity Fund(TM)
Schwab Small-Cap Equity Fund(TM)
Schwab Hedged Equity Fund(TM)
Schwab Focus Funds
Communications Focus Fund
Financial Services Focus Fund
Health Care Focus Fund
Technology Focus Fund
Schwab 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 MarketTrack All Equity Portfolio(TM)
Schwab MarketTrack Growth Portfolio(TM)
Schwab MarketTrack Balanced Portfolio(TM)
Schwab MarketTrack Conservative Portfolio(TM)
BOND FUNDS
Schwab YieldPlus Fund(R)
Schwab Short-Term Bond Market Fund(TM)
Schwab Total Bond Market Fund(TM)
Schwab GNMA Fund(TM)
Schwab Short/Intermediate Tax-Free Bond Fund(TM)
Schwab Long-Term Tax-Free Bond Fund(TM)
Schwab California Short/Intermediate
Tax-Free Bond Fund(TM)
Schwab California Long-Term Tax-Free Bond Fund(TM)
SCHWAB MONEY FUNDS
Schwab offers an array of money market funds that seek high current income
consistent with safety and liquidity. 3 Choose from taxable or tax-advantaged
alternatives. Many can be linked to your Schwab account to "sweep" cash balances
automatically 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.
REG26298
Item 2: Code of Ethics.
(a) Registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer, and any other officers
who serve a similar function.
(c) During the period covered by the report, no amendments were made to the
provisions of this code of ethics.
(d) During the period covered by the report, Registrant did not grant any
waivers, including implicit waivers, from the provisions of this code
of ethics.
(f)(1) Registrant has filed this code of ethics as an exhibit pursuant to Item
10(a)(1) of Form N-CSR.
Item 3: Audit Committee Financial Expert.
Registrant's Board of Trustees has determined that Registrant has three
"audit committee financial experts," as such term is defined in Item 3
of Form N-CSR, serving on its audit committee, including William A.
Hasler, Mariann Byerwalter and Donald R. Stephens. Each of these
members of Registrant's audit committee is "independent" under the
standards set forth in Item 3 of Form N-CSR.
The designation of each of Messrs. Hasler and Stephens and Ms.
Byerwalter as an "audit committee financial expert" pursuant to Item 3
of Form N-CSR does not (i) impose upon such individual any duties,
obligations, or liability that are greater than the duties, obligations
and liability imposed upon such individual as a member of the
Registrant's audit committee or Board of Trustees in the absence of
such designation; and (ii) affect the duties, obligations or liability
of any other member of the Registrant's audit committee or Board of
Trustees.
Item 4: Principal Accountant Fees and Services.
Not applicable.
Item 5: Audit Committee of Listed Registrants.
Not applicable.
Item 6: [Reserved].
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
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
Principal 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) During Registrant's last fiscal half-year (the Registrant's second
fiscal half-year in the case of this annual report), there have been no
changes in Registrant's internal control over financial reporting that
the above officers believe to have materially affected, or to be
reasonably likely to materially affect, Registrant's internal control
over financial reporting.
Item 10: Exhibits.
(a) (1) Registrant's code of ethics (that is the subject of the disclosure
required by Item 2(a)) is attached.
(2) Separate certifications for Registrant's principal executive officer
and principal financial officer, as required by Rule 30a-2(a) under the
1940 Act, are attached.
(b) A certification for Registrant's principal executive officer and
principal financial officer, as required by Rule 30a-2(b) under the
1940 Act, is attached. This certification is being furnished to the
Securities and Exchange Commission solely pursuant to 18 U.S.C. section
1350 and is not being filed as part of the Form N-CSR with the
Commission.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Schwab Capital Trust
---------------------
By: /s/ Randall W. Merk
------------------------------
Randall W. Merk
Chief Executive Officer
Date: December 15, 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: December 15, 2003
-----------------
By: /s/ Tai-Chin Tung
--------------------------------
Tai-Chin Tung
Principal Financial Officer
Date: December 15, 2003
-----------------