figures assume dividends and distributions were reinvested. index figures do not include trading and...

-----BEGIN PRIVACY-ENHANCED MESSAGE-----Proc-Type: 2001,MIC-CLEAROriginator-Name: [email protected]: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQABMIC-Info: RSA-MD5,RSA, SA/go4JEeXAmkLUPWbRsKQpZjtYpw/5eMY6+OUmmbTB8dCC7GVvJNswxqwIUuNRv ElBX6nXYNQu7fqP0xDMhGQ==

0000950134-05-013017.txt : 200507070000950134-05-013017.hdr.sgml : 2005070720050707171251ACCESSION NUMBER:0000950134-05-013017CONFORMED SUBMISSION TYPE:N-CSRSPUBLIC DOCUMENT COUNT:4CONFORMED PERIOD OF REPORT:20050430FILED AS OF DATE:20050707DATE AS OF CHANGE:20050707EFFECTIVENESS DATE:20050707

FILER:

COMPANY DATA:COMPANY CONFORMED NAME:SCHWAB INVESTMENTSCENTRAL INDEX KEY:0000869365IRS NUMBER:000000000STATE OF INCORPORATION:MAFISCAL YEAR END:0831

FILING VALUES:FORM TYPE:N-CSRSSEC ACT:1940 ActSEC FILE NUMBER:811-06200FILM NUMBER:05944013

BUSINESS ADDRESS:STREET 1:101 MONTGOMERY STCITY:SAN FRANCISCOSTATE:CAZIP:94104BUSINESS PHONE:4156277000

MAIL ADDRESS:STREET 1:101 MONTGOMERY STCITY:SAN FRANCISCOSTATE:CAZIP:94104

N-CSRS1f09238invcsrs.txtFORM N-CSRS

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: 811-6200

Schwab Investments - Schwab 1000 Index Fund ------------------------------------------------ (Exact name of registrant as specified in charter)

101 Montgomery Street, San Francisco, California 94104 ------------------------------------------------------ (Address of principal executive offices) (Zip code)

Evelyn Dilsaver Schwab Investments 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: April 30, 2005

ITEM 1: REPORT(S) TO SHAREHOLDERS.

SCHWAB EQUITY INDEX FUNDS

SEMIANNUAL REPORT April 30, 2005

Schwab S&P 500 Index Fund (formerly Schwab S&P 500 Fund)

Schwab 1000 Index(R) Fund (formerly 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

Performance and Fund Facts .............................................. 6

Schwab S&P 500 Index Fund ................. 6 Schwab 1000 Index(R) Fund ................. 10 Schwab Small-Cap Index Fund(R) ............ 13 Schwab Total Stock Market Index Fund(R) ............................. 16 Schwab International Index Fund(R) ........ 19

Fund Expenses ........................................................... 22

Financial Statements .................................................... 24

Schwab S&P 500 Index Fund ................. 24 Schwab 1000 Index(R) Fund ................. 34 Schwab Small-Cap Index Fund(R) ............ 43 Schwab Total Stock Market Index Fund(R) ............................. 51 Schwab International Index Fund(R) ........ 60

Financial Notes ......................................................... 68

Trustees and Officers of Schwab Capital Trust .................................................... 73

Glossary ................................................................ 76

SELECT SHARES(R) ARE AVAILABLE ON MANY SCHWAB FUNDS(R)

Schwab Funds offers Select Shares, a share class that carries lower expensesthan Investor Shares(TM) in exchange for higher investment minimums on many ofits funds. Select Shares are available for initial purchases of $50,000 or moreof a single fund in a single account and for shareholders who add to theirexisting Investor Share position, bringing the value to or above $50,000. Weencourage shareholders of Investor Shares to review their portfolio to see ifthey are eligible to exchange into Select Shares. If you believe you areeligible, you should contact Schwab to perform a tax-free interclass exchangeinto Select Shares. Instructions for performing a tax-free interclass exchangecan also be referenced on the Schwab Funds website at WWW.SCHWAB.COM/SCHWABFUNDSunder Schwab Funds Investor Information.

Fund investment adviser: Charles Schwab Investment Management, Inc. (CSIM)Distributor and transfer agent: Charles Schwab & Co., Inc. (Schwab).

The industry/sector classification of the funds' portfolio holdings uses theGlobal Industry Classification Standard (GICS) which was developed by and is theexclusive property of Morgan Stanley Capital International Inc. and Standard &Poor's. GICS is a service mark of MSCI and S&P and has been licensed for use byCharles Schwab & Co., Inc.

[PHOTO OF CHARLES SCHWAB]

Charles SchwabChairman

FROM THE CHAIRMAN

Dear Shareholder,

I am a big fan of mutual funds and have been throughout my 40-year career.During this time I've watched the mutual fund market grow, with investors todayhaving nearly 17,000 funds from which to choose.

I also have advocated the need to take a long-term view of investing, as well asthe importance of developing and maintaining an asset allocation plan. Icontinue to believe that mutual funds are excellent vehicles to help you build adiversified portfolio in keeping with your goals.

We have designed Schwab equity funds to deliver a combination of strongperformance and good value. While I am proud of Schwab Funds(R) in general, I amespecially pleased with the Schwab Dividend Equity Fund, which performed verywell over the report period. The Fund is one of eight powered by Schwab EquityRatings(R) and uses the same stock-ranking expertise that helped Schwab's modelequity portfolio achieve industry recognition in Barron's 2004 annualstock-selection competition.

Looking forward, we continue to see tremendous opportunities for investors, andmy colleagues and I are committed to helping you maximize them. We will continueto expand the array of products and services that can help you meet your long-and short-term investment goals.

In closing, I want to remind you that our commitment to our shareholders willnot change. Thank you for investing with us.

Sincerely,

/s/ Charles Schwab

Investors should consider carefully information contained in the prospectus,including investment objectives, risks, charges and expenses. You can request aprospectus by calling Schwab at 1-800-435-4000. Please read the prospectuscarefully before investing.

MANAGEMENT'S DISCUSSION for the six months ended April 30, 2005

[PHOTO OF EVELYN DILSAVER]

EVELYN DILSAVER is President and CEO of Charles Schwab Investment Management,Inc. and is president of the funds covered in this report. She joined the firmin 1992 and has held a variety of executive positions at Schwab.

Dear Shareholder,

When I assumed my new role as President and CEO of Schwab Funds(R) last year, Ipledged that I would be committed to offering you more relevant choices andbetter value. I am pleased to report that we already have done both.

I'm also happy to announce that Schwab Funds has launched another fund. TheSchwab Premier Equity Fund(TM), the newest addition to Schwab Funds' ActiveEquity Fund family, was launched on March 21, 2005. The Schwab Premier EquityFund portfolio managers use a multi-cap strategy and include a variety ofinvestment styles and asset classes, shifting between growth and value accordingto market conditions. The Fund also is diversified across all sectors. With thisbroad coverage, the Schwab Premier Equity Fund can be an integral part of abalanced, diversified portfolio that can help you reach your long-terminvestment goals.

In terms of value, the Schwab Premier Equity Fund, as well as other Schwabfunds, offer Select Shares, a share class that has lower expenses and higherinvestment minimums than Investor Shares.

I speak for all of Schwab Funds when I say we want Schwab to be a place whereinvestors can find useful, quality financial products and services to help themsucceed. Regardless of the size of their portfolios, Schwab should be the placeinvestors can trust to watch out for their best interests.

I continue to look for more ways to offer you relevant choices and value. Yourtrust is very important to us, and I will do all I can to maintain that trust.Thank you for investing in Schwab Funds.

Sincerely,

/s/ Evelyn Dilsaver

Investors should consider carefully information contained in the prospectus,including investment objectives, risks, charges and expenses. You can request aprospectus by calling Schwab at 1-800-435-4000. Please read the prospectuscarefully before investing.

2 Schwab Equity Index Funds

[PHOTO OF JEFFREY MORTIMER]

JEFFREY MORTIMER, CFA, senior vice president and chief investment officer,equities, of the investment adviser is responsible for the overall management ofthe funds. Prior to joining the firm in October 1997, he worked for more thannine years in asset management.

