N-CSR

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 Condensed 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^®		46
Financial Notes		54
Report of Independent Registered Accounting Firm		65
Other Federal Tax Information		66
Investment Advisory Agreement Approval		67
Trustees and Officers		69
Glossary		72
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, 2014

Schwab^® S&P 500 Index Fund (Ticker Symbol: SWPPX)			17.16%


S&P 500^® Index			17.27%
Fund Category: Morningstar Large Blend			14.33%


Performance Details			pages 6-7




Schwab 1000 Index^® Fund (Ticker Symbol: SNXFX)			16.36%


Schwab 1000 Index^®			16.62%
Fund Category: Morningstar Large Blend			14.33%


Performance Details			pages 8-9




Schwab Small-Cap Index Fund^® (Ticker Symbol: SWSSX)			8.08%


Russell 2000^® Index			8.06%
Fund Category: Morningstar Small Blend			7.66%


Performance Details			pages 10-11




Schwab Total Stock Market Index Fund^® (Ticker Symbol: SWTSX)			15.93%


Dow Jones U.S. Total Stock Market Index			16.00%
Fund Category: Morningstar Large Blend			14.33%


Performance Details			pages 12-13




Schwab International Index Fund^®¹ (Ticker Symbol: SWISX)			0.09%


MSCI EAFE^® Index (Net)			-0.60%
Fund Category: Morningstar Foreign Large Blend			-0.04%


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.


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,

For 25 years, Charles Schwab Investment Management has been committed to building funds that are designed to serve as part of the foundation of an investor’s portfolio. Our Schwab Equity Index Funds track the performance of stock market indexes constructed by industry-leading index providers, seeking returns by modeling their portfolios accordingly.

For the 12-month reporting period ended October 31, 2014, the funds generated returns that were closely aligned with their respective indices, and in most cases reflected a rally by U.S. stocks. For the Schwab International Index Fund, the depreciation of many foreign currencies versus the U.S. dollar reduced its total return to approximately zero percent.

In the U.S., the Federal Reserve continued to maintain its accommodative monetary policy. This combined with a stronger economy and favorable earnings reports by select companies drove U.S. stock market indices to record highs even as volatility increased. Large cap names were favored by the market, outperforming small-cap stocks.

Outside the U.S., economic growth generally stalled. This convinced the Bank of Japan and many other central banks to maintain low interest rates, even as the Fed began to scale back its policies. In response, the yen and other overseas currencies depreciated versus the U.S. dollar, reducing international stock returns in U.S. dollar terms. Financial markets faced additional hurdles that included continued geopolitical tensions.¹ These and other factors contributed

Asset Class Performance Comparison % returns during the 12 months ended 10/31/2014

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



		17.27%		S&P 500^® Index: measures U.S. large-cap stocks

		8.06%		Russell 2000^® Index: measures U.S. small-cap stocks

		−0.60%		MSCI EAFE^® Index (Net): measures (in U.S. dollars) large-cap stocks in Europe, Australasia and the Far East

		4.14%		Barclays U.S. Aggregate Bond Index: measures the U.S. bond market

		0.03%		Barclays U.S. Treasury Bills 1-3 Months Index: 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

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.

Performance. The fund returned 17.16% for the 12-month reporting period ended October 31, 2014, compared with the index, which returned 17.27%. 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.

Market Highlights. U.S. stocks produced double-digit returns for the 12-month reporting period, with large-cap stocks outperforming small-cap stocks. The Federal Reserve left short-term interest rates historically low, making financing more affordable for businesses and households and generally supporting stocks. Despite heightened geopolitical tensions and an uncertain global economic outlook, the U.S. economy rebounded during the reporting period, and forecasts for stronger earnings by select companies contributed positively to market performance.

Contributors and Detractors. The Information Technology sector contributed the most to the index’s return, and to the return of the fund. The large average weight of this sector represents part of the reason for this contribution, with Information Technology stocks representing approximately 19% of the fund. The Information Technology sector returned approximately 26% for the 12-month reporting period, reflecting the overall performance of companies involved in Internet and software services. One example from this sector is Apple, Inc., a company that designs, manufactures, and markets personal computers and related computing, mobile communication, and media devices, as well as a variety of related software and services. The fund’s holdings of Apple, Inc. represented the fund’s largest position within this sector and returned approximately 48%. The Health Care sector was another significant contributor to the fund’s overall performance, representing an average weight of approximately 13% of the fund and returning approximately 30%.

The Telecommunication Services sector also generated positive returns for the fund, but contributed the least to the fund’s performance. Telecommunication Services stocks represented an average weight of approximately 3% of the fund and returned approximately 5%, reflecting the overall performance of companies involved in diversified and wireless telecommunication services. One example from this sector is AT&T, Inc., a communications holding company. The fund’s holdings of AT&T, Inc. returned approximately 1%. The Materials sector was another weak overall contributor to the performance of the fund. Materials stocks represented an average weight of approximately 3% of the fund and returned approximately 13% for the 12-month reporting period.

As of 10/31/14:

Statistics


Number of Holdings			508
Weighted Average Market Cap ($ x 1,000,000)			$132,753
Price/Earnings Ratio (P/E)			18.9
Price/Book Ratio (P/B)			2.7
Portfolio Turnover Rate			2%

Sector Weightings % of Investments


Information Technology			19.1%
Financials			16.0%
Health Care			13.9%
Consumer Discretionary			11.4%
Industrials			10.1%
Consumer Staples			9.4%
Energy			9.0%
Materials			3.2%
Utilities			3.1%
Telecommunication Services			2.3%
Other			2.5%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Apple, Inc.			3.5%
Exxon Mobil Corp.			2.3%
Microsoft Corp.			2.1%
Johnson & Johnson			1.7%
General Electric Co.			1.4%
Berkshire Hathaway, Inc., Class B			1.4%
Wells Fargo & Co.			1.4%
The Procter & Gamble Co.			1.3%
JPMorgan Chase & Co.			1.2%
Chevron Corp.			1.2%
Total			17.5%

Management 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 10/31/14

October 31, 2004 – October 31, 2014
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^® S&P 500 Index Fund (5/19/97)		17.16	%		16.60	%		8.17	%
S&P 500^® Index		17.27	%		16.69	%		8.20	%
Fund Category: Morningstar Large Blend		14.33	%		15.03	%		7.58	%

Fund Expense Ratio⁴: 0.09%

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.

Index ownership – 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		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 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.

Performance. The fund returned 16.36% for the 12-month period ended October 31, 2014, compared with the index, which returned 16.62%. 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 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 representing approximately 18% of the fund. The Information Technology sector returned approximately 24% for the 12-month reporting period, reflecting the overall performance of companies involved in Internet and software services. One example from this sector is Apple, Inc., a company that designs, manufactures, and markets personal computers and related computing, mobile communication, and media devices, as well as a variety of related software and services. The fund’s holdings of Apple, Inc. returned approximately 48%. The Health Care sector also provided meaningful contributions to the fund’s return, representing an average weight of approximately 13% of the fund and returning approximately 30%.

The Telecommunication Services sector also generated positive returns for the fund, but was a weak overall contributor to the fund’s performance. The Telecommunication Services sector represented an average weight of approximately 2% of the fund and returned approximately 6%, reflecting the overall performance of companies involved in diversified and wireless telecommunication services. One example from this sector is Telephone and Data Systems, Inc., a diversified telecommunications company. The fund’s holdings of Telephone and Data Systems, Inc. returned approximately -20%. The Energy sector was another weak overall contributor to the performance of the fund, representing an average weight of approximately 10% of the fund and returning approximately 4% for the 12-month reporting period.

As of 10/31/14:

Statistics


Number of Holdings			995
Weighted Average Market Cap ($ x 1,000,000)			$117,350
Price/Earnings Ratio (P/E)			20.1
Price/Book Ratio (P/B)			2.7
Portfolio Turnover Rate			4%

Sector Weightings % of Investments


Information Technology			18.9%
Financials			16.7%
Health Care			13.8%
Consumer Discretionary			12.1%
Industrials			11.0%
Consumer Staples			8.7%
Energy			8.7%
Materials			3.5%
Utilities			3.1%
Telecommunication Services			2.3%
Other			1.2%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Apple, Inc.			3.1%
Exxon Mobil Corp.			2.0%
Microsoft Corp.			1.9%
Johnson & Johnson			1.5%
General Electric Co.			1.3%
Berkshire Hathaway, Inc., Class B			1.2%
Wells Fargo & Co.			1.2%
The Procter & Gamble Co.			1.1%
Chevron Corp.			1.1%
JPMorgan Chase & Co.			1.1%
Total			15.5%

Management 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 10/31/14

October 31, 2004 – October 31, 2014
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 1000 Index^® Fund (4/2/91)		16.36	%		16.56	%		8.28	%
Schwab 1000 Index^®		16.62	%		16.91	%		8.57	%
S&P 500^® Index		17.27	%		16.69	%		8.20	%
Fund Category: Morningstar Large Blend		14.33	%		15.03	%		7.58	%

Fund Expense Ratios⁴: 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		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. The expense information shown in the table has been restated to reflect the removal of expenses incurred indirectly by the fund through its investment in business development companies (“BDCs”). The fund’s benchmark index no longer includes BDCs. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the 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.

Performance. The fund returned 8.08% for the 12-month period ended October 31, 2014, compared with the index, which returned 8.06%. 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. Also, the fund engaged in securities lending, which positively contributed to the fund’s performance versus the index.

Market Highlights. Small-cap U.S. stocks underperformed large-cap U.S. stocks, though both generated positive returns for the 12-month reporting period. The Federal Reserve left short-term interest rates historically low, making financing more affordable for businesses and households and generally supporting stocks. Despite heightened geopolitical tensions and an uncertain global economic outlook, the U.S. economy rebounded during the reporting period, and forecasts for stronger earnings by select companies contributed positively to market performance.

Contributors and Detractors. The Health Care sector contributed the most to the index’s return, and to the return of the fund. Health Care stocks represented approximately 13% of the fund and returned approximately 22% for the 12-month reporting period, reflecting the overall performance of health care providers, manufacturers and distributors of health care equipment and supplies, health care technology companies, as well as companies involved in the research, development, production and marketing of pharmaceuticals and biotechnology products. One example from this sector is InterMune, Inc., a biotechnology company. The fund’s holdings of InterMune, Inc. produced triple-digit returns of approximately 426%. The Financials sector also provided meaningful contributions to performance, representing an average weight of approximately 23% of the fund and returning approximately 12%.

The Energy sector was the only detractor from the returns of both the index and the fund. The Energy sector represented an average weight of approximately 6% of the fund and returned approximately -18%, reflecting the overall performance of companies engaged in exploration and production, refining and marketing, and storage and transportation of oil, gas, coal and consumable fuels, as well as companies that offer oil and gas equipment and services. One example from this sector is Energy XXI (Bermuda) Ltd., a company that explores for and produces oil and natural gas. The fund’s holdings of Energy XXI (Bermuda) Ltd. returned approximately -73%. The Telecommunication Services sector was the weakest contributor to the performance of the fund, representing an average weight of approximately 1% of the fund and returning approximately 1% for the 12-month reporting period.

As of 10/31/14:

Statistics


Number of Holdings			1,995
Weighted Average Market Cap ($ x 1,000,000)			$1,834
Price/Earnings Ratio (P/E)			59.1
Price/Book Ratio (P/B)			2.1
Portfolio Turnover Rate			12%

Sector Weightings % of Investments


Financials			23.0%
Information Technology			16.9%
Industrials			13.3%
Health Care			13.2%
Consumer Discretionary			12.4%
Materials			4.5%
Energy			4.4%
Utilities			3.3%
Consumer Staples			3.0%
Telecommunication Services			0.7%
Other			5.3%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Puma Biotechnology, Inc.			0.4%
Isis Pharmaceuticals, Inc.			0.3%
WEX, Inc.			0.3%
Team Health Holdings, Inc.			0.3%
Brunswick Corp.			0.3%
Prosperity Bancshares, Inc.			0.3%
RLJ Lodging Trust			0.3%
The Ultimate Software Group, Inc.			0.2%
LaSalle Hotel Properties			0.2%
CNO Financial Group, Inc.			0.2%
Total			2.8%

Management 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 many 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 10/31/14

October 31, 2004 – October 31, 2014
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 Index Fund^® (5/19/97)		8.08	%		17.96	%		9.51	%
Russell 2000^® Index		8.06	%		17.39	%		8.67	%
Small-Cap Spliced Index		8.06	%		17.98	%		9.59	%
Fund Category: Morningstar Small Blend		7.66	%		16.61	%		8.49	%

Fund Expense Ratios⁴: Net 0.17%; Gross 0.20%

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		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. The expense information shown in the table has been restated to reflect the removal of expenses incurred indirectly by the fund through its investment in business development companies (“BDCs”). The fund’s benchmark index no longer includes BDCs. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the 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.

Performance. The fund returned 15.93% for the 12-month period ended October 31, 2014, compared with the index, which returned 16.00%. 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 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 representing approximately 18% of the fund. The Information Technology sector returned approximately 23% for the 12-month reporting period, reflecting the overall performance of companies involved in Internet and software services. One example from this sector is Apple, Inc., a company that designs, manufactures, and markets personal computers and related computing, mobile communication, and media devices, as well as a variety of related software and services. The fund’s holdings of Apple, Inc. represented the fund’s largest position within this sector and returned approximately 48%. The Health Care sector was another significant contributor to the fund’s overall performance, representing an average weight of approximately 13% of the fund and returning approximately 29%.

The Telecommunication Services sector also generated positive returns for the fund, but contributed the least to the fund’s performance. Telecommunication Services stocks represented an average weight of approximately 2% of the fund and returned approximately 6%, reflecting the overall performance of companies involved in diversified and wireless telecommunication services. One example from this sector is NII Holdings, Inc. (Class B), a company that provides mobile communications for business customers in Latin America. The fund’s holdings of NII Holdings, Inc. (Class B) returned approximately -98%. The Energy sector was another comparatively weak contributor to the performance of the fund. Energy stocks represented an average weight of approximately 9% of the fund and returned approximately 3% for the 12-month reporting period.

As of 10/31/14:

Statistics


Number of Holdings			2,511
Weighted Average Market Cap ($ x 1,000,000)			$107,838
Price/Earnings Ratio (P/E)			20.9
Price/Book Ratio (P/B)			2.6
Portfolio Turnover Rate			1%

Sector Weightings % of Investments


Information Technology			18.4%
Financials			17.2%
Health Care			13.5%
Consumer Discretionary			12.1%
Industrials			11.0%
Energy			8.2%
Consumer Staples			8.1%
Materials			3.6%
Utilities			3.1%
Telecommunication Services			2.1%
Other			2.7%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Apple, Inc.			2.9%
Exxon Mobil Corp.			1.8%
Microsoft Corp.			1.7%
Johnson & Johnson			1.3%
General Electric Co.			1.2%
Berkshire Hathaway, Inc., Class B			1.1%
Wells Fargo & Co.			1.1%
The Procter & Gamble Co.			1.0%
Chevron Corp.			1.0%
JPMorgan Chase & Co.			1.0%
Total			14.1%

Management 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 10/31/14

October 31, 2004 – October 31, 2014
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 Total Stock Market Index Fund^® (6/1/99)		15.93	%		17.02	%		8.71	%
Dow Jones U.S. Total Stock Market Index		16.00	%		17.09	%		8.71	%
Fund Category: Morningstar Large Blend		14.33	%		15.03	%		7.58	%

Fund Expense Ratios⁴: Net 0.09%; Gross 0.10%

For index definitions, please see the Glossary.

Index ownership – “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		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 the 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.

Performance. The fund returned 0.09% for the 12-month period ended October 31, 2014, compared with the index, which returned -0.60%. 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. Also, timing differences in foreign exchange calculations and fair valuation of the fund’s holdings contributed to the fund’s relative performance.¹

Market Highlights. Stocks in developed international markets produced slightly negative overall returns for the 12-month reporting period, in part due to continued geopolitical tensions and unsteady global economic growth. The reduction of some stimulative measures by the Federal Reserve contributed to the depreciation of many international currencies versus the U.S. dollar, generally reducing overall returns on overseas investments.

Contributors and Detractors. Stocks from Switzerland were among the biggest contributors to the fund’s total return from a country perspective, and represented an average weight of approximately 9% of the fund. Swiss stocks returned approximately 4% in U.S. dollar terms. One example from this market is Novartis AG, a company that manufactures pharmaceutical and consumer healthcare products. The fund’s holdings of Novartis AG returned approximately 23% in U.S. dollar terms. Stocks from Hong Kong also provided meaningful contributions to the returns of both the index and the fund, representing an average weight of approximately 3% of the fund and returning approximately 10% in U.S. dollar terms.

Stocks from France were among the biggest detractors from the total return of the fund. French stocks represented an average weight of approximately 10% of the fund and returned approximately -6% in U.S. dollar terms. One example from this market is Sanofi, a global pharmaceutical company that researches, develops, and manufactures prescription pharmaceuticals and vaccines. The fund’s holdings of Sanofi returned approximately -10% in U.S. dollar terms. Stocks from Japan also detracted from the performance of the fund, representing an average weight of approximately 20% of the fund and returning approximately -0.5% in U.S. dollar terms.

As of 10/31/14:

Statistics


Number of Holdings			917
Weighted Average Market Cap ($ x 1,000,000)			$63,589
Price/Earnings Ratio (P/E)			17.5
Price/Book Ratio (P/B)			1.6
Portfolio Turnover Rate			2%

Sector Weightings % of Investments


Financials			25.1%
Industrials			11.9%
Consumer Discretionary			11.3%
Health Care			10.6%
Consumer Staples			10.6%
Materials			7.3%
Energy			6.1%
Telecommunication Services			4.8%
Information Technology			4.4%
Utilities			3.8%
Other			4.1%
Total			100.0%

Top Equity Holdings % of Net Assets²


Nestle S.A. – Reg’d			1.8%
Novartis AG – Reg’d			1.6%
Roche Holding AG			1.5%
HSBC Holdings plc			1.5%
Toyota Motor Corp.			1.2%
Royal Dutch Shell plc, A Shares			1.0%
BP plc			1.0%
Total S.A.			1.0%
Bayer AG – Reg’d			0.9%
Commonwealth Bank of Australia			0.9%
Total			12.4%

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

Source of Sector Classification: S&P and MSCI.

International investments are subject to additional risks such as currency fluctuation, geopolitical risk and the potential for illiquid markets.


¹		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.
²		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 10/31/14

October 31, 2004 – October 31, 2014
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 International Index Fund^® (5/19/97)		0.09	%		6.90	%		5.86	%
MSCI EAFE^® Index (Net)		-0.60	%		6.52	%		5.81	%
International Spliced Index		-0.60	%		6.61	%		5.98	%
Fund Category: Morningstar Foreign Large Blend		-0.04	%		6.66	%		5.84	%

Fund Expense Ratios⁴: Net 0.19%; Gross 0.23%

Country Weightings % of Investments


Japan			20.5%
United Kingdom			20.1%
France			9.2%
Switzerland			8.9%
Germany			8.4%
Australia			7.7%
Spain			3.4%
Hong Kong			3.0%
Sweden			2.9%
Netherlands			2.6%
Other Countries			13.3%
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		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 the 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, 2014 and held through October 31, 2014.

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 5/1/14		at 10/31/14		05/1/14–10/31/14

Schwab^® S&P 500 Index Fund
Actual Return		0.09%	$	1,000.00	$	1,081.80	$	0.47
Hypothetical 5% Return		0.09%	$	1,000.00	$	1,024.75	$	0.46


Schwab 1000 Index^® Fund
Actual Return		0.29%	$	1,000.00	$	1,077.30	$	1.52
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	$	1,048.80	$	0.88
Hypothetical 5% Return		0.17%	$	1,000.00	$	1,024.34	$	0.87


Schwab Total Stock Market Index Fund^®
Actual Return		0.09%	$	1,000.00	$	1,075.70	$	0.47
Hypothetical 5% Return		0.09%	$	1,000.00	$	1,024.75	$	0.46


Schwab International Index Fund^®
Actual Return		0.19%	$	1,000.00	$	955.70	$	0.94
Hypothetical 5% Return		0.19%	$	1,000.00	$	1,024.24	$	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

Condensed Portfolio Holdings as of October 31, 2014

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	.5%	Common Stock		11,021,049,498		19,950,703,019
	0	.1%	Other Investment Company		29,007,003		29,007,003
	2	.3%	Short-Term Investments		479,925,014		479,925,014


	99	.9%	Total Investments		11,529,981,515		20,459,635,036
	0	.1%	Other Assets and Liabilities, Net				13,654,324


	100	.0%	Net Assets				20,473,289,360


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

Common Stock 97.5% of net assets

Automobiles & Components 1.0%
Other Securities				1.0		202,304,005

Banks 5.9%
Bank of America Corp.		11,678,311		1.0		200,399,817
Citigroup, Inc.		3,375,447		0.9		180,687,678
JPMorgan Chase & Co.		4,202,531		1.2		254,169,075
Wells Fargo & Co.		5,272,309		1.4		279,906,885
Other Securities				1.4		290,450,329

				5.9		1,205,613,784

Capital Goods 7.4%
3M Co.		726,719		0.5		111,747,581
General Electric Co.		11,121,452		1.4		287,044,676
The Boeing Co.		747,654		0.5		93,389,461
United Technologies Corp.		931,635		0.5		99,684,945
Other Securities				4.5		925,519,292

				7.4		1,517,385,955

Commercial & Professional Supplies 0.6%
Other Securities				0.6		126,388,673

Consumer Durables & Apparel 1.3%
Other Securities				1.3		265,310,261

Consumer Services 1.6%
McDonald’s Corp.		1,101,738		0.5		103,265,903
Other Securities				1.1		219,803,923

				1.6		323,069,826

Diversified Financials 5.1%
Berkshire Hathaway, Inc., Class B *		2,022,430		1.4		283,463,789
The Charles Schwab Corp. (a)		1,302,581		0.2		37,344,997
Other Securities				3.5		717,649,565

				5.1		1,038,458,351

Energy 9.0%
Chevron Corp.		2,114,734		1.2		253,662,343
ConocoPhillips		1,368,090		0.5		98,707,693
Exxon Mobil Corp.		4,749,241		2.3		459,299,097
Schlumberger Ltd.		1,447,415		0.7		142,801,964
Other Securities				4.3		878,926,479

				9.0		1,833,397,576

Food & Staples Retailing 2.2%
CVS Health Corp.		1,291,551		0.5		110,827,991
Wal-Mart Stores, Inc.		1,750,302		0.7		133,495,534
Other Securities				1.0		207,444,950

				2.2		451,768,475

Food, Beverage & Tobacco 5.2%
Altria Group, Inc.		2,209,791		0.5		106,821,297
PepsiCo, Inc.		1,685,563		0.8		162,100,594
Philip Morris International, Inc.		1,733,446		0.8		154,294,028
The Coca-Cola Co.		4,371,456		0.9		183,076,577
Other Securities				2.2		455,790,790

				5.2		1,062,083,286

Health Care Equipment & Services 4.4%
UnitedHealth Group, Inc.		1,086,310		0.5		103,210,313
Other Securities				3.9		800,427,010

				4.4		903,637,323

Household & Personal Products 2.0%
The Procter & Gamble Co.		3,009,890		1.3		262,673,100
Other Securities				0.7		150,686,281

				2.0		413,359,381

Insurance 2.7%
Other Securities				2.7		557,145,040

Materials 3.2%
Other Securities				3.2		656,784,271

Media 3.4%
Comcast Corp., Class A		2,889,664		0.8		159,942,902

18 See financial notes

Schwab S&P 500 Index Fund

Condensed Portfolio Holdings continued


	Number		% of Net		Value
Security	of Shares		Assets		($)
The Walt Disney Co.		1,751,583		0.8		160,059,655
Other Securities				1.8		377,508,929

				3.4		697,511,486

Pharmaceuticals, Biotechnology & Life Sciences 9.5%
AbbVie, Inc.		1,756,386		0.5		111,460,256
Amgen, Inc.		843,159		0.7		136,743,527
Bristol-Myers Squibb Co.		1,830,464		0.5		106,514,700
Celgene Corp. *		893,826		0.5		95,719,826
Gilead Sciences, Inc. *		1,684,050		0.9		188,613,600
Johnson & Johnson		3,145,925		1.7		339,067,797
Merck & Co., Inc.		3,211,014		0.9		186,046,151
Pfizer, Inc.		7,089,733		1.0		212,337,503
Other Securities				2.8		571,053,357

				9.5		1,947,556,717

Real Estate 2.3%
Other Securities				2.3		474,902,480

Retailing 4.1%
Amazon.com, Inc. *		421,980		0.6		128,898,011
The Home Depot, Inc.		1,500,150		0.7		146,294,628
Other Securities				2.8		562,482,981

				4.1		837,675,620

Semiconductors & Semiconductor Equipment 2.3%
Intel Corp.		5,532,605		0.9		188,163,896
Other Securities				1.4		285,990,121

				2.3		474,154,017

Software & Services 10.1%
Facebook, Inc., Class A *		2,316,800		0.8		173,736,832
Google, Inc., Class A *		315,912		0.9		179,396,947
Google, Inc., Class C *		316,358		0.9		176,869,431
International Business Machines Corp.		1,030,390		0.8		169,396,116
Microsoft Corp.		9,167,131		2.1		430,396,800
Oracle Corp.		3,617,586		0.7		141,266,733
Visa, Inc., Class A		547,300		0.6		132,134,639
Other Securities				3.3		667,530,550

				10.1		2,070,728,048

Technology Hardware & Equipment 6.7%
Apple, Inc.		6,660,715		3.5		719,357,220
Cisco Systems, Inc.		5,684,928		0.7		139,110,188
QUALCOMM, Inc.		1,862,365		0.7		146,214,276
Other Securities				1.8		352,938,585

				6.7		1,357,620,269

Telecommunication Services 2.3%
AT&T, Inc.		5,763,736		1.0		200,808,562
Verizon Communications, Inc.		4,601,178		1.1		231,209,194
Other Securities				0.2		41,081,884

				2.3		473,099,640

Transportation 2.1%
Union Pacific Corp.		1,000,550		0.6		116,514,048
Other Securities				1.5		313,981,396

				2.1		430,495,444

Utilities 3.1%
Other Securities				3.1		630,253,091

Total Common Stock
(Cost $11,021,049,498)						19,950,703,019




Other Investment Company 0.1% of net assets

Securities Lending Collateral 0.1%
Other Securities				0.1		29,007,003

Total Other Investment Company
(Cost $29,007,003)						29,007,003



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

Short-Term Investments 2.3% of net assets

Time Deposits 2.2%
Bank of Tokyo - Mitsubishi UFJ
0.03%, 11/03/14		202,290,854		1.0		202,290,854
Wells Fargo
0.03%, 11/03/14		202,290,854		1.0		202,290,854
Other Securities				0.2		52,943,644

				2.2		457,525,352

U.S. Treasury Obligations 0.1%
Other Securities				0.1		22,399,662

Total Short-Term Investments
(Cost $479,925,014)						479,925,014



End of Investments.

At 10/31/14, tax basis cost of the fund’s investments was $11,566,619,637 and the unrealized appreciation and depreciation were $9,323,536,713 and ($430,521,314), respectively, with a net unrealized appreciation of $8,893,015,399.

For the following notes, please refer to the complete schedule of portfolio 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 $28,501,109.
(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

See financial notes 19

Schwab S&P 500 Index Fund

Condensed Portfolio Holdings continued

In addition to the above, the fund held the following at 10/31/14:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

S&P 500 Index, e-mini, Long, expires 12/19/14

4,900

492,793,000

12,366,475

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):


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

Common Stock¹		$19,950,703,019		$—		$—		$19,950,703,019
Other Investment Company¹		29,007,003		—		—		29,007,003
Short-Term Investments¹		—		479,925,014		—		479,925,014

Total		$19,979,710,022		$479,925,014		$—		$20,459,635,036

Other Financial Instruments
Futures Contracts²		$12,366,475		$—		$—		$12,366,475


¹		As categorized in the complete schedule of portfolio holdings.
²		Futures contracts are not included in Investments in the schedule of portfolio holdings 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, 2014.

20 See financial notes

Schwab S&P 500 Index Fund

Statement of

Assets and Liabilities

As of October 31, 2014



Assets

Investments in affiliated issuers, at value (cost $17,491,210)		$37,344,997
Investments in unaffiliated issuers, at value (cost $11,483,483,302) including securities on loan of $28,501,109		20,393,283,036
Collateral invested for securities on loan, at value (cost $29,007,003)	+	29,007,003

Total investments, at value (cost $11,529,981,515)		20,459,635,036
Cash		420
Receivables:
Fund shares sold		39,122,079
Dividends		19,770,128
Variation margin on futures contracts		5,472,559
Income from securities on loan		42,153
Foreign tax reclaims		18,342
Interest		381
Prepaid expenses	+	286,882

Total assets		20,524,347,980

Liabilities

Collateral held for securities on loan		29,007,003
Payables:
Investment adviser and administrator fees		129,336
Shareholder service fees		52,284
Fund shares redeemed		21,542,799
Accrued expenses	+	327,198

Total liabilities		51,058,620

Net Assets

Total assets		20,524,347,980
Total liabilities	−	51,058,620

Net assets		$20,473,289,360

Net Assets by Source
Capital received from investors		11,478,444,634
Net investment income not yet distributed		289,403,265
Net realized capital losses		(236,578,535	)
Net unrealized capital appreciation		8,942,019,996

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$20,473,289,360

640,075,169

$31.99

See financial notes 21

Schwab S&P 500 Index Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends received from affiliated issuer		$299,995
Dividends received from unaffiliated issuers (net of foreign withholding taxes of $32,849)		372,214,336
Interest		145,801
Securities on loan	+	334,711

Total investment income		372,994,843

Expenses

Investment adviser and administrator fees		11,278,737
Shareholder service fees		3,610,136
Transfer agent fees		431,882
Portfolio accounting fees		414,790
Shareholder reports		375,769
Custodian fees		326,780
Registration fees		227,683
Independent trustees’ fees		95,216
Professional fees		87,259
Index fee		74,795
Other expenses	+	337,107

Total expenses		17,260,154
Expense reduction by CSIM and its affiliates	−	470,374

Net expenses	−	16,789,780

Net investment income		356,205,063

Realized and Unrealized Gains (Losses)

Net realized gains on unaffiliated investments		12,750,651
Net realized gains on futures contracts	+	80,559,459

Net realized gains		93,310,110
Net change in unrealized appreciation (depreciation) on affiliated issuer		7,458,238
Net change in unrealized appreciation (depreciation) on unaffiliated investments		2,516,412,581
Net change in unrealized appreciation (depreciation) on futures contracts	+	1,415,372

Net change in unrealized appreciation (depreciation)	+	2,525,286,191

Net realized and unrealized gains		2,618,596,301

Increase in net assets resulting from operations		$2,974,801,364

22 See financial notes

Schwab S&P 500 Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$356,205,063			$311,029,585
Net realized gains		93,310,110			53,530,089
Net change in unrealized appreciation (depreciation)	+	2,525,286,191			3,166,704,651

Increase in net assets from operations		2,974,801,364			3,531,264,325

Distributions to Shareholders

Distributions from net investment income		($297,103,536	)		($278,278,089	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			139,516,160		$4,137,951,788			155,380,507		$3,830,088,605
Shares reinvested			9,293,269		257,330,630			11,251,940		248,330,312
Shares redeemed	+		(125,148,250	)	(3,720,729,510	)		(117,760,806	)	(2,897,316,141	)

Net transactions in fund shares			23,661,179		$674,552,908			48,871,641		$1,181,102,776

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			616,413,990		$17,121,038,624			567,542,349		$12,686,949,612
Total increase	+		23,661,179		3,352,250,736			48,871,641		4,434,089,012

End of period			640,075,169		$20,473,289,360			616,413,990		$17,121,038,624


Net investment income not yet distributed					$289,403,265					$231,017,629

See financial notes 23

Schwab 1000 Index Fund

Condensed Portfolio Holdings as of October 31, 2014


				Cost		Value
Holdings by Category				($)		($)

	99	.2%	Common Stock		2,005,520,919		6,533,533,558
	1	.2%	Other Investment Companies		78,068,474		78,068,474
	0	.0%	Short-Term Investment		2,629,957		2,629,957


	100	.4%	Total Investments		2,086,219,350		6,614,231,989
	(0	.4%)	Other Assets and Liabilities, Net				(27,864,447	)


	100	.0%	Net Assets				6,586,367,542


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

Common Stock 99.2% of net assets

Automobiles & Components 1.2%
Other Securities				1.2		79,185,766

Banks 5.6%
Bank of America Corp.		3,346,841		0.9		57,431,791
Citigroup, Inc.		975,256		0.8		52,205,454
JPMorgan Chase & Co.		1,198,778		1.1		72,502,093
Wells Fargo & Co.		1,514,096		1.2		80,383,357
Other Securities				1.6		107,772,126

				5.6		370,294,821

Capital Goods 7.9%
3M Co.		206,554		0.5		31,761,809
General Electric Co.		3,190,202		1.3		82,339,114
The Boeing Co.		213,289		0.4		26,641,929
United Technologies Corp.		270,303		0.4		28,922,421
Other Securities				5.3		347,263,002

				7.9		516,928,275

Commercial & Professional Supplies 0.8%
Other Securities				0.8		52,976,248

Consumer Durables & Apparel 1.4%
Other Securities				1.4		94,606,614

Consumer Services 1.9%
McDonald’s Corp.		318,736		0.5		29,875,125
Other Securities				1.4		94,331,696

				1.9		124,206,821

Diversified Financials 4.8%
Berkshire Hathaway, Inc., Class B *		581,012		1.2		81,434,642
The Charles Schwab Corp. (a)		367,065		0.2		10,523,753
Other Securities				3.4		224,396,300

				4.8		316,354,695

Energy 8.7%
Chevron Corp.		606,937		1.1		72,802,093
ConocoPhillips		390,966		0.4		28,208,197
Exxon Mobil Corp.		1,359,263		2.0		131,454,325
Schlumberger Ltd.		411,647		0.6		40,613,093
Other Securities				4.6		302,172,326

				8.7		575,250,034

Food & Staples Retailing 2.0%
CVS Health Corp.		372,611		0.5		31,973,750
Wal-Mart Stores, Inc.		503,227		0.6		38,381,123
Other Securities				0.9		62,472,929

				2.0		132,827,802

Food, Beverage & Tobacco 4.8%
Altria Group, Inc.		635,805		0.4		30,734,814
PepsiCo, Inc.		480,985		0.7		46,256,327
Philip Morris International, Inc.		494,265		0.7		43,994,528
The Coca-Cola Co.		1,258,148		0.8		52,691,238
Other Securities				2.2		143,291,320

				4.8		316,968,227

Health Care Equipment & Services 4.6%
UnitedHealth Group, Inc.		309,692		0.5		29,423,837
Other Securities				4.1		270,695,776

				4.6		300,119,613

Household & Personal Products 1.9%
The Procter & Gamble Co.		861,119		1.1		75,149,855
Other Securities				0.8		52,112,984

				1.9		127,262,839

Insurance 3.0%
Other Securities				3.0		199,849,670

Materials 3.5%
Other Securities				3.5		231,219,343

Media 3.6%
Comcast Corp., Class A		827,123		0.7		45,781,258

See financial notes 25

Schwab 1000 Index Fund

Condensed Portfolio Holdings continued


	Number		% of Net		Value
Security	of Shares		Assets		($)
The Walt Disney Co.		503,360		0.7		45,997,037
Other Securities				2.2		142,063,034

				3.6		233,841,329

Pharmaceuticals, Biotechnology & Life Sciences 9.3%
AbbVie, Inc.		508,646		0.5		32,278,675
Amgen, Inc.		240,902		0.6		39,069,486
Bristol-Myers Squibb Co.		526,739		0.5		30,650,942
Celgene Corp. *		253,040		0.4		27,098,054
Gilead Sciences, Inc. *		481,844		0.8		53,966,528
Johnson & Johnson		901,987		1.5		97,216,159
Merck & Co., Inc.		924,818		0.8		53,583,955
Pfizer, Inc.		2,031,951		0.9		60,856,932
Other Securities				3.3		217,366,388

				9.3		612,087,119

Real Estate 3.3%
Other Securities				3.3		217,752,838

Retailing 4.1%
Amazon.com, Inc. *		120,741		0.6		36,881,546
The Home Depot, Inc.		428,935		0.6		41,829,741
Other Securities				2.9		192,669,942

				4.1		271,381,229

Semiconductors & Semiconductor Equipment 2.3%
Intel Corp.		1,577,980		0.8		53,667,100
Other Securities				1.5		97,313,046

				2.3		150,980,146

Software & Services 10.4%
Facebook, Inc., Class A *		664,600		0.7		49,838,354
Google, Inc., Class A *		90,388		0.8		51,328,634
Google, Inc., Class C *		90,388		0.8		50,534,123
International Business Machines Corp.		295,740		0.7		48,619,656
Microsoft Corp.		2,626,238		1.9		123,301,874
Oracle Corp.		1,036,510		0.6		40,475,715
Visa, Inc., Class A		156,900		0.6		37,880,367
Other Securities				4.3		281,590,620

				10.4		683,569,343

Technology Hardware & Equipment 6.3%
Apple, Inc.		1,908,474		3.1		206,115,192
Cisco Systems, Inc.		1,626,315		0.6		39,795,928
QUALCOMM, Inc.		534,178		0.7		41,938,315
Other Securities				1.9		124,874,266

				6.3		412,723,701

Telecommunication Services 2.3%
AT&T, Inc.		1,651,077		0.9		57,523,523
Verizon Communications, Inc.		1,324,157		1.0		66,538,889
Other Securities				0.4		24,875,175

				2.3		148,937,587

Transportation 2.4%
Union Pacific Corp.		285,924		0.5		33,295,850
Other Securities				1.9		124,566,564

				2.4		157,862,414

Utilities 3.1%
Other Securities				3.1		206,347,084

Total Common Stock
(Cost $2,005,520,919)						6,533,533,558




Other Investment Companies 1.2% of net assets

Money Market Fund 0.7%
State Street Institutional U.S. Government Money Market Fund, Premier Class 0.00% (e)		44,874,058		0.7		44,874,058

Securities Lending Collateral 0.5%
State Street Institutional U.S. Government Money Market Fund, Premier Class 0.00% (e)		33,194,416		0.5		33,194,416

Total Other Investment Companies
(Cost $78,068,474)						78,068,474



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

Short-Term Investment 0.0% of net assets

U.S. Treasury Obligation 0.0%
Other Securities				0.0		2,629,957

Total Short-Term Investment
(Cost $2,629,957)						2,629,957



End of Investments.

At 10/31/14, tax basis cost of the fund’s investments was $2,063,162,830 and the unrealized appreciation and depreciation were $4,587,737,414 and ($36,668,255), respectively, with a net unrealized appreciation of $4,551,069,159.

For the following notes, please refer to the complete schedule of portfolio 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 $33,735,231. Non-Cash Collateral pledged to the fund for securities on loan amounted to $1,049,914.
(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

26 See financial notes

Schwab 1000 Index Fund

Condensed Portfolio Holdings continued

In addition to the above, the fund held the following at 10/31/14:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

S&P 500 Index, e-mini, Long, expires 12/19/14

460

46,262,200

800,851

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):


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

Common Stock¹		$6,533,533,558		$—		$—		$6,533,533,558
Other Investment Companies¹		78,068,474		—		—		78,068,474
Short-Term Investment¹		—		2,629,957		—		2,629,957

Total		$6,611,602,032		$2,629,957		$—		$6,614,231,989

Other Financial Instruments
Futures Contracts²		$800,851		$—		$—		$800,851


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

See financial notes 27

Schwab 1000 Index Fund

Statement of

Assets and Liabilities

As of October 31, 2014



Assets

Investments in affiliated issuers, at value (cost $1,803,228)		$10,523,753
Investments in unaffiliated issuers, at value (cost $2,051,221,706) including securities on loan of $33,735,231		6,570,513,820
Collateral invested for securities on loan, at value (cost $33,194,416)	+	33,194,416

Total investments, at value (cost $2,086,219,350)		6,614,231,989
Receivables:
Investments sold		222,759
Dividends		6,115,533
Fund shares sold		2,912,015
Variation margin on futures contracts		524,400
Income from securities on loan		75,470
Foreign tax reclaims		4,914
Prepaid expenses	+	126,415

Total assets		6,624,213,495

Liabilities

Collateral held for securities on loan		33,194,416
Payables:
Investment adviser and administrator fees		127,028
Shareholder service fees		72,230
Fund shares redeemed		4,330,239
Accrued expenses	+	122,040

Total liabilities		37,845,953

Net Assets

Total assets		6,624,213,495
Total liabilities	−	37,845,953

Net assets		$6,586,367,542

Net Assets by Source
Capital received from investors		1,776,200,659
Net investment income not yet distributed		82,633,843
Net realized capital gains		198,719,550
Net unrealized capital appreciation		4,528,813,490

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$6,586,367,542

122,814,922

$53.63

28 See financial notes

Schwab 1000 Index Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends received from affiliated issuer		$88,096
Dividends received from unaffiliated issuers (net of foreign withholding taxes of $15,425)		119,708,654
Interest		814
Securities on loan	+	725,483

Total investment income		120,523,047

Expenses

Investment adviser and administrator fees		13,862,067
Shareholder service fees		6,033,432
Shareholder reports		180,488
Portfolio accounting fees		170,975
Custodian fees		111,815
Transfer agent fees		94,746
Registration fees		71,614
Professional fees		60,218
Independent trustees’ fees		50,872
Interest expense		183
Other expenses	+	116,777

Total expenses		20,753,187
Expense reduction by CSIM and its affiliates	−	2,683,006

Net expenses	−	18,070,181

Net investment income		102,452,866

Realized and Unrealized Gains (Losses)

Net realized gains on unaffiliated investments		169,698,983
Net realized gains on futures contracts	+	8,242,453

Net realized gains		177,941,436
Net change in unrealized appreciation (depreciation) on affiliated issuer		2,209,731
Net change in unrealized appreciation (depreciation) on unaffiliated investments		660,220,261
Net change in unrealized appreciation (depreciation) on futures contracts	+	(1,508,612	)

Net change in unrealized appreciation (depreciation)	+	660,921,380

Net realized and unrealized gains		838,862,816

Increase in net assets resulting from operations		$941,315,682

See financial notes 29

Schwab 1000 Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$102,452,866			$99,492,905
Net realized gains		177,941,436			178,811,471
Net change in unrealized appreciation (depreciation)	+	660,921,380			1,026,638,598

Increase in net assets from operations		941,315,682			1,304,942,974

Distributions to Shareholders

Distributions from net investment income		(91,043,881	)		(96,597,152	)
Distributions from net realized gains	+	(182,379,726	)		(197,828,775	)

Total distributions		($273,423,607	)		($294,425,927	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			8,474,992		$424,679,163			9,372,908		$400,294,068
Shares reinvested			5,073,441		236,878,978			6,695,843		255,781,218
Shares redeemed	+		(12,594,623	)	(630,314,274	)		(14,700,117	)	(627,358,330	)

Net transactions in fund shares			953,810		$31,243,867			1,368,634		$28,716,956

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			121,861,112		$5,887,231,600			120,492,478		$4,847,997,597
Total increase	+		953,810		699,135,942			1,368,634		1,039,234,003

End of period			122,814,922		$6,586,367,542			121,861,112		$5,887,231,600


Net investment income not yet distributed					$82,633,843					$71,285,685

30 See financial notes

Schwab Small-Cap Index Fund^®

Financial Statements

Financial Highlights


	11/1/13–			11/1/12–			11/1/11–			11/1/10–			11/1/09–
	10/31/14			10/31/13			10/31/12			10/31/11			10/31/10


Per-Share Data ($)

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

Income (loss) from investment operations:
Net investment income (loss)¹		0.35			0.42			0.33			0.25			0.22
Net realized and unrealized gains (losses)		1.76			6.94			1.89			1.37			3.97

Total from investment operations		2.11			7.36			2.22			1.62			4.19
Less distributions:
Distributions from net investment income		(0.31	)		(0.50	)		(0.35	)		(0.20	)		(0.15	)
Distributions from net realized gains		(1.29	)		(0.50	)		(1.16	)		(0.05	)		—

Total distributions		(1.60	)		(1.00	)		(1.51	)		(0.25	)		(0.15	)

Net asset value at end of period		28.13			27.62			21.26			20.55			19.18

Total return (%)		8.08			36.23			11.87			8.45			27.85

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.17			0.17			0.17			0.19			0.19
Gross operating expenses		0.21			0.20			0.21			0.19			0.20
Net investment income (loss)		1.27			1.76			1.63			1.18			1.23
Portfolio turnover rate		12			11			41	²		26			33
Net assets, end of period ($ x 1,000,000)		2,567			2,351			1,675			1,502			1,406

¹ Calculated based on the average shares outstanding during the period.

² 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

Condensed Portfolio Holdings as of October 31, 2014


				Cost		Value
Holdings by Category				($)		($)

	99	.9%	Common Stock		1,808,542,039		2,564,440,457
	0	.0%	Rights		320,914		320,914
	0	.0%	Warrants		—		—
	5	.1%	Other Investment Company		130,686,609		130,686,609
	0	.5%	Short-Term Investments		13,560,292		13,560,292


	105	.5%	Total Investments		1,953,109,854		2,709,008,272
	(5	.5%)	Other Assets and Liabilities, Net				(142,203,233	)


	100	.0%	Net Assets				2,566,805,039


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

Common Stock 99.9% of net assets

Automobiles & Components 1.2%
Dana Holding Corp.		251,200		0.2		5,139,552
Other Securities				1.0		24,789,854

				1.2		29,929,406

Banks 9.6%
Investors Bancorp, Inc.		537,604		0.2		5,779,243
Prosperity Bancshares, Inc.		105,600		0.3		6,377,184
Radian Group, Inc.		286,004		0.2		4,819,167
Other Securities				8.9		228,610,997

				9.6		245,586,591

Capital Goods 8.5%
CLARCOR, Inc.		74,600		0.2		4,995,216
Curtiss-Wright Corp.		71,982		0.2		4,981,874
Esterline Technologies Corp. *		47,000		0.2		5,504,170
HEICO Corp.		102,306		0.2		5,549,077
Moog, Inc., Class A *		67,700		0.2		5,181,758
Teledyne Technologies, Inc. *		55,571		0.2		5,758,823
Woodward, Inc.		100,500		0.2		5,146,605
Other Securities				7.1		182,099,756

				8.5		219,217,279

Commercial & Professional Supplies 3.6%
Other Securities				3.6		93,747,008

Consumer Durables & Apparel 2.6%
Brunswick Corp.		136,700		0.3		6,397,560
Other Securities				2.3		59,923,721

				2.6		66,321,281

Consumer Services 4.0%
Other Securities				4.0		103,171,036

Diversified Financials 2.6%
PRA Group, Inc. *		76,129		0.2		4,815,159
Other Securities				2.4		61,594,561

				2.6		66,409,720

Energy 4.6%
SemGroup Corp., Class A		62,965		0.2		4,832,564
Other Securities				4.4		113,784,925

				4.6		118,617,489

Food & Staples Retailing 1.0%
United Natural Foods, Inc. *		72,982		0.2		4,964,236
Other Securities				0.8		19,779,898

				1.0		24,744,134

Food, Beverage & Tobacco 1.8%
TreeHouse Foods, Inc. *		62,152		0.2		5,293,486
Other Securities				1.6		41,858,353

				1.8		47,151,839

Health Care Equipment & Services 6.5%
DexCom, Inc. *		114,200		0.2		5,133,290
HealthSouth Corp.		129,800		0.2		5,234,834
STERIS Corp.		88,188		0.2		5,450,018
Team Health Holdings, Inc. *		104,367		0.3		6,527,112
West Pharmaceutical Services, Inc.		108,630		0.2		5,567,287
Other Securities				5.4		137,914,324

				6.5		165,826,865

Household & Personal Products 0.4%
Other Securities				0.4		9,267,707

Insurance 2.6%
CNO Financial Group, Inc.		333,600		0.2		6,048,168
First American Financial Corp.		160,900		0.2		4,878,488
Other Securities				2.2		56,628,966

				2.6		67,555,622

Materials 4.8%
Graphic Packaging Holding Co. *		489,715		0.2		5,940,243
PolyOne Corp.		144,754		0.2		5,357,346

32 See financial notes

Schwab Small-Cap Index Fund

Condensed Portfolio Holdings continued


	Number		% of Net		Value
Security	of Shares		Assets		($)
Other Securities				4.4		111,368,932

				4.8		122,666,521

Media 1.4%
Other Securities				1.4		34,786,758

Pharmaceuticals, Biotechnology & Life Sciences 7.5%
Cepheid *		102,700		0.2		5,444,127
Isis Pharmaceuticals, Inc. *		177,200		0.3		8,161,832
Pacira Pharmaceuticals, Inc. *		53,800		0.2		4,993,716
Puma Biotechnology, Inc. *		34,800		0.4		8,720,880
Other Securities				6.4		164,978,477

				7.5		192,299,032

Real Estate 9.5%
CubeSmart		240,643		0.2		5,065,535
Highwoods Properties, Inc.		133,507		0.2		5,723,445
LaSalle Hotel Properties		159,626		0.2		6,258,935
RLJ Lodging Trust		195,282		0.3		6,291,986
Strategic Hotels & Resorts, Inc. *		382,700		0.2		4,917,695
Other Securities				8.4		215,108,170

				9.5		243,365,766

Retailing 4.0%
Other Securities				4.0		102,539,172

Semiconductors & Semiconductor Equipment 3.6%
RF Micro Devices, Inc. *		423,000		0.2		5,503,230
TriQuint Semiconductor, Inc. *		253,400		0.2		5,481,042
Other Securities				3.2		81,580,302

				3.6		92,564,574

Software & Services 9.4%
Aspen Technology, Inc. *		139,600		0.2		5,155,428
Guidewire Software, Inc. *		104,300		0.2		5,208,742
MAXIMUS, Inc.		101,496		0.2		4,918,496
SS&C Technologies Holdings, Inc. *		104,600		0.2		5,054,272
The Ultimate Software Group, Inc. *		43,100		0.2		6,486,981
Tyler Technologies, Inc. *		49,100		0.2		5,495,272
Verint Systems, Inc. *		88,372		0.2		5,080,506
WEX, Inc. *		58,476		0.3		6,640,534
Other Securities				7.7		197,702,866

				9.4		241,743,097

Technology Hardware & Equipment 4.7%
Cognex Corp. *		131,818		0.2		5,214,720
FEI Co.		63,900		0.2		5,385,492
Other Securities				4.3		111,281,680

				4.7		121,881,892

Telecommunication Services 0.7%
Other Securities				0.7		19,204,423

Transportation 1.8%
Other Securities				1.8		46,283,560

Utilities 3.5%
Cleco Corp.		90,700		0.2		4,876,032
Dynegy, Inc. *		183,200		0.2		5,587,600
Other Securities				3.1		79,096,053

				3.5		89,559,685

Total Common Stock
(Cost $1,808,542,039)						2,564,440,457




Rights 0.0% of net assets

Automobiles & Components 0.0%
Other Securities				0.0		107,470

Pharmaceuticals, Biotechnology & Life Sciences 0.0%
Other Securities				0.0		—

Telecommunication Services 0.0%
Other Securities				0.0		213,444

Total Rights
(Cost $320,914)						320,914




Warrants 0.0% of net assets

Energy 0.0%
Other Securities				0.0		—

Total Warrants
(Cost $—)						—




Other Investment Company 5.1% of net assets

Securities Lending Collateral 5.1%
Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.01% (f)		130,686,609		5.1		130,686,609

Total Other Investment Company
(Cost $130,686,609)						130,686,609



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

Short-Term Investments 0.5% of net assets

Time Deposit 0.4%
DNB
0.03%, 11/03/14		11,660,323		0.4		11,660,323

See financial notes 33

Schwab Small-Cap Index Fund

Condensed Portfolio Holdings continued

Face

Security

Amount

% of Net

Value

Rate, Maturity Date

($)

Assets

($)

U.S. Treasury Obligations 0.1%

Other Securities

0.1

1,899,969

Total Short-Term Investments

(Cost $13,560,292)

13,560,292

End of Investments.

At 10/31/14 tax basis cost of the fund’s investments was $1,960,321,155 and the unrealized appreciation and depreciation were $900,108,052 and ($151,420,935), respectively, with a net unrealized appreciation of $748,687,117.

For the following notes, please refer to the complete schedule of portfolio 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 $320,914 or 0.0% of net assets.
(c)		All or a portion of this security is on loan. Securities on loan were valued at $128,436,558.
(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.


CVR —		Contingent Value Rights
REIT —		Real Estate Investment Trust

In addition to the above, the fund held the following at 10/31/14:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

Russell 2000 Index, mini, Long, expires 12/19/14

2,342,000

202,898

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):


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

Common Stock¹		$2,564,440,457		$—		$—		$2,564,440,457
Rights¹		—		—		320,914		320,914
Warrants¹		—		—		—		—
Other Investment Company¹		130,686,609		—		—		130,686,609
Short-Term Investments¹		—		13,560,292		—		13,560,292

Total		$2,695,127,066		$13,560,292		$320,914		$2,709,008,272

Other Financial Instruments
Futures Contracts²		$202,898		$—		$—		$202,898


¹		As categorized in the complete schedule of portfolio holdings.
²		Futures contracts are not included in Investments in the schedule of portfolio holdings 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

2013

(Losses)

(Depreciation)

Purchases

Sales

out

2014

Rights

$—

$320,914

$—

$320,914

Total

$—

$320,914

$—

$320,914

34 See financial notes

Schwab Small-Cap Index Fund

Statement of

Assets and Liabilities

As of October 31, 2014



Assets

Investments, at value (cost $1,822,423,245) including securities on loan of $128,436,558		$2,578,321,663
Collateral invested for securities on loan, at value (cost $130,686,609)	+	130,686,609

Total investments, at value (cost $1,953,109,854)		2,709,008,272
Receivables:
Fund shares sold		1,693,089
Dividends		906,831
Income from securities on loan		449,465
Variation margin on futures contracts		198,210
Interest		10
Prepaid expenses	+	43,784

Total assets		2,712,299,661

Liabilities

Collateral held for securities on loan		130,686,609
Payables:
Investments bought		2,651,214
Investment adviser and administrator fees		30,877
Shareholder service fees		5,896
Fund shares redeemed		11,889,615
Accrued expenses	+	230,411

Total liabilities		145,494,622

Net Assets

Total assets		2,712,299,661
Total liabilities	−	145,494,622

Net assets		$2,566,805,039

Net Assets by Source
Capital received from investors		1,654,178,949
Net investment income not yet distributed		22,176,318
Net realized capital gains		134,348,456
Net unrealized capital appreciation		756,101,316

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$2,566,805,039

91,231,854

$28.13

See financial notes 35

Schwab Small-Cap Index Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends (net of foreign withholding taxes of $18,199)		$30,980,670
Interest		20,230
Securities on loan	+	5,025,528

Total investment income		36,026,428

Expenses

Investment adviser and administrator fees		3,754,578
Shareholder service fees		485,138
Index fee		324,115
Shareholder reports		155,464
Portfolio accounting fees		114,038
Registration fees		68,585
Transfer agent fees		64,795
Custodian fees		53,141
Professional fees		47,341
Independent trustees’ fees		18,011
Other expenses	+	46,862

Total expenses		5,132,068
Expense reduction by CSIM and its affiliates	−	875,516

Net expenses	−	4,256,552

Net investment income		31,769,876

Realized and Unrealized Gains (Losses)

Net realized gains on investments		137,599,673
Net realized gains on futures contracts		6,472,968
Net realized losses on foreign currency transactions	+	(266	)

Net realized gains		144,072,375
Net change in unrealized appreciation (depreciation) on investments		18,055,018
Net change in unrealized appreciation (depreciation) on futures contracts		(2,952,563	)
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	(9	)

Net change in unrealized appreciation (depreciation)	+	15,102,446

Net realized and unrealized gains		159,174,821

Increase in net assets resulting from operations		$190,944,697

36 See financial notes

Schwab Small-Cap Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$31,769,876			$35,040,608
Net realized gains		144,072,375			103,525,565
Net change in unrealized appreciation (depreciation)	+	15,102,446			474,902,335

Increase in net assets from operations		190,944,697			613,468,508

Distributions to Shareholders

Distributions from net investment income		(26,168,327	)		(39,112,389	)
Distributions from net realized gains	+	(110,361,333	)		(39,238,431	)

Total distributions		($136,529,660	)		($78,350,820	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			19,513,159		$532,426,174			17,519,506		$419,420,964
Shares reinvested			4,820,637		125,963,244			3,540,194		72,432,373
Shares redeemed	+		(18,247,583	)	(497,352,580	)		(14,685,439	)	(350,359,363	)

Net transactions in fund shares			6,086,213		$161,036,838			6,374,261		$141,493,974

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			85,145,641		$2,351,353,164			78,771,380		$1,674,741,502
Total increase	+		6,086,213		215,451,875			6,374,261		676,611,662

End of period			91,231,854		$2,566,805,039			85,145,641		$2,351,353,164


Net investment income not yet distributed					$22,176,318					$17,941,421

See financial notes 37

Schwab Total Stock Market Index Fund

Condensed Portfolio Holdings as of October 31, 2014


				Cost		Value
Holdings by Category				($)		($)

	98	.7%	Common Stock		2,419,182,444		3,996,962,109
	0	.0%	Rights		32,982		32,760
	0	.0%	Warrants		—		—
	0	.7%	Other Investment Company		26,162,578		26,162,578
	2	.1%	Short-Term Investments		86,325,341		86,325,341


	101	.5%	Total Investments		2,531,703,345		4,109,482,788
	(1	.5%)	Other Assets and Liabilities, Net				(60,247,221	)


	100	.0%	Net Assets				4,049,235,567


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

Common Stock 98.7% of net assets

Automobiles & Components 1.2%
Other Securities				1.2		47,727,756

Banks 5.9%
Bank of America Corp.		1,883,401		0.8		32,319,161
Citigroup, Inc.		539,889		0.7		28,900,258
JPMorgan Chase & Co.		671,463		1.0		40,610,082
Wells Fargo & Co.		845,813		1.1		44,904,212
Other Securities				2.3		92,490,937

				5.9		239,224,650

Capital Goods 7.8%
3M Co.		115,357		0.4		17,738,446
General Electric Co.		1,797,112		1.2		46,383,461
United Technologies Corp.		152,628		0.4		16,331,196
Other Securities				5.8		233,705,336

				7.8		314,158,439

Commercial & Professional Supplies 1.0%
Other Securities				1.0		42,139,145

Consumer Durables & Apparel 1.6%
Other Securities				1.6		62,440,667

Consumer Services 2.1%
McDonald’s Corp.		175,440		0.4		16,443,991
Other Securities				1.7		68,027,877

				2.1		84,471,868

Diversified Financials 4.6%
Berkshire Hathaway, Inc., Class B *		324,902		1.1		45,538,264
The Charles Schwab Corp. (a)		211,426		0.1		6,061,583
Other Securities				3.4		136,285,691

				4.6		187,885,538

Energy 8.4%
Chevron Corp.		339,623		1.0		40,737,779
ConocoPhillips		223,431		0.4		16,120,547
Exxon Mobil Corp.		761,999		1.8		73,692,923
Schlumberger Ltd.		232,003		0.6		22,889,416
Other Securities				4.6		185,142,251

				8.4		338,582,916

Food & Staples Retailing 1.9%
CVS Health Corp.		205,937		0.5		17,671,454
Wal-Mart Stores, Inc.		282,889		0.5		21,575,944
Other Securities				0.9		37,585,921

				1.9		76,833,319

Food, Beverage & Tobacco 4.5%
Altria Group, Inc.		356,923		0.4		17,253,658
PepsiCo, Inc.		270,258		0.7		25,990,712
Philip Morris International, Inc.		280,509		0.6		24,968,106
The Coca-Cola Co.		705,514		0.7		29,546,926
Other Securities				2.1		85,275,371

				4.5		183,034,773

Health Care Equipment & Services 4.7%
UnitedHealth Group, Inc.		172,781		0.4		16,415,923
Other Securities				4.3		172,793,029

				4.7		189,208,952

Household & Personal Products 1.8%
The Procter & Gamble Co.		482,524		1.0		42,109,870
Other Securities				0.8		30,497,227

				1.8		72,607,097

Insurance 3.0%
Other Securities				3.0		123,151,426

Materials 3.6%
Other Securities				3.6		146,031,968

Media 3.4%
Comcast Corp., Class A		461,960		0.6		25,569,486

See financial notes 39

Schwab Total Stock Market Index Fund

Condensed Portfolio Holdings continued


	Number		% of Net		Value
Security	of Shares		Assets		($)
The Walt Disney Co.		281,639		0.7		25,736,172
Other Securities				2.1		85,407,578

				3.4		136,713,236

Pharmaceuticals, Biotechnology & Life Sciences 9.0%
AbbVie, Inc.		283,230		0.5		17,973,776
Amgen, Inc.		135,489		0.5		21,973,606
Bristol-Myers Squibb Co.		295,053		0.4		17,169,134
Celgene Corp. *		145,262		0.4		15,556,108
Gilead Sciences, Inc. *		271,492		0.8		30,407,104
Johnson & Johnson		504,809		1.3		54,408,314
Merck & Co., Inc.		517,716		0.7		29,996,465
Pfizer, Inc.		1,138,625		0.8		34,101,819
Other Securities				3.6		144,521,127

				9.0		366,107,453

Real Estate 3.9%
Other Securities				3.9		156,779,819

Retailing 4.1%
Amazon.com, Inc. *		68,125		0.5		20,809,462
The Home Depot, Inc.		241,663		0.6		23,566,976
Other Securities				3.0		123,137,728

				4.1		167,514,166

Semiconductors & Semiconductor Equipment 2.4%
Intel Corp.		885,697		0.8		30,122,555
Other Securities				1.6		66,346,361

				2.4		96,468,916

Software & Services 10.1%
Facebook, Inc., Class A *		372,707		0.7		27,949,298
Google, Inc., Class A *		50,876		0.7		28,890,954
Google, Inc., Class C *		51,176		0.7		28,611,478
International Business Machines Corp.		166,051		0.7		27,298,784
Microsoft Corp.		1,474,318		1.7		69,219,230
Oracle Corp.		583,313		0.6		22,778,373
Visa, Inc., Class A		88,601		0.5		21,390,940
Other Securities				4.5		182,771,696

				10.1		408,910,753

Technology Hardware & Equipment 6.1%
Apple, Inc.		1,071,762		2.9		115,750,296
Cisco Systems, Inc.		918,640		0.5		22,479,121
QUALCOMM, Inc.		301,639		0.6		23,681,678
Other Securities				2.1		86,546,972

				6.1		248,458,067

Telecommunication Services 2.1%
AT&T, Inc.		929,055		0.8		32,368,276
Verizon Communications, Inc.		741,369		0.9		37,253,792
Other Securities				0.4		16,869,175

				2.1		86,491,243

Transportation 2.3%
Union Pacific Corp.		160,070		0.4		18,640,152
Other Securities				1.9		75,581,673

				2.3		94,221,825

Utilities 3.2%
Other Securities				3.2		127,798,117

Total Common Stock
(Cost $2,419,182,444)						3,996,962,109




Rights 0.0% of net assets

Pharmaceuticals, Biotechnology & Life Sciences 0.0%
Other Securities				0.0		—

Technology Hardware & Equipment 0.0%
Other Securities				0.0		—

Telecommunication Services 0.0%
Other Securities				0.0		32,760

Total Rights
(Cost $32,982)						32,760




Warrants 0.0% of net assets

Energy 0.0%
Other Securities				0.0		—

Total Warrants
(Cost $—)						—




Other Investment Company 0.7% of net assets

Securities Lending Collateral 0.7%
Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.01% (f)		26,162,578		0.7		26,162,578

Total Other Investment Company
(Cost $26,162,578)						26,162,578



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

Short-Term Investments 2.1% of net assets

Time Deposits 2.0%
Australia & New Zealand Banking Group Ltd.
0.03%, 11/03/14		39,996,785		0.9		39,996,785
DNB
0.03%, 11/03/14		39,996,785		1.0		39,996,785
Other Securities				0.1		2,731,828

				2.0		82,725,398

40 See financial notes

Schwab Total Stock Market Index Fund

Condensed Portfolio Holdings continued

Face

Security

Amount

% of Net

Value

Rate, Maturity Date

($)

Assets

($)

U.S. Treasury Obligations 0.1%

Other Securities

0.1

3,599,943

Total Short-Term Investments

(Cost $86,325,341)

86,325,341

End of Investments.

At 10/31/14 tax basis cost of the fund’s investments was $2,549,856,868 and the unrealized appreciation and depreciation were $1,634,592,191 and ($74,966,271), respectively, with a net unrealized appreciation of $1,559,625,920.

For the following notes, please refer to the complete schedule of portfolio 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 $32,760 or 0.0% of net assets.
(c)		All or a portion of this security is on loan. Securities on loan were valued at $26,055,558.
(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.


CVR —		Contingent Value Rights
REIT —		Real Estate Investment Trust

In addition to the above, the fund held the following at 10/31/14:


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

Futures Contracts


Russell 2000 Index, mini, Long, expires 12/19/14		60		7,026,000		398,936
S&P 500 Index, e-mini, Long, expires 12/19/14		410		41,233,700		1,834,405

Net Unrealized Appreciation						2,233,341

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):


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

Common Stock¹		$3,996,962,109		$—		$—		$3,996,962,109
Rights¹		—		—		32,760		32,760
Warrants¹		—		—		—		—
Other Investment Company¹		26,162,578		—		—		26,162,578
Short-Term Investments¹		—		86,325,341		—		86,325,341

Total		$4,023,124,687		$86,325,341		$32,760		$4,109,482,788

Other Financial Instruments
Futures Contracts²		$2,233,341		$—		$—		$2,233,341


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

See financial notes 41

Schwab Total Stock Market Index Fund

Statement of

Assets and Liabilities

As of October 31, 2014



Assets

Investments in affiliated issuers, at value (cost $4,180,778)		$6,061,583
Investments in unaffiliated issuers, at value (cost $2,501,359,989) including securities on loan of $26,055,558		4,077,258,627
Collateral invested for securities on loan, at value (cost $26,162,578)	+	26,162,578

Total investments, at value (cost $2,531,703,345)		4,109,482,788
Cash		33,257
Receivables:
Investments sold		3,556
Fund shares sold		5,514,185
Dividends		3,472,577
Variation margin on futures contracts		570,600
Income from securities on loan		92,909
Foreign tax reclaims		2,907
Interest		69
Prepaid expenses	+	53,314

Total assets		4,119,226,162

Liabilities

Collateral held for securities on loan		26,162,578
Payables:
Investments bought		40,749,501
Investment adviser and administrator fees		23,157
Shareholder service fees		8,077
Fund shares redeemed		2,921,177
Accrued expenses	+	126,105

Total liabilities		69,990,595

Net Assets

Total assets		4,119,226,162
Total liabilities	−	69,990,595

Net assets		$4,049,235,567

Net Assets by Source
Capital received from investors		2,414,095,825
Net investment income not yet distributed		53,845,311
Net realized capital gains		1,281,647
Net unrealized capital appreciation		1,580,012,784

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$4,049,235,567

109,556,860

$36.96

See financial notes 43

Schwab Total Stock Market Index Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends received from affiliated issuer		$46,464
Dividends received from unaffiliated issuers (net of foreign withholding taxes of $8,760)		66,988,404
Interest		23,493
Securities on loan	+	853,347

Total investment income		67,911,708

Expenses

Investment adviser and administrator fees		2,171,946
Shareholder service fees		692,268
Portfolio accounting fees		140,740
Shareholder reports		108,859
Transfer agent fees		103,590
Registration fees		101,073
Custodian fees		75,229
Professional fees		49,804
Independent trustees’ fees		23,129
Interest expense		461
Other expenses	+	63,497

Total expenses		3,530,596
Expense reduction by CSIM and its affiliates	−	272,216

Net expenses	−	3,258,380

Net investment income		64,653,328

Realized and Unrealized Gains (Losses)

Net realized gains on unaffiliated investments		5,348,371
Net realized gains on futures contracts	+	12,537,084

Net realized gains		17,885,455
Net change in unrealized appreciation (depreciation) on affiliated issuer		1,136,109
Net change in unrealized appreciation (depreciation) on unaffiliated investments		449,096,734
Net change in unrealized appreciation (depreciation) on futures contracts	+	(375,196	)

Net change in unrealized appreciation (depreciation)	+	449,857,647

Net realized and unrealized gains		467,743,102

Increase in net assets resulting from operations		$532,396,430

44 See financial notes

Schwab Total Stock Market Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$64,653,328			$54,198,628
Net realized gains		17,885,455			18,230,467
Net change in unrealized appreciation (depreciation)	+	449,857,647			606,599,386

Increase in net assets from operations		532,396,430			679,028,481

Distributions to Shareholders

Distributions from net investment income		(50,022,427	)		(47,503,974	)
Distributions from net realized gains	+	(14,754,888	)		—

Total distributions		($64,777,315	)		($47,503,974	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			24,674,667		$847,448,914			26,862,706		$768,188,272
Shares reinvested			1,621,857		52,337,326			1,519,219		38,800,859
Shares redeemed	+		(14,599,314	)	(501,556,679	)		(17,343,333	)	(494,804,875	)

Net transactions in fund shares			11,697,210		$398,229,561			11,038,592		$312,184,256

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			97,859,650		$3,183,386,891			86,821,058		$2,239,678,128
Total increase	+		11,697,210		865,848,676			11,038,592		943,708,763

End of period			109,556,860		$4,049,235,567			97,859,650		$3,183,386,891


Net investment income not yet distributed					$53,845,311					$39,398,594

See financial notes 45

Schwab International Index Fund

Condensed Portfolio Holdings as of October 31, 2014


				Cost		Value
Holdings by Category				($)		($)

	94	.8%	Common Stock		2,082,756,449		2,557,901,605
	0	.6%	Preferred Stock		12,000,924		14,597,344
	0	.0%	Rights		463,454		458,169
	0	.2%	Other Investment Company		6,284,134		6,284,134
	3	.8%	Short-Term Investments		102,482,807		102,482,807


	99	.4%	Total Investments		2,203,987,768		2,681,724,059
	0	.6%	Other Assets and Liabilities, Net				17,421,971


	100	.0%	Net Assets				2,699,146,030


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

Common Stock 94.8% of net assets

Australia 7.7%
Australia & New Zealand Banking Group Ltd.		554,974		0.6		16,421,997
BHP Billiton Ltd.		648,996		0.7		19,415,901
Commonwealth Bank of Australia		327,430		0.9		23,283,357
National Australia Bank Ltd.		476,014		0.6		14,725,852
Westpac Banking Corp.		627,984		0.7		19,275,505
Other Securities				4.2		113,503,715

				7.7		206,626,327

Austria 0.2%
Other Securities				0.2		5,257,600

Belgium 1.2%
Anheuser-Busch InBev N.V.		162,156		0.7		17,982,187
Other Securities				0.5		13,986,762

				1.2		31,968,949

Denmark 1.5%
Novo Nordisk A/S, Class B		406,216		0.7		18,362,067
Other Securities				0.8		21,222,165

				1.5		39,584,232

Finland 0.8%
Other Securities				0.8		22,824,273

France 9.1%
BNP Paribas S.A.		213,876		0.5		13,440,408
Sanofi		239,808		0.8		21,760,185
Total S.A.		431,824		1.0		25,781,299
Other Securities				6.8		184,951,657

				9.1		245,933,549

Germany 7.8%
Allianz SE - Reg’d		92,021		0.5		14,633,375
BASF SE		185,553		0.6		16,395,490
Bayer AG - Reg’d		166,836		0.9		23,861,178
Daimler AG - Reg’d		194,315		0.6		15,150,542
SAP SE		186,573		0.5		12,712,230
Siemens AG - Reg’d		160,263		0.7		18,076,612
Other Securities				4.0		108,919,079

				7.8		209,748,506

Hong Kong 3.0%
AIA Group Ltd.		2,431,600		0.5		13,569,361
Other Securities				2.5		67,254,559

				3.0		80,823,920

Ireland 0.3%
Other Securities				0.3		7,966,555

Israel 0.5%
Other Securities				0.5		14,292,621

Italy 2.3%
Other Securities				2.3		61,730,126

Japan 20.4%
Mitsubishi UFJ Financial Group, Inc.		2,576,709		0.6		15,020,186
SoftBank Corp.		194,200		0.5		14,137,646
Toyota Motor Corp.		556,403		1.2		33,482,763
Other Securities				18.1		488,288,321

				20.4		550,928,916

Netherlands 2.6%
ING Groep N.V. CVA *		780,729		0.4		11,180,322
Unilever N.V. CVA		330,199		0.5		12,798,001
Other Securities				1.7		45,205,768

				2.6		69,184,091

New Zealand 0.1%
Other Securities				0.1		3,375,772

Norway 0.7%
Other Securities				0.7		19,864,969

See financial notes 47

Schwab International Index Fund

Condensed Portfolio Holdings continued


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

Portugal 0.2%
Other Securities				0.2		4,344,746

Singapore 1.4%
Other Securities				1.4		38,476,799

Spain 3.3%
Banco Bilbao Vizcaya Argentaria S.A.		1,200,605		0.5		13,428,629
Banco Santander S.A.		2,426,020		0.8		21,435,158
Telefonica S.A.		827,077		0.4		12,445,589
Other Securities				1.6		42,914,176

				3.3		90,223,552

Sweden 2.9%
Other Securities				2.9		78,287,621

Switzerland 8.8%
Nestle S.A. - Reg’d		650,058		1.8		47,671,415
Novartis AG - Reg’d		464,123		1.6		43,071,939
Roche Holding AG		141,729		1.5		41,824,422
UBS AG - Reg’d *		738,535		0.5		12,841,745
Other Securities				3.4		92,074,824

				8.8		237,484,345

United Kingdom 20.0%
AstraZeneca plc		254,498		0.7		18,590,659
Barclays plc		3,315,853		0.5		12,752,500
BG Group plc		689,272		0.4		11,487,429
BP plc		3,717,531		1.0		26,747,268
British American Tobacco plc		378,448		0.8		21,449,524
Diageo plc		507,213		0.6		14,958,918
GlaxoSmithKline plc		979,362		0.8		22,147,257
HSBC Holdings plc		3,842,563		1.5		39,176,326
Lloyds Banking Group plc *		11,523,992		0.5		14,230,849
National Grid plc		755,203		0.4		11,207,186
Prudential plc		518,460		0.4		12,005,474
Reckitt Benckiser Group plc		131,606		0.4		11,084,313
Rio Tinto plc		256,983		0.5		12,227,623
Royal Dutch Shell plc, A Shares		793,932		1.0		28,360,643
Royal Dutch Shell plc, B Shares		487,416		0.7		18,007,793
SABMiller plc		195,209		0.4		11,041,598
Vodafone Group plc		5,332,119		0.7		17,731,718
Other Securities				8.7		235,767,058

				20.0		538,974,136

Total Common Stock
(Cost $2,082,756,449)						2,557,901,605




Preferred Stock 0.6% of net assets

Germany 0.6%
Other Securities				0.6		14,542,982

United Kingdom 0.0%
Other Securities				0.0		54,362

Total Preferred Stock
(Cost $12,000,924)						14,597,344




Rights 0.0% of net assets

Spain 0.0%
Other Securities				0.0		458,169

Total Rights
(Cost $463,454)						458,169




Other Investment Company 0.2% of net assets

United States 0.2%

Securities Lending Collateral 0.2%
Other Securities				0.2		6,284,134

Total Other Investment Company
(Cost $6,284,134)						6,284,134



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

Short-Term Investments 3.8% of net assets

Time Deposits 3.6%
Australia & New Zealand Banking Group Ltd.
0.03%, 11/03/14		18,382,677		0.7		18,382,677
Bank of Tokyo - Mitsubishi UFJ
0.03%, 11/03/14		26,411,153		1.0		26,411,153
DNB
0.03%, 11/03/14		26,411,153		1.0		26,411,153
Wells Fargo
0.03%, 11/03/14		26,373,131		0.9		26,373,131
Other Securities				0.0		104,740

				3.6		97,682,854

U.S. Treasury Obligation 0.2%
Other Securities				0.2		4,799,953

Total Short-Term Investments
(Cost $102,482,807)						102,482,807



End of Investments.

