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Five cost-efficient ways to tap into the power of

the stock market for long-term growth potential.

In This Report


Performance at a Glance		2
From the President		3
Fund Management		5
Performance and Fund Facts
Schwab^® S&P 500 Index Fund		6
Schwab 1000 Index^® Fund		8
Schwab Small-Cap Index Fund^®		10
Schwab Total Stock Market Index Fund^®		12
Schwab International Index Fund^®		14
Fund Expenses		16
Financial Statements and Portfolio Holdings
Schwab^® S&P 500 Index Fund		17
Schwab 1000 Index^® Fund		24
Schwab Small-Cap Index Fund^®		31
Schwab Total Stock Market Index Fund^®		38
Schwab International Index Fund^®		45
Financial Notes		53
Report of Independent Registered Public Accounting Firm		64
Other Federal Tax Information		65
Investment Advisory Agreement Approval		66
Trustees and Officers		68
Glossary		71
EX-99.CODEETH
EX-99.CERT
EX-99.906CERT

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

The Sector/Industry classifications in this report use the Global Industry Classification Standard (GICS), which was developed by, and is the exclusive property of, MSCI and Standard & Poor’s (S&P). GICS is a service mark of MSCI and S&P and has been licensed for use by Schwab. The Industry classifications used in the schedules of Portfolio Holdings are sub-categories of Sector classifications.

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.schwabfunds.com/prospectus.


Total Return for the 12 Months Ended October 31, 2013

Schwab^® S&P 500 Index Fund (Ticker Symbol: SWPPX)			27.06%


S&P 500^® Index			27.18%
Fund Category: Morningstar Large Blend			27.16%


Performance Details			pages 6-7




Schwab 1000 Index^® Fund (Ticker Symbol: SNXFX)			27.85%


Schwab 1000 Index^®			28.27%
Fund Category: Morningstar Large Blend			27.16%


Performance Details			pages 8-9




Schwab Small-Cap Index Fund^® (Ticker Symbol: SWSSX)			36.23%


Russell 2000^® Index			36.28%
Fund Category: Morningstar Small Blend			35.17%


Performance Details			pages 10-11




Schwab Total Stock Market Index Fund^® (Ticker Symbol: SWTSX)			28.76%


Dow Jones U.S. Total Stock Market Index			28.86%
Fund Category: Morningstar Large Blend			27.16%


Performance Details			pages 12-13




Schwab International Index Fund^®¹ (Ticker Symbol: SWISX)			26.40%


MSCI EAFE^® Index (Net)*			26.88%
Fund Category: Morningstar Foreign Large Blend			23.08%


Performance Details			pages 14-15


Minimum Initial Investment²	$	100

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.

For index definitions, please see the Glossary.

Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, a fund’s total return would have been lower. Performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.

Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.


*		Effective February 28, 2013, the fund changed its comparative index, for purposes of performance calculation, from MSCI EAFE Index (Gross) to MSCI EAFE Index (Net). The net version of the index more accurately reflects how dividends paid to the fund on its foreign securities are treated for tax purposes and provides a better basis for comparing the fund’s performance. The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.
¹		The fund’s performance relative to the index may be affected by fair-value pricing and timing differences in foreign exchange calculations. See financial note 2 for more information.
²		Please see the funds’ prospectus for further detail and eligibility requirements.

2 Schwab Equity Index Funds

From the President

Marie Chandoha is President and CEO of Charles Schwab Investment Management, Inc. and the funds covered in this report.

Dear Shareholder,

As President and CEO of Charles Schwab Investment Management, Inc., I’d like to thank you for trusting us to help you meet your investment goals, and for reading this annual report concerning the Schwab Equity Index Funds. Each fund employs an indexing strategy to track the performance of a particular stock market benchmark, seeking returns by modeling its portfolios according to the benchmark index.

Turning to the 12 months ended October 31, 2013, the funds generated returns that were generally aligned with their respective indices, and reflected a strong rally by stocks. The backdrop for these performances included Federal Reserve focus on keeping interest rates low through a policy of quantitative easing to stimulate the U.S. economy. Equities generally benefitted from this accommodative monetary policy stance. However, signs of economic improvement in the U.S. led the Fed to initially consider “tapering” this stimulus program. Long-term interest rates rose in response, and stocks traditionally known for paying high dividends underperformed. In spite of expectations to the contrary, the Fed’s anticipated tapering never materialized. This generally benefitted stocks and helped the market overcome uncertainty regarding a brief U.S. federal government shutdown and budgetary gridlock. Reflecting this environment, the S&P 500 Index returned 27.2% for the reporting period.

Equities in developed markets also performed well. Pockets of economic improvement in some countries, combined with low interest rates in many

Asset Class Performance Comparison % returns during the 12 months ended 10/31/2013

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



		27.18%		S&P 500^® Index: measures U.S. large-cap stocks

		36.28%		Russell 2000^® Index: measures U.S. small-cap stocks

		26.88%		MSCI EAFE^® Index (Net): measures (in U.S. dollars) large-cap stocks in Europe, Australasia and the Far East

		−1.08%		Barclays U.S. Aggregate Bond Index: measures the U.S. bond market

		0.06%		Three-Month U.S. Treasury Bills (T-bills): measures short-term U.S. Treasury obligations

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

For index definitions, please see the Glossary.

Data source: Index provider websites and CSIM.

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

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

Schwab Equity Index Funds 3

Fund Management



		Agnes Hong, CFA, Managing Director and Head of Passive Equity Strategies, leads the portfolio management teams of Schwab’s index mutual funds and equity ETFs. She also has overall responsibility for all aspects of the management of the funds. Prior to joining CSIM in 2009, Ms. Hong spent five years as a portfolio manager at Barclays Global Investors (subsequently acquired by BlackRock), where she managed institutional index funds and quantitative active funds. Prior to that, Ms. Hong worked in management consulting and product management, servicing global financial services clients.

		Ferian Juwono, CFA, Managing Director and Senior Portfolio Manager, is responsible for the day-to-day co-management of the funds. Prior to joining CSIM in 2010, Mr. Juwono worked at BlackRock (formerly Barclays Global Investors), where he spent over three years as a portfolio manager, managing equity index funds for institutional clients, and nearly two years as a senior business analyst. Prior to that, Mr. Juwono worked for over four years as a senior financial analyst with Union Bank of California.

		Ron Toll, Portfolio Manager, is responsible for the day-to-day co-management of each of the funds, except for the Schwab Total Stock Market Index Fund. Mr. Toll has been a portfolio manager with CSIM since 2007, and has held a number of positions at the firm since beginning his tenure in 1998. His previous roles included serving as a manager in Portfolio Operations, and as a manager in Portfolio Operations and Analytics.

Schwab Equity Index Funds 5

Schwab^® S&P 500 Index Fund

The Schwab S&P 500 Index Fund (the fund) seeks to track the total return of the S&P 500 Index (the index), which includes the stocks of 500 leading U.S. publicly traded companies from a broad range of industries. To pursue its investment objective, the fund uses a replication investment approach and generally gives the same weight to a given stock as does the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 27.06% for the 12-month period ended October 31, 2013, compared with the index, which returned 27.18%. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Market Highlights. Large-cap U.S. stocks generated double-digit returns for the 12-month report period. The backdrop for these results included Federal Reserve efforts to keep interest rates low and speed up economic growth, making financing more affordable for businesses and households and generally supporting stocks. Relative stability in the euro zone was another positive factor.

Contributors and Detractors. The Financials sector was the biggest contributor to the fund’s total return. The large average weight of this sector reflected part of the reason for this contribution, with Financials stocks comprising approximately 16% of the fund. Financials stocks also performed well, returning approximately 32%, and reflecting the performance of companies involved in banking, diversified financial services, insurance, and real estate. One significant contributor in this sector was Berkshire Hathaway Inc., a holding company that owns subsidiaries in a variety of business sectors. The fund’s Berkshire Hathaway Inc. holdings returned approximately 33%.

The Consumer Discretionary sector, which represented an average weight of nearly 12% of the fund, also provided a meaningful total return contribution. The fund’s Consumer Discretionary stocks returned approximately 40%, reflecting the overall performance of companies involved in automobiles and components, durable goods and apparel, consumer services, media, and retailing. One significant contributor in this sector was Amazon.com, Inc., an online retailer that offers a wide range of products. The fund’s Amazon.com, Inc. holdings returned approximately 56%.

The Telecommunication Services sector generated positive returns for the fund, but was among the weakest total return contributors. This sector represented an average weight of approximately 3% of the fund, and returned approximately 13%, reflecting the overall performance of companies involved in diversified and wireless telecommunication services. One significant detractor in this sector was CenturyLink Inc., an integrated communications company. The fund’s CenturyLink Inc. holdings returned approximately -6%.

The Utilities sector, which represented an average weight of approximately 3% of the fund, was another relatively weak contributor to the fund’s total return. The fund’s Utilities stocks returned approximately 10%, reflecting the overall performance of companies involved in gas, electric, and water utilities, as well as independent power production and energy trading. One significant detractor in this sector was Exelon Corporation, a utility services holding company. The fund’s Exelon Corporation holdings returned approximately -16%.

As of 10/31/13:

Statistics


Number of Holdings			504
Weighted Average Market Cap ($ x 1,000,000)			$110,786
Price/Earnings Ratio (P/E)			18.8
Price/Book Ratio (P/B)			2.7
Portfolio Turnover Rate			1%

Sector Weightings % of Investments


Information Technology			17.3%
Financials			15.6%
Health Care			12.7%
Consumer Discretionary			12.2%
Industrials			10.5%
Energy			10.3%
Consumer Staples			9.9%
Materials			3.4%
Utilities			3.1%
Telecommunication Services			2.4%
Other			2.6%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Apple, Inc.			3.0%
Exxon Mobil Corp.			2.4%
Google, Inc., Class A			1.8%
Microsoft Corp.			1.7%
General Electric Co.			1.7%
Johnson & Johnson			1.6%
Chevron Corp.			1.4%
The Procter & Gamble Co.			1.4%
Berkshire Hathaway, Inc., Class B			1.3%
Wells Fargo & Co.			1.3%
Total			17.6%

Management’s views and portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


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

6 Schwab Equity Index Funds

Schwab^® S&P 500 Index Fund

Performance and Fund Facts as of 10/31/13

October 31, 2003 – October 31, 2013
Performance of Hypothetical
$10,000 Investment^1,2

Average Annual Total Returns^1,2


Fund and Inception Date	1 Year			5 Years			10 Years


Fund: Schwab^® S&P 500 Index Fund (5/19/97)		27.06	%		15.10	%		7.41	%
S&P 500^® Index		27.18	%		15.17	%		7.46	%
Fund Category: Morningstar Large Blend		27.16	%		14.48	%		7.01	%

Fund Expense Ratios³: Net 0.09%; Gross 0.10%

All total returns 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.

For index definitions, please see the Glossary.

Standard & Poor’s^® S&P^®, S&P 500^®, Standard & Poor’s 500^® and 500^® are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by the Schwab S&P 500 Index Fund. The Schwab S&P 500 Index Fund is not sponsored, endorsed, sold or promoted by Standard & Poor’s, and Standard & Poor’s makes no representation regarding the advisability of investing in the fund.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		On September 9, 2009, the Investor Share class, Select Share class and e.Shares class were combined into a single class of shares of the fund. The performance history of the fund prior to September 9, 2009 is that of the fund’s former Select Shares. On September 9, 2009, the Schwab Institutional Select S&P 500 Fund merged into the fund.
³		As stated in the prospectus. 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 Equity Index Funds 7

Schwab 1000 Index^® Fund

The Schwab 1000 Index Fund (the fund) seeks to match the total return of the Schwab 1000 Index (the index), which includes the stocks of the largest 1,000 publicly traded companies in the U.S., with size being determined by market capitalization (total market value of all shares outstanding). To pursue its goal, the fund uses a replication investment approach and generally gives the same weight to a given stock as does the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 27.85% for the 12-month period ended October 31, 2013, compared with the index, which returned 28.27%. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Contributors and Detractors. The Financials sector was the biggest contributor to the fund’s total return. The large average weight of this sector reflected part of the reason for this contribution, with Financials stocks comprising approximately 17% of the fund. Financials stocks also performed well, returning approximately 31%, and reflecting the performance of companies involved in banking, diversified financial services, insurance, and real estate. One significant contributor in this sector was Berkshire Hathaway Inc., a holding company that owns subsidiaries in a variety of business sectors. The fund’s Berkshire Hathaway Inc. holdings returned approximately 33%.

The Consumer Discretionary sector, which represented an average weight of approximately 13% of the fund, also provided a meaningful total return contribution. The fund’s Consumer Discretionary stocks returned approximately 41%, reflecting the overall performance of companies involved in automobiles and components, durable goods and apparel, consumer services, media, and retailing. One significant contributor in this sector was Amazon.com, Inc., an online retailer that offers a wide range of products. The fund’s Amazon.com, Inc. holdings returned approximately 56%.

The Telecommunication Services sector generated positive returns for the fund, but was the weakest total return contributor. This sector represented an average weight of almost 3% of the fund, and returned approximately 14%, reflecting the overall performance of companies involved in diversified and wireless telecommunication services. One significant detractor in this sector was CenturyLink Inc., an integrated communications company. The fund’s CenturyLink Inc. holdings returned approximately -6%.

The Utilities sector, which represented an average weight of approximately 3% of the fund, was another relatively weak contributor to the fund’s total return. The fund’s Utilities stocks returned roughly 11%, reflecting the overall performance of companies involved in gas, electric, and water utilities, as well as independent power production and energy trading. One significant detractor in this sector was Exelon Corporation, a utility services holding company. The fund’s Exelon Corporation holdings returned approximately -16%.

As of 10/31/13:

Statistics


Number of Holdings			988
Weighted Average Market Cap ($ x 1,000,000)			$97,967
Price/Earnings Ratio (P/E)			19.7
Price/Book Ratio (P/B)			2.7
Portfolio Turnover Rate			4%

Sector Weightings % of Investments


Information Technology			17.5%
Financials			16.5%
Consumer Discretionary			13.0%
Health Care			12.2%
Industrials			11.2%
Energy			10.0%
Consumer Staples			9.2%
Materials			3.7%
Utilities			3.2%
Telecommunication Services			2.3%
Other			1.2%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Apple, Inc.			2.6%
Exxon Mobil Corp.			2.2%
Google, Inc., Class A			1.6%
Microsoft Corp.			1.5%
General Electric Co.			1.5%
Johnson & Johnson			1.4%
Chevron Corp.			1.3%
The Procter & Gamble Co.			1.2%
Wells Fargo & Co.			1.1%
Berkshire Hathaway, Inc., Class B			1.1%
Total			15.5%

Management’s views and portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


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

8 Schwab Equity Index Funds

Schwab 1000 Index^® Fund

Performance and Fund Facts as of 10/31/13

October 31, 2003 – October 31, 2013
Performance of Hypothetical
$10,000 Investment^1,2

Average Annual Total Returns^1,2


Fund and Inception Date	1 Year			5 Years			10 Years


Fund: Schwab 1000 Index^® Fund (4/2/91)		27.85	%		15.41	%		7.56	%
Schwab 1000 Index^®		28.27	%		15.74	%		7.86	%
S&P 500^® Index		27.18	%		15.17	%		7.46	%
Fund Category: Morningstar Large Blend		27.16	%		14.48	%		7.01	%

Fund Expense Ratios³: Net 0.29%; Gross 0.34%

For index definitions, please see the Glossary.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		On September 18, 2009, the Investor Share class and Select Share class were combined into a single class of shares of the fund. The performance history of the fund prior to September 18, 2009 is that of the fund’s former Investor Shares.
³		As stated in the prospectus. 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 Equity Index Funds 9

Schwab Small-Cap Index Fund^®

The Schwab Small-Cap Index Fund (the fund) seeks to track the total return of the Russell 2000 Index (the index), which is designed to measure the performance of the small-cap sector of the U.S. equity market. To pursue its goal, the fund uses a replication investment approach and generally gives the same weight to a given stock as does the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 36.23% for the 12-month period ended October 31, 2013, compared with the index, which returned 36.28%. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index. In addition, the fund engaged in securities lending, which positively contributed to the fund’s performance versus the index.

Market Highlights. Small-cap U.S. stocks generated double-digit returns for the 12-month report period. The backdrop for these results included Federal Reserve efforts to keep interest rates low and speed up economic growth, making financing more affordable for businesses and households and generally supporting stocks. Relative stability in the euro zone was another positive factor.

Contributors and Detractors. The Information Technology sector was the biggest contributor to the fund’s total return. The large average weight of this sector reflected part of the reason for this contribution, with Information Technology stocks comprising approximately 17% of the fund. Information Technology stocks also performed well, returning approximately 43%, and reflecting the performance of companies involved in Internet and software services. One significant contributor in this sector was CoStar Group Inc., a company that provides building-specific information to the U.S. commercial real estate industry. The fund’s CoStar Group Inc. holdings returned approximately 114%.

The Financials sector also provided a meaningful contribution to the fund’s total return. Financials stocks represented an average weight of approximately 23% of the fund, and returned 28%, reflecting the performance of companies involved in banking, diversified financial services, insurance, and real estate. One significant contributor in this sector was MGIC Investment Corporation, which provides private mortgage insurance coverage. The fund’s MGIC Investment Corporation holdings returned approximately 373%.

The Telecommunication Services sector generated positive returns for the fund, but was the weakest total return contributor. This sector represented an average weight of approximately 1% of the fund, and returned approximately 27%, reflecting the overall performance of companies involved in diversified and wireless telecommunication services. One significant detractor in this sector was NII Holdings Inc., a mobile communications provider. The fund’s NII Holdings Inc. shares returned approximately -49%.

The Utilities sector, which represented an average weight of approximately 3% of the fund, was another relatively weak contributor to the fund’s total return contribution. The fund’s Utilities stocks returned approximately 14%, reflecting the overall performance of companies involved in gas, electric, and water utilities, as well as independent power production and energy trading. One significant detractor in this sector was Atlantic Power Corporation, which holds indirect interests in non-utility electric generating facilities. The fund’s Atlantic Power Corporation holdings returned approximately -67%.

As of 10/31/13:

Statistics


Number of Holdings			1,987
Weighted Average Market Cap ($ x 1,000,000)			$1,697
Price/Earnings Ratio (P/E)			10.0
Price/Book Ratio (P/B)			1.8
Portfolio Turnover Rate			11%

Sector Weightings % of Investments


Financials			21.9%
Information Technology			17.0%
Industrials			14.0%
Consumer Discretionary			13.2%
Health Care			12.1%
Energy			5.7%
Materials			4.7%
Consumer Staples			3.8%
Utilities			3.0%
Telecommunication Services			0.7%
Other			3.9%
Total			100.0%

Top Equity Holdings % of Net Assets¹


CoStar Group, Inc.			0.3%
athenahealth, Inc.			0.3%
Acuity Brands, Inc.			0.3%
The Middleby Corp.			0.3%
The Ultimate Software Group, Inc.			0.3%
US Airways Group, Inc.			0.3%
Align Technology, Inc.			0.3%
Brunswick Corp.			0.2%
Rite Aid Corp.			0.2%
Prosperity Bancshares, Inc.			0.2%
Total			2.7%

Management’s 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.

10 Schwab Equity Index Funds

Schwab Small-Cap Index Fund^®

Performance and Fund Facts as of 10/31/13

October 31, 2003 – October 31, 2013
Performance of Hypothetical
$10,000 Investment^1,2

Average Annual Total Returns^1,2


Fund and Inception Date	1 Year			5 Years			10 Years


Fund: Schwab Small-Cap Index Fund^® (5/19/97)		36.23	%		18.80	%		9.72	%
Russell 2000^® Index		36.28	%		17.04	%		9.03	%
Small-Cap Spliced Index³		36.28	%		18.93	%		9.82	%
Fund Category: Morningstar Small Blend		35.17	%		17.34	%		9.02	%

Fund Expense Ratios⁴: Net 0.25%; Gross 0.29%

For index definitions, please see the Glossary.

Index ownership – “Russell 2000^®” is a registered mark of the Frank Russell Company (“Russell”) and has been licensed for use by the Schwab Small-Cap Index Fund. The Schwab Small-Cap Index Fund is not sponsored, endorsed, sold or promoted by Russell and Russell makes no representation regarding the advisability of investing in the fund.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		On August 21, 2009, the Investor Share class and Select Share class were combined into a single class of shares of the fund. The performance history of the fund prior to August 21, 2009 is that of the fund’s former Select Shares.
³		The Small-Cap Spliced Index is an internally calculated index, comprised of the Schwab Small-Cap Index (the fund’s former comparative index) from inception of the fund until the close of business on December 14, 2011, and the Russell 2000 Index from December 15, 2011 forward.
⁴		As stated in the prospectus. Includes acquired fund fees and expenses incurred indirectly by the fund through its investments in other investment companies. The annualized weighted average expense ratio of these investment companies was 0.08%. 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 Equity Index Funds 11

Schwab Total Stock Market Index Fund^®

The Schwab Total Stock Market Index Fund (the fund) seeks to track the total return of the entire U.S. stock market, as measured by the Dow Jones U.S. Total Stock Market Index (the index), which includes the stocks of all publicly traded companies headquartered in the U.S. for which pricing information is readily available. To pursue its investment objective, the funds use a sampling investment approach that involves investing in a representative sample of stocks with similar risk and return characteristics as the index, and maintains a tight allocation across all sectors, market capitalizations, and valuation measures compared with the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 28.76% for the 12-month period ended October 31, 2013, compared with the index, which returned 28.86%. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Market Highlights. U.S. stocks generated double-digit returns for the 12-month report period. The backdrop for these results included Federal Reserve efforts to keep interest rates low and speed up economic growth, making financing more affordable for businesses and households, and generally supporting stocks. Relative stability in the euro zone was another positive factor.

Contributors and Detractors. The Financials sector was the biggest contributor to the fund’s total return. The large average weight of this sector reflected part of the reason for this contribution, with Financials stocks comprising approximately 17% of the fund. Financials stocks also performed well, returning approximately 30%, and reflecting the performance of companies involved in banking, diversified financial services, insurance, and real estate. One significant contributor in this sector was Berkshire Hathaway Inc., a holding company that owns subsidiaries in a variety of business sectors. The fund’s Berkshire Hathaway Inc. holdings returned approximately 33%.

The Telecommunication Services sector generated positive returns for the fund, but was the weakest total return contributor. This sector represented an average weight of approximately 3% of the fund, and returned approximately 15%, reflecting the overall performance of companies involved in diversified and wireless telecommunication services. One significant detractor in this sector was CenturyLink Inc., an integrated communications company. The fund’s CenturyLink Inc. holdings returned approximately -6%.

The Utilities sector, which represented an average weight of approximately 3% of the fund, was another relatively weak contributor to the fund’s total return. The fund’s Utilities stocks returned approximately 12%, reflecting the overall performance of companies involved in gas, electric, and water utilities, as well as independent power production and energy trading. One significant detractor in this sector was Exelon Corporation, a utility services holding company. The fund’s Exelon Corporation holdings returned approximately -16%.

As of 10/31/13:

Statistics


Number of Holdings			2,432
Weighted Average Market Cap ($ x 1,000,000)			$90,060
Price/Earnings Ratio (P/E)			18.6
Price/Book Ratio (P/B)			2.6
Portfolio Turnover Rate			2%

Sector Weightings % of Investments


Information Technology			17.2%
Financials			16.8%
Consumer Discretionary			12.9%
Health Care			12.1%
Industrials			11.1%
Energy			9.4%
Consumer Staples			8.6%
Materials			3.7%
Utilities			3.1%
Telecommunication Services			2.2%
Other			2.9%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Apple, Inc.			2.4%
Exxon Mobil Corp.			2.0%
Google, Inc., Class A			1.4%
Microsoft Corp.			1.3%
General Electric Co.			1.3%
Johnson & Johnson			1.3%
Chevron Corp.			1.1%
The Procter & Gamble Co.			1.1%
Wells Fargo & Co.			1.0%
Berkshire Hathaway, Inc., Class B			1.0%
Total			13.9%

Management’s views and portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


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

12 Schwab Equity Index Funds

Schwab Total Stock Market Index Fund^®

Performance and Fund Facts as of 10/31/13

October 31, 2003 – October 31, 2013
Performance of Hypothetical
$10,000 Investment^1,2

Average Annual Total Returns^1,2


Fund and Inception Date	1 Year			5 Years			10 Years


Fund: Schwab Total Stock Market Index Fund^® (6/1/99)		28.76	%		15.99	%		8.15	%
Dow Jones U.S. Total Stock Market Index		28.86	%		16.01	%		8.13	%
Fund Category: Morningstar Large Blend		27.16	%		14.48	%		7.01	%

Fund Expense Ratios³: Net 0.09%; Gross 0.10%

For index definitions, please see the Glossary.

“Dow Jones” and “The Dow Jones U.S. Total Stock Market Index” are service marks of Dow Jones & Company, Inc. and have been licensed for certain purposes by CSIM. The Schwab Total Stock Market Index Fund, based on The Dow Jones U.S. Total Stock Market Index, is not sponsored, endorsed, sold or promoted by Dow Jones and Dow Jones makes no representation regarding the advisability of investing in such a product.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		On September 18, 2009, the Investor Share class and Select Share class were combined into a single class of shares of the fund. The performance history of the fund prior to September 18, 2009 is that of the fund’s former Select Shares.
³		As stated in the prospectus. 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 Equity Index Funds 13

Schwab International Index Fund^®

The Schwab International Index Fund (the fund) seeks to track the performance of the MSCI EAFE Index (Net) (the index), which measures the total return of large, publicly traded non-U.S. companies from countries with developed equity markets outside of the U.S. To pursue its goal, the fund uses a replication investment approach and generally gives the same weight to a given stock as does the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 26.40% for the 12-month period ended October 31, 2013, compared with the index, which returned 26.88%. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index. In addition, timing differences in foreign exchange calculations detracted from the fund’s relative performance.*

Market Highlights. Stocks in developed international markets performed well, generating double-digit overall returns for the 12-month report period. Relative stability in the euro zone, some pockets of improvement in a few developed international economies, and central bank policies aimed at keeping interest rates low in many parts of the world were some of the factors supporting stocks, while major overseas currencies finished mixed versus the U.S. dollar.

Contributors and Detractors. Japanese stocks were the biggest contributors to the fund’s total return from a country perspective, and represented an average weight of approximately 21%. In U.S. dollar terms, the fund’s Japanese stocks returned approximately 34%. One significant contributor in this market was Toyota Motor Corporation, a passenger vehicle company. The fund’s Toyota Motor Corporation holdings returned approximately 71% in U.S. dollar terms.

U.K. stocks also provided a meaningful contribution to the fund’s total return, and represented an average weight of approximately 22%. In U.S. dollar terms, the fund’s U.K. stocks returned approximately 21%. One significant contributor in this market was Vodafone Group PLC, a mobile telecommunications company. The fund’s Vodafone Group PLC holdings returned approximately 41% in U.S. dollar terms.

Israeli stocks generated positive returns for the fund, but were the weakest total return contributors from a country perspective. These stocks represented an average weight of less than 1% of the fund, and in U.S. dollar terms, returned approximately 1%. One significant detractor in this market was Teva Pharmaceutical Industries Ltd., a global pharmaceutical company. The fund’s Teva Pharmaceutical Industries Ltd. holdings returned approximately -5% in U.S. dollar terms.

Stocks from New Zealand also contributed little to the fund’s total return, while performing well on an absolute basis. New Zealand stocks represented less than 1% of the fund, while returning approximately 24% in U.S. dollar terms. One of the weaker contributors in this market was Contact Energy Limited, a diversified and integrated energy company. The fund’s Contact Energy Limited holdings returned approximately 1%.

As of 10/31/13:

Statistics


Number of Holdings			921
Weighted Average Market Cap ($ x 1,000,000)			$61,996
Price/Earnings Ratio (P/E)			18.9
Price/Book Ratio (P/B)			0.8
Portfolio Turnover Rate			5%

Sector Weightings % of Investments


Financials			25.0%
Industrials			12.4%
Consumer Discretionary			11.4%
Consumer Staples			10.8%
Health Care			9.7%
Materials			7.8%
Energy			6.7%
Telecommunication Services			5.5%
Information Technology			4.1%
Utilities			3.5%
Other			3.1%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Nestle S.A. – Reg’d			1.7%
HSBC Holdings plc			1.5%
Roche Holding AG			1.5%
Toyota Motor Corp.			1.3%
Novartis AG – Reg’d			1.3%
Vodafone Group plc			1.3%
BP plc			1.1%
Total S.A.			1.0%
GlaxoSmithKline plc			1.0%
Sanofi			0.9%
Total			12.6%

Management’s views and portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

Foreign securities can involve risks such as political and economic instability and currency risk.


*		Typically, the securities in the index are valued using foreign exchange rates obtained at the close of the London foreign currency exchange (11:00 AM EST). Securities in the fund, however, are valued using foreign exchange rates obtained at the close of the New York foreign currency exchange (4:00 PM EST). This difference in closing times can result in different foreign currency exchange rates between the two exchanges, and thus different foreign currency exchange rates used in the valuation of the index’s and fund’s securities.
¹		This list is not a recommendation of any security by the investment adviser.

14 Schwab Equity Index Funds

Schwab International Index Fund^®

Performance and Fund Facts as of 10/31/13

October 31, 2003 – October 31, 2013
Performance of Hypothetical
$10,000 Investment^1,2

Average Annual Total Returns^1,2


Fund and Inception Date	1 Year			5 Years			10 Years


Fund: Schwab International Index Fund^® (5/19/97)		26.40	%		11.32	%		7.67	%
MSCI EAFE^® Index (Net)³		26.88	%		11.99	%		7.71	%
MSCI EAFE^® Index (Gross)³		27.40	%		12.52	%		8.20	%
International Spliced Index⁴		26.96	%		11.78	%		7.89	%
Fund Category: Morningstar Foreign Large Blend		23.08	%		11.74	%		7.45	%

Fund Expense Ratios⁵: Net 0.19%; Gross 0.23%

Country Weightings % of Investments


United Kingdom			21.0%
Japan			20.3%
France			9.6%
Switzerland			8.7%
Germany			8.6%
Australia			7.9%
Spain			3.3%
Sweden			3.1%
Hong Kong			2.8%
Netherlands			2.6%
Other Countries			12.1%
Total			100.0%

For index definitions, please see the Glossary.

The fund’s performance relative to the index may be affected by fair-value pricing, see financial note 2 for more information.

Index ownership — “MSCI EAFE” is a registered mark of MSCI and has been licensed for use by the Schwab International Index Fund. The Schwab International Index Fund is not sponsored, endorsed, sold or promoted by MSCI and MSCI bears no liability with respect to the fund. The Statement of Additional Information contains a more detailed description of the limited relationship MSCI has with the fund.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		On August 21, 2009, the Investor Share class and Select Share class were combined into a single class of shares of the fund. The performance history of the fund prior to August 21, 2009 is that of the fund’s former Select Shares.
³		Effective February 28, 2013, the fund changed its comparative index, for purposes of performance calculation, from MSCI EAFE Index (Gross) to MSCI EAFE Index (Net). The net version of the index more accurately reflects how dividends paid to the fund on its foreign securities are treated for tax purposes and provides a better basis for comparing the fund’s performance. The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.
⁴		The International Spliced Index is an internally calculated index, comprised of the Schwab International Index (the fund’s former comparative index) from inception of the fund until the close of business on December 20, 2011, the MSCI EAFE Index (Gross) from December 21, 2011 until the close of business on February 28, 2013, and the MSCI EAFE Index (Net) from March 1, 2013 forward.
⁵		As stated in the prospectus. 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 Equity Index Funds 15

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

As a fund shareholder, you may incur two types of costs: (1) transaction costs, such as redemption fees; and (2) ongoing costs, including 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, 2013 and held through October 31, 2013.

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 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 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 a 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. Therefore, the hypothetical return lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, 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 5/1/13		at 10/31/13		5/1/13–10/31/13

Schwab^® S&P 500 Index Fund
Actual Return		0.09%	$	1,000.00	$	1,110.80	$	0.48
Hypothetical 5% Return		0.09%	$	1,000.00	$	1,024.75	$	0.46


Schwab 1000 Index^® Fund
Actual Return		0.29%	$	1,000.00	$	1,113.90	$	1.55
Hypothetical 5% Return		0.29%	$	1,000.00	$	1,023.74	$	1.48


Schwab Small-Cap Index Fund^®
Actual Return		0.17%	$	1,000.00	$	1,168.90	$	0.93
Hypothetical 5% Return		0.17%	$	1,000.00	$	1,024.35	$	0.87


Schwab Total Stock Market Index Fund^®
Actual Return		0.09%	$	1,000.00	$	1,119.00	$	0.48
Hypothetical 5% Return		0.09%	$	1,000.00	$	1,024.75	$	0.46


Schwab International Index Fund^®
Actual Return		0.19%	$	1,000.00	$	1,083.20	$	1.00
Hypothetical 5% Return		0.19%	$	1,000.00	$	1,024.25	$	0.97


¹		Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights which covers a 12-month period.
²		Expenses for each fund 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.

16 Schwab Equity Index Funds

Schwab^® S&P 500 Index Fund

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09¹


Per-Share Data ($)

Net asset value at beginning of period		22.35			19.82			18.70			16.28			15.28

Income (loss) from investment operations:
Net investment income (loss)		0.52			0.44			0.39			0.35			0.20
Net realized and unrealized gains (losses)		5.40			2.49			1.09			2.31			1.22

Total from investment operations		5.92			2.93			1.48			2.66			1.42
Less distributions:
Distributions from net investment income		(0.49	)		(0.40	)		(0.36	)		(0.24	)		(0.42	)

Net asset value at end of period		27.78			22.35			19.82			18.70			16.28

Total return (%)		27.06			15.09			7.97			16.50			9.81

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.09			0.09			0.09			0.09			0.13	²
Gross operating expenses		0.09			0.10			0.10			0.10			0.16
Net investment income (loss)		2.10			2.09			1.96			1.97			2.09
Portfolio turnover rate		1			2			3			2			3	³
Net assets, end of period ($ x 1,000,000)		17,121			12,687			10,909			10,007			8,718

¹ Effective September 9, 2009, the Investor Share class, the e.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 Select Shares.

² Effective May 5, 2009, the net operating expense limitation was lowered. The ratio presented for period ended 10/31/09 is a blended ratio.

³ Portfolio turnover excludes the impact of investment activity resulting from a merger with another fund.

See financial notes 17

Schwab S&P 500 Index Fund

Portfolio Holdings as of October 31, 2013

This section shows the fund’s 50 largest portfolio holdings in unaffiliated issuers, and any holdings exceeding 1% of the fund’s net assets as of the report date, and any affiliated issuers. The remaining securities held by the fund are grouped as “Other Securities” in each category. You can request a complete schedule of portfolio holdings as of the report date, free of charge, by calling Schwab Funds^® at 1-800-435-4000. This complete schedule, filed on the fund’s Form N-CSR, is also available on the SEC’s website at http://www.sec.gov.

In addition, 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 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. A copy of the fund’s most recently filed quarterly schedule of portfolio holdings, included on the fund’s Form N-CSR (with respect to the fund’s second and fourth fiscal quarters) or Form N-Q (with respect to the fund’s first and third fiscal quarters), is available by visiting the fund’s website at www.schwabfunds.com/prospectus.


				Cost		Value
Holdings by Category				($)		($)

	97	.2%	Common Stock		10,242,641,102		16,648,423,804
	2	.6%	Short-Term Investments		437,649,083		437,649,083


	99	.8%	Total Investments		10,680,290,185		17,086,072,887
	0	.1%	Collateral Invested for Securities on Loan		20,143,201		20,143,201
	0	.1%	Other Assets and Liabilities, Net				14,822,536


	100	.0%	Net Assets				17,121,038,624


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 97.2% of net assets

Automobiles & Components 1.1%
Other Securities				1.1		193,128,646

Banks 2.8%
Wells Fargo & Co.		5,149,209		1.3		219,819,732
Other Securities				1.5		250,524,800

				2.8		470,344,532

Capital Goods 7.9%
3M Co.		691,919		0.5		87,078,006
General Electric Co.		10,901,752		1.7		284,971,797
The Boeing Co.		739,654		0.6		96,524,847
United Technologies Corp.		899,535		0.5		95,575,594
Other Securities				4.6		796,238,324

				7.9		1,360,388,568

Commercial & Professional Supplies 0.7%
Other Securities				0.7		111,184,191

Consumer Durables & Apparel 1.2%
Other Securities				1.2		202,719,721

Consumer Services 1.8%
McDonald’s Corp.		1,073,638		0.6		103,627,540
Other Securities				1.2		200,627,293

				1.8		304,254,833

Diversified Financials 8.0%
American Express Co.		999,741		0.5		81,778,814
Bank of America Corp.		11,448,611		0.9		159,822,610
Berkshire Hathaway, Inc., Class B *		1,923,330		1.3		221,336,816
Citigroup, Inc.		3,240,747		0.9		158,083,639
JPMorgan Chase & Co.		4,011,331		1.2		206,744,000
The Charles Schwab Corp. (a)		1,232,381		0.2		27,913,430
Other Securities				3.0		512,161,313

				8.0		1,367,840,622

Energy 10.2%
Chevron Corp.		2,058,934		1.4		246,989,723
ConocoPhillips		1,299,390		0.6		95,245,287
Exxon Mobil Corp.		4,687,841		2.4		420,124,310
Occidental Petroleum Corp.		858,650		0.5		82,499,092
Schlumberger Ltd.		1,420,015		0.8		133,083,806
Other Securities				4.5		775,902,953

				10.2		1,753,845,171

Food & Staples Retailing 2.4%
CVS Caremark Corp.		1,309,051		0.5		81,501,515
Wal-Mart Stores, Inc.		1,727,302		0.8		132,570,429
Other Securities				1.1		188,082,892

				2.4		402,154,836

Food, Beverage & Tobacco 5.3%
Altria Group, Inc.		2,117,791		0.5		78,845,359
PepsiCo, Inc.		1,643,463		0.8		138,198,804
Philip Morris International, Inc.		1,724,346		0.9		153,673,715
The Coca-Cola Co.		4,062,856		0.9		160,767,212
Other Securities				2.2		383,590,073

				5.3		915,075,163

Health Care Equipment & Services 4.1%
Other Securities				4.1		695,978,837

Household & Personal Products 2.2%
The Procter & Gamble Co.		2,918,590		1.4		235,676,142
Other Securities				0.8		144,972,573

				2.2		380,648,715

Insurance 2.9%
American International Group, Inc.		1,566,554		0.5		80,912,514
Other Securities				2.4		421,681,110

				2.9		502,593,624

Materials 3.4%
Other Securities				3.4		584,157,134

18 See financial notes

Schwab S&P 500 Index Fund

Portfolio Holdings continued


	Number		% of Net		Value
Security	of Shares		Assets		($)

Media 3.6%
Comcast Corp., Class A		2,776,464		0.8		132,104,157
The Walt Disney Co.		1,770,483		0.7		121,437,429
Other Securities				2.1		365,951,119

				3.6		619,492,705

Pharmaceuticals, Biotechnology & Life Sciences 8.6%
AbbVie, Inc.		1,689,586		0.5		81,860,442
Amgen, Inc.		797,759		0.5		92,540,044
Bristol-Myers Squibb Co.		1,754,464		0.5		92,144,449
Gilead Sciences, Inc. *		1,631,150		0.7		115,795,339
Johnson & Johnson		3,003,125		1.6		278,119,406
Merck & Co., Inc.		3,118,514		0.8		140,613,796
Pfizer, Inc.		7,035,733		1.3		215,856,289
Other Securities				2.7		452,801,415

				8.6		1,469,731,180

Real Estate 1.9%
Other Securities				1.9		330,352,892

Retailing 4.5%
Amazon.com, Inc. *		394,380		0.9		143,566,151
The Home Depot, Inc.		1,540,150		0.7		119,962,283
Other Securities				2.9		499,052,197

				4.5		762,580,631

Semiconductors & Semiconductor Equipment 2.0%
Intel Corp.		5,309,105		0.8		129,701,435
Other Securities				1.2		210,639,262

				2.0		340,340,697

Software & Services 9.1%
Google, Inc., Class A *		298,107		1.8		307,223,112
International Business Machines Corp.		1,098,890		1.2		196,932,077
MasterCard, Inc., Class A		110,549		0.5		79,274,688
Microsoft Corp.		8,078,031		1.7		285,558,396
Oracle Corp.		3,799,886		0.7		127,296,181
Visa, Inc., Class A		550,100		0.6		108,188,167
Other Securities				2.6		453,213,855

				9.1		1,557,686,476

Technology Hardware & Equipment 6.2%
Apple, Inc.		968,154		3.0		505,715,242
Cisco Systems, Inc.		5,713,628		0.7		128,556,630
QUALCOMM, Inc.		1,821,665		0.7		126,551,067
Other Securities				1.8		300,320,067

				6.2		1,061,143,006

Telecommunication Services 2.4%
AT&T, Inc.		5,672,236		1.2		205,334,943
Verizon Communications, Inc.		3,049,578		0.9		154,034,185
Other Securities				0.3		58,466,716

				2.4		417,835,844

Transportation 1.9%
United Parcel Service, Inc., Class B		769,918		0.4		75,636,744
Other Securities				1.5		248,009,989

				1.9		323,646,733

Utilities 3.0%
Other Securities				3.0		521,299,047

Total Common Stock
(Cost $10,242,641,102)						16,648,423,804



	Face
Security	Amount		% of Net		Value
Rate, Maturity Date	($)		Assets		($)

Short-Term Investments 2.6% of net assets

Time Deposits 2.4%
Skandinaviska Enskilda Banken
0.03%, 11/01/13		190,701,794		1.1		190,701,794
Societe Generale
0.03%, 11/01/13		214,723,131		1.2		214,723,131
Other Securities				0.1		10,224,304

				2.4		415,649,229

U.S. Treasury Obligations 0.2%
Other Securities				0.2		21,999,854

Total Short-Term Investments
(Cost $437,649,083)						437,649,083



End of Investments.


	Number		% of Net		Value
Security	of Shares		Assets		($)

Collateral Invested for Securities on Loan 0.1% of net assets


Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.01% (e)		20,143,201		0.1		20,143,201

Total Collateral Invested for Securities on Loan
(Cost $20,143,201)						20,143,201



End of Collateral Invested for Securities on Loan.

At 10/31/13, tax basis cost of the fund’s investments was $10,717,310,195 and the unrealized appreciation and depreciation were $7,023,566,575 and ($654,803,883), respectively, with a net unrealized appreciation of $6,368,762,692.

See financial notes 19

Schwab S&P 500 Index Fund

Portfolio Holdings continued

For the following notes, please refer to complete schedule of holdings.


*		Non-income producing security.
(a)		Issuer is affiliated with the fund’s adviser.
(b)		All or a portion of this security is on loan. Securities on loan were valued at $19,513,953.
(c)		All or a portion of this security is held as collateral for open futures contracts.
(d)		The rate shown is the purchase yield.
(e)		The rate shown is the 7-day yield.


REIT —		Real Estate Investment Trust

In addition to the above, the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

S&P 500 Index, e-mini, Long, expires 12/20/13

4,920

430,746,000

10,951,103

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$16,648,423,804		$—		$—		$16,648,423,804
Short-Term Investments¹		—		437,649,083		—		437,649,083

Total		$16,648,423,804		$437,649,083		$—		$17,086,072,887

Other Financial Instruments
Collateral Invested for Securities on Loan		$20,143,201		$—		$—		$20,143,201
Futures Contract²		10,951,103		—		—		10,951,103


¹		As categorized in complete schedule of holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended October 31, 2013.

20 See financial notes

Schwab S&P 500 Index Fund

Statement of

Assets and Liabilities

As of October 31, 2013



Assets

Investments in affiliated issuers, at value (cost $15,517,881)		$27,913,430
Investments in unaffiliated issuers, at value (cost $10,664,772,304) including securities on loan of $19,513,953	+	17,058,159,457

Total investments, at value (cost $10,680,290,185)		17,086,072,887
Collateral invested for securities on loan		20,143,201
Receivables:
Fund shares sold		39,205,684
Dividends		16,913,159
Foreign tax reclaims		25,838
Income from securities on loan		18,833
Interest		346
Prepaid expenses	+	276,148

Total assets		17,162,656,096

Liabilities

Collateral held for securities on loan		20,143,201
Payables:
Investment adviser and administrator fees		82,245
Shareholder service fees		31,645
Independent trustees’ fees		14
Fund shares redeemed		18,493,793
Variation margin on futures contracts		2,361,600
Accrued expenses	+	504,974

Total liabilities		41,617,472

Net Assets

Total assets		17,162,656,096
Total liabilities	−	41,617,472

Net assets		$17,121,038,624

Net Assets by Source
Capital received from investors		10,818,088,774
Net investment income not yet distributed		231,017,629
Net realized capital losses		(344,801,584	)
Net unrealized capital appreciation		6,416,733,805

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$17,121,038,624

616,413,990

$27.78

See financial notes 21

Schwab S&P 500 Index Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends received from affiliated issuer		$265,675
Dividends received from unaffiliated issuers (net of foreign withholding taxes of $218,887)		323,309,294
Interest		121,887
Securities on loan	+	651,824

Total investment income		324,348,680

Expenses

Investment adviser and administrator fees		8,879,397
Shareholder service fees		2,863,824
Transfer agent fees		414,927
Portfolio accounting fees		341,057
Registration fees		336,918
Shareholder reports		299,994
Custodian fees		267,326
Independent trustees’ fees		107,140
Professional fees		95,892
Index fee		74,795
Other expenses	+	321,650

Total expenses		14,002,920
Expense reduction by CSIM and its affiliates	−	683,825

Net expenses	−	13,319,095

Net investment income		311,029,585

Realized and Unrealized Gains (Losses)

Net realized losses on unaffiliated investments		(14,416,210	)
Net realized gains on futures contracts	+	67,946,299

Net realized gains		53,530,089
Net change in unrealized appreciation on affiliated issuer		10,203,701
Net change in unrealized appreciation on unaffiliated investments		3,140,413,722
Net change in unrealized appreciation on futures contracts	+	16,087,228

Net change in unrealized appreciation	+	3,166,704,651

Net realized and unrealized gains		3,220,234,740

Increase in net assets resulting from operations		$3,531,264,325

22 See financial notes

Schwab S&P 500 Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$311,029,585			$249,809,268
Net realized gains		53,530,089			34,935,609
Net change in unrealized appreciation	+	3,166,704,651			1,365,738,638

Increase in net assets from operations		3,531,264,325			1,650,483,515

Distributions to Shareholders

Distributions from net investment income		($278,278,089	)		($218,494,240	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			155,380,507		$3,830,088,605			94,452,205		$2,011,893,595
Shares reinvested			11,251,940		248,330,312			10,225,170		196,221,005
Shares redeemed	+		(117,760,806	)	(2,897,316,141	)		(87,533,037	)	(1,861,743,855	)

Net transactions in fund shares			48,871,641		$1,181,102,776			17,144,338		$346,370,745

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			567,542,349		$12,686,949,612			550,398,011		$10,908,589,592
Total increase	+		48,871,641		4,434,089,012			17,144,338		1,778,360,020

End of period			616,413,990		$17,121,038,624			567,542,349		$12,686,949,612


Net investment income not yet distributed					$231,017,629					$200,192,592

See financial notes 23

Schwab 1000 Index^® Fund

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09¹


Per-Share Data ($)

Net asset value at beginning of period		40.23			37.44			35.79			31.00			28.69

Income (loss) from investment operations:
Net investment income (loss)		0.81	²		0.71	²		0.62	²		0.57	²		0.54	²
Net realized and unrealized gains (losses)		9.74			4.32			2.07			4.80			2.41

Total from investment operations		10.55			5.03			2.69			5.37			2.95
Less distributions:
Distributions from net investment income		(0.81	)		(0.72	)		(0.57	)		(0.58	)		(0.64	)
Distributions from net realized gains		(1.66	)		(1.52	)		(0.47	)		—			—

Total distributions		(2.47	)		(2.24	)		(1.04	)		(0.58	)		(0.64	)

Net asset value at end of period		48.31			40.23			37.44			35.79			31.00

Total return (%)		27.85			14.38			7.60			17.51			10.72

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.29			0.29			0.29			0.29			0.38	³
Gross operating expenses		0.34			0.34			0.34			0.35			0.44
Net investment income (loss)		1.87			1.85			1.64			1.71			1.96
Portfolio turnover rate		4			4			5			5			4
Net assets, end of period ($ x 1,000,000)		5,887			4,848			4,552			4,575			4,279

¹ Effective September 18, 2009, the Select Share class and the Investor 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 the average shares outstanding during the period.

³ Effective May 5, 2009, the net operating expense limitation was lowered. The ratio presented for period ended 10/31/09 is a blended ratio.

24 See financial notes

Schwab 1000 Index Fund

Portfolio Holdings as of October 31, 2013


				Cost		Value
Holdings by Category				($)		($)

	98	.7%	Common Stock		1,947,182,663		5,812,765,310
	1	.1%	Other Investment Company		65,007,364		65,007,364
	0	.1%	Short-Term Investment		2,899,981		2,899,981


	99	.9%	Total Investments		2,015,090,008		5,880,672,655
	0	.5%	Collateral Invested for Securities on Loan		27,618,344		27,618,344
	(0	.4%)	Other Assets and Liabilities, Net				(21,059,399	)


	100	.0%	Net Assets				5,887,231,600


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 98.7% of net assets

Automobiles & Components 1.3%
Other Securities				1.3		74,683,791

Banks 2.9%
Wells Fargo & Co.		1,572,396		1.1		67,125,585
Other Securities				1.8		101,651,787

				2.9		168,777,372

Capital Goods 8.3%
3M Co.		210,354		0.4		26,473,051
General Electric Co.		3,299,302		1.5		86,243,754
The Boeing Co.		224,889		0.5		29,348,014
United Technologies Corp.		270,303		0.5		28,719,694
Other Securities				5.4		318,700,402

				8.3		489,484,915

Commercial & Professional Supplies 0.8%
Other Securities				0.8		49,908,492

Consumer Durables & Apparel 1.4%
Other Securities				1.4		84,808,534

Consumer Services 2.0%
McDonald’s Corp.		323,736		0.5		31,246,999
Other Securities				1.5		87,420,489

				2.0		118,667,488

Diversified Financials 7.5%
American Express Co.		299,877		0.4		24,529,939
Bank of America Corp.		3,490,541		0.8		48,727,952
Berkshire Hathaway, Inc., Class B *		583,112		1.1		67,104,529
Citigroup, Inc.		987,956		0.8		48,192,494
JPMorgan Chase & Co.		1,216,778		1.1		62,712,738
The Charles Schwab Corp. (a)		367,065		0.1		8,314,022
Other Securities				3.2		179,132,295

				7.5		438,713,969

Energy 10.0%
Chevron Corp.		625,237		1.3		75,003,430
ConocoPhillips		397,266		0.5		29,119,598
Exxon Mobil Corp.		1,426,063		2.2		127,803,766
Occidental Petroleum Corp.		259,716		0.4		24,953,513
Schlumberger Ltd.		427,447		0.7		40,060,333
Other Securities				4.9		290,970,395

				10.0		587,911,035

Food & Staples Retailing 2.1%
CVS Caremark Corp.		398,011		0.4		24,780,165
Wal-Mart Stores, Inc.		532,527		0.7		40,871,447
Other Securities				1.0		59,425,195

				2.1		125,076,807

Food, Beverage & Tobacco 5.0%
Altria Group, Inc.		649,205		0.4		24,169,902
PepsiCo, Inc.		500,385		0.7		42,077,375
Philip Morris International, Inc.		524,365		0.8		46,731,409
The Coca-Cola Co.		1,226,248		0.8		48,522,633
Other Securities				2.3		131,271,103

				5.0		292,772,422

Health Care Equipment & Services 4.2%
Other Securities				4.2		244,969,779

Household & Personal Products 2.1%
The Procter & Gamble Co.		888,719		1.2		71,764,059
Other Securities				0.9		53,362,979

				2.1		125,127,038

Insurance 3.3%
American International Group, Inc.		481,976		0.4		24,894,060
Other Securities				2.9		167,606,988

				3.3		192,501,048

Materials 3.7%
Other Securities				3.7		219,826,158

See financial notes 25

Schwab 1000 Index Fund

Portfolio Holdings continued


	Number		% of Net		Value
Security	of Shares		Assets		($)

Media 3.7%
Comcast Corp., Class A		850,823		0.7		40,482,158
The Walt Disney Co.		538,260		0.6		36,919,254
Other Securities				2.4		142,076,096

				3.7		219,477,508

Pharmaceuticals, Biotechnology & Life Sciences 8.0%
AbbVie, Inc.		516,646		0.4		25,031,499
Amgen, Inc.		244,902		0.5		28,408,632
Bristol-Myers Squibb Co.		529,739		0.5		27,821,892
Gilead Sciences, Inc. *		491,644		0.6		34,901,807
Johnson & Johnson		914,287		1.4		84,672,119
Merck & Co., Inc.		948,118		0.7		42,750,641
Pfizer, Inc.		2,144,851		1.1		65,804,029
Other Securities				2.8		164,119,241

				8.0		473,509,860

Real Estate 2.8%
Other Securities				2.8		167,276,719

Retailing 4.6%
Amazon.com, Inc. *		119,941		0.7		43,662,122
The Home Depot, Inc.		464,035		0.6		36,143,686
Other Securities				3.3		188,124,755

				4.6		267,930,563

Semiconductors & Semiconductor Equipment 2.0%
Intel Corp.		1,617,180		0.7		39,507,708
Other Securities				1.3		77,839,023

				2.0		117,346,731

Software & Services 9.7%
Facebook, Inc., Class A *		528,600		0.5		26,567,436
Google, Inc., Class A *		90,628		1.6		93,399,404
International Business Machines Corp.		333,640		1.0		59,791,624
MasterCard, Inc., Class A		33,984		0.4		24,369,926
Microsoft Corp.		2,455,838		1.5		86,813,873
Oracle Corp.		1,155,210		0.7		38,699,535
Visa, Inc., Class A		167,200		0.6		32,883,224
Other Securities				3.4		209,157,575

				9.7		571,682,597

Technology Hardware & Equipment 5.8%
Apple, Inc.		294,330		2.6		153,743,275
Cisco Systems, Inc.		1,737,715		0.7		39,098,587
QUALCOMM, Inc.		555,178		0.7		38,568,216
Other Securities				1.8		109,380,053

				5.8		340,790,131

Telecommunication Services 2.3%
AT&T, Inc.		1,720,677		1.1		62,288,507
Verizon Communications, Inc.		934,057		0.8		47,179,219
Other Securities				0.4		28,008,150

				2.3		137,475,876

Transportation 2.0%
United Parcel Service, Inc., Class B		234,035		0.4		22,991,598
Other Securities				1.6		93,651,182

				2.0		116,642,780

Utilities 3.2%
Other Securities				3.2		187,403,697

Total Common Stock
(Cost $1,947,182,663)						5,812,765,310




Other Investment Company 1.1% of net assets

Money Market Fund 1.1%
State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (e)		65,007,364		1.1		65,007,364

Total Other Investment Company
(Cost $65,007,364)						65,007,364



	Face
Security	Amount		% of Net		Value
Rate, Maturity Date	($)		Assets		($)

Short-Term Investment 0.1% of net assets

U.S. Treasury Obligation 0.1%
Other Securities				0.1		2,899,981

Total Short-Term Investment
(Cost $2,899,981)						2,899,981



End of Investments.


	Number		% of Net		Value
Security	of Shares		Assets		($)

Collateral Invested for Securities on Loan 0.5% of net assets


State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (e)		27,618,344		0.5		27,618,344

Total Collateral Invested for Securities on Loan
(Cost $27,618,344)						27,618,344



End of Collateral Invested for Securities on Loan.

At 10/31/13, tax basis cost of the fund’s investments was $1,991,840,097 and the unrealized appreciation and depreciation were $3,917,847,320 and ($29,014,762), respectively, with a net unrealized appreciation of $3,888,832,558.

26 See financial notes

Schwab 1000 Index Fund

Portfolio Holdings continued

For the following notes, please refer to complete schedule of holdings.


*		Non-income producing security.
(a)		Issuer is affiliated with the fund’s adviser.
(b)		All or a portion of this security is on loan. Securities on loan were valued at $29,080,601.
(c)		All or a portion of this security is held as collateral for open futures contracts.
(d)		The rate shown is the purchase yield.
(e)		The rate shown is the 7-day yield.


REIT —		Real Estate Investment Trust

In addition to the above, the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

S&P 500 Index, e-mini, Long, expires 12/20/13

700

61,285,000

2,309,463

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$5,812,765,310		$—		$—		$5,812,765,310
Other Investment Company¹		65,007,364		—		—		65,007,364
Short-Term Investment¹		—		2,899,981		—		2,899,981

Total		$5,877,772,674		$2,899,981		$—		$5,880,672,655

Other Financial Instruments
Collateral Invested for Securities on Loan		$27,618,344		$—		$—		$27,618,344
Futures Contract²		2,309,463		—		—		2,309,463


¹		As categorized in complete schedule of holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

Balance

Change in

Balance

as of

Realized

Unrealized

Gross

as of

October 31,

Gains

Appreciation

Gross

Transfers

October 31,

Investments in Securities

2012

(Losses)

(Depreciation)

Purchases

Sales

out

2013

Common Stock

$64,997

$3,754

($4,047

)

$—

($64,704

)

$—

Total

$64,997

$3,754

($4,047

)

$—

($64,704

)

$—

See financial notes 27

Schwab 1000 Index Fund

Statement of

Assets and Liabilities

As of October 31, 2013



Assets

Investments in affiliated issuers, at value (cost $1,803,228)		$8,314,022
Investments in unaffiliated issuers, at value (cost $2,013,286,780) including securities on loan of $29,080,601	+	5,872,358,633

Total investments, at value (cost $2,015,090,008)		5,880,672,655
Collateral invested for securities on loan		27,618,344
Receivables:
Dividends		5,376,939
Fund shares sold		3,137,573
Income from securities on loan		42,694
Foreign tax reclaims		7,684
Interest		26
Prepaid expenses	+	125,899

Total assets		5,916,981,814

Liabilities

Collateral held for securities on loan		27,618,344
Payables:
Investment adviser and administrator fees		88,591
Shareholder service fees		52,358
Fund shares redeemed		1,526,929
Variation margin on futures contracts		336,000
Accrued expenses	+	127,992

Total liabilities		29,750,214

Net Assets

Total assets		5,916,981,814
Total liabilities	−	29,750,214

Net assets		$5,887,231,600

Net Assets by Source
Capital received from investors		1,744,956,792
Net investment income not yet distributed		71,285,685
Net realized capital gains		203,097,013
Net unrealized capital appreciation		3,867,892,110

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$5,887,231,600

121,861,112

$48.31

28 See financial notes

Schwab 1000 Index Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends received from affiliated issuer		$88,096
Dividends received from unaffiliated issuers (net of foreign withholding taxes of $78,874)		114,115,709
Interest		3,026
Securities on loan	+	706,606

Total investment income		114,913,437

Expenses

Investment adviser and administrator fees		12,027,118
Shareholder service fees		5,170,537
Portfolio accounting fees		154,799
Shareholder reports		150,494
Custodian fees		110,971
Transfer agent fees		101,668
Independent trustees’ fees		62,362
Professional fees		61,974
Registration fees		53,376
Interest expense		912
Other expenses	+	111,351

Total expenses		18,005,562
Expense reduction by CSIM and its affiliates	−	2,585,003
Custody credits	−	27

Net expenses	−	15,420,532

Net investment income		99,492,905

Realized and Unrealized Gains (Losses)

Net realized gains on unaffiliated investments		173,475,052
Net realized gains on futures contracts	+	5,336,419

Net realized gains		178,811,471
Net change in unrealized appreciation on affiliated issuer		3,329,279
Net change in unrealized appreciation on unaffiliated investments		1,020,334,566
Net change in unrealized appreciation on futures contracts	+	2,974,753

Net change in unrealized appreciation	+	1,026,638,598

Net realized and unrealized gains		1,205,450,069

Increase in net assets resulting from operations		$1,304,942,974

See financial notes 29

Schwab 1000 Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$99,492,905			$87,953,893
Net realized gains		178,811,471			196,881,889
Net change in unrealized appreciation	+	1,026,638,598			349,793,722

Increase in net assets from operations		1,304,942,974			634,629,504

Distributions to Shareholders

Distributions from net investment income		(96,597,152	)		(86,671,033	)
Distributions from net realized gains	+	(197,828,775	)		(183,283,175	)

Total distributions		($294,425,927	)		($269,954,208	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			9,372,908		$400,294,068			6,643,918		$254,453,021
Shares reinvested			6,695,843		255,781,218			6,777,525		235,112,352
Shares redeemed	+		(14,700,117	)	(627,358,330	)		(14,504,214	)	(557,797,536	)

Net transactions in fund shares			1,368,634		$28,716,956			(1,082,771	)	($68,232,163	)

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			120,492,478		$4,847,997,597			121,575,249		$4,551,554,464
Total increase or decrease	+		1,368,634		1,039,234,003			(1,082,771	)	296,443,133

End of period			121,861,112		$5,887,231,600			120,492,478		$4,847,997,597


Net investment income not yet distributed					$71,285,685					$69,309,270

30 See financial notes

Schwab Small-Cap Index Fund^®

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09¹


Per-Share Data ($)

Net asset value at beginning of period		21.26			20.55			19.18			15.14			13.85

Income (loss) from investment operations:
Net investment income (loss)		0.42	²		0.33	²		0.25	²		0.22	²		0.18	²
Net realized and unrealized gains (losses)		6.94			1.89			1.37			3.97			1.40

Total from investment operations		7.36			2.22			1.62			4.19			1.58
Less distributions:
Distributions from net investment income		(0.50	)		(0.35	)		(0.20	)		(0.15	)		(0.29	)
Distributions from net realized gains		(0.50	)		(1.16	)		(0.05	)		—			—

Total distributions		(1.00	)		(1.51	)		(0.25	)		(0.15	)		(0.29	)

Net asset value at end of period		27.62			21.26			20.55			19.18			15.14

Total return (%)		36.23			11.87			8.45			27.85			11.98

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.17			0.17			0.19			0.19			0.28	³
Gross operating expenses		0.20			0.21			0.19			0.20			0.33
Net investment income (loss)		1.76			1.63			1.18			1.23			1.41
Portfolio turnover rate		11			41	⁴		26			33			26
Net assets, end of period ($ x 1,000,000)		2,351			1,675			1,502			1,406			1,142

¹ Effective August 21, 2009, 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 Select Shares.

² Calculated based on the average shares outstanding during the period.

³ Effective May 5, 2009, the net operating expense limitation was lowered. The ratio presented for period ended 10/31/09 is a blended ratio.

⁴ Portfolio turnover rate increase was mainly the result of trading activities in connection with the change in primary benchmark index effective December 14, 2011.

See financial notes 31

Schwab Small-Cap Index Fund

Portfolio Holdings as of October 31, 2013


				Cost		Value
Holdings by Category				($)		($)

	96	.8%	Common Stock		1,537,930,364		2,275,773,764
	0	.0%	Rights		—		—
	0	.0%	Warrants		—		—
	3	.9%	Short-Term Investments		92,364,342		92,364,342


	100	.7%	Total Investments		1,630,294,706		2,368,138,106
	3	.9%	Collateral Invested for Securities on Loan		90,885,937		90,885,937
	(4	.6%)	Other Assets and Liabilities, Net				(107,670,879	)


	100	.0%	Net Assets				2,351,353,164


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 96.8% of net assets

Automobiles & Components 1.0%
Tenneco, Inc. *		87,900		0.2		4,664,853
Other Securities				0.8		19,500,890

				1.0		24,165,743

Banks 8.5%
Firstmerit Corp.		240,515		0.2		5,401,967
Prosperity Bancshares, Inc.		87,900		0.2		5,489,355
Other Securities				8.1		188,181,433

				8.5		199,072,755

Capital Goods 8.9%
Acuity Brands, Inc.		61,700		0.3		6,201,467
Chart Industries, Inc. *		43,700		0.2		4,696,439
EnerSys, Inc.		69,178		0.2		4,589,960
HEICO Corp.		95,806		0.2		5,133,299
Teledyne Technologies, Inc. *		55,300		0.2		4,911,746
The Middleby Corp. *		27,052		0.3		6,158,388
Other Securities				7.5		177,382,448

				8.9		209,073,747

Commercial & Professional Supplies 3.4%
Other Securities				3.4		80,467,570

Consumer Durables & Apparel 2.9%
Brunswick Corp.		129,800		0.2		5,857,874
Fifth & Pacific Cos., Inc. *		171,400		0.2		4,540,386
Wolverine World Wide, Inc.		73,036		0.2		4,217,099
Other Securities				2.3		52,940,968

				2.9		67,556,327

Consumer Services 4.1%
Sotheby’s		98,300		0.2		5,101,770
Other Securities				3.9		90,620,126

				4.1		95,721,896

Diversified Financials 3.7%
Portfolio Recovery Associates, Inc. *		73,329		0.2		4,359,409
Prospect Capital Corp.		401,000		0.2		4,547,340
Other Securities				3.3		78,385,646

				3.7		87,292,395

Energy 5.8%
Kodiak Oil & Gas Corp. *		384,400		0.2		4,985,668
Rosetta Resources, Inc. *		88,300		0.2		5,292,702
Other Securities				5.4		125,252,532

				5.8		135,530,902

Food & Staples Retailing 1.4%
Rite Aid Corp. *		1,063,800		0.2		5,670,054
United Natural Foods, Inc. *		70,882		0.2		5,064,519
Other Securities				1.0		21,519,254

				1.4		32,253,827

Food, Beverage & Tobacco 1.9%
The Hain Celestial Group, Inc. *		55,931		0.2		4,655,137
Other Securities				1.7		40,047,384

				1.9		44,702,521

Health Care Equipment & Services 6.8%
Align Technology, Inc. *		104,700		0.3		5,974,182
athenahealth, Inc. *		52,700		0.3		7,035,977
Centene Corp. *		79,592		0.2		4,469,887
HealthSouth Corp.		124,300		0.2		4,364,173
Medidata Solutions, Inc. *		37,900		0.2		4,180,749
Team Health Holdings, Inc. *		97,900		0.2		4,252,776
WellCare Health Plans, Inc. *		62,600		0.2		4,174,168
West Pharmaceutical Services, Inc.		98,930		0.2		4,783,265
Other Securities				5.0		119,812,035

				6.8		159,047,212

Household & Personal Products 0.5%
Other Securities				0.5		12,934,656

32 See financial notes

Schwab Small-Cap Index Fund

Portfolio Holdings continued


	Number		% of Net		Value
Security	of Shares		Assets		($)

Insurance 2.3%
CNO Financial Group, Inc.		316,700		0.2		4,934,186
Other Securities				2.1		49,210,374

				2.3		54,144,560

Materials 4.7%
PolyOne Corp.		142,354		0.2		4,313,326
Other Securities				4.5		105,895,036

				4.7		110,208,362

Media 1.4%
Other Securities				1.4		32,204,564

Pharmaceuticals, Biotechnology & Life Sciences 5.4%
Alnylam Pharmaceuticals, Inc. *		84,800		0.2		4,885,328
Isis Pharmaceuticals, Inc. *		163,600		0.2		5,442,972
Questcor Pharmaceuticals, Inc.		74,000		0.2		4,541,380
Other Securities				4.8		112,694,045

				5.4		127,563,725

Real Estate 7.6%
Highwoods Properties, Inc.		131,100		0.2		5,060,460
LaSalle Hotel Properties		149,726		0.2		4,648,992
RLJ Lodging Trust		178,100		0.2		4,498,806
Other Securities				7.0		163,693,986

				7.6		177,902,244

Retailing 4.0%
Lumber Liquidators Holdings, Inc. *		39,600		0.2		4,521,924
Other Securities				3.8		89,203,479

				4.0		93,725,403

Semiconductors & Semiconductor Equipment 3.2%
Other Securities				3.2		75,848,894

Software & Services 9.1%
Aspen Technology, Inc. *		135,400		0.2		5,176,342
CommVault Systems, Inc. *		68,300		0.2		5,332,864
CoStar Group, Inc. *		41,075		0.3		7,269,864
MAXIMUS, Inc.		98,696		0.2		4,781,821
PTC, Inc. *		173,200		0.2		4,801,104
The Ultimate Software Group, Inc. *		39,800		0.3		6,148,304
Tyler Technologies, Inc. *		44,900		0.2		4,342,279
WEX, Inc. *		55,976		0.2		5,225,360
Other Securities				7.3		170,188,925

				9.1		213,266,863

Technology Hardware & Equipment 4.8%
Belden, Inc.		62,800		0.2		4,223,928
FEI Co.		59,700		0.2		5,318,076
Other Securities				4.4		104,293,019

				4.8		113,835,023

Telecommunication Services 0.7%
Other Securities				0.7		17,099,998

Transportation 1.7%
US Airways Group, Inc. *		276,500		0.3		6,074,705
Other Securities				1.4		35,393,655

				1.7		41,468,360

Utilities 3.0%
Other Securities				3.0		70,686,217

Total Common Stock
(Cost $1,537,930,364)						2,275,773,764




Rights 0.0% of net assets

Banks 0.0%
Other Securities				0.0		—

Consumer Services 0.0%
Other Securities				0.0		—

Total Rights
(Cost $—)						—




Warrants 0.0% of net assets

Energy 0.0%
Other Securities				0.0		—

Total Warrants
(Cost $—)						—



	Face
Security	Amount		% of Net		Value
Rate, Maturity Date	($)		Assets		($)

Short-Term Investments 3.9% of net assets

Time Deposits 3.8%
Bank of Tokyo Mitsubishi
0.03%, 11/01/13		17,919,737		0.8		17,919,737
DNB
0.03%, 11/01/13		70,794,629		3.0		70,794,629

				3.8		88,714,366

U.S. Treasury Obligations 0.1%
Other Securities				0.1		3,649,976

Total Short-Term Investments
(Cost $92,364,342)						92,364,342



End of Investments.

See financial notes 33

Schwab Small-Cap Index Fund

Portfolio Holdings continued

Number

% of Net

Value

Security

of Shares

Assets

($)

Collateral Invested for Securities on Loan 3.9% of net assets

Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.01% (f)

90,885,937

3.9

90,885,937

Total Collateral Invested for Securities on Loan

(Cost $90,885,937)

90,885,937

End of Collateral Invested for Securities on Loan.

At 10/31/13 tax basis cost of the fund’s investments was $1,639,221,728 and the unrealized appreciation and depreciation were $829,827,183 and ($100,910,805), respectively, with a net unrealized appreciation of $728,916,378.

For the following notes, please refer to complete schedule of holdings.


*		Non-income producing security.
(a)		Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(b)		Illiquid security. At the period end, the value of these amounted to $0 or 0.0% of net assets.
(c)		All or a portion of this security is on loan. Securities on loan were valued at $88,014,699.
(d)		All or a portion of this security is held as collateral for open futures contracts.
(e)		The rate shown is the purchase yield.
(f)		The rate shown is the 7-day yield.


REIT —		Real Estate Investment Trust

In addition to the above, the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

Russell 2000 Index, mini, Long, expires 12/20/13

650

71,357,000

3,155,461

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$2,275,773,764		$—		$—		$2,275,773,764
Rights¹		—		—		—		—
Warrants¹		—		—		—		—
Short-Term Investments¹		—		92,364,342		—		92,364,342

Total		$2,275,773,764		$92,364,342		$—		$2,368,138,106

Other Financial Instruments
Collateral Invested for Securities on Loan		$90,885,937		$—		$—		$90,885,937
Futures Contract²		3,155,461		—		—		3,155,461


¹		As categorized in complete schedule of holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

Balance

Change in

Balance

as of

Realized

Unrealized

Gross

as of

October 31,

Gains

Appreciation

Gross

Transfers

October 31,

Investments in Securities

2012

(Losses)

(Depreciation)

Purchases

Sales

out

2013

Common Stock

$319,479

$—

($202,848

)

$—

($116,631

)

$—

Total

$319,479

$—

($202,848

)

$—

($116,631

)

$—

The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were transfers out of Level 3 to Level 1 due to the result of fair valued securities for which no quoted value was available. There were no transfers between Level 1 and Level 2 for the period ended October 31, 2013.

34 See financial notes

Schwab Small-Cap Index Fund

Statement of

Assets and Liabilities

As of October 31, 2013



Assets

Investments, at value (cost $1,630,294,706) including securities on loan of $88,014,699		$2,368,138,106
Collateral invested for securities on loan		90,885,937
Receivables:
Investments sold		4,668,014
Fund shares sold		4,509,414
Dividends		825,453
Income from securities on loan		329,658
Interest		76
Prepaid expenses	+	41,422

Total assets		2,469,398,080

Liabilities

Collateral held for securities on loan		90,885,937
Payables:
Investments bought		25,458,179
Investment adviser and administrator fees		23,770
Shareholder service fees		4,486
Fund shares redeemed		914,594
Variation margin on futures contracts		575,898
Accrued expenses	+	182,052

Total liabilities		118,044,916

Net Assets

Total assets		2,469,398,080
Total liabilities	−	118,044,916

Net assets		$2,351,353,164

Net Assets by Source
Capital received from investors		1,493,142,111
Net investment income not yet distributed		17,941,421
Net realized capital gains		99,270,762
Net unrealized capital appreciation		740,998,870

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$2,351,353,164

85,145,641

$27.62

See financial notes 35

Schwab Small-Cap Index Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends (net of foreign withholding taxes of $27,399)		$33,851,540
Interest		23,952
Securities on loan	+	4,549,702

Total investment income		38,425,194

Expenses

Investment adviser and administrator fees		2,986,400
Shareholder service fees		389,698
Index fee		233,494
Portfolio accounting fees		98,326
Registration fees		68,084
Transfer agent fees		65,161
Shareholder reports		64,179
Custodian fees		56,235
Professional fees		37,854
Independent trustees’ fees		20,219
Other expenses	+	39,644

Total expenses		4,059,294
Expense reduction by CSIM and its affiliates	−	674,708

Net expenses	−	3,384,586

Net investment income		35,040,608

Realized and Unrealized Gains (Losses)

Net realized gains on investments		91,184,165
Net realized gains on futures contracts		12,341,806
Net realized losses on foreign currency transactions	+	(406	)

Net realized gains		103,525,565
Net change in unrealized appreciation on investments		470,396,765
Net change in unrealized appreciation on futures contracts		4,505,583
Net change in unrealized depreciation on foreign currency translations	+	(13	)

Net change in unrealized appreciation	+	474,902,335

Net realized and unrealized gains		578,427,900

Increase in net assets resulting from operations		$613,468,508

36 See financial notes

Schwab Small-Cap Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$35,040,608			$25,899,729
Net realized gains		103,525,565			42,756,059
Net change in unrealized appreciation	+	474,902,335			105,693,799

Increase in net assets from operations		613,468,508			174,349,587

Distributions to Shareholders

Distributions from net investment income		(39,112,389	)		(25,652,389	)
Distributions from net realized gains	+	(39,238,431	)		(84,544,390	)

Total distributions		($78,350,820	)		($110,196,779	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			17,519,506		$419,420,964			13,103,409		$271,438,282
Shares reinvested			3,540,194		72,432,373			5,456,861		101,552,188
Shares redeemed	+		(14,685,439	)	(350,359,363	)		(12,880,545	)	(264,077,786	)

Net transactions in fund shares			6,374,261		$141,493,974			5,679,725		$108,912,684

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			78,771,380		$1,674,741,502			73,091,655		$1,501,676,010
Total increase	+		6,374,261		676,611,662			5,679,725		173,065,492

End of period			85,145,641		$2,351,353,164			78,771,380		$1,674,741,502


Net investment income not yet distributed					$17,941,421					$21,861,474

See financial notes 37

Schwab Total Stock Market Index Fund^®

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09¹


Per-Share Data ($)

Net asset value at beginning of period		25.80			22.92			21.57			18.50			17.08

Income (loss) from investment operations:
Net investment income (loss)		0.57			0.47			0.41			0.37			0.24
Net realized and unrealized gains (losses)		6.70			2.83			1.33			3.02			1.55

Total from investment operations		7.27			3.30			1.74			3.39			1.79
Less distributions:
Distributions from net investment income		(0.54	)		(0.42	)		(0.39	)		(0.32	)		(0.37	)

Net asset value at end of period		32.53			25.80			22.92			21.57			18.50

Total return (%)		28.76			14.71			8.14			18.53			10.92

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.09			0.09			0.09			0.09			0.21	²
Gross operating expenses		0.10			0.10			0.11			0.11			0.28
Net investment income (loss)		2.02			2.02			1.79			1.85			2.02
Portfolio turnover rate		2			3			1			3			5
Net assets, end of period ($ x 1,000,000)		3,183			2,240			1,747			1,470			1,205

¹ Effective September 18, 2009, 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 Select Shares.

² Effective May 5, 2009, the net operating expense limitation was lowered. The ratio presented for period ended 10/31/09 is a blended ratio.

38 See financial notes

Schwab Total Stock Market Index Fund

Portfolio Holdings as of October 31, 2013


				Cost		Value
Holdings by Category				($)		($)

	96	.9%	Common Stock		1,956,313,008		3,083,859,605
	0	.0%	Warrants		2		5
	2	.9%	Short-Term Investments		92,110,148		92,110,148


	99	.8%	Total Investments		2,048,423,158		3,175,969,758
	0	.6%	Collateral Invested for Securities on Loan		19,098,378		19,098,378
	(0	.4%)	Other Assets and Liabilities, Net				(11,681,245	)


	100	.0%	Net Assets				3,183,386,891


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 96.9% of net assets

Automobiles & Components 1.2%
Other Securities				1.2		39,441,928

Banks 3.3%
Wells Fargo & Co.		761,906		1.0		32,525,767
Other Securities				2.3		73,424,105

				3.3		105,949,872

Capital Goods 8.1%
3M Co.		102,400		0.4		12,887,040
General Electric Co.		1,614,166		1.3		42,194,299
The Boeing Co.		109,400		0.4		14,276,700
United Technologies Corp.		133,068		0.4		14,138,475
Other Securities				5.6		175,237,212

				8.1		258,733,726

Commercial & Professional Supplies 1.1%
Other Securities				1.1		33,645,546

Consumer Durables & Apparel 1.6%
Other Securities				1.6		50,381,381

Consumer Services 2.2%
McDonald’s Corp.		157,909		0.5		15,241,377
Other Securities				1.7		53,844,290

				2.2		69,085,667

Diversified Financials 6.8%
American Express Co.		149,250		0.4		12,208,650
Bank of America Corp.		1,694,056		0.7		23,649,022
Berkshire Hathaway, Inc., Class B *		284,774		1.0		32,771,792
Citigroup, Inc.		479,528		0.7		23,391,376
JPMorgan Chase & Co.		593,544		1.0		30,591,258
The Charles Schwab Corp. (a)		182,326		0.1		4,129,684
Other Securities				2.9		91,312,126

				6.8		218,053,908

Energy 9.4%
Chevron Corp.		304,639		1.1		36,544,494
ConocoPhillips		192,823		0.4		14,133,926
Exxon Mobil Corp.		694,134		2.0		62,208,289
Occidental Petroleum Corp.		127,020		0.4		12,204,082
Schlumberger Ltd.		208,760		0.6		19,564,987
Other Securities				4.9		153,552,113

				9.4		298,207,891

Food & Staples Retailing 2.0%
CVS Caremark Corp.		195,090		0.4		12,146,304
Wal-Mart Stores, Inc.		257,300		0.6		19,747,775
Other Securities				1.0		31,779,218

				2.0		63,673,297

Food, Beverage & Tobacco 4.6%
Altria Group, Inc.		316,500		0.4		11,783,295
PepsiCo, Inc.		243,158		0.6		20,447,156
Philip Morris International, Inc.		255,300		0.7		22,752,336
The Coca-Cola Co.		601,200		0.7		23,789,484
Other Securities				2.2		68,143,212

				4.6		146,915,483

Health Care Equipment & Services 4.3%
Other Securities				4.3		136,040,994

Household & Personal Products 2.0%
The Procter & Gamble Co.		431,915		1.1		34,877,136
Other Securities				0.9		27,633,148

				2.0		62,510,284

Insurance 3.2%
American International Group, Inc.		232,796		0.4		12,023,913
Other Securities				2.8		89,030,373

				3.2		101,054,286

Materials 3.7%
Other Securities				3.7		118,685,864

See financial notes 39

Schwab Total Stock Market Index Fund

Portfolio Holdings continued


	Number		% of Net		Value
Security	of Shares		Assets		($)

Media 3.5%
Comcast Corp., Class A		411,104		0.6		19,560,328
The Walt Disney Co.		261,993		0.6		17,970,100
Other Securities				2.3		73,510,136

				3.5		111,040,564

Pharmaceuticals, Biotechnology & Life Sciences 7.8%
AbbVie, Inc.		250,005		0.4		12,112,742
Amgen, Inc.		118,768		0.4		13,777,088
Bristol-Myers Squibb Co.		259,650		0.4		13,636,818
Gilead Sciences, Inc. *		241,380		0.5		17,135,566
Johnson & Johnson		444,370		1.3		41,153,106
Merck & Co., Inc.		464,470		0.7		20,942,952
Pfizer, Inc.		1,041,701		1.0		31,959,387
Other Securities				3.1		97,283,687

				7.8		248,001,346

Real Estate 3.4%
Other Securities				3.4		107,888,447

Retailing 4.4%
Amazon.com, Inc. *		58,400		0.7		21,259,352
The Home Depot, Inc.		228,070		0.6		17,764,372
Other Securities				3.1		102,462,819

				4.4		141,486,543

Semiconductors & Semiconductor Equipment 2.1%
Intel Corp.		785,632		0.6		19,192,990
Other Securities				1.5		47,224,775

				2.1		66,417,765

Software & Services 9.4%
Facebook, Inc., Class A *		257,300		0.4		12,931,898
Google, Inc., Class A *		44,065		1.4		45,412,508
International Business Machines Corp.		162,710		0.9		29,159,259
MasterCard, Inc., Class A		16,300		0.4		11,688,730
Microsoft Corp.		1,195,350		1.3		42,255,622
Oracle Corp.		562,249		0.6		18,835,342
Visa, Inc., Class A		81,400		0.5		16,008,938
Other Securities				3.9		122,532,418

				9.4		298,824,715

Technology Hardware & Equipment 5.6%
Apple, Inc.		143,300		2.4		74,852,755
Cisco Systems, Inc.		845,409		0.6		19,021,702
QUALCOMM, Inc.		269,700		0.6		18,736,059
Other Securities				2.0		67,405,334

				5.6		180,015,850

Telecommunication Services 2.2%
AT&T, Inc.		839,856		1.0		30,402,787
Verizon Communications, Inc.		451,272		0.7		22,793,749
Other Securities				0.5		15,593,531

				2.2		68,790,067

Transportation 1.9%
Other Securities				1.9		61,471,238

Utilities 3.1%
Other Securities				3.1		97,542,943

Total Common Stock
(Cost $1,956,313,008)						3,083,859,605




Warrants 0.0% of net assets

Energy 0.0%
Other Securities				0.0		—

Real Estate 0.0%
Other Securities				0.0		5

Total Warrants
(Cost $2)						5



	Face
Security	Amount		% of Net		Value
Rate, Maturity Date	($)		Assets		($)

Short-Term Investments 2.9% of net assets

Time Deposits 2.8%
Australia & New Zealand Banking Group Ltd.
0.03%, 11/01/13		73,797,969		2.3		73,797,969
JPMorgan Chase
0.03%, 11/01/13		13,812,209		0.5		13,812,209

				2.8		87,610,178

U.S. Treasury Obligation 0.1%
Other Securities				0.1		4,499,970

Total Short-Term Investments
(Cost $92,110,148)						92,110,148



End of Investments.


	Number		% of Net		Value
Security	of Shares		Assets		($)

Collateral Invested for Securities on Loan 0.6% of net assets


Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.01% (f)		19,098,378		0.6		19,098,378

Total Collateral Invested for Securities on Loan
(Cost $19,098,378)						19,098,378



End of Collateral Invested for Securities on Loan.

At 10/31/13 tax basis cost of the fund’s investments was $2,061,401,063 and the unrealized appreciation and

40 See financial notes

Schwab Total Stock Market Index Fund

Portfolio Holdings continued

depreciation were $1,194,577,512 and ($80,008,817), respectively, with a net unrealized appreciation of $1,114,568,695.

For the following notes, please refer to complete schedule of holdings.


*		Non-income producing security.
(a)		Issuer is affiliated with the fund’s adviser.
(b)		Illiquid security. At the period end, the value of these amounted to $0 or 0.0% of net assets.
(c)		All or a portion of this security is on loan. Securities on loan were valued at $18,479,281.
(d)		All or a portion of this security is held as collateral for open futures contracts.
(e)		The rate shown is the purchase yield.
(f)		The rate shown is the 7-day yield.
(g)		Fair-valued by management in accordance with procedures approved by the Board of Trustees.


REIT —		Real Estate Investment Trust

In addition to the above, the fund held the following at 10/31/13:


			Contract		Unrealized
	Number of		Value		Appreciation
	Contracts		($)		($)

Futures Contracts


Russell 2000 Index, mini, Long, expires 12/20/13		120		13,173,600		326,181
S&P 500 Index, e-mini, Long, expires 12/20/13		900		78,795,000		2,282,356

Net Unrealized Appreciation						2,608,537

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$3,083,859,605		$—		$—		$3,083,859,605
Warrants¹		5		—		—		5
Short-Term Investments¹		—		92,110,148		—		92,110,148

Total		$3,083,859,610		$92,110,148		$—		$3,175,969,758

Other Financial Instruments
Collateral Invested for Securities on Loan		$19,098,378		$—		$—		$19,098,378
Futures Contracts²		2,608,537		—		—		2,608,537


¹		As categorized in complete schedule of holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

Balance

Change in

Balance

as of

Realized

Unrealized

Gross

as of

October 31,

Gains

Appreciation

Gross

Transfers

October 31,

Investments in Securities

2012

(Losses)

(Depreciation)

Purchases

Sales

out

2013

Common Stock

$86,391

$966

($30,585

)

$—

($35,387

)

$—

($21,385

)

$—

Total

$86,391

$966

($30,585

)

$—

($35,387

)

$—

($21,385

)

$—

See financial notes 41

Schwab Total Stock Market Index Fund

Statement of

Assets and Liabilities

As of October 31, 2013



Assets

Investments in affiliated issuers, at value (cost $3,384,988)		$4,129,684
Investments in unaffiliated issuers, at value (cost $2,045,038,170) including securities on loan of $18,479,281	+	3,171,840,074

Total investments, at value (cost $2,048,423,158)		3,175,969,758
Collateral invested for securities on loan		19,098,378
Receivables:
Investments sold		281,805
Fund shares sold		5,881,701
Dividends		2,695,563
Income from securities on loan		52,472
Foreign tax reclaims		3,941
Interest		73
Prepaid expenses	+	49,727

Total assets		3,204,033,418

Liabilities

Collateral held for securities on loan		19,098,378
Payables:
Investment adviser and administrator fees		13,141
Shareholder service fees		5,991
Independent trustees’ fees		17
Fund shares redeemed		860,152
Variation margin on futures contracts		535,200
Accrued expenses	+	133,648

Total liabilities		20,646,527

Net Assets

Total assets		3,204,033,418
Total liabilities	−	20,646,527

Net assets		$3,183,386,891

Net Assets by Source
Capital received from investors		2,015,866,264
Net investment income not yet distributed		39,398,594
Net realized capital losses		(2,033,104	)
Net unrealized capital appreciation		1,130,155,137

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$3,183,386,891

97,859,650

$32.53

42 See financial notes

Schwab Total Stock Market Index Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends received from affiliated issuer		$39,648
Dividends received from unaffiliated issuers (net of foreign withholding taxes of $33,947)		55,849,485
Interest		18,013
Securities on loan	+	710,402

Total investment income		56,617,548

Expenses

Investment adviser and administrator fees		1,612,613
Shareholder service fees		518,724
Registration fees		125,606
Portfolio accounting fees		119,529
Transfer agent fees		92,513
Shareholder reports		86,121
Custodian fees		70,249
Professional fees		51,003
Independent trustees’ fees		24,929
Other expenses	+	50,911

Total expenses		2,752,198
Expense reduction by CSIM and its affiliates	−	333,278

Net expenses	−	2,418,920

Net investment income		54,198,628

Realized and Unrealized Gains (Losses)

Net realized gains on unaffiliated investments		7,036,591
Net realized gains on futures contracts	+	11,193,876

Net realized gains		18,230,467
Net change in unrealized appreciation on affiliated issuer		1,508,990
Net change in unrealized appreciation on unaffiliated investments		601,979,878
Net change in unrealized appreciation on futures contracts	+	3,110,518

Net change in unrealized appreciation	+	606,599,386

Net realized and unrealized gains		624,829,853

Increase in net assets resulting from operations		$679,028,481

See financial notes 43

Schwab Total Stock Market Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$54,198,628			$39,674,206
Net realized gains		18,230,467			12,059,250
Net change in unrealized appreciation	+	606,599,386			211,001,775

Increase in net assets from operations		679,028,481			262,735,231

Distributions to Shareholders

Distributions from net investment income		($47,503,974	)		($32,188,219	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			26,862,706		$768,188,272			21,918,622		$541,100,465
Shares reinvested			1,519,219		38,800,859			1,240,438		27,500,498
Shares redeemed	+		(17,343,333	)	(494,804,875	)		(12,563,348	)	(306,292,186	)

Net transactions in fund shares			11,038,592		$312,184,256			10,595,712		$262,308,777

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			86,821,058		$2,239,678,128			76,225,346		$1,746,822,339
Total increase	+		11,038,592		943,708,763			10,595,712		492,855,789

End of period			97,859,650		$3,183,386,891			86,821,058		$2,239,678,128


Net investment income not yet distributed					$39,398,594					$32,773,528

44 See financial notes

Schwab International Index Fund^®

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09¹


Per-Share Data ($)

Net asset value at beginning of period		16.32			16.02			17.31			16.26			13.95

Income (loss) from investment operations:
Net investment income (loss)		0.49			0.57			0.57			0.48			0.37
Net realized and unrealized gains (losses)		3.69			0.33			(1.38	)		1.01			2.58

Total from investment operations		4.18			0.90			(0.81	)		1.49			2.95
Less distributions:
Distributions from net investment income		(0.58	)		(0.60	)		(0.48	)		(0.44	)		(0.64	)

Net asset value at end of period		19.92			16.32			16.02			17.31			16.26

Total return (%)		26.40			6.07			(4.83	)		9.31			22.55

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.19			0.19			0.19			0.19			0.32	²
Gross operating expenses		0.23			0.23			0.21			0.22			0.41
Net investment income (loss)		2.88			3.66			3.26			2.88			2.92
Portfolio turnover rate		5			31	³		10			13			21
Net assets, end of period ($ x 1,000,000)		2,205			1,415			1,375			1,471			1,369

² Effective May 5, 2009, the net operating expense limitation was lowered. The ratio presented for period ended 10/31/09 is a blended ratio.

³ Portfolio turnover rate increase was mainly the result of trading activities in connection with the change in primary benchmark index effective December 20, 2011.