[PHOTO OF LARRY MANO]

LARRY MANO, vice president and senior portfolio manager, is responsible for theday-to-day management of the funds. Prior to joining the firm in 1998, he workedfor 20 years in equity management.

THE INVESTMENT ENVIRONMENT AND THE FUNDS

If the 2004 equity market ended with a bang, the 2005 market started with awhimper, with all the major equity indices down from their year-end highs at theend of April. For the six-month report period, however, the S&P 500(R) Index 1was still up 3.28%, due to the end-of-year rally. The broader Dow Jones Wilshire5000 Composite Index(SM) 2 was up 3.50% for the report period, againpredominantly because of strong equity returns in November and December 2004.Small-cap stocks lost their leading position to their larger-cap cohorts, andvalue continued to be the favored style. Stocks were volatile and sentiment wasfickle in the face of high energy prices, indications of budding inflation, andprospects of the Federal Reserve continuing to raise short-term interest rates,which it did four times during the six-month report period.

Early in the period, investors were heartened when oil prices dipped and theU.S. presidential election results were uncontested. Unfortunately, the briefrespite in oil prices was short-lived and strengthening global demand for oil,particularly in the Pacific Rim, and refinery constraints at home drove crudeprices to record highs, above $50 per barrel in mid-February.

The firming labor market, as well as steady gains in capital spending, kept theeconomic expansion on a self-sustaining path and corporate liquidity remainedpositive. Consumer sentiment, however, hit a soft patch and started to weaken in2005. First-quarter GDP came in at 3.1%, slightly below expectations and weakerthan the fourth quarter, when it was 3.8%. In this environment, retail salessoftened.

Despite the slowdown in the GDP, strong labor market conditions remainedpositive for domestic consumption. On the earnings front, fourth-quarterearnings were generally better than expected due, in part,

Source of Sector Classification: S&P and MSCI.

1 Standard & Poor's(R), S&P(R), S&P 500(R), Standard & Poor's 500(R) and 500(R) are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by the fund. The fund is not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in the fund.

2 Dow Jones", "Wilshire", "The DJW 5000(SM)", "The Dow Jones Wilshire 5000(SM)" and "The Dow Jones Wilshire 5000 Composite Index(SM)" are service marks of Dow Jones & Company, Inc. and Wilshire Associates Incorporated. The Schwab Total Stock Market Index Fund, based on The Dow Jones Wilshire 5000 Composite Index(SM), is not sponsored, endorsed, sold or promoted by Dow Jones or Wilshire; and, neither Dow Jones nor Wilshire makes any representation regarding the advisability of investing in such a product.

Schwab Equity Index Funds 3

MANAGEMENT'S DISCUSSION continued

[PHOTO OF TOM BROWN]

TOM BROWN, an associate portfolio manager of the investment adviser, is aday-to-day co-manager of the funds except for the Schwab Total Stock MarketIndex Fund. He joined Schwab in 1995, became a trader in 1999, and was named tohis current position in 2004.

to strong reports from companies in the Energy sector. Expectations forfirst-quarter earnings remained upbeat, although weaker than recent quarters,due to difficult year-over-year comparisons.

Though some high oil and commodity prices may have hampered growth and stirredinflationary pressures, productivity growth and slack in the economy have mostlykept a lid on core inflation. This productivity, coupled with foreign centralbanks buying large amounts of U.S. Treasury securities, also helped to keeplong-term interest rates under control.

While high energy prices remained a significant headwind for economicperformance, they certainly helped boost oil companies' bottom lines. In fact,the strongest sector, according to S&P, was Energy, closely followed byUtilities and then Health Care. On the flip side, Information Technology was theworst performing sector over the report period, while the Consumer Discretionarysector also suffered.

THE SCHWAB S&P 500 FUND ENDED THE SIX-MONTH REPORT PERIOD UP 3.13%, TRACKING ITSBENCHMARK, THE S&P 500 INDEX, WHICH WAS UP 3.28%.

Interestingly, most of this appreciation occurred during the beginning of thereport period. Once the calendar turned into 2005, the equity markets becameextremely volatile. While the pace of growth decelerated during the reportperiod, the price of crude oil still increased, making

ASSET CLASS PERFORMANCE COMPARISON % returns during the report period

This graph compares the performance of various asset classes during the reportperiod. Final performance figures for the period are in the key below.

3.28% S&P 500(R) INDEX: measures U.S. large-cap stocks

- -0.15% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks

8.71% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in Europe, Australasia and the Far East

0.98% 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-04 0.00 0.00 0.00 0.0005-Nov-04 -0.52 3.71 3.53 3.2112-Nov-04 -0.49 4.81 6.60 4.8819-Nov-04 -0.40 5.92 5.15 3.6926-Nov-04 -0.47 6.96 8.21 4.8103-Dec-04 -0.38 8.68 10.13 5.6210-Dec-04 0.13 5.79 8.44 5.3717-Dec-04 -0.05 7.36 10.16 5.9524-Dec-04 0.02 10.52 11.44 7.4031-Dec-04 0.12 11.52 11.89 7.5907-Jan-05 -0.09 8.50 5.32 5.3514-Jan-05 0.27 8.74 6.07 5.2221-Jan-05 0.68 7.81 4.98 3.7528-Jan-05 0.70 8.68 5.33 4.0804-Feb-05 1.05 10.43 9.55 6.9511-Feb-05 1.03 11.16 9.11 7.2318-Feb-05 0.51 12.75 8.33 6.9425-Feb-05 0.47 13.4 9.63 7.8604-Mar-05 0.44 15.44 10.92 8.8611-Mar-05 -0.43 15.54 7.84 6.9618-Mar-05 -0.34 14.06 7.13 6.0425-Mar-05 -0.79 11.43 5.88 4.4201-Apr-05 -0.16 11.55 5.31 4.5908-Apr-05 -0.28 12.02 5.20 5.3715-Apr-05 0.55 10.11 0.06 1.9522-Apr-05 0.78 10.36 1.57 2.8129-Apr-05 0.98 8.71 -0.15 3.28

These figures assume dividends and distributions were reinvested. Index figuresdo not include trading and management costs, which would lower performance.Indices are unmanaged and you cannot invest in them directly. Remember that pastperformance is not an indication of future results.

Data source: Charles Schwab & Co., Inc.



PERFORMANCE AT A GLANCE

Total return for the six months ended 4/30/05

THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE DOESNOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILLFLUCTUATE SO THAT AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN THEIRORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN PERFORMANCE DATAQUOTED. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END,PLEASE VISIT WWW.SCHWAB.COM/SCHWABFUNDS.

SCHWAB S&P 500 INDEX FUNDInvestor Shares ......................... 3.13%Select Shares(R) ........................ 3.25%e.Shares(R) ............................. 3.21%Benchmark ............................... 3.28%

Performance Details ..................... pages 6-8

SCHWAB 1000 INDEX(R) FUNDInvestor Shares ......................... 3.59%Select Shares ........................... 3.66%Benchmark ............................... 3.63%


SCHWAB SMALL-CAP INDEX FUND(R)Investor Shares ......................... 0.59%Select Shares ........................... 0.65%Benchmark ............................... 0.69%


SCHWAB TOTAL STOCK MARKETINDEX FUND(R)Investor Shares ......................... 3.49%Select Shares ........................... 3.57%Benchmark ............................... 3.50%


SCHWAB INTERNATIONAL INDEX FUND(R)Investor Shares ......................... 8.09%Select Shares ........................... 8.20%Benchmark ............................... 7.87%


energy-related stocks the top performers. Within this Fund, the best performingsectors were Utilities and Energy. On the downside, Information Technology wasthe worst performing sector during the report period.

