N-CSR

Schwab MarketTrack Growth Portfolio II

The Investment Environment

Over the 12-month reporting period ended December 31, 2017, both equity and fixed income markets generated positive returns. Stock markets in the U.S. reached record highs several times during 2017, driven largely by expectations for policy changes in Washington and a bright U.S. economic picture. Outside the U.S., stocks rose as global economies strengthened together and central bank policies remained relatively accommodative. The U.S. dollar generally depreciated against many major overseas currencies, supporting international stocks and enhancing returns on overseas investments in U.S. dollar terms. Meanwhile, the U.S. yield curve generally flattened over the 12-month reporting period, with short-term yields rising and longer-term yields remaining relatively steady. In this environment, the S&P 500^® Index, a bellwether for the overall U.S. stock market, returned 21.83%, while the MSCI EAFE^® Index (Net)*, a broad measure of developed international equity performance, returned 25.03%. For the same period, the MSCI Emerging Markets Index (Net)* returned 37.28%. In fixed income, the Bloomberg Barclays U.S. Aggregate Bond Index returned 3.54% for the 12-month reporting period, and the Citigroup Non-U.S. Dollar World Government Bond Index returned 10.33%.

Economies around the globe strengthened and grew over the reporting period. In the U.S., unemployment remained low, measuring below 5.0% for the entire reporting period and held at a 17-year low in December, while wage growth began to pick up toward the end of the year, brightening the U.S. inflation picture. Corporate profits came in strong and better than expected for most companies each quarter, and the U.S. consumer generally remained optimistic, as measurements of both consumer confidence and consumer sentiment stayed at near record levels throughout the reporting period. In addition, after a disappointing start to 2017, U.S. real gross domestic product (GDP) rose from slightly over 1% to above 3% in both the second and third quarters. Outside the U.S., a recovering labor market, strong exports, and continued accommodative monetary policies contributed to strengthening GDP numbers for the eurozone in 2017, with Germany and France leading the way. Increasing exports resulted in a seventh straight quarter of growth for Japan in the third quarter, while in China, economic growth showed signs of stability after concerns about slowing growth weighed on the country earlier in the year.

Asset Class Performance Comparison % returns during the 12 months ended December 31, 2017

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

Management views may have changed since the report date.

Index figures assume dividends and distributions were reinvested. Index figures do not include trading and management costs, which would lower performance. Indices are unmanaged and cannot be invested in directly. Performance results less than one year are not annualized. Past performance is not an indication of future results.

*	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.

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Schwab MarketTrack Growth Portfolio II | Annual Report

Schwab MarketTrack Growth Portfolio II

The Investment Environment (continued)

During 2017, the Federal Reserve (Fed) continued to take steps toward a more normalized monetary policy environment. Even with low levels of inflation, the Fed raised short-term interest rates in March, June, and December, each time by 0.25%, with the federal funds rate ending the reporting period in a range of 1.25% to 1.50%. The March increase was largely unexpected by the markets until about two weeks prior, resulting in a sharp increase in short-term yields. The remaining two interest rate hikes of the year were generally anticipated, and short-term yields rose more gradually as a result. Additionally, the Fed announced plans in June to begin reducing the size of its approximately $4.5 trillion balance sheet in late 2017 by allowing securities to mature without reinvesting the proceeds. This process began in October, and as expected, proved to be uneventful in the final months of the year. Both the short-term rate increases and the balance sheet unwinding signaled the Fed’s continued confidence in the U.S. and overall global economy.

Outside the U.S., monetary policies remained relatively accommodative amid low inflation, though some central banks did take steps toward tighter policies. The European Central Bank left interest rates unchanged and announced that while it would begin to slow the pace of its bond purchases, it would continue the bond buying program through September 2018. The Bank of England raised its benchmark rate for the first time in 10 years to 0.50% in early November, with expectations for only two additional increases by the end of 2020. Meanwhile, the Bank of Japan maintained negative interest rates and continued to use yield curve management as a policy tool.

During the 12-month reporting period, the U.S. bond yield curve flattened and yields remained low relative to historical averages. Short-term yields, which are directly influenced by central bank policy, rose in response to the federal funds rate increases in March, June, and December. Longer-term yields, by comparison, are driven more by economic growth and inflation expectations. Despite steady economic growth over 2017, inflation remained muted and longer-term yields were generally range bound.

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Schwab MarketTrack Growth Portfolio II | Annual Report

Schwab MarketTrack Growth Portfolio II as of December 31, 2017

The Schwab MarketTrack Growth Portfolio II (the fund) seeks high capital growth with less volatility than an all-stock fund. The fund primarily utilizes a fund-of-funds structure that involves holding equity, fixed income, and money market funds selected from within the Schwab Funds and Laudus Funds complex, but it may buy individual securities to accomplish its objective. The fund seeks to remain close to the target allocations of 80% equity, 15% fixed income, and 5% cash or cash equivalents (including money market funds), with the equity allocation further diversified into large-cap, small-cap, and international equities.

Market Highlights. U.S. stocks posted strong double-digit gains for the 12-month reporting period ended December 31, 2017 against a backdrop of an earnings rebound and global economic recovery. Over the reporting period, the U.S. economy showed continual strength, due in part to the Trump administration’s pro-business agenda. Labor markets remained strong, helping fuel growth in consumer spending and residential homebuilding and a high level of overall consumer confidence. Over the year, the Federal Reserve (Fed) continued its efforts toward interest rate normalization, raising the federal funds target rate three times and instituting the Fed’s balance sheet reduction program in October, all with little disruption to the markets. The global economic turnaround, which began in mid-2016, continued in 2017, propelling global stock prices.

Performance. The fund uses the internally calculated Growth Composite Index II (the composite index) as a performance gauge. (Please see Glossary for components of the composite index.)

For the 12-month reporting period ended December 31, 2017, the fund returned 16.57%. The S&P 500^® Index and the Bloomberg Barclays U.S. Aggregate Bond Index, reflecting broad-based U.S. stock and bond market performance, returned 21.83% and 3.54%, respectively. The composite index, described above, returned 17.05%. Differences between the return of the fund and the return of the index may be attributable to, among other things, operational and transactional costs incurred by the fund that are not incurred by the index.

Positioning and Strategies. The fund’s allocations were broadly in line with those of the composite index.

All five of the fund’s key asset classes (excluding cash) contributed positively to the fund’s total return for the reporting period, with the fund’s international equity exposure providing the greatest contribution to relative return. The Schwab International Index^® Fund, representing the fund’s international equity exposure, returned 25.28% and slightly outperformed the composite index’s international equity allocation component.

The fund’s U.S. mid- to large-cap equity exposures also contributed strongly to the fund’s total return. The Schwab^® S&P 500 Index Fund, representing the fund’s U.S. large-cap equity exposure, returned 21.79% for the 12-month reporting period, slightly underperforming the composite index’s U.S. large-cap equity allocation component, the S&P 500 Index. The Schwab 1000 Index^® Fund, representing U.S. large/mid-cap equities, returned 21.68%, slightly underperforming the composite index’s U.S. large/mid-cap equity allocation component.

The fund’s U.S. small-cap equity exposure also contributed to the fund’s total return, but to a somewhat lesser degree than large-caps. The Schwab Small-Cap Index Fund^®, representing the fund’s U.S. small-cap exposure, returned 14.68%, slightly outperforming the composite index’s U.S. small-cap equity allocation component, the Russell 2000^® Index.

While not nearly to the degree of the fund’s equity exposures, the fund’s fixed-income allocation also contributed positively to the fund’s total return, with the Schwab^® U.S. Aggregate Bond Index Fund returning 3.10% since inclusion. Early in the reporting period, the Schwab Total Bond Market Fund, the fund’s previous fixed-income allocation, was liquidated and the current allocation introduced. On a relative basis, the fund’s fixed-income exposure underperformed the composite index’s U.S. fixed income allocation component.

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

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Schwab MarketTrack Growth Portfolio II | Annual Report

Schwab MarketTrack Growth Portfolio II

Performance and Fund Facts as of December 31, 2017

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/schwabfunds_prospectus.

Performance of Hypothetical $10,000 Investment (December 31, 2007 – December 31, 2017)¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab MarketTrack Growth Portfolio II (11/01/96)	16.57%	10.40%	5.95%
Growth Composite Index II	17.05%	11.03%	6.35%
S&P 500^® Index	21.83%	15.79%	8.50%
Bloomberg Barclays U.S. Aggregate Bond Index	3.54%	2.10%	4.01%
Fund Category: Morningstar Allocation – 70% to 85% Equity²	17.47%	10.03%	5.64%
Fund Expense Ratios³: Net 0.68%; Gross 0.84%

All total return 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 cannot be invested in directly. Performance results less than one year are not annualized.

The first index listed for the fund is the fund’s primary benchmark, as shown in the prospectus. Additional indices are provided for comparative purposes.

The components that make up the composite index may vary over time. For index definitions, please see the Glossary.

¹	Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. Fund performance does not reflect the additional fees and expenses imposed by the insurance company under the variable insurance product contract. If those contract fees and expenses were included, the performance would be less than that shown. Please refer to the variable insurance product prospectus for a complete listing of these expenses.
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 0.18% of acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in the underlying funds. Net Expense: Expenses reduced by a contractual fee waiver in effect through at least April 29, 2019. 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.

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Schwab MarketTrack Growth Portfolio II | Annual Report

Schwab MarketTrack Growth Portfolio II

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

As a fund shareholder, you may incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, transfer agent fees, and other fund expenses.

The expense examples below are intended to help you understand your ongoing cost (in dollars) of investing in the 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 July 1, 2017 and held through December 31, 2017.

The Actual Return line in the table below provides 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 the fund under the heading entitled “Expenses Paid During Period.”

The Hypothetical Return line in the table below provides information about hypothetical account values and hypothetical expenses based on the 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 the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only, and do not reflect any transactional costs. 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.

	Expense Ratio (Annualized)^1,2	Effective Expense Ratio (Annualized)^3,4	Beginning Account Value at 7/1/17	Ending Account Value (Net of Expenses) at 12/31/17	Expenses Paid During Period 7/1/17-12/31/17^2,5	Effective Expenses Paid During Period 7/1/17-12/31/17^4,5
Schwab MarketTrack Growth Portfolio II
Actual Return	0.50%	0.57%	$1,000.00	$1,081.60	$2.62	$2.99
Hypothetical 5% Return	0.50%	0.57%	$1,000.00	$1,022.68	$2.55	$2.91

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	Excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.
³	Based on the most recent six-month acquired fund fees and expense ratio; may differ from the acquired fund fees and expenses ratios in the prospectus, which are based on estimated amounts for the current fiscal year.
⁴	Includes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.
⁵	Expenses for the 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.

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Schwab MarketTrack Growth Portfolio II | Annual Report

Schwab MarketTrack Growth Portfolio II

Financial Statements

Financial Highlights

	1/1/17– 12/31/17	1/1/16– 12/31/16	1/1/15– 12/31/15	1/1/14– 12/31/14	1/1/13– 12/31/13
Per-Share Data
Net asset value at beginning of period	$19.19	$18.48	$19.43	$19.30	$16.04
Income (loss) from investment operations:
Net investment income (loss)¹	0.28	0.27	0.27	0.28	0.23
Net realized and unrealized gains (losses)	2.79	1.33	(0.42)	0.77	3.48
Total from investment operations	3.07	1.60	(0.15)	1.05	3.71
Less distributions:
Distributions from net investment income	(0.32)	(0.31)	(0.31)	(0.26)	(0.30)
Distributions from net realized gains	(1.00)	(0.58)	(0.49)	(0.66)	(0.15)
Total distributions	(1.32)	(0.89)	(0.80)	(0.92)	(0.45)
Net asset value at end of period	$20.94	$19.19	$18.48	$19.43	$19.30
Total return	16.57%	9.00%	(0.93%)	5.46%	23.56%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses²	0.50%	0.50%	0.51% ³	0.50%	0.50%
Gross operating expenses²	0.65%	0.66%	0.75%	0.72%	0.80%
Net investment income (loss)	1.40%	1.49%	1.38%	1.45%	1.28%
Portfolio turnover rate	19%	11%	9%	14%	13%
Net assets, end of period (x 1,000,000)	$28	$27	$30	$33	$32

Calculated based on the average shares outstanding during the period.

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

The ratio of net operating expenses would have been 0.50%, if certain non-routine expenses had not been incurred.

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Schwab MarketTrack Growth Portfolio II | Annual Report

See financial notes

Schwab MarketTrack Growth Portfolio II

Portfolio Holdings as of December 31, 2017

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 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 fund also makes available its complete schedule of portfolio holdings 15 to 20 days after the end of the month on the fund’s website at www.schwabfunds.com/schwabfunds_prospectus.

Security	Number of Shares	Value ($)
Affiliated Underlying Funds 98.1% of net assets

Equity Funds 80.4%
International 20.5%
Schwab International Index Fund	272,197	5,683,467
Large-Cap 40.0%
Schwab 1000 Index Fund	44,985	2,816,526
Schwab S&P 500 Index Fund	200,016	8,238,648
		11,055,174
Small-Cap 19.9%
Schwab Small-Cap Index Fund	179,380	5,496,204
		22,234,845

Fixed-Income Fund 14.6%
Schwab U.S. Aggregate Bond Index Fund	400,950	4,037,566

Money Market Fund 3.1%
Schwab Variable Share Price Money Fund, Ultra Shares 1.32% (a)	847,895	847,980
Total Affiliated Underlying Funds
(Cost $15,508,136)		27,120,391

Issuer Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investments 1.9% of net assets

Time Deposits 1.9%
BNP Paribas
0.92%, 01/02/18 (b)	252,609	252,609
Sumitomo Mitsui Banking Corp.
0.92%, 01/02/18 (b)	277,249	277,249
Total Short-Term Investments
(Cost $529,858)		529,858

(a)	The rate shown is the 7-day yield.
(b)	The rate shown is the current daily overnight rate.

Pursuant to an exemptive order issued by the SEC, the fund may invest in other related funds. Below is a summary of the fund’s transactions with its affiliated underlying funds during the period ended December 31, 2017:

Affiliated Underlying Funds	Balance of Shares Held at 12/31/16	Gross Purchases	Gross Sales	Balance of Shares Held at 12/31/17	Net Change in Unrealized Appreciation (depreciation)	Realized Gains (Losses)	Distributions Received*
Schwab 1000 Index Fund	50,270	1,816	(7,101)	44,985	$286,405	$140,369	$114,265
Schwab International Index Fund	315,014	7,209	(50,026)	272,197	917,625	178,011	149,798
Schwab S&P 500 Index Fund	236,064	3,557	(39,605)	200,016	871,259	604,981	147,326
Schwab Small-Cap Index Fund	193,526	8,972	(23,118)	179,380	221,309	253,688	277,140
Schwab Total Bond Market Fund	424,340	2,536	(426,876)	—	(160,264)	198,623	30,462
Schwab U.S. Aggregate Bond Index Fund	—	427,065	(26,115)	400,950	292	830	68,192
Schwab Variable Share Price Money Fund, Ultra Shares	839,584	8,311	—	847,895	(169)	—	8,342
Total					$2,136,457	$1,376,502	$795,525

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

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Schwab MarketTrack Growth Portfolio II | Annual Report

See financial notes

Schwab MarketTrack Growth Portfolio II

Financial Notes

1. Business Structure of the Fund:

Schwab MarketTrack Growth Portfolio II (the fund) is a series of Schwab Annuity Portfolios (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 fund discussed in this report, which is highlighted:

SCHWAB ANNUITY PORTFOLIOS (ORGANIZED JANUARY 21, 1994)
Schwab Government Money Market Portfolio™
Schwab MarketTrack Growth Portfolio II
Schwab S&P 500 Index Portfolio
Schwab VIT Balanced Portfolio
Schwab VIT Balanced with Growth Portfolio
Schwab VIT Growth Portfolio

The fund is primarily a “fund of funds” as it invests a major portion of its assets in a combination of other Schwab Funds (underlying funds) to achieve its investment objectives and maintain its asset allocation. The fund may also invest directly in equity or fixed income securities and cash equivalents, including money market securities, to achieve its investment objectives.

The fund in this report offers one share class. Shares are bought and sold at closing net asset value per share (NAV), which is the price for all outstanding shares of the fund. Each share has a par value of 1/1,000 of a cent, and the fund’s Board of Trustees (the Board) may authorize the issuance of as many shares as necessary.

The fund is intended as an investment vehicle for variable annuity contracts and variable life insurance policies to be offered by separate accounts of participating life insurance companies and for pension and retirement plans qualified under the Internal Revenue Code of 1986, as amended. At December 31, 2017, 100% of the fund’s shares were held through a separate account of one insurance company. Subscriptions and redemptions of this insurance separate account could have a material impact on the fund.

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

2. Significant Accounting Policies:

The following is a summary of the significant accounting policies the fund uses in its preparation of financial statements. The fund follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board 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).

The financial statements of the fund should be read in conjunction with the underlying funds’ financial statements. For more information about the underlying funds’ operations and policies, please refer to those funds’ semiannual and annual reports, which are filed and available on the U.S. Securities and Exchange Commission’s (SEC) website at www.sec.gov or at the SEC’s Public Reference Room in Washington D.C.

Effective August 1, 2017, the fund adopted disclosure requirement changes for SEC Regulation S-X. The adopted changes are reflected throughout this report.

(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 fund to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.

The fund values the securities in its portfolio every business day. The fund uses the following policies to value various types of securities:

• Underlying funds: Mutual funds are valued at their respective NAVs.

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Schwab MarketTrack Growth Portfolio II

Financial Notes (continued)

2. Significant Accounting Policies (continued):

security’ s primary trading market is closed during regular market hours. The 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 the 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 fund pursuant to the valuation procedures.

In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the fund discloses the fair value of its investments in a hierarchy that prioritizes the significant 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 fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.

The 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. Investments in mutual funds are valued daily at their NAVs, which are classified as Level 1 prices, without consideration to the classification level of the specific investments held by an 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.

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

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 fund’s investments as of December 31, 2017 are disclosed in the Portfolio Holdings.

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

Cash Management Transactions: The fund may subscribe to the Brown Brothers Harriman & Co. (BBH) Cash Management Service Sweep (CMS Sweep). The BBH CMS Sweep is an investment product that automatically sweeps the fund’s cash balances into overnight offshore time deposits with either the BBH Grand Cayman branch or a branch of a pre-approved commercial bank. This fully automated program allows the fund to earn interest on cash balances. Excess cash invested with deposit institutions domiciled outside of the U.S., as with any offshore deposit, may be subject to sovereign actions in the jurisdiction of the deposit institution including, but not limited to, freeze, seizure or diminution. The fund bears the risk associated with the repayment of principal and payment of interest on such instruments by the institution with which the deposit is ultimately placed. Balances in the CMS Sweep are accounted for on a cost basis, which approximates market value.

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Schwab MarketTrack Growth Portfolio II | Annual Report

Schwab MarketTrack Growth Portfolio II

Financial Notes (continued)

2. Significant Accounting Policies (continued):

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.

(d) Investment Income:

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

(e) Expenses:

Expenses that are specific to the fund are charged directly to the fund. Expenses that are common to all funds within the trust generally are allocated among the funds in proportion to their average daily net assets. The fund bears its share of the acquired fund fees and expenses of the underlying funds, which are indirect expenses incurred by the fund through its investments in the underlying funds. Such expenses are reflected in the net asset values of the underlying funds.

(f) Distributions to Shareholders:

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

(g) 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.

(h) Federal Income Taxes:

The fund intends to meet federal income and excise tax requirements for regulated investment companies under subchapter M of the Internal Revenue Code, as amended. Accordingly, the fund distributes substantially all of its net investment income and net realized capital gains, if any, to the participating insurance company’s (shareholders) separate accounts each year. As long as the fund meets the tax requirements, it is not required to pay federal income tax.

(i) Indemnification:

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

3. Risk Factors:

Investing in the fund may involve certain risks, as discussed in the fund’s prospectus, including, but not limited to, those described below. Any of these risks could cause an investor to lose money.

Asset Allocation Risk. The fund is subject to the risk that the selection of the underlying funds and the allocation of the fund’s assets among the various asset classes and market segments may cause the fund to underperform other funds with a similar investment objective.

Conflicts of Interest Risk. The investment adviser’s authority to select and substitute underlying funds from a variety of affiliated and unaffiliated mutual funds and ETFs may create a conflict of interest because the fees paid to it and its affiliates by some underlying funds are higher than the fees paid by other underlying funds. The investment adviser also may have an incentive to select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund’s best interests when selecting underlying funds.

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Financial Notes (continued)

3. Risk Factors (continued):

Market Risk. Financial markets rise and fall in response to a variety of factors, sometimes rapidly and unpredictably. As with any investment whose performance is tied to these markets, the value of an investment in the fund will fluctuate, which means that an investor could lose money over short or long periods.

Direct Investment Risk. The fund may invest directly in cash, cash equivalents and equity and fixed-income securities, including money market securities, to maintain its allocations. The fund’s direct investment in these securities is subject to the same or similar risks as an underlying fund’s investment in the same securities.

Underlying Fund Investment Risk. The value of an investment in the fund is based primarily on the prices of the underlying funds that the fund purchases. In turn, the price of each underlying fund is based on the value of its securities. The fund is subject to the performance, expenses and risks of the underlying funds in which it invests. Before investing in the fund, investors should assess the risks associated with the underlying funds in which the fund may invest and the types of investments made by those underlying funds. These risks include any combination of the risks described below, although the fund’s exposure to a particular risk will depend on the fund’s overall asset allocation and underlying fund allocation.

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

• Investment Risk. The fund may experience losses with respect to its investment in an underlying fund. Further, there is no guarantee that an underlying fund will be able to achieve its objective.

• Investment Style Risk. Certain of the underlying funds seek to track the performance of various segments of the stock market, as measured by their respective indices. Each underlying fund follows these stocks during upturns as well as downturns. Because of their indexing strategy, the underlying funds do not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of an underlying fund’s expenses, the underlying fund’s performance is normally below that of the index.

• 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. Each underlying index fund seeks to track the performance of its benchmark indices, although it may not be successful in doing so. The divergence between the performance of a fund and its benchmark index, positive or negative, is called “tracking error.” Tracking error can be caused by many factors and it may be significant.

• Market Capitalization Risk. Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund’s performance could be impacted.

• Money Market Fund Risk. The fund may invest in underlying money market funds that either seek to maintain a stable $1 net asset value (“stable share price money market funds”) or that have a share price that fluctuates (“variable share price money market funds”). Although an underlying stable share price money market fund seeks to maintain a stable $1 net asset value, it is possible to lose money by investing in such a money market fund. Because the share price of an underlying variable share price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund’s liquidity falls below required minimums.

• Foreign Investment Risk. An underlying fund’s investments in securities of foreign issuers involve certain risks that may be 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 the fund’s investments, and could impair the fund’s ability to meet its investment objective or invest in accordance with its investment strategy. There is a risk that investments in securities denominated in, and/or receiving revenues in, foreign currencies will decline in value relative

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Financial Notes (continued)

3. Risk Factors (continued):

to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency hedged, resulting in the dollar value of the fund’s investment being adversely affected. These risks may be heightened in connection with investments in emerging markets or securities of issuers that conduct their business in emerging markets.

• Derivatives Risk. An underlying 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. An underlying fund’s use of derivatives could reduce the underlying fund’s performance, increase volatility, and could cause the fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund.

• ETF Risk. When an underlying fund invests in an ETF, it will bear a proportionate share of the ETF’s expenses. In addition, lack of liquidity in the market for an ETF’s shares can result in its value being more volatile than the underlying portfolio of securities.

• Debt Securities Risk. Bond prices generally fall when interest rates rise. Bonds with longer maturities tend to be more sensitive to this risk. Underlying fund performance also could be affected if an issuer or guarantor of a bond held by the fund fails to make timely principal or interest payments or otherwise honor its obligations. Lower-quality bonds are considered speculative with respect to their issuer’s ability to make timely payments or otherwise honor their obligations. In addition, prices of lower-quality bonds tend to be more volatile than those of investment-grade bonds, and may fall based on bad news about the issuer, an industry or the overall economy.

• Interest Rate Risk. An underlying fund’s investments in fixed income securities are subject to the risk that interest rates rise and fall over time. As with any investment whose yield reflects current interest rates, an underlying fund’s yield will change over time. During periods when interest rates are low, an underlying fund’s yield (and total return) also may be low. Changes in interest rates also may affect an underlying fund’s share price: a sharp rise in interest rates could cause the fund’s share price to fall. The risk is greater when the underlying fund holds bonds with longer maturities. To the extent that the investment adviser (or sub-adviser) of an underlying fund anticipates interest rate trends imprecisely, the underlying fund could miss yield opportunities or its share price could fall. Inflation-protected securities may react differently to interest rate changes than other types of debt securities and, as discussed below, tend to react to changes in “real” interest rates.

• Liquidity Risk. An underlying fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or an underlying fund may have to sell them at a loss.

• Sampling Index Tracking Risk. To the extent an underlying fund uses a sampling method, the underlying fund will not fully replicate its comparative index and may hold securities not included in the index. As a result, the underlying 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 the underlying fund utilizes a sampling approach, it may not track the return of the index as well as it would if the underlying fund purchased all of the securities in the index.

• Securities Lending Risk. An underlying fund may lend its portfolio securities to brokers, dealers, and other financial institutions. Securities lending involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

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

4. Affiliates and Affiliated Transactions:

Investment Adviser

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

For its advisory and administrative services to the 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:

Average Daily Net Assets
First $500 million	0.44%
Over $500 million	0.39%

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Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):

For the period ended December 31, 2017, the aggregate advisory fee paid to CSIM by the fund was 0.44%, as a percentage of the fund’s average daily net assets.

Expense Limitation

CSIM and its affiliates have made an additional agreement with the fund, for so long as CSIM serves as the investment adviser to the fund, which may only be amended or terminated with the approval of the Board, to limit the total annual fund operating expenses charged, excluding interest, taxes and certain non-routine expenses (expense limitation) to 0.50% through April 29, 2019.

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

Investments in Affiliates

The fund may engage in certain transactions involving related parties. Pursuant to an exemptive order issued by the SEC, the fund may invest in other related funds. As of December 31, 2017, the Schwab MarketTrack Growth Portfolio II’s ownership percentages of other related funds’ shares are:

Schwab 1000 Index Fund	0.0%*
Schwab International Index Fund	0.1%
Schwab S&P 500 Index Fund	0.0%*
Schwab Small-Cap Index Fund	0.2%
Schwab U.S. Aggregate Bond Index Fund	0.2%
Schwab Variable Share Price Money Fund, Ultra Shares	0.1%

*	Less than 0.05%

Interfund Borrowing and Lending

Pursuant to an exemptive order issued by the SEC, the fund may enter into interfund borrowing and lending transactions with other funds in the Fund Complex (for definition refer to Trustees and Officers section). All loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the overnight repurchase agreement rate and the short-term bank loan rate. All loans are subject to numerous conditions designed to ensure fair and equitable treatment of all participating funds. The interfund lending facility is subject to the oversight and periodic review by the Board. The fund 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 the fund’s Statement of Operations. For information regarding the trustees, please refer to the Trustees and Officers table at the end of this report.

6. Borrowing from Banks:

During the period, the fund was a participant with other U.S. registered investment companies managed by CSIM in a joint, syndicated, committed $555 million line of credit (the Syndicated Credit Facility), which matured on October 5, 2017. On October 5, 2017, the Syndicated Credit Facility was amended to run for a new 364 day period with an increased line of $605 million. Under the terms of the Syndicated Credit Facility, in addition to the interest charged on any borrowings by the fund, the fund paid a commitment fee of 0.15% per annum on its proportionate share of the unused portion of the Syndicated Credit Facility.

On December 1, 2017, the fund became a participant with other U.S. registered investment companies managed by CSIM in a joint, unsecured, uncommitted $500 million line of credit (the Uncommitted Credit Facility), with State Street Bank and Trust Company, which matures on November 30, 2018. Under the terms of the Uncommitted Credit Facility, the fund pays interest on the amount it borrows. There were no borrowings from either line of credit during the period.

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Financial Notes (continued)

6. Borrowing from Banks (continued):

The fund also has access to custodian overdraft facilities. The fund may have utilized the overdraft facility and incurred an interest expense, which is disclosed on the fund’s Statement of Operations, if any. The interest expense is determined based on a negotiated rate above the current Federal Funds Rate.

7. Purchases and Sales/Maturities of Investment Securities:

For the period ended December 31, 2017, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:

Purchases of Securities	Sales/Maturities of Securities
$5,021,156	$7,889,789

8. Federal Income Taxes:

As of December 31, 2017, the tax basis cost of the fund’s investments and gross unrealized appreciation and depreciation were as follows:

Tax cost	$16,607,290
Gross unrealized appreciation	$11,042,959
Gross unrealized depreciation	—
Net unrealized appreciation (depreciation)	$11,042,959

As of December 31, 2017, the components of distributable earnings on a tax basis were as follows:

Undistributed ordinary income	$439,284
Undistributed long-term capital gains	1,469,793
Net unrealized appreciation (depreciation) on investments	11,042,959
Total	$12,952,036

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. The tax cost of the funds’ investments, disclosed above, have been adjusted from their book amounts to reflect these unrealized appreciation or depreciation differences, as applicable.

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of December 31, 2017, the fund had no capital loss carryforwards.

For tax purposes, net realized capital losses and late-year ordinary losses incurred after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the year ended December 31, 2017, the fund had no capital losses deferred and no capital loss carryforwards utilized.