See financial notes 45

Schwab International Index Fund

Portfolio Holdings as of October 31, 2013


				Cost		Value
Holdings by Category				($)		($)

	96	.0%	Common Stock		1,549,007,351		2,115,822,955
	0	.6%	Preferred Stock		8,346,686		13,040,219
	0	.0%	Rights		371,648		389,200
	0	.4%	Other Investment Company		8,089,400		9,223,200
	2	.6%	Short-Term Investments		58,322,640		58,322,640


	99	.6%	Total Investments		1,624,137,725		2,196,798,214
	0	.2%	Collateral Invested for Securities on Loan		4,637,410		4,637,410
	0	.2%	Other Assets and Liabilities, Net				3,227,192


	100	.0%	Net Assets				2,204,662,816


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 96.0% of net assets

Australia 7.9%
Australia & New Zealand Banking Group Ltd.		451,524		0.7		14,448,926
BHP Billiton Ltd.		528,494		0.8		18,684,048
Commonwealth Bank of Australia		265,248		0.9		19,098,522
National Australia Bank Ltd.		385,557		0.6		12,885,639
Westpac Banking Corp.		510,729		0.8		16,581,912
Other Securities				4.1		91,672,290

				7.9		173,371,337

Austria 0.3%
Other Securities				0.3		6,141,982

Belgium 1.1%
Anheuser-Busch InBev N.V.		132,225		0.6		13,706,920
Other Securities				0.5		11,376,653

				1.1		25,083,573

Denmark 1.1%
Novo Nordisk A/S, Class B		65,535		0.5		10,915,023
Other Securities				0.6		12,578,430

				1.1		23,493,453

Finland 0.9%
Other Securities				0.9		19,327,424

France 9.5%
BNP Paribas S.A.		163,535		0.5		12,064,490
Sanofi		196,090		0.9		20,907,729
Total S.A.		351,989		1.0		21,595,558
Other Securities				7.1		155,405,281

				9.5		209,973,058

Germany 8.0%
Allianz SE - Reg’d		75,028		0.6		12,597,375
BASF SE		151,139		0.7		15,690,419
Bayer AG - Reg’d		136,077		0.8		16,880,654
Daimler AG - Reg’d		158,297		0.6		12,960,531
SAP AG		151,616		0.5		11,864,274
Siemens AG - Reg’d		130,474		0.8		16,673,552
Other Securities				4.0		89,764,445

				8.0		176,431,250

Greece 0.1%
Other Securities				0.1		964,277

Hong Kong 2.8%
AIA Group Ltd.		1,981,800		0.5		10,063,243
Other Securities				2.3		52,077,190

				2.8		62,140,433

Ireland 0.3%
Other Securities				0.3		7,348,091

Israel 0.4%
Other Securities				0.4		9,173,622

Italy 2.2%
Eni S.p.A.		418,612		0.5		10,627,271
Other Securities				1.7		38,389,754

				2.2		49,017,025

Japan 20.3%
Honda Motor Co., Ltd.		268,239		0.5		10,711,556
Mitsubishi UFJ Financial Group, Inc.		2,096,809		0.6		13,353,032
Softbank Corp.		158,100		0.5		11,806,728
Sumitomo Mitsui Financial Group, Inc.		209,446		0.5		10,123,755
Toyota Motor Corp.		453,903		1.3		29,430,241
Other Securities				16.9		371,565,511

				20.3		446,990,823

Netherlands 2.6%
Unilever N.V. CVA		268,056		0.5		10,627,195

46 See financial notes

Schwab International Index Fund

Portfolio Holdings continued


	Number		% of Net		Value
Security	of Shares		Assets		($)
Other Securities				2.1		46,461,814

				2.6		57,089,009

New Zealand 0.1%
Other Securities				0.1		2,616,879

Norway 0.8%
Other Securities				0.8		17,744,068

Portugal 0.2%
Other Securities				0.2		3,799,006

Singapore 1.5%
Other Securities				1.5		32,952,279

Spain 3.2%
Banco Bilbao Vizcaya Argentaria S.A.		921,450		0.5		10,768,908
Banco Santander S.A.		1,833,518		0.7		16,254,618
Telefonica S.A. *		673,997		0.5		11,861,882
Other Securities				1.5		32,351,631

				3.2		71,237,039

Sweden 3.0%
Other Securities				3.0		66,967,763

Switzerland 8.7%
Nestle S.A. - Reg’d		530,651		1.7		38,304,464
Novartis AG - Reg’d		378,516		1.3		29,381,384
Roche Holding AG		115,609		1.5		31,969,980
UBS AG - Reg’d *		599,812		0.5		11,601,001
Other Securities				3.7		80,566,867

				8.7		191,823,696

United Kingdom 21.0%
AstraZeneca plc		206,035		0.5		10,907,519
Barclays plc (b)		2,513,976		0.5		10,577,451
BG Group plc		560,092		0.5		11,425,689
BHP Billiton plc		347,548		0.5		10,724,799
BP plc		3,124,521		1.1		24,254,414
British American Tobacco plc		315,648		0.8		17,415,007
Diageo plc		413,071		0.6		13,167,648
GlaxoSmithKline plc		810,567		1.0		21,368,454
Glencore Xstrata plc *		1,746,029		0.4		9,502,270
HSBC Holdings plc		3,065,004		1.5		33,596,547
Lloyds Banking Group plc *		7,606,845		0.4		9,408,119
Rio Tinto plc		209,172		0.5		10,584,135
Royal Dutch Shell plc, A Shares		624,969		0.9		20,814,470
Royal Dutch Shell plc, B Shares		421,118		0.7		14,579,107
Standard Chartered plc		398,338		0.4		9,564,089
Vodafone Group plc		8,009,957		1.3		29,338,526
Other Securities				9.4		204,908,624

				21.0		462,136,868

Total Common Stock
(Cost $1,549,007,351)						2,115,822,955




Preferred Stock 0.6% of net assets

Germany 0.6%
Other Securities				0.6		12,998,305

United Kingdom 0.0%
Other Securities				0.0		41,914

Total Preferred Stock
(Cost $8,346,686)						13,040,219




Rights 0.0% of net assets

Hong Kong 0.0%
Other Securities				0.0		—

Spain 0.0%
Other Securities				0.0		389,200

Total Rights
(Cost $371,648)						389,200




Other Investment Company 0.4% of net assets

United States 0.4%
iShares MSCI EAFE ETF		140,000		0.4		9,223,200

Total Other Investment Company
(Cost $8,089,400)						9,223,200



	Face
Security	Amount		% of Net		Value
Rate, Maturity Date	($)		Assets		($)

Short-Term Investments 2.6% of net assets

Time Deposits 2.4%
Australia & New Zealand Banking Group Ltd.
0.03%, 11/01/13		10,413,037		0.5		10,413,037
DNB
0.03%, 11/01/13		41,779,649		1.9		41,779,649
Other Securities				0.0		229,990

				2.4		52,422,676

U.S. Treasury Obligation 0.2%
Other Securities				0.2		5,899,964

Total Short-Term Investments
(Cost $58,322,640)						58,322,640



End of Investments.

See financial notes 47

Schwab International Index Fund

Portfolio Holdings continued

Number

% of Net

Value

Security

of Shares

Assets

($)

Collateral Invested for Securities on Loan 0.2% of net assets

Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.01% (f)

4,637,410

0.2

4,637,410

Total Collateral Invested for Securities on Loan

(Cost $4,637,410)

4,637,410

End of Collateral Invested for Securities on Loan.

At 10/31/13, the tax basis cost of the fund’s investments was $1,648,601,656 and the unrealized appreciation and depreciation were $645,861,051 and ($97,664,493), respectively, with a net unrealized appreciation of $548,196,558.

At 10/31/13, the values of certain foreign securities held by the fund aggregating $2,108,330,382 were adjusted from their closing market values in accordance with international fair valuation procedures approved by the fund’s Board of Trustees. (See financial note 2)

For the following notes, please refer to complete schedule of holdings.


*		Non-income producing security.
(a)		All or a portion of this security is on loan. Securities on loan were valued at $3,176,224.
(b)		Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(c)		Illiquid security. At the period end, the value of these amounted to $0 or 0.0% of net assets.
(d)		All or a portion of this security is held as collateral for open futures contracts.
(e)		The rate shown is the purchase yield.
(f)		The rate shown is the 7-day yield.


ADR —		American Depositary Receipt
CDI —		CHESS Depositary Interest
CVA —		Dutch Certificate
ETF —		Exchange traded fund
Reg’d —		Registered
REIT —		Real Estate Investment Trust
RSP —		Risparmio (Convertible Savings Shares)
SDR —		Swedish Depositary Receipt

In addition to the above, the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

MSCI EAFE, e-mini, Long, expires 12/20/13

600

56,259,000

2,417,836

48 See financial notes

Schwab International Index Fund

Portfolio Holdings continued

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$—		$315,314,569		$—		$315,314,569
Belgium		516,861		24,566,712		—		25,083,573
Denmark		1,071,322		22,422,131		—		23,493,453
France		5,441,056		204,532,002		—		209,973,058
Germany		1,474,663		174,956,587		—		176,431,250
Hong Kong		241,971		61,898,462		—		62,140,433
Ireland		1,624,714		5,723,377		—		7,348,091
Italy		1,801,868		47,215,157		—		49,017,025
Japan		1,349,200		445,641,623		—		446,990,823
Netherlands		2,188,521		54,900,488		—		57,089,009
Norway		910,139		16,833,929		—		17,744,068
Spain		790,300		70,446,739		—		71,237,039
Switzerland		2,646,169		189,177,527		—		191,823,696
United Kingdom		434,094		461,702,774		—		462,136,868
Preferred Stock¹		—		12,998,305		—		12,998,305
United Kingdom		—		—		41,914		41,914
Rights¹		—		—		389,200		389,200
Other Investment Company¹		9,223,200		—		—		9,223,200
Short-Term Investments¹		—		58,322,640		—		58,322,640

Total		$29,714,078		$2,166,653,022		$431,114		$2,196,798,214

Other Financial Instruments
Collateral Invested for Securities on Loan		$4,637,410		$—		$—		$4,637,410
Futures Contract²		2,417,836		—		—		2,417,836


¹		As categorized in complete schedule of holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

Balance

Change in

Balance

as of

Realized

Unrealized

Gross

as of

October 31,

Gains

Appreciation

Gross

Transfers

October 31,

Investments in Securities

2012

(Losses)

(Depreciation)

Purchases

Sales

out

2013

Preferred Stock

United Kingdom

$30,829

$282

($710

)

$42,263

($30,750

)

$—

$41,914

Rights

Spain

—

17,551

371,651

)

—

389,200

Total

$30,829

$282

$16,841

$413,914

($30,752

)

$—

$431,114

All net realized and change in unrealized gains (losses) in the table above are reflected on the accompanying Statement of Operations. The change in net unrealized appreciation (depreciation) for Level 3 investments held by the fund at October 31, 2013 was $17,202.

The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were security transfers in the amount of $2,269,842 and $7,978,350 from Level 1 to Level 2 and from Level 2 to Level 1, respectively, for the period ended October 31, 2013. The transfers between Level 1 and Level 2 were primarily due to the use of international fair valuation by the fund. There were no transfers in or out of Level 3 securities during the period.

See financial notes 49

Schwab International Index Fund

Statement of

Assets and Liabilities

As of October 31, 2013



Assets

Investments, at value (cost $1,624,137,725) including securities on loan of $3,176,224		$2,196,798,214
Collateral invested for securities on loan		4,637,410
Receivables:
Fund shares sold		5,306,530
Dividends		3,970,072
Foreign tax reclaims		1,603,737
Income from securities on loan		36,877
Interest		44
Prepaid expenses	+	39,198

Total assets		2,212,392,082

Liabilities

Collateral held for securities on loan		4,637,410
Payables:
Investments bought		41,914
Investment adviser and administrator fees		20,763
Shareholder service fees		3,853
Independent trustees’ fees		5
Fund shares redeemed		2,418,287
Variation margin on futures contracts		246,000
Due to custodian		142,654
Accrued expenses	+	218,380

Total liabilities		7,729,266

Net Assets

Total assets		2,212,392,082
Total liabilities	−	7,729,266

Net assets		$2,204,662,816

Net Assets by Source
Capital received from investors		1,622,772,444
Net investment income not yet distributed		35,386,171
Net realized capital losses		(28,636,526	)
Net unrealized capital appreciation		575,140,727

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$2,204,662,816

110,660,018

$19.92

50 See financial notes

Schwab International Index Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends (net of foreign withholding taxes of $3,674,497)		$52,911,420
Interest		18,105
Securities on loan	+	912,186

Total investment income		53,841,711

Expenses

Investment adviser and administrator fees		2,626,727
Shareholder service fees		343,226
Custodian fees		317,110
Index fee		243,648
Registration fees		116,663
Portfolio accounting fees		107,746
Transfer agent fees		68,132
Shareholder reports		57,284
Professional fees		42,883
Independent trustees’ fees		18,484
Interest expense		183
Other expenses	+	52,520

Total expenses		3,994,606
Expense reduction by CSIM and its affiliates	−	667,236

Net expenses	−	3,327,370

Net investment income		50,514,341

Realized and Unrealized Gains (Losses)

Net realized gains on investments		1,243,684
Net realized gains on futures contracts		5,794,059
Net realized losses on foreign currency transactions	+	(236,734	)

Net realized gains		6,801,009
Net change in unrealized appreciation on investments		352,781,829
Net change in unrealized appreciation on futures contracts		2,417,836
Net change in unrealized appreciation on foreign currency translations	+	142,812

Net change in unrealized appreciation	+	355,342,477

Net realized and unrealized gains		362,143,486

Increase in net assets resulting from operations		$412,657,827

See financial notes 51

Schwab International Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$50,514,341			$49,562,359
Net realized gains		6,801,009			54,688,994
Net change in unrealized appreciation (depreciation)	+	355,342,477			(22,069,338	)

Increase in net assets from operations		412,657,827			82,182,015

Distributions to Shareholders

Distributions from net investment income		($50,551,708	)		($51,830,156	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			36,208,819		$648,488,445			14,938,008		$230,299,984
Shares reinvested			2,784,477		45,581,882			3,211,483		47,080,346
Shares redeemed	+		(15,012,168	)	(266,487,088	)		(17,316,607	)	(267,897,568	)

Net transactions in fund shares			23,981,128		$427,583,239			832,884		$9,482,762

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			86,678,890		$1,414,973,458			85,846,006		$1,375,138,837
Total increase	+		23,981,128		789,689,358			832,884		39,834,621

End of period			110,660,018		$2,204,662,816			86,678,890		$1,414,973,458


Net investment income not yet distributed					$35,386,171					$35,644,277

52 See financial notes

Schwab Equity Index Funds

Financial Notes

1. Business Structure of the Funds:

Each of the funds in this report is a series of Schwab Capital Trust, except Schwab 1000 Index Fund, which is a series of Schwab Investments. Both Schwab Capital Trust and Schwab Investments (the “trusts”) are no-load, open-end management investment companies. Each 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 trusts as of the end of the period, including the funds discussed in this report, which are highlighted:



Schwab Capital Trust (organized May 7, 1993)		Schwab Target 2035 Fund
Schwab S&P 500 Index Fund		Schwab Target 2040 Fund
Schwab Small-Cap Index Fund		Schwab Target 2045 Fund
Schwab Total Stock Market Index Fund		Schwab Target 2050 Fund
Schwab International Index Fund		Schwab Target 2055 Fund
Schwab MarketTrack All Equity Portfolio		Schwab Fundamental US Large Company Index Fund
Schwab MarketTrack Growth Portfolio		Schwab Fundamental US Small Company Index Fund
Schwab MarketTrack Balanced Portfolio		Schwab Fundamental International Large Company Index Fund
Schwab MarketTrack Conservative Portfolio		Schwab Fundamental International Small Company Index Fund
Laudus Small-Cap MarketMasters Fund		Schwab Fundamental Emerging Markets Large Company Index Fund
Laudus International MarketMasters Fund		Schwab Monthly Income Fund – Moderate Payout
Schwab Balanced Fund		Schwab Monthly Income Fund – Enhanced Payout
Schwab Core Equity Fund		Schwab Monthly Income Fund – Maximum Payout
Schwab Dividend Equity Fund
Schwab Large-Cap Growth Fund		Schwab Investments (organized October 26, 1990)
Schwab Small-Cap Equity Fund		Schwab 1000 Index Fund
Schwab Hedged Equity Fund		Schwab Short-Term Bond Market Fund
Schwab Financial Services Fund		Schwab Intermediate-Term Bond Fund
Schwab Health Care Fund		(formerly Schwab Premier Income Fund)
Schwab International Core Equity Fund		Schwab Total Bond Market Fund
Schwab Target 2010 Fund		Schwab GNMA Fund
Schwab Target 2015 Fund		Schwab Treasury Inflation Protected Securities Index Fund
Schwab Target 2020 Fund		Schwab Tax-Free Bond Fund
Schwab Target 2025 Fund		Schwab California Tax-Free Bond Fund
Schwab Target 2030 Fund		Schwab Global Real Estate Fund

Each fund in this report offers one share class. Shares are bought and sold (subject to a redemption fee, see financial note 9) at closing net asset value per share (“NAV”), which is the price for all outstanding shares of a fund. Each share has a par value of 1/1,000 of a cent, and the funds’ Board of Trustees (the “Board”) 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:

The following is a summary of the significant accounting policies the funds use in their preparation of financial statements. The accounting policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

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:

Under procedures approved by the Board, the investment adviser has formed a Pricing Committee to administer the pricing and valuation of portfolio securities and other assets and to ensure that prices used for internal purposes or provided by third parties reasonably reflect fair market value. Among other things, these procedures allow the funds to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.

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: Traded securities are valued at the closing value for the day, or, on days when no closing value has been reported, at halfway between the most recent bid and ask quotes. Securities that are

Schwab Equity Index Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):


		primarily traded on foreign exchanges are valued at the official closing price or the last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate, unless these securities are fair valued as discussed below.


	•	Securities for which no quoted value is available: The Board has adopted procedures to fair value each fund’s securities when market prices are not “readily available” or are unreliable. For example, a fund may fair value a security when it is de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a price; or when a security’s primary trading market is closed during regular market hours. Each fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. The Pricing Committee considers a number of factors, including unobservable market inputs when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security. The Board convenes on a regular basis to review fair value determinations made by the funds pursuant to the valuation procedures.

	•	Foreign equity security fair valuation: The Board has adopted procedures to fair value foreign equity securities that are traded in markets that close prior to the funds valuing their holdings. By fair valuing securities whose prices may have been affected by events occurring after the close of trading, each fund seeks to establish prices that investors might expect to realize upon the current sales of these securities. This methodology is designed to deter “arbitrage” market timers, who seek to exploit delays between the change in the value of a fund’s portfolio holdings and the NAV of the fund’s shares, and seeks to help ensure that the prices at which the fund’s shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders. When fair value pricing is used at the open or close of a reporting period, it may cause a temporary divergence between the return of a fund and that of its comparative index or benchmark. The Board regularly reviews fair value determinations made by the funds pursuant to these procedures.

	•	Futures and forward foreign currency exchange contracts: Futures are valued at their settlement prices as of the close of their exchanges. Forwards are valued based on that day’s forward exchange rates or by using an interpolated forward exchange rate for contracts with interim settlement dates.

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

	•	Underlying funds: Mutual funds are valued at their respective NAVs. Exchange traded funds (“ETFs”) traded on a recognized securities exchange are valued at the last reported sale price that day or the official closing price, if applicable.

In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the funds disclose the fair value of their 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 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). If inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the valuation. If the funds determine 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 three levels of the fair value hierarchy are 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, ETFs and futures contracts. Investments in mutual funds are valued daily at their NAVs, and investments in ETFs are valued daily at the last reported sale price or the official closing price, which are classified as Level 1 prices.

	•	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

Schwab Equity Index Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):


		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 fair valuations due to significant movement in the U.S. markets occurring after the daily close of the foreign markets. The Board has approved a vendor that calculates fair valuations of international equity 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 levels associated with valuing the funds’ investments as of October 31, 2013 are disclosed in the Portfolio Holdings.

(b) Accounting Policies for certain Portfolio Investments (if held):

Futures Contracts: 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. A fund must give the broker a deposit of cash and/or securities (initial margin) whenever it enters into the futures contract. The amount of the deposit may vary from one contract to another. Subsequent payments (variation margin) are made or received by a fund depending on the daily fluctuations in the value of the futures contract and are accounted for as unrealized gains or losses until the contract is closed, at which time the gains or losses are realized. Futures are traded publicly on exchanges, and their market value changes daily.

Forward Foreign Currency Exchange Contracts: “Forwards”, as they are known, are contracts to buy and sell a currency at a set price on a future date. The value of the forwards is accounted for as unrealized gains or losses until the contracts settle, at which time the gains or losses are realized.

Securities Lending: Under the trusts’ Securities Lending Program, a fund (lender) may make short-term loans of its securities to another party (borrower) to generate additional revenue for the fund. The borrower pledges collateral in the form of cash, securities issued or fully guaranteed by the U.S. government or foreign governments, or letters of credit issued by a bank. Collateral at the individual loan level is required to have a value of at least 102% of the prior day’s market value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities and is marked to market daily. The lending agent provides the fund with indemnification against borrower default. The fund bears the risk of loss with respect to the investment of cash collateral. The cash collateral of securities loaned is invested in money market portfolios operating under Rule 2a-7 of the 1940 Act. Securities lending income, as disclosed in a fund’s Statement of Operations, if applicable, represents the income earned from the investment of the cash collateral plus any fees paid by borrowers, less the fees paid to the lending agent which are subject to adjustments pursuant to the securities lending agreement. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the borrower, and is allocated between the fund and the lending agent.

Schwab Equity Index Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

The values of the securities on loan and the related cash collateral are disclosed in the Portfolio Holdings and the Statement of Assets and Liabilities for each fund. The following table presents the non-cash collateral as of October 31, 2013:


	Non-Cash
	Collateral Received

Schwab 1000 Index Fund		$2,294,984

(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. Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the differences between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period. These realized and unrealized foreign exchange gains or losses are reported in foreign currency transactions or translations in the Statement of Operations. 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.

Gains realized by the funds on the sale of securities in certain foreign countries may be subject to non-U.S. taxes. In those instances, the funds record a liability based on unrealized gains to provide for potential non-U.S. taxes payable upon the sale of these securities.

When a fund closes out a futures or forward 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.

(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.

Income received from foreign sources may result in withholding tax. Withholding taxes are accrued at the same time as the related income if the tax rate is fixed and known, unless a tax withheld is reclaimable from the local tax authorities in which case it is recorded as receivable. If the tax rate is not known or estimable, such expense or reclaim receivable is recorded when the net proceeds are received.

(e) Expenses:

Expenses that are specific to a 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 funds make distributions from net investment income and net realized capital gains, if any, once a year.

(g) Custody Credit:

Certain funds have an arrangement with their custodian bank, under which the funds may receive a credit for their uninvested cash balance to offset their custody fees and accounting fees. The credit amounts, if any, are disclosed in the Statement of Operations as a reduction to the funds’ operating expenses.

Schwab Equity Index Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(h) Accounting Estimates:

The accounting policies described in this report conform to GAAP. 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 and these differences may be material.

(i) 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. As long as a fund meets the tax requirements, it is not required to pay federal income tax.

(j) Foreign Taxes:

The funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, corporate events, foreign currency exchanges and capital gains on investments. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in foreign markets in which the funds invest. These foreign taxes, if any, are paid by the funds and are disclosed in the Statement of Operations. Foreign taxes payable as of October 31, 2013, if any, are reflected in the funds’ Statements of Assets and Liabilities.

(k) Indemnification:

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

(l) New Accounting Pronouncements:

In December 2011, Accounting Standards Update (“ASU”) No. 2011-11, “Disclosures about Offsetting Assets and Liabilities,” was issued and is effective for interim and annual periods beginning after January 1, 2013. The ASU enhances disclosure requirements with respect to an entity’s rights of offset and related arrangements associated with its financial and derivative instruments. Management has evaluated ASU No. 2011-11 and determined that upon adoption of the standard the funds’ financial statement disclosures will include the enhanced disclosures around rights of offset and related arrangements as required by the standard.

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. Any of these risks could cause an investor to lose money.

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

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. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.

As an index fund, each fund seeks to track the performance of its comparative index, although it may not be successful in doing so. The divergence between the performance of a fund and its 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 certain securities in the index, or match the securities’ weightings to the index, 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.

Schwab Equity Index Funds

Financial Notes (continued)

3. Risk Factors (continued):

Each fund invests in companies measured by its respective index. It follows these stocks during upturns as well as downturns. Because of its indexing strategy, a fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of a fund’s expenses, the fund’s performance may be below that of the index.

If a fund uses a sampling method, the fund will not fully replicate its comparative index and may hold securities not included in the index. As a result, the fund is subject to the risk that the investment adviser’s investment management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. If a fund utilizes a sampling approach, it may not track the return of the index as well as it would if the fund purchased all of the securities in its benchmark index.

To the extent that a fund’s or the index’s portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector, or asset class, the fund may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more susceptible to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector, or asset class.

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 fund’s small-cap holdings could reduce performance.

Both large- and mid-cap stocks tend to go in and out of favor based on market and economic conditions. However, stocks of mid-cap companies tend to be more volatile than those of large-cap companies because mid-cap companies tend to be more susceptible to adverse business or economic events than larger more established companies. During a period when large- and mid-cap U.S. stocks fall behind other types of investments — bonds, for instance — a fund’s large- and mid-cap holdings could reduce performance.

A fund’s investments in securities of foreign issuers may 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; changes in currency exchange rates or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs.

To the extent a fund’s investments in a single country or a limited number of countries represent a higher percentage of the fund’s assets, the fund assumes the risk that economic, political and social conditions in those countries will have a significant impact on its investment performance and it may be subject to increased price volatility.

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. Certain of these risks, such as liquidity risk and market risk, are discussed elsewhere in this section. A fund’s use of derivatives is also subject to credit risk, leverage risk, lack of availability risk, valuation risk, correlation risk and tax risk. Lack of availability risk is the risk that suitable derivative transactions may not be available in all circumstances for risk management or other purposes. Credit risk is the risk that the counterparty to a derivatives transaction may not fulfill its obligations. Leverage risk is the risk that a small percentage of assets invested in derivatives can have a disproportionately larger impact on a fund. Valuation risk is the risk that a particular derivative may be valued incorrectly. Correlation risk is the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gain. These risks could cause a fund to lose more than the principal amount invested.

A particular investment may be difficult to purchase or sell. A fund may be unable to sell illiquid securities at an advantageous time or price.

Securities lending involves the risk of loss of rights in the collateral or delay in recovery of the collateral if the borrower fails to return the security loaned or becomes insolvent.

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

Schwab Equity Index Funds

Financial Notes (continued)

4. Affiliates and Affiliated Transactions:

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 CSIM and each trust.

For its advisory and administrative services to the Schwab 1000 Index Fund, CSIM is entitled to receive an annual fee, payable monthly, based on a percentage of the fund’s average daily net assets as follows:


	Schwab
	1000
% of Average Daily Net Assets	Index Fund

First $500 million		0.30%
$500 million to $5 billion		0.22%
$5 billion to $10 billion		0.20%
Over $10 billion		0.18%

For its advisory and administrative services to the other funds discussed in this report, CSIM is entitled to receive an annual fee, payable monthly, based on a percentage of each fund’s average daily net assets as follows:

Schwab

Total Stock

Schwab

S&P 500

Small-Cap

Market

International

Index Fund

0.06%

0.15%

0.06%

0.15%

The Board has adopted a Shareholder Servicing Plan (the “Plan”) on behalf of the funds. The Plan enables each fund to bear expenses relating to the provision by service providers, including Charles Schwab & Co., Inc. (a broker-dealer affiliate of CSIM, “Schwab”), of certain account maintenance, customer liaison and shareholder services to the current shareholders of the funds. Schwab serves as the funds’ paying agent under the Plan for making payments of the shareholder service fee due to the service providers (other than Schwab). All shareholder service fees paid by the funds to Schwab in its capacity as the funds’ paying agent will be passed through to the service providers, and Schwab will not retain any portion of such fees.

Pursuant to the Plan, each fund’s shares are subject to an annual shareholder servicing fee up to the amount set forth in the table below. The shareholder servicing fee paid to a particular service provider is made pursuant to its written agreement with Schwab (or, in the case of payments made to Schwab, pursuant to Schwab’s written agreement with the funds). Payments under the Plan are made as described above regardless of Schwab’s or the service provider’s actual cost of providing the services. If the cost of providing the services under the Plan is less than the payments received, the unexpended portion of the fees may be retained as profit by Schwab or the service provider.

Schwab

Total Stock

Schwab

S&P 500

1000

Small-Cap

Market

International

Index Fund

0.02%

0.10%

0.02%

Although these agreements specify certain fees for these services, CSIM and its affiliates have made an additional agreement with the funds, for so long as CSIM serves as the investment adviser to the funds, which may only be amended or terminated with the approval of the Board, to limit the total annual fund operating expenses charged, excluding interest, taxes and certain non-routine expenses (“expense limitation”). The expense limitation as a percentage of average daily net assets is as follows:

Schwab

Total Stock

Schwab

S&P 500

1000

Small-Cap

Market

International

Index Fund

0.09%

0.29%

0.17%

0.09%

0.19%

Schwab Equity Index Funds

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):

The funds may engage in certain transactions involving affiliates. For instance, a fund may own shares of The Charles Schwab Corporation if that company is included in its index. The table below shows funds with investment activities involving The Charles Schwab Corporation shares during the report period:


	Balance						Balance				Realized		Dividends
	of Shares						of Shares		Market		Gains (Losses)		Received
	Held at		Gross		Gross		Held at		Value at		11/01/12		11/01/12
Fund	10/31/12		Purchases		Sales		10/31/13		10/31/13		to 10/31/13		to 10/31/13

Schwab S&P 500 Index Fund		1,085,681		146,700		—		1,232,381		$27,913,430		$—		$265,675
Schwab 1000 Index Fund		367,065		—		—		367,065		8,314,022		—		88,096
Schwab Total Stock Market Index Fund		154,226		28,100		—		182,326		4,129,684		—		39,648

Certain Schwab Funds may own shares of other Schwab Funds. The table below reflects the percentages of shares of each fund in this report that are owned by other Schwab Funds as of October 31, 2013, as applicable:


								Schwab
	Schwab			Schwab		Schwab		Total Stock		Schwab
	S&P 500			1000		Small-Cap		Market		International
	Index Fund			Index Fund		Index Fund		Index Fund		Index Fund

Schwab MarketTrack All Equity Portfolio		1.5%			—%		6.2%		—%		8.0%
Schwab MarketTrack Growth Portfolio		1.6%			—%		5.8%		—%		6.3%
Schwab MarketTrack Balanced Portfolio		0.8%			—%		3.1%		—%		3.3%
Schwab MarketTrack Conservative Portfolio		0.2%			—%		0.9%		—%		0.9%
Schwab MarketTrack Growth Portfolio II		0.1%			0.1%		0.3%		—%		0.3%
Schwab Target 2010 Fund		0.0%	*		—%		—%		—%		—%
Schwab Target 2015 Fund		0.0%	*		—%		—%		—%		—%
Schwab Target 2020 Fund		0.2%			—%		—%		—%		—%
Schwab Target 2025 Fund		0.1%			—%		—%		—%		—%
Schwab Target 2030 Fund		0.4%			—%		—%		—%		—%
Schwab Target 2035 Fund		0.1%			—%		—%		—%		—%
Schwab Target 2040 Fund		0.4%			—%		—%		—%		—%
Schwab Target 2045 Fund		0.0%	*		—%		—%		—%		—%
Schwab Target 2050 Fund		0.0%	*		—%		—%		—%		—%
Schwab Target 2045 Fund		0.0%	*		—%		—%		—%		—%


*		Less than 0.05%

Certain other related parties may own shares of Schwab funds in this report. As of October 31, 2013, the shares owned by Schwab Charitable Giving Trust (an affiliate of Schwab) as a percentage of the total shares of the Schwab Small Cap Index Fund, Schwab Total Stock Market Index Fund and Schwab International Index Fund were 2.5%, 6.2% and 3.6%, respectively.

Pursuant to an exemptive order issued by the SEC, the funds may enter into interfund borrowing and lending transactions with other Schwab Funds. All loans are for temporary or emergency purposes only. The interest rate to be charged on a 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 by the Board. The funds had no interfund borrowing or lending activity during the period.

5. Board of Trustees:

The Board may include people who are officers and/or directors of CSIM or its affiliates. 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 interested persons for their services as trustees, but it did pay non-interested persons (independent trustees), as noted in each fund’s Statement of Operations. For information regarding the trustees please refer to Trustees and Officers table at the end of this report.

Schwab Equity Index Funds

Financial Notes (continued)

6. Borrowing from Banks:

The funds have access to custodian overdraft facilities, a committed line of credit of $150 million with State Street Bank and Trust Company (“State Street”), 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 & Co. 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 for the committed line of credit.

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

7. Derivatives:

Certain funds entered into equity index futures contracts (“futures”) during the report period. The funds invested in futures to equitize available cash. The fair value and variation margin for futures contracts held at October 31, 2013 are presented on the face of the Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized/unrealized gains (losses) on futures contracts are presented on the Statement of Operations. Refer to financial note 2(b) for the funds’ accounting policies with respect to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period, the month-end average contract values of futures contracts held by the funds and the month-end average number of contracts held were as follows:


	Contract Values		Number of Contracts

Schwab S&P 500 Index Fund		$376,169,096		4,712
Schwab 1000 Index Fund		35,385,806		435
Schwab Small-Cap Index Fund		47,201,654		493
Schwab Total Stock Market Index Fund		55,825,573		687
Schwab International Index Fund		52,552,913		613

8. Purchases and Sales/Maturities of Investment Securities:

For the period ended October 31, 2013, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:


	Purchases of Securities		Sales/Maturities of Securities

Schwab S&P 500 Index Fund		$1,245,529,489		$178,456,063
Schwab 1000 Index Fund		203,575,460		387,050,584
Schwab Small-Cap Index Fund		351,703,956		211,970,555
Schwab Total Stock Market Index Fund		321,439,276		41,876,038
Schwab International Index Fund		463,141,620		88,970,945

9. Redemption Fee:

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 in the Statement of Changes in Net Assets. The redemption fees charged during the current and prior periods are:


	Current Period		Prior Period
	(11/1/12-10/31/13)		(11/1/11-10/31/12)

Schwab S&P 500 Index Fund		$199,433		$148,766
Schwab 1000 Index Fund		43,102		18,501
Schwab Small-Cap Index Fund		22,392		13,063
Schwab Total Stock Market Index Fund		45,887		149,791
Schwab International Index Fund		17,950		11,378

Schwab Equity Index Funds

Financial Notes (continued)

10. Federal Income Taxes:

As of October 31, 2013, the components of distributable earnings on a tax-basis were as follows:


										Schwab
	Schwab			Schwab			Schwab			Total Stock			Schwab
	S&P 500			1000			Small-Cap			Market			International
	Index Fund			Index Fund			Index Fund			Index Fund			Index Fund

Undistributed ordinary income		$231,017,629			$72,311,939			$31,549,957			$38,443,105			$51,023,095
Undistributed long-term capital gains		—			181,130,311			97,744,706			14,508,824			—
Unrealized appreciation on investments		7,023,566,575			3,917,847,320			829,827,183			1,194,577,512			645,861,051
Unrealized depreciation on investments		(654,803,883	)		(29,014,762	)		(100,910,805	)		(80,008,817	)		(97,664,493	)
Other unrealized appreciation (depreciation)		—			—			10			—			62,403

Net unrealized appreciation (depreciation)		$6,368,762,692			$3,888,832,558			$728,916,388			$1,114,568,695			$548,258,961

The primary differences between book-basis and tax-basis unrealized appreciation or unrealized depreciation of investments are the tax deferral of losses on wash sales, Passive Foreign Investment Companies (PFIC), partnership investments, non taxable dividends and futures mark to market.

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of October 31, 2013, the funds had capital loss carryforwards available to offset future net capital gains before the expiration dates as follows:


							Schwab
	Schwab		Schwab		Schwab		Total Stock		Schwab
	S&P 500		1000		Small-Cap		Market		International
Expiration Date	Index Fund		Index Fund		Index Fund		Index Fund		Index Fund

October 31, 2014		$109,256,533		$—		$—		$—		$—
October 31, 2015		89,645,092		—		—		—		—
October 31, 2016		77,879,594		—		—		—		—
October 31, 2017		20,049,252		—		—		—		17,391,687

Total		$296,830,471		$—		$—		$—		$17,391,687

For the year ended October 31, 2013, the funds had capital losses utilized and capital losses expired as follows:

Schwab

Total Stock

Schwab

S&P 500

1000

Small-Cap

Market

International

Index Fund

Capital losses utilized

$67,871,433

$—

$7,116,259

$8,898,651

Capital losses expired

50,785,672

—

Schwab Equity Index Funds

Financial Notes (continued)

10. Federal Income Taxes (continued):

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


							Schwab
	Schwab		Schwab		Schwab		Total Stock		Schwab
	S&P 500		1000		Small-Cap		Market		International
	Index Fund		Index Fund		Index Fund		Index Fund		Index Fund

Current period distributions
Ordinary income		$278,278,089		$96,597,152		$39,112,389		$47,503,974		$50,551,708
Long-term capital gains		—		197,828,775		39,238,431		—		—
Return of capital		—		—		—		—		—

Prior period distributions
Ordinary income		$218,494,240		$86,671,033		$69,464,601		$32,188,219		$51,830,156
Long-term capital gains		—		183,283,175		40,732,178		—		—
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 funds for financial reporting purposes. The funds may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.

Permanent book and tax basis differences may result in reclassifications between components of net assets as required. The adjustments will have no impact on net assets or the results of operations. As of October 31, 2013, the funds made the following reclassifications:


										Schwab
	Schwab			Schwab			Schwab			Total Stock			Schwab
	S&P 500			1000			Small-Cap			Market			International
	Index Fund			Index Fund			Index Fund			Index Fund			Index Fund

Capital shares		($50,785,670	)		$—			$—			$—			$—
Undistributed net investment income		(1,926,459	)		(919,338	)		151,728			(69,588	)		(220,739	)
Net realized capital gains (losses)		52,712,129			919,338			(151,728	)		69,588			220,739

As of October 31, 2013, 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 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 period ended October 31, 2013, the funds did not incur any interest or penalties.

11. Subsequent Events:

Management has determined there are no subsequent events or transactions through the date the financial statements were issued that would have materially impacted the financial statements as presented.

Report of Independent Registered Public Accounting Firm

To the Boards of Trustees and Shareholders of:

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

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 1000 Index Fund (one of the portfolios constituting Schwab Investments), Schwab S&P 500 Index Fund, Schwab Small-Cap Index Fund, Schwab Total Stock Market Index Fund, and Schwab International Index Fund (four of the portfolios constituting Schwab Capital Trust) (hereafter collectively referred to as the “Funds”) at October 31, 2013, and the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the 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 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 audit 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, 2013 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

December 17, 2013

Other Federal Tax Information (unaudited)

Schwab International Index Fund may elect to pass on the benefits of the foreign tax credit of $2,757,251 to its shareholders for the year ended October 31, 2013. The respective foreign source income on the fund is $50,517,627.

For corporate shareholders, the following percentage of the funds dividend distributions paid during the fiscal year ended October 31, 2013, qualify for the corporate dividends received deduction:


	Percentage

Schwab S&P 500 Index Fund		99.58
Schwab 1000 Index Fund		100.00
Schwab Small-Cap Index Fund		60.30
Schwab Total Stock Market Index Fund		94.62
Schwab International Index Fund		—

For the fiscal year ended October 31, 2013, the funds designate the following amounts of the dividend distributions as qualified dividends for the purpose of the maximum rate under section 1(h)(11) of the Internal Revenue Code. Shareholders will be notified in January 2014 via IRS form 1099 of the amounts for use in preparing their 2013 income tax return.


Schwab S&P 500 Index Fund			$278,278,089
Schwab 1000 Index Fund			96,597,152
Schwab Small-Cap Index Fund			24,033,593
Schwab Total Stock Market Index Fund			46,221,077
Schwab International Index Fund			41,320,653

Under Section 852 (b)(3)(C) of the Internal Revenue Code, certain funds hereby designate the following amounts as long-term capital gain dividends for the fiscal year ended October 31, 2013:


Schwab S&P 500 Index Fund			$—
Schwab 1000 Index Fund			197,828,775
Schwab Small-Cap Index Fund			39,238,431
Schwab Total Stock Market Index Fund			—
Schwab International Index Fund			—

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 of Trustees (the “Board” or the “Trustees”, as appropriate) calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory agreements between Schwab Capital Trust and Schwab Investments (collectively, the “Trusts”) and Charles Schwab Investment Management, Inc. (“CSIM”) (the “Agreements”) with respect to the existing funds in the Trusts, including Schwab S&P 500 Index Fund, Schwab 1000 Index Fund, Schwab Small- Cap Index Fund, Schwab Total Stock Market Index Fund and Schwab International Index Fund (the “Funds”), and to review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM, including information about CSIM’s affiliates, personnel and operations. As part of the renewal process, Independent Trustees’ legal counsel sends an information request letter to CSIM seeking certain relevant information. The responses by CSIM are provided to the Trustees for their review prior to their meeting, and the Trustees are provided with the opportunity to request any additional materials. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the Funds that the Board reviews during the course of each year, including information that relates to Fund operations and Fund performance. The Independent Trustees receive advice from independent counsel to the Independent Trustees, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Independent Trustees meet in executive session outside the presence of Fund management and participate in question and answer sessions with representatives of CSIM.

The Board, including a majority of the Independent Trustees, considered information specifically relating to its consideration of the continuance of the Agreements with respect to the Funds at meetings held on April 23, 2013, and June 4, 2013, and approved the renewal of the Agreements with respect to the Funds for an additional one-year term at the meeting held on June 4, 2013. The Board’s approval of the Agreements 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 Agreements, 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 Agreements 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, 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 Agreements with respect to the Funds.

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 their 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 Agreements with respect to the Funds.

Fund Expenses. With respect to the Funds’ expenses, the Trustees considered the rate of compensation called for by the Agreements, and each Fund’s net operating expense ratio, in each case, in comparison to those of a peer group of 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 CSIM’s contractual commitment to keep each Fund’s expense cap 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 exchange-traded funds. 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 Agreements 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 Agreements 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 Agreements 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 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 the existing contractual investment advisory fee schedules relating to Schwab 1000 Index Fund that include lower fees at higher graduated asset levels. 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 Agreements with respect to the Funds and concluded that the compensation under the Agreements 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 of Schwab Capital Trust and Schwab Investments, 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 99 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 funds’ 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 and Schwab Investments since 2000.)	Chairman of JDN Corporate Advisory LLC (advisory services firm) (Oct. 2001 – present).	76	Director, WageWorks, Inc. (2010 – present) Director, Redwood Trust, Inc. (1998 – present) Director, PMI Group Inc. (2001 – 2009)


John F. Cogan 1947 Trustee (Trustee of Schwab Capital Trust and Schwab Investments since 2008.)	Senior Fellow, The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow, Stanford Institute for Economic Policy Research; Professor of Public Policy, Stanford University (Sept. 2000 – present).	76	Director, Gilead Sciences, Inc. (2005 – present) Director, Monaco Coach Corporation (2005 – 2009)


William A. Hasler 1941 Trustee (Trustee of Schwab Capital Trust and Schwab Investments since 2000.)	Dean Emeritus, Haas School of Business, University of California, Berkeley (July 1998 – present).	76	Director, TOUSA (1998 – present) Director, Globalstar, Inc. (2009 – present) Director, Aviat Networks (2001 – present) Director, Mission West Properties (1998 – 2012) Director, Ditech Networks Corporation (1997 – 2012) Director, Genitope Corporation (2000 – 2009)


David L. Mahoney 1954 Trustee (Trustee of Schwab Capital Trust and Schwab Investments since 2011.)	Private Investor.	76	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Tercica Inc. (2004 – 2008)


Kiran M. Patel 1948 Trustee (Trustee of Schwab Capital Trust and Schwab Investments since 2011.)	Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services for consumers and small businesses) (Dec. 2008 – present); Senior Vice President and General Manager of Consumer Group, Intuit, Inc. (June 2007 – Dec. 2008); Senior Vice President and Chief Financial Officer, Intuit, Inc. (Sept. 2005 – Jan. 2008).	76	Director, KLA-Tencor Corporation (2008 – present) Director, BEA Systems, Inc. (2007 – 2008)


Gerald B. Smith 1950 Trustee (Trustee of Schwab Capital Trust and Schwab Investments since 2000.)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (1990 – present).	76	Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – present) Director, Oneok, Inc. (2009 – present) Lead Independent Director, Board of Cooper Industries (2002 – 2012)

Independent Trustees (continued)


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

Joseph H. Wender 1944 Trustee (Trustee of Schwab Capital Trust and Schwab Investments since 2008.)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (February 1998 – present).	76	Board Member and Chairman of the Audit Committee, Isis Pharmaceuticals (1994 – present)

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 1993 and Schwab Investments since 1991.)	Chairman and Director, The Charles Schwab Corporation, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc., Charles Schwab Bank, N. A.; Chairman and Chief Executive Officer, Schwab (SIS) Holdings Inc. I, Schwab International Holdings, Inc.; Chief Executive Officer, Schwab Holdings, Inc.; 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, Charles Schwab & Co., Inc.	76	None


Walter W. Bettinger II²1960 Trustee (Trustee of Schwab Capital Trust and Schwab Investments since 2008.)	As of October 2008, President and Chief Executive Officer, Charles Schwab & Co., Inc. 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. Until October 2008, President and Chief Operating Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation. 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.	99	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

Marie Chandoha 1961 President and Chief Executive Officer (Officer of Schwab Capital Trust and Schwab Investments since 2010.)		Executive Vice President, Charles Schwab & Co., Inc. (Sept. 2010 – present); Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010).

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 and Schwab Investments since 2004.)		Senior Vice President and Chief Financial Officer (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Treasurer and Chief Financial Officer, Laudus Funds (2006 – present); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – present) and Schwab ETFs (Oct. 2009 – present); Director, Charles Schwab Worldwide Fund, PLC and Charles Schwab Asset Management (Ireland) Limited (April 2005 – present).


Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities (Officer of Schwab Capital Trust and Schwab Investments since 2011.)		Senior Vice President and Chief Investment Officer — Equities, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds and Laudus Funds (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – April 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009).


Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of Schwab Capital Trust and Schwab Investments since 2011.)		Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds and Laudus Funds (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies, Loomis, Sayles & Company (April 2006 – Jan. 2008).


David Lekich 1964 Chief Legal Officer and Secretary (Officer of Schwab Capital Trust and Schwab Investments since 2011.)		Senior Vice President (Sept. 2011 – present), Vice President (March 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present), Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (April 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (April 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.


Catherine MacGregor 1964 Vice President and Assistant Secretary (Officer of Schwab Capital Trust and Schwab Investments since 2005.)		Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (March 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary, Schwab ETFs (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 retire at age 72 or after twenty years as a trustee, whichever comes first. In addition, the retirement policy requires any independent trustee of Schwab Funds who also serves as an independent trustee of the Laudus Funds to retire from the Boards of the Schwab Funds upon their required retirement date from either the Boards of Trustees of the Schwab Funds or the Laudus Funds, whichever comes first.
²		Mr. Schwab and Mr. Bettinger are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of the investment adviser.
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.

Barclays U.S. Aggregate Bond Index A broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-back securities (agency fixed-rate and hybrid ARM passthroughs), asset-backed securities, and commercial mortgage-backed securities.

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 capital gain or loss is considered unrealized appreciation or depreciation.

Dow Jones U.S. Total Stock Market Index An index that measures the performance of all U.S. equity securities with readily available prices.

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.

MSCI EAFE Index A free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada. The Net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes; returns are calculated applying dividend withholding rates applicable to non-resident persons who do not benefit from double taxation treaties.

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.

Russell 2000 Index An index that measures the performance of the small-cap segment of the U.S. equity universe. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.

S&P 500 Index A market capitalization index that is designed to measure the performance of 500 leading publicly held companies in leading industries of the U.S. economy.

Schwab 1000 Index An index that represents the performance of the largest 1,000 publicly traded companies in the United States.

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 Funds’ website at www.schwabfunds.com/prospectus, 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 the fund’s website at www.schwabfunds.com/prospectus or the SEC’s website at http://www.sec.gov.

The Schwab Funds Family^®

Stock Funds

Schwab Core Equity Fund^tm

Schwab Dividend Equity Fund^tm

Schwab Large-Cap Growth Fund^tm

Schwab Small-Cap Equity Fund^tm

Schwab Hedged 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 Company Index Fund

Schwab Fundamental International Large Company Index Fund

Schwab Fundamental International Small Company Index Fund

Schwab Fundamental Emerging Markets Large Company 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 Target 2045 Fund

Schwab Target 2050 Fund

Schwab Target 2055 Fund

Schwab^® Monthly Income Fund – Moderate Payout

Schwab^® Monthly Income Fund – Enhanced Payout

Schwab^® Monthly Income Fund – Maximum Payout

Bond Funds

Schwab Short-Term Bond Market Fund^tm

Schwab Intermediate-Term Bond Fund^tm

Schwab Total Bond Market Fund^tm

Schwab GNMA Fund^tm

Schwab^® Treasury Inflation Protected Securities Index Fund

Schwab Tax-Free Bond Fund^tm

Schwab California Tax-Free Bond Fund^tm

Schwab Money Funds

Schwab offers an array of money market funds¹. 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^®.


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 12 Months Ended October 31, 2013


Schwab Core Equity Fund^tm (Ticker Symbol: SWANX)			25.89%


S&P 500^® Index			27.18%
Fund Category: Morningstar Large Blend			27.16%


Performance Details			pages 8-9




Schwab Dividend Equity Fund^tm (Ticker Symbol: SWDSX)			27.99%


S&P 500^® Index			27.18%
Fund Category: Morningstar Large Value			26.84%


Performance Details			pages 10-11




Schwab Large-Cap Growth Fund^tm (Ticker Symbol: SWLSX)			26.76%


Russell 1000 Growth Index			28.30%
Fund Category: Morningstar Large Growth			29.40%


Performance Details			pages 12-13




Schwab Small-Cap Equity Fund^tm (Ticker Symbol: SWSCX)			41.10%


Russell 2000^® Index			36.28%
Fund Category: Morningstar Small Blend			35.17%


Performance Details			pages 14-15




Schwab Hedged Equity Fund^tm (Ticker Symbol: SWHEX)			13.81%


S&P 500^® Index			27.18%
Fund Category: Morningstar Long/Short Equity			12.66%


Performance Details			pages 16-17




Schwab Financial Services Fund^tm (Ticker Symbol: SWFFX)			30.20%


S&P 1500 SuperComposite Financials Sector Index			31.28%
Fund Category: Morningstar Financial			31.06%


Performance Details			pages 18-19




Schwab Health Care Fund^tm1 (Ticker Symbol: SWHFX)			35.46%


Dow Jones Global Health Care Index			30.80%
Fund Category: Morningstar Health			40.32%


Performance Details			pages 20-21




Schwab^® International Core Equity Fund¹ (Ticker Symbol: SICNX)			27.70%


MSCI EAFE^® Index (Gross)			27.40%
Fund Category: Morningstar Foreign Large Blend			23.08%


Performance Details			pages 22-23


Minimum Initial Investment²	$	100

For index definitions, please see the Glossary.

Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.


¹		The fund’s performance relative to the index may be affected by fair-value pricing and timing differences in foreign exchange calculations. See financial note 2 for more information.
²		Please see the funds’ prospectus for further detail and eligibility requirements.

4 Schwab Active Equity Funds

From the President

Marie Chandoha is President and CEO of Charles Schwab Investment Management, Inc. and the funds covered in this report.

Dear Shareholder,

As President and CEO of Charles Schwab Investment Management, Inc., I would like to thank you for trusting us to help you meet your investment goals, and for reading this annual report concerning the Schwab Active Equity Funds. Each fund employs a disciplined approach to investing that attempts to balance risks and expected returns. To aid in its stock selection process, each fund utilizes Schwab Equity Ratings^®, which represents Schwab’s proprietary approach to evaluating equity securities.

Turning to the 12 months ended October 31, 2013, the funds generated returns that reflected a strong performance by stocks, with the Schwab Small-Cap Equity Fund and Schwab Health Care Fund outperforming their comparative indices, and the Schwab Hedged Equity Fund underperforming its comparative index due to the nature of its investment strategies.

The backdrop for these results included policies by many of the world’s central banks aimed at keeping interest rates low to stimulate faster economic growth, and equities generally benefitted from these policies. However, some signs of improvement in the U.S. economy led the Federal Reserve to initially consider “tapering” its purchases of securities to keep interest rates low, while a brief U.S. federal government shutdown and budgetary gridlock created uncertainty in the financial markets. Stocks quickly overcame these obstacles as the Fed held off on the tapering, while stocks in developed international markets continued to rebound from previously depressed levels.

Asset Class Performance Comparison % returns during the 12 months ended 10/31/2013

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



		27.18%		S&P 500^® Index: measures U.S. large-cap stocks

		36.28%		Russell 2000^® Index: measures U.S. small-cap stocks

		26.88%		MSCI EAFE^® Index (Net): measures (in U.S. dollars) large-cap stocks in Europe, Australasia and the Far East

		−1.08%		Barclays U.S. Aggregate Bond Index: measures the U.S. bond market

		0.06%		Three-Month U.S. Treasury Bills (T-bills): measures short-term U.S. Treasury obligations

For index definitions, please see the Glossary.

Data source: Index provider websites and CSIM.

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

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

Schwab Active Equity Funds 5

From the President continued

Turning to the 12 months ended October 31, 2013, the funds generated returns that reflected a strong performance by stocks, with the Schwab Small-Cap Equity Fund and Schwab Health Care Fund outperforming their respective indices, and the Schwab Hedged Equity Fund underperforming its index due to the nature of its investment strategies.

In this environment, many U.S. stock market indices finished the period at or near record highs, and small-and mid-cap stocks generally outperformed large-cap stocks. Shares of companies in the Health Care and Financials sectors generated some of the highest returns, while Utilities and Telecommunication Services stocks generally underperformed by comparison. Reflecting this backdrop, the S&P 500 Index returned 27.2% for the reporting period, while the MSCI EAFE Index returned 26.9%.*

For more information about the Schwab Active Equity Funds, please continue reading this report. In addition, you can find further details about the Schwab Active Equity Funds and our other investment products by visiting www.schwabfunds.com. We are also happy to hear from you at 1-800-435-4000.

Sincerely,

* The total return cited is for the MSCI EAFE Index (Net), which is calculated net of foreign withholding. For full definitions of the referenced indices, please see the Glossary.

6 Schwab Active Equity Funds

Fund Management



		Jonas Svallin, CFA Managing Director and Head of Disciplined Active Equity Strategies, leads the portfolio management team of Schwab’s disciplined active equity funds. He also has overall responsibility for all aspects of the management of the funds. Prior to joining CSIM in 2012, Mr. Svallin spent nearly three years as a partner and a director of quantitative analytics and research at Fiduciary Research & Consulting, where he provided oversight of quantitative analytics and risk management efforts. From 2003 until 2009, Mr. Svallin was a principal and head portfolio manager at Algert Coldiron Investors (ACI). Prior to joining ACI, Mr. Svallin worked as a quantitative research associate at RCM Capital Management and a senior consultant at FactSet Research Systems.

		Wei Li, Ph.D., CFA Portfolio Manager, is responsible for the day-to-day co-management of each of the funds, except for Schwab Core Equity Fund, Schwab International Core Equity Fund, and Schwab Small-Cap Equity Fund. Prior to joining CSIM in 2012, Ms. Li spent more than ten years at BlackRock, Inc. (formerly Barclays Global Investors), where she held a number of positions. From 2001 to 2009, she worked in various roles in the Global Advanced Active group, including portfolio management and quantitative research for both U.S. and international equity markets. After 2009, she worked in the defined contribution research and product development area for almost two years.

Schwab Active Equity Funds 7

Schwab Core Equity Fund™

The Schwab Core Equity Fund (the fund) seeks long-term capital growth. To pursue its investment objective, the fund primarily invests in U.S. stocks. The fund expects to hold the common stocks of U.S companies that have market capitalizations of approximately $500 million or more. To aid its stock selection, the fund uses Schwab Equity Ratings. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 25.89% for the 12 months ended October 31, 2013, underperforming the S&P 500 Index (the index), which the fund uses for performance comparisons. The index returned 27.18% for the reporting period.

Market Highlights. All sectors within the index generated positive returns for the reporting period, as equities benefitted from the low-rate environment and some signs of improving economic conditions. The Consumer Discretionary and Industrials sectors performed particularly well, while the Utilities and Telecommunications sectors generated positive returns but underperformed by comparison.

Positioning and Strategies. The fund’s stock selections among large and mid-sized market-capitalization groups represented one of the most significant detractors from performance relative to the index. For example, the fund did not own shares of Gilead Sciences, Inc., a research-based biopharmaceutical company that represented a relatively large position in the index. Within the index, this Health Care sector holding returned approximately 111%, as the company reported solid financial results and benefitted from its strong line-up of products to treat life-threatening diseases. As a result, the fund’s lack of holdings in Gilead Sciences, Inc. represented a notable detractor from the fund’s relative performance.

However, some of the fund’s stock selections worked out more favorably. For example, the fund held an overweight compared with the index in Celgene Corporation, a global biopharmaceutical company. The company showed strong clinical results for its flagship product, which treats multiple types of cancer. As a result, the fund’s holdings of Celgene Corporation returned approximately 103%, and enhanced relative performance.

Among market sectors, the fund’s over- and underweights compared with the index generally detracted from the fund’s relative performance, although stock selection within these sectors generally helped performance overall. Stock selection in the Consumer Discretionary and Financials sectors detracted from the fund’s performance the most compared with the index, while stock selection in the Health Care and Energy sectors generated more successful results.

Within the Consumer Discretionary sector, for example, the fund held shares of Foot Locker, Inc. a retailer of athletic footwear and apparel. These holdings were not included in the index and generated a roughly flat return for the fund, underperforming the approximately 35% return for this sector within the fund, and reducing the fund’s return compared with the index.

As of 10/31/13:

Statistics


Number of Holdings			127
Weighted Average Market Cap ($ x 1,000,000)			$91,361
Price/Earnings Ratio (P/E)			17.5
Price/Book Ratio (P/B)			2.2
Portfolio Turnover Rate			80%

Sector Weightings % of Investments


Information Technology			17.2%
Health Care			15.5%
Financials			13.8%
Consumer Discretionary			13.8%
Energy			10.7%
Industrials			9.2%
Consumer Staples			8.3%
Utilities			4.1%
Materials			4.0%
Telecommunication Services			3.1%
Other			0.3%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Wells Fargo & Co.			3.2%
Pfizer, Inc.			2.9%
Apple, Inc.			2.9%
Chevron Corp.			2.7%
JPMorgan Chase & Co.			2.7%
ConocoPhillips			2.2%
Cisco Systems, Inc.			2.0%
AT&T, Inc.			1.8%
Nike, Inc., Class B			1.7%
Oracle Corp.			1.7%
Total			23.8%

Management’s views and portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


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

8 Schwab Active Equity Funds

Schwab Core Equity Fund^tm

Performance and Fund Facts as of 10/31/13

October 31, 2003 – October 31, 2013
Performance of Hypothetical
$10,000 Investment^1,2

Average Annual Total Returns^1,2,3


Fund and Inception Date	1 Year			5 Years			10 Years


Fund: Schwab Core Equity Fund^tm (7/1/96)		25.89	%		13.28	%		7.65	%
S&P 500^® Index		27.18	%		15.17	%		7.46	%
Fund Category: Morningstar Large Blend		27.16	%		14.48	%		7.01	%

Fund Expense Ratio⁴: 0.73%

For index definitions, please see the Glossary.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		On May 21, 2009, the Laudus U.S. MarketMasters Fund merged into the fund. And, on September 7, 2012, the Schwab Premier Equity Fund merged into the fund (see financial note 12).
³		Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
⁴		As stated in the prospectus. Reflects the total annual operating expenses without contractual fee waivers. For actual ratios during the period, refer to the financial highlights section of the financial statements.

Schwab Active Equity Funds 9

Schwab Dividend Equity Fund™

The Schwab Dividend Equity Fund (the fund) seeks current income and capital appreciation. Under normal circumstances, the fund invests at least 80% of its net assets in dividend-paying common and preferred stocks. To aid its stock selection, the fund uses Schwab Equity Ratings. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 27.99% for the 12 months ended October 31, 2013, outperforming the S&P 500 Index (the index), which the fund uses for performance comparisons. The index returned 27.18% for the reporting period. As of October 31, 2013, the fund’s dividend yield was 2.61%, higher than the 2.04% dividend yield of the index. As of October 31, 2013, the fund’s 30-Day SEC yield was 1.67%.

Market Highlights. Dividend-paying stocks generally performed well early in the reporting period, helped by a backdrop of low interest rates and expectations for Federal Reserve policies to remain extremely accommodative throughout 2013. However, once the financial markets learned that the Federal Reserve was initially considering “tapering” its stimulative economic efforts, dividend-paying stocks sold off sharply. In spite of general expectations to the contrary, the Fed’s anticipated tapering failed to materialize, and dividend-paying stocks began to recover. In this environment, the Consumer Discretionary and Industrials sectors performed particularly well, while the Utilities and Telecommunications sectors generated positive overall returns but underperformed by comparison.

Positioning and Strategies. Effective stock selection across select sectors, market-capitalization groups, and valuation measures helped the fund outperform the index. In particular, the fund benefitted from stock selection among market-capitalization groups of between $10 billion and $25 billion compared with the index.

For example, the fund did not own shares of Apple, Inc. Apple faced strong competition in the smartphone and tablet markets during the reporting period, and continued to generally lose market share to rivals such as Samsung Electronics Co., Ltd. Within the index, holdings of Apple represented one of the larger positions among Information Technology stocks, and returned approximately -10%. By not owning shares of this company, the fund’s performance relative to the index was enhanced.

Within the Consumer Staples sector, the fund’s holdings of Archer-Daniels-Midland Co. performed well, and represented one of the fund’s larger holdings. Archer-Daniels-Midland Co. procures, transports, stores, and merchandises agricultural products, and the fund held an overweight in this company compared with the index during the 12-month reporting period. The company continued to experience dividend growth and performed well, with the fund’s holdings returning approximately 56%, roughly double the overall return generated by Consumer Staples stocks in the index. As a result, these holdings enhanced the fund’s performance compared with the index.

Among market sectors, careful stock selection more than compensated for the negative overall performance impact of over- and underweights in one sector or another compared with the index. Selections among Information Technology sector stocks were particularly strong, enhancing the fund’s relative performance more than stock selections in all other market sectors combined.

As of 10/31/13:

Statistics


Number of Holdings			121
Weighted Average Market Cap ($ x 1,000,000)			$89,016
Price/Earnings Ratio (P/E)			17.0
Price/Book Ratio (P/B)			1.9
Portfolio Turnover Rate			64%

Sector Weightings % of Investments


Financials			27.3%
Energy			13.7%
Health Care			10.9%
Information Technology			9.3%
Consumer Discretionary			8.3%
Industrials			8.0%
Consumer Staples			6.6%
Utilities			6.0%
Materials			5.3%
Telecommunication Services			3.2%
Other			1.4%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Johnson & Johnson			3.7%
Wells Fargo & Co.			3.4%
JPMorgan Chase & Co.			3.2%
Chevron Corp.			3.0%
Pfizer, Inc.			3.0%
AT&T, Inc.			2.6%
ConocoPhillips			2.6%
Exxon Mobil Corp.			2.5%
Cisco Systems, Inc.			1.9%
Archer-Daniels-Midland Co.			1.7%
Total			27.6%

Management’s views and portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


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

10 Schwab Active Equity Funds

Schwab Dividend Equity Fund^tm

Performance and Fund Facts as of 10/31/13

October 31, 2003 – October 31, 2013
Performance of Hypothetical
$10,000 Investment^1,2

Average Annual Total Returns^1,2,3


Fund and Inception Date	1 Year			5 Years			10 Years


Fund: Schwab Dividend Equity Fund^tm (9/2/03)		27.99	%		13.65	%		8.41	%
S&P 500^® Index		27.18	%		15.17	%		7.46	%
Russell 1000 Value Index		28.29	%		14.06	%		7.81	%
Fund Category: Morningstar Large Value		26.84	%		13.73	%		7.19	%

Fund Expense Ratio⁴: 0.89%

Yields¹


30-Day SEC Yield			1.67%

For index definitions, please see the Glossary.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		On October 7, 2009, the Investor Share class and Select Share class were combined into a single class of shares of the fund. The performance history of the fund prior to October 7, 2009 is that of the fund’s former Select Shares.
³		Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
⁴		As stated in the prospectus. Reflects the total annual operating expenses without contractual fee waivers. For actual ratios during the period, refer to the financial highlights section of the financial statements.

Schwab Active Equity Funds 11

Schwab Large-Cap Growth Fund™

The Schwab Large-Cap Growth Fund (the fund) seeks long-term capital growth. To pursue its investment objective, the fund primarily invests in U.S. common stocks. Under normal circumstances, the fund invests at least 80% of its net assets in large-cap stocks of U.S. companies. To aid its stock selection, the fund uses Schwab Equity Ratings. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 26.76% for the 12 months ended October 31, 2013, underperforming the Russell 1000 Growth Index (the index), which the fund uses for performance comparisons. The index returned 28.30% for the reporting period.

Market Highlights. All sectors within the index generated positive returns, as equities benefitted from the low-rate environment and some signs of improving economic conditions. The Health Care and Consumer Discretionary sectors performed particularly well, while the Information Technology and Telecommunication Services sectors generated positive returns but underperformed by comparison.

Positioning and Strategies. The fund’s over- and underweights in many market sectors compared with the index represented one of the biggest overall detractors from the fund’s relative performance for the reporting period.

For example, the fund held an overweight in Telecommunications Service stocks that reduced the fund’s relative performance, as holdings in this sector returned approximately 3% and underperformed the index. Among Industrials stocks, the fund maintained an underweight that detracted from its relative performance as this sector generated overall returns that outperformed the index. However, the fund’s underweight in Consumer Staples stocks worked out more favorably, enhancing relative performance as stocks in this sector generally underperformed the index.

Stock selection within the various market sectors worked out more favorably for the fund overall, particularly within the Health Care sector. One strategic decision that detracted from the fund’s performance within this sector, however, was to underweight holdings of Gilead Sciences, Inc., a research-based biopharmaceutical company. The company represented a relatively large position in the index, where these holdings returned approximately 111% as the company reported solid financial results and benefitted from its strong product line-up. As a result, the fund’s relative underexposure to this company significantly detracted from relative performance.

By comparison, the fund’s overweight position in shares of Celgene Corporation, a global biopharmaceutical company, worked out more favorably. The company showed strong clinical results for its flagship product, which treats multiple types of cancer. As a result, the fund’s holdings of this company returned approximately 103%, and enhanced relative performance.

Stock selection within the Information Technology sector also enhanced the fund’s overall performance compared with the index. One strategic decision that detracted from the fund’s performance within this sector, however, was an underweight to holdings of Facebook Inc., which operates a social networking Internet site. The company reported mobile advertising revenues that generally exceeded expectations, helping holdings of Facebook Inc. return approximately 138% for the index during the period. As a result, the fund’s comparatively limited exposure detracted from performance compared with the index.

As of 10/31/13:

Statistics


Number of Holdings			113
Weighted Average Market Cap ($ x 1,000,000)			$85,099
Price/Earnings Ratio (P/E)			20.0
Price/Book Ratio (P/B)			3.6
Portfolio Turnover Rate			87%

Sector Weightings % of Investments


Information Technology			26.3%
Consumer Discretionary			21.8%
Health Care			14.9%
Consumer Staples			11.4%
Industrials			9.4%
Financials			4.8%
Materials			4.7%
Energy			4.2%
Telecommunication Services			1.6%
Utilities			0.4%
Other			0.5%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Apple, Inc.			3.8%
PepsiCo, Inc.			2.9%
Oracle Corp.			2.7%
Microsoft Corp.			2.6%
Google, Inc., Class A			2.5%
Amgen, Inc.			2.1%
Celgene Corp.			2.1%
EOG Resources, Inc.			2.0%
The TJX Cos., Inc.			2.0%
Nike, Inc., Class B			2.0%
Total			24.7%

Management’s views and portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


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

12 Schwab Active Equity Funds

Schwab Large-Cap Growth Fund^tm

Performance and Fund Facts as of 10/31/13

October 3, 2005 – October 31, 2013
Performance of Hypothetical
$10,000 Investment^1,2

Average Annual Total Returns^1,2,3


Fund and Inception Date	1 Year			5 Years			Since Inception


Fund: Schwab Large-Cap Growth Fund^tm (10/3/05)		26.76	%		14.49	%		6.22	%
Russell 1000 Growth Index		28.30	%		17.51	%		7.89	%
Fund Category: Morningstar Large Growth		29.40	%		15.90	%		6.93	%

Fund Expense Ratios⁴: Net 0.99%; Gross 1.05%

For index definitions, please see the Glossary.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		On October 7, 2009, the Investor Share class and Select Share class were combined into a single class of shares of the fund. The performance history of the fund prior to October 7, 2009 is that of the fund’s former Select Shares.
³		Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
⁴		As stated in the prospectus. 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 Active Equity Funds 13

Schwab Small-Cap Equity Fund™

The Schwab Small-Cap Equity Fund (the fund) seeks long-term capital growth. Under normal circumstances, the fund invests at least 80% of its net assets in small-cap equity securities. To aid its stock selection, the fund uses Schwab Equity Ratings. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 41.10% for the 12 months ended October 31, 2013, outperforming the Russell 2000 Index (the index), which the fund uses for performance comparisons. The index returned 36.28% for the reporting period.

Market Highlights. All sectors within the index generated positive returns for the reporting period, as equities benefitted from the low-rate environment and some signs of improving economic conditions. Within the index, the Industrials and Information Technology sectors performed particularly well, while the Utilities and Materials sectors generated positive returns but underperformed by comparison.

Positioning and Strategies. Effective stock selection across many market sectors, market-capitalization groups, and valuation measures helped the fund outperform the index.

For example, stock selections among price-to-book groups enhanced the fund’s overall performance relative to the index, with holdings performing particularly well among companies with low price-to-book ratios. For example, the fund owned shares of Rite Aid Corporation, which operates a retail drugstore chain. A favorable operating environment combined with some well-considered strategic shifts in the company’s operations helped holdings of this stock return approximately 301% for the fund. As a result, the fund’s overweight position in this company compared with the index enhanced relative performance.

Another example of a positive contributor within price-to-book groups was Zale Corporation, which operates retail jewelry stores. The company generated favorable operating results during the reporting period, helping the fund’s holdings return approximately 150%. As a result, the fund’s overweight position relative to the index enhanced performance. By comparison, the fund’s position in Delek US Holdings, Inc., a diversified energy company focused on petroleum refining and supply, reduced the fund’s relative performance. The fund’s holdings of Delek US Holdings, Inc. returned approximately -26%, and when combined with the fund’s relative overweight compared with the index, detracted from relative performance.

Not all stock selections within the fund’s price-to-earnings strategy worked out as favorably. The fund held overweight positions in Coeur Mining, Inc., a precious metals mining company, and in Rovi Corporation, a communications equipment company that was not in the index. Holdings of Coeur Mining, Inc. returned approximately -61% for the fund, while holdings of Rovi Corporation returned approximately 24%, underperforming the overall return of the Information Technology sector within the index. Both of these stock selections detracted from the fund’s relative performance.

Among various market sectors, overall stock selection contributed to the fund’s outperformance of the index. Selection among the Financials, Industrials, and Consumer Discretionary sectors was particularly strong. For example, the fund’s holdings of Investment Technology Group, Inc., an institutional brokerage company, returned approximately 90%, and when combined with the fund’s overweight in this stock, enhanced the fund’s performance versus the index.

As of 10/31/13:

Statistics


Number of Holdings			343
Weighted Average Market Cap ($ x 1,000,000)			$1,725
Price/Earnings Ratio (P/E)			34.5
Price/Book Ratio (P/B)			1.9
Portfolio Turnover Rate			84%

Sector Weightings % of Investments


Information Technology			20.6%
Financials			19.1%
Health Care			15.4%
Industrials			14.5%
Consumer Discretionary			10.9%
Materials			5.9%
Energy			5.9%
Consumer Staples			4.4%
Utilities			1.5%
Telecommunication Services			0.7%
Other			1.1%
Total			100.0%

Top Equity Holdings % of Net Assets¹


EnerSys, Inc.			1.0%
RLJ Lodging Trust			0.9%
PTC, Inc.			0.9%
Minerals Technologies, Inc.			0.9%
International Rectifier Corp.			0.9%
Worthington Technologies Corp.			0.9%
Esterline Technologies Corp.			0.9%
j2 Global, Inc.			0.9%
Black Hills Corp.			0.8%
STERIS Corp.			0.8%
Total			8.9%

Management’s 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.

14 Schwab Active Equity Funds

Schwab Small-Cap Equity Fund^tm

Performance and Fund Facts as of 10/31/13

October 31, 2003 – October 31, 2013
Performance of Hypothetical
$10,000 Investment^1,2

Average Annual Total Returns^1,2,3


Fund and Inception Date	1 Year			5 Years			10 Years


Fund: Schwab Small-Cap Equity Fund^tm (7/1/03)		41.10	%		18.86	%		10.20	%
Russell 2000^® Index		36.28	%		17.04	%		9.03	%
Fund Category: Morningstar Small Blend		35.17	%		17.34	%		9.02	%

Fund Expense Ratio⁴: 1.12%

For index definitions, please see the Glossary.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		On September 28, 2009, the Investor Share class and Select Share class were combined into a single class of shares of the fund. The performance history of the fund prior to September 28, 2009 is that of the fund’s former Select Shares.
³		Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
⁴		As stated in the prospectus. Reflects the total annual operating expenses without contractual fee waivers. For actual ratios during the period, refer to the financial highlights section of the financial statements.

Schwab Active Equity Funds 15

Schwab Hedged Equity Fund™

The Schwab Hedged Equity Fund (the fund) seeks long-term capital appreciation over market cycles with lower volatility than the broad equity market. To pursue its investment objective, the fund establishes long and short positions in equity securities issued by U.S. companies. When the fund takes a long position, it purchases a stock outright. However, when the fund takes a short position, it sells a stock that it has borrowed, and at the scheduled time of replacement, has to buy the stock at the current market price to close out the transaction. If the price of the stock rises after the short sale, the fund loses money, and vice versa. The fund typically purchases or sells short stocks of companies that have market capitalizations of $1 billion or more at the time the stock is purchased or sold short. To aid its stocks selection, the fund uses Schwab Equity Ratings. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 13.81% for the 12 months ended October 31, 2013, underperforming the S&P 500 Index (the index), which returned 27.18% for the reporting period. Although the fund uses the index for general performance comparisons, the fund’s investment objective and use of short sale transactions generally mean that its total return is expected to be lower than the total return of the index when stocks rally, but potentially higher than the total return of the index when the stock market loses ground.

Market Highlights. All sectors within the index generated positive returns for the reporting period, as equities benefitted from low interest rates that made financing more affordable for businesses and households. Some signs of improving economic conditions also generally supported these results. The Consumer Discretionary and Industrials sectors performed particularly well, while the Utilities and Telecommunications sectors generated positive returns but underperformed by comparison.

Positioning and Strategies. Throughout the 12-month reporting period, the fund held short positions of approximately 42% of net assets on average. Given the substantial rally by stocks, these short positions significantly detracted from the fund’s return compared with the index, and provided the most significant reason for the performance disparity between the two.

The fund’s allocations across market sectors also weighed on performance compared with the index, particularly among the Consumer Discretionary and Financials sectors. For example, the fund’s long positions in the Consumer Discretionary sector returned approximately 31%, significantly underperforming the approximately 40% corresponding return of the index. In addition, although the fund’s long positions in the Financials sector solidly outperformed those in the index, the fund’s short positions within this sector reduced this relative outperformance.

Not all sector strategies generated negative results, with the fund’s selections within the Materials sector providing one example. Overall selections in this sector compared with the index benefited relative performance as the fund’s long positions returned approximately 32%, outperforming those of the index.

From a valuation standpoint, the fund’s strategies among lower price-to-earnings groups generally helped the fund’s performance. For example, the fund’s relative overweight in the Kroger Co., which operates supermarkets and convenience stores in the U.S., helped the fund’s performance compared with the index. The company reported generally good earnings throughout the year, helping the fund’s holdings return approximately 73% for the reporting period and solidly outperform the overall return generated by the Consumer Staples sector.

Another stock selection that helped the fund’s performance relative to the index was Delta Air Lines, Inc., an air transportation company. The fund held an overweight in this company compared with the index, and these holdings returned approximately 104% for the reporting period as Delta Air Lines, Inc. reported very good earnings.

As of 10/31/13:

Statistics


Number of Holdings
Long Holdings			137
Short Holdings			95
Weighted Average Market Cap ($ x 1,000,000)
Long Holdings			$61,212
Short Holdings			$6,480
Price/Earnings Ratio (P/E)
Long Holdings			19.8
Short Holdings			46.1
Price/Book Ratio (P/B)
Long Holdings			2.2
Short Holdings			3.6
Portfolio Turnover Rate			130%
Portfolio Turnover Rate excluding short sales			71%

Top Equity Long Holdings

% of Net Assets¹


Apple, Inc.			2.6%
Wells Fargo & Co.			2.6%
Pfizer, Inc.			2.5%
FedEx Corp.			2.1%
ConocoPhillips			2.1%
Total			11.9%

Top Equity Short Holdings

% of Net Assets¹


Signature Bank			1.6%
TransDigm Group, Inc.			1.4%
The Hain Celestial Group, Inc.			1.2%
PartnerRe Ltd.			1.2%
RLI Corp.			1.1%
Total			6.5%

Management’s views and portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


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

16 Schwab Active Equity Funds

Schwab Hedged Equity Fund^tm

Performance and Fund Facts as of 10/31/13

October 31, 2003 – October 31, 2013
Performance of Hypothetical
$10,000 Investment^1,2

Average Annual Total Returns^1,2,3


Fund and Inception Date	1 Year			5 Years			10 Years


Fund: Schwab Hedged Equity Fund^tm (9/3/02)		13.81	%		8.23	%		5.80	%
S&P 500^® Index		27.18	%		15.17	%		7.46	%
Fund Category: Morningstar Long/Short Equity		12.66	%		7.15	%		5.45	%

Fund Expense Ratios⁴: Net 2.08%; Gross 2.13%

For index definitions, please see the Glossary.

The Schwab Hedged Equity Fund’s long positions can decline in value at the same time the value of its shorted stocks increases, thereby increasing the potential for loss. The potential loss associated with short positions is much greater than the original value of the securities sold. The use of borrowing and short sales may cause the fund to have higher expenses than those of equity funds that do not use such techniques.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		On September 28, 2009, the Investor Share class and Select Share class were combined into a single class of shares of the fund. The performance history of the fund prior to September 28, 2009 is that of the fund’s former Select Shares.
³		Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
⁴		As stated in the prospectus. 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 Active Equity Funds 17

Schwab Financial Services Fund™

The Schwab Financial Services Fund (the fund) seeks long-term capital growth. To pursue its investment objective, the fund primarily invests in equity securities issued by companies in the financial services sector. To aid its stock selection, the fund uses Schwab Equity Ratings. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 30.20% for the 12 months ended October 31, 2013, underperforming the S&P 1500 SuperComposite Financials Sector Index (the index), which the fund uses for performance comparisons. The index returned 31.28% for the reporting period.

Market Highlights. Stocks in U.S. and developed international markets generated solid returns for the reporting period, supported by efforts by the Federal Reserve and many other central banks to keep interest rates low to stimulate economic growth. This made financing more affordable for businesses and households alike, and generally made financial products at banks and companies offering diversified financial services more appealing to investors and savers. Insurance providers and companies involved in asset management also produced particularly noteworthy returns.

Positioning and Strategies. The fund’s over- and underweights among market-capitalization groups represented a primary detractor from performance compared with the index, although stock selection within this strategy generally helped overall. For example, the fund’s stock selections among companies with market capitalizations of $10 billion to $50 billion detracted overall from relative performance, while stocks in this group generated solid returns but underperformed many other market-capitalization groups.

Within the fund’s broader market-capitalization strategy, one significant detractor was an overweight position in Weyerhaeuser Company, a real estate investment trust. During the reporting period, the relatively modest pace of housing starts, particularly for single-family units, limited the performance of this company’s stock. As a result, the fund’s holdings of Weyerhaeuser Company returned approximately -10%, and when combined with the fund’s overweight in this company compared with the index, detracted from relative performance.

By comparison, over- and underweights compared with the index among price-to-earnings groups generally enhanced the fund’s performance. Allocations among the highest and lowest price-to-earnings groups in particular generally supported this result, although stock selection within these groups generally detracted from the fund’s relative return.

Within the fund’s strategy concerning price-to-earnings groups, holdings of WSFS Financial Corporation, a financial services company, enhanced the fund’s performance compared with the index. The index did not include holdings of WSFS Financial Corporation, which returned approximately 67% for the fund, as the company reported generally solid earnings and improved its market share, thanks in part to an evolving balance of products. As a result, the fund’s overweight position in this company enhanced relative performance, as the overall Thrifts & Mortgage Financing sub-industry within the index returned approximately 22%, well below the returns of the fund’s WSFS Financial Corporation holdings.

As of 10/31/13:

Statistics


Number of Holdings			66
Weighted Average Market Cap ($ x 1,000,000)			$73,801
Price/Earnings Ratio (P/E)			15.7
Price/Book Ratio (P/B)			1.3
Portfolio Turnover Rate			74%

Industry Weightings % of Investments


Diversified Financials			45.5%
Banks			21.9%
Real Estate			16.1%
Insurance			15.9%
Other			0.6%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Wells Fargo & Co.			8.7%
JPMorgan Chase & Co.			7.8%
Berkshire Hathaway, Inc., Class B			5.1%
Citigroup, Inc.			4.6%
American Express Co.			4.2%
Bank of America Corp.			4.1%
American International Group, Inc.			3.1%
The Bank of New York Mellon Corp.			3.0%
The PNC Financial Services Group, Inc.			3.0%
The Travelers Cos., Inc.			2.6%
Total			46.2%

Management’s views and portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


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

18 Schwab Active Equity Funds

Schwab Financial Services Fund^tm

Performance and Fund Facts as of 10/31/13

October 31, 2003 – October 31, 2013
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns^1,2


Fund and Inception Date	1 Year			5 Years			10 Years


Fund: Schwab Financial Services Fund^tm (7/3/00)		30.20	%		9.72	%		3.78	%
S&P 1500 SuperComposite Financials Sector Index		31.28	%		8.36	%		0.34	%
S&P 500^® Index		27.18	%		15.17	%		7.46	%
Fund Category: Morningstar Financial		31.06	%		11.25	%		3.24	%

Fund Expense Ratios³: Net 0.94%; Gross 1.10%

For index definitions, please see the Glossary.

Since the Financial Services Fund focuses its investments on companies involved in specific sectors, this fund may involve a greater degree of risk than an investment in mutual funds that do not concentrate their investments.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
³		As stated in the prospectus. 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 Active Equity Funds 19

Schwab Health Care Fund™

The Schwab Health Care Fund (the fund) seeks long-term capital growth. To pursue its investment objective, the fund primarily invests in equity securities issued by companies in the Health Care sector. The fund uses Schwab Equity Ratings to aid its U.S. stock selection and Schwab’s proprietary international stock research to aid its international stock selection. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 35.46% for the 12 months ended October 31, 2013, outperforming the Dow Jones Global Health Care Index (the index), which the fund uses for performance comparisons. The index returned 30.80% for the reporting period.

Market Highlights. Health Care stocks in the U.S. generally outperformed similar securities across much of the globe, and were some of the better overall performers within the broader U.S. stock market. Within the broad Health Care sector, Biotechnology, Pharmaceuticals, and Health Care Equipment stocks—collectively representing more than 80% of the index—each generated overall returns that ranged from approximately 25% to 63%.

Positioning and Strategies. Multiple strategies helped the fund outperform the index, but effective stock selection within the U.S. was one of the most significant overall contributors. By comparison, stock selection among overseas markets generally detracted from the fund’s relative return.

Stock selection in the U.S., which represented an average weight of approximately 78% of the fund, worked out well for the fund, and selection strategies among market-capitalization groups with $50 billion or less were some of the better performers within this strategy. For example, the fund held an overweight position versus the index in Celgene Corporation, a global biopharmaceutical company based in the U.S. The company showed strong clinical results for its flagship product, which treats multiple types of cancer. As a result, the fund’s holdings of Celgene Corporation returned approximately 103%, and when combined with the fund’s overweight in the company compared with the index, enhanced relative performance.

Turning to the fund’s broad market-capitalization strategy, the fund owned stock in Boston Scientific Corporation, which develops, manufactures, and markets cardiovascular devices. Boston Scientific Corporation generated positive organic sales growth during the reporting period, although the company’s product line produced comparatively mixed results. As a result, the fund’s holdings of Boston Scientific Corporation returned approximately 127%, allowing the fund’s overweight to substantially enhance relative performance.

However, not all of the fund’s stock selections within its broad market-capitalization strategy were as successful. For example, the fund owned an overweight position compared with the index in Eli Lilly and Company, a large pharmaceutical company based in the U.S. with an established, globally distributed product line-up. Holdings of Eli Lilly returned approximately 2% for the fund, well below the roughly 39% overall return that the fund’s U.S. Health Care stocks generated. As a result, the fund’s Eli Lilly holdings reduced the fund’s performance compared with the index.

As of 10/31/13:

Statistics


Number of Holdings			96
Weighted Average Market Cap ($ x 1,000,000)			$84,921
Price/Earnings Ratio (P/E)			20.8
Price/Book Ratio (P/B)			3.3
Portfolio Turnover Rate			54%

Industry Weightings % of Investments


Pharmaceuticals, Biotechnology & Life Sciences			71.0%
Healthcare – Services			26.9%
Materials			0.8%
Other			1.3%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Pfizer, Inc.			7.1%
Johnson & Johnson			7.0%
Amgen, Inc.			4.8%
AbbVie, Inc.			4.5%
Roche Holding AG			4.2%
Celgene Corp.			4.0%
Merck & Co., Inc.			4.0%
Medtronic, Inc.			3.9%
Biogen Idec, Inc.			3.4%
Novartis AG – Reg’d			3.3%
Total			46.2%

Management’s views and portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


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

20 Schwab Active Equity Funds

Schwab Health Care Fund^tm

Performance and Fund Facts as of 10/31/13

October 31, 2003 – October 31, 2013
Performance of Hypothetical
$10,000 Investment¹

Average Annual Total Returns^1,2


Fund and Inception Date	1 Year			5 Years			10 Years


Fund: Schwab Health Care Fund^tm (7/3/00)		35.46	%		18.18	%		13.32	%
Dow Jones Global Health Care Index		30.80	%		15.96	%		9.55	%
S&P 500^® Index		27.18	%		15.17	%		7.46	%
Fund Category: Morningstar Health		40.32	%		19.01	%		10.83	%

Fund Expense Ratios³: Net 0.82%; Gross 0.85%

For index definitions, please see the Glossary.

The fund’s performance relative to the index may be affected by fair-value pricing, see financial note 2 for more information.

Since the Health Care Fund focuses its investments on companies involved in specific sectors, this fund may involve a greater degree of risk than an investment in mutual funds that do not concentrate their investments.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
³		As stated in the prospectus. 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 Active Equity Funds 21

Schwab^® International Core Equity Fund

The Schwab International Core Equity Fund (the fund) seeks long-term capital growth. To pursue its investment objective, the fund primarily invests in stocks of publicly traded companies located in developed countries, excluding the U.S. To aid its stock selection, the fund uses Schwab’s proprietary international stock research. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 27.70% for the 12 months ended October 31, 2013, outperforming the MSCI EAFE Index (the index), which the fund uses for performance comparisons. The index returned 27.40% for the reporting period.

Market Highlights. International equities in developed markets performed well, continuing to rally from depressed levels during the height of the euro zone’s sovereign debt crisis. Policies by many central banks around the world aimed at keeping interest rates low to stimulate economic growth, pockets of economic improvement in some developed European economies, and relative stability in the euro zone generally supported the performance of overseas stocks.

Positioning and Strategies. Multiple strategies helped the fund outperform, but effective stock selection was one of the most noteworthy overall contributors. Stock selection in the U.K., France, and Australia was particularly strong, while stock selection in Japan was a primary detractor from the fund’s performance.

For example, the fund’s U.K. holdings returned approximately 27% for the reporting period in U.S. dollar terms, outperforming the approximately 21% return generated by U.K. holdings within the index. Within this country market, the fund’s holdings of Berendsen PLC, a textile service company, and Grainger PLC, a residential property company, performed particularly well as both companies experienced strong earnings and cash flow growth, enhancing the fund’s performance compared with the index.

Stock selection in Japan worked out less favorably, detracting from the fund’s relative performance. For example, the fund owned shares of Ajinomoto Co, Inc., which produces and sells a variety of food products. Holdings of this company returned approximately -9% in U.S. dollar terms, and when combined with the fund’s overweight in this stock, detracted from the fund’s return compared with the index.

Turning to valuation strategies, the fund’s stock selection among price-to-earnings groups was a significant contributor to the fund’s outperformance of the index. Stock selection among lower price-to-earnings groups was particularly strong, while selection among more middle price-to-earnings groups generally detracted from performance. One example of stock selection that enhanced relative performance within the fund’s overall price-to-earnings strategy was INPEX Corporation, a Japanese holding company involved in oil and natural gas exploration and production. The fund’s holdings of INPEX Corporation returned approximately -6% in U.S. dollar terms, while representing a smaller overall position than within the index, where this company’s stock generated even lower returns. As a result, this strategic positioning in INPEX Corporation enhanced the fund’s performance compared with the index.

As of 10/31/13:

Statistics


Number of Holdings			208
Weighted Average Market Cap ($ x 1,000,000)			$53,925
Price/Earnings Ratio (P/E)			18.7
Price/Book Ratio (P/B)			1.3
Portfolio Turnover Rate			75%

Sector Weightings % of Investments


Financials			22.6%
Consumer Discretionary			14.3%
Industrials			13.6%
Health Care			10.6%
Energy			9.3%
Consumer Staples			8.3%
Materials			6.9%
Information Technology			5.2%
Telecommunication Services			3.8%
Utilities			3.4%
Other			2.0%
Total			100.0%

Top Equity Holdings % of Net Assets¹


BP plc			2.3%
Sanofi			2.0%
Novartis AG – Reg’d			1.8%
BNP Paribas S.A.			1.8%
Roche Holding AG			1.8%
Siemens AG – Reg’d			1.7%
Panasonic Corp.			1.7%
Next plc			1.6%
Repsol S.A.			1.5%
Total S.A.			1.5%
Total			17.7%

Management’s views and portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

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.

22 Schwab Active Equity Funds

Schwab^® International Core Equity Fund

Performance and Fund Facts as of 10/31/13

May 30, 2008 – October 31, 2013
Performance of Hypothetical
$10,000 Investment^1,2

Average Annual Total Returns^1,2,3


Fund and Inception Date	1 Year			5 Years			Since Inception


Fund: Schwab^® International Core Equity Fund (5/30/08)		27.70	%		13.60	%		1.89	%
MSCI EAFE^® Index (Gross)		27.40	%		12.52	%		1.04	%
Fund Category: Morningstar Foreign Large Blend		23.08	%		11.74	%		0.02	%

Fund Expense Ratios⁴: Net 0.87%; Gross 1.17%

Country Weightings % of Investments


Japan			20.2%
United Kingdom			20.0%
France			10.5%
Germany			9.1%
Australia			8.2%
Switzerland			7.2%
Netherlands			4.0%
Sweden			3.3%
Spain			2.8%
Other Countries			14.7%
Total			100.0%

For index definitions, please see the Glossary.