THE SCHWAB 1000 INDEX FUND was up 3.59% for the report period, closely trackingits benchmark, the Schwab 1000 Index(R), which was up 3.63%. Once the calendarturned into 2005, the equity markets became extremely volatile. While the priceof a barrel of oil continued to rise during the report period, the pace ofgrowth decelerated, making energy-related stocks the top performers in the Fund.In addition to Energy, the Utilities sector also was strong. On the downside,Information Technology continued to struggle.

THE SCHWAB SMALL-CAP INDEX FUND was up 0.59% for the period, tracking itsbenchmark, the Schwab Small-Cap Index, which was up 0.69%. While this Fundtended to be more volatile than the large-cap fund, the price of oil impactedperformance significantly, and just as its larger-cap cohorts rallied in theEnergy sector, so, too, did small cap. Consumer Staples also performed well. Onthe downside, the Information Technology and Telecommunications Services sectorscontinued to struggle.

THE SCHWAB TOTAL STOCK MARKET INDEX FUND was up 3.49% for the six-month reportperiod, nearly matching its benchmark, the Dow Jones Wilshire 5000 CompositeIndex, which was up 3.50%. The best performing sectors in the Fund were HealthCare and Energy. Conversely, Information Technology was the worst performingsector.

THE SCHWAB INTERNATIONAL INDEX FUND was up 8.09%, outperforming its benchmark,the Schwab International Index, which was up 7.87% for the six-month reportperiod. Within the Fund, Australia was the best performing country, whileSingapore contributed the least to returns. The top sectors were ConsumerStaples and Health Care, while Information Technology performed as poorlyoverseas as it did in the U.S.

Source of Sector Classification: S&P and MSCI. All fund and index figures onthis page assume dividends and distributions were reinvested. Index figures donot include trading and management costs, which would lower performance. Indicesare unmanaged, and you cannot invest in them directly. Performance results lessthan one year are not annualized.

Expenses may be partially absorbed by CSIM and Schwab. Without these reductions,the funds' total returns would have been lower. Performance does not reflect thededuction of taxes that a shareholder would pay on fund distributions or on theredemption of fund shares.

Small-company stocks are subject to greater volatility than other assetcategories. Foreign securities can involve risks such as political and economicinstability and currency risk.

Nothing in this report represents a recommendation of a security by theinvestment adviser. Manager views and portfolio holdings may have changed sincethe report date.


SCHWAB S&P 500 INDEX FUND

INVESTOR SHARES PERFORMANCE as of 4/30/05

PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1, 2

This bar chart compares pre-tax performance of the fund's Investor Shares withits benchmark and Morningstar category. The table below the chart shows twotypes of after-tax returns.

[BAR CHART]

Fund: INVESTOR SHARES Benchmark: Fund Category: Ticker Symbol: S&P 500(R) MORNINGSTAR SWPIX INDEX LARGE-CAP BLEND 6 MONTHS 3.13% 3.28% 3.26%1 YEAR 6.02% 6.34% 5.50%5 YEARS -3.23% -2.94% -2.54%SINCE INCEPTION: 5/1/96 7.83% 8.23% 6.80%

6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION

Fund: Fund: Fund: Fund: INVESTOR Fund INVESTOR Fund INVESTOR Fund INVESTOR Fund SHARES Category: SHARES Category: SHARES Category: SHARES Category: Ticker MORNINGSTAR Ticker MORNINGSTAR Ticker MORNINGSTAR Ticker MORNINGSTAR Symbol: LARGE-CAP Symbol: LARGE-CAP Symbol: LARGE-CAP Symbol: LARGE-CAPTOTAL RETURNS AFTER TAX SWPIX BLEND SWPIX BLEND SWPIX BLEND SWPIX BLEND- ------------------------------------------------------------------------------------------------------------------------------- PRE-LIQUIDATION (still own shares) 2.88% 0.96% 5.77% 3.36% -3.56% -3.39% 7.46% n/a- -------------------------------------------------------------------------------------------------------------------------------POST-LIQUIDATION (shares were sold) 2.38% 1.00% 4.27% 2.63% -2.87% -2.56% 6.70% n/a- -------------------------------------------------------------------------------------------------------------------------------


PERFORMANCE OF A HYPOTHETICAL $10,000 INVESTMENT 2

This graph shows performance since inception of a hypothetical $10,000investment in the fund's Investor Shares, compared with a similar investment inits benchmark.

$19,722 INVESTOR SHARES

$20,399 S&P 500(R) INDEX

[LINE GRAPH]

INVESTOR SHARES S&P 500(R) INDEX 01-May-96 $10,000 $10,00031-May-96 $10,250 $10,25730-Jun-96 $10,290 $10,29631-Jul-96 $9,840 $9,84131-Aug-96 $10,040 $10,04930-Sep-96 $10,600 $10,61331-Oct-96 $10,880 $10,90630-Nov-96 $11,690 $11,73131-Dec-96 $11,462 $11,49831-Jan-97 $12,157 $12,21628-Feb-97 $12,248 $12,31231-Mar-97 $11,744 $11,80830-Apr-97 $12,430 $12,51131-May-97 $13,186 $13,27230-Jun-97 $13,760 $13,86731-Jul-97 $14,849 $14,96931-Aug-97 $14,012 $14,13130-Sep-97 $14,778 $14,90431-Oct-97 $14,284 $14,40630-Nov-97 $14,930 $15,07331-Dec-97 $15,184 $15,33231-Jan-98 $15,357 $15,50228-Feb-98 $16,455 $16,62031-Mar-98 $17,289 $17,47130-Apr-98 $17,452 $17,64731-May-98 $17,147 $17,34430-Jun-98 $17,838 $18,04831-Jul-98 $17,645 $17,85731-Aug-98 $15,092 $15,27830-Sep-98 $16,058 $16,25731-Oct-98 $17,340 $17,57930-Nov-98 $18,387 $18,64531-Dec-98 $19,443 $19,71831-Jan-99 $20,253 $20,54328-Feb-99 $19,617 $19,90431-Mar-99 $20,397 $20,70030-Apr-99 $21,176 $21,50131-May-99 $20,663 $20,99430-Jun-99 $21,812 $22,15931-Jul-99 $21,125 $21,46731-Aug-99 $21,012 $21,36030-Sep-99 $20,428 $20,77531-Oct-99 $21,709 $22,09030-Nov-99 $22,150 $22,53931-Dec-99 $23,448 $23,86631-Jan-00 $22,266 $22,66829-Feb-00 $21,841 $22,23931-Mar-00 $23,967 $24,41430-Apr-00 $23,241 $23,67931-May-00 $22,753 $23,19430-Jun-00 $23,313 $23,76731-Jul-00 $22,940 $23,39631-Aug-00 $24,361 $24,84930-Sep-00 $23,075 $23,53731-Oct-00 $22,971 $23,43830-Nov-00 $21,156 $21,59131-Dec-00 $21,261 $21,69731-Jan-01 $22,014 $22,46728-Feb-01 $19,996 $20,41831-Mar-01 $18,730 $19,12430-Apr-01 $20,174 $20,61031-May-01 $20,310 $20,74830-Jun-01 $19,808 $20,24431-Jul-01 $19,609 $20,04531-Aug-01 $18,375 $18,79030-Sep-01 $16,890 $17,27231-Oct-01 $17,204 $17,60230-Nov-01 $18,521 $18,95231-Dec-01 $18,678 $19,11931-Jan-02 $18,403 $18,84028-Feb-02 $18,044 $18,47631-Mar-02 $18,710 $19,17130-Apr-02 $17,579 $18,00931-May-02 $17,442 $17,87630-Jun-02 $16,195 $16,60331-Jul-02 $14,938 $15,31031-Aug-02 $15,023 $15,40930-Sep-02 $13,396 $13,73431-Oct-02 $14,568 $14,94330-Nov-02 $15,424 $15,82331-Dec-02 $14,516 $14,89431-Jan-03 $14,130 $14,50428-Feb-03 $13,915 $14,28631-Mar-03 $14,044 $14,42530-Apr-03 $15,202 $15,61431-May-03 $15,995 $16,43630-Jun-03 $16,188 $16,64731-Jul-03 $16,478 $16,94031-Aug-03 $16,788 $17,27030-Sep-03 $16,606 $17,08731-Oct-03 $17,539 $18,05430-Nov-03 $17,689 $18,21331-Dec-03 $18,601 $19,16731-Jan-04 $18,938 $19,52029-Feb-04 $19,199 $19,79131-Mar-04 $18,906 $19,49330-Apr-04 $18,601 $19,18731-May-04 $18,851 $19,44930-Jun-04 $19,210 $19,82731-Jul-04 $18,569 $19,17031-Aug-04 $18,645 $19,24730-Sep-04 $18,840 $19,45531-Oct-04 $19,123 $19,75330-Nov-04 $19,894 $20,55331-Dec-04 $20,561 $21,25131-Jan-05 $20,053 $20,73328-Feb-05 $20,472 $21,16831-Mar-05 $20,108 $20,79430-Apr-05 $19,722 $20,399

All figures on this page assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged, and you cannot invest in them directly. Performance results less than one year are not annualized.

