MSCI- LEHMAN BROTHERS S&P 500(R) 2000(R) EAFE(R) U.S. AGGREGATE INDEX INDEX INDEX BOND INDEX...

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0000950134-06-012643.txt : 200607050000950134-06-012643.hdr.sgml : 2006070420060703184739ACCESSION NUMBER:0000950134-06-012643CONFORMED SUBMISSION TYPE:N-CSRSPUBLIC DOCUMENT COUNT:4CONFORMED PERIOD OF REPORT:20060430FILED AS OF DATE:20060705DATE AS OF CHANGE:20060703EFFECTIVENESS DATE:20060705

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:06941154

BUSINESS ADDRESS:STREET 1:101 MONTGOMERY STCITY:SAN FRANCISCOSTATE:CAZIP:94104BUSINESS PHONE:415-627-7000

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

0000869365S000006807Schwab 1000 Index Fund

C000018433Investor SharesSNXFX

C000018434Select SharesSNXSX

N-CSRS1f21329sinvcsrs.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 ----------------------------------------------- (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, 2006

ITEM 1: REPORT(S) TO SHAREHOLDERS.

SCHWAB EQUITY INDEX FUNDS

SEMIANNUAL REPORT April 30, 2006

Schwab S&P 500 Index Fund

Schwab Institutional Select(R) S&P 500 Fund

Schwab 1000 Index(R) Fund

Schwab Small-Cap Index Fund(R)

Schwab Total Stock Market Index Fund(R)

Schwab International Index Fund(R)

[CHARLES SCHWAB LOGO]

Six cost-efficient ways to tap into the power of the stock market for long-term growth potential.

IN THIS REPORT

Management's Discussion ................................................. 2

Performance and Fund Facts Schwab S&P 500 Index Fund ........................................ 8 Schwab Institutional Select(R) S&P 500 Fund ..................................................... 12 Schwab 1000 Index(R) Fund ........................................ 14 Schwab Small-Cap Index Fund(R) ................................... 17 Schwab Total Stock Market Index Fund(R) .................................................... 20 Schwab International Index Fund(R) ............................... 23

Fund Expenses ........................................................... 26

Financial Statements Schwab S&P 500 Index Fund ........................................ 28 Schwab Institutional Select(R) S&P 500 Fund ..................................................... 37 Schwab 1000 Index(R) Fund ........................................ 44 Schwab Small-Cap Index Fund(R) ................................... 52 Schwab Total Stock Market Index Fund(R) .................................................... 60 Schwab International Index Fund(R) ............................... 69

Financial Notes ......................................................... 77

Trustees and Officers ................................................... 86

Glossary ................................................................ 90

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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 or your financial intermediary to request atax-free interclass exchange into Select Shares. Instructions for performing atax-free interclass exchange can also be referenced on the Schwab Funds websiteat WWW.SCHWAB.COM/SCHWABFUNDS under Schwab Funds Investor Information. SelectShares may not be available through financial intermediaries other than CharlesSchwab & Co., Inc.

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,

For over 30 years, Schwab has made it our business to put the needs of theinvestor first. By keeping our clients' interests as our main focus, SchwabFunds continues to provide a range of innovative investment choices that canserve as a foundation for many asset allocation plans.

I am especially pleased to say that since its inception 15 years ago, the Schwab1000 Index Fund has benefited from strong performance without ever paying out acapital gains distribution. It is also the only fund in Morningstar's large-capindex category with this long a history that can make this claim. While indexstrategies in general can help reduce capital gain distributions by reducing thenumber of buy and sell transactions, the Schwab 1000 Index Fund has been able toeliminate past capital gains distributions by combining a proprietary index witha tax conscious approach to fund management.

The Schwab 1000 Index Fund provides investors with broad market exposure,including both large and mid-cap stocks, reflecting the firm's approach todisciplined, long-term equity investing. In this one fund, you can invest in1,000 of America's largest companies, gaining exposure to nearly 90% of thevalue of the U.S. market diversified over 70 different industries. I amparticularly proud that we've been able to provide clients with this solidperformance and significant tax savings, which can translate into greaterreturns for investors.

In closing, we continue to see tremendous opportunities for investors, and mycolleagues and I are committed to helping you maximize them. We strive every dayto warrant the trust you have placed in us and our commitment to you will notchange.

Thank you for investing with us.

Sincerely,

/s/ Charles Schwab

Past performance is no guarantee of future results.

MANAGEMENT'S DISCUSSION for the six months ended April 30, 2006

[PHOTO OF EVELYN DILSAVER]

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

Dear Shareholder,

I'm pleased to bring you the semiannual report for the Schwab Equity Index Fundsfor the period ended April 30, 2006. During the report period, the fundsgenerated positive returns and performed as designed by tracking theirrespective benchmarks.