48 See financial notes

Schwab International Index Fund

Condensed Portfolio Holdings continued

At 10/31/14, the tax basis cost of the fund’s investments was $2,228,712,985 and the unrealized appreciation and depreciation were $596,840,562 and ($143,829,488), respectively, with a net unrealized appreciation of $453,011,074.

At 10/31/14, the values of certain foreign securities held by the fund aggregating $2,555,486,627 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(a) for additional information).

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


*		Non-income producing security.
(a)		All or a portion of this security is on loan. Securities on loan were valued at $5,980,410.
(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 $54,362 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.


CDI —		CHESS Depositary Interest
CVA —		Dutch Certificate
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 10/31/14:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

MSCI EAFE, e-mini, Long, expires 12/19/14

1,260

115,668,000

3,612,589

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):


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

Common Stock¹		$—		$587,668,696		$—		$587,668,696
Australia		1,275,299		205,351,028		—		206,626,327
Belgium		631,759		31,337,190		—		31,968,949
Finland		544,226		22,280,047		—		22,824,273
France		4,583,251		241,350,298		—		245,933,549
Ireland		2,112,489		5,854,066		—		7,966,555
Japan		950,683		549,978,233		—		550,928,916
Netherlands		1,263,184		67,920,907		—		69,184,091
Norway		206,749		19,658,220		—		19,864,969
Singapore		248,696		38,228,103		—		38,476,799
Switzerland		505,698		236,978,647		—		237,484,345
United Kingdom		4,635,926		534,338,210		—		538,974,136
Preferred Stock¹		—		14,542,982		—		14,542,982
United Kingdom		—		—		54,362		54,362
Rights¹		458,169		—		—		458,169
Other Investment Company¹		6,284,134		—		—		6,284,134
Short-Term Investments¹		—		102,482,807		—		102,482,807

Total		$23,700,263		$2,657,969,434		$54,362		$2,681,724,059

Other Financial Instruments
Futures Contracts²		$3,612,589		$—		$—		$3,612,589


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

See financial notes 49

Schwab International Index Fund

Condensed 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	2013		(Losses)		(Depreciation)			Purchases		Sales			in		out		2014

Common Stock
Portugal		$—		$—		($638,611	)		$284,328		$—			$354,283		$—		$—
Preferred Stock
United Kingdom		41,914		460		165			54,546		(42,723	)		—		—		54,362
Rights
Spain		389,200		—		(17,552	)		—		(371,648	)		—		—		—

Total		$431,114		$460		($655,998	)		$338,874		($414,371	)		$354,283		$—		$54,362

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, 2014 was ($618,397).

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, 2014. The transfers in the amount of $16,621,611 and $7,924,803 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 into Level 3 from Level 1 or Level 2 were due to the result of fair valued securities for which no quoted value was available.

50 See financial notes

Schwab International Index Fund

Statement of

Assets and Liabilities

As of October 31, 2014



Assets

Investments, at value (cost $2,197,703,634) including securities on loan of $5,980,410		$2,675,439,925
Collateral invested for securities on loan, at value (cost $6,284,134)	+	6,284,134

Total investments, at value (cost $2,203,987,768)		2,681,724,059
Foreign currency, at value (cost $325)		325
Cash		100,000
Receivables:
Fund shares sold		18,477,247
Dividends		4,940,649
Variation margin on futures contracts		2,037,618
Foreign tax reclaims		1,985,410
Income from securities on loan		31,393
Interest		81
Prepaid expenses	+	43,154

Total assets		2,709,339,936

Liabilities

Collateral held for securities on loan		6,284,134
Payables:
Investments bought		2,208,807
Investment adviser and administrator fees		28,882
Shareholder service fees		6,422
Fund shares redeemed		1,336,704
Accrued expenses	+	328,957

Total liabilities		10,193,906

Net Assets

Total assets		2,709,339,936
Total liabilities	−	10,193,906

Net assets		$2,699,146,030

Net Assets by Source
Capital received from investors		2,179,888,429
Net investment income not yet distributed		62,675,606
Net realized capital losses		(24,516,959	)
Net unrealized capital appreciation		481,098,954

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$2,699,146,030

138,984,661

$19.42

See financial notes 51

Schwab International Index Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends (net of foreign withholding taxes of $7,050,681)		$87,668,265
Interest		23,622
Securities on loan	+	1,248,476

Total investment income		88,940,363

Expenses

Investment adviser and administrator fees		3,694,085
Shareholder service fees		477,977
Custodian fees		481,429
Index fee		422,570
Portfolio accounting fees		126,801
Shareholder reports		95,426
Registration fees		90,817
Transfer agent fees		64,176
Professional fees		54,453
Independent trustees’ fees		17,773
Interest expense		1,680
Other expenses	+	55,332

Total expenses		5,582,519
Expense reduction by CSIM and its affiliates	−	901,665

Net expenses	−	4,680,854

Net investment income		84,259,509

Realized and Unrealized Gains (Losses)

Net realized gains on investments		938,120
Net realized gains on futures contracts		3,495,645
Net realized losses on foreign currency transactions	+	(329,634	)

Net realized gains		4,104,131
Net change in unrealized appreciation (depreciation) on investments		(94,924,198	)
Net change in unrealized appreciation (depreciation) on futures contracts		1,194,753
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	(312,328	)

Net change in unrealized appreciation (depreciation)	+	(94,041,773	)

Net realized and unrealized losses		(89,937,642	)

Decrease in net assets resulting from operations		($5,678,133	)

52 See financial notes

Schwab International Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$84,259,509			$50,514,341
Net realized gains		4,104,131			6,801,009
Net change in unrealized appreciation (depreciation)	+	(94,041,773	)		355,342,477

Increase (Decrease) in net assets from operations		(5,678,133	)		412,657,827

Distributions to Shareholders

Distributions from net investment income		($56,954,638	)		($50,551,708	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			42,892,587		$850,934,554			36,208,819		$648,488,445
Shares reinvested			2,686,474		50,828,092			2,784,477		45,581,882
Shares redeemed	+		(17,254,418	)	(344,646,661	)		(15,012,168	)	(266,487,088	)

Net transactions in fund shares			28,324,643		$557,115,985			23,981,128		$427,583,239

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			110,660,018		$2,204,662,816			86,678,890		$1,414,973,458
Total increase	+		28,324,643		494,483,214			23,981,128		789,689,358

End of period			138,984,661		$2,699,146,030			110,660,018		$2,204,662,816


Net investment income not yet distributed					$62,675,606					$35,386,171

See financial notes 53

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 Fundamental Global Real Estate Index 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
Schwab Large-Cap Growth Fund
Schwab Small-Cap Equity Fund		Schwab Investments (organized October 26, 1990)
Schwab Hedged Equity Fund		Schwab 1000 Index Fund
Schwab Financial Services Fund		Schwab Short-Term Bond Market Fund
Schwab Health Care Fund		Schwab Intermediate-Term Bond 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 funds follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 Financial Services — Investment Companies. The accounting policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

(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 Contracts (“futures”): Futures are valued at their settlement prices as of the close of their exchanges.

	•	Short-term securities (60 days or less to maturity): Short-term securities may be 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, without consideration to the classification level of the specific investments held by the underlying fund.

	•	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

Schwab Equity Index Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):


		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, 2014 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 a 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 appreciation or depreciation until the contract is closed, at which time the gains or losses are realized. Futures are traded publicly on exchanges, and their market value may change daily.

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 be maintained on a daily marked-to-market basis in an amount at least equal to the current value of the securities loaned. The lending agent provides a fund with indemnification against borrower default (the borrower fails to return the security on loan) reducing the risk of loss as a result of default. The cash collateral of securities loaned is currently invested in money market portfolios operating under Rule 2a-7 of the 1940 Act. Each fund bears the risk of loss with respect to the investment of cash collateral. The terms of the securities lending agreement allows the funds to terminate any loans at any given time. Securities lending income, as disclosed in each 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 and broker rebates which are subject to adjustments pursuant to the securities lending agreement. On loans not collateralized by cash, a fee is received from the borrower, and is allocated between a fund and the lending agent. A fund retains the right to recall a security on loan. The aggregate market value of securities loaned will not at any time exceed one-third of the total assets of a fund, including collateral received from the loan (at market value computed at the time of the loan). Total costs and expenses, including agent fees associated with securities lending activities under the trust’s Securities Lending Program paid to the unaffiliated lending agent are approximately 15% of the gross lending revenues.

The values of the securities on loan and the related collateral as of October 31, 2014, if any, are disclosed in the funds’ Portfolio Holdings. Investments of cash collateral are also disclosed in each fund’s Statement of Assets and Liabilities.

Schwab Equity Index Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(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 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:

(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, 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 a fund’s operating expenses.

(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.

Schwab Equity Index Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(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, 2014, if any, are reflected in each fund’s Statement 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.

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.

Market Risk. Equity 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.

Equity Risk. 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.

Tracking Error Risk. 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.

Investment Style Risk. 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.

A significant percentage of an index may be composed of securities in a single industry or sector of the economy. If a fund is focused in an industry or sector, it may present more risks than if it were broadly diversified over numerous industries and sectors of the economy.

Sampling Index Tracking Risk. 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 will be 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.

Concentration Risk. To the extent that a fund’s or an index’s portfolio is concentrated in the securities of issuers in a particular market, industry, group of industries, sector, country, 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, country, or asset class.

Schwab Equity Index Funds

Financial Notes (continued)

3. Risk Factors (continued):

Small-Cap Risk. 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 performance also will lag those investments.

Large- and Mid-Cap Risk. 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 or small-cap stocks, for instance — a fund’s performance also will lag those investments.

Foreign Investment Risk. 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); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of a fund’s investments, and could impair the fund’s ability to meet its investment objective or invest in accordance with its investment strategies. These risks may be heightened in connection with investments in emerging markets. Foreign securities also include American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts (“EDRs”), which are depositary receipts issued by U.S. and foreign banks that represent shares of foreign-based corporations. ADRs, GDRs and EDRs may be less liquid than the underlying shares in their primary trading markets; and GDRs, many of which are issued by companies in emerging markets, may be more volatile.

Geographic Risk. 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.

Derivatives Risk. 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 a fund to realize higher amounts of short-term capital gain. These risks could cause a fund to lose more than the principal amount invested.

Liquidity Risk. 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.

Security Lending Risk. 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:

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.

Schwab Equity Index Funds

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):

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		11/01/13		11/01/13
Fund	10/31/13		Purchases		Sales		10/31/14		10/31/14		to 10/31/14		to 10/31/14

Schwab S&P 500 Index Fund		1,232,381		70,200		—		1,302,581		$37,344,997		$—		$299,995
Schwab 1000 Index Fund		367,065		—		—		367,065		10,523,753		—		88,096
Schwab Total Stock Market Index Fund		182,326		29,100		—		211,426		6,061,583		—		46,464

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, 2014, as applicable:


	Underlying Funds
								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		1.4%			—%		6.0%		—%		6.9%
Schwab MarketTrack Growth Portfolio		1.5%			—%		5.7%		—%		5.4%
Schwab MarketTrack Balanced Portfolio		0.8%			—%		3.1%		—%		2.8%
Schwab MarketTrack Conservative Portfolio		0.2%			—%		0.9%		—%		0.8%
Schwab MarketTrack Growth Portfolio II		0.0%	*		0.1%		0.3%		—%		0.2%
Schwab Target 2010 Fund		0.0%	*		—%		—%		—%		—%
Schwab Target 2015 Fund		0.0%	*		—%		—%		—%		—%
Schwab Target 2020 Fund		0.2%			—%		—%		—%		—%
Schwab Target 2025 Fund		0.2%			—%		—%		—%		—%
Schwab Target 2030 Fund		0.4%			—%		—%		—%		—%
Schwab Target 2035 Fund		0.2%			—%		—%		—%		—%
Schwab Target 2040 Fund		0.4%			—%		—%		—%		—%
Schwab Target 2045 Fund		0.0%	*		—%		—%		—%		—%
Schwab Target 2050 Fund		0.0%	*		—%		—%		—%		—%
Schwab Target 2055 Fund		0.0%	*		—%		—%		—%		—%


*		Less than 0.1%

Certain other related parties may own shares of Schwab funds in this report. As of October 31, 2014, 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 2.8%, 6.6% and 3.4%, 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 on a fund’s Statement of Operations. For information regarding the trustees, please refer to the 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, 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 an interest expense, which is disclosed on a fund’s 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 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, 2014 are presented on the Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized and change in 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		$462,670,963		4,886
Schwab 1000 Index Fund		39,935,354		419
Schwab Small-Cap Index Fund		55,299,167		483
Schwab Total Stock Market Index Fund		69,348,292		717
Schwab International Index Fund		59,574,515		630

8. Purchases and Sales/Maturities of Investment Securities:

For the period ended October 31, 2014, 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		$1,076,416,361		$278,793,912
Schwab 1000 Index Fund		219,932,645		314,403,431
Schwab Small-Cap Index Fund		503,473,110		305,868,156
Schwab Total Stock Market Index Fund		508,454,594		37,603,609
Schwab International Index Fund		558,876,284		41,216,548

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


	Current Period		Prior Period
	(11/1/13-10/31/14)		(11/1/12-10/31/13)

Schwab S&P 500 Index Fund		$284,628		$199,433
Schwab 1000 Index Fund		27,406		43,102
Schwab Small-Cap Index Fund		29,424		22,392
Schwab Total Stock Market Index Fund		75,062		45,887
Schwab International Index Fund		24,510		17,950

Schwab Equity Index Funds

Financial Notes (continued)

10. Federal Income Taxes:

As of October 31, 2014, 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		$289,403,265			$87,159,600			$33,077,149			$59,208,843			$78,846,363
Undistributed long-term capital gains		—			171,938,124			130,861,822			16,304,979			—
Unrealized appreciation on investments		9,323,536,713			4,587,737,414			900,108,052			1,634,592,191			596,840,562
Unrealized depreciation on investments		(430,521,314	)		(36,668,255	)		(151,420,935	)		(74,966,271	)		(143,829,488	)
Other unrealized appreciation (depreciation)		—			—			—			—			(213,656	)

Net unrealized appreciation (depreciation)		$8,893,015,399			$4,551,069,159			$748,687,117			$1,559,625,920			$452,797,418

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, 2014, 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, 2015		$89,645,092		$—		$—		$—		$—
October 31, 2016		77,879,594		—		—		—		—
October 31, 2017		20,049,252		—		—		—		12,386,180

Total		$187,573,938		$—		$—		$—		$12,386,180

For the year ended October 31, 2014, the funds had capital loss carryforwards utilized and capital losses expired as follows:

Schwab

Total Stock

Schwab

S&P 500

1000

Small-Cap

Market

International

Index Fund

Capital loss carryforwards utilized

$95,059,485

$—

$5,012,069

Capital losses expired

14,197,048

—

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		$297,103,536		$92,284,725		$38,782,759		$50,259,453		$56,954,638
Long-term capital gains		—		181,138,882		97,746,901		14,517,862		—
Return of capital		—		—		—		—		—

Prior 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		—		—		—		—		—

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, 2014, 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		($14,197,048	)		$—			$—			$—			$—
Undistributed net investment income		(715,891	)		(60,827	)		(1,366,652	)		(184,184	)		(15,436	)
Net realized capital gains (losses)		14,912,939			60,827			1,366,652			184,184			15,436

As of October 31, 2014, 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, 2014, 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 of 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 condensed 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 funds 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 funds constituting Schwab Capital Trust) (hereafter collectively referred to as the “Funds”) at October 31, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

December 16, 2014

Other Federal Tax Information (unaudited)

Schwab International Index Fund may elect to pass on the benefits of the foreign tax credit of $7,006,596 to its shareholders for the year ended October 31, 2014. The respective foreign source income on the fund is $84,212,078.

For corporate shareholders, the following percentage of the funds dividend distributions paid during the fiscal year ended October 31, 2014, qualify for the corporate dividends received deduction:


	Percentage

Schwab S&P 500 Index Fund		98.44
Schwab 1000 Index Fund		100.00
Schwab Small-Cap Index Fund		50.68
Schwab Total Stock Market Index Fund		91.39
Schwab International Index Fund		—

For the fiscal year ended October 31, 2014, 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 2015 via IRS form 1099 of the amounts for use in preparing their 2014 income tax return.


Schwab S&P 500 Index Fund			$297,103,536
Schwab 1000 Index Fund			92,284,725
Schwab Small-Cap Index Fund			20,272,407
Schwab Total Stock Market Index Fund			47,706,854
Schwab International Index Fund			51,378,675

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, 2014:


Schwab S&P 500 Index Fund			$—
Schwab 1000 Index Fund			181,138,882
Schwab Small-Cap Index Fund			97,746,901
Schwab Total Stock Market Index Fund			14,517,862
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 30, 2014, and June 3, 2014, and approved the renewal of the Agreements with respect to the Funds for an additional one year term at the meeting held on June 3, 2014. 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 its review of Fund expenses and adviser profitability discussed below. Following such evaluation the Board concluded, within the context of its full deliberations, that the performance of the Funds supported renewal of the 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.

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 97 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)


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)


Kiran M. Patel 1948 Trustee (Trustee of Schwab Capital Trust and Schwab Investments since 2011.)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services for consumers and small businesses) (Dec. 2008 – Sept. 2013).	76	Director, KLA-Tencor Corporation (2008 – present)


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, Eaton (2012 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – 2013) Director, Oneok, Inc. (2009 – 2013) Lead Independent Director, Board of Cooper Industries (2002 – 2012)


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.	97	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 Investment Management, 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; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (January 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010).


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).

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

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.

Barclays U.S. Treasury Bills 1 − 3 Months Index An index that includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250 million or more of outstanding face value.

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 (Europe, Australasia, Far East) 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.

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 Securities Act of 1933 (the “1933 Act”), or in a registered public offering. Certain restricted securities, such as Section 4(a)(2) commercial paper and Rule 144A securities under the 1933 Act, may be considered to be liquid if they meet the criteria for liquidity established by the Board. 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. 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 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.

Small-Cap Spliced Index 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.

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 go to www.schwab.com/privacy.

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 the 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 Fundamental Global Real Estate 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, 2014


Schwab Core Equity Fund^tm (Ticker Symbol: SWANX)			17.88%


S&P 500^® Index			17.27%
Fund Category: Morningstar Large Blend			14.33%


Performance Details			pages 8-9




Schwab Dividend Equity Fund^tm (Ticker Symbol: SWDSX)			14.26%


S&P 500^® Index			17.27%
Fund Category: Morningstar Large Value			13.60%


Performance Details			pages 10-11




Schwab Large-Cap Growth Fund^tm (Ticker Symbol: SWLSX)			18.06%


Russell 1000 Growth Index			17.11%
Fund Category: Morningstar Large Growth			14.57%


Performance Details			pages 12-13




Schwab Small-Cap Equity Fund^tm (Ticker Symbol: SWSCX)			11.67%


Russell 2000^® Index			8.06%
Fund Category: Morningstar Small Blend			7.66%


Performance Details			pages 14-15




Schwab Hedged Equity Fund^tm (Ticker Symbol: SWHEX)			11.07%


S&P 500^® Index			17.27%
Fund Category: Morningstar Long/Short Equity			4.80%


Performance Details			pages 16-17




Schwab Financial Services Fund^tm (Ticker Symbol: SWFFX)			15.92%


S&P 1500 SuperComposite Financial Sector Index			17.21%
Fund Category: Morningstar Financial			10.51%


Performance Details			pages 18-19




Schwab Health Care Fund^tm1 (Ticker Symbol: SWHFX)			27.06%


Dow Jones Global Health Care Index			23.34%
Fund Category: Morningstar Health			32.03%


Performance Details			pages 20-21




Schwab^® International Core Equity Fund¹ (Ticker Symbol: SICNX)			2.20%


MSCI EAFE^® Index (Net)*			-0.60%
Fund Category: Morningstar Foreign Large Blend			-0.04%


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.


*		Effective February 28, 2014, 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.

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,

For 25 years, Charles Schwab Investment Management has been committed to building funds that are designed to serve as part of the foundation of an investor’s portfolio. Our Schwab Active Equity Funds employ a disciplined investment process that involves quantitative and qualitative research and analysis through a bottom-up approach to stock selection. To aid in each fund’s stock selection process, multiple inputs, including Schwab Equity Ratings^®, are analyzed by an experienced investment team.

For the 12-month reporting period ended October 31, 2014, the Schwab Active Equity Funds generated returns that in most cases reflected a rally by U.S. stocks but a weaker performance by international stocks. Most of the funds invest in U.S. stocks, but for funds that invested in international stocks, the depreciation of many foreign currencies versus the U.S. dollar reduced returns. The Schwab Health Care Fund, the Schwab Small-Cap Equity Fund, and the Schwab International Core Equity Fund performed particularly well versus their comparative indices, while the Schwab Financial Services Fund and the Schwab Dividend Equity Fund were comparative underperformers. In addition, the Schwab Hedged Equity Fund underperformed its comparative index, reflecting the fund’s use of short sale transactions that generally caused performance to lag when U.S. stocks rallied.

In the U.S., the Federal Reserve continued to maintain its accommodative monetary policy. This combined with a stronger economy and favorable

Asset Class Performance Comparison % returns during the 12 months ended 10/31/2014

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



		17.27%		S&P 500^® Index: measures U.S. large-cap stocks

		8.06%		Russell 2000^® Index: measures U.S. small-cap stocks

		−0.60%		MSCI EAFE^® Index (Net): measures (in U.S. dollars) large-cap stocks in Europe, Australasia and the Far East

		4.14%		Barclays U.S. Aggregate Bond Index: measures the U.S. bond market

		0.03%		Barclays U.S. Treasury Bills 1-3 Months Index: 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

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.

Performance. The fund returned 17.88% for the 12-month reporting period ended October 31, 2014, outperforming the S&P 500 Index (the index), which the fund uses for performance comparisons. The index returned 17.27% for the reporting period.

Market Highlights. Rebounding economic growth and favorable earnings reports by select companies late in the reporting period supported the performance of U.S. stocks, with large-cap stocks outperforming small-cap stocks. The Information Technology and Health Care sectors performed particularly well, while the Energy and Telecommunication Services sectors underperformed by comparison.

Positioning and Strategies. The fund’s over- and underweights in many market sectors compared with the index were among the largest overall contributors to the fund’s relative performance. Effective stock selection also helped overall and contributed to fund outperformance.

The fund’s holdings in Apple, Inc. contributed the most to relative performance, returning approximately 48% for the 12-month reporting period. Factors such as positive earnings reports and the highly anticipated release of the iPhone 6 and iPhone 6 Plus gave Apple, Inc. a boost toward the end of the reporting period, and helped this stock positively contribute to relative performance. From a sector standpoint, the Information Technology sector contributed the most to the fund’s total return, as this sector benefitted especially from improvements in the U.S. economy and increased corporate spending on technology. Although the fund was slightly underweight in Information Technology relative to the comparative index, effective stock selection within this sector helped make up for this relative weighting.

In contrast, the fund’s holdings of International Game Technology, a global casino-style gaming company, detracted the most from the fund’s total return. International Game Technology returned approximately -34%, in part due to muted demand in its core business. As a result, the fund’s overweight in this stock reduced the relative performance of the fund (please note this position was sold prior to the end of the reporting period). Within the fund, the Telecommunication Services sector detracted the most from the fund’s total return, as competition between several large companies impacted profit margins. Though the fund was underweight this sector compared with the index, stock selection negatively affected relative performance. The fund’s holdings of AT&T Inc. detracted the most from the fund’s total return in this sector, with returns of approximately -10%. The strategic decision to overweight in this stock detracted from relative performance (please note this position was sold prior to the end of the reporting period).

As of 10/31/14:

Statistics


Number of Holdings			124
Weighted Average Market Cap ($ x 1,000,000)			$104,805
Price/Earnings Ratio (P/E)			16.7
Price/Book Ratio (P/B)			2.4
Portfolio Turnover Rate			63%

Sector Weightings % of Investments


Information Technology			18.5%
Health Care			16.2%
Financials			13.7%
Industrials			12.6%
Energy			9.4%
Consumer Discretionary			9.2%
Consumer Staples			9.0%
Utilities			5.6%
Materials			3.4%
Telecommunication Services			1.1%
Other			1.3%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Apple, Inc.			3.6%
Pfizer, Inc.			3.1%
PepsiCo, Inc.			2.5%
Wells Fargo & Co.			2.3%
Occidental Petroleum Corp.			2.3%
PPG Industries, Inc.			2.3%
Entergy Corp.			2.2%
Archer-Daniels-Midland Co.			2.2%
The PNC Financial Services Group, Inc.			2.0%
Amgen, Inc.			2.0%
Total			24.5%

Management 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 10/31/14

October 31, 2004 – October 31, 2014
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)		17.88	%		15.26	%		8.44	%
S&P 500^® Index		17.27	%		16.69	%		8.20	%
Fund Category: Morningstar Large Blend		14.33	%		15.03	%		7.58	%

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 and September 7, 2012, respectively, the Laudus U.S. MarketMasters Fund and the Schwab Premier 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. 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.

Performance. The fund returned 14.26% for the 12-month reporting period ended October 31, 2014, underperforming the S&P 500 Index (the index), which the fund uses for performance comparisons. The index returned 17.27% for the reporting period. As of October 31, 2014, the fund’s dividend yield was 2.24%, higher than the 1.91% dividend yield of the index. As of October 31, 2014, the fund’s 30-Day SEC yield was 1.38%.

Market Highlights. Dividend-paying stocks generally performed well early in the reporting period, most notably in the Utilities sector and REITs industry. However, reductions in stimulative policies by the Federal Reserve and an uncertain global economic outlook negatively impacted dividend-paying stocks, reducing overall returns. In this environment, the Health Care and Information Technology sectors performed particularly well, while the Telecommunication Services and Energy sectors, which generated positive overall returns, underperformed by comparison.

Positioning and Strategies. Decisions to over- and underweight certain market sectors compared with the index represented one of the biggest overall detractors from the fund’s relative performance for the reporting period. However, the fund’s disciplined stock-selection strategies helped the investment advisor identify a number of stock opportunities that worked out well, although some stock selections and sector weightings were less effective than others.

For example, an overweight of Best Buy Co., Inc. detracted from the fund’s total return. Best Buy Co., Inc. returned approximately -18%, in part due to weak holiday sales early in the reporting period resulting from lack of consumer spending, high competition, and aggressive price cuts. From a sector standpoint, stocks from the Telecommunication Services sector contributed the least to the total return of the fund, as many of these companies faced high competition and stalled growth during the reporting period. The communications holding company AT&T, Inc. is an example from this sector and detracted from relative performance. Weak wireless subscriber growth and high capital spending negatively impacted this stock, with the fund’s holdings of AT&T, Inc. returning approximately 1%.

By comparison, an overweight of Wells Fargo & Co., a diversified financial services company, contributed the most to the total return of the fund. Wells Fargo & Co. demonstrated stable growth and had comparatively higher fee exposure during the 12-month reporting period, both of which contributed to this stock’s return of approximately 28% for the fund. Within the fund, the Financials sector was the overall biggest contributor to total return. Financials stocks benefitted especially from the strengthening of the U.S. economy, and effective stock selection within this sector positively contributed to the fund’s relative performance.

As of 10/31/14:

Statistics


Number of Holdings			137
Weighted Average Market Cap ($ x 1,000,000)			$88,950
Price/Earnings Ratio (P/E)			16.6
Price/Book Ratio (P/B)			1.8
Portfolio Turnover Rate			72%

Sector Weightings % of Investments


Financials			27.9%
Health Care			14.1%
Energy			13.5%
Industrials			10.6%
Information Technology			9.3%
Utilities			7.5%
Consumer Discretionary			6.7%
Consumer Staples			5.4%
Materials			2.3%
Telecommunication Services			1.9%
Other			0.8%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Pfizer, Inc.			3.7%
Merck & Co., Inc.			3.2%
Citigroup, Inc.			3.1%
Wells Fargo & Co.			3.1%
ConocoPhillips			2.5%
Cardinal Health, Inc.			2.2%
Morgan Stanley			2.2%
Exxon Mobil Corp.			2.2%
Chevron Corp.			2.2%
Entergy Corp.			2.2%
Total			26.6%

Management 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 10/31/14

October 31, 2004 – October 31, 2014
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)		14.26	%		15.45	%		8.15	%
S&P 500^® Index		17.27	%		16.69	%		8.20	%
Russell 1000 Value Index		16.46	%		16.49	%		7.90	%
Fund Category: Morningstar Large Value		13.60	%		14.53	%		7.23	%

Fund Expense Ratio⁴: 0.89%

Yields¹


30-Day SEC Yield			1.38%

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.

Performance. The fund returned 18.06% for the 12-month reporting period ended October 31, 2014, outperforming the Russell 1000 Growth Index (the index), which the fund uses for performance comparisons. The index returned 17.11% for the reporting period.

Market Highlights. U.S. large-cap stocks produced double-digit returns, in part due to a rebound in U.S. economic growth and favorable earnings reports by select companies late in the reporting period. The Information Technology and Health Care sectors performed particularly well, while the Energy and Telecommunication Services sectors underperformed by comparison.

Positioning and Strategies. The fund’s disciplined stock-selection strategies helped the investment advisor identify a number of stock opportunities that worked out well, enhancing the fund’s performance versus the index. Decisions to over- or underweight certain sectors also generally worked in the fund’s favor, although some stock selections and sector weightings were less effective than others.

Apple, Inc., a company that designs, manufactures, and markets personal electronic devices, contributed the most to the fund’s total return. Positive earnings reports and the highly anticipated release of the iPhone 6 and iPhone 6 Plus gave Apple, Inc. a boost toward the end of the reporting period, with the fund’s holdings of this company returning approximately 48%. Based on the results of the fund’s valuation models, holdings of Apple, Inc. were generally kept in line with those of the index. From a sector standpoint, Information Technology contributed the most to the fund’s total return, as this sector benefitted from innovations in cloud computing and growth in Internet services. Although the fund was slightly underweight in Information Technology relative to the comparative index, effective stock selection within this sector made up for this relative weighting.

By comparison, an overweight in shares of SM Energy Co. detracted more from the fund’s total return than any other holdings. SM Energy Co., an independent energy company that is engaged in the acquisition, exploration, development, and production of oil and gas in onshore North America, returned -35% for the fund for the reporting period. Key oil reserve revisions early in 2014 added to this negative performance, as did soft earnings and declining oil prices late in the reporting period. Within the fund, the Energy sector was the only detractor from the fund’s total return. Though the fund was slightly underweight this sector compared with the index, which helped relative performance, the fund’s stock selection strategies in the Energy sector worked out less favorably for the fund.

As of 10/31/14:

Statistics


Number of Holdings			115
Weighted Average Market Cap ($ x 1,000,000)			$108,462
Price/Earnings Ratio (P/E)			18.8
Price/Book Ratio (P/B)			3.3
Portfolio Turnover Rate			82%

Sector Weightings % of Investments


Information Technology			26.4%
Consumer Discretionary			16.0%
Health Care			15.4%
Industrials			12.4%
Consumer Staples			11.1%
Financials			7.6%
Energy			4.7%
Materials			3.4%
Telecommunication Services			1.5%
Utilities			1.1%
Other			0.4%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Apple, Inc.			6.4%
Gilead Sciences, Inc.			3.5%
PepsiCo, Inc.			3.2%
Oracle Corp.			2.8%
Amgen, Inc.			2.8%
Microsoft Corp.			2.6%
The Kroger Co.			2.3%
C.R. Bard, Inc.			2.1%
Dr Pepper Snapple Group, Inc.			2.0%
EOG Resources, Inc.			2.0%
Total			29.7%

Management 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 10/31/14

October 3, 2005 – October 31, 2014
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)		18.06	%		15.84	%		7.47	%
Russell 1000 Growth Index		17.11	%		17.43	%		8.88	%
Fund Category: Morningstar Large Growth		14.57	%		15.69	%		7.82	%

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 the 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.

Performance. The fund returned 11.67% for the 12-month reporting period ended October 31, 2014, outperforming the Russell 2000 Index (the index), which the fund uses for performance comparisons. The index returned 8.06% for the reporting period.

Market Highlights. Small-cap stocks underperformed large-cap stocks, but both produced positive returns for the 12-month reporting period. A rebound in U.S. economic growth helped, as did favorable earnings reports by select companies late in the reporting period. The Utilities and Health Care sectors performed particularly well, while the Energy and Telecommunication Services sectors underperformed by comparison.

For example, Green Plains, Inc., a vertically integrated producer, marketer and distributer of ethanol, contributed the most to the fund’s total return. Green Plains, Inc. returned approximately 114% for the fund, in part due to strong demand for ethanol both domestically and abroad. The performance of this company was particularly notable given that it resides within what was the worst-performing sector for the reporting period. From a sector standpoint, Financials stocks contributed the most to the fund’s total return and demonstrated the fund’s effective stock selection strategy. As an example, Ashford Hospitality Trust, a self-administered real estate investment trust (REIT) focused on investing in the hospitality industry, returned approximately 36% for the fund. The fund’s holdings of this stock benefitted from an overweight versus the index, and positively contributed to relative performance.

In contrast, the fund’s holdings of Pioneer Energy Services Corp. detracted the most from the total return of the fund. Pioneer Energy Services Corp., a company that provides drilling and production services to independent oil and gas exploration and production companies, returned approximately -39%. Though this stock performed well throughout much of 2014, sharp declines in the price of crude oil toward the end of the reporting period negatively affected returns. Within the fund, the Energy sector was the only detractor from the fund’s total return. An overweight in this sector reduced relative performance, as did the fund’s stock selection strategy for Energy stocks.

As of 10/31/14:

Statistics


Number of Holdings			363
Weighted Average Market Cap ($ x 1,000,000)			$1,611
Price/Earnings Ratio (P/E)			42.3
Price/Book Ratio (P/B)			1.8
Portfolio Turnover Rate			103%

Sector Weightings % of Investments


Financials			20.4%
Information Technology			18.3%
Health Care			16.0%
Industrials			13.2%
Consumer Discretionary			10.7%
Energy			6.2%
Consumer Staples			4.6%
Materials			4.4%
Utilities			2.0%
Telecommunication Services			1.3%
Other			2.9%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Take-Two Interactive Software, Inc.			1.1%
Molina Healthcare, Inc.			1.1%
DuPont Fabros Technology, Inc.			1.0%
Symetra Financial Corp.			1.0%
Penn National Gaming, Inc.			1.0%
American Equity Investment Life Holding Co.			1.0%
Sanderson Farms, Inc.			1.0%
Highwoods Properties, Inc.			1.0%
Argan, Inc.			0.9%
Emergent Biosolutions, Inc.			0.9%
Total			10.0%

Management 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 many 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 10/31/14

October 31, 2004 – October 31, 2014
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)		11.67	%		20.19	%		9.23	%
Russell 2000^® Index		8.06	%		17.39	%		8.67	%
Fund Category: Morningstar Small Blend		7.66	%		16.61	%		8.49	%

Fund Expense Ratio⁴: 1.11%

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.

Performance. The fund returned 11.07% for the 12-month reporting period ended October 31, 2014, underperforming the S&P 500 Index (the index), which returned 17.27% 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. U.S. equities produced double-digit returns for the 12-month reporting period. The Federal Reserve left short-term interest rates historically low, making financing more affordable for businesses and households. In this environment, the Information Technology and Health Care sectors performed particularly well, while the Telecommunication Services and Materials sectors, which generated positive returns, underperformed by comparison.

Positioning and Strategies. Throughout the 12-month reporting period, the fund held short positions of approximately 40% of net assets on average. Given the substantial rally by stocks, these short positions detracted from the fund’s total return compared with the index, and provided the most significant reason for the performance disparity between the two.

In contrast, the fund’s allocations across market sectors generally contributed to relative performance compared with the index, particularly in the Consumer Staples and Materials sectors. For example, the fund’s long positions in the Consumer Staples sector returned approximately 22%, outperforming the approximately 14% corresponding return of the index. In addition, although the fund’s short positions in the Materials sector detracted from performance, the positive returns of the fund’s long positions within this sector outperformed those in the index, enhancing relative performance. However, not all allocations across market sectors were as favorable. The Energy sector is an example of this, with the long positions in this sector returning approximately -8%, underperforming those of the index.

From a stock selection standpoint, shares of SM Energy Co. detracted more from the fund’s total return than any other holdings. SM Energy Co. is an independent energy company that is engaged in the acquisition, exploration, development, and production of oil and gas in onshore North America, and returned approximately -37% for the fund for the reporting period. Disappointing earnings in early 2014 were a part of this negative performance, as were declining oil prices late in the reporting period.

Zebra Technologies, by comparison, contributed the most to the total return of the fund. Zebra Technologies, a company that manufactures and distributes a broad line of direct thermal and thermal transfer bar code label and receipt printers, returned approximately 50% for the fund for the 12-month reporting period. In April 2014, Zebra Technologies announced the acquisition of Motorola Solutions’ Enterprise business. This announcement, combined with an overweight to this stock, positively impacted the returns of Zebra Technologies for the fund (please note this position was sold prior to the end of the reporting period).

As of 10/31/14:

Statistics


Number of Holdings
Long Holdings			136
Short Holdings			68
Weighted Average Market Cap ($ x 1,000,000)
Long Holdings			$48,967
Short Holdings			$10,603
Price/Earnings Ratio (P/E)
Long Holdings			18.2
Short Holdings			43.9
Price/Book Ratio (P/B)
Long Holdings			2.0
Short Holdings			3.2
Portfolio Turnover Rate			142%
Portfolio Turnover Rate excluding short sales			84%

Top Equity Long Holdings

% of Net Assets¹


Apple, Inc.			2.2%
The Kroger Co.			2.1%
Pfizer, Inc.			2.1%
Cardinal Health, Inc.			2.1%
Electronic Arts, Inc.			2.1%
Total			10.6%

Top Equity Short Holdings

% of Net Assets¹


Louisiana-Pacific Corp.			1.7%
NetSuite, Inc.			1.6%
American Express Co.			1.5%
CarMax, Inc.			1.4%
Texas Capital Bancshares, Inc.			1.3%
Total			7.5%

Management 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 10/31/14

October 31, 2004 – October 31, 2014
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)		11.07	%		8.99	%		5.63	%
S&P 500^® Index		17.27	%		16.69	%		8.20	%
Fund Category: Morningstar Long/Short Equity		4.80	%		7.98	%		5.88	%

Fund Expense Ratios⁴: Net 2.48%; Gross 2.52%

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 the 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.

Performance. The fund returned 15.92% for the 12-month reporting period ended October 31, 2014, underperforming the S&P 1500 SuperComposite Financials Sector Index (the index), which the fund uses for performance comparisons. The index returned 17.21% for the reporting period.

Market Highlights. U.S. stocks produced double-digit returns for the 12-month reporting period. The Federal Reserve left short-term interest rates historically low, making financing more affordable for businesses and households. Despite heightened geopolitical tensions and an uncertain global economic outlook, the U.S. economy rebounded during the reporting period, and forecasts for stronger earnings by select companies contributed positively to market performance.

Positioning and Strategies. Decisions to over- and underweight certain sub-industries compared with the index represented one of the biggest overall detractors from the fund’s relative performance for the reporting period. However, the fund’s disciplined stock-selection strategies helped the investment advisor identify a number of stock opportunities that worked out well, although some stock selections and sub-industry weightings were less effective than others.

Ocwen Financial Corporation, a financial services holding company, detracted the most from the total return of the fund. Contributing to these results were missed earnings-per-share estimates in October 2014, as well as a portfolio of mortgage servicing rights deal between Ocwen Financial Corporation and Wells Fargo & Co. that was denied by New York regulators. Based on high cash flow, price momentum, and analyst target prices, the fund was overweight in Ocwen Financial Corporation. This weighting, combined with returns of approximately -32%, detracted from relative performance (please note this position was sold prior to the end of the reporting period). Within the fund, the Thrifts & Mortgage Finance sub-industry returned less than 1% and was the biggest detractor from the relative performance of the fund, primarily due to the overweight in Ocwen Financial Corporation.

In contrast, an overweight in shares of Wells Fargo & Co., a diversified financial services company, contributed more to the fund’s total return than any other holdings. Wells Fargo & Co. exceeded federal minimum capital levels under stress scenarios and integrated Apple Pay for its customers and merchants, both of which contributed to this stock’s return of approximately 28% for the fund. Within the fund, the Diversified Banks sub-industry contributed the most to total return. The fund was underweight Diversified Banks due to an underweight position in U.S. Bancorp, but the overweight in Wells Fargo & Co. acted as a balance and drove this sub-industry’s positive performance (please note the fund’s position in U.S. Bancorp was sold prior to the end of the reporting period).

As of 10/31/14:

Statistics


Number of Holdings			61
Weighted Average Market Cap ($ x 1,000,000)			$81,264
Price/Earnings Ratio (P/E)			15.6
Price/Book Ratio (P/B)			1.3
Portfolio Turnover Rate			75%

Industry Weightings % of Investments


Diversified Financials			32.9%
Insurance			25.5%
Real Estate			20.7%
Banks			19.0%
Media			1.4%
Other			0.5%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Wells Fargo & Co.			8.5%
JPMorgan Chase & Co.			5.3%
Citigroup, Inc.			4.7%
Berkshire Hathaway, Inc., Class B			4.7%
Bank of America Corp.			4.4%
Simon Property Group, Inc.			3.7%
Morgan Stanley			3.6%
The PNC Financial Services Group, Inc.			3.4%
Discover Financial Services			2.7%
SL Green Realty Corp.			2.7%
Total			43.7%

Management 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 10/31/14

October 31, 2004 – October 31, 2014
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)		15.92	%		13.26	%		4.10	%
S&P 1500 SuperComposite Financial Sector Index		17.21	%		13.50	%		1.07	%
S&P 500^® Index		17.27	%		16.69	%		8.20	%
Fund Category: Morningstar Financial		10.51	%		11.49	%		3.04	%

Fund Expense Ratios³: Net 0.94%; Gross 1.03%

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 the 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.

Performance. The fund returned 27.06% for the 12-month reporting period ended October 31, 2014, outperforming the Dow Jones Global Health Care Index (the index), which the fund uses for performance comparisons. The index returned 23.34% for the reporting period.

Market Highlights. Health Care stocks were some of the better performers within the broad U.S. stock market. The Affordable Care Act had a positive impact on health care enrollment and while it benefitted some sub-industries, other sub-industries were negatively affected as some companies struggled to adjust to the new regulations. Within the broad Health Care sector, biotechnology and managed health care stocks were some of the better performers, with each sub-industry producing double-digit returns of approximately 40%.

Positioning and Strategies. The fund’s disciplined stock-selection strategies helped the investment advisor identify a number of stock opportunities that worked out well, enhancing the fund’s performance versus its comparative index. Decisions to over- or underweight certain sub-industries also worked in the fund’s favor overall, while some stock selections and sub-industry weightings were less effective than others.

Gilead Sciences, Inc., a research-based pharmaceuticals company, contributed the most to the fund’s total return. The launch of a new Hepatitis C drug helped to drive this company’s performance during the 12-month reporting period, as Gilead Sciences, Inc. returned approximately 57%. Looking at overall sub-industry performance, pharmaceuticals stocks were the biggest contributors to the fund’s total return. Though the fund was underweight in pharmaceuticals, the fund’s effective stock selection worked out well and enhanced the fund’s relative performance. Within pharmaceuticals, Merck & Co., Inc. delivered a notable performance, returning approximately 33% for the fund. Merck & Co., Inc., a global health care company, benefitted from several factors, including the acquisition of Idenix Pharmaceuticals and the launch of a new drug.

However, not all of the stock selections within the fund worked out as favorably. MedAssets, Inc., a company that provides technology-enabled products and services, detracted the most from the fund’s total return. MedAssets, Inc. experienced slowing order growth and returns during the reporting period, as hospitals continue to adjust to the Affordable Care Act. As a result, the fund’s holdings of MedAssets, Inc. returned approximately -1%, causing the fund’s overweight in this stock to detract from relative performance (please note this position was sold prior to the end of the reporting period). Within the fund, the health care technology sub-industry was the only detractor from total return, as many other companies in this sector were also negatively impacted by the Affordable Care Act. The fund’s overweight in this sub-industry compared with the index detracted from relative performance.

As of 10/31/14:

Statistics


Number of Holdings			99
Weighted Average Market Cap ($ x 1,000,000)			$99,834
Price/Earnings Ratio (P/E)			27.1
Price/Book Ratio (P/B)			3.8
Portfolio Turnover Rate			57%

Industry Weightings % of Investments


Pharmaceuticals, Biotechnology & Life Sciences			68.4%
Healthcare – Services			27.1%
Materials			1.7%
Other Investment Company			0.4%
Software & Services			0.2%
Technology Hardware & Equipment			0.1%
Other			2.1%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Johnson & Johnson			7.3%
Pfizer, Inc.			6.6%
Merck & Co., Inc.			6.3%
Amgen, Inc.			5.5%
Gilead Sciences, Inc.			5.0%
AbbVie, Inc.			5.0%
Novartis AG – Reg’d			4.4%
Celgene Corp.			4.1%
Biogen Idec, Inc.			3.7%
Aetna, Inc.			2.6%
Total			50.5%

Management 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 10/31/14

October 31, 2004 – October 31, 2014
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)		27.06	%		22.17	%		13.25	%
Dow Jones Global Health Care Index		23.34	%		18.48	%		10.96	%
S&P 500^® Index		17.27	%		16.69	%		8.20	%
Fund Category: Morningstar Health		32.03	%		23.35	%		13.08	%

Fund Expense Ratios³: Net 0.82%; Gross 0.83%

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 the 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.

Performance. The fund returned 2.20% for the 12-month reporting period ended October 31, 2014, outperforming the MSCI EAFE Index (the index), which the fund uses for performance comparisons. The index returned -0.60% for the reporting period.

Market Highlights. International equities in developed markets produced slightly negative overall returns for the 12-month reporting period. The reduction of some stimulative measures by the Federal Reserve contributed to the depreciation of many international currencies versus the U.S. dollar, generally reducing overall returns on overseas investments. Additionally, heightened geopolitical tensions in the Ukraine and the Middle East increased market volatility, as did an uncertain outlook on global economic growth.

Positioning and Strategies. Effective stock selection was the most noteworthy strategy that contributed to the fund’s outperformance. Stock selection in the United Kingdom and Switzerland was particularly strong, while stock selection in Australia and Germany detracted from the fund’s relative performance.

For example, an overweight of AstraZeneca plc, a company from the United Kingdom that researches, manufactures, and sells pharmaceutical and medical products, contributed the most to the fund’s total return. During the reporting period, AstraZeneca plc successfully avoided being taken over by a rival pharmaceuticals company. Combined with delays in the launch of a competing generic drug, this failed takeover attempt positively contributed to this stock’s performance, with the fund’s holdings of AstraZeneca plc returning approximately 43%. From a country perspective, the fund’s United Kingdom holdings returned approximately 12%, notably outperforming the index.

The selection of Compagnie Generale des Etablissements Michelin SCA stock did not work out as favorably, as the fund’s holdings of this company detracted the most from the fund’s total return. Compagnie Generale des Etablissements Michelin SCA, a manufacturer and distributor of tires, returned approximately -15%, due in part to concerns about the pace of European recovery and overall weak auto sales. Within the fund, stocks from Australia detracted the most from the fund’s total return. The fund held several stocks that the index did not, including Arrium Ltd., which contributed to this market’s poor performance. Arrium Ltd., an international diversified mining and materials company, was negatively affected by significant decreases in the price of iron ore and overall weaker commodity prices, and the fund’s holdings of this company returned approximately -72% for the 12-month reporting period (please note this position was sold prior to the end of the reporting period).

As of 10/31/14:

Statistics


Number of Holdings			190
Weighted Average Market Cap ($ x 1,000,000)			$54,480
Price/Earnings Ratio (P/E)			12.0
Price/Book Ratio (P/B)			1.6
Portfolio Turnover Rate			90%

Sector Weightings % of Investments


Financials			24.1%
Consumer Discretionary			13.1%
Industrials			11.4%
Consumer Staples			11.1%
Health Care			9.2%
Energy			8.9%
Materials			6.2%
Utilities			6.0%
Information Technology			4.7%
Telecommunication Services			3.8%
Other			1.5%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Total S.A.			2.9%
Unilever plc			2.4%
Royal Dutch Shell plc, A Shares			2.4%
Sumitomo Mitsui Financial Group, Inc.			2.4%
Tokyo Gas Co., Ltd.			2.1%
Allianz SE – Reg’d			2.1%
Resona Holdings, Inc.			2.0%
Banco Santander S.A.			2.0%
Swiss Life Holding AG – Reg’d			1.9%
Koninklijke Ahold N.V.			1.9%
Total			22.1%

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

Source of Sector Classification: S&P and MSCI.

International investments are subject to additional risks such as currency fluctuation, geopolitical risk and the potential for illiquid markets.


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 10/31/14

May 30, 2008 – October 31, 2014
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)		2.20	%		8.95	%		1.94	%
MSCI EAFE^® Index (Net)⁴		-0.60	%		6.52	%		0.39	%
MSCI EAFE^® Index (Gross)⁴		-0.17	%		7.00	%		0.85	%
Fund Category: Morningstar Foreign Large Blend		-0.04	%		6.66	%		0.13	%

Fund Expense Ratios⁵: Net 0.86%; Gross 1.10%

Country Weightings % of Investments


Japan			21.7%
United Kingdom			18.8%
Switzerland			9.2%
Germany			8.4%
France			7.3%
Australia			6.3%
Netherlands			4.2%
Spain			3.8%
Denmark			3.2%
Singapore			2.8%
Other Countries			14.3%
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		Effective February 28, 2014, 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.
⁵		As stated in the prospectus. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the 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 5/1/14		at 10/31/14		05/1/14–10/31/14

Schwab Core Equity Fund^tm
Actual Return		0.72%	$	1,000.00	$	1,088.40	$	3.79
Hypothetical 5% Return		0.72%	$	1,000.00	$	1,021.57	$	3.67


Schwab Dividend Equity Fund^tm
Actual Return		0.89%	$	1,000.00	$	1,060.40	$	4.62
Hypothetical 5% Return		0.89%	$	1,000.00	$	1,020.71	$	4.53


Schwab Large-Cap Growth Fund^tm
Actual Return		0.99%	$	1,000.00	$	1,104.60	$	5.25
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	$	1,043.20	$	5.67
Hypothetical 5% Return		1.10%	$	1,000.00	$	1,019.65	$	5.60


Schwab Hedged Equity Fund^tm
Actual Return		1.86%	$	1,000.00	$	1,049.70	$	9.61
Hypothetical 5% Return		1.86%	$	1,000.00	$	1,015.82	$	9.45


Schwab Financial Services Fund^tm
Actual Return		0.90%	$	1,000.00	$	1,084.30	$	4.73
Hypothetical 5% Return		0.90%	$	1,000.00	$	1,020.66	$	4.58


Schwab Health Care Fund^tm
Actual Return		0.80%	$	1,000.00	$	1,152.00	$	4.34
Hypothetical 5% Return		0.80%	$	1,000.00	$	1,021.17	$	4.08


Schwab^® International Core Equity Fund
Actual Return		0.86%	$	1,000.00	$	955.00	$	4.24
Hypothetical 5% Return		0.86%	$	1,000.00	$	1,020.86	$	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

Portfolio Holdings as of October 31, 2014

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				($)		($)

	98	.9%	Common Stock		1,799,662,828		2,291,904,761
	1	.3%	Other Investment Companies		30,191,923		30,191,923
	0	.0%	Short-Term Investments		646,991		646,991


	100	.2%	Total Investments		1,830,501,742		2,322,743,675
	(0	.2%)	Other Assets and Liabilities, Net				(5,414,620	)


	100	.0%	Net Assets				2,317,329,055


	Number		Value
Security	of Shares		($)

Common Stock 98.9% of net assets

Automobiles & Components 0.8%
Dana Holding Corp.		938,309		19,197,802

Banks 6.9%
Bank of America Corp.		1,207,858		20,726,843
Citigroup, Inc.		460,572		24,654,419
JPMorgan Chase & Co.		216,140		13,072,147
The PNC Financial Services Group, Inc.		547,400		47,289,886
Wells Fargo & Co.		1,030,670		54,718,271

				160,461,566

Capital Goods 7.7%
Caterpillar, Inc.		300,500		30,473,705
Emerson Electric Co.		94,100		6,028,046
General Dynamics Corp.		124,300		17,372,168
Huntington Ingalls Industries, Inc.		100,393		10,623,588
IDEX Corp.		154,500		11,573,595
Masco Corp.		284,687		6,283,042
Northrop Grumman Corp.		310,800		42,877,968
PACCAR, Inc.		154,400		10,085,408
Parker-Hannifin Corp.		54,100		6,872,323
Spirit AeroSystems Holdings, Inc., Class A *		114,838		4,517,727
Stanley Black & Decker, Inc.		71,330		6,679,341
United Rentals, Inc. *		219,085		24,112,495

				177,499,406

Commercial & Professional Supplies 1.8%
IHS, Inc., Class A *		16,559		2,169,726
Manpowergroup, Inc.		220,564		14,722,647
Pitney Bowes, Inc.		54,678		1,352,734
R.R. Donnelley & Sons Co.		1,190,000		20,765,500
Waste Management, Inc.		36,812		1,799,738

				40,810,345

Consumer Durables & Apparel 0.4%
Hanesbrands, Inc.		89,800		9,483,778

Consumer Services 2.2%
MGM Resorts International *		265,436		6,171,387
Wyndham Worldwide Corp.		204,000		15,844,680
Yum! Brands, Inc.		387,856		27,859,696

				49,875,763

Diversified Financials 2.5%
Berkshire Hathaway, Inc., Class B *		42,509		5,958,061
Capital One Financial Corp.		380,400		31,485,708
Lazard Ltd., Class A		406,524		20,005,046

				57,448,815

Energy 9.4%
Baker Hughes, Inc.		257,000		13,610,720
Chesapeake Energy Corp.		70,000		1,552,600
Chevron Corp.		300,726		36,072,084
ConocoPhillips		554,923		40,037,694
EOG Resources, Inc.		259,505		24,665,950
Exxon Mobil Corp.		145,500		14,071,305
Halliburton Co.		90,033		4,964,420
Hess Corp.		67,300		5,707,713
National Oilwell Varco, Inc.		30,056		2,183,268
Occidental Petroleum Corp.		598,290		53,205,930
Phillips 66		62,110		4,875,635
SM Energy Co.		232,600		13,095,380
Valero Energy Corp.		94,500		4,733,505

				218,776,204

Food & Staples Retailing 1.4%
The Kroger Co.		577,943		32,197,205

Food, Beverage & Tobacco 6.5%
Altria Group, Inc.		450,692		21,786,451
Archer-Daniels-Midland Co.		1,074,689		50,510,383
Dr Pepper Snapple Group, Inc.		120,117		8,318,102
PepsiCo, Inc.		606,320		58,309,794
Pilgrim’s Pride Corp. *		382,267		10,860,206

				149,784,936

Health Care Equipment & Services 4.2%
C.R. Bard, Inc.		95,800		15,708,326
Cardinal Health, Inc.		581,613		45,644,988
Centene Corp. *		90,033		8,343,358
McKesson Corp.		134,926		27,445,298

				97,141,970

26 See financial notes

Schwab Core Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Household & Personal Products 1.2%
Energizer Holdings, Inc.		186,800		22,911,020
Kimberly-Clark Corp.		41,310		4,720,494

				27,631,514

Insurance 3.2%
AmTrust Financial Services, Inc. (a)		167,234		7,503,789
Axis Capital Holdings Ltd.		142,045		6,838,046
CNO Financial Group, Inc.		405,229		7,346,802
Genworth Financial, Inc., Class A *		761,861		10,658,435
MetLife, Inc.		245,440		13,312,666
Reinsurance Group of America, Inc.		229,825		19,362,756
The Allstate Corp.		58,400		3,787,240
The Travelers Cos., Inc.		32,387		3,264,610
W. R. Berkley Corp.		48,300		2,489,382

				74,563,726

Materials 3.4%
Ashland, Inc.		120,100		12,979,207
Avery Dennison Corp.		169,700		7,950,445
PPG Industries, Inc.		256,700		52,287,223
The Sherwin-Williams Co.		20,763		4,766,354

				77,983,229

Media 1.5%
Comcast Corp., Class A		455,000		25,184,250
Live Nation Entertainment, Inc. *		170,924		4,444,024
Starz, Class A *		153,742		4,750,628

				34,378,902

Pharmaceuticals, Biotechnology & Life Sciences 12.0%
AbbVie, Inc.		220,000		13,961,200
Amgen, Inc.		285,552		46,310,823
Biogen Idec, Inc. *		16,175		5,193,469
Celgene Corp. *		168,090		18,000,758
Gilead Sciences, Inc. *		388,554		43,518,048
Johnson & Johnson		424,398		45,741,616
Merck & Co., Inc.		560,858		32,496,113
Pfizer, Inc.		2,420,907		72,506,165

				277,728,192

Real Estate 1.1%
CBRE Group, Inc., Class A *		140,700		4,502,400
Kilroy Realty Corp.		38,941		2,637,864
RLJ Lodging Trust		137,200		4,420,584
Simon Property Group, Inc.		43,600		7,813,556
SL Green Realty Corp.		62,856		7,272,439

				26,646,843

Retailing 4.3%
Best Buy Co., Inc.		73,992		2,526,087
Foot Locker, Inc.		88,506		4,957,221
Liberty Interactive Corp., Class A *		511,400		13,367,996
Liberty Ventures, Series A *		72,705		2,551,946
Lowe’s Cos., Inc.		513,546		29,374,831
Macy’s, Inc.		591,500		34,200,530
The Gap, Inc.		120,446		4,563,699
The Home Depot, Inc.		88,643		8,644,465

				100,186,775

Semiconductors & Semiconductor Equipment 0.9%
Intel Corp.		607,300		20,654,273

Software & Services 10.3%
AOL, Inc. *		148,314		6,456,109
Broadridge Financial Solutions, Inc.		105,687		4,642,830
Computer Sciences Corp.		749,606		45,276,202
Electronic Arts, Inc. *		272,802		11,176,698
Google, Inc., Class A *		24,223		13,755,515
Google, Inc., Class C *		16,700		9,336,636
Intuit, Inc.		121,100		10,658,011
Microsoft Corp.		756,800		35,531,760
Oracle Corp.		1,169,900		45,684,595
Synopsys, Inc. *		474,942		19,463,123
Xerox Corp.		2,782,200		36,947,616

				238,929,095

Technology Hardware & Equipment 7.4%
Apple, Inc.		774,900		83,689,200
Brocade Communications Systems, Inc.		237,800		2,551,594
Corning, Inc.		214,735		4,387,036
Hewlett-Packard Co.		1,066,851		38,278,614
NetApp, Inc.		110,387		4,724,564
SanDisk Corp.		118,800		11,183,832
Western Digital Corp.		265,300		26,097,561

				170,912,401

Telecommunication Services 1.1%
Frontier Communications Corp.		370,700		2,424,378
Verizon Communications, Inc.		465,714		23,402,128

				25,826,506

Transportation 3.1%
Delta Air Lines, Inc.		400,800		16,124,184
FedEx Corp.		115,200		19,284,480
Southwest Airlines Co.		1,089,700		37,572,856

				72,981,520

Utilities 5.6%
AES Corp.		1,286,409		18,099,774
American Electric Power Co., Inc.		399,917		23,331,158
Entergy Corp.		626,888		52,671,130
NRG Energy, Inc.		853,416		25,585,412
Public Service Enterprise Group, Inc.		269,100		11,116,521

				130,803,995

Total Common Stock
(Cost $1,799,662,828)				2,291,904,761

See financial notes 27

Schwab Core Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Other Investment Companies 1.3% of net assets

Money Market Fund 1.0%
State Street Institutional U.S. Government Money Market Fund, Premier Class 0.00% (d)		23,042,683		23,042,683

Securities Lending Collateral 0.3%
State Street Institutional U.S. Government Money Market Fund, Premier Class 0.00% (d)		7,149,240		7,149,240

Total Other Investment Companies
(Cost $30,191,923)				30,191,923



	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

Short-Term Investments 0.0% of net assets

U.S. Treasury Obligations 0.0%
U.S. Treasury Bills
0.00%, 12/18/14 (b)(c)		75,000		75,000
0.01%, 12/18/14 (b)(c)		572,000		571,991

Total Short-Term Investments
(Cost $646,991)				646,991



End of Investments.

At 10/31/14, the tax basis cost of the fund’s investments was $1,830,829,609 and the unrealized appreciation and depreciation were $509,940,490 and ($18,026,424), respectively, with a net unrealized appreciation of $491,914,066.


*		Non-income producing security.
(a)		All or a portion of this security is on loan. Securities on loan were valued at $7,128,587.
(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.

In addition to the above, the fund held the following at 10/31/14:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

S&P 500 Index, e-mini, Long, expires 12/19/14

138

13,878,660

281,245

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):


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

Common Stock¹		$2,291,904,761		$—		$—		$2,291,904,761
Other Investment Companies¹		30,191,923		—		—		30,191,923
Short-Term Investments¹		—		646,991		—		646,991

Total		$2,322,096,684		$646,991		$—		$2,322,743,675

Other Financial Instruments
Futures Contracts²		$281,245		$—		$—		$281,245


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

28 See financial notes

Schwab Core Equity Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends (net of foreign withholding taxes of $3,390)		$43,672,232
Interest		456
Securities on loan	+	68,128

Total investment income		43,740,816

Expenses

Investment adviser and administrator fees		10,745,276
Shareholder service fees		5,300,458
Shareholder reports		140,811
Portfolio accounting fees		82,656
Transfer agent fees		62,601
Custodian fees		49,577
Professional fees		39,159
Registration fees		38,427
Independent trustees’ fees		17,097
Interest expense		508
Other expenses	+	44,477

Total expenses		16,521,047
Expense reduction by CSIM and its affiliates	−	62,601

Net expenses	−	16,458,446

Net investment income		27,282,370

Realized and Unrealized Gains (Losses)

Net realized gains on investments		319,117,829
Net realized gains on futures contracts	+	2,649,392

Net realized gains		321,767,221
Net change in unrealized appreciation (depreciation) on investments		31,913,670
Net change in unrealized appreciation (depreciation) on futures contracts	+	117,869

Net change in unrealized appreciation (depreciation)	+	32,031,539

Net realized and unrealized gains		353,798,760

Increase in net assets resulting from operations		$381,081,130

30 See financial notes

Schwab Core Equity Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$27,282,370			$31,158,073
Net realized gains		321,767,221			232,627,413
Net change in unrealized appreciation (depreciation)	+	32,031,539			209,621,022

Increase in net assets from operations		381,081,130			473,406,508

Distributions to Shareholders

Distributions from net investment income		(21,200,511	)		(16,475,044	)
Distributions from net realized gains	+	(157,596,466	)		—

Total distributions		($178,796,977	)		($16,475,044	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			10,594,267		$247,389,415			9,345,311		$194,423,482
Shares reinvested			4,044,873		89,432,146			445,622		8,359,860
Shares redeemed	+		(19,480,472	)	(468,899,959	)		(13,994,307	)	(292,667,176	)

Net transactions in fund shares			(4,841,332	)	($132,078,398	)		(4,203,374	)	($89,883,834	)

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			95,775,504		$2,247,123,300			99,978,878		$1,880,075,670
Total increase or decrease	+		(4,841,332	)	70,205,755			(4,203,374	)	367,047,630

End of period			90,934,172		$2,317,329,055			95,775,504		$2,247,123,300


Net investment income not yet distributed					$24,336,689					$18,530,775

See financial notes 31

Schwab Dividend Equity Fund

Portfolio Holdings as of October 31, 2014

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

Cost

Value

Holdings by Category

($)

.9%

Common Stock

1,687,697,976

2,029,488,091

.8%

Short-Term Investments

17,302,900

.7%

Total Investments

1,705,000,876

2,046,790,991

.3%

Other Assets and Liabilities, Net

6,439,936

100

.0%

Net Assets

2,053,230,927


	Number		Value
Security	of Shares		($)

Common Stock 98.9% of net assets

Automobiles & Components 1.3%
Dana Holding Corp.		335,912		6,872,760
General Motors Co.		609,781		19,147,123

				26,019,883

Banks 11.9%
Bank of America Corp.		1,704,200		29,244,072
Citigroup, Inc.		1,198,560		64,158,917
Fifth Third Bancorp		106,000		2,118,940
First Niagara Financial Group, Inc.		387,000		2,898,630
Huntington Bancshares, Inc.		430,000		4,261,300
JPMorgan Chase & Co.		582,241		35,213,935
Regions Financial Corp.		376,400		3,737,652
The PNC Financial Services Group, Inc.		461,400		39,860,346
Wells Fargo & Co.		1,180,400		62,667,436

				244,161,228

Capital Goods 6.5%
3M Co.		81,400		12,516,878
Caterpillar, Inc.		253,725		25,730,252
Emerson Electric Co.		329,700		21,120,582
General Electric Co.		357,727		9,232,934
Huntington Ingalls Industries, Inc.		61,235		6,479,888
IDEX Corp.		32,600		2,442,066
Illinois Tool Works, Inc.		40,955		3,728,953
Lockheed Martin Corp.		11,391		2,170,783
Northrop Grumman Corp.		217,200		29,964,912
Parker-Hannifin Corp.		78,900		10,022,667
Raytheon Co.		39,061		4,057,656
Stanley Black & Decker, Inc.		48,606		4,551,466
United Rentals, Inc. *		20,366		2,241,482

				134,260,519

Commercial & Professional Supplies 1.7%
KAR Auction Services, Inc.		47,300		1,436,028
Manpowergroup, Inc.		74,209		4,953,451
Pitney Bowes, Inc.		349,800		8,654,052
R.R. Donnelley & Sons Co.		1,186,316		20,701,214

				35,744,745

Consumer Durables & Apparel 0.3%
Whirlpool Corp.		35,808		6,160,766

Consumer Services 2.3%
H&R Block, Inc.		404,688		13,075,469
Penn National Gaming, Inc. *		141,000		1,845,690
Yum! Brands, Inc.		435,879		31,309,189

				46,230,348

Diversified Financials 4.8%
Berkshire Hathaway, Inc., Class B *		67,417		9,449,167
Capital One Financial Corp.		85,991		7,117,475
Interactive Brokers Group, Inc., Class A		195,000		5,034,900
Lazard Ltd., Class A		612,908		30,161,202
Morgan Stanley		1,303,720		45,565,014
The NASDAQ OMX Group, Inc.		14,000		605,640
Voya Financial, Inc.		39,400		1,546,450

				99,479,848

Energy 13.4%
Baker Hughes, Inc.		127,300		6,741,808
Chesapeake Energy Corp.		331,198		7,345,972
Chevron Corp.		376,315		45,138,984
ConocoPhillips		703,270		50,740,930
Devon Energy Corp.		115,400		6,924,000
EOG Resources, Inc.		276,510		26,282,276
Exxon Mobil Corp.		471,144		45,564,336
Marathon Oil Corp.		320,700		11,352,780
Murphy Oil Corp.		125,139		6,681,171
Nabors Industries Ltd.		405,453		7,237,336
National Oilwell Varco, Inc.		51,761		3,759,919
Occidental Petroleum Corp.		447,456		39,792,262
SM Energy Co.		58,000		3,265,400
Valero Energy Corp.		296,600		14,856,694

				275,683,868

Food & Staples Retailing 0.7%
The Kroger Co.		253,959		14,148,056

Food, Beverage & Tobacco 4.1%
Altria Group, Inc.		86,937		4,202,534
Archer-Daniels-Midland Co.		905,184		42,543,648
Dr Pepper Snapple Group, Inc.		133,635		9,254,224
PepsiCo, Inc.		194,500		18,705,065
Pilgrim’s Pride Corp. *		316,458		8,990,572

				83,696,043

See financial notes 33

Schwab Dividend Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Health Care Equipment & Services 4.4%
Aetna, Inc.		210,600		17,376,606
Becton, Dickinson & Co.		22,133		2,848,517
C.R. Bard, Inc.		55,800		9,149,526
Cardinal Health, Inc.		582,435		45,709,499
Centene Corp. *		52,125		4,830,424
McKesson Corp.		33,700		6,854,917
Stryker Corp.		30,436		2,664,063

				89,433,552

Household & Personal Products 0.6%
Energizer Holdings, Inc.		86,441		10,601,989
The Procter & Gamble Co.		17,496		1,526,876

				12,128,865

Insurance 6.4%
AmTrust Financial Services, Inc.		117,628		5,277,968
Aspen Insurance Holdings Ltd.		104,600		4,563,698
Assurant, Inc.		80,900		5,518,998
Axis Capital Holdings Ltd.		116,000		5,584,240
CNO Financial Group, Inc.		469,310		8,508,590
Genworth Financial, Inc., Class A *		817,299		11,434,013
MetLife, Inc.		327,810		17,780,414
Old Republic International Corp.		905,100		13,368,327
Prudential Financial, Inc.		274,800		24,330,792
Reinsurance Group of America, Inc.		242,483		20,429,193
The Hanover Insurance Group, Inc.		14,000		937,160
The Travelers Cos., Inc.		117,207		11,814,466
Unum Group		30,800		1,030,568

				130,578,427

Materials 2.3%
Compass Minerals International, Inc.		41,295		3,538,156
Huntsman Corp.		69,900		1,705,560
PPG Industries, Inc.		101,237		20,620,964
Steel Dynamics, Inc.		817,858		18,818,913
United States Steel Corp.		56,429		2,259,417

				46,943,010

Media 1.2%
John Wiley & Sons, Inc., Class A		126,606		7,392,524
Live Nation Entertainment, Inc. *		373,586		9,713,236
The Interpublic Group of Cos., Inc.		356,499		6,912,516

				24,018,276

Pharmaceuticals, Biotechnology & Life Sciences 9.7%
AbbVie, Inc.		44,770		2,841,104
Amgen, Inc.		38,000		6,162,840
Gilead Sciences, Inc. *		96,818		10,843,616
Johnson & Johnson		356,500		38,423,570
Merck & Co., Inc.		1,124,891		65,176,185
Pfizer, Inc.		2,507,443		75,097,918

				198,545,233

Real Estate 4.7%
Brandywine Realty Trust		325,300		5,019,379
Duke Realty Corp.		1,635,831		31,015,356
Equity Lifestyle Properties, Inc.		175,148		8,599,767
Kilroy Rlty Corp.		112,898		7,647,710
Retail Properties of America, Inc., Class A		597,000		9,366,930
RLJ Lodging Trust		142,000		4,575,240
Simon Property Group, Inc.		27,300		4,892,433
SL Green Realty Corp.		184,948		21,398,484
UDR, Inc.		102,692		3,104,379
Vornado Realty Trust		12,626		1,382,294

				97,001,972

Retailing 1.7%
Best Buy Co., Inc.		290,450		9,915,963
Macy’s, Inc.		402,651		23,281,281
The Gap, Inc.		60,275		2,283,820

				35,481,064

Semiconductors & Semiconductor Equipment 1.4%
Intel Corp.		841,990		28,636,080

Software & Services 3.7%
Broadridge Financial Solutions, Inc.		23,665		1,039,604
Computer Sciences Corp.		605,835		36,592,434
Electronic Arts, Inc. *		212,795		8,718,211
Intuit, Inc.		35,680		3,140,197
Leidos Holdings, Inc.		78,255		2,861,785
Microsoft Corp.		196,501		9,225,722
Oracle Corp.		243,600		9,512,580
Xerox Corp.		290,900		3,863,152

				74,953,685

Technology Hardware & Equipment 4.2%
Apple, Inc.		117,900		12,733,200
Corning, Inc.		302,242		6,174,804
Hewlett-Packard Co.		1,076,400		38,621,232
NetApp, Inc.		389,109		16,653,865
SanDisk Corp.		71,900		6,768,666
Western Digital Corp.		62,642		6,162,094

				87,113,861

Telecommunication Services 1.9%
AT&T, Inc.		549,800		19,155,032
Frontier Communications Corp.		2,940,000		19,227,600

				38,382,632

Transportation 2.2%
Alaska Air Group, Inc.		198,800		10,582,124
Delta Air Lines, Inc.		239,100		9,618,993
Southwest Airlines Co.		749,600		25,846,208

				46,047,325

34 See financial notes

Schwab Dividend Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Utilities 7.5%
AES Corp.		1,050,600		14,781,942
American Electric Power Co., Inc.		514,374		30,008,579
DTE Energy Co.		199,452		16,386,976
Entergy Corp.		529,231		44,465,989
NRG Energy, Inc.		695,512		20,851,450
Public Service Enterprise Group, Inc.		556,800		23,001,408
UGI Corp.		136,441		5,142,461

				154,638,805

Total Common Stock
(Cost $1,687,697,976)				2,029,488,091



	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

Short-Term Investments 0.8% of net assets

Time Deposit 0.8%
DNB
0.03%, 11/03/14		16,756,909		16,756,909

U.S. Treasury Obligation 0.0%
U.S. Treasury Bill
0.01%, 12/18/14 (a)(b)		546,000		545,991

Total Short-Term Investments
(Cost $17,302,900)				17,302,900



End of Investments.