1 The pre-tax total return and the graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. After-tax returns are calculated using the highest historical individual federal marginal income tax rates in effect as of 4/30/05 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.



Select Shares(R) Performance as of 4/30/05


This bar chart compares pre-tax performance of the fund's Select Shares with itsbenchmark and Morningstar category. The table below the chart shows two types ofafter-tax returns.

[BAR CHART]

Fund: SELECT SHARES Benchmark: Fund Category: Ticker Symbol: S&P 500(R) MORNINGSTAR SWPPX INDEX LARGE-CAP BLEND 6 MONTHS 3.25% 3.28% 3.26%1 YEAR 6.26% 6.34% 5.50%5 YEARS -3.06% -2.94% -2.54%SINCE INCEPTION: 5/19/97 5.62% 5.80% 5.12%


Fund: Fund: Fund: Fund: SELECT Fund SELECT Fund SELECT Fund SELECT Fund SHARES Category: SHARES Category: SHARES Category: SHARES Category: Ticker MORNINGSTAR Ticker MORNINGSTAR Ticker MORNINGSTAR Ticker MORNINGSTAR Symbol: LARGE-CAP Symbol: LARGE-CAP Symbol: LARGE-CAP Symbol: LARGE-CAPTOTAL RETURNS AFTER TAX SWPPX BLEND SWPPX BLEND SWPPX BLEND SWPPX BLEND- --------------------------------------------------------------------------------------------------------------------------- PRE-LIQUIDATION (still own shares) 2.99% 0.96% 5.98% 3.36% -3.43% -3.39% 5.20% n/a- ---------------------------------------------------------------------------------------------------------------------------POST-LIQUIDATION (shares were sold) 2.48% 1.00% 4.45% 2.63% -2.76% -2.56% 4.67% n/a- ---------------------------------------------------------------------------------------------------------------------------



This graph shows performance since inception of a hypothetical $50,000investment (the minimum investment for this share class) in the fund's SelectShares, compared with a similar investment in its benchmark.

$77,245 SELECT SHARES

$78,278 S&P 500(R) INDEX

[LINE GRAPH]

SELECT SHARES S&P 500(R) INDEX 19-May-97 $50,000 $50,00031-May-97 $50,935 $50,93030-Jun-97 $53,190 $53,21231-Jul-97 $57,395 $57,44231-Aug-97 $54,165 $54,22530-Sep-97 $57,120 $57,19131-Oct-97 $55,215 $55,28130-Nov-97 $57,745 $57,84131-Dec-97 $58,745 $58,83631-Jan-98 $59,375 $59,48928-Feb-98 $63,660 $63,77831-Mar-98 $66,880 $67,04330-Apr-98 $67,550 $67,72031-May-98 $66,370 $66,55630-Jun-98 $69,040 $69,25831-Jul-98 $68,295 $68,52431-Aug-98 $58,435 $58,62930-Sep-98 $62,165 $62,38731-Oct-98 $67,155 $67,45930-Nov-98 $71,245 $71,54731-Dec-98 $75,340 $75,66831-Jan-99 $78,475 $78,83128-Feb-99 $76,015 $76,37931-Mar-99 $79,030 $79,43430-Apr-99 $82,085 $82,50931-May-99 $80,140 $80,56130-Jun-99 $84,545 $85,03331-Jul-99 $81,885 $82,38031-Aug-99 $81,490 $81,96830-Sep-99 $79,230 $79,72131-Oct-99 $84,230 $84,76730-Nov-99 $85,935 $86,49131-Dec-99 $91,000 $91,58531-Jan-00 $86,420 $86,98729-Feb-00 $84,770 $85,34131-Mar-00 $93,050 $93,68730-Apr-00 $90,235 $90,86731-May-00 $88,350 $89,00430-Jun-00 $90,515 $91,20331-Jul-00 $89,110 $89,78031-Aug-00 $94,655 $95,35630-Sep-00 $89,635 $90,32231-Oct-00 $89,230 $89,94230-Nov-00 $82,200 $82,85531-Dec-00 $82,655 $83,26131-Jan-01 $85,540 $86,21728-Feb-01 $77,745 $78,35431-Mar-01 $72,835 $73,38630-Apr-01 $78,480 $79,08831-May-01 $78,965 $79,61830-Jun-01 $77,055 $77,68331-Jul-01 $76,285 $76,92231-Aug-01 $71,500 $72,10730-Sep-01 $65,735 $66,28031-Oct-01 $66,955 $67,54630-Nov-01 $72,065 $72,72731-Dec-01 $72,700 $73,36731-Jan-02 $71,635 $72,29628-Feb-02 $70,240 $70,90131-Mar-02 $72,865 $73,56730-Apr-02 $68,430 $69,10831-May-02 $67,940 $68,59730-Jun-02 $63,095 $63,71331-Jul-02 $58,170 $58,75031-Aug-02 $58,580 $59,13230-Sep-02 $52,175 $52,70431-Oct-02 $56,775 $57,34230-Nov-02 $60,140 $60,71931-Dec-02 $56,585 $57,15531-Jan-03 $55,085 $55,65828-Feb-03 $54,250 $54,82331-Mar-03 $54,790 $55,35530-Apr-03 $59,300 $59,91631-May-03 $62,430 $63,07330-Jun-03 $63,180 $63,88131-Jul-03 $64,305 $65,00531-Aug-03 $65,560 $66,27330-Sep-03 $64,850 $65,57031-Oct-03 $68,480 $69,28130-Nov-03 $69,065 $69,89131-Dec-03 $72,695 $73,55331-Jan-04 $74,010 $74,90729-Feb-04 $75,025 $75,94831-Mar-04 $73,880 $74,80130-Apr-04 $72,695 $73,62731-May-04 $73,710 $74,63530-Jun-04 $75,110 $76,08331-Jul-04 $72,610 $73,56531-Aug-04 $72,910 $73,85930-Sep-04 $73,710 $74,65731-Oct-04 $74,810 $75,79930-Nov-04 $77,815 $78,86931-Dec-04 $80,475 $81,55131-Jan-05 $78,495 $79,56128-Feb-05 $80,130 $81,23231-Mar-05 $78,755 $79,79430-Apr-05 $77,245 $78,278






e.Shares(R) Performance as of 4/30/05


This bar chart compares pre-tax performance of the fund's e.Shares with itsbenchmark and Morningstar category. The table below the chart shows two types ofafter-tax returns.

