nvcsr

Purchase of Securities

Sales/Maturities of Securities

This supplement is not part of the shareholder report.

SCHWAB CAPITAL TRUST
(the “Trust”)

SCHWAB MARKETTRACK PORTFOLIOS
Schwab MarketTrack All Equity Portfolio
Schwab MarketTrack Growth Portfolio
Schwab MarketTrack Balanced Portfolio
Schwab MarketTrack Conservative Portfolio
(the “Portfolios”)

Supplement dated November 11, 2009 to the
Prospectus dated February 28, 2009,
as supplemented July 1, 2009

This supplement provides new and additional information beyond that contained in the Prospectus and should be read in conjunction with the Prospectus.

The Portfolios seek to maintain a defined mix of asset classes over time by investing mainly in a combination of other Schwab Funds, mainly index funds. With respect to the portion of the Portfolios’ assets that were allocated to the large-cap segment of the stock market, the Portfolios invested in the Schwab Institutional Select S&P 500 Fund. On September 9, 2009, the Schwab Institutional Select S&P 500 Fund was reorganized into the Schwab S&P 500 Index Fund, a separate series of the Trust. Effective September 10, 2009, the Portfolios no longer invest in the Schwab Institutional Select S&P 500 Fund; instead, the portion of the Portfolios’ assets that are allocated to the large-cap segment of the stock market are invested in the Schwab S&P 500 Index Fund. The Schwab Institutional Select S&P 500 Fund and the Schwab S&P 500 Index Fund have substantially similar investment objectives and each Fund pursues its investment objective by investing primarily in stocks that are included in the S&P 500 Index.

Accordingly, the following changes are made to the “Asset Allocation” Sub-Section of each Portfolio’s “Strategy” Section:


•	The reference to the Schwab Institutional Select S&P 500 Fund as the Portfolio’s underlying fund that focuses on the large-cap segment of the stock market is deleted and replaced with the Schwab S&P 500 Index Fund.

Please retain this supplement for future reference

Charles Schwab & Co., Inc. Member SIPC

Performance at a Glance

The performance data quoted represents past performance. Past performance does not guarantee future results. Investment returns and principal value will fluctuate so that an investor’s shares may be worth more or less than their original cost. Current performance may be lower or higher than performance data quoted. To obtain performance information current to the most recent month end, please visit www.schwab.com/schwabfunds.


Total Return for the Report Period


Schwab MarketTrack All Equity Portfolio^tm (Ticker Symbol: SWEGX)		13.54%

Benchmark: All Equity Composite Index		15.72%
Fund Category: Morningstar Large-Cap Blend		11.75%

Performance Details		pages 6-7



Schwab MarketTrack Growth Portfolio^tm

Investor Shares (Ticker Symbol: SWHGX)		12.95%
P Shares (Ticker Symbol: SWPGX)		13.09%
Benchmark: Growth Composite Index		14.44%
Fund Category: Morningstar Large-Cap Blend		11.75%

Performance Details		pages 8-9



Schwab MarketTrack Balanced Portfolio^tm (Ticker Symbol: SWBGX)		12.41%

Benchmark: Balanced Composite Index		14.47%
Fund Category: Morningstar Moderate Allocation		15.71%

Performance Details		pages 10-11



Schwab MarketTrack Conservative Portfolio^tm (Ticker Symbol: SWCGX)		11.82%*

Benchmark: Conservative Composite Index		14.25%
Fund Category: Morningstar Conservative Allocation		15.81%

Performance Details		pages 12-13



Minimum Initial Investment¹

Investor Shares		$ 100
P Shares		$100,000

The All Equity Composite Index is based on a comparable portfolio asset allocation and calculated using the following portion allocations: 70% Dow Jones U.S. Total Stock Market Index and 30% MSCI EAFE Index. The index is maintained by Charles Schwab Investment Management, Inc.

The Growth Composite Index is based on a comparable portfolio asset allocation and calculated using the following portion allocations: 60% Dow Jones U.S. Total Stock Market Index, 20% MSCI EAFE Index, 15% Barclays Capital U.S. Aggregate Bond Index, and 5% Barclays Capital U.S. Treasury Bills: 1-3 Months Index. The index is maintained by Charles Schwab Investment Management, Inc.

The Balanced Composite Index is based on a comparable portfolio asset allocation and calculated using the following portion allocations: 45% Dow Jones U.S. Total Stock Market Index, 15% MSCI EAFE Index, 35% Barclays Capital U.S. Aggregate Bond Index, and 5% Barclays Capital U.S. Treasury Bills: 1-3 Months Index. The index is maintained by Charles Schwab Investment Management, Inc.

The Conservative Composite Index is based on a comparable portfolio asset allocation and calculated using the following portion allocations: 30% Dow Jones U.S. Total Stock Market Index, 10% MSCI EAFE Index, 55% Barclays Capital U.S. Aggregate Bond Index, and 5% Barclays Capital U.S. Treasury Bills: 1-3 Months Index. The index is maintained by Charles Schwab Investment Management, Inc.

Source for category information: Morningstar, Inc.


*	Total return for the report period presented in the table differs from the return in the Financial Highlights. The total return presented in the above table is calculated based on the NAV at which shareholder transactions were processed. The total return presented in the Financial Highlights section of the report is calculated in the same manner, but also taking into account certain adjustments that are necessary under generally accepted accounting principles required in the annual and semiannual reports.

¹	Please see prospectus for further details and eligibility requirements.

2 Schwab MarketTrack Portfolios

From the President

Randall W. Merk is President and CEO of Charles Schwab Investment Management, Inc. and the funds covered in this report. He joined the firm in 2002 and has held a variety of executive positions at Schwab.

Dear Shareholder,

In the past year, volatile prices throughout the global financial marketplace and a recessionary economy have been among the numerous challenges affecting investment conditions and investor sentiment. While portfolios may still be below peak values reached in 2007, many have recovered substantially from lows touched as markets dropped in 2008 and early 2009. In particular, prices of many equity and fixed income securities declined precipitously toward the end of 2008 and the beginning of 2009. Since March of 2009, however, improvements in the financial markets and diminished concern over the depth and duration of the economic recession led to a broad-market recovery, with the prices of many equity securities rebounding from earlier lows.

During the reporting period, we made a number of improvements to the Schwab Funds family of mutual funds making it cheaper and easier for our clients to invest in Schwab Funds. On May 5, 2009, we lowered expenses on Schwab Equity Index Funds and consolidated share classes for Schwab equity and bond funds. Each Schwab equity and bond fund now offers one low fund expense to investors regardless of how much they invest, with a low $100 minimum investment. Our goal is to make investing easier and more affordable for our clients and the advisors who serve them.

For information on the investment environment and the performance of individual funds contained in this book, please see the fund managers’ discussion and analysis in the following pages of this report.

If you have any questions about Schwab Funds, we are always available at 1-800-435-4000, while additional resources may be found on Schwab.com

Thank you for investing with us.

Sincerely,

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

Schwab MarketTrack Portfolios 3

The Investment Environment

Investment conditions in the global financial market improved markedly in the second half of the reporting period, from the end of March through October, as concern over the economic recession and financial crisis ebbed. The first four months of the period, from November through February, were generally bearish; equity prices were driven down across the board as investors pulled back from the markets amidst poor macroeconomic data and pessimism over the markets’ ability to mount swift recoveries. Since March of 2009, however, both domestic and international markets experienced recovery, which helped to reduce earlier losses and produce positive 12-month returns in many cases. On the fixed income side, yields remained low on government backed securities, but leading broad market municipal and taxable bond indices were positive for the period.

Major economic indicators, such as Gross Domestic Product (GDP) and unemployment, continued to demonstrate that a consistent recovery has yet to materialize across many measures of the economy. GDP—the output of goods and services produced by labor and property located in the United States—rose 2.8% in the third quarter of 2009, after declining 0.7% in the prior quarter. The third quarter GDP gain was primarily attributable to increases in personal consumption expenditures, exports, private inventory investment, and government spending, according to the Bureau of Economic Analysis. The U.S. unemployment rate increased from 6.7% in November of 2008 to 10.2% in October of 2009. Sales of existing homes were a bright spot toward the end of the period, rising 9.4% in September, fueled by tax credits for new home buyers and favorable prices.

The returns of the S&P 500 Index, which is usually seen as a bellwether for financial markets, were positive. For the 12-month reporting period ending October 31, 2009, the S&P 500 Index returned 9.80%. In the index, Information Technology was the strongest performing sector, followed by Consumer Discretionary and Materials. Financials was the weakest sector, followed by Utilities and Industrials. In general, large-cap stocks outperformed small-cap as evidenced by the Russell 1000 Index, which returned 11.20%, compared with the Russell 2000 Index, which returned 6.46%. Looking at the broad market, growth outperformed value; the Russell 3000 Growth Index returned 17.04%, while the Russell 3000 Value Index returned 4.56%. Internationally, the MSCI EAFE Index returned 28.41%, while the MSCI Emerging Markets Index (Net)* returned 64.13%.

On the fixed income side, yields were low throughout the period for U.S. Treasury securities, especially those with the shortest maturities. The Barclays Capital U.S. Short Treasury: 9-12 Months returned 1.75%. The broad taxable bond market fared better, benefiting from price recovery on mortgage-backed securities and other assets that were out of favor with investors during the darkest moments of the financial crisis; the Barclays Capital U.S. Aggregate Bond Index returned 13.79%. Returns were also positive in the tax free bond market—the Barclays Capital General Muni Bond Index returned 13.60%. The Federal Open Market Committee reaffirmed on November 4, 2009 that it would continue to hold interest rates at a target range of 0 to 0.25%.

Asset Class Performance Comparison % returns during the report period

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


9.80%	S&P 500^® Index: measures U.S. large-cap stocks

6.46%	Russell 2000^® Index: measures U.S. small-cap stocks


28.41%	MSCI EAFE^® Index: measures (in U.S. dollars) large-cap stocks in Europe, Australasia and the Far East

13.79%	Barclays Capital U.S. Aggregate Bond Index: measures the U.S. bond market


0.21%	Three-Month U.S. Treasury Bills (T-bills): measures short-term U.S. Treasury obligations

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.

Nothing in this report represents a recommendation of a security by the investment adviser.

Manager views and portfolio holdings may have changed since the report date.

*The MSCI Emerging Markets Index (Net) is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. This series approximates the minimum possible dividend reinvestment.

4 Schwab MarketTrack Portfolios

Schwab MarketTrack All Equity Portfolio^tm

The Schwab MarketTrack Portfolios incorporate a mix of different asset classes, and each invests mainly in a combination of other Schwab Funds most of which are managed using indexing strategies. Each portfolio pursues a different investment goal. Accordingly, portfolio returns over a given period will reflect a blend of returns of the underlying asset classes, and will depend on their relative weightings in each portfolio.

The Schwab MarketTrack All Equity Portfolio returned 13.54% during the period, compared to the benchmark All Equity Composite Index, which returned 15.72%. The portfolio focuses on long-term stock growth, while remaining close to the target allocations of 45% in large-cap, 30% in international and 25% in small-cap stocks. On a total return basis, international equity securities were strong performers during the period. In general, prices on equity securities improved markedly during the period as both the domestic and international markets improved from March 2009 through October 2009. The portfolio’s underperformance relative to the benchmark (composed of 70% Dow Jones U.S. Total Stock Market Index and 30% MSCI EAFE Index) was primarily driven by the Schwab International Index Fund, which lagged the MSCI EAFE Index. Returns for the Schwab S&P 500 Index Fund also detracted slightly from performance when compared to the Dow Jones U.S. Total Stock Market Index. The Schwab Small-Cap Index Fund added value as it outperformed the Dow Jones U.S. Total Stock Market Index.

As of 10/31/09:

Statistics


Number of Holdings	4

Weighted Average Market


Cap ($ x 1,000,000)	$53,770


Price/Earnings Ratio (P/E)	55.1


Price/Book Ratio (P/B)	2.0


Portfolio Turnover Rate	10%

Asset Class Weightings % of Investments


Large-Cap Stocks	45.1%


International Stocks	30.2%


Small-Cap Stocks	24.6%


Short-Term Investments	0.1%


Total	100.0%

Top Holdings % Net Assets¹


Schwab S&P 500 Index Fund	45.2%


Schwab International Index Fund	30.2%


Schwab Small-Cap Index Fund	24.6%


Total	100.0%

Manager views and portfolio holdings may have changed since the report date.

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

6 Schwab MarketTrack Portfolios

Schwab MarketTrack All Equity Portfolio^tm

Performance Summary as of 10/31/09

October 31, 1999 – October 31, 2009
Performance of a Hypothetical
$10,000 Investment¹

Average Annual Total Returns^1,2


Portfolio and Inception Date	1 Year		5 Years		10 Years


Portfolio: Schwab MarketTrack All Equity Portfolio^tm (5/19/98)		13.54%		1.67%		0.65%
Benchmark: All Equity Composite Index		15.72%		2.25%		0.67%
Fund Category: Morningstar Large-Cap Blend		11.75%		0.45%		-0.10%

Portfolio Expense Ratios³: Net 0.64%; Gross 0.68%

Style Assessment⁴

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 All Equity Composite Index is based on a comparable portfolio asset allocation and calculated using the following portion allocations: 70% Dow Jones U.S. Total Stock Market Index and 30% MSCI EAFE Index. The index is maintained by Charles Schwab Investment Management, Inc.

²	Portfolio expenses have been partially absorbed by CSIM and Schwab. Without these reductions, the portfolio’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares.

³	As stated in the prospectus. Includes expenses of the underlying funds in which the Portfolio invests. The annualized weighted average expense ratio of the underlying funds was 0.14%. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual ratios during the period, refer to the financial highlights section of the financial statements.

⁴	Source: Morningstar, Inc. This style assessment is the result of evaluating the portfolio based on a ten-factor model for value and growth characteristics. The portfolio’s market capitalization placement is determined by the geometric mean of its holdings’ market capitalizations. The assessment reflects the portfolio’s holdings as of 10/31/09, which may have changed since then, and is not a precise indication of risk or performance—past, present, or future.

Schwab MarketTrack Portfolios 7

Schwab MarketTrack Growth Portfolio^tm

The Schwab MarketTrack Growth Portfolio returned 12.95% during the period, compared to the benchmark Growth Composite Index, which returned 14.44%. The portfolio focuses on stock investments, while including some bonds and cash investments, remaining close to the target allocations of 80% stocks, 15% bonds, and 5% cash. On a total return basis, international equity securities were strong performers during the period. In general, prices on equity securities improved markedly during the period as both the domestic and international markets improved from March 2009 through October 2009. The portfolio’s underperformance relative to the benchmark (composed of 60% Dow Jones U.S. Total Stock Market Index, 20% MSCI EAFE Index, 15% Barclays Capital U.S. Aggregate Bond Index, and 5% Morningstar 3 Month T-Bill Index) was primarily driven by the Schwab International Index Fund, which lagged the MSCI EAFE Index, and the Schwab Total Bond Market Fund, which lagged the Barclays Capital U.S. Aggregate Bond Index. Returns for the Schwab S&P 500 Index Fund also detracted slightly from performance when compared to the Dow Jones U.S. Total Stock Market Index. The Schwab Small-Cap Index Fund added value as it outperformed the Dow Jones U.S. Total Stock Market Index.

As of 10/31/09:

Statistics


Number of Holdings	6

Weighted Average Market


Cap ($ x 1,000,000)	$54,718


Price/Earnings Ratio (P/E)	59.7


Price/Book Ratio (P/B)	2.0


Portfolio Turnover Rate	23%

Asset Class Weightings % of Investments


Large-Cap Stocks	40.2%


International Stocks	20.0%


Small-Cap Stocks	19.5%


Bonds	15.4%


Short-Term Investments	4.9%


Total	100.0%

Top Holdings % Net Assets¹


Schwab S&P 500 Index Fund	40.2%


Schwab International Index Fund	20.0%


Schwab Small-Cap Index Fund	19.6%


Schwab Total Bond Market Fund	15.4%

Schwab Value Advantage Money


Fund, Institutional Shares	3.9%


Total	99.1%

Manager views and portfolio holdings may have changed since the report date.

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

8 Schwab MarketTrack Portfolios

Schwab MarketTrack Growth Portfolio^tm

Performance Summary as of 10/31/09

October 31, 1999 – October 31, 2009
Performance of a Hypothetical
$10,000 Investment in Investor Shares¹

April 6, 2006 – October 31, 2009
Performance of a Hypothetical
$100,000 Investment in P Shares¹

Average Annual Total Returns^1,2


Portfolio Class and Inception Date	1 Year		5 Years		10 Years		Since Inception


Investor Shares (11/20/95)		12.95%		1.98%		1.58%		5.47%
P Shares (4/6/06)		13.09%		n/a		n/a		-2.47%
Benchmark: Growth Composite Index		14.44%		2.77%		1.77%		(11/20/95) 5.92%
								(4/6/06) -1.77%
Fund Category: Morningstar Large-Cap Blend		11.75%		0.45%		-0.10%		(11/20/95) 5.53%
								(4/6/06) -4.64%

Portfolio Expense Ratios³: Investor Shares: Net 0.69%; Gross 0.72% / P Shares: Net 0.54%; Gross 0.57%

Style Assessment⁴


¹	The Growth Composite Index is based on a comparable portfolio asset allocation and calculated using the following portion allocations: 60% Dow Jones U.S. Total Stock Market Index, 20% MSCI EAFE Index, 15% Barclays Capital U.S. Aggregate Bond Index, and 5% Barclays Capital U.S. Treasury Bills: 1-3 Months Index. The index is maintained by Charles Schwab Investment Management, Inc.

²	Portfolio expenses have been partially absorbed by CSIM and Schwab. Without these reductions, the portfolio’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares.

³	As stated in the prospectus. Includes expenses of the underlying funds in which the Portfolio invests. The annualized weighted average expense ratio of the underlying funds was 0.19%. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual ratios during the period, refer to the financial highlights section of the financial statements.

⁴	Source: Morningstar, Inc. This style assessment is the result of evaluating the portfolio based on a ten-factor model for value and growth characteristics. The portfolio’s market capitalization placement is determined by the geometric mean of its holdings’ market capitalizations. The assessment reflects the portfolio’s holdings as of 10/31/09, which may have changed since then, and is not a precise indication of risk or performance—past, present, or future.

Schwab MarketTrack Portfolios 9

Schwab MarketTrack Balanced Portfolio^tm

The Schwab MarketTrack Balanced Portfolio returned 12.41%, compared to the benchmark Balanced Composite Index, which returned 14.47%. The portfolio focuses on both stock and bond investments, while remaining close to the target allocations of 60% stocks, 35% bonds, and 5% cash. On a total return basis, international equity securities were strong performers during the period. In general, prices on equity securities improved markedly during the period as both the domestic and international markets improved from March 2009 through October 2009. The portfolio’s underperformance relative to the benchmark (composed of 45% Dow Jones U.S. Total Stock Market Index, 15% MSCI EAFE Index, 35% Barclays Capital U.S. Aggregate Bond Index, and 5% Morningstar 3 Month T-Bill Index) was primarily driven by the Schwab International Index Fund, which lagged the MSCI EAFE Index, and the Schwab Total Bond Market Fund, which lagged the Barclays Capital U.S. Aggregate Bond Index. Returns for the Schwab S&P 500 Index Fund also detracted slightly from performance when compared to the Dow Jones U.S. Total Stock Market Index. The Schwab Small-Cap Index Fund added value as it outperformed the Dow Jones U.S. Total Stock Market Index.

As of 10/31/09:

Statistics


Number of Holdings	6

Weighted Average Market


Cap ($ x 1,000,000)	$54,361


Price/Earnings Ratio (P/E)	59.2


Price/Book Ratio (P/B)	2.0


Portfolio Turnover Rate	30%

Asset Class Weightings % of Investments


Bonds	36.0%


Large-Cap Stocks	29.8%


Small-Cap Stocks	14.9%


International Stocks	14.9%


Short-Term Investments	4.4%


Total	100.0%

Top Holdings % Net Assets¹


Schwab Total Bond Market Fund	35.8%


Schwab S&P 500 Index Fund	29.6%


Schwab Small-Cap Index Fund	14.8%


Schwab International Index Fund	14.8%

Schwab Value Advantage Money


Fund, Institutional Shares	3.4%


Total	98.4%

Manager views and portfolio holdings may have changed since the report date.