At 10/31/14, the tax basis cost of the fund’s investments was $1,704,662,205 and the unrealized appreciation and depreciation were $358,755,537 and ($16,626,751), respectively, with a net unrealized appreciation of $342,128,786.


*		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 10/31/14:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

S&P 500 Index, e-mini, Long, expires 12/19/14

9,855,860

203,408

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):

Quoted Prices in

Significant

Active Markets for

Other Significant

Unobservable

Identical Assets

Observable Inputs

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total

Common Stock¹

$2,029,488,091

$—

$2,029,488,091

Short-Term Investments¹

—

17,302,900

—

17,302,900

Total

$2,029,488,091

$17,302,900

$—

$2,046,790,991

Other Financial Instruments

Futures Contracts²

$203,408

$—

$203,408


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

See financial notes 35

Schwab Dividend Equity Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$28,562,537			$31,081,945
Net realized gains		273,148,591			183,794,300
Net change in unrealized appreciation (depreciation)	+	(45,088,782	)		169,340,491

Increase in net assets from operations		256,622,346			384,216,736

Distributions to Shareholders

Distributions from net investment income		(30,034,449	)		(30,254,415	)
Distributions from net realized gains	+	(118,279,747	)		—

Total distributions		($148,314,196	)		($30,254,415	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			17,591,274		$317,805,473			20,146,686		$334,691,092
Shares reinvested			5,046,536		87,839,410			1,039,729		16,530,353
Shares redeemed	+		(14,499,226	)	(264,363,089	)		(17,942,195	)	(291,824,449	)

Net transactions in fund shares			8,138,584		$141,281,794			3,244,220		$59,396,996

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			98,985,674		$1,803,640,983			95,741,454		$1,390,281,666
Total increase	+		8,138,584		249,589,944			3,244,220		413,359,317

End of period			107,124,258		$2,053,230,927			98,985,674		$1,803,640,983


Net investment income not yet distributed					$—					$1,659,809

38 See financial notes

Schwab Large-Cap Growth Fund

Portfolio Holdings as of October 31, 2014

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

Cost

Value

Holdings by Category

($)

.4%

Common Stock

205,644,055

254,506,341

.4%

Short-Term Investments

1,055,063

.8%

Total Investments

206,699,118

255,561,404

.2%

Other Assets and Liabilities, Net

416,908

100

.0%

Net Assets

255,978,312


	Number		Value
Security	of Shares		($)

Common Stock 99.4% of net assets

Automobiles & Components 2.3%
Dana Holding Corp.		176,737		3,616,039
Delphi Automotive plc		26,900		1,855,562
General Motors Co.		17,000		533,800

				6,005,401

Banks 1.2%
Citigroup, Inc.		55,043		2,946,452

Capital Goods 7.0%
Caterpillar, Inc.		27,800		2,819,198
Emerson Electric Co.		11,500		736,690
Exelis, Inc.		3,478		62,082
Huntington Ingalls Industries, Inc.		32,893		3,480,737
IDEX Corp.		6,700		501,897
Lockheed Martin Corp.		2,400		457,368
Masco Corp.		142,800		3,151,596
Raytheon Co.		32,500		3,376,100
Spirit AeroSystems Holdings, Inc., Class A *		32,210		1,267,142
The Toro Co.		2,000		123,460
United Rentals, Inc. *		18,700		2,058,122

				18,034,392

Commercial & Professional Supplies 2.4%
Manpowergroup, Inc.		30,400		2,029,200
Pitney Bowes, Inc.		26,600		658,084
R.R. Donnelley & Sons Co.		201,500		3,516,175

				6,203,459

Consumer Durables & Apparel 0.6%
Deckers Outdoor Corp. *		7,700		673,442
Hanesbrands, Inc.		4,000		422,440
Tempur Sealy International, Inc. *		7,241		381,166

				1,477,048

Consumer Services 3.1%
H&R Block, Inc.		70,100		2,264,931
MGM Resorts International *		93,900		2,183,175
Wyndham Worldwide Corp.		5,600		434,952
Yum! Brands, Inc.		42,800		3,074,324

				7,957,382

Diversified Financials 1.8%
Affiliated Managers Group, Inc. *		7,100		1,418,509
Lazard Ltd., Class A		66,100		3,252,781

				4,671,290

Energy 4.7%
Baker Hughes, Inc.		14,100		746,736
ConocoPhillips		20,200		1,457,430
EOG Resources, Inc.		53,400		5,075,670
Halliburton Co.		18,400		1,014,576
SM Energy Co.		45,500		2,561,650
Valero Energy Corp.		24,600		1,232,214

				12,088,276

Food & Staples Retailing 2.3%
The Kroger Co.		105,184		5,859,801

Food, Beverage & Tobacco 8.7%
Altria Group, Inc.		7,800		377,052
Archer-Daniels-Midland Co.		97,100		4,563,700
Dr Pepper Snapple Group, Inc.		75,153		5,204,345
Monster Beverage Corp. *		1,600		161,408
PepsiCo, Inc.		86,000		8,270,620
Pilgrim’s Pride Corp. *		81,200		2,306,892
Tyson Foods, Inc., Class A		35,500		1,432,425

				22,316,442

Health Care Equipment & Services 5.6%
Align Technology, Inc. *		25,100		1,320,762
C.R. Bard, Inc.		32,362		5,306,397
Cardinal Health, Inc.		61,200		4,802,976
Centene Corp. *		14,100		1,306,647
Edwards Lifesciences Corp. *		3,300		399,036
McKesson Corp.		6,351		1,291,857

				14,427,675

Household & Personal Products 0.1%
Energizer Holdings, Inc.		2,100		257,565

Insurance 1.8%
Genworth Financial, Inc., Class A *		210,800		2,949,092
Reinsurance Group of America, Inc.		18,666		1,572,610

				4,521,702

40 See financial notes

Schwab Large-Cap Growth Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Materials 3.4%
Compass Minerals International, Inc.		7,100		608,328
Crown Holdings, Inc. *		27,930		1,338,685
PolyOne Corp.		21,300		788,313
PPG Industries, Inc.		21,071		4,291,952
United States Steel Corp.		41,300		1,653,652

				8,680,930

Media 4.1%
Comcast Corp., Class A		56,800		3,143,880
John Wiley & Sons, Inc., Class A		42,600		2,487,414
Live Nation Entertainment, Inc. *		129,832		3,375,632
Starz, Class A *		50,100		1,548,090

				10,555,016

Pharmaceuticals, Biotechnology & Life Sciences 9.7%
AbbVie, Inc.		34,000		2,157,640
Amgen, Inc.		43,500		7,054,830
Biogen Idec, Inc. *		6,087		1,954,414
Celgene Corp. *		13,974		1,496,475
Gilead Sciences, Inc. *		80,438		9,009,056
Johnson & Johnson		8,600		926,908
Merck & Co., Inc.		19,587		1,134,871
Pfizer, Inc.		36,146		1,082,573

				24,816,767

Real Estate 2.8%
RLJ Lodging Trust		68,500		2,207,070
SL Green Realty Corp.		42,890		4,962,373

				7,169,443

Retailing 5.8%
Aaron’s, Inc.		15,100		373,876
Best Buy Co., Inc.		46,800		1,597,752
Big Lots, Inc.		34,200		1,561,230
Expedia, Inc.		11,500		977,155
Liberty Interactive Corp., Class A *		4,500		117,630
Liberty Ventures, Series A *		639		22,429
Macy’s, Inc.		71,600		4,139,912
Netflix, Inc. *		800		314,216
The Gap, Inc.		10,548		399,664
The Home Depot, Inc.		9,800		955,696
The Priceline Group, Inc. *		100		120,621
The TJX Cos., Inc.		67,500		4,274,100

				14,854,281

Semiconductors & Semiconductor Equipment 1.0%
Micron Technology, Inc. *		50,662		1,676,406
Skyworks Solutions, Inc.		14,000		815,360

				2,491,766

Software & Services 16.3%
Broadridge Financial Solutions, Inc.		38,319		1,683,354
Computer Sciences Corp.		79,000		4,771,600
DST Systems, Inc.		18,900		1,821,015
Electronic Arts, Inc. *		27,493		1,126,388
Facebook, Inc., Class A *		66,800		5,009,332
Global Payments, Inc.		6,528		525,504
Google, Inc., Class A *		6,100		3,464,007
Google, Inc., Class C *		5,800		3,242,664
IAC/InterActiveCorp		4,600		311,374
Intuit, Inc.		22,000		1,936,220
Microsoft Corp.		141,900		6,662,205
NeuStar, Inc., Class A *		23,300		615,353
Oracle Corp.		182,718		7,135,138
PTC, Inc. *		64,200		2,449,230
Xerox Corp.		64,000		849,920

				41,603,304

Technology Hardware & Equipment 9.1%
Apple, Inc.		152,669		16,488,252
ARRIS Group, Inc. *		14,700		441,294
CDW Corp.		20,500		632,220
Hewlett-Packard Co.		63,000		2,260,440
NetApp, Inc.		40,200		1,720,560
QUALCOMM, Inc.		12,500		981,375
SanDisk Corp.		8,300		781,362

				23,305,503

Telecommunication Services 1.5%
Level 3 Communications, Inc. *		2,251		105,594
Verizon Communications, Inc.		76,000		3,819,000

				3,924,594

Transportation 3.0%
Alaska Air Group, Inc.		86,940		4,627,816
Matson, Inc.		34,000		968,660
Southwest Airlines Co.		57,100		1,968,808

				7,565,284

Utilities 1.1%
AES Corp.		650		9,146
Entergy Corp.		21,900		1,840,038
NRG Energy, Inc.		30,800		923,384

				2,772,568

Total Common Stock
(Cost $205,644,055)				254,506,341



	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

Short-Term Investments 0.4% of net assets

Time Deposit 0.4%
Bank of Tokyo - Mitsubishi UFJ
0.03%, 11/03/14		990,064		990,064

See financial notes 41

Schwab Large-Cap Growth Fund

Portfolio Holdings continued


	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

U.S. Treasury Obligation 0.0%
U.S. Treasury Bill
0.01%, 12/18/14 (a)(b)		65,000		64,999

Total Short-Term Investments
(Cost $1,055,063)				1,055,063



End of Investments.

At 10/31/14, the tax basis cost of the fund’s investments was $206,639,628 and the unrealized appreciation and depreciation were $52,282,452 and ($3,360,676), respectively, with a net unrealized appreciation of $48,921,776.


*		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 10/31/14:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

S&P 500 Index, e-mini, Long, expires 12/19/14

703,990

12,187

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):

Quoted Prices in

Significant

Active Markets for

Other Significant

Unobservable

Identical Assets

Observable Inputs

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total

Common Stock¹

$254,506,341

$—

$254,506,341

Short-Term Investments¹

—

1,055,063

—

1,055,063

Total

$254,506,341

$1,055,063

$—

$255,561,404

Other Financial Instruments

Futures Contracts²

$12,187

$—

$12,187


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

42 See financial notes

Schwab Large-Cap Growth Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$1,533,883			$2,316,395
Net realized gains		39,312,198			31,663,612
Net change in unrealized appreciation (depreciation)	+	1,502,772			21,399,074

Increase in net assets from operations		42,348,853			55,379,081

Distributions to Shareholders

Distributions from net investment income		($1,490,864	)		($2,200,707	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			1,209,235		$20,323,834			1,838,655		$25,057,674
Shares reinvested			49,885		793,166			94,231		1,176,943
Shares redeemed	+		(3,467,366	)	(58,680,881	)		(3,195,045	)	(43,826,509	)

Net transactions in fund shares			(2,208,246	)	($37,563,881	)		(1,262,159	)	($17,591,892	)

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			16,135,868		$252,684,204			17,398,027		$217,097,722
Total increase or decrease	+		(2,208,246	)	3,294,108			(1,262,159	)	35,586,482

End of period			13,927,622		$255,978,312			16,135,868		$252,684,204


Net investment income not yet distributed					$972,556					$989,027

See financial notes 45

Schwab Small-Cap Equity Fund

Portfolio Holdings as of October 31, 2014

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	.3%	Common Stock		589,172,416		661,030,719
	2	.5%	Other Investment Company		16,708,242		16,708,242
	0	.5%	Short-Term Investments		3,360,305		3,360,305


	102	.3%	Total Investments		609,240,963		681,099,266
	(2	.3%)	Other Assets and Liabilities, Net				(15,099,462	)


	100	.0%	Net Assets				665,999,804


	Number		Value
Security	of Shares		($)

Common Stock 99.3% of net assets

Automobiles & Components 1.1%
American Axle & Manufacturing Holdings, Inc. *		81,905		1,583,224
Dana Holding Corp.		150,964		3,088,723
Tower International, Inc. *		122,156		2,968,391

				7,640,338

Banks 5.4%
1st Source Corp.		31,910		998,464
BancFirst Corp.		13,210		858,650
BNC Bancorp		12,053		205,022
C&F Financial Corp.		1,830		62,842
Federal Agricultural Mortgage Corp., Class C		22,007		732,833
Financial Institutions, Inc.		22,109		555,820
First Bancorp (North Carolina)		14,300		259,116
First BanCorp (Puerto Rico) *		595,581		3,102,977
First Busey Corp.		19,240		120,250
First Business Financial Services, Inc.		7,755		363,942
First Citizens BancShares, Inc., Class A		1,510		379,327
First Commonwealth Financial Corp.		122,906		1,149,171
First Community Bancshares, Inc.		6,466		105,848
First Defiance Financial Corp.		10,948		335,337
First Financial Corp.		19,833		687,808
First Interstate BancSystem, Inc., Class A		28,960		849,686
First Merchants Corp.		5,667		128,358
First Midwest Bancorp, Inc.		239,330		4,018,351
International Bancshares Corp.		44,030		1,249,131
Lakeland Bancorp, Inc.		14,605		160,509
MainSource Financial Group, Inc.		29,140		530,057
MidSouth Bancorp, Inc.		8,477		160,554
OFG Bancorp		181,222		2,821,627
Preferred Bank		12,454		331,027
PrivateBancorp, Inc.		106,549		3,443,664
S&T Bancorp, Inc.		36,980		1,020,278
State Bank Financial Corp.		17,540		314,317
Susquehanna Bancshares, Inc.		98,728		968,522
Synovus Financial Corp.		160,881		4,079,942
TCF Financial Corp.		188,779		2,916,636
WesBanco, Inc.		27,180		936,623
Wintrust Financial Corp.		33,640		1,558,205
WSFS Financial Corp.		9,120		717,288

				36,122,182

Capital Goods 7.9%
AAR Corp.		29,429		779,868
Altra Industrial Motion Corp.		20,400		643,008
Argan, Inc.		180,740		6,291,559
Blount International, Inc. *		221,104		3,385,102
Briggs & Stratton Corp.		102,655		2,074,658
CIRCOR International, Inc.		6,430		483,215
Commercial Vehicle Group, Inc. *		29,529		193,415
Curtiss-Wright Corp.		12,974		897,931
Douglas Dynamics, Inc.		56,556		1,172,406
Ducommun, Inc. *		5,923		156,426
EMCOR Group, Inc.		96,952		4,278,492
Engility Holdings, Inc. *		135,668		5,860,858
General Cable Corp.		155,302		2,200,629
Gibraltar Industries, Inc. *		64,900		989,725
Great Lakes Dredge & Dock Corp. *		63,050		440,720
Griffon Corp.		110,356		1,356,275
Harsco Corp.		89,460		1,939,493
Hillenbrand, Inc.		14,762		491,427
Hurco Cos., Inc.		9,200		354,476
Kadant, Inc.		20,540		849,124
L.B. Foster Co., Class A		16,000		865,440
Lydall, Inc. *		45,320		1,401,748
Moog, Inc., Class A *		37,689		2,884,716
Mueller Water Products, Inc., Class A		217,853		2,150,209
Norcraft Cos, Inc. *		5,794		98,498
Quanex Building Products Corp.		19,423		388,848
Rexnord Corp. *		57,450		1,697,647
SL Industries, Inc. *		3,200		144,000
Standex International Corp.		23,160		1,997,550
The Greenbrier Cos., Inc. (a)		38,582		2,412,918
Tutor Perini Corp. *		74,565		2,088,566
Wabash National Corp. *		126,135		1,299,190
Willis Lease Finance Corp. *		7,483		170,687

				52,438,824

Commercial & Professional Supplies 3.2%
ARC Document Solutions, Inc. *		30,710		311,706
CRA International, Inc. *		34,530		1,035,900
Deluxe Corp.		45,901		2,790,781
Heidrick & Struggles International, Inc.		37,554		781,874
Hill International, Inc. *		71,178		276,171
Kimball International, Inc., Class B		46,513		836,304

See financial notes 47

Schwab Small-Cap Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Korn/Ferry International *		54,343		1,517,800
Quad Graphics, Inc.		141,765		3,125,918
RPX Corp. *		407,010		5,718,490
TrueBlue, Inc. *		188,748		4,665,851
Viad Corp.		24,390		622,189

				21,682,984

Consumer Durables & Apparel 1.1%
Bassett Furniture Industries, Inc.		2,063		35,855
Blyth, Inc. (a)		38,930		326,623
Columbia Sportswear Co.		8,680		334,527
CSS Industries, Inc.		20,620		588,907
Culp, Inc.		12,400		235,228
JAKKS Pacific, Inc. *(a)		11,176		71,303
Johnson Outdoors, Inc., Class A		7,100		213,355
Nautilus, Inc. *		70,497		943,250
Skechers U.S.A., Inc., Class A *		47,230		2,585,843
Unifi, Inc. *		16,530		462,344
Vera Bradley, Inc. *		8,338		190,106
ZAGG, Inc. *		156,153		1,049,348

				7,036,689

Consumer Services 4.2%
Ascent Capital Group, Inc., Class A *		34,720		2,232,496
Boyd Gaming Corp. *		259,160		2,993,298
Buffalo Wild Wings, Inc. *		23,590		3,521,515
Capella Education Co.		25,692		1,817,452
Diamond Resorts International, Inc. *		56,339		1,462,561
Isle of Capri Casinos, Inc. *		130,480		969,466
K12, Inc. *		220,261		2,731,237
Penn National Gaming, Inc. *		503,040		6,584,794
Regis Corp.		173,292		2,942,498
Strayer Education, Inc. *		25,160		1,841,460
Universal Technical Institute, Inc.		51,590		614,437

				27,711,214

Diversified Financials 2.4%
Calamos Asset Management, Inc., Class A		216,846		2,970,790
Cash America International, Inc.		65,068		3,198,092
Compass Diversified Holdings		52,490		968,441
Interactive Brokers Group, Inc., Class A		194,810		5,029,994
Investment Technology Group, Inc. *		46,377		831,540
KCG Holdings, Inc., Class A *		16,531		176,220
Nelnet, Inc., Class A		54,400		2,588,896
Oppenheimer Holdings, Inc., Class A		22,000		540,100

				16,304,073

Energy 6.4%
Aemetis, Inc. *		15,850		123,947
Basic Energy Services, Inc. *		175,753		2,267,214
Bill Barrett Corp. *		100,346		1,525,259
Clayton Williams Energy, Inc. *		21,630		1,798,318
Cloud Peak Energy, Inc. *		135,727		1,624,652
Comstock Resources, Inc.		130,948		1,550,424
Contango Oil & Gas Co. *		39,908		1,459,436
Green Plains, Inc.		159,867		5,467,451
ION Geophysical Corp. *		1,041,823		2,917,104
Matrix Service Co. *		67,380		1,688,543
Pacific Ethanol, Inc. *		102,500		1,446,275
Parker Drilling Co. *		368,640		1,636,762
PBF Energy, Inc., Class A		102,094		2,661,591
Pioneer Energy Services Corp. *		414,701		3,806,955
REX American Resources Corp. *		44,370		3,228,361
SandRidge Energy, Inc. *(a)		254,099		990,986
Stone Energy Corp. *		32,439		794,755
Tesco Corp.		45,593		868,091
VAALCO Energy, Inc. *		488,059		3,621,398
W&T Offshore, Inc.		322,842		2,934,634

				42,412,156

Food & Staples Retailing 0.9%
Liberator Medical Holdings, Inc. (a)		82,340		237,139
Roundy’s, Inc.		337,390		1,137,004
SUPERVALU, Inc. *		78,930		681,166
The Andersons, Inc.		10,506		669,547
The Pantry, Inc. *		127,210		3,278,202

				6,003,058

Food, Beverage & Tobacco 2.7%
Alliance One International, Inc. *		42,950		87,188
Cal-Maine Foods, Inc.		50,504		4,433,746
Coca-Cola Bottling Co. Consolidated		30,540		2,762,038
Farmer Bros. Co. *		46,513		1,356,319
Omega Protein Corp. *		187,466		2,708,884
Sanderson Farms, Inc.		77,713		6,526,338
Seneca Foods Corp., Class A *		7,100		190,848

				18,065,361

Health Care Equipment & Services 6.2%
Accuray, Inc. *		337,371		2,135,558
Alere, Inc. *		13,414		536,158
Alliance HealthCare Services, Inc. *		8,250		199,073
AngioDynamics, Inc. *		56,030		952,510
Anika Therapeutics, Inc. *		33,579		1,347,861
Cantel Medical Corp.		27,840		1,180,416
CONMED Corp.		60,642		2,546,358
CryoLife, Inc.		22,429		230,122
Cynosure, Inc., Class A *		7,020		177,536
Globus Medical, Inc., Class A *		125,324		2,778,433
Greatbatch, Inc. *		76,634		3,846,260
Hill-Rom Holdings, Inc.		11,796		524,686
ICU Medical, Inc. *		33,654		2,386,069
Integra LifeSciences Holdings Corp. *		12,733		650,784
Kindred Healthcare, Inc.		139,808		3,040,824
Magellan Health, Inc. *		6,547		396,224
Merge Healthcare, Inc. *		217,088		596,992
Molina Healthcare, Inc. *		146,547		7,128,046
National Healthcare Corp.		11,100		669,441
NuVasive, Inc. *		90,270		3,692,043
Omnicell, Inc. *		25,050		809,365
Quality Systems, Inc.		151,310		2,286,294
SurModics, Inc. *		54,803		1,186,485
The Providence Service Corp. *		29,818		1,317,359

48 See financial notes

Schwab Small-Cap Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Triple-S Management Corp., Class B *		39,636		877,541

				41,492,438

Household & Personal Products 1.1%
Coty, Inc., Class A *		70,132		1,164,191
Harbinger Group, Inc. *		172,970		2,272,826
Medifast, Inc. *		35,958		1,141,307
Revlon, Inc., Class A *		17,300		593,390
Spectrum Brands Holdings, Inc.		17,390		1,575,360
USANA Health Sciences, Inc. *		2,750		313,445

				7,060,519

Insurance 5.7%
American Equity Investment Life Holding Co.		253,400		6,540,254
AmTrust Financial Services, Inc. (a)		114,602		5,142,192
Aspen Insurance Holdings Ltd.		130,301		5,685,033
FBL Financial Group, Inc., Class A		16,601		823,077
Maiden Holdings Ltd.		182,176		2,177,003
MBIA, Inc. *		402,801		3,931,338
Selective Insurance Group, Inc.		152,600		3,940,132
Symetra Financial Corp.		284,407		6,740,446
The Hanover Insurance Group, Inc.		42,399		2,838,189

				37,817,664

Materials 4.5%
Ampco-Pittsburgh Corp.		26,060		567,847
Boise Cascade Co. *		106,001		3,822,396
Calgon Carbon Corp. *		23,822		500,977
Clearwater Paper Corp. *		36,558		2,352,507
Commercial Metals Co.		308,203		5,328,830
Globe Specialty Metals, Inc.		22,667		426,366
Graphic Packaging Holding Co. *		282,306		3,424,372
KapStone Paper & Packaging Corp. *		31,019		954,144
KMG Chemicals, Inc.		4,214		74,588
Materion Corp.		77,527		3,058,440
Neenah Paper, Inc.		57,661		3,517,898
Noranda Aluminum Holding Corp.		47,350		208,813
OM Group, Inc.		56,400		1,468,092
PolyOne Corp.		59,518		2,202,761
Schweitzer-Mauduit International, Inc.		9,860		424,572
Tredegar Corp.		22,161		421,502
Trinseo S.A. *		80,297		1,160,292

				29,914,397

Media 0.4%
AH Belo Corp., Class A		48,000		552,480
Dex Media, Inc. *		39,336		306,427
Live Nation Entertainment, Inc. *		29,500		767,000
Sinclair Broadcast Group, Inc., Class A (a)		26,709		775,897

				2,401,804

Pharmaceuticals, Biotechnology & Life Sciences 10.1%
Acorda Therapeutics, Inc. *		16,045		558,687
Affymetrix, Inc. *		199,740		1,799,657
Akorn, Inc. *		14,627		651,633
Anacor Pharmaceuticals, Inc. *		73,300		2,155,753
Bio-Rad Laboratories, Inc., Class A *		31,770		3,584,291
BioCryst Pharmaceuticals, Inc. *		76,042		891,212
BioSpecifics Technologies Corp. *		44,115		1,769,894
Cepheid *		26,562		1,408,052
Dyax Corp. *		405,230		5,012,695
Emergent Biosolutions, Inc. *		276,912		6,263,750
Enanta Pharmaceuticals, Inc. *		33,544		1,442,392
Enzo Biochem, Inc. *		8,637		45,085
Hyperion Therapeutics, Inc. *		165,406		4,019,366
Ligand Pharmaceuticals, Inc. *		50,297		2,779,915
Myriad Genetics, Inc. *(a)		50,380		1,989,506
Nektar Therapeutics *		38,427		529,908
NPS Pharmaceuticals, Inc. *		40,738		1,116,221
Pacira Pharmaceuticals, Inc. *		11,025		1,023,341
PAREXEL International Corp. *		38,690		2,101,254
PDL BioPharma, Inc. (a)		224,448		1,914,542
POZEN, Inc. *		141,321		1,281,782
Prestige Brands Holdings, Inc. *		82,064		2,906,707
Repligen Corp. *		212,363		5,355,795
Rigel Pharmaceuticals, Inc. *		128,749		254,923
Sagent Pharmaceuticals, Inc. *		86,680		2,742,555
Sangamo BioSciences, Inc. *		118,045		1,433,066
SciClone Pharmaceuticals, Inc. *		176,322		1,347,100
Spectrum Pharmaceuticals, Inc. *(a)		637,952		4,835,676
Sucampo Pharmaceuticals, Inc., Class A *		20,228		174,365
The Medicines Co. *		236,281		5,982,635

				67,371,758

Real Estate 7.3%
Ashford Hospitality Trust, Inc.		385,234		4,353,144
Brandywine Realty Trust		212,061		3,272,101
Cedar Realty Trust, Inc.		112,124		771,413
CoreSite Realty Corp.		59,906		2,217,720
DCT Industrial Trust, Inc.		107,570		921,875
DuPont Fabros Technology, Inc.		221,444		6,858,121
Excel Trust, Inc.		66,265		861,445
FelCor Lodging Trust, Inc.		41,443		444,683
Highwoods Properties, Inc.		148,137		6,350,633
Hudson Pacific Properties, Inc.		40,990		1,119,437
LaSalle Hotel Properties		61,314		2,404,122
PS Business Parks, Inc.		38,031		3,202,971
RE/MAX Holdings, Inc., Class A		7,440		238,080
RLJ Lodging Trust		190,083		6,124,474
Saul Centers, Inc.		44,570		2,449,122
Strategic Hotels & Resorts, Inc. *		36,652		470,978
Summit Hotel Properties, Inc.		382,112		4,447,784
Sunstone Hotel Investors, Inc.		55,192		844,990
The Geo Group, Inc.		28,951		1,156,303

				48,509,396

Retailing 4.3%
Aaron’s, Inc.		56,480		1,398,445
Abercrombie & Fitch Co., Class A		49,975		1,673,163
ANN, Inc. *		47,466		1,822,220
Big Lots, Inc.		64,478		2,943,421
Brown Shoe Co., Inc.		104,401		2,776,023

See financial notes 49

Schwab Small-Cap Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Build-A-Bear Workshop, Inc. *		42,632		722,612
Citi Trends, Inc. *		114,958		2,603,799
Core-Mark Holding Co., Inc.		29,274		1,698,770
Guess?, Inc.		45,495		1,008,624
Haverty Furniture Cos, Inc.		68,973		1,518,096
Murphy USA, Inc. *		13,820		791,886
New York & Co., Inc. *		82,500		269,775
Orbitz Worldwide, Inc. *		284,233		2,350,607
Outerwall, Inc. *(a)		46,890		2,966,730
Stein Mart, Inc.		22,960		307,205
The Cato Corp., Class A		27,691		987,738
The Finish Line, Inc., Class A		90,656		2,399,664
The Pep Boys - Manny, Moe & Jack *		15,376		146,533

				28,385,311

Semiconductors & Semiconductor Equipment 3.1%
Alpha & Omega Semiconductor Ltd. *		12,475		115,643
Amkor Technology, Inc. *		126,350		856,653
Cirrus Logic, Inc. *		35,088		677,199
Diodes, Inc. *		89,283		2,306,180
Fairchild Semiconductor International, Inc. *		138,541		2,126,604
FormFactor, Inc. *		195,390		1,557,258
IXYS Corp.		54,900		640,683
OmniVision Technologies, Inc. *		199,713		5,348,314
Pericom Semiconductor Corp. *		51,100		558,523
Photronics, Inc. *		233,340		2,097,727
Sigma Designs, Inc. *		15,687		62,591
Silicon Image, Inc. *		69,360		371,770
Tessera Technologies, Inc.		117,285		3,564,291
Ultra Clean Holdings, Inc. *		37,572		329,882

				20,613,318

Software & Services 10.0%
Aspen Technology, Inc. *		142,940		5,278,774
Bankrate, Inc. *		33,770		366,742
Blucora, Inc. *		31,540		534,603
Callidus Software, Inc. *		99,822		1,406,492
comScore, Inc. *		12,970		546,556
Constant Contact, Inc. *		125,560		4,439,802
CSG Systems International, Inc.		50,132		1,328,999
Demand Media, Inc. *		88,286		621,533
Digital River, Inc. *		144,427		3,692,998
EarthLink Holdings Corp.		244,195		874,218
EnerNOC, Inc. *		331,320		4,893,596
Euronet Worldwide, Inc. *		10,823		580,870
Higher One Holdings, Inc. *		61,743		158,680
Intralinks Holdings, Inc. *		135,941		1,174,530
j2 Global, Inc.		46,399		2,509,722
LogMeIn, Inc. *		103,394		4,968,082
MicroStrategy, Inc., Class A *		8,226		1,323,399
Monster Worldwide, Inc. *		479,659		1,851,484
NetScout Systems, Inc. *		55,231		2,035,815
Pegasystems, Inc.		129,100		2,797,597
Progress Software Corp. *		14,087		364,853
PTC, Inc. *		119,208		4,547,785
QuinStreet, Inc. *		76,710		310,676
Rovi Corp. *		129,837		2,710,997
Sykes Enterprises, Inc. *		82,551		1,778,149
Take-Two Interactive Software, Inc. *		276,460		7,312,367
TeleCommunication Systems, Inc., Class A *		104,770		301,738
TeleTech Holdings, Inc. *		8,693		224,366
TiVo, Inc. *		125,564		1,638,610
Unisys Corp. *		54,783		1,404,636
VASCO Data Security International, Inc. *		25,958		657,257
Web.com Group, Inc. *		156,161		3,205,985
WebMD Health Corp. *		14,949		638,023

				66,479,934

Technology Hardware & Equipment 5.6%
Anixter International, Inc.		4,803		409,071
ARRIS Group, Inc. *		96,970		2,911,039
Aruba Networks, Inc. *		108,238		2,335,776
Benchmark Electronics, Inc. *		49,226		1,167,641
Brocade Communications Systems, Inc.		470,272		5,046,018
Calix, Inc. *		55,526		600,236
Checkpoint Systems, Inc. *		84,800		1,124,448
Daktronics, Inc.		52,700		701,437
Harmonic, Inc. *		403,860		2,693,746
II-VI, Inc. *		66,342		894,954
Insight Enterprises, Inc. *		95,400		2,170,350
Lexmark International, Inc., Class A		140,117		6,047,450
Newport Corp. *		89,440		1,600,082
Park Electrochemical Corp.		13,097		337,903
Plexus Corp. *		24,609		1,017,582
Polycom, Inc. *		233,247		3,050,871
Richardson Electronics Ltd.		16,310		163,263
Sanmina Corp. *		60,317		1,512,147
Tech Data Corp. *		47,506		2,837,058
Vishay Intertechnology, Inc.		51,890		701,034

				37,322,106

Telecommunication Services 1.3%
General Communication, Inc., Class A *		14,655		171,903
IDT Corp., Class B		217,062		3,577,182
Inteliquent, Inc.		171,691		2,889,559
Premiere Global Services, Inc. *		110,115		1,152,904
Shenandoah Telecommunications Co.		8,300		245,597
Spok Holdings, Inc.		38,190		620,206
Vonage Holdings Corp. *		60,400		210,192

				8,867,543

Transportation 2.3%
Air Transport Services Group, Inc. *		57,950		474,031
ArcBest Corp.		98,685		3,819,109
Con-way, Inc.		44,925		1,948,397
Hawaiian Holdings, Inc. *		58,212		1,009,396
JetBlue Airways Corp. *		386,655		4,461,999
Matson, Inc.		99,189		2,825,895
Park-Ohio Holdings Corp.		20,173		1,071,388

				15,610,215

50 See financial notes

Schwab Small-Cap Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Utilities 2.1%
American States Water Co.		69,759		2,495,977
Avista Corp.		53,460		1,895,157
Chesapeake Utilities Corp.		9,558		462,894
Consolidated Water Co., Ltd. (a)		56,903		682,267
Northwest Natural Gas Co.		64,542		3,028,956
Ormat Technologies, Inc.		27,023		782,316
PNM Resources, Inc.		107,958		3,114,588
Southwest Gas Corp.		22,470		1,305,282

				13,767,437

Total Common Stock
(Cost $589,172,416)				661,030,719




Other Investment Company 2.5% of net assets

Securities Lending Collateral 2.5%
Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.01% (d)		16,708,242		16,708,242

Total Other Investment Company
(Cost $16,708,242)				16,708,242



	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

Short-Term Investments 0.5% of net assets

Time Deposits 0.5%
Bank of Tokyo - Mitsubishi UFJ
0.03%, 11/03/14		3,041,309		3,041,309

U.S. Treasury Obligation 0.0%
U.S. Treasury Bill
0.01%, 12/18/14 (b)(c)		319,000		318,996

Total Short-Term Investments
(Cost $3,360,305)				3,360,305



End of Investments.

At 10/31/14, the tax basis cost of the fund’s investments was $609,705,161 and the unrealized appreciation and depreciation were $101,098,169 and ($29,704,064), respectively, with a net unrealized appreciation of $71,394,105.


*		Non-income producing security.
(a)		All or a portion of this security is on loan. Securities on loan were valued at $16,532,320.
(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.

In addition to the above, the fund held the following at 10/31/14:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

Russell 2000 Index, mini, Long, expires 12/19/14

1,756,500

105,491

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):


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

Common Stock¹		$661,030,719		$—		$—		$661,030,719
Other Investment Company		16,708,242		—		—		16,708,242
Short-Term Investments¹		—		3,360,305		—		3,360,305

Total		$677,738,961		$3,360,305		$—		$681,099,266

Other Financial Instruments
Futures Contracts²		$105,491		$—		$—		$105,491


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

See financial notes 51

Schwab Small-Cap Equity Fund

Statement of

Assets and Liabilities

As of October 31, 2014



Assets

Investments, at value (cost $592,532,721) including securities on loan of $16,532,320		$664,391,024
Collateral invested for securities on loan, at value (cost $16,708,242)	+	16,708,242

Total investments, at value (cost $609,240,963)		681,099,266
Cash		100,000
Receivables:
Investments sold		15,552,847
Fund shares sold		645,784
Dividends		232,973
Income from securities on loan		61,230
Variation margin on futures contracts		25,800
Interest		3
Prepaid expenses	+	8,533

Total assets		697,726,436

Liabilities

Collateral held for securities on loan		16,708,242
Payables:
Investments bought		14,312,917
Investment adviser and administrator fees		57,682
Shareholder service fees		18,495
Fund shares redeemed		550,218
Accrued expenses	+	79,078

Total liabilities		31,726,632

Net Assets

Total assets		697,726,436
Total liabilities	−	31,726,632

Net assets		$665,999,804

Net Assets by Source
Capital received from investors		471,816,146
Net investment income not yet distributed		65,851
Net realized capital gains		122,154,013
Net unrealized capital appreciation		71,963,794

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$665,999,804

26,519,491

$25.11

52 See financial notes

Schwab Small-Cap Equity Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends (net of foreign withholding taxes of $1,809)		$5,951,865
Interest		2,837
Securities on loan	+	317,421

Total investment income		6,272,123

Expenses

Investment adviser and administrator fees		5,090,478
Shareholder service fees		1,546,578
Shareholder reports		66,047
Portfolio accounting fees		56,313
Custodian fees		40,881
Registration fees		35,804
Professional fees		35,519
Transfer agent fees		26,609
Independent trustees’ fees		9,078
Other expenses	+	11,975

Total expenses		6,919,282
Expense reduction by CSIM and its affiliates	−	26,609

Net expenses	−	6,892,673

Net investment loss		(620,550	)

Realized and Unrealized Gains (Losses)

Net realized gains on investments		125,694,089
Net realized losses on futures contracts	+	(622,396	)

Net realized gains		125,071,693
Net change in unrealized appreciation (depreciation) on investments		(55,503,802	)
Net change in unrealized appreciation (depreciation) on futures contracts	+	(7,987	)

Net change in unrealized appreciation (depreciation)	+	(55,511,789	)

Net realized and unrealized gains		69,559,904

Increase in net assets resulting from operations		$68,939,354

See financial notes 53

Schwab Small-Cap Equity Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income (loss)		($620,550	)		$1,994,462
Net realized gains		125,071,693			70,691,514
Net change in unrealized appreciation (depreciation)	+	(55,511,789	)		89,763,924

Increase in net assets from operations		68,939,354			162,449,900

Distributions to Shareholders

Distributions from net investment income		(1,598,911	)		(2,100,800	)
Distributions from net realized gains	+	(56,889,199	)		—

Total distributions		($58,488,110	)		($2,100,800	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			7,201,760		$173,508,919			5,573,116		$121,933,084
Shares reinvested			1,076,328		24,841,650			39,481		707,097
Shares redeemed	+		(5,496,700	)	(133,118,038	)		(3,750,852	)	(80,237,495	)

Net transactions in fund shares			2,781,388		$65,232,531			1,861,745		$42,402,686

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			23,738,103		$590,316,029			21,876,358		$387,564,243
Total increase	+		2,781,388		75,683,775			1,861,745		202,751,786

End of period			26,519,491		$665,999,804			23,738,103		$590,316,029


Net investment income not yet distributed/Distributions in excess of net investment income					$65,851					($92,217	)

54 See financial notes

Schwab Hedged Equity Fund™

Financial Statements

Financial Highlights


	11/1/13–			11/1/12–			11/1/11–			11/1/10–			11/1/09–
	10/31/14			10/31/13			10/31/12			10/31/11			10/31/10


Per-Share Data ($)

Net asset value at beginning of period		18.62			16.36			15.32			14.79			13.45

Income (loss) from investment operations:
Net investment income (loss)		(0.08	)		(0.10	)		(0.08	)		(0.05	)		(0.08	)
Net realized and unrealized gains (losses)		1.99			2.36			1.12			0.58			1.42

Total from investment operations		1.91			2.26			1.04			0.53			1.34
Less distributions:
Distributions from net realized gains		(1.51	)		—			—			—			—

Net asset value at end of period		19.02			18.62			16.36			15.32			14.79

Total return (%)		11.07			13.81			6.79			3.58			9.96

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses (including dividend expense on short sales)		1.99			2.48			2.08			1.86			1.97
Net operating expenses (excluding dividend expense on short sales)		1.52	¹		1.48	¹		1.53	¹		1.44	²		1.38	³
Gross operating expenses		2.02			2.52			2.13			1.88			1.99
Net investment income (loss)		(0.46	)		(0.49	)		(0.47	)		(0.25	)		(0.54	)
Portfolio turnover rate		142			130			109			98			115
Net assets, end of period ($ x 1,000,000)		200			193			194			236			329

¹ The ratio of net operating expenses would have been 1.33% for the period ended 10/31/12, 10/31/13 and 10/31/14, respectively, if stock loan fees on short sales had not been incurred.

² 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.

³ The ratio of net operating expenses would have been 1.31%, if stock loan fees on short sales had not been incurred.

See financial notes 55

Schwab Hedged Equity Fund

Portfolio Holdings as of October 31, 2014

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

Cost

Value

Holdings by Category

($)

100

.5%

Common Stock

171,063,421

201,107,861

.1%

Short-Term Investments

175,997

100

.6%

Total Investments

171,239,418

201,283,858

(38

.4)%

Short Sales

(74,717,704

)

(76,728,153

)

.8%

Other Assets and Liabilities, Net

75,507,418

100

.0%

Net Assets

200,063,123


	Number		Value
Security	of Shares		($)

Common Stock 100.5% of net assets

Automobiles & Components 0.5%
Dana Holding Corp.		49,779		1,018,478

Banks 5.8%
Bank of America Corp.		111,244		1,908,947
Citigroup, Inc. (a)		58,000		3,104,740
Fifth Third Bancorp		69,798		1,395,262
Regions Financial Corp. (a)		239,500		2,378,235
SunTrust Banks, Inc.		7,634		298,795
The PNC Financial Services Group, Inc. (a)		27,938		2,413,564

				11,499,543

Capital Goods 4.1%
Caterpillar, Inc. (a)		20,601		2,089,147
Emerson Electric Co.		17,860		1,144,112
Huntington Ingalls Industries, Inc.		19,529		2,066,559
Masco Corp.		76,000		1,677,320
United Rentals, Inc. *		10,433		1,148,256

				8,125,394

Commercial & Professional Supplies 2.8%
Manpowergroup, Inc.		2,272		151,656
Pitney Bowes, Inc.		14,400		356,256
R.R. Donnelley & Sons Co. (a)		216,400		3,776,180
TrueBlue, Inc. *		53,408		1,320,246

				5,604,338

Consumer Services 2.1%
Apollo Education Group, Inc. *		12,320		353,091
Graham Holdings Co., Class B		1,700		1,332,120
Penn National Gaming, Inc. *		22,700		297,143
Yum! Brands, Inc.		30,550		2,194,407

				4,176,761

Diversified Financials 2.8%
Affiliated Managers Group, Inc. *		8,000		1,598,320
Cash America International, Inc.		8,300		407,945
Interactive Brokers Group, Inc., Class A (a)		113,732		2,936,560
Lazard Ltd., Class A		13,321		655,527

				5,598,352

Energy 9.1%
Baker Hughes, Inc.		6,549		346,835
Basic Energy Services, Inc. *		2,294		29,593
ConocoPhillips (a)		51,911		3,745,379
Devon Energy Corp.		1,400		84,000
EOG Resources, Inc. (a)		8,439		802,127
Exxon Mobil Corp. (a)		1,978		191,292
Green Plains, Inc.		19,100		653,220
Kosmos Energy Ltd. *		10,900		101,697
Marathon Oil Corp.		23,700		838,980
Murphy Oil Corp. (a)		17,357		926,690
National Oilwell Varco, Inc.		50,660		3,679,942
Occidental Petroleum Corp. (a)		41,100		3,655,023
Patterson-UTI Energy, Inc.		24,800		571,144
Pioneer Energy Services Corp. *		88,389		811,411
SM Energy Co.		31,500		1,773,450

				18,210,783

Food & Staples Retailing 2.1%
The Kroger Co. (a)		77,095		4,294,963

Food, Beverage & Tobacco 7.3%
Archer-Daniels-Midland Co. (a)		82,554		3,880,038
Bunge Ltd. (a)		42,168		3,738,193
Dr Pepper Snapple Group, Inc.		12,752		883,076
J&J Snack Foods Corp.		4,300		443,029
Pilgrim’s Pride Corp. *(a)		72,700		2,065,407
Sanderson Farms, Inc.		22,746		1,910,209
Tyson Foods, Inc., Class A		40,700		1,642,245

				14,562,197

Health Care Equipment & Services 5.6%
Align Technology, Inc. *		5,600		294,672
C.R. Bard, Inc.		7,600		1,246,172
Cardinal Health, Inc. (a)		54,138		4,248,750
Centene Corp. *		1,293		119,822
Edwards Lifesciences Corp. *		17,327		2,095,181
Kindred Healthcare, Inc.		5,700		123,975
Magellan Health, Inc. *(a)		10,846		656,400
Molina Healthcare, Inc. *		48,839		2,375,529

				11,160,501

Household & Personal Products 0.3%
Harbinger Group, Inc. *		29,200		383,688

56 See financial notes

Schwab Hedged Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Herbalife Ltd.		2,977		156,173

				539,861

Insurance 6.0%
American Equity Investment Life Holding Co. (a)		84,900		2,191,269
AmTrust Financial Services, Inc.		7,351		329,839
Aspen Insurance Holdings Ltd.		72,900		3,180,627
Assurant, Inc.		7,110		485,044
Axis Capital Holdings Ltd.		26,329		1,267,478
Genworth Financial, Inc., Class A *(a)		82,885		1,159,561
Reinsurance Group of America, Inc.		39,434		3,322,315
Symetra Financial Corp.		4,900		116,130

				12,052,263

Materials 3.3%
Ashland, Inc.		6,100		659,227
Commercial Metals Co.		44,900		776,321
Compass Minerals International, Inc.		1,700		145,656
Graphic Packaging Holding Co. *		51,410		623,603
Steel Dynamics, Inc.		24,000		552,240
United States Steel Corp. (a)		96,474		3,862,819

				6,619,866

Media 3.2%
Comcast Corp., Class A		15,316		847,740
John Wiley & Sons, Inc., Class A		33,966		1,983,275
Live Nation Entertainment, Inc. *(a)		136,443		3,547,518

				6,378,533

Pharmaceuticals, Biotechnology & Life Sciences 6.8%
Amgen, Inc.		19,700		3,194,946
Celgene Corp. *(a)		1,297		138,896
Gilead Sciences, Inc. *		27,487		3,078,544
Merck & Co., Inc. (a)		51,423		2,979,449
Pfizer, Inc. (a)		142,876		4,279,136

				13,670,971

Real Estate 4.3%
Ashford Hospitality Trust		14,204		160,505
Brandywine Realty Trust		100,500		1,550,715
CBRE Group, Inc., Class A *		14,940		478,080
Duke Realty Corp.		77,592		1,471,144
DuPont Fabros Technology, Inc.		28,196		873,230
Equity Lifestyle Properties, Inc.		26,826		1,317,157
RLJ Lodging Trust (a)		66,501		2,142,662
SL Green Realty Corp.		5,734		663,424

				8,656,917

Retailing 7.9%
Aaron’s, Inc.		26,578		658,071
Abercrombie & Fitch Co., Class A		15,969		534,642
ANN, Inc. *(a)		40,039		1,537,097
Best Buy Co., Inc.		33,300		1,136,862
Big Lots, Inc.		5,085		232,130
Brown Shoe Co., Inc.		9,200		244,628
Kohl’s Corp.		24,142		1,308,979
Lowe’s Cos., Inc. (a)		51,355		2,937,506
Macy’s, Inc. (a)		64,321		3,719,040
Outerwall, Inc. *		27,361		1,731,131
The Children’s Place, Inc.		23,300		1,147,525
The Finish Line, Inc., Class A		13,047		345,354
The Gap, Inc.		9,078		343,966

				15,876,931

Semiconductors & Semiconductor Equipment 0.2%
Spansion, Inc., Class A *		20,000		411,600

Software & Services 11.7%
Aspen Technology, Inc. *		23,900		882,627
CA, Inc. (a)		60,398		1,755,166
Computer Sciences Corp.		62,574		3,779,470
comScore, Inc. *		15,711		662,062
Convergys Corp.		32,016		645,763
Electronic Arts, Inc. *(a)		101,789		4,170,295
Intuit, Inc.		1,896		166,867
LogMeIn, Inc. *		10,460		502,603
Microsoft Corp. (a)		25,650		1,204,267
Oracle Corp. (a)		84,300		3,291,915
Pegasystems, Inc.		4,623		100,180
PTC, Inc. *		25,400		969,010
Synopsys, Inc. *		40,700		1,667,886
Take-Two Interactive Software, Inc. *(a)		112,200		2,967,690
Xerox Corp.		45,300		601,584

				23,367,385

Technology Hardware & Equipment 7.1%
Apple, Inc. (a)		39,907		4,309,956
ARRIS Group, Inc. *		3,291		98,796
Brocade Communications Systems, Inc. (a)		228,524		2,452,062
CDW Corp.		10,377		320,027
EchoStar Corp., Class A *(a)		2,970		138,788
Hewlett-Packard Co. (a)		53,869		1,932,820
II-VI, Inc. *		11,897		160,491
NetApp, Inc.		53,838		2,304,266
Western Digital Corp. (a)		25,479		2,506,369

				14,223,575

Telecommunication Services 0.0%
Windstream Holdings, Inc.		4,054		42,486

Transportation 1.3%
Alaska Air Group, Inc.		3,800		202,274
ArcBest Corp.		737		28,522
Con-way, Inc.		32,327		1,402,022
Southwest Airlines Co.		27,100		934,408

				2,567,226

Utilities 6.2%
AES Corp. (a)		242,428		3,410,962
Calpine Corp. *(a)		132,374		3,020,775
Entergy Corp. (a)		48,656		4,088,077
NRG Energy, Inc.		55,351		1,659,423

See financial notes 57

Schwab Hedged Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Short Sales 38.4% of net assets

Automobiles & Components 0.4%
Dorman Products, Inc. *		17,200		797,392

Banks 1.8%
Signature Bank *		7,200		872,136
Texas Capital Bancshares, Inc. *		42,927		2,624,986

				3,497,122

Capital Goods 2.8%
Chart Industries, Inc. *		3,600		167,580
DigitalGlobe, Inc. *		52,072		1,488,738
Fastenal Co.		47,300		2,083,092
Proto Labs, Inc. *		17,067		1,115,670
SolarCity Corp. *		6,200		366,916
Triumph Group, Inc.		5,000		348,150

				5,570,146

Commercial & Professional Supplies 0.5%
Healthcare Services Group, Inc.		5,100		151,878
The Advisory Board Co. *		14,400		772,848

				924,726

Consumer Durables & Apparel 1.2%
Kate Spade & Co. *		55,108		1,495,080
TRI Pointe Homes, Inc. *		2,366		32,391
Under Armour, Inc., Class A *		14,100		924,678

				2,452,149

Consumer Services 0.4%
Caesars Entertainment Corp. *		3,487		42,507
Norwegian Cruise Line Holdings Ltd. *		21,462		837,018

				879,525

Diversified Financials 2.7%
American Express Co.		33,469		3,010,536
Federated Investors, Inc., Class B		41,700		1,303,959
Financial Engines, Inc.		14,970		596,854
Leucadia National Corp.		6,600		156,948
Virtus Investment Partners, Inc.		1,300		232,973

				5,301,270

Energy 4.5%
Atwood Oceanics, Inc. *		26,300		1,069,095
Cheniere Energy, Inc. *		16,200		1,215,000
Cobalt International Energy, Inc. *		108,600		1,271,706
Diamondback Energy, Inc. *		22,856		1,564,265
Golar LNG Ltd.		14,005		785,821
Gulfport Energy Corp. *		8,400		421,512
Oasis Petroleum, Inc. *		19,339		579,396
Range Resources Corp.		4,396		300,686
Scorpio Tankers, Inc.		40,400		352,692
Seadrill Ltd.		65,376		1,503,648

				9,063,821

Food & Staples Retailing 1.1%
United Natural Foods, Inc. *		32,900		2,237,858

Health Care Equipment & Services 0.7%
Acadia Healthcare Co., Inc. *		17,306		1,073,837
Intuitive Surgical, Inc. *		700		347,060

				1,420,897

Insurance 1.2%
RLI Corp.		46,400		2,300,976

Materials 4.2%
FMC Corp.		27,900		1,600,065
Louisiana-Pacific Corp. *		235,400		3,436,840
Southern Copper Corp.		28,885		831,310
W.R. Grace & Co. *		27,093		2,562,998

				8,431,213

Media 0.6%
DreamWorks Animation SKG, Inc., Class A *		39,400		877,832
Loral Space & Communications, Inc. *		5,400		413,100

				1,290,932

Pharmaceuticals, Biotechnology & Life Sciences 0.1%
Perrigo Co., plc		1,288		207,948

Real Estate 0.5%
American Realty Capital Properties, Inc.		108,899		965,934

Retailing 3.1%
Cabela’s, Inc. *		39,561		1,899,719
CarMax, Inc. *		52,200		2,918,502
Restoration Hardware Holdings, Inc. *		16,263		1,306,244

				6,124,465

Semiconductors & Semiconductor Equipment 0.6%
SunEdison, Inc. *		48,000		936,480
SunPower Corp. *		10,500		334,320

				1,270,800

Software & Services 7.7%
Cornerstone OnDemand, Inc. *		13,305		482,572
Demandware, Inc. *		9,489		568,866
LinkedIn Corp., Class A *		3,200		732,672
NetSuite, Inc. *		29,458		3,200,906
Qlik Technologies, Inc. *		54,896		1,556,302
Splunk, Inc. *		33,525		2,215,332
Tableau Software, Inc., Class A *		16,393		1,353,898
The Ultimate Software Group, Inc. *		7,414		1,115,881
WEX, Inc. *		22,161		2,516,603
Workday, Inc., Class A *		18,283		1,745,661

				15,488,693

See financial notes 59

Schwab Hedged Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

Technology Hardware & Equipment 1.8%
Finisar Corp. *		44		736
Palo Alto Networks, Inc. *		4,649		491,399
Stratasys Ltd. *		10,431		1,255,475
ViaSat, Inc. *		28,392		1,778,475

				3,526,085

Transportation 0.3%
Kansas City Southern		3,900		478,881
XPO Logistics, Inc. *		3,791		151,337

				630,218

Utilities 2.2%
ALLETE, Inc.		8,000		417,920
Dominion Resources, Inc.		24,985		1,781,431
ITC Holdings Corp.		48,374		1,916,094
SCANA Corp.		4,200		230,538

				4,345,983

Total Short Sales
(Proceeds $74,717,704)				76,728,153



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, 2014 (see financial note 2(a) for additional information):

Assets Valuation Input


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

Common Stock¹		$201,107,861			$—		$—		$201,107,861
Short-Term Investments¹		—			175,997		—		175,997

Total		$201,107,861			$175,997		$—		$201,283,858



Liabilities Valuation Input


Other Financial Instruments
Short Sales¹		($76,728,153	)		$—		$—		($76,728,153	)


¹		As categorized in Portfolio Holdings.

60 See financial notes

Schwab Hedged Equity Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends		$2,917,111
Interest	+	21

Total investment income		2,917,132

Expenses

Investment adviser and administrator fees		1,998,791
Shareholder service fees		437,591
Dividends on short sales		892,589
Stock loan fees on short sales		358,355
Professional fees		45,238
Transfer agent fees		36,612
Registration fees		25,641
Shareholder reports		16,532
Custodian fees		14,633
Portfolio accounting fees		11,998
Independent trustees’ fees		7,002
Interest expense		692
Other expenses	+	4,563

Total expenses		3,850,237
Expense reduction by CSIM and its affiliates	−	66,799

Net expenses	−	3,783,438

Net investment loss		(866,306	)

Realized and Unrealized Gains (Losses)

Net realized gains on investments		8,596,512
Net realized gains on futures contracts		82,056
Net realized gains on short sales	+	16,785,799

Net realized gains		25,464,367
Net change in unrealized appreciation (depreciation) on investments		(15,247,458	)
Net change in unrealized appreciation (depreciation) on short sales	+	10,538,311

Net change in unrealized appreciation (depreciation)	+	(4,709,147	)

Net realized and unrealized gains		20,755,220

Increase in net assets resulting from operations		$19,888,914

62 See financial notes

Schwab Hedged Equity Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment loss		($866,306	)		($961,232	)
Net realized gains		25,464,367			17,802,813
Net change in unrealized appreciation (depreciation)	+	(4,709,147	)		8,282,576

Increase in net assets from operations		19,888,914			25,124,157

Distributions to Shareholders

Distributions from net realized gains		($15,225,593	)		$—

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			2,013,414		$36,941,019			2,580,370		$44,945,152
Shares reinvested			781,617		13,490,717			—		—
Shares redeemed	+		(2,622,388	)	(47,702,546	)		(4,113,122	)	(71,764,454	)

Net transactions in fund shares			172,643		$2,729,190			(1,532,752	)	($26,819,302	)

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			10,347,975		$192,670,612			11,880,727		$194,365,757
Total increase or decrease	+		172,643		7,392,511			(1,532,752	)	(1,695,145	)

End of period			10,520,618		$200,063,123			10,347,975		$192,670,612


Net investment loss					($2,468,247	)				($1,708,651	)

See financial notes 63

Schwab Financial Services Fund

Portfolio Holdings as of October 31, 2014

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	.6%	Common Stock		62,301,615		77,473,204
	1	.5%	Other Investment Company		1,192,275		1,192,275
	0	.5%	Short-Term Investments		369,765		369,765


	101	.6%	Total Investments		63,863,655		79,035,244
	(1	.6%)	Other Assets and Liabilities, Net				(1,216,936	)


	100	.0%	Net Assets				77,818,308


	Number		Value
Security	of Shares		($)

Common Stock 99.6% of net assets

Banks 33.3%
Bank of America Corp.		197,723		3,392,927
BNC Bancorp		6,463		109,936
Citigroup, Inc.		68,903		3,688,377
Fifth Third Bancorp		33,700		673,663
First Bancorp (North Carolina)		10,600		192,072
First Defiance Financial Corp.		3,308		101,324
Huntington Bancshares, Inc.		69,000		683,790
JPMorgan Chase & Co.		67,820		4,101,753
KeyCorp		44,497		587,360
OFG Bancorp		95,768		1,491,108
Regions Financial Corp.		82,500		819,225
The PNC Financial Services Group, Inc.		30,205		2,609,410
Wells Fargo & Co.		125,000		6,636,250
WSFS Financial Corp.		10,884		856,027

				25,943,222

Diversified Financials 24.6%
Affiliated Managers Group, Inc. *		8,863		1,770,739
Berkshire Hathaway, Inc., Class B *		25,986		3,642,198
Calamos Asset Management, Inc., Class A		5,365		73,500
Capital One Financial Corp.		22,182		1,836,004
Cash America International, Inc.		7,578		372,459
Discover Financial Services		33,588		2,142,243
Interactive Brokers Group, Inc., Class A		19,700		508,654
Lazard Ltd., Class A		33,473		1,647,206
Manning & Napier, Inc.		8,270		130,997
McGraw Hill Financial, Inc.		11,817		1,069,202
Morgan Stanley		81,089		2,834,060
Nelnet, Inc., Class A		13,100		623,429
SEI Investments Co.		24,698		954,825
The Bank of New York Mellon Corp.		10,433		403,966
Voya Financial, Inc.		29,400		1,153,950

				19,163,432

Insurance 20.9%
American Equity Investment Life Holding Co.		50,200		1,295,662
AmTrust Financial Services, Inc. (a)		27,940		1,253,668
Aspen Insurance Holdings Ltd.		16,600		724,258
Assurant, Inc.		4,000		272,880
Assured Guaranty Ltd.		55,367		1,277,870
Axis Capital Holdings Ltd.		3,398		163,580
CNA Financial Corp.		38,072		1,487,854
Genworth Financial, Inc., Class A *		127,624		1,785,460
Maiden Holdings Ltd.		77,675		928,216
MetLife, Inc.		29,500		1,600,080
Prudential Financial, Inc.		10,900		965,086
Reinsurance Group of America, Inc.		22,635		1,906,999
Symetra Financial Corp.		63,952		1,515,662
The Allstate Corp.		11,899		771,650
The Hanover Insurance Group, Inc.		4,100		274,454

				16,223,379

Real Estate 20.8%
American Campus Communities, Inc.		4,857		190,734
CBRE Group, Inc., Class A *		51,900		1,660,800
Cedar Realty Trust, Inc.		30,118		207,212
Cousins Properties, Inc.		65,823		856,357
Duke Realty Corp.		102,147		1,936,707
DuPont Fabros Technology, Inc.		11,400		353,058
Equity Lifestyle Properties, Inc.		23,346		1,146,289
Host Hotels & Resorts, Inc.		24,500		571,095
Kilroy Realty Corp.		17,820		1,207,127
PS Business Parks, Inc.		15,610		1,314,674
Retail Properties of America, Inc., Class A		11,000		172,590
RLJ Lodging Trust		36,501		1,176,062
Saul Centers, Inc.		6,800		373,660
Simon Property Group, Inc.		16,113		2,887,611
SL Green Realty Corp.		18,057		2,089,195

				16,143,171

Total Common Stock
(Cost $62,301,615)				77,473,204




Other Investment Company 1.5% of net assets

Securities Lending Collateral 1.5%
Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.01% (c)		1,192,275		1,192,275

Total Other Investment Company
(Cost $1,192,275)				1,192,275

See financial notes 65

Schwab Financial Services Fund

Portfolio Holdings continued


	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

Short-Term Investments 0.5% of net assets

Time Deposit 0.4%
DNB
0.03%, 11/03/14		277,766		277,766

U.S. Treasury Obligation 0.1%
U.S. Treasury Bill
0.01%, 12/18/14 (b)		92,000		91,999

Total Short-Term Investments
(Cost $369,765)				369,765



End of Investments.

At 10/31/14, the tax basis cost of the fund’s investments was $63,898,772 and the unrealized appreciation and depreciation were $15,416,656 and ($280,184), respectively, with a net unrealized appreciation of $15,136,472.


*		Non-income producing security.
(a)		All or a portion of this security is on loan. Securities on loan were valued at $1,188,831.
(b)		The rate shown is the purchase yield.
(c)		The rate shown is the 7-day yield.

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):

Quoted Prices in

Significant

Active Markets for

Other Significant

Unobservable

Identical Assets

Observable Inputs

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total

Common Stock¹

$77,473,204

$—

$77,473,204

Other Investment Company

—

1,192,275

—

1,192,275

Short-Term Investments¹

—

369,765

—

369,765

Total

$77,473,204

$1,562,040

$—

$79,035,244


¹		As categorized in Portfolio Holdings.

66 See financial notes

Schwab Financial Services Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$547,971			$519,997
Net realized gains		8,324,709			4,302,893
Net change in unrealized appreciation (depreciation)	+	1,496,790			9,540,044

Increase in net assets from operations		10,369,470			14,362,934

Distributions to Shareholders

Distributions from net investment income		($544,804	)		($406,901	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			1,726,999		$25,585,699			1,625,426		$20,364,480
Shares reinvested			33,720		471,741			33,206		353,309
Shares redeemed	+		(1,631,931	)	(23,993,680	)		(1,249,074	)	(15,437,977	)

Net transactions in fund shares			128,788		$2,063,760			409,558		$5,279,812

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			4,790,851		$65,929,882			4,381,293		$46,694,037
Total increase	+		128,788		11,888,426			409,558		19,235,845

End of period			4,919,639		$77,818,308			4,790,851		$65,929,882


Net investment income not yet distributed					$305,727					$338,279

See financial notes 69

Schwab Health Care Fund™

Financial Statements

Financial Highlights


	11/1/13–			11/1/12–			11/1/11–			11/1/10–			11/1/09–
	10/31/14			10/31/13			10/31/12			10/31/11			10/31/10


Per-Share Data ($)

Net asset value at beginning of period		24.57			20.59			17.29			15.48			13.41

Income (loss) from investment operations:
Net investment income (loss)		0.23			0.22			0.27			0.15			0.19
Net realized and unrealized gains (losses)		5.84			6.26			3.18			1.85			2.01

Total from investment operations		6.07			6.48			3.45			2.00			2.20
Less distributions:
Distributions from net investment income		(0.19	)		(0.33	)		(0.15	)		(0.19	)		(0.13	)
Distributions from net realized gains		(2.26	)		(2.17	)		—			—			—

Total distributions		(2.45	)		(2.50	)		(0.15	)		(0.19	)		(0.13	)

Net asset value at end of period		28.19			24.57			20.59			17.29			15.48

Total return (%)		27.06			35.46			20.10			13.00			16.49

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.80			0.82			0.82			0.81	¹		0.82
Gross operating expenses		0.81			0.83			0.85			0.85			0.86
Net investment income (loss)		0.93			1.06			1.44			0.85			1.14
Portfolio turnover rate		57			54			60			24			37
Net assets, end of period ($ x 1,000,000)		1,064			816			511			414			410

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.

70 See financial notes

Schwab Health Care Fund

Portfolio Holdings as of October 31, 2014

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	.5%	Common Stock		755,463,284		1,037,931,809
	0	.4%	Other Investment Company		4,174,429		4,174,429
	2	.1%	Short-Term Investments		22,136,246		22,136,246


	100	.0%	Total Investments		781,773,959		1,064,242,484
	(0	.0%)	Other Assets and Liabilities, Net				(119,207	)


	100	.0%	Net Assets				1,064,123,277


	Number		Value
Security	of Shares		($)

Common Stock 97.5% of net assets

Australia 0.6%


Pharmaceuticals, Biotechnology & Life Sciences 0.6%
CSL Ltd.		85,764		6,055,186

Denmark 1.1%


Health Care Equipment & Services 1.1%
Coloplast A/S, Class B		137,656		11,998,271

Germany 1.7%


Pharmaceuticals, Biotechnology & Life Sciences 1.7%
Merck KGaA		196,910		17,825,145

Hong Kong 0.1%


Pharmaceuticals, Biotechnology & Life Sciences 0.1%
Sino Biopharmaceutical Ltd.		1,320,000		1,328,960

Ireland 1.3%


Pharmaceuticals, Biotechnology & Life Sciences 1.3%
Actavis plc *		52,500		12,743,850
Endo International plc *		25,800		1,726,536

				14,470,386

Israel 2.5%


Pharmaceuticals, Biotechnology & Life Sciences 2.5%
Taro Pharmaceutical Industries Ltd. *		5,988		969,697
Teva Pharmaceutical Industries Ltd.		457,825		25,843,003

				26,812,700

Japan 3.4%


Health Care Equipment & Services 0.5%
Alfresa Holdings Corp.		305,600		3,878,037
BML, Inc.		6,600		197,081
Nihon Kohden Corp.		21,800		1,114,564

				5,189,682


Pharmaceuticals, Biotechnology & Life Sciences 2.9%
Astellas Pharma, Inc.		873,300		13,554,042
Chugai Pharmaceutical Co., Ltd.		95,200		2,976,212
Kaken Pharmaceutical Co., Ltd.		146,000		3,657,886
Kyowa Hakko Kirin Co., Ltd.		544,000		6,344,858
Mitsubishi Tanabe Pharma Corp.		113,000		1,718,411
Shionogi & Co., Ltd.		119,200		3,118,480

				31,369,889

				36,559,571

Malaysia 0.0%


Health Care Equipment & Services 0.0%
Kossan Rubber Industries		128,800		180,126

Netherlands Antilles 0.0%


Health Care Equipment & Services 0.0%
Orthofix International N.V. *		13,100		384,485

Republic of Korea 0.1%


Pharmaceuticals, Biotechnology & Life Sciences 0.1%
Bukwang Pharmaceutical Co., Ltd.		42,090		783,718

South Africa 0.1%


Health Care Equipment & Services 0.1%
Netcare Ltd.		236,136		714,402

Switzerland 8.5%


Health Care Equipment & Services 0.1%
Sonova Holding AG - Reg’d		9,562		1,491,011


Pharmaceuticals, Biotechnology & Life Sciences 8.4%
Actelion Ltd. - Reg’d *		79,364		9,451,867
Lonza Group AG - Reg’d *		165,759		18,264,407
Novartis AG - Reg’d		503,736		46,748,139
Roche Holding AG		48,764		14,390,323

				88,854,736

				90,345,747

United Kingdom 1.8%


Health Care Equipment & Services 0.8%
Smith & Nephew plc		490,780		8,331,147

See financial notes 71

Schwab Health Care Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Pharmaceuticals, Biotechnology & Life Sciences 1.0%
AstraZeneca plc		143,944		10,514,872

				18,846,019

United States 76.3%


Health Care Equipment & Services 24.6%
Aetna, Inc.		333,100		27,484,081
Alere, Inc. *		85,600		3,421,432
Align Technology, Inc. *		275,900		14,517,858
Alliance HealthCare Services, Inc. *		17,700		427,101
AngioDynamics, Inc. *		58,500		994,500
Anika Therapeutics, Inc. *		56,100		2,251,854
Becton, Dickinson & Co.		47,400		6,100,380
Boston Scientific Corp. *		832,900		11,060,912
C.R. Bard, Inc.		154,200		25,284,174
Cardinal Health, Inc.		273,600		21,472,128
Centene Corp. *		97,600		9,044,592
CONMED Corp.		70,500		2,960,295
CorVel Corp. *		27,100		932,782
DaVita HealthCare Partners, Inc. *		44,800		3,497,536
Edwards Lifesciences Corp. *		122,800		14,848,976
Express Scripts Holding Co. *		156,000		11,983,920
Gentiva Health Services, Inc. *		28,100		553,570
Globus Medical, Inc., Class A *		86,500		1,917,705
Greatbatch, Inc. *		111,928		5,617,666
HCA Holdings, Inc. *		22,900		1,604,145
Health Net, Inc. *		128,200		6,090,782
Hill-Rom Holdings, Inc.		121,900		5,422,112
Kindred Healthcare, Inc.		419,841		9,131,542
LifePoint Hospitals, Inc. *		73,200		5,124,000
Magellan Health, Inc. *		85,300		5,162,356
McKesson Corp.		101,500		20,646,115
Molina Healthcare, Inc. *		181,500		8,828,160
NuVasive, Inc. *		87,900		3,595,110
Omnicell, Inc. *		15,200		491,112
PharMerica Corp. *		48,800		1,400,072
Quality Systems, Inc.		127,200		1,921,992
St. Jude Medical, Inc.		84,300		5,409,531
Stryker Corp.		67,100		5,873,263
The Providence Service Corp. *		49,200		2,173,656
Thoratec Corp. *		88,800		2,413,584
UnitedHealth Group, Inc.		67,600		6,422,676
VCA, Inc. *		126,000		5,741,820

				261,823,490


Pharmaceuticals, Biotechnology & Life Sciences 51.7%
AbbVie, Inc.		830,900		52,728,914
Acorda Therapeutics, Inc. *		44,700		1,556,454
Affymetrix, Inc. *		221,900		1,999,319
Agilent Technologies, Inc.		26,700		1,475,976
Alexion Pharmaceuticals, Inc. *		35,300		6,755,008
Allergan, Inc.		133,260		25,327,396
Amgen, Inc.		359,800		58,352,364
Bio-Rad Laboratories, Inc., Class A *		68,000		7,671,760
BioCryst Pharmaceuticals, Inc. *		184,600		2,163,512
Biogen Idec, Inc. *		122,900		39,460,732
Bristol-Myers Squibb Co.		117,255		6,823,068
Celgene Corp. *		405,700		43,446,413
Covance, Inc. *		15,400		1,230,460
Dyax Corp. *		342,800		4,240,436
Eli Lilly & Co.		205,100		13,604,283
Emergent Biosolutions, Inc. *		57,800		1,307,436
Gilead Sciences, Inc. *		478,500		53,592,000
Hyperion Therapeutics, Inc. *		17,800		432,540
Johnson & Johnson		715,400		77,105,812
Ligand Pharmaceuticals, Inc. *		59,229		3,273,587
Merck & Co., Inc.		1,151,500		66,717,910
Myriad Genetics, Inc. *(a)		48,100		1,899,469
Nektar Therapeutics *		76,000		1,048,040
PDL BioPharma, Inc. (a)		290,400		2,477,112
Pfizer, Inc.		2,327,200		69,699,640
Repligen Corp. *		57,300		1,445,106
Sagent Pharmaceuticals, Inc. *		109,200		3,455,088
The Medicines Co. *		13,700		346,884
Threshold Pharmaceuticals, Inc. *		56,957		166,884

				549,803,603

				811,627,093

Total Common Stock
(Cost $755,463,284)				1,037,931,809




Other Investment Company 0.4% of net assets

United States 0.4%


Securities Lending Collateral 0.4%
Wells Fargo Advantage Government Money Market Fund, Institutional Class 0.01% (d)		4,174,429		4,174,429

Total Other Investment Company
(Cost $4,174,429)				4,174,429



Security	Face Amount		Value
Rate, Maturity Date	Local Currency		($)

Short-Term Investments 2.1% of net assets

Time Deposits 2.0%
Australia & New Zealand Banking Group Ltd.
US Dollar
0.03%, 11/04/14		8,925,729		8,925,729
Brown Brothers Harriman
Swiss Franc
0.00%, 11/03/14		1,579,981		1,642,136
DNB
US Dollar
0.03%, 11/03/14		10,565,388		10,565,388

				21,133,253

U.S. Treasury Obligations 0.1%
U.S. Treasury Bills
0.00%, 12/18/14 (b)(c)		575,000		574,999

72 See financial notes

Schwab Health Care Fund

Portfolio Holdings continued


Security	Face Amount		Value
Rate, Maturity Date	Local Currency		($)
0.01%, 12/18/14 (b)(c)		428,000		427,994

				1,002,993

Total Short-Term Investments
(Cost $22,136,246)				22,136,246



End of Investments.