[BAR CHART]

Fund: E.SHARES Benchmark: Fund Category: Ticker Symbol: S&P 500(R) MORNINGSTAR SWPEX INDEX LARGE-CAP BLEND 6 MONTHS 3.21% 3.28% 3.26%1 YEAR 6.10% 6.34% 5.50%5 YEARS -3.15% -2.94% -2.54%SINCE INCEPTION: 5/1/96 7.93% 8.23% 6.80%


Fund Fund Fund Fund Fund Fund Fund Fund E.SHARES Category: E.SHARES Category: E.SHARES Category: E.SHARES Category: Ticker MORNINGSTAR Ticker MORNINGSTAR Ticker MORNINGSTAR Ticker MORNINGSTAR Symbol: LARGE-CAP Symbol: LARGE-CAP Symbol: LARGE-CAP Symbol: LARGE-CAPTOTAL RETURNS AFTER TAX SWPEX BLEND SWPEX BLEND SWPEX BLEND SWPEX BLEND- ------------------------------------------------------------------------------------------------------------------------------------ PRE-LIQUIDATION (still own shares) 2.95% 0.96% 5.84% 3.36% -3.50% -3.39% 7.53% n/a- ------------------------------------------------------------------------------------------------------------------------------------POST-LIQUIDATION (shares were sold) 2.45% 1.00% 4.34% 2.63% -2.82% -2.56% 6.77% n/a- ------------------------------------------------------------------------------------------------------------------------------------



This graph shows performance since inception of a hypothetical $10,000investment in the fund's e.Shares, compared with a similar investment in itsbenchmark.

$19,882 E.SHARES

$20,399 S&P 500(R) INDEX

[LINE GRAPH]

E.SHARES S&P 500(R) INDEX 01-May-96 $10,000 $10,00031-May-96 $10,250 $10,25730-Jun-96 $10,290 $10,29631-Jul-96 $9,840 $9,84131-Aug-96 $10,050 $10,04930-Sep-96 $10,600 $10,61331-Oct-96 $10,890 $10,90630-Nov-96 $11,710 $11,73131-Dec-96 $11,473 $11,49831-Jan-97 $12,179 $12,21628-Feb-97 $12,270 $12,31231-Mar-97 $11,766 $11,80830-Apr-97 $12,452 $12,51131-May-97 $13,209 $13,27230-Jun-97 $13,794 $13,86731-Jul-97 $14,873 $14,96931-Aug-97 $14,036 $14,13130-Sep-97 $14,803 $14,90431-Oct-97 $14,318 $14,40630-Nov-97 $14,964 $15,07331-Dec-97 $15,227 $15,33231-Jan-98 $15,390 $15,50228-Feb-98 $16,490 $16,62031-Mar-98 $17,336 $17,47130-Apr-98 $17,499 $17,64731-May-98 $17,193 $17,34430-Jun-98 $17,886 $18,04831-Jul-98 $17,692 $17,85731-Aug-98 $15,136 $15,27830-Sep-98 $16,103 $16,25731-Oct-98 $17,397 $17,57930-Nov-98 $18,446 $18,64531-Dec-98 $19,504 $19,71831-Jan-99 $20,316 $20,54328-Feb-99 $19,679 $19,90431-Mar-99 $20,459 $20,70030-Apr-99 $21,240 $21,50131-May-99 $20,737 $20,99430-Jun-99 $21,878 $22,15931-Jul-99 $21,199 $21,46731-Aug-99 $21,086 $21,36030-Sep-99 $20,501 $20,77531-Oct-99 $21,795 $22,09030-Nov-99 $22,227 $22,53931-Dec-99 $23,536 $23,86631-Jan-00 $22,350 $22,66829-Feb-00 $21,924 $22,23931-Mar-00 $24,057 $24,41430-Apr-00 $23,328 $23,67931-May-00 $22,850 $23,19430-Jun-00 $23,401 $23,76731-Jul-00 $23,037 $23,39631-Aug-00 $24,462 $24,84930-Sep-00 $23,172 $23,53731-Oct-00 $23,068 $23,43830-Nov-00 $21,247 $21,59131-Dec-00 $21,364 $21,69731-Jan-01 $22,110 $22,46728-Feb-01 $20,092 $20,41831-Mar-01 $18,821 $19,12430-Apr-01 $20,271 $20,61031-May-01 $20,407 $20,74830-Jun-01 $19,903 $20,24431-Jul-01 $19,703 $20,04531-Aug-01 $18,463 $18,79030-Sep-01 $16,971 $17,27231-Oct-01 $17,297 $17,60230-Nov-01 $18,610 $18,95231-Dec-01 $18,768 $19,11931-Jan-02 $18,492 $18,84028-Feb-02 $18,141 $18,47631-Mar-02 $18,810 $19,17130-Apr-02 $17,674 $18,00931-May-02 $17,536 $17,87630-Jun-02 $16,282 $16,60331-Jul-02 $15,019 $15,31031-Aug-02 $15,114 $15,40930-Sep-02 $13,468 $13,73431-Oct-02 $14,647 $14,94330-Nov-02 $15,507 $15,82331-Dec-02 $14,593 $14,89431-Jan-03 $14,216 $14,50428-Feb-03 $14,000 $14,28631-Mar-03 $14,129 $14,42530-Apr-03 $15,294 $15,61431-May-03 $16,092 $16,43630-Jun-03 $16,297 $16,64731-Jul-03 $16,578 $16,94031-Aug-03 $16,890 $17,27030-Sep-03 $16,707 $17,08731-Oct-03 $17,656 $18,05430-Nov-03 $17,807 $18,21331-Dec-03 $18,727 $19,16731-Jan-04 $19,066 $19,52029-Feb-04 $19,328 $19,79131-Mar-04 $19,033 $19,49330-Apr-04 $18,738 $19,18731-May-04 $18,989 $19,44930-Jun-04 $19,350 $19,82731-Jul-04 $18,705 $19,17031-Aug-04 $18,782 $19,24730-Sep-04 $18,978 $19,45531-Oct-04 $19,263 $19,75330-Nov-04 $20,039 $20,55331-Dec-04 $20,716 $21,25131-Jan-05 $20,215 $20,73328-Feb-05 $20,627 $21,16831-Mar-05 $20,271 $20,79430-Apr-05 $19,882 $20,399






FUND FACTS as of 4/30/05

STYLE ASSESSMENT 1

[GRAPHIC]

INVESTMENT STYLE Value Blend Growth MARKET CAP Large / / /X/ / / Medium / / / / / / Small / / / / / /

STATISTICS

NUMBER OF HOLDINGS 501- --------------------------------------------------------------------------------WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $91,039- --------------------------------------------------------------------------------PRICE/EARNINGS RATIO (P/E) 19.5- --------------------------------------------------------------------------------PRICE/BOOK RATIO (P/B) 2.8- --------------------------------------------------------------------------------PORTFOLIO TURNOVER RATE 2 3%- --------------------------------------------------------------------------------MINIMUM INITIAL INVESTMENT 3 Investor Shares $2,500 ($1,000 for retirement, education and custodial accounts) Select Shares $50,000 e.Shares ($500 for retirement and custodial accounts) $1,000- --------------------------------------------------------------------------------

TOP HOLDINGS 4

% OFSECURITY NET ASSETS- -------------------------------------------------------------------------------- (1) GENERAL ELECTRIC CO. 3.6%- --------------------------------------------------------------------------------(2) EXXON MOBIL CORP. 3.4%- --------------------------------------------------------------------------------(3) MICROSOFT CORP. 2.4%- --------------------------------------------------------------------------------(4) CITIGROUP, INC. 2.3%- --------------------------------------------------------------------------------(5) JOHNSON & JOHNSON 1.9%- --------------------------------------------------------------------------------(6) PFIZER, INC. 1.9%- --------------------------------------------------------------------------------(7) BANK OF AMERICA CORP. 1.7%- --------------------------------------------------------------------------------(8) WAL-MART STORES, INC. 1.5%- --------------------------------------------------------------------------------(9) INTEL CORP. 1.4%- --------------------------------------------------------------------------------(10) PROCTER & GAMBLE CO. 1.3%- -------------------------------------------------------------------------------- TOTAL 21.4%

SECTOR WEIGHTINGS % of Investments

This chart shows the fund's sector composition as of the report date. A sectoris a portion of the overall stock market that is made up of industries whosebusiness components share similar characteristics.