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

Current period distributions
Ordinary income	$427,693
Long-term capital gains	1,288,666
Prior period distributions
Ordinary income	$464,401
Long-term capital gains	832,191

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 reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.

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Schwab MarketTrack Growth Portfolio II

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Schwab Annuity Portfolios and Shareholders of Schwab MarketTrack Growth Portfolio II

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the portfolio holdings, of Schwab MarketTrack Growth Portfolio II (one of the funds constituting Schwab Annuity Portfolios, hereafter referred to as the “Fund”) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agents and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
San Francisco, California
February 16, 2018

We have served as the auditor of one or more investment companies in the Schwab Funds Complex since 1989.

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Trustees and Officers

The tables below give information about the trustees and officers of Schwab Annuity Portfolios, which includes the fund covered in this report. The “Fund Complex” includes The Charles Schwab Family of Funds, Schwab Capital Trust, Schwab Investments, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust. The Fund Complex includes 108 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 fund’s Statement of Additional Information, which is available free by calling 1-877-824-5615.

Independent Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Robert W. Burns 1959 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	Retired/Private Investor (Jan. 2009 – present). Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) (investment management firm) and President, PIMCO Funds.	108	Director, PS Business Parks, Inc. (2005 – 2012)
John F. Cogan 1947 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Fellow, The Hoover Institution at Stanford University (public policy think tank) (Oct. 1979 – present); Senior Fellow, Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – 2015).	108	Director, Gilead Sciences, Inc. (2005 – present)
Stephen Timothy Kochis 1946 Trustee (Trustee of Schwab Strategic Trust since 2012; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	CEO and Owner, Kochis Global (wealth management consulting) (May 2012 – present); Chairman and CEO, Aspiriant, LLC (wealth management) (Jan. 2008 – Apr. 2012).	108	None
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Private Investor.	108	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present)

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Independent Trustees (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013).	108	Director, KLA-Tencor Corporation (2008 – present)
Kimberly S. Patmore 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Consultant, Patmore Management Consulting (management consulting) (2008 – present).	108	None
Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2015)	Co-Chief Executive Officer, Kudu Investment Management, LLC (financial services) (Jan. 2015 – present); Partner, Kudu Advisors, LLC (financial services) (June 2008 – Jan. 2015); Advisor, Asset International, Inc. (publisher of financial services information) (Aug. 2008 – Jan. 2015).	108	None
Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2000; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (Mar. 1990 – present).	108	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 The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Co-CEO, Colgin Cellars, LLC (vineyards) (Feb. 1998 – present).	108	Board Member and Chairman of the Audit Committee, Ionis Pharmaceuticals (1994 – present) Lead Independent Director and Chair of Audit Committee, OUTFRONT Media Inc. (2014 – present)

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Interested Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Walter W. Bettinger II² 1960 Chairman and Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010)	Director, President and Chief Executive Officer, The Charles Schwab Corporation (Oct. 2008 – present); President and Chief Executive Officer (Oct. 2008 – present), Director (May 2008 – present), Charles Schwab & Co., Inc.; Director, Charles Schwab Bank (Apr. 2006 – present); Director (May 2008 – present), President and Chief Executive Officer (Aug. 2017 – present), Schwab Holdings, Inc.; and Director, Charles Schwab Investment Management, Inc. (July 2016 – present).	108	Director, The Charles Schwab Corporation (2008 – present)
Marie A. Chandoha² 1961 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), 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 (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm) (Mar. 2007 – Aug. 2010).	108	None
Joseph R. Martinetto² 1962 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Senior Executive Vice President (July 2015 – present), Chief Financial Officer (July 2015 – Aug. 2017), Executive Vice President and Chief Financial Officer (May 2007 – July 2015), The Charles Schwab Corporation and Charles Schwab & Co., Inc.; Director, Charles Schwab & Co., Inc. (May 2007 – present); Director (Apr. 2010 – present) and Chief Executive Officer (July 2013 – Apr. 2015), Charles Schwab Bank; Director (May 2007 – present), Chief Financial Officer (May 2007 – Aug. 2017), Senior Executive Vice President (Feb. 2016 – present), and Executive Vice President (May 2007 – Feb. 2016), Schwab Holdings, Inc.	108	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 A. Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), 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 (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm) (Mar. 2007 – Aug. 2010).
Mark Fischer 1970 Treasurer and Chief Financial Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013)	Treasurer and Chief Financial Officer, Schwab Funds, Laudus Funds and Schwab ETFs (Jan. 2016 – present); Assistant Treasurer, Schwab Funds and Laudus Funds (Dec. 2013 – Dec. 2015), Schwab ETFs (Nov. 2013 – Dec. 2015); Vice President, Charles Schwab Investment Management, Inc. (Oct. 2013 – present); Executive Director, J.P. Morgan Investor Services (Apr. 2011 – Sept. 2013); Assistant Treasurer, Massachusetts Financial Service Investment Management (May 2005 – Mar. 2011).

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Officers of the Trust (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
George Pereira 1964 Senior Vice President and Chief Operating Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust since 2006; Schwab Strategic Trust since 2009)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Operating Officer (Jan. 2016 – present), Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – Dec. 2015); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – Dec. 2015) and Schwab ETFs (Oct. 2009 – Dec. 2015); Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Apr. 2005 – present).
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (investment management firm) (May 2009 – Apr. 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 The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds, Laudus Funds and Schwab ETFs (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 (investment management firm) (Apr. 2006 – Jan. 2008).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President (Sept. 2011 – present), Vice President (Mar. 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 (Apr. 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (Apr. 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds and Schwab ETFs Chief Legal Officer, Vice President and Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009)	Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (Mar. 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	Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee’s twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.
²	Mr. Bettinger, Ms. Chandoha and Mr. Martinetto are Interested Trustees. Mr. Bettinger is an Interested Trustee because he owns stock of The Charles Schwab Corporation (CSC), the parent company of Charles Schwab Investment Management, Inc. (CSIM), the investment adviser for the trusts in the Fund Complex, is an employee and director of Charles Schwab & Co., Inc. (CS&Co), the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios, and is a director of the investment adviser for the trusts in the Fund Complex. Ms. Chandoha is an Interested Trustee because she owns stock of CSC and is an employee and director of CSIM. Mr. Martinetto is an Interested Trustee because he owns stock of CSC and is an employee and director of CS&Co.
³	The President, Treasurer and Secretary/Clerk 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.

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Schwab MarketTrack Growth Portfolio II | Annual Report

Schwab MarketTrack Growth Portfolio II

Glossary

Bloomberg Barclays U.S. Aggregate Bond Index An index that represents securities that are SEC registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. The index excludes certain types of securities, including state and local government series bonds, structured notes embedded with swaps or other special features, private placements, floating rate securities, inflation-linked bonds and Eurobonds.

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

Citigroup Non-U.S. Dollar World Government Bond Index A market capitalization index that measures the total rate of return performance for the government bonds of 22 countries, excluding the U.S., with a remaining maturity of at least 1 year.

Dow Jones U.S. Total Stock Market Index An index that measures the performance of all publicly traded stocks of companies headquartered in the U.S. for which pricing data is readily available - currently less than 3,800 stocks. The index is a float adjusted market capitalization weighted index that reflects the shares of securities actually available to investors in the marketplace.

Growth Composite Index II A custom blended index developed by Charles Schwab Investment Management, Inc. based on a comparable portfolio asset allocation. Effective January 15, 2015, the index is composed of 30% S&P 500 Index, 10% Schwab 1000 Index, 20% Russell 2000 Index, 20% MSCI EAFE Index (Net), 15% Bloomberg Barclays U.S. Aggregate Bond Index, and 5% Bloomberg Barclays U.S. Treasury Bills 1-3 Month Index. For the period March 1, 2014 to January 14, 2015, the index was composed of 40% S&P 500 Index, 20% Russell 2000 Index, 20% MSCI EAFE Index (Net), 15% Bloomberg

Barclays U.S. Aggregate Bond Index, and 5% Bloomberg Barclays U.S. Treasury Bills 1-3 Month. Effective March 1, 2014, the Dow Jones U.S. Total Stock Market was replaced in the Growth Composite Index II by the S&P 500 Index and the Russell 2000 Index. Prior to March 1, 2014, the index was composed of 60% Dow Jones U.S. Total Stock Market Index, 20% MSCI EAFE Index (Net), 15% Bloomberg Barclays U.S. Aggregate Bond Index, and 5% Bloomberg Barclays U.S. Treasury Bills 1-3 Month Index.

MSCI EAFE Index (Net) A free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets in Europe, Australasia, and the Far East. 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.

MSCI Emerging Markets Index (Net) A free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets. This series approximates the minimum possible dividend reinvestment. The returns are calculated applying dividend withholding rates applicable to non-resident persons who do not benefit from double taxation treaties.

Russell 2000 Index An index that measures the performance of the 2,000 smallest companies in the Russell 3000 Index. The Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.

S&P 500 Index An index that is designed to measure the performance of 500 leading publicly traded companies from a broad range of industries.

Schwab 1000 Index An index that represents the performance of the largest 1,000 publicly traded companies in the United States. As a result of corporate actions, the index may be comprised of more or less than 1,000 securities.

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Schwab MarketTrack Growth Portfolio II | Annual Report

Schwab Government Money Market Portfolio

The Investment Environment

Over the 12-month reporting period ended December 31, 2017, yields on taxable money market funds rose amid three short-term interest rate increases from the Federal Reserve (Fed).

During the year, the Fed continued to take steps toward a more normalized monetary policy environment as global economic growth strengthened. Even with low levels of inflation, the Fed raised short-term interest rates in March, June, and December, each time by 0.25%, with the federal funds rate ending the reporting period in a range of 1.25% to 1.50%. The March increase was largely unexpected by the markets until about two weeks prior, while the remaining two interest rate hikes of the year were generally anticipated. Additionally, the Fed announced plans in June to begin reducing the size of its approximately $4.5 trillion balance sheet in late 2017 by allowing securities to mature without reinvesting the proceeds. This process began in October, and as expected, proved to be uneventful in the final months of the year. Both the short-term rate increases and the balance sheet unwinding signaled the Fed’s continued confidence in the U.S. and overall global economy.

During the 12-month reporting period, the U.S. yield curve generally flattened. Short-term yields, which are directly influenced by central bank policy, rose in response to the federal funds rate increases in March, June, and December. Longer-term yields, by comparison, are driven more by economic growth and inflation expectations. Despite steady economic growth over 2017, inflation remained muted and longer-term yields were generally range bound. Meanwhile, the yields on many international government-backed securities generally increased but remained lower than those in the U.S., further increasing the appeal of U.S. Treasuries.

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

Management views may have changed since the report date.

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Schwab Government Money Market Portfolio | Annual Report

Schwab Government Money Market Portfolio

Portfolio Management

Linda Klingman, Vice President and Head of Taxable Money Market Strategies, leads the portfolio management team of Schwab’s prime and government taxable money funds. Ms. Klingman also has overall responsibility for all aspects of the management of the fund. Prior to joining CSIM in 1990, Ms. Klingman was a senior money market trader with AIM Management. She has managed money market funds since 1988.

Lynn Paschen, Senior Portfolio Manager, is responsible for the day-to-day co-management of the fund. Prior to joining CSIM in 2011, Ms. Paschen held a number of positions at American Century Investments. She most recently was a portfolio manager and, from 2000 to 2003, worked as a fixed income trader. She has managed money market funds since 2003.

Nicole Perret-Gentil, Portfolio Manager, is responsible for the day-to-day co-management of the fund. Prior to joining CSIM in 2016, Ms. Perret-Gentil worked at Freddie Mac for 15 years, most recently as a Senior Portfolio Manager where she managed and executed trades for a fixed income strategy. Prior to that role, she served as a Portfolio Manager performing fixed income analysis, a Senior Research Analyst for investor and dealer relations, a Senior Securities Operations Analyst in loan and securities operations, and a Lead Mortgage Securities Operations Specialist. She also worked at Merrill Lynch for a year as a Senior Specialist in fixed income global banking and investments.

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Schwab Government Money Market Portfolio | Annual Report

Schwab Government Money Market Portfolio as of December 31, 2017

The Schwab Government Money Market Portfolio (the fund) seeks the highest current income consistent with stability of capital and liquidity. To pursue its goal, the fund invests in U.S. government securities such as U.S. Treasury bills and notes, other obligations that are issued by the U.S. government, its agencies or instrumentalities, repurchase agreements, and obligations that are issued by private issuers that are guaranteed as to principal or interest by the U.S. government, its agencies or instrumentalities. The fund will invest at least 99.5% of its total assets in cash, U.S. government securities and/or repurchase agreements that are collateralized fully by cash and/or U.S. government securities; under normal circumstances, investing at least 80% of the fund’s net assets solely (plus the amount of any borrowing for investment purposes) in U.S. government securities including repurchase agreements that are collateralized fully by U.S. government securities (excluding cash). For more information concerning the fund’s investment objective, strategy, and risks, please see the fund’s prospectus.

Market Highlights. During the 12-month reporting period ended December 31, 2017, moves by the Federal Reserve (Fed) played a key role in market activity. The Fed raised short-term interest rates three times in 2017, in March, June, and December, signaling continued confidence in the global recovery and driving short-term yields higher. While the March rate hike was largely unexpected by the market until about two weeks prior, the remaining two increases were better telegraphed by the Fed.

Meanwhile, volatility remained largely subdued for most of the reporting period outside of jumps tied to market concerns surrounding the U.S. debt ceiling and geopolitical tensions. Volatility spiked in July, triggered by uncertainty surrounding a timely increase of the U.S. borrowing limit. Markets soon calmed, however, and a temporary debt ceiling solution was passed in both the Senate and the House of Representatives in early September. Escalating tensions between the U.S. and North Korea also contributed to a spike in volatility as some investors feared a nuclear standoff between the two nations.

In 2016, the Fed’s Reverse Repurchase Facility (Facility) played a key part in Money Market Fund Reform, easing the large shift in assets from prime money market funds to government money market funds. In 2017, the Facility continued to play a major role in the money market sector by offering a consistent source of supply, which in turn worked to keep markets stable.

Performance, Positioning, and Strategies. Throughout the reporting period, the fund’s investment adviser remained focused on ensuring liquidity and stability of capital as market conditions evolved, while all issuers in which the fund invests continue to undergo a rigorous credit review process and ongoing monitoring. In anticipation of and in response to the Fed’s short-term interest rate increases, the fund’s weighted average maturity (WAM) declined, beginning the reporting period at 36 days and ending at 21 days.

Portfolio Composition By Effective Maturity % of Investments¹

Portfolio Composition by Security Type % of Investments³

Statistics

Weighted Average Maturity²

21 Days

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

¹	As shown in the Portfolio Holdings section of the shareholder report.
²	Money funds must maintain a dollar-weighted average maturity of no longer than 60 days and cannot invest in any security whose effective maturity is longer than 397 days (approximately 13 months).
³	The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets.
⁴	Less than 0.05%

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Schwab Government Money Market Portfolio | Annual Report

Schwab Government Money Market Portfolio

Performance and Fund Facts as of December 31, 2017

The performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be lower or higher than performance data quoted. To obtain more current performance information, please visit www.schwabfunds.com/schwabfunds_prospectus.

Seven-Day Average Yield Trend for Previous 12 Months

Seven-Day Yields¹

The seven-day yield is the income generated by the fund’s holdings minus the fund’s operating expenses. The seven-day yields are calculated using standard SEC formulas. The effective yield includes the effect of reinvesting daily dividends. Please remember that money market fund yields fluctuate.

	Schwab Government Money Market Portfolio
Ticker Symbol	SWPXX
Seven-Day Yield (with waviers)²	0.94%
Seven-Day Yield (without waivers)²	0.75%
Seven-Day Effective Yield (with waivers)²	0.95%

You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.

Fund yields do not reflect the additional fees and expenses imposed by the insurance company under the variable insurance product contract. If those contract fees and expenses were included, the yields would be less than those shown. Please refer to the variable insurance product prospectus for a complete listing of these expenses.

The Seven-Day Yield (with waviers) is the average income paid out over the previous seven days assuming interest income is not reinvested and it reflects the effect of any applicable waivers. Absent such waivers, the fund’s yield would have been lower. The Seven-Day Yield (without waivers) is the yield without the effect of any applicable waivers. The Seven-Day Effective Yield is the yield with waivers assuming that all interest income is reinvested in additional shares of the fund. For additional details, see financial note 4.

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Schwab Government Money Market Portfolio | Annual Report

Schwab Government Money Market Portfolio

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

As a fund shareholder, you may incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, transfer agent fees, and other fund expenses.

	Expense Ratio (Annualized)¹	Beginning Account Value at 7/1/17	Ending Account Value (Net of Expenses) at 12/31/17	Expenses Paid During Period 7/1/17-12/31/17²
Schwab Government Money Market Portfolio
Actual Return	0.43%	$1,000.00	$1,003.30	$2.17
Hypothetical 5% Return	0.43%	$1,000.00	$1,023.03	$2.19

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. Effective October 3, 2017, the contractual expense limitation changed to 0.35%. If the fund expense changes had been in place throughout the entire most recent fiscal half-year, the expenses paid during the period under the actual return and hypothetical 5% return examples would have been $1.77 and $1.79, respectively (see financial note 4).

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

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Schwab Government Money Market Portfolio | Annual Report

Schwab Government Money Market Portfolio

Financial Statements

Financial Highlights

	1/1/17– 12/31/17	1/1/16– 12/31/16	1/1/15– 12/31/15	1/1/14– 12/31/14	1/1/13– 12/31/13
Per-Share Data
Net asset value at beginning of period	$1.00	$1.00	$1.00	$1.00	$1.00
Income (loss) from investment operations:
Net investment income (loss)	0.00 ¹^,²	0.00 ¹^,²	0.00 ¹^,²	0.00 ²	0.00 ²
Net realized and unrealized gains (losses)	0.00 ²	0.00 ²	(0.00) ²^,³	0.00 ²	0.00 ²^,⁴
Total from investment operations	0.00 ²	0.00 ²	0.00 ²	0.00 ²	0.00 ²
Less distributions:
Distributions from net investment income	(0.00) ²	(0.00) ²	(0.00) ²	(0.00) ²	(0.00) ²
Net asset value at end of period	$1.00	$1.00	$1.00	$1.00	$1.00
Total return	0.45%	0.01%	0.01%	0.01%	0.01%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses	0.46% ⁵	0.37% ⁶	0.12% ⁶	0.07% ⁶	0.08% ⁶
Gross operating expenses	0.50%	0.49%	0.54%	0.49%	0.52%
Net investment income (loss)	0.44%	0.01%	0.01%	0.01%	0.01%
Net assets, end of period (x 1,000,000)	$95	$106	$116	$117	$106

Calculated based on the average shares outstanding during the period.

Per-share amount was less than $0.005.

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.

⁴

Net realized and unrealized gains (losses) ratio includes payment from affiliate of $45,600.

⁵

Effective October 3, 2017, the contractual expense limitation changed. The ratio presented for period ended December 31, 2017 is a blended ratio (see financial note 4).

⁶

Reflects the effect of a voluntary yield waiver in excess of the contractual expense limitation (see financial note 4).

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Schwab Government Money Market Portfolio | Annual Report

See financial notes

Schwab Government Money Market Portfolio

Portfolio Holdings as of December 31, 2017

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 quarter of each fiscal year on Form N-Q. The fund’s Form N-Q is available on the SEC’s website at 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 fund also files a complete schedule of portfolio holdings with the SEC monthly on Form N-MFP which is available immediately upon filing. The fund also makes available its complete schedule of portfolio holdings 5 business days after month end on the fund’s website at www.schwabfunds.com/schwabfunds_prospectus along with a link to the fund’s Form N-MFP filings on the SEC’s website.

For fixed-rate obligations and repurchase agreements, the rate shown is the coupon rate (the rate established when the obligation was issued) and if the coupon rate is not available, the effective yield at the time of purchase is shown. For variable-rate obligations, the rate shown is the interest rate as of the report date based on each security’s rate reset date. The reference rate and spread used is shown parenthetically in the security description, if available; if not, the reference rate is described in a footnote. The date shown in the maturity date column below is either the date on which the principal amount must be paid or the date payment must be made pursuant to a demand feature. If the security’s structure includes one of a number of maturity-shortening provisions set forth in Rule 2a-7, such as an interest rate reset, demand feature or put feature, the effective maturity date is also disclosed. If the effective maturity and maturity date are the same, the date will only appear in the maturity date column.

Issuer	Footnotes	Rate	Effective Maturity	Maturity Date	Face Amount ($)	Value ($)
Fixed-Rate Obligations 36.5% of net assets
U.S. Government Agency Debt 34.9%
FEDERAL FARM CREDIT BANKS FUNDING CORP		1.42%		04/02/18	200,000	200,106
FEDERAL HOME LOAN BANKS		1.05%		01/03/18	500,000	499,971
		1.15%		01/05/18	500,000	499,936
		1.09%		01/10/18	2,500,000	2,499,319
		1.18%		01/10/18	2,000,000	1,999,410
		1.09%		01/12/18	400,000	399,867
		1.15%		01/12/18	500,000	499,825
		1.23%		01/12/18	3,000,000	2,998,874
		1.10%		01/17/18	3,300,000	3,298,393
		1.12%		01/24/18	1,000,000	999,288
		1.13%		01/24/18	1,000,000	999,278
		1.25%		01/24/18	800,000	799,361
		1.14%		01/31/18	4,000,000	3,996,197
		1.27%		01/31/18	500,000	499,470
		1.11%		02/02/18	1,000,000	999,018
		1.29%		02/02/18	500,000	499,428
		1.15%		02/07/18	100,000	99,882
		1.22%		02/07/18	500,000	499,376
		1.12%		02/09/18	300,000	299,636
		1.26%		02/14/18	500,000	499,231
		1.29%		02/16/18	500,000	499,176
		1.13%		02/21/18	1,000,000	998,405
		1.31%		02/26/18	500,000	498,981
		1.14%		02/28/18	1,000,000	998,163
		1.13%		03/02/18	1,000,000	998,125
		1.14%		03/14/18	1,000,000	997,720
		0.88%		03/19/18	500,000	499,660
		1.18%		03/28/18	800,000	797,754
		1.21%		04/06/18	250,000	249,205

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Schwab Government Money Market Portfolio | Annual Report

See financial notes

Schwab Government Money Market Portfolio

Portfolio Holdings as of December 31, 2017 (continued)

Issuer	Footnotes	Rate	Effective Maturity	Maturity Date	Face Amount ($)	Value ($)
FEDERAL HOME LOAN MORTGAGE CORPORATION		1.27%		01/16/18	33,000	32,983
		1.11%		02/08/18	1,000,000	998,834
		1.05%		02/26/18	1,000,000	999,846
		0.88%		03/07/18	750,000	749,596
		0.75%		04/09/18	500,000	499,423
		5.00%		05/01/18	250,000	253,097
						33,156,834
U.S. Treasury Debt 1.6%
UNITED STATES TREASURY		3.50%		02/15/18	1,000,000	1,002,844
		2.75%		02/28/18	500,000	501,244
						1,504,088
Total Fixed-Rate Obligations
(Cost $34,660,922)						34,660,922

Variable-Rate Obligations 18.6% of net assets
U.S. Government Agency Debt 18.1%
FEDERAL HOME LOAN BANKS
(3 mo. USD-LIBOR - 0.03%)		1.31%		01/02/18	1,000,000	1,000,008
(3 mo. USD-LIBOR - 0.28%)		1.08%		01/19/18	350,000	350,000
(1 mo. USD-LIBOR - 0.17%)		1.37%		01/22/18	3,000,000	3,000,000
(3 mo. USD-LIBOR - 0.28%)		1.10%		01/26/18	500,000	500,000
(3 mo. USD-LIBOR - 0.11%)		1.29%		02/05/18	500,000	499,992
(3 mo. USD-LIBOR - 0.38%)		1.02%		02/09/18	1,000,000	1,000,000
(3 mo. USD-LIBOR - 0.15%)		1.27%		02/16/18	350,000	350,057
(1 mo. USD-LIBOR - 0.15%)		1.30%	01/12/18	03/12/18	1,000,000	1,000,000
(3 mo. USD-LIBOR - 0.17%)		1.40%		03/14/18	1,200,000	1,200,213
(3 mo. USD-LIBOR - 0.22%)		1.39%		03/19/18	500,000	500,099
(3 mo. USD-LIBOR - 0.31%)		1.33%		03/21/18	500,000	500,013
(1 mo. USD-LIBOR - 0.15%)		1.36%	01/20/18	04/20/18	1,000,000	999,988
(3 mo. USD-LIBOR - 0.35%)		1.07%	02/15/18	05/15/18	1,000,000	1,000,008
(3 mo. USD-LIBOR - 0.04%)		1.48%	03/07/18	06/07/18	350,000	350,341
(1 mo. USD-LIBOR - 0.15%)		1.41%	01/27/18	07/27/18	1,000,000	1,000,000
(3 mo. USD-LIBOR - 0.27%)		1.07%	01/05/18	10/05/18	500,000	500,000
(1 mo. USD-LIBOR - 0.13%)		1.30%	01/10/18	10/10/18	500,000	500,000
(1 mo. USD-LIBOR - 0.13%)		1.35%	01/15/18	11/15/18	1,000,000	1,000,000
(1 mo. USD-LIBOR - 0.13%)		1.36%	01/16/18	11/16/18	500,000	500,000
(1 mo. USD-LIBOR - 0.07%)		1.36%	01/11/18	02/11/19	500,000	500,000
(1 mo. USD-LIBOR - 0.07%)		1.48%	01/25/18	02/25/19	900,000	900,000
						17,150,719
U.S. Treasury Debt 0.5%
UNITED STATES TREASURY
(3 mo. Treasury Money Market Yield + 0.19%)		1.64%	01/02/18	04/30/18	500,000	500,255
Total Variable-Rate Obligations
(Cost $17,650,974)						17,650,974

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Schwab Government Money Market Portfolio | Annual Report

See financial notes

Schwab Government Money Market Portfolio

Portfolio Holdings as of December 31, 2017 (continued)

Security

Footnotes

Rate

Number
of Shares

Value ($)

Other Investment Company 0.0% of net assets

Money Market Fund 0.0%

State Street Institutional U.S. Government Money Market Fund, Premier Class

(a)

1.21%

n/a

45,600

Total Other Investment Company

(Cost $45,600)

45,600

Issuer

Footnotes

Rate

Effective
Maturity

Maturity
Date

Maturity
Amount ($)

Value ($)

Repurchase Agreements 44.8% of net assets

U.S. Government Agency Repurchase Agreements* 38.9%

BNP PARIBAS SA

Issued 12/29/17, repurchase date 01/02/18
(Collateralized by U.S. Treasury and U.S. Government Agency Securities valued at $9,191,512, 1.25% - 3.00%, due 03/31/19 - 08/20/46)

1.40%

01/02/18

9,001,400

9,000,000

JP MORGAN SECURITIES LLC

Issued 12/29/17, repurchase date 01/02/18
(Collateralized by U.S. Treasury Securities valued at $8,160,058, 0.00% - 3.63%, due 08/16/18 - 02/15/44)

1.43%

01/02/18

8,001,271

8,000,000

MERRILL LYNCH PIERCE FENNER & SMITH INC

Issued 12/29/17, repurchase date 01/02/18
(Collateralized by U.S. Government Agency Securities valued at $14,420,001, 2.50% - 3.50%, due 01/01/32 - 10/01/46)

1.41%

01/02/18

14,002,193

14,000,000

RBC CAPITAL MARKETS LLC

Issued 12/29/17, repurchase date 01/02/18
(Collateralized by U.S. Treasury Securities valued at $1,020,200, 2.25%, due 03/31/21)

1.40%

01/02/18

1,000,156

1,000,000

RBC DOMINION SECURITIES INC

Issued 12/29/17, repurchase date 01/02/18
(Collateralized by U.S. Treasury and U.S. Government Agency Securities valued at $1,020,194, 0.13% - 8.88%, due 02/15/19 - 08/15/44)

1.40%

01/02/18

1,000,156

1,000,000

WELLS FARGO SECURITIES LLC

Issued 12/29/17, repurchase date 01/02/18
(Collateralized by U.S. Government Agency Securities valued at $4,160,652, 3.00% - 3.50%, due 04/01/47 - 07/01/56)

1.41%

01/02/18

4,000,627

4,000,000

37,000,000

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Schwab Government Money Market Portfolio | Annual Report

See financial notes

Schwab Government Money Market Portfolio

Portfolio Holdings as of December 31, 2017 (continued)

Issuer

Footnotes

Rate

Effective
Maturity

Maturity
Date

Maturity
Amount ($)

Value ($)

U.S. Treasury Repurchase Agreements 5.9%

BARCLAYS BANK PLC

Issued 12/29/17, repurchase date 01/02/18
(Collateralized by U.S. Treasury Securities valued at $633,372, 1.13%, due 06/30/21)

1.30%

01/02/18

620,910

620,820

Issued 12/28/17, repurchase date 01/04/18
(Collateralized by U.S. Treasury Securities valued at $5,101,407, 0.88% - 1.63%, due 10/15/18 - 11/30/20)

1.34%

01/04/18

5,001,303

5,000,000

5,620,820

Total Repurchase Agreements

(Cost $42,620,820)

42,620,820

(a)	The rate shown is the 7-day yield.
*	Collateralized via U.S. Government Agency Securities or less frequently by higher rated U.S. Treasury Securities.