At 10/31/14, the tax basis cost of the fund’s investments was $782,154,921 and the unrealized appreciation and depreciation were $285,548,940 and ($3,461,377), respectively, with a net unrealized appreciation of $282,087,563.

At 10/31/14, the values of certain foreign securities held by the fund aggregating $210,300,022 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(a) for additional information)


*		Non-income producing security.
(a)		All or a portion of this security is on loan. Securities on loan were valued at $4,157,752.
(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

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

S&P 500 Index, e-mini, Long, expires 12/19/14

170

17,096,900

358,386

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):


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

Common Stock¹		$826,662,090		$—		$—		$826,662,090
Australia¹		—		6,055,186		—		6,055,186
Denmark¹		—		11,998,271		—		11,998,271
Germany¹		—		17,825,145		—		17,825,145
Hong Kong¹		—		1,328,960		—		1,328,960
Israel
Pharmaceuticals, Biotechnology & Life Sciences		969,697		25,843,003		—		26,812,700
Japan¹		—		36,559,571		—		36,559,571
Republic of Korea¹		—		783,718		—		783,718
South Africa¹		—		714,402		—		714,402
Switzerland¹		—		90,345,747		—		90,345,747
United Kingdom¹		—		18,846,019		—		18,846,019
Other Investment Company¹		4,174,429		—		—		4,174,429
Short-Term Investments¹		—		22,136,246		—		22,136,246

Total		$831,806,216		$232,436,268		$—		$1,064,242,484

Other Financial Instruments
Futures Contracts²		$358,386		$—		$—		$358,386


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

See financial notes 73

Schwab Health Care Fund

Statement of

Assets and Liabilities

As of October 31, 2014



Assets

Investments, at value (cost $777,599,530) including securities on loan of $4,157,752		$1,060,068,055
Collateral invested for securities on loan, at value (cost $4,174,429)	+	4,174,429

Total investments, at value (cost $781,773,959)		1,064,242,484
Foreign currency, at value (cost $456,475)		438,615
Cash		250,000
Receivables:
Fund shares sold		2,603,698
Dividends		669,258
Foreign tax reclaims		646,609
Variation margin on futures contracts		193,800
Income from securities on loan		13,047
Interest		16
Prepaid expenses	+	15,111

Total assets		1,069,072,638

Liabilities

Collateral held for securities on loan		4,174,429
Payables:
Investment adviser and administrator fees		60,033
Shareholder service fees		44,113
Fund shares redeemed		587,134
Accrued expenses	+	83,652

Total liabilities		4,949,361

Net Assets

Total assets		1,069,072,638
Total liabilities	−	4,949,361

Net assets		$1,064,123,277

Net Assets by Source
Capital received from investors		651,868,349
Net investment income not yet distributed		7,711,159
Net realized capital gains		121,781,285
Net unrealized capital appreciation		282,762,484

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$1,064,123,277

37,750,728

$28.19

74 See financial notes

Schwab Health Care Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends (net of foreign withholding taxes of $538,461)		$15,792,004
Interest		4,135
Securities on loan	+	170,039

Total investment income		15,966,178

Expenses

Investment adviser and administrator fees		4,877,930
Shareholder service fees		2,194,480
Shareholder reports		89,410
Transfer agent fees		82,155
Custodian fees		71,618
Portfolio accounting fees		65,392
Registration fees		47,908
Professional fees		34,427
Independent trustees’ fees		10,435
Interest expense		1,396
Other expenses	+	18,533

Total expenses		7,493,684
Expense reduction by CSIM and its affiliates	−	82,155

Net expenses	−	7,411,529

Net investment income		8,554,649

Realized and Unrealized Gains (Losses)

Net realized gains on investments		121,909,801
Net realized gains on futures contracts		657,856
Net realized losses on foreign currency transactions	+	(166,679	)

Net realized gains		122,400,978
Net change in unrealized appreciation (depreciation) on investments		91,265,896
Net change in unrealized appreciation (depreciation) on futures contracts		187,748
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	(74,264	)

Net change in unrealized appreciation (depreciation)	+	91,379,380

Net realized and unrealized gains		213,780,358

Increase in net assets resulting from operations		$222,335,007

See financial notes 75

Schwab Health Care Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$8,554,649			$6,965,890
Net realized gains		122,400,978			75,480,788
Net change in unrealized appreciation (depreciation)	+	91,379,380			112,825,265

Increase in net assets from operations		222,335,007			195,271,943

Distributions to Shareholders

Distributions from net investment income		(6,270,757	)		(8,336,930	)
Distributions from net realized gains	+	(76,135,752	)		(54,300,003	)

Total distributions		($82,406,509	)		($62,636,933	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			8,951,426		$224,018,159			11,259,344		$243,726,416
Shares reinvested			3,264,515		74,267,727			3,014,800		55,894,398
Shares redeemed	+		(7,695,559	)	(190,483,862	)		(5,854,185	)	(126,778,797	)

Net transactions in fund shares			4,520,382		$107,802,024			8,419,959		$172,842,017

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			33,230,346		$816,392,755			24,810,387		$510,915,728
Total increase	+		4,520,382		247,730,522			8,419,959		305,477,027

End of period			37,750,728		$1,064,123,277			33,230,346		$816,392,755


Net investment income not yet distributed					$7,711,159					$5,180,420

76 See financial notes

Schwab^® International Core Equity Fund

Financial Statements

Financial Highlights


	11/1/13–			11/1/12–			11/1/11–			11/1/10–			11/1/09–
	10/31/14			10/31/13			10/31/12			10/31/11			10/31/10


Per-Share Data ($)

Net asset value at beginning of period		9.82			7.90			7.32			7.80			7.25

Income (loss) from investment operations:
Net investment income (loss)		0.29	¹		0.20			0.16			0.17			0.16
Net realized and unrealized gains (losses)		(0.08	)		1.93			0.62			(0.46	)		0.57

Total from investment operations		0.21			2.13			0.78			(0.29	)		0.73
Less distributions:
Distributions from net investment income		(0.26	)		(0.21	)		(0.20	)		(0.19	)		(0.18	)

Net asset value at end of period		9.77			9.82			7.90			7.32			7.80

Total return (%)		2.20			27.70			11.17			(3.89	)		10.09

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.86			0.86			0.86			0.80	²		0.87	³
Gross operating expenses		0.98			1.10			1.16			1.22			1.27
Net investment income (loss)		2.95			2.40			2.45			2.32			1.85
Portfolio turnover rate		90			75			112			86			91	⁴
Net assets, end of period ($ x 1,000,000)		423			147			78			60			53

¹ Calculated based on the average shares outstanding during the period.

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.

See financial notes 77

Schwab International Core Equity Fund

Portfolio Holdings as of October 31, 2014

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	.7%	Common Stock		412,460,053		417,095,914
	1	.4%	Other Investment Company		5,747,659		5,747,659
	0	.1%	Short-Term Investments		513,996		513,996


	100	.2%	Total Investments		418,721,708		423,357,569
	(0	.2%)	Other Assets and Liabilities, Net				(781,670	)


	100	.0%	Net Assets				422,575,899


	Number		Value
Security	of Shares		($)

Common Stock 98.7% of net assets

Australia 6.3%


Banks 1.3%
Commonwealth Bank of Australia		34,485		2,452,208
Westpac Banking Corp.		96,449		2,960,431

				5,412,639


Capital Goods 0.2%
Monadelphous Group Ltd.		73,089		810,676


Commercial & Professional Supplies 0.1%
Mineral Resources Ltd.		38,840		291,145


Diversified Financials 0.4%
Challenger Ltd.		282,086		1,735,015


Energy 1.6%
Beach Energy Ltd.		1,360,482		1,407,280
Woodside Petroleum Ltd.		148,262		5,266,317

				6,673,597


Food & Staples Retailing 0.3%
Metcash Ltd.		486,183		1,214,277


Health Care Equipment & Services 0.2%
Sigma Pharmaceuticals Ltd.		1,363,627		929,063


Insurance 0.4%
Suncorp Group Ltd.		131,084		1,705,695


Materials 1.5%
BHP Billiton Ltd.		22,271		666,278
CSR Ltd.		335,801		1,027,762
Rio Tinto Ltd.		89,809		4,795,648

				6,489,688


Telecommunication Services 0.3%
Telstra Corp., Ltd.		267,141		1,329,335

				26,591,130

Belgium 1.1%


Energy 0.1%
Exmar N.V.		24,915		348,281


Food & Staples Retailing 0.5%
Delhaize Group S.A.		30,175		2,063,211


Transportation 0.5%
bpost S.A.		83,184		2,059,302

				4,470,794

Brazil 0.3%


Banks 0.3%
Banco do Brasil S.A.		114,100		1,276,885

Canada 1.1%


Automobiles & Components 1.1%
Magna International, Inc.		45,363		4,477,335

China 1.6%


Materials 0.3%
China Resources Cement Holdings Ltd.		1,696,000		1,153,278


Technology Hardware & Equipment 0.6%
Lenovo Group Ltd.		1,642,000		2,420,315


Utilities 0.7%
China Resources Power Holdings Co., Ltd.		1,090,039		3,172,715

				6,746,308

Denmark 3.2%


Consumer Durables & Apparel 0.2%
Pandora A/S		10,019		844,717


Health Care Equipment & Services 0.5%
Coloplast A/S, Class B		21,447		1,869,347


Pharmaceuticals, Biotechnology & Life Sciences 0.8%
Novo Nordisk A/S, Class B		78,512		3,548,956


Transportation 1.7%
AP Moeller - Maersk A/S, Series B		3,141		7,329,763

				13,592,783

Finland 1.0%


Capital Goods 0.1%
Metso Oyj		14,580		476,360


Materials 0.1%
UPM-Kymmene Oyj		24,368		386,537


Pharmaceuticals, Biotechnology & Life Sciences 0.8%
Orion Oyj, Class B		94,375		3,209,844

				4,072,741

78 See financial notes

Schwab International Core Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

France 7.4%


Automobiles & Components 0.6%
Compagnie Generale des Etablissements Michelin		28,685		2,491,491


Banks 0.5%
Credit Agricole S.A.		151,075		2,235,649


Capital Goods 0.6%
Vinci S.A.		40,936		2,336,555


Consumer Durables & Apparel 0.0%
Hermes International		646		200,055


Energy 3.1%
Etablissements Maurel et Prom *		24,827		296,735
Technip S.A.		5,028		363,275
Total S.A.		205,857		12,290,333

				12,950,343


Food & Staples Retailing 0.4%
Casino Guichard Perrachon S.A.		2,306		236,442
Rallye S.A.		42,232		1,636,765

				1,873,207


Insurance 0.2%
CNP Assurances		33,640		628,905


Pharmaceuticals, Biotechnology & Life Sciences 1.4%
Sanofi		63,141		5,729,416


Technology Hardware & Equipment 0.1%
Neopost S.A.		4,476		310,634


Telecommunication Services 0.4%
Orange S.A.		111,511		1,775,296


Utilities 0.1%
GDF Suez		23,117		561,279

				31,092,830

Germany 8.4%


Automobiles & Components 1.8%
Bayerische Motoren Werke AG		40,417		4,334,226
Continental AG		12,826		2,526,283
Daimler AG - Reg’d		10,757		838,712

				7,699,221


Capital Goods 1.0%
Duerr AG		14,845		1,042,775
HOCHTIEF AG		4,570		338,174
Siemens AG - Reg’d		20,027		2,258,914
Wacker Neuson SE		23,144		450,353

				4,090,216


Consumer Durables & Apparel 0.9%
Hugo Boss AG		28,514		3,788,329


Insurance 2.3%
Allianz SE - Reg’d		55,177		8,774,364
Hannover Rueck SE		9,375		782,506

				9,556,870


Materials 0.3%
BASF SE		15,507		1,370,201


Media 1.1%
ProSiebenSat.1 Media AG - Reg’d		116,654		4,712,372


Pharmaceuticals, Biotechnology & Life Sciences 0.8%
Merck KGaA		35,213		3,187,633


Software & Services 0.2%
United Internet AG - Reg’d		24,892		976,224

				35,381,066

Greece 0.1%


Consumer Services 0.1%
OPAP S.A.		37,865		458,732

Hong Kong 2.5%


Capital Goods 0.5%
Hutchison Whampoa Ltd.		167,000		2,117,653


Diversified Financials 0.3%
Sun Hung Kai & Co., Ltd.		1,708,065		1,271,865


Energy 0.3%
CNOOC Ltd.		806,000		1,262,106


Materials 0.1%
Huabao International Holdings Ltd.		694,000		496,248


Real Estate 0.9%
Cheung Kong (Holdings) Ltd.		214,000		3,798,987


Telecommunication Services 0.3%
China Mobile Ltd.		97,000		1,206,924


Utilities 0.1%
Guangdong Investment Ltd.		464,000		610,356

				10,764,139

Israel 0.5%


Pharmaceuticals, Biotechnology & Life Sciences 0.5%
Teva Pharmaceutical Industries Ltd.		36,605		2,066,255

Italy 0.9%


Automobiles & Components 0.6%
Brembo S.p.A.		52,500		1,740,973
Pirelli & C. S.p.A		76,930		1,031,612

				2,772,585


Capital Goods 0.0%
Danieli & Co., Officine Meccaniche S.p.A.		5,029		117,337


Real Estate 0.1%
Beni Stabili Spa		323,342		222,951


Telecommunication Services 0.2%
Telecom Italia S.p.A. *		653,369		740,451

				3,853,324

Japan 21.7%


Automobiles & Components 0.1%
Calsonic Kansei Corp.		75,781		419,557


Banks 4.8%
Resona Holdings, Inc.		1,507,000		8,619,717
Sumitomo Mitsui Financial Group, Inc.		243,300		9,922,481
The Bank of Yokohama Ltd.		277,000		1,600,849

				20,143,047

See financial notes 79

Schwab International Core Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Capital Goods 1.1%
COMSYS Holdings Corp.		88,900		1,587,095
Hoshizaki Electric Co., Ltd.		12,300		595,783
Minebea Co., Ltd.		16,000		219,239
Mitsubishi Electric Corp.		167,000		2,153,263
Takeuchi Manufacturing Co., Ltd.		6,500		273,223

				4,828,603


Commercial & Professional Supplies 0.2%
Meitec Corp.		25,600		802,788


Consumer Durables & Apparel 1.0%
Gunze Ltd.		375,869		1,046,059
Haseko Corp.		105,000		769,642
Panasonic Corp.		170,600		2,052,531
Yondoshi Holdings, Inc.		13,600		244,934

				4,113,166


Consumer Services 0.2%
Kura Corp.		8,200		222,316
Oriental Land Co., Ltd.		3,800		812,589

				1,034,905


Diversified Financials 1.4%
Daiwa Securities Group, Inc.		327,000		2,584,267
ORIX Corp.		243,100		3,374,287

				5,958,554


Health Care Equipment & Services 0.1%
Fukuda Denshi Co., Ltd.		8,000		409,448


Household & Personal Products 0.2%
Kao Corp.		19,300		752,586


Materials 0.9%
Asahi Holdings, Inc.		93,300		1,553,181
Nippon Paint Holdings Co., Ltd.		95,000		2,157,197

				3,710,378


Media 0.2%
SKY Perfect JSAT Holdings, Inc.		121,870		748,135


Pharmaceuticals, Biotechnology & Life Sciences 0.8%
Astellas Pharma, Inc.		161,600		2,508,111
Kaken Pharmaceutical Co., Ltd.		38,000		952,052

				3,460,163


Real Estate 0.2%
Daito Trust Construction Co., Ltd.		3,900		485,943
Takara Leben Co., Ltd.		78,300		331,794

				817,737


Retailing 1.1%
Canon Marketing Japan, Inc.		220,108		4,499,934
T-Gaia Corp.		28,000		279,939

				4,779,873


Semiconductors & Semiconductor Equipment 0.1%
Shindengen Electric Manufacturing Co., Ltd.		91,000		592,811


Software & Services 1.0%
Fujitsu Ltd.		671,000		4,079,319


Technology Hardware & Equipment 1.1%
Canon, Inc.		105,000		3,221,417
Japan Aviation Electronics Industry Ltd.		78,000		1,545,399

				4,766,816


Telecommunication Services 1.6%
Nippon Telegraph & Telephone Corp.		112,200		6,980,952


Transportation 0.9%
Central Japan Railway Co.		20,345		3,034,435
West Japan Railway Co.		13,500		643,482

				3,677,917


Utilities 4.7%
Osaka Gas Co., Ltd.		1,454,000		5,799,760
Tohoku Electric Power Co., Inc.		402,800		5,034,277
Tokyo Gas Co., Ltd.		1,536,000		8,853,985

				19,688,022

				91,764,777

Malaysia 0.1%


Real Estate 0.1%
Eastern & Oriental Bhd		359,700		306,338

Malta 0.5%


Consumer Services 0.5%
Unibet Group plc SDR		36,503		2,103,428

Netherlands 4.2%


Food & Staples Retailing 1.9%
Koninklijke Ahold N.V.		475,085		7,957,024


Food, Beverage & Tobacco 1.8%
Unilever N.V. CVA		198,650		7,699,366


Semiconductors & Semiconductor Equipment 0.4%
ASM International N.V.		43,153		1,729,258


Transportation 0.1%
PostNL N.V. *		54,225		230,475

				17,616,123

New Zealand 0.2%


Transportation 0.2%
Air New Zealand Ltd.		592,237		937,560

Norway 0.9%


Banks 0.2%
SpareBank 1 SMN		89,118		792,459


Energy 0.4%
Statoil A.S.A.		84,156		1,925,946


Food, Beverage & Tobacco 0.3%
Austevoll Seafood A.S.A.		89,647		582,964
Leroy Seafood Group A.S.A.		10,652		402,959
Salmar A.S.A.		13,265		238,989

				1,224,912

				3,943,317

Republic of Korea 0.1%


Capital Goods 0.1%
Doosan Infracore Co., Ltd. *		17,020		172,250

80 See financial notes

Schwab International Core Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Technology Hardware & Equipment 0.0%
LG Display Co., Ltd. *		4,350		128,060

				300,310

Singapore 2.8%


Banks 1.1%
DBS Group Holdings Ltd.		314,000		4,517,020


Food, Beverage & Tobacco 0.1%
Indofood Agri Resources Ltd.		616,603		401,185


Real Estate 0.2%
UOL Group Ltd.		154,000		773,504


Retailing 0.2%
Jardine Cycle & Carriage Ltd.		29,000		901,448


Transportation 1.2%
ComfortDelGro Corp., Ltd.		1,912,000		3,931,076
Singapore Post Ltd.		878,000		1,347,616

				5,278,692

				11,871,849

Spain 3.8%


Banks 2.0%
Banco Santander S.A.		954,073		8,429,735


Capital Goods 1.5%
ACS, Actividades de Construccion y Servicios S.A.		166,985		6,198,127
Sacyr S.A. *		56,644		248,885

				6,447,012


Utilities 0.3%
Endesa S.A.		64,035		1,249,186

				16,125,933

Sweden 2.0%


Banks 0.3%
Swedbank AB, A Shares		51,736		1,371,039


Capital Goods 0.3%
Peab AB		48,451		328,937
Trelleborg AB, B Shares		62,447		1,069,114

				1,398,051


Food & Staples Retailing 0.2%
Axfood AB		13,433		826,811


Real Estate 0.6%
Fastighets AB Balder, B Shares *		110,508		1,439,855
Wihlborgs Fastigheter AB		48,966		858,781

				2,298,636


Retailing 0.1%
Hennes & Mauritz AB, B Shares		10,339		412,520


Technology Hardware & Equipment 0.5%
Telefonaktiebolaget LM Ericsson, B Shares		193,260		2,283,637

				8,590,694

Switzerland 9.2%


Capital Goods 0.2%
Geberit AG - Reg’d		1,040		354,988
Rieter Holding AG - Reg’d *		1,894		349,769

				704,757


Consumer Durables & Apparel 0.2%
Forbo Holding AG - Reg’d *		1,015		1,053,347


Food, Beverage & Tobacco 2.2%
Aryzta AG *		19,796		1,688,629
Nestle S.A. - Reg’d		102,632		7,526,425

				9,215,054


Insurance 4.4%
Helvetia Holding AG - Reg’d		6,826		3,245,870
Swiss Life Holding AG - Reg’d *		36,143		8,292,676
Zurich Insurance Group AG *		23,829		7,211,333

				18,749,879


Materials 0.1%
Givaudan S.A. - Reg’d *		225		375,744


Pharmaceuticals, Biotechnology & Life Sciences 2.1%
Actelion Ltd. - Reg’d *		12,936		1,540,615
Lonza Group AG - Reg’d *		6,508		717,094
Novartis AG - Reg’d		39,866		3,699,678
Roche Holding AG		10,173		3,002,066

				8,959,453

				39,058,234

United Kingdom 18.8%


Banks 0.6%
Bank of Georgia Holdings plc		19,106		783,587
HSBC Holdings plc		161,684		1,648,427

				2,432,014


Capital Goods 0.1%
QinetiQ Group plc		150,283		487,082


Commercial & Professional Supplies 0.7%
Berendsen plc		113,098		1,831,404
Rentokil Initial plc		461,830		910,790

				2,742,194


Consumer Durables & Apparel 0.9%
Persimmon plc *		56,929		1,336,988
Taylor Wimpey plc		1,285,610		2,442,095

				3,779,083


Consumer Services 0.1%
Carnival plc		8,970		357,687


Diversified Financials 0.8%
Investec plc		241,770		2,216,904
Man Group plc		606,203		1,201,963

				3,418,867


Energy 3.4%
BP plc		523,625		3,767,430
Royal Dutch Shell plc, B Shares		269,972		9,974,231
Soco International plc *		118,102		622,007

				14,363,668

See financial notes 81

Schwab International Core Equity Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Food & Staples Retailing 0.2%
Greggs plc		80,976		785,450


Food, Beverage & Tobacco 2.9%
British American Tobacco plc		41,547		2,354,784
Unilever plc		248,077		9,979,016

				12,333,800


Household & Personal Products 0.2%
Reckitt Benckiser Group plc		8,140		685,579


Insurance 0.4%
Direct Line Insurance Group plc		101,863		450,607
Old Mutual plc		441,922		1,372,422

				1,823,029


Materials 2.9%
Anglo American plc		27,446		579,482
BHP Billiton plc		251,417		6,495,761
Rio Tinto plc		111,253		5,293,579

				12,368,822


Pharmaceuticals, Biotechnology & Life Sciences 1.3%
AstraZeneca plc		34,355		2,509,576
Shire plc		46,833		3,142,351

				5,651,927


Real Estate 0.5%
Grainger plc		564,736		1,711,364
Great Portland Estates plc		52,314		575,770

				2,287,134


Retailing 1.9%
Inchcape plc		61,620		686,466
Next plc		56,819		5,865,805
WH Smith plc		91,586		1,653,565

				8,205,836


Technology Hardware & Equipment 0.6%
Pace plc		470,276		2,614,469


Telecommunication Services 1.0%
BT Group plc		557,646		3,287,507
Vodafone Group plc		276,642		919,961

				4,207,468


Transportation 0.3%
easyJet plc		45,317		1,088,920

				79,633,029

Total Common Stock
(Cost $412,460,053)				417,095,914




Other Investment Company 1.4% of net assets

Money Market Fund 1.4%
State Street Institutional U.S. Government Money Market Fund, Premier Class 0.00% (c)		5,747,659		5,747,659

Total Other Investment Company
(Cost $5,747,659)				5,747,659



	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

Short-Term Investments 0.1% of net assets

U.S. Treasury Obligations 0.1%
U.S. Treasury Bills
0.00%, 12/18/14 (a)(b)		250,000		250,000
0.01%, 12/18/14 (a)(b)		264,000		263,996

Total Short-Term Investments
(Cost $513,996)				513,996



End of Investments.

At 10/31/14, the tax basis cost of the fund’s investments was $420,129,104 and the unrealized appreciation and depreciation were $16,560,581 and ($13,332,116), respectively, with a net unrealized appreciation of $3,228,465.

At 10/31/14, the values of certain foreign securities held by the fund aggregating $405,298,806 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(a) for additional information).


*		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.


CVA —		Dutch Certificate
Reg’d —		Registered
SDR —		Swedish Depositary Receipt

In addition to the above, the fund held the following at 10/31/14:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

MSCI EAFE, e-mini, Long, expires 12/19/14

2,295,000

152,233

82 See financial notes

Schwab International Core Equity Fund

Portfolio Holdings continued

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):


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

Common Stock¹		$—		$357,118,544		$—		$357,118,544
Belgium¹		—		2,411,492		—		2,411,492
Transportation		2,059,302		—		—		2,059,302
Brazil¹		1,276,885		—		—		1,276,885
Canada¹		4,477,335		—		—		4,477,335
Malta¹		2,103,428		—		—		2,103,428
Sweden¹		—		7,763,883		—		7,763,883
Food & Staples Retailing		826,811		—		—		826,811
Switzerland¹		—		38,004,887		—		38,004,887
Consumer Durables & Apparel		1,053,347		—		—		1,053,347
Other Investment Company¹		5,747,659		—		—		5,747,659
Short-Term Investments¹		—		513,996		—		513,996

Total		$17,544,767		$405,812,802		$—		$423,357,569

Other Financial Instruments
Futures Contracts²		$152,233		$—		$—		$152,233


¹		As categorized in Portfolio Holdings.
²		Futures contracts are not included in Investments in the schedule of portfolio holdings 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 $188,076 and $512,489 from Level 1 to Level 2 and from Level 2 to Level 1, respectively, for the period ended October 31, 2014. 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 during the period.

See financial notes 83

Schwab International Core Equity Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends (net of foreign withholding taxes of $793,556)		$8,230,698
Interest	+	166

Total investment income		8,230,864

Expenses

Investment adviser and administrator fees		1,253,116
Shareholder service fees		531,546
Custodian fees		96,890
Portfolio accounting fees		59,954
Professional fees		50,283
Registration fees		43,456
Shareholder reports		36,943
Transfer agent fees		27,662
Independent trustees’ fees		7,022
Interest expense		20
Other expenses	+	4,829

Total expenses		2,111,721
Expense reduction by CSIM and its affiliates	−	253,633

Net expenses	−	1,858,088

Net investment income		6,372,776

Realized and Unrealized Gains (Losses)

Net realized gains on investments		12,517,932
Net realized gains on futures contracts		118,091
Net realized losses on foreign currency transactions	+	(97,481	)

Net realized gains		12,538,542
Net change in unrealized appreciation (depreciation) on investments		(18,769,012	)
Net change in unrealized appreciation (depreciation) on futures contracts		122,097
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	(29,343	)

Net change in unrealized appreciation (depreciation)	+	(18,676,258	)

Net realized and unrealized losses		(6,137,716	)

Increase in net assets resulting from operations		$235,060

See financial notes 85

Schwab International Core Equity Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$6,372,776			$2,561,773
Net realized gains		12,538,542			6,540,993
Net change in unrealized appreciation (depreciation)	+	(18,676,258	)		17,187,224

Increase in net assets from operations		235,060			26,289,990

Distributions to Shareholders

Distributions from net investment income		($4,000,904	)		($2,100,275	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			35,207,779		$349,758,745			8,070,603		$70,752,618
Shares reinvested			277,927		2,612,515			154,692		1,217,426
Shares redeemed	+		(7,226,558	)	(73,262,028	)		(3,128,819	)	(27,045,232	)

Net transactions in fund shares			28,259,148		$279,109,232			5,096,476		$44,924,812

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			14,988,454		$147,232,511			9,891,978		$78,117,984
Total increase	+		28,259,148		275,343,388			5,096,476		69,114,527

End of period			43,247,602		$422,575,899			14,988,454		$147,232,511


Net investment income not yet distributed					$4,844,140					$2,291,719

86 See financial notes

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 Target 2010 Fund
Schwab Core Equity Fund		Schwab Target 2015 Fund
Schwab Dividend Equity Fund		Schwab Target 2020 Fund
Schwab Large-Cap Growth Fund		Schwab Target 2025 Fund
Schwab Small-Cap Equity Fund		Schwab Target 2030 Fund
Schwab Hedged Equity Fund		Schwab Target 2035 Fund
Schwab Financial Services Fund		Schwab Target 2040 Fund
Schwab Health Care Fund		Schwab Target 2045 Fund
Schwab International Core Equity Fund		Schwab Target 2050 Fund
Schwab S&P 500 Index Fund		Schwab Target 2055 Fund
Schwab Small-Cap Index Fund		Schwab Fundamental US Large Company Index Fund
Schwab Total Stock Market Index Fund		Schwab Fundamental US Small Company Index Fund
Schwab International Index Fund		Schwab Fundamental International Large Company Index Fund
Schwab MarketTrack All Equity Portfolio		Schwab Fundamental International Small Company Index Fund
Schwab MarketTrack Growth Portfolio		Schwab Fundamental Emerging Markets Large Company Index Fund
Schwab MarketTrack Balanced Portfolio		Schwab Fundamental Global Real Estate 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
Schwab Balanced Fund

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

Schwab Active Equity Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):


		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 contracts (“futures”) and forward foreign currency exchange contracts (“forwards”): 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 may be 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, without consideration to the classification level of the specific investments held by the underlying fund.

	•	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

Schwab Active Equity Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):


		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, 2014 are disclosed in the Portfolio Holdings.

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

Forward Foreign Currency Exchange Contracts: Forwards 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 appreciation or depreciation until the contracts settle, at which time the gains or losses are realized.

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 be maintained on a daily marked-to-market basis in an amount at least equal to the current value of the securities loaned. The lending agent provides a fund with indemnification against borrower default (the borrower fails to return the security on loan) reducing the risk of loss as a result of default. The cash collateral of securities loaned is currently invested in money market portfolios operating under Rule 2a-7 of the 1940 Act. Each fund bears the risk of loss with respect to the investment of cash collateral. The terms of the securities lending agreement allow the funds to terminate any loans at any given time. Securities lending income, as disclosed in each 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 and broker rebates which are subject to adjustments pursuant to the securities lending agreement. On loans not collateralized by cash, a fee is received from the borrower, and is allocated between a fund and the lending agent. A fund retains the right to recall a security on loan. The aggregate market value of securities loaned will not at any time exceed one-third of the total assets of a fund, including collateral received from the loan (at market value computed at the time of the loan). Total costs and expenses, including agent fees, associated with securities lending activities under the trust’s Securities Lending Program paid to the unaffiliated lending agent are approximately 15% of the gross lending revenues.

Schwab Active Equity Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

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.

(c) Security Transactions:

If a fund sells securities short, it records the proceeds received as an asset and the obligation to buy back the securities as a liability. At the time a short sale is initiated, the asset and 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 a 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 a fund’s records and presented in the Statement of Operations. A fund may also incur stock loan fees which represent the cost of borrowing securities used for short sale transactions.

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:

(e) Expenses:

Schwab Active Equity Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(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.

(g) Custody Credit:

(h) Accounting Estimates:

(i) Federal Income Taxes:

(j) Foreign Taxes:

(k) Indemnification:

3. Risk Factors:

Management Risk. 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 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.

Schwab Active Equity Funds

Financial Notes (continued)

3. Risk Factors (continued):

Small-Cap Risk. 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 performance also will lag those investments.

Large- and Mid-Cap Risk. 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 performance also will lag those investments.

Growth Investing Risk. 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.

Liquidity Risk. 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 Risk. 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.

ETFs Risk. 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.

REITs Risk. 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.

Short Sales Risk. 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 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.

Schwab Active Equity Funds

Financial Notes (continued)

3. Risk Factors (continued):

Dividend Paying Risk. 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 Markets Risk. 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, which may be magnified by currency fluctuations relative to the U.S. dollar.

Concentration Risk. 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.

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		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%

Schwab Active Equity Funds

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):

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.

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, 2014, as applicable:


	Underlying Funds
							Schwab
	Schwab		Schwab		Schwab		International
	Core		Dividend		Small-Cap		Core
	Equity Fund		Equity Fund		Equity Fund		Equity Fund

Schwab Target 2010 Fund		0.2%		0.1%		0.2%		0.4%
Schwab Target 2015 Fund		0.4%		0.2%		0.4%		0.9%
Schwab Target 2020 Fund		2.1%		1.2%		3.0%		5.2%
Schwab Target 2025 Fund		1.6%		0.9%		2.6%		4.3%
Schwab Target 2030 Fund		3.8%		2.1%		6.6%		10.1%
Schwab Target 2035 Fund		1.6%		0.9%		3.0%		4.3%
Schwab Target 2040 Fund		4.5%		2.5%		9.0%		12.5%
Schwab Target 2045 Fund		0.2%		0.1%		0.5%		0.7%
Schwab Target 2050 Fund		0.2%		0.1%		0.4%		0.6%
Schwab Target 2055 Fund		0.1%		0.1%		0.2%		0.3%
Schwab Monthly Income Fund - Moderate Payout		—%		0.7%		—%		—%
Schwab Monthly Income Fund - Enhanced Payout		—%		1.0%		—%		—%
Schwab Monthly Income Fund - Maximum Payout		—%		0.3%		—%		—%
Schwab Balanced Fund		3.1%		—%		—%		—%

Schwab Active Equity Funds

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):

5. Board of Trustees:

6. Borrowing from Banks:

7. Purchases and Sales/Maturities of Investment Securities:

For the period ended October 31, 2014, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:


	Purchases of Securities		Sales/Maturities of Securities

Schwab Core Equity Fund		$1,428,796,220		$1,725,857,740
Schwab Dividend Equity Fund		1,409,374,158		1,389,210,327
Schwab Large-Cap Growth Fund		207,778,177		244,576,946
Schwab Small-Cap Equity Fund		650,320,900		642,413,723
Schwab Hedged Equity Fund*		267,898,995		278,811,252
Schwab Financial Services Fund		56,831,347		54,320,995
Schwab Health Care Fund		544,637,130		523,014,986
Schwab International Core Equity Fund		473,127,200		194,669,452


*		Including securities sold short.

8. Derivatives:

Schwab Active Equity Funds

Financial Notes (continued)

8. Derivatives (continued):

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 Core Equity Fund		$21,342,707		222
Schwab Dividend Equity Fund		10,756,152		114
Schwab Large-Cap Growth Fund		1,170,240		12
Schwab Small-Cap Equity Fund		6,796,877		60
Schwab Hedged Equity Fund		1,449,355		15
Schwab Financial Services Fund		189,060		2
Schwab Health Care Fund		10,318,978		109
Schwab International Core Equity Fund		5,723,689		60

9. Redemption Fee:


	Current Period		Prior Period
	(11/1/13-10/31/14)		(11/1/12-10/31/13)

Schwab Core Equity Fund		$14,486		$19,267
Schwab Dividend Equity Fund		41,450		50,175
Schwab Large-Cap Growth Fund		3,756		6,787
Schwab Small-Cap Equity Fund		23,409		15,023
Schwab Hedged Equity Fund		3,590		10,792
Schwab Financial Services Fund		3,411		4,292
Schwab Health Care Fund		39,555		38,090
Schwab International Core Equity Fund		21,857		8,761

10. Federal Income Taxes:

As of October 31, 2014, 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		$67,487,129			$46,941,837			$972,559			$25,249,519			$—
Undistributed long-term capital gains		264,904,718			225,397,975			25,102,702			97,540,036			25,864,374
Unrealized appreciation on investments		509,940,490			358,755,537			52,282,452			101,098,169			33,713,856
Unrealized depreciation on investments		(18,026,424	)		(16,626,751	)		(3,360,676	)		(29,704,064	)		(3,725,060	)
Other unrealized appreciation (depreciation)		—			—			—			—			(2,428,210	)

Net unrealized appreciation (depreciation)		$491,914,066			$342,128,786			$48,921,776			$71,394,105			$27,560,586

Schwab Active Equity Funds

Financial Notes (continued)

10. Federal Income Taxes (continued):


							Schwab
	Schwab			Schwab			International
	Financial			Health Care			Core
	Services Fund			Fund			Equity Fund

							Schwab
	Schwab			Schwab			International
	Financial			Health Care			Core
	Services Fund			Fund			Equity Fund

Undistributed ordinary income		$305,727			$57,481,848			$6,060,608
Undistributed long-term capital gains		—			72,749,944			8,245,752
Unrealized appreciation on investments		15,416,656			285,548,940			16,560,581
Unrealized depreciation on investments		(280,184	)		(3,461,377	)		(13,332,116	)
Other unrealized appreciation (depreciation)		—			(64,427	)		(23,119	)

Net unrealized appreciation (depreciation)		$15,136,472			$282,023,136			$3,205,346

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

Core

Dividend

Large-Cap

Small-Cap

Hedged

Expiration Date

Equity Fund

Growth Fund

Equity Fund

October 31, 2016

$20,327,999

$—

October 31, 2017

1,636,580

—

Total

$21,964,579

$—

Schwab

International

Financial

Health Care

Core

Expiration Date

Services Fund

Fund

Equity Fund

October 31, 2017

$22,923,793

$—

$7,906,337

October 31, 2018

170,394

—

Total

$23,094,187

$—

$7,906,337


*		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 during the first day of the next taxable year. For the year ended October 31, 2014, the funds had late-year ordinary losses deferred and capital loss carryforwards utilized as follows:

Schwab

Core

Dividend

Large-Cap

Small-Cap

Hedged

Equity Fund

Growth Fund

Equity Fund

Late-year ordinary losses deferred

$—

($2,468,247

)

Capital loss carryforwards utilized

12,317,025

—

14,051,004

—

Schwab

International

Financial

Health Care

Core

Services Fund

Fund

Equity Fund

Capital loss carryforwards utilized

$8,384,496

$—

$4,262,847

Schwab Active Equity 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		Schwab
	Core		Dividend		Large-Cap		Small-Cap		Hedged
	Equity Fund		Equity Fund		Growth Fund		Equity Fund		Equity Fund

Current period distributions
Ordinary income		$21,200,511		$30,034,449		$1,490,864		$18,663,520		$—
Long-term capital gains		157,596,466		118,279,747		—		39,824,590		15,225,593
Return of capital		—		—		—		—		—

Prior period distributions
Ordinary income		$16,475,044		$30,254,415		$2,200,707		$2,100,800		$—
Long-term capital gains		—		—		—		—		—
Return of capital		—		—		—		—		—


					Schwab
	Schwab		Schwab		International
	Financial		Health Care		Core
	Services Fund		Fund		Equity Fund

Current period distributions
Ordinary income		$544,804		$21,202,575		$4,000,904
Long-term capital gains		—		61,203,934		—
Return of capital		—		—		—

Prior period distributions
Ordinary income		$406,901		$8,336,930		$2,100,275
Long-term capital gains		—		54,300,003		—
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		$—			$—			$—			$—			($95,555	)
Undistributed net investment income		(275,945	)		(187,897	)		(59,490	)		2,377,529			106,710
Net realized capital gains (losses)		275,945			187,897			59,490			(2,377,529	)		(11,155	)


							Schwab
	Schwab			Schwab			International
	Financial			Health Care			Core
	Services Fund			Fund			Equity Fund

Capital shares		$—			$—			$—
Undistributed net investment income		(35,719	)		246,847			180,549
Net realized capital gains (losses)		35,719			(246,847	)		(180,549	)

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 funds constituting Schwab Capital Trust, hereafter referred to as the “Funds”) at October 31, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

December 16, 2014

100

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 $793,942 to its shareholders for the year ended October 31, 2014. The respective foreign source income on the fund is $8,391,152.

For corporate shareholders, the following percentage of the funds dividend distributions paid during the fiscal year ended October 31, 2014, qualify for the corporate dividends received deduction:


	Percentage

Schwab Core Equity Fund		95.12
Schwab Dividend Equity Fund		60.35
Schwab Large-Cap Growth Fund		100.00
Schwab Small-Cap Equity Fund		32.05
Schwab Hedged Equity Fund		—
Schwab Financial Services Fund		100.00
Schwab Health Care Fund		35.15
Schwab International Core Equity Fund		—


Schwab Core Equity Fund			$20,172,716
Schwab Dividend Equity Fund			18,236,557
Schwab Large-Cap Growth Fund			1,490,864
Schwab Small-Cap Equity Fund			5,986,127
Schwab Hedged Equity Fund			—
Schwab Financial Services Fund			544,804
Schwab Health Care Fund			11,434,845
Schwab International Core Equity Fund			4,069,832

Under Section 852 (b)(3)(C) of the Internal Revenue Code, the funds hereby designate the following amounts as long-term capital gain dividends for the fiscal year ended October 31, 2014:


Schwab Core Equity Fund			$157,596,466
Schwab Dividend Equity Fund			118,279,747
Schwab Large-Cap Growth Fund			—
Schwab Small-Cap Equity Fund			39,824,590
Schwab Hedged Equity Fund			15,225,593
Schwab Financial Services Fund			—
Schwab Health Care Fund			61,203,934
Schwab International Core Equity Fund			—

101

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 30, 2014, and June 3, 2014, and approved the renewal of the Agreement with respect to the Funds for an additional one year term at the meeting held on June 3, 2014. 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.

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 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

102

performance of each Fund, the Trustees considered both risk and shareholder risk expectations for such Fund and the appropriateness of the benchmark used to compare the performance of each Fund. The Trustees further considered the level of Fund performance in the context of its review of Fund expenses and adviser profitability discussed below. Although Schwab Core Equity Fund, Schwab Dividend Equity Fund, Schwab Large-Cap Growth Fund, Schwab Hedged Equity Fund, Schwab Financial Services Fund and Schwab Health Care 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 Core Equity Fund, Schwab Dividend Equity Fund, Schwab Large-Cap Growth Fund, Schwab Hedged Equity Fund, Schwab Financial Services Fund and Schwab Health Care 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.

103

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 97 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)


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)


Kiran M. Patel 1948 Trustee (Trustee of Schwab Capital Trust since 2011.)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services for consumers and small businesses) (Dec. 2008 – Sept. 2013).	76	Director, KLA-Tencor Corporation (2008 – present)


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, Eaton (2012 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – 2013) Director, Oneok, Inc. (2009 – 2013) Lead Independent Director, Board of Cooper Industries (2002 – 2012)


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)

104

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.	97	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 Investment Management, 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; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (January 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010).


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).

105

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

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.

106

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.

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 Growth Index An index that is composed of larger-cap companies and measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values

Russell 1000 Index An index that measures the performance of the large-cap segment of the U.S. equity universe.

Russell 1000 Value Index An index that measures the performance of the large-cap segment of the U.S. equity universe.

Russell 2000 Index An index that measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 Index companies with lower price-to-book ratios and lower expected growth values.

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 Financial 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.

107

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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 Fundamental Global Real Estate 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

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Schwab MarketTrack Conservative Portfolio^tm

Schwab Target 2010 Fund

Schwab Target 2015 Fund

Schwab Target 2020 Fund

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Schwab Target 2030 Fund

Schwab Target 2035 Fund

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Schwab Target 2055 Fund

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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

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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, 2014


Schwab Fundamental US Large Company Index Fund (Ticker Symbol: SFLNX)			15.74%


Russell Fundamental U.S. Large Company Index			16.23%
Fund Category: Morningstar Large Value			13.60%


Performance Details			pages 6-7




Schwab Fundamental US Small Company Index Fund (Ticker Symbol: SFSNX)			10.99%


Russell Fundamental U.S. Small Company Index			11.49%
Fund Category: Morningstar Small Blend			7.66%


Performance Details			pages 8-9




Schwab Fundamental International Large Company Index Fund¹ (Ticker Symbol: SFNNX)			0.39%


Russell Fundamental Developed ex-U.S. Large Company Index (Net)			0.00%
Fund Category: Morningstar Foreign Large Value			-0.45%


Performance Details			pages 10-11




Schwab Fundamental International Small Company Index Fund¹ (Ticker Symbol: SFILX)			-0.07%


Russell Fundamental Developed ex-U.S. Small Company Index (Net)			-0.38%
Fund Category: Morningstar Foreign Small/Mid Blend			-0.50%


Performance Details			pages 12-13




Schwab Fundamental Emerging Markets Large Company Index Fund¹ (Ticker Symbol: SFENX)			-5.03%


Russell Fundamental Emerging Markets Large Company Index (Net)			-4.59%
Fund Category: Morningstar Diversified Emerging Markets			1.37%


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,

For 25 years, Charles Schwab Investment Management has been committed to building funds that are designed to serve as part of the foundation of an investor’s portfolio.

In recent years, fundamentally weighted index strategies have enjoyed significant asset growth as investors have embraced the value of alternative index strategies. Unlike traditional equity indices that are often weighted by market capitalization, fundamentally weighted indices select and weight stocks by objective non-price measures, such as dividends, cash flow, and sales. By using this weighting methodology, the Schwab Fundamental Index Funds can serve as effective complements to capitalization-weighted and actively managed investment vehicles, with the goal of helping shareholders to create the potential for more attractive risk-adjusted portfolios.

For the 12-month reporting period ended October 31, 2014, the funds generated returns that were closely aligned with their respective indices, reflecting a rally by U.S. stocks but a weaker performance by international stocks. The depreciation of many foreign currencies versus the U.S. dollar was a key reason for the performance by international stocks, as slow economic growth overseas convinced the Bank of Japan and other central banks to keep interest rates low, even as the Fed scaled back its stimulative policies. Financial markets faced additional hurdles that included continued geopolitical tensions. These and other factors contributed to heightened market uncertainty.¹In the

Asset Class Performance Comparison % returns during the 12 months ended 10/31/2014

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



		17.27%		S&P 500^® Index: measures U.S. large-cap stocks

		8.06%		Russell 2000^® Index: measures U.S. small-cap stocks

		−0.60%		MSCI EAFE^® Index (Net): measures (in U.S. dollars) large-cap stocks in Europe, Australasia and the Far East

		4.14%		Barclays U.S. Aggregate Bond Index: measures the U.S. bond market

		0.03%		Barclays U.S. Treasury Bills 1-3 Months Index: 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

U.S., many large-cap stock market indices reached record highs amid rebounding economic growth and generally favorable earnings reports, while small-cap stocks underperformed by comparison. As a result, the Russell Fundamental U.S. Large Company Index returned 16.2%, and the Russell Fundamental Emerging Markets Large Company Index returned -4.6%.²

In related product news, we are excited to announce the launch of the Schwab Fundamental Global Real Estate Index Fund, which enhances our line-up of fundamentally weighted strategies. More information about this new fund can be found on www.schwabfunds.com, or by contacting us at 1-800-435-4000. For information about the Schwab Fundamental Index Funds, please continue reading this report.

Sincerely,

¹ To find out more information, please read “Investments in Russian Securities” in the “What’s New” section on www.schwabfunds.com.

² 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

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.

Performance. The fund returned 15.74% for the 12-month reporting period ended October 31, 2014, while the comparative index returned 16.23%. 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. The fund also received strong cash inflows during the reporting period. On some occasions, this cash was briefly invested in S&P 500 Index futures, and these futures lagged the return of the index during portions of the 12-month reporting period, slightly detracting from the fund’s relative performance.

Market Highlights. Large-cap U.S. stocks produced double-digit returns and outperformed small-cap stocks for the 12-month reporting period, despite heightened geopolitical tensions and increased market volatility. The Federal Reserve left short-term interest rates historically low, making financing more affordable for businesses and households and generally supporting stocks. In addition, a rebounding U.S. economy and forecasts for stronger earnings by select companies contributed positively to market performance.

Contributors and Detractors. The Information Technology sector contributed the most to the fund’s total return. The large average weight of this sector represents part of the reason for this contribution, with Information Technology stocks comprising approximately 13% of the fund. The Information Technology sector returned approximately 26% for the 12-month reporting period, reflecting the overall performance of companies involved in Internet and software services. One example from this sector is Microsoft Corporation, a company that develops, manufactures, licenses, sells, and supports software products. The fund’s holdings of Microsoft Corporation returned approximately 36%. The Health Care sector also provided a meaningful contribution to the return of the fund, representing an average weight of approximately 12% of the fund and returning approximately 29%.

The Telecommunication Services sector also generated positive returns for the fund, but was the weakest contributor to the total return. Telecommunication Services stocks represented an average weight of approximately 4% of the fund and returned approximately 3%, reflecting the overall performance of companies involved in diversified and wireless telecommunication services. One example from this sector is NII Holdings, Inc. (Class B), a mobile communications provider for business customers in Latin America. The fund’s holdings of NII Holdings, Inc. (Class B) returned approximately -83%. Another relatively weak contributor the fund’s overall return was the Materials sector, which represented an average weight of approximately 4% of the fund and returned approximately 13%.

As of 10/31/14:

Statistics


Number of Holdings			634
Weighted Average Market Cap ($ x 1,000,000)			$116,587
Price/Earnings Ratio (P/E)			17.6
Price/Book Ratio (P/B)			2.3
Portfolio Turnover Rate			14%

Sector Weightings % of Investments


Energy			14.3%
Information Technology			13.6%
Financials			13.2%
Consumer Discretionary			12.0%
Health Care			11.8%
Consumer Staples			11.7%
Industrials			10.0%
Utilities			4.5%
Telecommunication Services			4.0%
Materials			3.8%
Other			1.1%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Exxon Mobil Corp.			4.6%
Chevron Corp.			2.5%
AT&T, Inc.			2.1%
Microsoft Corp.			2.1%
The Procter & Gamble Co.			1.5%
ConocoPhillips			1.5%
Intel Corp.			1.4%
Wal-Mart Stores, Inc.			1.4%
Verizon Communications, Inc.			1.4%
JPMorgan Chase & Co.			1.3%
Total			19.8%

Management 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 10/31/14

April 2, 2007 – October 31, 2014
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)		15.74	%		17.25	%		7.78	%
Russell Fundamental U.S. Large Company Index		16.23	%		N/A			N/A
Fundamental U.S. Large Company Spliced Index		16.23	%		17.56	%		8.00	%
Fund Category: Morningstar Large Value		13.60	%		14.53	%		5.25	%

Fund Expense Ratios⁵: Net 0.35%; Gross 0.41%

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. 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.


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		As stated in the prospectus. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the 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.

Performance. The fund returned 10.99% for the 12-month reporting period ended October 31, 2014, while the comparative index returned 11.49%. 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. The fund also received strong cash inflows during the reporting period. On some occasions, this cash was briefly invested in Russell 2000 Index futures, and these futures lagged the return of the index during portions of the 12-month reporting period, slightly detracting from the fund’s relative performance.

Market Highlights. Small-cap U.S. stocks underperformed large-cap U.S. stocks, though both generated positive returns for the 12-month reporting period. The Federal Reserve left short-term interest rates historically low, making financing more affordable for businesses and households and generally supporting stocks. Despite heightened geopolitical tensions and increased market volatility, the U.S. economy rebounded over the reporting period, and forecasts for stronger earnings by select companies contributed positively to market performance.

Contributors and Detractors. The Financials sector was the biggest contributor to the fund’s total return. The large average weight of this sector represents part of the reason for this contribution, with Financials stocks comprising approximately 21% of the fund. The Financials sector returned approximately 15%, reflecting the overall performance of companies involved in banking, diversified financial services, insurance, and real estate. One example from this sector is Protective Life Corporation, a provider of financial services through the production, distribution, and administration of insurance and investment products. The fund’s holdings of Protective Life Corporation returned approximately 54%. The Information Technology sector was another significant contributor to the fund’s overall performance, representing an average weight of approximately 15% of the fund and returning approximately 20%.

The Energy sector was the only detractor from the performance of the index and the fund. Energy stocks represented an average weight of approximately 6% of the fund and returned -18%, reflecting the overall performance of companies engaged in exploration and production, refining and marketing, and storage and transportation of oil, gas, coal and consumable fuels, as well as companies that offer oil and gas equipment and services. One example from this sector is McDermott International, Inc., a worldwide energy services company. The fund’s holdings of McDermott International, Inc. returned approximately -52%. The Telecommunication Services sector generated positive returns, but was among the weakest contributors to the performance of the fund. Telecommunication Services stocks represented an average weight of less than 1% of the fund and returned approximately 26%.

As of 10/31/14:

Statistics


Number of Holdings			903
Weighted Average Market Cap ($ x 1,000,000)			$3,997
Price/Earnings Ratio (P/E)			39.3
Price/Book Ratio (P/B)			2.0
Portfolio Turnover Rate			29%

Sector Weightings % of Investments


Financials			21.7%
Industrials			19.6%
Consumer Discretionary			15.1%
Information Technology			14.2%
Health Care			7.0%
Materials			5.6%
Energy			4.7%
Utilities			4.0%
Consumer Staples			3.6%
Telecommunication Services			1.0%
Other			3.5%
Total			100.0%

Top Equity Holdings % of Net Assets¹


ITT Corp.			0.3%
Protective Life Corp.			0.3%
Popular, Inc.			0.3%
Dean Foods Co.			0.3%
Endurance Specialty Holdings Ltd.			0.3%
Centene Corp.			0.3%
Lennox International, Inc.			0.3%
Questar Corp.			0.3%
The Pantry, Inc.			0.3%
Sanmina Corp.			0.3%
Total			3.0%

Management 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 many 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 10/31/14

April 2, 2007 – October 31, 2014
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)		10.99	%		18.29	%		8.54	%
Russell Fundamental U.S. Small Company Index		11.49	%		N/A			N/A
Fundamental U.S. Small Company Spliced Index		11.49	%		18.48	%		9.12	%
Fund Category: Morningstar Small Blend		7.66	%		16.61	%		6.28	%

Fund Expense Ratios⁵: Net 0.35%; Gross 0.48%

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. 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.


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		As stated in the prospectus. The expense information shown in the table has been restated to reflect the removal of expenses incurred indirectly by the fund through its investment in business development companies (“BDCs”). The fund’s benchmark index no longer includes BDCs. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the 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-U.S. 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.

Performance. The fund returned 0.39% for the 12-month reporting period ended October 31, 2014, while the comparative index returned 0.00%. 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. Also, the fund received strong cash inflows during the reporting period, and on some occasions, this cash was briefly invested in MSCI EAFE Index futures. These futures lagged the return of the index during portions of the 12-month reporting period, slightly detracting from the fund’s relative performance. However, timing differences in foreign exchange calculations and fair valuation of the fund’s holdings enhanced the fund’s relative performance.¹

Market Highlights. International large-cap stocks produced positive returns for the 12-month reporting period, despite continued geopolitical tensions and unsteady global economic growth. The reduction of some stimulative measures by the Federal Reserve contributed to the depreciation of many international currencies versus the U.S. dollar, generally reducing overall returns on overseas investments.

Contributors and Detractors. Stocks from Italy were among the biggest contributors to the returns of both the index and the fund. Italian stocks represented an average weight of approximately 5% of the fund and returned approximately 4% in U.S. dollar terms. One example from this market is Enel S.p.A., a company that generates, transmits, distributes, and trades electricity. The fund’s holdings of Enel S.p.A. returned approximately 19% in U.S. dollar terms. Stocks from Switzerland also contributed to the fund’s performance. Swiss stocks represented an average weight of approximately 6% of the fund and returned approximately 4% in U.S. dollar terms.

German stocks were among the biggest detractors from the total return of the fund. Stocks from Germany represented an average weight of approximately 9% of the fund and returned approximately -6% in U.S. dollar terms. One example from this market is Deutsche Bank AG, a global financial services provider. The fund’s holdings of Deutsche Bank AG returned approximately -31% in U.S. dollar terms. Stocks from Japan also performed poorly for the fund overall, representing an average weight of approximately 19% of the fund and returning less than 1% in U.S. dollar terms.

As of 10/31/14:

Statistics


Number of Holdings			830
Weighted Average Market Cap ($ x 1,000,000)			$60,142
Price/Earnings Ratio (P/E)			20.4
Price/Book Ratio (P/B)			1.4
Portfolio Turnover Rate			8%

Sector Weightings % of Investments


Financials			18.6%
Energy			13.1%
Industrials			12.4%
Consumer Discretionary			10.4%
Materials			9.3%
Consumer Staples			9.2%
Telecommunication Services			8.1%
Health Care			6.9%
Utilities			6.2%
Information Technology			4.7%
Other			1.1%
Total			100.0%

Top Equity Holdings % of Net Assets²


BP plc			2.2%
Royal Dutch Shell plc, A Shares			2.0%
Total S.A.			1.8%
HSBC Holdings plc			1.4%
Royal Dutch Shell plc, B Shares			1.4%
Banco Santander S.A.			1.2%
Nestle S.A. – Reg’d			1.1%
Telefornica S.A.			1.1%
Vodafone Group plc			1.0%
Eni S.p.A			1.0%
Total			14.2%

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

Source of Sector Classification: S&P and MSCI.

International investments are subject to additional risks such as currency fluctuation, geopolitical risk and the potential for illiquid markets.


¹		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.
²		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 10/31/14

April 2, 2007 – October 31, 2014
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)		0.39	%		5.90	%		1.16	%
Russell Fundamental Developed ex-U.S. Large Company Index (Net)		0.00	%		N/A			N/A
Fundamental Developed ex-U.S. Large Company Spliced Index		0.00	%		6.04	%		1.91	%
Fund Category: Morningstar Foreign Large Value		-0.45	%		6.13	%		0.25	%

Fund Expense Ratios⁵: Net 0.35%; Gross 0.52%

Country Weightings % of Investments


Japan			21.3%
United Kingdom			16.8%
France			10.3%
Germany			8.5%
Canada			6.8%
Netherlands			5.7%
Switzerland			5.6%
Australia			5.5%
Spain			4.4%
Italy			3.9%
Other Countries			11.2%
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. 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.


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		As stated in the prospectus. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the 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.

Performance. The fund returned -0.07% for the 12-month reporting period ended October 31, 2014, while the comparative index returned -0.38%. 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. Also, the fund received strong cash inflows during the reporting period, and on some occasions, this cash was briefly invested in MSCI EAFE Index futures and the iShares MSCI EAFE Small-Cap ETF. These securities lagged the return of the index during portions of the 12-month reporting period, slightly detracting from the fund’s relative performance. However, timing differences in foreign exchange calculations and fair valuation of the fund’s holdings enhanced the fund’s relative performance.¹

Market Highlights. International small-cap stocks produced negative returns for the 12-month reporting period, in part due to continued geopolitical tensions and unsteady economic growth. The reduction of some stimulative measures by the Federal Reserve contributed to the depreciation of many international currencies versus the U.S. dollar, generally reducing overall returns on overseas investments.

Contributors and Detractors. Stocks from the United Kingdom were among the biggest contributors to the fund’s total return from a country perspective, and represented an average weight of approximately 13% of the fund. United Kingdom stocks returned approximately 4% in U.S. dollar terms. One example from this market is Ashtead Group plc, an international equipment rental company servicing customers in the U.S. and the United Kingdom. The fund’s holdings of Ashtead Group plc returned approximately 61% in U.S. dollar terms. Stocks from Japan also provided meaningful contributions to the fund’s performance, representing an average weight of approximately 37% of the fund and returning approximately 2% in U.S. dollar terms.

German stocks were among the biggest detractors from the returns of both the index and the fund. Stocks from Germany represented an average weight of approximately 4% of the fund and returned approximately -9% in U.S. dollar terms. One example from this market is Suedzucker AG, an operator in the traditional sugar industry in Eastern and Western Europe. The fund’s holdings of Suedzucker AG returned approximately -38% in U.S. dollar terms. Stocks from Italy also detracted from the performance of the index and the fund. Italian stocks represented an average weight of approximately 3% of the fund and returned approximately -11% in U.S. dollar terms.

As of 10/31/14:

Statistics


Number of Holdings			1,328
Weighted Average Market Cap ($ x 1,000,000)			$3,362
Price/Earnings Ratio (P/E)			24.4
Price/Book Ratio (P/B)			1.3
Portfolio Turnover Rate			41%

Sector Weightings % of Investments


Industrials			23.1%
Consumer Discretionary			18.8%
Financials			17.3%
Materials			10.4%
Information Technology			8.8%
Consumer Staples			7.7%
Health Care			4.6%
Energy			3.4%
Utilities			1.6%
Telecommunication Services			1.1%
Other			3.2%
Total			100.0%

Top Equity Holdings % of Net Assets²


iShares MSCI EAFE Small Cap ETF			0.7%
Dixons Carphone plc			0.3%
Celesio AG			0.3%
DCC plc			0.2%
Persimmon plc			0.2%
Evraz plc			0.2%
Bankia S.A.			0.2%
Koito Manufacturing Co., Ltd.			0.2%
Hitachi High-Technologies Corp.			0.2%
Alps Electric Co., Ltd.			0.2%
Total			2.7%

Management 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 many other asset classes.

International investments are subject to additional risks such as currency fluctuation, geopolitical risk and the potential for illiquid markets.


¹		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.
²		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 10/31/14

January 31, 2008 – October 31, 2014
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)		-0.07	%		8.47	%		5.24	%
Russell Fundamental Developed ex-U.S. Small Company Index (Net)		-0.38	%		N/A			N/A
Fundamental Developed ex-U.S. Small Company Spliced Index		-0.38	%		8.75	%		6.61	%
Fund Category: Morningstar Foreign Small/Mid Blend		-0.50	%		9.71	%		4.11	%

Fund Expense Ratios⁵: Net 0.50%; Gross 0.94%

Country Weightings % of Investments


Japan			37.8%
United Kingdom			12.7%
Canada			7.9%
Australia			5.8%
France			4.2%
Germany			3.6%
United States			3.1%
Switzerland			2.9%
Hong Kong			2.8%
Other Countries			19.2%
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. 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. 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.


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		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 the 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 seeks to maintain 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.

Performance. The fund returned -5.03% for the 12-month reporting period ended October 31, 2014, while the comparative index returned -4.59%. 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. Additionally, timing differences in foreign exchange calculations and fair valuation of the fund’s holdings enhanced the fund’s relative performance.¹

Market Highlights. Emerging market stocks produced negative returns in U.S. dollar terms for the 12-month reporting period, in part due to continued geopolitical tensions and unsteady global economic growth. The reduction of some stimulative measures by the Federal Reserve contributed to the depreciation of many international currencies versus the U.S. dollar, generally reducing overall returns on overseas investments. However, continued low short-term interest rates in the U.S. helped emerging markets, as did relatively attractive stock valuations and high-profile election outcomes in several countries, including India and Indonesia.

Contributors and Detractors. Stocks from Taiwan were among the biggest contributors to the returns of both the index and the fund. Taiwanese stocks represented an average weight of approximately 13% of the fund and returned approximately 11% in U.S. dollar terms. One example from this market is Hon Hai Precision Industry Co., Ltd., a provider of electronic manufacturing services for computers, communications, and consumer electronic products. The fund’s holdings of Hon Hai Precision Industry Co., Ltd. returned approximately 42% in U.S. dollar terms. Stocks from India also contributed to the fund’s performance, representing an average weight of approximately 4% of the fund and returning approximately 30% in U.S. dollar terms.

Russian stocks were among the biggest detractors from the total return of the fund. Stocks from Russia represented an average weight of approximately 14% of the fund and returned approximately -24% in U.S. dollar terms. One example from this market is sponsored American depositary receipts of Gazprom OAO, a company that operates gas pipeline systems, produces and explores gas, and transports high pressure gas in the Russian Federation and European countries. The fund’s holdings of Gazprom OAO returned approximately -27% in U.S. dollar terms. Stocks from Brazil also detracted from the performance of the fund. Brazilian stocks represented an average weight of approximately 14% of the fund and returned approximately -19% in U.S. dollar terms.

As of 10/31/14:

Statistics


Number of Holdings			302
Weighted Average Market Cap ($ x 1,000,000)			$52,954
Price/Earnings Ratio (P/E)			10.7
Price/Book Ratio (P/B)			1.0
Portfolio Turnover Rate			19%

Sector Weightings % of Investments


Energy			24.2%
Financials			19.4%
Information Technology			15.8%
Materials			11.2%
Telecommunication Services			10.8%
Consumer Discretionary			5.5%
Industrials			5.4%
Utilities			3.7%
Consumer Staples			3.5%
Other			0.5%
Total			100.0%

Top Equity Holdings % of Net Assets²


Samsung Electronics Co., Ltd.			3.6%
Gazprom OAO ADR			2.9%
LUKOIL OAO ADR			2.6%
China Mobile Ltd.			2.4%
Petroleo Brasileiro S.A., Preferred Stock			2.0%
China Construction Bank Corp., Class H			2.0%
Taiwan Semiconductor Manufacturing Co., Ltd.			1.9%
Hon Hai Precision Industry Co., Ltd.			1.6%
Industrial & Commercial Bank of China Ltd., Class H			1.6%
China Petroleum & Chemical Corp., Class H			1.5%
Total			22.1%

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

Source of Sector Classification: S&P and MSCI.

International investments are subject to additional risks such as currency fluctuation, geopolitical risk and the potential for illiquid markets. Investing in emerging markets may accentuate these risks.


¹		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.
²		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 10/31/14

January 31, 2008 – October 31, 2014
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)		-5.03	%		2.31	%		0.39	%
Russell Fundamental Emerging Markets Large Company Index (Net)		-4.59	%		N/A			N/A
Fundamental Emerging Markets Large Company Spliced Index		-4.59	%		3.50	%		2.16	%
Fund Category: Morningstar Diversified Emerging Markets		1.37	%		4.72	%		0.81	%

Fund Expense Ratios⁵: Net 0.50%; Gross 0.89%

Country Weightings % of Investments


Republic of Korea			17.7%
China			16.4%
Brazil			13.6%
Taiwan			12.8%
Russia			12.4%
South Africa			7.0%
India			4.2%
Mexico			3.6%
Other Countries			12.3%
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. 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.


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		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 the 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 5/1/14		at 10/31/14		05/1/14–10/31/14

Schwab Fundamental US Large Company Index Fund
Actual Return		0.35%	$	1,000.00	$	1,062.80	$	1.82
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	$	1,037.60	$	1.80
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	$	938.40	$	1.71
Hypothetical 5% Return		0.35%	$	1,000.00	$	1,023.44	$	1.79


Schwab Fundamental International Small Company Index Fund
Actual Return		0.49%	$	1,000.00	$	955.40	$	2.42
Hypothetical 5% Return		0.49%	$	1,000.00	$	1,022.73	$	2.50


Schwab Fundamental Emerging Markets Large Company Index Fund
Actual Return		0.49%	$	1,000.00	$	995.40	$	2.46
Hypothetical 5% Return		0.49%	$	1,000.00	$	1,022.73	$	2.50


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


	11/1/13–			11/1/12–			11/1/11–			11/1/10–			11/1/09–
	10/31/14			10/31/13			10/31/12			10/31/11			10/31/10


Per-Share Data ($)

Net asset value at beginning of period		13.65			10.76			9.51			9.05			7.63

Income (loss) from investment operations:
Net investment income (loss)		0.26			0.24			0.21			0.18			0.14
Net realized and unrealized gains (losses)		1.87			2.89			1.22			0.43			1.37

Total from investment operations		2.13			3.13			1.43			0.61			1.51
Less distributions:
Distributions from net investment income		(0.22	)		(0.24	)		(0.18	)		(0.15	)		(0.09	)

Net asset value at end of period		15.56			13.65			10.76			9.51			9.05

Total return (%)		15.74			29.67			15.29			6.74			19.95

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.35			0.35			0.32	¹		0.35			0.35
Gross operating expenses		0.39			0.41			0.44			0.44			0.45
Net investment income (loss)		1.95			2.03			2.13			2.06			1.77
Portfolio turnover rate		14			10			32	²		11			27
Net assets, end of period ($ x 1,000,000)		4,465			3,020			1,960			1,490			1,019

¹ The ratio of net operating expenses would have been 0.35%, if voluntary waiver by CSIM had not been included.

² 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

Condensed Portfolio Holdings as of October 31, 2014


				Cost		Value
Holdings by Category				($)		($)

	99	.6%	Common Stock		3,311,517,644		4,445,205,810
	1	.0%	Other Investment Companies		45,972,730		45,972,730
	0	.1%	Short-Term Investment		3,299,949		3,299,949


	100	.7%	Total Investments		3,360,790,323		4,494,478,489
	(0	.7%)	Other Assets and Liabilities, Net				(29,730,141	)


	100	.0%	Net Assets				4,464,748,348


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

Common Stock 99.6% of net assets

Automobiles & Components 1.0%
Other Securities				1.0		44,888,506

Banks 5.6%
Bank of America Corp.		3,291,794		1.3		56,487,185
Citigroup, Inc.		651,872		0.8		34,894,708
JPMorgan Chase & Co.		965,923		1.3		58,419,023
Wells Fargo & Co.		847,363		1.0		44,986,502
Other Securities				1.2		56,163,571

				5.6		250,950,989

Capital Goods 7.5%
3M Co.		131,061		0.5		20,153,250
General Electric Co.		2,248,798		1.3		58,041,476
United Technologies Corp.		217,792		0.5		23,303,744
Other Securities				5.2		232,185,980

				7.5		333,684,450

Commercial & Professional Supplies 0.8%
Other Securities				0.8		36,879,166

Consumer Durables & Apparel 1.0%
Other Securities				1.0		46,649,311

Consumer Services 1.6%
McDonald’s Corp.		278,188		0.6		26,074,561
Other Securities				1.0		46,310,576

				1.6		72,385,137

Diversified Financials 3.2%
Berkshire Hathaway, Inc., Class B *		242,426		0.8		33,978,428
The Charles Schwab Corp. (a)		106,515		0.1		3,053,785
Other Securities				2.3		104,283,687

				3.2		141,315,900

Energy 14.4%
Chevron Corp.		927,912		2.5		111,303,044
ConocoPhillips		936,782		1.5		67,588,821
Exxon Mobil Corp.		2,135,781		4.6		206,551,380
Occidental Petroleum Corp.		208,200		0.4		18,515,226
Phillips 66		414,008		0.7		32,499,628
Schlumberger Ltd.		205,063		0.5		20,231,516
Valero Energy Corp.		412,966		0.5		20,685,467
Other Securities				3.7		165,748,998

				14.4		643,124,080

Food & Staples Retailing 4.2%
Costco Wholesale Corp.		158,463		0.5		21,134,210
CVS Health Corp.		493,816		0.9		42,374,351
Wal-Mart Stores, Inc.		826,472		1.4		63,035,020
Walgreen Co.		329,682		0.5		21,172,178
Other Securities				0.9		41,815,236

				4.2		189,530,995

Food, Beverage & Tobacco 5.3%
Altria Group, Inc.		477,216		0.5		23,068,621
PepsiCo, Inc.		350,763		0.8		33,732,878
Philip Morris International, Inc.		416,488		0.8		37,071,597
The Coca-Cola Co.		685,043		0.7		28,689,601
Other Securities				2.5		113,293,845

				5.3		235,856,542

Health Care Equipment & Services 6.0%
UnitedHealth Group, Inc.		386,796		0.8		36,749,488
WellPoint, Inc.		253,350		0.7		32,096,911
Other Securities				4.5		199,445,961

				6.0		268,292,360

Household & Personal Products 2.2%
The Procter & Gamble Co.		783,835		1.5		68,405,281
Other Securities				0.7		30,977,636

				2.2		99,382,917

Insurance 3.2%
The Travelers Cos., Inc.		241,772		0.5		24,370,618
Other Securities				2.7		120,234,908

				3.2		144,605,526

18 See financial notes

Schwab Fundamental US Large Company Index Fund

Condensed Portfolio Holdings continued


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

Materials 3.8%
Other Securities				3.8		169,272,078

Media 3.6%
Comcast Corp., Class A		439,657		0.5		24,335,015
The Walt Disney Co.		317,662		0.7		29,027,954
Time Warner, Inc.		310,533		0.6		24,678,057
Other Securities				1.8		81,696,389

				3.6		159,737,415

Pharmaceuticals, Biotechnology & Life Sciences 5.9%
Amgen, Inc.		174,623		0.6		28,320,358
Bristol-Myers Squibb Co.		318,061		0.4		18,507,970
Johnson & Johnson		529,307		1.3		57,048,708
Merck & Co., Inc.		542,262		0.7		31,418,660
Pfizer, Inc.		1,775,404		1.2		53,173,350
Other Securities				1.7		73,936,568

				5.9		262,405,614

Real Estate 1.3%
Other Securities				1.3		55,953,593

Retailing 4.9%
Lowe’s Cos., Inc.		428,245		0.6		24,495,614
Target Corp.		380,883		0.5		23,546,187
The Home Depot, Inc.		329,143		0.7		32,098,025
Other Securities				3.1		137,097,626

				4.9		217,237,452

Semiconductors & Semiconductor Equipment 2.6%
Intel Corp.		1,856,876		1.4		63,152,353
Other Securities				1.2		51,193,036

				2.6		114,345,389

Software & Services 6.5%
International Business Machines Corp.		333,101		1.2		54,761,804
Microsoft Corp.		1,945,428		2.1		91,337,845
Oracle Corp.		564,344		0.5		22,037,633
Other Securities				2.7		120,405,613

				6.5		288,542,895

Technology Hardware & Equipment 4.7%
Apple, Inc.		450,457		1.1		48,649,356
Cisco Systems, Inc.		1,393,051		0.8		34,087,958
Hewlett-Packard Co.		1,567,491		1.2		56,241,577
Other Securities				1.6		70,469,911

				4.7		209,448,802

Telecommunication Services 4.0%
AT&T, Inc.		2,714,031		2.1		94,556,840
Verizon Communications, Inc.		1,244,249		1.4		62,523,512
Other Securities				0.5		22,423,129

				4.0		179,503,481

Transportation 1.8%
Other Securities				1.8		79,055,528

Utilities 4.5%
Other Securities				4.5		202,157,684

Total Common Stock
(Cost $3,311,517,644)						4,445,205,810




Other Investment Companies 1.0% of net assets

Money Market Fund 0.6%
State Street Institutional U.S. Government Money Market Fund, Premier Class 0.00% (e)		27,373,071		0.6		27,373,071

Securities Lending Collateral 0.4%
State Street Institutional U.S. Government Money Market Fund, Premier Class 0.00% (e)		18,599,659		0.4		18,599,659

Total Other Investment Companies
(Cost $45,972,730)						45,972,730



	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		3,299,949

Total Short-Term Investment
(Cost $3,299,949)						3,299,949



End of Investments.