[PIE CHART]

20.2% FINANCIALS14.8% INFORMATION TECHNOLOGY13.7% HEALTH CARE11.8% INDUSTRIALS10.9% CONSUMER DISCRETIONARY10.4% CONSUMER STAPLES 8.5% ENERGY 3.4% UTILITIES 3.2% TELECOMMUNICATION SERVICES 3.1% MATERIALS

Portfolio holdings may have changed since the report date.


1 Source: Morningstar, Inc. This style assessment is the result of evaluating the fund based on a ten-factor model for value and growth characteristics. The fund's market capitalization placement is determined by the geometric mean of its holdings' market capitalizations. The assessment reflects the fund's portfolio as of 4/30/05, which may have changed since then, and is not a precise indication of risk or performance--past, present, or future.

2 Not annualized.

3 Please see prospectus for further detail and eligibility requirements.

4 This list is not a recommendation of any security by the investment adviser.


SCHWAB 1000 INDEX(R) FUND


PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1


[BAR CHART]

Fund: INVESTOR SHARES Benchmark: Fund Category: Ticker Symbol: SCHWAB 1000 MORNINGSTAR SNXFX INDEX(R) LARGE-CAP BLEND 6 MONTHS 3.59% 3.63% 3.26%1 YEAR 6.47% 6.74% 5.50%5 YEARS 2 -2.68% -2.41% -2.54%10 YEARS 2 10.09% 10.46% 8.79%

6 MONTHS 1 YEAR 5 YEARS 10 YEARS

Fund: Fund: Fund: Fund: INVESTOR Fund INVESTOR Fund INVESTOR Fund INVESTOR Fund SHARES Category: SHARES Category: SHARES Category: SHARES Category: Ticker MORNINGSTAR Ticker MORNINGSTAR Ticker MORNINGSTAR Ticker MORNINGSTAR Symbol: LARGE-CAP Symbol: LARGE-CAP Symbol: LARGE-CAP Symbol: LARGE-CAPTOTAL RETURNS AFTER TAX SNXFX BLEND SNXFX BLEND SNXFX BLEND SNXFX BLEND- ------------------------------------------------------------------------------------------------------------------------------------ PRE-LIQUIDATION (still own shares) 3.37% 0.96% 6.24% 3.36% -2.96% -3.39% 9.71% 7.18%- ------------------------------------------------------------------------------------------------------------------------------------POST-LIQUIDATION (shares were sold) 2.63% 1.00% 4.51% 2.63% -2.39% -2.56% 8.77% 6.93%- ------------------------------------------------------------------------------------------------------------------------------------



This graph shows performance over ten years of a hypothetical $10,000 investmentin the fund's Investor Shares, compared with a similar investment in itsbenchmark and an additional index.


$27,069 SCHWAB 1000 INDEX(R)

$26,553 S&P 500(R) INDEX

[LINE GRAPH]

INVESTOR SCHWAB 1000 S&P 500(R) SHARES INDEX(R) INDEX 30-Apr-95 $10,000 $10,000 $10,00031-May-95 $10,362 $10,370 $10,39930-Jun-95 $10,639 $10,655 $10,64031-Jul-95 $11,043 $11,057 $10,99231-Aug-95 $11,128 $11,143 $11,02030-Sep-95 $11,568 $11,599 $11,48531-Oct-95 $11,512 $11,540 $11,44430-Nov-95 $12,009 $12,049 $11,94531-Dec-95 $12,187 $12,229 $12,17531-Jan-96 $12,547 $12,600 $12,58929-Feb-96 $12,733 $12,787 $12,70631-Mar-96 $12,848 $12,911 $12,82830-Apr-96 $13,065 $13,131 $13,01731-May-96 $13,374 $13,448 $13,35230-Jun-96 $13,338 $13,427 $13,40231-Jul-96 $12,705 $12,790 $12,81031-Aug-96 $13,050 $13,135 $13,08030-Sep-96 $13,777 $13,871 $13,81531-Oct-96 $14,057 $14,151 $14,19730-Nov-96 $15,072 $15,176 $15,27031-Dec-96 $14,816 $14,929 $14,96731-Jan-97 $15,669 $15,794 $15,90128-Feb-97 $15,727 $15,849 $16,02731-Mar-97 $15,027 $15,158 $15,37030-Apr-97 $15,836 $15,958 $16,28631-May-97 $16,841 $16,989 $17,27630-Jun-97 $17,541 $17,707 $18,05031-Jul-97 $18,961 $19,136 $19,48531-Aug-97 $18,050 $18,232 $18,39430-Sep-97 $19,020 $19,212 $19,40031-Oct-97 $18,393 $18,582 $18,75230-Nov-97 $19,165 $19,374 $19,62031-Dec-97 $19,546 $19,762 $19,95831-Jan-98 $19,686 $19,914 $20,17928-Feb-98 $21,135 $21,399 $21,63431-Mar-98 $22,210 $22,507 $22,74230-Apr-98 $22,438 $22,752 $22,97231-May-98 $21,945 $22,255 $22,57630-Jun-98 $22,828 $23,149 $23,49331-Jul-98 $22,511 $22,825 $23,24431-Aug-98 $19,148 $19,417 $19,88830-Sep-98 $20,384 $20,687 $21,16231-Oct-98 $22,003 $22,359 $22,88330-Nov-98 $23,372 $23,755 $24,27031-Dec-98 $24,854 $25,259 $25,66731-Jan-99 $25,796 $26,219 $26,74028-Feb-99 $24,929 $25,367 $25,90931-Mar-99 $25,929 $26,377 $26,94530-Apr-99 $26,983 $27,466 $27,98831-May-99 $26,360 $26,839 $27,32730-Jun-99 $27,673 $28,197 $28,84431-Jul-99 $26,790 $27,299 $27,94431-Aug-99 $26,531 $27,075 $27,80430-Sep-99 $25,826 $26,270 $27,04231-Oct-99 $27,532 $28,042 $28,75430-Nov-99 $28,200 $28,697 $29,33931-Dec-99 $30,074 $30,620 $31,06731-Jan-00 $28,663 $29,194 $29,50729-Feb-00 $28,671 $29,232 $28,94931-Mar-00 $31,149 $31,774 $31,78030-Apr-00 $29,977 $30,581 $30,82331-May-00 $29,193 $29,785 $30,19130-Jun-00 $29,977 $30,601 $30,93731-Jul-00 $29,537 $30,131 $30,45431-Aug-00 $31,538 $32,180 $32,34630-Sep-00 $30,081 $30,693 $30,63831-Oct-00 $29,828 $30,449 $30,50930-Nov-00 $27,282 $27,853 $28,10531-Dec-00 $27,604 $28,176 $28,24331-Jan-01 $28,543 $29,115 $29,24628-Feb-01 $25,898 $26,418 $26,57831-Mar-01 $24,132 $24,621 $24,89330-Apr-01 $26,101 $26,643 $26,82831-May-01 $26,267 $26,818 $27,00730-Jun-01 $25,688 $26,233 $26,35131-Jul-01 $25,342 $25,889 $26,09331-Aug-01 $23,726 $24,247 $24,45930-Sep-01 $21,735 $22,215 $22,48331-Oct-01 $22,223 $22,722 $22,91330-Nov-01 $23,921 $24,462 $24,67031-Dec-01 $24,221 $24,776 $24,88731-Jan-02 $23,940 $24,494 $24,52428-Feb-02 $23,478 $24,029 $24,05031-Mar-02 $24,418 $24,999 $24,95530-Apr-02 $23,092 $23,648 $23,44231-May-02 $22,871 $23,426 $23,26930-Jun-02 $21,219 $21,734 $21,61231-Jul-02 $19,627 $20,107 $19,92931-Aug-02 $19,748 $20,237 $20,05830-Sep-02 $17,694 $18,134 $17,87831-Oct-02 $19,142 $19,628 $19,45130-Nov-02 $20,248 $20,765 $20,59731-Dec-02 $19,088 $19,578 $19,38831-Jan-03 $18,612 $19,100 $18,88028-Feb-03 $18,305 $18,789 $18,59731-Mar-03 $18,512 $19,002 $18,77730-Apr-03 $19,986 $20,520 $20,32431-May-03 $21,068 $21,646 $21,39530-Jun-03 $21,337 $21,929 $21,66931-Jul-03 $21,768 $22,378 $22,05031-Aug-03 $22,213 $22,852 $22,48030-Sep-03 $21,952 $22,593 $22,24231-Oct-03 $23,226 $23,914 $23,50130-Nov-03 $23,487 $24,187 $23,70831-Dec-03 $24,574 $25,317 $24,95031-Jan-04 $25,009 $25,775 $25,40929-Feb-04 $25,366 $26,156 $25,76231-Mar-04 $25,040 $25,825 $25,37330-Apr-04 $24,582 $25,360 $24,97531-May-04 $24,923 $25,719 $25,31730-Jun-04 $25,358 $26,185 $25,80831-Jul-04 $24,465 $25,268 $24,95431-Aug-04 $24,566 $25,381 $25,05430-Sep-04 $24,877 $25,712 $25,32531-Oct-04 $25,265 $26,122 $25,71230-Nov-04 $26,313 $27,219 $26,75331-Dec-04 $27,234 $28,182 $27,66331-Jan-05 $26,541 $27,475 $26,98828-Feb-05 $27,108 $28,072 $27,55531-Mar-05 $26,675 $27,591 $27,06730-Apr-05 $26,171 $27,069 $26,553