LIBOR —

London Interbank Offered Rate is the interest rate banks charge each other for short-term loans.

The following is a summary of the inputs used to value the fund’s investments as of December 31, 2017 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets
Fixed-Rate Obligations¹	$—	$34,660,922	$—	$34,660,922
Variable-Rate Obligations¹	—	17,650,974	—	17,650,974
Other Investment Company¹	45,600	—	—	45,600
Repurchase Agreements¹	—	42,620,820	—	42,620,820
Total	$45,600	$94,932,716	$—	$94,978,316

¹	As categorized in Portfolio Holdings.

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 December 31, 2017. Fund investments in underlying mutual funds are classified as Level 1, without consideration to the classification level of the investments held by the underlying mutual funds, which could be Level 1, Level 2 or Level 3.

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Schwab Government Money Market Portfolio | Annual Report

See financial notes

Schwab Government Money Market Portfolio

Financial Notes

1. Business Structure of the Fund:

Schwab Government Money Market Portfolio (the fund) is a series of Schwab Annuity Portfolios (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 fund discussed in this report, which is highlighted:

SCHWAB ANNUITY PORTFOLIOS (ORGANIZED JANUARY 21, 1994)
Schwab Government Money Market Portfolio
Schwab MarketTrack Growth Portfolio II™
Schwab S&P 500 Index Portfolio
Schwab VIT Balanced Portfolio
Schwab VIT Balanced with Growth Portfolio
Schwab VIT Growth Portfolio

The fund in this report offers one share class. Shares are bought and sold 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 fund’s Board of Trustees (the Board) may authorize the issuance of as many shares as necessary.

The fund is intended as an investment vehicle for variable annuity contracts and variable life insurance policies to be offered by separate accounts of participating life insurance companies and for pension and retirement plans qualified under the Internal Revenue Code of 1986, as amended. At December 31, 2017, 100% of the fund’s shares were held through separate accounts of five insurance companies. Subscriptions and redemptions of these insurance separate accounts could have a material impact on the fund.

2. Significant Accounting Policies:

The following is a summary of the significant accounting policies the fund uses in its preparation of financial statements. The fund follows 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).

Effective August 1, 2017, the fund adopted disclosure requirement changes for SEC Regulation S-X. The adopted changes are reflected throughout this report.

(a) Security Valuation:

Securities in the fund are valued at amortized cost (which approximates market value) as permitted in accordance with Rule 2a-7 of the 1940 Act. In the event that security valuations do not approximate market value, securities may be fair valued as determined in accordance with procedures adopted by the Board. 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 fund pursuant to the valuation procedures.

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Schwab Government Money Market Portfolio

Financial Notes (continued)

2. Significant Accounting Policies (continued):

categorization is based on the lowest level input that is significant to the valuation. If the fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.

• Underlying funds: Mutual funds are valued at their respective NAVs.

The three levels of the fair value hierarchy are as follows:

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 fund’s investments as of December 31, 2017 are disclosed in the Portfolio Holdings.

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

Repurchase Agreements: In a repurchase agreement, a fund buys a security from another party (the counterparty), usually a financial institution, with the agreement that it be sold back in the future. Repurchase agreements subject a fund to counterparty risk, meaning that the fund could lose money if the other party fails to perform under the terms of the agreement. The fund mitigates this risk by ensuring that a fund’s repurchase agreements are collateralized by cash and/or U.S. government securities. All collateral is held by the fund’s custodian (or, with multi-party agreements, the agent’s bank) and is monitored daily to ensure that its market value is at least equal to the repurchase price under the agreement. In the event of a default by the counterparty, realization of the collateral proceeds could be delayed or limited and the value of the collateral may decline. Investments in repurchase agreements are also based on a review of the credit quality of the repurchase agreement counterparty.

As of December 31, 2017, the fund had investments in repurchase agreements with a gross value of $42,620,820 as disclosed in the Portfolio Holdings and the Statement of Assets and Liabilities. The value of the related collateral disclosed in the Portfolio Holdings exceeded the value of the repurchase agreements at period end.

Delayed-Delivery Transactions: The fund may buy securities at a predetermined price or yield, with payment and delivery taking place after the customary settlement period for that type of security. The fund will assume the rights and risks of ownership at the time of purchase, including the risk of price and yield fluctuations. Typically, no interest will accrue to the fund until the security is delivered. The fund will earmark or segregate appropriate liquid assets to cover its delayed-delivery purchase obligations, if any.

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Schwab Government Money Market Portfolio

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(d) Investment Income:

Interest income is recorded as it accrues. If the fund buys a debt security at a discount (less than face value) or a premium (more than face value), it amortizes premiums and accretes discounts from the purchase settlement date up to maturity. The fund then increases (in the case of discounts) or reduces (in the case of premiums) the income it records from the security. Certain securities may be callable (meaning that the issuer has the option to pay it off before its maturity date). The fund amortizes the premium and accretes the discount on each callable security to the security’s maturity date, except when the purchase price is higher than the call price at the security’s call date (in which case the premium is amortized to the call date).

(e) Expenses:

(f) Distributions to Shareholders:

The fund declares distributions from net investment income, if any, every day it is open for business. These distributions are paid out to the insurance company separate accounts once a month. The fund makes distributions from net realized capital gains, if any, once a year.

(g) Custody Credit:

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

(h) Accounting Estimates:

(i) Federal Income Taxes:

(j) Indemnification:

(k) Recent Accounting Standards:

In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update “Premium Amortization on Purchased Callable Debt Securities” which amends the amortization period for a callable debt security held at a premium from the maturity date to the earliest call date. The guidance is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. At this time, management believes these changes will have no impact to the fund.

3. Risk Factors:

Investment Risk. You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.

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Schwab Government Money Market Portfolio

Financial Notes (continued)

3. Risk Factors (continued):

Interest Rate Risk. Interest rates rise and fall over time. As with any investment whose yield reflects current interest rates, the fund’s yield will change over time. During periods when interest rates are low, the fund’s yield (and total return) also will be low or may even be negative, which may make it difficult for the fund to pay expenses out of fund assets or maintain a stable $1.00 share price. A change in a central bank’s monetary policy or improving economic conditions, among other things, may result in an increase in interest rates. A sudden or unpredictable rise in interest rates may cause volatility in the market and may decrease liquidity in the money market securities markets, making it more difficult for the fund to sell its money market investments at a time when the investment adviser might wish to sell such investments. Decreased market liquidity also may make it more difficult to value some or all of the fund’s money market securities holdings. In addition, to the extent the fund makes any reimbursement payments to the investment adviser and/or its affiliates, the fund’s yield would be lower.

Stable Net Asset Value Risk. If the fund or another money market fund fails to maintain a stable net asset value (or such perception exists in the market place), the fund could experience increased redemptions, which may adversely impact the fund’s share price. The fund is permitted, among other things, to reduce or withhold any income and/or gains generated by the fund to maintain a stable $1.00 share price.

Repurchase Agreements Risk. When the fund enters into a repurchase agreement, the fund is exposed to the risk that the other party (i.e. the counterparty) will not fulfill its contractual obligation. In a repurchase agreement, there exists the risk that, when the fund buys a security from a counterparty that agrees to repurchase the security at an agreed upon price (usually higher) and time, the counterparty will not repurchase the security.

Credit Risk. The fund is subject to the risk that a decline in the credit quality of a fund investment could cause the fund to lose money or underperform. The fund could lose money if the issuer of a fund investment fails to make timely principal or interest payments or if a guarantor, liquidity provider or counterparty of a fund investment fails to honor its obligations. Even though the fund’s investments in repurchase agreements are collateralized at all times, there is some risk to the fund if the other party should default on its obligations and the fund is delayed or prevented from recovering or disposing of the collateral. Negative perceptions of the ability of an issuer, guarantor, liquidity provider or counterparty to make payments or otherwise honor its obligations, as applicable, could also cause the price of that investment to decline. The credit quality of the fund’s portfolio holdings can change rapidly in certain market environments and any downgrade or default on the part of a single fund investment could cause the fund’s share price or yield to fall.

Many of the U.S. government securities that the fund invests in are not backed by the full faith and credit of the U.S. government, which means they are neither issued nor guaranteed by the U.S. Treasury. Although maintained in conservatorship by the Federal Housing Finance Agency since September 2008, the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) maintain only lines of credit with the U.S. Treasury. The Federal Home Loan Banks maintain limited access to credit lines from the U.S. Treasury. Other securities, such as obligations issued by the Federal Farm Credit Banks Funding Corporation, are supported solely by the credit of the issuer. There can be no assurance that the U.S. government will provide financial support to securities of its agencies and instrumentalities if it is not obligated to do so under law. Also, any government guarantees on securities a fund owns do not extend to the shares of the fund itself.

Credit and Liquidity Enhancements Risk. The fund may invest in securities with credit or liquidity enhancements provided by a bank or other financial institution, and the existence and nature of such enhancements may be a significant factor in the investment adviser’s decision-making process. Generally, these enhancements are employed by the issuers of the securities to reduce credit risk and provide enhanced or back-up liquidity for a purchaser, such as the fund. Adverse developments affecting these banks and financial institutions could therefore have a negative effect on the value of the fund’s holdings. For example, a rating agency downgrade of a credit or liquidity enhancement provider may adversely affect the value of securities held by the fund. Any decline in the value of the securities held by the fund could cause the fund’s share price or yield to fall. To the extent that a portion of the fund’s underlying investments are enhanced by the same bank or financial institution, these risks may be increased.

Management Risk. Any actively managed mutual fund is subject to the risk that its investment adviser will select investments or allocate assets in a manner that could cause the fund to underperform or otherwise not meet its objective. The fund’s investment adviser applies its own investment techniques and risk analyses in making investment decisions for the fund, but there can be no guarantee that they will produce the desired results. The investment adviser’s maturity decisions will also affect the fund’s yield, and potentially could affect its share price. To the extent that the investment adviser anticipates interest rate trends imprecisely, the fund’s yield at times could lag those of other money market funds.

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Schwab Government Money Market Portfolio

Financial Notes (continued)

3. Risk Factors (continued):

Redemption Risk. The fund may experience periods of heavy redemptions that could cause the fund to liquidate its assets at inopportune times or at a loss or depressed value, particularly during periods of declining or illiquid markets. Redemptions by a few large investors in the fund may have a significant adverse effect on the fund’s ability to maintain a stable $1.00 share price. In the event any money market fund fails to maintain a stable net asset value, other money market funds, including the fund, could face a market-wide risk of increased redemption pressures, potentially jeopardizing the stability of their $1.00 share prices.

Money Market Fund Risk. The fund is not designed to offer capital appreciation. In exchange for their emphasis on stability and liquidity, money market investments may offer lower long-term performance than stock or bond investments.

Tax Diversification Risk. As described above, the fund intends to operate as a government money market fund under the regulations governing money market funds. Additionally, the fund intends to meet the diversification requirements that are applicable to insurance company separate accounts under Subchapter L of the Internal Revenue Code of 1986, as amended (the Diversification Requirements). To satisfy the Diversification Requirements applicable to variable annuity contracts, the value of the assets of the fund invested in securities issued by the U.S. government, its agencies or instrumentalities must remain below specified thresholds. For these purposes, each U.S. government agency or instrumentality is treated as a separate issuer.

Operating as a government money market fund may make it difficult for the fund to meet the Diversification Requirements. This difficulty may be exacerbated by the potential increase in demand for the types of securities in which the fund invests as a result of changes to the rules that govern SEC registered money market funds. A failure to satisfy the Diversification Requirements could have significant adverse tax consequences for variable annuity contract owners whose contract values are determined by investment in the fund.

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

4. Affiliates and Affiliated Transactions:

Investment Adviser

For its advisory and administrative services to the 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:

Average Daily Net Assets
First $1 billion	0.35%
More than $1 billion but not exceeding $10 billion	0.32%
More than $10 billion but not exceeding $20 billion	0.30%
More than $20 billion but not exceeding $40 billion	0.27%
Over $40 billion	0.25%

For the period ended December 31, 2017, the aggregate advisory fee paid to CSIM by the fund was 0.35%, as a percentage of the fund’s average daily net assets.

Contractual Expense Limitation

CSIM and its affiliates have made an additional agreement with the fund, for so long as CSIM serves as the investment adviser to the fund, which may only be amended or terminated with the approval of the Board, to limit the total annual fund operating expenses charged, excluding interest, taxes, and certain non-routine expenses (expense limitation) to 0.35%. Prior to October 3, 2017, the expense limitation was 0.50%.

Voluntary Yield Waiver/Reimbursement

CSIM and its affiliates also may waive and/or reimburse expenses to the extent necessary to maintain a positive net yield for the fund. There were no voluntary waivers or reimbursements to the fund during the period ending December 31, 2017.

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Schwab Government Money Market Portfolio

Financial Notes (continued)

4. Affiliates and Affiliated Transactions (continued):

Interfund Borrowing and Lending

5. Board of Trustees:

6. Borrowing from Banks:

7. Federal Income Taxes:

At December 31, 2017, the tax basis cost of the fund’s investments was $94,932,716 and the unrealized appreciation and depreciation were $45,600 and ($0), respectively, with a net unrealized appreciation of $45,600.

As of December 31, 2017, the components of distributable earnings on a tax basis were as follows:

Undistributed ordinary income	$2,564
Net unrealized appreciation (depreciation) on investments	45,600
Total	$48,164

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of December 31, 2017, the fund had no capital loss carryforwards.

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Schwab Government Money Market Portfolio

Financial Notes (continued)

7. Federal Income Taxes (continued):

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

Current period distributions
Ordinary income	$449,060
Long-term capital gains	1,056
Prior period distributions
Ordinary income	$13,338
Long-term capital gains	—

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 December 31, 2017, the fund made the following reclassifications:

Capital shares	$—
Undistributed net investment income	2,223
Net realized capital gains and losses	(2,223)

As of December 31, 2017, management has reviewed the tax positions for open periods (for federal purposes, three years from the date of filing and for state purposes, four years from the date of filing) as applicable to the fund, and has determined that no provision for income tax is required in the fund’s financial statements. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended December 31, 2017, the fund did not incur any interest or penalties.

8. Subsequent Events:

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

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Schwab Government Money Market Portfolio | Annual Report

Schwab Government Money Market Portfolio

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Schwab Annuity Portfolios and Shareholders of Schwab Government Money Market Portfolio

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the portfolio holdings, of Schwab Government Money Market Portfolio (one of the funds constituting Schwab Annuity Portfolios, hereafter referred to as the “Fund”) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
San Francisco, California
February 16, 2018

We have served as the auditor of one or more investment companies in the Schwab Funds Complex since 1989.

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Schwab Government Money Market Portfolio

Trustees and Officers

Independent Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Robert W. Burns 1959 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	Retired/Private Investor (Jan. 2009 – present). Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) (investment management firm) and President, PIMCO Funds.	108	Director, PS Business Parks, Inc. (2005 – 2012)
John F. Cogan 1947 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Fellow, The Hoover Institution at Stanford University (public policy think tank) (Oct. 1979 – present); Senior Fellow, Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – 2015).	108	Director, Gilead Sciences, Inc. (2005 – present)
Stephen Timothy Kochis 1946 Trustee (Trustee of Schwab Strategic Trust since 2012; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	CEO and Owner, Kochis Global (wealth management consulting) (May 2012 – present); Chairman and CEO, Aspiriant, LLC (wealth management) (Jan. 2008 – Apr. 2012).	108	None
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Private Investor.	108	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present)

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Schwab Government Money Market Portfolio

Independent Trustees (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013).	108	Director, KLA-Tencor Corporation (2008 – present)
Kimberly S. Patmore 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Consultant, Patmore Management Consulting (management consulting) (2008 – present).	108	None
Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2015)	Co-Chief Executive Officer, Kudu Investment Management, LLC (financial services) (Jan. 2015 – present); Partner, Kudu Advisors, LLC (financial services) (June 2008 – Jan. 2015); Advisor, Asset International, Inc. (publisher of financial services information) (Aug. 2008 – Jan. 2015).	108	None
Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2000; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (Mar. 1990 – present).	108	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 The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Co-CEO, Colgin Cellars, LLC (vineyards) (Feb. 1998 – present).	108	Board Member and Chairman of the Audit Committee, Ionis Pharmaceuticals (1994 – present) Lead Independent Director and Chair of Audit Committee, OUTFRONT Media Inc. (2014 – present)

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Schwab Government Money Market Portfolio | Annual Report

Schwab Government Money Market Portfolio

Interested Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Walter W. Bettinger II² 1960 Chairman and Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010)	Director, President and Chief Executive Officer, The Charles Schwab Corporation (Oct. 2008 – present); President and Chief Executive Officer (Oct. 2008 – present), Director (May 2008 – present), Charles Schwab & Co., Inc.; Director, Charles Schwab Bank (Apr. 2006 – present); Director (May 2008 – present), President and Chief Executive Officer (Aug. 2017 – present), Schwab Holdings, Inc.; and Director, Charles Schwab Investment Management, Inc. (July 2016 – present).	108	Director, The Charles Schwab Corporation (2008 – present)
Marie A. Chandoha² 1961 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), 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 (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm) (Mar. 2007 – Aug. 2010).	108	None
Joseph R. Martinetto² 1962 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Senior Executive Vice President (July 2015 – present), Chief Financial Officer (July 2015 – Aug. 2017), Executive Vice President and Chief Financial Officer (May 2007 – July 2015), The Charles Schwab Corporation and Charles Schwab & Co., Inc.; Director, Charles Schwab & Co., Inc. (May 2007 – present); Director (Apr. 2010 – present) and Chief Executive Officer (July 2013 – Apr. 2015), Charles Schwab Bank; Director (May 2007 – present), Chief Financial Officer (May 2007 – Aug. 2017), Senior Executive Vice President (Feb. 2016 – present), and Executive Vice President (May 2007 – Feb. 2016), Schwab Holdings, Inc.	108	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 A. Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), 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 (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm) (Mar. 2007 – Aug. 2010).
Mark Fischer 1970 Treasurer and Chief Financial Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013)	Treasurer and Chief Financial Officer, Schwab Funds, Laudus Funds and Schwab ETFs (Jan. 2016 – present); Assistant Treasurer, Schwab Funds and Laudus Funds (Dec. 2013 – Dec. 2015), Schwab ETFs (Nov. 2013 – Dec. 2015); Vice President, Charles Schwab Investment Management, Inc. (Oct. 2013 – present); Executive Director, J.P. Morgan Investor Services (Apr. 2011 – Sept. 2013); Assistant Treasurer, Massachusetts Financial Service Investment Management (May 2005 – Mar. 2011).

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Schwab Government Money Market Portfolio

Officers of the Trust (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
George Pereira 1964 Senior Vice President and Chief Operating Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust since 2006; Schwab Strategic Trust since 2009)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Operating Officer (Jan. 2016 – present), Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – Dec. 2015); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – Dec. 2015) and Schwab ETFs (Oct. 2009 – Dec. 2015); Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Apr. 2005 – present).
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (investment management firm) (May 2009 – Apr. 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 The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds, Laudus Funds and Schwab ETFs (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 (investment management firm) (Apr. 2006 – Jan. 2008).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President (Sept. 2011 – present), Vice President (Mar. 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 (Apr. 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (Apr. 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds and Schwab ETFs Chief Legal Officer, Vice President and Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009)	Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (Mar. 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	Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee’s twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.
²	Mr. Bettinger, Ms. Chandoha and Mr. Martinetto are Interested Trustees. Mr. Bettinger is an Interested Trustee because he owns stock of The Charles Schwab Corporation (CSC), the parent company of Charles Schwab Investment Management, Inc. (CSIM), the investment adviser for the trusts in the Fund Complex, is an employee and director of Charles Schwab & Co., Inc. (CS&Co), the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios, and is a director of the investment adviser for the trusts in the Fund Complex. Ms. Chandoha is an Interested Trustee because she owns stock of CSC and is an employee and director of CSIM. Mr. Martinetto is an Interested Trustee because he owns stock of CSC and is an employee and director of CS&Co.
³	The President, Treasurer and Secretary/Clerk 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.

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Schwab Government Money Market Portfolio | Annual Report

Schwab S&P 500 Index Portfolio

The Investment Environment

Over the 12-month reporting period ended December 31, 2017, U.S. equity markets performed well. U.S. stocks generated strong, double-digit returns, with 2017 marking the first calendar year ever in which the U.S. stock market saw positive returns all 12 months. Expectations for policy changes from Washington, stable global economic growth, and solid corporate earnings drove several indices to record highs over the reporting period, and market volatility remained historically low. Meanwhile, despite inflation measurements below its stated goal, the Federal Reserve (Fed) continued on the path of monetary policy normalization by raising short-term interest rates three times in 2017. In this environment, the S&P 500^® Index returned 21.83% for the 12-month reporting period.

U.S. equity markets maintained their upward trajectory over the reporting period, with several reaching record highs multiple times during the year. Investor expectations for policy changes from the Trump administration contributed to these gains, even as several setbacks in Washington appeared to stall meaningful progress. Toward the end of the reporting period, the passage of the GOP’s tax bill drove stocks even higher. Meanwhile, corporate earnings were strong throughout 2017 as companies generally exceeded expectations each quarter, and the Cboe Volatility Index^®¹ (or VIX^®), a gauge of equity market volatility, fell to an all-time low in November. The U.S. consumer generally remained optimistic, as measurements of both consumer confidence and consumer sentiment stayed at near record levels throughout the reporting period, while the U.S. economy continued improving at a slow and steady pace amid a solid labor market, modest wage growth, and increased consumer spending.

During the 12-month reporting period, the Fed continued to take steps toward a more normalized monetary policy environment. Even with low levels of inflation, the Fed raised short-term interest rates in March, June, and December, each time by 0.25%, with the federal funds rate ended the reporting period in a range of 1.25% to 1.50%. Additionally, the Fed announced plans in June to begin reducing the size of its approximately $4.5 trillion balance sheet in late 2017 by allowing securities to mature without reinvesting the proceeds. This process began in October, and as expected, proved to be uneventful in the final months of the year. Both the short-term rate increases and the balance sheet unwinding signaled the Fed’s continued confidence in the U.S. and overall global economy.

Asset Class Performance Comparison % returns during the 12 months ended December 31, 2017

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

Management views may have changed since the report date.

*	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.
¹	The Cboe Volatility Index^® (or VIX^®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.

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Schwab S&P 500 Index Portfolio | Annual Report

Schwab S&P 500 Index Portfolio

Portfolio Management

Christopher Bliss, CFA, Vice President and Head of the Passive Equity Team, leads the portfolio management team for Schwab’s Passive Equity Funds and ETFs. He also has overall responsibility for all aspects of the management of the fund. Prior to joining CSIM in 2016, Mr. Bliss spent 12 years at BlackRock (formerly Barclays Global Investors) managing and leading institutional index teams, most recently as a Managing Director and Head of Americas Institutional Index team. Prior to BlackRock, he worked as an equity analyst and portfolio manager for Harris Bretall and before that, as a research analyst for JP Morgan.

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

Sabya Sinha, Portfolio Manager, is responsible for the day-to-day co-management of the fund. Prior to joining CSIM in 2015, Mr. Sinha spent a year at F-Squared Investments on the product development and analytics team. Prior to F-Squared, he worked at IndexIQ Advisors as a senior index portfolio manager for three years and for Bank of America’s Columbia Management subsidiary as a portfolio manager for three years.

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Schwab S&P 500 Index Portfolio | Annual Report

Schwab S&P 500 Index Portfolio as of December 31, 2017

The Schwab S&P 500 Index Portfolio (the fund) seeks to track the total return of the S&P 500^® Index (the index), which comprises the stocks of 500 leading U.S. publicly traded companies across a broad range of industries. To pursue its investment objective, the fund uses a replication investment approach, so its stock weightings generally reflect those of the index. For more information concerning the fund’s investment objective, strategy and risks, please see the fund’s prospectus.

Market Highlights. U.S. stocks posted strong double-digit gains for the 12-month reporting period ended December 31, 2017, against a backdrop of an earnings rebound and global economic recovery. Over the reporting period, the U.S. economy showed continual strength, due in part to the Trump administration’s pro-business agenda. Labor markets remained strong, helping fuel growth in consumer spending and residential homebuilding and a high level of overall consumer confidence. Over 2017, the Federal Reserve (Fed) continued its efforts toward interest rate normalization, raising the federal funds target rate three times and instituting the Fed’s balance sheet reduction program in October, all with little disruption to the markets.

Performance. The fund returned 21.72% for the 12-month reporting period ended December 31, 2017, compared with the index, which returned 21.83%. 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 fund closely tracked the index for the reporting period, so contributors and detractors to the fund were consistent with those of the index. From a sector standpoint, the Energy sector was hard-hit in 2017 and detracted the most from fund performance for the reporting period. Representing approximately 6% of the fund’s investments, the sector returned approximately -1% for the reporting period. Among the fund’s Energy holdings, the weakest performers were multinational oil and gas manufacturer Exxon Mobil Corporation and oilfield services company Schlumberger NV, down 4% and 17%, respectively.

The Telecommunication Services sector also detracted from fund performance for the reporting period. Constituting just over 2% of the fund’s investments, the sector’s return was down approximately 1%. Among the fund’s holdings in the sector, the weakest performers were communications and data services providers CenturyLink, Inc. and AT&T Inc., down 22% and 4%, respectively.

By comparison, the strongest contributor to fund performance for the reporting period was the Information Technology sector. Representing roughly 23% of fund assets, the sector gained nearly 39% for the reporting period. Among the fund’s Information Technology sector holdings, tech giants Apple, Inc. and Microsoft Corp. were the strongest contributors, with those positions up 48% and 41%, respectively.

The Health Care sector was the second-strongest sector contributor to fund performance. Constituting approximately 14% of fund assets, the sector returned approximately 22% for the reporting period. Among the fund’s Health Care sector holdings, the two strongest performers were multinational medical devices, pharmaceutical and consumer packaged goods manufacturing company Johnson & Johnson and managed healthcare company UnitedHealth Group Incorporated, with those positions up 24% and 40%, respectively.

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

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Schwab S&P 500 Index Portfolio | Annual Report

Schwab S&P 500 Index Portfolio

Performance and Fund Facts as of December 31, 2017

Performance of Hypothetical $10,000 Investment (December 31, 2007 – December 31, 2017)¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	10 Years
Fund: Schwab S&P 500 Index Portfolio (11/01/96)	21.72%	15.55%	8.35%
S&P 500^® Index	21.83%	15.79%	8.50%
Fund Category: Morningstar Large-Cap Blend²	21.29%	14.95%	7.77%
Fund Expense Ratio³: 0.03%

Index ownership — “Standard & Poor’s^®,” “S&P^®,” and “S&P 500^®” are registered trademarks of Standard & Poor’s Financial Services LLC (S&P), and “Dow Jones^®” is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones) and have been licensed for use by S& P Dow Jones Indices LLC and its affiliates and sublicensed for certain purposes by Charles Schwab Investment Management (CSIM). The “S&P 500^® Index” is a product of S&P Dow Jones Indices LLC or its affiliates, and has been licensed for use by CSIM. The Schwab S&P 500^® Index Portfolio is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates, and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in the fund.

¹	Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. Fund performance does not reflect the additional fees and expenses imposed by the insurance company under the variable insurance product contract. If those contract fees and expenses were included, the performance would be less than that shown. Please refer to the variable insurance product prospectus for a complete listing of these expenses.
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.

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Schwab S&P 500 Index Portfolio | Annual Report

Schwab S&P 500 Index Portfolio

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

As a fund shareholder, you may incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees.

	Expense Ratio (Annualized)¹	Beginning Account Value at 7/1/17	Ending Account Value (Net of Expenses) at 12/31/17	Expenses Paid During Period 7/1/17-12/31/17²
Schwab S&P 500 Index Portfolio
Actual Return	0.03%	$1,000.00	$1,113.90	$0.16
Hypothetical 5% Return	0.03%	$1,000.00	$1,025.05	$0.15

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 the 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.

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Schwab S&P 500 Index Portfolio | Annual Report

Schwab S&P 500 Index Portfolio

Financial Statements

Financial Highlights

	1/1/17– 12/31/17	1/1/16– 12/31/16	1/1/15– 12/31/15	1/1/14– 12/31/14	1/1/13– 12/31/13
Per-Share Data
Net asset value at beginning of period	$33.01	$30.09	$30.21	$27.03	$20.82
Income (loss) from investment operations:
Net investment income (loss)	0.71 ¹	0.62 ¹	0.59 ¹	0.48	0.42
Net realized and unrealized gains (losses)	6.39	2.85	(0.24)	3.12	6.19
Total from investment operations	7.10	3.47	0.35	3.60	6.61
Less distributions:
Distributions from net investment income	(0.59)	(0.55)	(0.47)	(0.42)	(0.40)
Distributions from net realized gains	(0.01)	—	—	—	—
Total distributions	(0.60)	(0.55)	(0.47)	(0.42)	(0.40)
Net asset value at end of period	$39.51	$33.01	$30.09	$30.21	$27.03
Total return	21.72%	11.68%	1.17%	13.41%	32.06%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses	0.06% ²	0.22%	0.24%	0.22%	0.24%
Gross operating expenses	0.06% ²	0.22%	0.24%	0.23%	0.26%
Net investment income (loss)	1.97%	2.00%	1.94%	1.79%	1.84%
Portfolio turnover rate	3%	2%	3%	2%	2%
Net assets, end of period (x 1,000,000)	$346	$282	$245	$229	$193

Calculated based on the average shares outstanding during the period.