At 10/31/14 tax basis cost of the fund’s investments was $3,376,361,505 and the unrealized appreciation and depreciation were $1,151,767,191 and ($33,650,207), respectively, with a net unrealized appreciation of $1,118,116,984.

For the following notes, please refer to the complete schedule of portfolio 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 $18,481,001. Non-Cash Collateral pledged to the fund for securities on loan amounted to $413,538.
(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

See financial notes 19

Schwab Fundamental US Large Company Index Fund

Condensed Portfolio Holdings continued

In addition to the above, the fund held the following at 10/31/14:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

S&P 500 Index, e-mini, Long, expires 12/19/14

140

14,079,800

516,095

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):


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

Common Stock¹		$4,445,205,810		$—		$—		$4,445,205,810
Other Investment Companies¹		45,972,730		—		—		45,972,730
Short-Term Investments¹		—		3,299,949		—		3,299,949

Total		$4,491,178,540		$3,299,949		$—		$4,494,478,489

Other Financial Instruments
Futures Contracts²		$516,095		$—		$—		$516,095


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

20 See financial notes

Schwab Fundamental US Large Company Index Fund

Statement of

Assets and Liabilities

As of October 31, 2014



Assets

Investments in affiliated issuers, at value (cost $1,889,879)		$3,053,785
Investments in unaffiliated issuers, at value (cost $3,340,300,785) including securities on loan of $18,481,001		4,472,825,045
Collateral invested for securities on loan, at value (cost $18,599,659)	+	18,599,659

Total investments, at value (cost $3,360,790,323)		4,494,478,489
Receivables:
Investments sold		5,983
Fund shares sold		6,101,356
Dividends		5,569,514
Variation margin on futures contracts		142,584
Income from securities on loan		54,753
Foreign tax reclaims		4,968
Prepaid expenses	+	42,797

Total assets		4,506,400,444

Liabilities

Collateral held for securities on loan		18,599,659
Payables:
Investments bought		19,073,311
Investment adviser and administrator fees		94,687
Shareholder service fees		111,629
Fund shares redeemed		2,801,546
Due to custodian		5,983
Accrued expenses	+	965,281

Total liabilities		41,652,096

Net Assets

Total assets		4,506,400,444
Total liabilities	−	41,652,096

Net assets		$4,464,748,348

Net Assets by Source
Capital received from investors		3,173,710,920
Net investment income not yet distributed		59,284,035
Net realized capital gains		97,549,132
Net unrealized capital appreciation		1,134,204,261

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$4,464,748,348

286,895,766

$15.56

See financial notes 21

Schwab Fundamental US Large Company Index Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends received from affiliated issuer		$29,512
Dividends received from unaffiliated issuers (net of foreign withholding taxes of $20,097)		82,421,885
Interest		1,363
Securities on loan	+	634,758

Total investment income		83,087,518

Expenses

Investment adviser and administrator fees		8,356,401
Shareholder service fees		2,886,348
Index fee		2,187,893
Shareholder reports		150,468
Registration fees		126,082
Transfer agent fees		118,179
Portfolio accounting fees		113,261
Custodian fees		84,721
Professional fees		47,077
Independent trustees’ fees		22,776
Tax expenses		16,926
Interest expense		10,690
Other expenses	+	62,338

Total expenses		14,183,160
Expense reduction by CSIM and its affiliates	−	1,497,633

Net expenses	−	12,685,527

Net investment income		70,401,991

Realized and Unrealized Gains (Losses)

Net realized gains on affiliated issuer		576,680
Net realized gains on unaffiliated investments		118,765,187
Net realized gains on futures contracts	+	7,675,250

Net realized gains		127,017,117
Net change in unrealized appreciation (depreciation) on affiliated issuer		243,880
Net change in unrealized appreciation (depreciation) on unaffiliated investments		337,531,225
Net change in unrealized appreciation (depreciation) on futures contracts	+	39,319

Net change in unrealized appreciation (depreciation)	+	337,814,424

Net realized and unrealized gains		464,831,541

Increase in net assets resulting from operations		$535,233,532

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


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$70,401,991			$50,722,157
Net realized gains		127,017,117			57,736,284
Net change in unrealized appreciation (depreciation)	+	337,814,424			523,232,112

Increase in net assets from operations		535,233,532			631,690,553

Distributions to Shareholders

Distributions from net investment income		($47,960,089	)		($42,909,493	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			144,506,228		$2,105,376,361			84,032,984		$1,024,135,625
Shares reinvested			2,075,077		29,051,072			2,230,842		23,803,086
Shares redeemed	+		(80,931,679	)	(1,177,384,046	)		(47,078,841	)	(576,085,377	)

Net transactions in fund shares			65,649,626		$957,043,387			39,184,985		$471,853,334

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			221,246,140		$3,020,431,518			182,061,155		$1,959,797,124
Total increase	+		65,649,626		1,444,316,830			39,184,985		1,060,634,394

End of period			286,895,766		$4,464,748,348			221,246,140		$3,020,431,518


Net investment income not yet distributed					$59,284,035					$36,913,755

See financial notes 23

Schwab Fundamental US Small Company Index Fund

Financial Statements

Financial Highlights


	11/1/13–			11/1/12–			11/1/11–			11/1/10–			11/1/09–
	10/31/14			10/31/13			10/31/12			10/31/11			10/31/10


Per-Share Data ($)

Net asset value at beginning of period		12.78			10.31			10.11			10.10			7.88

Income (loss) from investment operations:
Net investment income (loss)		0.14			0.16			0.15			0.11			0.09
Net realized and unrealized gains (losses)		1.23			3.35			0.88			0.47			2.19

Total from investment operations		1.37			3.51			1.03			0.58			2.28
Less distributions:
Distributions from net investment income		(0.12	)		(0.20	)		(0.12	)		(0.10	)		(0.06	)
Distributions from net realized gains		(0.52	)		(0.84	)		(0.71	)		(0.47	)		—

Total distributions		(0.64	)		(1.04	)		(0.83	)		(0.57	)		(0.06	)

Net asset value at end of period		13.51			12.78			10.31			10.11			10.10

Total return (%)		10.99			37.55			11.37			5.55			29.07

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.35			0.35			0.32	¹		0.35			0.35
Gross operating expenses		0.44			0.48			0.50			0.50			0.53
Net investment income (loss)		1.14			1.41			1.46			1.18			1.03
Portfolio turnover rate		29			27			92	²		35			41
Net assets, end of period ($ x 1,000,000)		1,208			849			619			563			412

¹ The ratio of net operating expenses would have been 0.35%, if voluntary waiver by CSIM had not been included.

² 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

Condensed Portfolio Holdings as of October 31, 2014


				Cost		Value
Holdings by Category				($)		($)

	99	.5%	Common Stock		936,334,702		1,201,580,309
	0	.0%	Rights		266,857		266,364
	3	.4%	Other Investment Company		40,701,297		40,701,297
	0	.1%	Short-Term Investment		1,039,983		1,039,983


	103	.0%	Total Investments		978,342,839		1,243,587,953
	(3	.0%)	Other Assets and Liabilities, Net				(36,072,039	)


	100	.0%	Net Assets				1,207,515,914


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

Common Stock 99.5% of net assets

Automobiles & Components 0.8%
Other Securities				0.8		10,107,865

Banks 4.6%
Popular, Inc. *		110,600		0.3		3,525,928
Other Securities				4.3		52,385,498

				4.6		55,911,426

Capital Goods 11.2%
Carlisle Cos., Inc.		35,100		0.3		3,119,688
Huntington Ingalls Industries, Inc.		25,700		0.2		2,719,574
ITT Corp.		94,000		0.3		4,235,640
Lennox International, Inc.		36,500		0.3		3,245,580
Spirit AeroSystems Holdings, Inc., Class A *		77,400		0.2		3,044,916
Other Securities				9.9		119,465,774

				11.2		135,831,172

Commercial & Professional Supplies 5.0%
United Stationers, Inc.		70,400		0.2		2,940,608
Other Securities				4.8		57,649,976

				5.0		60,590,584

Consumer Durables & Apparel 2.8%
Hanesbrands, Inc.		28,100		0.3		2,967,641
Polaris Industries, Inc.		18,300		0.2		2,760,738
Other Securities				2.3		27,561,855

				2.8		33,290,234

Consumer Services 4.5%
Strayer Education, Inc. *		38,100		0.2		2,788,539
Other Securities				4.3		51,448,383

				4.5		54,236,922

Diversified Financials 3.3%
Eaton Vance Corp.		74,500		0.2		2,743,835
Federated Investors, Inc., Class B		102,000		0.3		3,189,540
SEI Investments Co.		75,700		0.3		2,926,562
Other Securities				2.5		30,465,864

				3.3		39,325,801

Energy 4.8%
Other Securities				4.8		58,124,276

Food & Staples Retailing 0.8%
The Pantry, Inc. *		125,600		0.3		3,236,712
Other Securities				0.5		6,162,280

				0.8		9,398,992

Food, Beverage & Tobacco 2.6%
Dean Foods Co.		238,800		0.3		3,512,748
Other Securities				2.3		27,626,293

				2.6		31,139,041

Health Care Equipment & Services 5.4%
Centene Corp. *		37,100		0.3		3,438,057
Cerner Corp. *		47,800		0.3		3,027,652
Edwards Lifesciences Corp. *		25,500		0.3		3,083,460
IDEXX Laboratories, Inc. *		19,500		0.2		2,762,565
Other Securities				4.3		52,373,065

				5.4		64,684,799

Household & Personal Products 0.3%
Other Securities				0.3		3,777,441

Insurance 5.2%
Allied World Assurance Co. Holdings AG		81,000		0.3		3,078,000
Arthur J. Gallagher & Co.		59,000		0.2		2,814,300
Aspen Insurance Holdings Ltd.		65,400		0.2		2,853,402
CNO Financial Group, Inc.		162,500		0.2		2,946,125
Endurance Specialty Holdings Ltd.		60,200		0.3		3,488,590
First American Financial Corp.		97,900		0.2		2,968,328
Platinum Underwriters Holdings Ltd.		49,500		0.3		3,100,185
Primerica, Inc.		60,900		0.3		3,115,035
Protective Life Corp.		51,500		0.3		3,588,520
Other Securities				2.9		34,659,259

				5.2		62,611,744

See financial notes 25

Schwab Fundamental US Small Company Index Fund

Condensed Portfolio Holdings continued


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

Materials 5.8%
Martin Marietta Materials, Inc.		24,000		0.2		2,806,080
Resolute Forest Products, Inc. *		168,500		0.3		3,127,360
Other Securities				5.3		63,683,969

				5.8		69,617,409

Media 2.3%
Cinemark Holdings, Inc.		78,100		0.2		2,758,492
Other Securities				2.1		24,591,951

				2.3		27,350,443

Pharmaceuticals, Biotechnology & Life Sciences 2.0%
Perrigo Co., plc		17,300		0.3		2,793,085
Other Securities				1.7		20,774,657

				2.0		23,567,742

Real Estate 9.3%
Corrections Corp. of America		84,728		0.3		3,116,296
Digital Realty Trust, Inc.		45,600		0.3		3,145,944
Duke Realty Corp.		163,400		0.2		3,098,064
Jones Lang LaSalle, Inc.		22,800		0.2		3,082,788
Piedmont Office Realty Trust, Inc., Class A		144,500		0.2		2,810,525
Other Securities				8.1		97,595,626

				9.3		112,849,243

Retailing 5.2%
Group 1 Automotive, Inc.		34,200		0.2		2,921,706
Other Securities				5.0		60,285,476

				5.2		63,207,182

Semiconductors & Semiconductor Equipment 3.8%
Other Securities				3.8		46,003,898

Software & Services 5.9%
Akamai Technologies, Inc. *		47,300		0.2		2,852,190
Convergys Corp.		143,600		0.2		2,896,412
DST Systems, Inc.		33,100		0.3		3,189,185
VeriSign, Inc. *		51,100		0.2		3,053,736
Other Securities				5.0		59,832,991

				5.9		71,824,514

Technology Hardware & Equipment 4.8%
Sanmina Corp. *		128,200		0.3		3,213,974
Other Securities				4.5		55,079,003

				4.8		58,292,977

Telecommunication Services 1.0%
Other Securities				1.0		12,647,760

Transportation 4.0%
Alaska Air Group, Inc.		57,100		0.2		3,039,433
Southwest Airlines Co.		90,700		0.3		3,127,336
Other Securities				3.5		41,808,496

				4.0		47,975,265

Utilities 4.1%
Hawaiian Electric Industries, Inc. (a)		102,000		0.3		2,872,320
Portland General Electric Co.		78,800		0.2		2,869,108
Questar Corp.		134,400		0.3		3,240,384
WGL Holdings, Inc.		60,400		0.2		2,838,800
Other Securities				3.1		37,392,967

				4.1		49,213,579

Total Common Stock
(Cost $936,334,702)						1,201,580,309




Rights 0.0% of net assets

Technology Hardware & Equipment 0.0%
Other Securities				0.0		—

Telecommunication Services 0.0%
Other Securities				0.0		266,364

Total Rights
(Cost $266,857)						266,364




Other Investment Company 3.4% of net assets

Securities Lending Collateral 3.4%
State Street Institutional U.S. Government Money Market Fund, Premier Class 0.00% (f)		40,701,297		3.4		40,701,297

Total Other Investment Company
(Cost $40,701,297)						40,701,297



	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		1,039,983

Total Short-Term Investment
(Cost $1,039,983)						1,039,983



End of Investments.

At 10/31/14 tax basis cost of the fund’s investments was $984,525,962 and the unrealized appreciation and depreciation were $298,144,150 and ($39,082,159), respectively, with a net unrealized appreciation of $259,061,991.

26 See financial notes

Schwab Fundamental US Small Company Index Fund

Condensed Portfolio Holdings continued

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


*		Non-income producing security.
(a)		All or a portion of this security is on loan. Securities on loan were valued at $40,305,835. Non-Cash Collateral pledged to the fund for securities on loan amounted to $697,106.
(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 $266,364 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.


CVR —		Contingent Value Rights
REIT —		Real Estate Investment Trust

In addition to the above, the fund held the following at 10/31/14:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

Russell 2000 Index, mini, Long, expires 12/19/14

4,684,000

63,962

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):


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

Common Stock¹		$1,201,580,309		$—		$—		$1,201,580,309
Rights¹		—		—		266,364		266,364
Other Investment Company		40,701,297		—		—		40,701,297
Short-Term Investment¹		—		1,039,983		—		1,039,983

Total		$1,242,281,606		$1,039,983		$266,364		$1,243,587,953

Other Financial Instruments
Futures Contracts²		$63,962		$—		$—		$63,962


¹		As categorized in the complete schedule of portfolio holdings.
²		Futures contracts are not included in Investments in the schedule of portfolio holdings 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

2013

(Losses)

(Depreciation)

Purchases

Sales

out

2014

Rights

$—

$266,364

$—

$266,364

Total

$—

$266,364

$—

$266,364

See financial notes 27

Schwab Fundamental US Small Company Index Fund

Statement of

Assets and Liabilities

As of October 31, 2014



Assets

Investments, at value (cost $937,641,542) including securities on loan of $40,305,835		$1,202,886,656
Collateral invested for securities on loan, at value (cost $40,701,297)	+	40,701,297

Total investments, at value (cost $978,342,839)		1,243,587,953
Foreign currency, at value (cost $34)		29
Receivables:
Investments sold		6,007,850
Fund shares sold		1,202,245
Dividends		504,356
Income from securities on loan		140,671
Variation margin on futures contracts		20,999
Prepaid expenses	+	14,926

Total assets		1,251,479,029

Liabilities

Collateral held for securities on loan		40,701,297
Payables:
Investment adviser and administrator fees		21,921
Shareholder service fees		12,314
Due to custodian		1,671,464
Fund shares redeemed		1,183,568
Accrued expenses	+	372,551

Total liabilities		43,963,115

Net Assets

Total assets		1,251,479,029
Total liabilities	−	43,963,115

Net assets		$1,207,515,914

Net Assets by Source
Capital received from investors		877,465,853
Net investment income not yet distributed		9,628,136
Net realized capital gains		55,112,854
Net unrealized capital appreciation		265,309,071

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$1,207,515,914

89,411,590

$13.51

28 See financial notes

Schwab Fundamental US Small Company Index Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends (net of foreign withholding taxes of $15,986)		$15,300,766
Interest		699
Securities on loan	+	1,023,767

Total investment income		16,325,232

Expenses

Investment adviser and administrator fees		2,811,863
Shareholder service fees		959,604
Index fee		663,584
Transfer agent fees		95,999
Portfolio accounting fees		72,211
Registration fees		66,415
Shareholder reports		60,202
Custodian fees		59,019
Professional fees		43,430
Independent trustees’ fees		11,192
Interest expense		426
Other expenses	+	18,813

Total expenses		4,862,758
Expense reduction by CSIM and its affiliates	−	1,025,278

Net expenses	−	3,837,480

Net investment income		12,487,752

Realized and Unrealized Gains (Losses)

Net realized gains on investments		59,963,207
Net realized losses on futures contracts		(1,569,653	)
Net realized gains on foreign currency transactions	+	535

Net realized gains		58,394,089
Net change in unrealized appreciation (depreciation) on investments		38,050,286
Net change in unrealized appreciation (depreciation) on futures contracts		(160,595	)
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	(7	)

Net change in unrealized appreciation (depreciation)	+	37,889,684

Net realized and unrealized gains		96,283,773

Increase in net assets resulting from operations		$108,771,525

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


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$12,487,752			$10,235,724
Net realized gains		58,394,089			35,664,271
Net change in unrealized appreciation (depreciation)	+	37,889,684			183,388,180

Increase in net assets from operations		108,771,525			229,288,175

Distributions to Shareholders

Distributions from net investment income		(8,210,484	)		(11,947,531	)
Distributions from net realized gains	+	(37,238,379	)		(50,580,881	)

Total distributions		($45,448,863	)		($62,528,412	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			40,867,612		$529,827,506			16,241,608		$178,159,226
Shares reinvested			1,787,741		22,900,966			2,784,659		26,509,953
Shares redeemed	+		(19,718,745	)	(257,947,641	)		(12,560,146	)	(140,960,955	)

Net transactions in fund shares			22,936,608		$294,780,831			6,466,121		$63,708,224

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			66,474,982		$849,412,421			60,008,861		$618,944,434
Total increase	+		22,936,608		358,103,493			6,466,121		230,467,987

End of period			89,411,590		$1,207,515,914			66,474,982		$849,412,421


Net investment income not yet distributed					$9,628,136					$5,421,598

30 See financial notes

Schwab Fundamental International Large Company Index Fund

Financial Statements

Financial Highlights


	11/1/13–			11/1/12–			11/1/11–			11/1/10–			11/1/09–
	10/31/14			10/31/13			10/31/12			10/31/11			10/31/10


Per-Share Data ($)

Net asset value at beginning of period		9.05			7.16			7.26			8.09			7.69

Income (loss) from investment operations:
Net investment income (loss)		0.30			0.23			0.22			0.23			0.21
Net realized and unrealized gains (losses)		(0.26	)		1.87			(0.08	)¹		(0.85	)		0.41

Total from investment operations		0.04			2.10			0.14			(0.62	)		0.62
Less distributions:
Distributions from net investment income		(0.25	)		(0.21	)		(0.24	)		(0.21	)		(0.22	)

Net asset value at end of period		8.84			9.05			7.16			7.26			8.09

Total return (%)		0.39			30.12			2.24			(7.88	)		8.27

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.35			0.34	²		0.31	²		0.35			0.35
Gross operating expenses		0.48			0.52			0.56			0.57			0.61
Net investment income (loss)		3.52			2.95			3.58			3.24			2.70
Portfolio turnover rate		8			22			61	³		35			65
Net assets, end of period ($ x 1,000,000)		908			646			501			372			301

¹ 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.

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 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

Condensed Portfolio Holdings as of October 31, 2014


				Cost		Value
Holdings by Category				($)		($)

	98	.8%	Common Stock		809,911,937		896,853,900
	0	.6%	Preferred Stock		4,534,745		5,189,504
	0	.0%	Rights		240,551		237,808
	1	.0%	Other Investment Companies		9,110,883		9,112,622
	0	.1%	Short-Term Investments		872,092		872,092


	100	.5%	Total Investments		824,670,208		912,265,926
	(0	.5%)	Other Assets and Liabilities, Net				(4,209,615	)


	100	.0%	Net Assets				908,056,311


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

Common Stock 98.8% of net assets

Australia 5.6%
BHP Billiton Ltd.		212,283		0.7		6,350,834
Commonwealth Bank of Australia		56,055		0.4		3,986,038
National Australia Bank Ltd.		116,229		0.4		3,595,632
Wesfarmers Ltd.		87,191		0.4		3,393,272
Westpac Banking Corp.		118,595		0.4		3,640,186
Other Securities				3.3		29,648,707

				5.6		50,614,669

Austria 0.3%
Other Securities				0.3		3,130,084

Belgium 0.9%
Other Securities				0.9		8,284,478

Canada 6.8%
Royal Bank of Canada		55,963		0.4		3,972,849
Other Securities				6.4		57,979,754

				6.8		61,952,603

Denmark 0.8%
Other Securities				0.8		7,614,765

Finland 1.2%
Nokia Oyj		481,701		0.5		4,025,043
Other Securities				0.7		6,496,259

				1.2		10,521,302

France 10.4%
BNP Paribas S.A.		73,041		0.5		4,590,047
GDF Suez		216,025		0.6		5,245,070
Orange S.A.		542,254		1.0		8,632,885
Sanofi		70,959		0.7		6,438,822
Total S.A.		278,735		1.8		16,641,388
Vivendi S.A. *		168,852		0.5		4,124,933
Other Securities				5.3		48,307,012

				10.4		93,980,157

Germany 8.1%
Allianz SE - Reg’d		29,776		0.5		4,735,043
BASF SE		74,645		0.7		6,595,643
Bayer AG - Reg’d		34,877		0.5		4,988,170
Daimler AG - Reg’d		78,994		0.7		6,159,081
Deutsche Telekom AG - Reg’d		422,902		0.7		6,374,536
E.ON SE		397,063		0.8		6,845,403
RWE AG		98,306		0.4		3,488,071
Siemens AG - Reg’d		51,256		0.6		5,781,340
Other Securities				3.2		28,813,980

				8.1		73,781,267

Hong Kong 1.1%
Other Securities				1.1		10,208,134

Ireland 0.6%
Other Securities				0.6		5,385,005

Israel 0.4%
Other Securities				0.4		3,483,341

Italy 3.7%
Enel S.p.A.		1,062,660		0.6		5,430,106
Eni S.p.A.		418,168		1.0		8,909,025
Intesa Sanpaolo S.p.A.		1,225,005		0.4		3,601,219
UniCredit S.p.A.		562,489		0.4		4,073,951
Other Securities				1.3		11,972,634

				3.7		33,986,935

Japan 21.4%
Canon, Inc.		124,900		0.4		3,831,952
Hitachi Ltd.		503,000		0.4		3,952,308
Honda Motor Co., Ltd.		135,400		0.5		4,328,634
Mitsubishi UFJ Financial Group, Inc.		649,834		0.4		3,788,021
Nippon Telegraph & Telephone Corp.		73,004		0.5		4,542,223
Toyota Motor Corp.		142,900		1.0		8,599,319
Other Securities				18.2		164,969,890

				21.4		194,012,347

32 See financial notes

Schwab Fundamental International Large Company Index Fund

Condensed Portfolio Holdings continued

Number

% of Net

Value

Security

of Shares

Assets

($)

Luxembourg 0.6%

Other Securities

0.6

5,120,954

Netherlands 5.7%

Royal Dutch Shell plc, A Shares

521,794

2.0

18,659,565

Royal Dutch Shell plc, B Shares

333,480

1.4

12,320,561

Other Securities

2.3

20,732,982

5.7

51,713,108

New Zealand 0.1%

Other Securities

0.1

1,189,994

Norway 0.9%

Statoil A.S.A.

156,569

0.4

3,583,149

Other Securities

0.5

4,405,455

0.9

7,988,604

Portugal 0.2%

Other Securities

0.2

1,940,888

Singapore 0.8%

Other Securities

0.8

7,535,882

Spain 4.4%

Banco Bilbao Vizcaya Argentaria S.A.

422,907

0.5

4,730,166

Banco Santander S.A.

1,232,639

1.2

10,891,012

Telefonica S.A.

665,756

1.1

10,018,082

Other Securities

1.6

13,847,339

4.4

39,486,599

Sweden 2.3%

Other Securities

2.3

20,970,577

Switzerland 5.6%

Nestle S.A. - Reg’d

138,024

1.1

10,121,865

Novartis AG - Reg’d

91,109

0.9

8,455,175

Roche Holding AG

20,671

0.7

6,100,040

Other Securities

2.9

26,220,551

5.6

50,897,631

United Kingdom 16.9%

Anglo American plc

176,933

0.4

3,735,684

AstraZeneca plc

107,613

0.9

7,860,952

Barclays plc

1,241,295

0.5

4,773,919

BP plc

2,811,246

2.2

20,226,637

British American Tobacco plc

88,516

0.6

5,016,874

GlaxoSmithKline plc

332,763

0.8

7,525,090

HSBC Holdings plc

1,229,358

1.4

12,533,752

Rio Tinto plc

84,733

0.5

4,031,719

Vodafone Group plc

2,701,957

1.0

8,985,234

Other Securities

8.6

78,364,715

16.9

153,054,576

Total Common Stock

(Cost $809,911,937)

896,853,900

Preferred Stock 0.6% of net assets

Germany 0.4%

Other Securities

0.4

3,630,656

Italy 0.2%

Other Securities

0.2

1,547,099

United Kingdom 0.0%

Other Securities

0.0

11,749

Total Preferred Stock

(Cost $4,534,745)

5,189,504

Rights 0.0% of net assets

Spain 0.0%

Banks 0.0%

Other Securities

0.0

237,808

Total Rights

(Cost $240,551)

237,808

Other Investment Companies 1.0% of net assets

United States 1.0%

Equity Fund 0.0%

Other Securities

0.0

6,395

Securities Lending Collateral 1.0%

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

9,106,227

1.0

9,106,227

Total Other Investment Companies

(Cost $9,110,883)

9,112,622

Face

Security

Amount

% of Net

Value

Rate, Maturity Date

($)

Assets

($)

Short-Term Investments 0.1% of net assets

Time Deposit 0.0%

Other Securities

0.0

201,101

U.S. Treasury Obligation 0.1%

Other Securities

0.1

670,991

Total Short-Term Investments

(Cost $872,092)

872,092

End of Investments.

See financial notes 33

Schwab Fundamental International Large Company Index Fund

Condensed Portfolio Holdings continued

At 10/31/14, the tax basis cost of the fund’s investments was $842,623,307 unrealized appreciation and depreciation were $107,992,010 and ($38,349,391), respectively, with a net unrealized appreciation of $69,642,619.

At 10/31/14, the values of certain foreign securities held by the fund aggregating $828,027,743 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(a) for additional information)

For the following notes, please refer to the complete schedule of portfolio 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 $11,749 or 0.0% of net assets.
(c)		All or a portion of this security is on loan. Securities on loan were valued at $8,622,312.
(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 10/31/14:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

MSCI EAFE, e-mini, Long, expires 12/19/14

2,754,000

91,820

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):


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

Common Stock¹		$—		$475,957,509		$—		$475,957,509
Australia		523,598		50,091,071		—		50,614,669
Austria		304,175		2,825,909		—		3,130,084
Canada		61,952,603		—		—		61,952,603
Finland		425,787		10,095,515		—		10,521,302
Ireland		1,730,550		3,654,455		—		5,385,005
Luxembourg		528,291		4,592,663		—		5,120,954
Netherlands		111,003		51,602,105		—		51,713,108
Singapore		884,722		6,651,160		—		7,535,882
Sweden		504,922		20,465,655		—		20,970,577
Switzerland		1,854,543		49,043,088		—		50,897,631
United Kingdom		5,183,718		147,870,858		—		153,054,576
Preferred Stock¹		—		5,177,755		—		5,177,755
United Kingdom		—		—		11,749		11,749
Rights¹		237,808		—		—		237,808
Other Investment Companies¹		9,112,622		—		—		9,112,622
Short-Term Investments¹		—		872,092		—		872,092

Total		$83,354,342		$828,899,835		$11,749		$912,265,926

Other Financial Instruments
Futures Contracts²		$91,820		$—		$—		$91,820


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

34 See financial notes

Schwab Fundamental International Large Company Index Fund

Condensed 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

as of

October 31,

Gains

Appreciation

Gross

Transfers

October 31,

Investments in Securities

2013

(Losses)

(Depreciation)

Purchases

Sales

out

2014

Preferred Stock

United Kingdom

$5,981

$66

$10

$11,789

($6,097

)

$—

$11,749

Rights

Spain

185,237

—

(8,353

)

—

(176,884

)

—

Total

$191,218

$66

($8,343

)

$11,789

($182,981

)

$—

$11,749

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 $2,782,474 and $2,131,258 from Level 1 to Level 2 and from Level 2 to Level 1, respectively, for the period ended October 31, 2014. 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 during the period.

See financial notes 35

Schwab Fundamental International Large Company Index Fund

Statement of

Assets and Liabilities

As of October 31, 2014



Assets

Investments, at value (cost $815,563,981) including securities on loan of $8,622,312		$903,159,699
Collateral invested for securities on loan, at value (cost $9,106,227)	+	9,106,227

Total investments, at value (cost $824,670,208)		912,265,926
Foreign currency, at value (cost $153)		153
Receivables:
Investments sold		3,509,592
Dividends		2,000,013
Fund shares sold		1,253,128
Foreign tax reclaims		440,637
Variation margin on futures contracts		51,750
Income from securities on loan		24,987
Prepaid expenses	+	10,892

Total assets		919,557,078

Liabilities

Collateral held for securities on loan		9,106,227
Payables:
Investments bought		248,031
Investment adviser and administrator fees		10,501
Shareholder service fees		3,912
Fund shares redeemed		1,172,060
Due to custodian		627,978
Accrued expenses	+	332,058

Total liabilities		11,500,767

Net Assets

Total assets		919,557,078
Total liabilities	−	11,500,767

Net assets		$908,056,311

Net Assets by Source
Capital received from investors		911,681,144
Net investment income not yet distributed		25,916,254
Net realized capital losses		(117,151,844	)
Net unrealized capital appreciation		87,610,757

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$908,056,311

102,694,214

$8.84

36 See financial notes

Schwab Fundamental International Large Company Index Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends (net of foreign withholding taxes of $2,824,215)		$31,561,811
Interest		6,916
Securities on loan	+	690,475

Total investment income		32,259,202

Expenses

Investment adviser and administrator fees		2,233,384
Shareholder service fees		672,237
Index fee		490,140
Custodian fees		241,076
Transfer agent fees		101,323
Portfolio accounting fees		94,383
Registration fees		82,329
Professional fees		48,637
Shareholder reports		37,332
Independent trustees’ fees		9,996
Interest expense		88
Other expenses	+	26,290

Total expenses		4,037,215
Expense reduction by CSIM and its affiliates	−	1,120,379

Net expenses	−	2,916,836

Net investment income		29,342,366

Realized and Unrealized Gains (Losses)

Net realized gains on investments		19,901,573
Net realized losses on futures contracts		(48,917	)
Net realized losses on foreign currency transactions	+	(92,456	)

Net realized gains		19,760,200
Net change in unrealized appreciation (depreciation) on investments		(59,305,801	)
Net change in unrealized appreciation (depreciation) on futures contracts		(187,529	)
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	(92,748	)

Net change in unrealized appreciation (depreciation)	+	(59,586,078	)

Net realized and unrealized losses		(39,825,878	)

Decrease in net assets resulting from operations		($10,483,512	)

See financial notes 37

Schwab Fundamental International Large Company Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$29,342,366			$17,039,641
Net realized gains (losses)		19,760,200			(9,812,563	)
Net change in unrealized appreciation (depreciation)	+	(59,586,078	)		144,914,210

Increase (Decrease) in net assets from operations		(10,483,512	)		152,141,288

Distributions to Shareholders

Distributions from net investment income		($17,955,621	)		($15,274,655	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			49,079,319		$452,063,298			24,782,287		$195,910,846
Shares reinvested			1,447,761		12,841,641			1,575,182		11,404,319
Shares redeemed	+		(19,204,938	)	(174,204,252	)		(24,923,187	)	(198,967,968	)

Net transactions in fund shares			31,322,142		$290,700,687			1,434,282		$8,347,197

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			71,372,072		$645,794,757			69,937,790		$500,580,927
Total increase	+		31,322,142		262,261,554			1,434,282		145,213,830

End of period			102,694,214		$908,056,311			71,372,072		$645,794,757


Net investment income not yet distributed					$25,916,254					$14,415,187

38 See financial notes

Schwab Fundamental International Small Company Index Fund

Financial Statements

Financial Highlights


	11/1/13–			11/1/12–			11/1/11–			11/1/10–			11/1/09–
	10/31/14			10/31/13			10/31/12			10/31/11			10/31/10


Per-Share Data ($)

Net asset value at beginning of period		11.47			9.13			9.53			9.96			9.00

Income (loss) from investment operations:
Net investment income (loss)¹		0.22			0.22			0.21			0.24			0.16
Net realized and unrealized gains (losses)		(0.23	)		2.42			0.03			(0.40	)		1.09

Total from investment operations		(0.01	)		2.64			0.24			(0.16	)		1.25
Less distributions:
Distributions from net investment income		(0.31	)		(0.30	)		(0.25	)		(0.27	)		(0.29	)
Distributions from net realized gains		—			—			(0.39	)		—			—

Total distributions		(0.31	)		(0.30	)		(0.64	)		(0.27	)		(0.29	)

Net asset value at end of period		11.15			11.47			9.13			9.53			9.96

Total return (%)		(0.07	)		29.75			3.13			(1.76	)		14.32

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.49			0.47	^2,3		0.46	^4,5		0.54			0.55
Gross operating expenses		0.80			0.93			0.92	⁵		0.99			1.07
Net investment income (loss)		1.87			2.21			2.42			2.29			1.77
Portfolio turnover rate		41			29			89	⁶		63			63
Net assets, end of period ($ x 1,000,000)		275			150			90			93			74

¹ Calculated based on the average shares outstanding during the period.

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.

³ The ratio of net operating expenses would have been 0.52%, if voluntary waiver by CSIM had not been included.

⁴ The ratio of net operating expenses would have been 0.51%, if voluntary waiver by CSIM had not been included.

⁵ The net operating and gross operating expense ratios would have been 0.50% and 0.97%, respectively, if vendor payments had not been included.

⁶ Portfolio turnover would have been 48%, if rebalancing trades had not been included due to a change in the fund’s index.

See financial notes 39

Schwab Fundamental International Small Company Index Fund

Condensed Portfolio Holdings as of October 31, 2014


				Cost		Value
Holdings by Category				($)		($)

	98	.1%	Common Stock		254,199,293		270,207,475
	0	.5%	Preferred Stock		1,230,970		1,295,299
	3	.0%	Other Investment Companies		8,233,674		8,313,893
	0	.2%	Short-Term Investments		520,504		520,504


	101	.8%	Total Investments		264,184,441		280,337,171
	(1	.8)%	Other Assets and Liabilities, Net				(4,939,486	)


	100	.0%	Net Assets				275,397,685


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

Common Stock 98.1% of net assets

Australia 5.9%
APA Group		67,760		0.2		471,090
CSR Ltd.		163,269		0.2		499,706
Dexus Property Group		494,864		0.2		528,914
DUET Group		212,149		0.1		459,207
Sigma Pharmaceuticals Ltd.		702,797		0.2		478,828
Sydney Airport		130,196		0.2		506,167
Transfield Services Ltd. *		320,558		0.2		541,186
Other Securities				4.6		12,732,865

				5.9		16,217,963

Austria 0.7%
Other Securities				0.7		1,822,135

Belgium 1.4%
Mobistar S.A. *		24,830		0.2		532,079
Other Securities				1.2		3,210,102

				1.4		3,742,181

Canada 8.1%
Other Securities				8.1		22,218,487

Denmark 1.4%
Other Securities				1.4		3,767,406

Finland 1.3%
Other Securities				1.3		3,555,543

France 4.3%
Other Securities				4.3		11,904,583

Germany 3.3%
Celesio AG		24,277		0.3		800,942
Symrise AG		9,220		0.2		519,817
Other Securities				2.8		7,903,243

				3.3		9,224,002

Greece 0.0%
Other Securities				0.0		—

Hong Kong 2.8%
Hongkong Land Holdings Ltd.		72,000		0.2		502,122
Orient Overseas International Ltd.		88,500		0.2		504,208
Other Securities				2.4		6,771,753

				2.8		7,778,083

Ireland 0.9%
DCC plc		11,747		0.2		658,311
Other Securities				0.7		1,919,888

				0.9		2,578,199

Israel 1.2%
Check Point Software Technologies Ltd. *		7,043		0.2		522,943
Other Securities				1.0		2,777,453

				1.2		3,300,396

Italy 2.1%
Banca Popolare Di Milano Scarl *		635,469		0.2		478,968
Other Securities				1.9		5,401,610

				2.1		5,880,578

Japan 38.5%
Alps Electric Co., Ltd.		35,300		0.2		600,847
Canon Marketing Japan, Inc.		24,000		0.2		490,661
Casio Computer Co., Ltd.		34,200		0.2		545,337
COMSYS Holdings Corp.		28,100		0.2		501,658
Fujikura Ltd.		111,000		0.2		466,267
Fukuoka Financial Group, Inc.		101,000		0.2		516,822
Hitachi Construction Machinery Co., Ltd.		25,300		0.2		517,496
Hitachi High-Technologies Corp.		19,700		0.2		601,825
IT Holdings Corp.		28,100		0.1		459,136
Keio Corp.		71,000		0.2		539,297
Kikkoman Corp.		24,000		0.2		552,029
Koito Manufacturing Co., Ltd.		20,400		0.2		614,698
Minebea Co., Ltd.		39,000		0.2		534,395
NGK Insulators Ltd.		24,000		0.2		516,912
NGK Spark Plug Co., Ltd.		18,600		0.2		485,097

40 See financial notes

Schwab Fundamental International Small Company Index Fund

Condensed Portfolio Holdings continued

Number

% of Net

Value

Security

of Shares

Assets

($)

NOK Corp.

23,500

0.2

595,360

Nomura Research Institute Ltd.

14,800

0.2

488,160

NTN Corp.

114,000

0.2

492,910

Santen Pharmaceutical Co., Ltd.

7,700

0.2

459,586

Yamaha Corp.

35,900

0.2

492,079

Other Securities

34.6

95,468,662

38.5

105,939,234

Luxembourg 0.4%

Other Securities

0.4

1,103,726

Netherlands 1.9%

Other Securities

1.9

5,258,076

New Zealand 0.7%

Other Securities

0.7

2,018,089

Norway 1.0%

Other Securities

1.0

2,695,412

Portugal 0.3%

Other Securities

0.3

896,909

Republic of Korea 0.0%

Other Securities

0.0

2,970

Singapore 1.9%

CapitaLand Ltd.

194,000

0.2

478,970

Other Securities

1.7

4,780,478

1.9

5,259,448

Spain 2.0%

Bankia S.A. *

344,465

0.2

617,745

Other Securities

1.8

4,783,903

2.0

5,401,648

Sweden 2.1%

Other Securities

2.1

5,794,474

Switzerland 3.0%

Actelion Ltd. - Reg’d *

4,314

0.2

513,776

Other Securities

2.8

7,730,580

3.0

8,244,356

United Kingdom 12.9%

Ashtead Group plc

28,050

0.2

469,956

Catlin Group Ltd.

54,796

0.2

470,740

Dixons Carphone plc

150,045

0.3

952,752

Evraz plc

299,042

0.2

619,913

Hammerson plc

50,607

0.2

497,163

Investec plc

54,984

0.2

504,174

London Stock Exchange Group plc

14,992

0.2

484,143

Persimmon plc *

26,969

0.2

633,372

Provident Financial plc

13,702

0.2

465,955

The British Land Co. plc

48,987

0.2

572,007

Other Securities

10.8

29,933,402

12.9

35,603,577

Total Common Stock

(Cost $254,199,293)

270,207,475

Preferred Stock 0.5% of net assets

Germany 0.3%

Other Securities

0.3

863,519

Italy 0.1%

Other Securities

0.1

232,345

Spain 0.1%

Other Securities

0.1

105,313

Sweden 0.0%

Other Securities

0.0

94,122

Total Preferred Stock

(Cost $1,230,970)

1,295,299

Other Investment Companies 3.0% of net assets

United States 3.0%

Equity Fund 0.7%

iShares MSCI EAFE Small Cap ETF

40,000

0.7

1,941,600

Securities Lending Collateral 2.3%

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

6,372,293

2.3

6,372,293

Total Other Investment Companies

(Cost $8,233,674)

8,313,893

Face

Security

Amount

% of Net

Value

Rate, Maturity Date

($)

Assets

($)

Short-Term Investments 0.2% of net assets

Time Deposit 0.2%

Other Securities

0.2

513,504

U.S. Treasury Obligation 0.0%

Other Securities

0.0

7,000

Total Short-Term Investments

(Cost $520,504)

520,504

End of Investments.

At 10/31/14, the tax basis cost of the fund’s investments was $267,827,595 and the unrealized appreciation and depreciation

See financial notes 41

Schwab Fundamental International Small Company Index Fund

Condensed Portfolio Holdings continued

were $27,972,860 and ($15,463,284), respectively, with a net unrealized appreciation of $12,509,576.

At 10/31/14, the values of certain foreign securities held by the fund aggregating $232,329,396 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(a) for additional information)

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


*		Non-income producing security.
(a)		All or a portion of this security is on loan. Securities on loan were valued at $6,049,729.
(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 $2,970 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
GDR —		Global Depositary Receipt
Reg’d —		Registered
REIT —		Real Estate Investment Trust
SDR —		Swedish Depositary Receipt

In addition to the above the fund held the following at 10/31/14:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

MSCI EAFE, e-mini, Long, expires 12/19/14

91,800

4,234

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):


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

Common Stock¹		$—		$118,930,642		$—		$118,930,642
Australia		729,672		15,488,291		—		16,217,963
Austria		738,630		1,083,505		—		1,822,135
Belgium		2,152,904		1,589,277		—		3,742,181
Canada		22,173,007		45,480		—		22,218,487
Finland		590,984		2,964,559		—		3,555,543
France		1,684,773		10,219,810		—		11,904,583
Greece		—		—		—		—
Hong Kong		675,387		7,102,696		—		7,778,083
Ireland		999,812		1,578,387		—		2,578,199
Israel		522,943		2,777,453		—		3,300,396
Italy		808,019		5,072,559		—		5,880,578
Luxembourg		462,751		640,975		—		1,103,726
Netherlands		1,213,796		4,044,280		—		5,258,076
New Zealand		657,757		1,360,332		—		2,018,089
Norway		374,322		2,321,090		—		2,695,412
Portugal		84,230		812,679		—		896,909
Republic of Korea		—		—		2,970		2,970
Singapore		246,530		5,012,918		—		5,259,448
Spain		133,264		5,268,384		—		5,401,648
Sweden		466,321		5,328,153		—		5,794,474
Switzerland		498,560		7,745,796		—		8,244,356
United Kingdom		3,956,746		31,646,831		—		35,603,577
Preferred Stock¹		—		1,295,299		—		1,295,299

42 See financial notes

Schwab Fundamental International Small Company Index Fund

Condensed Portfolio Holdings continued

Quoted Prices in

Significant

Active Markets for

Other Significant

Unobservable

Identical Assets

Observable Inputs

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total

Other Investment Companies

United States¹

$8,313,893

$—

$8,313,893

Short-Term Investments¹

—

520,504

—

520,504

Total

$47,484,301

$232,849,900

$2,970

$280,337,171

Other Financial Instruments

Futures Contracts²

$4,234

$—

$4,234


¹		As categorized in the complete schedule of portfolio holdings.
²		Futures contracts are not included in Investments in the schedule of portfolio holdings 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	2013		(Losses)			(Depreciation)			Purchases		Sales			in		out		2014

Common Stock
Australia		$—		($11,291	)		$11,291			$—		$—			$—		$—		$—
Luxembourg		—		—			(362,547	)		149,585		—			212,962		—		—
Portugal		—		—			(315,262	)		315,262		—			—		—		—
Republic of Korea		—		—			2,970			—		—			—		—		2,970
Sweden		—		—			12,129			—		(12,129	)		—		—		—

Total		$—		($11,291	)		($651,419	)		$464,847		($12,129	)		$212,962		$—		$2,970

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 and Level 2 for the period ended October 31, 2014. The transfers in the amount of $4,740,156 and $4,944,549 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 into Level 3 from Level 1 or Level 2 were due to the result of fair valued securities for which no quoted value was available.

See financial notes 43

Schwab Fundamental International Small Company Index Fund

Statement of

Assets and Liabilities

As of October 31, 2014



Assets

Investments, at value (cost $257,812,148) including securities on loan of $6,049,729		$273,964,878
Collateral invested for securities on loan, at value (cost $6,372,293)	+	6,372,293

Total investments, at value (cost $264,184,441)		280,337,171
Receivables:
Investments sold		179,303
Fund shares sold		893,501
Dividends		686,969
Foreign tax reclaims		39,848
Income from securities on loan		14,987
Variation margin on futures contracts		1,725
Due from investment adviser		1,219
Prepaid expenses	+	2,217

Total assets		282,156,940

Liabilities

Collateral held for securities on loan		6,372,293
Payables:
Fund shares redeemed		178,909
Due to custodian		52
Accrued expenses	+	208,001

Total liabilities		6,759,255

Net Assets

Total assets		282,156,940
Total liabilities	−	6,759,255

Net assets		$275,397,685

Net Assets by Source
Capital received from investors		257,738,160
Net investment income not yet distributed		1,960,947
Net realized capital losses		(436,176	)
Net unrealized capital appreciation		16,134,754

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$275,397,685

24,688,478

$11.15

44 See financial notes

Schwab Fundamental International Small Company Index Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends (net of foreign withholding taxes of $563,121)		$4,716,675
Interest		838
Securities on loan	+	172,056

Total investment income		4,889,569

Expenses

Investment adviser and administrator fees		829,112
Shareholder service fees		159,256
Custodian fees		225,145
Index fee		170,045
Portfolio accounting fees		72,870
Professional fees		48,391
Transfer agent fees		46,211
Registration fees		44,490
Shareholder reports		35,743
Independent trustees’ fees		7,019
Interest expense		302
Other expenses	+	22,069

Total expenses		1,660,653
Expense reduction by CSIM and its affiliates	−	644,689

Net expenses	−	1,015,964

Net investment income		3,873,605

Realized and Unrealized Gains (Losses)

Net realized gains on investments		4,204,752
Net realized gains on futures contracts		219,333
Net realized losses on foreign currency transactions	+	(60,490	)

Net realized gains		4,363,595
Net change in unrealized appreciation (depreciation) on investments		(12,434,582	)
Net change in unrealized appreciation (depreciation) on futures contracts		(208	)
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	(24,938	)

Net change in unrealized appreciation (depreciation)	+	(12,459,728	)

Net realized and unrealized losses		(8,096,133	)

Decrease in net assets resulting from operations		($4,222,528	)

See financial notes 45

Schwab Fundamental International Small Company Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$3,873,605			$2,524,591
Net realized gains		4,363,595			1,480,423
Net change in unrealized appreciation (depreciation)	+	(12,459,728	)		25,933,638

Increase (Decrease) in net assets from operations		(4,222,528	)		29,938,652

Distributions to Shareholders

Distributions from net investment income		($4,201,706	)		($3,109,770	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			15,320,962		$176,589,635			5,053,700		$51,573,590
Shares reinvested			238,640		2,675,147			227,023		2,068,185
Shares redeemed	+		(3,909,585	)	(45,018,061	)		(2,140,208	)	(21,234,821	)

Net transactions in fund shares			11,650,017		$134,246,721			3,140,515		$32,406,954

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			13,038,461		$149,575,198			9,897,946		$90,339,362
Total increase	+		11,650,017		125,822,487			3,140,515		59,235,836

End of period			24,688,478		$275,397,685			13,038,461		$149,575,198


Net investment income not yet distributed					$1,960,947					$1,971,951

46 See financial notes

Schwab Fundamental Emerging Markets Large Company Index Fund

Financial Statements

Financial Highlights


	11/1/13–			11/1/12–			11/1/11–			11/1/10–			11/1/09–
	10/31/14			10/31/13			10/31/12			10/31/11			10/31/10


Per-Share Data ($)

Net asset value at beginning of period		9.24			8.86			9.17			10.81			8.91

Income (loss) from investment operations:
Net investment income (loss)		0.20			0.19			0.25			0.24			0.17
Net realized and unrealized gains (losses)		(0.66	)		0.43			(0.17	)		(1.37	)		1.81

Total from investment operations		(0.46	)		0.62			0.08			(1.13	)		1.98
Less distributions:
Distributions from net investment income		(0.18	)		(0.24	)		(0.22	)		(0.15	)		(0.08	)
Distributions from net realized gains		—			—			(0.17	)		(0.36	)		—

Total distributions		(0.18	)		(0.24	)		(0.39	)		(0.51	)		(0.08	)

Net asset value at end of period		8.60			9.24			8.86			9.17			10.81

Total return (%)		(5.03	)		7.11			1.18			(10.99	)		22.36

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		0.49			0.51	^1,2		0.56	³		0.61	⁴		0.61	⁴
Gross operating expenses		0.85			0.88			0.91			0.91			0.98
Net investment income (loss)		2.35			2.22			2.75			2.51			2.31
Portfolio turnover rate		19			22			86	⁵		56			91
Net assets, end of period ($ x 1,000,000)		346			353			314			310			294

¹ Effective June 11, 2013, the net operating expense limitation was lowered. The ratio presented for period ended 10/31/13 is a blended ratio.

² The ratio of net operating expenses would have been 0.56%, if voluntary waiver by CSIM had not been included.

³ The ratio of net operating expenses would have been 0.60%, if voluntary waiver by CSIM had not been included.

⁴ The ratio of net operating expenses would have been 0.60%, if interest expenses had not been incurred.

⁵ Portfolio turnover would have been 51%, if rebalancing trades had not been included due to a change in the fund’s index.

See financial notes 47

Schwab Fundamental Emerging Markets Large Company Index Fund

Condensed Portfolio Holdings as of October 31, 2014


				Cost		Value
Holdings by Category				($)		($)

	89	.6%	Common Stock		308,489,784		309,766,041
	9	.5%	Preferred Stock		44,495,548		32,716,863
	0	.1%	Other Investment Companies		473,712		474,165
	0	.5%	Short-Term Investments		1,733,677		1,733,677


	99	.7%	Total Investments		355,192,721		344,690,746
	0	.3%	Other Assets and Liabilities, Net				932,964


	100	.0%	Net Assets				345,623,710


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

Common Stock 89.6% of net assets

Brazil 6.0%
Banco do Brasil S.A.		195,908		0.7		2,192,392
Petroleo Brasileiro S.A.		769,058		1.3		4,546,874
Vale S.A.		318,979		0.9		3,218,239
Other Securities				3.1		10,682,688

				6.0		20,640,193

Chile 1.0%
Other Securities				1.0		3,356,970

China 16.3%
Bank of China Ltd., Class H		9,758,234		1.3		4,670,788
China Construction Bank Corp., Class H		9,379,000		2.0		6,997,662
China Mobile Ltd.		661,600		2.4		8,231,965
China Petroleum & Chemical Corp., Class H		6,183,400		1.5		5,362,315
China Telecom Corp., Ltd., Class H		2,600,000		0.5		1,657,383
CNOOC Ltd.		1,893,000		0.9		2,964,228
Industrial & Commercial Bank of China Ltd., Class H		8,192,172		1.6		5,439,274
PetroChina Co., Ltd., Class H		3,578,000		1.3		4,479,454
Other Securities				4.8		16,643,522

				16.3		56,446,591

Colombia 0.3%
Other Securities				0.3		1,014,299

Czech Republic 0.4%
Other Securities				0.4		1,419,403

Greece 0.5%
Other Securities				0.5		1,672,474

Hungary 0.6%
Other Securities				0.6		1,986,762

India 4.2%
Infosys Ltd.		26,150		0.5		1,733,499
Oil & Natural Gas Corp., Ltd.		253,112		0.5		1,656,510
Reliance Industries Ltd.		203,869		1.0		3,308,833
Other Securities				2.2		7,703,638

				4.2		14,402,480

Indonesia 1.0%
Other Securities				1.0		3,602,707

Malaysia 2.1%
Other Securities				2.1		7,306,091

Mexico 3.6%
America Movil S.A.B. de C.V., Series L		3,440,800		1.2		4,198,076
Cemex S.A.B. de C.V., Series CPO *		1,515,865		0.5		1,867,498
Other Securities				1.9		6,459,201

				3.6		12,524,775

Peru 0.1%
Other Securities				0.1		402,500

Philippines 0.2%
Other Securities				0.2		692,240

Poland 2.1%
KGHM Polska Miedz S.A.		42,757		0.4		1,649,067
Polski Koncern Naftowy Orlen S.A.		133,942		0.5		1,668,676
Other Securities				1.2		4,079,158

				2.1		7,396,901

Republic of Korea 16.9%
Hyundai Motor Co.		17,692		0.8		2,807,394
Korea Electric Power Corp.		43,275		0.6		1,899,590
LG Corp.		42,161		0.7		2,508,582
LG Display Co., Ltd. *		59,385		0.5		1,748,236
LG Electronics, Inc.		39,027		0.7		2,383,444
POSCO		15,300		1.3		4,419,207
Samsung Electronics Co., Ltd.		10,721		3.6		12,502,213
Shinhan Financial Group Co., Ltd.		45,012		0.6		2,118,524
SK C&C Co., Ltd.		7,761		0.5		1,761,209
SK Holdings Co., Ltd.		12,809		0.6		2,007,796
SK Innovation Co., Ltd.		22,748		0.6		1,860,789

48 See financial notes

Schwab Fundamental Emerging Markets Large Company Index Fund

Condensed Portfolio Holdings continued


	Number		% of Net		Value
Security	of Shares		Assets		($)
Other Securities				6.4		22,233,937

				16.9		58,250,921

Russia 11.4%
Gazprom OAO		864,000		0.8		2,842,485
Gazprom OAO ADR		1,495,000		2.9		9,905,589
LUKOIL OAO *		36,299		0.5		1,789,199
LUKOIL OAO ADR		185,000		2.6		9,068,576
MMC Norilsk Nickel OJSC ADR		117,700		0.6		2,196,184
Sberbank of Russia ADR		214,003		0.5		1,629,620
Surgutneftegas ADR		577,500		1.1		3,809,780
Tatneft ADR		47,100		0.5		1,683,489
Other Securities				1.9		6,563,412

				11.4		39,488,334

South Africa 7.0%
MTN Group Ltd.		190,981		1.2		4,228,901
Sasol Ltd.		81,822		1.2		4,085,798
Standard Bank Group Ltd.		135,867		0.5		1,710,942
Other Securities				4.1		14,222,072

				7.0		24,247,713

Taiwan 12.8%
Asustek Computer, Inc.		175,041		0.5		1,787,200
AU Optronics Corp.		3,924,800		0.6		1,870,447
Hon Hai Precision Industry Co., Ltd.		1,766,416		1.6		5,590,701
Taiwan Semiconductor Manufacturing Co., Ltd.		1,483,689		1.9		6,431,600
Other Securities				8.2		28,471,494

				12.8		44,151,442

Thailand 1.4%
PTT PCL		194,187		0.6		2,194,069
Other Securities				0.8		2,588,149

				1.4		4,782,218

Turkey 1.7%
Other Securities				1.7		5,981,027

Total Common Stock
(Cost $308,489,784)						309,766,041




Preferred Stock 9.5% of net assets

Brazil 7.6%
Banco Bradesco S.A.		204,767		0.9		3,084,024
Itau Unibanco Holding S.A.		332,478		1.4		4,931,017
Petroleo Brasileiro S.A.		1,136,860		2.0		7,010,461
Vale S.A.		440,957		1.1		3,834,950
Other Securities				2.2		7,538,765

				7.6		26,399,217

Colombia 0.1%
Other Securities				0.1		400,719

Republic of Korea 0.8%
Other Securities				0.8		2,617,549

Russia 1.0%
AK Transneft OAO *		1,196		0.8		2,613,611
Other Securities				0.2		685,767

				1.0		3,299,378

Total Preferred Stock
(Cost $44,495,548)						32,716,863




Other Investment Companies 0.1% of net assets

United States 0.1%

Equity Fund 0.0%
Other Securities				0.0		4,215

Securities Lending Collateral 0.1%
Other Securities				0.1		469,950

Total Other Investment Companies
(Cost $473,712)						474,165



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

Short-Term Investments 0.5% of net assets

Time Deposit 0.4%
Other Securities				0.4		1,496,681

U.S. Treasury Obligation 0.1%
Other Securities				0.1		236,996

Total Short-Term Investments
(Cost $1,733,677)						1,733,677



End of Investments.

At 10/31/14, the tax basis cost of the fund’s investments was $363,303,514 and the unrealized appreciation and depreciation were $44,899,163 and ($63,511,931), respectively, with a net unrealized depreciation of ($18,612,768).

See financial notes 49

Schwab Fundamental Emerging Markets Large Company Index Fund

Condensed Portfolio Holdings continued

At 10/31/14, the values of certain foreign securities held by the fund aggregating $266,609,446 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(a) for additional information)

For the following notes, please refer to the complete schedule of porfolio 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 $519,813 or 0.2% of net assets.
(c)		All or a portion of this security is on loan. Securities on loan were valued at $442,919.
(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
ETF —		Exchange Traded Fund
GDR —		Global Depositary Receipt
Reg’d —		Registered

In additional to the above the fund held the following at 10/31/14:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

MSCI Emerging Markets, mini, Long, expires 12/19/14

2,027,200

56,924

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):


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

Common Stock¹		$—		$77,778,702		$—		$77,778,702
Brazil		14,738,235		5,901,958		—		20,640,193
Chile		2,608,296		748,674		—		3,356,970
Colombia		1,014,299		—		—		1,014,299
Czech Republic		389,928		1,029,475		—		1,419,403
India		564,893		13,837,587		—		14,402,480
Malaysia		1,621,106		5,684,985		—		7,306,091
Mexico		12,524,775		—		—		12,524,775
Peru		402,500		—		—		402,500
Republic of Korea		—		57,731,108		519,813		58,250,921
Russia		9,247,150		30,241,184		—		39,488,334
South Africa		495,443		23,752,270		—		24,247,713
Taiwan		475,710		43,675,732		—		44,151,442
Thailand		4,782,218		—		—		4,782,218
Preferred Stock¹		—		2,617,549		—		2,617,549
Brazil		22,788,995		3,610,222		—		26,399,217
Colombia		400,719		—		—		400,719
Russia		3,299,378		—		—		3,299,378
Other Investment Companies¹		474,165		—		—		474,165
Short-Term Investments¹		—		1,733,677		—		1,733,677

Total		$75,827,810		$268,343,123		$519,813		$344,690,746

Other Financial Instruments
Futures Contracts²		$56,924		$—		$—		$56,924


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

50 See financial notes

Schwab Fundamental Emerging Markets Large Company Index Fund

Condensed 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

as of

October 31,

Gains

Appreciation

Gross

Transfers

October 31,

Investments in Securities

2013

(Losses)

(Depreciation)

Purchases

Sales

out

2014

Common Stock

Republic of Korea

$—

$5,566

($158,076

)

$33,844

($137,990

)

$776,469

$—

$519,813

South Africa

—

(204,646

)

204,646

—

Total

$—

$5,566

($362,722

)

$238,490

($137,990

)

$776,469

$—

$519,813

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, 2014. The transfers in the amount of $7,912,385 and $37,863,542 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 into Level 3 from Level 1 or Level 2 were due to the result of fair valued securities for which no quoted value was available.

See financial notes 51

Schwab Fundamental Emerging Markets Large Company Index Fund

Statement of

Assets and Liabilities

As of October 31, 2014



Assets

Investments, at value (cost $354,722,771) including securities on loan of $442,919		$344,220,796
Collateral invested for securities on loan, at value (cost $469,950)	+	469,950

Total investments, at value (cost $355,192,721)		344,690,746
Foreign currency, at value (cost $713,071)		712,543
Receivables:
Fund shares sold		829,986
Dividends		176,643
Foreign tax reclaims		7,836
Variation margin on futures contracts		7,800
Income from securities on loan		826
Interest		1
Prepaid expenses	+	5,458

Total assets		346,431,839

Liabilities

Collateral held for securities on loan		469,950
Payables:
Investment adviser and administrator fees		2,537
Shareholder service fees		1,309
Fund shares redeemed		66,119
Foreign capital gains tax		57,979
Accrued expenses and other liabilities	+	210,235

Total liabilities		808,129

Net Assets

Total assets		346,431,839
Total liabilities	−	808,129

Net assets		$345,623,710

Net Assets by Source
Capital received from investors		371,914,754
Net investment income not yet distributed		7,079,065
Net realized capital losses		(22,857,935	)
Net unrealized capital depreciation		(10,512,174	)

Net Asset Value (NAV)

Shares

Net Assets

Outstanding

NAV

$345,623,710

40,207,901

$8.60

52 See financial notes

Schwab Fundamental Emerging Markets Large Company Index Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends (net of foreign withholding taxes of $1,488,924)		$10,212,867
Interest		2,194
Securities on loan	+	5,052

Total investment income		10,220,113

Expenses

Investment adviser and administrator fees		1,798,450
Shareholder service fees		263,489
Custodian fees		401,151
Index fee		326,190
Portfolio accounting fees		74,100
Transfer agent fees		61,326
Professional fees		55,556
Registration fees		41,299
Shareholder reports		37,024
Independent trustees’ fees		7,814
Interest expense		1,204
Other expenses	+	7,058

Total expenses		3,074,661
Expense reduction by CSIM and its affiliates	−	1,310,976

Net expenses	−	1,763,685

Net investment income		8,456,428

Realized and Unrealized Gains (Losses)

Net realized losses on investments (net of foreign capital gain tax paid of $3,482)		(6,970,760	)
Net realized losses on futures contracts		(993,223	)
Net realized losses on foreign currency transactions	+	(79,910	)

Net realized losses		(8,043,893	)
Net change in unrealized appreciation (depreciation) on investments (net of foreign capital gain tax of ($10,101))		(20,529,336	)
Net change in unrealized appreciation (depreciation) on futures contracts		(84,652	)
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	(7,173	)

Net change in unrealized appreciation (depreciation)	+	(20,621,161	)

Net realized and unrealized losses		(28,665,054	)

Decrease in net assets resulting from operations		($20,208,626	)

See financial notes 53

Schwab Fundamental Emerging Markets Large Company Index Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$8,456,428			$7,185,968
Net realized gains (losses)		(8,043,893	)		69,488
Net change in unrealized appreciation (depreciation)	+	(20,621,161	)		14,710,964

Increase (Decrease) in net assets from operations		(20,208,626	)		21,966,420

Distributions to Shareholders

Distributions from net investment income		($7,207,709	)		($8,681,589	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares sold			17,844,818		$157,305,857			14,934,368		$131,472,133
Shares reinvested			517,807		4,510,103			618,303		5,583,275
Shares redeemed	+		(16,378,090	)	(141,770,574	)		(12,809,415	)	(111,551,317	)

Net transactions in fund shares			1,984,535		$20,045,386			2,743,256		$25,504,091

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			38,223,366		$352,994,659			35,480,110		$314,205,737
Total increase or decrease	+		1,984,535		(7,370,949	)		2,743,256		38,788,922

End of period			40,207,901		$345,623,710			38,223,366		$352,994,659


Net investment income not yet distributed					$7,079,065					$5,875,828

54 See financial notes

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 Fundamental Global Real Estate Index Fund		Schwab Target 2010 Fund
Schwab S&P 500 Index Fund		Schwab Target 2015 Fund
Schwab Small-Cap Index Fund		Schwab Target 2020 Fund
Schwab Total Stock Market Index Fund		Schwab Target 2025 Fund
Schwab International Index Fund		Schwab Target 2030 Fund
Schwab MarketTrack All Equity Portfolio		Schwab Target 2035 Fund
Schwab MarketTrack Growth Portfolio		Schwab Target 2040 Fund
Schwab MarketTrack Balanced Portfolio		Schwab Target 2045 Fund
Schwab MarketTrack Conservative Portfolio		Schwab Target 2050 Fund
Laudus Small-Cap MarketMasters Fund		Schwab Target 2055 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

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

Schwab Fundamental Index Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):


		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 Contracts (“futures”): Futures are valued at their settlement prices as of the close of their exchanges.

	•	Short-term securities (60 days or less to maturity): Short-term securities may be 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, without consideration to the classification level of the specific investments held by the underlying fund.

	•	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, 2014 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 be maintained on a daily marked-to-market basis in an amount at least equal to the current value of the securities loaned. The lending agent provides a fund with indemnification against borrower default (the borrower fails to return the security on loan) reducing the risk of loss as a result of default. The cash collateral of securities loaned is currently invested in money market portfolios operating under Rule 2a-7 of the 1940 Act. Each fund bears the risk of loss with respect to the investment of cash collateral. The terms of the securities lending agreement allow the funds to terminate any loans at any given time. Securities lending income, as disclosed in each 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 and broker rebates which are subject to adjustments pursuant to the securities lending agreement. On loans not collateralized by cash, a fee is received from the borrower, and is allocated between a fund and the lending agent. A fund retains the right to recall a security on loan. The aggregate market value of securities loaned will not at any time exceed one-third of the total assets of a fund, including collateral received from the loan (at market value computed at the time of the loan). Total costs and expenses, including agent fees, associated with securities lending activities under the trust’s Securities Lending Program paid to the unaffiliated lending agent are approximately 15% of the gross lending revenues.

(c) Security Transactions:

Schwab Fundamental Index Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

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.

(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.

(g) Custody Credit:

(h) Accounting Estimates:

(i) Federal Income Taxes:

Schwab Fundamental Index Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(j) Foreign Taxes:

(k) Indemnification:

3. Risk Factors:

Market Risk. 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.

Large-Cap Risk. 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 performance also will lag those investments.

Schwab Fundamental Index Funds

Financial Notes (continued)

3. Risk Factors (continued):

Small-Cap Risk. 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 performance also will lag those investments.

Foreign Investment Risk. 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); the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may negatively impact the value or liquidity of a fund’s investments, and could impair the fund’s ability to meet its investment objective or invest in accordance with its investment strategy. These risks may be heightened in connection with investments in emerging markets. Foreign securities also include American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts (“EDRs”), which are depositary receipts issued by U.S. and foreign banks that represent shares of foreign-based corporations. Investments in ADRs, GDRs and EDRs may be less liquid than the underlying shares in their primary trading market; and GDRs, many of which are issued by companies in emerging markets, may be more volatile. To the extent a fund’s investments in a single country or a limited number of countries represent a larger percentage of the fund’s assets, the fund’s performance may be adversely affected by the economic, political and social conditions in those countries and it may be subject to increased price volatility.

Emerging Markets Risk. 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.

ETFs Risk. 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 proportionate share 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.

Liquidity Risk. 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.

Schwab Fundamental Index Funds

Financial Notes (continued)

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

Schwab

Fundamental

Emerging

Fundamental

International

Markets

US Large

US Small

Large

Small

Large

Company

Index Fund

0.35%

0.49%

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.

Schwab Fundamental 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. 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

11/01/13

Fund

10/31/13

Purchases

Sales

10/31/14

to 10/31/14

Schwab Fundamental US Large Company Index Fund

138,015

23,300

(54,800

)

106,515

$3,053,785

$576,680

$29,512

5. Board of Trustees:

6. Borrowing from Banks:

7. Derivatives:


	Contract Values		Number of Contracts

Schwab Fundamental US Large Company Index Fund		$54,689,038		584
Schwab Fundamental US Small Company Index Fund		18,048,771		157
Schwab Fundamental International Large Company Index Fund		13,281,507		140
Schwab Fundamental International Small Company Index Fund		290,144		3
Schwab Fundamental Emerging Markets Large Company Index Fund		4,575,223		90

Schwab Fundamental Index Funds

Financial Notes (continued)

8. Purchases and Sales/Maturities of Investment Securities:

For the period ended October 31, 2014, 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		$1,514,559,023		$498,392,478
Schwab Fundamental US Small Company Index Fund		587,621,468		312,183,399
Schwab Fundamental International Large Company Index Fund		375,955,826		68,433,572
Schwab Fundamental International Small Company Index Fund		219,389,305		85,946,719
Schwab Fundamental Emerging Markets Large Company Index Fund		88,528,243		66,215,735

9. Redemption Fee:


	Current Period		Prior Period
	(11/1/13-10/31/14)		(11/1/12-10/31/13)

Schwab Fundamental US Large Company Index Fund		$78,706		$30,032
Schwab Fundamental US Small Company Index Fund		9,756		7,961
Schwab Fundamental International Large Company Index Fund		16,541		6,437
Schwab Fundamental International Small Company Index Fund		5,415		3,107
Schwab Fundamental Emerging Markets Large Company Index Fund		10,683		4,863

10. Federal Income Taxes:

As of October 31, 2014, 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		$120,774,239			$24,413,634			$27,539,099			$3,961,978			$7,701,447
Undistributed long-term capital gains		52,146,205			46,574,441			—			1,210,175			—
Unrealized appreciation on investments		1,151,767,191			298,144,150			107,992,010			27,972,860			44,899,163
Unrealized depreciation on investments		(33,650,207	)		(39,082,159	)		(38,349,391	)		(15,463,284	)		(63,511,931	)
Other unrealized appreciation (depreciation)		—			(5	)		(163,403	)		(22,204	)		(67,123	)

Net unrealized appreciation (depreciation)		$1,118,116,984			$259,061,986			$69,479,216			$12,487,372			($18,679,891	)

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

—

58,777,944

—

October 31, 2018

—

20,948,477

—

No expiration*

—

14,155,355

—

15,312,596

Total

$—

$100,643,151

$—

$15,312,596


*		As a result of the passage of the Regulated Investment Company Modernization Act of 2010 (“RIC”), 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, 2014, the funds had capital loss carryforwards utilized as follows:

Schwab

Fundamental

International

Emerging

US Large

US Small

Large

Small

Markets Large

Company

Index Fund

Capital loss carryforwards utilized

$12,619,654

$—

$17,734,955

$3,782,977

$—

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		$47,960,089		$24,624,349		$17,955,621		$4,201,706		$7,207,709
Long-term capital gains		—		20,824,514		—		—		—
Return of capital		—		—		—		—		—

Prior 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		—		—		—		—		—

Schwab Fundamental Index Funds

Financial Notes (continued)

10. Federal Income Taxes (continued):

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, 2014, the funds made the following reclassifications:


							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

Capital shares		$—			$—			$—			$—			($70	)
Undistributed net investment income		(71,622	)		(70,730	)		114,322			317,097			(45,482	)
Net realized capital gains (losses)		71,622			70,730			(114,322	)		(317,097	)		45,552

11. Other:

As a result of recent political and military actions undertaken by the Russian Federation, the U.S. and the European Union have instituted various economic sanctions against Russian individuals and entities. The U.S. and/or the European Union may impose additional economic sanctions, or take other actions, against individuals and/or companies in specific sectors of the Russian economy, including, but not limited to, the financial services, energy, metals and mining, engineering, and defense and defense- related materials sectors. These sanctions, and the threat of additional sanctions, could have adverse consequences for the Russian economy, including continued weakening of the Russian currency, downgrades in Russia’s credit rating, and a significant decline in the value and liquidity of securities issued by Russian companies or the Russian government. Any of these events could negatively impact a fund’s investment in Russian securities. These sanctions have the possibility of impairing a fund’s ability to invest in accordance with its investment strategy and/or to meet its investment objective.