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

10 Schwab MarketTrack Portfolios

Schwab MarketTrack Balanced Portfolio^tm

Performance Summary as of 10/31/09

October 31, 1999 – October 31, 2009
Performance of a Hypothetical
$10,000 Investment¹

Average Annual Total Returns^1,2


Portfolio and Inception Date	1 Year		5 Years		10 Years


Portfolio: Schwab MarketTrack Balanced Portfolio^tm (11/20/95)		12.41%		2.20%		2.45%
Benchmark: Balanced Composite Index		14.47%		3.48%		3.03%
Fund Category: Morningstar Moderate Allocation		15.71%		2.07%		2.50%

Portfolio Expense Ratios³: Net 0.77%; Gross 0.78%


¹	The Balanced Composite Index is based on a comparable portfolio asset allocation and calculated using the following portion allocations: 45% Dow Jones U.S. Total Stock Market Index, 15% MSCI EAFE Index, 35% Barclays Capital U.S. Aggregate Bond Index, and 5% Barclays Capital U.S. Treasury Bills: 1-3 Months Index. The index is maintained by Charles Schwab Investment Management, Inc.

²	Portfolio expenses have been partially absorbed by CSIM and Schwab. Without these reductions, the portfolio’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares.

³	As stated in the prospectus. Includes expenses of the underlying funds in which the Portfolio invests. The annualized weighted average expense ratio of the underlying funds was 0.27%. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual ratios during the period, refer to the financial highlights section of the financial statements.

Schwab MarketTrack Portfolios 11

Schwab MarketTrack Conservative Portfolio^tm

The Schwab MarketTrack Conservative Portfolio returned 11.82% during the period, compared to the benchmark Conservative Composite Index, which returned 14.25%. The portfolio focuses on bond investments, but also includes equity investments, remaining close to the target allocations of 55% bonds, 40% stocks, and 5% cash. On a total return basis, international equity securities were strong performers during the period. In general, prices on equity securities improved markedly during the period as both the domestic and international markets improved from March 2009 through October 2009. The portfolio’s underperformance relative to the benchmark (composed of 30% Dow Jones U.S. Total Stock Market Index, 10% MSCI EAFE Index, 55% Barclays Capital U.S. Aggregate Bond Index, and 5% Morningstar 3 Month T-Bill Index) was primarily driven by the Schwab International Index Fund, which lagged the MSCI EAFE Index, and the Schwab Total Bond Market Fund, which lagged the Barclays Capital U.S. Aggregate Bond Index. Returns for the Schwab S&P 500 Index Fund also detracted slightly from performance when compared to the Dow Jones U.S. Total Stock Market Index. The Schwab Small-Cap Index Fund added value as it outperformed the Dow Jones U.S. Total Stock Market Index.

As of 10/31/09:

Statistics


Number of Holdings	6

Weighted Average Market


Cap ($ x 1,000,000)	$54,494


Price/Earnings Ratio (P/E)	59.3


Price/Book Ratio (P/B)	2.0


Portfolio Turnover Rate	25%

Asset Class Weightings % of Investments


Bonds	56.0%


Large-Cap Stocks	19.8%


International Stocks	9.9%


Small-Cap Stocks	9.8%


Short-Term Investments	4.5%


Total	100.0%

Top Holdings % Net Assets¹


Schwab Total Bond Market Fund	55.9%


Schwab S&P 500 Index Fund	19.7%


Schwab International Index Fund	9.9%


Schwab Small-Cap Index Fund	9.8%

Schwab Value Advantage Money


Fund, Institutional Shares	4.3%


Citibank, London Time Deposit	0.2%


Total	99.8%

Manager views and portfolio holdings may have changed since the report date.

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

12 Schwab MarketTrack Portfolios

Schwab MarketTrack Conservative Portfolio^tm

Performance Summary as of 10/31/09

October 31, 1999 – October 31, 2009
Performance of a Hypothetical
$10,000 Investment¹

Average Annual Total Returns^1,2


Portfolio and Inception Date	1 Year		5 Years		10 Years


Portfolio: Schwab MarketTrack Conservative Portfolio^tm (11/20/95)		11.82%*		2.33%		3.23%
Benchmark: Conservative Composite Index		14.25%		4.09%		4.18%
Fund Category: Morningstar Conservative Allocation		15.81%		2.70%		3.18%

Portfolio Expense Ratios³: Net 0.86%; Gross 0.90%


*	Total return for the report period presented in the table differs from the return in the Financial Highlights. The total return presented in the above table is calculated based on the NAV at which shareholder transactions were processed. The total return presented in the Financial Highlights section of the report is calculated in the same manner, but also taking into account certain adjustments that are necessary under generally accepted accounting principles required in the annual and semiannual reports.

¹	The Conservative Composite Index is based on a comparable portfolio asset allocation and calculated using the following portion allocations: 30% Dow Jones U.S. Total Stock Market Index, 10% MSCI EAFE Index, 55% Barclays Capital U.S. Aggregate Bond Index, and 5% Barclays Capital U.S. Treasury Bills: 1-3 Months Index. The index is maintained by Charles Schwab Investment Management, Inc.

²	Portfolio expenses have been partially absorbed by CSIM and Schwab. Without these reductions, the portfolio’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares.

³	As stated in the prospectus. Includes expenses of the underlying funds in which the Portfolio invests. The annualized weighted average expense ratio of the underlying funds was 0.36%. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual ratios during the period, refer to the financial highlights section of the financial statements.

Schwab MarketTrack Portfolios 13

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

As a fund shareholder, you incur two types of costs: transaction costs, such as redemption fees, and ongoing costs, such as management fees, transfer agent and shareholder services fees, and other fund expenses.

The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in a fund and to compare this cost with the ongoing cost of investing in other mutual funds. These examples are based on an investment of $1,000 invested for six-months beginning May 1, 2009 and held through October 31, 2009.

Actual Return lines in the table below provide information about actual account values and actual expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value ¸ $1,000 = 8.6), then multiply the result by the number given for your fund or share class under the heading entitled “Expenses Paid During Period”.

Hypothetical Return lines in the table below provide information about hypothetical account values and hypothetical expenses based on a fund’s or share class’ actual expense ratio and an assumed return of 5% per year before expenses. Because the return used is not an actual return, it may not be used to estimate the actual ending account value or expenses you paid for the period.

You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only, and do not reflect any transactional costs, such as redemption fees. If these transactional costs were included, your costs would have been higher.


					Ending
			Beginning		Account Value		Expenses Paid
	Expense Ratio¹		Account Value		(Net of Expenses)		During Period²
	(Annualized)		at 5/1/09		at 10/31/09		5/1/09–10/3109



Schwab MarketTrack All Equity Portfolio^tm
Actual Return		0.50%	$	1,000	$	1,226.00	$	2.81
Hypothetical 5% Return		0.50%	$	1,000	$	1,022.68	$	2.55


Schwab MarketTrack Growth Portfolio^tm
Investor Shares
Actual Return		0.50%	$	1,000	$	1,184.50	$	2.75
Hypothetical 5% Return		0.50%	$	1,000	$	1,022.68	$	2.55
P Shares
Actual Return		0.35%	$	1,000	$	1,185.50	$	1.93
Hypothetical 5% Return		0.35%	$	1,000	$	1,023.44	$	1.79


Schwab MarketTrack Balanced Portfolio^tm
Actual Return		0.50%	$	1,000	$	1,151.40	$	2.71
Hypothetical 5% Return		0.50%	$	1,000	$	1,022.68	$	2.55


Schwab MarketTrack Conservative Portfolio^tm
Actual Return		0.50%	$	1,000	$	1,117.10	$	2.67
Hypothetical 5% Return		0.50%	$	1,000	$	1,022.68	$	2.55


¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in Financial Highlights; does not include expenses of underlying funds in which the portfolios invest.

²	Expenses for each fund or share class are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 184 days of the period, and divided by the 365 days of the fiscal year.

14 Schwab MarketTrack Portfolios

Schwab MarketTrack All Equity Portfolio^tm

Financial Statements

Financial Highlights


	11/1/08–			11/1/07–			11/1/06–			11/1/05–			11/1/04–
	10/31/09			10/31/08			10/31/07			10/31/06			10/31/05


Per-Share Data ($)

Net asset value at beginning of period		9.44			15.58			13.63			11.55			10.44

Income (loss) from investment operations:
Net investment income (loss)		0.30			0.20			0.21			0.11			0.12
Net realized and unrealized gains (losses)		0.83			(6.11	)		2.01			2.10			1.11

Total from investment operations		1.13			(5.91	)		2.22			2.21			1.23
Less distributions:
Distributions from net investment income		(0.23	)		(0.22	)		(0.27	)		(0.13	)		(0.12	)
Distributions from net realized gains		(0.52	)		(0.01	)		—			—			—

Total distributions		(0.75	)		(0.23	)		(0.27	)		(0.13	)		(0.12	)

Net asset value at end of period		9.82			9.44			15.58			13.63			11.55

Total return (%)		13.54			(38.46	)		16.55			19.31			11.81

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses¹		0.50			0.50			0.50			0.50			0.50
Gross operating expenses¹		0.67			0.73			0.72			0.74			0.75
Net investment income (loss)		3.46			1.46			1.24			0.89			1.07
Portfolio turnover rate		10			10			0	²		8			49
Net assets, end of period ($ x 1,000,000)		461			429			682			527			463

¹ The expenses incurred by underlying funds in which the portfolio invests are not included in this ratio.

² Less than 1%.

See financial notes 15

Schwab MarketTrack All Equity Portfolio

Portfolio Holdings as of October 31, 2009

This section shows all the securities in the fund’s portfolio and their values as of the report date.

The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q is available on the SEC’s website at http://www.sec.gov and may be viewed and copied at the SEC’s Public Reference Room in Washington, D.C. Call 1-800-SEC-0330 for information on the operation of the Public Reference Room. The schedule of portfolio holdings filed on a fund’s most recent Form N-Q is also available by visiting Schwab’s website at www.schwab.com/schwabfunds.

Cost

Value

Holdings by Category

($ x 1,000)

100

.0%

Other Investment Companies

494,223

460,832

.1%

Short-Term Investment

572

100

.1%

Total Investments

494,795

461,404

.1)%

Other Assets and Liabilities, Net

(450

)

100

.0%

Total Net Assets

460,954


	Number		Value
Security	of Shares		($ x 1,000)

Other Investment Companies 100.0% of net assets

Equity Funds 100.0%
Schwab International Index Fund (a)		8,562,505		139,226
Schwab S&P 500 Index Fund (a)		12,790,339		208,227
Schwab Small-Cap Index Fund (a)		7,488,666		113,379

Total Other Investment Companies (Cost $494,223)				460,832



Security	Face Amount		Value
Rate, Maturity Date	($ x 1,000)		($ x 1,000)

Short-Term Investment 0.1% of net assets

Commercial Paper & Other Obligations 0.1%
Wells Fargo, San Francisco Time Deposit
0.03%, 11/02/09		572		572

Total Short-Term Investment (Cost $572)				572



End of Investments.

(All dollar amounts are x 1,000)

At 10/31/09, the tax basis cost of the fund’s investments was $520,324 and the unrealized appreciation and depreciation were $0 and ($58,920), respectively, with a net unrealized depreciation of ($58,920).


(a)		Issuer is affiliated with the fund’s adviser.

16 See financial notes

Schwab MarketTrack All Equity Portfolio

Statement of

Operations

For November 1, 2008 through October 31, 2009. All numbers are x 1,000.




Investment Income
Dividends received from affiliated underlying funds		$15,936
Interest	+	2


Total investment income		15,938


Net Realized Gains and Losses
Net realized losses on sales of affiliated underlying funds		(27,611	)
Net realized gains on unaffiliated investments		1
Net realized losses on futures contracts	+	(1,333	)


Net realized losses		(28,943	)


Net Unrealized Gains and Losses
Net unrealized gains on affiliated underlying funds		65,941
Net unrealized gains on futures contracts	+	1,146


Net unrealized gains		67,087


Expenses
Investment adviser and administrator fees		1,451
Transfer agent and shareholder services fees		1,019
Shareholder reports		122
Professional fees		39
Registration fees		32
Portfolio accounting fees		22
Custodian fees		12
Trustees’ fees		10
Other expense	+	18


Total expenses		2,725
Expense reduction by adviser and Schwab	−	710


Net expenses		2,015


Increase (Decrease) in Net Assets from Operations
Total investment income		15,938
Net expenses	−	2,015


Net investment income		13,923
Net realized losses		(28,943	)
Net unrealized gains	+	67,087


Increase in net assets from operations		$52,067

18 See financial notes

Schwab MarketTrack All Equity Portfolio

Statements of

Changes in Net Assets

For the current and prior report periods. All numbers are x 1,000.




Operations


		11/01/08-10/31/09			11/01/07-10/31/08
Net investment income			$13,923			$8,840
Net realized gains (losses)			(28,943	)		4,479
Net unrealized gains (losses)	+		67,087			(285,270	)


Increase (Decrease) in net assets from operations			52,067			(271,951	)


Distributions to Shareholders
Distributions from net investment income			10,448			9,700
Distributions from net realized gains	+		23,862			437


Total distributions			$34,310			$10,137

Transactions in Fund Shares


		11/01/08-10/31/09						11/01/07-10/31/08
		SHARES			VALUE			SHARES			VALUE
Shares sold			8,708			$74,119			11,241			$147,763
Shares reinvested			3,934			32,337			666			9,651
Shares redeemed	+		(11,183	)		(92,389	)		(10,225	)		(128,596	)


Net transactions in fund shares			1,459			$14,067			$1,682			$28,818


Shares Outstanding and Net Assets
		11/01/08-10/31/09						11/01/07-10/31/08
		SHARES			NET ASSETS			SHARES			NET ASSETS
Beginning of period			45,481			$429,130			43,799			$682,400
Total increase or decrease	+		1,459			31,824			1,682			(253,270	)


End of period			46,940			$460,954			45,481			$429,130


Net investment income not yet distributed/Distributions in excess of net investment income						$567						($2,911	)

See financial notes 19

Schwab MarketTrack Growth Portfolio^tm

Financial Statements

Financial Highlights


	11/1/08–			11/1/07–			11/1/06–			11/1/05–			11/1/04–
Investor Shares	10/31/09			10/31/08			10/31/07			10/31/06			10/31/05


Per-Share Data ($)

Net asset value at beginning of period		13.71			21.09			19.16			16.81			15.57

Income (loss) from investment operations:
Net investment income (loss)		0.39			0.37			0.40			0.30			0.27
Net realized and unrealized gains (losses)		1.25			(6.94	)		2.16			2.33			1.20

Total from investment operations		1.64			(6.57	)		2.56			2.63			1.47
Less distributions:
Distributions from net investment income		(0.40	)		(0.41	)		(0.46	)		(0.28	)		(0.23	)
Distributions from net realized gains		(0.44	)		(0.40	)		(0.17	)		—			—

Total distributions		(0.84	)		(0.81	)		(0.63	)		(0.28	)		(0.23	)

Net asset value at end of period		14.51			13.71			21.09			19.16			16.81

Total return (%)		12.95			(32.27	)		13.69			15.83			9.48

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses¹		0.50			0.50			0.50			0.50			0.50
Gross operating expenses¹		0.66			0.71			0.70			0.71			0.72
Net investment income (loss)		3.03			1.99			1.94			1.74			1.58
Portfolio turnover rate		23			10			4			7			33
Net assets, end of period ($ x 1,000,000)		507			454			686			602			657


	11/1/08–			11/1/07–			11/1/06–			4/6/06²–
P Shares	10/31/09			10/31/08			10/31/07			10/31/06


Per-Share Data ($)

Net asset value at beginning of period		13.72			21.10			19.18			18.32

Income (loss) from investment operations:
Net investment income (loss)		0.43			0.37			0.42			0.10
Net realized and unrealized gains (losses)		1.22			(6.91	)		2.16			0.76

Total from investment operations		1.65			(6.54	)		2.58			0.86
Less distributions:
Distributions from net investment income		(0.42	)		(0.44	)		(0.49	)		—
Distributions from net realized gains		(0.44	)		(0.40	)		(0.17	)		—

Total distributions		(0.86	)		(0.84	)		(0.66	)		—

Net asset value at end of period		14.51			13.72			21.10			19.18

Total return (%)		13.09			(32.14	)		13.83			4.69	³

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses¹		0.35			0.35			0.35			0.35	⁴
Gross operating expenses¹		0.51			0.56			0.55			0.56	⁴
Net investment income (loss)		3.31			2.10			2.07			0.95	⁴
Portfolio turnover rate		23			10			4			7	³
Net assets, end of period ($ x 1,000,000)		84			94			138			119

¹ The expenses incurred by underlying funds in which the portfolio invests are not included in this ratio.

² Commencement of operations.

³ Not annualized.

⁴ Annualized.

20 See financial notes

Schwab MarketTrack Growth Portfolio

Portfolio Holdings as of October 31, 2009

This section shows all the securities in the fund’s portfolio and their values as of the report date.

Cost

Value

Holdings by Category

($ x 1,000)

.1%

Other Investment Companies

544,928

585,551

.0%

Short-Term Investment

5,928

100

.1%

Total Investments

550,856

591,479

.1)%

Other Assets and Liabilities, Net

(624

)

100

.0%

Total Net Assets

590,855


	Number		Value
Security	of Shares		($ x 1,000)

Other Investment Companies 99.1% of net assets

Equity Funds 79.7%
Schwab International Index Fund (a)		7,252,275		117,922
Schwab S&P 500 Index Fund (a)		14,588,652		237,503
Schwab Small-Cap Index Fund (a)		7,630,640		115,528

				470,953

Fixed-Income Funds 15.5%
Schwab Total Bond Market Fund (a)		10,103,612		91,337

Money Funds 3.9%
Schwab Value Advantage Money Fund, Institutional Shares (a)		23,260,416		23,261

Total Other Investment Companies (Cost $544,928)				585,551



Security	Face Amount		Value
Rate, Maturity Date	($ x 1,000)		($ x 1,000)

Short-Term Investment 1.0% of net assets

Commercial Paper & Other Obligations 1.0%
Wells Fargo, San Francisco Time Deposit
0.03%, 11/02/09		5,928		5,928

Total Short-Term Investment (Cost $5,928)				5,928



End of Investments.

(All dollar amounts are x 1,000)

At 10/31/09, the tax basis cost of the fund’s investments was $555,084 and the unrealized appreciation and depreciation were $39,581 and ($3,186), respectively, with a net unrealized appreciation of $36,395.


(a)		Issuer is affiliated with the fund’s adviser.

See financial notes 21

Schwab MarketTrack Growth Portfolio

Statement of

Assets and Liabilities

As of October 31, 2009. All numbers are x 1,000 except NAV.




Assets
Investments in affiliated underlying funds, at value (cost $544,928)		$585,551
Investments in unaffiliated issuers, at value (cost $5,928)	+	5,928


Total investments, at value (cost $550,856)		591,479
Receivables:
Fund shares sold		440
Dividends		278
Prepaid expenses	+	9


Total assets		592,206


Liabilities
Payables:
Investments bought		281
Investment adviser and administrator fees		41
Shareholder services fees to affiliate		4
Fund shares redeemed		953
Accrued expenses	+	72


Total liabilities		1,351


Net Assets
Total assets		592,206
Total liabilities	−	1,351


Net assets		$590,855
Net Assets by Source
Capital received from investors		584,307
Net investment income not yet distributed		4,242
Net realized capital losses		(38,317	)
Net unrealized capital gains		40,623

Net Asset Value (NAV) by Share Class


			Shares
Share Class	Net Assets	¸	Outstanding	=	NAV

Investor Shares	$507,195		34,945			$14.51
P Shares	$83,660		5,764			$14.51

22 See financial notes

Schwab MarketTrack Growth Portfolio

Statement of

Operations

For November 1, 2008 through October 31, 2009. All numbers are x 1,000.