Effective March 1, 2017, the annual operating expense ratio was reduced. The ratio presented for period ended 12/31/17 is a blended ratio (see financial note 4).

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Schwab S&P 500 Index Portfolio | Annual Report

See financial notes

Schwab S&P 500 Index Portfolio

Portfolio Holdings as of December 31, 2017

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

Security	Number of Shares	Value ($)
Common Stock 99.3% of net assets

Automobiles & Components 0.7%
Aptiv plc	3,998	339,150
BorgWarner, Inc.	3,100	158,379
Ford Motor Co.	57,602	719,449
General Motors Co.	19,445	797,051
Goodyear Tire & Rubber Co.	3,662	118,319
Harley-Davidson, Inc.	2,702	137,478
		2,269,826

Banks 6.6%
Bank of America Corp.	146,826	4,334,304
BB&T Corp.	11,992	596,242
Citigroup, Inc.	39,446	2,935,177
Citizens Financial Group, Inc.	7,772	326,269
Comerica, Inc.	2,630	228,310
Fifth Third Bancorp	11,505	349,062
Huntington Bancshares, Inc.	16,456	239,599
JPMorgan Chase & Co.	51,963	5,556,923
KeyCorp	15,700	316,669
M&T Bank Corp.	2,271	388,318
People’s United Financial, Inc.	5,100	95,370
Regions Financial Corp.	18,537	320,319
SunTrust Banks, Inc.	7,200	465,048
The PNC Financial Services Group, Inc.	7,120	1,027,345
U.S. Bancorp	23,714	1,270,596
Wells Fargo & Co.	66,810	4,053,363
Zions Bancorp	2,908	147,814
		22,650,728

Capital Goods 7.3%
3M Co.	9,055	2,131,275
A.O. Smith Corp.	2,178	133,468
Acuity Brands, Inc.	600	105,600
Allegion plc	1,533	121,965
AMETEK, Inc.	3,409	247,050
Arconic, Inc.	6,251	170,340
Caterpillar, Inc.	8,861	1,396,316
Cummins, Inc.	2,379	420,227
Deere & Co.	4,737	741,388
Dover Corp.	2,300	232,277
Eaton Corp. plc	6,734	532,053
Emerson Electric Co.	9,711	676,760
Fastenal Co.	4,352	238,011
Flowserve Corp.	1,789	75,371
Fluor Corp.	2,000	103,300
Fortive Corp.	4,453	322,175
Fortune Brands Home & Security, Inc.	2,200	150,568
General Dynamics Corp.	4,145	843,300
General Electric Co.	130,470	2,276,701
Honeywell International, Inc.	11,429	1,752,751
Illinois Tool Works, Inc.	4,673	779,690
Ingersoll-Rand plc	3,900	347,841
Jacobs Engineering Group, Inc.	1,738	114,638
Johnson Controls International plc	13,788	525,461

Security	Number of Shares	Value ($)
L3 Technologies, Inc.	1,170	231,485
Lockheed Martin Corp.	3,730	1,197,516
Masco Corp.	4,821	211,835
Northrop Grumman Corp.	2,614	802,263
PACCAR, Inc.	5,130	364,640
Parker-Hannifin Corp.	2,035	406,145
Pentair plc	2,399	169,417
Quanta Services, Inc. *	2,497	97,658
Raytheon Co.	4,313	810,197
Rockwell Automation, Inc.	1,895	372,083
Rockwell Collins, Inc.	2,425	328,879
Roper Technologies, Inc.	1,504	389,536
Snap-on, Inc.	939	163,668
Stanley Black & Decker, Inc.	2,223	377,221
Textron, Inc.	4,174	236,207
The Boeing Co.	8,495	2,505,260
TransDigm Group, Inc.	750	205,965
United Rentals, Inc. *	1,310	225,202
United Technologies Corp.	11,167	1,424,574
W.W. Grainger, Inc.	842	198,923
Xylem, Inc.	2,695	183,799
		25,340,999

Commercial & Professional Services 0.6%
Cintas Corp.	1,357	211,461
Equifax, Inc.	1,742	205,417
IHS Markit Ltd. *	5,500	248,325
Nielsen Holdings plc	4,983	181,381
Republic Services, Inc.	3,336	225,547
Robert Half International, Inc.	1,750	97,195
Stericycle, Inc. *	1,300	88,387
Verisk Analytics, Inc. *	2,400	230,400
Waste Management, Inc.	6,155	531,177
		2,019,290

Consumer Durables & Apparel 1.2%
D.R. Horton, Inc.	5,022	256,473
Garmin Ltd.	1,600	95,312
Hanesbrands, Inc.	5,646	118,058
Hasbro, Inc.	1,675	152,241
Leggett & Platt, Inc.	1,900	90,687
Lennar Corp., Class A	3,200	202,368
Mattel, Inc.	4,800	73,824
Michael Kors Holdings Ltd. *	2,300	144,785
Mohawk Industries, Inc. *	950	262,105
Newell Brands, Inc.	7,424	229,402
NIKE, Inc., Class B	19,614	1,226,856
Pulte Homes, Inc.	4,442	147,696
PVH Corp.	1,086	149,010
Ralph Lauren Corp.	742	76,938
Tapestry, Inc.	4,294	189,924
Under Armour, Inc. *(a)	2,952	42,597
Under Armour, Inc., Class C *	2,469	32,887
VF Corp.	4,940	365,560
Whirlpool Corp.	1,133	191,069
		4,047,792

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Schwab S&P 500 Index Portfolio | Annual Report

See financial notes

Schwab S&P 500 Index Portfolio

Portfolio Holdings as of December 31, 2017 (continued)

Security	Number of Shares	Value ($)
Consumer Services 1.9%
Carnival Corp.	6,022	399,680
Chipotle Mexican Grill, Inc. *	409	118,213
Darden Restaurants, Inc.	1,791	171,972
H&R Block, Inc.	2,938	77,034
Hilton Worldwide Holdings, Inc.	3,000	239,580
Marriott International, Inc., Class A	4,655	631,823
McDonald’s Corp.	11,943	2,055,629
MGM Mirage	7,639	255,066
Norwegian Cruise Line Holdings Ltd. *	2,630	140,048
Royal Caribbean Cruises Ltd.	2,550	304,164
Starbucks Corp.	21,588	1,239,799
Wyndham Worldwide Corp.	1,580	183,075
Wynn Resorts Ltd.	1,257	211,918
Yum! Brands, Inc.	5,240	427,636
		6,455,637

Diversified Financials 5.5%
Affiliated Managers Group, Inc.	800	164,200
American Express Co.	10,872	1,079,698
Ameriprise Financial, Inc.	2,263	383,511
Berkshire Hathaway, Inc., Class B *	28,844	5,717,458
BlackRock, Inc.	1,870	960,638
Capital One Finl Corp.	7,230	719,963
Cboe Global Markets, Inc.	1,740	216,787
CME Group, Inc.	5,031	734,778
Discover Financial Services	5,590	429,983
ETRADE Financial Corp.	4,176	207,004
Franklin Resources, Inc.	5,000	216,650
Intercontinental Exchange, Inc.	8,754	617,682
Invesco Ltd.	6,010	219,605
Leucadia National Corp.	4,639	122,887
Moody’s Corp.	2,543	375,372
Morgan Stanley	20,979	1,100,768
Nasdaq, Inc.	1,780	136,757
Navient Corp.	4,380	58,342
Northern Trust Corp.	3,131	312,756
Price T Rowe Group, Inc.	3,523	369,668
Raymond James Financial, Inc.	2,000	178,600
S&P Global, Inc.	3,830	648,802
State Street Corp.	5,500	536,855
Synchrony Financial	11,452	442,162
The Bank of New York Mellon Corp.	15,478	833,645
The Charles Schwab Corp. (b)	17,599	904,061
The Goldman Sachs Group, Inc.	5,340	1,360,418
		19,049,050

Energy 6.0%
Anadarko Petroleum Corp.	8,433	452,346
Andeavor	2,200	251,548
Apache Corp.	5,508	232,548
Baker Hughes, a GE Co.	6,263	198,161
Cabot Oil & Gas Corp.	6,820	195,052
Chesapeake Energy Corp. *	14,856	58,830
Chevron Texaco Corp.	28,726	3,596,208
Cimarex Energy Co.	1,351	164,836
Concho Resources, Inc. *	2,226	334,390
ConocoPhillips	18,205	999,272
Devon Energy Corp.	7,932	328,385
EOG Resources, Inc.	8,640	932,342
EQT Corp.	3,550	202,066
Exxon Mobil Corp.	63,867	5,341,836
Halliburton Co.	13,395	654,614
Helmerich & Payne, Inc.	1,500	96,960
Hess Corp.	3,933	186,700

Security	Number of Shares	Value ($)
Kinder Morgan, Inc.	28,353	512,339
Marathon Oil Corp.	12,768	216,162
Marathon Petroleum Corp.	7,484	493,794
National-Oilwell Varco, Inc.	5,791	208,592
Newfield Exploration Co. *	3,141	99,036
Noble Energy, Inc.	7,282	212,197
Occidental Petroleum Corp.	11,397	839,503
Oneok, Inc.	5,627	300,763
Phillips 66	6,408	648,169
Pioneer Natural Resources Co.	2,485	429,532
Range Resources Corp.	3,514	59,949
Schlumberger Ltd.	20,994	1,414,786
TechnipFMC plc	6,746	211,217
Valero Energy Corp.	6,665	612,580
Williams Cos., Inc.	12,190	371,673
		20,856,386

Food & Staples Retailing 1.8%
Costco Wholesale Corp.	6,599	1,228,206
CVS Corp.	15,219	1,103,378
Kroger Co.	13,410	368,105
Sysco Corp.	7,214	438,106
Wal-Mart Stores, Inc.	22,002	2,172,697
Walgreens Boots Alliance, Inc.	13,073	949,361
		6,259,853

Food, Beverage & Tobacco 4.5%
Altria Group, Inc.	28,710	2,050,181
Archer-daniels-midla	8,235	330,059
Brown-Forman Corp., Class B	2,854	195,984
Campbell Soup Co.	3,045	146,495
ConAgra Foods, Inc.	6,278	236,492
Constellation Brands, Inc., Class A	2,600	594,282
Dr Pepper Snapple Group, Inc.	2,800	271,768
General Mills, Inc.	8,658	513,333
Hormel Foods Corp.	3,808	138,573
Kellogg Co.	3,800	258,324
McCormick & Co., Inc.	1,740	177,323
Molson Coors Brewing Co., Class B	2,784	228,483
Mondelez International, Inc., Class A	22,506	963,257
Monster Beverage Corp. *	6,220	393,664
PepsiCo, Inc.	21,364	2,561,971
Philip Morris International, Inc.	23,374	2,469,463
The Coca-Cola Co.	57,695	2,647,047
The Hershey Co.	2,044	232,014
The JM Smucker Co.	1,646	204,499
The Kraft Heinz Co.	9,326	725,190
Tyson Foods, Inc.	4,440	359,951
		15,698,353

Health Care Equipment & Services 5.6%
Abbott Laboratories	26,251	1,498,145
Aetna, Inc.	5,022	905,919
Align Technology, Inc. *	1,100	244,409
AmerisourceBergen Corp.	2,510	230,468
Anthem, Inc.	3,936	885,639
Baxter International, Inc.	7,457	482,020
Becton, Dickinson & Co.	3,928	840,879
Boston Scientific Corp. *	20,328	503,931
Cardinal Health, Inc.	4,624	283,312
Centene Corp. *	2,600	262,288
Cerner Corp. *	4,700	316,733
Cigna Corp.	3,761	763,821
Danaher Corp.	9,267	860,163
DaVita, Inc. *	2,230	161,118

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Schwab S&P 500 Index Portfolio | Annual Report

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Schwab S&P 500 Index Portfolio

Portfolio Holdings as of December 31, 2017 (continued)

Security	Number of Shares	Value ($)
Dentsply Sirona, Inc.	3,300	217,239
Edwards Lifesciences Corp. *	3,156	355,713
Envision Healthcare Corp. *	1,700	58,752
Express Scripts Holding Co. *	8,537	637,202
HCA Healthcare, Inc. *	4,200	368,928
Henry Schein, Inc. *	2,400	167,712
Hologic, Inc. *	4,200	179,550
Humana, Inc.	2,180	540,793
IDEXX Laboratories, Inc. *	1,300	203,294
Intuitive Surgical, Inc. *	1,693	617,843
Laboratory Corp. of America Holdings *	1,504	239,903
McKesson Corp.	3,118	486,252
Medtronic plc	20,645	1,667,084
Patterson Cos., Inc.	1,280	46,246
Quest Diagnostics, Inc.	1,960	193,040
ResMed, Inc.	2,097	177,595
Stryker Corp.	4,907	759,800
The Cooper Cos., Inc.	700	152,516
UnitedHealth Group, Inc.	14,584	3,215,189
Universal Health Services, Inc., Class B	1,300	147,355
Varian Medical Systems, Inc. *	1,300	144,495
Zimmer Holdings, Inc.	3,083	372,026
		19,187,372

Household & Personal Products 1.8%
Church & Dwight, Inc.	3,800	190,646
Clorox Co.	1,900	282,606
Colgate-Palmolive Co.	13,178	994,280
Coty, Inc., Class A	7,300	145,197
Kimberly-Clark Corp.	5,313	641,067
Lauder Estee Cos., Inc.	3,310	421,164
Procter & Gamble Co.	38,550	3,541,974
		6,216,934

Insurance 2.6%
AFLAC, Inc.	5,963	523,432
American International Group, Inc.	13,573	808,679
Aon plc	3,794	508,396
Arthur J. Gallagher & Co.	2,710	171,489
Assurant, Inc.	800	80,672
Brighthouse Financial, Inc. *	1,469	86,142
Chubb Ltd.	6,925	1,011,950
Cincinnati Financial Corp.	2,199	164,859
Everest Re Group Ltd.	600	132,756
Lincoln National Corp.	3,262	250,750
Loews Corp.	3,891	194,667
Marsh & McLennan Cos., Inc.	7,632	621,169
MetLife, Inc.	15,762	796,927
Principal Financial Group, Inc.	4,163	293,741
Prudential Financial, Inc.	6,414	737,482
The Allstate Corp.	5,421	567,633
The Hartford Financial Services Group, Inc.	5,615	316,012
The Progressive Corp.	8,773	494,095
The Travelers Cos., Inc.	4,159	564,127
Torchmark Corp.	1,600	145,136
Unum Group	3,453	189,535
Willis Towers Watson plc	1,941	292,489
XL Group Ltd.	4,100	144,156
		9,096,294

Materials 3.0%
Air Products & Chemicals, Inc.	3,209	526,533
Albemarle Corp.	1,588	203,089
Avery Dennison Corp.	1,300	149,318
Ball Corp.	5,318	201,286

Security	Number of Shares	Value ($)
CF Industries Holdings, Inc.	3,575	152,081
DowDuPont, Inc.	35,505	2,528,666
Eastman Chemical Co.	2,200	203,808
Ecolab, Inc.	3,897	522,900
FMC Corp.	2,000	189,320
Freeport-McMoRan Copper & Golc, Inc., Class B *	20,077	380,660
International Flavors & Fragrances, Inc.	1,160	177,028
International Paper Co.	6,298	364,906
LyondellBasell Industries N.V., Class A	4,863	536,486
Martin Marietta Materials, Inc.	900	198,936
Monsanto Co.	6,612	772,149
Newmont Mining Corp.	8,052	302,111
Nucor Corp.	4,699	298,762
Packaging Corp. of America	1,393	167,926
PPG Industries, Inc.	3,908	456,533
Praxair, Inc.	4,357	673,941
Sealed Air Corp.	2,828	139,420
The Mosaic Co.	5,100	130,866
The Sherwin-Williams Co.	1,233	505,579
Vulcan Materials Co.	1,955	250,963
WestRock Co.	3,628	229,326
		10,262,593

Media 2.7%
CBS Corp., Class B — Non Voting Shares	5,380	317,420
Charter Communications, Inc., Class A *	3,000	1,007,880
Comcast Corp., Class A	70,484	2,822,884
Discovery Communications, Inc., Class A *	2,300	51,474
Discovery Communications, Inc., Class C *	3,070	64,992
DISH Network Corp., Class A *	3,400	162,350
News Corp., Class A	5,148	83,449
News Corp., Class B	2,000	33,200
Omnicom Group, Inc.	3,340	243,252
Scripps Networks Interactive, Inc., Class A	1,500	128,070
The Interpublic Group of Cos., Inc.	5,697	114,852
Time Warner, Inc.	11,587	1,059,863
Twenty-First Century Fox, Inc., Class A	15,958	551,030
Twenty-First Century Fox, Inc., Class B	6,200	211,544
Viacom, Inc.	5,416	166,867
Walt Disney Co.	22,863	2,458,001
		9,477,128

Pharmaceuticals, Biotechnology & Life Sciences 8.1%
AbbVie, Inc.	23,929	2,314,174
Agilent Technologies, Inc.	4,851	324,871
Alexion Pharmaceuticals, Inc. *	3,339	399,311
Allergan plc	4,997	817,409
Amgen, Inc.	10,883	1,892,554
Biogen, Inc. *	3,146	1,002,221
Bristol-Myers Squibb Co.	24,643	1,510,123
Celgene Corp. *	11,942	1,246,267
Eli Lilly & Co.	14,805	1,250,430
Gilead Sciences, Inc.	19,592	1,403,571
Illumina, Inc. *	2,200	480,678
Incyte Corp. *	2,700	255,717
IQVIA Holdings, Inc. *	2,300	225,170
Johnson & Johnson	40,546	5,665,087
Merck & Co., Inc.	41,018	2,308,083
Mettler-Toledo International, Inc. *	380	235,418
Mylan N.V. *	7,791	329,637
PerkinElmer, Inc.	1,680	122,842
Perrigo Co., plc	1,934	168,567
Pfizer, Inc.	89,438	3,239,444
Regeneron Pharmaceuticals, Inc. *	1,137	427,467
Thermo Electron, Corp.	6,144	1,166,623

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Schwab S&P 500 Index Portfolio | Annual Report

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Schwab S&P 500 Index Portfolio

Portfolio Holdings as of December 31, 2017 (continued)

Security	Number of Shares	Value ($)
Vertex Pharmaceuticals, Inc. *	3,821	572,615
Waters Corp. *	1,200	231,828
Zoetis, Inc.	7,322	527,477
		28,117,584

Real Estate 2.9%
Alexandria Real Estate Eq, Inc.	1,350	176,296
American Tower Corp.	6,454	920,792
Apartment Investment & Management Co., Class A	2,677	117,012
AvalonBay Communities, Inc.	2,008	358,247
Boston Properties, Inc.	2,309	300,239
CBRE Group, Inc., Class A *	4,300	186,233
Crown Castle International Corp.	6,223	690,815
Digital Realty Trust, Inc.	3,100	353,090
Duke Realty Corp.	5,258	143,070
Equinix, Inc.	1,168	529,361
Equity Residential	5,500	350,735
Essex Property Trust, Inc.	1,000	241,370
Extra Space Storage, Inc.	1,950	170,528
Federal Realty Investment Trust	1,096	145,560
GGP, Inc.	9,190	214,954
HCP, Inc.	7,116	185,585
Host Hotels & Resorts, Inc.	11,120	220,732
Iron Mountain, Inc.	3,787	142,884
Kimco Realty Corp.	6,720	121,968
Mid-America Apartment Communities, Inc.	1,600	160,896
Prologis, Inc.	7,910	510,274
Public Storage, Inc.	2,252	470,668
Realty Income Corp.	4,700	267,994
Regency Centers Corp.	2,200	152,196
SBA Communications Corp. *	1,808	295,355
Simon Property Group, Inc.	4,601	790,176
SL Green Realty Corp.	1,500	151,395
The Macerich Co.	1,807	118,684
UDR, Inc.	4,150	159,858
Ventas, Inc.	5,219	313,192
Vornado Realty Trust	2,560	200,141
Welltower, Inc.	5,518	351,883
Weyerhaeuser Co.	11,194	394,700
		9,906,883

Retailing 5.7%
Advance Auto Parts, Inc.	1,167	116,338
Amazon.com, Inc. *	6,018	7,037,870
AutoZone, Inc. *	437	310,869
Best Buy Co., Inc.	3,871	265,047
CarMax, Inc. *	2,726	174,818
Dollar General Corp.	3,985	370,645
Dollar Tree, Inc. *	3,472	372,580
Expedia, Inc.	1,900	227,563
Foot Locker, Inc.	1,900	89,072
Genuine Parts Co.	2,290	217,573
Kohl’s Corp.	2,682	145,445
L Brands, Inc.	3,874	233,292
LKQ Corp. *	4,500	183,015
Lowe’s Cos., Inc.	12,530	1,164,538
Macy’s, Inc.	4,322	108,871
Netflix, Inc. *	6,437	1,235,647
Nordstrom, Inc.	1,750	82,915
O'Reilly Automotive, Inc. *	1,309	314,867
Ross Stores, Inc.	5,918	474,920
Signet Jewelers Ltd.	800	45,240
Target Corp.	8,076	526,959
The Gap, Inc.	3,476	118,393
The Home Depot, Inc.	17,584	3,332,696

Security	Number of Shares	Value ($)
The Priceline Group, Inc. *	730	1,268,550
The TJX Cos., Inc.	9,420	720,253
Tiffany & Co.	1,526	158,628
Tractor Supply Co.	1,900	142,025
TripAdvisor, Inc. *	1,500	51,690
Ulta Salon, Cosmetics & Fragrance, Inc. *	890	199,057
		19,689,376

Semiconductors & Semiconductor Equipment 3.9%
Advanced Micro Devices, Inc. *	11,600	119,248
Analog Devices, Inc.	5,516	491,089
Applied Materials, Inc.	15,974	816,591
Broadcom Ltd.	6,104	1,568,118
Intel Corp.	70,325	3,246,202
KLA-Tencor Corp.	2,330	244,813
Lam Research Corp.	2,412	443,977
Microchip Technology, Inc.	3,400	298,792
Micron Technology, Inc. *	17,599	723,671
NVIDIA Corp.	9,178	1,775,943
Qorvo, Inc. *	1,950	129,870
Qualcomm, Inc.	22,263	1,425,277
Skyworks Solutions, Inc.	2,800	265,860
Texas Instruments, Inc.	14,768	1,542,370
Xilinx, Inc.	3,693	248,982
		13,340,803

Software & Services 14.1%
Accenture plc, Class A	9,304	1,424,349
Activision Blizzard, Inc.	11,400	721,848
Adobe Systems, Inc. *	7,335	1,285,385
Akamai Technologies, Inc. *	2,481	161,364
Alliance Data Systems Corp.	716	181,492
Alphabet, Inc., Class A *	4,468	4,706,591
Alphabet, Inc., Class C *	4,562	4,773,677
Ansys, Inc. *	1,290	190,391
Autodesk, Inc. *	3,320	348,036
Automatic Data Processing, Inc.	6,615	775,212
CA, Inc.	4,544	151,224
Cadence Design Systems, Inc. *	4,100	171,462
Citrix Systems, Inc. *	2,140	188,320
Cognizant Technology Solutions Corp., Class A	8,820	626,396
CSRA, Inc.	2,300	68,816
DXC Technology Co.	4,259	404,179
eBay, Inc. *	14,967	564,855
Electronic Arts, Inc. *	4,552	478,233
Facebook, Inc., Class A *	35,969	6,347,090
Fidelity National Information Services, Inc.	5,000	470,450
Fiserv, Inc. *	3,120	409,126
Gartner, Inc. *	1,300	160,095
Global Payments, Inc.	2,300	230,552
International Business Machines Corp.	13,013	1,996,454
Intuit, Inc.	3,596	567,377
MasterCard, Inc., Class A	13,986	2,116,921
Microsoft Corp.	116,298	9,948,131
Oracle Corp.	46,092	2,179,230
Paychex, Inc.	4,936	336,043
PayPal Holdings, Inc. *	16,797	1,236,595
Red Hat, Inc. *	2,744	329,554
Salesforce Com, Inc. *	10,539	1,077,402
Symantec Corp.	9,187	257,787
Synopsys, Inc. *	2,230	190,085
The Western Union Co.	6,559	124,687
Total System Services, Inc.	2,400	189,816

₁₃

Schwab S&P 500 Index Portfolio | Annual Report

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Schwab S&P 500 Index Portfolio

Portfolio Holdings as of December 31, 2017 (continued)

Security	Number of Shares	Value ($)
VeriSign, Inc. *	1,225	140,189
Visa, Inc., Class A	27,407	3,124,946
		48,654,360

Technology Hardware & Equipment 5.7%
Amphenol Corp. New	4,600	403,880
Apple, Inc.	77,234	13,070,310
Cisco Systems, Inc.	74,930	2,869,819
Corning, Inc.	13,485	431,385
F5 Networks, Inc. *	955	125,315
FLIR Systems, Inc.	1,934	90,163
Harris Corp.	1,800	254,970
Hewlett Packard Enterprise Co.	24,669	354,247
HP, Inc.	24,769	520,397
Juniper Networks, Inc.	5,600	159,600
Motorola Solutions, Inc.	2,449	221,243
NetApp, Inc.	3,900	215,748
Seagate Technology plc	4,279	179,033
TE Connectivity Ltd.	5,232	497,249
Western Digital Corp.	4,411	350,807
Xerox Corp.	3,506	102,200
		19,846,366

Telecommunication Services 2.0%
AT&T Corp.	91,951	3,575,055
CenturyTel, Inc.	14,585	243,278
Verizon Communications, Inc.	61,364	3,247,996
		7,066,329

Transportation 2.2%
Alaska Air Group, Inc.	1,800	132,318
American Airlines Group, Inc.	6,381	332,003
C.H. Robinson Worldwide, Inc.	2,200	195,998
Csx Corp.	13,557	745,771
Delta Air Lines, Inc.	9,822	550,032
Expeditors International Washington, Inc.	2,600	168,194
FedEx Corp.	3,684	919,305
J.B. Hunt Transport Services, Inc.	1,192	137,056
Kansas City Southern	1,600	168,352
Norfolk Southern Corp.	4,310	624,519
Southwest Airlines Co.	8,323	544,740
Union Pacific Corp.	12,036	1,614,028
United Continental Holdings, Inc. *	3,800	256,120
United Parcel Service, Inc., Class B	10,258	1,222,241
		7,610,677

Utilities 2.9%
Alliant Energy Corp.	4,111	175,170
Ameren Corp.	3,700	218,263
American Electric Power Co., Inc.	7,349	540,666
American Water Works Co., Inc.	2,700	247,023
CenterPoint Energy, Inc.	6,450	182,922
Cms Energy Corp.	4,096	193,741
Consolidated Edison, Inc.	4,535	385,248
Dominion Res, Inc. Va	9,826	796,495
DTE Energy Co.	2,738	299,701
Duke Energy Corp.	10,527	885,426

Security	Number of Shares	Value ($)
Edison International	5,086	321,639
Entergy Corp.	2,687	218,695
Eversource Energy	4,606	291,007
Exelon Corp.	14,910	587,603
FirstEnergy Corp.	6,881	210,696
NextEra Energy, Inc.	7,042	1,099,890
NiSource, Inc.	4,992	128,145
NRG Energy, Inc.	4,386	124,913
PG&E Corp.	7,714	345,819
Pinnacle West Capital Corp.	1,550	132,029
Ppl Corporation	10,227	316,526
Public Service Enterprise Group, Inc.	7,414	381,821
SCANA Corp.	2,200	87,516
Sempra Energy	3,743	400,201
The AES Corp.	9,089	98,434
The Southern Co.	15,123	727,265
WEC Energy Group, Inc.	5,146	341,849
Xcel Energy, Inc.	7,533	362,413
		10,101,116
Total Common Stock
(Cost $153,108,890)		343,221,729

Other Investment Company 0.0% of net assets

Securities Lending Collateral 0.0%
Wells Fargo Government Money Market Fund, Select Class 1.19% (c)	44,380	44,380
Total Other Investment Company
(Cost $44,380)		44,380
Issuer Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investment 0.5% of net assets

Time Deposit 0.5%
Sumitomo Mitsui Banking Corp.
0.92%, 01/02/18 (d)	1,644,366	1,644,366
Total Short-Term Investment
(Cost $1,644,366)		1,644,366

	Number of Contracts	Notional Amount ($)	Current Value/ Unrealized Depreciation ($)
Futures Contracts
Long
S&P 500 Index, e-mini, expires expires 03/16/18	15	2,007,000	(4,286)

*	Non-income producing security.
(a)	All or a portion of this security is on loan. Securities on loan were valued at $40,404.
(b)	Issuers are affiliated with the fund’s investment adviser.
(c)	The rate shown is the 7-day yield.
(d)	The rate shown is the current daily overnight rate.

₁₄

Schwab S&P 500 Index Portfolio | Annual Report

See financial notes

Schwab S&P 500 Index Portfolio

Portfolio Holdings as of December 31, 2017 (continued)

The fund owns shares of an affiliate, The Charles Schwab Corp. since that company is included in its index. Below is the summary of investment activities involving The Charles Schwab Corp. shares during the period ended December 31, 2017:

	Balance of Shares Held at 12/31/16	Gross Purchases	Gross Sales	Balance of Shares Held at 12/31/17	Net Change in Unrealized Appreciation (depreciation)	Realized Gains (Losses)	Dividends Received
The Charles Schwab Corp.	17,549	300	(250)	17,599	$209,247	$1,990	$5,664

The following is a summary of the inputs used to value the fund’s investments as of December 31, 2017 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets
Common Stock¹	$343,221,729	$—	$—	$343,221,729
Other Investment Company¹	44,380	—	—	44,380
Short-Term Investment¹	—	1,644,366	—	1,644,366
Liabilities
Futures Contracts²	(4,286)	—	—	(4,286)
Total	$343,261,823	$1,644,366	$—	$344,906,189

¹	As categorized in Portfolio Holdings.
²	Futures contracts are valued at unrealized appreciation or depreciation.