The fund’s performance relative to the index may be affected by fair-value pricing, see financial note 2 for more information.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		On October 7, 2009, the Investor Share class, Select Share class and Institutional Share class were combined into a single class of shares of the fund. The performance history of the fund prior to October 7, 2009 is that of the fund’s former Institutional Shares. On December 3, 2009, the Laudus Rosenberg International Equity Fund merged into the fund.
³		Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
⁴		As stated in the prospectus. Includes acquired fund fees and expenses incurred indirectly by the fund through its investments in other investment companies. The annualized weighted average expense ratio of these investment companies was 0.01%. 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 Active Equity Funds 23

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 5/1/13		at 10/31/13		5/1/13–10/31/13

Schwab Core Equity Fund^tm
Actual Return		0.72%	$	1,000.00	$	1,108.70	$	3.83
Hypothetical 5% Return		0.72%	$	1,000.00	$	1,021.58	$	3.67


Schwab Dividend Equity Fund^tm
Actual Return		0.89%	$	1,000.00	$	1,107.20	$	4.73
Hypothetical 5% Return		0.89%	$	1,000.00	$	1,020.72	$	4.53


Schwab Large-Cap Growth Fund^tm
Actual Return		0.99%	$	1,000.00	$	1,118.60	$	5.29
Hypothetical 5% Return		0.99%	$	1,000.00	$	1,020.21	$	5.04


Schwab Small-Cap Equity Fund^tm
Actual Return		1.10%	$	1,000.00	$	1,183.20	$	6.05
Hypothetical 5% Return		1.10%	$	1,000.00	$	1,019.66	$	5.60


Schwab Hedged Equity Fund^tm
Actual Return		2.16%	$	1,000.00	$	1,050.20	$	11.16
Hypothetical 5% Return		2.16%	$	1,000.00	$	1,014.32	$	10.97


Schwab Financial Services Fund^tm
Actual Return		0.94%	$	1,000.00	$	1,099.00	$	4.97
Hypothetical 5% Return		0.94%	$	1,000.00	$	1,020.47	$	4.79


Schwab Health Care Fund^tm
Actual Return		0.82%	$	1,000.00	$	1,120.40	$	4.38
Hypothetical 5% Return		0.82%	$	1,000.00	$	1,021.07	$	4.18


Schwab^® International Core Equity Fund
Actual Return		0.86%	$	1,000.00	$	1,092.30	$	4.54
Hypothetical 5% Return		0.86%	$	1,000.00	$	1,020.87	$	4.38


¹		Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights which covers a 12-month period.
²		Expenses for each fund 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.

24 Schwab Active Equity Funds

Schwab Core Equity Fund™

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09


Per-Share Data ($)

Net asset value at beginning of period		18.80			16.81			15.78			14.26			13.43

Income (loss) from investment operations:
Net investment income (loss)		0.32			0.26			0.19			0.17			0.17
Net realized and unrealized gains (losses)		4.51			2.07			1.01			1.50			0.88

Total from investment operations		4.83			2.33			1.20			1.67			1.05
Less distributions:
Distributions from net investment income		(0.17	)		(0.34	)		(0.17	)		(0.15	)		(0.22	)

Net asset value at end of period		23.46			18.80			16.81			15.78			14.26

Total return (%)		25.89			13.99			7.60			11.77			8.11

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.72			0.72			0.73			0.73			0.75
Gross operating expenses		0.73			0.73			0.73			0.74			0.78
Net investment income (loss)		1.51			1.37			1.06			1.05			1.39
Portfolio turnover rate		80			45	¹		35			49			41	²
Net assets, end of period ($ x 1,000,000)		2,247			1,880			1,719			1,792			1,770

¹ Portfolio turnover excludes the impact of investment activity from a merger with another fund. See financial note 12 for additional information.

² Portfolio turnover excludes the impact of investment activity from a merger with another fund.

See financial notes 25

Schwab Core Equity Fund

Portfolio Holdings as of October 31, 2013

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 the fund’s website at www.schwabfunds.com/prospectus.


				Cost		Value
Holdings by Category				($)		($)

	99	.7%	Common Stock		1,779,675,648		2,240,003,911
	0	.3%	Other Investment Company		6,221,788		6,221,788
	0	.0%	Short-Term Investment		349,998		349,998


	100	.0%	Total Investments		1,786,247,434		2,246,575,697
	0	.7%	Collateral Invested for Securities on Loan		14,746,820		14,746,820
	(0	.7%)	Other Assets and Liabilities, Net				(14,199,217	)


	100	.0%	Total Net Assets				2,247,123,300


	Number		Value
Security	of Shares		($)

Common Stock 99.7% of net assets

Automobiles & Components 0.4%
Ford Motor Co.		528,000		9,034,080

Banks 3.2%
Wells Fargo & Co.		1,700,200		72,581,538

Capital Goods 6.0%
3M Co.		34,700		4,366,995
Danaher Corp.		447,000		32,224,230
Eaton Corp. plc		51,300		3,619,728
General Dynamics Corp.		124,300		10,768,109
General Electric Co.		396,100		10,354,054
Honeywell International, Inc.		137,500		11,925,375
IDEX Corp.		23,700		1,638,855
Northrop Grumman Corp.		229,000		24,619,790
Regal-Beloit Corp.		37,000		2,713,210
Textron, Inc.		460,000		13,243,400
The Boeing Co.		82,400		10,753,200
United Rentals, Inc. *		119,600		7,724,964

				133,951,910

Commercial & Professional Supplies 2.1%
Nielsen Holdings N.V.		224,000		8,834,560
The ADT Corp. (b)		368,500		15,981,845
Towers Watson & Co., Class A		51,600		5,924,196
Waste Management, Inc.		402,300		17,516,142

				48,256,743

Consumer Durables & Apparel 3.0%
Hanesbrands, Inc.		65,000		4,427,800
Jarden Corp. *		332,250		18,393,360
Mohawk Industries, Inc. *		52,000		6,885,840
NIKE, Inc., Class B		508,000		38,486,080

				68,193,080

Consumer Services 3.1%
International Game Technology		1,262,900		23,742,520
MGM Resorts International *		1,146,400		21,827,456
Service Corp. International		603,300		10,865,433
Wyndham Worldwide Corp.		204,000		13,545,600

				69,981,009

Diversified Financials 7.8%
Bank of America Corp.		1,574,000		21,973,040
Berkshire Hathaway, Inc., Class B *		112,100		12,900,468
Citigroup, Inc.		315,000		15,365,700
JPMorgan Chase & Co.		1,181,240		60,881,109
Morgan Stanley		140,000		4,022,200
State Street Corp.		471,000		33,002,970
The Bank of New York Mellon Corp.		825,000		26,235,000

				174,380,487

Energy 10.7%
Anadarko Petroleum Corp.		177,200		16,885,388
Baker Hughes, Inc.		219,100		12,727,519
Chevron Corp.		515,100		61,791,396
ConocoPhillips		674,100		49,411,530
EOG Resources, Inc.		95,600		17,055,040
Exxon Mobil Corp.		145,500		13,039,710
Hess Corp.		125,600		10,198,720
Marathon Petroleum Corp.		190,700		13,665,562
Murphy Oil Corp.		270,565		16,320,481
Occidental Petroleum Corp.		264,990		25,460,239
Phillips 66		42,900		2,764,047

				239,319,632

Food & Staples Retailing 1.8%
Costco Wholesale Corp.		116,400		13,735,200
The Kroger Co.		226,400		9,698,976
Walgreen Co.		279,700		16,569,428

				40,003,604

Food, Beverage & Tobacco 4.7%
Altria Group, Inc.		142,600		5,308,998
Archer-Daniels-Midland Co.		864,500		35,358,050
Hillshire Brands Co.		495,600		16,270,548
Molson Coors Brewing Co., Class B		116,500		6,291,000
PepsiCo, Inc.		440,000		36,999,600
Tyson Foods, Inc., Class A		185,000		5,118,950

				105,347,146

26 See financial notes

Schwab Core Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Health Care Equipment & Services 5.7%
Abbott Laboratories		450,700		16,473,085
Becton, Dickinson & Co.		88,000		9,251,440
Boston Scientific Corp. *		332,500		3,886,925
CareFusion Corp. *		614,500		23,824,165
Cigna Corp.		437,500		33,678,750
Covidien plc		159,000		10,193,490
Medtronic, Inc.		360,500		20,692,700
WellPoint, Inc.		119,500		10,133,600

				128,134,155

Household & Personal Products 1.8%
Energizer Holdings, Inc.		236,800		23,232,448
Kimberly-Clark Corp.		161,600		17,452,800

				40,685,248

Insurance 2.4%
Aflac, Inc.		208,500		13,548,330
American International Group, Inc.		134,300		6,936,595
MetLife, Inc.		150,000		7,096,500
Prudential Financial, Inc.		40,000		3,255,600
Reinsurance Group of America, Inc.		76,500		5,445,270
The Progressive Corp.		263,200		6,835,304
The Travelers Cos., Inc.		129,000		11,132,700

				54,250,299

Materials 4.0%
Avery Dennison Corp.		266,300		12,548,056
International Paper Co.		201,500		8,988,915
PPG Industries, Inc.		193,000		35,237,940
Steel Dynamics, Inc.		319,000		5,732,430
The Dow Chemical Co.		684,700		27,025,109

				89,532,450

Media 2.1%
Comcast Corp., Class A		455,000		21,648,900
Time Warner, Inc.		186,300		12,806,262
Viacom Inc., Class B		150,700		12,551,803

				47,006,965

Pharmaceuticals, Biotechnology & Life Sciences 9.8%
AbbVie, Inc.		220,000		10,659,000
Amgen, Inc.		248,652		28,843,632
Celgene Corp. *		235,500		34,969,395
Johnson & Johnson		395,000		36,580,950
Merck & Co., Inc.		230,980		10,414,888
Pfizer, Inc.		2,125,400		65,207,272
Thermo Fisher Scientific, Inc.		343,800		33,616,764

				220,291,901

Real Estate 0.4%
Prologis, Inc.		250,000		9,987,500

Retailing 5.2%
Best Buy Co., Inc.		252,000		10,785,600
Liberty Interactive Corp., Class A *		1,160,200		31,278,992
Macy’s, Inc.		553,700		25,531,107
Staples, Inc.		393,600		6,344,832
The Gap, Inc.		334,000		12,354,660
The Home Depot, Inc.		146,000		11,371,940
The TJX Cos., Inc.		301,000		18,297,790

				115,964,921

Semiconductors & Semiconductor Equipment 0.2%
Cree, Inc. *		22,500		1,366,875
Lam Research Corp. *		36,200		1,963,126

				3,330,001

Software & Services 8.1%
Activision Blizzard, Inc.		765,500		12,737,920
CA, Inc.		945,000		30,013,200
Computer Sciences Corp.		470,500		23,176,830
Google, Inc., Class A *		14,500		14,943,410
International Business Machines Corp.		18,100		3,243,701
Jack Henry & Associates, Inc.		164,800		8,999,728
Microsoft Corp.		756,800		26,752,880
Oracle Corp.		1,126,300		37,731,050
Symantec Corp.		135,000		3,069,900
Synopsys, Inc. *		474,942		17,311,636
TIBCO Software, Inc. *		124,300		3,052,808

				181,033,063

Technology Hardware & Equipment 9.0%
Apple, Inc.		123,000		64,249,050
Cisco Systems, Inc.		1,967,500		44,268,750
Hewlett-Packard Co.		583,500		14,219,895
NetApp, Inc.		112,000		4,346,720
SanDisk Corp.		152,700		10,612,650
TE Connectivity Ltd.		294,900		15,184,401
Western Digital Corp.		253,500		17,651,205
Xerox Corp.		3,251,300		32,317,922

				202,850,593

Telecommunication Services 3.1%
AT&T, Inc.		1,087,600		39,371,120
Telephone & Data Systems, Inc.		298,971		9,321,916
Verizon Communications, Inc.		413,300		20,875,783

				69,568,819

Transportation 1.0%
FedEx Corp.		179,400		23,501,400

Utilities 4.1%
Ameren Corp.		562,000		20,333,160
American Electric Power Co., Inc.		421,700		19,752,428
CenterPoint Energy, Inc.		610,800		15,025,680
NextEra Energy, Inc.		138,200		11,712,450
PG&E Corp.		311,000		13,015,350

See financial notes 27

Schwab Core Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
The AES Corp.		921,100		12,978,299

				92,817,367

Total Common Stock
(Cost $1,779,675,648)				2,240,003,911




Other Investment Company 0.3% of net assets

Money Market Fund 0.3%
State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (d)		6,221,788		6,221,788

Total Other Investment Company
(Cost $6,221,788)				6,221,788



	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

Short-Term Investment 0.0% of net assets

U.S. Treasury Obligation 0.0%
U.S. Treasury Bill
0.01%, 12/19/13 (a)(c)		350,000		349,998

Total Short-Term Investment
(Cost $349,998)				349,998



End of Investments.


	Number		Value
Security	of Shares		($)

Collateral Invested for Securities on Loan 0.7% of net assets


State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (d)		14,746,820		14,746,820

Total Collateral Invested for Securities on Loan
(Cost $14,746,820)				14,746,820



End of Collateral Invested for Securities on Loan.

At 10/31/13, the tax basis cost of the fund’s investments was $1,788,358,191 and the unrealized appreciation and depreciation were $462,825,364 and ($4,607,858), respectively, with a net unrealized appreciation of $458,217,506.


*		Non-income producing security.
(a)		All or a portion of this security is held as collateral for open futures contracts.
(b)		All or a portion of this security is on loan. Securities on loan were valued at $14,535,672.
(c)		The rate shown is the purchase yield.
(d)		The rate shown is the 7-day yield.

In addition to the above, the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

S&P 500 Index, e-mini, Long, expires 12/20/13

3,939,750

163,376

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$2,240,003,911		$—		$—		$2,240,003,911
Other Investment Company¹		6,221,788		—		—		6,221,788
Short-Term Investment¹		—		349,998		—		349,998

Total		$2,246,225,699		$349,998		$—		$2,246,575,697

Other Financial Instruments
Collateral Invested for Securities on Loan		$14,746,820		$—		$—		$14,746,820
Futures Contract²		163,376		—		—		163,376


¹		As categorized in Portfolio Holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

28 See financial notes

Schwab Core Equity Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends (net of foreign withholding taxes of $17,472)		$45,783,381
Interest		2,267
Securities on loan	+	244,678

Total investment income		46,030,326

Expenses

Investment adviser and administrator fees		9,683,636
Shareholder service fees		4,807,654
Shareholder reports		119,876
Transfer agent fees		81,965
Portfolio accounting fees		76,408
Custodian fees		48,593
Professional fees		42,868
Registration fees		37,296
Independent trustees’ fees		20,964
Interest expense		93
Other expenses	+	44,763

Total expenses		14,964,116
Expense reduction by CSIM and its affiliates	−	91,853
Custody credits	−	10

Net expenses	−	14,872,253

Net investment income		31,158,073

Realized and Unrealized Gains (Losses)

Net realized gains on investments		231,388,304
Net realized gains on futures contracts	+	1,239,109

Net realized gains		232,627,413
Net change in unrealized appreciation on investments		209,030,731
Net change in unrealized appreciation on futures contracts	+	590,291

Net change in unrealized appreciation	+	209,621,022

Net realized and unrealized gains		442,248,435

Increase in net assets resulting from operations		$473,406,508

30 See financial notes

Schwab Core Equity Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$31,158,073			$23,675,409
Net realized gains		232,627,413			141,751,928
Net change in unrealized appreciation	+	209,621,022			52,306,627

Increase in net assets from operations		473,406,508			217,733,964

Distributions to Shareholders

Distributions from net investment income		($16,475,044	)		($32,156,180	)

Transactions in Fund Shares¹


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			9,345,311		$194,423,482			6,062,795		$109,887,310
Issued in connection with merger			—		—			11,283,566		216,114,348
Shares reinvested			445,622		8,359,860			836,086		14,755,613
Shares redeemed	+		(13,994,307	)	(292,667,176	)		(20,453,309	)	(365,280,788	)

Net transactions in fund shares			(4,203,374	)	($89,883,834	)		(2,270,862	)	($24,523,517	)

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			99,978,878		$1,880,075,670			102,249,740		$1,719,021,403
Total increase or decrease	+		(4,203,374	)	367,047,630			(2,270,862	)	161,054,267

End of period			95,775,504		$2,247,123,300			99,978,878		$1,880,075,670


Net investment income not yet distributed					$18,530,775					$3,792,266


¹		Effective September 7, 2012, all of the assets and liabilities of the Schwab Premier Equity Fund were transferred to the Schwab Core Equity Fund. (See financial note 12)

See financial notes 31

Schwab Dividend Equity Fund™

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09¹


Per-Share Data ($)

Net asset value at beginning of period		14.52			13.15			12.08			10.94			10.63

Income (loss) from investment operations:
Net investment income (loss)		0.32			0.27			0.23			0.21			0.25
Net realized and unrealized gains (losses)		3.70			1.38			1.06			1.14			0.31

Total from investment operations		4.02			1.65			1.29			1.35			0.56
Less distributions:
Distributions from net investment income		(0.32	)		(0.28	)		(0.22	)		(0.21	)		(0.25	)

Net asset value at end of period		18.22			14.52			13.15			12.08			10.94

Total return (%)		27.99			12.65			10.73			12.42			5.62

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.89			0.89			0.89			0.89			0.90	²
Gross operating expenses		0.89			0.89			0.89			0.89			0.91
Net investment income (loss)		1.97			1.89			1.77			1.74			2.40
Portfolio turnover rate		64			55			31			37			39
Net assets, end of period ($ x 1,000,000)		1,804			1,390			1,325			1,322			1,297

¹ Effective October 7, 2009, the Investor Shares class and the Select Shares 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 Select Shares.

² Effective May 5, 2009, the net operating expense limitation was lowered. The ratio presented for period ended 10/31/09 is a blended ratio.

32 See financial notes

Schwab Dividend Equity Fund

Portfolio Holdings as of October 31, 2013

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

Cost

Value

Holdings by Category

($)

.0%

Common Stock

1,398,381,459

1,785,118,858

.4%

Short-Term Investments

25,904,746

100

.4%

Total Investments

1,424,286,205

1,811,023,604

.4%)

Other Assets and Liabilities, Net

(7,382,621

)

100

.0%

Total Net Assets

1,803,640,983


	Number		Value
Security	of Shares		($)

Common Stock 99.0% of net assets

Automobiles & Components 1.0%
Ford Motor Co.		1,109,300		18,980,123

Banks 5.3%
Huntington Bancshares, Inc.		430,000		3,784,000
Regions Financial Corp.		376,400		3,624,732
The PNC Financial Services Group, Inc.		380,000		27,941,400
Wells Fargo & Co.		1,418,400		60,551,496

				95,901,628

Capital Goods 6.1%
3M Co.		128,000		16,108,800
Eaton Corp. plc		232,200		16,384,032
Fluor Corp.		17,900		1,328,538
GATX Corp.		21,200		1,092,860
General Electric Co.		994,000		25,983,160
ITT Corp.		99,500		3,953,135
Northrop Grumman Corp.		217,200		23,351,172
The Boeing Co.		14,000		1,827,000
United Technologies Corp.		192,200		20,421,250

				110,449,947

Commercial & Professional Supplies 1.6%
R.R. Donnelley & Sons Co.		804,000		14,930,280
Waste Management, Inc.		342,700		14,921,158

				29,851,438

Consumer Durables & Apparel 2.1%
Hasbro, Inc.		251,500		12,989,975
NIKE, Inc., Class B		95,400		7,227,504
Whirlpool Corp.		116,400		16,995,564

				37,213,043

Consumer Services 1.3%
H&R Block, Inc.		224,800		6,393,312
International Game Technology		415,000		7,802,000
Service Corp. International		65,200		1,174,252
Wyndham Worldwide Corp.		120,000		7,968,000

				23,337,564

Diversified Financials 12.2%
Bank of America Corp.		865,000		12,075,400
Berkshire Hathaway, Inc., Class B *		55,800		6,421,464
Citigroup, Inc.		406,700		19,838,826
JPMorgan Chase & Co.		1,102,684		56,832,333
Morgan Stanley		978,300		28,106,559
SLM Corp.		883,400		22,411,858
State Street Corp.		406,500		28,483,455
The Bank of New York Mellon Corp.		894,000		28,429,200
The Goldman Sachs Group, Inc.		106,800		17,179,848

				219,778,943

Energy 13.8%
Anadarko Petroleum Corp.		130,000		12,387,700
Chevron Corp.		452,500		54,281,900
ConocoPhillips		642,000		47,058,600
Devon Energy Corp.		115,400		7,295,588
EOG Resources, Inc.		26,500		4,727,600
Exxon Mobil Corp.		512,800		45,957,136
Hess Corp.		164,000		13,316,800
Marathon Petroleum Corp.		156,500		11,214,790
Murphy Oil Corp.		175,000		10,556,000
Nabors Industries Ltd.		510,000		8,914,800
Occidental Petroleum Corp.		316,800		30,438,144
Phillips 66		32,500		2,093,975

				248,243,033

Food & Staples Retailing 1.4%
The Kroger Co.		115,000		4,926,600
Walgreen Co.		350,000		20,734,000

				25,660,600

Food, Beverage & Tobacco 3.9%
Altria Group, Inc.		147,600		5,495,148
Archer-Daniels-Midland Co.		757,000		30,961,300
Hillshire Brands Co.		88,300		2,898,889
Molson Coors Brewing Co., Class B		187,500		10,125,000
PepsiCo, Inc.		257,500		21,653,175

				71,133,512

Health Care Equipment & Services 2.6%
Abbott Laboratories		165,300		6,041,715
Cigna Corp.		106,000		8,159,880
Covidien plc		33,000		2,115,630

See financial notes 33

Schwab Dividend Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Medtronic, Inc.		490,000		28,126,000
WellPoint, Inc.		22,000		1,865,600

				46,308,825

Household & Personal Products 1.3%
Energizer Holdings, Inc.		93,400		9,163,474
The Procter & Gamble Co.		167,800		13,549,850

				22,713,324

Insurance 6.2%
Aflac, Inc.		348,300		22,632,534
American International Group, Inc.		19,400		1,002,010
Arthur J. Gallagher & Co.		2,200		104,390
Assurant, Inc.		80,900		4,731,032
MetLife, Inc.		165,000		7,806,150
Old Republic International Corp.		905,100		15,196,629
Protective Life Corp.		36,200		1,668,096
Prudential Financial, Inc.		321,700		26,183,163
Reinsurance Group of America, Inc.		40,300		2,868,554
StanCorp Financial Group, Inc.		18,600		1,095,540
The Hanover Insurance Group, Inc.		14,000		819,560
The Travelers Cos., Inc.		306,100		26,416,430
XL Group plc		17,200		525,804

				111,049,892

Materials 5.3%
International Paper Co.		397,400		17,728,014
PPG Industries, Inc.		130,200		23,771,916
Steel Dynamics, Inc.		1,353,300		24,318,801
The Dow Chemical Co.		747,500		29,503,825

				95,322,556

Media 1.3%
Comcast Corp., Class A		156,600		7,451,028
Time Warner, Inc.		240,500		16,531,970

				23,982,998

Pharmaceuticals, Biotechnology & Life Sciences 8.4%
AbbVie, Inc.		268,500		13,008,825
Amgen, Inc.		79,400		9,210,400
Eli Lilly & Co.		192,900		9,610,278
Johnson & Johnson		713,200		66,049,452
Pfizer, Inc.		1,743,400		53,487,512

				151,366,467

Real Estate 3.8%
Apartment Investment & Management Co., Class A		517,400		14,476,852
Brandywine Realty Trust		117,700		1,674,871
Duke Realty Corp.		619,100		10,258,487
Host Hotels & Resorts, Inc.		438,000		8,124,900
Liberty Property Trust		163,000		6,061,970
Prologis, Inc.		622,000		24,848,900
Retail Properties of America, Inc., Class A		185,500		2,654,505

				68,100,485

Retailing 2.6%
Best Buy Co., Inc.		338,000		14,466,400
Macy’s, Inc.		548,500		25,291,335
The Home Depot, Inc.		91,900		7,158,091

				46,915,826

Semiconductors & Semiconductor Equipment 1.2%
Applied Materials, Inc.		337,800		6,029,730
Microchip Technology, Inc.		153,000		6,572,880
Texas Instruments, Inc.		213,800		8,996,704

				21,599,314

Software & Services 3.0%
CA, Inc.		800,000		25,408,000
Computer Sciences Corp.		398,100		19,610,406
Jack Henry & Associates, Inc.		20,000		1,092,200
The Western Union Co.		507,000		8,629,140

				54,739,746

Technology Hardware & Equipment 5.1%
Cisco Systems, Inc.		1,555,700		35,003,250
Hewlett-Packard Co.		483,300		11,778,021
Seagate Technology plc		103,200		5,023,776
TE Connectivity Ltd.		526,000		27,083,740
Western Digital Corp.		136,000		9,469,680
Xerox Corp.		290,900		2,891,546

				91,250,013

Telecommunication Services 3.2%
AT&T, Inc.		1,306,400		47,291,680
Telephone & Data Systems, Inc.		59,700		1,861,446
Verizon Communications, Inc.		179,500		9,066,545

				58,219,671

Transportation 0.2%
CSX Corp.		136,400		3,554,584
FedEx Corp.		800		104,800

				3,659,384

Utilities 6.1%
Ameren Corp.		531,500		19,229,670
American Electric Power Co., Inc.		283,500		13,279,140
DTE Energy Co.		443,100		30,635,934
Entergy Corp.		98,500		6,374,920
PG&E Corp.		237,000		9,918,450
Pinnacle West Capital Corp.		204,800		11,474,944
Public Service Enterprise Group, Inc.		346,000		11,591,000

34 See financial notes

Schwab Dividend Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
The AES Corp.		485,200		6,836,468

				109,340,526

Total Common Stock
(Cost $1,398,381,459)				1,785,118,858



	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

Short-Term Investments 1.4% of net assets

Time Deposit 1.4%
Wells Fargo
0.03%, 11/01/13		25,489,752		25,489,752

U.S. Treasury Obligations 0.0%
U.S. Treasury Bills
0.01%, 12/19/13 (a)(b)		365,000		364,998
0.06%, 12/19/13 (a)(b)		50,000		49,996

				414,994

Total Short-Term Investments
(Cost $25,904,746)				25,904,746



End of Investments.

At 10/31/13, the tax basis cost of the fund’s investments was $1,424,790,152 and the unrealized appreciation and depreciation were $390,582,767 and ($4,349,315), respectively, with a net unrealized appreciation of $386,233,452.


*		Non-income producing security.
(a)		All or a portion of this security is held as collateral for open futures contracts.
(b)		The rate shown is the purchase yield.

In addition to the above, the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

S&P 500 Index, e-mini, Long, expires 12/20/13

8,317,250

344,906

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):

Quoted Prices in

Significant

Active Markets for

Significant Other

Unobservable

Identical Assets

Observable Inputs

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total

Common Stock¹

$1,785,118,858

$—

$1,785,118,858

Short-Term Investments¹

—

25,904,746

—

25,904,746

Total

$1,785,118,858

$25,904,746

$—

$1,811,023,604

Other Financial Instruments

Futures Contract²

$344,906

$—

$344,906


¹		As categorized in Portfolio Holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

See financial notes 35

Schwab Dividend Equity Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends		$45,083,054
Interest	+	4,976

Total investment income		45,088,030

Expenses

Investment adviser and administrator fees		9,785,648
Shareholder service fees		3,863,114
Shareholder reports		105,589
Portfolio accounting fees		70,728
Registration fees		59,770
Professional fees		40,165
Transfer agent fees		37,659
Custodian fees		35,273
Independent trustees’ fees		17,803
Interest expense		266
Other expenses	+	34,461

Total expenses		14,050,476
Expense reduction by CSIM and its affiliates	−	44,391

Net expenses	−	14,006,085

Net investment income		31,081,945

Realized and Unrealized Gains (Losses)

Net realized gains on investments		182,751,291
Net realized gains on futures contracts	+	1,043,009

Net realized gains		183,794,300
Net change in unrealized appreciation on investments		168,817,704
Net change in unrealized appreciation on futures contracts	+	522,787

Net change in unrealized appreciation	+	169,340,491

Net realized and unrealized gains		353,134,791

Increase in net assets resulting from operations		$384,216,736

See financial notes 37

Schwab Dividend Equity Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$31,081,945			$26,554,898
Net realized gains		183,794,300			109,337,725
Net change in unrealized appreciation	+	169,340,491			30,109,544

Increase in net assets from operations		384,216,736			166,002,167

Distributions to Shareholders

Distributions from net investment income		($30,254,415	)		($28,261,739	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			20,146,686		$334,691,092			16,849,993		$235,314,886
Shares reinvested			1,039,729		16,530,353			1,092,546		15,437,629
Shares redeemed	+		(17,942,195	)	(291,824,449	)		(22,962,741	)	(322,803,726	)

Net transactions in fund shares			3,244,220		$59,396,996			(5,020,202	)	($72,051,211	)

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			95,741,454		$1,390,281,666			100,761,656		$1,324,592,449
Total increase or decrease	+		3,244,220		413,359,317			(5,020,202	)	65,689,217

End of period			98,985,674		$1,803,640,983			95,741,454		$1,390,281,666


Net investment income not yet distributed					$1,659,809					$832,279

38 See financial notes

Schwab Large-Cap Growth Fund™

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09¹


Per-Share Data ($)

Net asset value at beginning of period		12.48			11.18			10.48			9.10			8.22

Income (loss) from investment operations:
Net investment income (loss)		0.14			0.07			0.07			0.05			0.05
Net realized and unrealized gains (losses)		3.17			1.29			0.69			1.39			0.87

Total from investment operations		3.31			1.36			0.76			1.44			0.92
Less distributions:
Distributions from net investment income		(0.13	)		(0.06	)		(0.06	)		(0.06	)		(0.04	)

Net asset value at end of period		15.66			12.48			11.18			10.48			9.10

Total return (%)		26.76			12.18			7.25			15.83			11.36

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.99			0.99			0.99			1.00	²		0.99
Gross operating expenses		1.05			1.05			1.05			1.04			1.03
Net investment income (loss)		1.00			0.53			0.56			0.39			0.65
Portfolio turnover rate		87			79			62			57			63
Net assets, end of period ($ x 1,000,000)		253			217			213			219			360

² The ratio of net operating expenses would have been 0.99%, if certain non-routine expenses had not been incurred.

See financial notes 39

Schwab Large-Cap Growth Fund

Portfolio Holdings as of October 31, 2013

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

Cost

Value

Holdings by Category

($)

.3%

Common Stock

203,553,675

250,870,917

.4%

Short-Term Investments

1,155,628

.7%

Total Investments

204,709,303

252,026,545

.3%

Other Assets and Liabilities, Net

657,659

100

.0%

Total Net Assets

252,684,204


	Number		Value
Security	of Shares		($)

Common Stock 99.3% of net assets

Automobiles & Components 0.5%
Ford Motor Co.		81,400		1,392,754

Banks 0.4%
Wells Fargo & Co.		26,900		1,148,361

Capital Goods 6.1%
AGCO Corp.		32,400		1,891,512
Danaher Corp.		4,200		302,778
Honeywell International, Inc.		23,100		2,003,463
ITT Corp.		52,600		2,089,798
Masco Corp.		14,600		308,498
The Boeing Co.		30,500		3,980,250
United Rentals, Inc. *		17,200		1,110,948
United Technologies Corp.		19,200		2,040,000
W.W. Grainger, Inc.		5,900		1,586,923

				15,314,170

Commercial & Professional Supplies 2.2%
Equifax, Inc.		32,400		2,095,308
Waste Management, Inc.		78,500		3,417,890

				5,513,198

Consumer Durables & Apparel 3.2%
Hanesbrands, Inc.		5,100		347,412
Jarden Corp. *		14,500		802,720
NIKE, Inc., Class B		67,200		5,091,072
Wolverine World Wide, Inc.		32,200		1,859,228

				8,100,432

Consumer Services 4.7%
Brinker International, Inc.		21,800		968,356
International Game Technology		164,900		3,100,120
MGM Resorts International *		147,300		2,804,592
Service Corp. International		159,900		2,879,799
Wyndham Worldwide Corp.		34,000		2,257,600

				12,010,467

Diversified Financials 1.6%
Affiliated Managers Group, Inc. *		12,000		2,369,280
SEI Investments Co.		47,400		1,573,206

				3,942,486

Energy 4.2%
Baker Hughes, Inc.		11,100		644,799
Chevron Corp.		24,000		2,879,040
ConocoPhillips		24,000		1,759,200
Dril-Quip, Inc. *		1,100		129,162
EOG Resources, Inc.		29,000		5,173,600

				10,585,801

Food & Staples Retailing 3.3%
Rite Aid Corp. *		87,400		465,842
The Kroger Co.		87,400		3,744,216
Walgreen Co.		71,200		4,217,888

				8,427,946

Food, Beverage & Tobacco 6.8%
Altria Group, Inc.		31,400		1,169,022
Archer-Daniels-Midland Co.		78,100		3,194,290
Hillshire Brands Co.		90,800		2,980,964
PepsiCo, Inc.		88,300		7,425,147
Pilgrim’s Pride Corp. *		28,500		403,845
The Coca-Cola Co.		48,400		1,915,188

				17,088,456

Health Care Equipment & Services 6.1%
Abbott Laboratories		53,800		1,966,390
Becton, Dickinson & Co.		5,000		525,650
Boston Scientific Corp. *		26,900		314,461
CareFusion Corp. *		79,700		3,089,969
Cigna Corp.		28,500		2,193,930
Covidien plc		43,900		2,814,429
Henry Schein, Inc. *		20,000		2,248,600
McKesson Corp.		11,200		1,751,008
Medtronic, Inc.		8,400		482,160

				15,386,597

Household & Personal Products 1.2%
Avon Products, Inc.		5,900		103,250
Energizer Holdings, Inc.		31,000		3,041,410

				3,144,660

Insurance 1.1%
Aflac, Inc.		25,200		1,637,496

40 See financial notes

Schwab Large-Cap Growth Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
The Travelers Cos., Inc.		13,000		1,121,900

				2,759,396

Materials 4.7%
Avery Dennison Corp.		65,500		3,086,360
E.I. du Pont de Nemours & Co.		7,400		452,880
PPG Industries, Inc.		26,100		4,765,338
Reliance Steel & Aluminum Co.		4,900		359,121
Steel Dynamics, Inc.		58,100		1,044,057
The Dow Chemical Co.		55,400		2,186,638

				11,894,394

Media 3.6%
AMC Networks, Inc., Class A *		4,000		280,360
Comcast Corp., Class A		100,000		4,758,000
Live Nation Entertainment, Inc. *		20,200		392,688
Regal Entertainment Group, Class A		8,500		161,585
Viacom Inc., Class B		41,000		3,414,890

				9,007,523

Pharmaceuticals, Biotechnology & Life Sciences 8.8%
AbbVie, Inc.		61,900		2,999,055
Amgen, Inc.		45,300		5,254,800
Biogen Idec, Inc. *		4,200		1,025,598
Celgene Corp. *		34,900		5,182,301
Johnson & Johnson		38,400		3,556,224
Pfizer, Inc.		129,900		3,985,332
Salix Pharmaceuticals Ltd. *		4,200		301,350

				22,304,660

Real Estate 1.7%
Apartment Investment & Management Co., Class A		42,000		1,175,160
Host Hotels & Resorts, Inc.		170,700		3,166,485

				4,341,645

Retailing 9.7%
Best Buy Co., Inc.		46,800		2,003,040
Liberty Interactive Corp., Class A *		107,000		2,884,720
Lowe’s Cos., Inc.		56,400		2,807,592
Macy’s, Inc.		86,400		3,983,904
Netflix, Inc. *		1,000		322,480
Staples, Inc.		14,300		230,516
The Gap, Inc.		64,500		2,385,855
The Home Depot, Inc.		60,800		4,735,712
The TJX Cos., Inc.		83,900		5,100,281

				24,454,100

Semiconductors & Semiconductor Equipment 1.8%
Applied Materials, Inc.		62,500		1,115,625
Freescale Semiconductor Ltd. *		22,500		347,400
LSI Corp.		349,900		2,967,152
Micron Technology, Inc. *		6,200		109,616

				4,539,793

Software & Services 16.8%
CA, Inc.		120,300		3,820,728
Computer Sciences Corp.		55,800		2,748,708
CoStar Group, Inc. *		5,100		902,649
Facebook, Inc., Class A *		46,900		2,357,194
Google, Inc., Class A *		6,100		6,286,538
IAC/InterActiveCorp		4,600		245,594
International Business Machines Corp.		9,900		1,774,179
Jack Henry & Associates, Inc.		53,400		2,916,174
Microsoft Corp.		182,700		6,458,445
Oracle Corp.		203,500		6,817,250
PTC, Inc. *		147,500		4,088,700
The Western Union Co.		218,900		3,725,678
Verisign, Inc. *		7,800		423,384

				42,565,221

Technology Hardware & Equipment 7.6%
Apple, Inc.		18,567		9,698,472
Cisco Systems, Inc.		76,300		1,716,750
Hewlett-Packard Co.		37,500		913,875
TE Connectivity Ltd.		60,900		3,135,741
Western Digital Corp.		13,600		946,968
Xerox Corp.		32,800		326,032
Zebra Technologies Corp., Class A *		49,000		2,367,190

				19,105,028

Telecommunication Services 1.6%
Verizon Communications, Inc.		78,700		3,975,137

Transportation 1.2%
AMERCO		6,000		1,211,580
Hertz Global Holdings, Inc. *		43,200		991,872
Matson, Inc.		27,900		755,811

				2,959,263

Utilities 0.4%
CenterPoint Energy, Inc.		1,400		34,440
The AES Corp.		62,100		874,989

				909,429

Total Common Stock
(Cost $203,553,675)				250,870,917



	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

Short-Term Investments 0.4% of net assets

Time Deposit 0.4%
DNB
0.03%, 11/01/13		1,087,629		1,087,629

U.S. Treasury Obligations 0.0%
U.S. Treasury Bills
0.01%, 12/19/13 (a)(b)		58,000		58,000

See financial notes 41

Schwab Large-Cap Growth Fund

Portfolio Holdings continued


	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)
0.06%, 12/19/13 (a)(b)		10,000		9,999

				67,999

Total Short-Term Investments
(Cost $1,155,628)				1,155,628



End of Investments.

At 10/31/13, the tax basis cost of the fund’s investments was $204,825,523 and the unrealized appreciation and depreciation were $47,796,177 and ($595,155), respectively, with a net unrealized appreciation of $47,201,022.


*		Non-income producing security.
(a)		All or a portion of this security is held as collateral for open futures contracts.
(b)		The rate shown is the purchase yield.

In addition to the above, the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

S&P 500 Index, e-mini, Long, expires 12/20/13

1,313,250

54,459

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):

Quoted Prices in

Significant

Active Markets for

Significant Other

Unobservable

Identical Assets

Observable Inputs

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total

Common Stock¹

$250,870,917

$—

$250,870,917

Short-Term Investments¹

—

1,155,628

—

1,155,628

Total

$250,870,917

$1,155,628

$—

$252,026,545

Other Financial Instruments

Futures Contracts²

$54,459

$—

$54,459


¹		As categorized in Portfolio Holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

42 See financial notes

Schwab Large-Cap Growth Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends		$4,583,226
Interest		570
Securities on loan	+	37,122

Total investment income		4,620,918

Expenses

Investment adviser and administrator fees		1,676,002
Shareholder service fees		573,730
Shareholder reports		47,427
Portfolio accounting fees		40,726
Professional fees		37,979
Transfer agent fees		24,624
Registration fees		23,940
Custodian fees		10,273
Independent trustees’ fees		8,620
Interest expense		21
Other expenses	+	5,901

Total expenses		2,449,243
Expense reduction by CSIM and its affiliates	−	144,720

Net expenses	−	2,304,523

Net investment income		2,316,395

Realized and Unrealized Gains (Losses)

Net realized gains on investments		31,514,702
Net realized gains on futures contracts	+	148,910

Net realized gains		31,663,612
Net change in unrealized appreciation on investments		21,297,180
Net change in unrealized appreciation on futures contracts	+	101,894

Net change in unrealized appreciation	+	21,399,074

Net realized and unrealized gains		53,062,686

Increase in net assets resulting from operations		$55,379,081

44 See financial notes

Schwab Large-Cap Growth Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$2,316,395			$1,181,258
Net realized gains		31,663,612			29,419,021
Net change in unrealized appreciation (depreciation)	+	21,399,074			(5,506,943	)

Increase in net assets from operations		55,379,081			25,093,336

Distributions to Shareholders

Distributions from net investment income		($2,200,707	)		($1,032,046	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			1,838,655		$25,057,674			2,590,944		$31,765,041
Shares reinvested			94,231		1,176,943			45,504		506,911
Shares redeemed	+		(3,195,045	)	(43,826,509	)		(4,310,391	)	(52,516,380	)

Net transactions in fund shares			(1,262,159	)	($17,591,892	)		(1,673,943	)	($20,244,428	)

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			17,398,027		$217,097,722			19,071,970		$213,280,860
Total increase or decrease	+		(1,262,159	)	35,586,482			(1,673,943	)	3,816,862

End of period			16,135,868		$252,684,204			17,398,027		$217,097,722


Net investment income not yet distributed					$989,027					$873,339

See financial notes 45

Schwab Small-Cap Equity Fund™

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09¹


Per-Share Data ($)

Net asset value at beginning of period		17.72			15.61			13.96			11.14			10.55

Income (loss) from investment operations:
Net investment income (loss)		0.09			0.02			(0.01	)		(0.04	)		(0.02	)
Net realized and unrealized gains (losses)		7.16			2.10			1.66			2.86			0.61

Total from investment operations		7.25			2.12			1.65			2.82			0.59
Less distributions:
Distributions from net investment income		(0.10	)		(0.01	)		—			—			(0.00	)²

Net asset value at end of period		24.87			17.72			15.61			13.96			11.14

Total return (%)		41.10			13.57			11.82			25.31			5.65

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		1.10			1.12			1.11			1.12			1.12
Gross operating expenses		1.11			1.12			1.12			1.14			1.17
Net investment income (loss)		0.42			0.11			(0.05	)		(0.26	)		(0.16	)
Portfolio turnover rate		84			101			72			64			85
Net assets, end of period ($ x 1,000,000)		590			388			226			219			202

¹ Effective September 28, 2009, the Investor Shares class and the Select Shares 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 Select Shares.

² Amount is less than $0.01.

46 See financial notes

Schwab Small-Cap Equity Fund

Portfolio Holdings as of October 31, 2013

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


				Cost		Value
Holdings by Category				($)		($)

	98	.8%	Common Stock		455,928,714		583,290,819
	1	.1%	Short-Term Investments		6,569,696		6,569,696


	99	.9%	Total Investments		462,498,410		589,860,515
	0	.5%	Collateral Invested for Securities on Loan		3,083,360		3,083,360
	(0	.4%)	Other Assets and Liabilities, Net				(2,627,846	)


	100	.0%	Total Net Assets				590,316,029


	Number		Value
Security	of Shares		($)

Common Stock 98.8% of net assets

Automobiles & Components 0.2%
Dana Holding Corp.		52,858		1,036,017

Banks 6.9%
1st Source Corp.		25,600		803,328
BancFirst Corp.		15,900		883,563
Bank of Kentucky Financial Corp.		7,000		201,670
BBCN Bancorp, Inc.		103,610		1,536,536
Berkshire Hills Bancorp, Inc.		11,300		286,681
Cathay General Bancorp		11,900		293,097
Chemical Financial Corp.		39,140		1,146,411
Columbia Banking System, Inc.		9,470		243,284
Community Trust Bancorp, Inc.		17,650		751,714
CVB Financial Corp.		136,350		1,982,529
F.N.B. Corp.		260,240		3,255,602
First BanCorp *		108,300		601,065
First Defiance Financial Corp.		17,200		444,104
First Horizon National Corp.		94,500		1,006,425
First Midwest Bancorp, Inc.		36,700		610,321
MainSource Financial Group, Inc.		23,100		374,682
MGIC Investment Corp. *		374,260		3,046,476
Ocwen Financial Corp. *		27,900		1,568,817
Pinnacle Financial Partners, Inc. *		27,400		849,400
PrivateBancorp, Inc.		130,500		3,178,980
S&T Bancorp, Inc.		28,200		691,464
Susquehanna Bancshares, Inc.		332,090		3,913,681
Synovus Financial Corp.		1,025,100		3,331,575
TCF Financial Corp.		56,100		851,598
UMB Financial Corp.		45,350		2,672,022
United Community Banks, Inc. *		150,990		2,353,934
Webster Financial Corp.		20,500		571,745
WesBanco, Inc.		44,770		1,316,238
Western Alliance Bancorp *		82,500		1,744,875
WSFS Financial Corp.		3,060		214,231

				40,726,048

Capital Goods 10.6%
AAR Corp.		158,200		4,632,096
Aceto Corp.		106,600		1,700,270
AECOM Technology Corp. *		128,530		4,084,683
Aircastle Ltd.		27,500		518,925
Albany International Corp., Class A		62,100		2,285,901
Altra Holdings, Inc.		20,400		619,548
Broadwind Energy, Inc. *		6,790		49,567
Curtiss-Wright Corp.		72,860		3,626,971
Dycom Industries, Inc. *		19,710		584,402
EnerSys, Inc.		91,700		6,084,295
Esterline Technologies Corp. *		63,520		5,091,763
Federal Signal Corp. *		22,500		308,025
General Cable Corp.		103,800		3,418,134
Gibraltar Industries, Inc. *		64,900		1,039,049
Griffon Corp.		47,200		591,416
Harsco Corp.		127,700		3,560,276
Huntington Ingalls Industries, Inc.		60,900		4,357,395
Hurco Cos., Inc.		9,200		225,308
Hyster-Yale Materials Handling, Inc.		20,500		1,608,020
II-VI, Inc. *		208,510		3,557,181
John Bean Technologies Corp.		87,300		2,372,814
Kadant, Inc.		20,540		735,332
L.B. Foster Co., Class A		16,000		748,000
Lydall, Inc. *		45,320		825,730
Moog, Inc., Class A *		61,500		3,673,395
Mueller Water Products, Inc., Class A		133,700		1,145,809
Northwest Pipe Co. *		7,400		266,622
Standex International Corp.		28,750		1,768,413
Terex Corp. *		18,700		653,565
Tutor Perini Corp. *		25,660		588,897
Watts Water Technologies, Inc., Class A		31,600		1,825,848
Xerium Technologies, Inc. *		20,370		244,236

				62,791,886

Commercial & Professional Supplies 1.5%
EnerNOC, Inc. *		22,330		371,348
G&K Services, Inc., Class A		39,000		2,433,600
Heidrick & Struggles International, Inc.		19,100		353,732
Kelly Services, Inc., Class A		10,532		219,697
RPX Corp. *		80,400		1,435,944
Steelcase, Inc., Class A		119,000		1,950,410
The Brink’s Co.		30,100		945,140
US Ecology, Inc.		6,500		231,075
Viad Corp.		31,000		827,700

				8,768,646

Consumer Durables & Apparel 2.3%
Blyth, Inc. (a)		25,750		355,608
Brunswick Corp.		6,900		311,397
CSS Industries, Inc.		14,800		383,172
Culp, Inc.		12,400		239,940
Helen of Troy Ltd. *		24,200		1,130,624
Jarden Corp. *		33,050		1,829,648

See financial notes 47

Schwab Small-Cap Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Johnson Outdoors, Inc., Class A		7,100		194,753
La-Z-Boy, Inc.		51,600		1,190,928
Skechers U.S.A., Inc., Class A *		75,100		2,188,414
The Jones Group, Inc.		185,250		2,878,785
Unifi, Inc. *		24,000		585,360
Universal Electronics, Inc. *		51,000		1,984,410

				13,273,039

Consumer Services 4.0%
Ascent Capital Group, Inc., Class A *		46,800		3,950,856
Boyd Gaming Corp. *		112,970		1,192,963
Capella Education Co. *		20,280		1,235,458
Corinthian Colleges, Inc. *		294,000		629,160
Cracker Barrel Old Country Store, Inc.		28,000		3,076,360
Jack in the Box, Inc. *		118,060		4,802,681
K12, Inc. *		14,130		258,296
Multimedia Games Holding Co., Inc. *		94,100		3,059,191
Regis Corp.		29,000		420,500
Ruth’s Hospitality Group, Inc.		70,095		854,458
Service Corp. International		197,300		3,553,373
Universal Technical Institute, Inc.		51,590		685,631

				23,718,927

Diversified Financials 3.4%
Calamos Asset Management, Inc., Class A		73,350		720,297
Cowen Group, Inc., Class A *		133,260		529,042
DFC Global Corp. *		52,860		639,606
Evercore Partners, Inc., Class A		65,950		3,328,496
FBR & Co. *		68,060		1,803,590
FXCM, Inc., Class A		171,350		2,808,427
GFI Group, Inc.		83,720		290,508
Interactive Brokers Group, Inc., Class A		166,700		3,439,021
Investment Technology Group, Inc. *		197,027		3,156,373
Manning & Napier, Inc.		24,210		401,886
Nelnet, Inc., Class A		54,400		2,319,072
Oppenheimer Holdings, Inc., Class A		20,120		398,980

				19,835,298

Energy 5.9%
Alon USA Energy, Inc.		72,360		874,109
Basic Energy Services, Inc. *		58,100		852,327
Bill Barrett Corp. *		125,050		3,460,133
Clayton Williams Energy, Inc. *		4,860		378,254
Comstock Resources, Inc.		246,100		4,210,771
Dawson Geophysical Co. *		24,700		722,228
Delek US Holdings, Inc.		52,330		1,337,032
Endeavour International Corp. (a)*		163,383		970,495
EPL Oil & Gas, Inc. *		91,600		2,920,208
Goodrich Petroleum Corp. *		37,342		873,429
Green Plains Renewable Energy, Inc.		205,920		3,321,490
Hercules Offshore, Inc. *		175,600		1,194,080
ION Geophysical Corp. *		123,600		573,504
Knightsbridge Tankers Ltd.		98,270		809,745
Natural Gas Services Group, Inc. *		9,970		279,060
Parker Drilling Co. *		395,500		2,847,600
REX American Resources Corp. *		20,280		584,875
Stone Energy Corp. *		45,500		1,586,130
Targa Resources Corp.		62,050		4,812,598
VAALCO Energy, Inc. *		176,200		928,574
Warren Resources, Inc. *		384,600		1,203,798

				34,740,440

Food & Staples Retailing 1.9%
Casey’s General Stores, Inc.		36,221		2,639,786
Rite Aid Corp. *		804,360		4,287,239
Roundy’s, Inc. (a)		71,630		666,159
The Andersons, Inc.		28,700		2,128,966
The Pantry, Inc. *		127,210		1,703,342

				11,425,492

Food, Beverage & Tobacco 2.0%
Coca-Cola Bottling Co. Consolidated		14,500		918,140
Farmer Brothers Co. *		35,870		647,812
Pilgrim’s Pride Corp. *		113,800		1,612,546
Sanderson Farms, Inc.		75,880		4,796,375
Seneca Foods Corp., Class A *		7,100		208,172
TreeHouse Foods, Inc. *		5,990		438,827
Universal Corp.		63,600		3,372,708

				11,994,580

Health Care Equipment & Services 9.4%
Alere, Inc. *		141,250		4,764,362
Align Technology, Inc. *		32,160		1,835,050
AMN Healthcare Services, Inc. *		38,800		481,120
AmSurg Corp. *		12,400		531,836
AngioDynamics, Inc. *		28,500		448,020
Anika Therapeutics, Inc. *		67,230		2,008,160
ArthroCare Corp. *		34,400		1,287,936
Cantel Medical Corp.		78,675		2,761,492
Centene Corp. *		12,120		680,659
CONMED Corp.		93,580		3,394,147
CryoLife, Inc.		46,100		414,439
Greatbatch, Inc. *		68,784		2,622,046
HealthStream, Inc. *		24,020		857,994
Hill-Rom Holdings, Inc.		107,540		4,440,327
ICU Medical, Inc. *		47,900		2,960,220
Lifepoint Hospitals, Inc. *		19,560		1,010,078
Magellan Health Services, Inc. *		69,000		4,050,300
MedAssets, Inc. *		198,210		4,564,776
Merge Healthcare, Inc. *		126,040		320,142
National Healthcare Corp.		11,100		537,018
NuVasive, Inc. *		104,800		3,330,544
Omnicell, Inc. *		32,200		742,854
RTI Surgical, Inc. *		130,800		364,932
STERIS Corp.		107,320		4,849,791
SurModics, Inc. *		81,670		1,925,779
Symmetry Medical, Inc. *		159,160		1,289,196
The Providence Service Corp. *		11,700		349,713
Triple-S Management Corp., Class B *		27,490		489,597
West Pharmaceutical Services, Inc.		16,600		802,610
Wright Medical Group, Inc. *		60,800		1,651,936

				55,767,074

Household & Personal Products 0.5%
Inter Parfums, Inc.		48,500		1,705,260
Prestige Brands Holdings, Inc. *		21,910		684,249

48 See financial notes

Schwab Small-Cap Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Revlon, Inc., Class A *		17,300		410,875

				2,800,384

Insurance 2.6%
American Equity Investment Life Holding Co.		216,250		4,506,650
CNO Financial Group, Inc.		208,560		3,249,365
FBL Financial Group, Inc., Class A		6,310		282,309
First American Financial Corp.		28,500		737,010
Maiden Holdings Ltd.		67,600		740,220
MBIA, Inc. *		174,150		1,980,085
Selective Insurance Group, Inc.		18,430		484,156
StanCorp Financial Group, Inc.		31,640		1,863,596
Symetra Financial Corp.		43,920		822,622
The Hanover Insurance Group, Inc.		10,220		598,279

				15,264,292

Materials 5.9%
A. Schulman, Inc.		70,000		2,318,400
AMCOL International Corp.		28,400		911,072
Balchem Corp.		8,700		498,162
Berry Plastics Group, Inc. *		17,800		357,424
Chemtura Corp. *		27,300		668,850
Coeur Mining, Inc. *		73,260		894,504
Commercial Metals Co.		131,500		2,414,340
FutureFuel Corp.		52,300		910,543
Handy & Harman Ltd. *		8,300		191,647
Innospec, Inc.		14,700		677,082
Kraton Performance Polymers, Inc. *		15,980		339,895
Materion Corp.		87,610		2,611,654
Minerals Technologies, Inc.		93,300		5,283,579
Neenah Paper, Inc.		76,210		3,135,279
Olympic Steel, Inc.		1,580		43,245
OM Group, Inc. *		56,400		1,917,600
Omnova Solutions, Inc. *		26,600		231,420
P.H. Glatfelter Co.		69,300		1,815,660
PolyOne Corp.		24,320		736,896
SunCoke Energy, Inc. *		118,300		2,366,000
Tredegar Corp.		53,500		1,563,270
Worthington Industries, Inc.		127,820		5,181,823

				35,068,345

Media 0.9%
AH Belo Corp., Class A		48,000		385,920
Live Nation Entertainment, Inc. *		173,700		3,376,728
The E.W. Scripps Co., Class A *		74,600		1,478,572

				5,241,220

Pharmaceuticals, Biotechnology & Life Sciences 5.9%
Acorda Therapeutics, Inc. *		35,300		1,080,533
AMAG Pharmaceuticals, Inc. *		87,810		2,369,114
Bio-Rad Laboratories, Inc., Class A *		31,770		3,924,230
Emergent Biosolutions, Inc. *		76,720		1,498,342
Enzo Biochem, Inc. *		64,360		160,256
Enzon Pharmaceuticals, Inc.		238,920		353,602
ICON plc *		103,090		4,168,960
Impax Laboratories, Inc. *		229,340		4,646,428
Lannett Co., Inc. *		67,290		1,588,717
Maxygen, Inc. (e)*		67,800		2,034
Nektar Therapeutics *		140,720		1,338,247
PAREXEL International Corp. *		104,500		4,776,695
PDL Biopharma, Inc. (a)		229,230		1,854,471
Repligen Corp. *		43,600		476,984
Sagent Pharmaceuticals, Inc. *		88,470		1,918,914
Santarus, Inc. *		138,190		3,223,973
The Medicines Co. *		10,940		371,085
Threshold Pharmaceuticals, Inc. *		243,065		1,054,902

				34,807,487

Real Estate 6.2%
Acadia Realty Trust		122,900		3,277,743
Apartment Investment & Management Co., Class A		106,100		2,968,678
Ashford Hospitality Trust		327,393		4,275,753
Brandywine Realty Trust		294,920		4,196,712
CyrusOne, Inc.		34,390		670,261
DCT Industrial Trust, Inc.		500,000		3,875,000
DiamondRock Hospitality Co.		153,760		1,751,326
RAIT Financial Trust		245,900		1,856,545
RLJ Lodging Trust		212,720		5,373,307
Saul Centers, Inc.		33,470		1,573,090
Strategic Hotels & Resorts, Inc. *		255,300		2,221,110
Sunstone Hotel Investors, Inc.		364,490		4,829,492

				36,869,017

Retailing 3.5%
ANN, Inc. *		74,400		2,630,784
Brown Shoe Co., Inc.		199,480		4,476,331
Citi Trends, Inc. *		6,030		88,520
Core-Mark Holding Co., Inc.		14,637		1,035,275
Haverty Furniture Cos, Inc.		62,900		1,749,249
hhgregg, Inc. *		52,340		811,794
Kirkland’s, Inc. *		81,200		1,441,300
New York & Co., Inc. *		82,500		422,400
Shutterfly, Inc. *		34,141		1,677,689
Stein Mart, Inc.		22,960		339,119
The Children’s Place Retail Stores, Inc. *		80,100		4,372,659
The Pep Boys - Manny, Moe & Jack *		133,720		1,730,337

				20,775,457

Semiconductors & Semiconductor Equipment 4.0%
Amkor Technology, Inc. *		255,750		1,358,032
ATMI, Inc. *		5,190		141,895
Axcelis Technologies, Inc. *		164,310		356,553
Cohu, Inc.		22,200		212,232
Diodes, Inc. *		116,823		2,829,453
DSP Group, Inc. *		26,000		193,700
Entegris, Inc. *		251,300		2,600,955
Exar Corp. *		151,100		1,742,183
First Solar, Inc. *		42,270		2,124,913
FormFactor, Inc. *		271,620		1,417,856
International Rectifier Corp. *		199,250		5,188,470
IXYS Corp.		54,900		638,487
Pericom Semiconductor Corp. *		51,100		412,888
Photronics, Inc. *		278,950		2,343,180
Sigma Designs, Inc. *		69,100		375,904
Spansion, Inc., Class A *		92,000		1,101,240

See financial notes 49

Schwab Small-Cap Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Ultra Clean Holdings, Inc. *		64,000		595,840

				23,633,781

Software & Services 10.7%
Accelrys, Inc. *		159,850		1,494,597
Acxiom Corp. *		87,270		2,899,982
Advent Software, Inc.		15,100		506,605
Aspen Technology, Inc. *		46,500		1,777,695
Bottomline Technologies, Inc. *		17,850		560,847
comScore, Inc. *		156,370		4,178,206
Convergys Corp.		168,800		3,332,112
CoreLogic, Inc. *		76,400		2,541,828
CSG Systems International, Inc.		112,800		3,142,608
Dealertrack Technologies, Inc. *		4,700		175,310
EPIQ Systems, Inc.		89,400		1,337,424
Euronet Worldwide, Inc. *		87,840		3,812,256
IntraLinks Holdings, Inc. *		76,100		790,679
j2 Global, Inc.		91,200		5,014,176
Limelight Networks, Inc. *		349,100		670,272
Mentor Graphics Corp.		94,090		2,077,507
MoneyGram International, Inc. *		43,224		912,459
Monotype Imaging Holdings, Inc.		92,300		2,604,706
Pegasystems, Inc.		21,530		819,432
PTC, Inc. *		192,080		5,324,458
QuinStreet, Inc. *		9,910		88,100
Rosetta Stone, Inc. *		33,360		506,405
Rovi Corp. *		197,750		3,314,290
SeaChange International, Inc. *		96,800		1,373,592
Sykes Enterprises, Inc. *		30,300		567,216
TeleCommunication Systems, Inc., Class A *		59,240		135,067
TeleTech Holdings, Inc. *		80,200		2,122,894
Travelzoo, Inc. *		8,200		176,546
United Online, Inc. *		534,800		4,620,672
Verint Systems, Inc. *		129,000		4,711,080
WebMD Health Corp. *		26,430		930,865
XO Group, Inc. *		37,600		521,888

				63,041,774

Technology Hardware & Equipment 5.9%
Aviat Networks, Inc. *		177,200		365,032
Benchmark Electronics, Inc. *		84,400		1,918,412
Brocade Communications Systems, Inc. *		525,200		4,212,104
Checkpoint Systems, Inc. *		47,000		799,940
Ciena Corp. *		94,600		2,201,342
Daktronics, Inc.		52,700		630,292
EchoStar Corp., Class A *		55,180		2,646,433
Electronics for Imaging, Inc. *		27,140		931,173
Emulex Corp. *		267,100		2,011,263
Harmonic, Inc. *		603,100		4,408,661
Hutchinson Technology, Inc. *		89,870		334,316
Immersion Corp. *		26,740		340,133
Insight Enterprises, Inc. *		95,400		2,010,078
Lexmark International, Inc., Class A		50,800		1,805,940
Littelfuse, Inc.		6,500		552,695
Newport Corp. *		20,100		318,987
Plexus Corp. *		41,700		1,596,276
Radisys Corp. *		65,400		197,508
Richardson Electronics Ltd.		17,800		205,056
Sanmina Corp. *		103,400		1,505,504
Silicon Graphics International Corp. *		160,200		2,045,754
TTM Technologies, Inc. *		92,860		812,525
Zebra Technologies Corp., Class A *		51,440		2,485,067
Zygo Corp. *		14,400		222,336

				34,556,827

Telecommunication Services 0.7%
Alaska Communications Systems Group, Inc. *		76,620		188,485
Cbeyond, Inc. *		99,190		638,784
IDT Corp., Class B		60,900		1,333,101
Inteliquent, Inc.		48,907		628,455
Premiere Global Services, Inc. *		149,200		1,344,292
Shenandoah Telecommunications Co.		8,300		230,159

				4,363,276

Transportation 2.4%
AMERCO		18,700		3,776,091
Arkansas Best Corp.		55,300		1,513,561
Con-way, Inc.		90,160		3,714,592
Park-Ohio Holdings Corp. *		28,200		1,167,762
Republic Airways Holdings, Inc. *		52,900		623,162
Saia, Inc. *		30,290		985,334
SkyWest, Inc.		138,600		2,084,544

				13,865,046

Utilities 1.5%
Avista Corp.		33,310		925,685
Black Hills Corp.		97,440		4,942,157
Chesapeake Utilities Corp.		10,700		582,187
PNM Resources, Inc.		103,530		2,476,437

				8,926,466

Total Common Stock
(Cost $455,928,714)				583,290,819



	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

Short-Term Investments 1.1% of net assets

Time Deposits 1.0%
Australia & New Zealand Banking Group Ltd.
0.03%, 11/01/13		5,979,700		5,979,700

U.S. Treasury Obligation 0.1%
U.S. Treasury Bill
0.01%, 12/19/13 (b)(c)		590,000		589,996

Total Short-Term Investments
(Cost $6,569,696)				6,569,696



End of Investments.

50 See financial notes

Schwab Small-Cap Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Collateral Invested for Securities on Loan 0.5% of net assets


Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.01% (d)		3,083,360		3,083,360

Total Collateral Invested for Securities on Loan
(Cost $3,083,360)				3,083,360



End of Collateral Invested for Securities on Loan

At 10/31/13, the tax basis cost of the fund’s investments was $463,020,967 and the unrealized appreciation and depreciation were $135,898,052 and ($9,058,504), respectively, with a net unrealized appreciation of $126,839,548.


*		Non-income producing security.
(a)		All or a portion of this security is on loan. Securities on loan were valued at $2,964,901.
(b)		All or a portion of this security is held as collateral for open futures contracts.
(c)		The rate shown is the purchase yield.
(d)		The rate shown is the 7-day yield.
(e)		Fair-valued by management in accordance with procedures approved by the Board of Trustees.

In addition to the above, the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

Russell 2000 Index, mini, Long, expires 12/20/13

2,415,160

113,478

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$548,483,332		$—		$—		$548,483,332
Pharmaceuticals, Biotechnology & Life Sciences		34,805,453		—		2,034		34,807,487
Short-Term Investments¹		—		6,569,696		—		6,569,696

Total		$583,288,785		$6,569,696		$2,034		$589,860,515

Other Financial Instruments
Collateral Invested for Securities on Loan		$3,083,360		$—		$—		$3,083,360
Futures Contract²		113,478		—		—		113,478


¹		As categorized in Portfolio Holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

Balance

Change in

Balance

as of

Realized

Unrealized

Gross

as of

October 31,

Gains

Appreciation

Gross

Transfers

October 31,

Investments in Securities

2012

(Losses)

(Depreciation)

Purchases

Sales

out

2013

Common Stock

$792,844

($140,267

)

($121,069

)

$—

($713,380

)

$703,452

($519,546

)

$2,034

Total

$792,844

($140,267

)

($121,069

)

$—

($713,380

)

$703,452

($519,546

)

$2,034

All net realized and change in unrealized gains (losses) in the table above are reflected on the accompanying Statement of Operations. The change in appreciation (depreciation) for Level 3 investments held by the fund at October 31, 2013 was $6,102.

See financial notes 51

Schwab Small-Cap Equity Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends		$7,155,482
Interest		1,982
Securities on loan	+	119,145

Total investment income		7,276,609

Expenses

Investment adviser and administrator fees		3,878,820
Shareholder service fees		1,181,930
Shareholder reports		54,586
Portfolio accounting fees		49,043
Registration fees		35,069
Professional fees		34,876
Custodian fees		34,845
Transfer agent fees		24,293
Independent trustees’ fees		10,142
Other expenses	+	9,780

Total expenses		5,313,384
Expense reduction by CSIM and its affiliates	−	31,237

Net expenses	−	5,282,147

Net investment income		1,994,462

Realized and Unrealized Gains (Losses)

Net realized gains on investments		69,413,131
Net realized gains on futures contracts	+	1,278,383

Net realized gains		70,691,514
Net change in unrealized appreciation on investments		89,650,446
Net change in unrealized appreciation on futures contracts	+	113,478

Net change in unrealized appreciation	+	89,763,924

Net realized and unrealized gains		160,455,438

Increase in net assets resulting from operations		$162,449,900

54 See financial notes

Schwab Small-Cap Equity Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$1,994,462			$412,291
Net realized gains		70,691,514			34,583,871
Net change in unrealized appreciation	+	89,763,924			23,055,659

Increase in net assets from operations		162,449,900			58,051,821

Distributions to Shareholders

Distributions from net investment income		($2,100,800	)		($177,045	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			5,573,116		$121,933,084			10,994,013		$164,489,009
Shares reinvested			39,481		707,097			3,977		61,875
Shares redeemed	+		(3,750,852	)	(80,237,495	)		(3,628,709	)	(61,262,349	)

Net transactions in fund shares			1,861,745		$42,402,686			7,369,281		$103,288,535

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			21,876,358		$387,564,243			14,507,077		$226,400,932
Total increase	+		1,861,745		202,751,786			7,369,281		161,163,311

End of period			23,738,103		$590,316,029			21,876,358		$387,564,243


Distributions in excess of net investment income/Net investment income not yet distributed					($92,217	)				$339,903

See financial notes 55

Schwab Hedged Equity Fund™

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09¹


Per-Share Data ($)

Net asset value at beginning of period		16.36			15.32			14.79			13.45			12.55

Income (loss) from investment operations:
Net investment income (loss)		(0.10	)		(0.08	)		(0.05	)		(0.08	)		(0.05	)
Net realized and unrealized gains (losses)		2.36			1.12			0.58			1.42			0.96

Total from investment operations		2.26			1.04			0.53			1.34			0.91
Less distributions:
Distributions from net investment income		—			—			—			—			(0.01	)

Net asset value at end of period		18.62			16.36			15.32			14.79			13.45

Total return (%)		13.81			6.79			3.58			9.96			7.28

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses (including dividend expense on short sales)		2.48			2.08			1.86			1.97			2.07	²
Net operating expenses (excluding dividend expense on short sales)		1.48	³		1.53	³		1.44	⁴		1.38	⁵		1.62	^2,5
Gross operating expenses		2.52			2.13			1.88			1.99			2.29
Net investment income (loss)		(0.49	)		(0.47	)		(0.25	)		(0.54	)		(0.41	)
Portfolio turnover rate		130			109			98			115			169
Net assets, end of period ($ x 1,000,000)		193			194			236			329			306

² Effective May 5, 2009, the net operating expense limitation was lowered. The ratio presented for period ended 10/31/09 is a blended ratio.

³ The ratio of net operating expenses would have been 1.33% for the period ended 10/31/12 and 10/31/13, respectively, if stock loan fees on short sales had not been incurred.

⁴ The ratio of net operating expenses would have been 1.33% for the period ended 10/31/11, if stock loan fees on short sales and payment for state filing fees had not been included.

⁵ The ratio of net operating expenses would have been 1.47% and 1.31% for the period ended 10/31/09, and 10/31/10, respectively, if stock loan fees on short sales had not been incurred.

56 See financial notes

Schwab Hedged Equity Fund

Portfolio Holdings as of October 31, 2013

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


				Cost			Value
Holdings by Category				($)			($)

	99	.1%	Common Stock		145,749,482			191,041,380
	0	.6%	Other Investment Company		1,130,585			1,130,585


	99	.7%	Total Investments		146,880,067			192,171,965
	(39	.7)%	Short Sales		(63,851,281	)		(76,400,041	)
	40	.0%	Other Assets and Liabilities, Net					76,898,688


	100	.0%	Total Net Assets					192,670,612


	Number		Value
Security	of Shares		($)

Common Stock 99.1% of net assets

Automobiles & Components 0.1%
Visteon Corp. *		2,500		192,725

Banks 6.2%
Fifth Third Bancorp		78,998		1,503,332
MGIC Investment Corp. *		56,100		456,654
Ocwen Financial Corp. *		14,600		820,958
Regions Financial Corp. (b)		239,500		2,306,385
SunTrust Banks, Inc.		51,134		1,720,147
Wells Fargo & Co. (b)		118,191		5,045,574

				11,853,050

Capital Goods 5.8%
3M Co.		2,400		302,040
AGCO Corp.		34,373		2,006,696
Aircastle Ltd.		16,000		301,920
Curtiss-Wright Corp.		43,600		2,170,408
General Electric Co. (b)		31,485		823,018
II-VI, Inc. *		69,800		1,190,788
Masco Corp.		76,000		1,605,880
Northrop Grumman Corp.		14,700		1,580,397
Terex Corp. *		21,400		747,930
Textron, Inc.		12,835		369,519

				11,098,596

Commercial & Professional Supplies 0.7%
Equifax, Inc.		13,800		892,446
R.R. Donnelley & Sons Co.		15,100		280,407
Waste Management, Inc.		3,600		156,744

				1,329,597

Consumer Durables & Apparel 1.5%
Jarden Corp. (b)*		35,416		1,960,630
NIKE, Inc., Class B		7,600		575,776
The Jones Group, Inc.		19,100		296,814

				2,833,220

Consumer Services 1.9%
Brinker International, Inc. (b)		6,626		294,327
Cracker Barrel Old Country Store, Inc.		4,300		472,441
Jack in the Box, Inc. *		26,900		1,094,292
MGM Resorts International *		52,300		995,792
Service Corp. International		43,200		778,032

				3,634,884

Diversified Financials 7.2%
Affiliated Managers Group, Inc. *		8,000		1,579,520
Bank of America Corp.		118,400		1,652,864
Citigroup, Inc.		23,700		1,156,086
JPMorgan Chase & Co. (b)		44,612		2,299,303
SLM Corp. (b)		113,309		2,874,649
State Street Corp.		13,600		952,952
The Bank of New York Mellon Corp. (b)		108,000		3,434,400

				13,949,774

Energy 9.2%
Anadarko Petroleum Corp.		21,100		2,010,619
Chevron Corp. (b)		11,096		1,331,076
ConocoPhillips (b)		54,500		3,994,850
EOG Resources, Inc. (b)		21,300		3,799,920
Exxon Mobil Corp. (b)		1,978		177,268
Hess Corp.		12,500		1,015,000
Murphy Oil Corp. (b)		40,553		2,446,157
Occidental Petroleum Corp.		6,800		653,344
Oceaneering International, Inc. (b)		24,501		2,104,146
SM Energy Co.		2,500		221,525

				17,753,905

Food & Staples Retailing 3.7%
Costco Wholesale Corp.		13,500		1,593,000
Rite Aid Corp. *		326,400		1,739,712
The Kroger Co. (b)		84,543		3,621,822
Walgreen Co.		4,500		266,580

				7,221,114

Food, Beverage & Tobacco 4.2%
Altria Group, Inc.		10,600		394,638
Archer-Daniels-Midland Co. (b)		87,500		3,578,750
Hillshire Brands Co.		20,100		659,883
J&J Snack Foods Corp.		9,600		821,472
Pilgrim’s Pride Corp. *		18,700		264,979
Sanderson Farms, Inc.		20,400		1,289,484
TreeHouse Foods, Inc. *		3,800		278,388
Universal Corp. (b)		14,700		779,541

				8,067,135

See financial notes 57

Schwab Hedged Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Health Care Equipment & Services 5.8%
Alere, Inc. *		41,400		1,396,422
CareFusion Corp. *		43,400		1,682,618
Cigna Corp.		17,300		1,331,754
Magellan Health Services, Inc. (b)*		41,000		2,406,700
MedAssets, Inc. *		56,200		1,294,286
Medtronic, Inc. (b)		54,000		3,099,600

				11,211,380

Household & Personal Products 0.2%
Harbinger Group, Inc. *		29,200		317,988

Insurance 3.8%
Aflac, Inc.		36,700		2,384,766
American Financial Group, Inc.		30,000		1,687,800
Principal Financial Group, Inc.		39,132		1,857,205
Reinsurance Group of America, Inc.		8,300		590,794
The Travelers Cos., Inc.		9,900		854,370

				7,374,935

Materials 6.7%
AMCOL International Corp.		20,400		654,432
Ashland, Inc.		6,100		564,555
Avery Dennison Corp.		3,500		164,920
Commercial Metals Co.		44,900		824,364
International Paper Co. (b)		21,916		977,673
MeadWestvaco Corp. (b)		33,347		1,162,143
Minerals Technologies, Inc. (b)		68,692		3,890,028
PPG Industries, Inc.		4,472		816,498
Steel Dynamics, Inc.		30,700		551,679
Stepan Co.		9,500		559,265
Worthington Industries, Inc.		65,393		2,651,032

				12,816,589

Media 3.0%
Comcast Corp., Class A		31,700		1,508,286
Live Nation Entertainment, Inc. *		40,300		783,432
The Washington Post Co., Class B		1,700		1,093,644
Time Warner, Inc.		24,800		1,704,752
Viacom Inc., Class B		8,300		691,307

				5,781,421

Pharmaceuticals, Biotechnology & Life Sciences 6.0%
Amgen, Inc.		19,700		2,285,200
Biogen Idec, Inc. *		1,800		439,542
Celgene Corp. (b)*		26,500		3,934,985
ICON plc *		4,100		165,804
Merck & Co., Inc. (b)		1,900		85,671
Pfizer, Inc. (b)		154,574		4,742,330

				11,653,532

Real Estate 2.1%
Apartment Investment & Management Co., Class A		11,700		327,366
Ashford Hospitality Trust		40,800		532,848
Brandywine Realty Trust		100,500		1,430,115
RLJ Lodging Trust		70,700		1,785,882

				4,076,211

Retailing 5.2%
ANN, Inc. (b)*		97,100		3,433,456
Best Buy Co., Inc.		33,300		1,425,240
Brown Shoe Co., Inc.		9,200		206,448
Macy’s, Inc. (b)		65,421		3,016,562
Staples, Inc.		2,400		38,688
The Children’s Place Retail Stores, Inc. *		24,900		1,359,291
The TJX Cos., Inc.		10,500		638,295

				10,117,980

Semiconductors & Semiconductor Equipment 0.9%
Diodes, Inc. *		1,200		29,064
International Rectifier Corp. *		38,200		994,728
LSI Corp.		83,966		712,032

				1,735,824

Software & Services 10.7%
Aspen Technology, Inc. *		23,900		913,697
CA, Inc. (b)		117,906		3,744,695
comScore, Inc. *		33,300		889,776
Convergys Corp. (b)		100,622		1,986,278
Google, Inc., Class A *		1,400		1,442,812
Jack Henry & Associates, Inc.		26,200		1,430,782
Microsoft Corp. (b)		85,519		3,023,097
Oracle Corp. (b)		84,300		2,824,050
Pegasystems, Inc.		13,200		502,392
PTC, Inc. *		25,400		704,088
Rovi Corp. *		37,300		625,148
Synopsys, Inc. *		45,900		1,673,055
Verint Systems, Inc. *		11,500		419,980
WebMD Health Corp. *		9,734		342,831

				20,522,681

Technology Hardware & Equipment 8.0%
Apple, Inc. (b)		9,728		5,081,421
Brocade Communications Systems, Inc. (b)*		228,524		1,832,763
Cisco Systems, Inc.		64,900		1,460,250
EchoStar Corp., Class A (b)*		21,567		1,034,353
Hewlett-Packard Co.		36,236		883,071
Lexmark International, Inc., Class A		16,200		575,910
Western Digital Corp.		25,479		1,774,103
Zebra Technologies Corp., Class A (b)*		59,300		2,864,783

				15,506,654

Telecommunication Services 2.0%
AT&T, Inc.		46,100		1,668,820
Telephone & Data Systems, Inc. (b)		37,020		1,154,284
Verizon Communications, Inc.		19,050		962,215

				3,785,319

58 See financial notes

Schwab Hedged Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Short Sales 39.7% of net assets

Automobiles & Components 1.1%
American Axle & Manufacturing Holdings, Inc. *		5,200		96,772
Dorman Products, Inc.		18,700		909,007
Thor Industries, Inc.		20,300		1,177,603

				2,183,382

Banks 4.9%
Bank of the Ozarks, Inc.		32,800		1,622,944
BankUnited, Inc.		46,800		1,440,036
M&T Bank Corp.		4,800		540,144
New York Community Bancorp, Inc.		77,400		1,254,654
Signature Bank *		29,900		3,044,418
Texas Capital Bancshares, Inc. *		11,500		598,575
Valley National Bancorp		103,835		1,012,391

				9,513,162

Capital Goods 3.0%
Deere & Co.		400		32,736
DigitalGlobe, Inc. *		20,700		658,674
Generac Holdings, Inc.		1,600		78,960
Joy Global, Inc.		700		39,725
Navistar International Corp. *		23,200		838,912
Proto Labs, Inc. *		13,080		1,096,889
Simpson Manufacturing Co., Inc.		8,000		283,600
TransDigm Group, Inc.		18,800		2,733,708

				5,763,204

Commercial & Professional Supplies 2.2%
Copart, Inc. *		28,985		934,187
Stericycle, Inc. *		11,400		1,324,680
The Advisory Board Co. *		14,400		987,840
Waste Connections, Inc.		24,200		1,034,308

				4,281,015

Consumer Durables & Apparel 0.6%
Garmin Ltd.		3,000		140,250
Tempur-Pedic International, Inc. *		24,600		943,410

				1,083,660

Diversified Financials 2.5%
CBOE Holdings, Inc.		36,500		1,770,250
CME Group, Inc.		12,700		942,467
Federated Investors, Inc., Class B		41,700		1,130,904
Walter Investment Management Corp. *		23,900		902,703

				4,746,324

Energy 3.7%
Bonanza Creek Energy, Inc. *		26,700		1,349,418
Cheniere Energy, Inc. *		43,300		1,723,340
CVR Energy, Inc.		13,000		516,360
FMC Technologies, Inc. *		6,400		323,520
Gulfport Energy Corp. *		8,400		492,996
Kodiak Oil & Gas Corp. *		98,484		1,277,337
PDC Energy, Inc. *		5,400		366,174
Range Resources Corp.		7,400		560,254
Western Refining, Inc.		17,800		574,406

				7,183,805

Food & Staples Retailing 0.7%
Sysco Corp.		23,900		772,926
The Fresh Market, Inc. *		12,000		610,920

				1,383,846

Food, Beverage & Tobacco 1.9%
B&G Foods, Inc.		33,600		1,137,360
McCormick & Co., Inc. - Non Voting Shares		1,700		117,555
Snyders-Lance, Inc.		3,200		95,968
The Hain Celestial Group, Inc. *		28,100		2,338,763

				3,689,646

Health Care Equipment & Services 1.4%
Acadia Healthcare Co., Inc. *		17,306		750,388
DexCom, Inc. *		27,083		778,095
Edwards Lifesciences Corp. *		4,200		273,798
HCA Holdings, Inc.		2,300		108,422
Intuitive Surgical, Inc. *		1,600		594,400
Quest Diagnostics, Inc.		2,700		161,757

				2,666,860

Insurance 4.0%
Hilltop Holdings, Inc. *		62,800		1,088,952
Mercury General Corp.		31,900		1,485,264
PartnerRe Ltd.		22,300		2,234,683
RLI Corp.		23,200		2,191,936
Validus Holdings Ltd.		15,000		592,200

				7,593,035

Materials 2.6%
Airgas, Inc.		800		87,256
Albemarle Corp.		19,500		1,290,705
Axiall Corp.		22,300		867,247
Eagle Materials, Inc.		11,800		885,118
KapStone Paper & Packaging Corp.		4,100		213,036
Newmont Mining Corp.		1,900		51,794
Southern Copper Corp.		28,885		807,336
The Mosaic Co.		15,400		706,090

				4,908,582

Media 1.9%
Cablevision Systems Corp., Class A		26,500		412,075
DISH Network Corp., Class A		12,700		612,140
DreamWorks Animation SKG, Inc., Class A *		39,400		1,349,056
Loral Space & Communications, Inc.		5,400		385,398
Sirius XM Radio, Inc.		223,300		841,841

				3,600,510

60 See financial notes

Schwab Hedged Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Pharmaceuticals, Biotechnology & Life Sciences 0.9%
Akorn, Inc. *		43,800		895,272
Mettler-Toledo International, Inc. *		3,400		841,364

				1,736,636

Real Estate 0.7%
American Tower Corp.		3,300		261,855
Rayonier, Inc.		12,900		606,558
Realty Income Corp.		10,900		453,985

				1,322,398

Retailing 1.2%
AutoZone, Inc. *		2,600		1,130,194
Lithia Motors, Inc., Class A		5,500		345,675
Restoration Hardware Holdings, Inc. *		9,300		648,582
TripAdvisor, Inc. *		2,800		231,588

				2,356,039

Software & Services 3.0%
Booz Allen Hamilton Holding Corp.		2,800		55,440
Cognizant Technology Solutions Corp., Class A *		2,100		182,553
Concur Technologies, Inc. *		12,500		1,307,500
FactSet Research Systems, Inc.		2,800		305,032
Intuit, Inc.		5,900		421,319
LinkedIn Corp., Class A *		2,712		606,593
NetSuite, Inc. *		3,200		322,816
Pandora Media, Inc. *		30,516		766,867
Paychex, Inc.		29,600		1,250,896
Qlik Technologies, Inc. *		16,100		407,974
Visa, Inc., Class A		700		137,669

				5,764,659

Technology Hardware & Equipment 3.4%
ADTRAN, Inc.		23,500		551,780
F5 Networks, Inc. *		1,600		130,416
IPG Photonics Corp.		23,200		1,537,464
National Instruments Corp.		70,900		2,059,645
OSI Systems, Inc. *		11,200		815,808
Palo Alto Networks, Inc. *		13,400		564,944
QUALCOMM, Inc.		500		34,735
Stratasys Ltd. *		8,200		928,486

				6,623,278

Total Short Sales
(Proceeds $63,851,281)				76,400,041



End of Short Sale Positions.


*		Non-income producing security

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):

Assets Valuation Input


	Quoted Prices in					Significant
	Active Markets for			Significant Other		Unobservable
	Identical Assets			Observable Inputs		Inputs
Description	(Level 1)			(Level 2)		(Level 3)		Total

Common Stock¹		$191,041,380			$—		$—		$191,041,380
Other Investment Company¹		1,130,585			—		—		1,130,585

Total		$192,171,965			$—		$—		$192,171,965



Liabilities Valuation Input


Other Financial Instruments
Short Sales¹		($76,400,041	)		$—		$—		($76,400,041	)


¹		As categorized in Portfolio Holdings.

The funds’ policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1 and Level 2 for the period ended October 31, 2013.

See financial notes 61

Schwab Hedged Equity Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends		$3,859,442
Interest	+	291

Total investment income		3,859,733

Expenses

Investment adviser and administrator fees		2,043,201
Shareholder service fees		456,665
Dividends on short sales		1,932,802
Stock loan fees on short sales		299,142
Professional fees		41,026
Portfolio accounting fees		38,681
Transfer agent fees		34,633
Registration fees		22,616
Shareholder reports		15,511
Custodian fees		13,865
Independent trustees’ fees		8,387
Interest expense		966
Other expenses	+	5,262

Total expenses		4,912,757
Expense reduction by CSIM and its affiliates	−	91,792

Net expenses	−	4,820,965

Net investment loss		(961,232	)

Realized and Unrealized Gains (Losses)

Net realized gains on investments		28,551,410
Net realized gains on futures contracts		36,025
Net realized losses on short sales	+	(10,784,622	)

Net realized gains		17,802,813
Net change in unrealized appreciation on investments		22,075,480
Net change in unrealized depreciation on short sales	+	(13,792,904	)

Net change in unrealized appreciation	+	8,282,576

Net realized and unrealized gains		26,085,389

Increase in net assets resulting from operations		$25,124,157

See financial notes 63

Schwab Financial Services Fund™

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09


Per-Share Data ($)

Net asset value at beginning of period		10.66			9.17			9.74			8.77			9.05

Income (loss) from investment operations:
Net investment income (loss)		0.11			0.08			0.05			0.04			0.08
Net realized and unrealized gains (losses)		3.08			1.46			(0.58	)		0.99			(0.21	)

Total from investment operations		3.19			1.54			(0.53	)		1.03			(0.13	)
Less distributions:
Distributions from net investment income		(0.09	)		(0.05	)		(0.04	)		(0.06	)		(0.15	)

Net asset value at end of period		13.76			10.66			9.17			9.74			8.77

Total return (%)		30.20			16.92			(5.51	)		11.79			(1.10	)

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.94			0.94			0.93	¹		0.95	²		0.96	³
Gross operating expenses		1.03			1.10			1.06			1.04			0.99
Net investment income (loss)		0.91			0.78			0.45			0.37			0.91
Portfolio turnover rate		74			84			77			54			47
Net assets, end of period ($ x 1,000,000)		66			47			40			52			64

¹ The ratio of net operating expenses would have been 0.94%, if payment for state filing fees had not been included.

² The ratio of net operating expenses would have been 0.94%, if certain non-routine expenses had not been incurred.

³ Effective July 1, 2009, the net operating expense limitation was lowered. The ratio presented for period ended 10/31/09 is a blended ratio.

See financial notes 65

Schwab Financial Services Fund

Portfolio Holdings as of October 31, 2013

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

Cost

Value

Holdings by Category

($)

.3%

Common Stock

51,812,024

65,486,823

.7%

Short-Term Investments

438,584

100

.0%

Total Investments

52,250,608

65,925,407

.0%

Other Assets and Liabilities, Net

4,475

100

.0%

Total Net Assets

65,929,882


	Number		Value
Security	of Shares		($)

Common Stock 99.3% of net assets

Banks 21.9%
Berkshire Hills Bancorp, Inc.		5,100		129,387
Chemical Financial Corp.		11,500		336,835
Fifth Third Bancorp		33,700		641,311
First Defiance Financial Corp.		8,700		224,634
First Interstate BancSystem, Inc.		11,500		288,765
Huntington Bancshares, Inc.		69,000		607,200
Ocwen Financial Corp. *		17,000		955,910
Regions Financial Corp.		82,500		794,475
S&T Bancorp, Inc.		5,100		125,052
SunTrust Banks, Inc.		4,400		148,016
TFS Financial Corp. *		16,200		196,668
The PNC Financial Services Group, Inc.		26,900		1,977,957
U.S. Bancorp		5,700		212,952
United Community Banks, Inc. *		25,400		395,986
Wells Fargo & Co.		135,000		5,763,150
WSFS Financial Corp.		16,000		1,120,160
Zions Bancorp		18,300		519,171

				14,437,629

Diversified Financials 45.5%
Affiliated Managers Group, Inc. *		6,200		1,224,128
American Express Co.		34,100		2,789,380
Bank of America Corp.		192,100		2,681,716
Berkshire Hathaway, Inc., Class B *		29,100		3,348,828
BlackRock, Inc.		3,100		932,511
Capital One Financial Corp.		20,200		1,387,134
Citigroup, Inc.		62,400		3,043,872
FBR & Co. *		5,800		153,700
FXCM, Inc., Class A		22,300		365,497
GFI Group, Inc.		76,600		265,802
Investment Technology Group, Inc. *		42,200		676,044
JPMorgan Chase & Co.		99,900		5,148,846
Morgan Stanley		51,700		1,485,341
Nelnet, Inc., Class A		700		29,841
SEI Investments Co.		14,200		471,298
SLM Corp.		37,100		941,227
State Street Corp.		24,100		1,688,687
The Bank of New York Mellon Corp.		62,400		1,984,320
The Goldman Sachs Group, Inc.		8,500		1,367,310

				29,985,482

Insurance 15.9%
Aflac, Inc.		23,900		1,553,022
American International Group, Inc.		39,000		2,014,350
Assurant, Inc.		4,000		233,920
HCC Insurance Holdings, Inc.		24,200		1,104,730
MetLife, Inc.		16,600		785,346
Prudential Financial, Inc.		10,900		887,151
Reinsurance Group of America, Inc.		15,100		1,074,818
The Travelers Cos., Inc.		20,000		1,726,000
Torchmark Corp.		14,000		1,020,040
XL Group plc		2,200		67,254

				10,466,631

Real Estate 16.0%
Apartment Investment & Management Co., Class A		33,700		942,926
Ashford Hospitality Trust		20,900		272,954
Brandywine Realty Trust		29,600		421,208
CBRE Group, Inc., Class A *		48,100		1,117,363
Chatham Lodging Trust		5,100		96,186
Chesapeake Lodging Trust		9,200		216,844
DCT Industrial Trust, Inc.		68,200		528,550
Duke Realty Corp.		73,400		1,216,238
Host Hotels & Resorts, Inc.		54,700		1,014,685
Inland Real Estate Corp.		12,300		131,487
Liberty Property Trust		25,900		963,221
One Liberty Properties, Inc.		2,800		59,192
Prologis, Inc.		38,000		1,518,100
Retail Properties of America, Inc., Class A		11,100		158,841
RLJ Lodging Trust		49,100		1,240,266
Saul Centers, Inc.		4,100		192,700
Sovran Self Storage, Inc.		4,400		336,556
Urstadt Biddle Properties, Inc., Class A		8,600		169,764

				10,597,081

Total Common Stock
(Cost $51,812,024)				65,486,823



	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

Short-Term Investments 0.7% of net assets

Time Deposit 0.7%
Bank of America
0.03%, 11/01/13		426,584		426,584

66 See financial notes

Schwab Financial Services Fund

Portfolio Holdings continued


	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

U.S. Treasury Obligation 0.0%
U.S. Treasury Bills
0.01%, 12/19/13 (a)		12,000		12,000

Total Short-Term Investments
(Cost $438,584)				438,584



End of Investments.

At 10/31/13, the tax basis cost of the fund’s investments was $52,261,658 and the unrealized appreciation and depreciation were $13,786,008 and ($122,259), respectively, with a net unrealized appreciation of $13,663,749.


*		Non-income producing security.
(a)		The rate shown is the purchase yield.

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):

Quoted Prices in

Significant

Active Markets for

Significant Other

Unobservable

Identical Assets

Observable Inputs

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total

Common Stock¹

$65,486,823

$—

$65,486,823

Short-Term Investments¹

—

438,584

—

438,584

Total

$65,486,823

$438,584

$—

$65,925,407


¹		As categorized in Portfolio Holdings.