With their market-tracking performance, broad diversification and lower costs,Schwab Equity Index Funds can complement a portfolio of actively managed funds.For example, the Schwab 1000 Index Fund includes the stocks of the largest 1,000publicly traded companies in the United States. For investors who want todiversify a portfolio that invests in larger-capitalization stocks, the SchwabTotal Stock Market Index Fund provides exposure to the entire domestic stockmarket. Both of these funds use a tax-efficient management strategy designed toreduce taxable capital gains distributions to shareholders. For example, theSchwab 1000 Index Fund has never paid out a capital gain in its 15 year history.

Here at Schwab, we continue to evaluate opportunities to expand our fund productoffering, while striving to provide strong results and good value to investors.I speak for all of Schwab Funds when I say we want Schwab to be the place whereinvestors find useful, quality financial products and services to help themsucceed.

Thank you for investing in Schwab Funds.

Sincerely,

/s/ Evelyn Dilsaver

Past performance is no guarantee of future results.

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 managementof the funds. Prior to joining the firm in October 1997, he worked for more thaneight years in asset management.

[PHOTO OF LARRY MANO]

LARRY MANO, vice president and senior portfolio manager of the investmentadviser, is responsible for the day-to-day management of the Schwab Total StockMarket Index Fund and co-management of the remaining funds. Prior to joining thefirm in 1998, he worked for 20 years in equity management.

THE INVESTMENT ENVIRONMENT AND THE FUNDS

The markets remained in a steady growth mode over the past six months and endedthe period with positive returns. During the report period, oil prices hit highsnever seen before and the Federal Reserve (the Fed) continued to raiseshort-term interest rates to curb inflationary pressures, raising the rate fourconsecutive times in the six-month period and bringing the benchmark rate up to4.75%. This was the 15th rate hike over the past two years and remains thelongest span of increases since the 1970s.

After rising sharply in the aftermath of Hurricanes Katrina and Rita, crude oilprices peaked at around $71 per barrel and domestic gasoline prices were over$3.00 a gallon. When it became evident that the damage was limited to theregions in the hurricanes' path and that the economic impact was minimal, oilprices declined to as low as $55 per barrel. However, in recent months, crudeoil has climbed back up due to concerns about possible confrontation with Iranand supply interruptions in Nigeria.

Despite recent weaknesses, domestic equity stocks remained near multi-yearhighs. Reasonable valuations, a solid earnings season, and expectations that thecurrent monetary policy tightening will soon come to an end have helped tosupport equity prices. Regardless of the fluctuating energy prices, gains inproductivity have remained strong and corporate earnings continue to rise.Additionally, with the unemployment rate at a healthy 4.7%, job and incomegrowth remained positive and investors remained optimistic. Low inflationaryexpectations and large foreign capital inflows helped to contain increases inlong-term interest rates.

As noted above, the Fed continued its tightening cycle throughout the period,raising short-term interest rates 0.25% at each of its four meetings. As the Fedcontinued raising its benchmark rate over the course of the last six months, theyield curve flattened and had brief periods of inversion. Historically, economicslowdowns or recessions have followed the inversion of the yield curve. Althougheconomic growth moderated in the fourth quarter of 2005, growth reboundedstrongly in the first quarter of 2006 and economic fundamentals remained healthyas of the end of the report period.

Source of Sector Classification: S&P and MSCI.

Schwab Equity Index Funds 3

MANAGEMENT'S DISCUSSION continued

[PHOTO OF TOM BROWN]

TOM BROWN, an associate portfolio manager of the investment adviser, isresponsible for day-to-day co-management of the funds except for the SchwabTotal Stock Market Index Fund. He joined Schwab in 1995, became a trader in1999, and was named to his current position in 2004.

Despite rising interest rates and soaring energy prices, the S&P 500 Index 1posted gains of 9.64% for the six-month period ending April 30, 2006 while theRussell 2000 Index also displayed a positive return of 18.91%. As improvingfundamentals and attractive valuations have strengthened investor interest inemerging markets, the MSCI EAFE (Morgan Stanley Capital International, Inc.Europe, Australasia, and Far East) Index also had an impressive return of 22.89%for the six-month period.

Although performance of the bond markets was sluggish, as measured by the LehmanBrothers U.S. Aggregate Bond Index, which returned 0.56% for the six-monthperiod, these types of results are not unusual. When the economy is strong andjob growth is robust, investors normally expect to see more inflation, whichgenerally leads to higher interest rates and lower bond prices.

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.

9.64% S&P 500(R) INDEX: measures U.S. large-cap stocks

18.91% RUSSELL 2000(R) INDEX: measures U.S. small-cap stocks

22.89% MSCI-EAFE(R) INDEX: measures (in U.S. dollars) large-cap stocks in Europe, Australasia and the Far East

0.56% LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX: measures the U.S. bond market

[LINE GRAPH]