In addition, as index based products, the funds will generally maintain exposure to Russian securities to the extent the indexes which they track include such securities. For this reason, the sanction instituted against Russia, and any continued disruption of the Russian economy, could negatively impact a fund’s performance to the extent its index and its portfolio contain securities of Russian issuers, and, depending on the fund’s exposure to Russian issuers, the impact could be significant.

12. 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 condensed 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 funds constituting Schwab Capital Trust, hereafter collectively referred to as the “Funds”) at October 31, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

December 16, 2014

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, 2014, 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		2,134,992		30,521,756
Schwab Fundamental International Small Company Index Fund		554,324		5,176,873
Schwab Fundamental Emerging Markets Large Company Index Fund		1,483,097		11,677,067

For corporate shareholders, the following percentage of the funds dividend distributions paid during the fiscal year ended October 31, 2014, qualify for the corporate dividends received deduction:


	Percentage

Schwab Fundamental US Large Company Index Fund		90.25
Schwab Fundamental US Small Company Index Fund		33.15
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			$43,431,321
Schwab Fundamental US Small Company Index Fund			8,605,889
Schwab Fundamental International Large Company Index Fund			18,076,709
Schwab Fundamental International Small Company Index Fund			2,735,179
Schwab Fundamental Emerging Markets Large Company Index Fund			6,644,257

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, 2014:


Schwab Fundamental US Large Company Index Fund			$—
Schwab Fundamental US Small Company Index Fund			20,824,514
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 its review of Fund expenses and adviser profitability discussed below. Although Schwab Fundamental International Large Company Index Fund, Schwab Fundamental International Small Company Index Fund and Schwab Fundamental Emerging Markets Large 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 International Large Company Index Fund, Schwab Fundamental International Small Company Index Fund and Schwab Fundamental Emerging Markets Large 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.

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.

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)


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)


Kiran M. Patel 1948 Trustee (Trustee of Schwab Capital Trust since 2011.)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services for consumers and small businesses) (Dec. 2008 – Sept. 2013).	76	Director, KLA-Tencor Corporation (2008 – present)


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, Eaton (2012 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – 2013) Director, Oneok, Inc. (2009 – 2013) Lead Independent Director, Board of Cooper Industries (2002 – 2012)


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.	97	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 Investment Management, 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; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (January 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010).


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).

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

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 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.

Fundamental Developed ex-U.S. Large Company Spliced Index 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.

Fundamental Developed ex-U.S. Small Company Spliced Index 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.

Fundamental Emerging Markets Large Company Spliced Index 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.

Fundamental U.S. Large Company Spliced Index 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.

Fundamental U.S. Small Company Spliced Index 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.

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 Securities Act of1933 (the “1933 Act”), or in a registered public offering. Certain restricted securities, such as Section 4(a)(2) commercial paper and Rule 144A securities under the 1933 Act, may be considered to be liquid if they meet the criteria for liquidity established by the Board. 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. 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 Fundamental Global Real Estate 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, 2014

Laudus Small-Cap MarketMasters Fund^tm


Investor Shares (Ticker Symbol: SWOSX)	4.28%
Select Shares^® (Ticker Symbol: SWMSX)	4.39%
Russell 2000^® Index	8.06%
Fund Category: Morningstar Small Growth	5.86%


Performance Details	pages 6-7




Laudus International MarketMasters Fund^tm


Investor Shares¹ (Ticker Symbol: SWOIX)	-1.73%
Select Shares^®¹ (Ticker Symbol: SWMIX)	-1.53%	**
MSCI EAFE^® Index (Net)*	-0.60%
Fund Category: Morningstar Foreign Large Growth	0.91%


Performance Details	pages 8-10


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.


*		Effective February 28, 2014, 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.
**		Total return for the report period presented in the table differs from the return in the Financial Highlights. The total return presented in the above table is calculated based on the NAV at which shareholder transactions were processed. The total return presented in the Financial Highlights section of the report is calculated in the same manner, but also takes into account certain adjustments that are necessary under generally accepted accounting principles required in the annual and semi-annual reports.
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,

For 25 years, Charles Schwab Investment Management has been committed to building funds that are designed to serve as part of the foundation of an investor’s portfolio. Our Laudus MarketMasters Funds combine complementary strategies from leading investment managers into single funds, with each providing diversification across multiple investment styles.

For the 12-month reporting period ended October 31, 2014, the Laudus Small-Cap MarketMasters Fund generated a positive return, while underperforming its comparative index due to manager underperformance in small-cap growth strategies. The Laudus International MarketMasters Fund produced a negative return, underperforming its comparative index in part because of manager underperformance in small-cap international stock strategies.

In the U.S., some signs of economic improvement led the Federal Reserve to wind down its quantitative easing policies aimed at holding down long-term interest rates. This contrasted with efforts by the Bank of Japan and many other overseas central banks, which maintained low interest rates to stimulate lackluster economic growth in their countries. This difference in policies caused the yen and other foreign currencies to depreciate versus the U.S. dollar, reducing international stocks returns in U.S. dollar terms. Political unrest between Russia and the Ukraine and heightened market volatility also reduced the performance of international investments.

Asset Class Performance Comparison % returns during the 12 months ended 10/31/2014

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



		17.27%		S&P 500^® Index: measures U.S. large-cap stocks

		8.06%		Russell 2000^® Index: measures U.S. small-cap stocks

		−0.60%		MSCI EAFE^® Index (Net): measures (in U.S. dollars) large-cap stocks in Europe, Australasia and the Far East

		4.14%		Barclays U.S. Aggregate Bond Index: measures the U.S. bond market

		0.03%		Barclays U.S. Treasury Bills 1-3 Months Index: 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

From the President continued

Amid this backdrop, large-cap stocks outperformed small-cap stocks, while U.S. stocks outperformed stocks in many developed international markets. In addition, value stocks narrowly outperformed growth stocks in the U.S., as market volatility rose toward the end of the reporting period. Reflecting this environment, the Russell 2000 Index returned 8.1%, while the MSCI EAFE Index, which broadly represents the performance of international stocks, returned -0.6%.¹

For more information about the Laudus MarketMasters Funds, please continue reading this report. In addition, you can find out more details about these funds by visiting www.laudus.com. We are also happy to hear from you at 1-800-435-4000.

Sincerely,

¹ The total return cited is for the MSCI EAFE Index (Net), which is calculated net of foreign withholding taxes.

4 Laudus MarketMasters Funds

Laudus Small-Cap MarketMasters Fund™

The Laudus MarketMasters Funds use a multi-manager strategy. Charles Schwab Investment Management, Inc. (CSIM)—the funds’ investment adviser—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.

Performance. For the 12-month reporting period ended October 31, 2014, Investor Shares of the Laudus Small-Cap MarketMasters Fund (the fund) returned 4.28%. The fund’s comparative index, the Russell 2000 Index (the index), returned 8.06%.

Market Highlights. Small-cap U.S. stocks generated positive returns but underperformed large-cap stocks for the reporting period, while U.S. stocks in general were helped by rebounding economic growth, favorable earnings reports by select companies, and continued low short-term interest rates. This helped several large-cap U.S. stock market indices reach record highs, even as market volatility increased. In addition, with the U.S. economy improving, the Federal Reserve wrapped up its quantitative easing policies aimed at holding down long-term interest rates, while providing assurances that low short-term interest rates remain necessary.

Positioning and Strategies. Over the 12-month reporting period, the fund’s value tilt slightly detracted from performance, although this was partially offset by the fund’s allocation to one of its better performing sub-advisers. However, overall manager selection detracted due to the underperformance of two of the fund’s sub-advisers relative to their respective comparative indexes.

The fund’s TAMRO Capital Partners allocation sharply 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. As of September 30, 2014, TAMRO was eliminated as an investment manager for the Laudus Small-Cap MarketMasters Fund, and the fund’s allocations to other investment managers were increased.

A strong performance of the fund’s allocation to Wellington Management Company, LLP 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 overweight in the Health Care sector and, to a lesser extent Information Technology, although underweights in the Financials and Utilities sectors detracted from performance. Wellington Management’s stock selection also contributed positively, most notably within the Information Technology and Health Care sectors, but reduced performance in Financials and Materials.

BMO Asset Management, which uses a bottom-up fundamental approach to search for stocks exhibiting strong and improving growth characteristics, underperformed its comparative index, detracting from the fund’s relative performance. BMO’s strongest detractors came from its stock selection among Energy and Consumer Staples stocks, although its stock selection among Health Care and Materials contributed positively.

As of 10/31/14:

Statistics


Number of Holdings			1,808
Weighted Average Market Cap ($ x 1,000,000)			$2,076
Price/Earnings Ratio (P/E)			38.0
Price/Book Ratio (P/B)			2.1
Portfolio Turnover Rate			79%

Sector Weightings % of Investments


Health Care			17.3%
Industrials			16.5%
Information Technology			15.6%
Financials			15.5%
Consumer Discretionary			11.6%
Energy			5.6%
Materials			3.8%
Telecommunication Services			1.8%
Consumer Staples			1.7%
Utilities			1.6%
Other			9.0%
Total			100.0%

Top Equity Holdings % of Net Assets¹


iShares Russell Mid-Cap ETF			2.9%
Bellatrix Exploration Ltd.			1.5%
Belden, Inc.			1.5%
Acacia Research Corp.			1.4%
inContact, Inc.			1.4%
Helen of Troy Ltd.			1.2%
Mueller Industries, Inc.			1.2%
Newcastle Investment Corp.			1.2%
PICO Holdings, Inc.			1.1%
TRI Pointe Homes, Inc.			1.1%
Total			14.5%

Management 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 many 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 10/31/14

October 31, 2004 – October 31, 2014
Performance of Hypothetical
$10,000 Investment (Investor Shares)¹

October 31, 2004 – October 31, 2014
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


Investor Shares (9/16/97)		4.28	%		13.90	%	6.87%
Select Shares^® (6/9/04)		4.39	%		14.07	%	7.04%
Russell 2000^® Index		8.06	%		17.39	%	8.67%

Fund Category: Morningstar Small Growth		5.86	%		17.42	%	8.93%

Fund Expense Ratios³: Investor Shares: Net 1.36%; Gross 1.60% / Select Shares: Net 1.21%; Gross 1.54%

Investment Managers and Allocations⁴


		% of
Investment Managers	Investment Style	Net Assets

Wellington Management Company, LLP	Small-Cap Value		43.8	%


BMO Asset Management Corp.	Small-Cap Growth		42.4	%


Mellon Capital Management Corp.	Small-Cap Value		9.4	%


Cash and other assets	—		4.4	%

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		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% for the Investor Shares and Select Shares. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the 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 7

Laudus International MarketMasters Fund™

Performance. For the 12-month period ended October 31, 2014, Investor Shares of the Laudus International MarketMasters Fund (the fund) returned -1.73%, underperforming its comparative index, the MSCI EAFE Index (Net) (the index), which returned -0.60%.

Market Highlights. A strong performance by the U.S. dollar was a key reason for the lackluster returns of international stocks. Slow economic growth overseas convinced the Bank of Japan, European Central Bank, and other central banks to try to keep interest rates low, even as the Federal Reserve scaled back its quantitative easing policies aimed at holding down long-term interest rates. These differing policies led to the depreciation of many foreign currencies, reducing the returns of international stocks in U.S. dollar terms.

Positioning and Strategies. Over the 12-month reporting period, the fund’s growth allocations generally enhanced relative performance, although allocations to value managers partially offset these results. In addition, the fund’s manager selection subtracted value as a result of weak performance by some of the fund’s sub-advisers, although other sub-advisers positively contributed to 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 reduced the fund’s relative performance. As of March 5, 2014, WHV was eliminated as a sub-adviser, and the fund’s allocations to other investment managers were increased.

Harris Associates, with its large-cap value focus, was another sub-adviser that underperformed its comparative index, notably detracting from the fund’s relative performance. Harris Associates’ stock selections within the United Kingdom and the Netherlands were some of the biggest detractors from the fund’s performance, while stock selection in the Industrials and Consumer Discretionary sectors also reduced the fund’s relative return. By comparison, stock selection in Italy, Germany, and Australia, as well as in the Materials sector, worked out much better.

Mondrian Investment Partners, which uses a value-oriented investment approach, also underperformed its comparative index. Mondrian’s relative results were driven in part by stock selection in the Industrials sector, as well as in Singapore, the United Kingdom, and Japan. Overweight positions in Singapore and the United Kingdom compounded these negative results. Stock selection in the Information Technology and Materials sectors enhanced the fund’s performance, as did stock selection in Canada and France.

William Blair & Company, which takes an all-cap growth approach, outperformed its comparative index and contributed positively to the fund’s relative performance. William Blair & Company’s biggest contribution came from strong stock selection, particularly among equities from the Health Care, Information Technology, and Consumer Discretionary sectors. Stock selection in the United Kingdom also helped. Less successful efforts included stock selection in the Energy sector, which reduced relative performance, although an underweight to the sector helped to limit the negative effects. Stock selection in Japan also reduced the fund’s relative return, as did selection in the Materials and Consumer Staples sectors, although an underweight to the Materials sector helped.

American Century, with its focus on small-cap growth stocks, was another sub-adviser that outperformed its comparative index. American Century’s greatest contribution came from its stock selection, particularly in the Consumer Discretionary and Information Technology sectors, and in Denmark and India. However, stock selection in the Industrials sector and in the United Kingdom and Spain dragged on performance. Stock selection in the Energy sector also reduced American Century’s relative performance, although an underweight to this sector helped limit the negative impact.

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

Source of Sector Classification: S&P and MSCI.

8 Laudus MarketMasters Funds

Laudus International MarketMasters Fund^tm

Performance and Fund Facts as of 10/31/14

As of 10/31/14:

Country Weightings % of Investments


United Kingdom			17.3%
Japan			14.4%
Germany			8.6%
France			8.1%
Switzerland			7.3%
Canada			4.9%
Australia			4.4%
United States			4.0%
China			3.6%
Sweden			2.8%
Singapore			2.8%
Other Countries			21.8%
Total			100.0%

Statistics


Number of Holdings			1,176
Weighted Average Market Cap ($ x 1,000,000)			$26,458
Price/Earnings Ratio (P/E)			17.7
Price/Book Ratio (P/B)			2.2
Portfolio Turnover Rate			74%

Sector Weightings % of Investments


Industrials			21.8%
Financials			18.9%
Consumer Discretionary			17.6%
Information Technology			10.1%
Health Care			8.2%
Materials			7.8%
Consumer Staples			6.1%
Energy			3.1%
Telecommunication Services			1.5%
Utilities			0.9%
Other			4.0%
Total			100.0%

Top Equity Holdings % of Net Assets¹


Vanguard FTSE Emerging Markets ETF			2.6%
Credit Suisse Group AG – Reg’d			1.1%
Symrise AG			1.1%
BNP Paribas S.A.			1.0%
Intesa Sanpaolo S.p.A.			0.9%
Bayerische Motoren Werke AG			0.8%
Daimler AG – Reg’d			0.7%
Samsung Electronics Co., Ltd.			0.7%
Bodycote plc			0.7%
Croda International plc			0.7%
Total			10.3%

Management 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.

Laudus MarketMasters Funds 9

Laudus International MarketMasters Fund^tm

Performance and Fund Facts as of 10/31/14

October 31, 2004 – October 31, 2014
Performance of Hypothetical
$10,000 Investment (Investor Shares)¹

October 31, 2004 – October 31, 2014
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


Investor Shares (10/16/96)		-1.73	%			10.31	%	8.64%
Select Shares^® (4/2/04)		-1.53	%	*		10.48	%	8.80%
MSCI EAFE^® Index (Net)³		-0.60	%			6.52	%	5.81%

MSCI EAFE^® Index (Gross)³		-0.17	%			7.00	%	6.29%

Fund Category: Morningstar Foreign Large Growth		0.91	%			7.83	%	6.32%

Fund Expense Ratios⁴: Investor Shares: Net 1.40%; Gross 1.60% / Select Shares: Net 1.25%; Gross 1.44%

Investment Managers and Allocations⁵


		% of
Investment Managers	Investment Style	Net Assets

American Century Investment Management, Inc.	International Small-Cap Growth		24.3	%


William Blair & Company, LLC	International Multi-Cap Growth		23.1	%


Mondrian Investment Partners Limited	International Small-Cap Value		22.2	%


Harris Associates L.P.	International Large-Cap Value		21.2	%


Mellon Capital Management Corp.	International Blend		5.1	%


Cash and other assets	—		4.1	%

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.


*		Total return for the report period presented in the table differs from the return in the Financial Highlights. The total return presented in the above table is calculated based on the NAV at which shareholder transactions were processed. The total return presented in the Financial Highlights section of the report is calculated in the same manner, but also takes into account certain adjustments that are necessary under generally accepted accounting principles required in the annual and semi-annual reports.
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		Effective February 28, 2014, 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		As stated in the prospectus. Net Expense: Expenses reduced by a contractual fee waiver in effect for so long as CSIM serves as the 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.
⁵		For more information about each of the investment manager’s investment styles, refer to the fund’s prospectus.

10 Laudus MarketMasters Funds

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 5/1/14		at 10/31/14		05/1/14–10/31/14

Laudus Small-Cap MarketMasters Fund^tm
Investor Shares
Actual Return		1.35%	$	1,000.00	$	1,036.80	$	6.93
Hypothetical 5% Return		1.35%	$	1,000.00	$	1,018.39	$	6.87
Select Shares
Actual Return		1.20%	$	1,000.00	$	1,037.40	$	6.16
Hypothetical 5% Return		1.20%	$	1,000.00	$	1,019.15	$	6.11


Laudus International MarketMasters Fund^tm
Investor Shares
Actual Return		1.40%	$	1,000.00	$	948.00	$	6.87
Hypothetical 5% Return		1.40%	$	1,000.00	$	1,018.14	$	7.12
Select Shares
Actual Return		1.25%	$	1,000.00	$	948.70	$	6.14
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.

Laudus MarketMasters Funds 11

Laudus Small-Cap MarketMasters Fund™

Financial Statements

Financial Highlights


	11/1/13–			11/1/12–			11/1/11–			11/1/10–			11/1/09–
Investor Shares	10/31/14			10/31/13			10/31/12			10/31/11			10/31/10


Per-Share Data ($)

Net asset value at beginning of period		17.28			13.14			11.99			11.52			9.40

Income (loss) from investment operations:
Net investment income (loss)¹		(0.05	)		(0.02	)		(0.10	)		(0.09	)		(0.08	)
Net realized and unrealized gains (losses)		0.79			4.16			1.25			0.56			2.20

Total from investment operations		0.74			4.14			1.15			0.47			2.12

Net asset value at end of period		18.02			17.28			13.14			11.99			11.52

Total return (%)		4.28			31.51			9.59			4.08			22.55

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		1.35			1.35			1.42	²		1.46			1.46
Gross operating expenses		1.56			1.59			1.59			1.51			1.50
Net investment income (loss)		(0.26	)		(0.16	)		(0.79	)		(0.70	)		(0.72	)
Portfolio turnover rate		79			97			144			95			78
Net assets, end of period ($ x 1,000,000)		70			76			65			62			68


	11/1/13–			11/1/12–			11/1/11–			11/1/10–			11/1/09–
Select Shares	10/31/14			10/31/13			10/31/12			10/31/11			10/31/10


Per-Share Data ($)

Net asset value at beginning of period		17.56			13.33			12.14			11.64			9.49

Income (loss) from investment operations:
Net investment income (loss)¹		(0.02	)		(0.00	)		(0.08	)		(0.07	)		(0.06	)
Net realized and unrealized gains (losses)		0.79			4.23			1.27			0.57			2.21

Total from investment operations		0.77			4.23			1.19			0.50			2.15

Net asset value at end of period		18.33			17.56			13.33			12.14			11.64

Total return (%)		4.39			31.73			9.80			4.30			22.66

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		1.20			1.20			1.27	²		1.31			1.32	³
Gross operating expenses		1.51			1.53			1.51			1.45			1.45
Net investment income (loss)		(0.13	)		(0.03	)		(0.60	)		(0.54	)		(0.58	)
Portfolio turnover rate		79			97			144			95			78
Net assets, end of period ($ x 1,000,000)		122			113			88			219			337

¹ Calculated based on the average shares outstanding during the period.

² Effective June 6, 2012, the net operating expense limitation was lowered. The ratio presented for period ended 10/31/12 is a blended ratio.

³ The ratio of net operating expenses would have been 1.31%, if certain non-routine expense had not been incurred.

12 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings as of October 31, 2014

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


				Cost		Value
Holdings by Category				($)		($)

	90	.5%	Common Stock		155,866,101		174,288,248
	8	.7%	Other Investment Companies		16,612,947		16,796,858
	0	.0%	Rights		2,814		2,814
	0	.0%	Warrants		—		—
	0	.2%	Short-Term Investments		385,996		385,996


	99	.4%	Total Investments		172,867,858		191,473,916
	0	.6%	Other Assets and Liabilities, Net				1,107,291


	100	.0%	Net Assets				192,581,207


	Number		Value
Security	of Shares		($)

Common Stock 90.5% of net assets

Automobiles & Components 0.6%
American Axle & Manufacturing Holdings, Inc. *		803		15,522
Cooper Tire & Rubber Co.		881		28,377
Cooper-Standard Holding, Inc. *		71		3,875
Dana Holding Corp.		1,903		38,935
Dorman Products, Inc. *		200		9,272
Drew Industries, Inc.		170		8,170
Federal-Mogul Holdings Corp. *		125		1,951
Fuel Systems Solutions, Inc. *		223		2,058
Gentherm, Inc. *		320		13,344
Modine Manufacturing Co. *		723		9,276
Motorcar Parts of America, Inc. *		20,042		582,020
Standard Motor Products, Inc.		198		7,825
Stoneridge, Inc. *		155		2,014
Superior Industries International, Inc.		233		4,546
Tenneco, Inc. *		673		35,238
Tower International, Inc. *		122		2,965
Winnebago Industries, Inc. *		18,694		396,500

				1,161,888

Banks 6.5%
1st Source Corp.		167		5,225
1st United Bancorp, Inc.		253		2,239
American National Bankshares, Inc.		73		1,767
Ameris Bancorp		222		5,506
Ames National Corp.		74		1,835
Arrow Financial Corp.		69		1,890
Astoria Financial Corp.		570		7,495
Banc of California, Inc.		386		4,543
Banco Latinoamericano de Comercio Exterior, S.A., Class E		479		16,114
BancorpSouth, Inc.		1,304		30,031
Bank Mutual Corp.		891		5,872
Bank of Marin Bancorp		43		2,147
Bank of the Ozarks, Inc.		664		23,399
BankFinancial Corp.		420		5,011
Banner Corp.		324		14,003
BBCN Bancorp, Inc.		963		13,617
Berkshire Hills Bancorp, Inc.		188		4,847
BNC Bancorp		198		3,368
BofI Holding, Inc. *		193		14,865
Boston Private Financial Holdings, Inc.		1,120		14,728
Bridge Bancorp, Inc.		294		7,720
Bridge Capital Holdings *		106		2,557
Brookline Bancorp, Inc.		662		6,349
Bryn Mawr Bank Corp.		73		2,251
Camden National Corp.		47		1,923
Capital Bank Financial Corp., Class A *		90		2,330
Capital City Bank Group, Inc.		144		2,176
Capitol Federal Financial, Inc.		1,245		15,948
Cardinal Financial Corp.		319		6,125
Cascade Bancorp *		518		2,647
Cathay General Bancorp		913		24,112
Centerstate Banks, Inc.		196		2,281
Century Bancorp, Inc., Class A		48		1,823
Charter Financial Corp.		168		1,905
Chemical Financial Corp.		186		5,539
Citizens & Northern Corp.		277		5,512
City Holding Co.		117		5,264
Clifton Bancorp, Inc.		136		1,771
CNB Financial Corp.		102		1,847
CoBiz Financial, Inc.		304		3,654
Columbia Banking System, Inc.		609		16,918
Community Bank System, Inc.		526		20,067
Community Trust Bancorp, Inc.		185		6,651
ConnectOne Bancorp, Inc.		278		5,143
Customers Bancorp, Inc. *		245		4,680
CVB Financial Corp.		989		15,606
Dime Community Bancshares, Inc.		304		4,788
Eagle Bancorp, Inc. *		294		10,563
Enterprise Bancorp, Inc.		99		2,329
Enterprise Financial Services Corp.		341		6,428
ESB Financial Corp.		136		2,538
Essent Group Ltd. *		369		8,981
EverBank Financial Corp.		771		14,765
F.N.B. Corp.		1,926		24,634
Federal Agricultural Mortgage Corp., Class C		120		3,996
Financial Institutions, Inc.		161		4,048
First Bancorp (North Carolina)		173		3,135
First BanCorp (Puerto Rico) *		1,156		6,023
First Bancorp, Inc.		103		1,822
First Busey Corp.		86,809		542,556
First Citizens BancShares, Inc., Class A		56		14,068
First Commonwealth Financial Corp.		784		7,330
First Community Bancshares, Inc.		299		4,895
First Connecticut Bancorp, Inc.		350		5,474
First Defiance Financial Corp.		73		2,236

See financial notes 13

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
First Financial Bancorp		612		10,734
First Financial Bankshares, Inc.		766		24,343
First Financial Corp.		124		4,300
First Merchants Corp.		290		6,569
First Midwest Bancorp, Inc.		79,912		1,341,722
First NBC Bank Holding Co. *		118		4,334
First Niagara Financial Group, Inc.		79,800		597,702
FirstMerit Corp.		1,951		35,801
Flagstar Bancorp, Inc. *		177		2,782
Flushing Financial Corp.		39,672		798,994
Fox Chase Bancorp, Inc.		185		3,030
Franklin Financial Corp. *		185		3,841
German American Bancorp, Inc.		77		2,300
Glacier Bancorp, Inc.		608		17,444
Great Southern Bancorp, Inc.		188		7,146
Guaranty Bancorp		155		2,444
Hancock Holding Co.		27,460		966,317
Hanmi Financial Corp.		351		7,529
Heartland Financial USA, Inc.		62		1,649
Heritage Commerce Corp.		248		2,158
Heritage Financial Corp.		496		8,705
Heritage Oaks Bancorp		282		2,219
Home BancShares, Inc.		27,094		864,840
Home Loan Servicing Solutions Ltd.		1,023		19,652
HomeTrust Bancshares, Inc. *		218		3,368
Horizon Bancorp		84		2,160
Hudson Valley Holding Corp.		100		2,274
Iberiabank Corp.		312		21,484
Independent Bank Corp., Massachusetts		171		6,977
Independent Bank Corp., Michigan		256		3,090
Independent Bank Group, Inc.		88		3,933
International Bancshares Corp.		55,757		1,581,826
Investors Bancorp, Inc.		3,414		36,700
Kearny Financial Corp. *		167		2,378
Ladder Capital Corp., Class A *		124		2,355
Lakeland Bancorp, Inc.		280		3,077
Lakeland Financial Corp.		158		6,548
MainSource Financial Group, Inc.		122		2,219
MB Financial, Inc.		34,629		1,092,545
Mercantile Bank Corp.		158		3,117
Merchants Bancshares, Inc.		58		1,728
Meridian Bancorp, Inc. *		225		2,552
Meta Financial Group, Inc.		84		3,151
Metro Bancorp, Inc. *		247		6,185
MGIC Investment Corp. *		3,588		32,005
MidSouth Bancorp, Inc.		214		4,053
MidWestOne Financial Group, Inc.		70		1,868
National Bank Holdings Corp., Class A		284		5,564
National Bankshares, Inc.		94		2,943
National Penn Bancshares, Inc.		1,336		13,747
NBT Bancorp, Inc.		552		14,175
NewBridge Bancorp *		271		2,409
NMI Holdings, Inc., Class A *		429		3,840
Northfield Bancorp, Inc.		345		4,913
Northrim BanCorp, Inc.		74		2,139
Northwest Bancshares, Inc.		92,398		1,185,466
OceanFirst Financial Corp.		300		4,971
OFG Bancorp		316		4,920
Old National Bancorp		1,439		20,937
OmniAmerican Bancorp, Inc.		193		5,219
Oritani Financial Corp.		482		7,119
Pacific Continental Corp.		150		2,163
Palmetto Bancshares, Inc.		123		2,044
Park National Corp.		92		7,762
Park Sterling Corp.		898		6,879
Peapack-Gladstone Financial Corp.		128		2,336
Penns Woods Bancorp, Inc.		41		1,990
PennyMac Financial Services, Inc., Class A *		80		1,333
Peoples Bancorp, Inc.		147		3,624
Peoples Financial Services Corp.		59		2,960
Pinnacle Financial Partners, Inc.		421		16,503
Preferred Bank		104		2,764
PrivateBancorp, Inc.		883		28,539
Prosperity Bancshares, Inc.		819		49,459
Provident Financial Services, Inc.		615		11,211
Radian Group, Inc.		2,434		41,013
Renasant Corp.		277		8,352
Republic Bancorp, Inc., Class A		75		1,819
Republic First Bancorp, Inc. *		386		1,532
S&T Bancorp, Inc.		199		5,490
Sandy Spring Bancorp, Inc.		230		5,934
Sierra Bancorp		117		2,008
Simmons First National Corp., Class A		206		8,650
South State Corp.		184		11,097
Southside Bancshares, Inc.		232		7,791
Southwest Bancorp, Inc.		261		4,706
State Bank Financial Corp.		630		11,290
Sterling Bancorp		634		8,914
Stock Yards Bancorp, Inc.		68		2,263
Suffolk Bancorp		99		2,273
Sun Bancorp, Inc. *		108		2,182
Susquehanna Bancshares, Inc.		2,136		20,954
Territorial Bancorp, Inc.		73		1,568
Texas Capital Bancshares, Inc. *		529		32,348
The Bancorp, Inc. *		650		6,149
The Bank of Kentucky Financial Corp.		63		2,955
The First of Long Island Corp.		76		2,002
Tompkins Financial Corp.		76		3,815
Towne Bank		116		1,759
Tree.com, Inc. *		70		2,589
Trico Bancshares		237		6,233
TriState Capital Holdings, Inc. *		128		1,248
TrustCo Bank Corp.		1,765		12,884
Trustmark Corp.		773		18,807
UMB Financial Corp.		369		21,985
Umpqua Holdings Corp.		2,104		37,030
Union Bankshares Corp.		492		11,060
United Bankshares, Inc.		674		23,105
United Community Banks, Inc.		452		8,150
United Community Financial Corp.		598		3,062
United Financial Bancorp, Inc.		505		7,085
Univest Corp. of Pennsylvania		90		1,847
Valley National Bancorp		1,517		15,140
ViewPoint Financial Group, Inc.		554		15,108
Walker & Dunlop, Inc. *		136		2,191
Washington Federal, Inc.		1,209		26,392
Washington Trust Bancorp, Inc.		60		2,302
Waterstone Financial, Inc.		425		5,202
Webster Financial Corp.		57,138		1,790,705

14 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
WesBanco, Inc.		200		6,892
West Bancorp, Inc.		141		2,338
Westamerica Bancorp		6,367		314,148
Western Alliance Bancorp *		957		25,475
Wilshire Bancorp, Inc.		1,173		11,613
Wintrust Financial Corp.		409		18,945
WSFS Financial Corp.		108		8,494
Yadkin Financial Corp. *		276		5,357

				12,604,238

Capital Goods 7.8%
AAON, Inc.		477		9,373
AAR Corp.		367		9,725
Accuride Corp. *		750		3,615
Aceto Corp.		475		10,801
Actuant Corp., Class A		15,257		483,494
Aegion Corp. *		602		11,029
Aerovironment, Inc. *		310		9,502
Aircastle Ltd.		931		17,763
Alamo Group, Inc.		42		1,799
Albany International Corp., Class A		45,039		1,701,573
Altra Industrial Motion Corp.		222		6,997
Ameresco, Inc., Class A *		500		4,120
American Railcar Industries, Inc.		62		4,080
American Science & Engineering, Inc.		132		7,300
American Woodmark Corp. *		70		2,864
Apogee Enterprises, Inc.		320		14,048
Applied Industrial Technologies, Inc.		463		22,599
Argan, Inc.		281		9,782
Astec Industries, Inc.		123		4,663
Astronics Corp. *		283		14,662
AZZ, Inc.		190		8,884
Barnes Group, Inc.		25,540		933,742
Beacon Roofing Supply, Inc. *		500		13,835
Blount International, Inc. *		317		4,853
Briggs & Stratton Corp.		492		9,943
Builders FirstSource, Inc. *		427		2,532
CAI International, Inc. *		97		2,042
Capstone Turbine Corp. *		4,521		4,521
Chart Industries, Inc. *		355		16,525
CIRCOR International, Inc.		136		10,220
CLARCOR, Inc.		459		30,735
Columbus McKinnon Corp.		79		2,248
Comfort Systems USA, Inc.		363		5,576
Commercial Vehicle Group, Inc. *		186		1,218
Cubic Corp.		32,330		1,559,599
Curtiss-Wright Corp.		560		38,758
DigitalGlobe, Inc. *		893		25,531
Douglas Dynamics, Inc.		430		8,914
DXP Enterprises, Inc. *		129		8,551
Dycom Industries, Inc. *		360		11,300
Dynamic Materials Corp.		194		3,533
EMCOR Group, Inc.		760		33,539
Encore Wire Corp.		156		5,919
EnerSys		560		35,168
Engility Holdings, Inc. *		249		10,757
Enphase Energy, Inc. *		247		3,710
EnPro Industries, Inc. *		253		16,326
ESCO Technologies, Inc.		31,404		1,193,980
Esterline Technologies Corp. *		346		40,520
Federal Signal Corp.		998		14,172
Franklin Electric Co., Inc.		516		19,267
FreightCar America, Inc.		71		2,341
FuelCell Energy, Inc. *		3,306		6,678
Furmanite Corp. *		517		3,867
GATX Corp.		27,900		1,768,860
GenCorp, Inc. *		786		13,331
Generac Holdings, Inc. *		730		33,098
General Cable Corp.		548		7,765
Gibraltar Industries, Inc. *		269		4,102
Global Power Equipment Group, Inc.		165		2,249
GrafTech International Ltd. *		881		3,779
Graham Corp.		175		5,863
Granite Construction, Inc.		406		14,985
Great Lakes Dredge & Dock Corp. *		907		6,340
Griffon Corp.		404		4,965
H&E Equipment Services, Inc.		411		15,367
Harsco Corp.		634		13,745
HEICO Corp.		735		39,866
Hexcel Corp. *		29,420		1,232,404
Hillenbrand, Inc.		654		21,772
Houston Wire & Cable Co.		288		3,905
Hurco Cos., Inc.		62		2,389
Hyster-Yale Materials Handling, Inc.		88		6,907
John Bean Technologies Corp.		331		9,920
Kadant, Inc.		176		7,276
Kaman Corp.		176		7,579
Kratos Defense & Security Solutions, Inc. *		818		5,701
L.B. Foster Co., Class A		39		2,110
Layne Christensen Co. *		350		2,520
Lennox International, Inc.		7,470		664,232
Lindsay Corp.		135		11,839
LSI Industries, Inc.		220		1,575
Luxfer Holdings plc ADR		33,000		525,690
Lydall, Inc. *		323		9,990
Masonite International Corp. *		232		12,542
MasTec, Inc. *		637		18,244
Meritor, Inc. *		825		9,479
Miller Industries, Inc.		263		5,200
Moog, Inc., Class A *		513		39,265
Mueller Industries, Inc.		70,392		2,284,924
Mueller Water Products, Inc., Class A		1,519		14,993
MYR Group, Inc. *		305		7,912
National Presto Industries, Inc.		23		1,450
NCI Building Systems, Inc. *		471		9,359
NN, Inc.		119		2,975
Nortek, Inc. *		45		3,748
Northwest Pipe Co. *		60		2,147
Omega Flex, Inc.		119		3,168
Orbital Sciences Corp. *		602		15,833
Patrick Industries, Inc. *		67		2,862
PGT, Inc. *		411		3,865
Pike Corp. *		317		3,785
Plug Power, Inc. *		1,567		7,381
Ply Gem Holdings, Inc. *		176		1,998
Polypore International, Inc. *		393		17,261
Powell Industries, Inc.		43		1,958
Power Solutions International, Inc. *		26		1,703
Preformed Line Products Co.		25		1,425
Primoris Services Corp.		515		14,791

See financial notes 15

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Proto Labs, Inc. *		174		11,374
Quanex Building Products Corp.		687		13,754
Raven Industries, Inc.		296		7,504
RBC Bearings, Inc.		163		9,902
Rexnord Corp. *		769		22,724
Rush Enterprises, Inc., Class A *		275		10,477
Simpson Manufacturing Co., Inc.		565		18,690
Sparton Corp. *		100		2,710
Standex International Corp.		110		9,488
Sterling Construction Co., Inc. *		183		1,614
Stock Building Supply Holdings, Inc. *		91		1,428
Sun Hydraulics Corp.		156		6,210
TAL International Group, Inc. *		294		12,680
Taser International, Inc. *		678		12,774
Teledyne Technologies, Inc. *		379		39,276
Tennant Co.		211		15,557
Textainer Group Holdings Ltd.		148		5,097
The ExOne Co. *		84		2,064
The Gorman-Rupp Co.		178		5,650
The Greenbrier Cos., Inc.		274		17,136
The KEYW Holding Corp. *		316		3,207
Thermon Group Holdings, Inc. *		245		5,971
Titan International, Inc.		760		8,026
Titan Machinery, Inc. *		100		1,376
Trex Co., Inc. *		348		14,964
TriMas Corp. *		12,949		409,965
Tutor Perini Corp. *		459		12,857
Twin Disc, Inc.		175		4,554
Universal Forest Products, Inc.		133		6,646
Vicor Corp. *		299		4,069
Wabash National Corp. *		970		9,991
Watsco, Inc.		8,254		838,771
Watts Water Technologies, Inc., Class A		325		19,705
Woodward, Inc.		729		37,332
Xerium Technologies, Inc. *		350		5,222

				14,986,250

Commercial & Professional Supplies 7.9%
ABM Industries, Inc.		513		14,179
Acacia Research Corp.		151,043		2,718,774
ACCO Brands Corp. *		141,782		1,166,866
ARC Document Solutions, Inc. *		292		2,964
Barrett Business Services, Inc.		134		3,150
Brady Corp., Class A		485		11,562
Casella Waste Systems, Inc., Class A *		875		3,938
CBIZ, Inc. *		487		4,495
CDI Corp.		118		2,028
Ceco Environmental Corp.		237		3,394
Civeo Corp.		754		9,191
CRA International, Inc. *		91		2,730
Deluxe Corp.		586		35,629
Ennis, Inc.		287		4,256
Exponent, Inc.		89		7,104
FTI Consulting, Inc. *		21,519		868,937
G&K Services, Inc., Class A		31,313		1,974,911
GP Strategies Corp. *		298		9,882
Healthcare Services Group, Inc.		719		21,412
Heidrick & Struggles International, Inc.		102		2,124
Heritage-Crystal Clean, Inc. *		114		2,068
Herman Miller, Inc.		593		18,976
HNI Corp.		475		22,159
Huron Consulting Group, Inc. *		307		21,370
ICF International, Inc. *		332		12,065
InnerWorkings, Inc. *		698		6,338
Insperity, Inc.		333		10,510
Interface, Inc.		681		10,916
Kelly Services, Inc., Class A		381		6,717
Kforce, Inc.		489		11,320
Kimball International, Inc., Class B		165		2,967
Knoll, Inc.		699		13,903
Korn/Ferry International *		566		15,808
Matthews International Corp., Class A		33,328		1,535,754
McGrath RentCorp		152		5,553
Mistras Group, Inc. *		196		3,232
MiX Telematics Ltd. ADR *		119,740		1,066,883
Mobile Mini, Inc.		380		16,655
MSA Safety, Inc.		375		21,551
Multi-Color Corp.		58		2,859
Navigant Consulting, Inc. *		787		12,112
NL Industries, Inc.		152		1,108
On Assignment, Inc. *		29,701		864,299
Pendrell Corp. *		1,575		2,630
Quad Graphics, Inc.		332		7,321
Resources Connection, Inc.		434		6,714
RPX Corp. *		278		3,906
SP Plus Corp. *		56,280		1,228,030
Steelcase, Inc., Class A		41,843		741,458
Team, Inc. *		331		13,948
Tetra Tech, Inc.		816		21,877
The Advisory Board Co. *		14,302		767,588
The Brink’s Co.		692		14,532
The Corporate Executive Board Co.		416		30,659
TrueBlue, Inc. *		239		5,908
UniFirst Corp.		132		14,726
United Stationers, Inc.		43,022		1,797,029
US Ecology, Inc.		159		7,995
Viad Corp.		380		9,694
VSE Corp.		41		2,472
WageWorks, Inc. *		309		17,616
West Corp.		213		6,816

				15,253,568

Consumer Durables & Apparel 5.2%
Arctic Cat, Inc.		229		7,708
Beazer Homes USA, Inc. *		196		3,514
Black Diamond, Inc. *		183		1,420
Brunswick Corp.		1,058		49,514
Callaway Golf Co.		1,416		11,101
Cavco Industries, Inc. *		63		4,591
Columbia Sportswear Co.		408		15,724
Crocs, Inc. *		945		11,038
CSS Industries, Inc.		196		5,598
Culp, Inc.		98		1,859
Ethan Allen Interiors, Inc.		459		12,990
Flexsteel Industries, Inc.		70		2,402
G-III Apparel Group Ltd. *		152		12,061

16 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Helen of Troy Ltd. *		37,143		2,297,295
Hovnanian Enterprises, Inc., Class A *		808		3,038
Iconix Brand Group, Inc. *		366		14,644
iRobot Corp. *		262		9,359
JAKKS Pacific, Inc. *		490		3,126
Johnson Outdoors, Inc., Class A		67		2,013
KB Home		1,186		18,668
La-Z-Boy, Inc.		492		11,247
LeapFrog Enterprises, Inc. *		1,107		5,889
Libbey, Inc. *		48,933		1,406,824
Lifetime Brands, Inc.		127		2,173
M.D.C. Holdings, Inc.		499		12,186
M/I Homes, Inc. *		52,228		1,124,991
Marine Products Corp.		229		1,933
Meritage Homes Corp. *		482		17,733
Movado Group, Inc.		234		8,260
NACCO Industries, Inc., Class A		44		2,577
Nautilus, Inc. *		206		2,756
Oxford Industries, Inc.		210		12,862
Perry Ellis International, Inc. *		300		6,135
Quiksilver, Inc. *		989		1,731
Sequential Brands Group, Inc. *		175		2,195
Skechers U.S.A., Inc., Class A *		433		23,707
Skullcandy, Inc. *		650		5,421
Smith & Wesson Holding Corp. *		826		8,392
Standard Pacific Corp. *		1,287		9,524
Steven Madden Ltd. *		709		22,227
Sturm, Ruger & Co., Inc.		143		5,960
The Ryland Group, Inc.		543		19,445
TRI Pointe Homes, Inc. *		156,959		2,148,769
Tumi Holdings, Inc. *		459		9,533
UCP, Inc., Class A *		26,520		363,059
Unifi, Inc. *		65		1,818
Universal Electronics, Inc. *		111		6,315
Vera Bradley, Inc. *		351		8,003
Vince Holding Corp. *		18,560		650,528
William Lyon Homes, Class A *		68,575		1,622,484
Wolverine World Wide, Inc.		1,060		28,768

				10,041,108

Consumer Services 1.7%
American Public Education, Inc. *		186		5,764
Ascent Capital Group, Inc., Class A *		118		7,587
Belmond Ltd., Class A *		1,121		12,847
Biglari Holdings, Inc. *		15		5,237
BJ’s Restaurants, Inc. *		371		16,331
Bloomin’ Brands, Inc. *		558		10,552
Bob Evans Farms, Inc.		356		17,391
Boyd Gaming Corp. *		838		9,679
Bravo Brio Restaurant Group, Inc. *		350		4,855
Bridgepoint Education, Inc. *		135		1,706
Bright Horizons Family Solutions, Inc. *		205		9,135
Buffalo Wild Wings, Inc. *		215		32,095
Caesars Acquisition Co., Class A *		318		3,320
Caesars Entertainment Corp. *		511		6,229
Capella Education Co.		123		8,701
Career Education Corp. *		498		2,888
Chegg, Inc. *		701		4,662
Churchill Downs, Inc.		120		12,238
Chuy’s Holdings, Inc. *		95		2,841
ClubCorp Holdings, Inc.		137		2,611
Cracker Barrel Old Country Store, Inc.		211		24,339
Del Frisco’s Restaurant Group, Inc. *		78		1,811
Denny’s Corp. *		1,027		8,853
Diamond Resorts International, Inc. *		253		6,568
DineEquity, Inc.		126		11,209
Education Management Corp. *		158		94
Einstein Noah Restaurant Group, Inc.		336		6,804
Fiesta Restaurant Group, Inc. *		203		11,195
Grand Canyon Education, Inc. *		573		27,447
Houghton Mifflin Harcourt Co. *		952		19,050
Ignite Restaurant Group, Inc. *		89		613
International Speedway Corp., Class A		319		9,994
Interval Leisure Group, Inc.		313		6,586
Isle of Capri Casinos, Inc. *		233		1,731
ITT Educational Services, Inc. *		274		2,770
Jack in the Box, Inc.		473		33,602
Jamba, Inc. *		114		1,522
K12, Inc. *		436		5,406
Krispy Kreme Doughnuts, Inc. *		62,136		1,175,613
La Quinta Holdings, Inc. *		310		6,327
Liberty Tax, Inc. *		105		3,978
Life Time Fitness, Inc. *		467		26,045
LifeLock, Inc. *		56,062		948,008
Marriott Vacations Worldwide Corp.		253		17,568
Morgans Hotel Group Co. *		666		5,321
Multimedia Games Holding Co., Inc. *		310		10,819
Nathan’s Famous, Inc. *		33		2,372
Papa John’s International, Inc.		432		20,200
Penn National Gaming, Inc. *		609		7,972
Pinnacle Entertainment, Inc. *		764		19,581
Popeyes Louisiana Kitchen, Inc. *		295		13,673
Red Robin Gourmet Burgers, Inc. *		7,666		421,400
Regis Corp.		569		9,662
Ruby Tuesday, Inc. *		766		5,883
Ruth’s Hospitality Group, Inc.		600		7,302
Scientific Games Corp., Class A *		564		6,638
Sonic Corp. *		749		18,882
Sotheby’s		755		29,943
Speedway Motorsports, Inc.		96		1,879
Steiner Leisure Ltd. *		92		3,881
Strayer Education, Inc. *		108		7,905
Texas Roadhouse, Inc.		909		26,243
The Cheesecake Factory, Inc.		672		30,872
The Marcus Corp.		350		5,996
Universal Technical Institute, Inc.		400		4,764
Vail Resorts, Inc.		346		29,881
Weight Watchers International, Inc. *		200		5,210

				3,230,081

Diversified Financials 2.5%
Arlington Asset Investment Corp., Class A		280		7,666
BGC Partners, Inc., Class A		1,391		11,796
Calamos Asset Management, Inc., Class A		525		7,193

See financial notes 17

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Cash America International, Inc.		385		18,923
Cohen & Steers, Inc.		135		5,786
Cowen Group, Inc., Class A *		568		2,295
Credit Acceptance Corp. *		80		11,805
Diamond Hill Investment Group, Inc.		21		2,814
Encore Capital Group, Inc. *		184		8,374
Evercore Partners, Inc., Class A		406		21,019
Ezcorp, Inc., Class A *		574		6,475
FBR & Co. *		184		4,442
Financial Engines, Inc.		590		23,523
First Cash Financial Services, Inc. *		374		22,096
FXCM, Inc., Class A		648		10,666
Gain Capital Holdings, Inc.		173,090		1,481,650
GAMCO Investors, Inc., Class A		30		2,479
GFI Group, Inc.		943		5,187
Green Dot Corp., Class A *		498		11,902
Greenhill & Co., Inc.		269		12,105
HFF, Inc., Class A		301		9,475
INTL FCStone, Inc. *		177		3,204
Investment Technology Group, Inc. *		253		4,536
Janus Capital Group, Inc.		1,351		20,251
KCG Holdings, Inc., Class A *		700		7,462
Ladenburg Thalmann Financial Services, Inc. *		1,958		8,361
Manning & Napier, Inc.		300		4,752
MarketAxess Holdings, Inc.		468		30,256
Marlin Business Services Corp.		80		1,691
Moelis & Co., Class A		51		1,742
Nelnet, Inc., Class A		172		8,185
NewStar Financial, Inc. *		255		3,488
Nicholas Financial, Inc. *		110		1,343
PHH Corp. *		622		14,735
PICO Holdings, Inc. *		99,879		2,207,326
Piper Jaffray Cos. *		273		15,414
PRA Group, Inc. *		585		37,001
Pzena Investment Management, Inc., Class A		326		3,276
Regional Management Corp. *		66		770
Resource America, Inc., Class A		210		2,003
Safeguard Scientifics, Inc. *		390		7,780
Solar Capital Ltd.		33,530		623,323
Springleaf Holdings, Inc. *		210		7,858
Stifel Financial Corp. *		778		36,963
Virtus Investment Partners, Inc.		53		9,498
Walter Investment Management Corp. *		369		8,384
WisdomTree Investments, Inc. *		1,219		17,980
World Acceptance Corp. *		106		7,596

				4,782,849

Energy 5.6%
Abraxas Petroleum Corp. *		646		2,668
Adams Resources & Energy, Inc.		80		3,364
Advantage Oil & Gas Ltd. *		90,240		385,325
Alon USA Energy, Inc.		425		6,817
Alpha Natural Resources, Inc. *		2,093		4,102
American Eagle Energy Corp. *		298		519
Amyris, Inc. *		611		1,845
Apco Oil & Gas International, Inc. *		55		788
Approach Resources, Inc. *		179,253		1,774,605
Arch Coal, Inc.		2,625		5,670
Basic Energy Services, Inc. *		450		5,805
Bellatrix Exploration Ltd. *		606,980		2,822,457
Bill Barrett Corp. *		503		7,646
Bonanza Creek Energy, Inc. *		279		12,622
BPZ Resources, Inc. *		1,313		1,628
Bristow Group, Inc.		422		31,186
C&J Energy Services, Inc. *		525		10,138
Callon Petroleum Co. *		610		4,002
CARBO Ceramics, Inc.		192		9,921
Carrizo Oil & Gas, Inc. *		492		25,555
CHC Group Ltd. *(e)		312		2,097
Clayton Williams Energy, Inc. *		52		4,323
Clean Energy Fuels Corp. *		957		6,996
Cloud Peak Energy, Inc. *		818		9,791
Comstock Resources, Inc.		612		7,246
Contango Oil & Gas Co. *		98		3,584
Delek US Holdings, Inc.		511		17,318
DHT Holdings, Inc.		570		3,796
Diamondback Energy, Inc. *		361		24,707
Dorian LPG Ltd. *		35,890		514,304
Emerald Oil, Inc. *		501		1,593
Energy XXI (Bermuda) Ltd.		1,132		8,705
Era Group, Inc. *		33,073		773,577
Evolution Petroleum Corp.		368		3,481
EXCO Resources, Inc.		1,244		3,794
Exterran Holdings, Inc.		688		27,059
Forest Oil Corp. *		1,042		844
Forum Energy Technologies, Inc. *		686		18,728
Frontline Ltd. *		849		1,197
FX Energy, Inc. *		1,211		3,633
GasLog Ltd.		376		7,828
Gastar Exploration, Inc. *		637		2,548
Geospace Technologies Corp. *		127		3,910
Goodrich Petroleum Corp. *		399		3,288
Green Plains, Inc.		321		10,978
Gulf Island Fabrication, Inc.		137		2,896
Gulfmark Offshore, Inc., Class A		323		9,742
Halcon Resources Corp. *		2,678		8,329
Hallador Energy Co.		205		2,460
Harvest Natural Resources, Inc. *		360		1,339
Helix Energy Solutions Group, Inc. *		1,159		30,876
Hercules Offshore, Inc. *		1,421		2,345
Hornbeck Offshore Services, Inc. *		437		13,398
Independence Contract Drilling, Inc. *		43,330		317,609
ION Geophysical Corp. *		1,487		4,164
Isramco, Inc. *		35		4,585
Key Energy Services, Inc. *		1,526		4,639
Kodiak Oil & Gas Corp. *		3,097		33,417
Magnum Hunter Resources Corp. *		2,000		9,280
Matador Resources Co. *		666		16,164
Matrix Service Co. *		288		7,217
McDermott International, Inc. *		2,022		7,764
Midstates Petroleum Co., Inc. *		288		855
Miller Energy Resources, Inc. *		401		1,395
Mitcham Industries, Inc. *		316		3,223
Natural Gas Services Group, Inc. *		230		5,918
Navios Maritime Acquisition Corp.		707		2,241
Newpark Resources, Inc. *		1,132		12,939
Nordic American Tankers Ltd.		851		7,191
North Atlantic Drilling Ltd.		402		2,488
Northern Oil & Gas, Inc. *		674		7,616

18 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Nuverra Environmental Solutions, Inc. *		117		1,108
Pacific Ethanol, Inc. *		171		2,413
Panhandle Oil & Gas, Inc., Class A		112		2,303
Parker Drilling Co. *		1,022		4,538
Parsley Energy, Inc., Class A *		371		6,296
PDC Energy, Inc. *		405		17,707
Penn Virginia Corp. *		604		5,176
PetroQuest Energy, Inc. *		764		3,591
PHI, Inc. - Non Voting Shares *		154		6,890
Pioneer Energy Services Corp. *		762		6,995
Quicksilver Resources, Inc. *		828		453
Renewable Energy Group, Inc. *		128		1,348
Resolute Energy Corp. *		676		2,352
REX American Resources Corp. *		47		3,420
Rex Energy Corp. *		550		4,312
RigNet, Inc. *		67		2,911
Ring Energy, Inc. *		107		1,840
Rosetta Resources, Inc. *		594		22,590
RSP Permian, Inc. *		34,875		853,391
Sanchez Energy Corp. *		415		7,084
Scorpio Tankers, Inc.		169,680		1,481,306
SEACOR Holdings, Inc. *		12,950		1,067,728
SemGroup Corp., Class A		502		38,529
Ship Finance International Ltd.		846		14,543
Solazyme, Inc. *		781		5,990
Stone Energy Corp. *		560		13,720
Swift Energy Co. *		615		4,213
Synergy Resources Corp. *		526		6,412
Teekay Tankers Ltd., Class A		1,281		5,431
Tesco Corp.		532		10,129
TETRA Technologies, Inc. *		1,052		10,026
TransAtlantic Petroleum Ltd. *		161		1,328
Triangle Petroleum Corp. *		903		6,998
VAALCO Energy, Inc. *		727		5,394
Vantage Drilling Co. *		927		897
W&T Offshore, Inc.		463		4,209
Warren Resources, Inc. *		1,494		5,169
Western Refining, Inc.		599		27,308
Westmoreland Coal Co. *		151		5,522
Willbros Group, Inc. *		458		2,688

				10,776,336

Food & Staples Retailing 0.7%
Casey’s General Stores, Inc.		15,130		1,238,693
Ingles Markets, Inc., Class A		68		1,829
Liberator Medical Holdings, Inc.		440		1,267
Natural Grocers by Vitamin Cottage, Inc. *		79		1,431
PriceSmart, Inc.		184		16,382
Roundy’s, Inc.		331		1,115
SpartanNash, Co.		442		9,905
SUPERVALU, Inc. *		1,788		15,430
The Andersons, Inc.		307		19,565
The Chefs’ Warehouse, Inc. *		99		1,769
The Fresh Market, Inc. *		338		12,408
The Pantry, Inc. *		475		12,241
United Natural Foods, Inc. *		577		39,248
Village Super Market, Inc., Class A		150		4,163
Weis Markets, Inc.		99		4,419

				1,379,865

Food, Beverage & Tobacco 1.0%
22nd Century Group, Inc. *		497		1,093
Alico, Inc.		40		1,476
B&G Foods, Inc.		660		19,444
Boulder Brands, Inc. *		689		6,118
Cal-Maine Foods, Inc.		152		13,344
Calavo Growers, Inc.		64		3,107
Chiquita Brands International, Inc. *		516		7,446
Coca-Cola Bottling Co. Consolidated		28		2,532
Craft Brew Alliance, Inc. *		211		2,929
Darling Ingredients, Inc. *		1,786		31,434
Dean Foods Co.		930		13,680
Diamond Foods, Inc. *		149		4,492
Farmer Bros. Co. *		120		3,499
Fresh Del Monte Produce, Inc.		372		11,945
Inventure Foods, Inc. *		208		2,754
J&J Snack Foods Corp.		97		9,994
John B. Sanfilippo & Son, Inc.		86		3,195
Lancaster Colony Corp.		202		18,481
Lifeway Foods, Inc. *		98		1,622
Limoneira Co.		88		2,258
National Beverage Corp. *		228		5,727
Omega Protein Corp. *		133		1,922
Post Holdings, Inc. *		23,867		895,012
Sanderson Farms, Inc.		247		20,743
Seaboard Corp. *		2		6,146
Seneca Foods Corp., Class A *		55		1,478
Snyder’s-Lance, Inc.		528		15,729
The Boston Beer Co., Inc., Class A *		102		25,398
The Hain Celestial Group, Inc. *		6,160		666,820
Tootsie Roll Industries, Inc.		55		1,631
TreeHouse Foods, Inc. *		435		37,049
Universal Corp.		260		11,570
Vector Group Ltd.		775		17,314

				1,867,382

Health Care Equipment & Services 9.9%
Abaxis, Inc.		283		14,903
ABIOMED, Inc. *		24,647		808,175
Acadia Healthcare Co., Inc. *		22,419		1,391,099
Accuray, Inc. *		991		6,273
Air Methods Corp. *		408		19,270
Alliance HealthCare Services, Inc. *		105		2,534
Allscripts Healthcare Solutions, Inc. *		65,900		904,148
Almost Family, Inc. *		220		6,477
Amedisys, Inc. *		483		12,606
AMN Healthcare Services, Inc. *		256		4,390
Amsurg Corp. *		17,666		954,141
Analogic Corp.		182		13,275
AngioDynamics, Inc. *		540		9,180
Anika Therapeutics, Inc. *		101		4,054
Antares Pharma, Inc. *		750		1,553
AtriCure, Inc. *		446		7,778
Atrion Corp.		18		5,940
Bio-Reference Laboratories, Inc. *		408		12,256
BioScrip, Inc. *		891		5,756
Cantel Medical Corp.		294		12,466
Capital Senior Living Corp. *		175		3,938
Cardiovascular Systems, Inc. *		244		7,564

See financial notes 19

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Castlight Health, Inc., Class B *		117		1,464
Centene Corp. *		10,880		1,008,250
Cerus Corp. *		389		1,618
Chemed Corp.		213		22,016
Computer Programs & Systems, Inc.		180		11,336
CONMED Corp.		284		11,925
CorVel Corp. *		11,858		408,152
Cross Country Healthcare, Inc. *		331		3,201
CryoLife, Inc.		266		2,729
Cyberonics, Inc. *		319		16,748
Cynosure, Inc., Class A *		56		1,416
Derma Sciences, Inc. *		127		1,156
DexCom, Inc. *		21,973		987,686
Endologix, Inc. *		32,826		374,216
Exactech, Inc. *		178		3,791
ExamWorks Group, Inc. *		430		16,675
Five Star Quality Care, Inc. *		326		1,346
GenMark Diagnostics, Inc. *		323		3,682
Gentiva Health Services, Inc. *		432		8,510
Globus Medical, Inc., Class A *		37,001		820,312
Greatbatch, Inc. *		288		14,455
Haemonetics Corp. *		26,343		993,658
Hanger, Inc. *		430		10,290
HealthSouth Corp.		21,223		855,924
HealthStream, Inc. *		236		7,307
Healthways, Inc. *		203		3,147
HeartWare International, Inc. *		144		11,105
HMS Holdings Corp. *		21,213		492,778
ICU Medical, Inc. *		23,042		1,633,678
Insulet Corp. *		16,623		717,615
Integra LifeSciences Holdings Corp. *		5,103		260,814
Invacare Corp.		171		2,686
IPC The Hospitalist Co., Inc. *		160		6,666
Kindred Healthcare, Inc.		501		10,897
Landauer, Inc.		74		2,648
LDR Holding Corp. *		85		2,927
LHC Group, Inc. *		240		5,844
Magellan Health, Inc. *		249		15,069
Masimo Corp. *		717		18,097
MedAssets, Inc. *		33,883		733,906
Medidata Solutions, Inc. *		630		28,419
Merge Healthcare, Inc. *		1,173		3,226
Meridian Bioscience, Inc.		185		3,430
Merit Medical Systems, Inc. *		791		11,984
Molina Healthcare, Inc. *		262		12,744
MWI Veterinary Supply, Inc. *		129		21,886
National Healthcare Corp.		93		5,609
National Research Corp., Class A *		104		1,653
Natus Medical, Inc. *		500		17,000
Neogen Corp. *		304		13,346
NuVasive, Inc. *		555		22,699
NxStage Medical, Inc. *		66,898		1,014,174
Omnicell, Inc. *		424		13,699
OraSure Technologies, Inc. *		921		8,243
Orthofix International N.V. *		107		3,140
Owens & Minor, Inc.		849		28,289
PharMerica Corp. *		425		12,193
Quality Systems, Inc.		584		8,824
Quidel Corp. *		77		2,198
RadNet, Inc. *		255		2,372
Rockwell Medical, Inc. *		418		3,645
Select Medical Holdings Corp.		656		9,460
Skilled Healthcare Group, Inc., Class A *		239		1,656
STAAR Surgical Co. *		395		3,780
STERIS Corp.		22,094		1,365,409
SurModics, Inc. *		218		4,720
Symmetry Medical, Inc. *		235		2,327
Team Health Holdings, Inc. *		841		52,596
TearLab Corp. *		102,800		297,092
The Ensign Group, Inc.		165		6,389
The Providence Service Corp. *		220		9,720
The Spectranetics Corp. *		27,505		873,834
Thoratec Corp. *		15,819		429,960
Tornier N.V. *		241		6,736
TransEnterix, Inc. *		315		1,292
Triple-S Management Corp., Class B *		424		9,387
TriVascular Technologies, Inc. *		150		1,988
Unilife Corp. *		233,095		855,459
Universal American Corp. *		375		3,495
Utah Medical Products, Inc.		34		1,931
Vascular Solutions, Inc. *		325		9,558
Vocera Communications, Inc. *		111		1,149
Volcano Corp. *		804		8,136
WellCare Health Plans, Inc. *		451		30,609
West Pharmaceutical Services, Inc.		610		31,262
Wright Medical Group, Inc. *		547		17,296
Zeltiq Aesthetics, Inc. *		177		4,538

				18,992,068

Household & Personal Products 0.0%
Central Garden & Pet Co., Class A *		440		3,780
Elizabeth Arden, Inc. *		249		4,084
Harbinger Group, Inc. *		791		10,394
IGI Laboratories, Inc. *		309		3,031
Inter Parfums, Inc.		107		3,039
Medifast, Inc. *		250		7,935
Nature’s Sunshine Products, Inc.		105		1,564
Nutraceutical International Corp. *		84		1,888
Oil-Dri Corp. of America		61		1,841
Orchids Paper Products Co.		165		4,745
Revlon, Inc., Class A *		69		2,367
Synutra International, Inc. *		329		2,083
USANA Health Sciences, Inc. *		63		7,181
WD-40 Co.		99		7,590

				61,522

Insurance 1.8%
Ambac Financial Group, Inc. *		456		10,433
American Equity Investment Life Holding Co.		960		24,778
AMERISAFE, Inc.		15,681		653,898
AmTrust Financial Services, Inc.		366		16,422
Argo Group International Holdings Ltd.		169		9,430
Baldwin & Lyons, Inc., Class B		70		1,884
Citizens, Inc. *		419		3,055
CNO Financial Group, Inc.		2,506		45,434
Crawford & Co., Class B		204		2,077
Donegal Group, Inc., Class A		120		1,898

20 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
eHealth, Inc. *		289		7,211
EMC Insurance Group, Inc.		64		2,051
Employers Holdings, Inc.		433		8,829
Enstar Group Ltd. *		83		12,290
FBL Financial Group, Inc., Class A		152		7,536
Federated National Holding Co.		70		2,342
First American Financial Corp.		1,164		35,292
Global Indemnity plc *		72		2,087
Greenlight Capital Re Ltd., Class A *		251		8,145
Hallmark Financial Services, Inc. *		183		2,134
HCI Group, Inc.		209		10,626
Hilltop Holdings, Inc. *		738		16,258
Horace Mann Educators Corp.		497		15,114
Independence Holding Co.		146		2,066
Infinity Property & Casualty Corp.		74		5,403
Kansas City Life Insurance Co.		45		2,233
Kemper Corp.		333		12,271
Maiden Holdings Ltd.		628		7,505
Meadowbrook Insurance Group, Inc.		979		6,236
Montpelier Re Holdings Ltd.		573		18,989
National General Holdings Corp.		189		3,544
National Interstate Corp.		57		1,621
National Western Life Insurance Co., Class A		9		2,439
OneBeacon Insurance Group Ltd., Class A		425		6,770
Platinum Underwriters Holdings Ltd.		13,946		873,438
Primerica, Inc.		29,535		1,510,715
RLI Corp.		538		26,679
Safety Insurance Group, Inc.		100		6,238
Selective Insurance Group, Inc.		614		15,853
State Auto Financial Corp.		93		1,946
Stewart Information Services Corp.		370		13,068
Symetra Financial Corp.		750		17,775
The Navigators Group, Inc. *		89		6,060
Third Point Reinsurance Ltd. *		255		3,902
United Fire Group, Inc.		216		7,016
Universal Insurance Holdings, Inc.		206		3,605

				3,454,596

Materials 3.8%
A. Schulman, Inc.		317		11,225
A.M. Castle & Co. *		183		1,345
Advanced Emissions Solutions, Inc. *		178		3,599
AK Steel Holding Corp. *		1,714		12,975
Allied Nevada Gold Corp. *		1,391		1,933
American Vanguard Corp.		404		4,662
Ampco-Pittsburgh Corp.		197		4,293
Axiall Corp.		860		34,658
Balchem Corp.		400		25,880
Berry Plastics Group, Inc. *		856		22,273
Boise Cascade Co. *		248		8,943
Calgon Carbon Corp. *		747		15,709
Century Aluminum Co. *		784		22,956
Chase Corp.		76		2,726
Chemtura Corp. *		913		21,264
Clearwater Paper Corp. *		251		16,152
Coeur Mining, Inc. *		1,259		4,658
Commercial Metals Co.		958		16,564
Deltic Timber Corp.		17,456		1,136,211
Ferro Corp. *		1,023		13,422
Flotek Industries, Inc. *		561		12,432
FutureFuel Corp.		348		4,635
Globe Specialty Metals, Inc.		678		12,753
Gold Resource Corp.		374		1,455
Graphic Packaging Holding Co. *		2,902		35,201
Greif, Inc., Class A		21,700		956,102
H.B. Fuller Co.		575		24,133
Handy & Harman Ltd. *		99		3,496
Hawkins, Inc.		42		1,617
Haynes International, Inc.		111		5,160
Headwaters, Inc. *		639		8,115
Hecla Mining Co.		2,963		6,459
Horsehead Holding Corp. *		490		7,698
Innophos Holdings, Inc.		307		17,499
Innospec, Inc.		22,459		906,670
Intrepid Potash, Inc. *		309		4,156
Kaiser Aluminum Corp.		195		13,562
KapStone Paper & Packaging Corp. *		1,000		30,760
KMG Chemicals, Inc.		78		1,381
Koppers Holdings, Inc.		28,548		1,127,075
Kraton Performance Polymers, Inc. *		526		9,410
Landec Corp. *		485		6,106
Louisiana-Pacific Corp. *		1,580		23,068
LSB Industries, Inc. *		286		10,734
Materion Corp.		153		6,036
Minerals Technologies, Inc.		298		22,860
Molycorp, Inc. *		1,237		1,707
Myers Industries, Inc.		508		7,590
Neenah Paper, Inc.		178		10,860
Noranda Aluminum Holding Corp.		508		2,240
Olin Corp.		775		18,786
OM Group, Inc.		319		8,304
OMNOVA Solutions, Inc. *		246		1,729
P.H. Glatfelter Co.		627		15,819
PolyOne Corp.		1,132		41,895
Quaker Chemical Corp.		100		8,208
Rentech, Inc. *		2,658		4,226
Resolute Forest Products, Inc. *		773		14,347
RTI International Metals, Inc. *		324		7,630
Schnitzer Steel Industries, Inc., Class A		373		8,784
Schweitzer-Mauduit International, Inc.		284		12,229
Senomyx, Inc. *		388		3,073
Sensient Technologies Corp.		23,269		1,377,059
Stepan Co.		149		6,598
Stillwater Mining Co. *		1,215		15,953
SunCoke Energy, Inc. *		956		22,848
Taminco Corp. *		131		3,392
Trecora Resources *		525		6,904
Tredegar Corp.		361		6,866
Tronox Ltd., Class A		498		12,042
UFP Technologies, Inc. *		86		1,894
United States Lime & Minerals, Inc.		34		2,384
Universal Stainless & Alloy Products, Inc. *		115		2,957
US Concrete, Inc. *		109		2,692
US Silica Holdings, Inc.		585		26,267
Walter Energy, Inc.		517		1,246
Wausau Paper Corp.		522		5,163
Worthington Industries, Inc.		533		20,600

See financial notes 21

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Zep, Inc.		59,006		947,636

				7,269,949

Media 0.7%
AH Belo Corp., Class A		155		1,784
AMC Entertainment Holdings, Inc., Class A		133		3,378
Carmike Cinemas, Inc. *		244		7,820
Central European Media Enterprises Ltd., Class A *		775		1,883
Cinedigm Corp., Class A *		686		1,063
Crown Media Holdings, Inc., Class A *		678		2,366
Cumulus Media, Inc., Class A *		1,288		4,972
Daily Journal Corp. *		27		4,932
Dex Media, Inc. *		151		1,176
Entercom Communications Corp., Class A *		610		6,271
Entravision Communications Corp., Class A		301		1,553
Eros International plc *		135		2,492
Global Sources Ltd. *		230		1,686
Gray Television, Inc. *		475		4,389
Harte-Hanks, Inc.		611		3,978
Hemisphere Media Group, Inc. *		122		1,562
Journal Communications, Inc., Class A *		904		8,868
Lee Enterprises, Inc. *		514		1,917
Loral Space & Communications, Inc. *		92		7,038
MDC Partners, Inc., Class A		381		7,887
Media General, Inc. *		488		7,291
Meredith Corp.		416		21,690
National CineMedia, Inc.		417		6,630
New Media Investment Group, Inc.		54,623		1,041,114
Nexstar Broadcasting Group, Inc., Class A		390		17,597
Radio One, Inc., Class D *		373		929
ReachLocal, Inc. *		133		602
Reading International, Inc., Class A *		278		2,772
Rentrak Corp. *		82		6,303
Saga Communications, Inc., Class A		146		5,855
Scholastic Corp.		400		13,924
SFX Entertainment, Inc. *		382		1,963
Sinclair Broadcast Group, Inc., Class A		842		24,460
Sizmek, Inc. *		490		2,808
The E.W. Scripps Co., Class A *		356		6,835
The McClatchy Co., Class A *		578		2,058
The New York Times Co., Class A		1,200		15,408
Time, Inc. *		1,143		25,820
World Wrestling Entertainment, Inc., Class A		170		2,100

				1,283,174

Pharmaceuticals, Biotechnology & Life Sciences 7.4%
ACADIA Pharmaceuticals, Inc. *		837		23,185
Accelerate Diagnostics, Inc. *		200		4,344
Acceleron Pharma, Inc. *		145		5,362
AcelRx Pharmaceuticals, Inc. *		200		1,326
Achillion Pharmaceuticals, Inc. *		1,341		15,757
Acorda Therapeutics, Inc. *		454		15,808
Actinium Pharmaceuticals, Inc. *		203		1,435
Aegerion Pharmaceuticals, Inc. *		290		5,855
Aerie Pharmaceuticals, Inc. *		85		2,144
Affymetrix, Inc. *		895		8,064
Agenus, Inc. *		525		1,565
Agios Pharmaceuticals, Inc. *		137		11,512
Akebia Therapeutics, Inc. *		66		855
Akorn, Inc. *		26,242		1,169,081
Albany Molecular Research, Inc. *		150		3,489
Alder Biopharmaceuticals, Inc. *		97		1,737
Alimera Sciences, Inc. *		304		1,733
AMAG Pharmaceuticals, Inc. *		61,105		2,017,076
Ampio Pharmaceuticals, Inc. *		296		1,148
Anacor Pharmaceuticals, Inc. *		306		8,999
ANI Pharmaceuticals, Inc. *		59		2,004
Applied Genetic Technologies Corp. *		57		1,146
Aratana Therapeutics, Inc. *		208		2,330
Arena Pharmaceuticals, Inc. *		2,745		11,968
ARIAD Pharmaceuticals, Inc. *		1,556		9,274
Array BioPharma, Inc. *		1,190		4,272
Arrowhead Research Corp. *		512		3,338
Auspex Pharmaceuticals, Inc. *		83		2,249
Auxilium Pharmaceuticals, Inc. *		736		23,677
Avanir Pharmaceuticals, Inc. *		2,289		29,620
Bio-Path Holdings, Inc. *		575		1,679
BioCryst Pharmaceuticals, Inc. *		681		7,981
BioDelivery Sciences International, Inc. *		653		11,362
BioTime, Inc. *		427		1,448
Bluebird Bio, Inc. *		174		7,306
Cambrex Corp. *		360		7,589
Cancer Genetics, Inc. *		46,580		344,692
Catalent, Inc. *		305		7,939
Celldex Therapeutics, Inc. *		1,074		17,989
Cellular Dynamics International, Inc. *		122		948
Cempra, Inc. *		296		4,026
Cepheid *		857		45,430
Charles River Laboratories International, Inc. *		32,100		2,027,436
ChemoCentryx, Inc. *		121		680
Chimerix, Inc. *		251		7,791
Clovis Oncology, Inc. *		235		14,020
Corcept Therapeutics, Inc. *		907		2,948
CTI BioPharma, Corp. *		1,000		2,440
Cytokinetics, Inc. *		140		514
Cytori Therapeutics, Inc. *		742		385
CytRx Corp. *		506		1,447
Dendreon Corp. *		2,516		2,464
Depomed, Inc. *		764		11,766
Durata Therapeutics, Inc. *		244		5,863
Dyax Corp. *		1,483		18,345
Dynavax Technologies Corp. *		2,128		3,490
Emergent Biosolutions, Inc. *		323		7,306
Enanta Pharmaceuticals, Inc. *		93		3,999
Endocyte, Inc. *		330		1,975
Enzo Biochem, Inc. *		358		1,869
Epizyme, Inc. *		125		3,316
Exact Sciences Corp. *		972		23,396