See financial notes 67

Schwab Financial Services Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends		$1,058,193
Interest		354
Securities on loan	+	180

Total investment income		1,058,727

Expenses

Investment adviser and administrator fees		309,484
Shareholder service fees		137,339
Portfolio accounting fees		36,575
Transfer agent fees		32,761
Professional fees		28,838
Registration fees		18,382
Shareholder reports		14,777
Independent trustees’ fees		7,355
Custodian fees		4,911
Other expenses	+	2,119

Total expenses		592,541
Expense reduction by CSIM and its affiliates	−	53,811

Net expenses	−	538,730

Net investment income		519,997

Realized and Unrealized Gains (Losses)

Net realized gains on investments		4,238,876
Net realized gains on futures contracts	+	64,017

Net realized gains		4,302,893
Net change in unrealized appreciation on investments		9,519,876
Net change in unrealized appreciation on futures contracts	+	20,168

Net change in unrealized appreciation	+	9,540,044

Net realized and unrealized gains		13,842,937

Increase in net assets resulting from operations		$14,362,934

See financial notes 69

Schwab Financial Services Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$519,997			$341,423
Net realized gains		4,302,893			1,502,885
Net change in unrealized appreciation	+	9,540,044			4,694,094

Increase in net assets from operations		14,362,934			6,538,402

Distributions to Shareholders

Distributions from net investment income		($406,901	)		($224,748	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			1,625,426		$20,364,480			1,195,666		$12,102,193
Shares reinvested			33,206		353,309			21,793		196,795
Shares redeemed	+		(1,249,074	)	(15,437,977	)		(1,227,292	)	(12,174,120	)

Net transactions in fund shares			409,558		$5,279,812			(9,833	)	$124,868

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			4,381,293		$46,694,037			4,391,126		$40,255,515
Total increase or decrease	+		409,558		19,235,845			(9,833	)	6,438,522

End of period			4,790,851		$65,929,882			4,381,293		$46,694,037


Net investment income not yet distributed					$338,279					$222,352

70 See financial notes

Schwab Health Care Fund™

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09


Per-Share Data ($)

Net asset value at beginning of period		20.59			17.29			15.48			13.41			12.55

Income (loss) from investment operations:
Net investment income (loss)		0.22			0.27			0.15			0.19			0.13
Net realized and unrealized gains (losses)		6.26			3.18			1.85			2.01			0.82

Total from investment operations		6.48			3.45			2.00			2.20			0.95
Less distributions:
Distributions from net investment income		(0.33	)		(0.15	)		(0.19	)		(0.13	)		(0.09	)
Distributions from net realized gains		(2.17	)		—			—			—			—

Total distributions		(2.50	)		(0.15	)		(0.19	)		(0.13	)		(0.09	)

Net asset value at end of period		24.57			20.59			17.29			15.48			13.41

Total return (%)		35.46			20.10			13.00			16.49			7.65

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.82			0.82			0.81	¹		0.82			0.83	²
Gross operating expenses		0.83			0.85			0.85			0.86			0.85
Net investment income (loss)		1.06			1.44			0.85			1.14			0.88
Portfolio turnover rate		54			60			24			37			36
Net assets, end of period ($ x 1,000,000)		816			511			414			410			430

¹ The ratio of net operating expenses would have been 0.82%, if payment for state filing fees and a voluntary reduction of Investment Adviser fees had not been included.

² Effective July 1, 2009, the net operating expense limitation was lowered. The ratio presented for period ended 10/31/09 is a blended ratio.

See financial notes 71

Schwab Health Care Fund

Portfolio Holdings as of October 31, 2013

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


				Cost		Value
Holdings by Category				($)		($)

	98	.4%	Common Stock		611,966,048		803,168,677
	1	.3%	Short-Term Investments		10,655,479		10,655,479


	99	.7%	Total Investments		622,621,527		813,824,156
	0	.2%	Collateral Invested for Securities on Loan		1,454,088		1,454,088
	0	.1%	Other Assets and Liabilities, Net				1,114,511


	100	.0%	Net Assets				816,392,755


	Number		Value
Security	of Shares		($)

Common Stock 98.4% of net assets

Australia 2.2%


Health Care Equipment & Services 0.4%
Primary Health Care Ltd.		100,000		466,542
Sonic Healthcare Ltd.		201,393		3,074,308

				3,540,850


Pharmaceuticals, Biotechnology & Life Sciences 1.8%
CSL Ltd.		222,874		14,650,600

				18,191,450

France 1.2%


Pharmaceuticals, Biotechnology & Life Sciences 1.2%
Sanofi		91,404		9,745,780

Germany 1.6%


Pharmaceuticals, Biotechnology & Life Sciences 1.6%
Merck KGaA		79,367		13,202,743

Israel 0.6%


Pharmaceuticals, Biotechnology & Life Sciences 0.6%
Teva Pharmaceutical Industries Ltd.		117,520		4,366,855

Japan 1.0%


Health Care Equipment & Services 0.0%
BML, Inc.		6,600		225,504


Pharmaceuticals, Biotechnology & Life Sciences 1.0%
Kissei Pharmaceutical Co., Ltd.		9,500		219,923
Kyowa Hakko Kirin Co., Ltd.		57,000		629,563
Mitsubishi Tanabe Pharma Corp.		412,200		5,813,549
Takeda Pharmaceutical Co., Ltd.		28,800		1,372,451

				8,035,486

				8,260,990

Malaysia 0.0%


Health Care Equipment & Services 0.0%
Kossan Rubber Industries		64,400		130,410

Republic of Korea 0.1%


Pharmaceuticals, Biotechnology & Life Sciences 0.1%
Daewoong Pharmaceutical Co., Ltd.		10,497		825,683

South Africa 0.1%


Health Care Equipment & Services 0.1%
Mediclinic International Ltd.		100,000		753,593

Sweden 0.1%


Pharmaceuticals, Biotechnology & Life Sciences 0.1%
Meda AB, A Shares		97,925		1,098,864

Switzerland 11.1%


Health Care Equipment & Services 0.4%
Straumann Holding AG - Reg’d		15,416		3,064,098


Pharmaceuticals, Biotechnology & Life Sciences 10.7%
Actelion Ltd. - Reg’d *		234,377		18,133,875
BB Biotech AG - Reg’d *		10,712		1,604,833
Lonza Group AG - Reg’d *		72,350		6,458,172
Novartis AG - Reg’d		343,944		26,697,816
Roche Holding AG		124,268		34,364,500

				87,259,196

				90,323,294

United Kingdom 2.0%


Pharmaceuticals, Biotechnology & Life Sciences 2.0%
AstraZeneca plc		142,499		7,543,915
GlaxoSmithKline plc		135,000		3,558,918
Shire plc		117,716		5,219,572

				16,322,405

United States 78.4%


Health Care Equipment & Services 29.0%
Abbott Laboratories		697,500		25,493,625
Alere, Inc. *		206,400		6,961,872
Align Technology, Inc. *		12,100		690,426
Alliance HealthCare Services, Inc. *		17,700		446,217
AMN Healthcare Services, Inc. *		60,000		744,000
AmSurg Corp. *		117,600		5,043,864
AngioDynamics, Inc. *		58,500		919,620
Anika Therapeutics, Inc. *		56,100		1,675,707
ArthroCare Corp. *		26,000		973,440
Baxter International, Inc.		29,100		1,916,817
Becton, Dickinson & Co.		92,000		9,671,960
Boston Scientific Corp. *		1,375,000		16,073,750
CareFusion Corp. *		470,600		18,245,162

72 See financial notes

Schwab Health Care Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Cigna Corp.		115,400		8,883,492
CONMED Corp.		70,500		2,557,035
CorVel Corp. *		27,100		1,127,360
Covidien plc		161,000		10,321,710
Express Scripts Holding Co. *		62,800		3,926,256
Five Star Quality Care, Inc. *		58,200		295,074
Greatbatch, Inc. *		111,928		4,266,695
Henry Schein, Inc. *		56,000		6,296,080
Hill-Rom Holdings, Inc.		167,000		6,895,430
Hologic, Inc. *		72,700		1,627,753
Humana, Inc.		30,000		2,764,500
Kindred Healthcare, Inc.		85,000		1,179,800
Lifepoint Hospitals, Inc. *		148,200		7,653,048
Magellan Health Services, Inc. *		51,900		3,046,530
McKesson Corp.		88,800		13,882,992
MedAssets, Inc. *		451,200		10,391,136
MEDNAX, Inc. *		8,700		948,474
Medtronic, Inc.		554,000		31,799,600
NuVasive, Inc. *		87,900		2,793,462
Omnicell, Inc. *		50,000		1,153,500
St. Jude Medical, Inc.		84,300		4,837,977
STERIS Corp.		111,000		5,016,090
Stryker Corp.		25,000		1,846,500
Symmetry Medical, Inc. *		100,000		810,000
The Providence Service Corp. *		49,200		1,470,588
UnitedHealth Group, Inc.		60,900		4,157,034
Universal Health Services, Inc., Class B		32,600		2,626,256
VCA Antech, Inc. *		17,700		503,565
WellPoint, Inc.		56,800		4,816,640

				236,751,037


Pharmaceuticals, Biotechnology & Life Sciences 49.4%
AbbVie, Inc.		753,900		36,526,455
Albany Molecular Research, Inc. *		12,000		157,200
Allergan, Inc.		35,000		3,171,350
AMAG Pharmaceuticals, Inc. *		73,500		1,983,030
Amgen, Inc.		338,000		39,208,000
Bio-Rad Laboratories, Inc., Class A *		61,000		7,534,720
Biogen Idec, Inc. *		115,100		28,106,269
Bristol-Myers Squibb Co.		505,600		26,554,112
Celgene Corp. *		221,400		32,875,686
Cubist Pharmaceuticals, Inc. *		17,000		1,054,000
Eli Lilly & Co.		435,900		21,716,538
Emergent Biosolutions, Inc. *		57,800		1,128,834
Forest Laboratories, Inc. *		67,400		3,169,822
Gilead Sciences, Inc. *		220,000		15,617,800
ICON plc *		128,000		5,176,320
Impax Laboratories, Inc. *		317,400		6,430,524
Johnson & Johnson		620,100		57,427,461
Lannett Co., Inc. *		37,000		873,570
Merck & Co., Inc.		717,500		32,352,075
Mylan, Inc. *		149,100		5,646,417
PAREXEL International Corp. *		115,100		5,261,221
PDL Biopharma, Inc. (a)		181,200		1,465,908
Pfizer, Inc.		1,882,400		57,752,032
Sagent Pharmaceuticals, Inc. *		109,200		2,368,548
Salix Pharmaceuticals Ltd. *		98,900		7,096,075
Santarus, Inc. *		58,000		1,353,140
Threshold Pharmaceuticals, Inc. *		238,700		1,035,958
Vanda Pharmaceuticals, Inc. *		21,300		152,508

				403,195,573

				639,946,610

Total Common Stock
(Cost $611,966,048)				803,168,677



	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

Short-Term Investments 1.3% of net assets

Time Deposit 1.3%
JPMorgan Chase
US Dollar
0.03%, 11/01/13		10,455,481		10,455,481

U.S. Treasury Obligations 0.0%
U.S. Treasury Bills
0.01%, 12/19/13 (b)(c)		10,000		9,999
0.02%, 12/19/13 (b)(c)		10,000		10,000
0.06%, 12/19/13 (b)(c)		180,000		179,999

				199,998

Total Short-Term Investments
(Cost $10,655,479)				10,655,479



End of Investments.


	Number		Value
Security	of Shares		($)

Collateral Invested for Securities on Loan 0.2% of net assets


Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.01% (d)		1,454,088		1,454,088

Total Collateral Invested for Securities on Loan
(Cost $1,454,088)				1,454,088



End of Collateral Invested for Securities on Loan.

At 10/31/13, the tax basis cost of the fund’s investments was $622,988,352 and the unrealized appreciation and depreciation were $192,120,890 and ($1,285,086), respectively, with a net unrealized appreciation of $190,835,804.

See financial notes 73

Schwab Health Care Fund

Portfolio Holdings continued

At 10/31/13, the values of certain foreign securities held by the fund aggregating $163,091,657 were adjusted from their closing market values in accordance with international fair valuation procedures approved by the fund’s Board of Trustees. (See financial note 2)


*		Non-income producing security.
(a)		All or a portion of this security is on loan. Securities on loan were valued at $1,392,613.
(b)		All or a portion of this security is held as collateral for open futures contracts.
(c)		The rate shown is the purchase yield.
(d)		The rate shown is the 7-day yield.


Reg’d —		Registered

In addition to the above, the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

S&P 500 Index, e-mini, Long, expires 12/20/13

4,114,850

170,638

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$640,077,020		$—		$—		$640,077,020
Australia¹		—		18,191,450		—		18,191,450
France¹		—		9,745,780		—		9,745,780
Germany¹		—		13,202,743		—		13,202,743
Israel¹		—		4,366,855		—		4,366,855
Japan¹		—		8,260,990		—		8,260,990
Republic of Korea¹		—		825,683		—		825,683
South Africa¹		—		753,593		—		753,593
Sweden¹		—		1,098,864		—		1,098,864
Switzerland¹		—		90,323,294		—		90,323,294
United Kingdom¹		—		16,322,405		—		16,322,405
Short-Term Investments¹		—		10,655,479		—		10,655,479

Total		$640,077,020		$173,747,136		$—		$813,824,156

Other Financial Instruments
Collateral Invested for Securities on Loan		$1,454,088		$—		$—		$1,454,088
Futures Contract²		170,638		—		—		170,638


¹		As categorized in Portfolio Holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

74 See financial notes

Schwab Health Care Fund

Statement of

Assets and Liabilities

As of October 31, 2013



Assets

Investments, at value (cost $622,621,527) including securities on loan of $1,392,613		$813,824,156
Foreign currency, at value (cost $19)		19
Collateral invested for securities on loan		1,454,088
Receivables:
Fund shares sold		1,873,811
Dividends		759,949
Foreign tax reclaims		280,516
Income from securities on loan		1,776
Interest		9
Prepaid expenses	+	14,243

Total assets		818,208,567

Liabilities

Collateral held for securities on loan		1,454,088
Payables:
Investment adviser and administrator fees		36,078
Shareholder service fees		28,679
Independent trustees’ fees		1
Fund shares redeemed		199,842
Variation margin on futures contracts		22,560
Accrued expenses	+	74,564

Total liabilities		1,815,812

Net Assets

Total assets		818,208,567
Total liabilities	−	1,815,812

Net assets		$816,392,755

Net Assets by Source
Capital received from investors		544,066,325
Net investment income not yet distributed		5,180,420
Net realized capital gains		75,762,906
Net unrealized capital appreciation		191,383,104

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$816,392,755

33,230,346

$24.57

See financial notes 75

Schwab Health Care Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends (net of foreign withholding taxes of $384,555)		$12,272,692
Interest		4,354
Securities on loan	+	67,557

Total investment income		12,344,603

Expenses

Investment adviser and administrator fees		3,510,997
Shareholder service fees		1,580,493
Transfer agent fees		87,912
Shareholder reports		71,667
Registration fees		65,062
Portfolio accounting fees		58,736
Custodian fees		41,539
Professional fees		32,847
Independent trustees’ fees		11,246
Interest expense		205
Other expenses	+	12,241

Total expenses		5,472,945
Expense reduction by CSIM and its affiliates	−	94,232

Net expenses	−	5,378,713

Net investment income		6,965,890

Realized and Unrealized Gains (Losses)

Net realized gains on investments		74,235,214
Net realized gains on futures contracts		1,309,821
Net realized losses on foreign currency transactions	+	(64,247	)

Net realized gains		75,480,788
Net change in unrealized appreciation on investments		112,398,883
Net change in unrealized appreciation on futures contracts		406,688
Net change in unrealized appreciation on foreign currency translations	+	19,694

Net change in unrealized appreciation	+	112,825,265

Net realized and unrealized gains		188,306,053

Increase in net assets resulting from operations		$195,271,943

76 See financial notes

Schwab Health Care Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$6,965,890			$6,550,477
Net realized gains		75,480,788			69,963,685
Net change in unrealized appreciation	+	112,825,265			6,352,277

Increase in net assets from operations		195,271,943			82,866,439

Distributions to Shareholders

Distributions from net investment income		(8,336,930	)		(3,529,101	)
Distributions from net realized gains	+	(54,300,003	)		—

Total distributions		($62,636,933	)		($3,529,101	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			11,259,344		$243,726,416			4,855,710		$92,832,540
Shares reinvested			3,014,800		55,894,398			178,373		3,114,387
Shares redeemed	+		(5,854,185	)	(126,778,797	)		(4,151,453	)	(78,160,304	)

Net transactions in fund shares			8,419,959		$172,842,017			882,630		$17,786,623

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			24,810,387		$510,915,728			23,927,757		$413,791,767
Total increase	+		8,419,959		305,477,027			882,630		97,123,961

End of period			33,230,346		$816,392,755			24,810,387		$510,915,728


Net investment income not yet distributed					$5,180,420					$6,599,289

See financial notes 77

Schwab^® International Core Equity Fund

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09¹


Per-Share Data ($)

Net asset value at beginning of period		7.90			7.32			7.80			7.25			5.85

Income (loss) from investment operations:
Net investment income (loss)		0.20			0.16			0.17			0.16			0.03
Net realized and unrealized gains (losses)		1.93			0.62			(0.46	)		0.57			1.46

Total from investment operations		2.13			0.78			(0.29	)		0.73			1.49
Less distributions:
Distributions from net investment income		(0.21	)		(0.20	)		(0.19	)		(0.18	)		(0.09	)

Net asset value at end of period		9.82			7.90			7.32			7.80			7.25

Total return (%)		27.70			11.17			(3.89	)		10.09			25.98

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.86			0.86			0.80	²		0.87	³		0.86
Gross operating expenses		1.10			1.16			1.22			1.27			1.60
Net investment income (loss)		2.40			2.45			2.32			1.85			1.19
Portfolio turnover rate		75			112			86			91	⁴		94
Net assets, end of period ($ x 1,000,000)		147			78			60			53			37

¹ Effective October 7, 2009, the Investor Shares class, the Select Shares class and the Institutional Shares 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 Institutional Shares.

² The ratio of net operating expenses would have been 0.86%, if a voluntary reduction of Investment Adviser fees had not been included.

³ The ratio of net operating expenses would have been 0.86%, if certain non-routine expenses had not been incurred.

⁴ Portfolio turnover excludes the impact of investment activity resulting from a merger with another fund.

78 See financial notes

Schwab International Core Equity Fund

Portfolio Holdings as of October 31, 2013

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


				Cost		Value
Holdings by Category				($)		($)

	97	.9%	Common Stock		120,753,916		144,158,873
	0	.0%	Rights		1,973		1,889
	1	.8%	Other Investment Company		2,687,292		2,687,292
	0	.2%	Short-Term Investments		239,984		239,984


	99	.9%	Total Investments		123,683,165		147,088,038
	0	.1%	Other Assets and Liabilities, Net				144,473


	100	.0%	Net Assets				147,232,511


	Number		Value
Security	of Shares		($)

Common Stock 97.9% of net assets

Australia 8.2%


Banks 1.0%
Australia & New Zealand Banking Group Ltd.		9,790		313,283
Westpac Banking Corp.		36,647		1,189,824

				1,503,107


Capital Goods 0.1%
Seven Group Holdings Ltd.		18,391		144,860


Diversified Financials 1.1%
Challenger Ltd.		282,086		1,600,290


Energy 0.4%
Woodside Petroleum Ltd.		16,649		610,351


Food & Staples Retailing 0.3%
Wesfarmers Ltd. *		10,928		443,447


Food, Beverage & Tobacco 0.2%
Goodman Fielder Ltd.		507,935		365,064


Insurance 0.9%
Insurance Australia Group Ltd.		238,298		1,391,639


Materials 1.6%
Amcor Ltd.		17,803		182,381
Arrium Ltd.		247,913		323,915
BHP Billiton Ltd.		22,271		787,355
Incitec Pivot Ltd.		256,332		644,912
Mount Gibson Iron Ltd.		420,032		352,311

				2,290,874


Pharmaceuticals, Biotechnology & Life Sciences 0.8%
CSL Ltd.		16,924		1,112,497


Retailing 1.2%
David Jones Ltd.		111,453		286,438
Harvey Norman Holdings Ltd.		181,050		557,121
Myer Holdings Ltd		161,736		382,244
Pacific Brands Ltd.		403,210		268,560
Premier Investments Ltd.		31,481		237,246

				1,731,609


Telecommunication Services 0.6%
Telstra Corp., Ltd.		170,368		833,657

				12,027,395

Austria 0.3%


Banks 0.1%
Erste Group Bank AG		4,445		156,063


Transportation 0.2%
Oesterreichische Post AG		6,443		302,130

				458,193

Belgium 1.7%


Food & Staples Retailing 1.3%
Delhaize Group S.A.		30,175		1,927,109


Materials 0.4%
Bekaert N.V.		11,191		468,599
Solvay S.A.		380		59,418

				528,017

				2,455,126

Brazil 0.2%


Consumer Durables & Apparel 0.2%
Cyrela Brazil Realty S.A. Empreendimentos e Participacoes		44,905		333,837

Canada 0.6%


Commercial & Professional Supplies 0.2%
Transcontinental, Inc., Class A		18,100		289,037


Energy 0.2%
Suncor Energy, Inc.		8,000		290,721


Retailing 0.0%
Canadian Tire Corp., Ltd., Class A		700		64,975


Technology Hardware & Equipment 0.2%
Celestica, Inc. *		28,000		307,486

				952,219

Chile 0.1%


Utilities 0.1%
Enersis S.A.		343,112		114,880

China 0.8%


Automobiles & Components 0.3%
Geely Automobile Holdings Ltd.		800,000		403,269


Banks 0.1%
China Construction Bank Corp., Class H		205,000		159,495

See financial notes 79

Schwab International Core Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Materials 0.3%
China Resources Cement Holdings Ltd.		636,000		425,564


Utilities 0.1%
Huaneng Power International, Inc., Class H		244,000		254,690

				1,243,018

Denmark 0.9%


Pharmaceuticals, Biotechnology & Life Sciences 0.9%
H. Lundbeck A/S		26,632		572,564
Novo Nordisk A/S, Class B		4,793		798,287

				1,370,851

Finland 0.9%


Energy 0.8%
Neste Oil Oyj		56,688		1,124,029


Materials 0.1%
Kemira Oyj		14,930		239,718

				1,363,747

France 10.5%


Automobiles & Components 1.3%
Compagnie Generale des Etablissements Michelin		8,885		925,799
Renault S.A.		11,098		968,303

				1,894,102


Banks 2.3%
BNP Paribas S.A.		36,716		2,708,654
Credit Agricole S.A. *		56,223		676,000

				3,384,654


Capital Goods 1.4%
Schneider Electric S.A.		9,972		839,120
Vinci S.A.		20,355		1,302,439

				2,141,559


Commercial & Professional Supplies 0.4%
Teleperformance		11,637		616,004


Consumer Durables & Apparel 0.1%
Kering		592		134,165


Energy 1.5%
Total S.A.		36,581		2,244,352


Insurance 0.2%
AXA S.A.		12,260		305,463


Pharmaceuticals, Biotechnology & Life Sciences 2.0%
Sanofi		27,739		2,957,619


Software & Services 0.2%
UbiSoft Entertainment S.A. *		19,919		255,514


Telecommunication Services 0.9%
Orange S.A.		95,807		1,316,970


Utilities 0.2%
GDF Suez		10,973		271,952

				15,522,354

Germany 9.1%


Automobiles & Components 0.9%
Bayerische Motoren Werke AG		2,491		281,927
Continental AG		5,419		990,955

				1,272,882


Capital Goods 2.1%
Krones AG		6,361		556,760
Siemens AG - Reg’d		20,027		2,559,293

				3,116,053


Consumer Durables & Apparel 0.5%
Adidas AG		6,604		752,496


Diversified Financials 1.1%
Deutsche Bank AG - Reg’d		34,207		1,653,194


Food & Staples Retailing 1.3%
Metro AG		39,712		1,861,936


Insurance 0.3%
Allianz SE - Reg’d		2,506		420,763


Materials 1.0%
BASF SE		13,798		1,432,432


Pharmaceuticals, Biotechnology & Life Sciences 0.5%
Merck KGaA		4,749		789,999


Real Estate 0.4%
Patrizia Immobilien AG *		65,892		617,173


Semiconductors & Semiconductor Equipment 0.5%
Infineon Technologies AG		48,818		472,282
SMA Solar Technology AG		4,905		199,945

				672,227


Telecommunication Services 0.4%
Deutsche Telekom AG - Reg’d		40,433		635,393


Utilities 0.1%
E.ON SE AG		7,523		137,133

				13,361,681

Greece 0.3%


Consumer Services 0.2%
OPAP S.A.		19,136		237,625


Materials 0.1%
Mytilineos Holdings S.A. *		12,531		101,186


Retailing 0.0%
JUMBO S.A. *		5,446		73,072

				411,883

Hong Kong 2.2%


Banks 0.3%
BOC Hong Kong (Holdings) Ltd.		150,000		489,874


Capital Goods 1.0%
Hutchison Whampoa Ltd.		100,000		1,246,066
Johnson Electric Holdings Ltd.		231,500		166,627

				1,412,693


Consumer Services 0.1%
Sands China Ltd.		31,600		224,679


Energy 0.3%
CNOOC Ltd.		200,000		406,794

80 See financial notes

Schwab International Core Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Real Estate 0.4%
Cheung Kong (Holdings) Ltd.		39,000		609,065


Utilities 0.1%
Power Assets Holdings Ltd.		17,500		145,796

				3,288,901

Israel 0.5%


Pharmaceuticals, Biotechnology & Life Sciences 0.5%
Teva Pharmaceutical Industries Ltd.		17,944		666,770

Italy 1.6%


Capital Goods 0.2%
Impregilo S.p.A.		34,018		216,561


Consumer Durables & Apparel 0.0%
Prada S.p.A.		7,000		68,297


Consumer Services 0.3%
GTECH S.p.A.		16,559		502,880


Energy 0.5%
Eni S.p.A.		29,410		746,629


Food, Beverage & Tobacco 0.1%
Parmalat S.p.A.		47,419		159,495


Media 0.1%
Mediaset S.p.A. *		20,209		100,917


Utilities 0.4%
Enel S.p.A.		122,774		541,670

				2,336,449

Japan 20.1%


Automobiles & Components 2.1%
Aisin Seiki Co., Ltd.		5,900		239,684
Denso Corp.		10,000		480,684
Toyoda Gosei Co., Ltd.		10,600		265,048
Toyota Motor Corp.		33,500		2,172,079

				3,157,495


Banks 5.1%
Mitsubishi UFJ Financial Group, Inc.		308,500		1,964,609
Mizuho Financial Group, Inc.		913,900		1,918,333
Resona Holdings, Inc.		306,100		1,592,250
Sumitomo Mitsui Financial Group, Inc.		38,000		1,836,763
The Bank of Yokohama Ltd.		15,000		82,714
The Shizuoka Bank Ltd.		16,000		180,022

				7,574,691


Capital Goods 1.4%
Fujikura Ltd.		169,000		771,174
Mitsubishi Electric Corp.		16,000		175,871
Mitsubishi Heavy Industries Ltd.		137,000		870,672
Nitta Corp.		5,600		117,950
The Japan Steel Works Ltd.		13,000		72,625
The Nippon Signal Co., Ltd.		16,100		122,441

				2,130,733


Commercial & Professional Supplies 0.1%
Dai Nippon Printing Co., Ltd.		14,000		147,084


Consumer Durables & Apparel 2.1%
Namco Bandai Holdings, Inc.		28,600		539,121
Panasonic Corp.		245,100		2,512,118

				3,051,239


Consumer Services 1.1%
Oriental Land Co., Ltd.		9,500		1,521,207
Round One Corp.		19,000		100,805

				1,622,012


Diversified Financials 1.7%
Daiwa Securities Group, Inc.		136,000		1,242,193
ORIX Corp.		70,400		1,219,404

				2,461,597


Food, Beverage & Tobacco 1.7%
Japan Tobacco, Inc.		52,300		1,892,406
Kirin Holdings Co., Ltd.		43,000		628,466

				2,520,872


Insurance 0.6%
T&D Holdings, Inc.		75,300		904,032


Materials 0.1%
Mitsubishi Chemical Holdings Corp.		20,000		93,625


Media 0.1%
SKY Perfect JSAT Holdings, Inc.		31,000		179,006


Real Estate 0.6%
Daito Trust Construction Co., Ltd.		3,900		398,205
Daiwa House Industry Co., Ltd.		17,000		340,574
Nomura Real Estate Holdings, Inc.		2,800		70,844

				809,623


Retailing 1.1%
Alpen Co., Ltd.		4,400		91,566
Aoyama Trading Co., Ltd.		10,200		260,076
Autobacs Seven Co., Ltd.		52,500		765,475
Canon Marketing Japan, Inc.		19,200		257,218
USS Co., Ltd.		16,000		234,312

				1,608,647


Semiconductors & Semiconductor Equipment 0.1%
Rohm Co., Ltd.		3,500		143,667


Software & Services 0.1%
Fujitsu Ltd. *		48,000		206,218


Technology Hardware & Equipment 1.6%
Canon, Inc.		35,000		1,104,484
FUJIFILM Holdings Corp.		6,400		156,568
Ibiden Co., Ltd.		4,900		84,944
Konica Minolta, Inc.		105,000		869,499
Nippon Electric Glass Co., Ltd.		33,000		169,743

				2,385,238


Transportation 0.5%
Central Japan Railway Co.		2,845		368,916
East Japan Railway Co.		3,400		295,360

				664,276

				29,660,055

Malaysia 0.3%


Materials 0.1%
Petronas Chemicals Group Berhad		47,000		105,906

See financial notes 81

Schwab International Core Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Utilities 0.2%
Tenaga Nasional Berhad		119,100		355,909

				461,815

Netherlands 4.0%


Capital Goods 1.0%
Koninklijke Philips N.V.		43,595		1,540,678


Commercial & Professional Supplies 1.1%
Randstad Holding N.V.		26,259		1,617,255


Consumer Durables & Apparel 0.2%
TomTom N.V. *		30,263		233,669


Food, Beverage & Tobacco 1.5%
Unilever N.V. CVA		55,640		2,205,872


Semiconductors & Semiconductor Equipment 0.2%
STMicroelectronics N.V.		32,680		251,375

				5,848,849

New Zealand 0.1%


Materials 0.1%
Fletcher Building Ltd.		19,350		159,687

Norway 0.8%


Energy 0.7%
Statoil A.S.A.		45,149		1,068,279


Food, Beverage & Tobacco 0.1%
Orkla A.S.A.		13,607		110,301

				1,178,580

Portugal 0.1%


Capital Goods 0.1%
Sonae		75,392		108,894

Republic of Korea 0.2%


Materials 0.1%
Hansol Paper Co., Ltd.		5,960		69,045


Semiconductors & Semiconductor Equipment 0.1%
Samsung Electronics Co., Ltd.		115		158,592

				227,637

Singapore 0.8%


Food, Beverage & Tobacco 0.1%
Wilmar International Ltd.		35,000		97,354


Real Estate 0.5%
UOL Group Ltd.		152,000		804,515


Transportation 0.2%
Singapore Airlines Ltd.		35,000		293,593

				1,195,462

South Africa 0.3%


Insurance 0.1%
Sanlam Ltd.		21,355		114,582


Materials 0.2%
Assore Ltd.		4,138		169,000
Kumba Iron Ore Ltd.		2,142		89,579

				258,579

				373,161

Spain 2.8%


Capital Goods 0.8%
ACS, Actividades de Construccion y Servicios S.A.		17,874		586,359
Ferrovial S.A.		24,538		467,737
Gamesa Corp. Tecnologica S.A. *		13,662		131,935

				1,186,031


Energy 1.5%
Repsol S.A.		84,388		2,262,513


Utilities 0.5%
Endesa S.A. *		23,046		667,096

				4,115,640

Sweden 3.3%


Banks 1.4%
Skandinaviska Enskilda Banken AB, A Shares		159,761		1,932,319
Swedbank AB, A Shares		6,826		177,656

				2,109,975


Capital Goods 0.6%
Trelleborg AB, B Shares		46,652		880,307


Commercial & Professional Supplies 0.1%
Loomis AB, Class B		5,532		132,607


Food & Staples Retailing 0.4%
Axfood AB		9,910		512,489


Technology Hardware & Equipment 0.8%
Telefonaktiebolaget LM Ericsson, B Shares		101,160		1,209,996

				4,845,374

Switzerland 7.2%


Capital Goods 0.5%
Bucher Industries AG - Reg’d		1,035		286,622
Georg Fischer AG - Reg’d *		598		411,931
OC Oerlikon Corp. AG - Reg’d *		5,015		70,111

				768,664


Diversified Financials 0.3%
UBS AG - Reg’d *		21,224		410,495


Health Care Equipment & Services 0.2%
Straumann Holding AG - Reg’d		1,306		259,582


Insurance 1.4%
Helvetia Holding AG - Reg’d		2,550		1,202,680
Swiss Re AG *		9,746		855,529

				2,058,209


Materials 0.5%
Givaudan S.A. - Reg’d *		404		572,948
Holcim Ltd. - Reg’d *		2,549		189,593

				762,541

82 See financial notes

Schwab International Core Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Pharmaceuticals, Biotechnology & Life Sciences 4.3%
Actelion Ltd. - Reg’d *		12,936		1,000,865
Novartis AG - Reg’d		35,057		2,721,214
Roche Holding AG		9,370		2,591,137

				6,313,216

				10,572,707

United Kingdom 20.0%


Banks 1.5%
HSBC Holdings plc		172,040		1,885,789
Lloyds Banking Group plc *		238,246		294,662

				2,180,451


Capital Goods 0.7%
BAE Systems plc		103,810		757,241
Cobham plc		46,976		216,950

				974,191


Commercial & Professional Supplies 0.9%
Berendsen plc		87,942		1,369,515


Consumer Durables & Apparel 0.4%
Persimmon plc *		32,782		663,711


Diversified Financials 0.1%
Man Group plc		92,831		132,119


Energy 3.4%
BG Group plc		11,082		226,069
BP plc		430,593		3,342,522
Enquest plc *		91,661		195,968
Royal Dutch Shell plc, B Shares		17,266		597,749
Soco International plc *		97,503		622,089

				4,984,397


Food & Staples Retailing 0.1%
J. Sainsbury plc		28,712		181,618


Food, Beverage & Tobacco 1.2%
Associated British Foods plc		25,989		944,829
Unilever plc		21,801		884,053

				1,828,882


Materials 2.5%
African Barrick Gold plc		129,271		399,432
BHP Billiton plc		36,330		1,121,088
Kazakhmys plc		22,427		94,357
Lonmin plc *		20,954		108,231
Rio Tinto plc		38,154		1,930,598

				3,653,706


Pharmaceuticals, Biotechnology & Life Sciences 1.5%
AstraZeneca plc		41,269		2,184,786


Real Estate 0.9%
Grainger plc		437,870		1,367,405


Retailing 1.8%
Next plc		27,508		2,402,189
WH Smith plc		18,947		273,435

				2,675,624


Semiconductors & Semiconductor Equipment 0.3%
CSR plc		48,478		427,015


Software & Services 1.0%
Micro Focus International plc		33,066		433,388
The Sage Group plc		186,156		1,004,258

				1,437,646


Technology Hardware & Equipment 0.1%
Pace plc		38,509		188,076


Telecommunication Services 1.9%
BT Group plc		150,480		910,499
Vodafone Group plc		507,178		1,857,670

				2,768,169


Utilities 1.7%
Centrica plc		365,842		2,069,104
SSE plc		18,395		417,293

				2,486,397

				29,503,708

Total Common Stock
(Cost $120,753,916)				144,158,873




Rights 0.0% of net assets

France 0.0%
Groupe Fnac (a)*		592		1,889

Total Rights
(Cost $1,973)				1,889




Other Investment Company 1.8% of net assets

United States 1.8%
State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (d)		2,687,292		2,687,292

Total Other Investment Company
(Cost $2,687,292)				2,687,292



	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

Short-Term Investments 0.2% of net assets

U.S. Treasury Obligations 0.2%
U.S. Treasury Bills
0.01%, 12/19/13 (b)(c)		40,000		40,000
0.06%, 12/19/13 (b)(c)		200,000		199,984

Total Short-Term Investments
(Cost $239,984)				239,984



End of Investments.

At 10/31/13, the tax basis cost of the fund’s investments was $125,364,270 and the unrealized appreciation and depreciation were $23,253,996 and ($1,530,228), respectively, with a net unrealized appreciation of $21,723,768.

See financial notes 83

Schwab International Core Equity Fund

Portfolio Holdings continued

At 10/31/13, the values of certain foreign securities held by the fund aggregating $142,331,134 were adjusted from their closing market values in accordance with international fair valuation procedures approved by the fund’s Board of Trustees. (See financial note 2)


*		Non-income producing security.
(a)		Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(b)		All or a portion of this security is held as collateral for open futures contracts.
(c)		The rate shown is the purchase yield.
(d)		The rate shown is the 7-day yield.


CVA —		Dutch Certificate
Reg’d —		Registered

In addition to the above, the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

MSCI EAFE, e-mini, Long, expires 12/20/13

1,875,300

30,136

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$—		$112,217,215		$—		$112,217,215
Canada¹		952,219		—		—		952,219
Chile¹		114,880		—		—		114,880
Denmark
Pharmaceuticals, Biotechnology & Life Sciences		572,564		798,287		—		1,370,851
United Kingdom¹		—		29,315,632		—		29,315,632
Technology Hardware & Equipment		188,076		—		—		188,076
Rights¹		1,889		—		—		1,889
Other Investment Company¹		2,687,292		—		—		2,687,292
Short-Term Investments¹		—		239,984		—		239,984

Total		$4,516,920		$142,571,118		$—		$147,088,038

Other Financial Instruments
Futures Contract²		$30,136		$—		$—		$30,136


¹		As categorized in Portfolio Holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were security transfers in the amount of $610,182 from Level 1 to Level 2 for the period ended October 31, 2013. The transfers between Level 1 and Level 2 were primarily due to the use of international fair valuation by the fund. There were no transfers in or out of Level 3 securities during the period.

84 See financial notes

Schwab International Core Equity Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends (net of foreign withholding taxes of $242,639)		$3,479,985
Interest	+	9

Total investment income		3,479,994

Expenses

Investment adviser and administrator fees		619,199
Shareholder service fees		263,725
Custodian fees		70,687
Portfolio accounting fees		68,190
Professional fees		48,997
Registration fees		29,318
Transfer agent fees		24,139
Shareholder reports		22,866
Independent trustees’ fees		7,644
Interest expense		98
Other expenses	+	22,258

Total expenses		1,177,121
Expense reduction by CSIM and its affiliates	−	258,900

Net expenses	−	918,221

Net investment income		2,561,773

Realized and Unrealized Gains (Losses)

Net realized gains on investments		6,449,116
Net realized gains on futures contracts		109,592
Net realized losses on foreign currency transactions	+	(17,715	)

Net realized gains		6,540,993
Net change in unrealized appreciation on investments		17,146,438
Net change in unrealized appreciation on futures contracts		30,136
Net change in unrealized appreciation on foreign currency translations	+	10,650

Net change in unrealized appreciation	+	17,187,224

Net realized and unrealized gains		23,728,217

Increase in net assets resulting from operations		$26,289,990

86 See financial notes

Schwab International Core Equity Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$2,561,773			$1,569,563
Net realized gains (losses)		6,540,993			(609,529	)
Net change in unrealized appreciation	+	17,187,224			6,164,196

Increase in net assets from operations		26,289,990			7,124,230

Distributions to Shareholders

Distributions from net investment income		($2,100,275	)		($1,709,354	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			8,070,603		$70,752,618			3,640,288		$26,971,761
Shares reinvested			154,692		1,217,426			151,161		1,017,316
Shares redeemed	+		(3,128,819	)	(27,045,232	)		(2,074,860	)	(15,099,441	)

Net transactions in fund shares			5,096,476		$44,924,812			1,716,589		$12,889,636

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			9,891,978		$78,117,984			8,175,389		$59,813,472
Total increase	+		5,096,476		69,114,527			1,716,589		18,304,512

End of period			14,988,454		$147,232,511			9,891,978		$78,117,984


Net investment income not yet distributed					$2,291,719					$1,463,091

See financial notes 87

Schwab Active Equity Funds

Financial Notes

1. Business Structure of the Funds:

Each of the funds 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 as of the end of the period, including the funds discussed in this report, which are highlighted:



Schwab Capital Trust (organized May 7, 1993)		Schwab Balanced Fund
Schwab Core Equity Fund		Schwab Target 2010 Fund
Schwab Dividend Equity Fund		Schwab Target 2015 Fund
Schwab Large-Cap Growth Fund		Schwab Target 2020 Fund
Schwab Small-Cap Equity Fund		Schwab Target 2025 Fund
Schwab Hedged Equity Fund		Schwab Target 2030 Fund
Schwab Financial Services Fund		Schwab Target 2035 Fund
Schwab Health Care Fund		Schwab Target 2040 Fund
Schwab International Core Equity Fund		Schwab Target 2045 Fund
Schwab S&P 500 Index Fund		Schwab Target 2050 Fund
Schwab Small-Cap Index Fund		Schwab Target 2055 Fund
Schwab Total Stock Market Index Fund		Schwab Fundamental US Large Company Index Fund
Schwab International Index Fund		Schwab Fundamental US Small Company Index Fund
Schwab MarketTrack All Equity Portfolio		Schwab Fundamental International Large Company Index Fund
Schwab MarketTrack Growth Portfolio		Schwab Fundamental International Small Company Index Fund
Schwab MarketTrack Balanced Portfolio		Schwab Fundamental Emerging Markets Large Company Index Fund
Schwab MarketTrack Conservative Portfolio		Schwab Monthly Income Fund - Moderate Payout
Laudus Small-Cap MarketMasters Fund		Schwab Monthly Income Fund - Enhanced Payout
Laudus International MarketMasters Fund		Schwab Monthly Income Fund - Maximum Payout

2. Significant Accounting Policies:

(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: Traded securities are valued at the closing value for the day, or, on days when no closing value has been reported, at halfway between the most recent bid and ask quotes. Securities that are primarily traded on foreign exchanges are valued at the official closing price or the last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate, unless these securities are fair valued as discussed below.

	•	Securities for which no quoted value is available: The Board has adopted procedures to fair value each fund’s securities when market prices are not “readily available” or are unreliable. For example, a fund may fair value a security when it is de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a

Schwab Active Equity Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):


		price; or when a security’s primary trading market is closed during regular market hours. Each fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. The Pricing Committee considers a number of factors, including unobservable market inputs when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security. The Board convenes on a regular basis to review fair value determinations made by the funds pursuant to the valuation procedures.


	•	Foreign equity security fair valuation: The Board has adopted procedures to fair value foreign equity securities that are traded in markets that close prior to the funds valuing their holdings. By fair valuing securities whose prices may have been affected by events occurring after the close of trading, each fund seeks to establish prices that investors might expect to realize upon the current sales of these securities. This methodology is designed to deter “arbitrage” market timers, who seek to exploit delays between the change in the value of a fund’s portfolio holdings and the NAV of the fund’s shares, and seeks to help ensure that the prices at which the fund’s shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders. When fair value pricing is used at the open or close of a reporting period, it may cause a temporary divergence between the return of a fund and that of its comparative index or benchmark. The Board regularly reviews fair value determinations made by the funds pursuant to these procedures.

	•	Futures and forward foreign currency exchange contracts: Futures are valued at their settlement prices as of the close of their exchanges. Forwards are valued based on that day’s forward exchange rates or by using an interpolated forward exchange rate for contracts with interim settlement dates.

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

	•	Underlying funds: Mutual funds are valued at their respective NAVs. Exchange traded funds (“ETFs”) traded on a recognized securities exchange are valued at the last reported sale price that day or the official closing price, if applicable.

The three levels of the fair value hierarchy are 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, ETFs and futures contracts. Investments in mutual funds are valued daily at their NAVs, and investments in ETFs are valued daily at the last reported sale price or the official closing price, which are classified as Level 1 prices.

	•	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 fair valuations due to significant movement in the U.S. markets occurring after the daily close of the foreign markets. The Board has approved a vendor that calculates fair valuations of international equity securities based on a number of factors that appear to correlate to the movements in the U.S. markets. As investments

Schwab Active Equity Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):


		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 levels associated with valuing the funds’ investments as of October 31, 2013 are disclosed in the Portfolio Holdings.

(b) Accounting Policies for certain Portfolio Investments (if held):

Securities Lending: Under the trust’s Securities Lending Program, a fund (lender) may make short-term loans of its securities to another party (borrower) to generate additional revenue for the fund. The borrower pledges collateral in the form of cash, securities issued or fully guaranteed by the U.S. government or foreign governments, or letters of credit issued by a bank. Collateral at the individual loan level is required to have a value of at least 102% of the prior day’s market value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities and is marked to market daily. The lending agent provides the fund with indemnification against borrower default. The fund bears the risk of loss with respect to the investment of cash collateral. The cash collateral of securities loaned is invested in money market portfolios operating under Rule 2a-7 of the 1940 Act. Securities lending income, as disclosed in a fund’s Statement of Operations, if applicable, represents the income earned from the investment of the cash collateral plus any fees paid by borrowers, less the fees paid to the lending agent which are subject to adjustments pursuant to the securities lending agreement. On loans collateralized by U.S. Treasury and/or federal agency obligations, a fee is received from the borrower, and is allocated between the fund and the lending agent.

The values of the securities on loan and the related cash collateral as of October 31, 2013 for the Schwab Core Equity Fund, Schwab Small-Cap Equity Fund and Schwab Health Care Fund are disclosed in each fund’s Portfolio Holdings and Statement of Assets and Liabilities.

Short Sales: When a fund sells securities short (sells securities it does not own), the fund identifies assets worth at least 100% of the value of the short securities as collateral. If the market value of the short securities subsequently falls, the fund can realize a gain by closing the short position. However, if the value rises, the fund typically would have to add to its collateral or close out its short position at a loss. The potential for losses associated with short positions is much greater than the original value of the securities sold short and may exceed amounts recorded in the Statement of Assets and Liabilities.

Schwab Active Equity Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(c) Security Transactions:

If the fund sells securities short, it records the proceeds received as an asset and the obligation to buy back the securities as a liability. At the time a short sale is initiated, the asset and liability are of equal value and effectively cancel each other out. Subsequently, the fund values the liability side of the transaction according to the market price of the securities sold short, and values the asset side according to the value of the proceeds. When the fund closes out a short position (buys the security), it records the outcome as a realized gain or loss. Dividends accrued on securities sold short are recorded as an expense on the fund’s records and presented in the Statement of Operations. The fund may also incur stock loan fees which represent the cost of borrowing securities used for short sale transactions.

(d) Investment Income:

(e) Expenses:

(f) Distributions to Shareholders:

The funds make distributions from net investment income, if any, once a year, with the exception of Schwab Dividend Equity Fund which typically pays quarterly dividends. The funds make distributions from net realized capital gains, if any, once a year.

Schwab Active Equity Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(g) Custody Credit:

(h) Accounting Estimates:

(i) Federal Income Taxes:

(j) Foreign Taxes:

(k) Indemnification:

(l) New Accounting Pronouncements:

3. Risk Factors:

The funds’ investment adviser makes investment decisions for 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, the portfolio optimization process used by each fund to assist in constructing the fund’s portfolio does not assure successful

Schwab Active Equity Funds

Financial Notes (continued)

3. Risk Factors (continued):

investment. Securities selected with the assistance of the process may be negatively impacted by factors or events not foreseen in developing the process. As a result, a fund may have a lower return than if it were managed using another process or strategy.

Historically, small-cap stocks have been riskier than large- and mid-cap stocks, and their prices may move sharply, especially during market upturns and downturns. Small-cap companies 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 — large-cap and mid-cap stocks, for instance — a fund’s small-cap holdings could reduce performance.

Both large- and mid-cap stocks tend to go in and out of favor based on market and economic conditions. However, stocks of mid-cap companies tend to be more vulnerable to adverse business or economic events than larger, more established companies. During a period when large- and mid-cap U.S. stocks fall behind other types of investments — small-cap stocks, for instance — a fund’s large- and mid-cap holdings could reduce performance.

Growth stocks can be volatile. Growth companies usually invest a high portion of earnings in their businesses and may lack the dividends of value stocks that can cushion stock prices in a falling market. The prices of growth stocks are based largely on projections of the issuer’s future earnings and revenues. If a company’s earnings or revenues fall short of expectations, its stock price may fall dramatically. Growth stocks may also be more expensive relative to their earnings or assets compared to value or other stocks.

To the extent that a fund invests in dividend paying stocks, the fund’s performance will correlate directly with the performance of the dividend paying stock segment of the stock market, and the fund may underperform funds that do not limit their investments to dividend paying stocks. If stocks held by a fund reduce or stop paying dividends, the fund’s ability to generate income may be affected.

A particular investment may be difficult to purchase or sell. A fund may be unable to sell illiquid securities at an advantageous time or price.

Convertible securities generally are debt obligations that pay income, but which may convert into common or preferred stock under certain circumstances. These investments, which are often issued by smaller or less established companies, are subject to the equity risks described above, but they also are subject to fixed income risks. For example, an issuer may fail to pay interest or dividends, and prices of convertible securities generally will fall when interest rates rise.

When a fund invests in an ETF, it will bear a proportionate share of the ETF’s expenses. In addition, lack of liquidity in an ETF can result in its value being more volatile than the underlying portfolio of securities.

A fund’s investments in real estate investment trusts (“REITs”) will be subject to the risks associated with the direct ownership of real estate, including fluctuations in the value of underlying properties, defaults by borrowers or tenants, changes in interest rates and risks related to general or local economic conditions. REITs are also subject to certain additional risks; for example, REITs are dependent upon specialized management skills and cash flows, and may have their investments in relatively few properties, a small geographic area or a single property type. Failure of a company to qualify as a REIT under federal tax law may have adverse consequences on a fund. In addition, REITs have their own expenses, and a fund will bear a proportionate share of those expenses.

Certain funds engage in short sales transactions. Short sales are transactions in which a fund sells a security it does not own. To complete a short sale, a fund must borrow the security to deliver to the buyer. A fund is then obligated to replace the borrowed security by purchasing the security at the market price at the time of replacement. This price may be more or less than the price

Schwab Active Equity Funds

Financial Notes (continued)

3. Risk Factors (continued):

at which the security was sold by a fund, and the fund will incur a loss if the price of the security sold short increases between the time of the short sales and the time the fund replaces the borrowed security.

To the extent a fund establishes both long and short positions in equity securities the fund’s long positions could decline in value at the same time that the value of the stocks sold short increase, thereby increasing the fund’s overall potential for loss. A fund’s short sales may result in a loss if the prices of the borrowed securities rise and it costs more to replace the borrowed securities. In contrast to a fund’s long positions, the potential loss on the fund’s short positions is unlimited. In addition, the lender of the borrowed securities may require a fund to return the securities on short notice, which may require the fund to purchase the borrowed securities at an unfavorable price, resulting in a loss.

Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Such countries often have less uniformity in accounting and reporting requirements. 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 a fund’s investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar.

The investments of certain funds are concentrated in issuers doing business in the same sector, and therefore, the companies in which a fund invests will be affected by many of the same factors, such as legislative or regulatory changes, intense competition for market share, and other competitive challenges. In addition, a fund is subject to the risks that stocks of these companies may underperform other segments of the equity market or stock market as a whole and are likely to have above-average volatility.

Securities lending involves the risk of loss of rights in the collateral or delay in recovery of the collateral if the borrower fails to return the security loaned or becomes insolvent.

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

4. Affiliates and Affiliated Transactions:

For its advisory and administrative services to the funds, CSIM is entitled to receive an annual fee, payable monthly, based on a percentage of each fund’s average daily net assets as follows:

Schwab

International

% of Average

Core

Dividend

Large-Cap

Small-Cap

Hedged

Core

Daily Net Assets

Equity Fund

Growth Fund

Equity Fund

Flat rate

0.47%

0.62%

0.72%

0.81%

1.05%

0.58%

Schwab Active Equity Funds

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):


	Schwab		Schwab
% of Average	Financial		Health Care
Daily Net Assets	Services Fund		Fund

First $500 million		0.54%		0.54%
$500 million to $1 billion		0.515%		0.515%
Over $1 billion		0.49%		0.49%

Pursuant to the Plan, each fund’s shares are subject to an annual shareholder servicing fee up to 0.25%. The shareholder servicing fee paid to a particular service provider is made pursuant to its written agreement with Schwab (or, in the case of payments made to Schwab, pursuant to Schwab’s written agreement with the funds). Payments under the Plan are made as described above regardless of Schwab’s or the service provider’s actual cost of providing the services. If the cost of providing the services under the Plan is less than the payment received, the unexpended portion of the fees may be retained as profit by Schwab or the service provider.

Schwab

Core

Dividend

Large-Cap

Small-Cap

Hedged

Equity Fund

Growth Fund

Equity Fund

0.75%

0.89%

0.99%

1.12%

1.33%


				Schwab
Schwab		Schwab		International
Financial		Health Care		Core
Services Fund		Fund		Equity Fund

	0.94%		0.82%		0.86%


*		Excludes dividends and stock loan fees paid on securities sold short.

Schwab Active Equity Funds

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):

Certain Schwab funds may own shares of other Schwab funds. The table below reflects the percentages of shares of each fund in this report that are owned by other Schwab funds as of October 31, 2013, as applicable:


	Schwab			Schwab			Schwab
	Core			Dividend			Small-Cap
	Equity Fund			Equity Fund			Equity Fund

Schwab Target 2010 Fund		0.1%			0.1%			0.4%
Schwab Target 2015 Fund		0.3%			0.2%			0.7%
Schwab Target 2020 Fund		1.6%			1.0%			3.9%
Schwab Target 2025 Fund		1.1%			0.7%			2.7%
Schwab Target 2030 Fund		3.1%			1.9%			7.5%
Schwab Target 2035 Fund		1.1%			0.7%			2.7%
Schwab Target 2040 Fund		3.7%			2.2%			9.0%
Schwab Target 2045 Fund		0.1%			0.1%			0.3%
Schwab Target 2050 Fund		0.1%			0.1%			0.2%
Schwab Target 2055 Fund		0.0%	*		0.0%	*		0.1%
Schwab Monthly Income Fund - Moderate Payout		—%			0.7%			—%
Schwab Monthly Income Fund - Enhanced Payout		—%			1.1%			—%
Schwab Monthly Income Fund - Maximum Payout		—%			0.3%			—%
Schwab Balanced Fund		2.6%			—%			—%


*		Less than 0.05%

During the period, CSIM voluntarily reduced its investment adviser fees for the Schwab Core Equity Fund and Schwab Small-Cap Equity Fund by $6,944 each, to reflect a credit in certain stock research fees incurred by CSIM and passed on to these funds.

5. Board of Trustees:

6. Borrowing from Banks:

Schwab Active Equity Funds

Financial Notes (continued)

7. Purchases and Sales/Maturities of Investment Securities:

For the period ended October 31, 2013, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:


	Purchases of Securities		Sales/Maturities of Securities

Schwab Core Equity Fund		$1,630,694,334		$1,688,241,102
Schwab Dividend Equity Fund		1,058,815,976		998,577,847
Schwab Large-Cap Growth Fund		199,213,500		215,647,798
Schwab Small-Cap Equity Fund		433,570,105		394,382,928
Schwab Hedged Equity Fund*		249,847,516		264,812,687
Schwab Financial Services Fund		47,542,644		41,180,679
Schwab Health Care Fund		465,935,320		346,369,443
Schwab International Core Equity Fund		122,933,510		79,145,591


*		Including securities sold short.

8. Derivatives:


	Contract Values		Number of Contracts

Schwab Core Equity Fund		$9,255,569		119
Schwab Dividend Equity Fund		8,573,719		108
Schwab Large-Cap Growth Fund		981,806		13
Schwab Small-Cap Equity Fund		3,749,561		38
Schwab Hedged Equity Fund		593,300		8
Schwab Financial Services Fund		583,611		8
Schwab Health Care Fund		6,691,543		86
Schwab International Core Equity Fund		308,823		3

The Schwab International Core Equity Fund invested in forwards during the report period. The fund invested in forwards in connection with the purchase and sale of portfolio securities to minimize the uncertainty of changes in future foreign currency exchange rates. The net realized losses of $1,075 on forwards held during the period is included in net realized losses on foreign currency transactions of the fund’s Statement of Operations. Refer to financial note 2(b) for the fund’s accounting policies with respect to forwards and financial note 3 for disclosures concerning the risks of investing in forwards. During the period, the month-end average forward foreign currency notional amount and the month-end average unrealized appreciation (depreciation) were $9,952 and ($1), respectively.

Schwab Active Equity Funds

Financial Notes (continued)

9. Redemption Fee:


	Current Period		Prior Period
	(11/1/12-10/31/13)		(11/1/11-10/31/12)

Schwab Core Equity Fund		$19,267		$14,523
Schwab Dividend Equity Fund		50,175		19,131
Schwab Large-Cap Growth Fund		6,787		6,173
Schwab Small-Cap Equity Fund		15,023		4,731
Schwab Hedged Equity Fund		10,792		5,426
Schwab Financial Services Fund		4,292		5,169
Schwab Health Care Fund		38,090		11,650
Schwab International Core Equity Fund		8,761		1,452

10. Federal Income Taxes:

As of October 31, 2013, the components of distributable earnings on a tax-basis were as follows:


	Schwab			Schwab			Schwab			Schwab			Schwab
	Core			Dividend			Large-Cap			Small-Cap			Hedged
	Equity Fund			Equity Fund			Growth Fund			Equity Fund			Equity Fund

Undistributed ordinary income		$18,530,775			$1,659,809			$989,030			$17,071,549			$—
Undistributed long-term capital gains		157,590,505			118,267,186			—			39,821,319			15,224,405
Unrealized appreciation on investments		462,825,364			390,582,767			47,796,177			135,898,052			46,153,261
Unrealized depreciation on investments		(4,607,858	)		(4,349,315	)		(595,155	)		(9,058,504	)		(920,473	)
Other unrealized appreciation (depreciation)		(1	)		—			—			—			(12,609,810	)

Net unrealized appreciation (depreciation)		$458,217,505			$386,233,452			$47,201,022			$126,839,548			$32,622,978



							Schwab
	Schwab			Schwab			International
	Financial			Health Care			Core
	Services Fund			Fund			Equity Fund

Undistributed ordinary income		$338,279			$20,280,205			$3,810,651
Undistributed long-term capital gains		—			61,200,584			—
Unrealized appreciation on investments		13,786,008			192,120,890			23,253,996
Unrealized depreciation on investments		(122,259	)		(1,285,086	)		(1,530,228	)
Other unrealized appreciation (depreciation)		—			9,837			5,978

Net unrealized appreciation (depreciation)		$13,663,749			$190,845,641			$21,729,746

The primary differences between book-basis and tax-basis unrealized appreciation or unrealized depreciation of investments are Passive Foreign Investment Companies (PFIC), Partnerships and the tax deferral of losses on wash sales.

Schwab Active Equity Funds

Financial Notes (continued)

10. Federal Income Taxes (continued):

Schwab

Core

Dividend

Large-Cap

Small-Cap

Hedged

Expiration Date

Equity Fund

Growth Fund

Equity Fund

October 31, 2016

$32,645,024

$—

October 31, 2017

1,636,580

—

14,051,004

—

Total

$34,281,604

$—

$14,051,004

$—

Schwab

International

Financial

Health Care

Core

Expiration Date

Services Fund

Fund

Equity Fund

October 31, 2016

$2,634,441

$—

October 31, 2017

28,673,848

—

12,169,184

October 31, 2018

170,394

—

Total

$31,478,683

$—

$12,169,184


*		The Schwab Core Equity Fund and Schwab International Core Equity Fund have capital loss carryforwards acquired via mergers, which are subject to certain annual limitations in regard to availability to offset potential future capital gains.

Qualified late-year losses are certain capital and ordinary losses which occur during the portion of a fund’s taxable year subsequent to October 31. A fund may elect to treat any portion of qualified late-year losses as arising on the first day of the next taxable year. For the year ended October 31, 2013, the funds had late-year ordinary losses deferred and capital losses utilized as follows:

Schwab

Core

Dividend

Large-Cap

Small-Cap

Hedged

Equity Fund

Growth Fund

Equity Fund

Late-year ordinary losses deferred

$—

$1,649,544

Capital losses utilized

75,465,662

66,553,849

31,765,537

14,134,762

2,570,724

Schwab

International

Financial

Health Care

Core

Services Fund

Fund

Equity Fund

Capital losses utilized

$4,316,363

$—

$6,149,622

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


	Schwab		Schwab		Schwab		Schwab		Schwab
	Core		Dividend		Large-Cap		Small-Cap		Hedged
	Equity Fund		Equity Fund		Growth Fund		Equity Fund		Equity Fund

Current period distributions
Ordinary income		$16,475,044		$30,254,415		$2,200,707		$2,100,800		$—
Long-term capital gains		—		—		—		—		—
Return of capital		—		—		—		—		—

Prior period distributions
Ordinary income		$32,156,180		$28,261,739		$1,032,046		$177,045		$—
Long-term capital gains		—		—		—		—		—
Return of capital		—		—		—		—		—

Schwab Active Equity Funds

Financial Notes (continued)

10. Federal Income Taxes (continued):

Schwab

International

Financial

Health Care

Core

Services Fund

Fund

Equity Fund

Schwab

International

Financial

Health Care

Core

Services Fund

Fund

Equity Fund

Current period distributions

Ordinary income

$406,901

$8,336,930

$2,100,275

Long-term capital gains

—

54,300,003

—

Return of capital

—

Prior period distributions

Ordinary income

$224,748

$3,529,101

$1,709,354

Long-term capital gains

—

Return of capital

—


	Schwab			Schwab			Schwab			Schwab			Schwab
	Core			Dividend			Large-Cap			Small-Cap			Hedged
	Equity Fund			Equity Fund			Growth Fund			Equity Fund			Equity Fund

Capital shares		$—			$—			$—			$—			($175,180	)
Undistributed net investment income		55,480			—			—			(325,782	)		152,680
Net realized capital gains (losses)		(55,480	)		—			—			325,782			22,500


							Schwab
	Schwab			Schwab			International
	Financial			Health Care			Core
	Services Fund			Fund			Equity Fund

Capital shares		$—			$—			$—
Undistributed net investment income		2,831			(47,829	)		367,130
Net realized capital gains (losses)		(2,831	)		47,829			(367,130	)

11. Subsequent Events:

12. Reorganization:

Under a plan of reorganization adopted by the Trust, all of the assets and liabilities of the Schwab Premier Equity Fund were transferred to the Schwab Core Equity Fund. The reorganization, which qualified as a tax-free exchange for federal income tax

100

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of:

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

In our opinion, the accompanying statements of assets and liabilities, including the portfolio holdings, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Schwab Core Equity Fund, Schwab Dividend Equity Fund, Schwab Large-Cap Growth Fund, Schwab Small-Cap Equity Fund, Schwab Hedged Equity Fund, Schwab Financial Services Fund, Schwab Health Care Fund, and Schwab International Core Equity Fund (eight of the portfolios constituting Schwab Capital Trust, hereafter referred to as the “Funds”) at October 31, 2013, and the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the 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 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 audit 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, 2013 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

December 17, 2013

102

Other Federal Tax Information (unaudited)

Schwab International Core Equity Fund elects to pass through under section 853 of the Internal Revenue Code foreign tax credit of $242,621 to its shareholders for the year ended October 31, 2013. The respective foreign source income on the fund is $3,706,865.

For corporate shareholders, the following percentage of the funds dividend distributions paid during the fiscal year ended October 31, 2013, qualify for the corporate dividends received deduction:


	Percentage

Schwab Core Equity Fund		100.00
Schwab Dividend Equity Fund		100.00
Schwab Large-Cap Growth Fund		100.00
Schwab Small-Cap Equity Fund		44.22
Schwab Hedged Equity Fund		—
Schwab Financial Services Fund		100.00
Schwab Health Care Fund		67.69
Schwab International Core Equity Fund		—


Schwab Core Equity Fund			$16,475,044
Schwab Dividend Equity Fund			30,254,415
Schwab Large-Cap Growth Fund			2,200,707
Schwab Small-Cap Equity Fund			928,747
Schwab Hedged Equity Fund			—
Schwab Financial Services Fund			406,901
Schwab Health Care Fund			7,562,144
Schwab International Core Equity Fund			2,246,594

Under Section 852 (b)(3)(C) of the Internal Revenue Code, the Schwab Health Care Fund hereby designates $54,300,003 as long-term capital gain dividend for the fiscal year ended October 31, 2013.

103

Investment Advisory Agreement Approval

The Board of Trustees (the “Board” or the “Trustees”, as appropriate) calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory agreement between Schwab Capital Trust (the “Trust”) and Charles Schwab Investment Management, Inc. (“CSIM”) (the “Agreement”) with respect to the existing funds in the Trust, including 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 and Schwab International Core Equity Fund (the “Funds”), and to review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM, including information about CSIM’s affiliates, personnel and operations. As part of the renewal process, Independent Trustees’ legal counsel sends an information request letter to CSIM seeking certain relevant information. The responses by CSIM are provided to the Trustees for their review prior to their meeting, and the Trustees are provided with the opportunity to request any additional materials. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the Funds that the Board reviews during the course of each year, including information that relates to Fund operations and Fund performance. The Independent Trustees receive advice from independent counsel to the Independent Trustees, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Independent Trustees meet in executive session outside the presence of Fund management and participate in question and answer sessions with representatives of CSIM.

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 23, 2013, and June 4, 2013, and approved the renewal of the Agreement with respect to the Funds for an additional one-year term at the meeting held on June 4, 2013. 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, exchange-traded funds and other accounts;

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.

104

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 their review of Fund expenses and adviser profitability discussed below. Although Schwab Large-Cap Growth Fund had performance that lagged that of a relevant peer group for certain (although not necessarily all) periods considered, the Board concluded that other factors relevant to performance supported renewal of the Agreement with respect to Schwab Large-Cap Growth Fund, including that the underperformance was attributable, to a significant extent, to investment decisions by CSIM that were reasonable and consistent with the Fund’s investment objective and policies; and that CSIM had taken steps designed to help improve performance. 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 a peer group of 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 CSIM’s contractual commitment to keep each Fund’s expense cap 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 exchange-traded funds. 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 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 the existing contractual investment advisory fee schedules relating to Schwab Financial Services Fund and Schwab Health Care Fund that, in each case, include lower fees at higher graduated asset levels. 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.

105

Trustees and Officers

The tables below give information about the trustees and officers of 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 99 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 (advisory services firm) (Oct. 2001 – present).	76	Director, WageWorks, Inc. (2010 – present) Director, Redwood Trust, Inc. (1998 – present) Director, PMI Group Inc. (2001 – 2009)


John F. Cogan 1947 Trustee (Trustee of Schwab Capital Trust since 2008.)	Senior Fellow, The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow, Stanford Institute for Economic Policy Research; Professor of Public Policy, Stanford University (Sept. 2000 – present).	76	Director, Gilead Sciences, Inc. (2005 – present) Director, Monaco Coach Corporation (2005 – 2009)


William A. Hasler 1941 Trustee (Trustee of Schwab Capital Trust since 2000.)	Dean Emeritus, Haas School of Business, University of California, Berkeley (July 1998 – present).	76	Director, TOUSA (1998 – present) Director, Globalstar, Inc. (2009 – present) Director, Aviat Networks (2001 – present) Director, Mission West Properties (1998 – 2012) Director, Ditech Networks Corporation (1997 – 2012) Director, Genitope Corporation (2000 – 2009)


David L. Mahoney 1954 Trustee (Trustee of Schwab Capital Trust since 2011.)	Private Investor.	76	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Tercica Inc. (2004 – 2008)


Kiran M. Patel 1948 Trustee (Trustee of Schwab Capital Trust since 2011.)	Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services for consumers and small businesses) (Dec. 2008 – present); Senior Vice President and General Manager of Consumer Group, Intuit, Inc. (June 2007 – Dec. 2008); Senior Vice President and Chief Financial Officer, Intuit, Inc. (Sept. 2005 – Jan. 2008).	76	Director, KLA-Tencor Corporation (2008 – present) Director, BEA Systems, Inc. (2007 – 2008)


Gerald B. Smith 1950 Trustee (Trustee of Schwab Capital Trust since 2000.)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (1990 – present).	76	Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – present) Director, Oneok, Inc. (2009 – present) Lead Independent Director, Board of Cooper Industries (2002 – 2012)

106

Independent Trustees (continued)


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

Joseph H. Wender 1944 Trustee (Trustee of Schwab Capital Trust since 2008.)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (February 1998 – present).	76	Board Member and Chairman of the Audit Committee, Isis Pharmaceuticals (1994 – present)

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 1993.)	Chairman and Director, The Charles Schwab Corporation, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc., Charles Schwab Bank, N. A.; Chairman and Chief Executive Officer, Schwab (SIS) Holdings Inc. I, Schwab International Holdings, Inc.; Chief Executive Officer, Schwab Holdings, Inc.; 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, Charles Schwab & Co., Inc.	76	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. 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. Until October 2008, President and Chief Operating Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation. 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.	99	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

Marie Chandoha 1961 President and Chief Executive Officer (Officer of Schwab Capital Trust since 2010.)		Executive Vice President, Charles Schwab & Co., Inc. (Sept. 2010 – present); Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010).

107

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 (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Treasurer and Chief Financial Officer, Laudus Funds (2006 – present); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – present) and Schwab ETFs (Oct. 2009 – present); Director, Charles Schwab Worldwide Fund, PLC and Charles Schwab Asset Management (Ireland) Limited (April 2005 – present).


Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities (Officer of Schwab Capital Trust since 2011.)		Senior Vice President and Chief Investment Officer — Equities, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds and Laudus Funds (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – April 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009).


Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of Schwab Capital Trust since 2011.)		Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds and Laudus Funds (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies, Loomis, Sayles & Company (April 2006 – Jan. 2008).


David Lekich 1964 Chief Legal Officer and Secretary (Officer of Schwab Capital Trust since 2011.)		Senior Vice President (Sept. 2011 – present), Vice President (March 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present), Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (April 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (April 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.


Catherine MacGregor 1964 Vice President and Assistant Secretary (Officer of Schwab Capital Trust since 2005.)		Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (March 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary, Schwab ETFs (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 retire at age 72 or after twenty years as a trustee, whichever comes first. In addition, the retirement policy requires any independent trustee of Schwab Funds who also serves as an independent trustee of the Laudus Funds to retire from the Boards of the Schwab Funds upon their required retirement date from either the Boards of Trustees of the Schwab Funds or the Laudus Funds, whichever comes first.
²		Mr. Schwab and Mr. Bettinger are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of the investment adviser.
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.

108

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.

cap, capitalization See “market cap.”

Dow Jones Global Health Care Index An index that measures the performance of healthcare providers, researchers, and supplies producers around theworld.

FTSE EPRA/NAREIT Global Index An index that is designed to provide a diverse representation of publicly traded equity REITs and listed property companies worldwide.

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

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.

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

Russell 1000 Index An index that measures the performance of the large-cap segment of the U.S. equity universe.

S&P 500 Index A market capitalization index that is designed to measure the performance of 500 leading publicly held companies in leading industries of the U.S. economy.

S&P 1500 SuperComposite Financials Sector Index A capitalization-weighted index designed to measure the performance of the financial sector of the S&P 1500 SuperComposite Index. The S&P SuperComposite 1500 is comprised of the 1500 companies included in the S&P 500, S&P MidCap 400 and S&P SmallCap 600 indices.

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.

109

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.

How We Collect Information About You

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


•	APPLICATION AND REGISTRATION INFORMATION.


•	TRANSACTION AND EXPERIENCE INFORMATION.


•	WEBSITE USAGE.

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.

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

Proxy Voting Policies, Procedures and Results

The Schwab Funds Family^®

Stock Funds

Schwab Core Equity Fund^tm

Schwab Dividend Equity Fund^tm

Schwab Large-Cap Growth Fund^tm

Schwab Small-Cap Equity Fund^tm

Schwab Hedged 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 Company Index Fund

Schwab Fundamental International Large Company Index Fund

Schwab Fundamental International Small Company Index Fund

Schwab Fundamental Emerging Markets Large Company 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 Target 2045 Fund

Schwab Target 2050 Fund

Schwab Target 2055 Fund

Schwab^® Monthly Income Fund – Moderate Payout

Schwab^® Monthly Income Fund – Enhanced Payout

Schwab^® Monthly Income Fund – Maximum Payout

Bond Funds

Schwab Short-Term Bond Market Fund^tm

Schwab Intermediate-Term Bond Fund^tm

Schwab Total Bond Market Fund^tm

Schwab GNMA Fund^tm

Schwab^® Treasury Inflation Protected Securities Index Fund

Schwab Tax-Free Bond Fund^tm

Schwab California Tax-Free Bond Fund^tm

Schwab Money Funds


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 12 Months Ended October 31, 2013


Schwab Fundamental US Large Company Index Fund (Ticker Symbol: SFLNX)			29.67%


Russell Fundamental U.S. Large Company Index			30.27%
Fund Category: Morningstar Large Value			26.84%


Performance Details			pages 6-7




Schwab Fundamental US Small Company Index Fund (Ticker Symbol: SFSNX)			37.55%


Russell Fundamental U.S. Small Company Index			38.01%
Fund Category: Morningstar Small Blend			35.17%


Performance Details			pages 8-9




Schwab Fundamental International Large Company Index Fund¹ (Ticker Symbol: SFNNX)			30.12%


Russell Fundamental Developed ex-U.S. Large Company Index (Net)			30.79%
Fund Category: Morningstar Foreign Large Value			24.94%


Performance Details			pages 10-11




Schwab Fundamental International Small Company Index Fund¹ (Ticker Symbol: SFILX)			29.75%


Russell Fundamental Developed ex-U.S. Small Company Index (Net)			30.78%
Fund Category: Morningstar Foreign Small/Mid Blend			26.78%


Performance Details			pages 12-13




Schwab Fundamental Emerging Markets Large Company Index Fund¹ (Ticker Symbol: SFENX)			7.11%


Russell Fundamental Emerging Markets Large Company Index (Net)			8.42%
Fund Category: Morningstar Diversified Emerging Markets			7.59%


Performance Details			pages 14-15


Minimum Initial Investment²	$	100

For index definitions, please see the Glossary.

Index ownership— each of the names identifying the Russell Fundamental Index Series is a joint trademark of Russell Investments (“Russell”) and Research Affiliates LLC (“RA”) and is used by the funds under license. “Research Affiliates” and “Fundamental Index” are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell Fundamental Index Series. Russell is the owner of the trademarks and copyrights related to the Russell Indexes. The Schwab Fundamental Index Funds are not sponsored, endorsed, sold or promoted by Russell or RA, and Russell and RA do not make any representation regarding the advisability of investing in shares of the fund.

Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.


¹		The fund’s performance relative to the index may be affected by fair-value pricing and timing differences in foreign exchange calculations. See financial note 2 for more information.
²		Please see the funds’ prospectus for further detail and eligibility requirements.

2 Schwab Fundamental Index Funds

From the President

Marie Chandoha is President and CEO of Charles Schwab Investment Management, Inc. and the funds covered in this report.

Dear Shareholder,

As President and CEO of Charles Schwab Investment Management, Inc., I’d like to thank you for trusting us to help you meet your investment goals, and for reading this annual report concerning the Schwab Fundamental Index Funds. Fundamentally weighted strategies have enjoyed significant asset growth in recent years, as investors have embraced the value of alternatives to traditional index funds. Unlike equity indices that are often weighted based on market capitalization, fundamentally weighted indices select and weight stocks by non-price measures. By using this methodology, the funds can serve as a complement to traditional cap-weighted and actively managed investment vehicles in an investment portfolio, potentially helping shareholders achieve better risk-adjusted returns over time.

Turning to the 12 months ended October 31, 2013, the funds generated returns that were generally aligned with their respective indices, and reflected a rally by stocks. The backdrop for these results included policies by many central banks aimed at stimulating economic growth. However, some signs of economic improvement in the U.S. led the Federal Reserve to initially consider “tapering” its purchases of securities to keep interest rates low, while a brief U.S. federal government shutdown and budgetary gridlock created market uncertainty late in the period. Stocks fell in response, but as the Fed’s anticipated tapering never materialized, stocks resumed their rally. As a result,

Asset Class Performance Comparison % returns during the 12 months ended 10/31/2013

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



		27.18%		S&P 500^® Index: measures U.S. large-cap stocks

		36.28%		Russell 2000^® Index: measures U.S. small-cap stocks

		26.88%		MSCI EAFE^® Index (Net): measures (in U.S. dollars) large-cap stocks in Europe, Australasia and the Far East

		−1.08%		Barclays U.S. Aggregate Bond Index: measures the U.S. bond market

		0.06%		Three-Month U.S. Treasury Bills (T-bills): measures short-term U.S. Treasury obligations

For index definitions, please see the Glossary.

Data source: Index provider websites and CSIM.

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

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

Schwab Fundamental Index Funds 3

From the President continued

Turning to the 12 months ended October 31, 2013, the funds generated returns that were generally aligned with their respective indices, and reflected a rally by stocks.

the Russell Fundamental U.S. Large Company Index returned 30.3%, and the Russell Fundamental Developed ex-U.S. Large Company Index returned 30.8%.*

By comparison, emerging market stocks generated far more modest returns. Slower economic growth early in 2013 and the depreciation of many emerging market currencies versus the U.S. dollar reduced returns on these stocks. However, as the Fed held off on tapering, these stocks generally rallied. Reflecting this environment, the Russell Fundamental Emerging Markets Large Company Index returned 8.4%.**

For more information about the Schwab Fundamental Index Funds, please continue reading this report. In addition, you can find further details about the Schwab Fundamental Index Funds and our other investment products by visiting www.schwabfunds.com. We are also happy to hear from you at 1-800-435-4000.

Sincerely,

For full definitions of the referenced indices, please see the Glossary.

* The total return cited is for the Russell Fundamental Developed ex-U.S. Large Company Index (Net), which is calculated net of foreign withholding taxes.

** The total return cited is for the Russell Fundamental Emerging Markets Large Company Index (Net), which is calculated net of foreign withholding taxes.

4 Schwab Fundamental Index Funds

Fund Management



		Agnes Hong, CFA, Managing Director and Head of Passive Equity Strategies, leads the portfolio management teams of Schwab’s index mutual funds and equity ETFs. She also has overall responsibility for all aspects of the management of the funds. Prior to joining CSIM in 2009, Ms. Hong spent five years as a portfolio manager at Barclays Global Investors (subsequently acquired by BlackRock), where she managed institutional index funds and quantitative active funds. Prior to that, Ms. Hong worked in management consulting and product management, servicing global financial services clients.

		Ferian Juwono, CFA, Managing Director and Senior Portfolio Manager, is responsible for the day-to-day co-management of the funds. Prior to joining CSIM in 2010, Mr. Juwono worked at BlackRock (formerly Barclays Global Investors), where he spent over three years as a portfolio manager, managing equity index funds for institutional clients, and nearly two years as a senior business analyst. Prior to that, Mr. Juwono worked for over four years as a senior financial analyst with Union Bank of California.

		Ron Toll, Portfolio Manager, is responsible for the day-to-day co-management of the funds. Mr. Toll has been a portfolio manager with CSIM since 2007, and has held a number of positions at the firm since beginning his tenure in 1998. His previous roles include serving as a manager in Portfolio Operations, and as a manager in Portfolio Operations and Analytics.

Schwab Fundamental Index Funds 5

Schwab Fundamental US Large Company Index Fund

The Schwab Fundamental US Large Company Index Fund (the fund) seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell Fundamental U.S. Large Company Index (the index), which measures the performance of the large company size segment by fundamental overall company scores that are created using as the universe the companies in the Russell 3000^® Index. To pursue its investment objective, the fund uses a replication investment approach and generally gives the same weight to a given stock as does the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 29.67% for the 12-month period that ended October 31, 2013, compared with the index, which returned 30.27%. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index. In addition, the fund received strong cash inflows during the period. On some occasions, this cash was briefly invested in S&P 500 Index futures, and these futures generally lagged the return of the index for the 12 months, slightly detracting from the fund’s relative performance.

Contributors and Detractors. The Financials sector was the biggest contributor to the fund’s total return. The large average weight of this sector reflected part of the reason for this contribution, with Financials stocks comprising approximately 15% of the fund. Financials stocks also performed well, returning approximately 35%, and reflecting the performance of companies involved in banking, diversified financial services, insurance, and real estate. One significant contributor in this sector was Bank of America, a diversified financial services company. The fund’s Bank of America holdings returned approximately 50%.

The Consumer Discretionary sector, which represented an average weight of roughly 12% of the fund, also provided a meaningful total return contribution. The fund’s Consumer Discretionary stocks returned approximately 40%, reflecting the overall performance of companies involved in automobiles and components, durable goods and apparel, consumer services, media, and retailing. One significant contributor in this sector was Time Warner Inc., a media and entertainment company. The fund’s Time Warner Inc. holdings returned approximately 61%.

The Utilities sector generated positive returns for the fund, but was the weakest total return contributor. The Utilities sector represented an average weight of approximately 4% of the fund, and returned approximately 11%, reflecting the overall performance of companies involved in gas, electric, and water utilities, as well as independent power production and energy trading. One significant detractor in this sector was Exelon Corporation, a utility services holding company. The fund’s Exelon Corporation holdings returned approximately -16%.

The Telecommunication Services sector, which represented an average weight of approximately 4% of the fund, was another relatively weak contributor to the fund’s total return. The fund’s Telecommunication Services stocks returned approximately 14%, reflecting the overall performance of companies involved in diversified and wireless telecommunication services. One significant detractor in this sector was NII Holdings Inc., a mobile communications provider. The fund’s NII Holdings Inc. shares returned roughly -57%.

As of 10/31/13:

Statistics


Number of Holdings			610
Weighted Average Market Cap ($ x 1,000,000)			$99,445
Price/Earnings Ratio (P/E)			19.4
Price/Book Ratio (P/B)			2.3
Portfolio Turnover Rate			10%

Sector Weightings % of Investments


Energy			15.1%
Financials			13.7%
Consumer Discretionary			12.4%
Information Technology			12.4%
Consumer Staples			11.6%
Health Care			11.4%
Industrials			10.7%
Utilities			4.1%
Telecommunication Services			3.8%
Materials			3.7%
Other			1.1%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Exxon Mobil Corp.			4.5%
Chevron Corp.			2.3%
AT&T, Inc.			2.0%
ConocoPhillips			2.0%
Microsoft Corp.			1.9%
General Electric Co.			1.5%
The Procter & Gamble Co.			1.5%
Bank of America Corp.			1.5%
Wal-Mart Stores, Inc.			1.4%
Johnson & Johnson			1.3%
Total			19.9%

Management’s views and portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.


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

6 Schwab Fundamental Index Funds

Schwab Fundamental US Large Company Index Fund

Performance and Fund Facts as of 10/31/13

April 2, 2007 – October 31, 2013
Performance of Hypothetical
$10,000 Investment^1,2,3

Average Annual Total Returns^1,2,4


Fund and Inception Date	1 Year			5 Years			Since Inception


Fund: Schwab Fundamental US Large Company Index Fund (4/2/07)		29.67	%		18.50	%		6.63	%
Russell Fundamental U.S. Large Company Index		30.27	%		n/a			n/a
Fundamental US Large Company Spliced Index⁵		30.27	%		18.76	%		6.81	%
Fund Category: Morningstar Large Value		26.84	%		13.73	%		4.00	%

Fund Expense Ratios⁶: Net 0.35%; Gross 0.44%

For index definitions, please see the Glossary.

Index ownership— “Russell Fundamental U.S. Large Company Index” is a joint trademark of Russell Investments (“Russell”) and Research Affiliates LLC (“RA”) and is used by the fund under license. “Research Affiliates” and “Fundamental Index” are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell Fundamental Index Series. FTSE is a trademark owned by the London Stock Exchange Group companies and is used by FTSE International Limited under license. Schwab Fundamental Index Funds are not sponsored, endorsed, sold or promoted by Russell, FTSE or RA, and Russell, FTSE and RA do not make any representation regarding the advisability of investing in shares of the fund.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		On October 27, 2009, the Investor Share class, Select Share class and Institutional Share class were combined into a single class of shares of the fund. The performance history of the fund prior to October 27, 2009 is that of the fund’s former Institutional Shares.
³		The inception date of the Russell Fundamental U.S. Large Company Index is February 24, 2011. The fund began tracking the index on October 19, 2012.
⁴		Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
⁵		The Fundamental U.S. Large Company Spliced Index is an internally calculated index, comprised of the FTSE RAFI US 1000 Index from inception of the fund until the close of business on October 18, 2012 and the Russell Fundamental U.S. Large Company Index from October 19, 2012 forward.
⁶		As stated in the prospectus. 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 Fundamental Index Funds 7

Schwab Fundamental US Small Company Index Fund

The Schwab Fundamental US Small Company Index Fund (the fund) seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell Fundamental U.S. Small Company Index (the index), which measures the performance of the small company size segment by fundamental overall company scores that are created using as the universe the companies in the Russell 3000^® Index. To pursue its investment objective, the fund uses a replication investment approach and generally gives the same weight to a given stock as does the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 37.55% for the 12-month period that ended October 31, 2013, compared with the index, which returned 38.01%. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index.

Contributors and Detractors. The Industrials sector was the biggest contributor to the fund’s total return. The large average weight of this sector reflected part of the reason for this contribution, with Industrials stocks comprising approximately 20% of the fund. Industrials stocks also performed well, returning approximately 46%, and reflecting the performance of companies involved in capital goods, commercial and professional services, and transportation. One significant contributor in this sector was Delta Air Lines, Inc., an air transportation company. The fund’s Delta Air Lines, Inc. holdings returned approximately 37%.

The Consumer Discretionary sector, which represented an average weight of approximately 19% of the fund, also provided a meaningful total return contribution. The fund’s Consumer Discretionary stocks returned approximately 41%, reflecting the overall performance of companies involved in automobiles and components, durable goods and apparel, consumer services, media, and retailing. One significant contributor in this sector was Netflix Inc., an online subscription service for watching television shows and movies. The fund’s Netflix Inc. holdings returned approximately 308%.

The Telecommunication Services sector generated positive returns for the fund, but was the weakest total return contributor. The Telecommunication Services sector represented an average weight of approximately 1% of the fund. Stocks in this sector generated a solid return of approximately 59%, reflecting the overall performance of companies involved in diversified and wireless telecommunication services. One significant detractor in this sector, however, was Cincinnati Bell Inc., a local exchange and wireless provider. The fund’s Cincinnati Bell Inc. shares returned approximately -45%.

The Utilities sector, which represented an average weight of approximately 4% of the fund, was another relatively weak contributor to the fund’s total return. The fund’s Utilities stocks returned approximately 16%, reflecting the overall performance of companies involved in gas, electric, and water utilities, as well as independent power production and energy trading. One significant detractor in this sector was Atlantic Power Corporation, which holds indirect interests in non-utility electric generating facilities. The fund’s Atlantic Power Corporation holdings returned approximately -67%.

As of 10/31/13:

Statistics


Number of Holdings			863
Weighted Average Market Cap ($ x 1,000,000)			$3,933
Price/Earnings Ratio (P/E)			59.4
Price/Book Ratio (P/B)			2.2
Portfolio Turnover Rate			27%

Sector Weightings % of Investments


Industrials			19.9%
Financials			19.7%
Consumer Discretionary			18.4%
Information Technology			14.6%
Energy			6.5%
Health Care			6.3%
Materials			5.9%
Consumer Staples			3.5%
Utilities			3.2%
Telecommunication Services			1.0%
Other			1.0%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Southwest Airlines Co.			0.6%
Delta Air Lines, Inc.			0.6%
SunEdison, Inc.			0.4%
United Continental Holdings, Inc.			0.3%
ITT Educational Services, Inc.			0.3%
Office Depot, Inc.			0.3%
SYNNEX Corp.			0.3%
Huntington Ingalls Industries, Inc.			0.3%
TD Ameritrade Holding Corp.			0.3%
Old Republic International Corp.			0.3%
Total			3.7%

Management’s 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.

8 Schwab Fundamental Index Funds

Schwab Fundamental US Small Company Index Fund

Performance and Fund Facts as of 10/31/13

April 2, 2007 – October 31, 2013
Performance of Hypothetical
$10,000 Investment^1,2,3

Average Annual Total Returns^1,2,4


Fund and Inception Date	1 Year			5 Years			Since Inception


Fund: Schwab Fundamental US Small Company Index Fund (4/2/07)		37.55	%		21.46	%		8.17	%
Russell Fundamental U.S. Small Company Index		38.01	%		n/a			n/a
Fundamental US Small Company Spliced Index⁵		38.01	%		21.86	%		8.76	%
Fund Category: Morningstar Small Blend		35.17	%		17.34	%		6.01	%

Fund Expense Ratios⁶: Net 0.35%; Gross 0.50%

For index definitions, please see the Glossary.

Index ownership— “Russell Fundamental U.S. Small Company Index” is a joint trademark of Russell Investments (“Russell”) and Research Affiliates LLC (“RA”) and is used by the fund under license. “Research Affiliates” and “Fundamental Index” are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell Fundamental Index Series. FTSE is a trademark owned by the London Stock Exchange Group companies and is used by FTSE International Limited under license. Schwab Fundamental Index Funds are not sponsored, endorsed, sold or promoted by Russell, FTSE or RA, and Russell, FTSE and RA do not make any representation regarding the advisability of investing in shares of the fund.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		On October 27, 2009, the Investor Share class, Select Share class and Institutional Share class were combined into a single class of shares of the fund. The performance history of the fund prior to October 27, 2009 is that of the fund’s former Institutional Shares.
³		The inception date of the Russell Fundamental U.S. Small Company Index is February 24, 2011. The fund began tracking the index on October 19, 2012.
⁴		Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
⁵		The Fundamental U.S. Small Company Spliced Index is an internally calculated index, comprised of the FTSE RAFI US Mid Small 1500 Index from inception of the fund until the close of business on October 18, 2012 and the Russell Fundamental U.S. Small Company Index from October 19, 2012 forward.
⁶		As stated in the prospectus. 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 Fundamental Index Funds 9

Schwab Fundamental International Large Company Index Fund

The Schwab Fundamental International Large Company Index Fund (the fund) seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell Fundamental Developed ex US Large Company Index (Net) (the index), which measures the performance of the large company size segment by fundamental overall company scores that is created using as the universe the companies in the Russell Developed ex-U.S. Index. To pursue its investment objective, the fund uses a replication investment approach and generally gives the same weight to a given stock as does the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 30.12% in for the 12-month period that ended October 31, 2013, compared with the index, which returned 30.79%. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index. In addition, timing differences in foreign exchange calculations detracted from the fund’s relative performance.*

Contributors and Detractors. Japanese stocks were the biggest contributors to the fund’s total return from a country perspective, and represented an average weight of approximately 20% of the fund. In U.S. dollar terms, the fund’s Japanese stocks returned approximately 39%. One significant contributor in this market was Toyota Motor Corporation, a passenger vehicle company. The fund’s Toyota Motor Corporation holdings returned approximately 71% in U.S. dollar terms.

U.K. stocks also provided a meaningful contribution to the fund’s total return, and represented an average weight of approximately 20% of the fund. In U.S. dollar terms, the fund’s U.K. stocks returned approximately 25%. One significant contributor in this market was Vodafone Group PLC, a mobile telecommunications company. The fund’s Vodafone Group PLC holdings returned approximately 41% in U.S. dollar terms.

Stocks from Greece detracted the most from the fund’s total return from a country perspective. These stocks represented an average weight of less than 1% of the fund, and in U.S. dollar terms, generated a very narrowly negative return. One significant detractor in this market was National Bank of Greece S.A., which offers retail and corporate banking services. The fund’s National Bank of Greece S.A. holdings returned approximately -72% in U.S. dollar terms.