Investment Income
Dividends received from affiliated underlying funds and stocks		$17,606
Dividends received from unaffiliated issuers		947
Interest	+	1


Total investment income		18,554


Net Realized Gains and Losses
Net realized losses on sales of affiliated underlying funds and stocks		(23,347	)
Net realized losses on unaffiliated investments	+	(7,739	)


Net realized losses		(31,086	)


Net Unrealized Gains and Losses
Net unrealized gains on affiliated underlying funds and stocks		96,202
Net unrealized losses on unaffiliated investments	+	(17,890	)


Net unrealized gains		78,312


Expenses
Investment adviser and administrator fees		1,887
Transfer agent and shareholder service fees:
Investor Shares		1,112
P Shares		85
Shareholder reports		91
Professional fees		40
Registration fees		31
Portfolio accounting fees		26
Custodian fees		14
Trustees’ fees		11
Interest expense		1
Other expenses	+	20


Total expenses		3,318
Expense reduction by adviser and Schwab	−	827


Net expenses		2,491


Increase (Decrease) in Net Assets from Operations
Total investment income		18,554
Net expenses	−	2,491


Net investment income		16,063
Net realized losses		(31,086	)
Net unrealized gains	+	78,312


Increase in net assets from operations		63,289

See financial notes 23

Schwab MarketTrack Growth Portfolio

Statements of

Changes in Net Assets

For the current and prior report periods. All numbers are x 1,000.




Operations


		11/01/08-10/31/09			11/01/07-10/31/08
Net investment income			$16,063			$14,619
Net realized gains (losses)			(31,086	)		15,981
Net unrealized gains (losses)	+		78,312			(295,758	)


Increase (Decrease) in net assets from operations			63,289			(265,158	)


Distributions to Shareholders
Distributions from net investment income
Investor Shares			13,232			13,372
P Shares	+		2,792			3,067


Total distributions from net investment income			16,024			16,439


Distributions from net realized gains
Investor Shares			14,726			13,018
P Shares	+		2,924			2,778


Total distributions from net realized gains			17,650			15,796

Total distributions			$33,674			$32,235

Transactions in Fund Shares


		11/01/08-10/31/09						11/01/07-10/31/08
		SHARES			VALUE			SHARES			VALUE


Shares Sold
Investor Shares			6,665			$86,068			5,270			$93,615
P Shares	+		674			8,706			1,702			31,974


Total shares sold			7,339			$94,774			6,972			$125,589


Shares Reinvested
Investor Shares			2,157			$26,857			1,316			$25,447
P Shares	+		460			5,715			302			5,845


Total shares reinvested			2,617			$32,572			1,618			$31,292


Shares Redeemed
Investor Shares			(6,983	)		($86,230	)		(6,000	)		($104,934	)
P Shares	+		(2,240	)		(28,121	)		(1,659	)		(29,888	)


Total shares redeemed			(9,223	)		($114,351	)		(7,659	)		($134,822	)

Net transactions in fund shares			733			$12,995			931			$22,059


Shares Outstanding and Net Assets
		11/01/08-10/31/09						11/01/07-10/31/08
		SHARES			NET ASSETS			SHARES			NET ASSETS
Beginning of period			39,976			$548,245			39,045			$823,579
Total increase or decrease	+		733			42,610			931			(275,334	)


End of period			40,709			$590,855			39,976			$548,245


Net investment income not yet distributed						$4,242						$4,220

24 See financial notes

Schwab MarketTrack Balanced Portfolio^tm

Financial Statements

Financial Highlights


	11/1/08–			11/1/07–			11/1/06–			11/1/05–			11/1/04–
	10/31/09			10/31/08			10/31/07			10/31/06			10/31/05


Per-Share Data ($)

Net asset value at beginning of period		12.74			18.13			17.04			15.46			14.66

Income (loss) from investment operations:
Net investment income (loss)		0.38			0.42			0.47			0.38			0.34
Net realized and unrealized gains (losses)		1.11			(5.06	)		1.41			1.58			0.74

Total from investment operations		1.49			(4.64	)		1.88			1.96			1.08
Less distributions:
Distributions from net investment income		(0.44	)		(0.48	)		(0.50	)		(0.34	)		(0.28	)
Distributions from net realized gains		(0.25	)		(0.27	)		(0.29	)		(0.04	)		—

Total distributions		(0.69	)		(0.75	)		(0.79	)		(0.38	)		(0.28	)

Net asset value at end of period		13.54			12.74			18.13			17.04			15.46

Total return (%)		12.41			(26.59	)		11.38			12.92			7.41

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses¹		0.50			0.50			0.50			0.50			0.50
Gross operating expenses¹		0.66			0.72			0.72			0.73			0.73
Net investment income (loss)		3.09			2.57			2.65			2.35			2.20
Portfolio turnover rate		30			17			6			8			25
Net assets, end of period ($ x 1,000,000)		434			405			598			534			519

¹ The expenses incurred by underlying funds in which the portfolio invests are not included in this ratio.

See financial notes 25

Schwab MarketTrack Balanced Portfolio

Portfolio Holdings as of October 31, 2009

This section shows all the securities in the fund’s portfolio and their values as of the report date.

Cost

Value

Holdings by Category

($ x 1,000)

.4%

Other Investment Companies

391,412

426,921

.1%

Short-Term Investment

4,624

.5%

Total Investments

396,036

431,545

.5%

Other Assets and Liabilities, Net

1,985

100

.0%

Total Net Assets

433,530


	Number		Value
Security	of Shares		($ x 1,000)

Other Investment Companies 98.4% of net assets

Equity Funds 59.2%
Schwab International Index Fund (a)		3,947,359		64,184
Schwab S&P 500 Index Fund (a)		7,893,746		128,510
Schwab Small-Cap Index Fund (a)		4,244,673		64,265

				256,959

Fixed-Income Funds 35.8%
Schwab Total Bond Market Fund (a)		17,171,458		155,230

Money Funds 3.4%
Schwab Value Advantage Money Fund, Institutional Shares (a)		14,732,411		14,732

Total Other Investment Companies (Cost $391,412)				426,921



Security	Face Amount		Value
Rate, Maturity Date	($ x 1,000)		($ x 1,000)

Short-Term Investment 1.1% of net assets

Commercial Paper & Other Obligations 1.1%
Wells Fargo, San Francisco Time Deposit
0.03%, 11/02/09		4,624		4,624

Total Short-Term Investment (Cost $4,624)				4,624



End of Investments.

(All dollar amounts are x 1,000)

At 10/31/09, the tax basis cost of the fund’s investments was $403,163 and the unrealized appreciation and depreciation were $34,096 and ($5,714), respectively, with a net unrealized appreciation of $28,382.


(a)		Issuer is affiliated with the fund’s adviser.

26 See financial notes

Schwab MarketTrack Balanced Portfolio

Statement of

Operations

For November 1, 2008 through October 31, 2009. All numbers are x 1,000.




Investment Income
Dividends received from affiliated underlying funds and stocks		$13,490
Dividends received from unaffiliated issuers		630
Interest	+	3


Total investment income		14,123


Net Realized Gains and Losses
Net realized losses on sales of affiliated underlying funds and stocks		(18,412	)
Net realized losses on unaffiliated investments	+	(5,728	)


Net realized losses		(24,140	)


Net Unrealized Gains and Losses
Net unrealized losses on unaffiliated investments		(11,406	)
Net unrealized gains on affiliated underlying funds and stocks	+	69,372


Net unrealized gains		57,966


Expenses
Investment adviser and administrator fees		1,428
Transfer agent and shareholder service fees		999
Shareholder reports		48
Professional fees		39
Registration fees		30
Portfolio accounting fees		24
Custodian fees		12
Trustees’ fees		9
Other expenses	+	5


Total expenses		2,594
Expense reduction by adviser and Schwab	−	629


Net expenses		1,965


Increase (Decrease) in Net Assets from Operations
Total investment income		14,123
Net expenses	−	1,965


Net investment income		12,158
Net realized losses		(24,140	)
Net unrealized gains	+	57,966


Increase in net assets from operations		$45,984

28 See financial notes

Schwab MarketTrack Balanced Portfolio

Statements of

Changes in Net Assets

For the current and prior report periods. All numbers are x 1,000.




Operations


		11/01/08-10/31/09			11/01/07-10/31/08
Net investment income			$12,158			$13,698
Net realized gains (losses)			(24,140	)		6,587
Net unrealized gains (losses)	+		57,966			(174,098	)


Increase (Decrease) in net assets from operations			45,984			(153,813	)


Distributions to Shareholders
Distributions from net investment income			14,076			15,748
Distributions from net realized gains	+		7,744			9,065


Total distributions			$21,820			$24,813

Transactions in Fund Shares


		11/01/08-10/31/09						11/01/07-10/31/08
		SHARES			VALUE			SHARES			VALUE
Shares sold			5,528			$67,635			5,213			$83,413
Shares reinvested			1,742			20,735			1,408			23,635
Shares redeemed	+		(7,035	)		(84,003	)		(7,834	)		(121,760	)


Net transactions in fund shares			235			$4,367			(1,213	)		($14,712	)


Shares Outstanding and Net Assets
		11/01/08-10/31/09						11/01/07-10/31/08
		SHARES			NET ASSETS			SHARES			NET ASSETS
Beginning of period			31,788			$404,999			33,001			$598,337
Total increase or decrease	+		235			28,531			(1,213	)		(193,338	)


End of period			32,023			$433,530			31,788			$404,999


Net investment income not yet distributed						$5,019						$6,950

See financial notes 29

Schwab MarketTrack Conservative Portfolio^tm

Financial Statements

Financial Highlights


	11/1/08–			11/1/07–			11/1/06–			11/1/05–			11/1/04–
Investor Shares	10/31/09			10/31/08			10/31/07			10/31/06			10/31/05


Per-Share Data ($)

Net asset value at beginning of period		11.34			14.90			14.33			13.42			13.09

Income (loss) from investment operations:
Net investment income (loss)		0.37			0.43			0.49			0.42			0.36
Net realized and unrealized gains (losses)		0.91			(3.40	)		0.78			0.92			0.32

Total from investment operations		1.28			(2.97	)		1.27			1.34			0.68
Less distributions:
Distributions from net investment income		(0.38	)		(0.46	)		(0.51	)		(0.42	)		(0.35	)
Distributions from net realized gains		(0.09	)		(0.13	)		(0.19	)		(0.01	)		—

Total distributions		(0.47	)		(0.59	)		(0.70	)		(0.43	)		(0.35	)

Net asset value at end of period		12.15			11.34			14.90			14.33			13.42

Total return (%)		11.72			(20.59	)		9.12			10.13			5.24

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses¹		0.50			0.50			0.50			0.50			0.50
Gross operating expenses¹		0.68			0.74			0.73			0.74			0.75
Net investment income (loss)		3.31			3.12			3.37			3.12			2.67
Portfolio turnover rate		25			16			4			11			9
Net assets, end of period ($ x 1,000,000)		181			182			252			232			300


	11/1/08–			11/01/07–			11/01/06–			4/06/06³–
P Shares	8/04/09²			10/31/08			10/31/07			10/31/06


Per-Share Data ($)

Net asset value at beginning of period		11.30			14.87			14.32			13.93

Income (loss) from investment operations:
Net investment income (loss)		0.30			0.42			0.51			0.23
Net realized and unrealized gains (losses)		0.67			(3.36	)		0.78			0.35

Total from investment operations		0.97			(2.94	)		1.29			0.58
Less distributions:
Distributions from net investment income		(0.33	)		(0.50	)		(0.55	)		(0.19	)
Distributions from net realized gains		(0.09	)		(0.13	)		(0.19	)		—

Total distributions		(0.42	)		(0.63	)		(0.74	)		(0.19	)

Net asset value at end of period		11.85			11.30			14.87			14.32

Total return (%)		8.88	⁴		(20.47	)		9.32			4.22	⁴

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses¹		0.35	⁵		0.35			0.35			0.35	⁵
Gross operating expenses¹		0.57	⁵		0.59			0.58			0.60	⁵
Net investment income (loss)		3.63	⁵		3.20			3.48			2.81	⁵
Portfolio turnover rate		25			16			4			11	⁴
Net assets, end of period ($ x 1,000,000)		95			86			99			79

¹ The expenses incurred by the underlying funds in which the portfolio invests are not included in this ratio.

² Effective August 4, 2009, all outstanding P shares were redeemed. The Board of Trustees voted that effective December 10, 2009 the fund will no longer offer P shares.

³ Commencement of operations.

⁴ Not annualized.

⁵ Annualized.

30 See financial notes

Schwab MarketTrack Conservative Portfolio

Portfolio Holdings as of October 31, 2009

This section shows all the securities in the fund’s portfolio and their values as of the report date.

Cost

Value

Holdings by Category

($ x 1,000)

.6%

Other Investment Companies

166,912

179,920

.2%

Short-Term Investment

306

.8%

Total Investments

167,218

180,226

.2%

Other Assets and Liabilities, Net

451

100

.0%

Total Net Assets

180,677


	Number		Value
Security	of Shares		($ x 1,000)

Other Investment Companies 99.6% of net assets

Equity Funds 39.4%
Schwab International Index Fund (a)		1,099,466		17,877
Schwab S&P 500 Index Fund (a)		2,190,907		35,668
Schwab Small-Cap Index Fund (a)		1,166,848		17,666

				71,211

Fixed-Income Funds 55.9%
Schwab Total Bond Market Fund (a)		11,171,182		100,988

Money Funds 4.3%
Schwab Value Advantage Money Fund, Institutional Shares (a)		7,721,069		7,721

Total Other Investment Companies (Cost $166,912)				179,920



Security	Face Amount		Value
Rate, Maturity Date	($ x 1,000)		($ x 1,000)

Short-Term Investment 0.2% of net assets

Commercial Paper & Other Obligations 0.2%
Wells Fargo, San Francisco Time Deposit
0.03%, 11/02/09		306		306

Total Short-Term Investment (Cost $306)				306



End of Investments.

(All dollar amounts are x 1,000)

At 10/31/09 the tax basis cost of the fund’s investments was $174,564 and the unrealized appreciation and depreciation were $9,487 and ($3,825), respectively, with a net unrealized appreciation of $5,662.


(a)		Issuer is affiliated with the fund’s adviser.

See financial notes 31

Schwab MarketTrack Conservative Portfolio

Statement of

Operations

For November 1, 2008 through October 31, 2009. All numbers are x 1,000.




Investment Income
Dividends received from affiliated underlying funds and stocks		$8,918
Dividends received from unaffiliated issuers		149
Interest	+	1


Total investment income		9,068


Net Realized Gains and Losses
Net realized losses on sales of affiliated underlying funds and stocks		(17,256	)
Net realized losses on unaffiliated investments	+	(2,423	)


Net realized losses		(19,679	)


Net Unrealized Gains and Losses
Net unrealized gains on affiliated underlying funds and stocks		38,686
Net unrealized losses on unaffiliated investments	+	(1,607	)


Net unrealized gains		37,079


Expenses
Investment adviser and administrator fees		890
Transfer agent and shareholder service fees:
Investor Shares		435
P Shares¹		65
Professional fees		39
Registration fees		23
Portfolio accounting fees		21
Shareholder reports		19
Custodian fees		9
Trustees’ fees		8
Other expenses	+	10


Total expenses		1,519
Expense reduction by adviser and Schwab	−	441


Net expenses		1,078


Increase (Decrease) in Net Assets from Operations
Total investment income		9,068
Net expenses	−	1,078


Net investment income		7,990
Net realized losses		(19,679	)
Net unrealized gains	+	37,079


Increase in net assets from operations		$25,390


¹	Effective August 4, 2009, all outstanding P shares were redeemed. The Board of Trustees voted that effective December 10, 2009 the fund will no longer offer P shares.

See financial notes 33

Schwab MarketTrack Conservative Portfolio

Statements of

Changes in Net Assets

For the current and prior report periods. All numbers are x 1,000.




Operations


		11/01/08-10/31/09			11/01/07-10/31/08
Net investment income			$7,990			$10,619
Net realized gains (losses)			(19,679	)		1,899
Net unrealized gains (losses)	+		37,079			(85,437	)


Increase (Decrease) in net assets from operations			25,390			(72,919	)


Distributions to Shareholders¹
Distributions from net investment income
Investor Shares			5,882			7,893
P Shares	+		2,531			3,905


Total distributions from net investment income			8,413			11,798


Distributions from net realized gains
Investor Shares			1,450			2,228
P Shares	+		714			1,018


Total distributions from net realized gains			2,164			3,246

Total distributions			$10,577			$15,044

Transactions in Fund Shares¹


		11/01/08-10/31/09						11/01/07-10/31/08
		SHARES			VALUE			SHARES			VALUE


Shares Sold
Investor Shares			3,062			$34,493			3,003			$41,069
P Shares	+		861			9,543			2,204			31,328


Total shares sold			3,923			$44,036			5,207			$72,397


Shares Reinvested
Investor Shares			612			$6,892			689			$9,481
P Shares	+		294			3,244			358			4,923


Total shares reinvested			906			$10,136			1,047			$14,404


Shares Redeemed
Investor Shares			(4,893	)		($53,978	)		(4,522	)		($59,815	)
P Shares	+		(8,763	)		(102,700	)		(1,596	)		(21,433	)


Total shares redeemed			(13,656	)		($156,678	)		(6,118	)		($81,248	)

Net transactions in fund shares			(8,827	)		($102,506	)		136			$5,553


Shares Outstanding and Net Assets
		11/01/08-10/31/09						11/01/07-10/31/08
		SHARES			NET ASSETS			SHARES			NET ASSETS
Beginning of period			23,698			$268,370			23,562			$350,780
Total increase or decrease	+		(8,827	)		(87,693	)		136			(82,410	)


End of period			14,871			$180,677			23,698			$268,370


Net investment income not yet distributed						$229						$655


¹	Effective August 4, 2009, all outstanding P shares were redeemed. The Board of Trustees voted that effective December 10, 2009 the fund will no longer offer P shares.

34 See financial notes

Schwab MarketTrack Portfolios

Financial Notes

1. Business Structure of the Funds:

Each of the portfolios discussed in this report is a series of Schwab Capital Trust (the “trust”), a no-load, open-end management investment company. The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The list below shows all the funds in the trust including the funds discussed in this report, which are highlighted:



Schwab Capital Trust (organized May 7, 1993) Schwab MarketTrack All Equity Portfolio Schwab MarketTrack Growth Portfolio Schwab MarketTrack Balanced Portfolio Schwab MarketTrack Conservative Portfolio Schwab S&P 500 Index Fund Schwab Small-Cap Index Fund Schwab Total Stock Market Index Fund Schwab International Index Fund Laudus Small-Cap MarketMasters Fund Laudus International MarketMasters Fund Schwab Balanced Fund Schwab Premier Equity Fund Schwab Core Equity Fund Schwab Dividend Equity Fund Schwab Large-Cap Growth Fund Schwab Small-Cap Equity Fund Schwab Hedged Equity Fund		Schwab Financial Services Fund Schwab Health Care Fund Schwab International Core Equity Fund Schwab Target 2010 Fund Schwab Target 2015 Fund Schwab Target 2020 Fund Schwab Target 2025 Fund Schwab Target 2030 Fund Schwab Target 2035 Fund Schwab Target 2040 Fund Schwab Fundamental US Large Company Index Fund Schwab Fundamental US Small-Mid Company Index Fund Schwab Fundamental International Large Company Index Fund Schwab Fundamental International Small-Mid Company Index Fund Schwab Fundamental Emerging Markets Index Fund Schwab Monthly Income Fund-Moderate Payout Schwab Monthly Income Fund-Enhanced Payout Schwab Monthly Income Fund-Maximum Payout

The Schwab MarketTrack Portfolios are primarily “fund of funds” as they invest a major portion of their assets in a combination of other Schwab Funds (underlying funds) to achieve their investment objectives and maintain their asset allocation. In addition, the portfolios may purchase individual securities to achieve their investment objectives. Each portfolio bears its share of the allocable expenses of the underlying funds in which they invest. Such expenses are reflected in the net asset value.

Schwab MarketTrack Growth Portfolio offers two share classes: Investor Shares and P Shares. Shares of each class represent interest in the same portfolio, but each class has different expenses and investment minimums. The Board of Trustees voted that effective December 10, 2009, Schwab MarketTrack All Equity Portfolio, Schwab MarketTrack Balanced Portfolio and Schwab MarketTrack Conservative Portfolio, each offer one share class: Investor class. Prior to December 10, 2009, Schwab MarketTrack Conservative Portfolio also offered P shares.