RUSSELL MSCI- LEHMAN BROTHERS S&P 500(R) 2000(R) EAFE(R) U.S. AGGREGATE INDEX INDEX INDEX BOND INDEX 31-Oct-05 0 0 0 007-Nov-05 1.36 2.29 1.12 -0.3914-Nov-05 2.35 2.73 0.92 -0.221-Nov-05 4.15 5.07 2.47 0.5428-Nov-05 4.39 3.94 2.98 0.8805-Dec-05 4.83 6.3 4.45 0.2112-Dec-05 4.73 6.78 6.48 0.4319-Dec-05 4.71 4.14 7.22 1.0426-Dec-05 5.49 6.35 7.89 1.3702-Jan-06 3.82 4.38 7.47 1.409-Jan-06 7.35 9.51 12.55 1.7316-Jan-06 7.16 9.86 12.28 1.9223-Jan-06 5.19 9.78 10.66 2.0430-Jan-06 6.99 13.37 13.11 1.3606-Feb-06 5.36 12.93 12.38 1.413-Feb-06 5.25 10.26 11.09 1.2120-Feb-06 7.33 13.44 11.54 1.5327-Feb-06 7.98 14.97 14.06 1.5106-Mar-06 6.69 13.51 13.53 0.913-Mar-06 7.25 13.06 14.21 0.8320-Mar-06 9.01 15.82 17.31 1.5327-Mar-06 8.73 17.13 16.45 1.403-Apr-06 8.44 18.01 18.57 0.6810-Apr-06 8.39 17.05 19.24 0.4217-Apr-06 7.46 16.53 18.88 0.3624-Apr-06 9.39 19.13 21.67 0.730-Apr-06 9.64 18.91 22.89 0.56

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

Data source: Charles Schwab & Co., Inc.


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.


PERFORMANCE AT A GLANCE

Total return for the six months ended 4/30/06

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 ................... 9.49%Select Shares(R) .................. 9.56%e.Shares(R) ....................... 9.60%Benchmark ......................... 9.64%

Performance Details ............... pages 8-10

SCHWAB INSTITUTIONAL SELECT(R)S&P 500 FUND ...................... 9.61%Benchmark ......................... 9.64%

Performance Details ............... page 12

SCHWAB 1000 INDEX(R) FUNDInvestor Shares ................... 9.79%Select Shares ..................... 9.87%Benchmark ......................... 10.07%


THE FUNDS IN THIS REPORT ARE INDEX FUNDS AND SHARE THE SAME BASIC INVESTMENTSTRATEGY: to match the performance of their respective benchmarks. Each fund,with the exceptions of the Schwab S&P 500 Index Fund and the SchwabInstitutional Select S&P 500 Fund, tracks a different index. Bear in mind thatindices are unmanaged and include no operational and transaction costs.

THE SCHWAB S&P 500 INDEX FUND AND THE SCHWAB INSTITUTIONAL SELECT S&P 500 FUNDended the six-month report period up 9.49% and 9.61%, respectively, closelytracking their benchmarks, the S&P 500 Index, which was up 9.64%. The sectorsthat performed the best during the report period were Materials, Energy, andIndustrials, while sectors such as Utilities, Health Care Equipment & Services,and Consumer Staples all appreciated the least. Within the funds, the bestperforming industry groups for the period were Materials, Transportation,Diversified Financials, and Energy. On the downside, Automobiles & Components,Household & Personal Products, and Food & Staples Retailing all producednegative returns. During the period, the price of oil continued to rise, makingenergy related stocks some of the top performers. In addition, some of thebetter performing stocks during the period were Allegheny Technologies Inc.,Nucor Corporation, and United States Steel Corporation.

THE SCHWAB 1000 INDEX FUND was up 9.79% for the six-month period, slightlyunderperforming its benchmark, the Schwab 1000 Index, which was up 10.07%. TheSchwab 1000 Index is comprised of the largest 1000 stocks in the United States.The Index is market-capitalization weighted, and therefore, its returns are mostheavily influenced by the largest names in the index. Since its inception 15years ago, the Schwab 1000 Index Fund has combined a proprietary index with atax-conscious approach to fund management and has gained over $6.7 billion inassets without ever paying out a capital gains distribution. Some of the topperforming stocks were Rambus Inc., Allegheny technologies Inc., and MEMCElectronic Materials, Inc. On the downside, stocks like Lear Corporation andSymantec Corporation detracted from returns.

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.


MANAGEMENT'S DISCUSSION continued

PERFORMANCE AT A GLANCE

Total return for the six months ended 4/30/06


SCHWAB SMALL-CAP INDEX FUND(R)Investor Shares ................... 16.80%Select Shares ..................... 16.87%Benchmark ......................... 16.96%


SCHWAB TOTAL STOCK MARKETINDEX FUND(R)Investor Shares ................... 10.45%Select Shares ..................... 10.54%Benchmark ......................... 11.05%


SCHWAB INTERNATIONAL INDEX FUND(R)Investor Shares ................... 21.19%Select Shares ..................... 21.27%Benchmark ......................... 21.74%


THE SCHWAB TOTAL STOCK MARKET INDEX FUND returned 10.45% for the period,slightly underperforming its benchmark, the Dow Jones Wilshire 5000 CompositeIndex 1, which was up 11.05%. This benchmark is a measure of allU.S.-headquartered stocks and encompasses large-cap, mid-cap, small-cap, andmicro-cap securities, also known as "all-cap". The index is a market-capitalization weighted benchmark, and overall performance reflects thereturns of the largest capitalization names. Some of the top performing sectorsfor the fund were Materials, Industrials and Energy. In contrast, Utilities andHealth Care sectors continued to struggle during the six-month report period.The fund's industry group weights were slightly negative, with positive returnsresulting from an underweight to the Media industry group. Some of the betterperforming stocks within the portfolio were Avanex Corporation and Rambus Inc.,while the utilities stock Calpine Corporation slightly detracted from returns.