22 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Exelixis, Inc. *		2,672		4,542
Five Prime Therapeutics, Inc. *		157		2,047
Fluidigm Corp. *		308		8,932
Foundation Medicine, Inc. *		105		2,717
Galectin Therapeutics, Inc. *		188		1,019
Galena Biopharma, Inc. *		1,426		2,923
Genomic Health, Inc. *		321		11,665
Geron Corp. *		1,639		3,655
Halozyme Therapeutics, Inc. *		1,180		11,352
Heron Therapeutics, Inc. *		194		1,711
Horizon Pharma plc *		65,134		842,834
Hyperion Therapeutics, Inc. *		147		3,572
ICON plc *		33,240		1,748,756
Idera Pharmaceuticals, Inc. *		589		1,502
ImmunoGen, Inc. *		1,054		9,760
Immunomedics, Inc. *		1,236		4,882
Impax Laboratories, Inc. *		865		25,059
Infinity Pharmaceuticals, Inc. *		426		5,802
Inovio Pharmaceuticals, Inc. *		539		6,123
Insmed, Inc. *		337		4,782
Insys Therapeutics, Inc. *		136		5,532
Intra-Cellular Therapies, Inc. *		139		2,154
Intrexon Corp. *		326		7,276
Ironwood Pharmaceuticals, Inc. *		1,156		16,207
Isis Pharmaceuticals, Inc. *		1,187		54,673
Karyopharm Therapeutics, Inc. *		111		4,560
Keryx Biopharmaceuticals, Inc. *		1,338		22,545
Kindred Biosciences, Inc. *		95		871
KYTHERA Biopharmaceuticals, Inc. *		154		5,428
Lannett Co., Inc. *		12,680		719,210
Lexicon Pharmaceuticals, Inc. *		2,643		3,832
Ligand Pharmaceuticals, Inc. *		171		9,451
Luminex Corp. *		628		11,932
MacroGenics, Inc. *		170		3,619
MannKind Corp. *		2,261		13,589
Merrimack Pharmaceuticals, Inc. *		1,070		9,812
MiMedx Group, Inc. *		897		9,131
Mirati Therapeutics, Inc. *		77		1,291
Momenta Pharmaceuticals, Inc. *		705		7,692
Myriad Genetics, Inc. *		17,120		676,069
NanoViricides, Inc. *		389		1,482
Navidea Biopharmaceuticals, Inc. *		1,179		1,592
Nektar Therapeutics *		1,261		17,389
NeoStem, Inc. *		266		1,365
Neuralstem, Inc. *		613		1,686
Neurocrine Biosciences, Inc. *		767		14,205
NewLink Genetics Corp. *		187		6,106
Northwest Biotherapeutics, Inc. *		349		1,836
Novavax, Inc. *		2,146		12,018
NPS Pharmaceuticals, Inc. *		19,752		541,205
Ohr Pharmaceutical, Inc. *		230		1,668
Omeros Corp. *		332		5,501
OncoMed Pharmaceuticals, Inc. *		102		2,119
Oncothyreon, Inc. *		612		1,102
Ophthotech Corp. *		140		5,841
OPKO Health, Inc. *		2,159		18,028
Orexigen Therapeutics, Inc. *		1,210		4,913
Organovo Holdings, Inc. *		547		3,577
Osiris Therapeutics, Inc. *		165		2,249
OvaScience, Inc. *		118		2,305
Pacific Biosciences of California, Inc. *		687		4,507
Pacira Pharmaceuticals, Inc. *		10,705		993,638
Pain Therapeutics, Inc. *		314		546
PAREXEL International Corp. *		17,616		956,725
PDL BioPharma, Inc.		1,198		10,219
Peregrine Pharmaceuticals, Inc. *		2,024		3,238
Pernix Therapeutics Holdings, Inc. *		319		3,110
Phibro Animal Health Corp., Class A		28,185		730,555
Portola Pharmaceuticals, Inc. *		338		9,633
POZEN, Inc. *		383		3,474
Prestige Brands Holdings, Inc. *		728		25,786
Progenics Pharmaceuticals, Inc. *		448		2,164
Prothena Corp. plc *		221		4,847
PTC Therapeutics, Inc. *		208		8,501
Puma Biotechnology, Inc. *		242		60,645
Raptor Pharmaceutical Corp. *		744		7,150
Receptos, Inc. *		147		15,237
Regulus Therapeutics, Inc. *		229		4,571
Relypsa, Inc. *		149		3,065
Repligen Corp. *		220		5,548
Repros Therapeutics, Inc. *		264		1,674
Retrophin, Inc. *		196		1,897
Revance Therapeutics, Inc. *		57		1,149
Rigel Pharmaceuticals, Inc. *		997		1,974
Sagent Pharmaceuticals, Inc. *		206		6,518
Sangamo BioSciences, Inc. *		652		7,915
Sarepta Therapeutics, Inc. *		472		7,632
SciClone Pharmaceuticals, Inc. *		344		2,628
Sequenom, Inc. *		1,119		3,659
Spectrum Pharmaceuticals, Inc. *		960		7,277
Stemline Therapeutics, Inc. *		66		1,016
Sunesis Pharmaceuticals, Inc. *		599		1,018
Supernus Pharmaceuticals, Inc. *		327		2,626
Synageva BioPharma Corp. *		221		16,739
Synergy Pharmaceuticals, Inc. *		849		2,912
Synta Pharmaceuticals Corp. *		932		2,759
TESARO, Inc. *		176		4,896
Tetraphase Pharmaceuticals, Inc. *		213		5,091
TG Therapeutics, Inc. *		269		2,956
The Medicines Co. *		11,852		300,093
TherapeuticsMD, Inc. *		1,025		4,551
Theravance Biopharma, Inc. *		214		3,916
Theravance, Inc.		782		12,528
Threshold Pharmaceuticals, Inc. *		1,100		3,223
Ultragenyx Pharmaceutical, Inc. *		70		3,291
Vanda Pharmaceuticals, Inc. *		478		5,741
Verastem, Inc. *		132		1,253
Versartis, Inc. *		63		1,254
Vital Therapies, Inc. *		63		1,087
VIVUS, Inc. *		1,152		3,905
Xencor, Inc. *		161		1,737
XenoPort, Inc. *		356		2,414
XOMA Corp. *		1,300		5,577
ZIOPHARM Oncology, Inc. *		1,259		4,180
Zogenix, Inc. *		1,020		1,295

				14,216,428

Real Estate 4.6%
Acadia Realty Trust		578		18,034
AG Mortgage Investment Trust, Inc.		79		1,507

See financial notes 23

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Agree Realty Corp.		205		6,275
Alexander & Baldwin, Inc.		485		19,415
Alexander’s, Inc.		13		5,746
Altisource Asset Management Corp. *		14		7,560
Altisource Portfolio Solutions S.A. *		138		10,303
Altisource Residential Corp.		549		12,748
American Assets Trust, Inc.		432		16,563
American Capital Mortgage Investment Corp.		401		7,856
American Realty Capital Healthcare Trust, Inc.		1,536		17,357
American Residential Properties, Inc. *		107		2,033
Anworth Mortgage Asset Corp.		1,734		8,999
Apollo Commercial Real Estate Finance, Inc.		505		8,302
Apollo Residential Mortgage, Inc.		435		7,256
Ares Commercial Real Estate Corp.		400		4,864
ARMOUR Residential REIT, Inc.		4,721		18,695
Ashford Hospitality Prime, Inc.		188		3,258
Ashford Hospitality Trust		944		10,667
Associated Estates Realty Corp.		410		8,007
AV Homes, Inc. *		99		1,484
Aviv REIT, Inc.		151		5,093
Campus Crest Communities, Inc.		754		4,780
Capstead Mortgage Corp.		1,244		15,811
CareTrust REIT, Inc. *		165		2,562
Cedar Realty Trust, Inc.		1,016		6,990
Chambers Street Properties		2,296		18,850
Chatham Lodging Trust		243		6,226
Chesapeake Lodging Trust		702		23,194
Colony Financial, Inc.		1,436		31,994
Consolidated-Tomoka Land Co.		43		2,244
CorEnergy Infrastructure Trust, Inc.		233		1,750
CoreSite Realty Corp.		342		12,661
Cousins Properties, Inc.		1,917		24,940
CubeSmart		1,627		34,248
CyrusOne, Inc.		81		2,212
CYS Investments, Inc.		2,209		19,726
DCT Industrial Trust, Inc.		2,844		24,373
DiamondRock Hospitality Co.		68,658		985,242
DuPont Fabros Technology, Inc.		773		23,940
Dynex Capital, Inc.		582		4,900
EastGroup Properties, Inc.		304		20,933
Education Realty Trust, Inc.		83,265		937,564
Empire State Realty Trust, Inc., Class A		745		11,890
EPR Properties		484		27,152
Equity One Ltd		911		21,864
Excel Trust, Inc.		688		8,944
FelCor Lodging Trust, Inc.		1,531		16,428
First Industrial Realty Trust, Inc.		1,384		27,030
First Potomac Realty Trust		864		10,800
Forestar Group, Inc. *		464		8,097
Franklin Street Properties Corp.		1,246		14,940
Getty Realty Corp.		457		8,505
Gladstone Commercial Corp.		438		7,928
Glimcher Realty Trust		1,953		26,815
Government Properties Income Trust		948		21,633
Gramercy Property Trust, Inc.		1,200		7,500
Hannon Armstrong Sustainable Infrastructure Capital, Inc.		148		2,069
Hatteras Financial Corp.		898		17,098
Healthcare Realty Trust, Inc.		1,244		32,929
Hersha Hospitality Tr		1,749		12,750
Highwoods Properties, Inc.		1,104		47,328
Hudson Pacific Properties, Inc.		811		22,148
Inland Real Estate Corp.		1,250		13,263
Invesco Mortgage Capital, Inc.		1,531		25,323
Investors Real Estate Trust		823		6,913
iStar Financial, Inc. *		1,209		17,156
Kennedy-Wilson Holdings, Inc.		730		19,776
Kite Realty Group Trust		441		11,417
LaSalle Hotel Properties		29,821		1,169,281
Lexington Realty Trust		1,679		18,402
LTC Properties, Inc.		485		20,341
Mack-Cali Realty Corp.		841		15,752
Medical Properties Trust, Inc.		1,708		23,041
Monmouth Real Estate Investment Corp.		752		8,422
National Health Investors, Inc.		278		18,323
New Residential Investment Corp.		1,149		14,225
New York Mortgage Trust, Inc.		1,050		8,201
New York REIT, Inc.		1,357		15,226
Newcastle Investment Corp.		92,848		2,242,279
Owens Realty Mortgage, Inc.		118		1,764
Parkway Properties, Inc.		583		11,689
Pebblebrook Hotel Trust		760		32,376
Pennsylvania Real Estate Investment Trust		629		13,479
PennyMac Mortgage Investment Trust		872		18,826
Physicians Realty Trust		281		4,311
Potlatch Corp.		420		18,476
PS Business Parks, Inc.		150		12,633
QTS Realty Trust, Inc., Class A		97		3,416
RAIT Financial Trust		1,290		9,456
Ramco-Gershenson Properties Trust		1,123		19,630
Redwood Trust, Inc.		711		13,360
Resource Capital Corp.		1,460		7,723
Retail Opportunity Investments Corp.		927		15,147
Rexford Industrial Realty, Inc.		216		3,337
RLJ Lodging Trust		1,430		46,075
Rouse Properties, Inc.		488		8,886
Ryman Hospitality Properties, Inc.		493		24,330
Sabra Health Care REIT, Inc.		591		16,885
Saul Centers, Inc.		205		11,265
Select Income REIT		316		7,745
Silver Bay Realty Trust Corp.		373		6,315
Sovran Self Storage, Inc.		372		31,653
STAG Industrial, Inc.		633		15,445
Starwood Waypoint Residential Trust		293		7,671
Strategic Hotels & Resorts, Inc. *		2,342		30,095
Summit Hotel Properties, Inc.		161,980		1,885,447
Sun Communities, Inc.		453		26,260
Sunstone Hotel Investors, Inc.		1,913		29,288
Tejon Ranch Co. *		159		4,799
Terreno Realty Corp.		337		7,097
The Geo Group, Inc.		928		37,064
The St. Joe Co. *		471		9,020
Trade Street Residential, Inc.		265		1,829
UMH Properties, Inc.		706		7,131

24 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Universal Health Realty Income Trust		106		5,136
Urstadt Biddle Properties, Inc., Class A		224		4,845
Washington Real Estate Investment Trust		491		13,876
Western Asset Mortgage Capital Corp.		145		2,178
Whitestone REIT		404		6,060

				8,840,369

Retailing 3.4%
Aeropostale, Inc. *		1,044		3,142
America’s Car-Mart, Inc. *		38		1,747
American Eagle Outfitters, Inc.		1,903		24,492
ANN, Inc. *		574		22,036
Asbury Automotive Group, Inc. *		397		27,806
Ascena Retail Group, Inc. *		87,700		1,091,865
Barnes & Noble, Inc. *		342		7,462
bebe stores, Inc.		766		1,754
Blue Nile, Inc. *		112		3,976
Brown Shoe Co., Inc.		497		13,215
Build-A-Bear Workshop, Inc. *		136		2,305
Burlington Stores, Inc. *		243		10,191
Christopher & Banks Corp. *		284		1,855
Conn’s, Inc. *		257		7,995
Core-Mark Holding Co., Inc.		210		12,186
Coupons.com, Inc. *		106		1,476
Destination Maternity Corp.		197		2,951
Express, Inc. *		813		12,171
Five Below, Inc. *		495		19,736
Francesca’s Holdings Corp. *		331		3,942
Fred’s, Inc., Class A		77,810		1,221,617
FTD Cos., Inc. *		208		7,317
Genesco, Inc. *		257		19,709
Group 1 Automotive, Inc.		250		21,358
Guess?, Inc.		504		11,174
Haverty Furniture Cos, Inc.		81		1,783
hhgregg, Inc. *		110		570
Hibbett Sports, Inc. *		290		13,163
HSN, Inc.		417		27,551
Kirkland’s, Inc. *		300		5,340
Lands’ End, Inc. *		107		5,079
Lithia Motors, Inc., Class A		246		19,095
Lumber Liquidators Holdings, Inc. *		321		17,260
MarineMax, Inc. *		149		2,856
Mattress Firm Holding Corp. *		92		5,814
Monro Muffler Brake, Inc.		329		17,582
Nutrisystem, Inc.		158		2,661
Office Depot, Inc. *		5,328		27,812
Orbitz Worldwide, Inc. *		429		3,548
Outerwall, Inc. *		264		16,703
PetMed Express, Inc.		284		3,752
Pier 1 Imports, Inc.		991		12,784
Pool Corp.		494		29,492
Rent-A-Center, Inc.		485		15,020
Restoration Hardware Holdings, Inc. *		10,751		863,520
RetailMeNot, Inc. *		286		6,023
Select Comfort Corp. *		587		15,080
Shoe Carnival, Inc.		70		1,288
Shutterfly, Inc. *		460		19,242
Sonic Automotive, Inc., Class A		451		11,225
Stage Stores, Inc.		58,893		993,525
Stein Mart, Inc.		616		8,242
Systemax, Inc. *		178		2,723
The Bon-Ton Stores, Inc.		370		3,260
The Buckle, Inc.		280		13,812
The Cato Corp., Class A		45,576		1,625,696
The Children’s Place, Inc.		270		13,298
The Container Store Group, Inc. *		102		1,881
The Finish Line, Inc., Class A		661		17,497
The Men’s Wearhouse, Inc.		637		29,958
The Pep Boys - Manny, Moe & Jack *		705		6,719
Tile Shop Holdings, Inc. *		190		1,636
Tilly’s, Inc., Class A *		145		1,032
Tuesday Morning Corp. *		543		11,072
ValueVision Media, Inc., Class A *		338		1,913
Vitamin Shoppe, Inc. *		384		18,021
VOXX International Corp. *		301		2,568
West Marine, Inc. *		151		1,486
Weyco Group, Inc.		68		2,118
Winmark Corp.		26		2,139
Zumiez, Inc. *		232		7,744

				6,464,061

Semiconductors & Semiconductor Equipment 1.0%
Advanced Energy Industries, Inc. *		466		9,217
Alpha & Omega Semiconductor Ltd. *		218		2,021
Ambarella, Inc. *		269		11,914
Amkor Technology, Inc. *		1,019		6,909
Applied Micro Circuits Corp. *		734		4,749
Audience, Inc. *		351		1,309
Axcelis Technologies, Inc. *		913		1,990
Brooks Automation, Inc.		992		12,231
Cabot Microelectronics Corp. *		357		17,218
Cavium, Inc. *		535		27,451
CEVA, Inc. *		286		4,662
Cirrus Logic, Inc. *		607		11,715
Cypress Semiconductor Corp. *		1,394		13,815
Diodes, Inc. *		365		9,428
DSP Group, Inc. *		206		1,996
Entegris, Inc. *		1,145		15,549
Entropic Communications, Inc. *		936		2,340
Fairchild Semiconductor International, Inc. *		1,004		15,411
FormFactor, Inc. *		1,000		7,970
Inphi Corp. *		480		7,430
Integrated Device Technology, Inc. *		1,097		18,002
Integrated Silicon Solution, Inc.		213		2,893
International Rectifier Corp. *		912		36,270
Intersil Corp., Class A		1,102		14,646
IXYS Corp.		155		1,809
Kopin Corp. *		1,298		4,932
Lattice Semiconductor Corp. *		1,055		7,079
MaxLinear, Inc., Class A *		247		1,751
Micrel, Inc.		65,613		796,542
Microsemi Corp. *		19,904		518,897
MKS Instruments, Inc.		523		19,037
Monolithic Power Systems, Inc.		496		21,918

See financial notes 25

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Nanometrics, Inc. *		425		5,755
NVE Corp. *		36		2,580
OmniVision Technologies, Inc. *		720		19,282
PDF Solutions, Inc. *		270		3,502
Peregrine Semiconductor Corp. *		678		8,428
Photronics, Inc. *		432		3,884
PMC-Sierra, Inc. *		1,362		10,610
Power Integrations, Inc.		378		19,036
QuickLogic Corp. *		527		1,518
Rambus, Inc. *		1,073		12,286
RF Micro Devices, Inc. *		2,700		35,127
Rubicon Technology, Inc. *		163		722
Rudolph Technologies, Inc. *		600		5,268
Semtech Corp. *		713		18,096
Silicon Image, Inc. *		1,158		6,207
Silicon Laboratories, Inc. *		339		15,455
Spansion, Inc., Class A *		809		16,649
Synaptics, Inc. *		343		23,472
Tessera Technologies, Inc.		654		19,875
TriQuint Semiconductor, Inc. *		1,917		41,465
Ultra Clean Holdings, Inc. *		244		2,142
Ultratech, Inc. *		231		4,419
Veeco Instruments, Inc. *		395		14,216
Vitesse Semiconductor Corp. *		517		1,799
Xcerra Corp. *		694		5,892

				1,926,786

Software & Services 9.0%
ACI Worldwide, Inc. *		1,023		19,683
Actua Corp. *		53,148		999,182
Actuate Corp. *		877		3,762
Acxiom Corp. *		688		12,962
Advent Software, Inc.		481		16,623
American Software, Inc., Class A		406		3,922
Angie’s List, Inc. *		432		3,011
Aspen Technology, Inc. *		27,907		1,030,606
AVG Technologies NV *		124		2,222
Bankrate, Inc. *		551		5,984
Barracuda Networks, Inc. *		64		2,058
Bazaarvoice, Inc. *		958		7,137
Benefitfocus, Inc. *		40		1,108
Blackbaud, Inc.		615		27,368
Blackhawk Network Holdings, Inc. *		497		17,176
Blucora, Inc. *		440		7,458
Bottomline Technologies de, Inc. *		560		14,050
Brightcove, Inc. *		325		2,083
BroadSoft, Inc. *		386		8,839
CACI International, Inc., Class A *		333		27,403
Callidus Software, Inc. *		675		9,511
Carbonite, Inc. *		132		1,444
Cardtronics, Inc. *		33,835		1,298,926
Cass Information Systems, Inc.		37		1,759
ChannelAdvisor Corp. *		195		2,709
Ciber, Inc. *		1,423		4,653
CommVault Systems, Inc. *		494		21,904
Compuware Corp.		1,722		17,478
comScore, Inc. *		464		19,553
Comverse, Inc. *		197		4,295
Constant Contact, Inc. *		250		8,840
Convergys Corp.		1,033		20,836
Conversant, Inc. *		862		30,385
Cornerstone OnDemand, Inc. *		13,634		494,505
Covisint Corp. *		241		696
Criteo S.A. ADR *		24,770		760,191
CSG Systems International, Inc.		200		5,302
Cvent, Inc. *		139		3,606
Cyan, Inc. *		556		1,751
Datalink Corp. *		156		1,973
Dealertrack Technologies, Inc. *		475		22,349
Demand Media, Inc. *		75		528
Demandware, Inc. *		293		17,565
Dice Holdings, Inc. *		775		7,727
Digimarc Corp.		79		2,290
Digital River, Inc. *		610		15,598
E2open, Inc. *		171		999
EarthLink Holdings Corp.		768		2,749
Ebix, Inc.		353		5,207
Ellie Mae, Inc. *		167		6,409
Endurance International Group Holdings Inc *		24,743		411,229
EnerNOC, Inc. *		440		6,499
Envestnet, Inc. *		355		15,769
EPAM Systems, Inc. *		311		14,847
Epiq Systems, Inc.		423		6,785
ePlus, Inc. *		28		1,710
Euronet Worldwide, Inc. *		523		28,069
EVERTEC, Inc.		651		14,778
Everyday Health, Inc. *		96		1,312
ExlService Holdings, Inc. *		420		11,756
Fair Isaac Corp.		433		26,976
FleetMatics Group plc *		28,423		1,055,630
Forrester Research, Inc.		33,139		1,334,839
Gigamon, Inc. *		223		3,332
Global Cash Access Holdings, Inc. *		785		5,723
Global Eagle Entertainment, Inc. *		351		4,293
Glu Mobile, Inc. *		631		2,442
Gogo, Inc. *		544		9,036
GrubHub, Inc. *		109		3,963
GTT Communications, Inc. *		179		2,323
Guidewire Software, Inc. *		703		35,108
Heartland Payment Systems, Inc.		470		24,276
Higher One Holdings, Inc. *		570		1,465
iGATE Corp. *		336		12,449
Imperva, Inc. *		182		7,457
Infoblox, Inc. *		497		8,022
Interactive Intelligence Group, Inc. *		204		9,845
Internap Network Services Corp. *		101,059		809,483
Intralinks Holdings, Inc. *		807		6,972
j2 Global, Inc.		490		26,504
Jive Software, Inc. *		313		1,912
Kofax, Ltd. *		496		3,150
Limelight Networks, Inc. *		612		1,493
Lionbridge Technologies, Inc. *		447		2,159
Liquidity Services, Inc. *		238		3,042
LivePerson, Inc. *		533		7,675
LogMeIn, Inc. *		14,911		716,474
Manhattan Associates, Inc. *		26,134		1,048,235
ManTech International Corp., Class A		165		4,646
Marchex, Inc., Class B		207		793
Marin Software, Inc. *		124,101		1,110,704
Marketo, Inc. *		239		7,713
MAXIMUS, Inc.		36,272		1,757,741

26 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Mentor Graphics Corp.		1,019		21,593
MicroStrategy, Inc., Class A *		122		19,627
Millennial Media, Inc. *		703		1,441
Model N, Inc. *		157		1,531
ModusLink Global Solutions, Inc. *		891		3,119
MoneyGram International, Inc. *		348		2,993
Monotype Imaging Holdings, Inc.		481		13,761
Monster Worldwide, Inc. *		941		3,632
Move, Inc. *		581		12,172
NetScout Systems, Inc. *		369		13,601
NeuStar, Inc., Class A *		653		17,246
NIC, Inc.		599		11,040
Pegasystems, Inc.		525		11,377
Perficient, Inc. *		270		4,477
Progress Software Corp. *		541		14,012
Proofpoint, Inc. *		22,194		977,424
PROS Holdings, Inc. *		257		7,191
Q2 Holdings, Inc. *		116		1,750
QAD, Inc., Class A		148		3,183
Qlik Technologies, Inc. *		1,050		29,767
Qualys, Inc. *		152		4,876
QuinStreet, Inc. *		551		2,232
Rally Software Development Corp. *		231		2,361
RealPage, Inc. *		505		10,034
Reis, Inc.		91		2,129
Rightside Group Ltd. *		75		710
Rocket Fuel, Inc. *		170		2,655
Rosetta Stone, Inc. *		128		1,225
Sapiens International Corp. N.V. *		293		2,321
Sapient Corp. *		1,309		22,672
Science Applications International Corp.		320		15,651
SciQuest, Inc. *		370		5,517
Seachange International, Inc. *		550		3,718
ServiceSource International, Inc. *		546		2,086
Shutterstock, Inc. *		143		11,120
Silver Spring Networks, Inc. *		299		2,864
SPS Commerce, Inc. *		166		9,678
SS&C Technologies Holdings, Inc. *		586		28,316
Stamps.com, Inc. *		166		6,125
Sykes Enterprises, Inc. *		329		7,087
Synchronoss Technologies, Inc. *		435		22,476
Syntel, Inc. *		187		16,196
Take-Two Interactive Software, Inc. *		1,157		30,603
Tangoe, Inc. *		25,640		376,139
TechTarget, Inc. *		391		3,730
Telenav, Inc. *		470		3,393
TeleTech Holdings, Inc. *		251		6,478
Textura, Corp. *		171		4,555
The Hackett Group, Inc.		327		2,292
The Rubicon Project, Inc. *		43,340		496,676
The Ultimate Software Group, Inc. *		293		44,099
TiVo, Inc. *		1,233		16,091
Travelzoo, Inc. *		203		2,657
Tremor Video, Inc. *		389		914
Trulia, Inc. *		368		17,167
Tyler Technologies, Inc. *		384		42,977
Unisys Corp. *		582		14,922
Unwired Planet, Inc. *		802		1,243
VASCO Data Security International, Inc. *		391		9,900
Verint Systems, Inc. *		8,076		464,289
VirnetX Holding Corp. *		369		2,166
Virtusa Corp. *		18,051		739,730
Vistaprint N.V. *		301		20,125
Vringo, Inc. *		563		580
Web.com Group, Inc. *		624		12,811
WebMD Health Corp. *		371		15,834
WEX, Inc. *		443		50,307
Wix.com Ltd. *		132		2,243
XO Group, Inc. *		322		4,099
Xoom Corp. *		297		4,485
Zix Corp. *		1,200		3,960

				17,320,455

Technology Hardware & Equipment 5.5%
ADTRAN, Inc.		544		11,538
Agilysys, Inc. *		137		1,548
Alliance Fiber Optic Products, Inc.		175		2,259
Anixter International, Inc.		285		24,273
Applied Optoelectronics, Inc. *		98		1,582
Aruba Networks, Inc. *		45,782		987,976
Badger Meter, Inc.		136		7,741
Bel Fuse, Inc., Class B		120		3,395
Belden, Inc.		39,306		2,798,194
Benchmark Electronics, Inc. *		401		9,512
Black Box Corp.		134		2,947
CalAmp Corp. *		43,084		830,660
Calix, Inc. *		848		9,167
Checkpoint Systems, Inc. *		467		6,192
Ciena Corp. *		1,307		21,905
Cognex Corp. *		862		34,101
Coherent, Inc. *		13,004		847,211
Comtech Telecommunications Corp.		298		11,345
Control4 Corp. *		253		3,924
Cray, Inc. *		415		14,384
CTS Corp.		176		3,238
CUI Global, Inc. *		193		1,579
Daktronics, Inc.		790		10,515
Diebold, Inc.		35,900		1,271,937
Dot Hill Systems Corp. *		445		1,758
DTS, Inc. *		346		10,304
Electro Rent Corp.		245		3,734
Electro Scientific Industries, Inc.		263		1,867
Electronics for Imaging, Inc. *		400		18,288
Emulex Corp. *		794		4,494
Extreme Networks, Inc. *		1,418		5,091
Fabrinet *		249		4,534
FARO Technologies, Inc. *		117		6,552
FEI Co.		463		39,022
Finisar Corp. *		1,149		19,211
GSI Group, Inc. *		370		4,754
Harmonic, Inc. *		788		5,256
II-VI, Inc. *		798		10,765
Immersion Corp. *		129		1,086
Infinera Corp. *		962		13,978
Insight Enterprises, Inc. *		288		6,552
InterDigital, Inc.		486		24,023
Intevac, Inc. *		212		1,569
InvenSense, Inc. *		666		10,796
Itron, Inc. *		317		12,341
Ixia *		345		3,322
Kemet Corp. *		1,092		5,242

See financial notes 27

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
KVH Industries, Inc. *		129		1,667
Littelfuse, Inc.		273		26,628
Maxwell Technologies, Inc. *		343		3,999
Mercury Systems, Inc. *		600		8,388
Mesa Laboratories, Inc.		31		2,367
Methode Electronics, Inc.		461		18,154
MTS Systems Corp.		3,724		245,821
Multi-Fineline Electronix, Inc. *		162		1,644
NETGEAR, Inc. *		527		17,939
Newport Corp. *		655		11,718
Nimble Storage, Inc. *		59		1,614
Numerex Corp., Class A *		148		1,930
Oclaro, Inc. *		788		1,237
Oplink Communications, Inc.		255		5,317
OSI Systems, Inc. *		237		16,799
Park Electrochemical Corp.		140		3,612
ParkerVision, Inc. *		408		534
PC Connection, Inc.		112		2,671
Plantronics, Inc.		482		25,001
Plexus Corp. *		453		18,732
Polycom, Inc. *		1,014		13,263
Procera Networks, Inc. *		410		3,071
QLogic Corp. *		849		10,027
Quantum Corp. *		1,535		1,965
RealD, Inc. *		627		7,098
Rofin-Sinar Technologies, Inc. *		393		8,799
Rogers Corp. *		112		7,657
Ruckus Wireless, Inc. *		55,539		720,896
Sanmina Corp. *		993		24,895
ScanSource, Inc. *		33,806		1,290,713
ShoreTel, Inc. *		692		5,598
Silicon Graphics International Corp. *		411		3,567
Sonus Networks, Inc. *		1,630		5,656
Speed Commerce, Inc. *		612		1,818
Super Micro Computer, Inc. *		479		15,309
SYNNEX Corp.		8,707		602,350
Tessco Technologies, Inc.		65		2,064
TTM Technologies, Inc. *		856		5,915
Ubiquiti Networks, Inc.		270		9,658
Universal Display Corp. *		493		15,421
ViaSat, Inc. *		418		26,184
Violin Memory, Inc. *		593		2,870
Vishay Precision Group, Inc. *		109		1,852
Zebra Technologies Corp., Class A *		4,300		317,125

				10,651,205

Telecommunication Services 1.7%
8x8, Inc. *		66,022		518,933
Atlantic Tele-Network, Inc.		34		2,284
Cincinnati Bell, Inc. *		1,940		7,120
Cogent Communications Holdings, Inc.		575		19,516
Consolidated Communications Holdings, Inc.		541		14,023
FairPoint Communications, Inc. *		420		6,972
General Communication, Inc., Class A *		408		4,786
Globalstar, Inc. *		2,732		6,475
Hawaiian Telcom Holdco, Inc. *		69		1,856
IDT Corp., Class B		265		4,367
inContact, Inc. *		304,630		2,711,207
Inteliquent, Inc.		360		6,059
Intelsat S.A. *		128		2,491
Iridium Communications, Inc. *		770		7,315
Lumos Networks Corp.		101		1,737
magicJack VocalTec Ltd. *		140		1,302
NTELOS Holdings Corp.		106		1,068
Premiere Global Services, Inc. *		787		8,240
RingCentral, Inc., Class A *		263		3,456
Shenandoah Telecommunications Co.		209		6,184
Spok Holdings, Inc.		257		4,174
Vonage Holdings Corp. *		1,484		5,164

				3,344,729

Transportation 0.7%
Air Transport Services Group, Inc. *		834		6,822
Allegiant Travel Co.		131		17,485
ArcBest Corp.		334		12,926
Atlas Air Worldwide Holdings, Inc. *		7,144		263,756
Baltic Trading Ltd.		361		1,354
Celadon Group, Inc.		131		2,549
Echo Global Logistics, Inc. *		281		7,342
Forward Air Corp.		423		20,249
Hawaiian Holdings, Inc. *		811		14,063
Heartland Express, Inc.		569		14,305
Hub Group, Inc., Class A *		309		11,214
International Shipholding Corp.		71		1,423
JetBlue Airways Corp. *		2,300		26,542
Knight Transportation, Inc.		414		12,114
Knightsbridge Shipping Ltd.		271		2,379
Marten Transport Ltd.		113		2,217
Matson, Inc.		243		6,923
Navios Maritime Holdings, Inc.		675		3,976
Park-Ohio Holdings Corp.		53		2,815
Patriot Transportation Holding, Inc. *		56		2,372
Quality Distribution, Inc. *		198		2,566
Republic Airways Holdings, Inc. *		835		10,454
Roadrunner Transportation Systems, Inc. *		377		7,770
Safe Bulkers, Inc.		243		1,298
Saia, Inc. *		260		12,745
Scorpio Bulkers, Inc. *		1,065		5,208
SkyWest, Inc.		318		3,663
Swift Transportation Co. *		1,082		26,725
Universal Truckload Services, Inc.		73		1,921
UTi Worldwide, Inc. *		75,945		830,079
Werner Enterprises, Inc.		613		16,882
Wesco Aircraft Holdings, Inc. *		447		7,934
XPO Logistics, Inc. *		615		24,551
YRC Worldwide, Inc. *		330		7,075

				1,391,697

Utilities 1.5%
Abengoa Yield plc *		141		4,583
ALLETE, Inc.		473		24,710
American States Water Co.		458		16,387
Artesian Resources Corp., Class A		311		6,926
Atlantic Power Corp.		1,045		2,320
Avista Corp.		534		18,930
Black Hills Corp.		521		28,514

28 See financial notes

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
California Water Service Group		444		11,557
Chesapeake Utilities Corp.		55		2,664
Cleco Corp.		743		39,944
Connecticut Water Service, Inc.		59		2,193
Dynegy, Inc. *		1,100		33,550
El Paso Electric Co.		450		17,028
IDACORP, Inc.		546		34,524
MGE Energy, Inc.		265		11,785
Middlesex Water Co.		87		1,962
New Jersey Resources Corp.		11,729		685,912
Northwest Natural Gas Co.		361		16,942
NorthWestern Corp.		410		21,664
NRG Yield, Inc., Class A		207		10,344
ONE Gas, Inc.		395		14,990
Ormat Technologies, Inc.		322		9,322
Otter Tail Corp.		409		12,679
Pattern Energy Group, Inc.		325		9,353
Piedmont Natural Gas Co., Inc.		872		33,145
PNM Resources, Inc.		772		22,272
Portland General Electric Co.		1,008		36,701
SJW Corp.		65		2,077
South Jersey Industries, Inc.		425		24,922
Southwest Gas Corp.		511		29,684
TerraForm Power, Inc., Class A *		175		4,980
The Empire District Electric Co.		430		12,229
The Laclede Group, Inc.		17,815		904,468
UIL Holdings Corp.		680		27,975
WGL Holdings, Inc.		17,975		844,825
York Water Co.		254		5,583

				2,987,644

Total Common Stock
(Cost $155,866,101)				174,288,248




Other Investment Companies 8.7% of net assets

Equity Funds 3.0%
iShares Russell 2000 ETF		333		38,814
iShares Russell Mid-Cap ETF		34,700		5,667,551

				5,706,365

Money Market Fund 5.7%
State Street Institutional U.S. Government Money Market Fund, Premier Class 0.00% (c)		11,090,493		11,090,493

Total Other Investment Companies
(Cost $16,612,947)				16,796,858




Rights 0.0% of net assets

Automobiles & Components 0.0%
Contra Furiex Pharmaceuticals CVR *(d)(e)		66		645

Telecommunication Services 0.0%
Contra Leap Wireless CVR *(d)(e)		861		2,169

Total Rights
(Cost $2,814)				2,814




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%, 12/18/14 (a)(b)		5,000		5,000
0.01%, 12/18/14 (a)(b)		381,000		380,996

Total Short-Term Investments
(Cost $385,996)				385,996



End of Investments.

At 10/31/14, the tax basis cost of the fund’s investments was $172,908,059 and the unrealized appreciation and depreciation were $28,560,167 and ($9,994,310), respectively, with a net unrealized appreciation of $18,565,857.


*		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 $4,911 or 0.0% of net assets.


ADR —		American Depositary Receipt
CVR —		Contingent Value Rights
ETF —		Exchange Traded Fund
REIT —		Real Estate Investment Trust

See financial notes 29

Laudus Small-Cap MarketMasters Fund

Portfolio Holdings continued

In addition to the above, the fund held the following at 10/31/14:

Contract

Unrealized

Number of

Value

Appreciation

Contracts

($)

Futures Contracts

Russell 2000 Index, mini, Long, expires 12/19/14

3,161,700

156,619

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):


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

Common Stock¹		$174,288,248		$—		$—		$174,288,248
Other Investment Companies¹		16,796,858		—		—		16,796,858
Rights¹		—		—		2,814		2,814
Warrants¹		—		—		—		—
Short-Term Investments¹		—		385,996		—		385,996

Total		$191,085,106		$385,996		$2,814		$191,473,916

Other Financial Instruments
Futures Contracts²		$156,619		$—		$—		$156,619


¹		As categorized in Portfolio Holdings.
²		Futures contracts are not included in Investments in the schedule of portfolio holdings 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

2013

(Losses)

(Depreciation)

Purchases

Sales

out

2014

Rights

$—

$2,814

$—

$2,814

Total

$—

$2,814

$—

$2,814

30 See financial notes

Laudus Small-Cap MarketMasters Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends (net of foreign withholding taxes of $1,294)		$2,008,386
Interest	+	82

Total investment income		2,008,468

Expenses

Investment adviser and administrator fees		2,176,760
Shareholder service fees:
Investor Shares		178,075
Select Shares		218,388
Portfolio accounting fees		65,536
Transfer agent fees		48,850
Professional fees		42,192
Custodian fees		41,942
Shareholder reports		31,438
Registration fees		31,041
Independent trustees’ fees		6,985
Interest expense		150
Other expenses	+	4,326

Total expenses		2,845,683
Expense reduction by CSIM and its affiliates	−	503,350

Net expenses	−	2,342,333

Net investment loss		(333,865	)

Realized and Unrealized Gains (Losses)

Net realized gains on investments		26,768,540
Net realized losses on futures contracts		(16,200	)
Net realized losses on foreign currency transactions	+	(28	)

Net realized gains		26,752,312
Net change in unrealized appreciation (depreciation) on investments		(18,011,059	)
Net change in unrealized appreciation (depreciation) on futures contracts	+	61,624

Net change in unrealized appreciation (depreciation)	+	(17,949,435	)

Net realized and unrealized gains		8,802,877

Increase in net assets resulting from operations		$8,469,012

32 See financial notes

Laudus Small-Cap MarketMasters Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment loss		($333,865	)		($139,269	)
Net realized gains		26,752,312			29,075,549
Net change in unrealized appreciation (depreciation)	+	(17,949,435	)		18,424,330

Increase in net assets from operations		$8,469,012			$47,360,610

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares Sold
Investor Shares			72,396		$1,292,414			122,198		$1,904,239
Select Shares	+		1,598,068		28,503,925			1,026,670		15,859,002

Total shares sold			1,670,464		$29,796,339			1,148,868		$17,763,241


Shares Redeemed
Investor Shares			(547,678	)	($9,687,773	)		(669,973	)	($10,039,749	)
Select Shares	+		(1,362,207	)	(24,624,208	)		(1,210,604	)	(19,403,597	)

Total shares redeemed			(1,909,885	)	($34,311,981	)		(1,880,577	)	($29,443,346	)

Net transactions in fund shares			(239,421	)	($4,515,642	)		(731,709	)	($11,680,105	)

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			10,813,301		$188,627,837			11,545,010		$152,947,332
Total increase or decrease	+		(239,421	)	3,953,370			(731,709	)	35,680,505

End of period			10,573,880		$192,581,207			10,813,301		$188,627,837


Net investment loss					($1,405,856	)				($1,053,254	)

See financial notes 33

Laudus International MarketMasters Fund™

Financial Statements

Financial Highlights


	11/1/13–			11/1/12–			11/1/11–			11/1/10–			11/1/09–
Investor Shares	10/31/14			10/31/13			10/31/12			10/31/11			10/31/10


Per-Share Data ($)

Net asset value at beginning of period		23.68			19.03			17.45			18.36			15.04

Income (loss) from investment operations:
Net investment income (loss)		0.25			0.23			0.21			0.16			0.09
Net realized and unrealized gains (losses)		(0.66	)		4.85			1.52			(0.85	)		3.41

Total from investment operations		(0.41	)		5.08			1.73			(0.69	)		3.50
Less distributions:
Distributions from net investment income		(0.32	)		(0.43	)		(0.15	)		(0.22	)		(0.18	)

Net asset value at end of period		22.95			23.68			19.03			17.45			18.36

Total return (%)		(1.73	)		27.23			10.05			(3.87	)		23.47

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		1.40			1.40			1.53	¹		1.59			1.60
Gross operating expenses		1.59			1.60			1.62			1.60			1.62
Net investment income (loss)		1.06			1.10			1.19			0.80			0.53
Portfolio turnover rate		74			65			68			78			83
Net assets, end of period ($ x 1,000,000)		631			675			592			665			849


	11/1/13–			11/1/12–			11/1/11–			11/1/10–			11/1/09–
Select Shares	10/31/14			10/31/13			10/31/12			10/31/11			10/31/10


Per-Share Data ($)

Net asset value at beginning of period		23.68			19.03			17.46			18.38			15.05

Income (loss) from investment operations:
Net investment income (loss)		0.28			0.28			0.25			0.19			0.10
Net realized and unrealized gains (losses)		(0.65	)		4.83			1.50			(0.86	)		3.43

Total from investment operations		(0.37	)		5.11			1.75			(0.67	)		3.53
Less distributions:
Distributions from net investment income		(0.36	)		(0.46	)		(0.18	)		(0.25	)		(0.20	)

Net asset value at end of period		22.95			23.68			19.03			17.46			18.38

Total return (%)		(1.57	)		27.43			10.20			(3.76	)		23.68

Ratios/Supplemental Data (%)

Ratios to average net assets:
Net operating expenses		1.25			1.25			1.37	¹		1.45			1.48	²
Gross operating expenses		1.47			1.44			1.47			1.47			1.50
Net investment income (loss)		1.20			1.26			1.40			0.99			0.69
Portfolio turnover rate		74			65			68			78			83
Net assets, end of period ($ x 1,000,000)		1,592			1,590			1,062			961			948

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.

34 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings as of October 31, 2014

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	.6%	Common Stock		1,835,934,796		2,081,026,614
	0	.2%	Preferred Stock		3,877,742		3,971,762
	3	.9%	Other Investment Companies		92,207,503		87,171,228
	0	.0%	Rights		26,110		25,813
	0	.1%	Short-Term Investments		813,987		813,987


	97	.8%	Total Investments		1,932,860,138		2,173,009,404
	2	.2%	Other Assets and Liabilities, Net				50,015,147


	100	.0%	Net Assets				2,223,024,551


	Number		Value
Security	of Shares		($)

Common Stock 93.6% of net assets

Australia 4.3%


Banks 0.4%
Australia & New Zealand Banking Group Ltd.		180,169		5,331,303
Bank of Queensland Ltd.		2,681		29,804
Bendigo & Adelaide Bank Ltd.		3,249		35,680
Commonwealth Bank of Australia		13,024		926,129
National Australia Bank Ltd.		18,907		584,902
Westpac Banking Corp.		24,974		766,559

				7,674,377


Capital Goods 0.0%
Leighton Holdings Ltd.		776		15,108


Commercial & Professional Supplies 0.0%
ALS Ltd.		2,658		13,164
Brambles Ltd.		12,529		105,379
Seek Ltd.		2,421		35,528

				154,071


Consumer Services 1.2%
Aristocrat Leisure Ltd.		855,860		4,865,733
Crown Resorts Ltd.		2,906		37,274
Flight Centre Travel Group Ltd.		377		13,988
G8 Education Ltd.		2,222,830		9,821,971
Invocare Ltd.		429,546		4,583,334
Slater & Gordon Ltd.		1,471,190		7,948,791
Tabcorp Holdings Ltd.		5,406		19,419
Tatts Group Ltd.		10,662		32,637

				27,323,147


Diversified Financials 0.2%
ASX Ltd.		1,532		48,606
Macquarie Group Ltd.		2,317		125,220
Magellan Financial Group Ltd.		414,480		4,920,321

				5,094,147


Energy 0.0%
Caltex Australia Ltd.		1,076		29,636
Origin Energy Ltd.		8,848		111,155
Santos Ltd.		7,830		89,726
Woodside Petroleum Ltd.		5,951		211,382
WorleyParsons Ltd.		2,058		24,564

				466,463


Food & Staples Retailing 0.0%
Metcash Ltd.		8,471		21,157
Wesfarmers Ltd.		9,180		357,264
Woolworths Ltd.		10,096		320,402

				698,823


Food, Beverage & Tobacco 0.0%
Coca-Cola Amatil Ltd.		4,504		36,345
Treasury Wine Estates Ltd.		6,454		26,351

				62,696


Health Care Equipment & Services 0.0%
Cochlear Ltd.		419		27,156
Ramsay Health Care Ltd.		1,049		48,494
Sonic Healthcare Ltd.		3,014		49,878

				125,528


Insurance 0.4%
AMP Ltd.		1,596,146		8,231,361
Insurance Australia Group Ltd.		18,771		108,544
QBE Insurance Group Ltd.		10,758		109,279
Suncorp Group Ltd.		10,318		134,260

				8,583,444


Materials 0.8%
Alumina Ltd. *		18,530		26,781
Amcor Ltd.		9,671		100,451
BHP Billiton Ltd.		25,799		771,824
Boral Ltd.		7,979		35,045
Fortescue Metals Group Ltd.		12,428		38,357
Iluka Resources Ltd.		4,224		27,117
Incitec Pivot Ltd.		12,206		31,322
Newcrest Mining Ltd. *		6,073		49,808
Orica Ltd.		595,365		10,867,934
Pact Group Holdings Ltd.		1,830,301		6,148,350
Rio Tinto Ltd.		3,496		186,681

				18,283,670


Media 0.1%
REA Group Ltd.		22,087		884,388


Pharmaceuticals, Biotechnology & Life Sciences 0.2%
CSL Ltd.		61,318		4,329,228


Real Estate 0.7%
CFS Retail Property Trust Group		16,560		30,801
Charter Hall Retail REIT		2,246,600		8,056,084
Dexus Property Group		42,943		45,898
Federation Centres		14,474		34,758
Goodman Group		13,831		67,526
Lend Lease Corp., Ltd.		4,389		61,213
Mirvac Group		29,187		46,306

See financial notes 35

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Scentre Group *		42,699		136,207
Shopping Centres Australasia Property Group		3,722,495		5,941,656
Stockland		18,630		69,653
The GPT Group		13,331		48,456
Westfield Corp.		15,826		111,209

				14,649,767


Retailing 0.0%
Harvey Norman Holdings Ltd.		3,492		11,743


Software & Services 0.0%
Computershare Ltd.		3,728		40,459


Telecommunication Services 0.3%
Telstra Corp., Ltd.		1,220,211		6,071,956
TPG Telecom Ltd.		2,113		13,682

				6,085,638


Transportation 0.0%
Asciano Ltd.		7,700		42,592
Aurizon Holdings Ltd.		17,112		70,976
Qantas Airways Ltd. *		6,878		10,276
Sydney Airport		8,660		33,668
Toll Holdings Ltd.		6,899		34,565
Transurban Group		14,441		103,425

				295,502


Utilities 0.0%
AGL Energy Ltd.		5,376		64,445
APA Group		6,604		45,913
AusNet Services		11,439		13,829

				124,187

				94,902,386

Austria 0.3%


Banks 0.0%
Erste Group Bank AG		2,235		57,031
Raiffeisen Bank International AG		1,296		27,750

				84,781


Capital Goods 0.0%
ANDRITZ AG		570		27,545


Energy 0.0%
OMV AG		1,175		36,934


Insurance 0.0%
Vienna Insurance Group AG Wiener Versicherung Gruppe		293		14,105


Materials 0.0%
Voestalpine AG		882		35,331


Real Estate 0.0%
IMMOFINANZ AG *		6,832		20,683


Semiconductors & Semiconductor Equipment 0.3%
ams AG		151,140		5,419,727

				5,639,106

Belgium 0.2%


Banks 0.0%
KBC Groep N.V. *		2,007		107,807


Diversified Financials 0.0%
Groupe Bruxelles Lambert S.A.		645		57,642


Food & Staples Retailing 0.0%
Colruyt S.A.		560		25,505
Delhaize Group S.A.		812		55,521

				81,026


Food, Beverage & Tobacco 0.0%
Anheuser-Busch InBev N.V.		6,459		716,267


Insurance 0.0%
Ageas		1,774		59,301


Materials 0.0%
Solvay S.A.		474		64,710
Umicore S.A.		803		31,517

				96,227


Media 0.1%
Telenet Group Holding N.V. *		19,697		1,113,834


Pharmaceuticals, Biotechnology & Life Sciences 0.1%
UCB S.A.		16,051		1,294,453


Telecommunication Services 0.0%
Belgacom S.A.		1,215		45,889

				3,572,446

Brazil 0.8%


Consumer Services 0.4%
GAEC Educacao S.A.		487,200		6,193,470
Kroton Educacional S.A.		288,000		2,052,577

				8,246,047


Diversified Financials 0.0%
CETIP S.A. - Mercados Organizados		55,700		705,832


Food, Beverage & Tobacco 0.2%
AMBEV S.A. ADR		611,486		4,084,727


Insurance 0.2%
BB Seguridade Participacoes S.A.		266,000		3,548,651


Software & Services 0.0%
Cielo S.A.		62,500		1,025,529

				17,610,786

Canada 4.8%


Banks 0.2%
The Toronto-Dominion Bank		90,315		4,445,032


Capital Goods 0.4%
ATS Automation Tooling Systems, Inc. *		187,320		2,343,474
CAE, Inc.		526,465		6,745,179

				9,088,653


Commercial & Professional Supplies 0.4%
Ritchie Bros. Auctioneers, Inc.		152,200		3,720,430
Stantec, Inc.		96,780		6,131,990

				9,852,420


Consumer Durables & Apparel 0.1%
Gildan Activewear, Inc.		23,600		1,405,886


Diversified Financials 0.4%
CI Financial Corp.		71,926		2,091,314
Element Financial Corp. *		664,620		7,725,054

				9,816,368

36 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Energy 1.1%
Canadian Natural Resources Ltd.		107,172		3,739,918
Enbridge, Inc.		108,379		5,128,302
Pason Systems, Inc.		232,500		5,563,662
Peyto Exploration & Development Corp.		35,998		1,016,012
Raging River Exploration, Inc. *		364,060		2,474,335
Suncor Energy, Inc.		175,800		6,242,417

				24,164,646


Food & Staples Retailing 0.1%
Alimentation Couche-Tard, Inc., Class B		64,986		2,205,505


Food, Beverage & Tobacco 0.1%
Saputo, Inc.		70,154		1,990,617


Materials 0.4%
CCL Industries, Inc., Class B		92,825		9,384,216


Media 0.1%
Thomson Reuters Corp.		31,100		1,157,023


Real Estate 0.9%
Brookfield Asset Management, Inc., Class A		58,300		2,854,951
Firstservice Corporation		174,480		9,220,557
Morguard Real Estate Investment Trust		135,490		2,224,005
Northern Property Real Estate Investment Trust		197,300		5,083,707

				19,383,220


Retailing 0.0%
Dollarama, Inc.		9,411		826,829


Software & Services 0.2%
Constellation Software, Inc.		2,233		629,056
The Descartes Systems Group, Inc. *		287,490		4,055,801

				4,684,857


Transportation 0.4%
Canadian National Railway Co.		59,527		4,201,415
Canadian Pacific Railway Ltd.		19,476		4,044,776

				8,246,191

				106,651,463

China 3.5%


Automobiles & Components 0.4%
Brilliance China Automotive Holdings Ltd.		422,000		729,750
Dongfeng Motor Group Co., Ltd., Class H		446,000		689,720
Nexteer Automotive Group Ltd.		9,000,000		8,018,175

				9,437,645


Capital Goods 0.0%
Weichai Power Co., Ltd., Class H		185,000		710,154


Consumer Durables & Apparel 0.3%
Ozner Water International Holding Ltd. *		12,924,000		6,609,722


Insurance 0.1%
Ping An Insurance (Group) Co. of China Ltd., Class H		315,500		2,579,127


Pharmaceuticals, Biotechnology & Life Sciences 0.5%
Lijun International Pharmaceutical Holding Co., Ltd.		15,842,000		7,711,861
Sihuan Pharmaceutical Holdings Group Ltd.		1,278,000		1,020,483
WuXi PharmaTech Cayman, Inc. ADR *		34,975		1,318,558

				10,050,902


Retailing 0.2%
Jumei International Holding Ltd. ADR *		111,600		3,004,272
Vipshop Holdings Ltd. ADR *		9,924		2,275,474

				5,279,746


Software & Services 0.8%
Alibaba Group Holding Ltd. ADR *		15,274		1,506,016
Baidu, Inc. ADR *		12,026		2,871,448
NetEase, Inc. ADR		8,233		779,830
Qihoo 360 Technology Co., Ltd. ADR *		8,746		638,283
Tencent Holdings Ltd.		234,600		3,770,553
YY, Inc. ADR *		89,113		7,383,903

				16,950,033


Technology Hardware & Equipment 0.7%
Lenovo Group Ltd.		1,912,000		2,818,296
PAX Global Technology Ltd. *		8,521,000		9,151,988
TCL Communication Technology Holdings Ltd.		2,986,000		2,936,603

				14,906,887


Transportation 0.4%
Sinotrans Ltd., Class H		11,384,000		9,033,253


Utilities 0.1%
ENN Energy Holdings Ltd.		242,000		1,570,193

				77,127,662

Denmark 2.1%


Banks 0.0%
Danske Bank A/S		5,259		144,414


Capital Goods 0.0%
Vestas Wind Systems A/S *		1,792		59,808


Consumer Durables & Apparel 0.1%
Pandora A/S		31,804		2,681,442


Food, Beverage & Tobacco 0.6%
Carlsberg A/S, Class B		857		75,586
Royal UNIBREW *		76,240		12,462,445

				12,538,031


Health Care Equipment & Services 0.5%
Coloplast A/S, Class B		23,671		2,063,194
GN Store Nord A/S		398,313		9,267,724
William Demant Holding A/S *		203		15,386

				11,346,304


Insurance 0.0%
Tryg A/S		226		24,457


Materials 0.6%
Chr. Hansen Holding A/S		345,486		13,917,511
Novozymes A/S, B Shares		1,918		88,816

				14,006,327

See financial notes 37

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Pharmaceuticals, Biotechnology & Life Sciences 0.3%
Novo Nordisk A/S, Class B		125,131		5,656,261


Telecommunication Services 0.0%
TDC A/S		6,427		49,083


Transportation 0.0%
AP Moeller - Maersk A/S, Series A		31		70,523
AP Moeller - Maersk A/S, Series B		57		133,014
DSV A/S		1,396		41,784

				245,321

				46,751,448

Finland 0.7%


Automobiles & Components 0.0%
Nokian Renkaat Oyj		828		23,391


Capital Goods 0.1%
Kone Oyj, Class B		62,773		2,703,504
Metso Oyj		828		27,052
Wartsila Oyj Abp		1,183		54,853

				2,785,409


Energy 0.0%
Neste Oil Oyj		995		21,509


Insurance 0.4%
Sampo Oyj, A Shares		170,905		8,189,324


Materials 0.2%
Huhtamaki Oyj		203,730		5,169,681
Stora Enso Oyj, R Shares		4,106		33,908
UPM-Kymmene Oyj		4,259		67,558

				5,271,147


Pharmaceuticals, Biotechnology & Life Sciences 0.0%
Orion Oyj, Class B		1,013		34,454


Technology Hardware & Equipment 0.0%
Nokia Oyj		30,062		251,195


Telecommunication Services 0.0%
Elisa Oyj		1,048		28,789


Utilities 0.0%
Fortum Oyj		3,558		82,516

				16,687,734

France 7.9%


Automobiles & Components 0.2%
Compagnie Generale des Etablissements Michelin		1,494		129,764
Peugeot S.A. *		3,124		37,127
Plastic Omnium S.A.		26,610		606,042
Renault S.A.		1,541		114,629
Valeo S.A.		22,149		2,483,581

				3,371,143


Banks 1.0%
BNP Paribas S.A.		343,799		21,605,036
Credit Agricole S.A.		8,023		118,727
Natixis S.A.		7,451		51,289
Societe Generale S.A.		5,781		278,592

				22,053,644


Capital Goods 0.7%
Alstom S.A. *		1,729		60,348
Bouygues S.A.		1,533		53,002
Compagnie de Saint-Gobain		3,563		153,155
Legrand S.A.		16,007		861,517
LISI (b)		203,716		5,108,287
Rexel S.A.		2,021		33,971
Safran S.A.		126,274		7,997,375
Schneider Electric SE		4,186		329,799
Thales S.A.		743		36,897
Vallourec S.A.		807		29,493
Vinci S.A.		3,880		221,464
Zodiac Aerospace		15,955		486,831

				15,372,139


Commercial & Professional Supplies 0.4%
Bureau Veritas S.A.		1,765		43,655
Edenred		1,606		44,522
Societe BIC S.A.		223		27,818
Teleperformance		132,300		8,336,827

				8,452,822


Consumer Durables & Apparel 1.1%
Christian Dior S.A.		25,537		4,518,824
Hermes International		2,324		719,704
Kering		56,148		10,835,709
LVMH Moet Hennessy Louis Vuitton S.A.		50,844		8,630,462

				24,704,699


Consumer Services 0.0%
Accor S.A.		1,370		57,557
Sodexo		755		72,837

				130,394


Diversified Financials 0.0%
Eurazeo S.A.		263		17,603
Wendel S.A.		247		27,234

				44,837


Energy 0.8%
Gaztransport Et Technigaz S.A. (b)		232,930		13,033,168
Technip S.A.		818		59,101
Total S.A.		65,263		3,896,413

				16,988,682


Food & Staples Retailing 0.0%
Carrefour S.A.		5,010		146,845
Casino Guichard Perrachon S.A.		452		46,345

				193,190


Food, Beverage & Tobacco 0.8%
Danone S.A.		153,382		10,480,983
Pernod-Ricard S.A.		70,704		8,054,022
Remy Cointreau S.A.		159		11,316

				18,546,321


Health Care Equipment & Services 0.6%
Essilor International S.A.		29,963		3,308,573
Korian-Medica		290,776		10,519,823

				13,828,396


Household & Personal Products 0.0%
L’Oreal S.A.		2,018		316,697

38 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Insurance 0.4%
AXA S.A.		274,536		6,341,376
CNP Assurances		1,900		35,521
Euler Hermes Group		18,708		1,832,621
SCOR SE		1,209		37,047

				8,246,565


Materials 0.0%
Air Liquide S.A.		2,764		333,658
Arkema S.A.		418		25,800
Imerys S.A.		265		19,016
Lafarge S.A.		1,497		103,892

				482,366


Media 0.3%
Eutelsat Communications S.A.		1,230		39,875
JC Decaux S.A.		531		17,625
Lagardere S.C.A.		1,178		28,668
Numericable Group S.A. *		1,097		40,554
Publicis Groupe S.A.		98,156		6,807,885

				6,934,607


Pharmaceuticals, Biotechnology & Life Sciences 0.6%
Boiron S.A. (b)		74,612		6,634,763
Eurofins Scientific SE		17,909		4,529,917
Sanofi		9,528		864,571

				12,029,251


Real Estate 0.1%
Fonciere Des Regions		219		20,134
Gecina		226		30,587
ICADE		399		31,745
Klepierre		795		34,409
Unibail-Rodamco SE		10,355		2,655,099

				2,771,974


Semiconductors & Semiconductor Equipment 0.0%
STMicroelectronics N.V.		5,003		33,419


Software & Services 0.2%
AtoS		625		43,193
Cap Gemini S.A.		1,155		75,994
Criteo S.A. ADR *		85,140		2,612,947
Dassault Systemes S.A.		21,529		1,365,173

				4,097,307


Technology Hardware & Equipment 0.3%
Alcatel-Lucent *		22,515		68,789
Ingenico		50,347		5,015,734
Neopost S.A.		18,377		1,275,361

				6,359,884


Telecommunication Services 0.0%
Iliad S.A.		209		45,703
Orange S.A.		14,883		236,943
Vivendi S.A. *		9,715		237,330

				519,976


Transportation 0.0%
Aeroports de Paris		237		28,052
Bollore S.A.		1,306		619,176
Groupe Eurotunnel S.A. - Reg’d		3,694		46,690

				693,918


Utilities 0.4%
Electricite de France S.A.		1,934		57,108
GDF Suez		11,622		282,181
Rubis S.C.A.		148,782		8,754,294
Suez Environnement Co.		2,240		37,738
Veolia Environnement S.A.		3,374		56,038

				9,187,359

				175,359,590

Germany 8.3%


Automobiles & Components 1.9%
Bayerische Motoren Werke AG		158,780		17,027,203
Continental AG		24,884		4,901,295
Daimler AG - Reg’d		203,234		15,845,947
ElringKlinger AG		159,739		4,886,084
Volkswagen AG		236		50,331

				42,710,860


Banks 0.3%
Aareal Bank AG		162,400		6,977,558
Commerzbank AG *		7,759		117,320

				7,094,878


Capital Goods 1.7%
Brenntag AG		16,438		797,598
DMG MORI SEIKI AG		101,700		2,603,997
Duerr AG		56,531		3,970,974
GEA Group AG		1,463		67,485
HOCHTIEF AG		216		15,984
MAN SE		281		32,023
MTU Aero Engines AG		141,904		12,445,709
Norma Group SE		196,852		9,227,242
OSRAM Licht AG *		640		22,483
Rational AG		11,284		3,536,229
Siemens AG - Reg’d		6,369		718,381
Stabilus S.A. *(b)		110,766		3,192,548

				36,630,653


Consumer Durables & Apparel 0.0%
adidas AG		1,678		122,269
Hugo Boss AG		253		33,613

				155,882


Diversified Financials 0.1%
Aurelius AG		71,760		2,500,986
Deutsche Bank AG - Reg’d		11,076		346,362
Deutsche Boerse AG		1,547		105,882

				2,953,230


Food & Staples Retailing 0.0%
METRO AG *		1,294		41,251


Health Care Equipment & Services 0.0%
Celesio AG		385		12,702
Fresenius Medical Care AG & Co. KGaA		1,736		127,419
Fresenius SE & Co. KGaA		3,029		155,860

				295,981


Household & Personal Products 0.0%
Beiersdorf AG		807		65,431
Henkel AG & Co. KGaA		936		85,193

				150,624


Insurance 0.7%
Allianz SE - Reg’d		91,166		14,497,411

See financial notes 39

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Hannover Rueck SE		482		40,231
Muenchener Rueckversicherungs-Gesellschaft AG - Reg’d		1,389		273,477

				14,811,119


Materials 1.3%
BASF SE		52,646		4,651,808
HeidelbergCement AG		1,128		77,005
K&S AG - Reg’d		1,357		38,030
LANXESS AG		685		35,679
Linde AG		1,491		275,172
Symrise AG		416,491		23,481,470
ThyssenKrupp AG *		3,627		87,416

				28,646,580


Media 0.3%
Axel Springer SE		304		16,723
CTS Eventim AG & Co. KGaA		170,370		4,501,788
Kabel Deutschland Holding AG *		176		23,859
ProSiebenSat.1 Media AG - Reg’d		61,459		2,482,707
Sky Deutschland AG *		6,081		51,368

				7,076,445


Pharmaceuticals, Biotechnology & Life Sciences 0.8%
Bayer AG - Reg’d		57,846		8,273,237
Merck KGaA		1,035		93,692
MorphoSys AG *		64,845		6,142,253
QIAGEN N.V. *		167,901		3,945,914

				18,455,096


Real Estate 0.1%
Deutsche Annington Immobilien SE		27,921		808,226
Deutsche Wohnen AG		37,661		850,071

				1,658,297


Retailing 0.3%
Fielmann AG		94,181		6,145,830


Semiconductors & Semiconductor Equipment 0.0%
Infineon Technologies AG		50,142		488,519


Software & Services 0.8%
SAP SE		74,000		5,042,021
United Internet AG - Reg’d		982		38,512
Wirecard AG		334,881		12,015,277

				17,095,810


Telecommunication Services 0.0%
Deutsche Telekom AG - Reg’d		25,020		377,134
Telefonica Deutschland Holding AG *		6,136		30,195

				407,329


Transportation 0.0%
Deutsche Lufthansa AG - Reg’d		1,836		27,196
Deutsche Post AG - Reg’d		7,768		244,613
Fraport AG Frankfurt Airport Services Worldwide		285		17,659

				289,468


Utilities 0.0%
E.ON SE		16,064		276,945
RWE AG		3,925		139,266

				416,211

				185,524,063

Hong Kong 2.1%


Banks 0.0%
Bank of East Asia Ltd.		10,200		42,596
BOC Hong Kong (Holdings) Ltd.		29,500		98,203
Hang Seng Bank Ltd.		6,100		103,360

				244,159


Capital Goods 0.2%
Haitian International Holdings Ltd.		1,757,000		3,768,899
Hutchison Whampoa Ltd.		17,000		215,570
Noble Group Ltd.		34,000		31,649
NWS Holdings Ltd.		12,000		22,432

				4,038,550


Consumer Durables & Apparel 0.1%
Li & Fung Ltd.		46,000		56,062
Man Wah Holdings Ltd.		409,767		613,089
Techtronic Industries Co., Ltd.		308,500		965,790
Yue Yuen Industrial Holdings Ltd.		5,500		18,463

				1,653,404


Consumer Services 0.3%
Galaxy Entertainment Group Ltd.		19,000		129,920
Melco Crown Entertainment Ltd. ADR		178,700		4,849,918
MGM China Holdings Ltd.		7,600		24,433
Paradise Entertainment Ltd.		6,104,000		2,526,763
Sands China Ltd.		19,200		119,752
Shangri-La Asia Ltd.		14,000		20,328
SJM Holdings Ltd.		15,683		33,148
Wynn Macau Ltd.		12,400		44,827

				7,749,089


Diversified Financials 0.1%
First Pacific Co., Ltd.		24,000		25,901
Hong Kong Exchanges & Clearing Ltd.		64,100		1,420,746

				1,446,647


Insurance 0.3%
AIA Group Ltd.		1,256,200		7,010,130


Real Estate 0.1%
Cheung Kong (Holdings) Ltd.		79,410		1,409,708
Hang Lung Properties Ltd.		18,000		56,209
Henderson Land Development Co., Ltd.		8,294		56,032
Hysan Development Co., Ltd.		6,000		27,377
Kerry Properties Ltd.		6,000		20,583
New World Development Co., Ltd.		42,000		52,794
Sino Land Co., Ltd.		24,000		39,669
Sun Hung Kai Properties Ltd.		13,000		193,974
Swire Pacific Ltd., Class A		5,000		65,583
Swire Properties Ltd.		9,400		30,121
The Link REIT		18,500		108,791
The Wharf Holdings Ltd.		12,349		91,335
Wheelock & Co., Ltd.		7,000		33,741

				2,185,917


Retailing 0.1%
Emperor Watch & Jewellery Ltd.		25,220,000		1,155,138


Semiconductors & Semiconductor Equipment 0.4%
ASM Pacific Technology Ltd.		289,000		3,179,143

40 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Xinyi Solar Holdings Ltd.		15,512,000		5,249,781

				8,428,924


Technology Hardware & Equipment 0.3%
AAC Technologies Holdings, Inc.		1,374,000		8,242,324
China High Precision Automation Group Ltd. *(a)(b)		766,000		—

				8,242,324


Telecommunication Services 0.0%
HKT Trust & HKT Ltd.		21,120		25,729
PCCW Ltd.		28,000		17,800

				43,529


Transportation 0.2%
Cathay Pacific Airways Ltd.		9,000		16,881
MTR Corp., Ltd.		11,500		46,891
Pacific Basin Shipping Ltd.		8,112,000		3,903,729

				3,967,501


Utilities 0.0%
Cheung Kong Infrastructure Holdings Ltd.		4,574		33,410
CLP Holdings Ltd.		15,000		129,167
Hong Kong & China Gas Co., Ltd.		50,494		117,913
Power Assets Holdings Ltd.		11,000		106,209

				386,699

				46,552,011

India 1.8%


Automobiles & Components 0.7%
Apollo Tyres Ltd.		867,190		3,089,870
Bharat Forge Ltd.		429,940		5,686,008
Hero MotoCorp Ltd.		29,580		1,477,178
Mahindra & Mahindra Ltd.		40,895		869,571
Maruti Suzuki India Ltd.		21,494		1,168,376
Tata Motors Ltd.		307,314		2,685,107

				14,976,110


Banks 0.5%
Axis Bank Ltd.		264,501		1,892,862
HDFC Bank Ltd.		190,322		2,833,500
Housing Development Finance Corp., Ltd.		128,137		2,307,837
IndusInd Bank Ltd.		238,220		2,794,512

				9,828,711


Food, Beverage & Tobacco 0.0%
ITC Ltd.		148,767		860,227


Materials 0.1%
Asian Paints Ltd.		131,687		1,407,013
UltraTech Cement Ltd.		17,345		719,608

				2,126,621


Pharmaceuticals, Biotechnology & Life Sciences 0.2%
Sun Pharmaceutical Industries Ltd.		257,134		3,538,925


Real Estate 0.1%
Oberoi Realty Ltd.		483,790		1,932,796


Software & Services 0.2%
HCL Technologies Ltd.		75,893		1,990,546
Tata Consultancy Services Ltd.		69,634		2,957,574
Tech Mahindra Ltd.		5,893		241,584

				5,189,704


Transportation 0.0%
Adani Ports & Special Economic Zone Ltd.		173,693		807,415

				39,260,509

Indonesia 0.3%


Banks 0.1%
PT Bank Rakyat Indonesia (Persero) Tbk		3,618,400		3,315,887


Retailing 0.2%
PT Matahari Department Store Tbk		3,363,500		4,072,432

				7,388,319

Ireland 0.9%


Banks 0.0%
Bank of Ireland *		220,385		86,756


Commercial & Professional Supplies 0.5%
Experian plc		829,238		12,468,542


Energy 0.1%
Dragon Oil plc		139,035		1,200,389


Food, Beverage & Tobacco 0.2%
Glanbia plc (f)		358,556		5,059,394
Glanbia plc (f)		38,400		542,449
Kerry Group plc, Class A		1,267		86,039

				5,687,882


Materials 0.1%
CRH plc		5,926		131,459
Smurfit Kappa Group plc		56,946		1,176,603

				1,308,062

				20,751,631

Israel 1.0%


Banks 0.0%
Bank Hapoalim B.M.		11,979		61,666
Bank Leumi Le-Israel B.M. *		14,505		51,835
Mizrahi Tefahot Bank Ltd. *		1,853		20,513

				134,014


Energy 0.0%
Delek Group Ltd.		68		23,504


Materials 0.4%
Caesarstone Sdot-Yam Ltd.		160,090		8,942,627
Israel Chemicals Ltd.		6,666		44,941
The Israel Corp., Ltd. *		35		17,076

				9,004,644


Pharmaceuticals, Biotechnology & Life Sciences 0.2%
Teva Pharmaceutical Industries Ltd.		9,646		544,491
Teva Pharmaceutical Industries Ltd. ADR		73,599		4,156,136

				4,700,627

See financial notes 41

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Semiconductors & Semiconductor Equipment 0.1%
Mellanox Technologies Ltd. *		60,840		2,725,024


Software & Services 0.3%
Check Point Software Technologies Ltd. *		69,045		5,126,591
NICE-Systems Ltd.		537		21,771