Israeli stocks generated positive overall returns for the fund, but were some of the weakest contributors from a country perspective. These stocks represented an average weight of less than 1% of the fund, and in U.S. dollar terms, returned approximately 9%. One significant detractor in this market was Israel Chemicals Limited, a chemical and fertilizer products company. The fund’s Israel Chemicals Limited holdings returned approximately -29% in U.S. dollar terms.

As of 10/31/13:

Statistics


Number of Holdings			790
Weighted Average Market Cap ($ x 1,000,000)			$56,999
Price/Earnings Ratio (P/E)			27.5
Price/Book Ratio (P/B)			0.6
Portfolio Turnover Rate			22%

Sector Weightings % of Investments


Financials			18.9%
Energy			12.8%
Industrials			12.7%
Consumer Discretionary			10.3%
Telecommunication Services			8.9%
Materials			8.9%
Consumer Staples			8.5%
Utilities			6.2%
Health Care			6.1%
Information Technology			4.6%
Other			2.1%
Total			100.0%

Top Equity Holdings % of Net Assets¹


BP plc			2.4%
Total S.A.			2.0%
Royal Dutch Shell plc, A Shares			1.7%
Vodafone Group plc			1.6%
HSBC Holdings plc			1.3%
Royal Dutch Shell plc, B Shares			1.2%
Telefonica S.A.			1.2%
Banco Santander S.A.			1.2%
Nestle S.A. – Reg’d			1.0%
Toyota Motor Corp.			1.0%
Total			14.6%

Management’s views and portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

Foreign securities can involve risks such as political and economic instability and currency risk.


*		Typically, the securities in the index are valued using foreign exchange rates obtained at the close of the London foreign currency exchange (11:00 AM EST). Securities in the fund, however, are valued using foreign exchange rates obtained at the close of the New York foreign currency exchange (4:00 PM EST). This difference in closing times can result in different foreign currency exchange rates between the two exchanges, and thus different foreign currency exchange rates used in the valuation of the index’s and fund’s securities.
¹		This list is not a recommendation of any security by the investment adviser.

10 Schwab Fundamental Index Funds

Schwab Fundamental International Large Company Index Fund

Performance and Fund Facts as of 10/31/13

April 2, 2007 – October 31, 2013
Performance of Hypothetical
$10,000 Investment^1,2,3

Average Annual Total Returns^1,2,4


Fund and Inception Date	1 Year			5 Years			Since Inception


Fund: Schwab Fundamental International Large Company Index Fund (4/2/07)		30.12	%		12.35	%		1.28	%
Russell Fundamental Developed ex-U.S. Large Company Index (Net)		30.79	%		n/a			n/a
Fundamental Developed ex-US Large Company Spliced Index⁵		30.79	%		13.44	%		2.21	%
Fund Category: Morningstar Foreign Large Value		24.94	%		11.32	%		0.38	%

Fund Expense Ratios⁶: Net 0.36%; Gross 0.57%

Country Weightings % of Investments


Japan			19.2%
United Kingdom			17.3%
France			11.5%
Germany			9.3%
Canada			5.8%
Switzerland			5.6%
Netherlands			5.5%
Australia			4.6%
Italy			4.5%
Spain			4.5%
Other Countries			12.2%
Total			100.0%

For index definitions, please see the Glossary.

The fund’s performance relative to the index may be affected by fair-value pricing, see financial note 2 for more information.

Index ownership— “Russell Fundamental Developed ex-U.S. Large Company Index” is a joint trademark of Russell Investments (“Russell”) and Research Affiliates LLC (“RA”) and is used by the fund under license. “Research Affiliates” and “Fundamental Index” are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell Fundamental Index Series. FTSE is a trademark owned by the London Stock Exchange Group companies and is used by FTSE International Limited under license. Schwab Fundamental Index Funds are not sponsored, endorsed, sold or promoted by Russell, FTSE or RA, and Russell, FTSE and RA do not make any representation regarding the advisability of investing in shares of the fund.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		On October 19, 2009, the Investor Share class, Select Share class and Institutional Share class were combined into a single class of shares of the fund. The performance history of the fund prior to October 19, 2009 is that of the fund’s former Institutional Shares.
³		The inception date of the Russell Fundamental Developed ex-U.S. Large Company Index (Net) is February 24, 2011. The fund began tracking the index on October 19, 2012.
⁴		Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
⁵		The Fundamental Developed ex-U.S. Large Company Spliced Index is an internally calculated index, comprised of the FTSE RAFI Developed ex-US 1000 Index from inception of the fund until the close of business on October 18, 2012 and the Russell Fundamental Developed ex-U.S. Large Company Index (Net) from October 19, 2012 forward.
⁶		As stated in the prospectus. Includes acquired fund fees and expenses incurred indirectly by the fund through its investments in other investment companies. The annualized weighted average expense ratio of these investment companies was 0.01%. 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 Fundamental Index Funds 11

Schwab Fundamental International Small Company Index Fund

The Schwab Fundamental International Small Company Index Fund (the fund) seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell Fundamental Developed ex-U.S. Small Company Index (Net) (the index), which measures the performance of the small company size segment by fundamental overall company scores that is created using as the universe the companies in the Russell Developed ex-U.S. Index. To pursue its investment objective, the fund uses a replication investment approach and generally gives the same weight to a given stock as does the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 29.75% for the 12-month period that ended October 31, 2013, compared with the index, which returned 30.78%. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index. In addition, timing differences in foreign exchange calculations detracted from the fund’s relative performance.*

Contributors and Detractors. Japanese stocks were the biggest contributors to the fund’s total return from a country perspective, and represented an average weight of approximately 37% of the fund. In U.S. dollar terms, the fund’s Japanese stocks returned approximately 31%. One significant contributor in this market was Aiful Corporation, a consumer financing firm. The fund’s Aiful Corporation holdings returned approximately 250% in U.S. dollar terms.

U.K. stocks also provided a meaningful contribution to the fund’s total return, and represented an average weight of approximately 13% of the fund. In U.S. dollar terms, the fund’s U.K. stocks returned approximately 38%. One significant contributor in this market was Invensys plc, a production assets and energy resources management company. The fund’s Invensys plc holdings returned approximately 122% in U.S. dollar terms.

Stocks from Greece detracted the most from the fund’s total return. These stocks represented an average weight of less than 1% of the fund, and in U.S. dollar terms, returned approximately -21%. One significant detractor in this market was Eurobank Ergasias SA, which offers commercial and retail banking services. The fund’s Eurobank Ergasias SA holdings returned approximately -78% in U.S. dollar terms.

Stocks from Singapore contributed to the fund’s total return, but represented relatively weak performers for the fund. Stocks from Singapore represented approximately 2% of the fund, while returning roughly 1% in U.S. dollar terms. One significant detractor in this market was Jardine Cycle & Carriage Limited, a motor vehicle company. The fund’s Jardine Cycle & Carriage Limited holdings returned approximately -13% in U.S. dollar terms.

As of 10/31/13:

Statistics


Number of Holdings			1,263
Weighted Average Market Cap ($ x 1,000,000)			$3,483
Price/Earnings Ratio (P/E)			36.3
Price/Book Ratio (P/B)			0.9
Portfolio Turnover Rate			29%

Sector Weightings % of Investments


Industrials			24.5%
Consumer Discretionary			18.7%
Financials			16.9%
Materials			10.1%
Information Technology			8.8%
Consumer Staples			7.0%
Health Care			4.3%
Energy			4.0%
Utilities			1.7%
Telecommunication Services			1.0%
Other			3.0%
Total			100.0%

Top Equity Holdings % of Net Assets¹


iShares MSCI EAFE Small Cap ETF			2.8%
Gamesa Corp. Tecnologica S.A.			0.4%
Enterprise Inns plc			0.3%
Methanex Corp.			0.2%
NGK Insulators Ltd.			0.2%
NTN Corp.			0.2%
USG People N.V.			0.2%
TOTO Ltd.			0.2%
SBM Offshore N.V.			0.2%
Daiwa Securities Group, Inc.			0.2%
Total			4.9%

Management’s 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.

Foreign securities can involve risks such as political and economic instability and currency risk.


*		Typically, the securities in the index are valued using foreign exchange rates obtained at the close of the London foreign currency exchange (11:00 AM EST). Securities in the fund, however, are valued using foreign exchange rates obtained at the close of the New York foreign currency exchange (4:00 PM EST). This difference in closing times can result in different foreign currency exchange rates between the two exchanges, and thus different foreign currency exchange rates used in the valuation of the index’s and fund’s securities.
¹		This list is not a recommendation of any security by the investment adviser.

12 Schwab Fundamental Index Funds

Schwab Fundamental International Small Company Index Fund

Performance and Fund Facts as of 10/31/13

January 31, 2008 – October 31, 2013
Performance of Hypothetical
$10,000 Investment^1,2,3

Average Annual Total Returns^1,2,4


Fund and Inception Date	1 Year			5 Years			Since Inception


Fund: Schwab Fundamental International Small Company Index Fund (1/31/08)		29.75	%		17.84	%		6.19	%
Russell Fundamental Developed ex-U.S. Small Company Index (Net)		30.78	%		n/a			n/a
Fundamental Developed ex-US Small Company Spliced Index⁵		30.78	%		19.77	%		7.87	%
Fund Category: Morningstar Foreign Small/Mid Blend		26.78	%		17.96	%		5.00	%

Fund Expense Ratios⁶: Net 0.49%; Gross 0.92%

Country Weightings % of Investments


Japan			37.0%
United Kingdom			12.9%
Canada			8.0%
France			4.7%
Australia			4.6%
Germany			3.7%
Italy			2.9%
Switzerland			2.9%
United States			2.8%
Hong Kong			2.6%
Other Countries			17.9%
Total			100.0%

For index definitions, please see the Glossary.

The fund’s performance relative to the index may be affected by fair-value pricing, see financial note 2 for more information.

Index ownership— “Russell Fundamental Developed ex-U.S. Small Company Index” is a joint trademark of Russell Investments (“Russell”) and Research Affiliates LLC (“RA”) and is used by the fund under license. “Research Affiliates” and “Fundamental Index” are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell Fundamental Index Series. FTSE is a trademark owned by the London Stock Exchange Group companies and is used by FTSE International Limited under license. Schwab Fundamental Index Funds are not sponsored, endorsed, sold or promoted by Russell, FTSE or RA, and Russell, FTSE and RA do not make any representation regarding the advisability of investing in shares of the fund.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		On October 19, 2009, the Investor Share class, Select Share class and Institutional Share class were combined into a single class of shares of the fund. The performance history of the fund prior to October 19, 2009 is that of the fund’s former Institutional Shares.
³		The inception date of the Russell Fundamental Developed ex-US Small Company Index (Net) is February 24, 2011. The fund began tracking the index on October 19, 2012.
⁴		Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
⁵		The Fundamental Developed ex-US Small Co. Spliced Index is an internally calculated index, comprised of the FTSE RAFI Developed ex-US Mid Small 1500 Index from inception of the fund until the close of business on October 18, 2012 and the Russell Fundamental Developed ex-US Small Company Index (Net) from October 19, 2012 forward.
⁶		As stated in the prospectus. 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 Fundamental Index Funds 13

Schwab Fundamental Emerging Markets Large Company Index Fund

The Schwab Fundamental Emerging Markets Large Company Index Fund (the fund) seeks investment results that correspond generally (before fees and expenses) to the total return of the Russell Fundamental Emerging Markets Large Company Index (Net) (the index), which measures the performance of the large company size segment by fundamental overall company scores that is created using as the universe the companies in the Russell Emerging Markets Index. To pursue its investment objective, the fund uses a replication investment approach where possible, and maintains a tight allocation across all countries, regions, sectors, market capitalizations, and valuation measures compared with the index. For more information concerning the fund’s investment objective, strategies, and risks, please see the fund’s prospectus.

The fund returned 7.11% for the 12-month period that ended October 31, 2013, compared with the index, which returned 8.42%. Differences between the return of the fund and the return of the index may be attributable to, among other things, the operational and transactional costs incurred by the fund and not the index. In addition, timing differences in foreign exchange calculations and fair valuation of the fund’s holdings detracted from the fund’s relative performance,* as did investments in Russian stocks through the use of depositary receipts,** which generally underperformed the underlying stocks during the report period.

Market Highlights. Emerging market stocks generated positive overall returns in U.S. dollar terms, while facing financial headwinds compared with many developed international markets. Some signs of slowing economic growth in major emerging markets early in 2013, and relatively high inflation, reduced the performance of these stocks, as did the depreciation of currencies from countries such as India, Russia, and Brazil versus the U.S. dollar. However, as the anticipated “tapering” by the U.S. Federal Reserve failed to materialize, the performance of emerging market stocks began to improve.

Contributors and Detractors. South Korean stocks were the biggest contributors to the fund’s total return from a country perspective, and represented an average weight of approximately 22% of the fund. In U.S. dollar terms, the fund’s South Korean stocks returned approximately 13%. One significant contributor in this market was Samsung Electronics, a communications equipment manufacturer. The fund’s Samsung Electronics holdings returned approximately 16% in U.S. dollar terms. Another contributor in this market was SK Telecom Co., Ltd., a telecommunications carrier. The fund’s SK Telecom Co., Ltd., holdings returned approximately 60%.

Stocks from Brazil detracted the most from the fund’s total return. These stocks represented an average weight of approximately 13% of the fund, and in U.S. dollar terms, returned approximately -1%. One significant detractor in this market was Petroleo Brasileiro S.A., an integrated oil company. The fund’s Petroleo Brasileiro S.A. common stock holdings returned approximately -16% in U.S. dollar terms. The fund also owned preferred stock of Petroleo Brasileiro S.A. that returned approximately -7% and also detracted from performance.

As of 10/31/13:

Statistics


Number of Holdings			281
Weighted Average Market Cap ($ x 1,000,000)			$42,072
Price/Earnings Ratio (P/E)			9.6
Price/Book Ratio (P/B)			1.3
Portfolio Turnover Rate			22%

Sector Weightings % of Investments


Energy			25.1%
Financials			16.4%
Information Technology			14.3%
Materials			12.6%
Telecommunication Services			10.5%
Consumer Discretionary			6.1%
Industrials			5.5%
Utilities			3.7%
Consumer Staples			2.6%
Other			3.2%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Gazprom ADR			4.2%
LUKOIL ADR			4.2%
Samsung Electronics Co., Ltd.			3.8%
Petroleo Brasileiro S.A.			2.1%
Surgutneftegas ADR			1.7%
China Mobile Ltd.			1.7%
Taiwan Semiconductor Manufacturing Co., Ltd.			1.6%
China Construction Bank Corp., Class H			1.6%
Petroleo Brasileiro S.A. – Petrobras			1.6%
POSCO			1.4%
Total			23.9%

Management’s views and portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

Foreign securities can involve risks such as political and economic instability and currency risk. These risks may be greater in emerging markets.


*		Typically, the securities in the index are valued using foreign exchange rates obtained at the close of the London foreign currency exchange (11:00 AM EST). Securities in the fund, however, are valued using foreign exchange rates obtained at the close of the New York foreign currency exchange (4:00 PM EST). This difference in closing times can result in different foreign currency exchange rates between the two exchanges, and thus different foreign currency exchange rates used in the valuation of the index’s and fund’s securities.
**		As of September 23, 2013, the fund was able to invest directly in equities from Russia.
¹		This list is not a recommendation of any security by the investment adviser.

14 Schwab Fundamental Index Funds

Schwab Fundamental Emerging Markets Large Company Index Fund

Performance and Fund Facts as of 10/31/13

January 31, 2008 – October 31, 2013
Performance of Hypothetical
$10,000 Investment^1,2,3

Average Annual Total Returns^1,2,4


Fund and Inception Date	1 Year			5 Years			Since Inception


Fund: Schwab Fundamental Emerging Markets Large Company Index Fund (1/31/08)		7.11	%		13.50	%		1.36	%
Russell Fundamental Emerging Markets Large Company Index (Net)		8.42	%		n/a			n/a
Fundamental Emerging Markets Large Company Spliced Index⁵		8.42	%		16.00	%		3.36	%
Fund Category: Morningstar Diversified Emerging Markets		7.59	%		14.43	%		0.61	%

Fund Expense Ratios⁶: Net 0.50%; Gross 0.92%

Country Weightings % of Investments


Republic of Korea			20.1%
Russia			15.3%
Brazil			13.4%
Taiwan			12.2%
China			11.4%
South Africa			7.0%
Mexico			3.4%
India			3.2%
Other Countries			14.0%
Total			100.0%

For index definitions, please see the Glossary.

The fund’s performance relative to the index may be affected by fair-value pricing, see financial note 2 for more information.

Index ownership— “Russell Fundamental Emerging Markets Large Company Index” is a joint trademark of Russell Investments (“Russell”) and Research Affiliates LLC (“RA”) and is used by the fund under license. “Research Affiliates” and “Fundamental Index” are trademarks of RA. Subject to RA’s intellectual property rights in certain content, Russell is the owner of all copyrights related to the Russell Fundamental Index Series. FTSE is a trademark owned by the London Stock Exchange Group companies and is used by FTSE International Limited under license. Schwab Fundamental Index Funds are not sponsored, endorsed, sold or promoted by Russell, FTSE or RA, and Russell, FTSE and RA do not make any representation regarding the advisability of investing in shares of the fund.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		On October 19, 2009, the Investor Share class, Select Share class and Institutional Share class were combined into a single class of shares of the fund. The performance history of the fund prior to October 19, 2009 is that of the fund’s former Institutional Shares.
³		The inception date of the Russell Fundamental Emerging Markets Large Company Index (Net) is February 24, 2011. The fund began tracking the index on October 19, 2012.
⁴		Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
⁵		The Fundamental Emerging Markets Large Company Spliced Index is an internally calculated index, comprised of the FTSE RAFI Emerging Index from inception of the fund until the close of business on October 18, 2012 and the Russell Fundamental Emerging Markets Large Company Index (Net) from October 19, 2012 forward.
⁶		As stated in the prospectus. Includes acquired fund fees and expenses incurred indirectly by the fund through its investments in other investment companies. The annualized weighted average expense ratio of these investment companies was 0.01%. 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 Fundamental Index Funds 15

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 5/1/13		at 10/31/13		5/1/13–10/31/13

Schwab Fundamental US Large Company Index Fund
Actual Return		0.35%	$	1,000.00	$	1,109.80	$	1.86
Hypothetical 5% Return		0.35%	$	1,000.00	$	1,023.44	$	1.79


Schwab Fundamental US Small Company Index Fund
Actual Return		0.35%	$	1,000.00	$	1,159.70	$	1.91
Hypothetical 5% Return		0.35%	$	1,000.00	$	1,023.44	$	1.79


Schwab Fundamental International Large Company Index Fund
Actual Return		0.35%	$	1,000.00	$	1,128.40	$	1.88
Hypothetical 5% Return		0.35%	$	1,000.00	$	1,023.44	$	1.79


Schwab Fundamental International Small Company Index Fund
Actual Return		0.50%	$	1,000.00	$	1,094.50	$	2.64
Hypothetical 5% Return		0.50%	$	1,000.00	$	1,022.68	$	2.55


Schwab Fundamental Emerging Markets Large Company Index Fund
Actual Return		0.52%	$	1,000.00	$	1,039.40	$	2.67
Hypothetical 5% Return		0.52%	$	1,000.00	$	1,022.58	$	2.65


¹		Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights which covers a 12-month period.
²		Expenses for each fund 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.

16 Schwab Fundamental Index Funds

Schwab Fundamental US Large Company Index Fund

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09¹


Per-Share Data ($)

Net asset value at beginning of period		10.76			9.51			9.05			7.63			6.47

Income (loss) from investment operations:
Net investment income (loss)		0.24			0.21			0.18			0.14			0.10
Net realized and unrealized gains (losses)		2.89			1.22			0.43			1.37			1.26

Total from investment operations		3.13			1.43			0.61			1.51			1.36
Less distributions:
Distributions from net investment income		(0.24	)		(0.18	)		(0.15	)		(0.09	)		(0.20	)

Net asset value at end of period		13.65			10.76			9.51			9.05			7.63

Total return (%)		29.67			15.29			6.74			19.95			22.04

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.35			0.32	²		0.35			0.35			0.35
Gross operating expenses		0.41			0.44			0.44			0.45			0.53
Net investment income (loss)		2.03			2.13			2.06			1.77			1.88
Portfolio turnover rate		10			32	³		11			27			28
Net assets, end of period ($ x 1,000,000)		3,020			1,960			1,490			1,019			663

¹ Effective October 27, 2009, the Investor Share class, the Select Share class and the Institutional 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 Institutional Shares.

² The ratio of net operating expenses would have been 0.35%, if voluntary waiver by CSIM had not been included.

³ Portfolio turnover would have been 12%, if rebalancing trades had not been included due to a change in the fund’s index.

See financial notes 17

Schwab Fundamental US Large Company Index Fund

Portfolio Holdings as of October 31, 2013


				Cost		Value
Holdings by Category				($)		($)

	98	.7%	Common Stock		2,186,526,479		2,982,439,540
	1	.0%	Other Investment Company		29,664,810		29,664,810
	0	.1%	Short-Term Investment		2,099,986		2,099,986


	99	.8%	Total Investments		2,218,291,275		3,014,204,336
	0	.6%	Collateral Invested for Securities on Loan		19,475,816		19,475,816
	(0	.4%)	Other Assets and Liabilities, Net				(13,248,634	)


	100	.0%	Net Assets				3,020,431,518


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 98.7% of net assets

Automobiles & Components 1.1%
Other Securities				1.1		32,498,866

Banks 2.3%
Wells Fargo & Co.		652,425		0.9		27,852,023
Other Securities				1.4		42,466,368

				2.3		70,318,391

Capital Goods 8.2%
3M Co.		105,075		0.4		13,223,689
General Electric Co.		1,779,325		1.5		46,511,555
United Technologies Corp.		172,815		0.6		18,361,594
Other Securities				5.7		169,210,381

				8.2		247,307,219

Commercial & Professional Supplies 0.8%
Other Securities				0.8		24,163,206

Consumer Durables & Apparel 1.0%
Other Securities				1.0		31,037,390

Consumer Services 1.5%
McDonald’s Corp.		168,580		0.5		16,271,342
Other Securities				1.0		28,129,763

				1.5		44,401,105

Diversified Financials 6.8%
Bank of America Corp.		3,172,660		1.5		44,290,334
Berkshire Hathaway, Inc., Class B *		179,011		0.7		20,600,586
Citigroup, Inc.		563,033		0.9		27,464,750
JPMorgan Chase & Co.		704,442		1.2		36,306,941
The Charles Schwab Corp. (a)		138,015		0.1		3,126,040
Other Securities				2.4		74,756,884

				6.8		206,545,535

Energy 15.1%
Chevron Corp.		589,905		2.3		70,765,004
ConocoPhillips		828,510		2.0		60,729,783
Exxon Mobil Corp.		1,516,084		4.5		135,871,448
Occidental Petroleum Corp.		148,570		0.5		14,274,606
Phillips 66		348,355		0.7		22,444,513
Schlumberger Ltd.		150,700		0.5		14,123,604
Valero Energy Corp.		401,725		0.5		16,539,018
Other Securities				4.1		120,994,392

				15.1		455,742,368

Food & Staples Retailing 4.3%
Costco Wholesale Corp.		110,415		0.4		13,028,970
CVS Caremark Corp.		388,435		0.8		24,183,963
Wal-Mart Stores, Inc.		544,625		1.4		41,799,969
Walgreen Co.		291,070		0.6		17,242,987
Other Securities				1.1		34,540,904

				4.3		130,796,793

Food, Beverage & Tobacco 5.1%
Altria Group, Inc.		403,680		0.5		15,029,006
Mondelez International, Inc., Class A		439,592		0.5		14,787,875
PepsiCo, Inc.		240,508		0.7		20,224,318
Philip Morris International, Inc.		216,020		0.6		19,251,702
The Coca-Cola Co.		401,330		0.5		15,880,628
Other Securities				2.3		67,152,882

				5.1		152,326,411

Health Care Equipment & Services 5.8%
McKesson Corp.		88,500		0.5		13,836,090
UnitedHealth Group, Inc.		321,775		0.7		21,964,361
WellPoint, Inc.		259,170		0.7		21,977,616
Other Securities				3.9		117,275,515

				5.8		175,053,582

Household & Personal Products 2.2%
The Procter & Gamble Co.		556,495		1.5		44,936,971
Other Securities				0.7		21,039,301

				2.2		65,976,272

18 See financial notes

Schwab Fundamental US Large Company Index Fund

Portfolio Holdings continued


	Number		% of Net		Value
Security	of Shares		Assets		($)

Insurance 3.6%
The Travelers Cos., Inc.		173,595		0.5		14,981,248
Other Securities				3.1		93,686,915

				3.6		108,668,163

Materials 3.7%
Other Securities				3.7		112,283,005

Media 4.1%
Comcast Corp., Class A		325,640		0.5		15,493,951
The Walt Disney Co.		296,150		0.7		20,312,928
Time Warner, Inc.		334,588		0.8		22,999,579
Other Securities				2.1		63,635,808

				4.1		122,442,266

Pharmaceuticals, Biotechnology & Life Sciences 5.5%
Amgen, Inc.		127,755		0.5		14,819,580
Bristol-Myers Squibb Co.		244,850		0.4		12,859,522
Johnson & Johnson		432,095		1.3		40,016,318
Merck & Co., Inc.		387,857		0.6		17,488,472
Pfizer, Inc.		1,253,499		1.3		38,457,349
Other Securities				1.4		43,458,433

				5.5		167,099,674

Real Estate 0.9%
Other Securities				0.9		27,749,418

Retailing 4.8%
Lowe’s Cos., Inc.		340,555		0.6		16,952,828
Target Corp.		219,495		0.5		14,221,081
The Home Depot, Inc.		232,296		0.6		18,093,535
Other Securities				3.1		95,354,659

				4.8		144,622,103

Semiconductors & Semiconductor Equipment 2.3%
Intel Corp.		1,295,910		1.0		31,659,081
Other Securities				1.3		38,914,912

				2.3		70,573,993

Software & Services 5.8%
International Business Machines Corp.		190,495		1.1		34,138,609
Microsoft Corp.		1,635,015		1.9		57,797,780
Other Securities				2.8		82,535,353

				5.8		174,471,742

Technology Hardware & Equipment 4.3%
Apple, Inc.		35,047		0.6		18,306,800
Cisco Systems, Inc.		879,565		0.7		19,790,213
Hewlett-Packard Co.		1,600,175		1.3		38,996,265
Other Securities				1.7		52,671,111

				4.3		129,764,389

Telecommunication Services 3.8%
AT&T, Inc.		1,685,685		2.0		61,021,797
Verizon Communications, Inc.		790,530		1.3		39,929,670
Other Securities				0.5		14,258,955

				3.8		115,210,422

Transportation 1.6%
Other Securities				1.6		49,361,989

Utilities 4.1%
Other Securities				4.1		124,025,238

Total Common Stock
(Cost $2,186,526,479)						2,982,439,540




Other Investment Company 1.0% of net assets

Money Market Fund 1.0%
State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (e)		29,664,810		1.0		29,664,810

Total Other Investment Company
(Cost $29,664,810)						29,664,810



	Face
Security	Amount		% of Net		Value
Rate, Maturity Date	($)		Assets		($)

Short-Term Investment 0.1% of net assets

U.S. Treasury Obligation 0.1%
Other Securities				0.1		2,099,986

Total Short-Term Investment
(Cost $2,099,986)						2,099,986



End of Investments.


	Number		% of Net		Value
Security	of Shares		Assets		($)

Collateral Invested for Securities on Loan 0.6% of net assets


State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (e)		19,475,816		0.6		19,475,816

Total Collateral Invested for Securities on Loan
(Cost $19,475,816)						19,475,816



End of Collateral Invested for Securities on Loan.

At 10/31/13 tax basis cost of the fund’s investments was $2,234,297,819 and the unrealized appreciation and depreciation were $793,590,567 and ($13,684,050), respectively, with a net unrealized appreciation of $779,906,517.

See financial notes 19

Schwab Fundamental US Large Company Index Fund

Portfolio Holdings continued

For the following notes, please refer to complete schedule of holdings.


*		Non-income producing security.
(a)		Issuer is affiliated with the fund’s adviser.
(b)		All or a portion of this security is on loan. Securities on loan were valued at $20,152,619.
(c)		All or a portion of this security is held as collateral for open futures contracts.
(d)		The rate shown is the purchase yield.
(e)		The rate shown is the 7-day yield.


REIT —		Real Estate Investment Trust

In addition to the above, the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

S&P 500 Index, e-mini, Long, expires 12/20/13

390

34,144,500

476,776

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$2,982,439,540		$—		$—		$2,982,439,540
Other Investment Company¹		29,664,810		—		—		29,664,810
Short-Term Investment¹		—		2,099,986		—		2,099,986

Total		$3,012,104,350		$2,099,986		$—		$3,014,204,336

Other Financial Instruments
Collateral Invested for Securities on Loan		$19,475,816		$—		$—		$19,475,816
Futures Contract²		476,776		—		—		476,776


¹		As categorized in complete schedule of holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

Balance

Change in

Balance

as of

Realized

Unrealized

Gross

as of

October 31,

Gains

Appreciation

Gross

Transfers

October 31,

Investments in Securities

2012

(Losses)

(Depreciation)

Purchases

Sales

out

2013

Common Stock

$170,860

$9,858

($10,637

)

$—

($170,081

)

$—

Total

$170,860

$9,858

($10,637

)

$—

($170,081

)

$—

20 See financial notes

Schwab Fundamental US Large Company Index Fund

Statement of

Assets and Liabilities

As of October 31, 2013



Assets

Investments in affiliated issuers, at value (cost $2,206,014)		$3,126,040
Investments in unaffiliated issuers, at value (cost $2,216,085,261) including securities on loan of $20,152,619	+	3,011,078,296

Total investments, at value (cost $2,218,291,275)		3,014,204,336
Collateral invested for securities on loan		19,475,816
Receivables:
Fund shares sold		6,731,013
Dividends		3,644,711
Income from securities on loan		49,572
Foreign tax reclaims		727
Interest		1
Prepaid expenses	+	39,575

Total assets		3,044,145,751

Liabilities

Collateral held for securities on loan		19,475,816
Payables:
Investment adviser and administrator fees		44,612
Shareholder service fees		76,901
Fund shares redeemed		3,078,327
Variation margin on futures contracts		187,200
Accrued expenses	+	851,377

Total liabilities		23,714,233

Net Assets

Total assets		3,044,145,751
Total liabilities	−	23,714,233

Net assets		$3,020,431,518

Net Assets by Source
Capital received from investors		2,216,667,533
Net investment income not yet distributed		36,913,755
Net realized capital losses		(29,539,607	)
Net unrealized capital appreciation		796,389,837

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$3,020,431,518

221,246,140

$13.65

See financial notes 21

Schwab Fundamental US Large Company Index Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends received from affiliated issuer		$34,594
Dividends received from unaffiliated issuers (net of foreign withholding taxes of $18,880)		58,847,143
Interest		5,168
Securities on loan	+	560,098

Total investment income		59,447,003

Expenses

Investment adviser and administrator fees		5,884,151
Shareholder service fees		2,040,919
Index fee		1,420,972
Transfer agent fees		247,135
Registration fees		170,924
Shareholder reports		162,349
Portfolio accounting fees		92,096
Professional fees		86,921
Custodian fees		66,990
Independent trustees’ fees		23,321
Interest expense		81
Other expenses	+	47,745

Total expenses		10,243,604
Expense reduction by CSIM and its affiliates	−	1,518,737
Custody credits	−	21

Net expenses	−	8,724,846

Net investment income		50,722,157

Realized and Unrealized Gains (Losses)

Net realized losses on affiliated issuer		(4,883	)
Net realized gains on unaffiliated investments		48,900,523
Net realized gains on futures contracts	+	8,840,644

Net realized gains		57,736,284
Net change in unrealized appreciation on affiliated issuer		1,297,224
Net change in unrealized appreciation on unaffiliated investments		521,076,437
Net change in unrealized appreciation on futures contracts	+	858,451

Net change in unrealized appreciation	+	523,232,112

Net realized and unrealized gains		580,968,396

Increase in net assets resulting from operations		$631,690,553

22 See financial notes

Schwab Fundamental US Large Company Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$50,722,157			$37,721,180
Net realized gains		57,736,284			38,504,726
Net change in unrealized appreciation	+	523,232,112			170,685,750

Increase in net assets from operations		631,690,553			246,911,656

Distributions to Shareholders

Distributions from net investment income		($42,909,493	)		($28,518,465	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			84,032,984		$1,024,135,625			67,538,254		$676,863,199
Shares reinvested			2,230,842		23,803,086			1,765,688		16,261,985
Shares redeemed	+		(47,078,841	)	(576,085,377	)		(43,856,574	)	(441,499,603	)

Net transactions in fund shares			39,184,985		$471,853,334			25,447,368		$251,625,581

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			182,061,155		$1,959,797,124			156,613,787		$1,489,778,352
Total increase	+		39,184,985		1,060,634,394			25,447,368		470,018,772

End of period			221,246,140		$3,020,431,518			182,061,155		$1,959,797,124


Net investment income not yet distributed					$36,913,755					$29,130,846

See financial notes 23

Schwab Fundamental US Small Company Index Fund

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09¹


Per-Share Data ($)

Net asset value at beginning of period		10.31			10.11			10.10			7.88			6.30

Income (loss) from investment operations:
Net investment income (loss)		0.16			0.15			0.11			0.09			0.06
Net realized and unrealized gains (losses)		3.35			0.88			0.47			2.19			1.59

Total from investment operations		3.51			1.03			0.58			2.28			1.65
Less distributions:
Distributions from net investment income		(0.20	)		(0.12	)		(0.10	)		(0.06	)		(0.07	)
Distributions from net realized gains		(0.84	)		(0.71	)		(0.47	)		—			—

Total distributions		(1.04	)		(0.83	)		(0.57	)		(0.06	)		(0.07	)

Net asset value at end of period		12.78			10.31			10.11			10.10			7.88

Total return (%)		37.55			11.37			5.55			29.07			26.68

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.35			0.32	²		0.35			0.35			0.35
Gross operating expenses		0.48			0.50			0.50			0.53			0.60
Net investment income (loss)		1.41			1.46			1.18			1.03			1.00
Portfolio turnover rate		27			92	³		35			41			29
Net assets, end of period ($ x 1,000,000)		849			619			563			412			298

² The ratio of net operating expenses would have been 0.35%, if voluntary waiver by CSIM had not been included.

³ Portfolio turnover would have been 29%, if rebalancing trades had not been included due to a change in the fund’s index.

24 See financial notes

Schwab Fundamental US Small Company Index Fund

Portfolio Holdings as of October 31, 2013


				Cost		Value
Holdings by Category				($)		($)

	98	.8%	Common Stock		612,399,768		839,594,596
	0	.0%	Rights		—		—
	0	.9%	Other Investment Company		7,423,228		7,423,228
	0	.1%	Short-Term Investment		714,995		714,995


	99	.8%	Total Investments		620,537,991		847,732,819
	2	.3%	Collateral Invested for Securities on Loan		19,735,329		19,735,329
	(2	.1)%	Other Assets and Liabilities, Net				(18,055,727	)


	100	.0%	Net Assets				849,412,421


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 98.8% of net assets

Automobiles & Components 1.0%
Thor Industries, Inc.		37,600		0.3		2,181,176
Other Securities				0.7		6,187,516

				1.0		8,368,692

Banks 4.7%
CapitalSource, Inc.		161,700		0.2		2,115,036
Synovus Financial Corp.		594,900		0.2		1,933,425
Other Securities				4.3		35,695,390

				4.7		39,743,851

Capital Goods 10.7%
Carlisle Cos., Inc.		27,200		0.2		1,976,896
Chicago Bridge & Iron Co., N.V.		29,698		0.3		2,200,325
Huntington Ingalls Industries, Inc.		34,600		0.3		2,475,630
Lincoln Electric Holdings, Inc.		30,400		0.2		2,104,896
Spirit AeroSystems Holdings, Inc., Class A *		74,900		0.2		1,999,081
Trinity Industries, Inc.		44,100		0.3		2,232,783
Other Securities				9.2		78,240,367

				10.7		91,229,978

Commercial & Professional Supplies 4.3%
Other Securities				4.3		36,907,010

Consumer Durables & Apparel 3.9%
Hanesbrands, Inc.		30,100		0.2		2,050,412
Polaris Industries, Inc.		14,700		0.2		1,924,965
The Jones Group, Inc.		135,900		0.2		2,111,886
Other Securities				3.3		27,328,640

				3.9		33,415,903

Consumer Services 5.4%
Chipotle Mexican Grill, Inc. *		3,782		0.2		1,993,001
ITT Educational Services, Inc. (a)*		67,935		0.3		2,725,552
Other Securities				4.9		41,260,560

				5.4		45,979,113

Diversified Financials 3.3%
Federated Investors, Inc., Class B (a)		71,700		0.2		1,944,504
TD Ameritrade Holding Corp.		86,800		0.3		2,366,168
Other Securities				2.8		23,561,878

				3.3		27,872,550

Energy 6.5%
Oceaneering International, Inc.		24,900		0.3		2,138,412
Oil States International, Inc. *		20,400		0.3		2,216,052
Tidewater, Inc.		37,400		0.3		2,252,228
Whiting Petroleum Corp. *		29,900		0.2		2,000,011
Other Securities				5.4		46,369,079

				6.5		54,975,782

Food & Staples Retailing 1.0%
Rite Aid Corp. *		373,200		0.2		1,989,156
United Natural Foods, Inc. *		26,900		0.2		1,922,005
Other Securities				0.6		4,473,111

				1.0		8,384,272

Food, Beverage & Tobacco 2.0%
Other Securities				2.0		16,572,100

Health Care Equipment & Services 4.2%
Kindred Healthcare, Inc.		140,100		0.2		1,944,588
Other Securities				4.0		34,151,237

				4.2		36,095,825

Household & Personal Products 0.5%
Nu Skin Enterprises, Inc., Class A		19,120		0.3		2,235,702
Other Securities				0.2		2,080,781

				0.5		4,316,483

Insurance 4.2%
Aspen Insurance Holdings Ltd.		55,800		0.3		2,176,758
CNO Financial Group, Inc.		137,800		0.3		2,146,924
Kemper Corp.		55,800		0.2		2,065,716
Old Republic International Corp.		137,300		0.3		2,305,267
Primerica, Inc.		46,000		0.2		1,975,700

See financial notes 25

Schwab Fundamental US Small Company Index Fund

Portfolio Holdings continued


	Number		% of Net		Value
Security	of Shares		Assets		($)
Protective Life Corp.		48,100		0.3		2,216,448
StanCorp Financial Group, Inc.		36,300		0.3		2,138,070
Other Securities				2.3		21,081,404

				4.2		36,106,287

Materials 5.9%
Cabot Corp.		42,000		0.2		1,957,620
Crown Holdings, Inc. *		44,400		0.2		1,935,840
Ferro Corp. *		160,230		0.2		2,055,751
Other Securities				5.3		43,992,394

				5.9		49,941,605

Media 2.4%
Other Securities				2.4		20,657,975

Pharmaceuticals, Biotechnology & Life Sciences 2.1%
Covance, Inc. *		24,600		0.3		2,195,796
Endo Health Solutions, Inc. *		51,800		0.3		2,265,214
Other Securities				1.5		13,238,543

				2.1		17,699,553

Real Estate 7.5%
Other Securities				7.5		63,729,145

Retailing 5.6%
Office Depot, Inc. *		482,800		0.3		2,698,852
The Men’s Wearhouse, Inc.		50,000		0.2		2,115,000
Other Securities				5.1		42,620,858

				5.6		47,434,710

Semiconductors & Semiconductor Equipment 3.9%
Avago Technologies Ltd.		42,600		0.2		1,935,318
SunEdison, Inc. *		343,600		0.4		3,195,480
Other Securities				3.3		27,853,927

				3.9		32,984,725

Software & Services 6.0%
Convergys Corp.		106,500		0.2		2,102,310
Lender Processing Services, Inc.		62,200		0.3		2,147,144
Verisign, Inc. *		42,300		0.3		2,296,044
Other Securities				5.2		44,337,363

				6.0		50,882,861

Technology Hardware & Equipment 4.7%
NCR Corp. *		57,800		0.2		2,112,590
SYNNEX Corp. *		41,200		0.3		2,525,560
Other Securities				4.2		35,438,962

				4.7		40,077,112

Telecommunication Services 1.0%
Other Securities				1.0		8,166,992

Transportation 4.8%
Con-way, Inc.		46,900		0.2		1,932,280
Delta Air Lines, Inc.		187,500		0.6		4,946,250
Southwest Airlines Co.		310,800		0.6		5,351,976
United Continental Holdings, Inc. *		83,200		0.3		2,824,640
Other Securities				3.1		25,607,636

				4.8		40,662,782

Utilities 3.2%
Other Securities				3.2		27,389,290

Total Common Stock
(Cost $612,399,768)						839,594,596




Rights 0.0% of net assets

Consumer Services 0.0%
Other Securities				0.0		—

Total Rights
(Cost $—)						—




Other Investment Company 0.9% of net assets

Money Market Fund 0.9%
State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (f)		7,423,228		0.9		7,423,228

Total Other Investment Company
(Cost $7,423,228)						7,423,228



	Face
Security	Amount		% of Net		Value
Rate, Maturity Date	($)		Assets		($)

Short-Term Investment 0.1% of net assets

U.S. Treasury Obligation 0.1%
Other Securities				0.1		714,995

Total Short-Term Investment
(Cost $714,995)						714,995



End of Investments.


	Number		% of Net		Value
Security	of Shares		Assets		($)

Collateral Invested for Securities on Loan 2.3% of net assets


State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (f)		19,735,329		2.3		19,735,329

Total Collateral Invested for Securities on Loan
(Cost $19,735,329)						19,735,329



End of Collateral Invested for Securities on Loan.

At 10/31/13 tax basis cost of the fund’s investments was $624,073,694 and the unrealized appreciation and depreciation

26 See financial notes

Schwab Fundamental US Small Company Index Fund

Portfolio Holdings continued

were $235,087,813 and ($11,428,688), respectively, with a net unrealized appreciation of $223,659,125.

For the following notes, please refer to complete schedule of holdings.


*		Non-income producing security.
(a)		All or a portion of this security is on loan. Securities on loan were valued at $19,952,900.
(b)		Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(c)		Illiquid security. At the period end, the value of these amounted to $0 or 0.0% of net assets.
(d)		All or a portion of this security is held as collateral for open futures contracts.
(e)		The rate shown is the purchase yield.
(f)		The rate shown is the 7-day yield.


REIT —		Real Estate Investment Trust

In addition to the above, the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

Russell 2000 Index, mini, Long, expires 12/20/13

8,233,500

224,557

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$839,594,596		$—		$—		$839,594,596
Rights¹		—		—		—		—
Other Investment Company¹		7,423,228		—		—		7,423,228
Short-Term Investment¹		—		714,995		—		714,995

Total		$847,017,824		$714,995		$—		$847,732,819

Other Financial Instruments
Collateral Invested for Securities on Loan		$19,735,329		$—		$—		$19,735,329
Futures Contract²		224,557		—		—		224,557


¹		As categorized in complete schedule of holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

Balance

Change in

Balance

as of

Realized

Unrealized

Gross

as of

October 31,

Gains

Appreciation

Gross

Transfers

October 31,

Investments in Securities

2012

(Losses)

(Depreciation)

Purchases

Sales

out

2013

Common Stock

$441,199

$—

($225,691

)

$—

($215,508

)

$—

Total

$441,199

$—

($225,691

)

$—

($215,508

)

$—

See financial notes 27

Schwab Fundamental US Small Company Index Fund

Statement of

Assets and Liabilities

As of October 31, 2013



Assets

Investments, at value (cost $620,537,991) including securities on loan of $19,952,900		$847,732,819
Foreign currency, at value (cost $34)		31
Collateral invested for securities on loan		19,735,329
Receivables:
Investments sold		2,864,959
Fund shares sold		678,231
Dividends		283,368
Income from securities on loan		36,063
Interest		2
Prepaid expenses	+	13,129

Total assets		871,343,931

Liabilities

Collateral held for securities on loan		19,735,329
Payables:
Investment adviser and administrator fees		10,380
Shareholder service fees		12,795
Due to custodian		1,133,812
Fund shares redeemed		716,782
Variation margin on futures contracts		64,500
Accrued expenses	+	257,912

Total liabilities		21,931,510

Net Assets

Total assets		871,343,931
Total liabilities	−	21,931,510

Net assets		$849,412,421

Net Assets by Source
Capital received from investors		582,685,022
Net investment income not yet distributed		5,421,598
Net realized capital gains		33,886,414
Net unrealized capital appreciation		227,419,387

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$849,412,421

66,474,982

$12.78

28 See financial notes

Schwab Fundamental US Small Company Index Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends (net of foreign withholding taxes of $30,640)		$12,275,456
Interest		2,400
Securities on loan	+	503,422

Total investment income		12,781,278

Expenses

Investment adviser and administrator fees		1,999,960
Shareholder service fees		643,451
Index fee		415,185
Shareholder reports		88,516
Transfer agent fees		83,115
Portfolio accounting fees		59,252
Professional fees		56,193
Registration fees		50,901
Custodian fees		43,174
Independent trustees’ fees		11,912
Interest expense		176
Other expenses	+	15,531

Total expenses		3,467,366
Expense reduction by CSIM and its affiliates	−	921,799
Custody credits	−	13

Net expenses	−	2,545,554

Net investment income		10,235,724

Realized and Unrealized Gains (Losses)

Net realized gains on investments		32,361,944
Net realized gains on futures contracts		3,302,445
Net realized losses on foreign currency transactions	+	(118	)

Net realized gains		35,664,271
Net change in unrealized appreciation on investments		183,089,035
Net change in unrealized appreciation on futures contracts		299,143
Net change in unrealized appreciation on foreign currency translations	+	2

Net change in unrealized appreciation	+	183,388,180

Net realized and unrealized gains		219,052,451

Increase in net assets resulting from operations		$229,288,175

See financial notes 29

Schwab Fundamental US Small Company Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$10,235,724			$8,822,319
Net realized gains		35,664,271			56,145,986
Net change in unrealized appreciation (depreciation)	+	183,388,180			(4,154,550	)

Increase in net assets from operations		229,288,175			60,813,755

Distributions to Shareholders

Distributions from net investment income		(11,947,531	)		(6,659,188	)
Distributions from net realized gains	+	(50,580,881	)		(39,248,349	)

Total distributions		($62,528,412	)		($45,907,537	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			16,241,608		$178,159,226			15,451,067		$154,128,648
Shares reinvested			2,784,659		26,509,953			1,892,528		17,089,526
Shares redeemed	+		(12,560,146	)	(140,960,955	)		(13,017,996	)	(130,341,328	)

Net transactions in fund shares			6,466,121		$63,708,224			4,325,599		$40,876,846

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			60,008,861		$618,944,434			55,683,262		$563,161,370
Total increase	+		6,466,121		230,467,987			4,325,599		55,783,064

End of period			66,474,982		$849,412,421			60,008,861		$618,944,434


Net investment income not yet distributed					$5,421,598					$7,645,395

30 See financial notes

Schwab Fundamental International Large Company Index Fund

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09¹


Per-Share Data ($)

Net asset value at beginning of period		7.16			7.26			8.09			7.69			6.01

Income (loss) from investment operations:
Net investment income (loss)		0.23			0.22			0.23			0.21			0.16
Net realized and unrealized gains (losses)		1.87			(0.08	)²		(0.85	)		0.41			1.81

Total from investment operations		2.10			0.14			(0.62	)		0.62			1.97
Less distributions:
Distributions from net investment income		(0.21	)		(0.24	)		(0.21	)		(0.22	)		(0.29	)

Net asset value at end of period		9.05			7.16			7.26			8.09			7.69

Total return (%)		30.12			2.24			(7.88	)		8.27			34.89

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.34	³		0.31	⁴		0.35			0.35			0.35
Gross operating expenses		0.52			0.56			0.57			0.61			0.76
Net investment income (loss)		2.95			3.58			3.24			2.70			2.80
Portfolio turnover rate		22			61	⁵		35			65			82
Net assets, end of period ($ x 1,000,000)		646			501			372			301			253

¹ Effective October 19, 2009, the Investor Share class, the Select Share class and the Institutional 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 Institutional Shares.

² The per share amount does not accord with the change in aggregate gains and losses in securities during the period because of the timing of fund transactions in relation to fluctuating market values.

³ The ratio of net operating expenses would have been 0.35%, if voluntary waiver by CSIM had not been included. See financial note 4.

⁴ The ratio of net operating expenses would have been 0.35%, if voluntary waiver by CSIM had not been included.

⁵ Portfolio turnover would have been 37%, if rebalancing trades had not been included due to a change in the fund’s index.

See financial notes 31

Schwab Fundamental International Large Company Index Fund

Portfolio Holdings as of October 31, 2013


				Cost		Value
Holdings by Category				($)		($)

	97	.2%	Common Stock		481,759,721		627,407,931
	0	.4%	Preferred Stock		1,388,645		2,631,669
	0	.0%	Rights		176,884		185,237
	0	.0%	Other Investment Company		4,656		6,588
	2	.1%	Short-Term Investments		13,393,244		13,393,244


	99	.7%	Total Investments		496,723,150		643,624,669
	0	.7%	Collateral Invested for Securities on Loan		4,663,448		4,663,448
	(0	.4%)	Other Assets and Liabilities, Net				(2,493,360	)


	100	.0%	Net Assets				645,794,757


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 97.2% of net assets

Australia 4.6%
BHP Billiton Ltd.		111,359		0.6		3,936,917
Other Securities				4.0		25,527,923

				4.6		29,464,840

Austria 0.4%
Other Securities				0.4		2,608,320

Belgium 0.9%
Other Securities				0.9		5,581,476

Canada 5.8%
Other Securities				5.8		37,222,604

Denmark 0.8%
Other Securities				0.8		5,145,436

Finland 1.6%
Nokia Oyj *		770,458		0.9		5,856,080
Other Securities				0.7		4,541,804

				1.6		10,397,884

France 11.5%
AXA S.A.		114,536		0.4		2,853,714
BNP Paribas S.A.		54,942		0.6		4,053,244
Carrefour S.A.		73,991		0.4		2,700,860
Compagnie de Saint-Gobain		52,646		0.4		2,763,391
GDF Suez		141,737		0.5		3,512,776
Orange S.A.		447,538		1.0		6,151,892
Sanofi		43,153		0.7		4,601,108
Total S.A.		215,345		2.0		13,212,048
Vivendi S.A.		123,697		0.5		3,131,973
Other Securities				5.0		31,069,320

				11.5		74,050,326

Germany 8.9%
Allianz SE - Reg’d		23,357		0.6		3,921,694
BASF SE		48,696		0.8		5,055,351
Bayer AG - Reg’d		25,513		0.5		3,164,944
Daimler AG - Reg’d		67,695		0.9		5,542,513
Deutsche Telekom AG - Reg’d		346,875		0.8		5,451,039
E.ON SE AG		260,794		0.7		4,753,881
Siemens AG - Reg’d		35,626		0.7		4,552,723
Other Securities				3.9		25,010,687

				8.9		57,452,832

Hong Kong 0.8%
Other Securities				0.8		5,376,058

Ireland 0.7%
Other Securities				0.7		4,329,262

Israel 0.3%
Other Securities				0.3		1,752,654

Italy 4.5%
Enel S.p.A.		844,247		0.6		3,724,755
Eni S.p.A.		241,596		0.9		6,133,379
Intesa Sanpaolo S.p.A.		1,248,322		0.5		3,096,928
UniCredit S.p.A.		544,579		0.6		4,087,929
Other Securities				1.9		12,018,937

				4.5		29,061,928

Japan 19.2%
Honda Motor Co., Ltd.		79,600		0.5		3,178,657
Nippon Telegraph & Telephone Corp.		50,904		0.4		2,646,006
Panasonic Corp.		266,750		0.4		2,734,017
Tokyo Electric Power Co., Inc. *		561,800		0.5		2,998,269
Toyota Motor Corp.		96,600		1.0		6,263,367
Other Securities				16.4		105,969,220

				19.2		123,789,536

Luxembourg 0.6%
ArcelorMittal		171,227		0.4		2,696,932
Other Securities				0.2		1,102,263

				0.6		3,799,195

32 See financial notes

Schwab Fundamental International Large Company Index Fund

Portfolio Holdings continued


	Number		% of Net		Value
Security	of Shares		Assets		($)

Netherlands 5.5%
ING Groep N.V. CVA *		206,997		0.4		2,630,457
Royal Dutch Shell plc, A Shares		322,786		1.7		10,752,277
Royal Dutch Shell plc, B Shares		223,667		1.2		7,743,353
Other Securities				2.2		14,573,250

				5.5		35,699,337

New Zealand 0.1%
Other Securities				0.1		708,670

Norway 0.8%
Other Securities				0.8		5,203,009

Portugal 0.3%
Other Securities				0.3		1,780,006

Singapore 0.6%
Other Securities				0.6		4,154,046

Spain 4.4%
Banco Bilbao Vizcaya Argentaria S.A.		319,456		0.6		3,733,455
Banco Santander S.A.		855,426		1.2		7,583,576
Repsol S.A.		94,946		0.4		2,545,582
Telefonica S.A. *		439,625		1.2		7,737,096
Other Securities				1.0		6,973,380

				4.4		28,573,089

Sweden 2.2%
Other Securities				2.2		14,124,502

Switzerland 5.5%
Nestle S.A. - Reg’d		93,816		1.0		6,772,006
Novartis AG - Reg’d		60,403		0.7		4,688,636
Roche Holding AG		13,365		0.6		3,695,895
Other Securities				3.2		20,631,626

				5.5		35,788,163

United Kingdom 17.2%
Anglo American plc		119,821		0.4		2,848,933
AstraZeneca plc		84,067		0.7		4,450,518
Barclays plc		739,641		0.5		3,112,009
BP plc		2,001,747		2.4		15,538,766
British American Tobacco plc		51,503		0.4		2,841,536
BT Group plc		457,919		0.4		2,770,698
GlaxoSmithKline plc		228,301		0.9		6,018,552
HSBC Holdings plc		765,505		1.3		8,390,960
Rio Tinto plc		50,193		0.4		2,539,774
Tesco plc		571,583		0.5		3,334,122
Vodafone Group plc		2,741,790		1.6		10,042,511
Other Securities				7.7		49,456,379

				17.2		111,344,758

Total Common Stock
(Cost $481,759,721)						627,407,931




Preferred Stock 0.4% of net assets

Germany 0.4%
Other Securities				0.4		2,625,688

United Kingdom 0.0%
Other Securities				0.0		5,981

Total Preferred Stock
(Cost $1,388,645)						2,631,669




Rights 0.0% of net assets

Spain 0.0%
Other Securities				0.0		185,237

Total Rights
(Cost $176,884)						185,237




Other Investment Company 0.0% of net assets

United States 0.0%
Other Securities				0.0		6,588

Total Other Investment Company
(Cost $4,656)						6,588



	Face
Security	Amount		% of Net		Value
Rate, Maturity Date	($)		Assets		($)

Short-Term Investments 2.1% of net assets

Time Deposits 1.8%
Bank of America
0.03%, 11/01/13		10,341,009		1.6		10,341,009
Other Securities				0.2		1,442,245

				1.8		11,783,254

U.S. Treasury Obligation 0.3%
Other Securities				0.3		1,609,990

Total Short-Term Investments
(Cost $13,393,244)						13,393,244



End of Investments.

See financial notes 33

Schwab Fundamental International Large Company Index Fund

Portfolio Holdings continued

Number

% of Net

Value

Security

of Shares

Assets

($)

Collateral Invested for Securities on Loan 0.7% of net assets

Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.01% (f)

4,663,448

0.7

4,663,448

Total Collateral Invested for Securities on Loan

(Cost $4,663,448)

4,663,448

End of Collateral Invested for Securities on Loan.

At 10/31/13, the tax basis cost of the fund’s investments was $516,396,557 unrealized appreciation and depreciation were $136,191,155 and ($8,963,043), respectively, with a net unrealized appreciation of $127,228,112.

At 10/31/13, the values of certain foreign securities held by the fund aggregating $583,511,965 were adjusted from their closing market values in accordance with international fair valuation procedures approved by the fund’s Board of Trustees. (See financial note 2)

For the following notes, please refer to complete schedule of holdings.


*		Non-income producing security.
(a)		Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(b)		Illiquid security. At the period end, the value of these amounted to $0 or 0.0% of net assets.
(c)		All or a portion of this security is on loan. Securities on loan were valued at $4,160,161.
(d)		The rate shown is the purchase yield.
(e)		All or a portion of this security is held as collateral for futures contracts.
(f)		The rate shown is the 7-day yield.


CVA —		Dutch Certificate
ETF —		Exchange traded fund
Reg’d —		Registered
REIT —		Real Estate Investment Trust
RSP —		Risparmio (Convertible Savings Shares)
SDR —		Swedish Depositary Receipt

In addition to the above, the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

MSCI EAFE, e-mini, Long, expires 12/20/13

135

12,658,275

279,349

34 See financial notes

Schwab Fundamental International Large Company Index Fund

Portfolio Holdings continued

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$—		$185,085,590		$—		$185,085,590
Canada		37,222,604		—		—		37,222,604
Denmark		439,111		4,706,325		—		5,145,436
France		572,395		73,477,931		—		74,050,326
Germany		185,088		57,267,744		—		57,452,832
Hong Kong		135,431		5,240,627		—		5,376,058
Ireland		1,302,935		3,026,327		—		4,329,262
Italy		408,990		28,652,938		—		29,061,928
Netherlands		1,299,193		34,400,144		—		35,699,337
Singapore		491,050		3,662,996		—		4,154,046
Spain		157,623		28,415,466		—		28,573,089
Sweden		365,129		13,759,373		—		14,124,502
Switzerland		3,308,921		32,479,242		—		35,788,163
United Kingdom		633,184		110,711,574		—		111,344,758
Preferred Stock¹		—		2,625,688		—		2,625,688
United Kingdom		—		—		5,981		5,981
Rights¹		—		—		185,237		185,237
Other Investment Company¹		6,588		—		—		6,588
Short-Term Investments¹		—		13,393,244		—		13,393,244

Total		$46,528,242		$596,905,209		$191,218		$643,624,669

Other Financial Instruments
Collateral Invested for Securities on Loan		$4,663,448		$—		$—		$4,663,448
Futures Contract²		279,349		—		—		279,349


¹		As categorized in complete schedule of holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:


	Balance					Change in												Balance
	as of		Realized			Unrealized								Gross		Gross		as of
	October 31,		Gains			Appreciation			Gross		Gross			Transfers		Transfers		October 31,
Investments in Securities	2012		(Losses)			(Depreciation)			Purchases		Sales			in		out		2013

Common Stock
Canada		$—		($129,892	)		$129,892			$—		$—			$—		$—		$—
China		6,079		(78,171	)		74,274			—		(2,182	)		—		—		—
Netherlands		—		—			(183,369	)		29,368		—			154,001		—		—
United Kingdom		—		(375,623	)		375,623			—		—			—		—		—
Preferred Stock																			—
United Kingdom		5,378		50			(113	)		6,031		(5,365	)		—		—		5,981
Rights				—
Hong Kong		30,003		43,202			(30,003	)		—		(43,202	)		—		—		—
Spain		—		—			8,353			176,884		—			—		—		185,237

Total		$41,460		($540,434	)		$374,657			$212,283		($50,749	)		$154,001		$—		$191,218

See financial notes 35

Schwab Fundamental International Large Company Index Fund

Statement of

Assets and Liabilities

As of October 31, 2013



Assets

Investments, at value (cost $496,723,150) including securities on loan of $4,160,161		$643,624,669
Foreign currency, at value (cost $49)		49
Collateral invested for securities on loan		4,663,448
Receivables:
Fund shares sold		1,222,127
Dividends		1,182,932
Foreign tax reclaims		407,478
Income from securities on loan		20,507
Interest		10
Prepaid expenses	+	10,148

Total assets		651,131,368

Liabilities

Collateral held for securities on loan		4,663,448
Payables:
Investments bought		5,981
Investment adviser and administrator fees		7,180
Shareholder service fees		8,260
Fund shares redeemed		394,871
Variation margin on futures contracts		53,339
Accrued expenses	+	203,532

Total liabilities		5,336,611

Net Assets

Total assets		651,131,368
Total liabilities	−	5,336,611

Net assets		$645,794,757

Net Assets by Source
Capital received from investors		620,980,457
Net investment income not yet distributed		14,415,187
Net realized capital losses		(136,797,722	)
Net unrealized capital appreciation		147,196,835

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$645,794,757

71,372,072

$9.05

See financial notes 37

Schwab Fundamental International Large Company Index Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends (net of foreign withholding taxes of $1,556,294)		$18,431,684
Interest		3,336
Securities on loan	+	555,482

Total investment income		18,990,502

Expenses

Investment adviser and administrator fees		1,669,236
Shareholder service fees		471,415
Index fee		321,092
Custodian fees		206,036
Portfolio accounting fees		84,584
Transfer agent fees		83,081
Professional fees		57,830
Shareholder reports		38,561
Registration fees		37,531
Independent trustees’ fees		10,862
Interest expense		3,413
Other expenses	+	26,750

Total expenses		3,010,391
Expense reduction by CSIM and its affiliates	−	1,059,530

Net expenses	−	1,950,861

Net investment income		17,039,641

Realized and Unrealized Gains (Losses)

Net realized losses on investments		(10,831,405	)
Net realized gains on futures contracts		1,139,879
Net realized losses on foreign currency transactions	+	(121,037	)

Net realized losses		(9,812,563	)
Net change in unrealized appreciation on investments		144,593,320
Net change in unrealized appreciation on futures contracts		279,349
Net change in unrealized appreciation on foreign currency translations	+	41,541

Net change in unrealized appreciation	+	144,914,210

Net realized and unrealized gains		135,101,647

Increase in net assets resulting from operations		$152,141,288

38 See financial notes

Schwab Fundamental International Large Company Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$17,039,641			$14,440,391
Net realized losses		(9,812,563	)		(12,889,488	)
Net change in unrealized appreciation	+	144,914,210			16,027,825

Increase in net assets from operations		152,141,288			17,578,728

Distributions to Shareholders

Distributions from net investment income		($15,274,655	)		($12,260,320	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			24,782,287		$195,910,846			35,480,423		$237,479,009
Shares reinvested			1,575,182		11,404,319			1,363,648		9,013,714
Shares redeemed	+		(24,923,187	)	(198,967,968	)		(18,197,244	)	(123,492,196	)

Net transactions in fund shares			1,434,282		$8,347,197			18,646,827		$123,000,527

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			69,937,790		$500,580,927			51,290,963		$372,261,992
Total increase	+		1,434,282		145,213,830			18,646,827		128,318,935

End of period			71,372,072		$645,794,757			69,937,790		$500,580,927


Net investment income not yet distributed					$14,415,187					$12,490,163

See financial notes 39

Schwab Fundamental International Small Company Index Fund

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09¹


Per-Share Data ($)

Net asset value at beginning of period		9.13			9.53			9.96			9.00			6.22

Income (loss) from investment operations:
Net investment income (loss)		0.22	²		0.21	²		0.24	²		0.16	²		0.12	²
Net realized and unrealized gains (losses)		2.42			0.03			(0.40	)		1.09			2.92

Total from investment operations		2.64			0.24			(0.16	)		1.25			3.04
Less distributions:
Distributions from net investment income		(0.30	)		(0.25	)		(0.27	)		(0.29	)		(0.26	)
Distributions from net realized gains		—			(0.39	)		—			—			—

Total distributions		(0.30	)		(0.64	)		(0.27	)		(0.29	)		(0.26	)

Net asset value at end of period		11.47			9.13			9.53			9.96			9.00

Total return (%)		29.75			3.13			(1.76	)		14.32			51.19

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.47	^3,4		0.46	^5,6		0.54			0.55			0.55
Gross operating expenses		0.93			0.92	⁶		0.99			1.07			3.82
Net investment income (loss)		2.21			2.42			2.29			1.77			1.59
Portfolio turnover rate		29			89	⁷		63			63			81
Net assets, end of period ($ x 1,000,000)		150			90			93			74			47

² Calculated based on the average shares outstanding during the period.

³ Effective June 11, 2013, the net operating expense limitation was lowered. The ratio presented for period ended 10/31/13 is a blended ratio. See financial note 4.

⁴ The ratio of net operating expenses would have been 0.52%, if voluntary waiver by CSIM had not been included. See financial note 4.

⁵ The ratio of net operating expenses would have been 0.51%, if voluntary waiver by CSIM had not been included.

⁶ The net operating and gross operating expense ratios would have been 0.50% and 0.97%, respectively, if vendor payments had not been included.

⁷ Portfolio turnover would have been 48%, if rebalancing trades had not been included due to a change in the fund’s index.

40 See financial notes

Schwab Fundamental International Small Company Index Fund

Portfolio Holdings as of October 31, 2013


				Cost		Value
Holdings by Category				($)		($)

	96	.3%	Common Stock		116,055,264		144,078,170
	0	.4%	Preferred Stock		380,406		578,681
	0	.0%	Rights		—		1,638
	2	.8%	Other Investment Company		3,757,207		4,121,700
	0	.2%	Short-Term Investments		344,569		344,569


	99	.7%	Total Investments		120,537,446		149,124,758
	1	.5%	Collateral Invested for Securities on Loan		2,221,642		2,221,642
	(1	.2)%	Other Assets and Liabilities, Net				(1,771,202	)


	100	.0%	Net Assets				149,575,198


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 96.3% of net assets

Australia 4.6%
Other Securities				4.6		6,902,219

Austria 0.7%
Other Securities				0.7		1,037,564

Belgium 1.1%
Other Securities				1.1		1,634,220

Canada 7.9%
Atco Ltd., Class I		5,425		0.2		251,777
Methanex Corp.		6,172		0.2		357,954
Precision Drilling Corp.		27,408		0.2		289,944
Quebecor, Inc., Class B		10,870		0.2		268,766
Other Securities				7.1		10,708,310

				7.9		11,876,751

Denmark 1.5%
D/S Norden A/S		6,066		0.2		266,806
Other Securities				1.3		1,952,284

				1.5		2,219,090

Finland 2.0%
Nokian Renkaat Oyj		5,036		0.2		254,702
Rautaruukki Oyj		35,030		0.2		302,984
Other Securities				1.6		2,451,317

				2.0		3,009,003

France 4.7%
Eurazeo S.A.		3,335		0.2		251,802
Neopost S.A.		3,538		0.2		267,123
Societe Television Francaise 1		14,913		0.2		287,342
Teleperformance		5,313		0.2		281,243
Zodiac Aerospace		1,600		0.2		256,011
Other Securities				3.7		5,721,174

				4.7		7,064,695

Germany 3.4%
Rhoen-klinikum AG		9,247		0.2		258,196
Stada Arzneimittel AG		4,498		0.2		258,553
Other Securities				3.0		4,512,299

				3.4		5,029,048

Greece 0.0%
Other Securities				0.0		—

Hong Kong 2.6%
Other Securities				2.6		3,876,368

Ireland 0.7%
Grafton Group plc		30,638		0.2		291,000
Other Securities				0.5		792,796

				0.7		1,083,796

Israel 1.2%
Bank Hapoalim B.M.		48,457		0.2		259,413
Other Securities				1.0		1,605,278

				1.2		1,864,691

Italy 2.8%
Other Securities				2.8		4,232,730

Japan 36.9%
Alps Electric Co., Ltd. *		28,800		0.2		252,736
Chugai Pharmaceutical Co., Ltd.		10,900		0.2		256,110
Daiwa Securities Group, Inc.		34,000		0.2		310,548
Hirose Electric Co., Ltd.		1,700		0.2		259,371
Kikkoman Corp.		14,000		0.2		255,158
Kinden Corp.		26,000		0.2		285,552
Marui Group Co., Ltd.		26,500		0.2		253,676
Minebea Co., Ltd.		47,000		0.2		260,190
Mitsubishi Gas Chemical Co., Inc.		31,000		0.2		253,351
NGK Insulators Ltd.		21,000		0.2		353,220
NGK Spark Plug Co., Ltd.		13,000		0.2		296,895
Nissan Shatai Co., Ltd.		15,000		0.2		258,616
Nomura Research Institute Ltd.		8,100		0.2		271,854

See financial notes 41

Schwab Fundamental International Small Company Index Fund

Portfolio Holdings continued

Number

% of Net

Value

Security

of Shares

Assets

($)

NTN Corp. *

72,000

0.2

346,093

Tokuyama Corp.

77,000

0.2

297,837

TOTO Ltd.

23,000

0.2

325,272

Other Securities

33.7

50,647,516

36.9

55,183,995

Luxembourg 0.5%

Other Securities

0.5

819,878

Netherlands 1.9%

Koninklijke Boskalis Westminster N.V.

5,299

0.2

254,683

SBM Offshore N.V. *

15,232

0.2

318,813

USG People N.V.

25,022

0.2

330,769

Other Securities

1.3

1,950,522

1.9

2,854,787

New Zealand 0.4%

Other Securities

0.4

670,248

Norway 1.1%

Other Securities

1.1

1,684,088

Portugal 0.4%

Other Securities

0.4

551,814

Republic of Korea 0.0%

Other Securities

0.0

—

Singapore 1.6%

Other Securities

1.6

2,332,253

Spain 2.3%

Bankinter S.A.

41,819

0.2

254,975

Gamesa Corp. Tecnologica S.A. *

61,562

0.4

594,509

Mapfre S.A.

62,485

0.2

250,920

Other Securities

1.5

2,273,494

2.3

3,373,898

Sweden 2.2%

Other Securities

2.2

3,263,379

Switzerland 2.9%

Georg Fischer AG - Reg’d *

436

0.2

300,338

Julius Baer Group Ltd. *

5,268

0.2

258,425

Other Securities

2.5

3,715,816

2.9

4,274,579

United Kingdom 12.9%

Bellway plc

11,022

0.2

265,480

Berendsen plc

17,200

0.2

267,855

Booker Group plc

116,941

0.2

281,657

Darty plc

202,354

0.2

266,429

DS Smith plc

54,602

0.2

264,652

Enterprise Inns plc *

162,678

0.3

395,221

Hiscox Ltd.

23,710

0.2

251,714

London Stock Exchange Group plc

10,057

0.2

264,338

UBM plc

22,821

0.2

249,811

Other Securities

11.0

16,731,919

12.9

19,239,076

Total Common Stock

(Cost $116,055,264)

144,078,170

Preferred Stock 0.4% of net assets

Germany 0.3%

Other Securities

0.3

473,708

Italy 0.1%

Other Securities

0.1

104,973

Total Preferred Stock

(Cost $380,406)

578,681

Rights 0.0% of net assets

Hong Kong 0.0%

Other Securities

0.0

—

Italy 0.0%

Other Securities

0.0

1,638

Total Rights

(Cost $—)

1,638

Other Investment Company 2.8% of net assets

United States 2.8%

iShares MSCI EAFE Small Cap ETF

82,500

2.8

4,121,700

Total Other Investment Company

(Cost $3,757,207)

4,121,700

Face

Security

Amount

% of Net

Value

Rate, Maturity Date

($)

Assets

($)

Short-Term Investments 0.2% of net assets

Time Deposit 0.1%

Other Securities

0.1

199,570

U.S. Treasury Obligation 0.1%

Other Securities

0.1

144,999

Total Short-Term Investments

(Cost $344,569)

344,569

End of Investments.

42 See financial notes

Schwab Fundamental International Small Company Index Fund

Portfolio Holdings continued

Number

% of Net

Value

Security

of Shares

Assets

($)

Collateral Invested for Securities on Loan 1.5% of net assets

Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.01% (f)

2,221,642

1.5

2,221,642

Total Collateral Invested for Securities on Loan

(Cost $2,221,642)

2,221,642

End of Collateral Invested for Securities on Loan.

At 10/31/13, the tax basis cost of the fund’s investments was $123,152,501 and the unrealized appreciation and depreciation were $29,925,605 and ($3,953,348), respectively, with a net unrealized appreciation of $25,972,257.

At 10/31/13, the values of certain foreign securities held by the fund aggregating $123,594,538 were adjusted from their closing market values in accordance with international fair valuation procedures approved by the fund’s Board of Trustees. (See financial note 2)

For the following notes, please refer to complete schedule of holdings.


*		Non-income producing security.
(a)		All or a portion of this security is on loan. Securities on loan were valued at $1,897,364.
(b)		Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(c)		Illiquid security. At the period end, the value of these amounted to $0 or 0.0% of net assets.
(d)		All or a portion of this security is held as collateral for open futures contracts.
(e)		The rate shown is the purchase yield.
(f)		The rate shown is the 7-day yield.


ADR —		American Depositary Receipt
CVA —		Dutch Certificate
ETF —		Exchange traded fund
GDR —		Global Depositary Receipt
Reg’d —		Registered
REIT —		Real Estate Investment Trust
RSP —		Risparmio (Convertible Savings Shares)
SDR —		Swedish Depositary Receipt

In addition to the above the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

MSCI EAFE, e-mini, Long, expires 12/20/13

93,765

4,442

See financial notes 43

Schwab Fundamental International Small Company Index Fund

Portfolio Holdings continued

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$—		$5,893,070		$—		$5,893,070
Australia		140,110		6,762,109		—		6,902,219
Austria		45,179		992,385		—		1,037,564
Belgium		706,382		927,838		—		1,634,220
Canada		11,876,751		—		—		11,876,751
Denmark		337,803		1,881,287		—		2,219,090
France		1,366,315		5,698,380		—		7,064,695
Germany		341,004		4,688,044		—		5,029,048
Greece		—		—		—		—
Hong Kong		112,897		3,763,471		—		3,876,368
Ireland		546,995		536,801		—		1,083,796
Israel		229,121		1,635,570		—		1,864,691
Italy		78,855		4,153,875		—		4,232,730
Japan		483,495		54,700,500		—		55,183,995
Luxembourg		274,208		545,670		—		819,878
Netherlands		507,900		2,346,887		—		2,854,787
New Zealand		106,765		563,483		—		670,248
Norway		320,677		1,363,411		—		1,684,088
Republic of Korea		—		—		—		—
Spain		137,079		3,236,819		—		3,373,898
Sweden		263,419		2,999,960		—		3,263,379
Switzerland		678,311		3,596,268		—		4,274,579
United Kingdom		2,509,047		16,730,029		—		19,239,076
Preferred Stock¹		—		578,681		—		578,681
Rights¹		1,638		—		—		1,638
Other Investment Company¹		4,121,700		—		—		4,121,700
Short-Term Investments¹		—		344,569		—		344,569

Total		$25,185,651		$123,939,107		$—		$149,124,758

Other Financial Instruments
Collateral Invested for Securities on Loan		$2,221,642		$—		$—		$2,221,642
Futures Contract²		4,442		—		—		4,442


¹		As categorized in complete schedule of holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

44 See financial notes

Schwab Fundamental International Small Company Index Fund

Portfolio Holdings continued

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:


	Balance					Change in												Balance
	as of		Realized			Unrealized								Gross		Gross		as of
	October 31,		Gains			Appreciation			Gross		Gross			Transfers		Transfers		October 31,
Investments in Securities	2012		(Losses)			(Depreciation)			Purchases		Sales			in		out		2013

Common Stock
Netherlands		$4,930		($490	)		$4,828			$—		($9,268	)		$—		$—		$—
Singapore		27,299		—			(27,299	)		—		—			—		—		—
Spain		—		—			(20,750	)		9,148		—			11,602		—		—
Preferred Stock
United Kingdom		1,108		(9	)		(7	)		—		(1,092	)		—		—		—

Total		$33,337		($499	)		($43,228	)		$9,148		($10,360	)		$11,602		$—		$—

The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were security transfers between Level 1, Level 2 and Level 3 for the period ended October 31, 2013. The transfers in the amount of $2,104,449 and $3,032,831 from Level 1 to Level 2 and from Level 2 to Level 1, respectively, were primarily due to the use of international fair valuation by the fund. The transfers in and out of Level 3 from Level 1 or Level 2 were the result of fair valued securities for which no quoted value was available.

See financial notes 45

Schwab Fundamental International Small Company Index Fund

Statement of

Assets and Liabilities

As of October 31, 2013



Assets

Investments, at value (cost $120,537,446) including securities on loan of $1,897,364		$149,124,758
Collateral invested for securities on loan		2,221,642
Receivables:
Investments sold		2,404,998
Fund shares sold		784,761
Dividends		370,683
Foreign tax reclaims		47,744
Income from securities on loan		7,287
Due from investment adviser		1,515
Prepaid expenses	+	1,940

Total assets		154,965,328

Liabilities

Collateral held for securities on loan		2,221,642
Payables:
Investments bought		651,155
Shareholder service fees		909
Independent trustees’ fees		2
Due to custodian		2,305,157
Fund shares redeemed		83,849
Variation margin on futures contracts		410
Accrued expenses	+	127,006

Total liabilities		5,390,130

Net Assets

Total assets		154,965,328
Total liabilities	−	5,390,130

Net assets		$149,575,198

Net Assets by Source
Capital received from investors		123,491,439
Net investment income not yet distributed		1,971,951
Net realized capital losses		(4,482,674	)
Net unrealized capital appreciation		28,594,482

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$149,575,198

13,038,461

$11.47

46 See financial notes

Schwab Fundamental International Small Company Index Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends (net of foreign withholding taxes of $240,666)		$2,938,591
Interest		1,150
Securities on loan	+	118,939

Total investment income		3,058,680

Expenses

Investment adviser and administrator fees		456,134
Shareholder service fees		79,722
Custodian fees		171,144
Index fee		95,455
Portfolio accounting fees		80,012
Professional fees		48,985
Transfer agent fees		40,028
Shareholder reports		28,036
Registration fees		24,533
Independent trustees’ fees		7,732
Interest expense		621
Other expenses	+	28,879

Total expenses		1,061,281
Expense reduction by CSIM and its affiliates	−	527,192

Net expenses	−	534,089

Net investment income		2,524,591

Realized and Unrealized Gains (Losses)

Net realized gains on investments		1,254,347
Net realized gains on futures contracts		249,472
Net realized losses on foreign currency transactions	+	(23,396	)

Net realized gains		1,480,423
Net change in unrealized appreciation on investments		25,921,422
Net change in unrealized appreciation on futures contracts		4,442
Net change in unrealized appreciation on foreign currency translations	+	7,774

Net change in unrealized appreciation	+	25,933,638

Net realized and unrealized gains		27,414,061

Increase in net assets resulting from operations		$29,938,652

See financial notes 47

Schwab Fundamental International Small Company Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$2,524,591			$2,224,158
Net realized gains (losses)		1,480,423			(3,921,600	)
Net change in unrealized appreciation	+	25,933,638			3,995,812

Increase in net assets from operations		29,938,652			2,298,370

Distributions to Shareholders

Distributions from net investment income		(3,109,770	)		(2,493,429	)
Distributions from net realized gains	+	—			(3,900,690	)

Total distributions		($3,109,770	)		($6,394,119	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			5,053,700		$51,573,590			3,585,058		$31,904,834
Shares reinvested			227,023		2,068,185			531,718		4,487,698
Shares redeemed	+		(2,140,208	)	(21,234,821	)		(3,924,070	)	(34,465,493	)

Net transactions in fund shares			3,140,515		$32,406,954			192,706		$1,927,039

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			9,897,946		$90,339,362			9,705,240		$92,508,072
Total increase or decrease	+		3,140,515		59,235,836			192,706		(2,168,710	)

End of period			13,038,461		$149,575,198			9,897,946		$90,339,362


Net investment income not yet distributed					$1,971,951					$2,170,780

48 See financial notes

Schwab Fundamental Emerging Markets Large Company Index Fund

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09¹


Per-Share Data ($)

Net asset value at beginning of period		8.86			9.17			10.81			8.91			5.74

Income (loss) from investment operations:
Net investment income (loss)		0.19			0.25			0.24			0.17			0.05
Net realized and unrealized gains (losses)		0.43			(0.17	)		(1.37	)		1.81			3.27

Total from investment operations		0.62			0.08			(1.13	)		1.98			3.32
Less distributions:
Distributions from net investment income		(0.24	)		(0.22	)		(0.15	)		(0.08	)		(0.15	)
Distributions from net realized gains		—			(0.17	)		(0.36	)		—			—

Total distributions		(0.24	)		(0.39	)		(0.51	)		(0.08	)		(0.15	)

Net asset value at end of period		9.24			8.86			9.17			10.81			8.91

Total return (%)		7.11			1.18			(10.99	)		22.36			59.55

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.51	^2,3		0.56	⁴		0.61	⁵		0.61	⁵		0.61	⁵
Gross operating expenses		0.88			0.91			0.91			0.98			1.70
Net investment income (loss)		2.22			2.75			2.51			2.31			1.56
Portfolio turnover rate		22			86	⁶		56			91			103
Net assets, end of period ($ x 1,000,000)		353			314			310			294			119

¹ Effective October 19, 2009, the Investor Share class, the Select Share and the Institutional 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 Institutional Shares.

² Effective June 11, 2013, the net operating expense limitation was lowered. The ratio presented for period ended 10/31/13 is a blended ratio. See financial note 4.

³ The ratio of net operating expenses would have been 0.56%, if voluntary waiver by CSIM had not been included. See financial note 4.

⁴ The ratio of net operating expenses would have been 0.60%, if voluntary waiver by CSIM had not been included.

⁵ The ratio of net operating expenses would have been 0.60%, if interest expenses had not been incurred.

⁶ Portfolio turnover would have been 0.51%, if rebalancing trades had not been included due to a change in the fund’s index.

See financial notes 49

Schwab Fundamental Emerging Markets Large Company Index Fund

Portfolio Holdings as of October 31, 2013


				Cost		Value
Holdings by Category				($)		($)

	87	.9%	Common Stock		295,265,216		310,499,007
	9	.7%	Preferred Stock		39,367,592		34,183,852
	0	.8%	Other Investment Company		2,898,912		2,866,050
	2	.4%	Short-Term Investments		8,425,412		8,425,412


	100	.8%	Total Investments		345,957,132		355,974,321
	(0	.8)%	Other Assets and Liabilities, Net				(2,979,662	)


	100	.0%	Net Assets				352,994,659


	Number		% of Net		Value
Security	of Shares		Assets		($)

Common Stock 87.9% of net assets

Brazil 5.6%
Banco do Brasil S.A.		157,667		0.6		2,087,006
Petroleo Brasileiro S.A. - Petrobras		639,553		1.6		5,560,207
Vale S.A.		219,270		1.0		3,486,492
Other Securities				2.4		8,694,046

				5.6		19,827,751

Chile 0.7%
Other Securities				0.7		2,508,354

China 11.5%
Bank of China Ltd., Class H		7,573,234		1.0		3,555,757
China Construction Bank Corp., Class H		7,183,000		1.6		5,588,565
China Mobile Ltd.		570,600		1.7		5,929,476
China Petroleum & Chemical Corp., Class H		4,850,400		1.1		3,926,436
CNOOC Ltd.		1,426,000		0.8		2,900,443
Industrial & Commercial Bank of China Ltd., Class H		5,399,172		1.1		3,784,960
PetroChina Co., Ltd., Class H		2,861,000		0.9		3,258,051
Other Securities				3.3		11,776,321

				11.5		40,720,009

Colombia 0.3%
Other Securities				0.3		910,628

Czech Republic 0.4%
Other Securities				0.4		1,549,844

Egypt 0.2%
Other Securities				0.2		757,829

Greece 1.8%
OPAP S.A.		141,502		0.5		1,757,126
Other Securities				1.3		4,498,400

				1.8		6,255,526

Hungary 0.6%
Other Securities				0.6		2,112,718

India 3.3%
Reliance Industries Ltd.		203,723		0.9		3,031,183
Other Securities				2.4		8,513,500

				3.3		11,544,683

Indonesia 0.7%
Other Securities				0.7		2,448,803

Malaysia 1.6%
Other Securities				1.6		5,631,376

Mexico 3.4%
America Movil S.A.B. de C.V., Series L		3,485,000		1.1		3,739,485
Cemex S.A.B. de C.V., Series CPO *		2,044,328		0.6		2,174,809
Other Securities				1.7		6,097,948

				3.4		12,012,242

Philippines 0.1%
Other Securities				0.1		302,592

Poland 2.2%
Other Securities				2.2		7,682,473

Republic of Korea 19.5%
Hyundai Heavy Industries Co., Ltd.		8,097		0.5		1,933,540
Hyundai Motor Co.		17,754		1.2		4,229,781
Korea Electric Power Corp. *		69,180		0.5		1,847,520
LG Corp.		60,098		1.0		3,552,848
LG Electronics, Inc.		41,572		0.8		2,662,935
POSCO		15,989		1.4		4,773,370
Samsung Electronics Co., Ltd.		9,631		3.8		13,281,711
Shinhan Financial Group Co., Ltd.		51,500		0.6		2,245,586
SK Holdings Co., Ltd.		14,270		0.7		2,586,292
SK Innovation Co., Ltd.		14,167		0.6		1,985,633
SK Telecom Co., Ltd.		8,882		0.5		1,935,567
Other Securities				7.9		27,864,280

				19.5		68,899,063

50 See financial notes

Schwab Fundamental Emerging Markets Large Company Index Fund

Portfolio Holdings continued


	Number		% of Net		Value
Security	of Shares		Assets		($)

Russia 14.4%
Gazprom ADR		1,601,170		4.2		14,966,778
LUKOIL ADR		227,440		4.2		14,895,923
Mining & Metallurgical Co. Norilsk Nickel OJSC ADR		137,278		0.6		2,073,677
Mobile TeleSystems ADR		80,851		0.5		1,843,403
Sberbank of Russia ADR		178,572		0.6		2,277,217
Surgutneftegas ADR		674,607		1.7		5,947,681
Tatneft ADR		44,415		0.5		1,824,476
Other Securities				2.1		7,146,700

				14.4		50,975,855

South Africa 7.1%
MTN Group Ltd.		189,770		1.1		3,772,088
Sasol Ltd.		87,696		1.3		4,481,072
Standard Bank Group Ltd.		134,934		0.5		1,716,643
Other Securities				4.2		15,037,199

				7.1		25,007,002

Taiwan 12.3%
China Steel Corp.		1,996,489		0.5		1,735,083
Chunghwa Telecom Co., Ltd.		541,906		0.5		1,739,774
Formosa Chemicals & Fibre Corp.		801,442		0.7		2,316,435
Formosa Plastics Corp.		667,732		0.5		1,814,581
Hon Hai Precision Industry Co., Ltd.		1,697,800		1.2		4,316,306
Nan Ya Plastics Corp.		847,811		0.5		1,933,720
Taiwan Semiconductor Manufacturing Co., Ltd.		1,578,689		1.6		5,818,361
Other Securities				6.8		23,827,638

				12.3		43,501,898

Thailand 1.0%
Other Securities				1.0		3,640,235

Turkey 1.2%
Other Securities				1.2		4,210,126

Total Common Stock
(Cost $295,265,216)						310,499,007




Preferred Stock 9.7% of net assets

Brazil 7.9%
Banco Bradesco S.A.		160,730		0.7		2,315,627
Gerdau S.A.		211,465		0.5		1,668,694
Itau Unibanco Holding S.A.		265,540		1.2		4,108,657
Petroleo Brasileiro S.A.		806,682		2.1		7,314,281
Vale S.A.		297,839		1.2		4,359,523
Other Securities				2.2		7,998,643

				7.9		27,765,425

Colombia 0.1%
Other Securities				0.1		281,769

Republic of Korea 0.7%
Other Securities				0.7		2,639,857

Russia 1.0%
AK Transneft OAO		1,371		1.0		3,496,801

Total Preferred Stock
(Cost $39,367,592)						34,183,852




Other Investment Company 0.8% of net assets

United States 0.8%
iShares MSCI Emerging Markets ETF		67,500		0.8		2,866,050

Total Other Investment Company
(Cost $2,898,912)						2,866,050



	Face
Security	Amount		% of Net		Value
Rate, Maturity Date	($)		Assets		($)

Short-Term Investments 2.4% of net assets

Time Deposit 2.1%
Wells Fargo
0.03%, 11/01/13		7,430,418		2.1		7,430,418

U.S. Treasury Obligation 0.3%
Other Securities				0.3		994,994

Total Short-Term Investments
(Cost $8,425,412)						8,425,412



End of Investments.

At 10/31/13, the tax basis cost of the fund’s investments was $350,696,164 and the unrealized appreciation and depreciation were $36,850,839 and ($31,572,682), respectively, with a net unrealized appreciation of $5,278,157.

At 10/31/13, the values of certain foreign securities held by the fund aggregating $306,729,784 were adjusted from their closing market values in accordance with international fair valuation procedures approved by the fund’s Board of Trustees. (See financial note 2)

For the following notes, please refer to complete schedule of holdings.


*		Non-income producing security.
(a)		All or a portion of this security is held as collateral for open futures contracts.
(b)		The rate shown is the purchase yield.
(c)		Fair-valued by management in accordance with procedures approved by the Board of Trustees.


ADR —		American Depositary Receipt
ETF —		Exchange traded fund
GDR —		Global Depositary Receipt
Reg’d —		Registered

See financial notes 51

Schwab Fundamental Emerging Markets Large Company Index Fund

Portfolio Holdings continued

In additional to the above the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

MSCI Emerging Markets, mini, Long, expires 12/20/13

4,607,550

141,576

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$—		$109,741,466		$—		$109,741,466
Brazil		5,090,107		14,737,644		—		19,827,751
Chile		1,884,485		623,869		—		2,508,354
Colombia		910,628		—		—		910,628
Czech Republic		541,307		1,008,537		—		1,549,844
Hungary		409,837		1,702,881		—		2,112,718
Malaysia		563,762		5,067,614		—		5,631,376
Mexico		12,012,242		—		—		12,012,242
Poland		1,302,621		6,379,852		—		7,682,473
Republic of Korea		1,446,667		67,452,396		—		68,899,063
Russia		4,547,636		46,428,219		—		50,975,855
South Africa		481,116		24,525,886		—		25,007,002
Thailand		3,640,235		—		—		3,640,235
Preferred Stock¹		—		2,639,857		—		2,639,857
Brazil		1,343,862		26,421,563		—		27,765,425
Colombia		281,769		—		—		281,769
Russia		3,496,801		—		—		3,496,801
Other Investment Company¹		2,866,050		—		—		2,866,050
Short-Term Investments¹		—		8,425,412		—		8,425,412

Total		$40,819,125		$315,155,196		$—		$355,974,321

Other Financial Instruments
Futures Contract²		$141,576		$—		$—		$141,576


¹		As categorized in complete schedule of holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were security transfers in the amount of $34,651,172 and $4,066,196 from Level 1 to Level 2 and from Level 2 to Level 1, respectively, for the period ended October 31, 2013. The transfers between Level 1 and Level 2 were primarily due to the use of international fair valuation by the fund. There were no transfers in or out of Level 3 securities during the period.