SCHWAB 1000 INDEX FUND

SELECT SHARES(R) PERFORMANCE as of 4/30/05


This bar chart compares pre-tax performance of the fund's Select Shares with itsbenchmark and Morningstar category. The table below the chart shows two types ofafter-tax returns.

[BAR CHART]

Fund: SELECT SHARES Benchmark: Fund Category: Ticker Symbol: SCHWAB 1000 MORNINGSTAR SNXSX INDEX(R) LARGE-CAP BLEND 6 MONTHS 3.66% 3.63% 3.26%1 YEAR 6.61% 6.74% 5.50%5 YEARS 2 -2.55% -2.41% -2.54%SINCE INCEPTION: 5/19/97 2 6.11% 6.31% 5.12%


Fund: Fund: Fund: Fund: SELECT Fund SELECT Fund SELECT Fund SELECT Fund SHARES Category: SHARES Category: SHARES Category: SHARES Category: Ticker MORNINGSTAR Ticker MORNINGSTAR Ticker MORNINGSTAR Ticker MORNINGSTAR Symbol: LARGE-CAP Symbol: LARGE-CAP Symbol: LARGE-CAP Symbol: LARGE-CAPTOTAL RETURNS AFTER TAX SNXSX BLEND SNXSX BLEND SNXSX BLEND SNXSX BLEND- ------------------------------------------------------------------------------------------------------------------------------------ PRE-LIQUIDATION (still own shares) 3.43% 0.96% 6.37% 3.36% -2.87% -3.39% 5.74% n/a- ------------------------------------------------------------------------------------------------------------------------------------POST-LIQUIDATION (shares were sold) 2.70% 1.00% 4.63% 2.63% -2.31% -2.56% 5.13% n/a- ------------------------------------------------------------------------------------------------------------------------------------



This graph shows performance since inception of a hypothetical $50,000investment (the minimum investment for this share class) in the fund's SelectShares, compared with a similar investment in its benchmark and an additionalindex.

$80,145 SELECT SHARES

$81,362 SCHWAB 1000 INDEX(R)

$78,278 S&P 500(R) INDEX

[LINE GRAPH]

SCHWAB 1000 S&P 500(R) SELECT SHARES INDEX(R) INDEX 19-May-97 $50,000 $50,000 $50,00031-May-97 $51,040 $51,064 $50,93030-Jun-97 $53,180 $53,222 $53,21231-Jul-97 $57,490 $57,518 $57,44231-Aug-97 $54,750 $54,801 $54,22530-Sep-97 $57,685 $57,746 $57,19131-Oct-97 $55,785 $55,851 $55,28130-Nov-97 $58,150 $58,233 $57,84131-Dec-97 $59,325 $59,398 $58,83631-Jan-98 $59,725 $59,855 $59,48928-Feb-98 $64,145 $64,318 $63,77831-Mar-98 $67,405 $67,648 $67,04330-Apr-98 $68,100 $68,387 $67,72031-May-98 $66,625 $66,893 $66,55630-Jun-98 $69,305 $69,578 $69,25831-Jul-98 $68,345 $68,606 $68,52431-Aug-98 $58,140 $58,362 $58,62930-Sep-98 $61,915 $62,179 $62,38731-Oct-98 $66,825 $67,206 $67,45930-Nov-98 $71,000 $71,400 $71,54731-Dec-98 $75,505 $75,922 $75,66831-Jan-99 $78,385 $78,805 $78,83128-Feb-99 $75,750 $76,244 $76,37931-Mar-99 $78,795 $79,282 $79,43430-Apr-99 $82,015 $82,553 $82,50931-May-99 $80,120 $80,671 $80,56130-Jun-99 $84,110 $84,753 $85,03331-Jul-99 $81,450 $82,052 $82,38031-Aug-99 $80,665 $81,380 $81,96830-Sep-99 $78,545 $78,960 $79,72131-Oct-99 $83,725 $84,287 $84,76730-Nov-99 $85,755 $86,255 $86,49131-Dec-99 $91,470 $92,034 $91,58531-Jan-00 $87,180 $87,747 $86,98729-Feb-00 $87,225 $87,861 $85,34131-Mar-00 $94,765 $95,504 $93,68730-Apr-00 $91,200 $91,917 $90,86731-May-00 $88,835 $89,525 $89,00430-Jun-00 $91,220 $91,977 $91,20331-Jul-00 $89,905 $90,566 $89,78031-Aug-00 $95,990 $96,722 $95,35630-Sep-00 $91,585 $92,255 $90,32231-Oct-00 $90,810 $91,519 $89,94230-Nov-00 $83,065 $83,717 $82,85531-Dec-00 $84,050 $84,689 $83,26131-Jan-01 $86,935 $87,511 $86,21728-Feb-01 $78,875 $79,404 $78,35431-Mar-01 $73,515 $74,002 $73,38630-Apr-01 $79,515 $80,081 $79,08831-May-01 $80,020 $80,608 $79,61830-Jun-01 $78,280 $78,847 $77,68331-Jul-01 $77,225 $77,815 $76,92231-Aug-01 $72,325 $72,879 $72,10730-Sep-01 $66,255 $66,771 $66,28031-Oct-01 $67,745 $68,296 $67,54630-Nov-01 $72,920 $73,526 $72,72731-Dec-01 $73,845 $74,470 $73,36731-Jan-02 $72,990 $73,622 $72,29628-Feb-02 $71,600 $72,223 $70,90131-Mar-02 $74,445 $75,140 $73,56730-Apr-02 $70,445 $71,078 $69,10831-May-02 $69,775 $70,413 $68,59730-Jun-02 $64,710 $65,326 $63,71331-Jul-02 $59,875 $60,436 $58,75031-Aug-02 $60,245 $60,827 $59,13230-Sep-02 $53,980 $54,506 $52,70431-Oct-02 $58,420 $58,995 $57,34230-Nov-02 $61,795 $62,414 $60,71931-Dec-02 $58,255 $58,846 $57,15531-Jan-03 $56,805 $57,410 $55,65828-Feb-03 $55,865 $56,475 $54,82331-Mar-03 $56,500 $57,115 $55,35530-Apr-03 $61,025 $61,676 $59,91631-May-03 $64,355 $65,062 $63,07330-Jun-03 $65,175 $65,913 $63,88131-Jul-03 $66,490 $67,261 $65,00531-Aug-03 $67,875 $68,686 $66,27330-Sep-03 $67,075 $67,908 $65,57031-Oct-03 $70,990 $71,880 $69,28130-Nov-03 $71,790 $72,699 $69,89131-Dec-03 $75,105 $76,095 $73,55331-Jan-04 $76,455 $77,473 $74,90729-Feb-04 $77,550 $78,618 $75,94831-Mar-04 $76,550 $77,622 $74,80130-Apr-04 $75,175 $76,223 $73,62731-May-04 $76,220 $77,305 $74,63530-Jun-04 $77,575 $78,705 $76,08331-Jul-04 $74,840 $75,948 $73,56531-Aug-04 $75,175 $76,288 $73,85930-Sep-04 $76,125 $77,284 $74,65731-Oct-04 $77,310 $78,514 $75,79930-Nov-04 $80,540 $81,812 $78,86931-Dec-04 $83,375 $84,706 $81,55131-Jan-05 $81,255 $82,583 $79,56128-Feb-05 $82,990 $84,375 $81,23231-Mar-05 $81,685 $82,931 $79,79430-Apr-05 $80,145 $81,362 $78,278