Shares are bought and sold (subject to a redemption fee, see Note 8) at closing net asset value (“NAV”), which is the price for all outstanding shares of a fund or share class, as applicable. Each share has a par value of 1/1,000 of a cent, and the trustees may authorize the issuance of as many shares as necessary.

Each fund maintains its own account for purposes of holding assets and accounting, and is considered a separate entity for tax purposes. Within its account, each fund may also keep certain assets in segregated accounts, as required by securities law.

2. Significant Accounting Policies:

(All dollar amounts are x 1,000)

The following is a summary of the significant accounting policies the funds use in the preparation of financial statements. The accounting policies are in conformity with accounting principles generally accepted in the United States of America. For more information about the underlying funds’ operations and policies, please refer to those funds’ semiannual and annual reports, which are filed with the Securities Exchange Commission (“SEC”).

Schwab MarketTrack Portfolios

Financial Notes (continued)

2. Significant Accounting Policies (continued):
(All dollar amounts are x 1,000)

(a) Security Valuation:

The funds value the securities in their portfolios every business day. The funds use the following policies to value various types of securities:


	•	Securities traded on an exchange or over-the-counter: valued at the closing value for the day, or, on days when no closing value has been reported, halfway between the most recent bid and asked quotes. Securities that are primarily traded on foreign exchanges are valued at the closing values of such securities on their respective exchanges with these values then translated into U.S. dollars at the valuation date exchange rate.

	•	Securities for which no quoted value is available or when a significant event has occurred between the time of the security’s last close and the time the fund calculates net asset value: valued at fair value, as determined in good faith by the funds’ investment adviser using guidelines adopted by the funds’ Board of Trustees and the Pricing Committee. Some of the more common reasons that may necessitate that a security be valued at fair value include: the security’s trading has been halted or suspended; the security has been delisted from a national exchange; the security’s primary pricing source is not able or willing to provide a price, or certain foreign securities’ closing market prices adjusted for changes in value that may occur between the close of foreign exchange and the time at which funds’ shares are priced. The Board of Trustees regularly reviews fair value determinations made by the funds pursuant to the procedures.

	•	Futures and Forwards contracts: valued at their settlement prices as of the close of their exchanges (for futures) or at a value based on that day’s exchange rates (for forwards).

	•	Underlying funds: valued at their respective net asset values as determined by those funds in accordance with the 1940 Act for a given day.

	•	Short-term securities (60 days or less to maturity): valued at amortized cost, which approximates market value.

In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the fund discloses the fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (level 3 measurements).

Effective June 15, 2009, the fund adopted the authoritative guidance under GAAP on determining fair value when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly. Accordingly, if the Fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.

The guidance establishes three levels of the fair value hierarchy as follows:


	•	Level 1 — quoted prices in active markets for identical securities. — Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities. The funds do not adjust the quoted price for such investments, even in situations where the funds hold a large position and a sale could reasonably impact the quoted price.

	•	Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) — Investments that trade in markets that are not considered to be active, but whose values are based on quoted market prices, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs are classified as Level 2 prices. These generally include U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations. In addition, international securities whose markets close hours before the funds value their holdings may require revised valuations due to significant movement in the U.S. markets occurring after the daily close of the foreign markets. The Board of Trustees has approved a vendor that would calculate revised valuations of

Schwab MarketTrack Portfolios

Financial Notes (continued)

2. Significant Accounting Policies (continued):
(All dollar amounts are x 1,000)


		international securities based on a number of factors that appear to correlate to the movements in the U.S. markets. As investments whose values are classified as Level 2 prices include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.


	•	Level 3 — significant unobservable inputs (including the funds’ own assumptions in determining the fair value of investments). — Investments whose values are classified as Level 3 prices have significant unobservable inputs, as they may trade infrequently or not at all. When observable prices are not available for these securities, the funds use one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the funds in estimating the value of Level 3 prices may include the original transaction price, quoted prices for similar securities or assets in active markets, completed or pending third-party transactions in the underlying investment or comparable issuers, and changes in financial ratios or cash flows. Level 3 prices may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the funds in the absence of market information. Assumptions used by the funds due to the lack of observable inputs may significantly impact the resulting fair value and therefore the funds’ results of operations.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the funds’ investments as of October 31, 2009:

Schwab MarketTrack All Equity Portfolio

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Assets

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total*

Other Investment Companies(a)

$460,832

$—

$460,832

Short-Term Investment(a)

—

572

—

$572

Total

$460,832

$572

$—

$461,404

Schwab MarketTrack Growth Portfolio

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Assets

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total*

Other Investment Companies(a)

$585,551

$—

$585,551

Short-Term Investment(a)

—

5,928

—

5,928

Total

$585,551

$5,928

$—

$591,479

Schwab MarketTrack Balanced Portfolio

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Assets

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total*

Other Investment Companies(a)

$426,921

$—

$426,921

Short-Term Investment(a)

—

4,624

—

4,624

Total

$426,921

$4,624

$—

$431,545

Schwab MarketTrack Portfolios

Financial Notes (continued)

2. Significant Accounting Policies (continued):
(All dollar amounts are x 1,000)

Schwab MarketTrack Conservative Portfolio

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Assets

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total*

Other Investment Companies(a)

$179,920

$—

$179,920

Short-Term Investment(a)

—

306

—

306

Total

$179,920

$306

$—

$180,226


*		The fund had no Other Financial Instruments.
(a)		As categorized in Portfolio Holdings

(b) Portfolio Investments:

Derivatives: The funds may invest in futures contracts to reduce the effects of uninvested cash on performance or for other reasons. Futures contracts are instruments that represent an agreement between two parties that obligates one party to buy, and the other party to sell, specific instruments at an agreed-upon price on a stipulated future date.

Because futures contracts carry inherent risks, a fund must give the broker a deposit of cash and/or securities (the “Initial Margin”) whenever it enters into the futures contract. The amount of the deposit may vary from one contract to another, but it is generally a percentage of the contract amount. Subsequent payments (“Variation Margin”) are made or received by a fund depending on the daily fluctuations in the value of the future contract and are accounted for as unrealized gains or losses. Futures are traded publicly on exchanges, and their market value changes daily.

(c) Security Transactions:

Security transactions are recorded as of the date the order to buy or sell the security is executed. Realized gains and losses from security transactions are based on the identified costs of the securities involved.

Assets and liabilities denominated in foreign currencies are reported in U.S. dollars. For assets and liabilities held on a given date, the dollar value is based on market exchange rates in effect on that date. Transactions involving foreign currencies, including purchases, sales, income receipts and expense payments, are calculated using exchange rates in effect on the transaction date. The funds do not isolate the portion of the fluctuations on investments resulting from changes in foreign currency exchange rates from the fluctuations in market prices of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

When a fund closes out a futures or forwards position, it calculates the difference between the value of the position at the beginning and at the end of the contract, and records a realized gain or loss accordingly. A fund records the daily change in market value of futures, and also the change in the amount of margin deposit required (“due to/from broker”).

(d) Investment Income:

Interest income is recorded as it accrues. Dividends and distributions from portfolio securities and underlying funds are recorded on the date they are effective (the ex-dividend date), although the funds record certain foreign security dividends on the day they learn of the ex-dividend date. Any distributions from underlying funds are recorded in accordance with the character of the distributions as designated by the underlying funds.

(e) Expenses:

Expenses that are specific to a fund or a class within the trust are charged directly to that fund or class. Expenses that are common to all funds within the trust generally are allocated among the funds in proportion to their average daily net assets.

Schwab MarketTrack Portfolios

Financial Notes (continued)

2. Significant Accounting Policies (continued):
(All dollar amounts are x 1,000)

For funds offering multiple share classes, net investment income, other than class specific expenses, and realized and unrealized gains or losses, are allocated daily to each class in proportion to its average daily net assets.

(f) Distributions to Shareholders:

The funds make distributions from net investment income and net realized capital gains once a year, if any, except for the MarketTrack Conservative Portfolio, which makes distributions from net investment income quarterly.

(g) Accounting Estimates:

The accounting policies described in this report conform with accounting principles generally accepted in the United States of America. Notwithstanding this, shareholders should understand that in order to follow these principles, fund management has to make estimates and assumptions that affect the information reported in the financial statements. It is possible that once the results are known, they may turn out to be different from these estimates.

(h) Federal Income Taxes:

The funds intend to meet federal income and excise tax requirements for regulated investment companies. Accordingly, the funds distribute substantially all of their net investment income and realized net capital gains (if any) to their respective shareholders each year except for the Schwab MarketTrack Conservative Portfolio, which typically makes distributions at the end of every calendar quarter. As long as a fund meets the tax requirements, it is not required to pay federal income tax.

(i) Indemnification:

The funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the funds. However, based on experience, the funds expect the risk of loss to be remote.

3. Risk factors:

Investing in the funds may involve certain risks, as discussed in the funds’ prospectus, including, but not limited to, those described below. These risks are associated with the underlying funds in which the funds may invest and the types of investments made by those underlying funds. The funds’ direct investments, if any, are subject to the same or similar risks.

Stock and bond markets rise and fall daily. As with any investment whose performance is tied to these markets, the value of your investment in the portfolios will fluctuate, which means that you could lose money.

The funds’ asset and stock allocations can have a substantial effect on performance. The risks and returns of different classes of assets and different segments of the stock market can vary over the long-term and the short-term. Because a fund may maintain exposure to bonds as well as stocks, the portfolio will be hurt by poor performance in either market. Also, because it does not intend to make strategic changes in its allocation, a fund’s performance may be hurt during times when segments emphasized by its target allocation are out of favor.

Many of the risks of the portfolios are associated with their investments in underlying stock and bond index funds. A fund’s underlying index funds seek to track the performance of various segments of the stock or bond market, as measured by their respective indices. Neither the funds, because of their asset allocation strategy, nor the underlying funds, because of their indexing strategy, take steps to reduce market exposure or to lessen the effects of a declining market. While a fund’s underlying funds seek to track the returns of various indices, in each case an underlying fund’s performance normally is below that of the index. This gap occurs mainly because, unlike an index, the underlying funds incur expenses and must keep a small portion of their assets in cash. To the extent that an underlying fund lends securities or makes short-term or other investments to reduce its

Schwab MarketTrack Portfolios

Financial Notes (continued)

3. Risk factors (continued):

performance gap, it may increase the risk that its performance will be reduced. A portfolio itself keeps a small portion of its assets in cash, which may contribute modestly to lower performance.

Bond prices generally fall when interest rates rise. Bonds with longer maturities tend to be more sensitive to this risk. A portfolio’s performance also could be affected if an issuer or guarantor of a bond held by the fund fails to make timely principal or interest payments or otherwise honor its obligations. Lower-quality bonds are considered speculative with respect to its issuer’s ability to make timely payments or otherwise honor its obligations. In addition, prices of lower-quality bonds tend to be more volatile than those of investment-grade bonds, and may fall based on bad news about the issuer, an industry or the overall economy. Mortgage-or asset-backed securities are subject to the risk that these bonds may be paid off earlier or later than expected. Either situation could cause the fund to hold securities paying lower than market rates of interest, which could hurt the fund’s yield or share price. Also, bonds of foreign issuers may be more volatile than those of comparable bonds from U.S. issuers, for reasons ranging from limited issuer information to the risk of political upheaval. A fund’s use of mortgage dollar rolls could cause the fund to lose money if the price of the mortgage-backed securities sold fall below the agreed upon repurchase price, or if the counterparty is unable to honor the agreement.

The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. In addition, the equity market tends to move in cycles which may cause stock prices to fall over short or extended periods of time.

Historically, small-cap stocks have been riskier than large and mid-cap stocks. Stock prices of smaller companies may be based in substantial part on future expectations rather than current achievements and may move sharply, especially during market upturns and downturns. Small-cap companies themselves may be more vulnerable to adverse business or economic events than larger, more established companies. During a period when small-cap stocks fall behind other types of investments — bonds or large-cap stocks, for instance — a portfolio’s performance also may lag these investments.

A fund’s investments in securities of foreign issuers involve certain risks that are greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions, or changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges). In certain countries, legal remedies available to investors may be more limited than those available with respect to investments in the United States. The securities of some foreign companies may be less liquid and, at times, more volatile than securities of comparable U.S. companies. A fund may also experience more rapid or extreme changes in value as compared to a fund that invests solely in securities of U.S. companies because the securities’ markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries.

A fund may use derivatives (including futures) to enhance returns or hedge against market declines. A fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments and could cause a fund to lose more than the principal amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately larger impact on a fund.

As index funds, the funds seek to track the performance of their benchmark indices, although they may not be successful in doing so. The divergence between the performance of a fund and its benchmark index, positive or negative, is called “tracking error.” Tracking error can be caused by many factors and it may be significant. For example, a fund may not invest in all of the securities in its benchmark index or may invest in securities not in the index, because the manager may use a sampling technique that is designed to balance the risk of tracking error against the negative effects of transaction costs associated with certain investments. Similarly, a fund may not invest in certain securities in its benchmark index, or match the securities’ weighting to the benchmark, due to regulatory, operational, custodial or liquidity constraints; corporate transactions; asset valuations; transaction costs and timing; tax considerations; and index rebalancing, which may result in tracking error. In addition, international funds may not invest in issuers located in certain countries due to these considerations. A fund may attempt to offset the effects of not being invested in certain index securities by making substitute investments, but these efforts

Schwab MarketTrack Portfolios

Financial Notes (continued)

3. Risk factors (continued):

may not be successful. In addition, cash flows into and out of a fund, operating expenses and trading costs all affect the ability of the fund to match the performance of its benchmark index, because the benchmark index does not have to manage cash flows and does not incur any costs.

The funds do not fully replicate the benchmark indices and may hold securities not included in the indices. As a result, the funds are subject to the risk that the Adviser’s investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. Because the funds utilize a sampling approach they may not track the return of the indices as well as they would if each fund purchased all of the securities in their benchmark index.

Please refer to the funds’ prospectus for a more complete description of the principal risks of investing in the fund and the underlying funds.

4. Affiliates and Affiliated Transactions:

(All dollar amounts are x 1,000)

Charles Schwab Investment Management, Inc. (“CSIM” or the “investment adviser”), a wholly owned subsidiary of The Charles Schwab Corporation, serves as each fund’s investment adviser and administrator pursuant to an Investment Advisory and Administration Agreement (“Advisory Agreement”) between it and the trust.

Effective July 1, 2009, for its advisory and administrative services to each fund, the investment adviser is entitled to receive an annual fee (fees), payable monthly based on each fund’s average daily net assets described as follows:

Schwab

MarketTrack

% of Average Daily

All Equity

Growth

Balanced

Conservative

Net Assets

Portfolio

Portfolio*

Portfolio

Portfolio*

Current rate

0.23%

Prior to July 1, 2009, the fees were:

First $500 million

0.44%

Over $500 million

0.39%

Charles Schwab & Co., Inc. (“Schwab”) is an affiliate of the investment adviser and was the trust’s transfer agent and shareholder services agent prior to July 1, 2009. Effective July 1, 2009, the trust has appointed Boston Financial Data Services, Inc. (“BFDS”) as transfer agent of the funds and adopted a Shareholder Servicing Plan (the “Plan”) on behalf of the funds. Pursuant to the Plan, the funds pay Schwab and other financial intermediaries to provide certain account maintenance, customer liaison and shareholder services to the funds’ shareholders holding shares of the funds through that financial intermediary. Under the Plan, Schwab is entitled to receive an annual fee payable monthly based on each funds’ average daily net assets as follows:

Schwab

MarketTrack

% of Average Daily

All Equity

Growth

Balanced

Conservative

Net Assets

Portfolio

Portfolio*

Portfolio

Portfolio*

Investor Shares

0.25%

P Shares*

n/a

0.10%

n/a

Prior to July 1, 2009, for its transfer agent and shareholder services, Schwab was entitled to receive an annual fee payable monthly based on each fund’s average daily net assets described as follows:


	Transfer Agent Fees		Shareholder Service Fees

Investor Shares		0.05%		0.20%
P Shares*		0.05%		0.05%

Schwab MarketTrack Portfolios

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):
(All dollar amounts are x 1,000)

Although these agreements specify certain fees for these services, CSIM and Schwab have made additional agreements with the funds to limit (“expense limitation”) the total expenses charged, excluding interest, taxes and certain non-routine expenses for so long as the investment adviser serves as the adviser to the funds, which may only be amended or terminated with the approval of the Fund’s Board of Trustees as follows:

The expense limitation is:

Schwab

MarketTrack

% of Average Daily

All Equity

Growth

Balanced

Conservative

Net Assets

Portfolio

Investor Shares

0.50%

P Shares*

n/a

0.35%

n/a

0.35%

The agreement to limit the funds’ total expenses charged is limited to each fund’s direct operating expenses and, therefore, does not apply to acquired fund fees and expenses, which are indirect expenses incurred by a fund through its investments in the underlying funds.

*P Shares are currently only offered by MarketTrack Growth Portfolio and were previously offered by MarketTrack Conservative Portfolio.

The funds may engage in certain transactions involving related parties. Pursuant to an exemptive order issued by the SEC, the funds may invest in other related funds. As of October 31, 2009, the percentages of shares of other related funds owned by each MarketTrack Portfolio are:


	Schwab		Schwab		Schwab		Schwab
	MarketTrack		MarketTrack		MarketTrack		MarketTrack
	All Equity		Growth		Balanced		Conservative
	Portfolio		Portfolio		Portfolio		Portfolio

Schwab Equity Index Funds:
Schwab International Index Fund		9.9%		10.1%		4.7%		1.3%
Schwab S&P 500 Index Fund		2.4%		2.7%		1.5%		0.4%
Schwab Small-Cap Index Fund		10.2%		8.6%		5.6%		1.6%

Schwab Bond Funds:
Schwab Total Bond Market Fund		—%		9.8%		16.7%		10.9%

Schwab Money Funds:
Schwab Value Advantage Money Fund		—%		0.1%		—%		—%

As of October 31, 2009, the shares owned by Schwab Charitable Giving Trust (an affiliate of Schwab) as a percentage of the total shares of the MarketTrack Growth Portfolio is 14.1%.