52 See financial notes

Schwab Fundamental Emerging Markets Large Company Index Fund

Statement of

Assets and Liabilities

As of October 31, 2013



Assets

Investments, at value (cost $345,957,132)		$355,974,321
Foreign currency, at value (cost $333,479)		333,864
Receivables:
Fund shares sold		481,627
Dividends		474,658
Foreign tax reclaims		8,545
Income from securities on loan		75
Interest		6
Prepaid expenses	+	5,395

Total assets		357,278,491

Liabilities

Payables:
Investments bought		3,850,190
Investment adviser and administrator fees		4,039
Shareholder service fees		1,783
Independent trustees’ fees		8
Fund shares redeemed		122,974
Variation margin on futures contracts		51,300
Foreign capital gains tax		47,878
Accrued expenses and other liabilities	+	205,660

Total liabilities		4,283,832

Net Assets

Total assets		357,278,491
Total liabilities	−	4,283,832

Net assets		$352,994,659

Net Assets by Source
Capital received from investors		351,869,438
Net investment income not yet distributed		5,875,828
Net realized capital losses		(14,859,594	)
Net unrealized capital appreciation		10,108,987

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$352,994,659

38,223,366

$9.24

See financial notes 53

Schwab Fundamental Emerging Markets Large Company Index Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends (net of foreign withholding taxes of $1,435,614)		$8,836,497
Interest		1,614
Securities on loan	+	2,353

Total investment income		8,840,464

Expenses

Investment adviser and administrator fees		1,620,621
Shareholder service fees		236,557
Index fee		328,739
Custodian fees		304,120
Transfer agent fees		75,084
Portfolio accounting fees		72,386
Professional fees		57,708
Shareholder reports		49,009
Registration fees		29,240
Independent trustees’ fees		9,290
Interest expense		1,505
Other expenses	+	53,074

Total expenses		2,837,333
Expense reduction by CSIM and its affiliates	−	1,182,837

Net expenses	−	1,654,496

Net investment income		7,185,968

Realized and Unrealized Gains (Losses)

Net realized gains on investments (net of foreign capital gain tax of $6,534)		337,384
Net realized losses on futures contracts		(113,696	)
Net realized losses on foreign currency transactions	+	(154,200	)

Net realized gains		69,488
Net change in unrealized appreciation on investments (net of foreign capital gain tax of ($47,878))		14,570,455
Net change in unrealized appreciation on futures contracts		141,576
Net change in unrealized depreciation on foreign currency translations	+	(1,067	)

Net change in unrealized appreciation	+	14,710,964

Net realized and unrealized gains		14,780,452

Increase in net assets resulting from operations		$21,966,420

54 See financial notes

Schwab Fundamental Emerging Markets Large Company Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$7,185,968			$8,746,795
Net realized gains (losses)		69,488			(10,496,285	)
Net change in unrealized appreciation	+	14,710,964			1,914,953

Increase in net assets from operations		21,966,420			165,463

Distributions to Shareholders

Distributions from net investment income		(8,681,589	)		(7,541,071	)
Distributions from net realized gains	+	—			(5,755,205	)

Total distributions		($8,681,589	)		($13,296,276	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares sold			14,934,368		$131,472,133			17,148,007		$151,059,085
Shares reinvested			618,303		5,583,275			938,276		7,843,989
Shares redeemed	+		(12,809,415	)	(111,551,317	)		(16,432,968	)	(141,900,887	)

Net transactions in fund shares			2,743,256		$25,504,091			1,653,315		$17,002,187

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			35,480,110		$314,205,737			33,826,795		$310,334,363
Total increase	+		2,743,256		38,788,922			1,653,315		3,871,374

End of period			38,223,366		$352,994,659			35,480,110		$314,205,737


Net investment income not yet distributed					$5,875,828					$7,501,592

See financial notes 55

Schwab Fundamental Index Funds

Financial Notes

1. Business Structure of the Funds:



Schwab Capital Trust (organized May 7, 1993)		Schwab Large-Cap Growth Fund
Schwab Fundamental US Large Company Index Fund		Schwab Small-Cap Equity Fund
Schwab Fundamental US Small Company Index Fund		Schwab Hedged Equity Fund
Schwab Fundamental International Large Company Index Fund		Schwab Financial Services Fund
Schwab Fundamental International Small Company Index Fund		Schwab Health Care Fund
Schwab Fundamental Emerging Markets Large Company Index Fund		Schwab International Core Equity Fund
Schwab S&P 500 Index Fund		Schwab Target 2010 Fund
Schwab Small-Cap Index Fund		Schwab Target 2015 Fund
Schwab Total Stock Market Index Fund		Schwab Target 2020 Fund
Schwab International Index Fund		Schwab Target 2025 Fund
Schwab MarketTrack All Equity Portfolio		Schwab Target 2030 Fund
Schwab MarketTrack Growth Portfolio		Schwab Target 2035 Fund
Schwab MarketTrack Balanced Portfolio		Schwab Target 2040 Fund
Schwab MarketTrack Conservative Portfolio		Schwab Target 2045 Fund
Laudus Small-Cap MarketMasters Fund		Schwab Target 2050 Fund
Laudus International MarketMasters Fund		Schwab Target 2055 Fund
Schwab Balanced Fund		Schwab Monthly Income Fund - Moderate Payout
Schwab Core Equity Fund		Schwab Monthly Income Fund - Enhanced Payout
Schwab Dividend Equity Fund		Schwab Monthly Income Fund - Maximum Payout

2. Significant Accounting Policies:

(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: Traded securities are valued at the closing value for the day, or, on days when no closing value has been reported, at halfway between the most recent bid and ask quotes. Securities that are primarily traded on foreign exchanges are valued at the official closing price or the last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate, unless these securities are fair valued as discussed below.

	•	Securities for which no quoted value is available: The Board has adopted procedures to fair value each fund’s securities when market prices are not “readily available” or are unreliable. For example, a fund may fair value a security when it is de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a

Schwab Fundamental Index Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):


		price; or when a security’s primary trading market is closed during regular market hours. Each fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. The Pricing Committee considers a number of factors, including unobservable market inputs when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security. The Board convenes on a regular basis to review fair value determinations made by the funds pursuant to the valuation procedures.


	•	Foreign equity security fair valuation: The Board has adopted procedures to fair value foreign equity securities that are traded in markets that close prior to the funds valuing their holdings. By fair valuing securities whose prices may have been affected by events occurring after the close of trading, each fund seeks to establish prices that investors might expect to realize upon the current sales of these securities. This methodology is designed to deter “arbitrage” market timers, who seek to exploit delays between the change in the value of a fund’s portfolio holdings and the NAV of the fund’s shares, and seeks to help ensure that the prices at which the fund’s shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders. When fair value pricing is used at the open or close of a reporting period, it may cause a temporary divergence between the return of a fund and that of its comparative index or benchmark. The Board regularly reviews fair value determinations made by the funds pursuant to these procedures.

	•	Futures and forward foreign currency exchange contracts: Futures are valued at their settlement prices as of the close of their exchanges. Forwards are valued based on that day’s forward exchange rates or by using an interpolated forward exchange rate for contracts with interim settlement dates.

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

	•	Underlying funds: Mutual funds are valued at their respective NAVs. Exchange traded funds (“ETFs”) traded on a recognized securities exchange are valued at the last reported sale price that day or the official closing price, if applicable.

The three levels of the fair value hierarchy are 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, ETFs and futures contracts. Investments in mutual funds are valued daily at their NAVs, and investments in ETFs are valued daily at the last reported sale price or the official closing price, which are classified as Level 1 prices.

	•	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 fair valuations due to significant movement in the U.S. markets occurring after the daily close of the foreign markets. The Board has approved a vendor that calculates fair valuations of international equity securities based on a number of factors that appear to correlate to the movements in the U.S. markets. As investments

Schwab Fundamental Index Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):


		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 levels associated with valuing the funds’ investments as of October 31, 2013 are disclosed in the Portfolio Holdings.

(b) Accounting Policies for certain Portfolio Investments (if held):

The values of the securities on loan and the related cash collateral as of October 31, 2013 for the Schwab Fundamental US Large Company Index Fund, Schwab Fundamental US Small Company Index Fund, Schwab Fundamental International Large Company Index Fund, and Schwab Fundamental International Small Company Index Fund are disclosed in each fund’s complete Portfolio Holdings and Statement of Assets and Liabilities.

Schwab Fundamental Index Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):


	Non-Cash
	Collateral Received

Schwab Fundamental US Large Company Index Fund		$1,618,115
Schwab Fundamental US Small Company Index Fund		1,068,528

(c) Security Transactions:

(d) Investment Income:

(e) Expenses:

(f) Distributions to Shareholders:

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

Schwab Fundamental Index Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(g) Custody Credit:

(h) Accounting Estimates:

(i) Federal Income Taxes:

(j) Foreign Taxes:

(k) Indemnification:

(l) New Accounting Pronouncements:

3. Risk Factors:

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

Schwab Fundamental Index Funds

Financial Notes (continued)

3. Risk Factors (continued):

index, or match the securities’ weightings to the index, 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.

Although certain indices encompass stocks from many different sectors of the economy, their performance may primarily reflect that of large company stocks, which tend to go in and out of favor based on market and economic conditions. As a result, during a period when these stocks fall behind other types of investments — bonds or small company stocks, for instance — a fund’s large-cap holdings could reduce performance.

Historically, small-cap stocks have been riskier than large-cap stocks, and their prices may move sharply, especially during market upturns and downturns. Small-cap companies 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 — large-cap stocks, for instance — a fund’s small-cap holdings could reduce performance.

Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Such countries often have less uniformity in accounting and reporting requirements and greater risk associated with the custody of securities. 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 a fund’s investments in emerging market countries and, at times, it may be difficult to value such investments.

A fund may purchase shares of ETFs to gain exposure to a particular portion of the market while awaiting an opportunity to purchase securities directly. When a fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a pro rata portion of the ETF’s expenses. Therefore, it may be more costly to own an ETF than to own the underlying securities directly. In addition, while the risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF is designed to track, lack of liquidity in an ETF can result in its value being more volatile than the underlying portfolio securities.

Schwab Fundamental Index Funds

Financial Notes (continued)

3. Risk Factors (continued):

or index. Tax risk is the risk that the use of derivatives may cause the fund to realize higher amounts of short-term capital gain. These risks could cause a fund to lose more than the principal amount invested.

A particular investment may be difficult to purchase or sell. A fund may be unable to sell illiquid securities at an advantageous time or price.

Securities lending involves the risk of loss of rights in the collateral or delay in recovery of the collateral if the borrower fails to return the security loaned or becomes insolvent.

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

4. Affiliates and Affiliated Transactions:

For its advisory and administrative services to the funds, CSIM is entitled to receive an annual fee, payable monthly, based on a percentage of each fund’s average daily net assets as follows:

Schwab

Fundamental

Schwab

Fundamental

Emerging

Fundamental

International

Markets

US Large

US Small

Large

Small

Large

Company

% of Average Daily Net Assets

Index Fund

First $500 million

0.30%

0.40%

0.50%

$500 million to $5 billion

0.22%

0.38%

0.48%

$5 billion to $10 billion

0.20%

0.36%

0.46%

over $10 billion

0.18%

0.34%

0.44%

Pursuant to the Plan, each fund’s shares are subject to an annual shareholder servicing fee up to 0.10%. The shareholder servicing fee paid to a particular service provider is made pursuant to its written agreement with Schwab (or, in the case of payments made to Schwab, pursuant to Schwab’s written agreement with the funds). Payments under the Plan are made as described above regardless of Schwab’s or the service provider’s actual cost of providing the services. If the cost of providing the services under the Plan is less than the payments received, the unexpended portion of the fees may be retained as profit by Schwab or the service provider.

Schwab Fundamental Index Funds

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):

the approval of the Board, to limit the total annual fund operating expenses charged, excluding interest, taxes and certain non-routine expenses (“expense limitation”). The expense limitation as a percentage of average daily net assets is as follows:

Schwab

Fundamental

Schwab

Fundamental

Emerging

Fundamental

International

Markets

US Large

US Small

Large

Small

Large

Company

Index Fund

Index Fund*

0.35%

0.49%


*		Prior to June 11, 2013, the expense limitation of the Schwab Fundamental International Small Company Index Fund and the Schwab Fundamental Emerging Markets Large Company Index Fund was 0.55% and 0.60%, respectively.

In addition to the contractual expense limitation agreements noted above, to further help offset the costs of a change in the comparative index for certain funds, CSIM agreed to voluntarily waive the net operating expenses to 0.00% (excluding interest, taxes, and certain non-routine expenses) as follows: (1) from November 1, 2012 through November 15, 2012 for Schwab Fundamental International Large Company Index Fund; (2) from November 1, 2012 through December 15, 2012 for Schwab Fundamental International Small Company Index Fund; and (3) from November 1, 2012 through November 30, 2012 for Schwab Fundamental Emerging Markets Large Company Index Fund.

CSIM has a licensing agreement with the Frank Russell Company to use certain Russell indices and trademarks in connection with the offering and operation of certain registered investment companies. The funds have entered into a sub-license agreement with CSIM pursuant to which CSIM has agreed to sub-license certain Russell indices and trademarks to the funds. Under the sub-license agreement, each fund pays its pro rata share of licensing fees.

The funds may engage in certain transactions involving affiliates. For instance, a fund may own shares of The Charles Schwab Corporation if that company is included in its index. Below is the summary of investment activities involving The Charles Schwab Corporation shares owned by the Schwab Fundamental US Large Company Index Fund during the report period:

Balance

Realized

Dividends

of Shares

Market

Gains (Losses)

Received

Held at

Gross

Held at

Value at

11/01/12

Fund

10/31/12

Purchases

Sales

10/31/13

to 10/31/13

Schwab Fundamental US Large Company Index Fund

145,215

14,800

(22,000

)

138,015

$3,126,040

($4,883

)

$34,594

The funds may engage in 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/or officers. For the period ended October 31, 2013, each fund’s total aggregate security transactions with other Schwab Funds were as follows:


Schwab Fundamental US Large Company Index Fund			$35,885,752
Schwab Fundamental US Small Company Index Fund			35,885,752
Schwab Fundamental International Large Company Index Fund			—
Schwab Fundamental International Small Company Index Fund			—
Schwab Fundamental Emerging Markets Large Company Index Fund			—

Schwab Fundamental Index Funds

Financial Notes (continued)

5. Board of Trustees:

6. Borrowing from Banks:

7. Derivatives:


	Contract Values		Number of Contracts

Schwab Fundamental US Large Company Index Fund		$41,145,198		515
Schwab Fundamental US Small Company Index Fund		11,780,547		122
Schwab Fundamental International Large Company Index Fund		8,586,967		100
Schwab Fundamental International Small Company Index Fund		1,602,153		19
Schwab Fundamental Emerging Markets Large Company Index Fund		4,099,915		81

8. Purchases and Sales/Maturities of Investment Securities:

For the period ended October 31, 2013, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:


	Purchases of Securities		Sales/Maturities of Securities

Schwab Fundamental US Large Company Index Fund		$737,947,832		$252,638,681
Schwab Fundamental US Small Company Index Fund		220,347,520		192,377,290
Schwab Fundamental International Large Company Index Fund		126,817,989		129,472,603
Schwab Fundamental International Small Company Index Fund		64,501,300		32,596,936
Schwab Fundamental Emerging Markets Large Company Index Fund		89,819,651		71,045,799

Schwab Fundamental Index Funds

Financial Notes (continued)

9. Redemption Fee:


	Current Period		Prior Period
	(11/1/12-10/31/13)		(11/1/11-10/31/12)

Schwab Fundamental US Large Company Index Fund		$30,032		$30,160
Schwab Fundamental US Small Company Index Fund		7,961		6,059
Schwab Fundamental International Large Company Index Fund		6,437		6,070
Schwab Fundamental International Small Company Index Fund		3,107		850
Schwab Fundamental Emerging Markets Large Company Index Fund		4,863		9,049

10. Federal Income Taxes:

As of October 31, 2013, the components of distributable earnings on a tax-basis were as follows:


							Schwab			Schwab			Schwab
	Schwab			Schwab			Fundamental			Fundamental			Fundamental
	Fundamental			Fundamental			International			International			Emerging
	US Large			US Small			Large			Small			Markets Large
	Company			Company			Company			Company			Company
	Index Fund			Index Fund			Index Fund			Index Fund			Index Fund

Undistributed ordinary income		$36,477,121			$22,250,148			$15,948,326			$3,891,755			$6,097,122
Undistributed long-term capital gains		—			20,818,122			—			—			—
Unrealized appreciation on investments		793,590,567			235,087,813			136,191,155			29,925,605			36,850,839
Unrealized depreciation on investments		(13,684,050	)		(11,428,688	)		(8,963,043	)		(3,953,348	)		(31,572,682	)
Other unrealized appreciation (depreciation)		—			2			15,968			2,728			(3,412	)

Net unrealized appreciation (depreciation)		$779,906,517			$223,659,127			$127,244,080			$25,974,985			$5,274,745

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.

Schwab Fundamental Index Funds

Financial Notes (continued)

10. Federal Income Taxes (continued):

Schwab

Fundamental

International

Emerging

US Large

US Small

Large

Small

Markets Large

Company

Expiration Date

Index Fund

October 31, 2016

$—

$6,761,375

$—

October 31, 2017

12,619,654

—

58,777,944

—

October 31, 2018

—

20,948,477

—

No expiration*

—

31,890,310

3,782,968

10,246,643

Total

$12,619,654

$—

$118,378,106

$3,782,968

$10,246,643


*		As a result of the passage of the Regulated Investment Company Modernization Act of 2010, capital losses incurred after December 31, 2010 may now be carried forward indefinitely, but must retain the character of the original loss. However, such losses must be utilized prior to the pre-enactment capital losses, which may increase the likelihood that the pre-enactment capital losses may expire unused. Under pre-enactment law, capital losses could be carried forward for eight years, and carried forward as short-term capital loss, irrespective of the character of the original loss.
**		For the year ended October 31, 2013, the Schwab Fundamental International Large Company Index Fund and the Schwab Fundamental Emerging Markets Index Fund utilized post-RIC Modernization enactment short-term capital losses of $1,295,562 and $827,213 respectively.

For the year ended October 31, 2013, the funds had capital losses utilized as follows:

Schwab

Fundamental

International

Emerging

US Large

US Small

Large

Small

Markets Large

Company

Index Fund

Capital losses utilized

$51,247,926

$—

$1,027,038

$605,972

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


					Schwab		Schwab		Schwab
	Schwab		Schwab		Fundamental		Fundamental		Fundamental
	Fundamental		Fundamental		International		International		Emerging
	US Large		US Small		Large		Small		Markets Large
	Company		Company		Company		Company		Company
	Index Fund		Index Fund		Index Fund		Index Fund		Index Fund

Current period distributions
Ordinary income		$42,909,493		$11,947,531		$15,274,655		$3,109,770		$8,681,589
Long-term capital gains		—		50,580,881		—		—		—
Return of capital		—		—		—		—		—

Prior period distributions
Ordinary income		$28,518,465		$15,388,818		$12,260,320		$4,093,832		$10,735,039
Long-term capital gains		—		30,518,719		—		2,300,287		2,561,237
Return of capital		—		—		—		—		—

Schwab Fundamental Index Funds

Financial Notes (continued)

10. Federal Income Taxes (continued):

net realized gains are recorded by the funds for financial reporting purposes. The funds may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.

Permanent book and tax basis differences, which are mainly due to differing treatments of paydown gains and losses and amortization of bond discounts and premiums, may result in reclassifications between components of net assets as required. The adjustments will have no impact on net assets or the results of operations. As of October 31, 2013, the funds made the following reclassifications:

Schwab

Fundamental

International

Emerging

US Large

US Small

Large

Small

Markets Large

Company

Index Fund

Capital shares

$—

Undistributed net investment income

(29,755

)

(511,990

)

160,038

386,350

(130,143

)

Net realized capital gains (losses)

29,755

511,990

(160,038

)

(386,350

)

130,143

11. Subsequent Events:

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of:

Schwab Fundamental US Large Company Index Fund

Schwab Fundamental US Small Company Index Fund

Schwab Fundamental International Large Company Index Fund

Schwab Fundamental International Small Company Index Fund

Schwab Fundamental Emerging Markets Large Company Index Fund

In our opinion, the accompanying statements of assets and liabilities, including the portfolio holdings, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Schwab Fundamental US Large Company Index Fund, Schwab Fundamental US Small Company Index Fund, Schwab Fundamental International Large Company Index Fund, Schwab Fundamental International Small Company Index Fund, and Schwab Fundamental Emerging Markets Large Company Index Fund (five of the portfolios constituting Schwab Capital Trust, hereafter collectively referred to as the “Funds”) at October 31, 2013, and the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the 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 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 audit 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, 2013 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

December 17, 2013

Other Federal Tax Information (unaudited)

The funds elect to pass through under section 853 of the Internal Revenue Code foreign tax credit to its shareholders for the year ended October 31, 2013, and the respective foreign source income on the funds as follows.


	Foreign Tax Credit		Foreign Source Income

Schwab Fundamental US Large Company Index Fund		$—		$—
Schwab Fundamental US Small Company Index Fund		—		—
Schwab Fundamental International Large Company Index Fund		1,112,215		19,888,675
Schwab Fundamental International Small Company Index Fund		199,814		2,914,857
Schwab Fundamental Emerging Markets Large Company Index Fund		1,431,677		10,238,446

For corporate shareholders, the following percentage of the funds dividend distributions paid during the fiscal year ended October 31, 2013, qualify for the corporate dividends received deduction:


	Percentage

Schwab Fundamental US Large Company Index Fund		100.00
Schwab Fundamental US Small Company Index Fund		56.26
Schwab Fundamental International Large Company Index Fund		—
Schwab Fundamental International Small Company Index Fund		—
Schwab Fundamental Emerging Markets Large Company Index Fund		—


Schwab Fundamental US Large Company Index Fund			$42,909,493
Schwab Fundamental US Small Company Index Fund			7,273,206
Schwab Fundamental International Large Company Index Fund			15,390,349
Schwab Fundamental International Small Company Index Fund			2,099,126
Schwab Fundamental Emerging Markets Large Company Index Fund			5,596,129

Under Section 852 (b)(3)(C) of the Internal Revenue Code, certain funds hereby designate the following amounts as long-term capital gain dividends for the fiscal year ended October 31, 2013:


Schwab Fundamental US Large Company Index Fund			$—
Schwab Fundamental US Small Company Index Fund			50,580,881
Schwab Fundamental International Large Company Index Fund			—
Schwab Fundamental International Small Company Index Fund			—
Schwab Fundamental Emerging Markets Large Company Index Fund			—

Investment Advisory Agreement Approval

The Board of Trustees (the “Board” or the “Trustees”, as appropriate) calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory agreement between Schwab Capital Trust (the “Trust”) and Charles Schwab Investment Management, Inc. (“CSIM”) (the “Agreement”) with respect to the existing funds in the Trust, including Schwab Fundamental U.S. Large Company Index Fund, Schwab Fundamental U.S. Small Company Index Fund, Schwab Fundamental International Large Company Index Fund, Schwab Fundamental International Small Company Index Fund and Schwab Fundamental Emerging Markets Large Company Index Fund (the “Funds”), and to review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM, including information about CSIM’s affiliates, personnel and operations. As part of the renewal process, Independent Trustees’ legal counsel sends an information request letter to CSIM seeking certain relevant information. The responses by CSIM are provided to the Trustees for their review prior to their meeting, and the Trustees are provided with the opportunity to request any additional materials. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the Funds that the Board reviews during the course of each year, including information that relates to Fund operations and Fund performance. The Independent Trustees receive advice from independent counsel to the Independent Trustees, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Independent Trustees meet in executive session outside the presence of Fund management and participate in question and answer sessions with representatives of CSIM.


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, 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 many 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.

Fund Performance. The Board considered Fund performance in determining whether to renew the Agreement with respect to the Funds. Specifically, the Trustees considered each Fund’s performance relative to a peer category of other mutual funds and appropriate indices/benchmarks, in light of total return, and market trends. As part of this review, the Trustees considered the composition of the peer category, selection criteria and the reputation of the third party who prepared the 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 their review of Fund expenses and adviser profitability discussed below. Although Schwab Fundamental Emerging Markets Large Company Index Fund and Schwab Fundamental International Small Company Index Fund had performance that lagged that of a relevant peer group for certain (although not necessarily all) periods considered, the Board concluded that other factors relevant to performance supported renewal of the Agreement with respect Schwab Fundamental Emerging Markets Large Company Index Fund and Schwab Fundamental International Small Company Index Fund, including that the underperformance was attributable, to a significant extent, to investment decisions by CSIM that were reasonable and consistent with the Fund’s investment objective and policies and that CSIM had taken steps designed to help improve performance. 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.

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 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 the existing contractual investment advisory fee schedules relating to the Funds that, in each case, include lower fees at higher graduated asset levels. 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

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 (advisory services firm) (Oct. 2001 – present).	76	Director, WageWorks, Inc. (2010 – present) Director, Redwood Trust, Inc. (1998 – present) Director, PMI Group Inc. (2001 – 2009)


John F. Cogan 1947 Trustee (Trustee of Schwab Capital Trust since 2008.)	Senior Fellow, The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow, Stanford Institute for Economic Policy Research; Professor of Public Policy, Stanford University (Sept. 2000 – present).	76	Director, Gilead Sciences, Inc. (2005 – present) Director, Monaco Coach Corporation (2005 – 2009)


William A. Hasler 1941 Trustee (Trustee of Schwab Capital Trust since 2000.)	Dean Emeritus, Haas School of Business, University of California, Berkeley (July 1998 – present).	76	Director, TOUSA (1998 – present) Director, Globalstar, Inc. (2009 – present) Director, Aviat Networks (2001 – present) Director, Mission West Properties (1998 – 2012) Director, Ditech Networks Corporation (1997 – 2012) Director, Genitope Corporation (2000 – 2009)


David L. Mahoney 1954 Trustee (Trustee of Schwab Capital Trust since 2011.)	Private Investor.	76	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Tercica Inc. (2004 – 2008)


Kiran M. Patel 1948 Trustee (Trustee of Schwab Capital Trust since 2011.)	Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services for consumers and small businesses) (Dec. 2008 – present); Senior Vice President and General Manager of Consumer Group, Intuit, Inc. (June 2007 – Dec. 2008); Senior Vice President and Chief Financial Officer, Intuit, Inc. (Sept. 2005 – Jan. 2008).	76	Director, KLA-Tencor Corporation (2008 – present) Director, BEA Systems, Inc. (2007 – 2008)


Gerald B. Smith 1950 Trustee (Trustee of Schwab Capital Trust since 2000.)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (1990 – present).	76	Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – present) Director, Oneok, Inc. (2009 – present) Lead Independent Director, Board of Cooper Industries (2002 – 2012)

Independent Trustees (continued)


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

Joseph H. Wender 1944 Trustee (Trustee of Schwab Capital Trust since 2008.)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (February 1998 – present).	76	Board Member and Chairman of the Audit Committee, Isis Pharmaceuticals (1994 – present)

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 1993.)	Chairman and Director, The Charles Schwab Corporation, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc., Charles Schwab Bank, N. A.; Chairman and Chief Executive Officer, Schwab (SIS) Holdings Inc. I, Schwab International Holdings, Inc.; Chief Executive Officer, Schwab Holdings, Inc.; 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, Charles Schwab & Co., Inc.	76	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. 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. Until October 2008, President and Chief Operating Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation. 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.	99	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

Marie Chandoha 1961 President and Chief Executive Officer (Officer of Schwab Capital Trust since 2010.)		Executive Vice President, Charles Schwab & Co., Inc. (Sept. 2010 – present); Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010).

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 (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Treasurer and Chief Financial Officer, Laudus Funds (2006 – present); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – present) and Schwab ETFs (Oct. 2009 – present); Director, Charles Schwab Worldwide Fund, PLC and Charles Schwab Asset Management (Ireland) Limited (April 2005 – present).


Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities (Officer of Schwab Capital Trust since 2011.)		Senior Vice President and Chief Investment Officer — Equities, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds and Laudus Funds (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – April 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009).


Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of Schwab Capital Trust since 2011.)		Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds and Laudus Funds (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies, Loomis, Sayles & Company (April 2006 – Jan. 2008).


David Lekich 1964 Chief Legal Officer and Secretary (Officer of Schwab Capital Trust since 2011.)		Senior Vice President (Sept. 2011 – present), Vice President (March 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present), Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (April 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (April 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.


Catherine MacGregor 1964 Vice President and Assistant Secretary (Officer of Schwab Capital Trust since 2005.)		Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (March 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary, Schwab ETFs (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 retire at age 72 or after twenty years as a trustee, whichever comes first. In addition, the retirement policy requires any independent trustee of Schwab Funds who also serves as an independent trustee of the Laudus Funds to retire from the Boards of the Schwab Funds upon their required retirement date from either the Boards of Trustees of the Schwab Funds or the Laudus Funds, whichever comes first.
²		Mr. Schwab and Mr. Bettinger are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of the investment adviser.
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.

cap, capitalization See “market cap.”

FTSE EPRA/NAREIT Global Index An index that is designed to provide a diverse representation of publicly traded equity REITs and listed property companies worldwide.

FTSE RAFI Developed ex US 1000 Index An index that is designed to track the performance of the largest listed companies domiciled in developed international markets (excluding the U.S.), selected based on the following four fundamental measures: dividends, cash flows, sales and book value.

FTSE RAFI Developed ex US Mid Small 1500 Index An index that is designed to track the performance of small and mid capitalization equities of companies domiciled in developed international markets (excluding the U.S.), selected based on the following four fundamental measures: dividends, cash flows, sales and book value.

FTSE RAFI Emerging Index An index that is designed to track the performance of the largest emerging market equities, selected based on the following four fundamental measures: dividends, cash flows, sales and book value.

FTSE RAFI US 1000 Index An index that is designed to track the performance of the largest listed U.S. companies, selected based on the following four fundamental measures: dividends, cash flows, sales and book value.

FTSE RAFI US Mid Small 1500 Index An index that is designed to track the performance of small and medium-sized listed U.S. companies, selected based on the following four fundamental measures: dividends, cash flows, sales and book value.

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

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.

restricted and illiquid securities. Restricted securities are securities that are subject to legal restrictions on their sale. Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the 1933 Act, or in a registered public offering. Certain restricted securities, such as 4(2) commercial paper and Rule 144A securities, may be considered to be liquid if they meet the criteria for liquidity established by the Board of Trustees. Illiquid securities generally are any securities that cannot be disposed of promptly and in the ordinary course of business at approximately the amount at which a fund has valued the instruments. The liquidity of a fund’s investments is monitored under the supervision and direction of the Board of Trustees. Investments currently not considered liquid include repurchase agreements not maturing within seven days and certain restricted securities.

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

Russell Fundamental Developed ex-U.S. Large Company Index An index that ranks companies in the Russell Developed ex-U.S. Index by fundamental measures of size and tracks the performance of those companies whose fundamental scores are in the top 87.5% of the Russell Developed ex-U.S. Index. The index uses a partial quarterly reconstitution methodology in which the index is split into four equal segments at the annual reconstitution and each segment is then rebalanced on a rolling quarterly basis. The Net series reduces index performance by adjusting for local taxes. The Russell Developed ex-U.S. Index measures the performance of the largest investable securities in developed countries globally, excluding companies assigned to the United States.

Russell Fundamental Developed ex-U.S. Small Company Index An index that ranks companies in the Russell Developed ex-U.S. Index by fundamental measures of size and tracks the performance of those companies whose fundamental scores are in the bottom 12.5% of the Russell Developed ex-U.S. Index. The index uses a partial quarterly reconstitution methodology in which the index is split into four equal segments at the annual reconstitution and each segment is then rebalanced on a rolling quarterly basis. The Net series reduces index performance by adjusting for local taxes. The Russell Developed ex-U.S. Index measures the performance of the largest investable securities in developed countries globally, excluding companies assigned to the United States.

Russell Fundamental Emerging Markets Large Company Index An index that ranks companies in the Russell Emerging Markets Index by measures of fundamental size and tracks the performance of those companies whose fundamental scores are in the top 87.5% of the Russell Emerging Markets Index. The index uses a partial quarterly reconstitution methodology in which the index is split into four equal segments at the annual reconstitution and each segment is then rebalanced on a rolling quarterly basis. The Net series reduces index performance by adjusting for local taxes. The Russell Emerging Markets Index measures the performance of the investable securities in emerging countries globally.

Russell Fundamental U.S. Large Company Index An index that ranks companies in the Russell 3000 Index by fundamental measures of size, and tracks the performance of those companies whose fundamental scores are in the top 87.5% of the Russell 3000 Index. The index uses a partial quarterly reconstitution methodology in which the index is split into four equal segments at the annual reconstitution and each segment is then rebalanced on a rolling quarterly basis. The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.

Russell Fundamental U.S. Small Company Index An index that ranks companies in the Russell 3000 Index by fundamental measures of size and tracks the performance of those companies whose fundamental scores are in the bottom 12.5% of the Russell 3000 Index. The index uses a partial quarterly reconstitution methodology in which the index is split into four equal segments at the annual reconstitution and each segment is then rebalanced on a rolling quarterly basis. The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.

S&P 500 Index A market capitalization index that is designed to measure the performance of 500 leading publicly held companies in leading industries of the U.S. economy.

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.

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Proxy Voting Policies, Procedures and Results

The Schwab Funds Family^®

Stock Funds

Schwab Core Equity Fund^tm

Schwab Dividend Equity Fund^tm

Schwab Large-Cap Growth Fund^tm

Schwab Small-Cap Equity Fund^tm

Schwab Hedged 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 Company Index Fund

Schwab Fundamental International Large Company Index Fund

Schwab Fundamental International Small Company Index Fund

Schwab Fundamental Emerging Markets Large Company 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^®

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Asset Allocation Funds

Schwab Balanced Fund^tm

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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 12 Months Ended October 31, 2013

Laudus Small-Cap MarketMasters Fund^tm


Investor Shares (Ticker Symbol: SWOSX)			31.51%
Select Shares^® (Ticker Symbol: SWMSX)			31.73%
Russell 2000^® Index			36.28%
Fund Category: Morningstar Small Growth			36.78%


Performance Details			pages 6-7




Laudus International MarketMasters Fund^tm


Investor Shares¹ (Ticker Symbol: SWOIX)			27.23%
Select Shares^®¹ (Ticker Symbol: SWMIX)			27.43%
MSCI EAFE^® Index (Gross)			27.40%
Fund Category: Morningstar Foreign Large Growth			20.72%


Performance Details			pages 8-9


Minimum Initial Investment²


Investor Shares	$	100
Select Shares^®	$	50,000

For index definitions, please see the Glossary.

Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of 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. These risks may be greater in emerging markets.


¹		The fund’s performance relative to the index may be affected by fair-value pricing and timing differences in foreign exchange calculations. See financial note 2 for more information.
²		Please see the funds’ prospectus for further detail and eligibility requirements.

2 Laudus MarketMasters Funds

From the President

Marie Chandoha is President and CEO of Charles Schwab Investment Management, Inc. and the funds covered in this report.

Dear Shareholder,

As President and CEO of Charles Schwab Investment Management, Inc., I would like to thank you for trusting us to help you meet your investment goals, and for reading this annual report concerning the Laudus MarketMasters Funds. The funds combine complementary strategies from leading investment managers, providing diversification across multiple investment styles.

Turning to the 12 months ended October 31, 2013, the returns of the funds reflected a global rally by stocks, although the Laudus Small-Cap MarketMasters Fund underperformed its benchmark index. At the center of the global rally by stocks were policies by many central banks that attempted to keep interest rates low to stimulate economic growth. Stocks generally benefitted from these policies and low interest rates made financing more affordable for businesses and households. However, some signs of improvement in the U.S. economy led the Federal Reserve to initially consider “tapering” its purchases of securities to keep interest rates low, and stocks sank globally in response. This included stocks in emerging markets, where the prospect of higher U.S. interest rates added to concerns early in 2013 about relatively high inflation and slower economic growth. A brief U.S. federal government shutdown and budgetary gridlock added to market uncertainty late in the reporting period.

Asset Class Performance Comparison % returns during the 12 months ended 10/31/2013

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



		27.18%		S&P 500^® Index: measures U.S. large-cap stocks

		36.28%		Russell 2000^® Index: measures U.S. small-cap stocks

		26.88%		MSCI EAFE^® Index (Net): measures (in U.S. dollars) large-cap stocks in Europe, Australasia and the Far East

		−1.08%		Barclays U.S. Aggregate Bond Index: measures the U.S. bond market

		0.06%		Three-Month U.S. Treasury Bills (T-bills): measures short-term U.S. Treasury obligations

For index definitions, please see the Glossary.

Data source: Index provider websites and CSIM.

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

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

Laudus MarketMasters Funds 3

Laudus Small-Cap MarketMasters Fund™

The Laudus MarketMasters Funds use a multi-manager strategy. Charles Schwab Investment Management, Inc. (CSIM)—the funds’ investment manager—selects investment professionals with strong long-term track records to manage a portion of each fund’s assets. In addition to selecting investment sub-advisers and allocating assets among them, CSIM is responsible for monitoring and coordinating the overall management of the funds. Each sub-adviser manages its respective portfolio relative to a comparative index that reflects its individual process and philosophy. The sub-adviser indexes may differ from a fund’s comparative index.

For the 12-month period ended October 31, 2013, Investor Shares of the Laudus Small-Cap MarketMasters Fund (the fund) returned 31.51%. The fund’s comparative index, the Russell 2000 Index (the index), returned 36.28%.

Market Highlights. U.S. stocks enjoyed very strong gains over the 12-month period, with major U.S. stock market indexes repeatedly reaching record highs throughout the period. The economy continued to recover, albeit at a slower pace than the U.S. Federal Reserve (the Fed) seemed to believe was self-sustaining. The Fed maintained an accommodative monetary policy throughout the period, keeping short-term interest rates near historic low levels. In addition, the unemployment rate fell during the period and inflation remained benign.

Positioning and Strategies. Over the 12-month period, the fund’s value tilt detracted from performance, although that was partially offset by the fund’s allocation to one of its sub-advisers that focuses on growth. Manager selection detracted due to the underperformance of two of the fund’s sub-advisers relative to their respective comparative indexes.

Despite its strong contribution to the fund’s total return, the fund’s TAMRO Capital Partners allocation underperformed its comparative index, the Russell 2000 Index, and detracted from the fund’s relative performance. TAMRO’s underperformance was primarily due to its stock selection, most significantly in the Consumer Staples, Information Technology, and Industrials sectors.

A strong performance by the fund’s allocation to Wellington Management Company, LLP also contributed to the fund’s total return, and this allocation’s outperformance of its comparative index also enhanced the fund’s relative return. This outperformance was partially driven by a significant underweight in the Financials sector and significant overweights in Industrials and, to a lesser extent, Health Care. Wellington Management’s stock selection also contributed, most notably within the Energy, Financials, and Materials sectors.

In March 2013, BMO Asset Management was added as a sub-adviser to the fund, replacing Neuberger Berman Management and representing approximately 23% of the fund as of October 31, 2013. BMO, which has a growth emphasis, slightly outperformed its comparative index, contributing positively to the fund’s relative performance. BMO’s strongest contributions came from its stock selection among Information Technology and Energy stocks, although its stock selection among Industrials and Financials detracted.

During the period, the fund’s allocation to TAMRO was reduced from approximately 49% at the start of the reporting period to roughly 29% as of October 31, 2013, while its allocation to Wellington Management rose from approximately 23% to 36%.

As of 10/31/13:

Statistics


Number of Holdings			1,744
Weighted Average Market Cap ($ x 1,000,000)			$2,187
Price/Earnings Ratio (P/E)			26.8
Price/Book Ratio (P/B)			2.3
Portfolio Turnover Rate			97%

Sector Weightings % of Investments


Financials			18.6%
Industrials			15.7%
Consumer Discretionary			14.1%
Health Care			12.8%
Information Technology			12.8%
Energy			7.6%
Consumer Staples			4.1%
Materials			4.0%
Utilities			2.2%
Telecommunication Services			0.8%
Other			7.3%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Belden			1.3%
Unit Corp.			1.1%
SEACOR Holdings, Inc.			1.0%
Bellatrix Exploration Ltd.			1.0%
LaSalle Hotel Properties			1.0%
DexCom, Inc.			0.9%
Mueller Industries, Inc.			0.9%
Charles River Laboratories International, Inc.			0.9%
American Capital Ltd.			0.9%
United Stationers, Inc.			0.8%
Total			9.8%

Management’s 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 Laudus MarketMasters Funds

Laudus Small-Cap MarketMasters Fund^tm

Performance and Fund Facts as of 10/31/13

October 31, 2003 – October 31, 2013
Performance of Hypothetical
$10,000 Investment (Investor Shares)¹

June 9, 2004 – October 31, 2013
Performance of Hypothetical
$50,000 Investment (Select Shares)¹

Average Annual Total Returns^1,2


Fund and Inception Date	1 Year			5 Years			10 Years			Since Inception


Investor Shares (9/16/97)		31.51	%		14.51	%		7.44	%	6.47%
Select Shares^® (6/9/04)		31.73	%		14.70	%		n/a		7.10%
Russell 2000^® Index		36.28	%		17.04	%		9.03	%	(9/16/97) 7.23%
										(6/9/04) 8.52%
Fund Category: Morningstar Small Growth		36.78	%		19.13	%		8.93	%	(9/16/97) 7.96%
										(6/9/04) 9.06%

Fund Expense Ratios³: Investor Shares: Net 1.36%; Gross 1.60% / Select Shares: Net 1.21%; Gross 1.52%

Investment Managers and Allocations⁴


		% of
Investment Managers	Investment Style	Net Assets

Wellington Management Company, LLP	Small-Cap Value		35.8	%


TAMRO Capital Partners LLC	Small-Cap Blend		28.6	%


BMO Asset Management Corp.⁵	Small-Cap Growth		22.7	%


Mellon Capital Management Corp.	Small-Cap Blend		8.9	%


Cash and other assets	—		4.0	%

For index definitions, please see the Glossary.

Because the fund originally used a multi-fund strategy, performance of the Investor Shares prior to June 3, 2002 does not reflect the current strategy and may have been different if it did.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
³		As stated in the prospectus. Includes acquired fund fees and expenses incurred indirectly by the fund through its investments in other investment companies. The annualized weighted average expense ratio of these investment companies was 0.01%. 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		For more information about each of the investment manager’s investment styles, refer to the fund’s prospectus.
⁵		On February 28, 2013, the fund’s Board of Trustees approved the addition of BMO Asset Management Corporation (BMO) as an investment manager to the fund, replacing Neuberger Berman Management LLC. BMO began managing its portion of the fund’s assets on or around March 14, 2013.

Laudus MarketMasters Funds 7

Laudus International MarketMasters Fund™

For the 12-month period ended October 31, 2013, Investor Shares of the Laudus International MarketMasters Fund (the fund) returned 27.23%, slightly underperforming its comparative index, the MSCI EAFE Index (the index), which returned 27.40%.

Market Highlights. Stocks enjoyed strong gains during the 12-month reporting period, buoyed by a rebound in the global economy and continuing U.S. monetary stimulus. The situation in the Eurozone continued to stabilize, and yields on sovereign bonds of distressed countries continued to recede. Developed international equity markets performed on par with broad-based domestic ones, but emerging markets lagged both significantly.

Positioning and Strategies. Over the 12-month period, the fund’s growth tilt detracted from performance, although that was partially offset by the fund’s allocation to value managers. The fund’s selection of managers added value as a result of strong performance from three of the fund’s sub-advisers, although two detracted due to their relative performances.

Mondrian Investment Partners, which uses a value-oriented investment approach, underperformed its comparative index for the reporting period, and detracted from the fund’s relative performance. Mondrian’s underperformance was primarily due to its defensive stock selections that were not able to keep up in a strongly rising market environment, particularly in parts of Europe. An underweight position in Japan and an overweight position in Singapore also detracted from the fund’s relative performance.

Harris Associates, on the other hand, with its large-cap value focus, outperformed its comparative index by more than 16%, contributing significantly to the fund’s relative performance. Harris Associates’ allocations added notable value, particularly its lack of exposure to the Energy sector and its overweight of Consumer Discretionary. But it was Harris Associates’ stock selection that added the greatest value, most notably within the Financials sector, but also among Consumer Discretionary, Health Care and Information Technology stocks, and among stocks in the United Kingdom, Japan and Germany.

American Century, which focuses on small-cap growth stocks, outperformed its comparative index by more than 12%, enough to overcome the drag due to its growth orientation. American Century’s greatest contribution came from its stock selection, particularly in the Consumer Discretionary Sector, but also among Industrials, Financials and Consumer Staples stocks.

William Blair & Company, which takes an all-cap growth approach, also outperformed its comparative index, but by a smaller degree, contributing positively to the fund’s relative performance.

WHV Investment Management, which takes a top-down sector allocation approach and focuses on long-term growth cycle trends, underperformed its comparative index and dragged on the fund’s relative performance.

As of 10/31/13:

Country Weightings % of Investments


United Kingdom			19.5%
Japan			12.7%
Germany			9.5%
France			8.3%
Switzerland			7.4%
United States			5.4%
Australia			4.8%
Canada			3.8%
Netherlands			3.6%
Singapore			3.2%
Sweden			2.8%
Hong Kong			2.6%
Other Countries			16.4%
Total			100.0%

Statistics


Number of Holdings			1,227
Weighted Average Market Cap ($ x 1,000,000)			$30,725
Price/Earnings Ratio (P/E)			19.5
Price/Book Ratio (P/B)			1.5
Portfolio Turnover Rate			65%

Sector Weightings % of Investments


Industrials			21.9%
Financials			19.0%
Consumer Discretionary			17.2%
Information Technology			9.1%
Materials			7.6%
Consumer Staples			7.3%
Health Care			5.7%
Energy			4.2%
Telecommunication Services			2.0%
Utilities			0.7%
Other			5.3%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Credit Suisse Group AG – Reg’d			1.5%
BNP Paribas S.A.			1.3%
Intesa Sanpaolo S.p.A.			1.1%
Bayerische Motoren Werke AG			1.0%
Allianz SE – Reg’d			0.9%
Lloyds Banking Group plc			0.9%
Daimler AG – Reg’d			0.8%
Rotork plc			0.8%
Canon, Inc.			0.8%
Koninklijke Boskalis Westminster N.V.			0.8%
Total			9.9%

Management’s views and portfolio holdings may have changed since the report date.

Source of Sector Classification: S&P and MSCI.

Foreign securities can involve risks such as political and economic instability and currency risk. These risks may be greater in emerging markets.


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

8 Laudus MarketMasters Funds

Laudus International MarketMasters Fund^tm

Performance and Fund Facts as of 10/31/13

October 31, 2003 – October 31, 2013
Performance of Hypothetical
$10,000 Investment (Investor Shares)¹

April 2, 2004 – October 31, 2013
Performance of Hypothetical
$50,000 Investment (Select Shares)¹

Average Annual Total Returns^1,2


Fund and Inception Date	1 Year			5 Years			10 Years			Since Inception


Investor Shares (10/16/96)		27.23	%		17.30	%		10.27	%	9.49%
Select Shares^® (4/2/04)		27.43	%		17.47	%		n/a		9.35%
MSCI EAFE^® Index (Gross)		27.40	%		12.52	%		8.20	%	(10/16/96) 5.58%
										(4/2/04) 6.85%
Fund Category: Morningstar Foreign Large Growth		20.72	%		13.27	%		7.86	%	(10/16/96) 6.39%
										(4/2/04) 6.67%

Fund Expense Ratios³: Investor Shares: Net 1.40%; Gross 1.62% / Select Shares: Net 1.25%; Gross 1.47%

Investment Managers and Allocations⁴


		% of
Investment Managers	Investment Style	Net Assets

Harris Associates L.P.	International Large-Cap Value		23.3	%


Mondrian Investment Partners Limited	International Small-Cap Value		20.6	%


American Century Investment Management, Inc.	International Small/Mid-Cap Growth		19.2	%


William Blair & Company, LLC	International Multi-Cap Growth		18.7	%


Mellon Capital Management Corp.	International Blend		8.9	%


WHV Investment Management	International Large-Cap Growth		5.3	%


Cash and other assets	—		4.0	%

For index definitions, please see the Glossary.

Because the fund originally used a multi-fund strategy, performance of the Investor Shares prior to June 3, 2002 does not reflect the current strategy and may have been different if it did.

The fund’s performance relative to the index may be affected by fair-value pricing. See financial note 2 for more information.


¹		Fund expenses may have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. These returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
²		Source for category information: Morningstar, Inc. The Morningstar Category return represents all active and index mutual funds within the category as of the report date.
³		As stated in the prospectus. 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		For more information about each of the investment manager’s investment styles, refer to the fund’s prospectus.

Laudus MarketMasters Funds 9

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

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.


					Ending
			Beginning		Account Value		Expenses Paid
	Expense Ratio¹		Account Value		(Net of Expenses)		During Period²
	(Annualized)		at 5/1/13		at 10/31/13		5/1/13–10/31/13

Laudus Small-Cap MarketMasters Fund^tm
Investor Shares
Actual Return		1.35%	$	1,000.00	$	1,154.30	$	7.33
Hypothetical 5% Return		1.35%	$	1,000.00	$	1,018.40	$	6.87
Select Shares
Actual Return		1.20%	$	1,000.00	$	1,155.30	$	6.52
Hypothetical 5% Return		1.20%	$	1,000.00	$	1,019.16	$	6.11


Laudus International MarketMasters Fund^tm
Investor Shares
Actual Return		1.40%	$	1,000.00	$	1,091.20	$	7.38
Hypothetical 5% Return		1.40%	$	1,000.00	$	1,018.15	$	7.12
Select Shares
Actual Return		1.25%	$	1,000.00	$	1,091.70	$	6.59
Hypothetical 5% Return		1.25%	$	1,000.00	$	1,018.90	$	6.36


¹		Based on the most recent six-month expense ratio; may differ from the expense ratio provided in the Financial Highlights which covers a 12-month period.
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.

10 Laudus MarketMasters Funds

Laudus Small-Cap MarketMasters Fund™

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
Investor Shares	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09


Per-Share Data ($)

Net asset value at beginning of period		13.14			11.99			11.52			9.40			8.78

Income (loss) from investment operations:
Net investment income (loss)		(0.02	)¹		(0.10	)¹		(0.09	)¹		(0.08	)¹		(0.05	)¹
Net realized and unrealized gains (losses)		4.16			1.25			0.56			2.20			0.67

Total from investment operations		4.14			1.15			0.47			2.12			0.62
Less distributions:
Distributions from net investment income		—			—			—			—			(0.00	)²

Net asset value at end of period		17.28			13.14			11.99			11.52			9.40

Total return (%)		31.51			9.59			4.08			22.55			7.10

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		1.35			1.42	³		1.46			1.46			1.48	⁴
Gross operating expenses		1.59			1.59			1.51			1.50			1.50
Net investment income (loss)		(0.16	)		(0.79	)		(0.70	)		(0.72	)		(0.64	)
Portfolio turnover rate		97			144			95			78			129
Net assets, end of period ($ x 1,000,000)		76			65			62			68			64


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
Select Shares	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09


Per-Share Data ($)

Net asset value at beginning of period		13.33			12.14			11.64			9.49			8.86

Income (loss) from investment operations:
Net investment income (loss)		(0.00	)¹		(0.08	)¹		(0.07	)¹		(0.06	)¹		(0.04	)¹
Net realized and unrealized gains (losses)		4.23			1.27			0.57			2.21			0.68

Total from investment operations		4.23			1.19			0.50			2.15			0.64
Less distributions:
Distributions from net investment income		—			—			—			—			(0.01	)

Net asset value at end of period		17.56			13.33			12.14			11.64			9.49

Total return (%)		31.73			9.80			4.30			22.66			7.29

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		1.20			1.27	³		1.31			1.32	⁵		1.33	⁴
Gross operating expenses		1.53			1.51			1.45			1.45			1.45
Net investment income (loss)		(0.03	)		(0.60	)		(0.54	)		(0.58	)		(0.48	)
Portfolio turnover rate		97			144			95			78			129
Net assets, end of period ($ x 1,000,000)		113			88			219			337			292

¹ Calculated based on the average shares outstanding during the period.

² Per share amount was less than $0.01.

³ Effective June 6, 2012, the net operating expense limitation was lowered. The ratio presented for period ended 10/31/12 is a blended ratio.

⁴ Effective February 28, 2009, the operating expense limitation was lowered. The ratio presented for period ended 10/31/09 is a blended ratio.

⁵ The ratio of net operating expenses would have been 1.31%, if certain non-routine expense had not been incurred.

See financial notes 11

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings as of October 31, 2013

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


				Cost		Value
Holdings by Category				($)		($)

	93	.3%	Common Stock		139,348,839		175,847,188
	7	.1%	Other Investment Companies		13,356,726		13,475,494
	0	.0%	Rights		—		—
	0	.0%	Warrants		—		—
	0	.2%	Short-Term Investments		351,994		351,994


	100	.6%	Total Investments		153,057,559		189,674,676
	(0	.6%)	Other Assets and Liabilities, Net				(1,046,839	)


	100	.0%	Net Assets				188,627,837


	Number		Value
Security	of Shares		($)

Common Stock 93.3% of net assets

Automobiles & Components 0.2%
American Axle & Manufacturing Holdings, Inc. *		707		13,157
Cooper Tire & Rubber Co.		817		21,250
Dana Holding Corp.		1,753		34,359
Dorman Products, Inc.		200		9,722
Drew Industries, Inc.		170		8,544
Fuel Systems Solutions, Inc. *		223		4,005
Gentherm, Inc. *		278		6,491
Modine Manufacturing Co. *		840		11,189
Standard Motor Products, Inc.		198		7,160
Stoneridge, Inc. *		155		1,978
Superior Industries International, Inc.		233		4,369
Tenneco, Inc. *		752		39,909
Winnebago Industries, Inc. *		7,164		212,484

				374,617

Banks 7.2%
1st Source Corp.		167		5,240
1st United Bancorp, Inc.		253		1,933
Access National Corp.		130		1,889
American National Bankshares, Inc.		73		1,675
Ameris Bancorp *		102		1,867
Ames National Corp.		74		1,667
Arrow Financial Corp.		68		1,755
Astoria Financial Corp.		570		7,530
Banco Latinoamericano de Comercio Exterior, S.A., Class E		540		14,164
BancorpSouth, Inc.		1,212		26,785
Bank Mutual Corp.		891		5,667
Bank of Kentucky Financial Corp.		63		1,815
Bank of Marin Bancorp		43		1,830
Bank of the Ozarks, Inc.		26,686		1,320,423
BankFinancial Corp.		420		3,902
Banner Corp.		363		13,888
Bar Harbor Bankshares		47		1,774
BBCN Bancorp, Inc.		963		14,281
Berkshire Hills Bancorp, Inc.		188		4,770
BofI Holding, Inc. *		193		11,661
Boston Private Financial Holdings, Inc.		946		10,775
Bridge Bancorp, Inc.		76		1,755
Bridge Capital Holdings *		106		1,865
Brookline Bancorp, Inc.		662		5,872
Bryn Mawr Bank Corp.		73		2,034
C&F Financial Corp.		32		1,725
Camden National Corp.		47		1,896
Capital Bank Financial Corp., Class A *		90		2,000
Capital City Bank Group, Inc. *		144		1,771
Capitol Federal Financial, Inc.		1,245		15,774
Cardinal Financial Corp.		319		5,264
Cascade Bancorp *		290		1,499
Cathay General Bancorp		913		22,487
Center Bancorp, Inc.		133		1,990
Centerstate Banks, Inc.		196		1,933
Century Bancorp, Inc., Class A		48		1,560
Charter Financial Corp.		168		1,821
Chemical Financial Corp.		186		5,448
Chemung Financial Corp.		50		1,762
Citizens & Northern Corp.		277		5,474
City Holding Co.		117		5,324
Clifton Savings Bancorp, Inc.		139		1,756
CNB Financial Corp.		102		2,041
Columbia Banking System, Inc.		609		15,645
Community Bank System, Inc.		576		20,915
Community Trust Bancorp, Inc.		169		7,198
ConnectOne Bancorp, Inc. *		56		2,129
CVB Financial Corp.		989		14,380
Dime Community Bancshares, Inc.		304		4,973
Doral Financial Corp. *		66		1,115
Eagle Bancorp, Inc. *		294		7,776
Enterprise Bancorp, Inc.		99		1,934
Enterprise Financial Services Corp.		341		6,148
ESB Financial Corp.		136		1,810
ESSA Bancorp, Inc.		310		3,398
EverBank Financial Corp.		569		8,603
F.N.B. Corp.		1,926		24,094
Farmers Capital Bank Corp. *		75		1,541
Federal Agricultural Mortgage Corp., Class C		62		2,213
Financial Institutions, Inc.		161		3,811
First Bancorp, Inc.		103		1,793
First Busey Corp.		79,609		411,579
First Commonwealth Financial Corp.		784		6,813
First Community Bancshares, Inc.		107		1,786
First Connecticut Bancorp, Inc.		350		5,138
First Defiance Financial Corp.		73		1,885
First Federal Bancshares of Arkansas, Inc. *		215		1,931
First Financial Bancorp		612		9,498
First Financial Bankshares, Inc.		383		23,558

12 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
First Financial Corp.		124		4,283
First Financial Holdings, Inc.		154		9,229
First Midwest Bancorp, Inc.		65,912		1,096,117
First Niagara Financial Group, Inc.		64,100		707,023
Firstmerit Corp.		52,379		1,176,432
Flushing Financial Corp.		30,222		607,160
Fox Chase Bancorp, Inc.		185		3,195
Franklin Financial Corp.		185		3,491
German American Bancorp, Inc.		77		2,093
Glacier Bancorp, Inc.		51,945		1,435,240
Great Southern Bancorp, Inc.		188		5,279
Guaranty Bancorp		155		2,093
Hancock Holding Co.		19,306		632,851
Hanmi Financial Corp.		351		6,135
Heartland Financial USA, Inc.		62		1,642
Heritage Commerce Corp.		248		1,932
Heritage Financial Corp.		278		4,484
Heritage Oaks Bancorp *		282		1,932
Hingham Institution for Savings		27		1,963
Home Bancorp, Inc. *		90		1,635
Home Bancshares, Inc.		604		20,464
Home Federal Bancorp, Inc.		136		2,120
Home Loan Servicing Solutions Ltd.		722		17,046
HomeTrust Bancshares, Inc. *		218		3,521
Horizon Bancorp		84		1,824
IBERIABANK Corp.		312		18,230
Independent Bank Corp.		171		6,135
Independent Bank Group, Inc.		55		2,075
International Bancshares Corp.		48,357		1,104,957
Investors Bancorp, Inc.		564		13,372
Kearny Financial Corp. *		167		1,754
Lakeland Financial Corp.		158		5,623
LCNB Corp.		79		1,592
MainSource Financial Group, Inc.		122		1,979
MB Financial, Inc.		25,463		756,251
Merchants Bancshares, Inc.		58		1,739
Meridian Interstate Bancorp, Inc. *		92		2,184
Meta Financial Group, Inc.		84		3,126
Metro Bancorp, Inc. *		247		5,271
MetroCorp Bancshares, Inc.		173		2,479
MGIC Investment Corp. *		3,588		29,206
Middleburg Financial Corp.		90		1,649
MidSouth Bancorp, Inc.		214		3,249
MidWestOne Financial Group, Inc.		70		1,849
NASB Financial, Inc. *		66		1,700
National Bank Holdings Corp., Class A		284		5,964
National Bankshares, Inc.		94		3,304
National Penn Bancshares, Inc.		48,417		502,084
NBT Bancorp, Inc.		552		13,452
NewBridge Bancorp *		271		2,022
Northfield Bancorp, Inc.		145		1,875
Northrim BanCorp, Inc.		74		1,857
Northwest Bancshares, Inc.		74,298		1,039,429
OceanFirst Financial Corp.		300		5,277
OFG Bancorp		167		2,473
Old National Bancorp		1,439		20,923
OmniAmerican Bancorp, Inc. *		193		4,231
Oritani Financial Corp.		482		7,818
Pacific Continental Corp.		150		2,067
PacWest Bancorp		280		10,654
Palmetto Bancshares, Inc. *		123		1,651
Park National Corp.		92		7,288
Park Sterling Corp.		898		5,846
Peapack-Gladstone Financial Corp.		101		1,852
Penns Woods Bancorp, Inc.		41		2,099
PennyMac Financial Services, Inc., Class A *		80		1,288
Peoples Bancorp, Inc.		147		3,296
Pinnacle Financial Partners, Inc. *		421		13,051
Preferred Bank *		104		1,999
PrivateBancorp, Inc.		713		17,369
Prosperity Bancshares, Inc.		630		39,343
Provident Financial Holdings, Inc.		250		3,790
Provident Financial Services, Inc.		615		11,525
Radian Group, Inc.		2,133		31,078
Renasant Corp.		277		7,944
Republic Bancorp, Inc., Class A		75		1,727
S&T Bancorp, Inc.		199		4,879
S.Y. Bancorp, Inc.		68		2,041
Sandy Spring Bancorp, Inc.		230		5,633
Sierra Bancorp		117		2,215
Simmons First National Corp., Class A		206		6,744
Southside Bancshares, Inc.		221		6,033
Southwest Bancorp, Inc. *		261		4,179
State Bank Financial Corp.		630		10,748
StellarOne Corp.		200		4,656
Sterling Bancorp *		324		4,779
Sterling Financial Corp.		536		15,523
Suffolk Bancorp *		99		1,935
Sun Bancorp, Inc. *		541		1,785
Susquehanna Bancshares, Inc.		2,136		25,173
Territorial Bancorp, Inc.		73		1,592
Texas Capital Bancshares, Inc. *		529		27,534
The Bancorp, Inc. *		650		10,510
The First of Long Island Corp.		51		2,007
Tompkins Financial Corp.		38		1,874
TowneBank		116		1,689
TriCo Bancshares		237		5,994
Tristate Capital Holdings, Inc. *		128		1,601
TrustCo Bank Corp.		1,765		11,861
Trustmark Corp.		679		18,442
UMB Financial Corp.		369		21,741
Umpqua Holdings Corp.		1,390		22,754
United Bankshares, Inc.		674		19,937
United Community Banks, Inc. *		106		1,653
United Financial Bancorp, Inc.		375		5,880
Univest Corp. of Pennsylvania		90		1,797
VantageSouth Bancshares, Inc. *		383		1,873
ViewPoint Financial Group, Inc.		684		14,918
Washington Banking Co.		245		4,167
Washington Trust Bancorp, Inc.		60		1,973
Waterstone Financial, Inc. *		174		1,851
Webster Financial Corp.		45,763		1,276,330
WesBanco, Inc.		200		5,880
West Bancorp, Inc.		141		1,949
Westamerica Bancorp		6,897		355,058
Western Alliance Bancorp *		957		20,241
Westfield Financial, Inc.		414		2,985
Wilshire Bancorp, Inc.		1,173		9,935
Wintrust Financial Corp.		271		11,791
WSFS Financial Corp.		32		2,240

				13,592,566

See financial notes 13

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Capital Goods 8.7%
AAON, Inc.		318		8,589
AAR Corp.		367		10,746
Accuride Corp. *		750		3,375
Aceto Corp.		475		7,576
Actuant Corp., Class A		10,467		393,140
Acuity Brands, Inc.		6,965		700,052
Aegion Corp. *		602		12,341
Aerovironment, Inc. *		425		11,522
Aircastle Ltd.		931		17,568
Alamo Group, Inc.		42		1,982
Albany International Corp., Class A		36,239		1,333,958
Altra Holdings, Inc.		222		6,742
Ameresco, Inc., Class A *		500		5,230
American Science & Engineering, Inc.		132		8,683
Ampco-Pittsburgh Corp.		197		3,627
Apogee Enterprises, Inc.		320		10,010
Applied Industrial Technologies, Inc.		5,708		270,045
Argan, Inc.		351		7,810
Astec Industries, Inc.		123		4,159
Astronics Corp. *		197		9,665
Astronics Corp., Class B *		39		1,883
AZZ, Inc.		190		8,531
B/E Aerospace, Inc. *		5,290		429,336
Barnes Group, Inc.		8,254		293,347
Beacon Roofing Supply, Inc. *		500		17,355
Blount International, Inc. *		317		3,861
Brady Corp., Class A		485		14,157
Briggs & Stratton Corp.		380		6,969
Capstone Turbine Corp. *		5,700		7,239
Chart Industries, Inc. *		8,343		896,622
Chicago Bridge & Iron Co., N.V.		5,140		380,823
CIRCOR International, Inc.		136		10,033
CLARCOR, Inc.		430		25,146
Comfort Systems USA, Inc.		363		6,763
Cubic Corp.		17,530		920,325
Curtiss-Wright Corp.		560		27,877
DigitalGlobe, Inc. *		633		20,142
Douglas Dynamics, Inc.		430		6,523
DXP Enterprises, Inc. *		129		11,855
Dycom Industries, Inc. *		360		10,674
Dynamic Materials Corp.		194		4,287
Edgen Group, Inc. *		407		4,872
EMCOR Group, Inc.		760		28,166
Encore Wire Corp.		156		7,727
EnerSys, Inc.		534		35,431
Engility Holdings, Inc. *		45		1,394
Enphase Energy, Inc. *		247		1,865
EnPro Industries, Inc. *		253		15,096
ESCO Technologies, Inc.		25,304		912,968
Esterline Technologies Corp. *		346		27,735
Federal Signal Corp. *		998		13,663
Foster Wheeler AG *		9,891		266,958
Franklin Electric Co., Inc.		24,813		939,172
FuelCell Energy, Inc. *		4,100		5,494
Furmanite Corp. *		517		5,816
GATX Corp.		22,300		1,149,565
GenCorp, Inc. *		786		13,205
Generac Holdings, Inc.		616		30,400
General Cable Corp.		378		12,448
Gibraltar Industries, Inc. *		269		4,307
Global Power Equipment Group, Inc.		165		3,359
GrafTech International Ltd. *		532		4,735
Graham Corp.		175		6,442
Granite Construction, Inc.		406		13,134
Great Lakes Dredge & Dock Corp.		907		7,365
Griffon Corp.		404		5,062
H&E Equipment Services, Inc. *		411		10,287
HEICO Corp.		735		39,381
Hexcel Corp. *		13,580		574,570
Houston Wire & Cable Co.		288		3,995
Hurco Cos., Inc.		62		1,518
Hyster-Yale Materials Handling, Inc.		88		6,903
II-VI, Inc. *		798		13,614
Innovative Solutions & Support, Inc.		247		1,946
John Bean Technologies Corp.		331		8,997
Kadant, Inc.		176		6,301
Kaman Corp.		176		6,544
Kratos Defense & Security Solutions, Inc. *		818		6,937
L.B. Foster Co., Class A		39		1,823
Layne Christensen Co. *		350		6,769
Lennox International, Inc.		3,310		258,379
Lindsay Corp.		135		10,261
LSI Industries, Inc.		220		2,026
Lydall, Inc. *		323		5,885
MasTec, Inc. *		637		20,365
Meritor, Inc. *		629		4,321
Miller Industries, Inc.		263		4,929
Moog, Inc., Class A *		513		30,641
Mueller Industries, Inc.		28,446		1,715,009
Mueller Water Products, Inc., Class A		1,519		13,018
MYR Group, Inc. *		305		8,067
National Presto Industries, Inc.		23		1,623
NCI Building Systems, Inc. *		471		6,797
Nortek, Inc. *		45		3,158
Northwest Pipe Co. *		60		2,162
Omega Flex, Inc.		119		2,420
Orbital Sciences Corp. *		602		13,888
PGT, Inc. *		204		2,132
Pike Electric Corp.		141		1,524
PMFG, Inc. *		210		1,646
Polypore International, Inc. *		13,753		621,636
Powell Industries, Inc. *		43		2,702
Preformed Line Products Co.		25		2,100
Primoris Services Corp.		575		14,973
Proto Labs, Inc. *		5,493		460,643
Quanex Building Products Corp.		687		12,215
Raven Industries, Inc.		12,253		408,760
RBC Bearings, Inc. *		163		11,213
Rexnord Corp. *		277		6,515
Rush Enterprises, Inc., Class A *		275		7,870
Simpson Manufacturing Co., Inc.		565		20,029
Sparton Corp. *		100		2,639
Standex International Corp.		110		6,766
Sterling Construction Co., Inc. *		183		1,757
Sun Hydraulics Corp.		156		6,190
TAL International Group, Inc. *		233		11,256
Taser International, Inc. *		811		14,411
Teledyne Technologies, Inc. *		379		33,663
Tennant Co.		211		12,806
Textainer Group Holdings Ltd.		148		5,609
The Gorman-Rupp Co.		143		5,826

14 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
The Greenbrier Cos., Inc. *		274		7,272
The Middleby Corp. *		214		48,717
Thermon Group Holdings, Inc. *		245		5,760
Titan International, Inc.		760		11,020
Titan Machinery, Inc. *		100		1,764
Trex Co., Inc. *		174		12,218
TriMas Corp. *		10,799		408,850
Triumph Group, Inc.		6,540		468,591
Tutor Perini Corp. *		625		14,344
Twin Disc, Inc.		175		4,527
United Rentals, Inc. *		6,230		402,396
Universal Forest Products, Inc.		133		7,038
USG Corp. *		864		23,596
Vicor Corp. *		299		2,634
Wabash National Corp. *		1,094		12,756
Watsco, Inc.		3,252		309,883
Watts Water Technologies, Inc., Class A		325		18,778
Westport Innovations, Inc. *		30,739		720,215
Woodward, Inc.		729		29,226
Xerium Technologies, Inc. *		350		4,196

				16,428,143

Commercial & Professional Supplies 5.1%
ABM Industries, Inc.		513		14,113
Acacia Research Corp.		55,833		842,520
ACCO Brands Corp. *		113,982		666,795
Acorn Energy, Inc.		192		722
Barrett Business Services, Inc.		154		12,824
Casella Waste Systems, Inc., Class A *		875		5,171
CBIZ, Inc. *		487		3,974
CDI Corp.		118		1,894
CECO Environmental Corp.		237		4,183
Compx International, Inc.		132		1,873
Consolidated Graphics, Inc. *		89		5,704
Courier Corp.		120		2,039
CRA International, Inc. *		91		1,734
Deluxe Corp.		586		27,595
EnerNOC, Inc. *		560		9,313
Ennis, Inc.		287		5,094
Exponent, Inc.		89		6,729
FTI Consulting, Inc. *		419		17,003
G&K Services, Inc., Class A		25,443		1,587,643
GP Strategies Corp. *		298		8,350
Healthcare Services Group, Inc.		719		19,693
Heidrick & Struggles International, Inc.		102		1,889
Heritage-Crystal Clean, Inc. *		114		2,014
Herman Miller, Inc.		593		17,992
HNI Corp.		475		18,454
Huron Consulting Group, Inc. *		307		17,981
ICF International, Inc. *		382		13,225
InnerWorkings, Inc. *		698		6,680
Insperity, Inc.		333		12,877
Interface, Inc.		681		13,790
Intersections, Inc.		341		2,922
Kelly Services, Inc., Class A		381		7,948
Kforce, Inc.		571		11,243
Kimball International, Inc., Class B		165		1,930
Knoll, Inc.		699		11,478
Korn/Ferry International *		566		13,471
McGrath RentCorp		152		5,422
Mine Safety Appliances Co.		375		18,060
Mistras Group, Inc. *		196		3,599
MiX Telematics Ltd. ADR *		28,810		375,682
Mobile Mini, Inc. *		296		10,692
Multi-Color Corp.		58		2,020
National Technical Systems, Inc. *		180		4,120
Navigant Consulting, Inc. *		878		15,233
NL Industries, Inc.		152		1,772
On Assignment, Inc. *		14,865		502,288
Pendrell Corp. *		1,575		3,512
Quad Graphics, Inc.		332		11,593
Resources Connection, Inc.		434		5,538
Standard Parking Corp. *		36,980		978,861
Steelcase, Inc., Class A		743		12,178
Team, Inc. *		331		12,343
Tetra Tech, Inc. *		816		21,322
The Advisory Board Co. *		19,810		1,358,966
The Brink’s Co.		692		21,729
The Corporate Executive Board Co.		15,985		1,165,306
TRC Cos., Inc. *		251		1,930
TrueBlue, Inc. *		239		5,903
UniFirst Corp.		132		13,572
United Stationers, Inc.		36,032		1,601,262
US Ecology, Inc.		45		1,600
Viad Corp.		380		10,146
VSE Corp.		41		1,796
WageWorks, Inc. *		143		7,323

				9,572,628

Consumer Durables & Apparel 3.6%
Arctic Cat, Inc.		8,099		424,388
Bassett Furniture Industries, Inc.		108		1,512
Beazer Homes USA, Inc. *		98		1,781
Black Diamond, Inc. *		183		2,728
Blyth, Inc.		300		4,143
Brunswick Corp.		1,054		47,567
Callaway Golf Co.		1,416		11,937
Cavco Industries, Inc. *		34		1,991
Columbia Sportswear Co.		228		15,246
Costa, Inc. *		102		2,052
Crocs, Inc. *		945		11,510
CSS Industries, Inc.		196		5,074
Culp, Inc.		98		1,896
Eastman Kodak Co. *		15,140		393,640
Ethan Allen Interiors, Inc.		459		12,228
Fifth & Pacific Cos., Inc. *		1,271		33,669
Flexsteel Industries, Inc.		70		1,922
G-III Apparel Group Ltd. *		61		3,460
Harman International Industries, Inc.		10,945		886,764
Helen of Troy Ltd. *		29,843		1,394,265
Hooker Furniture Corp.		107		1,691
Hovnanian Enterprises, Inc., Class A *		808		4,088
Iconix Brand Group, Inc. *		762		27,501
iRobot Corp. *		262		8,874
JAKKS Pacific, Inc.		714		4,598
Johnson Outdoors, Inc., Class A		67		1,838
KB Home		991		16,817
La-Z-Boy, Inc.		318		7,339
LeapFrog Enterprises, Inc. *		1,107		9,476

See financial notes 15

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Lifetime Brands, Inc.		127		1,989
M.D.C. Holdings, Inc.		372		10,859
M/I Homes, Inc. *		27,188		556,538
Marine Products Corp.		229		2,146
Meritage Homes Corp. *		482		21,878
Movado Group, Inc.		234		10,911
NACCO Industries, Inc., Class A		44		2,507
Nautilus, Inc. *		206		1,640
Oxford Industries, Inc.		210		15,072
Perry Ellis International, Inc.		300		5,703
Quiksilver, Inc. *		96,151		799,976
R. G. Barry Corp.		108		2,061
Skechers U.S.A., Inc., Class A *		433		12,618
Skullcandy, Inc. *		650		4,082
Smith & Wesson Holding Corp. *		945		10,187
Standard Pacific Corp. *		1,287		10,206
Steven Madden Ltd. *		709		26,006
Sturm, Ruger & Co., Inc.		143		9,354
The Jones Group, Inc.		796		12,370
The Ryland Group, Inc.		543		21,829
Tri Pointe Homes, Inc. *		56,300		896,296
Tumi Holdings, Inc. *		19,350		413,122
UCP, Inc., Class A *		22,970		323,877
Vera Bradley, Inc. *		351		7,775
William Lyon Homes, Class A *		7,700		178,409
Wolverine World Wide, Inc.		530		30,602
Zagg, Inc. *		972		4,607

				6,732,615

Consumer Services 4.3%
AFC Enterprises, Inc. *		295		13,151
American Public Education, Inc. *		186		7,446
Arcos Dorados Holdings, Inc.		55,690		670,508
Ascent Capital Group, Inc., Class A *		89		7,513
Biglari Holdings, Inc. *		13		5,668
BJ’s Restaurants, Inc. *		371		10,039
Bloomin’ Brands, Inc. *		399		9,987
Bob Evans Farms, Inc.		356		20,324
Boyd Gaming Corp. *		838		8,849
Bravo Brio Restaurant Group, Inc. *		350		5,225
Bridgepoint Education, Inc. *		169		3,312
Buffalo Wild Wings, Inc. *		215		30,655
Caesars Entertainment Corp. *		385		6,707
Capella Education Co. *		123		7,493
CEC Entertainment, Inc.		29,332		1,359,538
Choice Hotels International, Inc.		6,350		295,846
Churchill Downs, Inc.		120		10,309
Chuy’s Holdings, Inc. *		43		1,617
Corinthian Colleges, Inc. *		1,452		3,107
Cracker Barrel Old Country Store, Inc.		211		23,183
Denny’s Corp. *		1,027		6,521
DineEquity, Inc.		126		10,341
Diversified Restaurant Holdings, Inc. *		206		1,423
Education Management Corp. *		158		2,417
Einstein Noah Restaurant Group, Inc.		121		2,159
Fiesta Restaurant Group, Inc. *		203		8,605
Grand Canyon Education, Inc. *		23,794		1,124,742
Hillenbrand, Inc.		654		18,456
Ignite Restaurant Group, Inc. *		89		1,429
International Speedway Corp., Class A		319		10,434
Interval Leisure Group, Inc.		313		7,597
ITT Educational Services, Inc. *		110		4,413
Jack in the Box, Inc. *		473		19,242
Jamba, Inc. *		114		1,302
JTH Holding, Inc., Class A *		105		2,074
K12, Inc. *		436		7,970
Krispy Kreme Doughnuts, Inc. *		736		17,855
Life Time Fitness, Inc. *		423		19,213
LifeLock, Inc. *		34,712		558,516
Lincoln Educational Services Corp.		751		3,590
Luby’s, Inc. *		205		1,570
Mac-Gray Corp.		119		2,509
Marriott Vacations Worldwide Corp. *		253		12,670
Matthews International Corp., Class A		26,810		1,088,486
Multimedia Games Holding Co., Inc. *		310		10,078
Nathan’s Famous, Inc. *		33		1,694
Orient-Express Hotels Ltd., Class A *		1,121		14,921
Outerwall, Inc. *		264		17,155
Papa John’s International, Inc.		216		16,345
Pinnacle Entertainment, Inc. *		535		12,519
Red Robin Gourmet Burgers, Inc. *		15,320		1,167,078
Regis Corp.		569		8,250
Ruby Tuesday, Inc. *		766		4,542
Ruth’s Hospitality Group, Inc.		600		7,314
Scientific Games Corp., Class A *		564		10,310
SHFL Entertainment, Inc. *		798		18,498
Sonic Corp. *		749		14,456
Sotheby’s		812		42,143
Speedway Motorsports, Inc.		96		1,753
Steiner Leisure Ltd. *		92		5,154
Stewart Enterprises, Inc., Class A		1,203		15,892
Strayer Education, Inc.		108		4,269
Texas Roadhouse, Inc.		41,437		1,136,203
The Cheesecake Factory, Inc.		604		28,539
The Marcus Corp.		350		5,026
Universal Technical Institute, Inc.		400		5,316
Vail Resorts, Inc.		346		24,376

				8,005,842

Diversified Financials 5.0%
American Capital Ltd. *		120,740		1,691,567
Apollo Investment Corp.		2,835		24,183
Arlington Asset Investment Corp., Class A		280		6,908
BGC Partners, Inc., Class A		949		5,049
BlackRock Kelso Capital Corp.		209		1,963
Calamos Asset Management, Inc., Class A		525		5,156
California First National Bancorp		102		1,821
Capital Southwest Corp.		48		1,578
Cash America International, Inc.		385		15,188
Cohen & Steers, Inc.		135		5,179
Credit Acceptance Corp. *		80		9,464
DFC Global Corp. *		729		8,821
Diamond Hill Investment Group		21		2,316
Encore Capital Group, Inc. *		184		8,988
Evercore Partners, Inc., Class A		390		19,683
Ezcorp, Inc., Class A *		574		9,029
FBR & Co. *		184		4,876
Fidus Investment Corp.		94		1,909
Fifth Street Finance Corp.		1,407		14,351

16 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Financial Engines, Inc.		590		32,963
First Cash Financial Services, Inc. *		19,450		1,176,530
FXCM, Inc., Class A		648		10,621
GAMCO Investors, Inc., Class A		30		2,145
Garrison Capital, Inc.		113		1,664
GFI Group, Inc.		943		3,272
Gladstone Capital Corp.		406		3,581
Gladstone Investment Corp.		600		4,242
Golub Capital BDC, Inc.		96		1,690
Green Dot Corp., Class A *		498		10,687
Greenhill & Co., Inc.		13,135		673,825
GSV Capital Corp. *		375		5,734
Hannon Armstrong Sustainable Infrastructure Capital, Inc.		148		1,813
Hercules Technology Growth Capital, Inc.		939		14,498
HFF, Inc., Class A		301		7,390
Horizon Technology Finance Corp.		310		4,179
ICG Group, Inc. *		74,327		1,212,273
INTL FCStone, Inc. *		177		3,621
Investment Technology Group, Inc. *		120		1,922
Janus Capital Group, Inc.		1,002		9,890
JMP Group, Inc.		247		1,583
KCAP Financial, Inc.		580		4,889
KCG Holdings, Inc., Class A *		700		6,118
Main Street Capital Corp.		246		7,478
Manning & Napier, Inc.		300		4,980
MarketAxess Holdings, Inc.		468		30,528
Marlin Business Services Corp.		80		2,206
MCG Capital Corp.		1,300		6,123
Medallion Financial Corp.		375		5,693
Medley Capital Corp.		614		8,559
MVC Capital, Inc.		450		6,223
Nelnet, Inc., Class A		172		7,332
New Mountain Finance Corp.		97		1,375
NewStar Financial, Inc. *		128		2,228
Nicholas Financial, Inc.		110		1,766
PennantPark Floating Rate Capital Ltd.		118		1,568
PennantPark Investment Corp.		634		7,139
PHH Corp. *		497		11,953
PICO Holdings, Inc. *		53,789		1,262,966
Piper Jaffray Cos., Inc. *		312		11,198
Portfolio Recovery Associates, Inc. *		19,468		1,157,373
Prospect Capital Corp.		2,462		27,919
Regional Management Corp. *		66		2,113
Resource America, Inc., Class A		210		1,812
Safeguard Scientifics, Inc. *		33,382		582,516
Solar Capital Ltd.		5,012		115,025
Solar Senior Capital Ltd.		275		5,016
Stellus Capital Investment Corp.		109		1,618
Stifel Financial Corp. *		26,845		1,099,303
TCP Capital Corp.		350		5,834
The First Marblehead Corp. *		3,945		3,787
THL Credit, Inc.		100		1,625
TICC Capital Corp.		100		1,000
Triangle Capital Corp.		472		14,047
Virtus Investment Partners, Inc. *		53		10,787
Walter Investment Management Corp. *		369		13,937
WhiteHorse Finance, Inc.		111		1,711
WisdomTree Investments, Inc. *		617		8,576
World Acceptance Corp. *		106		11,037

				9,477,510

Energy 7.7%
Adams Resources & Energy, Inc.		80		4,142
Alon USA Energy, Inc.		425		5,134
Alpha Natural Resources, Inc. *		1,374		9,618
Amyris, Inc. *		611		1,540
Apco Oil & Gas International, Inc. *		55		837
Approach Resources, Inc. *		54,680		1,539,242
Arch Coal, Inc.		2,625		11,130
Basic Energy Services, Inc. *		520		7,628
Bellatrix Exploration Ltd. *		254,700		1,902,609
Berry Petroleum Co., Class A		500		23,875
Bill Barrett Corp. *		503		13,918
Bolt Technology Corp.		101		1,807
Bonanza Creek Energy, Inc. *		279		14,101
BPZ Resources, Inc. *		1,313		2,639
Bristow Group, Inc.		445		35,809
C&J Energy Services, Inc. *		525		12,096
Cal Dive International, Inc. *		845		1,665
Callon Petroleum Co. *		775		5,293
CARBO Ceramics, Inc.		192		24,065
Carrizo Oil & Gas, Inc. *		32,012		1,403,406
Clayton Williams Energy, Inc. *		52		4,047
Clean Energy Fuels Corp. *		957		10,900
Cloud Peak Energy, Inc. *		915		14,283
Comstock Resources, Inc.		678		11,601
Contango Oil & Gas Co.		98		4,199
Crosstex Energy, Inc.		679		20,839
Delek US Holdings, Inc.		226		5,774
Diamondback Energy, Inc. *		14,288		737,975
Emerald Oil, Inc. *		249		2,166
Endeavour International Corp. *		900		5,346
Energy XXI (Bermuda) Ltd.		915		26,590
EPL Oil & Gas, Inc. *		389		12,401
Era Group, Inc. *		23,193		732,899
Evolution Petroleum Corp. *		368		4,438
EXCO Resources, Inc.		744		4,025
Exterran Holdings, Inc. *		688		19,642
Forest Oil Corp. *		1,042		4,939
Forum Energy Technologies, Inc. *		320		9,363
Frontline Ltd. *		849		1,800
FX Energy, Inc. *		1,211		4,214
Gastar Exploration Ltd. *		637		2,752
Geospace Technologies Corp. *		127		12,372
Global Geophysical Services, Inc. *		365		872
Goodrich Petroleum Corp. *		399		9,333
Green Plains Renewable Energy, Inc.		321		5,178
Gulf Island Fabrication, Inc.		137		3,455
GulfMark Offshore, Inc., Class A		323		16,079
Halcon Resources Corp. *		32,275		167,185
Hallador Energy Co.		205		1,579
Helix Energy Solutions Group, Inc. *		1,159		27,422
Hercules Offshore, Inc. *		1,421		9,663
Hornbeck Offshore Services, Inc. *		476		26,309
ION Geophysical Corp. *		1,487		6,900
Isramco, Inc. *		19		2,507
Key Energy Services, Inc. *		1,733		13,552
KiOR, Inc., Class A *		377		878
Knightsbridge Tankers Ltd.		271		2,233

See financial notes 17

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Kodiak Oil & Gas Corp. *		3,097		40,168
L&L Energy, Inc. *		470		667
Magnum Hunter Resources Corp. *		1,297		9,248
Matador Resources Co. *		399		7,346
Matrix Service Co. *		288		5,988
Midstates Petroleum Co., Inc. *		288		1,624
Miller Energy Resources, Inc. *		401		2,711
Mitcham Industries, Inc. *		316		5,258
Natural Gas Services Group, Inc. *		230		6,438
Newpark Resources, Inc. *		1,132		14,433
Nordic American Tankers Ltd.		851		6,944
Northern Oil & Gas, Inc. *		674		11,074
Nuverra Environmental Solutions, Inc. *		1,174		2,865
Panhandle Oil & Gas, Inc., Class A		56		1,880
Parker Drilling Co. *		1,022		7,358
PDC Energy, Inc. *		405		27,463
Penn Virginia Corp. *		104,673		890,767
PetroQuest Energy, Inc. *		764		3,606
PHI, Inc. - Non Voting Shares *		154		6,132
Pioneer Energy Services Corp. *		762		6,401
Precision Drilling Corp.		58,512		619,642
Quicksilver Resources, Inc. *		828		1,772
Renewable Energy Group, Inc. *		128		1,397
Rentech, Inc.		2,658		4,545
Resolute Energy Corp. *		676		6,341
Rex Energy Corp. *		550		11,825
RigNet, Inc. *		67		2,470
Rosetta Resources, Inc. *		594		35,604
Sanchez Energy Corp. *		366		10,435
Scorpio Tankers, Inc.		135,806		1,567,201
SEACOR Holdings, Inc.		19,605		1,917,369
SemGroup Corp., Class A		525		31,705
Ship Finance International Ltd.		846		14,001
Solazyme, Inc. *		249		2,605
Stone Energy Corp. *		422		14,711
Swift Energy Co. *		615		8,438
Synergy Resources Corp. *		226		2,341
T.G.C. Industries, Inc.		575		4,238
Targa Resources Corp.		315		24,431
Teekay Tankers Ltd., Class A		1,281		3,343
Tesco Corp. *		617		10,600
TETRA Technologies, Inc. *		1,052		13,644
Triangle Petroleum Corp. *		1,061		11,215
Unit Corp. *		40,861		2,100,664
Uranium Energy Corp. *		1,212		2,133
VAALCO Energy, Inc. *		727		3,831
W&T Offshore, Inc.		463		8,839
Warren Resources, Inc. *		1,494		4,676
Western Refining, Inc.		553		17,845
Westmoreland Coal Co. *		151		2,146
Willbros Group, Inc. *		458		4,470

				14,489,112

Food & Staples Retailing 1.6%
Arden Group, Inc., Class A		15		1,950
Casey’s General Stores, Inc.		14,430		1,051,659
Harris Teeter Supermarkets, Inc.		626		30,874
Ingles Markets, Inc., Class A		68		1,755
Nash Finch Co.		140		3,928
Natural Grocers by Vitamin Cottage, Inc. *		79		3,152
PriceSmart, Inc.		184		20,937
Rite Aid Corp. *		6,692		35,668
Spartan Stores, Inc.		274		6,447
SUPERVALU, Inc. *		1,788		12,570
Susser Holdings Corp. *		215		11,791
The Andersons, Inc.		205		15,207
The Chefs’ Warehouse, Inc. *		99		2,372
The Fresh Market, Inc. *		7,180		365,534
The Pantry, Inc. *		475		6,360
United Natural Foods, Inc. *		20,052		1,432,716
Village Super Market, Inc., Class A		150		5,499
Weis Markets, Inc.		99		5,066

				3,013,485

Food, Beverage & Tobacco 2.4%
Alico, Inc.		40		1,598
Annie’s, Inc. *		138		6,520
B&G Foods, Inc.		714		24,169
Boulder Brands, Inc. *		689		11,293
Cal-Maine Foods, Inc.		152		7,711
Calavo Growers, Inc.		64		1,900
Chiquita Brands International, Inc. *		516		5,341
Coca-Cola Bottling Co. Consolidated		28		1,773
Cott Corp.		51,600		423,120
Craft Brew Alliance, Inc. *		211		3,422
Darling International, Inc. *		1,400		32,578
Diamond Foods, Inc. *		16,554		404,083
Farmer Brothers Co. *		120		2,167
Fresh Del Monte Produce, Inc.		372		9,891
Griffin Land & Nurseries, Inc.		62		2,046
Inventure Foods, Inc. *		208		2,342
J&J Snack Foods Corp.		97		8,300
John B. Sanfilippo & Son, Inc.		86		2,114
Lancaster Colony Corp.		202		16,764
Lifeway Foods, Inc.		98		1,434
Limoneira Co.		88		2,318
National Beverage Corp.		228		4,175
Pilgrim’s Pride Corp. *		845		11,974
Post Holdings, Inc. *		12,150		521,842
Sanderson Farms, Inc.		15,393		972,992
Seaboard Corp.		2		5,460
Seneca Foods Corp., Class A *		55		1,613
Snyders-Lance, Inc.		528		15,835
The Boston Beer Co., Inc., Class A *		102		23,418
The Hain Celestial Group, Inc. *		5,272		438,789
Tootsie Roll Industries, Inc. (e)		25,579		818,528
TreeHouse Foods, Inc. *		10,647		779,999
Universal Corp.		260		13,788
Vector Group Ltd.		478		7,729

				4,587,026

Health Care Equipment & Services 8.1%
Abaxis, Inc.		283		10,112
ABIOMED, Inc. *		14,827		355,551
Acadia Healthcare Co., Inc. *		11,858		514,163
Accretive Health, Inc. *		781		6,451
Accuray, Inc. *		991		6,689
Air Methods Corp.		408		17,838