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Schwab S&P 500 Index Portfolio | Annual Report

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Schwab S&P 500 Index Portfolio

Statement of Operations

For the period January 1, 2017 through December 31, 2017

Investment Income
Dividends received from affiliated issuer		$5,664
Dividends received from unaffiliated issuers		6,307,160
Interest		6,034
Securities on loan, net	+	6,465
Total investment income		6,325,323
Expenses 1
Investment adviser and administrator fees		149,401
Independent trustees’ fees		7,450
Professional fees		6,983
Portfolio accounting fees		5,961
Index fees		5,057
Shareholder reports		3,086
Custodian fees		1,882
Transfer agent fees		576
Other expenses	+	1,310
Total expenses	–	181,706
Net investment income		6,143,617
Realized and Unrealized Gains (Losses)
Net realized gains on affiliated issuer		1,990
Net realized gains on unaffiliated issuers		442,769
Net realized gains on futures contracts	+	268,419
Net realized gains		713,178
Net change in unrealized appreciation (depreciation) on affiliated issuer		209,247
Net change in unrealized appreciation (depreciation) on unaffiliated issuers		54,225,587
Net change in unrealized appreciation (depreciation) on futures contracts	+	16,026
Net change in unrealized appreciation (depreciation)	+	54,450,860
Net realized and unrealized gains		55,164,038
Increase in net assets resulting from operations		$61,307,655

¹	See financial note 2(e) and financial note 4.

₁₇

Schwab S&P 500 Index Portfolio | Annual Report

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Schwab S&P 500 Index Portfolio

Financial Notes

1. Business Structure of the Fund:

Schwab S&P 500 Index Portfolio (the fund) is a series of Schwab Annuity Portfolios (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 fund discussed in this report, which is highlighted:

SCHWAB ANNUITY PORTFOLIOS (ORGANIZED JANUARY 21, 1994)
Schwab Government Money Market Portfolio™
Schwab MarketTrack Growth Portfolio II™
Schwab S&P 500 Index Portfolio
Schwab VIT Balanced Portfolio
Schwab VIT Balanced with Growth Portfolio
Schwab VIT Growth Portfolio

2. Significant Accounting Policies:

Effective August 1, 2017, the fund adopted disclosure requirement changes for SEC Regulation S-X. The adopted changes are reflected throughout this report.

(a) Security Valuation:

The fund values the securities in its portfolio every business day. The fund uses 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 the mean of 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 the fund’s securities when market prices are not “readily available” or are unreliable. For example, the 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. The 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

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Schwab S&P 500 Index Portfolio | Annual Report

Schwab S&P 500 Index Portfolio

Financial Notes (continued)

2. Significant Accounting Policies (continued):

inputs and assumptions to calibrate the valuations. Due to the subjective and variable nature of fair value pricing, there can be no assurance that the 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 fund pursuant to the valuation procedures.

• Futures contracts: Futures contracts are valued at their settlement prices as of the close of their exchanges.

• Underlying funds: Mutual funds are valued at their respective NAVs.

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 and futures contracts. Investments in mutual funds are valued daily at their NAVs, which are classified as Level 1 prices, without consideration to the classification level of the specific investments held by an underlying fund.

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 fund’s investments as of December 31, 2017 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 contracts are traded publicly on exchanges, and their market value may change daily.

₂₀

Schwab S&P 500 Index Portfolio | Annual Report

Schwab S&P 500 Index Portfolio

Financial Notes (continued)

2. Significant Accounting Policies (continued):

outside of the U.S., as with any offshore deposit, may be subject to sovereign actions in the jurisdiction of the deposit institution including, but not limited to, freeze, seizure or diminution. The fund bears the risk associated with the repayment of principal and payment of interest on such instruments by the institution with which the deposit is ultimately placed. Balances in the CMS Sweep are accounted for on a cost basis, which approximates market value.

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 the 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. The fund bears the risk of loss with respect to the investment of cash collateral. The terms of the securities lending agreement allow the fund or the lending agent to terminate any loan at any given time and the securities must be returned within the earlier of the standard trade settlement period or the specified time period under the relevant securities lending agreement. Securities lending income, as disclosed in the 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 the fund and the lending agent. The aggregate market value of securities loaned will not at any time exceed one-third of the total assets of the fund, including collateral received from the loan. Total costs and expenses, including lending agent fees and broker rebates, associated with securities lending activities under the trust’s Securities Lending Program paid to the unaffiliated lending agents start at 10% of gross lending revenue.

As of December 31, 2017, the fund had securities on loan, all of which were classified as common stocks. The values of these securities on loan and the related collateral as of December 31, 2017, if any, are disclosed in the fund’s Portfolio Holdings. The value of the securities on loan and the investment of cash collateral are also disclosed in the fund’s Statement of Assets and Liabilities.

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

When a fund closes out a futures contract 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:

Prior to March 1, 2017, expenses that were specific to the fund were charged directly to the fund. Expenses that were common to all funds within the trust were allocated among the funds in proportion to their average daily net assets.

Effective March 1, 2017, pursuant to an Amended and Restated Investment Advisory and Administration Agreement (Advisory Agreement) between Charles Schwab Investment Management, Inc. (CSIM or the investment adviser) and the fund, CSIM pays the operating expenses of the fund, excluding acquired fund fees and expenses, taxes, any brokerage expenses, and extraordinary or non-routine expenses. Taxes, any brokerage expenses and extraordinary or non-routine expenses that are specific to the fund are charged directly to the fund.

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Financial Notes (continued)

2. Significant Accounting Policies (continued):

(f) Distributions to Shareholders:

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

(g) Accounting Estimates:

(h) Federal Income Taxes:

(i) Indemnification:

3. Risk Factors:

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.

Investment Style Risk. The fund primarily follows the large-cap portion of the U.S. stock market, as measured by the index. It follows these stocks during upturns as well as downturns. Because of its indexing strategy, the fund does not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of the fund’s expenses, the fund’s performance is normally below that of the index.

A significant percentage of the index may be composed of securities in a single industry or sector of the economy. If the 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.

Tracking Error Risk. As an index fund, the 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.

Market Capitalization Risk. Securities issued by companies of different market capitalizations tend to go in and out of favor based on market and economic conditions. During a period when securities of a particular market capitalization fall behind other types of investments, the fund’s performance could be impacted.

Large-Cap Company Risk. Large-cap companies are generally more mature and the securities issued by these companies may not be able to reach the same levels of growth as the securities issued by small- or mid-cap companies.

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

Derivatives Risk. The fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments and could cause the fund to lose more than the principal

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Financial Notes (continued)

3. Risk Factors (continued):

amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on the fund.

Liquidity Risk. The fund may be unable to sell certain securities, such as illiquid securities, readily at a favorable time or price, or the fund may have to sell them at a loss.

Security Lending Risk. Securities lending risk involves the risk of loss of rights in, or delay in recovery of, the loaned securities if the borrower fails to return the security loaned or becomes insolvent.

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

4. Affiliates and Affiliated Transactions:

Investment Adviser

CSIM, a wholly owned subsidiary of The Charles Schwab Corporation (CSC), serves as the fund’s investment adviser and administrator pursuant to an Advisory Agreement between CSIM and the trust.

Effective March 1, 2017, for its advisory services to the fund, CSIM is entitled to receive an annual fee, payable monthly, equal to 0.03% of the fund’s average daily net assets.

Prior to March 1, 2017, for its advisory and administrative services to the fund, CSIM was entitled to receive an annual fee, payable monthly, based on a percentage of the fund’s average daily net assets as follows:

Average Daily Net Assets
First $500 million	0.15%
More than $500 million but not exceeding $5 billion	0.09%
More than $5 billion but not exceeding $10 billion	0.08%
Over $10 billion	0.07%

For the period from January 1, 2017 to December 31, 2017, the aggregate advisory fee paid to CSIM by the fund was 0.05%, as a percentage of the fund’s average daily net assets.

Interfund Transactions

The fund may engage in direct transactions with certain other Schwab funds when practical. When one fund is seeking to sell a security that another is seeking to buy, an interfund transaction can allow both funds to benefit by reducing transaction costs. This practice is limited to funds that share the same investment adviser, trustees and/or officers. For the period ended December 31, 2017, the fund’s total aggregate security transactions with other Schwab funds was $947,747 and includes realized losses of ($197,442).

Interfund Borrowing and Lending

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. Effective March 1, 2017, the fund does not pay any interested or non-interested (independent trustees) trustees. The independent trustees are paid by CSIM. Prior to March 1, 2017, the fund paid independent trustees, as noted on the fund’s Statement of Operations. For information regarding the trustees, please refer to the Trustees and Officers table at the end of this report.

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Financial Notes (continued)

6. Borrowing from Banks:

During the period, the fund was a participant with other U.S. registered investment companies managed by CSIM in a joint, syndicated, committed $555 million line of credit (the Syndicated Credit Facility), which matured on October 5, 2017. On October 5, 2017, the Syndicated Credit Facility was amended to run for a new 364 day period with an increased line of $605 million. Under the terms of the Syndicated Credit Facility, in addition to the interest charged on any borrowings by a fund, each fund paid a commitment fee of 0.15% per annum on its proportionate share of the unused portion of the Syndicated Credit Facility. Effective March 1, 2017, where applicable, CSIM paid the commitment fee and any interest expenses charged on any borrowings by the fund.

On December 1, 2017, the fund became a participant with other U.S. registered investment companies managed by CSIM in a joint, unsecured, uncommitted $500 million line of credit (the Uncommitted Credit Facility), with State Street Bank and Trust Company, which matures on November 30, 2018. CSIM pays interest on the amount of any fund borrowings. There were no borrowings from either line of credit during the period.

7. Purchases and Sales/Maturities of Investment Securities:

For the period ended December 31, 2017, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:

Purchases of Securities	Sales/Maturities of Securities
$19,981,326	$10,397,397

8. Derivatives:

The fund entered into equity index futures contracts during the report period. The fund invested in futures contracts to equitize available cash. The current value and variation margin for futures contracts held at December 31, 2017 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 fund’s accounting policies with respect to futures contracts and financial note 3 for disclosures concerning the risks of investing in futures contracts. During the period ended December 31, 2017, the month-end average notional amounts of futures contracts held by the fund and the month-end average number of contracts held were as follows:

	Notional Amounts	Number of Contracts
Schwab S&P 500 Index Portfolio	$1,795,668	15

9. Federal Income Taxes:

As of December 31, 2017, the tax basis cost of the fund’s investments and gross unrealized appreciation and depreciation were as follows:

Tax cost	$156,891,755
Gross unrealized appreciation	$191,527,580
Gross unrealized depreciation	(3,513,146)
Net unrealized appreciation (depreciation)	$188,014,434

As of December 31, 2017, the components of distributable earnings on a tax basis were as follows:

Undistributed ordinary income	$6,192,074
Undistributed long-term capital gains	192,523
Net unrealized appreciation (depreciation) on investments	188,014,434
Total	$194,399,031

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Schwab S&P 500 Index Portfolio

Financial Notes (continued)

9. Federal Income Taxes (continued):

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 and realization for tax purposes of unrealized gains (losses) on futures contracts. The tax cost of the fund’s investments, disclosed above, has been adjusted from the book amounts to reflect these unrealized appreciation or depreciation differences, as applicable.

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of December 31, 2017, the fund had no capital loss carryforwards.

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

Current period distributions
Ordinary income	$5,086,309
Long-term capital gains	77,143
Prior period distributions
Ordinary income	$4,586,677

Capital shares	$—
Undistributed net investment income	(19,365)
Net realized capital gains (losses)	19,365

10. Subsequent Events:

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Schwab S&P 500 Index Portfolio

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Schwab Annuity Portfolios and Shareholders of Schwab S&P 500 Index Portfolio

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the portfolio holdings, of Schwab S&P 500 Index Portfolio (one of the funds constituting Schwab Annuity Portfolios, hereafter referred to as the “Fund”) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
San Francisco, California
February 16, 2018

We have served as the auditor of one or more investment companies in the Schwab Funds Complex since 1989.

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Trustees and Officers

Independent Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Robert W. Burns 1959 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	Retired/Private Investor (Jan. 2009 – present). Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) (investment management firm) and President, PIMCO Funds.	108	Director, PS Business Parks, Inc. (2005 – 2012)
John F. Cogan 1947 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Fellow, The Hoover Institution at Stanford University (public policy think tank) (Oct. 1979 – present); Senior Fellow, Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – 2015).	108	Director, Gilead Sciences, Inc. (2005 – present)
Stephen Timothy Kochis 1946 Trustee (Trustee of Schwab Strategic Trust since 2012; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	CEO and Owner, Kochis Global (wealth management consulting) (May 2012 – present); Chairman and CEO, Aspiriant, LLC (wealth management) (Jan. 2008 – Apr. 2012).	108	None
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Private Investor.	108	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present)

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Independent Trustees (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013).	108	Director, KLA-Tencor Corporation (2008 – present)
Kimberly S. Patmore 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Consultant, Patmore Management Consulting (management consulting) (2008 – present).	108	None
Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2015)	Co-Chief Executive Officer, Kudu Investment Management, LLC (financial services) (Jan. 2015 – present); Partner, Kudu Advisors, LLC (financial services) (June 2008 – Jan. 2015); Advisor, Asset International, Inc. (publisher of financial services information) (Aug. 2008 – Jan. 2015).	108	None
Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2000; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (Mar. 1990 – present).	108	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 The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Co-CEO, Colgin Cellars, LLC (vineyards) (Feb. 1998 – present).	108	Board Member and Chairman of the Audit Committee, Ionis Pharmaceuticals (1994 – present) Lead Independent Director and Chair of Audit Committee, OUTFRONT Media Inc. (2014 – present)

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Interested Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Walter W. Bettinger II² 1960 Chairman and Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010)	Director, President and Chief Executive Officer, The Charles Schwab Corporation (Oct. 2008 – present); President and Chief Executive Officer (Oct. 2008 – present), Director (May 2008 – present), Charles Schwab & Co., Inc.; Director, Charles Schwab Bank (Apr. 2006 – present); Director (May 2008 – present), President and Chief Executive Officer (Aug. 2017 – present), Schwab Holdings, Inc.; and Director, Charles Schwab Investment Management, Inc. (July 2016 – present).	108	Director, The Charles Schwab Corporation (2008 – present)
Marie A. Chandoha² 1961 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), 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 (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm) (Mar. 2007 – Aug. 2010).	108	None
Joseph R. Martinetto² 1962 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Senior Executive Vice President (July 2015 – present), Chief Financial Officer (July 2015 – Aug. 2017), Executive Vice President and Chief Financial Officer (May 2007 – July 2015), The Charles Schwab Corporation and Charles Schwab & Co., Inc.; Director, Charles Schwab & Co., Inc. (May 2007 – present); Director (Apr. 2010 – present) and Chief Executive Officer (July 2013 – Apr. 2015), Charles Schwab Bank; Director (May 2007 – present), Chief Financial Officer (May 2007 – Aug. 2017), Senior Executive Vice President (Feb. 2016 – present), and Executive Vice President (May 2007 – Feb. 2016), Schwab Holdings, Inc.	108	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 A. Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), 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 (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm) (Mar. 2007 – Aug. 2010).
Mark Fischer 1970 Treasurer and Chief Financial Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013)	Treasurer and Chief Financial Officer, Schwab Funds, Laudus Funds and Schwab ETFs (Jan. 2016 – present); Assistant Treasurer, Schwab Funds and Laudus Funds (Dec. 2013 – Dec. 2015), Schwab ETFs (Nov. 2013 – Dec. 2015); Vice President, Charles Schwab Investment Management, Inc. (Oct. 2013 – present); Executive Director, J.P. Morgan Investor Services (Apr. 2011 – Sept. 2013); Assistant Treasurer, Massachusetts Financial Service Investment Management (May 2005 – Mar. 2011).

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Schwab S&P 500 Index Portfolio

Officers of the Trust (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
George Pereira 1964 Senior Vice President and Chief Operating Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust since 2006; Schwab Strategic Trust since 2009)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Operating Officer (Jan. 2016 – present), Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – Dec. 2015); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – Dec. 2015) and Schwab ETFs (Oct. 2009 – Dec. 2015); Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Apr. 2005 – present).
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (investment management firm) (May 2009 – Apr. 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 The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds, Laudus Funds and Schwab ETFs (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 (investment management firm) (Apr. 2006 – Jan. 2008).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President (Sept. 2011 – present), Vice President (Mar. 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 (Apr. 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (Apr. 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds and Schwab ETFs Chief Legal Officer, Vice President and Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009)	Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (Mar. 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	Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee’s twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.
²	Mr. Bettinger, Ms. Chandoha and Mr. Martinetto are Interested Trustees. Mr. Bettinger is an Interested Trustee because he owns stock of The Charles Schwab Corporation (CSC), the parent company of Charles Schwab Investment Management, Inc. (CSIM), the investment adviser for the trusts in the Fund Complex, is an employee and director of Charles Schwab & Co., Inc. (CS&Co), the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios, and is a director of the investment adviser for the trusts in the Fund Complex. Ms. Chandoha is an Interested Trustee because she owns stock of CSC and is an employee and director of CSIM. Mr. Martinetto is an Interested Trustee because he owns stock of CSC and is an employee and director of CS&Co.
³	The President, Treasurer and Secretary/Clerk 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.

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Schwab S&P 500 Index Portfolio | Annual Report

Schwab VIT Balanced Portfolio

The Investment Environment

Asset Class Performance Comparison % returns during the 12 months ended December 31, 2017

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

Management views may have changed since the report date.

*	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.

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Schwab VIT Balanced Portfolio | Annual Report

Schwab VIT Balanced Portfolio

The Investment Environment (continued)

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Schwab VIT Balanced Portfolio | Annual Report

Schwab VIT Balanced Portfolio as of December 31, 2017

The Schwab VIT Balanced Portfolio (the fund) seeks to provide long-term capital appreciation and income. To pursue its goal, the fund aims to provide diversification across major asset classes, including domestic equity securities, international equity securities, real assets, fixed income securities, and money market investments, as well as diversification across a range of sub-asset classes within the major asset classes.

The fund is considered a “fund-of-funds” in that it gains exposure to these asset classes by primarily investing in affiliated exchange-traded funds (ETFs) from Schwab Funds, as well as unaffiliated ETFs. The fund may also invest in affiliated mutual funds from Schwab Funds and Laudus Funds and unaffiliated third-party mutual funds. The fund uses the internally calculated VIT Balanced Composite Index (the composite index) as a performance gauge. The composite index comprises 44% equity, 38% fixed income, 15% cash, and 3% commodities.

Performance. For the 12-month reporting period ended December 31, 2017, the fund returned 10.00%. The Dow Jones U.S. Total Stock Market Index and the Bloomberg Barclays U.S. Aggregate Bond Index, reflecting broad-based U.S. stock and bond market performance, returned 21.16% and 3.54%, respectively. The composite index, described above, returned 10.53%. Differences between the return of the fund and the return of the index may be attributable to, among other things, operational and transactional costs incurred by the fund that are not incurred by the index.

Positioning and Strategies. The fund’s allocations were broadly in line with those of the composite index.

International equities were the strongest contributors to overall fund performance for the reporting period. The Schwab Emerging Markets Equity ETF™ returned 32.67%; the Schwab International Small-Cap Equity ETF™, representing the fund’s developed international small-cap exposure, returned 29.39%; and the Schwab International Equity ETF™, representing the fund’s developed international large-cap exposure, returned 26.00%. On a relative basis, the three international equity funds slightly outperformed their comparative index components.

Also contributing notably to the fund’s total return for the reporting period were U.S. equities. Among the fund’s U.S. exposures, the strongest contributor was large-cap stocks, with the Schwab U.S. Large-Cap ETF™ returning 21.94%, although it slightly underperformed its comparative index component. The Schwab U.S. Small-Cap ETF™ returned 14.93% and the iShares Micro-Cap ETF returned 12.79%; however, both slightly underperformed their comparative index components, dampening the fund’s relative return. The fund’s real estate exposure also contributed positively, with the Schwab U.S. REIT ETF™ up 3.68%.

The fund’s fixed-income exposures also produced positive returns. In the U.S., the fund’s core bond allocation, in the Schwab U.S. Aggregate Bond Fund ETF™, returned 3.50%, slightly underperforming its comparative index component, and the fund’s exposure to inflation-protected bonds returned 3.02%, slightly outperforming its comparative index component. International bonds posted strong returns for the year, with the SPDR^® Bloomberg Barclays International Treasury Bond ETF up 9.93%.

Global commodities were comparatively weak for the year, with the Credit Suisse Commodity Return Strategy Fund, Class I returning 1.74%.

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

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Schwab VIT Balanced Portfolio

Performance and Fund Facts as of December 31, 2017

Performance of Hypothetical $10,000 Investment (July 25, 2012 – December 31, 2017)¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	Since Inception
Fund: Schwab VIT Balanced Portfolio (07/25/12)	10.00%	4.69%	5.24%
VIT Balanced Composite Index	10.53%	5.44%	5.98%
S&P 500^® Index	21.83%	15.79%	16.01%
Bloomberg Barclays U.S. Aggregate Bond Index	3.54%	2.10%	1.99%
Fund Category: Morningstar Allocation – 30% to 50% Equity²	10.84%	5.86%	N/A
Fund Expense Ratio³: 0.68%

The first index listed for the fund is the fund’s primary benchmark, as shown in the prospectus. Additional indices are provided for comparative purposes.

The components that make up the composite index may vary over time. For index definitions, please see the Glossary.

¹	Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. Fund performance does not reflect the additional fees and expenses imposed by the insurance company under the variable insurance product contract. If those contract fees and expenses were included, the performance would be less than that shown. Please refer to the variable insurance product prospectus for a complete listing of these expenses.
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 0.11% of acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in the underlying funds. 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.

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Schwab VIT Balanced Portfolio

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

As a fund shareholder, you may incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, transfer agent fees, and other fund expenses.

	Expense Ratio (Annualized)^1,2	Effective Expense Ratio (Annualized)^3,4	Beginning Account Value at 7/1/17	Ending Account Value (Net of Expenses) at 12/31/17	Expenses Paid During Period 7/1/17-12/31/17^2,5	Effective Expenses Paid During Period 7/1/17-12/31/17^4,5
Schwab VIT Balanced Portfolio
Actual Return	0.55%	0.66%	$1,000.00	$1,048.30	$2.84	$3.41
Hypothetical 5% Return	0.55%	0.66%	$1,000.00	$1,022.43	$2.80	$3.36

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	Excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.
³	Based on the most recent six-month acquired fund fees and expense ratio; may differ from the acquired fund fees and expense ratio in the prospectus, which are based on estimated amounts for the current fiscal year.
⁴	Includes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.
⁵	Expenses for the 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.

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Schwab VIT Balanced Portfolio

Financial Statements

Financial Highlights

	1/1/17– 12/31/17	1/1/16– 12/31/16	1/1/15– 12/31/15	1/1/14– 12/31/14	1/1/13– 12/31/13
Per-Share Data
Net asset value at beginning of period	$11.66	$11.25	$11.61	$11.21	$10.50
Income (loss) from investment operations:
Net investment income (loss)¹	0.18	0.15	0.13	0.15	0.17
Net realized and unrealized gains (losses)	0.98	0.38	(0.36)	0.31	0.55
Total from investment operations	1.16	0.53	(0.23)	0.46	0.72
Less distributions:
Distributions from net investment income	(0.15)	(0.12)	(0.12)	(0.06)	(0.01)
Distributions from net realized gains	(0.09)	(0.00) ²	(0.01)	(0.00) ²	—
Total distributions	(0.24)	(0.12)	(0.13)	(0.06)	(0.01)
Net asset value at end of period	$12.58	$11.66	$11.25	$11.61	$11.21
Total return	10.00%	4.78%	(2.00%)	4.15%	6.89%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses³	0.55%	0.57%	0.58%	0.57%	0.58%
Gross operating expenses³	0.55%	0.57%	0.65%	0.70%	1.07%
Net investment income (loss)	1.50%	1.28%	1.15%	1.29%	1.55%
Portfolio turnover rate	9%	54% ⁴	9%	14%	18%
Net assets, end of period (x 1,000,000)	$64	$56	$50	$44	$28

Calculated based on the average shares outstanding during the period.

Per-share amount was less than $0.005.

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

⁴

The portfolio turnover rate increased due to the consolidation of multiple unaffiliated investments into the Schwab U.S. Aggregate Bond ETF, which reduces costs for shareholders.

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Schwab VIT Balanced Portfolio | Annual Report

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Schwab VIT Balanced Portfolio

Portfolio Holdings as of December 31, 2017

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

Security	Number of Shares	Value ($)
Affiliated Underlying Funds 90.9% of net assets

U.S. Stocks 18.9%
Large-Cap 14.9%
Schwab U.S. Large-Cap ETF	150,311	9,586,836
Small-Cap 4.0%
Schwab U.S. Small-Cap ETF	37,492	2,614,692
		12,201,528

International Stocks 18.2%
Developed-Market Large-Cap 11.0%
Schwab International Equity ETF	209,047	7,122,231
Developed-Market Small-Cap 2.0%
Schwab International Small-Cap Equity ETF	35,275	1,292,123
Emerging-Market 5.2%
Schwab Emerging Markets Equity ETF	120,049	3,354,169
		11,768,523

Real Assets 6.0%
Real Estate 6.0%
Schwab U.S. REIT ETF	92,785	3,861,712

Fixed Income 36.0%
Inflation-Protected Bond 2.0%
Schwab U.S. TIPS ETF	23,539	1,304,767
Intermediate-Term Bond 34.0%
Schwab U.S. Aggregate Bond ETF	420,607	21,888,388
		23,193,155

Money Market Fund 11.8%
Schwab Variable Share Price Money Fund, Ultra Shares 1.32% (a)	7,589,228	7,589,987
Total Affiliated Underlying Funds
(Cost $52,010,934)		58,614,905

Unaffiliated Underlying Funds 6.1% of net assets

U.S. Stock 1.0%
Micro-Cap 1.0%
iShares Micro-Cap ETF	6,818	652,551

Security	Number of Shares	Value ($)
Real Assets 3.1%
Commodity 3.1%
Credit Suisse Commodity Return Strategy Fund, Class I	396,948	1,992,681

Fixed Income 2.0%
International Developed-Market Bond 2.0%
SPDR Bloomberg Barclays International Treasury Bond ETF	45,545	1,294,844
Total Unaffiliated Underlying Funds
(Cost $4,016,614)		3,940,076
Issuer Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investments 3.0% of net assets

Time Deposits 3.0%
BNP Paribas
0.92%, 01/02/18 (b)	644,882	644,882
JPMorgan Chase Bank
0.92%, 01/02/18 (b)	625,673	625,673
Sumitomo Mitsui Banking Corp.
0.92%, 01/02/18 (b)	644,882	644,882
Total Short-Term Investments
(Cost $1,915,437)		1,915,437

(a)	The rate shown is the 7-day yield.
(b)	The rate shown is the current daily overnight rate.

ETF —	Exchange-traded fund
REIT —	Real Estate Investment Trust
SPDR —	Standard & Poor’s Depositary Receipts
TIPS —	Treasury Inflation Protected Securities

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Schwab VIT Balanced Portfolio

Portfolio Holdings as of December 31, 2017 (continued)

Affiliated Underlying Funds	Balance of Shares Held at 12/31/16	Gross Purchases	Gross Sales	Balance of Shares Held at 12/31/17	Net Change in Unrealized Appreciation (depreciation)	Realized Gains (Losses)	Distributions Received*
Schwab Emerging Markets Equity ETF	124,405	22,020	(26,376)	120,049	$768,738	($6,376)	$77,588
Schwab International Equity ETF	221,738	25,986	(38,677)	209,047	1,354,611	(14,016)	171,124
Schwab International Small-Cap Equity ETF	37,382	1,346	(3,453)	35,275	268,972	5,343	35,212
Schwab U.S. Aggregate Bond ETF	371,730	65,059	(16,182)	420,607	214,093	(23,458)	483,189
Schwab U.S. Large-Cap ETF	161,199	14,351	(25,239)	150,311	1,483,986	140,141	163,742
Schwab U.S. REIT ETF	85,521	12,532	(5,268)	92,785	36,150	15,874	80,194
Schwab U.S. Small-Cap ETF	39,408	3,565	(5,481)	37,492	273,830	39,953	31,838
Schwab U.S. TIPS ETF	20,379	4,976	(1,816)	23,539	14,817	(2,720)	22,745
Schwab Variable Share Price Money Fund, Ultra Shares	7,514,841	74,387	—	7,589,228	(1,516)	—	74,670
Total					$4,413,681	$154,741	$1,140,302

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

The following is a summary of the inputs used to value the fund’s investments as of December 31, 2017 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets
Affiliated Underlying Funds¹	$58,614,905	$—	$—	$58,614,905
Unaffiliated Underlying Funds¹	3,940,076	—	—	3,940,076
Short-Term Investments¹	—	1,915,437	—	1,915,437
Total	$62,554,981	$1,915,437	$—	$64,470,418

¹	As categorized in Portfolio Holdings.