The funds may make direct transactions with certain other Schwab Funds when practical. When one fund is seeking to sell a security that another is seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and officers. During the period ended October 31, 2009, each fund’s total aggregate security transactions with other Schwab Funds were as follows;


Schwab MarketTrack All Equity Portfolio	$	—
Schwab MarketTrack Growth Portfolio		61,069
Schwab MarketTrack Balanced Portfolio		40,771
Schwab MarketTrack Conservative Portfolio		9,607

Schwab MarketTrack Portfolios

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):
(All dollar amounts are x 1,000)

Below is a summary of the affiliated transactions for each underlying fund during the period ended October 31, 2009:

Schwab MarketTrack All Equity Portfolio


												Realized			Distribution
								Balance				Gain (Loss)			Received*
	Balance of							of Shares		Market		11/01/2008			11/01/2008
	Shares Held		Gross		Gross			Held at		Value at		to			to
Underlying Fund	at 10/31/08		Additions		Sales			10/31/2009		10/31/2009		10/31/2009			10/31/2009

Schwab Equity Index Funds:
Schwab International Index Fund		9,006,531		614,372		(1,058,398	)		8,562,505		$139,226		($8,382	)		$5,707
Schwab S&P 500 Index Fund		—		12,879,891		(89,552	)		12,790,339		208,227		(581	)		—
Schwab Small-Cap Index Fund		7,853,845		500,447		(865,626	)		7,488,666		113,379		(8,455	)		2,340
Schwab Institutional Select Funds:
Schwab Institutional Select S&P 500 Index Fund		24,175,121		3,128,652		(27,303,773	)		—		—		(10,193	)		7,889

Total											$460,832		($27,611	)		$15,936

Schwab MarketTrack Growth Portfolio


												Realized			Distribution
								Balance				Gain (Loss)			Received*
	Balance of							of Shares		Market		11/01/2008			11/01/2008
	Shares Held		Gross		Gross			Held at		Value at		to			to
Underlying Fund	at 10/31/08		Additions		Sales			10/31/2009		10/31/2009		10/31/2009			10/31/2009

Schwab Equity Index Funds:
Schwab International Index Fund		7,559,140		539,543		(846,408	)		7,252,275		$117,922		($5,036	)		$4,915
Schwab S&P 500 Index Fund		—		14,646,843		(58,191	)		14,588,652		237,503		(163	)		—
Schwab Small-Cap Index Fund		7,975,717		944,206		(1,289,283	)		7,630,640		115,528		(9,503	)		2,450

Schwab Institutional Select Funds:
Schwab Institutional Select S&P 500 Fund		17,368,767		13,056,677		(30,425,443	)		—		—		(5,847	)		6,979

Schwab Bond Funds:
Schwab Total Bond Market Fund		9,539,883		3,048,022		(2,484,293	)		10,103,612		91,337		(2,845	)		3,105

Schwab Money Funds:
Schwab Value Advantage Money Fund		27,419,712		3,140,704		(7,300,000	)		23,260,416		23,261		—			156
Institutional Shares

The Charles Schwab Corp.		11,242				(11,242	)		—		—		47			1

Total											$585,551		($23,347	)		$17,606

Schwab MarketTrack Portfolios

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):
(All dollar amounts are x 1,000)

Schwab MarketTrack Balanced Portfolio


												Realized			Distribution
								Balance				Gain (Loss)			Received*
	Balance of							of Shares		Market		11/01/2008			11/01/2008
	Shares Held		Gross		Gross			Held at		Value at		to			to
Underlying Fund	at 10/31/08		Additions		Sales			10/31/2009		10/31/2009		10/31/2009			10/31/2009

Schwab Equity Index Funds:
Schwab International Index Fund		4,194,205		512,359		(759,205	)		3,947,359		$64,184		($1,754	)		$2,805
Schwab S&P 500 Index Fund		—		7,893,746		—			7,893,746		128,510		(505	)		—
Schwab Small-Cap Index Fund		4,455,891		1,008,292		(1,219,510	)		4,244,673		64,265		(6,318	)		1,392

Schwab Bond Funds:
Schwab Total Bond Market Fund		16,524,627		4,463,751		(3,816,920	)		17,171,458		155,230		(4,391	)		5,501

Schwab Institutional Select Funds:
Schwab Institutional Select S&P 500 Index		8,600,045		9,789,321		(18,389,366	)		—		—		(5,474	)		3,706

Schwab Money Funds:
Schwab Value Advantage Money Fund		12,712,884		2,069,527		(50,000	)		14,732,411		14,732		—			85

The Charles Schwab Corp.		6,883		—		(6,883	)		—		—		30			1

Total											$426,921		($18,412	)		$13,490

Schwab MarketTrack Conservative Portfolio


												Realized			Distribution
								Balance				Gain (Loss)			Received*
	Balance of							of Shares		Market		11/01/2008			11/01/2008
	Shares Held		Gross		Gross			Held at		Value at		to			to
Underlying Fund	at 10/31/08		Additions		Sales			10/31/2009		10/31/2009		10/31/2009			10/31/2009

Schwab Equity Index Funds:
Schwab International Index Fund		1,861,475		354,184		(1,116,193	)		1,099,466		$17,877		$343			$1,285
Schwab S&P 500 Index Fund		1,785,442		2,294,095		(1,888,630	)		2,190,907		35,668		(382	)		704
Schwab Small-Cap Index Fund		1,958,569		477,793		(1,269,514	)		1,166,848		17,666		(3,415	)		619

Schwab Institutional Select Funds:
Schwab Institutional Select S&P 500 Fund		1,973,844		3,386,063		(5,359,907	)		—		—		(3,167	)		1,031

Schwab Bond Funds:
Schwab Total Bond Market Fund		17,173,417		3,094,768		(9,097,003	)		11,171,182		100,988		(10,638	)		5,211

Schwab Money Funds:
Schwab Value Advantage Money Fund, Institutional Shares		10,389,731		556,338		(3,225,000	)		7,721,069		7,721		—			68

The Charles Schwab Corp.		2,125		—		(2,125	)		—		—		3			—

Total											$179,920		($17,256	)		$8,918


*		Distributions received include distributions from net investment income and from capital gains from the underlying funds.

Schwab MarketTrack Portfolios

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):
(All dollar amounts are x 1,000)

Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions within the Schwab Funds. All loans are for temporary or emergency purposes only. The interest rate charged on the loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The interfund lending facility is subject to the oversight and periodic review of the Board of Trustees of the Schwab Funds. There was no interfund borrowing or lending activity for any fund during the period.

5. Board of Trustees:

Trustees may include people who are officers and/or directors of the investment adviser or Schwab. Federal securities law limits the percentage of such “interested persons” who may serve on a trust’s board, and the trust was in compliance with these limitations throughout the report period. The trust did not pay any of these persons for their service as trustees, but it did pay non-interested persons (independent trustees), as noted in each fund’s Statement of Operations.

6. Borrowing from Banks:

The funds may borrow money from banks and custodians. The funds have custodian overdraft facilities, a committed line of credit of $150 million with State Street Corp., an uncommitted line of credit of $100 million with Bank of America, N.A. and an uncommitted line of credit of $50 million with Brown Brothers Harriman. The funds pay interest on the amounts they borrow at rates that are negotiated periodically. The funds also pay an annual fee to State Street Corp. for the committed line of credit.

There were no borrowings from the lines of credit by the funds during the period. However, certain funds utilized their overdraft facility and incurred interest expense, which is disclosed in the Statement of Operations. The interest expense is determined based on a negotiated rate above the current Federal Funds Rate.

7. Purchases and Sales of Investment Securities:

For the period ended October 31, 2009, purchases and sales of securities (excluding short-term obligations) were as follows:


	Purchases of Securities		Sales/Maturities of Securities

Schwab MarketTrack All Equity Portfolio		$38,786		$39,025
Schwab MarketTrack Growth Portfolio		122,730		130,890
Schwab MarketTrack Balanced Portfolio		116,932		122,962
Schwab MarketTrack Conservative Portfolio		58,930		163,433

8. Redemption Fee:

(All dollar amounts are x 1,000)

The funds charge a 2.00% redemption fee on shares sold or exchanged within 30 days of the original purchase date. Such amounts are netted against redemption proceeds on the Statement of Changes in Net Assets. The redemption fees charged during the current and prior period are:


	Current Period		Prior Period
	(11/01/08-10/31/09)		(11/01/07-10/31/08)

Schwab MarketTrack All Equity Portfolio		$18		$62
Schwab MarketTrack Growth Portfolio		19		18
Schwab MarketTrack Balance Portfolio		8		14
Schwab MarketTrack Conservative Portfolio		7		14

Schwab MarketTrack Portfolios

Financial Notes (continued)

9. Federal Income Taxes:

(All dollar amounts are x 1,000)

As of October 31, 2009, the components of distributable earnings on a tax-basis were as follows:


	Schwab			Schwab			Schwab			Schwab
	MarketTrack			MarketTrack			MarketTrack			MarketTrack
	All Equity			Growth			Balanced			Conservative
	Portfolio			Portfolio			Portfolio			Portfolio

Undistributed ordinary income		$—			$4,243			$5,018			$230
Undistributed long-term capital gains		—			—			—			—
Unrealized appreciation		—			39,581			34,096			9,487
Unrealized depreciation		(58,920	)		(3,186	)		(5,714	)		(3,825	)
Other unrealized appreciation/(depreciation)		—			—			—			—
Net unrealized appreciation/(depreciation)		($58,920	)		$36,395			$28,382			$5,662

The primary difference between book-basis and tax-basis unrealized appreciation or unrealized depreciation of investments is the tax deferral of losses on wash sales.

Capital loss carry forwards may be used to offset future realized capital gains for federal income tax purposes. As of October 31, 2009, the following funds had capital loss carry forwards available to offset net capital gains before the expiration dates:

Schwab

MarketTrack

All Equity

Growth

Balanced

Conservative

Portfolio*

Portfolio

Expiration Date

December 31, 2016

$12,514

—

October 31, 2017

—

$34,090

$21,312

$14,304

For tax purposes, realized net capital losses, occurring after October 31, may be deferred and treated as occurring on the first day of the following year. For the period ended, December 31, 2008, the Schwab MarketTrack All Equity Portfolio had deferred realized capital losses of $615 and did not utilize any capital losses to offset capital gains.

The tax-basis components of distributions paid during the current and prior fiscal years were:


	Schwab		Schwab		Schwab		Schwab
	MarketTrack		MarketTrack		MarketTrack		MarketTrack
	All Equity		Growth		Balanced		Conservative
	Portfolio*		Portfolio		Portfolio		Portfolio

Current period distributions
Ordinary income		$10,482		$16,025		$14,079		$8,414
Long-term capital gains		23,828		17,649		7,741		2,163
Return of Capital		—		—		—		—

Prior period distributions
Ordinary income		9,825		17,000		15,943		12,042
Long-term capital gains		312		15,235		8,870		3,002
Return of Capital		—		—		—		—

Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as non-U.S. currency gains and losses, short-term capital gains and losses; capital losses related to wash sales, unrealized appreciation of certain investments in non-U.S. securities; paydowns on fixed-income securities; and income on certain investments. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes. The fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.

Schwab MarketTrack Portfolios

Financial Notes (continued)

9. Federal Income Taxes (continued):
(All dollar amounts are x 1,000)

The permanent book and tax basis differences may result in reclassifications between capital account and other accounts as required. The adjustments will have no impact on net assets or the results of operations. As of October 31, 2009, the funds made the following reclassifications:


	Schwab			Schwab			Schwab			Schwab
	MarketTrack			MarketTrack			MarketTrack			MarketTrack
	All Equity			Growth			Balanced			Conservative
	Portfolio*			Portfolio			Portfolio			Portfolio

Capital Shares		($6	)		$—			$—			$—
Undistributed net investment income		3			(17	)		(13	)		(3	)
Net realized capital gains and losses		3			17			13			3


*		Tax information for Schwab MarketTrack All Equity Portfolio is as of December 31, 2008.

As of October 31, 2009, management has reviewed the tax positions for open periods (for Federal purposes, three years from the date of filing and State purposes, four years from the date of filing) as applicable to the funds, and has determined that no provision for income tax is required in the funds’ financial statements. The funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the year ended October 31, 2009, the funds did not incur any interest or penalties. The funds are not subject to examination by U.S. federal tax authorities for tax years before 2006 and by state tax authorities for tax years before 2005.

10. Subsequent Events:

As of December 16, 2009, the date the financial statements were available to be issued, no subsequent events or transactions had occurred that would have materially impacted the financial statements as presented.

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of:

Schwab MarketTrack All Equity Portfolio

Schwab MarketTrack Growth Portfolio

Schwab MarketTrack Balanced Portfolio

Schwab MarketTrack Conservative Portfolio

In our opinion, the accompanying statements of assets and liabilities, including the portfolio holdings, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Schwab MarketTrack All Equity Portfolio, Schwab MarketTrack Growth Portfolio, Schwab MarketTrack Balanced Portfolio, and Schwab MarketTrack Conservative Portfolio (four of the portfolios constituting Schwab Capital Trust, hereafter referred to as the “Funds”) at October 31, 2009, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2009 by correspondence with the custodian, transfer agents and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

December 16, 2009

Other Federal Tax Information (unaudited)

(All dollar amounts are x 1,000)

For corporate shareholders, the following percentage of the funds dividend distributions paid during the fiscal year ended October 31, 2009, qualify for the corporate dividends received deduction:


	Percentage

Schwab MarketTrack All Equity Portfolio*		48.26
Schwab MarketTrack Growth Portfolio		56.86
Schwab MarketTrack Balanced Portfolio		35.17
Schwab MarketTrack Conservative Portfolio		28.30

For the fiscal year ended October 31, 2009, the funds designate the following amounts of the dividend distributions as qualified dividends for the purpose of the maximum rate under section 1(h)(ii) of the Internal Revenue Code. Shareholders will be notified in January 2010 via IRS form 1099 of the amounts for use in preparing their 2009 income tax return.


Schwab MarketTrack All Equity Portfolio*			$11,218
Schwab MarketTrack Growth Portfolio			14,551
Schwab MarketTrack Balanced Portfolio			11,543
Schwab MarketTrack Conservative Portfolio			4,024


*		Tax information for MarketTrack All Equity Portfolio is as of December 31, 2008.

For the fiscal year ended October 31, 2009, the funds hereby designate the following amounts as capital gain dividends:


Schwab MarketTrack All Equity Portfolio*			$23,828
Schwab MarketTrack Growth Portfolio			17,649
Schwab MarketTrack Balanced Portfolio			7,741
Schwab MarketTrack Conservative Portfolio			2,163

Investment Advisory Agreement Approval

The Investment Company Act of 1940 (the “1940 Act”) requires that initial approval of, as well as the continuation of, a fund’s investment advisory agreement must be specifically approved (1) by the vote of the trustees or by a vote of the shareholders of the fund, and (2) by the vote of a majority of the trustees who are not parties to the investment advisory agreement or “interested persons” of any party (the “Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval. In connection with such approvals, the fund’s trustees must request and evaluate, and the investment adviser is required to furnish, such information as may be reasonably necessary to evaluate the terms of the investment advisory agreement.

The Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the continuance of the Agreement with respect to the Funds at meetings held on April 27, 2009, and May 15, 2009, and approved the renewal of the Agreement with respect to the Funds for an additional one year term at the meeting held on May 15, 2009. The Board’s approval of the Agreement with respect to the Funds was based on consideration and evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:


1.	the nature, extent and quality of the services provided to the Funds under the Agreement, including the resources of CSIM and its affiliates dedicated to the Funds;

2.	each Fund’s investment performance and how it compared to that of certain other comparable mutual funds;

3.	each Fund’s expenses and how those expenses compared to those of certain other comparable mutual funds;

4.	the profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (“Schwab”), with respect to each Fund, including both direct and indirect benefits accruing to CSIM and its affiliates; and

5.	the extent to which economies of scale would be realized as the Funds grow and whether fee levels in the Agreement reflect those economies of scale for the benefit of Fund investors.

Nature, Extent and Quality of Services. The Board considered the nature, extent and quality of the services provided by CSIM to the Funds and the resources of CSIM and its affiliates dedicated to the Funds. In this regard, the Trustees evaluated, among other things, CSIM’s personnel, experience, track record and compliance program. The Trustees also considered investments in CSIM’s mutual fund infrastructure and the fact that Schwab’s wide range of products, services, and channel alternatives such as free advice, investment and research tools, Internet access, and an array of account features that benefit the Funds and their shareholders. The Trustees also considered Schwab’s excellent reputation as a full service brokerage firm and its overall financial condition. Finally, the Trustees considered that the vast majority of the Funds’ shareholders are also brokerage clients of Schwab. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM to the Funds and the resources of CSIM and its affiliates dedicated to the Funds supported renewal of the Agreement with respect to the Funds.

selection criteria and the reputation of the third party who prepared the peer group and peer category analysis. In evaluating the performance of each Fund, the Trustees considered both risk and shareholder risk expectations for such Fund and the appropriateness of the benchmark used to compare the performance of each Fund. The Trustees further considered the level of Fund performance in the context of its review of Fund expenses and adviser profitability discussed below. Following such evaluation the Board concluded, within the context of its full deliberations, that the performance of the Funds supported renewal of the Agreement with respect to the Funds.

Fund Expenses. With respect to the Funds’ expenses, the Trustees considered the rate of compensation called for by the Agreement, and each Fund’s net operating expense ratio, in each case, in comparison to those of other comparable mutual funds, such peer groups and comparisons having been selected and calculated by an independent third party. The Trustees considered the effects of CSIM’s and Schwab’s historical practice of voluntarily waiving management and other fees to prevent total Fund expenses from exceeding a specified cap. The Trustees also considered a commitment (i) by CSIM to reduce its contractual investment advisory fee relating to each Fund; and (ii) by CSIM and Schwab to extend the specified expense cap of each Fund for so long as CSIM serves as the adviser to such Fund. The Trustees also considered fees charged by CSIM to other mutual funds and to other types of accounts, such as wrap accounts, but, with respect to such other types of accounts, accorded less weight to such comparisons due to the different legal, regulatory, compliance and operating features of mutual funds as compared to these other types of accounts. Following such evaluation, the Board concluded, within the context of its full deliberations, that the expenses of the Funds are reasonable and supported renewal of the Agreement with respect to the Funds.

Profitability. With regard to profitability, the Trustees considered the compensation flowing to CSIM and its affiliates, directly or indirectly. In this connection, the Trustees reviewed management’s profitability analyses, together with certain commentary thereon from an independent accounting firm. The Trustees also considered any other benefits derived by CSIM from its relationship with the Funds, such as whether, by virtue of its management of the Funds, CSIM obtains investment information or other research resources that aid it in providing advisory services to other clients. The Trustees considered whether the varied levels of compensation and profitability under the Agreement and other service agreements were reasonable and justified in light of the quality of all services rendered to each Fund by CSIM and its affiliates. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the profitability of CSIM is reasonable and supported renewal of the Agreement with respect to the Funds.

Economies of Scale. The Trustees considered the existence of any economies of scale and whether those are passed along to a Fund’s shareholders through a graduated investment advisory fee schedule or other means, including any fee waivers by CSIM and its affiliates. In this regard, and consistent with their consideration of Fund expenses, the Trustees considered that CSIM and Schwab have previously committed resources to minimize the effects on shareholders of diseconomies of scale during periods when fund assets were relatively small through their contractual expense waivers. For example, such diseconomies of scale may particularly affect newer funds or funds with investment strategies that are from time to time out of favor, but shareholders may benefit from the continued availability of such funds at subsidized expense levels. The Trustees also considered CSIM’s agreement to revised contractual investment advisory fee schedules. Based on this evaluation the Board concluded, within the context of its full deliberations, that the Funds obtain reasonable benefit from economies of scale.

In the course of their deliberations, the Trustees did not identify any particular information or factor that was all important or controlling. Based on the Trustees’ deliberation and their evaluation of the information described above, the Board, including all of the Independent Trustees, approved the continuation of the Agreement with respect to the Funds and concluded that the compensation under the Agreement with respect to the Funds is fair and reasonable in light of such services and expenses and such other matters as the Trustees have considered to be relevant in the exercise of their reasonable judgment.

Trustees and Officers

The tables below give information about the trustees and officers for Schwab Capital Trust which includes the funds covered in this report. The “Fund Complex” includes the Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust, Laudus Trust and Laudus Institutional Trust. The Fund Complex includes 86 funds.

The address for all trustees and officers is 211 Main Street, San Francisco, CA 94105. You can find more information about the trustees and officers in the Statement of Additional Information, which is available free by calling 1-800-435-4000.

Independent Trustees


Name, Year of Birth,		Number of
and Position(s) with		Portfolios in
the trust; (Terms of		Fund Complex
office, and length of	Principal Occupations	Overseen by
Time Served¹)	During the Past Five Years	the Trustee	Other Directorships

Mariann Byerwalter 1960 Trustee (Trustee of Schwab Capital Trust since 2000.)	Chairman of JDN Corporate Advisory LLC.	78	Board 1—Director, Redwood Trust, Inc.


John F. Cogan 1947 Trustee (Trustee of Schwab Capital Trust since 2008.)	Senior Fellow: The Hoover Institution at Stanford University; Stanford Institute for Economic Policy Research; Professor of Public Policy, Stanford University.	66	Board 1—Director, Gilead Sciences, Inc. Board 2—Director, Venture Lending and Leasing, Inc.


William A. Hasler 1941 Trustee (Trustee of Schwab Capital Trust since 2000.)	Dean Emeritus, Haas School of Business, University of California, Berkeley. Until February 2004, Co-Chief Executive Officer, Aphton Corp. (bio-pharmaceuticals).	78	Board 1—Director, Mission West Properties Board 2—Director, TOUSA Board 3—Director, Harris-Stratex Networks Board 4—Director, Globalstar, Inc. Board 5 – Director, Ditech Networks


Gerald B. Smith 1950 Trustee (Trustee of Schwab Capital Trust since 2000.)	Chairman, Chief Executive Officer and founder of Smith Graham & Co. (investment advisors).	66	Board 1—Lead Independent Director, Board of Cooper Industries Board 2—Director and Chairman of the Audit Committee of Oneok Partners LP Board 3—Director, Oneok, Inc.