THE SCHWAB SMALL CAP INDEX FUND is market-capitalization weighted and comprisedof the second largest 1000 U.S.-headquartered stocks. The fund returned 16.80%for the six-month period, slightly underperforming its benchmark, the SchwabSmall-Cap Index, which was up 16.96%. While the fund closely tracked itsbenchmark for the period, two of the leading contributors to total returns werethe Materials and Industrials sectors. Furthermore, the top performing industrygroups for the six-month report period were the Semiconductor & SemiconductorEquipment and Capital Goods industries. The portfolio held winning stocks suchas Atheros Communications, Inc. and Maxtor Corporation, both of which hadimpressive six-month performance.

Source of Sector Classification: S&P and MSCI. 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. Performance results less than 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 the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.

Small-company stocks are subject to greater volatility than other asset categories. Foreign securities can involve risks such as political and economic instability and currency risk.

1 "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.


THE SCHWAB INTERNATIONAL INDEX FUND returned 21.19% for the six-month period,closely tracking its benchmark, the Schwab International Index, which iscomprised of the largest 350 stocks within 21 developed countries and was up21.74%. Within the fund, Norway was the country that contributed the most tototal returns, while the United Kingdom and Japan were the two underperformers.Top performing sectors within the fund were Materials and InformationTechnology. Some of the better performing stocks within the portfolio were AbbLtd. and Schering AG, which appreciated in price after being identified aspotential takeover targets. Stocks like Vodafone Group Plc and NTT DoCoMo, bothproviding cellular service abroad, slightly detracted from returns.


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 4/30/06

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 Benchmark: Fund Category: SHARES Ticker S&P 500(R) MORNINGSTAR Symbol: SWPIX INDEX LARGE-CAP BLEND 6 MONTHS 9.49% 9.64% 10.20%1 YEAR 15.13% 15.42% 16.91%5 YEARS 2.39% 2.70% 2.61%SINCE INCEPTION: 5/1/96 8.55% 8.93% 7.94%

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) 8.91% 4.30% 14.52% 10.01% 1.88% 3.15% 8.09% 6.60%- ------------------------------------------------------------------------------------------------------------------------------------POST-LIQUIDATION (shares were sold) 6.16% 3.42% 9.82% 7.26% 1.72% 2.87% 7.28% 6.30%- ------------------------------------------------------------------------------------------------------------------------------------


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.

$22,706 INVESTOR SHARES

$23,539 S&P 500(R) INDEX

[LINE GRAPH]

INVESTOR S&P 500(R) SHARES 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 $20,39931-May-05 $20,351 $21,04730-Jun-05 $20,373 $21,07731-Jul-05 $21,123 $21,86131-Aug-05 $20,925 $21,66230-Sep-05 $21,090 $21,83731-Oct-05 $20,737 $21,47330-Nov-05 $21,521 $22,28431-Dec-05 $21,518 $22,29131-Jan-06 $22,079 $22,88228-Feb-06 $22,146 $22,94331-Mar-06 $22,415 $23,22830-Apr-06 $22,706 $23,539

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 4/30/06 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 4/30/06


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: Fund Category: SELECT Benchmark: MORNINGSTAR SHARES Ticker S&P 500(R) LARGE-CAP Symbol: SWPPX INDEX BLEND 6 MONTHS 9.56% 9.64% 10.20%1 YEAR 15.30% 15.42% 16.91%5 YEARS 2.56% 2.70% 2.61%SINCE INCEPTION: 5/19/97 6.66% 6.83% 6.51%

6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION 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) 9.27% 4.30% 15.00% 10.01% 2.07% 3.15% 6.18% n/a- ------------------------------------------------------------------------------------------------------------------------------------POST-LIQUIDATION (shares were sold) 6.56% 3.42% 10.31% 7.26% 1.90% 2.87% 5.54% 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.