18 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Align Technology, Inc. *		768		43,822
Alliance HealthCare Services, Inc. *		105		2,647
Allscripts Healthcare Solutions, Inc. *		48,600		672,138
Almost Family, Inc.		220		4,231
Amedisys, Inc. *		616		10,028
AMN Healthcare Services, Inc. *		256		3,174
AmSurg Corp. *		32,366		1,388,178
Analogic Corp.		11,869		1,094,678
AngioDynamics, Inc. *		540		8,489
Anika Therapeutics, Inc. *		101		3,017
Antares Pharma, Inc. *		750		3,000
ArthroCare Corp. *		284		10,633
athenahealth, Inc. *		6,306		841,914
AtriCure, Inc. *		446		6,177
Atrion Corp.		18		4,809
Bio-Reference Laboratories, Inc. *		408		13,223
Biolase, Inc. *		60,550		113,228
BioScrip, Inc. *		34,571		242,343
Cantel Medical Corp.		294		10,319
Capital Senior Living Corp. *		175		3,881
Cardiovascular Systems, Inc. *		81		2,458
Centene Corp. *		7,930		445,349
Cerus Corp. *		389		2,455
Chemed Corp.		213		14,446
Chindex International, Inc. *		105		1,767
Computer Programs & Systems, Inc.		209		11,921
CONMED Corp.		284		10,301
CorVel Corp. *		15,058		626,413
Cross Country Healthcare, Inc. *		331		1,966
CryoLife, Inc.		266		2,391
Cutera, Inc. *		190		1,910
Cyberonics, Inc. *		319		18,425
Cynosure, Inc., Class A *		56		1,210
Derma Sciences, Inc. *		127		1,469
DexCom, Inc. *		59,877		1,720,266
Emeritus Corp. *		16,818		322,233
Endologix, Inc. *		22,528		407,081
Exactech, Inc. *		178		4,041
ExamWorks Group, Inc. *		297		7,677
Five Star Quality Care, Inc. *		326		1,653
Gentiva Health Services, Inc. *		550		6,297
Globus Medical, Inc., Class A *		261		5,011
Greatbatch, Inc. *		288		10,979
Greenway Medical Technologies *		143		2,910
Haemonetics Corp. *		3,593		145,732
Hanger, Inc. *		430		15,781
HealthSouth Corp.		7,451		261,605
HealthStream, Inc. *		236		8,430
Healthways, Inc. *		26,878		258,835
HeartWare International, Inc. *		144		10,449
HMS Holdings Corp. *		51,041		1,078,496
ICU Medical, Inc. *		15,242		941,956
Insulet Corp. *		10,893		425,045
Integra LifeSciences Holdings Corp. *		303		13,871
Invacare Corp.		92		1,975
IPC The Hospitalist Co., Inc. *		160		8,766
Kindred Healthcare, Inc.		501		6,954
Landauer, Inc.		74		3,582
LHC Group, Inc. *		240		4,944
Magellan Health Services, Inc. *		249		14,616
MAKO Surgical Corp. *		650		19,376
Masimo Corp.		717		18,370
MedAssets, Inc. *		683		15,729
Medical Action Industries, Inc. *		227		1,376
Medidata Solutions, Inc. *		315		34,748
MEDNAX, Inc. *		4,020		438,260
Merge Healthcare, Inc. *		1,173		2,979
Meridian Bioscience, Inc.		185		4,573
Merit Medical Systems, Inc. *		791		12,648
Molina Healthcare, Inc. *		175		5,537
MWI Veterinary Supply, Inc. *		129		20,465
National Healthcare Corp.		93		4,499
National Research Corp., Class A *		104		1,824
Natus Medical, Inc. *		500		9,865
Neogen Corp. *		258		11,925
NuVasive, Inc. *		555		17,638
NxStage Medical, Inc. *		20,868		276,918
Omnicell, Inc. *		424		9,782
OraSure Technologies, Inc. *		921		6,005
Orthofix International N.V. *		107		2,192
Owens & Minor, Inc.		518		19,384
PharMerica Corp. *		487		7,188
Quality Systems, Inc.		584		13,327
Quidel Corp. *		77		1,902
Rochester Medical Corp. *		118		2,358
Rockwell Medical, Inc. *		418		4,815
Select Medical Holdings Corp.		656		5,563
Skilled Healthcare Group, Inc., Class A *		239		1,018
Spectranetics Corp. *		680		14,205
STAAR Surgical Co. *		395		5,230
STERIS Corp.		17,888		808,359
SurModics, Inc. *		218		5,140
Symmetry Medical, Inc. *		235		1,904
Team Health Holdings, Inc. *		663		28,801
TearLab Corp. *		32,176		335,596
The Ensign Group, Inc.		165		7,026
The Providence Service Corp. *		220		6,576
Thoratec Corp. *		10,909		471,160
Tornier N.V. *		101		2,173
Triple-S Management Corp., Class B *		424		7,551
Unilife Corp. *		81,385		246,597
Universal American Corp.		375		2,783
USMD Holdings, Inc. *		44		1,225
Utah Medical Products, Inc.		34		1,892
Vascular Solutions, Inc. *		325		6,376
Vocera Communications, Inc. *		111		1,868
Volcano Corp. *		804		15,413
WellCare Health Plans, Inc. *		451		30,073
West Pharmaceutical Services, Inc.		610		29,493
Wright Medical Group, Inc. *		480		13,042

				15,235,146

Household & Personal Products 0.0%
Central Garden & Pet Co., Class A *		440		3,238
Elizabeth Arden, Inc. *		249		9,011
Inter Parfums, Inc.		107		3,762
Medifast, Inc. *		250		5,828
Nature’s Sunshine Products, Inc.		105		1,983
Nutraceutical International Corp.		84		2,020
Oil-Dri Corp. of America		61		2,165
Orchids Paper Products Co.		165		5,033
Prestige Brands Holdings, Inc. *		576		17,988

See financial notes 19

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Spectrum Brands Holdings, Inc.		227		14,964
Star Scientific, Inc. *		1,181		2,138
Synutra International, Inc. *		329		2,247
USANA Health Sciences, Inc. *		63		4,298
WD-40 Co.		99		7,177

				81,852

Insurance 2.2%
Ambac Financial Group, Inc. *		250		5,048
American Equity Investment Life Holding Co.		841		17,526
AMERISAFE, Inc.		15,581		599,869
AmTrust Financial Services, Inc.		366		14,040
Argo Group International Holdings Ltd.		169		7,095
Assured Guaranty Ltd.		27,400		561,700
Baldwin & Lyons, Inc., Class B		70		1,913
Citizens, Inc. *		419		3,520
CNO Financial Group, Inc.		2,510		39,106
Donegal Group, Inc., Class A		120		1,902
Eastern Insurance Holdings, Inc.		90		2,200
eHealth, Inc. *		338		14,406
EMC Insurance Group, Inc.		64		2,179
Employers Holdings, Inc.		433		13,020
Enstar Group Ltd. *		83		11,282
FBL Financial Group, Inc., Class A		152		6,800
First American Financial Corp.		1,039		26,869
Fortegra Financial Corp. *		262		1,931
Global Indemnity plc *		72		1,773
Greenlight Capital Re Ltd., Class A *		251		7,728
Hallmark Financial Services, Inc. *		183		1,557
HCI Group, Inc.		209		9,183
Hilltop Holdings, Inc. *		738		12,797
Horace Mann Educators Corp.		497		13,767
Independence Holding Co.		146		2,003
Infinity Property & Casualty Corp.		74		5,075
Investors Title Co.		24		1,875
Kansas City Life Insurance Co.		45		2,066
Maiden Holdings Ltd.		628		6,877
Meadowbrook Insurance Group, Inc.		979		6,501
Montpelier Re Holdings Ltd.		634		17,505
National Interstate Corp.		57		1,489
National Western Life Insurance Co., Class A		9		1,872
OneBeacon Insurance Group Ltd., Class A		425		6,783
Platinum Underwriters Holdings Ltd.		11,124		691,802
Primerica, Inc.		26,830		1,152,348
RLI Corp.		269		25,415
Safety Insurance Group, Inc.		100		5,469
Selective Insurance Group, Inc.		614		16,130
State Auto Financial Corp.		93		1,767
Stewart Information Services Corp.		370		11,588
Symetra Financial Corp.		602		11,275
The Hanover Insurance Group, Inc.		12,946		757,859
The Navigators Group, Inc. *		89		5,005
Tower Group International Ltd.		499		1,811
United Fire Group, Inc.		216		6,847

				4,116,573

Materials 4.1%
A. Schulman, Inc.		317		10,499
A.M. Castle & Co. *		183		2,619
AK Steel Holding Corp. *		2,009		8,840
Allied Nevada Gold Corp. *		271		1,106
AMCOL International Corp.		426		13,666
American Pacific Corp. *		60		2,731
American Vanguard Corp.		404		10,544
AptarGroup, Inc.		15,800		1,013,728
Arabian American Development Co. *		525		4,777
Axiall Corp.		647		25,162
Balchem Corp.		400		22,904
Berry Plastics Group, Inc. *		369		7,410
Calgon Carbon Corp. *		747		14,903
Century Aluminum Co. *		969		8,411
Chase Corp.		76		2,300
Chemtura Corp. *		913		22,368
Clearwater Paper Corp. *		251		13,107
Coeur Mining, Inc. *		1,259		15,372
Commercial Metals Co.		869		15,955
Deltic Timber Corp.		12,166		777,164
Ferro Corp. *		32,543		417,527
Flotek Industries, Inc. *		561		11,994
FutureFuel Corp.		348		6,059
General Moly, Inc. *		1,289		2,114
Globe Specialty Metals, Inc.		678		11,892
Gold Resource Corp.		374		1,941
Graphic Packaging Holding Co. *		1,752		14,717
Greif, Inc., Class A		10,600		566,994
GSE Holding, Inc. *		354		998
H.B. Fuller Co.		575		27,525
Handy & Harman Ltd. *		99		2,286
Hawkins, Inc.		42		1,512
Haynes International, Inc.		111		5,983
Headwaters, Inc. *		395		3,448
Hecla Mining Co.		2,963		9,245
Horsehead Holding Corp. *		490		7,110
Innophos Holdings, Inc.		339		16,991
Innospec, Inc.		19,359		891,676
Intrepid Potash, Inc.		309		4,589
Kaiser Aluminum Corp.		195		13,153
KapStone Paper & Packaging Corp.		500		25,980
KMG Chemicals, Inc.		78		1,558
Koppers Holdings, Inc.		14,648		651,982
Kraton Performance Polymers, Inc. *		526		11,188
Landec Corp. *		485		5,679
Louisiana-Pacific Corp. *		1,702		28,951
LSB Industries, Inc. *		23,759		872,430
Materion Corp.		153		4,561
Minerals Technologies, Inc.		298		16,876
Molycorp, Inc. *		534		2,707
Myers Industries, Inc.		598		10,656
Neenah Paper, Inc.		178		7,323
Noranda Aluminum Holding Corp.		508		1,382
Olin Corp.		580		13,056
OM Group, Inc. *		319		10,846
P.H. Glatfelter Co.		627		16,427
Penford Corp. *		125		1,700
PolyOne Corp.		1,067		32,330
Quaker Chemical Corp.		100		7,591
Resolute Forest Products *		773		12,360

20 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
RTI International Metals, Inc. *		324		10,984
Schnitzer Steel Industries, Inc., Class A		373		10,832
Schweitzer-Mauduit International, Inc.		284		17,574
Sensient Technologies Corp.		14,943		778,979
Stepan Co.		149		8,772
Stillwater Mining Co. *		1,215		13,256
SunCoke Energy, Inc. *		1,032		20,640
Texas Industries, Inc. *		321		17,238
Tredegar Corp.		361		10,548
UFP Technologies, Inc. *		86		1,982
United States Lime & Minerals, Inc. *		34		1,889
Universal Stainless & Alloy Products, Inc. *		115		3,717
US Concrete, Inc. *		109		2,382
US Silica Holdings, Inc.		285		9,924
Walter Energy, Inc.		517		8,215
Wausau Paper Corp.		522		6,107
Worthington Industries, Inc.		573		23,229
Zep, Inc.		47,306		940,916
Zoltek Cos., Inc. *		521		8,701

				7,642,788

Media 1.0%
Belo Corp., Class A		1,015		13,936
Carmike Cinemas, Inc. *		244		5,585
Central European Media Enterprises Ltd., Class A *		775		2,379
Crown Media Holdings, Inc., Class A *		678		2,251
Daily Journal Corp. *		16		2,367
Digital Generation, Inc. *		490		6,198
Entercom Communications Corp., Class A *		610		5,350
Entravision Communications Corp., Class A		301		2,029
Global Sources Ltd. *		270		2,022
Gray Television, Inc. *		475		4,014
Harte-Hanks, Inc.		611		4,870
Hemisphere Media Group, Inc. *		122		1,154
Journal Communications, Inc., Class A *		904		7,548
Lin Media LLC, Class A *		10,340		254,054
Live Nation Entertainment, Inc. *		1,712		33,281
Loral Space & Communications, Inc.		67		4,782
MDC Partners, Inc., Class A		60		1,850
Meredith Corp.		416		21,341
Morningstar, Inc.		10,755		863,519
National CineMedia, Inc.		417		7,306
Nexstar Broadcasting Group, Inc., Class A		390		17,312
ReachLocal, Inc. *		133		1,635
Reading International, Inc., Class A *		278		1,840
Rentrak Corp. *		82		3,074
Saga Communications, Inc., Class A		90		4,285
Scholastic Corp.		454		13,025
Sinclair Broadcast Group, Inc., Class A		18,853		604,427
The E.W. Scripps Co., Class A *		356		7,056
The New York Times Co., Class A		1,084		14,992
Valassis Communications, Inc.		476		13,023
World Wrestling Entertainment, Inc., Class A		170		2,202

				1,928,707

Pharmaceuticals, Biotechnology & Life Sciences 4.8%
ACADIA Pharmaceuticals, Inc. *		837		19,025
AcelRx Pharmaceuticals, Inc. *		200		1,344
Achillion Pharmaceuticals, Inc. *		1,151		2,889
Acorda Therapeutics, Inc. *		454		13,897
Aegerion Pharmaceuticals, Inc. *		3,410		282,416
Affymetrix, Inc. *		895		6,328
Akorn, Inc. *		28,192		576,244
Albany Molecular Research, Inc. *		150		1,965
Alnylam Pharmaceuticals, Inc. *		661		38,080
AMAG Pharmaceuticals, Inc. *		395		10,657
Ampio Pharmaceuticals, Inc. *		296		2,617
Anacor Pharmaceuticals, Inc. *		306		3,981
Arena Pharmaceuticals, Inc. *		3,046		13,372
ArQule, Inc. *		769		1,730
Array BioPharma, Inc. *		758		3,805
Auxilium Pharmaceuticals, Inc. *		21,998		378,586
AVANIR Pharmaceuticals, Inc., Class A *		1,614		6,537
AVEO Pharmaceuticals, Inc. *		805		1,666
BioDelivery Sciences International, Inc. *		653		3,428
Biotime, Inc. *		427		1,550
Bruker Corp. *		45,063		921,538
Cadence Pharmaceuticals, Inc. *		1,048		5,167
Cambrex Corp. *		360		6,055
Celldex Therapeutics, Inc. *		1,074		24,605
Cepheid, Inc. *		24,842		1,011,566
Charles River Laboratories International, Inc. *		34,400		1,692,824
Chelsea Therapeutics International Ltd. *		790		2,236
ChemoCentryx, Inc. *		121		599
Chimerix, Inc. *		76		1,151
Clovis Oncology, Inc. *		87		4,447
Cornerstone Therapeutics, Inc. *		192		1,818
Coronado Biosciences, Inc. *		709		1,184
Curis, Inc. *		1,600		6,384
Cytokinetics, Inc. *		140		841
Dendreon Corp. *		2,516		6,466
DepoMed, Inc. *		900		6,480
Durata Therapeutics, Inc. *		244		2,362
Dyax Corp. *		518		4,258
Dynavax Technologies Corp. *		2,128		2,617
Emergent Biosolutions, Inc. *		323		6,308
Enanta Pharmaceuticals, Inc. *		93		1,856
Endocyte, Inc. *		330		3,442
Enzon Pharmaceuticals, Inc.		1,693		2,506
Epizyme, Inc. *		62		2,376
Exact Sciences Corp. *		804		8,860
Exelixis, Inc. *		1,072		5,285
Fibrocell Science, Inc. *		274		1,014
Fluidigm Corp. *		308		9,702
Furiex Pharmaceuticals, Inc. *		49		1,916
Galena Biopharma, Inc. *		839		1,871
Genomic Health, Inc. *		321		9,604
GTx, Inc. *		259		443

See financial notes 21

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Halozyme Therapeutics, Inc. *		1,180		13,747
Harvard Bioscience, Inc. *		284		1,673
Hi-Tech Pharmacal Co., Inc.		157		6,765
Horizon Pharma, Inc. *		684		2,866
Hyperion Therapeutics, Inc. *		76		1,522
ICON plc *		34,750		1,405,290
Idenix Pharmaceuticals, Inc. *		816		2,685
ImmunoGen, Inc. *		1,054		17,349
Immunomedics, Inc. *		1,236		4,684
Impax Laboratories, Inc. *		470		9,522
Infinity Pharmaceuticals, Inc. *		426		5,772
Insmed, Inc. *		148		2,108
Intercept Pharmaceuticals, Inc. *		43		2,332
InterMune, Inc. *		1,022		14,400
Ironwood Pharmaceuticals, Inc. *		1,036		9,956
Isis Pharmaceuticals, Inc. *		1,187		39,492
Jazz Pharmaceuticals plc *		5,840		529,922
KaloBios Pharmaceuticals, Inc. *		334		1,339
Keryx Biopharmaceuticals, Inc. *		980		10,143
KYTHERA Biopharmaceuticals, Inc. *		64		2,861
Lexicon Pharmaceuticals, Inc. *		596		1,430
Ligand Pharmaceuticals, Inc., Class B *		80		4,141
Luminex Corp. *		628		12,246
MannKind Corp. *		1,746		8,538
Merrimack Pharmaceuticals, Inc. *		281		753
MiMedx Group, Inc. *		226		1,198
Momenta Pharmaceuticals, Inc. *		705		11,555
Nanosphere, Inc. *		501		977
Nektar Therapeutics *		1,261		11,992
Neurocrine Biosciences, Inc. *		1,108		10,460
NewLink Genetics Corp. *		75		1,256
Novavax, Inc. *		845		2,620
NPS Pharmaceuticals, Inc. *		1,172		33,730
Omeros Corp. *		332		3,320
OncoGenex Pharmaceutical, Inc. *		177		1,244
Opko Health, Inc. *		1,609		16,122
Orexigen Therapeutics, Inc. *		283		1,381
Osiris Therapeutics, Inc. *		165		2,196
OvaScience, Inc. *		118		1,141
Pacific Biosciences of California, Inc. *		687		2,824
Pacira Pharmaceuticals, Inc. *		7,285		367,965
PAREXEL International Corp. *		10,506		480,229
PDL Biopharma, Inc.		1,198		9,692
Portola Pharmaceuticals, Inc. *		79		1,750
Pozen, Inc. *		383		2,407
Progenics Pharmaceuticals, Inc. *		448		1,631
Prothena Corp. plc *		144		3,462
Puma Biotechnology, Inc. *		138		5,287
Questcor Pharmaceuticals, Inc.		560		34,367
Raptor Pharmaceutical Corp. *		744		10,699
Receptos, Inc. *		89		2,275
Repligen Corp. *		220		2,407
Repros Therapeutics, Inc. *		264		4,763
Rigel Pharmaceuticals, Inc. *		997		3,081
Sagent Pharmaceuticals, Inc. *		206		4,468
Salix Pharmaceuticals Ltd. *		4,950		355,163
Sangamo BioSciences, Inc. *		538		5,041
Santarus, Inc. *		773		18,034
Sarepta Therapeutics, Inc. *		320		12,461
SciClone Pharmaceuticals, Inc. *		344		1,627
Sequenom, Inc. *		1,119		2,148
Spectrum Pharmaceuticals, Inc.		1,177		10,110
Stemline Therapeutics, Inc. *		66		1,837
Sunesis Pharmaceuticals, Inc. *		329		1,648
Supernus Pharmaceuticals, Inc. *		327		2,312
Synageva BioPharma Corp. *		106		5,385
Synergy Pharmaceuticals, Inc. *		368		1,487
Synta Pharmaceuticals Corp. *		932		4,231
Targacept, Inc. *		850		4,038
TESARO, Inc. *		52		2,002
Tetraphase Pharmaceuticals, Inc. *		213		2,669
TG Therapeutics, Inc. *		269		971
The Medicines Co. *		9,972		338,250
Threshold Pharmaceuticals, Inc. *		1,100		4,774
Vanda Pharmaceuticals, Inc. *		218		1,561
Verastem, Inc. *		132		1,320
Vical, Inc. *		1,240		1,550
ViroPharma, Inc. *		792		30,745
VIVUS, Inc. *		1,499		14,076
Xenoport, Inc. *		356		1,862
XOMA Corp. *		1,300		5,863
ZIOPHARM Oncology, Inc. *		1,259		4,457

				9,111,555

Real Estate 4.3%
Acadia Realty Trust		578		15,415
AG Mortgage Investment Trust, Inc.		79		1,291
Agree Realty Corp.		205		6,472
Alexander & Baldwin, Inc. *		353		13,061
Alexander’s, Inc.		13		4,183
Altisource Residential Corp.		192		5,101
American Assets Trust, Inc.		432		14,381
American Capital Mortgage Investment Corp.		401		7,663
American Realty Capital Properties, Inc.		1,523		20,210
Anworth Mortgage Asset Corp.		1,734		8,514
Apollo Commercial Real Estate Finance, Inc.		505		8,136
Apollo Residential Mortgage, Inc.		306		4,608
Ares Commercial Real Estate Corp.		400		4,972
ARMOUR Residential REIT, Inc.		4,721		19,451
Ashford Hospitality Trust		944		12,329
Associated Estates Realty Corp.		410		6,289
AV Homes, Inc. *		99		1,891
Campus Crest Communities, Inc.		70,415		704,854
CapLease, Inc.		1,009		8,577
Capstead Mortgage Corp.		1,244		14,717
Cedar Realty Trust, Inc.		1,016		5,801
Chambers Street Properties		2,296		21,422
Chesapeake Lodging Trust		354		8,344
Colony Financial, Inc.		53,645		1,085,238
Consolidated-Tomoka Land Co.		43		1,613
Coresite Realty Corp.		342		11,094
Cousins Properties, Inc.		1,239		14,038
CubeSmart		1,521		27,789
CYS Investments, Inc.		2,209		18,754
DCT Industrial Trust, Inc.		2,844		22,041
DiamondRock Hospitality Co.		55,458		631,667
DuPont Fabros Technology, Inc.		773		19,209
Dynex Capital, Inc.		582		5,028

22 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
EastGroup Properties, Inc.		304		19,353
Education Realty Trust, Inc.		58,565		535,284
EPR Properties		484		24,863
Equity One, Inc.		613		14,779
Excel Trust, Inc.		688		8,311
FelCor Lodging Trust, Inc. *		1,063		7,143
First Industrial Realty Trust, Inc.		1,384		25,009
First Potomac Realty Trust		864		10,619
Forestar Group, Inc. *		464		10,361
Franklin Street Properties Corp.		1,246		16,447
Getty Realty Corp.		550		10,549
Gladstone Commercial Corp.		236		4,460
Glimcher Realty Trust		1,953		20,018
Government Properties Income Trust		544		13,301
Gramercy Property Trust, Inc. *		1,200		5,484
Healthcare Realty Trust, Inc.		1,087		26,099
Hersha Hospitality Trust		1,259		7,139
Highwoods Properties, Inc.		1,077		41,572
Hudson Pacific Properties, Inc.		611		12,642
Inland Real Estate Corp.		1,250		13,363
Invesco Mortgage Capital, Inc.		1,531		23,654
Investors Real Estate Trust		823		7,094
iStar Financial, Inc. *		1,010		12,756
JAVELIN Mortgage Investment Corp.		342		4,060
Kennedy-Wilson Holdings, Inc.		329		6,593
LaSalle Hotel Properties		60,062		1,864,925
Lexington Realty Trust		1,679		19,644
LTC Properties, Inc.		485		19,133
Medical Properties Trust, Inc.		1,708		22,272
Monmouth Real Estate Investment Corp., Class A		752		6,933
National Health Investors, Inc.		250		15,630
New Residential Investment Corp.		2,023		13,372
New York Mortgage Trust, Inc.		1,050		6,741
NorthStar Realty Finance Corp.		2,445		22,812
Parkway Properties, Inc.		352		6,375
Pebblebrook Hotel Trust		561		16,942
Pennsylvania Real Estate Investment Trust		629		11,404
PennyMac Mortgage Investment Trust		872		20,117
Physicians Realty Trust		23,060		289,634
Potlatch Corp.		420		17,149
PS Business Parks, Inc.		150		12,224
RAIT Financial Trust		1,484		11,204
Ramco-Gershenson Properties Trust		811		13,187
Redwood Trust, Inc.		48,306		846,321
Resource Capital Corp.		1,460		8,979
Retail Opportunity Investments Corp.		927		13,720
RLJ Lodging Trust		1,418		35,819
Rouse Properties, Inc.		488		9,867
Ryman Hospitality Properties, Inc.		602		22,220
Sabra Health Care REIT, Inc.		591		15,898
Saul Centers, Inc.		205		9,635
Select Income REIT		100		2,755
Silver Bay Realty Trust Corp.		373		5,767
Sovran Self Storage, Inc.		372		28,454
STAG Industrial, Inc.		367		7,674
Strategic Hotels & Resorts, Inc. *		1,973		17,165
Summit Hotel Properties, Inc.		103,460		950,797
Sun Communities, Inc.		354		15,778
Sunstone Hotel Investors, Inc.		1,913		25,347
Tejon Ranch Co. *		159		5,886
Terreno Realty Corp.		299		5,316
The Geo Group, Inc.		771		27,193
UMH Properties, Inc.		287		2,887
Universal Health Realty Income Trust		106		4,656
Urstadt Biddle Properties, Inc., Class A		224		4,422
Washington Real Estate Investment Trust		491		12,869
Western Asset Mortgage Capital Corp.		133		2,143
Whitestone REIT		404		5,571
Winthrop Realty Trust		146		1,718

				8,113,661

Retailing 5.2%
Aeropostale, Inc. *		1,044		9,699
America’s Car-Mart, Inc. *		38		1,738
ANN, Inc. *		555		19,625
Asbury Automotive Group, Inc. *		434		20,854
Ascena Retail Group, Inc. *		63,300		1,252,707
Barnes & Noble, Inc. *		342		4,833
Bebe Stores, Inc.		766		4,619
Blue Nile, Inc. *		112		4,600
Body Central Corp. *		174		974
Brown Shoe Co., Inc.		497		11,153
Chico’s FAS, Inc.		52,134		894,098
Christopher & Banks Corp. *		284		1,639
Conn’s, Inc. *		161		9,731
Core-Mark Holding Co., Inc.		105		7,427
Destination Maternity Corp.		197		6,154
Express, Inc. *		813		18,870
Five Below, Inc. *		11,460		553,060
Francesca’s Holdings Corp. *		16,564		297,986
Fred’s, Inc., Class A		62,510		1,012,662
Genesco, Inc. *		257		17,504
Gordmans Stores, Inc.		128		1,267
Group 1 Automotive, Inc.		250		16,000
hhgregg, Inc. *		110		1,706
Hibbett Sports, Inc. *		290		16,916
HSN, Inc.		417		21,851
Jos. A. Bank Clothiers, Inc. *		408		19,576
Kirkland’s, Inc. *		300		5,325
Lithia Motors, Inc., Class A		246		15,461
Lumber Liquidators Holdings, Inc. *		321		36,655
Monro Muffler Brake, Inc.		21,422		985,412
Nutrisystem, Inc.		158		2,970
Office Depot, Inc. *		2,606		14,568
OfficeMax, Inc.		1,012		15,160
Orbitz Worldwide, Inc. *		221		2,042
Penske Automotive Group, Inc.		498		19,731
PetMed Express, Inc.		284		4,215
Pier 1 Imports, Inc.		991		20,692
Pool Corp.		19,076		1,037,353
RadioShack Corp. *		543		1,526
Rent-A-Center, Inc.		485		16,606
Restoration Hardware Holdings, Inc. *		122		8,508
Saks, Inc. *		1,056		16,885
Select Comfort Corp. *		587		10,754
Shoe Carnival, Inc.		70		1,819
Shutterfly, Inc. *		460		22,604
Sonic Automotive, Inc., Class A		10,751		239,532

See financial notes 23

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Stage Stores, Inc.		39,686		819,516
Stein Mart, Inc.		616		9,098
Systemax, Inc.		178		1,691
The Bon-Ton Stores, Inc.		370		4,237
The Buckle, Inc.		280		13,703
The Cato Corp., Class A		40,486		1,213,365
The Children’s Place Retail Stores, Inc. *		270		14,739
The Finish Line, Inc., Class A		661		16,551
The Men’s Wearhouse, Inc.		598		25,295
The Pep Boys - Manny, Moe & Jack *		705		9,123
Tilly’s, Inc., Class A *		145		2,111
Trans World Entertainment Corp.		344		1,490
Tuesday Morning Corp. *		543		7,683
ValueVision Media, Inc., Class A *		338		1,805
Vitacost.com, Inc. *		446		3,528
Vitamin Shoppe, Inc. *		384		18,013
VOXX International Corp. *		301		4,669
West Marine, Inc. *		151		1,844
Weyco Group, Inc.		68		1,954
Winmark Corp.		26		1,903
Zale Corp. *		197		3,079
Zumiez, Inc. *		28,117		833,388

				9,713,852

Semiconductors & Semiconductor Equipment 1.3%
Advanced Energy Industries, Inc. *		466		9,730
Alpha & Omega Semiconductor Ltd. *		218		1,604
Ambarella, Inc. *		102		2,096
Amkor Technology, Inc. *		1,019		5,411
Applied Micro Circuits Corp. *		734		8,558
ATMI, Inc. *		546		14,928
Brooks Automation, Inc.		992		9,563
Cabot Microelectronics Corp. *		357		14,598
Cavium, Inc. *		22,417		903,629
CEVA, Inc. *		286		4,098
Cirrus Logic, Inc. *		607		13,615
Cypress Semiconductor Corp. *		1,129		10,477
Diodes, Inc. *		365		8,840
DSP Group, Inc. *		206		1,535
Entegris, Inc. *		1,145		11,851
Entropic Communications, Inc. *		936		4,006
FormFactor, Inc. *		1,000		5,220
GSI Technology, Inc. *		525		3,686
GT Advanced Technologies, Inc. *		983		7,373
Hittite Microwave Corp. *		339		21,659
Inphi Corp. *		480		7,075
Integrated Device Technology, Inc. *		1,097		11,672
International Rectifier Corp. *		777		20,233
Intersil Corp., Class A		1,102		12,298
IXYS Corp.		155		1,803
Kopin Corp. *		1,298		4,764
Lattice Semiconductor Corp. *		1,055		5,412
LTX-Credence Corp. *		900		5,517
MaxLinear, Inc., Class A *		247		2,139
Micrel, Inc.		11,770		108,284
Microsemi Corp. *		11,014		276,782
Mindspeed Technologies, Inc. *		1,088		3,144
MKS Instruments, Inc.		523		15,502
Monolithic Power Systems, Inc.		539		17,162
Nanometrics, Inc. *		425		7,897
NVE Corp. *		36		1,921
OmniVision Technologies, Inc. *		41,699		584,203
PDF Solutions, Inc. *		270		6,202
Photronics, Inc. *		432		3,629
PLX Technology, Inc. *		904		5,460
PMC-Sierra, Inc. *		1,362		7,995
Power Integrations, Inc.		409		23,493
Rambus, Inc. *		947		8,277
RF Micro Devices, Inc. *		2,375		12,469
Rubicon Technology, Inc. *		163		1,402
Rudolph Technologies, Inc. *		600		6,360
Semtech Corp. *		713		22,181
Sigma Designs, Inc. *		800		4,352
Silicon Image, Inc. *		1,158		6,080
Spansion, Inc., Class A *		809		9,684
SunEdison, Inc. *		2,744		25,519
SunPower Corp. *		527		15,910
Supertex, Inc.		69		1,760
Synaptics, Inc. *		343		15,949
Tessera Technologies, Inc.		654		12,439
TriQuint Semiconductor, Inc. *		1,424		11,292
Ultratech, Inc. *		231		5,495
Veeco Instruments, Inc. *		395		11,538

				2,365,771

Software & Services 6.7%
Accelrys, Inc. *		1,102		10,304
ACI Worldwide, Inc. *		341		18,796
Actuate Corp. *		877		7,025
Acxiom Corp. *		606		20,137
Advent Software, Inc.		481		16,138
American Software, Inc., Class A		406		3,552
Angie’s List, Inc. *		432		6,087
Aspen Technology, Inc. *		17,786		679,959
AVG Technologies NV *		46,230		929,223
Bankrate, Inc. *		551		9,279
Bazaarvoice, Inc. *		185		1,735
Blackbaud, Inc.		615		22,140
Blucora, Inc. *		440		10,397
Bottomline Technologies, Inc. *		560		17,595
Brightcove, Inc. *		16,235		247,908
BroadSoft, Inc. *		386		12,630
CACI International, Inc., Class A *		168		12,093
Callidus Software, Inc. *		675		6,986
Carbonite, Inc. *		132		1,748
Cardtronics, Inc. *		17,415		683,539
Cass Information Systems, Inc.		37		2,121
CIBER, Inc. *		1,423		4,625
CommVault Systems, Inc. *		14,901		1,163,470
comScore, Inc. *		464		12,398
Comverse, Inc. *		197		6,221
Constant Contact, Inc. *		187		4,845
Convergys Corp.		796		15,713
Cornerstone OnDemand, Inc. *		480		22,738
CoStar Group, Inc. *		325		57,522
CSG Systems International, Inc.		200		5,572
Dealertrack Technologies, Inc. *		360		13,428
Demandware, Inc. *		42		2,077
Dice Holdings, Inc. *		775		5,719
Digimarc Corp.		79		1,664
Digital River, Inc. *		679		12,113

24 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
EarthLink, Inc.		768		3,886
Ebix, Inc.		353		4,017
eGain Corp. *		198		2,273
Ellie Mae, Inc. *		167		4,826
Envestnet, Inc. *		355		12,886
EPAM Systems, Inc. *		3,443		129,009
EPIQ Systems, Inc.		706		10,562
ePlus, Inc.		28		1,522
Euronet Worldwide, Inc. *		523		22,698
EVERTEC, Inc.		78		1,830
ExlService Holdings, Inc. *		9,860		285,053
Fair Isaac Corp.		462		26,463
FleetMatics Group plc *		10,840		344,170
Forrester Research, Inc.		27,439		1,064,908
Global Cash Access Holdings, Inc. *		785		6,515
Global Eagle Entertainment, Inc. *		80,360		818,065
Guidewire Software, Inc. *		452		22,925
Heartland Payment Systems, Inc.		425		17,191
Higher One Holdings, Inc. *		570		4,531
iGATE Corp. *		257		8,183
Imperva, Inc. *		90		3,451
Infoblox, Inc. *		12,357		549,269
Interactive Intelligence Group, Inc. *		204		12,536
Internap Network Services Corp. *		8,989		65,350
IntraLinks Holdings, Inc. *		807		8,385
j2 Global, Inc.		490		26,940
Jive Software, Inc. *		97		1,056
Liquidity Services, Inc. *		238		6,214
LivePerson, Inc. *		24,403		227,924
LogMeIn, Inc. *		331		10,691
Manhattan Associates, Inc. *		221		23,539
ManTech International Corp., Class A		165		4,610
Marketo, Inc. *		77		2,600
MAXIMUS, Inc.		23,656		1,146,133
Mentor Graphics Corp.		1,019		22,500
MicroStrategy, Inc., Class A *		122		14,883
Millennial Media, Inc. *		197		1,385
Mitek Systems, Inc. *		320		1,693
ModusLink Global Solutions, Inc. *		891		3,671
MoneyGram International, Inc. *		348		7,346
Monotype Imaging Holdings, Inc.		481		13,574
Monster Worldwide, Inc. *		941		4,065
Move, Inc. *		581		9,860
Net Element International, Inc. *		295		1,395
NetScout Systems, Inc. *		369		10,450
NIC, Inc.		599		14,747
NICE Systems Ltd. ADR		10,250		401,595
OpenTable, Inc. *		7,848		545,279
Pegasystems, Inc.		340		12,940
Perficient, Inc. *		168		3,039
Progress Software Corp. *		541		14,044
Proofpoint, Inc. *		13,361		422,742
PROS Holdings, Inc. *		257		9,085
PTC, Inc. *		1,218		33,763
QAD, Inc., Class A		148		2,208
Qlik Technologies, Inc. *		1,050		26,607
Qualys, Inc. *		152		3,162
QuinStreet, Inc. *		551		4,898
RealPage, Inc. *		505		12,388
Reis, Inc. *		91		1,637
Responsys, Inc. *		433		7,075
Rosetta Stone, Inc. *		128		1,943
Sapiens International Corp. N.V.		293		1,890
Sapient Corp. *		1,309		20,695
SciQuest, Inc. *		370		8,081
SeaChange International, Inc. *		550		7,804
ServiceSource International, Inc. *		546		5,908
SPS Commerce, Inc. *		72		4,907
SS&C Technologies Holdings, Inc. *		511		20,082
Stamps.com, Inc. *		166		7,543
Sykes Enterprises, Inc. *		329		6,159
Synchronoss Technologies, Inc. *		435		15,060
Syntel, Inc.		187		16,052
Take-Two Interactive Software, Inc. *		938		16,800
Tangoe, Inc. *		17,750		339,025
TechTarget, Inc. *		391		1,963
TeleNav, Inc. *		470		3,407
TeleTech Holdings, Inc. *		251		6,644
The Active Network, Inc. *		820		11,841
The Hackett Group, Inc.		327		2,328
The Ultimate Software Group, Inc. *		293		45,263
TiVo, Inc. *		1,233		16,387
Travelzoo, Inc. *		203		4,371
Trulia, Inc. *		169		6,755
Tyler Technologies, Inc. *		7,461		721,553
Unisys Corp. *		582		15,336
United Online, Inc. *		776		6,705
ValueClick, Inc. *		801		15,387
VASCO Data Security International, Inc. *		391		2,936
Verint Systems, Inc. *		17,267		630,591
VirnetX Holding Corp. *		369		8,022
Virtusa Corp. *		27		839
VistaPrint N.V. *		301		16,269
Vocus, Inc. *		319		2,759
Vringo, Inc. *		563		1,588
Web.com Group, Inc. *		624		16,817
WebMD Health Corp. *		387		13,630
WEX, Inc. *		477		44,528
XO Group, Inc. *		322		4,469
Xoom Corp. *		74		2,202
Yelp, Inc. *		356		24,119
Zillow, Inc., Class A *		220		17,519
Zix Corp. *		1,200		4,896

				12,654,812

Technology Hardware & Equipment 4.9%
ADTRAN, Inc.		544		12,773
Aeroflex Holding Corp. *		348		2,697
Agilysys, Inc. *		137		1,610
Anaren, Inc. *		131		3,272
Anixter International, Inc. *		285		24,365
ARRIS Group, Inc. *		1,232		22,004
Aruba Networks, Inc. *		22,389		420,018
Aviat Networks, Inc. *		1,283		2,643
Avid Technology, Inc. *		773		5,759
Badger Meter, Inc.		136		7,073
Bel Fuse, Inc., Class B		120		2,525
Belden, Inc.		37,306		2,509,202
Benchmark Electronics, Inc. *		401		9,115
Black Box Corp.		134		3,355
CalAmp Corp. *		22,041		518,625
Calix, Inc. *		848		8,624

See financial notes 25

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Checkpoint Systems, Inc. *		467		7,948
Ciena Corp. *		1,254		29,181
Cognex Corp.		862		26,938
Coherent, Inc.		10,404		688,641
Comtech Telecommunications Corp.		372		11,167
Cray, Inc. *		415		9,279
Daktronics, Inc.		790		9,448
Datalink Corp. *		156		1,602
Diebold, Inc.		31,200		934,752
DTS, Inc. *		346		6,920
Electro Rent Corp.		245		4,444
Electro Scientific Industries, Inc.		263		3,151
Electronics for Imaging, Inc. *		400		13,724
Emulex Corp. *		794		5,979
Extreme Networks, Inc. *		1,418		7,600
Fabrinet *		249		4,168
FARO Technologies, Inc. *		117		5,558
FEI Co.		463		41,244
Finisar Corp. *		1,149		26,438
Fusion-io, Inc. *		445		4,784
Globecomm Systems, Inc. *		349		4,896
GSI Group, Inc. *		370		3,693
Harmonic, Inc. *		788		5,760
Hutchinson Technology, Inc. *		679		2,526
Imation Corp. *		950		4,418
Immersion Corp. *		129		1,641
Infinera Corp. *		962		9,822
Insight Enterprises, Inc. *		288		6,068
InterDigital, Inc.		486		18,833
InvenSense, Inc. *		666		11,249
Itron, Inc. *		317		13,526
Ixia *		24,652		349,565
KEMET Corp. *		1,092		6,192
KVH Industries, Inc. *		129		1,772
Littelfuse, Inc.		273		23,213
Maxwell Technologies, Inc. *		653		4,898
Measurement Specialties, Inc. *		130		7,245
Mercury Systems, Inc. *		600		5,532
Mesa Laboratories, Inc.		31		2,159
Methode Electronics, Inc.		461		11,792
MTS Systems Corp.		8,424		550,256
Multi-Fineline Electronix, Inc. *		162		2,172
NETGEAR, Inc. *		11,996		345,005
Newport Corp. *		655		10,395
Numerex Corp., Class A *		148		1,748
Oplink Communications, Inc. *		255		4,654
OSI Systems, Inc. *		237		17,263
Park Electrochemical Corp.		140		3,927
ParkerVision, Inc. *		408		1,118
PC Connection, Inc.		112		2,239
PC-Tel, Inc.		222		2,045
Plantronics, Inc.		482		20,697
Plexus Corp. *		494		18,910
Procera Networks, Inc. *		410		5,802
QLogic Corp. *		849		10,485
Quantum Corp. *		1,535		1,903
RealD, Inc. *		770		5,328
Rofin-Sinar Technologies, Inc. *		393		10,316
Rogers Corp. *		112		6,828
Ruckus Wireless, Inc. *		22,003		319,043
Sanmina Corp. *		993		14,458
ScanSource, Inc. *		23,406		900,195
ShoreTel, Inc. *		692		5,501
Silicon Graphics International Corp. *		411		5,248
Sonus Networks, Inc. *		1,630		4,890
Speed Commerce, Inc. *		612		2,246
Super Micro Computer, Inc. *		549		7,642
Symmetricom, Inc. *		431		3,090
SYNNEX Corp. *		277		16,980
Tech Data Corp. *		2,591		134,887
Tellabs, Inc.		2,907		7,093
TESSCO Technologies, Inc.		65		2,303
TTM Technologies, Inc. *		856		7,490
Ubiquiti Networks, Inc.		99		3,819
Universal Display Corp. *		554		17,673
ViaSat, Inc. *		418		27,638
Vishay Precision Group, Inc. *		109		1,788
Zebra Technologies Corp., Class A *		16,300		787,453
Zygo Corp. *		108		1,668

				9,183,622

Telecommunication Services 0.8%
8x8, Inc. *		24,522		281,022
Atlantic Tele-Network, Inc.		34		1,884
Cincinnati Bell, Inc. *		1,476		4,221
Cogent Communications Group, Inc.		575		20,200
Consolidated Communications Holdings, Inc.		423		7,881
Fairpoint Communications, Inc. *		420		3,923
General Communication, Inc., Class A *		408		3,880
Hawaiian Telcom Holdco, Inc. *		69		1,834
HickoryTech Corp.		160		2,141
IDT Corp., Class B		265		5,801
inContact, Inc. *		157,140		1,192,693
Inteliquent, Inc.		360		4,626
Iridium Communications, Inc. *		770		4,643
Leap Wireless International, Inc. *		861		13,862
Lumos Networks Corp.		101		2,223
NII Holdings, Inc. *		972		3,344
NTELOS Holdings Corp.		106		2,018
Premiere Global Services, Inc. *		922		8,307
Shenandoah Telecommunications Co.		99		2,745
Straight Path Communications, Inc., Class B *		132		721
USA Mobility, Inc.		257		3,834
Vonage Holdings Corp. *		1,000		3,730

				1,575,533

Transportation 1.9%
Air Transport Services Group, Inc. *		834		6,038
Allegiant Travel Co.		131		13,659
Arkansas Best Corp.		453		12,399
Atlas Air Worldwide Holdings, Inc. *		22,244		823,695
Echo Global Logistics, Inc. *		281		5,173
Forward Air Corp.		462		18,702
Hawaiian Holdings, Inc. *		940		7,755
Heartland Express, Inc.		900		12,924
Hub Group, Inc., Class A *		309		11,350
International Shipholding Corp.		71		1,762
JetBlue Airways Corp. *		2,129		15,095
Knight Transportation, Inc.		249		4,226

26 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Landstar System, Inc.		14,237		787,164
Matson, Inc.		243		6,583
Pacer International, Inc. *		762		6,081
Park-Ohio Holdings Corp. *		53		2,195
Patriot Transportation Holding, Inc. *		56		2,070
Quality Distribution, Inc. *		198		2,035
Republic Airways Holdings, Inc. *		835		9,836
Roadrunner Transportation Systems, Inc. *		377		9,991
Saia, Inc. *		142		4,619
SkyWest, Inc.		318		4,783
Spirit Airlines, Inc. *		509		21,963
Swift Transportation Co. *		1,155		25,167
Universal Truckload Services, Inc.		73		1,946
US Airways Group, Inc. *		55,279		1,214,480
Uti Worldwide, Inc.		40,666		618,123
Werner Enterprises, Inc.		439		10,167
Wesco Aircraft Holdings, Inc. *		138		2,528
XPO Logistics, Inc. *		248		5,005

				3,667,514

Utilities 2.2%
ALLETE, Inc.		473		23,901
American States Water Co.		458		13,044
Artesian Resources Corp., Class A		77		1,763
Atlantic Power Corp.		1,045		4,692
Atmos Energy Corp.		18,100		801,287
Avista Corp.		534		14,840
Black Hills Corp.		521		26,425
California Water Service Group		444		9,679
Chesapeake Utilities Corp.		37		2,013
Cleco Corp.		650		30,121
Connecticut Water Service, Inc.		59		1,891
Delta Natural Gas Co., Inc.		78		1,741
Dynegy, Inc. *		908		17,642
El Paso Electric Co.		450		15,826
Genie Energy Ltd., Class B *		176		1,818
IDACORP, Inc.		546		28,174
MGE Energy, Inc.		177		9,967
Middlesex Water Co.		87		1,803
New Jersey Resources Corp.		7,329		337,354
Northwest Natural Gas Co.		21,691		942,040
NorthWestern Corp.		321		14,715
NRG Yield, Inc., Class A *		106		3,755
Ormat Technologies, Inc.		384		10,011
Otter Tail Corp.		409		12,200
Piedmont Natural Gas Co., Inc.		726		24,786
PNM Resources, Inc.		772		18,466
Portland General Electric Co.		1,003		28,786
SJW Corp.		65		1,835
South Jersey Industries, Inc.		425		25,309
Southwest Gas Corp.		511		27,727
The Empire District Electric Co.		430		9,671
The Laclede Group, Inc.		11,278		530,855
UIL Holdings Corp.		680		26,194
UNS Energy Corp.		13,211		653,680
WGL Holdings, Inc.		11,175		502,987
York Water Co.		254		5,260

				4,182,258

Total Common Stock
(Cost $139,348,839)				175,847,188




Other Investment Companies 7.1% of net assets

Equity Funds 3.2%
iShares Russell 2000 ETF		784		85,636
iShares Russell Mid-Cap ETF		41,700		6,003,549

				6,089,185

Money Market Fund 3.9%
State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (c)		7,386,309		7,386,309

Total Other Investment Companies
(Cost $13,356,726)				13,475,494




Rights 0.0% of net assets

Banks 0.0%
Peapack-Gladstone Financial Corp. (d)(e)*		101		—

Consumer Services 0.0%
Caesars Entertainment Corp. (d)(e)*		385		—

Total Rights
(Cost $—)				—




Warrants 0.0% of net assets

Energy 0.0%
Magnum Hunter Resources Corp. (d)(e)*		129		—

Total Warrants
(Cost $—)				—



	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

Short-Term Investments 0.2% of net assets

U.S. Treasury Obligations 0.2%
U.S. Treasury Bills
0.00%, 12/19/13 (a)(b)		100,000		100,000
0.01%, 12/05/13 (a)(b)		27,000		27,000
0.01%, 12/19/13 (a)(b)		175,000		174,999

See financial notes 27

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)
0.07%, 12/19/13 (a)(b)		50,000		49,995

Total Short-Term Investments
(Cost $351,994)				351,994



End of Investments.

At 10/31/13, the tax basis cost of the fund’s investments was $153,768,184 and the unrealized appreciation and depreciation were $40,011,568 and ($4,105,076), respectively, with a net unrealized appreciation of $35,906,492.


*		Non-income producing security.
(a)		All or a portion of this security is held as collateral for open futures contracts.
(b)		The rate shown is the purchase yield.
(c)		The rate shown is the 7-day yield.
(d)		Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(e)		Illiquid security. At the period end, the value of these amounted to $818,528 or 0.4% of net assets.


ADR —		American Depositary Receipt
ETF —		Exchange traded fund
REIT —		Real Estate Investment Trust

In addition to the above, the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

Russell 2000 Index, mini, Long, expires 12/20/13

1,866,260

94,995

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$175,847,188		$—		$—		$175,847,188
Other Investment Companies¹		13,475,494		—		—		13,475,494
Short-Term Investments¹		—		351,994		—		351,994
Rights¹		—		—		—		—
Warrants¹		—		—		—		—

Total		$189,322,682		$351,994		$—		$189,674,676

Other Financial Instruments
Futures Contract²		$94,995		$—		$—		$94,995


¹		As categorized in Portfolio Holdings.
²		Futures contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

Balance

Change in

Balance

as of

Realized

Unrealized

Gross

as of

October 31,

Gains

Appreciation

Gross

Transfers

October 31,

Investments in Securities

2012

(Losses)

(Depreciation)

Purchases

Sales

out

2013

Common Stock

$1,808

$—

($357

)

$—

($1,451

)

$—

Total

$1,808

$—

($357

)

$—

($1,451

)

$—

28 See financial notes

Laudus Small-Cap MarketMasters Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends (net of foreign withholding taxes of $7,686)		$2,036,769
Interest	+	1,250

Total investment income		2,038,019

Expenses

Investment adviser and administrator fees		2,020,472
Shareholder service fees:
Investor Shares		170,868
Select Shares		183,799
Portfolio accounting fees		85,228
Professional fees		48,555
Transfer agent fees		47,247
Custodian fees		40,514
Shareholder reports		36,042
Registration fees		32,518
Independent trustees’ fees		8,161
Interest expense		238
Other expenses	+	5,490

Total expenses		2,679,132
Expense reduction by CSIM and its affiliates	−	501,836
Custody credits	−	8

Net expenses	−	2,177,288

Net investment loss		(139,269	)

Realized and Unrealized Gains (Losses)

Net realized gains on investments		28,209,487
Net realized gains on futures contracts		865,900
Net realized gains on foreign currency transactions	+	162

Net realized gains		29,075,549
Net change in unrealized appreciation on investments		18,123,973
Net change in unrealized appreciation on futures contracts	+	300,357

Net change in unrealized appreciation	+	18,424,330

Net realized and unrealized gains		47,499,879

Increase in net assets resulting from operations		$47,360,610

30 See financial notes

Laudus Small-Cap MarketMasters Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment loss		($139,269	)		($1,094,267	)
Net realized gains		29,075,549			17,333,546
Net change in unrealized appreciation (depreciation)	+	18,424,330			(10,805,359	)

Increase in net assets from operations		$47,360,610			$5,433,920

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares Sold
Investor Shares			122,198		$1,904,239			481,008		$6,525,131
Select Shares	+		1,026,670		15,859,002			1,179,826		15,072,446

Total shares sold			1,148,868		$17,763,241			1,660,834		$21,597,577


Shares Redeemed
Investor Shares			(669,973	)	($10,039,749	)		(745,538	)	($9,511,650	)
Select Shares	+		(1,210,604	)	(19,403,597	)		(12,619,122	)	(146,015,616	)

Total shares redeemed			(1,880,577	)	($29,443,346	)		(13,364,660	)	($155,527,266	)

Net transactions in fund shares			(731,709	)	($11,680,105	)		(11,703,826	)	($133,929,689	)

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			11,545,010		$152,947,332			23,248,836		$281,443,101
Total increase or decrease	+		(731,709	)	35,680,505			(11,703,826	)	(128,495,769	)

End of period			10,813,301		$188,627,837			11,545,010		$152,947,332


Net investment loss					($1,053,254	)				($899,903	)

See financial notes 31

Laudus International MarketMasters Fund™

Financial Statements

Financial Highlights


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
Investor Shares	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09


Per-Share Data ($)

Net asset value at beginning of period		19.03			17.45			18.36			15.04			11.78

Income (loss) from investment operations:
Net investment income (loss)		0.23			0.21			0.16			0.09			0.14
Net realized and unrealized gains (losses)		4.85			1.52			(0.85	)		3.41			3.63

Total from investment operations		5.08			1.73			(0.69	)		3.50			3.77
Less distributions:
Distributions from net investment income		(0.43	)		(0.15	)		(0.22	)		(0.18	)		(0.51	)

Net asset value at end of period		23.68			19.03			17.45			18.36			15.04

Total return (%)		27.23			10.05			(3.87	)		23.47			33.64

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		1.40			1.53	¹		1.59			1.60			1.62
Gross operating expenses		1.60			1.62			1.60			1.62			1.63
Net investment income (loss)		1.10			1.19			0.80			0.53			0.95
Portfolio turnover rate		65			68			78			83			96
Net assets, end of period ($ x 1,000,000)		675			592			665			849			931


	11/1/12–			11/1/11–			11/1/10–			11/1/09–			11/1/08–
Select Shares	10/31/13			10/31/12			10/31/11			10/31/10			10/31/09


Per-Share Data ($)

Net asset value at beginning of period		19.03			17.46			18.38			15.05			11.80

Income (loss) from investment operations:
Net investment income (loss)		0.28			0.25			0.19			0.10			0.15
Net realized and unrealized gains (losses)		4.83			1.50			(0.86	)		3.43			3.64

Total from investment operations		5.11			1.75			(0.67	)		3.53			3.79
Less distributions:
Distributions from net investment income		(0.46	)		(0.18	)		(0.25	)		(0.20	)		(0.54	)

Net asset value at end of period		23.68			19.03			17.46			18.38			15.05

Total return (%)		27.43			10.20			(3.76	)		23.68			33.82

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		1.25			1.37	¹		1.45			1.48	²		1.47
Gross operating expenses		1.44			1.47			1.47			1.50			1.58
Net investment income (loss)		1.26			1.40			0.99			0.69			1.08
Portfolio turnover rate		65			68			78			83			96
Net assets, end of period ($ x 1,000,000)		1,590			1,062			961			948			630

¹ Effective June 6, 2012, the net operating expense limitation was lowered. The ratio presented for period ended 10/31/12 is a blended ratio.

² The ratio of net operating expenses would have been 1.47% if certain non-routine expenses had not been incurred.

32 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2013

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


				Cost		Value
Holdings by Category				($)		($)

	94	.0%	Common Stock		1,603,354,249		2,128,971,390
	0	.3%	Preferred Stock		5,886,941		6,120,319
	5	.0%	Other Investment Company		114,088,179		114,088,179
	0	.0%	Rights		35,341		37,011
	0	.2%	Short-Term Investments		4,849,957		4,849,957


	99	.5%	Total Investments		1,728,214,667		2,254,066,856
	0	.5%	Other Assets and Liabilities, Net				11,049,228


	100	.0%	Net Assets				2,265,116,084


	Number		Value
Security	of Shares		($)

Common Stock 94.0% of net assets

Australia 4.8%


Banks 0.3%
Australia & New Zealand Banking Group Ltd.		42,771		1,368,687
Bendigo & Adelaide Bank Ltd.		6,444		66,340
Commonwealth Bank of Australia		24,782		1,784,366
National Australia Bank Ltd.		36,538		1,221,131
Westpac Banking Corp.		48,304		1,568,293

				6,008,817


Capital Goods 0.4%
Leighton Holdings Ltd.		2,271		38,472
Monadelphous Group Ltd.		509,150		8,736,284

				8,774,756


Commercial & Professional Supplies 0.1%
ALS Ltd.		5,060		47,866
Brambles Ltd.		23,345		204,940
Seek Ltd.		4,000		49,141
Transfield Services Ltd.		2,260,626		2,851,242

				3,153,189


Consumer Services 0.5%
Crown Ltd.		6,204		98,906
Echo Entertainment Group Ltd.		12,297		30,863
Flight Centre Ltd.		123,358		6,056,052
Invocare Ltd.		429,546		4,448,893
TABCORP Holdings Ltd.		10,270		34,931
Tatts Group Ltd.		22,383		66,462

				10,736,107


Diversified Financials 0.0%
ASX Ltd.		2,806		97,468
FlexiGroup Ltd.		136,543		607,648
Macquarie Group Ltd.		4,847		233,139

				938,255


Energy 0.0%
Caltex Australia Ltd.		2,024		35,366
Origin Energy Ltd.		16,850		232,942
Santos Ltd.		14,656		209,757
Whitehaven Coal Ltd. *		6,829		10,461
Woodside Petroleum Ltd.		10,320		378,330
WorleyParsons Ltd.		3,314		69,010

				935,866


Food & Staples Retailing 0.1%
Metcash Ltd.		14,377		45,498
Wesfarmers Ltd. *		15,554		631,165
Woolworths Ltd.		19,039		627,838

				1,304,501


Food, Beverage & Tobacco 0.0%
Coca-Cola Amatil Ltd.		8,985		109,493
Treasury Wine Estates Ltd.		9,858		43,780

				153,273


Health Care Equipment & Services 0.0%
Cochlear Ltd.		852		47,339
Ramsay Health Care Ltd.		1,970		72,318
Sonic Healthcare Ltd.		5,555		84,798

				204,455


Insurance 0.7%
AMP Ltd.		3,172,735		14,216,831
Insurance Australia Group Ltd.		32,789		191,485
QBE Insurance Group Ltd.		18,204		254,934
Suncorp Group Ltd.		20,038		252,667

				14,915,917


Materials 1.0%
Alumina Ltd. *		36,590		35,575
Amcor Ltd.		18,052		184,932
BHP Billiton Ltd.		49,777		1,759,785
BHP Billiton Ltd. ADR		86,675		6,127,056
Boral Ltd.		10,945		51,071
DuluxGroup Ltd.		161,850		788,164
Fortescue Metals Group Ltd.		21,499		105,439
Iluka Resources Ltd.		6,278		60,937
Incitec Pivot Ltd.		26,096		65,656
Newcrest Mining Ltd.		11,930		115,681
Orica Ltd.		674,162		13,421,391
Rio Tinto Ltd.		6,818		410,254

				23,125,941


Media 0.0%
REA Group Ltd.		18,461		724,554


Pharmaceuticals, Biotechnology & Life Sciences 0.2%
CSL Ltd.		56,905		3,740,644


Real Estate 1.2%
CFS Retail Property Trust Group		32,493		63,592
Charter Hall Retail REIT		1,645,358		6,281,891
Commonwealth Property Office Fund		11,902,377		13,465,916
Dexus Property Group		72,559		74,360

See financial notes 33

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Federation Centres Ltd.		22,668		53,198
Goodman Group		25,244		120,641
GPT Group		30,770		107,242
Lend Lease Group		8,133		87,705
Mirvac Group		51,235		84,228
Shopping Centres Australasia Property Group		3,392,393		5,108,890
Stockland		32,727		124,040
Westfield Group		32,509		332,681
Westfield Retail Trust		45,683		133,282

				26,037,666


Retailing 0.0%
Harvey Norman Holdings Ltd.		7,965		24,509
Super Retail Group Ltd.		37,367		473,327

				497,836


Software & Services 0.0%
Computershare Ltd.		6,665		67,639


Telecommunication Services 0.3%
Telstra Corp., Ltd.		1,394,000		6,821,222


Transportation 0.0%
Asciano Ltd.		14,625		80,318
Aurizon Holdings Ltd.		33,984		153,837
Qantas Airways Ltd. *		16,643		19,567
Sydney Airport		1,870		7,406
Toll Holdings Ltd.		10,116		55,110
Transurban Group		20,579		138,051

				454,289


Utilities 0.0%
AGL Energy Ltd.		8,346		123,292
APA Group		12,878		73,786
SP AusNet		24,580		29,037

				226,115

				108,821,042

Austria 0.0%


Banks 0.0%
Erste Group Bank AG		3,933		138,087
Raiffeisen Bank International AG		733		26,886

				164,973


Capital Goods 0.0%
Andritz AG		1,076		66,262


Energy 0.0%
OMV AG		2,275		108,523


Insurance 0.0%
Vienna Insurance Group AG Wiener Versicherung Gruppe		576		30,472


Materials 0.0%
Voestalpine AG		1,648		77,745


Real Estate 0.0%
Immofinanz AG *		13,432		58,827


Telecommunication Services 0.0%
Telekom Austria AG		2,926		24,054


Utilities 0.0%
Verbund AG		1,021		23,951

				554,807

Belgium 0.2%


Banks 0.0%
KBC GROEP N.V.		3,694		201,255


Diversified Financials 0.0%
Groupe Bruxelles Lambert S.A.		1,210		107,902


Food & Staples Retailing 0.1%
Colruyt S.A.		42,899		2,393,228
Delhaize Group S.A.		1,527		97,521

				2,490,749


Food, Beverage & Tobacco 0.1%
Anheuser-Busch InBev N.V.		12,382		1,283,563


Insurance 0.0%
Ageas		3,420		145,330


Materials 0.0%
Solvay S.A.		938		146,668
Umicore S.A.		1,709		81,381

				228,049


Media 0.0%
Telenet Group Holding N.V.		838		46,024


Pharmaceuticals, Biotechnology & Life Sciences 0.0%
UCB S.A.		1,687		110,738


Telecommunication Services 0.0%
Belgacom S.A.		2,281		62,412

				4,676,022

Brazil 0.7%


Capital Goods 0.1%
Mills Estruturas e Servicos de Engenharia S.A.		177,400		2,462,789


Consumer Services 0.2%
Estacio Participacoes S.A.		455,300		3,516,066
Kroton Educacional S.A.		86,700		1,281,033

				4,797,099


Insurance 0.1%
BB Seguridade Participacoes S.A.		227,700		2,487,197


Materials 0.2%
Vale S.A. ADR		205,400		3,288,454


Software & Services 0.1%
Cielo S.A.		64,100		1,943,933
Linx S.A.		33,900		612,718

				2,556,651


Transportation 0.0%
CCR S.A.		120,400		1,001,273

				16,593,463

Cambodia 0.1%


Consumer Services 0.1%
NagaCorp Ltd.		2,382,000		2,199,646

34 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Canada 3.8%


Capital Goods 0.3%
ATS Automation Tooling Systems, Inc. *		311,070		4,302,143
CAE, Inc.		282,300		3,235,491
Finning International, Inc.		13,350		307,806

				7,845,440


Commercial & Professional Supplies 0.1%
Ritchie Bros. Auctioneers, Inc.		152,200		3,008,528


Diversified Financials 0.3%
CI Financial Corp.		61,622		2,049,634
Element Financial Corp. *		351,420		4,486,070

				6,535,704


Energy 0.6%
Africa Oil Corp. *		248,900		2,208,586
Canadian Natural Resources Ltd.		68,400		2,171,700
Pason Systems, Inc.		269,600		5,603,253
Suncor Energy, Inc.		105,525		3,835,834

				13,819,373


Materials 0.5%
Agrium, Inc.		18,600		1,586,952
CCL Industries, Inc., Class B		38,680		2,656,201
Potash Corp. of Saskatchewan, Inc.		144,325		4,488,507
West Fraser Timber Co., Ltd.		22,560		2,067,865

				10,799,525


Media 0.5%
Thomson Reuters Corp.		275,700		10,360,069


Real Estate 0.3%
Brookfield Asset Management, Inc., Class A		26,987		1,068,146
Morguard Real Estate Investment Trust		135,490		2,209,111
Northern Property REIT		139,300		3,740,853

				7,018,110


Transportation 1.2%
Canadian National Railway Co.		121,312		13,335,828
Canadian Pacific Railway Ltd.		86,647		12,396,586
WestJet Airlines Ltd.		37,806		988,798

				26,721,212

				86,107,961

Chile 0.0%


Software & Services 0.0%
Sonda S.A.		223,339		579,395

China 2.0%


Automobiles & Components 0.4%
Great Wall Motor Co., Ltd., Class H		364,500		2,142,428
Minth Group Ltd.		2,687,073		5,620,935

				7,763,363


Banks 0.1%
China Merchants Bank Co., Ltd., Class H		1,249,723		2,484,941


Capital Goods 0.3%
CIMC Enric Holdings Ltd.		1,352,000		1,903,903
Haitian International Holdings Ltd.		1,578,000		3,802,017

				5,705,920


Energy 0.3%
CNOOC Ltd.		1,530,000		3,111,976
Hilong Holding Ltd.		5,494,000		3,654,283

				6,766,259


Materials 0.1%
AMVIG Holdings Ltd. (b)		4,286,000		2,011,814


Pharmaceuticals, Biotechnology & Life Sciences 0.1%
Sino Biopharmaceutical Ltd.		1,740,000		1,229,797
WuXi PharmaTech Cayman, Inc. ADR *		22,248		650,754

				1,880,551


Retailing 0.0%
E-Commerce China Dangdang, Inc. ADR *		100,760		891,726


Software & Services 0.5%
58.Com Inc. ADR *		13,985		337,318
Baidu, Inc. ADR *		19,417		3,124,195
NetEase, Inc. ADR		17,943		1,211,332
Qihoo 360 Technology Co., Ltd. ADR *		9,635		796,237
SouFun Holdings Ltd. ADR		12,836		683,260
Tencent Holdings Ltd.		59,100		3,222,747
YY, Inc. ADR *		57,600		2,832,192

				12,207,281


Technology Hardware & Equipment 0.2%
Hollysys Automation Technologies Ltd. *		37,761		633,252
Ju Teng International Holdings Ltd.		4,846,000		3,525,446
Sunny Optical Technology Group Co., Ltd.		1,154,670		1,118,354

				5,277,052

				44,988,907

Cyprus 0.0%


Energy 0.0%
Prosafe SE		59,361		508,779

Denmark 1.8%


Banks 0.3%
Danske Bank A/S *		10,154		237,256
Jyske Bank A/S - Reg’d *		94,420		5,338,487

				5,575,743


Consumer Durables & Apparel 0.1%
Pandora A/S		46,240		2,204,570


Food, Beverage & Tobacco 0.3%
Carlsberg A/S, Class B		1,681		167,908

See financial notes 35

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Royal UNIBREW		50,850		6,526,055

				6,693,963


Health Care Equipment & Services 0.1%
Coloplast A/S, Class B		1,705		111,208
GN Store Nord A/S		102,401		2,336,053
William Demant Holding A/S *		443		43,869

				2,491,130


Insurance 0.0%
Tryg A/S		368		33,605


Materials 0.7%
Auriga Industries, Class B *		96,695		3,794,658
Christian Hansen Holding A/S		319,298		11,831,086

				15,625,744


Pharmaceuticals, Biotechnology & Life Sciences 0.1%
Novo Nordisk A/S, Class B		6,140		1,022,633
Novozymes A/S, B Shares		3,747		146,753

				1,169,386


Software & Services 0.2%
SimCorp A/S		161,885		5,299,833


Telecommunication Services 0.0%
TDC A/S		10,598		95,692


Transportation 0.0%
AP Moller - Maersk A/S, Series A		9		81,269
AP Moller - Maersk A/S, Series B		20		193,499
DSV A/S		3,059		89,495

				364,263

				39,553,929

Finland 0.3%


Automobiles & Components 0.0%
Nokian Renkaat Oyj		1,651		83,501


Capital Goods 0.1%
Cramo Oyj		60,380		1,207,209
Kone Oyj, Class B		2,450		215,997
Metso Oyj		1,916		75,414
Wartsila Oyj Abp		2,658		117,940

				1,616,560


Diversified Financials 0.0%
Pohjola Bank plc, A Shares		2,071		37,714


Energy 0.0%
Neste Oil Oyj		1,922		38,110


Food & Staples Retailing 0.0%
Kesko Oyj, B Shares		1,003		33,330


Insurance 0.2%
Sampo Oyj, A Shares		107,389		5,079,572


Materials 0.0%
Stora Enso Oyj, R Shares		8,723		81,001
UPM-Kymmene Oyj		8,330		132,257

				213,258


Pharmaceuticals, Biotechnology & Life Sciences 0.0%
Orion Oyj, Class B		1,428		38,379


Technology Hardware & Equipment 0.0%
Nokia Oyj *		57,419		436,429


Telecommunication Services 0.0%
Elisa Oyj		2,120		53,114


Utilities 0.0%
Fortum Oyj		6,918		154,320

				7,784,287

France 8.2%


Automobiles & Components 0.3%
Compagnie Generale des Etablissements Michelin		2,745		286,023
Plastic Omnium S.A.		166,620		4,760,173
Renault S.A.		2,997		261,489
Valeo S.A.		10,968		1,085,056

				6,392,741


Banks 1.3%
BNP Paribas S.A.		396,384		29,242,492
Credit Agricole S.A. *		14,879		178,898
Natixis		13,865		74,560
Societe Generale S.A.		10,977		620,085

				30,116,035


Capital Goods 0.5%
Alstom S.A.		3,268		121,311
Bouygues S.A.		2,833		110,535
Compagnie de Saint-Gobain		51,670		2,712,161
Legrand S.A.		4,048		229,423
Nexans S.A.		63,503		2,823,409
Rexel S.A.		3,743		93,764
Safran S.A.		3,830		244,193
Schneider Electric S.A.		8,134		684,457
Thales S.A.		1,517		92,910
Vallourec S.A.		1,597		95,056
Vinci S.A.		41,669		2,666,240
Zodiac Aerospace		7,138		1,142,129

				11,015,588


Commercial & Professional Supplies 0.0%
Bureau Veritas S.A.		3,576		107,873
Edenred		3,517		119,394
Societe BIC S.A.		431		53,821

				281,088


Consumer Durables & Apparel 1.2%
Christian Dior S.A.		25,961		4,925,754
Hermes International		4,233		1,440,153
Kering		53,382		12,097,996
LVMH Moet Hennessy Louis Vuitton S.A.		44,852		8,611,375

				27,075,278


Consumer Services 0.0%
Accor S.A.		2,211		98,823
Sodexo		1,491		144,724

				243,547


Diversified Financials 0.0%
Eurazeo S.A.		520		39,261
Wendel S.A.		493		68,715

				107,976

36 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Energy 0.2%
CGG S.A. *		2,590		56,928
Technip S.A.		1,522		159,412
Total S.A.		67,414		4,136,047

				4,352,387


Food & Staples Retailing 0.0%
Carrefour S.A.		9,083		331,552
Casino Guichard Perrachon S.A.		918		103,188

				434,740


Food, Beverage & Tobacco 1.0%
Danone		159,547		11,816,714
Pernod-Ricard S.A.		83,622		10,043,716
Remy Cointreau S.A.		330		32,505

				21,892,935


Health Care Equipment & Services 0.2%
Essilor International S.A.		3,172		339,929
Medica S.A.		186,943		4,803,875

				5,143,804


Household & Personal Products 0.0%
L’Oreal S.A.		3,759		641,837


Insurance 0.6%
AXA S.A.		410,807		10,235,434
CNP Assurances		2,227		39,231
Euler Hermes S.A.		18,708		2,469,971
SCOR SE		2,591		91,452

				12,836,088


Materials 0.1%
Air Liquide S.A.		4,863		660,948
Arkema S.A.		947		107,139
Imerys S.A.		509		40,832
Lafarge S.A.		2,886		199,121

				1,008,040


Media 0.7%
Eutelsat Communications S.A.		1,976		62,497
Havas S.A.		526,240		4,384,184
Ipsos		59,758		2,515,463
JC Decaux S.A.		997		40,055
Lagardere S.C.A.		1,770		64,303
Publicis Groupe S.A.		103,514		8,608,163

				15,674,665


Pharmaceuticals, Biotechnology & Life Sciences 0.7%
Boiron S.A. (b)		74,612		5,051,037
Eurofins Scientific		20,550		5,625,709
Sanofi		56,453		6,019,195

				16,695,941


Real Estate 0.2%
Fonciere des Regions		412		35,284
Gecina S.A.		329		43,904
ICADE		684		62,914
Klepierre		1,564		70,147
Unibail-Rodamco SE (g)		1,445		378,656
Unibail-Rodamco SE (g)		16,947		4,427,724

				5,018,629


Semiconductors & Semiconductor Equipment 0.0%
STMicroelectronics N.V.		9,557		73,512


Software & Services 0.2%
AtoS		901		76,802
Cap Gemini S.A.		39,684		2,602,396
Criteo S.A. ADR *		44,700		1,578,357
Dassault Systemes S.A.		981		119,223

				4,376,778


Technology Hardware & Equipment 0.7%
Ingenico		103,841		7,800,385
Neopost S.A.		95,590		7,217,137

				15,017,522


Telecommunication Services 0.0%
Iliad S.A.		348		79,569
Orange S.A.		28,027		385,261
Vivendi S.A.		18,351		464,642

				929,472


Transportation 0.0%
Aeroports de Paris		519		55,458
Groupe Eurotunnel S.A. - Reg’d		8,871		85,879

				141,337


Utilities 0.3%
EDF S.A.		3,627		126,937
GDF Suez		20,731		513,792
Rubis S.C.A.		99,836		6,232,520
Suez Environnement Co.		4,195		73,150
Veolia Environnement S.A.		5,454		93,567

				7,039,966

				186,509,906

Germany 9.4%


Automobiles & Components 2.3%
Bayerische Motoren Werke AG		193,440		21,893,235
Continental AG		39,979		7,310,830
Daimler AG - Reg’d		225,602		18,471,112
ElringKlinger AG		121,753		5,176,841
Volkswagen AG		442		108,089

				52,960,107


Banks 0.5%
Aareal Bank AG *		263,280		10,097,605
Commerzbank AG *		14,145		180,909

				10,278,514


Capital Goods 1.8%
Brenntag AG		11,117		1,881,099
DMG MORI SEIKI AG		96,690		3,178,345
Duerr AG		56,700		4,962,310
GEA Group AG		2,817		122,435
Hochtief AG		480		43,413
MAN SE		665		80,133
MTU Aero Engines Holding AG		95,623		9,536,608
NORMA Group		302,328		15,119,492
Osram Licht AG *		1,220		63,218
Rational AG		11,284		3,455,395
Siemens AG - Reg’d		12,207		1,559,959

				40,002,407


Commercial & Professional Supplies 0.4%
Bertrandt AG		5,165		675,512

See financial notes 37

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Bilfinger SE		64,200		7,124,294

				7,799,806


Consumer Durables & Apparel 0.0%
Adidas AG		3,242		369,411
Hugo Boss AG		414		53,931

				423,342


Diversified Financials 0.2%
Aurelius AG		105,490		3,597,424
Deutsche Bank AG - Reg’d		15,671		757,365
Deutsche Boerse AG		3,030		227,938

				4,582,727


Food & Staples Retailing 0.0%
Metro AG		1,944		91,146


Food, Beverage & Tobacco 0.0%
Suedzucker AG		1,360		43,749


Health Care Equipment & Services 0.0%
Celesio AG		1,275		39,639
Fresenius Medical Care AG & Co KGaA		3,256		215,177
Fresenius SE & Co KGaA		1,919		249,112

				503,928


Household & Personal Products 0.0%
Beiersdorf AG		1,597		152,280
Henkel AG & Co. KGaA		2,052		189,252

				341,532


Insurance 0.9%
Allianz SE - Reg’d		121,834		20,456,210
Hannover Rueckversicherung SE - Reg’d		904		72,348
Muenchener Rueckversicherungs-Gesellschaft AG - Reg’d		2,796		583,336

				21,111,894


Materials 1.0%
BASF SE		14,156		1,469,598
BASF SE ADR		46,050		4,784,595
HeidelbergCement AG		2,226		175,274
K&S AG - Reg’d		2,720		69,114
Lanxess AG		1,318		92,566
Linde AG		2,864		543,660
Symrise AG		343,917		14,561,203
ThyssenKrupp AG *		6,015		153,463

				21,849,473


Media 0.3%
Axel Springer AG		593		35,782
GfK SE (b)		64,177		3,751,217
Kabel Deutschland Holding AG		340		42,684
ProSiebenSat.1 Media AG - Reg’d		63,395		3,013,926

				6,843,609


Pharmaceuticals, Biotechnology & Life Sciences 0.6%
Bayer AG - Reg’d		34,591		4,291,090
Merck KGaA		1,024		170,343
Morphosys AG *		6,476		500,935
QIAGEN N.V. *		169,552		3,891,377
Stada Arzneimittel AG		80,300		4,615,784

				13,469,529


Real Estate 0.0%
Deutsche Wohnen AG		39,415		741,271


Retailing 0.3%
Fielmann AG		60,527		6,768,862


Semiconductors & Semiconductor Equipment 0.1%
Infineon Technologies AG		300,245		2,904,670


Software & Services 0.9%
SAP AG		155,205		12,145,122
United Internet AG - Reg’d		1,612		63,587
Wirecard AG		202,730		7,375,995

				19,584,704


Technology Hardware & Equipment 0.1%
Wincor Nixdorf AG		15,868		1,049,165


Telecommunication Services 0.0%
Deutsche Telekom AG - Reg’d		43,810		688,461
Telefonica Deutschland Holding AG		3,480		27,412

				715,873


Transportation 0.0%
Deutsche Lufthansa AG - Reg’d *		3,433		66,370
Deutsche Post AG - Reg’d		14,072		475,231
Fraport AG Frankfurt Airport Services Worldwide		551		42,627

				584,228


Utilities 0.0%
E.ON SE AG		28,121		512,604
RWE AG		7,394		272,410

				785,014

				213,435,550

Greece 0.1%


Consumer Services 0.0%
OPAP S.A.		3,348		41,575


Diversified Financials 0.1%
Hellenic Exchanges S.A.		224,190		2,356,474


Telecommunication Services 0.0%
Hellenic Telecommunications Organization S.A. *		3,767		47,409

				2,445,458

Hong Kong 2.6%


Automobiles & Components 0.1%
Xinyi Glass Holdings Ltd.		2,090,000		2,069,924


Banks 0.1%
Bank of East Asia Ltd.		17,800		77,140
BOC Hong Kong (Holdings) Ltd.		58,000		189,418
Dah Sing Banking Group Ltd.		1,201,200		2,259,335
Hang Seng Bank Ltd.		12,000		200,013

				2,725,906


Capital Goods 0.0%
Hopewell Holdings Ltd.		8,500		28,626

38 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Hutchison Whampoa Ltd.		33,000		411,202
Noble Group Ltd.		58,000		47,920
NWS Holdings Ltd.		20,000		31,232

				518,980


Consumer Durables & Apparel 0.6%
Haier Electronics Group Co., Ltd.		308,000		657,461
Li & Fung Ltd.		90,000		127,239
Man Wah Holdings Ltd.		2,722,000		4,691,330
Techtronic Industries Co., Ltd.		3,175,500		7,975,119
Yue Yuen Industrial Holdings Ltd.		11,000		30,205

				13,481,354


Consumer Services 0.4%
Galaxy Entertainment Group Ltd. *		32,000		238,876
Melco International Development Ltd.		1,772,000		5,562,161
MGM China Holdings Ltd.		364,400		1,256,465
Sands China Ltd.		38,000		270,183
Shangri-La Asia Ltd.		26,000		47,631
SJM Holdings Ltd.		29,683		95,976
Wynn Macau Ltd.		23,200		89,059

				7,560,351


Diversified Financials 0.0%
First Pacific Co., Ltd.		36,000		40,933
Hong Kong Exchanges & Clearing Ltd.		16,500		266,179
Value Partners Group Ltd.		194,000		117,744

				424,856


Insurance 0.2%
AIA Group Ltd.		700,400		3,556,512


Real Estate 0.4%
Cheung Kong (Holdings) Ltd.		21,410		334,361
China Overseas Grand Oceans Group Ltd.		454,000		541,026
China Overseas Land & Investment Ltd.		660,000		2,045,354
Hang Lung Properties Ltd.		35,000		115,259
Henderson Land Development Co., Ltd.		16,500		97,635
Hysan Development Co., Ltd.		10,000		46,778
Kerry Properties Ltd.		11,000		47,702
New World Development Co., Ltd.		54,000		74,704
Sino Land Co., Ltd.		44,000		61,710
Sun Hung Kai Properties Ltd.		24,000		314,369
Swire Pacific Ltd., Class A		10,500		121,354
Swire Properties Ltd.		17,800		48,213
The Link REIT		35,500		178,588
Wharf Holdings Ltd.		513,349		4,319,966
Wheelock & Co., Ltd.		14,000		71,446

				8,418,465


Retailing 0.1%
Emperor Watch & Jewellery Ltd.		25,220,000		2,018,829
Sa Sa International Holdings Ltd.		544,000		593,456

				2,612,285


Semiconductors & Semiconductor Equipment 0.1%
ASM Pacific Technology Ltd.		240,900		2,321,884


Software & Services 0.1%
21Vianet Group Inc. ADR *		119,220		2,145,960


Technology Hardware & Equipment 0.2%
AAC Technologies Holdings, Inc.		963,500		4,258,248
China High Precision Automation Group Ltd. (a)(b)		766,000		12,251

				4,270,499


Telecommunication Services 0.0%
HKT Trust & HKT Ltd.		34,000		31,528
Hutchison Telecommunications Hong Kong Holdings Ltd.		1,270,000		557,293
PCCW Ltd.		60,000		27,086

				615,907


Transportation 0.3%
Cathay Pacific Airways Ltd.		18,000		35,658
MTR Corp., Ltd.		23,500		91,038
Orient Overseas International Ltd.		3,500		18,078
Pacific Basin Shipping Ltd.		8,994,000		6,436,169

				6,580,943


Utilities 0.0%
Cheung Kong Infrastructure Holdings Ltd.		11,400		79,329
CLP Holdings Ltd.		26,500		213,250
Hong Kong & China Gas Co., Ltd.		89,540		209,165
Power Assets Holdings Ltd.		21,000		174,955

				676,699

				57,980,525

India 0.6%


Automobiles & Components 0.2%
Bharat Forge Ltd.		646,670		3,147,917
Tata Motors Ltd.		223,630		1,390,726

				4,538,643


Pharmaceuticals, Biotechnology & Life Sciences 0.2%
Lupin Ltd.		73,748		1,063,937
Sun Pharmaceutical Industries Ltd.		281,520		2,784,615

				3,848,552


Software & Services 0.2%
HCL Technologies Ltd.		82,198		1,465,430
Tata Consultancy Services Ltd.		42,736		1,468,362
WNS Holdings Ltd. ADR *		97,410		2,190,751

				5,124,543

				13,511,738

Ireland 1.4%


Banks 0.0%
Bank of Ireland *		262,886		96,081


Capital Goods 0.3%
Eaton Corp. plc		54,700		3,859,632
Ingersoll-Rand plc		43,200		2,917,296

				6,776,928

See financial notes 39

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Commercial & Professional Supplies 0.6%
Experian plc		627,626		12,777,592


Energy 0.0%
Dragon Oil plc		119,023		1,126,949


Food, Beverage & Tobacco 0.3%
Glanbia plc (g)		358,556		5,058,155
Glanbia plc (g)		38,400		538,060
Kerry Group plc, Class A		2,289		146,583

				5,742,798


Materials 0.2%
CRH plc		11,148		271,270
Smurfit Kappa Group plc		144,640		3,501,231

				3,772,501


Pharmaceuticals, Biotechnology & Life Sciences 0.0%
Elan Corp. plc *		7,936		131,815
Shire plc		8,489		376,406

				508,221

				30,801,070

Israel 0.3%


Banks 0.0%
Bank Hapoalim B.M.		15,869		84,954
Bank Leumi Le-Israel B.M. *		18,157		69,114
Mizrahi Tefahot Bank Ltd.		1,853		21,721

				175,789


Energy 0.0%
Delek Group Ltd.		68		23,480


Materials 0.0%
Israel Chemicals Ltd.		6,666		55,109
The Israel Corp., Ltd. *		35		17,611

				72,720


Pharmaceuticals, Biotechnology & Life Sciences 0.0%
Teva Pharmaceutical Industries Ltd.		13,176		489,599


Software & Services 0.3%
Check Point Software Technologies Ltd. *		109,500		6,353,190
NICE Systems Ltd.		898		35,212

				6,388,402


Telecommunication Services 0.0%
Bezeq Israeli Telecommunication Corp., Ltd.		26,399		45,900

				7,195,890

Italy 2.2%


Automobiles & Components 0.0%
Brembo S.p.A.		19,135		506,089
Fiat S.p.A. *		13,397		105,123
Pirelli & C. S.p.A		3,567		50,177

				661,389


Banks 1.1%
Banca Monte dei Paschi di Siena S.p.A. *		73,168		23,068
Intesa Sanpaolo S.p.A.		9,949,719		24,683,986
UniCredit S.p.A.		65,736		493,453
Unione di Banche Italiane S.C.P.A.		12,391		85,640

				25,286,147


Capital Goods 0.2%
Finmeccanica S.p.A. *		6,068		44,466
Interpump Group S.p.A.		284,860		3,167,918
Prysmian S.p.A.		3,054		74,601

				3,286,985


Consumer Durables & Apparel 0.2%
Brunello Cucinelli S.p.A.		92,890		2,895,163
Luxottica Group S.p.A.		2,543		137,758
Tod’s S.p.A.		2,704		449,975

				3,482,896


Consumer Services 0.0%
Autogrill S.p.A. *		6,461		57,999


Diversified Financials 0.6%
Azimut Holding S.p.A.		61,824		1,568,299
Banca Generali S.p.A.		452,574		11,814,580
Exor S.p.A.		1,831		72,583
Mediobanca S.p.A.		7,747		70,586

				13,526,048


Energy 0.1%
Eni S.p.A.		39,252		996,488
Saipem S.p.A.		4,111		96,169
Tenaris S.A.		7,371		172,440

				1,265,097


Insurance 0.0%
Assicurazioni Generali S.p.A.		17,664		412,966


Retailing 0.0%
World Duty Free S.p.A. *		57,043		631,993


Telecommunication Services 0.0%
Telecom Italia S.p.A.		146,192		142,617
Telecom Italia S.p.A. - RSP		90,360		70,675

				213,292


Transportation 0.0%
Atlantia S.p.A.		4,962		108,753


Utilities 0.0%
Enel Green Power S.p.A.		26,240		63,830
Enel S.p.A.		103,014		454,490
Snam S.p.A.		30,056		154,864
Terna - Rete Elettrica Nationale S.p.A.		21,282		105,354

				778,538

				49,712,103

Japan 12.7%


Automobiles & Components 2.6%
Aisin Seiki Co., Ltd.		2,900		117,811
Bridgestone Corp.		10,100		346,255
Calsonic Kansei Corp.		571,000		2,745,230
Daihatsu Motor Co., Ltd.		3,000		58,249
Denso Corp.		79,300		3,811,826
F.C.C. Co., Ltd.		260,400		5,948,813
Fuji Heavy Industries Ltd.		226,900		6,203,792
Honda Motor Co., Ltd.		323,907		12,934,539
Isuzu Motors Ltd.		18,317		114,071

40 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Koito Manufacturing Co., Ltd.		1,485		27,032
Mazda Motor Corp. *		44,000		198,066
Mitsubishi Motors Corp. *		5,800		65,175
Musashi Seimitsu Industry Co., Ltd.		168,000		3,964,340
NGK Spark Plug Co., Ltd.		3,000		68,514
NHK Spring Co., Ltd.		2,200		23,029
Nifco, Inc.		302,300		8,055,911
Nissan Motors Co., Ltd.		38,900		390,605
NOK Corp.		1,600		24,733
Stanley Electric Co., Ltd.		2,200		51,174
Sumitomo Rubber Industries Ltd.		2,600		36,196
Suzuki Motor Corp.		5,400		135,785
The Yokohama Rubber Co., Ltd.		3,000		29,345
Toyoda Gosei Co., Ltd.		1,000		25,005
Toyota Boshoku Corp.		1,000		13,394
Toyota Industries Corp.		2,514		110,892
Toyota Motor Corp.		196,477		12,739,210
TS Tech Co., Ltd.		15,900		595,699
Yamaha Motor Co., Ltd.		4,200		64,338

				58,899,029


Banks 0.7%
Aozora Bank Ltd.		16,000		46,513
Fukuoka Financial Group, Inc.		12,000		54,125
Hokuhoku Financial Group, Inc.		15,000		30,929
Mitsubishi UFJ Financial Group, Inc.		196,400		1,250,727
Mizuho Financial Group, Inc.		352,900		740,759
Resona Holdings, Inc.		29,500		153,451
Seven Bank Ltd.		8,900		31,499
Shinsei Bank Ltd.		21,000		49,167
Sumitomo Mitsui Financial Group, Inc.		209,500		10,126,365
Sumitomo Mitsui Trust Holdings, Inc.		49,000		242,015
Suruga Bank Ltd.		105,000		1,665,647
The Bank of Kyoto Ltd.		5,000		44,057
The Bank of Yokohama Ltd.		19,000		104,771
The Chiba Bank Ltd.		12,000		85,547
The Chugoku Bank Ltd.		3,000		43,130
The Gunma Bank Ltd.		6,000		34,717
The Hachijuni Bank Ltd.		7,000		43,243
The Hiroshima Bank Ltd.		8,000		34,047
The Iyo Bank Ltd.		4,000		41,767
The Joyo Bank Ltd.		10,000		51,941
The Nishi-Nippon City Bank Ltd.		10,000		27,018
The Shizuoka Bank Ltd.		8,454		95,119
Yamaguchi Financial Group, Inc.		3,274		30,853

				15,027,407


Capital Goods 2.2%
Aica Kogyo Co., Ltd.		175,800		3,598,917
Aida Engineering Ltd.		422,600		4,085,091
Amada Co., Ltd.		6,000		51,615
Asahi Glass Co., Ltd.		16,000		98,816
Chiyoda Corp.		2,417		30,651
Daifuku Co., Ltd.		349,000		4,487,922
Daikin Industries Ltd.		56,600		3,256,388
Fanuc Corp.		11,251		1,804,746
Fuji Electric Co., Ltd.		8,000		35,863
Furukawa Electric Co., Ltd.		10,000		23,178
Hino Motors Ltd.		4,000		56,518
Hitachi Construction Machinery Co., Ltd.		1,600		33,886
IHI Corp.		20,000		84,686
Itochu Corp.		197,100		2,369,958
JGC Corp.		3,000		114,791
JTEKT Corp.		3,300		42,366
Kajima Corp.		13,000		55,176
Kanamoto Co., Ltd.		136,000		3,673,540
Kawasaki Heavy Industries Ltd.		23,000		89,873
Kinden Corp.		2,000		21,966
Komatsu Ltd.		14,600		320,329
Kubota Corp.		17,000		251,713
Kurita Water Industries Ltd.		1,700		37,101
LIXIL Group Corp.		4,000		93,891
Mabuchi Motor Co., Ltd.		400		21,267
Makita Corp.		55,400		2,801,541
Marubeni Corp.		25,445		199,220
Misumi Group, Inc.		23,100		676,237
Mitsubishi Corp.		21,349		431,913
Mitsubishi Electric Corp.		30,000		329,759
Mitsubishi Heavy Industries Ltd.		46,000		292,342
Mitsui & Co., Ltd.		27,200		388,577
Nabtesco Corp.		1,400		34,171
NGK Insulators Ltd.		4,000		67,280
Nidec Corp.		1,700		165,669
NSK Ltd.		7,000		74,776
NTN Corp. *		928,000		4,460,754
Obayashi Corp.		10,000		64,071
Sanwa Holdings Corp.		635,000		4,069,604
Shimizu Corp.		9,000		46,156
SMC Corp.		837		194,869
Sojitz Corp.		18,800		36,506
Sumitomo Corp.		17,400		226,431
Sumitomo Electric Industries Ltd.		11,800		176,815
Sumitomo Heavy Industries Ltd.		9,000		39,833
Tadano Ltd.		204,000		2,805,258
Taisei Corp.		15,000		76,954
The Japan Steel Works Ltd.		5,000		27,933
THK Co., Ltd.		157,100		3,429,237
Toshiba Corp.		62,000		263,517
Toshiba Plant Systems & Services Corp.		182,000		3,211,272
TOTO Ltd.		4,313		60,996
Toyota Tsusho Corp.		3,200		88,886

				49,480,825


Commercial & Professional Supplies 0.3%
Dai Nippon Printing Co., Ltd.		9,000		94,554
Meitec Corp.		58,700		1,564,746
Park24 Co., Ltd.		34,900		681,407
Secom Co., Ltd.		62,200		3,747,077
Toppan Printing Co., Ltd.		9,000		71,085