Donald R. Stephens 1938 Trustee (Trustee of Schwab Capital Trust since 1989.)	Managing Partner, D. R. Stephens & Company (investments).	66	None


Joseph H. Wender 1944 Trustee (Trustee of Schwab Capital Trust since 2008.)	Senior Consultant, Goldman Sachs & Co., Inc., 2008 to present; Senior Director, Chairman of the Finance Committee, GSC Group, until December 2007; General Partner, Goldman Sachs & Co., Inc., until June 2005.	66	Board 1—Director and Chairman of the Audit Committee, Isis Pharmaceuticals


Michael W. Wilsey 1943 Trustee (Trustee of Schwab Capital Trust since 1989.)	Chairman, Chief Executive Officer, Wilsey Bennett, Inc. (real estate investment and management, and other investments).	66	None

Interested Trustees


Name, Year of Birth,		Number of
and Position(s) with		Portfolios in
the trust; (Terms of		Fund Complex
office, and length of	Principal Occupations	Overseen by
Time Served )	During the Past Five Years	the Trustee	Other Directorships

Charles R. Schwab²1937 Chairman and Trustee (Chairman and Trustee of Schwab Capital Trust since 1989.)	Founded Charles Schwab & Co., Inc. in 1971 and became Chairman in 1978. Since 1986, Chairman and Director, The Charles Schwab Corporation. Since 1989, Director, Charles Schwab Investment Management, Inc., and appointed as Chairman in 1991. Since 1996, Chairman and Chief Executive Officer, Schwab (SIS) Holdings Inc. I and Schwab International Holdings, Inc. Since 1999, Director and Chief Executive Officer, Schwab Holdings, Inc. Since 2003, Chairman, Charles Schwab Bank, N. A.; Through June 2007, Director, U.S. Trust Company, N. A., U.S. Trust Corporation, United States Trust Company of New York. Until October 2008, Chief Executive Officer, The Charles Schwab Corporation, and the Charles Schwab & Co., Inc.	66	None


Walter W. Bettinger II²1960 Trustee (Trustee of Schwab Capital Trust since 2008.)	As of October 2008, President and Chief Executive Officer, Charles Schwab & Co., Inc., principal underwriter to the Funds, and The Charles Schwab Corporation. Since October 2008, Director, The Charles Schwab Corporation. Since May 2008, Director, Charles Schwab & Co., Inc. and Schwab Holdings, Inc. Since 2006, Director, Charles Schwab Bank. From 2004 through 2007, Executive Vice President and President, Schwab Investor Services. From 2004 through 2005, Executive Vice President and Chief Operating Officer, Individual Investor Enterprise, and from 2002 through 2004, Executive Vice President, Corporate Services. Until October 2008, President and Chief Operating Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation.	74	None

Officers of the Trust


Name, Year of Birth, and Position(s)
with the trust; (Terms of office, and
length of Time Served³)		Principal Occupations During the Past Five Years

Randall W. Merk 1954 President and Chief Executive Officer (Officer of Schwab Capital Trust since 2007.)		Executive Vice President and President, Investment Management Services, Charles Schwab & Co., Inc. (August 2004 – present); Executive Vice President, Charles Schwab & Co., Inc. (2002-present); Director, President and Chief Executive Officer, Charles Schwab Investment Management, Inc. (August 2007-present); President and Chief Executive Officer, Schwab Strategic Trust (Oct. 2009 – present); Director, Charles Schwab Asset Management (Ireland) Limited and Charles Schwab Worldwide Funds PLC (Sept. 2002 – present).

Officers of the Trust (continued)


Name, Year of Birth, and Position(s)
with the trust; (Terms of office, and
length of Time Served³)		Principal Occupations During the Past Five Years

George Pereira 1964 Treasurer and Principal Financial Officer (Officer of Schwab Capital Trust since 2004.)		Senior Vice President and Chief Financial Officer, Charles Schwab Investment Management, Inc. (November 2004 – present); Treasurer and Chief Financial Officer, Laudus Trust and Laudus Institutional Trust (2006 – present); Treasurer and Principal Financial Officer, Schwab Strategic Trust (Oct. 2009 – present); Director, Charles Schwab Worldwide Fund, PLC and Charles Schwab Asset Management (Ireland) Limited (Sept. 2002 – present); Treasurer, Chief Financial Officer and Chief Accounting Officer, Excelsior Funds Inc., Excelsior Tax-Exempt Funds, Inc. and Excelsior Funds Trust (June 2006 – June 2007).


Jeffrey Mortimer 1963 Senior Vice President and Chief Investment Officer (Officer of Schwab Capital Trust since 2004.)		Senior Vice President and Chief Investment Officer, Charles Schwab Investment Management, Inc. (May 2004 – present); Chief Investment Officer (2004 – present), President and Chief Executive Officer (March 2008 – present), Laudus Trust and Laudus Institutional Trust); Senior Vice President and Chief Investment Officer, Schwab Strategic Trust (Oct. 2009 – present).


Koji E. Felton 1961 Secretary and Chief Legal Officer (Officer of Schwab Capital Trust since 1998.)		Senior Vice President, Chief Counsel and Corporate Secretary, Charles Schwab Investment Management, Inc. (July 2000 – present); Senior Vice President and Deputy General Counsel, Charles Schwab & Co., Inc. (June 1998 — present); Secretary and Chief Legal Officer, Schwab Strategic Trust (Oct. 2009 – present); Chief Legal Officer, Excelsior Funds Inc., Excelsior Tax-Exempt Funds, Inc. and Excelsior Funds Trust (June 2006 – June 2007); Chief Legal Officer, Laudus Trust and Laudus Institutional Trust (Aug. 2006 – Dec. 2006).


Catherine MacGregor 1964 Vice President (Officer of Schwab Capital Trust since 2005.)		Vice President, Charles Schwab & Co., Inc. and Charles Schwab Investment Management, Inc., (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer (March 2007 – present), Laudus Trust and Laudus Institutional Trust; Vice President, Schwab Strategic Trust (Oct. 2009 – present).


Michael Haydel 1972 Vice President (Officer of Schwab Capital Trust since 2006.)		Vice President, Asset Management Client Services, Charles Schwab & Co., Inc. (2004 – present); Vice President (Sept. 2005 – present), Anti-Money Laundering Officer (Oct. 2005 – Feb. 2009), Laudus Trust and Laudus Institutional Trust; Vice President, Schwab Strategic Trust (Oct. 2009 – present).


¹		Trustees remain in office until they resign, retire or are removed by shareholder vote. The Schwab Funds retirement policy requires that independent trustees elected after January 1, 2000 retire at age 72 or after 20 years of service as a trustee, whichever comes first. Independent trustees elected prior to January 1, 2000 will retire on the following schedule: Messrs. Stephens and Wilsey will retire on December 31, 2010.
²		Messrs. Schwab and Bettinger are Interested Trustees because they are employees of Schwab and/or the investment adviser. In addition to their employment with Schwab and/or the investment adviser, Messrs. Schwab and Bettinger also own stock of The Charles Schwab Corporation.
³		The President, Treasurer and Secretary hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.

Glossary

asset allocation The practice of dividing a portfolio among different asset classes, with each asset class assigned a particular percentage.

asset class A group of securities with similar structure and basic characteristics. Stocks, bonds and cash are the three main examples of asset classes.

beta A historical measure of an investment’s volatility relative to a market index (usually the S&P 500{R}). The index is defined as having a beta of 1.00. Investments with a beta higher than 1.00 have been more volatile than the index; those with a beta of less than 1.00 have been less volatile.

bond A security representing a loan from the investor to the issuer. A bond typically pays interest at a fixed rate (the “coupon rate”) until a specified date (the “maturity date”), at which time the issuer returns the money borrowed (“principal” or “face value”) to the bondholder. Because of their structure, bonds are sometimes called “fixed income securities” or “debt securities.”

An individual bond is subject to the credit risk of the issuer. Changes in interest rates can affect a bond’s market value prior to call or maturity. There is no guarantee that a bond’s yield to call or maturity will provide a positive return over the rate of inflation.

bond fund A bond fund is subject to the same credit, interest rate, and inflation risks as bonds. In addition, a bond fund incurs ongoing fees and expenses. A bond fund’s net asset value will fluctuate with the price of the underlying bonds and the portfolio turnover activity; return of principal is not guaranteed.

cap, capitalization See “market cap.”

capital gain, capital loss the difference between the amount paid for an investment and its value at a later time. If the investment has been sold, the capital gain or loss is considered a realized gain or loss. If the investment is still held, the gain or loss is still “on paper” and is considered unrealized.

earnings growth rate For a mutual fund, the average yearly rate at which the earnings of the companies in the fund’s portfolio have grown, measured over the past five years.

earnings per share (EPS) A company’s earnings, or net income, for the past 12 months, divided by the number of shares outstanding.

expense ratio The amount that is taken from a mutual fund’s assets each year to cover the fund’s operating expenses. An expense ratio of 0.50% means that a fund’s expenses amount to half of one percent of its average net assets a year.

market cap, market capitalization The value of a company as determined by the total value of all shares of its stock outstanding.

median market cap The midpoint of the range of market caps of the stocks held by a fund. There are different ways of calculating median market cap. With a simple median, half of the stocks in the fund’s portfolio would be larger than the median, and half would be smaller. With a weighted median (the type that is calculated for these funds), half of the fund’s assets are invested in stocks that are larger than the median market cap, and half in stocks that are smaller.

net asset value (NAV) The value of one share of a mutual fund. NAV is calculated by taking the fund’s total assets, subtracting liabilities, and dividing by the number of shares outstanding.

outstanding shares, shares outstanding When speaking of a company or mutual fund, indicates all shares currently held by investors.

price-to-book ratio (P/B) The market price of a company’s stock compared with its “book value.” A mutual fund’s P/B is the weighted average of the P/B of all stocks in the fund’s portfolio.

price-to-earnings ratio (P/E) The market price of a company’s stock compared with earnings over the past year. A mutual fund’s P/E is the weighted average of the P/E of all stocks in the fund’s portfolio.

return on equity (ROE) The average yearly rate of return for each dollar of investors’ money, measured over the past five years.

stock A share of ownership, or equity, in the issuing company.

total return The percentage that an investor would have earned or lost on an investment in the fund assuming dividends and distributions were reinvested.

weighted average For mutual funds, an average that gives the same weight to each security as the security represents in the fund’s portfolio.

yield The income paid out by an investment, expressed as a percentage of the investment’s market value.

PRIVACY NOTICE
THIS IS NOT PART OF THE SHAREHOLDER REPORT

A Commitment to Your Privacy

Your Privacy Is Not for Sale

We do not and will not sell your personal information to anyone, for any reason.

We are committed to protecting the privacy of information we maintain about you. Below are details about our commitment, including the types of information we collect and how we use and share that information. This Privacy Notice applies to you only if you are an individual who invests directly in the funds by placing orders through the funds’ transfer agent. If you place orders through your brokerage account at Charles Schwab & Co., Inc. or an account with another broker-dealer, investment advisor, 401(k) plan, employee benefit plan, administrator, bank or other financial intermediary, you are covered by the privacy policies of that financial institution and should consult those policies.

How We Collect Information About You

We collect personal information about you in a number of ways.


•	APPLICATION AND REGISTRATION INFORMATION.

We collect personal information from you when you open an account or utilize one of our services. We may also collect information about you from third parties such as consumer reporting agencies to verify your identity. The information we collect may include personal information, including your Social Security number, as well as details about your interests, investments and investment experience.


•	TRANSACTION AND EXPERIENCE INFORMATION.

Once your account has been opened, we collect and maintain personal information about your account activity, including your transactions, balances, positions and history. This information allows us to administer your account and provide the services you have requested.


•	WEBSITE USAGE.

When you visit our websites, we may use devices known as “cookies,” graphic interchange format files (GIFs), or other similar web tools to enhance your web experience. These tools help us to recognize you, maintain your web session, and provide a more personalized experience. To learn more, please click the Privacy link on our website.

How We Share and Use Your Information

We provide access to information about you to our affiliated companies, outside companies and other third parties in certain limited circumstances, including:


•	to help us process transactions for your account;

•	when we use other companies to provide services for us, such as printing and mailing your account statements;

•	when we believe that disclosure is required or permitted under law (for example, to cooperate with regulators or law enforcement, resolve consumer disputes, perform credit/authentication checks, or for risk control)

State Laws

We will comply with state laws that apply to the disclosure or use of information about you.

Safeguarding Your Information — Security Is a Partnership

We take precautions to ensure the information we collect about you is protected and is accessed only by authorized individuals or organizations.

Companies we use to provide support services are not allowed to use information about our shareholders for their own purposes and are contractually obligated to maintain strict confidentiality. We limit their use of information to the performance of the specific services we have requested.

We restrict access to personal information by our employees and agents. Our employees are trained about privacy and are required to safeguard personal information.

We maintain physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.

Contact Us

To provide us with updated information, report suspected fraud or identity theft, or for any other questions, please call the number below.

Schwab Funds^® direct investors: 1-800-407-0256

Schwab Funds^® offers you an extensive family of mutual funds, each one based on a clearly defined investment approach and using disciplined management strategies. The list at right shows all currently available Schwab Funds.

Whether you are an experienced investor or just starting out, Schwab Funds can help you achieve your financial goals. An investor should consider a fund’s investment objectives, risks, charges and expenses carefully before investing or sending money. This and other important information can be found in the fund’s prospectus. Please call 1-800-435-4000 for a prospectus and brochure for any Schwab Fund. Please read the prospectus carefully before you invest. This report must be preceded or accompanied by a current prospectus.

Proxy Voting Policies, Procedures and Results

A description of the proxy voting policies and procedures used to determine how to vote proxies on behalf of the funds is available without charge, upon request, by visiting Schwab’s website at www.schwab.com, the SEC’s website at http://www.sec.gov, or by contacting Schwab Funds at 1-800-435-4000.

Information regarding how a fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available, without charge, by visiting Schwab’s website at www.schwab.com/schwabfunds or the SEC’s website at http://www.sec.gov.

The Schwab Funds Family^®

Stock Funds

Schwab Premier Equity Fund^®

Schwab Core Equity Fund^tm

Schwab Dividend Equity Fund^tm

Schwab Large-Cap Growth Fund^tm

Schwab Small-Cap Equity Fund^tm

Schwab Hedge Equity Fund^tm

Schwab Financial Services Fund^tm

Schwab Health Care Fund^tm

Schwab^® International Core Equity Fund

Schwab Fundamental US Large* Company Index Fund

Schwab Fundamental US Small-Mid* Company Index Fund

Schwab Fundamental International* Large Company Index Fund

Schwab Fundamental International* Small-Mid Company Index Fund

Schwab Fundamental Emerging Markets* Index Fund

Schwab Global Real Estate Fund^tm

Schwab S&P 500 Index Fund

Schwab 1000 Index^® Fund

Schwab Small-Cap Index Fund^®

Schwab Total Stock Market Index Fund^®

Schwab International Index Fund^®

Asset Allocation Funds

Schwab Balanced Fund^tm

Schwab MarketTrack All Equity Portfolio^tm

Schwab MarketTrack Growth Portfolio^tm

Schwab MarketTrack Balanced Portfolio^tm

Schwab MarketTrack Conservative Portfolio^tm

Schwab Target 2010 Fund

Schwab Target 2015 Fund

Schwab Target 2020 Fund

Schwab Target 2025 Fund

Schwab Target 2030 Fund

Schwab Target 2035 Fund

Schwab Target 2040 Fund

Schwab^® Monthly Income Fund – Moderate Payout

Schwab^® Monthly Income Fund – Enhanced Payout

Schwab^® Monthly Income Fund – Maximum Payout

Bond Funds

Schwab YieldPlus Fund^®

Schwab Short-Term Bond Market Fund^tm

Schwab^® Premier Income Fund

Schwab Total Bond Market Fund^tm

Schwab GNMA Fund^tm

Schwab Inflation Protected Fund^tm

Schwab Tax-Free YieldPlus Fund^tm

Schwab Tax-Free Bond Fund^tm

Schwab California Tax-Free YieldPlus Fund^tm

Schwab California Tax-Free Bond Fund^tm

Schwab Money Funds

Schwab offers an array of money market funds that seek high current income consistent with safety and liquidity¹. Choose from taxable or tax-advantaged alternatives. Many can be linked to your eligible Schwab account to “sweep” cash balances automatically, subject to availability, when you’re between investments. Or, for your larger cash reserves, choose one of our Value Advantage Investments^®.


*		SCHWAB is a registered trademark of Charles Schwab & Co., Inc. FUNDAMENTAL INDEX, FUNDAMENTAL US LARGE, FUNDAMENTAL US SMALL-MID, FUNDAMENTAL INTERNATIONAL AND FUNDAMENTAL EMERGING MARKETS are trademarks of Research Affiliates LLC.

¹		Investments in money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency and, although they seek to preserve the value of your investment at $1 per share, it is possible to lose money.

Performance at a Glance


Total Return for the Report Period


Schwab Balanced Fund^tm (Ticker Symbol: SWOBX)		9.45%

Benchmark: Balanced Blended Index		12.04%
Fund Category: Morningstar Moderate Allocation		15.71%

Performance Details		pages 6-7



Minimum Initial Investment¹		$ 100

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.

Fund expenses may have been partially absorbed by CSIM and Schwab. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

Source for category information: Morningstar, Inc.


¹	Please see prospectus for further details and eligibility requirements.

2 Schwab Balanced Fund

From the President

Randall W. Merk is President and CEO of Charles Schwab Investment Management, Inc. and the fund covered in this report. He joined the firm in 2002 and has held a variety of executive positions at Schwab.

Dear Shareholder,

If you have any questions about Schwab Funds, we are always available at 1-800-435-4000, while additional resources may be found on Schwab.com

Thank you for investing with us.

Sincerely,

Schwab Balanced Fund 3

The Investment Environment

Asset Class Performance Comparison % returns during the report period

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



		9.80%		S&P 500^® Index: measures U.S. large-cap stocks

		6.46%		Russell 2000^® Index: measures U.S. small-cap stocks

		28.41%		MSCI EAFE^® Index: measures (in U.S. dollars) large-cap stocks in Europe, Australasia and the Far East

		13.79%		Barclays Capital U.S. Aggregate Bond Index: measures the U.S. bond market

		0.21%		Three-Month U.S. Treasury Bills (T-bills): measures short-term U.S. Treasury obligations

Data source: Charles Schwab & Co., Inc.

Nothing in this report represents a recommendation of a security by the investment adviser.

Manager views and portfolio holdings may have changed since the report date.

4 Schwab Balanced Fund

Schwab Balanced Fund^tm

The Schwab Balanced Fund returned 9.45% for the period, underperforming the benchmark Balanced Blended Index, which returned 12.04%. During the period, the fixed income portion of the Schwab Balanced Fund’s portfolio experienced the largest gain on a total return basis, but underperformed relative to the benchmark. The Schwab Total Bond Market Fund returned 9.68%, underperforming the Barclays Capital U.S. Aggregate Bond Index, which returned 13.79%. Underperformance of the Schwab Total Bond Market Fund relative to its respective benchmark occurred primarily due to security selection in corporate and mortgage sectors, particularly in non-agency collateralized mortgage obligations and commercial mortgage-backed securities. The Schwab Core Equity Fund returned 8.11%, underperforming the S&P 500 Index, which returned 9.80%. Underperformance of the Schwab Core Equity Fund occurred primarily due to stock selection in Consumer Staples and Consumer Discretionary, while selection in and an overweight allocation to Industrials also hurt relative performance. In the small-cap portion of the portfolio, the Laudus Small-Cap MarketMasters Fund Select Shares returned 7.29%, outperforming the Russell 2000 Index, which returned 6.46%.

As of 10/31/09:

Statistics


Number of Holdings	4

Weighted Average Market


Cap ($ x 1,000,000)	$47,496


Price/Earnings Ratio (P/E)	12.1


Price/Book Ratio (P/B)	1.9


Portfolio Turnover Rate	21%

Asset Class Weightings % of Investments


Equity Funds - Domestic	63.2%


Fixed - Income Funds	36.5%


Short-Term Investments	0.3%


Total	100.0%

Top Holdings % of Net Assets¹


Schwab Core Equity Fund	46.2%


Schwab Total Bond Market Fund	36.5%

Laudus Small-Cap MarketMasters


Fund, Select Shares	17.0%

State Street Institutional

Liquid Reserves Fund - Institutional


Class	0.3%


Total	100.0%

Manager views and portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

Small company stocks are subject to greater volatility than other asset classes.