$89,060 SELECT SHARES

$90,330 S&P 500(R) INDEX

[LINE GRAPH]

SELECT S&P 500(R) SHARES 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 $78,27831-May-05 $79,700 $80,76730-Jun-05 $79,785 $80,88031-Jul-05 $82,755 $83,88931-Aug-05 $81,980 $83,12530-Sep-05 $82,630 $83,79931-Oct-05 $81,295 $82,39930-Nov-05 $84,350 $85,51431-Dec-05 $84,330 $85,54031-Jan-06 $86,565 $87,80628-Feb-06 $86,825 $88,04331-Mar-06 $87,880 $89,13530-Apr-06 $89,060 $90,330






E.SHARES(R) PERFORMANCE as of 4/30/06


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 9.60% 9.64% 10.20%1 YEAR 15.30% 15.42% 16.91%5 YEARS 2.49% 2.70% 2.61%SINCE INCEPTION: 5/1/96 8.65% 8.93% 7.94%

6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION 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) 9.32% 4.30% 15.01% 10.01% 2.02% 3.15% 8.19% 6.60%- ------------------------------------------------------------------------------------------------------------------------------------POST-LIQUIDATION (shares were sold) 6.59% 3.42% 10.31% 7.26% 1.85% 2.87% 7.39% 6.30%- ------------------------------------------------------------------------------------------------------------------------------------



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

$22,924 E.SHARES

$23,539 S&P 500(R) INDEX

[LINE GRAPH]

S&P 500(R) E.SHARES 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 $20,39931-May-05 $20,351 $21,04730-Jun-05 $20,373 $21,07731-Jul-05 $21,123 $21,86131-Aug-05 $20,925 $21,66230-Sep-05 $21,090 $21,83731-Oct-05 $20,737 $21,47330-Nov-05 $21,521 $22,28431-Dec-05 $21,518 $22,29131-Jan-06 $22,079 $22,88228-Feb-06 $22,146 $22,94331-Mar-06 $22,415 $23,22830-Apr-06 $22,924 $23,539






FUND FACTS as of 4/30/06

STYLE ASSESSMENT 1

[GRAPHIC]

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

STATISTICS

NUMBER OF HOLDINGS 504- --------------------------------------------------------------------------------WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $91,020- --------------------------------------------------------------------------------PRICE/EARNINGS RATIO (P/E) 18.0- --------------------------------------------------------------------------------PRICE/BOOK RATIO (P/B) 3.1- --------------------------------------------------------------------------------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, education and custodial accounts) $1,000- --------------------------------------------------------------------------------

TOP HOLDINGS 4

% OFSECURITY NET ASSETS- -------------------------------------------------------------------------------- (1) EXXON MOBIL CORP. 3.3%- --------------------------------------------------------------------------------(2) GENERAL ELECTRIC CO. 3.0%- --------------------------------------------------------------------------------(3) CITIGROUP, INC. 2.1%- --------------------------------------------------------------------------------(4) BANK OF AMERICA CORP. 2.0%- --------------------------------------------------------------------------------(5) MICROSOFT CORP. 1.8%- --------------------------------------------------------------------------------(6) PROCTER & GAMBLE CO. 1.6%- --------------------------------------------------------------------------------(7) PFIZER, INC. 1.6%- --------------------------------------------------------------------------------(8) JOHNSON & JOHNSON 1.5%- --------------------------------------------------------------------------------(9) AMERICAN INTERNATIONAL GROUP, INC. 1.4%- --------------------------------------------------------------------------------(10) JPMORGAN CHASE & CO. 1.3%- -------------------------------------------------------------------------------- TOTAL 19.6%

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]

21.9% FINANCIALS

15.7% INFORMATION TECHNOLOGY

12.2% HEALTH CARE

11.7% INDUSTRIALS

10.0% CONSUMER DISCRETIONARY

9.8% ENERGY

9.2% CONSUMER STAPLES

3.2% TELECOMMUNICATION SERVICES

3.1% UTILITIES

3.1% MATERIALS

0.1% OTHER

Portfolio holdings may have changed since the report date.


1 Source: Morningstar, Inc. This style assessment is the result of evaluating the fund based on a ten-factor model for value and growth characteristics. The fund's market capitalization placement is determined by the geometric mean of its holdings' market capitalizations. The assessment reflects the fund's portfolio as of 4/30/06, 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 INSTITUTIONAL SELECT(R) S&P 500 Fund

PERFORMANCE as of 4/30/06


This bar chart compares pre-tax performance of the fund with its benchmark andMorningstar category. The table below the chart shows two types of after-taxreturns.

[BAR CHART]

FUND Ticker Benchmark: Fund Category: Symbol: S&P 500(R) MORNINGSTAR ISLCX INDEX LARGE-CAP BLEND 6 MONTHS 9.61% 9.64% 10.20%1 YEAR 15.27% 15.42% 16.91%5 YEARS 2.60% 2.70% 2.61%SINCE INCEPTION: 2/1/99 1.79% 1.90% 2.72%

6 MONTHS 1 YEAR 5 YEARS SINCE INCEPTION Fund Fund Fund Fund FUND Category: FUND Category: FUND Category: FUND Category: Ticker MORNINGSTAR Ticker MORNINGSTAR Ticker MORNINGSTAR Ticker MORNINGSTAR Symbol: LARGE-CAP Symbol: LARGE-CAP Symbol: LARGE-CAP Symbol: LARGE-CAPTOTAL RETURNS AFTER TAX ISLCX BLEND ISLCX BLEND ISLCX BLEND ISLCX BLEND- ------------------------------------------------------------------------------------------------------------------------------------ PRE-LIQUIDATION (still own shares) 9.37% 4.30% 15.02% 10.01% 2.10% 3.15% 1.34% n/a- ------------------------------------------------------------------------------------------------------------------------------------POST-LIQUIDATION (shares were sold) 6.50% 3.42% 10.20% 7.26% 1.92% 2.87% 1.25% n/a- ------------------------------------------------------------------------------------------------------------------------------------



This graph shows performance since inception of a hypothetical $75,000investment (the minimum investment for this fund) in the fund compared with asimilar investment in its benchmark.