SCHWAB 1000 INDEX FUND

FUND FACTS as of 4/30/05

STYLE ASSESSMENT 1

[GRAPHIC]

INVESTMENT STYLE Value Blend Growth MARKET CAP Large / / /X/ / / Medium / / / / / / Small / / / / / /

STATISTICS

NUMBER OF HOLDINGS 999- --------------------------------------------------------------------------------WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $79,885- --------------------------------------------------------------------------------PRICE/EARNINGS RATIO (P/E) 20.3- --------------------------------------------------------------------------------PRICE/BOOK RATIO (P/B) 2.8- --------------------------------------------------------------------------------PORTFOLIO TURNOVER RATE 2 5%- --------------------------------------------------------------------------------MINIMUM INITIAL INVESTMENT 3 Investor Shares $2,500 ($1,000 for retirement, education and custodial accounts) Select Shares $50,000- --------------------------------------------------------------------------------

TOP HOLDINGS 4

% OFSECURITY NET ASSETS- -------------------------------------------------------------------------------- (1) GENERAL ELECTRIC CO. 3.0%- --------------------------------------------------------------------------------(2) EXXON MOBIL CORP. 2.9%- --------------------------------------------------------------------------------(3) MICROSOFT CORP. 2.1%- --------------------------------------------------------------------------------(4) CITIGROUP, INC. 1.9%- --------------------------------------------------------------------------------(5) PFIZER, INC. 1.6%- --------------------------------------------------------------------------------(6) JOHNSON & JOHNSON 1.6%- --------------------------------------------------------------------------------(7) WAL-MART STORES, INC. 1.6%- --------------------------------------------------------------------------------(8) BANK OF AMERICA CORP. 1.4%- --------------------------------------------------------------------------------(9) INTEL CORP. 1.2%- --------------------------------------------------------------------------------(10) PROCTER & GAMBLE CO. 1.1%- -------------------------------------------------------------------------------- TOTAL 18.4%

SECTOR WEIGHTINGS % of Investments

This chart shows the fund's sector composition as of the report date. A sectoris a portion of the overall stock market that is made up of industries whosebusiness components share similar characteristics.

[PIE CHART]

21.2% FINANCIALS14.4% INFORMATION TECHNOLOGY13.4% HEALTH CARE12.6% CONSUMER DISCRETIONARY10.6% INDUSTRIALS10.2% CONSUMER STAPLES 8.1% ENERGY 3.4% UTILITIES 3.2% MATERIALS 2.9% TELECOMMUNICATION SERVICES

Portfolio holdings may have changed since the report date.


1 Source: Morningstar, Inc. This style assessment is the result of evaluating the fund based on a ten-factor model for value and growth characteristics. The fund's market capitalization placement is determined by the geometric mean of its holdings' market capitalizations. The assessment reflects the fund's portfolio as of 4/30/05, which may have changed since then, and is not a precise indication of risk or performance--past, present, or future.

2 Not annualized.

3 Please see prospectus for further detail and eligibility requirements.

4 This list is not a recommendation of any security by the investment adviser.


SCHWAB SMALL-CAP INDEX FUND(R)




[BAR CHART]

Fund: Fund Category: INVESTOR SHARES Benchmark: MORNINGSTAR Ticker Symbol: SCHWAB SMALL-CAP SMALL-CAP SWSMX INDEX(R) BLEND 6 MONTHS 0.59 0.69 2.321 YEAR 6.30 6.70 7.505 YEARS 2 3.56 3.59 8.8410 YEARS 2 9.47 10.42 11.78

6 MONTHS 1 YEAR 5 YEARS 10 YEARS Fund: Fund: Fund: Fund: INVESTOR INVESTOR INVESTOR INVESTOR SHARES Fund Category: SHARES Fund Category: SHARES Fund Category: SHARES Fund Category: Ticker MORNINGSTAR Ticker MORNINGSTAR Ticker MORNINGSTAR Ticker MORNINGSTAR Symbol: SMALL-CAP Symbol: SMALL-CAP Symbol: SMALL-CAP Symbol: SMALL-CAPTOTAL RETURNS AFTER TAX SWSMX BLEND SWSMX BLEND SWSMX BLEND SWSMX BLEND- ------------------------------------------------------------------------------------------------------------------------------------ PRE-LIQUIDATION (still own shares) 0.50% -0.36% 6.21% 4.77% 2.51% 7.45% 8.72% 9.73%- ------------------------------------------------------------------------------------------------------------------------------------POST-LIQUIDATION (shares were sold) 0.52% 1.33% 4.24% 4.87% 2.50% 6.99% 8.02% 9.38%- ------------------------------------------------------------------------------------------------------------------------------------



This graph shows performance over ten years of a hypothetical $10,000 investmentin the fund's Investor Shares, compared with a similar investment in itsbenchmark and an additional index.


$26,957 SCHWAB SMALL-CAP INDEX(R)

$24,865 RUSSELL 2000(R) INDEX

[LINE GRAPH]

SCHWAB INVESTOR SMALL-CAP RUSSELL 2000(R) SHARES INDEX(R) INDEX 30-Apr-95 $10,000 $10,000 $10,00031-May-95 $10,143 $10,129 $10,17230-Jun-95 $10,611 $10,642 $10,70031-Jul-95 $11,231 $11,265 $11,31631-Aug-95 $11,430 $11,498 $11,55030-Sep-95 $11,650 $11,723 $11,75731-Oct-95 $11,154 $11,161 $11,23230-Nov-95 $11,669 $11,697 $11,70331-Dec-95 $11,889 $11,978 $12,01231-Jan-96 $11,822 $11,947 $11,99929-Feb-96 $12,273 $12,428 $12,37431-Mar-96 $12,465 $12,644 $12,62630-Apr-96 $13,155 $13,312 $13,30131-May-96 $13,614 $13,768 $13,82630-Jun-96 $13,106 $13,328 $13,25731-Jul-96 $11,966 $12,253 $12,10031-Aug-96 $12,695 $13,030 $12,80330-Sep-96 $13,260 $13,509 $13,30431-Oct-96 $13,020 $13,278 $13,09930-Nov-96 $13,576 $13,806 $13,63831-Dec-96 $13,731 $14,063 $13,99631-Jan-97 $14,097 $14,395 $14,27628-Feb-97 $13,606 $14,044 $13,93031-Mar-97 $12,923 $13,361 $13,27330-Apr-97 $13,019 $13,400 $13,31031-May-97 $14,559 $15,041 $14,79030-Jun-97 $15,261 $15,818 $15,42431-Jul-97 $16,291 $16,720 $16,14231-Aug-97 $16,599 $17,096 $16,51130-Sep-97 $17,840 $18,438 $17,72031-Oct-97 $17,061 $17,633 $16,94230-Nov-97 $16,887 $17,472 $16,83231-Dec-97 $17,259 $17,838 $17,12631-Jan-98 $16,834 $17,558 $16,85628-Feb-98 $18,167 $19,010 $18,10131-Mar-98 $18,969 $19,866 $18,84730-Apr-98 $19,065 $20,002 $18,95131-May-98 $17,916 $18,827

figures assume dividends and distributions were reinvested. index figures do not include trading and...

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