¹	This list is not a recommendation of any security by the investment adviser.

6 Schwab Balanced Fund

Schwab Balanced Fund^tm

Performance Summary as of 10/31/09

October 31, 1999 – October 31, 2009
Performance of a Hypothetical
$10,000 Investment¹

Average Annual Total Returns^1,2


Fund and Inception Date	1 Year		5 Years		10 Years


Fund: Schwab Balanced Fund^tm (11/18/96)		9.45%		1.76%		2.63%
Benchmark: Balanced Blended Index		12.04%		2.50%		2.25%
Fund Category: Morningstar Moderate Allocation		15.71%		2.07%		2.50%

Fund Expense Ratios³: Net 0.48%; Gross 0.78%

Because the fund originally used a different asset allocation strategy and a multi-fund strategy, its performance prior to June 3, 2002 does not reflect the current strategy and may have been different if it did. From June 3, 2002 to February 28, 2008, the fund used a manager of managers strategy, and therefore its performance during this time does not reflect the fund’s current multi-fund strategy and may have been different if it did.


¹	Fund expenses have been absorbed by CSIM and Schwab. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Balanced Blended Index is composed of 60% S&P 500^® Index and 40% Barclays Capital U.S. Aggregate Bond Index.

²	Source for category information: Morningstar, Inc.

³	As stated in the prospectus. Includes expenses of the underlying funds in which the fund invests. The annualized weighted average expense ratio of the underlying funds was 0.48%. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as adviser to the fund. Gross Expense: Does not reflect the effect of contractual fee waivers. For actual ratios during the period, refer to the financial highlights section of the financial statements.

Schwab Balanced Fund 7

Fund Expenses (Unaudited)

Examples for a $1,000 Investment


					Ending
			Beginning		Account Value		Expenses Paid
	Expense Ratio¹		Account Value		(Net of Expenses)		During Period²
	(Annualized)		at 5/1/09		at 10/31/09		5/1/09–10/31/09



Schwab Balanced Fund^tm
Actual Return		0.00%	$	1,000	$	1,126.30	$	0.00
Hypothetical 5% Return		0.00%	$	1,000	$	1,025.21	$	0.00


¹	Based on the most recent six-month expense ratio; may differ from the expense ratio provided in Financial Highlights.

²	Expenses for each share class are equal to its annualized expense ratio, multiplied by the average account value over the period, multiplied by the 184 days of the period, and divided by the 365 days of the fiscal year.

8 Schwab Balanced Fund

Schwab Balanced Fund^tm

Financial Statements

Financial Highlights


	11/1/08–			11/1/07–			11/1/06–			11/1/05–			11/1/04–
	10/31/09			10/31/08¹			10/31/07			10/31/06			10/31/05


Per-Share Data ($)

Net asset value at beginning of period		9.82			13.86			13.39			12.85			11.88

Income (loss) from investment operations:
Net investment income (loss)		0.22	²		0.20	²		0.25	²		0.25	²		0.15
Net realized and unrealized gains (losses)		0.64			(3.26	)		1.06			0.83			0.91

Total from investment operations		0.86			(3.06	)		1.31			1.08			1.06
Less distributions:
Distributions from net investment income		(0.37	)		(0.29	)		(0.24	)		(0.16	)		(0.09	)
Distributions from net realized gains		(0.32	)		(0.69	)		(0.60	)		(0.38	)		—

Total distributions		(0.69	)		(0.98	)		(0.84	)		(0.54	)		(0.09	)

Net asset value at end of period		9.99			9.82			13.86			13.39			12.85

Total return (%)		9.45			(23.56	)		10.24			8.59			8.92

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses³		0.00			0.36			1.02	⁴		1.03	⁴		1.10
Gross operating expenses³		0.17			0.53			1.27			1.26			1.27
Net investment income (loss)		2.41			1.81			1.84			1.90			1.14
Portfolio turnover rate		21			267			244			244			283
Net assets, end of period ($ x 1,000,000)		86			85			112			122			130

¹ Effective February 28, 2008, the Investor Share class and the Select Share class were combined into a single class of shares of the fund. The financial history as shown in the financial highlights is that of the former Investor Shares.

² Calculated based on average shares outstanding during the period.

³ The expenses incurred by underlying funds in which the fund invests are not included in this ratio.

⁴ The ratio of net operating expenses would have been 1.10% for periods ended 10/31/06 and 10/31/07, respectively, if custody credits and dividend and interest expenses on short sales had not been included.

See financial notes 9

Schwab Balanced Fund

Portfolio Holdings as of October 31, 2009

This section shows all the securities in the fund’s portfolio and their values as of the report date.

Cost

Value

Holdings by Category

($ x 1,000)

100

.0%

Other Investment Companies

94,612

85,490

100

.0%

Total Investments

94,612

85,490

.0%

Other Assets and Liabilities

100

.0%

Net Assets

85,503


	Number of		Value
Security	Shares		($ x 1,000)

Other Investment Companies 100.0% of net assets

Equity Funds 63.2%
Laudus Small-Cap MarketMasters Fund, Select Shares (a)		1,528,130		14,502
Schwab Core Equity Fund (a)		2,771,812		39,526

				54,028

Fixed-Income Funds 36.5%
Schwab Total Bond Market Fund (a)		3,447,725		31,168

Money Funds 0.3%
State Street Institutional Liquid Reserves Fund - Institutional Class		294,106		294

Total Other Investment Companies (Cost $94,612)				85,490


End of Investments.

(All dollar amounts are x 1,000)

At 10/31/09, the tax basis cost of the fund’s investments was $95,838 and the unrealized appreciation and depreciation were $1,700 and ($12,048), respectively, with a net unrealized depreciation of ($10,348).


(a)		Issuer is affiliated with the fund’s adviser.

10 See financial notes

Schwab Balanced Fund

Statements of

Changes in Net Assets

For the current and prior report periods. All numbers are x 1,000.




Operations


		11/01/08-10/31/09			11/01/07-10/31/08
Net investment income			$1,942			$2,079
Net realized gains (losses)			(5,972	)		3,160
Net unrealized gains (losses)	+		11,205			(33,936	)


Increase (Decrease) in net assets from operations			7,175			(28,697	)


Distributions to Shareholders¹
Distributions from net investment income
Investor Shares			3,133			2,272
Select Shares	+		—			573


Total distributions from net investment income			3,133			2,845


Distributions from net realized gains
Investor Shares			2,727			5,482
Select Shares	+		—			1,276


Total distributions from net realized gains			2,727			6,758

Total distributions			$5,860			$9,603

Transactions in Fund Shares¹


		11/01/08-10/31/09						11/01/07-10/31/08
		SHARES			VALUE			SHARES			VALUE


Shares Sold
Investor Shares			899			$8,338			2,660			$31,962
Select Shares	+		—			—			125			1,558


Total shares sold			899			$8,338			2,785			$33,520


Shares Reinvested
Investor Shares			608			$5,511			593			$7,378
Select Shares	+		—			—			132			1,638


Total shares reinvested			608			$5,511			725			$9,016


Shares Redeemed
Investor Shares			(1,584	)		($14,502	)		(2,719	)		($31,898	)
Select Shares	+		—			—			(2,242	)		(27,365	)


Total shares redeemed			(1,584	)		($14,502	)		(4,961	)		($59,263	)

Net transactions in fund shares			(77	)		($653	)		(1,451	)		($16,727	)


Shares Outstanding and Net Assets
		11/01/08-10/31/09						11/01/07-10/31/08
		SHARES			NET ASSETS			SHARES			NET ASSETS
Beginning of period			8,636			$84,841			10,087			$139,868
Total increase or decrease	+		(77	)		662			(1,451	)		(55,027	)


End of period			8,559			$85,503			8,636			$84,841


Net investment income not yet distributed						$870						$2,062


¹	Effective February 28, 2008, all outstanding Select Shares (1,906 shares valued at $23,077) combined with Investor Shares, resulting in a single class of shares of the fund..

See financial notes 13

Schwab Balanced Fund

Financial Notes

1. Business Structure of the Fund:

Schwab Balanced Fund is a series of Schwab Capital Trust (the “trust”), a no-load, open-end management investment company. The trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The list below shows all the funds in the trust including the fund discussed in this report, which is highlighted:



Schwab Capital Trust (organized May 7, 1993) Schwab Balanced Fund Schwab S&P 500 Index Fund Schwab Small-Cap Index Fund Schwab Total Stock Market Index Fund Schwab International Index Fund Schwab MarketTrack All Equity Portfolio Schwab MarketTrack Growth Portfolio Schwab MarketTrack Balanced Portfolio Schwab MarketTrack Conservative Portfolio Laudus Small-Cap MarketMasters Fund Laudus International MarketMasters Fund Schwab Premier Equity Fund Schwab Core Equity Fund Schwab Dividend Equity Fund Schwab Large-Cap Growth Fund Schwab Small-Cap Equity Fund Schwab Hedged Equity Fund		Schwab Financial Services Fund Schwab Health Care Fund Schwab International Core Equity Fund Schwab Target 2010 Fund Schwab Target 2015 Fund Schwab Target 2020 Fund Schwab Target 2025 Fund Schwab Target 2030 Fund Schwab Target 2035 Fund Schwab Target 2040 Fund Schwab Fundamental US Large Company Index Fund Schwab Fundamental US Small-Mid Company Index Fund Schwab Fundamental International Large Company Index Fund Schwab Fundamental International Small-Mid Company Index Fund Schwab Fundamental Emerging Markets Index Fund Schwab Monthly Income Fund—Moderate Payout Schwab Monthly Income Fund—Enhanced Payout Schwab Monthly Income Fund—Maximum Payout

The Schwab Balanced Fund is a single class “fund of funds” which seeks to achieve its investment objective by investing in a diversified group of other Schwab and/or Laudus Funds, but also may invest in other unaffiliated, third party mutual funds, including exchange traded funds (“ETFs”). In addition, the fund may purchase individual securities to maintain its allocations. The fund bears its share of allocable expenses of the underlying funds in which it invests. The financial statements of the fund should be read in conjunction with the underlying funds’ financial statements.

The fund offers one share class. Shares are bought and sold (subject to a redemption fee, see Note 8) at closing net asset value (“NAV”), which is the price for all outstanding shares. Each share has a par value of 1/1,000 of a cent, and the trustees may authorize the issuance of as many shares as necessary.

The fund maintains its own account for purposes of holding assets and accounting, and is considered a separate entity for tax purposes. Within its account, the fund may also keep certain assets in segregated accounts, as required by securities law.

2. Significant Accounting Policies:

(All dollar amounts are x 1,000)

The following is a summary of the significant accounting policies the fund used in the preparation of its financial statements. The accounting policies are in conformity with accounting principles generally accepted in the United States of America. For more information about the underlying funds’ operations and policies, please refer to those funds’ semiannual and annual reports, which are filed with the Securities Exchange Commission (“SEC”).

(a) Security Valuation:

The fund values the investments in underlying funds every business day. The fund uses the following policies to value various types of securities:


	•	Underlying funds: valued at their respective NAV as determined by the fund in accordance with the 1940 Act for a given day.

	•	Short-term securities (60 days or less to maturity): valued at amortized cost, which approximates market value.

Schwab Balanced Fund

Financial Notes (continued)

2. Significant Accounting Policies (continued):
(All dollar amounts are x 1,000)

hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (level 3 measurements).

The fund adopted the authoritative guidance under GAAP on determining fair value when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly. Accordingly, if the Fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.

The guidance establishes three levels of the fair value hierarchy as follows:


	•	Level 1 — quoted prices in active markets for identical securities — Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities. The fund does not adjust the quoted price for such instruments, even in situations where the fund holds a large position and a sale could reasonably impact the quoted price.

	•	Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) — Investments that trade in markets that are not considered to be active, but whose values are based on quoted market prices, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs are classified as Level 2 prices. These generally include certain U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations. In addition, international securities whose markets close hours before the funds value their holdings may require revised valuations due to significant movement in the U.S. markets occurring after the daily close of the foreign markets. The Board of Trustees has approved a vendor that would calculate revised valuations of international securities based on a number of factors that appear to correlate to the movements in the U.S. markets. As investments whose values are classified as Level 2 prices include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.

	•	Level 3 — significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments) — Investments whose values are classified as Level 3 prices have significant unobservable inputs, as they may trade infrequently or not at all. When observable prices are not available for these securities, the fund uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the fund in estimating the value of Level 3 prices may include the original transaction price, quoted prices for similar securities or assets in active markets, completed or pending third-party transactions in the underlying investment or comparable issuers, and changes in financial ratios or cash flows. Level 3 prices may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the fund in the absence of market information. Assumptions used by the fund due to the lack of observable inputs may significantly impact the resulting fair value and therefore the fund’s results of operations.

Quoted Prices in

Significant

Active Markets for

Significant Other

Unobservable

Identical Assets

Observable Inputs

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total*

Other Investment Companies(a)

$85,490

$—

$85,490

Total

$85,490

$—

$85,490


*		The fund had no Other Financial Instruments.
(a)		As categorized in Portfolio Holdings

Schwab Balanced Fund

Financial Notes (continued)

2. Significant Accounting Policies (continued):
(All dollar amounts are x 1,000)

(b) Portfolio Investments:

Repurchase Agreements: The fund may enter into repurchase agreements. In a repurchase agreement, the fund buys a security from another party (usually a financial institution) with the agreement that it be sold back in the future. The date, price and other conditions are all specified when the agreement is created.

The fund’s repurchase agreements will be fully collateralized by U.S. government securities or U.S. government agency securities. All collateral is held by the fund’s custodian (or, with tri-party agreements, the agent’s bank) and is monitored daily to ensure that its market value is at least equal to the repurchase price under the agreement.

(c) Security Transactions:

(d) Investment Income:

Interest income is recorded as it accrues. Dividends and distributions from portfolio securities and underlying funds are recorded on the date they are effective (the ex-dividend date), although the fund records certain foreign security dividends on the day it learns of the ex-dividend date. Any distributions from underlying funds are recorded in accordance with the character of the distributions as designated by the underling funds.

(e) Expenses:

Expenses that are specific to the fund are charged directly to the fund. Expenses that are common to all funds within the trust generally are allocated among the funds in proportion to their average daily net assets.

(f) Distributions to Shareholders:

The fund makes distributions from net investment income and from any net realized capital gains once a year, if any.

(g) Custody Credit:

The fund has an arrangement with its custodian bank, State Street Corp., under which the fund receives a credit for its uninvested cash balances to offset its custody fees and accounting fees. The credit amounts (if any) are disclosed in the Statement of Operations as a reduction to the fund’s operating expenses.

(h) Accounting Estimates:

The accounting policies described in this report conform with accounting principles generally accepted in the United States of America. Notwithstanding this, shareholders should understand that in order to follow these principles, fund management has to make estimates and assumptions that affect the information reported in the financial statements. It’s possible that once the results are known, they may turn out to be different from these estimates.

(i) Federal Income Taxes:

The fund intends to meet federal income and excise tax requirements for regulated investment companies. Accordingly, the fund distributes substantially all of its net investment income and realized net capital gains (if any) to its respective shareholders each year. As long as the fund meets the tax requirements, it is not required to pay federal income tax.

(j) Indemnification:

Under the fund’s organizational documents, the officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the fund. In addition, in the normal course of business the fund enters into contracts with its vendors and others that provide general indemnifications. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the fund. However, based on experience, the fund expects the risk of loss to be remote.

Schwab Balanced Fund

Financial Notes (continued)

3. Risk Factors

Investing in the fund may involve certain risks as described in the prospectus including, but not limited to, those described below. These risks are associated with the underlying funds in which the fund may invest and the types of investments made by those underlying funds. The fund’s direct investments, if any, are subject to the same or similar risks.

The fund’s particular asset allocation can have a significant effect on performance. The fund manages its allocation with long-term performance in mind, and does not seek any particular type of performance in the short-term. Because the risks and returns of different asset classes can vary widely over any given time period, the fund’s performance could suffer if a particular asset class does not perform as expected.

Stock and bond markets rise and fall daily. As with any investment whose performance is tied to these markets, the value of your investment in the fund will fluctuate, which means that you could lose money.

Historically, small-cap stocks have been riskier than large and mid-cap stocks. Stock prices of smaller companies may be based in substantial part on future expectations rather than current achievements and may move sharply, especially during market upturns and downturns. Small-cap companies themselves may be more vulnerable to adverse business or economic events than larger, more established companies. During a period when small-cap stocks fall behind other type of investments — Large-Cap Stocks, for instance — a funds’ performance also will lag these investments.

The fund is subject to the risk that a decline in the credit quality of a portfolio investment could cause the fund’s share price to fall. Although the fund invests primarily in investment-grade securities, the fund could lose money if the issuer or guarantor of a portfolio investment fails to make timely principal or interest payments or otherwise honor its obligations. Securities rated below investment-grade (junk bond) involve greater risks of default or downgrade and are more volatile than investment-grade securities. Below investment-grade securities involve greater risk of price declines than investment-grade securities due to actual or perceived changes in an issuer’s creditworthiness. In addition, issuers of below investment-grade securities may be more susceptible than other issuers to economic downturns. Such securities are subject to the risk that the issuer may not be able to pay interest or dividends and ultimately to repay principal upon maturity. Discontinuation of these payments could substantially adversely affect the marker value of the security.

The fund’s investments in securities of foreign issuers involve certain risks that are greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions, or changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges). In certain countries, legal remedies available to investors may be more limited than those available with respect to investments in the United States. The securities of some foreign companies may be less liquid and, at times, more volatile than securities of comparable U.S. companies. The fund may also experience more rapid or extreme changes in value as compared to a fund that invests solely in securities of U.S. companies because the securities’ markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries.

Emerging market countries are countries that the World Bank or the United Nations considers to be emerging or developing. Emerging markets may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Emerging market countries often have less uniformity in accounting and reporting requirements and unreliable securities valuation. It is sometimes difficult to obtain and enforce court judgments in such countries and there is often a greater potential for nationalization and/or expropriation of assets by the government of an emerging market country. In addition, the financial stability of issuers (including governments) in emerging market countries may be more precarious than in other countries. As a result, there will tend to be an increased risk of price volatility associated with the fund’s investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar.

Any actively managed mutual fund is subject to the risk that its investment adviser (or sub-adviser) will make poor stock selections. An adviser applies its own investment techniques and risk analyses in making investment decisions for the fund, but

Schwab Balanced Fund

Financial Notes (continued)

3. Risk Factors (continued)

there can be no guarantee that they will produce the desired results. In addition, the investment adviser makes investment decisions for certain of the funds using a strategy based largely on historical information. There is no guarantee that a strategy based on historical information will produce the desired results in the future. In addition, if market dynamics change, the effectiveness of this strategy may be limited.

The performance of the underlying funds will impact the performance of the fund. Please refer to the fund’s prospectus for a more complete description of the principal risks of investing in the fund and the underlying funds.

4. Affiliates and Affiliated Transactions

(All dollar amounts are x 1,000)

Charles Schwab Investment Management, Inc. (“CSIM” or “investment adviser”), a wholly owned subsidiary of The Charles Schwab Corporation, serves as the fund’s investment adviser and administrator pursuant to an Investment Advisory and Administration Agreement (“Advisory Agreement”) between it and the trust.

Charles Schwab & Co., Inc. (“Schwab”) is an affiliate of the investment adviser and was the trust’s transfer agent and shareholder services agent. Effective July 1, 2009, the trust has appointed Boston Financial Data Services Inc. (“BFDS”) as transfer agent of the fund. Prior to July 1, 2009, BFDS served as the fund’s sub-transfer agent.

The underlying funds pay fees to the investment adviser for advisory and administrative services. Prior to July 1, 2009, the underlying funds paid Schwab for transfer agent and shareholder services. Effective July 1, 2009, the trust adopted a Shareholder Servicing Plan (the “Plan”) on behalf of the funds. The Plan enables, the funds to bear expenses relating to the provision by, financial intermediaries, including Schwab, of certain account maintenance, customer liaison and shareholder services to the current shareholders of the funds. The fund is not subject to any fees under the plan.