$85,283 FUND

$85,940 S&P 500(R) INDEX

[LINE GRAPH]

S&P 500(R) FUND INDEX 01-Feb-99 $75,000 $75,00028-Feb-99 $72,600 $72,66831-Mar-99 $75,525 $75,57430-Apr-99 $78,450 $78,49931-May-99 $76,500 $76,64630-Jun-99 $80,775 $80,90031-Jul-99 $78,300 $78,37631-Aug-99 $77,850 $77,98430-Sep-99 $75,750 $75,84731-Oct-99 $80,550 $80,64830-Nov-99 $82,125 $82,28731-Dec-99 $87,015 $87,13431-Jan-00 $82,620 $82,76029-Feb-00 $81,030 $81,19331-Mar-00 $88,980 $89,13430-Apr-00 $86,258 $86,45131-May-00 $84,443 $84,67930-Jun-00 $86,558 $86,77031-Jul-00 $85,200 $85,41731-Aug-00 $90,495 $90,72230-Sep-00 $85,650 $85,93231-Oct-00 $85,275 $85,57130-Nov-00 $78,608 $78,82831-Dec-00 $79,005 $79,21531-Jan-01 $81,758 $82,02728-Feb-01 $74,333 $74,54631-Mar-01 $69,585 $69,82030-Apr-01 $75,023 $75,24531-May-01 $75,480 $75,74930-Jun-01 $73,643 $73,90831-Jul-01 $72,878 $73,18431-Aug-01 $68,363 $68,60230-Sep-01 $62,850 $63,05931-Oct-01 $63,998 $64,26430-Nov-01 $68,903 $69,19331-Dec-01 $69,480 $69,80231-Jan-02 $68,475 $68,78328-Feb-02 $67,155 $67,45531-Mar-02 $69,713 $69,99130-Apr-02 $65,445 $65,75031-May-02 $64,980 $65,26330-Jun-02 $60,330 $60,61731-Jul-02 $55,680 $55,89531-Aug-02 $55,988 $56,25830-Sep-02 $49,943 $50,14331-Oct-02 $54,285 $54,55530-Nov-02 $57,540 $57,76931-Dec-02 $54,128 $54,37831-Jan-03 $52,710 $52,95328-Feb-03 $51,915 $52,15931-Mar-03 $52,395 $52,66530-Apr-03 $56,730 $57,00431-May-03 $59,648 $60,00830-Jun-03 $60,443 $60,77631-Jul-03 $61,463 $61,84631-Aug-03 $62,648 $63,05230-Sep-03 $62,018 $62,38431-Oct-03 $65,490 $65,91530-Nov-03 $66,045 $66,49531-Dec-03 $69,540 $69,97931-Jan-04 $70,740 $71,26629-Feb-04 $71,775 $72,25731-Mar-04 $70,658 $71,16630-Apr-04 $69,540 $70,04931-May-04 $70,500 $71,00830-Jun-04 $71,858 $72,38631-Jul-04 $69,458 $69,99031-Aug-04 $69,780 $70,27030-Sep-04 $70,500 $71,02931-Oct-04 $71,618 $72,11630-Nov-04 $74,498 $75,03631-Dec-04 $76,988 $77,58731-Jan-05 $75,120 $75,69428-Feb-05 $76,748 $77,28431-Mar-05 $75,368 $75,91630-Apr-05 $73,980 $74,47431-May-05 $76,260 $76,84230-Jun-05 $76,418 $76,94931-Jul-05 $79,185 $79,81231-Aug-05 $78,450 $79,08630-Sep-05 $79,103 $79,72631-Oct-05 $77,805 $78,39530-Nov-05 $80,730 $81,35831-Dec-05 $80,745 $81,38331-Jan-06 $82,890 $83,53928-Feb-06 $83,138 $83,76531-Mar-06 $84,210 $84,80330-Apr-06 $85,283 $85,940


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 4/30/06 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.