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 December 31, 2017. Fund investments in underlying mutual funds and ETFs are classified as Level 1, without consideration to the classification level of the investments held by the underlying mutual funds and ETFs, which could be Level 1, Level 2 or Level 3.

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Schwab VIT Balanced Portfolio

Financial Notes

1. Business Structure of the Fund:

Schwab VIT Balanced Portfolio (the fund) is a series of Schwab Annuity Portfolios (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 fund discussed in this report, which is highlighted:

SCHWAB ANNUITY PORTFOLIOS (ORGANIZED JANUARY 21, 1994)
Schwab Government Money Market Portfolio™
Schwab MarketTrack Growth Portfolio II™
Schwab S&P 500 Index Portfolio
Schwab VIT Balanced Portfolio
Schwab VIT Balanced with Growth Portfolio
Schwab VIT Growth Portfolio

The fund is a “fund of funds” which primarily invests in affiliated Schwab ETFs and unaffiliated third-party ETFs. The fund may also invest in affiliated Schwab funds and Laudus funds and unaffiliated third-party mutual funds (all such ETFs and mutual funds referred to as underlying funds). The fund may also invest directly in equity or fixed-income securities, including bonds, cash equivalents, money market funds and money market investments, to achieve its investment objectives.

The fund is intended as an investment vehicle for variable annuity contracts and variable life insurance policies to be offered by separate accounts of participating life insurance companies and for pension and retirement plans qualified under the Internal Revenue Code of 1986, as amended. At December 31, 2017, 100% of the fund’s shares were held through separate accounts of two insurance companies. Subscriptions and redemptions of these insurance separate accounts could have a material impact on the fund.

2. Significant Accounting Policies:

Effective August 1, 2017, the fund adopted disclosure requirement changes for SEC Regulation S-X. The adopted changes are reflected throughout this report.

(a) Security Valuation:

The fund values the securities in its portfolio every business day. The fund uses the following policies to value various types of securities:

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

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Financial Notes (continued)

2. Significant Accounting Policies (continued):

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 and ETFs. 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 an underlying fund.

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 fund’s investments as of December 31, 2017 are disclosed in the Portfolio Holdings.

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

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Schwab VIT Balanced Portfolio

Financial Notes (continued)

2. Significant Accounting Policies (continued):

including, but not limited to, freeze, seizure or diminution. The fund bears the risk associated with the repayment of principal and payment of interest on such instruments by the institution with which the deposit is ultimately placed. Balances in the CMS Sweep are accounted for on a cost basis, which approximates market value.

(d) Investment Income:

(e) Expenses:

(f) Distributions to Shareholders:

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

(g) Accounting Estimates:

(h) Federal Income Taxes:

(i) Indemnification:

3. Risk Factors:

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Schwab VIT Balanced Portfolio

Financial Notes (continued)

3. Risk Factors (continued):

select an affiliated underlying fund for other reasons, including to increase assets under management or to support new investment strategies. In addition, other conflicts of interest may exist where the best interests of the affiliated underlying fund may not be aligned with those of the fund. However, the investment adviser is a fiduciary to the fund and is legally obligated to act in the fund’s best interests when selecting underlying funds.

ETF Risk. When the fund invests in an ETF, it will bear a proportionate share of the ETF’s expenses. In addition, lack of liquidity in the market for an ETF’s share can result in its value being more volatile than the underlying portfolio of securities.

• 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. Emerging market 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 developed countries. As a result, there may be an increased risk of illiquidity and price volatility associated with an underlying fund’s investments in emerging market countries, which may be magnified by currency fluctuations relative to the U.S. dollar, and, at times, it may be difficult to value such investments.

• Growth Investing Risk. Certain of the underlying funds pursue a “growth style” of investing. Growth investing focuses on a company’s prospects for growth of revenue and earnings. If a company’s earnings or revenues fall short of expectations, its stock price may fall dramatically. Growth stocks also can perform differently from the market as a whole and other types of stocks and can be more volatile than other types of stocks. Since growth companies usually invest a high portion of earnings in their business, they may lack the dividends of value stocks that can cushion stock prices in a falling market. Growth stocks may also be more expensive relative to their earnings or assets compared to value or other stocks.

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Schwab VIT Balanced Portfolio

Financial Notes (continued)

3. Risk Factors (continued):

• Value Investing Risk. Certain of the underlying funds may pursue a “value style” of investing. Value investing focuses on companies whose stocks appear undervalued in light of factors such as the company’s earnings, book value, revenues or cash flow. If an underlying fund’s investment adviser’s (or sub-adviser’s) assessment of a company’s value or prospects for exceeding earnings expectations or market conditions is wrong, the underlying fund could suffer losses or produce poor performance relative to other funds. In addition, “value stocks” can continue to be undervalued by the market for long periods of time.

• Interest Rate Risk. An underlying fund’s investments in fixed income securities are subject to the risk that interest rates rise and fall over time. As with any investment whose yield reflects current interest rates, an underlying fund’s yield will change over time. During periods when interest rates are low, an underlying fund’s yield (and total return) also may be low. Changes in interest rates also may affect an underlying fund’s share price: a sharp rise in interest rates could cause the underlying fund’s share price to fall. The longer the underlying fund’s duration, the more sensitive to interest rate movements its share price is likely to be. A change in a central bank’s monetary policy or improving economic conditions, among other things, may result in an increase in interest rates.

• Credit Risk. Certain of the underlying funds are subject to the risk that a decline in the credit quality of a portfolio investment could cause the underlying fund’s share price to fall. An underlying fund could lose money if the issuer or guarantor of a portfolio investment fails to make timely principal or interest payments or otherwise honor its obligations. Securities rated below investment grade (junk bonds) involve greater risk of price declines than investment grade securities due to actual or perceived changes in the issuer’s creditworthiness.

• Prepayment and Extension Risk. An underlying fund’s investments in fixed income securities are subject to the risk that the securities may be paid off earlier or later than expected. Either situation could cause the underlying fund to hold securities paying lower-than-market rates of interest, which could hurt the underlying fund’s yield or share price.

• U.S. Government Securities Risk. Some of the U.S. government securities that the underlying funds invest in are not backed by the full faith and credit of the U.S. government, which means they are neither issued nor guaranteed by the U.S. Treasury. Certain securities such as those issued by the Federal Home Loan Banks are supported by limited lines of credit maintained by their issuers with the U.S. Treasury. Securities issued by other issuers, such as the Federal Farm Credit Banks Funding Corporation, are supported solely by the credit of the issuer. There can be no assurance that the U.S. government will provide financial support to securities of its agencies and instrumentalities if it is not obligated to do so under law. Also, any government guarantees on securities the underlying funds own do not extend to shares of the underlying funds themselves.

• Real Estate Investment Risk. An underlying fund in which the fund may invest may have a policy of concentrating its investments in real estate companies and companies related to the real estate industry. As such, an underlying fund is subject to risks associated with the direct ownership of real estate securities and the fund’s investment in such an underlying fund is subject to risks associated with the direct ownership of real estate securities and an investment in the underlying fund will be closely linked to the performance of the real estate markets. These risks include, among others, declines in the value of real estate; risks related to general and local economic conditions; possible lack of availability of mortgage funds or other limits to accessing the credit or capital markets; defaults by borrowers or tenants, particularly during an economic downturn; and changes in interest rates.

• Real Estate Investment Trust (REITs) Risk. An underlying fund may invest in REITs. An underlying fund’s investments in 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, equity REITs may be affected by changes in the value of the underlying properties owned by the trusts, and mortgage REITs may be affected by the quality of any credit extended. Further, REITs may have their investments in relatively few properties, a small geographic area or a single property type. In addition, REITs have their own expenses, and the underlying fund will bear a proportionate share of those expenses.

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Schwab VIT Balanced Portfolio

Financial Notes (continued)

3. Risk Factors (continued):

• Mortgage-Backed and Mortgage Pass-Through Securities Risk. Certain of the mortgage-backed securities in which an underlying fund may invest are not backed by the full faith and credit of the U.S. government and there can be no assurance that the U.S. government would provide financial support to its agencies or instrumentalities where it was not obligated to do so. Mortgage-backed securities tend to increase in value less than other debt securities when interest rates decline, but are subject to similar risk of decline in market value during periods of rising interest rates. Because of prepayment and extension risk, mortgage-backed securities react differently to changes in interest rates than other bonds. Small movements in interest rates-both increases and decreases-may quickly and significantly affect the value of certain mortgage-backed securities. Transactions in mortgage pass-through securities primarily occur through to be announced (TBA) transactions. Default by or bankruptcy of a counterparty to a TBA transaction would expose an underlying fund to possible losses because of an adverse market action, expenses, or delays in connection with the purchase or sale of the pools of mortgage pass-through securities specified in the TBA transaction.

• Portfolio Turnover Risk. Certain of the underlying funds may buy and sell portfolio securities actively. If they do, their portfolio turnover rate and transaction costs will rise, which may lower the underlying fund’s performance and may increase the likelihood of capital gains distributions.

• Commodity Risk. To the extent that an underlying fund invests in commodity-linked derivative instruments, it may subject the underlying fund to greater volatility than investments in traditional securities. Also, commodity-linked investments may be more volatile and less liquid than the underlying commodity. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and other regulatory and market developments. The use of leveraged commodity-linked derivatives creates an opportunity for increased return, but also creates the possibility for a greater loss.

• Derivatives Risk. An underlying 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. An underlying fund’s use of derivatives could reduce the underlying fund’s performance, increase volatility, and could cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund.

• Management Risk. An underlying fund may be an actively managed mutual fund. An underlying fund’s adviser applies its own investment techniques and risk analyses in making investment decisions for the fund, but there can be no guarantee that they will produce the desired results or cause the underlying fund to meet its objectives.

• Investment Style Risk. Certain underlying funds seek to track the performance of various segments of the stock market, as measured by their respective indices. Such underlying funds follow these stocks during upturns as well as downturns. Because of their indexing strategy, these underlying funds do not take steps to reduce market exposure or to lessen the effects of a declining market. In addition, because of an underlying fund’s expenses, the underlying fund’s performance is normally below that of the index.

• Tracking Error Risk. An underlying fund may seek to track the performance of its benchmark index, although it may not be successful in doing so. The divergence between the performance of a fund and its benchmark index, positive or negative, is called “tracking error.” Tracking error can be caused by many factors and it may be significant.

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Financial Notes (continued)

3. Risk Factors (continued):

price money market fund will fluctuate, when the fund sells the shares it owns they may be worth more or less than what the fund originally paid for them. In addition, neither type of money market fund is designed to offer capital appreciation. Certain underlying money market funds may impose a fee upon the sale of shares or may temporarily suspend the ability to sell shares if such fund’s liquidity falls below required minimums.

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

4. Affiliates and Affiliated Transactions:

Investment Adviser

For its advisory and administrative services to the fund, CSIM is entitled to receive an annual fee, accrued daily and payable monthly, equal to 0.45% of the fund’s average daily net assets.

Expense Limitation

CSIM and its affiliates have made an additional agreement with the fund, for so long as CSIM serves as the investment adviser to the fund, which may only be amended or terminated with approval of the fund’s Board, to limit the total annual fund operating expenses charged, excluding interest, taxes and certain non-routine expenses (expense limitation) of the fund to 0.58%.

Investments in Affiliates

The fund may engage in certain transactions involving related parties. Pursuant to an exemptive order issued by the SEC, the fund may invest in other related ETFs and mutual funds. As of December 31, 2017, the Schwab VIT Balanced Portfolio’s ownership percentages of other related funds’ shares are:

Schwab Emerging Markets Equity ETF	0.1%
Schwab International Equity ETF	0.1%
Schwab International Small-Cap Equity ETF	0.1%
Schwab U.S. Aggregate Bond ETF	0.4%
Schwab U.S. Large-Cap ETF	0.1%
Schwab U.S. REIT ETF	0.1%
Schwab U.S. Small-Cap ETF	0.0%*
Schwab U.S. TIPS ETF	0.0%*
Schwab Variable Share Price Money Fund, Ultra Shares	0.6%

*	Less than 0.05%

Interfund Borrowing and Lending

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Financial Notes (continued)

5. Board of Trustees:

6. Borrowing from Banks:

7. Purchases and Sales/Maturities of Investment Securities:

For the period ended December 31, 2017, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:

Purchases of Securities	Sales/Maturities of Securities
$7,402,488	$5,212,291

8. Federal Income Taxes:

As of December 31, 2017, the tax basis cost of the fund’s investments and gross unrealized appreciation and depreciation were as follows:

Tax cost	$58,306,214
Gross unrealized appreciation	$6,856,335
Gross unrealized depreciation	(692,131)
Net unrealized appreciation (depreciation)	$6,164,204

As of December 31, 2017, the components of distributable earnings on a tax basis were as follows:

Undistributed ordinary income	$893,982
Undistributed long-term capital gains	85,726
Net unrealized appreciation (depreciation) on investments	6,164,204
Total	$7,143,912

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of December 31, 2017, the fund had no capital loss carryforwards.

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Schwab VIT Balanced Portfolio

Financial Notes (continued)

8. Federal Income Taxes (continued):

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

Current period distributions
Ordinary income	$738,090
Long-term capital gains	377,352
Prior period distributions
Ordinary income	$580,069
Long-term capital gains	16,519

9. Subsequent Events:

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Schwab VIT Balanced Portfolio | Annual Report

Schwab VIT Balanced Portfolio

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Schwab Annuity Portfolios and Shareholders of Schwab VIT Balanced Portfolio

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the portfolio holdings, of Schwab VIT Balanced Portfolio (one of the funds constituting Schwab Annuity Portfolios, hereafter referred to as the “Fund”) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

PricewaterhouseCoopers LLP
San Francisco, California
February 16, 2018

We have served as the auditor of one or more investment companies in the Schwab Funds Complex since 1989.

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Schwab VIT Balanced Portfolio

Trustees and Officers

Independent Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Robert W. Burns 1959 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	Retired/Private Investor (Jan. 2009 – present). Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) (investment management firm) and President, PIMCO Funds.	108	Director, PS Business Parks, Inc. (2005 – 2012)
John F. Cogan 1947 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Fellow, The Hoover Institution at Stanford University (public policy think tank) (Oct. 1979 – present); Senior Fellow, Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – 2015).	108	Director, Gilead Sciences, Inc. (2005 – present)
Stephen Timothy Kochis 1946 Trustee (Trustee of Schwab Strategic Trust since 2012; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	CEO and Owner, Kochis Global (wealth management consulting) (May 2012 – present); Chairman and CEO, Aspiriant, LLC (wealth management) (Jan. 2008 – Apr. 2012).	108	None
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Private Investor.	108	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present)

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Schwab VIT Balanced Portfolio

Independent Trustees (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013).	108	Director, KLA-Tencor Corporation (2008 – present)
Kimberly S. Patmore 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Consultant, Patmore Management Consulting (management consulting) (2008 – present).	108	None
Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2015)	Co-Chief Executive Officer, Kudu Investment Management, LLC (financial services) (Jan. 2015 – present); Partner, Kudu Advisors, LLC (financial services) (June 2008 – Jan. 2015); Advisor, Asset International, Inc. (publisher of financial services information) (Aug. 2008 – Jan. 2015).	108	None
Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2000; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (Mar. 1990 – present).	108	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 The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Co-CEO, Colgin Cellars, LLC (vineyards) (Feb. 1998 – present).	108	Board Member and Chairman of the Audit Committee, Ionis Pharmaceuticals (1994 – present) Lead Independent Director and Chair of Audit Committee, OUTFRONT Media Inc. (2014 – present)

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Schwab VIT Balanced Portfolio

Interested Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Walter W. Bettinger II² 1960 Chairman and Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010)	Director, President and Chief Executive Officer, The Charles Schwab Corporation (Oct. 2008 – present); President and Chief Executive Officer (Oct. 2008 – present), Director (May 2008 – present), Charles Schwab & Co., Inc.; Director, Charles Schwab Bank (Apr. 2006 – present); Director (May 2008 – present), President and Chief Executive Officer (Aug. 2017 – present), Schwab Holdings, Inc.; and Director, Charles Schwab Investment Management, Inc. (July 2016 – present).	108	Director, The Charles Schwab Corporation (2008 – present)
Marie A. Chandoha² 1961 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), 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 (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm) (Mar. 2007 – Aug. 2010).	108	None
Joseph R. Martinetto² 1962 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Senior Executive Vice President (July 2015 – present), Chief Financial Officer (July 2015 – Aug. 2017), Executive Vice President and Chief Financial Officer (May 2007 – July 2015), The Charles Schwab Corporation and Charles Schwab & Co., Inc.; Director, Charles Schwab & Co., Inc. (May 2007 – present); Director (Apr. 2010 – present) and Chief Executive Officer (July 2013 – Apr. 2015), Charles Schwab Bank; Director (May 2007 – present), Chief Financial Officer (May 2007 – Aug. 2017), Senior Executive Vice President (Feb. 2016 – present), and Executive Vice President (May 2007 – Feb. 2016), Schwab Holdings, Inc.	108	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 A. Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), 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 (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm) (Mar. 2007 – Aug. 2010).
Mark Fischer 1970 Treasurer and Chief Financial Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013)	Treasurer and Chief Financial Officer, Schwab Funds, Laudus Funds and Schwab ETFs (Jan. 2016 – present); Assistant Treasurer, Schwab Funds and Laudus Funds (Dec. 2013 – Dec. 2015), Schwab ETFs (Nov. 2013 – Dec. 2015); Vice President, Charles Schwab Investment Management, Inc. (Oct. 2013 – present); Executive Director, J.P. Morgan Investor Services (Apr. 2011 – Sept. 2013); Assistant Treasurer, Massachusetts Financial Service Investment Management (May 2005 – Mar. 2011).

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Schwab VIT Balanced Portfolio

Officers of the Trust (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
George Pereira 1964 Senior Vice President and Chief Operating Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust since 2006; Schwab Strategic Trust since 2009)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Operating Officer (Jan. 2016 – present), Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – Dec. 2015); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – Dec. 2015) and Schwab ETFs (Oct. 2009 – Dec. 2015); Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Apr. 2005 – present).
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (investment management firm) (May 2009 – Apr. 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 The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds, Laudus Funds and Schwab ETFs (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 (investment management firm) (Apr. 2006 – Jan. 2008).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President (Sept. 2011 – present), Vice President (Mar. 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 (Apr. 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (Apr. 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds and Schwab ETFs Chief Legal Officer, Vice President and Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009)	Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (Mar. 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	Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee’s twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.
²	Mr. Bettinger, Ms. Chandoha and Mr. Martinetto are Interested Trustees. Mr. Bettinger is an Interested Trustee because he owns stock of The Charles Schwab Corporation (CSC), the parent company of Charles Schwab Investment Management, Inc. (CSIM), the investment adviser for the trusts in the Fund Complex, is an employee and director of Charles Schwab & Co., Inc. (CS&Co), the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios, and is a director of the investment adviser for the trusts in the Fund Complex. Ms. Chandoha is an Interested Trustee because she owns stock of CSC and is an employee and director of CSIM. Mr. Martinetto is an Interested Trustee because he owns stock of CSC and is an employee and director of CS&Co.
³	The President, Treasurer and Secretary/Clerk 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.

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Schwab VIT Balanced Portfolio

Glossary

Bloomberg Barclays Global Treasury ex-U.S. Index An index that tracks fixed-rate local currency non-U.S. government debt of investment grade countries with a remaining maturity of at least one year. The Capped version of the index uses custom weights.

Bloomberg Barclays High Yield Very Liquid Index An index that includes publicly issued U.S. dollar denominated, non-investment grade, fixed-rate, taxable corporate bonds that have a remaining maturity of at least one year, are rated high-yield (Ba1/BB+/ BB+ or below) using the middle rating of Moody’s, S&P, and Fitch, respectively, and have $600 million or more of outstanding face value.

Bloomberg Barclays U.S. 3 – 10 Year Treasury Bond Index An index that measures the performance of U.S. Treasury securities that have a remaining maturity of greater than or equal to three years but less than 10 years, are rated investment grade and have $250 million or more of outstanding face value.

Bloomberg Barclays U.S. Aggregate: Agencies Index An index that measures fixed rate securities issued by U.S. government agencies with at least one year to final maturity and $250 million par amount outstanding. The index is a sub-set of the Barclays US Aggregate: Government-Related Index.

Bloomberg Barclays U.S. Credit Index An index that comprises the Barclays U.S. Corporate Index and a non-corporate component that includes foreign agencies, sovereigns, supranationals and local authorities.

Bloomberg Barclays U.S. Mortgage-Backed Securities (MBS): Agency Fixed Rate MBS Index An index that measures agency mortgage-backed pass-through fixed-rate securities issued by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC).

Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index (Series-L) An index that tracks inflation-protected securities issued by the U.S. Treasury that have at least one year remaining to maturity, are rated investment grade, and have $250 million or more of outstanding face value.

Dow Jones-UBS Commodity Index A broadly diversified index composed of futures contracts on physical commodities. The total return index reflects the return on fully collateralized positions in the underlying commodity futures.

Dow Jones U.S. Large-Cap Total Stock Market Index An index that is a subset of the Dow Jones U.S. Total Stock Market Index, which measures all U.S. equity securities with readily available prices. The index includes approximately the largest 750 stocks and is float-adjusted market-capitalization weighted.

Dow Jones U.S. Select REIT Index An index that is a float-adjusted market-capitalization weighted index comprised of real estate investment trusts (REITs). REITs are real estate companies that own and commonly operate income-producing commercial and/or residential real estate. The index excludes mortgage REITs, net-lease REITs, real estate finance companies, mortgage brokers and bankers, commercial and residential real estate brokers and estate agents, homebuilders, large landowners and sub dividers of unimproved land, hybrid REITs, timber REITs and companies that have more than 25% of their assets in direct mortgage investments.

Dow Jones U.S. Small-Cap Total Stock Market Index An index that is a subset of the Dow Jones U.S. Total Stock Market Index, which measures all U.S. equity securities with readily available prices. The index includes components ranked 751-2500 by full market capitalization and is float-adjusted market cap weighted.

FTSE Developed ex US Index (Net) An index that is comprised of approximately 85% large-cap stocks and 15% mid-cap stocks from more than 20 developed markets, excluding the U.S. This index defines the large- and mid-cap stocks as approximately the top 90% of the eligible universe. The Net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.

FTSE Developed Small Cap ex US Liquid Index (Net) An index comprised of small-cap companies in developed countries, excluding the United States, as defined by the index provider. The index defines the small-cap universe as approximately the bottom 10% of the eligible universe with a minimum free float capitalization of $150 million. The Net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.

FTSE Emerging Index (Net) An index comprised of large- and mid-cap companies in emerging countries, as defined by the index provider. The index defines the large- and mid-cap universe as approximately the top 90% of the eligible universe. The Net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.

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Schwab VIT Balanced Portfolio

Russell Microcap Index An index that measures the performance of the microcap segment of the U.S. equity market. Microcap stocks make up less than 3% of the U.S. equity market (by market cap) and consist of the smallest 1,000 securities in the small-cap Russell 2000^® Index, plus the next smallest eligible securities by market cap.

S&P 500 Index An index that is designed to measure the performance of 500 leading publicly traded companies from a broad range of industries.

VIT Balanced Composite Index A custom blended index developed by CSIM based on a comparable portfolio asset allocation and calculated using the following portion allocations effective June 8, 2016: 2% Bloomberg Barclays Global Treasury ex-U.S. Capped Index, 34%

Bloomberg Barclays U.S. Aggregate Bond Index, 15% Bloomberg Barclays U.S. Treasury Bills 1–3 Month Index, 2% Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index (Series-L), 3% Bloomberg Commodity Index, 6% Dow Jones U.S. Select REIT Index, 15% Dow Jones U.S. Large-Cap Total Stock Market Index, 4% Dow Jones U.S. Small-Cap Total Stock Market Index, 5% FTSE All Emerging Index (Net), 11% FTSE Developed ex US Index (Net), 2% FTSE Developed Small Cap ex US Liquid Index (Net), 1% Russell Microcap Index. Prior to June 8, 2016, the composite index was derived using the following allocations: 15% Dow Jones U.S. Large-Cap Total Stock Market Index, 4% Dow Jones U.S. Small-Cap Total Stock Market Index, 1% Russell Microcap Index, 11% FTSE Developed ex US Index (Net), 2% FTSE Developed Small Cap ex US Liquid Index (Net), 5% FTSE Emerging Index (Net), 6% Dow Jones U.S. Select REIT Index, 3% Dow Jones UBS Commodity Index, 2% Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index (Series-L), 12% Bloomberg Barclays U.S. 3–10 Year Treasury Bond Index, 2% Bloomberg Barclays U.S. Aggregate: Agencies Index, 6% Bloomberg Barclays U.S. Credit Index, 13% Bloomberg Barclays U.S. Mortgage Backed Securities Index, 2% Bloomberg Barclays Global Treasury ex-U.S. Capped Index, 1% Bloomberg Barclays High Yield Bond Very Liquid Index, 15% Bloomberg Barclays U.S. Treasury Bills 1–3 Month Index.

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Schwab VIT Balanced Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

The Investment Environment

Asset Class Performance Comparison % returns during the 12 months ended December 31, 2017

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

Management views may have changed since the report date.

*	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

The Investment Environment (continued)

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio as of December 31, 2017

The Schwab VIT Balanced with Growth Portfolio (the fund) seeks to provide long-term capital appreciation and income. To pursue its goal, the fund aims to provide diversification across major asset classes, including domestic equity securities, international equity securities, real assets, fixed income securities, and money market investments, as well as diversification across a range of sub-asset classes within the major asset classes.

The fund is considered a “fund-of-funds” in that it gains exposure to these asset classes by primarily investing in affiliated exchange-traded funds (ETFs) from Schwab Funds, as well as unaffiliated ETFs. The fund may also invest in affiliated mutual funds from Schwab Funds and Laudus Funds and unaffiliated third-party mutual funds. The fund uses the internally calculated VIT Balanced with Growth Composite Index (the composite index) as a performance gauge. The composite index comprises 61% equity, 30% fixed income, 5% cash, and 4% commodities.

Performance. For the 12-month reporting period ended December 31, 2017, the fund returned 13.70%. The Dow Jones U.S. Total Stock Market Index and the Bloomberg Barclays U.S. Aggregate Bond Index, reflecting broad-based U.S. stock and bond market performance, returned 21.16% and 3.54%, respectively. The composite index, described above, returned 14.10%. Differences between the return of the fund and the return of the index may be attributable to, among other things, operational and transactional costs incurred by the fund that are not incurred by the index.

Positioning and Strategies. The fund’s allocations were broadly in line with those of the composite index.

International equities were the strongest contributors to overall fund performance to the fund’ the reporting period. The Schwab Emerging Markets Equity ETF™ returned 32.67%; the Schwab International Small-Cap Equity ETF™, representing the fund’s developed international small-cap exposure, returned 29.39%; and the Schwab International Equity ETF™, representing the fund’s developed international large-cap exposure, returned 26.00%. On a relative basis, the three international equity funds slightly outperformed their comparative index components.

Global commodities were comparatively weak for the year, with the Credit Suisse Commodity Return Strategy Fund, Class I returning 1.74%.

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

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Performance and Fund Facts as of December 31, 2017

Performance of Hypothetical $10,000 Investment (July 25, 2012 – December 31, 2017)¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	Since Inception
Fund: Schwab VIT Balanced with Growth Portfolio (07/25/12)	13.70%	6.36%	7.17%
VIT Balanced with Growth Composite Index	14.10%	7.17%	7.98%
S&P 500^® Index	21.83%	15.79%	16.01%
Bloomberg Barclays U.S. Aggregate Bond Index	3.54%	2.10%	1.99%
Fund Category: Morningstar Allocation – 50% to 70% Equity²	14.72%	8.63%	N/A
Fund Expense Ratio³: 0.61%

The first index listed for the fund is the fund’s primary benchmark, as shown in the prospectus. Additional indices are provided for comparative purposes.

The components that make up the composite index may vary over time. For index definitions, please see the Glossary.

¹	Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. Fund performance does not reflect the additional fees and expenses imposed by the insurance company under the variable insurance product contract. If those contract fees and expenses were included, the performance would be less than that shown. Please refer to the variable insurance product prospectus for a complete listing of these expenses.
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 0.10% of acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in the underlying funds. Reflects the total annual fund operating expenses without contractual fee waivers. For actual ratios during the period, refer to the Financial Highlights section of the financial statements.

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

As a fund shareholder, you may incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, transfer agent fees, and other fund expenses.

	Expense Ratio (Annualized)^1,2	Effective Expense Ratio (Annualized)^3,4	Beginning Account Value at 7/1/17	Ending Account Value (Net of Expenses) at 12/31/17	Expenses Paid During Period 7/1/17-12/31/17^2,5	Effective Expenses Paid During Period 7/1/17-12/31/17^4,5
Schwab VIT Balanced with Growth Portfolio
Actual Return	0.50%	0.60%	$1,000.00	$1,066.50	$2.60	$3.13
Hypothetical 5% Return	0.50%	0.60%	$1,000.00	$1,022.68	$2.55	$3.06

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	Excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.
³	Based on the most recent six-month acquired fund fees and expense ratio; may differ from the acquired fund fees and expense ratio in the prospectus, which are based on estimated amounts for the current fiscal year.
⁴	Includes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.
⁵	Expenses for the 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.