				6,158,869


Consumer Durables & Apparel 0.1%
Arnest One Corp. (a)*		1,800		49,426
Asics Corp.		2,200		38,787
Casio Computer Co., Ltd.		3,600		34,457
Namco Bandai Holdings, Inc.		2,900		54,666
Nikon Corp.		5,300		97,977
Panasonic Corp.		33,900		347,453
Rinnai Corp.		500		38,700
Sankyo Co., Ltd.		800		38,047

See financial notes 41

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Sega Sammy Holdings, Inc.		3,200		82,034
Sekisui Chemical Co., Ltd.		7,000		81,330
Sekisui House Ltd.		8,355		119,926
Sharp Corp. *		15,419		45,611
Shimano, Inc.		1,145		100,215
Sony Corp.		15,500		270,393
Yamaha Corp.		2,400		35,833

				1,434,855


Consumer Services 0.0%
Benesse Holdings, Inc.		1,000		37,272
McDonald’s Holdings Co., Ltd.		1,000		27,621
Oriental Land Co., Ltd.		800		128,102

				192,995


Diversified Financials 1.0%
Acom Co., Ltd. *		6,100		23,886
AEON Financial Service Co., Ltd.		1,200		36,852
Century Tokyo Leasing Corp.		25,000		790,879
Credit Saison Co., Ltd.		2,600		71,163
Daiwa Securities Group, Inc.		1,510,000		13,791,992
Japan Exchange Group, Inc.		4,000		92,993
Mitsubishi UFJ Lease & Finance Co., Ltd.		8,700		49,196
Nomura Holdings, Inc.		56,200		415,151
ORIX Corp.		422,100		7,311,229
SBI Holdings, Inc.		3,336		40,372

				22,623,713


Energy 0.0%
Cosmo Oil Co., Ltd. *		9,000		15,847
Idemitsu Kosan Co., Ltd.		340		28,463
Inpex Corp.		13,600		157,107
Japan Petroleum Exploration Co.		400		16,286
JX Holdings, Inc.		34,900		172,569
Showa Shell Sekiyu K.K.		2,800		30,102
TonenGeneral Sekiyu K.K.		4,367		40,567

				460,941


Food & Staples Retailing 0.4%
Aeon Co., Ltd.		9,500		129,641
FamilyMart Co., Ltd.		29,100		1,303,584
Lawson, Inc.		29,729		2,384,084
Seven & i Holdings Co., Ltd.		11,700		433,001
Sundrug Co., Ltd.		103,500		5,159,377
Tsuruha Holdings, Inc.		7,000		635,521

				10,045,208


Food, Beverage & Tobacco 0.4%
Ajinomoto Co., Inc.		10,000		139,930
Ariake Japan Co., Ltd.		131,000		3,169,071
Asahi Group Holdings Ltd.		6,100		164,971
Calbee, Inc.		160,000		4,198,297
Coca-Cola West Co., Ltd.		900		18,255
Japan Tobacco, Inc.		16,800		607,886
Kikkoman Corp.		3,000		54,677
Kirin Holdings Co., Ltd.		14,000		204,617
Meiji Holdings Co., Ltd.		1,000		55,902
Nippon Meat Packers, Inc.		3,000		43,924
Nisshin Seifun Group, Inc.		3,300		35,777
Nissin Food Holdings Co., Ltd.		900		38,523
Suntory Beverage & Food Ltd. *		1,900		62,552
Toyo Suisan Kaisha Ltd.		1,365		43,411
Yakult Honsha Co., Ltd.		1,500		76,190
Yamazaki Baking Co., Ltd.		2,000		20,362

				8,934,345


Health Care Equipment & Services 1.3%
Alfresa Holdings Corp.		600		32,794
Hogy Medical Co., Ltd.		97,200		5,655,613
M3, Inc.		1,000		2,738,577
Medipal Holdings Corp.		2,200		29,664
Miraca Holdings, Inc.		110,200		4,965,393
Nihon Kohden Corp.		14,700		605,443
Olympus Corp. *		334,800		10,710,722
Ship Healthcare Holdings, Inc.		100,300		4,115,744
Suzuken Co., Ltd.		1,100		39,721
Sysmex Corp.		1,100		72,867
Terumo Corp.		2,400		116,234

				29,082,772


Household & Personal Products 0.2%
Kao Corp.		8,200		273,089
Pigeon Corp.		79,400		4,096,500
Shiseido Co., Ltd.		5,400		92,378
Unicharm Corp.		1,800		115,612

				4,577,579


Insurance 0.0%
MS&AD Insurance Group Holdings, Inc.		7,810		201,946
NKSJ Holdings, Inc.		5,900		152,722
Sony Financial Holdings, Inc.		2,600		48,549
T&D Holdings, Inc.		8,700		104,450
The Dai-ichi Life Insurance Co., Ltd.		13,100		187,013
Tokio Marine Holdings, Inc.		10,500		344,237

				1,038,917


Materials 0.2%
Nippon Steel & Sumitomo Metal Corp.		115,000		379,563
Air Water, Inc.		2,278		32,562
Asahi Kasei Corp.		19,463		148,125
Daicel Corp.		5,000		42,144
Daido Steel Co., Ltd.		4,373		25,146
Hitachi Chemical Co., Ltd.		1,600		24,547
Hitachi Metals Ltd.		3,000		40,397
JFE Holdings, Inc.		7,300		165,963
JSR Corp.		2,700		51,430
Kaneka Corp.		4,337		27,521
Kansai Paint Co., Ltd.		3,373		45,323
Kobe Steel Ltd. *		37,000		65,356
Kuraray Co., Ltd.		5,200		61,055
Maruichi Steel Tube Ltd.		700		17,094
Mitsubishi Chemical Holdings Corp.		20,500		95,965
Mitsubishi Gas Chemical Co., Inc.		6,000		49,036
Mitsubishi Materials Corp.		17,000		66,511
Mitsui Chemicals, Inc.		12,000		31,900
Nitto Denko Corp.		2,500		131,102
Oji Holdings Corp.		13,000		59,410
Shin-Etsu Chemical Co., Ltd.		6,424		363,226
Showa Denko K.K.		22,000		29,831
Sumitomo Chemical Co., Ltd.		24,000		87,897
Sumitomo Metal Mining Co., Ltd.		8,000		110,805
Taiheiyo Cement Corp.		16,000		67,859
Taiyo Nippon Sanso Corp.		4,000		27,429

42 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Teijin Ltd.		14,000		31,437
Toray Industries, Inc.		23,000		143,721
Toyo Seikan Group Holdings Ltd.		2,300		47,801
Ube Industries Ltd.		15,000		31,048
Yamato Kogyo Co., Ltd.		600		22,238
Zeon Corp.		241,000		2,872,029

				5,395,471


Media 0.1%
Avex Group Holdings, Inc.		71,700		1,816,846
Dentsu, Inc.		3,600		136,016
Hakuhodo DY Holdings, Inc.		3,500		27,070
Toho Co., Ltd.		1,700		36,427

				2,016,359


Pharmaceuticals, Biotechnology & Life Sciences 0.2%
Astellas Pharma, Inc.		45,200		2,519,735
Chugai Pharmaceutical Co., Ltd.		3,400		79,888
Daiichi Sankyo Co., Ltd.		10,500		194,680
Dainippon Sumitomo Pharma Co., Ltd.		2,400		32,294
Eisai Co., Ltd.		3,800		149,272
Hisamitsu Pharmaceutical Co., Inc.		900		48,700
Kyowa Hakko Kirin Co., Ltd.		4,000		44,180
Mitsubishi Tanabe Pharma Corp.		3,400		47,953
Ono Pharmaceutical Co., Ltd.		1,300		98,293
Otsuka Holdings Co., Ltd.		5,400		153,803
Santen Pharmaceutical Co., Ltd.		1,100		55,842
Sawai Pharmaceutical Co., Ltd.		8,800		643,309
Shionogi & Co., Ltd.		4,500		99,578
Taisho Pharmaceutical Holdings Co., Ltd.		600		42,129
Takeda Pharmaceutical Co., Ltd.		12,200		581,385
Tsumura & Co.		900		28,287

				4,819,328


Real Estate 0.1%
Aeon Mall Co., Ltd.		2,100		59,642
Daito Trust Construction Co., Ltd.		1,100		112,314
Daiwa House Industry Co., Ltd.		9,000		180,304
Hulic Co., Ltd.		3,700		58,876
Japan Prime Realty Investment Corp.		11		36,554
Japan Real Estate Investment Corp.		9		102,824
Japan Retail Fund Investment Corp.		34		68,861
Mitsubishi Estate Co., Ltd.		19,255		550,300
Mitsui Fudosan Co., Ltd.		13,000		430,637
Nippon Building Fund, Inc.		11		136,080
Nippon Prologis REIT, Inc.		4		39,945
Nomura Real Estate Holdings, Inc.		2,000		50,603
Nomura Real Estate Office Fund, Inc.		4		19,760
NTT Urban Development Corp.		1,700		21,701
Sumitomo Realty & Development Co., Ltd.		5,495		260,004
Tokyo Tatemono Co., Ltd.		8,000		75,104
Tokyu Fudosan Holdings Corp. *		7,000		68,768
United Urban Investment Corp.		28		42,735

				2,315,012


Retailing 0.5%
ABC-Mart, Inc.		400		20,004
Don Quijote Co., Ltd.		51,100		3,401,546
Fast Retailing Co., Ltd.		800		269,289
Isetan Mitsukoshi Holdings Ltd.		5,600		84,869
J. Front Retailing Co., Ltd.		7,000		54,470
Marui Group Co., Ltd.		3,300		31,590
Nitori Holdings Co., Ltd.		550		51,593
Oisix, Inc. *		43,600		1,729,370
Rakuten, Inc.		11,400		148,538
Ryohin Keikaku Co., Ltd.		23,400		2,334,282
Sanrio Co., Ltd.		700		38,466
Seria Co., Ltd.		67,700		2,260,900
Shimamura Co., Ltd.		342		38,447
Start Today Co., Ltd.		26,800		747,186
Takashimaya Co., Ltd.		4,000		38,164
United Arrows Ltd.		14,400		620,437
USS Co., Ltd.		3,300		48,327
Yamada Denki Co., Ltd.		14,200		39,831

				11,957,309


Semiconductors & Semiconductor Equipment 0.1%
Advantest Corp.		2,200		26,329
Rohm Co., Ltd.		34,800		1,428,458
Sumco Corp.		1,700		15,448
Tokyo Electron Ltd.		2,700		148,156

				1,618,391


Software & Services 0.4%
Dena Co., Ltd.		1,500		32,685
Digital Garage, Inc.		104,000		2,735,696
Dwango Co., Ltd.		112,400		2,048,891
Enigmo, Inc. *		26,900		1,914,671
Fujitsu Ltd. *		29,000		124,590
Gree, Inc.		1,400		12,031
GungHo Online Entertainment, Inc. *		40		25,242
Itochu Techno-Solutions Corp.		400		15,692
Konami Corp.		1,400		33,834
Nexon Co., Ltd.		75,200		878,906
Nintendo Co., Ltd.		1,600		179,926
Nomura Research Institute Ltd.		1,500		50,343
NTT Data Corp.		1,900		63,165
Oracle Corp., Japan		600		23,690
Otsuka Corp.		5,146		667,453
Trend Micro, Inc.		1,600		59,511
Yahoo Japan Corp.		324,900		1,515,892

				10,382,218


Technology Hardware & Equipment 1.5%
Brother Industries Ltd.		3,500		39,768
Canon, Inc.		542,260		17,111,927
Citizen Holdings Co., Ltd.		3,900		27,825
FUJIFILM Holdings Corp.		7,200		176,139
Hamamatsu Photonics K.K.		1,000		37,419
Hirose Electric Co., Ltd.		500		76,285
Hitachi High-Technologies Corp.		900		20,700
Hitachi Ltd.		73,000		510,642
Horiba Ltd.		87,300		3,189,980
Hoya Corp.		20,000		479,587
Ibiden Co., Ltd.		1,800		31,204
Japan Aviation Electronics Industry Ltd.		298,000		3,000,135

See financial notes 43

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Keyence Corp.		6,600		2,828,692
Konica Minolta, Inc.		8,000		66,248
Kyocera Corp.		5,200		270,039
Murata Manufacturing Co., Ltd.		3,124		250,763
NEC Corp.		39,000		87,601
Nippon Electric Glass Co., Ltd.		6,000		30,862
Omron Corp.		38,300		1,461,574
Ricoh Co., Ltd.		10,000		105,608
Shimadzu Corp.		4,000		39,170
TDK Corp.		1,900		80,750
Yaskawa Electric Corp.		238,321		3,086,437
Yokogawa Electric Corp.		3,200		41,820

				33,051,175


Telecommunication Services 0.2%
KDDI Corp.		8,200		444,083
Nippon Telegraph & Telephone Corp.		6,800		353,466
NTT DoCoMo, Inc.		23,700		376,001
Softbank Corp.		41,700		3,114,109

				4,287,659


Transportation 0.1%
ANA Holdings, Inc.		19,000		39,696
Central Japan Railway Co.		2,200		285,278
East Japan Railway Co.		5,238		455,028
Hankyu Hanshin Holdings, Inc.		17,000		95,350
Japan Airlines Co., Ltd.		900		52,607
Kamigumi Co., Ltd.		4,000		34,793
Keikyu Corp.		7,000		65,892
Keio Corp.		9,000		62,356
Keisei Electric Railway Co., Ltd.		4,266		44,056
Kintetsu Corp.		26,000		95,684
Mitsubishi Logistics Corp.		2,000		27,794
Mitsui O.S.K. Lines, Ltd.		17,000		71,958
Nippon Express Co., Ltd.		13,000		65,280
Nippon Yusen K.K.		27,000		82,498
Odakyu Electric Railway Co., Ltd.		10,000		96,508
Tobu Railway Co., Ltd.		16,000		82,942
Tokyu Corp.		17,000		115,771
West Japan Railway Co.		2,700		121,068
Yamato Holdings Co., Ltd.		6,000		129,035

				2,023,594


Utilities 0.1%
Chubu Electric Power Co., Inc.		9,931		147,009
Electric Power Development Co., Ltd.		1,900		60,720
Hokkaido Electric Power Co., Inc. *		2,700		34,782
Hokuriku Electric Power Co.		2,500		35,608
Kyushu Electric Power Co., Inc. *		6,400		90,111
Osaka Gas Co., Ltd.		30,000		126,362
Shikoku Electric Power Co., Inc. *		2,700		48,193
The Chugoku Electric Power Co., Inc.		4,500		68,979
The Kansai Electric Power Co., Inc. *		11,700		148,087
Toho Gas Co., Ltd.		6,330		33,008
Tohoku Electric Power Co., Inc. *		6,800		82,308
Tokyo Electric Power Co., Inc. *		21,700		115,811
Tokyo Gas Co., Ltd.		37,000		200,763

				1,191,741

				287,015,712

Luxembourg 0.3%


Energy 0.3%
Subsea 7 S.A.		4,220		89,248
Tenaris S.A. ADR		117,425		5,496,664

				5,585,912


Materials 0.0%
ArcelorMittal		15,267		240,465


Media 0.0%
SES S.A.		4,524		131,585


Telecommunication Services 0.0%
Millicom International Cellular S.A. SDR		976		90,042

				6,048,004

Malaysia 0.2%


Transportation 0.2%
Malaysia Airports Holdings Bhd		1,513,800		4,034,497

Mexico 0.2%


Diversified Financials 0.2%
Compartamos S.A.B. de C.V.		1,982,690		3,862,881

Netherlands 3.5%


Capital Goods 1.8%
CNH Industrial N.V. *		1,078,262		12,751,522
European Aeronautic Defence & Space Co., N.V.		9,176		628,781
Koninklijke Boskalis Westminster N.V.		354,813		17,053,206
Koninklijke Philips N.V.		272,654		9,635,783
OCI *		1,395		53,640

				40,122,932


Commercial & Professional Supplies 0.0%
Randstad Holding N.V.		1,794		110,490


Diversified Financials 0.0%
ING Groep N.V. CVA *		59,758		759,387


Energy 0.6%
Core Laboratories N.V.		26,100		4,886,442
Fugro N.V. CVA		1,037		64,834
Koninklijke Vopak N.V.		1,054		64,824
Schlumberger Ltd.		75,725		7,096,947

				12,113,047


Food & Staples Retailing 0.3%
Koninklijke Ahold N.V.		340,755		6,476,573


Food, Beverage & Tobacco 0.4%
Heineken Holding N.V.		93,259		5,923,329
Heineken N.V.		3,567		245,792
Unilever N.V.		66,975		2,660,247
Unilever N.V. CVA		25,122		995,973

				9,825,341

44 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Insurance 0.0%
Aegon N.V.		26,811		213,332
Delta Lloyd N.V.		3,129		66,340

				279,672


Materials 0.4%
Akzo Nobel N.V.		117,000		8,493,541
James Hardie Industries plc CDI		6,557		67,821
Koninklijke DSM N.V.		2,431		183,766

				8,745,128


Media 0.0%
Reed Elsevier N.V.		10,856		218,255
Wolters Kluwer N.V.		4,864		131,770

				350,025


Real Estate 0.0%
Corio N.V.		1,077		46,882


Semiconductors & Semiconductor Equipment 0.0%
ASML Holding N.V.		5,497		520,498


Technology Hardware & Equipment 0.0%
Gemalto N.V.		1,173		131,657


Telecommunication Services 0.0%
Koninklijke (Royal) KPN N.V. *		46,305		147,997
Ziggo N.V.		2,466		105,716

				253,713


Transportation 0.0%
TNT Express N.V.		5,312		48,974

				79,784,319

New Zealand 0.5%


Consumer Services 0.2%
SKYCITY Entertainment Group Ltd.		1,223,525		3,929,449


Health Care Equipment & Services 0.0%
Ryman Healthcare Ltd.		114,901		716,260


Materials 0.0%
Fletcher Building Ltd.		10,175		83,970


Telecommunication Services 0.0%
Telecom Corp. of New Zealand Ltd.		28,860		56,001


Transportation 0.3%
Auckland International Airport Ltd.		2,113,476		5,982,897


Utilities 0.0%
Contact Energy Ltd.		5,211		22,597

				10,791,174

Nigeria 0.0%


Banks 0.0%
Guaranty Trust Bank plc GDR - Reg’d		80,383		626,987

Norway 0.7%


Banks 0.0%
DnB A.S.A.		15,192		269,301


Energy 0.3%
Aker Solutions A.S.A.		2,465		34,055
Farstad Shipping A.S.A. (b)		94,566		2,147,260
Fred Olsen Energy A.S.A.		72,066		3,028,478
Seadrill Ltd.		6,042		279,468
Statoil A.S.A.		17,457		413,054
TGS Nopec Geophysical Co. A.S.A.		13,351		367,201

				6,269,516


Food, Beverage & Tobacco 0.0%
Orkla A.S.A.		11,571		93,796


Insurance 0.0%
Gjensidige Forsikring A.S.A.		2,999		55,977


Materials 0.0%
Norsk Hydro A.S.A.		13,961		62,305
Yara International A.S.A.		2,941		126,661
Yara International A.S.A. ADR		11,100		481,074

				670,040


Pharmaceuticals, Biotechnology & Life Sciences 0.0%
Algeta A.S.A. *		12,215		485,272


Software & Services 0.1%
Opera Software A.S.A.		261,050		3,159,611


Telecommunication Services 0.3%
Telenor A.S.A.		235,895		5,667,995

				16,671,508

Philippines 0.1%


Food & Staples Retailing 0.1%
Puregold Price Club, Inc.		2,651,300		2,768,064

Poland 0.0%


Food & Staples Retailing 0.0%
Eurocash S.A.		44,853		689,002

Portugal 0.0%


Banks 0.0%
Banco Espirito Santo, S.A. - Reg’d *		30,126		39,585


Energy 0.0%
Galp Energia, SGPS, S.A.		6,040		102,278


Food & Staples Retailing 0.0%
Jeronimo Martins, SGPS, S.A.		4,439		81,751


Telecommunication Services 0.0%
Portugal Telecom, SGPS, S.A. - Reg’d		10,082		45,445


Utilities 0.0%
EDP - Energias de Portugal S.A.		28,618		105,343

				374,402

Republic of Korea 1.2%


Automobiles & Components 0.0%
Halla Visteon Climate Control Corp.		16,300		609,500

See financial notes 45

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Capital Goods 0.3%
Hyundai Rotem Co., Ltd. (a)*		61,560		2,115,354
Sung Kwang Bend Co., Ltd.		160,170		4,384,843

				6,500,197


Consumer Services 0.2%
Hotel Shilla Co., Ltd.		84,130		5,434,663


Retailing 0.2%
GS Home Shopping, Inc.		2,876		663,181
Kolao Holdings		116,638		3,413,815

				4,076,996


Semiconductors & Semiconductor Equipment 0.3%
Samsung Electronics Co., Ltd.		2,680		3,695,876
Seoul Semiconductor Co., Ltd.		89,220		3,712,430

				7,408,306


Software & Services 0.1%
NAVER Corp.		3,319		1,862,513


Telecommunication Services 0.1%
SK Telecom Co., Ltd.		10,269		2,237,823

				28,129,998

Russia 0.2%


Banks 0.0%
TCS Group Holding plc GDR (c)*		35,761		613,122


Software & Services 0.2%
Mail.ru Group Ltd. GDR		25,798		951,430
QIWI plc ADR		49,860		2,018,333
Yandex N.V. Class A *		23,654		871,887

				3,841,650

				4,454,772

Singapore 3.2%


Banks 0.1%
DBS Group Holdings Ltd.		26,316		354,778
Oversea-Chinese Banking Corp., Ltd.		40,000		334,620
United Overseas Bank Ltd.		20,000		334,932

				1,024,330


Capital Goods 0.1%
Keppel Corp., Ltd.		22,000		191,979
SembCorp Industries Ltd.		15,000		64,131
SembCorp Marine Ltd.		13,000		47,029
Singapore Technologies Engineering Ltd.		820,000		2,780,457
Yangzijiang Shipbuilding Holdings Ltd.		29,000		27,510

				3,111,106


Consumer Services 0.0%
Genting Singapore plc		96,000		117,456


Diversified Financials 0.0%
Singapore Exchange Ltd.		13,000		76,695


Energy 0.5%
Ezion Holdings Ltd.		2,191,000		3,943,493
Ezra Holdings Ltd. *		5,292,000		5,703,453
KrisEnergy Ltd. *		2,261,000		2,242,194

				11,889,140


Food & Staples Retailing 0.0%
Olam International Ltd.		22,000		27,218


Food, Beverage & Tobacco 0.0%
Golden Agri-Resources Ltd.		117,000		56,495
Wilmar International Ltd.		29,000		80,665

				137,160


Media 0.0%
Singapore Press Holdings Ltd.		26,000		88,938


Real Estate 0.9%
Ascendas REIT		3,903,000		7,420,900
CapitaCommercial Trust		30,000		35,499
CapitaLand Ltd.		38,000		95,209
CapitaMall Trust		7,173,200		11,650,664
CapitaMalls Asia Ltd.		20,000		32,479
City Developments Ltd.		8,000		66,218
Global Logistic Properties Ltd.		45,000		111,703
Keppel Land Ltd.		11,000		32,794
UOL Group Ltd.		7,000		37,050

				19,482,516


Retailing 0.1%
Jardine Cycle & Carriage Ltd.		2,000		58,942
Osim International Ltd.		1,354,000		2,299,222

				2,358,164


Telecommunication Services 0.4%
Singapore Telecommunications Ltd.		121,000		367,361
StarHub Ltd.		2,366,000		8,460,269

				8,827,630


Transportation 1.0%
ComfortDelGro Corp., Ltd.		28,000		43,237
Hutchison Port Holdings Trust, Class U		78,000		56,924
SATS Ltd.		3,321,000		9,085,876
SIA Engineering Co., Ltd. (b)		2,635,000		10,704,691
Singapore Airlines Ltd.		8,331		69,740
SMRT Corp., Ltd.		1,379,553		1,442,793

				21,403,261


Utilities 0.1%
Hyflux Ltd.		3,057,000		2,850,816

				71,394,430

South Africa 0.3%


Capital Goods 0.1%
Bidvest Group Ltd.		70,940		1,890,164


Diversified Financials 0.1%
Coronation Fund Managers Ltd.		68,526		558,887
FirstRand Ltd.		585,573		2,102,200

				2,661,087


Media 0.1%
Naspers Ltd., N Shares		15,704		1,469,953

				6,021,204

46 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Spain 1.1%


Banks 0.2%
Banco Bilbao Vizcaya Argentaria S.A. (a)		85,427		998,378
Banco de Sabadell S.A.		49,339		126,422
Banco Popular Espanol S.A. *		19,576		111,042
Banco Santander S.A.		170,914		1,515,197
Bankia S.A. *		74,028		110,764
Bankinter S.A.		172,971		1,054,625
CaixaBank (a)		17,550		90,964

				4,007,392


Capital Goods 0.0%
ACS, Actividades de Construccion y Servicios S.A.		2,400		78,732
Ferrovial S.A.		5,945		113,322
Zardoya Otis S.A.		2,289		39,821

				231,875


Commercial & Professional Supplies 0.2%
Prosegur Cia de Seguridad S.A. - Reg’d		679,458		4,031,319


Consumer Services 0.2%
Melia Hotels International S.A.		448,706		5,080,208


Energy 0.2%
Repsol S.A.		183,529		4,920,567


Food & Staples Retailing 0.0%
Distribuidora Internacional de Alimentacion S.A.		8,853		80,712


Insurance 0.0%
Mapfre S.A.		11,544		46,357


Pharmaceuticals, Biotechnology & Life Sciences 0.0%
Grifols S.A.		2,426		99,433


Retailing 0.1%
Inditex S.A.		12,725		2,089,940


Software & Services 0.1%
Amadeus IT Holding S.A., A Shares		5,686		210,964
Indra Sistemas S.A.		130,800		2,156,998

				2,367,962


Telecommunication Services 0.1%
Telefonica S.A. *		63,206		1,112,382


Transportation 0.0%
Abertis Infraestructuras S.A. (a)		5,947		127,414
International Consolidated Airlines Group S.A. *		13,910		77,250

				204,664


Utilities 0.0%
Acciona S.A.		381		24,152
Enagas S.A.		3,153		84,185
Gas Natural SDG S.A.		5,204		122,742
Iberdrola S.A.		75,547		474,197
Red Electrica Corp. S.A.		1,623		101,056

				806,332

				25,079,143

Sweden 2.8%


Banks 0.1%
Nordea Bank AB		43,456		555,868
Skandinaviska Enskilda Banken AB, A Shares		24,515		296,510
Svenska Handelsbanken AB, A Shares		7,786		352,134
Swedbank AB, A Shares		13,677		355,962

				1,560,474


Capital Goods 1.1%
Alfa Laval AB		5,063		115,491
Assa Abloy AB, B Shares		5,013		248,731
Atlas Copco AB, A Shares		187,894		5,205,999
Atlas Copco AB, B Shares		309,650		7,694,398
Indutrade AB		68,460		2,678,160
Sandvik AB		17,264		233,272
Scania AB, B Shares		4,727		94,745
Skanska AB, B Shares		5,997		115,468
SKF AB, B Shares		280,016		7,409,033
Volvo AB, B Shares		22,768		292,225

				24,087,522


Commercial & Professional Supplies 0.5%
AF AB, B Shares		168,963		5,337,633
Intrum Justitia AB		122,479		3,256,639
Loomis AB, Class B		120,800		2,895,671
Securitas AB, B Shares		4,695		53,537

				11,543,480


Consumer Durables & Apparel 0.0%
Electrolux AB, B Shares		3,606		88,942
Husqvarna AB, B Shares		6,685		39,278

				128,220


Diversified Financials 0.0%
Industrivarden AB, C Shares		1,765		31,419
Investment AB Kinnevik, B Shares		3,776		138,972
Investor AB, B Shares		7,103		227,738
Ratos AB, B Shares		2,873		24,863

				422,992


Energy 0.0%
Lundin Petroleum AB *		3,337		68,770


Food, Beverage & Tobacco 0.3%
AarhusKarlshamn AB		100,340		5,936,463
Swedish Match AB		3,051		100,600

				6,037,063


Health Care Equipment & Services 0.0%
Elekta AB, B Shares		5,993		88,512
Getinge AB, B Shares		3,001		95,072

				183,584


Household & Personal Products 0.0%
Svenska Cellulosa AB, SCA B Shares		9,015		255,586


Materials 0.2%
Boliden AB		4,101		58,247
Hexpol AB		68,920		5,178,197

				5,236,444

See financial notes 47

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Retailing 0.5%
Hennes & Mauritz AB, B Shares		245,713		10,617,709


Technology Hardware & Equipment 0.1%
Fingerprint Cards AB, B Shares *		252,370		2,079,896
Hexagon AB, B Shares		3,800		113,942
Telefonaktiebolaget LM Ericsson, B Shares		47,070		563,014

				2,756,852


Telecommunication Services 0.0%
Tele2 AB, B Shares		4,754		57,302
TeliaSonera AB		36,468		301,553

				358,855

				63,257,551

Switzerland 7.4%


Banks 0.0%
Banque Cantonale Vaudoise - Reg’d		44		24,449


Capital Goods 0.4%
ABB Ltd. - Reg’d *		33,956		865,116
Burckhardt Compression Holding AG		14,934		5,982,817
Geberit AG - Reg’d		8,237		2,460,924
Schindler Holding AG		720		102,048
Schindler Holding AG - Reg’d		323		45,967
Sulzer AG - Reg’d		360		56,318

				9,513,190


Commercial & Professional Supplies 0.4%
Adecco S.A. - Reg’d *		108,487		8,000,235
SGS S.A. - Reg’d		86		201,219

				8,201,454


Consumer Durables & Apparel 0.5%
Cie Financiere Richemont S.A.		107,176		10,958,712
The Swatch Group AG - Bearer Shares		479		305,933
The Swatch Group AG - Reg’d		651		72,432

				11,337,077


Diversified Financials 1.8%
Cembra Money Bank AG *		51,930		3,219,334
Credit Suisse Group AG - Reg’d *		1,119,755		34,833,276
Julius Baer Group Ltd. *		3,221		158,008
Pargesa Holding S.A.		405		32,225
Partners Group Holding AG		8,841		2,291,789
UBS AG - Reg’d *		56,189		1,086,755

				41,621,387


Energy 0.5%
Noble Corp.		156,750		5,909,475
Transocean Ltd.		5,427		256,307
Weatherford International Ltd. *		286,600		4,711,704

				10,877,486


Food, Beverage & Tobacco 1.0%
Aryzta AG *		1,308		97,580
Barry Callebaut AG - Reg’d *		27		28,210
Coca-Cola HBC AG CDI *		3,294		94,737
Lindt & Spruengli AG		15		63,316
Lindt & Spruengli AG - Reg’d		2		100,601
Nestle S.A. - Reg’d		209,023		15,088,097
Nestle S.A. - Reg’d ADR		107,312		7,770,462

				23,243,003


Health Care Equipment & Services 0.0%
Sonova Holding AG - Reg’d *		737		95,914


Insurance 0.1%
Baloise Holding AG - Reg’d		712		82,716
Swiss Life Holding AG - Reg’d *		457		90,614
Swiss Re AG *		5,505		483,243
Zurich Insurance Group AG *		2,278		629,464

				1,286,037


Materials 1.0%
EMS-Chemie Holding AG - Reg’d		124		45,154
Givaudan S.A. - Reg’d *		2,091		2,965,432
Glencore Xstrata plc *		912,345		4,965,180
Holcim Ltd. - Reg’d *		192,136		14,290,969
Sika AG		35		110,336
Syngenta AG - Reg’d		1,451		585,647

				22,962,718


Pharmaceuticals, Biotechnology & Life Sciences 1.1%
Actelion Ltd. - Reg’d *		1,659		128,358
Lonza Group AG - Reg’d *		754		67,304
Novartis AG - Reg’d		105,416		8,182,661
Novartis AG ADR		45,375		3,518,831
Roche Holding AG		41,743		11,543,417
Tecan Group AG - Reg’d		20,020		2,089,723

				25,530,294


Real Estate 0.0%
Swiss Prime Site AG - Reg’d *		883		66,859


Telecommunication Services 0.0%
Swisscom AG - Reg’d		365		186,170


Transportation 0.6%
Kuehne & Nagel International AG - Reg’d		97,610		12,331,161

				167,277,199

Taiwan 1.2%


Capital Goods 0.4%
AirTac International Group		675,410		4,887,608
Teco Electric & Machinery Co., Ltd.		4,010,000		4,276,745

				9,164,353


Consumer Durables & Apparel 0.5%
Eclat Textile Co., Ltd.		510,000		5,608,715
Makalot Industrial Co., Ltd.		731,000		4,412,822

				10,021,537


Health Care Equipment & Services 0.0%
St. Shine Optical Co., Ltd.		21,484		632,753


Semiconductors & Semiconductor Equipment 0.2%
Taiwan Semiconductor Manufacturing Co., Ltd. ADR		172,777		3,180,825


Technology Hardware & Equipment 0.1%
Everlight Electronics Co., Ltd.		1,553,000		2,934,280

				25,933,748

48 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Thailand 0.3%


Banks 0.1%
Kasikornbank PCL		343,100		2,145,009


Consumer Services 0.1%
Minor International PCL		2,300,800		2,051,316


Telecommunication Services 0.1%
Jasmine International PCL		7,168,200		1,946,066

				6,142,391

Turkey 0.1%


Transportation 0.1%
Pegasus Hava Tasimaciligi A/S *		148,580		2,808,093

United Kingdom 19.4%


Automobiles & Components 0.0%
GKN plc		23,980		141,260


Banks 1.2%
Barclays plc (a)		232,977		980,241
HSBC Holdings plc (g)		288,604		3,163,486
HSBC Holdings plc (g)		121,200		1,325,297
Lloyds Banking Group plc *		16,188,444		20,021,810
Royal Bank of Scotland Group plc *		31,558		185,861
Standard Chartered plc		37,199		893,147

				26,569,842


Capital Goods 4.2%
Ashtead Group plc		387,900		4,076,110
BAE Systems plc		49,054		357,824
Bodycote plc		917,017		9,666,294
Bunzl plc		122,889		2,710,809
Cobham plc		745,626		3,443,529
Fenner plc		583,722		3,739,871
Grafton Group plc (a)		451,150		4,285,027
IMI plc		138,758		3,375,835
Interserve plc		557,983		5,499,769
Invensys plc		9,740		78,160
Keller Group plc		237,116		3,995,814
Meggitt plc		301,194		2,765,014
Melrose Industries plc		18,513		94,911
Rolls-Royce Holdings plc *		276,063		5,085,907
Rotork plc		386,003		17,685,214
Senior plc		105,744		504,637
Smiths Group plc		350,031		8,056,097
Spirax-Sarco Engineering plc		191,866		8,972,319
The Weir Group plc		3,386		122,296
Travis Perkins plc		4,230		125,790
Ultra Electronics Holdings plc		257,238		7,976,867
Wolseley plc		28,986		1,560,344

				94,178,438


Commercial & Professional Supplies 1.1%
Aggreko plc		4,162		107,322
Babcock International Group plc		192,573		3,937,926
Berendsen plc		40,498		630,673
Capita plc		219,016		3,462,239
De La Rue plc		570,562		7,819,915
G4S plc		26,746		112,341
Intertek Group plc		2,390		127,505
Regus plc		788,330		2,586,933
Serco Group plc		539,478		4,820,706

				23,605,560


Consumer Durables & Apparel 0.4%
Bellway plc		240,660		5,796,628
Berkeley Group Holdings plc		86,942		3,259,029
Burberry Group plc		6,834		167,935
Persimmon plc *		5,320		107,710

				9,331,302


Consumer Services 0.9%
Carnival plc		2,747		97,635
Compass Group plc		321,741		4,627,020
Greene King plc		400,266		5,296,636
InterContinental Hotels Group plc		128,546		3,745,411
Restaurant Group plc		459,239		4,238,016
TUI Travel plc		7,543		46,502
Whitbread plc		6,266		344,574
William Hill plc		297,701		1,911,378

				20,307,172


Diversified Financials 0.8%
3i Group plc		14,557		87,003
Aberdeen Asset Management plc		14,467		102,670
Ashmore Group plc		127,480		826,083
Close Brothers Group plc		256,000		5,184,451
Hargreaves Lansdown plc		50,947		970,555
ICAP plc		8,336		51,475
IG Group Holdings plc		126,879		1,246,967
International Personal Finance plc		62,380		576,490
Investec plc		8,046		56,295
Jupiter Fund Management plc		169,409		1,083,239
London Stock Exchange Group plc		2,950		77,538
Provident Financial plc		32,678		826,553
Schroders plc		188,495		7,779,632
Schroders plc, Non Voting Shares		1,100		37,529

				18,906,480


Energy 0.6%
AMEC plc		4,981		93,943
BG Group plc		118,509		2,417,544
BP plc		292,190		2,268,155
Ensco plc, Class A		41,325		2,382,386
Petrofac Ltd.		3,837		89,991
Royal Dutch Shell plc, A Shares		58,907		1,961,886
Royal Dutch Shell plc, B Shares		39,489		1,367,109
Tullow Oil plc		250,266		3,782,823

				14,363,837


Food & Staples Retailing 0.5%
J. Sainsbury plc		18,131		114,688
Tesco plc		2,043,395		11,919,404
WM Morrison Supermarkets plc		34,299		154,758

				12,188,850


Food, Beverage & Tobacco 1.4%
Associated British Foods plc		5,619		204,278
British American Tobacco plc		29,533		1,629,402

See financial notes 49

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
British American Tobacco plc ADR		43,300		4,784,217
Diageo plc		525,669		16,756,985
Diageo plc ADR		48,725		6,216,823
Imperial Tobacco Group plc		15,069		562,585
SABMiller plc		14,784		770,849
Tate & Lyle plc		7,497		95,144
Unilever plc		19,810		803,316

				31,823,599


Health Care Equipment & Services 0.0%
Smith & Nephew plc		13,959		178,531


Household & Personal Products 0.0%
Reckitt Benckiser Group plc		10,071		783,112


Insurance 1.3%
Admiral Group plc		3,040		62,241
Amlin plc		235,584		1,609,642
Aviva plc		44,994		323,008
Direct Line Insurance Group plc		10,282		37,094
Hiscox Ltd.		108,986		1,157,034
Lancashire Holdings Ltd.		107,222		1,395,988
Legal & General Group plc		91,272		316,331
Old Mutual plc		75,509		246,087
Prudential plc		471,229		9,636,987
Resolution Ltd.		21,377		122,400
RSA Insurance Group plc		52,603		108,337
St. James’s Place plc		135,415		1,465,801
Standard Life plc		36,765		207,417
Willis Group Holdings plc		264,200		11,907,494

				28,595,861


Materials 2.0%
Anglo American plc		21,690		515,714
Antofagasta plc		83,483		1,140,959
AZ Electronic Materials S.A.		1,858,451		8,537,659
BHP Billiton plc		32,585		1,005,523
Croda International plc		373,159		14,582,184
Elementis plc		217,639		903,452
Fresnillo plc		2,689		42,036
Johnson Matthey plc		3,228		155,342
Randgold Resources Ltd.		1,346		99,822
Rexam plc		396,042		3,297,878
Rio Tinto plc		19,564		989,941
Rio Tinto plc ADR		110,700		5,612,490
Vedanta Resources plc		1,793		30,549
Victrex plc		352,754		9,322,476

				46,236,025


Media 0.6%
British Sky Broadcasting Group plc		16,255		244,231
Daily Mail & General Trust plc		83,805		1,093,052
ITV plc		1,933,569		5,912,041
Pearson plc		12,645		264,470
Reed Elsevier plc		18,961		265,612
Rightmove plc		26,283		1,116,877
WPP plc		199,113		4,229,343

				13,125,626


Pharmaceuticals, Biotechnology & Life Sciences 0.7%
Abcam plc		100,973		816,786
AstraZeneca plc		19,208		1,016,874
BTG plc *		96,176		647,168
GlaxoSmithKline plc		495,914		13,073,460

				15,554,288


Real Estate 0.4%
Big Yellow Group plc		90,425		677,526
British Land Co., plc		14,802		147,626
Countrywide plc		853,423		7,635,548
Derwent London plc		22,029		884,256
Hammerson plc		10,685		90,542
Intu Properties plc		10,954		60,415
Land Securities Group plc		12,150		192,603
Segro plc		11,121		58,247

				9,746,763


Retailing 0.8%
Dixons Retail plc *		9,515,390		7,455,318
Dunelm Group plc		83,039		1,179,249
Howden Joinery Group plc		981,866		5,077,886
Kingfisher plc		36,805		222,650
Marks & Spencer Group plc		24,746		199,556
Next plc		26,978		2,355,905
Signet Jewelers Ltd.		28,700		2,142,742

				18,633,306


Semiconductors & Semiconductor Equipment 0.1%
ARM Holdings plc		73,263		1,148,003
Nanoco Group plc *		78,191		203,729

				1,351,732


Software & Services 0.1%
Aveva Group plc		13,562		561,933
Moneysupermarket.com Group plc		198,288		486,967
The Sage Group plc		18,865		101,771

				1,150,671


Technology Hardware & Equipment 1.7%
Diploma plc (b)		601,096		6,679,112
Domino Printing Sciences plc (b)		589,965		6,541,240
Halma plc		975,826		8,571,203
Laird plc		1,219,608		4,878,856
Spectris plc		240,861		8,918,538
TT Electronics plc		993,774		3,171,979

				38,760,928


Telecommunication Services 0.4%
BT Group plc		1,054,790		6,382,143
Inmarsat plc		6,807		78,565
Vodafone Group plc		753,012		2,758,100

				9,218,808


Transportation 0.1%
easyJet plc		122,577		2,567,636


Utilities 0.1%
Centrica plc		81,198		459,234
National Grid plc		56,210		706,376
Severn Trent plc		3,562		106,325
SSE plc		14,882		337,600
United Utilities Group plc		10,763		121,729

				1,731,264

				439,050,891

50 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

United States 0.1%


Food, Beverage & Tobacco 0.0%
Bunge Ltd.		14,600		1,199,098


Insurance 0.1%
PartnerRe Ltd.		15,925		1,595,844

				2,794,942

Total Common Stock
(Cost $1,603,354,249)				2,128,971,390




Preferred Stock 0.3% of net assets

Brazil 0.2%


Banks 0.0%
Itau Unibanco Holding S.A.		62,500		967,052


Food, Beverage & Tobacco 0.2%
Companhia de Bebidas das Americas ADR		104,401		3,883,717

				4,850,769

Germany 0.1%


Automobiles & Components 0.1%
Bayerische Motoren Werke AG		783		65,358
Porsche Automobil Holding SE		2,393		223,450
Volkswagen AG		2,259		572,901

				861,709


Household & Personal Products 0.0%
Henkel AG & Co. KGaA		2,771		299,186


Materials 0.0%
Fuchs Petrolub SE		442		35,685


Utilities 0.0%
RWE AG		585		19,930

				1,216,510

United Kingdom 0.0%


Capital Goods 0.0%
Invensys plc (a)		12,175		14,973
Rolls-Royce Holdings plc (a)*		23,741,418		38,067

				53,040

Total Preferred Stock
(Cost $5,886,941)				6,120,319




Other Investment Company 5.0% of net assets

Money Market Fund 5.0%
State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00% (f)		114,088,179		114,088,179

Total Other Investment Company
(Cost $114,088,179)				114,088,179




Rights 0.0% of net assets

Hong Kong 0.0%
New Hotel (a)*		675		—

Spain 0.0%
Banco Santander S.A. (a)*		170,914		37,011

Total Rights
(Cost $35,341)				37,011



	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

Short-Term Investments 0.2% of net assets

U.S. Treasury Obligations 0.2%
U.S. Treasury Bills
0.01%, 12/05/13 (d)(e)		55,000		55,000
0.02%, 12/05/13 (d)(e)		5,000		5,000
0.03%, 12/05/13 (d)(e)		5,000		5,000
0.04%, 12/05/13 (d)(e)		20,000		19,999
0.05%, 12/05/13 (d)(e)		20,000		19,999
0.00%, 12/19/13 (d)(e)		225,000		225,000
0.01%, 12/19/13 (d)(e)		4,120,000		4,119,970
0.02%, 12/19/13 (d)(e)		400,000		399,989

Total Short-Term Investments
(Cost $4,849,957)				4,849,957



End of Investments.

At 10/31/13, the tax basis cost of the fund’s investments was $1,767,940,581 and the unrealized appreciation and depreciation were $509,920,702 and ($23,794,427), respectively, with a net unrealized appreciation of $486,126,275.

At 10/31/13, the values of certain foreign securities held by the fund aggregating $1,797,740,885 were adjusted from their closing market values in accordance with international fair valuation procedures approved by the fund’s Board of Trustees. (See financial note 2)


*		Non-income producing security.
(a)		Fair-valued by management in accordance with procedures approved by the Board of Trustees.
(b)		Illiquid security. At the period end, the value of these amounted to $36,898,622 or 1.6% of net assets.
(c)		Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers. At the period end, the value of these amounted to $613,122 or 0.0% of net assets.
(d)		All or a portion of this security is held as collateral for open futures contracts.
(e)		The rate shown is the purchase yield.
(f)		The rate shown is the 7-day yield.
(g)		Securities are traded on separate exchanges for the same entity.

See financial notes 51

Laudus International MarketMasters Fund

Portfolio Holdings continued


ADR —		American Depositary Receipt
CVA —		Dutch Certificate
GDR —		Global Depositary Receipt
Reg’d —		Registered
REIT —		Real Estate Investment Trust
RSP —		Risparmio (Convertible Savings Shares)
SDR —		Swedish Depositary Receipt


AUD —		Australian dollar
CHF —		Swiss franc
JPY —		Japanese yen
NZD —		New Zealand dollar
SEK —		Swedish krona
USD —		U.S. dollar

In addition to the above, the fund held the following at 10/31/13:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contract

MSCI EAFE, e-mini, Long, expires 12/20/13

970

90,952,050

2,632,085

Amount of

Unrealized

Currency

Appreciation

Expiration

to be

(Depreciation)

Date

Counterparty

Received

Delivered

($)

Forward Foreign Currency Exchange Contracts

12/18/2013

State Street Bank & Trust Co.

AUD

2,150,000

USD

2,026,223

80,194

12/18/2013

State Street Bank & Trust Co.

USD

12,553,159

AUD

13,320,000

997,277

01/31/2014

State Street Bank London

USD

12,147,364

AUD

12,927,000

82,871

03/19/2014

State Street Bank & Trust Co.

USD

22,399,690

CHF

20,300,000

(520,210

)

12/18/2013

State Street Bank & Trust Co.

USD

5,096,445

JPY

501,000,000

27,302

01/31/2014

State Street Bank London

USD

6,042,895

NZD

7,360,500

(3,936

)

06/18/2014

State Street Bank & Trust Co.

USD

7,598,124

SEK

49,500,000

(46,867

)

06/18/2014

State Street Bank & Trust Co.

USD

982,384

SEK

6,400,000

9,895

Net Unrealized Appreciation on Forward Foreign Currency Exchange Contracts

626,526

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2013 (see financial note 2(a) for additional information):

Assets Valuation Input


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Common Stock¹		$—		$108,339,346		$—		$108,339,346
Australia¹		—		85,695,101		—		85,695,101
Materials		6,127,056		16,998,885		—		23,125,941
Belgium¹		—		4,629,998		—		4,629,998
Media		46,024		—		—		46,024
Brazil
Capital Goods		2,462,789		—		—		2,462,789
Consumer Services		4,797,099		—		—		4,797,099
Insurance		2,487,197		—		—		2,487,197
Materials		3,288,454		—		—		3,288,454
Software & Services		612,718		1,943,933		—		2,556,651
Transportation		1,001,273		—		—		1,001,273
Canada¹		86,107,961		—		—		86,107,961
Chile¹		579,395		—		—		579,395

52 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

China¹		$—		$19,026,377		$—		$19,026,377
Capital Goods		3,802,017		1,903,903		—		5,705,920
Pharmaceuticals, Biotechnology & Life Sciences		650,754		1,229,797		—		1,880,551
Retailing		891,726		—		—		891,726
Software & Services		8,984,534		3,222,747		—		12,207,281
Technology Hardware & Equipment		633,252		4,643,800		—		5,277,052
Denmark¹		—		30,559,704		—		30,559,704
Consumer Durables & Apparel		2,204,570		—		—		2,204,570
Food, Beverage & Tobacco		6,526,055		167,908		—		6,693,963
Telecommunication Services		95,692		—		—		95,692
France¹		—		119,577,861		—		119,577,861
Capital Goods		93,764		10,921,824		—		11,015,588
Consumer Services		144,724		98,823		—		243,547
Insurance		2,469,971		10,366,117		—		12,836,088
Media		4,424,239		11,250,426		—		15,674,665
Pharmaceuticals, Biotechnology & Life Sciences		5,051,037		11,644,904		—		16,695,941
Real Estate		378,656		4,639,973		—		5,018,629
Software & Services		1,697,580		2,679,198		—		4,376,778
Telecommunication Services		79,569		849,903		—		929,472
Transportation		55,458		85,879		—		141,337
Germany¹		—		144,740,061		—		144,740,061
Capital Goods		143,351		39,859,056		—		40,002,407
Materials		4,784,595		17,064,878		—		21,849,473
Media		3,751,217		3,092,392		—		6,843,609
Hong Kong¹		—		50,948,159		—		50,948,159
Software & Services		2,145,960		—		—		2,145,960
Technology Hardware & Equipment		—		4,258,248		12,251		4,270,499
Telecommunication Services		27,086		588,821		—		615,907
India¹		—		8,387,195		—		8,387,195
Software & Services		2,190,751		2,933,792		—		5,124,543
Ireland¹		—		18,281,344		—		18,281,344
Capital Goods		6,776,928		—		—		6,776,928
Food, Beverage & Tobacco		5,742,798		—		—		5,742,798
Israel¹		—		807,488		—		807,488
Software & Services		6,353,190		35,212		—		6,388,402
Italy¹		—		49,080,110		—		49,080,110
Retailing		631,993		—		—		631,993
Japan¹		—		272,690,632		—		272,690,632
Consumer Durables & Apparel		—		1,385,429		49,426		1,434,855
Consumer Services		27,621		165,374		—		192,995
Real Estate		68,768		2,246,244		—		2,315,012
Software & Services		12,031		10,370,187		—		10,382,218
Luxembourg¹		—		462,092		—		462,092
Energy		5,585,912		—		—		5,585,912
Malaysia¹		4,034,497		—		—		4,034,497

See financial notes 53

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total

Mexico¹		$3,862,881		$—		$—		$3,862,881
Netherlands¹		—		17,469,286		—		17,469,286
Capital Goods		12,805,162		27,317,770		—		40,122,932
Energy		11,983,389		129,658		—		12,113,047
Food, Beverage & Tobacco		2,660,247		7,165,094		—		9,825,341
Telecommunication Services		147,997		105,716		—		253,713
Nigeria¹		626,987		—		—		626,987
Norway¹		—		15,516,196		—		15,516,196
Materials		481,074		188,966		—		670,040
Pharmaceuticals, Biotechnology & Life Sciences		485,272		—		—		485,272
Republic of Korea¹		—		17,552,805		—		17,552,805
Capital Goods		2,115,354		4,384,843		—		6,500,197
Retailing		663,181		3,413,815		—		4,076,996
Russia¹		4,454,772		—		—		4,454,772
Spain¹		—		21,071,751		—		21,071,751
Banks		110,764		3,896,628		—		4,007,392
Sweden¹		—		39,170,029		—		39,170,029
Capital Goods		2,678,160		21,409,362		—		24,087,522
Switzerland¹		—		56,491,839		—		56,491,839
Capital Goods		5,982,817		3,530,373		—		9,513,190
Diversified Financials		3,219,334		38,402,053		—		41,621,387
Energy		10,621,179		256,307		—		10,877,486
Food, Beverage & Tobacco		7,962,589		15,280,414		—		23,243,003
Pharmaceuticals, Biotechnology & Life Sciences		3,518,831		22,011,463		—		25,530,294
Taiwan¹		—		22,752,923		—		22,752,923
Semiconductors & Semiconductor Equipment		3,180,825		—		—		3,180,825
Thailand¹		—		2,145,009		—		2,145,009
Consumer Services		2,051,316		—		—		2,051,316
Telecommunication Services		1,946,066		—		—		1,946,066
United Kingdom¹		—		139,806,114		—		139,806,114
Capital Goods		3,995,814		90,182,624		—		94,178,438
Energy		2,382,386		11,981,451		—		14,363,837
Food, Beverage & Tobacco		11,001,040		20,822,559		—		31,823,599
Insurance		13,340,576		15,255,285		—		28,595,861
Materials		5,612,490		40,623,535		—		46,236,025
Pharmaceuticals, Biotechnology & Life Sciences		816,786		14,737,502		—		15,554,288
Real Estate		8,313,074		1,433,689		—		9,746,763
Retailing		2,142,742		16,490,564		—		18,633,306
Semiconductors & Semiconductor Equipment		203,729		1,148,003		—		1,351,732
Technology Hardware & Equipment		13,220,352		25,540,576		—		38,760,928
United States¹		2,794,942		—		—		2,794,942
Preferred Stock¹		—		1,216,510		—		1,216,510

54 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Quoted Prices in					Significant
	Active Markets for		Significant Other			Unobservable
	Identical Assets		Observable Inputs			Inputs
Description	(Level 1)		(Level 2)			(Level 3)		Total

Brazil¹		$—		$967,052			$—		$967,052
Food, Beverage & Tobacco		3,883,717		—			—		3,883,717
United Kingdom¹		—		—			53,040		53,040
Other Investment Company¹		114,088,179		—			—		114,088,179
Rights¹		—		—			37,011		37,011
Short-Term Investments¹		—		4,849,957			—		4,849,957

Total		$451,324,286		$1,802,590,842			$151,728		$2,254,066,856

Other Financial Instruments
Futures Contract²		$2,632,085		$—			$—		$2,632,085
Forward Foreign Currency Exchange Contracts²		—		1,197,539			—		1,197,539


Liabilities Valuation Input


Other Financial Instruments
Forward Foreign Currency Exchange Contracts²		$—		($571,013	)		$—		($571,013	)


¹		As categorized in Portfolio Holdings.
²		Futures contracts and forward foreign currency exchange contracts are not included in Investments and are valued at unrealized appreciation or depreciation.

The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:


	Balance							Change in												Balance
	as of		Accrued		Realized			Unrealized								Gross		Gross		as of
	October 31,		Discounts		Gains			Appreciation			Gross		Gross			Transfers		Transfers		October 31,
Investments in Securities	2012		(Premiums)		(Losses)			(Depreciation)			Purchases		Sales			in		out		2013

Common Stock
Hong Kong		$30,640		$—		$—			($18,389	)		$—		$—			$—		$—		$12,251
Japan		—		—		83,747			(1,796	)		49,704		(580,713	)		498,484		—		49,426
Preferred Stock
United Kingdom		32,214		—		296			(333	)		52,996		(32,133	)		—		—		53,040
Rights
Spain		—		—		—			1,669			35,342		—			—		—		37,011
Corporate Bonds
Brazil		28,510		89		(3,908	)		88,682			—		(113,373	)		—		—		—

Total		$91,364		$89		$80,135			$69,833			$138,042		($726,219	)		$498,484		$—		$151,728

The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were security transfers between Level 1, Level 2 and Level 3 for the period ended October 31, 2013. The transfers in the amount of $9,059,466 and $21,032,286 from Level 1 to Level 2 and from Level 2 to Level 1, respectively, were primarily due to the use of international fair valuation by the fund. The transfers in and out of Level 3 from Level 1 or Level 2 were the result of fair valued securities for which no quoted value was available.

See financial notes 55

Laudus International MarketMasters Fund

Statement of

Assets and Liabilities

As of October 31, 2013



Assets

Investments, at value (cost $1,728,214,667)		$2,254,066,856
Foreign currency, at value (cost $2,926,316)		2,939,407
Cash		370,378
Receivables:
Investments sold		18,302,426
Fund shares sold		13,343,412
Dividends		3,354,936
Foreign tax reclaims		1,452,617
Interest		39
Unrealized gains on forward foreign currency exchange contracts		1,197,539
Prepaid expenses	+	110,127

Total assets		2,295,137,737

Liabilities

Payables:
Investments bought		27,685,131
Investment adviser and administrator fees		206,545
Shareholder service fees		340,995
Fund shares redeemed		817,084
Variation margin on futures contracts		356,395
Foreign capital gains tax		44,490
Unrealized losses on forward foreign currency exchange contracts	+	571,013

Total liabilities		30,021,653

Net Assets

Total assets		2,295,137,737
Total liabilities	−	30,021,653

Net assets		$2,265,116,084

Net Assets by Source
Capital received from investors		1,955,627,874
Net investment income not yet distributed		17,610,213
Net realized capital losses		(237,287,311	)
Net unrealized capital appreciation		529,165,308

Net Asset Value (NAV) by Shares Class


			Shares
Share Class	Net Assets	÷	Outstanding	=	NAV
Investor Shares	$674,873,443		28,501,558			$23.68
Select Shares	$1,590,242,641		67,147,955			$23.68

56 See financial notes

Laudus International MarketMasters Fund

Statement of

Operations

For the period November 1, 2012 through October 31, 2013



Investment Income

Dividends (net of foreign withholding taxes of $3,603,670)		$48,284,713
Interest (net of foreign withholding taxes of $431)	+	58,101

Total investment income		48,342,814

Expenses

Investment adviser and administrator fees		24,398,127
Shareholder service fees:
Investor Shares		1,505,561
Select Shares		1,013,731
Custodian fees		1,086,912
Portfolio accounting fees		196,100
Transfer agent fees		175,001
Shareholder reports		108,128
Professional fees		83,366
Registration fees		81,429
Independent trustees’ fees		19,948
Interest expense		162
Other expenses	+	55,175

Total expenses		28,723,640
Expense reduction by CSIM and its affiliates	−	3,705,570
Custody credits	−	4

Net expenses	−	25,018,066

Net investment income		23,324,748

Realized and Unrealized Gains (Losses)

Net realized gains on investments (net of foreign capital gain tax of $48)		161,318,500
Net realized gains on futures contracts		5,480,780
Net realized gains on foreign currency transactions	+	6,696,119

Net realized gains		173,495,399
Net change in unrealized appreciation on investments (net of foreign capital gain tax of ($44,490))		262,585,042
Net change in unrealized appreciation on futures contracts		3,225,503
Net change in unrealized depreciation on foreign currency translations	+	(620,868	)

Net change in unrealized appreciation	+	265,189,677

Net realized and unrealized gains		438,685,076

Increase in net assets resulting from operations		$462,009,824

See financial notes 57

Laudus International MarketMasters Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/12-10/31/13				11/1/11-10/31/12
Net investment income		$23,324,748			$20,817,525
Net realized gains		173,495,399			16,733,565
Net change in unrealized appreciation	+	265,189,677			114,959,645

Increase in net assets from operations		462,009,824			152,510,735

Distributions to Shareholders

Distributions from net investment income
Investor Shares		(13,288,779	)		(5,407,664	)
Select Shares	+	(25,873,436	)		(9,563,990	)

Total distributions from net investment income		($39,162,215	)		($14,971,654	)

Transactions in Fund Shares


		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		VALUE			SHARES		VALUE
Shares Sold
Investor Shares			3,013,633		$63,900,921			1,866,086		$33,699,589
Select Shares	+		19,866,078		424,219,097			14,627,352		259,539,496

Total shares sold			22,879,711		$488,120,018			16,493,438		$293,239,085


Shares Reinvested
Investor Shares			634,180		$12,214,309			313,230		$4,983,484
Select Shares	+		892,608		17,173,788			403,057		6,404,578

Total shares reinvested			1,526,788		$29,388,097			716,287		$11,388,062


Shares Redeemed
Investor Shares			(6,234,658	)	($130,752,070	)		(9,205,299	)	($164,437,304	)
Select Shares	+		(9,414,179	)	(198,148,130	)		(14,236,435	)	(249,904,027	)

Total shares redeemed			(15,648,837	)	($328,900,200	)		(23,441,734	)	($414,341,331	)

Net transactions in fund shares			8,757,662		$188,607,915			(6,232,009	)	($109,714,184	)

Shares Outstanding and Net Assets

		11/1/12-10/31/13					11/1/11-10/31/12
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			86,891,851		$1,653,660,560			93,123,860		$1,625,835,663
Total increase or decrease	+		8,757,662		611,455,524			(6,232,009	)	27,824,897

End of period			95,649,513		$2,265,116,084			86,891,851		$1,653,660,560


Net investment income not yet distributed					$17,610,213					$20,990,598

58 See financial notes

Laudus MarketMasters Funds

Financial Notes

1. Business Structure of the Funds:



Schwab Capital Trust (organized May 7, 1993)		Schwab International Core Equity Fund
Laudus Small-Cap MarketMasters Fund		Schwab Target 2010 Fund
Laudus International MarketMasters Fund		Schwab Target 2015 Fund
Schwab S&P 500 Index Fund		Schwab Target 2020 Fund
Schwab Small-Cap Index Fund		Schwab Target 2025 Fund
Schwab Total Stock Market Index Fund		Schwab Target 2030 Fund
Schwab International Index Fund		Schwab Target 2035 Fund
Schwab MarketTrack All Equity Portfolio		Schwab Target 2040 Fund
Schwab MarketTrack Growth Portfolio		Schwab Target 2045 Fund
Schwab MarketTrack Balanced Portfolio		Schwab Target 2050 Fund
Schwab MarketTrack Conservative Portfolio		Schwab Target 2055 Fund
Schwab Balanced Fund		Schwab Fundamental US Large Company Index Fund
Schwab Core Equity Fund		Schwab Fundamental US Small Company Index Fund
Schwab Dividend Equity Fund		Schwab Fundamental International Large Company Index Fund
Schwab Large-Cap Growth Fund		Schwab Fundamental International Small Company Index Fund
Schwab Small-Cap Equity Fund		Schwab Fundamental Emerging Markets Large Company Index Fund
Schwab Hedged Equity Fund		Schwab Monthly Income Fund - Moderate Payout
Schwab Financial Services Fund		Schwab Monthly Income Fund - Enhanced Payout
Schwab Health Care Fund		Schwab Monthly Income Fund - Maximum Payout

Each of the Laudus MarketMasters Funds offers two share classes: Investor Shares and Select Shares^®. Shares of each class represent an interest in the same portfolio, but each class has different expenses and investment minimums.

Shares are bought and sold (subject to a redemption fee, see financial note 9) at closing net asset value per share (“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 funds’ Board of Trustees (the “Board”) may authorize the issuance of as many shares as necessary.

2. Significant Accounting Policies:

(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: Traded securities are valued at the closing value for the day, or, on days when no closing value has been reported, at halfway between the most recent bid and ask quotes. Securities that are primarily traded on foreign exchanges are valued at the official closing price or the last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate, unless these securities are fair valued as discussed below.

Laudus MarketMasters Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):


	•	Securities for which no quoted value is available: The Board has adopted procedures to fair value each fund’s securities when market prices are not “readily available” or are unreliable. For example, a fund may fair value a security when it is de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a price; or when a security’s primary trading market is closed during regular market hours. Each fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. The Pricing Committee considers a number of factors, including unobservable market inputs when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security. The Board convenes on a regular basis to review fair value determinations made by the funds pursuant to the valuation procedures.

	•	Foreign equity security fair valuation: The Board has adopted procedures to fair value foreign equity securities that are traded in markets that close prior to the funds valuing their holdings. By fair valuing securities whose prices may have been affected by events occurring after the close of trading, each fund seeks to establish prices that investors might expect to realize upon the current sales of these securities. This methodology is designed to deter “arbitrage” market timers, who seek to exploit delays between the change in the value of a fund’s portfolio holdings and the NAV of the fund’s shares, and seeks to help ensure that the prices at which the fund’s shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders. When fair value pricing is used at the open or close of a reporting period, it may cause a temporary divergence between the return of a fund and that of its comparative index or benchmark. The Board regularly reviews fair value determinations made by the funds pursuant to these procedures.

	•	Futures and forward foreign currency exchange contracts: Futures are valued at their settlement prices as of the close of their exchanges. Forwards are valued based on that day’s forward exchange rates or by using an interpolated forward exchange rate for contracts with interim settlement dates.

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

	•	Underlying funds: Mutual funds are valued at their respective NAVs. Exchange traded funds (“ETFs”) traded on a recognized securities exchange are valued at the last reported sale price that day or the official closing price, if applicable.

The three levels of the fair value hierarchy are 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, ETFs and futures contracts. Investments in mutual funds are valued daily at their NAVs, and investments in ETFs are valued daily at the last reported sale price or the official closing price, which are classified as Level 1 prices.

	•	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

Laudus MarketMasters Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):


		value their holdings may require fair valuations due to significant movement in the U.S. markets occurring after the daily close of the foreign markets. The Board has approved a vendor that calculates fair valuations of international equity 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 levels associated with valuing the funds’ investments as of October 31, 2013 are disclosed in the Portfolio Holdings.

(b) Accounting Policies for certain Portfolio Investments (if held):

(c) Security Transactions:

Laudus MarketMasters Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(d) Investment Income:

(e) Expenses:

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

(f) Distributions to Shareholders:

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

(g) Custody Credit:

The funds have an arrangement with their custodian bank, State Street Bank and Trust Company (“State Street”), under which the funds may receive a credit for their uninvested cash balance to offset their custody fees and accounting fees. The credit amounts, if any, are disclosed in the Statement of Operations as a reduction to the funds’ operating expenses.

(h) Accounting Estimates:

(i) Federal Income Taxes:

(j) Foreign Taxes:

Laudus MarketMasters Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(k) Indemnification:

(l) New Accounting Pronouncements:

3. Risk Factors:

The fund’s investment managers attempt to reduce the impact of the performance of any given investment style by investing in both value and growth style stocks. But whenever value stocks fall out of favor with investors, they may underperform growth stocks, and vice versa.

As with all actively managed funds, the strategies of the fund’s managers — its investment adviser and investment managers — may not achieve their desired results.

Emerging market countries may be more likely to experience political turmoil or rapid changes in market or economic conditions than more developed countries. Such countries often have less uniformity in accounting and reporting requirements and unreliable securities valuation and greater risk associated with the custody of securities. 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 a fund’s investments in emerging market countries, and at times, it may be difficult to value such investments.

Laudus MarketMasters Funds

Financial Notes (continued)

3. Risk Factors (continued):

As a result of the fund’s investments in securities denominated in, and/or receiving revenues in, foreign currencies, the fund will be subject to currency risk. This is the risk that those currencies will decline in value relative to the U.S. dollar. If such an event occurs, the dollar value of an investment in the fund would be adversely affected.

Although CSIM monitors and seeks to coordinate the overall management of a fund, each investment manager makes investment decisions independently, and it is possible that the investment styles of the investment managers may not complement one another. As a result, a fund’s exposure to a given stock, industry or investment style could unintentionally be smaller or larger than if a fund had a single manager.

A particular investment may be difficult to purchase or sell. A fund may be unable to sell illiquid securities at an advantageous time or price.

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

4. Affiliates and Affiliated Transactions:

For its advisory and administrative services to the funds, CSIM is entitled to receive an annual fee, payable monthly, based on a percentage of each fund’s average daily net assets as follows:


	Laudus Small-Cap		Laudus International
% of Average Daily Net Assets	MarketMasters Fund		MarketMasters Fund

First $500 million		1.17%		1.29%
$500 million to $1 billion		1.13%		1.275%
Over $1 billion		1.07%		1.25%

Pursuant to the Plan, each fund’s shares are subject to an annual shareholder servicing fee up to 0.25% for Investor Shares and 0.20% for Select Shares. The shareholder servicing fee paid to a particular service provider is made pursuant to its written agreement with Schwab (or, in the case of payments made to Schwab, pursuant to Schwab’s written agreement with the funds). Payments under the Plan are made as described above regardless of Schwab’s or the service provider’s actual cost of providing the services. If the cost of providing the services under the Plan is less than the payments received, the unexpended portion of the fees may be retained as profit by Schwab or the service provider.

Laudus MarketMasters Funds

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):


	Laudus Small-Cap		Laudus International
	MarketMasters Fund		MarketMasters Fund

Investor Shares		1.35%		1.40%
Select Shares		1.20%		1.25%

Certain Schwab funds may own shares of other Schwab funds. The table below reflects the percentage of shares of each fund in this report that are owned by other Schwab funds as of October 31, 2013, as applicable:


	Laudus Small-Cap		Laudus International
	MarketMasters Fund		MarketMasters Fund

Schwab Target 2010 Fund		0.6%		0.1%
Schwab Target 2015 Fund		1.1%		0.2%
Schwab Target 2020 Fund		6.1%		1.0%
Schwab Target 2025 Fund		4.3%		0.7%
Schwab Target 2030 Fund		11.9%		2.0%
Schwab Target 2035 Fund		4.3%		0.7%
Schwab Target 2040 Fund		14.3%		2.3%
Schwab Target 2045 Fund		0.4%		0.1%
Schwab Target 2050 Fund		0.3%		0.1%
Schwab Target 2055 Fund		0.2%		0.0%	*
Schwab Monthly Income Fund - Moderate Payout		—%		0.2%
Schwab Monthly Income Fund - Enhanced Payout		—%		0.3%
Schwab Monthly Income Fund - Maximum Payout		—%		0.1%
Schwab Balanced Fund		8.7%		—%


*		Less than 0.05%

5. Board of Trustees:

6. Borrowing from Banks:

The funds have access to custodian overdraft facilities, a committed line of credit of $150 million with State Street, 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 & Co. 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 for the committed line of credit.

Laudus MarketMasters Funds

Financial Notes (continued)

7. Purchases and Sales/Maturities of Investment Securities:

For the period ended October 31, 2013, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:


	Purchases of Securities		Sales/Maturities of Securities

Laudus Small-Cap MarketMasters Fund		$160,015,999		$167,475,679
Laudus International MarketMasters Fund		1,295,111,669		1,188,539,076

8. Derivatives:

The funds entered into equity index futures contracts (“futures”) during the report period. The funds invested in futures to equitize available cash. The fair value and variation margin for futures contracts held at October 31, 2013 are presented on the face of the Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized/unrealized gains (losses) on futures contracts are presented on the Statement of Operations. Refer to financial note 2(b) for the funds’ accounting policies with respect to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period, the month-end average contract values of futures contracts held by the funds and the month-end average number of contracts held were as follows:


	Contract Values		Number of Contracts

Laudus Small-Cap MarketMasters Fund		$2,710,898		29
Laudus International MarketMasters Fund		50,002,705		586

The Laudus International MarketMasters Fund invested in forwards during the report period. The fund invested in forwards in connection with the purchase and sale of portfolio securities to minimize the uncertainty of changes in future foreign currency exchange rates. Refer to financial note 2(b) for the fund’s accounting policies with respect to forwards and financial note 3 for disclosures concerning the risks of investing in forwards. During the period, the month-end average forward foreign currency notional amount and the month-end average unrealized appreciation were $151,434,065 and $3,561,703, respectively.

As of October 31, 2013, the derivatives contracts held by the funds, categorized by primary risk exposure, were:


	Laudus Small-Cap		Laudus International
	MarketMasters Fund		MarketMasters Fund
Asset Derivatives	Fair Value

Equity Index - Futures Contracts¹		$94,995		$2,632,085
Forward Foreign Currency Exchange Contracts²		—		1,197,539

Total		94,995		3,829,624


Liability Derivatives	Fair Value

Forward Foreign Currency Exchange Contracts³		$—		$571,013


¹		Includes cumulative unrealized appreciation of futures contracts as reported in the Schedule of Portfolio Holdings. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.
²		Statement of Assets and Liabilities location: Unrealized appreciation on forward foreign currency exchange contracts.
³		Statement of Assets and Liabilities location: Unrealized depreciation on forward foreign currency exchange contracts.

Laudus MarketMasters Funds

Financial Notes (continued)

8. Derivatives (continued):

During the period ending October 31, 2013, the derivatives held by the funds, categorized by primary risk exposure, were:


	Laudus Small-Cap		Laudus International
	MarketMasters Fund		MarketMasters Fund

Equity Index Futures Contracts
Realized Gains (Losses)¹		$865,900		$5,480,780
Change in Unrealized Appreciation (Depreciation)²		300,357		3,225,503
Forward Foreign Currency Exchange Contracts
Realized Gains (Losses)¹		$—		$7,322,089
Change in Unrealized Appreciation (Depreciation)²		—		(763,771	)


¹		Statement of Operations location: Net realized gains (losses) on futures contracts and net realized gains (losses) on foreign currency transactions.
²		Statement of Operations location: Net unrealized appreciation (depreciation) on futures contracts and net unrealized appreciation (depreciation) on foreign currency translations.

9. Redemption Fee:


	Current Period		Prior Period
	(11/1/12-10/31/13)		(11/1/11-10/31/12)

Laudus Small-Cap MarketMasters Fund		$341		$394
Laudus International MarketMasters Fund		12,421		7,324

10. Federal Income Taxes:

As of October 31, 2013, the components of distributable earnings on a tax-basis were as follows:


	Laudus Small-Cap			Laudus International
	MarketMasters Fund			MarketMasters Fund

Undistributed ordinary income		$—			$33,602,909
Undistributed long-term capital gains		—			—
Unrealized appreciation on investments		40,011,568			509,920,702
Unrealized depreciation on investments		(4,105,076	)		(23,794,427	)
Other unrealized appreciation (depreciation)		(8	)		113,510

Net unrealized appreciation (depreciation)		$35,906,484			$486,239,785


	Laudus Small-Cap		Laudus International
Expiration Date	MarketMasters Fund		MarketMasters Fund

October 31, 2017		$22,461,534		$210,354,492

Total		$22,461,534		$210,354,492

Laudus MarketMasters Funds

Financial Notes (continued)

10. Federal Income Taxes (continued):

next taxable year. For the year ended October 31, 2013, the funds had late-year ordinary losses deferred and capital losses utilized as follows:


	Laudus Small-Cap		Laudus International
	MarketMasters Fund		MarketMasters Fund

Late-year ordinary losses deferred		$1,041,833		$—
Capital losses utilized		28,218,426		158,069,352

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


	Laudus Small-Cap		Laudus International
	MarketMasters Fund		MarketMasters Fund

Current period distributions
Ordinary income		$—		$39,162,215
Long-term capital gains		—		—
Return of capital		—		—

Prior period distributions
Ordinary income		$—		$14,971,654
Long-term capital gains		—		—
Return of capital		—		—


	Laudus Small-Cap			Laudus International
	MarketMasters Fund			MarketMasters Fund

Capital shares		$—			$—
Undistributed net investment income		(14,082	)		12,457,082
Net realized capital gains (losses)		14,082			(12,457,082	)

11. Subsequent Events:

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of:

Laudus Small-Cap MarketMasters Fund

Laudus International MarketMasters Fund

In our opinion, the accompanying statements of assets and liabilities, including the portfolio holdings, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Laudus Small-Cap MarketMasters Fund and Laudus International MarketMasters Fund (two of the portfolios constituting Schwab Capital Trust, hereafter referred to as the “Funds”) at October 31, 2013, and the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the 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 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 audit 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, 2013 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

December 17, 2013

Approval of New Sub-Advisory Agreement and Renewal of Investment Advisory and Sub-Advisory Agreements

Approval of New Sub-Advisory Agreement

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 agreements must be specifically approved (1) by the vote of the trustees or by a vote of the shareholders of the fund¹, and (2) by the vote of a majority of the trustees who are not parties to the investment advisory agreements 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 agreements.

At a meeting of the Board of Trustees (the “Board” or the “Trustees,” as appropriate) held on February 28, 2013, Charles Schwab Investment Management, Inc. (“CSIM”) recommended, and the Trustees, including each of the Independent Trustees, approved the a new investment sub-advisory agreement between CSIM and BMO Asset Management Corp. (“BMO”), pursuant to which BMO was appointed to replace Neuberger Berman Management LLC as a sub-adviser to Laudus Small-Cap MarketMasters Fund (the “Fund”) (“New Sub-Advisory Agreement).

For the New Sub-Advisory Agreement, the Board was provided with detailed materials related to BMO in advance of and at each meeting. The materials included, but were not limited to, information about BMO’s (a) quality of investment management and other services; (b) investment management personnel; (c) operations and financial condition; (d) brokerage practices (including any soft dollar arrangements) and other investment strategies; (e) compliance systems; (f) policies on, and compliance procedures for, personal securities transactions; (g) reputation, expertise and resources; (h) performance compared with similar advisers; and (i) performance with respect to similar accounts managed by BMO. In addition, the Board was provided with information about the level of the sub-advisory fees to be paid to BMO and comparable fees paid to BMO for managing similar accounts. The Independent Trustees received advice from independent counsel to the Independent Trustees, including a memorandum regarding the responsibilities of Trustees for the approval of the New Sub-Advisory Agreement. The proposed appointment of BMO was first reviewed and discussed in the Investment Oversight Committee of the Board (the “Committee”) on February 27, 2013. Following such discussions, the Committee recommended the New Sub-Advisory Agreement to the Board for approval.

In its consideration of the approval of the New Sub-Advisory Agreement, the Board considered a variety of specific factors, including:


1.	the nature, extent and quality of the services to be provided to the Fund under the New Sub-Advisory Agreement, including the resources of BMO to be dedicated to the Fund;

2.	BMO’s investment performance in providing sub-advisory services with respect to similar accounts;

3.	the Fund’s expenses and how those expenses would be impacted by the hiring of BMO;

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 may be realized as the Fund grows and whether fee levels in the New Sub-Advisory Agreement reflect the 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 sub-advisory services to be provided by BMO to the Fund and the resources BMO will dedicate to the Fund. In this regard, the Trustees considered the information provided by BMO with respect to its history, reputation, expertise, qualifications of its personnel, and experience in managing the type of strategies for which the sub-adviser was being engaged. The Board also considered reports regarding the search process undertaken by CSIM that led to the identification of BMO by CSIM as a well-qualified sub-adviser to the Fund with an investment style consistent with the Fund’s investment objective and strategies, and CSIM’s desired risk/return profile. The Trustees also considered the Trust’s Chief Compliance Officer’s evaluation of BMO’s compliance program and the recommended compliance monitoring program for the sub-adviser. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services to be provided by BMO to the Fund and the resources of BMO to be dedicated to the Fund supported approval of the New Sub-Advisory Agreement.

Investment Performance. The Board considered BMO’s investment performance in determining whether to approve the New Sub-Advisory Agreement. Specifically, the Trustees considered BMO’s tracking error relative to appropriate benchmarks as well as its overall relative performance in providing investment advisory services to similar accounts.

Following such evaluation, the Board concluded, within the context of its full deliberations, that the investment performance of BMO supported approval of the New Sub-Advisory Agreement.

Fund Expenses. With respect to the Fund’s expenses, the Trustees considered the rate of compensation to be paid under the New Sub-Advisory Agreement, and the Fund’s net operating expense ratio. When considering the fees to be paid to BMO, the Trustees took into account the fact that BMO will be compensated by CSIM, and not by the Fund directly, and that the fees paid to BMO would not impact the fees paid by the Fund to CSIM. The Trustees also considered fees charged by BMO to comparable accounts, such as separately managed accounts. Finally, the Board considered CSIM’s statements that the fees to be paid to BMO are reasonable in light of the anticipated quality of services to be provided by BMO. Following such evaluation, the Board concluded, within the context of its full deliberations, that the fees to be paid to BMO are reasonable and supported approval of the New Sub-Advisory Agreement.

Profitability. With respect to the profitability of CSIM, the Trustees considered the projected profitability of CSIM before and after the appointment of BMO as a new sub-adviser. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the expected profitability of CSIM is reasonable and supported approval of the New Sub-Advisory Agreement. With respect to BMO, no historical information regarding the profitability of its relationship to the Fund was available. The Trustees took into account, however, the fact that BMO will be compensated by CSIM, and not by the Fund directly, and that the compensation paid to BMO reflects an arms-length negotiation between CSIM and the sub-adviser, which are unaffiliated with each other.

Economies of Scale. The Board 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 connection with its evaluation, the Board took into account the fact that the existing contractual investment advisory fee schedules and the proposed sub-advisory fee schedules relating to the Fund include lower fees at higher graduated asset 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 each Independent Trustee, approved the New Sub-Advisory Agreement for an initial two-year term and concluded that the compensation under the New Sub-Advisory Agreement is fair and reasonable in light of such services, and such other matters as the Trustees considered to be relevant in the exercise of their reasonable judgment.

Approval of Renewal of Investment Advisory and Sub-Advisory Agreements

The Board calls and holds one or more meetings each year that are dedicated, in whole or in part, to considering whether to renew the investment advisory agreements between the Trust and CSIM with respect to the existing funds in the Trust, including Laudus Small-Cap MarketMasters Fund and Laudus International MarketMasters Fund (the “Funds”), and the individual sub-advisory agreements between CSIM and each of BMO, Mellon Capital Management Corp.(“Mellon”), TAMRO Capital Partners, LLC and Wellington Management Company LLP relating to Laudus Small-Cap MarketMasters Fund; and between CSIM and each of American Century Global Investment Management, Inc., Harris Associates L.P., William Blair & Company, LLC, Mellon, Mondrian Investment Partners Limited and WHV Investment Management, relating to the Laudus International Market-Masters Fund (collectively, the “Sub-Advisers”). Such investment advisory and sub-advisory agreements are collectively referred to herein as the “Agreements”. The Trustees also review certain other agreements pursuant to which CSIM provides investment advisory services to certain other registered investment companies. In preparation for the meeting(s), the Board requests and reviews a wide variety of materials provided by CSIM and the Sub-Advisers, including information about their affiliates, personnel and operations. The Board also receives extensive data provided by third parties. This information is in addition to the detailed information about the Funds that the Board reviews during the course of each year, including information that relates to Fund operations and Fund performance. The Independent Trustees receive advice from independent counsel to the Independent Trustees, including a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Independent Trustees meet in executive session outside the presence of Fund management and participate in question and answer sessions with representatives of CSIM. The Board also discusses with CSIM the Funds’ operations and CSIM’s ability, consistent with the “manager of managers” structure of each of the Funds to (i) identify and recommend to the Trustees sub-advisers for each Fund, (ii) monitor and oversee the performance and investment capabilities of each sub-adviser, and (iii) recommend the replacement of a sub-adviser when appropriate. As part of the renewal process, Independent Trustees’ legal counsel sends an information request letter to CSIM and CSIM sends an information request letter to each of the Sub-Advisers seeking certain relevant information. The responses by CSIM and the Sub-Advisers are provided to the Trustees for their review prior to their meeting, and the Trustees are provided with the opportunity to request any additional materials.

respect to the Funds for an additional one year term at the meeting held on June 4, 2013. The Board’s approval of the Agreements 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 Agreements, including the resources of CSIM and its affiliates, and the Sub-Advisers, 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, and other types of accounts;

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, as well as the profitability of the Sub-Advisers; and

5.	the extent to which economies of scale would be realized as the Funds grow and whether fee levels in the Agreements 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, 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. In addition, the Trustees considered that many of the Funds’ shareholders are also brokerage clients of Schwab. The Board also considered the nature, extent and quality of the sub-advisory services provided by the Sub-Advisers to the Funds and the resources each dedicates to the Funds. Following such evaluation, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of services provided by CSIM and the Sub-Advisers to the Funds and the resources of CSIM, and its affiliates, and the Sub-Advisers dedicated to the Funds supported renewal of the Agreements with respect to the Funds.

Fund Performance. The Board considered Fund performance in determining whether to renew the Agreements with respect to the Funds. Specifically, the Trustees considered each Fund’s performance relative to a peer category of other mutual funds and appropriate indices/ benchmarks, in light of total return, and market trends. As part of this review, the Trustees considered the composition of the peer category, selection criteria and the reputation of the third party who prepared the 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. In addition, the Trustees considered whether irrespective of relative performance, each Sub-Adviser’s absolute performance was consistent with expectations for such Sub-Adviser’s unique investment methodology. The Trustees further considered the level of Fund performance in the context of their review of Fund expenses and adviser and Sub-Adviser profitability discussed below. Although Laudus Small-Cap MarketMasters Fund had performance that lagged that of a relevant peer group for certain (although not necessarily all) periods considered, the Board concluded that other factors relevant to performance supported renewal of the Agreement with respect to Laudus Small-Cap MarketMasters Fund, including that the underperformance was attributable, to a significant extent, to investment decisions by CSIM that were reasonable and consistent with the Fund’s investment objective and policies; that recent performance showed improvement and that CSIM and the Sub-Advisers had taken steps designed to help improve performance. Following such evaluation the Board concluded, within the context of its full deliberations, that the performance of the Funds supported renewal of the Agreements with respect to the Funds.

Fund Expenses. With respect to the Funds’ expenses, the Trustees considered the rate of compensation called for by the Agreements, and each Fund’s net operating expense ratio, in each case, in comparison to those of a peer group of 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 CSIM’s contractual commitment to keep each Fund’s expense cap for so long as CSIM serves as the adviser to such Fund. The Trustees also considered fees charged by CSIM and the Sub-Advisers to other mutual funds, and to other types of accounts, such as separate accounts, pooled vehicles, wrap accounts and offshore funds, 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 Agreements with respect to the Funds.

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. With respect to CSIM, the Trustees considered whether the varied levels of compensation and profitability under the Agreements 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. The Trustees also considered the compensation flowing to the Sub-Advisers, directly or indirectly. The Trustees also considered any other benefits derived by the Sub-Advisers from their relationship with the Funds, such as whether, by virtue of its management of the Funds, any Sub-Adviser obtains investment information or other research resources that aid it in providing advisory services to other clients. With respect to the Sub-Advisers, the Trustees considered whether the varied levels of compensation and profitability under the Agreements and other service agreements were reasonable and justified in light of the quality of all services rendered to each Fund by the Sub-Advisers, and their respective affiliates. The Board also considered the profitability of the Sub-Advisers with respect to the sub-advisory services they provide to the Funds, although, when doing so, the Board took into account the fact that the Sub-Advisers are compensated by CSIM, and not by the Funds directly, and such compensation with respect to any Sub-Adviser reflects an arms-length negotiation between the Sub-Adviser and CSIM. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the profitability of CSIM and the Sub-Advisers is reasonable and supported renewal of the Agreements 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 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 the existing contractual investment advisory fee schedules relating to the Funds that, in each case, include lower fees at higher graduated asset levels. Based on this evaluation, the Board concluded, within the context of its full deliberations, that the Funds obtain reasonable benefit from economies of scale.


¹		Each fund and the investment adviser have received exemptive relief from the Securities and Exchange Commission to permit the investment adviser and the fund to hire or terminate investment managers without shareholder approval, subject to certain conditions. One of the conditions requires approval by the Board of Trustees before any such hiring is implemented.

Trustees and Officers

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 (advisory services firm) (Oct. 2001 – present).	76	Director, WageWorks, Inc. (2010 – present) Director, Redwood Trust, Inc. (1998 – present) Director, PMI Group Inc. (2001 – 2009)


John F. Cogan 1947 Trustee (Trustee of Schwab Capital Trust since 2008.)	Senior Fellow, The Hoover Institution at Stanford University (Oct. 1979 – present); Senior Fellow, Stanford Institute for Economic Policy Research; Professor of Public Policy, Stanford University (Sept. 2000 – present).	76	Director, Gilead Sciences, Inc. (2005 – present) Director, Monaco Coach Corporation (2005 – 2009)


William A. Hasler 1941 Trustee (Trustee of Schwab Capital Trust since 2000.)	Dean Emeritus, Haas School of Business, University of California, Berkeley (July 1998 – present).	76	Director, TOUSA (1998 – present) Director, Globalstar, Inc. (2009 – present) Director, Aviat Networks (2001 – present) Director, Mission West Properties (1998 – 2012) Director, Ditech Networks Corporation (1997 – 2012) Director, Genitope Corporation (2000 – 2009)


David L. Mahoney 1954 Trustee (Trustee of Schwab Capital Trust since 2011.)	Private Investor.	76	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Tercica Inc. (2004 – 2008)


Kiran M. Patel 1948 Trustee (Trustee of Schwab Capital Trust since 2011.)	Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services for consumers and small businesses) (Dec. 2008 – present); Senior Vice President and General Manager of Consumer Group, Intuit, Inc. (June 2007 – Dec. 2008); Senior Vice President and Chief Financial Officer, Intuit, Inc. (Sept. 2005 – Jan. 2008).	76	Director, KLA-Tencor Corporation (2008 – present) Director, BEA Systems, Inc. (2007 – 2008)


Gerald B. Smith 1950 Trustee (Trustee of Schwab Capital Trust since 2000.)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (1990 – present).	76	Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – present) Director, Oneok, Inc. (2009 – present) Lead Independent Director, Board of Cooper Industries (2002 – 2012)

Independent Trustees (continued)


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

Joseph H. Wender 1944 Trustee (Trustee of Schwab Capital Trust since 2008.)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Partner, Colgin Partners, LLC (vineyards) (February 1998 – present).	76	Board Member and Chairman of the Audit Committee, Isis Pharmaceuticals (1994 – present)

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 1993.)	Chairman and Director, The Charles Schwab Corporation, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc., Charles Schwab Bank, N. A.; Chairman and Chief Executive Officer, Schwab (SIS) Holdings Inc. I, Schwab International Holdings, Inc.; Chief Executive Officer, Schwab Holdings, Inc.; 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, Charles Schwab & Co., Inc.	76	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. 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. Until October 2008, President and Chief Operating Officer, Charles Schwab & Co., Inc. and The Charles Schwab Corporation. 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.	99	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

Marie Chandoha 1961 President and Chief Executive Officer (Officer of Schwab Capital Trust since 2010.)		Executive Vice President, Charles Schwab & Co., Inc. (Sept. 2010 – present); Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; President, Chief Executive Officer (Dec. 2010 – present), and Chief Investment Officer (Sept. 2010 – Oct. 2011), Schwab Funds, Laudus Funds and Schwab ETFs; Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010).

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 (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Treasurer and Chief Financial Officer, Laudus Funds (2006 – present); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – present) and Schwab ETFs (Oct. 2009 – present); Director, Charles Schwab Worldwide Fund, PLC and Charles Schwab Asset Management (Ireland) Limited (April 2005 – present).


Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities (Officer of Schwab Capital Trust since 2011.)		Senior Vice President and Chief Investment Officer — Equities, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds and Laudus Funds (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (May 2009 – April 2011); Head of Quantitative Equity, ING Investment Management (July 2004 – Jan. 2009).


Brett Wander 1961 Senior Vice President and Chief Investment Officer – Fixed Income (Officer of Schwab Capital Trust since 2011.)		Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (April 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds and Laudus Funds (June 2011 – present); Senior Managing Director, Global Head of Active Fixed-Income Strategies, State Street Global Advisors (Jan. 2008 – Oct. 2010); Director of Alpha Strategies, Loomis, Sayles & Company (April 2006 – Jan. 2008).


David Lekich 1964 Chief Legal Officer and Secretary (Officer of Schwab Capital Trust since 2011.)		Senior Vice President (Sept. 2011 – present), Vice President (March 2004 – Sept. 2011), Charles Schwab & Co., Inc.; Senior Vice President and Chief Counsel (Sept. 2011 – present), Vice President (Jan. 2011 – Sept. 2011), Charles Schwab Investment Management, Inc.; Secretary (April 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (April 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.


Catherine MacGregor 1964 Vice President and Assistant Secretary (Officer of Schwab Capital Trust since 2005.)		Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (March 2007 – present), Laudus Funds; Vice President (Nov. 2005 – present) and Assistant Secretary (June 2007 – present), Schwab Funds; Vice President and Assistant Secretary, Schwab ETFs (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 retire at age 72 or after twenty years as a trustee, whichever comes first. In addition, the retirement policy requires any independent trustee of Schwab Funds who also serves as an independent trustee of the Laudus Funds to retire from the Boards of the Schwab Funds upon their required retirement date from either the Boards of Trustees of the Schwab Funds or the Laudus Funds, whichever comes first.
²		Mr. Schwab and Mr. Bettinger are Interested Trustees because they own stock of The Charles Schwab Corporation, the parent company of the investment adviser.
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.