SCHWAB INSTITUTIONAL SELECT S&P 500 FUND

FUND FACTS as of 4/30/06

STYLE ASSESSMENT 1

[GRAPHIC]

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

STATISTICS

NUMBER OF HOLDINGS 505- --------------------------------------------------------------------------------WEIGHTED AVERAGE MARKET CAP ($ x 1,000,000) $90,789- --------------------------------------------------------------------------------PRICE/EARNINGS RATIO (P/E) 18.0- --------------------------------------------------------------------------------PRICE/BOOK RATIO (P/B) 3.1- --------------------------------------------------------------------------------PORTFOLIO TURNOVER RATE 2 1%- --------------------------------------------------------------------------------MINIMUM INITIAL INVESTMENT 3 $75,000- --------------------------------------------------------------------------------

TOP HOLDINGS 4

% OFSECURITY NET ASSETS- -------------------------------------------------------------------------------- (1) EXXON MOBIL CORP. 3.2%- --------------------------------------------------------------------------------(2) GENERAL ELECTRIC CO. 3.0%- --------------------------------------------------------------------------------(3) CITIGROUP, INC. 2.1%- --------------------------------------------------------------------------------(4) BANK OF AMERICA CORP. 1.9%- --------------------------------------------------------------------------------(5) MICROSOFT CORP. 1.8%- --------------------------------------------------------------------------------(6) PROCTER & GAMBLE CO. 1.6%- --------------------------------------------------------------------------------(7) PFIZER, INC. 1.5%- --------------------------------------------------------------------------------(8) JOHNSON & JOHNSON 1.4%- --------------------------------------------------------------------------------(9) AMERICAN INTERNATIONAL GROUP, INC. 1.4%- --------------------------------------------------------------------------------(10) JP MORGAN CHASE & CO. 1.3%- -------------------------------------------------------------------------------- TOTAL 19.2%

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]

21.4% FINANCIALS

15.5% INFORMATION TECHNOLOGY

11.9% HEALTH CARE

11.4% INDUSTRIALS

9.8% CONSUMER DISCRETIONARY

9.7% ENERGY

9.0% CONSUMER STAPLES

3.1% TELECOMMUNICATIONS SERVICES

3.1% MATERIALS

3.0% UTILITIES

2.1% OTHER

Portfolio holdings may have changed since the report date.


1 Source: Morningstar, Inc. This style assessment is the result of evaluating the fund based on a ten-factor model for value and growth characteristics. The fund's market capitalization placement is determined by the geometric mean of its holdings' market capitalizations. The assessment reflects the fund's portfolio as of 4/30/06, 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

INVESTOR SHARES PERFORMANCE as of 4/30/06

PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1

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: SCHWAB 1000 MORNINGSTAR SNXFX INDEX(R) LARGE-CAP BLEND 6 MONTHS 9.79% 10.07% 10.20%1 YEAR 16.63% 17.14% 16.91%5 YEARS 2 3.18% 3.54% 2.61%10 YEARS 2 8.86% 9.21% 7.94%

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) 9.59% 4.30% 16.41% 10.01% 2.79% 3.15% 8.46% 6.60%- ------------------------------------------------------------------------------------------------------------------------------------POST-LIQUIDATION (shares were sold) 6.62% 3.42% 11.08% 7.26% 2.49% 2.87% 7.61% 6.30%- ------------------------------------------------------------------------------------------------------------------------------------



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.

$23,363 INVESTOR SHARES

$24,148 SCHWAB 1000 INDEX(R)

$23,539 S&P 500(R) INDEX

[LINE GRAPH]