Effective July 1, 2009, CSIM and Schwab have made agreements with the fund to limit the total expenses charged, excluding interest, taxes and certain non-routine expenses to 0.00% for so long as CSIM serves as the investment adviser to the fund, which may only be amended or terminated with the approval of the Fund’s Board of Trustees. Prior to July 1, 2009, CSIM and Schwab had agreed to limit the total expenses charged, excluding interest, taxes, and certain non-routine expenses to 0.00% through February 27, 2011. The agreement to limit the fund’s total expenses charged is limited to the fund’s direct operating expenses and, therefore, does not apply to acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in the underlying funds.

The fund may make direct transactions with certain other Schwab Funds when practical. When one fund is seeking to sell a security that another is seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and officers. During the period ended October 31, 2009, the fund had no security transactions with other Schwab Funds.

The fund may engage in certain transactions involving related parties. Pursuant to an exemptive order issued by the SEC, the fund may invest in other related funds. As of October 31, 2009, the percentages of shares of other related funds owned by the Balanced Fund are:


Schwab Active Equity Funds:
Schwab Core Equity Fund			2.2%
Laudus MarketMasters Funds:
Laudus Small-Cap MarketMasters Fund			4.1%
Schwab Bond Funds:
Schwab Total Bond Market Fund			3.3%

Schwab Balanced Fund

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued)
(All dollar amounts are x 1,000)

Below is a summary of the affiliated transactions for each underlying fund during the period ended October 31, 2009.


												Realized
	Balance of							Balance		Market		Gain			Distribution
	Shares							of Shares		Value		(Loss)			Received*
	Held at		Gross		Gross			Held at		at		11/01/08			11/01/08
Underlying Fund	10/31/08		Additions		Sales			10/31/09		10/31/09		to 10/31/09			to 10/31/09

Laudus Small-Cap MarketMasters Fund, Select Shares		662,831		1,266,485		(401,186	)		1,528,130		$14,502		($832	)		$9
Schwab Core Equity Fund		3,356,643		60,952		(645,783	)		2,771,812		39,526		(4,369	)		738
Schwab Total Bond Market Fund		3,668,621		692,272		(933,168	)		3,447,725		31,168		(781	)		1,189

Totals											$85,196		($5,982	)		$1,936


*		Distributions received include distributions from net investment income and from capital gains from the underling funds.

Pursuant to an exemptive order issued by the SEC, the fund may enter into interfund borrowing and lending transactions within the Schwab Funds. All loans are for temporary or emergency purposes only. The interest rate charged on the loan is the average of the overnight repurchase agreement rate and the short-term bank loan rate. The interfund lending facility is subject to the oversight and periodic review of the Board of Trustees of the Schwab Funds. There was no interfund borrowing or lending activity for the fund during the period.

5. Board of Trustees:

6. Borrowing from Banks:

The fund may borrow money from banks and custodians. The fund has custodian overdraft facilities, a committed line of credit of $150 million with State Street Corp., an uncommitted line of credit of $100 million with Bank of America, N.A. and an uncommitted line of credit of $50 million with Brown Brothers Harriman. The fund pays interest on the amounts it borrows at rates that are negotiated periodically. The funds also pay an annual fee to State Street Corp. for the committed line of credit.

There were no borrowings from the lines of credit by the fund during the period. However, the fund utilized its overdraft facility and incurred interest expense, which is disclosed in the Statement of Operations. The interest expense is determined based on a negotiated rate above the current Federal Funds Rate.

7. Purchases and Sales of Investment Securities:

(All dollar amounts are x 1,000)

For the period ended October 31, 2009, purchases and sales of securities (excluding short-term obligations) were as follows:

8. Redemption Fee:

(All dollar amounts are x 1,000)

The fund charges a 2.00% redemption fee on shares sold or exchanged within 30 days of the original purchase date. Such amounts are netted against redemption proceeds on the Statement of Changes in Net Assets. The redemption fees charged during the current and prior periods are $2 and $4, respectively.

Schwab Balanced Fund

Financial Notes (continued)

9. Federal Income Taxes:

(All dollar amounts are x 1,000)

As of October 31, 2009, the components of distributable earnings on a tax-basis were as follows:


Undistributed ordinary income	$870
Undistributed long-term capital gains	—
Unrealized appreciation	1,700
Unrealized depreciation	(12,048	)
Other unrealized appreciation/(depreciation)	—
Net unrealized appreciation/(depreciation)	($10,348	)

The primary difference between book-basis and tax-basis unrealized appreciation or unrealized depreciation of investments is the tax deferral of losses on wash sales.

Capital loss carry forwards may be used to offset future realized capital gains for federal income tax purposes. As of October 31, 2009, the fund had capital loss carry forwards of $5,199 available to offset future net capital gains before October 31, 2017.

The tax-basis components of distributions paid during the current and prior periods were:


	Current Period		Prior Period

Ordinary income		$3,133		$4,039
Long-term capital gains		2,727		5,564
Return of capital		—		—

Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as non-U.S. currency gains and losses, short-term capital gains and losses; capital losses related to wash sales, unrealized appreciation of certain investments in non-U.S. securities; and income on certain investments. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes. The fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.


Capital Shares	$—
Undistributed net investment income	(1	)
Net realized capital gains and losses	1

As of October 31, 2009, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the fund and has determined that no provision for income tax is required in the fund’s financial statements. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended October 31, 2009, the fund did not incur any interest or penalties. The fund is not subject to examination by U.S. federal tax authorities for tax years before 2006 and by state tax authorities for the tax years before 2005.

10. Subsequent Events:

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of:

Schwab Balanced Fund

In our opinion, the accompanying statement of assets and liabilities, including the portfolio holdings, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Schwab Balanced Fund (one of the portfolios constituting Schwab Capital Trust, hereafter referred to as the “Fund”) at October 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

December 16, 2009

Investment Advisory Agreement Approval

The Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the continuance of the Agreement with respect to the Fund at meetings held on April 27, 2009, and May 15, 2009, and approved the renewal of the Agreement with respect to the Fund for an additional one year term at the meeting held on May 15, 2009. The Board’s approval of the Agreement with respect to the Fund was based on consideration and evaluation of a variety of specific factors discussed at these meetings and at prior meetings, including:


1.	the nature, extent and quality of the services provided to the Fund under the Agreement, including the resources of CSIM and its affiliates dedicated to the Fund;

2.	the Fund’s investment performance and how it compared to that of certain other comparable mutual funds;

3.	the Fund’s expenses and how those expenses compared to those of certain other comparable mutual funds;

4.	the profitability of CSIM and its affiliates, including Charles Schwab & Co., Inc. (“Schwab”), with respect to the Fund, including both direct and indirect benefits accruing to CSIM and its affiliates; and

5.	the extent to which economies of scale would be realized as the Fund grows and whether fee levels in the Agreement reflect those economies of scale for the benefit of Fund investors.

Nature, Extent and Quality of Services. The Board considered the nature, extent and quality of the services provided by CSIM to the Fund and the resources of CSIM and its affiliates dedicated to the Fund. In this regard, the Trustees evaluated, among other things, CSIM’s personnel, experience, track record and compliance program. The Trustees also considered investments in CSIM’s mutual fund infrastructure and the fact that Schwab’s wide range of products, services, and channel alternatives such as free advice, investment and research tools, Internet access, and an array of account features that benefit the Fund and its shareholders. The Trustees also considered Schwab’s excellent reputation as a full service brokerage firm and its overall financial condition. Finally, the Trustees considered that many of the Fund’s shareholders are also brokerage clients of Schwab. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM to the Fund and the resources of CSIM, and its affiliates dedicated to the Fund supported renewal of the Agreement with respect to the Fund.

Fund Performance. The Board considered Fund performance in determining whether to renew the Agreement with respect to the Fund. Specifically, the Trustees considered the Fund’s performance relative to a peer group and peer category of other mutual funds and appropriate indices/benchmarks, in light of total return, yield, if applicable, and market trends. As part of this review, the Trustees considered the composition of the peer group and peer category, selection criteria and the reputation of the third party who prepared the peer group and peer category analysis. In

evaluating the performance of the Fund, the Trustees considered both risk and shareholder risk expectations for the Fund and the appropriateness of the benchmark used to compare the performance of the Fund. The Trustees further considered the level of Fund performance in the context of its review of Fund expenses and adviser profitability discussed below. Following such evaluation the Board concluded, within the context of its full deliberations, that the performance of the Fund supported renewal of the Agreement with respect to the Fund.

Fund Expenses. With respect to the Fund’s expenses, the Trustees considered the rate of compensation called for by the Agreement, and the Fund’s net operating expense ratio, in each case, in comparison to those of other comparable mutual funds, such peer groups and comparisons having been selected and calculated by an independent third party. The Trustees considered the effects of CSIM’s and Schwab’s historical practice of voluntarily waiving management and other fees to prevent total Fund expenses from exceeding a specified cap. The Trustees also considered a commitment by CSIM and Schwab to extend the specified expense cap of the Fund for so long as CSIM serves as the adviser to the Fund. The Trustees also considered fees charged by CSIM to other mutual funds and to other types of accounts, such as wrap accounts, but, with respect to such other types of accounts, accorded less weight to such comparisons due to the different legal, regulatory, compliance and operating features of mutual funds as compared to these other types of accounts. Following such evaluation, the Board concluded, within the context of its full deliberations, that the expenses of the Fund are reasonable and supported renewal of the Agreement with respect to the Fund.

Profitability. With regard to profitability, the Trustees considered the compensation flowing to CSIM and its affiliates, directly or indirectly. In this connection, the Trustees reviewed management’s profitability analyses, together with certain commentary thereon from an independent accounting firm. The Trustees also considered any other benefits derived by CSIM from its relationship with the Fund, such as whether, by virtue of its management of the Fund, CSIM obtains investment information or other research resources that aid it in providing advisory services to other clients. The Trustees considered whether the varied levels of compensation and profitability under the Agreement and other service agreements were reasonable and justified in light of the quality of all services rendered to the Fund by CSIM and its affiliates. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the profitability of CSIM is reasonable and supported renewal of the Agreement with respect to the Fund.

Economies of Scale. The Trustees considered the existence of any economies of scale and whether those are passed along to the Fund’s shareholders through a graduated investment advisory fee schedule or other means, including any fee waivers by CSIM and its affiliates. In this regard, and consistent with their consideration of Fund expenses, the Trustees considered that CSIM and Schwab have previously committed resources to minimize the effects on shareholders of diseconomies of scale during periods when fund assets were relatively small through their contractual expense waivers. For example, such diseconomies of scale may particularly affect newer funds or funds with investment strategies that are from time to time out of favor, but shareholders may benefit from the continued availability of such funds at subsidized expense levels. Based on this evaluation the Board concluded, within the context of its full deliberations, that the Fund obtains reasonable benefit from economies of scale.

In the course of their deliberations, the Trustees did not identify any particular information or factor that was all important or controlling. Based on the Trustees’ deliberation and their evaluation of the information described above, the Board, including all of the Independent Trustees, approved the continuation of the Agreement with respect to the Fund and concluded that the compensation under the Agreement with respect to the Fund is fair and reasonable in light of such services and expenses and such other matters as the Trustees have considered to be relevant in the exercise of their reasonable judgment.

Trustees and Officers

The tables below give information about the trustees and officers for Schwab Capital Trust which includes the fund covered in this report. The “Fund Complex” includes the Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust, Laudus Trust and Laudus Institutional Trust. The Fund Complex includes 86 funds.

Independent Trustees


Name, Year of Birth,		Number of
and Position(s) with		Portfolios in
the trust; (Terms of		Fund Complex
office, and length of	Principal Occupations	Overseen by
Time Served¹)	During the Past Five Years	the Trustee	Other Directorships

Mariann Byerwalter 1960 Trustee (Trustee of Schwab Capital Trust since 2000.)	Chairman of JDN Corporate Advisory LLC.	78	Board 1—Director, Redwood Trust, Inc.


John F. Cogan 1947 Trustee (Trustee of Schwab Capital Trust since 2008.)	Senior Fellow: The Hoover Institution at Stanford University; Stanford Institute for Economic Policy Research; Professor of Public Policy, Stanford University.	66	Board 1—Director, Gilead Sciences, Inc. Board 2—Director, Venture Lending and Leasing, Inc.


William A. Hasler 1941 Trustee (Trustee of Schwab Capital Trust since 2000.)	Dean Emeritus, Haas School of Business, University of California, Berkeley. Until February 2004, Co-Chief Executive Officer, Aphton Corp. (bio-pharmaceuticals).	78	Board 1—Director, Mission West Properties Board 2—Director, TOUSA Board 3—Director, Harris-Stratex Networks Board 4—Director, Globalstar, Inc. Board 5 – Director, Ditech Networks


Gerald B. Smith 1950 Trustee (Trustee of Schwab Capital Trust since 2000.)	Chairman, Chief Executive Officer and founder of Smith Graham & Co. (investment advisors).	66	Board 1—Lead Independent Director, Board of Cooper Industries Board 2—Director and Chairman of the Audit Committee of Oneok Partners LP Board 3—Director, Oneok, Inc.


Donald R. Stephens 1938 Trustee (Trustee of Schwab Capital Trust since 1989.)	Managing Partner, D. R. Stephens & Company (investments).	66	None


Joseph H. Wender 1944 Trustee (Trustee of Schwab Capital Trust since 2008.)	Senior Consultant, Goldman Sachs & Co., Inc., 2008 to present; Senior Director, Chairman of the Finance Committee, GSC Group, until December 2007; General Partner, Goldman Sachs & Co., Inc., until June 2005.	66	Board 1—Director and Chairman of the Audit Committee, Isis Pharmaceuticals


Michael W. Wilsey 1943 Trustee (Trustee of Schwab Capital Trust since 1989.)	Chairman, Chief Executive Officer, Wilsey Bennett, Inc. (real estate investment and management, and other investments).	66	None

Interested Trustees


Name, Year of Birth,		Number of
and Position(s) with		Portfolios in
the trust; (Terms of		Fund Complex
office, and length of	Principal Occupations	Overseen by
Time Served )	During the Past Five Years	the Trustee	Other Directorships

Charles R. Schwab²1937 Chairman and Trustee (Chairman and Trustee of Schwab Capital Trust since 1989.)	Founded Charles Schwab & Co., Inc. in 1971 and became Chairman in 1978. Since 1986, Chairman and Director, The Charles Schwab Corporation. Since 1989, Director, Charles Schwab Investment Management, Inc., and appointed as Chairman in 1991. Since 1996, Chairman and Chief Executive Officer, Schwab (SIS) Holdings Inc. I and Schwab International Holdings, Inc. Since 1999, Director and Chief Executive Officer, Schwab Holdings, Inc. Since 2003, Chairman, Charles Schwab Bank, N. A.; Through June 2007, Director, U.S. Trust Company, N. A., U.S. Trust Corporation, United States Trust Company of New York. Until October 2008, Chief Executive Officer, The Charles Schwab Corporation, and the Charles Schwab & Co., Inc.	66	None


Walter W. Bettinger II²1960 Trustee (Trustee of Schwab Capital Trust since 2008.)	As of October 2008, President and Chief Executive Officer, Charles Schwab & Co., Inc., principal underwriter to the Funds, and The Charles Schwab Corporation. Since October 2008, Director, The Charles Schwab Corporation. Since May 2008, Director, Charles Schwab & Co., Inc. and Schwab Holdings, Inc. Since 2006, Director, Charles Schwab Bank. From 2004 through 2007, Executive Vice President and President, Schwab Investor Services. From 2004 through 2005, Executive Vice President and Chief Operating Officer, Individual Investor Enterprise, and from 2002 through 2004, Executive Vice President, Corporate Services. Until October 2008, President and Chief Operating Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation.	74	None

Officers of the Trust


Name, Year of Birth, and Position(s)
with the trust; (Terms of office, and
length of Time Served³)		Principal Occupations During the Past Five Years

Randall W. Merk 1954 President and Chief Executive Officer (Officer of Schwab Capital Trust since 2007.)		Executive Vice President and President, Investment Management Services, Charles Schwab & Co., Inc. (August 2004 – present); Executive Vice President, Charles Schwab & Co., Inc. (2002-present); Director, President and Chief Executive Officer, Charles Schwab Investment Management, Inc. (August 2007-present); President and Chief Executive Officer, Schwab Strategic Trust (Oct. 2009 – present); Director, Charles Schwab Asset Management (Ireland) Limited and Charles Schwab Worldwide Funds PLC (Sept. 2002 – present).

Officers of the Trust (continued)


Name, Year of Birth, and Position(s)
with the trust; (Terms of office, and
length of Time Served³)		Principal Occupations During the Past Five Years

George Pereira 1964 Treasurer and Principal Financial Officer (Officer of Schwab Capital Trust since 2004.)		Senior Vice President and Chief Financial Officer, Charles Schwab Investment Management, Inc. (November 2004 – present); Treasurer and Chief Financial Officer, Laudus Trust and Laudus Institutional Trust (2006 – present); Treasurer and Principal Financial Officer, Schwab Strategic Trust (Oct. 2009 – present); Director, Charles Schwab Worldwide Fund, PLC and Charles Schwab Asset Management (Ireland) Limited (Sept. 2002 – present); Treasurer, Chief Financial Officer and Chief Accounting Officer, Excelsior Funds Inc., Excelsior Tax-Exempt Funds, Inc. and Excelsior Funds Trust (June 2006 – June 2007).


Jeffrey Mortimer 1963 Senior Vice President and Chief Investment Officer (Officer of Schwab Capital Trust since 2004.)		Senior Vice President and Chief Investment Officer, Charles Schwab Investment Management, Inc. (May 2004 – present); Chief Investment Officer (2004 – present), President and Chief Executive Officer (March 2008 – present), Laudus Trust and Laudus Institutional Trust); Senior Vice President and Chief Investment Officer, Schwab Strategic Trust (Oct. 2009 – present).


Koji E. Felton 1961 Secretary and Chief Legal Officer (Officer of Schwab Capital Trust since 1998.)		Senior Vice President, Chief Counsel and Corporate Secretary, Charles Schwab Investment Management, Inc. (July 2000 – present); Senior Vice President and Deputy General Counsel, Charles Schwab & Co., Inc. (June 1998 — present); Secretary and Chief Legal Officer, Schwab Strategic Trust (Oct. 2009 – present); Chief Legal Officer, Excelsior Funds Inc., Excelsior Tax-Exempt Funds, Inc. and Excelsior Funds Trust (June 2006 – June 2007); Chief Legal Officer, Laudus Trust and Laudus Institutional Trust (Aug. 2006 – Dec. 2006).


Catherine MacGregor 1964 Vice President (Officer of Schwab Capital Trust since 2005.)		Vice President, Charles Schwab & Co., Inc. and Charles Schwab Investment Management, Inc., (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer (March 2007 – present), Laudus Trust and Laudus Institutional Trust; Vice President, Schwab Strategic Trust (Oct. 2009 – present).


Michael Haydel 1972 Vice President (Officer of Schwab Capital Trust since 2006.)		Vice President, Asset Management Client Services, Charles Schwab & Co., Inc. (2004 – present); Vice President (Sept. 2005 – present), (Anti-Money Laundering Officer (Oct. 2005 – Feb. 2009), Laudus Trust and Laudus Institutional Trust; Vice President, Schwab Strategic Trust (Oct. 2009 – present).


¹		Trustees remain in office until they resign, retire or are removed by shareholder vote. The Schwab Funds retirement policy requires that independent trustees elected after January 1, 2000 retire at age 72 or after 20 years of service as a trustee, whichever comes first. Independent trustees elected prior to January 1, 2000 will retire on the following schedule: Messrs. Stephens and Wilsey will retire on December 31, 2010.
²		Messrs. Schwab and Bettinger are Interested Trustees because they are employees of Schwab and/or the investment adviser. In addition to their employment with Schwab and/or the investment adviser, Messrs. Schwab and Bettinger also own stock of The Charles Schwab Corporation.
³		The President, Treasurer and Secretary hold office until their respective successors are chosen and qualified or until he or she sooner dies, resigns, is removed or becomes disqualified. Each of the other officers serves at the pleasure of the Board.