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Financial Statements

Financial Highlights

	1/1/17– 12/31/17	1/1/16– 12/31/16	1/1/15– 12/31/15	1/1/14– 12/31/14	1/1/13– 12/31/13
Per-Share Data
Net asset value at beginning of period	$12.38	$11.80	$12.26	$11.86	$10.71
Income (loss) from investment operations:
Net investment income (loss)¹	0.22	0.19	0.17	0.19	0.23
Net realized and unrealized gains (losses)	1.46	0.56	(0.47)	0.30	0.93
Total from investment operations	1.68	0.75	(0.30)	0.49	1.16
Less distributions:
Distributions from net investment income	(0.18)	(0.16)	(0.15)	(0.09)	(0.01)
Distributions from net realized gains	(0.08)	(0.01)	(0.01)	(0.00) ²	—
Total distributions	(0.26)	(0.17)	(0.16)	(0.09)	(0.01)
Net asset value at end of period	$13.80	$12.38	$11.80	$12.26	$11.86
Total return	13.70%	6.38%	(2.47%)	4.15%	10.79%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses³	0.51%	0.51%	0.53%	0.55%	0.58%
Gross operating expenses³	0.51%	0.51%	0.55%	0.57%	0.75%
Net investment income (loss)	1.65%	1.55%	1.41%	1.53%	2.07%
Portfolio turnover rate	6%	33% ⁴	7%	8%	14%
Net assets, end of period (x 1,000,000)	$150	$133	$116	$99	$70

Calculated based on the average shares outstanding during the period.

Per-share amount was less than $0.005.

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

⁴

The portfolio turnover rate increased due to the consolidation of multiple unaffiliated investments into the Schwab U.S. Aggregate Bond ETF, which reduces costs for shareholders.

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Schwab VIT Balanced with Growth Portfolio | Annual Report

See financial notes

Schwab VIT Balanced with Growth Portfolio

Portfolio Holdings as of December 31, 2017

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

Security	Number of Shares	Value ($)
Affiliated Underlying Funds 92.0% of net assets

U.S. Stocks 28.3%
Large-Cap 22.2%
Schwab U.S. Large-Cap ETF	522,539	33,327,538
Small-Cap 6.1%
Schwab U.S. Small-Cap ETF	131,945	9,201,844
		42,529,382

International Stocks 26.3%
Developed-Market Large-Cap 17.2%
Schwab International Equity ETF	761,091	25,930,370
Developed-Market Small-Cap 3.0%
Schwab International Small-Cap Equity ETF	121,830	4,462,633
Emerging-Market 6.1%
Schwab Emerging Markets Equity ETF	328,150	9,168,511
		39,561,514

Real Assets 5.8%
Real Estate 5.8%
Schwab U.S. REIT ETF	208,862	8,692,837

Fixed Income 28.7%
Inflation-Protected Bond 1.8%
Schwab U.S. TIPS ETF	50,552	2,802,097
Intermediate-Term Bond 26.9%
Schwab U.S. Aggregate Bond ETF	775,775	40,371,331
		43,173,428

Money Market Fund 2.9%
Schwab Variable Share Price Money Fund, Ultra Shares 1.32% (a)	4,330,348	4,330,781
Total Affiliated Underlying Funds
(Cost $116,619,496)		138,287,942

Unaffiliated Underlying Funds 5.9% of net assets

U.S. Stock 1.0%
Micro-Cap 1.0%
iShares Micro-Cap ETF	15,995	1,530,881

Security	Number of Shares	Value ($)
Real Assets 3.9%
Commodity 3.9%
Credit Suisse Commodity Return Strategy Fund, Class I	1,176,300	5,905,025

Fixed Income 1.0%
International Developed-Market Bond 1.0%
SPDR Bloomberg Barclays International Treasury Bond ETF	49,471	1,406,461
Total Unaffiliated Underlying Funds
(Cost $9,686,973)		8,842,367
Issuer Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investments 2.1% of net assets

Time Deposits 2.1%
JPMorgan Chase Bank
0.92%, 01/02/18 (b)	1,503,628	1,503,628
Sumitomo Mitsui Banking Corp.
0.92%, 01/02/18 (b)	118,022	118,022
Wells Fargo
0.92%, 01/02/18 (b)	1,503,628	1,503,628
Total Short-Term Investments
(Cost $3,125,278)		3,125,278

(a)	The rate shown is the 7-day yield.
(b)	The rate shown is the current daily overnight rate.

ETF —	Exchange-traded fund
REIT —	Real Estate Investment Trust
SPDR —	Standard & Poor’s Depositary Receipts
TIPS —	Treasury Inflation Protected Securities

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Schwab VIT Balanced with Growth Portfolio | Annual Report

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Schwab VIT Balanced with Growth Portfolio

Portfolio Holdings as of December 31, 2017 (continued)

Affiliated Underlying Funds	Balance of Shares Held at 12/31/16	Gross Purchases	Gross Sales	Balance of Shares Held at 12/31/17	Net Change in Unrealized Appreciation (depreciation)	Realized Gains (Losses)	Distributions Received*
Schwab Emerging Markets Equity ETF	365,522	11,620	(48,992)	328,150	$2,231,184	($28,175)	$212,083
Schwab International Equity ETF	812,213	33,759	(84,881)	761,091	5,024,077	(116,524)	609,482
Schwab International Small-Cap Equity ETF	131,875	1,258	(11,303)	121,830	952,676	10,278	121,611
Schwab U.S. Aggregate Bond ETF	699,249	94,130	(17,604)	775,775	392,933	(30,186)	902,993
Schwab U.S. Large-Cap ETF	551,656	14,998	(44,115)	522,539	5,362,037	246,590	574,664
Schwab U.S. REIT ETF	198,976	19,106	(9,220)	208,862	125,256	9,594	188,405
Schwab U.S. Small-Cap ETF	132,478	10,514	(11,047)	131,945	1,030,454	81,174	114,362
Schwab U.S. TIPS ETF	49,142	1,917	(507)	50,552	30,746	(735)	52,757
Schwab Variable Share Price Money Fund, Ultra Shares	3,789,408	540,940	—	4,330,348	(865)	—	41,246
Total					$15,148,498	$172,016	$2,817,603

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

The following is a summary of the inputs used to value the fund’s investments as of December 31, 2017 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets
Affiliated Underlying Funds¹	$138,287,942	$—	$—	$138,287,942
Unaffiliated Underlying Funds¹	8,842,367	—	—	8,842,367
Short-Term Investments¹	—	3,125,278	—	3,125,278
Total	$147,130,309	$3,125,278	$—	$150,255,587

¹	As categorized in Portfolio Holdings.

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 December 31, 2017. Fund investments in underlying mutual funds and ETFs are classified as Level 1, without consideration to the classification level of the investments held by the underlying mutual funds and ETFs, which could be Level 1, Level 2 or Level 3.

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Schwab VIT Balanced with Growth Portfolio | Annual Report

See financial notes

Schwab VIT Balanced with Growth Portfolio

Financial Notes

1. Business Structure of the Fund:

Schwab VIT Balanced with Growth Portfolio (the fund) is a series of Schwab Annuity Portfolios (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 fund discussed in this report, which is highlighted:

SCHWAB ANNUITY PORTFOLIOS (ORGANIZED JANUARY 21, 1994)
Schwab Government Money Market Portfolio™
Schwab MarketTrack Growth Portfolio II™
Schwab S&P 500 Index Portfolio
Schwab VIT Balanced Portfolio
Schwab VIT Balanced with Growth Portfolio
Schwab VIT Growth Portfolio

The fund is intended as an investment vehicle for variable annuity contracts and variable life insurance policies to be offered by separate accounts of participating life insurance companies and for pension and retirement plans qualified under the Internal Revenue Code of 1986, as amended. At December 31, 2017, 100% of the fund’s shares were held through separate accounts of two insurance companies. Subscriptions and redemptions of these insurance separate accounts could have a material impact on the fund.

2. Significant Accounting Policies:

Effective August 1, 2017, the fund adopted disclosure requirement changes for SEC Regulation S-X. The adopted changes are reflected throughout this report.

(a) Security Valuation:

The fund values the securities in its portfolio every business day. The fund uses the following policies to value various types of securities:

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Financial Notes (continued)

2. Significant Accounting Policies (continued):

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 and ETFs. 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 an underlying fund.

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 fund’s investments as of December 31, 2017 are disclosed in the Portfolio Holdings.

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

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(d) Investment Income:

(e) Expenses:

(f) Distributions to Shareholders:

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

(g) Accounting Estimates:

(h) Federal Income Taxes:

(i) Indemnification:

3. Risk Factors:

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Financial Notes (continued)

3. Risk Factors (continued):

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Financial Notes (continued)

3. Risk Factors (continued):

• Interest Rate Risk. An underlying fund’s investments in fixed income securities are subject to the risk that interest rates rise and fall over time. As with any investment whose yield reflects current interest rates, an underlying fund’s yield will change over time. During periods when interest rates are low, an underlying fund’s yield (and total return) also may be low. Changes in interest rates also may affect an underlying fund’s share price: a sharp rise in interest rates could cause the underlying fund’s share price to fall. The longer the underlying fund’s duration, the more sensitive to interest rate movements its share price is likely to be. A change in a central bank’s monetary policy or improving economic conditions, among other things, may result in an increase in interest rates.

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Financial Notes (continued)

3. Risk Factors (continued):

• Derivatives Risk. An underlying 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. An underlying fund’s use of derivatives could reduce the underlying fund’s performance, increase volatility, and could cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund.

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Financial Notes (continued)

3. Risk Factors (continued):

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

4. Affiliates and Affiliated Transactions:

Investment Adviser

For its advisory and administrative services to the fund, CSIM is entitled to receive an annual fee, accrued daily and payable monthly, equal to 0.45% of the fund’s average daily net assets.

Expense Limitation

CSIM and its affiliates have made an additional agreement with the fund, for so long as CSIM serves as the investment adviser to the fund, which may only be amended or terminated with approval of the fund’s Board, to limit the total annual fund operating expenses charged, excluding interest, taxes and certain non-routine expenses (expense limitation) of the fund to 0.58%.

Investments in Affiliates

The fund may engage in certain transactions involving related parties. Pursuant to an exemptive order issued by the SEC, the fund may invest in other related ETFs and mutual funds. As of December 31, 2017, the Schwab VIT Balanced with Growth Portfolio’s ownership percentages of other related funds’ shares are:

Schwab Emerging Markets Equity ETF	0.2%
Schwab International Equity ETF	0.2%
Schwab International Small-Cap Equity ETF	0.2%
Schwab U.S. Aggregate Bond ETF	0.8%
Schwab U.S. Large-Cap ETF	0.3%
Schwab U.S. REIT ETF	0.2%
Schwab U.S. Small-Cap ETF	0.1%
Schwab U.S. TIPS ETF	0.1%
Schwab Variable Share Price Money Fund, Ultra Shares	0.3%

Interfund Borrowing and Lending

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Financial Notes (continued)

5. Board of Trustees:

6. Borrowing from Banks:

7. Purchases and Sales/Maturities of Investment Securities:

For the period ended December 31, 2017, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:

Purchases of Securities	Sales/Maturities of Securities
$9,970,142	$8,855,034

8. Federal Income Taxes:

As of December 31, 2017, the tax basis cost of the fund’s investments and gross unrealized appreciation and depreciation were as follows:

Tax cost	$130,000,291
Gross unrealized appreciation	$22,346,843
Gross unrealized depreciation	(2,091,547)
Net unrealized appreciation (depreciation)	$20,255,296

As of December 31, 2017, the components of distributable earnings on a tax basis were as follows:

Undistributed ordinary income	$2,352,622
Undistributed long-term capital gains	160,567
Net unrealized appreciation (depreciation) on investments	20,255,296
Total	$22,768,485

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of December 31, 2017, the fund had no capital loss carryforwards.

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Financial Notes (continued)

8. Federal Income Taxes (continued):

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

Current period distributions
Ordinary income	$1,961,332
Long-term capital gains	761,570
Prior period distributions
Ordinary income	$1,597,912
Long-term capital gains	107,610

9. Subsequent Events:

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Schwab Annuity Portfolios and Shareholders of Schwab VIT Balanced with Growth Portfolio

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the portfolio holdings, of Schwab VIT Balanced with Growth Portfolio (one of the funds constituting Schwab Annuity Portfolios, hereafter referred to as the “Fund”) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

PricewaterhouseCoopers LLP
San Francisco, California
February 16, 2018

We have served as the auditor of one or more investment companies in the Schwab Funds Complex since 1989.

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Trustees and Officers

Independent Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Robert W. Burns 1959 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	Retired/Private Investor (Jan. 2009 – present). Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) (investment management firm) and President, PIMCO Funds.	108	Director, PS Business Parks, Inc. (2005 – 2012)
John F. Cogan 1947 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Fellow, The Hoover Institution at Stanford University (public policy think tank) (Oct. 1979 – present); Senior Fellow, Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – 2015).	108	Director, Gilead Sciences, Inc. (2005 – present)
Stephen Timothy Kochis 1946 Trustee (Trustee of Schwab Strategic Trust since 2012; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	CEO and Owner, Kochis Global (wealth management consulting) (May 2012 – present); Chairman and CEO, Aspiriant, LLC (wealth management) (Jan. 2008 – Apr. 2012).	108	None
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Private Investor.	108	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present)

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Independent Trustees (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013).	108	Director, KLA-Tencor Corporation (2008 – present)
Kimberly S. Patmore 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Consultant, Patmore Management Consulting (management consulting) (2008 – present).	108	None
Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2015)	Co-Chief Executive Officer, Kudu Investment Management, LLC (financial services) (Jan. 2015 – present); Partner, Kudu Advisors, LLC (financial services) (June 2008 – Jan. 2015); Advisor, Asset International, Inc. (publisher of financial services information) (Aug. 2008 – Jan. 2015).	108	None
Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2000; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (Mar. 1990 – present).	108	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 The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Co-CEO, Colgin Cellars, LLC (vineyards) (Feb. 1998 – present).	108	Board Member and Chairman of the Audit Committee, Ionis Pharmaceuticals (1994 – present) Lead Independent Director and Chair of Audit Committee, OUTFRONT Media Inc. (2014 – present)

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Interested Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Walter W. Bettinger II² 1960 Chairman and Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010)	Director, President and Chief Executive Officer, The Charles Schwab Corporation (Oct. 2008 – present); President and Chief Executive Officer (Oct. 2008 – present), Director (May 2008 – present), Charles Schwab & Co., Inc.; Director, Charles Schwab Bank (Apr. 2006 – present); Director (May 2008 – present), President and Chief Executive Officer (Aug. 2017 – present), Schwab Holdings, Inc.; and Director, Charles Schwab Investment Management, Inc. (July 2016 – present).	108	Director, The Charles Schwab Corporation (2008 – present)
Marie A. Chandoha² 1961 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), 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 (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm) (Mar. 2007 – Aug. 2010).	108	None
Joseph R. Martinetto² 1962 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Senior Executive Vice President (July 2015 – present), Chief Financial Officer (July 2015 – Aug. 2017), Executive Vice President and Chief Financial Officer (May 2007 – July 2015), The Charles Schwab Corporation and Charles Schwab & Co., Inc.; Director, Charles Schwab & Co., Inc. (May 2007 – present); Director (Apr. 2010 – present) and Chief Executive Officer (July 2013 – Apr. 2015), Charles Schwab Bank; Director (May 2007 – present), Chief Financial Officer (May 2007 – Aug. 2017), Senior Executive Vice President (Feb. 2016 – present), and Executive Vice President (May 2007 – Feb. 2016), Schwab Holdings, Inc.	108	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 A. Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), 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 (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm) (Mar. 2007 – Aug. 2010).
Mark Fischer 1970 Treasurer and Chief Financial Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013)	Treasurer and Chief Financial Officer, Schwab Funds, Laudus Funds and Schwab ETFs (Jan. 2016 – present); Assistant Treasurer, Schwab Funds and Laudus Funds (Dec. 2013 – Dec. 2015), Schwab ETFs (Nov. 2013 – Dec. 2015); Vice President, Charles Schwab Investment Management, Inc. (Oct. 2013 – present); Executive Director, J.P. Morgan Investor Services (Apr. 2011 – Sept. 2013); Assistant Treasurer, Massachusetts Financial Service Investment Management (May 2005 – Mar. 2011).

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Officers of the Trust (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
George Pereira 1964 Senior Vice President and Chief Operating Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust since 2006; Schwab Strategic Trust since 2009)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Operating Officer (Jan. 2016 – present), Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – Dec. 2015); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – Dec. 2015) and Schwab ETFs (Oct. 2009 – Dec. 2015); Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Apr. 2005 – present).
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (investment management firm) (May 2009 – Apr. 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 The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds, Laudus Funds and Schwab ETFs (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 (investment management firm) (Apr. 2006 – Jan. 2008).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President (Sept. 2011 – present), Vice President (Mar. 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 (Apr. 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (Apr. 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds and Schwab ETFs Chief Legal Officer, Vice President and Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009)	Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (Mar. 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	Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee’s twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.
²	Mr. Bettinger, Ms. Chandoha and Mr. Martinetto are Interested Trustees. Mr. Bettinger is an Interested Trustee because he owns stock of The Charles Schwab Corporation (CSC), the parent company of Charles Schwab Investment Management, Inc. (CSIM), the investment adviser for the trusts in the Fund Complex, is an employee and director of Charles Schwab & Co., Inc. (CS&Co), the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios, and is a director of the investment adviser for the trusts in the Fund Complex. Ms. Chandoha is an Interested Trustee because she owns stock of CSC and is an employee and director of CSIM. Mr. Martinetto is an Interested Trustee because he owns stock of CSC and is an employee and director of CS&Co.
³	The President, Treasurer and Secretary/Clerk 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.

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

Glossary

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Balanced with Growth Portfolio

S&P 500 Index An index that is designed to measure the performance of 500 leading publicly traded companies from a broad range of industries.

VIT Balanced with Growth Composite Index A custom blended index developed by CSIM based on a comparable portfolio asset allocation and calculated using the following portion allocations effective June 8, 2016: 1% Bloomberg Barclays Global Treasury ex-U.S. Capped Index,

27% Bloomberg Barclays U.S. Aggregate Bond Index, 5% Bloomberg Barclays U.S. Treasury Bills 1–3 Month Index, 2% Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index (Series-L), 4% Bloomberg Commodity Index, 6% Dow Jones U.S. Select REIT Index, 22% Dow Jones U.S. Large-Cap Total Stock Market Index, 6% Dow Jones U.S. Small-Cap Total Stock Market Index, 6% FTSE All Emerging Index (Net), 17% FTSE Developed ex US Index (Net), 3% FTSE Developed Small Cap ex US Liquid Index (Net), 1% Russell Microcap Index. Prior to June 8, 2016, the composite index was derived using the following allocations: 22% Dow Jones U.S. Large-Cap Total Stock Market Index, 6% Dow Jones U.S. Small-Cap Total Stock Market Index, 1% Russell Microcap Index, 17% FTSE Developed ex US Index (Net), 3% FTSE Developed Small Cap ex US Liquid Index (Net), 6% FTSE Emerging Index (Net), 6% Dow Jones U.S. Select REIT Index, 4% Dow Jones UBS Commodity Index, 2% Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index (Series-L), 9% Bloomberg Barclays U.S. 3–10 Year Treasury Bond Index, 2% Bloomberg Barclays U.S. Aggregate: Agencies Index, 4% Bloomberg Barclays U.S. Credit Index, 11% Bloomberg Barclays U.S. Mortgage Backed Securities Index, 1% Bloomberg Barclays Global Treasury ex-U.S. [Capped] Index, 1% Bloomberg Barclays High Yield Bond Very Liquid Index, 5% Bloomberg Barclays U.S. Treasury Bills 1–3 Month Index.

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Schwab VIT Balanced with Growth Portfolio | Annual Report

Schwab VIT Growth Portfolio

The Investment Environment

Asset Class Performance Comparison % returns during the 12 months ended December 31, 2017

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

Management views may have changed since the report date.

*	The net version of the index reflects reinvested dividends net of withholding taxes, but reflects no deductions for expenses or other taxes.

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Schwab VIT Growth Portfolio

The Investment Environment (continued)

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Schwab VIT Growth Portfolio | Annual Report

Schwab VIT Growth Portfolio as of December 31, 2017

The Schwab VIT Growth Portfolio (the fund) seeks to provide long-term capital appreciation. To pursue its goal, the fund aims to provide diversification across major asset classes, including domestic equity securities, international equity securities, real assets, fixed income securities, and money market investments, as well as diversification across a range of sub-asset classes within the major asset classes.

The fund is considered a “fund-of-funds” in that it gains exposure to these asset classes by primarily investing in affiliated exchange-traded funds (ETFs) from Schwab Funds, as well as unaffiliated ETFs. The fund may also invest in affiliated mutual funds from Schwab Funds and Laudus Funds and unaffiliated third-party mutual funds. The fund uses the internally calculated VIT Growth Composite Index (the composite index) as a performance gauge. The composite index comprises 78% equity, 13% fixed income, 5% cash, and 4% commodities.

Performance. For the 12-month reporting period ended December 31, 2017, the fund returned 17.14%. The Dow Jones U.S. Total Stock Market Index and the Bloomberg Barclays U.S. Aggregate Bond Index, reflecting broad-based U.S. stock and bond market performance, returned 21.16% and 3.54%, respectively. The composite index, described above, returned 17.56%. Differences between the return of the fund and the return of the index may be attributable to, among other things, operational and transactional costs incurred by the fund that are not incurred by the index.

Positioning and Strategies. The fund’s allocations were broadly in line with those of the composite index.

The fund’s U.S. fixed-income exposures also produced positive returns. The bulk of the fund’s exposure is in the Schwab U.S. Aggregate Bond Fund ETF™, providing core bond exposure, which returned 3.50%, slightly underperforming its comparative index component. Albeit comparatively smaller, the fund’s exposure to inflation-protected bonds, the Schwab US TIPS ETF™, returned 3.02%.

Global commodities were weaker for the year, with the Credit Suisse Commodity Return Strategy Fund, Class I returning 1.74%.

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

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Schwab VIT Growth Portfolio | Annual Report

Schwab VIT Growth Portfolio

Performance and Fund Facts as of December 31, 2017

Performance of Hypothetical $10,000 Investment (July 25, 2012 – December 31, 2017)¹

Average Annual Total Returns¹

Fund and Inception Date	1 Year	5 Years	Since Inception
Fund: Schwab VIT Growth Portfolio (07/25/12)	17.14%	8.04%	9.18%
VIT Growth Composite Index	17.56%	8.83%	9.90%
S&P 500^® Index	21.83%	15.79%	16.01%
Bloomberg Barclays U.S. Aggregate Bond Index	3.54%	2.10%	1.99%
Fund Category: Morningstar Allocation – 70% to 85% Equity²	17.47%	10.03%	N/A
Fund Expense Ratio³: 0.61%

The first index listed for the fund is the fund’s primary benchmark, as shown in the prospectus. Additional indices are provided for comparative purposes.

The components that make up the composite index may vary over time. For index definitions, please see the Glossary.

¹	Fund expenses have been partially absorbed by CSIM and its affiliates. Without these reductions, the fund’s returns would have been lower. Fund performance does not reflect the additional fees and expenses imposed by the insurance company under the variable insurance product contract. If those contract fees and expenses were included, the performance would be less than that shown. Please refer to the variable insurance product prospectus for a complete listing of these expenses.
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 0.10% of acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in the underlying funds. Reflects the total annual fund operating expenses without contractual fee waivers. For actual ratios during the period, refer to the Financial Highlights section of the financial statements.

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Schwab VIT Growth Portfolio | Annual Report

Schwab VIT Growth Portfolio

Fund Expenses (Unaudited)

Examples for a $1,000 Investment

As a fund shareholder, you may incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, transfer agent fees, and other fund expenses.

	Expense Ratio (Annualized)^1,2	Effective Expense Ratio (Annualized)^3,4	Beginning Account Value at 7/1/17	Ending Account Value (Net of Expenses) at 12/31/17	Expenses Paid During Period 7/1/17-12/31/17^2,5	Effective Expenses Paid During Period 7/1/17-12/31/17^4,5
Schwab VIT Growth Portfolio
Actual Return	0.50%	0.60%	$1,000.00	$1,083.70	$2.63	$3.15
Hypothetical 5% Return	0.50%	0.60%	$1,000.00	$1,022.68	$2.55	$3.06

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	Excludes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.
³	Based on the most recent six-month acquired fund fees and expense ratio; may differ from the acquired fund fees and expense ratio in the prospectus, which are based on estimated amounts for the current fiscal year.
⁴	Includes acquired fund fees and expenses, which are indirect expenses incurred by the fund through its investments in underlying funds.
⁵	Expenses for the 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.

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Schwab VIT Growth Portfolio | Annual Report

Schwab VIT Growth Portfolio

Financial Statements

Financial Highlights

	1/1/17– 12/31/17	1/1/16– 12/31/16	1/1/15– 12/31/15	1/1/14– 12/31/14	1/1/13– 12/31/13
Per-Share Data
Net asset value at beginning of period	$13.26	$12.50	$13.05	$12.65	$10.95
Income (loss) from investment operations:
Net investment income (loss)¹	0.23	0.20	0.19	0.20	0.33
Net realized and unrealized gains (losses)	2.02	0.75	(0.55)	0.30	1.37
Total from investment operations	2.25	0.95	(0.36)	0.50	1.70
Less distributions:
Distributions from net investment income	(0.19)	(0.17)	(0.17)	(0.10)	(0.00) ²
Distributions from net realized gains	(0.04)	(0.02)	(0.02)	(0.00) ²	—
Total distributions	(0.23)	(0.19)	(0.19)	(0.10)	(0.00) ²
Net asset value at end of period	$15.28	$13.26	$12.50	$13.05	$12.65
Total return	17.14%	7.67%	(2.85%)	3.97%	15.56%
Ratios/Supplemental Data
Ratios to average net assets:
Net operating expenses³	0.50%	0.51%	0.52%	0.54%	0.58%
Gross operating expenses³	0.50%	0.51%	0.54%	0.56%	0.77%
Net investment income (loss)	1.61%	1.54%	1.42%	1.56%	2.72%
Portfolio turnover rate	6%	21% ⁴	7%	9%	9%
Net assets, end of period (x 1,000,000)	$150	$131	$121	$107	$77

Calculated based on the average shares outstanding during the period.

Per-share amount was less than $0.005.

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

⁴

The portfolio turnover rate increased due to the consolidation of multiple unaffiliated investments into the Schwab U.S. Aggregate Bond ETF, which reduces costs for shareholders.

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Schwab VIT Growth Portfolio | Annual Report

See financial notes

Schwab VIT Growth Portfolio

Portfolio Holdings as of December 31, 2017

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

Security	Number of Shares	Value ($)
Affiliated Underlying Funds 91.7% of net assets

U.S. Stocks 36.1%
Large-Cap 29.1%
Schwab U.S. Large-Cap ETF	685,860	43,744,151
Small-Cap 7.0%
Schwab U.S. Small-Cap ETF	150,257	10,478,923
		54,223,074

International Stocks 34.2%
Developed-Market Large-Cap 21.2%
Schwab International Equity ETF	932,149	31,758,316
Developed-Market Small-Cap 4.9%
Schwab International Small-Cap Equity ETF	203,025	7,436,806
Emerging-Market 8.1%
Schwab Emerging Markets Equity ETF	435,414	12,165,467
		51,360,589

Real Assets 5.7%
Real Estate 5.7%
Schwab U.S. REIT ETF	204,659	8,517,907

Fixed Income 12.9%
Inflation-Protected Bond 0.9%
Schwab U.S. TIPS ETF	25,769	1,428,376
Intermediate-Term Bond 12.0%
Schwab U.S. Aggregate Bond ETF	345,878	17,999,491
		19,427,867

Money Market Fund 2.8%
Schwab Variable Share Price Money Fund, Ultra Shares 1.32% (a)	4,130,332	4,130,745
Total Affiliated Underlying Funds
(Cost $109,749,249)		137,660,182

Security	Number of Shares	Value ($)
Unaffiliated Underlying Funds 6.0% of net assets

U.S. Stock 2.1%
Micro-Cap 2.1%
iShares Micro-Cap ETF	32,545	3,114,882

Real Assets 3.9%
Commodity 3.9%
Credit Suisse Commodity Return Strategy Fund, Class I	1,165,457	5,850,594
Total Unaffiliated Underlying Funds
(Cost $9,342,786)		8,965,476
Issuer Rate, Maturity Date	Face Amount ($)	Value ($)
Short-Term Investments 2.3% of net assets

Time Deposits 2.3%
BNP Paribas
0.92%, 01/02/18 (b)	1,502,756	1,502,756
JPMorgan Chase Bank
0.92%, 01/02/18 (b)	512,692	512,692
Sumitomo Mitsui Banking Corp.
0.92%, 01/02/18 (b)	1,502,756	1,502,756
Total Short-Term Investments
(Cost $3,518,204)		3,518,204

(a)	The rate shown is the 7-day yield.
(b)	The rate shown is the current daily overnight rate.