				5,148,362


Telecommunication Services 0.0%
Bezeq The Israeli Telecommunication Corp., Ltd.		26,399		45,119

				21,781,294

Italy 2.3%


Automobiles & Components 0.0%
Pirelli & C. S.p.A		1,854		24,861


Banks 1.1%
Banca Monte dei Paschi di Siena S.p.A. *		32,176		24,618
Banca Popolare Di Milano Scarl *		6,339,780		4,778,441
Banco Popolare SC *		2,858		41,516
Intesa Sanpaolo S.p.A.		6,859,526		20,165,350
UniCredit S.p.A.		35,434		256,639
Unione di Banche Italiane S.C.p.A.		6,783		53,270

				25,319,834


Capital Goods 0.3%
Finmeccanica S.p.A. *		3,165		28,600
Interpump Group S.p.A.		425,430		5,548,198
Prysmian S.p.A.		1,487		25,771

				5,602,569


Consumer Durables & Apparel 0.4%
Luxottica Group S.p.A.		1,339		68,299
Prada S.p.A.		1,483,800		9,153,648

				9,221,947


Diversified Financials 0.5%
Azimut Holding S.p.A.		39,417		922,597
Banca Generali S.p.A.		255,880		6,789,206
Exor S.p.A.		67,785		2,957,891
Mediobanca S.p.A.		4,816		42,507

				10,712,201


Energy 0.0%
Eni S.p.A.		20,429		435,238
Saipem S.p.A. *		2,112		33,063
Tenaris S.A.		3,781		74,768

				543,069


Insurance 0.0%
Assicurazioni Generali S.p.A.		9,370		192,277
UnipolSai S.p.A.		7,022		18,880

				211,157


Telecommunication Services 0.0%
Telecom Italia S.p.A. *		80,626		91,372


Transportation 0.0%
Atlantia S.p.A.		3,307		78,102


Utilities 0.0%
Enel Green Power S.p.A.		13,956		34,308
Enel S.p.A.		52,840		270,008
Snam S.p.A.		16,256		87,904
Terna - Rete Elettrica Nationale S.p.A.		12,062		60,813

				453,033

				52,258,145

Japan 14.1%


Automobiles & Components 2.6%
Aisin Seiki Co., Ltd.		1,500		49,963
Bridgestone Corp.		5,200		173,772
Daihatsu Motor Co., Ltd.		2,100		29,805
Denso Corp.		3,900		178,751
F.C.C. Co., Ltd.		260,400		4,431,702
Fuji Heavy Industries Ltd.		193,300		6,433,633
Honda Motor Co., Ltd.		415,107		13,270,651
Isuzu Motors Ltd.		4,800		62,627
Koito Manufacturing Co., Ltd.		885		26,667
Mazda Motor Corp.		4,300		101,595
Mitsubishi Motors Corp.		5,100		52,475
Musashi Seimitsu Industry Co., Ltd.		192,300		3,775,197
NGK Spark Plug Co., Ltd.		1,400		36,513
NHK Spring Co., Ltd.		1,000		9,152
Nifco, Inc.		406,400		12,877,436
Nissan Motor Co., Ltd.		19,900		181,522
NOK Corp.		900		22,801
Stanley Electric Co., Ltd.		1,400		28,463
Sumitomo Electric Industries Ltd.		6,000		82,012
Sumitomo Rubber Industries Ltd.		1,200		16,585
Suzuki Motor Corp.		2,900		97,204
The Yokohama Rubber Co., Ltd.		1,000		9,078
Toyoda Gosei Co., Ltd.		400		7,685
Toyota Industries Corp.		1,314		62,568
Toyota Motor Corp.		243,777		14,669,812
Yamaha Motor Co., Ltd.		2,100		39,727

				56,727,396


Banks 0.5%
Aozora Bank Ltd.		9,000		31,634
Fukuoka Financial Group, Inc.		6,000		30,702
Hokuhoku Financial Group, Inc.		8,000		16,071
Mitsubishi UFJ Financial Group, Inc.		102,400		596,912
Mizuho Financial Group, Inc.		185,100		337,311
Resona Holdings, Inc.		17,700		101,240
Seven Bank Ltd.		4,100		17,123
Shinsei Bank Ltd.		13,000		29,216
Sumitomo Mitsui Financial Group, Inc.		177,700		7,247,122
Sumitomo Mitsui Trust Holdings, Inc.		27,000		110,234
Suruga Bank Ltd.		120,300		2,515,035
The Bank of Kyoto Ltd.		3,000		25,997
The Bank of Yokohama Ltd.		9,000		52,013
The Chiba Bank Ltd.		6,000		42,618
The Chugoku Bank Ltd.		1,500		22,171
The Gunma Bank Ltd.		4,000		24,962
The Hachijuni Bank Ltd.		4,000		24,491
The Hiroshima Bank Ltd.		5,000		24,997
The Iyo Bank Ltd.		2,300		24,560
The Joyo Bank Ltd.		5,000		26,773
The Shizuoka Bank Ltd.		4,454		46,022

42 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Yamaguchi Financial Group, Inc.		1,274		12,168

				11,359,372


Capital Goods 2.6%
Aica Kogyo Co., Ltd.		277,100		5,735,710
Aida Engineering Ltd.		554,500		5,388,679
Amada Co., Ltd.		3,500		30,567
Asahi Glass Co., Ltd.		8,000		41,637
Chiyoda Corp.		1,417		14,598
Daifuku Co., Ltd.		259,500		3,005,537
Daikin Industries Ltd.		84,500		5,281,933
FANUC Corp.		23,699		4,176,611
Fuji Electric Co., Ltd.		4,000		17,574
Hino Motors Ltd.		2,100		30,730
Hitachi Construction Machinery Co., Ltd.		700		14,318
Hoshizaki Electric Co., Ltd.		113,100		5,478,300
IHI Corp.		11,000		53,027
ITOCHU Corp.		215,600		2,606,289
JGC Corp.		2,000		51,400
JTEKT Corp.		2,200		35,383
Kajima Corp.		6,000		26,697
Kanamoto Co., Ltd.		173,200		6,321,877
Kawasaki Heavy Industries Ltd.		11,000		43,207
Komatsu Ltd.		7,500		177,070
Kubota Corp.		9,000		143,262
Kurita Water Industries Ltd.		900		19,421
LIXIL Group Corp.		2,100		46,054
Mabuchi Motor Co., Ltd.		200		17,275
Maeda Corp.		453,000		4,005,083
Makita Corp.		1,000		55,999
Marubeni Corp.		13,245		85,158
Minebea Co., Ltd.		118,124		1,618,586
Mitsubishi Corp.		11,249		220,574
Mitsubishi Electric Corp.		16,000		206,301
Mitsubishi Heavy Industries Ltd.		24,000		149,713
Mitsui & Co., Ltd.		13,700		206,857
Nabtesco Corp.		800		19,360
NGK Insulators Ltd.		2,000		43,076
Nidec Corp.		34,400		2,272,899
NSK Ltd.		4,000		52,392
Obayashi Corp.		5,000		34,313
Sanwa Holdings Corp.		789,600		5,475,097
Seibu Holdings, Inc.		900		17,304
Shimizu Corp.		6,000		44,278
SMC Corp.		10,237		2,903,555
Sumitomo Corp.		9,000		96,027
Sumitomo Heavy Industries Ltd.		5,000		27,412
Tadano Ltd.		132,000		1,973,185
Taisei Corp.		8,000		44,488
THK Co., Ltd.		1,100		27,668
Toshiba Corp.		32,000		141,316
TOTO Ltd.		2,313		26,100
Toyota Tsusho Corp.		1,700		42,866

				58,546,763


Commercial & Professional Supplies 0.7%
Dai Nippon Printing Co., Ltd.		4,000		39,427
Meitec Corp.		34,900		1,094,427
Nihon M&A Center, Inc.		89,600		2,575,037
Park24 Co., Ltd.		600		9,079
Recruit Holdings Co., Ltd. *		24,500		805,943
Secom Co., Ltd.		79,800		4,917,676
Sohgo Security Services Co., Ltd.		235,100		5,497,940
Temp Holdings Co., Ltd.		23,200		753,875
Toppan Printing Co., Ltd.		4,000		27,217

				15,720,621


Consumer Durables & Apparel 0.2%
Asics Corp.		1,200		28,100
Bandai Namco Holdings, Inc.		1,400		34,745
Casio Computer Co., Ltd.		2,100		33,486
Fujitsu General Ltd.		235,000		2,941,826
Iida Group Holdings Co., Ltd.		2,000		22,224
Nikon Corp.		2,700		36,995
Panasonic Corp.		17,700		212,953
Rinnai Corp.		300		26,648
Sankyo Co., Ltd.		300		10,917
Sega Sammy Holdings, Inc.		1,800		28,594
Sekisui Chemical Co., Ltd.		3,000		37,390
Sekisui House Ltd.		4,355		54,154
Sharp Corp. *		11,419		28,758
Shimano, Inc.		645		85,530
Sony Corp.		8,400		165,844
Yamaha Corp.		1,100		15,078

				3,763,242


Consumer Services 0.0%
Benesse Holdings, Inc.		500		15,777
McDonald’s Holdings Co., Ltd.		400		9,763
Oriental Land Co., Ltd.		400		85,536

				111,076


Diversified Financials 1.2%
Acom Co., Ltd. *		2,300		7,666
AEON Financial Service Co., Ltd.		1,100		22,988
Credit Saison Co., Ltd.		1,500		31,666
Daiwa Securities Group, Inc.		1,802,000		14,241,128
Japan Exchange Group, Inc.		2,100		52,093
Mitsubishi UFJ Lease & Finance Co., Ltd.		4,700		24,814
Nomura Holdings, Inc.		29,100		181,770
ORIX Corp.		389,200		5,402,190
SBI Holdings, Inc.		1,936		22,325
Zenkoku Hosho Co., Ltd.		235,700		7,448,692

				27,435,332


Energy 0.0%
Idemitsu Kosan Co., Ltd.		600		11,604
Inpex Corp.		7,000		89,533
JX Holdings, Inc.		18,000		77,106
Showa Shell Sekiyu K.K.		1,200		10,296
TonenGeneral Sekiyu K.K.		2,367		20,659

				209,198


Food & Staples Retailing 0.1%
Aeon Co., Ltd.		5,100		50,464
FamilyMart Co., Ltd.		600		24,092
Lawson, Inc.		529		35,886
Seven & i Holdings Co., Ltd.		6,000		234,336
Tsuruha Holdings, Inc.		19,400		1,145,390

				1,490,168


Food, Beverage & Tobacco 0.3%
Ajinomoto Co., Inc.		5,142		97,084
Ariake Japan Co., Ltd.		153,900		3,468,794
Asahi Group Holdings Ltd.		53,000		1,643,999
Calbee, Inc.		700		24,517

See financial notes 43

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Japan Tobacco, Inc.		8,800		300,247
Kikkoman Corp.		1,314		30,224
Kirin Holdings Co., Ltd.		6,600		85,568
MEIJI Holdings Co., Ltd.		500		41,951
NH Foods Ltd.		1,000		23,060
Nisshin Seifun Group, Inc.		1,900		19,213
Nissin Foods Holdings Co., Ltd.		600		31,623
Suntory Beverage & Food Ltd.		1,100		39,242
Toyo Suisan Kaisha Ltd.		365		12,606
Yakult Honsha Co., Ltd.		700		38,765
Yamazaki Baking Co., Ltd.		1,000		12,363

				5,869,256


Health Care Equipment & Services 1.4%
Alfresa Holdings Corp.		1,200		15,228
Hogy Medical Co., Ltd.		97,200		5,049,518
M3, Inc.		333,000		5,557,258
Medipal Holdings Corp.		800		8,867
Miraca Holdings, Inc.		109,800		4,609,342
Nihon Kohden Corp.		155,800		7,965,556
Olympus Corp. *		121,000		4,344,514
Suzuken Co., Ltd.		700		18,768
Sysmex Corp.		55,800		2,382,109
Terumo Corp.		2,400		59,997

				30,011,157


Household & Personal Products 0.3%
Fancl Corp.		308,700		4,234,593
Kao Corp.		79,600		3,103,928
Shiseido Co., Ltd.		2,800		46,464
Unicharm Corp.		3,000		69,760

				7,454,745


Insurance 0.0%
MS&AD Insurance Group Holdings, Inc.		4,010		86,683
Sompo Japan Nipponkoa Holdings, Inc.		2,700		67,988
Sony Financial Holdings, Inc.		1,300		20,754
T&D Holdings, Inc.		4,600		59,255
The Dai-ichi Life Insurance Co., Ltd.		8,600		130,150
Tokio Marine Holdings, Inc.		5,600		179,581

				544,411


Materials 0.6%
Air Water, Inc.		1,278		20,372
Asahi Kasei Corp.		487,463		4,000,224
Daicel Corp.		2,000		23,055
Daido Steel Co., Ltd.		1,373		5,267
Hitachi Chemical Co., Ltd.		700		12,338
Hitachi Metals Ltd.		2,000		33,766
JFE Holdings, Inc.		3,900		77,376
JSR Corp.		1,800		32,415
Kaneka Corp.		1,337		7,346
Kansai Paint Co., Ltd.		2,373		36,275
Kobe Steel Ltd.		24,000		38,132
Kuraray Co., Ltd.		2,500		29,038
Kureha Corp.		1,073,000		5,321,688
Maruichi Steel Tube Ltd.		300		7,085
Mitsubishi Chemical Holdings Corp.		10,800		53,200
Mitsubishi Gas Chemical Co., Inc.		4,000		23,933
Mitsubishi Materials Corp.		11,000		34,429
Mitsui Chemicals, Inc.		6,000		17,380
Nippon Paint Holdings Co., Ltd.		1,000		22,707
Nippon Steel & Sumitomo Metal Corp.		61,000		160,969
Nitto Denko Corp.		1,300		70,309
Oji Holdings Corp.		8,000		28,924
OSAKA Titanium technologies Co., Ltd.		105,900		2,059,446
Shin-Etsu Chemical Co., Ltd.		3,324		213,363
Sumitomo Chemical Co., Ltd.		12,000		41,165
Sumitomo Metal Mining Co., Ltd.		4,000		55,490
Taiheiyo Cement Corp.		9,000		33,021
Taiyo Nippon Sanso Corp.		2,000		18,006
Teijin Ltd.		6,000		14,669
Toray Industries, Inc.		12,000		80,561
Toyo Seikan Group Holdings Ltd.		1,100		13,339
Yamato Kogyo Co., Ltd.		200		6,479

				12,591,767


Media 0.0%
Dentsu, Inc.		1,700		63,205
Hakuhodo DY Holdings, Inc.		1,600		15,823
Toho Co., Ltd.		800		18,350

				97,378


Pharmaceuticals, Biotechnology & Life Sciences 0.3%
Astellas Pharma, Inc.		409,900		6,361,848
Chugai Pharmaceutical Co., Ltd.		1,800		56,273
Daiichi Sankyo Co., Ltd.		5,100		76,713
Eisai Co., Ltd.		2,000		78,218
Hisamitsu Pharmaceutical Co., Inc.		500		16,831
Kyowa Hakko Kirin Co., Ltd.		2,000		23,327
Mitsubishi Tanabe Pharma Corp.		1,800		27,373
Ono Pharmaceutical Co., Ltd.		700		70,661
Otsuka Holdings Co., Ltd.		3,100		108,742
Santen Pharmaceutical Co., Ltd.		600		35,812
Shionogi & Co., Ltd.		2,400		62,788
Sumitomo Dainippon Pharma Co., Ltd.		1,100		12,976
Taisho Pharmaceutical Holdings Co., Ltd.		300		21,057
Takeda Pharmaceutical Co., Ltd.		6,300		273,094

				7,225,713


Real Estate 0.3%
Aeon Mall Co., Ltd.		1,100		20,191
Daito Trust Construction Co., Ltd.		23,000		2,865,818
Daiwa House Industry Co., Ltd.		4,800		90,814
Hulic Co., Ltd.		1,800		19,914
Japan Prime Realty Investment Corp.		5		18,413
Japan Real Estate Investment Corp.		10		54,493
Japan Retail Fund Investment Corp.		19		38,255
Mitsubishi Estate Co., Ltd.		9,587		244,226
Mitsui Fudosan Co., Ltd.		7,000		225,165
Nippon Building Fund, Inc.		11		61,651
Nippon Prologis REIT, Inc.		13		30,166
Nomura Real Estate Holdings, Inc.		1,200		21,209
NTT Urban Development Corp.		700		7,923
Sumitomo Realty & Development Co., Ltd.		83,495		3,130,141

44 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Tokyo Tatemono Co., Ltd.		3,460		30,204
Tokyu Fudosan Holdings Corp.		4,800		34,115
United Urban Investment Corp.		18		28,408

				6,921,106


Retailing 0.8%
ABC-Mart, Inc.		200		11,532
Don Quijote Holdings Co., Ltd.		400		23,966
Fast Retailing Co., Ltd.		430		159,856
Hikari Tsushin, Inc.		100		6,634
Isetan Mitsukoshi Holdings Ltd.		3,400		46,288
J. Front Retailing Co., Ltd.		2,400		31,944
Marui Group Co., Ltd.		1,600		13,522
Nitori Holdings Co., Ltd.		27,200		1,723,815
Rakuten, Inc.		6,400		72,169
Ryohin Keikaku Co., Ltd.		71,500		9,654,717
Sanrio Co., Ltd.		300		8,674
Seria Co., Ltd.		126,200		5,299,897
Shimamura Co., Ltd.		142		12,489
Start Today Co., Ltd.		43,100		932,562
Takashimaya Co., Ltd.		2,000		17,037
USS Co., Ltd.		2,200		34,624
Yamada Denki Co., Ltd.		8,400		26,927

				18,076,653


Semiconductors & Semiconductor Equipment 0.0%
Advantest Corp.		1,100		12,827
Rohm Co., Ltd.		800		48,697
Tokyo Electron Ltd.		1,400		89,760

				151,284


Software & Services 0.2%
Dena Co., Ltd.		600		7,753
Fujitsu Ltd.		15,000		91,192
Gree, Inc.		1,400		10,026
GungHo Online Entertainment, Inc.		3,100		12,495
Itochu Techno-Solutions Corp.		100		3,976
Kakaku.com, Inc.		1,000		13,615
Konami Corp.		700		14,055
Nexon Co., Ltd.		1,600		14,100
Nintendo Co., Ltd.		900		97,000
Nomura Research Institute Ltd.		49,300		1,626,101
NS Solutions Corp.		46,000		1,416,072
NTT Data Corp.		1,000		39,091
Oracle Corp., Japan		200		7,743
Otsuka Corp.		17,400		646,988
SCSK Corp.		27,600		741,978
Trend Micro, Inc.		1,000		33,696
Yahoo Japan Corp.		11,400		41,070

				4,816,951


Technology Hardware & Equipment 1.8%
Brother Industries Ltd.		1,700		30,268
Canon, Inc.		146,360		4,490,348
Citizen Holdings Co., Ltd.		1,700		11,168
FUJIFILM Holdings Corp.		3,700		124,204
Hamamatsu Photonics K.K.		700		31,801
Hirose Electric Co., Ltd.		300		36,783
Hitachi High-Technologies Corp.		400		12,220
Hitachi Ltd.		39,000		306,441
Horiba Ltd.		87,300		3,158,318
Hoya Corp.		109,600		3,878,397
Ibiden Co., Ltd.		800		12,025
Iriso Electronics Co., Ltd.		64,300		4,381,336
Japan Aviation Electronics Industry Ltd.		265,000		5,250,395
Japan Display, Inc. *		2,000		5,937
Keyence Corp.		9,700		4,700,451
Konica Minolta, Inc.		3,800		42,460
Kyocera Corp.		2,600		119,838
Murata Manufacturing Co., Ltd.		43,124		4,845,431
NEC Corp.		21,000		74,264
Nippon Electric Glass Co., Ltd.		3,000		13,950
Omron Corp.		59,900		2,835,346
Ricoh Co., Ltd.		5,700		58,866
Seiko Epson Corp.		130,600		6,060,455
Shimadzu Corp.		2,000		17,403
TDK Corp.		1,000		56,762
Yaskawa Electric Corp.		2,221		28,789
Yokogawa Electric Corp.		2,100		29,217

				40,612,873


Telecommunication Services 0.1%
KDDI Corp.		4,700		308,646
Nippon Telegraph & Telephone Corp.		3,000		186,657
NTT DOCOMO, Inc.		12,300		207,450
SoftBank Corp.		7,731		562,812

				1,265,565


Transportation 0.1%
ANA Holdings, Inc.		13,000		30,143
Central Japan Railway Co.		1,200		178,979
East Japan Railway Co.		2,738		213,847
Hankyu Hanshin Holdings, Inc.		9,000		52,916
Japan Airlines Co., Ltd.		1,000		26,852
Kamigumi Co., Ltd.		2,000		19,284
Keikyu Corp.		3,000		24,960
Keio Corp.		4,000		30,383
Keisei Electric Railway Co., Ltd.		2,266		26,633
Kintetsu Corp.		14,000		48,700
Mitsubishi Logistics Corp.		1,000		15,231
Mitsui O.S.K. Lines, Ltd.		11,000		34,753
Nagoya Railroad Co., Ltd.		8,000		34,207
Nippon Express Co., Ltd.		6,000		26,394
Nippon Yusen K.K.		12,000		31,111
Odakyu Electric Railway Co., Ltd.		5,000		46,926
Tobu Railway Co., Ltd.		8,000		40,469
Tokyu Corp.		9,000		59,426
West Japan Railway Co.		1,300		61,965
Yamato Holdings Co., Ltd.		2,900		62,008

				1,065,187


Utilities 0.0%
Chubu Electric Power Co., Inc. *		5,131		61,570
Electric Power Development Co., Ltd.		900		31,474
Hokuriku Electric Power Co.		1,200		16,200
Kyushu Electric Power Co., Inc. *		3,400		36,889
Osaka Gas Co., Ltd.		15,000		59,832
Shikoku Electric Power Co., Inc. *		1,200		16,467
The Chugoku Electric Power Co., Inc.		2,200		29,013
The Kansai Electric Power Co., Inc. *		5,600		55,303
Toho Gas Co., Ltd.		4,330		23,419
Tohoku Electric Power Co., Inc.		3,600		44,994

See financial notes 45

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Tokyo Electric Power Co., Inc. *		11,400		41,105
Tokyo Gas Co., Ltd.		19,000		109,522

				525,788

				312,593,002

Luxembourg 0.4%


Energy 0.0%
Subsea 7 S.A.		2,037		21,921


Materials 0.3%
APERAM *		188,920		5,435,588
ArcelorMittal		8,010		105,221

				5,540,809


Media 0.0%
RTL Group S.A.		308		28,769
SES S.A.		2,434		84,032

				112,801


Real Estate 0.1%
GAGFAH S.A. *		40,575		758,794
Grand City Properties S.A. *		143,060		1,833,094

				2,591,888


Telecommunication Services 0.0%
Millicom International Cellular S.A. SDR		528		43,093

				8,310,512

Malaysia 0.2%


Food & Staples Retailing 0.1%
7-Eleven Malaysia Holdings Berhad, Class B *		6,585,200		3,343,043


Software & Services 0.1%
My EG Services Berhad		1,241,600		1,517,371

				4,860,414

Mexico 0.1%


Food, Beverage & Tobacco 0.0%
Arca Continental S.A.B. de C.V.		106,279		684,416


Materials 0.0%
Cemex S.A.B. de C.V., Series CPO *		560,300		690,272


Real Estate 0.1%
Fibra Uno Administracion S.A. de C.V.		368,900		1,282,058

				2,656,746

Netherlands 2.3%


Automobiles & Components 0.0%
Fiat Chrysler Automobiles N.V. *		7,013		78,461


Banks 0.0%
ING Groep N.V. CVA *		30,963		443,401


Capital Goods 1.7%
Airbus Group N.V.		4,719		281,729
CNH Industrial N.V.		1,608,080		13,122,547
Koninklijke Boskalis Westminster N.V.		276,296		14,740,488
Koninklijke Philips N.V.		348,587		9,745,755
OCI N.V. *		903		31,482

				37,922,001


Commercial & Professional Supplies 0.0%
Randstad Holding N.V.		1,007		44,450


Energy 0.0%
Fugro N.V. CVA		450		6,215
Koninklijke Vopak N.V.		550		27,582

				33,797


Food & Staples Retailing 0.1%
Koninklijke Ahold N.V.		96,268		1,612,357


Food, Beverage & Tobacco 0.2%
Heineken Holding N.V.		60,606		3,928,274
Heineken N.V.		1,848		138,053
Unilever N.V. CVA		13,082		507,038

				4,573,365


Insurance 0.0%
Aegon N.V.		14,526		118,393
Delta Lloyd N.V.		1,520		34,646

				153,039


Materials 0.1%
Akzo Nobel N.V.		33,464		2,231,597
James Hardie Industries plc CDI		3,336		35,584
Koninklijke DSM N.V.		1,381		86,531

				2,353,712


Media 0.0%
Altice S.A. *		693		43,152
Reed Elsevier N.V.		5,601		129,021
Wolters Kluwer N.V.		2,416		64,504

				236,677


Real Estate 0.0%
Corio N.V.		513		24,970


Semiconductors & Semiconductor Equipment 0.2%
ASML Holding N.V.		2,869		286,074
NXP Semiconductor N.V. *		40,348		2,770,294

				3,056,368


Software & Services 0.0%
Gemalto N.V.		627		47,957


Telecommunication Services 0.0%
Koninklijke (Royal) KPN N.V.		25,657		84,456
Ziggo N.V. *		1,200		58,642

				143,098


Transportation 0.0%
TNT Express N.V.		4,402		25,587

				50,749,240

New Zealand 0.5%


Consumer Services 0.2%
SKYCITY Entertainment Group Ltd.		1,214,874		3,714,354


Health Care Equipment & Services 0.0%
Ryman Healthcare Ltd.		2,586		15,311

46 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Materials 0.0%
Fletcher Building Ltd.		5,143		34,689


Software & Services 0.0%
Xero Ltd. *		968		12,007


Telecommunication Services 0.0%
Spark New Zealand Ltd.		13,651		33,688


Transportation 0.3%
Auckland International Airport Ltd.		2,585,225		7,815,615


Utilities 0.0%
Contact Energy Ltd.		2,424		11,759

				11,637,423

Norway 0.5%


Banks 0.0%
DNB A.S.A.		7,839		144,020


Capital Goods 0.1%
Hexagon Composites A.S.A.		390,225		1,623,875


Energy 0.2%
Aker Solutions A.S.A. *		1,419		9,193
BW LPG Ltd.		242,960		2,302,844
Farstad Shipping A.S.A. (b)		94,566		1,090,760
Seadrill Ltd.		3,005		67,910
Statoil A.S.A.		8,957		204,985

				3,675,692


Food, Beverage & Tobacco 0.0%
Orkla A.S.A.		6,519		49,844


Insurance 0.0%
Gjensidige Forsikring A.S.A.		45,492		826,341


Materials 0.0%
Norsk Hydro A.S.A.		10,761		60,250
Yara International A.S.A.		1,449		66,540

				126,790


Telecommunication Services 0.2%
Telenor A.S.A.		200,680		4,512,619

				10,959,181

Peru 0.1%


Banks 0.1%
Credicorp Ltd.		13,111		2,110,871

Portugal 0.0%


Banks 0.0%
Banco Comercial Portugues S.A., Class R *		391,289		44,226
Banco Espirito Santo S.A. - Reg’d *(a)(b)		42,176		—

				44,226


Energy 0.0%
Galp Energia, SGPS, S.A.		3,081		44,670


Food & Staples Retailing 0.0%
Jeronimo Martins, SGPS, S.A.		2,786		24,382


Utilities 0.0%
EDP - Energias de Portugal S.A.		18,549		79,822

				193,100

Republic of Korea 1.7%


Consumer Durables & Apparel 0.5%
Coway Co., Ltd.		11,027		842,977
Hanssem Co., Ltd.		83,450		9,946,934

				10,789,911


Consumer Services 0.2%
Hotel Shilla Co., Ltd.		38,950		3,666,922


Household & Personal Products 0.2%
Cosmax, Inc. *		48,040		4,853,572


Semiconductors & Semiconductor Equipment 0.1%
SK Hynix, Inc. *		47,360		2,111,985


Software & Services 0.0%
NAVER Corp.		823		582,373


Technology Hardware & Equipment 0.7%
Samsung Electronics Co., Ltd.		13,543		15,793,068

				37,797,831

Singapore 2.7%


Banks 0.0%
DBS Group Holdings Ltd.		13,316		191,556
Oversea-Chinese Banking Corp., Ltd.		22,888		176,309
United Overseas Bank Ltd.		10,000		179,157

				547,022


Capital Goods 0.1%
Keppel Corp., Ltd.		12,000		87,998
Sarine Technologies Ltd. (b)		1,368,000		3,172,522
Sembcorp Industries Ltd.		8,000		30,265
Sembcorp Marine Ltd.		6,000		16,998
Singapore Technologies Engineering Ltd.		12,000		35,035
Yangzijiang Shipbuilding Holdings Ltd.		12,000		10,563

				3,353,381


Consumer Services 0.0%
Genting Singapore plc		49,000		41,967


Diversified Financials 0.0%
Singapore Exchange Ltd.		6,000		32,698


Energy 0.2%
Ezra Holdings Ltd.		5,292,000		3,362,634


Food & Staples Retailing 0.0%
Olam International Ltd.		8,000		13,264


Food, Beverage & Tobacco 0.0%
Golden Agri-Resources Ltd.		70,000		28,368
Wilmar International Ltd.		15,000		37,390

				65,758


Media 0.0%
Singapore Press Holdings Ltd.		13,000		43,331


Real Estate 1.0%
Ascendas REIT		5,226,000		9,077,384
CapitaCommercial Trust		14,000		18,204
CapitaLand Ltd.		20,000		49,378
CapitaMall Trust		9,017,200		13,830,505
City Developments Ltd.		4,427		32,582
Global Logistic Properties Ltd.		25,000		53,574

See financial notes 47

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Keppel Land Ltd.		5,000		13,011
UOL Group Ltd.		3,000		15,068

				23,089,706


Retailing 0.0%
Jardine Cycle & Carriage Ltd.		1,000		31,084


Telecommunication Services 0.3%
Singapore Telecommunications Ltd.		64,000		186,420
StarHub Ltd.		2,095,000		6,733,974

				6,920,394


Transportation 0.9%
ComfortDelGro Corp., Ltd.		15,000		30,840
Hutchison Port Holdings Trust, Class U		44,000		29,709
SATS Ltd.		3,321,000		8,014,759
SIA Engineering Co., Ltd. (b)		3,138,000		11,636,499
Singapore Airlines Ltd.		4,331		33,412

				19,745,219


Utilities 0.2%
Hyflux Ltd. (b)		4,406,000		3,463,890

				60,710,348

South Africa 0.2%


Capital Goods 0.1%
The Bidvest Group Ltd.		48,522		1,335,407


Insurance 0.0%
Sanlam Ltd.		36,290		229,318


Telecommunication Services 0.1%
MTN Group Ltd.		113,139		2,505,242

				4,069,967

Spain 1.5%


Banks 0.3%
Banco Bilbao Vizcaya Argentaria S.A.		277,338		3,101,997
Banco de Sabadell S.A.		27,312		78,965
Banco Popular Espanol S.A.		14,295		82,113
Banco Santander S.A.		95,697		845,533
Bankia S.A. *		36,876		66,131
Bankinter S.A.		303,906		2,514,065
CaixaBank S.A.		14,376		78,568

				6,767,372


Capital Goods 0.4%
ACS, Actividades de Construccion y Servicios S.A.		1,413		52,448
Ferrovial S.A.		3,289		67,244
Gamesa Corp. Tecnologica S.A. *		847,930		8,371,639
Zardoya Otis S.A.		1,334		15,554

				8,506,885


Commercial & Professional Supplies 0.2%
Prosegur Cia de Seguridad S.A. - Reg’d		679,458		3,990,947


Consumer Services 0.1%
Melia Hotels International S.A.		265,690		2,657,739


Energy 0.2%
Repsol S.A.		185,596		4,147,881


Food & Staples Retailing 0.0%
Distribuidora Internacional de Alimentacion S.A.		4,564		28,999


Insurance 0.0%
Mapfre S.A.		230,371		789,955


Pharmaceuticals, Biotechnology & Life Sciences 0.0%
Grifols S.A.		1,192		48,674


Retailing 0.0%
Inditex S.A.		8,756		246,333


Software & Services 0.2%
Amadeus IT Holding S.A., A Shares		90,599		3,333,333


Telecommunication Services 0.0%
Telefonica S.A.		32,895		494,993


Transportation 0.1%
Abertis Infraestructuras S.A.		91,690		1,911,951
International Consolidated Airlines Group S.A. *		8,154		53,330

				1,965,281


Utilities 0.0%
Enagas S.A.		1,623		54,467
Gas Natural SDG S.A.		2,805		80,999
Iberdrola S.A.		40,912		289,613
Red Electrica Corp. S.A.		867		75,760

				500,839

				33,479,231

Sweden 2.7%


Banks 0.3%
Nordea Bank AB		24,387		313,659
Skandinaviska Enskilda Banken AB, A Shares		12,186		156,520
Svenska Handelsbanken AB, A Shares		4,006		191,508
Swedbank AB, A Shares		197,205		5,226,065

				5,887,752


Capital Goods 1.1%
Alfa Laval AB		2,516		51,864
Assa Abloy AB, B Shares		2,680		142,267
Atlas Copco AB, A Shares		146,340		4,238,851
Atlas Copco AB, B Shares		196,426		5,202,897
Haldex AB		488,880		5,999,984
Sandvik AB		8,544		93,857
Skanska AB, B Shares		3,040		61,969
SKF AB, B Shares		477,670		9,580,827
Volvo AB, B Shares		12,301		141,959

				25,514,475


Commercial & Professional Supplies 0.3%
AF AB, B Shares (b)		392,557		5,949,130
Intrum Justitia AB		25,359		755,234
Securitas AB, B Shares		3,149		34,845

				6,739,209


Consumer Durables & Apparel 0.0%
Electrolux AB, B Shares		1,924		54,516

48 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Husqvarna AB, B Shares		4,048		30,223

				84,739


Diversified Financials 0.1%
Avanza Bank Holding AB		78,110		2,488,826
Industrivarden AB, C Shares		1,032		18,079
Investment AB Kinnevik, B Shares		1,883		59,791
Investor AB, B Shares		3,653		131,115

				2,697,811


Energy 0.0%
Lundin Petroleum AB *		1,568		22,163


Food, Beverage & Tobacco 0.2%
Cloetta AB, B Shares *		864,180		2,509,138
Swedish Match AB		52,599		1,710,363

				4,219,501


Health Care Equipment & Services 0.0%
Elekta AB, B Shares		2,715		27,842
Getinge AB, B Shares		1,575		36,135

				63,977


Household & Personal Products 0.0%
Svenska Cellulosa AB, S.C.A., B Shares		4,706		105,445


Materials 0.2%
Boliden AB		2,042		33,749
Hexpol AB		63,008		5,582,334

				5,616,083


Retailing 0.4%
Clas Ohlson AB, B Shares		94,960		1,639,647
Hennes & Mauritz AB, B Shares		178,073		7,105,019

				8,744,666


Technology Hardware & Equipment 0.1%
Hexagon AB, B Shares		25,000		843,640
Telefonaktiebolaget LM Ericsson, B Shares		24,432		288,698

				1,132,338


Telecommunication Services 0.0%
Tele2 AB, B Shares		3,256		41,370
TeliaSonera AB		19,099		132,256

				173,626

				61,001,785

Switzerland 7.1%


Capital Goods 0.8%
ABB Ltd. - Reg’d *		17,658		387,393
Belimo Holding AG - Reg’d		595		1,476,748
Burckhardt Compression Holding AG (b)		20,264		8,681,914
Geberit AG - Reg’d		6,775		2,312,546
Schindler Holding AG		40,966		5,730,619
Schindler Holding AG - Reg’d		169		22,869
Sulzer AG - Reg’d		240		27,355

				18,639,444


Commercial & Professional Supplies 0.5%
Adecco S.A. - Reg’d *		152,401		10,329,985
SGS S.A. - Reg’d		44		96,735

				10,426,720


Consumer Durables & Apparel 0.7%
Cie Financiere Richemont S.A. - Reg’d		181,891		15,335,918
The Swatch Group AG - Bearer Shares		247		117,167
The Swatch Group AG - Reg’d		396		33,503

				15,486,588


Diversified Financials 1.7%
Cembra Money Bank AG		49,750		2,808,514
Credit Suisse Group AG - Reg’d *		900,610		23,995,670
Julius Baer Group Ltd. *		1,792		78,557
Leonteq AG *		35,260		7,688,967
Pargesa Holding S.A.		238		18,526
Partners Group Holding AG		11,877		3,160,604
UBS AG - Reg’d *		29,325		509,907

				38,260,745


Energy 0.0%
Transocean Ltd.		2,901		86,402


Food, Beverage & Tobacco 0.7%
Aryzta AG *		698		59,540
Barry Callebaut AG - Reg’d *		24		25,190
Chocoladefabriken Lindt & Sprungli AG		7		35,133
Chocoladefabriken Lindt & Sprungli AG - Reg’d		1		59,898
Coca-Cola HBC AG CDI *		1,598		34,859
Nestle S.A. - Reg’d		198,906		14,586,592

				14,801,212


Health Care Equipment & Services 0.3%
Sonova Holding AG - Reg’d		13,585		2,118,321
Straumann Holding AG - Reg’d		14,926		3,674,857

				5,793,178


Insurance 0.0%
Baloise Holding AG - Reg’d		376		47,333
Swiss Life Holding AG - Reg’d *		257		58,966
Swiss Re AG *		2,827		228,594
Zurich Insurance Group AG *		1,199		362,851

				697,744


Materials 1.1%
Clariant AG - Reg’d *		125,381		2,187,025
EMS-Chemie Holding AG - Reg’d		91		32,772
Givaudan S.A. - Reg’d *		494		824,966
Glencore plc *		1,764,836		9,054,729
Holcim Ltd. - Reg’d *		151,536		10,755,196
Sika AG		229		818,588
Syngenta AG - Reg’d		747		231,015

				23,904,291


Pharmaceuticals, Biotechnology & Life Sciences 0.8%
Actelion Ltd. - Reg’d *		27,900		3,322,754
Lonza Group AG - Reg’d *		419		46,168
Novartis AG - Reg’d		85,020		7,890,099
Roche Holding AG		26,022		7,679,128

				18,938,149


Real Estate 0.0%
Swiss Prime Site AG - Reg’d *		428		32,540


Telecommunication Services 0.0%
Swisscom AG - Reg’d		187		110,240

See financial notes 49

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)


Transportation 0.5%
Kuehne & Nagel International AG - Reg’d		82,332		10,730,334

				157,907,587

Taiwan 0.9%


Diversified Financials 0.5%
Chailease Holding Co., Ltd.		3,897,500		9,625,203
Fubon Financial Holding Co., Ltd.		1,357,000		2,297,296

				11,922,499


Semiconductors & Semiconductor Equipment 0.2%
MediaTek, Inc.		104,000		1,485,427
Taiwan Semiconductor Manufacturing Co., Ltd. ADR		128,777		2,835,670

				4,321,097


Technology Hardware & Equipment 0.2%
Largan Precision Co., Ltd.		13,000		913,241
TPK Holding Co., Ltd.		440,000		2,597,466

				3,510,707

				19,754,303

Thailand 0.3%


Banks 0.1%
Kasikornbank PCL		184,800		1,339,929


Real Estate 0.2%
Supalai PCL		5,534,100		4,375,287


Telecommunication Services 0.0%
Advanced Info Service PCL - Reg’d		121,500		891,572

				6,606,788

United Arab Emirates 0.1%


Real Estate 0.1%
Emaar Properties PJSC		454,102		1,265,961

United Kingdom 16.9%


Automobiles & Components 0.0%
GKN plc		13,131		67,098


Banks 0.8%
Barclays plc		131,698		506,500
HSBC Holdings plc (f)		153,211		1,562,042
HSBC Holdings plc (f)		73,737		754,521
Lloyds Banking Group plc *		12,075,686		14,912,130
Royal Bank of Scotland Group plc *		20,127		125,141
Standard Chartered plc		19,814		298,253

				18,158,587


Capital Goods 4.5%
Wolseley plc		82,776		4,402,025
Ashtead Group plc		93,107		1,559,936
BAE Systems plc		25,373		186,853
Bodycote plc		1,553,340		15,546,903
Brammer plc		760,919		3,946,909
Bunzl plc		88,415		2,400,948
Cobham plc		8,983		41,903
Diploma plc		644,181		7,167,105
Fenner plc		715,334		3,524,506
Grafton Group plc		351,360		3,566,780
HellermannTyton Group plc		1,253,952		6,119,679
IMI plc		79,298		1,552,868
Interserve plc		830,605		8,432,899
Meggitt plc		751,102		5,425,515
Melrose Industries plc		7,985		32,819
Rolls-Royce Holdings plc *		15,089		204,373
Rotork plc		363,399		14,896,237
Smiths Group plc		282,855		5,282,801
Spirax-Sarco Engineering plc		233,040		10,648,423
The Weir Group plc		1,707		62,389
Travis Perkins plc		1,955		51,800
Ultra Electronics Holdings plc		178,786		4,999,804

				100,053,475


Commercial & Professional Supplies 0.3%
Aggreko plc		2,027		49,454
Babcock International Group plc		152,072		2,669,021
Capita plc		146,443		2,574,749
G4S plc		281,880		1,153,804
Intertek Group plc		1,291		56,270

				6,503,298


Consumer Durables & Apparel 0.5%
Bellway plc		400,900		11,245,692
Burberry Group plc		3,555		87,359
Persimmon plc *		2,419		56,811

				11,389,862


Consumer Services 1.2%
Carnival plc		1,471		58,657
Compass Group plc		192,623		3,109,111
Domino’s Pizza Group plc		269,120		2,741,432
Greene King plc		685,693		8,815,577
InterContinental Hotels Group plc		37,733		1,433,291
The Restaurant Group plc		543,380		5,887,236
TUI Travel plc		4,003		25,580
Whitbread plc		52,325		3,657,569
William Hill plc		6,557		37,866

				25,766,319


Diversified Financials 0.4%
3i Group plc		7,689		48,905
Aberdeen Asset Management plc		7,356		51,158
Hargreaves Lansdown plc		1,890		30,116
ICAP plc		5,542		37,207
Investec plc		4,316		39,576
London Stock Exchange Group plc		1,803		58,225
Provident Financial plc		22,307		758,579
Schroders plc		218,092		8,434,152
Schroders plc, Non Voting Shares		1,100		33,932

				9,491,850


Energy 0.5%
AMEC plc		2,239		37,333
BG Group plc		122,134		2,035,489
BP plc		148,112		1,065,651
Genel Energy plc *		75,425		848,369
Hunting plc		462,205		5,444,344
Petrofac Ltd.		2,040		34,565
Royal Dutch Shell plc, A Shares		31,588		1,128,379

50 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)
Royal Dutch Shell plc, B Shares		19,603		724,241
Tullow Oil plc		7,283		56,836

				11,375,207


Food & Staples Retailing 0.0%
J. Sainsbury plc		9,905		39,021
Tesco plc		65,137		180,820
WM Morrison Supermarkets plc		16,585		41,179

				261,020


Food, Beverage & Tobacco 1.2%
Associated British Foods plc		2,857		126,085
British American Tobacco plc		15,047		852,828
Diageo plc		478,974		14,126,082
Imperial Tobacco Group plc		7,685		333,850
SABMiller plc		7,744		438,023
Stock Spirits Group plc		934,910		4,561,507
Tate & Lyle plc		3,477		33,651
Unilever plc		160,267		6,446,817

				26,918,843


Health Care Equipment & Services 0.0%
Smith & Nephew plc		7,159		121,526


Household & Personal Products 0.3%
Reckitt Benckiser Group plc		81,250		6,843,157


Insurance 0.9%
Admiral Group plc		1,519		32,502
Aviva plc		23,655		197,856
Direct Line Insurance Group plc		11,884		52,571
Friends Life Group Ltd.		11,241		58,296
Hiscox Ltd.		74,186		809,129
Legal & General Group plc		47,482		175,982
Old Mutual plc		39,277		121,978
Prudential plc		407,548		9,437,193
RSA Insurance Group plc *		8,104		62,655
Standard Life plc		19,168		121,038
Willis Group Holdings plc		249,200		10,100,076

				21,169,276


Materials 1.3%
Anglo American plc		11,210		236,683
Antofagasta plc		3,147		35,441
BHP Billiton plc		16,961		438,215
Croda International plc		422,393		15,529,838
Fresnillo plc		1,755		19,613
Johnson Matthey plc		1,642		78,392
Randgold Resources Ltd.		695		40,677
Rexam plc		5,558		42,362
Rio Tinto plc		53,178		2,530,286
Victrex plc		371,275		10,085,260

				29,036,767


Media 0.7%
British Sky Broadcasting Group plc		8,278		117,318
ITV plc		1,559,874		5,067,536
Pearson plc		6,567		122,911
Reed Elsevier plc		82,794		1,362,561
Rightmove plc		40,340		1,364,442
WPP plc		392,751		7,671,470

				15,706,238


Pharmaceuticals, Biotechnology & Life Sciences 1.3%
AstraZeneca plc		10,140		740,710
BTG plc *		530,293		6,410,056
GlaxoSmithKline plc		389,313		8,803,910
Hikma Pharmaceuticals plc		281,465		8,536,969
Shire plc		81,979		5,500,540

				29,992,185


Real Estate 0.1%
Countrywide plc		74,803		549,400
Derwent London plc		16,494		784,746
Hammerson plc		6,276		61,655
Intu Properties plc		6,995		38,159
Land Securities Group plc		6,336		112,426
Segro plc		5,536		33,727
The British Land Co. plc		7,703		89,946

				1,670,059


Retailing 0.5%
ASOS plc *		372		15,862
Dixons Carphone plc		7,829		49,712
Halfords Group plc		453,250		3,598,021
Kingfisher plc		18,989		91,992
Marks & Spencer Group plc		13,079		85,168
Next plc		29,195		3,013,995
Poundland Group plc *		648,658		3,268,625
Sports Direct International plc *		2,903		29,984

				10,153,359


Semiconductors & Semiconductor Equipment 0.0%
ARM Holdings plc		11,296		159,922


Software & Services 0.3%
Telecity Group plc		456,870		5,641,848
The Sage Group plc		8,683		52,580

				5,694,428


Technology Hardware & Equipment 1.4%
Domino Printing Sciences plc		713,610		6,883,621
Halma plc		790,997		7,892,508
Laird plc		1,083,597		5,469,452
Oxford Instruments plc		209,593		3,631,760
Spectris plc		229,835		6,638,520

				30,515,861


Telecommunication Services 0.3%
BT Group plc		1,132,521		6,676,585
Inmarsat plc		3,182		34,938
Vodafone Group plc		212,392		706,300

				7,417,823


Transportation 0.2%
easyJet plc		156,954		3,771,441
Royal Mail plc		5,187		36,708

				3,808,149


Utilities 0.2%
Centrica plc		40,451		196,186
National Grid plc		29,992		445,080
Severn Trent plc		1,915		61,210
SSE plc		108,020		2,768,659
United Utilities Group plc		5,460		74,847

				3,545,982

				375,820,291

See financial notes 51

Laudus International MarketMasters Fund

Portfolio Holdings continued


	Number		Value
Security	of Shares		($)

United States 0.0%


Pharmaceuticals, Biotechnology & Life Sciences 0.0%
ICON plc *		13,751		723,440

Total Common Stock
(Cost $1,835,934,796)				2,081,026,614




Preferred Stock 0.2% of net assets

Brazil 0.1%


Banks 0.1%
Itau Unibanco Holding S.A.		129,750		1,924,336

Germany 0.1%


Automobiles & Components 0.0%
Bayerische Motoren Werke AG		404		32,394
Porsche Automobil Holding SE		1,227		100,752
Volkswagen AG		1,305		279,077

				412,223


Capital Goods 0.1%
Jungheinrich AG		24,840		1,404,335


Household & Personal Products 0.0%
Henkel AG & Co. KGaA		1,429		141,425


Materials 0.0%
Fuchs Petrolub SE		700		27,264

				1,985,247

Italy 0.0%


Banks 0.0%
Intesa Sanpaolo S.p.A. - RSP		6,481		16,570


Telecommunication Services 0.0%
Telecom Italia S.p.A. - RSP		47,559		42,553

				59,123

United Kingdom 0.0%


Capital Goods 0.0%
Rolls-Royce Holdings plc, C Shares *(a)(b)		1,910,070		3,056

Total Preferred Stock
(Cost $3,877,742)				3,971,762




Other Investment Companies 3.9% of net assets

Equity Fund 2.6%
Vanguard FTSE Emerging Markets ETF		1,367,000		58,288,880

Money Market Fund 1.3%
State Street Institutional U.S. Government Money Market Fund, Premier Class 0.00% (c)		28,882,348		28,882,348

Total Other Investment Companies
(Cost $92,207,503)				87,171,228




Rights 0.0% of net assets

Spain 0.0%


Banks 0.0%
Banco Santander S.A. *		135,514		25,813

Total Rights
(Cost $26,110)				25,813



	Face
Security	Amount		Value
Rate, Maturity Date	($)		($)

Short-Term Investments 0.1% of net assets

U.S. Treasury Obligations 0.1%
U.S. Treasury Bills
0.01%, 12/11/14 (d)(e)		75,000		74,999
0.01%, 12/18/14 (d)(e)		739,000		738,988

Total Short-Term Investments
(Cost $813,987)				813,987



End of Investments.

At 10/31/14, the tax basis cost of the fund’s investments was $1,958,909,416 and the unrealized appreciation and depreciation were $292,010,842 and ($77,910,854), respectively, with a net unrealized appreciation of $214,099,988.

At 10/31/14, the values of certain foreign securities held by the fund aggregating $1,783,513,735 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(a) for additional information)


*		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 $61,966,537 or 2.8% of net assets.
(c)		The rate shown is the 7-day yield.
(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)		Securities are traded on separate exchanges for the same entity.

52 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


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


AUD —		Australian dollar
CHF —		Swiss franc
NZD —		New Zealand dollar
SEK —		Swedish krona
USD —		U.S. dollar

In addition to the above, the fund held the following at 10/31/14:

Contract

Unrealized

Number of

Value

Depreciation

Contracts

($)

Futures Contracts

MSCI EAFE, e-mini, Long, expires 12/19/14

484

44,431,200

(75,899

)

Amount of

Unrealized

Currency

Appreciation

Expiration

to be

(Depreciation)

Date

Counterparty

Received

Delivered

($)

Forward Foreign Currency Exchange Contracts

12/17/2014

State Street Bank & Trust Co.

CHF

5,627,000

USD

5,850,637

(349,572

)

03/18/2015

State Street Bank & Trust Co.

SEK

6,009,000

USD

814,029

(57,118

)

03/18/2015

State Street Bank & Trust Co.

SEK

1,212,000

USD

164,188

(974

)

06/17/2015

State Street Bank & Trust Co.

USD

6,984,988

AUD

8,065,000

223,993

12/17/2014

State Street Bank & Trust Co.

USD

30,194,153

CHF

29,040,000

3,165,985

01/30/2015

State Street Bank & Trust Co.

USD

6,525,683

NZD

8,443,000

115,032

03/18/2015

State Street Bank & Trust Co.

USD

6,221,384

SEK

45,925,000

618,963

Net Unrealized Appreciation on Forward Foreign Currency Exchange Contracts

3,716,309

The following is a summary of the inputs used to value the fund’s investments as of October 31, 2014 (see financial note 2(a) for additional information):

Assets Valuation Input


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

Common Stock¹		$—		$205,340,945		$—		$205,340,945
Australia¹		—		76,618,716		—		76,618,716
Materials		49,808		18,233,862		—		18,283,670
Belgium¹		—		2,458,612		—		2,458,612
Media		1,113,834		—		—		1,113,834
Brazil¹		—		4,574,180		—		4,574,180
Consumer Services		8,246,047		—		—		8,246,047
Diversified Financials		705,832		—		—		705,832
Food, Beverage & Tobacco		4,084,727		—		—		4,084,727
Canada¹		106,651,463		—		—		106,651,463
China¹		—		44,846,981		—		44,846,981
Pharmaceuticals, Biotechnology & Life Sciences		1,318,558		8,732,344		—		10,050,902
Retailing		5,279,746		—		—		5,279,746
Software & Services		13,179,480		3,770,553		—		16,950,033
Finland¹		—		16,666,225		—		16,666,225
Energy		21,509		—		—		21,509

See financial notes 53

Laudus International MarketMasters Fund

Portfolio Holdings continued


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

France¹		$—		$102,817,258		$—		$102,817,258
Capital Goods		5,108,287		10,263,852		—		15,372,139
Energy		13,033,168		3,955,514		—		16,988,682
Health Care Equipment & Services		10,519,823		3,308,573		—		13,828,396
Media		40,554		6,894,053		—		6,934,607
Pharmaceuticals, Biotechnology & Life Sciences		6,634,763		5,394,488		—		12,029,251
Real Estate		31,745		2,740,229		—		2,771,974
Software & Services		2,612,947		1,484,360		—		4,097,307
Telecommunication Services		45,703		474,273		—		519,976
Germany¹		—		148,893,410		—		148,893,410
Capital Goods		3,192,548		33,438,105		—		36,630,653
Hong Kong¹		—		38,802,922		—		38,802,922
Consumer Services		4,849,918		2,899,171		—		7,749,089
India¹		—		22,309,298		—		22,309,298
Banks		1,892,862		7,935,849		—		9,828,711
Real Estate		1,932,796		—		—		1,932,796
Software & Services		3,199,158		1,990,546		—		5,189,704
Ireland¹		—		15,063,749		—		15,063,749
Food, Beverage & Tobacco		5,145,433		542,449		—		5,687,882
Israel¹		—		202,637		—		202,637
Materials		8,942,627		62,017		—		9,004,644
Pharmaceuticals, Biotechnology & Life Sciences		4,156,136		544,491		—		4,700,627
Semiconductors & Semiconductor Equipment		2,725,024		—		—		2,725,024
Software & Services		5,126,591		21,771		—		5,148,362
Japan¹		—		296,872,381		—		296,872,381
Commercial & Professional Supplies		805,943		14,914,678		—		15,720,621
Luxembourg¹		—		5,605,823		—		5,605,823
Media		84,032		28,769		—		112,801
Real Estate		1,833,094		758,794		—		2,591,888
Mexico¹		2,656,746		—		—		2,656,746
Netherlands¹		—		47,422,398		—		47,422,398
Energy		6,215		27,582		—		33,797
Media		43,152		193,525		—		236,677
Semiconductors & Semiconductor Equipment		2,770,294		286,074		—		3,056,368
Norway¹		—		7,283,489		—		7,283,489
Energy		9,193		3,666,499		—		3,675,692
Peru¹		2,110,871		—		—		2,110,871
Singapore¹		—		57,233,194		—		57,233,194
Food & Staples Retailing		13,264		—		—		13,264
Utilities		3,463,890		—		—		3,463,890
Sweden¹		—		52,257,119		—		52,257,119
Retailing		1,639,647		7,105,019		—		8,744,666

54 See financial notes

Laudus International MarketMasters Fund

Portfolio Holdings continued


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

Switzerland¹		$—			$139,268,143			$—		$139,268,143
Capital Goods		22,869			18,616,575			—		18,639,444
Taiwan¹		—			15,433,206			—		15,433,206
Semiconductors & Semiconductor Equipment		2,835,670			1,485,427			—		4,321,097
Thailand¹		—			1,339,929			—		1,339,929
Real Estate		4,375,287			—			—		4,375,287
Telecommunication Services		891,572			—			—		891,572
United Kingdom¹		—			171,303,239			—		171,303,239
Capital Goods		14,638,520			85,414,955			—		100,053,475
Food, Beverage & Tobacco		4,561,507			22,357,336			—		26,918,843
Insurance		10,162,731			11,006,545			—		21,169,276
Media		122,911			15,583,327			—		15,706,238
Retailing		3,268,625			6,884,734			—		10,153,359
Technology Hardware & Equipment		6,883,621			23,632,240			—		30,515,861
United States¹		723,440			—			—		723,440
Preferred Stock¹		—			2,044,370			—		2,044,370
Brazil¹		1,924,336			—			—		1,924,336
United Kingdom¹		—			—			3,056		3,056
Other Investment Companies¹		87,171,228			—			—		87,171,228
Rights
Spain¹		25,813			—			—		25,813
Short-Term Investments¹		—			813,987			—		813,987

Total		$372,885,558			$1,800,120,790			$3,056		$2,173,009,404

Other Financial Instruments
Forward Foreign Currency Exchange Contracts²		$—			$4,123,973			$—		$4,123,973


Liabilities Valuation Input


Other Financial Instruments
Futures Contracts²		($75,899	)		$—			$—		($75,899	)
Forward Foreign Currency Exchange Contracts²		—			(407,664	)		—		(407,664	)


¹		As categorized in Portfolio Holdings.
²		Futures contracts and forward foreign currency exchange contracts are not included in Investments in the schedule of portfolio holdings and are valued at unrealized appreciation or depreciation.

See financial notes 55

Laudus International MarketMasters 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	2013		(Losses)		(Depreciation)			Purchases		Sales			in		out		2014

Common Stock
Hong Kong		$12,251		$—		($12,251	)		$—		$—			$—		$—		$—
Japan		49,426		—		278			—		(49,704	)		—		—		—
Portugal		—		—		(50,231	)		10,646		—			39,585		—		—
Preferred Stock
United Kingdom		53,040		1,503		(55	)		3,066		(54,498	)		—		—		3,056
Rights
Spain		37,011		—		(1,669	)		—		(35,342	)		—		—		—

Total		$151,728		$1,503		($63,928	)		$13,712		($139,544	)		$39,585		$—		$3,056

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, 2014. The transfers in the amount of $41,674,776 and $9,776,880 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 into Level 3 from Level 1 or Level 2 were due to the result of fair valued securities for which no quoted value was available.

56 See financial notes

Laudus International MarketMasters Fund

Statement of

Assets and Liabilities

As of October 31, 2014



Assets

Investments, at value (cost $1,932,860,138)		$2,173,009,404
Foreign currency, at value (cost $1,947,375)		1,935,826
Receivables:
Investments sold		60,206,918
Dividends		3,089,349
Fund shares sold		2,369,120
Foreign tax reclaims		1,670,928
Variation margin on futures contracts		98,467
Unrealized appreciation on forward foreign currency exchange contracts		4,123,973
Prepaid expenses	+	173,680

Total assets		2,246,677,665

Liabilities

Payables:
Investments bought		16,575,553
Investment adviser and administrator fees		260,322
Shareholder service fees		468,877
Fund shares redeemed		3,207,763
Due to custodian		1,594,454
Foreign capital gains tax		1,138,481
Unrealized depreciation on forward foreign currency exchange contracts	+	407,664

Total liabilities		23,653,114

Net Assets

Total assets		2,246,677,665
Total liabilities	−	23,653,114

Net assets		$2,223,024,551

Net Assets by Source
Capital received from investors		1,982,713,797
Net investment income not yet distributed		18,038,415
Net realized capital losses		(20,177,344	)
Net unrealized capital appreciation		242,449,683

Net Asset Value (NAV) by Shares Class


			Shares
Share Class	Net Assets	÷	Outstanding	=	NAV
Investor Shares	$631,111,255		27,497,580			$22.95
Select Shares	$1,591,913,296		69,352,708			$22.95

See financial notes 57

Laudus International MarketMasters Fund

Statement of

Operations

For the period November 1, 2013 through October 31, 2014



Investment Income

Dividends (net of foreign withholding taxes of $5,216,040)		$56,324,050
Interest	+	573

Total investment income		56,324,623

Expenses

Investment adviser and administrator fees		29,000,671
Shareholder service fees:
Investor Shares		1,575,105
Select Shares		1,930,919
Custodian fees		1,318,890
Portfolio accounting fees		204,903
Transfer agent fees		170,861
Shareholder reports		88,417
Registration fees		77,372
Professional fees		63,454
Independent trustees’ fees		17,156
Interest expense		577
Other expenses	+	64,258

Total expenses		34,512,583
Expense reduction by CSIM and its affiliates	−	4,829,545

Net expenses	−	29,683,038

Net investment income		26,641,585

Realized and Unrealized Gains (Losses)

Net realized gains on investments (net of foreign capital gain tax paid of $100,341)		222,949,985
Net realized gains on futures contracts		1,912,818
Net realized losses on foreign currency transactions	+	(362,111	)

Net realized gains		224,500,692
Net change in unrealized appreciation (depreciation) on investments (net of foreign capital gain tax of ($1,093,991))		(286,796,914	)
Net change in unrealized appreciation (depreciation) on futures contracts		(2,707,984	)
Net change in unrealized appreciation (depreciation) on foreign currency translations	+	2,789,273

Net change in unrealized appreciation (depreciation)	+	(286,715,625	)

Net realized and unrealized losses		(62,214,933	)

Decrease in net assets resulting from operations		($35,573,348	)

58 See financial notes

Laudus International MarketMasters Fund

Statement of

Changes in Net Assets

For the current and prior report periods



Operations


11/1/13-10/31/14				11/1/12-10/31/13
Net investment income		$26,641,585			$23,324,748
Net realized gains		224,500,692			173,495,399
Net change in unrealized appreciation (depreciation)	+	(286,715,625	)		265,189,677

Increase (Decrease) in net assets from operations		(35,573,348	)		462,009,824

Distributions to Shareholders

Distributions from net investment income
Investor Shares		(9,151,462	)		(13,288,779	)
Select Shares	+	(24,452,646	)		(25,873,436	)

Total distributions from net investment income		($33,604,108	)		($39,162,215	)

Transactions in Fund Shares


		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		VALUE			SHARES		VALUE
Shares Sold
Investor Shares			2,681,598		$63,944,369			3,013,633		$63,900,921
Select Shares	+		17,762,259		421,251,532			19,866,078		424,219,097

Total shares sold			20,443,857		$485,195,901			22,879,711		$488,120,018


Shares Reinvested
Investor Shares			364,557		$8,395,762			634,180		$12,214,309
Select Shares	+		703,683		16,184,703			892,608		17,173,788

Total shares reinvested			1,068,240		$24,580,465			1,526,788		$29,388,097


Shares Redeemed
Investor Shares			(4,050,133	)	($96,267,673	)		(6,234,658	)	($130,752,070	)
Select Shares	+		(16,261,189	)	(386,422,770	)		(9,414,179	)	(198,148,130	)

Total shares redeemed			(20,311,322	)	($482,690,443	)		(15,648,837	)	($328,900,200	)

Net transactions in fund shares			1,200,775		$27,085,923			8,757,662		$188,607,915

Shares Outstanding and Net Assets

		11/1/13-10/31/14					11/1/12-10/31/13
			SHARES		NET ASSETS			SHARES		NET ASSETS
Beginning of period			95,649,513		$2,265,116,084			86,891,851		$1,653,660,560
Total increase or decrease	+		1,200,775		(42,091,533	)		8,757,662		611,455,524

End of period			96,850,288		$2,223,024,551			95,649,513		$2,265,116,084


Net investment income not yet distributed					$18,038,415					$17,610,213

See financial notes 59

Laudus MarketMasters Funds

Financial Notes

1. Business Structure of the Funds:



Schwab Capital Trust (organized May 7, 1993)		Schwab Target 2010 Fund
Laudus Small-Cap MarketMasters Fund		Schwab Target 2015 Fund
Laudus International MarketMasters Fund		Schwab Target 2020 Fund
Schwab S&P 500 Index Fund		Schwab Target 2025 Fund
Schwab Small-Cap Index Fund		Schwab Target 2030 Fund
Schwab Total Stock Market Index Fund		Schwab Target 2035 Fund
Schwab International Index Fund		Schwab Target 2040 Fund
Schwab MarketTrack All Equity Portfolio		Schwab Target 2045 Fund
Schwab MarketTrack Growth Portfolio		Schwab Target 2050 Fund
Schwab MarketTrack Balanced Portfolio		Schwab Target 2055 Fund
Schwab MarketTrack Conservative Portfolio		Schwab Fundamental US Large Company Index Fund
Schwab Balanced Fund		Schwab Fundamental US Small Company Index Fund
Schwab Core Equity Fund		Schwab Fundamental International Large Company Index Fund
Schwab Dividend Equity Fund		Schwab Fundamental International Small Company Index Fund
Schwab Large-Cap Growth Fund		Schwab Fundamental Emerging Markets Large Company Index Fund
Schwab Small-Cap Equity Fund		Schwab Fundamental Global Real Estate 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
Schwab International Core Equity Fund

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 contracts (“futures”) and forward foreign currency exchange contracts (“forwards”): 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 may be 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, without consideration to the classification level of the specific investments held by the underlying fund.

	•	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

Laudus MarketMasters Funds

Financial Notes (continued)

2. Significant Accounting Policies (continued):


		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, 2014 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:

3. Risk Factors:

Investment Style Risk. The funds’ 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.

Large- and Mid-Cap Risk. 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 - bonds and small-cap stocks, for instance - a fund’s performance also will lag those investments.

Management Risk. As with all actively managed funds, the investment strategies of each fund’s managers — its investment adviser and investment sub-advisers — may not achieve their desired results.

Emerging Market Risk. 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.

Currency Risk. As a result of a 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.

Laudus MarketMasters Funds

Financial Notes (continued)

3. Risk Factors (continued):

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 a fund to realize higher amounts of short-term capital gain. These risks could cause a fund to lose more than the principal amount invested.

Multi-Manager Risk. 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.

Liquidity Risk. 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 Small-Cap		Laudus International
	MarketMasters Fund		MarketMasters Fund

Investor Shares		1.35%		1.40%
Select Shares		1.20%		1.25%

Laudus MarketMasters 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 percentage of shares of each fund in this report that are owned by other Schwab funds as of October 31, 2014, as applicable:


	Underlying Funds
	Laudus Small-Cap		Laudus International
	MarketMasters Fund		MarketMasters Fund

Schwab Target 2010 Fund		0.4%		0.1%
Schwab Target 2015 Fund		0.8%		0.2%
Schwab Target 2020 Fund		5.5%		1.5%
Schwab Target 2025 Fund		4.8%		1.2%
Schwab Target 2030 Fund		12.1%		2.9%
Schwab Target 2035 Fund		5.4%		1.2%
Schwab Target 2040 Fund		16.4%		3.6%
Schwab Target 2045 Fund		0.9%		0.2%
Schwab Target 2050 Fund		0.8%		0.2%
Schwab Target 2055 Fund		0.4%		0.1%
Schwab Monthly Income Fund - Moderate Payout		—%		0.3%
Schwab Monthly Income Fund - Enhanced Payout		—%		0.4%
Schwab Monthly Income Fund - Maximum Payout		—%		0.1%
Schwab Balanced Fund		10.4%		—%

5. Board of Trustees:

6. Borrowing from Banks:

7. Purchases and Sales/Maturities of Investment Securities:

For the period ended October 31, 2014, 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		$140,501,954		$149,420,735
Laudus International MarketMasters Fund		1,710,295,459		1,643,664,770

Laudus MarketMasters Funds

Financial Notes (continued)

8. Derivatives:

The funds entered into equity index futures contracts 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, 2014 are presented on the Portfolio Holdings and Statement of Assets and Liabilities, respectively. The net realized and change in 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		$3,447,310		30
Laudus International MarketMasters Fund		46,783,179		491

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 and to hedge exposure to certain currencies. 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 $67,963,085 and $772,149, respectively.

As of October 31, 2014, 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		$156,619		$—
Forward Foreign Currency Exchange Contracts²		—		4,123,973

Total		$156,619		$4,123,973


Liability Derivatives	Fair Value

Equity Index - Futures Contracts³		$—		$75,899
Forward Foreign Currency Exchange Contracts⁴		—		407,664

Total		$—		$483,563


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		Includes cumulative unrealized depreciation 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.
⁴		Statement of Assets and Liabilities location: Unrealized depreciation on forward foreign currency exchange contracts.

The effects of the derivatives held by the funds in the Statement of Operations for the period ended October 31, 2014 were:


	Laudus Small-Cap			Laudus International
	MarketMasters Fund			MarketMasters Fund

Equity Index Futures Contracts
Realized Gains (Losses)¹		($16,200	)		$1,912,818
Change in Unrealized Appreciation (Depreciation)²		61,624			(2,707,984	)
Forward Foreign Currency Exchange Contracts
Realized Gains (Losses)¹		$—			$711,354
Change in Unrealized Appreciation (Depreciation)²		—			3,089,783


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 change in unrealized appreciation (depreciation) on futures contracts and net change in unrealized appreciation (depreciation) on foreign currency translations.

Laudus MarketMasters Funds

Financial Notes (continued)

8. Derivatives (continued):

The funds’ forwards are entered into pursuant to International Swaps and Derivatives Association, Inc. (“ISDA”) agreements which govern certain terms of derivative transactions. ISDA agreements typically contain, among other things, master netting provisions in the event of a default or other termination event. Master netting provisions allow the funds and the counterparty, in the event of a default or other termination event, to offset payable and receivable amounts for each party related to derivative contracts to one net amount payable by either the funds or the counterparty. The Laudus International MarketMasters Fund’s forwards, which are reported gross in the Statement of Assets and Liabilities, are presented in the table below. The following table presents the fund’s forwards, net of amounts available for offset under a master netting agreement and net of any related collateral received by the fund for assets and pledged by the fund for liabilities as of October 31, 2014.

Laudus International MarketMasters Fund

Gross Amounts Not Offset in the

Statement of Assets and Liabilities

Gross Amounts of Assets

Presented in the

Financial

Cash Collateral

Net

Counterparty

Statement of Assets and Liabilities

Instruments

Received

Amounts^(a)

State Street Bank & Trust Co.

$4,123,973

($407,664

)

$—

$3,716,309

Total

$4,123,973

($407,664

)

$—

$3,716,309

Gross Amounts of Liabilities

Presented in the

Financial

Cash Collateral

Net

Counterparty

Statement of Assets and Liabilities

Instruments

Pledged

Amounts^(b)

State Street Bank & Trust Co.

($407,664

)

$407,664

$—

Total

($407,664

)

$407,664

$—


^a		Represents the net amount due from the counterparty in the event of default.
^b		Represents the net amount due to the counterparty in the event of default.

9. Redemption Fee:


	Current Period		Prior Period
	(11/1/13-10/31/14)		(11/1/12-10/31/13)

Laudus Small-Cap MarketMasters Fund		$384		$341
Laudus International MarketMasters Fund		6,455		12,421

10. Federal Income Taxes:

As of October 31, 2014, the components of distributable earnings on a tax-basis were as follows:


	Laudus Small-Cap			Laudus International
	MarketMasters Fund			MarketMasters Fund

Undistributed ordinary income		$—			$31,273,280
Undistributed long-term capital gains		3,718,509			—
Unrealized appreciation on investments		28,560,167			292,010,842
Unrealized depreciation on investments		(9,994,310	)		(77,910,854	)
Other unrealized appreciation (depreciation)		—			(1,289,405	)

Net unrealized appreciation (depreciation)		$18,565,857			$212,810,583

Laudus MarketMasters Funds

Financial Notes (continued)

10. Federal Income Taxes (continued):


	Laudus Small-Cap		Laudus International
Expiration Date	MarketMasters Fund		MarketMasters Fund

October 31, 2017		$—		$3,773,115

Total		$—		$3,773,115


	Laudus Small-Cap		Laudus International
	MarketMasters Fund		MarketMasters Fund

Late-year ordinary losses deferred		$1,396,656		$—
Capital loss carryforwards utilized		22,461,534		206,581,377

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		$—		$33,604,108
Long-term capital gains		—		—
Return of capital		—		—

Prior period distributions
Ordinary income		$—		$39,162,215
Long-term capital gains		—		—
Return of capital		—		—


	Laudus Small-Cap			Laudus International
	MarketMasters Fund			MarketMasters Fund

Capital shares		($15,579	)		$—
Undistributed net investment income		(18,737	)		7,390,725
Net realized capital gains (losses)		34,316			(7,390,725	)

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 funds constituting Schwab Capital Trust, hereafter referred to as the “Funds”) at October 31, 2014, 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, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

December 16, 2014

Approval of Renewal of Investment Advisory and Sub-Advisory Agreements

The Board of Trustees (the “Board” or the “Trustees”, as appropriate) calls and holds one or more meetings each year that are dedicated, in part, to considering whether to renew the investment advisory agreements between Schwab Capital Trust (the “Trust”) and Charles Schwab Investment Management, Inc. (“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 BMO Asset Management Corp., Mellon Capital Management Corp. (“Mellon”), TAMRO Capital Partners, LLC and Wellington Management Company LLP relating to Laudus Small-Cap MarketMasters Fund; and CSIM and American Century Investment Management, Inc., Harris Associates L.P., Mellon, Mondrian Investment Partners Limited and William Blair & Company, LLC, 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.


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 its review of Fund expenses and adviser and Sub-Adviser profitability discussed below. Although the Funds 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 Agreements with respect to the Funds, 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 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.

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. 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 respective 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.

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)


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)


Kiran M. Patel 1948 Trustee (Trustee of Schwab Capital Trust since 2011.)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services for consumers and small businesses) (Dec. 2008 – Sept. 2013).	76	Director, KLA-Tencor Corporation (2008 – present)


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, Eaton (2012 – present) Director and Chairman of the Audit Committee, Oneok Partners LP (2003 – 2013) Director, Oneok, Inc. (2009 – 2013) Lead Independent Director, Board of Cooper Industries (2002 – 2012)


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.	97	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 Investment Management, 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; Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (January 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (March 2007 – August 2010).


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).

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

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.