INVESTOR SCHWAB 1000 S&P 500(R) SHARES INDEX(R) INDEX 30-Apr-96 $10,000 $10,000 $10,00031-May-96 $10,237 $10,242 $10,25730-Jun-96 $10,209 $10,225 $10,29631-Jul-96 $9,724 $9,741 $9,84131-Aug-96 $9,989 $10,003 $10,04930-Sep-96 $10,545 $10,563 $10,61331-Oct-96 $10,760 $10,777 $10,90630-Nov-96 $11,536 $11,557 $11,73131-Dec-96 $11,341 $11,369 $11,49831-Jan-97 $11,993 $12,028 $12,21628-Feb-97 $12,038 $12,070 $12,31231-Mar-97 $11,502 $11,544 $11,80830-Apr-97 $12,121 $12,153 $12,51131-May-97 $12,891 $12,938 $13,27230-Jun-97 $13,426 $13,485 $13,86731-Jul-97 $14,513 $14,574 $14,96931-Aug-97 $13,816 $13,885 $14,13130-Sep-97 $14,558 $14,631 $14,90431-Oct-97 $14,078 $14,151 $14,40630-Nov-97 $14,669 $14,755 $15,07331-Dec-97 $14,961 $15,050 $15,33231-Jan-98 $15,068 $15,166 $15,50228-Feb-98 $16,178 $16,297 $16,62031-Mar-98 $17,000 $17,140 $17,47130-Apr-98 $17,175 $17,327 $17,64731-May-98 $16,797 $16,949 $17,34430-Jun-98 $17,473 $17,629 $18,04831-Jul-98 $17,231 $17,383 $17,85731-Aug-98 $14,657 $14,787 $15,27830-Sep-98 $15,603 $15,755 $16,25731-Oct-98 $16,842 $17,028 $17,57930-Nov-98 $17,890 $18,091 $18,64531-Dec-98 $19,024 $19,237 $19,71831-Jan-99 $19,745 $19,967 $20,54328-Feb-99 $19,081 $19,318 $19,90431-Mar-99 $19,847 $20,088 $20,70030-Apr-99 $20,653 $20,917 $21,50131-May-99 $20,177 $20,440 $20,99430-Jun-99 $21,181 $21,474 $22,15931-Jul-99 $20,506 $20,790 $21,46731-Aug-99 $20,307 $20,620 $21,36030-Sep-99 $19,768 $20,006 $20,77531-Oct-99 $21,074 $21,356 $22,09030-Nov-99 $21,585 $21,855 $22,53931-Dec-99 $23,020 $23,319 $23,86631-Jan-00 $21,939 $22,233 $22,66829-Feb-00 $21,945 $22,262 $22,23931-Mar-00 $23,842 $24,198 $24,41430-Apr-00 $22,945 $23,289 $23,67931-May-00 $22,345 $22,683 $23,19430-Jun-00 $22,945 $23,305 $23,76731-Jul-00 $22,608 $22,947 $23,39631-Aug-00 $24,140 $24,507 $24,84930-Sep-00 $23,025 $23,375 $23,53731-Oct-00 $22,831 $23,189 $23,43830-Nov-00 $20,882 $21,212 $21,59131-Dec-00 $21,129 $21,458 $21,69731-Jan-01 $21,848 $22,173 $22,46728-Feb-01 $19,823 $20,119 $20,41831-Mar-01 $18,472 $18,750 $19,12430-Apr-01 $19,978 $20,290 $20,61031-May-01 $20,105 $20,424 $20,74830-Jun-01 $19,662 $19,978 $20,24431-Jul-01 $19,397 $19,716 $20,04531-Aug-01 $18,161 $18,466 $18,79030-Sep-01 $16,636 $16,918 $17,27231-Oct-01 $17,010 $17,304 $17,60230-Nov-01 $18,310 $18,630 $18,95231-Dec-01 $18,539 $18,869 $19,11931-Jan-02 $18,325 $18,654 $18,84028-Feb-02 $17,971 $18,299 $18,47631-Mar-02 $18,690 $19,039 $19,17130-Apr-02 $17,675 $18,009 $18,00931-May-02 $17,506 $17,841 $17,87630-Jun-02 $16,242 $16,552 $16,60331-Jul-02 $15,023 $15,313 $15,31031-Aug-02 $15,116 $15,412 $15,40930-Sep-02 $13,543 $13,811 $13,73431-Oct-02 $14,652 $14,948 $14,94330-Nov-02 $15,499 $15,814 $15,82331-Dec-02 $14,610 $14,910 $14,89431-Jan-03 $14,246 $14,546 $14,50428-Feb-03 $14,011 $14,309 $14,28631-Mar-03 $14,169 $14,471 $14,42530-Apr-03 $15,298 $15,627 $15,61431-May-03 $16,126 $16,485 $16,43630-Jun-03 $16,332 $16,701 $16,64731-Jul-03 $16,661 $17,042 $16,94031-Aug-03 $17,002 $17,403 $17,27030-Sep-03 $16,802 $17,206 $17,08731-Oct-03 $17,778 $18,212 $18,05430-Nov-03 $17,978 $18,420 $18,21331-Dec-03 $18,810 $19,280 $19,16731-Jan-04 $19,142 $19,630 $19,52029-Feb-04 $19,416 $19,920 $19,79131-Mar-04 $19,166 $19,668 $19,49330-Apr-04 $18,816 $19,313 $19,18731-May-04 $19,077 $19,587 $19,44930-Jun-04 $19,410 $19,942 $19,82731-Jul-04 $18,727 $19,243 $19,17031-Aug-04 $18,804 $19,329 $19,24730-Sep-04 $19,041 $19,582 $19,45531-Oct-04 $19,339 $19,893 $19,75330-Nov-04 $20,141 $20,729 $20,55331-Dec-04 $20,845 $21,462 $21,25131-Jan-05 $20,315 $20,924 $20,73328-Feb-05 $20,749 $21,378 $21,16831-Mar-05 $20,418 $21,013 $20,79430-Apr-05 $20,032 $20,615 $20,39931-May-05 $20,749 $21,361 $21,04730-Jun-05 $20,858 $21,480 $21,07731-Jul-05 $21,659 $22,318 $21,86131-Aug-05 $21,460 $22,115 $21,66230-Sep-05 $21,617 $22,280 $21,83731-Oct-05 $21,279 $21,939 $21,47330-Nov-05 $22,099 $22,796 $22,28431-Dec-05 $22,106 $22,817 $22,29131-Jan-06 $22,747 $23,497 $22,88228-Feb-06 $22,747 $23,489 $22,94331-Mar-06 $23,095 $23,865 $23,22830-Apr-06 $23,363 $24,148 $23,539





SCHWAB 1000 INDEX FUND

SELECT SHARES(R) PERFORMANCE as of 4/30/06

PRE- AND POST-TAX AVERAGE ANNUAL TOTAL RETURNS 1

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

MSCI- LEHMAN BROTHERS S&P 500(R) 2000(R) EAFE(R) U.S. AGGREGATE INDEX INDEX INDEX BOND INDEX...

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