ETF —	Exchange-traded fund
REIT —	Real Estate Investment Trust
TIPS —	Treasury Inflation Protected Securities

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Schwab VIT Growth Portfolio | Annual Report

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Schwab VIT Growth Portfolio

Portfolio Holdings as of December 31, 2017 (continued)

Affiliated Underlying Funds	Balance of Shares Held at 12/31/16	Gross Purchases	Gross Sales	Balance of Shares Held at 12/31/17	Net Change in Unrealized Appreciation (depreciation)	Realized Gains (Losses)	Distributions Received*
Schwab Emerging Markets Equity ETF	478,882	14,847	(58,315)	435,414	$2,928,327	$36,733	$281,408
Schwab International Equity ETF	985,595	32,462	(85,908)	932,149	6,129,227	8,005	746,465
Schwab International Small-Cap Equity ETF	219,885	1,780	(18,640)	203,025	1,587,093	38,601	202,659
Schwab U.S. Aggregate Bond ETF	300,053	56,305	(10,480)	345,878	182,727	(13,408)	407,933
Schwab U.S. Large-Cap ETF	713,754	21,033	(48,927)	685,860	7,053,248	396,066	762,726
Schwab U.S. REIT ETF	195,611	9,048	—	204,659	122,455	—	188,271
Schwab U.S. Small-Cap ETF	153,742	2,339	(5,824)	150,257	1,209,194	71,139	133,281
Schwab U.S. TIPS ETF	22,683	3,086	—	25,769	13,516	—	26,505
Schwab Variable Share Price Money Fund, Ultra Shares	3,092,857	1,037,475	—	4,130,332	(825)	—	37,918
Total					$19,224,962	$537,136	$2,787,166

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

The following is a summary of the inputs used to value the fund’s investments as of December 31, 2017 (see financial note 2(a) for additional information):

Description	Quoted Prices in Active Markets for Identical Assets (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets
Affiliated Underlying Funds¹	$137,660,182	$—	$—	$137,660,182
Unaffiliated Underlying Funds¹	8,965,476	—	—	8,965,476
Short-Term Investments¹	—	3,518,204	—	3,518,204
Total	$146,625,658	$3,518,204	$—	$150,143,862

¹	As categorized in Portfolio Holdings.

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 December 31, 2017. Fund investments in underlying mutual funds and ETFs are classified as Level 1, without consideration to the classification level of the investments held by the underlying mutual funds and ETFs, which could be Level 1, Level 2 or Level 3.

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Schwab VIT Growth Portfolio | Annual Report

See financial notes

Schwab VIT Growth Portfolio

Financial Notes

1. Business Structure of the Fund:

Schwab VIT Growth Portfolio (the fund) is a series of Schwab Annuity Portfolios (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 fund discussed in this report, which is highlighted:

SCHWAB ANNUITY PORTFOLIOS (ORGANIZED JANUARY 21, 1994)
Schwab Government Money Market Portfolio™
Schwab MarketTrack Growth Portfolio II™
Schwab S&P 500 Index Portfolio
Schwab VIT Balanced Portfolio
Schwab VIT Balanced with Growth Portfolio
Schwab VIT Growth Portfolio

The fund is intended as an investment vehicle for variable annuity contracts and variable life insurance policies to be offered by separate accounts of participating life insurance companies and for pension and retirement plans qualified under the Internal Revenue Code of 1986, as amended. At December 31, 2017, 100% of the fund’s shares were held through separate accounts of two insurance companies. Subscriptions and redemptions of these insurance separate accounts could have a material impact on the fund.

2. Significant Accounting Policies:

Effective August 1, 2017, the fund adopted disclosure requirement changes for SEC Regulation S-X. The adopted changes are reflected throughout this report.

(a) Security Valuation:

The fund values the securities in its portfolio every business day. The fund uses the following policies to value various types of securities:

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Schwab VIT Growth Portfolio | Annual Report

Schwab VIT Growth Portfolio

Financial Notes (continued)

2. Significant Accounting Policies (continued):

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 and ETFs. 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 an underlying fund.

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 fund’s investments as of December 31, 2017 are disclosed in the Portfolio Holdings.

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

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Schwab VIT Growth Portfolio | Annual Report

Schwab VIT Growth Portfolio

Financial Notes (continued)

2. Significant Accounting Policies (continued):

(d) Investment Income:

(e) Expenses:

(f) Distributions to Shareholders:

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

(g) Accounting Estimates:

(h) Federal Income Taxes:

(i) Indemnification:

3. Risk Factors:

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Schwab VIT Growth Portfolio | Annual Report

Schwab VIT Growth Portfolio

Financial Notes (continued)

3. Risk Factors (continued):

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Schwab VIT Growth Portfolio | Annual Report

Schwab VIT Growth Portfolio

Financial Notes (continued)

3. Risk Factors (continued):

• Interest Rate Risk. An underlying fund’s investments in fixed income securities are subject to the risk that interest rates rise and fall over time. As with any investment whose yield reflects current interest rates, an underlying fund’s yield will change over time. During periods when interest rates are low, an underlying fund’s yield (and total return) also may be low. Changes in interest rates also may affect an underlying fund’s share price: a sharp rise in interest rates could cause the underlying fund’s share price to fall. The longer the underlying fund’s duration, the more sensitive to interest rate movements its share price is likely to be. A change in a central bank’s monetary policy or improving economic conditions, among other things, may result in an increase in interest rates.

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Schwab VIT Growth Portfolio | Annual Report

Schwab VIT Growth Portfolio

Financial Notes (continued)

3. Risk Factors (continued):

• Derivatives Risk. An underlying 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. An underlying fund’s use of derivatives could reduce the underlying fund’s performance, increase volatility, and could cause the underlying fund to lose more than the initial amount invested. In addition, investments in derivatives may involve leverage, which means a small percentage of assets invested in derivatives can have a disproportionately large impact on an underlying fund.

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Schwab VIT Growth Portfolio | Annual Report

Schwab VIT Growth Portfolio

Financial Notes (continued)

3. Risk Factors (continued):

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

4. Affiliates and Affiliated Transactions:

Investment Adviser

For its advisory and administrative services to the fund, CSIM is entitled to receive an annual fee, accrued daily and payable monthly, equal to 0.45% of the fund’s average daily net assets.

Expense Limitation

CSIM and its affiliates have made an additional agreement with the fund, for so long as CSIM serves as the investment adviser to the fund, which may only be amended or terminated with approval of the fund’s Board, to limit the total annual fund operating expenses charged, excluding interest, taxes and certain non-routine expenses (expense limitation) of the fund to 0.58%.

Investments in Affiliates

The fund may engage in certain transactions involving related parties. Pursuant to an exemptive order issued by the SEC, the fund may invest in other related ETFs and mutual funds. As of December 31, 2017, the Schwab VIT Growth Portfolio’s ownership percentages of other related funds’ shares are:

Schwab Emerging Markets Equity ETF	0.3%
Schwab International Equity ETF	0.2%
Schwab International Small-Cap Equity ETF	0.4%
Schwab U.S. Aggregate Bond ETF	0.4%
Schwab U.S. Large-Cap ETF	0.4%
Schwab U.S. REIT ETF	0.2%
Schwab U.S. Small-Cap ETF	0.2%
Schwab U.S. TIPS ETF	0.0%*
Schwab Variable Share Price Money Fund, Ultra Shares	0.3%

*	Less than 0.05%.

Interfund Borrowing and Lending

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Schwab VIT Growth Portfolio | Annual Report

Schwab VIT Growth Portfolio

Financial Notes (continued)

5. Board of Trustees:

6. Borrowing from Banks:

7. Purchases and Sales/Maturities of Investment Securities:

For the period ended December 31, 2017, purchases and sales/maturities of securities (excluding short-term obligations) were as follows:

Purchases of Securities	Sales/Maturities of Securities
$8,115,925	$8,751,555

8. Federal Income Taxes:

As of December 31, 2017, the tax basis cost of the fund’s investments and gross unrealized appreciation and depreciation were as follows:

Tax cost	$123,531,990
Gross unrealized appreciation	$28,219,381
Gross unrealized depreciation	(1,607,509)
Net unrealized appreciation (depreciation)	$26,611,872

As of December 31, 2017, the components of distributable earnings on a tax basis were as follows:

Undistributed ordinary income	$2,309,391
Undistributed long-term capital gains	497,552
Net unrealized appreciation (depreciation) on investments	26,611,872
Total	$29,418,815

Capital loss carryforwards may be used to offset future realized capital gains for federal income tax purposes. As of December 31, 2017, the fund had no capital loss carryforwards.

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Schwab VIT Growth Portfolio | Annual Report

Schwab VIT Growth Portfolio

Financial Notes (continued)

8. Federal Income Taxes (continued):

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

Current period distributions
Ordinary income	$1,910,073
Long-term capital gains	403,061
Prior period distributions
Ordinary income	$1,689,400
Long-term capital gains	147,955

9. Subsequent Events:

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Schwab VIT Growth Portfolio | Annual Report

Schwab VIT Growth Portfolio

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Schwab Annuity Portfolios and Shareholders of Schwab VIT Growth Portfolio

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the portfolio holdings, of Schwab VIT Growth Portfolio (one of the funds constituting Schwab Annuity Portfolios, hereafter referred to as the “Fund”) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

PricewaterhouseCoopers LLP
San Francisco, California
February 16, 2018

We have served as the auditor of one or more investment companies in the Schwab Funds Complex since 1989.

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Schwab VIT Growth Portfolio | Annual Report

Schwab VIT Growth Portfolio

Trustees and Officers

Independent Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Robert W. Burns 1959 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	Retired/Private Investor (Jan. 2009 – present). Formerly, Managing Director, Pacific Investment Management Company, LLC (PIMCO) (investment management firm) and President, PIMCO Funds.	108	Director, PS Business Parks, Inc. (2005 – 2012)
John F. Cogan 1947 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Fellow, The Hoover Institution at Stanford University (public policy think tank) (Oct. 1979 – present); Senior Fellow, Stanford Institute for Economic Policy Research (2000 – present); Professor of Public Policy, Stanford University (1994 – 2015).	108	Director, Gilead Sciences, Inc. (2005 – present)
Stephen Timothy Kochis 1946 Trustee (Trustee of Schwab Strategic Trust since 2012; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2016)	CEO and Owner, Kochis Global (wealth management consulting) (May 2012 – present); Chairman and CEO, Aspiriant, LLC (wealth management) (Jan. 2008 – Apr. 2012).	108	None
David L. Mahoney 1954 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Private Investor.	108	Director, Symantec Corporation (2003 – present) Director, Corcept Therapeutics Incorporated (2004 – present) Director, Adamas Pharmaceuticals, Inc. (2009 – present)

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Schwab VIT Growth Portfolio

Independent Trustees (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Kiran M. Patel 1948 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2011; Schwab Strategic Trust since 2016)	Retired. Executive Vice President and General Manager of Small Business Group, Intuit, Inc. (financial software and services firm for consumers and small businesses) (Dec. 2008 – Sept. 2013).	108	Director, KLA-Tencor Corporation (2008 – present)
Kimberly S. Patmore 1956 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Consultant, Patmore Management Consulting (management consulting) (2008 – present).	108	None
Charles A. Ruffel 1956 Trustee (Trustee of Schwab Strategic Trust since 2009; The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2015)	Co-Chief Executive Officer, Kudu Investment Management, LLC (financial services) (Jan. 2015 – present); Partner, Kudu Advisors, LLC (financial services) (June 2008 – Jan. 2015); Advisor, Asset International, Inc. (publisher of financial services information) (Aug. 2008 – Jan. 2015).	108	None
Gerald B. Smith 1950 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2000; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Chairman, Chief Executive Officer and Founder of Smith Graham & Co. (investment advisors) (Mar. 1990 – present).	108	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 The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Laudus Trust since 2010; Schwab Strategic Trust since 2016)	Senior Consultant, Goldman Sachs & Co., Inc. (investment banking and securities firm) (Jan. 2008 – present); Co-CEO, Colgin Cellars, LLC (vineyards) (Feb. 1998 – present).	108	Board Member and Chairman of the Audit Committee, Ionis Pharmaceuticals (1994 – present) Lead Independent Director and Chair of Audit Committee, OUTFRONT Media Inc. (2014 – present)

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Schwab VIT Growth Portfolio

Interested Trustees
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served¹)	Principal Occupations During the Past Five Years	Number of Portfolios in Fund Complex Overseen by the Trustee	Other Directorships
Walter W. Bettinger II² 1960 Chairman and Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2008; Schwab Strategic Trust since 2009; Laudus Trust since 2010)	Director, President and Chief Executive Officer, The Charles Schwab Corporation (Oct. 2008 – present); President and Chief Executive Officer (Oct. 2008 – present), Director (May 2008 – present), Charles Schwab & Co., Inc.; Director, Charles Schwab Bank (Apr. 2006 – present); Director (May 2008 – present), President and Chief Executive Officer (Aug. 2017 – present), Schwab Holdings, Inc.; and Director, Charles Schwab Investment Management, Inc. (July 2016 – present).	108	Director, The Charles Schwab Corporation (2008 – present)
Marie A. Chandoha² 1961 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), 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 (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm) (Mar. 2007 – Aug. 2010).	108	None
Joseph R. Martinetto² 1962 Trustee (Trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2016)	Senior Executive Vice President (July 2015 – present), Chief Financial Officer (July 2015 – Aug. 2017), Executive Vice President and Chief Financial Officer (May 2007 – July 2015), The Charles Schwab Corporation and Charles Schwab & Co., Inc.; Director, Charles Schwab & Co., Inc. (May 2007 – present); Director (Apr. 2010 – present) and Chief Executive Officer (July 2013 – Apr. 2015), Charles Schwab Bank; Director (May 2007 – present), Chief Financial Officer (May 2007 – Aug. 2017), Senior Executive Vice President (Feb. 2016 – present), and Executive Vice President (May 2007 – Feb. 2016), Schwab Holdings, Inc.	108	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 A. Chandoha 1961 President and Chief Executive Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2010)	Director, President and Chief Executive Officer (Dec. 2010 – present), Chief Investment Officer (Sept. 2010 – Oct. 2011), Charles Schwab Investment Management, Inc.; Trustee (Jan. 2016 – present), 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 (Jan. 2011 – present); Global Head of Fixed Income Business Division, BlackRock, Inc. (formerly Barclays Global Investors) (investment management firm) (Mar. 2007 – Aug. 2010).
Mark Fischer 1970 Treasurer and Chief Financial Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2013)	Treasurer and Chief Financial Officer, Schwab Funds, Laudus Funds and Schwab ETFs (Jan. 2016 – present); Assistant Treasurer, Schwab Funds and Laudus Funds (Dec. 2013 – Dec. 2015), Schwab ETFs (Nov. 2013 – Dec. 2015); Vice President, Charles Schwab Investment Management, Inc. (Oct. 2013 – present); Executive Director, J.P. Morgan Investor Services (Apr. 2011 – Sept. 2013); Assistant Treasurer, Massachusetts Financial Service Investment Management (May 2005 – Mar. 2011).

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Schwab VIT Growth Portfolio

Officers of the Trust (continued)
Name, Year of Birth, and Position(s) with the trust (Terms of office, and length of Time Served³)	Principal Occupations During the Past Five Years
George Pereira 1964 Senior Vice President and Chief Operating Officer (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios since 2004; Laudus Trust since 2006; Schwab Strategic Trust since 2009)	Senior Vice President and Chief Financial Officer (Nov. 2004 – present), Chief Operating Officer (Jan. 2011 – present), Charles Schwab Investment Management, Inc.; Senior Vice President and Chief Operating Officer (Jan. 2016 – present), Treasurer and Chief Financial Officer, Laudus Funds (June 2006 – Dec. 2015); Treasurer and Principal Financial Officer, Schwab Funds (Nov. 2004 – Dec. 2015) and Schwab ETFs (Oct. 2009 – Dec. 2015); Director, Charles Schwab Worldwide Funds plc and Charles Schwab Asset Management (Ireland) Limited (Apr. 2005 – present).
Omar Aguilar 1970 Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Equities and Multi-Asset Strategies, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Equities, Schwab Funds, Laudus Funds and Schwab ETFs (June 2011 – present); Head of the Portfolio Management Group and Vice President of Portfolio Management, Financial Engines, Inc. (investment management firm) (May 2009 – Apr. 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 The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President and Chief Investment Officer – Fixed Income, Charles Schwab Investment Management, Inc. (Apr. 2011 – present); Senior Vice President and Chief Investment Officer – Fixed Income, Schwab Funds, Laudus Funds and Schwab ETFs (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 (investment management firm) (Apr. 2006 – Jan. 2008).
David Lekich 1964 Chief Legal Officer and Secretary, Schwab Funds and Schwab ETFs Vice President and Assistant Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Schwab Strategic Trust and Laudus Trust since 2011)	Senior Vice President (Sept. 2011 – present), Vice President (Mar. 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 (Apr. 2011 – present) and Chief Legal Officer (Dec. 2011 – present), Schwab Funds; Vice President and Assistant Clerk, Laudus Funds (Apr. 2011 – present); Secretary (May 2011 – present) and Chief Legal Officer (Nov. 2011 – present), Schwab ETFs.
Catherine MacGregor 1964 Vice President and Assistant Secretary, Schwab Funds and Schwab ETFs Chief Legal Officer, Vice President and Clerk, Laudus Funds (Officer of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust since 2005; Schwab Strategic Trust since 2009)	Vice President, Charles Schwab & Co., Inc., Charles Schwab Investment Management, Inc. (July 2005 – present); Vice President (Dec. 2005 – present), Chief Legal Officer and Clerk (Mar. 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	Each Trustee shall hold office until the election and qualification of his or her successor, or until he or she dies, resigns or is removed. The retirement policy requires that each independent trustee retire by December 31 of the year in which the Trustee turns 74 or the Trustee’s twentieth year of service as an independent trustee on any trust in the Fund Complex, whichever occurs first.
²	Mr. Bettinger, Ms. Chandoha and Mr. Martinetto are Interested Trustees. Mr. Bettinger is an Interested Trustee because he owns stock of The Charles Schwab Corporation (CSC), the parent company of Charles Schwab Investment Management, Inc. (CSIM), the investment adviser for the trusts in the Fund Complex, is an employee and director of Charles Schwab & Co., Inc. (CS&Co), the principal underwriter for The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios, and is a director of the investment adviser for the trusts in the Fund Complex. Ms. Chandoha is an Interested Trustee because she owns stock of CSC and is an employee and director of CSIM. Mr. Martinetto is an Interested Trustee because he owns stock of CSC and is an employee and director of CS&Co.
³	The President, Treasurer and Secretary/Clerk 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.

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Schwab VIT Growth Portfolio

Glossary

S&P 500 Index An index that is designed to measure the performance of 500 leading publicly traded companies from a broad range of industries.

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Schwab VIT Growth Portfolio | Annual Report

Schwab VIT Growth Portfolio

VIT Growth Composite Index A custom blended index developed by CSIM based on a comparable portfolio asset allocation and calculated using the following portion allocations effective June 8, 2016: 12% Bloomberg Barclays U.S. Aggregate Bond Index, 5% Bloomberg Barclays U.S. Treasury Bills 1–3 Month Index, 1% Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index (Series-L), 4% Bloomberg Commodity Index, 6% Dow Jones U.S. Select REIT Index, 29% Dow Jones U.S. Large-Cap Total Stock Market Index, 7% Dow Jones U.S. Small-Cap Total Stock Market Index, 8% FTSE All Emerging Index (Net), 21% FTSE Developed ex US Index (Net), 5% FTSE Developed Small Cap ex US Liquid Index (Net), 2% Russell Microcap Index. Prior to June 8, 2016, the composite index was derived using the

following allocations: 29% Dow Jones U.S. Large-Cap Total Stock Market Index, 7% Dow Jones U.S. Small-Cap Total Stock Market Index, 2% Russell Microcap Index, 21% FTSE Developed ex US Index (Net), 5% FTSE Developed Small Cap ex US Liquid Index (Net), 8% FTSE Emerging Index (Net), 6% Dow Jones U.S. Select REIT Index, 4% Dow Jones UBS Commodity Index, 1% Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index (Series-L), 5% Bloomberg Barclays U.S. 3–10 Year Treasury Bond Index, 2% Bloomberg Barclays U.S. Credit Index, 5% Bloomberg Barclays U.S. Mortgage Backed Securities Index, 5% Bloomberg Barclays U.S. Treasury Bills 1–3 Month Index.

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Schwab VIT Growth Portfolio | Annual Report

Registrant’s Board of Trustees has determined that Kiran M. Patel, Robert W. Burns and Kimberly S. Patmore, each currently serving on its audit, compliance and valuation committee, are each an “audit committee financial expert,” as such term is defined in Item 3 of Form N-CSR. Each member of Registrant’s audit, compliance and valuation committee is “independent” under the standards set forth in Item 3 of Form N-CSR.

The designation of each of Mr. Patel, Mr. Burns and Ms. Patmore as an “audit committee financial expert” pursuant to Item 3 of Form N-CSR does not (i) impose upon such individual any duties, obligations, or liability that are greater than the duties, obligations and liability imposed upon such individual as a member of Registrant’s audit, compliance and valuation committee or Board of Trustees in the absence of such designation; and (ii) affect the duties, obligations or liability of any other member of Registrant’s audit, compliance and valuation committee or Board of Trustees.

(a) Below are the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of Registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.

The following table presents fees billed by the principal accountant in each of the last two fiscal years for the services rendered to the Funds:

(g) Below are the aggregate non-audit fees billed in each of the last two fiscal years by Registrant’s principal accountant for services rendered to Registrant, to Registrant’s investment adviser, and to any entity controlling, controlled by, or under common control with Registrant’s investment adviser that provides ongoing services to Registrant.

(h) During the past fiscal year, all non-audit services provided by Registrant’s principal accountant to either Registrant’s investment adviser or to any entity controlling, controlled by, or under common control with Registrant’s investment adviser that provides ongoing services to Registrant were pre-approved. Included in the audit committee’s pre-approval was the review and consideration as to whether the provision of these non-audit services is compatible with maintaining the principal accountant’s independence.

The schedules of investments are included as part of the report to shareholders filed under Item 1 of this Form.

Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Assets
Investments in affiliated underlying funds, at value (cost $15,508,136)		$27,120,391
Investments in unaffiliated issuers, (cost $529,858)		529,858
Receivables:
Fund shares sold		29,709
Dividends		9,824
Interest		34
Prepaid expenses	+	95
Total assets		27,689,911
Liabilities
Payables:
Investments bought		10,054
Investment adviser and administrator fees		7,020
Fund shares redeemed		946
Accrued expenses	+	19,606
Total liabilities		37,626
Net Assets
Total assets		27,689,911
Total liabilities	–	37,626
Net assets		$27,652,285
Net Assets by Source
Capital received from investors		14,700,249
Net investment income not yet distributed		411,844
Net realized capital gains		927,937
Net unrealized capital appreciation		11,612,255

Operations
	1/1/17-12/31/17		1/1/16-12/31/16
Net investment income		$381,259	$409,064
Net realized gains		1,656,969	1,380,681
Net change in unrealized appreciation (depreciation)	+	2,136,457	545,698
Increase in net assets from operations		4,174,685	2,335,443
Distributions to Shareholders
Distributions from net investment income		(411,713)	(455,658)
Distributions from net realized gains	+	(1,304,646)	(840,934)
Total distributions		($1,716,359)	($1,296,592)

Transactions in Fund Shares
		1/1/17-12/31/17		1/1/16-12/31/16
		SHARES	VALUE	SHARES	VALUE
Shares sold		43,066	$866,274	96,355	$1,795,315
Shares reinvested		88,655	1,716,359	72,314	1,296,592
Shares redeemed	+	(215,760)	(4,345,851)	(367,406)	(6,800,438)
Net transactions in fund shares		(84,039)	($1,763,218)	(198,737)	($3,708,531)
Shares Outstanding and Net Assets
		1/1/17-12/31/17		1/1/16-12/31/16
		SHARES	NET ASSETS	SHARES	NET ASSETS
Beginning of period		1,404,585	$26,957,177	1,603,322	$29,626,857
Total increase or decrease	+	(84,039)	695,108	(198,737)	(2,669,680)
End of period		1,320,546	$27,652,285	1,404,585	$26,957,177
Net investment income not yet distributed			$411,844		$411,673

Assets
Investments in unaffiliated issuers, at cost and value (Note 2a)		$52,357,496
Repurchase agreements, at cost and value (Note 2a)		42,620,820
Receivables:
Fund shares sold		226,615
Interest		52,106
Prepaid expenses	+	346
Total assets		95,257,383
Liabilities
Payables:
Investment adviser and administrator fees		12,255
Fund shares redeemed		123,359
Accrued expenses	+	59,284
Total liabilities		194,898
Net Assets
Total assets		95,257,383
Total liabilities	–	194,898
Net assets		$95,062,485
Net Assets by Source
Capital received from investors		95,014,321
Net investment income not yet distributed		2,564
Net realized capital gains		45,600

Operations
	1/1/17-12/31/17		1/1/16-12/31/16
Net investment income		$449,466	$13,338
Net realized gains	+	2,223	340
Increase in net assets from operations		451,689	13,678
Distributions to Shareholders
Distributions from net investment income		($450,116)	($13,338)
Transactions in Fund Shares*
Shares sold		67,235,376	81,374,331
Shares reinvested		450,116	13,327
Shares redeemed	+	(78,281,164)	(91,698,938)
Net transactions in fund shares		(10,595,672)	(10,311,280)
Net Assets
Beginning of period		105,656,584	115,967,524
Total decrease	+	(10,594,099)	(10,310,940)
End of period		$95,062,485	$105,656,584
Net investment income not yet distributed		$2,564	$991

¹	The fund invests mainly in other Schwab Funds.
²	The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets.
³	This list is not a recommendation of any security by the investment adviser.
⁴	The holdings listed exclude any temporary liquidity investments.

Net Asset Value (NAV)
Net Assets	÷	Shares Outstanding	=	NAV
$27,652,285		1,320,546		$20.94

Investment Income
Dividends received from affiliated underlying funds		$515,058
Interest	+	2,417
Total investment income		517,475
Expenses
Investment adviser and administrator fees		119,870
Professional fees		28,721
Independent trustees’ fees		10,908
Shareholder reports		7,349
Portfolio accounting fees		4,912
Custodian fees		1,663
Transfer agent fees		160
Other expenses	+	2,683
Total expenses		176,266
Expense reduction by CSIM	–	40,050
Net expenses	–	136,216
Net investment income		381,259
Realized and Unrealized Gains (Losses)
Realized capital gain distributions received from affiliated underlying funds		280,467
Net realized gains on sales of affiliated underlying funds	+	1,376,502
Net realized gains		1,656,969
Net change in unrealized appreciation (depreciation) on affiliated underlying funds	+	2,136,457
Net realized and unrealized gains		3,793,426
Increase in net assets resulting from operations		$4,174,685

Investment Income
Interest		$916,406
Dividends	+	358
Total investment income		916,764
Expenses
Investment adviser and administrator fees		358,616
Portfolio accounting fees		52,884
Professional fees		36,101
Custodian fees		23,722
Independent trustees’ fees		16,472
Shareholder reports		15,001
Transfer agent fees		1,951
Other expenses	+	5,004
Total expenses		509,751
Expense reduction by CSIM and its affiliates	–	42,453
Net expenses	–	467,298
Net investment income		449,466
Realized Gains (Losses)
Net realized gains on investments		2,223
Increase in net assets resulting from operations		$451,689

Number of Holdings	506
Weighted Average Market Cap ($ x 1,000,000)	$197,205
Price/Earnings Ratio (P/E)	23.4
Price/Book Ratio (P/B)	3.2
Portfolio Turnover Rate	3%

¹	Excludes derivatives.
²	The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, excluding derivatives, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets.
³	This list is not a recommendation of any security by the investment adviser.

Assets
Investment in affiliated issuer, at value (cost $274,182)		$904,061
Investments in unaffiliated issuers, at value (cost $154,479,074) including securities on loan of $40,404		343,962,034
Collateral invested for securities on loan, at value (cost $44,380)		44,380
Deposit with broker for futures contracts		117,600
Receivables:
Investments sold		356,076
Dividends		346,186
Fund shares sold		78,803
Income from securities on loan		292
Interest	+	107
Total assets		345,809,539
Liabilities
Collateral held for securities on loan		44,380
Payables:
Investments bought		117,541
Investment adviser and administrator fees		8,740
Fund shares redeemed		72,772
Variation margin on futures contracts	+	7,275
Total liabilities		250,708
Net Assets
Total assets		345,809,539
Total liabilities	–	250,708
Net assets		$345,558,831
Net Assets by Source
Capital received from investors		151,159,800
Net investment income not yet distributed		6,269,216
Net realized capital losses		(1,978,738)
Net unrealized capital appreciation		190,108,553

¹	The fund intends to primarily invest in affiliated Schwab ETFs and unaffiliated third-party ETFs. The fund may also invest in affiliated Schwab and Laudus mutual funds and unaffiliated third party mutual funds (all such ETFs and mutual funds referred to as “underlying funds”). The fund may also invest directly in equity or fixed income securities, and money market investments to achieve its investment objectives.
²	The percentage may differ from the Portfolio Holdings because the above calculation is based on a percentage of total investments, whereas the calculation in the Portfolio Holdings is based on a percentage of net assets.
³	This list is not a recommendation of any security by the investment adviser.
⁴	The holdings listed exclude any temporary liquidity investments.


(a) Audit Fees			(b) Audit-Related Fees¹				(c) Tax Fees²				(d) All Other Fees³
Fiscal Year 2017	Fiscal Year 2016		Fiscal Year 2017		Fiscal Year 2016		Fiscal Year 2017		Fiscal Year 2016		Fiscal Year 2017		Fiscal Year 2016
$150,743	$	150,743	$	12,000	$	0	$	14,626	$	14,626	$	0	$	0